Shri Kalpesh Narsinhbhai Lathiya, Surat V. The Income Tax Officer, Ward-7(3), Surat

ITA 285/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9513 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G.C. DAXINI
• Keywords: Income from undisclosed sources; Opportunity of being heard; Peak credit; Additional evidence; Onus to prove; Revised return
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 285/AHD/2014 / ASSESSMENT YEAR : 2008-2009 KALPESH NARSINHBHAI LATHIYA, C-34, SHIVNAGAR SOCIETY, MATAWADI, LH ROAD, SURAT PAN : ACOPL 6684 P VS ITO, WARD 7 (3), SURAT / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI RUSHI PAREKH, AR REVENUE BY : SHRI G.C. DAXINI, SR DR DATE OF HEARING : 0 5/12/2016 DATE OF PRONOUNCEMENT IN COURT : 12/01/20 17 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-V, SUR AT DATED 27.02.2013 FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED ARE TO THE EFFECT THAT THE LD . CIT(A) ERRED IN LAW AND ON FACTS . (I) IN NOT ADMITTING THE ADDITIONAL EVIDENCES LIKE SHAR E TRADING LOSS, COMMISSION EARNED ON SHARE TRADING BUSINESS, PROFIT & LOSS A/C ETC; (II) BY ALLOWING THE ASSESSEE RIGHT OF SET OFF OF TRADIN G LOSS ON SHARE BUSINESS IN SAME BANK ACCOUNT OR ALLOWING TO CARRY FORWARD THE SAME; (III) IN ENHANCING THE ASSESSED INCOME OF THE ASSESSEE FR OM RS.7,00,779/- TO RS.36,76,800/- BY TAKING ONLY CREDIT SIDE OF THE BANK ACCOUNTS AND NOT CONSIDERING THE DEBITS AND THE NET AMOUNT ON PE AK BASIS; (IV) IN REJECTING THE ASSESSEES EXPLANATION THAT THE CR EDITS IN THE BANK ACCOUNTS WERE INTRODUCED BY FARMERS FOR WHICH THE A SSESSEE HAD SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 2 DISCHARGED ITS BURDEN IN RESPECT OF IDENTITY, CREDI TWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. 3. BRIEF FACTS AND OBSERVATIONS OF THE LD. CIT(A) C AN BE CULLED OUT FROM THE FOLLOWING EXTRACT OF THE ORDER OF THE LD. CIT(A ):- FINDINGS AND CONCLUSION OF THE A.O.: 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT IS FOUND THAT ASSESSEE HAD DEPOSITED THE CASH OF RS.36,78,800/- IN 2 BANK ACCOUNTS. THE AR OF THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS NOT OWN ED BY THE ASSESSEE, BUT INVESTED BY OTHER PERSONS WHO ARE HIS RELATIVE FARM ERS AND THEY HAD GIVEN FOR THE PURPOSE OF INVESTMENT. THE AR OF THE ASSESSEE A LSO EXPLAINED THAT THE ASSESSEE MADE AGREEMENTS FOR INVESTMENTS ON BEHALF OF THOSE DEPOSITORS WHO ARE GIVEN MONEY TO THE ASSESSEE. ON VERIFICATION OF THE DOCUMENTS GIVEN BY THE AR THERE IS NOT GIVEN A SINGLE PROOF OF INVESTM ENT MADE BY HIM FOR THOSE FARMERS. ON VERIFICATION OF THE BANK STATEMENT IT I S FOUND THAT THE ASSESSEE HAD DEPOSITED CASH IN BANK PERIODICALLY. THEREFORE THE AMOUNT OF RS.7,00,779/- WHICH IS NOT VERIFIABLE BEING THE PEA K BALANCE WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. NOTICE OF ENHANCEMENT U/S 251(1) RWS 251(2) OF THE IT ACT ISSUED DURING APPELLATE PROCEEDINGS DURING THE COURSE OF THE APPELLATE PROCEEDINGS IT W AS FOUND THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.7,00,7 79/- ON ACCOUNT OF PEAK CREDIT. SINCE THE WORKING OF THE PEAK CREDIT WAS ER RONEOUS AND INCORRECT, A NOTICE OF ENHANCEMENT U/S 251(1) R.W.S. 251(2) OF T HE IT ACT WAS ISSUED ON 13.02.2013 SEEKING THE EXPLANATION OF THE APPELLANT THAT WHY THE WHOLE AMOUNT OF CASH DEPOSIT OF RS.36,78,800/- IS NOT TRE ATED AS INCOME FROM UNDISCLOSED SOURCES. SUBMISSIONS OF THE APPELLANT: 5. DURING THE APPELLATE PROCEEDINGS, THE A.R. OF TH E APPELLANT HAS FILED WRITTEN SUBMISSION AND THE CASE WAS HEARD. THE APPE LLANT SUBMITTED THAT THE SAVINGS ACCOUNT WAS THOUGH IN THE NAME OF ASSESSEE BUT THE TRANSACTIONS ARE PERFORMED OR ENTERED INTO WERE FOR & ON BEHALF OF T HE RELATIVES WHO ARE FARMERS AND THE ASSESSEE HAS NOTHING TO DO WITH THE AMOUNT INVESTED BY THE RELATIVES EXCEPT TO EARN 5% COMMISSION ON INCOME EA RNED THEREON AS PER THE AGREEMENTS EXECUTED BETWEEN THE ASSESSEE & RELATIVE S. IT WAS DULY EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT A DE-FACTO OWNER OF THE BANK ACCOUNT. ALSO THE RESULT OF SHARE TRANSACTIONS WAS LOSS ONLY AND HE HAS NOT EVEN EARNED A COMMISSION. THEREON AS PER SETTLEMENT WITH THE SHARE BROKER R. WADIWALA & CO, THE NOMINAL AMOUNT OF RS. 1,25,00 0/- WAS RETURNED BY SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 3 HIM OUT OF RS. 36 LACS INVESTED WHICH IN TURN WAS R ETURNED TO THE RELATIVES- FARMERS. BUT ALL THESE EXPLANATIONS WERE NOT TAKEN COGNIZANCE BY ASSESSING OFFICER & HE STRAIGHTAWAY ADDED THE PEAK BALANCE OF RS.7,00,779/- WITHOUT ANY COGENT MATERIAL. THE APPELLANT ALSO SUBMITTED T HAT COPY OF AGREEMENT (ORIGINAL) AS WELL AS IDENTITY PROOF AND SOURCES OF INVESTMENT LIKE LAND HOLDING IN FORM OF COPIES OF 7/12 & 8A WITH A REQUE ST THAT THE SAME MAY BE VERIFIED BY ASSESSING OFFICER WITH PROPER INVESTIGA TION BY CALLING THE PARTIES TO THE AGREEMENT. IT IS ALSO ONCE AGAIN URGED THAT THE INVESTMENT OF ASSESSEE FROM THAT SAME BANK ACCOUNT BE INVESTIGATED AND THE BENEFIT OF LOS S INCURRED OVER THE TRANSACTIONS MAY KINDLY BE GIVEN SET OFF AGAINST HI S OTHER INCOME. DECISION 6. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL A S THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL- GROUND NO. 1 PERT AINS TO ADDITION OF RS.7,00,779/- ON ACCOUNT OF UNDISCLOSED CASH DEPOSI TS. AS MENTIONED IN THE AFORESAID PARAS, THAT DURING THE COURSE OF THE APPE LLATE PROCEEDINGS, A NOTICE OF ENHANCEMENT U/S 251(1) RWS 251(2) OF THE IT ACT WAS ISSUED TO THE APPELLANT ON 18.02.2013 SEEKING THE EXPLANATION OF THE APPELLANT THAT WHY THE WHOLE AMOUNT OF CASH DEPOSIT OF RS. 36,78,800/- IS NOT TREATED AS INCOME FROM UNDISCLOSED SOURCES. THE ISSUE IN THE GROUNDS OF APPEAL OF THE APPELLANT IS MERGED WITH THE ISSUE RAISED IN THE NOTICE OF EN HANCEMENT U/S 251(1) OF THE ACT AND IS BEING DECIDED ACCORDINGLY. 6.7 THE APPELLANT HAS ALSO CONTENDED THAT THE CLAIM OF LOSS FROM SHARE TRANSACTION BE SET OFF AGAINST OTHER INCOME. THE CO NTENTION OF APPELLANT IS AGAIN SELF CONTRADICTORY AS ON ONE HAND HE CLAIMS T HAT THE SO CALLED SHARE TRADING WAS DONE ON THE BEHALF OF HIS FARMER RELATI VES AND HE WAS TO ONLY GET COMMISSION INCOME WHILE ON THE OTHER HAND HE CLAIMS THAT THE LOSS FROM THE SHARE TRADING BE SET OFF AGAINST OTHER INCOME. THE APPELLANT IN THE RETURN OF INCOME HAS DISCLOSED INCOME FROM TUITION ONLY. NO I NCOME FROM ANY ETHER SOURCE HAS BEEN SHOWN IN TAX RETURNS. THE APPELLANT HAS NEITHER SHOWN ANY INCOME FROM SHARE TRANSACTION NOR SHOWN ANY INCOME FROM COMMISSION INCOME. IN THE INSTANT CASE, THE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE THE BURDEN OF PROOF. THE ANALYSIS OF THE APPELLANT SUBM ISSIONS OF SHARE TRADING ETC CLEARLY SHOWS THAT IT IS AN AFTERTHOUGHT TO EXP LAIN THE SOURCE OF THE CASH DEPOSITS. THE APPELLANT HAS NEVER INTENDED TO DIS CLOSE THE SECRET BANK ACCOUNT TO THE INCOME-TAX DEPARTMENT. IN REGARDS TO APPELLANT'S CLAIM TO SET OFF OF LOSS ON SHARE TRADING BUSINESS AGAINST THE A DDITION MADE ON ACCOUNT OF CASH DEPOSITED IN BANK ACCOUNT CANNOT BE GIVEN. IN FACT, THE APPELLANT HAS NOT SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 4 SHOWN ANY LOSS FROM SHARE TRADING BUSINESS IN THE O RIGINAL RETURN OF INCOME FILED FOR A.Y. 2008-09 NOR HE FILED ANY REVISED ROI SHOWING LOSS FROM SHARE TRADING. THEREFORE, THE APPELLANT WILL NOT BE ENTITLE TO CLAIM ANY SET OFF LOSS WHICH IS NEITHER SHOWN IT THE ORIGINAL ROI OR REVISED ROI. THIS FACT HAS NOW BECOME A SETTLED PRINCIPAL IT THE LIGHT OF THE JUDGMENT OF THE HON'BLE SUPREME COURT WHICH IS REPORTED VIDE IN THE CASE GO ETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME TAX (2006) 284 ITR 323, WHER E IT WAS HELD THAT AN ASSESSEE CANNOT MAKE A CLAIM FOR DEDUCTION OTHER TH AN BY FILING A REVISED RETURN OF INCOME. SINCE, NO REVISED RETURN OF INCOM E HAS BEEN FILED IN THIS CASE, HENCE, THE CONTENTION OF THE APPELLANT FAILS ON THIS FRONT. 6.8 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE APPELLANT HAS NOT BEEN ABLE TO PROVE THE SOURCE OF THE CASH DEPOSIT IN THE BANK ACCOUNT. THE SUBMISSIONS AND THE EVIDENCES PRODUCED BY THE APPEL LANT HAVE BEEN FOUND TO HAVE BEEN FABRICATED AND MANUFACTURED FOR A 'MAKE B ELIEVE' ARRANGEMENT. HENCE, THE ENTIRE CASH DEPOSIT OF RS.36,76,800/- IS BEING TREATED AS UNDISCLOSED AND ADDED TO THE INCOME OF THE APPELLAN T. THE ADDITION MADE BY THE AO IN THE ASSESSMENT ORDER OF RS 7,00,779/- ON ACCOUNT OF PEAK CREDIT IS BEING ENHANCED TO RS.36,76,800 /- UNDER THE PROVISI ONS OF SECTION 251(1) RWS 251(2) OF THE ACT. THE AO IS BEING DIRECTED TO ISSU E THE DEMAND NOTICE ACCORDINGLY. AS THIS ORDER OF THE ENHANCEMENT MERGE S WITH THE ASSESSMENT ORDER, NO SEPARATE PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT, IS BEING INITIATED DURING THE APPELLATE PROCEEDINGS AS THE A O HAS ALREADY INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) RWS 274 OF THE AC T IN THE ASSESSMENT ORDER ON THIS ISSUE OF CASH DEPOSITS. 4. THE BRIEF SUMMARY OF THE OBSERVATIONS COUPLED WI TH OTHER FACTS NARRATED BY LD. COUNSEL FOR THE ASSESSEE INDICATE T HAT THE ASSESSEE CLAIMED TO BE A STUDENT AND IT APPEARS THAT HE GOT INTO SHARE TRADING ACTIVITIES. HIS EXPLANATIONS WERE FOUND TO BE CONTRADICTORY AND THE AMOUNTS CREDITED IN THE BANK ACCOUNT WERE CLAIMED TO BE FROM THE RELATI VES WHO HAPPENED TO BE FARMERS. ACCORDING TO ASSESSEE, THE ONUS OF PROVIN G THEIR CASH CREDITS AS GENUINE WAS DISCHARGED. THE LD. ASSESSING OFFICER, HOWEVER, HELD THAT THE ONUS WAS NOT DISCHARGED AND ON THE PEAK BASIS THE A DDITION OF RS.7,00,779/- WAS MADE. 4.1 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE THE LD. CIT(A) ISSUED ENHANCEMENT NOTICE U/S 251(1) R.W.S 251(2) A ND CONCLUDED THAT THE SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 5 CASH FLOW/PEAK WORKING WAS NOT ACCEPTABLE AND ENHAN CED THE INCOME TO RS.36,76,800/-. THE LD. COUNSEL FOR THE ASSESSEE C ONTENDS THAT THERE IS NO JUSTIFICATION IN ENHANCEMENT AS LD. AO MADE THE ADD ITION OF RS.7,00,779/- BY FOLLOWING OBSERVATION:- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT ASSESSEE HAD DEPOSITED THE CASH OF RS.36,78,800/-. THE AR O F THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS NOT OWNED BY THE ASSESSEE, BUT INVESTED BY OTHER PERSONS WHO ARE HIS RELATIVE FARMERS AND THEY HAD G IVEN FOR THE PURPOSE OF INVESTMENT. THE AR OF THE ASSESSEE ALSO EXPLAINED THAT THE ASSESSEE MADE AGREEMENTS FOR INVESTMENTS ON BEHALF OF THOSE DEPOS ITORS WHO HAVE GIVEN MONEY TO THE ASSESSEE. ON VERIFICATION OF THE DOCUM ENTS GIVEN BY THE AR THERE IS NOT GIVEN A SINGLE PROOF OF INVESTMENT MAD E BY HIM FOR THOSE FARMERS. ON VERIFICATION OF THE BANK STATEMENT IT IS FOUND T HAT THE ASSESSEE HAD DEPOSITED CASH IN BANK PERIODICALLY. THEREFORE THE AMOUNT OF RS.7,00,779/- WHICH IS NOT VERIFIABLE, HENCE THE AMOUNT OF RS.7,0 0,779/- (I.E. PEAK BALANCE IN BANK) ADDED BACK TO THE TOTAL INCOME OF THE ASSE SSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE BEING INITIATED SEPARA TELY. 4.2 THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY CON TENDS THAT THE ASSESSEE HAD FILED ADDITIONAL EVIDENCES IN SUPPORT OF THE PEAK CREDIT WORKING AND THE GENUINENESS OF CASH CREDITS. UNFORT UNATELY, THE LD. CIT(A) HAS NOT PASSED ANY ORDER ABOUT THE ADMISSIBILITY OF ADDITIONAL EVIDENCES AND CONSIDERATION THEREOF. THUS, THE ORDER OF LD. CIT(A) IS PER INCURIAM INASMUCH AS THE ADMISSIBILITY OF ADDITIONAL EVIDEN CES HAS NOT BEEN CONSIDERED WHICH WAS MANDATORY. CONSEQUENTLY, THE ASSESSEE HAS BEEN DENIED A FAIR OPPORTUNITY TO PRESENT HIS CASE. BES IDES, ON MERITS ALSO, LD. CIT(A) FAILED TO CONSIDER THE VITAL ASPECTS THAT TH E ASSESSEES SHARE TRADING ACTIVITY RESULTED IN HUGE LOSSES WHICH ARE EVIDENT FROM THE BANK ACCOUNT STATEMENT ITSELF AS WELL AS THE BROKERS NOTE HAS N OT BEEN ALLOWED. THUS, THE ENHANCEMENT MADE BY LD. CIT(A) HAS RESULTED INTO HI GH PITCHED ASSESSMENT WITHOUT ANY BASIS, SADDLING THE GULLIBLE ASSESSEE W ITH A HUGE DEMAND. THEREFORE, THE ADDITIONS MAY BE DELETED. ALTERNATI VELY, THE INCOME ASSESSED BY THE LD. AO MAY BE ACCEPTED. SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 6 5. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED ON THE ORDER OF THE LD. CIT(A) AND CONTENDS THAT THE ENHAN CEMENT OF INCOME BY LD. CIT(A) U/S 251(1) R.W.S. 251(2) IS FULLY JUSTIFIED. THE ASSESSEE WAS GIVEN MANY NUMBERS OF OPPORTUNITIES BY THE ASSESSING OFFI CER TO EXPLAIN THE CASH CREDITS WHICH WERE IN HIS EXCLUSIVE KNOWLEDGE. THE FACT THAT THERE IS NO MENTION ABOUT THE ADMISSIBILITY OF ADDITIONAL EVIDE NCES IN THE CIT(A)S ORDER IMPLIES THAT THE LD. CIT(A) REFUSED TO ADMIT THEM. 6. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES. THE INCOME- TAX ACT, BY A STATUTORY MANDATE, GIVES THE RIGHT TO AN ASSESSEE TO SUBMIT ADDITIONAL EVIDENCE AND OBLIGES THE APPELLATE AUTHO RITY TO DECIDE WHETHER THE ADDITIONAL EVIDENCE IS ADMISSIBLE FOR CONSIDERA TION IN TERMS OF RULE 46A OF THE INCOME-TAX RULES, WHICH HAS NOT BEEN DONE IN THIS CASE RESULTING IN A STATUTORY MISTAKE IN THE ORDER WHICH NEEDS TO BE CO RRECTED. BE THAT AS IT MAY, LOOKING AT THE FACT THAT THE ASSESSEE IS A STU DENT AND INDULGED IN SHARE TRADING ACTIVITIES WHICH ARE CLAIMED TO BE RESULTED INTO LOSSES, NO COMMENTS ON MERITS OF THE FACTS OF THE CASE CAN BE COMMENTED FROM THE BENCH AT THIS LEVEL. HOWEVER, LOOKING AT THE FACTS AND CIRCUMSTA NCES OF THE CASE, IT IS DIRECTED THAT THE ADDITIONAL EVIDENCE STANDS ADMITT ED. THE APPEAL IS THUS REMITTED BACK TO THE LD. CIT(A) TO CONSIDER THE ADD ITIONAL EVIDENCES FILED BY THE ASSESSEE AND DECIDE THE APPEAL AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 12/01/2017 *BIJU T., SR. PS SMC-ITA NO. 285/AHD/2014 SHRI KALPESH N. LATHIYA VS. ITO AY : 2008-2009 7 / 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