SHRI UMROV LAL YADAV, Jaipur V. ITO, BEHROR

ITA 638/JPR/2011

• Counselvise Citation: 63823114 RSA 2011
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-11-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 20-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: ALOKITA
• Keywords: Unexplained cash credit; Depreciation; Non compliance; Onus to prove
• Section: 131; 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR (BEFORE SHRI N.L. KALRA, ACCOUNTANT MEMBER) ITA NO. 638 & 639/JP/2011 ASSESSMENT YEAR: 1999-2000 & 2001-02 PAN AAQPY 3840 G SHRI UMROV LAL YADAV VS. THE ITO C/O TRIPATI AUTOMOBILES WARD- BEHROR NEAR NHAI OFFICE,NH-8 BEHROR VILLAGE SANGTEDA, KOTPUTLI DISTT. JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY: MISS. ALOKITA DEPARTMENT BY: SHRI D.K. MEENA DATE OF HEARING: 22-11-2011 DATE OF PRONOUNCEMENT: 25-11-2011 ORDER THE ASSESSEE HAS FILED APPEALS AGAINST THE ORDER O F THE LD. CIT(A) , ALWAR DATED 18-04-2011 FOR THE ASSESSMENT YEARS 1999-2000 AND 2 001-02. 2.0 FIRST OF ALL, WE L TAKE UP THE APPEAL FOR THE A SSESSMENT YEAR 1999-2000. 2.1 THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN MAKING ADDITION OF RS. 1,09,000/- ON ACCOUNT OF UNEXPLAIN ED CASH. THE FACTS IN THIS CASE ARE AS UNDER:- THE APPELLANT IS ENGAGED IN THE BUSINESS OF PLAYING OF TRUCKS. HE DECLARED INCOME OF RS. 50,000/- U/S 44AE THIS YEAR AS PER PAST PRACTICE. HE OWNED ONE TRUCK, TILL LAST YEAR. A SURVEY U/S 13 3(1) WAS CARRIED OUT ON 10.08.2001 AT THE PREMISES OF SHRI RAMESH CHAND SON I PROP. M/S TRUPATI AUTOMOBILES, KOTPUTLI, WHO WAS ENGAGED IN THE BUSIN ESS OF PLAYING OF VARIOUS TRUCKS AND USED TO DECLARE HIS INCOME U/S 4 4AE AS PER PAST PRACTICE. STATEMENTS SHRI RAMESH CHAND SONI AND VAR IOUS OTHER PERSONS 2 WERE RECORDED DURING SURVEY ON 10.08.2001 AND THERE AFTER, ON 21.08.2001. THE CASE MADE OUT BY THE DEPARTMENT WAS THAT (I) SH RI SONI WAS THE REAL PERSON, WHO OWNED VARIOUS TRUCKS, AND VARIOUS OTHER PERSONS NAMELY SHRI UMRAO LAL YADAV (THE PRESENT APPELLANT ), SHRI BABU LAL YADAV, SHRI RAMESH YADAV, SHRI JAGDISH YADAV AND SHRI RAMKALA Y ADAV, WERE MERE BENAMIDER AND HENCE, OWNERSHIP AND INCOME BOTH BELO NGED TO SHRI SONI, (II) THAT THE FACT OF TAKING FINANCE FROM TATA FINA NCE/RPG ITOCHU FINANCE LTD. WAS ALSO DOUBTED, (III) THAT THE COST OF BODY AND CABIN BUILDING WAS ALSO ENHANCED THAN DECLARED AND (IV) THAT APART FRO M FINANCE, THE SOURCE WAS DECLARED BEING LOANS FROM CREDITORS, TRUCK INCO ME ETC., WITH THE HELP OF FUND FLOW STATEMENT HOWEVER, THE AO REJECTED THE SAME AND THEREFORE, SOURCE OF PURCHASE OF CHASSIS WAS ADDED. HOWEVER, M ATTERS IN ALL MOST ALL THE CASES REACHED TO THE STAGE OF HONBLE ITAT IN A .Y.2002-03 WHEREIN VIDE CONSOLIDATED ORDER DATED 14.12.2007, THE HONB LE ITAT HAS HELD THAT SHRI SONI WAS NOT THE REAL PERSON HENCE, INCOME AS DECLARED WAS TO BE ASSESSED IN THE HANDS OF VARIOUS INDEPENDENT PERSON S, WHO OWNED THE TRUCKS. THERE APART, THE FACT OF FINANCE BY THE FIN ANCE COMPANIES AS ALSO THE SUPPORT TAKEN BY THE APPELLANT FROM FUND FLOW S TATEMENT IN ABSENCE OF REGULAR ACCOUNTS WAS ALSO ACCEPTED. MOREOVER, HIGHE R ESTIMATION OF THE COST OF TROLLEY AND CABIN WAS ALSO REJECTED. THE AO HAS DEALT WITH THE PRESENT ISSUE AT PAGE 4 & 7. HE NOTED THAT THE APPE LLANT HAS PURCHASED A CHASSIS OF TRUCK NO. HR-38-6424 FROM SHRI RAMESH CH AND SONI FOR RS. 5,30,000/-. OUT OF TOTAL CONSIDERATION OF RS. 5,30, 000/-, RS. 1,09,000/- WAS PAID TO HIM IN CASH AND BALANCE RS.4,21,000/- WAS G OT FINANCED. HE FURTHER INCURRED RS. 1,40,000/- ON THE COST OF TROLLY AND C ABIN TOLLING TO RS. 6,70,000/-. THE AO ASKED THE SOURCE OF RS. 1,09,000 /-. THE APPELLANT SUBMITTED THAT THIS AMOUNT WAS PAID OUT OF REGULAR INCOME AND THE RECOVERY MADE FROM OLD DEBTORS. A DETAILED FUND FLO W STATEMENT WAS FILED BEFORE THE AO SHOWING INCOMING AND OUTGOINGS OF CAS H. BUT THE AO COMPLETELY REJECTED IT ON THE GROUND THAT THIS IS F ABRICATED AND NOT RELIABLE SINCE APPELLANT IS NOT MAINTAINING REGULAR BOOKS OF ACCOUNT. THE AO 3 FURTHER ALLEGED THAT THE APPELLANT HAS NOT SUBMITTE D CONFIRMATIONS FROM THE FOUR DEBTORS AND WHEN HE ISSUED SUMMONS TO THEM NON E ATTENDED. HE ALSO ALLEGED THAT THE TRUCK WAS IN THE NAME OF SHRI RAME SH CHAND SONI WHO WAS THE LEGAL OWNER THEREFORE, WHO THE FINANCE COMP ANY COULD HAVE GIVEN LOAN TO THE APPELLANT. THE APPELLANT FILED THE RETU RN FOR FIRST TIME THIS YEAR, THE OPENING CAPITAL OF RS. 1,88,626/- IN THE BALANC E SHEET FILED AS ON 31.03.1998 IS JUST TO EXPLAIN THE ASSETS SIDE HAVI NG NO BASIS. WHEN ASKED THE SOURCE OF OPENING CAPITAL, HE REJECTED SAYING T HAT EARLIER YEARS ARE NOT SUBJECT TO VERIFICATION. HE ALSO ALLEGED THAT THIS ARRANGEMENT WAS MADE TO REDUCE TAX INCIDENCE IN CASE OF SHRI RAMESH CHAND S ONI HENCE, HE HELD TRUCK PLYING INCOME AS BELONGING TO SHRI SONI. HENC E, AO MADE AN ADDITION OF RS. 1,09,000/- IN THE INCOME OF THE APP ELLANT. 2.2 THE LD. CIT(A) HAS CONFIRMED THE ADDITION AFTER OBS ERVING AS UNDER:- 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL A S THE SUBMISSION OF THE ASSESSEE AND CASE RELIED UPON AND ALSO GONE THROUGH THE FUND FLOW STATEMENT SUBMITTED BY THE ASSESSEE. THE ASSESSEE O WNED ONE TRUCK AS ON 1 ST APRIL 1998. ON THE BASIS OF THIS FUND FLOW STATEME NT. THE POSITION IS WORKED OUT IS UNDER: --- ( REFER PAGE 4 TO 6 OF THE CIT(A) ORDER) . IT IS CLEAR FROM THE ABOVE FUND FLOW STATEMENT T HAT ASSESSEE HAD NEGATIVE BALANCE AT THE TIME OF PAYMENT. FURTHER, T HE NO DETAILS AND CONFIRMATION HAD BEEN SUBMITTED BY THE ASSESSEE BEF ORE THE AO AS BEFORE ME FOR RS.58,000/-. IN ABSENCE OF ANY CONFIRMATION WITH DOCUMENTARY EVIDENCE THE CREDIT OF THE DEBTORS CAN NOT BE GIVEN . THE ABOVE CASH FLOW IS CALCULATED U/S 44AE PROPORTIONATELY @ 2,000/- TRUCK PER MONTH AND PROPORTIONATE DEPRECIATION OF RS.3,168/- PER MONTH. THE ASSESSEE HAD SHOWN IN FUND FLOW STATEMENT INCOME FROM SECOND TRU CK IN THE MONTH OF DECEMBER 1998 ITSELF WHICH IS NOT POSSIBLE TO MAKE THE BODY AND TROLLEY IN DECEMBER ITSELF. THEREFORE, INCOME FROM THE SECO ND TRUCK @ 2,000/- PER MONTH AND DEPRECIATION FOR 3 MONTHS @ 44,667/- PER MONTH IS TAKEN FROM JANUARY 1999. THUS, ADDITION IS CONFIRMED. THE ASSESSEES APPEAL IS DISMISSED ON THIS GROUND. 2.3 BEFORE ME, THE LD. AR HAS FILED THE SUBMISSIONS AS UNDER:- 4 1. IT IS MOST PERTINENT TO MENTION HERE THAT SAME A.O HAS ALSO REJECTED THE CASH FLOW STATEMENT ON SAME GROUNDS AND FACTS IN SU RVEY YEAR (A.Y 2002- 03) VIDE HIS ORDER (PB-3 PAGES 27) IN THE CASE OF A PPELLANT AND IN ANOTHER CONNECTED GROUP CASE JAGDISH YADAV AND HAS MADE THE ADDITION OF EXACTLY SIMILAR NATURE. THE HONBLE ITAT IN SURVEY YEAR (A. Y 2002-03), AFTER DISCUSSING THE DETAILS FACTS AND SUBMISSION HAS HEL D THAT SINCE ASSESSEE IS NOT REQUIRE TO MAINTAIN REGULAR BOOKS OF ACCOUNTS H ENCE CASH FLOW STATEMENT IS THE RIGHT WAY TO PROVE THE SOURCE OF F UNDS AND DELETED THE ADDITION WHICH WAS MADE BY REJECTING THE CASH FLOW STATEMENT VIDE ITS ORDER (PB-1 PAGES 19-20). FOLLOWING THIS VIEW, RECE NTLY YOUR HONOUR [LD. CIT(A)] HAS ALSO DELETED THE ADDITION IN ANOTHER CO NNECTED GROUP CASE OF SHRI JAGDISH YADAV VIDE GROUND OF APPEAL 1 OF APPEA L NO 28/2006-07. SINCE THIS ADDITION IS ALSO BASED ON SAME FACTS AND FINDINGS THEREFORE THIS ADDITION IS ALSO LIABLE TO BE DELETED. RELIANCE IS PLACED ON THE CASE OF DIPTI TEXTILE INDUSTRIES LTD 2009 25 DTR 46 IN WHICH HON BLE BOMBAY HIGH COURT HAS HELD THAT IF ITAT HAVING ALLOWED THE CL AIM OF THE ASSESSEE AND DEPARTMENT ACCEPTED IT THEN IT IS NOT OPEN FOR THE REVENUE TO TAKE DIFFERENT STAND ON SAME ISSUE IN SUBSEQUENT YEAR. 2. FROM A PERUSAL OF A DETAILED FUND FLOW STATEMENT (P B-4 PAGE 32) PREPARED ON MONTHLY BASIS; IT WILL BE OBSERVED THAT THE APPE LLANT WAS HAVING SUFFICIENT FUNDS IN HAND AS ON DATE WHEN CASH WAS P AID TO SHRI RAMESH CHAND SONI. IN THE FUND FLOW STATEMENT, THE APPELL ANT HAS INCLUDED ALL THE RECEIPTS FROM TRUCK ON PROPORTIONATE BASIS. WE MAY CLARIFY THAT THE APPELLANT HAVING BEEN COVERED BY SEC.44AE NO BOOKS OF ACCOUNTS ARE BEING MAINTAINED AND THE ONLY WAY OUT TO EXPLAIN SO URCE OF PAYMENT IS TO PREPARE A FUND FLOW STATEMENT. WE MAY SUBMIT THAT P ERTINENTLY THE LD. AO ITSELF ASSESSED THE INCOME FROM TRUCK AND HENCE THE FACT OF RECEIPTS FROM TRUCKS CANNOT BE DENIED. THUS IT IS QUITE CLEAR THA T THE APPELLANT WAS HAVING SUFFICIENT FUNDS WITH IT FOR PAYMENT TO SHRI RAMESH SONI AND HENCE NO ADDITIONS COULD HAVE BEEN MADE. THE ENTIRE ADDIT ION THEREFORE, MAY KINDLY BE DELETED IN FULL. 3. THE A.O ALLEGED THAT ASSESSEE HAS NOT SUBMITTED RET URNS IN EARLIER YEARS THEREFORE OPENING CAPITAL OF RS188626/- AS TAKEN IN BALANCE SHEET AS AT 31- 03-1999 CANNOT BE ACCEPTED. ON PERUSAL OF BALANCE S HEET AS AT 31-03-1998 (PB-2 PAGE 23) (PB 9) IT CAN BE NOTED THAT ASSESSEE HAS PURCHASED A TRUCK NO 4124 IN 1994 W.D.V VALUE OF THIS TRUCK AS ON 1-4 -1997 WAS RS158400/- AND OPENING CAPITAL AS ON 1-4-1997 WAS R S 158731/- ONLY. W.D.V OF TRUCK NO 4124 IT SELF PROVES THAT THERE IN NOTHING ABNORMAL IF ASSESSEE TAKES THE OPENING BALANCE OF CAPITAL AS EQ UAL TO W.D.V OF TRUCK WHICH WAS PURCHASED IN 1994. A.O HIMSELF HAS NOT DO UBTED ABOUT THE FIGURE OF W.D.V OF TRUCK NO 4124. 5 4. A.O FURTHER ALLEGES THAT APPELLANT DID NOT SUBMIT T HE CONFIRMATION OF CASH DEBTORS FROM WHOM, HE REALIZED THE MONEY IN THE REL EVANT PREVIOUS YEAR. IT IS SUBMITTED THAT THE ALL THE DEBTORS ARE SQUARED U P ACCOUNTS MATTER WAS VERY OLD AND SOME OF THE DEBTORS HAD GONE OUT OF ST ATION THEREFORE HE COULD NOT ARRANGE THEIR WRITTEN CONFIRMATION. HOWEV ER HE HAS MADE A SPECIFIC REQUEST TO A.O FOR ISSUING SUMMON U/S 131. THE A.O ISSUED SUMMON BUT DID NOT SHARE THE RESULT OF ENQUIRY WITH THE APPELLANT. BALANCE SHEET AS AT 31-03-1998 (PB-2 PAGE 23) (PB 9 ) ITSELF RATIFY THE FACTS THAT THERE WERE PETTY CASH DEBTORS. A.O COULD NOT BRING ANY EVIDENCE ON RECORD SUGGESTING THAT EXPLANATION FURNISHED BY THE APPELLANT IS FALSE. IT IS A SETTLED LAW THAT BEFORE REJECTING AN EXPLANATI ON A.O IS BOUND TO SPELL THAT HOW IT INCORRECT WITH SOME MATERIAL OR EVIDENC E. FOR THIS RELIANCE IS PLACED ON STAR INTERNATIONAL P LTD V ACIT 2009 308 ITR 33 (LUCKNOW). IN VIEW OF ABOVE IT IS SUBMITTED THAT A.O HAS PROCE EDED MERELY ON PRESUMPTION OR GUESSWORK AND ADDITION BASED ON PRESUMPTION IS NOT SUSTAINABLE UNDER LAW THEREFORE IT CAN BE DELED IN FULL. 2.4 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 2.5 I HAVE HEARD BOTH THE PARTIES. BEFORE PROCEEDIN G FURTHER, IT WILL BE USEFUL TO REPRODUCE THE CASH FLOW STATEMENT AS UNDER:- DATE PARTICULARS DEBIT CREDIT BALANCE APRIL 98 OPENING BALANCE TRUCK INCOME DRAWINGS 35586.00 10500.00 NIL 1500.00 35586.00 46086.00 44586.00 MAY 98 TRUCK INCOME DRAWINGS SUNDRY DEBTORS 9200.00 25000.00 1500.00 53786.00 52286.00 77286.00 JUNE 98 TRUCK INCOME DRAWINGS SUNDRY DEBTORS 9500.00 33000.00 1500.00 86786.00 85286.00 118286.00 JULY 98 TRUCK INCOME DRAWINGS 9560.00 1500.00 127846.00 126346.00 AUG 98 TRUCK INCOME DRAWINGS 8100.00 1500.00 134446.00 132946.00 SEPT 98 TRUCK INCOME DRAWINGS 9500.00 1500.00 14246.00 140946.00 OCT 98 TRUCK INCOME DRAWINGS 12450.00 1500.00 153846.00 151986.00 NOV 98 TRUCK INCOME DRAWINGS 11500.00 1500.00 163486.00 161986.00 6 DEC 98 TRUCK PURCHASE (R.C. SONI) TRUCK INCOME DRAWINGS TRUCK PURCHASE (BODY) 35650.00 109000.00 1500.00 70000.00 52986.00 88636.00 87136.00 17136.00 THE ASSESSEE HAS INCLUDED THE TRUCK INCOME IN THE F UND FLOW STATEMENTS ON AVERAGE BASIS. THE AO ISSUED THE SUMMONS U/S 131 OF THE ACT TO THE DEBTORS FROM WHOM THE ASSESSEE HAS INCLUDED THE AMOUNTS RECEIVED. THERE IS AN OPEN ING BALANCE OF RS. 35,586/-. IT IS TRUE THAT THE FUND FLOW STATEMENT IS NOT VERIFIABLE BECA USE THE TRUCK INCOME CANNOT BE THE SAME IN EACH MONTH. MOREOVER, THE DRAWINGS MENTIONE D IN THE FUND FLOW STATEMENTS ARE ALSO NOT SUBJECT TO COMPLETE VERIFICATION. THE STAT EMENT OF THE ASSESSEE WAS RECORDED THAT HE IS PLYING THE TRUCKS FROM 1994. HENCE, IT CANNOT BE ACCEPTED THAT THERE WAS NIL OPENING BALANCE. IN THE STATEMENT, THE ASSESSEE MEN TIONED THAT HE HAS PURCHASED THE TRUCKS AFTER RAISING THE LOANS FROM RELATIVES AND F RIENDS. THUS THE AMOUNT RECEIVED FROM SUNDRY DEBTORS IS ALSO NOT VERIFIABLE BUT THE AMOUN T SPENT IN THE FUND FLOW STATEMENTS FOR PURCHASE OF THE TRUCK ALSO INCLUDED IN THE TRUCK IN COME. IN THE MONTH OF DEC. 1998, THE ASSESSEE HAS SHOWN TRUCK INCOME OF RS. 35,650/- WHI LE IN EARLIER MONTHS, SUCH TRUCK INCOME HAS BEEN SHOWN AS VARYING FROM 8100/- TO RS. 12,540/-. THUS CONSIDERING THE FUND FLOW STATEMENTS, WE FEEL THAT IT WILL BE FAIR AND REASONABLE TO HOLD THAT RECEIPTS INCLUDED IN THE FUND FLOW STATEMENTS TO THE EXTENT OF RS. 25,000/- ARE NOT VERIFIABLE. THUS THE ADDITION IS REDUCED TO RS. 25,000/-. 3.0 NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02. 3.1 THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN MAKING ADDITION OF RS. 1,00,000/- ON ACCOUNT OF UNEXPLAIN ED CASH CREDIT. 3.2 THE FACTS IN THE CASE ARE AS UNDER:- 7 THE APPELLANT IS ENGAGED IN THE BUSINESS OF PLAYIN G OF TRUCKS. HE DECLARED INCOME OF `78,500/- U/S 44AE THIS YEAR AS PER PAST PRACTICE. A SURVEY U/S 133(1) WAS CARRIED OUT ON 10.08.2001 A T THE PREMISES OF SHRI RAMESH CHAND SONI PROP. M/S TRUPATI AUTOMOB ILES, KOTPUTLI, WHO WAS ENGAGED IN THE BUSINESS OF PLAYING OF VARIOUS T RUCKS AND USED TO DECLARE HIS INCOME U/S 44AE AS PER PAST PRACTICE. S TATEMENTS SHRI RAMESH CHAND SONI AND VARIOUS OTHER PERSONS WERE RECORDED DURING SURVEY ON 10.08.2001 AND THEREAFTER, ON 21.08.2001. THE CASE MADE OUT BY THE DEPARTMENT WAS THAT (I) SHRI SONI WAS THE REAL PERS ON, WHO OWNED VARIOUS TRUCKS, AND VARIOUS OTHER PERSONS NAMELY SHRI UMRAO LAL YADAV (THE PRESENT APPELLANT ), SHRI BABU LAL YADAV, SHRI RAME SH YADAV, SHRI JAGDISH YADAV AND SHRI RAMKALA YADAV, WERE MERE BEN AMIDER AND HENCE, OWNERSHIP AND INCOME BOTH BELONGED TO SHRI SONI, (I I) THAT THE FACT OF TAKING FINANCE FROM TATA FINANCE/RPG ITOCHU FINANCE LTD. WAS ALSO DOUBTED, (III) THAT THE COST OF BODY AND CABIN BUIL DING WAS ALSO ENHANCED THAN DECLARED AND (IV) THAT APART FROM FINANCE, THE SOURCE WAS DECLARED BEING LOANS FROM CREDITORS, TRUCK INCOME ETC., WITH THE HELP OF FUND FLOW STATEMENT HOWEVER, THE AO REJECTED THE SAME AND THE REFORE, SOURCE OF PURCHASE OF CHASSIS WAS ADDED. HOWEVER, MATTERS IN ALL MOST ALL THE CASES REACHED TO THE STAGE OF HONBLE ITAT IN A.Y.2002-03 WHEREIN VIDE CONSOLIDAT ED ORDER DATED 14.12.2007, THE HONBLE ITAT HAS HELD THAT SHRI SON I WAS NOT THE REAL PERSON HENCE, INCOME AS DECLARED WAS TO BE ASSESSED IN THE HANDS OF VARIOUS INDEPENDENT PERSONS, WHO OWNED THE TRUCKS. THERE APART, THE FACT OF FINANCE BY THE FINANCE COMPANIES AS ALSO THE SUP PORT TAKEN BY THE APPELLANT FROM FUND FLOW STATEMENT IN ABSENCE OF RE GULAR ACCOUNTS WAS ALSO ACCEPTED. MOREOVER, HIGHER ESTIMATION OF THE C OST OF TROLLEY AND CABIN WAS ALSO REJECTED. DURING THE YEAR UNDER REFERENCE APPELLANT HAS TAKEN PETTY CASH LOANS OF `1,00,000/- FROM 6 PEOPLE. AO MADE THIS AD DITION U/S 68 TREATING THEM AS UNEXPLAINED CREDIT. THE APPELLANT SUBMITTED THAT DURING THE COURSE OF SURVEY PROCEEDING `1 LAC HAD BEEN DISCLOSED AN A DDITIONAL INCOME IN AY 2002-03 ON ACCOUNT OF THESE PETTY LOANS AND ADDE D IN THE INCOME OF THE APPELLANT. WHILE MAKING THIS ADDITION FINDINGS OF THE AO, AS PER LAST PARA (9.7 III) OF PAGE 5 OF THE IMPUGNED ORDER ARE AS UNDER:- 1. ALL THE CASH CREDITORS ARE NON INCOME TAX ASSESSEE HENCE THEIR CREDITWORTHINESS ARE NOT PROVED. 2. SUMMONS U/S 131 WERE ISSUED TO ALL CASH CREDITORS B UT NONE OF THEM ATTENDED THE OFFICE. THEREFORE THEIR IDENTITY ALSO REMAINS UNPROVED. 8 3. THE APPELLANT DID NOT FURNISH THE CONFIRMATION OF C ASH CREDITORS. THE APPELLANT HAD FURNISHED REPAYMENT PLAN IN WHICH BALANCE SHOWN AS OUTSTANDING. 3.3 THE LD. CIT(A) HAS CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER:- 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL A S THE SUBMISSION OF THE ASSESSEE AND CASE RELIED UPON, TH E ASSESSEE FILED PHOTOCOPY OF CONFIRMATION IN CASE OF RAMJI LAL YADA V FOR RS.18,000/-, IN CASE OF BUDH RAM YADAV FOR RS.15,00 0/-, IN CASE OF HARDWARI LAL YADAV FOR RS.17,000/-, IN CASE OF R AMAVATAR KUMHAR FOR RS.18,000/- AND IN CASE OF PRAHALAD SWAR OOP KUMAR FOR RS.15,000/-. ALL THE CASH CREDITORS HAD SHOWN I NCOME FROM AGRICULTURAL BUT NOT ASSESSED TO TAX. THE ASSESSEE COULD NOT PRODUCE THESE CASH CREDITORS BEFORE THE AO FOR VERIFICATION . NO EVIDENCE REGARDING AGRICULTURAL LAND OWNED BY THESE CASH CRE DITORS WERE FILED BEFORE THE AO AS WELL AS ME. THE ASSESSEE HAD NOT PROVED IDENTITY OF THE PERSON, GENUINENESS OF THE TRANSACT ION AND CREDITWORTHINESS OF THE CASH CREDITORS. THE ASSESSE ES CLAIM THAT HE HAD DISCLOSED ADDITIONAL INCOME IN A.Y.2002-03 ON A CCOUNT OF THESE LOANS CAN NOT BE ADJUSTED IN YEAR OF RECEIPT OF LOAN. THEREFORE, ADDITION IS CONFIRMED. 3.4 BEFORE ME, THE LD. AR HAS FILED THE WRITTEN SUB MISSION AS UNDER:- 1. ONUS AS REGARD TO PROVE IDENTITY OF CASH CREDITORS RIGHTLY DISCHARGED:- A.O HIMSELF HAS ADMITTED IN THE MAIN BODY OF ASSESS MENT ORDER THAT APPELLANT HAS DULY FILED THE CONFIRMATORY LETTER (P .B-2) OF EACH CREDITORS ON WHICH COMPLETE ADDRESS OF CREDITORS AR E WRITTEN. A.O HAS ISSUED SUMMON TO THEM WHICH HAVE BEEN DULY SERVED O N THEM. THUS IN THE INSTANT CASE APPELLANT HAS DULY DISCHARGED HIS ONUS AS REGARD TO IDENTITY OF THE CREDITORS AS LIES UPON HIM AS PER THE PROVISION OF SECTION 68 OF I.T ACT 1961. SO FAR AS THE NON COMPL IANCE OF SUMMON IS CONCERNED, APPELLANT CANNOT BE HELD DEFAULTER FOR T HAT UNDER SECTION 68 BECAUSE LAW DOES NOT CONFIRM ANY POWER TO APPELLANT FOR ENFORCING THE ATTENDANCE OF A PARTICULAR WITNESS. HE CAN ONLY REQ UEST THEM FOR APPEARING BEFORE THE A.O. IF THEY AVOID OR DONT CO -OPERATE WITH THE 9 PROCEEDINGS, THEN ONLY A.O CAN ENFORCE THEIR ATTEND ANCE BY EXERCISING HIS LEGAL POWER AS VESTED TO HIM UNDER INCOME TAX L AW. BUT A.O INSTEAD OF TAKEN LEGAL ACTION AGAINST THEM PENALIZE D TO APPELLANT FOR THE DEFAULT WHICH HE DID NOT COMMIT. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF G.P INTERNATIONAL LTD 20 09 9 DTR 163 HAS HELD THAT A CREDIT ENTRY CAN NOT BE TREATED AS B OGUS ON THE REASON THAT SOME OF PARTIES DID NOT RESPOND THE SUMMON ISS UED BY THE A.O. IT IS SETTLED LAW THAT APPELLANT CANNOT BE PUNISHED FOR A DEFAULT WHICH HE DID NOT COMMIT. IF ANY ACTION IS LIABLE FOR NON COMPLIANCE OF SUMMON THEN IT SHOULD HAVE BEEN TAKEN AGAINST THE P ERSONS WHO MADE NON COMPLIANCE OF A STATUTORY NOTICE. THE MADHYA P ARDESH HIGH COURT IN THE CASE OF CIT VS METACHEM INDUSTRIES 2001 116 TAXMANN 572 HAS HELD THAT THE MOMENT THE ASSESSEE HAS GIVEN A SATISFACTORY EXPLANATION AS REGARD TO IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE CREDITORS THAT THE BURDEN OF THE ASSESSEE IS DI SCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATED AS THE INC OME OF THE ASSESSEE. IT IS OPEN FOR THE A.O TO TAKE APPROPRIATE ACTION UNDE R SECTION 69 AGAINST THE PERSON WHO HAS NOT BEEN ABLE TO EXPLAIN THE AMO UNT. 2. CREDITWORTHINESS FOR A PETTY (MEAGER) AMOUNT CANNOT BE DOUBTED AND A.O CANNOT ASK TO PROVE THE SOURCE OF SOURCE:- ON P ERUSAL OF CONFIRMATION OF CASH CREDITORS (P.B-2), IT IS CLEAR LY EVIDENT THAT ALL CREDITORS HAVE EXPLAINED THEIR SOURCE OF INCOME FRO M WHICH THEY HAVE ADVANCED THE MONEY .AMOUNT ADVANCED BY THEM IS LESS THAN RS 20000/- WHICH IS A MEAGER OR PETTY AMOUNT. THE HON BLE JURISDICTIONAL RAJASTHAN HIGH COURT IN THE CASE OF CIT VS AJAY KUM AR SHARMA 2002 124 TAXMANN 814 /259 ITR 240 HAS HELD THAT THAT :- ALL CASH CREDITORS CONFIRMED THE ADVANCEMENT OF LOAN TO THE ASSESSEE. THEY HAD BEEN DISCLOSED THEIR SOURCE OF INCOME. THE IDENTITY OF C REDITOR WAS NOT IN DISPUTE. WITH REGARD TO CREDIT WORTHINESS OF PETTY AMOUNT, IT COULD NOT BE SAID THAT CREDITOR WAS NOT CAPABLE TO ADVANCE. ---- KINDLY REFER LABHCHAND BOHRA V/S ITO (2008) 8 DTR 4 4 (RAJ.)- HELD: CASH CREDIT- BURDEN OF PROOF- IDENTITY OF THE CREDITORS ESTABLISHED AND THE CONFIRMED THE CREDIT. THIS DISCHARGED THE BURDE N OF ASSESSEE TO PROVE GENUINENESS. HOWEVER CAPACITY OF THE LENDER TO ADVA NCEMENT MONEY TO ASSESSEE WAS NOT A MATTER WHICH THE ASSESSEE COULD BE REQUIRED TO ESTABLISH AND THAT WOULD AMOUNT TO CALLING UPON HIM TO ESTABL ISH THE SOURCE OF SOURCE. HENCE ADDITION CANNOT BE SUSTAINED. ALSO REFER KANHAIALAL JANGID VS. ACIT (2008) 8 DTR 38 (RAJ.), ( 217 CTR 354) HELD INCOME CASH CREDIT BURDEN OF PROOF ASSESSEE HAV ING FILED CONFIRMATION FROM THE CREDITOR AND HAVING PRO DUCED THE CREDITOR BEFORE AO WHERE THE CREDITOR AFFIRMED ADVA NCEMENT OF 10 LOAN TO ASSESSEE, NO ADDITION UNDER S. 68 COULD BE MADE IN THE HANDS OF ASSESSEE ON THE GROUND THAT THE CREDITOR C OULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF LOAN- BURDEN O N THE ASSESSEE IN SUCH CASES DOES NOT EXTEND TO PROVE THE SOURCE OF T HE CREDITOR FROM WHERE HE MADE THE ADVANCE TO THE ASSESSEE. ALSO REFER ARAVALI TRADING CO. V/S ITO 8 DTR 199 HE LD THAT ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH P ERSONS OWN THE CREDITS WHICH ARE FOUND IN THE BOOKS OF THE ASSESSEE, THE A SSESSEE'S ONUS STAND DISCHARGED AND THE LATTER IS NOT FURTHER REQUIRED T O PROVE THE SOURCES FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY DEPOSITED WITH HIM AND, THEREFORE THE ADDITION U/S 68 CAN NOT BE SUSTA INED IN THE ABSENCE OF ANYTHING TO ESTABLISH THAT THE SOURCES OF THE CREDI TORS DEPOSITS FLEW FROM THE ASSESSEE ITSELF. ------RELIANCE IS ALSO PLACED ON THE OF CIT V RAM N ARAYAN GOYAL (P & H HIGH COURT ) 1997 224 ITR 180 AND CIT V DIAM OND PRODUCT LTD (DELHI HIGH COURT) IN WHICH HONBLE COURTS HAS HELD THAT ASSESSEE IS NOT LIABLE TO PROVE THE SOURCE OF LENDER. IF THE SOURCE OF LENDER DOES NOT PROVE, THEN A.O CAN PROCEED AGAINST THEM. IN VIEW OF THESE FACTS AND SUBMISSION IT IS SUBMITTED THAT ALLEGATION OF THE A.O THAT CRE DIT WORTHINESS OF CREDITORS IS NOT PROVED IS NOT TENABLE THEREFORE ADDITION IS NOT SUSTAINABLE. 3. EVIDENCE OR EXPLANATION FURNISHED BY THE APPELLANT CANNOT BE REJECTED ARBITRARILY:- IN THE INSTANT CASE, A.O COULD NOT BR ING ANY MATERIAL ON RECORD SUGGESTING THAT ALLEGED CASH CREDIT WERE BOG US OR MONEY SHOWN AS CASH CREDIT WAS ACTUALLY BELONG TO THE APPELLANT . IN FACT HE DID NOT MAKE ANY INDEPENDENT ENQUIRY OR INVESTIGATION AT HI S END. HE SIMPLY REJECTED THE EVIDENCE (CONFIRMATION) ON THE GROUND OF NON COMPLIANCE AND BEING NON INCOME TAX ASSESSEE OF CREDITORS. THE HONBLE BENCH OF LUCKNOW ITAT IN THE CASE STAR INTERNATIONAL V ACIT 2009 308 ITR 33 HAS HELD THAT ONCE IT IS HELD THAT EXPLANATION O R EVIDENCE FURNISHED BY THE ASSESSEE IS INCORRECT THEN. A.O HAS TO PROVE THE INACCURACY WITH SOME MATERIAL OR EVIDENCE MERE DISBELIEVING THE CLA IM OF ASSESSEE IS NOT SUFFICIENT. 4. DOUBLE TAXATION IS NOT PERMISSIBLE:-IT IS MOST IMPO RTANT TO MENTION HERE THAT THIS CASE IS CONNECTED WITH SHRI RAMESH C HAND SONI AND OTHERS WHOSE BUSINESS PREMISES WERE SURVEYED ON 10- 8-2001. AFTER SURVEY PROCEEDINGS ON 21-8-2001 STATEMENT OF THE AP PELLANT WAS RECORDED. DURING SURVEY PROCEEDINGS HE ADMITTED TH AT HE HAS TAKEN INTEREST FREE LOANS OF RS 100000/- FROM HIS FRIENDS AND RELATIVES IN PAST YEAR (A.Y 2001-02) FOR PURCHASE OF TRUCKS AND HAS R EPAID THIS LOAN IN A.Y 2002-03 OUT OF UNDISCLOSED INCOME, WHICH HE SUR RENDERED FOR TAX IN A.Y 2002-03 VIDE QUESTION NO 5 OF THE STATEMENT (P.B-3). HE HAS DULY PAID TAX ON THIS SURRENDERED AMOUNT VIDE COMPU TATION OF INCOME 11 FOR A.Y 2002-03 (P.B-4). DEPARTMENT HAS DULY ACCEPT ED THIS ADMISSION AND TAXED THE AMOUNT SO SURRENDERED .THUS BY ACCEP TING THE ADMISSION AND TAXING THIS REPAYMENT OF LOAN BY WAY OF SURRENDER OF INCOME, DEPARTMENT ITSELF HAS ACCEPTED THAT APPELLA NT HAS TAKEN INTEREST FREE LOANS OF RS 100000/- IN FINANCIAL YEAR 2000-01 . IN THE INSTANT CASE DEPARTMENT HAS TAXED THIS SINGLE TRANSACTION TWICE. IN A.Y 2001-02 THIS TRANSACTION HAS BEEN TAXED AS UNEXPLAINED CRED IT AND IN A.Y 2002- 03 IT HAS BEEN TAXED AS REPAYMENT OF LOANS OUT OF U NDISCLOSED INCOME. IT IS A SETTLED LAW THAT AN INCOME CANNOT BE TAXED TWICE. SINCE THE REPAYMENT OF ALLEGED LOAN OF RS 100000/- HAS ALREAD Y BEEN TAXED IN A.Y 2002-03 ON ACCOUNT OF REPAYMENT OUT OF UNDISCLO SED INCOME, THEREFORE AGAIN IT CANNOT BE BROUGHT TO TAX ON ACCO UNT OF UNEXPLAINED CREDIT , THEREFORE THIS ADDITION IS LIABLE TO BE D ELETED . 2. HENCE, THE ENTIRE ADDITION KINDLY BE DELETED IN FULL. 2. INITIAL ONUS DISCHARGED: IT IS SUBMITTED THAT IT IS ONLY INITIAL ONUS, WHICH LAY UPON THE APPELLANT TO PROVE THE IDE NTITY AND THE CAPACITY OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACT ION AND ONCE THIS INITIAL ONUS IS DISCHARGED, IT SHIFTS TO THE AO TO REBUT/DI SPROVE THE SAME FOR MAKING A VALID ADDITION U/S 68. KINDLY REFER CIT V/ S SHREE BARKHA SYNTHETICS 182 CTR 175 (RAJ). ALSO SHANKER INDUSTRI ES V/S CIT 114 ITR 689 (CAL). RECENTLY THE HONBLE RHC AGAIN REITERATE D THE SAME VIEW IN CIT V/S FIRST POINT FINANCE LTD 286 ITR 477 (RAJ.) HOLDING THAT THIS COURT HELD AFTER REFERRING TO THE AFORESAID DECISIONS, TH AT ONCE THE INITIAL BURDEN HAS BEEN DISCHARGED IN RESPECT OF THE IDENTITY OF I NVESTORS, ABOUT THEIR EXISTENCE, AND THE CONFIRMATION FROM SUCH INVESTORS HAS BEEN OBTAINED, THE BURDEN SHIFTS TO THE REVENUE TO PROVE OTHERWISE NOT ONLY THAT THE INVESTED AMOUNT DID NOT BELONG TO THE CREDITORS BUT FURTHER IT HAS TO PROVE THE SAID AMOUNT BELONGING TO THE ASSESSEE. THE APPELLANT DID DISCHARGE THE INITIAL ONUS CAST UPON IN THIS CASE, AS DISCUSSED BELOW. (A) IDENTITY ESTABLISHED: THE IDENTITY OF ALL THE S IX CREDITORS STANDS PROVED IN AS MUCH AS COMPLETED ADDRESSES WER E FILED AND SUMMONS ISSUED WERE DULY SERVED (B) GENUINENESS OF TRANSACTION: GENUINENESS OF TRAN SACTION IS ALSO DULY AND FULLY ESTABLISHED BECAUSE THE CRED ITORS CONFIRMED THE FACT OF GIVING LOAN TO THE APPELLANT. (C) CAPACITY PROVED: THE LD. CIT(A) AGREED THAT ALL THE CREDITORS HAD SHOWN INCOME FROM AGRICULTURE. THE APPELLANT THUS, DULY DISCHARGED THE INITIAL BUR DEN LAY UPON IT, TO WHICH EXTENT ONLY IT WAS RESPONSIBLE, AS HELD IN CIT V/S ORISSA CREDIT CORP. LTD. 159 ITR 78 (SC). 12 3. ONUS NOT DISCHARGED BY THE AO: ON THE OTHER HAND , WHEN THE ONUS SHIFTED TO THE AO, WHO FAILED TO DISCHARGE THE SAME. ADMITTEDLY THE APPELLANT MADE REQUEST TO SUMMON THE PARTNER U/S 13 1. THE FACT THAT DESPITE SERVICE OF SUMMONS, THE CREDITORS DID NOT A PPEAR, WAS NOT COMMUNICATED TO THE APPELLANT NOR THE AO APPEARS TO HAVE MADE FURTHER EFFORTS. WE MAY SUBMIT THAT THE POWERS OF THE CIVIL COURT HAVE BEEN PURPORTEDLY CONFERRED BY THE LEGISLATURE UPON AN AO U/S 131 OF THE ACT, WHICH MUST HAVE BEEN USED IN SUCH CASES WHERE THE C IRCUMSTANCES CLEARLY WARRANTED, IN THE INTEREST OF JUSTICE. KINDLY REFER SOM PRAKASH KAYAL V/S AO IN ITA NO364/ JU/2005, WHEREIN VIDE ORDER DATED 09.08.2005 THE HONBLE TRI BUNAL HAS FOLLOWED THE DECISION IN JHAVERI BHAI BIHARI LAL & CO. V/S C IT (1985) 154 ITR 991 (PAT) IN THAT CASE IT WAS HELD THAT CASH CREDIT R EFUSAL BY ITO TO ISSUE SUMMON U/S 131 REVENUES ONUS WHETHER DISCHARGED CERTIFICATE CREDITOR PRODUCED LAW ENJOINS THE ISSUANCE OF SUM MONS IN CASE CERTIFICATE PURPORTED TO HAVE BEEN GRANTED BY SUCH CREDITORS ARE PRODUCED BEFORE AO. 4. ONE IMPORTANT ASPECT IS THAT ADMITTEDLY NO BOOKS OF ACCOUNT ARE THERE AND THEREFORE, IT CANNOT BE SAID THAT THE SUB JECTED SUM WAS FOUND CREDITED, WHICH IS A CONDITION PRECEDENT TO INVOKE SEC.68. SINCE, THE AO REPEATEDLY SAID THAT NO BOOKS OF ACCOUNT WERE THERE AND THERE IS NO FINDING OF FACT THAT THE SUBJECTED AMOUNT WAS FOUND CREDITE D THEREIN. HENCE, SEC.68 CANNOT BE INVOKED. THE FACT THAT HE NOTICED THE CREDITS FROM THE BALANCE SHEET CANNOT BE EQUATED WITH THE ACCOUNTS A S CONTEMPLATED U/S 68. KINDLY REFER CIT VS. P. MOHAN KALA (2007) 291 ITR 2 78 (SC) THE QUESTION IS WHAT IS THE NATURE AND SCOPE OF S. 68 OF THE ACT? WHEN AND IN WHAT CIRCUMSTANCES SEC. 68 OF THE ACT WOULD COME INTO PLAY? THAT A BARE READING OF S. 68 SUGGEST THAT THERE HAS TO B E CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY ASSESSEE; SOME CREDIT HAS TO BE OF DURING THE PREVIOUS YEAR --- 3.5 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 3.6 I HAVE HEARD BOTH THE PARTIES. IN THE INSTANT C ASE, THE ASSESSEE IN HIS STATEMENT ADMITTED THAT HE RAISED LOAN OF RS. 1.00 LAC AND SU CH SUM WAS PAID BACK IN THE SUBSEQUENT YEAR OUT OF UNDISCLOSED INCOME. THE REVENUE HAS ACC EPTED THE UNDISCLOSED INCOME. IT MEANS THAT THE ASSESSEE HAS NOT TAKEN CREDIT OF RS. 1.00 LAC AS INCOME FOR THE PURPOSE OF 13 ACQUIRING ANY ASSET. IT WAS ADMITTED BY THE ASSESSE E THAT SUM OF RS. 1.00 LACS WAS UTILIZED FOR REPAYING THE AMOUNT TO THE CASH CREDITOR AND TH E REVENUE HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AND INCLUDED THE UNDISCLOSED INCOME OF RS. 5.00 LACS. I THEREFORE, FEEL THAT IT WAS NOT A CASE WHERE ADDITION SHOULD HAVE B EEN MADE IN THE YEAR UNDER REFERENCE BECAUSE THE EXP FILED BY THE ASSESSEE IN RESPECT OF CASH CREDIT CANNOT BE STATED TO BE INCORRECT OR FALSE. THE LD. CIT(A) WAS THEREFORE, N OT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 1.00 LAC. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 1999-2000 IS PARTLY ALLOWED AND APPEAL FOR THE ASSESSMENT YEAR 2001-02 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 25-11 -2011 . SD/- (N.L. KALRA) ACCOUNTANT MEMBER JAIPUR DATED: 25/11/2011 *MISHRA COPY FORWARDED TO:- 1. UMROV LAL YADAV, KOTPUTILI DISTT JAIPUR 2.THE I.T.O. , WARD BEHROR BY ORDER 3.THE LD. CIT(A) 4.THE LD. CIT 5.THE LD. DR 6.THE GUARD FILE (I.T.A. NO 638& 639/JP/11) A.R. I TAT: JAIPUR