M/S.KAMAL BRICKS FACTORY V. INCOME TAX OFFICER

TAXAP/242/2002

AI Insights

The case involves M/S Kamal Bricks Factory, the appellant, contesting an order by the Income Tax Appellate Tribunal, which had partly restored an addition of Rs. 3,00,000 to the assessee's income for the assessment year 1993-94. The addition was initially made by the Assessing Officer under section 68 of the Income Tax Act, which deals with unexplained cash credits. The Tribunal's decision was challenged by the appellant on grounds that the Tribunal did not properly appreciate the facts and the applicability of section 68. The High Court, after reviewing the submissions and the relevant legal precedents, agreed with the Tribunal's findings and dismissed the appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 754105 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 16-10-2014
• Assessment Year: misc
• Other Referred Cases: Murlidhar Lahorimal vs. Commissioner of Income Tax, Ashwinbhai B. Pokiya vs. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: SWATI SOPARKAR
• Keywords: Assessment year 1993-94; Credit entry; Genuineness of Credits; Income Tax; Section 68
• Section: 68

Judgement Text

"O/TAXAP/242/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 242 of 2002 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ M/S.KAMAL BRICKS FACTORY....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 7 O/TAXAP/242/2002 JUDGMENT Date : 16/10/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgement and order dated 08.01.2002 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (Tribunal) in Income Tax Appeal No. 875/Ahd/1996 for the assessment year 1993-94, the revenue has preferred the present tax appeal. The appeal was admitted on the following substantial question of law: “Whether, in the facts and circumstances of the case, the ITAT was right in law in upholding the addition of Rs. 3,00,000/- u/s 68 of the Act without properly appreciating facts and without considering the applicability of sec. 68 of the Act?” 2. The appellant filed its return of income for the assessment year 1993-94 on 30.08.1993 declaring total income of Rs. 524/-. Vide order dated 16.03.1995, the Assessing Officer assessed the total income of appellant at 453580/-. The appellant challenged the said order by filing appeal before CIT(A)-II who by order dated 07.12.1995 allowed the appeal and deleted the impugned addition made u/s 68 of the Act. 2.1 Being aggrieved by the order of CIT(A), the respondent filed appeal before the Tribunal and the Tribunal vide impugned order dated 08.01.2002 partly allowed the appeal Page 2 of 7 O/TAXAP/242/2002 JUDGMENT and partly restored the order passed by the Assessing Officer. Being aggrieved by the said order, the present appeal is filed by the assessee. 3. Learned advocate appearing for the appellant – assessee submitted that the Tribunal has seriously erred in upholding the order of the Assessing Officer in adding Rs. 3,00,000/- u/s 68 of the Act without properly appreciating facts and without considering the applicability of section 68 of the Act. She submitted that the Tribunal has erred in not appreciating that section 68 is at all not attracted as no money has been received by the appellant from the parties concerned and the entire outstanding liability was discharged by payment to respective labourers by the end of March 1994. Learned advocate for the appellant has relied upon the decision of this Court in the case of Murlidhar Lahorimal vs. Commissioner of Income Tax reported in 280 ITR 512 (Guj). 4. Mr. Manish Bhatt, learned Senior Advocate appearing with Ms. Mauna Bhatt, learned advocate for the revenue submitted that the present appeal lacks merits and therefore deserves to be dismissed. He submitted that in fact the onus is upon the assessee to furnish documents and to prove that the transaction was not bogus. In support of his submission, Mr. Bhatt has relied upon the decision of this Court in the case of Ashwinbhai B. Pokiya vs. Assistant Commissioner of Income Tax reported in 45 Taxamnn.com 62. He submitted that in fact the Tribunal proportionately discharged the credit in respect of one workman who was produced by the assessee. Page 3 of 7 O/TAXAP/242/2002 JUDGMENT 5. We have heard learned advocates for both the sides and perused the orders passed by the CIT as well as the Tribunal. The Tribunal in the impugned judgment and order has observed that if the Assessing Officer has failed to notice the credits in the preceding year, perhaps because the assessment was made u/s 143(1) that does not preclude the Officer from scrutinising the accounts in the subsequent assessment year. The Tribunal observed that the addition had been made by the Assessing Officer on the basis of the credits appearing in the books of accounts of the assessee in the year under appeal. 6. As a result of hearing and perusal of records, we are in complete agreement with the reasonings adopted and findings arrived at by the Tribunal. The Tribunal rightly held that no credence can be given to the statement filed before the revenue authorities regarding payments having been made to the labourers during the year under appeal relating to the earlier’s outstandings. It is to be noted that only peak entry of the payment made to the labourers till the last date of accounting year is made and actual dates of payments are not known. 6.1 In the case of Murlidhar Larhorimal (supra) this Court has observed as under: “13. Despite this factual position, the Tribunal singularly fails to note the fact that the identity of the donor is established, the donor having appeared in person before the assessing officer, the genuineness of the transaction is established, not only by the receipt of the bank draft, but also by the fact of transaction having borne gift tax Page 4 of 7 O/TAXAP/242/2002 JUDGMENT once the assessment was framed. The primary onus which rested with the assessee, thus, stood discharged. Thereafter, if the revenue was not satisfied with the source of the funds in the hands of the donor, it was upto the revenue to take appropriate action. The Tribunal fails to consider all these aspects. In fact, the donor having filed gift tax return and assessment having been framed on the donor, is not taken into consideration by the Tribunal at all. This was a very strong factor in support of the explanation tendered by the assessee. 14. The Tribunal, to the contrary, goes on to discuss and question as to why the donor should make a gift to the assessee; the size of the donor's family and availability or otherwise of the amount in hands of the donor; the area of the land held by the donor etc. At best, these could be factors for the donor to be called upon to explain the source of the funds in his hands, but that could not be a ground for disbelieving a gift which had admittedly been received by the assessee as a gift and being treated as undisclosed income of the assessee. 15. Having gone through the statements of the donor as well as the assessee, it is apparent that despite minor discrepancies, the factum of the gift having been made has been accepted by the donor and in the circumstances, it cannot be stated that the credit entry in the capital account of the assessee did not reflect the true picture. The assessee had shown the same as “gift received”. The assessee tendered an explanation and nothing has been brought on record to even hold for a moment that the said explanation is not satisfactory. Though the same is stated as a conclusion, the reasoning for stating so is as to disbelieving source of source. In these circumstances, the impugned order of Tribunal cannot be sustained.” 6.2 In the case of Ashwinbhai Pokiya (supra), this Court has held as under: Page 5 of 7 O/TAXAP/242/2002 JUDGMENT “7. The Tribunal examined evidence on record and came to the conclusion that to the extent CIT [A] confirmed the additions, no interference was called for. The Tribunal recorded that for rest of the parties, the Assessing Officer had given number of opportunities to the assessee to produce them and other evidences in support of genuineness of the credits. However, the assessee had not furnished even the names and addresses of such creditors. The Tribunal, in fact, noted that initially the assessee had accepted the credits to be bogus and also had agreed to surrender the income in the revised return, but, only a part of bogus credits were disclosed as undisclosed income. In such a situation, burden is very heavy on the assessee to prove the genuineness of the credits of rest of the amount, which the assessee has not disclosed in the revised return despite admitted in the voluntary statement recorded on the date of survey. Tribunal noted that the assessee did not produce any such material either before the Assessing Officer or even before the appellate authority. In that view of the matter, the Tribunal was unable to give further relief to the assessee. 8. On merits also, we do not find Tribunal having committed any error to the extent that the assessee could not establish genuineness of the credits by producing necessary documentary evidence; even at the appellate stage. Counsel for the appellant, however, submitted that if the Tribunal had adjourned the matter; as prayed for, the assessee would have moved an application for production of additional evidence which would have established the genuineness of credits. To our mind, it is a too far-fetched an argument to uphold the contention that reasonable opportunity was not granted to the appellant. In the result, no question of law arises, Tax Appeal stands disposed of. “ 7. The sum and substance in both these decisions is that when the assessee produces relevant documents as evidence to establish genuineness of the credits, much needed relief is required to be given to the assessee. In the present case, the Page 6 of 7 O/TAXAP/242/2002 JUDGMENT Tribunal has observed that only one labourer was produced before the Assessing Officer and accordingly the Tribunal discharged the onus on the assessee so far as this labourer was concerned. However since no other labourer was produced before the officer, the credits for those entries could not be given. We are in complete agreement with the order passed by the tribunal. The Tribunal has correctly adjudged the genuineness of the credits and accordingly held Rs. 89000/- as correct credit as on the close of the previous year. We therefore answer the issue in the affirmative i.e. in favour of the revenue and against the assessee. 8. In the premises aforesaid, appeal is dismissed. No costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 7 of 7 "