Income Tax Appellate Tribunal - Ahmedabad
Gajanan Developers, Ahmedabad vs Assessee on 18 July, 2012
1 IT A. No.2863AHD/2009
Asst Year 2006-07.
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IN THE INCOME TAX APPELLATE TRIBUNAL " C" BENCH, AHMEDABAD
(BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 2863/AHD/2009
(Asst. Year: 2006-07)
M/s.Gajanan Developers Vs. Deputy Commissioner of
C/o. Kamleshbhai Income Tax,Circle-9,
Ranchhodbhai Patel Pratyaksha Kar Bhavan,
37 Swami AKHAND Anand Nr.Panjara Pole,
Society, Gate No.4, K.K.Nagar, Ambawadi,Ahmedabad.
Ghatlodia,
Ahmedabad.
(Appellant) (Respondent)
PAN: AAGFG2725C
Appellant by : Mr.M.J.Shah
Respondent by : Mr. O.P. Bhateja,Sr. D.R.
आदे श)/ORDER
(आदे Date of hearing : 18 - 7 -2012 Date of Pronouncement : 5-10-2012 PER: SHRI ANIL CHATURVEDI, A.M. This appeal is filed by the assessee against the order of Ld. CIT (A)- XV, Ahmedabad dated 12-8-2009 for the assessment year 2006-07.
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2. The assessee has filed concise grounds of appeal and the same are dealt with numerically while deciding the appeal.
3. Since Ground No.1 and 1.2 are interconnected both are considered and disposed off together for the sake of convenience.
4. The assessee is a firm engaged in the civil construction activity. Assessee filed return of income on 28-12-2006 declaring total income of Rs.15,14,410/-. A survey action u/s. 133A was carried out on 30th September/1st October,2008 at the business premises. During the course of survey incriminating documents in the form of loose papers, chits etc., were found and impounded. The statement of Shri Rajanbhai Patel was recorded on 10-10-2008.
5. On going through Annexure A-17, impounded during the course of survey, the A.O. noticed that there were certain notings about certain payments (the details listed on page 3 to 6 of the Assessment order) which aggregated to Rs.1,32,57,366/-.The A.O. was of the view that it represented the cash payments with date of payment to the partners of the firm towards the expenses. The assessee in reply to the query of the A.O. submitted that the entry did not belong to the firm or the partners & the paper is unsigned. The explanation of the assessee was not found acceptable for the reason that against all the transactions/figures noted in loose papers, the partner's name was mentioned, the papers were impounded from the premises of the firm and the assessee could not substantiate by furnishing necessary details of the persons to whom, it 3 IT A. No.2863AHD/2009 Asst Year 2006-07.
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belonged. The A.O. thus treated Rs.1,32,57,366/- as unexplained expenditure u/s. 69C and added it to the assessee's income. Aggrieved by the action of A.O., the assessee carried the matter before CIT (A). CIT (A) upheld the addition by holding as under:
"5. During the course of appellate proceedings vide written submissions the explanation given before the A.O. was repeated. Further it was stated that u/s.69C any expenditure the source of which is not explained satisfactorily can be added only if it is found recorded in books of accounts but the loose papers were not books of accounts. It was argued that the papers were not signed by any of the partners and that the presumption that the expenditure was incurred is not supported by any other evidence by the A.O. It was stated that loose papers do not indicate the correctness of notings.
6. After going through rival submissions I am of the view that there is sufficient force in the argument of the A.O. that in the impounded papers names of partners have been mentioned again and again and the details are about certain expenditure with amounts and dates. Very logical inference is that this expenditure related to business expenditure only because papers were impounded from the business premises of the firm. The recording of payments/expenditure is so accurate that it mentions dates total amount of expenditure, how much payment made to which partner and the net expense thereafter. During course of appellate proceedings nothing was explained but for stating that no addition can be made. I have no alternative but to confirm the addition made by the A.O. u/s. 69C of unexplained expenditure of Rs.1,32,57,366/- found recorded on account of paper impounded from the business premises of the firm because the papers mention clear cut dates, amounts, the narration of expenditure and the names of partners indifferent columns. And for this no explanation has been offered by the appellant at any stage."
6. Aggrieved by the action of CIT (A), the assessee is now in appeal before us.
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7. Before us the Ld. A. R. submitted that the assessee is a partnership firm constituted on 16-5-2005 and commenced the business w.e.f. 16-5- 2005 and therefore the business working period was for 9.5 months. In the loose papers impounded there were certain entries pertaining to date prior to 16.5.2005.Since the firm was constituted on 16-5-2005 there could not be any expenses/receipts of the firm prior to the date of its constitution. The Ld. A.R. placed on record at page 37 to 43 of the paper book the copy of the partnership deed. The Ld. A.R. therefore urged that the notings in the loose paper does not belong to the assessee. The Ld. A.R. further submitted that the loose papers contains 5 columns. 1st column indicate the date, 2nd column indicate expenses, 3rd column indicates unchinna + payment for expenses, 4th column indicates net expenses and 5th column indicates the figures in bracket and name. The A.O. has drawn the conclusion from these loose papers that it gives datewise figure of total expenses, money borrowed, payment thereof and net expenses of family whereas the last column is cash borrowed, cash repaid and cash paid towards expenses. He placed on record at pages 32A to 35 copies of the loose sheets impounded. He submitted that the A.O. has treated the gross amount of Rs.1,32,57,366/- as expenditure and added to the income of the assessee. He submitted that at the most the total of paid for expenses aggregating to Rs.14,69,500/- should have been added to the income instead of Rs.1,32,57,366/-. Without prejudice, the Ld. A.R. submitted that the A.O. has erred in not giving telescopic effect for the purpose of calculating the alleged income.
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8. The Ld. D.R. on the other hand submitted that the explanation that the 4thcolumn indicates net expenses (I, e. difference of total expense minus paid for expenses) is not correct. He pointed out various instances where the net expense shown in column 4 is after adjusting the amount paid to partners. He thus relied on the order of the A.O.
9. We have heard the rival submissions and perused the material on record. The factual position is that based on the loose paper impounded during the course of survey, the A.O. had treated the total expenditure of Rs.1,32,57,366/- as unexplained and made addition u/s.69C. On the basis of the loose sheets impounded the fact that it represents expenditure is not in doubt. From the sheet it was seen that in the remarks column there were notings which indicate that in certain occasions the amounts were returned/repaid. On the basis of query from the Bench, the Ld. A.R. agreed to verify the figures and after verification recalculated the figures after considering the amounts repaid/returned to the partners and the net figure of expenses worked out to Rs.31,46,500/-.This figure was also checked and confirmed by the Revenue. The Ld. A.R. submitted that instead of addition of Rs.1,32,56,366/- made by the A.O., the addition could be made of Rs.31,46,500/-. In view of these facts, we are of the view that the addition made by the A.O. be restricted to Rs.31,46,500/- instead of Rs.1,32,57,366/- made by him. We therefore direct accordingly. In the result this ground of the assessee is partly allowed.
10. Ground No.2 relates to the addition of Rs.25,20,000/- u/s.68 of the Act.
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11. On going through the loose papers impounded during the course of survey, the A.O. noticed notings were made on the stationery of the assessee. The assessee was asked to clarify the notings to which the assessee submitted that it had nothing to do with the assessee firm. The contention of the assessee was not acceptable to the A.O. for the reason that the loose papers were found and impounded from the premises of the firm and therefore it was presumed that it belonged to the assessee. The contention of the assessee that the entries represented some rough working of the accountant which had nothing to do with the firm or partners was also not acceptable to the A.O. for the reason that if the notings pertained to some other person the assessee should have furnished the complete details of such other person. In the absence of satisfactory explanation, the A.O. was of the view that the figures related to financial transactions for the reason that it was punctuated by commas and there was date against each entry. He therefore aggregated the figures and after excluding the first entry of Rs.3 lac and Rs.12 lacs, since it did not pertain to the financial year under consideration, considered the balance sum of Rs.34,20,000/- as unexplained credit in the hands of the assessee and added it u/s. 68 of the Act. Aggrieved by the addition made by the A.O. the assessee carried the matter before CIT (A).
12. The submissions made by the assessee before CIT (A) were not accepted by CIT (A) as according to him the submissions made by the Accountant before A.O. that the page was only an estimate drawn by him and did not relate to the assessee was considered to be an afterthought. But since there was totaling mistake (the correct figure was Rs.25,20,000/-
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instead of Rs.34,20,000/-) he upheld the addition of Rs.25,20,000/- but telescoped it against the addition of Rs. 1,32,57,366/- u/s. 69C. Aggrieved by the action of the CIT (A), the assessee is now in appeal before us.
13. Before us, the Ld. A.R. submitted that the paper on which certain figures were jotted down does not belong to the firm or to any partners. The Accountant of the assessee has submitted that though the notings are in the handwriting of the Accountant but it does not pertain to the firm. The Accountant had further submitted that the figures mentioned in the loose paper were neither paid nor received by the firm. The aforesaid submissions were made by the Accountant before the A.O. by letter dated 24-12-2008.He placed on record at page 73 to 75 of the paper book and its English translation at page 76 to 77 of the paper book. He also placed on record the copy of the impounded paper at page 35A of the paper book. The Ld. A.R. submitted that the jottings of figures and date without any signature are no evidence on record. The loose paper does not indicate any receipt, payment or expense and therefore it cannot be considered to be deemed income. It was further submitted that provisions of Section 68 becomes applicable only if any sum is found credited in the books of the assessee maintained for any previous year. In the present case since the sum has not been found in the books of the assessee the provisions of section 68 are not applicable. It was further submitted that the auditors have not qualified their report to that effect. It was further submitted that unless and until the contents of the document are proved against a person, the possession of the document or handwriting of that person on such document by itself cannot prove the contents of the document. The Ld. 8 IT A. No.2863AHD/2009 Asst Year 2006-07.
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A.R. relied on the decision of Tribunal in the case of (2008) 5 DTR (Jab.) (Trib.)202, CIT vs. Bhaichand Gandhi (1983) 141 ITR 67 (Mum.), S.P. Goyal vs. DCIT (2002) 82 ITD 85 (Mum.) (TM), 293 ITR 42 (Del)
14. The Ld. D.R. on the other hand relied on the order of A.O.
15. We have heard the rival submissions and perused the material on record. The factual matrix of the case is that during the course of survey u/s. 133A loose papers were found and impounded. In one of the loose papers that was found in the business premises of the assessee the A.O. noticed that it had certain notings on it and the same was on the letter head of the assessee. The Accountant of the assessee submitted during the assessment proceedings that the notings did not belong to the assessee or its partners and the figures mentioned in the loose papers were neither paid nor received by the firm. The notings of the sheet does not have any date nor does it have signature of any person. The Revenue has not brought any material on record to prove that the notings on the loose sheet represents the amount received/spent by the assessee. There is no evidence found by the Revenue in the form of extra cash, jewellery or investment outside the books. In such a case the explanation offered by the assessee cannot be rejected.
16. In the case of S. P. Goyal (supra) the co-ordinate Bench of the Tribunal has held that the loose paper in itself has got no intrinsic value. When it is a mere entry on a loose sheet of paper and if the assessee claims that it was only a planning, not supported by actual cash, then there 9 IT A. No.2863AHD/2009 Asst Year 2006-07.
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has to be circumstantial evidence to support that this entry really represent cash.
17. In the case of ACIT vs. Satyapal Wassan (supra) the co-ordinate Bench has held that a charge on the basis of document can be levied only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The speaking from the document should be loud, clear and unambiguous. If it is not so, then document is only a dumb document. No charge can be levied on the basis of a dumb document.
18. In the case of CIT vs. S.M. Aggarwal (supra) the Hon'ble High Court has held that the only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof. So, unless and until the contents of the documents are proved against a person, the possession of the document or handwriting of that person, on such document by itself cannot prove the contents of the document.
19. Viewed in the light of the facts and the various decisions cited above, we are of the view that the Revenue has not been able to prove that the notings in the loose sheet belong to the assessee. The loose sheet being undated, unsigned, without the name nature of transaction thus cannot be considered for the basis of making addition. In view of these facts, we are of the view that no addition can be made on the basis of loose sheets. We thus direct the deletion of the addition made. Thus this ground of the assessee is allowed.
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20. Ground No.3 relates to the addition of Rs.5,70,000/- as unexplained credit u/s. 68.
21. During the course of assessment the A.O. observed that assessee had received aggregate unsecured loan of Rs.5,70,000/- from six persons. On verification of the loan confirmation and bank statement of the lenders, the A.O. noticed that the lenders have deposited cash in their respective bank accounts a day or two before and issued the cheque to the assessee as unsecured loans. The A.O. also observed that no interest was paid to the lenders. He therefore held the loans to be non genuine and added it as unexplained credit u/s. 68. Aggrieved by the addition made by A.O., the assessee carried the matter before CIT (A).
22. CIT (A) was of the view that assessee had not explained satisfactorily why just a day or two before issuing of cheques, cash was deposited by the lenders and therefore the assessee did not discharge the onus of proving the identity, creditworthiness and genuineness of the transactions. The assessee also did not produce the lenders before the A.O. or CIT (A).He accordingly confirmed the addition made by the A.O. but however telescoped against the addition of Rs.1,32,57,366/- made u/s.69C.Aggrieved by the action of CIT (A), the assessee is now in appeal before us.
23. Before us, the Ld. A.R. submitted that the assessee had produced the copies of confirmation of account of the lenders, copy of their pass 11 IT A. No.2863AHD/2009 Asst Year 2006-07.
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book, copy of acknowledgement of Income tax returns in case of Income tax payers, copy of 7/12 utara, copy of PAN card etc., before the A.O. He placed on record the copy of the covering letter addressed to A.O. evidencing the submission of aforesaid documents at page No.18 to 20 of the paper book. Thus it was submitted that the assessee has proved the identity, creditworthiness and genuineness of the transactions. The assessee relied on the decision in the case of Rohini Builders 256 ITR 360 (Guj.), 220 CTR 622 (Raj.), 217 CTR 354 (Raj.) and 177 Taxman 331 (Del.).The Ld. D.R. on the other hand relied on the order of A.O.
24. We have heard the rival submissions and perused the material on record. The factual matrix of the case is that the assessee has obtained aggregate loan of Rs.5,70,000/- from six parties. The assessee had submitted the copies of confirmation of account of the lenders, copy of their pass book, copy of acknowledgement of Income tax returns in case of Income tax payers, copy of 7/12 utara, copy of PAN card etc. before the A.O. and has thus discharged the initial onus cast u/s. 68. The Revenue has not placed on record any material to controvert the submissions made by the assessee.
25. In the case of 220 CTR 622 (Raj.) Hon'ble Rajasthan High Court in the case of Aravali Trading Co. vs. ITO has concluded as under:
"Assessing Officer is not permitted to examine the source of the source once the assessee is able to establish that the transaction with his creditor is genuine and the identity and creditworthiness of the creditor have been established."12 IT A. No.2863AHD/2009
Asst Year 2006-07.
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26. In the case of CIT vs. Diamonds Products Ltd.,177 Taxman 331 (Del.), the Hon'ble High Court has held that A.O. is not permitted to examine the source of the source once the assessee has been able to establish that the transaction with his creditors is genuine and that the creditors identifies and creditworthiness have been established.
27. Considering the facts in the present case in the backdrop of the aforesaid decisions of High Courts it can be said that the assessee has discharged the onus cast on it. The assessee is not required to prove the source from which the lenders have acquired the money deposited with the assessee. The Revenue has not established that the source of lenders deposits flew from the assessee. Thus in view of the totality of the facts and in view of the aforesaid decisions of High Court, we are of the view that no addition can be made in the hands of the assessee. Thus this ground of the assessee is allowed.
Ground No.4 relates to the addition of Rs.11,70,762/- made u/s. 40(a)(ia)
28. During the course of assessment proceedings the A.O. observed that assessee had made payments to various parties (details listed on page 12 of assessment order) aggregating to Rs.11,70,762/- and on which the assessee had not deducted TDS u/s. 194C.The A.O. was of the view that provisions of section 194C are attracted in the assessee's case. Since the assessee had not deducted TDS u/s. 194C, the provisions of Sec. 40(a)(ia) was also attracted. He accordingly, disallowed Rs.11,70,762/- u/s. 40(a)(ia). Aggrieved by the action of A.O., the assessee carried the matter 13 IT A. No.2863AHD/2009 Asst Year 2006-07.
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before CIT (A). CIT (A) confirmed the action of the A.O. Aggrieved by the action of CIT (A), the assessee is now in appeal before us.
29. Before us, the Ld. A.R. submitted that assessee had made all the payments before the year end and there was no amount which was payable as at the end of the year. Relying on the Special Bench decision in the case of Merilyn Shipping & Transporters, the Ld. A.R. submitted that no disallowance was called for. On the other hand, the Ld. D.R. relied on the order of the A.O.
30. We have heard the rival submissions and perused the material on record. From the details of payment listed by the A.O. in the assessment order, it is seen that the A.O. furnished a chart showing interalia, the names of party, amount paid and date of payment/credit. Since the information with respect to date of payment and credit is clubbed together, it is not known whether the amount represents the amount paid or amount credited. Further, if the amount is credited, then what is the amount outstanding as on the balance sheet date. We therefore, feel that this aspect needs verification and accordingly remit the matter to the file of A.O. for verification and with a direction to verify the payments and allow the deduction considering the decision of Spl. Bench in the case of Merilyn Shipping & Transporters wherein it has been held as under:-
"The provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS."14 IT A. No.2863AHD/2009
Asst Year 2006-07.
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Thus this ground of the assessee is allowed for statistical purposes.
Ground No.5 relates to charging of interest u/s 234A.
31. The assessment order reveals that the assessee filed its return of income on 28-12-2006. The due date of filing of return in the case of assessee was 31-10-2006. Central Board of Direct Taxes vide order issued u/s.119 dated 13-10-2006 extended the date of filing of return for the assessees in the state of Gujarat to 31st December, 2006. Since the assessee had filed the return of income on 28-12-2006 which is within the extended due date of filing of return, we are of the view that assessee is not liable to pay interest u/s. 234A. We accordingly direct the A.O. to delete the interest charged u/s.234A. Thus this ground of assessee is allowed.
32. In the result, assessee's appeal is partly allowed Order pronounced in Open Court on 5-10- 2012.
Sd/- Sd/-
(G.C.GUPTA) (ANIL CHATURVEDI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad.
S.A.Patki.
15 IT A. No.2863AHD/2009
Asst Year 2006-07.
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Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -XV, Ahmedabad.
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad.
1.Date of dictation 22 - 8 -2012
2.Date on which the typed draft is placed before the Dictating 1,6,12,14,28 / 9 / 2012 Member................Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S - -2012.
4.Date on which the fair order is placed before the Dictating Member for pronouncement - -2012
5.Date on which the fair order comes back to the Sr.P.S./P.S - -2012
6.Date on which the file goes to the Bench Clerk - -2012.
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order............