SHRI SWATI ATIT AGARWAL, MUMBAI V. DCIT CC-5(2), MUMBAI

ITA 2605/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7372 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV K GUBGOTRA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Retraction; Capital Gains
• Section: 143(3); 153A; 143(1); 143(2); 191; 208; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2604/MUM/2018 ASSESSMENT YEAR: 2011-12 & ITA NO. 2605/MUM/2018 ASSESSMENT YEAR: 2012-13 SMT. SWATI ATIT AGARWAL, 6C, AGARWAL HOUSE, D ROAD, CHURCHGATE, MUMBAI-400020. VS. DCIT-CC 5(2), AIR INDIA BUILDING ROOM NO. 1908, 19 TH FLOOR NARIMAN POINT, MUMBAI-400021. PAN NO. ABRPJ9441J APPELLANT RESPONDENT ASSESSEE BY : MR. RUSHABH MEHTA, AR REVENUE BY : MR.RAJEEV K. GUBGOTRA, DR DATE OF HEARING : 01/08/2019 DATE OF PRONOUNCEMENT: 28/10/2019 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX- (APPEALS)-53, MUMBAI [IN SHORT THE CIT(A)] AND ARISE OUT OF ASS ESSMENT COMPLETED U/S153A R.WS. 143(3) OF THE INCOME TAX ACT 1961,(TH E ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDINGS TO DISPOSE THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FAC TS BEING IDENTICAL, WE BEGIN WITH THE AY 2011-12. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 2 ITA NO. 2604/MUM/2018 ASSESSMENT YEAR: 2011-12 2. THE 1 ST GROUND OF APPEAL THE ID. CIT(A) ERRED IN FACTS AND LAW IN NOT TREATI NG THE: A ASSESSMENT ORDER PASSED U/S 153A R.WS 143(3) OF THE ACT AS NON-EST, INVALID AND BAD IN LAW. B THE ID. CIT (A) ERRED IN FACTS AND LAW IN SUSTAININ G THE ADDITIONS MADE BY THE ASSESSING OFFICER IN ABSENCE OF ANY INCRIMINATING M ATERIAL FOUND DURING THE COURSE OF SEARCH. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED ON 26.11.2014 IN RESPONSI VE GROUP. THE ASSESSEE WAS ALSO COVERED U/S 132 OF THE ACT. THERE AFTER, IN RESPONSE TO THE NOTICE U/S 153A THE ASSESSEE FILED HER RETURN O F INCOME DISCLOSING INCOME OF RS.13,42,804/-. THE SAID RETURN OF INCOME WAS ACCOMPANIED BY A COMPUTATION OF INCOME. THE ASSESSEE HAS SHOWN REMUNERATION FROM SOME GROUP ENTITIES, CAPITAL GAINS, INTEREST A ND DIVIDEND INCOME. HER HUSBAND SHRI ATIT AGARWAL IS A DIRECTOR OF M/S RESPONSIVE INDUSTRIES LTD. THE ASSESSING OFFICER (AO) VIDE ORDER DATED 23.12.2016 ASSESSED THE INCOME AT RS.17,42,800/-. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITS THAT NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SEARCH AND THE ONLY ADDITION PERTAINS TO CASH DEPOSITED IN THE BANK ACC OUNT WHICH WAS REFLECTED IN THE ANNUAL INFORMATION RETURN (AIR) AN D ON THE BASIS OF WHICH, THE STATEMENT OF THE APPELLANT AND HER FATHE R-IN-LAW SHRI OMPRAKASH AGARWAL WAS RECORDED U/S 132(4) OF THE AC T. IT IS ARGUED THAT THE EVIDENCE OF CASH DEPOSITED IN THE BANK ACC OUNT AND THE SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 3 STATEMENT RECORDED DID NOT CONSTITUTE INCRIMINATING EVIDENCE. FURTHER, IT IS CONTENDED THAT ON THE DATE OF SEARCH I.E. ON 26.11.2014, THE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) OF THE ACT HAD EXPIRED AND NO NOTICE U/S 148 WAS ISSUED BEFORE THE INITIATION OF SEARCH AND THEREFORE, THE RETURN PROCESSED U/S 143(1) HAD ATTEND FINALITY. TH US IT IS ARGUED THAT THE ASSESSMENT CAN ONLY BE MADE IF INCRIMINATING DO CUMENTS WERE FOUND IN THE COURSE OF SEARCH. IN THIS REGARD RELIA NCE IS PLACED BY HIM ON THE DECISION IN CIT V. SKS ISPAT & POWER LTD . (ITA NO.1874 OF 2014 & 58 OF 2015) (BOM.), CIT V. RAJ PAL BHATIA (2011) 10 TAXMAN.COM 191 (DELHI), PR. CIT V. BEST INFRASTRUCTURE (INDIA) PVT. LTD (2017-TIOL-1496- DEL-IT), & CIT V. RRJ SECURITIES LTD (2015), 62 TAXMANN.COM 391 (DELHI). 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITS THAT (I) THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 29.07.2011 AND THE SAM E WAS PROCESSED U/S 143(1); THERE WAS NO ASSESSMENT U/S 143(3) OF T HE ACT, (II) THIS IS NOT A CASE WHERE NO INCRIMINATING MATERIAL WAS FOUN D DURING THE COURSE OF SEARCH ; RATHER DURING THE COURSE OF SEARCH IT W AS FOUND THAT CASH DEPOSITS WERE MADE IN THE BANK ACCOUNT NO. 00851000 059396 OF THE ASSESSEE IN HDFC BANK AT COLABA BRANCH, (III) THE A SSESSEE WAS UNABLE TO EXPLAIN THE SOURCE OF CASH DEPOSITED OR BRING EVIDE NCE EXPLAINING THE SAME, (IV) ON BEING ASKED, THE ASSESSEE ADMITTED TH AT THE SAME WAS UNEXPLAINED CASH DEPOSITS, (V) THE EVIDENCE OF THE CASH DEPOSIT IN THE BANK ACCOUNT ALONG WITH INQUIRY AND THE STATEMENT R ECORDED CONSTITUTE INCRIMINATING EVIDENCE. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 4 THUS THE LD. DR EXPLAINS THAT THERE WAS INCRIMINAT ING MATERIAL BEFORE THE AO TO MAKE AN ASSESSMENT U/S 153A AND TH US THE ORDER PASSED BY THE LD. CIT(A) ON THE ABOVE ISSUE BE AFFI RMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISION A RE GIVEN BELOW. HERE, WE DISCUSS THE CASE LAWS RELIED ON BY THE LD . COUNSEL. IN SKS ISPAT & POWER LTD (SUPRA), IT IS HELD THAT SECTION 153A DOES NOT MAKE ANY DISTINCTION BETWEEN THE ASSESSMENT CONDUCTED U/S.14 3(1) & 143(3) OF THE ACT. FURTHER, IT IS HELD THAT THE SCOPE OF ASSE SSMENT AFTER SEARCH U/S.153A WOULD BE LIMITED TO THE INCRIMINATING EVID ENCE FOUND DURING THE SEARCH AND NO FURTHER. IN RAJ PAL BHATIA (SUPRA), IT IS HELD THAT THE STATEMENT RECORDED DURING THE COURSE OF SEARCH WOULD NOT QUALIFY THE E XPRESSION DOCUMENTS HAVING BEEN SEIZED DURING SEARCH. IN BEST INFRASTRUCTURE INDIA PVT. LTD (SUPRA), IT IS HELD THAT STATEMENTS RECORDED U/S.132(4), BY THEMSELVES DO NO T CONSTITUTE INCRIMINATING MATERIALS AND WHEN THERE WAS NO INCRI MINATING MATERIALS FOUND DURING COURSE OF SEARCH, ASSUMPTION OF JURISD ICTION BY REVENUE AUTHORITIES U/S.153A IS UNSUSTAINABLE. IN RRJ SECURITIES LTD. (SUPRA), IT IS HELD THAT WHERE IN THE COURSE OF SEARCH CARRIED OUT AT PREMISES OF CHARTERED ACCOUNT ANT, A HARD DISK CONTAINING WORKING PAPERS BELONGING TO ASSESSEE WAS SEIZED, SINCE SAID DISK DID NOT CONTAIN ANY INCRIMINATING MATERIAL, RA THER IT SUPPORTED SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 5 RETURNS FILED BY ASSESSEE, PROCEEDINGS U/S.153C COU LD NOT BE INITIATED AGAINST THE ASSESSEE ON THE BASIS OF SAID HARD DISK . 6.1 WE ABIDE BY THE RATIO LAID DOWN IN THE ABOVE CA SE LAWS. ONLY WE HAVE TO SEE THE APPLICATION OF THE ABOVE RATIO TO T HE INSTANT CASE. AS MENTIONED EARLIER, IT WAS FOUND DURING THE COURS E OF SEARCH THAT CASH DEPOSITS WERE MADE IN THE BANK ACCOUNT NO . 00851000059396 OF THE ASSESSEE IN HDFC BANK AT COLABA BRANCH. THE DATES OF SUCH CASH DEPOSITS ARE AS UNDER : DATE OF DEPOSIT AMOUNT (RS.) 04.02.2011 4,00,000 31.03.2012 3,00,000 22.03.2012 2,50,000 30.03.2012 8,00,000 TOTAL 17,50,000 SUBSEQUENTLY, STATEMENT OF THE ASSESSEE WAS RECORD ED U/S 132(4) OF THE ACT ON 28.11.2014. SHE WAS SHOWN THE BANK ST ATEMENT REFLECTING THE CASH DEPOSITS AMOUNTING TO RS.17,50,000/- AND W AS ASKED TO EXPLAIN THE SOURCE OF THESE CASH DEPOSITS. IN RESPONSE TO I T, SHE STATED THAT HER FATHER-IN-LAW SHRI OMPRAKASH AGARWAL WAS THE RIGHT PERSON TO ANSWER THE QUESTION. SHRI OMPRAKASH AGARWAL, THE CFO OF TH E RESPONSIVE GROUP WAS CONFRONTED WITH THE STATEMENT OF THE ASSESSEE. EVEN SHRI AGARWAL WAS NOT ABLE TO EXPLAIN THE SOURCE OF CASH DEPOSITS OF RS.17,50,000/- IN SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 6 THE ACCOUNT OF THE ASSESSEE. SHRI AGARWAL IN HIS ST ATEMENT RECORDED U/S 132(4) ON 29.11.2014 ADMITTED THAT HE WAS UNABLE TO EXPLAIN THE SAME AND ACCORDINGLY, OFFERED THE CASH DEPOSITS OF RS.17 ,50,000/- AS INCOME IN THE HANDS OF THE ASSESSEE DURING THE RESPECTIVE FINANCIAL YEARS. THE STATEMENT OF SHRI AGARWAL WAS SHOWN TO THE ASSE SSEE, AND HER STATEMENT WAS RECORDED AGAIN ON 29.11.2014 U/S 132( 4) OF THE ACT. THE ASSESSEE ADMITTED THAT RS.17,50,000/- CASH DEPOSITE D IN HER ACCOUNT WAS OUT OF UNEXPLAINED SOURCES. TWO MONTH LATER, ST ATEMENT OF SHRI AGARWAL WAS AGAIN RECORDED U/S 132(4) ON 21.01.2015 . SHRI AGARWAL ONCE AGAIN ACCEPTED THAT THE CASH DEPOSIT OF RS.17, 50,000/- IN THE ACCOUNT OF THE ASSESSEE WAS UNACCOUNTED INCOME AND WOULD BE OFFERED TO TAX IN THE RELEVANT FINANCIAL YEARS. THUS, THE INSTANT CASE IS DISTINGUISHABLE ON FACTS FROM THE ABOVE CASE LAWS RELIED ON BY THE LD. COUNSEL. 6.2 IN ORDER TO APPRECIATE THE ABOVE ISSUES IN PROP ER PERSPECTIVES, WE REPRODUCE BELOW THE RELEVANT EXTRACTS OF THE STATEM ENTS RECORDED U/S.132(4) OF THE ACT. IN THE STATEMENT DATED 28.11.2014 RECORDED U/S.132( 4) ON OATH, THE ASSESSEE IN RESPONSE TO QUESTION NO.13 HAS REPL IED AS UNDER: Q.13 ON PERUSAL OF THE BANK STATEMENT, IT IS SEEN THAT THERE ARE ACTUAL CASH DEPOSIT OF RS.17,00,000/- (SINCE THERE ARE REPETITI ON OF ENTRY AT SR. NO. 5,6 & 7 OF ABOVE TABLE) ON VARIOUS DATES DURING THE F.Y. 20 10-2011 AND 2011-12. IN THIS CONNECTION, YOU ARE REQUESTED TO EXPLAIN THE S OURCE OF CASH DEPOSITS OF RS.17,00,000/-. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 7 ANS: SIR, I AM NOT ABLE TO EXPLAIN THE SOURCE OF AB OVE CASH DEPOSIT OF RS.17,00,000/-. MY FATHER IN LAW IS THE RIGHT PERSO N TO ANSWER THE ABOVE QUESTION. IN THIS STATEMENT DATED 29.11.2014 RECORDED U/S.132 (4) ON OATH, SHRI OMPRAKASH AGARWAL IN RESPONSE TO QUESTION NO. 42 & 43, HAS STATED AS UNDER: Q.42 I AM SHOWING YOU THE STATEMENT OF MRS. SWATI ATIT AGARWAL RECORDED U/S.132(4) OF THE I.T. ACT, 1961 ON 28.11.2014. PL EASE GO THROUGH THE SAME AND CONFIRM. ANS: SIR, I DO NOT REMEMBER THE SAME. I WILL VERIFY THE BOOKS OF ACCOUNT AND PRODUCE THE DETAILS IN 15 DAYS. Q.43 ON BEING ASKED ABOUT THE CASH DEPOSIT AMOUNTIN G TO RS.17,50,000/- DEPOSITED IN HER ACCOUNT DURING THE F.Y. 2010-11 & 2011-12, SHE HAS STATED THAT SHE IS A HOUSEWIFE AND SHE IS NOT AWARE OF CAS H DEPOSITS IN HER ACCOUNT. AS PER HER STATEMENT YOU WILL BE ABLE TO GIVE EXPLA NATION WITH REGARD TO THE CASH DEPOSITS MADE IN HER ACCOUNT. YOU ARE REQUESTE D TO EXPLAIN THE SAME. ANS: SIR, I HAVE GONE THROUGH THE STATEMENT OF MRS. SWATI ATIT AGARWAL AND ALSO GONE THROUGH THE ACCOUNT MAINTAINED IN THE OFF ICE. I AM UNABLE TO EXPLAIN THE SAME SINCE THE DEPOSIT WAS MADE 3 YEARS BACK. T HUS, THIS DEPOSIT OF RS.17,50,000/- IS OFFERED AS INCOME IN THE HANDS OF MRS. SWATI ATIT AGARWAL DURING THE RESPECTIVE FINANCIAL YEARS. IN THIS STATEMENT DATED 29.11.2014 RECORDED U/S.13 2(4) ON OATH, THE ASSESSEE FURTHER STATED IN RESPONSE TO QUESTIO N NO.2 THAT : Q.2 IN RESPONSE TO Q NO 18 OF YOUR STATEMENT DT 28 -11-2014, YOU HAVE REPLIED THAT YOUR FATHER IN LAW I.E SHRI O P AGARWA L WILL BE THE RIGHT PERSON TO ANSWER THE SOURCE OF CASH DEPOSIT OF RS.17,00,000/- MADE IN YOUR BANK SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 8 ACCOUNT. I AM SHOWING YOU THE STATEMENT OF SHRI O P AGARWAL TAKEN AT THE OFFICE PREMISES, WHEREIN HE HAS ADMITTED THAT THE D EPOSIT OF RS.17,00,000/- IS OUT OF UNEXPLAINED SOURCES. KINDLY OFFER YOUR EXPLA NATION? ANS: SIR, HAVE GONE THROUGH THE STATEMENT OF SHRI O P AGARWAL. I AM NOT ABLE TO EXPLAIN THE SOURCE OF ABOVE CASH DEPOSIT OF RS.1 7,00,000/-. I ADMIT THAT THE ABOVE MONEY DEPOSITED IS OUT OF UNEXPLAINED SOURCES . ALSO IN THIS STATEMENT DATED 21.01.2015, RECORDED U/S.132(4) ON OATH, SHRI OMPRAKASH AGARWAL HAS STATED IN RESPONS E TO QUESTION NO.4 & 5 THAT: Q.4 YOU ARE BEING SHOWN CERTAIN BANK STATEMENT SEI ZED FROM THIS PREMISE AS ANNEXURE A1 LOOSE PAPER FOLDERS PAGES 1-56. KINDLY CONFIRM THE SAME AND EXPLAIN THE CONTENTS THEREIN AND SPECIFICALLY PAGE NO. 32 & 33. ANS: I CONFIRM THAT I HAVE BEEN SHOWN CERTAIN BANK STATEMENT SEIZED FROM THIS PREMISES AS ANNEXURE A1 LOOSE PAPER FOLDERS PA GES 1-56. THE SAID BANK STATEMENT PERTAINS TO MS. SWATI AGARWAL. THE BANK S TATEMENTS PERTAINS TO HER BANK ACCOUNT HELD WITH HDFC BANK (A/C. NO. 00851000 059396) FOR THE PERIOD 01.03.2010 TO 19.06.2014. PAGE NO. 57 IS THE BANK RECONCILIATION STATEMENT OF MS. SWATI AGARWAL FOR THE PERIOD 01.04 .2013 TO 31.03.2014. THE PAGE NO. 32 & 33 CONTAINS BANK STATEMENT FOR THE PE RIOD 04.02.2011 TO 01.04.2012. IN THIS BANK STATEMENT THERE ARE CASH D EPOSIT AMOUNT TO RS.17,50,000/-. Q.5 PLEASE CONFIRM IT THE ABOVE CASH DEPOSIT IS REF LECTED IN THE BOOKS OF ACCOUNT. IF YES, PLEASE PRODUCE THE EVIDENCE OF THE SAME. ANS: SIR, THE ABOVE CASH DEPOSIT IS NOT REFLECTED I N THE BOOKS OF ACCOUNT OF MY DAUGHTER-IN-LAW MS. SWATI ATIT AGARWAL. IN MY STATE MENT DATED 29.11.2014 I SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 9 HAVE ALREADY OFFERED RS.17.5 LAKHS AS INCOME IN THE HANDS OF MS. SWATI ATIT AGARWAL DURING THE RESPECTIVE FINANCIAL YEARS. 6.3 THE QUESTION ARISES WHAT CONSTITUTES INCRIMINA TING MATERIALS. IN MERRIAM WEBSTER DICTIONARY , INCRIMINATE ALSO MEANS TO CHARGE WITH OR SHOW EVIDENCE OR PROOF OF INVOLVEMENT IN A FAULT. THUS, AS EVIDENT FROM ABOVE, THERE WAS INCRIMINATI NG MATERIALS BEFORE THE AO TO INITIATE PROCEEDINGS BY ISSUING NO TICE U/S 153A AND THEN FRAME AN ASSESSMENT. THEREFORE, WE AFFIRM THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND OF APPEAL. THUS, THE 1 ST GROUND OF APPEAL IS DISMISSED. 7. THE 2 ND GROUND OF APPEAL (A) THE LD. CIT (A) ERRED IN FACTS AND LAW IN CONFI RMING THE ADDITIONS OF RS.13,50,000/- U/S.68 MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT. (B) THE LD. CIT (A) ERRED IN FACTS AND LAW IN NOT A PPRECIATING THAT THE ADDITION CANNOT BE MADE MERELY ON THE BASIS OF STATEMENTS RE CORDED DURING SEARCH AND ON PRESUMPTIONS AND SURMISES TOTALLY IGNORING T HE EVIDENCES GATHERED/ SEIZED IN THE COURSE OF SEARCH AND WITHOUT BRINGING ON RECORD ANY CORROBORATIVE EVIDENCE AGAINST THE APPELLANT. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE AMOUNT OF CASH DEPOSITS AD MITTED TO BE UNACCOUNTED INCOME WAS NOT REFLECTED IN THE RETURN OF INCOME AND WHY SUCH ADDITION SHOULD NOT BE MADE. THE ASSESSEE EXPL AINED BEFORE THE AO THAT SHE HAD RECEIVED RS.5,55,500/- FROM M/S WELLKN OWN BUSINESS VENTURES PVT. LTD. TOWARDS DIVIDEND ON 19.10.2010 W HICH WAS DEPOSITED SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 10 IN THE BANK ACCOUNT WITH HDFC BANK, COLABA BRANCH. THERE WAS A CASH WITHDRAWAL OF RS.5,00,000/- ON 25.10.2010 AND IT WA S THE SAME CASH OUT OF WHICH RS.4,00,000/- WAS AGAIN DEPOSITED ON 04.02 .2011. SIMILARLY, AS REGARDS RS.13,50,000/- IN THE FY 2011-12, IT WAS SU BMITTED THAT THE ASSESSEE HAD AN OPENING CASH BALANCE OF RS.9,55,602 /-, AN AMOUNT OF RS.2,00,000/- WAS RECEIVED FROM SHRI RISHABH AGARWA L BY ACCOUNT PAYEE CHEQUE AS LOAN WHICH WAS DEPOSITED IN THE SAME BANK ACCOUNT WITH HDFC BANK AND WAS WITHDRAWN ON THE SAME DATE. ON 29 .02.2012, AN AMOUNT OF RS.5,77,700/- WAS RECEIVED FROM M/S GAURI SHANKAR INVESTMENT PVT. LTD. BY ACCOUNT PAYEE CHEQUE TOWARD S THE REPAYMENT OF LOAN GIVEN. THEREAFTER, THERE WAS A CASH WITHDRAWL OF RS.5,75,000/- ON 01.03.2012 AND THERE WAS A CASH BALANCE AVAILABLE O F RS.14,20,397/-. IT IS OUT OF THIS CASH BALANCE OF RS.2,50,000/-, RS.3, 00,000/- AND RS.8,00,000/- WERE AGAIN DEPOSITED ON 22.03.2012, 3 0.03.2012 AND 31.03.2012. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE E XPLANATION OF THE ASSESSEE FOR THE REASON THAT PRIOR TO THE WITHD RAWAL OF RS.5,00,000/- ON 25.10.2010, THE ASSESSEE HAD ALREADY WITHDRAWN C ASH OF RS.9,00,000/- AND RS.2,00,000/- ON 14.10.2010 AND 1 5.10.2010 RESPECTIVELY. THUS THERE WAS A CASH WITHDRAWAL OF R S.16,00,000/- IN THE MONTH OF OCTOBER 2010. AS COMPARED TO THE OPENING B ALANCE IN THE CASH BOOK OF RS.42,500/- AS ON 01.04.2010, THE ASSESSEE DID NOT WITHDRAW EVEN A SINGLE RUPEE FROM 01.04.2010 TO 14.10.2010. ALMOST THE ENTIRE WITHDRAWAL OF CASH IN FY 2010-11 WAS MADE ONLY IN T HE MONTH OF OCTOBER 2010. SIMILARLY, PRIOR TO THE WITHDRAWAL OF THIS RS.2,00,000/- ON SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 11 07.12.2011, THE ASSESSEE HAD A CASH BALANCE OF RS.6 ,43,602/-. THEREFORE, THE AO CAME TO FINDING THAT THE ASSESSEE WAS HAVING CASH BALANCE OF RS.8,45,396/- ON 31.12.2011. THE REASONS GIVEN BY T HE ASSESSEE BEFORE THE AO FOR KEEPING SUCH AMOUNT OF CASH AT HER DISPO SAL WERE THAT SHE HAD RECEIVED THE POSSESSION OF FLAT IN PUNE IN DECE MBER 2010 AND THE CASH WAS WITHDRAWN FOR THE PURPOSE OF THE INTERIOR WORK ON THE SAID PROPERTY. IT WAS FURTHER STATED BEFORE THE AO THAT THIS WORK COULD NOT BE DONE, THEREFORE, THE EXCESS CASH WAS RE-DEPOSITED I N THE BANK ACCOUNT. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID EXP LANATION OF THE ASSESSEE FOR THE REASON THAT IT WAS HIGHLY UNUSUAL FOR SOMEONE TO KEEP IDLE CASH FOR SUCH A LONG PERIOD AND NOT EARN ANY I NTEREST BY KEEPING IT IN THE BANK. IN FY 2010-11, THE DEPOSIT OF THE CASH OF RS.4,00,000/- ON 03.02.2011 WAS FOLLOWED BY THE ISSUANCE OF CHEQUE O F RS.7,50,000/- ON THE SAME DAY TO HER HUSBAND SHRI ATIT AGARWAL. SIMI LARLY, IN FY 2011-12, THE CASH DEPOSITS ON 22.03.2011, 30.03.2011 AND 31. 03.2011 WERE FOLLOWED BY ISSUANCE OF CHEQUE EITHER TO SHRI ATIT AGARWAL AS LOAN REPAYMENT OR AS SHARE APPLICATION MONEY TO M/S MAVI BUSINESS VENTURES LTD. THE AO NOTED THAT IT IS THE TREND OF ISSUANCE OF CHEQUE WHICH IS PRECEDED BY THE DEPOSIT OF CASH ON THE SAM E DATE WHICH POINTS TOWARDS THE FACT THAT THE ASSESSEE HAD DEPOSITED HE R UNACCOUNTED CASH IN THE BANK ACCOUNT. REGARDING THE RETRACTION STATE MENT FILED BY THE ASSESSEE AND SHRI OMPRAKASH AGARWAL ON 14.09.2016, THE AO OBSERVED THAT THE RETRACTION WAS MORE THAN 18 MONTHS AFTER T HE RECORDING OF STATEMENT U/S 132(4) OF THE ACT AND THERE WAS NO EV IDENCE OF PRESSURE OR COERCION WHILE RECORDING THE STATEMENT IN DECEMB ER 2014. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 12 BECAUSE OF THE ABOVE FACTS, THE AO MADE AN ADDITIO N OF RS.4,00,000/- IN AY 2011-12 AND RS.13,50,000/- IN A Y 2012-13. 9. IN APPEAL, THE LD. CIT(A) OBSERVED FROM THE STAT EMENTS RECORDED OF SHRI OMPRAKASH AGARWAL, FATHER-IN-LAW OF THE ASS ESSEE DATED 29.11.2014 THAT APART FROM THE CASH DEPOSITS IN THE APPELLANTS BANK ACCOUNT, HE HAS ADMITTED TO THE FACT THAT TRANSACTI ONS WITH M/S ANANYA IMPEX PVT. LTD., M/S ACROSS ENTERPRISES AND M/S SUP ERSTAR INTERNATIONAL WERE BOGUS TRANSACTIONS. PURCHASES HAD BEEN CLAIMED BY APPELLANT GROUP COMPANIES M/S RESPONSIVE INDUSTRIES LTD. AND M/S AXIOM IMPEX P. LTD. FROM THESE CONCERNS. FURTHER, IT IS OBSERVED BY THE LD. CIT(A) THAT SHR I AGARWAL HAD A DIRECT INVOLVEMENT WITH M/S ANANYA IMPEX PVT. LTD. AND ITS BOOKS OF ACCOUNTS WERE CERTIFIED BY SHRI K.K. KEDIA, AUDITOR S OF M/S ANANYA IMPEX PVT. LTD., WITHOUT ANY ACTUAL VERIFICATION ON THE DIRECTION OF SHRI OMPRAKASH AGARWAL. IT IS ALSO NOTED BY THE LD. CIT( A) THAT CASH ON HAND AS PER THE BOOKS WAS RS.1,82,57,353/- BUT ACTUAL CA SH FOUND WAS A MEAGRE AMOUNT OF RS.11,84,590/-. A GROUP CONCERN M/ S KRISHIRAJ HAD CLAIMED EXEMPT INCOME OF RS.81,07,60,078/- PRIMARIL Y ON ACCOUNT OF CAPITAL GAINS ON SALE OF SHARES OF M/S RESPONSIVE I NDUSTRIES LTD. IT WAS FOUND AND ADMITTED BY SHRI OMPRAKASH AGARWAL THAT T HE GAINS WERE SHORT TERM CAPITAL GAINS AND NOT EXEMPT. CERTAIN CA SH ON HAND DEALS AND GAIN ON SALE OF SHARES WERE OFFERED AS ADDITIONAL I NCOME. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD . CIT(A) PUT A QUERY TO THE ASSESSEE REGARDING THE ASSESSMENT AND APPELLATE ORDERS IN SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 13 RESPECT OF THESE ENTITIES AND HE WAS INFORMED THAT THESE WERE SUBJECT MATTER OF APPLICATION BEFORE THE INCOME TAX SETTLEM ENT COMMISSION. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE CLEARLY ADMITTED IN HER STATEMENT RECORDED THAT SHE IS A SLEEPING DI RECTOR IN THE GROUP CONCERNS AND IT IS HER FATHER-IN-LAW, WHO CAN EXPLA IN THE CASH DEPOSITS IN HER BANK ACCOUNT (REF. Q.10 & 13 OF THE STATEMENT O F THE ASSESSEE RECORDED ON 28.11.2014). THOUGH THE APPELLANT HAS B EEN FILING TAX RETURNS, NO BALANCE SHEET WAS PREPARED NOR WERE BOO KS OF ACCOUNT AUDITED. IT IS FURTHER OBSERVED BY HIM THAT SINCE B ALANCE SHEETS ARE NOT PREPARED AND BOOKS OF ACCOUNTS ARE NOT AUDITED, THE VERACITY AND EXPLANATION OF DEPOSITS CANNOT BE EXPLAINED. THE LD. CIT(A) HAS FURTHER MENTIONED THAT AS PER T HE CASH BOOK, THE CASH ON HAND WITH THE ASSESSEE AS ON THE DATE O F SEARCH ON 26.11.2014 WAS RS.6,14,437/-. THE TOTAL CASH FOUND FROM THE RESIDENCE OF THE ASSESSEE, WHICH INCLUDES HER HUSBAND AND FAT HER-IN-LAW ALSO WAS ONLY RS.1,86,070/- AS SEEN FROM THE COPY OF PANCHNA MA AND INVENTORY DATED 26.11.2014. THUS THE CASH BOOK IS NOT RELIABL E. ALSO THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO CORROBORATE WHERE CA SH WAS KEPT AND PURPOSE OF CASH WITHDRAWALS. FINALLY, THE LD. CIT(A) OBSERVED THAT THE PLEA THA T THE STATEMENT OF ADMISSION IN THE COURSES OF SEARCH WAS GIVEN UNDER PRESSURE IS UNBELIEVABLE SINCE IT WAS CONFIRMED EVEN AS LATE AS 21.01.2015 IN THE STATEMENT RECORDED, WHICH IS CLEARLY TWO MONTHS AFT ER THE DATE OF SEARCH. FURTHER, SHRI OMPRAKASH AGARWAL HAS ADMITTE D THAT THE SOURCE CANNOT BE EXPLAINED AND OFFERED THE SAME IN THE HAN DS OF THE ASSESSEE SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 14 AFTER VERIFICATION OF BOOKS OF ACCOUNTS (Q.43 OF HI S STATEMENT RECORDED ON 29.11.2014 AND Q.5 OF HIS STATEMENT RECORDED ON 21.01.2015). IN VIEW OF THE ABOVE REASONS, THE LD. CIT(A) DISMI SSED THE 2 ND GROUND OF APPEAL. 10. BEFORE US, THE LD. COUNSEL SUBMITS THAT STATEME NT U/S 132(4) IN THE PRESENT CASE HAS BEEN RECORDED SOLELY ON AIR IN FORMATION AND CONTENDED THAT SUCH STATEMENT HAS NO EVIDENTIARY VA LUE. IT IS FURTHER ARGUED THAT ADDITION CANNOT BE BASED ON MERE STATEM ENT RECORDED U/S 132(4) OF THE ACT. IT IS EXPLAINED THAT THE TRANSAC TIONS WERE NEARLY THREE YEARS PRIOR TO THE DATE OF SEARCH AND HENCE, THE AS SESSEE COULD NOT RECOLLECT THE SOURCE OF CASH DEPOSITS AT THAT POINT OF TIME AND THE OFFER OF INCOME WAS MERELY TO BUY PEACE OF MIND. IT IS FURTH ER EXPLAINED THAT THE BOOKS OF ACCOUNTS WERE MAINTAINED IN THE TALLY ERP SYSTEM WHICH WAS SEIZED DURING THE COURSE OF SEARCH AND ALL THE CASH TRANSACTIONS WERE REFLECTED IN THE BANK STATEMENT AND CASH BOOKS OF T HE APPELLANT. IT IS FURTHER STATED THAT THE STATEMENT WAS RECORDED UNDE R GROSS MISUNDERSTANDING, DURESS AND MENTAL PRESSURE. THE LD. COUNSEL RELIED ON THE DECISION IN CIT V. RAMANBHAI PATEL (TA NO.207, 208 & 210 OF 2008), CHETNABEN J. SHAH V. ITO (TA NO.1437 OF 2007) AND THE CBDT CIRCULAR DATED 18.12.2014. THE LD. COUNSEL STATES THAT IN THE SUBMISSION FILE D ON 04.11.2016 THE ASSESSEE HAD EXPLAINED THAT SHE HAD RECEIVED RS .5,55,000/- FROM M/S WELLKNOWN BUSINESS VENTURES PVT. LTD. TOWARDS D IVIDEND ON 19.10.2010 IN HDFC BANK, COLABA BRANCH AND THE DETA ILS ARE AS UNDER : SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 15 DATE WITHDRAWAL DEPOSIT REMARKS 19.10.2010 5,55,000 RECEIVED DIVIDEND FROM WELLKNOWN BUSINESS VENTURES PVT. LTD. 25.10.2010 5,00,000 WITHDRAWN FOR THE PURPOSE OF INTERIOR DECORATION OF PUNE FLAT. 03.02.2011 4,00,000 FUNDS WITHDRAWN FOR PUNE FLAT WERE NOT UTILIZED AND THEREFORE DEPOSITED BACK IN BANK ACCOUNT. 04.02.2011 7,50,000 ADVANCED TO ATIT AGARWAL. THE LD. COUNSEL SUBMITS THAT THE CASH BOOKS WAS AV AILABLE IN THE TALLY ACCOUNT SEIZED DURING THE SEARCH, WHICH CORRO BORATES THE EXPLANATION AND AS SUCH CANNOT BE IGNORED. 11. ON THE OTHER HAND, THE LD. DR, REFERRING TO THE STATEMENT RECORDED OF THE ASSESSEE AND SHRI OMPRAKASH AGARWAL AND THE ANALYSIS OF TRANSACTIONS DONE BY THE AO, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE CONFIRMED. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. AT THIS MOMENT, WE DISCUSS THE CASE LAWS RELIED ON BY THE LD. COUNSEL. IN RAMANBHAI B PATEL (SUPRA), IT IS HELD THAT THE FINDING OF THE TRIBUNAL THAT THE ADMISSION MADE BY THE ASSESSEE IS NOT A CONCLUSIVE PROOF AND SUCH ADMISSION CAN BE USED AS AN EVIDENCE UNLESS IT IS NOT RETRACTED, IS CORRECT. IN CHETNABEN J SHAH (SUPRA), IT IS HELD THAT ADDITION TO THE INCOME CANNOT BE MADE MERELY BASED ON SPECULATION AND IT S HOULD BE JUSTIFIED WITH SOME MATERIAL SUBSTANCE. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 16 IN CIRCULAR DATED 18.12.2014, THE CBDT HAS EMPHASI ZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/ SURVEY AND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED I NCOME UNDER COERCION/UNDUE INFLUENCE. WE ABIDE BY THE RATIO LAID DOWN IN THE ABOVE CASE LAWS. ONLY WE HAVE TO SEE THE APPLICATION OF THE ABOVE RATIO TO T HE INSTANT CASE. 12.1 IN THE INSTANT CASE, THE STATEMENTS RECORDED U /S.132(4) ON OATH FROM THE ASSESSEE AND SHRI OMPRAKASH AGARWAL INVARI ABLY CONTAIN THE FOLLOWING: WHATEVER STATED ABOVE IS TRUE AND CORRECT TO THE B EST OF MY KNOWLEDGE AND BELIEF. THE ABOVE STATEMENT IS GIVEN BY ME VOLUNTAR ILY, WITHOUT ANY FORCE, THREAT, COERCION, ANY INDUCEMENT, PROMISE, OR ANY O THER UNDUE INFLUENCE WAS BROUGHT TO BEAR ON ME. I FURTHER AFFIRM THAT OATH W AS ADMINISTERED TO ME BEFORE RECORDING THE STATEMENT. FURTHER, I DECLARE THAT I HAVE READ, UNDERSTOOD ITS CONTENTS AND OF AGREEING THAT IT HAD BEEN CORRECTLY RECORDED. THE SEARCH AND SEIZURE ACTION TOOK PLACE ON 26.11. 2014. THE RETRACTION STATEMENTS WERE FILED BY THE ASSESSEE AN D SHRI OMPRAKASH AGARWAL ON 14.09.2016, WHICH IS MORE THAN 18 MONTHS AFTER THE RECORDING OF THE STATEMENT IN DECEMBER 2014. THUS T HERE HAS BEEN LACHES ON THE PART OF THE ASSESSES AS WELL AS SHRI OMPRAKASH AGARWAL IN RETRACTING THE STATEMENT. THE PLEA OF THE ASSESSEE THAT STATEMENT OF ADMISSI ON IN THE COURSE OF SEARCH WAS UNDER PRESSURE IS NOT TENABLE FOR THE REASON THAT THE SAME WAS CONFIRMED EVEN AS LATE AS 21.01.2015 IN THE STA TEMENT RECORDED, SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 17 WHICH IS NEARLY TWO MONTHS AFTER THE DATE OF SEARCH . AS PER Q. 43 OF HIS STATEMENT RECORDED ON 29.11.2014 AND Q.5 OF HIS STA TEMENT RECORDED ON 21.01.2015, SHRI OMPRAKASH AGARWAL HAS ADMITTED THA T THE SOURCE CANNOT BE EXPLAINED AND OFFERED THE SAME IN THE HAN DS OF THE ASSESSEE AFTER VERIFICATION OF THE BOOKS OF ACCOUNTS. SECTION 132(4) AUTHORIZES A SEARCH OFFICER TO RECO RD A STATEMENT ON OATH. SUCH STATEMENT HAS EVIDENTIARY VALUE. BUT WHERE THE ASSESSEE TRIES TO RETRACT FROM THE SAME, HE HAS TO ESTABLISH IT. THE HONBLE SUPREME COURT IN PULLANGODE RUBBER PRODUCE CO. LTD V. STATE OF KERAL A (1973) 91 ITR 18 (SC), HAS POINTED OUT THAT AN ADMI SSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE, THOUGH IT CA NNOT BE CONCLUSIVE. IN VIEW OF THE ABOVE FACTS AND POSITION OF LAW, TH E CONTENTIONS OF THE ASSESSEE VIDE RETRACTION THAT THE STATEMENT OF ADMISSION IN THE COURSE OF SEARCH WAS GIVEN UNDER MENTAL PRESSURE AN D DURESS IS REJECTED. 13. HOWEVER, WE FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE REGARDING THE DEPOSIT OF RS.5,55,000/- ON 19.10.201 0, WITHDRAWAL OF RS.5,00,000/- ON 25.10.2010, DEPOSIT OF RS.4,00,000 /- ON 03.02.2011 AND WITHDRAWAL OF RS.7,50,000/- ON 04.02.2011 NEED PROPER VERIFICATION AT THE LEVEL OF THE AO. ALSO THE CONTENTIONS OF THE LD. COUNSEL THAT THE BO OKS OF ACCOUNTS WERE MAINTAINED IN TALLY ERP SYSTEM WHICH WAS SEIZE D DURING THE COURSE OF SEARCH AND ALL THE CASH TRANSACTIONS WERE REFLECTED IN THE BANK STATEMENTS AND CASH BOOK OF THE APPELLANT NEED EXAM INATION. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 18 A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTU NITY TO THOSE WHO ARE PARTIES IN THE CONTROVERSY FOR CORRECTING O R CONTRADICTING ANYTHING PREJUDICIAL TO THEIR VIEW. CROSS-EXAMINATI ON IS ALLOWED BY PROCEDURAL RULES AND EVIDENTLY ALSO BY THE RULES OF NATURAL JUSTICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PARTY I S LIABLE TO BE CROSS- EXAMINED ON BEHALF OF THE OTHER PARTY TO THE PROCEE DINGS. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORA L EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE T HE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH I T THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CR OSS-EXAMINE WITNESSES. THEREFORE, TO ARRIVE AT A PROPER FINDING, WE SET AS IDE THE ORDER OF THE LD. CIT(A) IN RESPECT OF ADDITION OF RS.4,00,00 0/- IN AY 2011-12 AND RS.13,50,000/- IN AY 2012-13 AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFRESH AFTER PROVIDING THE RELE VANT SEIZED MATERIALS AND GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. TO ADDRESS THE GRIEVANCE OF THE ASSESSEE, THE AO MAY G IVE OPPORTUNITY OF CROSS EXAMINATION IN SUITABLE CASES. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 2 ND GROUND OF APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13.1 FACTS BEING IDENTICAL, OUR DECISION FOR THE AY 2011-12 APPLIES MUTATIS MUTANDIS TO AY 2012-13. SMT. SWATI ATIT AGARWAL ITA NOS. 2604 & 2605/MUM/2018 19 14. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.2019 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI; DATED: 28/10/2019 S. SAMANTA P.S (ON TOUR). COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) ITAT, MUMBAI