ITO., Ward- 5(1), Hyderabad V. Sri Khalid Bin Mahfooz Ahmed, Hyderabad

ITA 1436/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91684 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 01-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-09-2014
• Court: TRIBUNAL
• Department Lawyers: V RAJITHA
• Assessee Lawyers: B SHANTI KUMAR
• Keywords: Principle of natural justice; Peak credit
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A. NO. 1436/HYD/2014 ASSESSMENT YEAR: 2009-10 THE INCOME TAX OFFICER, WARD-5(1), HYDERABAD VS SRI KHALID BIN MAHFOOZ AHMED, BADI CHOWDI, HYDERABAD [PAN: AEYPM2698L] (APPELLANT) (RESPONDENT) FOR REVENUE : MS. V. RAJITHA, DR FOR ASSESSEE : SHRI B. SHANTI KUMAR , AR DATE OF HEARING : 1 9 - 0 5 - 201 5 DATE OF PRONOUNCEMENT : 22 - 05 - 2015 O R D E R PER INTURI RAMA RAO, A.M. : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, HYDERABAD, D ATED 20-03-2014 ON THE FOLLOWING GROUNDS: '1. THE LD. CIT(A)'S HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE'S CREDIT CARD STATEMENTS DO NOT SHOW ANY ENTRY OF CREDIT CARD SWIPING FOR CASH WITHDRAWALS. 2. THE LD. CIT(A)'S HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE BEFORE THE AO DURING ASSESSMENT PROCEEDINGS OR DURING SUBMISSION OF REMAND REP ORT IN SUPPORT OF CREDIT CARD SWIPING FOR CASH WITHDRAWAL. I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 2 -: 3. THE LD. CIT(A)'S HAS ERRED IN APPRECIATING THE FACT THAT THE CREDIT CARD STATEMENTS SHOW ONLY PERSONAL EXPENSES O F THE ASSESSEE AND PURCHASE OF JEWELLERY, CLOTHES, VEHICLE, MO BILES, FURNITURE, FLIGHT TICKETS ETC., AND NO ENTRIES OTHER THAN THESE. 4. THE LD. CIT(A)'S HAS ERRED IN APPRECIATING THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE WITH REGARD TO SALE OF H IS WIFE'S JEWELLERY, MOTOR VEHICLE FOR THE PURPOSE OF CASH BALANCE AND OP ENING CASH BALANCE BEFORE THE AO EITHER DURING ASSESSMENT P ROCEEDINGS OR DURING SUBMISSION OF REMAND REPORT. 5. THE LD. CIT(A) HAS ERRED IN GIVING THE PEA K CREDIT BENEFIT TO THE ASSESSEE ON THE CASH WITHDRAWALS FROM THE BANK ACCOUNTS. IN ABSENCE OF EVIDENCE THE PURPOSE OF WITHDRAWAL AND IMMED IATE RE-DEPOSITING CLAIM. THE CIT(A) FAILED TO APPRECIATE THAT THE CASH WITHDRAWALS FROM THE BANK ACCOUNTS WERE IN FACT UTILIZED FOR TH E PURPOSE OF PERSONAL EXPENSES. 6. THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FA CT THAT THE ASSESSEE HAS FAILED TO FILE CLEAR EVIDENCE TO SUBSTANTIATE HIS CLAIM THAT THE ACCOUNT STATEMENT DOES NOT BELONG TO THE ASST. YEAR UND ER REFERENCE WITH REGARD TO THE ADDITION OF RS. 4,90,000/- CASH DEPOSITS IN STANDARD CHARTERED BANK, SAVING BANK ACCOUNT NO. 44610327529. 7. ANY OTHER GROUND THAT MAY BE RAISED DURING THE COURSE OF APPEAL PROCEEDINGS'. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS AN INDIVIDUAL, IS IN TH E BUSINESS OF TRADING 'READYMADE DUPATTAS' AND IN DYEING OF 'WHIT E DUPATTAS' INTO 'COLOURED DUPATTAS' OF CUSTOMER'S CHOICE AND ALSO R UNNING 'DIAGNOSTICS' UNDER NAME AND STYLE OF 'SRK DIAGNOSTICS' SITUATED NEAR PRINCESS DURRESHEWAR HOSPITAL IN OLD CITY. HE FILED THE RET URN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 30-07-2009 ADMITTIN G INCOME OF RS. 2,23,540/-. AGIANST SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 [ ACT] VIDE ORDER DT. 29-12-2011 BY THE ITO, WARD-5(1), HYDERABAD AT A TOTAL INCOME OF I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 3 -: RS. 1,03,28,739/-. WHILE DOING SO, THE LD. ASSESSI NG OFFICER (AO) MADE ADDITION OF RS. 79,02,500/- ON ACCOUNT OF CASH DEPO SITED IN SAVINGS ACCOUNT OF THE BANK HELD IN THE NAME OF THE RESPOND ENT-ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT PROPERLY EXPLAIN THE SOURCE FOR CASH DEPOSITED. THE AO ALSO MADE A FURTHER ADDITION OF RS. 22,02,699/- ON THE GROUND THAT THE PAYMENTS WERE MADE TO THE CREDI T CARD FOR WHICH NO EXPLANATION FOR THE SOURCES FOR THE PAYMENT WAS EXP LAINED. BEING AGGRIEVED BY THE SAID ASSESSMENT ORDER, APPEAL WAS PREFERRED BEFORE CIT(A)-V, HYDERABAD, WHO VIDE ORDER DT. 20-03-2014 ALLOWED THE APPEAL FILED BY THE RESPONDENT-ASSESSEE. 3. DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT( A), THE RESPONDENT-ASSESSEE FILED THE INFORMATION SUCH AS C ASH FLOW STATEMENT WHEREIN ALL THE TRANSACTIONS AND CASH DEPOSITS ARE SUPPOSED TO HAVE BEEN REFLECTED. THE CIT(A) HAD FORWARDED THIS INFOR MATION TO THE AO AND CALLED FOR THE REMAND REPORT. IN RESPONSE TO WHICH , THE AO OBSERVED THAT THE RESPONDENT-ASSESSEE FAILED TO EXPLAIN THE SOURC ES FOR CREDIT CARD BILL PAYMENTS AND HE FURTHER OBSERVED THAT THE CASH FLOW STATEMENT IS NOT CORROBORATED BY THE EVIDENCES LIKE EVIDENCE FOR THE SALE OF ASSESSEE'S WIFE JEWELLERY FOR RS. 4,86,350/- AND OPENING CASH BALAN CE OF RS. 2,17,000/- AND FOR SALE OF TWO WHEELER FOR RS. 84,500/- AND TH E CASH RECEIVED FROM CREDIT CARDS SWIPING OF RS. 32,93,952/-. FURTHER, THE LD.AO OBSERVED THAT THE CREDIT CARDS WERE SWIPED TO MEET THE PERSO NAL EXPENSES SUCH AS CATERERS, MOBILES, AIR TICKET PURCHASE, HARSHA TOYO TA, CLOTHES PURCHASES, JEWELLERY PURCHASES, LATITUDES PRO. FURN ITURE PURCHASES, RADIO GUYS & GALS, SHOES PURCHASE, FAHION PARADISE, CLOUB MINI TRAVELS & FOREIGN PETROL PURCHASES, FENANDEZ MATERN ITY, DIMAI STUDENT VISA ETC., WHICH ARE IN NATURE OF PERSONAL USE. FU RTHER, AO OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED COMPLETE ADDRESS ES OF ALL THOSE I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 4 -: BUSINESS ENTITIES TO EXAMINE WHETHER THOSE PEOPLE A RE GIVEN CASH AGAINST CREDIT CARDS SWIPING WHICH IS AN UNUSUAL PRACTICE. 4. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT O F THE AO AS WELL AS THE INFORMATION FURNISHED BY THE RESPONDENT-ASSESSE E, HELD THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE EVIDENCE PRODUCE D IN THE FORM OF CASH FLOW STATEMENT, BANK TRANSACTIONS ETC., AND DELETED THE ADDITION BY SAYING THAT THE FACTS OF THE CASE JUSTIFY THE APPLI CATION OF PEAK THEORY AND DISCUSSED CERTAIN CASE LAWS IN SUPPORT OF APPLI CATION OF PEAK CREDIT THEORY. AGGRIEVED, THE REVENUE HAD COME UP WITH TH E PRESENT APPEAL. 5. THE LD. DR ARGUED THAT THE CIT(A) WAS NOT JUSTIF IED IN DELETING THE ADDITIONS WITHOUT PROPERLY APPRECIATING THE EVIDENC E THAT THE CREDIT CARD STATEMENT DOES NOT SHOW ANY TRANSACTION OF CASH WIT HDRAWALS AND FURTHER MORE THAT THE ASSESSEE FAILED TO PRODUCE AN Y EVIDENCE IN SUPPORT OF SALE OF THE JEWELRY OF HIS WIFE AND MOTOR VEHICL E AND OPENING CASH BALANCE. HE FURTHER ARGUED THAT THE CIT(A) HAD MIS DIRECTED HIMSELF IN APPLYING THE PEAK CREDIT THEORY IN AS MUCH AS THE F ACTS OF THE CASE DOES NOT JUSTIFY THE APPLICATION OF PEAK CREDIT. THUS, CIT(A) FAILED TO APPRECIATE PROPERLY THE EVIDENCE ON RECORD IN SUPPO RT OF THE ADDITIONS MADE BY THE AO. 6. ON THE OTHER HAND, THE LD. AR FOR THE ASSESSEE R ELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ORDER OF CIT (A) SHOULD BE UPHELD. 7. WE HEARD THE RIVAL PARTIES AND PERUSED THE ORDER S OF LOWER AUTHORITIES. WE FIND THAT THE AO MADE ADDITION BEC AUSE OF FAILURE OF THE RESPONDENT-ASSESSEE TO FURNISH THE EVIDENCE IN SUPP ORT OF THE SOURCES FOR CASH DEPOSIT IN THE ACCOUNT OF RS. 79,02,500/- AND AS WELL AS PAYMENT TO CREDIT CARD AS RS. 22,02,699/-. APPAREN TLY, IT WAS ONLY I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 5 -: DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT(A), THE RESPONDENT- ASSESSEE FILED THE CASH FLOW STATEMENT, WHEREIN THE SOURCES FOR THE ABOVE ARE SUPPOSED TO HAVE BEEN EXPLAINED. HOWEVER, THE AO ON REMAND REPORT HAD NOT ACCEPTED THE CASH FLOW STATEMENT IN THE ABSENCE OF EVIDENCE FILED IN SUPPORT OF THE CASH SOURCES SHOWN IN THE CASH FLOW STATEMENT. EVEN DURING THE COURSE OF REMAND PROCEE DINGS, THE LD. AO WAS NOT SATISFIED ABOUT THE EXPLANATION RENDERED FO R THE SOURCES FOR CASH DEPOSITS IN THE BANK AND THE PAYMENTS MADE FOR CRED IT CARDS. THE LD. CIT(A) WITHOUT MEETING THE OBJECTIONS RAISED BY TH E AO HAS SIMPLY ACCEPTED THE EXPLANATION TENDERED BY THE RESPONDENT -ASSESSEE AND HE WENT ON DISCUSSING ABOUT PEAK CREDIT THEORY WITHOUT DISCUSSING AS TO HOW THE FACT SITUATION OF THE CASE FITS INTO PEAK C REDIT THEORY AND WE FIND FROM THE GROUNDS OF APPEAL FILED BEFORE HIM THAT NO SUCH GROUND WAS RAISED. THE ADDITIONS WERE MADE PURELY BASED ON FA CTS, UNLESS THE FACTS WERE DULY VERIFIED BY THE AO, THE ADDITION SHOULD N OT HAVE BEEN DELETED. OBJECTIONS RAISED BY AO IN HIS REMAND REPORT WERE N OT MET BY THE CIT(A). THE CASH FLOW STATEMENT FILED BY THE RESPON DENT-ASSESSEE BEFORE CIT(A) DOES NOT INDICATE THE AVAILABILITY OF CASH O N DAY TO DAY BASIS. IN THE ABSENCE OF THIS, IT CANNOT BE HELD THAT THE CAS H DEPOSITS MADE IN THE SAVINGS BANK ACCOUNT OF THE RESPONDENT-ASSESSEE ARE EXPLAINED. SIMILARLY, IT CANNOT BE HELD THAT THE SOURCES FOR P AYMENT OF CREDIT CARDS ARE EXPLAINED. 8. THE CIT(A) IN THE IMPUGNED ORDER HAD NOT DEALT W ITH THE FACTS OF THE CASE, HE SIMPLY REFERRED TO CERTAIN CASE LAWS G OVERNING THE PEAK CREDIT THEORY WHICH IS NOT THE GERMANE TO THE ISSUE ON HAND BEFORE HIM. THE IMPUGNED ORDER GIVES NO REASON WHICH WOULD INDI CATE AS TO WHY THE ADDITIONS ARE DELETED. THE ORDER IS BEREFT OF REAS ONS AND DOES NOT DISCUSS THE FACTS OF THE CASE. THEREFORE, THE ORDE R SUFFERS FROM THE VICE OF BEING AN ORDER WITHOUT REASONS. THE HON'BLE SUP REME COURT HELD IN I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 6 -: THE CASE OF CCT VS. SHUKLA BROTHERS [2010 (4) SCC 7 85] HELD THAT, RECORDING OF REASONS IS AN ESSENTIAL FEATURE OF PRO VIDING JUSTICE AND IN FACT IS THE SOUL OF ORDERS . FURTHER, THE SUPREME COURT IN THE CASE OF KRANTI ASSOCIATES (P) LTD. VS. MASOOD ALAM KHAN [2010 (9) SCC 496] HAS SUMMARIZED THE PRINCIPLES FOR RECORDING REASONS AS UNDER: (A) IN INDIA THE JUDICIAL TREND HAS ALWAYS BEEN TO REC ORD REASONS, EVEN IN ADMINISTRATIVE DECISIONS, IF SUCH DECISIONS AFFECT ANYONE PREJUDICIALLY. (B) A QUASI-JUDICIAL AUTHORITY MUST RECORD REASONS IN S UPPORT OF ITS CONCLUSION. (C) INSISTENCE ON RECORDING OF REASONS IS MEANT TO SERV E THE WIDER PRINCIPLE OF JUSTICE THAT JUSTICE MUST NOT ONLY BE DONE IT MUST ALSO APPEAR TO BE DONE AS WELL. (D) RECORDING OF REASONS ALSO OPERATES AS A VALID REST RAINT OF ANY POSSIBLE ARBITRARY EXERCISE OF JUDICIAL AND QUASI-J UDICIAL OR EVEN ADMINISTRATIVE POWER. (E) REASONS REASSURE THAT DISCRETION HAS BEEN EXERCISED BY THE DECISION MAKER ON RELEVANT GROUNDS AND BY DISREGARD ING EXTRANEOUS CONSIDERATIONS. (F) REASONS HAVE VIRTUALLY BECOME AS INDISPENSABLE A CO MPETENT OF A DECISION MAKING PROCESS AS OBSERVING PRINCIPLE S OF NATURAL JUSTICE BY JUDICIAL, QUASI-JUDICIAL AND EVE N BY ADMINISTRATIVE BODIES. (G) REASONS FACILITATE THE PROCESS OF JUDICIAL REVIEW BY SUPERIOR COURTS. (H) THE ONGOING JUDICIAL TREND IN ALL COUNTRIES COMMITT ED TO RULE OF LAW AND CONSTITUTIONAL GOVERNANCE IS IN FAVOUR OF R EASONED DECISIONS BASED ON RELEVANT FACTS. THIS IS VIRTUAL LY THE LIFE BLOOD OF JUDICIAL DECISION MAKING JUSTIFYING THE PR INCIPLE THAT REASON IS THE SOUL OF JUSTICE. (I) JUDICIAL OR EVEN QUASI-JUDICIAL OPINIONS THESE DAYS CAN BE AS DIFFERENT AS THE JUDGES AND AUTHORITIES WHO DELIVER THEM. ALL THESE DECISIONS SERVE ONE COMMON PURPOSE WHICH IS T O DEMONSTRATE BY REASON THAT THE RELEVANT FACTORS HAV E BEEN I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 7 -: OBJECTIVELY CONSIDERED. THIS IS IMPORTANT FOR SUST AINING THE LITIGANT'S FAITH IN THE JUSTICE DELIVERY SYSTEM. (J) INSISTENCE ON REASON IS A REQUIREMENT FOR BOTH JUDI CIAL ACCOUNTABILITY AND TRANSPARENCY. (K) IF A JUDGE OR A QUASI-JUDICIAL AUTHORITY IS NOT CA NDID ENOUGH ABOUT HIS/HER DECISION MAKING PROCESS THEN IT IS IM POSSIBLE TO KNOW WHETHER THE PERSON DECIDING IS FAITHFUL TO THE DOCTRINE OF PRECEDENT OR TO PRINCIPLES OF INCREMENTALISM. (L) REASONS IN SUPPORT OF DECISIONS MUST BE COGENT, CLE AR AND SUCCINCT. A PRETENCE OF REASONS OR 'RUBBER STAMP R EASONS' IS NOT TO BE EQUATED WITH A VALID DECISION MAKING PROC ESS. (M) IT CANNOT BE DOUBTED THAT TRANSPARENCY IS THE SIN E QUA NON OF RESTRAINT ON ABUSE OR JUDICIAL POWERS. TRANSPAR ENCY IN DECISION MAKING NOT ONLY MAKES THE JUDGES AND DECIS ION MAKERS LESS PRONE TO ERRORS BUT ALSO MAKES THEM SUB JECT TO BROADER SCRUTINY. (N) SINCE THE REQUIREMENT TO RECORD REASONS EMANATES FR OM THE BROAD DOCTRINE OF FAIRNESS IN DECISION MAKING, THE SAID REQUIREMENT IS NOW VIRTUALLY A COMPONENT OF HUMAN R IGHTS AND WAS CONSIDERED PART OF STRASBOURG JURISPRUDENCE . SEE (1994) 19 EHRR 553, AT 562 PARA 29 AND ANYA VS. UNI VERSITY OF OXFORD 2001 EWCA CIV. 405, WHEREIN THE COURT REF ERRED TO ARTICLE 6 OF EUROPEAN CONVENTION OF HUMAN RIGHTS WH ICH REQUIRES, 'ADEQUATE AND INTELLIGENT REASONS MUST BE GIVEN FOR JUDICIAL DECISIONS'. (O) IN ALL COMMON LAW JURISDICTIONS JUDGMENTS PLAY A V ITAL ROLE IN SETTING UP PRECEDENTS FOR THE FUTURE. THEREFORE, F OR DEVELOPMENT OF LAW, REQUIREMENT OF GIVING REASONS F OR THE DECISION IS OF THE ESSENCE AND IS VIRTUALLY A PART OF 'DUE PROCESS'. THEREFORE, IN THE LIGHT OF THE ABOVE PRINCIPLES ENU NCIATED BY THE HON'BLE SUPREME COURT IN THE CASES MENTIONED SUPRA, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF CIT(A) CANNOT BE SUSTAINE D IN THE EYES OF LAW. THEREFORE, KEEPING IN VIEW THE INTEREST OF JUSTICE, WE REMIT THE MATTER BACK TO THE FILE OF CIT(APPEALS) FOR FRESH ADJUDICA TION OF THE ISSUE AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO TH E RESPONDENT- ASSESSEE. I.T.A. NO. 1436/HYD/2014 SRI KHALID BIN MAHFOOZ AHMED :- 8 -: 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAY, 2015 SD/- SD/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED 22 ND MAY, 2015 TNMM COPY TO : 1. THE INCOME TAX OFFICER, WARD-5(1), ROOM NO. 604, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 2. SRI KHALID BIN MAHFOOZ AHMED, D.NO. 4-2-579, BAD I CHOWDI, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD. 4. CIT-IV, HYDERABAD. 5. D.R. ITAT, HYDERABAD