SHRI SARVAJIT PATEL, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6(2), MUMBAI

CO 106/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7430 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Additional evidence; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 143(1); 147; 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 879/MUM/2018 ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CENTRAL-6(2), ROOM NO. 1903, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021. VS. SHRI SARVAJIT PATEL, FLAT NO. 1101, UTTUNG CHS LTD., D.L., VAIDYA ROAD, DADAR (W), MUMBAI-28. PAN NO. ALBPP6642B APPELLANT RESPONDEN T C.O. NO. 106/MUM/2019 (ITA NO. 879/MUM/2018) ASSESSMENT YEAR: 2009-10 SHRI SARVAJIT PATEL, FLAT NO. 1101, UTTUNG CHS LTD., D.L., VAIDYA ROAD, DADAR (W), MUMBAI-28. VS. DCIT CIRCLE CENTRAL-6(2), ROOM NO. 1903, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI- 400021. PAN NO. ALBPP6642B APPELLANT RESPONDEN T REVENUE BY : MS. VIDISHA KALRA, CIT(DR) ASSESSEE BY : MR. MALAV P. SHETH, AR DATE OF HEARING : 06/08/2019 DATE OF PRONOUNCEMENT : 28/10/2019 SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 2 ORDER PER N.K. PRADHAN, AM THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION(C.O.) BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE COMMIS SIONER OF INCOME TAX (APPEALS)-54, MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT U/S 143(3) R.W.S. OF THE INCOME TAX ACT 1961, (THE ACT ). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.61,50,000/- MA DE U/S 68 OF THE INCOME TAX ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ADDITION WAS MADE ON THE BASIS OF PARALLEL BOOKS MAINTAINED BY THE ASSESSEE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE IN CONTRAVEN TION OF RULE 46A. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 25.0 7.2009 DECLARING TOTAL INCOME OF RS.15,51,248/-. THE RETURN OF INCOM E WAS PROCESSED U/S 143(1) OF THE ACT. ON RECEIPT OF INFORMATION FROM T HE DEPUTY DIRECTOR OF INCOME TAX (INV.)-5(4), MUMBAI (IN SHORT DDIT), T HE ASSESSING OFFICER (AO) RECORDED REASONS FOR REOPENING THE ASSESSMENT (REF. PAGE 1 TO 5 OF THE ASSESSMENT ORDER) AND THEN ISSUED AND SERVED NOTICE U/S 148 TO THE ASSESSEE. THE AO RECEIVED INFORMATION FROM THE DDIT THAT DUR ING THE COURSE OF SEARCH AND SEIZURE ACTION CARRIED OUT BY THE DEP ARTMENT IN AHUJA GROUP SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 3 AND THEIR ASSOCIATE CONCERNS ON 25.06.2015, THE STA TEMENT OF SHRI JAGDISH BHAGWANDAS AHUJA, DIRECTOR AND PROMOTER OF M/S AHUJ A GROUP WAS RECORDED ON 28.06.2015 AND 07.07.2015. IN THE SAID STATEMENT SHRI AHUJA HAD ADMITTED THE TRANSACTIONS WHICH WERE FOUND IN L OOSE PAPERS AND PEN DRIVES HAD NOT BEEN ENTERED IN THE REGULAR BOOKS OF ACCOUNTS. AS PER THE REPORT OF THE DDIT, SHRI AHUJA HAD TRANSACTIONS WIT H SHRI SARVAJIT D. PATEL (THE ASSESSEE) AND HIS FATHER SHRI DILIP PATEL. THE TRANSACTIONS ARE THAT SHRI DILIP PATEL RECEIVED TWO CHEQUES OF RS.10 LACS AND RS.25 LACS FAVOURING SHRI SARVAJIT D. PATEL ON 05.07.2008 AND 01.10.2008 RESPECTIVELY FROM AHUJA GROUP. SUBSEQUENTLY, ON 24. 11.2008, RS.25 LACS HAS BEEN PAID BACK VIDE CHEQUE BY SHRI DILIP PATEL. OUT OF THE AMOUNT OF RS.25 LACS, RS.23.5 LACS WAS ISSUED BY SHRI DILIP P ATEL (HUF) AND RS.1.50 LACS BY SHRI SARVAJIT PATEL. ON THE BASIS OF THE AB OVE INFORMATION, THE AO ISSUED NOTICE U/S 148 OF THE ACT. THE FOLLOWING CONCLUDING PARA OF THE REASONS RECOR DED BY THE AO WOULD ADDRESS THE PRESENT ISSUE 7. ACCORDINGLY, THE TRANSACTIONS FOR FY 2008-09 IN RESPECT OF SHRI SARVAJIT D. PATEL MAINTAINED IN THE UNACCOUNTED PARALLEL BO OKS IN TALLY ACCOUNTING SOFTWARE / PACKAGE MAINTAINED BY DIRECTORS AND PROM OTERS OF M/S. AHUJA GROUP REVEALS ON MONEY/CASH SALE, ACCOMMODATION ENT RIES, CASH LOAN RECEIPTS AND MISCELLANEOUS CASH RECEIPTS AS UNDER:- DATE DR / CR PARTICULARS NARRATION DEBIT CREDIT 05.07.2008 CR ENTRY A/C. DILIP BIPIN PATEL CHEQUE FOR 10L ISSUED FVG SARVAJIT PATEL FROM THE ACCOUNT OF AHUJA PROPERTIES AND ASSOCIATES 1000000 SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 4 01.10.2008 CR. ENTRY A/C. DILIP BIPIN PATEL CHEQUE FOR 25L ISSUED FUG SARVAJIT PATEL FROM THE ACCOUNT OF AHUJA PROPERTIES AND ASSOCIATES 2500000 24.11.2008 DR ENTRY A/C DILIP BIPIN PATEL CHEQUE REED BACK FVG P&L 23.5L FROM DILIP PATEL HUF, 1.5L FROM SARVAJEET D. PATEL 2500000 TOTAL 3500000 2500000 8. OUT OF THE ABOVE AMOUNT OF RS.2500000/-, RS.1500 00/- IS CASH GIVEN TO SHRI SARVAJIT D. PATEL, WHICH IS RECEIVED BACK IN THE FO RM OF ACCOMMODATION ENTRY IN THE AHUJA GROUP, AND TO PROTECT THE INTEREST OF REV ENUE, THIS CASH RECEIPT SHOULD BE ADDED IN THE HANDS OF SARVAJIT D. PATEL AS UNACC OUNTED CASH INCOME IN THE RELEVANT A.Y. 2009-10. FURTHER, THE AMOUNT OF RS.35 00000/- IN THE FORM OF CHEQUES ISSUED TO SARVAJIT PATEL AND CASH IS GIVEN TO M/S. AHUJA PROPERTIES AND ASSOCIATES. THE SOURCE OF THIS CASH COMPONENT OF RS .35,00,000/- IS NOT EXPLAINED AND IS TO BE ADDED AS UNACCOUNTED INCOME IN THE CASE OF SHRI SARVAJIT D. PATEL FOR THE RELEVANT PERIOD, OVER AND ABOVE IT S REGULAR SOURCE OF INCOME. IN VIEW OF THE ABOVE I HAVE REASON TO BELIEVE THAT AN INCOME OF RS.61,50,000/- HAS ESCAPED ASSESSMENT IN THE HANDS OF SHRI SARVAJI T D. PATEL.' HENCE I PROPOSE TO REOPEN THE ASSESSMENT U/S 147 OF THE I.T. ACT BY ISSUING NOTICE U/S 148 OF THE I.T. ACT. 3.1 IN RESPONSE TO THE QUERY RAISED BY THE AO DURIN G THE REASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A REPLY DATED 30.06 .2016 STATING (I) THE NOTINGS MENTIONED THAT CASH LOAN OF RS.4,600/- 4600, 4500 A ND RS.5,308/- IS RECEIVED BY THE ASSESSEE AND IT DOES NOT REFER TO INTEREST RECE IPT, (II) IF LOAN IS RECEIVED BY THE ASSESSEE FROM THAT GROUP, THE SOURCE HAS TO BE EXPL AINED BY THEM AND IT DOES NOT BECOME ASSESSEES UNACCOUNTED INCOME, (III) IN THE STATEMENTS RECORDED BY THAT GROUP, NOWHERE THE DIRECTOR OF THAT GROUP HAS EVER REFERRED TO THE NAME OF THE ASSESSEE IN PARTICULAR AND HAS NOT REFERRED TO ANY DIRECT NEXUS WITH HIM, (IV) THE SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 5 PRESUMPTION IS DRAWN AS IF ALL THE TRANSACTIONS REC ORDED IN THE TALLY DATA OF THAT GROUP REFERS TO ONLY THE ACCOMMODATION ENTRIES AND THE ASSESSEE IS A PART OF IT ; THAT MERELY ON SURMISES AND PRESUMPTIONS AND WITHOU T ANY DIRECT NEXUS, THE VIEW IS TAKEN AGAINST THE ASSESSEE, (V) THERE IS NO ENTRY BEFORE THE SAID NOTING INDICATING PAYMENT OF CASH LOAN BY THE ASSESSEE AND IN ABSENCE OF CASH LOAN BEING GIVEN BY THE ASSESSEE, QUESTION OF RECEIPT OF LOAN INTEREST IS MERELY A PRESUMPTION. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EX PLANATION OF THE ASSESSEE FOR THE REASON THAT AS PER THE STATEMENT G IVEN BY SHRI JAGDISH BHAGWANDAS AHUJA, DIRECTOR/PROMOTER OF AHUJA GROUP, CASH WAS PAID TO THE ASSESSEE AGAINST CHEQUE WHICH WERE RECORDED IN THE PARALLEL BOOKS OF ACCOUNTS AND THE ASSESSEE HAD RECEIVED CASH OF RS.26,50,000/ - AND THAT ASSESSEE HAD MADE UNEXPLAINED EXPENDITURE FROM THE CASH RECEIVED FROM THE AHUJA GROUP WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND SIMU LTANEOUSLY, THE ASSESSEE LATTER PAID AHUJA GROUP IN CASH A SUM OF RS.35,00,0 00/- IN LIEU OF THE CHEQUE RETURNED BY THE GROUP. WITH THE ABOVE OBSERVATIONS, THE AO MADE AN ADDITIO N OF RS.61,50,000/- U/S 68 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 20.11.2017, THE LD. CIT(A) OBSERVED THAT (I) AS PER THE TABLE MENTIONED IN THE REASONS RECORDED BY THE AO, THE ASSESSEE HAS RECEIVED RS.10 LACS ON 05.07.2008 AND RS.25 LACS ON 01.10.2008 BY CHEQUES ; ACCORDING TO THE DDIT THESE ARE THE EN TRIES FOUND IN THE PARALLEL BOOKS MAINTAINED BY AHUJA GROUP BUT NOWHERE IT IS M ENTIONED THAT CASH HAS CHANGED HANDS, (II) THE ASSESSEE HAS REPAID RS.25 L ACS OUT OF THE SAID AMOUNT SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 6 OF RS.35 LACS ON 24.11.2008 AND OUT OF THE SAID AMO UNT OF RS.25 LACS WHICH HAS BEEN REPAID RS.23.50 LACS WAS A CHEQUE ISSUED B Y SHRI DILIP PATEL (HUF) AND RS.1.50 LACS FROM SHRI SARVAJIT PATEL ; AGAIN T HERE IS NO MENTION OF ANY CASH, (III) DDIT HAS PRESUMED THAT OUT OF THE AMOUN T OF RS.25 LACS, RS.1.50 LACS IS THE CASH GIVEN BY SHRI SARVAJIT PATEL WHICH IS RECEIVED BACK IN THE FORM OF ACCOMMODATION ENTRY IN THE AHUJA GROUP ; THERE I S ABSOLUTELY NO BASIS FOR MAKING SUCH A PRESUMPTION, (IV) THE ASSESSEE IS SHO WING REPAYMENT OF RS.25 LACS BY CHEQUES AND THE DDIT IS SAYING THAT RS.1.50 LACS IS THE CASH GIVEN TO SHRI SARVAJIT PATEL WHICH IS RECEIVED BACK IN THE F ORM OF ACCOMMODATION ENTRY; IF THAT BE THE CASE, THERE WOULD BE CHEQUE R ECEIPT OF RS.1.50 LACS IN THE AHUJA GROUP BUT NEITHER THE DDIT NOR THE AO HAS BRO UGHT OUT THIS FACT, IF IT IS TRUE. OBSERVING AS ABOVE THE LD. CIT(A) CONCLUDED THAT IN STEAD OF INVESTIGATING AND TRYING TO PROVE, THE AO HAS COMPL ETELY DISTORTED THE FACTS AND MADE AN ADDITION OF RS.61,50,000/- MERELY ON TH E BASIS OF PRESUMPTIONS AND WRONG ASSUMPTIONS. RELYING ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW AND BROS V. CIT (1959) 37 ITR 271 (SC), WHEREIN IT IS HELD THAT CONCLUSION AS A RESULT OF S USPICION, SURMISES AND CONJECTURES CANNOT TAKE PLACE OF PROOF, THE LD. CIT (A) DELETED THE ADDITION OF RS.61,50,000/- MADE BY THE AO U/S 68 OF THE ACT. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL FOR THE AS SESSEE SUPPORTS THE ORDER PASSED BY THE CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 7 WE FIND THAT THE LD. CIT(A) HAS NOT ADMITTED ANY A DDITIONAL EVIDENCE IN CONTRAVENTION TO RULE 46A OF THE INCOME TAX RULES, 1962. IT IS WELL SETTLED THAT IN ORDER TO DISCHARGE THE ONUS U/S 68 OF THE ACT, THE ASSESSEE MUST PROVE THE FOLLOWING: (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY ; AND (III) THE GENUINENESS OF TRANSACTION. AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLI SH PRIMA FACIE THE AFORESAID, THE ONUS SHIFTS TO THE DEPARTMENT AS HEL D IN SHANKAR IND V. CIT 114 ITR 689; PRAKASH TEXTILE V. CIT 121 ITR 890; CIT V. UNITED 187 ITR 596; RAJSHREE V. CIT 256 ITR 331; ASHOKPAL V. CIT 220 ITR 452, 454; CIT V. METACHEM 245 ITR 160; CIT V. SHREE GOPAL 204 ITR 285; MOD CREATIONS P. LTD. V. ITO 354 ITR 282. IN THE INSTANT CASE, THE AO HAS NOT DONE EVEN PREL IMINARY INQUIRY TO DISPROVE THE CONTENTIONS OF THE ASSESSEE. THE AO HAS FAILED TO DISPROVE THE CONTENTION OF TH E ASSESSEE THAT (I) THE LOAN TAKEN FROM AHUJA GROUP AND REPAID ARE GENU INE AND REFLECTED IN ITS BOOKS OF ACCOUNTS AND THERE IS NO CASH RECEIPT OR CASH WITHDRAWAL, (II) SHRI AHUJA HAD NOWHERE IN THE STATEMENT ADMITTED TO HAVING GIVEN ANY ACCOMMODATION ENTRY TO THE ASSESSEE, (III) EVEN IF SHRI AHUJA MAINTAINED PARALLEL BOOKS, IT IS OF NO CONCERN TO THE ASSESSEE WHO HAD REFLECTED THE LOAN TRANSACTIONS IN HIS BOOKS OF ACCOUNTS, (IV) IF IT IS PRESUMED THAT RS.35 LACS GIVEN TO THE ASSESSEE BY AHUJA GROUP IS AN ACC OMMODATION ENTRY AND SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 8 OUT OF THIS RS.25 LACS HAS BEEN REPAID, THERE IS NO SENSE OF MAKING AN ADDITION OF AN ENTRY AMOUNTING TO RS.61,50,000/-, W HICH IS RS.1.50 LACS MORE THAN THE AMOUNT OF LOAN GIVEN AND REPAID. THOUGH THE ONUS SHIFTED TO THE AO, HE FAILED TO DI SPROVE THE CONTENTIONS OF THE ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE FACTUAL SCENARIO AND POSITION OF LAW, WE UPHOLD THE ORDER O F THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 8. IN THE CROSS-OBJECTION FILED BY THE ASSESSEE THE RE IS A DELAY OF 20 DAYS. HAVING CONSIDERED THE REASONS FOR DELAY IN FI LING THE CROSS-OBJECTION, WE CONDONE THE DELAY OF 20 DAYS. IN THE CROSS-OBJECTION, THE ASSESSEE HAS CHALLENGE D THE ORDER OF THE LD. CIT(A) AFFIRMING THE ACTION OF THE AO TO REOPEN THE CASE BY ISSUING NOTICE U/S 147 TO BE VALID. AS MENTIONED EARLIER, THE ASSESSEE FILED HIS RETUR N OF INCOME FOR THE AY 2009-10 ON 25.07.2009 DECLARING TOTAL INCOME OF RS.15,51,248/-. THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 12.09.2010. THEREAFTER, THE AO REOPENED THE ASSESSMENT BY ISSUI NG NOTICE U/S. 148 DATED 30.03.2016. IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD . 291 ITR 500, IT IS HELD BY THE HONBLE SUPREME COURT THAT I NTIMATION U/S 143(1)(A) IS NOT AN ASSESSMENT AND THE NOTICE U/S 148 OF THE ACT WAS VALIDLY ISSUED. IN VIEW OF THE ABOVE POSITION OF LAW, THE CROSS-OB JECTION FILED BY THE ASSESSEE IS DISMISSED. SHRI SARVAJIT PATEL ITA NO. 879/M/2018 & CO NO. 106/M/2019 9 9. TO SUM UP, THE APPEAL FILED BY THE REVENUE AND T HE CROSS-OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.2019 SD/- SD/- (SAKTIJIT DEY) (N.K. PRA DHAN) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI; DATED: 28/10/2019 S. SAMANTA, P.S.(ON TOUR) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) ITAT, MUMBAI