ITO, Ghaziabad V. Sh. Harish Chaudhary, Ghaziabad

ITA 99/DEL/2013

• Counselvise Citation: 9920114 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Unexplained investment; Business income; Depreciation; Opportunity of being heard; Source of fund
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.99/DEL/2013 ASSESSMENT YEAR : 2008-09 ITO, WARD 1(3), GHAZIABAD. VS. HARISH CHAUDHARY, VILLAGE PAVI SADAKPUR LONI, GHAZIABAD. PAN : AFBPC4491D ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI S AMEER KAPOOR, CA DEPARTMENT BY : S HRI SATPAL SINGH, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) ON 19.10.2012 IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION OF `15,02,456/-. BRIEFLY STATED, THE FACTS APROPOS TH IS GROUND ARE THAT THE AO, ON PERUSAL OF INCOME-TAX RETURN, OBSER VED THAT THE ITA NO.99/DEL/2013 2 ASSESSEE HAD SHOWN SOURCE OF FUNDS AT ` 13,85,570 /- AGAINST WHICH THE APPLICATION OF FUNDS WAS SHOWN AT ` 28, 88,026/- LEADING TO DIFFERENCE OF ` 15,02,456/-, DIVULGING U NEXPLAINED INVESTMENT. DESPITE SEVERAL NOTICES/REMINDERS ISSU ED BY THE AO, THERE WAS IMPROPER PARTICIPATION FROM THE ASSESSEE S END WHICH LED TO THE PASSING OF THE ASSESSMENT ORDER U/S 144. THE AO MADE ADDITION OF ` 15.02 LAC AS UNEXPLAINED INVESTMENT. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED DETAILED REASONS ABOUT THE DIFFERENCE IN THE FIGURE S GIVEN IN THE RETURN SHOWING SOURCES AND APPLICATION OF FUNDS . IT WAS EXPLAINED THAT THE COUNSEL WHO FILED THE RETURN OF INCOME WAS NOT WELL FULLY CONVERSANT WITH THE ACCOUNTING PRACTICES AND MADE MISTAKES IN MENTIONING THE FIGURES RELATING TO THE ASSESSEES BALANCE SHEET. THE POSITION WAS CORRECTLY EXPLAINE D BEFORE THE LD. CIT(A) WITH THE HELP OF SOME EVIDENCE. THE LD. CIT (A) CALLED FOR THE REMAND REPORT FROM THE AO ON THE ASSESSEES EXP LANATION ABOUT THE DIFFERENCE IN THE BALANCE SHEET FIGURES. CONSIDERING ALL THE FACTS, THE ADDITION SO MADE BY THE AO CAME TO B E DELETED. THE REVENUE IS AGGRIEVED AGAINST SUCH DELETION OF A DDITION. ITA NO.99/DEL/2013 3 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS SEEN FROM THE C OPY OF INCOME- TAX RETURN, AVAILABLE ON PAGES 1 ONWARDS OF THE PAP ER BOOK THAT THERE ARE CERTAIN GLARING MISTAKES IN MENTIONING TH E FIGURES IN PART A-BS OF THE RETURN. TO CITE A FEW, CAPITAL OF ` 547,570/- HAS BEEN SHOWN AS PROPRIETORS CAPITAL AND THE SAME A MOUNT HAS BEEN INADVERTENTLY INCLUDED IN THE FIXED ASSETS AS CAPITAL WORK- IN-PROGRESS. SIMILARLY, AS AGAINST THE GROSS VALU E OF THE BLOCK OF ASSETS AT ` 7,79,400/- AND DEPRECIATION OF ` 77,940 /-, THE NET BALANCE HAS BEEN SHOWN AT ` 6,78,960/- AS AGAINST T HE CORRECT BALANCE WHICH OUGHT TO HAVE BEEN AT ` 7.01 LAC. SI MILARLY, UNDER THE HEAD CASH AND BANK BALANCE, BALANCE WITH BANK HAS BEEN SHOWN AT ` 5,54,488/-. IN FACT, THIS AMOUNT REPRESE NTS THE BALANCE PAYABLE TO BANK ON ACCOUNT OF CAR LOAN. THUS IT CA N BE SEEN THAT THE PERSON WHO FILED THE RETURN MENTIONED THE FIGUR ES INCORRECTLY, WHICH ULTIMATELY DISTORTED THE FIGURES OF ASSETS AN D LIABILITIES. THE CORRECT POSITION WAS PLACED BEFORE THE AO DURIN G REMAND PROCEEDINGS. FROM A COPY OF REMAND REPORT AVAILABL E ON PAGES 87 ONWARDS OF THE PAPER BOOK, IT CAN BE SEEN THAT T HE ASSESSEE EXPLAINED THE DIFFERENCE IN BALANCE SHEET AMOUNTING TO ` 15.02 ITA NO.99/DEL/2013 4 LAC, WHICH WAS THE BASIS FOR ADDITION. THE AO CONS IDERED THESE FIGURES BUT DID NOT ADVERSELY COMMENT UPON THE SAME . UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINIO N THAT NO FAULT CAN BE FOUND WITH THE LD. CIT(A) IN DELETING THE ADDITION BASED ON THE EXPLANATION TENDERED BY THE ASSESSEE B EFORE HIM AS WELL AS THE AO IN REMAND PROCEEDINGS, COMPLETELY EX PLAINING THE DIFFERENCE IN THE FIGURES OF SOURCE AND APPLICAT ION OF FUNDS, WHICH WERE ORIGINALLY WRONGLY TAKEN. WE, THEREFORE , UPHOLD THE IMPUGNED ORDER ON THIS SCORE. THIS GROUND IS NOT A LLOWED. 4. GROUND NO.2 IS AGAINST THE REDUCTION IN ADDITION OF ` 4,76,640/- TO ` 57,197/-. 5. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T THE ASSESSEES PASSBOOK SHOWED DEPOSIT IN BANK ACCOUNT AMOUNTING TO ` 25,75,000/- DURING THE YEAR. THE AO OBSERVED THAT THE TOTAL SALES EFFECTED BY THE ASSESSEE WERE TO THE TUNE OF ` 20,98,360/-. EVEN IF IT WAS ACCEPTED THAT THE ENTIRE CASH SALES WERE DEPOSITED IN THE BANK ACCOUNT, THE AO OBSERVED THAT STILL THE RE WAS A DIFFERENCE OF ` 476,640/-. THE AO FURTHER NOTED TH AT THERE WAS ITA NO.99/DEL/2013 5 HUGE CASH DEPOSIT OF ` 12.50 LAC IN A VERY SHORT IN TERVAL FROM 04.12.2007 TO 20.12.2007. IN VIEW OF THE FACT THAT HE MADE ADDITION OF `15,02,456/- ON ACCOUNT OF DIFFERENCE I N BALANCE SHEET FIGURES, HE TREATED THIS AMOUNT OF ` 4,76,640/- OF EXCESS CASH DEPOSIT IN THE BANK AS COVERED BY THE ABOVE ADDITIO N. AS SUCH, NO SEPARATE ADDITION WAS MADE ON THIS SCORE. THE L D. CIT(A) OBSERVED THAT THERE WAS A DIFFERENCE OF ` 4,76,640/ - IN THE FIGURE OF TOTAL SALES AND CASH DEPOSITS IN THE BANK. HE, THEREFORE, ENHANCED THE SALES FIGURE BY SUCH CASH DEPOSITS OF ` 4,76,640/-. CONSIDERING THE FACT THAT ONLY NET PROFIT WAS TO BE ADDED ON SUCH EXCESS SALES AND NOT THE AMOUNT OF SALES ITSELF, H E BROUGHT DOWN THE ADDITION TO ` 57,197/-, BEING NET PROFIT RATE OF 12% APPLIED ON SUCH SALES OF `4.76 LAC CONSIDERED TO HAVE BEEN MAD E OUTSIDE THE BOOKS OF ACCOUNT. THE REVENUE IS AGGRIEVED AGAINST THE RELIEF ALLOWED IN THE FIRST APPEAL. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE AO DID NOT SPECIFICALLY MAKE THE ADDITION OF ` 4,76,640/- ON T HE GROUND THAT HE HAD ALREADY MADE ADDITION OF ` 15.02 LAC ON ACCO UNT OF ITA NO.99/DEL/2013 6 DIFFERENCE IN SOURCES AND APPLICATION OF FUNDS GIVEN BY THE ASSESSEE IN THE BALANCE SHEET. SINCE THE ABOVE ADD ITION OF ` 15.02 LAC HAS BEEN DELETED BY US, THE INSTANT ADDIT ION OF ` 4.76 LAC CROPS UP FOR CONSIDERATION. IT IS SEEN THAT TH E ASSESSEE DEPOSITED A SUM OF ` 25.75 LAC IN HIS BANK ACCOUNT. NO DETAILS ABOUT THE SOURCE OF SUCH DEPOSITS WERE GIVEN TO THE AO, WHO CHOSE TO MAKE ADDITION FOR THE SAID AMOUNT BY CONSI DERING THE AMOUNT OF TOTAL TURNOVER DECLARED AT `20.98 LAC. I N OUR CONSIDERED OPINION, THE LD. CIT(A) NEEDLESSLY SWAYE D BY THE ASSESSEES CONTENTION OF SALES OUTSIDE THE BOOKS OF ACCOUNT TO THIS MAGNITUDE. WHEN WE PERUSE THE BALANCE SHEET O F THE ASSESSEE, IT CAN BE SEEN THAT THE CLOSING STOCK AT THE END OF THE YEAR STOOD AT ` 2.03 LAC. IF ONE HAS TO DRAW A PRE SUMPTION THAT THE ASSESSEE HAD STOCK-IN-TRADE, BUT SOLD THE GOODS WITHOUT ISSUING BILLS, THEN, THERE SHOULD HAVE BEEN CORRESP ONDING STOCK AVAILABLE, WHICH IS NOT THE CASE HERE. IF, ON THE OTHER HAND, ONE HAS TO DRAW A PRESUMPTION THAT NOT ONLY THE SALES, BUT ALSO PURCHASES WERE MADE OUTSIDE THE BOOKS OF ACCOUNT, T HEN, APART FROM THE PROFIT ELEMENT, THE CAPITAL BASE REQUIRED FOR MAKING UNEXPLAINED PURCHASES SHOULD ALSO BE ADDED TO THE T OTAL INCOME, ITA NO.99/DEL/2013 7 WHICH IS AGAIN NOT THE CASE HERE. IT CAN BE SEEN FR OM THE ASSESSMENT ORDER THAT THE AO DID NOT MAKE OUT A CAS E ABOUT THE DEPOSIT OF UNEXPLAINED/UNRECORDED SALES IN THE BOOK S OF ACCOUNT. THERE CAN BE UNEXPLAINED DEPOSITS IN BANK ACCOUNTS EVEN OTHERWISE THAN THROUGH UNRECORDED SALES. THUS IT I S MANIFEST THAT THE LD. CIT(A)S ORDER IS CLEARLY NOT SUSTAINABLE. AS THE ASSESSMENT ORDER WAS PASSED U/S 144, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IM PUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTOR ED TO THE FILE OF THE AO FOR A FRESH ADJUDICATION. WE ORDER ACCORDIN GLY. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE O PPORTUNITY OF BEING HEARD IN THE FRESH PROCEEDINGS. 7. THE LAST GROUND IS AGAINST THE DELETION OF ADDIT ION OF `12,59,000/-. THE ASSESSEE SHOWED TO HAVE RECEIVED FOUR AMOUNTS, TABLED ON PAGE 3 OF THE ASSESSMENT ORDER A S LOAN FROM SHRI DHEER SINGH. ON BEING CALLED UPON TO ESTABLIS H THE GENUINENESS OF THESE CREDIT ENTRIES APPEARING IN TH E NAME OF SHRI DHEER SINGH, THE ASSESSEE DID NOT FURNISH ANY EXPLA NATION REGARDING THE SOURCE OF THE ABOVE ENTRIES. EVEN TH E IDENTITY, ITA NO.99/DEL/2013 8 CREDIT WORTHINESS AND ALSO THE GENUINENESS OF THE T RANSACTIONS WITH SHRI DHEER SINGH WERE NOT PROVED. THIS RESULTE D INTO THE ADDITION OF ` 12.59 LAC BY THE AO U/S 68 OF THE ACT . THE LD. CIT(A) DELETED THE ADDITION BY CONSIDERING THAT SHRI DHIR SINGH FURNISHED CONFIRMATION ALONG WITH PAN AND ALSO BANK ACCOUNT. THE REVENUE IS AGGRIEVED AGAINST SUCH DELETION OF ADDITION. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE AO MADE ADDITION U/S 68 ON ACCOUNT OF FOUR ITEMS OF LOAN ALLEGEDLY RECEI VED BY THE ASSESSEE FROM ONE SH. DHEER SINGH ON DIFFERENT DATE S. NO EVIDENCE WORTH THE NAME WAS FILED BEFORE THE AO TO SUBSTANTIATE THE IDENTITY AND CAPACITY OF THE LENDER ALONG WITH THE GENUINENESS OF THE TRANSACTIONS. THE LD. CIT(A) SIMPLY DELETED THE ADDITION BY CONSIDERING THAT SHRI DHIR SINGH HAD FILED RETURN O F INCOME. THE SO-CALLED RETURN SHOWS THE NAME AS DHIR SINGH AS AGAINST DHEER SINGH EXPLAINED BY THE ASSESSEE TO BE THE PERSON F ROM WHOM THE LOAN WAS RECEIVED. FURTHER, THE MERE FACT THAT A P ARTICULAR AMOUNT HAS BEEN RECEIVED THROUGH BANKING CHANNEL IS NOT SUFFICIENT IN ITSELF TO PROVE THE GENUINENESS OF TH E TRANSACTION AND ITA NO.99/DEL/2013 9 CAPACITY OF THE PERSON. IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THIS ADDITION. SINCE THE ASSESSMENT WAS FRAMED U/S 144, WE ARE OF THE CONSIDERED OPINIO N THAT IT WOULD BE IN THE FITNESS OF THINGS IF THIS ISSUE IS ALSO SENT BACK TO THE AO FOR A FRESH ADJUDICATION. WE, THEREFORE, SE T ASIDE THE IMPUGNED ORDER ON THIS SCORE AND SEND THE MATTER BA CK TO THE AO FOR A FRESH DETERMINATION, AFTER ALLOWING A REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.08.201 4. SD/- SD/- [ H.S. SIDHU ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 13 TH AUGUST, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.