Kusum K. Jain, Mumbai vs Department Of Income Tax

सव ी आई.पी. बंसल, या यक सद य, एवं ी एन .के ."ब#लैया, लेखा सद य के सम& । Before Shri I P Bansal, JM, & Shri N K Billaiya, AM

आयकर अपील सं./ITA No.407/Mum/2014 ( नधा रण वष / Assessment Year : 2005-06)

ACIT 23(1) Vs. Kusum K Jain Mumbai Shop No.4, Ishwar Niwas, Ramkishan Wadi, Ground Floor, Bhandup (W), Mumbai 400078 PAN : AADPJ9059P (अपीलाथ) /Appellant) (*+यथ) / Respondent)

Appellant by : Shri Asghar Zain Respondent by : Shri Jayant R Bhatt

Date of Hearing : 25.06.2015 Date of Pronouncement : 30.06.2015

आदे श / O R D E R

Per I P Bansal, Judicial Member :

This appeal is filed by the Revenue. It is directed against the order passed by the CIT(A) dated 01.10.2013 for A.Y. 2005-06. The grounds of appeal read as under:

"Whether on the facts and in circumstances of the case and in law the Ld. CIT(A) was right in deleting penalty levied u/s. 271(1)(c) of the Income-tax Act 1961 of Rs.12,09,516/- without appreciating that quantum addition was made on the basis of information received that the assessee had advanced loan, sources of which could not be explained by the assessee during the assessment proceedings, interalia, the assessee had filed inaccurate particulars of income and also concealed the particulars of income under the provisions of section 271(1)(c) of the Income-tax Act, 1961."

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2. The impugned penalty is levied on an addition of Rs.36,80,000/-, which comprises of amount received by the assessee from the following persons:

Name Amount Jagdishji 5,00,000 Laxmanlal 5,00,000 Mohan Shingh 5,00,000 Rupalalji 5,00,000 Vijay Singh 5,00,000 Gordhan Singh 5,00,000 Mod Singh 5,00,000 Total 35,00,000

It was the case of the assessee that these amounts were given to the aforementioned persons in earlier years for the purpose of mining, which were received back by the assessee during the year under consideration. However, the AO disbelieved such version of the assessee and added a sum of Rs.36,80,000/-, which included the aforementioned amount of Rs.35 lacs. The addition was agitated in an appeal filed before the CIT(A), who confirmed the addition vide his order dated 15.03.2011. The addition was sustained by the learned CIT(A) mainly on the ground that amount of Rs.35 lacs is outstanding to be receivable even in the balance sheet filed for A Y 2005- 06 and these findings of the learned CIT(A) in the quantum order are found in para 16 to 18, which are reproduced below:

"16. Having said that the return filed by appellant starting from assessment year 1997-98 onwards have also been looked into. It is seen from the balance sheet of Ms. Kusum Jain on 31.03.1997 that the amount of Rs. 35 lakhs is reflected under the head loans and advances as found and stated above. However, detail schedule for the same is not forming part of the audited accounts filed by the appellant. Same is the case for assessment year 1998-99 where the amount of Rs.35 lakhs is appearing under the head loans and advances however again party wise details is not available. It is only in A.Y. 2004-05 that the names of seven persons are appearing in the schedule for loans and advances i.e Shri Mod Singh, Shri Mohan Singh, Shri Gordhan Singh, Shri Vijay Singh, Shri Laxmanlal, Shri Jagdish Gameti and Shri Rupalalji. The appellant has stated that the amount was paid to the parties as advances way back in assessment year 1997-98. However, in assessment year 2005-06 also the amount is reflected at 3 ITA No. 407/Mum/2014 AY: 2005-06

35,00,000/- It is in contradiction to appellant that in case of Shri Jagdish Gameti copy of agreement (through unregistered) dated 14.07.2004 has been filed in support of the claim that the appellant received back also Rs.5 lakhs from Shri Jagdish Gameti.

17. Then records of earlier year available in form of audit report have also been checked. It is seen from the audit reports filed along with return for assessment year 1996-97 that rent for pocklain machine has been debited at Rs.3,69,600/- in the trading account of Lovely Marble. Hire charges under the head for pocklain machine an amount of Rs.50,937/- is debited for assessment year 2001-02 and then hire charges for pocklain machine for assessment year 2002-03 are 'Nil'

18. In view of this the very premise taken by the appellant that the cash amount which was advanced to M/s. Apsara Jewellers was received from the parties to whom it was advanced much earlier in somewhere in 1997 is not sustainable for two reasons:

(1) The appellant has not been able to prove the amount given and received from them satisfactorily. The only thing in her favour was that the transaction was made in cash because there were no bank branch in the near by area where these persons are residing and working. Though the appellant herself is in a city like Mumbai she could not substantiate with any evidence the withdrawal if any made by her to that extent made for that year including bank statements, cash book claimed to be maintained by business and capital account for relevant assessment year. It is not disputed that the balance sheet for that year is showing loans and advances for Rs.35,00,000/- however as stated there is no schedule available giving the details like name of the parties and amount thereof for the loans and advance reflected at Rs.35,00,000/- till A.Y. 2003-04. It is only in A.Y. 2004-05 that seven names are reflected as produced above. Again loan and advances are reflected at Rs.35,00,000/- as on 31.03.2005 even though appellant claims that Rs.5,00,000/- were returned by one of debtors named Shri Jagdish Gameti on 14.07.2004 which goes against appellant.

(2) Along with this the whole issue revolved around the make believe story of appellant was that it was done because intensive labour was required to work on the site and they have to be paid in cash only for the reason that in initial stage of mining the extraction of sub soil and soft strata is not possible with the help of machines i.e. Pocklain machine and JVC as it is intensive manual job. Now having found that the appellant was hiring 4 ITA No. 407/Mum/2014 AY: 2005-06

Pocklain machine way back in 1997 as reflected in P & L Account of Lovely Marbles and could purchase it in 2004 only as reflected in opening balance of block of assets in A.Y. 2002-03, it cannot be stated that it was initial stage of mining where intensive labour jobs were required.

(3) It is also seen from the license that in 1997 the appellant got renewal of licence for another twenty years. This means that the appellant was already carrying mining job and after lapse of permitted period she applied for renewal of license.

Consequently, the mining rights were renewed further for another twenty years from 1999 to 2090 (2019) vide order dated 01.07.1997. Thus by no stretch of imagination it can be presumed that license being renewed in the year 1997, still 1997 was initial year of mining when mining job could be done only with manual labourers and hence the theory advanced by the appellant is found totally unsupported and in fact contradictory with the facts available on the record. In view of this the amount introduced in the capital account of the appellant in her proprietary concern Rs.13,80,000/- and another Rs.24,00,000/- advanced to Kishanlal Surya proprietor of M/s. Apsara Jewellers Rs.36,80,000/- remains unproved and hence addition for this much amount in the hand of the appellant are sustained."

(emphasis implied)

3. On the basis of the confirmation of addition by the CIT(A), impugned penalty has been levied by the AO. The aforementioned order of the CIT(A) was challenged by the assessee in further appeal, which has been decided by the Tribunal vide its order dated 17.06.2015 and it was found that aforementioned findings of the CIT(A) in the quantum proceedings were contrary to the facts available on record as the aforementioned amount of Rs.35 lacs was not outstanding in the balance sheet for A Y 2005-06. Therefore, the order passed by the learned CIT(A) was set aside and the matter was restored back to the file of the AO with the following observations:

"5. Before us, the Ld A.R demonstrated that the assessee has been filing personal balance sheet regularly along with her return of income and in AY 2004-05, the break up details of advance amount of Rs.35.00 lakhs were duly given. The Ld A.R further submitted that the personal Balance Sheet as on 31.3.2005 does not disclose the advance amount of Rs.35.00 lakhs and accordingly submitted that the view entertained by Ld CIT(A) was wrong. Accordingly he submitted that the explanation given by the 5 ITA No. 407/Mum/2014 AY: 2005-06

assessee was not properly appreciated by the tax authorities by considering the personal books of account of the assessee.

6. On the contrary, the Ld D.R strongly supported the order of Ld CIT(A).

7. Having heard rival submissions, we find merit in the submission of the assessee that the factual aspects have not been properly appreciated by the tax authorities. We notice that the AO did not refer to the personal books/financial statements and the Ld CIT(A) has entertained the view that the Balance sheet as on 31.3.2005 disclosed the advance amount of Rs.35.00 lakhs. We notice that the view entertained by the Ld CIT(A) is contrary to the facts available on record. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh by duly considering the personal financial statements and/or books of accounts of the assessee and take appropriate decision in law.

8. During the course of hearing, the Ld A.R also placed reliance on certain case law to contend that the refund of advance amount given in earlier years would not attract the provisions of sec. 68 of the Act. Since we have set aside the matter to the file of the AO, the assessee is free to bring those case laws to the notice of the assessing officer.

9. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes." (emphasis implied by us) Thus, it can be seen that the observations of the CIT(A), that even as on 31.03.2005, there was outstanding balance of Rs.35 lacs, is contrary to the facts available on record.

4. The levy of penalty was challenged by the assessee before the CIT(A), which is decided by the impugned order passed by the CIT(A). Before him, it was pleaded that the assessee had furnished ample evidence to prove that what was received by the assessee from the above mentioned seven persons were amounts paid by the assessee in earlier years and on completion of work the amounts were received back by the assessee. The evidence filed before the AO, as per the submissions recorded by the learned CIT(A) is as under:

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During the course of assessment proceedings as well as during the course of appellant proceedings and also during the penalty proceedings the appellant had given party wise details of advance as given above to following persons along with necessary evidence as under:-

1. MOHAN SING RAJPUT: The amount is given to Shri Mohan Sing Rajput on 10/01/98 to carry out the initial working and that they were given mobilization advance in term of deposit and Shri Monhan Singh Rajput was required handle the extraction activities which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference.

The appellant has also filed confirmation of accounts appearing in the assessee's book duly confirmed by the Shree Mohan Singh Rajput. Appellant had also requested AO "If you need You can also verify the genuinely of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly"

2. GORDHAN SING RAJPUT : The amount was given to him on 05/1/98 to carry out the initial working and that they were given mobilization advance in term of deposit and he were required to handle the extraction which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's book duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

3. JAGDISH GAMETI : The amount was given to him on 20/7/98 to carry out the initial working and that they were given mobilization advance in term of deposit and he were required to handle the extraction activities which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's books duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

4. MOD SING RAJPUT : The amount was given to him on 25/2/98 to carry out initial working and that they were given mobilization advance in term of deposit and he were required handle the extraction activities which interalia include arrangements of the 7 ITA No. 407/Mum/2014 AY: 2005-06

workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's books duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

5. LAXMILAL GAMETI : The amount was given to him on 19/7/97 to carry out the initial working and that they were given mobilization advance in term of deposit and he were required handle the extraction activities which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's books duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

6. VIJAY SING : The amount was given to him on 15/7/97 to carry out the initial working and that they were given mobilization advance in term of deposit and he were required to handle activities which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's books duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

7. RUPALAL MEGHWAL : The amount was given on 05/1/98 to carry out the initial working and that they were given mobilization advance in term of deposit and he were required handle the extraction activities which interalia include arrangements of the workers required. The copy of agreement attached herewith for your ready reference. The appellant has also filed confirmation of accounts appearing in the assessee's books duly confirm by him. Appellant has also requested AO if you need You can also verify the genuinity of the above transaction by issuing the summons or notice u/s. 131 or 133(6) of the income tax act and verify accordingly.

Appellant also requested the AO that she had attached all possible documentary evidence as required for proving genuineness of advances and realization of advances . In case if 8 ITA No. 407/Mum/2014 AY: 2005-06

he goodself needed to verify of said advances he may issue summons under section 131 of Income Tax Act.

As per the direction of AO and under the section 131 or 133(6) Three Person namely Shri Vijay Singh, Shri Mod Singh and Shri Mohan Singh appeared before learned DCIT CIR 23(1) on 14/12/2009 at R No 108, C-10, 1st Floor Bandra Kurla Complex, Bandra (east) Mumbai- 51 and given the statement on oath and confirmed all the transactions, the copies of the statement of all the three parties are attached herewith for your ready reference. Due to the determination of memorandum of understanding with various parties the appellant could get her principal amount back which she had deposited in her bank account. During the assessment proceedings the appellant was asked to justify such cash deposits in her bank account which was duly explained. However the AO has disregarded the explanation given in this regard and has made addition of Rs.36,80,000/- being 35,00,000/- received from those who were being given advances by her in the F Y 97-98, which was in turn given as loan given to Shri K M Surya. The AO has also made addition on account of capital introduced in the proprietary concern out of her personal cash balance as unexplained cash credit. However, in doing so the AO has ignored various facts such as copies of the confirmation of the all the respective parties with copy of agreements entered with them to whom the advances given. The appellant has also submitted all the memorandum of understanding and confirmations from the parties stating that they had repaid such amount as well as the appellant could also produce various parties before the AO. However, the same has not been considered by the AO on some technical grounds without appreciating the actual facts of the case and, therefore, the AO has violated the principles of natural justice. Similarly the AO has also failed to appreciate that the appellant is a lady and that calling her to produce the people would not be possible without any legal rights and therefore it was on AO to have issued summons of commission to verify the genuineness of those transactions for which detailed submissions were made."

Considering the aforementioned evidence and various judicial pronouncements, which have been referred in detail in the order passed by the CIT(A), he has recorded the following conclusion

"6. I have gone through the submission of the appellant as well as order of the A.O. levying the penalty and find merit in the 9 ITA No. 407/Mum/2014 AY: 2005-06

appellant's case. In the present case, the appellant had deposited cash in her bank account which was stated to be the amount received back by the appellant from advances given by her in earlier years. It is also true that the appellant had been showing such advances as outstanding year after year and that during the year under consideration the appellant has reduced the aforesaid debt as outstanding. Thus, there is a reduction of advances to the extent of amount shown to have been received by the appellant. These facts are neither controverted nor disproved. The appellant has also explained the transactions of receipts and payments in cash as due to non availability of bank in the vicinity of 15-30 kms. From the aforesaid site where the transactions actually took place. The appellant has also produced confirmations and other evidences which are not established to be false and, therefore, merely because in the assessment proceedings additions were made or confirmed does not automatically becomes the ground for levying penalty. The Hon'ble ITAT on the similar facts has deleted the penalty despite additions were confirmed on the ground that in the balance sheets of 2004 and 2005 the amounts of debtors were found to be reduced to the extent of such cash being deposited in the bank account. In the appellant's case also the appellant has explained the source to be refund of advance which are also found to be reduced from the outstanding appearing in preceding previous year. As also in the instant case, the parties from who, the amount were said to be received back had also confirmed having repaid such sum and the transactions as such, the explanation given by the appellant cannot be brushed aside merely because in the opinion of the A.O. the same were not found favour in the assessment proceedings or for that matter appellate proceedings without proving the explanation to be false. Thus, considering the various documents and explanations submitted by the appellant as also appreciating various judicial pronouncements, it does not appear a fit case to confirm the penalty and, therefore, penalty levied by the A.O. is deleted.

7. In the result, the appeal is allowed. "

5. The department has agitated the deletion of penalty by filing the aforementioned grounds of appeal.

6. The learned DR relied upon the order passed by the AO and submitted that the penalty has wrongly been deleted by the CIT(A) and his order should be set aside and that of the AO should be restored.

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7. On the other hand, it was submitted by the learned AR that the assessee had filed all the evidence and considering the same, the learned CIT(A) has deleted the penalty. Referring to the order passed by the Tribunal in the quantum proceedings, it was submitted by the learned AR that the addition was upheld by the CIT(A) on the basis of wrong facts. Therefore, on such addition, penalty could not be levied. Thus, it was pleaded by the learned AR that the order passed by the CIT(A) should be confirmed.

8. We have heard the parties and their contentions have carefully been considered. In the quantum order, it has been found by the Tribunal that the confirmation of the addition by the learned CIT(A) was based on incorrect facts. Therefore, the quantum was set aside to the file of the AO. The relevant observations of the Tribunal have already been reproduced in the above part of this order. The assessee has filed ample evidence in respect of each person from whom she has received her amount back. Considering the explanation of the assessee and the evidence filed by the assessee and also the fact that the addition was wrongly sustained by the CIT(A) on incorrect facts, we are of the opinion that the learned CIT(A) did not commit any error in deleting the penalty. We decline to interfere with the findings of the CIT(A).

9. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 30th June, 2015.

Sd/- Sd/-

(N K Billaiya) (I P Bansal) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, Dt :30th June, 2015 SA Copy forwarded to : 1. The Appellant 2. The Respondent 3. The C.I.T, concerned 4. The CIT (A)-concerned 5. The DR, "A" Bench, Mumbai BY ORDER //True Copy// ASSISTANT REGISTRAR ITAT, Mumbai Benches, Mumbai