SHRI SHRI SANJAY PATEL PRIVATE TRUST,RAJNANDGAON, RAJNANDGAON V. THE INCOME TAX OFFICER-1, RAJNANDGAON, RAJNANDGAON

ITA 5/BIL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3195 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 22-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Additional evidence; Set aside
• Section: 131; 68; 139; 143(3); 143(2)

Judgement Text

ITAT-Raipur Page 1 of 12 आयकर अपीलीय Æयायािधकरण, रायप ु र Æयायपीठ, रायप ु र म¤। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील स ं . / ITA No. : 5/RPR/2017 कर िनधाªरण वषª / Assessment Year : 1984-1985 Shri Sanjay Patel Private Trust, Kailash Nagar, G.E. Road, Rajnandgaon – 491 441., (C.G.) PAN / GIR : S-602 . . . . . . . अपीलाथê / Appellant बनाम / V/s The Income Tax Officer, Ward-1, Rajnandgaon – 491 441.(C.G.) . . . . . . . ÿÂयथê / Respondent }kjk / Appearances Assessee by : None for the appellant Revenue by : Shri Sanjay Kumar स ु नवाई कì तारीख / Date of conclusive Hearing : 15/03/2022 घोषणा कì तारीख / Date of Pronouncement : 29/04/2022 आदेश / ORDER PER JAMLAPPA D BATTULL, AM; The present appeal of the assessee assailed against the order of Commissioner of Income Tax (Appeals)-II [for short “CIT(A)”] passed u/s 250 of the Income Tax Act, [for short “the Act”] vide order dt. 07/10/2016 for the assessment year [for short “AY”] 1984-1985, which in turn emanated out of the assessment order dt. 27/03/1987 passed by the Income Tax Officer [for short “AO”] u/s 143(3) of the Act. Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 2 of 12 2. The Controversy in the present appeal lies in a thin compass, as to whether first appellate authority right in law and facts of the case in sustaining addition u/s 68 of the Act. 3. Before advancing the matter on facts for adjudication, it is essential to reproduce grounds assailed by the appellant assessee as; “1. The Learned CIT(A) erred in confirming the addition amounting to Rs.2,27,186/- under section 68 of the Income Tax Act, 1961. 2. Learned CIT(A) erred in not consider assessee’s submission and various documents filed before A.O. & CIT(A). 3. Learned CIT(A) erred in deciding the matter after 20 years of set aside the order by ITAT.” (Emphasis supplied) 4. Now its turn to state the facts of the case succinctly as; 4.1 The assessee is a private trust with four identified individual (minor) as beneficiary with a determined (equal) share of 25% each, has for the AY 1984-1985 filed its return of income [for short “ROI/ITR”] on 18/11/1984 u/s 139 of the Act declaring a taxable income of ₹NIL after apportionment of total income of ₹1,50,310/- amongst the four identified beneficiaries equally. The return of income was subjected to scrutiny by issue of notice u/s 143(2) of the Act, and certain addition were carried out dislodging the claims of various expenses amounting to ₹1,11,666/- and further an addition u/s 68 of the Act for failure to establish threefold attributes of unsecured loan for ₹2,27,186/- was culminated by an order of assessment u/s 143(3) dt. 27/03/1987, Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 3 of 12 thereby assessed the total taxable income of ₹NIL after a revised apportionment of income in the hands of four beneficiaries equally at ₹1,22,340/- each. 4.2 The impugned assessment order was unsuccessfully changed before the Ld. CIT(A), consequently aggrieved by the action of FAA, the assessee trust preferred the present appeal before the Tribunal on the grounds assailed at foregoing para 3. 5. After hearing to departmental contention; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the respondent revenue. 6. It is evidently discernible form the records are that; 6.1 The hang fire controversy in the present appeal is over the establishment of threefold attributes of unsecured loan to wriggle out from the application of section 68 of the Act. 6.2 Nota bene, the appellant is private trust, during the year under consideration was engaged in the business of bidi leaves, and has for the AY 1984-1985 filed its ITR declaring ₹NIL taxable income after apportionment of income earned amongst four identified beneficiaries in determined equal share of 25% each. The return of the assessee was selected for scrutiny by service of statutory notice u/s 143(2) and in response thereto, the Trustee of the assessee trust alongwith its authorised representative [for short “AR”] attended the proceedings Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 4 of 12 and made submissions in terms of notice and the directions of the Ld. AO. From the books of accounts produced, the Ld. AO noticed cash credits in the account of twenty five creditors, balances ranging from ₹5,000/- to ₹12,500/-, consequently called upon the assessee to prove genuineness by producing the creditors physically (in person) for identification. In reply thereof, the appellant filed balance confirmation certificates from first six parties, however same were rejected by the Ld. AO on the premise that, the contents of all the confirmation were similar, claiming cash advances were extended out of saving from agricultural income. Consequently, an addition u/s 68 of the Act was carried out for sum of ₹2,27,186/- in the event of failure on the part of assessee to produce these creditors during the course of assessment proceedings in establishing the genuineness of cash credits appearing in the books of account and further by disallowing of certain expenses totalling to ₹1,11,666/-, the total income of the trust was computed at ₹4,89,360/- and after apportionment between four beneficiaries equally in the ratio of ¼ (25%) taxable income of the Trust was determined at ₹NIL, by an order dt. 27/03/1987 u/s 143(3) of the Act. 6.3 The impugned assessment order on a previous occasion was assailed before the first appellate authority [for short “FAA”], however on account of non-appearance, the Ld. CIT(A) dismissed the appeal without touching the merits of the case by an order number 17/87/88 dt. 02/04/1993, consequently matter in the first round of appeal travelled before the Income Tax Appellate Tribunal [for short Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 5 of 12 “Tribunal”]. Considering the facts and circumstance of the case, the tribunal set aside the order and restored the matter back to the file of Ld. CIT(A) for deciding the matter on merits a fresh after providing reasonable opportunity to the assessee. 6.4 In the second round of appeal before the Ld. CIT(A), the assessee through representative attended and made written submissions recapping the like submissions made during the course of original assessment proceedings before the Ld. AO. The assessee during the course of proceedings, furnished an additional evidence u/r 46A of the Income Tax Rules, 1962 [for short “Rules”], Ld. CIT(A) before admitting the same was referred to Ld. AO for remand. Through a remand report dt. 15/03/2011 comments were communicated to the office of Ld. CIT(A). During the course of second round of hearing before the FAA, the Ld. AR in substantiating the genuineness of cash credit contented that, all the person who advanced the money were either relatives or connected with the trust business and all the amounts were invariably returned to the respective creditors in the subsequent years and no amount is outstanding as on date. It was also contended before the Ld. CIT(A) that, since at the relevant times, people were neither aware of banking facilities nor such were available in small village/town, and these creditor had advanced the money not on commercial basis but on personal surety out of their cash savings. In omnibus, the FAA gave partial relief deleting the additions by accepting the claims of various expenses for an amount to ₹1,11,666/, Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 6 of 12 however, the submission and contention of the appellant trust as regards to unsecured loan did not find favour, consequently by an order the Ld. CIT(A) echoed with the views of Ld. AO in confirming the addition u/s 68 of the Act for failure to establish or discharge threefold attributes of unsecured loan by producing all twenty five creditors who extended or advanced the credits to the assessee trust. 6.5 Aggrieved by the action of lower tax authorities, the appellant trust is before us with grounds of appeal set at foregoing para 3. 7. During the course of the virtual hearing, none appeared for or on behalf of the appellant, however, to dispose of the case on merits, on a careful perusing of records we have noticed that, the assessment year under consideration is relating 1984-1985, and the order of original assessment was passed u/s 143(3) in the financial year 1986-1987, whereas first appellate authority in first round dismissed the appeal in the year 1993. The Tribunal on earlier occasion set-aside the matter for de-nova adjudication and after almost twenty years therefrom, the matter was finally adjudicated by the Ld. CIT(A) by an order dt. 07/10/2016. We are mindful to quote that, provision of section 250(6A) prescribed the deadline for disposal of matter / appeal by the first appellate authority i.e. CIT(A) within a period of one year from the end of the financial year in which such appeal is filed with a rider that “where it is possible”, albeit such is a directive in nature, however if legal redress or equitable relief to an aggrieved party is available, but is not forthcoming in a timely fashion, it Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 7 of 12 is effectively the same as having no remedy at all, it is as if “Justice delayed is Justice denied”, and the justice being one of civilisation’s foundational goals, it is therefore imperative for the quasi-judiciary authority like Ld. CIT(A) to perform its duty in a manner to enable the aggrieved to continue its pursuit of peace, harmony and progress, which in this case has miserably failed. 8. In re, the appellant in the second round of appellate proceedings, has filed the present appeal before the Tribunal on 23/01/2017 and on being first listed on 10/02/2022 was adjourned for non-appearance, in the light of aforestated facts & circumstance and heedful to the substantial delay in justice, we proceeded to adjudicate the matter on no objection from the departmental representative [for short “DR”]. 9. Since the matter exclusively calls for adjudication on the applicability of section 68, it is apt to quote the lex lata as it stood at the relevant time, before we proceed further; 9.1 Section 68 Cash credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (Emphasis supplied) Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 8 of 12 9.2 From the text of the provision, it can be evinced that, the prime constituent of section 68 of the Act are fourfold viz; a sum must have been credited in the books of accounts during the previous year, and assessee tenders no explanation or un-satisfactory explanation, then assessing officer may charge the amount so credited as income of the assessee u/s 68 as cash credit, thus the section accords a discretion to the assessing officer in drawing conclusion, of course such shall always be in the light of material placed substantiating the claim or otherwise in the light of deprecative material brought on record by the revenue and not merely on surmise or conjecture. 9.3 In the instance case, the appellant assessee admittedly was maintaining books of accounts for its of bidi leaves business employing mercantile system of accounting and on perusal of such books of accounts when produced during the course of assessment proceedings, the Ld. AO vide second para (unnumbered) on page 3 recorded the following observation that; “On perusal of the books of account, the cash credits in the following accounts were noticed. Name of the Creditors Amount 1. . . . . . . . Rs. . . . . . . . 2. . . . . . . . Rs. . . . . . . . . . . . . . . . . Rs. . . . . . . . 25. . . . . . . . Rs. . . . . . . . Total Credits 2,27,186/-” Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 9 of 12 9.4 The Ld. DR candidly submitted that, the order of the assessment is non-speaking and from the aforesaid para, it is not at all clear, whether such cash credits were newly credited in the books accounts during the previous year relevant to assessment year 1984- 1985 or the represents brought forward balances from the preceding previous year or years, if the said submission is taken on record, then prima-facie it shall be contra legem to apply the provisions of section 68 of the Act. Lex lata, section 68 triggers when any sum credited in the books during the previous year relevant to assessment year under adjudication and does not apply to opening balances. Thus, credit in the accounts during the previous year is condicio sine qua non for the application of section 68 and said view has been consistently taken in plethora of judicial precedents; some of such could be quoted here as; “CIT Vs Usha Stud Agricultural Farms Ltd” reported at 301 ITR 384 (Del), “DCIT Vs Amod Petrochem (P) Ltd” 23 ITCL 145 (Guj), “Bhogilal Virchand Vs CIT” reported in 127 ITR 591 (Bom), consequently, the addition culminated u/s 68, can discretely find merits in deletion. 9.5 On the other hand, blowing hot and cold together, the Ld. DR, contended that, since the appellant Trust is not prosecuting the appeal, as it might have consented or accepted the addition of unexplained cash credit as income u/s 68 of the Act. In our opinion, this argument of Ld. DR cannot be upheld, in the light of judgment of Hon’ble High Court of Madras in the case of “Mariam Aysha Vs CIT” Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 10 of 12 reported in 104 ITR 381 (Mad) wherein the Hon’ble Lordship have held that; “That, consent/acceptance given by assessee cannot give jurisdiction and a right to the assessing authority to make an addition, is an essential principle of law, the taxing authority can act only if there is power under the statute to do so.” (Emphasis supplied) 9.6 Coming to the merits of the case, the balance confirmation certificates from first six out of twenty five creditors were submitted during the course of original assessment as well appellate proceedings, thereby the requirement of section 68 as regards to tendering of explanation stands discharged, but both the tax authorities blatantly rejected to admit the same for reason of failure to produce creditors in person. While doing so these tax authorities inarticulate as to which creditors were asked to be produced and as to why the certificates of confirmation placed on record were not acceptable, with remained undoubted on records. Insofar as the production of creditors in person is concerned, to our limited knowledge, no provision in the Act casted such an obligation on the assessee to produce the creditors before the authorities, if at all the presence of any such person is found necessary to vouch the identification, then the tax authorities are expected to exercise the powers enabled u/s 131 and 133 of the Act. However, no such exercise at least in cases of six parties whose balance confirmation certificates were filed on records was carried. We are also not neglectful Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 11 of 12 to the fact that, neither tax authorities brought on record any deprecative material in support of rejection of material placed before them and further were speechless as to how & to what extent the explanation tendered by the appellant trust remained unsatisfactory in terms of section 68 of the Act. It is a settled legal preposition that when the primary onus is discharged by the assessee, the burden shifts on the assessing officer to examine the material and in case he want to rebut the evidence supplied by the assessee, he has to collect the material or evidence and confront to the assessee before arriving at any adverse conclusion. In sum and substance, formation of adverse inference militates in the absence of depreciative material unless placed on record, and the said view has been fortified by the Hon’ble High Court of Bombay in the case of “Orient Trading Co. Ltd Vs CIT” reported in 49 ITR 723 (Bom.), further in an identical situation, the Hon’ble Kolkata High Court in “Northern Bengal Jute Trading Co. Ltd. Vs CIT” reported at 70 ITR 407 has categorically held that, “the fate of the assessee cannot be decided by the revenue on the basis of surmises, suspicions or probabilities.” In the light of aforesaid discussion, in our considered view, both the tax authorities have perfunctory & arbitrarily brushed aside the submissions of the appellant, and without articulating the insufficiency of explanation tendered, merely carried way for personal appearance of the creditors and concluded the proceedings capriciously under surmise, conjecture and guesswork, which is bad in law, thus the addition made u/s 68 finds no merits, and consequently deserves to be deleted. Shri Sanjay Patel Private Trust ITA No. 05/RPR/2017, PAN / GIR : S-602 AY : 1984-1985 ITAT-Raipur Page 12 of 12 9.7 Before we part with, compos mentis, during the course of virtual hearing the bench pondered on the undue delay in adjudication in the light of provision of section 250(6A), which has been legislated with an intent of ensuring justice to the aggrieved within a set time frame i.e. period of one year from the end of the financial year in which the appeal is filed for adjudication, therefore FAA should be liable to justify the hang fired adjudication with the reasons as to why the adjudication could not be possible within the stipulated time period, the Ld. DR however opted silence to rest his case. 10. Resultantly, the appeal of the assessee is allowed, in terms of aforestated observation. Order pronounced in open court on this Friday 29 th day of April, 2022. -S/d- -S/d- RAVISH SOOD JAMLAPPA D BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र / RAIPUR ; िदना ं क / Dated : 29 th April, 2022 आदेश कì ÿितिलिप अúेिषत / Copy of the Order forwarded to : 1. अपीलाथê / The Appellant. 2. ÿÂयथê / The Respondent. 3. The Pr. CIT-1, Raipur(C.G) 4. The Pr. CIT, Raipur (C.G) 5. िवभागीय ÿितिनिध, आयकर अपीलीय Æयायािधकरण, रायप ु र ब¤च, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाडªफ़ाइल / Guard File. आदेशान ु सार / BY ORDER, िनजीसिचव / Private Secretary आयकर अपीलीय Æयायािधकरण, रायप ु र / ITAT, Raipur.