M/s Gurukrupa Agencies, Hubli V. DCIT, Hubli

ITA 805/BANG/2010

• Counselvise Citation: 80521114 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Section: 143(3); 234B; 131; 68

Judgement Text

PAGE 1 OF 8 ITA NO.8 05/BANG/2010 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE, K. JUDICIAL MEMBER I.T.A. NO.805(BANG.)/2010 (ASSESSMENT YEAR : 2004-2005) M/S GURUKRUPA AGENCIES, KOPPIKAR ROAD, HUBLI-580 020 PAN NO.AABFG2064K APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), HUBLI-580 020 RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE REVENUE BY : SMT. SUSAN THOMAS JOSE , JCIT DATE OF HEARING : 20-11-2011 DATE OF PRONOUNCEMENT : 22-12- 2011 O R D E R PER SHRI GEORGE GEORGE, K, JM; THIS APPEAL HAS BEEN INSTITUTED BY THE ASSESSEE AG AINST THE ORDER OF THE CIT(A), HUBLI DATED 30-03-2010 FOR THE RELEVANT ASSESSMENT YEAR 2004-05. 2. THE ISSUE INVOLVED IN THE PRESENT APPEAL FOR AD JUDICATION IS THE ADDITION OF RS.6,95,000/- MADE U/S 68 OF THE IT ACT WITH REGARD TO DEPOSIT AND DISALLOWANCE OF INTEREST PAID ON SUCH DEPOSITS AMOUNTING TO RS.22,370/-. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF LEVY OF INTEREST U/S 234A, 234B AND 23 4C OF THE IT ACT. THE LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE IT ACT IS MANDATORY AND CONSEQUENTIAL, HENCE, N O ADJUDICATION IS CALLED FOR. 3. THE BRIEF FACTS IN RELATION TO THE ADDITION MA DE UNDER SECTION 68 OF THE IT ACT ARE AS FOLLOWS:- PAGE 2 OF 8 ITA NO.805/BANG/2010 2 THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS A DISTR IBUTOR IN PHARMACEUTICALS. FOR THE CONCERNED ASSESSMENT YEAR, THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.16,94,660/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2). THE AO CONCLUDED THE ASSESSMENT U/S 143(3) OF THE ACT, VIDE ORDER DATED 19-12-2006 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 24,88,729/- AS AGAINST THE INCOME RETURNED BY THE ASSESSEE AT RS.16,94,660/-. 3.1 IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT W AS NOTICED IN THE BOOKS OF ACCOUNTS, THAT A SUM OF RS. 1,75,85,336/- WAS SHOWN AS DEPOSIT RECEIVED FROM THE OUTSIDERS AS ON 31-03- 2004. THE ASSESSEE FIRM WAS DIRECTED TO FURNISH TH E DETAILS OF THE DEPOSITS RECEIVED DURING THE PERIOD FROM 01-04- 2003 TO 31- 03-2004 AND THE RATE OF INTEREST PAID ON THESE DEPO SITS. THE ASSESSEE VIDE LETTER DATED 16-05-2006 FURNISHED THE DETAILS OF THE DEPOSITS OF RS.32,93,000/- RECEIVED FROM 121 PERSON S. IT WAS STATED THAT THE RATE OF INTEREST PAID ON THESE DEPO SITS WERE AT 10%. OUT OF 121 DEPOSITORS, FOUR PERSONS FROM HUBL I WERE DIRECTLY SUMMONED BY THE AO AND THEY ADMITTED THAT THEY HAD MADE DEPOSITS WITH THE ASSESSEE FIRM. THEREAFTER, THE AO RANDOMLY SELECTED 27 DEPOSITORS OUT OF 121 DEPOSITO RS AND DIRECTED THE ASSESSEE TO PROVE THE GENUINENESS OF D EPOSITS MADE BY THESE 27 DEPOSITORS. THE NAME OF THE 27 DEPOSIT ORS, THE AMOUNT DEPOSITED BY THEM AND THE DATE OF DEPOSITS A RE MENTIONED AT PAGE 2, PARA 5 OF THE IMPUGNED ASSESSM ENT ORDER. FEW DEPOSITORS APPEARED AND FURNISHED THE DETAILS O F THE DEPOSITS MADE BY THEM. WITH REGARD TO OTHER DEPOSI TORS WHO HAD FAILED TO APPEAR, THE ASSESEEE SUBMITTED THAT MOST OF THE DEPOSITS WERE REPAID BY THE ASESSSEE FIRM BY WAY OF CHEQUES. THEREFORE, THE DEPOSITORS WERE NOT INTERESTED IN APPEARING BEF ORE THE INCOME TAX DEPARTMENT AND HAD TURNED HOSTILE AND WERE NOT CO- OPERATING. THE ASSESSEES COUNSEL FURNISHED THE D ETAILS OF THE DEPOSITORS, THE REPAYMENT DETAILS OF THE DEPOSITS E TC. IT WAS ALSO PAGE 3 OF 8 ITA NO.805/BANG/2010 3 REQUESTED THAT THE AO SHOULD ISSUE SUMMONS TO THE D EPOSITORS WHO HAD FAILED TO APPEAR. 4. THE AO WAS OF THE VIEW THAT THE ASSESSEE FIRM HA D DELIBERATELY AVOIDED IN PRODUCING THE DEPOSITORS BE FORE THE AO FOR VERIFICATION. THE ASSESSING OFFICER ALSO EXAMINED THE DETAILS OF RE-PAYMENT OF THE DEPOSITS AND HELD THAT THE CHEQUE S WERE ISSUED IN FAVOUR OF PERSONS OTHER THAN THE DEPOSITO RS. THEREFORE, THE ASSESSING OFFICER HELD THAT THE CLAIM OF REPAYM ENT OF DEPOSIT BY CHEQUE CANNOT BE THE SOLE REASON TO HOLD THAT TH E DEPOSITS ARE GENUINE. THE ASSESSING OFFICER CONCLUDED THAT THE GENUINENESS OF DEPOSITS MADE BY 21 PERSONS AMOUNTING TO RS.6,95 ,000/- HAS NOT BEEN SATISFACTORILY EXPLAINED AND MADE ADDITION UNDER SECTION 68 OF THE ACT. THE RELEVANT CONCLUSION OF T HE AO READS AS UNDER; IN VIEW OF THE ABOVE, IT IS TO BE STATED THAT THE ASSESSEE FIRM FAILED TO ESTABLISH THE IDENTITY OF T HE DEPOSITORS AND THAT IT DID NOT DISCHARGE THE ONUS TO ESTABLISH THE IDENTITY OF THE DEPOSITORS AND ALS O THE CREDITWORTHINESS OF THE DEPOSITED AMOUNT. AS MENTIONED EARLIER, FIRST THE ASSESSEE CHOSE TO PROLONG THE MATTER BY REQUESTING TIME TO PRODUCE THE DEPOSITORS ANDS FINALLY ENOUGH OPPORTUNITY AND TIME WERE ALLOWED TO ESTABLISH THE IDENTITY AND THE CREDIT WORTHINESS OF THE DEPOSITORS, THE ASSESSEE FIRM EXPRESSED ITS INABILITY TO PRODUCE THEM BEFORE ME FOR VERIFICATION ON THE GROUND THAT THEY TURNED HOSTILE SINCE THE DEPOSITS WERE RETURNED BACK TO THEM BY WAY OF CHEQUES. WHEN THE ASSESSEE FIRM WAS ASKED TO ESTABLISH THE PAYMENTS BY CHEQUE, BARRING 4, IT COULD NOT ESTABLISH IN 21 CASES WHEREIN CHEQUES STATED TO HAVE BEEN ISSUED TO THE DEPOSITORS. THEREFORE, I AM CONVINCED THAT THE ASSESEE FIRMS EXPLANATION ABOUT THE NATURE OF DEPOSITS RECORDED IN THE BOOKS OF ACCOUNT IS NOT SATISFACTORY WITH REGARD TO 21 PERSONS DEPOSIT AND NOT GENUINE. 4.1 THE ASSESSING OFFICER ALSO DISALLOWED RELATED INTEREST AMOUNTING TO RS.22,370/- ON THESE DEPOSITS, WHICH W ERE TREATED AS NON-GENUINE. PAGE 4 OF 8 ITA NO.805/BANG/2010 4 5. THE ASSESSEE BEING AGGRIEVED FILED AN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY. IT WAS SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE AO FAILED TO APPRECIAT E THAT THE PROOF ADDUCED IN SUPPORT OF PAYMENTS OF THE DEPOSITS. IT WAS CONTENDED THAT WHEN THE RE-PAYMENTS ARE MADE BY WAY OF CHEQUE S AND THE DEPOSITORS HAVE TURNED HOSTILE, THE AO HAS ERRED IN NOT ISSUING SUMMONS U/S 131 TO THE DEPOSITORS INSPITE OF SPECIF IC REQUEST MADE BY THE ASSESSEE. 6. THE FIRST APPELLATE AUTHORITY DISMISSED THE APP EAL OF THE ASSESSEE. THE CIT(A) HELD THAT OUT OF 27 DEPOSITOR S RANDOMLY SELECTED FOR EXAMINING THE GENUINENESS OF THE DEPOS ITS, THE AO HAD CORRECTLY COME TO THE CONCLUSION THAT ONLY SIX WERE GENUINE DEPOSITORS. IT WAS FURTHER HELD THAT REPAYMENT OF THE AMOUNT BY THE ASSESSEE FIRM IN THE SUBSEQUENT PERIOD ITSELF C ANNOT BE THE SOLE PARAMETER TO PROVE THAT THE INITIAL DEPOSITS ARE GE NUINE UNLESS THE ASSESSEE EXPLAINS SAME INDEPENDENTLY WITH DOCUMENTA RY EVIDENCE. 7. AGGRIEVED BY THE DISMISSAL OF THE APPEAL BY THE FIRST APPELLATE AUTHORITY, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING 43-PAGES INTER- ALIA CONSISTING OF THE CONFIRMATION/ AFFIDAVIT OF T HE DEPOSITORS. THE LETTERS WRITTEN TO THE AO REQUESTING TO ISSUE SUMMO NS TO THE DEPOSITORS WHO HAD FAILED TO APPEAR BEFORE THE AO. 7.1 IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR T HE ASSESSEE THAT DEPOSITS WERE ACCEPTED FROM KNOWN PERSONS WHO WERE PAYING INTEREST ON SUCH DEPOSITS. IT WAS SUBMITTED THAT T HE ASSESSEE FIRM HAD REPAID MOST OF THE DEPOSITS DURING THE SUBSEQUE NT YEAR THROUGH CHEQUES ONLY. THUS, THE BONAFIDE AND GENUIN ENESS OF THE DEPOSITS SHOULD NOT BE DOUBTED. IT WAS FURTHER CON TENDED THAT THE AO OUGHT TO HAVE SUMMONED ALL THE DEPOSITORS AND VE RIFIED THE GENUINENESS OF THE DEPOSITS, SINCE ALL THE DETAILS OF THE DEPOSITORS PAGE 5 OF 8 ITA NO.805/BANG/2010 5 WERE PROVIDED TO THE AO WHICH HE HAD FAILED TO DO S O IN CERTAIN CASES. 7.2 THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECIS IONS IN SUPPORT OF ITS CONTENTIONS ; CIT VS ORISSA CORPN. 159 ITR 78(SC) CIT VS DAULAT RAM RAWAT MALL87 ITR 349(SC) DCIT VS ROHINI BUILDERS 256 ITR 360(GUJ.) LABH CHAND BOHAR VS ITO 219 CTR 571 (RAJ.) ARAVALI TRADING CO. VS ITO 220 CTR 622(RAJ.) 8. THE LEARNED DR ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE INCOME-TAX AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS NOT IN DISPUTE THAT THE CONFIRMATION/AFFIDAVITS HAVE BEEN FILED FROM THE 27 DEPOSITORS WHO WERE RANDOMLY SELECTED BY THE ASSESSING OFFICER. I T IS ALSO A FACT THAT SUMMONS ISSUED BY THE AO IN RESPECT OF FOUR DE POSITORS AT HUBLI WERE DULY COMPLIED WITH AND THESE DEPOSITORS APPEARED AND GAVE NECESSARY DOCUMENTS TO PROVE THAT HE/SHE IS A GENUINE DEPOSITOR. OUT OF 27 DEPOSITORS SELECTED BY THE AO, SOME OF THE DEPOSITORS, AT THE REQUEST OF THE ASSESSEE, DID APP EAR BEFORE THE AO AND GAVE THE NECESSARY DETAILS. SINCE MANY OF THE DEPOSITORS FAILED TO APPEAR BEFORE THE ASSESSING OFFICER FOR EXAMINAT ION, THE ASSESSEE WROTE LETTER TO THE AO PLEADING HIM TO ISSUE SUMMON S TO THE DEPOSITORS. THE CONTENT OF THE LETTER DATED 09-12- 2006, IS AS UNDER; WE INVITE YOU KIND ATTENTION TO THE ABOVE SUBJECT. AS REGARDS PRODUCING 22 DEPOSITORS, WE WISH TO INFORM YOU THAT MOST OF THESE DEPOSITS HAVE BEEN REPAID BY US BY WAY OF CHEQUES. AS A RESULT OF THIS, THE DEPOSITORS HAVE TURNED HOSTILE AND ARE NOT CO-OPERATING WITH US. WE ARE ENCLOSING A DETAILED LIST WITH DATES AND CHEQUE NOS. PAGE 6 OF 8 ITA NO.805/BANG/2010 6 WE HAVE BEEN REQUESTING YOU TO ISSUE NOTICE SUMMONS U/S 131 TO THESE DEPOSITORS. YOU HAD OF YOUR OWN ACCORD ISSUED SUMMONS TO 3-4 DEPOSITORS. IN RESPONSE TO YOUR NOTICE THEY HAVE APPEARED AND ADDUCED PROOF. WE THEREFORE, ONCE AGAIN REQUEST YOU TO ISSUE SUMMONS IN THE INTEREST OF EQUITY TO ALL THESE 22 DEPOSITORS AT TH E EARLIEST AND EXAMINE THEM 9.1 APART FROM THE ABOVE LETTERS, THE ASSESSEE HAD FURTHER WRITTEN LETTERS TO THE AO ON 09-12-2006 AND 06-11-2 006 REQUESTING THE AO TO ISSUE SUMMONS, SINCE THE DEPOS ITORS WERE REFUSING TO APPEAR BEFORE THE INCOME-TAX AUTHORITIE S. THE AO HOWEVER, IN HIS ORDER (PARA 5) HELD AS FOLLOWS; THUS, THE ASSESSEE FIRM HAS DELIBERATELY AVOIDED PRODUCING DEPOSITORS FOR MY VERIFICATION IN ORDER TO EXAMINE THE IDENTITY OF THE DEPOSITORS, THE CREDIT WORTHINESS OF THE DEPOSITORS AND THE GENUINITY OF THE TRANSACTION . 9.2. WE FAIL TO UNDERSTAND HOW THE ASSESSEE FIRM H AS DELIBERATELY AVOIDED IN PRODUCING THE DEPOSITORS. THE ASSESSEE IS NOT VESTED WITH THE POWERS TO ISSUE SUMMONS AND IT DOES NOT HAVE ANY AUTHORITY OR POWER TO COMPEL A PERSON TO A PPEAR BEFORE THE AO. WHEN THE ASSESSEE FIRM HAD EXPRESSED ITS I NABILITY TO PRODUCE THE DEPOSITORS BEFORE THE ASSESSING OFFICER AND HAD REQUESTED THE AO TO ISSUE SUMMONS TO THE DEPOSITORS , THE AO OUGHT TO HAVE ACCEDED TO THE ASSESSEES REQUEST IN THE INTEREST OF JUSTICE. 9.3 THE AO HAS ALSO EXAMINED THE DETAILS OF THE REPAYMENT OF DEPOSITS AND HELD THAT THE CHEQUES ISS UED WERE IN FAVOUR OF THE PERSONS OTHER THAN THE DEPOSITORS AND HENCE, THE DEPOSITS CANNOT BE HELD TO BE GENUINE. ACCORDING T O THE ASSESSEES COUNSEL THE REPAYMENTS WERE MADE TO THIR D PERSONS AT THE REQUEST OF THE DEPOSITORS. A JOINT AFFIDAVIT O F THE DEPOSITORS MENTIONED IN SL.NOS.16,18,21,23,24 & 26 LISTED OUT AT PAGE-2 & 3 OF THE ASSESSMENT ORDER IS PLACED ON RECORD (COURTE SY PAGE 9 OF THE PAPER BOOK FILED BY THE ASSESSEE) WHICH READS A S FOLLOWS; PAGE 7 OF 8 ITA NO.805/BANG/2010 7 WE 1) SMT.MALLAVVA,P METI 2) SRI VEERAPPA.P.METI 3) SMT.GAURAMMA, HODLI, 4) SRI YALLAPPAGOUDAR S PATIL 5) SHILPA M HADDLI 6)DAKSHAYINI, HADLI ALL MAJOR RESIDENTS OF HUBLI SWEAR AND STATE ON OATH A UNDER. I, WE ARE ALL MEMBERS OF JOINT FAMILY CONSISTING O MORE THAN 70 MEMBERS HAVING AGRICULTURAL INCOME, OWNING ABOUT 50 ACRES OF AGRICULTURAL LAND PARASAPUR, CHEB BNI. TAL.HUBLI GROWING MAINLY CHILLI, COTTON, GROUNDNUTS , PADDY, JOWAR, ONIONS AND OTHER FRUIT YIELDING TREES . 2. WE HAD KEPT FIXED DEPOSITS IN OUR NAME WITH M/S GURUKRUPA AGENCIES, HUBLI. THE DETAILS ARE AS FOL LOWS; FDR NO. AMOUNT 1. SMT. MALLAVVA P. METI 5070 RS.35,000 2. SRI VEERAPPA P METI 5071 RS.35,000 3. SMT GAURAMMA HADLI 5069 RS.35,000 4. SRI YALLAPA GOUDAR S PATIL 5074 RS.35,000 5. SHILPA M HADDLI 5067 RS.25,000 6. DAKSHAYINI HADLI 5068 RS.35,000 RS.2,00,000 THE SOURCES FOR THE ABOVE IS AGRICULTURAL INCOME OF THE FAMILY. 3. WE INSTRUCTED THE ABOVE SAID FIRM OF M/S GURUKRU PA AGENCIES TO REFUND THE ABOVE SAID DEPOSIT AND ALSO TO ISSUE CHEQUE IN FAVOUR OF SRI BASAVARAJ P. MUDALINGANNAVAR A SENIOR MEMBER OF OUR FAMILY. TH E SAID FIRM ACTION ON OUR INSTRUCTION HAS ISSUED A CH EQUE BEARING NO.625707 DATED 07-12-2004 ON KARNATAKA BANK, HUBLI FOR RS.2,00,000/- WHICH INCLUDES AMOUNT DUE O US IN FULL DISCHARGE OF THE AMOUNTS DUE TO US . FROM THE ABOVE AFFIDAVIT OF THE DEPOSITORS, IT IS CLEAR THAT REPAYMENT HAS BEEN MADE BY THE ASSESSEE FIRM TO THE THIRD PERSONS AT THE INSTANCE OF THE DEPOSITORS. THESE F ACTS ARE NOT PROPERLY EXAMINED BY THE AUTHORITIES BELOW. MOREOV ER, WHEN THE ASSESSEE HAD EXPRESSED HIS INABILITY TO PRODUCE SOM E OF THE DEPOSITORS SINCE THEY HAVE TURNED HOSTILE, IT WAS T HE DUTY OF THE AO TO ISSUE SUMMONS, ESPECIALLY WHEN THE ASSESSEE H AD REPEATEDLY REQUESTED FOR ISSUANCE OF SUMMONS. THER EFORE, FOR A PROPER EXAMINATION OF THE MATTER AND ALSO IN THE IN TEREST OF JUSTICE THE ISSUE IS RESTORED TO THE FILE OF THE AO . HE SHALL DISPOSE PAGE 8 OF 8 ITA NO.805/BANG/2010 8 OF THE MATTER AS EXPEDITIOUSLY AS POSSIBLE, AFTER A FFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND DAY OF DECEMBER, 2011 SD/- SD/- ( N.K.SAINI) (GEORGE GEORGE , K) ACCOUNTANT MEMBER JUDICI AL MEMBER AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR, ITAT, BANGALORE