Mrs. Kothari Jyoti Anil, Pune V. Income-tax Officer, Pune

ITA 648/PUN/2006

• Counselvise Citation: 64824514 RSA 2006
• Duration Of Justice: 5 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 30-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Additional evidence; Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 648/PN/06 (ASSTT. YEAR: 2002-03) MRS KOTHARI JYOTI ANIL, .. APPELLANT PLOT NO 39/44 SADASHANTI APARTMENT, LANE NO 9, PRABHAT ROAD, PUNE 411 004 PAN AFPPK5066E VS. INCOME-TAX OFFICER, .. RESPONDENT WD. 5(1), PUNE APPELLANT BY: SHRI BHUPENDRA SHAH RESPONDENT BY: SHRI MANOJ KUMAR DATE OF HEARING : 29.09.2011 DATE OF PRONOUNCEMENT : 29.11.2011 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, PUNE DATED 10. 3.2006, WHICH IN TURN, HAS ARISEN FROM THE ORDER OF THE ASSESSING OFFICER DATED 7.2.2005 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT TH E ACT), PERTAINING TO THE ASSESSMENT YEAR 2002-03. 2. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF D EALING IN FOOD GRAINS. THE FIRST ISSUE RAISED IN THE APPEAL RELATES TO T HE CONFIRMATION OF THE ADDITION OF RS 89,686/- MADE ON ACCOUNT OF DIFFERENCE IN THE FIGURES OF PURCHASE AND SALES AS FOUND IN THE REGISTER AS COMPARED TO THE F IGURE INCORPORATED IN THE PROFIT & LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE 2 ASSESSING OFFICER NOTED THAT AS PER THE RELEVANT REGISTER THE PURCHASES WERE OF RS 5,00,090/-, WHILE THE SALES WERE RECORDED AT RS 8, 68,300/-. IT WAS FURTHER NOTED THAT AS PER PROFIT & LOSS ACCOUNT, THE PURCHASES WERE RS 5,76,160/- AS AGAINST SALES OF RS 8,54,774/-. THE ASSESSING OFFICER ACCO RDINGLY NOTED THAT THERE WAS A DIFFERENCE OF RS 76,160/- IN PURCHASES REFLE CTED IN THE PROFIT & LOSS ACCOUNT AND AS PER REGISTER; AND OF RS 13,526/- IN THE SALES AS RECORDED IN THE PROFIT & LOSS ACCOUNT AND AS PER REGISTER. SINCE THE ASSESS EE COULD NOT EXPLAIN AND RECONCILE THE DIFFERENCE, THE ASSESSING OFFICER ADDE D RS 76,070/- ON ACCOUNT OF DIFFERENCE IN PURCHASES AND RS 13,526/- ON ACCOUNT OF DIFFERENCE IN SALES, THUS, MAKING A TOTAL ADDITION OF RS 89,596/-. 3. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) UPHELD THE IMPUGNED ADDITION BY HOLDING AS UNDER: 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE SUBMISSION OF THE APPELLANT THAT THE REGISTER PRODUCED BEFORE THE AO IS ROUGH REGISTER REMAINS UNSUBSTANTIATED. THIS REGISTER HAS BEEN PRODUCED BEFORE THE AO AT THE TIME OF HEARING AND, THEREFORE, THE A PPELLANT IS UNDER OBLIGATION TO EXPLAIN THE DIFFERENCE DETECTED BY THE AO AND THE BURDEN OF PROOF TO EXPLAIN THE SOURCE OF PURCHASES SHOWN OVER AND ABOVE IN P & L ACCOUNT AND RECORDED IN REGISTER IS ENTIRELY ON THE APPELLANT. A PERUSAL OF MATERIAL ON RECORD SHOW S THAT THIS BURDEN HAS NOT BEEN DISCHARGED. THE ATTEMPTS ON THE PART OF THE APPELLA NT TO SAY THAT THIS IS ROUGH REGISTER IS A DESPERATE ATTEMPT TO COME OUT OF DIFFICULT SITUATIO N. SUCH A LAME DUCK EXPLANATION CANNOT BE ALLOWED TO HAVE ITS WAY. ACCORDINGLY, I AM OF TH E CONSIDERED VIEW THAT THE AO IS FULLY JUSTIFIED ON FACTS AND IN LAW IN MAKING ADDITION OF RS 76,070/- ON ACCOUNT OF UNEXPLAINED PURCHASES WHICH DID NOT APPEAR IN THE PURCHASE REGI STER BUT ARE REFLECTED IN PROFIT & LOSS ACCOUNT. THE APPELLANT HAS FAILED TO GIVE THE SOURC E OF THESE PURCHASES. ACCORDINGLY THE SECTION 69B CLEARLY APPLIES TO THE FACTS OF THE CAS E AND ACCORDINGLY ADDITION OF RS 76,070/- MADE BY THE AO IS UPHELD. AS REGARD THE EXCESS SALES OF RS 13,526/- WHICH IS LESS SHOWN IN THE PROFIT & LOSS ACCOUNT, IT MAY BE MENTIONED THAT THE ACTION O F THE AO IN TAXING ENTIRE AMOUNT IS CONSIDERED TO BE IN ACCORDANCE WITH LAW AND JUSTIFI ED ON FACTS BECAUSE THE EXPENSES ALREADY STAND CONSIDERED. AS REGARDS THE APPELLANTS ALTERNATE SUBMISSION FO R ALLOWING TELESCOPING OF AMOUNT OF RS 89,686/- FOR THE PURPOSE OF OTHER ADDI TIONS, IT MAY BE MENTIONED THAT ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES COME W ITHIN THE PURVIEW OF SECTION 69B WHICH SAYS THAT INVESTMENT IN UNEXPLAINED PURCHASES MAY BE DEEMED TO BE THE INCOME OF THE APPELLANT FOR SUCH FINANCIAL YEAR. IN VIEW O F THIS, NO TELESCOPING CAN BE ALLOWED AGAINST AMOUNT OF RS 76,070/-. EVEN IN RESPECT OF O THER ADDITIONS, WHICH ARE SUBJECT MATTER OF THIS APPEAL, DEEMING PROVISIONS APPLY AND , THEREFORE, NO TELESCOPING CAN BE ALLOWED IN MY VIEW. BEING AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US . 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE AFORESAID ADDITION WAS UNCALLED FOR, INASMUCH AS THE A SSESSEE DOES NOT MAINTAIN 3 ANY REGULAR BOOKS OF ACCOUNT AND THE BUSINESS CARRIED OUT W AS OF A VERY SMALL SCALE. THEREFORE, THE DIFFERENCE IN THE FIGURES OF PUR CHASE AND SALES AS NOTED IN THE PROFIT & LOSS ACCOUNT AND AS WRITTEN IN THE REGISTE RS MAINTAINED DID NOT REFLECT ANY REVENUE LOSS, INASMUCH AS THE ASSESSEE WAS ONLY MAINTAI NING ROUGH RECORDS. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE, APPEARING FOR THE REVENUE, HAS POINTED OUT THAT NO EXPLANATION HAS BEEN OFFERED BY THE ASSESSEE AS TO THE REASONS FOR DIFFERENCE IN THE FIGURES O F SALES AND PURCHASES DECLARED IN THE PROFIT & LOSS ACCOUNT AND AS PER THE RESPE CTIVE REGISTERS FOUND TO HAVE BEEN MAINTAINED, AND THEREFORE, THE ADDITION W AS JUSTIFIED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND FIND THAT IN THIS CASE IT IS QUITE EVIDENT THAT THE ASSESSEE IS NOT MAINTAIN ING PROPER BOOKS OF ACCOUNT, AS NOTED BY THE ASSESSING OFFICER IN PARA 4 OF THE ASSESSMENT ORDER. IN FACT, IN RELATION TO THE ADDITION OF RS 76,070/-, IT IS NOTICEABLE THAT PURCHASES DECLARED IN THE PROFIT & LOSS ACCOUNT WERE MORE THAN T HE AMOUNT FOUND RECORDED IN THE RESPECTIVE REGISTER. QUITE CLEARLY, THERE IS NO JUSTIFICATION FOR MAKING SUCH AN ADDITION. EVEN WITH REGARD TO THE DIFFERENCE IN THE SALES, IT WAS NOTICED BY THE ASSESSING OFFICER THAT SALES HAVE BEEN UNDER-DECLARED IN THE PROFIT & LOSS ACCOUNT BY A SUM OF RS 13,526/- IN COMPARISON TO THE AMO UNT RECORDED IN THE REGISTER. ON THIS ASPECT, THE ASSESSEE EXPLAINED THAT IT W AS ON ACCOUNT OF SALES REJECTION, WHICH WAS NOT KNOWN TO THE PERSON WHO WAS MAIN TAINING THE REGISTER. SUCH AN EXPLANATION, A COPY OF WHICH HAS BEEN PLACED A T PAGE 19 OF THE PAPER BOOK WAS VERY MUCH BEFORE THE ASSESSING OFFICER ALSO, AND H AS BEEN MERELY DISBELIEVED. CONSIDERING THAT THE ASSESSEE DOES NOT MAINT AIN ANY FORMAL ACCOUNT BOOKS, THE AFORESAID ADDITION UNLESS MERITED ON ACCOUNT OF ANY CREDIBLE INFORMATION, IS UNWARRANTED. THERE IS NO CREDIBLE EVID ENCE TO SHOW ANY SALES OVER AND ABOVE THE AMOUNT DECLARED BY THE ASSESSEE IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS 89,59 6/-. ACCORDINGLY, THE ASSESSEE SUCCEEDS ON THIS GROUND. 4 6. THE NEXT ISSUE RAISED IN THE APPEAL BY THE ASSESSEE REL ATES TO THE ADDITIONS MADE UNDER SECTION 68 OF THE ACT OF RS 1,69,20 0/- AND RS 61,750/-, BEING UNSECURED LOANS AND GIFTS RECEIVED RESPECTIVELY. ON A SCRUTINY OF THE BALANCE SHEET FILED BY THE ASSESSEE, THE ASSESSING OFFICER F OUND THAT THE ASSESSEE HAD SHOWN AN AMOUNT OF RS 1,69,200/- AS UNSECURED LOANS FROM NINE INDIVIDUALS AND EACH LOAN WAS BELOW RS 20,000/-. SINCE T HERE WAS NO DEBIT ON ACCOUNT OF INTEREST IN THE PROFIT & LOSS ACCOUNT, THE ASS ESSING OFFICER CONSTRUED THAT THE SAID LOANS WERE INTEREST FREE. AS THE ASSESSEE FAILED TO FURNISH THE DETAILS OF THE LENDERS FOR EXAMINATION, THE ASSESSING OFFICER INF ERRED THAT THE ASSESSEE PREFERRED TO REMAIN NON-COOPERATIVE AND THE ASSESSEE AL SO MADE A CALCULATED MOVE TO MISLEAD THE DEPARTMENT BY SHOWING THE AMOUNTS BELOW RS 20,000/- IN ORDER TO ESCAPE THE MISCHIEF OF SECTION 269SS OF THE ACT . THE ASSESSING OFFICER HELD THAT IT WAS THE ASSESSEES OWN MONEY FROM UNDISCLOSED SO URCES AND ACCORDINGLY ADDED THE AMOUNT OF RS 1,69,200/- TO THE T OTAL INCOME OF THE ASSESSEE. ON SIMILAR FOOTING, THE AMOUNT OF RS 61,750/- W AS ADDED TO THE TOTAL INCOME AS UNEXPLAINED GIFTS. 7. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SOUGHT PERMISSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) T O PRODUCE ADDITIONAL EVIDENCE IN THE FORM OF AFFIDAVITS OF LOAN CREDITORS AN D CONFIRMATION OF GIFTS IN RESPECT OF TWO PERSONS IN TERMS OF RULE 46A OF THE INCOM E-TAX RULES, 1962. AFTER OBTAINING THE COMMENTS OF THE ASSESSING OFFICER IN THIS REGARD, THE COMMISSIONER OF INCOME-TAX (APPEALS) ADMITTED THE ADDIT IONAL EVIDENCE AND ADJUDICATED UPON THE SAME. AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, THE COMMISSIONER OF INCOME-TAX (APPEALS) UPHELD THE ADD ITION OF RS 1,69,200/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT. THE RELEVANT FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ARE AS FOLLO WS: IN VIEW OF THIS, IT IS ABSOLUTELY CLEAR THAT THE C OLOUR OF THESE AFFIDAVITS FILED BY THE APPELLANT DOES LNOT MATCH WITH THE MATERIAL ON RECO RD AND IT DOES NOT FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THESE AFFIDAVITS ARE SEL F SERVING AND, THEREFORE, CANNOT BE 5 RELIED UPON. IT IS TRITE LAW THAT FOR PROVING GENUI NENESS OF LOAN GENUINENESS OF TRANSACTION, GENUINENESS OF PARTY AND CAPACITY OF PARTY TO ADVAN CE LOANS ARE TO BE PROVED. IN CASE OF THE APPELLANT ALL THE DEPOSITORS ARE NOT ASSESSED T O TAX AND THE MODE OF RECEIPT OF LOAN IS CLAIMED TO BE IN CASH. IN VIEW OF THIS, IT IS HELD THAT THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND CAPACITY OF DEPO SIT TO ADVANCE LOANS. ACCORDINGLY, AN AMOUNT OF RS 1,69,200/- HAS BEEN CORRECTLY ASSESSED TO TAX U/S 68 OF THE INCOME-TAX ACT, 1961 . 8. ON THIS ISSUE BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SUCH ADDITION IS UNSUSTAINABLE, INASMUCH AS THE ASSESSEE DOES NOT MAINTAIN ANY REGULAR BOOKS OF ACCOUNT AND, THEREFOR E, SECTION 68 OF THE ACT CANNOT BE INVOKED TO TREAT THE IMPUGNED CREDITS AS UNEXP LAINED. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUB MITTED THAT THE BURDEN WAS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF LOANS AN D GIFTS CLAIMED TO HAVE BEEN RECEIVED FROM VARIOUS PERSONS. 9. WE HAVE CAREFULLY EXAMINED THE RIVAL CONTENTIONS AN D FIND THAT THE PLEA OF THE ASSESSEE THAT MERELY BECAUSE SHE WAS NOT MAINTAINING B OOKS OF ACCOUNT AND, THEREFORE, IMPUGNED ADDITION IS UNSUSTAINABLE, IS CLEARLY UNTENABLE. PERHAPS, THE ASSESSEE MAY BE JUSTIFIED IN ASSAILING THE INV OKING OF SECTION 68 OF THE ACT IN A SITUATION WHERE THE ACCOUNT BOOKS ARE NOT MA INTAINED, SO, HOWEVER, EVEN WHERE THE ACCOUNT BOOKS ARE NOT MAINTAINED AS IS TH E CASE HEREIN, YET THE ONUS WOULD REMAIN ON THE ASSESSEE TO JUSTIFIABLY EXPLAIN UNSECURED LOANS OF RS 1,69,200/- CLAIMED TO HAVE BEEN RAISED BY IT FROM 9 D IFFERENT PERSONS. EVIDENTLY, THE CONFIRMATIONS FROM SUCH PERSONS WERE PRODUCED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO REQUIRED THE ASSESSING OFFICER T O CARRY OUT NECESSARY VERIFICATION DURING REMAND PROCEEDINGS. THE ASSESSING OFF ICER CARRIED OUT A VERIFICATION EXERCISE AND REPORTED TO THE COMMISSIONER O F INCOME-TAX (APPEALS) THAT CONFIRMATIONS IN THE CASES OF 7 PERSONS WERE EXAMI NED AND INFORMATION UNDER SECTION 133(6) AND 131 OF THE ACT WAS OBTAINED. I T TRANSPIRES THAT THREE OF THE PERSONS WERE EXAMINED BY THE ASSESSING OFFICER AND ST ATEMENTS RECORDED UNDER SECTION 131 OF THE ACT WHEREIN THEY CONFIRMED H AVING ADVANCED IMPUGNED LOANS TO THE ASSESSEE. IN THE CASE OF OTHER THREE PERSONS, WRITTEN REPLIES WERE EXAMINED BY THE ASSESSING OFFICER. IN ALL THESE CASES, THE ASSESSING OFFICER HAS 6 DISBELIEVED THE CONFIRMATIONS ON THE GROUND THAT IT WA S UNBELIEVABLE THAT SUCH PERSONS WOULD HAVE ADVANCED LOANS TO THE ASSESSEE, AND SU CH PLEA OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE COMMISSIONER OF I NCOME-TAX (APPEALS). IN OUR CONSIDERED OPINION, IT WAS NOT JUSTIFI ED ON THE PART OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO HAVE AGREED TO THE AFORESAID STAND OF THE ASSESSING OFFICER, INASMUCH AS IT IS A CASE WHERE THE STAND OF THE CREDITORS HAVE BEEN MERELY DISBELIEVED AND THE SAME HAS NOT BE EN FOUND TO BE FALSE. THEREFORE, IN OUR CONSIDERED OPINION, SO FAR AS THE LOA NS RAISED FROM THE FOLLOWING SIX PARTIES ARE CONCERNED, THEY CAN BE SAID TO HAVE BEEN SATISFACTORILY EXPLAINED AND NO ADDITION THEREOF IS CALLED FOR. S.NO . NAME OF THE PARTY 1. SMT TRUPTI M GANDHI 2. SMT REKHA M GANDHI 3. SHRI PRASHANT R BIYANI 4. SMT MANJINI S RAIGAONKAR 5. SMT SWATI MEHENDARGE 6. SHRI ARVIND BADVE IN SO FAR AS THE AMOUNT OF LOANS SAID TO HAVE BEEN RE CEIVED FROM OTHER PERSONS IS CONCERNED, IN THIS CASE THE VERIFICATION EXERCISE CARRIED O UT BY THE ASSESSING OFFICER DURING REMAND PROCEEDINGS DOES NOT PROVE THE I DENTITY AND EXISTENCE OF THE PERSONS AND, THEREFORE, THE CORRESPONDING AMOUNTS CA N BE ASSESSED AS UNEXPLAINED. IN THIS MANNER, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO A LLOW APPROPRIATE RELIEF. 10. AS REGARDS THE OTHER ADDITION OF RS 61,750/- MADE UNDER SECTION 68 OF THE ACT REPRESENTING UNDISCLOSED INCOME ON ACCOUNT OF GIFTS RECEIVED, THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMED THE SAME, AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE SAME. BEING A GGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US 7 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N OUR CONSIDERED OPINION, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS JU STIFIED IN CONFIRMING THE ADDITION OF RS 61,750/- REPRESENTING UNDISCLOSED INCO ME ON ACCOUNT OF GIFTS ALLEGED TO HAVE BEEN RECEIVED. THE ASSESSEE HAS NOT BEE N ABLE TO ESTABLISH WITH ANY COGENT EVIDENCE THAT SHE HAD IN FACT RECEIVED THE GI FTS IN QUESTION AND NEITHER THE RELATIONSHIP BETWEEN HER AND THE DONOR OF THE GIFTS AND THE OCCASION FOR SUCH GIFTS HAVE BEEN EXPLAINED. IN THIS VIEW OF T HE MATTER, WE AFFIRM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASP ECT. THE ASSESSEE FAILS ON THIS GROUND OF APPEAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THE 29 TH DAY OF NOVEMBER, 2011. SD/- SD/- (I C SUDHIR) (G .S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 29 TH NOVEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT (A)-II, PUNE 4) CIT-II, PUNE 5) DR, B BENCH, ITAT, PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, I.T.A.T., PUNE