USMAN ALI RAWTHER , MUMBAI V. DY. COMM. OF INCOME TAX, MUMBAI

ITA 2794/MUM/2022

AI Insights

The case involves Usman Ali Rawther, the appellant, who challenged the additions made by the Income Tax Officer under sections 69 and 68 of the Income Tax Act, 1961, for the assessment year 2016-17. The additions were made on the grounds of unexplained investment and unexplained cash credit, respectively. The appellant argued that the additions were made without proper opportunity and that the sources of the investments and cash deposits were explained and documented. The Commissioner of Income Tax (Appeals) upheld the additions, leading to the appeal before the Tribunal. The Tribunal found that the appellant had not adequately substantiated the sources of the funds and remanded the matter back to the Assessing Officer for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299237 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 24-04-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 31-10-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Source of fund; Set aside
• Section: 68; 69; 142(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.2794/Mum./2022 (Assessment Year : 2016–17) Usman Ali Rawther Kautilya Bhavan, Bandra Kurla Complex Bandra (East), Mumbai 400 058 PAN – ALVPM0755G ................ Appellant v/s Income Tax Officer Ward–25(1)(5), Mumbai ................Respondent Assessee by : Shri Haridas Bhat Revenue by : Ms. Vranda U. Matkari Date of Hearing – 25/04/2023 Date of Order – 27/04/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 27/09/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016–17. 2. In this appeal, the assessee has raised the following grounds:– “GROUND I 1. On the facts and circumstances of the case, and in Law, the Learned AO and CIT Appeals, erred in making and confirming the additions without giving proper opportunity. Usman Ali Rawther ITA no.2794/Mum./2022 Page | 2 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that. a) During the Assessment only a questionnaire was issued to the Assessee which was answered by him. No show cause notice was issued before making the additions. b) The said questionnaire did not have any questions regarding the shortcomings in the submission noted in the order. c) The CIT(A) has given only one hearing notice with the requirements as NA in the annexure, which was replied by the Assessee. d) The CIT(A) has passed the order mentioning about the non filing of details without asking for any details. 3. The Appellant therefore prays that the additions made without giving proper opportunity is bad at law the said order may please be annulled. GROUND II (without prejudice to Ground no. I) 1. On the facts and circumstances of the case, and in Law, the CIT Appeals, erred in confirming the Addition of Rs.86,60,540/- as unexplained investment of the assessee and treated as unexplained cash credit within the meaning of section 69 of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law the AO/ CIT(A) failed to appreciate that a) The assessee has explained the source of the investments. b) The Assessee has submitted the supporting documents towards the same. c) The shortcomings in the submissions were not made known to the Assessee hence he could not give any clarifications. 3. The Appellant therefore prays that the Addition of Rs.86,60,540/- made U/s 69 of the Act may please be deleted. GROUND III (without prejudice to Ground no. I) 1. On the facts and circumstances of the case, and in Law, the CIT Appeals, erred in confirming the Addition of Rs.58,32,500/- as unexplained cash credit and treated as unexplained cash credit within the meaning of section 68 of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law the AO/ CIT(A) failed to appreciate that a) The assessee has explained the source of the investments. b) The Assessee has submitted the supporting documents towards the same.. Usman Ali Rawther ITA no.2794/Mum./2022 Page | 3 c) The shortcomings in the submissions were not made known to the Assessee hence he could not give any clarifications. 3. The Appellant therefore prays that the Addition of Rs.58,32,500/- made U/s 69 of the Act may please be deleted. The appellant craves leave to add to, alter, and / or amend the above grounds of appeal.” 3. The only grievance of the assessee, in the present appeal, is against the addition of Rs.86,60,540, under section 69 and Rs.58,32,500, under section 68 of the Act. 4. The brief facts of the case as emanating from the record are that the assessee is an individual and for the year under consideration filed its return of income on 28/03/2018, declaring a total income of Rs.5,03,950. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, from the AIR information and the details filed by the assessee, it was noticed that the assessee has purchased property amounting to Rs.1,38,10,540, and cash deposit. The assessee was asked to provide the source of funds for the said property purchased and cash deposit. In response thereto, the assessee only provided bank statement and land purchase agreement but did not provide any justification regarding the source of funds for property purchased and cash deposit. From the bank statement provided by the assessee, it was noticed that during the year under consideration, the assessee has made cash deposit amounting to Rs.58,32,500, out of which Rs.51,50,000, was used for the purchase of the said property. However, despite various opportunities to the assessee, no documentary evidence regarding the property purchase was Usman Ali Rawther ITA no.2794/Mum./2022 Page | 4 furnished by the assessee. Therefore, the Assessing Officer (“AO”) proceeded to complete the assessment on the basis of material available on record. Since the assessee could only justify the payment of Rs.51,50,000, from the cash deposit for the purchase of property, the balance amount of Rs.86,60,540 (i.e. Rs.1,38,10,540 minus Rs.51,50,000) was treated as an unexplained investment under section 69 of the Act and added to the total income of the assessee. Further, since the assessee has not furnished any explanation for the cash deposit of Rs.58,32,500 and the source of the fund was also not justified by the assessee, therefore, the AO made the addition of Rs.58,32,500 as undisclosed credit under section 68 of the Act. 5. In his appeal before the learned CIT(A), the assessee provided the details of the source of payment for the property purchased as under:- Sr. No. Source of Payments Amount (Rs.) 1. Cash Deposited into Bank 58,32,000 2. Gift received from Wasim Usman Rawther (Appellant Son) 35,00,000 3. Loan from Relatives and Friends 35,90,000 4. Out of owned source 8,88,540 Total:– 1,38,10,540 6. Further, as regards the cash deposited in the bank account, the assessee submitted the following details:- 4.2 Details of Cash Deposits: Lender’s Name Loan Amount (Rs.) Attachment Sultan Rawther Rs.10,00,000 Copy of highlighted bank Usman Ali Rawther ITA no.2794/Mum./2022 Page | 5 PAN – AXVPR1466J entries attached herewith Nabi Nisha 5,00,000 PAN – AXVPR7982G Copy of highlighted bank entries attached herewith R.M. Alagamma 4,75,000 Copy of highlighted bank entries attached herewith Sikandar 10,00,000 PAN – BUTPS2253P Copy of highlighted bank entries attached herewith Md. Ali 6,15,000 Copy of highlighted bank entries attached herewith Other Friends and relatives 6,00,000 Copy of highlighted bank entries attached herewith Total: 41,90,000 7. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee by observing as under:- “7.2 Finding of Grounds of Appeal No. 1 and 2 a) Vide submission dated 02.03.2021, the Appellant stated that sources of purchase of property are as under. Cash deposited in Bank Rs.58,32,000 Gift from Wasim Usman Rs.35,00,000 Rawther (Appellant’s Son) Loans from relatives and friends Rs.35,90,000 Out of own Sources – Rs.8,88,540 Total: Rs.1,38,10,540 b) The sources of Cash deposits in bank a/c were stated to be as under:– Lender’s Name Loan Amount i) Sultan Rawther Rs.10,00,000 ii) Nabi Nisha Rs.5,00,000 iii) R.M. Alagamma Rs.4,75,000 iv) Sikandar Rs.10,00,000 v) Md. Ali Rs.6,15,000 vi) Other friends and relatives Rs.6,00,000 Usman Ali Rawther ITA no.2794/Mum./2022 Page | 6 It was stated that balance Rs.8,88,540/- was paid towards purchase of property out of own funds of Appellant which is out of income earned in past and during the year. c) The Appellant could not produce any other documentary evidences to prove the – – Creditworthiness of Wasim Usman Rawther to give cash gift of Rs.35,00,000/- to Appellant. – Copies of Gift deeds, if any. – Genuineness of Transaction. – Proof that Appellants son earned such a huge Income to advance gifts of Rs. 35,00,000/- to Appellant. – ITR or bank statements of Appellants son. In view of the above facts, the contention of Appellant that source of Investment in property is from Cash Gift received from his son is not acceptable and hence the same is hereby rejected. d) In respect of loans from Relatives and friends of Rs. 35,90,000/- the Appellant has not filed even a single document to prove the following: Identity of Creditor Creditworthiness of Creditor Genuineness of Transaction In absence of even basic documents like confirmation letter, PAN of lender, bank statement of lender, copy of ITR of lender for AY 2016-17 this contention of Appellant is not acceptable. Just by giving a few names with amounts show that the onus cast on the Appellant is not discharged. Hence, the contention of Appellant that source of purchase of property is loan from relatives and friends to tune of Rs.35,90,000/- is not acceptable and same is here by rejected. e) Appellant has contended that source of purchase of property to tune of Rs. 8,88,540/- is from Appellants own sources of Income. Appellant has stated that it is from Income earned in past and during the year and same has been declared in the ITRS filed for past years and AY 2016-17. In the ITR filed the Appellant has shown rental income and income from other sources. Net Income of Rs. 5,03,950/- has been shown in AY 2016-17. f) On the other hand, it is normal in our society that personal savings in form of cash are kept by people in general in order to meet any emergency situations like medical condition etc. The source of these personal savings are cash savings, cash gifts received on various occasions like marriage, birth of child etc. It is also a fact that no separate record/accounts is maintained in respect of such personal cash savings. In view of these facts, it is estimated Usman Ali Rawther ITA no.2794/Mum./2022 Page | 7 that Appellant had Rs. 5,00,000/- as funds available with him out of personal and past savings which was utilized for purchase of said property. g) In view of the above facts and discussion the Appellant is allowed relief of Rs. 5,00,000/- out of addition of Rs. 86,60,540/- made by the AO u/s 69 of Act. The addition made by the AO of Rs. 81,60,540/- u/s 69 of Act is hereby confirmed. Ground of Appeal No. 1 is partly allowed. h) In respect of the source of cash deposit in Appellants bank a/c the Appellant stated that it is duly explained as per para 4.2.1 of written submissions. The said sources of cash deposits are mentioned or tabulated in para 7.2 (b) of this order. Appellant stated that source of cash deposits is loans taken from friends and relatives. Apart from the name of friend/relative and amount the Appellant has not furnished even an lota of evidence to prove the genuineness of the sources of Cash deposits. Even the basic documents in support of these alleged loans i.e. confirmation letter, PAN of friend / relative, bank statement of friend/relative, Copy of ITR of friend/relative for AY 2016-17 etc were not filed by Appellant before the AO or the undersigned. The Appellant has given five names, PAN of three parties and loan amount to explain the source of Cash deposits. Thus, the onus cast on Appellant to prove the genuineness of source of Cash deposits in Appellants bank account has not been discharged by Appellant. The identity of lender, the creditworthiness of lender and genuineness of transaction does not stand proved by the submissions filed by Appellants. In view of these facts the addition of Rs. 58,32,500/- made by AO u/s 68 of Act is hereby upheld. Ground of Appeal No. 2 is dismissed.” Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the learned CIT(A) did not consider the submission filed by the assessee and proceeded to uphold the addition on a completely new basis without providing any opportunity to the assessee to meet the same. 9. On the contrary, the learned Departmental Representative by vehemently relying upon the orders passed by the lower authorities submitted that the assessee did not provide the details as sought during the scrutiny assessment proceedings in respect of the property purchased and cash deposit. Usman Ali Rawther ITA no.2794/Mum./2022 Page | 8 10. We have considered the rival submissions and perused the material available on record. We find that during the assessment proceedings, from the very beginning, the assessee was asked to justify the cash deposit and transaction in the property. As is evident from the record, the assessee apart from providing bank statement and land purchase agreement did not furnish any other justification regarding the source of funds for property purchased and cash deposit. From the paper book, we find that in this regard the AO issued notices under section 142(1) of the Act on 10/09/2018, 12/11/2018, 30/11/2018, 12/12/2018, and 14/12/2018. However, in the absence of documentary evidence regarding the source of funds for property purchased and cash deposit, the AO proceeded to complete the assessment on the basis of best judgment and made the addition under section 69 as well as section 68 of the Act. We find that before the learned CIT(A) the assessee provided the breakup of the source of payments for the property purchased as well as details of cash deposits, however, the learned CIT(A) dismissed the appeal filed by the assessee in the absence of any evidence regarding the creditworthiness of the parties from whom the cash was received for the purchase of property as well as deposited in the bank account. Therefore, in view of the above and in the interest of justice, we deem it appropriate to provide one last opportunity to the assessee to furnish all the evidence in support of its plea before the AO. Accordingly, the issues pertaining to addition under section 69 as well as section 68 of the Act are remanded to the file of AO for de novo adjudication. The assessee is also directed to fully cooperate and comply with all the notices and furnish all the details as sought by the AO without any default. Since a considerable amount of time and money has been Usman Ali Rawther ITA no.2794/Mum./2022 Page | 9 spent by the Revenue in carrying out the scrutiny assessment followed by the appellate proceedings, therefore, we deem it appropriate to impose a cost of Rs.5000 on the assessee for his lackadaisical approach. We direct that the aforesaid cost be paid by the assessee towards Prime Minister's Relief Fund within 30 days from the date of receipt of this order. With the above directions, we set aside the impugned order. As a result, grounds raised by the assessee are allowed for statistical purposes. 11. In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 27/04/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/04/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai