MAYUR RAJNIKANT JOSHI, MUMBAI V. ITO 15(3)(2), MUMBAI

ITA 2357/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 26-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIYA
• Assessee Lawyers: S C TIWARINATASHA MANGAT
• Keywords: Opportunity of being heard; Peak credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI .. , . . !' , #$ %! BEFORE SHRI H.L. KARWA, PRESIDENT & SHRI B R BASKARA N , AM ./I.T.A. NO. 2357/MUM/2013 ( ' ' ' ' & & & & / ASSESSMENT YEAR : 2009-10) SHRI. MAYUR RAJNIKANT JOSHI B/16, SAIBABA DHAM, SAIBABA NAGAR, S.V. ROAD, BORIVALI (W) MUMBAI 400092 ' ' ' ' / VS. I.T.O. 15(3)(2) MUMBAI !' #$ ./PAN : AFCPJ4545C ( '( /APPELLANT ) ( )*'( / RESPONDENT ) '( + , # / APPELLANT BY : SHRI S.C. TIWARI/NATASHA MANGAT )*'( + , # / RESPONDENT BY : SHRI DEEPAK SUTARIYA (DR) ' + -.$ /DATE OF HEARING : 26.05.2014 /0& + -.$ / DATE OF PRONOUNCEMENT :28.05.2014 %#1 / O R D E R PER B R BASKARAN, AM : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 04-02-2013 PASSED BY LD CIT(A)-26 AND I T RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF RS.55,37,660/-, BEING AGGREGATE AMOUNT SHRI MAYUR R. JOSHI 2 OF DEPOSITS FOUND IN THE BANK ACCOUNTS OF THE ASSES SEE, MADE U/S 68 OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE DISCUSSED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE SUBMITTED THE DETAILS OF HIS TWO BANK ACCOUNTS MAINTAINED WIT H M/S AXIS BANK, BRIVALI (W) BRANCH, MUMBAI. ON EXAMINATION OF THE ABOVE SAID BANK ACCOUNTS, THE AO NOTICED THAT THE ASSESSEE HAS MADE HUGE DEPOSITS IN BOTH THE BANK ACCOUNTS. THE AO WORKED OUT THE AGGR EGATE AMOUNT OF CREDITS FOUND IN BOTH THE BANK ACCOUNTS AS RS.55,37 ,660/-. THE AGGREGATE AMOUNT OF CASH DEPOSITS FOUND WAS WORKED OUT AT RS.58,41,870/-. THE AGGREGATE AMOUNT OF WITHDRAWAL S MADE FROM THE ABOVE SAID BANK ACCOUNTS WAS WORKED OUT AT RS.53,39 ,720/-. THE AO NOTICED THAT THE ASSESSEE HAS BEEN USING THE WITHDR AWALS FOR MAKING FIXED DEPOSITS, FOR PAYING INSURANCE POLICY PREMIUM S. THE ASSESSEE WAS ALSO SEEN WITHDRAWING FUNDS THROUGH ATMS. THE ASSE SSEE HAD ALSO INCURRED EXPENSES ON SHOPPING AT VARIOUS PLACES. THE AO SOUGHT FOR EXPLANATIONS FROM THE ASSESSEE ABOUT THE SOURCES FO R THE DEPOSITS FOUND IN THE TWO BANK ACCOUNTS, REFERRED ABOVE. 4. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT TH E SOURCES OF VARIOUS CASH DEPOSITS WERE THE WITHDRAWALS MADE ON EARLIER DATES. IN THIS CONNECTION, THE ASSESSEE SUBMITTED A CASH BOOK AND DAILY CASH SHRI MAYUR R. JOSHI 3 SUMMARY BEFORE THE AO. ON EXAMINATION OF THE SAME, THE AO NOTICED THAT THERE WAS A NEGATIVE CASH BALANCE OF RS.4,34,2 71/- ON 13.1.2009. THE ASSESSEE DID NOT FURNISH ANY EXPLANATION FOR TH E NEGATIVE CASH BALANCE. THE AO DID NOT ALSO ACCEPT THE EXPLANATIO NS OF THE ASSESSEE THAT THE EARLIER WITHDRAWALS WERE USED FOR MAKING S UBSEQUENT DEPOSITS. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO OFFER ANY SATISFACTORY EXPLANATION WITH REGARD TO THE SOURCES FOR MAKING THE DEPOSITS. ACCORDINGLY, THE AO ASSESSED THE AGGREGA TE AMOUNT OF CREDITS OF RS.55,37,660/- AS THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) ALSO CONFI RMED THE ORDER PASSED BY THE AO. AGGRIEVED, THE ASSESSEE HAS FILE D APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. DURING THE COURSE OF HEARING, THE LD A.R SUBMITTED THAT THE ASSESSING OF FICER HAS ALSO ASSESSED THE OPENING BALANCE OF RS.4,73,438/- FOUND IN BANK ACCOUNT WITH NO.018010100359450 AND CONTENDED THAT THE OPEN ING BALANCE COULD NOT BE ASSESSED IN THE YEAR UNDER CONSIDERATI ON. WHEN THIS CONTENTION WAS PUT TO THE LD D.R, THE LD. DEPARTMEN TAL REPRESENTATIVE FAIRLY CONCEDED THAT THE ABOVE SAID OPENING BALANCE CANNOT BE ASSESSED DURING THE YEAR UNDER CONSIDERATION, SINCE IT RELAT ES TO THE IMMEDIATELY PRECEDING YEAR. IN VIEW OF THE ABOVE, WE DIRECT TH E AO TO DELETE THE SHRI MAYUR R. JOSHI 4 ASSESSMENT OF RS.4,73,438/- RELATING TO THE OPENING BALANCE OF THE BANK ACCOUNT CITED ABOVE. 6. DURING THE COURSE OF HEARING, THE LD A.R SUB MITTED DETAILS OF WITHDRAWALS, WHICH WERE NOT RE-DEPOSITED INTO THE B ANK ACCOUNT. THE AGGREGATE AMOUNT OF SUCH KIND OF WITHDRAWALS WAS WO RKED OUT BY THE ASSESSEE AT RS.11,58,389/-. WE HAVE ALREADY NOTICE D THAT THE ASSESSEE HAS CONTENDED THAT THE SOURCES OF THE DEPOSITS WERE THE EARLIER WITHDRAWALS. THE VERY FACT THAT THE ABOVE SAID SUM OF RS.11,58,389/- WAS NOT RE-DEPOSITED WOULD SHOW THAT THE SAID AMOUN T COULD NOT HAVE BEEN AVAILABLE AS SOURCE. IN THAT CASE, IT IS THE RESPONSIBILITY OF THE ASSESSEE TO EXPLAIN THE DEPOSITS THAT WERE MADE EAR LIER, WHICH RELATE TO THE ABOVE SAID WITHDRAWALS, I.E., THE OBLIGATION TO EXPLAIN THE SOURCES OF DEPOSITS, AT LEAST TO THE EXTENT OF RS.11,58,389/- IS PLACED UPON THE ASSESSEE. 7. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS B EEN ACTING AS AN INTERMEDIARY FOR ARRANGING CASH LOANS BETWEEN THE L ENDERS AND BORROWERS. BUT, THE VERY FACT THAT THE ASSESSEE HA S USED THE DEPOSITS TO THE TUNE OF RS.11,58,389/- WOULD SHOW THAT THE A BOVE SAID EXPLANATION OF THE ASSESSEE, AT LEAST TO THE EXTENT OF RS.11,58,389/- IS NOT CORRECT FOR THE SIMPLE REASON THAT THE ASSESSEE COULD NOT HAVE USED SHRI MAYUR R. JOSHI 5 OTHER PEOPLES MONEY (LENDERS MONEY) FOR MAKING DE POSITS IN HIS NAME AND FOR MEETING HIS OWN EXPENSES. HENCE THE EXPLAN ATION OF THE ASSESSEE IS LIABLE TO BE REJECTED FOR THE ABOVE SAI D AMOUNT OF RS.11,58,389/-. WE ALSO NOTICE THAT THE ASSESSEE D OES NOT HAVE ANY OTHER EXPLANATION TO OFFER IN RESPECT OF THE ABOVE SAID AMOUNT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD CIT(A) IN RESPECT OF THE ADDITION OF RS.11,58,389/- REFERRED ABOVE. HOWEVER , THE WORKING OF RS.11,58,389/- WAS NOT EXAMINED BY THE AO. HENCE, THE AO MAY EXAMINE THE WORKINGS FURNISHED BY THE ASSESSEE AND MAY CARRY OUT ANY AMENDMENT, IF ANY, AFTER AFFORDING OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 8. WITH REGARD TO THE REMAINING AMOUNT OF ADDIT IONS, THE SUBMISSION OF THE ASSESSEE IS THAT THE WITHDRAWALS MADE ON EAR LIER DATES WERE USED FOR MAKING DEPOSITS IN THE SUBSEQUENT DATES. ACCOR DINGLY, IT WAS SOUGHT TO BE EXPLAINED THAT, ONLY THE PEAK CREDIT BALANCE OF THE DEPOSITS CAN BE TREATED AS THE INCOME OF THE ASSESSEE. ACCORDING T O THE LD A.R, THE PEAK CREDIT BALANCE IN BOTH THE ACCOUNTS WAS RS.9,6 7,149/-. AGAINST THE SAME THE ASSESSEE HAS CLAIMED REDUCTION OF THE OPENING BANK BALANCE, INCOME DECLARED IN THE RETURN OF INCOME. THE ASSESSEE HAS ALSO INCREASED THE PEAK CREDIT BALANCE WITH THE AMO UNT OF WITHDRAWALS, WHICH WERE NOT RE-DEPOSITED AND ALSO WITH THE AMOUN T OF EXPENSES. WE SHRI MAYUR R. JOSHI 6 NOTICE THAT THE COMPUTATION OF PEAK CREDIT BALANCE AND OTHER WORKINGS HAVE NOT BEEN EXAMINED BY THE AO. 9. THE LD D.R, HOWEVER, SUBMITTED THAT THE PEAK C REDIT WORKINGS MADE BY THE AO SUFFERS FROM MANY INFIRMITIES. ADVERTING OUR ATTENTION TO THE CASH BOOK, WHICH IS PLACED AT PAGE 3 OF THE PAPER BOOK, THE LD A.R SUBMITTED THAT THE CASH BALANCE WAS SHOWN AT NEGATI VE FIGURE OF RS.73,073/- ON 04.04.2008. HE FURTHER SUBMITTED TH AT THE ASSESSING OFFICER HAS ALSO NOTICED NEGATIVE CASH BALANCE OF R S.4,34,271/- ON 13.01.2009. THE LD D.R SUBMITTED THAT THE NEGATIVE CASH BALANCES SHOULD BE ASSESSED AS THE INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS IGNORED THE EFFECT OF NEGATIVE CAS H BALANCES WHILE WORKING OUT THE PEAK CREDIT STATEMENT. 10. WE FIND FORCE IN THE SUBMISSIONS OF LD D.R. IN OUR VIEW, THE NEGATIVE CASH BALANCE FOUND IN A PARTICULAR DAY SHO ULD NECESSARILY BE TAKEN AS THE INCOME OF THE ASSESSEE FOR THE SIMPLE REASON THAT A PERSON CANNOT MAKE DISBURSEMENTS FROM OUT OF EMPTY CASH BO X, MEANING THEREBY, THE NEGATIVE CASH BALANCE REPRESENTS UNACC OUNTED INCOME OF THE ASSESSEE. ONCE IT IS TAKEN AS THE INCOME, IT C ONSTITUTES A SOURCE FOR THE ASSESSEE AND HENCE THE CASH BALANCE SHOULD BE I NCREASED BY THE SAID AMOUNT ON THE VERY SAME DATE. FOR EXAMPLE, WE HAVE NOTICED THAT THERE WAS A NEGATIVE CASH BALANCE OF RS.73,073/- ON 04.04.2008. IN SHRI MAYUR R. JOSHI 7 OUR VIEW, THE AMOUNT OF RS.73,073/- SHOULD BE TAKEN AS THE INCOME OF THE ASSESSEE AND SHOULD ALSO BE TAKEN AS A SOURCE I N THE CASH BOOK ON THE ABOVE SAID DATE OF 04.04.2008. HENCE, AS ON 04 .04.2008, THE CASH BALANCE WILL TURN INTO A NIL FIGURE. THE CASH BOOK SHOULD BE SO CONTINUED THEREAFTER. THE NEGATIVE CASH BALANCE NOT ICED IN ANY OF THE SUBSEQUENT DATES SHOULD ALSO BE TAKEN AS THE INCOME OF THE ASSESSEE AND SHOULD ALSO BE TAKEN AS A SOURCE ON THE VERY SA ME DATE. 11. IT IS ALSO TO BE NOTED THAT THE WITHDRAWALS, WHICH WERE NOT RE- DEPOSITED, SHOULD NOT FIND PLACE IN THE WORKING OF PEAK CREDIT BALANCE. SINCE THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE CASH WITHDRAWALS MADE ON EARLIER DATES WERE NOT USE D FOR ANY OTHER PURPOSE, IN OUR VIEW, IT WOULD BE REASONABLE TO ACC EPT THAT THE SAID WITHDRAWALS WERE USED FOR MAKING SUBSEQUENT DEPOSIT S. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CASH BOOK SHOULD BE REC AST IN THE METHOD DISCUSSED BY US IN THE EARLIER PARAGRAPHS. AFTER C ARRYING OUT THE EXERCISE OF PLACING WITHDRAWALS AND DEPOSITS IN CHR ONOLOGICAL ORDER AND AFTER INFUSING THE NEGATIVE CASH BALANCE AS A SOURC E (TO BE ASSESSED AS INCOME), ONE HAS TO ASCERTAIN THE PEAK BALANCE OF T HE YEAR AND THE PEAK BALANCE SO ARRIVED HAS TO BE CONSIDERED AS THE INCOME OF THE ASSESSEE. SHRI MAYUR R. JOSHI 8 12. WE NOTICE THAT THE ASSESSEE HAS NOT WORKED O UT THE PEAK CREDIT BALANCE IN THE METHOD DISCUSSED IN THE PRECEDING P ARAGRAPH. IN ANY CASE, THE WORKING MADE BY THE ASSESSEE ALSO REQUIRE S VERIFICATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE REST ORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR MAKING FRESH EXAM INATION. THE ASSESSEE IS DIRECTED TO WORK OUT THE PEAK CREDIT BALANCE IN TERMS OF THE DISCUSSIONS MADE SUPRA AND FURNISH THE SAME TO THE AO. THE ASSESSING OFFICER SHOULD EXAMINE THE SAME AND MAY MAKE NECESS ARY AMENDMENTS, IF ANY, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ASSESS THE PEAK CREDIT BALANCE AS THE INCOME OF THE ASSESSEE, BESIDES ASSESSING THE NEGATIVE CASH BALAN CES, IF ANY AND ALSO THE AMOUNT OF WITHDRAWALS, WHICH WERE NOT RE-DEPOSI TED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2 -3 '2- + 4+ 56#7 # ! 8- + 9- :; ORDER PRONOUNCED IN THE OPEN COURT ON 28/05/2014 . %#1 + /0& $# <%'3 28/05/2014 0 + = SD/- SD/- ( H.L. KARWA) ( B R BASKARAN ) /PRESIDENT #$ %! / ACCOUNTANT MEMBER MUMBAI; <%' 28/05/ 2014 .'../ A.K.PATEL . PS SHRI MAYUR R. JOSHI 9 %#1 + )-? @# %#1 + )-? @# %#1 + )-? @# %#1 + )-? @#?&- ?&-?&- ?&-/ COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. A ( ) / THE CIT(A)- 4. A / CIT 5. ? = )-' , , / DR, ITAT, MUMBAI 6. =E F / GUARD FILE. %#1' %#1' %#1' %#1' / BY ORDER, *?- )- //TRUE COPY// / // /: 9 : 9 : 9 : 9 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI