THAKUR MULANI, MUMBAI V. ITO 1(1)(4), MUMBAI

ITA 350/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0269 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 12-11-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 15-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHADR
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence; Corroborative evidences
• Section: 143(3); 68

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./350/MUM/2014, /ASSESSMENT YEAR: 1998-99 MR. THAKUR N. MULANI FLAT NO.37D, KONARK INDRAPRASTHA, JAIN MANDIR ROAD, MULUND (W) MUMBAI-400 080. PAN:AEJPM 8951 P VS. INCOME TAX OFFICER-1(1)(4) 531 A, 5TH FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH OJHA-DR ASSESSEE BY: S/SHRI VIRAJ MEHTA & NILESH PATEL / DATE OF HEARING: 30.05.2017 / DATE OF PRONOUNCEMENT: 09.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 01.11.2013 OF THE CIT(A )-1,MUMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL. ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF TRADING IN TEXTILE GOODS, FILED ITS RETURN OF INCOME AT RS.73,379/-ON 02.12.1 998.THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT U/S. 143(3) ON 29.03.2001,DETERMININ G HIS TOTAL INCOME AT RS.22.51 LAKHS. WHILE COMPLETING THE ASSESSMENT, THE A.O. MADE FOUR ADDITIONS NAMELY, UNEXPLAINED CASH CREDIT(RS.12.75 LAKHS),ADDITION ON ACCOUNT OF ARTIF ICIAL LOSS CLAIM (RS.6.06 LAKHS), ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN (RS.2.48 LAKHS) AND CASH CREDITS (RS.48,500/-). THE MATTER TRAVELLED UP TO THE TRIBUNAL.VIDE ITS ORDER DATED 1 8.06.2010, THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF THE A.O. WITH FOLLOWING DIRECTI ONS ON EACH OF THE ISSUES INVOLVED IN APPEAL: I. ON THE ISSUE OF UNEXPLAINED CASH CREDITS (JOUR NAL ENTRY) OF RS.12,75,000/- : ALL THE ENTRIES DURING THE YEAR IN THE CAPITAL ACCOUNT IN T HE BOOKS OF G.N INTERNATIONAL AS WELL AS IN INDIVIDUAL BOOKS OF ASSESSEE ARE REQUIRED TO BE VER IFIED. IT MAY BE A CASE OF THE ASSESSEE NOT ABLE TO RECONCILE AND EXPLAIN EXACT REASONS FOR THE DIFFERENCES IN ACCOUNTS. SINCE THE COPIES OF ACCOUNTS IN PROPRIETARY CONCERN AS WELL AS IN PERSO NAL ACCOUNTS HAVE BEEN FILED, IF THE ASSESSEE FAILED TO RECONCILE THE ACCOUNTS, THE BOOK S OF ACCOUNTS CAN BE REJECTED BY INVOKING SECTION 145A OF THE ACT. THEREFORE, AFTER VERIFICAT ION OF THE ASSESSEE'S RECORDS, THE AO FINDS ANY DISCREPANCY HE CAN MAKE ADDITION AFTER GIVING F ULL FACTS AND NARRATION AND DETAILS OF THE REASONS OF THE ADDITIONS MADE. THE AO WILL DECIDE T HE ISSUE AFRESH IN ACCORDANCE WITH LAW KEEPING IN VIEW THE ABOVE DIRECTIONS AND WILL PROVI DE REASONABLE OPPORTUNITY. II. ON THE ISSUE OF TAXING OF STCG OF RS.248,000/-: THE AO AND CIT(A) HAS NOT CONSIDERED THE PROVISIONS OF THE ACT IN DECIDING DATE OF ACQUISITI ON OF THE ASSET SOLD, AS SUCH, THE ISSUE IS 350/M/14(98-99) TNMULANI 2 REMITTED BACK TO THE FILE OF AO TO DECIDE THE SAM E AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING -REASONABLE OPPORTUNITY OF BEING HEARD. III. ON THE ISSUE OF CASH CREDITS U/S. 68 OF RS.48 ,500/- : THESE ENTRIES ARE RELATED TO RECONCILIATION OF ACCOUNTS AS SUCH THIS ISSUE IS A LSO SENT BACK TO THE FILE OF AO FOR FRESH CONSIDERATION . IV. ON THE ISSUE OF ARTIFICIAL LOSS OF RS.6,06,392/ -: IN LIGHT OF DETAILED DISCUSSION AND DIRECTION GIVEN IN-GROUND NO.1 ABOVE, THE ISSUE ALS O REQUIRES VERIFICATION FROM THE AO, THEREFORE , THE SAME IS REMITTED TO THE FILE OF AO WITH A-DIRECTION-TO-DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 2. IN PURSUANCE OF THE ORDER OF THE TRIBUNAL,THE A.O. ISSUED NOTICE TO THE ASSESSEE AND CALLED FOR CERTAIN DETAILS.AS PER THE AO THE ASSESSEE DID NOT FILED ANY SUPPORTING OR EXPLANATORY EVIDENCES WITH REGARD TO THE ENTRIES APPEARING IN H IS CAPITAL ACCOUNT, THAT HE WAS GIVEN SPECIFIC OPPORTUNITY TO SUPPORT HIS CASE,THAT AFTER A LAPSE OF CONSIDERABLE TIME THE ASSESSEE HAD NOT FILED/PRODUCED ANY BOOKS OF ACCOUNT/SUPPORT ING DOCUMENT FOR VERIFICATION. 3. FIRST GROUND OF APPEAL IS ABOUT ADDITION OF RS.12.7 5 LAKHS U/S. 68 OF THE ACT. IN HIS ORDER, PASSED U/S. 143(3), THE A.O. HAD REFERRED TO THE DE TAILED SUBMISSION MADE BY THE ASSESSEE. HE OBSERVED THE ASSESSEE HAD STATED THAT THE ENTRY OF RS.12.75 LAKHS WAS NOT FROM THE BOOKS OF ACCOUNT,THAT DURING THE ORIGINAL ASSESSMENT PROCEED INGS THE ASSESSEE HAD TRIED TO RECONCILE THE DIFFERENCE OF THE IMPUGNED AMOUNT, THAT THE ASSESSE E WAS CHANGING HIS SUBMISSIONS, THAT IT HAD NOT PRODUCED ANY SUPPORTING EVIDENCES,THAT HE H AD FAILED TO DISCHARGE THE LEGAL ONUS CAST UPON HIM IN EXPLAINING THE ENTRIES IN CAPITAL ACCOU NT,THAT THE UNEXPLAINED ENTRY TO THE EXTENT OF RS.12.75 LAKHS HAD TO BE TREATED AS UNEXPLAINED CREDIT U/S. 68 OF THE ACT. 3.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE THE ELABORATE SUB MISSIONS.AFTER CONSIDERING THE SAME,HE HELD THAT THE SUBMISSIONS OF THE ASSESSEE WERE IRRE LEVANT AND MISLEADING,THAT THE AO HAD REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE,THAT SAME WERE NOT RELIABLE FOR THE PURPOSE OF ASSESSMENT. HE CONFIRMED THE ORDER OF THE A.O. 3.2. BEFORE US,THE AUTHORIZED REPRESENTATIVE(AR)ARGUED T HAT THE OPENING BALANCE OF THE CAPITAL ACCOUNT,IN THE BALANCE SHEET AS ON 31.03.20 17,IN CASE OF G N INTERNATIONAL WAS 2.11 CRORES(PG.19 OF THE PB),THAT SAME FIGURE WAS APPEAR ING IN THE INDIVIDUAL BALANCE SHEET (PG.21 OF THE PB),THAT THERE WAS TYPOGRAPHICAL ERROR IN TH E BOOKS OF ACCOUNTS,THAT IT WAS NOT A CASE OF CASH CREDIT,THAT THERE WAS SHORT CREDIT AND THAT SA ME WAS BROUGHT TO THE NOTICE OF THE DEPARTMENTAL AUTHORITIES, THAT THERE WAS NO ENTRY I N THE BOOKS OF ACCOUNT SO, PROVISIONS OF 350/M/14(98-99) TNMULANI 3 SECTION 68 WERE NOT APPLICABLE.HE REFERRED TO THE C ASES OF KHARAWALA(147ITR67); AND BALADIN RAM(71ITR427)(SC).THE DEPARTMENTAL REPRESEN TATIVE CONTENDED THAT DISPUTED SUM WAS FOUND CREDITED IN THE BOOKS OF ACCOUNT, THAT TH ERE WAS NO ENTRY IN THE BANK STATEMENT ABOUT UBI CHARGES, THAT THE ASSESSEE HAD NOT FILED RECONCILIATION AS DIRECTED BY THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE DECIDING THE APPEAL THE FAA HAD PASSED A VERY CRYPT IC ORDER WITHOUT ASSIGNING ANY REASON FOR ARRIVING AT THE CONCLUSION.WE FIND THAT FAA HAD NOT DEALT WITH THE SUBMISSIONS MADE BY ASSESSEE HOLDING THAT SAME WERE IRRELEVANT AND MISL EADING.BUT,HE HAS NOT STATED AS TO HOW THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE WAS IRRELEVANT.WE ARE OF THE OPINION THAT FAA SHOULD HAVE PASSED A SPEAKING ORDER.THEREFORE, IN T HE INTEREST OF JUSTICE,WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE FAA FOR FRESH ADJ UDICATION.HE IS DIRECTED TO DEAL WITH EACH AND EVERY ARGUMENT RAISED BY THE ASSESSEE AND THE D OCUMENTS RELIED UPON BY HIM.THE ASSESSEE WOULD BE GIVEN A PROPER OPPORTUNITY OF HEA RING.FIRST GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 5. SECOND GROUND OF APPEAL DEALS WITH ADDITION OF RS.4 8,500/- UNDER THE HEAD UNEXPLAINED CASH CREDIT. IN HIS ORDER THE AO REFERRED TO THE OR DER OF THE FAA PASSED IN THE FIRST ROUND OF APPEAL.HE OBSERVED THAT THE THEN FAA HAD GIVEN A FI NDING THAT THERE WAS A FALLACY IN THE SUBMISSIONS MADE BY THE ASSESSEE AND THE SAME WERE AN AFTERTHOUGHT. HE FURTHER HELD IN THE ABSENCE OF ANY ADDITIONAL EVIDENCES THE DISPUTED AM OUNT REMAINED UNEXPLAINED AND WAS TO BE TAXED IN THE HANDS OF THE ASSESSEE. 5.1. IN THE APPELLATE PROCEEDINGS THE FAA HELD THAT THE ASSESSEE HAD REFERRED TO A HYPOTHETICAL ARGUMENT,THAT IT HAD NOT DISCHARGED THE ONUS CAST UPON HIM. 5.2. DURING THE HEARING BEFORE US, THE AR ARGUED THAT IT WAS A CASE OF REDEPOSITING OF CASH, THAT THE ASSESSEE HAD WITHDRAWN RS.76,000/- THAT I T HAD RE-DEPOSITED RS.10,000/- ,THAT IT HAD DEBITED TOWARDS MOTOR CAR CAPITAL ACCOUNT, THAT PRO VISIONS OF SECTION 68 WERE NOT APPLICABLE, HE REFERRED TO THE PAGE NO.28 OF THE PAPER BOOK.THE DR SUPPORTED THE ORDER OF THE FAA. WE FIND THAT THE ORDER PASSED BY THE FAA IS NOT A S PEAKING AND REASONED ORDER.IN PURSUANCE OF THE DIRECTIONS OF THE ITAT THE ASSESSEE HAD FILE D BANK STATEMENT.THE FAA SHOULD HAVE DEALT WITH THE ARGUMENTS OF REDEPOSIT OF CASH AND M OTOR CAR INSURANCE CLAIM BEFORE DECIDING THE APPEAL.SO, WE ARE REMITTING BACK THE ISSUE TO F AA TO DECIDE THE ISSUE AFRESH. THE FAA WOULD AFFORD AN EFFECTIVE HEARING TO THE ASSESSEE.S ECOND GROUND IS PARTLY ALLOWED. 350/M/14(98-99) TNMULANI 4 6. THIRD GROUND OF APPEAL IS ON ACCOUNT OF LOSS OF RS.6.06 LAKHS. THE AO OBSERVED THAT THE BUYER OF THE GOODS WAS A COMPANY, IN WHICH ASSESSEE HIMSELF WAS A DIRECTOR, THAT PROFIT WAS DIVERTED IN THE INSTANT CASE TO AN ASSOCIATED CONCE RN,THAT LOSS CLAIMED BY ASSESSEE WAS AN ARTIFICIAL LOSS,THAT HE HAD NOT PRODUCED ANY EVIDEN CE TO PROVE JUSTIFICATION AND ALLOWABILITY OF THE LOSS INCURRED. IN THE APPELLATE PROCEEDINGS,THE FAA CONFIRMED THE ORDER OF THE AO. 6.1. BEFORE US, THE AR STATED THAT ASSESSEE WAS AN EXPO RTER OF FABRIC, THAT IT HAD PURCHASED GOODS WORTH RS.43 LAKHS FOR EXPORT,THAT THE EXPORT COULD NOT BE MADE AND ASSESSEE HAD TO SELL THE GOODS LOCALLY,THAT THE DISTRESS SALE RESULTED I N LOSS, THAT IN EARLIER YEARS THE ASSESSEE HAD EXPORTED GOODS MORE THAN RS.2 CRORES EVERY YEAR (FR OM AY.1992-93 TO 1997-98), THAT FOR THE YEAR UNDER APPEAL EXPORT TURNOVER WAS NIL, THAT HE HAD PURCHASED GOODS IN ADVANCE, THAT IN ABSENCE OF EXPORT ORDERS HE HAD SOLD FABRIC IN OPEN MARKET, THAT THE PENALTY LEVIED FOR THE SAID ADDITION HAD BEEN DELETED BY THE FAA,THAT PURCHASE OF FABRICS WAS MADE IN THE START OF FINANCIAL YEAR,THAT THE MARKET PRICE OF THE STOCK W AS LOWER.HE REFERRED TO THE CASES OF A. RAMAN &CO.(67ITR11) AND BIRAJ INVESTMENT (P) LTD. ( 210TAXMANN418).THE DR SUPPORTED THE ORDER OF THE FAA. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT BOTH THE AUTHORITIES HAVE NOT DOUBTED THAT THE PURC HASE IS MADE BY THE ASSESSEE, THAT THEY HAD NOT DOUBTED THAT THE SALE MADE BY THE ASSESSEE,THAT THEIR OBJECTION IS ABOUT THE SALE PRICE ONLY, THAT DURING THE YEAR THE ASSESSEE HAD NOT EXPORTED ANY GOODS.THE PURCHASES WERE MADE IN THE INITIAL PHASE OF AY.AND LATER ON SAME WAS SOLD.IF T HE TRANSACTION IN QUESTION RESULTED IN LOSS SAME SHOULD NOT BE DISALLOWED MERELY BECAUSE PURCHA SER WAS A RELATED CONCERN.WE ALSO AGREE WITH THE ASSESSEE THAT IF HE HAD VALUED THE STOCK AT MARKET RATE IT WOULD HAVE RESULTED IN LOSS.CONSIDERING THE PECULIAR FACTS AND CIRCUMST ANCES OF THE CASE,WE HOLD THAT THE FAA WAS NOT JUSTIFIED IN REJECTING THE CLAIM MADE BY TH E AO.SO,REVERSING HIS ORDER,WE DECIDE GROUND NO.3 IN FAVOUR OF THE ASSESSEE. 7. NEXT GROUND OF APPEAL (GOA 4,5 AND 6)DEALS WITH ONE ISSUE AND THAT IS COMPUTATION OF INCOME UNDER LONG TERM CAPITAL GAIN (LTCG) AS AGAIN ST SHORT TERM CAPITAL GAIN (STCG) OF RS.12.51 LAKHS.A FLAT WAS ALLOTTED TO THE ASSESSEE ,VIDE MEMORANDUM OF UNDERSTANDING, DT. 25/10/1993.HE PAID A CONSIDERATION OF RS.32 LAKHS O N THE DATE OF SIGNING THE MOU AND PAID RS.7 LAKHS MORE WITHIN 20 DAYS FROM THE DATE OF SIG NING OF MEMORANDUM.THE FLAT WAS PURCHASED FOR RS.56 LAKHS.ON 23/6/95 A FORMAL AGREE MENT WAS ENTERED INTO BETWEEN THE ASSESSEE AND THE BUILDER.THE ASSESSEE, VIDE SALE A GREEMENT,DATED 18/02/1998 SOLD THE FLAT AND 350/M/14(98-99) TNMULANI 5 CLAIMED STCG.THE AO AND THE FAA HELD THAT FLAT WAS SOLD WITHIN A PERIOD OF THREE YEARS, SO PROFIT ARISING OUT OF THE TRANSACTION WAS TO BE ASS ESSED AS STCG. 7.1. BEFORE US,THE AR ARGUED THAT THE WORD USED IN THE A CT WAS ASSET HELD BY AN ASSESSEE, THAT ACT DOES NOT USE THE WORD ASSET OWNED BY THE ASSESS EE, THAT THE PERIOD OF HOLDING HAD TO CALCULATED FROM THE DATE OF ALLOTMENT,SIGNING OF MO U FOR 25/10/93.HE REFERRED TO CASE OF ANITA KANJANI (163ITD451).THE DR STATED THAT THE FL AT WAS SOLD WITHIN A PERIOD OF THREE YEARS, THAT IT WAS A CLEAR CUT CASE OF STCG. 7.2. WE FIND THAT IN THE CASE OF ANITA KANJANI (SUPRA) T HE TRIBUNAL HAS DEALT WITH IDENTICAL ISSUE AND HAS HELD THAT PERIOD OF HOLDING HAS TO C ALCULATED FROM THE DATE OF HOLDING OF FLAT. THEREFORE,RESPECTFULLY FOLLOWING THE SAID ORDER AND REVERSING THE ORDER OF FAA WE DECIDE GROUND NO. 4,5,6 IN FAVOUR OF THE ASSESSEE. 8. LAST GROUND OF APPEAL DEALING WITH INITIATION OF PE NALTY U/S. 271(1)( C ) IS PREMATURE AND IS NOT BEING ADJUDICATED. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED. . ORDER PRONOUNCED IN TH E OPEN COURT ON 09 TH AUGUST, 2017. 09 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 09.08 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.