PANKAJ R . GANDHI, MUMBAI V. ITO 19(2)(4), MUMBAI

ITA 4020/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100736 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 02-06-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Keywords: Unexplained expenditure; Business income; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 69C; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 4020/M/2014 (AY:2008 - 20 09 ) PANKAJ R. GANDHI, C/O. SANJAY C. SHAH, B - 3, OM JOSHI APARTMENT, LALUBHAI PARK ROAD, ANDHERI WEST, MUMBAI - 058. / VS. ITO 19(2)(4), PIRAMAL CHAMBERS, MUMBAI. ./ PAN : A IJPG2872P ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY C. SHAH / RESPONDENT BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 09.07.2015 / DATE OF PRONOUNCEMENT : 28 .08.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 2.6.2014 IS AGAINST THE ORDER OF THE CIT (A) - 18, MUMBAI DATED 16.1.2014 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, ASSESSEE RAISE THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. LD CIT (A) ERRED IN CONFIRMING THE ADDITIONS MADE OF RS. 12,04,026/ - U/S 69C OF THE ACT BY THE AO ON THE PLEA THAT ARGUMENT OF APPELLANT THAT ON IDENTICAL FACTS THE PAYMENT THROUGH CREDIT CARD WAS ACCEPTED IN AY 2009 - 2010 IS MISLEADING STATEMENT BECAUSE IN ASSESSMENT YEAR 2009 - 2010, THERE IS NO DISCUSSION OF CREDIT CARD ENTRIES. APPELLANT SUBMITS TH AT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE ADDITION OF R S. 12,04,026/ - U/S 69C OF THE ACT DESERVES TO BE DELETED. 2. LD CIT (A) ERRED IN CONFIRMING ADDITIONS MADE OF RS. 12,04,026/ - U/S 69C OF THE ACT BY THE AO ON THE PLE A THAT THE AR HAS FAILED TO SUBMIT PURCHASE BILLS, SALES BILLS AND COMPLETE ADDRESS OF PURCHASE AND SALES PARTIES. APPELLANT SUBMITS THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS WELL AS IN LAW THE ADDITION OF RS. 12,04,026/ - U/S 69C OF TH E ACT DESERVES TO BE DELETED. 2. IN THE ABOVE MENTIONED GROUNDS, THE CORE ISSUE RAISED BY THE ASSESSEE RELATES TO THE SUSTAINING OF ADDITION OF RS. 12,04,026/ - U/S 69C OF THE ACT. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THE ASSESSEE, WHO IS AN INDIVIDUAL, FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 25, 280/ - . ASSESSEE HAS A SHARE OF 2 INCOME FROM HIS FIRM M/S. IMP ELECTRONICS. DURING THE ASSESSMENT PROCEEDINGS, AO RECEIVED AIR INFORMATION AND WHICH SAYS THAT THE ASSESSEE MADE P AYMENTS AMOUNTING TO RS. 12,04,026/ - USING HIS CREDIT CARDS. ASSESSEE HAS CREDIT CARDS ISSUED BY HDFC BANK AND DEUTSCHE BANK. ASSESSEE SPENT AN AMOUNT OF RS. 2,78,564/ - USING HDFC BANK CREDIT CARD. SIMILARLY, HE SPENT RS. 9,25,462/ - USING DEUTSCHE BANK C REDIT CARD. THE TOTAL AMOUNT SPENT WORKS OUT TO RS. 12,04,026/ - . DURING THE ASSESSMENT PROCEEDINGS, AO MADE ATTEMPTS TO REACH THE ASSESSEE AND THE INCOME TAX INSPECTOR (ITI) ALSO MADE A VISIT TO THE PREMISES ONLY TO COME TO KNOW WHETHER THE ASSESSEES SH OP WAS SOLD AND SHIFTED THE RESIDENCE TO GUJARAT. SINCE, THE ASSESSMENT IS GETTING TIME BARRED AS WELL AS CONSIDERING THE NON - COMPLIANCE OF THE ASSESSEE, AO COMPLETED THE ASSESSMENT U/S 144 OF THE ACT. IN THE ASSESSMENT AO MADE ADDITION OF RS. 12,04,026 / - U/S 69C OF THE ACT ON ACCOUNT OF UNEXPLAINED EXPENDITURE. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE MADE ELABORATE SUBMISSIONS AND EXPLAINED THE METHOD OF USE OF THE SAID CREDIT CORDS FOR PURCHASES OF THE ELECTRONIC GOODS. ASSESSEE MENTIONED THAT SALE PROCEEDS OF THE SAID ELECTRONIC GOODS WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE WITH SHAMRAO VITHHAL COOPERATIVE BANK AND THE CHEQUES WERE ISSUED FROM THE SAID BANK FOR PAYING THE CREDIT CARDS OUTSTANDING BALANCES. ASSESSEE FURNISHED THE ADDITIONAL EVIDENCES BEFORE THE CIT (A) GIVING DETAILS OF THE PURCHASES (PAGES 10 AND 11 OF THE PAPER BOOK) AND THE SALES OF 49 PARTIES, THE DETAILS OF WHICH ARE PLACED AT PAGES 8 AN D 9 OF THE PAPER BOOK. ASSESSEE ALSO FURNISHED WORKING OF THE OPENING STOCK AND CLOSING STOCK; DETAILS OF THE GP RATE AT PAGE 15 OF THE PAPER BOOK. FURTHER, HE FILED REVISED COMPUTATION OF INCOME AT PAGE 18, WHICH SHOWS THAT THE RECEIPT OF PROFIT SHARE INCOME FROM M/S. IMP ELECTRONICS APART FROM OTHER BUSINESS INCOME, WHERE THE TOTAL INCOME IS SHOWN AT RS. 1,58,940/ - . ASSESSEE ALSO FURNISHED THE CREDIT CARD DETAILS OF BOTH THE BANKS. THE SAID ADDITIONAL EVIDENCES WERE REMAN DED TO THE AO FOR HIS COMMENTS. AS PER THE REMAND REPORT PLACED AT PAGE 22 OF THE PAPER BOOK ON THE ISSUE OF CREDIT CARDS, AO COMMENTED THAT MAJOR PAYMENTS USING CREDIT CARDS WAS TO HIS FIRM NAMED M/S. IMP ELECTRONICS AND FRIGKING. ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF THE PARTIES. USING THE ADDRESSED PROVIDED BY THE ASSESSEE, AO ISSUED NOTICES AND THEY WERE RETURNED UNSERVED. FURTHER, AO NOTICED THAT THE BUSINESS OF TRADE IN ELECTRONIC GOODS IS UNDISCLOSED BUSINESS OF THE ASSESSEE. NO PROPER BILLS FOR 3 PURCHASES AND SALES ARE MAINTAINED. ALTHOUGH THE AO ACCEPTS THE FACT OF ASSESSEES BUSINESS IN ELECTRONIC GOODS, THE AO GAVE A FINDING THAT THE ITEMS OF SUCH TRADING COULD NOT BE IDENTIFIED AS THE DETAILS WERE NOT FURNISHED BY THE ASSESSEE. AO IS ALSO NOT HAPPY OF THE GP RATIOS PROVIDED BY THE ASSESSEE. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THAT ON IDENTICAL FACTS INVOLVING CREDIT CARD PAYMENTS FOR THE BUSINESS PURPOSES OF THE ELECTRONIC GOODS, THE AO DID NOT MAKE ANY ADDIT ION U/S 69C OF THE ACT. ONLY GP ADDITIONS WERE MADE IN THE ASSESSMENT FOR THE AY 2009 - 2010. HOWEVER, THE CIT (A) CONSIDERED THE SUBMISSIONS AND GAVE FINDING THAT THE ASSESSEE DISCHARGED THE ONUS IN MATTERS OF DETAILS OF SALES AND ITEMS SOLD TO THE PARTIE S. ON THE ISSUE OF COMMISSION RELATING TO THE ASSESSMENT MADE FOR THE A Y 2009 - 2010, CIT (A) MENTIONED THAT THE ADDITION ON ACCOUNT OF GP RATE WAS THE ISSUE AND NOT THE ADDITION U/S 69C OF THE ACT ON ACCOUNT OF CREDIT CARD BILLS. ACCORDINGLY, HE CONFIRMED THE ADDITION FOR WANT OF DOCUMENTARY EVIDENCES IN SUPPORT OF THE SOURCE OF RS.12,04,026/. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR TH E ASSESSEE BROUGHT OUR ATTENTION TO THE ADDITIONAL EVIDENCES, REMAND REPORTS, PARTICULARS OF THE CREDIT CARD BILLS AND OTHER DATA DISCUSSED ABOVE AND SUBMITTED THAT THE ISSUE OF ACCEPTING THE CREDIT CARD TRANSACTIONS FOR BUSINESS PURPOSES WAS CONSIDERED AN D ACCEPTED BY THE ASSESSING OFFICER FOR THE AY 2009 - 2010 AS EVIDENT FROM THE FACT THAT NO ADDITION IS MADE U/S 69C OF THE ACT, COPY OF THE ASSESSMENT ORDER FOR THE AY 2009 - 2010 IS PLACED AT PAGE 33 OF THE PAPER BOOK. UNDER SIMILAR FACTS AND TRANSACTIONS, AO MADE ADDITION OF RS. 70,230/ - ON ACCOUNT OF GP @ 12% AS AGAINST THE DECLARED GP OF 10.09% AND THE SAME IS ACCEPTED BY THE ASSESSEE AS THE GROUND IS WITHDRAWN DURING THE FIRST APPELLATE PROCEEDINGS. OTHERWISE, THERE IS NO ADDITION MADE FOR THE AY 2009 - 2 010 U/S 69C OF THE ACT. 5. ON THE OTHER HAND, LD DR HIGHLIGHTED THE ASSESSEES FAILURE IN FURNISHING THE EVIDENCES OR SUSTAINABLE ADDRESSES OF THE SALES PARTIES AND THE FACT OF EFFECTING CASH SALES, WHICH IS THE SOURCE FOR DEPOSITS IN BANK ACCOUNT WITH SH AMRAO VITHHAL COOPERATIVE BANK. THE EXPLANATION OF THE ASSESSEE FOR THE CASH DEPOSITS IN THE SAID BANK IS THE CASH SALES OF THE ELECTRONIC GOODS. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT M ATERIAL PLACED ON RECORD. THE CORE ARGUMENT OF 4 THE ASSESSEE IS THAT THE SIMILAR BUSINESS OPERATIONS WERE DONE BY THE ASSESSEE IN THE YEAR RELEVANT TO THE AY 2009 - 2010 AND NO ADDITION WAS MADE IN THAT ASSESSMENT YEAR U/S 69C OF THE ACT. SIMILAR DOCUMENTAT ION WAS FURNISHED TO THE AO DURING THE SCRUTINY ASSESSMENT PROCEEDINGS. GP ADDITION APPLYING THE RATE OF 12% WAS FINAL IN THAT AY. ON GOING THROUGH THE PAPERS FILED BEFORE THE TRIBUNAL, WE FIND THE CREDIT CARDS IN QUESTION WERE UTILISED FOR BUSINESS PURP OSES AND FOR BUYING THE ELECTRONIC GOODS FROM M/S. IMP ELECTRONICS AND FRIGKING. NOW THE QUESTION IS WHAT HE HAS DONE WITH SUCH ELECTRONIC PURCHASES FROM THE SAID CONCERNS, IF NOT FOR SALES. ASSESSEE IS UNDISPUTEDLY IN THIS LINE OF BUSINESS FOR MANY YEAR S AS ACCEPTED BY THE ASSESSING OFFICER. BEFORE US ALSO THERE IS NO EXPLANATION OF THE ASSESSEE AS TO WHY THE GP RATE FOR THE YEAR UNDER CONSIDERATION IS ONLY 9.84% (PAGE 15 OF THE PAPER BOOK) WHICH IS MUCH LESS THAN 12% AS ACCEPTED BY THE ASSESSEE IN THE LATER ASSESSMENT YEARS. IN THESE CIRCUMSTANCES, IT IS REASONABLE TO INFER THAT THE GOODS PURCHASED USING THE SAID CREDIT CARDS WERE SOLD AND THE SAID SALE PROCEEDS SHOULD CONSTITUTE EXPLANATION FOR EXPLAINING THE SOURCE OF CASH DEPOSITS IN THE BANK ACCOUN T WITH SHAMRAO VITHHAL COOPERATIVE BANK. WE ALSO ACCEPT THE FACT THAT NO ADDITION WAS MADE U/S 69C OF THE ACT IN THE AY 2009 - 2010 UNDER COMPARABLE CIRCUMSTANCES AND FACTS. THUS, IN MY CONSIDERED OPINION, IT IS ALSO A CASE FOR GP ADDITION, IF ANY, IF THE GP OF THE YEAR UNDER CONSIDERATION IS BELOW 12%. THUS, I FIND THIS IS NOT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT AND THE AO SHOULD RESTRICT THE ADDITION IF ANY TO THE GP RATIOS AS DONE BY THE AO IN THE SUBSEQUENT ASSESSMENT YEARS . AO IS DIRECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE PRINCIPLE OF NATURAL JUSTICE IN THE SET ASIDE PROCEEDINGS FOR MAKING ADDITION IN THE LINES MADE FOR THE AY 2009 - 2010. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSES SEE ARE ALLOWED PROTANTO. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN THE ABOVE MENTIONED MANNER. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 T H AUGUST, 2015. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 2 8 .8 .2015 . . ./ OKK , SR. PS 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI