The Gurukul Trust, New Delhi V. ADIT (E), New Delhi

ITA 723/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65424 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 30-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHUMANA SEN
• Assessee Lawyers: ANOOP SHARMA M GIRI
• Keywords: Unexplained cash credit; Principle of natural justice
• Section: 143(3); 68; 12; 11

Judgement Text

ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.723/DEL/2012 ASSESSMENT YEAR : 2005-06 THE GURUKUL TRUST, VS ADIT(E), C/O SH. ANUP SHARMA, ADVOCATE, TRU ST CIRCLE-IV, 108, LAWYERS CHAMBER, NEW DELHI. DELHI HIGH COURT, NEW DELHI-110003 (PAN: AAATT3993R) APPELLANT BY: SHRI ANOOP SHARMA, M. GIRI RESPONDENT BY : MRS. SHUMANA SEN, SR. DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 13.12.2011 OF THE CIT(A)-XXI, NEW DELHI FOR AY 2005 -06, PASSED U/S 143(3) OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN DISALLOWING THE EXPENDITURE OF RS.1,70,000/-. 2. THE CIT(A) HAS FAILED TO APPRECIATE THE FACTS I N THE CASE AND SUBMISSIONS OF THE ASSESSEE AND THUS THE O RDER IS CONTRARY TO THE FACTS OF THE CASE. 3. THE DISALLOWANCE OF THE EXPENSE IS BAD IN LAW A ND THE ORDER DESERVES TO BE CORRECTED. ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 2 4. THE ASSESSMENT ORDER AS WELL AS THE ORDER OF TH E CIT(A) HAS BEEN PASSED IN CONTRAVENTION TO THE PRIN CIPLE OF NATURAL JUSTICE. THE SAME IS LIABLE TO BE SET A SIDE AND THE CASE DESERVES TO BE DECIDED ON THE BASIS OF FAC TS. 3. BRIEFLY STATED, THE FACTS OF THE CASE GIVING RIS E TO THIS APPEAL ARE THAT THE ASSESSEE FILED A RETURN SHOWING INCOME AS NIL A ND HIS CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 143(2) OF THE ACT WAS SERVED ON THE ASSESSEE. THE ASSESSEE TRUST WAS REGISTERED U/S 12 A OF THE ACT W.E.F. 12.05.2010. THE AO ALLOWED THE BENEFIT OF SECTION 11 AND 12 OF THE ACT TO THE ASSESSEE WITH A NOTING THAT HE HAS NOT FOUND AN Y VIOLATION OF SECTION 13 OF THE ACT. FURTHER, ON EXAMINATION OF BALANCE SHE ET OF THE ASSESSEE TRUST, THE AO NOTED THAT THE FOLLOWING LOAN CREDITORS OF T HE ASSESSEE TRUST WERE NOT ASSESSED TO INCOME TAX: SL.NO. NAME AMOUNT OF LOAN TAKEN BY THE ASSESSEE 1. RAJ RANI RS. 4,00,000/- 2. CHARU JAIN RS. 1,20,000/- 3. RAKHI RS. 50,000/- TOTAL RS.5,70,000/- 4. THE AO CALLED THE ASSESSEE TO EXPLAIN WHY THE AB OVE CLAIM OF UNSECURED LOAN FROM THE ABOVE THREE PERSONS SHALL B E TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 3 SUBMITTED DETAILS OF CHEQUE NOS. BY WHICH CREDITS W ERE RECEIVED AND ALSO THE DETAILS OF CHEQUE NOS. BY WHICH THE ASSESSEE TRUST MADE THE REPAYMENT TO THE CREDITOR. THE ASSESSEE ALSO SUBMITTED CONFIRMATION FROM MS RAKHEE AGARWAL AND MS CHARU JAIN BUT IT COULD NOT SUBMIT C ONFIRMATION FROM MS RAJRANI KAINTH AS SHE WAS NO MORE AT THE TIME OF AS SESSMENT. THE AO HELD THAT THE EXPLANATION ADVANCED BY THE ASSESSEE WAS F OUND TO BE NOT SATISFACTORY AND THE CLAIM OF UNSECURED LOAN OF RS. 5,70,000 WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND THE S AME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE TH E CIT(A) WHICH WAS ALLOWED IN REGARD TO CASH CREDIT FROM MS RAJRANI KA INTH BUT PARTLY DISALLOWED WITH REGARD TO CASH CREDIT PROVIDER MS R AKHEE AGARWAL AND CHARU JAIN TOTAL AMOUNTING TO RS.1,70,000. 6. THE OPERATIVE PART OF THE IMPUGNED ORDER IS BEIN G REPRODUCED BELOW:- 3.2 I HAVE GONE THROUGH THE FINDING OF THE AO IN THE ASSESSMENT ORDER AND WRITTEN SUBMISSION OF THE LD. AR. IN THIS REGARD AO HAS OBSERVED THAT ALL THE THREE P ERSONS WHO HAVE GIVEN THE LOAN ARE NOT ASSESSED TO TAX. S O, HE HAS HELD THAT PROVISIONS OF SECTION 68 ARE ATTRACTE D AND HE HAS RELIED ON VARIOUS CASE LAWS IN THIS REGARD. DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS SUBMITTE D BY THE LD. AR THAT OUT OF THREE CREDITORS MS CHARU JAI N AND MS RAKHEE AGARWAL ARE NOT ASSESSED TO TAX BUT RAJRA NI KAINTH WHO HAS GIVEN LOAN OF RS. 4 LAKH IS ASSESSED TO TAX AND HE HAS ALSO FILED COPY OF INCOME TAX RETURN FOR AY 2005-06. ON FURTHER EXAMINATION HE HAS ALSO EXPLAI NED ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 4 VIDE LETTER DATED 18.11.2010 THAT MS RAJRANI KAINTH HAS SINCE BEEN DECEASED, SO, HER CONFIRMATION COULD NOT BE SUBMITTED. IN THIS REGARD I HAVE PERUSED THE DETAI L FILED FROM TIME TO TIME AND IT IS THAT WITH REGARD TO MS RAJRANI KAINTH LD. AR OF THE APPELLANT HAS FILED COPY OF TH E IT RETURN, DETAILS OF CHEQUE NUMBERS, LEDGER ACCOUNT. THE ONLY PAPER WHICH COULD NOT BE FILED IS THE CONFIRMA TION BECAUSE MS RAJRANI KAINTH IS NO MORE. SO, IN MY CONSIDERED OPINION, IDENTITY AND CAPACITY OF THE CR EDITOR HAS BEEN ESTABLISHED AS FAR AS MS RAJRANI KAINTH IS CONCERNED BUT SIMILAR CASE IS NOT WITH MS RAKHEE AGARWAL FOR LOAN AMOUNTING TO RS.50,000/- AND MS CHARU JAIN FOR LOAN AMOUNTING TO RS.1,20,000/-. TH EIR CREDITWORTHINESS HAS NOT BEEN ESTABLISHED EITHER BE FORE THE AO OR DURING THE APPELLATE PROCEEDINGS BECAUSE THEY HAVE BEEN FOUND TO BE NOT ASSESSED TO INCOME TAX. HOW A PERSON CAN GIVE A LOAN AMOUNTING TO RS.50,000 AND AMOUNTING TO RS.1,20,000 WHEN HIS/HER INCOME IS NOT TO THE TAXABLE LIMIT. IN VIEW OF THE ABOVE DISCUSSION , I AM OF THE CONSIDERED OPINION THAT OUT OF ADDITION OF RS.5,70,000, AN ADDITION OF RS.4,00,000/- PERTAININ G TO MS RAJRANI KAINTH HAS BEEN FOUND TO BE PROPERLY EXPLAINED, BUT, REMAINING ADDITION OF RS.1,70,000/- HAS NOT BEEN EXPLAINED PROPERLY. SO, AN ADDITION OF RS.1,70,000/- IS SUSTAINED. ASSESSEE GETS RELIEF O F RS.4,00,000/-. IN VIEW OF THE ABOVE DISCUSSION GRO UNDS NO. 1 TO 4 ARE PARTLY ALLOWED. NOW, AGGRIEVED THE ASSESSEE IS BEFORE THIS TRIBUNAL WITH THIS SECOND APPEAL. 7. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S IN THE LIGHT OF MATERIAL AND DOCUMENTS ON RECORD BEFORE US. THE AS SESSEES REPRESENTATIVE SUBMITTED THAT THE CASH CREDIT FROM MS RAJRANI KAIN TH WAS CONFIRMED WITH A FINDING THAT THE ASSESSEE COULD NOT SUBMIT HER CONF IRMATION REGARDING THE CASH CREDIT BECAUSE AT THE TIME OF ASSESSMENT SHE H AD EXPIRED. THE CIT(A) ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 5 ALSO NOTED THAT MS RAJRANI KAINTH WAS AN INCOME TAX ASSESSEE. THEREFORE, HER IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION WAS ACCEPTED AND THE ORDER OF THE AO IN THIS REGARD WAS SET ASIDE DELETING THE ADDITION OF RS.4 LAKH. 8. HE FURTHER SUBMITTED THAT THE ASSESSEE SUBMITTED DETAILS OF CHEQUES PERTAINING TO ALL THREE CREDITORS BY WHICH THE ASSE SSEE TRUST RECEIVED THE LOAN AND MADE REPAYMENT TO THE CREDITORS AND CONFIRMATIO N FROM MS RAKHEE AGARWAL AND MS CHARU JAIN WERE ALSO SUBMITTED BUT T HE CIT(A) SUSTAINED THE ADDITION IN REGARD TO THESE CREDITORS WITH THE ONLY FINDING THAT THEY HAVE BEEN FOUND TO BE NOT ASSESSED TO INCOME TAX AND HOW A PERSON CAN GIVE A LOAN OF RS.50,000 AND RS.1,20,000 WHEN HER INCOME I S NOT TO THE TAXABLE LIMIT. THE AR CONCLUDED HIS ARGUMENT WITH THE SUBM ISSION THAT THE TREATMENT WHICH WAS GIVEN TO THE CASH CREDIT TO MS RAJRANI KAINTH WAS TO BE GIVEN TO THE OTHER CREDITORS I.E. MS RAKHEE AGARWAL AND MS CHARU JAIN. BUT THE LD. CIT(A) TOOK A BASELESS STAND FOR SUSTAINING ADDITION MADE BY THE AO IN THIS REGARD. 9. THE DR SUBMITTED THAT THE ACTION OF THE AO AS WE LL AS FINDINGS OF THE CIT(A) IN THE IMPUGNED ORDER IN REGARD TO ADDITION OF RS.1,70,000 ARE BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHICH NE EDS NO INTERFERENCE. THE DR ALSO SUBMITTED THAT THE ONUS WAS ON THE ASSESSEE TRUST TO ESTABLISH ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 6 IDENTITY, CREDITWORTHINESS AND CAPABILITY OF THE CR EDITORS WITH GENUINENESS OF THE TRANSACTION PERTAINING TO THE CASH CREDITS SHOW N BY IT IN THE BALANCE SHEET SUBMITTED BEFORE THE AO BUT THE ASSESSEE TRUST MISE RABLY FAILED TO DO SO. THEREFORE, ADDITION MADE BY THE AO AND PARTLY CONFI RMED BY THE CIT(A) DESERVES TO BE CONFIRMED. 10. ON CAREFUL CONSIDERATION OF THE SUBMISSIONS, RE LEVANT CITATIONS AND MATERIAL ON RECORD BEFORE US, WE OBSERVE THAT IT IS NOT IN DISPUTE THAT ALL THREE CASH CREDITS WERE RECEIVED THROUGH ACCOUNT PAYEE CH EQUES FROM THE CREDITORS AND REPAYMENT WAS ALSO MADE THROUGH ACCOUNT PAYEE C HEQUES TO THE CREDITORS BY THE ASSESSEE TRUST. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE TRUST FILED CONFIRMATIONS, IDENTITY AND ALL RELEVANT DOCU MENTS SHOWING THAT THE LOAN ADVANCED TO THE ASSESSEE TRUST AND ITS REPAYME NT BY THE ASSESSEE TRUST WAS ROUTED THROUGH ACCOUNT PAYEE CHEQUES AND THE RE LEVANT WRITTEN CONFIRMATIONS CONTAINING FULL ADDRESS OF THE CREDIT ORS AND THEIR BANK PASS BOOKS AND BANK STATEMENT OF THE ASSESSEE TRUST WERE ALSO SUBMITTED BEFORE THE AUTHORITIES BELOW BY THE ASSESSEE TRUST. THE A SSESSEE APPELLANT HAS ALSO FURNISHED A PAPER BOOK BEFORE US WITH A CERTIFICATI ON THAT DOCUMENTS SHOWN AT SL.NO. 1 TO 6 I.E. CONFIRMATION FROM MS RAKHEE A GARWAL, HER LEDGER ACCOUNT WITH THE ASSESSEE, HER BANK PASS BOOK SHOWI NG PAYMENT AND RECEIPT OF RS.50,000 AND ALSO CONFIRMATION FROM MS CHARU JA IN, HER LEDGER ACCOUNT ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 7 WITH THE ASSESSEE TRUST WITH BANK STATEMENT OF THE ASSESSEE TRUST SHOWING THE RECEIPT AND REPAYMENT OF THE CASH CREDITS OF RS.1,7 0,000 WERE SUBMITTED BEFORE THE AO AND THE CIT(A). 11. AT THIS JUNCTURE, IT IS NECESSARY AND APPROPRIA TE TO RELY ON THE JUDGMENT OF HONBLE GUWAHATI HIGH COURT IN THE CASE OF NEMI CHA ND KOTHARI V. COMMISSIONER OF INCOME-TAX [2003] 264 ITR 254 (GAU. ) WHEREIN THEIR LORDSHIPS HELD THAT IT CANNOT BE SAID THAT A TRANSACTION, WHICH TAKES PLACE BY WAY OF CHEQUE, IS INVARIABLY SACROSA NCT. ONCE THE ASSESSEE HAS PROVED THE IDENTITY OF HIS CREDITORS, THE GENUI NENESS OF THE TRANSACTION WHICH HE HAD WITH HIS CREDITORS AND THE CREDITWORTH INESS OF THE CREDITORS VIS- -VIS THE TRANSACTIONS WHICH HE HAD WITH THE CREDIT ORS, HIS BURDEN STANDS DISCHARGED AND THE BURDEN THEN SHIFTS TO THE REVENU E TO SHOW THAT THOUGH COVERED BY CHEQUES, THE AMOUNTS IN QUESTION ACTUALL Y BELONGED TO, OR WAS OWNED BY THE ASSESSEE HIMSELF. IN THE PRESENT CAS E, SINCE THE ASSESSEE HAS SHOWN THAT THE TRANSACTION WAS MADE THROUGH CHEQUES AND HE ALSO SUBMITTED THE CONFIRMATION WITH DETAILED ADDRESS OF THE CREDI TORS, THEN THE BURDEN SHIFTS TO THE REVENUE TO ESTABLISH THAT THE AMOUNT IN QUES TION ACTUALLY BELONGED TO OR WAS OWNED BY THE ASSESSEE TRUST BUT NEITHER THE AO NOR THE CIT(A) HAS BROUGHT ANY INCRIMINATING MATERIAL OR EVIDENCE AGAI NST THE ASSESSEE TRUST TO ESTABLISH THAT THE CASH CREDITS SHOWN IN THE BALANC E SHEET ACTUALLY BELONGED ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 8 TO OR OWNED BY THE ASSESSEE HIMSELF. WE ALSO OBSER VE THAT THE AO AND THE CIT(A) NEVER WENT A STEP AHEAD TO VERIFY THE IDENTI TY AND CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSAC TION WHICH THE ASSESSEE TRUST HAD WITH HIS CREDITORS. 12. THE HONBLE HIGH COURT OF MADHYA PRADESH IN THE CAS E OF CIT VS METACHEM INDUSTRIES (2008) 245 ITR 160 (MP) HELD THAT:- ASSESSEE CANNOT BE ASKED TO EXPLAIN WHETHER CREDIT HAS SUFFERED TAX WHERE THE ASSESSEE FIRM HAD SATISFACTORILY EXPLAINED THE CREDITORS STANDING IN THE NAME OF ITS PARTNERS, THE RESPONSIBILITY OF THE ASS ESSEE STANDS DISCHARGED. ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE A P ARTNER OR AN INDIVIDUAL, THEN THE RESPONSIBILITY OF THE AS SESSEE FIRM IS OVER. THE ASSESSEE-FIRM CANNOT ASK THAT PE RSON WHO MAKES INVESTMENT WHETHER THE MONEY INVESTED IS PROPERLY TAXED OR NOT. IF THAT PERSON OWNS THE ENT RY, THEN THE BURDEN OF THE ASSESSEE-FIRM IS DISCHARGED. IT IS OPEN TO THE ASSESSING OFFICER TO UNDERTAKE FURTHER INVESTIGATION WITH REGARD TO THAT INDIVIDUAL WHO HA S DEPOSITED THE AMOUNT CIT VS METACHEM INDUSTRIES (2000) 245 ITR 160 (MP). 13. IN THE PRESENT CASE, WE ARE INCLINED TO OBSERVE THAT THE LD. CIT(A) SIMPLY CONFIRMED THE ADDITION OF RS.1,70,000 WITH A FINDING THAT THE CREDITORS MS RAKHEE AGARWAL AND MS CHARU JAIN HAVE BEEN FOUND TO BE NOT ASSESSED TO INCOME TAX. THEREFORE, THEIR CAPABILIT Y TO ADVANCE LOAN IS DOUBTFUL AND THEIR INCOME WAS NOT TO THE TAXABLE LI MIT. WE ARE UNABLE TO UPHOLD THIS FINDING BECAUSE THIS IS NOT A TEST PARA METER FOR EVALUATING THE ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 9 CAPABILITY OF A PERSON FOR ADVANCING LOAN THAT WHET HER HIS INCOME IS ASSESSED TO INCOME TAX OR NOT. IF THIS TEST STANDARD IS APP ROVED, THEN THE CREDITWORTHINESS OF ALL THE PERSONS OUT OF THE AMBI T OF INCOME TAX ASSESSMENT WOULD BE DOUBTFUL. 14. IN VIEW OF ABOVE, FOLLOWING THE JUDGMENT OF HON BLE GUWAHATI HIGH COURT IN THE CASE OF NEMI CHAND KOTHARI (SUPRA) AND THE JUDGMENT OF MADHYA PRADESH HIGH COURT IN THE CASE OF METACHEM I NDUSTRIES (SUPRA), WE HOLD THAT THE AO AND THE CIT(A) DID NOT MAKE ANY EF FORT TO VERIFY THE CONFIRMATIONS, IDENTITY AND CREDITWORTHINESS OF THE CREDITORS IN QUESTION AND THEY ALSO IGNORED THE FACT THAT THE TRANSACTION OF CASH CREDITS RECEIVED AND ITS REPAYMENT WERE MADE THROUGH BANK AND WE ALSO HOLD T HAT THE AUTHORITIES BELOW DID NOT BRING ANY INCRIMINATING MATERIAL OR E VIDENCE AGAINST THE ASSESSEE TRUST TO ESTABLISH THAT THE AMOUNT SHOWN I N THE BALANCE SHEET AS CASH CREDITS AMOUNTING TO RS.1,70,000 ACTUALLY BELONGED OR WAS OWNED BY THE ASSESSEE TRUST ITSELF. 15. ACCORDINGLY, WE ARRIVE TO A CONCLUSION THAT THE ADDITION OF RS.1,70,000 U/S 68 OF THE ACT CONFIRMED BY THE CIT( A) IS NOT SUSTAINABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE, THERE FORE, ALLOW THE APPEAL OF THE ASSESSEE TRUST, SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD. ITA NO. 723/DEL/2012 ASSTT. YEAR: 2005-06 10 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.9.2012. SD/- SD/- (SHAMIM YAHYA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 19TH SEPTEMBER 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR