Jt. CIT,Cent. Cir., Aurangabad V. Shri Kachrulal N. Mutha, Jalna

ITA 636/PUN/2011

• Counselvise Citation: 63624514 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-09-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of cross examination
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.636/PN/2011 ASSESSMENT YEAR : 2000 - 01 JT. CIT, CENT. CIR., AURANGABAD VS. KACHRULAL N. MUTHA, SHREE COLONY, COLLEGE ROAD, JALNA (APPELLANT) (RESPONDENT) PAN NO. AMPPM0401Q APPELLANT BY: SHRI KISHORE PHADKE RESPONDENT BY: SMT. SHAILJA RAI ORDER PER R.S. PADVEKAR, JM:- THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNE D ORDER OF THE LD.CIT(A), AURANGABAD DATED 25-02-2011 FOR THE A.Y. 2000- 01. THE REVENUE HAS TAKEN FOLLOWING GROUNDS IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) WAS CORRECT IN HOLDING THAT ONCE THE I DENTITY OF THE CREDITORS IS PROVED AND FURTHER ACCEPTANCE OF THE T RANSACTION BY THE CREDITORS, IT IS NOT NECESSARY TO LOOK INTO THE IMPORTA NT ASPECT OF CREDITWORTHINESS INVOLVED IN THE TRANSACTION. 2. WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) WAS CORRECT IN HOLDING THAT THE CREDITORS WERE IN POSITION TO MAKE ALLEGED INVESTMENT OF RS.31 LAKH ESPECIALLY WHEN THERE IS NO EVIDENCE REGARDING AGRICULTURE INCOME GENERATED AND IT IS APPARENT THAT THE ALLEGED CREDITOR COULD NOT HAVE BEEN GENERATI NG SUCH SURPLUS TO THE EXTENT OF RS.31 LAKHS. 2. THE SOLITARY ISSUE IN CONTROVERSY IS IN RESPECT OF THE ADDITION OF RS.31 LAKHS WHICH WAS MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME-TAX ACT AND DELETED BY THE LD.CIT(A). THE FACTS A S NOTED BY THE ASSESSING OFFICER ARE AS UNDER. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 OF THE INCOME-TAX ACT ON THE RUDRANEE GROUP O F AURANGABAD AND ITS ASSOCIATES ON 02-02-2006. DURING THE COURSE O F THE SEARCH ACTION, PROMISSORY NOTE EXECUTED IN FAVOUR OF THE ASSESSE E WAS FOUND 2 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, WHICH WAS OF RS.25,00,000/-. FROM SAID PROMISSORY NOTE T HE INFERENCE WAS DRAWN THAT RUDRANEE CONSTRUCTION COMPANY AND THE ASSESSEE WERE INDULGED INTO UNAUTHORIZED AND ILLEGAL MONEY LENDING. A SURVE Y ACTION WAS TAKEN U/S.133A OF THE ACT IN THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE PRESENT ASSESSEE. THE ASSESSEE WAS ISS UED NOTICES U/S.153C ON THE BASIS OF THE DOCUMENT IN THE FORM OF PROM ISSORY NOTES SEIZED FROM THE PREMISES OF RUDRANEE CONSTRUCTION COMPAN Y DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. AS PER THE DO CUMENTS FOUND FROM THE PREMISES OF THE ASSESSEE, IT WAS REVEALED THAT H E WAS ALLEGEDLY ENGAGED IN THE MONEY LENDING BUSINESS SINCE LONG AND ENTIR E MONEY LENDING BUSINESS WAS UNACCOUNTED AND HE WAS ADVANCING M ONEY TO THE PARTIES BY TAKING HUNDIES PROMISSORY NOTES AS SECURITIES AND ALSO TO KEEP SIGNED BLANK CHEQUES AS A SECURITY. AS NOTED BY T HE ASSESSING OFFICER STATEMENT OF THE ASSESSEE WAS RECORDED IN THE CO URSE OF THE SURVEY ACTION U/S.133A OF THE ACT. THE ASSESSEE DECL ARED SUM OF RS.2.51 CRORES AS UNDISCLOSED INCOME FOR DIFFERENT ASSESSME NT YEARS BUT WHILE FILING OF RETURNS OF INCOME FOR THE A.YS. 2000-01 TO 2006 -07 THE ASSESSEE DID NOT ADHERE TO HIS STATEMENT RECORDED U/S .131 AND RETURNED THE TOTAL INCOME FOR RS.89 LAKHS ONLY IN DIFFERENT ASSESSMENT YEARS. 3. SO FAR AS THE ISSUE BEFORE US IS CONCERNED, AS NOTED BY THE ASSESSING OFFICER, DURING THE SURVEY U/S.133A IN THE PREMISE S OF THE ASSESSEE CERTAIN PAPERS RELATING TO A SUB CONTRACT OF P ACKAGING OF MID- DAY MEAL, PACKS OF RICE AND WHEAT WAS NOTICED BETWEEN T HE ASSESSEE AND NATIONAL CO-OPERATIVE AND CONSUMER FEDERATION OF INDIA N CCF. THE ASSESSEE HAS MADE THE INVESTMENT IN THE NCCF CONTRACT TO THE EXTENT OF RS.59 LAKHS. THE ASSESSING OFFICER SOUGHT THE EXPLANATION O F THE ASSESSEE IN RESPECT OF THE SOURCE OF THE SAID INVESTMENT . THE ASSESSEE STATED THAT HE HAS RECEIVED AN AMOUNT OF RS.31 LAKHS AS AN ADVANCE AGAINST THE PROPOSED SALE OF LAND AND IN SUPPORT OF THE SAID STATEMENT HE SUBMITTED A COPY OF THE AGREEMENT OF SALE. HE ALSO EXPLAIN ED THAT AN AMOUNT OF RS.20 LAKHS WAS RECEIVED AS PART OF THE SAID CO NTRACT. THE 3 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE SOURCE OF RS.31 LAKHS. 4. THE ASSESSING OFFICER HAS OBSERVED THAT AS PER THE A GREEMENT OF THE SALE OF THE LAND WHICH IS UNREGISTERED IN THE FORM OF I SAR PAVATI, SOME SIX PERSONS HAD ENTERED INTO AN AGREEMENT TO PU RCHASE LAND FROM THE ASSESSEE FOR A CONSIDERATION OF RS.50 LAKHS AND AT TH E TIME OF EXECUTION OF THE SAID AGREEMENT RS.31 LAKHS HAS BEEN SHOWN AS PAID TO THE ASSESSEE AS AN ADVANCE. HOWEVER, EVEN AFTER LAPSE OF 8 YEARS, THE SALE DEED HAS NOT BEEN REGISTERED NOR POSSESSION OF LAND HAS BEEN GIVEN. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE PURC HASER SHOWN IN THE AGREEMENT ARE SAID TO BE AGRICULTURIST AND THE PUR CHASE OF THE LAND WAS FOR THE AGRICULTURAL BUT IN FACT THOSE PURCHASERS WER E LOCATED MORE THAN 50-100 KM FROM ASSESSEES PLACE. THE ASSESSING OFFIC ER ALSO NOTED THAT ALL THE SIX PURCHASERS HAVE COLLECTIVELY SIGNED AGR EEMENT TO PURCHASE 7 ACRE LAND WITHOUT ALLOCATION OF THEIR SHARES, WH ICH IS RATHER UNCOMMON. THE ASSESSING OFFICER THEREFORE MADE THE ADDITI ON OF RS.31 LAKHS TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLE NGED THE SAID ADDITION BEFORE THE LD.CIT(A). 5. BEFORE THE LD.