Income Tax Appellate Tribunal - Delhi
Pushpak Auto Centre, vs Assessee on 16 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F', NEW DELHI
Before Sh. N. K. Saini, AM And Sh. I. C. Sudhir, JM
ITA No. 268/Del/2008 : Asstt. Year : 2003-04
M/s Pushpak Auto Centre, Vs Income Tax Officer,
C/o-Nagender Singh Parmar, Ward-2, Bhiwani
H. No. 1752, Sector013, H.U.D
A, Bhiwani, Haryana-127021
(APPELLANT) (RESPONDENT)
PAN No. AAGFP0820M
Assessee by : Sh. Sudhir Sehgal, CA
Revenue by : Sh. Vikram Sahay, Sr. DR
Date of Hearing : 18.11.2014 Date of Pronouncement : 16.01.2015
ORDER
Per N. K. Saini, AM:
This is an appeal by the assessee against the order dated 16.11.2007 of ld. CIT(A), Karnal.
2. Following grounds have been raised in this appeal:
"1. That the Worthy Commissioner of Income Tax (Appeals), Karnal has erred in confirming the action of the Assessing Officer in making addition of Rs. 10,74,600/- of all the 62 cash creditors merely on the basis of surmises and conjectures.
2. That the Worthy CIT(A), Karnal while sustaining the addition of cash credit of Rs. 10,74,600/- has not appreciated the fact that all the cash creditors were produced before the Assessing Officer and their 2 ITA No. 268/Del/2008 Pushpak Auto Centre statements were recorded and they have confirmed having advanced the money and every question asked by the Assessing Officer from them was answered to his satisfaction. As such, all the ingredients of cash credits viz. identity of creditors, credit worthiness of creditors and genuineness of transactions were proved.
3. That the Worthy CIT(A), Karnal has also erred in confirming the addition of Rs. 3,60,199/- made by the Assessing Officer as additional income from Tanker not shown.
4. That while sustaining addition of Rs. 3,60,199/- made by the Assessing Officer as additional income from Tanker, the Worthy CIT(A), Karnal has not considered the fact properly that entire diesel expenses made for plying of tanker are fully vouched and accounted for in the books and no defect was found in it.
5. That the Worthy CIT(A), Karnal has also not appreciated that income from Tanker shown is assessable as per provision of section 44AE of the Income Tax Act, 1961 and income shown by the assessee from the Tanker is on higher side than what is assessable as per section 44AE.
6. That, the appellant, craves leave to add or amend the grounds of appeals before the appeal is finally heard or disposed off. "
3. Ground No. 6 is general in nature while the Ground No. 5 was not pressed, therefore, these grounds do not require any 3 ITA No. 268/Del/2008 Pushpak Auto Centre adjudication on our part. Grievance of the assessee vide Ground Nos. 1 and 2 relates to the confirmation of addition of Rs. 10,74,600/- made by the AO on account of cash credit.
4. Facts related to this issue in brief are that the assessee filed the return of income on 01.12.2003 declaring an income of Rs. 79,365/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 30.08.2004. Later on, the case was selected for scrutiny.
5. During the course of assessment proceedings the assessee furnished the affidavits of the cash creditors and produced 9 cash creditors whose statements were recorded. The AO noticed that the assessee received unsecured loans amounting to Rs. 17,18,198/- from 62 new and 20 old creditors. The AO asked the assessee to establish the identity, creditworthiness and the genuineness of the transactions. He also noticed that the assessee had accepted an amount less than Rs. 20,000/- from each of the 62 creditors pertaining to the year under consideration and total such amount came to Rs. 10,74,600/-. According to him the creditors were men of no means and had no capacity to pay the amounts to the assessee and all the creditors were not assessed to tax. He, therefore, added a sum of Rs. 10,74,600/- in the income of the assessee considering 4 ITA No. 268/Del/2008 Pushpak Auto Centre the same as income from undisclosed sources. The reliance was placed on the following case laws:
Ø CIT Vs United Commercial Co. (P) Ltd. (1991) 187 ITR 596 (Cal.) Ø Shankar Industries Vs CIT (1978) 114 ITR 689 (Cal.) Ø Mcdowell & Co. Ltd. Vs Commercial Tax Officer 154 ITR 148 (SC) Ø Munish Iron Store Vs CIT 263 ITR 484 (Punjab & Haryana)
6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and furnished the written submission which had been incorporated by the ld. CIT(A) in para 5 of the impugned order which read as under:
"a) During the year under consideration, the assessee had raised loan from various known-acquaintances and the loans had been received in cash in small amounts and the Assessing Officer directed the assessee to prove the identity and necessary proof in respect of such loans which have been received During the course of assessment proceedings starting from Jan., 2005 to March, 2006, the detailed enquiries were made by the Assessing Officer and as per the Assessing Officer, the following evidences were led to prove the genuineness of the cash creditors.
i) Affidavits of the persons duly sworn in.
ii) Such persons were produced before the Assessing Officer wherein all such persons claimed having advanced loans to the assessee and they also answered to various queries as raised by the Assessing Officer.5 ITA No. 268/Del/2008
Pushpak Auto Centre
iii) For the identification proof, such persons produced evidences of their identification vis-a-vis Ration Card/ Election Commission identity Card, Driving License etc. and the Assessing Officer has not doubted about the bonafides of the statements and the proof as advanced before him.
iv) Some of the persons who are agriculturists, they had submitted the proof of their land holdings and not doubted by the Assessing Officer.
v) Some of the persons who had advanced the loans are advocates, service class employees and they had given their sources of income.
b) Copies of such details alongwith their relevant proof as stated above are being produced herewith for your goodself's ready reference.
c) The Assessing Officer has discussed these aspects at pages 1, 2 & 3 of his order, but then in para-5, he has made the addition on account of such amounts lent by those persons by stating that such persons have not confirmed the date of advancement and such persons are not being assessed to tax with the Income Tax Department and lastly, he has also doubted the genuineness of transactions that the said amount, have been advanced without interest. The Assessing Officer has not doubted about the identity of the persons, but doubted to the other aspect i.e the capacity.
d) It is being submitted herewith that all such persons when produced, have confirmed the advancement of loans with sources thereof and replied to all the queries as raised by the Assessing Officer and your goodself can peruse any statement, which will confirm that all such persons have emphatically stated that they have advanced the loan to the 6 ITA No. 268/Del/2008 Pushpak Auto Centre appellant. It is not a case of the Assessing Officer that the persons did not appear or did not reply to the various queries and even some of the persons when asked about their bank accounts, they clearly stated that they did not have any bank account and Le they had advanced the amount to the appellant in cash. The Assessing Officer has not been able to find out any defects in the statement so recorded and the circumstances in which such amount has been advanced, but he has only said in a general way that the persons concerned did not remember the dates of advancement of loans.
e) In this regard, it is submitted that' the persons when produced has clearly stated the dates of advancement of the amount which is apparent from the statements and when some of the persons were not asked about the date, there was no need to answer the same, but, they had definitely replied to the relevant questions and, if any, date have been asked, the same have been given to the Assessing Officer and a reference can be made to any of the statement as recorded before the Assessing Officer. Therefore, this contention of the Assessing Officer is not borne out from the records. Regarding the 2nd contention about non-charging of interest, it may be submitted that it is prerogative of the persons lending the money that whether he charges the interest or not and in the present case, all such persons are known- acquaintances to the appellant and since the appellant is running a Petrol Pump, the persons who had advanced the amount require petroleum products most of the times and, therefore, on account of the good relations, no interest was desired/ charged by the lenders but that would not automatically prove that the amount as advanced by them is not genuine.
f) With regard to the fact that such persons 'are not being assessed to Income tax, it may be stated that even if a person 7 ITA No. 268/Del/2008 Pushpak Auto Centre is not being assessed to Income tax, that would not automatically mean that the amount advanced by such persons is not genuine.
g) Thus, from the above said facts, it is very clear that the onus which has been placed on the assessee to prove the genuineness of cash credits has been discharged and, now, the onus would be on the revenue to prove that why under such circumstances, such evidences can't be accepted Merely, on the basis of some general statements that the persons are not assessed to Income tax or no interest has been charged, the addition can't be sustained Even the Assessing Officer has not stated anything about the onus which have 'been discharged. Then again, it is a settled law that the assessee should not be placed upon the rack, should not be called upon to explain not merely the origin and the source of contribution, but the origin of origin and source of source as well. This view have been taken by the Hon'ble Supreme Court in the case of Hasti Mal Vs. CIT as reported in 49 ITR
112.
h) It is also a settled law by the Hon'ble Supreme Court in the case as reported in the case of Shri Lekha Banerji Vs. CIT in 49 ITR 112 that if the explanation given by the assessee is bonafide then the department cannot convert the good proof into no proof or otherwise act non-reasonably rejected Also, where the explanation have been given by the assessee, then it cannot be rejected arbitrarily without any sufficient ground, unimaginary or irrelevant ground This view finds support from the decision of the Delhi High Court in the case of Sona Electric Co. as reported in 152 ITR 507. In our case, we have given the detailed explanation of each and everything about the credits and it is upto the department to peruse the matter further to trace and examine the credit worthiness. This has been held by the Hon'ble Supreme Court 8 ITA No. 268/Del/2008 Pushpak Auto Centre in the case of CIT Vs Orissa Corpn. Pvt. Ltd. (1986) as reported in 159 ITR 78.
i) Even by way of letter, dated 17.03.2006 in para-3, the jamabanhi of various persons who had advanced the loans have been given- and it was submitted that the such persons own fertile land and were having substantial income and such evidence have not been disproved by the Assessing Officer. In view of the above said facts and circumstances, the addition as made by the Assessing Officer deserves to be deleted.
7. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee claimed that all the creditors were produced and their statements recorded. He further observed that the assessee also filed the copies of the affidavits of the creditors and their statements were recorded during the appellate proceedings which proved the identity of the creditors. The ld. CIT(A) also observed that the assessee had not filed any evidence to show that those people were of sufficient means and they were in a position to give interest- free advances of about Rs. 20,000 each. The ld. CIT(A) observed that the statements and affidavits of such persons revealed that most of them were agriculturist having small land holding of about 2 to 3 acres, three of them were school teachers and few were small shopkeepers or government employee, driver, accountant or claimed to be advocates but none of them had sufficient income, then it was for the 9 ITA No. 268/Del/2008 Pushpak Auto Centre assessee to prove the same which the assessee had failed to prove, therefore, it was clear that the people from whom cash credits were alleged to have been taken were people of small means and they did not have the capacity to lend amount of about Rs. 20,000/- each to the assessee. The ld. CIT(A) further observed that no interest had been charged despite the fact that the alleged creditors were of small means and there was no repayment of those cash credits till date, whereas, the assessee had merely claimed that those were adjusted on account of purchase of petroleum products by such persons but without any evidence, therefore, the transaction were not genuine. The ld. CIT(A) held that the assessee had failed to establish the creditworthiness of the creditors and genuineness of the transaction, therefore, he confirmed the addition made by the AO.
8. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the confirmation and the affidavits of the creditors for advancement of loans were furnished during the course of assessment proceedings and all the persons were produced before the AO with identity proof and they had confirmed about the deposits of amount alongwith source of their income. It was stated that no 10 ITA No. 268/Del/2008 Pushpak Auto Centre discrepancy had been noticed by the AO or by the ld. CIT(A) and the only doubt had been raised with regard to the capacity of the persons since no interest had been paid to them. It was stated that the evidence of land holding had been given which was not doubted either by the AO or by the ld. CIT(A). It was further stated that there is no bar in giving a deposit by way of cash and the creditors have clearly stated that they did not have any bank account, the amount had been deposited by them in cash which is one of the accepted mode of the financial transaction. It was contended that merely on this basis that cash had been received the doubt could not be raised. It was also contended that the interest had not been charged because of the reasons that the assessee was dealing in resale of Petroleum Products which were required by the villagers, especially from time to time and, in fact, these were the deposits made by them for ensuring regular supplies of Petroleum Products like diesel etc., which was used for the purpose of harvesting and sowing, it was a prime reason for making the deposits with the assessee by the agriculturists and these deposits could ensure their requirement for Petroleum Products as and when required even during the time of shortages. Therefore, the addition made by the AO and 11 ITA No. 268/Del/2008 Pushpak Auto Centre sustained by the ld. CIT(A) was not justified. The reliance was placed on the following case laws:
Ø Monga Metals Pvt. Ltd. Vs ACIT 67 TTJ (All) 247 Ø Elite Developers Vs Dy. CIT 73 ITD (Nagpur-Trib) 379 Ø DCIT Vs D. N. Kamani (HUF) 70 ITD (Patna-Trib) 77 Ø JCIT Vs Gramophone Company of India Ltd. 265 ITR (Kol-Trib) 46 (AT) Ø CIT Vs Ram Narain 224 ITR 180 (P & H) Ø DCIT Vs Rajinder Pal in ITA No. 3250/Del/2010, ITAT Delhi Bench Ø Sh. Trilokchand S. Gandhi Vs ACIT in ITA No. 1858/Ahd/2007, ITAT Ahmadabad Bench Ø ITO Vs Jai Bajran Ginning & Pressing P. Ltd. in ITA No. 1430/PN/2009, ITAT Pune Bench Ø Suntex Creation Pvt. Ltd. Surat Vs Deptt. Of Income Tax in CO No. 288/Ahd/2010, ITAT Ahmadabad Bench
9. In his rival submissions the ld. DR reiterated the observations made by the authorities below and strongly support the impugned order passed by the ld. CIT(A).
10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is noticed that the assessee received the deposits from 62 persons in cash, those persons were produced before the AO and their statements were recorded wherein they confirmed the deposits with the assessee. The depositors also explained the source of their deposits which was the agricultural income and the income 12 ITA No. 268/Del/2008 Pushpak Auto Centre from salary or profession/business etc. The AO however did not accept the explanation of the assessee and also doubted the confirmation by presuming that the persons having the land holding of 2 to 3 acres each were not in a position to advance the deposits of less than Rs. 20,000/-. The other reason given by the AO was that the deposits were received in cash and not by cheque. In the instant case, it was explained that the assessee was dealing in Petroleum Products and the persons who were mainly agriculturists deposited the amount in cash to ensure the regular supplies of the Petroleum Products like diesel etc. which was required for the purpose of harvesting and sowing, the said explanation of the assessee was not rebutted at any stage. It, therefore, appears that the impugned addition has been made merely on the basis of surmises and conjecture. It is well settled that the doubt or suspicion howsoever strong it cannot replace the reality based on the evidence. In the present case also the assessee produced the depositors before the AO, their statements were recorded, the evidences of their land holding were also produced which were not doubted, the assessee was dealing in resale of the Petroleum Products and the depositors to ensure the uninterrupted supply of the diesel etc. during the harvesting or sowing season made the deposits. Therefore, the deposits in 13 ITA No. 268/Del/2008 Pushpak Auto Centre question were genuine and the addition made by the AO and confirmed by the ld. CIT(A) was not justified, we, therefore, delete the same.
11. The next issue vide Ground Nos. 3 & 4 relates to the sustenance of addition of Rs. 3,60,199/-. The facts related to this issue in brief are that the assessee was running a Petrol Pump for which it required to lift the Petroleum Products from Panipat Refinery and transported the same to its Petrol Pump at Village Jhumpa Kalan, Bhiwani, Haryana. The assessee owned a Tanker which was used by it for transportation of such Petroleum Products. The transportation charges were reimbursed to the assessee by BPCL i.e. Petroleum Company, for such transportation during the year under consideration. The assessee received such reimbursement of transportation charges to the extent of Rs. 18,82,516/- against which the assessee had claimed expenses on diesel for tanker amounting to Rs. 16,86,275/-. The AO was of the view that the expenses for diesel consumption were on higher side, he disallowed 50% of such expenses. Accordingly, an addition of Rs. 8,43,138/- was made.
12. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that as per the provisions of Section 14 ITA No. 268/Del/2008 Pushpak Auto Centre 44AE of the Act, the assessee was required to show income of Rs. 42,000/- for running a lorry, whereas, it has shown income of Rs. 43,867/- after claiming depreciation, repair and maintenance and other related expenses. It was claimed that the assessee had declared more than what was required to be declared u/s 44AE, at the same time the entire expenses of diesel were fully vouched, diesel has been consumed from its own stock and the same is shown in the books of accounts. The assessee also filed certified copies of such details which were filed before the AO and claimed that the entire expenditure was allowable.
13. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee's tanker had made 304 trips during the year for transportation of Petroleum Products from Panipat Refinery to assessee's Petrol Pump. He further observed that the distance between Panipat Refinery and the assessee's Petrol Pump was 254 km, one way, therefore, 508 km per trip was distance covered. The ld. CIT(A) also observed that the consumption of diesel of the assessee tanker gives the average of 2.5 to 3.00 km per liter of diesel and the average cost of diesel during the year under consideration was Rs. 20/- per liter. The ld. CIT(A) estimated the consumption average, lowest at 2.5 km per liter and the total cost of the 15 ITA No. 268/Del/2008 Pushpak Auto Centre diesel consumption was worked out at Rs. 12,35,456/-. He was of the view that the assessee had shown excess consumption of diesel to the extent of Rs. 3,60,199/- and sustained the disallowance to that extent.
14. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee was incurring the expenditure on account of salary to the driver and cleaner, maintenance/repair expenses of the tankers and also incurred expenditure for the diesel consumed by tanker. It was stated that the assessee maintained a separate account in respect of such tanker, the gross income of which was disclosed at Rs. 1,96,242/- and after claiming the depreciation at Rs. 1,52,275/-, the net income was shown at Rs. 43,867/- which was more than the income deemed to be shown u/s 44AE of the Act. It was further stated that the addition sustained by the ld. CIT(A) on the basis of average consumption per liter of diesel was not justified because there were other expenses of repair/maintenance, driver/cleaner salary and that there could not be any fixed consumption of diesel which depended upon many factors such as traffic hazard on the way etc. It was stated that the amount was reimbursed to the assessee on the basis of certain parameters 16 ITA No. 268/Del/2008 Pushpak Auto Centre which has not been challenged either by the AO or by the ld. CIT(A). It was also stated that no defect in the books of accounts maintained on day to day basis had been noticed and neither the books were rejected u/s 145(3) of the Act. Therefore, this adhoc disallowance could not be sustained.
15. In his rival submissions the ld. DR reiterated the observation made by the authorities below and strongly supported the impugned order passed by the ld. CIT(A).
16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is an admitted fact that the assessee maintained separate books of accounts for the tanker which were not rejected by invoking the provisions of section 145(3) of the Act. The AO disallowed 50% of the total expenses without any basis and the ld. CIT(A) also worked out the expenses on the basis of consumption of diesel but ignored other expenses like salary to the driver & the cleaner, repairs & maintenance, depreciation etc. In the present case the assessee received the reimbursement of the expenses on the basis of certain parameters fixed by the Petroleum Company those parameters were not doubted. The assessee received the transportation charges of Rs. 18,82,516/- claimed the expenses 17 ITA No. 268/Del/2008 Pushpak Auto Centre at Rs. 16,86,875/- which were much less than the reimbursement made by the Petroleum Company, the assessee after claiming depreciation of Rs. 1,52,275/- had shown the income from tanker at Rs. 43,867/- which was more than Rs. 42,000/- i.e. the income to be shown u/s 44AE of the Act, on that score also the disallowance sustained by the ld. CIT(A) was not justified. We, therefore, considering the totality of the fact of the present case set aside the impugned order passed by the ld. CIT(A) on this issue and the addition of Rs. 3,60,199/- sustained by the ld. CIT(A) is deleted.
17. In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 16/01/2015) Sd/- Sd/-
(I. C. Sudhir) (N. K. Saini)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 16/01/2015
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR