Shri Prahladray M.Shah, Nadiad V. The ACIT.,Kheda Circle, Nadiad

ITA 1763/AHD/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6022 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-05-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 25-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C PIPARA AR SHRI K C MATHEWS
• Keywords: Income from undisclosed sources; Principle of natural justice; Peak credit

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT (S) RESPOND- ENT(S) 1. 1763/AHD/2010 1998-1999 PRAHLADRAY M.SHAH 23, SHYAMKUNJ SOCIETY B/H.VAISHALI CINEMA NADIAD, DISTRICT KHEDA PAN : AGTPS 8575 P THE ASST.CIT KHEDA CIRCLE NADIAD 2. 1764/AHD/2010 1999-2000 -DO- -DO- 3. 1765/AHD/2010 2000-01 -DO- -DO- 4. 1766/AHD/2010 2001-02 -DO- -DO- 5. 1767/AHD/2010 2002-03 -DO- -DO- 6. 1768/AHD/2010 2003-04 -DO- -DO- 7. 1769/AHD/2010 1998-1999 -DO- -DO- 8. 1770/AHD/2010 1999-2000 -DO- -DO- 9. 1771/AHD/2010 2000-01 -DO- -DO- 10. 1772/AHD/2010 2001-02 -DO- -DO- 11. 1773/AHD/2010 2002-03 -DO- -DO- 12. 1774/AHD/2010 2003-04 -DO- -DO- ASSESSEE BY : SHRI G.C. PIPARA, AR REVENUE BY : SHRI K.C.MATHEWS, SR.DR $'' ( & / / / / DATE OF HEARING : 27/05/2014 *+, ( & / DATE OF PRONOUNCEMENT : 27/05/2014 - / O R D E R PER BENCH : THESE BUNCH OF 12 APPEALS BY THE ASSESSEE (SIX AR E QUANTUM APPEALS AND ANOTHER SIX ARE PENALTY APPEALS) ARE DI RECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TA X(APPEALS)-IV, BARODA (CIT(A) FOR SHORT) ALL IDENTICALLY DATED 30/03/20 10 FOR ASST.YEARSS 1998-99 TO 2003-04 RESPECTIVELY. SINCE ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE, THESE WERE HEARD TOGE THER AND ARE BEING ITA NOS. 1763 TO 1768/AHD/2010 AND ITA NOS.1769 TO 1774/AHD/2010 SHRI PRAHALADRAY M.SHAH VS. ACIT ASST.YEARS 1998-99 TO 2003-04 RESEPECTIVELY - 2 - DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. THE GROUNDS ARE IDENTICAL IN QUANTUM APPEALS AS WELL AS IN PENALTY APPEALS. EXTRACTED FROM ITA NO.1763/AHD/2010-AY 1998-99 (QUA NTUM APPEAL) 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FAC TS IN PASSING THE IMPUGNED APPELLATE ORDER WITHOUT CONFRONTING THE AP PELLANT WITH THE A.O/S REMAND REPORT AND THE FINDINGS ARRIVED THEREI N FOR REBUTTAL THOUGH HAVING RELIED UPON THE SAME WHILE DECIDING T HE ISSUES IN DISPUTE. THE IMPUGNED ORDER THUS REQUIRES TO BE HELD AS BAD IN LAW, THE SAME BEING IN VIOLATION OF THE PRINCIPLES OF NATURAL JUS TICE AND EQUITY. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,50,000/- OUT OF TOTAL ADDITION OF RS.35,27,200/- MADE BY THE A.O. ON ACCOUNT OF NON-OPERATIVE FINANC E. THE SAID ADDITION BEING BASED ON ESTIMATES AND THE BANK ACCO UNT IN RESPECT OF WHICH THE SAID ESTIMATE IS MADE HAVING BEEN DULY RE FLECTED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, WHICH WERE DULY PRODU CED BEFORE THE A.O. IN THE REMAND PROCEEDINGS AND ALSO IMPOUNDED BY THE A.O., THE IMPUGNED ESTIMATED ADDITION OF RS.2,50,000/-BEING P URELY BASED ON ESTIMATES, SURMISES AND WITHOUT ANY MATERIAL IN SUP PORT THEREOF REQUIRES TO BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.4,04,38,563/- ON ACCOUNT OF OPERATIVE FINANCE WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS AND SUBMISSIONS FILED. IN VIEW OF FACTS OF THE CASE AND SUBMISSIONS FILED, THE IMPUGNED ADDITION OF RS.4,04,38,563/- TO THE EXTENT OF TRANS ACTIONS APPEARING IN FOUR UNACCOUNTED BANK ACCOUNTS ADMITTED BY THE APPE LLANT REQUIRES TO BE RESTRICTED ONLY TO THE AMOUNT OF PEAK CREDIT OF SUC H FOUR ACCOUNTS. 3.1 THE LEARNED CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN REJECTING THE APPELLANT'S PLEA FOR TAXING THE PEAK CREDIT IN RESPECT OF TRANSACTIONS APPEARING IN FOUR UNACCOUNTED BANK ACC OUNTS ADMITTED BY THE APPELLANT WHILE WRONGLY OBSERVING THAT THE THEO RY OF PEAK CREDIT IS APPLICABLE ONLY IN CASE OF CASH DEPOSITS AND NOT CH EQUE DEPOSITS. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE A.O. HIMSELF ON IDENTICAL FACTS WHILE MAKING ADDITIONS I N RESPECT OF UNACCOUNTED BANK ACCOUNTS IN CASE OF OTHER FAMILY M EMBERS OF THE ITA NOS. 1763 TO 1768/AHD/2010 AND ITA NOS.1769 TO 1774/AHD/2010 SHRI PRAHALADRAY M.SHAH VS. ACIT ASST.YEARS 1998-99 TO 2003-04 RESEPECTIVELY - 3 - APPELLANT HAS TAXED ONLY PEAK CREDIT EVEN IN CASE O F CHEQUE DEPOSITS. THUS, IN ABSENCE OF ANY CHANGE IN FACTS, THE LEARNE D A.O. WAS NOT JUSTIFIED IN TAXING ONLY THE CREDITS APPEARING IN T HE BANK ACCOUNTS. THE LEARNED CIT(A) WAS ACCORDINGLY NOT JUSTIFIED IN CON FIRMING THE SAID ACTION OF THE A.O. 3.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT BEING ENGAGED IN THE BUSINESS OF FINANCING, BOTH TH E DEBIT AND CREDIT ENTRIES APPEARING IN THE UNACCOUNTED BANK ACCOUNTS REQUIRES TO BE CONSIDERED SINCE THE DEBITS REPRESENTS FINANCE GIVE N AND CREDITS REPRESENT FINANCE RECEIVED BACK. THE APPELLANT STAT ES THAT IN ABSENCE OF DETAILS IN RESPECT OF EACH ENTRY, THE ONLY LOGICAL APPROACH WAS TO TAX THE PEAK CREDIT OF SUCH BANK ACCOUNTS WHICH COULD BE SA ID TO BE THE MAXIMUM AMOUNT ROTATED BY THE APPELLANT IN HIS FINA NCING BUSINESS DURING THE YEAR AND THE REASONABLE INCOME EARNED TH ERE FROM. 3.4 THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE CREDITS APPEARING IN THE BANK ACCOUNTS PER TAIN TO ADVANCES GIVEN IN EARLIER YEARS RECEIVED BACK DURING THE YEA R WHICH CANNOT BE TREATED AS INCOME FOR THE YEAR. THAT APART, THE INT ER BANK TRANSFER ENTRIES HAVING NOT BEEN ELIMINATED WHILE WORKING OU T THE INCOME ONLY ON THE BASIS OF CREDITS APPEARING IN THE UNACCOUNTE D BANK ACCOUNTS, THE IMPUGNED ADDITION OF RS.4,04,38,563/- ON ACCOUNT OF OPERATIVE FINANCE CONFIRMED BY THE LEARNED CIT(A) IS EVEN OTHERWISE I NCORRECT AND ILLOGICAL. 3.5 THE LEARNED CIT(A) FURTHER FAILED TO CONSID ER AND APPRECIATE THE FACT THAT THE INVESTMENTS MADE AND APPLICATION OF F UNDS EVEN AS PER ADDITIONS MADE BY THE A.O. [WITHOUT PREJUDICE TO CO RRECTNESS OF THE SAME], ARE MUCH LESS THAN THE AGGREGATE AMOUNT OF P EAK CREDIT WORKED OUT BY THE APPELLANT. THIS FACT ITSELF JUSTIFIES TH E THEORY OF PEAK CREDIT SINCE THE A.O. HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL OR EVIDENCE IN SUPPORT OF ANY OTHER INVESTMENTS, WHICH ARE OUT OF BOOKS OF ACCOUNT. ACCORDINGLY, TAXING THE ENTIRE CREDITS APPEARING IN THE BANK ACCOUNTS AS INCOME OF THE APPELLANT IS WHOLLY ILLOGICAL AND BAD IN LAW. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO RECOMPUTE THE ESTIMATED AND HYPOTHETICAL ADDITION OF RS.24,65,985/- ON ACCOUNT OF ALLEGED INTEREST INCOME ACCRUED ON NO N- OPERATIVE AND OPERATIVE FINANCE FOR A PERIOD OF 6 M ONTHS @ 15%. THE APPELLANT STATES THAT THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE A.O. ITA NOS. 1763 TO 1768/AHD/2010 AND ITA NOS.1769 TO 1774/AHD/2010 SHRI PRAHALADRAY M.SHAH VS. ACIT ASST.YEARS 1998-99 TO 2003-04 RESEPECTIVELY - 4 - TO WORK OUT THE INTEREST @ 9% ON THE ACTUAL DAY-TO- DAY CASH BALANCE AND NOT ON THE CLOSING CASH BALANCE WHICH IS WHOLLY ILLOGICAL. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,75,000/- ON ACCOUNT OF INVESTMENT IN FDR'S OUT OF INCOME FROM UNDISCLOSED SOURCES. IN VIEW OF FACTS O F THE CASE, THE SAID INVESTMENT IN FOR REQUIRES TO BE TREATED AS MADE OU T OF OR COVERED BY THE FUNDS AVAILABLE ON ACCOUNT OF INTANGIBLE ADDITI ONS MADE AND CONFIRMED ON ACCOUNT OF OPERATIVE FINANCE FOLLOWING THE SETTLED PRINCIPLE OF TELESCOPING. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MO DIFY OR DELETE ANY OF THE ABOVE GROUNDS AS WELL AS TO SUBMIT ADDIT IONAL GROUNDS AT THE TIME OF HEARING OF THE APPEAL. EXTRACTED FROM ITA NO.1769/AHD/2010-AY 1998-99 (PEN ALTY APPEAL) 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE PENALTY OF RS.1,47,29,204/- LEVIED BY THE A.O. U/S. 271(1)(C) OF THE ACT TO THE EXTENT OF ADDITIONS CONFIRMED BY HIM IN HE QUAN TUM APPEAL WITHOUT INDEPENDENT CONSIDERATION AND APPRECIATION OF FACTS OF THE CASE. IN VIEW OF ELABORATE FACTS AND SUBMISSIONS FILED COUPL ED WITH LEGAL POSITION, THE ENTIRE PENALTY OF RS.1,47,29,204/- U/ S.271(1)(C) OF THE ACT REQUIRES TO BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, M ODIFY OR DELETE ANY OF THE ABOVE GROUNDS AS WELL AS TO SUBMIT ADDIT IONAL GROUNDS AT HE TIME OF HEARING OF HE APPEAL. 2. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE P OINTED THAT THE LD.CIT(A) HAS SOUGHT REMAND REPORT FROM THE ASSESSI NG OFFICER. THIS REMAND REPORT WAS NOT SUPPLIED TO HIM DESPITE HAVIN G MADE A SUBMISSION BEFORE THE LD.CIT(A). HE FURTHER POINTED OUT THAT THIS IS A SECOND INNING. IN THE EARLIER ROUND, THE HONBLE TRIBUNAL (ITAT A BENCH AHMEDABAD) IN ITA NOS.1868 TO 1872/AHD/2007 & ITA N OS.1263 TO 1267/AHD/2008 FOR AYS 1998-99 TO 2002-03 VIDE ORDE R DATED 10/06/2008 HAD RESTORED THE APPEALS BACK TO THE FIL E OF LD.CIT(A) FOR A ITA NOS. 1763 TO 1768/AHD/2010 AND ITA NOS.1769 TO 1774/AHD/2010 SHRI PRAHALADRAY M.SHAH VS. ACIT ASST.YEARS 1998-99 TO 2003-04 RESEPECTIVELY - 5 - FRESH DECISION. HE SUBMITTED THAT THE TRIBUNAL HAD FOLLOWED THE DECISION PASSED IN ITA NOS.291 & 292/AHD/2008 FOR AY 2003-04 DATED 01/05/2008. HE POINTED OUT THAT ALTHOUGH THE LD.CI T(A) HAS REPRODUCED THE SUBMISSION OF THE ASSESSEE IN HIS ORDER, HE HA S NOT CONSIDERED THE REQUEST MADE FOR SUPPLY OF THE REMAND REPORT. HE HAS DRAWN OUR ATTENTION TOWARDS PAGE NO.28 OF THE LD.CIT(A)S ORD ER, WHEREIN HE HAS REPRODUCED THE SUBMISSION MADE BY THE ASSESSEE. HE HAS ALSO DRAWN OUR ATTENTION TOWARDS PAGE NO.408 OF THE PAPER-BOOK, WH EREIN THE SUBMISSION DATED 18/03/2010 IS ENCLOSED. THE LD.CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO T HE FILE OF LD.CIT(A) AND THE SAME MAY BE DECIDED AFTER SUPPLYING THE COP Y OF THE REMAND REPORT AND CONSIDERING THE SUBMISSION OF THE ASSESS EE ON THE SAID REMAND REPORT. 4. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT BOTH TH E AO AND THE LD.COUNSEL FOR THE ASSESSEE WERE PRESENT IN THE RE MAND PROCEEDINGS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITHOUT GOING INTO THE MERIT OF THE CASES, WE FIND THAT THE LD.CIT(A) HAS NOT SUPPLIED THE REMAND REPORT TO THE ASSESSEE. THE LD.CIT(A) OUGHT TO HAVE SUPPLIED THE REMAND REPORT TO THE ASSESSEE AND AFTER REVIEWING THE COMMENTS FROM THE ASSESSEE SHOULD HAVE DECIDED THES E APPEALS. THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, WE H EREBY SET ASIDE THE IMPUGNED ORDERS OF THE LD.CIT(A) AND RESTORE ALL T HESE APPEALS BACK TO THE FILE OF LD.CIT(A), WHO WILL ACCORDINGLY FIX THE HEARING OF THE APPEALS WITHIN SEVEN DAYS ON RECEIPT OF THIS ORDER AND PASS A FRESH ORDER, AFTER SUPPLYING THE REMAND REPORT AND CONSIDERING THE SUB MISSION OF THE ITA NOS. 1763 TO 1768/AHD/2010 AND ITA NOS.1769 TO 1774/AHD/2010 SHRI PRAHALADRAY M.SHAH VS. ACIT ASST.YEARS 1998-99 TO 2003-04 RESEPECTIVELY - 6 - ASSESSEE ON THE SAID REMAND REPORT. THE LD.CIT(A) IS FURTHER REQUESTED TO DISPOSE OF ALL THESE APPEALS AS EXPEDITIOUSLY AS PO SSIBLE PREFERABLY WITHIN THREE MONTHS ON RECEIPT OF THIS ORDER. THE ASSESSE E IS ALSO DIRECTED TO CO- OPERATE WITH THE LD.CIT(A) IN DISPOSING OF THESE AP PEALS EXPEDITIOUSLY. THUS, ALL THE APPEALS FILED BY THE ASSESSEE ARE ALL OWED BUT FOR STATISTICAL PURPOSES. 6. IN THE RESULT, ALL THE 12 APPEALS OF THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN COURT ON TUESDAY, THE 27TH OF M AY, 2014 AT AHMEDABAD SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER 0.., '.../ T.C. NAIR, SR. PS - ( 1&2 32,& - ( 1&2 32,& - ( 1&2 32,& - ( 1&2 32,&/ COPY OF THE ORDER FORWARDED TO : 1. 45 / THE APPELLANT 2. 1645 / THE RESPONDENT. 3. ## & $7 / CONCERNED CIT 4. $7() / THE CIT(A)-IV, BARODA 5. 2'%8 1& , , / DR, ITAT, AHMEDABAD 6. 89 :' / GUARD FILE. -$ -$ -$ -$ / BY ORDER, 62& 1& //TRUE COP Y// ; ;; ;/ // / #< #< #< #< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 27.05.14(DICTATION-PAD 7-PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.05.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEF ORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.27.5.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.5.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER