ITO 16(1)(4), MUMBAI V. VIPUL BHATT, MUMBAI

ITA 1335/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7248 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: BIJHARILAL
• Keywords: Income from undisclosed sources; Accommodation entries; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI T.R. SOOD, AM AND SMT. ASHA VIJAYARAGH AVAN, JM I.T.A.NO.1335/MUM/2009 ASSESSMENT YEAR : 2005-06 THE ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 18 & 19, CGO BLDG., M.K. ROAD, MUMBAI 400 020. VS. SHRI VIPUL BHATT, 44/3 RD FLOOR, JARIWALA BUILDING, ARTHUR ROAD, TULSIWADI, TARDEO, MUMBAI 400 034. PAN: AAHPB 4066 E (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI VIRENDRA OJHA RESPONDENT BY : SHRI BIJHARILAL O R D E R PER T.R. SOOD, AM: IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ADDITIONS MADE AMOUNTING TO RS. 1,57,17,200/- AS THE CONCEPT OF PE AK IS APPLICABLE ONLY WHEN THE DEPOSITS AND THE WITHDRAWA LS ARE MADE FROM THE SAME PERSON/SAME ACCOUNT AND WHERE IT IS PROVED THAT THE WITHDRAWAL FORMS THE SOURCE FOR THE SUBSEQUENT DEPOSIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.2,34,000/- U/S.69 OF INCOME-TAX ACT, BEING THE C ASH DEPOSITED IN THREE ACCOUNTS OF THE ASSESSEE BY ACCE PTING THE ADDITIONAL NEW EVIDENCE AND THEREBY VIOLATING THE P RINCIPLE LAID OUT BY RULE 46A WITHOUT RECORDING THE REASON AS STI PULATED BY SUB-RULE (2) AND WITHOUT GIVING OPPORTUNITY TO THE A.O. AS STIPULATED BY SUCH RULE (3). 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT ASS ESSEE WAS OPERATING VARIOUS ACCOUNTS IN WHICH HUGE CASH AMOUNTS WERE DE POSITED. THE ASSESSEE HAD OWNED UP SOME OF THE BANK ACCOUNTS AND ADMITTED THT THE ASSESSEE WAS ACCEPTING CASH FROM VARIOUS PEOPLE AND ISSUING CHEQUES BY CHA RGING HALF PER CENT TO ONE PERCENT COMMISSION. THE ASSESSING OFFICER WAS OF T HE VIEW THAT IN THE ACCOUNTS ITA 1335/M/09 SHRI VIPUL BHATT 2 OWNED BY THE ASSESSEE THE WHOLE OF CASH DEPOSITED O N PEAK BASIS HAS TO BE TREATED AS INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LEARNED CIT(A) ADJUDICATED THIS I SSUE VIDE PARA 9 OF THE APPELLATE ORDER, WHICH READS AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O THE APPELLANT. THE MAIN ISSUE RELATES TO THE COMPUTATION OF PEAK AMO UNT T BE ADDED U/S.69 OF THE INCOME TAX ACT. THE APPELLANT HAD 12 BANK ACCO UNTS MOSTLY AS JOINT ACCOUNTS. OUT OF THESE, THE APPELLANT STATES THREE ACCOUNTS DID NOT BELONG TO HIM THOUGH HE WAS A JOINT ACCOUNT HOLDER OF THOSE A CCOUNTS. AS FOR THE REMAINING 9 ACCOUNTS, TWO HAD ALREADY BEEN DISCLOSE D. THE APPELLANTS BUSINESS IS MAINLY PROVIDING ACCOMMODATION ENTRIES TO OTHER BUSINESS MEN WHO HAD UNACCOUNTED INCOME WITH THEM. HE USED TO D O THIS BY ACCEPTING CASH FROM THEM, DEPOSITING THE CASH IN ONE OF THE N INE ACCOUNTS AND ISSUING CHEQUES TO THE PERSONS WHO HAD HANDED OVER CASH TO HIM. CHEQUE NEED NOT NECESSARILY BE ISSUED FROM THE ACCOUNT IN WHICH THE CURRENCY WAS DEPOSITED. IN THE PROCESS HE EARNED INCOME BY WAY OF COMMISSIO N AT THE RATE OF 0.5% TO 1% OF THE TOTAL TRANSACTIONS. SO THE BASIC ACTIV ITY WAS RECEIVING CASH AND GIVING CHEQUE IN RETURN. THE NATURE OF THE ACTIVITY BEING WHAT IT IS, IT IS QUITE LOGICAL THAT CASH WITHDRAWALS WOULD NOT BE THERE FROM ANY OF THE NINE ACCOUNTS BUT ONLY CASH DEPOSITS. AT THE SAME TIME THE APPELLANT HAD NECE SSARILY TO ISSUE CHEQUES TO THOSE PARTIES FOR THE AMOUNT RECEIVED FROM THEM AND NATURALLY MAJORITY OF THE WITHDRAWALS ARE BY WAY OF CHEQUES. THIS POSITI ON BEING THE REALITY. IT IS NOT FAIR TO SAY THAT ONLY ONE ASPECT OF THE TRANSAC TION WOULD BE RECOGNIZED WHICH IS RECEIPT OF CASH AND THE CORRESPONDING ASPE CT WHICH IS THAT OF WITHDRAWAL BY WAY OF CHEQUE WOULD NOT BE RECOGNIZED . THE APPELLANT HAD ADMITTED THAT IT HAD NOT DISCLOSED 7 ACCOUNTS BEFOR E. PRESENTLY HE HAS DISCLOSED THESE ACCOUNTS AND HAVE CONSIDERED ALL TH E 9 ACCOUNTS TOGETHER. AS STATED BY THE APPELLANT THESE 9 ACCOUNTS FORM A KIT TY AND ALL THE OPERATIONS IN THESE ACCOUNTS REPRESENT THE DEPOSITS AND WITHDRAWA LS FROM THIS ONE KITTY. VIEWED IN THIS PERSPECTIVE THE PEAK HAS TO BE TAKEN AS CONSIDERING ALL THE DEPOSITS AND WITHDRAWALS, WHETHER IT BE IN CHEQUE O R CASH. THE A.O. HAS NEITHER QUESTIONED THE NATURE OF THE BUSINESS AS DI SCLOSED BY THE APPELLANT NOR FOUND ANY MISTAKES OR INCONSISTENCIES WITH THE TRANSACTIONS AS DISCLOSED BY THE APPELLANT. THE ONLY FEATURE WHICH THE A.O. F OUND IT DIFFICULT TO ACCEPT WAS THAT THE DESTINATION OF THE CHEQUES WERE NOT ST ATED. THIS COULD HAVE BEEN GOT CLARIFIED BY THE A.O. BUT IT APPEARS HE HA S NOT DONE SO. IN THE ABSENCE OF ANY SUCH ATTEMPT AND AS THE A.O. HAS NOT FOUND ANY OTHER ADVERSE FEATURE, THE DISCLOSURE MADE BY THE APPELLA NT HAS TO BE ACCEPTED AS IT IS. FROM THE EXAMPLES AS WORKED OUT BY THE A.O. TO SHOW HOW THE PEAK IS TO BE ARRIVED AT BY CONSIDERING THE TRANSACTIONS IN CASH ONLY AND AGAIN BY CONSIDERING CHEQUE TRANSACTIONS TOO, THERE IS AN IN DICATION THAT THE PEAK IS THE FIGURE AS ON THE LAST DAY OF TRANSACTIONS. THIS IS NOT THE CASE THE PEAK; IS THE MAXIMUM BALANCE AS ON A DAY WHEN ALL DEPOSITS O R WITHDRAWALS ARE CONSIDERED FOR A PERIOD AND THIS DAY MAY BE IN ANY PART OF THE PERIOD, EITHER DURING THE BEGINNING OR TOWARDS THE END. THE PEAK AS WORKED OUT BY THE APPELLANT IS CORRECT. THE TRANSACTION IN CHEQUES AL SO SHOULD BE CONSIDERED AS THE NATURE OF THE BUSINESS OF THE APPELLANT IS WITH DRAWAL BY CHEQUE AND DEPOSIT BY CASH. IF THIS REALITY IS NOT ACCEPTED, AND ONLY CASH TRANSACTIONS ITA 1335/M/09 SHRI VIPUL BHATT 3 ARE CONSIDERED, THE RESULT WOULD BE SKEWED AND UNRE ALISTIC. THEREFORE, THE APPEAL ON THIS GROUND IS MAINTAINABLE. THE ADDITION MADE BY THE A.O. U/S.69 OF RS. 1,60,45,500/- IS DELETED. IN ITS PLACE, THE PEAK OF RS. 20,00,540/- AS DISCLOSED BY THE APPELLANT IS TO BE ASSESSED U/S.69 OF THE INCOME-TAX ACT. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE LEARNED CIT(A) HAS NOT GIVEN ANY REASON FOR GIVING RELIEF MERELY STATING THAT THE PEAK HAS TO BE WORKED ON THE BASIS OF CHEQUE AND CA SH. ACCORDING TO HIM THIS IS NOT CORRECT BECAUSE THE ASSESSEE HAS NOT FURNISHED ANY DETAIL OF THE PERSONS WHO HAD GIVEN THE CASH AND OBTAINED THE CHEQUE. IN ANY CASE, THE CIT(A) HAS NOT WORKED OUT WHICH PARTICULAR CHEQUES WERE REQUIRED T O BE REDUCED. THEREFORE, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSIN G OFFICER. 6. HE HAS ALSO SUBMITTED IN RESPECT OF GROUND NO.2 THAT THE ACCOUNTS WHICH MAY BE ACCEPTED BY THE ASSESSING OFFICER IN THE ABS ENCE OF DETAILS FOR WHICH SOME AFFIDAVITS WERE FILED BEFORE THE CIT(A) ALSO NEEDS TO BE SET ASIDE BECAUSE THE CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSI NG OFFICE TO VERIFY THAT MATERIAL. 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE HAD NO OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE ASSES SING OFFICER. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO TH E FILE OF THE ASSESSING OFFICER FOR EXAMINATION ON THE WHOLE ISSUE AND, THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION OF BOTH THE ISSUES AGAIN. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 24 TH DAY OF MARCH 2010. SD. SD. (ASHA VIJAYARAGHAVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 24 TH MARCH, 2010. KN ITA 1335/M/09 SHRI VIPUL BHATT 4 COPY TO: 1. 2. THE ASSESSEE 3. THE REVENUE 4. THE CIT, CITY XVI, MUMBAI 5. THE CIT (A)-XVI, MUMBAI 6. THE DR, F BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI ITA 1335/M/09 SHRI VIPUL BHATT 5