The ACIT, Circle-6, Surat V. M/s. Patel Ambalal Hargovandas & Co., Surat

ITA 573/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6303 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S PARIDA
• Assessee Lawyers: P M MEHTA
• Section: 131; 132

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M ASSTT. CIT, CIR-6, SURAT. VS. M/S PATEL AMBALAL HARGOVANDAS & CO., 5/725, HARIPURA, BHAVANIWAD, OPP. DHOBHI SHERI, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. S. PARIDA, CIT/DR RESPONDENT BY:- SHRI P. M. MEHTA, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . IN THE APPEAL FILED BY THE REVENUE FOLLOWING GROUN DS HAVE BEEN RAISED :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-II, AHMEDABAD HAS ERRED IN DELETING THE ADDITION OF RS.15,80,000/- MADE BY THE AO ON ACCOUNT OF UNACCOU NTED CASH. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A)-II, AHMEDABAD HAS ERRED IN DELETING THE A DDITION OF RS.2,39,400/- MADE BY THE AO ON ACCOUNT OF DISALLOW ED INTEREST. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-II, AHMEDABAD HAS ERRED IN RESTRICTING T HE ADDITION ITA NO.573/AHD/2009 ALONG WITH CO. NO.59/AHD/2009 ASST. YEAR 2005-06 ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 2 OF RS.15,000/- TO 10% ONLY, MADE BY THE AO ON ACCOU NT OF DISALLOWED OFFICE EXPENSES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-II, AHMEDABAD, HAS ERRED IN RESTRICTING THE ADDITION OF RS.27,321/- TO 10% ONLY, MADE BY THE AO ON ACCOU NT OF DISALLOWED OFFICE EXPENSES. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF ANGADIA I.E. DELIVERY OF PARCELS ETC. FROM ONE PLACE TO ANOTHER. THE ORDER U/S 143(3)/153A WAS PASSED ON 31 .10.2007. A SEARCH U/S 132 WAS CARRIED OUT ON A VAN CARRYING CASH AND PARCELS. DURING THE SEARCH AN AMOUNT OF RS.15,00,000/- BELONGING TO THE ASSESSEE FIRM WAS SEIZED BY THE AUTHORISED OFFICERS. IT WAS CLAIMED T HAT ABOVE MONEY WAS SENT BY THE ASSESSEE FIRM OUT OF ITS CASH BALANCE A S PER CASH BOOK TO AHMEDABAD OFFICE. ALONG WITH SAID AMOUNT AN ORIGINA L BHARATIYA DATED 21.07.2004 SENT FROM MUMBAI TO AHMEDABAD SHOW ING NAME OF SENDER I.E. ASSESSEE FIRM, DESCRIPTION OF THE PARCE L I.E. NOTES/CASH AND RECEIVERS NAME I.E. ASSESSEE FIRM AT AHMEDABAD WAS FOUND. DURING THE COURSE OF SEARCH THE STATEMENT OF THE EMPLOYEE OF T HE ASSESSEE FIRM WAS RECORDED U/S 132(4). SHRI MANIBHAI NATHUDAS PATEL A N EMPLOYEE CATEGORICALLY STATED ON 21/22.07.2004 THAT CASH OF RS.15,00,000/- BELONGING TO ASSESSEE AS PER CASH BOOK OF MUMBAI BR ANCH WAS BEING SENT FROM MUMBAI TO AHMEDABAD. EVEN THOUGH THE CASH WAS FOUND FULLY EXPLAINED THE AO CHOSE TO MAKE THE ADDITION OF THIS SUM ON THE GROUND THAT SHRI MANIBHAI NATHUDAS PATEL COULD NOT GIVE A NY EXPLANATION IN ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 3 RESPECT OF THE CASH SEIZED AND ALSO THAT ASSESSEE F IRM COULD NOT GIVE ANY EVIDENCE OF TRANSFER OF CASH. HOWEVER, THE LD. CIT( A) DELETED THE ADDITION HOLDING THAT SOURCE OF CASH OF RS.15,00,000/- IS PR OVED BEYOND DOUBT BECAUSE OF - (I) EVIDENCE FOUND DURING THE COURSE OF SEARCH I.E. BHARATIYA; (II) STATEMENT OF EMPLOYEES TAKEN DURING THE COURSE OF SEARCH; AND (III) XEROX COPY OF CASH BOOK PRODUCED BEFORE THE A O ALONG WITH LETTERS DATED 9.8.2004 & 16.8.2004 WRITTEN TO DY. D IRECTOR OF INCOME TAX (INV) UNIT NO.2, MUMBAI 3. WE HAVE HEARD THE PARTIES. UNDER SIMILAR CIRCUMS TANCES, THE TRIBUNAL UPHELD THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF THE CASH ON THE BASIS OF ENTRIES IN THE CASH BOOK. THE CASH IN THE CASE OF PRESENT ASSESSEE AND IN THE CASE OF M/S PATEL NATVE RLAL CHNUBHAI & CO. WAS BEING TRANSFERRED THROUGH THE SAME VAN WHICH WA S SEARCHED BY THE DEPARTMENT ON 21.7.2004. THE TRIBUNAL IN THIS REGAR D HAD OBSERVED IN ITA NO.737/AHD/2008 ASST. YEAR 2005-06 PRONOUNCED O N 3.9.2010 AS UNDER :- 9. FROM THE REPORT, WE FIND THAT THE DETAILED REAS ONS FOR MAKING THE AFORESAID ADDITION ARE DISCUSSED BY THE AO IN PARA 5 OF THE ASSESSMENT ORDER. IN PARA 2 OF THE ASSESSMENT ORDER, THE AO ST ATED THAT AT THE MUMBAI CENTRAL RAILWAY STATION, WHERE THE WARRANT O F AUTHORIZATION TO SEARCH IN A MINI BUS TOOK PLACE. DURING THE COURSE OF SEARCH CASH AND JEWELLERY WORTH RS.2,17,04,640/- WAS FOUND FROM WHI CH CASH OF RS.1,33,05,000/- AND JEWELLERY AND DIAMOND OF RS.83 ,99,640/- WERE SEIZED. THE SAID CASH AND JEWELLERY BELONG TO NINE FIRMS WHICH WERE ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 4 CARRYING THE SAME FROM THEIR RESPECTIVE OFFICES TOG ETHER. THE DETAILS OF CASH AND JEWELLERY FOUND AND SEIZED ARE MENTIONED B Y THE AO AT PAGE 2 OF THE ASSESSMENT ORDER. DURING THE COURSE OF SEARC H CASH BELONGED TO THE ASSESSEE AMOUNTING TO RS.26,25,000/-. THIS CASH FOU ND WAS SEIZED IN PARA 5 OF THE ASSESSMENT ORDER, THE AO STATED THAT CASH OF RS.25,00,000/- FOUND WRAPPED IN NEWSPAPER AND KEPT IN A BAG AND DOES NOT SHOW NAMES OF SENDER OR THE RECEIVED. SHRI PRAKASH ISHVERLAL PATE L WAS AVAILABLE AT THAT TIME AND HIS STATEMENTS WAS RECORDED UNDER SECTION 131 OF THE ACT ON 21/22.07.2004. IN THIS STATEMENT, HE STATED THAT CA SH BELONGED TO THE FIRM AND WAS BEING TRANSFERRED TO AHMEDABAD. THE DDIT(IN V) UNIT-II(3), MUMBAI SEIZED THE AMOUNT FOR THE REASONS THAT SINCE NO SATISFACTORY EXPLANATION WITH REGARD TO THE SOURCE OF CASH AND D ISCLOSURE IN REGULAR BOOKS OF ACCOUNTS COULD BE FURNISHED BY THE PERSON OR ANY OTHER PERSON EVEN AFTER PASSES 15 HOURS SINCE COMMENCEMENT OF SE ARCH THE AMOUNT OF RS.25 LACS WAS SEIZED. IN THE ASSESSMENT ORDER, AFT ER CONSIDERING THE REPLY OF THE ASSESSEE THE AO MADE THE ADDITION OF R S.25,00,000/-. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE ARE T HE SAME, CASH WAS ALSO FOUND RECORDED IN THE CASH BOOK OF THE ASSESSEE AND THERE IS NO FURTHER EVIDENCE TO CONTRADICT THIS ASPECT, WE UPHOLD THE O RDER OF LD. CIT(A) IN DELETING THE ADDITION. ACCORDINGLY THE FIRST GROUND RAISED BY THE REVENUE IS DISMISSED. 4. THE SECOND GROUND RELATES TO DELETION OF ADDITIO N OF RS.2,39,400/- BY DISALLOWING INTEREST PAID ON MONEY BORROWED. THE LD. AO OBSERVED ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 5 THAT ASSESSEE HAS PAID INTEREST ON THE MONEY BORROW ED. THE CASH WAS KEPT IDLE AND WAS NOT USED FOR THE PURPOSE OF BUSINESS. 5. THE LD. CIT(A) DELETED THE ADDITION BY HOLDING T HAT MERELY BECAUSE ASSESSEE IS MAINTAINING CASH BALANCE IT CANNOT BE S AID THAT BORROWINGS ARE NOT USED FOR THE PURPOSES OF BUSINESS. IT IS ALSO N OT THE CASE OF THE AO THAT BORROWED FUNDS ARE DIVERTED ELSEWHERE FOR NON-BUSIN ESS PURPOSES. THE CASH BALANCE IS KEPT AS PER THE NEED OF THE BUSINES S AS JUDGED BY THE ASSESSEE. IN ANY CASE CASH BALANCES WERE ALSO TOTAL LY COVERED BY THE PARTNERS CAPITAL. 6. WE HAVE HEARD THE PARTIES. THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). INTEREST PAID ON BORROWED FUND S CAN BE DISALLOWED ONLY WHEN BORROWED FUNDS ARE USED FOR NON-BUSINESS PURPOSES. THE ASSESSEE HAS SHOWN TO THE AUTHORISED OFFICERS THAT CASH BALANCE IS REQUIRED TO BE KEPT IN THE LINE OF HIS BUSINESS. TH E NATURE OF BUSINESS SHOWN BY THE ASSESSEE IS TRANSFER OF PARCELS AND CA SH FROM ONE PLACE TO ANOTHER. IF FOR CERTAIN UNAVOIDABLE CIRCUMSTANCES L IKE DELAY IN TRANSPORTATION ON ACCOUNT OF CANCELLATION OF TRAINS OR OTHER PROBLEMS NOT IN THE CONTROL OF THE ASSESSEE, THE ASSESSEE WAS NO T ABLE TO MAKE DELIVERY OF THE CASH THEN CASH LYING WITH IT, IS UTILIZED FO R DELIVERY BACK AND TO FULFILL ITS COMMITMENT. THE ASSESSEE IS HIMSELF TO JUDGE ABOUT THE REQUIREMENT OF CASH IN HIS LINE OF HIS BUSINESS. EV EN OTHERWISE CASH ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 6 BALANCE IS FULLY COVERED BY PARTNERS CAPITAL AND, THEREFORE, THERE IS NO REASON TO DISALLOW A PART OF INTEREST PAYMENT. THUS ONCE ASSESSEE DISCHARGES THE ONUS THEN FOR MAKING DISALLOWANCES I T IS FOR THE AO TO PRODUCE EVIDENCE TO SHOW THAT MONEY BORROWED WAS UT ILIZED FOR NON- BUSINESS PURPOSES. SINCE IT IS NOT THE CASE AND THE RE IS NO MATERIAL ON RECORD TO SHOW THAT MONEY BORROWED WAS UTILIZED FOR NON-BUSINESS PURPOSES THE DISALLOWANCE OF INTEREST CANNOT BE UPH ELD. AS A RESULT, THIS GROUND OF REVENUE IS ALSO REJECTED. 7. THE THIRD AND FOURTH GROUNDS RELATE TO THE RESTR ICTED DISALLOWANCE TO 10% IN RESPECT OF OFFICE EXPENSES. THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.82,123/- UNDER THE HEAD OFFICE EX PENSES AND RS.1,82,141/- UNDER THE HEAD STATIONERY EXPENSES. T HE AO DISALLOWED RS.15,000/- AND RS.27,321/- RESPECTIVELY UNDER THE TWO HEADS ON THE GROUND THAT THESE EXPENSES DID NOT RELATE TO BUSINE SS. THE LD. CIT(A) RESTRICTED THE ADDITIONS TO 10% OF THE TOTAL CLAIMS . 8. WE HAVE HEARD THE PARTIES. THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE ESTIMATE MADE BY THE LD. C IT(A) IS REASONABLE AND THE SAME IS UPHELD. AS A RESULT, THE TWO GROUND S RAISED BY THE REVENUE ARE ALSO REJECTED. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.573/AHD/2009 ALONG WITH CO NO.59/AHD/2009 ASST. YEAR 2005-06 7 9. C.O. NO.59/AHD/2009 FILED BY THE ASSESSEE IS WIT HDRAWN AND HENCE THE SAME IS DISMISSED AS WITHDRAWN. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CO FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30/6/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 30/6/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 29/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 29/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..