ACIT, CENTRAL CIRCLE,1(2), Nagpur V. SHRI KASTURCHAND SHARAMA, Nagpur

ITSSA 25/NAG/2012

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0738 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 05-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. IT(SS)A. NO. 25/NAG/2012 ASSESSMENT YE AR : 2006-07. ASSTT. COMMISSIONER OF INCOME-TAX, SHRI KASTURCHAND SHARMA, CENTRAL CIRCLE-1(2), NAGPUR. V/S. 425, SHRI AMBAY BUILDING, WARDHAMAN NAGA R, C.A. ROAD, NAGPUR-440008 . PAN ADEPS5132 Q. APPELLANT RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SH RI K.P. DEWANI. DATE OF HEARING - 08-04-2015 DATE OF ORDER - 8 TH MAY, 2015 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF CIT(APPEALS)-I, NAGPUR DATED 31-08-2012 AND PERTAINS TO ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF ` .2621,400/- ON ACCOUNT OF UNEXPLAINED CREDITS. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT DEPOSITS I N CASH OF ` .26,21,400/- ARE UNEXPLAINED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESS EE FAILED TO PROVE THE GENUINENESS OF TRANSACTIONS, CREDITWORTHINESS OF T HE LOAN CREDITORS AND TO BRING ONLY MATERIAL ON RECORD IN RESPECT OF PURPO RTED CASH LOANS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESS EE FAILED TO SUBMIT NAME, ADDRESS, P.A. NO. AND CONFIRMATION LETTERS OF SUCH PERSONS FROM WHOM CASH BELOW ` .20,000/- WERE TAKEN. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESS EE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM THAT INCOME OF THE EARLIER YEARS WAS AVAILABLE IN THE FORM OF CASH WITH THE A SSESSEE SO AS TO EXPLAIN THE VARIOUS DEPOSITS. 2. IN THIS CASE THE ASSESSING OFFICER NOTED THAT DU RING THE CONCERNED FINANCIAL YEAR THE ASSESSEE HAS DEPOSITED VARIOUS AMOUNTS IN CASH TOTALING TO ` .26,21,400/- IN THE NAME OF VARIOUS PERSONS. THE ASSESSEE CLAIME D THAT HE HAS TAKEN LOAN IN CASH (ALL BELOW ` .20,000/-). THE ASSESSING OFFICER OBSERVED THAT ASS ESSEE DID NOT SUBMIT ANY CONFIRMATION FROM THESE PARTIES. HE OBSE RVED THAT THE ASSESSEE DID NOT BRING ANY MATERIAL ON RECORD IN RESPECT OF PURP ORTED CASH LOANS. HENCE THE ASSESSING OFFICER ADDED THE SAME AS UNEXPLAINED CAS H CREDIT UNDER SECTION 68. AGAINST THE ABOVE ADDITION, ASSESSEE APPEALED BEFOR E THE LEARNED CIT(APPEALS). APART FROM THE MERITS OF THE ADDITION, THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS ALSO ERRED IN NOT CONSIDERING THE EXPLANATION OF THE ASSESSEE TO ALLOW TELESCOPIC SET OFF OF THE CASH CREDIT INTR ODUCED IN THE FINANCIAL YEAR 2005- 3 06 AGAINST THE INCOME ARISING OUT OF INTANGIBLE AD DITION ASSESSED IN EARLIER WHICH ARE MORE THE CASH CREDIT. 3. THE LEARNED CIT(APPEALS) OBSERVED THAT THE ASSES SEE SUBMITTED THAT IT IS TRUE THAT ASSESSEE COULD NOT SUBMIT CONFIRMATION NO R COULD PROVE THE IDENTITY OF THE PERSONS FROM WHOM THE LOANS/DEPOSITS WERE ACCEP TED. HOWEVER, IT WAS SUBMITTED THAT AT THE TIME OF ASSESSMENT PROCEEDING S IT WAS EXPLAINED THAT IN CASE OF SHRI KASTURCHAND SHARMA FOR ASSESSMENT YEAR S 2002-03 TO 2006-07 INTANGIBLE ADDITIONS WERE MADE TOTALING TO ` .32,03,209/- AT THE RATE OF .50% OF THE TOTAL DEPOSITS IN THE FIVE BANK ACCOUNTS OWNED BY SHRI KASTURCHAND SHARMA. IT WAS FURTHER SUBMITTED THAT IN VIEW OF THE AFORESAID ADDITIONS THE ASSESSEE REQUESTED THAT HE SHOULD BE ALLOWED THE TELESCOPIC SET OFF OF CASH CREDIT INTRODUCED DURING THE YEAR AGAINST THE INTANGIBLE A DDITIONS BEING 0.50% ON DEPOSITS, DURING THE EARLIER YEAR WHICH AFORESAID ARE MUCH MORE THAN THE CASH CREDIT INTRODUCED DURING THE YEAR 2006-07 I.E. ` .26,21,400/-. THE ASSESSEE FURTHER STATED THAT HE HAD NOT ACQUIRED ANY OTHER ASSETS OR INVESTMENTS IN ALL THESE EARLIER YEARS. THAT EVEN DURING THE COURSE OF SEARC H PROCEEDINGS NO MATERIAL WAS FOUND IN RESPECT OF ANY INVESTMENTS OR ACQUISITION OF INVESTMENTS FROM UNDISCLOSED INCOME. THAT NO OTHER ADDITIONS ARE MAD E ON THIS ACCOUNT. THAT COPY OF BALANCE SHEET AS ON 31-03-2005 WAS ENCLOSED HERE WITH. THE LEARNED CIT(APPEALS) ASKED FOR THE REMAND REPORT FROM THE A SSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED. HE OBSERVE D THAT THE ASSESSEE IS REQUIRED TO ESTABLISH THE MANNER, THE INCOME OF EAR LIER YEAR WAS AVAILABLE WITH HIM WITH CORRESPONDING EVIDENCES. THAT SINCE THERE IS NO EVIDENCE THAT INCOME OF EARLIER YEARS WAS AVAILABLE WITH HIM IN CONCERNED P REVIOUS YEAR, THE TELESCOPIC SET OFF AS DESIRED BY THE ASSESSEE CANNOT BE ALLOWED. CONSIDERING THE ABOVE, THE LEARNED CIT(APPEALS) HELD THAT IT IS UNDISPUTED THA T THE ADDITION TO THE EXTENT OF ` .32,63,507/- HAVE BEEN MADE TO THE RETURNED INCOME OF THE ASSESSEE FROM ASSESSMENT YEAR 2001-02 TO 2005-06. THAT THE ASSESS ING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT AMOUNTS TREATE D AS INCOME AND TAXED IN THE EARLIER YEARS HAVE BEEN INVESTED IN ANY FIRM OR IN OTHER ASSET. THE LEARNED CIT(APPEALS) CONCLUDED AS UNDER : 4 THE HONBLE MADRAS HIGH COURT IN THE DECISION REP ORTED IN 51 ITR 757 IN THE CASE OF S. KUPPUSWAAMI MUDALLAR VS. CIT HAS WH ILE ENDORSING THE PRINCIPLE OF TELESCOPING HELD THAT THAT WHEN ESTIM ATED ADDITIONS ARE MADE THEY SHOULD BE TREATED AS TRUE INCOME OF THE ASSESSEE. IN THE DECISION OF THE HONBLE SUPREME COURT RELIED UPON BY THE APPELLANT REPORTED IN 123 ITR 457 IN THE CASE OF ANANTHARAM VEERASINGHALAH & CO. VS. CIT (SC) IT HAS BEEN HELD THAT THERE CAN BE N O ESCAPE FROM THE PROPOSITION THAT THE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR MAY CONSTITUT E A FUND, EVEN THOUGH CONCEALED FROM WHICH ASSESSEE MAY DRAWN SUBSEQUENT LY FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS OF THIS ACCOUNT BOOK. I, THEREFORE FIND MERIT IN THE APPELLANTS CONTENTION THAT THE INCOM E ESTIMATED TO HAVE BEEN EARNED BY THE ASSESSEE IN THE EARLIER YEARS IS TO BE CONSIDERED AS AVAILABLE FOR THE PURPOSE OF THESE UNEXPLAINED CREDITS. IN T HE REMAND REPORT IT HAS BEEN POINTED OUT BY AO THAT WEALTH TAX RETURNS HA VE NOT BEEN FILED FOR A.Y. 2003-04 TO A.Y. 2005-06 AND THIS VITIATES T HE CASE OF THE ASSESSEE. HOWEVER IT IS NECESSARY TO NOTE THAT THE AO IS EM POWERED BY THE ACT TO TAKE ACTION AS PER THE PROVISIONS OF LAW WHEN ANY DEFAULT IS OBSERVED. CONSIDERING THE ISSUE IN TOTALITY I AM OF THE VIEW THAT BASED ON FACTUAL PARAMETERS AND ON ESTABLISHED JUDICIAL PROPOSITIONS DISCUSSED ABOVE, THE APPELLANT IS ENTITLED TO RELIEF. AO IS THEREFORE DIRECTED TO DELETE THE ADDITION MADE OF ` .26,21,400/-. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFOR E US. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORD. THE LEARNED DR RELIED UPON THE GROUNDS OF APPEAL AND THE ORDER OF THE ASSESSING OFFICER. PER CONTRA, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(APPEALS) IS QUITE CORRECT IN ALLOWING TELESCOPING OF THE EAR LIER YEARS INCOME TO THE UNDISCLOSED CASH CREDITS DETERMINED THIS YEAR. FOR THE PROPOSITION THAT TELESCOPING SHOULD BE PERMITTED, HE REFERRED TO FOL LOWING CASE LAWS : 5 I) (2007) IT(SS)A NO. 50/NAG/2006 ACIT V/S. SEWAKR AM K. GURBAXANI. II) (1992) 210 ITR 1010 (KER.) CIT V/S. K. SREEDHA RAN. III) (1983) 151 ITR 353 (BOM.) CIT V/S. JAWANMAL GEMAJI SGANDHI. IV) (1980) 123 ITR 457 (SC) ANANTHARAM VEERASINGHA IAH V/S. CIT. 5. UPON CAREFUL CONSIDERATION, WE NOTE THAT IN TH IS CASE THE ASSESSING OFFICER HAS DETERMINED ` .26,21,400/- AS UNEXPLAINED CASH CREDIT UNDER SECTI ON 68 IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAD SOUGHT TELE SCOPING OF UNDISCLOSED INCOME ASSESSED IN ASSESSMENT YEARS 2002-03 TO 2006 -07 AMOUNTING TO ` .32,03,209/- AGAINST THIS AMOUNT. IN OTHER WORDS, A SSESSEES CLAIM IS THAT SUM OF ` .26,21,400/- HAS BEEN INTRODUCED IN THE BOOKS OF TH IS YEAR OUT OF THE ABOVE INTANGIBLE ADDITION MADE IN EARLIER YEAR. LEARNED C IT(APPEALS) HAS ACCEPTED THIS PROPOSITION BY HOLDING THAT COURTS HAVE PERMITTED T ELESCOPING. HE HAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE UNDISCLOSED INCOME ASSESSED IN EARLIER YEA R HAS BEEN INVESTED IN ANY OTHER FIRM. WE FIND THAT ABOVE PROPOSITION HAS SUPP ORT FROM THE CASE LAWS AS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE. WE FURTHER NOTE THAT IN THE GROUNDS OF APPEAL RAISED, THE REVENUE HAS PRIMARILY CONTESTED THAT THE ASSESSEE HAS BEEN UNABLE TO EXPLAIN THE CREDITWORTHINESS OF THE LOAN CREDITOR, THAT THE ASSESSEE HAS FAILED TO SUBMIT NAME, ADDRESS, PA NO. AND CONFIRMATION LETTER ETC. WE FIND THAT THE REVENUE HAS MISDIRECTED ITSELF IN RAISING SUCH GROUNDS AS IT HAS BEEN ADMITTED BY THE ASSESSEE BEFORE THE LEARNED CI T(APPEALS) THAT ASSESSEE IS UNABLE TO EXPLAIN THESE CASH DEPOSITS BUT IT HAS ON LY WANTED TELESCOPING AGAINST THE INTANGIBLE INCOME DETERMINED IN EARLIER YEARS. FROM THIS POINT OF VIEW ALSO REVENUES APPEAL IS NOT SUSTAINABLE. IN THE BACKGRO UND OF AFORESAID DISCUSSION 6 AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 6. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MAY, 2015. SD/- S D/- (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER. ACCOUNTANT MEMBER NAGPUR, DATED: 8 TH MAY, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. T RUE COPY. BY ORDER ASSISTANT REGISTRAR, I TAT, NAGPUR WAKODE