Ita/1766/2009 Of Commissioner Of Income Tax v. Sri.s.shihabudeen

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 24TH MARCH 2010 / 3RD CHAITHRA 1932 ITA.No. 1766 of 2009() ---------------------- ITA.116/2008 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ------------------------------ THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT ------------------------ SHIHABUDEEN, PROPRIETOR, VILAYIL JEWELLERS, KARUNAGAPPALLY, KOLLAM (DIST.). ADV. SRI.P.BALAKRISHNAN (E) FOR R THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH ITA NO.1785/2009 ON 24/03/2010, THE COURT ON 24/03/2010 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &P.S.GOPINATHAN, JJ.....................................................................I.T. Appeal Nos.1766 & 1785 of 2009 ....................................................................Dated this the 24th day of March, 2010. C.R. JUDGMENT Ramachandran Nair, J. Heard Senior counsel appearing for the appellant and counselappearing for the respondent-assessee. 2. The assessee is a jeweller who claims to have received golddeposits from nine persons for each of the two years, the names andaddresses of whom were furnished to the department. The assessmentsinvolved are for the years 2000-2001 and 2002-2003. The AssessingOfficer conducted detailed enquiry by going to the houses of thedepositors and she found that their condition in life is so poor that noneof them have the capacity to deposit such huge quantity of gold, whichin some cases is above 3 kilograms. After taking evidence from thedepositors personally, the Assessing Officer came to the conclusionthat assessee's cash credit entries of gold are bogus entries and,therefore, the entire cash credits were added as income under Section 68 of the Income Tax Act. When assessee filed appeals before theCommissioner (Appeals), the Commissioner also considered in detailthe alleged deposit made by each and every depositor and found thatthe assessee's claim is bogus. However, in second appeal filed beforethe Tribunal, the Tribunal came to the conclusion that the depositorsare genuine persons because they have issued confirmation letters tothe effect that deposits have been made. However, Senior counselappearing for the appellants referred to Division Bench decision of thiscourt in INCOME TAX OFFICER VS. DIZA HOLDINGS PVT. LTD.(255 ITR 573) and contended that unless the assessee proves thegenuineness of the credits which necessarily involves the capacity ofthe creditors to deposit the amount or gold, addition under Section 68is permissible. We find force in the contention of the Revenue becausethe Tribunal has in a casual and indifferent manner allowed the appealwithout considering the facts found by the Assessing Officer onenquiry and confirmed by the appellate authority. A strange observation is made by the Tribunal that “it is the customary practice ofvillage people to possess gold by way of ornaments so that it can beused in case of emergency needs”. Further observation of the Tribunalis that it is the practice of people going abroad to deposit their goldornaments with gold dealers. To our knowledge, nobody entrusts hisgold with any dealer without adequate security in the first place.Secondly, it is common knowledge that most of the women in poorhousehold in Kerala wear imitation gold which is the thriving businessin the State. Therefore, the observation of the Tribunal which we feel isthe basis of their order, is thoroughly unrealistic and unacceptable.When the Assessing Officer and the first appellate authority consideredthe genuineness of each and every case of deposit alleged to have beenreceived by the appellant, it was the duty of the Tribunal to haveconsidered the evidence in a realistic manner and to make reasonableinference and decide the case reasonably. Even though assessee is adealer in gold ornaments who has registration under the KGST Act and is filing returns, strangely none of the authorities have chosen toconsider whether assessee has accounted purchase of all these goldornaments and paid purchase tax under Section 5A because depositsare admittedly taken as stock in trade and used in business. Therefore,if the transaction is genuine, the assessee would have accountedpurchase of old gold paying tax under Section 5A and paid sales tax oncorresponding sales turnover of new jewellery. This is of course only acorroboration of facts and even if assessee has paid sales taxaccounting bogus purchases, nothing stands in the way of the IncomeTax Department in making addition under Section 68, if justified. Asalready stated, we find absolutely no material for the Tribunal toreverse the orders of the lower authorities. However, since Tribunal hasnot considered the findings of the Assessing Officer running intoseveral pages after taking facts and figures and evidence from thehousehold of each and every depositor, we allow the appeals by settingaside the orders of the Tribunal and remand the matter to the Tribunal for rehearing and to decide afresh after giving an opportunity to bothsides. We make it clear that the Tribunal should consider claim ofcash credit in a genuine and realistic sense without making fantasticassumptions of the kind made in the impugned orders. The Tribunal isdirected to dispose of the appeals afresh within a period of threemonths from date of receipt of copy of this judgment. C.N.RAMACHANDRAN NAIRJudge pms P.S.GOPINATHANJudge