Commissioner of Income-tax v. Chandela Trading Co. P. Ltd
[Citation -2014-LL-1030-2]

Citation 2014-LL-1030-2
Appellant Name Commissioner of Income-tax
Respondent Name Chandela Trading Co. P. Ltd.
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 30/10/2014
Assessment Year 1994-95
Judgment View Judgment
Keyword Tags undisclosed income • stock exchange • unsecured loan • share broker
Bot Summary: In the instant case, the Assessing Officer had simply held as follows: There appeared unsecured loan of Rs. 1,11,34,237 in the account of the assessee during the year. The omission on the part of the creditors to subject themselves to enquiry being initiated thereof by the Revenue or non-furnishing of accounts by them would, as aforesaid, not lead to the conclusion that the creditors lacked identity without any other contradiction of facts and particulars of the transactions between them furnished by the assessee being uncontroverted. We find the learned Tribunal had discussed seven instances of loan threadbare and while deleting the addition had held in substance with regard to each of those loan transactions, that the Revenue had failed to bring any other material on record to show that the amounts advanced by the creditors was in reality and in fact, money belonging to the assessee. So far as the second question is concerned, the Tribunal while dealing with the facts had held as under: It has been brought to our notice by the learned counsel for the assessee that copy of contract note, copy of ledger account of share broker, letter from the Mumbai Stock Exchange, copy of the bank statement have been furnished before the authorities below and they are placed at pages 146 to 152 of the paper book. On a perusal of the contract it is seen that the assessee had purchased 19000 shares of Kedia Distilleries for Rs. 42,32,215 and 3100 shares of Kedia Distilleries for Rs. 6,76,575, vide contract No. R/RM/27/002 and R/RM/30/ 002 of dated September 27, 1994, and September 30, 1994, respectively. On verification of the bank account with State Bank of India, Government Colony, Bandra East Branch, maintained by the assessee, it is revealed that an amount of Rs. 49,08,825 has been debited to the assessee's account being withdrawn, vide Cheque No. 453609 on April 8, 1995. The Commissioner of Income-tax as well as the Assessing Officer have made the additions only on suspicion and surmises disbelieving the assessee's contention and presuming that no share broker would keep the amount outstanding for such a long time.


JUDGMENT This appeal has been filed under section 260A of Income-tax Act, 1961, against order dated November 13, 2013, passed by learned Income-tax Appellate Tribunal, "A" Bench, Kolkata, in I. T. A. No. 235/Kol/ 2012 relating to assessment year 2005-06 on following questions: "1. Whether, on facts and in circumstances of case, learned Income-tax Appellate Tribunal erred on fact as well in law in deleting addition of Rs. 96,34,237 made as undisclosed income on account of loans pertaining to five alleged creditors and interest thereon, without appreciating that addition was sustained by learned Commissioner of Income-tax (Appeals) for detailed reasons given in her order highlighting that creditworthiness of creditors and genuineness of transactions were not proved at all and even in some cases identity of creditors remained unestablished and for that matter, learned Income-tax Appellate Tribunal's order is perverse? 2. Whether order of Income-tax Appellate Tribunal is sustainable inasmuch as per Rules of Stock Exchange, shares can be delivered strictly against payment and further transaction was of Rs. 49 lakhs no evidence forward before Commissioner of Income-tax (Appeals) showing payment made to sundry creditors even after expiry of year and as such order of Incometax Appellate Tribunal deleting addition treating same is in accordance with law is perverse?" On first question, relying on judgment in Hindusthan Tea Trading Co. Ltd v. CIT [2003] 263 ITR 289 (Cal) it is submitted by Mr. S. N. Dutta, learned advocate appearing on behalf of Revenue-appellant, that since creditors could not be found and/or located and did not turn up to produce books of account in spite of summons being issued under section 131 of Act identity, genuineness and creditworthiness could not be satisfied by assessee and addition made by Assessing Officer was correctly made. Mr. J. P. Khaitan, learned senior advocate appearing on behalf of respondent-assessee, has submitted that as facts would reveal, proper explanation was furnished by assessee inasmuch as every transaction of loan was made through bank, particulars of creditors' income-tax file furnished and as such assessee had done everything in its power to do in offering such explanation. Revenue could not contradict such explanation and sought something further which was not in hands of assessee to ensure and as such deletion made by Tribunal was unjustified. He relied on two judgments, one of hon'ble Supreme Court in case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) and other of Allahabad High Court in CIT v. Jauharimal Goel [2005] 147 Taxman 448 (All); [2008] 296 ITR 263 (All) in support of his submission. From judgment in Daulat Ram Rawatmull (supra) we find hon'ble Supreme Court had held that person can still be held to be owner of sum of money even though explanation furnished by him regarding source of that money is found to be not correct and from simple fact that explanation regarding source of money furnished by him, in whose name money is lying in deposit, has been found to be false, it would be remote and farfetched conclusion to hold that money belongs to some other person. In context of present case, if no further explanation could be obtained by Revenue upon creditors failure to present themselves in enquiry, from such simple fact of omission on part of creditors, it would be remote and farfetched conclusion that creditors lack identity. Even from case of Hindusthan Tea Trading Co. Ltd. (supra) relied on by Revenue we find our court had held process of enquiry is such that assessee has to offer explanation and produce material in support of such explanation and then it could do no further. We are also persuaded by reasoning given in decision of High Court at Allahabad in Jauharimal Goel (supra) as appearing from paragraphs 12 to 16 thereof. In instant case, Assessing Officer had simply held as follows: "There appeared unsecured loan of Rs. 1,11,34,237 (including interest) in account of assessee during year. assessee was asked to produce loan creditors for examination but assessee expressed inability to produce them. Hence, entire amount of Rs. 1,11,34,237 is treated as income of assessee from undisclosed source. There appeared another credit of Rs. 49,08,825 under head'sundry creditors'. assessee was asked to produce sundry creditors for examination. But assessee failed to do so. Hence, amount of Rs. 49,08,825 is treated as income of assessee from undisclosed source." We do not find Revenue could contradict explanation furnished by assessee. omission on part of creditors to subject themselves to enquiry being initiated thereof by Revenue or non-furnishing of accounts by them would, as aforesaid, not lead to conclusion that creditors lacked identity without any other contradiction of facts and particulars of transactions between them furnished by assessee being uncontroverted. We find learned Tribunal had discussed seven instances of loan threadbare and while deleting addition had held in substance with regard to each of those loan transactions, that Revenue had failed to bring any other material on record to show that amounts advanced by creditors was in reality and in fact, money belonging to assessee. So far as second question is concerned, Tribunal while dealing with facts had held as under: "It has been brought to our notice by learned counsel for assessee that copy of contract note, copy of ledger account of share broker, letter from Mumbai Stock Exchange, copy of bank statement have been furnished before authorities below and they are placed at pages 146 to 152 of paper book. On perusal of contract it is seen that assessee had purchased 19000 shares of Kedia Distilleries for Rs. 42,32,215 and 3100 shares of Kedia Distilleries for Rs. 6,76,575, vide contract No. R/RM/27/002 and R/RM/30/ 002 of dated September 27, 1994, and September 30, 1994, respectively. This amount has been credited to account of share broker and debited to share account in books of assessee on September 27, 1994, and September 30, 1994. On perusal of ledger account placed at page 149 of paper book, we find that this amount has been paid by assessee to broker on April 8, 1995, vide cheque No. 453509. On verification of bank account with State Bank of India, Government Colony, Bandra East Branch, maintained by assessee, it is revealed that amount of Rs. 49,08,825 has been debited to assessee's account being withdrawn, vide Cheque No. 453609 on April 8, 1995. It is, therefore, clear that payment has been made to share broker after expiry of accounting year, relevant to assessment year under consideration, that is it has been paid in month of April, 1995. There is no material on record to show that amount had actually been paid by assessee to share broker end of current year. subsequent payment made in April, 1995, has not been found to be bogus or non-genuine. It is, therefore, clear that there was outstanding liability of Rs. 49,08,825 on account of amount payable against purchase of shares. Commissioner of Income-tax (Appeals) as well as Assessing Officer have made additions only on suspicion and surmises disbelieving assessee's contention and presuming that no share broker would keep amount outstanding for such long time. transaction of payment made by assessee is fully supported by bank statement. We, therefore, do not find any reason to sustain addition." We find no fault with Tribunal in concluding as it did on such facts. Hence, both questions are answered against Revenue and in favour of assessee. appeal is dismissed. Urgent certified copy of this order, if applied for, be given to parties on priority basis. *** Commissioner of Income-tax v. Chandela Trading Co. P. Ltd
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