ITO 24(3)(1), MUMBAI V. M/S. A-1 PRINTS, MUMBAI

ITA 505/MUM/2011

• Counselvise Citation: 50519914 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 14-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 18-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Keywords: Bogus loan
• Section: 131; 68; 143(3); 142(1)

Judgement Text

, I INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. , !' , ! BEFORE S/SH. JOGINDER SINGH, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.505/MUM/2011 , # # # # $ $ $ $ ASSESSMENT YEAR 2007-08 ITO- 24(3)(1) R.NO.703, 7TH FLOOR, B.K.C. BANDRA(E), MUMBAI-400051. VS. M/S. A-1 PRINTS, PLOT NO.4, VIRAJ NAGAR, AHMEDABAD ROAD, GOREGAON (E), MUMBAI-400063 PAN:AAGFA4132P ( %& / APPELLANT) ( '(%& / RESPONDENT) ) * ! / REVENUE BY : SHRI ASGHAR ZAIN V.P. #+, #+, #+, #+, * * * * ! !! ! / ASSESSEE BY : NONE # # # # ) )) ) ,- ,- ,- ,- / DATE OF HEARING : 14-09-2014 .$ ) ,- / DATE OF PRONOUNCEMENT : 22-10-2014 # # # # , 1961 ) )) ) 254(1) ! !! ! ,, ,, ,, ,, !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! !' !' !' !' ! !! ! # # # # : CHALLENGING THE ORDER DT.11.11.2010 OF THE CIT(A)-3 4,MUMBAI,ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 9,80,000/- BEING LOAN AMOUNT U/ S 68, WITHOUT APPRECIATING THE FACT THAT ALL THE LOAN CREDITORS ARE FAMILY MEMBERS OF THE ASSESSEE W HO HAVE NO CREDITWORTHINESS TO ADVANCE LOANS. FURTHER HUGE AMOUNTS ARE DEPOSITED IN THEIR BANK AC COUNTS BY WAY OF CASH ON THE SAME DAY OR ONE DAY PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE WHICH CLEARLY INDICATES THE MONEY HAS BEEN ROUTED BACK BY WAY OF BOGUS LOANS.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,31,190/- BEING INTEREST PAID ON UNSECURED LOAN, WITHOUT APPRECIATING THE FACT THAT THE SAID UNSECURED LOAN IS NOT GENUINE.' THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAV ES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE FIRM,ENGAGED IN THE BUSINESS OF SAREE PRIN TING JOB, FILED ITS RETURN OF INCOME ON 25.10. 2006 DECLARING INCOME AT RS. 35,252/-.AO FINALISED THE ASSESSMENT ON 21.12.2009 U/S 143(3) OF THE ACT,DETERMINING THE INCOME AT RS. 12.46 LAKHS.D URING THE COURSE OF HEARING NO ONE APPEARED BEFORE US. 2.1. FIRST GROUND OF APPEAL IS ABOUT ADDITION MADE BY TH E AO OF RS. 9.80 LAKHS U/S 68 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN UNSECURED LOANS TO THE TUNE OF R S.9,24,358/ FROM 10 LOAN CREDITORS IN THEIR INDIVIDUAL CAPACITY. IN THIS REGARD DURING THE COUR SE OF SCRUTINY PROCEEDINGS VIDE NOTICE U/S 142(1) DTD..01.2009 THE ASSESSEE WAS ASKED TO FURNISH THE LOAN CONFIRMATIONS ALONG WITH COPY OF BANK STATEMENTS AND COPIES OF RETURNS OF INCOME.AFTER GO ING THROUGH THE DETAILS FILED BY THE ASSESSEE, THE AO HELD THAT IN MOST OF THE CASE CASH WAS DEPOS ITED IN THE ACCOUNTS OF THE CREDITORS BEFORE THEY ISSUED CHEQUES TO THE ASSESSEE.HE SUMMARISED T HE CASH DEPOSITED BY THE LENDER AS UNDER: 2 ITA NO. 505/MUM/2011 M/S. A-1 PRINTS SN NAME OF THE PARTY CASH/CHEQUE DEPOSIT DATE DEPOSIT CASH (RS.) DEPOSIT CHEQUE (RS.) ISSUED CHEQUE (RS.) DATE OF CHEQUE 1 REHANA M KADIWAL 14.02.2007 15,824 20,000 10.03.2007 22.03.2007 1,00,000 1,00,000 23.03.2007 1,00,000 22.03.2007 2 YASMEEN I KADIWAL 22.03.2007 1,00,000 1,00,000 22.03.2007 3 JOHARA M KADIWAL - 1,50,000 13.09.2007 50,000 10.03.2007 4 SABINA M KADIWAL 22.03.2007 50,000 - 50,000 23.03.2007 5 HASINA M KADIWAL 22.03.2007 1,00,000 - 1,00,000 22.03.2007 7 FARZANA M KADIWAL 22.03.2007 1,00,000 75,000 22.03.2007 SAHEENA A KADIWAL 35,000 07.04.2006 22.03.2007 50,000 50,000 23.03.2007 8 SHAWANA S KADIWAL 22.03.2 007 50,000 50,000 23.03.2007 9 YASEEN I KADIWAL 22.03.2007 1,00,000 23.03.2007 TOTAL 9,80,000 ACCORDINGLY, TO EXAMINE THE GENUINENESS OF UNSECURE D LOANS RECEIVED BY THE ASSESSEE, SUMMONS U/S 131 WERE ISSUED TO THE 9 LOAN CREDITORS ON 19.1 0.2009 AND 28.11.2009 FIXING THE HEARING ON 27.10.2009, 28.10.2009, 5.11.2009, AND 6.11. 2009. OUT OF 9 SUMMONS ISSUED, 6 LOAN CREDITORS ATTENDED FOR HEARING.HE FURTHER FOUND THAT ALL THE PERSONS WHO HAD ATTENDED THE PROCEEDINGS WERE RELATED TO THE PARTNERS OF THE FIRM.CONSIDERING THE EDUCATIONAL BACKGROUND OF THE LADY LENDERS,HE HELD THAT THEY WERE NOT QUALIFIED TO PROVIDE TUITIO N TO THE ACADEMIC CHILDREN,THAT ALL THE LADIES WERE UNDER MATRICULATE.FINALLY,HE HELD THAT THE LOA N GIVEN BY THE RELATIVES OF THE FIRM'S PARTNER WAS NOT GENUINE,THAT THE LOAN CREDITORS HAD NO CRED ITWORTHINESS TO GIVE SUCH HUGE LOANS AND ADVANCES TO THE ASSESSEE FIRM.THE AO RELIED UPON TH E CASE OF ROSHAN DI HATTI (107 ITR 938), SUMATI DAYAL(214 ITR 801). HE FURTHER HELD THAT LOA N RECEIVED BY THE ASSESSEE BY WAY OF 'BOGUS' LOANS.CONSEQUENTLY, LOANS RECEIVED BY THE ASSESSEE TOTALING TO RS.9,80,000/- DURING THE YEAR UNDER CONSIDERATION WERE TREATED AS UNEXPLAINED CASH CRED IT U/S.68 AND WERE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE ASSESSMENT OR DER AND THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE AO HAD MADE THE ADDITION BASICALL Y ON THE GROUNDS THAT THE CREDITORS WERE RELATIVES OF THE FIRMS PARTNER AND OUT OF THE LADY CREDITORS A FEW LADIES DID NOT HAVE THE REQUISITE QUALIFICATION TO EARN INCOME BY WAY OF IMPARTING TU TION,THAT THE AO HAD EXAMINED THESE CREDITORS BY ISSUING SUMMONS AND THE PARTIES HAD APPEARED BEF ORE HIM ,THAT THE EXISTENCE OF THE CREDITORS WAS PROVED,THAT THE OBJECTION OF THE AO THAT A FEW LADIES WERE NOT QUALIFIED BEYOND 10TH STANDARD AND THAT THEY DID NOT MAINTAIN ANY REGISTER AND REC EIPT BOOKS FOR THE FEES COLLECTED OUT OF TUTION GIVEN WAS VERY FRIVOLOUS,THAT THEY HAD GIVEN LOANS OF 20,000/- TO150000/- AT A GIVEN POINT OF TIME,THAT THE AMOUNT INVOLVED WAS NOT VERY HIGH,THA T THERE WAS NO ADVERSE MATERIAL IN POSSESSION OF THE AO TO CONCLUDE THAT CASH GENERATED BY THE FI RM HAD BEEN ROUTED THROUGH RELATIVES OF THE FIRMS PARTNERS,THAT THE ASSESSEE HAD PROVED THE GE NUINENESS OF THE CREDITORS AND THEIR CREDITWORTH -INESS,THAT GENERAL CREDITWORTHINESS OF THE CREDIT ORS HAD NOTHING TO DO WITH THE IMPUGNED CREDITS, THAT IT WAS SUFFICIENT TO HAVE THE REQUISITE AMOUNT IN THE CREDITORS ACCOUNT WHILE ISSUING CHEQUE TO THE ASSESSEE.FINALLY,HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 2.3.BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)STATED THAT THE ASSESSEE HAD NOT PROVED THE CREDITWORTHINESS OF THE LENDERS,THAT CASH WAS DEPOS ITED IN ALL THE ACCOUNTS BEFORE CHEQUES WERE ISSUED TO THE ASSESSEE-FIRM.AS STATED EARLIER,NOBOD Y APPEARED ON BEHALF OF THE ASSESSEE,NOR ANY 3 ITA NO. 505/MUM/2011 M/S. A-1 PRINTS LETTER WAS FILED FOR ADJOURNING THE MATTER.THEREFOR E,WE ARE DECIDING THE ISSUE ON MERITS AFTER CONSIDERING THE AVAILABLE MATERIAL.WE FIND THAT IN THE CASE UNDER APPEAL OUT OF THE NINE LENDER ONLY SIX TURNED UP, THAT ALL THE LADY CREDITORS CLA IMED TO HAVE INCOME FROM TUTUION,THAT THEY DID NOT HAVE ANY EVIDENCE OF IMPARTING OF TUTION,THAT C ASH WAS FOUND TO BE DEPOSITED IN THEIR ACCOUNTS BEFORE THEY ISSUE CHEQUES.IF WE TAKE IN TO CONSIDER ATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PRINCIPLES PROPOUNDED IN THE CA SES OF SUMATI DAYAL(SUPRA)AND DURGA PRASAD MORE(82 ITR 540),IT BECOMES CLEAR THAT THE STAND TA KEN BY THE AO WAS JUSTIFIABLE.THE FACT THAT ALL THE LADIES HAVE CLAIMED TO HAVE EARNED INCOME FROM TUTION AND ALL THEY RELATIVES OF THE PARTNERS OF THE FIRM CANNOT BE IGNORED AS HAS BEEN BRUSHED ASID E BY THE FAA.IN OUR OPINION CREDITWORTHINESS OF THE LENDERS OF MONEY HAS NOT BEEN ESTABLISHED.TH EREFORE,REVERSING THE ORDER OF THE FAA,WE DECIDE GROUND NO.1 IN FAVOUR OF THE AO. 3.SECOND GROUND IS DIRECTLY CONNECTED WITH THE FIRS T GROUND.THE AO HAD DISALLOWED THE INTEREST AMOUNTING TO RS.2,31,190/- LAKHS,THAT WAS CLAIMED T O HAVE BEEN PAID ON ABOVE REFERRED UNSECURED LOANS.THE FAA HAD DELETED THE ADDITION MADE BY THE AO,AS HE WAS OF THE OPINION THAT THE LOANS TAKEN BY THE ASSESSEE-FIRM WERE GENUINE.WE HAVE,IN THE PRECEDING PARAGRAPHS,HELD THAT THE LOANS TAKEN BY THE ASSESSEE WERE NOT GENUINE.FOLLOWING TH E SAME WE REVERSE THE ORDER OF THE FAA AND ALLOW GROUND NO.2. AS A RESULT,APPEAL FILED BY THE AO STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND ,OCTOBER,2014 . !/ !/ !/ !/ ) )) ) .$ .$ .$ .$ ! ! ! ! 0 00 0 1# 1# 1# 1# 22.10.2014 ) )) ) 2 22 2 SD/- SD/- ( # / JOGINDER SINGH) ( !' !' !' !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! /ACCOUNTANT MEMBER / MUMBAI, 1# /DATE: 22 .10.2014. SK !/ !/ !/ !/ ) )) ) ',3 ',3 ',3 ',3 4!3$, 4!3$, 4!3$, 4!3$, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ 5 6 , 4. THE CONCERNED CIT / 5 6 5. DR I BENCH, ITAT, MUMBAI / 37 ',# VKBZ , . . . 6. GUARD FILE/ 8 (3 (3 (3 (3, ,, , ', ',', ', //TRUE COPY// !/# / BY ORDER, 9 / DY./ASST. REGISTRAR , /ITAT, MUMBAI