M/S MAGHAR SINGH AND SONS vs. A.C.I.T. C.C. IV LUDHIANA

ITA No. 34 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 34 of 2004 Date of Decision: 30.9.2010 M/s Maghar Singh & Sons ....Appellant. Versus ACIT-C.C.IV ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Jyoti, Advocate for the appellant. Mr. Rajesh Katoch, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. The facts as narrated in the appeal for disposal of the appeal are that the assessee is a partnership firm having business of timber and plywood. The assessee for the assessment year 1995-96 filed its return on 31.10.1995 declaring an income of Rs.54,984/-. During the scrutiny assessment proceedings, cash credit of Rs.8 lacs from six parties was added by the Assessing Officer as undisclosed income of the assessee under Section 68 of the Act. The Assessing Officer while making the said addition on account of unexplained cash credits held that the assessee had used the creditors as conduit to introduce his own money into its business. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income

ITA No. 34 of 2004 -2- Tax (Appeals) [in short “the CIT (A)”] deleted the said addition vide order dated 2.2.2009. Against the order of the CIT (A), the revenue filed an appeal before the Tribunal who vide order dated 13.11.2003 partially upheld the order of the Assessing Officer holding the transaction with Sh. Inder Pal Singh to be doubtful. Hence, the present appeal by the assessee. 2. We have heard learned counsel for the parties. 3. The solitary issue that requires determination in this appeal is whether Rs.1 lac which was alleged to have been given by Shri Inder Pal Singh to the assessee was a genuine transaction or not. The Assessing Officer had disallowed the said transaction holding it to be unexplained cash credit in the books of account of the assessee which was reversed by the CIT (A). The Tribunal while reversing the finding of the CIT (A) had recorded as under:- “10. Before us, the Departmental Representative for the Revenue placed reliance on the reasoning given in the order of the AO and submitted that the AO has rightly made the impugned addition of Rs.1.00 Lac. On the other hand the learned A.R. for the assessee reiterated the same submissions, which he made before the Commissioner of the Income tax (Appeals). However, he could not give a satisfactory answer to the query of the Bench that in case Sh. Inder Pal Singh proprietor of Keval agency had advanced this amount for the purchase of wood for running business on 23.04.1994, why the same was

ITA No. 34 of 2004 -3- not taken back by him till 15.2.1997 when the assessee concern had refused to supply him the wood. He also could not give a satisfactory answer to the query of the Bench that in case Sh. Inder Pal Singh was doing wood business, then why he did not demand any interest from the assessee when the assessee returned his money on 15.02.1997 i.e. after a gap of just less than 3 years when Sh. Inder Pal Singh was simply having business dealing with the assessee. We are of the opinion that the genuineness of the transaction as narrated by the assessee as well as the creditor, Sh. Inder Pal Singh, becomes doubtful because a business person would never like to advance his money for purchasing the material for such a long time without charging any interest and more so, when he wants to do some business with that wood and the same he could not do because of non-supply of that wood by the assessee. Hence, we are of the opinion that though in this case of Sh. Inder Pal Singh, his identity is not in dispute and his capacity to advance this money to the assessee, could not be doubted but the genuineness of the transaction in the manner in which it has been narrated by Sh. Inder Pal Singh, does not stand established because of this peculiar circumstances as discussed by us hereinabove.

ITA No. 34 of 2004 -4- 11. We are of the opinion that keeping in view this aspect of the manner, the Commissioner of Income tax (Appeals) was not justified in deleting this impugned addition of Rs.1.00 Lac pertaining to the amount received by the assessee from Sh. Inder Pal Singh because the genuineness of the transactions does not stand established.” 4. In the instant case, the Assessing Officer had concluded that the creditor, Sh. Inder Pal Singh was not a man of good financial standing and had also not charged any interest from the assessee. The creditor was held to have been used as a conduit to introduce own money by the assessee. Further, the plea of the assessee that Sh. Inder Pal Singh had advanced Rs.1 lac to the assessee on 23.4.1994 for supply of wood and the same was returned on 15.2.1997 when the assessee had failed to supply the required wood was not accepted. The transaction being commercial in nature, no interest was charged by Sh. Inder Pal Singh on the said amount for three years. The Tribunal on appreciation of material had concluded that the transaction was not genuine and was unexplained money of the assessee which was exigible to tax under Section 68 of the Act. This is based on plausible view taken by the Tribunal. 5. Learned counsel for the appellant made strenuous efforts to persuade this Court to record a different conclusion on re- appreciation of evidence. However, she was unable to point out any error in the impugned order and in the absence of any illegality or perversity therein, the same is not amenable to fresh scrutiny under

ITA No. 34 of 2004 -5- Section 260A of the Act. 6. In view of the above, it is held that the Tribunal was right in holding the cash credit in the name of Sh. Inder Pal Singh to be unexplained income of the assessee. 7. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 30, 2010 (ADARSH KUMAR GOEL) gbs JUDGE