Gujarat High Court
Pr. Commissioner Of Income Tax I vs Chartered Speed Pvt. ... on 3 March, 2015
Bench: Jayant Patel, S.H.Vora
O/TAXAP/126/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 126 of 2015
with
TAX APPEAL NO. 127 of 2015
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PR. COMMISSIONER OF INCOME TAX I....Appellant(s)
Versus
CHARTERED SPEED PVT. LTD....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL
and
HONOURABLE MR.JUSTICE S.H.VORA
Date : 03/03/2015
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE JAYANT PATEL)
1. The Revenue has preferred the present appeals wherein the main question raised is as under: Whether the appellate Tribunal has substantially erred in deleting the addition of Rs.70 Lakhs made under section 68 of the Act despite the fact that the assessee failed to prove the genuineness of the transaction?
In Tax Appeal No.127/15, similar is the question but there is change in the amount, i.e., Rs.2 Crores instead of Rs.70 Lakhs.
2. We have heard Mr.Manish Bhatt, learned Senior Counsel for the appellant Revenue.
3. It appears that as per the AO, since he found Page 1 of 7 O/TAXAP/126/2015 ORDER that the creditworthiness of the purchaser of the shares and the fact that the shares thereafter were transferred at the price of Rs. 10/ per share to the sister company of the assessee, he did not accept the explanation given under section 68 of the Income Tax Act (hereinafter referred to as the "Act") and the said amount of share money credited in the books of accounts of the assessee were considered as unexplained income and therefore, added as income of the assessee. In the appeal before the Commissioner (Appeals), the order of the AO was confirmed. In the further appeal before the Tribunal, at paras 17 and 18, it was observed thus "17. We find that in the instant case, the addition is made u/s. 68 of the Act on the ground of unexplained cash credit. As per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account. We find that this initial onus was discharged in the instant case by the assessee by furnishing documents like MOA, AOA, share application & board resolution, Certificate of Incorporation, Certificate of Commencement, acknowledgements of ITRs, audited accounts etc. of concerned companies. Thereafter, in our view, the onus shifted upon the Department and it was for the Department to bring on record relevant material to show that why inspite of the above stated documents, the addition is still to be made in the hands of the assessee. In the instant case, the Department has endeavoured to discharge its burden on the basis of statements recorded by it of the persons mentioned above.
Page 2 of 7O/TAXAP/126/2015 ORDER
18. We find that the assessee requested for crossobjection of the maker of the statement. Further, we find that the Assessing Officer also made an attempt to allow the assessee opportunity to cross examine the makers of the statement by issuing summons to them. However, the cross examination could not take place because of failure on the part of the makers of the statements to appear on the appointed date. But strangely, thereafter, the Assessing Officer did not take any step to allow effective opportunity to the assessee to crossexamine the makers of the statements. The Assessing Officer did not pursue the matter further. Thus, we find that the assessee was not allowed any real opportunity to crossexamine the persons who made the statement at the back of the assessee. In our considered view, in the circumstances, the statement of those persons cannot be read against the assessee. Our above view finds support from the decision of the Hon'ble Jurisdictional High Court in the case of
(i) Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax (supra)
(ii) CIT Vs. Indrajit Singh Suri (supra)
(iii) DCIT Vs. Mahendra Ambalal Patel (supra)
(iv) CIT Vs. Kantibhai Revidas Patel (supra) In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissible evidence against the assessee. In absence of these statements, we find that no other material has been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee Page 3 of 7 O/TAXAP/126/2015 ORDER when the assessee furnished all the documents which were available with it to discharge the onus which was upon it u/s. 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition so made cannot be sustained. We, therefore, delete the addition of Rs 2,00,00,000/ made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of Rs.70,00,000/ made in the case of M/s. Chartered Speed Private Limited."
Under the circumstances, the present Tax Appeals before this Court.
4. Mr.Bhatt, learned counsel appearing for the Revenue contended that three aspects were required to be proved. One was the identity of the person concerned from whom the source of money is disclosed. The another was the creditworthiness of the person concerned and the third was the genuineness of the transaction. He submitted that in the present case, the Tribunal has committed error in not considering that the creditworthiness as well as genuineness of the transaction were not proved and therefore, irrespective of the fact that the persons who had given statements were not made available for crossexamination, the Tribunal has committed error in accepting the explanation as sufficient and thereby deleting the amount as income of the assessee concerned. He also relied upon the decision of this Court in the case of Umesh Krishnani Vs. ITO in Tax Appeal No.800/12 Page 4 of 7 O/TAXAP/126/2015 ORDER decided on 15.12.2013 and he contended that as the preliminary burden was not discharged by the assessee, the Tribunal has not considered the said aspect and hence, the matter deserves consideration on the question raised.
5. As recorded by the Tribunal, the Tribunal found that the initial burden was discharged by the asseessee. In our view, once the Tribunal upon the appreciation of the material found and recorded the finding of the fact that the assessee had discharged initial burden, such a finding of fact would be outside the judicial scrutiny in the appeal before this Court unless the finding of fact is perverse to the record. It is an undisputed position that the statement of the persons concerned which were recorded by the department, those persons were not made available for crossexamination, may be for one reason or another inspite of the attempts made by the department. Therefore the Tribunal has rightly found that the statement of those persons cannot be read against the assessee.
6. The attempt made to contend that the burden is upon the assessee to prove the identity of the person, creditworthiness of the person and the genuineness of the transaction are to be examined in context to the existence of the person concerned, the factum of actual money in possession of the person and having paid to the asseessee and the mode of payment. Thereafter, Page 5 of 7 O/TAXAP/126/2015 ORDER if the person concerned is in existence and has actually paid the amount from his account by cheque, it can be said that the initial burden is discharged so far as explanation to be considered under section 68 of the Act. Thereafter, the burden would be upon the revenue to show that either the person was bogus or there was no financial capacity to make the payment and the arrangement of money was artificial or that the money has not passed over and it was only by way of an eye wash. Such could be proved by the Revenue in the present case through the statement of the persons, but unfortunately, they were not made available for crossexamination and therefore, the statements could be used as an evidence against the asseessee. No other evidence was available with the Revenue.
7. Under these circumstances, if the Tribunal has found that the explanation under section 68 of the Act was acceptable in absence of non discharge of the burden upon the Revenue, such a finding of fact would not call for interference when the appeal before this Court is limited to the substantial questions of law. The decision upon which the reliance has been placed by Mr.Bhatt in Tax Appeal No.800/12 (supra) is of no help to the Revenue because the facts and circumstances of the present case cannot be equated with the facts of the said case considered by this Court. It is hardly required to be stated that whether the explanation is Page 6 of 7 O/TAXAP/126/2015 ORDER sufficient or not would essentially depend upon the facts and circumstances of each case. But the principle remains that once the initial burden is discharged by the assessee, it would be for the Revenue to show that the transaction was bogus leading to conclusion for discarding of the explanation. In the present case, as observed by us hereinabove, the burden was not discharged and therefore the Tribunal has held in favour of the assessee. We do not find that any substantial question of law would arise for consideration in the present appeals, as canvassed.
8. Hence, the appeals are meritless and therefore, dismissed.
(JAYANT PATEL, J.) (S.H.VORA, J.) bjoy Page 7 of 7