JITEN K. ANKHAD, MUMBAI V. ITO 25(3)(2), MUMBAI

ITA 334/MUM/2009

• Counselvise Citation: 33419914 RSA 2009
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 18-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PA RTHASARATHY NAIK
• Assessee Lawyers: DHIRENDRA M SHAH
• Keywords: Business expenditure; Peak credit; Revised return
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI R.S. PADVEKAR, ( JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.334/MUM/2009 ASSESSMENT YEAR : 2005-06 MR. JITEN K. ANKHAD A/302, MAHAVIR DARSHAN PAREKH LANE, S.V. ROAD KANDIVILI (W) MUMBAI-400 067. ..( APPELLANT ) P.A. NO. (AACPA 0543 Q) VS. THE INCOME TAX OFFICER WARD 25(3)(2) PRATYAKSHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI DHIRENDRA M. SHAH RESPONDENT BY : SHRI PA RTHASARATHY NAIK DATE OF HEARING : 18.10.2011 DATE OF PRONOUNCEMENT : 16 TH NOVEMBER, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.8.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06 . THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION ON ACCO UNT OF UNACCOUNTED CASH DEPOSITS IN THE BANK ACCOUNTS. ITA NO.334/M/09 A.Y:05-06 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WHO CLAIMED TO BE RUNNING A PHARMACEUTICAL COMPANY, HAD DECLARE D TOTAL INCOME OF RS.1,13,499/- IN THE RETURN FILED ON 10.10.2005 FOR THE ASSESSMENT YEAR 2005-06. SUBSEQUENTLY FROM THE ANNUAL INFORMATION RETURN (AIR) FILED BY IDBI BANK, IT WAS FOUND THAT DURING ASSESSMENT YEAR 2005-06 THE ASSESSEE HAD DEPOSITED CASH OF RS.20,36,300/-. THE ASSESSEE WAS THEREFORE, ASKED TO FILE SOURCE OF CASH DEPOSIT. THE ASSESSEE SUBMITTE D ONLY DETAILS OF BANK ACCOUNT NO.17250 WITH BANK OF BARODA (BOB) IN WHICH CLOSING BALANCE AS ON 31.3.2005 WAS RS.14,218/- AND TOTAL DEPOSITS DURING THE YEAR WERE RS.8.06 LACS AGAINST THE CASH DEPOSIT OF RS.20,36,300/- AS PER AIR REPORT. THE LD. AR OF THE ASSESSEE WAS THEREAFTER SHOWN THE AIR REP ORT AND ON SEEING THE REPORT THE LD. AR ADMITTED THAT THE ASSESSEE HELD A N ACCOUNT IN IDBI BANK WHICH WAS NOT DISCLOSED. THE STATEMENT OF THE ASSE SSEE UNDER SECTION 131 WAS RECORDED ON 16.7.2007 IN WHICH THE ASSESSEE ADM ITTED THAT IT HAD SAVINGS BANK ACCOUNT NO.51101 IN IDBI BANK, WARDEN ROAD BRANCH WHICH WAS NOT DISCLOSED IN THE BALANCE SHEET. THE ASSESS EE THEREAFTER FILED REVISED RETURN ON 24.9.2007 DECLARING ADDITIONAL INCOME OF RS.9,49,203/- OVER AND ABOVE THE INCOME OF RS.1,13,499/- DISCLOSED IN THE ORIGINAL RETURN. IN THE REVISED COMPUTATION, THE ASSESSEE HAD CLAIMED DEDUC TION OF RS.3,16,481/- ON ACCOUNT OF TRAVELLING, BOARDING, LODGING AND BUS INESS EXPENSES. THE AO THEREAFTER OBTAINED INFORMATION UNDER SECTION 133(6 ) FROM THE IDBI BANK REGARDING DETAILS OF DEPOSITS IN THE UNDISCLOSED BA NK ACCOUNT AS REVISED RETURN FILED WAS ONLY IN RESPECT OF CASH DEPOSIT OF RS.14,12,000/- AS AGAINST RS.20,36,300/- REPORTED IN THE AIR. THEREAFTER IT WAS FOUND THAT THE ITA NO.334/M/09 A.Y:05-06 3 ASSESSEE WAS HAVING ANOTHER ACCOUNT BEARING NO.5996 3 WITH IDBI BANK BEING JOINTLY OPERATED WITH HIS BROTHER SHRI PARAS ANKHAD IN WHICH ASSESSEE WAS FIRST HOLDER. AGAIN THE STATEMENT OF THE ASSES SEE UNDER SECTION 131 WAS RECORDED ON 1.10.2007 IN WHICH THE ASSESSEE ADMITTE D THAT THE ACCOUNT NO.59963 WAS ALSO UNDISCLOSED WHICH HE HAD OMITTED TO MENTION IN HIS FIRST STATEMENT. THE ASSESSEE FILED ANOTHER REVISED RETU RN ON 10.10.2011 OFFERING TOTAL CASH DEPOSIT OF RS.4,49,000/- IN THE SECOND A CCOUNT. THE ASSESSEE IN THE SECOND REVISED RETURN ALSO INCREASED TRAVELLING , BOARDING, LODGING AND BUSINESS EXPENSES FROM RS.3,16,418/- TO RS.5,58,300 /-. THE ADDITIONAL INCOME IN THE SECOND REVISED RETURN WAS INCREASED B Y RS.2,07,181/- ONLY. 3. THE AO WITH A VIEW TO ASCERTAIN THE NATURE AND S OURCE OF RECEIPTS DEPOSITED IN THE TWO BANK ACCOUNTS EXAMINED THE ASS ESSEE UNDER SECTION 131 ON 16.7.2007. THE ASSESSEE IN THE STATEMENT IN ITIALLY STATED THAT DEPOSITS WERE SALE PROCEEDS COLLECTED FROM BUYERS O N BEHALF OF SELLERS. WHEN ASKED TO GIVE DETAILS I.E., THE NAMES OF BUYER S AND SELLERS THE ASSESSEE PROMISED TO PROVIDE DETAILS IN A FEW DAYS. HOWEVER, SUBSEQUENTLY DURING THE COURSE OF RECORDING OF STATEMENT HE CHANGED THE STA ND AND STATED THAT THE NATURE OF DEPOSITS WERE SECURITY DEPOSIT COLLECTED BY HIM FROM BUYER OF GOODS TILL PAYMENT OF RECEIPT FROM SELLERS. THE AS SESSEE COULD NOT GIVE ANY EVIDENCE IN SUPPORT OF THE CLAIM. NEITHER HE COULD GIVE THE NAMES OF DEPOSITORS NOR THOSE OF THE SELLING PARTIES. THE A O THEREFORE, CONCLUDED THAT THE ASSESSEE HAD COMPLETELY FAILED TO OFFER ANY CRE DIBLE INFORMATION WITH REGARD TO NATURE AND SOURCE OF CREDITS IN TWO UNDIS CLOSED BANK ACCOUNTS. AO NOTED THAT ALMOST ALL DEPOSITS IN BANK ACCOUNT WERE IN CASH FROM VARIOUS ITA NO.334/M/09 A.Y:05-06 4 PARTS OF THE COUNTRIES. THERE WAS NO DISPUTE THAT T OTAL CASH OF RS.18,61,000/- HAD BEEN CREDITED IN THE TWO UNDISCLOSED BANK ACCOU NT. THE AO THEREFORE, ADDED A SUM OF RS.18,61,000/- UNDER SECTION 69A OF THE IT ACT. THE AO ALSO TREATED THE REVISED RETURN AS INVALID ON THE GROUND THAT THE ORIGINAL RETURN HAD BEEN FILED ON 10.10.2005 WHICH WAS AFTER DUE DA TE OF 31.8.2005. THE AO ALSO REJECTED THERE REVISED RETURN ON THE GROUND THAT THESE WERE NOT VOLUNTARY TO RECTIFY, ANY OMISSION OR COMMISSION IN THE ORIGINAL RETURN BUT TO DECLARE ADDITIONAL INCOME ON THE BASIS OF INCRIMINA TING MATERIAL FOUND. THE AO ALSO REJECTED THE CLAIM OF EXPENSES ON TRAVELLIN G, BOARDING, LODGING AND BUSINESS EXPENSES ON THE GROUND THAT THE SAME WERE NOT SUPPORTED BY ANY EVIDENCE NOR THE ASSESSEE GAVE THE NATURE OF INCOME OFFERED AGAINST WHICH EXPENDITURE WAS CLAIMED. 3.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT(A) THAT THE ASSESSEE WAS PARTNER IN M/S. KHUSHI CHEM A ND WAS DOING COMMISSION AND BROKERAGE ACTIVITY. IT WAS ALSO SUB MITTED THAT THE TWO BANK ACCOUNTS WERE OMITTED TO BE DISCHARGED DUE TO ERROR . IT WAS EXPLAINED THAT THE MONEY DEPOSITED IN THE BANK ACCOUNTS REPRESENTE D COMMISSION INCOME ON WHICH EXPENSES WERE ALSO INCURRED. IT WAS FURTH ER SUBMITTED THAT CASH DEPOSITED IN ONE CITY WAS WITHDRAWN THROUGH ANOTHER CITY TO AVOID RISK OF DURING TRANSIT OR TRAVELLING. THE ASSESSEE ALSO AR GUED THAT THERE WERE ALSO CASH WITHDRAWALS FROM THE TWO BANK ACCOUNT THEREFOR E ONLY PEAK AMOUNT COULD BE ADDED. THE CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS NOTED BY HIM THAT IN THE STATEMENT BEFORE AO , ASSESSEE INITIALLY TOLD THAT THE CASH DEPOSIT REPRESENTED SALE PROCEEDS OF PHARMACEUTICAL MATERIALS ITA NO.334/M/09 A.Y:05-06 5 BUT WHEN ASKED TO GIVE NAME AND ADDRESSES OF SUPPLI ERS AND BUYERS, ASSESSEE FAILED TO GIVE ANY DETAILS DESPITE SEVERAL OPPORTUNITIES. THE ASSESSEE REVISED RETURN ONLY AFTER DEPARTMENT HAD C ONFRONTED THE ASSESSEE WITH INCRIMINATING MATERIAL. THE RETURN FILED BY T HE ASSESSEE COULD NOT THEREFORE BE TREATED AS VALID REVISED RETURN. CIT(A ) ALSO REJECTED THE CLAIM OF PEAK CREDIT ADDITION ON THE GROUND THAT ASSESSEE CO ULD NOT PROVE THAT THE MONIES WITHDRAWN WAS AVAILABLE FOR MAKING SUBSEQUEN T DEPOSITS AND HAD NOT BEEN UTILIZED FOR OTHER PURPOSES. THE CLAIM OF EXP ENSES INCURRED COULD ALSO NOT BE ALLOWED FOR WANT OF EVIDENCE. CIT(A), THERE FORE, CONFIRMED THE ADDITION MADE BY THE AO AGGRIEVED BY WHICH THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE CIT(A). IT WAS SUBMITTED THAT THE ARGUMENT OF THE ASSESSEE WAS TO MAKE ADDITION ONLY ON ACCOUNT OF PEAK CREDIT WHICH IS AN ESTABLIS HED METHOD OF COMPUTING INCOME IN CASE OF REGULAR DEPOSITS AND WITHDRAWALS IN ACCOUNTS. HE REFERRED TO THE DECISION OF RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF MAHESHKUMAR JAYANTILAL VORA (3 SOT 96) IN WHICH IT WAS HELD THA T ONLY PEAK CREDIT SHOULD BE ADDED AS ADDING ALL THE DEPOSITS WILL LEAD TO D OUBLE ADDITION. IT WAS ALSO ARGUED THAT IN CASE PEAK CREDIT WAS NOT ALLOWED, EX PENSES CLAIMED IN THE REVISED RETURN SHOULD BE ALLOWED AS NO INCOME COULD BE EARNED WITHOUT INCURRING SOME EXPENSES. THE LD. DR ON THE OTHER H AND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS IN THE RESPECTIVE ORDERS. ITA NO.334/M/09 A.Y:05-06 6 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION TO TH E TOTAL INCOME ON ACCOUNT OF CASH DEPOSITED IN UNACCOUNTED BANK ACCOUNTS. THE A SSESSEE FOR THE ASSESSMENT YEAR 2005-06 HAD DECLARED TOTAL INCOME O F RS.1,13,499/- IN THE RETURN FILED ON 10.10.2005. THE ASSESSEE IN THE RE TURN OF INCOME HAD DISCLOSED ONLY BANK ACCOUNT NO.17250 WITH THE BANK OF BARODA. THE AO NOTICED FROM ANNUAL INFORMATION RETURN (AIR) FILED BY THE IDBI BANK THAT THE ASSESSEE IN THE SAID ASSESSMENT YEAR HAD DEPOSITED CASH OF RS.20,36,300/-. ON BEING CONFRONTED, THE ASSESSEE ADMITTED THAT IT HAD ACCOUNT NO.51101 WITH IDBI BANK IN WHICH THERE WAS CASH DEPOSIT OF R S.14,12,000/-. THE ASSESSEE THEREAFTER FILED RETURN ON 24.9.2007 IN WH ICH THE UNDISCLOSED CASH WAS DECLARED AS INCOME AND AFTER CLAIMING EXPENSES THE ASSESSEE DECLARED ADDITIONAL INCOME OF RS.9,49,203/-. THE AO AGAIN M ADE ENQUIRY FROM IDBI BANK AS CASH WAS NOT FULLY DECLARED BY THE ASSESSEE AND WAS INFORMED BY THE BANK THAT THE ASSESSEE HAD ANOTHER ACCOUNT NO.59963 WHICH WAS ALSO NOT DISCLOSED. THERE WAS CASH DEPOSIT OF RS.4,49,000/- . THE ASSESSEE ON BEING CONFRONTED FILED ANOTHER REVISED RETURN ON 10.10.20 11 IN WHICH THE CASH DEPOSIT OF RS.4,49,000/- WAS DISCLOSED AS INCOME AN D AFTER CLAIMING EXPENSES, ADDITIONAL INCOME OF RS.2,07,181/- WAS DE CLARED IN THE REVISED RETURN. THE REVISED RETURNS WERE TREATED BY AO AS INVALID, FIRSTLY ON THE GROUND THAT THE ORIGINAL RETURN WAS NOT FILED WITHI N DUE DATE UNDER SECTION 139(1) AND, SECONDLY, RETURNS WERE REVISED ONLY AFT ER INCRIMINATING MATERIALS WERE FOUND BY THE DEPARTMENT AND THEREFORE THESE WE RE NOT VOLUNTARY RETURNS TO RECTIFY ANY OMISSION IN THE ORIGINAL RET URN. AFTER CAREFUL ITA NO.334/M/09 A.Y:05-06 7 CONSIDERATION, WE AGREE WITH THE FINDINGS OF THE AU THORITIES BELOW THAT THE REVISED RETURNS CANNOT BE TREATED AS VALID REVISED RETURNS. IN FACT, LD. AR FOR THE ASSESSEE ALSO DID NOT ADVANCE ANY ARGUMENTS AS TO WHY RETURNS SHOULD BE TREATED AS VALID REVISED RETURNS. 5.1 COMING TO THE MERIT OF THE CASE, WE FIND THAT T HE ASSESSEE INITIALLY EXPLAINED THAT CASH DEPOSITS WERE SALE PROCEEDS COL LECTED BY BUYERS ON BEHALF OF SELLERS. THE ASSESSEE HOWEVER COULD NOT GIVE DETAILS OF NAME AND ADDRESS OF BUYERS AND SELLERS AND SUBSEQUENTLY CHAN GED THE STAND THAT CASH DEPOSITS WERE SECURITY DEPOSITS COLLECTED BY HIM FR OM BUYERS. EVEN IN RESPECT OF THE REVISED STAND, THE ASSESSEE COULD NO T GIVE THE NAMES OF DEPOSITORS OR THE SELLER OF GOODS. THE ASSESSEE RA THER ARGUED BEFORE CIT(A) THAT ONLY PEAK OF THE DEPOSITS SHOULD BE ADDED AS T HERE WERE CASH DEPOSITS AS WELL AS CASH WITHDRAWALS IN THE BANK ACCOUNTS. ALTERNATIVELY, IT WAS ALSO SUBMITTED THAT EXPENSES CLAIMED IN THE P&L ACCOUNT SHOULD BE ALLOWED. BOTH THE CLAIMS WERE REJECTED BY THE CIT(A). WE FIND FR OM THE PERUSAL OF RECORDS THAT CASH DEPOSITS AND WITHDRAWAL PERTAIN TO DIFFER ENT PLACES ALL OVER THE COUNTRY. THE ASSESSEE HAS PRODUCED ANY EVIDENCE EI THER BEFORE CIT(A) OR BEFORE US TO SUBSTANTIATE THAT CASH WITHDRAWALS WER E AVAILABLE FOR SPECIFIC CASH DEPOSITS AND NOT UTILIZED FOR SOME OTHER PURPO SES AND TO CO-RELATE THE CASH WITHDRAWALS MADE AT DIFFERENT PLACES TO THE DE POSITS IN THE BANK ACCOUNTS. NO DOUBT, IT IS TRUE THAT IN CASE THERE ARE BOTH DEPOSITS AND WITHDRAWALS IN BANK ACCOUNTS, ONLY THE PEAK CREDIT SHOULD BE ADDED BUT THIS IS SUBJECT TO THE RIDER THAT THE CASH WITHDRAWALS S HOULD BE AVAILABLE FOR MAKING SUBSEQUENT DEPOSITS. IN THIS CASE, THERE IS NO EVIDENCE TO SHOW THAT ITA NO.334/M/09 A.Y:05-06 8 CASH WITHDRAWALS WERE AVAILABLE AND SAME WERE DEPOS ITED IN THE BANK ACCOUNTS. MOREOVER ASSESSEE HIMSELF IN THE REVISED RETURN DID NOT MAKE ANY CLAIM OF THE PEAK ADDITION AND DECLARED THE ENTIRE CASH DEPOSITS AS UNDISCLOSED INCOME AGAINST WHICH SOME EXPENSES WER E CLAIMED ON BOARDING & LODGING, TRAVELLING AND BUSINESS EXPENSES. CONSI DERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES WE UPHOLD THE ACTION OF CIT (A) IN REJECTING THE PLEA OF PEAK ADDITION. HOWEVER, WE FIND SOME MERIT IN TH E ALTERNATE CLAIM THAT SOME EXPENSES SHOULD BE ALLOWED. THE ASSESSEE OBVI OUSLY HAS SOME UNDISCLOSED SOURCE OF INCOME FROM WHICH CASH HAS BE EN DEPOSITED. THE ASSESSEE WAS IN THE COMMISSION AGENCY BUSINESS. WE , THEREFORE, ALLOW ON ESTIMATE 10% OF THE CASH DEPOSIT AS EXPENSES INCURR ED FOR EARNING OF INCOME IN THE ABSENCE OF BILLS AND VOUCHERS. THE EXPENSES @ 10% BEING ALLOWED IS WITHIN THE AMOUNTS WITHDRAWN IN CASH FROM THE BANK ACCOUNT AND THEREFORE THE SOURCE OF THESE EXPENSES REMAINS EXPLAINED. WE THUS ALLOW THE APPEAL OF THE ASSESSEE PARTLY. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.2011. SD/- SD/- (R.S. PADVEKAR) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16.11.2011. JV. ITA NO.334/M/09 A.Y:05-06 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.