Punjab-Haryana High Court
The Commissioner Of Income Tax-I vs Sh. Varinder Rawlley on 28 January, 2014
Author: Anita Chaudhry
Bench: Ajay Kumar Mittal, Anita Chaudhry
ITA No. 218 of 2007 1
IN THE HIGH COURT OF PUNJAB & HARYANA
AT CHANDIGARH
ITA No. 218 of 2007
Date of Decision: 28.01.2014
The Commissioner of Income Tax-I, Amritsar
... Appellant
vs.
Sh. Varinder Rawlley
... Respondent
CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL
HON'BLE MRS. JUSTICE ANITA CHAUDHRY
Present:- Mr. Dinesh Goyal, Advocate
for the appellant.
Mr. Pankaj Jain, Advocate and
Ms. Divya Suri, Advocate
for the respondent.
---
ANITA CHAUDHRY, J.
1. Through the instant appeal filed under Section 260-A of the Income Tax Act, 1961 (for brevity, the 'Act'), the appellant-revenue is questioning the legality and propriety of order dated 01.12.2006 (Annexure A-2) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar(hereinafter, to be referred as 'Tribunal', in short) in ITA No. 74 (ASR)/2006 relating to the assessment year 2002-2003, vide which the orders passed by the authorities directing addition of an amount of `86737/- in the income of the respondent and initiation of penalty proceedings under Section 271(1)(c) read with Explanation 1(A), have been set aside.
2. On 19.10.2007, the instant appeal was admitted to determine the following substantial questions of law:-
"1. Whether the ITAT has erred in law in deleting the addition sustained by the CIT(A) despite having returned the finding that as per the provision of Section 68 of the Income Tax Act, the onus to establish the Sharma Jiten 2014.03.20 16:00 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 218 of 2007 2 genuineness of the transaction lies upon the assessee and the assessee having been miserably failed to discharge the onus?
2. Whether the ITAT was right in holding that failure to issue summons under Sections 133(1)to the creditor was sufficient to delete the addition, though the onus to establish the genuineness of the transaction was upon the assessee?
3. Whether the ITAT has erred in law in recording a finding that the addition made on the basis of satisfaction recorded by the Assessing Officer to the effect that M/s Vishnu Jewellers was engaged in providing "Accommodation Entries" to various beneficiaries against charging of commission is perverse and without any factual basis"
3. The factual matrix. The respondent-assessee is engaged in the business of supply of LPG stoves, pipes, burners etc. For the financial year 2002-2003, he filed the return showing the total sales of `2262814/-, having a credit entry of `86737/- in the name of M/s Vishnu Jewellers. The Assessing Authority doubted the veracity of the said entry and called upon the assessee to render explanation thereto. The assessee took a stand that he received an advance amount of `86737 from M/s Vishnu Jewellers vide cheque No. 331190 dated 10.05.2001 for supply of packing charges of 200 LPG stoves. But the order did not mature and he returned the amount without interest vide cheque No. 64838 dated 12.12.2002. The version was not accepted by the Assessing Authority and treated the entry of `86737/- as an unexplained credit and ordered addition thereof in the return of the assessee vide order dated 26.03.2005.
Sharma Jiten 2014.03.20 16:00 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 218 of 2007 3
4. Dis-satisfied with the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jammu (Headquarters Amritsar) [for short, 'the CIT(A)'], which concurred with the view taken by the Assessing Authority and dismissed the appeal vide order dated 16.02.2006 (Annexure A-1).
5. Impugning both the orders, the assessee approached the Tribunal and filed ITA No. 74(ASR)/2006. The Tribunal came to the conclusion that since the credit and debit transactions were made through account payee cheques and more particularly when the assessee had established the identity of the creditor, the genuineness of the entry could not be doubted. The Tribunal accordingly vide order dated 1.12.2006 (Annexure A-2) allowed the appeal of the assessee and directed deletion of addition.
6. Aggrieved with the order, the revenue has come up before this Court impugning the order passed by the Tribunal.
7. We have heard the learned counsel for the appellant-revenue as well as for the respondent and have perused the paper-book carefully.
8. The factual aspect of the case is not in dispute. The whole controversy between the parties revolves around a credit entry of `86737/- in the name of M/s Vishnu Jewellers, shown by the respondent in his account books. The Assessing Authority as well as the CIT(A) doubted the said entry. They drew an adverse inference against the respondent as he failed to produce Rishi Grover, Prop. M/s Vishnu Jewellers to prove the said entry and in the light of the fact that the firm dealt in jewellery and had not done any business in the financial year 2001-02 and came to the conclusion that it was an "accommodation entry" made by M/s Vishnu Jewellers to extend undue benefit to the respondent. In this view of the matter, it has to be seen that, whether the respondent had discharged the burden of genuineness of Sharma Jiten 2014.03.20 16:00 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 218 of 2007 4 the said entry by proving the identity and capacity of the creditor.
9. Section 68 provides for charging of income of the assessee to tax, if in the opinion of the Assessing Officer, the assessee failed to render any explanation or the explanation offered by the assessee about the nature and source of any sum found credited in the books of assessee maintained for the previous year, is unsatisfactory. In other words, it is for the assessee to prove the genuineness of the transaction by identifying the creditor and its capacity to advance money. The onus lies upon the assessee to explain the credit entry, but it shifts upon the assessing officer under certain circumstances. Where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he has discharged the onus. In that case it cannot be charged as the assessee's income in the absence of any material to indicate that they belong to the assessee. Reference can be placed on Orient Trading Co. Ltd. Vs. Commissioner of Income Tax (Central), Calcutta (1963) 49 ITR 723 (Bombay).
10. It has come on record that the assessee-respondent received the amount by way of an account payee cheque. The amount was returned by way of an account payee cheque. The transactions were reflected in the bank accounts of the assessee as well as the creditor. The firm M/s Vishnu Jewellers was an income tax assessee. Its PAN card was placed on record. The assessee had filed the copy of the account of M/s Vishnu Jewellers in his books of account. The assessee had on three occasions informed that the firm was not under his control and he is unable to produce it before the Assessing Officer. He had requested the Assessing Officer to directly make enquiries. It appears that no enquiry was made by the Assessing Authority. If the Assessing Officer had any doubts about the entry, instead of drawing Sharma Jiten 2014.03.20 16:00 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 218 of 2007 5 any inference, the Assessing Officer could have summoned the proprietor of the firm. No attempt was made by the Assessing Officer to ascertain the factum of clearance of cheque from the bank and subsequent refund of the amount. Once it is so, in our view the assessee had sufficiently discharged the burden which lay upon it to explain the nature and source of the credit entry appearing in its accounts and the burden clearly shifted in the present case on to the department to prove to the contrary and hold that in spite of the assessee's explanation, the entries could still be held to represent the assessee's income. The Assessing Officer failed to invoke the provisions under Section 131 of the Act, the Tribunal has rightly concluded that it was sufficient to delete the addition. We find no error of law and facts in the findings returned by the Tribunal.
11. We answer the questions against the appellant and in favour of the assessee. The appeal is dismissed.
(AJAY KUMAR MITTAL) (ANITA CHAUDHRY)
JUDGE JUDGE
28.01.2014
Jiten
Sharma Jiten
2014.03.20 16:00
I attest to the accuracy and
integrity of this document
High Court Chandigarh