A.C.I.T. CENTRAL CIRCLE 17 & 28, MUMBAI V. BEAUTIFUL DIAMONDS LTD. (NOW KNOWNS AS SPLENDOUR GEMS LTD.), MUMBAI

ITA 2557/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71631 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 16-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHWA NI SINHA
• Keywords: Unexplained cash credit; Business income; Non compliance

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVAL AN, JM ! ' I.T.A. NO. 2557/MUM/2012 ( / ASSESSMENT YEAR: 2004-05) DY. CIT, CIRCLE 3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 ' VS. BEAUTIFUL DIAMONDS LTD. (NOW KNOWN AS SPLENDOUR GEMS LTD.) DIAMOND HOUSE, VATCHHA GANDHI ROAD, GAMDEVI, MUMBAI-400 007 # '!$! ./PAN/GIR NO. AAACB 5355 L ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #%( / APPELLANT BY : SHRI ASHWANI SINHA &'#% )( / RESPONDENT BY : SHRI JITENDRA JAIN * + ), / DATE OF HEARING : 23.10.2013 - ./ ), / DATE OF PRONOUNCEMENT : 31.10.2013 !0' O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, MUMBAI (CIT(A) FOR SHO RT) DATED 20.01.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2004-05 VIDE ORDER DATED 26.12.2006. 2 ITA NO. 2557/MUM/2012 (A.Y. 2004-05) DY. CIT VS. BEAUTIFUL DIAMONDS LTD. 2. THE APPEAL RAISES A SINGLE ISSUE, I.E., THE MAIN TAINABILITY OF THE DELETION OF THE ADDITION IN THE SUM OF RS.16,18,150/- U/S.68 OF THE ACT BY THE LD. CIT(A) IN APPEAL. 3.1 THE BACKGROUND FACTS OF THE CASE ARE THAT THE A SSESSEE, A COMPANY, WHICH FILED ITS RETURN OF INCOME FOR THE YEAR ON 01.11.2004 AT A LO SS OF RS.31.95 CRORES, WAS EXTREMELY UNCOOPERATIVE DURING THE ASSESSMENT PROCEEDINGS, WI TH EVEN ITS RETURN BEING NOT ACCOMPANIED BY EITHER THE AUDITED ACCOUNTS OR THE A UDIT REPORT U/S.44AB OF THE ACT, SO THAT THERE WAS NON COMPLIANCE OF THE SAID PROVISION . FURTHER, A FINANCIAL STATEMENT FILED AT THE FAG END OF THE ASSESSMENT PROCEEDINGS, I.E., ON 19.12.2006, WAS ALSO FOUND TO BE AT VARIANCE WITH THAT PER THE RETURN OF INCOME, AND FO R WHICH NO REASONABLE EXPLANATION WAS FORTHCOMING. THE ASSESSING OFFICER (A.O.), THEREFOR E, FINDING THE SAME AS UNRELIABLE, REJECTED THE BOOKS OF ACCOUNT U/S.145(3), DISALLOWI NG THE LOSS CLAIMED BY THE ASSESSEE. FURTHER, ON THE BASIS OF THE INFORMATION OBTAINED F ROM THE ASSESSEES BANK U/S. 133(6), CASH DEPOSITS TO THE EXTENT OF RS.16,18,150/- WERE FOUND TO HAVE BEEN MADE DURING THE RELEVANT YEAR. ADDITION FOR THE SAME WAS MADE IN TH E ABSENCE OF ANY EXPLANATION BY THE ASSESSEE. 3.2 IN APPEAL, THE ASSESSEE PRODUCED ITS BOOKS OF A CCOUNTS, CLAIMING THE CASH DEPOSITS IN BANK TO BE SOURCED FROM THE CASH IN HAND AS AVAI LABLE IN ITS BOOKS OF ACCOUNTS. THE LD. CIT(A) DELETED THE ADDITION ON THE BASIS THAT NO AD DITION U/S.68 COULD BE MADE ON THE BASIS OF THE CASH DEPOSITS IN THE BANK ACCOUNT INAS MUCH AS THE SAME DOES NOT FORM PART OF THE ASSESSEES BOOKS OF ACCOUNT. AGGRIEVED, THE REV ENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. EVEN AS OBSERVED DURING HEARING, THERE HAS BEEN NO FACTUAL EXAMINATION OF THE ASSESSEES CASE, MADE WITH REFERENCE TO ITS ACCOUNT S BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. AUTHORIZED REPRESENTATIVE (AR) WAS UNABLE T O, ON BEING QUESTIONED BY THE BENCH, SUBSTANTIATE ITS CLAIM OF AN EXPLANATION HAV ING BEEN FURNISHED TOWARD THE IMPUGNED CASH DEPOSITS DURING THE ASSESSMENT PROCEE DINGS. IN FACT, THE ASSESSEES EXPLANATION IS WITH REFERENCE TO ITS BOOKS OF ACCOU NTS, WHICH WERE NOT, AS THE LD. 3 ITA NO. 2557/MUM/2012 (A.Y. 2004-05) DY. CIT VS. BEAUTIFUL DIAMONDS LTD. DEPARTMENTAL REPRESENTATIVE (DR) WAS BEFORE US AT P AINS TO EMPHASIZE, NOT PRODUCED BEFORE THE LD. A.O. CONTINUING FURTHER, HOWEVER, THOUGH THE BOOKS MAY N OT HAVE BEEN FOUND RELIABLE FOR THE PURPOSE OF ASSESSMENT OF INCOME, BUT THAT W OULD NOT IMPLY THAT EACH AND EVERY ENTRY THEREIN IS INCORRECT OR FALSE. IN FACT, THE A SSESSEE HAD CLAIMED A LOSS WITH REFERENCE TO ITS BOOKS OF ACCOUNT, THE DISALLOWANCE OF WHICH BY THE A.O. STANDS SINCE CONFIRMED BY THE FIRST APPELLATE AUTHORITY. THE SAID LOSS WOULD ONLY IMPLY THAT THE BOOK OR THE ASSESSEES ACCOUNTED ASSETS STAND DEPLETED TO THAT EXTENT. AS SUCH, WE FIND NO CONFLICT BETWEEN THE REJECTION OF ITS ACCOUNTS BY THE REVENU E AND RELIANCE THEREON BY THE ASSESSEE FOR THE PURPOSE OF EXPLAINING THE NATURE AND SOURCE OF THE IMPUGNED CASH DEPOSITS. THE BOOKS OF ACCOUNTS ARE ONLY TOWARD THE ASSESSEES EX PLANATION, AND WHICH THE A.O. IS BOUND TO CONSIDER ON MERITS. IT MAY, HOWEVER, WELL BE THAT THE AVAILABILITY OF CASH REFLECTED IN THE ACCOUNTS IS ONLY ATTRIBUTABLE OR R EFERABLE TO CERTAIN CASH CREDITS THEREIN, IN WHICH CASE, WHERE ARISING DURING THE RELEVANT YEAR, THE SAME MAY ATTRACT SEC. 68. THE BANK DEPOSITS PER SE , WE MAY ALSO CLARIFY, COULD BE BROUGHT TO TAX ONLY U/SS.69 OR 69A OF THE ACT, SO THAT THE ADDITION AS EFFECTED BY THE A. O. HAS TO BE REGARDED AS UNDER THOSE SECTIONS, AND NOT U/S.68, WHICH THOUGH WOULD BE OF NO CONSEQUENCE. AS EXPLAINED BY THE HONBLE COURTS, AS IN THE CASE OF CIT VS. JAUHARIMAL GOEL (2005) 147 TAXMAN 448 (ALL.), THE SAID SECTIONS ARE PARA MATERIA . THE DELETION BY THE LD. CIT(A), THEREFORE, ON THA T BASIS, IS MISCONCEIVED, AND THE ASSESSEE IS BOUND T O EXPLAIN THE IMPUGNED BANK DEPOSITS. WE ARE ALSO IN AGREEMENT WITH THE REVENUE THAT THE RELIANCE ON THE DECISION IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (JAL.) [2008] 302 ITR 246 (P & H), HOLDING THAT NO ADDITION U/S.68 (OR SECTION 69/69A) COULD BE MADE W HERE THE INCOME IS ASSESSED BY ESTIMATING INCOME, REJECTING THE BOOKS OF ACCOUNT, IS OF NO MOMENT. THE APEX COURT IN THE CASE OF CIT V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC) CLARIFIED THAT AN ASSESSMENT BY ESTIMATING INCOME WOULD NOT PRECLUDE AN ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT U/S.68 OF THE ACT. THE TWO OPERA TE IN DIFFERENT FIELDS (ALSO REFER FAKIR MOHAMED HAJI HASAN VS. CIT [2001] 247 ITR 290 (GUJ)). THE DECISION IN THE CASE OF AGGARWAL ENGG. CO. (JAL.) (SUPRA) DOES NOT CONSIDER THE SAID DECISION BY THE APEX COURT, 4 ITA NO. 2557/MUM/2012 (A.Y. 2004-05) DY. CIT VS. BEAUTIFUL DIAMONDS LTD. WHICH IS SQUARELY ON THE POINT, SETTLING THE LAW IN THE MATTER. IN FACT, THE HONBLE HIGH COURT RELIED ON THE DECISION IN THE CASE OF CIT VS. BANWARILAL BANSHIDHAR [1998] 229 ITR 229 (ALL), WHICH IS IN THE CONTEXT OF DISALLOWANCE U/S.40A(3) AND, THUS, QUA A DIFFERENT PROVISION, TOWARD COMPUTING BUSINESS INCOME UNDER C HAPTER IV-D. THE MATTER IS, AS ALSO EXPLAINED BY THE APEX COURT, FACTUAL, SO THAT THERE COULD BE A CASE FOR TELESCOPING, AND IT WOULD ALL DEPEND ON THE FACTS OF THE CASE. IN FACT, IN THE INSTANT CASE THERE IS NO QUESTION OF ESTIMATING INCOME UPON REJECTION OF BOOKS OF ACC OUNT INASMUCH AS THE SAME WERE NEVER PRODUCED BEFORE THE A.O. WHEN HE SAYS OF REJE CTION OF ACCOUNTS, WHICH ACTION STANDS ALSO CONFIRMED BY THE LD. CIT(A), HE ONLY IM PLIES OF THE INCOME BEING ASSESSED WITHOUT REFERENCE TO, AND IN DISREGARD OF, THE ASSE SSEES BOOK RESULTS. REFERENCE IN THIS REGARD IS DRAWN TO THE REVENUES SECOND GROUND, SEE KING TO DRAW THIS DISTINCTION VIS--VIS THE CASE LAW RELIED UPON INASMUCH AS THERE HAS BEEN NO ESTIMATION OF INCOME BY THE A.O. THE SAID RELIANCE BY THE ASSESSEE, AS WELL AS ON TH E ORDER BY THE TRIBUNAL IN THE CASE OF RELIABLE SURFACE COATING VS. ASST. CIT [2011] 7 ITR (TRIB.) 183 (AHBD) FOLLOWING IT IS THUS MISPLACED BOTH ON FACTS AND IN LAW. UNDER THE GIVEN FACTS AND CIRCUMSTANCES, THEREFORE, WE ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. FOR FACTUAL EXAMINATION AND VERIFICATION OF THE ASSESSEES CASE, AND ADJUDICATI ON AFRESH AFTER DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. 1/ ,2 ) 3 )456 7 8 , ) ,9:; ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31, 2 013 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * + MUMBAI; < DATED : 31.10.2013 ' ROSHANI , SR. PS 5 ITA NO. 2557/MUM/2012 (A.Y. 2004-05) DY. CIT VS. BEAUTIFUL DIAMONDS LTD. ! ' #$%& ' &$ ' COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ! ! * =, > ? / THE CIT(A) 4. ! ! * =, / CIT - CONCERNED 5. @A B&,CD ! CD / * + / DR, ITAT, MUMBAI 6. B EF + ' GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , * + / ITAT, MUMBAI