Income Tax Appellate Tribunal - Ahmedabad
Apex Therm Packaging Pvt.Ltd.,, Surat vs Department Of Income Tax on 23 April, 2014
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'ए
ए',, अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
ौी कुल भारत,
भारत Ûयाियक सदःय एवं ौी टȣ.
टȣ.आर.
आर.मीणा,
मीणा, लेखा सदःय के सम¢।
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER and
SHRI T.R.MEENA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.253/Ahd/2010
( िनधा[रण वष[ / Assessment Year : 2006-07)
The Income Tax Officer बनाम/ M/s.Apex Therm Packaging
Ward-1(1) Vs. Pvt.Ltd.
Surat 5006, Trade House
Ring Road, Surat
ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAECA 0982 C
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से / Appellant by : Shri O.P.Batheja, Sr.DR
ू×यथȸ कȧ ओर से/Respondent by : Shri Ramesh Malpani, AR
सुनवाई कȧ तारȣख / Date of Hearing : 23/4/2014
घोषणा कȧ तारȣख /Date of Pronouncement : 23/05/2014
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-I, Surat ('CIT(A)' for short) dated 26.11.2009 pertaining to Assessment Year (AY) 2006-07. The Revenue has raised the following grounds of appeal:-
1) On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in restricting the addition made by AO of Rs.43,70,000 on account of unexplained cash credit u/s.68 of the Act to Rs.2,00,000.
2) On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in restricting the disallowance of interest made by the AO of Rs.1,82,648 claimed to have been paid ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -2- by the assessee on the amount of unexplained cash credit to Rs.11,770.
3) On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer.
4) It is, therefore, prayed that the order of the CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent.
2. This appeal is restored by the Hon'ble High Court of Gujarat vide order dated 03/12/2013 passed in Tax Appeal No.584 of 2013. Before the Hon'ble High Court, the grievance of the assessee was that number of decisions of the Jurisdictional High Court as well as the learned Tribunal were relied upon and cited on on behalf of the assessee, however, without considering and/or dealing with the decisions relied upon by the assessee, this Tribunal observed in one line in para-9 that "due to these reasons, the case laws relied upon by the assessee do not come to its rescue". The Hon'ble High Court has directed to pass order afresh in accordance with law and on merits considering and/or dealing with the decisions which may be relied upon by either of the parties and pass a speaking order.
3. During the course of hearing, the ld.counsel for the assessee submitted that a miscellaneous application No.36/Ahd/2013 was also filed by the assessee and this Tribunal (ITAT "A" Bench Ahmedabad) was pleased to recall its order and the order dated 13/12/2013 was passed. In the order dated 13/12/2013, the Tribunal had partly allowed the Revenue's appeal and Cross Objection of the assessee was allowed for statistical purposes. It appears this fact was not brought to the notice of the Hon'ble High Court by the assessee which amounts to suppression and concealment of fact. This act of the assessee is highly deprecated, ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -3- Revenue authority is at liberty to take appropriate step against the assessee as per law. In pursuance to the direction of the Hon'ble High Court, this appeal was fixed for hearing on 23/04/2014.
4. Ground No.1 is with regard to restricting the addition made by the AO of Rs.43,70,000/- on account of unexplained cash credit u/s.68 of the Act to Rs.2,00,000/-.
4.1. The ld.counsel for the assessee strongly placed reliance on the order of the ld.CIT(A) and submitted that all relevant details were furnished before the Assessing Officer(AO). He submitted that out 17 lenders, 8 were produced before the AO during remand proceedings who have confirmed the payment of money. He submitted that the balance- sheet and the capital accounts of the concerned parties make it ample clear that the parties were having sufficient capital to advance loans to the assessee. The loans received and repaid with interest were through banking channels by way of 'account payee cheques'. Reliance has been placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT vs. Ranchhod Jivabhai Nakhava in Tax Appeal No.50 of 2011 dated 20/03/2012. He submitted that the Hon'ble High Court has categorically held that once the AO gets hold of the PAN of the lenders, it was his duty to ascertain from the AO of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the AO of the lenders of the assessee, the AO decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -4- in our opinion, the AO did not follow the principle laid down under Section 68 of the Income Tax Act. He submitted that the Hon'ble High Court further held that if on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the AO could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the AO in examining the lenders of the assessee was a wrong approach. He submitted that the Hon'ble High Court has categorically held that If the AO of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the AO in question has no justification to disbelieve the transactions reflected in the account of the creditors. He also placed reliance on the judgement of Hon'ble Rajasthan High Court rendered in the case of Aravali Trading Co. vs. Income Tax Officer reported at (2000) 220 CTR (Raj) 622. He submitted that the Hon'ble Rajasthan High Court has held that neither the provisions of section 68 nor on general principle, it can be said that once the existence of persons in whose name credits are found in the books of the assessee is proved and such persons own such credits with the assessee still the assessee is to further prove the source from which the creditors could have acquired money to be deposited with him. The ld.counsel for the assessee relied on the decision of the Hon'ble Gujarat High Court rendered in the case of Dy.CIT vs. Rohini Builders reported at (2002) 256 ITR 360 (Guj.). The ld.counsel for the assessee submitted that the view of the ld.Tribunal has been affirmed by the Hon'ble High ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -5- Court of Gujarat. He submitted that the Hon'ble ITAT Ahmedabad 'B' Bench in ITA No.3860/Ahd/1992 in the case of Rohini Builders vs. Dy.CIT has held that the assessee has furnished the complete addresses of all the creditors along with GIR numbers/PAN as well as confirmations along with copies of assessment orders passed in the cases of some creditors. It is held by the Tribunal that it is clear that the assessee has discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR Numbers/Permanent Account Numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the amounts were received by the assessee by 'account payee cheques' drawn from bank account of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Hon'ble Bombay High Court in the case of Orient Trading Co. vs. CIT (1963) 49 ITR 723(Bom). The ld.counsel for the assessee also placed reliance on the decision of the Hon'ble Co-ordinate Bench (ITAT 'B' Bench Ahmedabad) rendered in the case of ACIT vs. Shri Pareshbhai Chandrakant Jariwala in ITA No.2425/Ahd/2008 for A.Y. 2005-06 dated 25/03/2011. He submitted that in the said case, the Tribunal has held once the assessee produced the basic records of the creditors which show the identity of the creditors, capital accounts of the creditors and the bank accounts through which money was transferred through cheques to the assessee and evidence that all of them are income-tax assessees then it ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -6- cannot be said that assessee has still to discharge the onus. The ld.counsel for the assessee has also relied on the judgement of Hon'ble Madya Pradesh rendered in the case of CIT vs. Barjatiya Children Trust reported at (1997) 225 ITR 640 (M.P.) and also the judgement of Hon'ble High Court of Gauhati rendered in the case of P.K. Sethi vs. CIT reported at (2006) 286 ITR 318 (Gau). In support of the contention that the creditors are income-tax assessees and the transactions were accepted as genuine in the cases of creditors. Thus, no inference could be drawn that these are fake transactions. Further, the ld.counsel for the assessee relied on the judgement(s) of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. Apex Them Packaging (P.) Ltd. reported at (2014) 42 taxmann.com 473 (Gujarat) and of CIT vs. Ayachi Chandrashekhar Narsangji reported at (2014) 42 taxmann.com 251 (Gujarat). The ld.counsel for the assessee submitted that the ld.CIT(A) has given a very detailed finding and no fault can be found in the order of the ld.CIT(A).
5. On the other hand, ld.Sr.DR pointed out that the AO has categorically given a finding that the creditworthiness of the creditors could not be proved. He submitted that the entire transactions raise suspicion about the conduct of the assessee. He submitted that the cash was deposited into the bank accounts and subsequently, the cheques were issued. He has submitted a chart giving details about the deposit of cash and issuance of cheques by the creditors. He pointed out that the cash was deposited a day or two prior to issuance of cheques to the assessee.
ITA No.253/Ahd/2010The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -7- He has also placed reliance on the judgment of the Hon'ble High Court of Gujarat rendered in the case of Blessing Construction vs. ITO reported a (2013) 32 taxmann.com 366 (Gujarat). He submitted that the facts of the present case are squarely covered by the judgement of Hon'ble Gujarat High Court rendered in the case of Blessing Construction vs. ITO (supra). He submitted that the Hon'ble High Court has held that with respect to legal contention that the Revenue cannot insist on assessee supplying the source of source is impeccable. However, the facts of the present case are vastly different. It is of course true that some of the observations made by the Tribunal may suggest that the Tribunal did concern itself with the source of the source. However, such observations cannot be picked in isolation as to treat that as the conclusion of the Tribunal. When one reads the order of the Assessing Officer, that of the Commissioner (Appeals) and also of the Tribunal, inescapable conclusion one arrives at is that the Revenue authorities as well as the Tribunal found the entire transaction not genuine. There was sufficient evidence on record to suggest that in case of all the depositors, their bank accounts contained meager balance shortly before sizable amount of Rs.1 lakh and upward were given to the assessee through such account. In such bank accounts, cash amounts were credited and immediately entire amounts were withdrawn through issuance of such cheques in favour of the assessee. It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheque of sizable amounts was established. In short therefore, the very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -8- failing to establish source of the source. The Ld.Sr.DR also relied on the judgement of Hon'ble High Court of Gujarat rendered in the case of Umesh Krishnani vs. ITO reported at (2013) 35 taxmann.com 598 (Gujarat) dated 15th April-2013. He submitted that the Hon'ble High Court has held that three basic ingredients; i.e. (a) identity, (b) creditworthiness and (c) genuineness of the transaction, when are considered, it cannot be disputed that all the three of them require independent consideration and yet they are not mutually exclusive or can be considered in isolation. It hardly needs to be specified that the well recognized principle of not insisting upon source of the source needs no elaboration. Upon appreciation of materials on record and totality of facts and circumstances of the case, the revenue authorities and the Tribunal came to the conclusion that the entire transaction was a circuitous route to bring on books the assessee's own unaccounted money. The factor that the donors did not possess independent source to make such deposits must be viewed in light of the findings that the assessee had no justification for borrowing such amounts at such high rate of interest. These aspects would have a bearing on the genuineness of the transaction and the creditworthiness of the donors and cannot be seen as an attempt to throw the burden to prove source of the source of the assessee. He submitted that the Hon'ble High Court has taken note of the fact that substantial amount of cash was deposited in the bank accounts of all the creditors shortly prior to issuance of cheques and insufficiency of the fund with the creditors when could be duly established from the overall facts and circumstances of the case and when it is further found as a matter of fact that the assessee had no justification ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07 -9- for borrowing such amounts at high rate of interest, even without disturbing the well established principle of not insisting on the assessee proving source of the source, on the robust facts of the revenue authorities have rightly not concluded in favour of the assessee. The ld.Sr.DR also relied on the judgement of the Hon'ble Supreme Court rendered in the case of ITO vs. M.Pirai Choodi reported at (2012) 20 taxmann.com 733 (SC) dated 19th November-2010.
6. We have heard the rival submissions, perused the material available on record and gone through the case-laws relied upon by the respective parties. The AO made additions on the ground that the creditworthiness of the lenders could not be established. The case of the assessee is that all the creditors are assessed to income-tax and in support of this contention, assessee furnished copy of PANs, income-tax returns, etc. The ld.counsel for the assessee placed reliance on various case-laws as discussed in para 4.1 of this order. The facts of the present case are distinguishable, in the present case there is no dispute that transaction is effected through banking channel, the assessee has furnished the PANs, income-tax returns and in some cases produced the creditors who have confirmed the payment to the assessee. But dispute is with regard to creditworthiness of the creditors. It is brought on record that money was deposited in bank account a day or two prior to issuance of cheques. This fact is not disputed by the ld.counsel for the assessee. The explanation for cash deposit in bank account a day or two before is that there was cash in hand and in some cases the assessee has shown receivables in their accounts. The ld.CIT(A) has discussed elaborately ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07
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this issue in his order. In para-5.12 of his order, the ld.CIT(A) has given a finding that all the depositors have explained the source of availability of cash with them. Some portion of their capital was in the form of outstanding receivables which were received in cash before depositing the same in their respective bank accounts. The ld.CIT(A) has reproduced a chart in para 5.12 of his order, which is reproduced hereinbelow for the sake of clarity.
Sr.No. Name of Depositors Loan given to Total Capital of
the appellant Depositors as
(Rs.) on 31.03.2006
(Rs.)
1. Shri Bhavansingh 2,00,000 3,80,470
Sekhawat
2. Smt. Chunkidevi Singhodia 2,00,000 4,86,883
3. Shri Gopal Saini 2,60,000 3,15,457
4. Shri Govind Seshma 2,00,000 5,58,311
5. Smt.Indra Parekh 2,00,000 4,80,263
6. Smt.Kamal Kishore 2,00,000 3,71,732
R.Pareek
7. Shri Mukesh Kumar 2,00,000 3,38,536
Malwal
8. Shri Narpat Sharma 2,00,000 4,46,956
9. Shri Om Prakash Sharma 2,00,000 3,83,523
10. Shri R.L. Agrawal & Sons 12,50,000 6,94,492
HUF Loans &
advances of
Rs.33,29,471
11. Shri Ramesh Bhadu 1,60,000 3,76,988
12. Shri Ram Chander 1,60,000 3,72,449
Chaudhary
13. Shri Satya Narayan 2,00,000 3,37,335
Chaudhary
14. Shri.Seo Narayan 1,60,000 3,65,071
Chaudhary
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15. Smt. Suman Om Prakash 2,60,000 4,07,853
Sharma
16. Shri.Surendra Kumar 1,60,000 3,41,155
Chaudhary
17. Shri Vijay Kumar 1,60,000 3,68,020
Chaudhary
6.1 The Revenue has placed reliance on the judgement of Hon'ble
Jurisdictional High Court rendered in the case of Blessing Construction vs. ITO reported at (2013) 32 taxmann.com 366 (Gujarat). On the other hand, the ld.counsel for the assessee has submitted that in assessee's own case for AY 2007-08, the appeal filed by the Revenue was dismissed by the Hon'ble Gujarat High Court. We find that the Hon'ble High Court in assessee's own case in Tax Appeal No.1070 of 2013 for AY 2007-08 has held as under:
"We are in complete agreement with the reasoning given by the CIT(A) as well as the ITAT. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender were furnished and when it has been found that the loans were received through cheques and the loan account were duly reflected in the balance sheet, the Assessing Officer was not justified in making the addition of Rs.33,55,011/-. Under the circumstances, no question of law, much less substantial question of law arises in the present Tax Appeal. Accordingly, the present Tax Appeal deserves to be dismissed and is accordingly dismissed".
6.2. However, in the present year, the explanation of the lenders are that there were receivables in the books of accounts which were received in the bank accounts. We find that the AO has given a finding that in all the cases the cash has been deposited one or two days before issuing the ITA No.253/Ahd/2010 The ITO vs. M/s.Apex Therm Packaging P.Ltd.
Asst.Year - 2006-07
- 12 -
cheques and has suspected about the authenticity of the explanation given by the assessee. However, ld.CIT(A) has given finding on fact that out of 17 creditors, either appeared before the AO in remand proceedings and confirmed the loan to the assessee. It is also observed by the ld.CIT(A) that all the creditors have enclosed their balance-sheet along with return of income reflecting capital. The ld.CIT(A) has also given finding on fact that loan was received by cheque and has also been returned through banking channel. These finding of ld.CIT(A) has not been controverted by the Revenue by placing any material on record. Therefore, in the light of judgement of Hon'ble Jurisdictional High Court in the case of the assessee in Tax Appeal No.1070 of 2013, we do not find any infirmity of the orders of ld.CIT(A), same is hereby upheld. Thus, ground No.1 of the Revenue's appeal is dismissed.
7. Ground No.2 of Revenue's appeal is connected with ground No.1 and, therefore, this ground is also dismissed.
8. Ground Nos.3 & 4 are general in nature which require no independent adjudication.
9. In the result, Revenue's appeal is dismissed.
Order pronounced in Court on the date mentioned hereinabove at caption page Sd/- Sd/-
( टȣ.आर.मीणा ) (कुल भारत)
लेखा सदःय Ûयाियक सदःय
( T.R. MEENA ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 23/ 05 /2014
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
ITA No.253/Ahd/2010
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आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-I, Surat
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .13 & 20.5.14(dictation-pad 25-pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ......15.5.14/20.5.14
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which fair order placed before Other Member............
6. Date on which the fair order comes back to the Sr.P.S./P.S.......23.5.14
7. Date on which the file goes to the Bench Clerk.....................23.5.14
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................