Vildirect: IncomeTax-caselaws-1999-VIL-106-ITAT-DEL

1999-VIL-106-ITAT-DEL

Equivalent Citation: [2003] 1 SOT 393 (DELHI)

Income Tax Appellate Tribunal DELHI

IT APPEAL NO. 6621 (DELHI) OF 1992

Date: 13.10.1999

CONTINENTAL SEEDS & CHEMICALS LTD.

ASSISTANT COMMISSIONER OF INCOME-TAX

Rakesh Gupta for the Appellant.
Sanjay K. Jain for the Respondent.

BENCH

U.B.S. BEDI, SIKANDER KHAN, JJ.

JUDGMENT

U.B.S. Bedi, JM. –

This is assessee’s appeal directed against the order of CIT(A)-I, New Delhi dated 21-7-1992 relevant to assessment year 1989-90 and following two grounds have been raised :

"1. On the facts and circumstances of the case, the ld. CIT(A) has erred in upholding an addition of Rs. 10,000 out of foreign travelling expenses without giving any explanation and purely on ad hoc basis.

2(a) On the facts and circumstances of the case, the ld. CIT(A) has erred in confirming the addition of Rs. 40,000 received as deposits by the appellant from Ms. Bani Dhillon (Rs. 20,000) and Ms. Lagan Dhillon (Rs. 20,000).

2(b) On the facts and circumstances of the case, the ld. CIT(A) has erred in upholding an addition of Rs. 2938.10 paid as interest to the above depositors on their deposits."

2. Earlier, appeal of the assessee case to be dismissed by ‘C’ Bench of the Tribunal vide order dated 1-12-1998 but the same was recalled on the application of the assessee by ‘A’ Bench of the Tribunal vide order dated 11th June, 1999.

3. As regards round No. 1 relevant facts are like this that Assessing Officer while making assessment has disallowed the entire amount of expenses of Rs. 46,180 of travelling outside India by Managing Director of the assessee on the ground that no details alongwith purpose of visit has been submitted by the assessee.

4. Assessee challenged this action of Assessing Officer in appeal and it was submitted before the first appellate authority that no such details were ever called for. The assessee company provided all the details of the foreign travelling to the ld. CIT(A) at the time of hearing of the appeal against the order of Assessing Officer. In fact expenditure of Rs. 46,180 pertains to travelling by Capt. V.N. Kumar to USA and Japan for business purpose. The object of the travel was to inter-alia finalise collaboration with Harris Morron Seeds of USA and to be abreast with the latest technological advancement in the production and processing of seeds which the Japanese are employing in Takii and Company.

5. The ld. CIT(A) while considering the submissions of the assessee’s counsel has deleted the addition to the extent of Rs. 36,130 and confirmed the addition of Rs. 10,000.

6. Assessee further challenged this action of ld. CIT(A) and is before us. It was pleaded by learned counsel for the assessee that CIT(A) has erred in upholding part addition without giving any explanation and without any basis. The addition of Rs. 10,000 is purely ad hoc and is not justified. Moreover, ld. CIT(A) has failed to appreciate the fact that considering the number of days mainly devoted for the purpose of business of the assessee out of India in terms of section 37(3) of the Income-tax Act, the expenditure of Rs. 46,180 in travelling to two countries is rather very small and should have been allowed in full. The disallowance of Rs. 10,000 is purely on ad hoc basis without any substance and is contrary to the facts of the case. It was pleaded for deleting the entire addition.

7. The learned DR, on the other hand, submitted that since no details or purpose of travel are given by the assessee during the assessment proceeding, therefore, Assessing Officer was fully justified in making disallowance of the expenditure and ld. CIT(A) before whom certain details were filed has rightly sustained the addition to the extent of Rs. 10,000 by allowing substantial relief to the assessee to the extent of Rs. 36,180. So his order being in conformity with the law requires to be confirmed.

8. We have heard rival submissions, perused the record, gone through the orders of authorities below. We find that ld. CIT(A) while sustaining part addition of Rs. 10,000 has not given any cogent reason and based, on ad hoc and estimated basis has sustained the addition of Rs. 10,000 whereas assessee has furnished details and other documents to justify the claim of expenditure incurred for business purposes. Since no material or evidence has been placed on record to justify sustenance of addition of Rs. 10,000 by CIT(A) while accepting this ground of appeal of the assessee, we would order deletion of part addition sustained in this regard.

9. As a result, this ground of appeal of the assessee gets accepted.

10. As regards ground No. 2( a) and 2(b) are concerned relevant facts are like this that during assessment proceedings Assessing Officer made disallowance of an amount of Rs. 90,000 which was received as deposit from following parties:

1.Smt. Gurbachan KaurRs. 50,000

2.Ms. Bani DhillonRs. 20,000

3.Ms. Lagan DhillonRs. 20,000.

11. The Assessing Officer has treated the above amount of Rs. 90,000 as the income of the assessee from undisclosed sources. The bank pass books of above three depositors were not produced.

12. Assessee challenged this action of Assessing Officer before the first appellate authority and it was submitted that this statement of the Assessing Officer is not correct as the photo copies of the bank pass book of the depositors were duly produced by the assessee confirming the source of deposit. This matter has been looked into by various Assessing Officers from time to time and thereafter the order was passed by the present Assessing Officer without giving adequate opportunity to the assessee company to explain his case. Regarding the deposits of Rs. 50,000 in the case of Smt. Gurbachan Kaur, the plea of the assessee was accepted and addition came to be deleted so far as other two deposits of Rs. 20,000 in the name of Ms. Bani Dhillon and Ms. Lagan Dhillon, it was observed by ld. CIT that they are both minor grand children of retired Brig. Dhillon from whose account the payment in question has been made. The father of one of the girls is in the Army and that of the other girl is in the Navy. On a perusal of the details filed is also the affidavit of the grand father. The CIT(A) thus held that no adequate proof has been given regarding the capacity of the depositor to have made these deposits with the assessee company. So action of Assessing Officer was wrong in treating these two amounts of Rs. 20,000 each as the assessee company’s income from undisclosed sources (sic). Regarding the interest of Rs. 7500, the Assessing Officer was directed to restrict the disallowance under the head in respect of the two deposits of Rs. 20,000 each only.

13. Aggrieved by this action of ld. CIT(A) assessee is in further appeal and while reiterating the submissions as made before the first appellate authority, it was further pleaded that deposits made by Ms. Lagan and Ms. Bani Dhillon was made out of gifts made by their grand parents Brig. H.S. Dhillon. The gifts were made by crossed cheques in favour of the assessee company to be kept as deposits in the name of these two girls. The title to the property was irrevocably transferred voluntarily and without consideration in money or money’s worth satisfying the sine qua non of making a valid gift. If at all ld. Assessing Officer was not satisfied about the validity of the gift made by Brig. Dhillon and Smt. Raghubir Dhillon, at the most, the deposits can be treated to have been made by them only and not by their grand daughters. In no circumstances whatsoever, the deposits can be treated as cash credits found in the books of the assessee and added to the total income of the assessee. During the assessment proceedings Assessing Officer asked for the affidavits from the two depositors, which were duly produced. The Assessing Officer has observed that the bank pass books of the depositors were not produced which are contradictory to the facts of the case. The photocopies of the bank pass books of the depositors were produced for verification before the Assessing Officer. On being called upon by Assessing Officer to produce the pass books again, the assessee again approached the depositors for their pass books but they expressed their inability to co-operate with the assessee. The assessee, therefore, requested the Assessing Officer to exercise his powers under section 131. Neither the Assessing Officer nor the ld. CIT(A) asked for any other documents specifically but still the amount has been added on the ground that no adequate proof has been given. It is unjustified on the part of Assessing Officer and the ld. CIT(A) to have made/confirmed the addition of Rs. 40,000 when the cash book of the assessee was accepted and entries therein were not challenged and neither further accounts nor vouchers were called for and the persons who gave the affidavits were not cross examined. It was thus pleaded that in the circumstances, it was not open to the revenue to challenge the correctness of the cash book or the statement made in the affidavits without asking the assessee to produce other evidence on the ground that department was not satisfied that the truth of the statement in the affidavit, thus should not have been rejected. If there is no material whatsoever on record for doubting the veracity of the statement made in the affidavits and if the deponents have also not been subjected to cross-examination for brining out the falsity of their statement, then the finding arrived at in such a case would be a finding based on pure surmises having no basis in evidence. Reliance need in 301 ITR 181 (SC).

14. The ld. DR while relying upon the orders of authorities below has pleaded that since no adequate evidence was filed before the Assessing Officer, he was justified in treating the deposits to be income of the assessee from the undisclosed sources. It was pleaded for confirmation of order of CIT(A).

15. We have heard rival submissions, perused the record, gone through the orders of authorities below. We have also looked into the case law as relied upon by counsel for the assessee.

16. We, after having considered the arguments of both the sides, going through the record and considering the case law as relied upon, find that assessee had filed copies of bank account of the depositors before the Assessing Officer during the assessment proceedings. Since assessee could not produce the bank statement of the depositor second time as demanded by the other Assessing Officer as the depositors refused to give the bank statement and specific request made for summoning the depositors under section 131 and Assessing Officer did not summon the depositors, therefore, we are of the view that there was no lapse on the part of the assessee to substantiate claim of having received deposits. However, assessee had filed list of depositors account shown as unsecured loans, confirmation from the parties, who have deposits with the assessee, copies of bank pass books of Ms. Bani and Ms. Lagan Dhillon and affidavits from depositors confirming the source of funds before the ld. CIT(A) in appellate proceedings but ld. CIT(A) without going into all these details has observed that no adequate opportunity has been given regarding capacity of the proof (sic) to made deposits with the assessee-company. Whereas Assessing Officer added this amount for not furnishing of bank statement of the depositors which was duly filed before the Assessing Officer. Under these circumstances, we do not find any justification in making the addition made by Assessing Officer and which is confirmed by ld. CIT(A) as despite assessee’s specific request these depositors were not summoned by the Assessing Officer. While accepting this ground of the assessee, we order deletion of addition of Rs. 40,000 made by the Assessing Officer and confirmed by CIT(A).

17. This sub ground of appeal gets accepted.

18. As regards ground 2(b ) is concerned, same relates to disallowance of interest paid on these deposits of Rs. 40,000. Since we have ordered deletion of addition of Rs. 40,000 made by the Assessing Officer and confirmed by CIT(A), interest claim of the assessee on these deposits is also held to be an allowable expenditure. While accepting this sub ground of appeal of the assessee, we order deletion of this addition also.

19. As a result, this sub ground of appeal of the assessee also gets accepted.

20. As a result, appeal of the assessee gets accepted.

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