MOTI MANI SINGH, MUMBAI V. ITO 19(3)-3, MUMBAI

ITA 1331/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3006 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 25-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAKESH KUMAR AGARWAL
• Assessee Lawyers: B N RAO
• Keywords: Unexplained cash credit; Business income; Peak credit; Onus to prove
• Section: 143(3); 69

Judgement Text

SHRI MOTI MANI SING H ITA 1331 /M/201 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 1331 /MUM/20 1 1 (ASSESSMENT YEAR :200 7 - 0 8) SHRI MOTI MANI SINGH , 63/2783, SAMAJ MANDIR HALL, GANDHI NAGAR, BANDRA(EAST), MUMBAI - 400 051 .: PAN: AA OPS 8657 H VS INCOME TAX OFFICER - 19 ( 3 ) - 3 , 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400 013 (APPELLANT (RESPONDENT) APPELLANT BY : SHRI B N RAO RESPONDENT BY : SHRI RAKESH KUMAR AGARWAL /DATE OF HEARING : 21 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 19 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 3 1 . 12 . 201 0 PASSED BY CIT(A) - 30 MUMBAI , FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2007 - 08 ON FOLLOWING GROUNDS OF APPEAL : - 1. THE LD . C OMMISSIONER OF I NCOME TAX (A PPEALS ) - 30, MUMBAI HAS ERRED IN LAW IN CONFIRMING THE ADDITION OF RS. 15,36,170/ - MADE U/S 41(1) OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER WITHOUT CLEARLY LOOKING INTO THE MERITS OF THE APPELLANTS CASE. SHRI MOTI MANI SING H ITA 1331 /M/201 1 2 2. THE LD. ASSESSING OFFICER COMMISSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI HAS ERRED IN LAW IN CONFIRMING THE ADDITION OF RS. 18,41,027/ - MADE U/S 69A OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS OF THE APPELLANTS CASE. 2. BRIEF FACTS QUA THE ISSUE RAISED IN GROUND NO. 1 IS THAT , ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN HOSIERY GOODS. IN THE BALANCE SHEE T AS ON 31 ST MARCH, 2007, ON THE LIABILITY SIDE, OUTSTANDING SUNDRY CREDITORS WERE APPEARING, THE DETAILS OF WHICH ARE AS UNDER: - NAME OF THE PARTY AMOUNT AKASH TEXTILES 8,04,421 ANUP TEXTILES 615 BALAJI COLOUR CO. 9,090 DENIM APPARELS1 36,734 GIPPY KNITTERS 64,890 KRISHNA TEXTILES 7,474 PREM HOSIERY 52,000 S M GARMENTS 1,10,000 TEX ONE HOSIERIES 1,65,276 THE AO REQUIRED THE ASSESSEE TO GIVE NAME AND ADDRESSES OF THE SUNDRY CREDITORS AND ALSO TO FILE CONFIRMATION FROM THEM . HOWEVER, AS PER THE OBSERVATION MADE BY THE AO IN THE ASSESSMENT ORDER, THE ASSESSEE COULD NOT PROVIDE ANY SUCH DETAILS AND ADDRESS ES OR CONFIRMATION. THE ASSESSEE S CASE BEFORE THE AO WAS THAT, THE AMOUNT OUTSTANDING MOSTLY ON ACCOUNT OF THE FACT THAT DAMAGED GOODS WERE RETURNED TO THE CREDITORS AND HENCE NO PAYMENT WAS MADE BY THE ASSESSEE TO THE SUNDRY CREDITORS . THE LD. AO HELD THAT , SINCE ASSESSEE COULD NOT DISCHARGE HIS ONUS TO PROVE THE LIABILITY WHICH SUBSIST S ON THE DATE OF THE B ALANCE SHEET , THEREFORE , HE ADDED ENTIRE AMOUNT OF RS. 15,36,170/ - U/S 41(1) , AS CESSATION OF LIABILITY IN THIS YEAR. SHRI MOTI MANI SING H ITA 1331 /M/201 1 3 3. BEFORE THE CIT(A), THE ASSESS EES CONTENTION HAD BEEN THAT REMISSION OF LIABILITY ARISES ONLY WHEN THE CREDITOR VOLUNTARILY GIVES UP THE CLAIM ; OR DEBT HAD BECOME BARRED BY TIME ; OR THE CREDITORS WOULD NOT BE ABLE TO RECOVER THE AMOUNT BY ENFORCING THEIR RIGHT S IN THE COURT. IN SUPPO RT, CERTAIN DECISIONS WERE ALSO RELIED UPON. THE LD. CIT(A), AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE, NOTED THAT ASSESSEE COULD NOT FURNISH ANY DETAILS OR EVIDENCE WHATSOEVER TO SHOW THA T THERE IS A N OUTSTANDING LIABILITY IN THE NAME OF THE SUNDRY CREDITORS AS ON THE DATE OF BALANCE SHEET . FURTHER T HERE IS NO BUSINESS TRANSACTION FROM THESE PARTIES AND THE LIABILITY IS SUBSISTING FOR MORE THAN 3 YEARS. THEREFORE, THERE WAS SUFFICIENT RE ASON BY THE AO TO MAKE THE ADDITION U/S 41(1). ACCORDINGLY, HE CONFIRMED THE ADDITION. 4. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE LIABILITY OF THE SUNDRY CREDITORS WHICH WAS OUTSTANDING WAS MAINLY ON ACCOUNT OF DAMAGED GOODS SUPPLIED BY THEM, WHICH WAS RETURNED AND NO PAYMENT WAS MADE BY THE ASSESSEE TO THEM. FURTHER, THESE PARTIES HAVE NOT GIVEN UP THE IR RIGHT TO RECEIVE THE MONEY FROM ASSESSEE, HENCE, ADDITION U/S 41(1) CAN ONLY BE MADE WHEN EITHER THE CLAIM HAS BEC O ME TIME BARRED OR ASSESSEE WRITE S OFF THE SUNDRY CREDITS IN THE BOOKS OF ACCOUNTS. I N THIS CASE, NON E O F CONDITIONS HAVE BEEN FULFILLED AND MOST OF THE LIABILITIES ARE CONTINUING IN THE ASSESSMENT YEAR 2008 - 09 AND 2009 - 10 ALSO, THEREFORE, ADDITION CANNOT BE MADE IN THIS YEAR AS CESSATION OF LIABILITY. 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT NONE OF THE CONTENTIONS RAISED BY THE ASSESSEE HAVE BEEN CORROBORATED BY ANY EVIDENCE S, NEITHER ANY DETAILS LIKE NAME S AND ADDRESS ES NOR ANY CONFIRMATION FROM ANY CREDITORS WERE F ILED, THUS, ASSESSEE WAS UNABLE TO PROVE EVEN THE GENUINENESS OF THE SUNDRY CREDITORS. EVEN OTHERWISE ALSO , IT IS THE DUTY OF THE ASSESSEE TO SHOW THAT THE LIABILITY OF MAKING THE PAYMENT TO THE SUNDRY CREDITORS STILL SHRI MOTI MANI SING H ITA 1331 /M/201 1 4 SUBSISTS. THIS ONUS HAS NOT BEEN DISCH ARGED AND ACCORDINGLY, ADDITION HAS TO BE CONFIRMED. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE FINDING GIVEN IN THE IMPUGNED ORDERS . FIRST OF ALL, IT IS NOTED THAT RIGHT FROM THE STAGE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQU IRED TO FURNISH ADDRESSES OF THE CREDITORS AND TO FILE THE CONFIRMATIONS WHICH UP TILL THE STAGE OF THE TRIBUNAL ALSO, NO SUCH DETAILS OR ANY EVIDENCE HAVE BEEN FILED. FURTHER, ASSESSEE WAS UNABLE TO CORROBORATE OR SUBSTANTIATE ITS EXPLANATION THAT ASSESSE E HAD RETURNED THE DAMAGED GOODS TO THE CREDITORS AND FOR THIS REASON ALONE THE ASSESSEE HAS NOT MADE ANY PAYMENT TO SUCH PARTIES . IF THERE WAS SOME SORT OF DISPUTE REGARDING RETURN OF GOODS AND NON - PAYMENT, THEN SAME COULD HAVE BEEN BROUGHT ON RECORD, EITHER BY WAY OF SOME KIND OF CORRESPONDENCE OR COMMUNICATIONS BETWEEN THE PARTIES OR BY WAY OF LEDGER ACCOUNTS OF THE PARTIES . ONCE, THE ASSESSEE IS UNABLE TO DISCHARGE THE PRIMARY ONUS CAST UPON HIM, THEN IT IS VERY DIFFICULT TO REVERSE THE FINDING OF F ACTS RECORDED BY THE AO AS WELL AS CIT(A). UNDER THESE FACTS , WE UPHOLD THE ORDER OF THE CIT(A) INASMUCH AS ASSESSEE HAS BEEN UNABLE TO SUBSTANTIATE FROM THE RECORD THAT THE LIABILITY IN REAL SENSE IS ACTUALLY SUBSISTING IN THIS YEAR AND THERE IS NO CESSA TION OF LIABILITY. THUS, ADDITION HAS RIGHTLY BEEN MADE BY AND CONFIRMED BY THE REVENUE AUTHORITIES. ACCORDINGLY, GROUND NO. 1 AS RAISED BY THE ASSESSEE IS DISMISSED. 7 . IN G ROUND NO. 2 , THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 18,41,027/ - MADE U/S 69A ON ACCOUNT OF CASH DEPOSIT MADE IN THE BANK ACCOUNT. 8 . THE AO , FR O M THE PERUSAL OF THE BANK STATEMENT FI LED BY THE ASSESSEE NOTED THAT , CASH DEPOSITS HAVE BEEN MADE IN THE BANK ACCOUNT MAINTAINED WITH THE SANGALI BANK LTD.. THE TOTAL CASH DEPOSITS IN THE SAID BANK ACCOUNT WAS TO THE TUNE OF RS. 10,65,555/ - DURING THE YEAR. THE SAID BANK ACCOUNT WAS NOT SHRI MOTI MANI SING H ITA 1331 /M/201 1 5 DISCLOSED IN THE RETURN OF INCOME. HE FURTHER NOTED THAT THERE ARE SOME OTHER DEPOSITS AND CREDIT TO HIS BANK ACCOUNT TO THE TUNE OF RS. 7,25,472/ - WHICH WAS IN CHEQUE, FOR WHICH THERE WAS NO PROPER EXPLANATION. ACCORDINGLY, HE ADDED TOTAL UNEXPLAINED CREDITS TO THE BANK ACCOUNT TO THE TUNE OF RS. 18,41,027/ - . BEFORE THE AO, ONE OF THE MAIN CONTENTIONS OF THE ASSESSEE WAS THAT , THESE DEPOSITS AND WI THDRAWALS WERE ON ACCOUNT OF BUSINESS TRANSACTIONS MADE TO THE PARTIES FOR PURCHASES AND SALE . THEREFORE, AT THE MOST, GROSS PROFIT OR NET PROFIT OF THESE DEPOSITS / SALES SHOULD BE ADDED. THE AO REJECTED THE ASSESSEES CONTENTION ON THE GROUND THAT ASSESSEE HAS NOT GIVEN ANY SUFFICIENT PROOF IN SUPPORT OF THE CONTENTION THAT THE MONEY DEPOSITED W ERE ACTUALLY BUSINESS RECEIPTS. AFTER DETAIL ED DISCUSSION, HE ADDED THE ENTIRE AMOUNT OF ALL CREDIT DEPOSIT S IN THE BANK AGGREGATING RS. 18,41,027/ - , WHICH WAS ADDED UNDER THE HEAD INCOME FROM OTHER SOURCES U/S 69 A . 9. BEFORE THE CIT(A), THE ASSESSEE SU BMITTED THAT, WHENEVER, THE CASH WAS DEPOSITED, THERE WERE CORRESPONDING WITHDRAWALS ALSO. THE TOTAL CASH OF RS. 10,65,555/ - WAS MADE ON 25 OCCASIONS AND THERE WERE WITHDRAWALS OF CASH ON 8 OCCASIONS FOR SUMS AGGREGATING TO RS. 2,92,000/ - . THUS, THERE WAS ONLY CASH DEPOSITS OF RS. 7,73,555/ - . SIMILARLY, THE ASSESSEE HAS DEPOSITED 35 CHEQUE AMOUNT OF RS.7,77,000/ - , WHICH CANNOT BE TREATED AS UNEXPLAINED IF O VERALL AMOUNT ON DEBIT SIDE AND CREDIT ENTRIES ARE TO BE ANALYZED THEN IT CAN BE WITNESSED THAT ASSE SSEE HAS WITHDRAWN TOTAL AMOUNT OF RS. 15,06,921/ - ON 29 OCCASIONS THROUGH ACCOUNT PAYEE CHEQUES IN LIEU OF PAY MENT FOR THE GOODS, SUPPLIERS BILLS. COMPLETE DETAILS OF CASH AND CHEQUE DEPOSITS AS WELL AS WITHDRAWALS WERE FURNISHED. FURTHER, AN EXPENDITURE OF RS. 27,683/ - WAS ALSO INCURRED THROUGH CHEQUE WHICH WAS THE PAYMENT FOR BUSINESS PURPOSE. THE ASSESSEE EVEN FILE D THE BILLS OF VARIOUS PARTIES ALONG WITH THE CONFIRMATION FROM CERTAIN PARTIES THAT ASSESSEE HAS CARRIED OUT BUSINESS TRANSACTION FROM THESE PARTIES AND, THEREFORE, THE SAME SHOULD BE ON ACCOUNT OF NET PROFIT. SHRI MOTI MANI SING H ITA 1331 /M/201 1 6 ASSESSEES DETAIL ED SUBMISSION S HAVE BEEN INCORPORATED BY CIT(A) FROM PAGES 7 TO 10 OF THE APPELLATE ORDER. HOWEVER, THE LD. CIT(A) ASKED THE ASSESSEE TO FURNISH NAME S AND ADDRESS ES OF THE OVERSEAS CLIENTS/CUSTOMERS TO WHOM GOODS WERE SUPPLIED AND OTHER DETAILS , HOWEVER ASSESSEE COULD NOT FILE THESE DETAILS , AS NOTED BY THE CIT(A), AND ACCORDINGLY, HE HELD THAT THE ENTIRE AMOUNT OF CREDITS WERE DEPOSITED IN THE BANK ACCOUNT SHOULD BE ADD ED. 10. BEFORE US, THE LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND RELIED UPON VARIOUS DECISIONS IN SUPPORT OF THE CONTENTION THAT , IN SUCH A SITUATION WHEN CONTEMPORANEOUS DEBITS AND CREDITS ARE THERE REFLECTING SOME KIND OF TRANSAC TIONS OR BUSINESS ACTIVITIES , THEN ADDITION CAN ONLY BE MADE ON ACCOUNT OF ESTIMATE D PROFIT RATE . 11. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT HERE IN THIS CASE ALSO, THE ONUS WHICH LIE D UPON THE ASSESSEE HAS NOT BEEN DISCHARGED , THEREFORE, ADDITION SHOULD BE CONFIRMED. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT BANK ACCOUNT OF SANGALI BANK LTD. HAD NOT BEEN DISCLOSED IN THE RETURN OF INCOME OR IN THE BOOKS OF A CCOU NT. PERUSAL OF S UCH BANK ACCOUNT REVEALED THAT ASSESSE E HAD MADE CASH DEPOSITS AND CHEQUES DEPOSITS AND ALSO ISSU ED CHEQUE S AND MADE WITHDRAWALS . THE AGGREGATE OF ALL DEPOSITS WAS RS. 18,41027/ - WHICH HAS BEEN CONF IRMED BY THE CIT(A) CONSIST ING OF CASH DEPOSITS OF RS. 10,65,555/ - AND CHEQUE AMOUNT OF RS. 7,75,472/ - . THE ASSESSEE BEFORE THE CIT(A) HA D SUBMITTED THAT THERE HAD BEEN CORRESPONDING WITHDRAWALS ON 29 OCCASIONS BOTH BY CHEQUE AND BY CASH AGGREGATING RS. 1 5,06,902/ - WHICH WERE PAID FOR SUPPLIERS BILLS AND FOR THE GOODS SUPPLIED BY VARIOUS PARTIES. IN OTHER WORDS, THE TRANSACTIONS OF DEPOSIT S AND WITHDRAWALS PERTAINED TO ASSESSEES SHRI MOTI MANI SING H ITA 1331 /M/201 1 7 BUSINESS ACTIVITIES. IN SUPPORT, THE ASSESSEE HAD ALSO FILED CERTAIN DETAILS OF SUPPLIERS BEFORE THE CIT(A). WHEN THERE ARE CREDITS AND DEBIT ENTRIES, THEN THERE SHOULD HAVE BEEN TELESCOPING OF DEBIT ENTRIES, WHICH ARE LESSER TH A N CREDIT ENTRIES. IF OVERALL POSITION OF ENTIRE CREDIT AND DEBIT SIDE IS SEEN, THEN THERE IS NET CREDIT OF RS. 3,34,107/ - ONLY . THE ACTION OF THE DEPARTMENT TO CONFIRM THE ENTIRE DEPOSITS APPEARS TO BE VERY UNREASONABLE AND UNFAIR. THEREFORE, EITHER THE DEPARTMENT SHOULD APPLY A GROSS PROFIT ON SUCH CREDIT ENTRIES AS PRIMA FACI E IT APPEARS THAT THESE ARE RELATING TO S O M E BUSINESS TRANSACTION OR WORK - OUT SOME PEAK CREDIT. THUS, IN THE INTEREST OF JUSTICE, WE FEEL THIS MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO TO EXAMINE THE IMPUGNED ISSUE IN THE LIGHT OF OUR OBSERVATION. T HE ASSESSEE WILL GIVE TH E ENTIRE REQUISITE FACTS TO THE AO TO MAKE THE PROPER ASSESSMENT ON THIS ISSUE. ACCORDINGLY, GROUND NO. 2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 19 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH OCTOBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 30 , MUMBAI. 4 ) THE CIT CITY - 19 , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER SHRI MOTI MANI SING H ITA 1331 /M/201 1 8 / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS