Shri Prakash Kakaldas Shah, Surat V. Income Tax Officer, Ward - 1(3)(4), Surat

ITA 217/SRT/2022

AI Insights

The case involves Prakash Kakaldas Shah, who appealed against the order of the National Faceless Appeal Centre (NFAC)/Ld. CIT(A), which upheld the additions made by the Assessing Officer under section 143(3) of the Income Tax Act for the Assessment Year 2016-17. The additions pertained to unexplained cash credits for rental and brokerage incomes. The Tribunal found merit in the assessee's arguments regarding the rental income, directing its reclassification and allowing standard deductions. However, for the brokerage income, the Tribunal upheld the addition due to insufficient evidence provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302243 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 04-01-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 28-07-2022
• Other Referred Cases: CIT vs Nevendram Ahuja, PCIT vs Manoj Kumar Vipin Kumar
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Corroborative evidences
• Section: 131; 68; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT ‘SMC” BENCH, BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 217/SRT/2022 (Assessment Year: 2016-17) (Physical hearing) Prakash Kakaldas Shah, 702, Sterling Apartment, Nr. Priya Hotel, Athwagate, Surat – 395003. PAN : ABIPS4373F Vs. The ITO, Ward-1(3)(4), Surat. APPELLANT RESPONDEDNT Appellant by Shri Bharat Jhaveri, AR Respondent by Shri Vinod Kumar, Sr. DR Date of hearing 05/01/2023 Date of pronouncement 10/03/2023 Order Under Section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre (in short’ NFAC’)/Ld. CIT(A), dated 02/06/2022 for Assessment Year (AY) 2016-17, which in turn arise against the additions made by Assessing Officer/Income Tax Officer, Ward-1(3)(4), Surat, in assessment order dated 04.12.2018, under section 143(3). 2. The assessee has raised the following grounds: “1. On the facts and circumstances of the case as well as law on subject the learned CIT(A) National Faceless Appeal Centre (NFAC) Delhi erred in dismissed the appeal without properly considering the facts of the case. 2. As your appellant already shown rent income & brokerage income in return of income filed.” 3. Brief facts of the case are that assessee filed his return of income for AY.2016-17 on 19.0.08.2016 declaring income of Rs.4,85,930/-. The case was selected for scrutiny. On verification of detail furnished by assessee, the Assessing Officer noted that besides other income, the 2 ITA No. 217/SRT/2022 Prakash Kakaldas Shah assessee has shown brokerage income of Rs.2,39,200/- and rental income of Rs.2,25,00/-. The assessee was asked to furnish name, PAN and address of the parties from whom brokerage income was received along with the nature of services provided and confirmation by the person who has paid such brokerage to the assessee. For rental income, the Assessing Officer asked the assessee to furnish the name of the tenant, PAN number and address of the property from rent was received and to furnish copy of rent agreement with ownership documents. The Assessing Officer recorded that despite giving full opportunity, the assessee failed to furnish the require details. A final show cause notice dated 13.11.2018 was issued to the assessee to furnish the required details. The Assessing Officer noted that again no requisite details were furnished. In respect of rental income, the assessee simply given the name of tenant and address of the property, PAN number of tenant namely Shri Mukesh Vagehela was not provided. Copy of rent agreement and other details were not furnished. The assessee has credited Rs.2,25,000/- as rental income in his capital account. As no supporting documents were furnished by assessee, in absence of such supporting evidence, rental income of Rs.2,25,000/- was treated as unexplained cash credit and accordingly an amount of Rs.1,57,500/- (Rs.2,25,000 – 30% of standard deduction) was reduced from the income and addition of unexplained cash credit under section 68 made. 4. Similarly, with regard to brokerage and commission income, the assessee failed to furnish name and address of the parties from whom 3 ITA No. 217/SRT/2022 Prakash Kakaldas Shah brokerage income was received. No nature of services provided by assessee, thus the brokerage income of Rs.2,39,200/- was also treated as unexplained cash credit under section 68 in the assessment order dated 04.12.2018 passed under section 143(3). 5. Aggrieved by the addition, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee contended that Assessing Officer not considered the details submitted by assessee in a proper spirit before finalizing the assessment and added Rs.4,64,200/- in his total income under section 68, which is not correct at all. It was the duty of Assessing Officer to verify the details furnished by assessee. For brokerage income, the assessee stated that he does not have any details of the person from whom commission was received. 6. The Ld. CIT(A) after considering the submission of assessee held that the onus on the assessee to substantiate the nature and source of receipt. The Assessing Officer clearly elaborated his reasons for his non-satisfaction of the explanation of the assessee. The assessee has not established the genuineness of transaction of rent receipt and brokerage income. On the basis of aforesaid observation, the Ld. CIT(A)/NFAC upheld both the additions. Further aggrieved, the assessee has filed present appeal before Tribunal. 7. I have heard the submission of Learned Authorized Representative (Ld. AR) for the assessee and the Learned Departmental Representative (Ld. Sr. DR) for the Revenue and have gone through the orders of lower authorities carefully. The Ld. AR of the assessee submits that assessee was doing the business of purchase of sale of diamond as well as 4 ITA No. 217/SRT/2022 Prakash Kakaldas Shah brokerage in the diamond business. The assessee also having other business income in the form of share of profit from partnership firm, rental income, interest income and dividend income. The assessee purchased office premises for diamond business in Mahidherpura, Surat. The assessee stopped business activity and lay out the office premises to Maheshkumar Vagehela from AY: 2015-16. The Ld. AR submitted that copy of rent agreement is filed on record. The Ld. AR for the assessee submits that assessee was doing business of brokerage in diamond market and earned small amount from such transaction and has shown the same in the rental income. The case of assessee was selected for limited scrutiny for share capital, however the Assessing Officer exercised his jurisdiction beyond the scope of selection of scrutiny. During the assessment, the assessee furnished the copy of name of tenant and proof regarding office premises. The tenant has not provided his PAN, such fact was communicated to the Assessing Officer. No notice under section 131 for under section 133(6) was issued by Assessing Officer has not inspector was deputed to verify the genuineness of rental income. In subsequent year, the tenant of the office premises started business in the name of J. Nathalal Impex, a partnership firm and executed a rent agreement wherein the said tenant is a partner. 8. So far as detail regarding brokerage income is concerned, the assessee before lower authorities contended that details are not available. The Assessing Officer not considered the explanation furnished by assessee and treated the rental income and brokerage income under section 68 5 ITA No. 217/SRT/2022 Prakash Kakaldas Shah without bringing any adverse material and taxed the same at a special rate under section 115BBE which is correct. The assessee has not concealed any income rather has shown rental income and brokerage income and his profit and loss account and paid tax thereon. There is no credit which is unexplained, so there is no question of taxing the said income on a special rate under section 115BBE. To support his submission, the Ld. AR of the assessee relied the decision of CIT vs Nevendram Ahuja, [2007] 290 ITR 453 (MP), dated 01.02.2005 and PCIT vs Manoj Kumar Vipin Kumar, in Income Tax Appeal No.22 of 2021 (Rajasthan HC), dated 15.11.2021. 9. On the other hand, Ld. Sr. DR for the Revenue supported the order of lower authorities. The ld SR DR for the revenue submits that the assessee failed to substantiate both the income with requisite evidence, still the assessee has not filed such details. In absence of such evidences, the assessee is not eligible for any relief. The Ld. Sr. DR for the Revenue submits that the assessee failed to discharge his primary onus lie upon the assessee. The assessee has neither furnished any evidence of ownership of the tenant premises nor furnished the required details of tenant. Similarly, for brokerage income, the assessee has not given the name, address, PAN Number of the nature of services rendered by the assessee, thus in absence of any detail, the assessee failed to proof the nature and source of income offered either as rental income or brokerage income. In absence of proper explanation and evidence both the income was treated as unexplained cash credit under section 68. 6 ITA No. 217/SRT/2022 Prakash Kakaldas Shah 10. I have considered the submission of both the parties and orders of lower authorities. I have also deliberated on the case law relied by ld AR for the assessee. The assessing officer made both the additions by taking view that complete details to substantiate both the receipt of income, were not filed by the assessee. The ld CIT(A) upheld both the addition by holding that The assessee has not established the genuineness of transaction of rent receipt and brokerage income. Before me, on the addition of rental income the ls AR for the assessee submits that he has furnished the name of the tenant and all other required details, except his PAN and that no investigation of the facts was carried out by the assessing officer. I find merit in the submissions of the ld AR for the assessee that in absence of any adverse evidence or record or verification of fact the treatment of rental income as income from other source is not justified. Hence I direct the assessing officer to delete the addition made by treating the rental income as unexplained cash credit. The assessing officer is also directed to treat the said receipt of Rs. 2,25,000/- as income from house property and to allow standard deduction as per section 24(a). in the result, this part of ground of appeal is allowed. 11. So far as other part of addition of brokerage income is concerned, I find that the assessee failed to disclose the nature of commission and source thereof. No details were furnished before the assessing officer or before ld CIT(A) / NFAC. However, before Tribunal, for the first time the assessee took stand that he was in the brokerage of diamonds, but no other details were furnished. Thus, in my considered view the assessee 7 ITA No. 217/SRT/2022 Prakash Kakaldas Shah failed to discharge his primary onus. Hence, the addition made by assessing officer of Rs. 2,39,000/- is upheld. So far taxing of such addition is concerned, the special rate prescribed in section 115BBE is applicable from AY 2017-18, which is otherwise clarify by Circular No. 11/2019 issued by Central Board of Direct Tax (CBDT). Thus, this part of ground No. 2 of the appeal is dismissed with the above observation. Ground No. 1 is general and need no specific adjudication. 12. In the result, the appeal of the assessee is partly allowed. Order pronounced on 10/03/2023 in open Court. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 10/03/2023 SAMANTA Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order // TRUE COPY // Assistant Registrar/Sr.PS/PS, ITAT, Surat