M/s. A to Z Forex Pvt. Ltd., RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), Veraval

ITA 84/RJT/2012

• Counselvise Citation: 8424914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE DR I
• Assessee Lawyers: D M RINDANI CA I
• Keywords: Opportunity of being heard
• Section: 68

Judgement Text

I , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . . . . BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 8 4 /RJT/2012 A A / ASSESSMENT YEAR 200 6 - 0 7 M/S. A TO Z FOREX PVT. LTD. NEAR LILAPUR DARGAH, KOT AREA, DIST. JUNAGADH, UNA. PAN : AAECA8813G ( / APPELLANT) THE INCOME - TAX OFFICER, WARD - 1(3), VERAVAL. ' / RES PONDENT AEI / ASSESSEE BY SHRI D. M. RINDANI, CA ) I / REVENUE BY SHRI VILAS V. SHINDE, DR I / DATE OF HEARING 01 - 08 - 2013 I / DATE OF PRONOUNCEMENT 14 - 08 - 2013 / ORDER . . , 2013 / T. K. SHARMA, J. M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 28 - 12 - 2011 OF LD. CIT (A) - IV, RAJKOT FOR THE ASSESSMENT YEAR 200 6 - 0 7 . 2 . T HE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MONEY CHANGER UNDER LICENSE ISSUED BY THE R.B.I. FOR THE ASSESSMENT YEAR UNDER APPEAL, T HE COMPANY FILED E - RETURN OF INCOME ON 23 - 10 - 2007 DECLARING T OTAL INCOME OF RS. 52,210/ - . AO ASKED THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF CREDITWORTHINESS/CAPACI TY OF THE FOLLOWING DEPOSITORS/LOANS A/CS. : - SR. NO. NAME OF THE DEPOSITORS AMOUNT 1 . SMT. FEMIDA KASHMANI RS.2,25,000/ - 2 . SMT. SABERA KASHMANI RS.2,25,000/ - 3 . SMT. FEMIDA KASHMANI RS.2,25,000/ - 3. ASSESSEE FILED WRITTEN SUBMISSIONS BEFO RE THE AO VIDE LETTER DATED 18 - 07 - 2009 ALONG WITH ACCOMPANYING DETAILS. THEREUPON, AO REFERRED THE ISSUE FOR DIRECTION U/S.144A OF THE I.T. ACT. THE ADDITIONAL CIT, JR - 1, JUNAGADH VIDE LETTER DATED 21.07.2009 GRANTED AN OPPORTUNITY OF BEING HEARD TO ASSE SSEE - COMPANY AND THEREAFTER DECIDED THE ISSUE ON MERIT. THE ENTIRE DIRECTION S OF ADDITIONAL ITA 8 4 - 2012 2 CIT , JR - 1 ARE CONTAINED IN PARA - 4 AND 5 OF THE ASSESSMENT ORDER WHICH READ AS UNDER: - 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE ASSESSEE AND I AM NOT FULLY IN AGREEMENT WITH THE SAME. AS PER THE ASSESSEES OWN CLAIM, THE LADIES WERE ALLEGEDLY ENGAGED IN PERSONAL BUSINESS OF THE NATURE DISCUSSED ABOVE AND FOR WHICH ALSO THERE IS NO EVIDENCE. THERE IS NO CLAIM OF ANY SPECIALIZED KNOWLEDGE OR EXPERIENC E OF THE PECULIAR NATURE OF THE BUSINESS IN WHICH THE ASSESSEE IS ENGAGED. ASSUMING THAT THERE IS SAME ATTENDANCE TO BUSINESS, STILL IT CANNOT BE A FULL TIME ENGAGEMENT BECAUSE ALL OF THEM ARE MARRIED LADIES WITH FAMILY TO LOOK AFTER. UNDER THE CIRCUMSTANC ES, THE CLAIM OF PAYMENT OF REMUNERATION IS CERTAINLY QUESTIONABLE. THE NET PROFIT OF THE BUSINESS HAS REMAINED ALMOST THE SAME AS IN THE PRECEDING YEARS THOUGH THE TURNOVER HAS SUBSTANTIALLY INCREASED. 4. AFTER CONSIDERING THE DIRECTIONS AND OBJECTIONS OF THE ASSESSEE, AO TREATED THE UNSECURED LOANS OF RS.6,75,000/ - IN THE NAME OF LADY DIRECTORS OF THE C OMPANY AS UNEXPLAINED WITHIN THE MEANING OF SECTION 68 OF THE I.T. ACT, AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL, IN THE IMPUGNED OR DER, THE LD. CIT (A) UPHELD THE ACTION OF AO FOR THE DETAILED REASONS GIVEN IN PARA - 4 OF THE IMPUGNED ORDER, WHICH READS AS UNDER: - 4. I HAVE GONE TH R OUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT. I FIND THAT THE THREE LADIES NAMELY SMT. FEMIDA K ASHMANI, SMT. SABERA KASHMANI AND SMT. YASHMIN KASHMANI WERE NOT ASSESSED TO TAX PRIOR TO DECEMBER 2006 WHEN EACH OF THEM ADVANCED LOANS OF RS.2,25,000/ - TO THE APPELLANT COMPANY IN DECEMBER 2006. THEY FILED BELATED RETURN OF INCOME OF ASSESSMENT YEAR 2005 - 06 AND RETURN OF INCOME OF ASSESSMENT YEAR 2006 - 07 ON 30.12.2006 AFTER THE LOAN OF RSS.2,25,000/ - WAS GIVEN TO APPELLANT COMPANY BY EACH OF THEM ON 27 - 12 - 2006 AND 28 - 12 - 2006. THE RETURN OF INCOME WERE FILED BY THE THREE LADIES FOR INCOME OF ABOUT RS.9 - TH OUSAND TO RS.1 LAKH, WHICH WAS BELOW THE TAXABLE LIMIT FOR BOTH THE ASSESSMENT YEAR AND NO TAX WAS ACTUALLY PAID BY THEM. THE INCOME OF THESE TWO ASSESSMENT YEARS WITH SOME OPENING BALANCE IN THEIR CAPITAL ACCOUNTS AS ON 01 - 04 - 2004, WAS SHOWN AS CASH BALAN CE ON 31 - 03 - 2006. THIS CASH WAS DEPOSITED BETWEEN 22 - 12 - 2006 TO 28 - 12 - 2006, IN THE BANK ACCOUNTS OF THESE THREE LADIES AND THE CHEQUES OF RS.1,75,000/ - AND RS.50,000/ - WERE ISSUED BY THEM ON 27 - 12 - 2006 AND 28 - 12 - 2006 IN FAVOUR OF THE APPELLANT. THE SOURCE OF EARNING INCOME IN CASH WAS REPORTED AS TRADING AND MANUFACTURING OF PAPAD ON BEHALF OF THE THREE LADIES BY THE APPELLANT. HOWEVER NO EVIDENCE FOR CARRYING OUT THE ACTIVITY OF PAPAD BUSINESS BY THE THREE LADIES COULD BE SUBMITTED BEFORE THE ASSESSING OFFICER. NORMALLY THE SOURCE OF SOURCE NEE NOT BE EXAMINED BY THE APPELLANT BUT WHEN THE ASSOCIATION OF APPELLANT AND CREDITORS IS CLOSE, THE SOURCE OF ACQUISITION OF CASH BY THE CREDITOR MUST BE EXPLAINED AS HELD IN THE CASE OF BANARSI PRASAD V. CIT 304 ITR 239 (ALL.). I FIND THAT ALL THE EVENTS MENTIONED ABOVE EASILY FALL UNDER THE CATEGORY OF AFTERTHOUGHT. THIS IS SO BECAUSE THERE IS NOT EVEN A SINGLE ACTIVITY OF THE THREE LADIES SUBMITTED BY THE APPELLANT WHICH COULD PROVE THAT THE LADIES WERE ACTUALL Y EARNING ANY INCOME BEFORE THEY ADVANCED THE LOANS OF RS.2,25,000/ - EACH TO THE APPELLANT COMPANY. APPELLANT HAS SUBMITTED ITA 8 4 - 2012 3 THAT PANS WERE OBTAINED BY THE THREE LADIES BEFORE THE RETURN OF INCOME WAS FILED. THE EVIDENCE OF PAN CARD SUBMITTED BY APPELLANT S UGGESTS THAT THE PAN WAS OBTAINED IN JUNE/JULY 2006 AS PER THE LIKELY DATE MENTIONED NEAR THE PHOTOGRAPH IN THE PAN CARD. HOWEVER, THIS FACT IS NOT ANY EVIDENCE FOR ACTUAL EARNING OF INCOME BY THE THREE LADIES BEFORE THE LOANS WERE ADVANCE BY THEM TO THE A PPELLANT COMPANY. THE RETURNS OF INCOME WERE FILED BY THE THREE LADIES AFTER THE LOAN WAS ADVANCED. THE SO CALLED PAPAD BUSINESS OF THE LADIES COULD NOT BE PROVED BY ANY EVIDENCE. THE CASH SAID TO BE EARNED OVER THE PERIOD OF LAST 3 YEARS WAS NOT DEPOSITED IN THE BANK ACCOUNT WHEN THE BANK ACCOUNT WAS READILY AVAILABLE DURING THIS TIME. THEREFORE THE FACTS OF THE CASE INDICATE THAT THE FILING OF RETURN OF INCOME BELOW THE TAXABLE LIMIT FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07 BY THE THREE LADIES WAS AN AFTER THOUGHT TO SUBSTITUTE A NON GENUINE SOURCE OF CASH OF RS.225000 DEPOSITED IN THEIR BANK ACCOUNTS BETWEEN 22 - 12 - 2006 TO 28 - 12 - 2006. THE FACTS FURTHER SHOW THAT THE CASH WAS DEPOSITED IN THE BANK ACCOUNTS OF THE THREE LADIES HELD JOINTLY WITH THEIR HUSBANDS BY SHRI FAIZAN, WHO IS AN EMPLOYEE OF THE APPELLANT COMPANY. THE CHEQUES OF LOANS WERE NOT SIGNED BY THE THREE LADIES BUT WERE SIGNED BY THEIR HUSBANDS WHO WERE ALREADY DIRECTORS IN THE APPELLANT COMPANY. THEREFORE THERE IS A DIRECT INVOLVEMENT OF APPELLAN T COMPANY IN ROUTING THE CHEQUES OF LOAN THROUGH THE BANK ACCOUNT OF THREE LADIES. IT WOULD BE UNFAIR TO SAY THAT THE CASH OF RS.2,25,000/ - WHICH WAS DEPOSITED IN THE BANK ACCOUNTS OF THE THREE LADIES BETWEEN 22 - 12 - 2006 TO 28 - 12 - 2006 COULD BE EARNED BY THE THREE LADIES WHO DID NOT HAVE ANY APPARENT OR PROVED SOURCE OF EARNING OF ANY INCOME. THE OTHER PERSON WHO IS THE REAL BENEFICIARY OF THE CASH ROUTED THROUGH AS LOAN IS THE APPELLANT COMPANY. THE APPELLANT COMPANY HAS A PROVEN CAPACITY TO EARN INCOME AND THEREFORE I FIND THAT ASSESSING OFFICER HAS CORRECTLY DEEMED THE CREDITS OF RS.6,75,000/ - IN THE BOOKS OF APPELLANT AS INCOME OF APPELLANT BECAUSE THE THREE LADIES DID NOT HAVE THE CAPACITY TO ADVANCE SUCH LOANS TO THE APPELLANT AT LEAST ON 27 - 12 - 2006 AND 28 - 12 - 2006. DIRECT INVOLVEMENT OF APPELLANT COMPANY IN ROUTING THE CASH THROUGH THE BANK ACCOUNTS OF THE THREE LADIES AND THE CAPACITY OF APPELLANT COMPANY TO EARN INCOME FURTHER SUPPORTS THE ADDITION MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT. I THEREFORE CONFIRM THE ADDITION OF RS.6,75,000 MADE BY THE ASSESSING OFFICER T O THE TOTAL INCOME OF APPELLANT. AGGRIEVED WITH THE ORDER OF LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUND: - 1 . LEARNED COMMISSIONER OF INCO ME TAX HAS ERRED IN CONFIRMING THE ADDITION U/S.68 OF THE ACT MADE BY THE AO OF RS.675000/ - FOR LOANS OF 3 LADY DIRECTORS. THE ADDITION MAY PLEASE BE CANCELLED IN THE INTEREST OF JUSTICE. 6. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE, SHRI D. M. RINDAN I, CA, APPEARED AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. AS AGAINST THIS, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT (A). 7. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE T HAT THE LD. CIT (A) AFTER CONSIDERING EACH AND EVERY OBJECTIONS OF THE ASSESSEE, CAME TO THE CONCLUSION THAT THE AO HAS CORRECTLY DEEMED THE CREDIT OF RS.6,75,000/ - IN THE BOOKS OF THE ASSESSEE AS INCOME OF ASSESSEE BECAUSE THREE LADIES HAVE NO CAPACITY TO ADVANCE SUCH LOAN ITA 8 4 - 2012 4 TO THE ASSESSEE AT LEAST ON 27 - 12 - 2006 AND 28 - 12 - 2006. FURTHER, THE DIRECT INVOLVEMENT OF THE ASSESSEE COMPANY IN ROUTING THE CASH THROUGH THE BANK ACCOUNTS OF THE THREE LADIES AND CAPACITY OF THE ASSESSEE COMPANY TO EARN INCOME FURTHER SUPPORTS THE ADDITION MADE BY AO U/S.68 OF THE I.T. ACT. IN OUR CONSIDERED OPINION, THE LD. CIT (A) HAS GIVEN COGENT REASON FOR CONFIRMING THE ORDER OF AO U/S.68 OF THE I.T. ACT AMOUNTING TO RS.6,75,000/ - . WE THEREFORE, DECLINED TO INTERFERE. 8. IN THE RE SULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 9 . THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . ) D. K. SRIVASTAVA ) ( . . A / T. K. SHARMA) / ACCOUNTANT ME MBER ) / JUDICIAL MEMBER / ORDER DATE 14 - 08 - 2013. /RAJKOT NVA/ - 8 JO O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - M/S. A TO Z FOREX PVT. LTD., NEAR LILAPUR DARGAH, KOT AREA, DIST. JUNAGADH, UNA. 2 . ' / RESPONDENT - THE INCOME - TAX OFFICER, WARD - 1(3), VERAVAL. 3 . I M / CONCERNED CIT - II I , RAJKOT. 4 . M - / CIT (A) - I V , RAJKOT. 5 . 'I , I , / DR, ITAT, R AJKOT 6 . A / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT