ACIT, Central Circle - 4(3) , Kolkata V. Sri Shashankdhar Mantri , Kolkata

ITA 2494/KOL/2019

AI Insights

The case involves an appeal by the revenue against the decision of the CIT(A) which had deleted an addition made by the Assessing Officer (AO) regarding unexplained cash deposits of Rs. 1,49,00,000 in the assessee's bank accounts. The assessee, Shri Shashankdhar Mantri, had declared this amount as income from commodity speculation in earlier assessment years (2012-13 & 2013-14) during a search operation under section 132 of the Income Tax Act, 1961. The AO was not satisfied with the explanation provided by the assessee regarding the source of these deposits, leading to the initial addition. However, the CIT(A) found merit in the assessee's arguments, leading to the deletion of the addition, which was contested by the revenue in the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132599 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-02-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 25-11-2019
• Other Referred Cases: Anantharam Veerasinghaiah & Co. Vs CIT (123 ITR 457)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Unexplained expenditure
• Section: 68; 132; 143(3); 142(1); 153A; 250; 143(2)

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJPAL YADAV, HON’BLE VICE PRESIDENT & DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 A.C.I.T., Central Circle - 4(3), Kolkata Vs Shri Shashankdhar Mantri Continental Chambers 15A, Hemant Basu Sarani Kolkata - 700001 [PAN : AJJPM5600L] अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri Miraj D. Shah, A.R. Revenue by : Shri P.P. Barman, Addl. CIT सुनवाई कᳱ तारीख/Date of Hearing : 09/02/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 20/02/2023 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The present appeal is directed at the instance of the revenue against the order of the learned Commissioner of Income Tax (Appeals)-21, Kolkata, (hereinafter the “ld. CIT(A)”) dt. 12/09/2019, passed u/s 250 of the Income Tax Act, 1961 (“the Act’), for Assessment Year 2016-17. 2. Brief facts of the case are that the assessee is an individual and he e- filed the return of income for Assessment Year 2016-17 on 31/07/2016 declaring total income of Rs. 30,30,350/-. Case selected for limited scrutiny under CASS followed by serving of notice u/s 143(2) & 142(1) of Act. In the course of assessment proceedings, the ld. Assessing Officer noticed that during the year under consideration the assessee had deposited cash of Rs.1,49,00,000/- in the bank accounts held with UCO Bank & Kotak Mahindra Bank. The assessee was asked to explain the source of said cash deposits. In reply, the assesse submitted that it had offered income of Rs.4.10 Crores in the income for Assessment Year 2012-13 & 2013-14 declared , during the course of search, towards commodity speculation income earned in those years and the same were duly disclosed in the I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 2 return filed in pursuance to notice u/s 153A of the Act and the same has been accepted by the revenue authorities. However, the ld. Assessing Officer was not satisfied with the submissions made by the assessee and made addition of Rs. 1,49,00,000/- and assessed the income at Rs.1,79,30,350/-. 2.1. Aggrieved, the assessee preferred appeal before the ld. CIT(A) and succeeded. The ld. CIT(A) had appreciated the fact about the disclosure of Rs.4.10 Crores during Assessment Year 2012-13 & 2013-14 and deleted the addition. 3. Aggrieved the revenue is in appeal before this Tribunal. 4. The ld. D/R supported the order of the ld. Assessing Officer. On the other hand, the ld. Counsel for the assessee, relied on the order of the ld. CIT(A) and also took us through the assessment orders of 2013-14 & 2014-15 framed u/s 153A/143(3)/143 of the Act respectively on 30/03/2016, pointing out that income of Rs.2,10,02,803/- and Rs.2,00,02,000/- which was surrendered towards commodity speculation income and was part of the total disclosure of Rs.4,00,04,803/- made by the DM Group and the said sum has been duly offered to tax in the return filed subsequent to the search proceedings. It was also submitted that the said sum which was shown as debtors at the time of search was subsequently recovered in cash and the same was available in the hands of the assessee which is the source of alleged cash deposit. 5. We have heard rival contentions and perused the record placed before us. 6. Addition for unexplained cash deposit of Rs.1,49,00,000/- deleted by the ld. CIT(A) has been challenged by the revenue in the instant appeal. We find that the ld. CIT(A) deleted the alleged addition referring to the surrender made by the assessee during the course of search u/s 132 of the Act and offering the same for income observing as follows:- I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 3 “05. FINDINGS & DECISION: 1. I have carefully considered the submissions of the Ld. AR of the appellant and the materials placed on record. I have also perused the observations and findings of the Ld. AO. In the grounds raised in the appeal, the issue to be decided in sum and substance is whether the cash deposit amounting to Rs.1,49,00,000/- was assessable by way of unexplained cash credit u/s 68 of the Act. From the impugned order it is observed that the Ld. AO found from the ITS details of the assessee that he had deposited cash of Rs.1,49,00,000/-, of which Rs.74,00,000/- as in UCO Bank and Rs.75,00,000/- was in Kotak Mahindra Bank, both at Kolkata. Upon enquiry the assessee explained to the Ld. AO that there was a search conducted upon his premises on 11.04.2013 and that in the course of search he had offered commodity speculation income of Rs.4,00,04,803/- in FYs 2012-13 & 2013-14. Accordingly in the returns filed u/s 153A for the Asst Years 2013-14 & 2014-15, the aforesaid sums were offered to tax and the same was shown as receivable in the Balance Sheet of the respective years. Hence, according to the appellant, the sum of Rs.1,49,00,000/- so deposited in the bank account represented the proceeds from speculation income disclosed and offered to tax in the earlier years. The Ld. AO however was not agreeable to the contention put forth by the appellant. The Ld. AO observed that although the cash found in the course of search had no nexus or link with the speculation income of Rs.4,00,04,803/- offered during the course of search; the Ld. AO however held that such speculation income could have been derived only through broker and that too could not have been derived in cash and therefore he was of the view that disclosure of speculation income of Rs.4,00,04,803/- could not be correlated with the cash of Rs.1,49,00,000/- deposited by the appellant during the year. Instead the Ld. AO held that the cash of Rs.1,49,00,000/- is seen to have been received from sundry debtors and is therefore an independent source. Since the appellant was unable to provide the details of sundry debtors, the impugned sum of Rs.1,49,00,000/- was assessed by the Ld. AO as unexplained income of the appellant. 2. In order to adjudicate this issue, it is deemed necessary to first set out the facts of the case leading to the impugned addition. It is noted that search u/s 132 was conducted upon the assessee. In the course of such search operation, the appellant and his Group made certain disclosures, and of the said disclosures, a sum of Rs.4,00, 04,803/- was disclosed in the hands of the appellant, on account of Commodity Speculation Income in the appellant's hands in F.Y. 2012-13 & 2013-14. It is noted that such disclosure did not have any nexus or link with any incriminating documents or unexplained/undisclosed assets found in the course of search. The offer of sum of Rs.4,00,04,803/- was voluntary and the income so disclosed was reflected in the P&L A/cs prepared for the respective years and correspondingly it was shown as receivable under the head 'Sundry Debtors' I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 4 in the Balance Sheet. It is thus the appellant's contention is that the deposit of Rs.1,49,00,000/- was out of such receivable of Rs.4,00,04,803/- which has already been assessed to tax in the earlier years and hence no addition on this count was warranted. On the other hand, the Ld. AO is of the view that such offer of income of Rs.4,00,04,803/- could not have any link with the subsequent cash deposit and hence the impugned amount was assessable the unexplained income of the appellant. 3. After giving thoughtful consideration to the facts of the case and the averments of the Ld. AO as well as the Ld. AR, I find sufficient force in contentions put forth by the appellant. The undisputed facts of the case are that the appellant had voluntarily offered speculative income of Rs.4,00,04,803/- in FYs 2012-13 & 2013-14. It is also not disputed by the Ld. AO that such income so offered did not have any link with any incriminating documents nor was it telescoped against any unexplained assets found in the course of search. Instead, from the assessment orders of the earlier years as well as the entries in the financial statements of the appellant, it is abundantly clear that such income was offered to tax and correspondingly it was reflected as Receivable' in the Balance Sheet. It is noted that such sum was reported separately by the appellant in the Balance Sheet with a view to distinguish it from the regular cash balance. The Ld. AR did submit that it was an inadvertent error" on the appellant's part that it showed such income of Rs.4,00,04,803/- as receivable by way of 'Sundry Debtors' and not separately as 'cash on account of undisclosed income'. I however agree with him that for such inadvertence on the accountant's part, it could not be disbelieved that the income of Rs.4,00,04,803/- which was indeed reflected in the Balance Sheet and shown as receivable, was an 'Asset' of the appellant. In the circumstances the deposit of cash of Rs.1,49,00,000/- out of such receivable, which has been assessed as income in the earlier years, cannot be doubted or for that matter assessed to tax again in the hands of the appellant. I therefore hold that the impugned addition of Rs. 1,49,00,000/- was wholly unwarranted on facts and in law. 4. This issue may also be viewed from another angle. It is by now a settled legal proposition that if an addition is made in the assessment on account of unexplained income which is assessed with to tax since it was not recorded in the regular books then such income can be telescoped against unexplained assets found subsequently. Reference in this regard may be made to the judgment of the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. Vs CIT (123 ITR 457) wherein the Hon'ble Apex Court held that when an "intangible" addition is made while assessing the profits of an assessee, it is made on the basis that amount represented by that addition constitutes the undisclosed income of the assessee. The Hon'ble Court stated that although such income is commonly described as I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 5 'intangible' but it is very much a part of assessee's real income as disclosed in his account books and has the same concrete existence. The Hon'ble Court thus held that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a secret fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. The intangible additions were thus held to be available to the assessee as the regular book profits could be. The Hon'ble Apex Court accordingly held when the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or by reference to concealed income earned in that very year then no addition is warranted on account of such cash deficits or cash credits. The relevant extracts of the judgment is as follows: "In the instant case, the Tribunal had relied entirely on the basis that an intangible addition of Rs. 2,00,000 had been made to the book profits of the assessee for the assessment year 1957-58 and it inferred that an amount of Rs. 90,000 was available for being put to use in the relevant assessment year. Now it can hardly be denied that when an intangible addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as 'intangible', is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be. There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 6 circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income. A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration. It is open in to the revenue to rely on all the circumstances pointing to that conclusion." 5. Applying the ratio decindi laid down by the Hon'ble Supreme Court in the above judgment, I am of the considered view that when commodity income of Rs.4,00,04,803/- was assessed by the Department as the appellant's unexplained income on intangible basis in the earlier AYS 2013-14 & 2014- 15, then such undisclosed/concealed income, which has already been assessed to tax, was to be telescoped against the identifiable cash deposit of Rs.1,49,00,000/- made in the relevant AY 2015-16. For the reasons set out in the foregoing, I am of the considered view that the impugned addition of Rs.1,49,00,000/- was untenable on facts as well as in law. The Ld. AO is therefore directed to delete the same in full.” 7. From perusal of the above finding and also taking note of the fact that in the total surrender of Rs.4,00,04,803/- made by DM Group on account of search proceedings carried out u/s 132 of the Act on 11/04/2013 interalia included the surrender made by the assessee for Assessment Year 2012-13 & 2013-14 towards commodity speculation income communicated in search document DKM/4, page 29-31 at Rs.2,10,02,803/- and Rs.2,00,02,000/- respectively. Further we notice that in the computation of income appearing in the assessment order u/s 153A r.w.s. 143(3) and Section 143(3) of the Act for Assessment Year 2012-13 and 2013-14 includes the income offered for tax under the head profit for trading in commodities speculation. It remains an uncontroverted fact that income of Rs.4,00,04,803/- declared in Assessment Year 2012-13 & 2013-14 has been duly offered to tax and after paying the tax liability the remaining amount was available with the assessee in the form of cash and the same stands duly explained on the strength of the fact that the assessee has offered Rs.4.10 Crores as income in Assessment Year 2012- 13 & 2013-14 and this fact has been rightly appreciated by the ld. CIT(A) in I.T.A. No. 2494/Kol/2019 Assessment Year: 2016-17 Shri Shashankdhar Mantri 7 the impugned order observing that the assessee was eligible for telescoping benefit of the alleged cash deposit of Rs.1.49 Crores against the commodity income offered in the preceding years as detailed above. We, thus, fail to find any infirmity in the finding of the ld. CIT(A) and, therefore, all the effective grounds raised by the revenue are dismissed. 8. In the result, appeal of the revenue is dismissed. Order pronounced in the Court on 20 th February, 2023 at Kolkata. Sd/- Sd/- (RAJPAL YADAV) (DR. MANISH BORAD) VICE-PRESIDENT ACCOUNTANT MEMBER Kolkata, Dated 20/02/2023 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata