Amar Lal Miglani, Karnal V. ITO, Kaithal

ITA 626/CHANDI/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51420 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Business income
• Section: 68; 145; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER & SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 626/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI AMAR LAL MIGLANI, VS. THE ITO, PROP MIGLANI RICE & WARD-3, KAITHAL GENERAL MILLS, KARNAL PAN NO. ABZPL7381D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ JAIN RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KARNAL RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. BECAUSE THE ACTION OF THE CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW IN UPHOLDING THE ADDITION OF RS. 50,0 00/- ON ACCOUNT OF HUSK BY FOLLOWING THE PRECEDING YEAR ORDER WITHOUT ASSIGNING INDEPENDENT REASONING QUA T HE IMPUGNED YEAR. 2. BECAUSE THE ACTION OF THE CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW IN UPHOLDING THE ADDITION OF CASH CRE DIT AMOUNTING TO RS. 90,000/- FOR MRS RUBY MIGLANI AND 2 RS. 90,000/- FOR MRS SONIA MIGLANI AND THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 54,022/- ON THE LOANS IS UNDER DISPUTE. 3. BECAUSE THE ACTION OF THE CIT(A) IS UNDER CHALLENGE ON FACTS AND LAW IN UPHOLDING THE ADDITION OF RS. 25,0 00/- (OUT OF RS. 4,21,441/-) RELATABLE TO LABOUR IN THE PRODUCTION AND TRADING ACCOUNT AND THE QUANTUM THEREOF IS UNDER CHALLENGE TOO. 4. THE ISSUE IN GROUND NO.1 IS AGAINST ADDITION OF RS. 50,000/- ON ACCOUNT OF HUSK. 5. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS RUNNING A RICE SHELLER. THE ASSESSEE IN THE IMMEDIATELY PR ECEDING YEAR WAS RUNNING THE BUSINESS IN THE STATUS OF HUF, WHICH DU RING THE YEAR HAS BEEN TAKEN OVER BY THE ASSESSEE IN HIS INDIVIDUAL CAPACI TY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE MILLED 14078 QUIN TAL OF PADDY BESIDES MILLING OF 4180.75 QUINTAL PADDY OF THE GOVERNMENT ON JOB CHARGES BASIS. THE ASSESSEE CLAIMED TO HAVE RECEIVED HUSK OF 3525. 76 QUINTALS OUT OF TOTALLY PADDY MILLED WEIGHING 18258.75 QUINTALS. T HE ASSESSEE CLAIMED THAT 1880.65 QUINTALS OF HUSK WAS CONSUMED AS FUEL IN THE DRIER FOR DRYING THE PADDY. THE ASSESSEE HAS NOT MAINTAINED ANY DAY TO DAY RECORD OF THE HUSK PRODUCED AND THE CONSUMPTION OF HUSK AVAILABL E WAS SHOWN HIGH AS PER THE ASSESSING OFFICER. FURTHER, THE ASSESSIN G OFFICER NOTED THAT THE ASSESSEE WAS NOT AWARE OF THE QUANTITY OF HUSK LYIN G WITH HIM ON 31.3.2007 AS NO SUCH RECORDS WERE BEING MAINTAINED. ACCORDINGLY, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED U/S 145 (3) OF THE ACT AND THE ASSESSING OFFICER HELD THAT 1/3 RD OF THE HUSK PRODUCED DURING THE YEAR WAS CONSUMED AS FUEL FOR THE DRIER WHICH WORKS OUT TO 1175.25 QUINTALS 3 AND AFTER GIVING SET OFF OF THE HUSK CLAIMED TO BE SOLD, THE BALANCE CLOSING STOCK OF HUSK WAS WORKED OUT TO 705.40 QUINTALS. TH E INCOME OF THE ASSESSEE WAS THUS INCREASED TO RS. 70,540/- BY ADOP TING THE RATE OF HUSK AT RS. 100/- PER QUINTALS. THE CIT(A) NOTED THAT THE FACTS OF THE PRESENT CASE WITH RESPECT TO ISSUE RAISED WERE SAME AS IN THE LA ST YEAR WHEREIN ADDITION OF RS. 1,07,696/- WAS MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT, WHICH WAS RESTRICTED TO RS. 50,000/- BY THE CIT(A) AND UPHELD BY THE TRIBUNAL. ACCORDINGLY, THE ADDITION WAS RESTRICTED TO RS. 50,000/- BY THE CIT(A). THE ASSESSEE IS IN APPEAL AGAINST THE AFO RESAID ADDITION OF RS. 50,000/-. 6. WE FIND THAT THE TRIBUNAL IN THE CASE OF SHRI AM AR LAL HUF, PROP MIGLANI RICE & GENERAL MILLS, KAITHAL V THE JCIT, K URUKSHETRA (ITA NO. 540/CHD/2009) RELATING TO ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 26.2.2010 HAD ADDRESSED THE ISSUE OF ADDITION ON AC COUNT OF YIELD OF HUSK VIDE PARA 5 TO 9 OF THE ORDER. THE TRIBUNAL VIDE P ARA 9 HELD AS UNDER:- 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE IS IN THE BUSINESS OF RICE SHELLER AND HAD SHOWN 19.5% OF HUSK PRODUCTION IN THE PROCESS O F RICE SHELLING OUT OF WHICH IT CLAIMS TO HAVE CONSUMED 10 .5% AS FUEL FOR BOILERS AND THE BALANCE 9% WAS SHOWN AS IT S CLOSING STOCK AT THE END OF THE YEAR. THE ASSESSEE HAS NO T MAINTAINED ANY RECORD TO EVIDENCE ITS PRODUCTION AN D CONSUMPTION OF HUSK. THE ASSESSING OFFICER ALSO ES TIMATED THE YIELD OF HUSK AT 18% AND WAS OF THE VIEW THAT 1 /3 RD WAS CONSUMED BY THE ASSESSEE AND 2/3 RD WAS AVAILABLE WITH THE ASSESSEE AT THE CLOSE OF THE YEAR. THE ASSESSING O FFICER HAD MADE AN ADDITION OF RS. 1,07,696/-. THE CIT(A) NOTED THAT BOTH THE ASSESSEE AND THE ASSESSING OFFICER HAD EST IMATED THE YIELD OF HUSK, ITS UTILIZATION AND BALANCE AVAILABL E AS STOCK. THE ADDITION WAS RESTRICTED TO RS. 50,000/- BY THE CIT(A) AND IT WAS ALSO NOTED THAT SIMILAR ADDITION OF RS. 50,000/- WAS ACCEPTED BY THE ASSESSEE IN THE EARLIER YEAR ON THIS ISSUE. IN THE TOTALITY OF FACTS AND CIRCUMSTANCE OF THE CASE, WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN UPHOLDING THE ADDITION TO THE EXTENT OF RS. 50,000/ - IN THE ABSENCE OF THE ASSESSEE BRINGING ON RECORD ANY EVID ENCE TO 4 PROVE ITS CASE. THE GROUND NO.2 RAISED BY THE ASSE SSEE IS THUS DISMISSED. 7. THE FACTS IN THE PRESENT GROUND OF APPEAL RAISED BY THE ASSESSEE ARE IDENTICAL TO THE FACTS ARISING BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2006- 07 AND FOLLOWING OUR ORDER DATED 26.2.2010, WE CONF IRM THE ADDITION OF RS. 50,000/-. THE GROUND NO. 1 RAISED BY THE ASSES SEE IS THUS DISMISSED. 8. THE ISSUE IN GROUND NO.2 RAISED IS AGAINST THE A DDITION ON ACCOUNT OF TWO CASH CREDITS AND THE INTEREST THEREON. THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION HAD RAISED THE UNSECURED LOANS OF RS. 90,000/- EACH FROM MRS RUBY MIGLANI AND MRS SONIA MIGLANI, DAUGH TER-IN-LAWS OF THE APPELLANT. THE SOURCES OF DEPOSITS WERE EXPLAINED TO BE OUT OF CASH BALANCE AVAILABLE IN THE BOOKS OF BOUTIQUE BUSINESS AND THE DEPOSITS BEING MADE AFTER WITHDRAWALS FROM THE BANK. THE AFFIDAVI TS OF THE TWO PERSONS WERE FURNISHED BEFORE THE ASSESSING OFFICER. THE A SSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE C REDITORS AND ALSO TO PRODUCE THE CREDITORS. IN REPLY, THE ASSESSEE EXPL AINED THAT THE SAID CREDITORS WERE PRODUCED LAST YEAR ALSO AND HENCE TH EIR IDENTITIES STAND ESTABLISHED. FURTHER, THE EVIDENCE OF THE BOUTIQUE BUSINESS CARRIED ON BY THE CREDITORS WERE ALSO ESTABLISHED IN THE PRECEDIN G YEARS. THE ASSESSING OFFICER NOTED THAT MRS RUBY MIGLANI DEPOSITED CASH OF RS. 40,000/- ON 28.12.2006 AND RS. 50,000/- ON 29.1.2007 AND THEREA FTER LOAN OF RS. 90,000/- WAS ADVANCED TO THE ASSESSEE ON 15.2.2007. SIMILARLY, IN THE ACCOUNT OF SMT. SONIA MIGLANI, CASH OF RS. 50,000/- WAS DEPOSITED ON 1.3.2007 AND LOAN EQUIVALENT TO THE AMOUNT WAS GIVE N ON 6.3.2007. FURTHER, CASH OF RS. 40,000/- WAS DEPOSITED ON 7.3. 2007 AND LOAN OF RS. 40,000/- WAS ADVANCED ON 10.3.2007. THE SAID CREDI TORS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. IN VIEW TH EREOF, THE ASSESSING 5 OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS FAILE D TO ESTABLISH THE GENUINENESS OF THE CREDITS IN THE NAME OF THE SAID CREDITORS AND THE SAME WAS ADDED AS INCOME OF THE ASSESSEE AS PER SECTION 68 OF THE ACT. THE INTEREST CLAIMED TO BE PAID TO THE SAID CREDITORS W ERE ALSO DISALLOWED. IN APPEAL THE CIT(A) UPHELD THE ORDER OF ASSESSING OFF ICER. 9. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE LOANS FROM THE SAID PARTIES WAS RAISED IN THE PRECEDING YEAR ALSO AND T HE SOURCE OF THE SAID LOANS WAS EXPLAINED TO BE OUT OF THE BOUTIQUE BUSIN ESS CARRIED ON BY BOTH THE LADIES. THE TRIBUNAL VIDE ORDER (SUPRA) DATE D 26.2.2010 HAD DELETED THE AFORESAID ADDITIONS AS THE ASSESSEE HAD ESTABLI SHED THE IDENTITY AND THE CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRA NSACTIONS. THE LD. DR PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 10. ON PERUSAL OF THE RECORD AND THE ORDER OF THE T RIBUNAL (SUPRA) DATED 26.2.2010 WE FIND THAT THE ASSESSEE DURING THE PREC EDING YEAR HAD RAISED LOANS OF RS. 75,000/- FROM MRS. RUBY MIGLANI AND R S. 1,20,000/- FROM MRS. SONIA MIGLANI. THE AFFIDAVITS OF THE SAID LAD IES WERE FURNISHED BEFORE THE ASSESSING OFFICER AND EVEN ONE OF THE CR EDITORS APPEARED BEFORE THE ASSESSING OFFICER. THE STATEMENT OF THE HUSBAN D OF THE OTHER CREDITOR WAS ALSO RECORDED AND SOURCES OF THE SAID CREDITOR WERE EXPLAINED TO BE OUT OF THE BOUTIQUE BUSINESS BEING CARRIED OUT BY THE S AID LADIES. BOTH THE LADIES WERE FOUND TO BE ASSESSED TO TAX AND IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, THE TRIBUNAL VIDE PARA 5 HELD AS UND ER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE YEAR HAD RECEIVED RS. 75,000/- FROM MRS RUBY MIGLANI AND RS. 1,20,000/- F ROM MRS SONIA MIGLANI WHO ARE BOTH DAUGHTERS IN LAW OF THE ASSESSEE. THE AFFIDAVIT OF BOTH THE PERSONS WERE FILED BEFORE THE 6 ASSESSING OFFICER. MRS RUBY MIGLANI APPEARED BEFOR E THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HER STATEMENT WAS RECORDED. HOWEVER , HUSBAND OF MRS SONIA MIGLANI APPEARED BEFORE THE AS SESSING OFFICER AND ADMITTED THAT HIS WIFE HAD ADVANCED TH E SAID LOAN. BOTH THE LADIES CLAIMED TO HAVE BEEN CARRYIN G OF THE BUSINESS OF RUNNING BOUTIQUES AND THE SOURCE OF THE SAID LOAN ADVANCED TO THE ASSESSEE BEFORE US WAS OUT OF THE A FORESAID BUSINESS INCOME. BOTH THE LADIES ARE ASSESSED TO T AX SINCE ASSESSMENT YEAR 2001-02 UNDER PAN NO. AGMPR 4048 M IN THE CASE OF MRS RUBY MIGLANI AND PAN NO. AJVPM 7361 G IN THE CASE OF MRS. SONIA MIGLANI. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WHERE THE LOAN CREDITORS ARE BEING ASSESSED TO TAX AND THE AMOUNT IS RECEIVED AS A LOAN BY THE ASSESSEE DURING THE YEAR THROUGH BANKING CHANNELS, WE FIND T HAT THE IDENTITY OF THE PERSON IS ESTABLISHED. IN RESPECT OF THE GENUINENESS OF THE TRANSACTIONS, THE SAME BEING BET WEEN FAMILY MEMBERS STANDS ESTABLISHED AND THE CREDITWOR THINESS OF THE CREDITOR IS ESTABLISHED IN THE CASE, WHERE BOTH THE LOAN CREDITORS ARE ASSESSED TO TAX AND THE AMOUNT I S CLAIMED TO HAVE BEEN ADVANCED OUT OF THEIR RESPECTIVE BUSIN ESS INCOME. IN ASSESSMENT YEAR 2005-06 BOTH THE LADIE S HAD ADVANCED LOANS TO THE ASSESSEE AND THEY WERE SUMMON ED BY THE ASSESSING OFFICER AND AFTER EXAMINATION AND REC ORDING OF STATEMENT, THE CREDIT OF DEPOSIT WAS ACCEPTED. AS THE ASSESSEE HAVE FULFILLED ALL THE THREE INGREDIENTS I N RESPECT OF LOAN CREDITORS, WE FIND NO MERIT IN THE AFORESAID A DDITION OF RS. 75,000/- RECEIVED AS LOAN FROM SMT.RUBY MIGLANA I AND RS. 1,20,000/- RECEIVED FROM SONIA MIGLANI. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RAM NARAIN GOEL [224 ITR 180 (P&H)] AND CIT VS KULWANT SINGH & COMPANY [299 ITR 553 (P&H)] HAD HELD THAT SOURCE OF SOURCE CANNOT BE ENQUIRED. ESPECIALLY IN THE FACTS OF THE PRESENT CASE, WHERE THE LOAN CREDITORS ARE ASSESSED TO TAX, WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN REJECTING THE EXPLANATION OF THE ASSESSEE IN RESPE CT OF LOAN CREDITORS. . WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE GROUND NO.1 RAISED BY THE ASSESSEE IN THIS REGARD. 11. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAS RAISED FURTHER LOANS OF RS. 90,000/- EACH FROM THE SAID LADIES I.E . MRS. RUBY MIGLANI AND MRS SONIA MIGLANI WHO ARE DAUGHTER-IN-LAWS OF THE A SSESSEE. THE ADDITIONS IN THE CAPTIONED YEARS HAVE BEEN MADE AS THE ASSESSEE HAS FAILED TO PRODUCE THE SAID CREDITORS. THE PLEA OF THE ASSE SSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE LADIES WERE PRODUCED IN THE PRECEDING YEAR AND THEIR STATEMENTS WERE RECORDED AND THE FACTUM O F THEIR CARRYING ON THE BUSINESS WAS ALSO ESTABLISHED IN THE PRECEDING YEAR S. BOTH THE LADIES ARE 7 ASSESSED TO TAX UNDER PAN NO. AGMPR 4048 M IN THE C ASE OF MRS RUBY MIGLANI AND PAN NO. AJVPM 7361G IN THE CASE OF MRS. SONIA MIGLANI . 12. THE AMOUNTS HAS BEEN RECEIVED THROUGH BANKING CHANNELS THOUGH AFTER DEPOSIT OF CASH RECEIPTS OF THE BUSINESS. TH E FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS RAISED IN THE ASSES SMENT YEAR 2006-07 AND FOLLOWING THE RATIO LAID DOWN IN THE SAID YEARS, WE FIND NO MERIT IN THE ADDITION OF RS. 90,000/- EACH RAISED FROM M/S RUBY MIGLANI AND MRS. SONIA MIGLANI. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 1,80,000/-. IN LINE THEREOF, THE ASSESSEE IS A LSO ENTITLED TO CLAIM THE DEDUCTION ON ACCOUNT OF INTEREST PAID ON THE AFORES AID LOANS. THUS THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 13. THE ISSUE IN GROUND NO.3 IS AGAINST THE DISALLO WANCE OF RS. 25,000/- OUT OF LABOUR EXPENSES AND RS. 4,21,441/-. THE AFO RESAID DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AS THE ASSESSEE H AD PRODUCED SELF MADE VOUCHERS. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCE S OF THE CASE, WE UPHOLD THE DISALLOWANCE OF RS. 25,000/- OUT OF LABO UR EXPENSES. THE GROUND NO.3 RAISED BY THE ASSESSEE IS THUS DISMISSE D. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF AUGUST, 2011. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 4 TH AUGUST, 2011 RKK 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH