2015 (2) TMI 584 - AT - Income Tax

Addition u/s.68 - reopening of assessment - contention of learned AR is that in a situation when the impugned addition was based upon the action taken in A.Y. 2004-05, now stood deleted by the Tribunal then this Appeal should also be decided on the same lines - Held that - We find force in this submission of learned AR; primarily because of the reason that one bench of the Tribunal should respectfully follow the decision of an another Co-ordinate Bench pronounced on identical facts. In addition to the view taken by ITAT Ahmedabad in assessee s own case we have also noted that the fact about the issuance of cheque by the assessee in favour of M/s. Bharat Jari Works has not been denied. The doubt was that the power of attorney holder Sri Rajesh Kapadia has expired on 16th of August, 2001 and proprietor of Bharat Jari Works Smt. Kailashben expired on 8th May, 2002 then how the bank transaction was carried out. The explanation of the assessee before the AO was that through cheque no.M004308 the impugned amount was transacted in favour of M/s. Bharat Jari Work on 12th of January, 2002 and on that the proprietor Smt. Kailashbank was alive. Therefore it is relevant to comment that although some doubts were raised by the Revenue Department about the said transaction but the direct evidence of the execution of transaction through bank cannot be altogether brushed aside. A suspicion or doubt howsoever strong cannot replace the evidence. There was also a doubt in respect of an affidavit of a third party, namely, Chandrakant Raghunath Patil, but that affidavit was in respect of criminal proceedings and therein he has mentioned the figures of advance as well as the date which have not tallied with the actual figure and the date as mentioned in the ledger account. But the purpose of that affidavit was not to establish the correctness of this transaction but the purpose of the said affidavit was in respect of some bail application pertaining to a criminal case where the bank was the complainant against some bank officer. It transpires form the said affidavit that the proceedings were carried out against the alleged fraud stated to be committed by a public servant, i.e., an officer of the bank. We, therefore, hold that such third party mistakes should not adversely affect the facts as stated by the assessee, therefore, to conclude we hereby hold that in a situation when on identical facts in the past a view has been taken by Respected Co-ordinate Bench in A.Y.2004-05 in assessee s own case, therefore, we have no reason to take any other view but to follow the view already taken; hence in the result we hereby reverse the findings of the authorities below and direct to delete the addition. - Decided in favour of assessee

Issues Involved:
1. Addition of Rs. 26,54,922/- under Section 68 of the Income Tax Act.
2. Genuineness of the transaction with M/s. Bharat Jari Works.
3. Establishment of the identity of the creditor.
4. Relevance of past assessment years, particularly A.Y. 2004-05.
5. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Addition of Rs. 26,54,922/- under Section 68 of the Income Tax Act:
The primary issue revolves around the addition of Rs. 26,54,922/- made under Section 68 of the Income Tax Act. The Assessee's return of income declaring a loss of Rs. 8250/- was reopened under Section 147, and the Assessing Officer (AO) noted a transfer of Rs. 44,29,835/- to M/s. Bharat Jari Works, with Rs. 22 lacs received back by cheque and further amounts received in cash. The AO found that the Assessee failed to establish the purpose and genuineness of the transaction, leading to the addition of Rs. 26,54,922/- as unexplained cash credit under Section 68.

2. Genuineness of the transaction with M/s. Bharat Jari Works:
The AO questioned the genuineness of the transaction, noting that the Assessee could not establish the purpose and nature of the advance to M/s. Bharat Jari Works. The Assessee contended that the amount was a trade advance, which was subsequently refunded. The AO, however, was not convinced due to the closure of the account of Bharat Jari Works following the deaths of its key persons. The CIT(A) upheld the AO's findings, emphasizing the lack of explanation for the issuance of the cheque and the closure of Bharat Jari Works' account.

3. Establishment of the identity of the creditor:
The CIT(A) noted that the Assessee failed to establish the identity of the creditor and the genuineness of the transactions. The Assessee argued that the cheque issued to Bharat Jari Works was a trade advance, which was later refunded. However, the CIT(A) pointed out discrepancies, such as the issuance of cheques after the deaths of key persons of Bharat Jari Works and the closure of its business, raising doubts about the identity and capacity of the creditor.

4. Relevance of past assessment years, particularly A.Y. 2004-05:
The AO and CIT(A) referred to the assessment year 2004-05, where similar issues were raised, and an addition was made under Section 68. The Assessee argued that the Tribunal had deleted the addition for A.Y. 2004-05, and the same rationale should apply to the current year. The Tribunal in the Assessee's own case for A.Y. 2004-05 held that Section 68 could not be applied as the transaction occurred in a different financial year, and the amount was a repayment of an advance, not an actual receipt.

5. Condonation of delay in filing the appeal:
The Assessee's appeal faced a delay, which was condoned by the Hon'ble Gujarat High Court. Consequently, the appeal was to be decided on its merits.

Conclusion:
The Tribunal, after considering the arguments and the past decision for A.Y. 2004-05, concluded that the addition under Section 68 was not justified. The Tribunal emphasized that doubts or suspicions could not replace direct evidence of transactions. The issuance of the cheque by the Assessee to M/s. Bharat Jari Works was acknowledged, and the subsequent repayment was considered genuine. The Tribunal reversed the findings of the lower authorities and directed the deletion of the addition of Rs. 26,54,922/-. The appeal of the Assessee was allowed.

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