Income Tax Appellate Tribunal - Amritsar
Income Tax Officer vs M.S. Advance (P) Ltd. on 31 August, 2004
Equivalent citations: (2005)93TTJ(ASR)778
ORDER
U.B.S. Bedi, J.M.
1. This appeal of the Revenue is directed against the order passed by the learned CIT(A), Bhatinda, dt. 8th May, 2001, relevant to the asst. yr. 1998-99 whereby deletion of addition of Rs. 2,79,218 on account of unexplained cash credits made by the AO under Section 68 has been challenged,
2. The AO made the addition of Rs. 2,79,218 being unexplained cash credits under Section 68 and interest thereon. In appeal, it was argued that the assessee is a private limited company and carrying on the business of finance. The assessee is accepting deposits and advancing loans to the customers and the AO made an addition of Rs. 2,79,218 out of which the first addition relates to Rs. 81,610 being unexplained cash credits and interest thereon in the name of Shri Jangir Singh. The assessee's counsel argued that Shri Jangir Singh deposited Rs. 97,000 on 14th Feb., 1998, through draft. The attested affidavit of the creditor was furnished and the statement was also recorded during the course of assessment proceedings. The creditor accepted that he deposited the amount out of sale proceeds of agricultural land for Rs. 1,50,000 at Village Bhairupa on 26th Aug., 1997. Photocopy of the sale deed was furnished before the AO. The creditor also stated that he received pension from State Government and also earned agricultural income. The creditor produced a copy of saving account with State Bank of Patiala in which he deposited Rs. 80,000 from 3rd Feb., 1998 to 14th Feb., 1998. The creditor purchased the draft from his saving fund account and the AO after discussing the explanation of the creditor has rejected such explanation on the ground that there was a time gap of about 5 months in the sale of agricultural land and depositing the amount in the bank. The AO has further observed that as per sale deed the amount was received earlier but the AO has failed to prove that the deposits of Rs. 80,000 were not made out of the sale proceeds of Rs. 1,50,000. The creditworthiness of the creditor was proved by the assessee and the AO made the addition of Rs. 80,000 out of the deposit of Rs. 97,000 without any basis. The AO has partly accepted the credit. It was pleaded that since the assessee has discharged the onus of proving the identity, capacity and source of the creditor and moreover a sum of Rs. 44,000 was withdrawn by Shri Jangir Singh on 7th Jan., 2000. Therefore, placing reliance on the Amritsar Bench's decision in the case of ITO v. Ramji Dass Om Parkash in ITA No. 863/Asr/1992, it was pleaded for deletion of the addition whereas the AO, on the other hand, observed that the assessee has failed to prove the creditworthiness of the creditor and has given its own money to be deposited and immediately get the same in the shape of bank draft. So, addition has rightly been made. .
3. The learned CIT(A) while considering and accepting the plea of the assessee has concluded to delete the addition as per para 2.2 of the order as under :
"2.2 I have given careful consideration to the views expressed by both the sides. It is a fact that the creditor, Shri Jangir Singh, was produced before the AO who in turn has given statement before the AO that he has advanced the loan to the assessee amounting to Rs. 97,000 on 14th Feb., 1998. It is also a fact that the creditor has sold the land through registered deed for a sum of Rs. 1,50,000 on 26th Aug., 1997. It is also a fact that the AO failed to adduce any evidence to prove that the creditor utilised the sale proceeds of agricultural land of Rs. 1,50,000 somewhere else. It is also a fact that the creditor has filed an affidavit that he is an agriculturist and owns 15 acres of agricultural land. It is further seen that the creditor has paid the amount through bank draft of Rs. 97,000 which is duly debited to the bank account on 14th Feb., 1998. Keeping in view all these factors, I hold that the creditor, Shri Jangir Singh, has discharged the burden of proving the identity, source of creditor and also the transaction made. Accordingly, the addition of Rs. 81,610 made by the AO is not justified and stands deleted." .
4. Similarly, second addition of Rs. 88,590 (Rs. 44,295 + Rs. 44,295) has been made on account of unexplained cash credits of Rs. 44,295 each in the names of Shri Baldev Singh and Shri Balkar Singh. The assessee argued that Shri Baldev Singh and his son, Shri Balkar Singh, deposited Rs; 40,000 each with the assessee. Attested affidavits of both the creditors were furnished and the statements were recorded. It was explained before the AO during the course of assessment proceedings that Shri Baldev Singh sold ancestral agricultural land at village Laundewala for Rs. 3,00,000 on 20th Jan., 1997. Photocopy of the sale deed was furnished before the AO that Shri Baldev Singh deposited Rs. 40,000 through payee's account pay order dt. 23rd June, 1997, purchased from Punjab & Sind Bank, Extension Counter, Muktsar, on 23rd June, 1997, and deposited the same with the company. According to the AO the amount could be given to the son at the time of complete partition of the family only. The AO has further doubted the contention of the assessee because the land was sold in January, 1997, and the pay order was purchased in June, 1997. The AO failed to prove that the amount of sale proceeds was utilised by the depositors somewhere else. The AO failed to appreciate the fact that the only business of the company is to accept deposits from the public and the interest was duly credited to the accounts of the creditors. The assessee proved the identity, capacity and source of the creditors.
5. The learned CIT(A) while considering and accepting the plea of the assessee has concluded to delete such addition with respect to both the creditors as per para 3.2 of the order as under :
"I have given careful consideration to the views expressed by both the sides, and hold that there is weightage in the arguments advanced by the learned counsel of the appellant (that) Shri Baldev Singh and his son, Balkar Singh, deposited Rs. 40,000 each through payee's account pay order dt. 23rd June, 1997, with the appellant. The affidavits were furnished and the statements of the creditors were also recorded. Shri Baldev Singh has confirmed that he has deposited Rs. 40,000 through payee's account pay order dt. 23rd June, 1997, with the assessee. He further explained that the amount was deposited out of the sale proceeds of agricultural land in village Laundewala for Rs. 3,00,000 through registered deed dt. 20th Jan., 1997, Similarly, Shri Balkar Singh confirmed that he deposited Rs. 40,000 through payee's account pay order on 26th March, 1997, and he received this amount out of HUF funds from sale proceeds of ancestral agricultural land sold by his father. The AO, on the other hand, failed to prove that the sum of Rs. 3,00,000 was utilised by the creditors for some other purposes. Accordingly, the identity of the creditor, source of deposit and genuineness of transactions have been proved beyond doubt. I, therefore, hold that the addition of Rs. 88,590 made by the AO is not justified and the same stands deleted."
6. Similarly, next addition of Rs. 53,410 has been made on account of unexplained cash credit in the name of Shri Rajinder Singh and the Authorised Representative of the assessee argued that Shri Rajinder Singh deposited Rs. 49,900 through pay order purchased from Punjab & Sind Bank, Extension Counter, Muktsar, on 11th June, 1997. Affidavit of the creditor was furnished and the statement of the creditor was recorded during the course of assessment proceedings. It has been explained that Shri Rajinder Singh along with his brother, Sukhchain Singh and sister-in-law (brother's widow) own 430 Kanals of agricultural land in village Ghudiana, Tehsil Fazilka, Copy of the Jamabandi was also filed before the AO. The annual Theka from this land is Rs. 4.25 lakhs. The AO rejected the explanation of the creditor because 104 kanals of land was mortgaged with the bank. The AO has failed to observe that only 16 kanals of agricultural land, i.e., 320/2080 shares of 104 kanals was mortgaged without possession for raising crop loan on 30th May, 1999. The same was not relevant to the asst. yr. 1998-99. Thus, the AO failed to provide an opportunity to the assessee to clarify the factual position. Moreover, the interest was credited to the account of the creditor. The assessee proved the identity, capacity and source of credit.
7. The learned CIT(A) while considering and accepting the plea of the assessee has concluded to delete this addition also as per para 4.2 of the order as under :
"I have given careful consideration to the views expressed by both the sides and hold that there is weightage in the arguments advanced by the learned counsel of the appellant. Shri Rajinder Singh was produced before the AO and his statement was also recorded. He has confirmed the deposit of Rs. 49,000 through pay order dt. 11th June, 1997. He explained that he along with his brother and sister-in-law own 430 kanals of agricultural land at village Ghudiana and the amount of Rs. 49,000 was deposited out of Theka of agricultural land. The AO, on the other hand, rejected the contention of the assessee because of the entry in the Jamabandi of the creditor that he mortgaged 16 kanals of agricultural land. The finding of the AO that the creditor mortgaged 104 kanals of agricultural land is factually incorrect and does not relate to the period of transaction of loan as the land was mortgaged on 30th May, 1999. Keeping in view these facts of the case, I hold that the assessee has proved the identity of the creditor, source of credit and the genuineness of the transaction. Therefore, the addition made by the AO is not justified and stands deleted."
8. The next addition of Rs. 55,608 has been made on account of unexplained cash credit in the name of Smt. Amritpal Kaur and it was argued that Smt. Amritpal Kaur deposited Rs. 49,900 through payee's account dt. 11th June, 1997, through pay order purchased from Punjab & Sind Bank, Extension Counter, Muktsar. An affidavit of the creditor was furnished and her statement was recorded by the AO. She explained that she received Rs. 30,000 as gift from her father, Shri Jagjit Singh, on 1st June, 1997. She further explained that she owns 2 acres of agricultural land. She purchased the pay order out of gift of Rs. 30,000 from her father and balance from savings of agricultural income. An affidavit of Shri Jagjit Singh, father of Smt. Amritpal Kaur, along with the copy of Jamabandi as evidence of land owned by Shri Jagjit Singh was also furnished. Shri Jagjit Singh appeared before the AO and his statement was recorded. He confirmed the gift of Rs. 30,000. The assessee, therefore, proved the identity, capacity and source of the creditor whereas, on the other hand, the AO observed that no evidence regarding withdrawal of Rs. 30,000 by the father of the creditor has been furnished. In the absence of evidence, Rs. 49,000 paid by pay order have been treated as unexplained under Section 68 of the IT Act, 1961.
9. The learned CIT(A) while considering and accepting the plea of the assessee has concluded to delete the addition as per para 5.2 of the order as under :
"5,2 I have given careful consideration to the views expressed by both the sides and hold that there is weightage in the arguments advanced by the learned counsel of the appellant. The creditor was produced before the AO who recorded her statement during the course of assessment proceedings. She has confirmed the deposit of Rs. 49,900 through payee's account pay order dt. 11th June, 1997, with the assessee. She further explained that she received Rs. 30,000 as gift from her father on 1st June, 1997, and she owns 2 acres of agricultural land. She utilised the gift of Rs. 30,000 and the savings of agricultural income for making deposit of Rs. 49,900 with the appellant. The appellant also produced Shri Jagjit Singh, father of the creditor before the AO and his statement was recorded. Shri Jagjit Singh also confirmed the fact of making gift to his daughter. The assessee also filed the Jamabandi of Shri Jagjit Singh. Therefore, the identity of the creditor, source of credit and genuineness of the transaction have been proved beyond any doubt. Therefore, the addition made by the AO is not justified and stands deleted."
10. Against the deletion of all the additions aggregating to Rs. 2,79,218, the Department is in appeal and the main thrust of argument of the learned Departmental Representative is that in some cases ft was a time gap between the source of receipt of the amount and the payment of the assessee and in one case, there was occasion for gifting the amount of Rs. 30,000 was birth of son and amounts should not have been given to the other party when it belongs to the son on whose birth the same was given by the father of the creditor and in one of the cases portion of the land was not mortgaged to the bank for obtaining credit note. The AO's action in making the addition is fully justified. It was thus pleaded for setting aside the order of the learned CIT(A) and restoring that of the AO.
11. The learned counsel for the assessee while relying upon the order of the learned CIT(A) pleaded for confirmation of the impugned order. It was also pleaded that all the creditors were produced, evidence of their being having capacity to give the loan has also been furnished and while recording the statement, the AO has not done any probing when fact of having given the amount and having source of income has also been proved. Therefore, there was no occasion for the AO to make the addition arid the learned CIT(A) has rightly deleted the same which relying on the case law of difference Courts, other Benches and even Amritsar Bench to support the order of the learned CIT(A).
12. After hearing both the sides and considering the material on record as well as documentary evidence, which were filed before the lower authorities and copies placed before this Bench to which my attention was drawn, I find that the CIT(A) has rightly appreciated the facts in the light of the material available on record. The assessee has not only filed confirmation letters, affidavits of the creditors and also produced all the creditors who have admitted to have given the loans to the assessee-company and also furnished necessary evidence to prove their capacity to advance such loans, and in view of fact and circumstances of the case it is immaterial whether some amount is kept at home and deposited the same before issuing cheques, etc. Since source of such deposits has been proved by the assessee and the AO has not objected to the assertion made by the creditors at the time of recording of the statements, therefore, in my considered opinion, the learned CIT(A) is fully justified in view of the facts and the circumstances of the case to delete all the additions. Since no fresh material or evidence has been adduced nor any infirmity or flaw in the order of the learned CIT(A) came to my notice, therefore, while concurring with the findings of the learned CIT(A), I uphold his order and dismiss the appeal of the Revenue.
13. As a result, the appeal of the Revenue gets dismissed.