DEEPAK B. JAIN, MUMBAI V. ITO 25(3)(2), MUMBAI

ITA 3844/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55408 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S M JAIN
• Keywords: Salary income; Additional evidence
• Section: 69C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.3844/MUM/2009 A.Y 2005-06 SHRI DEEPAK B. JAIN, A-501, YAMUNA, VASANT SAGAR CHS LTD., THAKUR VILLAGE, KANDIVALI (E), MUMBAI 4001 001. PAN: AACPJ 1817 E VS. INCOME TAX OFFICER 25-(3)(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.M.JAIN. RESPONDENT BY : SHRI RAJEEV KHANDELWAL. DATE OF HEARING: 20-09-2011. DATE OF PRONOUNCEMENT: 30-09-2011 O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE CREDITS FOUND IN THE BANK STATEMENT WOULD NOT BE APPLICABLE U/S 68 AS THE BANK STATEMENT FURNISHED B Y THE BANK TO THE AO IS NOT A BOOK OF ACCOUNTS MAINTAINED BY THE ASSESSEE. REASONS ASSIGNED BY HIM ARE WRONG AND INSUFFICIENT ESPECIALLY WHEN THE CASH BALANCE OF RS. 13,02,598/- IS NOT FOU ND CREDITED IN THE BOOKS OF ACCOUNT IN AS MUCH AS THE SAME IS B ROUGHT FORWARD FROM THE PREVIOUS YEAR AND IS TAKEN ON THE DEBIT SIDE OF THE CASH BOOK WITHOUT A CORRESPONDING CREDIT BEING GIVEN TO ANY SPECIFIC ACCOUNT. 2. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS. 11,73,810/- WHEN HE HIMSELF HAS NOT DOUBTED THAT TH E AMOUNT AGGREGATING RS. 5,02,300/- IS OUT OF THE WITHDRAWAL OF THE CASH FROM THE BANK ACCOUNTS AND SUBSEQUENT RE-DEPOSITED IN THE DEVELOPMENT CREDIT BANK LTD. 3. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION IN THE RESPECT OF INSURANCE CLAIM TO THE EXTENT OF RS. 17,145/-. THE SAME BEING LIC REFUND, IT OUGHT NOT TO HAVE BEEN TREATED AS I NCOME. 4. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS. 85,000/-, RS. 2,00,000/-, RS.1,00,000/- AND RS. 1,00,000/- RE CEIVED FROM SHRI. RAVI AGARWAL, SHRI SURESH JAM, VANDANA JAIN A ND RAJESH JOIN RESPECTIVELY THOUGH THE CONFIRMATIONS WERE DUL Y FILED ITA NO.3844 OF 2009 2 GIVING THE PAN AND ADDRESS OF THE CONCERNED PARTIES . REASONS ASSIGNED BY HIM STATING THAT THE SAME ARE NOT GENUI NE AND THAT THE SAME ARE OUT OF UNEXPLAINED SOURCES ARE WRONG A ND INSUFFICIENT. REGARD BEING HAD TO THE FACT THAT CON FIRMATIONS SPECIFYING THE ADDRESS, GIVING PAN WERE DULY FILED AS ADMITTED BY THE CIT(A), IT WAS WRONG ON THE PART OF THE CIT( A) TO HOLD THAT THE LOANS ARE NOT GENUINE. 5. SEC. 68 EMPOWERS AO TO MAKE ENQUIRY REGARDING C ASH CREDITS, THE SATISFACTION OF THE AO IS THE BASIS FOR INVOKIN G THE POWER U/S 68 AND THE SATISFACTION MUST BE DERIVED FROM TH E RELEVANT FACTS ON THE BASIS OF PROPER ENQUIRY. NO ENQUIRY HA S BEEN MADE AS ENJOINED BY SEC. 68 AND THUS THERE IS NO JUSTIFI CATION FOR CONFIRMING THE IMPUGNED ADDITION. 6. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS. 15,011/- IN RESPECT OF EMI PAYMENTS WHEN IT IS EVIDENTLY CLE AR THAT THE SAME WAS PAID OUT OF THE AMOUNTS . WITHDRAWN FROM B ANKS. 7. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS. 1,20,259/- U/S 69C IN RESPECT OF RE-PAYMENT OF HOUS ING LOAN OF RS. 59,499/- & INTEREST OF RS. 60,760/- THEREON SPE CIALLY WHEN THE SAME IS PAID OUT OF HSBC BANK AND A SUM OF RS. 17,000/- WAS PAID OUT OF THE CASH ON 01-10-2004 WHICH WAS WI THDRAWN FROM DCB BANK ON 11-09-2004. REASONS ASSIGNED BY HI M FOR CONFIRMING THE SAME ARE WRONG AND INSUFFICIENT. 8. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITIO N OF RS. 60,000/- IN RESPECT OF LIC INSTALLMENT PAID STATING THE SOUR CES ARE UNEXPLAINED WHEN THE SAME WAS PAID FROM CITIBANK AN D BANK OF RAJASTHAN. THUS HE HAS ERRED IN CONFIRMING THAT THE SOURCES ARE UNEXPLAINED. 9. HE HAS FURTHER ERRED IN RESTRICTING THE CLAIM O F LOSS BEING INTEREST IN RESPECT OF HOME LOAN TAKEN FOR THE HOUS E PROPERTY. 2. OUT OF THESE GROUNDS. GROUNDS NO.3 AND 9 WERE NO T PRESSED, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. 3. GROUND NOS.1, 2 & 5 : THE BRIEF FACTS OF THE CASE ARE THAT FROM AIR INFORMATION WHICH WAS RECEIVED, THE AO NOTICED THAT ASSESSEE HAD DEPOSITED A CASH OF RS.11,73,810/- IN HIS BANK ACCO UNT IN DEVELOPMENT CREDIT BANK [FOR SHORT DEB]. VARIOUS NOTICES WERE I SSUED TO THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPOSITS BUT NO R ESPONSE WAS MADE. THEREFORE, AO MADE EFFORTS TO MAKE ENQUIRY FROM THE BANK. FROM THE DETAILS GATHERED IT APPEARS THAT TOTAL CREDITS OF R S.25,33,186/- EXCLUDING THE CREDIT FOR BOUNCED CHEQUE WERE THERE. THIS ALSO EXCLUDED A SUM OF RS.3,23,716/- RECEIVED FROM M/S KARATS GE MS AND JEWELLERY ITA NO.3844 OF 2009 3 PVT. LTD., WHICH WAS APPARENTLY A RECEIPT OF SALARY . THE AO OBSERVED THAT ASSESSEES ONLY SOURCE OF INCOME WAS SALARY, T HEREFORE, THERE IS NO SOURCE OF CASH AVAILABLE TO THE ASSESSEE. FURTHER S INCE ASSESSEE HAS NOT FILED ANY BALANCE SHEET ALONG WITH THE RETURN A ND MOREOVER ASSESSEE HAS NOT COME FORWARD TO EXPLAIN THE SOURCE S, THEREFORE, IT IS A CLEAR CASE WHERE ASSESSEE HAS FAILED TO DISCHARGE T HE ONUS OF PROVING THE CASH CREDIT AND, ACCORDINGLY, ADDITIONS OF RS.2 5,33,186/- WAS MADE. 4. ON APPEAL, VARIOUS DETAILED SUBMISSIONS VIDE LET TER DATED 6-5- 2008 WERE MADE THROUGH WHICH A COPY OF THE CASH BOO K BANK ACCOUNT AND OTHER DOCUMENTS, WERE ALSO ENCLOSED. IT WAS MAI NLY ARGUED THAT THESE DOCUMENTS COULD NOT BE FILED EARLIER BECAUSE OF THE CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE. T HE LD. CIT[A] SENT THESE DOCUMENTS ALONG WITH THE SUBMISSIONS OF THE A SSESSEE TO THE AO FOR VERIFICATIONS. THE AO IN THE REMAND REPORT DATE D 29-9-08 OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE IN RESPECT OF FIGURE OF OPENING CASH OF RS.13,02,597/- WHICH WAS CLAIMED TO HAVE BE EN ACCUMULATED OVER A PERIOD OF TIME AS PER DETAILS BELOW: ASST. YEAR TOTAL INCOME CASH WITHDRAWAL 1993-94 41000 24000 1994-95 52590 30000 1995-96 81472 36000 1996-97 136888 48000 1997-98 120974 72000 1998-99 166627 84000 1999-00 160964 84000 2000-01 232074 84000 2001-02 279256 96000 2002-03 309439 96000 ITA NO.3844 OF 2009 4 THE ABOVE OPENING CASH WAS NOT ACCEPTED BY THE AO B ECAUSE ASSESSEE WAS NOT IN THE HABIT OF FILING THE BALANCE SHEET AL ONG WITH THE RETURN AND EVEN FOR THE YEAR UNDER CONSIDERATION NO BALANC E SHEET WAS FILED. THEREFORE, SUCH CASH COULD NOT BE ACCEPTED. FURTHER , IT WAS NOTED THAT DURING THE REMAND PROCEEDINGS ASSESSEE HAD CLAIMED THAT HE HAS TAKEN LOANS FROM ICICI BANK AND DCB LTD. SHRI RAJE SH CHANDELIA, VANDANA JAIN, SURESH JAIN AND RAVI AGARWAL OF APPRO XIMATELY RS.6 LAKHS. HE OBSERVED THAT NO MAN OF PRUDENCE WILL KEE P THIS CASH IDLE AT HOME AND TAKE INTEREST BEARING LOANS. HE ALSO OBSER VED THAT ASSESSEE HAD TWO FLATS, OUT OF WHICH ONE WAS SELF OCCUPIED T HEREFORE THE OTHER FLAT WAS LIABLE FOR WEALTH TAX AND IF THIS CASH BAL ANCE WAS AVAILABLE THEN ASSESSEE WAS BOUND TO FILE WEALTH TAX RETURN, WHICH HAS NOT BEEN FILED AND, THEREFORE, CASH CANNOT BE ACCEPTED. THE LD. CI T[A] GAVE COPY OF THE ABOVE REMAND REPORT FOR THE COMMENTS OF THE ASS ESSEE. IN RESPONSE, ASSESSEE STRONGLY CONTENDED THAT ADDITION S HAS BEEN MADE ON THE BASIS OF PASS BOOK SUPPLIED BY DCB LTD., WHI CH COULD NOT BE CONSTRUED AS COPY OF ACCOUNT MAINTAINED BY THE ASSE SSEE AND, THEREFORE, ADDITIONS COULD NOT BE SUSTAINED IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BH AICHAND H. GABNDHI [141 ITR 67]. IN THIS CASE, IT WAS HELD THA T PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE COULD NOT BE REGARDED A S BOOK OF THE ASSESSEE. CERTAIN ERRORS WERE ALSO POINTED OUT IN T HE CALCULATION OF THE AO. THE SOURCES OF THE TOTAL DEPOSITS WERE EXPLAINE D AS PER DETAILS BELOW: ITA NO.3844 OF 2009 5 SR PARTICULARS AMOUNT REMARK PAGE NOS I CASH DEPOSITED (A)OUT OF OPENING BALANCE (B) OUT OF CURRENT YEAR WITHDRAWALS 6,71,510 5,02,300 1.173,810 CASH DEPOSITED 70 -- 73 OF PAPER BOOK I 2 KARATS GEMS AND JLEWELLERY P LTD LOAN 748,716 REPAYMENT OF LOAN CONFIRMATION ENCLOSED 210 OF PAPER BOOK 11 3 KARATS GEMS AND JEWELLERY P LTD REIMBURSEMENT OF EXPENSES I 0,123 CONFIRMATION ENCLOSED II OF PAPER BOOK II 4 LIC COMMISSION 14,715 COMMISSION RECEIVED AND OFFERED AS INCOME 201 OF PAPER BOOK II 5 VANDANA JAIN 100,000 LOAN RECEIVED- CONFIRMATION FILED 87 OF PAPER BOOK I 6 SURESH JAIN 200,000 LOAN RECEIVED CONFIRMATION ENCLOSED 212 OF PAPER BOOK II 7 DIRECTOR S REMUNERATION 148,000 SALARY INCOME OFFERED AS INCOME 200 OF PAPER BOOK II 8 MASTER PIECE JEWELLERY P LTD 100,000 RECOVERY OF LOAN GIVEN EARLIER CONFIRMATION ENCLOSED 211 OF PAPER BOOK II 9 RECEIVED FROM KRITIKAR VISION 17,145 RECOVERY OF LOAN GIVEN EARLIER 176 OF PAPER BOOK I 10 CHEQUE RETURNED 3,06,822 CHEQUE BOUNCED PAGE 196 OF PAPER BOOK II 11 RAVI AGARWAL 85,000 CHEQUE BOUNCED PAGE 213 OF PAPER BOOK II 12 DCFJ LTD PERSONAL LOAN 23,210 LOAN RECEIVED CONFIRMATION ENCLOSED PAGE NO.206 OF PAPER BOOK II 13 ICICI BANK LOAN 96,040 LOAN RECEIVED PAGE 202- 203 OF PAPER ITA NO.3844 OF 2009 6 CONFIRMATION ENCLOSED BOOK II 14 RAJESH M JIN 100,000 LOAN RECEIVED CONFIRMATION ENCLOSED PAGE 86 OF PAPER BOOK I 31,23,581 THE LD. CIT[A] AFTER EXAMINING THE SUBMISSIONS, OBS ERVED THAT IT WAS HIS PREROGATIVE TO ACCEPT OR REJECT THE ADDITIONAL EVIDENCE AND SINCE HE HAS FOUND THAT DUE TO CIRCUMSTANCES BEYOND THE CONT ROL OF THE ASSESSEE, EVIDENCE COULD NOT BE FILED BEFORE THE AO , HE ACCEPTED THE ADDITIONAL EVIDENCE. IN ANY CASE, THE WHOLE OF THE EVIDENCE HAS BEEN GIVEN TO THE AO FOR HIS VERIFICATION AND ACCORDINGL Y THE OBJECTION OF THE AO FOR REJECTION OF ADDITIONAL EVIDENCE WAS REJECTE D. WITH RESPECT TO OTHER ISSUES, THE LD. CIT[A] DISCUSSED THE SAME AS UNDER: I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE/AP PELLANT ON THE ISSUE AND ARGUMENT PUT FORWARDED BY HIM. AFTER RELYING ON THE HIGH COURT JUDGEMENT. IT IS NOTICED FROM THE JU DGMENT OF HONBLE MUMBAI HIGH COURT THAT THE ISSUE BEFORE THE HONBLE HIGH COURT WAS WHETHER BANK PASS BOOK CAN BE CALLED AS BOOK OF ACCOUNT WHEN IT WAS NOT MAINTAINED BY THE ASSESSEE/APPELLANT OR UNDER HIS INSTRUCTION. THE HO NBLE HIGH COURT HAS HELD THAT WHEN MONEY ARE DEPOSITED IN BAN K, THE RELATIONSHIP BEEN THE ASSESSEE AND BANKER IS ONE OF THE DEBTORS. ARID CREDITORS AND NOT OF TRUSTEE AND BENEFICIARY A ND ACCORDINGLY AS PER HONBLE COURT, THE PASS BOOK SUPPLIED BY THE BANK TO ITS CLIENT IS ONLY A COPY OF THE CLIENTS ACCOUNTS IN TH E BOOK MAINTAINED BY THE BANK. THEREFORE, THE HONBLE HIGH COURT HELD THAT THE PASS BOOK SUPPLIED BY THE BANK COULD NOT B E REGARDED AS BOOK OF THE ASSESSEE/APPELLANT. THE FACTS OF THE CASE RELIED BY THE ASSESSEE/APPELLANT ARE DIFFERENT AND DISTING UISHABLE TO THE CASE OF ASSESSEE/APPELLANT. IN THE INSTANT CASE OF THE ASSESSEE/APPELLANT, THE ASSESSEE/APPELLANT HAS NOT ONLY DEPOSITED CASH ON VARIOUS DATES IN THE BANK ACCOUNT BUT ALSO ISSUED AND RECEIVED CHEQUES THROUGH BANK ACCOUNT DU RING THE YEAR. ALL THESE CREDITS AND DEBITS WERE ROUTED THRO UGH THE CASH BOOK MAINTAINED BY THE ASSESSEE/APPELLANT AND ONE S UCH COPY OF THE CASH BOOK IS FILED BY THE ASSESSEE/APPELLANT DURING THE APPEAL PROCEEDINGS AND SAME WAS REFERRED TO THE ASS ESSING OFFICER FOR HIS COMMENTS. IT IS FURTHER NOTICED THA T THE ASSESSEE/APPELLANT TIED HEAVILY ON THE ENTRIES IN T HE CASH BOOK ITA NO.3844 OF 2009 7 MAINTAINED BY HIM INCLUDING THE OPENING CASH BALANC E AND OTHER NARRATIONS ABOUT ENTRIES. ONCE THE BANK PASS BOOK A ND ENTRIES THEREIN ARE ROUTED THROUGH CASH BOOK AND OTHER BOOK S OF ACCOUNTS, THE SAME IS PART AND PARCEL OF THE BOOK O F ACCOUNTS MAINTAINED BY THE ASSESSEE/APPELLANT. THEREFORE, TH E RELIANCE OF THE ASSESSEE/APPELLANT ON THE JUDGMENT OF THE HON'B LE MUMBAI HIGH COURT IS MISPLACED AS THE FACTS ARE DIFFERENT AND DISTINGUISHABLE AS ALL THE ENTRIES OF PASS BOOK/BAN K ACCOUNT ARE REFLECTED IN CASH BOOK. 4.5. (II) THE OTHER CONTENTION OF THE ASSESSEE/APPE LLANT IS THAT THE OPENING CASH BALANCE WAS ACCUMULATED OVER THE Y EARS AND WAS AVAILABLE TO HIM TO THE EXTENT OF RS,13,02,597/ - ON 1/4/2004. THE ASSESSING OFFICER HAS EXAMINED THE CL AIM OF THE ASSESSEE IN REMAND PROCEEDINGS IN DETAIL AND SUBMIT TED THAT THERE IS NO PROOF/EVIDENCE WHICH SHOWS THAT THIS MU CH CASH WAS AVAILABLE WITH THE ASSESSEE/APPELLANT AT THE BEGINN ING OF THE YEAR. THE ASSESSEE/APPELLANT HAS NOT SUBMITTED ANY CREDIBLE EVIDENCE WHICH SHOWS THAT CASH TO THE EXTENT OF RS. 13,02,597/- WAS AVAILABLE TO HIM WHICH WAS ACCUMULATED OVER THE YEAR STARTING FROM THE YEAR 1993-94 TO 2002-03 AFTER EXP ENDITURE INCURRED FOR HOUSEHOLD EXPENSES OUT OF INCOME RETUR NED IN THESE YEARS. IN THE ABSENCE OF ANY CO-RELATION AND EVIDENCE WHICH SHOWS THAT OPENING CASH BALANCE WAS AVAILABLE , THE ARGUMENT OF THE ASSESSEE/APPELLANT CANNOT BE ACCEPT ED AND ACCORDINGLY THEORY PUT FORWARD DURING THE APPEAL PR OCEEDINGS OF OPENING CASH BALANCE IS NOT ACCEPTED BY THE ASSESSI NG OFFICER NOR PROVED TO THE UNDERSIGNED BY THE ASSESSEE/APPEL LANT FROM COGENT AND RELIABLE EVIDENCES. ACCORDINGLY, THE NEW THEORY PUT FORWARD BY THE ASSESSEE ABOUT THE CASH BALANCE AT T HE START OF THE YEAR IS NEITHER BELIEVABLE NOR ACCEPTABLE IN VI EW OF THE FACT AND CIRCUMSTANCES REPORTED BY THE ASSESSING OFFICER IN HIS DETAILED REMAND REPORT ON THE ISSUE. THE ASSESSEE H AS ALSO FAILED TO SUBSTANTIATE HIS ARGUMENT ABOUT CASH BALA NCE AT THE BEGINNING OF THE YEAR TO ME DURING THE APPEAL PROCE EDINGS. ACCORDINGLY, THE CONTENTIONS OF THE ASSESSEE/APPELL ANT TO THAT EXTENT ARE REJECTED. 4.6. IN THE SUBMISSION MADE ON 26/12/2008, THE ASSESSEE/APPELLANT HAS ALSO FILED THE DETAILED NARR ATION OF DEPOSITS IN DEVELOPMENT CREDIT BANK LTD. WHICH SHOW S THAT TOTAL OF THE CREDITS ENTERED IN THE BANK ACCOUNT WITH THE BANK ARE OF RS.31,23,581/- WHICH INCLUDES VARIOUS ENTRIES OF CA SH DEPOSITS AND BY CHEQUES AS UNDER : - (1) CASH DEPOSIT RS.11,73,810/- (2) CHEQUE RETURNED/BOUNCED RS. 3,06,822/- (3) LOAN FROM KARATS GEMS & JEWELLERY PVT. LTD. RS. 7,48,716/- (4) LIC COMMISSION RS.. 14,715/- - (5) INSURANCE CLAIMED RECD. RS. 17,145/- (6) LOAN FROM RAVI AGARWAL RS. 85,000/ ITA NO.3844 OF 2009 8 (7) SALARY RECEIVED RS. 1,48,000/- (8) LOAN FROM SURESH JAIN RS, 2,00,000/- (9) LOAN FROM VANDANA JAIN RS. 1,00,000/- (10) LOAN FROM RAJESH M. JAIN RS.. 1 .00.000/- (11) INT. RECEIVED FROM KARATS GEMS & JEWELLERY PVT. LTD. RS. 1 0,123/- (12) LOAN RECEIVED FROM MASTER PIECE JEWELLERY (I) LTD. RS.1,00, 000/- (13) PERSONAL LOAN TAKEN FROM DCB LTD. RS. 23 ,210 (14) PERSONAL LOAN FROM ICICI BANK RS. 96,040 RS.31,23,581/- ========= 4.7. THE SUBMISSIONS MADE AND BIFURCATIONS GIVEN BY THE ASSESSEE/APPELLANT IS BASED ON THE CREDITS ENTERED IN THE BANK ACCOUNT AND ALSO ENTERED IN THE CASH BOOK SUBMITTED BY HIM TO THE ASSESSING OFFICER FOR REMAND AND IN OTHER RELEV ANT DOCUMENTS FILED DURING THE PROCEEDIN9S IN THIS REGA RD. THE ASSESSEE/APPELLANT HAS FURTHER SUBMITTED AND CLAIME D THAT CASH DEPOSIT OF RS.11,73,8101- IN ACCOUNT NO. 1914 WITH DEVELOPMENT CREDIT BANK LTD ARE PARTLY FROM WITHDRA WAL IN CASH FROM VARIOUS BANK ACCOUNTS TO THE EXTENT OF RS,5,02 ,300/- AND PARTLY FROM THE OPENING BALANCE OF THE CASH AS ON 1 /4/2004 TO THE EXTENT OF RS. 6,71,510/-. AS ALREADY DISCUSSED, THE ASSESSEE/APPELLANT HAS FAILED MISERABLY TO PROVE TH E ACCUMULATION AND AVAILABILITY OF HUGE CASH OPENING BALANCE TO THE EXTENT OF RS. 13,02,597/-, THEREFORE, IT IS HEL D THAT DEPOSITS IN CASH TO THE EXTENT OF RS.6,71,510/- ARE FROM UNE XPLAINED SOURCE OF INCOME. SIMILARLY, WITHDRAWAL OF THE CASH FROM THE BANK ACCOUNTS AND SUBSEQUENT REDEPOSIT IN THE DEVEL OPMENT CREDIT BANK LTD. ACCOUNT TO THE EXTENT OF RS.5,02,3 00/- HAS NO NEXUS TO THE WITHDRAWAL AND ALSO NOT EXPLAINED BY T HE ASSESSEE/APPELLANT WITH EVIDENCE. EVEN, THE BANK AC COUNT MAINTAINED WITH CITY BANK AND SANK OF RAJASTHAN AND OTHERS ARE NOT DISCLOSED TO THE DEPARTMENT. IN THE ABSENCE OF ANY EVIDENCE AND NEXUS OF CASH WITHDRAWAL TO THE DEPOSITS, THE A RGUMENTS OF THE ASSESSEE/APPELLANT ARE NOT ACCEPTABLE. IN THE R ESULT, THE EXPLANATION OF THE ASSESSEE/APPELLANT ABOUT DEPOSIT OF THE CASH TO THE EXTENT OF RS.11,73,810/- OUT OF CASH WITHDRA WN FROM VARIOUS BANK AND FROM OPENING BALANCE OF THE CASH I S NOT ACCEPTABLE AND THEREFORE, ADDITION TO THE EXTENT: O F RS.11,73,810/- IS CONFIRMED. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE LD. CIT[A]. IT WAS EMPH ASIZED THAT ADDITION HAS BEEN MADE MAINLY ON THE BASIS OF THE D EPOSITS IN THE DECB ACCOUNTS AND COPY OF THAT ACCOUNT WAS OBTAINED BY THE AO FROM ITA NO.3844 OF 2009 9 THE BANK WHICH CANNOT BE TREATED AS BOOKS OF ACCOUN TS AND, ACCORDINGLY, ADDITION COULD NOT HAVE BEEN MADE IN V IEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND H. GABNDHI [SUPRA]. HE FURTHER REFERRED TO PAGES 70 TO 73 OF THE PAPER BOOK WHICH IS COPY OF THE CASH BOOK, WHICH CLEARLY SHOWS A SUM OF RS.13,02,597/- AS OPENING BALANCE. HE ALSO REFERRED TO PAGES 195 TO 197 OF THE PAPER BOOK, WHICH GAVE DETAILS OF VARIOU S SOURCES OF CASH DEPOSITED AND SOME OF THE CASH WAS WITHDRAWN FROM C ITI BANK AND DEPOSITED IN DCB BANK. HE FURTHER ARGUED THAT SOME OF THE DEPOSITS WERE MADE OUT OF AMOUNTS RECEIVED AS LOANS WHICH HA VE BEEN SEPARATELY EXPLAINED. HE ARGUED THAT EVEN IF IT IS ASSUMED THAT AN ADDITION CAN BE MADE FOR CASH DEPOSITS, THEN SUCH A DDITION COULD NOT HAVE BEEN MADE DURING THE YEAR BECAUSE FOR OPENING BALANCES AO COULD HAVE MADE ADDITION IN EARLIER YEAR ONLY. IN A NY CASE, ONCE ASSESSEE HAS DISCLOSED THE SOURCE AND IF AO FAILS T O DISPUTE THE CLAIM, THEN NO SUCH ADDITION CAN BE MADE. IN THIS REGARD, HE RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F CIT VS. GOBI TEXTILES LTD. 294 ITR 663. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED ON THE ORDER OF THE LD. CIT[A] AND SUBMITTED THAT IT IS VERY STRANGE TH AT ASSESSEE HAD CASH BALANCES STILL AT TIMES HE HAS WITHDRAWN SMALL AMOU NTS OF SAY RS.2500/- AND RS.3000/- ETC. FROM CITI BANK AS PER DETAILS GIVEN AT PAGE 195 OF THE PAPER \BOOK ON 23-4-04 AND 12-3-04 AND DEPOSITED SUCH CASH IN DCB LTD. THIS IS NOT A NORMAL ACTION A ND NOT PROBABLE. HE REFERRED TO THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF SUMATI DAYAL VS. CIT [214 ITR 801] WHEREIN THIS HUM AN PROBABILITY ITA NO.3844 OF 2009 10 TEST WAS PROVED BY THE HON'BLE SUPREME COURT. FURTH ER, IF ASSESSEE HAD CASH BALANCES AT HOME, THEN WHAT WAS THE NEED F OR TAKING LOANS FROM ICICI BANK AND PERSONAL LOAN FROM DCB BANK APA RT FROM OTHER LOANS FROM VARIOUS INDIVIDUALS AND THAT TOO INTERES T BEARING LOANS. IN ANY CASE, IF CASH WAS LYING WITH THE ASSESSEE THEN ALONG WITH OTHER ASSETS PARTICULARLY THE VACANT FLAT ASSESSEE WAS LI ABLE TO PAY WEALTH TAX AS OBSERVED BY THE AO IN THE REMAND REPORT. SIN CE NO WEALTH TAX HAS BEEN PAID, THEREFORE, NO SUCH CASH BALANCE CAN BE ACCEPTED. HE CONTENDED THAT LD. CIT[A] HAS RIGHTLY DISTINGUISHED THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BH AICHAND H. GABNDHI [SUPRA] BY OBSERVING THAT THE FACTS ARE DIF FERENT AS THE ASSESSEE HAS PRODUCED A CASH BOOK THROUGH WHICH ALL ENTRIES HAVE BEEN ROUTED. IN ANY CASE, IF THE ADDITION IS NOT MA INTAINABLE U/S.68, SAME COULD HAVE BEEN EASILY MADE BY WAY OF UNDISCLO SED INVESTMENT U/S.69. AS FAR AS THE DECISION OF HON'BLE MADRAS HI GH COURT IN THE CASE OF GOBI TEXTILE [SUPRA] IS CONCERNED, SAME IS DISTI NGUISHABLE ON FACTS BECAUSE IN THAT CASE THE ISSUE WAS REGARDING RECEIP T OF SHARE APPLICATION MONEY AND ASSESSEE WAS REQUIRED TO PROV E THE SOURCE OF SHARE APPLICATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND WE ARE UNABLE TO AGREE WITH THE SUBMISSIONS OF THE LD. COU NSEL FOR THE ASSESSEE. AS FAR AS THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND H. GABNDHI [SUPRA] IS CONCERNED, SAME HAS BEEN CORRECTLY DISTINGUISHED BY THE LD. CIT[A]. IN THAT CASE THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS WHETHER BAN K PASS BOOK CAN BE CALLED BOOK OF ACCOUNTS OF THE ASSESSEE. THE HON 'BLE COURT HELD ITA NO.3844 OF 2009 11 THAT WHEN MONEY WAS DEPOSITED IN THE BANK THE RELAT IONSHIP BETWEEN THE ASSESSEE AND BANK IS ONE OF THE DEBTOR AND CRED ITOR AND NOT OF TRUSTEE AND BENEFICIARY AND, THEREFORE, THE PASS BO OK ISSUED BY THE BANK TO ITS CLIENT IS ONLY A COPY OF THE ACCOUNTS I N THE BOOK MAINTAINED BY THE BANK AND THE SAME CANNOT BE REGARDED AS BOOK OF ACCOUNTS OF THE ASSESSEE. BUT IN THE CASE BEFORE US, ASSESSEE H AS DEPOSITED CASH ON VARIOUS DATES WHICH HAS BEEN ROUTED THROUGH CASH BOOK AND IN FACT ASSESSEE HAS TRIED TO EXPLAIN THE DEPOSITS OF CASH ONLY BY REFERENCE TO THE CASH BOOK. THEREFORE, CLEARLY THIS DECISION CAN NOT BE APPLIED TO THE ASSESSEES CASE. 8. SIMILARLY, IN THE CASE OF CIT VS. GOBI TEXTILES LTD. L[SUPRA], THE ASSESSEE COMPANY HAD RECEIVED CERTAIN SHARE APPLICA TIONS AND SOME OF THE APPLICANTS WERE NOT INCOME TAX ASSESSEE AND, TH EREFORE, AO ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH TRANS ACTIONS. THE ASSESSEE PRODUCED SALARY CERTIFICATES OF SUCH PERSO NS BUT DID NOT PRODUCE SUCH PERSONS. ON THE BASIS OF THIS AO HELD THAT SUCH PERSONS EXCEPT FOR ONE WERE NOT CAPABLE OF SAVING MONEY. TH E HON'BLE COURT HELD THAT AO FAILED TO DISPROVE THE CLAIM. THEREFOR E, CLEARLY THE FACTS ARE DISTINGUISHABLE BECAUSE BURDEN ON A COMPANY TO PROVE THE SOURCE OF SHARE APPLICATION MONEY IS ALTOGETHER OF DIFFERE NT NATURE. 9. WE FURTHER FIND THAT THE HON'BLE SUPREME COURT I N THE CASE OF SUMATI DAYAL VS. CIT [SUPRA] WAS CONCERNED WITH THE FOLLOWING FACTS: THE APPELLANT CARRIED ON BUSINESS AS DEALER IN ART PIECES, ANTIQUES AND CURIOS BANGALORE. DURING THE ASSESSMEN T YEAR 1971-72, SHE CLAIMED THAT SHE RECEIVED A TOTAL AMOU NT OF RS. 3,11R831BY WAY OF RACE WINNINGS IN JACKPOTS AND TRE BLE EVENTS IN RACES AT TURF CLUBS IN BANGALORE, MADRAS AND HYD ERABAD. THE SAID AMOUNT WAS SHOWN BY THE APPELLANT IN THE CAPIT AL ACCOUNT IN THE BOOKS. FOR THE ASSESSMENT YEAR 1972-73, SHE CLAIMED ITA NO.3844 OF 2009 12 RECEIPTS OF RS. 93,500 AS RACE WINNINGS IN TWO JACK POTS AT BANGALORE AND MADRAS AND THE SAID AMOUNT WAS CREDIT ED IN THE CAPITAL ACCOUNT IN THE BOOKS. THE INCOME-TAX OFFICE R INCLUDED THESE AMOUNTS AS INCOME FROM OTHER SOURCES AND ASSE SSED THEM. THE APPELLATE ASSISTANT COMMISSIONER CONFIRME D THE ORDER. THE APPELLANT REFERRED THE MATTER TO THE SET TLEMENT COMMISSION. THE SETTLEMENT COMMISSION BY A MAJORITY HELD THAT THE EXPLANATION OF THE ASSESSEE WAS NOT GENUINE FOR THE FOLLOWING REASONS : (I) THE APPELLANTS KNOWLEDGE O F RACING WAS VERY MEAGRE. (II) A JACKPOT IS A STAKE OF FIVE EVEN TS IN A SINGLE DAY AND ONE CAN BELIEVE A REGULAR AND EXPERIENCED P UNTER CLEARING A JACK POT OCCASIONALLY BUT THE CLAIM OF T HE APPELLANT OF HAVING WON A NUMBER OF JACKPOTS IN THREE OR FOUR SE ASONS NOT MERELY AT ONE PLACE BUT AT THREE DIFFERENT CENTRES, NAMELY, MADRAS, BANGALORE AND HYDERABAD APPEARED, PRIMA FAC IE, TO BE WILD AND CONTRARY TO STATISTICAL THEORIES AND EXPER IENCE OF FREQUENCIES AND PROBABILITIES. (III) THE APPELLANT S BOOKS DID NOT SHOW ANY DRAWINGS ON RACE DAYS OR ON THE IMMEDIATEL Y PRECEDING DAYS FOR THE PURCHASE OF JACKPOT COMBINAT ION TICKETS, WHICH ENTAILED SIZABLE AMOUNTS VARYING GENERALLY BE TWEEN RS. 2,000 AND RS. 3,000. THE DRAWINGS RECORDED IN THE B OOKS COULD NOT BE CO-RELATED TO THE VARIOUS RACING EVENTS AT W HICH THE APPELLANT MADE THE ALLEGED WINNINGS. (IV) WHILE THE APPELLANTS CAPITAL ACCOUNT WAS CREDITED WITH THE GROSS AMOUNT OF RACE WINNINGS, THERE WERE NO DEBITS EITHER FOR EXPENSES AND PURCHASES OF TICKETS OR FOR LOSSES. (V) IN VIEW OF THE EXCEPTIONAL LUCK CLAIMED TO HAVE BEEN ENJOYED BY THE APPELLANT, HER LOSS OF INTEREST IN RACES FROM 1972 ASSUMED SIGNIFICANCE. T HE SETTLEMENT COMMISSION TOOK THE VIEW THAT WINNINGS I N RACING BECAME LIABLE TO INCOME-TAX FROM APRIL 1, 1972, BUT ONE WOULD NOT GIVE UP AN ACTIVITY YIELDING OR LIKELY TO YIELD A LARGE INCOME MERELY BECAUSE THE INCOME WOULD SUFFER TAX AND THAT THE POSITION WOULD BE DIFFERENT, HOWEVER, IF THE CLAIM OF WINNINGS IN RACES WAS FALSE AND WHAT WERE PASSED OFF AS SUCH WI NNINGS REALLY REPRESENTED THE APPELLANTS TAXABLE INCOME F ROM SOME UNDISCLOSED SOURCES. ON THE ABOVE FACTS IT WAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE SETTLEMENT C OMMISSION AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUD ED THAT THE APPELLANTS CLAIM ABOUT THE AMOUNT BEING HER WINNIN GS FROM RACES WAS NOT GENUINE. THEREFORE, IT IS CLEAR THAT WHILE DECIDING AN ISSUE THE SURROUNDING CIRCUMSTANCES AND ALSO HUMAN PROBABILITIES HAVE TO BE LOOKED INTO. IN THE CASE BEFORE US, ASSESSEE HAS CLAIMED TO HAVE OP ENING CASH BALANCE ITA NO.3844 OF 2009 13 OF RS.13,02,597/-. IF THAT IS SO, WE FAIL TO UNDERS TAND AS TO WHY ASSESSEE HAS BORROWED THE MONEY FROM ICICI BANK, DC B BANK IN ADDITION TO OTHER LOANS FROM THE INDIVIDUALS. FURTH ER, IF CASH WAS LYING AT HOME, WE FAIL TO UNDERSTAND FROM DETAILS OF VARI OUS TRANSACTIONS FILED AT PAGE 194 OF THE PAPER BOOK, THAT SOME CASH WAS W ITHDRAWN FROM CITI BANK AND/OR DEPOSITED IN CITI BANK. WHAT ASSES SEE IS TRYING TO SAY THAT SOMETIME CASH WAS WITHDRAWN FROM CITI BANK AND DEPOSITED IN DCB AND OTHER TIMES IT WAS WITHDRAWN FROM DCB BANK AND DEPOSITED IN CITI BANK. NO NEED FOR SUCH WITHDRAWAL OR DEPOSITS HAS BEEN EXPLAINED. IF ASSESSEE IS TRYING TO PLAY SOME GAME FOR THE SAK E OF FUN PARTICULARLY KEEPING IN VIEW THAT THERE IS HUGE CASH LYING AT HO ME, E.G. IT HAS BEEN CLAIMED THAT CASH IN EXCESS OF RS.13 LAKHS IS LYING AT HOME THEN WE FAIL TO UNDERSTAND WHY THERE WAS A WITHDRAWALS OF RS.650 0 AND RS.2500/- ON 8-4-04 AND 23-4-04. WE FURTHER FIND THAT A SUM O F RS.11,000/- HAS BEEN DEPOSITED ON 2 ND APRIL IN DCB WHAT ASSESSEE IS TRYING TO DO IS BEYOND COMPREHENSION. ALL THESE FACTS CLEARLY SHOW THAT, IN FACT, NO CASH WAS AVAILABLE AND ASSESSEE HAS AN AFTER THOUGH T CREATED AN EXPLANATION WHICH CANNOT BE ACCEPTED IN THE ABSENCE OF ANY EVIDENCE FOR THE SAME. THERE IS NO FORCE IN THE SUBMISSION T HAT CASH COULD NOT BE ADDED TO THE INCOME OF THIS YEAR BECAUSE AO HAS NOT ACCEPTED THE AVAILABILITY OF CASH BALANCE AND, THEREFORE, THERE IS NO QUESTION OF MAKING ADDITION IN EARLIER YEARS. ACCORDINGLY, WE F IND NOTHING WRONG WITH THE ORDER OF THE LD. COUNSEL FOR THE ASSESSEE. LD. CIT[A] AND CONFIRM THE SAME. ACCORDINGLY, GROUNDS NO.1, 2 AND 5 ARE REJECTED. 10. GROUNDS NOS.4 TO 8 : THROUGH THESE GROUNDS ASSESSEE HAS CHALLENGED THE OTHER ADDITIONS MAINLY ADDITION ON A CCOUNT OF LOANS ITA NO.3844 OF 2009 14 AMOUNTING TO RS.4,85,000/-, ADDITION ON ACCOUNT PAY MENT ON ACCOUNT OF EMI AGAINST THE BANK LOAN FROM DCB AMOUNTING TO RS.15,011/-, ADDITION ON ACCOUNT OF REPAYMENT OF LOAN AND INTERE ST AMOUNTING TO RS.1,20,259/- TO HSBC AND ADDITION AMOUNTING TO RS. 60,000/- IN RESPECT OF REPAYMENT OF INSTALLMENT TO LIC. THE AO HAD MADE THESE ADDITIONS BECAUSE NO SOURCE WAS EXPLAINED. 11. ON APPEAL, LD. CIT(A) CONFIRMED THE ADDITION ON ACCOUNT OF LOAN BECAUSE THOUGH LOAN CONFIRMATION WAS FILED, BUT CRE DITWORTHINESS WAS NOT PROVED. IN THE CASE OF REPAYMENT OF EMI TO DCB IT WAS OBSERVED THAT SOURCE WAS EXPLAINED AS WITHDRAWALS FROM CITI BANK BUT SINCE CITI BANK ACCOUNT WAS NOT DISCLOSED BY THE ASSESSEE DURI NG ASSESSMENT PROCEEDINGS, THEREFORE, SOURCE REMAINED UNEXPLAINED . SIMILARLY, IN THE CASE OF REPAYMENT OF LOANS TO HSBC AND LIC THE SAME WAS SHOWN FROM EITHER WITHDRAWAL FROM CITI BANK OR DCB BANK, BUT A CCORDING TO THE LD. CIT(A) THOSE ACCOUNTS WERE NOT DISCLOSED, THEREFORE , SOURCES REMAINED UNEXPLAINED. 12. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT LOAN CONFIRMATION WAS DULY FILED BEFORE THE CIT(A) BUT N O OPPORTUNITY WAS GIVEN TO PROVE THE CREDITWORTHINESS. SIMILARLY, REP AYMENT OF EMI TO DCB BANK AND REPAYMENTS TO HSBC AS WELL AS LIC, SAM E WERE WITHDRAWN FROM OTHER BANK BUT HAVE NOT BEEN VERIFIE D PROPERLY. 13. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF THE CIT(A). 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT SINCE ASSESSEE HAS NOT MADE ANY REPRESENTATION BEFORE THE AO AND THAT IS WHY THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF ST ATEMENTS OBTAINED ITA NO.3844 OF 2009 15 FROM THE BANK. HOWEVER, BEFORE THE LD. CIT(A) ALSO PROPER DETAILS HAVE NOT BEEN FILED AND IN ANY CASE IT SEEMS THAT PROPER OPPORTUNITY WAS NOT GIVEN TO EXPLAIN THE SOURCE OF DEPOSITS IN CITI BANK AND OTHER BANKS FOR EXPLAINING THE SOURCES FOR REPAYMENTS OF EMI TO DCB, HSBC AND LIC. THEREFORE, IN THE INTERESTS OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN RESPECT OF THESE ADDITIONS AND REMIT THE MATTER TO THE FILE OF THE AO FOR RE-EXAMINATION OF THE ISSUE AFTER PRO VIDING AN ADEQUATE OPPORTUNITY TO THE ASSESSEE. 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0/9/2011. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30/9/2011. P/-*