M/s Ramgopal Harbans Lal, V. ITO,

ITA 726/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3928 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: HARISH BINDAL
• Keywords: Unexplained cash credit; Gift
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH-F, NEW DELHI BEFORE SHRI RAJ PAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A.NO.726/DEL/2009 ASSESSMENT YEAR 2005-06 M/S RAMGOPAL HARBANS LAL, VS. INCOME-TAX OFFICER, C/O HARISH HARISH BINDAL, ADVOCATE, WARD-3, 946/545, KATH MANDI, HISSAR. HISSAR. PAN: AAIFR5129D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARISH BINDAL, ADVOCATE RESPONDENT BY : SHRI H.K. LAL, SR. D.R. O R D E R PER SHAMIM YAHYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER OF THE CIT(A), ROHTAK DATED 23.12.2008 AND PERTAINS TO ASSESSMENT YEAR 2005-06. THE ISSUE RAISED IS THAT THE CIT(A) HAS ERRED IN SUSTAI NING THE ADDITION OF RS.2 LAKHS AS UNEXPLAINED CASH CREDIT. 2. THE ASSESSEE IN THIS CASE IS A PARTNERSHIP FIRM . FROM A PERUSAL OF BALANCE-SHEET, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS RAISED A FRESH UNSECURED` LOAN OF RS.2,00,000/- FROM ONE SHR I DINESH GOEL. IN ORDER TO EXAMINE THE VERACITY OF THE LOAN, THE ASSESSING OFFICER EXAMINED THE ISSUE AND OBSERVED AS UNDER:- 3IN ORDER TO EXAMINE THE GENUINENESS OF THE LOA N & CREDITWORTHINESS OF THE CREDITOR, THE ASSESSEE WAS REQUIRED TO PRODUCE THE CREDITOR FOR EXAMINATION ON OATH. ON 02 .08.2007, THE ITA NO.726/DEL/09 2 CREDITOR SHRI DINESH GOYAL, WAS PRODUCED AND HIS ST ATEMENT WAS RECORDED ON OATH. IN HIS STATEMENT, SHRI DINESH GO YAL DEPOSED THAT HE HAS NO INDEPENDENT SOURCE OF INCOME. HOWEVER, H E ADMITTED HAVING ADVANCED A SUM OF RS.2,00,000/- TO THE ASSES SEE DURING THE YEAR. ON BEING REQUIRED TO EXPLAIN THE SOURCE OF A DVANCING SUCH LOAN, THE CREDITOR DEPOSED THAT HE HAD RECIVED A GI FT OF RS.2,00,000 FROM HIS MATERNAL UNCLES/AUNT (MAUSI) NAMELY SHRI R AM NIWAS, SHRI KISHORI LAL AND SMT. USHA, RESIDENT OF VILLAGE BIBI PUR (DISTT. JIND) THROUGH CHEQUE AND OUT OF THIS GIFT, HE ADVANCED TH E LOAN OF RS.2,00,000 TO THE ASSESSEE. THE CREDITOR WAS SPEC IFICALLY QUESTIONED ABOUT THE OCCASION ON WHICH SUCH GIFT WA S RECEIVED. IN RESPONSE, HE DEPOSED THAT:- I WAS IN NEED OF SUCH GIFT AND MY MATERNAL UNCLES WERE HAVING CONSIDERABLE AGRICULTURE LAND, WHO GAVE ME S UCH GIFT ON DEMAND. 3.1. ON BEING REQUIRED, THE ASSESSEE COULD NEITHER PRODUCE THE BANK PASS BOOK NOR HE COULD FURNISH COPY OF GIFT-DE ED AS THE SAME HAD ADMITTEDLY NOT BEEN EXECUTED. THE CREDITOR WAS FURTHER REQUIRED TO EXPLAIN WHETHER HE HAD EVER RECEIVED SUCH TYPE O F GIFTS FROM THESE RELATIVES EARLIER. IT IS NOTABLE THAT THE CRE DITOR CATEGORICALLY DENIED HAVING RECEIVED SUCH TYPE OF GIFTS EARLIER, EXCEPT THE ABOVE MENTIONED GIFT OF RS.2,00,000/-. COPY OF BANK ACCO UNT OF THE CREDITOR WITH UNION BANK OF INDIA, HANSI, WAS CALLE D FOR WHICH WAS SUBMITTED AND HAS BEEN PLACED ON RECORD. FROM A PE RUSAL OF THE SAME, IT HAS BEEN OBSERVED THAT HE WAS HAVING CREDI T BALANCE OF RS.260/- AS ON 30.4.2004. ON 27.5.2004, HE DEPOSIT ED CHEQUES WORTH RS.2,00,000/- (I.E. RS.55,000, RS.55,000, RS. 37,000 AND RS.53,000) INTO HIS BANK ACCOUNT AND AFTER TEN DAY S I.E. ON 7.6.2004, SHRI DINESH GOYAL ISSUED A CHJEQUE OF RS. 2,00,000 TO THE ITA NO.726/DEL/09 3 ASSESSEE. FURTHER PERUSAL OF THE BANK ACCOUNT OF T HE CREDITOR GIVES THE FOLLOWING INTERESTING GLIMPSE: BALANCE AS ON 7.6.2004 AFTER MAKING GIFT OF RS.2,00,000/- : RS.260 BALANCE 1.7.2007 AFTER DEDUCTION OF PENALTY OF RS.5/- FOR NOT MAINTAINING MINIMUM BALANCE : RS. 255/- REQUIRED. BALANCE 02.08.2007 AFTER DEDUCTION OF PENALTY OF RS.5/- FOR NOT MAINTAINING MINIMUM BALANCE REQUIR ED: RS.250/- INTEREST CREDITED ON 10.8.2004 : RS.2/- BALANCE 02.09.2007 AFTER DEDUCTION OF PENALTY : RS.247/- OF RS.5/- FOR NOT MAINTAINING MINIMUM BALANCE REQUIRED. ..AND SO ON. IN THE BACKGROUND OF ABOVE FINDINGS, THE ASSESSING OFFICER HELD THAT LOAN IN QUESTION IS NOTHING BUT UNACCOUNTED MONEY OF THE AS SESSEE BROUGHT BACK IN THE GARB OF LOAN ROUTING IT THROUGH THE BANK ACC OUNT OF SHRI DINESH GOYAL WHO HIMSELF IS ADMITTEDLY A MAN OF LIMITED MEANS. SINCE CREDITWORTHINESS OF THE CREDITOR COULD NOT BE PROVED BY THE ASSESSEE , ASSESSING OFFICER MADE THE ADDITION OF RS.2,00,000/- U/S 68 OF THE IN COME-TAX ACT. 3. UPON ASSESSEES APPEAL, LD CIT(A) CONSIDERED THE ISSUE AND CONFIRMED ASSESSING OFFICERS ACTION HOLDING AS UND ER:- CREDITWORTHY HAS BEEN MEANT AS ABLE TO BE TRUS TED TO PAY BACK MONEY THAT IS OWED; SAFE TO LEND MONEY TO IN THE NEW OXFORD ITA NO.726/DEL/09 4 ADVANCED LEARNERS DICTIONARY 7 TH EDITION BY A.S. HORNBY. THUS CREDITWORTHINESS DOES NOT MEAN THAT A PERSON IS HAV ING A PARTICULAR AMOUNT OF CASH AT A PARTICULAR POINT OF TIME TO LEN D/ADVANCE THE SAME TO OTHERS; IT IS OVERALL FINANCIAL CAPABILITY OF THE PERSON, IN TOTALITY OF CIRCUMSTANCES, WHICH IS TO BE LOOKED IN TO FOR EXAMINING HIS CREDITWORTHINESS. IN THE CASE UNDER CONSIDERATION THE CREDITOR OF THE APPELLANT DID NOT HAVE CREDITWORTHINESS IN VIEW O F THE CIRCUMSTANCES EXPLAINED AND DISCUSSED IN THE ASSESS MENT ORDER. EVEN THE CREDITOR COULD NOT MAINTAIN MINIMUM BALANC E IN THE BANK AND PENALTY WAS IMPOSED UPON HIM. THE HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE, 82 ITR 540 ( SC) AT PAGE 545 AND 547 HAS LAID DOWN THAT THE APPARENT MUST B E CONSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS T O BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. AGAINST THE CIT(A)S ORDER, THE ASSESSEE IS IN APPE AL BEFORE US. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE HAD PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE LOAN. ASSESSEE HAD RECEIVED THE LOAN THROUGH BANKING CHANNELS. ASSESS EE HAD DULY PRODUCED THE CREDITOR WHO HAD CONFIRMED THAT HE HAD GIVEN TH E GIFT. GIFT HAD BEEN RECEIVED THROUGH BANKING CHANNELS. THE LD. COUNSEL IN THIS REGARD ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL, 87 ITR 349 (SC). HE C LAIMED THAT ASSESSEE IS BEING ASKED TO SUBSTANTIATE THE SOURCE OF SOURCE WHICH IS NOT PERMISSIBLE IN LAW. ITA NO.726/DEL/09 5 5. LD. D.R., ON THE OTHER HAND, SUBMITTED THAT ASSE SSEE HAS NOT AT ALL BEEN ABLE TO PROVE THE CREDITWORTHINESS OF THE CRED ITOR AND THE GENUINENESS OF THE TRANSACTION. HE CLAIMED THAT TH ERE IS NO MENTION OF ANY OCCASION ON WHICH THE SAID CREDITOR OBTAINED THOSE GIFTS TO ENABLE HIM TO GRANT THE LOAN TO THE ASSESSEE. IN THIS REGARD, LD . D.R. PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F CIT V. P. MOHANAKALA , 291 ITR 278 (SC), AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT V. ANIL KUMA R, 292 ITR 552 (DELHI). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. IT IS SETTLED LAW THAT FOR PROVING THE CREDIT U/S 68 OF T HE INCOME-TAX ACT, IDENTITY AND CREDITWORTHINESS OF THE LENDER AS WELL AS GENUI NENESS OF THE TRANSACTION ARE NEEDED TO BE ESTABLISHED BY THE ASS ESSEE. AS PER ADMITTED FACTS OF THE CASE, ASSESSEE FIRM HAS RECEI VED AN UNSECURED LOAN OF RS.2,00,000/- FROM SHRI DINESH GOYAL. THE SAID LOAN HAS BEEN RECEIVED THROUGH CHEQUE FROM BANK ACCOUNT. AN EXAMINATION O F THE CREDITORS BANK ACCOUNT REVEALED THAT THERE WAS VERY MEAGER BALANCE IN THE ACCOUNT AND CREDITOR HAD RECEIVED RS.2,00,000/- BY DEMAND DRAF T WHICH HAS BEEN GIVEN BY CHEQUE TO THE ASSESSEE FIRM AS LOAN. THE SAID CREDITOR HAS CLEARLY STATED THAT HE HAS OBTAINED THE GIFT AS HE WAS IN NEED OF THE GIFT. NO CONFIRMATION ETC. ON THE SO-CALLED DONOR WAS PRO DUCED. HENCE THE CREDITWORTHINESS OF THE DONOR HAS NOT AT ALL BEEN E STABLISHED. THE CIRCUMSTANCES CLEARLY WARRANTS A CONCLUSION THAT IT IS ASSESSEES OWN MONEY IN THE GARB OF LOAN. ITA NO.726/DEL/09 6 7. IN THE CASE OF DAULAT RAM RAWATMULL, SUPRA, RELI ED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, THE HON'BLE SUPREME COUR T HELD AS UNDER:- THE RESPONDENT-FIRM HAD OPENED AN OVERDRAFT ACCOU NT WITH A LIMIT OF RS. 10 LAKHS AGAINST THE COLLATERAL SECUR ITY OF TWO FIXED DEPOSIT RECEIPTS OF RS. 5 LAKHS EACH, ONE OF WHICH WAS IN THE NAME OF B, SON OF A PARTNER OF THE FIRM, AND THE OTHER I N THE NAME OF A, SON OF ANOTHER PARTNER. THE FIXED DEPOSIT RECEIPT IN T HE NAME OF B HAD BEEN ISSUED ON NOVEMBER, 21, 1944, BY THE JAMNAGAR BRANCH OF A BANK AGAINST THE SUM OF RS. 5 LAKHS TENDERED ON NOV EMBER, 15, 1944, AT A BRANCH OF THE BANK IN CALCUTTA IN THE SA ME BUILDING IN WHICH THE RESPONDENT HAD ITS BUSINESS PREMISES. TH E OTHER FIXED DEPOSIT RECEIPT HAD ALSO BEEN OBTAINED SIMILARLY. LETTER OF GUARANTEE AND OF CONTINUITY WERE SIGNED BY B AND A. NO CONS IDERATION WAS RECEIVED BY THEM. AFTER AS DEATH THE AMOUNT OF HIS FIXED DEPOSIT WAS NOT PAID TO HIS HEIRS BUT WAS ADJUSTED AGAINST THE OVERDRAFT OF THE RESPONDENT, WHEREAS, IN THE CASE OF THE FIXED D EPOSIT IN BS NAME B HIMSELF ULTIMATELY RECEIVED THE AMOUNT IN JA NUARY, 1946. BS EXPLANATION THAT THE AMOUNT OF RS. 5 LAKHS WAS TRANSFERRED IN MARCH, 1942, TO HIS NATIVE PLACE TO RATANGARH OWING TO BOMBING PANIC IN CALCUTTA AND WHEN THE WAR SITUATION IMPR OVED THE MONEY WAS TAKEN FOR DEPOSIT THERE, WAS REJECTED AS FALSE. THE TRIBUNAL HELD THAT THE SUM OF RS. 5 LAKHS BELONGED TO THE FI RM AND WAS ITS CONCEALED INCOME, ON THE FOLLOWING MATERIAL: (I) TH E EXPLANATION FURNISHED BY B WAS FOUND TO BE INCORRECT; (II) THE TRANSFER OF THE TWO SUMS OF RS. 5 LAKHS EACH FROM CALCUTTA TO JAMNAGA R THROUGH BOMBAY AND ISSUE OF FIXED DEPOSIT RECEIPT IN THE NA MES OF THE SONS OF THE PARTNERS; (III) THE USE OF THE TWO RECEIPTS AS COLLATERAL SECURITY FOR THE OVERDRAFT FACILITY. ON A REFERENCE THE HIG H COURT HELD THAT THIS MATERIAL WAS NOT SUFFICIENT FOR THE TRIBUNAL TO HOL D THAT THE SUM OF ITA NO.726/DEL/09 7 RS.5 LAKHS BELONGED TO THE RESPONDENT-FIRM. ON APP EAL TO THE SUPREME COURT: HELD, AFFIRMING THE DECISION OF THE HIGH COURT: (I) THAT THE QUESTION WAS NOT WHETHER THE AMOUNT OF RS. 5 LAKSH BELONGED TO B, BUT WHETHER IT BELONGED TO THE RESPONDENT-FIRM. T HE FACT THAT B HAD NOT BEEN ABLE TO GIVE A SATISFACTORY EXPLANATION RE GARDING THE SOURCE OF RS. 5 LAKHS WOULD NOT BE DECISIVE EVEN OF THE MA TTER AS TO WHETHER B WAS OR WAS NOT THE OWNER OF THAT AMOUNT. A PERSON COULD STILL BE HELD TO BE OWNER OF A SUM OF MONEY E VEN THOUGH THE EXPLANATION FURNISHED BY HIM REGARDING THE SOURCE OF THAT MONEY WAS FOUND TO BE NOT CORRECT. FROM THE SIMPLE FACT THAT THE EXPLANATION REGARDING THE SOURCE OF MONEY FURNISHED BY X, IN WHOSE NAME THE MONEY WAS LYING IN DEPOSIT, HAD BEEN FOU ND TO BE FALSE, IT WOULD BE REMOTE AND FAR-FETCHED CONCLUSION TO HOLD THAT THE MONEY BELONGED TO Y. THERE WOULD BE IN SUCH A CASE NO DIR ECT NEXUS BETWEEN THE FACTS FOUND AND THE CONCLUSION DRAWN TH EREFROM. 8. IN THE CASE OF CIT V. P. MOHANAKALA , 291 ITR 27 8 (SC), RELIED UPON BY THE LD. D.R., THE HON'BLE SUPREME COURT HAS EXPO UNDED AS UNDER:- A BARE READING OF SECTION 68 OF THE INCOME TAX A CT, 1961, SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUN TS IN THE BOOKS MAINTAINED BY THE ASSESSEE; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR; AND (III) EITHER (A ) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOOKS OR (B) THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISF ACTORY. IT IS ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TO INCOME-T AX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASESSEE OFFERS NO EXPLANATION MEANS THE ASSESSEE OFFERS NO ITA NO.726/DEL/09 8 PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS R EGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQ UIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTEND ING CIRCUMSTANCES AVAILABLE ON THE RECORD. THE OPINIO N OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIV ELY WITH REFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED I N THE BOOKS IS NOT SATISFACTORY THERE IS, PRIMA FACIE, EVIDENCE AGAINS T THE ASSESSEE, VIZ., THE RECEIPT OF MONEY. THE BURDEN IS ON THE AS SESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REBUT IT, IT CAN BE H ELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NATUR E. THE BURDEN IS ON THE ASSESSEE TO TAKE THE PLEA THAT , EVEN IF THE EXPLANATION IS NOT ACCEPTABLE, THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY TH E SUM FOUND CREDITED IN THE BOOKS BEING TREATED AS A RECEIPT O F INCOME NATURE. WE FIND THAT THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF DAULAT RAM RAWATMULL, SUPRA, RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE, WAS ON DIFFERENT FACTS. THE ISSUE THERE WAS REGARDING TREATMENT OF FD IN THE NAME OF SON OF PARTNER OF THE FIRM AS UNDISCLOSED INCOME OF THE FIRM. THERE WAS NO DIRECT NEXUS BETWEEN THE FA CTS FOUND AND THE CONCLUSION DRAWN THEREFROM. HENCE IT WAS HELD THAT IT WOULD THEREFORE, BE REMOTE AND FARFETCHED TO HOLD THAT THE MONEY BELONG ED TO THE FIRM. IN THE ITA NO.726/DEL/09 9 PRESENT CASE, IN OUR CONSIDERED OPINION, THE EXPOSI TION FROM THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F P. MOHANAKALA , CITED ABOVE, ON THE ISSUE OF UNEXPLAINED CASH CREDI T, IS SQUARELY APPLICABLE. HERE, THE ASSESSEES EXPLANATION THAT THE LOAN HAS BEEN OBTAINED FROM SHRI DINESH GOYAL HAS BEEN FOUND TO B E NOT AT ALL SATISFACTORY INASMUCH AS HE HAS BEEN FOUND TO BE A MAN OF NO MEANS OR SOURCE OF INCOME. HE HAS STATED TO HAVE GIVEN THE LOAN BY RECEIVING GIFTS AS HE WAS IN NEED OF GIFTS WITHOUT ANY CORROBORAT IVE MATERIAL. HIS BANK ACCOUNT SHOWS A VERY MEAGER BALANCE. THERE IS DEPO SIT OF RS.2,00,000/- BY DEMAND DRAFT AND THERE IS IMMEDIATE ISSUE OF CHE QUES TO THE ASSESSEE. HENCE, CLEARLY THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN CAST UPON IT BY THE PROVISION OF SECTION 68, AS HAS BEEN EXPO UNDED BY THE HONBLE APEX COURT IN THE CASE OF P. MOHANAKALA (SUPRA). 9. IN THE BACKGROUND OF ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UP HOLD THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.5.2010. SD/- SD/- ( RAJ PAL YADAV ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14.5.2010. VSK ITA NO.726/DEL/09 10 COPY TO:- 1. APPELLANT-ASSESSEE 2. RESPONDENT- REVENUE 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. DEPUTY REGISTRAR ITA NO.726/DEL/09 11