M/s. Jain Ceramics Colours & Coatings (P) Ltd., JODHPUR V. ACIT, BIKANER

ITA 73/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70195 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-08-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Question of law
• Section: 143(3); 6; 68

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 73/JODH/2013 (A.Y. 2000-01) M/S. JAIN CERAMICS COLOURS & VS ACIT, CIRCLE-1, COATINGS (P) LTD. BIKANER. C/O. SHRI U.C. JAIN, ADVOCATE, SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN NO. AABFC0768J (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAJENDRA JAIN. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 20/08/2013. DATE OF PRONOUNCEMENT : 18/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2000-01 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A), BIKANER, DATED 20/12/2012. 2 2. FOLLOWING MATERIAL GROUNDS HAVE BEEN RAISED IN T HIS APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN SUSTAINING AN ADDITION OF RS. 12,520/- ON ACCOUNT OF INTEREST PAID TO SHRI JEEWAN RAM SHARMA IN RESPECT OF LOAN OBTAINED IN THE PRECEDING YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN SUSTAINING ADDITION OF RS. 6,68,549/- U/S 68 IN RESPECT OF DEPOSIT IN THE NAME OF THE FOLLOWING PERSONS; A. SMT. NEENA DEVI JAIN RS. 4,68,549/- B. SHRI JEEWAN LAL KIRADOO RS. 2,00,000/- RS. 6,68,549/- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DISALLOWING THE CLAIM O F PAYMENT OF INTEREST OF RS. 12,520/- TO SHRI JEEWAN LAL KIRADOO. 4. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL OR ALTERNATIVE GROUND AT OR BEFORE T HE TIME OF HEARING. 5. THE PETITIONER PRAYS FOR JUSTICE AND RELIEF. 3 2.1 WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. THE FACTS OF THE CASE ARE THAT THE A SSESSEE-COMPANY DERIVES ITS INCOME FROM THE MANUFACTURING OF GLAZE FRUIT. FOR THE A.Y. 2000-01 THE ASSESSEE-COMPANY FILED ITS RETURN OF IN COME (ROI) ON 29/11/2010 DECLARING TOTAL LOSS OF RS. 14,41,959/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT FOR SHORT) ON 28/03/2003 AT A POSITIVE INCOME OF RS. 5040/-. T HE A.O. HAS MADE THE FOLLOWING ADDITIONS TO THE DECLARED INCOME :- 1) ADDITION ON ACCOUNT OF TRADING ACCOUNT RS. 1,89,463/- 2) DISALLOWANCE UNDER THE HEAD TELEPHONE EXPE NSES RS. 12,000/- 3) DISALLOWANCE OF SALE TAX PENALTY DEBITED TO P&L ACCOUNT RS. 49,905/- 4) ADDITION ON ACCOUNT OF CASH CREDITORS U/S 68 APPEARING IN THE FOLLOWING NAMES: I) SH. JEEWAN RAM SHARMA RS. 12,520/- II) SH. MOHAN LAI TATER (100000 + 14563) RS. 1,14 ,563/- III) SMT. NEENA DEVI JAIN RS. 4,68,549/- IV) SH. MADAN LAI VYAS RS. 1,50,000/- V) SH. JEEWAN LAI KIRADOO RS. 2,00,000/- VI) SH. SHAYAM AGGARWAL RS. 2,50,000/- 2.2 AGGRIEVED, THE ASSESSEE FILED APPEAL AND LD. CI T(A) VIDE ORDER DATED 18/12/2007 ALLOWED A RELIEF OF RS. 17,85,095/ - BEING A RELIEF OF RS. 1,29,463/- ON ACCOUNT OF TRADING ADDITION AND O F RS. 11,95,632/- ON 4 ACCOUNT OF CASH CREDITORS. AGAINST THAT ORDER THE R EVENUE FILED APPEAL AND THE APPELLATE TRIBUNAL VIDE ITS ORDER DATED 20/ 07/2009 SET ASIDE THE ISSUE RELATING TO THE CASH CREDITORS TO THE FIL E OF THE A.O. FOR DE NOVO ADJUDICATION. DURING THE FRESH PROCEEDINGS THE ASSESSEE PRODUCED SOME OF THE CREDITORS IN PERSON AND ALSO PRODUCED S OME DOCUMENTARY EVIDENCE WITH REGARD TO THESE LOANS. REGARDING SOME NO EVIDENCE WERE PRODUCED. BUT THE A.O. WAS NOT SATISFIED AND MADE I MPUGNED ADDITION. IN THE SECOND ROUND LD. CIT(A) HAS SUSTAINED ADDITI ON OF RS. 6,68,549/- BEING THE UNEXPLAINED CASH CREDITORS NAMELY (I) SMT . NEENA DEVI JAIN OF RS. 4,68,549/- AND (II)JEEWAN LAL KIRADOO OF RS. 2 LAKH. HE HAS ALSO DISALLOWED INTEREST ALLEGEDLY OF RS. 12,520/- PAID TO SHRI JEEWAN LAL KIRADOO. 2.3 AGAINST THE ABOVE ADDITIONS, THE ASSESSEE HAS R AISED GROUND NOS. 1, 2 AND 3. WE HAVE HEARD RIVAL SUBMISSIONS. 2.4 REGARDING CASH CREDITOR OF RS. 4,68,549/- IN TH E NAME OF SMT. NEENA DEVI JAIN. THE ASSESSEE HAS PRODUCED HER COMP LETE ADDRESS, PAN, CONFIRMATION, PROOF OF MODE OF TRANSACTION. IN THE LIGHT OF THE FOLLOWING DECISIONS OF THE HONBLE JURISDICTIONAL H IGH COURT PRIMARY ONUS CAST ON THE ASSESSEE GETS DISCHARGED. THE SAID CASH CREDITOR HAS 5 ALSO EXPLAINED THE SOURCE OF HER DEPOSIT. THESE DEC ISIONS ARE AS UNDER:- (I) CIT VS. BHAWANI OIL MILLS LTD. (2011) 49 DTR (RAJ) 212 (APB 42 ONWARDS). IN THIS CASE IT HAS BEEN HELD AS UNDE R :- MERE NON-APPEARANCE OF EIGHT PERSONS IN RESPONSE T O THE NOTICE GIVEN BY THE AO, BY ITSELF CANNOT HE A REASO N TO DISCARD THEIR VERSION PARTICULARLY WHEN ONE OF THEM HAD APPEARED AND ADMITTED ADVANCEMENT OF LOAN. EVEN IF OTHERS HAVE SUBSEQUENTLY FILED THEIR CONFIRMATIONS SUPPORTED BY THEIR AFFIDAVITS, IT CANNOT BE ASSUMED THAT THEY WOULD NOT HAVE MADE SAME STATEMENTS, IF THEY H AD APPEARED IN RESPONSE TO THE NOTICE ISSUED BY THE AO . AO WAS REQUIRED TO HAVE EXAMINED THOSE CONFIRMATIONS A ND THE CONTENTS OF THE AFFIDAVITS ON THEIR MERITS TREA TING AS IF THEY WERE STATEMENTS GIVEN TO HIM. THEIR VERSION CONTAINED IN THE AFFIDAVITS COULD NOT BE TREATED AS OF A LESSER IMPORTANCE THAN THE STATEMENT GIVEN BY ONE O F THE CREDITORS BEFORE THE AO. ALTHOUGH, IT IS ANOTHER MA TTER THAT THE AO WOULD BE ENTITLED TO EVALUATE REABILITY OF SUCH VERSION ON ITS OWN MERIT. TRIBUNAL IN PARAS 7 AND 8 OF ITS JUDGMENT, HAS IN DETAILED DISCUSSION DEALT WITH THE CONFIRMATIONS GIVEN BY THOSE CREDITORS AND OBSERVED THAT THERE WAS NO REASON TO DOUBT CORRECTNESS OF THE CLA IMED CASH CREDIT AMOUNTING TO RS. 24,86,866 TAKEN FROM T HE SAID CREDITORS. THE MATTER THEREFORE TOUCHES UPON APPREC IATION AND EVALUATION OF EVIDENCE AND DOES NOT RAISE ANY Q UESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW, SO AS TO 6 JUSTIFY INTERFERENCE BY THE COURT IN THE MATTER. (II) ARAVALI TRADING CO. VS. ITO (2008) 8 DTR 199 APB 34 ONWARDS. IN THIS CASE IT HAS BEEN HELD AS UNDER :- NEITHER THE PROVISIONS OF SECTION 68 NOR ON GENERA L PRINCIPLE, IT CAN BE SAID THAT ONCE THE EXISTENCE O F PERSONS IN WHOSE NAME CREDITS ARE FOUND IN THE BOOKS OF ASS ESSEE IS PROVED AND SUCH PERSONS OWN SUCH CREDITS WITH THE A SSESSEE STILL THE ASSESSEE IS TO FURTHER PROVE THE SOURCE F ROM WHICH THE CREDITORS COULD HAVE ACQUIRED MONEY TO BE DEPOS ITED WITH HIM. THE FACT THAT THE DEPOSITORS' EXPLANATION ABOUT THE SOURCES WHERE FROM THEY ACQUIRED THE MONEY IS N OT ACCEPTABLE TO THE AO, IT CANNOT BE PRESUMED THAT TH E DEPOSITS MADE BY THE SUCH CREDITORS IS THE MONEY OF THE ASSESSEE HIMSELF. THERE IS NO WARRANT FOR SUCH PRESUMPTION. IN SUCH EVENT IF THE CREDITORS' EXPLAN ATION IS FOUND TO BE NOT ACCEPTABLE ABOUT SUCH DEPOSITS, THE INVESTMENT OWNED BY SUCH PERSONS MAY BE SUBJECTED T O THE PROCEEDINGS FOR INCLUSION OF SUCH INVESTMENT AS THE IR INCOME FROM UNDISCLOSED SOURCES OR IF THEY HAVE BEE N FOUND BENAMI, THE REAL OWNER CAN BE BROUGHT TO THE TAX NET. BUT IN ORDER TO FASTEN LIABILITY ON THE ASSESS EE BY INCLUDING SUCH CREDITS AS HIS INCOME FROM UNEXPLAIN ED SOURCES A NEXUS HAS TO BE ESTABLISHED THAT THE SOUR CES OF CREDITORS DEPOSIT FLEW FROM THE ASSESSEE. IN THE AB SENCE OF ANY SUCH LINK, ADDITIONS OF CASH CREDITS FOUND IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE CONSIDERED TO BE 7 UNEXPLAINED INCOME OF THE ASSESSEE, WHERE EXISTENCE OF DEPOSITORS OF SUCH CREDITS IS ESTABLISHED AND SUCH DEPOSITS/ADVANCE/LOAN IS OWNED BY SUCH EXISTING PER SON. ON SUCH PROOF THE ASSESSEE'S ONUS IS DISCHARGED. TH E FACT THAT THE EXPLANATION FURNISHED BY THE FOUR CREDITOR S ABOUT THE SOURCES WHERE FROM THEY ACQUIRED THE MONEY WAS NOT ACCEPTABLE BY THE REVENUE COULD NOT PROVIDE NECESSA RY NEXUS FOR DRAWING INFERENCE THAT THE AMOUNT ADMITTE D TO BE DEPOSITED BY THESE FOUR PERSONS BELONGED TO THE ASSESSEE. THE ASSESSEE HAVING DISCHARGED HIS BURDEN BY PROVING THE EXISTENCE OF THE DEPOSITORS AND THE DEP OSITORS OWING THEIR DEPOSITS, HE WAS NOT FURTHER REQUIRED T O PROVE SOURCE OF SOURCE. ACCORDINGLY THE TRIBUNAL, AND THE AO HAD SERIOUSLY ERRED AND MISDIRECTED THEMSELVES IN LAW B Y NOT CORRECTLY APPRECIATING THE LEGAL PRINCIPLE ABOUT NE CESSITY OF ESTABLISHING SUCH NEXUS ONCE THE ASSESSEE HAS DI SCHARGED HIS ONUS BY PROVING THE EXISTENCE OF THE DEPOSITORS AND THE DEPOSITORS HAVING ACCEPTED THEIR DEPOSITS WITH THE ASSESSEE. ONCE THIS ONUS IS DISCHARGED THE PRESUMPT ION RAISED UNDER S. 68 STANDS REBUTTED AND IT BECOMES B URDEN OF REVENUE TO PROVE THAT SOURCE OF SUCH DEPOSITS IS TRACEABLE TO ASSESSEE BEFORE THE SAME CAN BE TREATE D AS UNDISCLOSED INCOME OF THE ASSESSEE CONCERNED. THE ADDITIONS MADE IN THE INCOME OF THE ASSESSEE ARE DI RECTED TO BE DELETED.LATE MANGILAL AGARWAL THROUGH LRS VS. ASSTT. GIT (2007) 208 CTR (RAJ) 159 APPLIED]. 8 2.5 ACCORDINGLY, THE EVIDENCE PRODUCED BY THE ASSES SEE, AS ABOVE, SHIFTS THE ONUS TO DISPROVE THE CASH CREDITOR ON TH E REVENUE WHO IS REQUIRED TO BEING SOME EVIDENCE TO PROVE THE EXPLAN ATIONS INCORRECT. THE REVENUE HAS NOT TAKEN ANY SUCH STEP AND HAS SIM PLY FOUND FAULT WITH THE EVIDENCE PRODUCED. IN THE LIGHT OF THE ABO VE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT WE HAVE TO DELETE THIS ADDITION OF RS. 4,68,549/-. 2.6 SIMILARLY IN THE CASE OF SHRI JEEWAN LAL KIRADO O, WHO ADVANCED A SUM OF RS. 2 LAKH TO THE ASSESSEE FILED CONFIRMATIO N IN THE FORM OF HIS AFFIDAVIT. SHRI KIRADOO WAS 82 YEARS OLD BED RIDDEN PERSON, WHO COULD NOT BE PRODUCED BEFORE THE A.O. THE ASSESSEE PROVID ED ALL THE DETAILS OF SHRI JEEVAN LAL KIRADOO. IN THIS REGARD APART FR OM THE ABOVE MENTIONED DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT DECISIONS, THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V S. ORISA CORP. (P) LTD. 159 ITR 78 (SC) IS ALSO RELEVANT. THE A.O. IS BOUND TO DISPROVE THE CONTENTS OF THE AFFIDAVIT WITH THE HELP OF SOME EVI DENCE. THE REVENUE HAS FAILED IN ITS DUTY. THEREFORE, THIS ADDITION CA NNOT BE SUSTAINED. THEREFORE, THE SAME IS HEREBY DELETED. 9 2.7 THE A.O. HAS ALSO DISALLOWED INTEREST PAID OF R S. 12,520/- TO SHRI JEEVAN RAM SHARMA. BECAUSE HE HAD HELD THE CASH CRE DIT OF SHRI SHARMA AS NOT GENUINE. DURING THE FIRST ROUND SHRI SHARMA WAS PRODUCED BEFORE A.O. AND HE HAD ACCEPTED THAT HE HA D ADVANCED A SUM OF RS. 10,000/- IN THE F.Y. 1999-2000 TO THIS A SSESSEE. BUT DURING THE FRESH PROCEEDINGS HE HAD ALREADY DIED AND COULD NOT BE PRODUCED. WE FIND FORCE IN THE SUBMISSION OF LD. A.R. THAT WH EN THE LOAN OF SHRI JEEWAN RAM SHARMA HAS BEEN ACCEPTED THERE CAN BE NO VALID REASON TO DISBELIEVE THE PAYMENT OF THE RELATED INTEREST. WE HAVE FOUND THAT THE A.O. HAS NOT DISPUTED THE FACT OF LOAN TAKEN BY THI S ASSESSEE FROM SHRI JEEVAN RAM SHARMA IN THE F.Y. 1999-2000. THEREFORE, THE DENIAL OF THIS INTEREST PAID TO HIM IS UNCALLED FOR. THEREFOR E, WE ORDER TO DELETE THE SUSTAINED ADDITION OF RS. 12,520/- AND ALLOWED GROUND NO. (1) OF ASSESSEES APPEAL. 3. LIKEWISE, WHEN WE HAVE ALLOWED THE CASH CREDITOR OF SHRI JEEWAN LAL KIRADOO, THE RELATED INTEREST AMOUNT OF RS. 12, 520/- HAS TO BE ALLOWED. IN THAT WAY WE ALLOW GROUND NO. (3) BY DE LETING THE ADDITION OF RS. 12,520/-. 10 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 18 TH SEPTEMBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MARATH A] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH SEPTEMBER, 2013. VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR