JITESH H MEHTA, MUMBAI V. ITO 25(3)(2), MUMBAI

ITA 2351/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84550 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 20-10-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: S V NAVALKAR
• Keywords: Reasonable cause
• Section: 69C; 69; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE : SHRI I.P.BANSAL, JM & SHRI R.C.SHARMA , A M ITA NO. 2351 / MUM/2 0 0 9 ( ASSESSMENT YEAR : 200 5 - 200 6 ) JITESH H. MEHTA, A - 304, ARPIT ENCLAVE, MAHAVIR NAGAR, KANDIVALI(W), MUMBAI - 400067 VS. ITO 25(3)(2), MUMBAI PAN/GIR NO. : A EDPM 7039 L ( APPELLA NT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI S.V.NAVALKAR /REVENUE BY : SHRI LOVE KUMAR DATE OF HEARING : 20 TH OCT . 201 4 DATE OF PRONOUNCEMENT : 18 /12/ 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 10 - 11 - 2008 FOR ASSESSMENT YEAR 200 5 - 0 6 , IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.145(3) OF THE I.T. ACT , WHEREIN FOLLOW ING GROUNDS HAVE BEEN TAKEN BY ASSESSEE : - 1. THE APPELLANT MET WITH AN ACCIDENT AND HIS WIFE ATTENDED THE DATE AND GAVE TO THE ASSESSING OFFICER THE MEDICAL EVIDENCE WHICH WAS ACCEPTED BY THE ASSESSING OFFICER AND RECORDED IN THE ASSESSMENT ORDER THEREFOR E THE MATTER MAY PLEASED BE CONSIDERED ON SYMPATHETIC GROUNDS. 2. ASSESSING OFFICER HAS MADE HEFTY ADDITIONS AND DETERMINED R S. 35.15 L ACS AS INCOME OF THE ASSESSEE AS AGAINST INCOME OF RS. 2.20 LACS RETURNED IN A HIGH PITCHED BIASED ASSESSMENT BASED ON P RESUMPTIONS AND ASSUMPTIONS ASKING ASSESSEE TO PAY RS. 15.59 LACS WHICH IS B EYOND HIS MEANS AND CAPACITY AGAINST TAX LIABILITY OF NOT MORE THAN RS. 20,00 01 - TO RS. 30,0001 - PER ANNUM, WHICH ASSESSEE IS LIABLE TO PAY. 3. ASSESSING OFFICER MADE AN ADDITION OF RS. 13.99 LACS ULS 68 AND RS. 20.08 ULS 69A WHICH WERE DEPOSITED OVER THE YEAR IN NOT LESS THAN 150 ENTRIES AND INCLUDED PROFESSIONAL RECEIPTS, BANK LOAN AMOUNT RECEIVED, ITA NO. 2351 / 09 2 BANK TRANSFERS, CHEQUES BOUNCED AMOUNTS, CASH WITHDRAWN AND REDEPOSITED. 4. PRO VISIONS OF SECTION 68 AND SECTION 69A ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. WE ARE ENCLOSING CO PY OF SHOW CAUSE NOTICE DATED 3 1/10/2008 GIVEN BY CIT(A) XXV AND COPIES OF SUBMISSIONS DATED 3.11.2008, 5. '11.2008 AND 7.11.2008 WHEREIN WE HAVE MADE DETAILED SUBMISSIONS. L.AST HEARING OF THE CASE WA S HELD ON 6.11.2008 AND NO FURTHER EXPLANATION WAS SOUGHT AND THE ORDER OF THE CIT(A) WAS PASSED ON 10.11.2008. 5. A LETTER DATED 4.10.2008 SENT TO CIT(A) XXV AND OTHERS IS ENC L OSED AND POINTS MADE THEREI N FROM PAGE 3 TO 6 ARE BEING RECORDED HERE 2S GROUNDS OF APPEAL I.E. A) IGNORING WITHDRAWALS FOR BUSINESS PURPOSE B) NO EVIDENCE OF INVESTMENTS FOUND BY THE ASSESSING OFFICER C) EVEN BANK LOANS ARE ADDED AS A PART OF CASH CREDIT. D) BOUNCED CHEQUES AD DED BY THE ASSESSING OFFICER E) NO NOTICE WAS GIVEN TO THE ASSESSEE THAT THE ASSESSING OFFICER WISHES TO MAKE SUCH AN ADDITION IN THE ORDER. F) A REASONABLE PROFIT ARISING OUT OF BUSINESS ONLY NEEDS TO BE DETERMINED AS INCOME BY THE ASSESSING OFFICER. 6. ADDITIONS OF RS. 34.07 U/S 68 AND U/S 69A ARE THE AMOUNT OF TOTAL DEPOSITS OF THE ASSESSEE DURING THE YEAR AND AS AT THE END OF THE YEAR ON 31.3.2005 TOTAL BALANCES WERE RS. 68,444/ - AND REST OF THE AMOUNT HAD BEEN WITHDRAWN AND SPENT FOR BUSINESS AND OTHER PURPOSES BY OVER 200 ENTRIES BY CHEQUE PAYMENTS AND SIMILARLY BUSINESS COLLECTIONS HAVE BEEN DEPOSITED IN BANK ACCOUNTS VERY FREQUENTLY. PROVISIONS OF SECTION 68 AND 69A ARE NOT AT ALL APPLICABLE AND IN THE CASE OF A BEST JUDGEMENT ASSESSMENT ONLY P EAK BALANCE AMOUNT WHICH NEVER EXCEEDED RS. 2 LACS SHOULD HAVE BEE N ADDED AND IN A NORMAL SITUATION BANK BALANCES GENERALLY NEVER EXCEEDED RS. 1 LAC. 7. APPELLANT WAS NEVER THE OWNER AND NEVER POSSESSED OVER RS. 34 LACS WHICH IS SOUGHT TO BE ADDED AS ASS ESSEE'S INCOME. CONDITIONS PREREQUISITE FOR INVOKING PROVISIONS OF SECTION 68 AND SECTION 69 A ARE TOTALLY ABSENT. 8. EVEN UNDER SECTION 44AF 8% OF GROSS RECEIPTS ARE TAXED AND THERE CANNOT BE ANY JUSTIFICATION OF ASSESSING 100% RECEIPTS AS INCOME. 9. A N ADDITION U/S 69C OF RS. 35,271/ - HAS BEEN CONFIRMED FOR NON PRODUCTION OF RECEIPTS OF L1C PREMIUM PAID. SINCE L1C PREMIUM PAID IS NOT CLAIMED AS EXPENDITURE THEREFORE IT CANNOT BE ADDED AS INCOME. IT IS WITHOUT ANY REASON AND LOGIC. 10.AN ADDITION OF R S. 50,655 HAS BEEN MADE DUE TO LOW PERSONAL DRAWINGS. ASSESSEE HAS ALREADY SHOWN ABOUT RS. 10,0001 - PER MONTH AS PERSONAL DRAWINGS AND TO DETERMINE RS. 15,0001 - PER MONTH AS ASSESSEE'S DRAWINGS IS BIT TOO HIGH COMPARED TO SIMILAR CASES ASSESSED BY THE DEPA RTMENT. IT MAY PLEASE BE NOTED THAT THE APPELLANT AND HIS WIFE ARE THE ONLY TWO ME M BERS IN THE FAMILY AND THEY DO 110T HAVE ANY CHILDREN. ITA NO. 2351 / 09 3 2. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE WAS THE PROPRIETOR OF M/S EUROPA (WHICH WAS EARLIER KNOWN AS EUROPA ANIMATION AND SPECIAL EFFECTS) WHICH WAS SAID TO BE ENGAGED IN THE BUSINESS OF PROVIDING CONSULTATION IN COMPUTER ANIMATION. IN THE P/L ACCOUNT THE ASSESSEE CREDITED PROFESSIO NAL RECEIPTS OF RS. 7,45,239/ - AND OFFERED NET PROFIT OF RS. 2,30,264/ - AFTER CLAIMING TOTAL EXPENDITURE OF RS. 5,14,975/ - . ON THE BASIS OF AIR INFORMATION THE AO OBSERVED THAT ASSESSEE HAS DEPOSITED CASH OF RS. 11,97,100/ - IN THE ACCOUNT MAINTAINED WITH MADHV I COOPERATIVE BANK LTD. DURING THE COURSE OF SCRUTINY ASSESSMENT , THE AO ALSO FOUND THAT ASSESSEE HAS UNDISCLOSED BANK ACCOUNT IN THE IDBI BANK, WHEREIN TOTAL CASH DEPOSIT WAS RS. 28,08,835/ - . AS PER THE AO, ASSESSEE COULD NOT EXPLAIN SOURCE OF DEPOSIT . A CCORDIN GLY AFTER CONSIDERING ASSESSEES REPLY, ADDITION OF RS. 20,0 8 ,135/ - WAS MADE U/S. 69 A OF THE ACT IN RESPECT OF UNDISCLOSED BANK ACCOUNT , WHEREAS AN ADDITION OF RS. 13,99, 301/ - WAS MADE U/S.68 OF THE IT ACT IN RESPECT OF DEPOSIT IN BANK . THE AO HAS ALSO ADDED RS. 57, 974/ - , I N RESPECT OF LIC INSURANCE PAYMENT CLAIMED U/S. 8 8 OF THE ACT , SOURCE OF WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE. AN ADDITION OF RS. 50,65 5 / - WAS ALSO MADE U/S.69C TOWARDS LOW WITHDRAWAL OF HOUSEHOLD EXPENSES. 3. BY THE IMPUGNED ORDER, TH E CIT(A) ALLOWED RELIEF OF RS. 12,46,174/ - WITH RESPECT OF THE CHEQUES/TRANSFER FROM THE UNDISCLOSED BANK ACCOUNT IN IDBI AND CASH WITHDRAWAL FROM ONE BANK ACCOUNT UTILIZED FOR DEPOSIT IN ANOTHER BANK ACCOUNT. THE CIT(A) HAS ALSO GIVEN CREDIT OF RS. 22,703/ - ON ITA NO. 2351 / 09 4 ACCOUNT OF INSURANCE PREMIUM PAID BY ASSESSEE, WHICH WAS EXPLAINED BEFORE THE CIT(A). NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AGAINST THE ADDITION OF RS. 21, 16 , 061 / - CONFIRMED BY THE CIT(A0 AND FURTHER ADDITION OF RS. 35,271/ - RETAINED BY THE CI T(A) U/S.69C AND RS. 50,656/ - MADE DUE TO LOW PERSONAL DRAWINGS. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THERE WAS DELAY OF 80 DAYS IN FILING APPEAL. AFTER GOING THR OUGH THE REASONS STATED FOR DELAY ACCOMPANIED BY AFFIDAVIT, WE FOUND THAT THERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL. KEEPING IN VIEW THE INTEREST OF SUBSTANTIAL JUSTICE, WE CONDONE THE DELAY AND THE APPEAL IS BEING HEARD ON MERIT. 5. WE FOUND THAT ASSESSEE IS ENGAGED IN PROFESSION OF COMPUTER ANIMATION. ON THE BASIS OF AIR INFORMATION, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT, AO FOUND THAT THERE WAS SUBSTANTIAL DEPOSIT OF CASH IN BANK ACCOUNT AS WELL AS THERE IS ONE BANK ACCOUNT IN IDBI BANK, WHICH WAS NOT DISCLOSED BY THE ASSESSEE IN RETURN OF INCOME SO FILED, THEREFORE, ADDITION WAS MADE U/S.68&69C OF THE ACT. THE AO ALSO MADE ADDITION ON ACCOUNT OF LIC PREMIUM PAID WHICH WAS CLAIMED AS DEDUCTION U/S.88 OF T HE ACT, ON THE PLEA THAT ASSESSEE COULD NOT SUBSTANTIATE THE SOURCE OF PAYMENT OF LIC PREMIUM. SIMILARLY ADDITION WAS MADE ON ACCOUNT OF HOUSEHOLD WITHDRAWALS. BY THE IMPUGNED ORDER, CIT(A) AFTER CONSIDERING ASSESSEES CONTENTION REGARDING WITHDRAWALS OF C ASH FROM ONE ACCOUNT AND DEPOSIT IN THE ANOTHER BANK ACCOUNT AND ALSO ITA NO. 2351 / 09 5 ON ACCOUNT OF TRANSFER OF CHEQUES, GAVE PARTIAL RELIEF WITH REGARD TO THE DEPOSIT MADE U/S.68/69B OF THE ACT. FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS A SSESSEE MET WITH AN ACCIDENT AND HIS WIFE ATTENDED THE HEARING AND ALSO FILED MEDICAL CERTIFICATE. THIS IS THE REASON THAT ASSESSEE COULD NOT FURNISH ALL DOCUMENTARY EVIDENCE S WITH REGARD TO DEPOSIT OF CASH/CHEQUE IN HIS BANK ACCOUNT. WE ALSO FOUND THAT AS SESSEE HAS FILED HIS RETURN DECLARING NET PROFIT OF RS. 2,30,264/ - O N GROSS PROFESSIONAL RECEIPTS OF RS. 7,35,239/ - , NET PROFIT THEREON WORKED OUT AT 30.90%, WHICH APPEARS TO BE QUITE REASONABLE. WE FOUND THAT THE B ECAUSE OF THE INABILITY OF THE ASSESSEE TO ATTEND DUE TO ACCIDENT THE A SSESSING OFFICER REJECTED INCOME DECLARED BY THE ASSESSEE AND COMPUTED HIS INCOME AS PER DETAILS BELOW: - SARASWAT CO - OPERATIVE BANK (FORMERLY RUPEES RUPEES KNOWN AS MANDVI CO - OPERATIVE BANK) CASH DEPOSITS 11,97,100 CH EQUE DEPOSITS AND TRANSFERS 2,0.2,000 13,99,100 L D BI BANK ACCOUN T CASH DEPOSITS 9,93,060 CHEQUES AND TRANSFERS 10,1 5,075 20,08,135 ADDITIONS DUE TO LOW PERSONAL DRAWINGS 50,655 ADDITION MADE DUE TO NON PRODUCTION OF 57,974 LI C PREMIUM RECEIPTS U/S 69C AND NO REBATE U/S 88 WAS ALLOWED TOTAL ADDITIONS MADE BY THE ASSESSING 35,15,864 OFFICER ___________ OUT OF THE ABOVE THE FOLLOWING DELETIONS WERE MADE BY THE CIT(A): CASH WITHDRAWN AND REDEPOSITE D 8,34,100 LOANS RECEIVED FROM BANK DELETED FROM 4,98,000 INCOME INSURANCE PREMIUM PAID NOT TREATED AS 22,903 (13,54,803) INCOME ADDITIONS CONFIRMED BY CIT (A) 21,16,061 ITA NO. 2351 / 09 6 6. THE CONTENTION OF THE LEARNED AR WAS THAT THE ASSESSING OFFICER HAS AD DED BANK LOANS AS INCOME OF THE ASSESSEE AND ITEM OF RS.98,000/ - RECEIVED AS A LOAN FROM L D BI BANK. THIS AMOU NT IS YET TO BE DELETED FROM IN COME, WHICH WAS CREDITED IN THE BANK ACCOUNT ON 20.7.2004. IT WAS ALSO CONTENDED BY LD. AR THAT BOUNCED CHEQUE WAS A LSO CONSIDERED AS DEPOSIT BY THE AO, WHEN THE AMOUNT WAS NEVER RECEIVED AND CREDITED TO THE ASSESSEES BANK ACCOUNT. IT WAS ALSO CONTENDED THAT THE AO HAS AL S O TAKEN NOTE OF EXPENSES REPRESENTED BY PAYMENTS BY CHEQUES AND OTHER W ITHDRAWALS BY NOT LOSE THAN 200 ENTRIES AND IN THE CASE OF BEST JUDGEMENT ASSESSMENT WHAT WERE THE REASONS FOR ASSESSING OFFICER NOT TO FIND A SINGLE EXPENSE ITEM WORTHY OF BEING ALLOWED AS DEDUCTION AS PER THE INCOME TAX LAW, MOREOVER EVEN THE BANK CHARGES APPARENT ON THE FAC E OF T HE BANK STATEMENTS PARTICU LARLY OF CHEQUES BOUNCED HAVE NOT BEEN REDUCED FROM INCOME. LEARNED AR FURTHER DREW OUR ATTENTION TO THE FACT THAT A SSESSEE IN THE TAX RETURN FILED BY HIM HAS DISCLOSED PROFESSIONAL RECEIPTS OF RS. 7,45,239/ - AND THIS AMOUNT HAS NO T BEEN REDUCED FROM ADDITIONS MADE. 7. IT WAS ALSO ARGUED BY LEARNED AR THAT RS. 1 ,87,180 / - BEING BANK LOAN WAS TREATED AS INCOME, CASH WITHDRAWALS RS. 1,87,000 / - , WITHDRAWN AND REDEPOSITED WRONGLY TREATED AS INCOME, THERE IS TOTALING ERRORS OF RS.58,300 / - , CHEQUES OF RS.44,800 WHICH WERE DEPOSITED IN BANK BUT SUBSEQUENTLY BOUNCED BEING TREATED AS INCOME . IT WAS ALSO CONTENDED BY LD. AR THAT THE CIT(A) HAS IGNORED THE WITHDRAWALS SPENT FOR BUSINESS AND OTHER PURPOSES BY OVER 200 ENTRIES BY CHEQUE PAYMENTS. EVEN GOING BY ITA NO. 2351 / 09 7 JUDICIAL PRONOUNCEMENTS PEAK AMOUNT CAN BE DETERMINED AS INCOME OF THE ASSESSEE, AS THE ASSESSEE WAS NEVER IN POSSESSION OF RS.16.19IAKHS WHICH IS SOUGHT TO BE ADDED AS ASSESSEE'S INCOME. AS PER LD. AR THE ASSESSEE HAS ALSO FILED STATEMENT O F BANK BALANCE AND LOWER AUTHORITIES HAVE NOT CONSIDERED THE PEAK AMOUNT OF BALANCE ONLY WHICH OUGHT TO BE ADDED AND NOT THE COMPLETE DEPOSIT IN THE BANK ACCOUNT. ACCORDING TO THE BANK STATEMENT, CREDIT WORKS OUT TO BE RS.3,05,783/ - . 8 . IN VIEW OF ABOVE SH ORTCOMINGS POINTED OUT BY LD. AR, WE ARE OF THE VIEW THAT ALL THESE REQUIRE VERIFICATION O N THE PART OF AO. EVEN THOUGH THERE IS GROSS FAILURE OF ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE SOURCE OF DEPOSIT IN THE BANK ACCOUNT, HOWEVER, K EEPING IN VIEW THE FACT THAT ASSESSEE COULD NOT FILE THE NECESSARY DOCUMENTARY EVIDENCE TO SUBSTANTIATE DEPOSIT IN THE BANK ACCOUNT DUE TO ACCIDENT, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIRPLAY, WE RESTORE THE ADDITION RETAINED BY THE CIT(A) IN RESPE CT OF DEPOSIT IN BANK ACCOUNT TO THE FILE OF AO FOR DECIDING AFRESH. THE ASSESSEE IS AT LIBERTY TO FILE DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE DEPOSIT IN THE RESPECTIVE BANK ACCOUNT. AO IS TO DECIDE AFRESH. 9 . WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF LOW WITHDRAWALS, WE FOUND THAT ASSESSEE FAMILY CONSISTED OF TWO MEMBERS ASSESSEE HIMSELF AND HIS WIFE, THEREFORE, THE WITHDRAWAL OF RS. 1,29,345/ - SHOWN BY THE ASSESSEE WAS SUFFICIENT FOR HIS HOUSEHOLD EXPENSES. ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE AO ON ACCOUNT O F LOW WITHDRAWALS. ITA NO. 2351 / 09 8 10 . WITH REGARD TO THE INSURANCE PREMIUM CLAIMED U/S. 88 OF THE ACT, THE CONTENTION OF THE LD. AR WAS THAT PART OF THE AMOUNT WAS PAID OUT OF THE WITHDRAWAL FROM THE BANK, ACCORDINGLY, WE ALSO RESTORE THIS GROUND BACK TO THE FILE OF AO F OR CONSIDERING ASSESSEES SUBMISSIONS AND TO DECIDE THE SAME AFRESH. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART , IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 / 1 2 / 201 4 . / 1 2 / 2014 SD/ - SD/ - ( ) ( I.P.BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMB AI ; DATED 18 / 1 2 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//