Income Tax Appellate Tribunal - Chandigarh
Presstime Informational Service Pvt. ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT
AND MS SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.664/Chd/2008
Assessment Year: 2000-01
The AC IT, Vs. M/s Presstime Information Services
Central Circle-II, Pvt Ltd, Chandigarh
Chandigarh
(Appellant) (Respondent)
Appellant By : Shri S.S.Khemwal
Respondent By: Shri Sudhir Sehgal
ORDER
PER SUSHMA CHOWLA, JM
The appeal by the Revenue is against the order of CIT(A)-I, Ludhiana dated 15.4.2008 relating to assessment year 2000-01 against the order passed under section 144 of the I.T. Act, 1961.
2. The Revenue has raised the following grounds of appeal:-
1. The Ld. CIT(A) has erred both in law and on facts of the case in deleting the addition of Rs. 50,51,650/-
made by the Assessing Officer u/s 68 on account of unexplained Income / Cash credits.
2. The Ld. CIT(A) has erred both in law and on facts of the case in admitting fresh / additional evidence regarding cash credits and accepting the same ignoring the fact that during assessment proceedings the assessee has already been given various opportunity to explain his case.
3. The Ld. CIT(A) has erred both in law and on facts of the case in admitting fresh / additional evidence 2 regarding cash credits and accepting the same without giving an opportunity of cross examination to the Assessing Officer.
3. The issue raised in the present appeal is against the deletion of addition made u/s 68 of the Income Tax Act, 1961 amounting to Rs. 50,51,650/-. The grievance of the Revenue is against the admission of fresh/additional evidence regarding the cash credits, without giving an opportunit y of cross examination to the Assessing Officer
4. The brief facts of the case are that the assessment in the case was completed ex-parte u/s 144 of the Act as despite several notices of hearing issued to the assessee, none attended the assessment proceedings. The Assessing Officer noted the assessee to have received loans of Rs. 50,61,650/- i.e. Rs. 72,000/- from Mrs Pritpal Kaur and Rs. 49,79,650/- from Shri Reetinder Sidhu. As the assessee had failed to furnish the evidence in respect of the said fresh loans received during the year, the same were treated as unexplained income of the assessee u/s 68 of the Income Tax Act, 1961. During the course of appellate proceedings, it was explained by the Ld. AR for the assessee that none of the notices of hearing were either served or refused by any of the directors of the assessee company. It was further explained that one of the director, Smt. Pritpal Kaur was staying in H.No. 549, Sector 10-A, Chandigarh but she had left India on 5th April, 2002 for medical treatment in Unites States of America where her son Mr. Reetinder Sidhu was staying. It was further explained that no person was residing at the given address, which is the address of the assessee company and as such none of the notice could be served upon the assessee. The Ld. counsel further submitted that in the absence of service of any notice of hearing, the assessment framed u/s 144 3 of the Act was not justified. Further, an application was moved to file certain additional evidence and a request was made to admit the same under Rule 46A of the I.T. Rules. The claim of the assessee was that Smt. Pritpal Kaur had received amounts in earlier years from her son Shri Reetinder Sidhu, who was a permanent resident of United States of America since 1998 and was carrying on the business on a large scale. The son had sent the money to his mother Smt. Pritpal Kaur, who in turn had invested the said sum in FDRs and on their encashment as deposit with the assessee company. The assessee filed the Photostat copies of the draft/s prepared from abroad by Shri Reetinder Sidhu in the name of Smt. Pritpal Kaur, which were made from USA. The said documents were furnished as additional evidence before the CIT(A). Further, it was pointed out that the bank draft bears the name of the purchaser i.e. Shri Reetiner Sidhu and name of the beneficiary, Smt. Pritpal Kaur. The said amount was deposited in the bank account bearing No. 24203 with Punjab & Sind Bank and the same were credited to the account of Smt. Pritpal Kaur. From there, the amount was advanced to the assessee company, which in turn is reflected in the bank account of the assessee company. The copies of the aforesaid bank accounts were also filed. The C IT(A) observed that the written submissions of the Ld. counsel as above along with copies of additional evidence, whatsoever, sought to be admitted by the Ld. counsel were forwarded to the Assessing Officer. The Assessing Officer (ACIT, CC, Chandigarh) sent his report under letter No:
CC/ACIT/06-07/1082 dated 20.2.2007. As per this report of the Assessing Officer, it is a fact that no notice or any questionnaire could be served directly upon the appellant since nobody was there at the last known address. In this report, the Assessing Officer has further stated that from the evidence filed by the appellant in the shape of passport of Smt. Pritpal 4 Kaur showing that she had left for USA, and further evidence relating to her medical treatment in USA and also other relevant information, it appears that Smt. Pritpal Kaur was not in India when the case was taken up for hearing. The Assessing Officer further reported that it appeared that the appellant was prevented by sufficient cause in not filing any information before him. However, he further mentioned in this report that the issue of admission of additional evidence might be decided on merit for the sake of justice.
5. In view of the report of the Assessing Officer that there was sufficient cause in not filing any information during the course of assessment proceedings as from the evidence filed by the assessee. It appeared that Smt. Pritpal Kaur was not in India when the case was taken up for hearing, it was held by the CIT(A) that admittedly the notices issued by the Assessing Officer fixing up the case at different times were not complied with. Smt. Pritpal Kaur being not in India, having gone to USA for medical treatment etc., as per the evidence on record and there being no responsible person of the appellant company to attend the assessment proceedings at the relevant time, as also opined by the Assessing Officer, the appellant can very well be said to have been prevented by sufficient cause in not filing the evidence which is sought of be admitted now as additional evidence under is Rule 46A of the I.T. Rule 1962. This evidence is, therefore, duly admissible u/r 46A of the I.T. Rules and it is admitted accordingly.
6. In view of the confronting of the additional evidence by the CIT(A) to the Assessing Officer and the report of Assessing Officer dated 5 20.2.2007, wherein the Assessing Officer had acknowledged that assessee was prevented by sufficient cause in not filing the information during the assessment proceedings and the issue of admission of additional evidence be decided on merits for the sake of justice, we find no merit in the ground of appeal raised by the Revenue that no opportunit y was afforded to the Assessing Officer before admitting the fresh / additional evidence. We reject the ground Nos. 2 & 3 raised by the Revenue in this regard.
7. Now, the issue remains against the merits of the addition. In the balance sheet of the assessee company, it was reflected that assessee had received Rs. 72,000/- from Smt. Pritpal Kaur, one of the director of the assessee company and Rs. 49,86,650/- from Shri Reetinder Sidhu. The explanation of the assessee was that the said amounts were received from Smt. Pritpal Kaur, Director of the assessee company, who in turn had received the amounts in various years from her son, Mr.Reetinder Sidhu. It was further clarified that in the balance sheet of the company, the deposit appears in the name of Shri Reetinder Sidhu and this mistake was committed by the Accountant of the company at the time of finalizing the balance sheet in as much as when he asked the management that who had sent the money, the name was given as Shri Reetinder Sidhu without realizing the fact that there is a documentary evidence of the amounts having come to the mother of Shri Reetinder Sidhu and from the Saving fund a/c of the mother, the amount had been advanced to the company.
8. Further, evidence was furnished by the Ld. AR for the assessee that the amounts received in the saving account of Smt. Pritpal Kaur was in turn received from her son were invested in FDRs and later on out of encashment of the FDRs received the amounts were advanced to the 6 company. It was also explained that the amount received from Smt. Pritpal Kaur was later on returned back to his son after her death. It was claimed that the assessee having received the amount from the director stand explained and even the source of source has been explained. The confirmation of Smt. Pritpal Kaur along with the source from where the amounts were advanced were furnished before the C IT(A).
9. The C IT(A) on consideration of the records, admitting the additional evidence further observed as under:-
"The Ld. counsel for the appellant has sought to explain these credits on the basis of additional evidence which has been admitted under Rule 46A of the I.T. Rules, 1962 as mentioned above. All the evidence which is admitted as additional evidence was also forwarded to the Assessing Officer. With regard to the merits of such additional evidence, the Assessing Officer, in his report dated 20.2.2007 has mentioned that the same is a question of appreciation of facts. The additional evidence, is therefore, being considered accordingly."
10. The C IT(A) further held that there was a mistake in as much as the amount in question was received from the director of the assessee company Smt. Pritpal Kaur and by an error, the said amount was shown as a loan from Shri Reetinder Sidhu in the balance sheet of the assessee company observing as under:-
"First, of all, let us discuss one mistake pointed out by the Ld. counsel. Though in the assessment order, the Assessing Officer has mentioned that the amount of Rs. 49,79,650/- has been credited in the books of appellant as loan from Shri Reetinder Sidhu, as clarified by the Ld. counsel in the written submissions, this is not the correct position. As per Shri Sudhir Sehgal, this was a mistake committed by the accountant of the company at the time of finalizing the balance sheet. It is further clarified that though the amount did come from Shri Reeinder Sidhu, however, this amount having come in the saving fund account of his mother, Smt. Pritpal Kaur and this having come further in the books of the appellant from the bank account of Smt. Pritpal Kaur, it is 7 quite clear that it was Smt. Pritpal Kaur, who had advanced the amount to the appellant and it was just a typographical error under the mistaken belief to show this amount as a loan from Shri Reetinder Sidhu. The above contention being proved on the basis of evidence on record, this is taken to be the factual position."
11. The C IT(A) in appreciation of the evidence filed by the assessee to prove the source of the said loan received from the director of the assessee company observed as under:-
"As far as the source of the amounts in question which were credited in the books of the appellant before we take up this issue for discussion, one thing is quite clear that the Assessing Officer made this addition just because assessment proceedings could not be attended and necessary evidence could not be filed before him. However, it is amply clarified in the written submissions of the Ld. counsel and the evidence brought on record under Rule 46A of the I.T. Rules, 1962 by him that Shri Reetinder Sidhu has been residing in USA for the last 20 years or so. He is the son of Smt. Pritpal Kaur. Shri Reetinder Sidhu had been sending different amounts to his mother, Smt. Pritpal Kaur in various years. This is quite evident from the entries in the bank pass book of Smt. Pritpal Kaur and other documents filed. Shri Reetinder Sidhu is shown to be carrying on business in USA and he is stated to have opened even an outlet namely "Pizza Hut" and also carrying on his independent business. Therefore, the identity of Shri Reetinder Sidhu, as rightly pointed out by the Ld. counsel, is beyond any doubt. From the vary fact that he had been carrying on business in USA for the last 20 years, his capacity is also proved. The evidence filed in the shape of copies of cheques and bank drafts and copy of bank account of Sm.t Pritpal Kaur further confirms without any doubt that it was the money sent by Shri Reetinder Sidhu from USA which was deposited in the bank account of Smt. Pritpal Kuar. Though the amounts having been deposited in the account No. 24202 of Smt. Pritpal Kaur, were stated to be first invested in FDRs and later on out of encashment of FDRs's the same was advanced to the appellant, the fact remains that this is the same money which was received by her from her son and form no one other than her son Shri Reetinder Sidhu. Smt. Pritpal Kaur is stated to have expired subsequently and major part of this amount is shown to be returned by the appellant to her son Shri Reetinder Sidhu vide Cheque No. 751320 dated 15.3.2005 and 751321 on 28.3.2005. The amounts returned by the appellant vide these cheques are Rs. 11 lac and Rs. 19,85,000/- respectively as is reflected in the bank account of the appellant.8
12. In view of the above said discussion and on the basis of the evidence furnished by the assessee the credits appearing in the books of accounts were held to be full y explained and the addition made by the Assessing Officer u/s 68 of the Income Tax Act was deleted by the CIT(A) . It was further held by the CIT(A) that for the purposes of addition u/s 68 of the Act, no assessee could be asked to explain source of the source and as the source of funds in the hands of Smt. Pritpal Kuar had been proved with evidence, no addition u/s 68 of the Act could be justifiabl y made in the hands of the assessee company.
13. The Ld. DR for the Revenue stressed that in order to fulfill the conditions of section 68 of the Act, the assessee has to establish the creditworthiness of the lender and also the establish the genuineness of the transactions. Reliance was placed on several case laws by the Ld. DR for the abovesaid propositions. In repl y, Ld. AR for the assessee pointed out that the onus on the assessee to prove the identit y and creditworthiness of the lender and to prove the genuineness of the transactions, has been discharged by the assessee. Our attention was drawn to the copy of account of Smt. Pritpal Kuar, placed at pages 15 to 21 of the paper book, wherein the amounts were received vide drafts and were invested in FDRs which were later encashed and amount advanced to the assessee company. The assessee drew our attention to the evidence filed before CIT(A) i.e. Photostat copies of the cheques / drafts sent by Shri Reetinder Sidhu from abroad, which in turn were deposited in the bank account of Smt. Pritpal Kaur. The copies of such evidence are placed at pages 6 to 14 of the paper book. The Ld. AR thus pointed out 9 that once the sources are explained in the hands of the assessee compan y there is no merit in any addition u/s 68 of the Income Tax Act, 1961.
14. We find that the CIT(A) has elaboratel y looked in to the evidence filed by the assessee, which was admitted and taken on record pursuant to the remand report of the Assessing Officer. The said amount though has been reflected as received from Shri Reetinder Sidhu in the balance sheet of the assessee was in fact transferred from the bank account of Smt Pritpal Kaur, one of the directors of the assessee company. She in turn had received the said amount from her son vide cheques / drafts issued abroad, which were deposited in her bank account and FDRs were made in the first instances from the said amounts received. Later the said FDRs were encashed and the amount deposited in the saving account of Smt. Pritpal Kaur with Punjab & Sind Bank, from where the cheques then issued to the assessee company.
15. The amount has by an error been shown to have received from Shri Reetinder Sidhu, as reflected in the balance sheet of the assessee company but in fact is the amount received from his mother Smt. Pritpal Kaur. The evidence of money received by Smt. Pritpal Kaur vide cheques / drafts from her son is furnished on record at pages 6 to 14 of the paper book and the copy of bank account of Smt. Pritpal Kaur evidencing the deposit of the said cheques is placed at pages 15 to 21 of the paper book. The said amount has been advanced to the assessee company, and the same was returned by the assessee company to Shri Reetinder Sidhu after the demise of his mother Smt. Pritpal Kaur. The said evidence is furnished at page 26 of the paper book. The Ld. DR for the Revenue has failed to controvert the aforesaid evidence filed by the assessee before the CIT(A) 10 and before us. In the absence of any contrary findings, we uphold the order of C IT(A) in holding that once the assessee has established the identit y, creditworthiness and genuineness of the transactions, there is no merit in the addition u/s 68 of the Income Tax Act. Upholding the order of C IT(A), we dismiss the ground of appeal raised by the Revenue.
16. In the result, appeal of the Revenue is dismissed.
Order Pronounced in the Open Court on this 8 t h day of December, 2010, Sd/- Sd/-
(N.BARATHVAJA SANKAR) (SUSHMA CHOWLA)
VICE PRESIDENT JUDICIAL MEMBER
Dated : 8 t h December, 2010
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR