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Income Tax Appellate Tribunal, AMRITSAR BENCH; AMRITSAR.
Before: SH. SANJAY ARORA & SH. N. K. CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 465/(Asr)/2017 Assessment Year: 2013-14
Abdul Hafiz, Vs. Deputy Commissioner of Income Near Post Office Jakhni, Tax, Circle-2, Jammu Udhampur (J & K) [PAN: AARPH 6698A] (Appellant) (Respondent)
Appellant by : Sh. P. N. Arora, Adv. Respondent by: Sh. Rajeev Gubgotra (D.R.) Date of Hearing: 14.03.2018 Date of Pronouncement: 19.03.2018
ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)' for short) dated 27.04.2017, dismissing the assessee’s appeal contesting his assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 06.01.2016 for Assessment Year (AY) 2013-14.
The instant appeal concerns an addition of Rs. 9 lacs brought to tax u/s. 68 of the Act. The assessee, a Government contractor, observed during the course of assessment proceedings to have received Rs. 9 lacs by bank transfer on 14.05.2012 from one, Zaitoon Begum, was asked to explain the same. The assessee furnished a ledger account which did not exhibit the said receipt, further explaining Zaitoon
2 ITA No.465/(Asr)/2017(AY 2013-14) Abdul Hafiz v. Dy. CIT Begum to be his wife, who had worked as ‘mate’ for a short spell in Doda Area - the ledger account reflecting a credit of Rs.2.15 lacs to her account by way of labour charges, and which was paid by the assessee during the year. The assessee, admittedly in receipt of Rs. 9 lacs from the said person, had not credited the said sum in his books of account, so that the receipt was unexplained as to its’ nature and source. The AO, accordingly, brought the same to tax u/s. 68. The same stood confirmed in first appeal for principally the same reason; the assessee not effecting any improvement in his case before him.
We have heard the parties, and perused the material on record. The assessee’s first objection that section 68 would not apply where, as observed by the Assessing Officer (AO), the impugned sum had not been found credited in his books of account, is rendered of no consequence as, by own admission, the impugned sum stands credited in the assessee’s books of account (PB pg. 29). In fact, as explained by the ld. counsel, Sh. P. N. Arora, Advocate, the assessee has maintained two accounts of the creditor, and the account reproduced by the AO (at pg. 2 of his order) is the other account, i.e., for labour charges (PB pg. 27), while the cash credits - received during the year at Rs.12.95 lacs, stand credited to another account (PB pg. 29). Though the cash credit account is also certified to have been furnished before the AO and, in fact, before the ld. CIT(A) as well, we are unable to comprehend as to how, where so, could both of them overlook the same, with, rather, the AO observing that the impugned sum does not find reflection even in the assessee’s final accounts. Then, again, the assessee would have, in that case, specifically drawn the attention of the ld. CIT(A) to this account which, as apparent, he has not. The controversy raised however is without any substance in law, as the impugned sum stands admittedly received by the assessee, duly credited to his bank account, so that even if not credited in his books
3 ITA No.465/(Asr)/2017(AY 2013-14) Abdul Hafiz v. Dy. CIT of account - which in fact he has shown to, the assessee is yet obliged u/s. 69/69A to furnish a satisfactory explanation as to the nature and the source of deposit in his bank account. Reference in this context may be made to the decision in CIT v. Jauharimal Goel [2005] 147 Taxman 448 (All). On balance, section 68 is clearly applicable in the facts and circumstances of the case. The next question is if the assessee has discharged the burden of proof cast on him u/s. 68. The nature and source of a credit, as is well-settled, is to be discharged on the anvil of the parameters of the identity and capacity of the creditor, and the genuineness of the credit transaction/s. The bank account of the creditor (PB pg. 9), coupled with the confirmation (bearing her address and PAN, at PB pg. 8), clearly establish the identity of the creditor. The genuineness of the credit transaction also cannot, at least prima facie, be doubted as - even if on interest-free basis, the loan/advance is extended to the assessee by his spouse. That leaves us with the third aspect of the matter, i.e., the creditors’ creditworthiness. We observe no reference to this aspect in the assessee’s explanation before either authority. There is, correspondingly, no finding by the Revenue in the matter. Though the ld. AR would draw our attention to the creditors’ tax returns for AY 2012-13 (PB pg. 31) and AY 2013-14 (PB pg. 32), they hardly inspire confidence. Apart from fact that there is - as afore-noted, no reference thereto either in the assessee’s submissions before the Revenue Authorities (or even before us) nor, perhaps consequently, any finding by them qua it, the same cannot be regarded as enabling a positive satisfaction as to the creditors’ capacity. The return for AY 2012-13 is for a paltry sum of Rs.0.83 lacs, filed, as it appears, to claim a tax refund. As regards the return for AY 2013-14, the same, though at a higher figure (of Rs.1.74 lacs), cannot be said to lead to generation of capital and, thus, to exhibit her financial capacity (to the required extent). It also does not show as to when the relevant income was available to the creditor in-as-much as the funds
4 ITA No.465/(Asr)/2017(AY 2013-14) Abdul Hafiz v. Dy. CIT under reference were advanced to the assessee in mid May, 2012, i.e., barely 1½ months into the year, whereat presumably only a fraction of the total income for the year (f.y. 2012-13) would have materialized. The creditor had, at the time of the impugned credit, in fact already extended Rs.3.95 lacs to the assessee during the relevant year itself. Though it is only the credit of Rs. 9 lacs that is under examination, the creditors’ – who is also maintaining books of account, capacity has to be shown with reference to the entire sum. A credit may not necessarily arise from the creditors’ current year income, and may well be from his capital, hereinbefore employed in some other asset/s, since realized. At the same time, it may be that a creditor may be merely a conduit for funds, the source of which is thus located in another person/s, so that the creditor is only an ostensibly source, and does not have the capacity to lend or assume (financial) risk. We have already stated that the identity is proved, and there is nothing on record to doubt the genuineness of the transaction. The matter, therefore, for examination of the capacity shall have to necessarily travel back to the file of the AO. To the extent the aspect of capacity is linked to genuineness, which may have some overlap, our finding as to genuineness may be regarded as reserved. The primary burden toward establishing the credit would be on the assessee. The AO shall decide issuing definite finding/s of fact, based on the material on record. Before parting, we may also address an argument raised by the ld. AR during hearing, i.e., that the addition is not sustainable in law as the assessee’s books of account have not been ‘rejected’ by the AO during assessment. The assessee’s books of account reflect a credit and, placing reliance thereon, is required by the assessing authority to prove the genuineness thereof - nothing more and nothing less. The same is as per the mandate of law (s.68), which thereby makes a departure from the normal rule that the apparent is real unless shown otherwise, and the burden to show so (otherwise) is on the person who so claims/
5 ITA No.465/(Asr)/2017(AY 2013-14) Abdul Hafiz v. Dy. CIT alleges. As explained by the Apex Court time and again, it is on account of the credit appearing in the assessee’s books of account, so that he is the beneficiary of the sum credited, that the law deems it to be the assessee’s income unless he satisfactorily explains the same (credit) as to its nature and source. Reference in this context may also be made to the decision in CIT v. S. Kamaraja Pandian [1984] 150 ITR 703 (Mad), wherein it stands explained that in spite of the entries to that effect in his accounts, an assessee, in view of section 68, will have to establish the identity of the creditor; the capacity of the creditor to advance; and the genuineness of the transaction/s, and where the assessee does not offer any explanation about the nature and source of the cash credits or the explanation offered is not satisfactory, the same may be charged to tax as the income of the assessee of that previous year. Where and how, then, one may ask, does the question or the need for the AO to regard the assessee’s books of account as not reliable arise for invoking the provisions of section 68 or, for that matter, sections 69, 69A, et. al, which are essentially rules of evidence. The other provisions, viz. section 69, 69A, etc. can in fact be invoked only where the Revenue discharges the primary onus on it to show the assessee to be owner of the relevant asset. As explained in Chuharmal v. CIT [1988] 172 ITR 250 (SC), the same seek to provide statutory recognition to the principles of common law jurisprudence as enshrined in the Evidence Act. We decide accordingly. 4. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on March 19, 2018
Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date:19.03.2018.
6 ITA No.465/(Asr)/2017(AY 2013-14) Abdul Hafiz v. Dy. CIT /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Abdul Hafiz near Post Office Jakhni, Udhampur (J&K) (2) The Respondent: Dy.CIT, Circle 2, Jammu (3) The CIT(Appeals), Jammu. (4) The CIT concerned. (5) The Sr. DR, I.T.A.T.