(CIT(A) THE ASSESSEE TOOK THE FOLLOWING CONTENTIONS : (I) THE COPY OF AGREEMENT FOR PROPOSED SALE OF AGRICULTU RAL LAND DATED 19/04/1999 HAS BEEN FILED ON THE RECORD OF THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS . (II) AS PER THE SAID AGREEMENT TO SALE THE SIX PROPOSED PURC HASERS HAVE AGREED TO PURCHASE 7 ACRES OF AGRICULTURAL LAN D BELONGING TO THE APPELLANT FOR CONSIDERATION OF RS.50 LAKHS OUT OF WHICH RS.31 LAKHS HAVE BEEN PAID ON THE DATE OF THE AGREEMENT. (III) THE SALE DEED IS NOT YET EXECUTED AND POSSESSION IS ALSO NOT GIVEN TO THE PROPOSED PURCHASERS AS THE BALANCE AMO UNT OF RS.19 LAKHS HAS NOT BEEN YET RECEIVED. (IV) THE AGREEMENT CANNOT BE SAID TO BE NON-GENUINE AS ALLE GED BY THE ASSESSING OFFICER AS THE SAME IS ON STAMP PA PER OF RS.20/- WHICH HAS BEEN PURCHASED BY THE APPELLANT IN H IS OWN NAME. THE SAID STAMP PAPER WAS PURCHASED FROM AUTHORISED VENDOR OF GOVERNMENT STAMPS AS MENTIONED ON THE STAMP PAPER. THE STAMP PAPER IS DULY SIGNED BY T WO WITNESSES AND ALSO BY A PERSON WHO HAS WRITTEN THE 4 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, AGREEMENT. THE NAME OF THE PERSON WRITING THE AGREE MENT AND HIS ADDRESS HAS ALSO BEEN MENTIONED IN THE SAID AGREEMENT. (V) THE SAID AGREEMENT WAS NOT FOUND IN SURVEY ACTION W ITH THE APPELLANT AS THE SAME WAS WITH THE PURCHASERS I.E. THE PERSONS WHO HAVE MADE PAYMENT OF RS.31 LAKHS TO THE APPELLANT. (VI) AS PER PROVISIONS OF CONTRACT ACT IT IS NOT MANDATOR Y THAT THE AGREEMENT SHOULD BE REGISTERED. (VII) THE ALLEGATION OF THE A.O. THAT SHRI RAMANLAL KANKR IYA COULD NOT REMEMBER THE NAMES OF TWO CO-PURCHASERS IS ALSO INCO RRECT AS SHRI RAMESHLAL HAS CLEARLY STATED THE NAMES OF ALL THE CO- OWNERS INCLUDING THE TWO MEMBERS OF PATODIYA FAMILY WHO ARE ALSO HIS RELATIVES, HOWEVER, HE COULD NOT REMEMBE R FIRST NAME OF THE SAID TWO CO-OWNERS. (VIII) THE MAIN REASON FOR THE PROPOSED SALE OF LAND TO TH E CLOSE RELATIVES AS ALSO CONFIRMED BY THE PROPOSED PURCHAS ERS IN THEIR STATEMENTS IS THAT THE LAND SHOULD NOT BE SOL D TO ANY PERSON OUT OF THE FAMILY. THE PROPOSED PURCHASERS BEING CLOSED RELATIVES OF THE APPELLANT HAVE ALSO ACCEPTE D THE REQUEST OF THE APPELLANT AS THE APPELLANT WAS IN NE ED OF THE FUNDS AT THE PARTICULAR TIME AS HE REQUIRED THE FUN DS URGENTLY TO EXECUTE NCCF CONTRACT. (IX) IN THE STATEMENTS RECORDED ON OATH AND ALSO IN THE VOLUNTARY STATEMENTS ON OATH GIVEN BY THE PROPOSED PURCHASERS HAVE CLEARLY STATED THAT THEY HAVE ADVANCED AN AMOUNT TO TALING TO RS.31 LAKHS TO THE APPELLANT FOR PROPOSED PURCHAS E OF AGRICULTURAL LAND ON 19/04/1999. (X) IN THE SAID STATEMENTS, THE PROPOSED PURCHASERS HAV E ALSO CLEARLY MENTIONED THEIR SOURCE- OF AGRICULTURAL INC OME AT RS.2.5 LAKHS TO RS.7 LAKHS PER ANNUM AND HAVE ALSO FILED 7/12 EXTRACTS IN RESPECT OF THEIR LAND HOLDINGS. (XI) THE PROPOSED PURCHASERS HAVE ALSO CLEARLY S TATED IN THEIR STATEMENTS THE REASON FOR PROPOSED PURCHASE OF THE LAND AND ALSO REASON FOR NOT EXECUTING THE PURCHASE DEED EVE N AFTER LAPSE OF 8 YEARS. (XII) AS THE PURCHASERS HAVE ACCEPTED IN THEIR S TATEMENTS RECORDED ON OATH, THE FACT OF ADVANCING THE AMOUNT TO THE APPEL LANT AND HAVE ALSO STATED SOURCE OF THE SAID AMOUNT ADVANCED, THE A.O. CANNOT ASK THE APPELLANT TO EXPLAIN THE SOURCE OF THE SOURCE. I T IS WELL ESTABLISHED LAW THAT IN SUCH CASES, THE A.O. CAN MAKE ENQUIRY/VERIFICATION IN THE CASES OF THE PERSONS AD VANCING THE AMOUNTS AND TAKE ACTION IN THEIR CASES IF THEY FAIL TO PROVE THE SOURCE OF THE AMOUNT ADVANCED BY THEM. THIS LEGAL PROP OSITION IS SUPPORTED BY THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARAVALI TRADING CO. VS ITO (2010) 187 TAXMAN 338 [220 CTR 622]. IN THIS CASE, IT HAS BEEN HELD THAT ONCE THE EX ISTENCE THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDIT S, ASSESSEES ONUS STANDS DISCHARGED AND HE IS NOT FURTHER REQUIR ED TO PROVE THE SOURCE OF THE CREDITOR AND THE ADDITION CANNOT BE SU STAINED IN THE ABSENCE OF ANYTHING TO ESTABLISH THAT THE SOURCE OF THE CREDITORS' DEPOSITS FLEW FROM THE ASSESSEE ITSELF. THE ABOVE C ONTENTION IS ALSO SUPPORTED BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS 5 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 HAS BEEN HELD THAT ONCE THE ONUS OF PROVING THE CREDIT IS DISCHARGED BY THE ASSESSEE, THE DEPARTMENT IS FREE TO MAKE ENQUIRY OF THE CREDITORS AND TAKE NECESSARY ACTION IN THEIR CASES. THE LD. CIT(A) RELYING ON THE DECISION OF THE HON'BLE HIGH C OURT OF RAJASTHAN DELETED THE ADDITION MADE BY THE ASSESSING OFFIC ER. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE HAS FILED PAPER BOOK CONTAINING THE FOLLOWING DOCUMENTS: SR. NO. PARTICULARS PAGE NO. FROM PAGE NO. TO 1 COPY OF STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE INCOME-TAX ACT DATED 02/02/2006. 1 12 2 COPY OF STATEMENT RECORDED CONSEQUENT TO THE SURVEY ACTION UNDER SECTION 133A DATED 03/02/2006 13 17 3 COPY OF ISAR (AGREEMENT TO SALE) DATED 19/02/1999 18 19 4 FREE TRANSLATION OF THE ISAR PATRA 20 21 5 COPIES OF LETTERS TO DCIT FROM INDERCHAND GANESHLAL MANDLECHA, RAMANLAL HIRALAL KANKARIA AND KACHRULAL NATHMAL MUTHA (ALL DATED 12/11/2009) 22 29 6 COPIES OF STATEMENT OF OATH OF INDERCHAND GANESHLAL MANDLECHA AND RAMANLAL HIRALAL KANKARIA 30 42 7 COPIES OF THE OPPORTUNITY OF CROSS EXAMINATION OF INDERCHAND GANESHLAL MANDLECHA AND RAMANLAL HIRALAL KANKARIA 43 44 8 COPY OF REMAND REPORT FROM DCIT TO CIT(A) 45 48 7. THE ISSUE IN CONTROVERSY IS IN RESPECT OF THE SOURCE O F RS.31 LAKHS WHICH WAS IN RESPECT OF THE INVESTMENT MADE BY THE ASSE SSEE IN THE CONTRACT WITH THE NCCF. THE ASSESSEE CLAIM THAT RS.31 LAKHS WERE GENERATED FROM AGREEMENT FOR SALE OF HIS AGRICULTURAL LAND TO RAMANLAL HIRALAL KANKARIA AND FIVE OTHERS. DURING THE COURSE OF TH E APPELLATE 6 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, PROCEEDINGS THE LD.CIT(A) CALLED FOR THE REMAND REPORT OF THE ASSESSING OFFICER. IT APPEARS THAT THE ASSISTANT DIRECTOR OF INCOME -TAX INVESTIGATION, AURANGABAD WAS APPOINTED AS A COMMISSION T O EXAMINE THE PURCHASERS SHOWN IN THE AGREEMENT TO SALE I.E. RAMA NLAL HIRALAL KANKARIA AND OTHERS. IT APPEARS THAT THE PROPOSED PU RCHASER BELONG TO DIFFERENT FAMILIES BUT ARE CLOSELY RELATED TO THE ASSESSEE. AS PER THE AGREEMENT TO SALE I.E. ISAR PAVATI, DATED 19-04-1999 IT IS SEEN THAT THE ASSESSEE ENTERED INTO SAID AGREEMENT TO SALE HIS AGRICULT URAL LAND BEING SURVEY NO. 154 OUT OF JALNA MUNICIPAL LIMITED ADMEASURING 7 ACRES. THE SAID AGREEMENT WAS EXECUTED ON THE STAMP PAPER O F RS.20/-. THE ASSESSEE PRODUCED THE SAID AGREEMENT BEFORE THE ASSESSING OFFICE R. 7.1 AT THE TIME OF ASSESSMENT PROCEEDING THE ASSESSING O FFICER DID NOT TAKE ANY PAIN TO VERIFY THE AUTHENTICITY OF THE PURCHASE RS SHOWN IN THE SAID AGREEMENT TO SALE. WHEN THE MATTER REACHED BEFORE THE CIT(A), THE ASSESSEE PRODUCED (I) SHRI RAMANLAL HIRALAL KANKARIA AND (II) S HRI INDERCHAND GANESHLAL MANDLECHA BEFORE THE ADDL. DIT (INV ESTIGATION), AURANGABAD AND BOTH THE PARTIES CONFIRMED THAT THEY HA VE EXECUTED THE SALE AGREEMENT AND THEY HAVE ENTERED INTO AGREEMENT FO R PURCHASE OF AGRICULTURAL LAND. IT IS TRUE THAT THOUGH ORALLY THEY STA TED THAT THEY ARE DERIVING INCOME FROM AGRICULTURE OPERATIONS BUT NO EVIDENCE TO THAT EXTENT WAS FILED. IT IS ALSO SEEN THAT IN THE STATEMENT R ECORDED ON OATH THE PARTIES CONFIRMED THAT THEY HAVE PAID THE AMOUNT TO THE ASSESSEE. THE TRANSACTION OF AGREEMENT TO SALE IS DATED 19-04-19 99 AND THE STATEMENTS WERE RECORDED ON 12-11-2009 I.E. AFTER THE G AP OF MORE THAN 10 YEARS. THIS EXERCISE COULD HAVE BEEN DONE BY THE AS SESSING OFFICER WHEN HE PASSED THE ASSESSMENT ORDER IN THE YEAR 2007 WHEN THE ASSESSEE HAS FILED COPY OF THE AGREEMENT TO SALE DATED 19-04-1999. ONCE THE PARTIES HAVE CONFIRMED THAT THEY PAID THE MONE Y TO THE ASSESSEE AND ADMITTED EXECUTION OF ISAR PAVTI AND ALS O EXPLAINED THE SOURCE, NOTHING IS LEFT TO PROVE FURTHER. IN OUR OPINION, TH E ASSESSING OFFICER AT THE TIME OF THE ASSESSMENT PROCEEDING ITSELF COULD HAVE MADE 7 ITA NO.636/PN/2011, KACHRULAL N. MUTHA, JALNA, BETTER INVESTIGATION INSTEAD OF REJECTING THE AGREEMENT B Y APPLYING HIS OWN LOGICS. AS THE PARTIES TO THE AGREEMENT TO SALE HA VE ADMITTED EXECUTION OF SAID AGREEMENT BY GIVING STATEMENT ON OATH, WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED HIS BURDEN BY EXPLAINING SOURCE. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT. WE ACCORDINGLY CONFIRM THE SAME. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12-04-2013 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 12 TH APRIL, 2013 COPY TO 1 THE ASSESSEE 2 THE DEPARTMENT 3 THE CIT(A)), AURANGABAD 4 THE CIT, CENTRAL, NAGPUR 5 T HE DR, ITAT B BENCH , PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE