JATIN K. BHUTA, MUMBAI V. ITO WD 25 (1)(1), MUMBAI

ITA 3247/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7486 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Opportunity of being heard; Peak credit; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA NO. 3247/MUM/2016 (ASSESSMENT YEAR: 2011-12) SHRI J ATIN K. BHUTA 308 & 309 SAI AMRUT SOCIETY J.S. ROAD, OFF ROKADIA LANE DAHISAR (W), MUMBAI 400068 VS. INCOME TAX OFFICER - 25(1)(1) MUMBAI PAN AACPB6793P APPELLANT RESPONDENT APPELLANT BY: SHRI PRAKASH JHUNJHUNWALA & SHRI ABHISHEK JHUNJHUNWALA RESPONDENT BY: MS. ARJU GARODIA DATE OF HEARING: 19.04.2018 DATE OF PRONOUNCEMENT: 19.04.2018 O R D E R PER G.S. PANNU, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-44, MUMBAI DATED 16.03.2016 FOR A.Y. 2011-12 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: - 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION U/S 68 IN RESPECT OF ENTIRE CASH DEPOSITS MADE IN BANK ACCOUNT OF RS.4,12,28,000/-; 2.0 THE LD. CIT(A), BEFORE CONFIRMING THE ADDITION U/S 68 OF CASH DEPOSITS MADE OF RS.4,12,28,000/-, ERRED IN NOT APP RECIATING THE UNDERSTATED VITAL FACTS, BEING; A) THE APPELLANT HAD DEPOSITED THE ACCOUNTED AND DI SCLOSED CASH FUNDS IN HIS REGULAR BANK ACCOUNT; B) THE LD. AO HAD NOT DISPUTED THE FACT THAT THE B ANK ACCOUNT IN WHICH CASH HAD BEEN DEPOSITED IS ACCOUNTED IN RE GULAR BOOKS OF ACCOUNTS AND DISCLOSED IN BALANCE-SHEET FI LED ON RECORD; ITA NO. 3247/MUM/2016 SHRI JATIN K. BHUTA 2 C) THE APPELLANT HAD DISCLOSED THE COMMISSION/BUSIN ESS INCOME ON TRANSACTIONS CORRESPONDING TO CASH DEPOSI TS MADE IN BANK ACCOUNT; D) THE LD. AO HAD NOT BROUGHT ANY CONTRARY DOCUMENT S TO DISPROVE THE APPELLANT'S SUBMISSION AND TO JUSTIFY THE ADDITION MADE IN ASSESSMENT; E) THE APPELLANT'S BOOKS OF ACCOUNTS HAD NOT BEEN R EJECTED U/S 145(3), THUS ADDITIONS OF RECORDED CASH ENTRIES TAX ED U/S 68 IS UNJUSTIFIED; 3.0 THE LD. CIT(A) OUGHT TO HAVE ADOPTED THE CONCEP T OF REAL INCOME AND SUSTAINED THE ADDITION TO THE EXTENT OF REAL IN COME EMBEDDED IN DISPUTED CASH TRANSACTIONS HAVING DEPOS ITED IN REGULAR BANK ACCOUNT; 4.0 WITHOUT PREJUDICE, LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF ENTIRE CASH DEPOSITS OF RS. 4, 12, 28,0 00/- AND OUGHT TO HAVE SUSTAINED THE ADDITION TO THE EXTENT OF UNE XPLAINED PEAK CREDITS ON FOLLOWING THE TELESCOPING METHOD. 3. AS THE GROUNDS OF APPEAL REVEAL, THE SOLITARY DISPU TE IN THIS APPEAL IS WITH REGARD TO ADDITION OF ` 4,12,28,000/- MADE BY THE AO TREATING THE ENTIRE CASH DEPOSITS IN THE BANK ACCOUNT AS UNEXPLA INED WITHIN THE MEANING OF SECTION 68 OF THE INCOME TAX ACT (HEREIN AFTER THE ACT). 4. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE AS SESSEE IS AN INDIVIDUAL WHO CARRIES ON THE BUSINESS OF DEALER IN READYMADE GARMENTS AND RENDERING SERVICES RELATING TO OCTROI AND CLEAR ING AGENTS THROUGH PROPRIETARY CONCERNS, M/S. SHREE JALARAM OCTROI SER VICES, M/S. SASHI ENGINEERING WORKS, M/S. HITESH EVENTS AND M/S. JAY ENTERPRISES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, HE HAS FILED R ETURN OF INCOME DECLARING A NET INCOME OF ` 9,18,207/- WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT. THE ASSESSMENT ORDER REVEALS THAT THE A O TOOK NOTE OF AN AIR INFORMATION WHICH SHOWED THAT THE ASSESSEE HAS MADE CASH DEPOSITS TOTALLING TO ` 4,12,28,000/- N THE SAVINGS ACCOUNT MAINTAINED WITH JAIN SAHAKARI BANK LTD. ON BEING SHOW CAUSED, THE ASSESS EE FURNISHED A REPLY DATED 11.03.2014, WHICH HAS BEEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THEREIN TH AT HE WAS CARRYING OUT COMMISSION ACTIVITIES WHEREBY HE ASSISTED HIS CLIEN TS FOR SELLING VARIOUS PRODUCTS, VIZ., CARS, JEWELLERIES, PAINTINGS AND OT HER PERSONAL BELONGINGS, ITA NO. 3247/MUM/2016 SHRI JATIN K. BHUTA 3 ETC. AND HIS COMMISSION RANGED BETWEEN 1% TO 2% OF THE SALES VALUE. THE ACCOUNT WITH JAIN SAHAKARI BANK WAS EXPLAINED AS BE EN USED TO DEPOSIT THE CASH AS WELL AS CHEQUES/DRAFTS RECEIVED FROM VA RIOUS CLIENTS TOWARDS SALE OF ARTICLES AND AGAINST SUCH RECEIPTS MONEYS W ERE WITHDRAWN AND PAYMENT MADE TO THE SELLERS OF THE ARTICLES AND FOR EXPENSES INCURRED ON SALE AND PURCHASE OF SUCH ARTICLES. THE AO WAS NOT SATISFIED WITH THE EXPLANATION REGARDING THE SOURCE OF CASH DEPOSITS A ND HE TREATED THE ENTIRE DEPOSITS OF CASH AS UNEXPLAINED UNDER SECTION 68 OF THE ACT; THUS THE INCOME WAS ASSESSED AT ` 4,20,46,210/- AS AGAINST THE RETURNED INCOME OF ` 9,18,207/- ONLY. THE ADDITION HAS SINCE BEEN SUSTAI NED BY THE CIT(A) ALSO. AGAINST THE SAID ORDER OF THE CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE POI NTED OUT THAT IN THE BANK ACCOUNT MAINTAINED BY THE ASSESSEE THERE WERE CASH AND DRAFT/ CHEQUE DEPOSITS TOTALLING TO ` 14,00,34,433/- AND CASH/CHEQUE WITHDRAWALS OF ` 14,00,32,274/- WHICH ESTABLISHED THAT THE DEPOSITS AND THE WITHDRAWALS WERE MORE OR LESS EQUAL. THE LEARNED A.R. POINTED T HAT THE ASSESSEE WAS SUFFERING FROM SERIOUS HEART AILMENT AND THEREFORE AT THE REQUISITE POINT OF TIME COMPLETE BANK STATEMENTS AND COMPLETE DOCUMENT S COULD NOT BE FURNISHED BEFORE THE LOWER AUTHORITIES WHICH WOULD HAVE DEMONSTRATED THE PROXIMITY OF DEPOSITS AND CASH WITHDRAWALS. THE LEA RNED A.R. ALSO REFERRED TO AN APPLICATION MADE BY THE ASSESSEE UNDER RULE 2 9 OF THE APPELLATE TRIBUNAL RULES, 1963 FOR ADMISSION OF FRESH EVIDENC E WHICH WERE HITHERTO NOT BEFORE THE LOWER AUTHORITIES, WHICH IS AS UNDER : - S. NO. PARTICULARS PAGE NO. 1 BANK BOOK OF M/S. SHREE JALARAM OCTROI SERVICE 17-27 2 BANK STATEMENT OF M/S. SHREE JALARAM OCTROI SERVICE 28-38 3 BANK BOOK OF M/S. SASHI ENGINEERING WORKS 39-41 4 BANK STATEMENT OF M/S. SASHI ENGINEERING WORKS 42-45 5 BANK BOOK OF M/S. HITECH EVENTS 46-52 6 BANK STATEMENT OF M/S. HITECH EVENTS 53-59 7 BANK BOOK OF M/S. JAY ENTERPRISES 60-63 8 BANK STATEMENT OF M/S. JAY ENTERPRISES 64-67 ITA NO. 3247/MUM/2016 SHRI JATIN K. BHUTA 4 9 SUBMISSION BEFORE CIT(A) & LD. AO 68-73 10 SAMPLE LEDGER ACCOUNT OF SUPPLIERS & CUSTOMERS 74-104 11 SAMPLE PURCHASE AND SALE BILLS 105-136 6. APART THERE FROM, AN AFFIDAVIT JUSTIFYING THE ADMIS SION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE RULES AS WELL AS DOCU MENTS EVIDENCING MEDICAL ILLNESS OF THE ASSESSEE HAVE ALSO BEEN REFE RRED TO. IT IS EXPLAINED BY THE ASSESSEE THAT NON FILING OF THE AFORESAID DOCUM ENTS WAS PRIMARILY ON ACCOUNT OF MEDICAL AILMENT AND ALSO DUE TO EXISTENC E OF DISPUTE BETWEEN FAMILY MEMBERS, AND THE RELEVANT BANK STATEMENT AND DOCUMENTS WERE NOT HANDED OVER TO THE ASSESSEE. THE LEARNED COUNSEL FO R THE ASSESSEE EXPLAINED THAT THE ASSESSEE WAS CARRYING OUT BUSINE SS ALONG WITH HIS FATHER WHO HAD LATER DIED ON 12.08.2012 AND THEREAF TER DISPUTE AROSE BETWEEN THE FAMILY MEMBERS WHO DID NOT COOPERATE WI TH THE ASSESSEE AND THEREFORE THERE WAS A DELAY IN OBTAINING ALL THE RE QUISITE DETAILS BY THE ASSESSEE IN AS MUCH AS THE ASSESSEE HAD TO APPROACH THE BANKS TO OBTAIN COPIES OF THE BANK STATEMENTS, ETC. AN ALTERNATE PL EA WAS ALSO MADE, BY REFERRING TO THE ADDITIONAL EVIDENCE TO THE EFFECT THAT EVEN THE PEAK CREDIT IN THE BANK ACCOUNT BE ADDED SO AS TO ARRIVE AT THE ES TIMATED INCOME BUT CERTAINLY THE ENTIRE CASH DEPOSITS IN THE BANK ACCO UNT COULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE. IT WAS POINTE D OUT THAT THE AO HIMSELF HAS NOT CONSIDERED THE DEPOSITS MADE BY CHE QUES AS UNEXPLAINED AND HAS MERELY CONSIDERED THE CASH DEPOSITS AS UNEX PLAINED EVEN WHEN THE NATURE OF BOTH KIND OF DEPOSITS WAS SIMILAR. ON BEING ASKED, THE LEARNED A.R. HAS FURNISHED A WRITTEN PRAYER OF THE ASSESSEE TO ESTIMATE THE INCOME BY CONSIDERING THE PEAK CREDIT METHOD (TELES COPING) AND ADMIT THE ADDITIONAL EVIDENCES UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES. THE SAID PRAYER/APPLICATION DATED 17.04.2018 READS AS U NDER: - THAT, I WAS HOLDING THE 4 BANKS ACCOUNTS IN THE NA MES OF M/S SHREE JALARAM OCTROI SERVICE, M/S SASHI ENGINEERING WORKS, M/S HITECH EVENTS AND M/S JAY ENTERPRISES AND THE AGGRE GATED DEPOSITS AND WITHDRAWALS MADE IN SUCH BANK ACCOUNTS ARE AS U NDER :- CASH AND CHEQUE DEPOSITS RS.14,00,34,433/- CASH AND CHEQUE WITHDRAWAL RS.14,00,32,274/- ITA NO. 3247/MUM/2016 SHRI JATIN K. BHUTA 5 THAT, THE DEPOSITS MADE IN THE ABOVESTATED BANK ACC OUNTS ARE CIRCULAR IN NATURE AND THERE EXISTS CORRESPONDING D EBITS (CASH WITHDRAWALS AND CHEQUE ISSUED) AGAINST THE CREDITS (CASH AND CHEQUE DEPOSITS) IN SUCH BANK ACCOUNTS. THERE IS A RECYCLI NG OF THE SAME FUNDS ROTATED FOR SEVERAL TIMES AND DOES NOT INVOLV E THE DEPLOYMENT OF FRESH FUNDS. I AM A MAN OF MEAGER RESOURCE AND H AD DEPLOYED NOMINAL AMOUNTS IN SUCH BANK ACCOUNTS; 3.0 THAT DUE TO MY SERIOUS ILLNESS OF HEART AILMEN T, THE BANK STATEMENTS AND RELEVANT DOCUMENTS COULD NOT BE FURN ISHED BEFORE LD. AO AND LD.CIT(A). I RESPECTFULLY MAKE A PRAYER TO ALLOW THE BENEFIT O F TELESCOPING AND ESTIMATE THE TOTAL INCOME ON ALLOWING THE TELESCOPI NG (PEAK CREDITS)AND IN SUPPORT, THE DAY-WISE BALANCE, STATE MENT DISCLOSING NEXUS OF DEPOSITS WITH WITHDRAWALS AND ALL BRINK ST ATEMENTS AND OTHER DOCUMENTS HAD BEEN FILED BEFORE HON'BLE ITAT. 7. THE LEARNED A.R. POINTED OUT THAT THE ASSESSEE WOU LD BE SATISFIED IF THE MATTER IS RESTORED BACK TO THE FILE OF THE AO F OR APPROPRIATE ADJUDICATION IN THIS MATTER. 8. THE LEARNED D.R. FOR THE REVENUE REITERATED THAT TH E ASSESSEE HAS BEEN ALLOWED ADEQUATE OPPORTUNITIES, BUT DID NOT SE RIOUSLY OPPOSE THE PLEA OF THE ASSESSEE FOR RESTORING BACK THE MATTER TO TH E FILE OF THE AO. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. FIRSTLY, FROM THE CIRCUMSTANCES EXPLAINED BY THE ASSESSEE, WHICH ARE AVERRED IN THE AFFIDAVIT, IT IS CLEARLY EMERGING THAT THERE WAS IN ADEQUACY OF REPRESENTATION AT THE LEVEL OF THE AO. THOUGH THE INADEQUACY ON TH E PART OF THE ASSESSEE MAY ATTRACT PENAL CONSEQUENCES, BUT IT SHOULD NOT R ESULT IN AN ASSESSMENT WHICH IS GROSSLY DISPROPORTIONATE TO A GIVEN SITUAT ION. NOTABLY, IN THE INSTANT CASE, THE RETURN OF INCOME WAS FILED ON A M EAGRE INCOME OF ` 9,18,207/- WHEREAS THE FINAL ASSESSMENT HAS BEEN MA DE AT ` 4,20,46,210/-. THE ASSESSMENT IS BASED ON CASH DEPO SITS MADE IN ONE OF THE BANK ACCOUNTS. THOUGH THE ASSESSEE HAD EXPLAINE D HIS BUSINESS OPERATIONS BUT THE SAME WAS FOUND TO BE LACKING IN SUBSTANTIATION AND THEREFORE THE AO PROCEEDED TO TREAT THE CASH DEPOSI TS AS UNEXPLAINED. INCIDENTALLY, THE CLAIM OF THE ASSESSEE WAS THAT TH E CHEQUE AS WELL AS THE CASH DEPOSITS IN THE BANK ACCOUNT WERE RELATED TO H IS BUSINESS ACTIVITY OF COMMISSION AGENCY. WHILE THE AO, ON THE SAME SET OF FACTS AND MATERIAL ITA NO. 3247/MUM/2016 SHRI JATIN K. BHUTA 6 BEFORE HIM, ACCEPTED THE EXPLANATION QUA CHEQUE DEP OSITS BUT DID NOT ACCEPT THE SAME WITH REGARD TO CASH DEPOSITS. IN OU R VIEW, THE AFORESAID APPROACH CONSIDERED IN THE LIGHT OF THE CIRCUMSTANC ES PREVAILING WITH THE ASSESSEE, CANNOT BE SAID TO BE JUSTIFIED. CONSIDERI NG THE ENTIRETY OF CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE IMPUG NED ASSESSMENT REQUIRES A REAPPRAISAL AND A FRESH LOOK. THEREFORE, FOR THE AFORESAID REASONS AND IN THE INTEREST OF JUSTICE AND FAIR PLA Y WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE CIT(A) AND RES TORE THE MATTER BACK TO THE FILE OF THE AO WHO SHALL DE NOVO CONSIDER THE P LEA OF THE ASSESSEE IN SUPPORT OF THE RETURN OF INCOME AND IF THE AO IS NO T SO SATISFIED, THEN HE IS FREE TO CONSIDER THE ALTERNATE PLEA OF THE ASSESSEE ON MERITS FOR ESTIMATION OF INCOME BASED ON PEAK CREDIT METHOD. THE AO SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND ONLY THER EAFTER PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL, 2018 AT THE CONCLUSION OF THE HEARING IN THE PRESENCE OF BOTH THE PARTIES. SD/ - SD/ - (RAMLAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH APRIL, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -44, MUMBAI 4. THE CIT - 32, MUMBAI 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.