M/s. GILTEDGE FINANCIAL & MANAGEMENT SERVICES, MUMBAI V. ITO 4(1)(2), MUMBAI

ITA 568/MUM/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48471 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-01-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 25-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR P DANIEL
• Keywords: Unexplained cash credit; Bogus loan
• Section: 68; 143(3); 133(6)

Judgement Text

ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH, MUMBAI BEFORE SHRI D K AGARWAL (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000-01 GILTEDGE FINANCIAL & MANAGEMENT SERVICES APPELLANT 103, LIBERTY APARTMENT 80 A SAROJINI ROAD, VILE PARLE (WEST) MUMBAI 400056 VS. INCOME TAX OFFICER WARD 4(1)(2), MUMBAI ... RESPONDENT APPEARANCES: AARTI VISSANJI, FOR THE APPELLANT DR P DANIEL, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 14 TH NOVEMBER,2005, PASSED BY THE CIT(A) IV MUMBAI, I N THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2000-01. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE ADDI TION OF RS 4,08,04,262 UNDER SECTION 68 OF THE INCOME TAX ACT, 1961, OUT O F CREDIT BALANCES OF VARIOUS PARTIES AT THE YEAR END, FOR THE REASON THA T SOME OF THE PARTIES FAILED TO COMPLY WITH THE NOTICES ISSUED AND FOR WA NT OF DETAILS. ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 2 OF 7 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE A SSESSEE IS A SHARE AND STOCK SUB BROKER AND ENGAGED IN THE BUSINESS AS SUCH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT CER TAIN CREDIT BALANCES AGGREGATING TO RS 14,08,04,262 ( LATER RECTIFIED TO RS 4,08,04 ,262) ARE SHOWN IN THE BOOKS OF ACCOUNTS BUT LETTERS DATED 3 RD JANUARY 2003 ISSUED TO THESE CREDITORS, CALLING FO R INFORMATION UNDER SECTION 133(6) FOR VERIFYING THE GENUINENESS, HAVE REMAINED UNRESPONDED BY THESE CREDITORS. THESE CREDIT BALAN CES WERE AS FOLLOWS: I. SIGMA FISCAL PVT LTD 80,51,532 II. HASSARAM INVESTMENT & FINANCE PVT LTD 37,83,640 III. TUSHAR M SHAH 16,16,383 IV. GILTEDGE CREDIT CAPITAL LIMITED 51,89,773 V. SURE WIN LIMITED 13,03,255 VI. SHAREEN SUBBU 35,21,277 VII. GAUTAM SILK PVT LTD 12,49,629 VIII. GILTEDGE PORTFOLIO MGT LTD 32,17,162 IX. CENTURY CONSULTANCY LIMITED 1,28,71,611 4. THE ASSESSEE WAS ASKED TO PRODUCE THESE PARTIES TO ASSIST ASSESSING OFFICER EXAMINE GENUINENESS OF THE CREDITS, AND THE ASSESSE E WAS ALSO REQUIRED TO SHOW CAUSE AS TO WHY, IN THE ABSENCE OF GENUINENESS OF T HESE CREDITS HAVING BEEN ESTABLISHED, THE SAME MAY NOT BE ADDED TO ASSESSEE S INCOME AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. IT APPEARS THAT ON 4 TH MARCH 2003, THE ASSESSEE SUBMITTED (I) THAT SIGMA FISCAL PVT LTD HAS SHIFTE D ITS OFFICES, AND THE NEW ADDRESS OF SIGMA FISCAL PVT LTD WAS FURNISHED BY THE ASSESS EE; (II) THAT CENTURY CONSULTANCY SERVICES LIMITED HAS BEEN DECLARED DEFAULTER MEMBER OF THE STOCK EXCHANGE AND THEIR PREMISES ARE SEALED BY THE STOCK EXCHANGE AUT HORITIES; AND (III) THAT BALANCE CONFIRMATION FROM GILTEDGE CREDIT CAPITAL LIMITED W AS FURNISHED TO THE ASSESSING OFFICER. AS REGARDS THE REMAINING BALANCES, THE ASS ESSEE PROMISED TO FURNISH THE REQUISITE DETAILS IN DUE COURSE BUT TILL THE TIME T HE ASSESSMENT WAS COMPLETED, NO SUCH DETAILS WERE FURNISHED. THE ASSESSEE WAS GIVEN YET ANOTHER OPPORTUNITY TO ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 3 OF 7 FURNISH ALL THE REQUISITE DETAILS BY 17 TH MARCH 2003 AND THEN A FINAL OPPORTUNITY ON 24 TH MARCH 2003, BUT THERE WAS NO COMPLIANCE. THE ASSES SING OFFICER THUS PROCEEDED TO ADD THE ABOVE BALANCES AS UNEXPLAINED CREDITS, IN THE HANDS OF THE ASSESSEE, UNDER SECTION 68 OF THE ACT. AGGRIEVED, A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) TOOK NOTE OF A SSESSES ARGUMENT THAT ALL THESE EXPLANATIONS COULD NOT BE FILED BEFORE THE ASSESSIN G OFFICER AS THERE HAVE BEEN ARRESTS BY THE CBI IN THE GROUP CONCERNS, THAT BUSI NESS OF THE ASSESSEE GROUP HAD COME TO A STANDSTILL DUE TO ACCOUNTS HAVING BEEN FR OZEN BY THE CBI AND DUE TO MANY RELEVANT DOCUMENTS HAVING BEEN SEIZED BY THE CBI.IT WAS SUBMITTED BY THE ASSESSEE THAT AS FAR AS SIGMA FISCAL PVT LTD IS CONCERNED, I T IS A DEBIT BALANCE OF RS 80,51,532 AND, AS SUCH, NO ADDITION COULD HAVE BEEN MADE BY T HE ASSESSING OFFICER AS UNEXPLAINED CREDIT UNDER SECTION 68. A COPY OF THE PRINTOUT OF LEDGER ACCOUNT SHOWING RS 1,00,92,805 WAS FURNISHED AND IT WAS FUR THER EXPLAINED THAT THE AMOUNT HAS BEEN SHOWN AT RS 80,51,532 BECAUSE CREDIT BALAN CE OF RS 20,41,091 IN ANOTHER ACCOUNT WITH THEM WAS ADJUSTED AGAINST THE DEBIT BA LANCE OF RS 1,00,92,805. SIMILARLY, AS REGARDS HASSARAM INVESTMENTS AND FINA NCE PVT LTD, IT WAS EXPLAINED THAT THE BALANCE OF RS 37,83,630 WAS A DEBIT BALANC E AND NO CONFIRMATION WAS POSSIBLE AS THE OWNER, A LONDON BASED NRI, HAD INCU RRED HUGE LOSSES AND WAS NOT COOPERATING WITH THE ASSESSEE. AS FOR TUSHAR M SHAH , ONCE AGAIN IT WAS A DEBIT BALANCE OF RS 16,16,383, WHICH COULD NOT BE ADDED U NDER SECTION 68, AND IT WAS SUBSEQUENTLY RECOVERED IN THE ASSESSMENT YEAR 2001- 02. IN THE CASE OF GILTEDGE CREDIT CAPITAL LIMITED ALSO, THE BALANCE OF RS 51,8 9,773 WAS A DEBIT BALANCE AND THE BALANCE CONFIRMATION WAS DULY FURNISHED AT THE ASSE SSMENT STAGE ITSELF. IN THE CASE OF SURE WIN LIMITED, THE ASSESSEE ACCEPTED THAT IT WAS A CREDIT BALANCE OF RS 13,03,255 BUT IT WAS SUBMITTED THAT IN THE SUBSEQUE NT YEAR, THIS ACCOUNT WAS SQUARED UP AGAINST AMOUNT RECEIVABLE FROM DAYABHAI & SONS WHO WAS PRINCIPAL OF THE SAID SUB BROKER. REGARDING SHAREEN SUBBU, IT W AS SUBMITTED THAT THE CREDIT BALANCE OF RS 35,21,277 HAS BEEN ADJUSTED AGAINST D EBIT BALANCE IN THE HANDS OF THE SISTER CONCERN GILTEDGE CREDIT CAPITAL LIMITED IN T HE SUBSEQUENT YEAR, AND A COPY OF THE LEDGER ACCOUNT WAS ALSO FURNISHED. IT WAS ALSO POINTED OUT THAT AS FAR CREDIT BALANCE OF RS 12,49,629 IS CONCERNED, IT WAS WITH R EGARD TO A SALES TRANSACTION WHICH HAS BEEN SQUARED UP IN THE SUBSEQUENT YEAR THROUGH AN ACCOUNT PAYEE DEMAND DRAFT. THE CREDIT BALANCE OF RS 32,17,162, ACCORDI NG TO THE ASSESSE, COULD NOT HAVE ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 4 OF 7 BEEN ADDED BACK AS IT WAS A SISTER CONCERN OF THE ASSESSEE, AS PAN AND OTHER DETAILS WERE DULY FURNISHED, AS THE ASSESSEE HAD A RUNNING ACCOUNT WITH THEM AND AS THE BALANCES WERE SQUARED UP IN THE SUBSEQUENT YEAR THR OUGH VARIOUS CHEQUE PAYMENTS. FINALLY, AS REGARDS CENTURY CONSULTANTS L IMITED, IT WAS SUBMITTED THAT THE SAID COMPANY WAS A STOCK EXCHANGE DEFAULTER AND AS THEIR PREMISES WERE SEALED, NONE COULD HAVE ISSUED A CONFIRMATION FOR THEM. ALL THE DETAILS IN SUPPORT OF THESE CONTENTIONS WERE FILED BEFORE THE CIT(A). LEARNED C IT(A) TOOK NOTE OF ALL THESE ARGUMENTS, BUT, IN HIS RATHER BRIEF AND CRYPTIC OPE RATIVE PORTION OF THE IMPUGNED ORDER, SIMPLY BRUSHED ASIDE THE SAME BY OBSERVING A S FOLLOWS; I HAVE CAREFULLY CONSIDERED THE ISSUE AND HOLD THAT THE AO WAS FULLY JUSTIFIED IN LAW TO MAKE THE AFORESAID ADDITION. TH E ONUS WAS ENTIRELY ON THE APPELLANT TO GET THE TRANSACTIONS VERIFIED BY E ACH AND EVERY PARTY. THE AO WAS WELL WITHIN THE PARAMETERS OF LAW TO ASK THE ASSESSEE TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS OF VARIOUS PARTIES AS ALSO THE GENUINENESS OF THE TRANSACTIONS AND ALSO TO EXPLAIN IN FULL AND COMPLETE DETAIL THE NATURE OF SUCH TRANSACTIONS. THE APPELLANT HAS FAIL ED TO DISCHARGE THE ONUS CAST UPON IT, AND IN THE ABSENCE OF THESE DETA ILS AND LACK OF EVIDENCE, THE ACTION OF THE AO IS UPHELD. 5. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 7. WE HAVE NOTED THAT THERE IS NO REASONING IN SUPP ORT OF CIT(A)S DECISION, NOR THE CIT(A) HAS SPECIFICALLY DEALT WITH SUCH FUNDAME NTAL ARGUMENTS AS THE PLEA THAT EVEN DEBIT BALANCES COULD NOT HAVE BEEN ADDED AS UN EXPLAINED CASH CREDITS UNDER SECTION 68. A PLAIN READING OF THE OPERATIVE PORTI ON SHOWS THAT THERE HAS BEEN NO ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 5 OF 7 APPLICATION OF MIND BY ANY OF THE AUTHORITIES BELOW . THE ASSESSING OFFICER NOTES THAT THE ASSESSEE HAS GIVEN EXPLANATIONS IN RESPECT OF THREE PARTIES, BUT, WITHOUT EVEN GOING THROUGH THE MOTIONS OF DEALING WITH OR R EJECTING SUCH EXPLANATIONS, MAKES AN ADDITION IN RESPECT OF ALL THE BALANCES. E VEN AS A SPECIFIC PLEA IS RAISED THAT WHAT HAS BEEN ADDED IS A DEBIT BALANCE, AND NOT A C REDIT BALANCE, THE CIT(A) DOES NOT EVEN CARE TO VERIFY THIS ELEMENTARY FACTUAL DETAIL. THERE IS NO APPLICATION OF MIND BY ANY OF THE AUTHORITIES BELOW. THE ASSESSEE HAS SUBM ITTED VOLUMINOUS DETAILS BEFORE US, AND EVEN THOUGH WE MADE OUR EFFORTS TO GO THROU GH THE SAME, IN OUR CONSIDERED VIEW, IT WOULD NOT APPROPRIATE FOR US TO EXAMINE TH E MATTER ON MERITS, WITHOUT BENEFIT OF EXAMINATION BY ANY OF THE AUTHORITIES BE LOW. WE HAVE ALSO NOTED THAT THE CIT(A) HAS TAKEN NOTE OF THE GENUINE DIFFICULTIES B ECAUSE OF WHICH COMPLIANCES COULD NOT BE MADE AT THE ASSESSMENT STAGE, AND DID NOT DISPUTE THE SAME. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE RIGHT CO URSE OF ACTION WILL BE TO REMIT THE MATTER TO THE FILE OF THE CIT(A) FOR FRESH EXAMINAT ION, AFTER GIVING YET ANOTHER OPPORTUNITY OF HEARING TO THE ASSESSEE, AND AFTER D EALING WITH THE SUBMISSIONS OF THE ASSESSEE IN A FAIR AND OBJECTIVE MANNER, BY WAY OF A SPEAKING ORDER AND IN ACCORDANCE WITH THE LAW. WE MAY ALSO CLARIFY THAT T HE DEBIT BALANCES PER SE CANNOT BE ADDED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68, AND, TO THAT EXTENT, THE IMPUGNED ADDITIONS MUST BE DELETED. HOWEVER, IT IS OPEN TO THE CIT(A) TO EXAMINE THE MATTER WITH REGARD TO ANY AMOUNTS CREDITED DURI NG THE RELEVANT PREVIOUS YEAR. WITH THESE DIRECTIONS, WE REMIT THE MATTER TO THE F ILE OF THE CIT(A). 8. GROUND NO. 1 IS THUS ALLOWED FOR STATISTICAL PUR POSES IN THE TERMS INDICATED ABOVE. 9. IN GROUND NOS. 2,3,6,7 AND 8, THE ASSESSEE HAS R AISED SOMEWHAT SIMILAR GRIEVANCES WHICH REQUIRE FACTUAL VERIFICATIONS ON T HE SAME LINES, AS GROUND NO. 1 ABOVE, AND REQUIRE TO BE ADJUDICATED IN ACCORDANCE WITH THE LAW BY WAY OF A SPEAKING ORDER AFTER GIVING ASSESSEE YET ANOTHER OP PORTUNITY OF HEARING AND IN ACCORDANCE WITH THE LAW. THESE GRIEVANCES PERTAIN T O (I) CIT(A) SUSTAINING THE ADDITION OF RS 1,42,75,776 IN CONNECTION WITH DIFFE RENCES IN CLOSING BALANCES ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 6 OF 7 [GROUND 2]; (II) CIT(A)S SUSTAINING THE ADDITION O F RS 12,00,000 IN RESPECT OF UNEXPLAINED CASH CREDITS IN RESPECT OF LOAN CREDIT ORS WHO ARE NOT IDENTIFIABLE IN THE ABSENCE OF PAN [GROUND NO. 3]; (III) CIT(A)S SUSTA INING THE ADDITIONS OF RS 59,84,997 IN RESPECT OF ALLEGED BOGUS LOANS [GROUND NO. 6]; (IV) CIT(A)S SUSTAINING THE ADDITION OF RS 3,00,000 IN RESPECT OF ALLEGED B OGUS LOAN FROM JIVARAJ VIRJI MITALI [GROUND NO. 7]; AND (V) CIT(A)S SUSTAINING THE ADD ITIONS OF RS 4,88,84,006 AMD RS 4,60,33,911 IN RESPECT OF ALLEGED BOGUS LOANS AND I N THE ABSENCE OF COMPLIANCES [GROUND NO. 8]. ACCORDINGLY, THESE ISSUES ARE ALSO REMITTED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. 10. THAT LEAVES US WITH ASSESSEES GRIEVANCES AGAIN ST CIT(A)S SUSTAINING THE DISALLOWANCE IN RESPECT OF MARKET RESEARCH (RS 20,0 0,000) AND MANAGEMENT FEES (RS 20,00,000) [GROUND NOS. 3 AND 4]. THESE DISAL LOWANCES WERE MADE FOR WANT OF EVIDENCES IN SUPPORT OF THE SAID EXPENDITURES. IN A PPELLATE PROCEEDINGS BEFORE THE CIT(A),AS ALSO BEFORE US ALSO, THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH THE SATISFACTORY EVIDENCES IN SUPPORT OF THE SAID EXPEN DITURE. HAVING PERUSED THE ORDERS OF THE AUTHORITIES BELOW, AND THE MATERIAL ON RECOR D, WE ARE NOT INCLINED TO INTERFERE IN THE MATTER. GROUND NOS. 3 AND 4 ARE, ACCORDINGLY , DISMISSED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 8 TH DAY OF APRIL, 2011. SD/- SD/- (D K AGARWAL ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI; 8 TH DAY OF APRIL , 2011 . ITA NO. 568/MUM/06 ASSESSMENT YEAR: 2000- 01 PAGE 7 OF 7 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, C BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI