Sri Vinay Gangwal, Hyderabad V. Income Tax Officer, Ward-15(1), Hyderabad

ITA 157/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3039 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 23-01-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 22-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R MOHANKUMAR
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Unexplained cash credit; Peak credit
• Section: 143(3); 142(1); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 15 7 / HYD/201 8 ASSESSMENT YEAR: 20 1 3 - 14 SRI VINAY GANGWAL, HYDERABAD. PAN A CWPG 4396F VS. INCOME - TAX OFFICER, WARD 15(1) , HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: S HRI B. SATYANARAYANA MURTHY REVENUE BY: SHRI R. MOHAN KUMAR DATE OF HEARING: 23 / 0 1 / 201 9 DATE OF PRONOUNCEMENT: 27 / 0 2 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 7 , HYDERABAD, DATED, 1 6 / 11 /201 7 FOR AY 20 1 3 - 14. 2. BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE , AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SHARES IN STOCK EXCHANGES OF BSE & NSE THROUGH ITS BROKERS M/S STEEL CITY SECURITIES LTD. AND M/S ACUMEN CAPITAL MARKET (INDIA) LTD, AND A PARTNER IN THE FIRM M/S SIDHARATHA DISTRIBUTORS, FILED HIS RETU RN OF INCOME FOR THE AY 2013 - 14 ON 30/09/2013 ADMITTING TOTAL INCOME AT RS. NIL. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED ON THE ASSESSEE. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE AC T ON 24/03/2016 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 3,80,475/ - TOWARDS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 2 2.1 THE RELEVANT PORTION OF THE ISSUES DIS CUSSED BY THE AO IN THE ASSESSMENT ORDER ARE EXTRACTED BELOW, FOR THE SAKE OF CLARITY: '2. ON VERIFICATION OF THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE PARTNERSHIP FIRM MIS SIDDHARTHA DISTRIBUTORS, IT IS NOTICED THAT THERE ARE CERTAIN CREDIT S IN THE ACCOUNT. TO VERIFY THE SOURCES FOR THE CREDITS, VIDE THIS OFFICE NOTICE U/S. 142(1) DATED 02.12.2015, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE SOURCES FOR THE AMOUNTS CREDITED TO HIS CAPITAL ACCOUNT WITH MIS. SIDDHARTHA DISTRIBUTORS. I N RESPONSE, THE ASSESSEE VIDE HIS LETTER DATED 04.3.2016, HAS REPLIED AS UNDER : 'AS ENQUIRED BY YOU I AM SUBMITTING HEREWITH THE FOLLOWING REGARDING DEPOSITS IN MIS. SIDDHARTHA DISTRIBUTORS IN MY CAPITAL ACCOUNT DURING AY 2013 - 14. FOR A. Y. 2013 - 14 IN MY CAPITAL ACCOUNT TOTAL CREDITS ARE RS.15,55,032 / - AND TOTAL DEBITS ARE RS. 8, 14, 9621 - . OUT OF TOTAL CREDITS OF RS.15,55,0321 - REDUCED BY AN AMOUNT OF RS.4,93,8471BEING REMUNERATION AND RS.50,846/ - BEING NET PROFIT OF THE FIRM RESULTANT TOTAL CREDITS WI LL BE ONLY RS.10,10,339 (15,55,0324,93,847 - 50(846) FINANCIAL YEAR ASST. YEAR DEPOSITS WITHDRAWALS CASH ON HAND 2009 - 10 2010 - 11 241500 827100 585600 2010 - 11 2011 - 12 963000 1080775 117775 2011 - 12 2012 - 13 569000 434890 ( - ) 134110 CASH AVAILABLE AS ON 01.04.2012 569265 THE DEPOSITS IN MY CAPITAL ACCOUNT WERE ONLY OUT OF MY PAST SAVINGS AND ALSO WITHDRAWALS IN THE YEAR UNDER CONSIDERATION. I HAVE ALSO TAKEN HAND LOAN OF RS.2,00,0001 - FROM HUF OF SRI GAURAV MAHAVIR GANGWAL MY COUSIN (MY FATHER'S OWN BROTHER'S SON) ON 04.11.2012, SCANNED COPY OF CONFIRMATION LETTER ENCLOSED FOR YOUR READY REFERENCE. MY FATHER SRI KANTI KUMAR GANGWAL (PAN ACAPG1362R), WHO IS ALSO A PARTNER IN M/S SIDDHARTHA DISTRIBUTORS, DIRECTLY DEPOSITED IN BANK ON M Y BEHALF RS. 1,00,000 / - ON 08.2.2013, CONFIRMATION LETTER ENCLOSED. I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 3 THUS YOU WILL APPRECIATE THAT DEPOSITS WERE OUT OF MY PAST SAVINGS AND HAND LOANS TAKEN. I HAVE ALREADY EXPLAINED YOU THAT I DO NOT HAVE ANY OTHER INCOME OTHER THAN MENTIONED ABOVE. ' 3. THE CONTENTION OF THE ASSESSEE IS VERIFIED AND FOUND TO BE NOT ACCEPTABLE AND THE SAME IS DISCUSSED AS UNDER: - THE ASSESSEE HAS STATED THAT THERE IS AVAILABILITY OF CASH AS ON 1.4.2012 TO THE TUNE OF RS. 5, 69,265/ - AS SHOWN IN THE TABLE ABOVE AND HAS SUBMITTED HIS CAPITAL ACCOUNT IN THE BOOKS OF M/S. SIDDHARTHA DISTRIBUTORS FOR THE FINANCIAL YEARS 2009 - 10 TO 2011 - 12 AND ON VERIFICATION OF THE SAME, A STATEMENT WAS DRAWN WHEREIN IT IS SEEN THAT WITHDRAWALS MADE BY THE ASSESSEE DATE WISE FROM 1.4.2009 AND SUBSEQUENT DEPOSITS MADE IMMEDIATELY TO WITHDRAWALS, THERE IS DEFICIT CASH BALANCE TO THE TUNE OF RS. 11,41,682 / - AS ON 08.5.2010, WHILE MAKING A DEPOSIT OF RS. 19,00,000/ - IN THE SAID FIRM. THE ASSESSEE APPEARED AND VIDE THIS OFFICE ORDER SHEET NOTING DT. 23.3.2016, THE ABOVE STATEMENT WAS SHOWN TO THE ASSESSEE BRINGING OUT THE FACT THAT THERE ARE CASH DEFICITS WH ILE MAKING DEPOSITS BY HIM IN M/S. SIDDHARTHA DISTRIBUTORS AND HE WAS ASKED TO SHOW CAUSE AS TO HOW HIS CONTENTION THAT THERE IS AVAILABILITY OF CASH AS ON HAND ON 1.4.2012 CAN BE ACCEPTED IN VIEW OF THE ABOVE. HE WAS ALSO ASKED TO SHOW CAUSE THAT AS HE HA S NOT PROPERLY EXPLAINED HIS CASE AND AS THE INFORMATION SUBMITTED BY THE ASSESSEE IS NOT RELIABLE, IT IS PROPOSED TO ADOPT THE PEAK CREDIT FOR THE CASH DEPOSITS MADE BY THE ASSESSEE FOR THE FINANCIAL YEAR 2012 - 13, RELEVANT TO ASST. YEAR 2013 - 14. IN RESPON SE, THE SUBMITTED A LETTER DATED 23.3.2016, WHICH READS AS UNDER: - 'WITH REFERENCE TO THE A BOVE, I WOULD LIKE TO INFORM YOU THAT I HAVE SUBMITTED ALL THE RE QUIRED PAPERS FROM TIME TO TIME ASKED BY YOU AND ALSO EXPLAINED YOU REGARDING DEPOSITS AND WITHDRAWALS DONE IN SIDDHARTHA DISTRIBUTORS WHERE I AM A PARTNER. ' IN VIEW OF THE ABOVE AND DESPITE THE FACT THAT THE ASSESSEE'S ATTENTION WAS DRAWN TO THE CASH D EFICITS OBSERVED IN THE EARLIER FINANCIAL YEARS AND SHOW CAUSED AS TO WHY PEAK CREDIT SHOULD NOT BE ADOPTED FOR THIS ASST. YEAR, THE ASSESSEE COULD NOT FURNISH ANY PROPER REPLY OR ANY DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM. DURING DISCUSSIONS, THE A SSESSEE'S CONTENTION THAT THERE WAS DEBIT OPENING BALANCE IN HIS CAPITAL ACCOUNT OF RS. 22,21,213/ - ALSO CANNOT BE ACCEPTED FOR I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 4 THE REASON THAT IF THERE WAS AVAILABILITY OF CASH ON HAND, THERE WAS NO NEED FOR THE ASSESSEE TO ON THE FIRST HAND, WITHDRAW CAS H FROM THE PARTNERSHIP FIRM FROM TIME TO TIME, STARTING FROM THE FINANCIAL YEAR 2009 - 10 WHEREIN THERE WAS OPENING DEBIT BALANCE OF RS. 28,51,182/ - . THIS CLEARLY SHOWS THAT THE ASSESSEE HAS NO EXPLANATION TO OFFER AND HENCE, THE PEAK CREDIT FOR THE FINANCIA L YEAR 2012 - 13 RELEVANT TO ASST. YEAR 2013 - 14 IS WORKED OUT AS UNDER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME TAX ACT. STATEMENT OF PEAK CREDIT FOR THE FINANCIAL YEAR 2012 - 13 RELEVANT TO AY 2013 - 14 DATE OPENING BALANCE CASH WITHDRAWAL CASH DEPOSITS BALANCE DEFICIT 1.4.2012 -- 5477 NIL 5477 4.4.2012 -- 10000 -- 10,000 -- 5.4.2012 10000 -- 10000 NIL -- 05.4.12 TO 07.5.12 NIL (TOTAL) 44269 44269 09.05.2012 44269 -- 32000 12269 -- 23.5.2012 12269 40000 -- 52269 -- 29.5.2012 52269 200000 -- 252269 -- 1.6.2012 252269 -- 10000 242269 -- 2.6.12 TO 31.8.12 242269 30279 272548 -- 6.9.2012 272548 -- 8510 264038 -- 25.9.12 TO 2.11.12 264038 53150 317188 -- 9.11.2012 317188 -- 6000000 NIL 282812 9.11.12 TO 01.2.13 NIL 207814 -- 207814 -- 7.2.2013 207814 -- 200000 7814 -- 8.2.2013 7814 -- 100000 NIL 92186 8.2.13 TO 4.313 164560 164560 -- 25.3.2013 164560 -- 20000 144560 -- 26.3.13 TO 31.3.13 144560 64884 -- 209444 -- 31.3.2013 209444 -- 24352 185092 -- 31.3.2013 185092 50846* 493847** 185092 -- TOTAL PEAL CREDIT ARRIVED AT FOR F.Y. 2012 - 13 380475 * PROFIT FROM MIS. SIDDHARTHA DISTRIBUTORS - RS.50,846 / - **INTEREST FROM MIS. SIDDHARTHA DISTRIBUTORS - RS.4,93,847 / - 4. THE ASSESSEE'S CONTENTION REGARDING RECEIPT OF LOANS FROM SRI GAURAV GANGWAL (ASSESSEE'S COUSIN) AND SRI KANTI KUMAR GANGWAL (ASSESSEE'S FATHER) ALSO CANNOT BE I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 5 ACCEPTED. THE CONFIRMATION GIVEN BY SRI GAURAV GANGWAL ONLY STATES THAT HE HAS GIVEN LOAN ON 4.11.2012 AND THE BALANCE OUTSTANDING AS ON 31.3.2013 IS RS. 2 LAKHS AND THE INTEREST IS LOAN FREE. THE ASSESSEE HAS NOT FURNISHED AS TO WHEN AND HOW MUCH LOAN WAS TAKEN, THE MODE OF RECEIPT WHETHER IN CASH OR CHEQUE AND SOURCES FOR SRI GAURAV TO GIVE THE LOAN AND HAS ALSO NOT FURNISHED THE RETURN OF INCOME OF SRI GAURAV. WITH REGARD TO THE LOAN FROM HIS FATHER SRI KANTI KUMAR GANGWAL, THE ASSESSEE IS ONLY STATING THAT HIS FATHER DIRECTLY DEPOSITED RS.1 LAKH INTO THE ASSESSEE'S BANK ACCOUNT AND HAS FURNISHE D A COPY OF THE RETURN OF INCOME OF HIS FATHER FOR ASST. YEAR 2013 - 14. APART FROM THE ABOVE, HE HAS NOT FURNISHED ANY OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CONTENTION. IT IS PERTINENT TO MENTION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED A LETTER DATED 20.8.2015, WHEREIN HE HAS SUBMITTED AS UNDER: - ' ... .4. I HAVE TAKEN UNSECURED LOANS FROM MY FAMILY MEMBERS AND OTHER FOR THE PURPOSE OF SHARE BUSINESS. NO NEW UNSECURED LOAN WAS TAKEN DURING THE ASSESSMENT YEAR 20 13 - 14. LOANS WERE TAKEN IN THE EARLIER YEARS. LOAN CONFIRMATIONS LETTERS ARE ATTACHED. ' FROM THE ABOVE, IT CAN BE SEEN THAT THE STATEMENT MADE BY THE ASSESSEE IN HIS LETTER DATED 04.3.2016 THAT THE HE HAD TAKEN UNSECURED LOANS DURING THE YEAR UNDER CONS IDERATION IS CONTRADICTORY TO THE STATEMENT MADE BY HIM EARLIER IN THE LETTER DATED 20.08.2015 THAT HE HAD NOT TAKEN ANY FRESH LOANS DURING THE YEAR. FURTHER, AS SEEN FROM THE ASSESSEE'S BALANCE SHEET AS ON 31.3.2013, IN THE LIST OF UNSECURED LOANS, THE NA ME OF SRI GAURAV GANGWAL IS NOT APPEARING AT ALL AND WITH REGARD TO SRI K.S. GANGWAL (ASSESSEE'S FATHER), AN AMOUNT OF RS. 5,65,332/ - IS APPEARING AS THE CLOSING BALANCE AS ON 31.3.2013. FROM THE CONFIRMATION LETTER GIVEN BY SRI K.S. GANGAWAL, IT IS MENTIO NED THAT THE LOAN WAS GIVEN IN THE YEAR 2004 - 05. FROM THE ABOVE, IT IS VERY CLEAR THAT THIS IS ONLY AN AFTERTHOUGHT BY THE ASSESSEE TO COVER UP THE DEFICIT CASH BALANCE AFTER THIS OFFICE CALLED FOR THE SOURCES FOR THE AMOUNTS CREDITED TO HIS CAPITAL ACCOUN T WITH M/S. SIDDHARTHA DISTRIBUTORS VIDE NOTICE U/S. 142(1) DATED 02.12.2015. IN VIEW OF ALL THE ABOVE, THE TOTAL PEAK CREDIT ARRIVED AT RS. 3,80,475/ - IS TREATED AS UNEXPLAINED CASH CREDITS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ' I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 6 3. AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) OBSERVED THAT I N THE COURSE OF APPELLATE PROCEEDINGS, THE A SSESSEE TRIED TO RECONCILE, BUT FAILED TO EXPLAIN WHY THE CONTRADICTORY STATEMENTS FOR THE LOANS GIVEN BY R ELATIVES WERE MADE IN THE FIRST PLACE. THE RECONCILIATION GIVEN BY THE AR OF THE A SSESSEE IN THE COURSE OF APPELLATE PROCEEDINGS WE RE NOT VERIFIABLE. THE SOURCES FOR THE LOAN AMOUNTS PRODUCED BEFORE ASSESSING OFFICER WERE NOT VERIFIABLE. IN VIEW OF THE ABO VE OBSERVATIONS, THE CIT(A) CONFIRMED THE ORDER OF AO. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING 7 GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH IS AGAINST SUSTAINING THE ADDITION OF RS. 3,80,475/ - MADE BY THE AO AS UNEXPLAINED CASH CREDIT. 6. THE LD. AR SUBMITTED THAT THE A.O HAS CONSIDERED THE DEPOSIT MADE BY THE ASSESSEE IN THE FIRM ON 08.05.2010 AS CASH DEPOSIT TO THE EXTENT OF RS. 19 LAKHS, WHICH IN FACT IS A CHEQUE DEPOSIT. THE CO PIES OF THE DEPOSITS ARE FILED IN THE PAPER BOOK. IN CASE , IF THE A B O V E DEPOSITS ARE R EMOVED, THE ASSESSEE WILL HAVE ENOUGH CASH BALANCE TO COVER THE DEFICIT CASH BALANCE IN THE HAND. 7. THE LD. DR RELIED ON THE ORDER OF THE REVENUE AUTHORITIES. 8. CONSIDERING THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RE C ORD. WE NOTICE THAT T HE ASSESSEE HAS MADE CASH TRANSACTIONS WITH THE FIRM NAMELY M/S. SIDDHARTH DISTRIBUTORS. THE ASSESSEE WAS HABITUALLY CARRYING ON DEPOSITING IN THE FIRM IN CASH AS WELL AS CHEQUES AND I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 7 WITHDRAWING IN CASH, THIS WAS NOTICED DURING THE ASSESSMENT PROCEEDINGS AND THE A.O DRAWN A STATEMENT OF DEPOSITS AND WITHDRAWALS MADE BY THE ASSESSEE FROM 01.04.2009 ONWARDS. THE A.O MADE A REFERENCE TO THE DATE OF DEPOSITS BY ASSESSEE ON 08.05.2010 OF RS. 19 LAKHS AND ON THAT DAY, THE STATEMENT SHOWED THE DEFICIT CASH BALANCE OF RS. 11,41,682/ - . THE A.O GAVE REFERENCE TO THIS ONLY TO HIGHLIGHT THAT ASSESSEE USED TO WITHDRAW MORE FUNDS THAN IN HIS CREDIT. THE A.O HAS NOT APPLIED THE DEPOSIT OF RS. 19 LAKHS AS CASH DEPOSITS IN HIS STATEMENT. HOWEVER, ASSESSEE WAS DEALING WITH T HE A.Y 2013 - 14 AND THE A.O HAS NOT APPLIED ANY INFERENCE FROM THE EARLIER YEAR CASH BALANCES. THEREFORE, THE SUBMISSIONS OF THE ASSESSEE ON THE DEPOSIT ON 08.05.2010 HAS NO IMPLICATION . 8.1 AT THE SAME TIME, WE NOTICE THAT A.O APPLIED PEAK CREDIT METHOD TO DETERMINE THE EXCESS WITHDRAWAL FROM THE FIRM. WE DO NOT UNDERSTAND THE LOGIC OF TAKING THE EXCESS WITHDRAWN ON EACH DAY AND ADDING THE SAME AS PEAK CREDIT. THE CONCEPT OF PEAK CREDIT IS NOT UNDERSTOOD BY THE A.O. WE NOTICE FROM THE LEDGER EXTRACT OF CAPITAL ACCOUNT BY THE ASSESSEE IN THE FIRM, THE ASSESSEE HAS DEPOSITED RS. 9,80,510/ - AND WITHDRAWN RS. 7,71,025/ - , WE HAVE NOT CONSIDERED THE JOURNAL ENTRIES T O CREDIT YEAR ENDED PROFIT. CONSIDERING THE A B O V E, ASSESSEE HA S TO EXPLAIN TO THE EXTENT OF RS. 2,09,485/ - . SINCE, THE ASSESSEE HAS NOT EXPLAINED THE ABOVE PROPER L Y, THE A.O CAN DETERMINE THIS AMOUNT AS UNEXPLAINED CREDIT , NOT BASED ON PEAK CREDIT . WE NOTICE THAT ASSESSEE HAS EXPLAINED DEPOSIT OF RS. 2,00,000/ - FROM HIS COUSIN ON 07 .02.2012, HENCE, WE CANNOT ACCEPT THIS BECAUSE THIS TRANSACTION T OOK PLACE IN THE PREVIOUS ASSESSMENT YEAR. WITH REGARD TO DEPOSIT FROM HIS FATHER, THIS ALSO REFERS TO PREVIOUS YEAR. THEREFORE, WE DIRECT THE A.O TO MAKE ADDITION U/S 6 9 OF THE ACT TO THE E XTENT OF RS. 2,09,485/ - . I.T.A. NO. 157 /HYD/18 SRI VINAY GANGWAL, H YD. 8 ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. P RONOUNCED IN THE OPEN COURT ON 27 TH FEBRUA RY, 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH FEBRUARY , 201 9. KV COPY FORWARDED TO: 1. SHRI VINAY GANGWAL, C/O VENUGOPAL & CHENOY, CAS, 4 - 1 - 889/16/2, TILAK ROAD, HYDERABAD 500 001 2 . IT ) , WARD 15(1), , HYDERABAD . 3 . CIT (A) - 7 , HYDERABAD 4. PR. CIT 7 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE