KARSANDAS LALKHMAN JHAVERI,MUMBAI vs. ACIT 18(2), MUMBAI

The brief facts of the case are that the assessee is a partnership firm carrying on the business of dealers and exporters in precious metals, diamonds, stones, gold and silver jewellery. Return of income for the year under consideration was filed on 27.09.2012 declaring total income at `1,48,23,960/-. The case was selected for scrutiny under CASS for reason “Large amount of sundry creditors”. During the course of assessment proceedings the AO found that advances received from one Shri Quasim Mohd Yousuf A Bastak and Smt. Samira Abbas was shown in the books. Assessee had shown an advance of `1.50 crores from Shri Quasim Mohd Yousuf A Bastak and `75 lakhs from Smt. Samira Abbas. It was explained

Aggrieved by the order of AO, Assessee preferred appeal before the Ld. CIT(A) and the Ld. CIT(A) vide order dated 21.11.2016 dismissed the appeal filed by the assessee.

Now before us the assessee has filed the present appeal on the following grounds: -

The Ld. A.R., before us, reiterated the same arguments as were raised by him before the Ld. CIT(A). It was submitted that the assessee is a partnership firm carrying on the business of dealers and exporters of precious metals, diamonds, stone, gold, silver and jewellery. It filed its return of income and later on the case was selected for scrutiny and during the course of assessment proceedings various queries regarding advances received from Shri Qassim Moh. Yusuf A. Bastak and Smt Samira Abbas was raised by the AO and consequently, all the details were filed before the AO. Vide letter dated 02.02.2015, the assessee filed party- wise details of “Advance against order”. The AO issued show cause notice dated 03.03.2015 stating as to why the advances received by the assessee should not be added back as unexplained credit under Section 68 of the Act. The assessee vide letter dated 11.03.2015 submitted all the required supportive documents in respect of identity, genuineness of transaction and creditworthiness of the following parties from whom assessee had received „Advances for sale of jewellery‟: - Mr. Qassim Mohd. Yousuf A. Bastaki-Rs. 1.50.00.000 i. Confirmation of Qassim Mohd. with details of date and bank from which he has given advance. ii. PAN details alongwith details of Assessing Officer. iii. Bank statement of Qassim Mohd. Yousuf highlighting the entries for advance given. Ms. Samira Abbas - Rs. 75.00.000 i. Copy of sale register for the relevant date. ii. Copy of ledger account of Samira Abbas in the books from 1.4.2011 till date.

It was submitted by Ld. AR that the assessee had received Advance for preparing jewellery for the daughter‟s wedding of Shri Qassim Mohd. and due to some unavoidable circumstances, the marriage was postponed. It was settled that whenever the wedding of his daughter would take place then the jewellery would invariably be prepared by the assessee and for that reason Shri Qassim Bastaki had kept the advance which he had given to the Assessee.

In the case of Smt. Samira Abbas, it is stated that the amount was adjusted next year by supplying ornaments to her. As far as the supply of ornaments in lieu of Advance is concerned,, the assessee has produced copy of sale register for the relevant date, copy of bills raised dated 22.06.2012 relevant to A.Y. 2013-14 bearing invoice no. GS0045, GS0046 and DS0013, copy of stock register as on 22.06.12 for 18 Kt gold, 22 Kt gold and diamonds which reflect the outword entry for use of these items for making jewellery for Samira Abbas. The amount of Rs. `50,00,000/- was advanced in April 2011. It was submitted that AO made wrong additions by holding that Smt. Samira Abbas was not available at the given address. It was submitted that the AO had wrongly concluded that assessee had not replied the show cause notice and thus the advance against orders were unexplained cash credits as the assessee has failed to prove the identity and genuineness of the parties. It was also submitted this stand of the AO was wrong as during the course of assessment proceedings, the assessee had submitted all the documents to establish the identity, genuineness of transactions as mentioned hereinabove. In support of his contention, Ld. A.R. relied upon the documents which were submitted before the lower authorities and also relied upon the judgement in the following cases:

On the contrary Ld. D.R. relied upon the orders passed by revenue authorities and submitted that the assessee had submitted the documents which were in no way prove the genuineness or identity of the parties. It was also argued that the assessee failed to produce the parties, their income tax return details and confirmation letters from them. It was also submitted that the addresses provided by the assessee were bogus and both the buildings where the parties were supposed to live were under renovation and the assessee had not furnished the correct addresses. It was submitted that the assessee had miserably failed in discharging the primary onus cast upon it in proving the genuineness of the transactions and the identity of the creditors. In view of this, Ld. DR submitted that there is no substance in these grounds of appeal and requested for dismissal of the appeal.

We have heard the counsels for both the parties and we have also perused the material available on record and the orders passed by the Revenue authorities and the judgements cited by the parties. As per the facts of the present case, It is an undisputed fact that the assessee had received a sum of `1.5 crores and `75 lakhs from Shri Quasim Mohd Yousuf A Bastak and Smt. Samira Abbas respectively. In this regard it was submitted that assessee had received the above amounts by way of “Advance against order”. In this regard, vide letter dated 11.03.15, the assessee had supplied all the details on record. The assessee had also placed on record the confirmation in the case of Smt. Samira Abbas in order to show that the assessee had already sold ornaments to her on 22.06.2012. In this regard confirmation of Smt Samira Abbas, copy of sale register for the relevant date, copy of ledger account of Samira Abbas in the books of the assessee from 01.04.2011 till date, copy of sales invoices

In the case of Shri Qassim Moh. Yousuf A Bastaki the assessee vide letter dated 11.03.15 had placed on record the confirmation of Shri Bastaki with details of date and bank from which he had given advance to the assessee, PAN details along with details of AO, bank statement of Bastaki highlighting the entries for advance given to the assessee.

After having gone through the record we found that the AO had made the addition by holding that the assessee had not offered „satisfactory explanation‟ regarding credit of the above amounts and the assessee had failed to establish the identity of parties.

In order to decide the issue, it is necessary to look into the provisions of Section 68 of the Act, which are reproduced below: - ''Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the {Assessing] Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless - (a) the person, being a resident in whose name such credit is recorded in the books oj such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory;

On the other hand, initially, no counter affidavit was filed by the Revenue, but directions were given to the revenue to file affidavit and the matter was again posted on 12.10.18. On this day, Ld. DR filed an affidavit dated 10.10.18. First of all, the affidavit filed by the revenue contains no verification. It mentions that Letter dated 11.03.15 is on record of the revenue, but it nowhere mention that documents contained in letter dated 11.03.15 are not on record with the revenue. On the contrary, a detailed affidavit had already been filed by the assessee which clearly mentions that letter dated 11.03.15 contains documents at serial no. 1 to 12. The assessee has also mentioned in the affidavit that the documents as contained in the letter dated 11.03.15 were also filed before Ld. CIT(A) as M/s. Karsandas Lakhman Jhaveri/ACIT, Circle 18(2) well. This fact found support from the copy of statement of facts filed before Ld. CIT(A). Apart from above, the affidavit dated 10.10.18 filed by the revenue, also mentions that assessment order was passed on 11.03.15, whereas Ld. AR drawn our attention to computer generated Income Tax Computation Form, where the date of order has been mentioned by the revenue as 16.03.15, therefore keeping in view the above discrepancies, we are of the view that affidavit filed by the revenue is evasive and do not inspire confidence. Thus, we find that all the relevant documentary evidences mentioned by the assessee were available on record of the revenue. Hence the assessee cannot be made to suffer, because of the laxities, in-action on the part of the revenue,.

We have gone through the judgements titled Orchid Industries (P) Ltd. (supra) wherein it was held as under: - “Section 68 of the Income-tax Act, 1961 – Cash credit (Share application money) – Where assessee had produced on record documents to establish genuineness of party such as PAN of all creditors along with confirmation, their bank statements showing payment of share application money, only because those persons had not appeared before Assessing Officer would not negate case of assessee so as to invoke Section 68.” CIT vrs. Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxman.com 272, wherein it was held that it was for the revenue to proceed by reopening assessment of such paersons and assessing them to tax who had paid advances and not to add same to assessee’s income as unexplained cash credit. CIT vrs. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom), wherein it was held that when the assessee had given the details of name, PAN No. And also given the cheque nos, name of bank statements then it was expected on the part of AO to make proper investigations and not to make additions in the case of assesses.. On same principles, the Hon’ble Supreme Court in the case of CIT Vrs. Orissa Corp Pvt. Ltd. 1986 25 Taxman80F, ACIT Vrs. Swift Sole India Pvt. Ltd. (2018) 95 taxman. 286, Crystal Networks vrs. CIT (2013)33 taxamn.com 432, Hon’ble Delhi High Court in the case of CIT Vrs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334, Yash Developers vrs. DCIT, (ITAT-Mum), Hon’ble Delhi High Court in M/s. Karsandas Lakhman Jhaveri/ACIT, Circle 18(2) the case of CIT Vrs. Winstral Petro Chemicals Pvt. Ltd. (2011) 10 tasman.com 137. In all the above cases, it has been held that where all the documents are genuine then the additions could not be made as cash credit for advances received from the customers. More particularly, when the assessee had given the name and addresses of the alleged creditors.

Having gone through the facts, material as well as the judicial pronouncements mentioned above we found that there are series of orders of the Hon'ble Jurisdictional High Court wherein it is clearly mentioned that when the assessee produce on record documents to establish the genuineness of party such as PAN along with confirmation, bank statement showing payment then only because those persons had not appeared before the AO, would not negate the case of the assessee so as to invoke Section 68 of the Act. Apart from this the Hon'ble Jurisdictional High Court in the case of Gagandeep Infrastructure P. Ltd. (supra) categorically mentioned that where the assessee had established identity, genuineness and capacity of the persons who had paid the amount, AO is not justified in adding the amount of unexplained credit. It was further held that it was for the Income Tax Officers to proceed by reopening the assessment of such persons and assessing them to tax in accordance with law and it did not entitle Revenue to add same to assessee’s income as unexplained cash credit.

We have also gone through the judgement of the Hon'ble Jurisdictional High Court in the case of Co-operative Centrale Reiffeisen Boerenleenbank B.A. vs. DCIT 97 taxmann.com 24 (Bom) wherein it was held that where there was all relevant documentary evidence available on record to prove the facts then the Tribunal could not have remanded back the matter to the AO for fresh consideration especially when the AO has not discharged the burden of proving the facts.

In the present case, since the assessee from the very beginning had furnished the required documents along with evidences and discharged his

In the result, the appeal filed by the assessee is allowed with no order as to cost.

Order pronounced in the open court on 12th October, 2018.