IMTIYAZ AMIRULLAH KHAN, MUMBAI V. ITO 17(2)(4), MUMBAI

ITA 2018/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3489 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUMAN RATNAM DARSI
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SANJAY ARORA , A M AND SHRI AMARJIT SINGH , J M ./ I.T.A. NO. 2018/MUM/2016 ( / ASSESSMENT YEAR: 2010 - 11 ) IMTIYAZ AMIR ULLAH KHAN GR. FLOOR, R. NO. 1A, NEAR MUNICIPLE MARKET, CH - 011, GATE NO. 6, SEWREE CROSS ROAD, WADALA, MUMBAI - 400 031 / VS. ITO - 17(2)(4), MUMBAI ./ ./ PAN/GIR NO. AZPK 9500 G ( / APPELLANT ) : ( / RESP ONDENT ) / APPELLANT BY : SHRI SHEKHAR GUPTA / RESPONDENT BY : DR. SUMAN RATNAM DARSI / DATE OF HEARING : 04.8.2016 / DATE OF PRONOUNCEMENT : 26 .8.2016 / O R D E R PER SANJA Y ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 32 , MUMBAI (CIT(A) FOR SHORT) DATED 18.2.2016 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME T AX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 20.3.2013 . 2. THE SOLE ISSUE ARISING IN THE INSTANT CASE IS THE EXTENT OF INCOME LIABLE TO BE BROUGHT TO TAX AGAINST UNDISCLOSED CASH DEPOSITS IN THE ASSESSEES B ANK ACCOUNT WITH ICICI BANK, BANDRA KURLA COMPLEX, MUMBAI ( A CCOUNT N UMBER 087401500061). 2 ITA NO. 2018/MUM/2016 (A.Y. 2010 - 11) IMTIYAZ AMIRULLAH KHAN VS. ITO 3. 1 THE ASSESSEE - INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE CURRENT YEAR ON 30.3.2012 , DECLARING AN INCOME AT RS.2,45,330/ - FROM, AS STATED, GARMENT BUSINESS, CARR IED OUT IN THE NAME AND STYLE JANNAT GARMENTS. IN EXPLANATION OF THE CASH DEPOSITS OF RS.88,45,200/ - IN HIS BANK ACCOUNT (SUPRA) DURING THE YEAR, O BS ERV ED BY THE ASSESSING OFFICER (A.O.) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT THE SAME REPRESENT S THE SALE PROCEEDS O F THE SALE OF GARMENTS AS RECEIVED FROM CUSTOMERS , WHO, BEING SMALL DEALERS, REMITTED THE SAME IN CASH. THERE W ERE CORRESPONDING WITHDRAWALS FOR AND TOWARD PURCHASE S AS WELL. THE ACCOUNTANT , HAD, AS AGAINST THE ACTUAL TURNOVER AND PURCHASES AT RS.92.30 LACS AND RS.89.31 LACS RESPECTIVELY, INCORRECTLY SHOW N THE PURCHASE AND SALE AT RS.12,62,774/ - AND RS.15,62,310/ - RESPECTIVELY. THE ASSESSEE BEING, HOWEVER, UNABLE TO FURNISH THE NAMES AND ADDRESSES OF THE PARTIES FROM WH OM THE PURCHASE S AND SALES WERE CLAIMED, THE SAID EXPLANATION WAS FOUND NOT ACCEPTABLE BY THE A.O. WHO, RELYING ON THE DECISIONS IN THE CASE OF ROSHAN DI HATTI VS. CIT [1977] 107 ITR 938 (SC) ; CIT VS. M. GANAPATHI MUDALIAR [1964] 5 3 ITR 623 (SC) ; KALE KHAN MOHAMMAD HANIF VS. CIT [1963] 50 IT R 1 (SC); AND NANAK CHANDRA LAXMAN DAS VS. CIT [1983] 140 ITR 151 (ALL) , TREATED THE ENTIRE CASH DEPOSIT ED (R S . 88.45 LACS) AS INCOME ASSESSABLE U/S. 68 OF THE ACT. HOWEVER, AS THE ASSESSEE HAD ALREADY DISCLOSED THE TURN OVER OF RS.15.62 LACS, CREDIT FOR THE SAME WAS ALLOWED AND ONLY THE EXCESS TURNOVER OF RS.72,82,890/ - (RS. 88 , 45 , 200 RS.15,62,310) ADDED AS INCOME FROM OTHER SOURCES. 3.2 IN APPEAL , THE ASSESSEE REITERATED HIS STAND, WITHOUT, HOWEVER, IMPROVING HIS CASE IN ANY MANNER. N O S HRED OF EVIDENCE HAD BEEN BROUGHT ON RECORD TO EXHIBIT THE CONDUCT OF BUSINESS, WHICH THUS IS NO MORE THAN A BA LD STATEMENT. THE REGISTRATION OF THE APPELLANT UNDER THE BOMBAY SHOP AND E STABLISHMENT A CT, 1948 WOULD NOT PROVE THE CONDUCT OF BUSINESS. THE AO HAD IN FACT COMMITTED AN ERROR IN ALLOWING CREDIT FOR RS.15.62 L ACS ON ACCOUNT OF DISCLOSED TURNOVER OF THE BUSINESS IN - AS - MUCH AS THE 3 ITA NO. 2018/MUM/2016 (A.Y. 2010 - 11) IMTIYAZ AMIRULLAH KHAN VS. ITO ASSESSEE HAD CLEARLY FAILED TO ESTABLISH ANY NEXUS OF HIS BANK ACCOUNT WITH THE ALLEGED BUSINESS. THE ENTIRE CASH DEPOSITS WERE UNDER THE CIRCUMSTANCES LIABLE TO BE ASSESSED AS INCOME AND, ACCORDINGLY, ENHANCED THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS (IN BANK) TO RS.88.45 L ACS AFTER SHOW CAUSING THE ASSESSEE QUA ENHANCEMENT. 4 . WE HA VE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. BEFORE US ALSO THE ASSESSEES CASE REMAINED THE SAME, I.E., OF THE CREDITS IN HIS BANK ACCOUNT AS REPRESENTING THE TURNOVER OF HIS GARMENT BUSINESS, AGAINST WHICH WITHDRAW A LS FOR PURCHASES STAND ALSO MADE. AND THAT THEREFORE ONLY THE PEAK AMOUNT OF RS.4, 45, 381 / - COULD BE BROUGHT TO TAX. THE LD. D EPARTMENTAL R EPRESENTATIVE (DR) , ON THE OTHER HAND, EMPHASIZE D THAT THERE WAS NO BASIS TO ARRIVE AT A FINDING OF IT BEING SO, WITH THE CONDUCT OF THE BUSINESS ITSELF BEING COMPLETELY UN - EVIDENCE D . FROM THE EXTRACT OF THE ASSESSEES BANK ACCOUNT, FURNISHED DURING HEARING, IT IS FOUND THAT THERE ARE REGULAR WITHDRAWALS . THE SAME CLEARLY INDICATE A REGULAR ACTIVITY. THE REVENUE, IN OUR OPINION, ERRED IN PROCEEDINGS DE HORS THIS VITAL FACT. WHAT THAT ACTIVITY THOUGH IS, IS NOT CERTAIN ? THE RELUCTANCE OF THE ASSESSEE TO FURNISH THE NAMES AND ADDRESSES OF THE SUPPLIERS AND CUSTOMERS (OF HIS BUSINESS) IS THOUGH UNDERSTANDABLE IN - AS - MUCH THE I R TRAD E/ ACTIVITY IS UNDISCLOS ED. A T THE SAME TIME, THE ASSESSEE ALSO CANNOT, WHILE PLEADING FOR ACCEPTANCE OF ITS CASE OF BEING IN BUSINESS, REFRAIN FROM FURNISHING ANY EVIDENCE TOWARD THE SAME. WHY, WE OBSERVE THAT THERE ARE WITHDRAW A LS BY WAY OF CHEQUES , AGAINST WHICH THE NAME OF T HE P AYEE/S , WHICH INCLUDES ONE BY THE NAME DEVANG APPARELS (AT RS.15,000 / - , ON 0 8 . 4 . 2009 ) , AND WHICH CAN SURELY BE DISCLOSED . WITHOUT DOUBT, SOME EVIDENCE TOWARD THE BUSINESS BEING UNDERTAKEN BY THE ASSESSEE, STATED AS MANUFACTURE OF GARMENTS BY THE LD. AR , WHILE THE ASSESSMENT ORDER RECORDS IT AS RETAIL BUSINESS IN GARMENTS, COULD SURELY BE, AND WOULD DEFINITELY BE REQUIRED TO BE, BROUGHT ON RECORD. IN VIEW OF THE FOREGOING, THE MATTER WOULD REQUIRE BEING RESTORED BACK TO THE FILE OF THE ASSESSING AUTHOR ITY TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE 4 ITA NO. 2018/MUM/2016 (A.Y. 2010 - 11) IMTIYAZ AMIRULLAH KHAN VS. ITO H IS CASE IN SOME MANNER. THE AO, WHERE PRIMA FACIE SATISFIED OF THE SAME, I.E., OF THE ASSESSEE BEING IN THE GARMENT T RADE AT THE RELEVANT TIME, I.E., ON THE BASIS OF THE EVIDENCES LED BY THE AS SESSEE, RECORD HIS FINDING OF THE BUSINESS CARRIED O N BY THE ASSESSEE, TOWARD WHICH THE LD. AR HAS ALSO PLACED THE RETURN OF THE ASSESSEE FOR THE PRECEDING YEARS ON RECORD. W E ARE NOT ISSUING ANY DEFINITE FINDING S IN THE MATTER, YET THE AO WOULD NECESSARIL Y DECIDE T HE SAME ON SOME OBJECTIVE BASIS IN - AS - MUCH AS, AS AFORE - STATED, THE CONDUCT OF THE BANK ACCOUNT ITSELF REVEALS A REGULAR CHURNING OF FUNDS. ON QUANTUM, APART FROM THE PEAK VALUE, THE NORMAL PROFIT EARNED WOULD ALSO BE REQUIRE D TO BE BROUGHT TO T AX. THE SAME , ON THE BASIS OF PRELIMINARY ENQUIRIES MADE DURING HEARING , IS BETWEEN 10 TO 15 PER CENT . IN THIS REGARD, WE MAY ALSO ADD THAT THE ENTIRE WITHDRAW A LS CANNOT BE TAKEN AS ON ACCOUNT OF PURCHASES AS THERE ARE WITHDRAW A L S FOR PERSONAL PURPOSES AS WELL A ND, BESIDES, SOME OF THE PURCHASES W OULD RESULT IN CLOSING STOCK WITH THE ASSESSEE . THAT IS, WHILE THE ASSESSEES - WHO PLEADS FOR BEING ASSESSED ON PEAK AMOUNT IN THE BANK ACCOUNT, STAND MERITS ACCEPTANCE WHERE HE IS FOUND TO BE IN BUSINESS, THE AMO UNT OF STOCK - IN - TRADE WOULD ALSO REQUIRE TO BE SIMILARLY BROUGHT TO TAX. WE MAY THOUGH HASTEN TO ADD THAT THERE APPEARS SCOPE FOR TELESCOPING OF THE PROFIT (OF THE BUSINESS) AGAINST THE AMOUNT ASSESSABLE ON ACCOUNT OF UNEXPLAINED DEPOSIT (IN THE BANK ACCOU NT) AND AS WELL AS STOCK - IN - TRADE, BOTH OF WHICH WOULD BE U/S. 69/69A OF THE ACT AND NOT U/S. 68. THE AO SHALL EXAMINE TH E S E AS PECT S , AND DECIDE BY ISSUING DEFINITE FINDINGS OF FACT. THE AO, WE MAY REITERATE, IS BOUND TO ACT REASONABLY, AND BY DRAWING INFE RENCES AS PERMISSIBLE IN LAW. L EST WE BE CONSIDERED AS HAVING TRAVELLED OUTSIDE THE SCOPE OF THIS APPEAL, WE MAY ADVERT TO THE DECISIONS , INTER ALIA , IN THE CASE OF KAPURCHAND SHRIMAL V. CIT [1981] 131 ITR 451 ( SC) AND AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351 (BOM)(FB). WE DECIDE ACCORDINGLY. 5 ITA NO. 2018/MUM/2016 (A.Y. 2010 - 11) IMTIYAZ AMIRULLAH KHAN VS. ITO 5 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 26 , 201 6 SD/ - SD/ - ( AMARJIT SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 26 . 0 8 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI