ANU D LOHANA, MUMBAI V. ITO 22(2)1, MUMBAI

ITA 4070/MUM/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9256 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Unexplained cash credit; Unexplained investment; Question of law; Cost of acquisition; Block assessment
• Section: 143(3); 68

Judgement Text

1 ITA NO.4070/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.4070/MUM/2011 (ASSESSMENT YEAR 2007-08) SMT. ANU D LOHANA 503/504, 5 TH FLOOR A-WING, GOLF SCAPPE, SION TROMBAY ROAD, CHEMBUR, MUMBAI-74 PAN : AACPL2177M VS ITO, WD.22(2)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI DEVENDRA JAIN RESPONDENT BY SHRI RAM TIWARI DATE OF HEARING 03-08-2017 DATE OF PRONOUNCEMENT 25-09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF CIT(A)-33, MUMBAI DATED 15-02-2011 AND IT PERTAINS TO AY 2007- 08. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . ASSESSING OFFICER OF TREATING THE CAPITAL GAINS ON SALE OF PROPERTY AS S HORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION U/S. 49(1) OF R S.8,51 835/- BEING THE COST OF ACQUISITION OF PROPERTY PAID BY APPELLANT'S HUSBAND, IN SPITE OF THE CLEAR FINDING OF FACT REACHED BY THE HONORABLE ITAT IN ORDER FOR 2 ITA NO.4070/MUM/2017 BLOCK PERIOD 01-04-89 TO 14-07-99 IN APPELLANT'S AN D HER HUSBAND'S OWN CASE. 3. WITHOUT PREJUDICE TO GROUND NO. 2, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HO LDING THE COST OF ACQUISITION OF THE PROPERTY SOLD AS RS. 2,71400/-, INSTEAD OF RS. 8,79,000/- AS PAID BY THE APPELLANT IN SPITE OF THE CLEAR FINDING OF FACT REACHED BY THE HONORABLE ITAT IN ORDER FOR BLOCK PE RIOD 01-04-89 TO 14-07-99 IN APPELLANT'S AND HER HUSBAND'S OWN CASE. 4. WITHOUT PREJUDICE TO GROUND NO. 2 & 3, THE LD. CIT( A) HAS ERRED IN CHARGING TO TAX THE ENTIRE CAPITAL GAINS ARISING ON SALE OF PROPERTY IN THE HANDS OF THE APPELLANT, IN SPITE OF THE FACT THAT T HE APPELLANT'S HUSBAND HAS INCURRED A PART OF THE COST OF ACQUISITION AND HENCE A PART OF THE CAPITAL GAINS IS LIABLE TO BE CLUBBED IN THE HANDS OF THE HUSBAND U/S. 64(1)(IV). 5. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTIONS OF THE LD. ASSESSIN G OFFICER IN ADDING RS. 6,00,000/- AS UNEXPLAINED CASH CREDIT U/S 68 IN SPI TE OF THE FACT THAT THE SAME AMOUNT HAS BEEN DISALLOWED AS COST OF IMPROVEM ENT WHILE CALCULATING THE CAPITAL GAINS, THEREBY TAXING THE S AME AMOUNT TWICE. 6. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTIONS OF THE LD. ASSE SSING OFFICER IN ADDING RS. 10,99,955/- AS UNEXPLAINED CASH CREDIT U /S 68. 2. THE ASSESSEE HAS FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUNDS ON 30-05-2012 WHICH READS AS FOLLOWS :_ DEAR SIR, SUB: REQUEST FOR ADMISSION OF ADDITIONAL GROUND REF: APPEAL NO. 4070/MUM/2011 FIXED ON JUNE 7, 2012 THE ABOVE-REFERRED APPEAL HAS BEEN FIXED FOR HEARIN G ON THE 7 1 OF JUNE. IN THIS REGARD, I HEREBY REQUEST THE HONORABLE TRIB UNAL TO KINDLY ADMIT FOLLOWING ADDITIONAL GROUND: 2A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION OF RS.4, 24,9001- BEING PART OF THE COST OF ACQUISITION OF PROPERTY PAID BY APPELLANT, IN 3 ITA NO.4070/MUM/2017 SPITE OF THE CLEAR FINDING OF FACT REACHED BY THE H ONORABLE ITAT IN ORDER FOR BLOCK PERIOD 01-04-89 TO 14-07-99 IN APPE LLANT'S AND HER HUSBAND'S OWN CASE.' THE ABOVE GROUND OF APPEAL ARISES OUT OF THE ORDER OF CIT(A) DATED 15.02.2011 ONLY AND ALL THE FACTS RELEVANT FOR THE SAME ARE ALREADY ON RECORD. THIS GROUND WAS INADVERTENTLY NOT TAKEN UP WHILE FILING THE FORM NO. 36 AND THE SAME IS SINCERELY REGRETTED FOR . 3. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE FACTS RELATING TO ADDITIONAL GROUND RAISED BY THE ASSESSEE ARE ALREADY ON RECORD AND NO NEW FACTS OR EVIDENCES HAVE BEEN BROUGHT ON RECORD TO SUPPORT TH E ADDITIONAL GROUNDS RAISED BY THE ASSESSEE; THEREFORE, ADDITIONAL GROUN D MAY BE ADMITTED FOR ADJUDICATION AND DISPOSED OF ON MERITS. THE LD.DR, ON THE OTHER HAND, STRONGLY OPPOSED ADMISSION OF ADDITIONAL GROUNDS. 4 HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND C HALLENGING THE FINDING OF THE LD.CIT(A) IN NOT ALLOWING DEDUCTION OF RS.4,24,900 BEING PART OF THE COST OF ACQUISITION OF THE PROPERTY PAID BY THE ASSESSEE IN CASH, IN SPITE OF THE CLEAR FINDING OF FACT REACHED BY THE ITAT IN ITS ORDER FO R THE BLOCK PERIOD 01-04-1989 TO 14-07-1999. WE FIND THAT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IS EMANATING FROM THE FACTS ALREADY ON RECORD AND NO N EW FACTS OR EVIDENCES ARE BROUGHT ON RECORD TO SUPPORT THE ADDITIONAL GROUNDS . THEREFORE, WE DEEM IT APPROPRIATE TO ADMIT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AND 4 ITA NO.4070/MUM/2017 PROCEED TO DISPOSE OF ON MERITS. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-0 8 ON 26-09-2007 DECLARING TOTAL INCOME AT RS.5,21,524. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES ISSUED U/S 143(2) AND 142(1). IN RESPONSE TO THE NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED FROM TIME T O TIME AND FURNISHED THE DETAILS AS CALLED FOR. THE ASSESSMENT WAS COMPLETE D U/S 143(3) ON 23-10-2010 DETERMINING THE TOTAL INCOME OF RS.51,83,300, INTER ALIA MAKING ADDITIONS TOWARDS RE-WORKING OF INCOME FROM HOUSE PROPERTY, I NCOME FROM SHORT TERM CAPITAL GAINS, ADDITION TOWARDS UNEXPLAINED CASH CR EDIT U/S 68 OF THE I.T. ACT, 1961. THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE FIRST APPELLATE AUTHORITY. THE CIT(A) FOR THE REASONS RECORDED IN HIS ORDER DA TED 15-02-2011 PARTLY ALLOWED COST OF ACQUISITION OF THE PROPERTY FOR RS .2,74,100 AND DIRECTED THE AO TO RE-WORK THE SHORT TERM CAPITAL GAIN. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS DETERMINATION OF INCOME FROM SALE OF PROPERTY. THE FACTUAL MATRIX W HICH LEADS TO THE IMPUGNED DISPUTE ARE THAT DURING THE FINANCIAL YEAR RELEVANT TO AY 2007-08, THE ASSESSEE HAS SOLD AN IMMOVABLE PROPERTY FOR A CONSIDERATION OF RS.33,07,970 AND 5 ITA NO.4070/MUM/2017 COMPUTED LONG TERM CAPITAL GAIN. THE SAID PROPERTY HAS BEEN PURCHASED BY WAY OF A TRIPARTITE AGREEMENT DATED 27-10-2004 AND DEED OF CONFIRMATION DATED 05-08-2005 EXECUTED BETWEEN CIDCO LTD, SHETH AKSHAY HARSHADRAI AND M/S KEKI CONSULTANTS PVT LTD AND THE ASSESSEE HAD T HE RIGHT OVER THE PROPERTY ON 27-04-2004 BY VIRTUE OF A SALE AGREEMENT AND CON FIRMATION DEED. THE ASSESSEE CLAIMS THAT SHE HAD PURCHASED THE PROPERTY FROM M/S SHEETAL BUILDERS PVT LTD AS PER LETTER DATED 09-06-1994. THE ASSESS EE FURTHER CONTENDED THAT IN FACT, THEY HAD PURCHASED THE PROPERTY IN THE YEAR 1 994 BECAUSE OF CERTAIN DISPUTE BETWEEN THE LAND OWNER AND THE BUILDER, THE PROJECT WAS INCOMPLETE AND WHICH WAS ASSIGNED TO M/S KEKI CONSULTANTS PVT LTD ON 27-10-2004. THE PAYMENT FOR PURCHASE OF PROPERTY HAS BEEN MADE OVER A PERIOD OF TIME STARTING FROM 24-05-1994 TO 03-07-1999 AND BY VIRTUE OF ALLO TMENT LETTER, SHE ASSUMED THE OWNERSHIP OF THE PROPERTY IN THE FINANCIAL YEAR RELEVANT TO AY 1995-96, THEREFORE, THE IMPUGNED ASSET IS A LONG TERM CAPITA L ASSET AND ACCORDINGLY SHE HAS RIGHTLY COMPUTED INCOME FROM SALE OF PROPERTY U NDER THE HEAD INCOME FROM LONG TERM CAPITAL GAIN. 7. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE M ATERIAL AVAILABLE ON RECORD. THE ONLY DISPUTE IS WITH REGARD TO THE PER IOD OF HOLDING OF THE PROPERTY. ACCORDING TO THE ASSESSEE SHE BECAME OWN ER OF THE PROPERTY IN THE FINANCIAL YEAR 1994-95 BY VIRTUE OF AN ALLOTMENT LE TTER DATED 09-06-1994 BY M/S 6 ITA NO.4070/MUM/2017 SHEETAL BUILDERS PVT LTD. THE AO WAS OF THE OPINIO N THAT THE ASSESSEE BECAME OWNER OF THE PROPERTY IN THE FINANCIAL YEAR 2004-05 WHICH IS EVIDENT FROM THE FACT THAT SHE GOT RIGHT OVER THE PROPERTY BY VIRTUE OF A TRIPARTITE AGREEMENT DATED 27-10-2004 BETWEEN CIDCO, SHETH AKSHAY HARSHA DRAI AND M/S KEKI CONSULTANTS PVT LTD. WE FIND FORCE IN THE FINDING OF THE AO FOR THE REASON THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR PURC HASE OF PROPERTY ON 27-10- 2004 BY VIRTUE OF A TRIPARTITE AGREEMENT. WE FURTH ER NOTICE THAT IN THE SALE AGREEMENT DATED 05-07-2006 FOR CONVEYING THE TITLE OF THE PROPERTY TO THE SELLER, IN THE PREAMBLE OF THE SALE DEED IT WAS CAT EGORICALLY STATED THAT THE ORIGINAL LICENCEE SHETH AKSHAY HARSHADRAI HAS TRANS FERRED AND ASSIGNED FLAT NO.28 TO M/S KEKI CONSULTANTS PVT LTD THROUGH ITS DIRECTORS, MR. ANU D LOHANA AND OTHERS BY TRIPARTITE AGREEMENT DATED 27-10-2004 AND DEED OF CONFIRMATION DATED 05-08-2005 DULY REGISTERED WITH SUB REGISTRAR , THANE. THOUGH ASSESSEE CLAIMS THAT SHE HAD GOT RIGHT OVER THE PROPERTY IN THE FINANCIAL YEAR 1995-96 BY VIRTUE OF AN ALLOTMENT LETTER FROM M/S SHEETAL BUIL DERS PVT LTD, THE SAID ARRANGEMENT BETWEEN PARTIES IS A MERE WILLINGNESS T O PURCHASE PROPERLY UNDER AN AGREEMENT FOR CONVEYING THE TITLE IN THE PROPERT Y TO THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A O WAS RIGHT IN TREATING THE HOLDING PERIOD OF THE PROPERTY FROM THE DAY ON WHIC H THE ASSESSEE HAS GOT RIGHT OVER THE PROPERTY BY VIRTUE OF A VALID SALE A GREEMENT, ACCORDING TO WHICH 7 ITA NO.4070/MUM/2017 THE HOLDING PERIOD OF THE PROPERTY IS LESS THAN 36 MONTHS AND HENCE, THE AO HAS RIGHTLY COMPUTED INCOME FROM SALE OF HOUSE PROP ERTY AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, THE GROUND RAISED BY THE ASSESS EE IS DISMISSED. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION F ROM GROUNDS 2-4 IS WITH REGARD TO COST OF ACQUISITION OF THE PROPERTY. THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAIN. THE ASSESSEE CLAIMS TO HAV E INCURRED COST OF ACQUISITION OF RS.15,30,350 FOR PURCHASE. THE ASSESSEE ALSO CL AIMED COST OF IMPROVEMENT OF RS.6 LAKHS. THE AO DISALLOWED COST OF ACQUISITI ON CLAIMED BY THE ASSESSEE IN THE ABSENCE OF ANY EVIDENCE TO SUBSTANTIATE COST OF ACQUISITION CLAIMED BY THE ASSESSEE. THE CIT(A), ALTHOUGH DISCUSSED THE ISSUE IN HIS ORDER AT PAGE 6 THAT AS PER THE ORDER OF ITAT, THE TOTAL PAYMENT MADE FOR T HE PROPERTY WAS FOUND AT RS.18,32,835 (RS.8,51,835 + RS.9,81,000), DID NOT C ONSIDER PAYMENT OF RS.8,51,835 MADE BY ASSESSEES HUSBAND ON THE GROUN D THAT THE SAID AMOUNT HAS BEEN TREATED AS UNEXPLAINED INVESTMENT IN THE H ANDS OF ASSESSEES HUSBAND FOR THE BLOCK PERIOD. INSOFAR AS REMAINING AMOUNT OF RS.9,81,000 THE CIT(A) HAS ALLOWED A SUM OF RS.2,74,100 WHICH WAS P AID BY CHEQUE AND REJECTED THE BALANCE AMOUNT OF RS.4,21,900 ON THE GROUND THA T THE ASSESSEE HAS PAID THE AMOUNT IN CASH FOR WHICH NO SOURCE HAS BEEN EXP LAINED. THE ASSESSEE CLAIMS THAT OUT OF THE TOTAL COST OF ACQUISITION OF THE PROPERTY, A SUM OF RS.8,51,835 HAS BEEN PAID BY ASSESSEES HUSBAND FOR WHICH A SEPARATE ADDITION 8 ITA NO.4070/MUM/2017 HAS BEEN MADE TOWARDS UNEXPLAINED INVESTMENT IN HIS HANDS WHICH IS CONFIRMED BY THE ITAT. THE ASSESSEE FURTHER SUBMIT TED THAT ONCE ADDITION HAS BEEN MADE FOR THE AMOUNT AS UNEXPLAINED INVESTMENT, THE SOURCE AVAILABLE IN THE FORM OF INVESTMENT FOR PROPERTY HAS TO BE ALLOW ED AS COST OF ACQUISITION IN THE HANDS OF THE ASSESSEE. INSOFAR AS BALANCE AMOU NT OF RS.4,24,900 IS CONCERNED, THE ASSESSEE HAS PAID CASH OUT OF CASH B ALANCE AVAILABLE IN HER BOOKS OF ACCOUNT WHICH FACT HAS BEEN ACCEPTED BY TH E ITAT IN THE BLOCK ASSESSMENT. 9. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASO N THAT THE CIT(A) HIMSELF HAS DISCUSSED THE FACT THAT A SUM OF RS.8,51,835 HAS BE EN PAID BY ASSESSEES HUSBAND TOWARDS PURCHASE OF PROPERTY FOR WHICH A SE PARATE ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEES HUSBAND FOR THE BLO CK PERIOD WHICH IS EVIDENT FROM THE FACT THAT THE SAME HAS BEEN UPHELD BY THE ITAT IN ITS ORDER DATED 23- 03-2007 IN IT (SS) A NO.699/MUM/2002). ONCE ADDITI ON HAS BEEN MADE TOWARDS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEES HUSBAND, THE SOURCE AVAILABLE IN THE FORM OF INVESTMENT TOWARDS PROPERTY CANNOT BE DENIED AS COST OF ACQUISITION. INSOFAR AS BALANCE AMOUNT OF RS.4,24,900 THE ASSESSEE HAS PAID CASH FOR PURCHASE OF PROPERTY OUT OF CASH BALANCE AVAILABLE IN THE BOOKS OF ACCOUNT WHICH FACT HAS NOT BEEN DISPUTED B Y THE LOWER AUTHORITIES. 9 ITA NO.4070/MUM/2017 THE CIT(A) HAS THOUGH ACCEPTED THE FACT THAT THE IT AT HAS ACCEPTED AS SUCH IN ITS ORDER, DISALLOWED THE COST INCURRED BY THE ASSE SSEE BY HOLDING THAT THE ADDITIONS MADE IN THE HANDS OF THE ASSESSEE DURING BLOCK PERIOD ON PROTECTIVE BASIS HAS ALREADY BEEN DELETED, CANNOT AGAIN BE CLA IMED BY THE ASSESSEE NOW. WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE CIT (A) FOR THE REASON THAT SINCE SUBSTANTIVE ADDITION HAS BEEN MADE IN THE HANDS OF THE ASSESSEES HUSBAND, ADDITION MADE ON PROTECTIVE BASIS IN THE HANDS OF T HE ASSESSEE CANNOT BE A GROUND FOR DENYING THE SOURCES AVAILABLE IN THE FOR M OF CASH. THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE EXAMINED BY THE AO IN THE LIGHT OF THE CLAIMS OF THE ASSESSEE THAT RS.8,51,835 HAS BEEN PA ID BY THE ASSESSEES HUSBAND FOR WHICH A SEPARATE ADDITION HAS BEEN MADE FOR THE BLOCK PERIOD AND ALSO AVAILABILITY OF SOURCE FOR RS.4,24,900, AS PER THE ORDER OF THE ITAT. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DI RECT HIM TO VERIFY THE COST OF ACQUISITION OF THE ASSESSEE AND RECOMPUTE THE CAPIT AL GAIN. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S ADDITION TOWARDS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT, 196 1. THE AO MADE ADDITION OF RS.6 LAKHS AS UNEXPLAINED CASH CREDIT FOR THE REASO N THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINENESS OF TRANSACTION A ND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE CLAIMS THAT ADDITIONS MADE B Y THE AO TOWARDS UNEXPLAINED CASH CREDIT U/S 68 AMOUNTS TO DOUBLE AD DITION, BECAUSE AO HAS 10 ITA NO.4070/MUM/2017 DISALLOWED COST OF IMPROVEMENT OF RS.6 LAKHS CLAIME D BY THE ASSESSEE WHILE COMPUTING CAPITAL GAIN FOR WHICH THE SOURCE HAS BEE N EXPLAINED BY WAY OF PAYABLE TOWARDS COST OF IMPROVEMENT SHOWN FOR THE PROPERTY. ONCE THE COST OF IMPROVEMENT HAS BEEN DISALLOWED, THE PAYABLE SHO WN AGAINST COST OF IMPROVEMENT AUTOMATICALLY NULLIFIES. THEREFORE, AD DITION TOWARDS PAYABLE FOR COST OF IMPROVEMENT SHOWN IN THE BALANCE-SHEET U/S 68 AS UNEXPLAINED CASH CREDIT AMOUNTS TO DOUBLE DEDUCTION, WHICH IS INCORR ECT. 11. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS SHOWN COST OF IMPROVE MENT OF RS.6 LAKHS TOWARDS PROPERTY AND SHOWN THE SAME AS PAYABLE IN THE BALAN CE-SHEET. THE AO HAS DISALLOWED COST OF IMPROVEMENT SHOWN BY THE ASSESSE E ON THE GROUND THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO JUSTIFY COST OF IMPROVEMENT. ONCE COST OF IMPROVEMENT HAS BEEN DISALLOWED WHILE COMPUTING CAPITAL GAIN, THE CREDIT SHOWN IN THE BALANCE-SHEET AGAINST COST OF IMPROVEM ENT AUTOMATICALLY NULLIFIES. THEREFORE, THE AO WAS INCORRECT IN MAKI NG ADDITIONS TOWARDS PAYABLES U/S 68 OF THE INCOME-TAX ACT, 1961. HOWEV ER, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR VERIFICATION OF THE FACT WITH REGARD TO THE COST OF IMPROVEMENT AND PAYABLES SHOWN BY THE ASSESSEE IN T HE BALANCE-SHEET. HENCE, WE DIRECT THE AO TO VERIFY THE CLAIM OF THE ASSESSEE AND IF THE PAYABLE SHOWN IN THE BALANCE-SHEET IS ON ACCOUNT OF COST OF IMPROVEMENT ALREADY 11 ITA NO.4070/MUM/2017 DISALLOWED WHILE COMPUTING CAPITAL GAIN, THEN ADDIT ION MADE U/S 68 CANNOT BE SUSTAINED IN THE EYES OF LAW AND IT SHOULD BE DELET ED. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION IS ADDITION OF RS.10,99,955 TOWARDS DIFFERENCE IN CAPITAL ACCOUNT AS PER BALANCE-SHEET ENCLOSED ALONGWITH LETTER DATED 16-06-2009 AND BALA NCE-SHEET ENCLOSED ALONGWITH LETTER DATED 09-10-2009. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THERE IS A DIFFER ENCE IN CAPITAL ACCOUNT SHOWN BY THE ASSESSEE IN THE BALANCE-SHEET AS ON 31 -03-2007. THEREFORE, HE ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DIFF ERENCE SHALL NOT BE ADDED AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. IN RESPON SE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT DIFFERENCE IN THE CAPITAL A CCOUNT BALANCE AS POINTED OUT BY THE AO IS DUE TO A CLERICAL MISTAKE OF THE A CCOUNTANT WHICH HAS BEEN RECTIFIED BY FILING A REVISED BALANCE-SHEET. THERE FORE, DIFFERENCE IN CAPITAL ACCOUNT IS NOT AN ITEM OF CREDIT FOUND IN THE BOOKS OF ACCOUNT TO MAKE ADDITION U/S 68 OF THE ACT. THE AO, AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN TH E DIFFERENCE IN CAPITAL ACCOUNT AND BALANCE-SHEETS. THOUGH ASSESSEE CLAIMS THAT IT IS A CLERICAL MISTAKE COMMITTED BY THE ACCOUNTANT, THE BALANCE IN CAPITAL ACCOUNT HAS BEEN ENHANCED BY RS.10,99,955 INCREASING THE LIABILITY S IDE OF THE BALANCE-SHEET. THEREFORE, IT IS EVIDENT FROM THE FACT THAT THE ASS ESSEE HAS INCREASED CAPITAL 12 ITA NO.4070/MUM/2017 ACCOUNT TO EXPLAIN SOURCES FOR ASSETS AND HENCE, TH E DIFFERENCE OF RS.10,59,955 HAS BEEN TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 13. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.AO WAS ERRED IN MAKING ADDITIONS OF RS.10,99,955 U/S 68 OF THE ACT, AS UNE XPLAINED CASH CREDIT TOWARDS DIFFERENCE IN CAPITAL ACCOUNT, AS THE SAID DIFFEREN CE CANNOT BE CONSIDERED AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. THE LD.AR FU RTHER SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AND IN T HE ABSENCE OF BOOKS OF ACCOUNT ADDITION CANNOT BE MADE TOWARDS CREDIT FOUN D IN THE BALANCE-SHEET. IN SUPPORT OF HIS ARGUMENTS, HE RELIED UPON CERTAIN JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS TAJ BOREWELLS (2007) 291 ITR 232 (MAD). THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE AO MADE ADDITION OF RS.10,99,955 TOWAR DS DIFFERENCE IN CAPITAL ACCOUNT IN THE BALANCE-SHEETS AS PER TWO BALANCE-SH EETS FILED BY THE ASSESSEE U/S 68 OF THE ACT. ACCORDING TO THE AO, ASSESSEE H AS INFLATED CAPITAL ACCOUNT BALANCE TO EXPLAIN THE SOURCES IN THE ASSET SIDE OF THE BALANCE-SHEET. THE ASSESSEE CLAIMS THAT ADDITION U/S 68 CANNOT BE MADE TOWARDS DIFFERENCE IN CAPITAL ACCOUNT BALANCE, AS SECTION 68 MANDATES ADD ITION OF SUM FOUND CREDITED 13 ITA NO.4070/MUM/2017 IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. SINCE THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT, THE AO WAS INCORRECT IN MAKING AD DITIONS BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. 15. WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF THE AS SESSEE FOR THE REASON THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AND SO SECTION 68 WILL NOT BE APPLICABLE, IS NOT ACCEPTABLE. IT IS INCUMBENT UPON EVERY ASSESSEE DOING BUSINESS TO MAINTAIN PROPER BOOKS OF ACCOUNT. IT M AY BE OF ANY FORM. HOWEVER, THE ASSESSEE HAS NOT DONE SO, SO HE CANNOT BE ALLOWED TO TAKE ADVANTAGE OF HIS OWN WRONG. BURDEN LIES ON THE ASS ESSEE TO SHOW FROM WHERE HE HAS RECEIVED THE AMOUNT AND WHAT IS THE NATURE. UNLESS THESE FACTS ARE EXPLAINED, HE CANNOT CLAIM DEDUCTION OF THE SAME AM OUNT FROM INCOME-TAX U/S 68 OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE DIFFERENCE IN CAPITAL ACCOUNT AS PER TW O BALANCE-SHEETS FILED BEFORE THE AO AND ALSO CONSIDERING THE FACT THAT THE ASSES SEE HAS INFLATED THE CAPITAL ACCOUNT TO EXPLAIN THE ASSETS APPEARING IN BALANCE- SHEET, THE AO WAS RIGHT IN TREATING DIFFERENCE IN CAPITAL ACCOUNT AS UNEXPLAIN ED CASH CREDIT U/S 68 OF THE ACT. THIS PROPOSITION IS FURTHER STRENGTHENED BY T HE LATEST DECISION OF THE BOMBAY HIGH COURT, IN THE CASE OF SHRIARUNKUMAR J M UCHHALA VS CIT IN INCOME- TAX APPEAL NO.363 OF 2015 JUDGEMENT DATED 24-08-201 7 WHEREIN THE HONBLE HIGH COURT CATEGORICALLY HELD THAT THE ASSESSEE CAN NOT TAKE ADVANTAGE OF HIS 14 ITA NO.4070/MUM/2017 OWN WRONG DONE BY NOT MAINTAINING BOOKS OF ACCOUNT AS REQUIRED UNDER THE ACT. THE HONBLE COURT FURTHER OBSERVED THAT THE A SSESSEE HAS TO EXPLAIN EACH AND EVERY CREDIT APPEARING IN THE BOOKS OF ACCOUNT. THE COURT FURTHER CONSIDERING THE CASE LAWS RELIED UPON BY THE ASSESS EE IN THE CASE OF CIT VS TAJ BOREWELLS (SUPRA) OBSERVED THAT THE ASSESSEE HAS TO EXPLAIN ABOUT THE NATURE AND SOURCE OF THE CREDITS IN THE BOOKS OF ACCOUNT, AND THE AMOUNTS SO CREDITED IN THE BANK PASSBOOK. THE SOURCE OF SUCH AMOUNT HA S BEEN DISCUSSED BY THE AO FROM THE BALANCE-SHEET FILED BY THE ASSESSEE. A PPARENTLY, IT MIGHT HAVE BEEN PREPARED FROM THE BOOKS OF ACCOUNT. THE RELEV ANT PORTION OF THE ORDER OF THE HONBLE HIGH COURT IS EXTRACTED BELOW:- 11. THE FACTS AS EMERGED BEFORE THE ASSESSING OFFIC ER APPEARS TO BE NOT IN DISPUTE. THE APPELLANT HAS NOT DENIED TH AT HE HAS RECEIVED THE SAID LOAN AMOUNT / CASH DEPOSITS FROM THOSE PER SONS WHOSE LIST HAS BEEN GIVEN IN THE ORDER OF ASSESSING OFFICER. HE HAS REVEALED THOSE NAMES FROM THE BANK ACCOUNT OF THE APPELLANT. NOW, APPELLANT INTENDS TO SAY THAT HE HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND THEREFORE, THOSE AMOUNTS CAN NOT BE CO NSIDERED. WHEN APPELLANT IS DOING BUSINESS, THEN IT WAS INCUM BENT ON HIM TO MAINTAIN PROPER BOOKS AND/ OR BOOKS OF ACCOU NT. IT MAY BE IN ANY FORM. THEREFORE, IF HE HAD NOT MAINTA INED IT, THEN HE CAN NOT BE ALLOWED TO TAKE ADVANTAGE OF HIS OWN WRONG. BURDEN LIES ON HIM TO SHOW FROM WHERE HE HAS RECEIVED THE AMOUNT AND WHAT IS ITS NATURE. UNLESS THIS FACT IS EXPLAINED HE CANNOT CLAIM OR HAVE DEDUCTION OF THE SAID AMOUNT FROM THE INCOME TAX. SEC. 68 OF I. T. ACT PR OVIDES THAT WHERE THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE CREDITS IN THE BOOKS OF ACCOUNT, ALL THE AMOUNTS 15 ITA NO.4070/MUM/2017 SO CREDITED OR WHERE THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY IN RELATION TO THE SAM E THEN SUCH CREDITS MAY BE CHARGED TO TAX AS INCOME OF THE ASSE SSEE FOR THAT PARTICULAR PREVIOUS YEAR. IT IS TO BE NOTED HE RE IN THIS CASE THAT HUGE AMOUNTS HAVE BEEN CREDITED IN THE ACCOUNT OF THE APPELLANT AND HE HAS NOT EXPLAINED THE NATURE OF TH E SAME. THE SOURCE OF THE SAID AMOUNT HAS BEEN DISCOVERED B Y THE ASSESSING OFFICER FROM BANK PASS BOOK. IT IS TO BE NOTED THAT WHEN THE SOURCE AND NATURE HAS BEEN HELD TO HAVE BE EN EXPLAINED, THE SAID AMOUNT HAS BEEN DELETED BY THE APPELLATE FORUMS. NOW THE DISPUTE HAS REMAINED IN R ESPECT OF AMOUNT OF RS.9,00,000/- FROM M/S. POOJACORPORATI ON, RS.7,00,000/- FROM M/S. POOJA ENTERPRISES, RS.24,00 ,000/- FROM SHRI. ASHOK MEHTA, RS.18,00,000/- FROM MR. AJAY SHA H. NO DOCUMENT WAS PRODUCED IN RESPECT OF THESE TRANSACTI ONS NOR THE AMOUNTS HAVE BEEN CONFIRMED FROM THOSE PERS ONS, WHO ARE SHOWN TO HAVE LENT THEM. THE AUTHORITIES BE LOW HAVE THEREFORE, RIGHTLY HELD THAT NATURE OF THE TRANSACT ION HAS NOT BEEN PROPERLY SHOWN BY THE APPELLANT. 12. THE RATIO OF THE AUTHORITIES RELIED BY THE LEAR NED COUNSEL APPEARING FOR APPELLANT IS NOT APPLICABLE H ERE. IN THOSE CASES, EITHER THE ENTRIES WERE CONFIRMED BY T HE PARTIES IN WHOSE NAME THEY WERE STANDING OR BOOKS O F ACCOUNTS WERE SHOWING THE CASH CREDITS FROM UNDISCL OSED SOURCE. HERE IN THIS CASE, AT NO EARLIER POINT OF T IME, A FIRM STAND WAS TAKEN BY THE APPELLANT THAT HE HAS NOT MA INTAINED BOOKS OF ACCOUNT. WHENEVER A DIRECTION WAS GIVEN TO PRODUCE THE SAME IN ANY FORM, IT WAS REPLIED BY THE APPELLANT THAT HE WANTS TIME TO PREPARE. MANY OPPORTUNITIES WERE GIVEN BY THE ASSESSING OFFICER F OR THE PRODUCTION OF RELEVANT DOCUMENTS INCLUDING BOOKS OF ACCOUNT IN THE FORM OF LEDGER, BALANCE SHEET, ETC. HOWEVER, SUCH DOCUMENTS WERE NEVER PRODUCED. NON-PRODUCTION OF TH E DOCUMENT IS DIFFERENT FROM NOT MAINTAINING THE BOOK S OF ACCOUNT. THE APPELLANT HAS RAISED THE SAID POINT OF 'HOOKS OF ACCOUNTS NOT MAINTAINED' FOR THE FIRST TIME BEFORE THIS COURT. THE FACTS IN THE CASE OF SUDHIR KUMAR SHARMA (SUPRA) ARE 16 ITA NO.4070/MUM/2017 ALMOST SIMILAR AND THEREFORE, THE OBSERVATIONS ARE BINDING. 13. WHEN EVEN AFTER GIVING OPPORTUNITIES , THE APPE LLANT HAD FAILED TO PRODUCE RELEVANT DOCUMENTS AND EXPLAI N THE NATURE AND SOURCE OF THE AMOUNT RECEIVED BY HIM AS NARRATED ABOVE; THE ORDER OF THE ASSESSMENT OFFICER AND THE APPELLATE AUTHORITIES IN RESPECT OF THOSE AMOUNTS IS JUSTIFIE D. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW RAISED BY THE APPELLANT IN THIS APPEAL AND THEREFORE, WE PROCEED TO PASS FOLLOWING ORDER. 16. IN THIS VIEW OF THE MATTER AND ALSO CONSIDERING THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE THAT ADDITION CANNOT BE MADE U/S 68 OF THE ACT, IN THE ABSENCE OF BOOKS OF ACCOUNT. THE AO HAS MADE ADDITION TOWARDS DIFFEREN CE IN CAPITAL ACCOUNT WHICH IS APPARENTLY FROM THE BOOKS OF ACCOUNT OF TH E ASSESSEE AND HENCE, WE UPHOLD THE ADDITIONS MADE BY THE AO AND DISMISS GRO UNDS RAISED BY THE ASSESSEE. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2017. SD/- SD/- (D.T. GARASIA) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 25 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI