ITO 18(3)(1), MUMBAI V. FARZANA SHAKIL SAUDAGAR, MUMBAI

ITA 3713/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79566 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 06-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARMINDAR KAUR
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Wrong claim; Onus to prove
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ! ./I.T.A. NO.3713/MUM/2012 ( '#$ % / ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER - 18 ( 3 ) (1) , ROOM NO.207, 2 ND FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. MRS.FARZANA SHAKIL SAUDAGAR, 701, VILLA QUEEN CO-OP HSG.SOCIETY LTD, PLOT NO.369, 16 TH ROAD, BANDRA (W), MUMBZAI-400050 ( !&' / APPELLANT) .. ( ()&' / RESPONDENT) AND ! ./I.T.A. NO.1327/MUM/2013 ( '#$ % / ASSESSMENT YEAR : 2008-09) MRS.FARZANA SHAKIL SAUDAGAR, 701, VILLA QUEEN CO-OP HSG.SOCIETY LTD, PLOT NO.369, 16 TH ROAD, BANDRA (W), MUMBZAI-400050 / VS. INCOME TAX OFFICER - 18(3)(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( !&' / APPELLANT) .. ( ()&' / RESPONDENT) & ./ *+ ./PAN/GIR NO. : BCSPS3919R !&' , / REVENUE BY : SHRI PARMINDAR KAUR ()&' - , /ASSESSEE BY : NONE . / - 01 / DATE OF HEARING : 24.7.2014 2 %$ - 01 /DATE OF PRONOUNCEMENT : 31.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ORDE R DATED 29.3.2012 PASSED BY LD. CIT(A)-29, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2008- 09. I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 2 2. THOUGH THESE APPEALS WERE ADJOURNED ON SEVERAL O CCASIONS AT THE REQUEST OF THE ASSESSEE AND FINALLY IT WAS ADJOURNED TO 23. 7.2014 AT THE SPECIFIC REQUEST OF ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSE E ON THAT DATE. HENCE BOTH THE APPEALS WERE ADJOURNED TO 24.7.2014 BY ANNOUNC ING THE DATE IN THE OPEN COURT. HOWEVER, ON 24.7.2014 ALSO, NONE APPEARED O N BEHALF OF THE ASSESSEE. HENCE, WE PROCEED TO DISPOSE OF THESE APPEALS EX-PA RTE, WITHOUT THE PRESENCE OF ASSESSEE. 3. WE NOTICE THAT THE APPEAL FILED BY THE ASSESSE E IS BARRED BY LIMITATION BY 248 DAYS. WE NOTICE THAT THE ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE DELAY OF 225 DAYS ONLY. THUS, IT IS SEEN THAT THE ASSESS EE HAS NOT EXPLAINED THE DELAY TILL THE DATE OF FILING OF APPEAL. IT IS WELL SETT LED LAW THAT THE ASSESEE HAS TO EXPLAIN THE DELAY ON DAY TO DAY BASIS TILL THE DATE OF FILING OF APPEAL. FURTHER WE NOTICE THAT THE REGISTRY HAS SENT A DEFECT MEMO POI NTING OUT THAT THE ASSESSMENT ORDER HAS NOT BEEN FILED BY THE ASSESSEE. FROM TH E RECORD, WE NOTICE THAT THE ASSESSEE HAS NOT RECTIFIED THE SAID DEFECT SO FAR. IN VIEW OF THE ABOVE REASONS, WE ARE OF THE VIEW THAT THE APPEAL FILED BY THE ASS ESSEE CANNOT BE ADMITTED AND ACCORDINGLY WE REJECT THE APPEAL FILED BY THE ASSES SEE IN LIMINE. 4. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REV ENUE, WHEREIN FOLLOWINGS ISSUES ARE CONTESTED : A) RELIEF GRANTED IN RESPECT OF BUSINESS INCOME O F RS.2,45,466/-; B) RELIEF GRANTED IN RESPECT OF CASH CREDITS OF R S.5,98,536/-; AND C) RELIEF GRANTED IN RESPECT OF UNEXPLAINED CASH DE POSITS OF RS.3,26,514/-. I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 3 5. THE FIRST ISSUE RELATES TO THE RELIEF GRANTED IN RESPECT OF BUSINESS INCOME OF THE ASSESSEE. THE FACTS RELATING THERETO ARE ST ATED IN BRIEF. THE ASSESSEE FILED A PROFIT AND LOSS ACCOUNT ALONG WITH THE RETU RN OF INCOME. HE ALSO FILED ANOTHER PROFIT AND LOSS ACCOUNT DURING THE COURSE O F ASSESSMENT PROCEEDINGS. THE AO NOTICED THAT THERE WERE DIFFERENCES IN BOTH THE PROFIT AND LOSS ACCOUNTS IN RESPECT OF MANY ITEMS. THE AO HAS TABULATED THE SAME AND FOR THE SAKE OF CONVENIENCE WE EXTRACT THE SAME HERE UNDER: AS PER RETURN AS PER P AND L A/C SALES 8,28,544 12,18,544 PURCHASES 3,60,170 5,60,170 SALARY 40,170 80,170 SALES PROMOTION 2,840 12,840 COMMISSION 3,600 13,600 TELEPHONE EXP. 6,208 16,208 CASH IN HAND NIL 1,2 1,600 DIWALI EXP. 3,995 13,995 OTHER EXPENSES 1,40,887 2,22,192 CONVEYANCE 20,570 NET PROFIT 2,50,102 2,50,104 IN VIEW OF THE ABOVE SAID DISCREPANCIES, THE AO AD DED THE SUM OF RS.3.00 LAKHS TO THE BUSINESS INCOME RETURNED BY THE ASSESSEE BY TREATING THE SAME AS UNDISCLOSED INCOME. BEFORE THE LD. CIT(A), THE AS SESSEE CONTENDED THAT THE NET PROFIT HAS REMAINED THE SAME IN BOTH THE STATEMENTS AND ACCORDINGLY PLEADED FOR THE DELETION OF THE ABOVE SAID ADDITION OF RS.3.00 LAKHS. IN THE FACTS DISCUSSED ABOVE, THE LD. CIT(A) THOUGH IT FIT TO REJECT THE B OOK RESULT AND ESTIMATE THE PROFIT. THE LD. CIT(A) NOTICED THE NET PROFIT DECL ARED BY THE ASSESSEE WORKED AT 19.40% OF THE SALES AMOUNT OF RS.12.18 LAKHS. HEN CE THE LD. CIT(A) ESTIMATED THE NET PROFIT BY ADOPTING A HIGHER NET PROFIT RATE OF 25% AND APPLIED THE SAME ON THE SALE AMOUNT OF RS.12,18,544/- AND ACCORDINGL Y DETERMINED THE NET PROFIT I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 4 AT RS.3,04,636/-. SINCE THE ASSESSEE HAD ALREADY D ISCLOSED A NET PROFIT OF RS.2,50,104/-, THE LD. CIT(A) SUSTAINED THE ADDITIO N TO THE EXTENT OF RS.54,434/-, BEING THE DIFFERENCE BETWEEN THE PROFIT ESTIMATED B Y HIM AND THAT DISCLOSED BY THE ASSESSEE. THUS, THE ASSESSEE GOT A RELIEF OF RS .2,45,466/-. REVENUE IS AGGRIEVED BY THE SAID DECISION. 6. WE HEARD LD D.R AND PERUSED THE RECORD. WE NOTI CE THAT THE AO HAS NOT GIVEN ANY BASIS OR REASON FOR ESTIMATING THE UNDISC LOSED INCOME OF RS.3.00 LAKHS, WHICH WAS ADDED TO THE BUSINESS INCOME OF THE ASSES SEE. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAS FILED TWO SETS OF PRO FIT AND LOSS ACCOUNT DISCLOSING DIFFERENT AMOUNTS IN RESPECT OF VARIOUS ITEMS. EVE N THOUGH THE NET PROFIT REMAINED THE SAME IN BOTH THE STATEMENTS, YET THE D ISCREPANCIES POINTED OUT BY THE AO SHOWS THAT THE BOOKS OF ACCOUNTS OF THE ASSE SSEE ARE NOT RELIABLE. HENCE, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS J USTIFIED IN REJECTING THE BOOK RESULTS. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED. WE NOTICE THAT THE LD CI T(A) HAS ADOPTED A HIGHER NET PROFIT RATE OF 25%, AS AGAINST THE RATE OF 19.40% D ECLARED BY THE ASSESSEE, FOR ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE. TH ERE SHOULD NOT BE ANY DOUBT THAT THE ADOPTION OF HIGHER RATE OF PROFIT WOULD TA KE CARE OF POSSIBLE DISCREPANCIES AND WRONG CLAIMS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS ADOPTED A REASONABLE VIEW I N THIS MATTER AND ACCORDINGLY WE UPHOLD HIS ORDER ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE RELIEF GRANTED OUT OF THE ADDITION MADE U/S 68 OF THE INCOME TAX ACT, 1961 (THE ACT). THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.9 LAKHS FROM HER FATHER, RS.5,08,400/- FROM HER I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 5 MOTHER AND RS.80,500/- FROM VARIOUS OTHER PARTIES. SINCE THE ASSESSEE DID NOT FILE ANY MATERIAL TO PROVE THE IDENTITY OF THE CRED ITORS, CAPACITY OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS, THE AO ASSESSE D A SUM OF RS.14,88,900/-, BEING THE AGGREGATE AMOUNT OF ALL THE THREE CREDITS REFERRED ABOVE, AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT HE W AS WORKING IN DUBAI DURING THE PERIOD FROM 1994 TO 2004 AND HE HAS GIVEN MONEY TO HIS FATHER BY WAY OF CASH AS WELL AS BY WAY OF CHEQUES. ACCORDINGLY, HE SUBMITTED THAT HE HAS RECEIVED FUNDS FROM HIS PARENTS WHEN HE WANTED MONE Y FOR RESIDENTIAL PURPOSES. THE LD. CIT(A) CONSIDERED THE EXPLANATION OF THE AS SESSEE AND HELD THAT IT CAN BE REASONABLY BELIEVED THAT BOTH THE PARENTS WERE I N POSSESSION OF CASH OF RS.1,50,000/- EACH AND ACCORDINGLY DIRECTED THE AO TO DELETE RS.3 LAKHS OUT OF THE ADDITION RELATING TO THE LOAN AMOUNTS RECEIVED FROM THE PARENTS OF THE ASSESSEE. THE LD. CIT(A) FURTHER NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.2,18,036/- FROM HIS FATHER BY WAY OF CHEQUE AND THE SAID FACT WAS ALSO MENTIONED BY THE AO IN THE ASSESSMENT ORDER. ACCOR DINGLY THE LD CIT(A) TOOK THE VIEW THAT THE ABOVE SAID AMOUNT OF RS.2,18,036/ - STANDS EXPLAINED. ACCORDINGLY, HE DIRECTED THE AO TO DELETE THE ADDIT ION RELATING TO RS.2,18,036/-. WITH REGARD TO THE AMOUNT RECEIVED FROM VARIOUS PAR TIES AGGREGATING TO RS.80,500/-, THE LD. CIT(A) TOOK THE VIEW THAT ENOU GH EVIDENCES ARE AVAILABLE TO SHOW THAT THEY ARE TRADE RECEIPTS AND THE CLAIM OF RECEIPT OF RS.80,500/- IS ALSO FOUND TO BE REASONABLE BY LD CIT(A), WHEN COMPARED WITH THE TURNOVER OF RS.12.18 LAKHS. ACCORDINGLY, HE DIRECTED THE AO TO DELETE THE ADDITION OF RS.80,500/- ALSO. REVENUE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) ON THIS ISSUE. I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 6 8. WE HAVE HEARD LD D.R ON THIS ISSUE AND PERUSED T HE RECORD. WE NOTICE THAT THE AO HAS ASSESSED THE AGGREGTE AMOUNT OF RS .14,88,900/- U/S 68 OF THE ACT, SINCE THE ASSESSEE HAD FAILED TO PROVE THE IDE NTITY OF THE CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTIONS. FROM THE ASSESSMENT ORDER, IT IS CLEAR THAT THE ASSESSEE DID NOT FILE ANY DOCUMENT TO PROVE THE ABOVE SAID THREE MAIN INGREDIENTS. BEFORE THE LD. CIT(A), THE ASSESSEE HAS SIMPLY OFFERED SOME EXPLANATIONS WITHOUT PRODUCING ANY CORROBORATIVE MATERIAL. WE NOTICE THAT THE LD. CIT(A) HAS GRANTED THE RELIE F BY EXAMINING THE REASONABLENESS OF THE SAID EXPLANATIONS, MEANING TH EREBY, THE IMPUGNED RELIEF HAS NOT BEEN GRANTED ON THE BASIS OF DOCUMENTS. IT IS WELL SETTLED PROPOSITION OF LAW THAT PRIMARY BURDEN TO PROVE THE CASH CREDIT IS PLACED ON THE ASSESSEE U/S 68 OF THE ACT. WE HAVE ALREADY NOTICED THAT THE AS SESSEE HAS NOT DISCHARGED THE SAID PRIMARY BURDEN OF PROOF PLACED UPON HIM. UNDE R THESE CIRCUMSTANCES, IN OUR VIEW, THE LD. CIT(A) WAS NOT JUSTIFIED IN GRANT ING THE PARTIAL RELIEF TO THE ASSESSEE ON THE BASIS OF EXPLANATIONS FURNISHED BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE HIS ORDER ON THIS ISSUE. 9. THE NEXT ISSUE RELATES TO ASSESSMENT OF UNEXPLAI NED BANK DEPOSITS. THE AO NOTICED THAT THE ASSESSEE HAS DEPOSITED A SUM OF RS.7,27,000/- BY WAY OF CASH IN THE SAVING BANK ACCOUNT MAINTAINED WITH CEN TRAL BANK OF INDIA, MAHIM BRANCH. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN TH E SOURCES OF THE ABOVE SAID DEPOSITS, THE ASSESSEE EXPLAINED THE SOURCES AS UN DER : OPENING BALANCE RS.1, 19,036/- LOAN FROM FATHER-IN-LAW RS.2,18 ,036/- BUSINESS INCOME RS. 63,414/- RS.4,00,486/- ========= I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 7 SINCE THE ASSESSEE DID NOT EXPLAIN THE SOURCES FOR BALANCE AMOUNT OF DEPOSITS, I.E., SOURCES FOR RS.3,26,514/- (RS.7,27,000- RS.40 0,486/-), THE AO TREATED THE SAME AS UNEXPLAINED INVESTMENT AND ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) TOOK THE VIEW THAT THE ADDITION OF RS.8,90,364/- CONFIRMED BY HIM U/S 68 O F THE ACT WOULD MAKE THE ASSESSEE IN POSSESSION OF CASH OF EQUAL AMOUNT AND THE SAME WOULD EXPLAIN THE SOURCE FOR MAING BANK DEPOSITS OF RS.3,14,252/-. A CCORDINGLY HE DELETED THIS ADDITION. REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) ON THIS ISSUE. 10. WE HEARD LD D.R ON THIS ISSUE AND PERUSED THE R ECORD. WE NOTICE FROM THE ORDER OF LD CIT(A) THAT THE ASSESSEE HAS SUBMIT TED THAT HE HAS TAKEN LOANS FROM HIS PARENTS IN ORDER TO MAKE PAYMENT FOR A RES IDENCE (APPARENTLY FOR PURCHASING OR CONSTRUCTING A HOUSE), MEANING THEREB Y, THE ASSESSEE MUST HAVE UTILISED THE LOAN FOR PURCHASING/CONSTRUCTING A RES IDENTIAL PROPERTY. HENCE THE ASSESSEE MIGHT NOT HAVE BEEN LEFT WITH ANY MONEY FO R MAKING DEPOSITS INTO HIS BANK ACCOUNT. FURTHER THE EXPLANATIONS FURNISHED B Y THE ASSESSEE BEFORE THE AO SHOWS THAT HE HAS USED ONLY HIS PAST SAVINGS AND LO ANS TAKEN FROM FATHER IN LAW AND BUSINESS INCOME FOR MAKING DEPOSITS. IF THE AS SESSEE HAD USED THE LOAN TAKEN FROM HIS PARENTS FOR MAKING BANK DEPOSITS, HE WOULD HAVE DEFINITELY TAKEN THAT PLEA BEFORE THE AO. HOWEVER, THE ASSESSEE HA S EXPLAINED THE SOURCES ONLY TO THE EXTENT OF RS.4,00,486/- AND DID NOT EXPLAIN THE SOURCES OF THE REMAINING AMOUNT OF DEPOSITS OF RS.3,26,514/-. HENCE, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT CORRECT IN PRESUMING THAT THE ASSESS EE WAS LEFT WITH CASH EQUIVALENT TO THE AMOUNT OF CASH CREDIT CONFIRMED B Y HIM. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE. I.T.A. NO.3713/MUM/2012 I.T.A. NO.1327/MUM/2013 8 11. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS DISMISSED AND THE APPEAL FILED BY REVENUE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 31ST JULY, 2014 . 2 %$ . 3 4 5 6 31ST JULY, 2014 - 7/ 8 SD SD ( . / D. MANMOHAN ) ( . . , / B.R. BASKARAN ) / VICE- PRESIDENT / ACCOUNTANT MEMBER . / MUMBAI: 31ST JULY,2014. . ' . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !&' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. . =0 ( ! ) / THE CIT(A)- CONCERNED 4. . =0 / CIT CONCERNED 5. >?7 ('0'@# , !1 !@#$ , . / / DR, ITAT, MUMBAI CONCERNED 6. 7 / / GUARD FILE. A . / BY ORDER, TRUE COPY * (ASSTT. REGISTRAR) !1 !@#$ , . / /ITAT, MUMBAI