AJIT KUMAR J SINGH, MUMBAI V. ASST CIT 27(1), NAVI MUMBAI

ITA 2621/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7485 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: KAUSHAL SHAH LD
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset; Source of fund; Capital receipt
• Section: 44AD; 143(3); 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2621/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) AJIT KUMAR J. SINGH F/604, GULMOHAR CHS LTD. RAMKRISHNA,CHEMURKAR MARG CHEMBUR NAKA,CHEMBUR MUMBAI-400 071. / VS. ACIT - 27(1) 4 TH FLOOR, TOWER-6 VASHI RAILWAY STATION BLDG. VASHI NAVI MUMBAI-400 703. ! ./ ./PAN/GIR NO. AETPS-7307-F ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : SHRI KAUSHAL SHAH- LD. AR REVENUE BY : SHRI RAJESH KUMAR YADAV - LD.DR / DATE OF HEARING : 24/04/2019 / DATE OF PRONOUNCEMENT : 03/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-25, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-25/IT-111/14-15 D ATED 09/02/2017 QUA CONFIRMATION OF CERTAIN ADDITIONS. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 12/03/2015 W HEREIN THE INCOME WAS DETERMINED AT RS.88.47 LACS AFTER CERTAI N ADDITIONS AS 2 AGAINST RETURNED INCOME OF RS.29.25 LACS FILED BY T HE ASSESSEE ON 20/03/2013. THE FOLLOWING QUANTUM ADDITIONS AS MADE BY LD. AO & CONFIRMED BY FIRST APPELLATE AUTHORITY ARE SUBJECT MATTER OF PRESENT APPEAL BEFORE US: - NO. NATURE OF ADDITION AMOUNT (RS.) 1. DISALLOWANCE OF EXPENDITURE 13,70,787/- 2. UNEXPLAINED INVESTMENT U/S 69 29,51,471/- 3. UNEXPLAINED CASH CREDIT U/S 68 16,00,000/- 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE REFLECTED GROSS RECEIPTS IN THE PROFIT & LOSS ACCOU NT FOR RS.43.31 LACS AND AFTER CLAIMING EXPENSES OF RS.13.70 LACS WORKED OUT NET PROFIT OF RS.29.61 LACS. THE RECEIPTS WERE STATED TO BE IN CA SH AND IT WAS SUBMITTED THAT THE ASSESSEE WAS CARRYING LIASIONING BUSINESS AND DID NOT MAINTAIN LIST OF PERSONS FROM WHOM THE PAYMENTS WEE RECEIVED. IN THE ABSENCE OF DOCUMENTARY EVIDENCES, THE EXPENSE OF RS .13.70 LACS CLAIMED BY THE ASSESSEE WAS ADDED BACK TO THE INCOM E OF THE ASSESSEE. THE QUANTUM ASSESSMENT ORDER RECORDS A FINDING THAT THE ASSESSEE ACQUIESCED TO SUCH DISALLOWANCE OF EXPENDITURE. 2.3 IT ALSO TRANSPIRED THAT THE ASSESSEE DEPOSITED CASH OF RS.31.05 LACS IN ICICI BANK, RS.14.12 LACS IN HDFC BANK LTD. & MADE PAYMENT FOR VARIOUS CREDIT CARDS AMOUNTING TO RS.33.50 LACS . ALSO, THE ASSESSEE MADE INVESTMENT IN FLAT NOS. 1903 & 1904 SITUATED A T CASA UNIVIS, BDG. CIELO A-WING, THANE PURCHASED FROM LODHA NOVEL BUILDFARMS PVT. LTD . AND ANOTHER PROPERTY BEING FLAT NO. 1603 SITUATED AT A WING, EVERSHINE, COSMIC, OSHIWARA, JOGESHWARI PURCHASED FROM M/S EVERSHINE BUILDERS . ACCORDINGLY, THE ASSESSEE WAS DIRECTED TO PROVE SOU RCE OF ALL THESE DEPOSITS / PAYMENTS / INVESTMENTS. FOR EASE OF REFE RENCE / 3 UNDERSTANDING, THE QUANTUM OF THE SAME COULD BE TAB ULATED IN THE FOLLOWING MANNER: - NO. NATURE OF DEPOSIT / PAYMENTS / INVESTMENTS AMOUNT (RS.) 1. CASH DEPOSIT IN ICICI BANK 31,05,550/- 2. CASH DEPOSIT IN HDFC BANK 14,12,000/- 3. PAYMENT THROUGH CREDIT CARDS 33,50,609/- 4. INVESTMENT IN FLAT NO. 1903 & 1904 AT THANE 38,3 7,745/- 5. INVESTMENT IN FLAT NO. 1603 AT JOGESHWARI 9,03,9 55/- 2.4 THE ASSESSEE RECONCILED THAT NET PAYMENT THROUG H CREDIT CARD AMOUNTED TO RS.25.41 LACS SINCE CERTAIN PAYMENTS WE RE REVERSED. OUT OF BALANCE RS.25.41 LACS, ACTUAL USAGE OF CREDIT CA RD I.E. NET OF CASH WITHDRAWALS OF RS.12.32 LACS WAS STATED TO BE RS.13 .09 LACS. THE NET CASH DEPOSIT IN THE BANK ACCOUNTS WAS STATED TO BE RS.40.99 LACS CONSIDERING THE CASH WITHDRAWALS MADE BY THE ASSESS EE. THE INVESTMENT OF RS.38.37 LACS IN FLAT NO. 1903 & 1904 SITUATED A T THANE WAS STATED BE FUNDED TO THE EXTENT OF RS.16 LACS FROM SALE OF AN AURANGABAD PROPERTY HELD BY THE ASSESSEE AND THE BALANCE WAS S TATED TO BE PAID OUT OF INCOME. SIMILARLY, THE PAYMENT IN RESPECT OF FLA T NO.1603 SITUATED AT JOGESHWARI WAS STATED TO BE SOURCED OUT OF INCOME E ARNED BY THE ASSESSEE. THE SOURCE AND INVESTMENT, WERE THUS, REC ONCILED BY THE ASSESSEE IN THE FOLLOWING MANNER: - APPLICATION OF FUND AMOUNT (RS.) INVESTMENT IN LODHA PROPERTY 38,37,745 INVESTMENT IN EVERSHINE PROPERTY 9,03,955 CREDIT CARD EXPENSES DRAWING 13,09,544 TOTAL APPLICATION OF FUND 60,51,244 SOURCE OF FUND CAPITAL RECEIPT THROUGH SALE OF AURANGABAD PROPERTY 16,00,000 GROSS RECEIPT RECEIVED 43,31,773 OUT OF CREDIT CARD EXPENSES 1,19,471 TOTAL SOURCE OF FUND 60,51,244 4 2.5 HOWEVER CERTAIN DISCREPANCIES WERE NOTED IN THE INVESTMENT FIGURES REFLECTED IN THE BALANCE SHEET WHICH WAS SH OW-CAUSED TO THE ASSESSEE VIDE NOTICE DATED 13/02/2015. IT WAS NOTED THAT THE ASSESSEE, IN ITS BALANCE SHEET AS ON 31/03/2012, REFLECTED AD VANCE TO LODHA AS RS.80 LACS AND SHOWN INVESTMENT IN RESIDENTIAL PROP ERTIES AS RS.88.16 LACS WHICH WERE NOT MATCHING WITH THE DETAILS FURNI SHED BY THE ASSESSEE. 2.6 THE ASSESSEE, VIDE REPLY DATED 28/02/2015, ACCE PTING THE NOMENCLATURE ISSUES, BIFURCATED THE GROSS INVESTMEN TS OF RS.168.16 LACS IN THE FOLLOWING MANNER: - HEAD AMOUNT (RS.) INVESTMENT IN LODHA PROPERTY FLAT NO. 1904 38,17,38 7/- INVESTMENT IN LODHA PROPERTY FLAT NO. 1903 3,34,210 /- INVESTMENT IN EVERSHINE PROPERTY 96,39,200/- OLD PREMISES AT BIHAR 30,25,615/- TOTAL 1,68,16,412/- 2.7 HOWEVER, NOT CONVINCED, LD. AO OPINED THAT EXP ENSES INCURRED AS WELL AS INVESTMENT MADE BY THE ASSESSEE WERE IN EXC ESS OF THE INCOME SHOWN DURING THE YEAR BY RS.29.51 LACS AS COMPUTED IN THE FOLLOWING MANNER: - HEAD AMOUNT (RS.) GROSS RECEIPTS CREDITED IN P & L ACCOUNT 43,31,77 3/- LESS: EXPENSES THROUGH CREDIT CARD 25,41,544/- INVESTMENT IN FLAT NO. 1904 38,37,745/- INVESTMENT IN FLAT NO. 1603 9,03,955/- 72,83,244/- EXCESS EXPENSES / INVESTMENTS 29,51,471/- ACCORDINGLY, EXCESS AMOUNT OF RS.29.51 LACS WAS ADD ED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENT U/S 69. 2.8 THE LAST ADDITION OF RS.16 LACS WAS AN ADDITION ON PROTECTIVE BASIS AGAINST SALE OF A PROPERTY BEARING PLOT NO. M-46, MIDC WALUJ, 5 GANGAPUR, DISTT. AURANGABAD. IT WAS SUBMITTED THAT THE PROPERTY BELONGED TO A PARTNERSHIP FIRM OF THE ASSESSEE NAME LY M/S MARATHA CHEMICALS. IT WAS SUBMITTED THAT THE ASSESSEE WAS THE GPA HOLDER OF THE FIRM. THE LAND WAS ACQUIRED BY THE FIRM AND A F ACTORY BUILDING WAS CONSTRUCTED THEREUPON. DURING THE YEAR, THE SAID PL OT ALONG WITH CONSTRUCTION AND MACHINERY WAS SOLD TO M/S OMKAR INDUSTRIES FOR A SALE CONSIDERATION OF RS.16 LACS AND THE POSSESSION WAS HANDED OVER ON 25/08/2011. SINCE THE FIRM WAS NOT HAVING ANY BANK ACCOUNT AND WAS IN THE PROCESS OF OBTAINING PAN, THE ASSESSEE, AS GPA HOLDER GOT THE CREDIT OF THE SAME IN HIS OWN BANK ACCOUNT WHICH WA S NOTHING BUT RECEIPTS UNDER TRUST. IN THE SAID BACKGROUND, IT W AS SUBMITTED THAT THE SAME WOULD BE REFLECTED IN THE INCOME TAX RETURN OF THE FIRM. ACCEPTING THE ASSESSEES VERSION, THE ADDITION WAS MADE ON PR OTECTIVE BASIS. THE IMPUGNED ORDER OF LD. CIT(A) RECORDS A FINDING THAT TILL THE DATE OF APPELLATE PROCEEDINGS WHICH CONCLUDED VIDE ORDER DA TED 09/02/2017, NO RETURN WAS FILED BY THE FIRM AND THEREFORE, THE ADD ITIONS WERE CONFIRMED IN FIRST APPEAL. 3. AGGRIEVED, THE ASSESSEE AGITATED THE ADDITIONS B EFORE LD. CIT (A), WHEREIN WHILE CONFIRMING THE ADDITIONS, RELIEF OF R S.16 LACS, BEING RECEIPTS OF AURANGABAD PROPERTY WAS GRANTED AGAINST ADDITION OF UNEXPLAINED INVESTMENTS. IN OTHER WORDS, THE ADDITI ON ON ACCOUNT OF UNEXPLAINED INVESTMENT WERE REDUCED FROM RS.29.51 L ACS TO RS.13.51 LACS. AGGRIEVED, THE ASSESSEE, IS IN FURTHER APPEAL BEFORE US. 4.1 WE HAVE CAREFULLY HEARD RIVAL SUBMISSIONS AND P ERUSED RELEVANT MATERIAL ON RECORD. AT THE OUTSET, SO FAR AS THE AD DITION OF RS.16 LACS IS CONCERNED, WE FIND THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT THE SAID AMOUNT WAS EVER OFFERED BY THE FIRM TO TAX. TH E ADDITION WAS MADE 6 ON PROTECTIVE BASIS ON THE STRENGTH OF ASSESSEES R EASONING THAT THE MONEY WAS RECEIVED UNDER TRUST ON BEHALF OF THE FIR M WHICH WAS UNDER THE PROCESS OF FILING ITS RETURN OF INCOME. NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE FIRM HAS FILED ITS RET URN OF INCOME FOR THE IMPUGNED AY. THEREFORE, THIS INCOME WOULD BE ASSESS ABLE IN THE HANDS OF THE ASSESSEE. 4.2 THE LD. AR HAS ALTERNATIVELY PLEADED THAT SINCE THE AFORESAID INCOME HAS ARISEN OUT OF SALE OF LONG-TERM CAPITAL ASSETS, THE SAME WOULD BE ASSESSABLE AS LONG-TERM CAPITAL GAINS ONLY . THE WORKING OF THE SAME HAS ALSO BEEN PLACED ON RECORD. WE AGREE W ITH THE SAME. UPON PERUSAL, IT IS NOTED THAT ADDITIONS HAVE BEEN MADE U/S 68 AS UNEXPLAINED CASH CREDIT, WHICH IS NOT THE CASE HERE SINCE THE ASSESSEE IS ABLE TO EXPLAIN THE NATURE OF CREDIT. IT IS UNCO NTROVERTED FACT THAT THE GAINS HAVE ARISEN ON SALE OF A LONG-TERM CAPITAL AS SETS AND THEREFORE, THE RESULTANT GAINS WOULD BE ASSESSABLE AS LONG-TERM CAPITAL GAINS ONLY . THE COMPUTATION OF THE SAME SHALL BE GOVERNED BY TH E PROVISIONS OF THE ACT AND ACCORDINGLY, THE BENEFIT OF COST OF ACQUISI TION ETC. SHALL BE AVAILABLE TO THE ASSESSEE AGAINST THE SALE CONSIDER ATION. THE ASSESSEE HAS ALREADY PLACED ON RECORD THE WORKING OF THE SAM E AND SUBMITTED THAT LONG-TERM CAPITAL GAINS WOULD WORK OUT TO RS.14.51 LACS. THE LD. AO IS DIRECTED TO VERIFY THE COMPUTATIONS AND ASSESS T HE INCOME ACCORDINGLY. THE GROUND STAND PARTLY ALLOWED. 5. SO FAR AS THE EXPENSE DISALLOWANCE OF RS.13.70 L ACS IS CONCERNED, WE FIND THAT THE ASSESSEE REFLECTED RECEIPTS OF RS. 43.31 LACS FROM LIASIONING BUSINESS AND AFTER CLAIMING EXPENDITURE OF RS.13.70 LACS AGAINST THE SAME, REFLECTED PROFIT OF RS.29.61 LACS WHICH WAS MORE THAN 68% OF TOTAL RECEIPTS. THIS RATE IS MUCH MORE THAN PRESUMPTIVE RATE OF 7 8% AS PRESCRIBED BY SECTION 44AD OF THE ACT. SINCE THE OFFERED RATE WAS MUCH MORE THAN 8%, THERE WAS NO REQUIREMENT ON ASSE SSEE TO MAINTAIN BOOKS OF ACCOUNTS ETC. FURTHER, THESE EXPENSES WERE STATED TO BE IN THE NATURE OF AUDIT FEES, BANK CHARGES, CONVEYANCE EXPE NSES, SALARY EXPENSES, TRAVELLING EXPENSES ETC. AS SUBMITTED BEF ORE LD. FIRST APPELLATE AUTHORITY. THEREFORE, THE ADDITION OF EXPENSE DISAL LOWANCE FOR RS.13.70 LACS COULD NOT BE SUSTAINED. WE ORDER SO. THE GROUN D STANDS PARTLY ALLOWED. 6. THE LAST ADDITION OF RS.29.51 LACS REPRESENTING UNEXPLAINED INVESTMENTS HAS BEEN REDUCED TO RS.13.51 LACS BY LD . FIRST APPELLATE AUTHORITY AFTER GIVING THE CREDIT OF RS.16 LACS, BE ING RECEIPTS OF SALE OF AURANGABAD PROPERTY. HOWEVER, IT WAS SUBMITTED THAT THE AMOUNT OF RS.12.32 LACS WAS CASH WITHDRAWALS THROUGH CREDIT C ARDS AND THE SAME WERE NOT INVESTMENTS, AS WRONGLY TAKEN BY LD. AO. T HIS AFORESAID FACT REMAINS UNCONTROVERTED BEFORE US. ANOTHER PERTINENT FACT TO BE NOTED IS THAT THE ADDITION HAS BEEN MADE U/S 69 AS UNEXPLAIN ED INVESTMENTS. HOWEVER, WE FIND THAT THE INVESTMENTS WERE DULY REC ORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND THEY WERE NOT UNEXPLAINED INVESTMENTS FOUND OUT OF THE BOOKS. FURTHER, THE CO NCLUSION DRAWN BY LD. AO COULD NOT BE SUSTAINED SINCE THE OPENING CASH / BANK BALANCES HAVE NOT BEEN CONSIDERED IN THE COMPUTATIONS. VIEWING FR OM ANY ANGLE, THE IMPUGNED ADDITION OF RS.13.51 LACS COULD NOT BE SUS TAINED. BY DELETING THE SAME, WE ALLOW THIS GROUND OF APPEAL. 7. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. 8 ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD MAY 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :03/05/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.