Manoj Sharma, Kolkata V. A.D.I.T (IT) 2(1),Kolkata, Kolkata

ITA 366/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1718 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Residential status; Corroborative evidences; Competent authority
• Section: 143(3); 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 366/KOL/201 3 ASSESSMENT YEAR : 2005-0 6 MANOJ SHARMA -VS- ADIT(IT)-2(1), KOLKATA [PAN: AYSPS 1971 N] (APPELLANT) (RESPONDE NT) FOR THE APPELLANT : SHRI AKKAL DUDHWEW ALA, AR FOR THE RESPONDENT : SHRI ARUP CHATTERJEE, AD DL. CIT SR. DR DATE OF HEARING : 21.08.2017 DATE OF PRONOUNCEMENT : 06.09.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, KOLKATA [IN SHORT THE LD. CIT(A)] IN APPEAL NO. 25/CIT(A)- VI/ADIT(IT)-2(1)/KOL DATED 10.12.2012 AGAINST THE O RDER PASSED BY THE ADIT(IT)-2(1), KOLKATA [IN SHORT THE LD. AO] U/S 143(3) OF THE INC OME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 29.12.2011 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF THE ASSESSEE IS AS TO WHETHER THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE FOR THE SUM OF RS. 19,76,100/- U/S 68 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE I S A NON-RESIDENT INDIAN AND IS A TAX RESIDENT OF U.K. SINCE 1987. THE ASSESSEE IS WORKIN G IN UK RECEIVING SALARY AND DIVIDEND INCOME THEREON. THE ASSESSEE USED TO VISIT INDIA TO MEET HIS PARENTS FREQUENTLY. THE LD. AO OBSERVED THAT THERE WAS A CASH DEPOSIT O F RS. 26,50,000/- IN SAVING BANK A/C NO. 444559189 HELD WITH INDIAN BANK, JAIPUR BRANCH IN THE NAME OF ASSESSEE. 2 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 2 ACCORDINGLY, THE LD. AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT ON THE GROUND THAT THE SAID CASH DEPOSIT REPRESENTS INCOME OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CONFRONTED WITH THE SAME AND WAS ASKED TO EXPLAIN THE SOURCE OF CASH DEPOSITS MADE IN THE AFORESAID BANK ACCOUNT. THE ASSESSEE APART FROM GIVING PRIMARY INFORMATION ABOU T HIS RESIDENTIAL STATUS AND INCOME DERIVED THEREON, INFORMED THAT HE USED TO FREQUENTL Y VISIT INDIA TO MEET HIS PARENTS AND AT THE TIME OF EACH VISIT, IN ACCORDANCE WITH FEMA REGULATIONS, HE USED TO BRING 5,000 US DOLLARS AND THE SAME WOULD BE ENCASHED IN INDIAN RUPEES IN INDIA AND HANDED OVER TO THE ASSESSEES PARENTS. IT WAS ALSO INFORMED THA T HIS PARENTS ARE STAYING IN KOLKATA ALONG WITH HIS BROTHER, WHO IS MAINTAINING THE PARE NTS. THE ASSESSEE EXPLAINED BY WAY OF CASH FLOW STATEMENT THAT HE HAD OPENING CASH BAL ANCE WHICH WAS ACCUMULATED OVER THE YEARS AMOUNTING TO RS. 10,88,328/- WHICH WAS AP PARENTLY LEFT WITH HIS PARENTS AT THE TIME OF EACH VISIT TO INDIA ON EARLIER OCCASIONS. I N SUPPORT OF THIS, THE ASSESSEE FILED THE COPY OF CASH BOOK FROM FINANCIAL YEARS 1999-2000 TO 2003-04 EXPLAINING THE OPENING CASH BALANCE OF RS. 10,88,328/-. THE ASSESSEE FURTH ER EXPLAINED THAT DURING THE PREVIOUS YEAR RELEVANT TO YEAR UNDER APPEAL, THE ASSESSEE HA D BROUGHT US DOLLARS AND THE SAME WERE REPORTEDLY EXCHANGED FROM RBI AUTHORIZED MONEY CHANGERS FOR RS. 7,62,300/-. THE ASSESSEE FURTHER EXPLAINED THAT DURING THE YEAR , HE HAD SOLD CERTAIN HOUSEHOLD ARTICLES REPRESENTING FOUR PIECES OF PAINTINGS, THR EE PIECES OF STATUES OF MIXED METAL, SEVEN PIECES OF OLD RINGS AND FIVE PIECES OF WOODEN SMALL SHOW STATUES TO MR. JOSEPH PANAKAL OF SWITZERLAND THROUGH HIS AGENT FOR RS. 5, 60,000/-. THE ASSESSEE ALSO EXPLAINED THAT HE HAD RECEIVED UNSECURED LOAN OF RS. 1,25,000 /- FROM MR. AMAN SHARMA OF KOLKATA IN CASH ON 25.11.2004. HE EXPLAINED THAT HE HAS RENTAL INCOME OF RS. 89,548/- FROM A PROPERTY IN INDIA. HE ALSO EXPLAINED THAT HE HAS RECEIVED A GIFT OF RS. 19,500/- FROM HIS FATHER SHRI SITARAM SHARMA AND OUT OF THIS A SUM OF RS. 15,000/- ALONE WAS DEPOSITED IN THE BANK ACCOUNT. THE ASSESSEE EXPLAIN ED THE SOURCE OF CASH DEPOSITS IN THE AFORESAID MANNER. IN SUPPORT OF EACH AND EVERY ITEM , THE ASSESSEE FILED THE RELEVANT DOCUMENTARY EVIDENCES AND EXPLANATION AS BELOW: 3 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 3 3.1. OPENING CASH BALANCE OF RS. 10,88,328/- THE ASSESSEE STATED THAT DURING HIS SHORT HOLIDAY T RIP TO INDIA EVERY TIME, AS EVERY INDIAN, WHENEVER HE VISITS INDIA, HE BRINGS HIS SAV INGS FROM THE UK TAX PAID INCOME, CONVERTS THEM AND KEEPS THEM IN THE COMMON HOTCHPOT OF HIS FAMILY WHICH CONSISTS OF HIS OLD PARENTS. AFTER INCURRING CERTAIN PERSONAL E XPENSES , IF ANY, BY THE PARENTS, THE BALANCE MONEY WAS RETAINED BY THEM IN INDIA. IT WAS ALSO EXPLAINED THAT THE PARENTS WERE MAINTAINED BY THE BROTHER OF THE ASSESSEE. THI S CASH BALANCE OF RS. 10,88,328/- WAS ARRIVED AFTER TAKING INTO ACCOUNT VARIOUS RECEI PTS SUCH AS ENCASHMENT OF US DOLLARS FROM AUTHORIZED MONEY CHANGERS, RENTAL INCOME RECEI VED BY THE ASSESSEE FROM A FLAT IN KOLKATA ETC. AND AFTER MEETING THE PROPERTY TAX PAY MENT AND WATER TAX PAYMENT FOR A FLAT IN KOLKATA AND SOME EXPENSES OF THE FAMILY. IT WAS EXPLAINED THAT THE ASSESSEES PARENTS WANTED TO GO AND STAY IN THEIR HOMETOWN IN JAIPUR A ND FOR THAT PURPOSE A PROPERTY WAS REQUIRED TO BE PURCHASED IN JAIPUR FOR THEIR HABITA TION. ACCORDINGLY, THE ASSESSEE OPENED A BANK ACCOUNT WITH INDIAN BANK, JAIPUR AND DEPOSIT ED A SUM OF RS. 26,50,000/- IN THE SAID BANK ACCOUNT FOR PURCHASE OF PIECE OF LAND IN JAIPUR. THE ASSESSEE ALSO PRODUCED THE COPY OF GIFT RECEIPTS, MUNICIPAL TAX PAYMENT RE CEIPTS, RENT RECEIPTS, MONEY CHANGERS RECEIPTS FOR ENCASHMENT OF US DOLLARS INTO INDIAN R UPEES TO SUPPORT THE FACT THAT THE CASH RECEIPTS GENERATED OUT OF THIS TRANSACTION ARE INDE ED GENUINE IN NATURE AND NOT AN AFTERTHOUGHT. THE LD. AO HOWEVER DISCARDED THESE EV IDENCES AS SELF-SERVED AND FICTITIOUS. 3.2. SALE OF US DOLLARS THROUGH HIMANI MONEY CHANGE RS PVT. LTD.- RS. 7,62,300/- THE ASSESSEE CLAIMED TO HAVE EXCHANGED US DOLLARS B ROUGHT TO INDIA ON VARIOUS DATES DURING THE YEAR UNDER APPEAL THROUGH HIMANI MONEY C HANGERS PVT. LTD., 46, MOTI SIL STREAT, KOLKATA-700013. THE ASSESSEE PRODUCED COPY OF RECEIPTS FROM THE MONEY CHANGERS BEFORE THE LD. AO. THE LD. AO WAS NOT SATI SFIED WITH THE CONTENTION OF THE ASSESSEE ON THE FOLLOWING GROUNDS: 4 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 4 A) THE ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY EVI DENCE OR TRAVELERS CHEQUES HAVING BEEN CARRIED WITH HIM AND OF EXCHANGING THE SAME. B) THE MONEY CHANGER M/S HIMANI MONEY CHANGERS PVT. LT D. PROVIDED THE RECEIPTS BUT FAILED TO PROVIDE THE SUPPORTING EVIDENCE OF TH E MANDATORY REGISTERS REQUIRED TO BE MAINTAINED BY A FOREX DEALER. C) THE LD. AO ASKED THE QUESTION WHY FOREIGN EXCHANGE SALES WERE BROKEN INTO SEVERAL DATES. D) THE ASSESSEE WAS ASKED TO PROVE THROUGH INDEPENDENT SOURCES LIKE HIS BANK ACCOUNT IS UK THAT HE HAD PURCHASED US DOLLARS FROM UK FOR BRINGING THE SAME TO INDIA WHENEVER HE TRAVELLED TO INDIA. E) THE ASSESSEE DID NOT FURNISH THE REASON AND ANY PRO OF OF EXCHANGING HIS POUNDS INTO DOLLARS. 3.2.1. THE ASSESSEE IN RESPONSE TO THE ABOVE ALLEGA TIONS STATED AS BELOW: A) THE ASSESSEE CARRIED CASH WITH HIM ON EVERY VISI T AND NO TRAVELERS CHEQUE WAS EVER CARRIED BY THE ASSESSEE BECAUSE CASH FETCHED A BETTER EXCHANGE RATE THAN TRAVELERS CHEQUE. FOR EXAMPLE, ON 29 TH AUGUST, 2012, AS PER THOMAS COOK, SELL TC RATE FOR DOLLAR IS RS. 55.00 SELL CASH RATE FOR DOLLAR IS RS. 55.40 A DIFFERENCE OF 40 PAISA WHICH FOR USD $15000/- WOR KS OUT A BENEFIT OF RS. 6,000/- COMPARED TO A TRAVELERS CHEQUE. B) M/S HIMANI MONEY CHANGERS (P) LTD. PROVIDED A WR ITTEN REPLY THROUGH HIS CA AND CONFIRMED THAT AS PER THEIR RECORDS, THE FOREIG N EXCHANGES WERE TRANSACTED FOR 5 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 5 MONAJ SHARMA AND RECEIPTS WERE ISSUED AS PER RBI RU LES. FURTHER, AS PER RBI CIRCULAR, A.P.(DIR SERIES) CIRCULAR NO. 57 MARCH, 09,2009 (ANNEXURE 6), THE MONEY CHANGER ARE OBLIGED TO MAINTAIN RECORDS FOR 5 YEARS ONLY. C) THE MONEY WAS CONVERTED IN PARTS DUE TO CASH TRA NSACTION LIMIT OF USD 3000 IMPOSED BY THE RBI. THERE WAS NO MISUSE OF FOREX PO LICY AS RULES AND LIMITS IMPOSED BY RBI WERE BEING FOLLOWED. D) REGARDING THE QUESTION OF BRINGING DOLLARS INSTE AD OF POUNDS, THE SAME WAS DONE FOR A BETTER EXCHANGE RATE. FOR EXAMPLE ON 19.04.2004 GBP 1 WAS EQUIVALENT TO USD 1.8075 USD 1.8075 WAS EQUIVALENT TO INR 79.34 GBP 1 WAS EQUIVALENT TO INR 79.10 THE ASSESSEE ENCLOSED A YEAR WISE COMPARABLE STATEM ENT WHICH MAKES IT CLEAR THAT A PERSON GETS MORE BENEFIT WHEN HE CONVERTS TH ROUGH US DOLLARS INSTEAD OF BRITISH POUNDS. E) UNLIKE INDIA, THERE ISNT ANY RESTRICTION IN THE UK ON FOREIGN EXCHANGE AND ONE CAN WITHDRAW/CONVERT INTO ANY CURRENCY TYPE. AS UK FOREIGN EXCHANGE LAWS ARE SIMPLE AND THE CURRENCY IS FULLY CONVERTIBLE, IT IS NOT REQUIRED TO RECORD THESE TRANSACTIONS, THE ASSESSEE HAS NOT KEPT THE CONVERS ION RECEIPTS. 3.2.2. THE ASSESSEE STATED THAT IN SUPPORT OF CONVE RSION OF FOREIGN EXCHANGE WORTH RS. 7,62,300/- THAT HE HAD VISITED INDIA THREE TIMES CA RRYING USD 5,000/- EACH TIME. IT WAS FURTHER SUBMITTED THAT DURING THE YEARS 1999-2005 T HE ASSESSEE HAD EARNED INCOME GBP 6 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 6 203852 AT UK EQUIVALENT TO RS. 1,52,77,557/- IN IND IAN MONEY. IN SUPPORT OF THIS, THE ASSESSEE ALSO FURNISHED THE FOLLOWING GROUNDS: A) ACKNOWLEDGMENT OF RETURN OF INCOME FOR THE YEARS 1999-2000 TO 2004-05. B) CERTIFICATE OF THE UK CA CERTIFYING THE INCOME F OR YEARS 2004-05. C) UK TAX RETURN FOR YEAR ENDED 5 TH APRIL, 2005. 3.2.3. THE LD. AO HOWEVER DISBELIEVED THE ENTIRE DO CUMENTS AND EVIDENCES PRODUCED BEFORE HIM AND DID NOT AGREE TO THE EXPLANATION OF SOURCE OFFERED BY THE ASSESSEE IN THE SUM OF RS. 7,62,300/-. 3.3. SALE OF HOUSEHOLD ARTICLES AMOUNTING TO RS. 5, 60,000/- THE ASSESSEE EXPLAINED THAT CERTAIN HOUSEHOLD ARTIC LES WERE SOLD TO ONE JOSEPH PANAKAL OF SWITZERLAND. THE LD. AO WAS NOT SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE ON THE FOLLOWING GROUNDS: A) IT IS NOT EXPLAINED BY THE ASSESSEE WHETHER THOSE ARTICLES WERE HANDED OVER TO MR. JOSEPH PANAKAL IN INDIA, UK OR SWITZERLAND. B) THE ASSESSEE HAS DECLARED THAT THE SALE WAS CONCLUD ED IN INDIAN RUPEES. IT IS IMPROBABLE THAT A SWISS NATIONAL WOULD OFFER TO PAY IN INR AND NOT IN SWISS FRANC AND THAT TOO IN CASH. C) THE GOODS ARE NOT SENT BY ANYONE. MR. PANAKAL HAS N OT COME TO INDIA. THE ASSESSEE DOES NOT SUBMIT PROOF OF ANY DISPATCH OF G OODS TO MR. PANAKAL OR EVEN AND INSURANCE SLIP. THE ASSESSEE DOES NOT EXPLAIN T HE URGENCY IN ANY OF HIS OTHER SUBMISSIONS FOR RECEIVING THE SO-CALLED CASH IN KOL KATA AND MERELY DEPOSITS THE SAME IN JAIPUR WITHOUT BUYING ANY PROPERTY. 7 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 7 3.3.1. ACCORDINGLY, THE LD. AO REJECTED THE EXPLANA TION OF THE ASSESSEE AND STATED THAT THE ASSESSEE HAS NOT DISCHARGED HIS BASIC ONUS TO P ROVE THAT THIS SO-CALLED SALES EVER TOOK PLACE. 3.3.2. THE ASSESSEE REPLIED TO THE SAME AS BELOW: A) THE HOUSEHOLD ARTICLES INCLUDING PAINTING, STATU ES OF MIXED METAL, OLD RINGS AND SHOW PIECES WERE PURCHASED BY THE ASSESSEE IN THE YEAR 1998. THE SAME WERE BROUGHT TO KOLKATA BY THE ASSESSEE AND KEPT A T HIS FAMILY RESIDENCE. B) MR. JOSEPH PANAKAL ON AN EARLIER VISIT TO KOLKAT A HAD SHOWN INTEREST IN BUYING THE SAME. THE ASSESSEE REQUIRED MONEY TO BUY A PIEC E OF LAND. SO HE CONTACTED MR. JOSEPH PANAKAL WHO AGREED TO PURCHASE THE ARTIC LE AND MAKE PAYMENT IN INDIA. C) AN ASSOCIATE OF MR. JOSEPH PANAKAL CAME TO THE F AMILY RESIDENCE OF THE ASSESSEE AND ON SATISFACTORY INSPECTION OF THE GOOD S, PAID CASH RS. 5,60,000/- AS AGREED WITH MR. PANAKAL AND TOOK THE DELIVERY OF TH E GOODS. D) IT IS BEYOND THE ASSESSEE TO TRACK WHAT MR. PANA KAL DID WITH THE GOODS. THE SITUATION OF THE ASSESSEE IS SIMILAR TO A SHOPKEEPE R AFTER AN ARTICLE IS SOLD BY HIM. THE SELLER HAS NO ONUS OR BUSINESS TO TRACK THE BUY ERS INTENTION WITH THE SOLD ARTICLES. 3.3.3. THE ASSESSEE ALSO PROVIDED THE ENTIRE TRANSA CTION LIFE CYCLE FROM PURCHASE OF ARTICLES IN JAIPUR, PAYMENT OF ARTICLES, STORAGE OF GOODS AT KOLKATA, DESCRIPTION OF ARTICLES, SALE BILL, CORRESPONDENCE WITH BUYER, REC EIVED PAYMENT DETAILS, RECONFIRMATION FROM THE BUYER, AND RECORD OF ARTICLE IN THE CORRES PONDING PREVIOUS YEAR BALANCE SHEET. 8 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 8 THE LD. AO HOWEVER PROCEED TO DISBELIEVE THE ENTIRE EXPLANATION OFFERED BY THE ASSESSEE IN THIS REGARD. 3.4. RECEIPT OF UNSECURED LOAN - RS. 1,25,000/- THE ASSESSEE STATED THAT HE HAD RECEIVED A SUM OF R S. 1,25,000/- IN CASH TOWARDS UNSECURED LOAN FROM HIS RELATIVE SHRI AMAN SHARMA. THE LD. AO OBSERVED THAT SHRI AMAN SHARMA HAS RECEIVED AN INCOME OF RS. 60,000/- PER ANNUM FOR THE FINANCIAL YEARS 2002-03, 2003-04 AND 2004-05 FROM M/S AAR SERVICES. THE LD. AO ALSO ISSUED SUMMONS TO M/S AAR SERVICES TO VERIFY THE PAYMENT M ADE BY THEM TO MR. AMAN SHARMA AND NONE APPEARED IN RESPONSE TO THE SAID S UMMONS. HE OBSERVED THAT AN ANONYMOUS LETTER WAS RECEIVED BY HIM GIVING THE CO NFIRMATION OF THE TRANSACTION WHOSE VERACITY CANNOT BE ESTABLISHED. ACCORDINGLY, HE CON CLUDED THAT THE ALLEGED LENDER SHRI AMAN SHARMA DID NOT HAVE CREDITWORTHINESS TO GIVE I NTEREST FREE LOANS AT RS. 1,25,000/- TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE RESPOND ED THAT AMAN SHARMA LIVES IN A JOINT FAMILY WHERE HIS ACCOMMODATION AND LIVING EXPENDITU RE ARE FREE AND ALL HIS INCOME ARE PRESERVED AS SAVING. HENCE, HE WAS ABLE TO GIVE AN UNSECURED LOAN TO THE ASSESSEE FROM HIS SAVINGS. THE ASSESSEE ALSO PRODUCED CONFIRMATIO N FROM AMAN SHARMA, CONFIRMATION OF M/S AAR SERVICES (I.E EMPLOYER OF AMAN SHARMA) E VIDENCING THE PAYMENT OF MONEY TO AMAN SHARMA. THE ASSESSEE ALSO PRODUCED PA N OF AMAN SHARMA TOGETHER WITH COPY OF HIS PAN CARD. THE LD. AO HOWEVER OBSER VED THAT THE CREDITWORTHINESS OF THE SAID PARTY HAS NOT BEEN PROVED AND HENCE, DISBE LIEVED THE FACTUM OF LOAN GIVEN BY THE SAID PARTY TO THE ASSESSEE AS A SOURCE. HE ALSO INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT FOR VIOLATION OF SECTION 269SS OF THE AC T IN RESPECT OF LOAN OF RS. 1,25,000/- TAKEN FROM MR. AMAN SHARMA BY THE ASSESSEE. 3.5. RENTAL AND GIFT RECEIVED THE ASSESSEE ADMITTED RENTAL INCOME OF RS. 89,548/- AND STATED THAT THERE IS NO LOAN AGREEMENT WITH ANY INDIVIDUAL OF THIS POSSESSION. T HE LD. AO CONCLUDED THAT THE SAME 9 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 9 COULD NOT BE VERIFIED. THE ASSESSEE GAVE THE NAME O F THE TENANT MR. SAMPAT KUMAR JAJODIA AND IN VIEW OF CLOSE RELATIONSHIP WITH THE SAID TENANT NO FORMAL WRITTEN AGREEMENT WAS ENTERED INTO. WITH REGARD TO GIFT REC EIVED FROM HIS FATHER AMOUNTING TO RS. 19,500/-, THE ASSESSEE EXPLAINED THAT THE SAME WAS DONE AS A ROUTINE FORMAL GIFT AS HIS PREVALENT IN MOST OF THE FAMILIES. THE ASSESSEE PRODUCED COPY OF LOAN RECEIPTS AND CONFIRMATION LETTER FROM THE TENANT IN SUPPORT OF H IS RENTAL INCOME AND COPY OF DECLARATION OF GIFT GIVEN BY MR. SITARAM SHARMA (AS SESSEES FATHER) THAT THE GIFT WAS GIVEN BY HIM FREELY, VOLUNTARILY AND UNCONDITIONALL Y OUT OF HIS OWN FUNDS. THE ASSESSEE HAS PRODUCED AN AFFIDAVIT FROM THE TENANT SHRI SAMP AT KUMAR JAJODIA DULY NOTARIZED CERTIFYING THE VARIOUS RENTAL PAYMENTS MADE BY HIM TO THE ASSESSEE FROM 01.04.1999 TO 31.03.2005. THE LD. AO DISBELIEVED THE SAME AS AVAI LABLE CASH SOURCE. ACCORDINGLY, HE SOUGHT TO BRING TO TAX THE TOTAL CASH DEPOSITS MADE IN THE INDIAN BANK ACCOUNT IN THE SUM OF RS. 26,50,000/- AS UNEXPLAINED CASH CREDIT U/S 6 8 OF THE ACT. 4. THE LD. CIT(A) ON VERIFICATION ON VARIOUS DETAIL S FILED BY THE ASSESSEE GRANTED RELIEF TO THE TUNE OF RS. 6,73,900/- BEING US DOLLARS ENCA SHED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL AS AVAILABLE CASH SOURCE FOR EXPLAININ G THE CASH DEPOSIT, AS THEY ARE DULY SUPPORTED BY THE RECEIPT OF THE MONEY CHANGERS. WIT H REGARD TO THE OTHER EXPLANATION OFFERED BY THE ASSESSEE, HE OBSERVED THAT IT IS V ERY UNLIKELY THAT THE ASSESSEE OR HIS PARENTS OR LENDER WOULD HAVE RETAINED THE ENTIRE MO NIES IN CASH WITHOUT DEPOSITING THE SAME INTO THE BANK ACCOUNT AND THE SAID SITUATION C OULD NOT BE BELIEVED AND ACCORDINGLY, CONFIRMED THE ACTION OF THE LD. AO TO THAT EXTENT. IN OTHER WORDS, OUT OF TOTAL ADDITION MADE BY THE LD. AO U/S 68 OF THE ACT IN THE SUM OF RS. 26,50,000/-, THE LD. CIT(A) DELETED RS. 6,73,900/- AND CONFIRMED THE ADDITION O F RS. 19,76,100/-. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 19,76,100/- MADE U/S 68 OF THE INCOME TAX ACT WITHOUT APPRECIATING THE EXPLANATIONS FURNISHED BY THE APPE LLANT. 10 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 10 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE AUTHORITIES BELOW WERE GROSSLY UNJUSTIFIED IN INVOKING PROVISIONS OF SECTI ON 68 OF THE INCOME TAX ACT EVEN THOUGH SUM OF RS. 26,50,000/- ASSESSED IN A.Y. 2005 -06 WAS NOT CREDITED IN THE ASSESSEES BOOKS FOR THE YEAR. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ADDITION OF RS. 19,76,100/- AS CONFIRMED BY THE CIT(A) MAY KINDLY B E DELETED AND/OR REDUCED. 4. FOR THAT THE APPELLANT CRAVES LEAVE TO FILE ADDI TIONAL GROUNDS AND/OR AMEND OR ALTER THE GROUNDS ALREADY TAKEN EITHER BEFORE OR AT THE T IME OF HEARING OF THE APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE COM PRISING OF I) COPY OF THE AFFIDAVIT FURNISHED BY THE ASSESSEE BEFORE THE NOTARY PUBLIC , KOLKATA (ENCLOSED IN PAGES 11-12 IN PAPER BOOK); II) COPY OF TAX RETURNS FILED IN UK FO R THE YEARS 2000 TO 2004 ALONG WITH CONFIRMATION ISSUED BY THE UK AUDITOR (ENCLOSED IN PAGES 13-26 OF PAPER BOOK); III) STATEMENT GIVING THE DETAILS OF INCOME EVEN IN UK, DATES OF ARRIVAL AND DEPARTURE FORM INDIA, DETAILS OF US DOLLARS BROUGHT TO INDIA ALONG WITH DATE AND RATE OF CONVERSION INTO INDIAN RUPEES (ENCLOSED IN PAGE 27 OF THE PAPER BOO K); IV) COPY OF COMMUNICATION FROM IMMIGRATION DEPARTMENT, UNITED KINGDOM ALONG W ITH RELEVANT EXTRACTS OF PASSPORT GIVING DETAILS OF IMMIGRATION INTO AND OUT OF INDIA, ALONG WITH A STATEMENT GIVING THE DETAILS OF ARRIVAL IN AND DEPARTURE FROM INDIA (ENCLOSED IN PAGES 28-30 OF THE PAPER BOOK); V) COPIES OF ACCOUNT, PROFIT AND LOSS ACCOUNT. MUNICIPAL TAX RECEIPTS, ENCASHMENT CERTIFICATE OF DOLLARS, RENTAL RECEIPT I SSUED TO TENANT, MR. SAMPAT KUMAR JAJODIA AND GIFT DECLARATION GIVEN BY FATHER FOR TH E FINANCIAL YEARS 1999-2000 TO 2003-04 (ENCLOSED IN PAGES 31 TO 60 OF PAPER BOOK); VI) REL EVANT EXTRACTS OF THE CASH BOOK FOR THE PERIOD 01.04.1999 TO 31.03.2004 OF THE ASSESSEE (ENCLOSED IN PAGES 61 TO 64 OF THE PAPER BOOK); VII) COPY OF GIFT DECLARATION GIVEN BY ASSESSEES FATHER MR. SITARAM SHARMA (ENCLOSED IN PAGE 65 OF THE PAPER BOOK); VII I) COPY OF AFFIDAVIT ALONG WITH CONFIRMATION AND SAMPLE RENTAL RECEIPTS GIVEN BY AS SESSEES TENANT MR. SAMPAT KUMAR JAJODIA(ENCLOSED IN PAGES 66-71 OF THE PAPER BOOK) ; IX) COPY OF INVOICE ISSUED BY M/S MANOHARDAS RAMLALJI SUNAR EVIDENCING PURCHASE OF HO USEHOLD PAINTINGS, STATUES, RINGS 11 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 11 ETC. BY THE ASSESSEE ALONG WITH CORRESPONDING CORR ESPONDENCES BETWEEN ASSESSEE AND BUYER, MR. JOSEPH PANAKOL FOR SALE OF THESE PAINTIN GS, STATUES, RINGS ETC. IN THE FINANCIAL YEAR 2004-05 (ENCLOSED IN PAGES 72 TO 76 OF PAPER BOOK) AND X) COPY OF LOAN CONFIRMATION OF MR. AMAN SHARMA ALONG WITH HIS PAN CARD AND SALARY CERTIFICATE FROM HIS EMPLOYER (ENCLOSED IN PAGES 77 TO 79 OF PAPER B OOK). 5.1. THE LD. AO HAD MADE THE ADDITION TOWARDS CASH DEPOSITS MADE BY THE ASSESSEE IN INDIAN BANK, JAIPUR BRANCH TO THE TUNE OF RS. 26,50 ,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE LD. CIT(A) DELETED A SUM OF RS. 6,73,900/- AS EXPLAINED CASH SOURCE BY THE ASSESSEE. WE FIND THAT THE ASSESSEE IS A TAX RESIDENT OF UK AND FROM THE PERUSAL OF THE VARIOUS DOCUMENTS ABOVE, HE HAD BEEN VISITIN G INDIA TO VISIT HIS PARENTS AND WE FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE TH AT HE USED TO VISIT INDIA AND DURING EACH VISIT, USED TO CARRY USD 5000 IN ACCORDANCE W ITH FEMA REGULATIONS FOR HANDING OVER TO HIS PARENTS AS IS THE USUAL CUSTOM IN EVERY FAMILY. WE FIND THAT THE LD. CIT(A) HAD AGREED TO THIS PARTICULAR PLEA OF THE ASSESSEE IN RESPECT OF US DOLLARS ENCASHED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL TO THE TU NE OF RS. 6,73,900/-. HENCE, WE HELD THAT THE FACT OF ASSESSEE ENCASHING US DOLLARS THRO UGH AUTHORIZED MONEY CHANGERS IN EARLIER YEARS ALSO (WHICH ARE SUPPORTED BY RECEIPTS FROM MONEY CHANGERS) REQUIRES TO BE BELIEVED. HENCE, THE EXPLANATION GIVEN BY THE ASSE SSEE THAT THESE DOLLARS CONVERTED INTO INDIAN RUPEES WERE HANDED OVER TO HIS PARENTS WHO I N TURN, HAD RETAINED THEM FOR AND ON BEHALF OF THE ASSESSEE, ALSO REQUIRES TO BE BELI EVED. WE FIND THAT THE VARIOUS DOCUMENTS IN THE FORM OF MONEY CHANGERS RECEIPTS, G IFT DECLARATION, RENTAL INCOME, FROM CASH BOOKS FROM 01.04.1999 TO 31.03.2004 EXPLA INS THE OPENING CASH BALANCE OF RS. 10,88,328/- WHICH IS ARRIVED AFTER MEETING ALL EXPENSES THEREON, AT AS A SOURCE FOR THE ASSESSEE TO EXPLAIN THE CASH DEPOSIT MADE DURIN G THE FINANCIAL YEAR 2004-05. JUST BECAUSE THE ASSESSEE HAD NOT PRODUCED THE CASH BOOK AND BALANCE SHEET BEFORE ANY STATUTORY AUTHORITY, THE CONTENTS OF THE SAME COULD NOT BE DISBELIEVED. ON THE CONTRARY, THE ASSESSEE WAS NOT BOUND TO SUBMIT / FURNISH THE SAME BEFORE ANY COMPETENT AUTHORITY. 12 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 12 IN FACT IT IS NOT IN DISPUTE THAT THE ASSESSEE IS A TAX RESIDENT OF UK AND DOES NOT HAVE ANY TAXABLE INCOME IN INDIA. HENCE, THERE WAS NO OCCASI ON FOR THE ASSESSEE TO FILE THESE DOCUMENTS BEFORE ANY STATUTORY AUTHORITY. HENCE, TH E EXPLANATION GIVEN BY THE ASSESSEE IN THIS REGARD IS ACCEPTED. 5.2. THE LD. CIT(A) HAD ACCEPTED THE CASH SOURCE OF RS. 6,73,900/- TO THE EXTENT OF MONEY CHANGERS RECEIPT SUBMITTED BEFORE HIM BY THE ASSESSEE, AS AGAINST RS. 7,62,300/- CLAIMED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE ASSESSEE INDEED HAD BROUGHT US DOLLARS AND CONVERTED THE SAME INTO INDIAN RUPEES DURING THE YEAR UNDER APPEAL. WE HOLD THAT MERELY BECAUSE CERTAIN RECEIPTS TO THE TU NE OF RS. 88,400/- (7,62,300 6,73,900) COULD NOT BE PRODUCED BEFORE THE REVENUE, THE SAME DOES NOT AUTOMATICALLY REQUIRE TO BE DISBELIEVED. THE ASSESSEE IN THE INST ANT CASE HAS GIVEN AN EXPLANATION EXPLAINING A SOURCE THEREOF. IN THE GIVEN FACTS AND CIRCUMSTANCES IN WHICH THE ASSESSEE IS PLACED, BEING A TAX RESIDENT OF UK, AND BEING DE PENDENT ON HIS PARENTS FOR TAKING CARE OF HIS INDIAN AFFAIRS, CERTAIN MONEY CHANGERS RECEI PTS IF NOT PROPERLY MAINTAINED BY THE PARENTS OF THE ASSESSEE, THE ASSESSEE COULD NOT BE PENALIZED BY WAY OF ADDITION THEREON. HENCE, IN OUR CONSIDERED OPINION, A SUM OF RS. 88,4 00/- REPRESENTING US DOLLARS CONVERTING INTO INDIAN RUPEES ALSO SHOULD BE TREATE D AS A CASH SOURCE AVAILABLE FOR EXPLAINING CASH DEPOSIT IN THE BANK. 5.3. IN RESPECT OF SALE OF PAINTING OF RS. 5,60,000 /-, WE FIND FROM THE AFORESAID DOCUMENTS THAT THE ASSESSEE HAD INDEED ACCOUNTED FO R THE PURCHASE OF THOSE PAINTINGS, STATUES, RINGS IN HIS CASH BOOK IN THE EARLIER YEAR S AND HAD EVEN PRODUCED THE INVOICE THEREON DATED 20.05.1999. WE FIND THAT THE ASSESSEE HAS PURCHASED THE SAME FOR RS. 5,42,000/- DURING FINANCIAL YEAR 1999-2000 FROM M/S MANOHARDAS RAMLALJI SUNAR AND HAD SOLD THE SAME TO MR. JOSEPH PANAKAL OF SWITZERL AND DURING FINANCIAL YEAR 2004-05 FOR RS. 5,60,000/- THEREBY MAKING MEAGER PROFIT OF RS. 18,000/-. IT IS NOT IN DISPUTE THAT THESE ITEMS BEING PERSONAL EFFECTS OF THE ASSESSEE ARE NOT LIABLE FOR CAPITAL GAINS. THE 13 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 13 OTHER ALLEGATIONS LEVELLED BY THE LD. AO AGAINST TH E ASSESSEE, THAT THE INSURANCE SLIP WAS NOT PRODUCED BY THE ASSESSEE AND NO EVIDENCE W AS PRODUCED FOR DELIVERY OF THE SAID ITEMS TO MR. JOSEPH PANAKAL, ARE IRRELEVANT. I N OUR CONSIDERED OPINION, THE ASSESSEE COULD ONLY BE EXPECTED TO PRODUCE EVIDENCE THAT ARE AVAILABLE IN RESPECT OF SALE OF ITEMS MADE TO JOSEPH PANAKAL. IT IS NOT IN DISPUTE THAT THE SALE INDEED WAS MADE BY THE ASSESSEE AFTER THE AGENT OF MR. JOSEPH PANAKAL HAD DULY INSPECTED THE SAID GOODS (AS IS EVIDENT FOR THE ASSESSMENT ORDER). HENCE, THE EXPLA NATION GIVEN BY THE ASSESSEE THAT THE SAID AGENT HAD HANDED OVER CASH OF RS. 5,60,000/- T OWARDS THOSE ITEMS AS PER THE INSTRUCTION OF MR. JOSEPH PANAKAL OF SWITZERLAND DE SERVES ACCEPTANCE. HENCE, IN OUR CONSIDERED OPINION, THE SAID SUM OF RS. 5,60,000/- WOULD ACT AS A CASH SOURCE FOR EXPLAINING THE CASH DEPOSIT MADE BY THE ASSESSEE. 5.4. IN RESPECT OF LOAN OF RS. 1,25,000/- RECEIVED BY THE ASSESSEE FROM HIS RELATIVE MR. AMAN SHARMA, THE ASSESSEE HAS PRODUCED THE SOURCES FOR AMAN SHARMA AND ALSO CONFIRMATION TOGETHER WITH HIS PAN CARD BEFORE THE REVENUE. IN FACT, THE LD. AO HAD ALSO ACCEPTED THIS TRANSACTION AS A LOAN AS HE HAS INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT ON THE ASSESSEE. WE HOLD THAT ONCE A PAR TICULAR RECEIPT HAS BEEN ACCEPTED AS A LOAN BY THE LD. AO, FOR WHICH PROCEEDINGS U/S 271D WERE ALSO INITIATED, THE SAME WOULD HAVE TO BE TREATED AS AN AVAILABLE CASH SOURCE IN T HE HANDS OF THE ASSESSEE FOR EXPLAINING THE CASH DEPOSIT MADE BY HIM. 5.5. IN RESPECT OF GIFT RECEIVED FROM HIS FATHER TO THE TUNE OF RS. 15,000/- (BEING THE AMOUNT DEPOSITED IN BANK OUT OF GIFT RECEIVED FOR R S 19,500/-), THE SAME IS DULY EVIDENCED BY GIFT DECLARATION GIVEN BY HIS FATHER O UT OF NATURAL LOVE AND AFFECTION. IN FACT THE FATHER HAS GIVEN A DECLARATION THAT HE HAD GIVEN THE GIFT OF RS. 19,500/- TO THE ASSESSEE. WE FIND THAT THIS IS ALSO DULY INCORPORAT ED IN THE CASH BOOK FILED BY THE ASSESSEE, HENCE, THIS ALSO ACTS AS A CASH SOURCE AV AILABLE TO THE ASSESSEE FOR EXPLAINING THE CASH DEPOSITS. 14 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 14 5.6. IN RESPECT OF RENTAL INCOME DERIVED FROM THE F LAT IN KOLKATA, THE SAME IS DULY SUPPORTED BY RENTAL RECEIPTS FROM THE TENANT AND T HE LD. AO ALSO DOES NOT DISPUTE THE RECEIPT OF THE SAME BY THE ASSESSEE . HENCE THE SA ME WOULD ACT AS CASH SOURCE AVAILABLE TO THE ASSESSEE TO EXPLAIN THE CASH DEPOSIT. 5.7. IN VIEW OF THE AFORESAID FINDINGS, WE HOLD TH AT THE ASSESSEE HAD INDEED DULY EXPLAINED THE SOURCE FOR CASH DEPOSITS MADE IN THE TOTAL SUM OF RS. 26,50,000/- AND THEREFORE, NO ADDITION COULD BE MADE THEREON U/S 68 OF THE ACT. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 06.09.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06.09.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. MR. MANOJ SHARMA, C/O, MR. RAJ SHARMA,1/2, LORD SINHA ROAD, 3 RD FLOOR, SHARMA HOUSE, KOLKATA-700071 2. ADIT(IT)-2(1), AAYAKAR BHAWAN (POORVA), KOLKATA. 3. C.I.T(A)-VI, KOLKATA 4. C.I.T.- KOLKATA . 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 15 ITA NO.366/KOL/2013 MANOJ SHARMA A.YR.2005-06 15