2016 (10) TMI 49 - HC - Income Tax

Unexplained loan - Variation in the copies of Capital Account partner as produced in the court and copies of account filed with the Income-tax Department - failure to to produce books of accounts - Held that - We have gone through the order of the Commissioner and find therein no proper analyses of the statements of the persons who were said to have loaned money to the assessee through its finance division. One of the persons whose statement was considered by the Commissioner was Harish Kumar son of Dharam Pal, who is stated to have not categorically denied the transaction . How such a vague statement could support the defence set up by the assessee, is cause of wonder for us. Sher Singh son of Bishan Dass, is stated to have confirmed answers to questions No.7 and 8. The Commissioner s order nowhere refers to questions No.7 and 8 and, therefore, it is impossible to conclude as to what was confirmed by Sher Singh. Kuldip Singh son of Onkar Singh is said to have confirmed answers to questions No.4 and 5 and Dinesh Kumar son of Onkar Singh is said to have confirmed questions No.6 and 7. In their cases also it has nowhere been discussed by the Commissioner as to what were the questions in their cases. As per the statements of said Kapil Kumar and Ramesh Kumar, they did not loan any money to the assessee or its finance division. This contradicts the assessee s stand that this fact has also been ignored by the Commissioner. The statements of the other persons who allegedly had given loans to the assessee through its finance division have also not been considered the way they deserved to be. It is thus clear that the order of the Commissioner lacks consideration of material and crucial facts. The Commissioner further goes on to hold that the transactions have more or less been unequivocally confirmed. This finding of his is not only self-contradictory but also against the record. The order of the Tribunal does not clarify the matter either. No discussion is found therein with regard to the above-referred statements of the alleged creditors of the assessee-firm. It was observed that the imprest account does not necessarily form part of capital account. Reliance was placed on the statement of Surinder Mahajan, a partner of the assessee without comparing the same with the statements of the alleged creditors. After simply finding fault with the assessing officer for having not found the source of repayment of the said amount of ₹ 1,70,00,000/- and having failed to find out about the finality of proceedings before the civil court, the Tribunal gave its stamp of approval to the order of the Commissioner without considering the matter in the correct perspective The Tribunal, which is the final fact finding authority, failed to properly analyse the evidence on record and without appropriate reasons confirmed the order of the Commissioner with regard to the deletion of ₹ 1,70,00,000/- from the income of the assessee. In view of the above, the order of the Tribunal is found to be perverse. While setting aside the order of the Tribunal, we remit the matter to the Tribunal for a fresh decision on merits. - Decided in favour of revenue

Summary

Issues Involved:

1. Variation in the copies of the Capital Account.
2. Deletion of addition due to failure to produce books of accounts and relevant pass books.
3. Non-appreciation of case law regarding proving identity, capacity, and genuineness of transactions.

Issue-wise Detailed Analysis:

1. Variation in the copies of the Capital Account:

The revenue challenged the Tribunal's decision regarding the variation in the copies of the Capital Account of a partner, Ajay Kumar. The assessing officer noted discrepancies between the capital account filed with the Income-tax Department and the one produced in court. Ajay Kumar claimed the withdrawal of ?1,70,00,000/- was from an imprest account and not reflected in the capital account. The Tribunal's decision that this variation was immaterial was contested by the revenue.

2. Deletion of addition due to failure to produce books of accounts and relevant pass books:

The revenue questioned the Tribunal's confirmation of the CIT (A)'s action in deleting the addition of ?1,70,00,000/- to the assessee's income. The assessee failed to produce books of accounts and relevant pass books of Ajay Electronics, Finance Division to substantiate the claim of giving ?1,40,00,000/- to Ajay Kumar. The CIT (A) deleted the addition based on the explanation that the finance division borrowed money from the public, which was then given to Ajay Kumar. The Tribunal upheld this deletion without a thorough analysis of the evidence and statements of the alleged creditors.

3. Non-appreciation of case law regarding proving identity, capacity, and genuineness of transactions:

The revenue argued that the Tribunal did not appreciate the case law of Hari Chand Virender Paul vs. Commissioner of Income Tax, which requires the assessee to prove the identity of creditors, their capacity to advance money, and the genuineness of the transaction before the burden shifts to the department. The Tribunal’s failure to properly analyze the evidence and the statements of the alleged creditors led to the confirmation of the CIT (A)'s order without appropriate reasons.

Conclusion:

The High Court found that the Tribunal failed to properly analyze the evidence and statements of the alleged creditors. The Tribunal's order was deemed perverse and was set aside. The matter was remitted to the Tribunal for a fresh decision on merits, with the liberty to remand the matter further if deemed fit.