PRAKASH SHIVJI VISARIA, MUMBAI V. ITO 15(2)(3), MUMBAI

ITA 3436/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6807 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: DHARAN V GANDHI
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3436/M/2016 ASSESSMENT YEAR: 2008-09 MR. PRAKASH SHIVJI VISARIA, 32, 5 TH FLOOR, MALAD SHOPPING CENTRE, SWAMI VIVEKANAND ROAD, MALAD (W), MUMBAI 400 064 PAN: AEEPV 7772C VS. ITO 15(2)(3), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARAN V. GANDHI, A.R. REVENUE BY : SHRI RAM TIWARI, D.R. DATE OF HEARING : 17.04.2018 DATE OF PRONOUNCEMENT : 07.06.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 18.03.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09.THE VARIOUS GROU NDS RAISED BY THE ASSESSEE ARE AS UNDER:- GROUND NO.1 1. RE-OPENING OF ASSESSMENT ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C.I.T. (APPEAL) ERRED IN CONFIRMING THE RE-OPENING OF ASSE SSMENT WITHOUT APPRECIATING THE FACT THAT: ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 2 ASSESSING OFFICER CIT (A) PROCEEDED ON FALLACIOUS A SSUMPTION THAT BANK DEPOSITS CONSTITUTED UNDISCLOSED INCOME AND OVER LOOKED FACT THAT SOURCE OF DEPOSIT NEED NOT NECESSARILY THE DEPOSIT OF THE ASSESSEE. 2. CONFIRMING ORDER PASSED U/S 144 THE LEARNED C.I.T. (APPEAL) ERRED IN CONFIRMING THE ORDER PASSED U/S 144 BY THE A.O. WITHOUT APPRECIATING THE FACT THAT THE APPELLA NT ATTENDED BEFORE THE A.O. AND SUBMITTED THE DETAILS AND 3. ADDITION OF RS.4425020/- ON ACCOUNT OF CASH DEPOSIT . A. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED C.I.T. (APPEAL) ERRED IN CONFIRMING ADDITION OF RS.4425020 /- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT WITHOUT A PPRECIATING THE FACT THAT: THE APPELLANT HAS EXPLAINED SOURCE OF THE CASH DEPO SIT. B. THAT THE APPELLANT HAS EARNED 1% COMMISSION AND THE SAME IS DECLARED AS INCOME. THE DEPOSIT AND SUBSEQUENT WITHDRAWALS CAN NOT BE T REATED AS INCOME FROM UNDISCLOSED SOURCES. 4 . GROUND NO.4 CASH CREDIT APPEARING IN THE BANK PASS BOOK. IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED C.I.1,KP-7R (APPEAL) ERRED IN NOT APPRECIATING THE FACT THAT: A. CASH CREDIT FOUND ONLY IN BANK PASS BOOK AND NOT IN CASH BOOK MAINTAINED BY ASSESSEE WOULD BE INCLUDIBLE UNDER SECTION 68 AS PASS BOOK SUPPLIED BY BANK TO ASSESSEE IS NOT A BOOK MAINTAINED BY ASSESS EE. RELYING ON C.I.T. VS. BHAICHAND H. GANDHI 141 ITR 67 (BOM.) B. THE SUM OF RS.4425020/- IS NOT FOUND CREDITED IN TH E BOOKS OF APPELLANT MAINTAINED FOR ANY PREVIOUS YEAR. THEREFORE THE SUM SO CREDITED CAN NOT BE CHARGED TO INCOME TAX AS THE INCOME OF THE APPELLAN T. C. THE PASSBOOK SUPPLIED BY THE BANK TO ITS CONSTITUEN T IS ONLY A COPY OF THE CONSTITUENTS ACCOUNT IN THE BOOK MAINTAINED BY THE BANK. IT IS NOT AS IF THE PASS BOOK IS MAINTAINED BY THE BANK AS THE AGENT OF THE CONSTITUENT NOT CAN IT BE SAID THAT PASS BOOK IS MAINTAINED BY THE BANK UNDER THE INSTRUCTION OF THE CONSTITUENT. THEREFORE THE PASS BOOK IS NOT MAI NTAINED BY THE BANK AS THE AGENT OF THE CONSTITUENT AND PASS BOOK IS NOT M AINTAINED BY THE BANK UNDER THE INSTRUCTIONS OF THE CONSTITUENT. ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 3 5. GROUNDS NO. 5 INCOME ESTIMATED ON ACCOUNT OF OTHER CREDIT ENTRIES . ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C.I.T. (APPEAL) ERRED IN CONFIRMING THE ESTIMATION OF THE INCOME @5 % AT RS.1210068/- INSTEAD OF 1% RS.243000/- DECLARED BY THE APPELLANT WITHOUT AP PRECIATING THE FACT THAT: A. THE APPELLANT IS A REAL ESTATE BROKER AND THE NET E ARNING IN REAL ESTATE TRANSACTION IS 1% ONLY. B. THE APPELLANT HAS DECLARED THE INCOME @1% WHICH IS NET INCOME WITHOUT CLAIMING THE EXPENDITURE SUCH AS TELEPHONE, ELECTRI CITY, PRINTING AND STATIONERY AND SUB- BROKARAGE. 6. GROUND NO.6 DEDUCTION U/S 80-C ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C.I.T. (APPEAL) ERRED IN NOT ALLOWING DEDUCTION U/S 80-C OF THE INCOME TAX ACT, IN RESPECT OF LIFE INSURANCE POLICY RS.769 16/- CLAIMED IN THE RETURN OF INCOME SUBMITTED ON 14.03.2014. YOUR APPELLANT CRAVE LEAVE TO ADD, AMEND OR ALTER O R DELETE ANY OR ALL ABOVE GROUNDS OF APPEAL. 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT GRO UND NO.1, 2, 4 & 6 ARE NOT PRESSED AND THEREFORE THE SAM E ARE DISMISSED AS NOT BEING PRESSED. 3. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE CONFIRMATION OF ADDITION BY LD. CIT(A) OF RS.44,25,02 0/- AS MADE BY THE AO UNDER SECTION 68 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS EXPLAIN ED THE SOURCE OF CASH CREDIT AND THAT ASSESSEE HAS ONLY EA RNED COMMISSION @ 1% ON THE TOTAL TRANSACTIONS WHEREAS T HE ISSUE RAISED IN GROUND NO.5 IS AGAINST UPHOLDING THE ESTIM ATION OF INCOME AT THE RATE OF 5% THEREBY CONFIRMING THE ADD ITION OF RS.12,10,068/- AS AGAINST 1% I.E. RS.2,43,000/- AS HAS BEEN DECLARED BY THE ASSESSEE. ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 4 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DEPOSITED RS.10 LAKH IN CASH IN HIS SAVING BANK ACCO UNT AND NO RETURN WAS FILED FOR A.Y. 2008-09. THE ASSESSEE I S ENGAGED IN THE BUSINESS OF REAL ESTATE AGENT AND WAS FACILI TATING THE PURCHASE AND SALE OF PROPERTIES. THE AO AFTER COMI NG TO KNOW ABOUT THE CASH DEPOSIT, ISSUED A NOTICE UNDER SECTIO N 148 WHICH WAS DULY SERVED UPON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE AUTHORISED REPRESENTATIV E OF THE ASSESSEE ADMITTED THAT THE ASSESSEE HAS DEPOSITED A SUM OF RS.44,25,020/- IN HIS SAVING ACCOUNT WITH BHARAT CO -OP BANK AND THE SAID AMOUNT WAS RECEIVED FOR FACILITATING T HE PURCHASE OF LAND BUT WHEN THE DEAL DID NOT BE MATERIALIZE , THE MONEY WAS RETURNED BACK AFTER DEDUCTING RS.45,000/- TOWARD S COMMISSION. THE ASSESSEE CLAIMED THE ADVANCE TO HA VE BEEN RECEIVED FROM THREE PERSONS WHOSE COMPLETE NAMES AN D ADDRESSES WERE NOT FILED DURING THE COURSE OF HEARI NG. THEREAFTER A SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE TO FILE THE NECESSARY EVIDENCES ABOUT THESE PERSONS FA ILING WHICH THE SAME WOULD BE ADDED TO THE INCOME OF THE ASSESS EE. HOWEVER, THE ASSESSEE FAILED TO FILE THE NECESSARY E VIDENCES SUCH AS CONFIRMATIONS ETC DESPITE REPEATED OPPORTUN ITIES BY THE AO AND FINALLY THE AO ADDED THE ENTIRE CASH DEP OSIT OF RS.44,25,020/- TO THE INCOME OF THE ASSESSEE. THE A O ALSO NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HAT THERE ARE SOME CREDIT ENTRIES IN THE BANK ACCOUNT OF THE ASSESSEE TO THE TUNE OF RS.2,42,32,133/- WHICH THE ASSESSEE WAS AS KED TO EXPLAIN WHICH WAS REPLIED BY THE ASSESSEE BY SUBMIT TING THAT ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 5 HE HAS ONLY EARNED A COMMISSION OF 1% ON THE SALE A FFECTED THROUGH HIM AS AN AGENT FOR THE REAL ESTATE. THE A O DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ADDED A S OME OF RS.12,11,600/- BY APPLYING A RATE OF 5% ON RS.2,42,32,133/-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONFI RMED THE ADDITION OF RS.44,25,020/- WHICH REPRESENTED THE CASH DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE AND ALS O CONFIRMED THE ADDITION OF RS.12,11,600/- BEING 5% OF T OTAL CHEQUE CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE AFTER TAKING INTO ACCOUNT THE SUBMISSIONS AND CONTENTIONS AS MADE BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AGENT AND WAS EARNING ONLY COMMISSION ON THE TOTAL TRANSACTION DONE THROUGH HIM. DURING THE YEAR THE ASSESSEE RECEIVED CASH OF RS.44,25,020/- FROM THREE PARTIES AND THE NAMES WHEREOF WERE DULY FILED BEFORE THE AUTHORITIE S BELOW AND HE ALSO SUBMITTED THAT ASSESSEE HAS RECEIVED ON LY COMMISSION ON THE SAID CASH DEPOSITS. THE LD. A.R. P LACED BEFORE THE BENCH THE COPY OF BANK STATEMENT WHICH I S PLACED IN THE PAPER BOOK AT PAGE NOS.14 TO 20 AND ARGUED TH AT AGAINST EACH DEPOSIT WHETHER BY WAY OF CASH OR BY C HEQUE, THE ASSESSEE HAS ISSUED THE CORRESPONDING CHEQUE IN THE NEXT DAY AND THEREBY HARDLY LEAVING ANY BALANCE IN THE B ANK ACCOUNT OF THE ASSESSEE. THE LD. A.R. TRIED TO CORRE LATE ALL THE ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 6 ENTRIES IN THE BANK STATEMENT OF THE ASSESSEE. THE LD. A.R. SUBMITTED THAT ON 12.05.2007 THERE WAS A CASH DEPOSI T OF RS.19,000/- AND CHEQUE DEPOSIT OF RS.1,10,000/- AND O N 12.05.2007 A CHEQUE OF RS.2 LAKHS WAS ISSUED. SIMIL ARLY, A CASH DEPOSIT ON 17.05.2007 OF RS.1 LAKH AND A CHEQUE WAS ISSUED ON THE SAME DATE OF THE EQUAL AMOUNT. THE L D. A.R. ARGUED THAT WHEN THE AO HAS CONSIDERED THE PERCENTA GE ADDITION ON THE AMOUNT FOR CHEQUE CREDITS IN THE BA NK ACCOUNT OF THE ASSESSEE BUT DID NOT FOLLOW THE SAME ANALOGY IN RESPECT OF THE CASH DEPOSITS WHEREAS BOTH THE DEPOSITS BY C HEQUE AS WELL AS BY CASH REPRESENTED THE SAME NATURE OF TRAN SACTIONS IN THE BANK ACCOUNT OF THE ASSESSEE. THEREFORE, THE LD . A.R. ARGUED THAT THE ADDITION OF TOTAL CASH DEPOSIT TO T HE INCOME OF THE ASSESSEE IS WRONG AND ONLY A PERCENTAGE SHOULD BE APPLIED. 7. SO FAR AS THE CONFIRMATION OF ADDITION OF RS.12,11,6 00/- IS CONCERNED, THE LD. A.R. SUBMITTED THAT THE ASSESSEE WAS EARNING ONLY 1% COMMISSION ON THE TOTAL TRANSACTIO NS WHICH HAS BEEN SUBMITTED BEFORE BOTH THE AUTHORITIES BELO W AND THUS TO APPLY A RATE OF 5% TO TAX THE INCOME WITHOUT ANY BASIS IS WRONG AND NOT BASED UPON ANY EVIDENCES. THE LD AR SUBMITTED THAT THERE IS NO PRACTICE OF PAYING 5 % C OMMISSION IN THE REAL ESTATE DEALS AND THUS THE SAID IS EXCE SSIVE AND SHOULD BE REDUCED TO 1%. 8. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF AUTHORITIES BELOW. ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 7 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD. UNDISPUTABLY, TH E ASSESSEE IS DOING AGENCY BUSINESS IN REAL ESTATE AN D HAS ACCEPTED DEPOSITS FROM DIFFERENT PARTIES IN HIS BAN K ACCOUNT BY WAY OF CASH AS WELL AS BY CHEQUES. SO FAR AS THE C ASH DEPOSIT IS CONCERNED THE ASSESSEE SUBMITTED BEFORE THE AO T HREE NAMES FROM WHOM THE ASSESSEE RECEIVED THE CASH FOR PROPERTY PURCHASE WHICH DID NOT MATERIALISE BUT THE AO REJEC TED THE SUBMISSIONS OF THE ASSESSEE AND ADDED THE ENTIRE CA SH TRANSACTION OF RS.44,25,020/- TO THE INCOME OF THE ASSESSEE WHEREAS IN RESPECT OF CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE TO THE OF RS.2,42,32,133/- THE AO APPLIE D 5% ON RS.2,42,32,133/- AND THE LD. CIT(A) AFFIRMED THE SAM E. WE OBSERVE THAT THE ASSESSEE HAS RECEIVED MONEY IN THE FORM OF CASH AND CHEQUES AND IMMEDIATELY ON THE SAME DAY OR NEXT FOLLOWING DAY ISSUED THE CHEQUE IN THE NAME OF THE OTHER PARTY WHICH SUPPORT THE CONTENTION OF THE ASSESSEE THAT O NLY COMMISSION IS BEING CHARGED FOR THE SERVICES RENDER ED BY THE ASSESSEE AND THE CASH ADDED SHOULD BE ALSO ASSESSED TO TAX BY APPLYING THE PERCENTAGE COMMISSION. NOTABLY THE AO HAS APPLIED COMMISSION AT THE RATE OF 5% OF THE TOTAL C HEQUE DEPOSITS WHICH WERE TO THE TUNE OF RS.2,42,32,133/- W HEREAS THE ADDED THE ENTIRE CASH DEPOSITS. WE FAIL TO UNDE RSTAND AS TO HOW A DIFFERENT YARDSTICK COULD BE APPLIED IN RE SPECT OF CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSE E WHEREAS A DIFFERENT PARAMETER IS APPLIED TO THE CASH DEPOSI TS IGNORING THE FACT THAT THE AMOUNT OF CASH AND CHEQUE DEPOSIT S WAS ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 8 PAID TO THE THIRD PARTY BY WAY OF CONSOLIDATED CHEQ UE AS IS APPARENT FROM THE BANK STATEMENT OF THE ASSESSEE. THE ASSESSEE HAS MAINTAINED ALL THROUGHOUT THAT HE IS C HARGING 1% COMMISSION FOR THE SERVICES RENDERED BY WAY OF ARRA NGING PROPERTIES FOR OTHERS. UNDER THESE CIRCUMSTANCES W E ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. C IT(A) AS REGARDS THE CONFIRMATION OF ADDITION OF RS.44,25,02 0/- AND ARE OF THE OPINION THAT THE SAME SHOULD ALSO BE SUB JECTED TO TAX BY APPLYING AN APPROPRIATE PERCENTAGE. FURTHER, THE PERCENTAGE APPLIED @ 5% ON THE CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE IS ALSO EXCESSIVE AND DEVOI D OF ANY BASIS. IN OUR OPINION THE INCOME OF THE ASSESSEE S HOULD BE ASSESSED BY APPLYING 2% ON THE GROSS CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE I.E. RS.2,86,57,153/- COMPRISING OF RS.44,25,020/- AS ON ACCOUNT OF CASH AND RS.2,42,32,133 /- TOWARDS CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.44,2 5,020/- AND APPLY A PERCENTAGE OF 2% AS STATED HEREINABOVE ON THE TOTAL DEPOSIT OF RS.2,86,57,153/-. THE ISSUES RAISED I N GROUND NO.3 & 5 ARE ALLOWED PARTLY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2018. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 07.06.2018. * KISHORE, SR. P.S. ITA NO.3436/M/2016 MR. PRAKASH SHIVJI VISARIA 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.