ITO 25(2)(1), MUMBAI V. JAYESH C. SHAH, MUMBAI

ITA 3205/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87933 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 20-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 3205/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) ITO-25(2)(1), C-11 BUILDING, ROOM NO. 107, P. K. BHAVAN, B.K.C., BANDRA (E), MUMBAI-400 051 VS. JAYESH C. SHAH D-WING, 601, ADINATH TOWER, NANCY COLONY, BORIVALI (E), MUMBAI-400 066 ! ' ./PAN/GIR NO. ALZPS 4743 C ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI VIVEK BATRA $%!#&' / RESPONDENT BY : NONE ( )*&+, / DATE OF HEARING : 21.10.2014 -./&+, / DATE OF PRONOUNCEMENT : 07.01.2015 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (CIT(A) FOR SH ORT) DATED 23.02.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 20.12.2010. 2. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE- RESPONDENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING. THE ASSESSEE STANDS DULY IN FORMED OF THE DATE OF HEARING THROUGH THE LISTINGS AT THE NOTICE BOARD OF THE TRIBUNAL. T HERE HAS IN FACT BEEN NO REPRESENTATION 2 ITA NO. 3205/MUM/2012 (A.Y. 2008-09) ITO VS. JAYESH C. SHAH ON ANY OF THE SEVERAL OCCASIONS, VIZ. 24.10.2013, 0 6.03.2014, 05.05.2014 AND 20.10.2014, ON WHICH THE APPEAL WAS POSTED FOR HEARING. UNDER T HE CIRCUMSTANCES, IT WAS ONLY CONSIDERED FIT AND PROPER TO PROCEED WITH THE MATTE R, DECIDING THE APPEAL AFTER HEARING THE PARTY BEFORE US. 3. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE VAL IDITY OR OTHERWISE IN LAW, AND IN FACTS AND CIRCUMSTANCES OF THE CASE, OF THE RESTRICTION O F THE ADDITION IN THE SUM OF RS.32,41,475/- IN RESPECT OF UNEXPLAINED CASH DEPOS ITS IN THE ASSESSEES UNDISCLOSED BANK ACCOUNT, TO RS.3,48,666/- BY THE LD. CIT(A). 4. THE ASSESSEE WAS DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS OBSERVED TO HAVE AN UNDISCLOSED SAVINGS BANK (S/B) ACCOUNT WITH ORIENTAL BANK OF COMMERCE, BYCULLA BRANCH, MUMBAI (# 52572011001268). THE ASSE SSEE, WHO HAD DISCLOSED HIS INCOME FOR THE YEAR BY WAY OF COMMISSION, CAPITAL G AINS AND INCOME FROM OTHER SOURCES, EXPLAINED THE SAID ACCOUNT TO BE IN FACT BELONGING TO HIS WIFE, AMISHA JAYESH SHAH, THE SECOND HOLDER OF THE ACCOUNT, IN WHOSE NAME THE SAI D ACCOUNT COULD NOT BE OPENED FOR WANT OF PROPER DOCUMENTS. THE TRANSACTIONS IN THE S AID ACCOUNT WERE DULY INCORPORATED IN HER REGULAR BOOKS OF ACCOUNT AND, FURTHER, DISCLOSE D PER HER RETURN OF INCOME FOR THE YEAR, ALSO FURNISHING A COPY OF HER STATEMENT OF INCOME. THE SAME WAS FOUND UNACCEPTABLE BY THE ASSESSING OFFICER (AO). AMISHA JAYESH SHAH HAD A SAVINGS BANK ACCOUNT (# 3985) WITH SARASWATI COOPERATIVE BANK LTD., WHICH WAS IN FACT SINCE PRIOR TO THE YEAR 2006, WHILE THE BANK ACCOUNT WITH ORIENTAL BANK OF COMMER CE (OBC) WAS OPENED ONLY IN MAY, 2007. HER INCOME DETAILS, AS SUBMITTED, WERE A T VARIANCE WITH HER RETURN OF INCOME FOR THE YEAR AS FILED WITH ITO-25(1)(3), MUMBAI. TH E STORY OF INCOME BY WAY OF COMMISSION ON SALE OF READYMADE GARMENTS BY HIS WIF E, WHICH THE CASH DEPOSITED IN AND WITHDRAWN FROM THE SAID BANK ACCOUNT WAS STATED TO REPRESENT, HAD BEEN COOKED UP AS AN ALIBI BY THE ASSESSEE . THE ENTIRE CASH DEPOSIT OF RS.34.91 LACS IN THE OBC BANK ACCOUNT WAS ADDED AS INCOME BY WAY OF UNEXPLAINED DEPOSIT, RELYING ON THE DECISION BY THE TRIBUNAL IN ALUMINUM SMALL INDUSTRIES VS. ITO [2006] 103 ITD 142 (KOL). IN APPEAL, THE ASSESSEES CONTENTION THAT IN-AS-MUCH AS THE DEPOSI TS AND WITHDRAWALS IN THE OBC BANK 3 ITA NO. 3205/MUM/2012 (A.Y. 2008-09) ITO VS. JAYESH C. SHAH ACCOUNT, BOTH IN CASH, REPRESENTED PURCHASE AND SAL E OF READYMADE GARMENTS, ONLY THE NET, I.E., THE EXCESS OF THE DEPOSIT (CREDITS) OVER WITH DRAWLS (DEBITS, AT RS.3230394/-), OR RS.11081/- , REPRESENT HIS INCOME AND OUGHT TO BE ASSESSED, WA S NOT FOUND ACCEPTABLE IN THE ABSENCE OF ANY PROOF THAT THE ENTIRE WITHDRAWAL WAS MADE FOR THE PURPOSES OF BUSINESS. HOWEVER, ONLY THE PEAK CREDIT COULD BE BR OUGHT TO TAX. HE, ACCORDINGLY, DIRECTED FOR THE RESTRICTION OF THE ADDITION TO THE PEAK CREDIT IN THE SAID BANK ACCOUNT FOR THE RELEVANT YEAR, I.E., AT RS. 3,48,666/-. AGGRIEV ED, THE REVENUE IS IN APPEAL. 5. WE HAVE THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THE BAN K ACCOUNT WITH THE ORIENTAL BANK OF COMMERCE UNDER REFERENCE IS UNDISCLOSED, BOTH IN THE HANDS OF ASSESSEE AND HIS WIFE, SO THAT NO INCOME QUA THE SAID ACCOUNT STANDS RETURNED BY EITHER, AND WO ULD THEREFORE MERIT BEING BROUGHT TO TAX. THE QUESTION OR THE ISS UE THAT ARISES IS THE INCOME THAT COULD PROPERLY AND REASONABLY BE ASCRIBED TO THE SAID ACC OUNT. WHILE THE REVENUE INSISTS ON THE ENTIRE CASH DEPOSITED THEREIN DURING THE YEAR AS RE PRESENTING INCOME, THE FIRST APPELLATE AUTHORITY, ACCEPTING THE SAID ACCOUNT AS A CHANNEL OF ROUTING THE FUNDS OF THE ASSESSEES BUSINESS OF READYMADE GARMENTS, RESTRICTED IT TO TH E PEAK CREDIT AS REFLECTED IN THE SAID ACCOUNT. TOWARDS THIS, WE OBSERVE THAT, FIRSTLY, THE BANK AC COUNT STANDS OPENED DURING THE RELEVANT PREVIOUS YEAR, SO THAT IT WOULD HAVE NO OP ENING BALANCE, WHICH, WHERE SO, WOULD REQUIRE EXCLUSION IN-AS-MUCH AS THE SAME REPRESENTS (CASH) DEPOSIT/S DURING A PRIOR PERIOD. FURTHER, WE CONSIDER IT REASONABLE ON THE P ART OF THE LD. CIT(A) TO INFER THE CASH WITHDRAWALS IN THE SAID BANK ACCOUNT, WHICH ARE IN SELF, WHILE CANNOT BE CONSIDERED AS WHOLLY FOR BUSINESS PURPOSES, TO REPRESENT A SYSTEM ATIC BUSINESS ACTIVITY, SO THAT THEY ARE AVAILABLE FOR RE-DEPOSIT AND, THEREFORE, ONLY THE P EAK CREDIT AS REFLECTED IN THE SAID ACCOUNT COULD BE SAID TO BE THE UNEXPLAINED DEPOSIT OR FUNDS OF THE BUSINESS. THE REVENUES CHALLENGE, CONTESTING THE SAID INFERENCE IN THE VIEW OF ABSENCE OF ANY DOCUMENTARY EVIDENCE/S, WOULD FAIL ON ACCOUNT OF TH E VERY PROFILE OF AND BEHAVIOR REFLECTED BY THE SAID ACCOUNT, I.E., A SYSTEMATIC A CTIVITY. 4 ITA NO. 3205/MUM/2012 (A.Y. 2008-09) ITO VS. JAYESH C. SHAH SO, HOWEVER, IN-AS-MUCH AS THE WITHDRAWALS ARE FOR BUSINESS, I.E., AS FOR PURCHASE OF READYMADE GARMENTS, THE DEPOSITS ARISE ON SALE T HEREOF, DULY BANKED. THE PROFIT ARISING ON THE SALES WOULD THEREFORE STAND TO BE BROUGHT TO TAX. IT NEEDS TO BE APPRECIATED THAT THIS FLOWS FROM AND IS A NATURAL COROLLARY TO THE ASSESS EES CONTENTION OF ONLY THE NET CREDIT (DEPOSIT) IN THE BANK ACCOUNT AS INCOME, OR THE LD. CIT(A)S FINDING OF THE WITHDRAWALS AS BEING SUBJECT TO RECYCLING, SO THAT IT IS ONLY THE PEAK CREDIT THAT CAN BE CONSIDERED AS UNEXPLAINED. THAT IS, IT IS ONLY THE INFERENCE OF A SYSTEMATIC BUSINESS ACTIVITY THAT COULD SUSTAIN AND SUPPORT THE FINDING OF ONLY THE PEAK CR EDIT, AND NOT THE ENTIRE CASH DEPOSIT, IN THE ASSESSEES UNDISCLOSED BANK ACCOUNT, THE SOURCE OF WHICH IS OTHERWISE UNEXPLAINED, AS BEING LIABLE TO TAX AS UNEXPLAINED INCOME PER THE S AID BANK ACCOUNT. FURTHER, THE RECEIPT OF SALES ON COMMISSION BASIS, AS CONTENDED BY THE ASSESSEE, WOULD NOT STAND TO BE CREDITED TO THE ASSESSEES BA NK ACCOUNT, AND THAT TOO HIS PERSONAL ACCOUNT. WHILE, THEREFORE, A BUSINESS ACTIVITY IS I NFERABLE, THE CLAIM OF IT BEING ON COMMISSION BASIS IS NEITHER BORNE OUT FROM THE RECO RD NOR CONSISTENT WITH THE INCIDENTS OF SUCH BUSINESS. TO THIS EXTENT, THEREFORE, THE IMPUG NED ORDER IS DEFICIENT. THE ASSESSEE, WHO WAS ALSO NOT REPRESENTED BEFORE US, AS ALSO THE ASSESSING AUTHORITY, WOULD NEED TO BE HEARD BEFORE ANY FINAL CONCLUSION IS DRAWN. WE, AC CORDINGLY, CONSIDER IT FIT AND PROPER TO RESTORE THE MATTER TO THE FILE OF THE FIRST APPELLA TE AUTHORITY TO, CONSISTENT WITH HIS FINDING OF THE PEAK CREDIT AS BEING LIABLE TO BE TAXED, ALS O EXAMINE THE ISSUE OF THE PROFITS ARISING ON THE BUSINESS ACTIVITY OF PURCHASE AND SALE OF GO ODS, THAT THE DEBITS AND CREDITS IN THE UNDISCLOSED BANK ACCOUNT RESPECTIVELY ARE CONSIDERE D AND TAKEN AS REPRESENTING. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. 1/+2) & 3& 4567 60) 8 + & +9 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 07, 2 015 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER 5 ITA NO. 3205/MUM/2012 (A.Y. 2008-09) ITO VS. JAYESH C. SHAH ( :* MUMBAI; ; DATED : 07.01.2015 )< ROSHANI , SR. PS !' # $%&' ('% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( =+ > ? / THE CIT(A) 4. ( =+ / CIT - CONCERNED 5. @)AB$<+