CHETN V. THAKKAR, THANE V. DCIT CEN CIR-2, THANE

ITA 3415/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79529 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Period of limitation; Reasonable cause; Condonation of delay
• Section: 68; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 3415 & 3414/MUM/2012 (ASSESSMENT YEAR: 2007-08) CHETAN V. THAKKAR 33, 3 RD FLOOR, MARUTI DHAM, C WING, ANAND NAGAR, VASAI(W) THANE-401 202. VS. INCOME TAX OFFICER - 4(1) INCOME TAX OFFICE QURESHI MANSION NEAR TEEN HATH NAKA THANE(W) PIN-400 602. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : A APPT 5348 F ASSESSEE BY : SHRI SUBODH RATNAPARKHI REVENUE BY : SHRI MANJUNATHA SWAMY DATE OF HEARING : 14/07/2014 DATE OF PRONOUNCEMENT : 23/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEM BER: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF CIT(A) ONE ARISING FROM THE ASSE SSMENT ORDER PASSED UNDER SECTION 144 AND ANOTHER FROM THE PENALTY ORDE R PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT DATED 23/12 /2012 AND 14/4/2012 RESPECTIVELY FOR THE ASSESSMENT YEAR 2007 -08. IN THE QUANTUM APPEAL THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS :- ON THE FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEA L WHICH WAS LATE BY 411 DAYS, ITA NO.3414 & 3415/M/12 AY:07-08 2 A. NOT APPRECIATING THAT THE DELAY IN FILING OF APP EAL WAS CAUSED BY BONAFIDE REASONS BEING FINANCIAL INABILITY OF THE A PPELLANT TO ENGAGE PROFESSIONAL PERSON TO PREPARE AND FILE THE APPEAL ON HIS BEHALF. B. BY RELYING ON CERTAIN FACTS WHICH DID NOT EXIST AT THE TIME OF COMPLETION OF ASSESSMENT PROCEEDINGS AND ACCORDING LY WERE NOT RELEVANT TO THE MATTER. C. FOR THE REASON THAT CONDONATION WOULD PREJUDICE THE INTEREST OF REVENUE. 2A. THE ORDER OF THE CIT (A) HAS RESULTED IN UPHOLD ING THE ERRONEOUS ADDITION OF RS.19,20,62,184/- AS UNEXPLA INED CASH CREDIT U/S 68 OF THE I. TAX ACT 1961, ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNTS OF THE APPELLANT OVERLOOKING THE FACT THAT ONLY THE CREDIT ENTRIES WERE CONSIDERED FOR ADDITION WHILE A T THE SAME TIME IGNORING THE DEBIT ENTRIES IN THE SAME BANK ACCOUNT S WHICH IS NOT JUSTIFIED BY FACTS AND IN LAW. 2B. THE ORDER OF THE CIT (A) HAS RESULTED IN ADDITI ON OF THE DEPOSITS IN THE BANK ACCOUNTS OF THE APPELLANT ARIS ING FROM REGULAR BUSINESS TRANSACTIONS OF THE APPELLANT WHIC H COULD NOT BE CONSIDERED AS UNEXPLAINED CASH CREDITS AND CONSEQUE NTLY INCOME OF THE APPELLANT. 2C. WITHOUT PREJUDICE, THE APPELLANT PRAYS THAT IN CASE THE EXPLANATION OF THE APPELLANT WITH REGARDS TO THE BA NK TRANSACTIONS IS NOT ACCEPTED THEN THE 'PEAK' OF ALL THE BANK TRA NSACTIONS, DEBIT AS WELL AS CREDIT BE CONSIDERED AND ADDITION RESTRI CTED TO THE SAID AMOUNT ONLY. 2D. WITHOUT PREJUDICE, THE APPELLANT PRAYS THAT ADD ITION BE RESTRICTED TO THE 'INCOME' OF THE APPELLANT FOR TH E YEAR UNDER APPEAL. 2. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT TH E CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE IN LIMINE AS B ARRED BY LIMITATION BECAUSE THERE WAS A DELAY OF 13 MONTHS AND 15 DAYS IN FILING THE APPEAL. 3. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT TH E ASSESSEE IS A PROPRIETOR OF M/S. VIVA OVERSEAS AND M/S. EAST IND IA TRADING CO. THE ASSESSEE RECEIVED THE EXPARTE ASSESSMENT ORDER WHER EBY A HUGE DEMAND OF TAX WAS RAISED BY AO AGAINST THE ASSESSEE ON THE BASIS OF THE ENTRIES IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE T HOUGH SUFFERED HEAVY ITA NO.3414 & 3415/M/12 AY:07-08 3 LOSSES IN THE PROPRIETARY BUSINESS AND WAS NOT HAVI NG FUNDS TO PAY SUCH A HUGE DEMAND ARISING FROM THE ASSESSMENT AND, THER EFORE, FOR WANT OF THE FUNDS THE ASSESSEE COULD NOT FILE THE APPEAL BE FORE CIT(A) WITHIN THE PERIOD OF LIMITATION. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE REASON AND CAUSE FOR DELAY IN FILING THE APPEAL BEFORE CIT(A). HOWEVER, CIT(A) DID NOT ACCEPT THE EXPLANAT ION OF THE ASSESSEE AND DECLINED TO CONDONE THE DELAY IN FILING THE APP EAL. CIT(A) HAS GIVEN THE REASON THAT WHEN THERE ARE HUGE TRANSACTION AND CREDIT ENTRIES IN THE BANK ACCOUNT OF THE ASSESSEE THEN THE EXPLANATI ON OF THE ASSESSEE CANNOT BE ACCEPTED. THE LD. AR HAS POINTED OUT THAT THE BANK ACCOUNT OF THE ASSESSEE IN THE NAME OF M/S. VIVA OVERSEAS AND M/S. EAST INDIA TRADING CO. WERE OPERATED BY SHRI MINESH D. SHAH O F M/S. DELUXE KAARAN GROUP. THUS, THE LD. AR HAS SUBMITTED THAT T HE TRANSACTIONS CARRIED OUT IN THE ASSESSEES BANK ACCOUNT DO NOT B ELONG TO THE ASSESSEE BUT THESE WERE CARRIED OUT BY MR. MINESH D. SHAH OF M/S. DELUXE KAARAN IMPORTS PVT. LTD. IN SUPPORT OF HIS CONTENTI ON HE HAS REFERRED TO THE ASSESSMENT ORDER OF M/S. DELUXE KAARAN AND SUBM ITTED THAT THE AO HAS HELD THAT M/S. VIVA OVERSEAS AND M/S. EAST INDI A TRADING CO. ARE FICTITIOUS CONCERNS OF M/S. DELUXE KAARAN IMPORT PV T. LTD. AND ARE ONLY CONDUIT FOR LEGALIZING CASH SALES. THE CASH DEPOSIT S ROUTED THROUGH THESE TWO CONCERNS INCLUDES RS.8.32 CRORES IN THE BANK AC COUNT OF M/S. VIVA OVERSEAS AND RS.14.76 CRORES IN THE BANK ACCOUNT OF M/S. EAST INDIA TRADING CO. FROM THE PERIOD 2002-03 TO 2006-07 WERE TREATED AS UNACCOUNTED SALE OF M/S. DELUXE KAARAN IMPORTS PVT. LTD. THE AO ASSESSED THE PROFIT @ OF 6% OF THE TOTAL CASH DEPOS IT IN THESE TWO ACCOUNTS IN HAND OF M/S. DELUXE KAARAN IMPORTS PVT. LTD. THUS THE LD. AR SUBMITTED THAT WHEN THE CASH DEPOSIT FOUND IN TH E BANK ACCOUNT OF THE ASSESSEE DOES NOT BELONG TO THE ASSESSEE THEN T HE EXPLANATION OF THE ASSESSEE THAT HE HAD NO MONEY TO PAY THE HUGE DEMA ND OF TAX IN RESPECT OF THE ADDITIONS MADE ON ACCOUNT OF THESE ENTRIES I N BANK ACCOUNT ARE NOT JUSTIFIED. THE LD. AR HAS REFERRED TO THE AFFID AVIT FILED BY THE ASSESSEE ITA NO.3414 & 3415/M/12 AY:07-08 4 IN SUPPORT OF HIS EXPLANATION AND PRAYED THAT THE D ELAY IN FILING APPEAL BEFORE CIT(A) MAY BE CONDONED. 4. ON THE OTHER HAND THE LD. DR HAS VEHEMENTLY OPPO SED THE CONDONATION OF DELAY AND SUBMITTED THAT THERE IS IN -ORDINATE DELAY IN FILING HE APPEAL BEFORE CIT(A) AND FURTHER THE EXPL ANATION OF THE ASSESSEE IS AN AFTER THOUGHT. HE HAS RELIED UPON THE ORDER O F AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS EXPLAINED THE CAUSE OF DELAY IN FILING THE APPEAL BEFORE CIT(A) THAT HE HAD NO MON EY TO PAY THE FEE OF THE REPRESENTATIVE TO FILE THE APPEAL AND CONDUCT THE L EGAL PROCEEDINGS. WE NOTE THAT THE ASSESSEE HAD ADMITTED THE RETURN OF I NCOME AT RS.1,03,252/- WHEREAS THE AO HAS COMPLETED THE ASSE SSMENT ON A TOTAL INCOME OF RS.19,21,65,440/-. THE ADDITION OF RS.19. 20 CRORES HAS BEEN MADE BY THE AO AS A RESULT OF A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT IN THE CASE OF M/S. DELUX E KARRAN IMPORTS PVT. LTD. THE QUESTION ARISES WHETHER THE EXPLANATION OF THE ASSESSEE FOR DELAY IN FILING THE APPEAL BEFORE THE CIT(A) IS A B ONAFIDE EXPLANATION OR IT IS A DEVICE TO COVER AN ULTERIOR PURPOSE OR AN ATTE MPT TO SAVE THE LIMITATION IN AN UNDERHAND WAY. SINCE THE ASSESSEE HAS FILED AN AFFIDAVIT TO EXPLAIN THE DELAY AND NON AVAILABILITY OF THE FU NDS, THIS TRIBUNAL VIDE ORDER DATED 26/09/2013 DIRECTED THE AO TO FILE THE REPORT ON THE FACTS EXPLAINED BY THE ASSESSEE IN THE AFFIDAVIT. THE AO FILED THE REPORT DATED 17/02/2014 WHEREIN IT HAS BEEN ACCEPTED THAT THE AM OUNT OF RS.8.32 CRORES AND RS.14.76 CRORES IN THE BANK ACCOUNTS OF M/S. VIVA OVERSEAS AND M/S. EAST INDIA TRADING CO. RESPECTIVELY WAS TR EATED AS UNACCOUNTED CASH SALES OF M/S. DELUXE KARRAN IMPORTS PVT. LTD. THE AO HAS CONCLUDED ITS REPORT BY INCLUDING THE FOLLOWING FAC TS AS UNDER :- ITA NO.3414 & 3415/M/12 AY:07-08 5 1. THE APPELLANT WAS CONSIDERED AS HAWALA ENTRY PR OVIDER AS IS APPARENT FROM THE ASSESSMENT IN THE CASE OF DELUXE KAARAN IMPORTS PVT. LTD. HOWEVER THE SAME ASSESSING OFFICE R WHO ASSESSED DELUX IMPORTS PVT. LTD. TREATED THE ENTIRE DEPOSITS IN THE BANK ACCOUNT OF HIS PROPRIETARY CONCERNS M/S. VIVA OVERS EAS AND EAST INDIA TRADING CO. AS UNEXPLAINED CASH CREDIT. IN TH E CASE OF APPELLANT, THE A.O HAD TO MAKE THE ADDITION AS THE APPELLANT DID NOT ATTEND IN HIS OWN ASSESSMENT PROCEEDINGS. 2. SHRI CHETAN THAKKAR'S STATEMENT GIVEN AT THE TIM E OF ASSESSMENT PROCEEDINGS OF DELUXE KAARAN IMPORTS PVT . LTD. WAS NOT ACCEPTED BY THE A.O OF DELUXE IMPORTS PVT. LTD. 3. AS FAR AS THE AFFIDAVIT FILED BY SHRI CHETAN THA KKAR DURING APPELLATE PROCEEDINGS IN HIS ASSESSMENT FOR A.Y. 20 06-07, IS CONCERNED NOTHING CAN BE STATED AT THIS STAGE, AS I T CAN BE DONE ONLY THE SIGNATURE IS VERIFIED BY THE AUTHORISED EX PERT. 5.1 THE AO HAS ALSO ACCEPTED THE FACT THAT THIS AMO UNT INTRODUCED IN THESE BANK ACCOUNTS WAS IN RESPECT OF THE UNACCOUNT ED SALES OF M/S. DELUXE KARRAN IMPORTS PVT. LTD. THE RELEVANT PART O F THIS REPORT IS AS UNDER :- M/S. DELUXE KAARAN IMPORTS PVT. LTD. HAS MADE CASH SALES TO THIRD PARTIES{ ACTUAL USER OF GOODS) AND A PART OF THE CASH SO GENERATED IS PLOUGHED BACK AS SALE PROCEEDS IN THE BOOKS OF M/S. DELUXE KAARAN IMPORTS PVT. LTD. THROUGH ONE OR MORE SUCH FICTITIOUS ENTITIES. THESE FICTITIOUS CONCERNS ARE ONLY CONDUIT FOR LEGALIZING CASH SALES. THE A.O ANALYZED THE BANK ST ATEMENT OF ALL SUCH FICTITIOUS CONCERNS AND PROFIT @ 6% OF THE TOT AL CASH DEPOSITS ROUTED THROUGH DUMMY CONCERNS.. M/S. VIVA OVERSEAS AND M/S EAST INDIA TRADING CO. HAD INTRODUCED RS. 8.32. CRO RE FROM THE ACCOUNT OF VIVA OVERSEAS AND RS.14.76 CRORE FROM E AST INDIA TRADING CO. FROM PERIOD 2002-03 TO 2006-07. ON APPE AL THE LD. CIT(A) 36 MUMBAI REDUCED THE ESTIMATION OF GP FROM 6% TO 0.30%. THE ITAT H-BENCH HAS UPHELD THE DECISION O F CIT(A). 5.2 WE FURTHER NOTE THAT IN THE ASSESSMENT ORDER FO R THE ASSESSMENT YEAR 2007-08 OF M/S. DELUXE KARRAN IMPORTS PVT. LTD . THE AO TREATED THE CASH DEPOSIT IN THE BANK ACCOUNT INTERALIA OF M/S. VIVA OVERSEAS AND M/S. EAST INDIA TRADING CO. AS CASH SALES OF M/S. D ELUXE KARRAN IMPORTS PVT. LTD. BY TREATING THESE TWO CONCERNS AS FICTITI OUS TO BE USED FOR ITA NO.3414 & 3415/M/12 AY:07-08 6 LEGALIZING THE CASH SALES. ACCORDINGLY THE AO MADE AN ADDITION OF UNACCOUNTED INCOME @6% OF THE CASH SALES ON THE BAS IS OF ENTRIES IN THESE ACCOUNTS. THUS IT IS CLEAR THAT THE EXPLANATI ON FURNISHED BY THE ASSESSEE FOR DELAY IN FILING THE APPEAL HAS BEEN SU BSTANTIATED BY THE AO ITSELF BY TREATING THE CASH SALES OF M/S. DELUXE KA RRAN IMPORTS PVT. LTD. THOUGH THERE IS AN INORDINATE DELAY IN FILING THE A PPEAL BEFORE CIT(A) HOWEVER THE REASONS EXPLAINED BY THE ASSESSEE ARE N OT FOUND AS MALAFIDE OR A DEVICE TO COVER UP ULTERIOR PURPOSE WHEN THE E NTIRE ALLEGED TRANSACTIONS WERE CARRIED OUT THROUGH THESE BANK AC COUNTS PRIMA FACIE BELONGS TO M/S. DELUXE KARRAN IMPORTS PVT. LTD. ACC ORDINGLY WE ARE SATISFIED WITH THE REASONS EXPLAINED BY THE ASSESSE E THAT THE ASSESSEE WAS HAVING A REASONABLE CAUSE FOR NOT FILING THE AP PEAL WITHIN THE PERIOD OF LIMITATION. WE FIND THAT THE CIT(A) HAS REJECTED THE EXPLANATION ON THE GROUND THAT A HUGE CASH TRANSACTION WAS CARRIED OUT IN THE BANK ACCOUNT OF ASSESSEE. HOWEVER, THESE TRANSACTIONS HAVE BEEN TREATED BY THE AO AS THE TRANSACTION OF M/S. DELUXE KARRAN IMPORTS PVT. LTD. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE WE CONDONE THE DELAY OF 13 MONTHS AND 15 DAYS IN FILIN G THE APPEAL BEFORE THE CIT(A). 6. ON MERITS WE HAVE HEARD THE LD. AR AS WELL AS TH E LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. CIT(A) HAS NOT DECIDED THE APPEAL OF THE ASSESSEE ON MERITS AS IT WAS DISMISSE D IN LIMINE ON THE GROUND OF LIMITATION. FURTHER THE MATTER REQUIRES A FRESH EXAMINATION IN VIEW OF THE FACT THAT SAME AMOUNT HAS ALREADY BEEN TREATED BY THE AO AS CASH SALES BELONGING TO M/S. DELUXE KARRAN IMPORTS PVT. LTD. AND AN INCOME @ 6% HAS BEEN ASSESSED IN THE HAND OF M/S. D ELUXE KARRAN IMPORTS PVT. LTD. ACCORDINGLY WE SET ASIDE THE MATT ER TO THE RECORD OF AO TO DECIDE IT AFRESH AFTER CONSIDERING THE ASSESSMEN T MADE IN THE CASE OF M/S. DELUXE KARRAN IMPORTS PVT. LTD. ITA NO.3414 & 3415/M/12 AY:07-08 7 ITA NO. 3414/MUM/2012 7. IN THE PENALTY APPEAL THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS:- ON THE FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEA L WHICH WAS LATE BY 204 DAYS, A. NOT APPRECIATING THAT THE DELAY IN FILING OF APP EAL WAS CAUSED BY BONAFIDE REASONS BEING FINANCIAL INABILITY OF THE A PPELLANT TO ENGAGE PROFESSIONAL PERSON TO PREPARE AND FILE THE APPEAL ON HIS BEHALF. B. BY RELYING ON CERTAIN FACTS WHICH DID NOT EXIST AT THE TIME OF COMPLETION OF ASSESSMENT/PENALTY PROCEEDINGS AND AC CORDINGLY WERE NOT RELEVANT TO THE MATTER. C. FOR THE REASON THAT CONDONATION WOULD PREJUDICE THE INTEREST OF REVENUE. 2. THE ACTION OF THE LEARNED CIT (APPEALS) IN DISMI SSING THE APPEAL HAS RESULTED IN CONFIRMATION OF PENALTY OF RS. 6,46 ,26,455/- LEVIED U/S 271 (1)( C) OF THE 1. TAX ACT 1961 IN RESPECT O F ADDITION MADE BY CONSIDERING THE ENTIRE DEPOSITS (CREDIT ENTRIES) IN THE BANK ACCOUNTS OF THE APPELLANT TO BE THE CONCEALED INCOM E OF THE APPELLANT WHICH IS NOT ACCORDANCE WITH LAW AND BY F ACTS. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR VARY THE GROUNDS OF APPEAL AT ANY TIME BEFORE THE DECISION O F THE APPEAL. THERE WAS A DELAY OF 204 DAYS IN FILING THE APPEAL BEFORE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND OF LIMITATION. THE REASONS AND EXPLANATION WHICH ARE GIVEN FOR DEL AY IN FILING THE APPEAL ARE IDENTICAL AS IN THE CASE OF QUANTUM APPE AL. ACCORDINGLY, IN VIEW OF OUR FINDING ON THE CONDONATION OF DELAY IN THE QUANTUM APPEAL WE CONDONE THE DELAY OF 304 DAYS IN FILING THE PENA LTY APPEAL BEFORE THE CIT(A). 8. ON MERITS, SINCE THE MATTER IN QUANTUM APPEAL HA S BEEN SET ASIDE TO THE RECORD OF AO, THEREFORE, THE PENALTY WOULD N OT SURVIVE. ACCORDINGLY ITA NO.3414 & 3415/M/12 AY:07-08 8 WE DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C ). HOWEVER, THE AO IS AT LIBERTY TO TAKE APPROPRIATE ACTION AS PER THE OU TCOME OF THE ASSESSMENT PROCEEDINGS IN QUANTUM MATTER. 9. IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES AND PENALTY APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 23/07/2014. JV. 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.