Sanjay Singh, Ghaziabad V. DCIT, Ghaziabad

ITA 6097/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3304 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI
• Assessee Lawyers: L M AGGARWAL
• Keywords: Opportunity of being heard; Additional evidence; Onus to prove
• Section: 131; 68; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE SH RI N. K. SAINI, A CCOUNTANT MEMBER ITA NO. 6097/DEL/2016 : ASSTT. YEAR : 2012 - 13 SANJAY SINGH, L.M. AGARWAL & CO ., CA, KA - 32, KAVI NAGAR, GHAZIABAD VS DCIT , CIRCLE - 2 , GHAZIABAD - 201001 (APPELLANT) (RESPONDENT) PAN NO. A ONPS6917B ASSESSEE BY : SH. L. M. AGGARWAL, CA REVENUE BY : MS. BEDOBANI , S R . DR DATE OF HEARING : 0 6 .0 2 .20 1 7 DATE OF PRONOUNCE MENT : 05 .05 . 201 7 ORDER TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 01 . 09 .201 6 OF LD. CIT (A) , GHAZIABAD . 2. FOLLOWING GROUNDS HAVE B EEN RAISED IN THIS APPEAL : 1. THAT THE LEARNED CIT(A), GZB. ERRED IN LAW IN REJECT THE GROUND FOR WRONG ADHOC ADDITION OF RS.100000/ - ON ACCOUNT OF UNVERIFIED EXPENSES. 2 . THAT THE LEARNED CIT(A), GZB. ERRED IN LAW IN REJECT THE ASSESSEE GROUND FOR WRONG ADDITION OF RS.100000/ - IN RESPECT OF LOAN TAKEN FOR SH. PR EMJEET SINGH U/S 68 OF I.T. ACT. 3 . THAT THE ASSESSEE THE RIGHT TO ADD O R AMEND ANY GROUNDS OF APPEAL IF SO REQUIRED. ITA NO. 6097/DEL/2016 SANJAY SINGH 2 3. VIDE GROUND NO. 1, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADHOC ADDITION OF RS.1,00,000/ - ON ACCOUNT OF UNVERIFI ED EXPENSES. 4. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE DERIVED INCOME FROM BUSINESS OF WHOLESALE TR ADING OF ELECTRONIC ITEMS, INVER TORS AND BATTERIES ETC. AND FILED THE RETURN OF INCOME ON 22.09.2012 DECLARING AN INCOME OF RS.13,87,660 / - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE AO NOTICED THAT THE NET PROFIT RATE DECLARED BY THE ASSESSEE WAS V BETTER THAN THE EARLIER YEAR. HE ASKED THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNT S A LONGWITH SUPPORTING BILLS/VOUCHERS FOR EXPENSES CLAIMED IN PROFIT AND LOSS ACCOUNTS. THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED FOLLOWING EXPENSES IN THE PROFIT AND LOSS ACCOUNTS : BUSINESS PROMOTION - RS.2,18,444/ - DISCOUNT ALLOWED - RS.4,65,505/ - TR AVELLING & CONVEYANCE - RS.54,080/ - ACCORDING TO THE AO, PAYMENT S OF AFORESAID EXPENSES HAD BEEN MADE IN CASH AND NO SUPPORTING VOUCHERS WERE AVAILABLE. HE, THEREFORE, DISALLOWED RS.1,00,000/ - . 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT (A) AND SUBMITTED THAT THE AO HAD NOT POINTED OUT ITA NO. 6097/DEL/2016 SANJAY SINGH 3 ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT WHICH WERE DULY AUDITED AND THE AUDITOR MENTIONED THAT NO PERSONAL EXPENSES HAD BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD MADE CASH PAYMENT WITHOUT ANY SUPPORTING VOUCHERS TO SUBSTANTIATE THAT THE EXPENDITURE INCURRED HAD BEEN INCURRED FULLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HE ALSO OBSERVE D THA T UNDER THE HEAD TRAVELLING EXPENSES A CASH PAY MENT OF RS.3 00/ - PER DAY ON MOST OF THE DAYS FOR THE ENTIRE YEAR HAD BEEN MADE AND NO VOUCHER NUMBER ETC. HAD BEEN MENTIONED IN THE LEDGER ACCOUNT. HE, THEREFORE, SUSTAINED THE ADDITION MADE BY THE AO. 7. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT ALL THE MAJOR EXPENSES INCURRED DURING THE COURSE OF REGULAR BUSINESS, WERE THROUGH BILLS/VOUCHERS. T HEREFORE, ADHOC DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. 8. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 6097/DEL/2016 SANJAY SINGH 4 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABL E ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE DISALLOWANCE HAD BEEN MADE BY THE AO FOR THE REASONS THAT MOST OF THE EXPENSES WERE PAID IN CASH WHICH WERE TREATED AS UNVERIFIED EXPENSES. HOWEVER, THE AO DID NOT POINT OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT, AT THE SAME TIME, THE ASSESSEE ALSO DID NOT FURNISH THE COMPLETE VOUCHERS FOR THE EXPENSES INCURRED. IN MY OPINION, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS ON HIGHER SIDE. I, THEREFORE, TO MEET THE ENDS OF JUSTI CE, DEEM IT APPROPRIATE TO SUSTAIN THE DISALLOWANCE OF RS.50,000/ - AND AS SUCH THE ASSESSEE WILL GET A RELIEF OF RS.50,000/ - . 10 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE SUSTENANCE OF ADDITION OF RS.1,00,000/ - MADE BY THE AO U/S 68 OF THE INCOME - T AX ACT, 1961 ON ACCOUNT OF LOAN TAKEN FROM SH. PREM JEET SINGH. 11 . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD RECEIVED A LOAN OF RS.1,00,000/ - FROM SH. PREM JEET SING H AND FURNISHED A CONFIRMATION LETTER. THE AO ASKED THE ASSESSEE TO SUBMIT THE COPY OF INCOME TAX RETURN ITA NO. 6097/DEL/2016 SANJAY SINGH 5 ALONGWITH COPY OF BANK STATEMENT OF THE ABOVE SAID CREDITOR, SO THAT HIS CREDITWORTHINESS COULD HAVE BEEN EXAMINED, SINCE THE ASSESSEE COULD PRODUCE TH E PHOTO COPY OF THE BANK STATEMENT ON THE SPECIFIED DATE AND NO COPY OF RETURN OF INCOME WAS FILED. THE AO HELD THAT THE SOURCE AND NATURE OF THE OUTCOME OF MONEY IN THE CREDITOR S BANK ACCOUNT COULD NOT BE ASCERTAINED. HE, THEREFORE, MADE THE ADDITION OF RS.1,00,000/ - IN THE HANDS OF THE ASSESSEE. 12 . BEING AGGRIEVED THE ASSESSEE C ARRIED THE MATTER TO THE LD. CIT (A) AND SUBMITTED THE FOLLOWING DOCUMENTS: (1) COPY OF ITR OF THE ASSESSEE (2) COPY OF COMPUTATION OF INCOME OF THE ASSESSEE (3) COPY OF AUD ITED TRADING PROFIT & LOSS ACCOUNT (4) COPY OF BALANCE SHEET (5) COPY OF FIXED ASSETS SCHEDULE (6) COPY OF AUDIT REPORT (7) COPY OF REPLY FILED BEFORE AO ON 11/11/14 (8) COPY OF CONFIRMATION OF SH. PREM JEET SINGH AS FILED ON 11/11/14 (9) COPY OF REP LY FILED ON 08/03/15 (10)COPY OF ASSESSEE REPLY LETTER 16/03/15 (11) COPY OF REPLY FILED ON 19/03/15 (12) COPY OF BANK STATEMENT OF SH. PREM JEET SINGH FILED ON 19/03/15 FOR VERIFICATION OF LOAN ENTRY OF RS. 100000/ - ON 26/09/11 (13) COPY OF APPLICATIO N U/S 154 OF I. TAX ACT DT 04/04/15 ITA NO. 6097/DEL/2016 SANJAY SINGH 6 13 . IT WAS FURTHER SUBMITTED THAT THE ASSESSEE RECEIVED THE LOAN BY ACCOUNT PAYEE CHEQUE ON 26.09.2011 AND FURNISHED THE CONFIRMATION FROM THE LENDER VIDE REPLY DATED 11.11.2014 AND TRIED TO GET THE COPY OF BANK ACCOUN T FROM THE ABOVE LENDER BUT THE ASSESSEE CAME TO KNOW THAT HE FACE D SOME PROBLEM, SO COPY OF BANK ACCOUNT WOULD BE TAKEN IN 3 TO 4 DAYS TIME AND THE ASSESSEE REQUESTED THE AO TO ISSUE SUMMON U/S 131 OF THE ACT FOR GETTING THE REQUIRED PAPERS OR ALLOWED TIM E UPTO 20.03.2015 BUT THE AO DID NOT ISSUE THE SUMMON AND ALSO NOT ALLOW ED TIME UPTO 20.03.2015. THEREFORE, THE ONUS TO PROVE THE IDENTITY OF THE CREDITORS, CAPACITY OF CREDITORS TO ADVANCE MONEY AND GENUINENESS OF THE TRANSACTION HAD BEEN FULFILLED BY THE ASSESSEE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: SHREELEKHA BANARJEE VS CIT (196 3) 49 ITR 112 (SC) CIT VS SHREE GOPAL & CO. (1993) 204 ITR 285 (GAU) PRECISION FINANCE (P) LTD. (1994) 208 ITR 465 (CAL.) CIT VS BAISHNAB CHARAN MOHANTY (1995) 21 2 ITR 199 (ORI) UNITED COMMERCIAL & INDUSTRIAL CO. (P) LTD. (1994) 187 ITR 596 (CAL.) ORIEN TAL WIRE IND. PVT. LTD. (1981) 1 34 ITR 688 (CAL.) C. KANT & CO. (1980) 126 ITR 63 (CAL.) ITA NO. 6097/DEL/2016 SANJAY SINGH 7 M.A. LIMITER KUTTY (1992) 198 ITR 147 (KER.) RBN NAIDU VS CIT (1956) 29 ITR 194 (NAG.) CHUNNILAL TIKAMCHAND COAL CO. LTD. VS CIT (1955) 30 ITR 181 (SC) LALCHAND BHAGAT AMBICA RAM VS C IT (1959) 37 ITR 288 (SC) SRI RAM TANDON VS CIT (1961) 42 ITR 689 (ALL.) KANPUR STEEL CO. LTD. VS CIT (1957) 32 ITR 56 (ALL.) ALI HUE SIN VS STO (1988 ) 68 STC 319 (ORI ) ASHOK ELECTRO DIAMONDS VS JT. CTO (1971) 28 ST C 21 (MAD.) EMC WORKS PVT. LTD. VS ITO (1963) 49 ITR 650 (ALL.) MAHBOOB SINGH SUBHASH CHAND ARHATI VS CST (1988) STC 229 MUNNALAL MURLIDHAR VS CIT (1971) 79 ITR 540 (ALL.) KS SETH GOPIKISAN A GARWAL VS AC OF ST (1971) TAX LR 355 (MP) PRAVIN COLOUR CO. VS ITO (1977) TAXATION 48(6) - 155 (BOM - TRIB.) NATHU RAM PREM CHNAD VS CIT (1963) 49 ITR 561 (ALL) CIT VS ORISSA CORPORATION (P) LTD. (1986) 159 ITR 78 (SC) ADD. CIT VS HANUMAN AGARWAL (1985) 151 IT R 150 (PAT) 1 4 . THE LD. CIT(A) ALSO ASKED THE REMAND REPORT FROM THE AO WHO SUBMITTED THAT THE ASSESSEE WAS ASKED TO FURNISH THE COPY OF ITR OF SH. PREM JEET SINGH ALONGWITH COPY OF STATEM ENT SO THAT THE GENUINITY AND CREDITWORTHINESS WOULD ITA NO. 6097/DEL/2016 SANJAY SINGH 8 BE PROVED. BUT THE ASSESSEE COULD NOT PRODUCE THE ITR OF THE CREDITOR NOR COULD PRODUCE SH. PREM JEET SINGH TO PROVE THE GENUINENESS OF THE TRANSACTION. 15 . IN HIS REJOINDER THE ASSESSEE SUBMITTED THAT THE TRANSACTION HAD ROUTED THROUGH BANK AND COPY OF BANK STATEMENT WAS FURNISHED. IT WAS FURTHER SUBMITTED THAT WHEN THE BANK STATEMENT OF THE LENDER WAS AVAILABLE IN THE RECORD THEN WHY SHE MENTIONED THAT IT COULD NOT BE ASCERTAINED THAT OUTCOME OF MONEY FROM THE CREDITOR S BANK ACCOUNT. IT WAS STATED THAT THE AO NEVER ISSUED ANY ORDER TO PRODUCE THE LENDER AND ALSO NOT ISSUED ANY NOTICE U/S 131 OF THE ACT FOR VERIFICATION OF CREDITWORTHINESS. IT WAS ALSO STATED THAT THE CASE LAWS RELIED BY THE AO WERE DIFFERENT ON THE FACTS FROM THE ASSESSEE S CASE. 16. THE LD. CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITION BY OBSERVING IN PARA 7.2 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 7.2 GROUND NO. 3: APPELLANT HAS CHALLENGED THE ADDITION MADE BY AO RS. 1,00,000/ - U/S 68 BEING LOAN TAKEN BY AP PELLANT FROM SHRI PREM JEET SINGH. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED ADDITIONAL EVIDENCE SUCH AS COPY OF BANK STATEMENT OF THE CREDITOR FOR THE SPECIFIED DATE. HOWEVER, THE AO POINTED IN HER REMAND REPORT THAT APPELLANT ITA NO. 6097/DEL/2016 SANJAY SINGH 9 NE ITHER FURNISHED COPY OF ITR NOR THE COPY OF THE BANK ACCOUNT OF THE CREDITOR TO PROVE THE CREDITWORTHINESS OF , THE CREDITOR. THE COPY OF THE BANK ACCOUNT OF SHRI PREMJEET SINGH (THE CREDITOR), FURNISHED DURING APPELLATE PROCEEDINGS SHOWS THAT THE CREDITOR HAD GIVEN LOAN TO APPELLANT ON 26.09.2011. ON THE SAME DAY RS. 1,00,000/ - CASH HAS BEEN DEPOSITED IN THE SAID ACCOUNT. THUS, IN ABSENCE OF DETAILS OF INCOME TAX RETURNS OF THE CREDITOR AND ABOVE MENTIONED FACTS REGARDING BANK ACCOUNT, IT IS HELD THAT THE C REDITWORTHINESS OF CREDITOR HAS NOT BEEN SUBSTANTIATED BY THE APPELLANT. THE APPELLANT'S ARGUMENTS THAT TRANSACTION HAS BEEN MADE THROUGH BANK, DOES NOT PROVE THAT THE CREDITOR HAD CREDITWORTHINES S. THUS, THE ACTION OF THE AO, MAKING AN ADDITION OF RS. 1,0 0,000/ - U/S 68 IS UPHELD AND THIS GROUND OF APPELLANT IS DISMISSED. 17. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED THE CON FIRMATION RECEIVED FROM SH. PREM JEET SINGH WHO HAD GIVEN A CHEQUE OF RS.1,00,000/ - ON 26.09.2011 AND THE STATEMENT OF BANK ACCOUNT COULD NOT BE OBTAINED WHICH WAS LATER ON RECEIVED AND FURNISHED BEFORE THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THE ASS ESSEE REQUESTED THE AO TO ISSUE THE SUMMON U/S 131 OF THE ACT FOR GETTING THE REQUIRED PAPERS FROM THE BANK AND TO ALLOW THE TIME UPTO 20.03.2015 BUT THE AO CLOSED THE PROCEEDINGS ITA NO. 6097/DEL/2016 SANJAY SINGH 10 ON 16.03.2015 AND THE COPY OF ACCOUNT FROM BANK RECEIVED ON 19.03.2015 WAS S UBMITTED AT THE D O UCK COUNTER ON 19.03.2015. THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 18. IN HER RIVAL SUBMISSIONS THE LD. DR REITERATED THE OBSERVATIONS MADE IN THE IMPUGNED ORDER AND STRONGLY SUPPORTED TH E ORDER PASSED BY THE LD. CIT(A). 19. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE FURNISHED THE COPY OF CONFIRMATION RECEIVED FROM THE CREDITO R SH. PREM JEET SINGH FROM WHOM THE LOAN OF RS.1,00,000/ - WAS RECEIVED THROUGH CHEQUE WHICH IS EVIDENT FROM COPY OF THE BANK STATEMENT PLACED AT PAGE NO. 27 OF THE ASSESSEE S PAPER BOOK. THE SAID BANK STATEMENT WAS NOT AVAILABLE DURING THE COURSE OF ASSESS MENT PROCEEDINGS. HOWEVER, IT WAS OBTAINED ON 19.03.2015 WHILE THE AO CLOSED THE PROCEEDINGS ON 16.03.2015. THE ASSESSEE ALSO REQUESTED THE AO TO ISSUE THE SUMMON U/S 131 OF THE ACT BUT THAT REQUEST WAS NOT ACCEPTED BY THE AO FOR THE REASON BASED KNOWN TO HIM. IN THE PRESENT CASE, THE LOAN OF RS.1,00,000/ - WAS RECEIVED BY THE ASSESSEE THROUGH CHEQUE FROM SH. PREM JEET SINGH , ITA NO. 6097/DEL/2016 SANJAY SINGH 11 HOWEVER, THE ASSESSEE NEITHER FURNISHED THE COPY OF HIS INCOME TAX RETURN NOR PRODUCED HIM TO PROVE THE IDENTITY AND CREDITWORTHINESS. I, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS , DEEM IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 20 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . (ORDER PRONOUNCED IN THE OPEN COURT ON 05 /0 5 /2017) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DATED: 05 /05 /2017 * SUBODH * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR