SHRI DINESH KUMAR CHAUDHARY, Garoth V. THE ITO, Mandsaur

ITA 757/IND/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4594 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 04-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MORYA
• Assessee Lawyers: S N AGRAWAL; PANKAJ MOGRA CAS
• Keywords: Unexplained investment; Loose papers; Document seized; Onus to prove; Documents seized
• Section: 143(3); 142(1); 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.757/IND/2016 ASSESSMENT YEAR:2003-04 DINESH KUMAR CHO UDHARY , PROP. ABHINAV TRADERS C/O P. MOGRA& ASSOCIATES, CA 203, M.D. TOWER NEAR JANJIRWALLA SQUARE GAROTH / VS. ITO, MANDSAUR ( APPELLANT ) ( REVENUE ) P.A. NO. AAXPC8055G APPELLANT BY S/ SHRI S.N. AGRAWAL & PANKAJ MOGRA CAS REVENUE BY SHRI R.P. MORYA, SR . DR DATE OF HEARING: 29.06.2018 DATE OF PRONOUNCEMENT: 02.08.2018 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL FILED BY THE ASSESSEE PERTAINING TO A.Y . 2003-04IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX(APPEALS), UJJAIN,(IN SHORT CIT(A)), VIDE APPE AL NO. U-253/2006- 07ORDER DATED 10.05.2016 WHICH IS ARISING OUT OF TH E ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER CALLE D AS THE ACT) FRAMED ON 29.03.2006 BY ITO- MANDSAUR. DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS IN T HE NAME PROPRIETORSHIP CONCERN ABHINAV TRADERS AT MANDSAUR. A SURVEY PROCEEDINGS U/S 133A OF THE ACT WAS CONDUCTED ON 27 .05.2003 AT THE BUSINESS PREMISES OF THE ASSESSEE. IT WAS REVEA LED THAT THE ASSESSEE IS NOT FILING ITS INCOME TAX RETURN. THERE AFTER NOTICE U/S 143(2) & 142(1) OF THE ACT WERE SERVED UPON THE ASS ESSEE. THE INCOME OF RS.78,000/- DECLARED IN THE RETURN FILED ON 31.03.2004. NECESSARY DETAILS AS CALLED FOR WERE FILED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. AO, ON GOING THROUGH THE STATEMENTS GIVEN BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS AS WELL AS VARIOUS LOOSE PAPERS SEIZED MARKED AS LP-01 TO LP 0 4, OBSERVED THAT THERE WERE THREE BUNDLES OF PROMISSORY NOTES. AS PER THESE PROMISSORY NOTES AMOUNTS WERE ADVANCED TO VARIOUS P ERSONS ON CREDIT AND INTEREST RATES AS WELL AS DATE OF RECEIV ING THE MONEY AND ADVANCE MONEY WERE MENTIONED. IN THE STATEMENT GIVE N DURING THE COURSE OF SURVEY THE ASSESSEE ACCEPTED UNDISCLOSED INCOME OF RS.9,00,000/- BEING OFFERED TO TAX ON ACCOUNT OF PR OMISSORY NOTES. HOWEVER, AS THE ASSESSEE DID NOT DECLARE THE ALLEGE D SURRENDERED INCOME IN THE INCOME TAX RETURN. THE LD. AO BEING N OT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE MADE AN ADDITI ON OF RS.7,15,900/- AND ADDITION OF INTEREST ON PROMISSOR Y NOTES AT RS.99,848/-. THE LD. AO ALSO MADE ADDITION OF RS.17 ,000/- FOR UNDERSTATEMENT OF NET PROFITS AND ADDITION FOR UNAC COUNTED PURCHASE AT RS.1,36,864/-. IN TOTAL ADDITION OF RS. 9,70,612/- WAS DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 3 MADE TO THE DECLARED INCOME OF RS.78,000/-. THE INC OME ASSESSED AT RS.10,48,612/-. 3. SUBSEQUENTLY, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT(A) AND PARTLY SUCCEEDED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L RAISING 4 GROUNDS OF APPEAL OUT OF WHICH GROUND NO.4 IS GENER AL IN NATURE. GROUND NO. 1& 2 ARE INTER CONNECTED AND THEREFORE T AKEN TOGETHER WHICH READS AS FOLLOWS; 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN MAINTAINING ADDITION OF RS.7,15 ,900/- BEING TOTAL AMOUNT ADVANCED AGAINST THE PROMISSORY NOTES DURING THE A.Y. 2003-04 WITHOUT PROPERLY APPRECIATING THE FACT S OF THE CASE AND SUBMISSION MADE BEFORE HIM. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN MAINTAINING THE ADDITION OF RS. 99,848/- ON ACCOUNT OF INTEREST ON PROMISSORY NOTES. 5. BRIEF FACTS RELATING TO THESE TWO GROUNDS ARE TH AT DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A ON 27.05.2003 VARIOUS INCRIMINATING MATERIALS IN THE SHAPE OF PROMISSORY NOTES WERE FOUND WHICH INDICATED THAT THE ASSESSEE WAS INVOLVE D IN MONEY LENDING BUSINESS AND WAS GIVING SHORT TERM LOANS OF SMALL AMOUNTS. THE ASSESSEE HIMSELF SURRENDERED INCOME OF RS.9,00, 000/- AT HIS OWN WILL FOR THE ALLEGED PROMISSORY NOTES. HOWEVER IN THE RETURN OF INCOME FILED SUBSEQUENT TO THE SEARCH PROCEEDINGS T HE SURRENDERED DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 4 INCOME WAS NOT OFFERED TO TAX. DURING THE PROCEEDI NGS BEFORE THE LOWER AUTHORITIES IT IS CONTENDED THAT THE ALLEGED LOOSE PAPERS/PROMISSORY NOTES ARE ACTUALLY THE SUNDRY DEB TORS FOR GOODS WHO HAVE NOT PAID THEIR OUTSTANDING DUES AGAINST TH E SALES MADE AND THEREFORE INTEREST HAS BEEN CHARGED ON THE OUTS TANDING DEBIT BALANCE OF THE DEBTORS. LD.AO HOWEVER NOT SATISFIED WITH THESE SUBMISSIONS MADE ADDITION FOR THE ALLEGED PROMISSOR Y NOTES ON THE BASIS OF THE AMOUNT PERTAINING TO EACH YEAR AND FOR ASSESSMENT YEAR 2003-04 ADDITION OF RS.7,15,900/- WAS MADE ALO NG WITH THE ADDITION FOR INTEREST INCOME OF RS.99,848/- EARNED FROM THE ADVANCES GIVEN. THE LD.CIT(A) COULD NOT SUPPORT TH E SUBMISSIONS OF THE ASSESSEE AS THE APPELLANT FAILED TO DISCHAR GE THE BURDEN OF PROOF AS UNABLE TO ESTABLISH THE SOURCE OF INVESTM ENT IN THE PROMISSORY NOTES. 6. NOW THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF LD. CIT(A) FOR THE ADDITIONS CONFIRMED AT RS.7,15,900/- FOR THE AL LEGED UN ACCOUNTED INVESTMENTS IN PROMISSORY NOTES AND ALSO AGAINST THE ADDITION CONFIRMED FOR THE INTEREST INCOME OF RS.99 ,848/-. 7. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGU ED REFERRING TO THE WRITTEN SUBMISSION GIVEN BEFORE THE TRIBUNAL AN D THE SAME ARE REPRODUCED BELOW; 7.1 THAT IN THE SAID GROUND OF APPEAL THE ASSESSEE HAS CHALLENGED THE ADDITION AS MADE TO THE TOTAL INCOME OF THE ASS ESSEE OF RS. 7,15,900/- ON ACCOUNT OF AMOUNT ADVANCED AGAINST T HE DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 5 PROMISSORY NOTES DURING THE YEAR UNDER CONSIDERATIO N. LIST OF SUCH PROMISSORY NOTES IS GIVEN ON PAGE NOS 28 & 29 OF TH E COMPILATION. 7.2 A SURVEY PROCEEDINGS WAS CARRIED OUT AT THE BUS INESS PREMISES OF THE ASSESSEE U/S 133A OF THE INCOME TAX ACT ON 27.05.2003 I.E. DURING THE PREVIOUS YEAR RELEVANT T O THE ASST YEAR 2004-05. THE ASSESSING OFFICER ON THE BASIS OF PROM ISSORY NOTES AS FOUND IN POSSESISON OF THE APPELLANT OBSERVED THAT THESE WERE NOT INCORPORATED IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. THE APPELLANT RECEIVED PROMISSORY NOTES FROM THE DEBTOR S FROM WHOM GOODS WERE SOLD AND AMOUNT WAS NOT REALISED IN TIME . THE AMOUNT OF PROMISSORY NOTES RELATES TO THE AMOUNT OF SUNDRY DEBTORS AS SHOWN IN THE BALANCE SHEET OF THE APPELLANT. 7.3 THE ASSESSING OFFICER HAS MADE SIMILAR ADDITION IN THE ASST YEARS 2000-01, 2001-02 AND 2002-03. DETAIL OF ADDIT ION AS MADE BY THE ASSESSING OFFICER IN THESE YEARS AND THAT OF YE AR UNDER APPEAL IS AS UNDER:- S.NO PARTICULARS 2000-01 2001-02 2002-02 2003-04 1.1 PROMISSORY NOTES 54,200 65,500 82,800 7,15,900 1.2 INTEREST ON PROMISSORY NOTES 4,878 14,448 24,330 99,848 2.1 SUNDRY DEBTORS AS SHOWN IN THE BALANCE SHEET 49,200 1,14,700 1,26,430 5,41,770 2.2 CASH IN HAND 99,058 68,420 3,282 43,385 1,48,258 1,83,120 1,29,712 5,85,155 3.1 DELETED BY THE LD CIT[A] 54,200 65,500 82,800 NIL 3.2 REFERENCE OF CIT[A] ORDER DT 18-04- 2013 18-04- 2013 18-04-13 10-05-16 DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 6 7.3.1 THE LD CIT[A] VIDE HER ORDER DT 18-04-2013 AS PASSED IN THE CASE OF THE APPELLANT FOR THE ASST YEARS 2000-01 TO 2002-03 HAS DEALT THE SAID ISSUE IN DETAIL AND ACCEPTED THE CON TENTION OF THE APPELLANT AND DELETED ENTIRE ADDITION SO MADE ON AC COUNT OF PROMISSORY NOTES. HOWEVER, THE LD CIT[A] VIDE HIS O RDER DT 10-05- 2016 HAS MAINTAINED THE ADDITION AS MADE BY THE ASS ESSING OFFICER BUT HE HAS NOT REFERRED THE FINDING OF HIS PREDECES SOR WHEREIN SIMILAR ADDITION WAS DELETED IN LAST THREE YEARS AN D THEREFORE THERE WAS NO REASON TO DEVIATE WITH THE FINDING OF HIS PR EDECESSOR. 7.3.2 THE ASSESSING OFFICER HAS GROSSLY ERRED IN AD DING THE GROSS AMOUNT OF PROMISSORY NOTES TO THE INCOME OF THE APP ELLANT MORE-SO ON THE BACK OF THE PROMISSORY NOTES ITSELF DETAIL O F REFUND WAS MENTIONED AND THEREFORE THE ASSESSING OFFICER WAS N OT JUSTIFIED IN ADDING THE GROSS AMOUNT OF PROMISSORY NOTES. YEAR-W ISE CHART AS PREPARED AND FILED BEFORE THE ASSESSING OFFICER AND LDCIT[A] IS ENCLOSED FOR YOUR READY REFERENCE. THAT AS PER SUMM ARY AND AFTER TAKING CREDIT OF THE AMOUNT AS RECEIVED BY THE APPE LLANT NET AMOUNT DUE AS PER PROMISSORY NOTES WAS OF RS 5,58,770/- BU T THE SAME WAS SHOWN IN THE BALANCE SHEET FOR RS 5,41,770/-. T HUS, THERE WAS DIFFERENCE OF RS 17,000/- WHICH CAN BE EXPLAINED TH ROUGH THE CASH AS AVAILABLE WITH THE APPELLANT. 7.3.3 IT WAS ALSO EXPLAINED TO THE LD. A.O, THAT A N AMOUNT OF RS. 259900/- OUT OF TOTAL AMOUNT OF RS. 715900/- WAS AL READY RECEIVED BY HIM DURING THE YEAR ITSELF. DETAIL OF THE SAME I S ENCLOSED ON PAGE 17 OF THE PAPER BOOK. FURTHER IT WAS ALSO BEEN EXPL AINED TO THE LD. DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 7 A.O, THAT AN AMOUNT OF RS. 70400/- OUT WAS RECEIVED OUT OF PROMISSORY NOTES PERTAINING TO A.Y. 2000-01 TO 2002 -03. DETAIL OF THE SAME IS ENCLOSED ON PAGE 17 OF THE PAPERBOOK. S UMMARY OF THE SAME IS AS UNDER:- F.Y. TOTAL AMOUNT ADVANCED REALISATIONS AS PER THE NOTING ON PROMISSORY NOTES BALANCE AS ON 31.03.2003 1999- 2000 2000- 01 2001-02 2002-03 1999- 00 54200 5000 30000 19200 2000- 01 65500 0 0 23000 20000 22500 2001- 02 82800 0 1330 0 20400 61070 2002- 03 715900 0 0 0 259900 456000 TOTAL 918400 5000 1330 23000 330300 558770 7.3.4 THAT IN VIEW OF THE ABOVE, THE AMOUNT OF PROMISSORY NOTES AS FOUND IN POSSESSION OF THE APPELLANT WAS D ULY EXPLAINED AND PROPERLY REFLECTED IN THE STATEMENT OF AFFAIRS AS FILED WITH THE RETURN OF TOTAL INCOME BEFORE THE ASSESSING OFFICER . THE LD CIT [A] WHILE DECIDING THE APPEALS FOR THE ASST YEARS 2000- 01, 2001-02 AND 2002-03 HAS ALSO ACCEPTED SIMILAR CONTENTION OF THE APPELLANT. THE ADDITION OF RS 7,15,900/- IS THEREFORE NEITHER LEGA L NOR PROPER, THE SAME NOW REQUIRES TO BE DELETED IN FULL. 7.4 AS REGARDS GROUND NO.2, HE SUBMITTED THAT IN THE S AID GROUND OF APPEAL THE ASSESSEE HAS CHALLENGED THE ADDITION AS MADE TO THE TOTAL INCOME OF THE ASSESSEE OF RS. 99848/- ON ACCO UNT OF INTEREST DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 8 ON THE AMOUNT ADVANCED DURING THE AY. 2003-04 TO TH E VARIOUS PARTIES THROUGH PROMISSORY NOTES. 7.4.1 THE ASSESSEE OFFERS THE INTEREST INCOME ON RE CEIPT BASIS WHEN THE INTEREST IS ACTUALLY RECEIVED BY HIM. IT IS SUB MITTED THAT ASSESSEE HAS SHOWN INTEREST INCOME OF RS. 20000/- I N ITS RETURN OF TOTAL INCOME FOR THE A.Y. 2003-04. HOWEVER, THE A.O . HAS NOT ALLOWED THE CREDIT OF THE SAME. FURTHER THE LD. A. O. WHILE CALCULATING THE AMOUNT OF INTEREST OF RS. 99848/- H AS ALSO NOT CONSIDERED THAT AN AMOUNT OF RS. 259900/- AS MENTIO NED IN PARA HAS BEEN RECEIVED FROM DEBTORS ON VARIOUS DATE AS P ER THE NOTINGS ON PROMISSORY NOTES THEMSELVES. 7.4.2 THAT FROM THE FACTS WHEN THE AMOUNT WAS RECEI VED FROM DEBTORS AND THEREFORE THERE WAS NO REASON FOR CHARG ING OF INTEREST ON THE SAME. THUS, ADDITION AS MADE TO THE TOTAL IN COME OF THE ASSESSEE WAS NOT JUSTIFIED. HENCE, HONBLE BENCH IS HEREBY REQUESTED TO DELETE THE SAME. WITHOUT PREJUDICE TO THE ABOVE 7.4.3 THE ASSESSING OFFICER ALSO GROSSLY ERRED IN T AXING THE GROSS AMOUNT OF INTEREST WITHOUT ALLOWING CREDIT OF THE I NTEREST WHICH WAS VOLUNTARILY OFFERED BY THE ASSESSEE IN HIS RETURN O F TOTAL INCOME. IN VIEW OF THE ABOVE HON'BLE BENCH IS HEREBY REQUESTED TO DELETE THE ENTIRE AMOUNT OF INTEREST AS TAXED OR REDUCE THE SA ME BY THE AMOUNT OF INTEREST INCOME WHICH WAS VOLUNTARILY OFF ERED BY THE ASSESSEE IN HIS RETURN OF TOTAL INCOME. DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 9 8. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE V EHEMENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES A ND AGAIN ASSERTED THAT THE ALLEGED DOCUMENTS SEIZED WERE PRO MISSORY NOTES ONLY AND THEY ARE NOT CONNECTED TO THE SUNDRY DEBTO RS OF THE ASSESSEE. HE ALSO PLACED RELIANCE ON THE DECISION O F COORDINATE BENCH IN THE CASE OF M/S HI-TECH CONSTRUCTION ITA NO.615/IND/2016 IN SUPPORT OF THE VIEW THAT STATEME NT MADE BY THE ASSESSEE VOLUNTARILY DURING THE COURSE OF SURVE Y SHOULD HAVE BEEN DISCLOSED IN THE RETURN OF INCOME AND IN CASE THE ASSESSEE DEVIATED FROM ITS STATEMENT THEN THE BURDEN WAS UPO N THE ASSESSEE TO ESTABLISH THAT THE SUBMISSION MADE IN SUCH STATE MENT AT THE TIME OF SURVEY WAS WRONG. 9. WE HAVE HEARD RIVAL CONTENTIONS AND THE PERUSED THE RECORDS PLACED BEFORE US. THE ASSESSEE HAS CHALLENGED THE F INDING OF LD.CIT(A) CONFIRMING THE ADDITION OF RS.7,15,900/- FOR THE ALLEGED UNACCOUNTED INVESTMENT IN PROMISSORY NOTE AND ADDIT ION OF RS.99,848/ MADE BY THE LD.A.O CALCULATING INTEREST ON PROMISSORY NOTE NOT OFFERED TO TAX. DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 10 10. THIS FACT IS NOT DISPUTED BY THE ASSESSEE THAT DURING THE COURSE OF SURVEY PROMISSORY NOTES WERE FOUND WHICH INDICAT ED THAT THE ASSESSEE APART FROM HIS BUSINESS OF RETAIL TRADING WAS ALSO ENGAGED IN MONEY LENDING BUSINESS BY WAY OF GIVING SHORT TE RM ADVANCES ON INTEREST. PERUSAL OF THE PROMISSORY NOTES PLACED I N THE PAPER BOOK INDICATES THE AMOUNT ADVANCED ON INTEREST, NAME OF THE MONEY LENDER, NAME OF THE BORROWER, DATE OF SIGNING THE P ROMISSORY NOTE AND RATE OF INTEREST. THE LD. COUNSEL FOR THE ASSE SSEE IN ITS CONTENTIONS HAS REFERRED TO THE FINDINGS OF LD.CIT( A) FOR OTHER ASSESSMENT YEARS WHICH ARE CONNECTED TO THE SURVEY PROCEEDINGS WHEREIN ASSESSEE HAS BEEN GRANTED RELIEF FOR THE AD DITIONS MADE ON PROMISSORY NOTES WAS DELETED. IT IS TRUE THAT THE AMOUNT OF ADDITION IN THE OTHER ASSESSMENT YEARS ARE VERY SMA LL AND THE MAXIMUM ADDITION RELATING TO PROMISSORY NOTE HAVE B EEN MADE IN THE ASSESSMENT YEAR FOR 2003-04. 11. NOW TO ADJUDICATE THIS ISSUE, IN OUR UNDERSTAND ING TWO QUESTIONS NEEDS TO BE DEALT FIRST (I) WHETHER THE A LLEGED PROMISSORY NOTES ARE THE OUTSTANDING SUNDRY DEBTORS OF THE ASS ESSEE (II) DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 11 WHETHER THE ALLEGED PROMISSORY NOTES ARE TO BE TREA TED AS UNEXPLAINED INVESTMENT. 12. SO FAR AS LINKING OF THE PROMISSORY NOTES WITH THE SUNDRY DEBTORS IS CONCERNED, WE FIND THAT THE ASSESSEE IS ENGAGED INTO RETAIL TRADE OF PUMP SETS, ITS PARTS AND GC SHEETS. TURNOVER OF RS.11,60,000/- WAS DECLARED DURING THE YEAR AND INC OME HAS BEEN OFFERED @ 5% OF THE TURNOVER. DURING THE COURSE OF SURVEY STATEMENTS WERE RECORDED OF THE PROPRIETOR WHO HAS NOWHERE MENTIONED THAT THE AMOUNT SHOWN IN THE ALLEGED PROM ISSORY NOTES ARE THE PART OF ITS BUSINESS I.E. M/S. ABHINAV TRAD ERS AND NAMES MENTIONED IN THE PROMISSORY NOTES ARE SUNDRY DEBTOR S OF ABHINAV TRADERS. IN NORMAL COURSE THE PERSONS WHO IS DOING THE RETAIL BUSINESS WILL NORMALLY HAVE MORE OF CASH SALES OF S MALL AMOUNTS AND LITTLE OF CREDIT SALES AND EVEN IF FOR THE SAKE OF ARGUMENT IT IS ACCEPTED THAT THE ASSESSEE WAS REGULARLY MAKING CRE DIT SALES THEN THE SAME WOULD HAVE BEEN NARRATED IN THE STATEMENT ITSELF MENTIONING THAT THE PERSONS MENTIONED IN THE PROMIS SORY NOTES ARE SUNDRY DEBTORS OF PROPRIETARY CONCERN M/S. ABHINAV TRADERS. DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 12 13. IN THE BACK GROUND OF THIS FACT EMANATING OUT OF THE STATEMENT GIVEN IN THE SURVEY PROCEEDINGS AS WELL AS FOR THE REASON THAT NOWHERE DURING THE COURSE OF PROCEEDINGS BEFORE LOW ER AUTHORITIES AS WELL AS BEFORE US, THE ASSESSEE HAS BEEN ABLE TO DEMONSTRATE WITH THE HELP OF BILLS ISSUED FOR CREDIT SALES FROM THE SHOP WHICH COULD BE LINKED TO THE PROMISSORY NOTES FOUND DURIN G THE COURSE OF SURVEY. 14. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT TH E ALLEGED PROMISSORY NOTES ARE HAVING NO CONNECTION WITH THE SUNDRY DEBTORS OF THE ASSESSEE AND THE AMOUNTS INDICATED IN THE AL LEGED PROMISSORY NOTES ARE ACTUALLY THE PART OF THE MONEY LENDING BUSINESS OF THE ASSESSEE AND THIS BUSINESS WAS CONS ISTENTLY CARRIED OUT BY THE ASSESSEE ALONG WITH THE BUSINESS OF RETA IL TRADE OF GC SHEETS AND PVC PIPES. 15. NOW COMING TO THE SECOND QUESTION AS TO WHE THER THE ADDITION FOR UNACCOUNTED INVESTMENT OF RS.7,15,900/ - IS TO BE MADE FOR THE UNACCOUNTED INVESTMENT IN THE PROMISSORY NO TES. WE NEED TO FIRST EXAMINE AS TO WHETHER THE ASSESSEE WAS HAV ING EXPLAINED SOURCE TO COVER UP THE INVESTMENT IN THE PROMISSORY NOTES. FOR DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 13 REACHING TO THE CORRECT CONCLUSION WE HAVE GONE THR OUGH THE COMPUTATION OF INCOME AND STATEMENT OF AFFAIRS FILE D BY THE ASSESSEE DURING THE A.Y 1999-2000 PLACED AT PAGE 10 3 OF THE PAPER BOOK WHICH SHOWS THAT THE ASSESSEE WAS HAVING CLOSI NG CAPITAL BALANCE OF RS.6,43,781/- AND SUNDRY CREDITOR OF RS. 68,409/-. AGAINST THE TOTAL OF RS.7,32,190/- ON THE LIABILITY SIDE ASSESSEE HAS SHOWN INVESTMENTS IN PPF, CLOSING STOCK, OLD PROPER TY, SUNDRY DEBTORS OF RS.49,200/- AND CASH IN HAND AND BANK BA LANCE OF RS.1,09,200/-. IN THIS STATEMENT OF AFFAIRS RS.49, 200/- IS THE AMOUNT SHOWN AS SUNDRY DEBTORS AND PROMISSORY NOTES FOUND FOR THIS YEAR WERE AT RS.54,200/. SIMILARLY IN THE FIN ANCIAL YEAR 2000- 01 SUNDRY DEBTORS OF RS.1,14,700/- HAVE BEEN SHOWN IN THE STATEMENT OF AFFAIRS AND PROMISSORY NOTES AT RS.65, 555/- AND AS FAR AS FINANCIAL YEAR 2001-02 IS CONCERNED DEBTORS HAVE BEEN DISCLOSED AT RS.1,26,430/-. FROM THE PERUSAL OF STATEMENT OF FINANCIAL STATEMENT FILED BY THE ASSESSEE THE SOURCE OF INVES TMENT IN ASSETS HAS BEEN EXPLAINED BY WAY OF OPENING BALANCE, INCOM E EARNED DURING THE YEAR INCLUDING AGRICULTURAL INCOME AS WE LL AS SUNDRY CREDITORS. THESE FIGURES OF OPENING BALANCE AND THE INCOME EARNED DURING THE YEAR BY THE ASSESSEE DISCLOSED IN THE RE TURN OF INCOME DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 14 HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES. IN THE INVESTMENT AS WELL AS THE ASSETS SHOWN IN THE STATE MENT OF FINANCIAL AFFAIRS AS ON 31.3.2002, THE ASSESSEE POSSESSED C LOSING STOCK OF RS.4,00,270/- AND ALLEGED SUNDRY CREDITORS AT RS.1, 26,430/- AND IN THE STATEMENT OF AFFAIRS AS ON 31.3.2003 THE CLOSIN G STOCK HAS MOVED DOWN TO RS.95,500/- AND THE ALLEGED DEBTORS H AVE INCREASED TO RS.5,41,770/-. SO THERE IS SOURCE OF INVESTMENT TO THE VARIOUS ASSETS OF THE COMPANY WHICH IS DISCEMABLE FROM THE STATEMENT OF FINANCIAL AFFAIRS CONSISTENTLY MAINTAINED BY THE AS SESSEE AND FILED BEFORE THE REVENUE AUTHORITIES. CRUX OF THE ABOVE DISCUSSION IS THAT THE SUNDRY DEBTORS FIGURE SHOWN BY THE ASSESSEE IN HIS STATEMENT OF AFFAIRS ARE ACTUALLY THE PROMISSORY NOTES ISSUED TO VARIOUS PERSONS IN THE COURSE OF MONEY LENDING BUSINESS. A SSESSEE HAS ALSO GIVEN THE DETAILED WORKING OF THE PROMISSORY N OTES WITH THE YEAR OF THE ISSUE OF THE PROMISSORY NOTES, INTEREST RECEIVED YEAR BY YEAR, AMOUNTS RETURNED BACK BY THE BORROWERS ALONG WITH DATES AND AMOUNT OF SUCH RECEIPTS. ASSESSEE THROUGH HIS WRITT EN SUBMISSION HAS TRIED TO ASSERT THE FACT THAT NO ADDITION IS CA LLED FOR THE ALLEGED PROMISSORY NOTES AS THE DEBTORS AT THE CLOSE OF THE YEAR CAN BE RECONCILED TO THE AMOUNT OUTSTANDING AT THE PAYING OF THE YEAR, DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 15 AMOUNT RECEIVED DURING THE YEAR AS WELL AS RECEIVED AFTER THE CLOSE OF FINANCIAL YEAR 2002-03 BUT ALL THESE DETAILS RAT HER THAN SOLVING THE ISSUE AND MAKING IT MORE COMPLICATED TO ARRIVE ON A CONCLUSION. 16. WE THEREFORE WITH A VIEW TO END THE LITIGATION AND ALSO AFTER APPRECIATING THE FACTS NARRATED ABOVE INCLUDING THE INCOME EARNED BY THE ASSESSEE DURING ALL THE PRECEDING YEARS FROM HIS RETAIL BUSINESS AS WELL AS AGRICULTURAL INCOME AND FROM TH E PROMISSORY NOTE ARE OF THE CONSIDERED VIEW THAT AS AGAINST ALL EGED ADDITION OF RS.7,19,500/-, SUM OF RS.5,41,770/- SHOWN AS DEBTOR S NEEDS TO BE ACCEPTED AS EXPLAINED AS PROMISSORY NOTES I.E. LOAN AND ADVANCE. WE ACCORDINGLY DO SO AND DELETE THE ADDITION OF RS. 5,41,770/- AND CONFIRM THE REMAINING ADDITION OF RS.1,74,730/-, AS THE ALLEGED UN ACCOUNTED INCOME INVESTED IN THE MONEY LENDING BUSI NESS BY WAY OF ISSUING PROMISSORY NOTES. GROUND NO.1 OF THE ASS ESSEE IS PARTLY ALLOWED. 17. AS REGARDS GROUND NO.2 RELATING TO ALLEGED INT EREST INCOME OF RS.99,848/- AS INTEREST ON PROMISSORY NOTES WE ARE OF THE VIEW THAT THE ASSESSEE DESERVES SET OFF OF INTEREST INCOME OF RS.20,000/- SHOWN IN THE INCOME TAX RETURN AND WE ACCORDINGLY A CCEPT THE DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 16 ALTERNATE SUBMISSION OF THE ASSESSEE AND CONFINE TH E ADDITION TO RS.79,848/-. IN THE RESULT GROUND NO.2 IS PARTLY A LLOWED. GROUND NO.3 18. NOW WE CAME TO GROUND NO.3 WHICH READS AS FOLLO WS; 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN MAINTAINING THE ADDITION OF RS. 137864/- ON ACCOUNT OF ALLEGED INVESTMENT IN PURCHASES BY OBSER VING THAT SUCH PURCHASES WERE NOT RECORDED IN THE REGULAR BOO KS OF ACCOUNTS AND ASSESSEE HAS FAILED TO FURNISH THE SOU RCE OF INVESTMENT. 19. BRIEF FACTS OF THIS GROUND ARE THAT THE LD. AS SESSING OFFICER ON THE STRENGTH OF THE LIST OF PURCHASE BILL AND LOOSE PAPERS BUNDLE APPEARING AT LP-4 FOUND DURING THE SURVEY NOTICED T HAT THERE WAS UNACCOUNTED INVESTMENT IN PURCHASE OF RS.1,37,864/- . IT IS CONTENDED BY THE ASSESSEE THAT IT OFFERS INCOME U/S 44AF OF THE ACT AND THEREFORE THE INCOME IS DISCLOSED ON THE SALES TURNOVER WHICH HAS NOT BEEN DISPUTED BY THE LD.AO THEREFORE NO ADD ITION WAS CALLED FOR ANY UNACCOUNTED PURCHASES. THE ISSUE CA ME UP BEFORE THE LD.CIT(A) AND THE ASSESSEE FAILED TO SUCCEED. THE LD.CIT(A) CONFIRMED THE VIEW OF LD. AO OBSERVING AS FOLLOWS; GROUND NO.3:- THROUGH THIS GROUND OF APPEAL THE APP ELLANT HAS CHALLENGED THE ADDITION OF RS.7,15,900/- ON ACCOUNT OF INVESTMENT IN PROMISSORY NOTES. A SURVEY U/S 133A WAS CARRIED OUT AT BUSINESS PREMISES OF THE APPELLANT. DURING THE COURSE OF SUR VEY PROMISSORY NOTES AND LOOSE PAPER WERE FOUND. A PROMISSORY RECOMM ENDS THE DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 17 AMOUNT GIVEN ON INTEREST BY THE APPELLANT. THE APPE LLANT FAILED TO FURNISH THE SOURCE OF INVESTMENT IN RESPECT OF THES E PROMISSORY NOTES. THE APPELLANT ALSO FAILED TO PRODUCE THE BOOKS OF AC COUNT WHERE THE ENTRY IN RESPECT OF THE PROMISSORY NOTES WAS MADE. ON THE, BASIS OF PROMISSORY NOTES AND LOOSE PAPERS, THE AO MADE THE INVENTORY OF PROMISSORY NOTES. THE COPY OF INVENTORY OF PROMISSO RY NOTES PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION HAS BEEN ANNEXED BY THE AO AS PER ANNEXURE 'A' ALONG WITH THE ASSESSMENT ORDER. AS PER THE INVENTORY THE APPELLANT HAS MADE THE INVESTMENT OF RS.7,15,900/~ IN THE PROMISSORY NOTES AND FAILED TOFURNISH THE SOURCE DURING THE COURSE ASSESSMENT PROCEEDINGS AS W ELL AS APPELLATE PROCEEDINGS. SECTION 69A PROVIDES THAT ANY UNEXPLAINED MONEY FOUND I N THE BOOKS RELATING TO WHICH APPELLANT OFFERS NO EXPLANA TION ABOUT THE NATURE AND SOURCE THEREOF OR SUCH EXPLANATION IS UNS ATISFACTORY, SUCH UNEXPLAINED MONEY COULD BE CHARGED TO, TAX AS I NCOME OF THE APPELLANT. THE PRINCIPLE EMBODIED IN SECTION 69A IS, ONLY A STATUTORY RECOGNITION OF WHAT WAS ALWAYS UNDERSTOOD TO BE THE LAW BASED UPON THE RULE THAT BURDEN OF PROOF IS ON THE TAXPAYE R TO, PROVE THE, GENUINENESS OF UNEXPLAINED MONEY IN 'HIS BOOKS, SINC E THE RELEVANT FACTS ARE EXCLUSIVELY WITHIN HIS KNOWLEDGE. THE EXPRESSION 'NATURE AND SOURCE' HAS TO BE UNDERST OOD TOGETHER AS A REQUIREMENT OF IDENTIFICATION' OF THE SOURCE AND TH E NATURE OF THE SOURCE, SO THAT THE GENUINENESS OR OTHERWISE COULD BE INFERRED. IT IS SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED UNEXPLAINED MONEY WAS A GENUINE TRANSACTION, THE INITIAL ONUS IS ALWAYS UPON THE APPELLANT AND IF NO EXPLANAT ION IS GIVEN OR THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 18 ASSESSING OFFICER CAN DISBELIEVE THE ALLEGED TRANSAC TION OF LOAN: GIVEN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE, INITIAL BURDEN IS DISCHARGED BY THE APPELLANT BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE UNEXPLAINED MONEY, THE ONUS SHIFTS UP ON THE ASSESSING OFFICER AND AFTER VERIFICATION, HE CAN CA LL FOR FURTHER EXPLANATION FROM THE APPELLANT AND IN THE PROCESS, T HE ONUS MAY AGAIN SHIFT FROM THE ASSESSING OFFICER TO THE APPEL LANT. IT HAS BEEN HELD IN THE CASE OF CIT VS. K.T.M.S. MOHA MMAD {1997} 92 TAXMAN 169/228 ITR 113 (MAD.) THAT THE BURDEN OF PROOF IS ALWAYS ON THE ASSESSEE. THEREFORE, THE APPELLANT FAILED TO DISCHARGE THE BUR DEN OF PROOF BY NOT ESTABLISHING THE SOURCE OF INVESTMENT IN THE PR OMISSORY NOTES. THEREFORE, THE ADDITION MADE BY THE AO ON THIS GROU ND AMOUNTING TO RS.7,1 5,900/- IS CONFIRMED. THE APPEAL ON THIS GROUND IS DISMISSED . 20. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF TRADING OF PUMP SETS, I TS PARTS, GC SHEETS AND PVC PIPES ETC. AT GAROTH UNDER HIS PROP. CONCERN IN THE NAME OF M/S ABHINAVTRADERS. HE DOES NOT MAINTAIN TH E REGULAR BOOKS OF ACCOUNTS AND IS FILING INCOME TAX RETURN F OLLOWING THE PROVISIONS OF SEC. 44AF OF THE INCOME TAX ACT SINCE LAST SO MANY YEARS. 20.1. THE APPELLANT HAS SHOWN INCOME AS PER PROVIS ION OF SECTION 44AF OF THE INCOME TAX ACT. HENCE, THERE WA S NO REQUIREMENT TO MAINTAIN PROPER BOOKS OF ACCOUNT. TH E BILLS AS FOUND IN POSSESSION OF THE APPELLANT IS AS UNDER:- DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 19 S.N O PARTICULARS AMOUNT [RS] 1 PURC H ASE BILLS AS FOUND IN FILE 9,34,172 2 CASH PURCHASE BILL AS FOUND LOOSE FROM THE PREMISES 1,37,864 10,72,036 3 SALES AS SHOWN BY THE APPELLANT IN THE RETURN 11,60,000 4 PURCHASE NET OF PROFIT AS CONSIDERED BY THE APPELLANT IN RETURN 11,02,000 5 THE AMOUNT OF PURCHASES AS CONSIDERED BY THE APPELLANT HIMSELF WAS HIGHER THAN BILLS WHICH WERE FOUND IN POSSESSION OF THE APPELLANT. HENCE, NO SEPA RATE ADDITION WAS MADE TO THE INCOME OF THE APPELLANT 20.2. THAT HON'BLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF CIT VS AGARWAL ENGG CO AS REPORTED IN 302 ITR 246 HAS H ELD THAT WHEN NET PROFIT RATE APPLIED IN THAT CASE NO SEPARATE AD DITION CAN BE MADE TO THE INCOME OF THE APPELLANT ON ACCOUNT UNEX PLAINED CASH AND PURCHASES. THE HON'BLE ALLAHBAD HIGH COURT IN T HE CASE OF CIT VSBANWARILALBANSIDHAR AS REPORTED IN 229 ITR 229 HA S ALSO EXPRESSED SIMILAR VIEW. 20.3 THAT IN VIEW OF THE ABOVE, WHEN THE APPELLANT HAS SHOWN INCOME AS PER PROVISION OF SECTION 44AF OF THE INCO ME TAX ACT. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE E NTIRE AMOUNT OF PURCHASES TO THE INCOME OF THE APPELLANT. THAT AS P ER THE PROVISION OF SECTION 44AF ARE COMPREHENSIVE AND NO OTHER ADDI TION IS REQUIRED TO BE MADE IN THE CASE OF AN ASSESSE WHO D ECLARES INCOME DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 20 UNDER THE SECTION 44AF AS PER THE CONTENTS OF CBDT CIRCULAR 684 DT. 10.06.94 AND 763 DT.18.02.98. THUS CONSIDERING THE ABOVE FACTS IT IS REQUESTED THAT THE ENTIRE AMOUNT OF ADDITION AS MADE TO THE TOTAL INCOME OF ASSESSEE OF RS. 137854/- REQUIRED T O DELETED. 21. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF CIT(A). 22. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH GROUND NO.3, THE ASSESSEE IS AG GRIEVED WITH THE FINDINGS OF LD.CIT(A) CONFIRMING THE ADDITION OF UN ACCOUNTED PURCHASE OF RS.1,36,864/-. WE FIND THAT THE ASSESE E REGULARLY PREPARES FINANCIAL STATEMENTS AND OFFERS BUSINESS I NCOME U/S 44AF DECLARING THE NET PROFIT @5% ON THE TURNOVER DURING THE YEAR WHICH FOR THE INSTANT APPEAL THE TURNOVER STOOD AT RS.11, 60,000/- AND ASSESSEE DECLARED INCOME OF RS.58,000/-. THE ISSUE ARISED FROM THE DOCUMENT SEIZED DURING THE COURSE OF SURVEY RELATIN G TO PURCHASE. WE STILL FIRST LIKE TO GO THROUGH THE RELEVANT FACT S LINKING TO THE PURCHASES. EVEN THOUGH THE ASSESSEE IS NOT MAINTAI NING REGULAR BOOKS OF ACCOUNTS BUT HE HAS SUBMITTED THE FIGURE O F CLOSING STOCK IN THE STATEMENT OF FINANCIAL AFFAIRS. WE START WIT H THE FIGURE OF CLOSING STOCK SHOWN BY THE ASSESSEE AS ON 31.3.2002 . DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 21 PARTICULARS AMOUNT CLOSING STOCK AS ON 31.3.2002 4,00,270 ADD: PURCHASE BILLS FOUND IN FILE FOR FINANCIAL YEAR 2002-03 9,34,172 ADD: CASH PURCHASE BILL FOUND DURING THE SURVEY PROCEEDINGS 1,37,864 TOTAL 14,72,306 LESS:CLOSING STOCK SHOWN BY ASSESSEE IN HIS STATEMENT OF AFFAIRS AS ON 31.3.2003 95,50 0 TOTAL COST OF GOODS SOLD DURING THE YEAR 13, 76,306 23. THE ABOVE DETAILS OF COST OF GOODS SOLD AT RS. 13,76,306/- IS EMINATING OUT OF THE DETAILS FILED BY THE ASSESSEE HIMSELF AND THIS FIGURE IS MUCH MORE THAN SALES SHOWN BY THE ASSESSE E AT RS.11,60,000/-. THIS CLEARLY ESTABLISHES THAT THE ASSESSEE WAS ENGAGED IN MAKING SALES OUT OF RECORD WHICH WAS NOT DISCLOSED IN THE TOTAL TURNOVER SHOWN IN THE RETURN OF INCOME. IF WE DO REVERSE CALCULATION REDUCING THE ESTIMATED GROSS MARGIN FRO M SALE THE RESULTANT FIGURE OF GOODS SOLD WOULD BE MUCH LESS T HAN COST OF GOODS SOLD CALCULATED BY US AT RS.13,76,306/- AND T HE ADDITION FOR UNACCOUNTED PURCHASE WOULD RATHER INCREASE THAN THE ONE MADE BY THE ASSESSING OFFICER. 24. WE, THEREFORE IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF LD.CIT(A) CONFIRMING THE ADDITION OF PU RCHASES OF RS.1,36,864/-. IN THE RESULT GROUND NO.3 OF THE AS SESSEE IS DINESH KUMAR CHOUDHARY ITA, NO. 757/IND/2016 22 DISMISSED. 25. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 02 .0 8.2018. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIALMEMBER ACCOUNTANTMEMBER INDORE; DATED :02 / 08/2018 /DEV . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE