DINESHKUMAR VERMA, MUMBAI V. ITO WARD 2(1), KALYAN

ITA 1183/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0046 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Presumptive income
• Section: 44AD; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 1183 / /201 9 ((. .2014-15 ) ITA NO. 1183/MUM/2019 (A.Y.2014-15) DINESHKUMAR VERMA, 102, SAI AASHRAM APARTMENT, 2 ND FLOOR, TEJUMAL CHAKI ROAD, NR. SADHUBELA SCHOOL, ULHASNAGAR, TAHANE 421 001 PAN : ACMPV 7468B / VS. : / APPELLANT ITO,WARD -2(1), 2 ND FLOOR, MOHAN PLAZA, WAYALE NAGAR, NEAR KHADAKPADA CIRCLE, KALYAN (W) 421 301. : / RESPONDENT ASSESSEE BY : SHRI TANMAY PHADKE REVENUE BY : MS. SMITA VERMA / DATE OF HEARING : 04/11/2020 / DATE OF PRONOUNCEMENT : 28 /12/2020 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, THANE (IN S HORT THE CIT(A)) DATED 18/09/2018 FOR THE ASSESSMENT YEAR 2014-15. 2 ITA NO. 1183/MUM/2019 (A.Y.2014-15) 2. SHRI TANMAY PHADKE , APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THA T THE ASSESSEE AN INDIVIDUAL IS A CONTRACTOR OF WOOD, TILES AND MARBLE WORKS. THE GROSS RECEIPTS OF THE ASSESSEE FROM CONTRACT WORK D URING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL IS RS.16,00,000/-. THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 44AD AND HENCE, DID NOT MAINTAIN BOOKS OF ACCOUNT. IN SCRUTINY ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER ON THE BASIS OF AIR REPORT OBSERVED THAT THERE WERE CASH DEPOSIT S AMOUNTING TO RS.11,20,000/- IN THE BANK ACCOUNT OF ASSESSEE MAI NTAINED WITH BANK OF INDIA. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO E XPLAIN THE DEPOSITS. THE ASSESSEE VIDE LETTER DATED 13/05/2016 EXPLAINED THA T THE DEPOSITS WERE MADE FROM SAVINGS OF EARLIER YEARS FROM WOOD/TILES CONTR ACT WORK AND SUPPLY OF BUILDING MATERIAL. EXPLAINING THE REASON FOR DEPOSI T OF CASH IN BANK ACCOUNT THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PURCHASED LAND AT DEHU ROAD FOR RS.12,00,000/-. SINCE PAYMENT FOR PURCHASE OF LAND WAS TO BE MADE URGENTLY, THE ASSESSEE DEPOSITED CASH IN HIS BANK ACCOUNT. D URING ASSESSMENT PROCEEDINGS STATEMENT OF ASSESSEE WAS RECORDED ON O ATH, WHEREIN THE ASSESSEE HAD EXPLAINED THE CIRCUMSTANCES UNDER WHIC H CASH WAS DEPOSITED IN THE BANK AND ALSO THE FACT THAT THE DEPOSITS WERE M ADE OUT OF PAST SAVINGS MADE IN LAST THREE TO FOUR YEARS. THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD FU RNISHED CASH FLOW STATEMENT FOR THE FINANCIAL YEAR 2013-14. HOWEVER, THE ASSESSING OFFICER DID NOT CONSIDERED THE SAME. 2.1. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE SUBMITTED THAT THE ASSESSING OFFICER HAS ERRED IN INVOKING THE PROVISI ONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) IN THE A BSENCE OF BOOKS OF ACCOUNT. AS THE ASSESSEE FILED RETURN OF INCOME U/S 44AD OF THE ACT I.E. UNDER 3 ITA NO. 1183/MUM/2019 (A.Y.2014-15) PRESUMPTIVE TAX SCHEME, THE ASSESSEE WAS NOT MAINTA INING BOOKS OF ACCOUNT. NO ADDITION CAN BE MADE U/S 68 OF THE ACT IN ABSENC E OF ANY CREDIT ENTRY IN THE BOOKS. THE LD. AUTHORISED REPRESENTATIVE OF THE ASS ESSEE CONTENDED THAT BANK PASSBOOK/STATEMENT DOES NOT CONSTITUTE BOOKS OF ACC OUNT. TO SUPPORT OF HIS SUBMISSIONS, HE PLACED RELIANCE ON THE FOLLOWING DE CISIONS: (1) CIT VS. BHAICHAND N. GANDHI 141 ITR 67 (BOM.) (2) MADHU RAITANI VS. ACIT, 10 TAXMANN.COM 206 (GU WAHATI)(TM) (3) MANASI MAHENDRA PITKAR VS. ITO 160 ITD 605 (MU MBAI TRIB.) (4) KOKARRE PRABHAKARA VS. ITO, ITA 1239/BANG/2019 DOD 11/09/2020 2.2. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSE SSEE ASSERTED THAT ALTHOUGH THE PROVISIONS OF SECTION 68 DOES NOT APPL Y WHERE THE RETURN HAS BEEN FILED ON PRESUMPTIVE BASIS UNDER SECTION 44AD OF THE ACT, WHERE THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT, NOTWI THSTANDING, THE ASSESSEE HAS FULLY EXPLAINED SOURCE OF CASH DEPOSITS IN THE BANK. 3. PER CONTRACT, MS. SMITA VERMA, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED F OR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DEPARTMENTAL REPRESENT ATIVE STRONGLY OPPOSING THE GROUND RAISED BY THE ASSESSEE IN APPEAL POINTED THAT THESE GROUNDS WERE NEVER RAISED BEFORE THE CIT(A). THE ASSESSEE HAS C HANGED ITS STAND BEFORE THE TRIBUNAL. 4. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSE E REBUTTING THE ARGUMENTS RAISED ON BEHALF OF THE DEPARTMENT SUBMIT TED THAT THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL ARE PURELY LEGAL I N NATURE AND HENCE, CAN BE RAISED AT ANY STAGE. THE LD. AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE POINTED THAT IN THE CASE OF MANASI MAHENDRA PITKAR VS. ITO (SUPRA) SIMILAR GROUNDS 4 ITA NO. 1183/MUM/2019 (A.Y.2014-15) WERE RAISED AT SECOND APPELLATE STAGE AND THE SAME WERE ADMITTED BY THE TRIBUNAL BEING LEGAL IN NATURE. 5. BOTH SIDES HEARD. ORDERS OF AUTHORITIES BELOW A ND THE DECISIONS ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE EXAMINED. THE ADDITION OF RS.11,20,000/- UNDER SECTION 68 OF THE ACT HAS BEEN MADE IN THE INSTANT CASE ON THE BASIS OF U NEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT OF ASSESSEE. THE CONTENTION OF THE ASSESSEE IS THAT THE CASH DEPOSITS IN BANK ARE FROM HIS PAST SAVINGS FROM BUS INESS INCOME. TO BUTTRESS HIS CONTENTIONS THE ASSESSEE PURPORTEDLY FURNISHED FUND FLOW STATEMENT FOR THE IMPUGNED ASSESSMENT YEAR BEFORE THE ASSESSING O FFICER. HOWEVER, THE SAME WAS NOT CONSIDERED BY THE AUTHORITIES BELOW. T HE ASSESSEE HAS NOT MAINTAINED BOOKS AND HAS FILED RETURN OF INCOME U/S .44AD OF THE ACT. 6. THE ASSESSEE IN APPEAL BEFORE THE TRIBUNAL HAS R AISED A FRESH ISSUE I.E. WHETHER THE PROVISIONS OF SECTION 68 OF THE ACT ARE ATTRACTED WHERE THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND HA S FILED RETURN OF INCOME ON THE BASIS OF PRESUMPTIVE INCOME UNDER SECTION 44 AD OF THE ACT? THE LD. DR HAS OPPOSED ADMISSION OF NEW GROUND AT SECOND APPEL LATE STAGE. 7. THE NEW GROUND RAISED BY THE ASSESSEE CHALLENGIN G ACTION OF THE ASSESSING OFFICER IN INVOKING PROVISIONS OF SECTION 68 OF THE ACT IN ABSENCE OF BOOKS OF ACCOUNT GOES TO THE ROOT OF VALIDITY OF AD DITION MADE U/S 68. THE NEW GROUND RAISED BY THE ASSESSEE IS LEGAL IN NATURE AN D HENCE, CAN BE VERY WELL RAISED EVEN AT SECOND APPELLATE STAGE. THE FACTS AN D DOCUMENTS TO DECIDE THE GROUND ARE ALREADY AVAILABLE ON RECORD AND NO NEW D OCUMENTS ARE REQUIRED TO BE ADDUCED TO DECIDE THIS LEGAL ISSUE. THE COORDINA TE BENCH IN THE CASE OF 5 ITA NO. 1183/MUM/2019 (A.Y.2014-15) MANASI MAHENDRA PITKAR VS. ITO (SUPRA) UNDER SIMILA R SET OF FACTS ADMITTED THE ADDITIONAL GROUND CHALLENGING THE ADDITION MADE BY ASSESSING OFFICER U/S 68 OF THE ACT MERELY ON THE BASIS OF CASH DEPOSITS IN THE BANK ACCOUNT. THE OBJECTION RAISED BY THE LD. DR IS REJECTED. THE NEW GROUND RA ISED BY THE ASSESSEE BEFORE THE TRIBUNAL BEING LEGAL IN NATURE IS ADMITTED FOR ADJUDICATION ON MERITS IN THE LIGHT OF DECISION RENDERED BY HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT REPORTED AS 229 ITR 383. 8. BEFORE PROCEEDING FURTHER TO DECIDE THIS ISSUE I T WOULD BE IMPERATIVE TO REFER TO THE RELEVANT PROVISIONS OF SECTION 68 OF T HE ACT. THE SAME ARE REPRODUCED HEREIN UNDER: 68 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE C HARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR: A BARE PERUSAL OF SECTION 68 OF THE ACT MAKES EXPLI CITLY CLEAR THAT THE ADDITION CAN BE MADE UNDER THE SECTION IF, ANY SUM IS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE . THAT IS THE BOOKS SHOULD BE THAT OF THE ASSESSEE. 9. THE BOOKS OR BOOKS OF ACCOUNT HAVE BEEN DEFINE D IN SECTION 2(12A) OF THE ACT. THE SAME READS AS UNDER:- 2( 12A) BOOKS OR BOOKS OF ACCOUNT' INCLUDES LEDGERS, DAY-B OOKS, CASH BOOKS, ACCOUNT-BOOKS AND OTHER BOOKS, WHETHER KEPT IN THE WRITTEN FORM O R AS PRINT-OUTS OF DATA STORED IN A FLOPPY, DISC, TAPE OR ANY OTHER FORM OF ELECTRO-MAGNETIC DA TA STORAGE DEVICE; THE DEFINITION OF BOOKS UNDER THE ACT IS INCLUSIVE. A PERUSAL OF THE DEFINITION SHOWS THAT THE SAME DOES NOT INCLUDE BAN K PASSBOOK OR BANK STATEMENT. A CONJOINT READING OF ABOVE PROVISIONS W OULD THUS LEAD TO THE 6 ITA NO. 1183/MUM/2019 (A.Y.2014-15) CONCLUSION THAT THE ADDITION U/S 68 CAN BE MADE ONL Y WHERE ANY AMOUNT IS FOUND CREDIT IN THE BOOKS AS DEFINED U/S 2(12A) OF THE ACT MAINTAINED BY THE ASSESSEE. 10. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. BHAICHAND N. GANDHI (SUPRA) UPHOLDING THE DECISION OF TRIBUNAL C ONCLUDED THAT BANK PASSBOOK DOES NOT CONSTITUTE BOOKS AS ENVISAGED UND ER U/S 68 OF THE ACT. THE RELEVANT EXTRACT OF THE JUDGEMENT READS AS UNDER: .. THE PASS BOOK SUPPLIED BY THE BANK TO ITS CONSTITUE NT IS ONLY A COPY OF THE CONSTITUENTS ACCOUNT IN THE BOOKS MAINTAINED BY TH E BANK. IT IS NOT AS IF THE PASS BOOK IS MAINTAINED BY THE BANK AS THE AGENT OF THE CONSTITUENT, NOR CAN IT BE SAID THAT THE PASS BOOK IS MAINTAINED BY THE BANK UNDER THE INSTRUCTIONS OF THE CONSTITUENT. IN VIEW OF THIS, THE TRIBUNAL WAS, WIT H RESPECT, JUSTIFIED IN HOLDING THAT THE PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE IN THE PRESENT CASE COULD NOT BE REGARDED AS A BOOK OF THE ASSESSEE, THAT IS, A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. IN OUR VIEW, THE TRIBUNAL W AS JUSTIFIED IN THE CONCLUSIONS AT WHICH IT ARRIVED. 11. UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT , WHERE THE ASSESSEE IS ENGAGED IN ELIGIBLE BUSINESS AND HAS TOTAL TURNOVER OR GROSS RECEIPTS IN THE PREVIOUS YEAR NOT EXCEEDING RS.60,00,000/-, THE ASS ESSEE IS ELIGIBLE TO FILE RETURN OF INCOME ON THE BASIS OF PRESUMPTIVE INCOME @ 8% OF TOTAL TURNOVER OR GROSS RECEIPTS. IN THE PRESENT CASE UNDISPUTEDLY THE ASSESSEE HAS NOT MAINTAINED BOOKS AND HAS OFFERED HIS BUSINESS INCOM E TO TAX ON PRESUMPTIVE BASIS U/S 44AD OF THE ACT. THE SAME HAS BEEN ACCEPT ED BY THE ASSESSING OFFICER EXCEPT FOR ADDITION U/S.68 OF THE ACT. IT I S NOT MANDATORY FOR THE ASSESSEE TO MAINTAIN BOOKS, IF THE RETURN OF INCOME IS FILED UNDER SECTION 44AD OF THE ACT. 12. AS HAS BEEN OBSERVED EARLIER THAT ADDITION UNDE R SECTION 68 CAN BE MADE ONLY IF ANY SUM IS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE 7 ITA NO. 1183/MUM/2019 (A.Y.2014-15) ASSESSEE FOR ANY PREVIOUS YEAR AND THE ASSESSEE FAI LS TO OFFER VALID EXPLANATION FOR CREDIT OF SUCH SUM IN THE BOOKS OR EXPLANATION OFFERED IS REJECTED BY THE ASSESSING OFFICER. IN OTHER WORDS MAINTAINS OF BOOK S BY THE ASSESSEE IS SINE QUA NON FOR MAKING ADDITION U/S 68 OF THE ACT. SINC E SECTION 44AD DOES NOT OBLIGATES THE ASSESSEE TO MAINTAIN BOOKS, THE PROVI SIONS OF SECTION 68 CANNOT BE INVOKED WHERE THE ASSESSEE HAS FILED RETURN OF I NCOME UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT WITHOUT MAINTAINING BOOK S OF ACCOUNT. 13. THE HONBLE HIGH COURT OF GAUHATI IN THE CASE OF ANAND RAM RAITANI VS. CIT REPORTED AS 223 ITR 544 HAS HELD THAT EXISTENCE OF BOOKS OF ACCOUNT IS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 68 BY THE ASSESSING OFFICER. THE RELEVANT EXTRACT OF THE JUDGEMENT IS A S UNDER: WE HAVE GONE THROUGH SECTION 68 OF THE ACT. THE ASSESSING OFFICER BEFORE INVOKING THE POWER UNDER SECTION 68 OF THE ACT MUST BE SATIS FIED THAT THERE ARE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE CASH CRE DIT IS RECORDED IN THE SAID BOOKS OF ACCOUNT AND IF THE ASSESSEE FAILS TO SATIS FY THE ASSESSING OFFICER, THE SAID SUM SO CREDITED HAS TO BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXISTENCE OF BOOKS OF ACCOU NT IS A CONDITION PRECEDENT FOR INVOKING OF THE POWER. DISCHARGING OF BURDEN IS A SUBSEQUENT CONDITION. IF THE FIRST POINT IS NOT FULFILLED THE QUESTION OF BURDEN OF PR OOF DOES NOT ARISE. THE ASSESSING OFFICER MADE THE ASSESSMENT BY MAKING ADDITION OF T HE AMOUNT FOR WHICH DISALLOWANCE WAS CLAIMED MR. BHUYAN VERY CANDIDLY A DMITS THAT ADDITION WAS MADE IN EXERCISE OFTHE POWER UNDER-SECTION 68 OF THE ACT , THEREFORE, THE FIRST CONDITION NECESSARY FOR INVOCATION OF THE POWER IS THE EXISTE NCE OF THE BOOKS OF ACCOUNT. [E MPHASISED ] 14. THE TRIBUNAL IN THE CASE OF MADHU RAITANI VS. A CIT (SUPRA) FOLLOWING THE DECISION RENDERED IN THE CASE OF CIT VS. BHAICHAND N. GANDHI (SUPRA) AND ANAND RAM RAITANI (SUPRA) HELD THAT IF BOOKS OF ACC OUNT ARE NOT MAINTAINED BY THE ASSESSEE, THE PROVISIONS OF SECTION 68 CANNOT B E INVOKED. THE TRIBUNAL FURTHER HELD THAT BANK PASSBOOK CANNOT BE CONSIDERE D AS BOOKS OF ACCOUNT. 8 ITA NO. 1183/MUM/2019 (A.Y.2014-15) SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH IN THE CASE OF MANASI MAHENDRA PITKAR (SUPRA). 15. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF SHRI KOKARRE PRABHAKARA VS. ITO(SUPRA), IN A SIMILAR SITUATION W HERE THE ASSESSEE HAD DECLARED INCOME UNDER SECTION 44AD OF THE ACT WITHO UT MAINTAINING BOOKS AND THE ASSESSING OFFICER HAD INVOKED THE PROVISIO NS OF SECTION 68 OF THE ACT, THE TRIBUNAL DELETED THE ADDITION BY PLACING RELIAN CE OF VARIOUS DECISIONS OF THE TRIBUNAL HOLDING THAT WHERE THE RETURNS ARE FILED O N THE BASIS OF INCOME DECLARED UNDER SECTION 44A OF THE ACT, THERE CANNOT BE ANY APPLICATION OF SECTION 68 OF THE ACT. 16. THUS, IN THE BACK DROP OF THE FACTS, RELEVANT P ROVISIONS OF THE ACT AND CASE LAWS DISCUSSED ABOVE, NO ADDITION UNDER SECTIO N 68 CAN BE MADE IN THE INSTANT CASE. WE FIND MERIT IN GROUND NO.1 RAISED BY THE ASSESSEE IN APPEAL. 17. IN GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS IMPUGNED ADDITION U/S.68 OF THE ACT ON MERITS. SINCE, THE LEGAL GROUND RAISE D BY ASSESSEE AGAINST INVOKING OF SEC. 68 HAS BEEN ACCEPTED, THE GROUND N O.2 HAS BECOME ACADEMIC AND HENCE, NOT DELIBERATED UPON. 18. IN THE RESULT, IMPUGNED ORDER IS SET-ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY THE 28 TH DAY OF DECEMBER, 2020. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, +(/ DATED: 28/12/2020 VM , SR. PS(O/S) 9 ITA NO. 1183/MUM/2019 (A.Y.2014-15) COPY OF THE ORDER FORWARDED TO : 1. , / THE APPELLANT , 2. -. / THE RESPONDENT. 3. /. ( )/ THE CIT(A)- 4. /. CIT 5. 01-.( , . . . , / DR, ITAT, MUMBAI 6. 12345 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI