JIGNESH C. MEHTA, MUMBAI V. ITO WD 20(1)(3), MUMBAI

ITA 1395/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9533 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 03-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Assessee Lawyers: SHRIRAM BAJAJ
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Surrender of tenancy right
• Section: 54F; 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 1395/MUM/2010(A.Y. 2006-07) SHRI JIGNESH C. MEHTA, 804, CLIFF TOWERS, CROSS ROAD NO.3, LOKHANDWALA COMPLEX, ANDHERI-WEST, MUMBAI-53 PAN:AABPM 8545K (APPELLANT) VS. THE INCOME TAX OFFICER, WARD-20(1)(3), PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 (RESPONDENT) APPELLANT BY : SHRI SHRIRAM BAJAJ RESPONDENT BY : SHRI AMARDEEP DATE OF HEARING : 21/11/2012 DATE OF PRONOUNCEMENT : 30 /11/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) -31,MUMBAI DATED 25/11/2009 FO R THE ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE READ AS UNDER: BEING AGGRIEVED BY THE ORDER DATED 25.11.2009 PASS ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-31, MUMBAI [ CIT(A)] U/S. 250 OF THE INCOME-TAX ACT, 1961 [ACT], YOUR APPELLANT PR EFERS THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. ADDITION OF RS.21,36,500/- ON ACCOUNT OF ALLEGE D UNEXPLAINED CASH DEPOSITS: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.21,36,500/- MADE BY THE ASSESSING OFFICER IN RESPECT OF VARIOU S CASH DEPOSITS IN THE APPELLANTS BANK ACCOUNT. ITA NO. 1395/MUM/2010(A.Y. 2006-07 ) 2 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN NOT ACCEPTING YOUR AP PELLANTS CONTENTION THAT THE SUM OF RS.15,50,000/- OUT OF TH E ABOVE SUM OF RS.21,36,500/- WAS RECEIVED BY THE APPELLANT FOR S URRENDER OF TENANCY RIGHT OF THE RESIDENTIAL HOUSE, AND THEREFO RE, ITS TAXABILITY OUGHT TO HAVE BEEN CONSIDERED UNDER THE HEAD CAPIT AL GAINS. 1.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, HE LEARNED CIT(A) ERRED IN NOT ACCEPTING YOUR APPEL LANTS CLAIM FOR EXEMPTION U/S.54F IN RESPECT OF THE UTILIZATION OF THE ABOVE SUM OF RS.15,50,000/- RECEIVED ON SURRENDER OF TENANCY RI GHT IN PURCHASING A NEW RESIDENTIAL HOUSE. 1.4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN NOT ACCEPTING YOUR APPE LLANTS EXPLANATION THAT THE BALANCE OF RS.5,86,500/- OUT O F THE SUM OF RS.21,36,500/- REPRESENTED PARTLY THE RECEIPTS ALRE ADY OFFERED TO TAX AS INCOME AND PARTLY THE CASE WITHDRAWALS FROM THE BANK. IN THE LIGHT OF THE ABOVE, YOUR APPELLANT PRAYS THA T THE ADDITION OF RS.21,36,500/- BE DELETED. 2. ADDITION OF RS.2,38,000/- U/S.68 ON ACCOUNT OF ALLEGED UNEXPLAINED CREDITS IN BANK. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,38,000/- MADE ON ACCOUNT OF ALLEGED UNEXPLAINED CREDITS IN T HE APPELLANTS BANK ACCOUNT. 2.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADMITTING THE ADDIT IONAL EVIDENCE FILED BEFORE HIM BY THE APPELLANT EXPLAIN THE SOURC E AND NATURE OF THE AFORESAID CREDIT ENTRIES. IN THE LIGHT OF THE ABOVE, YOUR APPELLANT PRAYS THA T THE ADDITION OF RS.2,38,000/- BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,18,380/- U/S. 69 IN RESPECT OF FIXED DEPOSITS. IN THE LIGHT OF ABOVE, YOUR APPELLANT PRAYS THAT TH E ADDITION OF RS.1,18,380/- BE DELETED. 2. IN THE PRESENT CASE THE ASSESSEE HAS BEEN ASSESS ED AT AN INCOME OF RS.37,56,941/- AGAINST RETURNED INCOME OF RS.1,39,0 61/-. COURSE OF DATES OF HEARING AS MENTIONED IN THE ASSESSMENT ORDER ARE TH AT FOR THE FIRST TIME ON ITA NO. 1395/MUM/2010(A.Y. 2006-07 ) 3 21/7/2008, DURING THE COURSE OF HEARING THE AO REQU IRED THE ASSESSEE TO FURNISH CERTAIN DETAILS. THE HEARING WAS ADJOURNE D TO 4/8/2008 AND THE ASSESSEE HAD FILED DETAILS. AGAIN AFTER PERUSAL OF DETAILS A SHOW CAUSE NOTICE DATED 21/10/2008 WAS ISSUED IN WHICH CERTAIN QUERIE S WERE RAISED AND HEARING WAS FIXED ON 26/11/2008. THERE BEING NO CO MPLIANCE BY THE ASSESSEE THE ASSESSMENT WAS COMPLETED ON THE BASIS OF MATER IAL AVAILABLE ON RECORD AND ASSESSMENT HAS BEEN FRAMED BY THE AO VIDE ORDER DAT ED 28/11/2008. THE MAIN ADDITION MADE BY THE AO IN THE ASSESSMENT ORDE R ARE RS. 13,63,000/- AS LONG TERM CAPITAL GAIN; RS.21,36,500/- UNDER SECTIO N 68 OF THE INCOME TAX ACT,1961 (THE ACT) BEING UNEXPLAINED CASH DEPOSITS AND RS. 1,18,380/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FIX DEPOSITS. 3. APPEAL BEFORE LD. CIT(A) HAS BEEN FILED RAISING FIRST GROUND THAT AO HAS PASSED ASSESSMENT ORDER WITHOUT AFFORDING THE ASSE SSEE A REASONABLE AND SUFFICIENT OPPORTUNITY OF HEARING, THEREFORE, IMPUG NED ORDER IS BAD IN LAW AS THE SAME IS PASSED IN VIOLATION OF PRINCIPLES OF N ATURAL JUSTICE. SO FAR AS IT RELATES TO ADDITION OF RS.21,36,500/- IT WAS SUBMIT TED THAT THESE ARE NOT UNEXPLAINED CASH DEPOSITS AND ASSESSEE HAS VALID EX PLANATION FOR THE SAME. SIMILARLY IN RESPECT OF LONG TERM CAPITAL GAIN IT WAS SUBMITTED THAT IT IS ON ACCOUNT OF SURRENDER OF TENANCY RIGHTS AND AO HAS WRONGLY TAKEN THE SAME AS COMPENSATION RECEIVED BY THE ASSESSEE FOR SURRENDER OF TENANCY RIGHT, WHEREAS IT ACTUALLY REPRESENTS HOUSING LOAN TAKEN BY ASSES SEE FROM ICICI BANK AND ALSO SOME OTHER CREDITS, THEREFORE, LONG TERM CAPIT AL GAIN COULD NOT BE ASSESSED AT RS.13,63,000/-. APART FROM THIS THE ASSESSEE AG ITATED AGAINST THE ACTION OF AO FOR NON GRANT OF DEDUCTION UNDER SECTION 54F OF THE ACT AND ALSO ADDITION MADE OF RS.1,18,380/- ON ACCOUNT OF UNEXPLAINED FI XED DEPOSITS AS THOSE DEPOSITS WERE MADE UNDER THE SWEEPING ARRANGEMENT WITH HDFC BANK AND ASSESSEE IS IN A POSITION TO EXPLAIN THE SOURCE. LD. CIT(A) HAS REJECTED THE FIRST AND FOREMOST GROUND THAT PROPER OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE. ACCORDING TO LD. CIT(A), AO HAD GIVEN PROPER OPPORT UNITY, THEREFORE, ASSESSMENT COULD NOT BE HELD INVALID ON THAT ACCOUN T. SO FAR AS IT RELATES TO ITA NO. 1395/MUM/2010(A.Y. 2006-07 ) 4 ADDITION OF RS.21,36,500/- LD. CIT(A) HELD THAT A P ART OF THOSE DEPOSITS WERE OUT OF SURRENDER OF TENANCY RIGHTS PERTAINING TO C- 11,MADHAVJI BUILDING OCCUPIED SINCE LONG AND ASSESSEE COULD NOT FURNISH RELEVANT DOCUMENTS I.E. A COPY OF LEAVE AND LICENCE AGREEMENT, EVIDENCE ABOUT RECEIPT OF CASH OR CHEQUE ON SURRENDER OF TENANCY RIGHT, THE CASE OF THE ASSE SSEE CANNOT BE ACCEPTED SIMPLY ON XEROX COPY OF RENT RECEIPT FURNISHED BY T HE ASSESSEE. THEREFORE, LD. CIT(A) HAS REJECTED THE CLAIM OF THE ASSESSEE. HE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT CERTAIN DEPOSITS ARE MADE OUT OF EARLIER CASH WITHDRAWALS MADE FROM TIME TO TIME. IN RESPECT OF A SUM OF R S.13,63,000/- ASSESSED AS LONG TERM CAPITAL GAIN ON SURRENDER OF TENANCY RIGH T LD. CIT(A) HAS FOUND THAT OUT OF AMOUNT OF RS.13,63,000/- A SUM OF RS. 11,25, 000/- RECEIVED ON 3/6/2005 IS ON ACCOUNT OF HOUSING LOAN AVAILED FROM ICICI HOME FINANCE COMPANY AND THE BALANCE ADDITION OF RS.2,38,000/- H AS BEEN SUSTAINED. 3.1 SO FAR AS IT RELATES TO NON-GRANT OF DEDUCTION UNDER SECTION 54F OF THE ACT THE FINDING OF LD. CIT(A) IS THAT ASSESSEE COULD NO T PROVE THAT THE AMOUNT ON WHICH EXEMPTION UNDER SECTION 54F IS CLAIMED IS NOT PROVED TO BE ON ACCOUNT OF SURRENDER OF TENANCY RIGHT BUT THE SAID AMOUNT I S UNEXPLAINED AS UNACCOUNTED INCOME OR CASH CREDIT ASSESSABLE UNDER SECTION 68 OF THE ACT, THEREFORE, ASSESSEE IS NOT ENTITLED FOR DEDUCTION U NDER SECTION 54F. LD. CIT(A) HAS ALSO SUSTAINED ADDITION REGARDING INVESTMENT I N FDR AND ALSO LEVIABILITY OF INTEREST UNDER SECTION 234B OF THE ACT. THE ASSESS EE IS AGGRIEVED WITH SUCH FINDINGS OF LD. CIT(A) AND IN GROUND NO.1 ASSESSEE HAS AGITATED THE ADDITION OF RS.21,36,500/- ON ACCOUNT OF UNEXPLAINED CASH DEPOS IT. SUSTAINED ADDITION OF RS.2,38,000/- IS IN RESPECT OF A SUM OF RS.13,63, 000/- AND ADDITION REGARDING INVESTMENT IN FDRS. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . A.R THAT THE ADDITION OF RS.21,36,500/- HAS WRONGLY BEEN SUSTAINED BY LD. CI T(A). LD. A.R TOOK US THROUGH THE DATES OF HEARING GIVEN BY THE AO AND S UBMITTED THAT AO DID NOT GIVE SUFFICIENT TIME TO THE ASSESSEE TO PROPERLY EX PLAIN THE SAME. THE LAST DATE FIXED FOR HEARING BY THE AO WAS 26/11/2008 AND ORDE R WAS PASSED ON ITA NO. 1395/MUM/2010(A.Y. 2006-07 ) 5 28/11/2008. HE SUBMITTED THAT ASSESSEE HAS PROPER EVIDENCE TO PROVE THAT THE AMOUNT OF RS.15,50,000/- WAS RECEIVED BY THE AS SESSEE ON SURRENDER OF TENANCY RIGHT OF RESIDENTIAL HOUSE, THEREFORE, TAXA BILITY OF THE SAME SHOULD HAVE BEEN CONSIDERED UNDER THE HEAD CAPITAL GAIN. SO FA R AS IT RELATES TO BALANCE AMOUNT OF RS.5,86,500/- IT WAS SUBMITTED THAT THE S AME REPRESENTS PARTLY THE RECEIPT ALREADY OFFERED TO TAX AS INCOME AND PARTLY THE CASH WITHDRAWN FROM THE BANK. SO FAR AS IT RELATES TO SUSTENANCE OF PART A DDITION OF RS.2,38,000/- LD. A.R SUBMITTED THAT A VALID PLAUSIBLE EXPLANATION W AS FURNISHED BEFORE LD. CIT(A) AS THE SAME REPRESENTED LOANS TAKEN BY THE ASSESSEE AND INCOME DERIVED FROM TIME ASSORTMENT ACTIVITY ETC. AND LD. CIT(A) HAS FAILED TO APPRECIATE THE CONTENTION OF THE ASSESSEE. HE SUBM ITTED THAT IF THE CLAIM OF THE ASSESSEE IS ACCEPTED REGARDING SURRENDER OF TENANCY RIGHT THEN ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT . SO FAR AS IT RELATES TO INVESTMENT IN FDRS HE SUBMITTED THAT THE FUNDS IN S AVING ACCOUNTS WHENEVER EXCEEDS CERTAIN LIMITS WILL BE AUTOMATICALLY CONVER TED INTO FIXED DEPOSITS. THE FDR IS NOT OUT OF UNEXPLAINED DEPOSITS. HE SUBMITT ED THAT EVIDENCE FURNISHED BY THE ASSESSEE BEFORE AO AND LD. CIT(A) HAS NOT BE EN PROPERLY APPRECIATED. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. WE HAVE GONE THROUGH CO URSE OF HEARING BEFORE THE AO AND FOUND THAT THERE IS A SUBSTANCE IN THE SUBMI SSION OF THE ASSESSEE THAT ADDITIONS HAVE BEEN MADE BY THE AO WITHOUT GIVING T HE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE HAVE ALSO GONE THROUGH ORDER PASSED BY LD. CIT(A). WE FIND THAT THE ADDITIONS WHICH HAVE BEEN SUSTAINE D ARE SUSTAINED WITHOUT GIVING COGENT REASONS AND WITHOUT PROPERLY EXAMINI NG THE CONTENTIONS OF THE ASSESSEE. THEREFORE, WE CONSIDER IT JUST AND PROPE R TO RESTORE THE ISSUES RAISED BEFORE US TO THE FILE OF AO FOR DENOVO CONSIDERATIO N WITH A DIRECTION TO RE- ADJUDICATE THE SAME AFTER GIVING THE ASSESSEE A REA SONABLE OPPORTUNITY OF ITA NO. 1395/MUM/2010(A.Y. 2006-07 ) 6 HEARING. WE MAKE IT CLEAR THAT THE RE-ADJUDICATION BY THE AO WILL BE LIMITED TO THE ISSUES RAISED IN APPEAL FILED BEFORE US. WITH THESE DIRECTIONS, WE REMIT THESE ISSUES TO THE FILE OF AO. ALL THE GROUNDS RA ISED BEFORE US ARE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF NOV. 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH NOV. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R I BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.