ACIT, V. Shri Hemant Kumar Somani,

ITA 89/JAB/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0900 (ITAT-JABALPUR)
• Duration Of Justice: 8 year(s) 8 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2010
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHUKLA
• Assessee Lawyers: A P SHRIVASTAVA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Peak credit
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH AT JABALPUR BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R. C. SHARMA, ACCOUNTANT MEMBER I.T.A. NO. 89/JBP/2010 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE KATNI APPELLANT VS. SHRI HEMANT KUMAR SAMANI KATNI PAN AJFPS-0041-M RESPONDENT CO NO. 14/JAB/2010 (ARISING OUT OF I.T.A. NO. 89/JBP/2010) SHRI HEMANT KUMAR SAMANI KATNI ... OBJECTOR VS ACIT, CIRCLE KATNI ... RESPONDENT DEPTT. BY SHRI ABHISHEK SHUKLA, D. R. ASSESSEE BY SHRI A.P. SHRIVASTAVA DATE OF HEARING 13/09/2013 DATE OF PRONOUNCEMENT 25 /10/2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER : THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER DATED 18.8.2010 OF THE LEARNED FIRST APPELLATE AUTHORITY, JABALPUR WHEREAS THE ASSESSEE HAS PREFERRED THE CROSS OBJECTION SUPPORTING THE ORDER OF THE LEA RNED CIT(A). 2 2. WE SHALL DEAL WITH THE APPEAL OF THE REVENUE FIRS T. THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL PERTAINS TO DELETING THE ADDITION OF RS.1,65,33,007/- MADE BY THE ASSESSING OFFICER UNDE R SECTION 68 OF THE INCOME TAX ACT, 1961 OUT OF CASH CREDIT. 3. DURING HEARING WE HAVE HEARD SHRI ABHISHEK SHUKLA , LEARNED SENIOR DR, AND SHRI A.P. SHRIVASTAVA, LEARNED COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE ADDI TION WAS RIGHTLY MADE BY THE ASSESSING OFFICER AS THE NATURE OF BUSINESS OF THE ASSESSEE WAS THAT HE WAS OPERATING ACCOUNTS WITH SEVERAL BANKS. THE CHEQUES IS SUED ARE PAYABLE AT ALL BRANCHES OF THE BANK AT PAR. AS PER SECTION 68 OF THE ACT, ONUS WAS UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE TRANSA CTION WHICH HE DID NOT PROVE. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT ALL THE INGRE DIENTS OF SECTION 68 OF THE ACT WERE DULY COMPLIED WITH BY THE ASSESSEE AND AS SU CH THERE IS NO JUSTIFICATION TO MAKE THE ADDITION U/S 68 OF THE ACT. IT WAS ALSO CONTENDED THAT THE ASSESSING OFFICER HAS NOT ASSIGNED ANY REASON AS TO WHY ONLY C HEQUES IN TRANSIT WERE CONSIDERED TO BE TAXED U/S 68 OF THE ACT. A PLEA WA S ALSO RAISED THAT THE ENTRIES IN RESPECT OF AMOUNTS ARE VERIFIABLE FROM THE ACCOU NTS. BROADLY IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE SOURCE OF CREDIT EN TRIES APPEARING IN THE BOOKS OF 3 ACCOUNTS OF THE ASSESSEE WERE EXPLAINED AND THUS THE LEARNED CIT(A) RIGHTLY DELETED THE ADDITION SO MADE U/S 68 OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSIO N, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE CONCLUSION DR AWN BY THE LEARNED CIT(A) :- NOW SO FAR AS THE ALLEGATION OF COUNSEL OF THE APP ELLANT THAT THE ASSESSMENT ORDER WAS PASSED AT THE DICTATE OF THE HIGHER AUTHORITIES IS CONCERNED, THERE IS NO DIRECT EVIDENCE FOUND ON THE BASIS OF WHICH IT COULD BE CONCLUDED TH AT THE A.O. HAD PASSED THE ORDER AS DICTATED TO HIM BY HIS ADDL . COMMISSIONER AND THAT HE HAD NOT APPLIED HIS MIND. THE CONTENTS OF THE ORDER IN RESPECT OF ALL THE THREE A SSESSSEES OF THIS GROUP MAY BE THE SAME BUT IT DOES NOT MEAN THA T THE A.O. HAD NOT APPLIED HIS MIND AND THAT HE BLIENDLY TAXED THE INCOME AS COMPUTED BY HIS SUPERIOR. SINCE THE FACTS AND CIRCUMSTANCES OF ALL THE THREE CASES WERE IDENTICAL AND IT WAS EARLIER AND CONVENIENT AND ALSO IN CONSONANCE WITH E ACH OTHER THE ASSESSMENT ORDER WAS PASSED ON THE SAME LINE. FO R THIS PURPOSE EVEN IF THE ADDL. COMMISSIONER, ACIT AND THE ITO DISCUSSED THE MATTER TOGETHER AND DECIDED TO USE TH E SAME STYLE OF LANGUAGE, THERE WAS NOTHING UNLAWFUL AND ON THIS GROUND ONLY THE ASSESSMENT ORDER CANNOT BE HELD TO BE INVALID. ON GOING THROUGH THE ORDER, IT HOWEVER IS FOUND THAT THERE IS A BIG LACUNA OR POTENTIAL MISTAKE IN SO FAR AS THE AP PELLANTS ARGUMENTS HAVE NEITHER BEEN BROUGHT OUT IN THE ORDE R NOR THEY 4 HAVE BEEN CONTROVERTED BEFORE TAKING THE DECISION T O TAX THE INCOME U/S 68, THE WAY IT HAS BEEN DONE BY THE A.O. SO FAR AS THE A.O.S REMARKS REGARDING CURBING OF VARIOUS MAL PRACTICES AND ANTI-SOCIAL ACTIVITIES AND MONEY LAUNDERING ACT IVITY, IS CONCERNED IT WAS NOT DIRECTLY WITH REFERENCE TO THE A PPELLANTS BUSINESS ACTIVITIES BUT IT WAS WITH REFERENCE TO THE RULES AND REGULATIONS ISSUED BY THE RBI WHICH (ACCORDING TO T HE A.O.) WERE NOT ONLY OF REGULATORY IN NATURE BUT ALSO ACT A S AN INSTRUMENT TO IMPLEMENT THE GOVERNMENT POLICIES WHIC H ENSURES FISCAL DISCIPLINE AND ALSO MALPRACTICES AND ANTI-SOCIAL ACTIVITIES. IN ANY CASE DISUSING THE A.O.S OBSERV ATIONS WHETHER THEY ARE CORRECT OR NOT AND WHETHER THEY NEED TO BE EXPUNGED OR NOT WOULD NOT HELP IN ANY WAY AND SERVE NO PURPOSE IT WOULD BE MERE APPROPRIATE IF THE CRUX OF THE MATTER IS DIRECTLY DEALT WITH. THE A.O.S FINDING THAT IT I S THE ONUS UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF C ASH CREDITS AND TO PROVE ITS SOURCES, IS TRUE AND CORRECT TO CE RTAIN EXTENT, BUT ONLY WHEN THERE ACTUALLY WERE CASH CREDITS ENTRIE S. IN SUCH A SITUATION THE ONLY LOGICAL AND ACCEPTED METH OD WAS TO TAX PEAK OF THE CASH CREDIT OF THE YEAR AND NOT THA T AMOUNT WHICH HAS BEEN WORKED OUT BY THE A.O. WITHOUT ANY SOU ND AND SETTLED PRINCIPLE OF ACCOUNTANCY. THUS THE ENTRIES IN THE BOOKS OF ACCOUNTS AT ITS PEAK CAN ONLY BE TAXED UNDER SEC TION 68 WHEN THE SOURCES OF SUCH FUNDS REMAIN UNVERIFIABLE. HOWEVER, DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS CL AIMED BY THE APPELLANT THAT SO FAR AS HE IS CONCERNED FOR IS SUING OUT STATION CHEQUES HE WAS NORMALLY RECEIVING FUNDS THRO UGH 5 ACCOUNT PAYEE CHEQUES ONLY AND 99% OF THE ENTRIES WE RE EXPLAINABLE AND VERY WELL VERIFIABLE AND THEREFORE T HERE WAS NO QUESTION OF TAXING THE SAME U/S 68. IT WAS ALSO ARG UED THAT HAD THE A.O. GIVEN HEED TO HIS ARGUMENTS AND ALLOWED OPPORTUNITY TO THE APPELLANT, HE COULD HAVE EXPLAIN ED THE SOURCES OF ALL THE RECEIPT AND THE A.O. WOULD NOT HA VE MADE SUCH AN ARBITRARY ASSESSMENT. BECAUSE OF THESE REAS ONS THE BOOKS OF ACCOUNTS AND RELEVANT DOCUMENTS WERE EXAMIN ED AND IT WAS FOUND THAT IN MOST OF THE CASES THE TRANSACTI ONS WERE VERY WELL VERIFIABLE WITH THE BOOKS OF ACCOUNT OF THE PARTIES WITH WHOM SUCH TRANSACTIONS HAD TAKEN PLACE. IT WAS AL SO FOUND THAT EVEN PRIOR TO ISSUANCE OF OUTSTATION CHE QUE, EQUAL AMOUNT WAS RECEIVED BY THE APPELLANT MOSTLY THROUGH ACCOUNT PAYEE CHEQUES ONLY. SIMILARLY IN MANY CASES, A/C PA YEE CHEQUE WAS ISSUED FIRST AND EQUAL AMOUNT WAS RECEIVED LATER, MANY A TIMES THROUGH A/C PAYEE CHEQUE ONLY. THIS MEA NS THAT IT WAS NOT A CASE OF SIMPLE CASH CREDIT ENTRIES AND TO THE EXTENT THE ASSESSEE WAS IN A POSITION TO PROVE THE S OURCE OF SUCH CREDIT ENTRIES, IT COULD NOT BE BROUGHT TO TAX U/S 68. INITIALLY VIDE LETTER DATED 22 ND FEBRUARY, 2010 A SET OF APPLICANTS WRITTEN SUBMISSION DATED 22.2.2010 WERE F ORWARDED TO THE ASSESSING OFFICER ON THE SAME DATE ASKING FO R HIS COMMENTS ON THE SUBMISSIONS MADE BY THE APPELLANT. THE ASSESSING OFFICER SUBMITTED HIS PARAWISE COMMENTS VI DE HIS LETTER DATED 31.5.2010. DURING THE COURSE OF APPELL ATE PROCEEDINGS THE ADDITIONAL COMMISSIONER, RANGE KATN I ALSO APPEARED ALONG WITH THE ASSESSING OFFICER AND THE AS SESSEE 6 WAS DIRECTED TO APPEAR BEFORE THEM SO AS TO GET SUCH CREDIT ENTRIES VERIFIED AT RANDOM. IT WAS MADE CLEAR TO BO TH THE OFFICERS THAT AS CLAIMED BY THE ASSESSEE, ON EXAMIN ATION OF BOOKS OF ACCOUNTS IT WAS FOUND THAT IN MOST OF THE C ASES THE AMOUNTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND WERE REMITTED ALSO THROUGH ACCOUNT PAYEE CHEQUES AND THUS AT LEAST THE SOURCE OF THE FUNDS WAS WELL VERIFIABLE TO THAT EXTENT AND HENCE COULD NOT BE TAXED U/S 68. THE ADDL. CIT WAS ALSO ADVISED AS TO HOW TO PROCEED AHEAD WITH TEST CHECK O F THOUSANDS OF ENTRIES IN A UNIFORM MANNER SO THAT TH E RANDOM CHECKING REPRESENTED THE TRUE AND CORRECT AFFAIR OF THE ENTIRE TRANSACTION. THE ADDITIONAL COMMISSIONER OF INCOME TAX, THEREFORE, PICKED UP CERTAIN CREDIT ENTRIES TOTALLI NG TO S. 3,68,14,118/- SO AS TO VERIFY THE SOURCES AND THE G ENUINENESS OF THE TRANSACTION. SUBSEQUENTLY A LETTER DATED 30. 03.2010 WAS WRITTEN TO THE IOTO, WARD, KATNI WHEREBY HE WAS PROVIDE D WITH THE DETAILS OF CREDIT ENTRIES APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE TOTALLING TO RS. 3,68,14,1 18/- AND HW AS ASKED TO VERIFY THE CORRECTNESS OF THE FACTS, TH E SOURCE OF THE FUNDS AND THE GENUINENESS OF THE TRANSACTION AN D REPORT TO THIS OFFICE ACCORDINGLY. ACCORDING TO ALL THESE REP ORTS THE CREDIT ENTRIES APPEARING IN THE BOOKS OF ACCOUNTS OF THE A PPELLANT WERE FOUND PROPERLY TALLIED WITH THE BOOKS OF ACCOUNT S OF THOSE VARIOUS PERSONS FROM WHOM THE FUNDS WERE RECEIVED BY THE APPELLANT FOR PREPARATION OF OUTSTATION CHEQUES. THI S MEANS THE SOURCE OF CREDIT ENTRIES TO THE EXTENT OF RS. 3 ,68,14,118/- STOOD WELL EXPLAINED AND, THEREFORE, COULD NOT BE TA XED U/S 68. 7 NOW THE ASSESSMENT ORDER OF THE ASSESSING OFFICER M AKES IT CLEAR THAT THE AMOUNT OF RS. 1,65,33,007/- WAS BR OUGHT TO TAX WITHOUT ANY BASIS OR WITHOUT HAVING REGARD TO ANY SOUND PRINCIPLE OF THE ACCOUNTANCY. THE ASSESSING OFFICER HAD NO ASSIGNED ANY REASON AS TO WHY ONLY CHEQUES IN TRANS IT WERE CONSIDERED TO BE TAXED U/S 68 AND AS TO WHY NOT ALL THE CASH CREDIT ENTRIES APPEARING THE BOOKS OF ACCOUNT. AS A MATTER OF FACT, IT WAS ONLY THE PEAK CREDIT OF THE YEAR WHICH C OULD BE BROUGHT TO TAX. HOWEVER, WHILE DOING SO THE CREDIT FOR THE CAPITAL OF THE APPELLANT AND THE KNOWN SOURCES OF F UNDS WHICH STOOD WELL EXPLAINED HAD TO BE GIVEN SO AS TO TO TAX ONLY THE UNACCOUNTED INCOME. NOW HERE IN THE APPELLANTS CASE ALMOST 99% OF THE ENTRIES ARE IN RESPECT OF RECEIPT OF AMO UNTS THE SOURCE AT WHICH WERE WELL VERIFIABLE. ON RANDOM CHECKI NG, AS REPORTED BY THE ASSESSING OFFICER, ALL THE ENTRIES WERE FOUND WELL VERIFIABLE AND HENCE SOURCES TO THE EXTENT OF R S. 3,68,14,118/- STOOD EXPLAINED. NOW EVEN IF THE AMOUN T OF RS. 1,65,33,007/- IS CONSIDERED TO BE PEAK CREDIT DURIN G THE YEAR THE EXPLAINED FUND TO THE EXTENT OF RS. 3,68,14,118 /- WAS AVAILABLE WITH THE APPELLANT WHICH WAS MUCH MORE THAN THE SOCALLED PEAK CREDIT. FURTHER AS PER THE BALANCE SH EET AS ON 31.3.2006, THE SECURED LOAN TO THE EXTENT OF RS. 73 ,99,089/- WAS ALSO AVAILABLE WITH THE APPELLANT FOR CIRCULATION IN THE BUSINESS. PEAK CREDIT AT A PARTICULAR GIVEN POINT O F TIME DURING THE FINANCIAL YEAR 2005-06 AND 2006-07 IN RESPECT O F ALL THE BANK ACCOUNTS OF THE APPELLANT WERE ALSO DETERMINED. THIS IS AS PER ANNEXURE A AND ANNEXURE B OF THIS APPELL ATE ORDER. 8 NOW AS PER ANNEXURE B THE PEAK CREDIT ENTRY FOR F .Y. 2005-06 I.E. A.Y. 2006-07 WAS FOUND ON 16.8.2005 FOR RS. 1,18,90,319/- AND SIMILARLY THE PEAK CREDIT OF ALL THE BANKS TOGETHER FOR F.Y. 2006-07 WAS ON 22.4.2006 WHERE THE AMOUNT WAS OF RS. 1,21,19,108/-. AS AGAINST THESE PEAK CRE DITS THE WELL EXPLAINED CAPITAL TO THE EXTENT OF RS. 3,68,14, 118/- + RS. 73,99,089/- = RS. 4,42,13,207/- WAS VERY MUCH AVAILA BLE WTIH THE APPELLANT AND THEREFORE THE FUNDS TO THE EXTENT OF PEAK CREDITS STOOD EXPLAINED AND HENCE COULD NOT BE TAXE D U/S 68. THIS ALSO MEANT THAT THE SOURCES OF 99% OF THE CREDI T ENTRIES APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT STOOD WELL EXPLAINED AND COULD NOT BE REQUIRED TO BE TAXED U/S 68. AS AGAINST THIS THE ASSESSING OFFICER HAS SIMPLY SURMI SED THAT THE CHEQUE IN TRANSIT WERE IN RESPECT OF UNEXPLAINED CRE DIT ENTRIES AND NEEDED TO BE TAXED U/S 68 OF THE IT ACT. AS A M ATTER OF FACT HAD HE VERIFIED THE BOOKS OF ACCOUNTS OF THE A PPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF THE RESULT WOULD HAVE BEEN THE SWAME AS WERE FOUND NOW ON VERIFIAB LE AND, THEREFORE, IT WOULD NOT HAVE RESULTED INTO ADDI TION OF RS. 1,65,33,007/-. ON SUBSEQUENT VERIFICATION OF BOOKS OF ACCOUNTS THE SOURCES OF CREDIT ENTRIES ARE FOUND VE RIFIABLE, ADDITION OF RS.1,65,33,007/- WAS NOT CORRECT AND IN ACCORDANCE WITH THE LAW. THE SAME IS, THEREFORE, HEREB Y DELETED. 6. AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE ARGUMENTS PUT- FORTH BEFORE US BY THE 9 RESPECTIVE PARTIES, WE ARE OF THE VIEW THAT THE LEAR NED CIT(A) HAS DEALT WITH THE ISSUE EXHAUSTIVELY AND THERE IS NO ERROR IN HIS ORD ER INASMUCH AS HE HAS RIGHTLY OBSERVED THAT THE ASSESSING OFFICER HAS SIMPLY MADE THE ADDITION U/S 68 ONLY ON THE SURMISE THAT THE CHEQUES IN TRANSIT WERE IN RESP ECT OF UNEXPLAINED CREDIT ENTRIES. MOREOVER, THE LEARNED ASSESSING OFFICER AL SO FAILED TO VERIFY THE BOOKS OF ACCOUNTS WITH REFERENCE TO THE CREDIT ENTRIES. THE LE ARNED CIT(A) HIMSELF HAD VERIFIED THE CREDIT ENTRIES IN THE BOOKS OF ACCOUNT S AND FOUND THE SAME TO BE CORRECT. WE, THEREFORE, HAVE NO ALTERNATE BUT TO S USTAIN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, THE ORDER OF THE LEARNED CIT(A) IS CONFIRMED AND THE GROUND OF APPEAL TAKEN BEFORE US BY THE REVENUE IS DISMISSED. 7. IN VIEW OF THE ABOVE ORDER, SINCE WE HAVE UPHELD THE ORDER OF THE LEARNED CIT(A), THE CROSS OBJECTION PREFERRED BY THE ASSESSE E REMAINS FOR ACADEMIC PURPOSES ONLY AND DISMISSED AS SUCH. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C ROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON25.10.2 013 SD/- SD/- (R. C. SHARMA ) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:./10/2013 VYAS!2424 COPY TO APPELLANT, RESPONDENT, CIT (A),CIT, DR, GUA RD FILE