ITO 25(2)(3), MUMBAI V. KISHORE V WAGLE, MUMBAI

ITA 9072/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4180 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 9072/MUM/2010 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER - 25(2)(1) SHRI KISHORE V. WAGLE C-11 BLDG., ROOM NO. 107 4, NIMISH KUNJ, OPP. UNION BANK P.K. BHAVAN, B.K.C. VS. OF INDIA, MANDPESHWAR ROAD BANDRA (W), MUMBAI 400051 BORIVALI (W), MUMBAI 400 092 PAN - AAAPW 1511 G APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY SHANKAR RESPONDENT BY: NONE DATE OF HEARING: 08.07.2013 DATE OF PRONOUNCEMENT: 08.07.2013 O R D E R PER D. MANMOHAN, V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE REVE NUE AND IT PERTAINS TO A.Y. 2006-07. THOUGH NOTICE WAS SENT TO THE ASSESSE E BY RPAD, WHICH WAS DULY ACKNOWLEDGED, NONE APPEARED ON BEHALF OF THE A SSESSEE. WE, THEREFORE, PROCEED TO DISPOSE OF THE APPEAL EXPARTE, QUA ASSES SEE. 2. THE FOLLOWING GROUNDS WERE URGED BY THE REVENUE: - I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 14,60,876/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CAS H CREDIT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF SHRI CHANDRAKANT C. S HAH, HUF FROM WHOM HE HAS TAKEN LOAN DIRECTLY AND THROUGH SH RI PRAMOD WAGLE. II) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEE IS PROPRIETOR OF M/S. WAGLES ALAP ELECTRO NICS. ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEALING IN ELECTRICAL AN D CONSUMABLE ITEMS. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE DECLARED TOTAL INCOME OF ITA NO. 9072/MUM/2010 SHRI KISHORE V. WAGLE 2 ` 1,58,996/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE AO NOTICED THAT THE ASSESSEE INTRODUCED CAPITAL OF ` 9,68,700/-. ASSESSEE WAS ASKED TO PRODUCE THE SOURCE OF SUCH CASH. IN THE ABSENCE OF ANY DETAILS FURNISHED BEFORE THE AO THE CAPITAL INTRODUCED BY THE ASSESSE E WAS ASSUMED TO BE COMING OUT OF ASSESSEES UNDISCLOSED SOURCE AND ACC ORDINGLY MADE AN ADDITION OF ` 9,68,700/- UNDER SECTION 68 OF THE ACT. 4. SIMILARLY, THE AO NOTICED THAT THE ASSESSEE HAD SHO WN UNSECURED LOAN OF ` 11,42,176/-, WHICH WAS ` 6,50,000/- FOR THE YEAR ENDED ON 31.03.2005. SINCE THE BOOKS SHOW THAT THERE WAS ADDITIONAL LOAN OF ` 4,92,176/- THE ASSESSEE WAS CALLED UPON TO FURNISH THE DETAILS OF THE LOAN CREDITORS, ETC. ON PERUSAL OF THE LOAN CONFIRMATIONS THE AO NOTICED TH AT ALL THE LOANS ARE OLD LOANS AND THEY WERE SHOWN AS OPENING BALANCE AS ON 01.04.2005. SINCE THERE IS NO EXPLANATION WITH REGARD TO THE ADDITION AL LOAN OF ` 4,92,176/- THE AO BROUGHT TO TAX THE UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE FIRST APPE LLATE AUTHORITY, VIDE STATEMENT OF FACTS, THAT DURING THE FINANCIAL YEAR 2005-06 THE ASSESSEE INTRODUCED CAPITAL OF ` 9,68,700/- FROM HIS PERSONAL SOURCE. IN THE GROUNDS OF APPEAL IT WAS MERELY SUBMITTED THAT THE AO FAILE D TO APPRECIATE THE DETAILS SUBMITTED IN RELATION TO THE CAPITAL INTRODUCED OF ` 9,68,700/-. BEFORE THE LEARNED CIT(A) IT WAS CONTENDED THAT THE ASSESSEE A VAILED THE LOAN BY ACCOUNT PAYEE CHEQUE FROM ONE CHANDRAKANT S. SHAH, HUF TO THE EXTENT OF ` 9.25 LAKHS, WHICH WAS ROUTED THROUGH THE BANK ACCOU NT OF THE ASSESSEE AND AGAIN THIS AMOUNT WAS TRANSFERRED TO THE BOOKS OF THE ASSESSEE BY ACCOUNT PAYEE CHEQUE. THEREFORE, THE ENTRY IN THE C APITAL ACCOUNT MERELY MENTIONS THAT THE AMOUNT WAS RECEIVED BY ACCOUNT PA YEE CHEQUE; THEREFORE, THERE WAS NO REASON TO TREAT IT AS UNEXPLAINED CASH CREDIT. 6. WITH REGARD TO THE ADDITION OF ` 4,92,176/- THE ASSESSEE CONTENDED THAT CONFIRMATION WAS ALREADY FILED AND HENCE THERE IS NO CASE FOR MAKING AN ADDITION UNDER SECTION 68 OF THE ACT. ACCORDING TO THE ASSESSEE IT WAS A LOAN TAKEN DURING THE FINANCIAL YEAR 2004-05. 7. THE LEARNED CIT(A), WHILE DEALING WITH BOTH THE ADD ITIONS, DID NOT SPECIFY AS TO HOW THE SUM OF ` 9,68,700/- WAS EXPLAINED, WHICH CAN BE SEEN FROM PARA 4 OF HIS ORDER. THERE WAS NO CLEAR FINDIN GS AS TO WHAT IS THE LOAN ITA NO. 9072/MUM/2010 SHRI KISHORE V. WAGLE 3 TAKEN FROM CHANDRAKANT S. SHAH, HUF. AT PARA 4.2 TH E LEARNED CIT(A) OBSERVED THAT A LOAN OF ` 9.25 LAKHS WAS TAKEN AND THIS EXPLAINS THE CAPITAL INTRODUCED OF ` 9,68,700/-. AT THE SAME TIME HE HAS ALSO DISCUSSED ABOUT THE ADDITION OF ` 4,92,176/-AND IN THIS REGARD HE OBSERVED THAT THE A SSESSEES BROTHER SHRI PRAMOD WAGLE HAS GIVEN A LOAN DURING T HE FINANCIAL YEAR 2004- 05 FOR WHICH CONFIRMATION LETTER WAS ALSO FILED. IN PAGE 4 OF LEARNED CIT(A)S ORDER HE OBSERVED AS UNDER: - HE EXPLAINED THAT THE APPELLANT HAD GIVEN A LOAN O F RS.10 LAKHS TO SHRI. PRAMOD WAGLE WHICH WAS OUTSTANDING AS ON 31.0 3.2005 AND OBTAINED A LOAN OF RS.4,98,733/- AS ON 31.03.2005 W HICH WERE APPEARING SEPARATELY IN THE BALANCE SHEET AS ON 31. 03.2005 BUT DURING THIS YEAR THE SAME WERE NETTED AND, THEREFORE, THER E WAS INCREASE IN UNSECURED LOAN ... HE ALSO OBSERVED THAT THE AO HAD NOT INDICATED ON W HICH DATE HE REQUIRED THE APPELLANT TO FURNISH DETAILS AND ASSERTED THAT THE APPELLANT RECEIVED LOAN OF ` 10 LAKHS BY ACCOUNT PAYEE CHEQUE AND EVEN AS PER TH E CAPITAL ACCOUNT AN AMOUNT OF ` 9,25,000/- WAS RECEIVED. 8. FROM A READING OF PARAS 4.2 AND 4.3 IT IS NOT VERY CLEAR WHETHER THE ASSESSEE HAD TAKEN LOAN OR WHETHER THE ASSESSEE HAD GIVEN LOAN, WHICH WOULD DEFINITELY HIGHLIGHT THAT THE LEARNED CIT(A) HAS NOT APPLIED HIS MIND TO THE FACTUAL MATRIX OF THE CASE. PRESUMABLY, THE LOA N OF ` 10 LAKHS WAS IN CONNECTION WITH THE ADDITION OF ` 4,92,176/- AND THE LOAN OF ` 9.25 LAKHS WAS TO EXPLAIN THE SOURCE OF ` 9,68,700/-. SIMILARLY, UNLESS IT IS CLEAR AS TO WHETHER THE ASSESSEE HAS TAKEN LOAN OR GIVEN LOAN T O SHRI PRAMOD WAGLE IT CANNOT BE APPRECIATED AS TO WHETHER THE INITIAL ONU S LAY UPON THE ASSESSEE STOOD DISCHARGED. 9. THE LEARNED CIT(A) WAS OF THE OPINION THAT IF THE L OANS WERE TAKEN THROUGH ACCOUNT PAYEE CHEQUES AND IF NO ADVERSE REM ARKS WERE MADE BY THE AO THE BURDEN PLACED UPON THE ASSESSEE UNDER SECTIO N 68 OF THE ACT STANDS DISCHARGED AND IN THE ABSENCE OF PROVING THAT THERE WAS INCOME FROM UNDISCLOSED SOURCES NO ADDITION CAN BE MADE BY THE AO. IN THIS REGARD HE OBSERVED THAT THE AO, IN HIS REMAND REPORT, RECEIVE D CONFIRMATION LETTERS FROM BOTH THE CREDITORS REGARDING THEIR TRANSACTION WITH THE ASSESSEE AND COPIES OF RELEVANT BANK STATEMENTS, WHICH INDICATE THAT GENUINENESS OF THE CREDITS IS ESTABLISHED. HE ALSO OBSERVED THAT CHAND RAKANT S. SHAH, HUF HAS ITA NO. 9072/MUM/2010 SHRI KISHORE V. WAGLE 4 FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 AND BAL ANCE SHEET WAS ALSO FILED ALONGWITH THE RETURN OF INCOME AND HENCE THERE CANN OT BE ANY DOUBT WITH REGARD TO THE GENUINENESS OF THE CREDITS ONCE CHAND RAKANT S. SHAH, HUF IS ASSESSED TO TAX. 10. AT THE TIME OF HEARING THE LEARNED D.R. SUBMITTED T HAT THE LEARNED CIT(A) HAS NOT PROPERLY APPRECIATED THE FACTS AND I N FACT THE ORDER DOES NOT REFLECT AS TO WHETHER HE WAS CONSIDERING THE UNEXPL AINED CREDIT OF ` 9,68,700/- VIS--VIS THE SO CALLED LOAN TAKEN FROM CHANDRAKANT S. SHAH, HUF OR WITH REGARD TO THE LOAN GIVEN/OBTAINED FROM SHRI PRAMOD WAGLE. THE LEARNED D.R. ADVERTED OUR ATTENTION TO THE ORDER PA SSED BY THE LEARNED CIT(A) TO SUBMIT THAT AN OVERALL READING OF THE ORD ER GIVES AN INDICATION THAT THE LEARNED CIT(A) ASSUMED THAT THE INITIAL ONUS IS UPON THE REVENUE TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINES S OF THE TRANSACTION OVERLOOKING THE FACT THAT THE INITIAL ONUS IS ON TH E ASSESSEE TO PROVE THAT ALL THE THREE INGREDIENTS ARE FULFILLED WHEREAS, IN THE INSTANT CASE, IT IS NOT VERY CLEAR AS TO HOW THE SO CALLED LOAN OF ` 9.25 LAKHS TAKEN FROM CHANDRAKANT S. SHAH, HUF CAN EXPLAIN THE SOURCE OF ` 9,68,700/- PARTICULARLY WHEN THERE IS NO DISCUSSION BY THE LEARNED CIT(A) WITH REGARD TO THE BALANCE AMOUNT. SIMILARLY, HE ALSO HIGHLIGHTED THE CONFUSION CREATE D WITH REGARD TO THE LOAN IN THE NAME OF SHRI PRAMOD WAGLE. HE THUS SUBMITTED THAT THE ORDER PASSED BY THE LEARNED CIT(A) DESERVES TO BE QUASHED AND TH E ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FOR RECONSIDERATION. 11. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE CA REFULLY CONSIDERED THE SUBMISSION OF THE LEARNED D.R. AND ALSO PERUSED THE RECORD. HAVING REGARD TO THE FACTS HIGHLIGHTED BY THE LEARNED D.R. WE ARE OF THE VIEW THAT THE LEARNED CIT(A) SET ASIDE THE ADDITION WITHOUT P ROPERLY ANALYSING THE FACTS OF THE CASE. THEREFORE, IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE AO TO RECONSIDER THE MATTER IN ACCORDANCE WITH LAW. NEEDLESS TO OBSERVE THAT THE INITIAL ONUS IS U PON THE ASSESSEE TO PROVE THE IDENTIFY, GENUINENESS AND CREDITWORTHINESS OF T HE CREDITORS AND THE ENTIRE CAPITAL INTRODUCED BY THE ASSESSEE IN THIS Y EAR AS WELL AS THE DIFFERENTIAL FIGURE OF THE LOAN TAKEN IN THE EARLIE R YEARS AND IN THE CURRENT ITA NO. 9072/MUM/2010 SHRI KISHORE V. WAGLE 5 YEAR ARE ALSO TO BE EXPLAINED BY THE ASSESSEE PROPE RLY. WITH THESE OBSERVATIONS THE MATTER IS HEREBY SET ASIDE TO THE FILE OF THE AO. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY, 2013. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 8 TH JULY, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 35, MUMBAI 4. THE CIT 25, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.