PRAHLAD V. PANCHAL, MUMBAI V. ITO 25(2)(2), MUMBAI

ITA 1531/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83747 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER SHRI O P MEENA
• Assessee Lawyers: N M PORWAL
• Keywords: Unexplained cash credit
• Section: 68; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI , , ! '#$ , % & BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 1531/MUM/2009 ( ' ' ' ' / ASSESSMENT YEAR : 2005-06 ./I .T.A. NO. 918/MUM/2010 ( ' ' ' ' / ASSESSMENT YEAR : 2006-07 ./I .T.A. NO. 3105/MUM/2013 ( ' ' ' ' / ASSESSMENT YEAR : 2005-06 SHRI PRAHLAD V. PANCHAL, 16, SINDHI CHAWL, 6 TH DAULAT NAGAR, BORIVALI(E), MUMBAI-400 066 / VS. THE ITO 25(2)(2), BANDRA KURLA COMPLEX, MUMBAI-400 051 ( % ./ ) ./ PAN/GIR NO. : AADPP 4559Q ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI N.M. PORWAL +,(* . - / RESPONDENT BY: SMT. PARMINDER SHRI O.P. MEENA . /0% / DATE OF HEARING :10.09.2014 12' . /0% / DATE OF PRONOUNCEMENT :17.09.2014 SHRI PRAHLAD V. PANCHAL 2 3 / O R D E R PER N.K. BILLAIYA, AM: ITA NO. 1531/M/09 AND 918/M/2010 ARE PREFERRED FOR ASSESSMENT YEARS 2005-06 AND 2006-07. ITA NO. 3105/M/2013 IS AN APPEAL AGAINST THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT FOR A .Y. 2005-06. COMMON GRIEVANCE IN BOTH THE YEARS RELATE TO THE ADDITION MADE ON ACCOUNT OF THE CREDIT ENTRIES FOUND IN THE BANK PASSBOOK AS UNEXPL AINED CREDIT. 2. WE ARE TAKING THE FACTS OF A.Y. 2005-06. THE AS SESSEE FILED THE RETURN OF INCOME ON 11.12.2006 DECLARING TOTAL INCO ME AT RS. 1,01,430/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. THE AO P ROCEEDED WITH THE AIR INFORMATION REGARDING CASH DEPOSIT WITH MANDVI CO. OPERATIVE BANK LTD. (NOW SARASWAT CO. OP. BANK LTD). ON GOING TH ROUGH THE BANK STATEMENT, THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE HAS MADE THE DEPOSIT AGGREGATING TO RS. 87,88,028/-. THE ASSESS EE WAS ASKED TO EXPLAIN THE NATURE AND SOURCE OF THE DEPOSITS APPEA RING IN THE BANK ACCOUNT. 2.1. NO ONE ATTENDED THE ASSESSMENT PROCEEDINGS. T HE AO WAS FORCED TO PROCEED U/S. 144 OF THE ACT. ON RECEIVING NO RE PLY, THE AO TREATED THE ENTIRE DEPOSIT AMOUNTING TO RS. 87,88,028/- MADE IN SARASWAT CO. OP. BANK LTD. AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND COMPLETED THE ASSESSMENT. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). BEFORE THE LD. CIT(A) IT WAS PLEADED THAT THE ASSESSEE WAS UND ER AURVEDIC SHRI PRAHLAD V. PANCHAL 3 TREATMENT AT HIS NATIVE PLACE AND THEREFORE COULD N OT ATTEND BEFORE THE AO. IT WAS ALSO CLAIMED THAT THE ASSESSEE IS DOING BUSINESS IN FABRICS ON ADVANCE CASH PAYMENT BASIS WITH A VERY LOW MARGIN O F PROFIT. THE CASH RECEIVED FROM THE PURCHASER IS DEPOSITED IN BANK AN D PAYMENT OUT OF THE SAME IS MADE TO THE SUPPLIER AND THE TRANSACTION IS SQUARED UP. IN ALTERNATIVE, THE ASSESSEE STATED THAT SAME CASH IS BEING ROTATED OVER AND OVER AGAIN IN VARIOUS TRANSACTIONS THEREFORE PEAK C REDIT THEORY SHOULD BE APPLIED TO THE FACTS OF THE CASE. THE LD. CIT(A) C ALLED FOR A REMAND REPORT FROM THE AO. THE AO IN HIS REMAND REPORT ST ATED THAT THE ASSESSEE HAS FAILED TO ATTEND AND FILE THE EVIDENCE REGARDIN G THE SOURCE OF SUCH HUGE CREDIT. THE AO IN HIS REMAND REPORT STATED TH AT THE ASSESSEE HAS NOT FURNISHED SALES TAX REGISTRATION NUMBER NOR HE HAS GOT HIS ACCOUNTS AUDITED. THE ASSESSEE HAS NEITHER FURNISHED DETAIL S OF SUNDRY CREDITORS/SUNDRY DEBTORS NOR HAS PRODUCED ANY DOCUM ENTARY EVIDENCE IN SUPPORT OF HIS CLAIM OF DOING BUSINESS IN FABRICS. THE ASSESSEE HAS ALSO NOT PRODUCED BILLS OF PURCHASE AND SALES TO SUBSTAN TIATE THE CLAIM THAT HE DID THE BUSINESS. 3.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S AND THE REMAND REPORT, THE LD. CIT(A) WAS CONVINCED THAT THE ASSES SEE COULD NOT EXPLAIN THE SOURCE OF CASH DEPOSITS IN BANK ACCOUNT FROM BI LLS OF SALES AND PURCHASES AND ACCORDINGLY CONFIRMED THE ADDITIONS M ADE BY THE AO. 4. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE FOR THE FIRST TIME TOOK A PLEA THAT TH E ASSESSEE IS INFACT ENGAGED IN THE HAWALA BUSINESS AND IN PURSUANCE OF THIS HAWALA BUSINESS, THE ASSESSEE IS LENDING HIS NAME. THE CASH DEPOSI T IN THE BANK IS THE CASH RECEIVED FROM VARIOUS PARTIES AND SIMULTANEOUSLY CH EQUE WAS ISSUED IN THE NAME OF THE PARTIES AND THE ACCOUNT WAS SQUARED UP. IN THE BARGAIN, SHRI PRAHLAD V. PANCHAL 4 THE ASSESSEE USE TO GET 0.1% AS COMMISSION. IT IS THE SAY OF THE LD. COUNSEL THAT CONSIDERING THE NATURE OF BUSINESS, TH E ENTIRE DEPOSITS IN THE BANK ACCOUNT CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STATED THAT THIS CLAIM OF BUSINESS IS TAKEN BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL. THEREFORE, THE SAME SHOULD NOT BE ENTERT AINED. AS THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF DEPOSITS, THE A O HAS RIGHTLY TREATED IT AS UNEXPLAINED INCOME OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVANT DO CUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US. IT IS AN UNDISPUTED F ACT THAT FOR THE FIRST TIME, THE ASSESSEE HAS TAKEN THE PLEA OF HAWALA BUS INESS. HOWEVER, A PERUSAL OF THE BANK STATEMENT SHOWS THAT THE CASH W AS DEPOSITED AND IMMEDIATELY CHEQUES WERE ISSUED, SUCH TRANSACTIONS ARE SUGGESTIVE OF HAWALA ACTIVITY, THEREFORE, CLAIM OF THE ASSESSEE C ANNOT BE BRUSHED ASIDE LIGHTLY. HOWEVER, SINCE THIS ASPECT WAS NEVER CONS IDERED BY THE AO, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE T HIS ISSUE TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO EXPLAIN THE TRANSA CTIONS OF ISSUING CHEQUES TO VARIOUS PARTIES TO THE SATISFACTION OF T HE AO. THE AO IS ALSO DIRECTED TO VERIFY THE TRANSACTIONS OF PAYMENT THRO UGH CHEQUE FROM THE RESPECTIVE BANK. THE ASSESSEE IS EXPECTED TO ATTEN D THE ASSESSMENT PROCEEDINGS THIS TIME AND FILE NECESSARY DETAILS/EX PLANATION AS AND WHEN CALLED UPON BY THE AO. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2,4,5,6,7,9,10 & 11. THESE GROUNDS ARE ACCORDINGLY DISMISSED AS NOT PRESSED. OTHER GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. SHRI PRAHLAD V. PANCHAL 5 ITA NO. 918/M/2010-A.Y. 2006-07 THE ISSUES INVOLVED ARE IDENTICAL WITH THE ISSUE IN ITA NO. 1531/M/09 FOR A.Y. 2005-06, THOUGH QUANTUM MAY DIFFER, THEREFORE, ON S IMILAR LINES, SIMILAR REASONS, THE APPEAL FILED BY THE ASSESSEE IN ITA NO . 918/M/10 FOR ASSESSMENT YEAR 2006-2007 IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 3105/M/2013 A.Y. 2005-06 9. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. AS WE HAVE SET ASIDE THE QUANTUM ADDITIONS TO THE FILES OF THE AO, WE ACCORDINGLY SE T ASIDE THE LEVY OF PENALTY TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AFTER DECIDING THE QUANTUM APPEAL. 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 4 DATED : 17 TH SEPTEMBER, 2014 . . ./ RJ , SR. PS SHRI PRAHLAD V. PANCHAL 6 3 3 3 3 . .. . +/ +/ +/ +/ 5 '/ 5 '/ 5 '/ 5 '/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 78 +/ , , / DR, ITAT, MUMBAI 6. 89 : / GUARD FILE. 3 3 3 3 / BY ORDER, ,/ +/ //TRUE COPY// ; ;; ; / < < < < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI