VIREN DIAMOND EXPORTS LIMITED, MUMBAI V. ITO 5(3)-3, MUMBAI

ITA 1249/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4066 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 03-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Peak credit
• Section: 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' F ' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 1249 /MUM/201 4 (ASSESSMENT YEAR: 2008 - 09 ) M/S. VIREN DIAMONDS EXP O RTS LTD. VS. INCOME TAX OFFICER - 5(3)(3) 19, DR. D.D. S ATHE MARG 3 RD FLOOR, OFFICE NO. 1A OPEARA HOUSE, MUMBAI 400004 AYAKAR BHAVAN, M.K. ROAD MUMBAI PAN - AAACV3408Q APPELLANT RESPONDENT APPELLANT BY: SHRI RAHUL K. HAKANI RESPONDENT BY: SHRI SUMIT KUMAR DATE OF HEARING: 13 .04 .2016 DATE OF PRONOUNCEMENT: 22 .0 4 .2016 O R D E R PER JASON P. BOAZ, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 9, MUMBAI DATED 13.11.2013 FOR A.Y. 2008 - 09. 2 . THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER: - 2.1 THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF TRADING OF CUT AND POLISHED DIAMOND, JEWELLERY AND COLOURED IMITATION STONES, FILED ITS RETURN OF INCOME FOR A.Y. 2008 - 09 ON 08.09.2008 DECLARING TOTAL INCOME OF ` 86,040/ - . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY AND COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 29.12.2009, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT ` 52,09,499 / - . IN THE CASE ON HAND, THE ASSESSMENT FOR A.Y. 2005 - 06 WAS RE - OPENED ON THE BASIS OF INFORMATION RECEIVED ABOUT INVESTMENTS MADE BY THE ASSESSEE COMPANY IN THE SHARES OF M/S. SHARADA SPUNT EX PVT. LTD. THROUGH AN UNDISCLOSED BANK ACCOUNT NO. 2356 OF CANA RA BANK, KHETWADI BRANCH WHICH WAS NOT REFLECTED IN THE ASSESSEES RETURN OF INCOME FOR A.Y. 2005 - 06 AND OTHER ASSESSMENT ITA NO. 1249 /MUM/2014 M/S. VIREN DIAMONDS EXP O RTS LTD. 2 YEARS ALSO . THE REASSESSMENT FOR A.Y. 2005 - 06 WAS COMPLETED AFTER TREATING THE DEPOSIT OF ` 6,19,95,743/ - PERTAINING TO THAT PERIOD AS UN EXPLAINED DEPOSITS. 2.2 THE UNEXPLAINED DEPOSITS PERTAINING TO THE PERIOD RELEVANT TO A.Y. 2008 - 09, IN THE UNDISCLOSED BANK ACCOUNT NO. 2356 IN CANARA BANK WAS FOUND TO BE ` 67,16,250/ - AND THEREFORE AFTER INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT , THE ASSESSMENT FOR A.Y. 2008 - 09 WAS REOPENED BY ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 25.03.2013 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT ` 78, 71,500/ - IN VIEW OF THE ADDITION OF ` 67,16,250/ - UNDER SECTION 68 OF THE ACT OF THE UNEXPLAINED DEPOSITS IN THE ASSESSEES UNDISCLOSED BANK ACCOUN T NO. 2356 WITH CANARA BANK, KHETWADI BRANCH. 2.3 AGGRIEVED BY THE ORDER OF REASSESSMENT FOR A.Y. 2008 - 09 DATE D 25.03.2013 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) - 9, MUMBAI. THE LEARNED CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 13.11.2013. 3 . AGGRIEVED BY THE ORDER OF THE CIT(A) - 9, MUMBAI DATED 13.11.2013 FOR A.Y. 2008 - 09 THE ASS ESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS: - 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEAL WAS NOT JUSTIFIED IN TREATING THE BANK DEPOSIT/BANK RECEIPTS TRANSACTIONS AMOUNTING TO RS.67,16,250/ - AS UNDISCLOSED INCOME FROM BUSINESS. 2. FOR THE CASES/MATTERS RELATED TO A.Y. 2005 - 06, A.Y. 2006 - 07 AND A.Y. 2007 - 08 OF THE SAME ASSESSEE COMPANY THE HON'BLE ITAT HAS DECIDED THE CASES AND DIRECTED TO LEARNED ASSESSING OFFICER TO CONSIDER THE ALTERNATIVE CLAIM OF THE ASS ESSEE OF ALLOWING THE BENEFIT OF TELESCOPING OF TRADING ADDITION WITH THE ADDITION TO BE MADE ON ACCOUNT OF PEAK CREDIT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS IGNORED THIS ORDER. 3. THE APPELLANT CRAVES TO ADD, AMEND OR ALTER THE GROUNDS O F APPEAL AS THE TIME OF OR BEFORE THE HEARING OF APPEAL. 3.1 AT THE OUTSET OF THE HEARING, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THERE IS ONLY ONE ISSUE IN APPEAL REGARDING THE JUSTIFICATION OF TREATING THE BANK DEPOSITS AMOUNTING TO ` 67,16,250 / - AS UNDISCLOSED INCOME FROM BUSINESS. IT WAS SUBMITTED THAT THIS ISSUE WAS CONSIDERED IN ITA NO. 1249 /MUM/2014 M/S. VIREN DIAMONDS EXP O RTS LTD. 3 THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 IN ITA NOS. 5567 & 5568/MUM/2009 AND ITA NO. 5628/MUM/2010 DATED 27.02.2013 AND THE SAME MATTER HAS BEEN SET ASIDE AND RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT OF THE TRANSACTIONS OF DEPOSITS AND WITHDRAWALS REFLECTED IN THE UNDISCLOSED BAN K DEPOSIT OF THE ASSESSEE WITH CANARA BANK AND TO RESTRICT THE ADDITION TO THE EXTENT OF THE PEAK CREDIT SO WORKED OUT FOR EACH ASSESSMENT YEAR. 3.2.1 WE HAVE HEARD BOTH THE LEARNED A.R. FOR THE ASSESSEE AND THE LEARNED D.R. FOR REVENUE IN THE MATER AND PE RUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE CITED DECISION OF THE COORDINATE BENCH IN THE ASSESSEES OWN CASE (SUPRA). WE FIND THAT THE ISSUE OF TREATMENT OF THE CASH DEPOSITS IN THE ASSESSEE S UNDISCLOSED BANK ACCOUNT NO. 2356 WIT H CANARA BANK, KHETWADI BRANCH HAS BEEN CONSIDERED AND ADJUDICATED UPON BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 IN ITA NOS. 5567 & 5568/MUM/2009 AND ITA NO. 5628/MUM/2010 DATED 27.02.2013 AT PARAS 7 TO 9 THEREOF FOR A.Y. 2005 - 06, PARA 10 & 11 THEREOF FOR A.Y. 2006 - 07 AND PARA 12 THEREOF FOR A.Y. 2007 - 08. IN THIS ORDER, THE COORDINATE BENCH HAS HELD AS UNDER: - 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS TO BE NOTED AT THE OUTSET THAT NO ARGUMENT HAS BEEN RAISED ON BEHALF OF THE ASSESSEE BEFORE US TO DISPUTE THE POSITION THAT THE CURRENT ACCOUNT NO. 2356 WIT H CANARA BANK, KHETWADI BRANCH MAINTAINED IN THE NAME OF THE ASSESSEE IS ACTUALLY BELONGING TO IT. IN ANY CASE, SUFFICIENT EVIDENCE WAS BROUGHT ON RECORD BY THE AO IN SUPPORT OF HIS CASE ON THIS ISSUE WHICH, IN OUR OPINION, WAS SUFFICIENT TO ESTABLISH THAT THE SAID BANK ACCOUNT WAS MAINTAINED BY AND BELONGING TO THE ASSESSEE COMPANY. AS REGARDS THE CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AMOUNTS FOUND DEPOSITED IN THE SAID BANK ACCOUNT WERE RECEIVED BY THE ASSESSEE AGAINST ISSUE O F ACCOMMODATION BILL FOR COMMISSION, WE FIND THAT THERE IS NO EVIDENCE WHATSOEVER BROUGHT ON RECORD BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE THE SAME. MOREOVER, AS RIGHTLY HELD BY THE AUTHORITIES BELOW AS WELL AS REITERATED BY THE LEARNED DR AT THE TIME OF HEARING BEFORE US, THE INVESTMENT OF RS.23 LAKHS WAS MADE BY THE ASSESSEE IN THE SHARES OF SHARDA SPUNTEX P. LTD. FROM THE SAID ACCOUNT WHICH WAS MORE THAN THE COMMISSION OF 1% TO 2% STATED ITA NO. 1249 /MUM/2014 M/S. VIREN DIAMONDS EXP O RTS LTD. 4 TO BE RECEIVED BY THE ASSESSEE BY ISSUING ACCOMMODATION BILLS. WE, THEREFORE, FIND NO MERIT IN THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE OF HAVING 7 ITA NOS.5567,5568/MUM/2009, ITA NO. 5628/MUM/2010. ISSUED ACCOMMODATION BILLS AND HAVING RECEIVED ONLY 1% OR 2% COMMISSION FROM THE ISSUE OF SUCH ACCOMMODATION BIL LS. 8. AS REGARDS THE ALTERNATIVE CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE BASED ON PEAK CREDIT THEORY, WE ARE OF THE VIEW THAT THERE IS SOME MERIT IN THIS CONTENTION RAISED BY HIM. IN OUR OPINION, IF THERE ARE ENTRIES SHOWING DEPOSITS MA DE IN THE BANK ACCOUNT AND ALSO WITHDRAWALS MADE FROM THE SAID ACCOUNT, THE ADDITION THAT IS REQUIRED TO BE MADE ON SUCH TRANSACTIONS HAS TO BE WORKED OUT BY APPLYING A PEAK CREDIT THEORY. HOWEVER, WE FIND MERIT IN THE SUBMISSION MADE BY THE LEARNED DR THA T IN ORDER TO AVAIL THE BENEFIT OF PEAK CREDIT THEORY, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THE WITHDRAWALS MADE FROM THE BANK ACCOUNT WERE AVAILABLE FOR MAKING THE FURTHER DEPOSITS. FOR EXAMPLE, IF THE AMOUNT OF RS.23 LAKHS WITHDRAWN FROM THE BAN K ACCOUNT WAS ADMITTEDLY UTILIZED FOR MAKING INVESTMENT IN THE SHARES OF SHARDA SPUNTEX P. LTD., THE SAME CANNOT BE TAKEN INTO CONSIDERATION FOR WORKING OUT THE PEAK CREDIT. IN THE DECISION OF THE TRIBUNAL IN THE CASE OF SURENDRA M. KHANDHAR (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT WAS HELD THAT FOR WORKING OF THE PEAK CREDIT, IT WAS FOR THE ASSESSEE TO PROVE THAT THE WITHDRAWALS WERE NOT UTILIZED FOR OTHER EXPENSES OR INVESTMENTS AND WERE AVAILABLE FOR SUBSEQUENT DEPOSIT IN THE SAID BANK A CCOUNT AND BENEFIT OF PEAK COULD BE GIVEN ONLY WHEN THE RECYCLING OF FUNDS WAS PROVED. KEEPING IN VIEW THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SURENDRA M. KHANDHAR (SUPRA) AND HAVING REGARD TO ALL THE FACTS OF THE CASE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT OF THE TRANSACTIONS OF DEPOSITS AND WITHDRAWALS REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE WITH CANARA BANK AND RESTRICT THE ADDITION TO THE EXTENT OF PEAK CREDIT SO WORKED OUT. THE AO SHALL AFFORD SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD ON THIS ISSUE. 8 ITA NOS.5567,5568/MUM/2009, ITA NO. 5628/MUM/ 2010. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07, WHICH INVOLVES A SOLITARY ISSUE RELATING TO A DDITION OF RS.2,73,36,016/ - MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF DEPOSITS FOUND TO BE MADE IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SAME AS ITS UNDISCLOSED INCOME. AS THIS ISSUE INVOLVED IN ASSESSMENT YEAR 2006 - 07 AS WELL AS ALL THE FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2005 - 06 WHICH HAS ALREADY BEEN DECIDED BY US, WE FOLLOW OUR DECISION RENDERED IN ASSESSMENT YEAR 2005 - 06 AND RESTORE THIS MATTER TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT WITH THE SIMILAR DIRECTIONS AS GIVEN IN ASSESSMENT YEAR 2005 - 06. THE AO IS ALSO DIRECTED TO REDUCE THE PEAK CREDIT OF THE EARLIER YEARS FROM THE PEAK CREDIT OF THE YEAR UNDER CONSIDERATION SO AS TO AVOID DOUBLE ITA NO. 1249 /MUM/2014 M/S. VIREN DIAMONDS EXP O RTS LTD. 5 ADDITION OF TH E SAME AMOUNT AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SURENDRA M. KHANDHAR (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. 11. THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07 IS ACCORDINGLY TREATED AS PARTLY ALLOWED F OR STATISTICAL PURPOSES. 12. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2007 - 08, GROUND NO. 1 OF WHICH INVOLVES THE SIMILAR ISSUE AS INVOLVED IN THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 RELATING TO THE ADDITION OF RS.37,10,901/ - MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF DEPOSITS FOUND TO BE MADE IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SAME AS ITS UNDISCLOSED INCOME. FOLLOWING OUR DECISION RENDERED IN ASSESSMENT YEAR S 2005 - 06 AND 2006 - 07 ON THE SIMILAR ISSUE, WE RESTORE THIS MATTER TO THE FILE OF THE AO WITH THE SAME DIRECTIONS AS GIVEN IN ASSESSMENT YEARS 2005 - 06 AND 2006 - 9 ITA NOS.5567,5568/MUM/2009, ITA NO. 5628/MUM/2010. 07. GROUND NO.1 OF THE ASSESSEES APPEAL F OR ASSESSMENT YEAR 2007 - 08 IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3.2.2 FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH IN ITA NOS. 5567 & 5568/MUM/2009 AND ITA NO. 5628/MUM/2010 DATED 27.02.2013 IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 (SUPRA), WE RESTORE THIS ISSUE REGARDING CASH DEPOSITS IN THE ASSESSEES UNDISCLOSED BANK ACCOUNT NO. 2356, CANARA BANK KHATWADI BRANCH, TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT OF TH E TRANSACTIONS OF DEPOSITS AND WITHDRAWALS REFLECTED IN THE SAID BANK ACCOUNT OF THE ASSESSEE AND TO RESTRICT THE ADDITION TO THE EXTENT OF PEAK CREDIT SO WORKED OUT AFTER AFFORDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4 . IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2008 - 09 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL , 2016 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( JASON P. BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22 ND APRIL , 2016 ITA NO. 1249 /MUM/2014 M/S. VIREN DIAMONDS EXP O RTS LTD. 6 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) - 9, MUMBAI 4 . THE CIT - 5, MUMBAI 5 . THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.