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Income Tax Appellate Tribunal, RANCHI
Before: SHRI N.S.SAINI & SHRI PAVAN KUMAR GADALEShri Rajendra lal, vs ACIT, Circle-2,
1 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018
IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI
BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.48/Ran/2016 AND Cross Objection No.05/Ran/2018 A.Y. : 2009-2010 Shri Rajendra lal, vs ACIT, Circle-2, Prop: M/s Alankar Jewellers Hazaribag Malviya Marg, Hazaribag PAN No. : AAQPL 6547 B Respondent (Appellant) . AND ITA No.78/Ran/2016 A.Y. : 2009-2010 ACIT, Circle-2, Hazaribag vs Shri Rajendra lal, Prop: M/s Alankar Jewellers Malviya Marg, Hazaribag PAN No. : AAQPL 6547 B Respondent (Appellant) .
Assessee by :Shri S.K.Poddar & Devesh Poddar, Adv Revenue by :Shri A.K.Mohanty, JCIT
Date of Hearing : 24.05.2018 Date of Pronouncement : 25.05.2018
O R D E R Per Pavan Kumar Gadale, JM: These are the appeals filed by the assessee and Revenue against
the order of CIT(A), Hazaribag, dated 14.12.2015, for the assessment year
2009-10.
2 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018
Since the issues involved in both the appeals of assessee and
Revenue are common, therefore, for the sake of convenience, the facts
and grounds narrated in the appeal of assessee i.e. ITA No.48/Ran/2016
are taken into consideration.
The assessee has raised the revised grounds of appeal as under :-
For that Ld. CIT(A) was not justified in confirming addition of Rs.3,89,931/- for gold, Rs. 22,920/- for silver and Rs.14,264/-for diamond. Addition was made on the ground that there was difference between physical verification of stock and stock found at the time of survey. In a short time available for survey physical verification of stock as made by Ld. A.O. was just not possible. The variation in total stock found and stock as per books of account was nominal. The addition made is unjustified and illegal. 2. For that Ld. CIT (A) confirmed addition of Rs. 3,89,931/- for gold on presumption that the gold found as per fiscal verification was more than the total stock as per books of account including explanation submitted. The stock of silver and diamond found was less than the stock as per books of account, as such, on the shortage of stock net profit on 10.58% was estimated. The addition made for alleged excess stock found relating to gold was unjustified, illegal and incorrect. The alleged difference was very nominal and it was just not possible to take stock item wise in detail in the short time of survey. Estimate of net profit on the shortage of stock is unjustified and illegal. 3. For that Ld. CIT(A) confirmed the addition of RS. 5,49,956/- made on the basis of presumption and estimate. Ld. A.O. invoked provision of section 145(3) on presumption, no defect whatsoever has been pointed out for maintenance of books of account. Ld. A.O. made an estimated addition of Rs. 5,49,956/-. The estimate of repair receipt as well as estimate of sale as made by Ld. A.O. is without any basis, justification 4. and arbitrary, as such, fit to be deleted. 5. For that interest u/s 234A and 234B should have been charged on the returned income and not on the assessed income following the decision of Hon'ble Jharkhand High Court. 6. For that other grounds in detail will be argued at the time of hearing
3 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 4. At the time of hearing, ld. AR of the assessee did not press the
addition made on account of difference in silver stock and diamond stock.
Accordingly, we dismiss the grounds raised with regard to addition made
on account of difference in silver stock and diamond stock as not pressed.
The effective grounds of appeal raised by the assessee are as under:- 1. The CIT(A) was not justified in confirming the addition of Rs.3,89,931/- made on account of difference in gold stock; and 2. The CIT(A) was not justified in confirming the addition of Rs.5,49,956/- made on account of estimation of unaccounted receipts. 6. Brief facts of the case are that the assessee is engaged in retail sale
of diamond, gold & silver jewellery and repairing work thereof and filed
return of income on 30.09.2009 with total income at Rs.5,47,020/-. In this
case a survey operation u/s.133A of the Act was conducted on 22.01.2009
at the business premises of M/s Alankar Jewellers situated at Malviya
Marg, Hazaribag. The case was selected for scrutiny and notices
u/s.143(2) and 142(1) were issued to the assessee. The AO completed the
assessment making following additions and passed order
u/s.143(3)/263/143(3) of the Act, dated 10.03.2014 :-
i) Rs.51,94,150/- u/s.69 of the Act; ii) Rs.6,38,906/- on account of difference in gold stock. iii) Rs.22,920/- on account of difference in silver stock. iv) Rs.14,264/- on account of difference in diamond stock. v) Rs.5,49,956/- on account of estimation of unaccounted receipts.
Aggrieved by the assessment order, the assessee has filed an
appeal with the CIT(A). In the appellate proceedings ld. AR of the
4 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 assessee argued the grounds and reiterated the submissions and ld.CIT(A)
having considered the findings and the submissions of the assessee dealt
on the disputed issue, deleted the addition made u/s.69 of the Act and
gave part relief on the addition made on account of difference in gold stock.
With respect to addition on account of difference in silver and diamond
stock and estimation of unaccounted receipts, the CIT(A) upheld the
same. Accordingly, the CIT(A) partly allowed the appeal of the assessee.
Aggrieved by the order of CIT(A), the assessee has filed an appeal
before the Tribunal.
At the outset, the ld.AR on the first disputed issue submitted that as
required by the AO the assessee has produced the original gift deed, which
was verified by the and the assessee has also filed the requisite details
before the CIT(A) and the CIT(A) without considering the same gave part
relief. On the second disputed issue, ld. AR submitted that no defects
whatsoever has been pointed out by the AO for maintenance of books of
accounts and the addition has been made and confirmed by the CIT(A) is
only on the basis of presumption. Therefore, he prayed for deleting the
above additions.
Contra, Ld. DR relied on the order of lower authorities on the above
two additions.
We have heard rival submissions and perused the material available on record. Prima facie, on the first disputed issue, ld. AR’s contention that the addition was made on the ground that there was difference between physical
5 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 verification of stock and stock found at the time of survey, however, in a short
time available for survey physical verification of stock as made by Ld. A.O. was
just not possible. The variation in total stock found and stock as per books of
account was nominal. On the second disputed issue, ld. AR’s contention is that
the addition on account of estimation of unaccounted receipts is made on the
basis of presumption and estimate and the ld. A.O. invoked provision of section
145(3) of the Act on presumption, no defect whatsoever has been pointed out for maintenance of books of account. From the above submissions of assessee,
findings of AO and observations of the CIT(A), we are of the opinion matter
needs examination and verification on the above two counts at the end of CIT(A).
Therefore, we remit both the issues to the file of CIT(A), who shall verify and
consider the submissions of assessee and pass order after providing adequate
opportunity of hearing to the assessee and the assessee shall cooperate in early
disposal of the appeal. Accordingly, we allow these grounds of appeal for
statistical purposes.
Now, we shall take up the appeal of Revenue in ITA No.78/Ran/2016,
wherein the Revenue has raised the following grounds :- 1. That on the facts and in the circumstances of the case, Ld.CIT(A) erred in deleting the addition made by the Assessing Officer without giving the AO any opportunity of being heard.
That on the facts and in the circumstances of the case, Ld.CIT(A) erred in accepting the papers and documents produced before him when the same books of a/c papers documents have not been produced before the AO in the scrutiny proceedings.
Though in the grounds of appeal, there is no mention against which
addition the Revenue is in appeal and only mentioned that the CIT(A) has
6 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018
erred in deleting the addition, however, before us, ld. DR submitted that the
present appeal is filed against the deletion addition of Rs.51,94,150/- made
u/s.69 of the Act and placed a written submission which is as under :-
1.On the issue of deletion of addition of Rs. 51,94,150/- - The Ld. CIT(A) Hazaribagh has accepted the contention of the appellant without examining creditworthiness of Sri Janaki Shaw ( donor). Infact he has stated that it was the Assessing Officer who did not establish to the contrary. This is contrary to the provisions of law. It is the claim of the appellant that the jewellery which was gifted was from the stock of the closed business of Sri Janaki Shaw which closed in AY 1998-99. The appellant did not submit copies of the last return of income filed by Sri Janaki Shaw and the balance sheet. No inference in favour of the appellant could be drawn on the fact that the jewellery was found in a potlee at the time of survey. While the law states that the onus to prove the three pillars of identity, genuineness and creditworthiness is on the assesse, the CIT(A) held that it was for the Assessing Officer to prove creditworthiness.
The Ld.AO was of the view that the gift was not adequately explained. Section 106 of the Evidence Act states “ When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.” This could have been done by filing the balance sheet and return of income of Sri Janaki Shaw for AY 1998-99 which was not done.
The law laid down by the Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT reported in 214 1TR 801 (SC) is relevant. It was held that it is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted, can be used against him by holding that it is a receipt of an income nature. Examination whether the credits can be treated as income of the assessee is based on the three pillar test of identity, genuineness
7 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 and creditworthiness. The Hon’ble Calcutta High Court in the case of Shankar Industries v CIT reported in 114 ITR 689 ( Cal) has held that the law on this point is now well settled. It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These findings must be proved prima facie by the assessee and only after the assessee had adduced evidence to establish prima facie the aforesaid, the onus shifts on the department. As narrated above, in the case of the creditor the creditworthiness could not be proved. It is held that the appellant was not able to discharge the initial onus of capacity of the donor to gift. In the case of Anil Kumar Vs. CIT reported in 292 ITR 552 CIT ( Del) the Hon’ble Delhi High Court has held that from the judgments of the High Court in the case of CIT vs. R.S.Sibal 269 ITR 429 (Del) and Sajan Das and Sons vs. CIT 264 ITR 435 ( Del) the position has emerged as under:
(i )mere identification of donor and showing the movement of gift amount through banking channels is not sufficient to prove the genuineness of the gift.
(ii )since the claim of the gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift.
In the case of Anil Kumar ( supra) , there was nothing on record to show as to what was the financial capacity of the donors, what was the creditworthiness of the donors, what kind of relationship the donors had with the assessee, what were the sources of funds gifted to the assessee and whether they had the capacity of giving large amount of gift to the assessee. Further, the assessee was asked to appear in person before the Assessing Officer, however, he never appeared. Since the assessee did not prove the genuineness of the transaction nor he established the identity of the donors, nor the capacity of donors to make gift, the Tribunal was wrong in deleting the addition on account of gift alleged to have been received by the assessee. Also, in the case of CIT vs. Kapur Brothers 118 ITR 741 ( All) it was held that when the explanations offered by the assessee were disbelieved, the result was that the firm had failed to prove that the deposits belonged to the partners and then, the revenue was entitled to draw an inference that the deposits constituted the income of the assessee from undisclosed sources and the same should be treated as such. In the present case too, the creditworthiness of the creditor have not been proved.
8 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 The question was considered in Homi Jehangir Gheesta v. CIT 41 ITR 135, when the Hon’ble Supreme Court reiterated that it was not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established ; but where the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there was no reason why the assessing authority should not draw such an inference. Facts as emerging in the present case clearly prove that the only conclusion that could be reached is that the donor did not have the capacity to make the gift. In the case of Narinder S Shekhri reported in 366 ITR 225 the Hon’ble Punjab and Haryana HC, based on the circumstances, had held, in view of the totality of facts and circumstances that this family had adopted a modus operandi of creation of capital by NRI gifts without there being any occasion, the alleged gifts cannot be held to be genuine transaction. In the light of these facts the findings of the Tribunal that the distant relatives had come to his aid at the time of need, was not sustainable.
Therefore, the ld.DR submitted that the AO was justified in making the
addition u/s.69 of the Act and prayed for allowing the appeal.
Ld. AR of the assessee relied on the order of CIT(A) in this regard.
We have heard rival submissions and perused the material on
record. Prima facie, the contention of ld.DR is that the assessee claimed
that the jewellery which was gifted was from the stock of the closed
business of Sri Janaki Shaw which closed in AY 1998-99, however, the
assessee could not submit copies of the last return of income filed by Sri
Janaki Shaw and the balance sheet, therefore, no inference in favour of the
assessee could be drawn on the fact that the jewellery was found in a
potlee at the time of survey. On perusal of the assessment order, we find
that the AO has mentioned that the assessee was not able to furnish any
further evidence to substantiate his claim. The AO further noted that the
9 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018 credit worthiness of the donor could not be proved. On consideration of the
written submissions of ld. DR and the findings of both the authorities,
below, we are of the opinion that the matter needs further verification by
the CIT(A) on the submissions filed by the CIT(A) before us. Accordingly,
we remit the disputed issue to the file of CIT(A), who shall verify and
examine the issue again, after providing adequate opportunity of hearing to
the assessee and assessee shall cooperate in submitting the information
before the CIT(A). Hence, we allow the ground of appeal of Revenue for
statistical purposes.
The assessee has filed the cross objection i.e. CO No.05/Ran/2018,
which is in support of the order of CIT(A). Since we have allowed the
appeal of Revenue on the disputed issue for statistical purposes, therefore,
the cross objection filed by the assessee has become infructuous, hence,
dismissed.
In the result, appeal of the assessee i.e. ITA No.48/Ran/2016 and
appeal of Revenue i.e. ITA No.78/Ran/2016 are allowed for statistical
purposes, whereas the cross objection filed by the assessee i.e. CO
No.05/Ran/2018 is dismissed.
Order pronounced in the open court on 25/05 /2018
Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi, Dated 25/05/2018 Prakash Kumar Mishra , Sr. Ps
10 ITA No.48&78/Ran/2016 And CO No.05/Ran/2018
Copy of the Order forwarded to : 1. The Appellant – 2. The Respondent – 3. The CIT(A) concerned 4. CIT , concerned 5. DR, ITAT, Ranchi BY ORDER, 6. Guard file.
//True Copy// SR.PS, ITAT, RANCHI