Shri Jignesh Madanlal Bhatt, Ahmedabad V. The Income tax Officer,Ward-11(3), Ahmedabad

ITA 3315/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6341 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWA LA
• Assessee Lawyers: MEHUL K PATEL

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M JIGNESH MADANLAL BHATT C/O LALITKALA DECORATORS, 50/5, ANAND FLATS, NR. LBS STADIUM, BAPUNAGAR, AHMEDABAD. VS. INCOME-TAX OFFICER, WARD 11(3), NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI MEHUL K. PATEL, AR RESPONDENT BY:- SHRI SAMIR TEKRIWALA, SR.DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A, O. TO TREAT ALL THE CASH DEPOSITS MADE IN THE PERSONAL BANK ACCOUNT OF THE APPELLANT IF THERE ARE CASH WITHDRAWALS TO THAT EXTENT FROM THE BANK ACCOUNT OF LALITKALA DECORATORS EITHER ON THE SAME DAY OR UPTO 4 DAYS BEFORE. THAT SINCE THE NATURE OF THE DIRECTION ISSUED BY TH E LEARNED CIT(A) AMOUNTS TO SETTING ASIDE OF THE ASSESSMENT ORDER TO THAT EXTENT AND SINCE THE SAME BEING OUTSIDE THE POWERS OF THE LEAR NED CIT(A), THE ORDER OF THE CIT(A) REQUIRES TO BE QUASHED AS VOID- AB-INITIO AND BAD IN LAW OR IN THE ALTERNATIVE SET-ASIDE FOR DECI SION AFRESH ON MERITS OF THE ISSUE, 2. THE LEARNED CIT(A) HAS ALSO ERRED IN GIVING THE ABOVE DIRECTIONS TO THE A.O. FOR VERIFICATION OF THE ISSUE IN DISPUTE B EFORE HIM WITHOUT PROPER CONSIDERATION, UNDERSTANDING AND APPRECIATIO N OF THE FACTS OF THE CASE. IN VIEW OF FACTS AND SUBMISSIONS FILED CO UPLED WITH ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 2 COMPREHENSIVE EVIDENCES, THE ENTIRE ADDITION OF RS, 6,98,878/-ON ACCOUNT OF INVESTMENT IN SHARES REQUIRES TO BE DELE TED, THE SOURCE OF THE SAME BEING DULY EXPLAINED AND RECORDED IN BOOKS OF ACCOUNT. 3. THE LEARNED C]T{A) FAILED TO APPRECIATE THE FACT THAT THE CASH DEPOSITS MADE IN PERSONAL BANK ACCOUNT OF THE APPEL LANT OUT OF WHICH INVESTMENT IN SHARES WAS MADE AND ADDED BY TH E A.O. WERE OUT OF WITHDRAWALS FROM THE CASH ON HAND BALANCE OF HIS PROPRIETARY CONCERN NAMELY LALITKALA DECORATORS AS REFLECTED IN ITS CASH BOOK ON THE SAME DATE AND THE SOURCE OF WHICH WAS THE WITHDRAWALS FROM ITS BANK ACCOUNT FROM TIME TO TIME . 4. THE LEARNED CTT(A) FURTHER FAILED TO APPRECIATE THE FACT THAT SINCE THE AMOUNT GIVEN TO THE APPELLANT BY LALITKALA DECO RATORS WAS FROM ITS CASH ON HAND BALANCE, HE WAS NOT JUSTIFIED IN D IRECTING THE A.O. TO VERIFY THE WITHDRAWALS FROM BANK ACCOUNT OF LAII TKALA DECORATORS VIS-A-VIS THE DEPOSITS IN THE PERSONAL B ANK ACCOUNT OF THE APPELLANT SINCE IT HAS NO NEXUS AT ALL. THUS, T HE DIRECTION OF THE LEARNED CIT(A} BEING BASED ON MISUNDERSTANDING OF F ACTS, THE SAME REQUIRES TO BE QUASHED AND THE ADDITION MADE B Y THE A.O. REQUIRES TO BE DELETED. 5 THE LEARNED CIT(A) HAS FURTHER ERRED IN CONFIRMIN G THE ADDITION TO THE EXTENT OF RS.L,00,000/- RECEIVED FROM SHRI CHAN DRA PRAKASH DAVE BY CHEQUE. THAT SINCE NO SUCH ADDITION HAVING BEEN SEPARATELY MADE BY THE A.O. OR RAISED DURING THE CO URSE OF ASSESSMENT AND SINCE NO QUERY HAVING BEEN RAISED BY THE LEARNED CIT(A) ALSO DURING THE APPELLATE PROCEEDINGS AND SI NCE THE FACTS OF THE CASE HAVING NOT BEEN PROPERLY UNDERSTOOD BY THE LEARNED CIT(A), THE IMPUGNED ADDITION OF RS.L,00,000/- REQU IRES TO BE DELETED, THE SAME NOT BEING SUBJECT MATTER OF THE A PPEAL AND THUS BEING OUTSIDE THE SCOPE AND PURVIEW OF THE APPEAL, THE ISSUE HAVING BEEN RAISED FOR THE FIRST TIME WHILE PASSING THE AP PELLATE ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS D EALING IN SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE WAS HOLDING A BANK ACCOUNT WITH NUTAN NAGA RIK SAHAKARI BANK LTD. IN WHICH ASSESSEE HAD DEPOSITED SOME CASH. OUT OF THIS CASH DEPOSIT IN THE BANK ASSESSEE HAS PURCHASED SHARES. THE DEMA T ACCOUNT IN WHICH ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 3 SHARES AS WELL AS THE BANK ACCOUNT FROM WHICH INVES TMENT WAS MADE BY DEPOSITING CASH OF RS.6,98,878/- WAS APPARENTLY NOT DECLARED IN THE RETURN OF INCOME FILED. THE ASSESSEE WAS ISSUED A SHOW CAU SE NOTICE DATED 30.10.08 ASKING TO EXPLAIN WHY THE CASH DEPOSIT IN THE BANK ACCOUNT AND THE INVESTMENT IN SHARES WAS NOT OFFERED FOR TAXATI ON. IT WAS EXPLAINED TO THE AO THAT ASSESSEE HAS WITHDRAWN CASH FROM HIS PR OPRIETARY CONCERN NAMELY LALIKALA DECORATORS AND DEPOSITED IN THE BAN K ACCOUNT WITH NUTAN NAGARIK SAHAKARI BANK LTD. HOWEVER, THIS WITHDRAWAL OF MONEY FROM LALITKALA DECORATORS WAS SUBSEQUENTLY SQUARED UP AT THE END OF THE YEAR. THE AO, HOWEVER, FOUND THAT NO DETAIL OF SUCH ACCOU NT WAS FILED WITH THE RETURN. THE AO REJECTED THE CONTENTION OF THE ASSES SEE THAT IT HAS WITHDRAWN MONEY FROM LALITKALA DECORATORS FOR THE F OLLOWING REASONS :- (A) THE CASH WITHDRAWALS MADE FOR MAKING THE INV ESTMENT IN SHARES IS NOT REFLECTED IN THE CAPITAL ACCOUNT OF THE PROPRIE TOR. (B) THE CASH DEPOSITS STATED TO BE RECEIVED BACK ON REFUND ARE ALSO NOT REFLECTED IN PROPRIETOR'S CAPITAL ACCOUNT. (C) THE RETURN OF INCOME DOES NOT SHOW ANY PROFIT O N THE SHARES SOLD. (D) THE BALANCE SHEET DOES NOT SHOW THE SHARES AS A SSETS IN THE ACCOUNTS. (E) THE BANK ACCOUNT NO. 1540/4043 WITH NUTAN NAGRI K SAHAKARI BANK LTD. WAS CONVENIENTLY KEPT AWAY FROM THE DEPAR TMENT WHILE FILING THE RETURN OF INCOME. THE SAME IS NOT REFLEC TED IN HIS ACCOUNTS. (F) THE DEMAT ACCOUNT NO. 10064010 HELD BY THE ASSE SSEE WITH ASE CAPITAL MARKETS LTD. HAS NOT BEEN DISCLOSED IN THE RETURN OF ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 4 INCOME. IT IS ONLY BECAUSE OF THE AIR INFORMATION THAT THE DEPARTMENT COULD RETRIEVE THE UNDISCLOSED BANK ACCO UNT NO. 1540/4043 AND THE DEMAT ACCOUNT NO, 10064010. (G) THE ASSESSEE HAS ACKNOWLEDGED THAT THE PROFIT O N TRANSACTIONS IN SHARES HAVE NOT BEEN OFFERED FOR TAXATION. WHEN THE INCOME IS NOT OFFERED, HOW CAN THE INVESTMENT BE EXPLAINED? 3. ON THE BASIS OF ABOVE OBSERVATIONS THE AO MADE A N ADDITION OF RS.6,98,878/- TO THE TOTAL INCOME. 4. WHEN THE MATTER CAME UP BEFORE LD. CIT(A), HE CO NFIRMED THE FINDING OF THE AO THAT ASSESSEES ACCOUNT WITH NUTA N NAGARIK SAHAKARI BANK LTD. WAS NOT DISCLOSED. HE ALSO FOUND THAT PRO FIT OF RS.1.15 LACS ON PURCHASE AND SALE OF SHARES AND INTEREST INCOME FRO M THIS BANK ACCOUNT WAS ALSO NOT DISCLOSED. HE FURTHER GAVE FINDING THA T THERE ARE WITHDRAWALS AND DEPOSIT IN THIS BANK ACCOUNT EITHER FOR LALITKA LA DECORATORS OR OTHERWISE. HE TOOK THE VIEW THAT IF THE SOURCE OF D EPOSIT IN THE BANK ACCOUNT EVEN THOUGH NOT DISCLOSED IS EXPLAINED THEN NO ADDITION IN RESPECT OF INVESTMENT MADE THROUGH PERSONAL BANK AC COUNT SHOULD BE MADE. HE, THEREFORE, DIRECTED THE AO TO TREAT ONLY THOSE INVESTMENTS AS UNEXPLAINED IN RESPECT OF WHICH NO EVIDENCE IS FURN ISHED. HE DIRECTED TO DELETE A SUM OF RS.47,000/- TREATING IT AS EXPLAINE D AND CONFIRMED THE ADDITION IN RESPECT OF OTHER AS UNDER :- 5.2 BEFORE ME IT WAS PLEADED THAT THE AMOUNT OF RS .6,98,878/- INCLUDED LOAN OF RS.1,00,000/- RECEIVED FROM SHRI CHANDRA PR AKASH DAVE RECEIVED BY CHEQUE IN THE SAID BANK ACCOUNT ON 4.12.2008 AND RS.47,000/- ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 5 RECEIVED BY CHEQUE FROM LALITKALA DECORATORS ON 23. 7.2005. AS STATED EARLIER, THIS BANK ACCOUNT IS UNACCOUNTED AND NO EX PLANATION REGARDING THE CREDIT ENTRY OF RS.1 LAC WAS GIVEN BEFORE THE A O OR BEFORE ME, THE ADDITION OF RS.1,00,000/- MADE IS THEREFORE CONFIRM ED. FURTHER RS.47,000/- WAS CLAIMED TO HAVE BEEN RECEIVED FROM THE BANK ACCOUNT OF LALITKALA DECORATORS ON 23.7.2005. THE ENTRY OF THE CHEQUE IS APPEARING IN THE BANK ACCOUNT OF LALITKALA DECORATORS AS WELL AS OF SHRI JIGNESH MADANLAL BHATT ON 23.7.2009 AS TRANSFER ENTRY. SINC E THE INVESTMENTS IN SHARES OF RS.6,98,878/- ALSO INCLUDE RS.47,000/- W HICH IS PROPERLY EXPLAINED THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.47,000/-. 5. BEFORE US THE CONTENTION OF THE LD. AR IS THAT E VEN THOUGH THE BANK ACCOUNT IS NOT DISCLOSED BUT THE DEPOSITS MADE THER EIN ARE RELATABLE TO ACCOUNT IN LALITKALA DECORATORS, THEREFORE, NO ADDI TION OF ANY SUM COULD BE MADE. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT ASS ESSEE HAS NOT BEEN ABLE TO EXPLAIN THE ENTRIES IN THE PERSONAL BANK AC COUNT. 7. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, ONCE THE LD. CIT(A) HAS GIVEN DIRECTION THAT SOURCE OF DEPOSITS IN PERSONAL BANK ACCOUNT SH OULD BE EXAMINED AND ONLY THAT ADDITION SHOULD BE MADE WHICH IS NOT FOUN D EXPLAINED THEN THERE SHOULD NOT BE ANY REASON TO SUSTAIN THE ADDITION UN TILL SUCH EXAMINATION IS CARRIED OUT BY THE AO. WE, THEREFORE, SET ASIDE THE ENTIRE MATTER TO THE FILE OF AO TO EXAMINE EACH DEPOSIT IN THE BANK ACCOUNT A ND ASK THE ASSESSEE TO EXPLAIN THE SOURCE THEREOF. IF SOURCES ARE FOUND EXPLAINED THEN NO ITA NO.3315/AHD/2009 ASST. YEAR 2006-07 6 ADDITION OF ANY DEPOSIT IS CALLED FOR. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 24/6/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 24/6/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 15/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 17/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..