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TAXAP/966/2009 6/ 6 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 966 of 2009
=========================================
COMMISSIONER
OF INCOME TAX-VI - Appellant(s)
Versus
INTERNATIONAL
STEEL CORPORATION - Opponent(s)
=========================================
Appearance :
MR
MR BHATT, SR. ADVOCATE with MRS MAUNA M BHATT
for Appellant
None for
Opponent(s) : 1,
=========================================
CORAM
:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
and
HONOURABLE
MR.JUSTICE H.B.ANTANI
Date
: 27/12/2010
ORAL
ORDER
(Per
: HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. In
this appeal under section 260A of the Income Tax Act, 1961 (the Act),
the appellant-revenue has challenged the order dated 8.8.2008 made by
the Income Tax Appellate Tribunal (the Tribunal), proposing the
following two questions :
[A] Whether
on the facts and in the circumstances of the case, the Appellate
Tribunal erred in law in deleting the addition of Rs.10 lacs
confirmed by the CIT (A) on account of unexplained credits appearing
in the accounts of the assessee, without appreciating that the
assessee could not discharge the onus which lay upon it of
establishing the genuineness of the said credit entries?
[B] Whether
the Appellate Tribunal was justified in observing that the revenue
failed to establish any relation between the assessee and the
“Darbar”, without properly appraising the evidence on
record in the form of account of “Darbar” in the books of
late Shri Mahendra H. Shah which clearly showed that cheques were
issued in the name of “International Steel” by depositing
cash amounts of Rs.7 lacs and Rs.3 lacs in the said bogus account of
“Darbar”?”
2. The
assessment period is the block period 1.4.1989 to 7.12.1999. The
assessee is engaged in the business of ship breaking. A search under
section 132(1) of the Act came to be conducted in the case of Mr.
Mahendra H. Shah, Mr. Hemant Shah and their associates (Madhupuri
Group). During the course of search and post search inquiries, it was
found that late Mr. Mahendra H. Shah was indulging in the activity of
issuing accommodative entries of loan and purchase/sale to various
parties against receipt of cash from them. While examining the books
seized during the course of search, it was found that entries had
been obtained by the assessee concern also. Proceedings under section
158BD of the Act came to be initiated against the assessee. The
Assessing Officer framed assessment under section 158BC read with
158BD of the Act determining the total undisclosed income of the
assessee at Rs.44,13,657/-. The assessee partly succeeded in its
appeal before the Commissioner (Appeals) who deleted the addition
made the Assessing Officer in respect of loans other than the loan of
Rs.10 lacs shown in the account of ‘Darbar’ and additions
on account of interest and commission in respect thereof out of the
total income of Rs.44,13,657/- Being aggrieved, both the assessee as
well the revenue preferred appeals before the Tribunal. The Tribunal
vide its order dated 08.08.2008, dismissed the appeal preferred by
the revenue and partly allowed the appeal preferred by the assessee.
3. The
present appeal arises out of the appeal preferred by the assessee
before the Tribunal.
4. During
the course of search certain material was recovered, which included
copy of account of ‘Darbar’. The copy of the account of
‘Darbar’ which formed part of the assessment order as
Annexure “A” showed that the assessee had taken two
cheques of Rs.5 lacs on 25.8.1999 and that cash of Rs.7 lacs was paid
on 25.8.1999 and Rs.3 lacs was paid on 26.8.1999. There were other
entries in the said account, which did not pertain to the assessee.
The said cheques transactions were reflected in the account of
Madhupuri Corporation for the financial year 1999-2000 in the books
of the assessee as loans received from Madhupuri Corporation. The
account of ‘Darbar’ revealed that the said account had
been squared up in the books of Shri Mahendra H. Shah. The Assessing
Officer was of the view that the possibility of ‘Darbar’
advancing money to Shri Mahendra H. Shah who in turn advanced the
same to the assessee, was ruled out. That, it was clear from the
account that cash had been deposited by ‘Darbar’ on
behalf of the assessee to whom cheques of the same amount had been
issued.
5. The
Commissioner (Appeals) was of the view that in respect of the entries
of cheques of Rs.5 lacs, against which entries of cash of Rs.7 lacs
and Rs.3 lacs were reflected in the same account, the onus was on the
assessee to prove that such entries of cash deposit did not pertain
to it and pertained to somebody else and it had no connection
whatsoever with the entries of cash deposits. The Commissioner
(Appeals) was of the view that the assessee had not discharged the
said onus and held that the assessee was not able to explain
satisfactorily loans of Rs.10 lacs and accordingly, confirmed the
addition made on account of such loans and also disallowed the
interest in respect thereto.
6. In
appeal, the Tribunal, upon appreciation of the evidence on record,
found that the revenue has not established any relation between the
assessee and ‘Darbar’ which was very much necessary to
implicate the assessee. The Tribunal further found that proceedings
under section 158BD of the Act had been initiated against the
assessee on the basis of post search inquiries carried out by the
DDIT from the assessee itself and not on the basis of the
material/evidence gathered during the search. It was noted that the
learned Departmental Representative could not pinpoint any seized
material indicating that the assessee had taken any accommodative
entry of loan from Shri M. H. Shah and his associates or paid any
cash to any person in exchange of cheques. According to the Tribunal,
the burden of showing that the assessee had undisclosed income was on
the revenue. The said burden could not be discharged merely by
referring to a general statement given by a third party without
alluding to the assessee that cash was received from him in lieu of
loans and making such a statement the sole foundation for the
assessment. The Tribunal was, accordingly, of the view that the
Commissioner (Appeals) was not justified in upholding the addition of
Rs.10 lacs made by the Assessing Officer and disallowing the interest
paid by the assessee thereon and accordingly, deleted the same.
7. Thus,
both the Assessing Officer as well as the Commissioner (Appeals) had
made the addition on the ground that the assessee had not explained
the entry in the account of ‘Darbar’. The Tribunal upon
appreciation of the evidence on record has found that the revenue was
not in a position to establish any relation between the assessee and
the Darbar. As is apparent from the facts noted hereinabove, the
entry in question was made in the account of ‘Darbar’
found during the course of search. The account did not belong to the
assessee, but pertained to a party in respect of whom there is no
evidence on record to connect it to the assessee. In the
circumstances, the department could not have thrown the burden on the
assessee to explain the said entries. It was for the revenue to
establish its case that the entries regarding receipt of cash in fact
pertained to the assessee as well as to establish the connection
between the assessee and ‘Darbar’ to make out a case that
the cash of Rs.7 lacs and Rs.3 lacs had in fact been paid by or on
behalf of the assessee. However, in the absence of any evidence to
establish any connection between the assessee and ‘Darbar’,
the Assessing Officer was not justified in making the addition by
presuming that the cash had been deposited by ‘Darbar’ on
behalf of the assessee. The Tribunal was, therefore, justified in
holding that the Department had not been able to make out any case to
show that the cash of Rs.7 lacs and Rs.3 lacs paid in the account of
‘Darbar’ had been paid by or on behalf of the assessee.
Since the loan amount of Rs.10 lacs had wrongly been added as
undisclosed income of the assessee, consequently the disallowance of
interest thereon was also not justified.
8. In
the light of the aforesaid discussion, there being no infirmity in
the impugned order of the Tribunal, the same does not give rise to
any question of law, much less, a substantial question of law, so as
to warrant interference.
9. The
appeal is accordingly dismissed.
[HARSHA
DEVANI, J.]
[H.B.ANTANI,
J.]
parmar*
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