NAYANA PANCHAL, MUMBAI V. ITO WD- 25(1)(4), MUMBAI

ITA 2269/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8226 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A DHYANI
• Assessee Lawyers: ANIL THAKR
• Keywords: Business income; Principle of natural justice; Additional evidence
• Section: 143(3); 133(6); 68; 148

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.2269/ MUM/2016 ( / ASSESSMENT YEAR : 2007-08) NAYANA PANCHAL, 16, SINDHI CHAWL, ROAD NO. 6, DAULAT NAGAR, BORIVALI (EAST), MUMBAI 400 066. / V. ITO- WARD 25(1)(4), MUMBAI. ./ PAN : AICPP0500E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : MR. ANIL THAKR AR REVENUE BY : MR. R.A. DHYANI, DR / DATE OF HEARING : 07-02-2017 / DATE OF PRONOUNCEMENT : 15-02-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 2269/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 30-03-20 16 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 44, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2007-08, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 19 TH MARCH, 2014 PASSED BY LEARNED ASSESSING OFFICER(HEREINAFTER CAL LED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 2269/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE LD AO AS WELL AS THE LD CIT (A) IS ERRED IN ADDING AND CONFIRMING A SUM OF RS. 7,87,025/- AS UNEXPLAINED D EPOSITS, WHICH ARE NOTHING BUT UNSECURED LOANS RECEIVED BACK BY THE APPE LLANT, BANK INTEREST, LOAN INTEREST, ETC OF WHICH, OTHER INTEREST W ERE ALREADY DECLARED BY THE APPELLANT IN RESPONSE TO THE NOTICE ISSUED BY THE LD AO U/S 148 OF THE ACT. 2. THE APPELLANT PRAYS TO DELETE THE ADDITION MADE ARB ITRARILY WITHOUT APPRECIATING THE FACT THAT THE TURNOVER DECLARED B Y THE APPELLANT IS RS. 18,79,000/- AND NOT RS. 16,30,000/- AS CONSIDERED BY THE LD CIT(A) IN HIS ORDER VIDE PAGE NO. 5 OF THE OR DER, PARA-2. 3. BRIEF FACTS OF THE CASE ARE THAT IT WAS OBSERVED BY THE A.O. DURING THE COURSE OF REMAND PROCEEDINGS FOR EARLIER YEAR THAT THE ASSESSEE HAD MADE DEPOSITS AGGREGATING TO RS. 24,17,025/- INCLUDING C ASH DEPOSITS OF RS. 16,30,000/- IN HIS SAVING ACCOUNT NO. 22585 MAINTAI NED WITH SARASWAT COOPERATIVE BANK LTD., SAMUEL STREET BRANCH, MUMBAI DURING THE RELEVANT PREVIOUS YEAR. IT WAS OBSERVED BY THE A.O. THAT TH E ASSESSEE HAS NOT FURNISHED HER RETURN OF INCOME THE ASSESSMENT YEAR 2007-08 AS PROVIDED U/S 139(1) OR 139(4) OF THE ACT . ACCORDINGLY. THE PROC EEDINGS IN THIS CASE WERE REOPENED BY THE AO U/S 147 OF THE ACT AFTER RECORDI NG REASONS FOR RE-OPENING AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 27 TH FEBRUARY, 2013 TO THE ASSESSEE BY THE AO WHICH WAS DULY SERVED UPON THE A SSESSEE. IN REPLY, THE ASSESSEE STATED AS UNDER:- THE ASSESSEE WAS IN THE RETAIL TEXTILE BUSINESS DURI NG THE YEAR UNDER CONSIDERATIONS AS ALSO CAN BE SEEN FROM EARLIER YEA RS. THE TOTAL TURNOVER FROM THE BUSINESS WAS RS. 20,20,490/- AND THE INCOME AS PER THE PRESUMPTIVE PROVISIONS OF SECTION 44AF (SPECIAL P ROVISIONS FOR COMPUTING PROFITS AND GAINS OF RETAIL BUSINESS) COMES TO RS. 1,01,025/- I.E. @ 5% OF RS. 20,20,490/- WHICH IS BELOW THE TAXA BLE INCOME. ITA 2269/MUM/2016 3 THOUGH, TO COMPLY WITH YOUR NOTICE U/S 148 OF THE INCOM E TAX ACT, 1961 , THE ASSESSEE HAS FILED HER INCOME TAX RETURN, THE COPY OF WHICH IS ENCLOSED HEREWITH FOR YOUR REFERENCE. THE ASSESSEE FILED HER RETURN OF INCOME ON 26 TH MARCH, 2013 DECLARING TOTAL INCOME OF RS. 1,33,590/- IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF THE BANK D EPOSITS WHEREIN THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS. 17,85,000/ - WAS DEPOSITED IN THE BANK ACCOUNT WHICH WAS RECEIVED BY THE ASSESSEE OUT OF CARRYING ON DAY-TO- DAY BUSINESS TRANSACTIONS. THE ASSESSEE SUBMITTED THAT THE TOTAL SALES MADE DURING THE YEAR WERE RS. 20,20,490/- AND ASSESSEE B EING SMALL SCALE RETAIL BUSINESS , MOST OF THE PAYMENTS WERE MADE BY THE CU STOMERS IN CASH WHICH WAS DEPOSITED IN THE BANK ACCOUNT. THE A.O. OBSERV ED THAT VIDE LETTER DATED 21 ST SEPTEMBER, 2012 , THE ASSESSEE HAD SUBMITTED THAT LAST YEAR OF BUSINESS WAS FINANCIAL YEAR 2005-06 AND NO RETURN OF INCOME THEREAFTER HAS BEEN FILED AND THUS THE AO OBSERVED THAT THERE IS CONTRADICTIO N IN THE STATEMENTS OF THE ASSESSEE AS THE ASSESSEE SUBMITTED RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR DECLARING BUSINESS INCOME. WHEN ASK ED FOR THE EXPLANATION, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS CARRYI NG ON SMALL BUSINESS OF TRADING IN TEXTILES, SAREES, CUT-PIECES ETC. AND WA S DEPOSITING CASH IN HER REGULAR BANK ACCOUNT MAINTAINED WITH SARASWAT CO-OP ERATIVE BANK LIMITED, MUMBAI. IT WAS SUBMITTED BY THE ASSESSEE BEFORE TH E AO THAT EARLIER STATEMENT WAS MADE DUE TO OVERSIGHT AND DUE TO NO K NOWLEDGE OF DIFFERENCE BETWEEN FINANCIAL YEAR AND ASSESSMENT YEAR WHEREIN THE ASSESSEE STATED THAT THE LAST YEAR OF BUSINESS WAS FINANCIAL YEAR 2005-0 6 AND NO RETURN OF INCOME THEREAFTER HAD BEEN FILED WHICH HAS BEEN RECTIFIED BY THE ASSESSEE VIDE AFFIDAVIT DATED 27 TH APRIL,2013. THE A.O. DIS-BELIEVED THE SAME AND IS SUED NOTICE U/S 133(6) OF THE ACT TO VARIOUS CUSTOMERS W HICH RETURNED UN-SERVED WITH THE REMARK LEFT . THUS , THE A.O. OBSERVED T HAT THE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESSES . THE AO DISBELIEV ED THE CONFIRMATION FROM SUCH PARTIES FILED BY THE ASSESSEE. THE AO CONFRONT ED THE ASSESSEE ABOUT THE ITA 2269/MUM/2016 4 SAME WHICH WAS NOT REPLIED BY THE ASSESSEE. THUS T HE A.O. ADDED THE ENTIRE AMOUNT OF RS. 24,17,025/- TO THE INCOME OF THE ASSE SSEE AS UNACCOUNTED RECEIPTS VIDE ASSESSMENT ORDER DATED 19-03-2014 PAS SED BY THE AO U/S 143(3) R.W.S. 147 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 19-03-20 14 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE PREF ERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO ACCEPTED THAT THE ASSESSEES CASE FA LLS U/S 44AF OF THE ACT AND BROUGHT TO TAX INCOME COMPUTED AT 8% OF THE CASH DE POSITS IN BANK OF RS. 16,30,000/- (BY TREATING THE CASH DEPOSIT AS TURNOV ER OF THE ASSESSEE ) WHEREIN INCOME WAS COMPUTED AT RS. 1,30,400/- VIDE APPELLATE ORDER DATED 30-03-2016 PASSED BY LEARNED CIT(A). THE LEARNED C IT(A) RELIED UPON THE FINDING OF LEARNED CIT(A) FOR THE IMMEDIATELY PRECE DING ASSESSMENT YEAR 2006- 07 WHICH WAS CONFIRMED BY THE MUMBAI BENCHES OF THE TRIBUNAL. THIS FINDING HAS BEEN NOW SET AT REST AS NO FURTHER APPEAL HAS B EEN FILED BY THE REVENUE TO CHALLENGE THE SAID FINDING OF LEARNED CIT(A). H OWEVER, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 7,87,025/- WITH RESPE CT TO THE OTHER DEPOSITS (OTHER THAN CASH DEPOSITS) IN THE BANK ACCOUNT AS U NEXPLAINED INCOME OF THE ASSESSEE AS THE ASSESSEE FAILED TO FURNISH ANY EXPL ANATION REGARDING SOURCE OF THESE DEPOSITS VIDE APPELLATE ORDER DATED 30-03-201 6 PASSED BY LEARNED CIT(A). 5. AGGRIEVED BY THE APPELLATE ORDER DATED 30-03-201 6 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE THE TRIBUNA L. 6. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THESE DEPOSITS WERE IN THE NATURE OF LOAN RAISED OR ARE I N THE NATURE OF RETURN OF LOANS ADVANCED BY THE ASSESSEE TO VARIOUS PARTIES. THE LD. COUNSEL DREW OUR ATTENTION TO THE COPY OF BALANCE SHEET PLACED AT PA PER BOOK PAGE 3 & 4 TO CONTEND THAT UNSECURED LOANS OUTSTANDING AS ON 31 ST MARCH 2007 WERE ITA 2269/MUM/2016 5 RS.2,50,000/- . HE FURTHER DREW OUR ATTENTION TO T HE LOAN CONFIRMATIONS WHICH WERE FILED IN THE PAPER BOOK PAGES 17 TO 20. IT WAS CONTENDED THAT THE AUTHORITIES BELOW ERRED TO BRING TO TAX THESE CHEQU E DEPOSITS OF RS. 7,87,025/- IN BANK ACCOUNT WHICH WERE MERELY IN THE NATURE OF LOAN TRANSACTIONS AND IT WAS SUBMITTED IF THE MATTER IS SET ASIDE , THE ASSESSEE WILL SUBMIT ALL NECESSARY EVIDENCES AND EXPLANATION TO E STABLISH IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THESE TRANSACTI ONS TO COMPLY WITH MANDATE OF SECTION 68 AND OTHER APPLICABLE PROVISIO NS OF THE ACT. 7. THE LD. D.R. SUBMITTED THAT AS PER FACTS EMERGIN G FROM THE ORDERS OF AUTHORITIES BELOW THESE LOAN CONFIRMATIONS WERE NOT FILED BEFORE THE LOWER AUTHORITIES AND THIS CONTENTION OF THE ASSESSEE WER E NOT SCRUTINIZED BY THE AUTHORITIES BELOW AND HENCE THE MATTER MAY BE SET A SIDE FOR NECESSARY VERIFICATION AND ENQUIRY AS TO THE BONAFIDE OF THE ASSESSEE AND ALSO TO VERIFY THAT THE ASSESSEE COMPLIED WITH PROVISIONS OF SECTI ON 68 AND OTHER APPLICABLE PROVISIONS OF THE ACT. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE A.O . HAS MADE ADDITIONS OF RS. 24,17,025/- WHICH WERE CONFIRMED BY THE LD. CI T(A) TO THE EXTENT OF RS. 7,87,025/- BEING OTHER DEPOSITS(OTHER THAN CASH DEP OSIT) IN BANK ACCOUNT OF THE ASSESSEE. THE ADDITIONS OF RS.16,30,000/- MADE BY THE AO TO THE INCOME OF THE ASSESSEE BEING CASH DEPOSIT IN BANK ACCOUNT OF THE ASSESSEE IS HELD TO BE TURNOVER OF THE ASSESSEE FROM BUSINESS BY LEARNE D CIT(A) IN HIS APPELLATE ORDER AND ACCORDINGLY 8% OF THE SAID TURNOVER OF RS .16,30,000/- WAS BROUGHT TO TAX AS INCOME U/S 44AF OF THE ACT BY LEARNED CIT (A) IN HIS APPELLATE ORDER WHICH HAS ATTAINED FINALITY AS THE LEARNED DR COULD NOT POINT THAT THE REVENUE HAS CHALLENGED THE AFORESAID RELIEF GRANTED BY THE LEARNED CIT(A). THE ASSESSEE CONTENDED WITH RESPECT TO OTHER DEPOSI TS OF RS. 7,87,025/- IN THE BANK ACCOUNT OF THE ASSESSEE WHICH WAS CONFIRME D BY LEARNED CIT(A) THAT ITA 2269/MUM/2016 6 THESE DEPOSITS ARE LOAN TRANSACTION WHICH WERE REC EIVED BY THE ASSESSEE FROM VARIOUS PARTIES OR THEY ARE LOANS GRANTED BY THE AS SESSEE WHICH WERE RECEIVED BACK BY THE ASSESSEE FROM LENDERS, DURING THE RELEV ANT PREVIOUS YEAR. THE ASSESSEE HAD BROUGHT TO OUR NOTICE BALANCE SHEET WH EREIN UNSECURED LOANS OF RS. 2,50,000/- ARE REFLECTED AS PAYABLE AS ON 31-03 -2007(PAPER BOOK/PAGE 3) AS ALSO LOAN CONFIRMATIONS ARE FILED BY THE ASSESSE E BEFORE THE TRIBUNAL WHICH ARE PLACED IN PAPER BOOK /PAGE 17-20 . THE PAPER BO OK CONTAINS A CERTIFICATE DATED 30-01-2017 SIGNED BY THE ASSESSEE WHEREIN IT IS MENTIONED THAT THESE AFORE-STATED DOCUMENTS WERE FILED BEFORE LOWER AUTH ORITIES AND THESE DOCUMENTS DO NOT CONSTITUTE ADDITIONAL EVIDENCES. H OWEVER, WE FIND THAT NO SUCH DISCUSSIONS ABOUT THESE LOANS ARE COMING OUT O F THE ORDERS OF THE AUTHORITIES BELOW NOR IS THERE ANY REFERENCE TO THE SE DOCUMENTS IN THE ORDERS OF THE AUTHORITIES BELOW . RATHER, IT IS THE FINDI NG OF THE LD. CIT(A) THAT WITH RESPECT TO THE OTHER DEPOSIT OF RS. 7,87,025/- (OTH ER THAN CASH DEPOSIT) IN BANK ACCOUNT , THE ASSESSEE HAD FAILED TO FURNISH A NY EXPLANATION REGARDING THE SOURCE OF THESE DEPOSITS. UNDER THESE CIRCUMST ANCES IN ORDER TO DO JUSTICE TO BOTH THE PARTIES , WE ARE INCLINED TO SE T ASIDE AND RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR DE-NOVO DET ERMINATION OF THE ISSUE ON MERITS. THE ASSESSEE IS DIRECTED TO PRODUCE ALL LO AN CONFIRMATIONS AND OTHER EVIDENCES/EXPLANATIONS BEFORE THE AO IN SET ASIDE R EMAND PROCEEDINGS WITH RESPECT TO THE DEPOSIT OF RS. 7,87,025/- IN HER BAN K ACCOUNT TO SATISFY THE INGREDIENTS AND MANDATE OF SECTION 68 AND OTHER APP LICABLE PROVISIONS OF THE ACT, SO THAT NECESSARY VERIFICATION AND ENQUIRY CAN BE DONE BY THE A.O. WITH RESPECT TO THE GENUINENESS OF THE LOAN TRANSACTIONS , IDENTITY OF THE LOAN CREDITORS AS WELL CREDITWORTHINESS OF THE PARTIES I N ORDER TO ENSURE THAT THESE DEPOSITS COMPLY WITH MANDATE AND INGREDIENTS OF SE CTION 68 AS WELL OTHER APPLICABLE PROVISIONS OF THE ACT. NEEDLESS TO SAY, THE AO SHALL GRANT ASSESSEE IN REMAND PROCEEDINGS SUFFICIENT OPPORTUNITY OF BEI NG HEARD IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WI TH LAW. WE ORDER ACCORDINGLY. ITA 2269/MUM/2016 7 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 2269/MUM/2016 FOR THE ASSESSMENT YEAR 2007-08 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2017. # $% &' 15-02-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 15-02-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI I BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI