Samay Tradelink Pvt. Ltd., Ahmedabad V. The Income tax Officer, Ward-8(1), Ahmedabad

ITA 802/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5950 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained cash credit; Notional interest; Reason to believe; Reassessment proceedings
• Section: 68; 69

Judgement Text

, *,L *,L*,L *,L- -- -,E ,E,E ,E- -- -LH LHLH LH* ** * IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. NO.802/AHD/2014 ( / ASSESSMENT YEAR : 2006-07) SAMAY TRADELINK PVT. LTD. JINDAL & JINDAL, CHARTERED ACCOUNTANT, B-810, FAIRDEAL HOUSE NAVRANGPURA, AHMEDABAD 380 009 VS. INCOME TAX OFFICER, WARD 8(1), PRATYAKSH KAR BHAVAN, PANJARA POLE AHMEDABAD. ! PAN/GIR NO. : AAICS 0905 P ( ' / APPELLANT ) .. ( #' RESPONDENT ) '$ APPELLANT BY : SHRI S. N. DIVATIA, A.R. #'%$ / RESPONDENT BY : SHRI JAMES KURIAN, SR. D.R & ' (%) * / DATE OF HEARING 24/01/2018 +,-. %) * / DATE OF PRONOUNCEMENT 26/02/2018 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE RELATING TO ASSESSMEN T YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XIV, AHMEDABAD DATED 02.01.2014 WHICH IS ARISING OUT OF ORDER U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, VIDE APPEAL NO.CIT(A)-XIV/WD.8(1)/219/2011-12. ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 2 - 2. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE THE LEARNED CIT (APPEAL) ERRED IN NOT CONSIDERING THE REOPENING U/S.147 OF THE INCOME TAX ACT OF THE COMPLETED ASSESSMENT BAD AND WITHOUT JURISDICTION; 2. IN THE FACT AND CIRCUMSTANCES OF THE APPELLAN T'S CASE THE LEARNED CIT (APPEAL) ERRED IN NOT CONSIDERING THE REASSESSM ENT BAD IN LAW WHEN THE LEARNED ASSESSING OFFICER SATISFIED TH AT THERE IS NO ESCAPEMENT OF INCOME ON THE REASON RECORDED FOR THE REOPENING OF THE CASE I.E. THE AMOUNT RECEIVED FROM SWILOO M SHAH IS UNEXPLAINED CASH CREDIT FOR THE COMPANY; 3. IN THE FACTS AND CIRCUMSTANCES OF THE APPELLA NT'S CASE THE LEARNED CIT(APPEAL) ERRED IN NOT DELETING THE ADDITION OF R S.12,28,000/- AS INCOME FROM UNEXPLAINED SOURCES; 4. IN THE FACTS AND CIRCUMSTANCES OF THE APPELLA NT'S CASE THE LEARNED CIT( APPEAL) ERRED IN NOT DELETING THE ADDITION OF RS.1,35,080/- BY NOTIONAL DISALLOWANCE OUT OF INTEREST EXPENDITUR E; ANY OTHER GROUND OR GROUNDS AS MAY BE DEEMED FIT AN D PROPER AT THE TIME OF HEARING OF THE APPEAL. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE RETURN OF INCOME WAS ORIGINALLY FILED ON 30/1 2/2006 THROUGH E-FILING DECLARING TOTAL INCOME AT RS.L,79,820/-. T HE ASSESSMENT WAS FINALIZED U/S.143(3) OF THE I.T. ACT, 1961 ON 12/12 /2008 DETERMINING TOTAL INCOME AT RS.5,47,449/-. THEREAFTER, IT WAS COME TO THE NOITCE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD ACCEPTED FUNDS MORE THAN RS.1,00,000/- FROM SHRI SWITOO M. SHAH. T HE SAID FUND HAS BEEN TRANSFERRED FROM THE BANK ACCOUNT NIO.00481050 011374 OF HDFC BANK MAINTAINED IN THE NAME OF SHRI SWITOO M. SHAH IN THE F.Y.2005- 06. THE SAID BANK ACCOUNT HAD NOT BEEN DISCLOSED BY SHRI SWITOO M. SHAH IN HIS RETURN OF INCOME. FROM PERUSAL OF THE B ANK STATEMENT OF THE SAID BANK ACCOUNT OF SHRI SWITOO M. SHAH, IT IS NOT ICED THAT SUBSTANTIAL ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 3 - CASH HAD BEEN DEPOSITED IN THE BANK BEFORE OR ON TH E DATE OF TRANSFER OF FUNDS TO THE ASSESSEE COMPANY. SHRI SWITOO M. SHAH DECLARED INCOME WAS NOT AT PAR WITH THE SUBSTANTIAL AMOUNTS DEPOSIT ED IN THE BANK ACCOUNT MEANING THEREBY THAT THERE IS NO CREDIT WORTHINESS OF THE DEPOSITOR. THEREFORE, THERE WAS REASON TO BELIEVE THAT THE AMO UNT RECEIVED BY THE ASSESSEE FROM SHRI SWITOO M. SHAH THROUGH HDFC BANK ACCOUNT NO.00481050011374 IS UNEXPLAINED CASH CREDITS OF TH E ASSESSEE COMPANY AND THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESS MENT. THEREFORE, AFTER RECORDING REASONS, NOTICE U/S.148 OF THE DAY ASKING FOR THE COMPLIANCE WITHIN 30 DAYS. HOWEVER, THERE WAS NO CO MPLIANCE FROM THE ASSESSEE. THEREAFTER DUE TO CHANGE OF INCUMBENT, A LETTER/NOTICE WAS ISSUED TO THE ASSESSEE ON 19.07.2011 FOR THE COMPLI ANCE. IN RESPONSE THERETO, THE ASSESSEE VIDE LETTER DTD.04.10.2011 RE QUESTED TO CONSIDER THE ORIGINAL RETURN FILED AS COMPLIANCE TO NOTICE ISSUE D U/S.148 OF THE I. T. ACT, 1961. THE ASSESSEE FURTHER REQUESTED TO FURNIS H THE REASONS RECORDED FOR ISSUE OF NOTICE U/S.148 OF THE I. T. ACT, 1961, WHICH WAS GIVEN TO THE ASSESSEE ON 11.10.2011. THEREAFTER NOTICE U/S.142( 1) OF THE I.T. ACT, 61 WAS ISSUED TO THE ASSESSEE ON 04.11.2011, WHICH WAS SERVED ON THE ASSESSEE ON 05.11.2011. IN RESPONSE TO THE NOTICES ISSUED, SHRI AJAY CHAYA, C.A. DUELY AUTHORIZED BY THE ASSESSEE ATTEND ED AND THE CASE WAS DISCUSSED WITH HIM. 3.1 THE ASSESSEE RAISED OBJECTION FOR REOPENING OF THE CASE, WHICH IS DULY REPLIED VIDE LETTER DATED 21.11.2011 AND SERVE D UPON THE ASSESSEE COMPANY. FURTHER, IT WAS ASKED TO SUBMIT THE NECESS ARY EVIDENCES FOR VERIFICATION ON 30.11.2011 THE ASSESSMENT PROCEEDIN GS. ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 4 - 3.2 DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, VIDE ORDER SHEET ENTRY DTD. 30.11.2011 IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE THAT THE ASSESSEE HAD GIVEN LOAN OF RS.12.28 LACS TO SHRI SW ITOO M. SHAH AND ALSO RECEIVED LOAN OF RS.(3.25 LACS FROM HIM, WHICH WERE NOT REFLECTED IN THE AUDIT REPORT AS WELL AS EARLIER SUBMISSIONS. ON VER IFICATION OF THE BANK ACCOUNT IT IS NOTICED THAT THE AMOUNT OF RS. 6,03,0 00/- REMAIN BALANCE IN THE HANDS OF DIRECTORS AS ON 31.3.2006. THE ASSESSE E HAS NOT DECLARED IN THE BALANCE SHEET AND SHOWN AN ADVANCE MONEY GIVEN TO SHREE S.M SHAH. THEREFORE, THE ASSESSEE WAS ASKED TO SHOW CAU SE WHY THE PROVISIONS OF SECTION 69 OF THE I.T. ACT '61 SHOULD NOT BE INVOKED IN ITS CASE, FOR WHICH TIME WAS GIVEN UPTO 02.12.2011. ANO THER SHOW CAUSE NOTICE/LETTER WAS ALSO ISSUED TO THE ASSESSEE ON 30 .11.2011, WHICH, WAS SERVED ON THE ASSESSEE ON 08.12. 2011. HOWEVER, THE ASSESSEE HAD NO EXPLANATION TO OFFER. THE FOLLOWING CASE LAW HAVE BEEN RELIED AND PLACED ON RECORD WHERE IN IT IS HELD THAT BY THE HONBLE HIGH COURT IN THE CASE OF JAGMOHAN RAM RAM CHANDRA V/S COMMISSIONER OF INCOME-TAX [2004] 1 41 TAXMAN 574 (ALL.) THAT INCOME CASH CREDIT-ASSESSMENT IN TH E HANDS OF FIRM VIS- -VIS PARTNERS CASH CREDIT FOUND IN THE NAMES OF PA RTNERS IN THE BOOKS OF FIRM. IT IS THE FIRM WHICH HAD TO EXPLAIN THE ID ENTITY AND SOURCE OF SUCH DEPOSITS. EXPLANATION GIVEN BY FIRM DISBELIEVE D. ADDITION HAS TO BE MADE UNDER SECTION 68 IN THE HANDS OF THE FIRM REGA RDLESS OF THE FACT THAT IT HAS BEEN ALSO ASSESSED IN THE HANDS OF PART NERS UNDER SECTION 69. QUESTION OF DOUBLE TAXATION DOES NOT ARISE. 3.3 IN VIEW OF THE FACTS MENTIONED IN PARA 2 ABOVE, THE LOAN OF RS.12.28 LACS GIVEN TO SHRI SWITOO M. SHAH, WHICH I S NOT AT ALL REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE COMPANY, IS TR EATED AS INCOME FROM UNDISCLOSED SOURCE GIVEN TO SHRI SWITOO M. SHAH AND ACCORDINGLY THE SAID SUM OF RS. 12,28,000/- IS ADDED TO THE TOTAL I NCOME AS CONCEALED ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 5 - INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I. T. ACT '61 ARE ALSO SEPARATELY INITIATED FOR CONCEALMENT, FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3.4 IN THE P&L ACCOUNT, THE ASSESSEE HAS CLAIMED IN TEREST EXPENSES OF RS.2,94,072/-. SINCE THE ASSESSEE HAS NOT SHOWN ANY INTEREST INCOME ON THE LOAN OF RS.12.28 LACS GIVEN TO SHRI SWITOO M. S HAH, A REASONABLE NOTIONAL INTEREST @11% ON THE SAME, WHICH WORKS OUT TO RS.1,35,080/- IS DISALLOWED OUT OF THE TOTAL INTEREST CLAIMED BY THE ASSESSEE AS INTEREST BEARING LOANS HAVE BEEN ADVANCED INTEREST FREE TO T HE SAID PARTY. 3.5 WITH THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER:_ TOTAL INCOME AS PER ORDER U/S. L43(3) DTD. 12.12.08 , THE CIT(APPEAL) HAS CONFIRMED THE ADDITION OF THE AO VIDE ORDER DATED 9 .11.2009. RS. 5,47,449 ADD: ADDITIONS/DISAILOWANCES AS DISCUSSED: 1. CONCEALED INCOME AS PER PARA 3 RS. 12,28, 000 2. OUT OF INTEREST EXP. AS PER PARA 4 RS. 1,3 5,080 RS.13,63,080 TOTAL INCOME RS.19,10,529 I.E. RS.19,10,530 4. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. ASSESSEE IS FILED ITS RETURN OF INCOME DECLARING TO TAL INCOME OF RS.1,79,818/- AND ASSESSMENT U/S.143(3) HAD BEEN CO MPLETED ON ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 6 - 12/12/2008 DETERMINING TOTAL INCOME OF RS.5,47,449/ -. IT CAME TO THE KNOWLEDGE OF THE LEARNED AO THAT DURING THE YEAR UN DER CONSIDERATION, ASSESSEE COMPANY HAS ACCEPTED MORE THAN RS.1,00,000 /- FROM SHRI SWITOO M. SHAH. THE SAID FUND HAS BEEN TRANSFERRED FROM THE BANK ACCOUNT NO.00481050011374 OF HDFC BANK MAINTAINING IN THE NAME OF SHRI SWITOO M. SHAH IN THE FINANCIAL YEAR 2005-06. THE SAID BANK ACCOUNT HAS NOT BEEN DISCLOSED BY SHRI SWITOO M. SH AH IN HIS RETURN OF INCOME. FROM THE PERUSAL OF THE BANK STATEMENT OF T HE SAID BANK ACCOUNT OF SHRI SWITOO M. SHAH, IT IS NOTICED THAT SUBSTANT IAL CASH AMOUNT HAS BEEN DEPOSITED IN THE BANK BEFORE OR ON THE DAY OF TRANSFER OF FUNDS TO THE ASSESSEE COMPANY. SHRI SWITOO M. SHAH DECLARED INCO EM IS NOT AT PAR WITH THE SUBSTANTIAL AMOUNT DEPOSITED IN THE BANK A CCOUNT MEANING THEREBY THAT THERE IS NO CREDITWORTHINESS OF THE DE POSITOR. THEREFORE, AO HAS REASON TO BELIEVE THAT THE AMOUNT RECEIVED BY ASSESSEE FROM SHRI SWITOO M. SHAH THROUGH HDFC BANK ACCOUNT IS UNEXPLAINED CASH CREDIT OF THE ASSESSEE COMPANY AND THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AND AS PE R THE AO THIS WAS A FIT CASE FOR REOPENING OF THE ASSESSMENT. 5.1 IN RESPONSE TO THE SAID NOTICE, ASSESSEE COMPAN Y STATED THAT IT HAS ACCEPTED FUNDS FROM ONE OF THE DIRECTOR SHRI SWITOO M. SHAH. THE COMPANY HAS ACCEPTED FUNDS FROM DIRECTOR AS TEMPORA RY LOAN BY ACCOUNT PAYEE CHEQUE AND REPAID THE SAME DURING THE YEAR. T HE ASSESSEE COMPANY HAS DONE TRANSACTION WITHIN THE PURVIEW OF THE LEGA L FRAMEWORK. IT IS NOT THE DUTY OF THE COMPANY TO VERIFY AND JUSTIFY THE S OURCE OF THE INCOME. THEREFORE, DEPOSIT OF THE CASH IN PERSONAL ACCOUNT OF SHRI SWITOO M. ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 7 - SHAH CANNOT BE THE REASON FOR ASSUMING THE ESCAPE O F THE INCOME FROM THE ASSESSMENT OF THE COMPANY. THE DEPOSITOR IS A D IRECTOR IN THE COMPANY. HE FILED HIS INDIVIDUAL TAX RETURN REGULAR LY AND RUNS THE AFFAIRS OF THE COMPANY, MERELY THE BASIS OF HIS UNDISCLOSED BANK ACCOUNT HAD JUSTIFY ESCAPEMENT OF INCOME OF THE COMPANY. MOREOV ER SHRI SWITOO M. SHAH SEPARATELY ASSESSED BY THE INCOME TAX OFFICER WARD - 3(4) AHMEDABAD AND MADE AN ADDITION AMOUNTING TO RS.16,2 0,030/-FOR UN- EXPLAINED CASH CREDIT (CASH DEPOSITED IN BANK ACCOU NT), UN-EXPLAINED SALARY AND UN-EXPLAINED INTEREST AFTER SCRUTINIZING HIS BOOK ACCOUNTS AND VARIOUS TRANSACTIONS. A COPY OF ASSESSMENT ORDER OF MR. SWITTO M. SHAH WAS ALSO SUBMITTED BEFORE THE AO. THE SAID FACTS SH OWS THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER ON THE REASON RECORDED AS WELL AS NO APPLICATION OF MIND BY THE JOINT/ADDITIO NAL COMMISSIONER ON RECORDING HIS SATISFACTION ON THE REASON RECORDED B Y THE LD. ASSESSING OFFICER. AS FAR AS THE ASSESSEE COMPANY IS CONCERNE D, THE AMOUNTS WERE RECEIVED FROM SHRI S. M. SHAH, ONE OF THE DIRECTOR OF THE COMPANY, THROUGH BANKING CHANNEL. THE MERE FACT THAT THERE W ERE SOME CASH DEPOSITS IN THE BANK ACCOUNT OF THE PERSON WHO HAS ADVANCED MONEY TO THE ASSESSEE, CANNOT BE REASONED ENOUGH TO COME TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT IN THE HANDS OF THE A SSESSEE COMPANY. QUITE CLEARLY, THERE IS NO RELATIONSHIP IN THE OBSE RVATIONS MADE BY THE ASSESSING OFFICER WHILE RECORDING THE REASONS AND I N THE CONCLUSION ARRIVED BY THE ASSESSING OFFICER IN THE SAME REASON SO RECORDED. THEREFORE, BEING THE FACTS OF THE APPLICANTS CASE THE INITIATION OF THE ENTIRE REASSESSMENT PROCEEDINGS THROUGH THE NOTICE U/S.148 DATED 07/05/2010 IS BAD IN LAW AS WELL AS FACTS OF THE AP PELLANT CASE AND IN OUR ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 8 - CONSIDERED OPINION SAME IS DESERVED TO BE QUASHED. SINCE IN THIS MATTER ASSESSING OFFICER ON THE REASON RECORDED AS WELL AS NO APPLICATION OF MIND BY THE JOINT/ADDL. COMMISSIONER. SO IN LACK OF BOTH THE INGREDIENTS WE HOLD THAT RE-OPENING IS BAD IN LAW AND SAME IS QUAS HED. THEREFORE, GROUND NO.1 IS THUS ALLOWED. 6. IN VIEW OF THE FACT THAT WE HAVE QUASHED IN RE-A SSESSMENT ITSELF, IT IS NOT REALLY NECESSARY TO DEAL WITH THE MERITS OF THE CASE. ALL THE ASPECTS OF THE MATTER, GIVEN IN THE RE-ASSESSMENT HAVING QU ASHED, ARE ACADEMIC AND INFRUCTUOUS. WE THEREFORE SEE NO NEED TO DEAL W ITH THE GRIEVANCE ON MERITS. THEREFORE, GROUND NO.2 AND 3 ARE DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. THIS ORDER PRONOUNCED IN OPEN COURT ON 26 / 0 2 /201 8 SD/- SD/- IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRAMOD KUMAR) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/02/2018 PRITI YADAV, SR.PS ITA NO.802/AHD/ 2014 SAMAY TRADELINK PVT. LTD. VS. ITO ASST.YEAR 2006-07 - 9 - !'# $#! COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) 45 / THE CIT(A)- XIV, AHMEDABAD. 5. 67 8)'12 *12. 0 / DR, ITAT, AHMEDABAD 6. 8 9: ( GUARD FILE. % & / BY ORDER, # 6)) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 24/01/2018. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 30/01/2018 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE F 6. AIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER