Income Tax Appellate Tribunal - Ahmedabad
Lion Tapes Pvt. Ltd.,, Bhavnagar vs Assessee on 12 May, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A"
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI MAHAVIR SINGH, JUDICIAL MEMBER
Date of hearing: 12.5.10 Drafted on:12.05.2010
ITA No.2636/AHD/2007
Assessment Year : 2003-2004
M/s. Lion Tapes Pvt. Ltd. Vs. ACIT,
283/B, GIDC, Chitra, Circle-1, Aaykar Bhavan,
Bhavnagar. Bhavnagar.
PAN/GIR No. : AAACL3629B
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri T.P.Hemani Ad.
Respondent by: Shri Dr. Jayant Javeri Sr. D.R.
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
This is an appeal filed by the assessee against the order of the ld.CIT(Appeals)-XIX, Ahmedabad dated 14.01.2006.
2. Ground of the appeal of the assessee reads as under:-
1. The Learned CIT(A) has erred in law and on facts in confirming the action of AO in adding Rs.9,62,000/- as unexplained cash credit u/s 68 of the Act.
2. The Learned CIT(A) has erred in law and on facts in confirming the action of AO in disallowing interest expenditure of Rs.1,12,079/- in respect of alleged unexplained cash credit u/s 68 of the Act.
3. The Learned CIT(A) has erred in law and on facts in confirming the action of AO in disallowing remuneration paid to the Directors of the appellant company amounting to -2- Rs.4,48,000/-. Under the facts and circumstances of the case, ld. CIT(A) ought to have deleted the disallowance made by the AO.
4. Both the lower authorities have passed the respective orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order.
5. Ld. CIT(A) has erred in law in confirming the levy of interest u/s 234A/B/C of the Act.
6. Ld. CIT(A) has erred in law in confirming the initiation of penalty proceedings u/s 271(1)(c) of the Act without there being any satisfaction recorded by the ld. AO. while framing the assessment order.
3. The Learned Commissioner of Income Tax (Appeals) has held as under:-
2. The Authorised Representative has furnished confirmation letters along with copies of pass book. The Authorised Representative has alleged that the Assessing Officer has made addition u/s.63 of the Income Tax Act without appreciating the facts and examination of the creditors, hence, the Assessing Officer vide this office letter No.CIT(A)-XIX/inquity/06-07 doled 12.7.2006 was directed to examine the creditors whose confirmations were filed by the assessee during the assessment proceedings. As per the direction, the Assessing Officer conducted necessary enquiries and sent remand report dated 27/10/2006 which has been placed on record after perusal. A copy of said remand report was given to the appellant for its comments.
But nothing has been heard either from the appellant or from the Authorised Representative.
3. The appellant has raised four grounds of appeal which are dealt with as under:
4. The first ground says that the assessment order is against law, equity and justice. The Authorised Representative did not bring in my notice any defects to prove the order passed by the Assessing Officer is against law, equity and justice except for agitating additions made -3- by the Assessing Officer in the assessment order. The assessment order has been passed as per the provision of the Act. The appellant has been given proper opportunity of being heard. No infirmity has been brought in my notice. Hence, this ground of appeal is rejected.
5. The next ground pertains tO an addition of Rs.10,62,000/- mode u/s.68 of the Income Tax Act as unexplained cash credits. The Assessing Officer has mentioned that the assessee failed to prove the genuineness, existence and creditworthiness of 10 creditor. Thus, by making elaborate discussion of each creditor, he made an addition of Rs.10,62,000/- u/s.68 as unexplained cash credit.
5.1. During the course of appellate proceedings, the Authorised Representative filed a written submission in which it is explained that the appellant is a Private Limited Company and the company filed its return of income on 31/1/2003 together with audited accounts. After filing of the return the first notice of u/s. 143(2) was issued on 15/10/2004 and which is served on 25/10/2004. Then otter the fresh notice dated 2/12/2004 together with questionnaire containing 13 question, and hearing was fixed on 9/1/2005. As the day fixed the appellant appear on the date and submitted reply of the original questioner. With this reply the appellant filed confirmation letters of all the depositors and Xerox copy of bank passbook of all depositors and out of some depositors Xerox copy receipt of return filing. But after compliance of the above notice the assessing authority allowed to elapse one year time and the after the assessing authority issue a fresh notice on 10/3/2006 and which was served to 11/3/2006 (i.e. Saturday) upon to assess asking to verify source of fund given to the assessee by such depositors, and if possible produce the depositors on 17/3/2006. As the appellant accepted most of the loan through the finance brokers, he was not in direct contact of many depositors, in spite of this appellant tried level best to contact to depositors, and forced to them to attend to income tax office before the assessing authority on the hearing date but, due to short period notice nobody attended. Therefore, the appellant -4- was forced to request the assessing authority to issue summons to depositors. This request remained unattended by the assessing authority. Then after the Assessing authority issued the show cause notice on 20/3/2006 and say that 12 depositors are non genuine. In reply of above said show cause notice the appellant submitted the postal address of all 12 depositors, accounts copy one Xerox copy of bank pass book, and also requesting the assessing authority to please issue the summons to all depositors, but the assessing authority failed to prevent appellant from producing proper evidence to the loan taken by the assessee.
5.2 In the assessment order, the assessing authority alleging that the some depositors' bank pass book show cash credit and that cash credit was deposited to appellant firm that is wrong of the assessing authority. We are submitting herewith the Xerox copy of bank passbook of the depositors which was submitted before the assessing authority. In this bank passbook shows that all amount deposited in the bank was by clearing. So, I the undersigned beg to submit that your honour are requested to assessing authority verify all the depositors again.
5.3 In view of the specific request of the appellant, the Assessing Officer, as mentioned in earlier para, was directed to examine the alleged creditors and send his remand report. In view of these Directions, the Assessing Officer made necessary enquiries and thereafter sent a remand report dated 27/10/2006. A copy of said remand report was given by the Assessing Officer directly to the appellant as per my instruction with a view to ovoid delay in appellate proceedings. The Authorised Representative vide my order sheet entry dated 18/10/2006 was requested to send his comments on such remand report by 26/10/2006. However, as per the request the Authorised Representative did not approach the Assessing Officer to collect a copy of remand report. Therefore, the Assessing Office served a copy of remand report on Shri Ramesh D. Mehta, Director of the Company on 27/10/2006. However, no comments were received. Considering the principle of nature justice, the -5- appellant was given final opportunity vide this office letter No.CIT(A)-XIX/Cir.l/BNR/l7/06-07 dated 6/11/2006 with a request to send his comments on the remand report by 13/11/2006 positively. Said letter is reproduced for ready reference as under:-
"Your Authorised Representative, Shri R.C. Parekh, Advocate, appeared before me on 18/10/2006 and he was requested to collect a copy of remand report from the Assessing Officer directly to avoid unnecessary delay in disposal of the appeal. However, the Assessing Officer informed me that the appellant did not turn up and a copy of said remand report has been served upon the director of the appellant company on 27/10/2006. Though your Authorised Representative was requested to submit comments on the said remand report by 26/10/2006, however, the said remand report has been served later on. Therefore, you are requested to give your comments, if any, on the same by 13/11/2006 positively. It may be treated as last opportunity. If nothing is heard from you by the stipulated date, then the issue involved in this appeal will be decided on merits of the facts available on record. Please ensure it."
Neither, the Authorised Representative appeared nor any adjournment was sought. Considering the facts and circumstances of the case, I have no other alternative, but to decide the appeal on the basis of material available on record.
5.4 As per the direction, the Assessing Officer filed his enquiry report dated 27/10/2003 which is reproduced as under:
"The assessment order for Assessment Year 2003-04 was finalised u/s.143(3) of the Income Tax Act, 1961 on 28.03.2006 determining total income Rs.23,45,590/- with following additions/ disallowances.
1 None Genuine cash 1062000 Credit U/s.68 2 Interest paid on non 120704 genuine cash credits u/s.68 3 Remuneration paid to 448000 -6- Directors Total 1630704 In this letter under reference inquiry report u/s.250(4) was called for offer conduct of independent inquiries from depositors and it was also directed to verify whether the enclosures filed with the written submission during the course of appellate proceedings, were produced during the course of regular assessment proceedings. Summons were issued to all depositors in order to examine them personally.
The report on the inquiry conducted in individual cases is given below;
i. Ashaben Gendrasinh Parmar Rs. 1,00,000/-
11, Gopi Complex, Bhaikakanagar, Thaltej Char Rasta, Ahmedabad.
In the case of Ashaben G. Patel, prior to issuing summons she had sent written submission by speed post along with affidavit on non judicial paper of Rs.20/- along with bank pass book of Dena Bank which was received in this office on 25.7.2006. She has stated in the affidavit that she has no taxable income and the amount of Rs.1 lac deposited in Lion Tapes is out of amount received before marriage and after marriage which was in 1991. On verification of bank pass book it is found that she has deposited Rs.1 lac in cash on 11.11.2002 and withdrawn Rs.1 lac by cheque on the same date to be given to Lion Tapes. No details of source of income are furnished. Thereafter summons u/s.131 dated 21.5.2006 was issued and served on the same date. In response thereto letter dated 22.8.2006 was filed stating that amount deposited in Lion Tapes of Rs.1 lac was out of personal savings. Thereafter another letter dated 26.09.2006 was received stating her inability to attend in response to summon issued.
On verification of details filed, it is found that she has no capacity whatsoever to extend the loan of Rs.1 lac. Cash has been deposited on 11.11.2002 and cheque given to Lion Tapes on the same date. No satisfactory explanation is -7- offered regarding source of cash deposit nor has she attended in response to summon issued.
Hence, the explanation given by the party cannot be accepted and therefore deposit of Rs.1 lac treated by Assessing Officer as non genuine is correct and requires to be upheld.
During the course of assessment proceedings a copy of bank pass book had been furnished and the Assessing Officer had already perused the same before giving his finding and making the addition. New evidence in the form of affidavit is filed by the party which is not accepted.
2. Bhartiben Mohanlal, Rs.1,00,000/-
& Shri Dinesh Dhanjibhai Gohel Rs.2,72,000/- Gautamnagar, Near Akhlol Jakat Naka, Bhavnagar.
In response to summons dated 21.8.2006 both husband and wife attended on 25.8.2006, statement on oath were recorded of both parties. In her statement, Bhartiben stated that she is a House wife and in addition to that doing house hold labour work in different houses, out of which her monthly earnings are about Rs.1 thousand. With regard to source of deposit no answer could be given by her. She has stated that she is uneducated and is unaware of the deposit of Rs.1 lac shown in her name.
Shri Dineshbhai in his statement slated that he was serving since last 25 years in Stretch Bank, a sister concern of the assessee and was earning about Rs.4,300/-(net). With regard to deposit of Rs.2,72,000/- shown in his name Lion Tapes, he stated he does not remember anything about such deposit at the moment. As such genuineness of the transaction is not proved. Both of them have denied any knowledge of such deposits during their statement recorded. Therefore, the deposit of Rs.1,00,000/- and Rs.2,72,000/- made by Smt. Bhartiben Mohanbhai and Dineshbhai Gohel respectively is required to be treated as unexplained and hence, non genuine.-8-
During the course of assessment proceedings a copy of bank pass book had been furnished and the Assessing Officer had already perused the same before giving his finding and making the addition. No fresh evidence is furnished during the course of statement recorded.
3. Bijal R. Mehta, Rs.1,00,000/-
D-225, Kalvibid Opp; Water Tank, Bhavnagar.
In response to summons issued or. 21.08.2006 which was duly served on the same day, there was neither attendance nor was any written submission filed. During the course of assessment proceedings a copy of bank pass book had been furnished and the Assessing Officer had already perused the some before giving his finding and making the addition. Since, the depositor has rot attended in response to summons issued he could not be examined. Hence, even though opportunity was given, the depositor has failed to avail of the same. Under the circumstances, in absence of any explanation, the findings of the Assessing Officer requires to be upheld.
4. Mansi M. Mehta, Rs.50,000/-
MIG 81 Shashtrinagar, Bhavnagar.
In response to summons she attended on 28.8.2006 and statement was recorded on oath. She staled that she is present serving as teacher in Nand Kunverba Chhatriya Kanya Vidyalay, Bhavnagar. In the relevant period she was doing computer job work. She is assessed to tax vide PAN AFRM 1546 F and submitted proof of acknowledgement of return of income and computation of income for A.Y.2003-
04. She had given deposit of Rs.50,000/- to Lion Tapes on 22.4.2002 out of maturity proceeds received from Akshya Fixed Deposit Receipt, wherein she had initially made deposit of Rs.45,000/- on 4.12.2000 necessary evidences are produced and found to be in order. In view of this credit worthiness, genuineness of transaction and source of investment is established. Therefore, deposit of Rs.50,000/- and interest earned thereupon Rs.2,250/- are found to be genuine.
5. Niteben Ajaybhai Shah, Rs.50,000/-
A-3, Snital Fiats, Kaliubha, Bhavnagar.-9-
In response to summons she attended on 29,8.2006 and her statement was recorded. The depositor is assessed to tax vide PAN No.ANKPS 8740 G and in respect of A.Y.2003-04 she had filed her return of income declaring income of Rs.44,090/-. Her main source of income is investment in share and interest income. In reply to particular question of deposit of Rs.50,000/- -in Lion Tapes on 18.07.2002, she stated that the deposit was made out of maturity proceeds of Rs.52,625/- received on 17.7.2002 from Khubsurat Enterprise wherein deposit of Rs.50.000/- was given on 17.4.2002, Proof of transaction is verified and found to be genuine. It is also to be mentioned here that in the assessment order it was stated that at the time of assessment proceedings, assessee could not produce the pass book of the assessee. However, the same is now produced and verified for genuineness of deposit.
6. Pankaj Harkani Vyas, Rs.40,000/-
Khijaoavali Sheri, Soni Fall, Vadva, Bhovnagar.
In response to summons issued, the depositor attended and his statement was recorded. He has denied giving any deposit to anybody in the relevant year. He further stated that he was studying in Standard-X and not having any source of income. In view of the facts mentioned credit worthiness of depositor, genuineness of transaction and source of investment is not established. AS such deposit of Rs.40,000/- and interest earned thereupon Rs.18,120/- shown in the name of depositor is not found to be genuine and addition made requires to be upheld.
7. Ranjanben J. Sheth, Rs.50,000/-
C/o. Bharatkumar & Bros., Opp: Railway Station, Bhavnagar.
In response to summons issued Smt. Ranjanben Jitendrabhai Sheth attended on 29.8.2006 and her statement was recorded. She was not having any sources of income except petty amounts received on various auspicious occasions. No suitable reply could be given, by depositor regarding source of deposit in question. In view of the facts mentioned credit worthiness of depositor, genuineness of transaction and
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source of investment is not established. Therefore, deposit of Rs.50,000/- and interest earned thereupon Rs.9,161/- are not found to be genuine and requires to be upheld, it is further to be stated that copy of pass book was not produced by assessee of the stage or assessment proceedings as mentioned in the assessment order.
8. Chandrikaben Rasiklal Mehta Rs.2,00,000/-
& Milan Rasiklal Mehta Rs.1,00,000/-
13, Nilkanth Ashish, 60FT, R.B.Mehta Road.Ghatkopar, Mumbai.
Summons issued on the address furnished by the assessee was returned unserved in the case of the two depositor. Therefore, depositors could not be examined. The creditworthiness of expositors and genuineness of transactions cannot be established on the basis of abstract of bank pass book. Therefore, deposit of Rs.1,00,000/- and interest earned thereupon Rs.12,477/- in the case Milanbhai and Rs.2,00,000/- and interest earned thereupon Rs.29,112/-. In the case of Chandrikaben R. Mehta has been correctly held to be non genuine and requires to be upheld. Therefore, out of 10 depositors in whose cases addition u/s.68 was made in the assessment order alter considering the deposits to be non genuine and disallowances made under section 37 in respect of interest thereon. 7 depositors were examined and 3 depositors did not cited in response to summons issued. Two of the deposits in the name of Mansi M. Mehta (deposit Rs.50.000/-plus interest Rs.2,250/-) and Nitaben A. Shah (deposit Rs.50,000/- plus interest of Rs.6,375/-) are considered to be genuine. In respect of the other genuineness is not established. As mentioned earlier, the appellant did not file any comments. Therefore, it is presumed that the appellant has nothing to say against the present enquiry conducted by the Assessing Officer. As per Assessing Officer's inquiry, the following credit remained unexplained.
1) Ashaben Gendrasinh Parmar Rs.1,00,000/-
2) Bhartiben Mohanlal Rs.1,00,000/-
3) Shri Dinesh Dhanjibhai Gohel Rs.2,72,000/-
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4) Bijal R. Mehta Rs.1,00,000/-
5) Pankaj Harkant Vyas, Rs. 40,000/-
6) Ranjanben J. Sheth, Rs. 50,000/-
7) Chandrikaben Rasiklal Mehta & Rs.2,00,000/-
8) Milan Rasiklal Mehta Rs.1,00,000/-
Total Rs.9,62,000/-
The appellant failed to discharge its onus 10 prove the genuineness, creditworthiness and existence of the creditors. Thus, in view of these facts, addition to the extent of Rs.9,62,000/- is sustained and balance of Rs.1,00,000/- is treated as explained. The appellant gets relief of Rs.1,00,000/- only.
6. The next ground is in respect of disallowance of interest of Rs.1,20,704/-. The Assessing Officer has disallowed the claim of interest of Rs.1,20,704/- claimed to have paid to the alleged creditors because the assessee could not prove the gaminess, creditworthiness and existence of the creditors. As discussed in the second ground only two creditors were found genuine, hence interest of Rs.8,625/- is allowed for credit entries in the names of Shri Mansi Mehta and Nitaben A. Shah while rest of the 8 credits remained unexplained. Hence, remaining disallowance of interest of Rs.1,12,079/- is confirmed.
7. Last ground pertains to disallowance of remuneration of Rs.4.48 lacs to lady directors. Identical issue was involved in the case of the appellant the immediately preceding year, wherein I have confirmed the disallowance made by the Assessing Officer vide my appellate order No. CIT(A)- XIX/A.C.Cir.l/BNR/48/05-06 dated 21/11/2005. The facts for the year under consideration are some and identical: hence, for the detailed reasons given in my said appellate order, the disallowance made in this year is confirmed.
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4. We have heard the rival submissions and perused the materials available on record. In the instant case, the Learned Commissioner of Income Tax(Appeals) upheld the addition of following cash credit under section 68 of the Act.
1) Ashaben Gendrasinh Parmar Rs.1,00,000/-
2) Bhartiben Mohanlal Rs.1,00,000/-
3) Shri Dinesh Dhanjibhai Gohel Rs.2,72,000/-
4) Bijal R. Mehta Rs.1,00,000/-
5) Pankaj Harkant Vyas, Rs. 40,000/-
6) Ranjanben J. Sheth, Rs. 50,000/-
7) Chandrikaben Rasiklal Mehta & Rs.2,00,000/-
8) Milan Rasiklal Mehta Rs.1,00,000/-
Total Rs.9,62,000/-
The Learned Commissioner of Income Tax(Appeals) also consequently upheld the disallowance of claim of interest of the assessee in respect of the above parties totaling to Rs.1,12,079/-.
5. The Learned Authorised Representative of the assessee submitted before us that all the particulars which were available with him were filed before the lower authorities and the same clearly establishes the identity of the creditors, genuineness of the transactions and the creditworthiness of the creditors. He submitted that the above additions were mainly made as the Learned Assessing Officer was not satisfied about the source of source of the cash credits. He argued that burden under section 68 on the assessee is to explain his source only and not the source of source. In case, the assessing Authority is not satisfied about the source of the creditor then the addition is to be made in the hands of the creditor and not in the hands of the assessee. He also contended that the Learned Commissioner of Income Tax(Appeals) has drawn adverse view solely on the basis of remand report submitted by the
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Learned Assessing Officer before him. He contended that no sufficient opportunity was allowed by the Learned Commissioner of Income Tax(Appeals) to the assessee to controvert the remand report before admission of the same by the Learned Commissioner of Income Tax(Appeals).
6. We find that the Learned Commissioner of Income Tax(Appeals) has upheld the addition only on the basis of the findings given by the Learned Assessing Officer in his report dated 27.10.2006. From the material available before us, it is not clear that whether any opportunity of hearing was allowed to the assessee or not by the Learned Assessing Officer before finalizing the remand report. We observe from the CIT(A)'s order that copy of the remand report was forwarded to the assessee by the Learned Commissioner of Income Tax(Appeals) vide his letter dated 6.11.2006 and asking the assessee to submit his comments by 13.11.2006. Thus, we find that time of even less than 7 days was allowed to the assessee by the Learned Commissioner of Income Tax(Appeals) for making submissions in respect of the remand report which involved as many as 10 parties and the transactions were for the financial year 2002- 03 i.e. more than 3 years earlier. In our considered opinion, the above time allowed by the Learned Commissioner of Income Tax(Appeals) on facts of the case cannot be considered as reasonable and sufficient. We therefore, are of the view that is shall be in the interest of the justice to restore the issues under consideration back to the file of the Learned Commissioner of Income Tax(Appeals) for adjudication afresh as per law after allowing sufficient opportunity of hearing to both the parties. We
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order accordingly. Thus, the appeal of the assessee is allowed for statistical purpose.
5. In the result, the appeal of the assessee is allowed for statistical purpose.
Order signed, dated and pronounced in the Court on this 21st day of May 2010 Sd/- Sd/-
( MAHAVIR SINGH) ( N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
st
Ahmedabad; On this 21 day of May 2010
Paras
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-XIX, Ahmedabad.
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER, स᭜यािपत ᮧित //True Copy// (Dy./Asstt.Registrar), ITAT, Ahmedabad Date Initials
1. Draft dictated on 12.05.2010 -------------------
2. Draft Placed before authority14.05.2010 -------------------
3. Draft proposed & placed 14.05.2010 ------------------- JM Before the Second Member
4. Draft discussed/approved 14.05.2010 ------------------- JM By Second Member
5. Approved Draft comes to P.S 14.05.2010 --------------------
6. Kept for pronouncement on 21.05.2010 --------------------
7. File sent to the Bench Clerk 21.05.2010 --------------------
8. Date on which file goes to the ---------------- --------------------
9. Date of dispatch of Order ---------------- ---------------------