ACIT CIR 25(3), MUMBAI V. KIRIT B. GADHIYA, MUMBAI

ITA 5680/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2359 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI BEFORE SHRI SHAILENDER KUMAR YADAV,JM AND SHRI RAJE SH KUMAR,AM ./ I.T.A. NO 5680/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ACIT, 25(3), MUMBAI 308, C-11, BANDRA-KURLA COMPLEX, BANDRA (EAST), MUMBAI-400 051. / VS. SHRI KIRIT B. GADHIYA B/603, VICKY CLASSIC, MAHAVIR NAGAR, KANDIVALI (W), MUMBAI-67 ./ ./PAN/GIR NO. AKSPG4142P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SATYA PAL KUMAR / RESPONDENT BY : SHRI ANIL THAKRAR / DATE OF HEARING : 03/11/2015 !'# / DATE OF PRONOUNCEMENT : 20/11/2015 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 30/12/2011 OF COMMISSIONER OF INCOME TAX (APPEALS) 35, MUMBAI (HE REINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 2 I.T.A. NO 5680/MUM/2012 (A.Y: 2009-10) ACIT VS. KIRIT B. GADLIYA 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GIVING RELIEF OF RS.46,86,610/- ON THE ISSUE OF ADDITION MADE ON ACCOUNT OF THE UNEXPLAINED SUNDRY CREDIT U/ S.69 (INADVERTENTLY MENTIONED AS SECTION 68 IN THE ASSESSMENT ORDER) TO THE ASSESSEE WITHOUT APPRECIATING THE FACT NOTHING IS OUTSTANDING AT THE END OF THE YEAR. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND. 2. THE ISSUE RAISED IN BOTH THE GROUNDS OF APPEAL I S WITH RESPECT TO THE ADDITION OF RS.46,86,610/- ON ACCOUNT OF UNEXPLAINED SUNDRY CRE DITORS BY THE CIT(A). THE BRIEF FACTS ARE THAT THE ASSESSEE IS THE PROPRIETOR M/S. SHRI KRISHNA TRAVELS AND TOURS AND THE INCOME OF THE ASSESSEE COMPRISED OF INCOME FRO M BUSINESS AND BY WAY OF CAPITAL GAINS. DURING THE YEAR THE ASSESSEE TRANSFERRED RS. 46,86,610/- BEING THE AMOUNT OF SUNDRY CREDITORS BY DEBITING THE SUNDRY CREDITORS A CCOUNT AND CREDITING THE CAPITAL ACCOUNT OF THE ASSESSEE. THE SAID EXERCISE WAS UNDE RTAKEN FOR THE BANKING PURPOSE IN ORDER TO IMPROVE THE RATIOS OF THE BALANCE-SHEET OF THE ASSESSEE AS THE ASSESSEE WAS IN NEED OF FUNDS WHICH WERE TO BE BORROWED BANK FINAN CES. SIMULTANEOUSLY, THE ASSESSEES ACCOUNTED FOR THESE CREDITORS IN THE PERSONAL BALANCE SHEET WHICH WAS DIFFERENT FROM THE PROPRIETORY CONCERN BY DEBITING CAPITAL ACCOUNT AND CREDITING THE RESPECTIVE SUNDRY CREDITORS ACCOUNT. THESE CREDITOR S WERE ALSO REPAID SUBSEQUENTLY AFTER CLOSING OF THE YEAR. 3 DURING THE COURSE OF ASSESSMENT PROCEEDING THE LD . AO NOTICED THAT THE ASSESSEE INTRODUCED CAPITAL IN HIS CAPITAL ACCOUNT AMOUNTING TO RS.52,33,450/- AND SOUGHT EXPLANATION FOR THE SAME WHICH THE ASSESSEE REPLIED THAT RS.46,86,610/- WERE 3 I.T.A. NO 5680/MUM/2012 (A.Y: 2009-10) ACIT VS. KIRIT B. GADLIYA TRANSFERRED FROM THE SUNDRY CREDITORS ACCOUNT OF RS .5,46,840/- WAS ON ACCOUNT OF CAPITAL GAIN ON THE SALE OF PROPERTY. THE LD. AO AD DED RS.46,86,610/- U/S 68 OF THE ACT ON THE GROUNDS THAT THE MOVEMENT THE CREDITORS ARE TRANSFERRED TO THE CAPITAL ACCOUNT THE LIABILITY TO PAY SUCH CREDITORS CEASED. 4 AGGRIEVED BY THE ORDER THE LD. AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD.CIT (A) WHO AFTER VERIFICATION OF THE PROOF AS T O PAYMENT OF THESE CREDITORS DELETED THE ADDITION BY OBSERVING THAT THE ASSESSSEE ACTUAL LY DISCHARGED THESE SUNDRY CREDITORS AT A LATER DATE ON THE BASIS OF PROOFS COMPRISING O F LEDGER COPIES AND CONFIRMATION FROM THESE CREDITORS AND FURTHER OBSERVED THAT TH E LIABILITY TO REPAY THE CREDITORS DID NOT GET LIQUIDATED BY MAKING THE BOOK ENTRIES. 5 THE LD. DR SUBMITTED BEFORE US THAT THESE UNEXPLA INED SUNDRY CREDITORS WERE WRONGLY STATED TO BE ADDED TO THE INCOME OF THE ASS ESSEE U/S 68 OF THE ACT INSTEAD OF 69. THE LD. DR FURTHER SUBMITTED THAT THE MOVEMENT CREDITORS WERE TRANSFERRED OUT OF BOOKS BY MAKING BOOK ENTRY DEBITING THE SUNDRY CRED ITORS ACCOUNT AND CREDITING THE CAPITAL ACCOUNT OF THE ASSESSEE THE LIABILITY CEASE D TO EXIST AND THEREFORE, THE LD. COUNSEL PRAYED FOR SETTING ASIDE THE ORDER OF CIT( A) AND RESTORING THE ORDER OF LD.AO. 6 THE LD. AR ON THE OTHER HAND SUBMITTED THAT THE A SSESSEE TOOK OUT SUNDRY CREDITORS OUT OF THE BUSINESS BOOKS BY MAKING BOOK ENTRY DEBITING THE SUNDRY CREDITORS ACCOUNT AND CREDITING THE ASSESSEES CAPITAL ACCOUN T. SIMULTANEOUSLY, THESE CREDITORS WERE BROUGHT INTO THE PERSONAL BOOKS OF THE ASSESSE E BY DEBITING CAPITAL ACCOUNT AND CREDITING THE RESPECTIVE CREDITORS ACCOUNT WHICH WE RE DIFFERENT FROM THE BOOKS MAINTAINED FOR THE BUSINESS OF SUCH PROPRIETARY CON CERN. THE LD. COUNSEL FURTHER 4 I.T.A. NO 5680/MUM/2012 (A.Y: 2009-10) ACIT VS. KIRIT B. GADLIYA SUBMITTED THAT THE WHOLE EXERCISED WAS UNDERTAKEN I N ORDER TO IMPROVE THE BUSINESS BALANCE-SHEET OF THE ASSESSEE SO THAT THE BANK FINA NCES COULD BE ARRANGED. THE LD. COUNSEL FURTHER ARGUED THAT ALL THESE SUNDRY CREDIT ORS WERE DULY DISCHARGED AT THE SUBSEQUENT DATES AS WERE VERIFIED AND OBSERVED BY T HE CIT(A). THE PROVES THEREOF COMPRISING OF LEDGER COPIES AND CONFIRMATION FROM T HE CREDITORS WERE FILED BEFORE THE CIT(A) WHO RIGHTLY DELETED THE ADDITION AFTER HAVIN G EXAMINED AND VERIFYING THE MATTER. LD COUNSEL FOR THE ASSESSEE PRAYED THAT WI TH THE MERE BOOK ENTRIES THE LIABILITY TOWARDS SUNDRY CREDITORS DID NOT CEASE TO EXIST AND WERE SUBSEQUENTLY DISCHARGED AND THEREFORE SUBMITTED THAT THE ORDER OF CIT (A) TO BE UPHELD. 7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. WE NOTE THAT THE CREDITORS WERE TRANSFERRED OUT OF BUSINESS BOOKS OF M/S. SHRI KRISHNA TRAVELS AND TOURS A PROPRIETARY CONCERN OF THE ASSE SSEE IN ORDER TO MAKE IT MORE ATTRACTIVE FROM THE BANKS POINT OF VIEW SO THAT TH E ASSESSEE COULD ARRANGE BANK FINANCES TO EXPAND HIS BUSINESS. WE ALSO NOTE THAT SIMULTANEOUSLY THESE CREDITORS WERE BROUGHT INTO PERSONAL BALANCE SHEET OF ASSESSEE W HICH WERE BEING MAINTAINED SEPARATELY FROM THE PROPRIETARY CONCERN. IT IS ALSO CLEAR THAT THESE CREDITORS WERE PAID ON THE LATER DATE AND THE LD. CIT (A) HAD MADE OBSE RVATION TO THIS EFFECT AFTER VERIFICATION OF THE LEDGER COPIES AND CONFIRMATION OF THE CREDITORS. THE LD. AO NOWHERE DOUBTED THE PURCHASES MADE BY THE ASSESSEE IN THE NORMAL COURSE WHEREBY THESE SUNDRY CREDITORS WERE INCURRED. GOING BY THE FACTS OF THE CASE AND MATERIAL ON RECORD WE ARE OF THE OPINION THAT THE LD. CIT(A) HA D RIGHTLY DELETED THE ADDITION AND THEREFORE ORDER OF CIT(A) IS UPHELD. WE, THEREFORE, DISMISS THE APPEAL OF THE REVENUE. 5 I.T.A. NO 5680/MUM/2012 (A.Y: 2009-10) ACIT VS. KIRIT B. GADLIYA IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. &#'( ) & *+ , ORDER PRONOUNCED IN THE OPEN COURT ON NOV. 20 TH , 2015 SD/- SD/- (SHAILENDRA K.YADAV) (RAJESH KUMAR) -. $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ' / MUMBAI; 0$ DATED :20 .11.2015 ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT - CONCERNED 5. 456 ..78 , 78# , ' / / DR, ITAT, MUMBAI 6. 6:; < / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ' / / ITAT, MUMBAI