GHAZI MOHSIN MHEHFOOZ, MUMBAI V. ITO WD NO 13(3)(4), MUMBAI

ITA 1529/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78993 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: DINESH R SHAH
• Keywords: Gift
• Section: 68; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENC H MUMBAI . . , ..'#. , BEFORE SHRI B.R.BASKARAN, AM & DR.S.T.M PAVALAN, JM ./ ITA NO.1529/MUM/2013 ( % % % % / ASSESSMENT YEAR :2009-10) GHAZI MOHSIN MEHFOOZ, ROOM NO.31/34,KAMAL KHAN CHAWL NO.12, IMAMWADA ROAD, BHINDI BAZAR (W), MUMBAI-400 009 VS. ITO WD NO.13(3)(4), MUMBAI-400 020 & ./ ' ./ PAN/GIR NO. : AFQPM 0586 G ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) +, - -- - . . . . /ASSESSEE BY : MR. DINESH R. SHAH - -- - . . . . /REVENUE BY : MR. R.K.SAHU - ,# / DATE OF HEARING : 22 ND MAY, 2014 /0% - ,# / DATE OF PRONOUNCEMENT : 28 TH MAY, 2014 1 1 1 1 / O R D E R PER B.R.BASKARAN (A.M.) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 20.12.2012 PASSED BY LD CIT(A)-24, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2 . THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD C IT(A) IN CONFIRMING THE ADDITION OF RS.26,27,000/- MADE BY T HE ASSESSING OFFICER U/S 68 OF THE ACT. 3 . THE FACTS RELATING THERETO ARE DISCUSSED IN BRIEF . THE ASSESSEE IS A SPIRITUAL HEALER BY PROFESSION AND IS ALSO ENGAGED IN THE BUSINESS OF SELLING PRECIOUS MAGIC STONES. FROM THE AIR INFORM ATION, THE AO NOTICED THAT THE ASSESSEE HAS DEPOSITED AN AGGREGATE AMOUNT OF RS.26,27,000/- ITA NO.1529/13 2 IN HIS BANK ACCOUNT MAINTAINED WITH M/S DCB BANK. THE ASSESSEE DID NOT EXPLAIN ABOUT THE SOURCES FOR MAKING THE ABOVE SAID DEPOSIT. HENCE THE AO ASSESSED THE SAME AS THE INCOME OF THE ASSES SEE BY INVOKING THE PROVISIONS OF SEC. 68 OF THE ACT. THE LD CIT(A) AL SO CONFIRMED THE ADDITION AND HENCE THE ASSESSEE HAS FILED THIS APPE AL BEFORE US. 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND CAR EFULLY PERUSED THE RECORD. A PERUSAL OF THE ORDER PASSED BY LD CIT(A) SHOWS THAT THE FIRST APPELLATE AUTHORITY HAS TAKEN THE VIEW THAT THE ASS ESSEE COULD NOT HAVE SAVED THE AMOUNT FROM OUT OF HIS PAST INCOME, SINCE THE ASSESSEE HAD DISCLOSED LOW INCOME WITH THE CORRESPONDING DRAWING S. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVAT IONS MADE BY LD CIT(A). 4.3.2 IT APPEARS FROM THE SAVINGS ACCOUNT WITH DCB LTD. THAT ASSESSEE HAS DEPOSITED RS.26,27,000/- IN HIS BANK A CCOUNT OVER A PERIOD OF 12 MONTHS AND THESE DEPOSITS RANGE FROM R S.11,000/- TO RS.13,00,000/- DURING THE YEAR. THE OPENING BALANCE IN THE ACCOUNT WAS RS.32,591/- AND CLOSING BALANCE WAS RS.44,016/- . IT IS OBSERVED FROM THE COPY OF THE BANK ACCOUNT THAT ASSESSEE HAS DEPOSITED CASH IN BANK ACCOUNT AND UTILIZED IT FOR MAKING PAY MENT FOR PURCHASING DEMAND DRAFTS, MAKING PAYMENTS TO INSURA NCE COMPANIES AND TRANSFERRING FUNDS TO ANOTHER BANK AC COUNT AND LOAN ACCOUNT. ASSESSEE ALSO HAD ANOTHER SAVINGS ACCOUNT WITH B.M.C. BANK LTD. AND A FIXED DEPOSIT ACCOUNT ALSO AND THER E IS TRANSFER CREDIT ENTRY OF RS.10,30,293/- IN THE ACCOUNT. ASSE SSEE HAS ALSO SUBMITTED THAT HE HAD BEEN EARNING INCOME FOR THE L AST 10 YEARS, HAS ACCUMULATED FUNDS OVER A PERIOD OF LAST 20 YEAR S. IT FURTHER APPEARS FORM THE PERUSAL OF THE PERSONAL CAPITAL AC COUNT, PERSONAL BALANCE SHEET AND P&L ACCOUNT AND BALANCE SHEET OF THE BUSINESS THAT ASSESSEES NET SAVINGS AFTER DEFRAYING PERSONA L EXPENSES RANGES FROM RS.20,000/- TO RS.30,000/- ONLY AND THU S ASSESSEES SAVINGS COULD NOT HAVE EXCEEDED RS.TWO LAKHS OVER A PERIOD OF 10 YEARS. HOWEVER ASSESSEE HAS ALWAYS BEEN HOLDING HIS MONEYS IN THE BANK ACCOUNT AND, THEREFORE, HOLDING CASH OF RS .26,27,000/- IN HAND DOES NOT ARISE. ASSUMING FOR THE SAKE OF BREVI TY THAT ASSESSEE WAS HOLDING CASH IN HAND, THEN WHAT WAS THE NECESSI TY FOR THE ASSESSEE TO BROW LOAN OF RS.1,08,629/- FROM ABN AMR O BANK AS ON 1/4/2008? MOREOVER ASSESSEE COULD HAVE DEPOSITED TH IS CASH IN HAND IN A BANK ACCOUNT AND EARNED A REGULAR INCOME BY WAY OF ITA NO.1529/13 3 INTEREST IN ADDITION TO HIS REGULAR INCOME FROM THE PROFESSION OF DISCOURSES AND BUSINESS OF SELLING STONES. THIS HAS NOT HAPPENED BECAUSE ASSESSEE NEVER HAD SUCH A HUGE BALANCE RUNN ING INTO LAKHS OF RUPEES EXCEPT THOUSANDS OF RUPEES. MOREOVE R ASSESSEE HAD A CAPITAL BALANCE OF RS.1,55,279/- ONLY AS ON 3 1/03/2001 AND COULD NOT HAVE GROWN TO RS.24,89,239/- ESPECIALLY W HEN NET ACCRETION TO CAPITAL OVER A PERIOD OF TEN YEARS CAN NOT EXCEED RS.TWO LAKHS AFTER TAKING INTO CONSIDERATION NET PROFITS, WITHDRAWALS FOR PERSONAL EXPENSES, PAYMENT OF INSURANCE PREMIA AND INCOME TAX FROM YEAR TO YEAR AND OTHER EXPENSES. IT IS WORTH N OTHING HERE THAT ASSESSEE ALSO HAD OTHER BANKING TRANSACTIONS WITH B MC BANK LTD. ALSO AND DETAILS OF THESE TRANSACTIONS ARE NOT PROD UCED FOR PERUSAL AND VERIFICATION. IT IS QUITE CLEAR FROM THE DETAIL S AND DOCUMENTS THAT ASSESSEE IS NOT IN A POSITION TO SUPPORT ITS SOURCE OF CASH DEPOSITS OF RS.26,27,000/- IN THE BANK ACCOUNT WITH DCB LTD. AND HAS PREPARED PERSONAL CAPITAL ACCOUNT AND BALANCE SHEET FOR THE LAST TEN YEARS AS AN AFTERTHOUGHT AND TRIED TO EXPLAIN CASH DEPOSITS OF RS.26,27,000/- IN THE BANK ACCOUNT. THUS ASSESSEES EXPLANATION FOR DELETING THE ADDITION OF CASH CREDIT OF RS.26,27,00 0/- IS REJECTED AND ITS APPEAL ON THIS GROUND IS REJECTED. WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS TA KEN THE VIEW THAT THE ASSESSEE COULD NOT HAVE SAVED MORE THAN RS.2.00 LAK HS FROM THE PAST INCOME. HE ALSO NOTED THE FACT THAT THE ASSESSEE H AS AVAILED A LOAN OF RS.1,08,629/- FROM A BANK ON 1.4.2008 AND ACCORDING LY EXPRESSED THE VIEW THAT THERE WAS NO NECESSITY TO BORROW MONEY FR OM BANK, IF THE ASSESSEE WAS POSSESSING CASH AS CLAIMED. 5 . BEFORE US, THE LD A.R SUBMITTED THAT THE ASSE SSEE, BEING A SPIRITUAL LEADER, HAS ALSO RECEIVED GIFTS FROM HIS DEVOTEES I N THE PAST. FURTHER HE SUBMITTED THAT THE ASSESSEE HAS BEEN FILING RETURN OF INCOME FOR THE PAST SEVERAL YEARS. ACCORDINGLY, HE SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE EXPLANATIONS OF THE ASSE SSEE ALTOGETHER. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS FO UND THE DEPOSITS IN BANK PASS BOOK AND THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. BHAICHAND H GANDHI(1983)(141 ITR 67) HAS HELD THAT THE CASH CREDIT SHOWN IN THE PASS BOOK BUT NOT SHOWN IN THE CASH BO OK MAINTAINED BY ITA NO.1529/13 4 THE ASSESSEE DOES NOT FALL IN THE AMBIT OF SEC. 68 OF THE ACT. WHEN IT WAS POINTED OUT THAT THE ASSESSEE HAS GOT AN OBLIGATION TO EXPLAIN THE SOURCES OF DEPOSITS U/S 69 OF THE ACT, THE LD A.R SUBMITTED THAT THE BENCH MAY MAKE A REASONABLE ESTIMATE OF CASH AVAILABLE WITH T HE ASSESSEE ON THE BASIS OF PAST RECORD. 6 . ON THE CONTRARY, THE LD D.R PLACED STRONG REL IANCE ON THE ORDER OF LD CIT(A) AND SUBMITTED THAT IT IS BEYOND THE COMPREHE NSION OF HUMAN PROBABILITIES AND HUMAN CONDUCT THAT A PERSON, WHIL E KEEPING HUGE AMOUNT OF CASH IN HAND, WOULD BORROW A SMALL AMOUNT FROM BANK AND PAY INTEREST THEREON. IN THIS REGARD, HE PLACED RELIAN CE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971)(82 ITR 540)(SC) AND SUMATI DAYAL VS. CIT (21 4 ITR 801) . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLARED LO WER INCOME ONLY IN THE PAST AND CONSIDERING HIS SAVINGS, HE COULD NOT HAVE SAVED MUCH. 7 . WITH REGARD TO THE CONTENTION OF THE ASSESSE E THAT THE BANK PASS BOOK CANNOT BE CONSIDERED FOR MAKING ADDITION U/S 6 8 OF THE ACT, WE MAY REFER TO THE DECISION OF THE FIVE MEMBERS SPECIAL B ENCH OF DELHI TRIBUNAL IN THE CASE OF MANOJ AGGARWAL VS. DY. CIT (113 ITD 377)(DELHI) (SB ) , WHEREIN IT IS OBSERVED AS UNDER:- 26. THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESS EE BEFORE US WAS THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THE DEPOSITS WERE FOUND ONLY THE ASSESSEES BAN K STATEMENT WHICH CANNOT BE CONSIDERED AS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREFORE, SECTION 68 WAS NOT APPLICA BLE. WE ARE HOWEVER UNABLE TO ACCEPT THE ARGUMENT. THOUGH SECTION 68 OF THE ACT MAY NOT BE STRICTLY APPLICABLE, SINCE THE A SSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THE BANK STATE MENT CANNOT BE CONSIDERED AS THE ASSESSEES BOOKS OF ACCOUNT, O N THE BASIS OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF A. GOVINDARAJULU MUDALIAR VS. CIT (1958)(34 ITR 807), IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THE CASH RECEIVED BY HIM AND IF THERE IS NO EXPLANATION OR ITA NO.1529/13 5 ACCEPTABLE EVIDENCE TO PROVE THE NATURE AND SOURCE OF THE RECEIPT, THE AMOUNT MAY BE ADDED AS THE ASSESSEES INCOME ON GENERAL PRINCIPLES AND IT IS NOT NECESSARY TO INVOKE SECTIO N 68, NOR IS IT NECESSARY FOR THE INCOME TAX AUTHORITIES TO POINT O UT THE SOURCE OF THE MONIES RECEIVED. EVEN IF SECTION 68 IS NOT APP LICABLE, THE CASH DEPOSIT IN THE BANK CAN BE ASKED TO BE EXPLAINED BY THE ASSESSEE UNDER SECTION 69 OR SECTION 69B OF THE ACT. THUS, IT CAN BE SEEN THAT THE ONUS IS PLACED UPON T HE ASSESSEE TO EXPLAIN THE SOURCES FOR MAKING THE BANK DEPOSITS UNDER GENE RAL PRINCIPLES AND FURTHER, IN ANY CASE, THE ASSESSEE IS REQUIRED TO E XPLAIN THE SOURCES FOR MAKING DEPOSITS U/S 69 OF THE ACT. 8 . THE ASSESSEE HAS FILED CAPITAL, INCOME A ND DRAWING DETAILS AT PAGE 144 OF THE PAPER BOOK. A PERUSAL OF THE SAME REVEALS THAT THE ASSESSEE HAD BEEN SHOWING HIGHER INCOME IN AY 2001- 02, 2002-03, 2005-06 TO 2009-10 WHEN COMPARED TO THE OTHER YEARS . WE ALSO NOTICE THAT THE ASSESSEE HAS SHOWN HIGHER DRAWINGS AMOUNT IN AY 2006-07, 2008-09 AND 2009-10 AND IT SHOWS THAT THE ASSESSEE MIGHT HAVE TAKEN SINCERE EFFORTS TO SHOW THE CORRECT CAPITAL BALANCE . WE HAVE ALREADY NOTICED THAT THE LD CIT(A) HAS EXPRESSED THE VIEW T HAT THE ASSESSEE MIGHT HAVE SAVED RS.2.00 LAKHS OVER THE YEARS. HOW EVER, THE LD CIT(A) HAS FAILED TO GIVE RELIEF AT LEAST TO THE EXTENT OF RS.2.00 LAKHS, AS ESTIMATED BY HIM. ANOTHER IMPORTANT POINT TO BE N OTED HERE IS THAT THE LD CIT(A) DID NOT TAKE INTO ACCOUNT THE OPENING CAPITA L BALANCE THAT WAS AVAILABLE WITH THE ASSESSEE, I.E., THE LD CIT(A) HA S CONSIDERED THE INCOME DECLARED BY THE ASSESSEE AND NOT THE OPENING CAPITAL BALANCE. IN THE WORKING SHEET PLACED AT PAGE 144 OF THE PAPER B OOK, THE ASSESSEE HAS SHOWN OPENING CAPITAL BALANCE AS ON 1.4.1991 AT RS.22,06,210/- . CONSIDERING THE INCOME LEVELS DECLARED BY THE ASSES SEE THEREAFTER, THE ITA NO.1529/13 6 SAME APPEARS TO BE VERY MUCH ON THE HIGHER SIDE. A T THE SAME TIME, THE AVAILABILITY OF OPENING CAPITAL BALANCE CANNOT BE D ISCOUNTED ALTOGETHER. BESIDES THE ABOVE, WE ARE OF THE VIEW THAT IT MAY N OT BE PROPER TO ALTOGETHER REJECT THE CLAIM OF SAVINGS FROM PAST IN COME ALSO. ACCORDINGLY, BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE, IF THE AMOUNT SAVED OUT OF OPENING CAPITAL BALANCE AND PAST INCOME IS ESTIMATE D AT RS.6,00,000/- (RUPEES SIX LAKHS ONLY). WE ORDER ACCORDINGLY. TH E ASSESSING OFFICER IS DIRECTED TO GRANT RELIEF OF RS.6,00,000/-(RUPEES SIX LAKHS ONLY) FROM OUT OF THE IMPUGNED ADDITION. THE ORDER OF LD CIT(A) S TANDS MODIFIED ACCORDINGLY. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS PARTLY ALLOWED. + ,2 +, - 1 3, - , 45 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MAY, 2014. 1 - /0% 6 72 28 TH MAY,2014 0 - 8 SD/- SD/- ( . . '# . ) (DR.STM PAVALAN) ( . . ) (B.R.BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 7 DATED 28/05/2014 ). . /PKM , . / PS 1 1 1 1 - -- - ),9 ),9 ),9 ),9 :9%, :9%, :9%, :9%, / COPY OF THE ORDER FORWARDED TO : 1 1 1 1 / BY ORDER, ; ;; ; / 4 4 4 4 ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. < ( ) / THE CIT(A), MUMBAI. 4. < / CIT 5. 9=8 ), , , / DR, ITAT, MUMBAI 6. 8 > / GUARD FILE. *9, ), //TRUE COPY//