Shri Maheshbhai Manherlal Shah, Surat V. The Income Tax Officer, Ward-3(3), Surat

ITA 2813/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0571 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Keywords: Unexplained investment; Salary income
• Section: 44AD; 143(3); 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 2813/AHD/2013 / ASSESSMENT YEAR : 2007-08 MAHESHBHAI MANHERLAL SHAH, PLOT NO.7, AMIKUNJ SOCIETY, NEAR AANDHJAN SCHOOL, GHOD DOD ROAD, SURAT PAN : AELPS 1929 M VS ITO, WARD 3 (3), SURAT / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI ANIL SHAH, AR REVENUE BY : SHRI RAJESH MEENA, SR DR / DATE OF HEARING : 23/08/2016 / DATE OF PRONOUNCEMENT: 16/09/2016 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, SURAT DATE D 24.09.2013 FOR AY 2007-08. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APP EAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,45,165/- ON ACCOUNT OF UNEXPLAINED INVESTMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,14,026/- ON ACCOUNT OF ESTIMATED PROFIT ON THE TRANSACTIONS IN BANK ACCOUNT. 3. ALTERNATE PRAYER : THE A REQUEST YOUR HONOUR TO ES TIMATE REASONABLE PROFIT ON THE AMOUNT OF TRANSACTIONS IN THE BANK ACCOUNT A S THE A HAS DECLARED THE INCOME U/S 44AD OF THE IT ACT (BENEFICIAL SECTION) 4. THE A CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE A LL OR ANY GROUNDS OF THE APPEAL. ITA NO. 2813/AHD/2013 MAHESHBHAI MANHERLAL SHAH VS. ITO AY : 2007-08 2 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY, INTEREST AND RETAIL TRADING. R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 11.02.2008 DE CLARING TOTAL INCOME OF THE ASSESSEE AT RS.65,280/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT' ). SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 15.12 .2009. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT AMOUNTING TO RS.7,45,165/- AND NET PROFIT OUT OF BUSINESS ACTIVITY @ 5% AMOUNTING TO RS.1,14,026/-; THUS TOTALING TO RS.8,59,191/-. 4. AGGRIEVED BY THE AFORESAID ORDER OF LD. AO, THE ASSESSEE PREFERRED FIRST APPEAL WHERE THE LD. CIT(A), AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL OF THE ASSESSEE BY F OLLOWING OBSERVATIONS:- 5. I HAVE GONE THROUGH THE FACTS OF THE CASE, THE R EMAND REPORT AND THE VARIOUS SUBMISSIONS OF THE APPELLANT. I HAVE ALSO G ONE THROUGH THE DOCUMENTS WHICH HAVE BEEN PLACED BEFORE ME BY THE APPELLANT A S WELL AS THE A.O. AFTER GOING THROUGH THE ABOVE, I AM OF THE BELIEF THAT TH E CLAIM OF THE APPELLANT NEEDS TO BE REJECTED. THE APPELLANT HAS CLAIMED THA T HE HAD MENTIONED THE IMPUGNED ACCOUNT IN THE VERY FIRST HEARING BEFORE T HE A.O. THIS IS INCORRECT. THE ASSESSEE HAS PLACED BEFORE ME AT PAGES-89 TO 91 OF HIS PAPER BOOK, FILED WITH LETTER DATED 27.02.2012, A COPY OF HIS REPLY T O THE A.O. DURING THE COURSE OF ASSESSMENT IN WHICH HE IS GIVING DETAILS REGARDING HIMSELF AND HIS FAMILY MEMBERS. THIS LETTER IS A DETAILED REPLY R EGARDING ASSETS - MOVABLE AND IMMOVABLE. IN THE DETAILS OF BANK ACCOUNTS OF A LL FAMILY MEMBERS THE IMPUGNED BANK ACCOUNT IS NOT MENTIONED. THE FACTS M ENTIONED IN THE SAME LETTER ARE IN SUCH GREAT DETAIL THAT THE CLAIM OF T HE APPELLANT THAT HIS AND HIS WIFE'S ACCOUNTANT WERE DIFFERENT FOR WHICH REASON H E WAS NOT AWARE OF THE TRANSACTIONS IN THE IMPUGNED BANK ACCOUNT BEING REF LECTED IN HIS WIFE'S RETURN LEADING TO HIS ADMISSION BEFORE THE A.O. ALSO NEED TO BE REJECTED AS AN AFTERTHOUGHT. THE APPELLANT HAS CLAIMED THAT THE TR ANSACTIONS IN THE ACCOUNT WERE REFLECTING IN THE ACCOUNTS OF HIS WIFE IS NOT BORNE OUT BY FACTS WHICH WERE ON THE RECORD OF THE DEPARTMENT. THE TOTAL CRE DITS IN THE ACCOUNT WERE IN EXCESS OF RS.22,00,000/- WHICH INCLUDED CASH OF RS.19,44,042/-. IN THE RETURN OF THE APPELLANT'S WIFE FILED ON 16.01.2009, THE COMPUTATION SHOWS ITA NO. 2813/AHD/2013 MAHESHBHAI MANHERLAL SHAH VS. ITO AY : 2007-08 3 THAT THE INCOME WAS OFFERED U/S. 44AF AND THE TURNOV ER WAS ONLY RS.1,85,925/-. THE BUSINESS HAS BEEN MENTIONED AS ' TAILORING JOB WORK AND INTEREST'. THE APPELLANT HAS HOWEVER CLAIMED THE BU SINESS AS RETAIL CLOTH. AGAIN, THE WIFE'S BALANCE SHEET FILED WITH THE RETU RN OF INCOME AND AVAILABLE WITH THE DEPARTMENT IS DIFFERENT FROM THE BALANCE-S HEET NOW PRODUCED. THIS ANOMALY HAS BEEN BROUGHT OUT IN THE REMAND REPORT O F THE A.O. IN THEIR COUNTER COMMENTS TO THE REMAND REPORT IT HAS BEEN C LAIMED BY THE APPELLANT THAT THERE IS NO DIFFERENCE AND IN SUPPORT THEREOF A BANK RECONCILIATION AND CONFIRMATION FROM ONE SHRI RAMDAS MARUTIBHAI DAMUGA DE HAS BEEN FILED TO JUSTIFY THE SAME. IT HAS BEEN CLAIMED THAT THE APPE LLANT'S WIFE RECEIVED ADVANCES FOR SALE OF PROPERTY WHICH WAS RETURNED TO THE PROSPECTIVE BUYER BY CHEUQE ON 31.03.2007 (LAST DAY OF THE FINANCIAL YEA R). IT WAS EXPLAINED THAT THE SAID CHEQUE HAD BEEN ENTERED IN THEIR BANK BOOK LEADING TO THERE BEING NIL BALANCE FOR WHICH REASON THE SAID ACCOUNT WAS NOT S HOWN IN THE BALANCE SHEET BUT AS THE CHEQUE HAD NOT BEEN CASHED WITHIN THE FI NANCIAL YEAR THERE WAS CREDIT BALANCE APPEARING IN THE ACCOUNT. THE APPELL ANT WAS ASKED AS TO WHEN THE CHEQUE ISSUED TO THE PROSPECTIVE BUYER RETURNIN G THE ADVANCE WAS ENCASHED TO WHICH IT WAS SUBMITTED THAT THE CHEQUE WAS NOT ENCASHED AT ALL AND RETURNED TO THE APPELLANT'S WIFE AS THE DIFFERE NCES WERE RECONCILED. THE THEORY OF RECONCILIATION IS THEREFORE UNVERIFIABLE FROM ANY INDEPENDENT SOURCE. A CLOSE ANALYSIS OF THE CASH BOOK PRODUCED L AYS BARE THE INGENUITY OF THE APPELLANT IN TRYING TO EXPLAIN THE NON APPEARAN CE OF DENA BANK IN THE BALANCE SHEET FILED WITH THE DEPARTMENT. THE APPELL ANT IN THE CASH BOOK HAS MADE ENTRIES FOR RECEIPT OF ADVANCES FOR SALE OF FL AT STARTING FROM 19.01.2007. THESE HAVE BEEN RECEIVED IN SMALL AMOUNTS IN CASH O N SEVERAL DATES THE LAST PAYMENT BEING RECEIVED ON 30.03.2007 AND ON THE VER Y NEXT DAY, I.E. 31.03.2007, IT IS RETURNED BY CHEQUE DUE TO DIFFERE NCES BETWEEN THE PARTIES BUT THE CHEQUE IS NEVER ENCASHED AND RETURNED TO TH E APPELLANT AS DIFFERENCES ARE RECONCILED LEADING TO NO ENTRY IN ANY BANK ACCO UNT BUT ONLY SO-CALLED CASH BOOK PREPARED BY THE APPELLANT. ALL THE EVIDENC ES TAKEN TOGETHER CLEARLY ESTABLISH THAT JUSTIFICATIONS HAVE BEEN PREPARED AS AN AFTERTHOUGHT ONLY TO AVOID PAYMENT OF DUE TAXES. AN ARGUMENT HAS BEEN PU T FORTH BY THE APPELLANT THAT THOUGH ADMISSION IS GOOD PIECE OF EVIDENCE IT IS NOT CONCLUSIVE AND IT IS OPEN TO THE APPELLANT TO SHOW THAT CONTRARY FACTS E XISTED. IN THE APPELLANT'S CASE HE HAD MADE AN ADMISSION BEFORE THE A.O. IN UNE QUIVOCAL TERMS, NOT ONCE BUT TWICE. HIS ATTEMPTS AT SHOWING THAT THE SA ID ADMISSION WAS INCORRECT HAVE FAILED MISERABLY. THE ADDITION MADE IS THEREFORE CONFIRMED. ALL GROUNDS ARE DISMISSED. 5. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH IS TRIBUNAL. 6. LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT ASSE SSEE AND HIS WIFE ARE DOING THE BUSINESS OF RETAIL TRADING OF CLOTH ON SM ALL BASIS AND THEY DO NOT ITA NO. 2813/AHD/2013 MAHESHBHAI MANHERLAL SHAH VS. ITO AY : 2007-08 4 HAVE INFRASTRUCTURE AND A FULL TIME ACCOUNTANT. IT IS SUBMITTED THAT THERE WAS MISTAKE IN FILING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION INASMUCH AS THE BANK ACCOUNT WAS NOT DISCLOSED IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE AS IT WAS THE FIRST E-RETURN OF THE AS SESSEE. IT IS ALSO CONTENDED THAT A REVISED BALANCE-SHEET WAS PRODUCED DURING TH E COURSE OF REMAND REPORT PROCEEDING WITH AN INTENSION TO RECTIFY THE BONA FIDE MISTAKE. IN THE RETURN OF INCOME THE BANK BALANCE WAS NOT SHOWN AS THERE WAS NIL BALANCE AS PER BOOKS OF ACCOUNTS AFTER RECONCILIATION OF TH E CHEQUE ISSUED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS N O INTENTION ON THE PART OF THE ASSESSEE TO CONCEAL THE BANK ACCOUNT, INSTEAD I T WAS DISCLOSED THE SAID BANK ACCOUNT DURING THE SCRUTINY PROCEEDINGS. ALTER NATIVELY, THE LD. COUNSEL FOR THE ASSESSEE PLEADED THAT THE ALLEGED S B ACCOUNT IS REFLECTED IN HIS WIFES ACCOUNT AND IF AT ALL THE ADDITION NEEDS TO BE CONFIRMED, IT WAS REQUESTED TO ESTIMATE THE REASONABLE PROFIT ON THE AMOUNT OF DEPOSIT IN THE BANK AS IT REPRESENTS THE SALE PROCEEDS OF CLOTH. 7. ON THE CONTRARY, LD. DR OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND SUPPORTED THE ORDERS OF THE AU THORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE HAVE NOTICED IN THE CASE OF SHRI DINESHBHAI DHANSUKHLAL MITHAIWALA IN ITA NOS.555/AHD/2010 AND 321/AHD/2013 THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN A MATERIALLY IDENTICAL SITUATION HAS RE STRICTED THE ADDITION TO 3.5% OF DEPOSITS IN THE BANK ACCOUNT REPRESENTING S ALES. WE HAVE NOTED THAT, ACCORDING TO THE ASSESSEE, THE ACCOUNT WAS IN ADVERTENTLY INCLUDED IN HIS WIFES BOOKS OF ACCOUNTS, AND, AT BEST CREDITS TO THESE ACCOUNTS CAN BE TREATED AS SUPPRESSED SALES. IN VIEW OF THE FACTS A ND CIRCUMSTANCES OF THE CASE COUPLED WITH THE FACT THAT THE SMALLNESS OF TH E AMOUNT INVOLVED, WE ITA NO. 2813/AHD/2013 MAHESHBHAI MANHERLAL SHAH VS. ITO AY : 2007-08 5 HAVE NO REASON TO TAKE ANY OTHER VIEW IN THE MATTER THAN THE VIEW TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF SHRI DINESHBHA I DHANSUKHLAL MITHAIWALA (SUPRA). THUS, THE LD. ASSESSING OFFICE R IS DIRECTED TO RE- COMPUTE THE ADDITION IN THE LIGHT OF OUR ABOVE OBSE RVATIONS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. THE ASSESSEES APPEAL IS PARTLY ALLOWED AS INDIC ATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 16 TH SEPTEMBER, 2016 AT AHMEDABAD. SD/- SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) MAHAVIR PRASAD (JUDICIAL MEMBER) AHMEDABAD; DATED 16/09/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD