RAMNARAYAN B GUPTA, MUMBAI V. ITO 8(2)(2), MUMBAI

ITA 2527/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2282 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANU K AGGARWAL
• Assessee Lawyers: CHETAN V PABARI
• Keywords: Unexplained cash credit; Presumptive income; Salary income; Peak credit; Non compliance; Onus to prove
• Section: 44AD; 142(1); 133(6); 68; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 2527 /MUM/201 4 ( / ASSESSMENT YEAR : 20 1 0 - 11 ) SHRI RAMNARAYAN BABULAL GUPTA, A - 206, WINSWAY CO MPLEX, OLD POLICE LINE, ANDHERI (E), MUMBAI - 400069 / VS. INCOME TAX OFFICER - 8(2)(2), MUMBAI .. ./ PAN : AJHPG7063P APPELLANT BY SHRI CHETAN V PABARI RESPONDENT BY SMT.ANU K AGGARWAL / DATE OF HEARING : 17 .11. 2016 / DATE OF PRONOUNCEMENT : 05 .1 2 . 2016 / O R D E R PER RAJESH KUMAR , A M THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7.1.2014 , PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS) - 17 , MUMBAI FOR THE ASSESSMENT YEAR 20 10 - 11 CONFIRMING THE ADDITION OF RS.29,54,385/ - UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 3.09. 201 0 DECLARING A TOTA L INCOME AT RS. 2,07,110/ - OUT OF SALARY INCOME. T HEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER THE CASS AND ACCORDINGLY STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) DATED 2 ITA NO. 2527 / / MUM/ 201 4 24.8.2011 WERE ISSUED AND SERVED UPON THE ASSESSEE CALLING UPON CERTAIN DETAILS AND INFORMATION . THE CASE OF THE ASSESSEE WAS ADJOURNED FROM TIME TO TIME AT THE REQUEST OF THE LD AR OF THE ASSESSEE BUT THE ASSESSEE DID NOT APPEAR THE AO. FINALY T HE AO ISSUED SHOW CAUSE NOTICE U/S 271(1)(B) DATED 4.10.2012 FIXIN G THE HEARING ON 12.10.2012 BUT TO NO AVAIL. A GAIN ANOTHER NOTICE DATED 7.11.2012 U/S 271(1)(B) WAS ISSUED TO THE ASSESSEE AS TO WHY THE PENALTY OF RS.10,000/ - SHOULD NOT BE IMPOSED FOR EACH DEFAULT OF NON COMPLIANCE TO THE REQUIREMENT OF NOTICE U/S 14 2(1) OF THE ACT F IXING THE HEARING ON 20.11.2012 . IN REPLY, THE ASSESSEE VIDE HIS LETTER DATED 19.11.2012 SUBMITTED THAT HE WAS INDISPOSED AND COULD NOT APPEAR ON THE APPOINTED DATE OF HEARING. THEREAFTER NO RESPONSE FROM THE ASSESSEE WHATSOEVER WAS BR OUGHT ON RECORD . 3 . THE ASSESSEE WAS A DIRECTOR OF M /S LEADER GAS AND PETROCHEM LIMITED. AS FACTS EMERGED FROM THE RECORD THAT AS PER ANNUAL INFORMATION REPORT (AIR) FILED BY THE SYNDICATE BANK, MAROL, MUMBAI - 400093, THE ASSESSEE HAD DEPOSITED CASH OF RS.29,54,385/ - IN HIS SAVING BANK ACCOUNT NO. 50322030001529/ - THROUGHOUT THE YEAR . THE AO VIDE NOTICE DATED 27.11.2012 ASKED THE ASSESSEE TO FILE THE STATEMENT OF ALL THE BANK ACCOUNTS HELD ALONG WITH THE NARRATION OF EACH ENTRY OF DEBIT AND CREDIT TO SU CH ACCOUNT. SINCE ASSESSEE FAILED TO COMPLY WITH THE VARIOUS NOTICES ISSUED BY 3 ITA NO. 2527 / / MUM/ 201 4 THE AO FROM TIME TO TIME . F INALLY VIDE NOTICE DATED 7.11.2012 THE AO CALLED UPON THE ASSESSEE AS TO WHY THE ASSESSMENT U/S 144 OF THE ACT SHOULD NOT BE NOT MADE BY MAKING AN AD DITION OF RS.29,54,385/ - BEING CASH DEPOSITED IN YOUR ACCOUNT MAINTAINED WITH SYNDICATE BANK, B - 59, GIRIRAJ INDUSTRIAL ESTATE, MUMBAI - 400093 AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE NOTICE U/S 133(6) OF THE ACT WAS ALSO ISSUED TO THE SYNDICATE B ANK. THE SYNDICATE BANK VIDE LETTER DATED 10.11.2012 SUBMITTED STATEMENT OF ACCOUNT BEING 50322030001529 FOR THE PERIOD FROM 1.4.2009 TO 31.3.2010 IN WHICH IT HAS BEEN MENTIONED THAT THE ASSESSEE DEPOSITED RS.29,54,385/ - ON VARIOUS DATES DURING THE YEAR. THE AO, THEREFORE, WAS OF THE VIEW DESPITE GIVING VARIOUS OPPORTUNIT IES TO PRODUCE THE DETAILS AS CALLED DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE DID NOT COMPLY WITH ANY OF THE NOTICE AND HENCE THE AO PROCEEDED TO FRAMED THE ASSESSMENT EX - PARTE U /S 144 OF THE ACT BY ADDING RS.29,55,106/ - ON ACCOUNT OF CASH DEPOSITS INTO BANK ACCOUNT AS INCOME FROM OTHER SOURCES BY ASSESSING THE INCOME AT RS.31,62,220/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WH O ALSO DISMISSED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AS INCORPORATED IN PARA 1.2 OF THE APPEAL ORDER AND OBSERVED AND HELD AS UNDER: 4 ITA NO. 2527 / / MUM/ 201 4 1.3 DECISION 1.3.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS AND CONTENTION OF THE LD. AR OF THE APPELLANT AND ALSO CAREFULLY GONE THROUGH THE FACTS AND EXPLANATION GIVEN BY THE LD.AR OF THE APPELLANT AS WELL AS THE LD. AO. I FIND THAT LD. AO HAS MADE AN ADDITION U/S 68 OF THE ACT OF THE CASH DEPOSITS AMOUNTING T O RS. 29,55,106/ - , AS NO EXPLANATION WAS OFFERED TO THE SEVENTY ENTRIES OF CASH DEPOSITS ON VARIOUS DATES THROUGH OUT THE PREVIOUS YEAR. THE LD. AO OBSERVED THAT THE MOST OF THE DEPOSITS WERE LESS THAN RS. 50000/ - AND WERE IMMEDIATELY WITHDRAWN AGAIN IN T HE FORM OF CASH ONLY. DURING THE COURSE OF THE APPELLATE PROCEEDINGS IT WAS SUBMITTED BY THE LD. COUNSEL OF THE APPELLANT THAT THE APPELLANT IS A SCRAP DEALER AND THE DEPOSITS OF CASH WAS ON ACCOUNT OF SALE PROCEEDS OF THE SCRAP AND WITHDRAWAL CONSEQUENT T HERETO WAS ON ACCOUNT OF PURCHASE OF THE SCRAP. THE APPELLANT WAS CATEGORICALLY ASKED TO GIVE THE NAME OF THE PERSONS FROM WHOM PURCHASES WERE MADE OR TO WHOM THE SALE WAS AFFECTED. THE APPELLANT NEITHER BEFORE ME NOR BEFORE THE LD. A O GAVE ANY DOCUMENTARY EVIDENCES. FURTHER, THE APPELLANT WAS NOT ABLE TO GIVE ANY DOCUMENTARY EVIDENCES AS TO THE TRANSPORTATION OF THE SCRAP TO VARIOUS DEALERS IN OTHER PARTS OF THE COUNTRY AS THE GOODS WOULD HAVE BEEN TRANSFERRED BY DIFFERENT MODES OF TRANSPORT, NO EVIDENCE O F ANY KIND WAS ADDUCED. FURTHER, THE APPELLANT SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE TOTAL TURNOVER OF THE APPELLANT COULD BE PUT TO TAX ON PRESUMPTIVE BASIS I.E. U/ S. 44AD @ 5% OF THE TURNOVER. IT WAS ALSO SUGGESTED BY THE APPELLANT THAT IT MAY BE ASSESSED AT THE PEAK OF THE CASH CREDIT I.E. RS. 1,15,340/ - BEING THE PEAK CREDIT AND NOT ON THE ENTIRE AMOUNT. THE PLEA OF THE APPELLANT CANNOT BE ACCEPTED AS THIS IS NOT A CASE WHERE THE LD. A O IS MAKING A ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES OR SALES. THE ADDITIONS ARE MADE U/ S. 68 OF THE ACT WHEREIN UNEXPLAINED CREDITS APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE TAKEN INTO ACCOUNT. THE APPELLANT HAVING FAILED TO ADDUCE ANY EVIDENCE TO THIS EFFECT AND OFFERED NO VALID EXPLANATION TO THE SOURCES OF CREDITS, IT SQUARELY FALLS WITHIN THE MISCHIEF OF PROVISIONS OF SEC. 68 OF THE ACT. 1.3.2 SECTION 68 COMES INTO PLAY ONLY WHEN ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR FOR THE SOURCE AND NATURE OF WHICH EITHER NO EXPLANATION IS OFFERED BY THE ASSESSEE OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY. THUS, SECTION 68 GETS ACTIVATED ONLY WHEN ANY SUM IS FOUND CREDITED IN 5 ITA NO. 2527 / / MUM/ 201 4 THE BOOKS OF THE ASSESSEE. SECTION 6 8 DOES NOT MAKE ANY DISTINCTION BETWEEN COMMERCIAL LOANS AND NON - COMMERCIAL LOANS AND AS SUCH APPLIES TO BOTH THE CATEGORIES OF LOANS. ONCE THE ASSESSEE OFFERS NO EXPLANATION REGARDING CASH CREDIT APPEARING IN HIS BOOKS OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO TAX. IN SUCH A CONTEXT, THE DEPARTMENT DOES NOT HAVE TO PROVE ANYTHING FURTHER. 1.3.3 SECTION 68 IS A CHARGING PROVISION IN SO FAR AS UNEXPLAINED CASH CREDITS ARE CONCERNED. THOUGH SECTION 2(22)(E )(II) AND SECTION 2(24) DO NOT REFER TO CASH CREDITS WHICH ARE TREATED AS THE ASSESSEES INCOME SPECIFICALLY , THE SAID POSITION DOES NOT EFFECT THE AOS RIGHT TO CHARGES TO TAX THE AMOUNTS OF CASH CREDITS WHICH ARE TREATED AS THE ASSESSEES INCOME. THE DEF INITION SECTIONS I.E. SECTION 2(22)(E)(II) AND SECTION 2(24) MAKE CERTAIN RECEIPTS, BEAR THE CHARACTER OF INCOME WHEREAS SECTION 68 MAKES, IN CERTAIN CIRCUMSTANCES, CERTAIN SUMS TO BE THE INCOME OF THE ASSESSEE. THUS, SECTION 68 ITSELF IS A CHARGING SECTIO N AND CONSEQUENTLY IS A SUBSTANTIVE PROVISION. FURTHERMORE, SECTION 2(24) GIVES AN INCLUSIVE DEFINITION TO THE TERM 'INCOME'. THE EFFECT OF SUCH A DEFINITION IS NOT TO SINGLE OUT, FOR SPECIFIC MENTION, SOME OF THE THINGS COMPRISED WITHIN THE NATURAL IMPORT OF THE TERM DEFINED, BUT THE EFFECT IS TO ENLARGE THAT IMPORT FOR THE ADDITION OF CERTAIN THINGS WHICH WOULD OTHERWISE NOT BE REGARDED IN THE OTHER SENSE. IN THAT VIEW, THE AMOUNT ADDED UNDER SECTION 68 CONSTITUTES 'INCOME' FOR THE PURPOSE OF THE IT ACT, 1961. THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 BESTOW A LARGE LATITUDE TO THE PROVISIONS OF SECTION 68. WHEREVER A SUM IS FOUND CREDITED IN THE ASSESSEE'S BOOKS OF ACCOUNT, THEN IRRESPECTIVE OF THE COLOUR OR THE NATURE OF THE SUM RECEI VED WHICH IS SOUGHT TO BE GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER HAS JURISDICTION TO ENQUIRE INTO THE NATURE AND SOURCE OF SUCH AMOUNT AND TO CHARGE THE CREDITS TO TAX IF THE ASSESSEE'S EXPLANATION IS NOT SATISFACTORY. 1.3.4 UNDER SECTION 68, IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE TRANSACTION WHICH RESULTS IN A CASH CREDIT IN HIS BOOKS OF ACCOUNT. SUCH PROOF INCLUDES PROOF OF THE IDENTITY OF THE CREDITOR, THE CAPACITY OF SUCH CREDITOR TO ADVANCE THE MONEY AND LASTLY, THE GENUINENE SS OF THE TRANSACTION. ONLY WHEN THE ASSESSEE HAS PROPER EVIDENCE TO ESTABLISH PRIMA FACIE THE AFORESAID FACTS, THE ONUS SHIFTS ON TO THE DEPARTMENT. WHERE THE ASSESSEE ESTABLISHES THE IDENTITY OF THE CREDITOR AND NOTHING MORE, THE CASH CREDITS WOULD CONST ITUTE THE 6 ITA NO. 2527 / / MUM/ 201 4 INCOME OF THE ASSESSEE UNDER SECTION 68. EVEN THOUGH THERE ARE A NUMBER OF CREDITORS OF SIMILAR NATURE, THE ASSESSEE HAS TO DISCHARGE THE BURDEN OF PROOF IN RESPECT OF EACH AND EVERY CREDITOR. 1.3.5 IN VIEW THE FOREGOING DISCUSSION, THE ADDITIO N MADE BY THE LD.AO IS THEREFORE BASED ON THE CORRECT POSITION OF LAW AND IS ACCORDINGLY UPHELD. THESE GROUNDS OF APPEAL ARE THUS DISMISSED. 4. THE LD.AR OF THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS IN SCRAP DEALE R AND USED TO PURCHASE SCRAP FROM VARIOUS PERSONS AND SEND THE SAME TO VARIOUS PLACES PARTICULARLY UTTAR PRADESH, BIHAR AND CALCUTTA . THE LD AR OF THE ASSESSEE FURTHER SUBMITTED THAT T HE PURCHASER S OF THE SCRAP FROM THE ASSESSEE USE D TO DEPOSIT CAS H IN THE ASSESSEES ACCOUNT FROM THEIR LOCAL STATION S WHICH WAS PERIODICALLY WITHDRAWN BY THE ASSESSEE FOR THE PURPOSE OF PURCHASES OF SCRAP. THE LD. AR SUBMITTED THAT THERE WERE REGULAR DEPOSITS AND WITHDRAWALS FROM THE ACCOUNT WHICH PROVE D THE CASE O F THE ASSESSEE THAT THE AMOUNT S WERE DEPOSITED ON VARIOUS DA T ES AND WERE WITHDRAWN IMME DIATELY THEREAFTER . IT WAS ARGUED THAT TO ADD THE ENTIRE AMOUNT OF DEPOSITS UNDER SECTION 68 OF THE ACT WAS GROSSLY WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOM E TAX ACT AS THE ASSESSEE COULD BE TAXED ONLY IN RESPECT OF THE INCOME EARNED AND NOT THE GROSS AMOUNTS DEPOSITED IN THE BANK ACCOUNT WITHOUT TAKING INTO ACCOUNT THE CORRESPONDING WITHDRAWALS. THE LD. AR PRAYED BEFORE THE BENCH THAT THE LD. CIT(A) HAS G ROSSLY EARNED IN NOT ACCEPTING THE ARGUMENTS OF THE ASSESSEE TO 7 ITA NO. 2527 / / MUM/ 201 4 EITHER ASSESS THE ASSESSEE ON PRESUMPTIVE BASIS UNDER SECTION 44AD OF THE ACT AT THE RATE OF 5% OF THE TOTAL TURNOVER OF RS.29,79,700/ - OR ALTERNATIVELY ASSESS THE ASSESSEE ON THE BASIS O F PEAK CREDIT IN THE BANK . THE LD. AR FINALLY SUBMITTED THAT THE ORDER OF LD.CIT(A) WAS WRONG AND REQUIRED TO BE REVERSED AS THE ENTIRE AMOUNT OF DEPOSITS INTO BANKS WERE CONFIRMED AS INCOME AND THEREFORE THE AO BE DIRECTED TO ASSESS THE ASSESSEE EITH ER ON THE BASIS OF PEAK CREDIT OR ON PRESUMPTIVE BASIS UNDER SECTION 44AD OF THE ACT DURING THE YEAR. 5 . ON THE CONTRARY, THE LD. DR RELIED HEAVILY ON THE ORDERS OF AUTHORITIES BELOW AND REQUESTED FOR CONFIRMING THE SAME. 6 . WE HAVE HEARD THE RIV AL SUBMISSIONS AND PERUSED THE RELEVANT RECORD PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW . WE FIND FROM THE COPY OF THE ACCOUNT OF THE SYNDICATE BANK IN THE BOOKS OF THE ASSESSEE THAT THE ALL DEPOSITS WERE OF LESS THAN RS.50,000/ - AND THE MONEY WAS REGULARLY WITHDRAWN IN CASH BY THE ASSESSEE . IN THE PRESENT CIRCUMSTANCES THE ADDITION OF ENTIRE AMOUNT OF DEPOSITS INTO BANK OF RS. 29,79,700/ - WAS WRONG AND CANNOT BE SUSTAINED. W E FIND REASONING IN THE SUBMISSIONS OF THE LD.AR THAT IN SUCH SCE NARIO WHERE THE REGULAR DEPOSITS AND WITHDRAW ALS FROM THE BANK WERE MADE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE , THE INCOME COULD BE ASSESSED ON THE BASIS OF PEAK CASH CREDIT ONLY. WE ALSO FIND THAT THE AO FRAMED THE ASSESSMENT EX - PARTE WITHOUT GI VING AN OPPORTUNITY TO THE 8 ITA NO. 2527 / / MUM/ 201 4 ASSESSEE, WHEREAS THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AFTER REJECTING THE CONTENTION S OF THE ASSESSEE OF APPLYING PEAK CREDIT THEORY OR PRESUMPTIVE TAX SCHEME UNDER SECTION 44AD OF THE ACT. UNDER THE PRESENT CI RCUMSTANCES, WE ARE OF THE OPINION THAT ENDS OF JUSTICE WOULD BE MET IF THE ASSESSEE IS BROUGHT TO TAX ON THE BASIS OF PEAK CREDIT WORKED OUT ON THE BASIS OF DEPOSITS AND WITHDRAWALS. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE AO TO ASSESS THE INCOME OF THE ASSESSEE ON THE BASIS OF PEAK CREDIT THEORY IN THE BANK ACCOUNT OF THE ASSESSEE AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . 7 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDE R HAS BEEN PRONOUNCED IN THE OPEN COURT ON 05 .12 . 2016. SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI ; DATED : 05 .12 . 2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / TH E CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY OR DER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI