I.T.O.22(3)-3, NAVI MUMBAI V. SHREE RAMESH KUMAR SHARMA, NAVI MUMBAI

ITA 2596/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3621 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 04-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MAHUA SARKAR
• Assessee Lawyers: MRS SHALU ANAND
• Keywords: Unexplained cash credit; Gift; Source of fund; Corroborative evidences; TDS; Set aside
• Section: 68

Judgement Text

1 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI D. MANMOHAN, V.P. AND SHRI P.M. JAGTAP , A.M. ITA NO. 2596/MUM/09 ASSESSMENT YEAR 2004-05 INCOME TAX OFFICER -22(3)-3, 3 RD FLOOR, TOWER NO. 6, VASHI RLY STATION COMPLEX, VASHI, NAVI MUMBAI. VS. SHREE RAMESH KUMAR SHARMA, 102 PLOT NO. 104, SECTOR NO. 29, SAI MAYA, VASHI, NAVI MUMBAI. PAN NO. ALOPS 0049L APPELLANT RESPONDENT APPELLANT BY MS. MAHUA SARKAR RESPONDENT BY MRS. SHALU ANAND ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) XXII, MUMBAI DATED 18.12.2008. 2. AT THE OUTSET, WE MAY OBSERVE THAT THERE IS A DE LAY OF 5 DAYS ON THE PART OF THE REVENUE IN FILING THIS APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, THE CONCERNED COMMISSIONER OF INCOME TAX I.E C.I.T. -22 HAS FILED AN AFFIDAVIT EXPLAINING THE REASONS FOR THE SAID DELAY AND KEEPING IN VIEW THE SAID EXP LANATION, WE ARE SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY ON THE PART OF THE REVENUE IN FILING THIS APPEAL BEFORE THE TRIBUNAL. THE SAID DELAY, THEREFORE, HAS BEEN CONDONED BY US AND THIS APPEAL OF THE REVENUE IS BEING DISPOSED OF ON MERIT AFTER HEARING THE ARGUMENTS OF BOTH THE SIDES AND PERUSING THE RELEVANT MATERIAL ON RECORD. 2 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA 3. IT IS OBSERVED THAT THE REVENUE HAS CHALLENGED I N THIS APPEAL THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF ` 6,50,000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 AND ALSO IN RESTRICT ING THE ADDITION OF ` 8,62,606/- MADE BY THE A.O. ON ACCOUNT OF PAYMENTS MADE TO M/S INTENT AND M/S KARMA KAUSHAL TO ` 4,31,303/-. 4. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF EXPORT OF SHIP SPARES, RUNNING A WEEKLY NEWS PAPER ETC. UNDER THE NAMES OF DIFFERENT PROPRIETARY CONCERNS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 31.10.2005 DECLARING TOTAL INCOME OF ` 3,05,910/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD INTRODUCED CAPITAL OF ` 5 LACS IN HIS PROPRIETARY CONCERN M/S R.K. PRODUCTIONS. WHEN HE WAS CALLED UPON BY T HE A.O. TO EXPLAIN THE SOURCE OF FUNDS INTRODUCED AS CAPITAL, THE ASSESSEE EXPLAINED THAT A SUM OF ` 3 LACS WAS HIS ACCUMULATED SAVING OF 21 YEARS DURING WHICH PERIOD HE WAS WORKING AS MERCHANT NAVY EMPLOYEE. HE ALSO CLAIMED OF HAVING RECEIVED A GIF T OF ` 1 LAC FROM HIS FATHER AND A SUM OF ` 50,000/- EACH FROM HIS WIFE AND SON. HE, HOWEVER, COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE TH E SAID SOURCE OF FUNDS DESPITE SUFFICIENT OPPORTUNITY AFFORDED BY THE A.O. THE A. O., THEREFORE, TREATED THE SUM OF ` 5 LACS INTRODUCED BY THE ASSESSEE AS HIS CAPITAL AS U NEXPLAINED CASH CREDIT AND THE SAME WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE. THE A.O. ALSO FOUND THAT THERE WAS A DIFFERENCE OF ` 1,50,000/- IN THE CAPITAL ACCOUNT OF THE ASSESSEE WITH M/S R.K. PRODUCTIONS IN AS MUCH AS THE TOTAL OF DEBIT SIDE W AS MORE BY ` 1,50,000/- THAN THE CREDIT SIDE. SINCE THE ASSESSEE COULD NOT OFFER ANY SATIS FACTORY EXPLANATION IN REGARD TO THE SAID DIFFERENCE, THE A.O. ADDED THE DIFFERENCE AMOUNT OF ` 1,50,000/- ALSO TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 TREATING THE SAME AS UNEXPL AINED CASH CREDIT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ALSO NOTED THAT THE AMOUNTS OF ` 4,49,302/- AND ` 4,13,304/- PAID BY THE ASSESSEE FROM HIS PROPRIETA RY CONCERN OF M/S R.K. PRODUCTIONS TO OTHER TWO PROPRIETARY CONCERNS M/S INTENT AND M/S KARM KAUSHAL 3 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA RESPECTIVELY WERE CLAIMED AS EXPENDITURE. THE ASSE SSEE, HOWEVER, COULD NOT OFFER ANY EXPLANATION WHATSOEVER TO SUPPORT AND SUBSTANTIATE HIS CLAIM FOR THE SAID EXPENDITURE AND IN THE ABSENCE OF THE SAME, THE AMOUNTS PAID TO M/S INTENT AND M/S KARM KAUSHAL AGGREGATING TO ` 8,62,606/- WAS ADDED BY THE A.O. TO THE TOTAL INCO ME OF THE ASSESSEE. 6. THE ADDITIONS OF ` 6,50,000/- AND ` 8,62,606/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND UNEXPLAINED PAYMENTS WE RE CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION OF ` 6,50,000/- MADE BY THE A.O. U/S 68 FOR THE FOLLOWING REASONS GIVEN IN PARA NO. 9.3 OF HIS IMPUGNED ORDER: I HAVE CAREFULLY CONSIDERED THE ORDER OF THE ASSESS ING OFFICER AND THE SUBMISSION OF THE APPELLANT. BEFORE ME THE AUTHORI ZED REPRESENTATIVE OF THE APPELLANT SUBMITTED PROOF TO SHOW THAT THERE HAS BE EN A HUMAN ERROR REGARDING THIS POINT. I FIND THAT THIS ISSUE/POINT OF THE APPELLA NT CAN BE ACCEPTED. I FIND THE INTRODUCTION OF CAPAL OF ` 5 LAKHS HAVE BEEN SUFFICIENTLY EXPLAINED TO BE HEL D AS BONAFIDE. AS AN EX-MERCHANT NAVY MAN IT STANDS TO REASON THAT HE MUST HAVE SAVED AT LEAST ` 5 LACS FOR INVESTMENT. THE GIFT FROM HIS FATHER I S ALSO PLAUSIBLE. AS HIS FATHER IS NO MORE IT IS NOT JUSTIFIED ASKING HIM TO VERIFY THE SAME. REGARDING THE ERROR MADE THE PROBABILITY OF HUMAN ERROR ALWAYS EX ISTS AND IF PROVED SATISFACTORILY IT SHOULD BE ACCEPTED. IN VIEW OF THIS THE ADDITIO N MADE IS DELETED AND GROUND OF APPEAL ALLOWED. [RELIEF: ` . 1,50,000/- + ` . 5,00,000/-] 7. THE ADDITION OF ` 8,62,606/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAI NED PAYMENTS WERE ALSO RESTRICTED BY THE LD. CIT(A) TO ` 4,31,303/- ALLOWING RELIEF OF THE BALANCE AMOUNT OF ` 4,31,303/- FOR THE FOLLOWING REASONS GIVEN IN PAGE NO. 2 OF HIS IMPUGNED ORDER: I HAVE CAREFULLY EXAMINED THE ISSUE, THE ORDER OF T HE ASSESSING OFFICER AND SUBMISSION OF THE APPELLANT. THE APPELLANT HAS BEFO RE ME SUBMITTED COPY OF THE NEWSPAPER THE INTENT AND KARM KAUSHAL TO PROVE THAT THIS WAS PUBLICITY AND ADVERTISEMENT EXPENSE. I FIND THAT THE EXPLANATION IS PLAUSIBLE. HOWEVER, IN THE SUBMISSION THE APPELLANT HAS RESORTED TO TRADING NA MES AND LEVELING INSULTS ON THE ASSESSING OFFICER WHICH I FIND NOT CORRECT AND UNCA LLED FOR AND I AM FORCED TO REFER THE SAME IN THIS ORDER TO STATE THE LEVEL OF UN-CO- OPERATION AND HOSTILE ATTITUDE OF THE APPELLANT VIS--VIS THE ASSESSING OFFICER. IN VIEW OF THE FACT THAT THE APPELLANT OFFERED NOTHING BEFORE THE ASSESSING OFFICER TO SUB STANTIATE HIS EXPENSES IT WAS CORRECT ON THE PART OF THE ASSESSING OFFICER TO DIS ALLOW EXPENSES NOT PROVED OR CREDITS NOT PROVED. NOW THE APPELLANT IN THE APPEL LATE STATE HAS EXPLAINED THE SAME 4 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA AS ADVERTISEMENT EXPENSES. WHAT IS TO BE KEPT IN MI ND HERE IS THAT BOTH THE CONCERNS THROUGH WHOM ADVERTISEMENT HAS BEEN EFFECTED ARE TH E PROPRIETORSHIP BUSINESS OF THE APPELLANT. THE BILLS RAISED AS PRODUCED BEFORE ME ALSO HAVE LACUNAE AND CANNOT FULLY JUSTIFY THE EXPENSE IN TERMS OF RATE ETC. IT HAS N OT BEEN EXPLAINED HOW ADVERTISEMENT RATES HAVE BEEN FIXED. THE CONCERNS HAVE REFLECTED LOSSES IN THE YEAR. I FIND THAT THE APPELLANT IS RESORTING TO THE USAGE OF DIVERSION OF FUNDS TO LOWER HIS TAX LIABILITY. HOWEVER, AS THE APPELLANT HAS PROVED ADVERTISEMENT TO A CONCERN EXTENT A BENEFIT OF DOUBT CAN BE GIVEN AND THEREFORE THE DISALLOWANCE U NDER THIS HEAD IS RESTRICTED TO 50% OF THE EXPENSES CLAIMED. THIS DISALLOWANCE IS ALSO ON ACCOUNT OF THE FACT THAT THE APPELLANT HAS NOT BEEN ABLE TO SHOW 1) THE DAY TO DAY BENEFITS THAT RESULTED FROM THE DAY TO DAY ADVERTISEMENT IN TERMS OF MANPOWER ETC. THAT HE HAS CLAIMED AS THE REASON OF THE ADVERTISEMENT 2) THE RATE AT WHICH THE ADVERTISEMENT WERE CONTRACTED 3) THE TDS ELEMENT INVOLVED 4) THE VERY GENUINE CHARACTER OF THE EXPENSE [ADDITION CONFIRMED: ` 4,31,303/-] (RELIEF : ` 4,31,303/-) AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE ARE IN AGREE MENT WITH THE CONTENTION OF THE LEARNED D.R. THAT THE IMPUGNED ORDER PASSED BY THE LD. CIT( A) GIVING RELIEF TO THE ASSESSEE ON BOTH THE ISSUES UNDER CONSIDERATION IS NEITHER WELL REASONED NOR WELL DISCUSSED. THE EXPLANATION OFFERED BY THE ASSESSEE ON BOTH THESE I SSUES HAS BEEN FOUND TO BE PLAUSIBLE BY THE LD. CIT(A) WITHOUT THERE BEING ANY EVIDENCE TO SUPPORT AND SUBSTANTIATE THE SAME. HE HAS COMPLETELY OVERLOOKED THE FAILURE OF THE ASS ESSEE TO FURNISH THE RELEVANT DETAILS AND SUPPORTING EVIDENCE TO JUSTIFY HIS CLAIM REGARD ING SOURCE OF FUNDS FOR CAPITAL INTRODUCED AND PAYMENTS MADE FROM ONE PROPRIETARY C ONCERN TO OTHER PROPRIETARY CONCERN. HE HAS ALSO IGNORED THE LEGAL POSITION TH AT THE ONUS TO EXPLAIN THE RELEVANT CASH CREDIT IN TERMS OF SECTION 68 WAS PRIMARILY ON THE ASSESSEE AND THE ASSESSEE WAS ALSO REQUIRED TO ESTABLISH ON EVIDENCE THAT THE EXPENDIT URE CLAIMED BY HIM ON ACCOUNT OF PAYMENTS MADE TO M/S INTENT AND M/S KARM KAUSHAL WA S WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF HIS BUSINESS. IF ANY DOCUMENTAR Y EVIDENCE IN THIS REGARD WAS FILED BY 5 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA THE ASSESSEE FOR THE FIRST TIME BEFORE THE LD. CIT( A), THE SAME SHOULD HAVE BEEN ADMITTED BY THE LD. CIT(A) BY PASSING A SPEAKING ORDER AND A N OPPORTUNITY ALSO OUGHT TO HAVE BEEN GIVEN BY HIM TO THE A.O. TO VERIFY THE SAID EVIDENC E WHICH HE HAS APPARENTLY FAILED TO DO. HAVING REGARD TO ALL THESE FACTS OF THE CASE, WE FI ND IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON BOTH THE ISSUES UNDER CONSIDERATION AND REMIT THE MATTER BACK TO HIM FOR DECIDING THE SAID ISSUES AFRESH BY PASSING A WELL REASONED AND WELL DISCUSSED ORDER IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 15 TH DECEMBER, 2010. SD/- SD/ - (D. MANMOHAN) (P.M. JAGTAP) VICE PRESIDENT ACCOUNT ANT MEMBER MUMBAI, DATED 15 TH DECEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXII - MUMBAI 4. THE CIT- 22 MUMBAI 5. THE DR BENCH, I 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 6 ITA 2596/MUM/09, M/S SHRI RAMESH KR. SHARMA DATE INITIALS 1. DRAFT DICTATED 2.12.10, 6.12.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 3.12.10,8.12.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.