HARRESH NAVNITRAI MEHTA, MUMBAI V. DCIT CEN CIR 44, MUMBAI

ITA 1475/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48660 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 06-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 23-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Keywords: Gift; Search and seizure; Bogus loan
• Section: 143(3); 153A

Judgement Text

1 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER. S.NO. I.T.A. NO. ASSESSMENT YEAR 1. 1473/MUM/2010 2001-02. 2. 1474/MUM/2010 2002-03. 3. 1475/MUM/2010 2003-04 . 4. 1476/MUM/2010 2005-06 . HARESH NAVNITRAI MEHTA, DY. COMMISSIONER OF INCOME-TAX, 2601, SHIVTAPI BUILDING, VS. CENTRAL CIRCLE-44, MUMBAI. HARISHANDRA GOREGAONKAR MARG, MUMBAI 400 007. PAN :AALPM3811G APPELLANT. RESPONDENT. APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY: SHRI SATBIR SINGH. O R D E R PER J. SUDHAKAR REDDY : ALL THESE FOUR APPEALS ARE DIRECTED AGAINST THE C OMMON ORDER PASSED BY THE CIT(APPEALS)-38, MUMBAI DATED 24-12-2009 FOR THE AS SESSMENT YEARS 2001-02 TO 2003-04 AND 2005-06, WHEREIN THE APPELLATE AUTHORIT Y HAS PARTLY CONFIRMED THE ORDER PASSED BY THE AO U/S 143(3) READ WITH SECTION 153A OF THE ACT. AS THE ISSUES INVOLVE ARE COMMON, FOR THE SAKE OF CONVENIENCE, W E DISPOSE OF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. 2 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. 2. FACTS IN BRIEF: THERE WAS SEARCH AND SEIZURE ACTION U/S 132(1) CAR RIED OUT BY DDIT (INV.) UNIT-III(2), MUMBAI ON10-8-2006 IN THE CASE OF M/S ROHAN GROUP INCLUDING DIRECTORS OF DIFFERENT ASSOCIATED AND SISTER COMPAN IES AND IN ASSESSEES CASE. THE ASSESSEE AND HIS FAMILY MEMBERS WERE FOUND TO HAVE NO WITHDRAWALS FOR HOUSEHOLD EXPENSES DURING THE PERIOD A.Y. 2002-03 TO A.Y. 2004-05 AND FOR THE PERIOD A.Y. 2001-02, THE WITHDRAWAL WAS VERY LOW AT RS.1,65,000/-, FOR A.Y. 2005-06, IT WAS RS.1,20,000/-, FOR A.Y.06-07 IT WAS RS.1,95,000/-, FOR A.Y. 2007- 08, IT WAS RS.1,65,000/-. THE ASSESSEE FAMILY OWNS 5 CARS NAMELY ONE MERCEDEZ, ONE SKODA, ONE MITSUBISH LANCER, ONE OPTRA AND ONE MARUTI SUZUKI AND STAY IN THE MOST UPMARKET AREA OF MUMBAI. THEY ALSO OWN A LARGE NUMBER OF VERY EXPENSIVE RACE HORSES WHICH CONFIRMS THEIR STATUS OF BEING SO CIAL ELITE. IN VIEW OF THE SAID FACTS, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO W HY A SUM OF RS.5,00,000/- PER ANNUM SHOULD NOT BE ADDED TO THE INCOME. THE ASSESS EE IN HIS REPLY DATED 16-12- 2008 STATED THAT HIS FAMILY AND THE FAMILY OF HIS B ROTHER HARESH ALONG WITH THE PARENTS STAY TOGETHER. HE FURTHER GAVE A YEARLY LIS T OF AGGREGATE EXPENSES INCURRED BY THE JOINT FAMILY AND CONCLUDED THAT IN VIEW OF T HE FACT THAT AN ADDITION OF RS.3,00,000/- PER ANNUM WAS ALSO PROPOSED TO BE MAD E IN THE CASE OF HIS BROTHER, HE WOULD LIKE TO OFFER FOLLOWING AMOUNTS FOR TAXATI ON VOLUNTARILY. ASSESSMENT YEAR AMOUNT OFFERED. 2001-02 RS. 90,000/- 2002-03 RS.1,20,000/- 2003-04 RS.1,20,000/- 2004-05 RS.1,50,000/- 3 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. AFTER CONSIDERING THE ABOVE FACTS, THE AO OBSERVE D THAT LOOKING TO THE TOTAL SIZE OF THE JOINT FAMILY CONSISTING OF 10 MEMBERS, THE VOLUNTARY OFFER OF THE ASSESSEE CANNOT BE ACCEPTED AS REASONABLE. THE ADDI TION PROPOSED BEING IN CONFORMITY WITH THE COST INFLATION INDEX AND SOCIAL STATUS OF THE ASSESSEE FAMILY, THE SAME IS ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE IS BEFORE US. THE LEARNE D COUNSEL FOR THE ASSESSEE SHRI VIJAY MEHTA REITERATED THE CONTENTIONS MADE BY THE ASSESSEE BEFORE THE CIT(APPEALS) THAT, THE ADDITION IN QUESTION MADE B Y THE AO WAS AN ADHOC ADDITION WHICH WAS ARBITRARY. HIS CASE IS THAT THER E IS NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH WARRANTING ADDITION IN AN ORDE R PASSED U/S 143(3) READ WITH SECTION 153A. HE FILED AN ORDER OF THE MUMBAI I-BEN CH OF THE TRIBUNAL IN ITA NO. 6192 TO 6198/MUM/2009 FOR THE ASSESSMENT YEARS 2001 -02 TO 2007-08, ORDER DATED 30 TH JULY, 2010 AND SUBMITTED THAT IN THE CASE OF THE A SSESSEES BROTHER MR. JITENDRA N. MEHTA, THE TRIBUNAL RETAINED AN ADDITION OF RS.1 .5 LAKHS FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 AND THAT IT RETAINED AN A DDITION OF RS.2 LAKHS FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 AND THAT FOR T HE ASSESSMENT YEARS 2005-06 TO 2007-08, IT HELD THAT THE FAMILY HAD SUFFICIENT WITHDRAWALS AND HENCE NO ADDITION IS REQUIRED. HE FILED A CHART TO SHOW THE WITHDRAWA LS OF THE FAMILY FOR EACH OF THE ASSESSMENT YEAR AND SUBMITTED THAT NO ADDITION SHOU LD BE MADE IN THESE YEARS. THE LEARNED DR, MR. SATBIR SINGH, ON THE OTHER HAND, OP POSED THE CONTENTIONS AND SUBMITTED THAT THE ASSESSEE HAD SUO MOTU AGREED THA T THE DRAWINGS ARE LOW AND HAS COME FORWARD WITH AN OFFER FOR LOW WITHDRAWALS. TH US HE SUBMITS THAT ONCE THERE IS AN ADMISSION, THE QUESTION OF FINDING EVIDENCE D OES NOT ARISE. HE SUPPORTED THE ORDER LEARNED CIT(APPEALS). 4 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. 4. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT TH E ASSESSEE HAD OFFERED VOLUNTARILY THE FOLLOWING AMOUNTS TO TAX ON THE GRO UND THAT THE WITHDRAWALS ARE NOT SUFFICIENT TO MEET THE EXPENSES INCURRED BY THE JOI NT FAMILY: 2001-02 RS. 90,000/- 2002-03 RS.1,20,000/- 2003-04 RS.1,20,000/- 2004-05 RS.1,50,000/- ONCE THE SUO MOTU OFFER HAS BEEN MADE, WE ARE OF TH E CONSIDERED OPINION THAT THE AO CANNOT BE FAULTED FOR ADJUDICATING THE SUFFICIE NCY OF THESE DISCLOSURES. THE AO HAS JUST VARIED THE QUANTUM BASED ON REASONS GIV EN BY HIM. NOW THE ONLY ISSUE THAT HAS TO BE ADJUDICATED IS THE REASONABLEN ESS OF THE ADDITION. FROM THE CHART FILED BEFORE US FOR THE ASSESSMENT YEAR 2005- 06, THE TOTAL DRAWINGS ARE RS.40,92,000/- APPROXIMATELY. FOR THE ASSESSMENT Y EARS 2001-02, 2002-03 AND 2003-04 IT IS RS.2,94,494/-, RS.6,18,226/- AND RS.1 ,60,610/- RESPECTIVELY. THERE IS A LOT OF VARIATION IN THE DRAWINGS FOR THE ASSESSME NT YEAR 2005-06 AND THE OTHER ASSESSMENT YEARS. NO DOUBT IN THE CASE OF THE ASSES SEES BROTHER THE TRIBUNAL HAS SUSTAINED CERTAIN AMOUNTS. AFTER CONSIDERING THESE AMOUNTS, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION IN QUESTION SU STAINED BY THE CIT(APPEALS) FOR THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04 H AVE TO BE SUSTAINED. THE APPEALS FOR ALL THESE THREE YEARS ARE HEREBY DISMIS SED. 5. COMING TO THE ASSESSMENT YEAR 2005-06, THE DRAWI NGS ARE RS.40.92 LAKHS APPROXIMATELY AND HENCE SUBSTANTIAL. IT CALLS FOR NO FURTHER ADDITION IN THAT YEAR. HENCE GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 200 5-06 ARE ALLOWED. 6. THERE IS ONE MORE GROUND OF APPEAL FOR THE ASSES SMENT YEAR 2003-04. THE CIT(APPEALS) AT PARA 4 DISCUSSED THE ISSUES AS FOLL OWS: 5 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. 4. IN THE NEXT ISSUE RAISED IN APPEAL PERTAINS TO THE ADDITION OF RS.1,00,000/- ON ACCOUNT OF BOGUS LOAN FOR A.Y. 03- 04 ONLY. THE REASONS FOR MAKING THE ADDITION OF RS.1,00,000/- ARE DISCUSSED IN PARA SIX OF THE ASSESSMENT ORDER AS UNDER : THE ASSESSEE HAS DECLARED A SUM OF RS.29,00,000/ - AS ADDITIONAL INCOME U/S 132(4) ON ACCOUNT OF BOGUS LOANS OF RS.9,00,000/- FROM D.M. TRADERS AND OM FINANCE & IN VESTMENT COMPANY AND RS.20,00,000/- BY WAY OF BOGUS GIFTS FR OM NIMESH SAGAR AND MANASI RAUL. DURING THE SEARCH, THE COMPA NIES AND FIRMS OF THE ASSESSEE GROUP HAD ADMITTED TO HAVING INTROD UCED BOGUS LOANS FROM CERTAIN PARTIES WHICH THEY OFFERED FOR TAX U/S 132(4) AND ALSO BEFORE THE SETTLEMENT COMMISSION. THE ASSESSEES RE CORD REVEALED THAT EVEN HE HAD SHOWN A LOAN OF RS.1,00,000 FROM O NE OF THE TAINTED PARTIES VIZ. SHRI CHETAN SHAH. THIS PARTY BEING ADM ITTEDLY A BOGUS LOAN GIVER, THE SAID SUM OF RS.1,00,000/- IS ADDED TO THE INCOME OF THE ASSESSEE. AS THE ASSESSEE HAS NOT DECLARED THIS SUM OF RS.1,00,000/-, THE PENALTY PROCEEDINGS ARE INITIATED U/S 271(1)(C) OF THE I.T. ACT. AT PARA 4.2 THE LEARNED CIT(APPEALS) CONCLUDED AS F OLLOWS: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBM ISSIONS, AND DO NOT FIND ANY MERIT IN THE A.RS CONTENTION. SINCE THE APPELL ANT HAD DISCLOSED ADDITIONAL INCOME U/S 132(4) ON ACCOUNT OF BOGUS LO AN FROM SEVERAL PARTIES AND THE NATURE OF LOAN RECEIVED FROM SHRI CHETAN SH AH WAS ALSO SIMILAR, THE A.O. WAS JUSTIFIED TO TREAT THE SAID LOAN AS BOGUS ON THE BASIS OF EVIDENCE FOUND DURING THE COURSE OF SEARCH. ACCORDINGLY, TH E ADDITION MADE AT RS.1,00,000/- ON ACCOUNT OF BOGUS LOAN AS UNEXPLAIN ED IS HEREBY CONFIRMED. THIS GROUND OF APPEAL FOR A.Y. 03-04 IS DISMISSED. 7. IN OUR OPINION, THE CONCLUSIONS DRAWN BY THE REV ENUE AUTHORITIES ARE DEVOID OF MERIT. THERE IS NO BASIS TO HOLD THAT SHRI CHETA N SHAH IS A TAINTED PARTY. ADDITION CANNOT BE JUSTIFIED ON THE GROUND THAT THE ASSESSEE HAD OFFERED CERTAIN OTHER ACCOUNTS AS BOGUS LOANS. THE ISSUE SHOULD HAV E BEEN INVESTIGATED BY THE AO 6 ITA NOS.1473 TO 1476/MUM/2010 ASSTT.YEARS:2001-02 TO 2003-04 & 2005-06. BEFORE ADDITION. IN VIEW OF THE ABOVE DISCUSSION, W E ALLOW THIS GROUND FOR THE ASSESSMENT YEAR 2003-04. 8. IN THE RESULT, THE APPEALS FOR THE ASSESSMENT YE ARS 2001-02 AND 2002-03 ARE DISMISSED, APPEAL FOR THE ASSESSMENT YEAR 2003-04 I S ALLOWED IN PART AND THE APPEAL FOR ASSESSMENT YEAR 2005-06 IS ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2011. SD/- SD/- (VIJAY PAL RAO) (J. SUDHAKAR RED DY) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED: 27 TH APRIL, 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH (TRUE COPY) BY ORDE R ASSTT. REGIST RAR, ITAT, MUMBAI BEN CHES