Income Tax Appellate Tribunal - Amritsar
Ajay Electronics,, Pathankot vs Department Of Income Tax on 2 January, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. No.60(Asr)/2012
Assessment year:2003-04
PAN :ACPPK9573M
Dy.Commr. of Income Tax, vs. Sh. Ajay Kumar,
Circle-VI, Pathankot. Gurdaspur.
(Appellant) (Respondent)
I.T.A. No.62(Asr)/2012
Assessment year:2003-04
PAN :AABFA6955H
Dy.Commr. of Income Tax, vs. Sh. Ajay Electricals
Circle-VI, Pathankot. Gurdaspur.
(Appellant) (Respondent)
Appellant by:Sh.Mahavir Singh, DR
Respondent by:Sh. Subhash Mahajan, Advcoate
Date of hearing: 02/01/2014
Date of pronouncement:28/02/2014
ORDER
PER BENCH ;
These two appeals of the Revenue arise from different orders of CIT(A), Amritsar, each dated 08.11.2011 each for the assessment year 2003-
04. Since the issues involved in both the appeals are inter-connected, 2 ITA NOs. 60 & 62(Asr)/2012 therefore, both the appeals are being taken up together by this consolidated order for the sake of convenience: in ITA No.60(Asr)/2012, the Revenue has raised following grounds:
"1. Whether on the facts and circumstances of the case, the variation in the copies of Capital Account of Sh. Ajay Kumar partner as produced in the Court and copies of account filed with the Income Tax Department is immaterial.
2. Whether on the facts and circumstances of the case, the assessee was right without producing books of accounts of M/s. Ajay Electronics, Finance Division and Bank Pass book before the A.O. to substantiate claim that Rs.1,40,00,000/- was given to Sh. Ajay Kumar."
2. In ITA No.62(Asr)/2012, the revenue has raised following grounds of appeal:
1. Whether on the facts and circumstances of the case, the variation in the copies of Capital Account of Sh. Ajay Kumar partner as produced in the Court and copies of account filed with the Income Tax Department is immaterial.
2. Whether on the facts and circumstances of the case, the assessee was right without producing books of accounts of M/s.
Ajay Electronics, Finance Division and Bank Pass book before the A.O. to substantiate claim that Rs.1,40,00,000/- was given to Sh. Ajay Kumar."
3. First of all, we take up appeal of the Revenue in ITA No. 60(Asr)/2012. The brief facts of the case are that the assessee derives income from house property at Rs.100643/-, income in the hands of minor son, Master Amit as well as taxable receipts under the head 2 3 ITA NOs. 60 & 62(Asr)/2012 'Business Income" being remuneration and interest from two firms namely Ajay T.V. Centre, Gurdaspur and Ajay Electronics Pathankot. Subsequently, on receipt of information by way of complaint from two residents of two residents of Gurdaspur namely S/Sh.Nijjar Siongh, Bahadur Singh sons of S. Sewa Singh r/o Sant Nagar, Gurdsaspur to the effect that the assessee had filed documentary evidence n the court of Additional Civil Judge, Gurdaspur showing that he has withdrawn cash of Rs.1,70,00,000/- from Ajay Electronics, Pathankot on 31.12.2002 by filing copy of his capital account in the said court showing the said cash withdrawal. It is alleged by the complainant that the assessee has manipulated the books of account and there is variation in the copies of accounts as filed with the Income Tax Department. As per copy of capital account filed in the court of Addl. Civil Judge, Gurdaspur on 30.12.2202, the assessee is shown to have withdrawn Rs.1,70,00,000/- from M/s. Ajay Electronics, Pathankot and paid the same on 4.1.2003 but these entries did not appear in the copies of accounts filed with the return during assessment proceedings. Similarly, Sh. Ajay Kumar withdrawn Rs.5 lacs from Ajay T.V. Centre, Gurdaspur on 30.12.2002 and repaid the same on 2.1.2003. After confronting the assessee with the contents of the said complaint, and after verifying the capital account for 3 4 ITA NOs. 60 & 62(Asr)/2012 the relevant period in respect of assessee's firm, M/s. Ajay Electronics, the AO formed his independent reasons to believe that by failure on the part of the assessee to disclose fully and truly all material facts, income to the extent of RS.1,70,00,000/- has escaped assessment and thus initiated reopening proceedings by recording reasons u/s 148(2) and by issuing notice u/s 148 with the prior approval dated 11.3.2010 of Ld. CIT-II, Asr. From these facts, the AO observed that Sh. Ajay Kumar and two partnership firm M/s. Ajay TV Centre, Gurdaspur (Rs.5,00,000/-) and M/s. Ajay Electronics Pathankot (Rs.1,70,00,000/-) has introduced unaccounted money of Rs.1,75,00,000/- . In response to notice u/s 148, the assessee filed a letter dated 7.12.2010 stating therein that return already filed u/s 139(1) on 31.12.2003 be treated as having been filed in response to notice u/s 148. The assessee was asked not only to reconcile and explain the variation in the copies of his respective capital accounts, one filed in the court and the 2nd filed with the department and also required to explain the source of introducing this huge cash withdrawal of Rs.1,70,00,000/-. After considering the assessee's explanation, the AO rejected the same. In view of the variation in the assessee's copy of capital account appearing in the books of Ajay Electronics as furnished before the Trial Court vis-à-vis as furnished with the return of income, 4 5 ITA NOs. 60 & 62(Asr)/2012 which has been made part of his re-asstt. order, the AO has made an addition of Rs.1,70,00,000/- u/s 68 treating it assessee's own undisclosed income from unexplained sources.
4. The Ld. CIT(A) deleted the addition for the reasons mentioned in his order.
5. During the course of appellate proceedings before the Ld. CIT(A), the ld. counsel for the assessee filed written submissions which are available in para 5 at pages 5 to 9 of CIT(A)'s order.
6. As regards the legal ground, the Ld. CIT(A) vide para 8 at pages 10 to 15 rejected the legal ground of the assessee and confirmed the action of the A.O. with regard to the reopening of assessment proceedings u/s 147 read with section 151 of the Act.
7. There is no appeal of the assessee before us and therefore, the issue of reopening of assessment has attained finality.
8. The Ld. DR relied upon the order of the A.O.
9. The Ld. counsel for the assessee, on the other hand, relied upon the submissions made before the ld. CIT(A) and order of the Ld. CIT(A).
10. We have heard the rival contentions and perused the facts of the case. As regards the addition of Rs.1,70,00,000/-, the brief facts as reproduced in Ld. CIT(A)'s order are that the addition has arisen on receipt of a written complaint on 18.5.2009 by the 5 6 ITA NOs. 60 & 62(Asr)/2012 6 7 ITA NOs. 60 & 62(Asr)/2012 7 8 ITA NOs. 60 & 62(Asr)/2012 8 9 ITA NOs. 60 & 62(Asr)/2012
11. The assessee made the submissions and submitted the explanation which have been depicted by the ld. CIT(A) at pages 19 to 21 of his order in the form of question and the explanation by the assessee. We have perused the explanations given by the assessee, which are found to be convincing and accordingly, we concur with the views of the ld. CIT(A) at pages 21 to 26 of his order that the assessee has explained in explicit manner & the source of of the said investment of Rs.1,70,00,000/- pertaining to the previous year relevant to A.T.2003-04 and he is not further required to explain the source of source. Further the AO has not attempted to ask the source of repayment on 4.1.03 of such huge cash of Rs.1,70,00,000/- to its firm within such a short period of 5 days and since the department failed to invoke the provisions of section 269SS and 269T in this case, the ld. CIT(A) is of the view that the AO has not been able to make out a befitting case for making such abrupt addition u/s 68 without bringing on record the conclusive evidence such as copy of the final sale deed in whose name the registration was directed by the Court to be got done and as to whether the deal was at all matured or how finally the issue was settled by the Trial court so as to enable the Deptt. To make the addition in the appropriate hands. Moreover, from 9 10 ITA NOs. 60 & 62(Asr)/2012 the accounting practice & procedure, nature of imprest account and capital account is totally different. Imprest account does not necessarily forms part of capital account. Moreover, the AO has not taken any adverse view of similar cash credit of Rs.5,00,000/- taken on 30.12.2002 from another fim, M/s. Ajay TV Centre, Gurdaspur and repaid on 2.1.2003 i.e. within 3 days because the facts, purpose, circumstances in assessee's two transactions each with both the firms are almost identical and similar. Further the AO has failed to bring full facts regarding the finality achieved at the end of the Trial court had as to in whose name the sale deed was directed to be registered and or whether the transaction was matured or not. On the other hand, the assessee has all along been contending that he was conducting the transaction for and on behalf of the firms. Even concluding lines of para 5 of the AO's assessment order stating therein from the above facts, it appears that Sh. Ajay Kumar and the two partnership firms i.e. Ajay TV Centre, Gurdaspur (Rs.5,00,000/-) and M/s. Ajay Electronics, Pathankot (Rs.1,70,00,000/-. The assessee has claimed that he is not maintaining personal books of account. Therefore, in the absence of books, no credit can be given to the application of section 68 of the Act. Further, the assessee has produced Sh.Surinder Mahajan Partner of M/s. Ajay Electronics, Pathankot, who has confirmed 10 11 ITA NOs. 60 & 62(Asr)/2012 payment of Rs.1,70,00,000/- to the assessee. Moreover, the Finance Division is working since 1997-98 and it is duty appearing in the list of creditors . Interest paid by the Finance Division is duly reflected and debited in the P & L account and duly allowed by the AO. Moreover, asstt. For the A.Y. 1998-99 and 2001-02 have been completed u/s 143(3). It is not the case of the AO that funds of the firm were clandestinely were used to siphon out funds of the firm. As the funds were invested from the books of account, the asset against it would take place in the balance sheet of the firm. Therefore, the assessee has satisfactorily and rightly explained the source of funds in his hands. From this it can be safely transpired and inferred that the AO was also not of the confirmed opinion as to in whose hands, these additions are liable to be made. Thus onus was on the assessee to prove the identity of the creditor, his creditworthiness and genuineness of the transaction. The assessee during the course of assessment proceedings explained that the amount of cash deposit of Rs.1,70,00,000/- was taken form the firm M/s. Ajay Electronics, Pathankot. Sh. Surinder Mahajan, partner of M/s. Ajay Electronics, Pathankot in his written submissions dt.29.12.2010 before the AO furnished during the course of re-assessment proceedings in the case of the firm M/s. Ajay Electronics, Pathankot for the A.Y. 2003-04 11 12 ITA NOs. 60 & 62(Asr)/2012 stated and also confirmed the fact that the firm has advanced this amount to the assessee for purchase of land for land on its behalf. The relevant gist of the said reply is extracted hereinbelow "We, at Ajay Electronics arranged the money from our Finance Division, which in turn borrowed money from public since said 'Finance Division' is already in this business for last more than six years. The money was paid to our partner Sh. Ajay Mahajan and later on the deal remained immatured and money was return to us, We in turn returned the money to the public from whom we borrowed for short term. Sir, this money was borrowed by our Finance Division from public and lent the same to our partner, Sh. Ajay Mahajan Imprest A/c" and later on recovered the same from Sh. Ajay Mahajan Imprest A/c and returned back to depositors of our Finance Division immediately. We at M/s. Ajay Electronics did not lend the said money. It was neither deposited in our books of account nor any payments were made to suppliers or creditors etc. except for repaying the borrowings of Finance Division from where the money was received during the year itself..
During the course of re-asstt. Proceedings, the assessee's reply dt.29.12.2010 was taken into consideration by the AO and its relevant extracts are reproduced below for the sake of ready reference:
In this case, Sh. Ajay Mahajan has received the money at Rs.170 lakhs from M/s. Ajay Electronics, Pathankot a regular assessee with your circle. Copy of account viz (1) Capital account (2) Imprest A/c from M/s. Ajay Electronics is enclosed herewith. Sir, money received is debited in imprest a/c and since the saem was not used by Sh. Ajay Mahajan for the purpose it was collected/taken from firm M/s. Ajay Electronics was returned back to them and as such the Imprest a/c. was squared up. Sir, since this entry was squared up in Imprest a/c itself such the same was not made part of capital account filed with you. In capital a/c, the entry of permanent nature were recorded except this Imprest account. Sir, no adverse inference should be drawn since Sh. Ajay Mahajan is an regular assessee and his source, M/s. Ajay Electroncis , Pathankot is also regular assessee with your circle...12
13 ITA NOs. 60 & 62(Asr)/2012 The A/R of the assessee has placed on record the following judgments in support of his contentions that if the creditor has confirmed on oath that he advanced the amounts to the assessee, the burden immediately shifts on the AO to show as to why it must be held that credit represented the income of the assessee from suppressed sources unless it is proved that the creditor is only a name-lender. In order to arrive at such a conclusion, even the AO has to be in possession of sufficient and adequate material. But in the present case, the AO has not made any exercise to prove that the amount of Rs.170 lakhs in fact belonged to the assessee because as discussed supra, Sh.Surinder Mahajan in his reply in writing dated 29.12.2010 has categorically confirmed that the firm has advan ced the amount for purchase of land for and on its behalf and the appellant has further proved beyond doubt the creditworthiness of the firm. It has been held by the Hon;ble Gauhati High Court in the case of Nemi Chand Kothari v. CIT 264 ITR 254 (2003):
"Income - cash credit-burden of proof- There is nothing in s. 68 to show that the scope of enquiry by the Revenue shall remain confirmed to the transaction which have taken place between the assessee and the creditor nor does the wording of s. 68 indicate that it does not authorize the Revenue to make enquiry into the source9s) of the creditor and/or sub creditor. However once the assessee had disclosed the source9s) from which he has received the loans, burden stands discharged. It is not the burden of the assessee to show the source9s) of the sub-creditors. In the instant case, assessee has established the identity of the creditor and the amounts has been received by him by way of cheques. Loan amounts could not be treated as income from undisclosed sources on mere failure on the part of the creditors. To show that their sub-creditors had creditworthiness to advance the said loan amounts are findings of facts, the findings being based on an wholly erroneous view of law, the question raised in the appeal is a substantial question of law."
12. But in this case, the assessee has proved the fact that the firm, M/s. Ajay Electronics has sufficient funds in its hands. It has also been held by 13 14 ITA NOs. 60 & 62(Asr)/2012 the Hon'ble Patna High Court in the case of Sarogi Credit Corporation vs. CIT reported in 103 ITR 344 (1976):
"Cash credit-Burden of proof-Creditors appearing before the ITO and stating that the amount of Rs.20,000/- was in act advanced by them. ITO disbelieving them and making addition - Tribunal accepting the deposit to be genuine to the extent of Rs.5,000/- making addition of Rs.15,000/-. Non-justified - Once the identity of the third party creditors is established before the ITO and the creditors have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry tough purporting to be in the name of a third part, still represented the income of the assessee from a suppressed source- Further, tribunal having accepted the genuineness of cash credits in part, the other part of the Tribunal's findings was without evidence."
The same issue has also been confirmed by the Hon'ble Madhya Pradesh high Court in the case of CIT vs. Metachem Industries, cited at 245 ITR 160 (2000):
"So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of Income- tax."
13. Further the heavy reliance can be placed on the decision dated 19.10.2001 in ITA No.592(Asr)/1994 for the A.Y. 1992-93 in the case of the ACIT, Circle, Jammu vs. M/s. Mahavir Metals & Alloys, Jammu, wherein the Amritsar Bench has inter-alia held as under:
14
15 ITA NOs. 60 & 62(Asr)/2012 From the above, it is clear that there was no dispute regarding identification. As far as the genuineness of the transaction is concerned, the A.O. never doubted the same, the only reason for making the addition was the A.O. disbelieved the creditworthiness of the creditor, although, the source was duly explained to him, it appears that the A.O. doubted the source of the source. The Hon'ble Madras High Court in the case of S.Hastimal v. CIT reported in 49 ITR 273 held that:
"After the lapse of a decade, an assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution but the origin of origin and source of source as well. The difficulty on the part of any assessee to explain a transaction which took place before a decade has to be borne in mind by the department and should under no circumstances be under- estimated or taken advantage of by them."
Keeping in view the ratio laid down by the Hon'ble Madras High Court in the aforesaid case, we are of the view that the ld. CIT(A) was justified in deleting the additions. We are also fortified for this view by the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Metachem Indistries reported in2 45 ITR 160, wherein it has been held that:
"Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the partner or an individual, then the responsibility of the assessee is over, whether that person is an income tax payer or not and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person wo has deposited the amount, then the burden of the firm is discharged and in that case that credit cannot be treated to be the income of the firm for the purpose of income tax."
14. Accordingly, in the facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A), who has rightly 15 16 ITA NOs. 60 & 62(Asr)/2012 deleted the addition made by the A.O. Thus, all the grounds of the Revenue are dismissed.
15. Now, we take up appeal of the Revenue in ITA No.62(Asr)/2012. The brief facts of the case are that the facts in the present case are identical to the facts in the case of ITA No.60(Asr)/2012. Rather the facts in the present case are inter-connected with the case of Sh. Ajay Kumar and the A.O. made protective addition of Rs.170 lacs u/s 68 by treating the person owned undisclosed income from undisclosed sources. The assessee in the present case made submissions which were considered by the Ld. CIT(A) and on identical facts, the Ld. CIT(A) dismissed the legal grounds of the assessee and held the reopening of the assessment proceedings u/s 147 read with section 151 of the Act as valid. There is no appeal by the assessee before us and therefore the reopening of the assessment by the AO has attained finality.
16. As regards the issue on merit, after considering the submissions of the assessee, placed before the ld. CIT(A) and the explanations which have been tabulated by the ld. CIT(A) at pages 22 to 25 and findings of the ld. CIT(A) thereafter at pages 25 to 29, we concur with the views of the ld. CIT(A) in para 9.3 & 9.4 (pages 29 to 36 which are reproduced as under:
16
17 ITA NOs. 60 & 62(Asr)/2012 "that the assessee has explained the explicit manner & the 17 18 ITA NOs. 60 & 62(Asr)/2012 18 19 ITA NOs. 60 & 62(Asr)/2012 19 20 ITA NOs. 60 & 62(Asr)/2012 20 21 ITA NOs. 60 & 62(Asr)/2012 21 22 ITA NOs. 60 & 62(Asr)/2012 22 23 ITA NOs. 60 & 62(Asr)/2012
17. In the facts and circumstances, we find no infirmity in the order of the Ld. CIT(A) which is well reasoned one. Thus, all the grounds of the revenue are dismissed.
18. In the result, both the appeals of the Revenue in ITA Nos. 60 & 62(Asr)/2012 are dismissed.23
24 ITA NOs. 60 & 62(Asr)/2012 Order pronounced in the open court on 28th February, 2014.
Sd/- Sd/-
(H.S. SIDHU) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 28th February, 2014
/SKR/
Copy of the order forwarded to:
1. The Assessee:i) Sh. Ajay Kumar Gurdaspur (ii) M/s. Ajay Electronics, Pathankot.
2. The DCIT, Circle VI, Pathankot.
3. The CIT(A)
4. The CIT
5. The SR DR, ITAT, Amritsar.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar 24