SUNIL KUMAR MEHTA, MUMBAI V. ITO WD 25(3)(4), MUMBAI

CO 86/MUM/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2201 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2015
• Court: TRIBUNAL
• Department Lawyers: VIVEK A OJHA
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Peak credit; Transactions in derivatives; Question of law; Condonation of delay
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI SANDEEP GOSAIN , J M ./ ITA NO . 5319 /MUM /20 1 3 ( / ASSESSMENT YEAR : 20 0 9 - 2010 ) ITO 25(3)(4), MUMBAI - 400051 VS. SUNIL KUMAR MEHTA, EVERSHINE MILLENIUM PARADISE 47, FLAT NO.1804, PHASE - V, THAKUR VILLAGE, KANDIVALI(E), MUMBAI - 400101 ./ ./ PAN/GIR NO. : A CEPM 8838 L ( / APPELLANT ) .. ( / RESPONDENT ) AND CROSS OBJECTION NO . 86 /MUM/201 5 ( / ASSESSMENT YEAR :200 9 - 2010 ) SUNIL KUMAR MEHTA, EVERSHINE MILLENIUM PARADISE 47, FLAT NO.1804, PHASE - V, THAKUR VILLAGE, KANDIVALI(E), MUMBAI - 400101 VS. ITO 25(3)(4), MUMBAI - 400051 ./ ./ PAN/GIR NO. : A CEPM 8838 L ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI VIVEK A OJHA /ASSESSEE BY : SHRI PRAKASH JHUNJHUNWALA / DATE OF HEARING : 29 / 12 / 201 5 / DATE OF PRONOUNCEMENT 3 1 / 03 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), MUMBAI, FOR THE ASSESSMENT YEAR S 2009 - 2010 , IN THE MATTER OF ORDER ITA NO.5319/13 & CO NO.86/15 2 PASSED U/S.143 (3) OF THE I.T.ACT . THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. 2. THE CROSS OBJECTION FILED BY THE ASSESSEE IS BARRED BY 378 DAYS. THE ASSESSEE HAS FILED APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT. WE HAVE CAREFULLY GONE THROUGH THE REASON S STATED IN THE APPLICATION AND RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE COLLECTOR, LAND ACQUISITION V. MST KATIJI , 167 ITR 471 , IN THE INTEREST OF SUBSTANTIAL JUSTICE WE CONDONE THE DELAY OF 378 DAYS IN FILING THE CROSS OBJECTION AND THE SAME IS HEARD ON MERIT. 3. THE REVENUE IN ITS APPEAL, HAS RAISED THE FOLLOWING GROUNDS : - (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS NOT JUSTIFIED IN APPLYING PEAK CREDIT AND RESTRICTING THE ADDITION TO RS 46,9 8,051/ - AS UNACCOUNTED INCOME OF THE ASSESSEE ON THE BASIS OF BANK STATEMENTS WHICH SHOWS CREDITS AS MIXTURE OF CASH AND CHEQUE DEPOSITS.' (II) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS NOT JUSTIFIED IN GIVING SPECIF IC DIRECTIONS TO CALCULATE PEAK CREDIT (TELESCOPING) WHILE ASKING FOR REMAND REPORT AND TO INCLUDE ALL CREDITS AND DEBITS REFLECTED IN ALL BANK STATEMENT BELONGING TO THE ASSESSEE AND HIS RELATIVES, WITHOUT EXAMINING THE GENUINENESS OF NATURE AND SOURCE OF ALL CREDITS.' (III) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING COMMISSION INCOME OF RS 2,78,063/ - (IV) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED.' 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND DERIVATIVES (F&O). T HE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) CA RRIED OUT CERTAIN INVESTIGATION IN THE CASE OF THE ASSESSEE AND VIDE LETTER DATED 19 - 9 - 2011 INFORMED THE INCOME TAX ITA NO.5319/13 & CO NO.86/15 3 DEPARTMENT THAT THE ASSESSED AND HIS FAMILY MEMBERS ARE ENGAGED IN SYNCHRONIZED TRADING IN SHARES FROM MARCH 2009 TO DECEMBER 2009. THE SEBI INFORMED THAT THE ASSESSEE WAS CARRYING THE SHARE TRANSACTIONS BY DEPOSING CASH IN VARIOUS BANK ACCOUNTS. THE SEBI FURTHER OBSERVED THAT 4 PERSONS NAMED J I TENDRA KUMAR JAIN , HEMLATA RAMESH HANKARE, ANJANA MEHTA AND USHA MEHTA WERE ALSO GETTING HUGE CASH D EPOSITED IN THEIR RESPECTIVE BANK ACCOUNTS AND ALL THE BANK ACCOUNTS WERE OPENED AT KANDIVALI, MUMBAI WHERE THE ASSESSEE USED TO STAY . THE SEBI, ON VERIFYING THE SAMPLE CASH DEPOSIT SLIPS AND CHEQUES SEND FOR FORENSIC HANDWRITING ANALYSIS, HELD THAT BANK ACCOUNTS WERE OPERATED: BY T HE ASSESSEE . ACCORDINGLY, SEBI CONCLUDED THAT .ALL ENTITIES BELON G TO THE ASSESSEE AND THE BANK ACCOUNTS OF ALL ENTITIES WERE USED BY THE A SSESSEE AS CONDUIT OF SUSPICIOUS MONEY WHICH WAS BEING USED FOR MANIPULATION IN THE SHARE MARKET. THE AO FRAMED THE ASSESSMENT ON THE BASIS OF THIS INFORMATION AND MADE ADDITION OF RS.4,06,27,000/ - . BY THE IMPUGNED ORDER THE CIT(A) RESTRICTED THE ADDITION TO RS.46,98,051/ - AFTER HAVING FOLLOWING OBSERVATIONS : - I HAVE CAREFULLY CONSIDERED THE WORKING OF PEAK CREDITS, REMAND REPORT AND AGREE TO THE ARGUMENTS ADVANCED BY LD. AR FOR THE REASON THAT ENTIRE CREDITS OF ALL BANK ACCOUNTS CANNOT BE BROUGHT TO TAX AND THE BENEFIT OF TELESCOPING NEEDS TO BE ALLOWED TO THE APPELLANT WHICH WOULD REFLECT T HE UNDISCLOSED INCOME OF THE APPELLANT. I FIND FORCE IN THE ARGUMENT OF LD. AR THAT THERE CANNOT BE CASE OF ONLY RECEIPTS WITHOUT CORRESPONDING PAYMENT, ACCORDINGLY IF AN UNACCOUNTED RECEIPT IS CONSIDERED AS UNDISCLOSED INCOME, THEN IT IS ALSO REQUIRED TO BE PRESUMED THAT THE SUBSEQUENT SUM PAID/SPENDED WOULD HAVE BEEN SOURCED OUT OF SUCH RECEIPT AND THEREAFTER SUCH SUM PAID/SPENDED WOULD HAVE BEEN RECEIVED BACK AND WOULD HAVE BEEN DEPOSITED IN THE BANK ACCOUNTS, THUS ONLY THE BALANCE OF UNACCOUNTED RECEIPT S AND UNACCOUNTED PAYMENTS (PEAK) COULD BE CONSIDERED AS UNDISCLOSED INCOME OF THE APPELLANT. ITA NO.5319/13 & CO NO.86/15 4 I AGREE THAT THE APPELLANT HAD OWNED ALL THE BANK ACCOUNTS AS OPERATED BY HIM ON VARIOUS OCCASIONS, THUS OBSERVATION OF AO THAT THE APPELLANT HAD NOT OWNED THE BA NK ACCOUNTS IS FACTUALLY INCORRECT. IT IS OBSERVED THAT THE MAXIMUM PEAK BALANCE OF ALL BANK ACCOUNTS IS OF RS.46,98,051/ - ON 04/04/2008. THIS WORKING OF PEAK CREDIT HAD ALSO BEEN ACCEPTED TO BE CORRECT BY AO IN THE REMAND REPORT DATED 06/05/2013. THE SEV ERAL JUDICIAL DECISIONS RELIED BY LD. AR ALSO SUPPORTS THE CASE OF THE APPELLANT. IN THE CASE OF ITO VS. MAHESHKUMAR JAYANTILAL VORA [3 SOT 96], HON'BLE ITAT RAJKOT DECIDED THAT - WHILE MAKING ADDITION UNDER S.68 ON THE BASIS OF CASH DEPOSITS, ONLY PEAK CR EDITS SHOULD BE CONSIDERED AND BY AGGREGATING ALL DEPOSITS, THEY TEND TO GET TAXED TWICE WHICH IS AGAINST THE PRINCIPLES OF TAXATION. IN THE CASE OF SANJAY KUMAR JAIN VS. CIT [118 TAXMAN 821], HON'BLE CALCUTTA HIGH COURT DECIDED THAT - TO FIND OUT THE PE AK CASH CREDIT, OUT OF SO MANY BOGUS CASH CREDIT, TAXABLE IS ONLY PEAK CASH CREDIT AMOUNT. IN THE CASE OF CIT VS. ISHWARDASS MUTHA[270 ITR 597] HON'BLE GUJARAT HIGH COURT DECIDED 'THAT - , TRIBUNAL HAVING SUSTAINED THE ADDITION IN RESPECT OF UN .EXPLAINE D INVESTMENT IN MONEY - LENDING BUSINESS ONLY TO THE EXTENT OF PEAK CREDIT AND THUS HELD THAT NO QUESTION OF LAW ARISES. IN THE CASE OF CIT VS, NEEMAR RAM BADLU RAM [122 ITR 68] HON'BLE ALLAH ABAD HIGH COURT DECIDED THAT - TRIBUN A I, WAS JUST I F I ED I N HOLDING THAT THE ADDITIONS IN 'RESPECT OF EXTRA PROFIT IN EACH' OF THE YEARS U NDER APPEAL WOULD BE NIL IN THE YEARS IN WHICH THE ADDITION ON THE BASIS OF THE DIFFERENCE IN THE - PEAK UNACCOUNT ED MONEY USED FROM YEAR TO YEAR EXCEEDS THE EXTRA PROFIT. AND THAT WHERE THE EXTRA PROFIT ADDITION IS MORE THAN THE ADDITION ON ACCOUNT OF THE DIFFERENCE IN PEAK CREDITS, THE BIGGER OF THE TWO WOULD REMAIN AS THE ADDITION. IN THE CASE OF ERR VS. JAFAR HASAN KHAN [110 CTR 213) HON'BLE ALLAH ABAD HIGH' COURT DECIDED THAT - NO S TATABLE QUESTION AROSE FROM CONFIRMATION OF UNEXPLAINED INVESTMENT IN PURCHASE OF BANK DRAFTS WORKED OUT BY APPLYING PEAK CREDIT METHOD WHEN EACH AND EVERY INVESTMENT WAS FOUND TO BE UNEXPLAINED. IN THE CASE OF ARUN KALA VS, ACIT [98 DJ 1046] HON'BLE ITAT , JAIPUR BENCH DECIDED THAT - TH E BENEFIT OF TELESCOPING OR SET OFF OF SECRET PRO FITS OR UNDISCLOSED INCOME OF THE ASSESSEE MAY CONSTITUTE A FUND FRO M WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING THE EXPENDITURE OR MAKING INVESTMENTS. THE AO MAY AL SO ALLOW BENEFIT OF TELESCOPING/SETTING OFF OF INCOME AGAINST EXPENDITURE/INVESTMENT, EVEN DURING THE CURRENT YEAR, AFTER LOOKING INTO THE FACT THAT UNEXPLAINED EXPENDITURE/INVESTMENT COULD BE REASONABLY ATTRIBUTED TO THE PRE - EXISTING FUND OF CONCEALED INC OME ITA NO.5319/13 & CO NO.86/15 5 OR THEY WERE REASONABLY EXPLAINED BY REFERENCE TO THE CONCEALED INCOME EARNED IN THE RELEVANT YEAR. THUS, RESPECTFULLY FOLLOWING THE JUDICIAL DECISIONS STATED ABOVE, I HOLD THAT THE BENEFIT OF TELESCOPING NEEDS TO BE ALLOWED TO THE APPELLANT. AS REGA RDS QUANTUM OF PEAK CREDIT IT IS SEEN THAT THE LD. AR HAD GIVEN PEAK QUANTUM AT RS.33,35,628/ - . HOWEVER, ,DURING THE COURSE OF VERIFICATION BY THE AO 'DURING THE REMAND PROCEEDINGS, IT HAS BEEN FOUND TO 'BE AMOUNTING TO .RS.46,98, 051/ - TAKING INTO CONSIDER ATION OF ALL THE BANK ACCOUNTS WHERE CASH WAS DEPOSITED. THEREFORE THE WORKING 'OF AR IS NOT ACCEPTED AND THE WORK I N G OF AO IS ACCEPTED AND THE PEAK CREDIT IS TAKEN AT RS,46,98, 051/ - . THEREFORE, IT IS SEEN THAT THE AO HAD STATED IN HIS REMAND REPORT THAT T HE ACCEPTANCE OF PEAK QUANTUM IS CONDITION PRECEDENT TO ACCEPTING AL L THE BANK ACCOUNT AND DEPOSITS THEREIN APPELLANT AS HIS OWN FUND. NOW, IT HAS BEEN SEEN FROM THE ASSESSMENT ORDER ALSO THAT THE APPELLANT HAD OWNED UP THE BANK ACCOUNT AND EVEN DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS SPECIFICALLY OWN UP ALL BANK ACCOUNT AND CASH DEPOSITED THEREIN AND ALSO NOT PRESSED AND WITHDRAWN GROUND NO.1,2&3, THEN THE OBJECTION OF AO GET NULLIFIED ON THIS SCORE ALSO. UNDER THE CIRCUMST ANCES, THE PEAK CREDI T METHOD IS ADOPTED AND ADDITION OF RS.4,06,27,000/ - IS RESTRICTED TO RS.46,98,051/ - AND THE BALANCE OF RS.3,59,28,949/ - IS DELETED. IN THE RESULT GROUND NO.4 IS PARTLY ALLOWED. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AFTER GIVING DETAILED FINDING THE CIT(A) WORKED OUT PEAK ADDITION AT RS. 46,98,051/ - TAKING INTO CONSIDERATION OF THE BANK ACCOUNTS WHERE CASH WAS DEPOSITED. THE CIT(A) HAS ALSO CONSIDERED THE REMAND REPORT WHEREIN THE AO HAS STATED REGARDING ALL THE BANK ACCOUNTS WHEREIN THE ASSESSEE HAS DEPOSITED THE CASH. SINCE THE ASSESSEE OWNED UP ALL THE BANK ACCOUNTS AND ALSO CASH DEPOSITED THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ITA NO.5319/13 & CO NO.86/15 6 WORKING OUT PEAK ADDITION OF RS.46,98,051/ - AND CONFIRM THE ADDITION TO THIS EXTENT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 6. IN THE CROSS APPEAL, THE ASSESSEE HAS TAKEN AL TERNATE GROUND TO ALLOW BUSINESS LOSS IN TRADING IN SHARES. AS WE HAVE ALREADY UPHELD THE PEAK AMOUNT OF CREDIT, WE DO NOT FIND ANY REASON TO GO ON THE ALTERNATE CONTENTION TAKEN BY THE ASSESSEE. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL A S CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 31/03 / 201 6 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 31/03 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//