Vikrambhai G. Sonara, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

ITA 113/RJT/2012

• Counselvise Citation: 11324914 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained investment; Gift; Transactions in derivatives
• Section: 68

Judgement Text

C , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. 2 . . 3 R 2 . . 2 BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 113 /RJT/2012 W W / ASSESSMENT YEAR 200 6 - 0 7 VIKRAMBHAI G . SONARA, 150 FT. RING ROAD, OPP: GANDHIGRAM POLICE STATION, JAI GANESH COMPLEX, SHOP NO.4, RAJKOT. PAN : A SDPS5303H ( A / APPELLANT) THE INCOME - TAX OFFICER, WAR D - 1(3), RAJKOT. NA / RESPONDENT WE / ASSESSEE BY SHRI D. M. RINDANI, CA / REVENUE BY SHRI VILAS V. SHINDE, DR / DATE OF HEARING 01 - 08 - 2013 / DATE OF PRONOUNCEMENT 14 - 08 - 2013 / ORDER . . 3 , R / T. K. SHARMA, J. M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 01 - 12 - 2011 OF LD. CIT (A ), GANDHINAGAR, AHMEDABAD FOR THE ASSESSMENT YEAR 200 6 - 0 7 . 2 . T HE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A N I NDIVIDUAL ENGAGED IN DERIVING INCOME FROM COMMISSION AND BANK INTEREST , ETC. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 2 2 - 06 - 2006 DECLARING T OTAL INCOME OF RS. 1,04,300 / - . DURING THE ASSESSMENT PROCEEDINGS, AO CATEGORICALLY ASKE D THE ASSESSEE TO EXPLAIN THE SOURCE OF CASH DEPOSITS IN BANK ACCOUNT. THE INFORMATION WAS ALSO SOUGHT U/S.133(6) OF THE ACT FROM THE MANAGER, BANK OF BARODA, BEDIPARA BRANCH, RAJKOT. THE MANAGER SUBMITTED THE FOLLOWING DETAILS: - (I) ACCOUNT OPENING FORM (II) BANK STATEMENT (III) ALL INSTRUMENTS THROUGH WHICH DR/CR. ENTRIES MADE INCLUDING PAY - IN - SLIPS SHOWING CASH DEPOSITS OF RS.10,83,700/ - . FURTHER, THE MANAGER OF ANGEL COMMODITIES BROKING PVT. LTD. WAS ALSO REQUESTED TO PROVIDE THE DETAILS U/S.133 (6) OF THE ACT REGARDING TRANSACTIONS MADE WITH THE ASSESSEE. THE ANGEL COMMODITIES BROKING PVT. LTD FILED A LETTER DATED 25 - 09 - 2008 AND PROVIDED THE COPY OF THE STATEMENT FOR THE PERIOD FROM 01 - ITA 113 - 2012 2 04 - 2005 TO 31 - 03 - 2006 RELATED TO MCX TRANSACTIONS OF THE ASS ESSEE (PARTY LEDGE CODE VY41 VIKRAMBHAI GOVINDBHAI SONARA). 3. IN RESPECT OF DEPOSITS OF CASH AMOUNTING TO RS. 10,83,700/ - , ASSESSEE COULD NOT PROVIDE ANY PROPER EXPLANATION AND SIMPLY FILED A COPY OF COMPUTERIZED CASH BOOK SHOWING CASH DEPOSITS. AO ACCOR DINGLY ISSUED A SHOW CAUSE NOTICE VIDE LETTER NO. ITO/WD.1(3)/SCR/08 - 09 DATED 30 - 09 - 2008 TO THE ASSESSEE, WHICH READS AS UNDER: - 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AS PER AIR INFORMATION , IT IS SEEN THAT YOU HAVE DEPOSITED RS.10,83,700/ - C ASH IN YOUR BANK ACCOUNT VIDE NO.2004643 (BANK OF BARODA BEDIPARA BRANCH, RAJKOT). PLEASE FIND ENCLOSED HEREWITH COPY OF YOUR BANK ACCOUNT OBTAINED U/S.133(6) OF THE I.T. ACT, 1961. YOU ARE, THEREFORE, REQUESTED TO PLEASE EXPLAIN THE SOURCES OF DEPOSITS IN YOUR BANK ACCOUNT THROUGH CASH AMOUNTING TO RS.10,83,700/ - , WITHIN 7 DAYS ON RECEIPT OF THIS LETTER. 3. PLEASE NOTE THAT IF NOTHING IS HEARD FROM YOU, WITHIN 7 DAYS ON RECEIPT OF THIS LETTER, RS,10,83,700/ - WILL BE ADDED TO YOUR INCOME U/S. 68/69A OF THE I.T. ACT. ACCORDINGLY, YOU ARE ALSO REQUESTED TO PLEASE EXPLAIN WHY RS.10,83,700/ - SHOULD NOT BE ADDED U/S.68/69A OF THE ACT, TO THE RETURNED INCOME DECLARED BY YOU. 4. IN RESPONSE TO AFORESAID NOTICE, ASSESSEE FILED A WRITTEN SUBMISSION DATED 14 - 10 - 200 8 REGARDING EXPLANATION OF CASH DEPOSITS IN BANK, WHICH IS REPRODUCED HEREUNDER: - SUB: CLARIFICATION OF BANK DEPOSIT IN OUR BANK SAVING A/C. NO.20046543, BANK OF BARODA, BEDIPARA BRANCH , RAJKOT DURING THE A.Y.2006 - 07 SIR, ABOVE SAID SUBJECT, I HAVE PRESENTED MY DOCUMENTS OF ACCOUNT FOR BANK CASH DEPOSIT AMOUNT RS.1083700/ - DURING THE A.Y. 2006 - 07 AND I CLARIFY THAT THE CASH DEPOSITS RECEIVED FROM MY BROKING CLIENT THROUGH REC. NO. 1 TO 63. THESE AMOUNT DEPOSITS IN MY BANK A/C AND PAY ANGEL COMM ODITIES BROKING PVT. LTD. 5. AFTER CONSIDERING AFORESAID SUBMISSION, AO TREATED THE UNEXPLAINED INVESTMENT IN BANK ACCOUNT U/S.68/ 69/ 69A OF THE I.T. ACT FOR THE DETAILED REASON GIVEN IN PARA - 6.2, WHICH READS AS UNDER: - 6.2 THE ASSESSEES EXPLANATION IS NOT SATISFACTORY AND TENABLE AS THE ASSESSEE IS DEALING AS A CLIENT OF ANGEL COMMODITIES BROKING PVT. LTD AND NOT AS AN AGENT, BROKER OR SUB - BROKER. SO WHICHEVER TRANSACTIONS ARE MADE WITH ANGEL COMMODITIES BROKING PVT. LTD BY THE ASSESSEE IS AS CLIENT AND ALL THE TRANSACTIONS ARE OF THE ASSESSEE AND RELATED TO THE ASSESSEE. IT IS ALSO NOT PERMISSIBLE AS PER MCX PREVAILING RULES. AS SUCH, THERE IS NO POSSIBILITY OF RECEIPT OF DEPOSITS FROM BROKING CLIENT. THIS IS SIMPLY A FABRICATED STORY MADE BY THE ASSESS EE. ACCORDINGLY, EXPLANATION REGARDING CASH DEPOSITS WITH BANK BY THE ASSESSEE IS NOT SATISFACTORY AND NOT ACCEPTABLE AT ALL. AS SUCH, RS.10,83,700/ - IS ADDED U/S.68/69/69A OF ITA 113 - 2012 3 THE I.T. ACT TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. A SHOW CAUSE NOTICE U /S.271(1)(C) IS ALSO ISSUED SEPARATELY FOR CONCEALMENT OF INCOME & FURNISHING INACCURATE PARTICULARS OF INCOME. 6. ON APPEAL IN THE IMPUGNED ORDER, THE LD. CIT (A) CONFIRMED THE DISALLOWANCE FOR THE DETAILED REASON GIVEN IN PARA - 6 , WHICH IS REPRODUCED AS UNDER: - 6. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSION MADE BY THE APPELLANT AND THE ASSESSMENT ORDER. IT IS TO BE OBSERVED THAT THE APPELLANT HAD DEPOSITED CASH IN THE BANK OF BARODA ACCOUNT WHICH WAS UTILIZED TO DO TRANSACTIONS IN COMMODITIES O N MCX THROUGH ANGEL COMMODITIES BROKING PVT. LTD WHEN ASKED TO EXPLAIN THE DEPOSITS, THE APPELLANT CLAIMED THAT : A ) THE APPELLANT IS HAVING LIMITED LIQUIDITY OF CAPITAL IN HIS REGULAR SOURCE OF INCOME AND HE INTENDED TO PARTICIPATE IN MCX TRADING TRANSACTIO NS WITH ONLY MOTIVE TO GAIN EXPERIENCE IN COMMODITY TRANSACTIONS; FUTURE POTENTIAL AS SUB - BROKER. B ) THE APPELLANT WAS NOT HAVING SUFFICIENT FUND FOR PARTICIPATING IN TRADING IN COMMODITY TRANSACTIONS THROUGH ANGEL AS SUCH HE HAS CARRIED OUT TRANSACTIONS ON B EHALF OF HIS FRIENDS AND RELATIVES. THE BOOKS CLAIMED TO REPRESENT THE TRANSACTIONS AS ABOVE WERE ALSO PRODUCED . IT IS CRUCIAL TO NOTE THAT THE APPELLANT IS THE SOLE HOLDER OF THE ACCOUNT WITH ANGEL COMMODITIES BROKING PVT. LTD. FURTHER, THE APPELLANT HAS CLAIMED THAT THE TOTAL LOSS SUFFERED IN THE TRANSACTION WHICH WAS MET BY DEPOSITING CASH IN THE BANK ACCOUNT AND ISSUING CHEQUES IN THE NAME OF BROKING FIRM, WAS OF HIS FRIENDS AND RELATIVES WHO RECOUPED THE AMOUNT. HOWEVER, IF SUCH WAS THE CASE, THE APPE LLANT SHOULD HAVE BEEN KNOWING/HAVE RECORD OF THE EXACT TRANSACTIONS WHICH WERE ENTERED ON BEHALF OF THE CLAIMED BENEFICIARIES OF THE TRANSACTIONS. THE BOOKS OF ACCOUNTS ARE PRODUCED BUT NO ENTRIES REGARDING THE CLAIMED PERSON IN WHOSE BEHALF THE TRANSACTI ONS ARE CLAIMED TO HAVE BEEN ENTERED ARE MENTIONED. DEFINITELY, IF THE BOOKS REPRESENTED THE TRANSACTIONS AS CLAIMED, THE TRANSACTIONS WOULD HAVE BEEN NOTED IN THE NAME OF THE CLAIMED BENEFICIARIES AND THE PAYMENT WOULD HAVE BEEN RECEIVED AGAINST THE TOTAL DEMAND MATCHING THE LOSS FROM THESE TRANSACTIONS. THE APPELLANT WAS SPECIFICALLY ASKED VIDE ORDER SHEET ENTRY DATED 13/7/2011 DURING APPELLATE PROCEEDINGS TO PRODUCE THE TRADE RECORDS OF DIFFERENT PARTIES CLAIMED AND IT WAS STATED THAT NO SUCH RECORD IS M AINTAINED. FURTHER, VIDE ORDER SHEET ENTRY DATED 13/10/2011 IN THE APPELLATE PROCEEDINGS, THE ASSESSEE WAS ASKED TO STATE THE SHARE OF THE TRANSACTIONS OF EACH PERSON AND THE AR STATED THAT NO SUCH RECORD IS THERE. IN THE RETURN, NO INCOME OR LOSS FROM THE SE TRANSACTIONS HAS BEEN SHOWN. THE APPELLANT IS NOT SHOWING EVEN ANY BROKERAGE ON THE SO CALLED TRANSACTIONS CLAIMED ENTERED ON BEHALF OF OTHERS. THE STORY AND THE BOOKS ARE CONCOCTED. IT IS CLEAR THAT THE APPELLANT ENTERED THE TRANSACTIONS ON HIS OWN BEH ALF AND INCURRED LOSS AND DEPOSITED UNEXPLAINED MONEY IN THE BANK ACCOUNT TO PAY FOR IT. THE CREDITS IN THE BOOKS PRODUCED FOR THE PREVIOUS YEAR IN THE NAME OF THESE SO CALLED FRIENDS ETC. (SHOWN AS PAYMENTS RECEIVED) ARE HELD NOT EXPLAINED AND THE EXPLANA TION CONCOCTED. THE ADDITION MADE BY THE AO ARE CONFIRMED U/S.68 OF THE IT ACT 1961. THE APPELLATE ORDER MERGER WITH THAT OF AO. THE APPEAL IS DISMISSED. AGGRIEVED WITH THE ORDER OF LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE F OLLOWING GROUND: - ITA 113 - 2012 4 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), GANDHINAGAR ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.10,83,700/ - U/S.68 OF THE I.T. ACT, 1961 MADE BY THE I.T.O., WARD 1(3), RAJKOT AS UNEXPLAINED INVESTMENT IN BANK A CC OUNT. 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF ASSESSEE, SHRI D. M. RINDANI, CA, APPEARED AND CONTENDED THAT THE ASSESSEE IS A CLIENT OF ANGEL COMMODITIES BROKING PVT. LTD., A MEMBER OF BOMBAY STOCK EXCHANGE LTD. HE WAS HAVING LIMITED LIQUIDITY O F CAPITAL THEREFORE HE CARRIED OUT TRANSACTIONS ON BEHALF OF HIS FRIENDS AND RELATIVES. THE COPIES OF CONTRACT ACCOUNT ARE AVAILABLE AT PAGE 42 - 44 OF THE WRITTEN SUBMISSION. IT WAS CLAIMED THAT THESE DOCUMENTS WERE FILED BEFORE THE CIT (A). THE AMOUNT S RE FLECTED IN THE CASH BOOK WERE REPRESENTING THE SETTLEMENT OF SPECULATION OF TRANSACTIONS OF RESPECTIVE PARTIES FRIENDS AND SUCH CREDITS CANNOT BE REGARDED AS LOAN: DEPOSIT OR GIFT AND PROVISIONS OF SECTION 68 OF THE ACT HAVE NO APPLICATION, SINCE: FURTHER , PROVISIONS OF SEC.69 AND 69A OF THE ACT ARE ALSO NOT APPLICABLE TO THESE TRANSACTION S . 8. BEFORE US, ALTERNATIVE PLEA IS ALSO RAISED WHEREIN IT WAS CONTENDED THAT IF ADDITION IS MADE ON ACCOUNT OF UNEXPLAINED INCOME IN THE INVESTMENT , THAT WILL RISE TO THE COST OF THE CONSTRUCTION AND THE RESULT WILL REMAIN THE SAME, I.E. ZERO. IN SUPPORT OF THIS, RELIANCE IS ALSO PLACED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. STAR BUILDERS (2007) 294 ITR 338 (GUJ). 9. TO SUM UP, IT WAS CONT ENDED THAT EVEN, THE SPECULATION TRANSACTIONS ARE CONSIDERED TO BE BELONGING TO THE ASSESSEE, ONLY PROFIT MARGIN INVOLVED IN SUCH TRANSACTIONS OR EARNING OF BROKERAGE CAN ONLY BE SUBJECT TO CHARGE AND NOT ENTIRE FUND. IT WAS THEREFORE CONTENDED THAT SINCE NO INCOME HAS BEEN EARNED ON THESE TRANSACTIONS, THERE IS NO JUSTIFICATION IN MAKING THE ADDITION OF RS.10,83,700/ - MERELY ON THE BASIS OF DEPOSITS IN BANK ACCOUNT, THEREFORE, SAME BE DELETED. 10. ON THE OTHER HAND, SHRI VILAS S. SHINDE, DR, APPEARED ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT (A). HE POINTED OUT THAT DEPOSITS ARE APPEARED IN THE BANK ACCOUNT OF THE ASSESSEE AND THE ASSESSEE FAILED TO FURNISH THE NAME AND ADDRESS OF THE PERSON/INVESTOR WHO HAS GIVEN THE ITA 113 - 2012 5 MONEY TO TH E ASSESSEE. THEREFORE, ADDITION WAS RIGHTLY MADE AND CONFIRMED BY LD. CIT (A) IN HIS IMPUGNED ORDER. WITH REGARD TO ALTERNATE PLEA, THE LD. DR POINTED OUT THAT THIS PLEA WAS NOT RAISED BEFORE ANY OF THE AUTHORITIES BELOW THEREFORE, ON THIS GROUND ALONE, S AME BE REJECTED. EVEN OTHERWISE, THERE IS NO MERIT IN ALTERNATE PLEA RAISED BY THE ASSESSEE FIRST TIME BEFORE THE TRIBUNAL BECAUSE ADDITION HAS BEEN MADE IN RESPECT OF DEPOSITS MADE IN ASSESSEES BANK ACCOUNT WITH BANK OF BARODA FOR WHICH IT WAS FAILED TO FURNISH THE EXPLANATION AS REQUIRED U/S.68 OF THE I.T. ACT, 1961. THEREFORE, ADDITION WAS RIGHTLY MADE AND CONFIRMED BY LD. CIT (A) IN THE IMPUGNED ORDER. 11. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS P ERTINENT TO NOTE THAT BEFORE NONE OF THE AUTHORITIES OR EVEN BEFORE US, ASSESSEE FAILED TO FURNISH THE NAME, ADDRESS OR ANY EVIDENCE OF CLAIMED BENEFICIARIES/CLIENTS. THE LD. CIT (A) VIDE ORDER SHEET ENTRY DATED 13 - 10 - 2011 ASKED THE ASSESSEE TO STATE THE S HARE OF TRANSACTIONS OF EACH PERSON AND THE AR STATED THAT NO SUCH RECORD IS AVAILABLE. IN THE RETURN OF INCOME, ASSESSEE HAS NOT SHOWN ANY INCOME OR LOSS FROM THESE TRANSACTIONS. EVEN NO BROKERAGE INCOME IS SHOWN ON SO CALLED TRANSACTIONS WHICH ARE CLAIME D TO HAVE ENTERED ON BEHALF OF OTHERS. IN VIEW OF THESE CONSPICUOUS FACTS OF THE CASE, WE FULLY AGREE WITH THE FINDINGS OF LD. CIT (A) THAT A STORY OF THE BOOKS ARE CONCOCTED THEREFORE, ADDITION WAS RIGHTLY MADE BY AO U/S.68 OF THE I.T. ACT, 1961. WE THER EFORE, DECLINED TO INTERFERE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 13 . THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . D. K. SRIVASTAVA ) ( . . W / T. K. SHARMA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ORDER DATE 14 - 08 - 2013. /RAJKOT NVA/ - 8 RJO O / COPY OF ORDER FORWARDED TO: - 1 . A / APPELLANT - VIKRAMBHAI G. SONARA, 150 FT. RING ROAD, OPP: GANDHIGRAM POLICE STATION, JAI GANESH COMPLEX, SHOP NO.4, RAJKOT. ITA 113 - 2012 6 2 . NA / RESPONDENT - THE INCOME - TAX OFFICER, WARD - 1(3), RAJKOT. 3 . C 11 / CONCERNED CIT , GANDHINAGAR . 4 . M - / CIT (A ),GANDHINAGAR. 5 . NC , C , / DR, ITAT, RAJKOT 6 . W / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT