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Income Tax Appellate Tribunal, C BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of NFAC for the assessment year 2011-2 dated 28.12.2023. The assessee has raised following grounds of appeal:
1. The order of the learned CIT(A) NFAC, Delhi is arbitrary, against the provisions of law and contrary to the facts of the case and is therefore unsustainable.
2. The learned CIT(A) erred in not considering the submissions of the Appellant against the notice UIS, 148 issued to assume jurisdiction for passing the Assessment Order by the Assessing officer.
3. The learned CIT(A) erred in enhancing the addition of Sundry Creditors to Rs.1 ,44,78,321 without considering the detailed submissions made before the Assessing officer and the CIT(A) and by erroneously presuming that the Sundry Creditors in the same Audited Financials filed before the CIT(A) and the Assessing officer are different figures.
Nadella Venkata Ashok Kumar, Bangalore Page 2 of 10 4. The learned CIT(A) erred in holding that the Sundry Creditors of Rs.1,44,78,321 as unsubstantiated without considering the comprehensive explanation, Ledger extracts and Confirmation letters furnished to the Assessing officer and to the CIT(A).
5. The learned CIT(A) erred in sustaining the addition of Gift to wife of Rs. 21,00,000 added as income U/s 56(2) of the l. T. Act in the Assessment Order as unexplained money/cash U/s 69A of the l. T. Act without considering the submissions of the Appellant and the record available.
6. For the grounds stated above and for the grounds which may be permitted to be adduced at the time of hearing of the appeal it is prayed that the enhanced addition of Sundry Creditors at Rs.1,44,78,321 and addition of Gift to wife of Rs.21,00,000 as Unexplained Money/cash U/s 69A made in the order of the CIT (A) be deleted and justice rendered.
Ground No.1 is general in nature, which does not require any adjudication.
At the time of hearing, ld. A.R. has not pressed ground No.2. Accordingly, this ground is dismissed as not pressed. 4. Ground Nos.3 & 4 are with regard to sustaining addition of Rs.1,44,78,321/- as unexplained credits. 4.1 The ld. A.R. submitted that the Sundry Creditors in the Accounts are the credit balances of the customers of the Assessee who purchased old papers and magazines from the Assessee’s Proprietary concern M/s Sri Srinivasa Corporation. Total amount of Sundry Creditors is Rs.1,44,78,321 the breakup of which is as below:
Sl. Name Amount (Rs.) No. 1 Akula Board Ltd 1,06,79,380 (L.C. Account -80,00,000 + Regular account 26,79,380) 2 Prabhujee Enterprises 5,84,711 3 Aruna Paper Board Pvt Ltd 30,40,430 4 Astha Lakshmi Industries 20,746 Nadella Venkata Ashok Kumar, Bangalore Page 3 of 10 5 Sivasai enterprises 70,000 6 Jai Maakali Pulp Products 83,054 Pvt Ltd Total 1,44,78,321 4.2 He submitted that during the scrutiny proceedings and also the appellate proceedings before the CIT(A) the Assessee had submitted Ledger copies of all the parties, copy of Bank Accounts and Confirmation letters from Akula Board Ltd (Rs. 1,06,79,380) Prabhujee Enterprises (Rs.5,84,711) and Aruna Paper Board Pvt Ltd (Rs. 30,40,430). The submissions made and the details/documents submitted during the Assessment proceedings and the proceedings of the CIT(A) are summarised below:
Sl. Name of Amount (Rs.) Submitted to the Submitted to the No the Party Assessing officer CIT(A) 1 Akula 1) 80,00,000 1). a). Ledger Copy of 1) & 2). Ledger Board Ltd (PB Page no: Akula Boards – LC-C conformation from 160) Account (Letter of Akula Boards Credit Discount confirming the facility) in the books balance of 2) 26,79,380 of Sri Srinivasa Rs.1,06,79,380 (PB Page Corporation by with Application no:143) submissions dated U/r 46A dated 13/11/2018 20/12/2019 b). Proof of Bank Statement from SBH for Rs.80,00,000 by submissions dated 26/12/2018 2). Ledger Copy of Akula Boards for regular account for Rs.26,79,380 by submissions dated 06/12/2018 2 Prabhujee Ledger Copy of Ledger Enterprises 5,84,711 Prabhujee conformation from ( PB Page no: Enterprises in the Prabhujee 159) books of Sri Srinivasa Enterprises Corporation by confirming the Nadella Venkata Ashok Kumar, Bangalore Page 4 of 10 submissions dated balance of 13/11/2018 R.5,84.711 with Application U/r 46A dated 20/12/2019 3 Aruna 30,40,430 (PB Confirmation of Confirmation Paper Page no: 114) Accounts from Aruna letter from Aruna Board Pvt Paper Boards for Paper Boards for Ltd Rs.30,43,430 by Rs.30,43,430 by submissions dated Paper Book dated 13/11/2018 20/12/2019 4 Astha 20,746 Ledger Copy of Astha Lakshmi (PB Page Lakshmi Industries in Industries no: 115) the books of Sri Srinivasa Corporation by submissions dated 13/11/2018 5 Sivasai 70,000 (PB Ledger Copy of enterprises Page no: Sivasai Enterprises in 113) the books of Sri Srinivasa Corporation by submissions dated 13/11/2018. The Credit balance is on account of advance received on 31/03/2011 6 Jai 83,054 Ledger Copy of Jai Maakali (PB Page Maakali Pulp Pulp no : 132) Products Pvt Ltd., in Products the books of Sri Pvt Ltd Srinivasa Corporation by submissions dated 06/12/2018 and 26/12/2018 Total 1,44,78,321 4.3 He submitted that Sundry Creditors are nothing but credit balances of purchasers of old newspapers and magazines procured by the Assessee through his purchases. Being a Trader of Old Newspapers and magazines, the Assessee buys the old Newspapers and magazines from different suppliers and sells them to his customers. The purchases and the sales have been accounted in the Books of accounts. The books of account of the assessee have been Nadella Venkata Ashok Kumar, Bangalore Page 5 of 10 audited u/s 44AB of the I.T. Act. There is no adverse mention regarding the Sundry Creditors in the Audit Report. 4.4 He submitted that the Assessing officer has accepted the audited accounts and has not found anything adverse about them. The Books of Accounts have not been rejected in the Assessment proceedings. The purchases and sales in the accounts have been accepted. The CIT(A) has also not found anything adverse about the Books of Accounts, except factually erroneously stating that the Sundry Creditors in the Balance Sheet before the Assessing officer and filed with him were not the same. The Assessee had explained the nature of transactions with the Sundry Creditors, given the details of the Sundry Creditors of Rs. 1,44,78,321 along with their Ledger Accounts. He also furnished confirmation from the Sundry Creditors for Rs.1,43,04,521 (Rs. 1,06,79,380 + Rs.5,84,711 + Rs. 30,40,430) out of the Total Sundry Creditors of Rs. 1,44,78,321. 4.5 He submitted that the Assessee had discharged his onus in explaining and establishing the correctness and veracity of Sundry Creditors. Both the Assessing officer and the CIT(A) have not considered the submissions. Further they have also not even mentioned any evidence to doubt the Sundry Creditors. 4.6 He submitted that for the detailed reasons with evidences furnished as above, the disallowance/addition of Sundry Creditors of Rs.1,17,15,887 made in the Assessment Order further enhanced to Rs. 1,44,78,321 by the CIT(A) is unjust and against the provisions of law and facts on record and prayed that the disallowance/addition of Sundry Creditors of Rs. 1,44,78,321 be deleted and justice rendered.
The ld. D.R. submitted that before ld. AO assessee was asked to furnish the evidence in respect of sundry creditors shown I the balance sheet. The assessee has failed to produce the details of sundry creditors to substantiate that these are genuine sundry creditors. Hence, the addition has been made by ld. AO. Even before ld. CIT(A), assessee failed to prove the identity and creditworthiness Nadella Venkata Ashok Kumar, Bangalore Page 6 of 10 of these parties and capacity of these creditors. He submitted that it has to be noted that assessee filed two balance sheets showing two different balances and the assessee was unable to reconcile the difference between two figures to the tune of Rs.26,79,380/- pertaining to Akula Board Limited and Rs.83,054/- pertaining to M/s. Jai Maa Kali Pulp Products Ltd. The ld. CIT(A) has enhanced the additions in terms of provisions of section 251(1A) of the Act from Rs.1,17,15,887/- to Rs.1,44,78,321/- and the same to be confirmed.
We have heard the rival submissions and perused the materials available on record. In this case, the ld. A.R. submitted that assessee has filed the confirmation letter from all the parties along with their PAN nos. and their account copies. As such, the primary burden cast upon the assessee has been discharged and there is no question of any addition on this count. In our opinion, the argument of assessee’s counsel goes contrary to the findings of the lower authorities. Hence, in the interest of justice, it is appropriate to remit this issue to the file of ld. AO for fresh consideration and the assessee is directed to explain these credits to the satisfaction of ld. AO by providing PAN Numbers of these parties, confirmation letters and the ledger account copies of the assessee with them along with the nature of these transactions. The ld. AO after going through these documents shall cause necessary enquiries and decide the issue in accordance with law after giving opportunity of hearing to the assessee. The issue is remitted to the file of ld. AO for de-novo consideration.
Next ground in this appeal is ground No.5 which is with regard to sustaining addition of Rs.21 lakhs being gift made to assessee’ wife as unexplained money u/s 69A of the Act. The assessee said to be gifted a sum of Rs.21 lakhs to assessee’s wife Mrs. Archana Nadella on 31.3.2011 through some unregistered gift deed. According to the lower authorities, assessee has not explained the source of this gift made to assessee’s wife. count. Hence, the addition made on this 7.1 Before us, ld. A.R. submitted that the Assessee had given a Gift Nadella Venkata Ashok Kumar, Bangalore Page 7 of 10 of Rs.21,00,000 to his wife Mrs. Archana Nadella on 31/03/2011 out of his disclosed income and Cash balance. The transaction was recorded in the Books of Accounts and the Balance Sheet for A.Y. 2011-12. The Books of Accounts were audited U/s 44AB of the I.T. Act and Audit Report was filed by the Assessee. The Assessing officer accepted the Books of Accounts and completed the assessment on the basis of the Audited Books of Accounts. Neither the Assessing officer nor the CIT(A) have found anything adverse about the Books of Accounts. 7.2. Under the above facts the Assessing officer treated the gift of Rs.21,00,000 as income U/s 56(2) of the I.T. Act which is patently incorrect as sec 56(2) is applicable to the donee and not the donor and Gift between Husband and Wife is exempted. While implicitly deleting such an addition, the CIT(A) has inexplicably confirmed the addition of Rs.21,00,000 as Unexplained Money/Cash held by the Assessee U/s 69A of the I.T. Act. 7.3 He drew our attention to Section 69A of the I T Act as below:
69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
7.4 He submitted that section 69A can be applied only when an assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account. Sec 69A is not applicable for the assets/transactions recorded in the Books of Accounts. The Gift of Rs.21,00,000 is recorded in the Books of Accounts of the Assessee, it is out of the cash balance available and Nadella Venkata Ashok Kumar, Bangalore Page 8 of 10 is also shown in the Capital Account of the Balance Sheet. Prima facie provisions of sec 69A are not applicable in the case of the Assessee. 7.5 He submitted that the CIT(A) has treated the Gift of Rs.21,00,000 as unexplained Money U/s 69A only for the reason that the Balance Sheet enclosed was not signed by the Assessee. Assessee had furnished Audited Financials along with the Audit Report which was signed. The CIT(A) enhanced the addition of Sundry Creditors based on the same balance Sheet. Thus, there was no basis to not to consider the Balance Sheet on the issue of Gift to wife which is also in the same Balance Sheet. 7.6 Without prejudice to the submission that sec 69A is not applicable as the Gift is recorded in the Books of Accounts, he submitted that the Assessee explained the source of Gift as from the available cash balances as on 31/03/2011. As shown in the Balance Sheet cash balance with the Assessee as on 31/03/2011 was Rs.69,91,840.86, after the Gift of Rs.21,00,000 to his wife on 31/03/2011. He submitted that as submitted earlier the Assessing officer and the CIT(A) have accepted the Books of Accounts. The Assessee had therefore discharged his burden in explaining the source of Gift of Rs.21,00,000 given to his wife on 31/03/2011. The Assessing officer has found the explanation satisfactory and did not consider application of provisions of sec 69A. The CIT(A) without any basis and without bringing any evidence on record to hold that the explanation of the Assessee is not satisfactory or that the amount of Gift of Rs.21,00,000 by the Assessee was from any unexplained sources very arbitrarily and unjustly treated the Gift as Unexplained Money/cash U/s 69A of the I.T. Act. 7.7 He submitted that for the detailed reasons submitted above, provisions of sec 69A are not applicable to the facts of the Assessee’s case and the treatment of gift to wife of Rs.21,00,000 as Unexplained Money/cash U/s69A of the I.T. Act is not tenable in law and on facts.
Nadella Venkata Ashok Kumar, Bangalore Page 9 of 10 8. We have heard the rival submissions and perused the materials available on record. The main plea of the assessee’s counsel is that this gift has been recorded in the books of accounts of the assessee. As such, provision of section 69A of the Act is not applicable once the books of accounts has been accepted by the department. In this case, the ld. AO has invoked the provisions of section 56(2) of the Act for making gift to his wife. However, section 56(2) of the Act is not applicable for making gift to any person including wife. Section 56(2) of the Act refers to receipt of gift and not making of gift from assessee’s side. As such, the ld. CIT(A) invoked the provisions of section 69A of the Act. Section 69A of the Act is applicable when the assessee is found to be owner of any money, bullion, jewellery or other valuable articles or such money, bullion, jewellery or valuable articles which is not recorded in the books of accounts, if any maintained by him for any source of income and the assessee offers no explanation about the nature and source of acquisition of such money, bullion or jewellery or other valuable article or explanation offered by him is not, in the opinion of the ld. AO, satisfactory, then the value of such money or bullion or jewellery or other valuable article may be deemed to be income of the assessee for such financial year. In the present case, the transaction relating to gift to his wife to the tune of Rs.21 lakhs has been recorded in the books of accounts. As such, section 69A of the Act is also not applicable. However, section 69C of the Act is applicable, which reads as follows: “69C Where in any financial year an assessee has incurred any expenditure thereof, or the explanation, if any, offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:] [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.]