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2016 DIGILAW 1061 (GUJ)

Laxmi Trading Co. v. Income Tax Officer

2016-06-09

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. Being aggrieved and dissatisfied with the impugned judgment and orders passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' (hereinafter referred to as 'the Tribunal') dated 13.05.2004 in ITA Nos. 3800/Ahd/2003, 3801/Ahd/2003 & 3802/Ahd/2003 for the Assessment Years 1993-94, 1994-95 & 1995-96 respectively, the assessee has preferred the present Tax Appeals. 1.1 These appeals were admitted by this Court for consideration of the following substantial question of law:- "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in confirming the addition made as unexplained investments on account of demand drafts allegedly purchased by the appellant in cash?" 2. During the course of assessment proceedings the Assessing Officer reopened the assessment u/s.147. The Assessing Officer also made an addition of Rs. 6,50,593/- u/s. 69 of the Income Tax Act on the ground that the assessee had purchased demand drafts of the value stated from The Baroda Traders Co-operative Bank Ltd. and Shree Bharat Co-operative Banl Ltd., Fatehpura, Baroda. 2.1 Being aggrieved by the same, the assessee filed appeals before CIT(A). The CIT(A) confirmed the assessment made by the Assessing Officer and dismissed the appeals. The assessee therefore preferred appeals before the Tribunal. The Tribunal restored the matter to the file of the CIT(A) to verify the investment made by the assessee. Being aggrieved by the said order, the present appeals are preferred. 3. Mr. J.P. Shah, learned advocate appearing with Mr. Manish Shah, learned advocate for the assessee has stated that the Tribunal has erred in not following the ratio laid down by the Supreme Court in Kishinchand Chellaram v. Commissioner of Income Tax reported in 125 ITR 713 wherein it is held as under:- "It is to our mind impossible to hold, in the face of the application for the remittance signed in the name of Tilokchand that this amount was sent by the assessee and the finding to that effect reached by the Tribunal must be held to be unreasonable and perverse. Even if we accept that Tilokchand and Nathirmal were employees of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee of the assessee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. Even if we accept that Tilokchand and Nathirmal were employees of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee of the assessee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. It is quite possible that Tilokchand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal. It was for the revenue to rule out this possibility by bringing proper evidence on record for the burden of showing that the amount was remitted by the assessee was on the revenue." 3.1 Mr. Shah submitted that considering the aforesaid decision, even if things are assumed against the assessee, the factum of money being that of assessee is not proved by the revenue. He submitted that even assuming that as per the decision in the case of Kishinchand (supra) the two letters were to be taken into account, those letters would at the highest establish that Trilokchand, an employee, remitted the amount from Madras and N, another employee, received it at Bombay. From this it did not follow that the remittance was made at Madras and received at Bombay on behalf of the assessee. The burden was on the department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call T and N in evidence to help the department to discharge the burden that lay upon it. 3.2 Mr. Shah has drawn the attention of this Court to the statement of Hasmukh bhai Shah dated 19.08.2003 before CIT(A) and submitted that questions No. 18, 19 and 21 clearly show that it was nothing but malicious proceedings when the Assessing Officer vide his letter dated 03.07.2003 addressed to CIT(A) made the following concession." "Shri Bharat Cooperative Bank Ltd. was not following practice to obtain DD forms and hence the same are not available. As regards the purchase of DDs from Baroda Traders Cooperative Bank Ltd., the DD forms have been obtained and same are being produced before your honour for kind perusal. It is relevant to mention here that the assessee M/s. Laxmi Trading Co. has used various bogus names on the DD forms while purchasing the DDs obviously with the intention to avoid detection by the Enforcing Agencies." 3.3 Mr. It is relevant to mention here that the assessee M/s. Laxmi Trading Co. has used various bogus names on the DD forms while purchasing the DDs obviously with the intention to avoid detection by the Enforcing Agencies." 3.3 Mr. Shah submitted that in other words, at the end of it all there is confession by the officer that his earlier assertion that the names of the employees on the application forms were there was factually wrong. 3.4 Mr. Shah has further stated that one Mr. Atul Shah has stated in his statement that the list of the DDs purchased was prepared by Shri Hasmukh Shah after asking him the details and that Mr. Atul Shah has prepared the list on the basis of the DD application forms. He submitted that Mr. Atul Shah admits that the name of the assessee is not mentioned on any of the application forms and that he has filled the column for the purchaser on the basis of his memory. Mr. Atul Shah stated that the DDs were handed over on production of counter foils. He submitted that this can be interpreted to mean that the bank did not obtain any acknowledgements from the person who came to collect the DD. 3.5 Mr. Shah submitted that the DD clerk Mr. Atul Shah would not have been in a position to know as to who had deposited cash for purchase of DDs. His contact with the applicant came only when the draft was to be delivered. He submitted that the entire exercise undertaken by the Assessing Officer is on the basis of the some so called evidence which he claims to be in his possession but he is not prepared to confront the assessee with and therefore the evidence is not a clinching evidence and the allegation against the assessee therefore remains unproved. 3.6 In support of his submissions, Mr. Shah has relied upon the decision of this Court in the case of Krishna Textiles v. Commissioner of Income Tax reported in (2009) 310 ITR 227 (Guj). 4. Mr. K.M. Parikh, learned advocate appearing for the respondent - revenue has supported the impugned orders and submitted that the same having been passed in accordance with law does not call for interference. 4. Mr. K.M. Parikh, learned advocate appearing for the respondent - revenue has supported the impugned orders and submitted that the same having been passed in accordance with law does not call for interference. He has submitted that the bank manager in his statement under section 131(1A) dated 21.07.1995 has confirmed that these demand drafts were purchased by the assessee's employees and that the bank also produced the demand draft register wherein names of the employees of the assessee were mentioned. He submitted that the copies of register and records of the bank were provided to the assessee for verification. 4.1 Mr. Parikh further submitted that the copies and records of the bank were provided to the assessee for verification and that the assessee failed to provide books of accounts and names and signatures of employees but the assessing officer has clearly mentioned in the assessment order that the names written in the demand drafts are of employees of the assessee as per old records. He submitted that the assessee has not even furnished the copies of accounts or confirmations from the parties in whose name demand drafts have been purchased and sent. He submitted that the statement of Shri Hasmukh Shah cannot be said to be incorrect since in case of other four parties they have accepted of having purchased the demand drafts by depositing cash and hence the statement of bank authorities cannot be said to be just 'hearsay' evidence as contended by the assessee. 4.2 Mr. Parikh further contended that the contention of the assessee that the bank manager cannot know the employees of the assessee since the procedure of making demand drafts is such that bank manager in no way comes into direct dealing with the person who takes the draft is also not found to be convincing since a manager who is responsible for banking transactions normally knows the persons who deals on day to day basis with the bankers. The assessee inspite of having allowed cross examination of witnesses i.e. bank officials failed to furnish any document in the form of copies of accounts with the parties and names of employees so as to establish that the names written in the bank demand draft forms were not pertaining to the assessee. 5. We have heard learned advocates for both the sides. 5. We have heard learned advocates for both the sides. The decision of the Apex Court in the case of Kishinchand Chellaram (supra) is applicable on the facts of the present case. The Apex Court in the said decision has held as under:- "It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. Unfortunately, for the Revenue, neither Tilokchand nor Nathirmal was in the service of the assessee at the time when the assessment was reopened and the assessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it. We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee." 5.1 It is very well clear from the decision hereinabove that the burden of proof lies on the revenue to prove its case and in the present case, the revenue has failed to discharge the same. The Tribunal has wrongly observed that the aforesaid decision shall not apply and that the onus is on the assessee to disprove the findings arrived at by the Assessing Officer. We are of the opinion that the Tribunal has erred in arriving at the said conclusion. 5.2 In this context we have also perused the statement of Hasmukhbhai Shah dated 19.08.2003 before CIT(A) and as per questions No. 19 and 21 the revenue has not been able to prove that the demand drafts purchased in cash belong to the assessee. Even if the onus in respect of the two DDs amounting to Rs. 1,61,527/- is discharged in assessment year 1993-94 in absence of any evidence for the remaining DDs added in assessment year 1993-94 and all other DDs added in other years there is absolutely no manner of justification. The CIT(A) erred in casting negative onus on the assessee when it observed that the onus is on assessee to submit the necessary details and evidence that those DDs were not purchased by the assessee. The CIT(A) erred in casting negative onus on the assessee when it observed that the onus is on assessee to submit the necessary details and evidence that those DDs were not purchased by the assessee. 5.3 In fact the Assessing Officer in his letter dated 03.07.2003 had mentioned as under:- "The assessee M/s. Laxmi Trading Co. has used various bogus names on the DD forms while purchasing the DDs obviously with the intention to avoid detection by the Enforcing Agencies." 6. Thus, the department has not been successful in proving that the DDs were purchased by the assessee. In that view of the matter, the questions raised in the present appeals are required to be answered in favour of the assessee and against the revenue. The impugned orders passed by the Tribunal and the Assessing Officer are quashed and set aside. Appeals are allowed accordingly.