BHUPESH R SHAH, MUMBAI V. ITO 16(2)(4), MUMBAI

ITA 2291/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93249 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Assessee Lawyers: APURVA R SHAH
• Keywords: Unexplained investment; Gift; Source of fund; Additional evidence; Reassessment proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.2291/M/2014 (AY:2005 - 2006 ) BHUPESH R. SHAH, 3, BHASKAR SMRUTI, FRIER BRIDGE, LOWER LEVEL SOUTH, GRANT ROAD, MUMBAI 400 007. / VS. ITO 16(2)(4), R.NO.215, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 07. ./ PAN : AAEPS1739A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : APURVA R. SHAH / RESPONDENT BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 22 .06.2015 / DATE OF PRONOUNCEMENT : 22 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 4.4.2014 IS AGAINST THE ORDER OF THE CIT (A) - 5, MUMBAI DATED 30.01.2014 FOR THE ASSESSMENT YEAR 2005 - 2006. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. IN CONFIRMING THAT A SUM OF RS. 9,00,000/ - REPORTED UNDER AIR AS INVESTED BY THE APPELLANT AND EXPLAINED BY THE APPELLANT AS HAVING BEEN INVESTED BY HIS MOTHER PREMILA RASIKLAL SHAH FROM HER OWN FUNDS AND WHERE THE APPELLANT WAS MERELY AS A JOINT HOLDER, AS BEING AN UNEXPLAINED INVESTMENT TAXABLE U/S 69B IN THE APPELLANTS HANDS. 2 . IN CONFIRMING THE SAID ADDITION BASED ON VARIOUS PRESUMPTIONS AND SURMISES AND WITHOUT ADEQUATELY APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT. 3. IN CONFIRMING THE SAID ADDITION WITHOUT ADEQUATELY CONSIDERING THE EVIDENCE PRODUCED WHICH SHOWED THA T THE APPELLANT WAS ONLY A JOINT HOLDER AND THAT THE FUNDS HAD BEEN INVESTED THOUGH THE BANK ACCOUNT OF THE APPELLANTS MOTHER. 4. IN HOLDING THAT ADDITIONAL EVIDENCE COULD NOT BE ADMITTED WITHOUT APPRECIATING FACTS OF THE CASE. 5. IN CONFIRMING THE ALLEGA TIONS THAT THERE WAS A DIVERSION OF THE APPELLANTS FUNDS TO HIS MOTHER WITHOUT THE AO HAVING PRODUCED ANY EVIDENCE TO THAT EFFECT. 6. IN HOLDING THAT THE APPELLANT COULD NOT PROVE THE SOURCE OF FUNDS EITHER. 7. WITHOUT PREJUDICE, IN NOT APPRECIATING THAT T HE APPELLANT HAD GIFTED RS. 4,00,000/ - TO HIS MOTHER AND HENCE THE ADDITION OUGHT TO HAVE BEEN RESTRICTED TO RS. 5,00,000/ - ONLY. HE ALSO ERRED IN HOLDING THAT THIS GROUND COULD NOT BE ACCEPTED SINCE IT WAS NOT TAKEN UP DURING THE ASSESSMENT PROCEEDINGS OR DURING APPELLATE PROCEEDINGS. 2 2. IN THE ABOVE GROUNDS, ASSESSEE RAISED THE ISSUE OF ADDITION OF RS. 9 LAKHS U/S 69B OF THE ACT BASED ON THE AIR INFORMATION. WITHOUT PREJUDICE, ASSESSEE ALSO ARGUED IN GROUND NO.7 THAT THE ADDITION SHOULD HAVE BEEN RESTRICTED TO RS. 5 LAKHS ONLY AS THE BAL ANCE OF RS. 4 LAKHS STAND EXPLAINED AS THE GIFT GIVEN BY HER TO HIS MOTHER. BRIEFLY STATED, RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE (MR. BHUPESH R. SHAH) IS A JOINT OWNER OF HDFC MUTUAL FUNDS WITH HIS MOTHER AS THE ORIGINAL OWNER OF THE MUTUAL FUNDS. ASSESSEE GAVE HIS PAN: AAEPS1739A AND BANK ACCOUNT NUMBER 23484 WITH SHAMRAO VITHAL CO - OP BANK LTD DURING THE INVESTMENT IN MUTUAL FUNDS. THE DETAILS OF ORIGINAL INVESTMENTS IN MUTUAL FUNDS ARE NOT AVAILABLE ON TO THE RECORD. HOWEVER, ACCOUNT OF STATEMENT OF THE MUTUAL FUNDS SHOWS THAT 6.8.2004 IS THE DATE OF INVESTMENT OF RS. 9 LAKHS IN THE MUTUAL FUNDS. BASED ON THE AIR INFORMATION, THE ASSESSMENT WAS SCRUTINIZED UNDER CASS U/S 143(3) OF THE ACT AND THE SOURCE OF THE INVESTMENT WAS EXAMINED. DURING THE SCRUTINY PROCEEDINGS, IT WAS SUBMITTED THAT THE INVESTMENT OF RS. 9 LAKHS WAS MADE BY HIS MOTHER SMT. PRAMILA R SHAH AND THE ASSESSEE IS ONLY A JOINT OWNER AND THE INVESTMENT WAS MADE BY HER OUT HER OWN FUNDS. FOR THIS, ASSESSEE SUBMITTED THE BANK ACCOUNT COPY OF SMT. PRAMILA R. SHAH. ASSESSEE EXPLAINED THAT THE SOURCE FOR THE SAID RS.9 LAKHS INVESTMENT IS THE SALE PROCEEDS OF THE MUTUAL FUNDS OF HIS MOTHER. IN THIS REGARD, HE MENTIONED THAT ON 31.7.2004, SMT. PRAMILA R. SHAH RECEIVED SALE PR OCEEDS AMOUNT OF RS. 23,17,387/ - ON REDEMPTION OF HER MUTUAL FUNDS. THIS AMOUNT IS SAID TO BE THE IMMEDIATE SOURCE OF THE SAID INVESTMENT OF RS. 9 LAKHS. ASSESSING OFFICER VERIFIED ASSESSMENT PARTICULARS OF SMT. PRAMILA R. SHAH AND FOUND THAT SHE IS NEIT HER HAVING A PAN NOT ASSESSED TO TAX AT THE RELEVANT POINT OF TIME. HOWEVER, RELYING ON THE DOCUMENTS LIKE BANK STATEMENT AND THE STATEMENT OF THE HDFC MUTUAL FUNDS, ASSESSEE STRONGLY CONTESTED THE INVESTMENT BELONG TO SMT. PRAMILA R. SHAH. ON THE SOURCE OF INCOME FOR SMT. PRAMILA R. SHAH, IT IS THE CASE OF THE ASSESSEE THAT SHE RECEIVED LOT OF MONEY BY WAY OF GIFTS IN THE PAST, WHICH INCLUDES A GIFT OF RS. 4 LAKHS FROM HER SON. ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD IN PARA 8 OF THE ASSESSMENT ORDER THAT THE ORIGINAL SOURCE OF THE INVESTMENT IS THE ASSESSEES MONEY AND SMT. PRAMILA R. SHAH DOES NOT HAVE ANY SOURCE OF INCOME AND THEREFORE, HE PROCEEDED TO MAKE ADDITION OF RS. 9 LAKHS AS INCOME OF THE 3 ASSESSEE U/S 69B OF THE ACT. PARA 10 OF THE ASSESSMENT ORDER REFERS TO THE AOS PROPOSAL TO RE - ASSESS THIS AMOUNT IS IN HER HANDS. 3. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE FURNISHED SOME DOCUMENTS AND THE WRITTEN SUBMISSIONS IN SUPPORT OF THE ABOVE MENTIONED CON TENTIONS WHICH WERE REMANDED TO THE FILE OF THE AO FOR WANT OF A REPORT. THE CIT (A) AFTER CONSIDERING THE SAID REMAND REPORT OF THE AO, WHO WAS AGAINST THE ENTERTAINING OF THE ASSESSEES FRESH SUBMISSIONS, UPHELD THE ORDER OF THE AO. ASSESSEES SUBMISSI ONS, WITHOUT PREJUDICE, FOR RESTRICTING THE ADDITION TO RS. 5 LAKHS ONLY WAS ALSO REJECTED. CONTENTS OF PARA 4.1.2 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. IN THE SAID PARA, CIT (A) HELD THAT DESPITE THE ADEQUATE OPPORTUNITY GRANTED TO THE ASS ESSEE, THE SOURCE OF INVESTMENT IN THE MUTUAL FUNDS WAS NOT EXPLAINED. THE SUBMISSION THAT THE ASSESSEE IS MERELY A JOINT HOLDER AND THE ORIGINAL OWNER WAS HIS MOTHER WAS NOT APPRECIATED. 4. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL, LD COUNSEL FOR THE A SSESSEE NARRATED THE ABOVE FACTS OF THE CASE AND BROUGHT MY ATTENTION TO PAGES 1 TO 12 OF THE PAPER BOOK AND SUBMITTED THAT PAGE 4 OF THE PAPER BOOK CONSTITUTE ACCOUNT STATEMENT OF THE HDFC STANDING IN THE NAME OF PRAMILA RASIKLAL SHAH. PAGES 5 AND 6 CONS TITUTE, BANK ACCOUNT COPY OF PRAMILA R SHAH, BEARING SB A/C NO. 23484 WITH THE SHAMRAO VITHAL CO - OPERATIVE BANK LTD. PAGE 11 CONSTITUTES CAPITAL ACCOUNT OF PRAMILA R SHAH, SHOWING THE SAME GIFT TRANSACTIONS. PAGE 12 SHOWS A TRANSACTION OF RS. 4 LAKHS RECE IVED FROM THE ASSESSEE AS ON 31.3.2005. THE ARGUMENT OF THE LD COUNSEL IS THAT THE ADDITION MADE U/S 69B BASED ON MERELY AIR INFORMATION IS UNSUSTAINABLE. FOR THIS, HE RELIED ON THE ORDER OF TRIBUNAL IN THE CASE OF M/S. A.F. FERGUSON & CO. VS. JCIT IN IT A NO.5037/M/2012 (AY 2008 - 2009), DATED 17.10.2014. FURTHER, HE ARGUED THAT THE SOURCE OF RS. 9 LAKHS INVESTED IN THE MUTUAL FUNDS IS THE SALE PROCEEDS OF THE MUTUAL FUNDS OWNED BY HIS MOTHER. IN THESE CIRCUMSTANCES, INVOKING THE PROVISIONS OF SECTION 69B OF THE ACT IS NOT PROPER. REFERRING TO THE SAID PARA 4.1 OF THE CIT (A)S ORDER, LD COUNSEL MENTIONED THAT THE ADDITIONAL EVIDENCES REFERRED IN THE SAID PARA IS A MISTAKE AND ASSESSEE NEVER SUBMITTED ANY ADDITIONAL EVIDENCES. IN RESPONSE TO THE QUERY RA ISED FROM THE BENCH REGARDING THE ORIGINAL SOURCE OF FUNDS FOR HIS MOTHER, LD COUNSEL SUBMITTED THAT IT IS A FACT THAT THE 4 ASSESSEE GAVE AN AMOUNT OF RS. 4 LAKHS IN THE PAST TO HIS MOTHER. THEREFORE, THE ADDITION AT THE MAXIMUM SHOULD BE RESTRICTED TO RS. 5 LAKHS ONLY. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE SUBMITTED THAT THERE IS NO CLARITY WITH REGARD TO THE REASSESSMENT IN THE CASE OF SMT. PRAMILA R. SHAH AS PROPOSED IN THE ASSESSMENT ORDER. HOWEVER, DURING THE REBUTTAL TIME, LD COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE REASSESSMENT PROPOSED BY THE ASSESSING OFFICER WAS NEVER MATERIALIZED FOR THE REASONS BEST KNOWN TO THE ASSESSING AUTHORITY. IN THESE CIRCUMSTANCES, THE RETURNS FILED BY SMT. PRAMILA R SHAH FOR THE YEARS UNDER CONSIDERATION REMAI NS ACCEPTED. IN THESE CIRCUMSTANCES, THE ADDITION MADE IN THE INSTANT CASE SHOULD BE DELETED. HE ALSO SUBMITTED THAT WHILE FILING THE RETURN OF INCOME IN THE CASE OF SMT. PRAMILA R SHAH, ASSESSEE PAID TAXES ON THE GAINS EARNED BY THE ASSESSEE ON SALE OF M UTUAL FUNDS. IN CONNECTION WITH THE GROUND NO.7 RAISED WITHOUT PREJUDICE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION, IF ANY, HAS TO BE MADE SHOULD BE DONE IN THE APPROPRIATE YEAR OF THE ASSESSMENT AT THE MAXIMUM , THE PROFIT EARNED BY THE ASS ESSEE IS ONLY BE TAXED IN THE YEAR OF SALE OF THE MUTUAL FUNDS. 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF ADDITION OF RS. 9 LAKHS U/S 69B OF THE ACT IN THE CASE OF THE ASSESSEE. THE BANK STATEMENT OF PRAMILA R. SHAH AND THE ACCOUNT STATEMENT OF T HE HDFC MUTUAL FUNDS FURNISHED IN THE PAPER BOOK WERE PERUSED AND FOUND THEY ARE STAND IN THE NAME OF THE ASSESSEE. IN THE ABSENCE OF INCOME TAX PARTICULARS AND THE FAILURE OF THE ASSESSEES MOTHER TO FURNISH THE INCOME TAX RETURN AT THE RELEVANT POINT O F TIME, THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT THE INVESTMENT MADE BY HIS MOTHER ACTUALLY BELONGS TO THE ASSESSEE UNDER CONSIDERATION. IN THE PROCESS, AO IGNORED THE RETURNS FILED BELATEDLY BY HIS MOTHER ON THE TRANSACTIONS MENTIONED THEREI N. PARA 4.1.2 OF THE CIT (A)S ORDER IS UNFORTUNATELY DOES NOT CONTAIN THE DETAILS OF THE ABOVE FACTS. IT IS THE OBJECTION OF THE LD COUNSEL FOR THE ASSESSEE THAT CIT (A) ERRONEOUSLY MADE A REFERENCE TO THE ADDITIONAL EVIDENCES, WHICH WERE NEVER THERE IN THE SUBMISSION OF THE ASSESSEE. THERE IS NO CLARITY ON THE REASSESSMENT PROCEEDINGS PROPOSED TO BE UNDERTAKEN BY THE AO (PARA 10 OF THE ASSESSMENT ORDER) IN THE CASE OF SMT. PRAMILA R. SHAH. THERE IS NO ENQUIRY INTO THE MUTUAL FUNDS INVESTED BY SMT. PRAMILA R. SHAH, WHICH YIELDED SALE P ROCEEDS OF RS. 23,17,387/ - (PAGE 6 OF THE PAPER BOOK), WHICH IS THE 5 IMMEDIATE SOURCE OF INCOME FOR THE SAID RS. 9 LAKHS. IT IS NOT CLEAR FROM THE RECORDS HOW THE ADDITION OF RS. 9 LAKHS MADE IN THE CASE OF THE ASSESSEE IS SUSTAINABLE IN LAW WHEN THE IMMED IATE SOURCE OF INCOME UNDISPUTEDLY BELONGS TO HIS MOTHER. IN THESE CIRCUMSTANCES, I AM OF THE OPINION THAT THE TRANSACTION IS REQUIRED TO REVISIT THE FILE OF THE AO FOR FRESH EXAMINATION OF THE FACTS AND FOR PASSING A SPEAKING ORDER BRINGING ALL THE FACTS INTO THE ORDER. WE ORDER ACCORDINGLY. THUS, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 22 .7 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBA I