M.A. SHAHUL HAMEED, MUMBAI V. ITO 21(3)(3), MUMBAI

ITA 4132/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6589 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JITENDRA SINGH
• Keywords: Peak credit
• Section: 10(10D); 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND SANJAY GARG, (JM) . . , , , ./I.T.A.NO.4132/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) M .A. SHAHUL HAMEED NEW SANSAR RESTAURANT AND STORES, STATION ROAD, KURLA (W), MUMBAI-400070 / VS. INCOME TAX OFFICER - 2 1 ( 3 )( 3 ), ROOM NO.507, 5 TH FLOOR,, C-11,PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. ./ ./PAN/GIR NO. : AAJPM6709K ( $ / APPELLANT) .. ( %&$ / RESPONDENT) $ / APPELLANT BY : S/ SHRI K GOPAL AND JITENDRA SINGH %&$ ( /ASSESSEE BY SHRI RAVI PRAKASH ( + / DATE OF HEARING : 13.3.2014 ( + /DATE OF PRONOUNCEMENT : 7. 5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-32, MUMBAI DATED 21.12.2011 WHEREBY HE CONFIRMED /SUSTAINED TH E FOLLOWING ADDITIONS/DISALLOWANCES MADE BY AO: A: DISALLOWANCE OF INTEREST EXPENDITURE RS.37,521/- B: ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN RS.1,56,599/- C: ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 (THE ACT) RS.13,40,750/- 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THE ISSUES INVOLVED IN THIS APPEAL AND ALSO PERUSED THE RELEVANT MATERIAL AVAI LABLE ON RECORD. AS REGARDS, THE ISSUE INVOLVED IN GROUND A REGARDING DISALLOWANCE OF INTEREST, IT IS OBSERVED THAT THE LOAN TAKEN BY THE ASSESSEE ON INTEREST FROM THE BAN K WAS FOUND BY THE AO TO HAVE I.T.A.NO.4132/MUM/2012 2 BEEN PARKED IN THE INTEREST FREE MUTUAL FUNDS, CAS H IN HAND AND CASH IN BANK ACCOUNT. HE, THEREFORE, DISALLOWED THE INTEREST ATTRIBUTABLE TO THE SAID LOANS WORKED OUT AT RS.1,56,582/-. ON APPEAL, THE LD. CIT(A) HELD THAT THE ASSESSEE HAVING HIS OWN FUNDS SUFFICIENT TO MAKE INVESTMENT IN THE INTEREST FREE MUTUAL FUNDS AS WELL AS TO COVER CASH IN HAND AND CASH AT BANK, THERE WAS NO CASE OF U TILIZATION OF INTEREST BEARING LOANS BY THE ASSESSEE FOR THE SAID PURPOSES. HE HOWEVER FO UND THAT THE ASSESSEE HAD PAID INTEREST AT THE RATE OF 14% TO THE BANK ON ONE HA ND AND IT HAD ADVANCED MONEY IN THE FORM OF HIS CAPITAL IN THE PARTNERSHIP FIRMS ON TH E OTHER HAND, AT INTEREST RATE OF 12% ONLY. HE HELD THAT THIS EXCESS AMOUNT OF INTEREST PAID BY ASSESSEE AT THE RATE OF 2% THEREFORE WAS DISALLOWABLE AND ACCORDINGLY THE DIS ALLOWANCE MADE BY AO ON ACCOUNT OF INTEREST WAS SUSTAINED BY HIM TO THE EXTENT OF RS. 37,521/- 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO CONTROVERT OR R EBUT THE FINDINGS RECORDED BY LD. CIT(A) THAT THE LOAN TAKEN BY THE ASSESSEE FROM BAN K AT THE INTEREST RATE OF 14% WAS UTILIZED TO MAKE INVESTMENT BY THE ASSESSEE AS HIS CAPITAL IN THE PARTNERSHIP FIRMS AT THE RATE OF 12% ONLY AND THIS BEING SO, WE FIND NO JUS TIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF LD. CIT(A) SUSTAINING THE DISALLO WANCE MADE ON ACCOUNT OF INTEREST TO THE EXTENT OF RS.37,521/-. GROUND A OF ASSESSEE S APPEAL IS ACCORDINGLY DISMISSED. 4. AS REGARDS THE ISSUE RAISED IN GROUND B, IT IS OBSERVED THAT THE AO DURING THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERA TION NOTICED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.2,56,699/- FROM LIFE INSURANC E CORPORATION AGAINST THE INVESTMENT OF RS.1 LAKH MADE EARLIER. ALTHOUGH THE ASSESSEE CLAIMED THAT THIS ENTIRE AMOUNT WAS EXEMPT U/S 10(10D) OF THE INCOME TAX ACT, 1961 (TH E ACT) BEING MATURITY VALUE OF THE LIC POLICY, NO EVIDENCE COULD BE PRODUCED BY THE A SSESSEE TO SHOW THAT THE SAID AMOUNT REPRESENTED MATURITY VALUE OF ANY LIC POLI CY TAKEN BY HIM. THE AO, THEREFORE, TREATED THE DIFFERENCE OF RS.1,56,599/- AS SHORT TERM CAPITAL GAIN (STCG) I.T.A.NO.4132/MUM/2012 3 CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AND THE LD. CIT(A) UPHELD THE ACTION OF THE AO ON THIS ISSUE. 5. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE HAS NOT BEEN ABLE TO IS UNABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT THE AMOUNT IN QUESTION RECEIVED BY ASSESSEE FROM LIC WAS ON ACCOUNT OF MATURITY PRO CEEDS OF ANY POLICY TAKEN BY ASSESSEE. IN THE ABSENCE OF SUCH EVIDENCE TO SUB STANTIATE THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(10D) OF THE ACT, WE DO NOT FIN D ANY INFIRMITY IN THE IMPUGNED ORDER OF LD. CIT(A) CONFIRMING THE ADDITION MADE B Y AO TREATING THE DIFFERENCE OF RS.1,56,590/- AS STCG ARISEN FROM SALE OF UNITS OF LIC MUTUAL FUND. GROUND B OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 6. AS REGARDS GROUND C RELATING TO THE ISSUE OF A DDITION OF RS.13,40,750/- MADE BY AO AND SUSTAINED BY LD. CIT(A) ON ACCOUNT OF UN EXPLAINED CASH DEPOSITS, IT IS OBSERVED THAT IN THE JOINT ACCOUNT HELD BY ASSESSEE WITH HIS WIFE IN AXIS BANK AT TRICHUR, CASH DEPOSITS OF RS.25,20,000/- WERE FOUND TO BE MADE ON VARIOUS DATES. SIMULTANEOUSLY, THERE WERE CASH WITHDRAWALS ALSO FR OM THE SAID ACCOUNT TO THE TUNE OF RS.22,05,000/-. IN THE ABSENCE OF ANY EXPLANATION OFFERED BY ASSESSEE, THE DIFFERENCE BETWEEN THE TOTAL CASH DEPOSITS AND TOTAL CASH WITH DRAWALS AMOUNTING TO RS.3,15,000/- WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSE SSEE. THE AO ALSO FOUND THAT THERE WERE CASH DEPOSITS OF RS.15,99,446/- ON VARIOUS D ATES IN THE SAID ACCOUNT AND IN THE ABSENCE OF ANY EXPLANATION FORTHCOMING FROM THE AS SESSEE, THIS AMOUNT WAS ALSO ADDED BY AO TO THE TOTAL INCOME OF THE ASSESSEE. 7. BEFORE THE LD.CIT(A), IT WAS CONTENDED ON BEHAL F OF THE ASSESSEE THAT THERE WAS DOUBLE ADDITION MADE BY AO BY ADDING THE DIFFERENC E OF RS.3,15,000/- BETWEEN TOTAL CASH DEPOSITS AND TOTAL CASH WITHDRAWALS AND ALSO RS.15,99,446/- ON ACCOUNT OF CASH DEPOSITS FOUND TO BE MADE IN THE SAME BANK ACCOUNT. IT WAS ALSO CONTENDED THAT SOME OF THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS WERE RELATED TO THE WIFE OF THE I.T.A.NO.4132/MUM/2012 4 ASSESSEE AND THE SAME WERE MADE OUT OF LOANS OF RS. 4 LAKHS AND RS.6 LAKHS TAKEN BY THE WIFE OF THE ASSESSEE FROM ICICI BANK AND PRIV ATE PARTY. 8. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DECIDED THIS I SSUE VIDE PARA 7.3 OF HIS IMPUGNED ORDER WHICH READS AS UNDER : 7.3 I HAVE CONSIDERED THE ABOVE ARGUMENTS OF THE LD.AR. DURING THE APPELLATE PROCEEDINGS THE LD. AR WAS REQUESTED TO G IVE THE DATE WISE DETAILS OF THE CASH WITHDRAWN AND CASH DEPOSITED IN THE BANK A CCOUNT WHICH IS SUMMARIZED AS UNDER :- DATE OP BAL.OF CASH IN HAND CASH WITHDRAWALS CASH DEPOSITS IN BANK CLOSING BAL OF CASH IN HAND 10.4.2007 300000 (ASSUMING ) 0 300000 0 16.5.2007 0 50000 50000 24.5.2007 50000 500000 550000 8.6.2007 550000 200000 530000 13.06.2007 350000 300000 50000 16.8.2007 50000 100000 150000 4.9.2007 150000 19750 130250 4.9.2007 130250 64000 66250 5.10.2007 66250 7000 59250 16.10.2007 59250 200000 -140750 18.10.2007 -140750 200000 -340750 27.10.2007 -340750 50000 -290750 30.10.2007 -290750 35000 -255750 6.11.2007 -255750 100000 -155750 24.12.2007 -155750 50000 -105750 7.1.2008 -105750 500000 394250 14.1.2008 394250 100000 494250 25.1.2008 494250 100000 594250 28.1.2008 594250 200000 794250 6.2.2008 794250 30000 764250 22.2.2008 764250 200000 564250 26.2.2008 564250 600000 -35750 28.2.2008 -35750 500000 464250 13.3.2008 464250 400000 64250 TOTAL 2285000 2520750 FROM THE ABOVE SUMMARY, IT IS NOTED THAT ON 3 OCCAS IONS CASH WAS DEPOSITED IN BANK ACCOUNT TOTALING TO RS.10,00,000/- WHEN THE ASSESSEE HAD A NEGATIVE BALANCE OF CASH IN HAND WHICH SUGGEST THAT THERE WA S NO CASH AVAILABLE OUT OF THE EARLIER WITHDRAWALS MADE FOR BEING DEPOSITED ON THOSE THREE OCCASIONS. THE ASSESSEE HAD NEGATIVE BALANCE AT 7 OCCASIONS T HAT TOO WHEN RS.3,00,000 DEPOSITED ON 10.4.2007 IS PRESUMED TO BE AVAILED AS OPENING BALANCE THOUGH NO EVIDENCE HAS BEEN PROVIDED. HENCE THE SOURCE OF RS.10,00,000/- STRAIGHTWAY BECOMES UNEXPLAINED. FURTHER FROM THE P ATTERN OF WITHDRAWALS AND DEPOSITS IN THE ABOVE CHART IT IS ALSO NOTED THAT T HE ASSESSEE HAS MADE VERY I.T.A.NO.4132/MUM/2012 5 SMALL DEPOSITS OF CASH IN BANK ACCOUNT THOUGH AS ON SAID DATES HE WAS SUPPOSED TO HAVE HUGE CASH BALANCE WITH HIM. SIMILARLY HE CLAIMS TO HAVE WITHDRAWN CASH THOUGH HE HAD ENOUGH CASH IN HAND AS PER EARL IER WITHDRAWALS . SUCH ABNORMAL PATTERNS OF WITHDRAWALS/DEPOSITS OF CASH S UGGESTS THAT THERE WAS NOT ENOUGH CASH BALANCE LYING ACTUALLY WITH THE ASSESSE E OUT OF THE EARLIER WITHDRAWALS FROM BANK BECAUSE ONE WOULD DEPOSITS OF THE CASH IN BANK ACCOUNT LEAVING ONLY SMALL AMOUNTS AS CASH IN HAND WHEREA S THE ASSESSEE HAS ON SEVERAL OCCASIONS DEPOSITED ONLY SMALL AMOUNTS WHE N HE WAS SHOWING TO HAVE HUGE CASH IN HAND. FURTHER THERE IS NO CORRELATIO N IN AMOUNTS OF DEPOSITS WITH ANY OF THE WITHDRAWALS MADE. MERE WITHDRAWALS MADE ON EARLIER DATES DOES NOT PROVE THE PHYSICAL AVAILABILITY OF CASH IN HAND UN LESS THE ASSESSEE IS ABLE TO JUSTIFY THAT SUCH CASH WITHDRAWN WAS AVAILABLE WIT H HIM AND NOT SPENT ANY WHERE FOR OTHER PURPOSES. THE NEGATIVE CASH BALANC E PROVES THAT THE CASH WITHDRAWN ON EARLIER DATES WAS ACTUALLY NEVER AVAIL ABLE WITH ASSESSEE FOR BEING RE-DEPOSITED. THERE IS NO JUSTIFICATION OF HOLDING SUCH HUGE CASH IN HAND WHEN NO EXPENDITURE/INVESTMENT HAS BEEN CLAIMED TO BE MA DE OUT OF CASH WITHDRAWALS EVEN THOUGH ON AS MANY AS 12 OCCASIONS CASH HAS BE EN WITHDRAWN. HENCE THE SOURCE OF CASH OF RS.22,85,000/- DEPOSITED IN BANK CANNOT BE SAID TO BE FULLY EXPLAINED. CONSIDERING THE CASH OF RS.10,00,000/- DEPOSITED ON DATES WHEN ASSESSEE HAD NEGATIVE CASH BALANCES AND THE ASSESSE E HAS PEAK NEGATIVE CASH BALANCE OF RS.340750/-, THE TOTAL UNEXPLAINED CASH WILL BE RS.13,40,750 (RS.10,00,000/- + 340750). THE LD. CIT(A), THUS, SUSTAINED THE ADDITION MADE BY AO ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT FOUND TO BE MADE IN THE BANK ACCOUNT O F THE ASSESSEE TO THE EXTENT O RS.13,40,750/-. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY POINT ED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, WHEN THERE ARE CASH DEPOSITS MADE IN THE BANK ACCOUNT AND ALSO CASH WITHDRAWALS MADE FROM THE SAME ACCOUNT, THE ADDITIO NS ON ACCOUNTS OF UNEXPLAINED CASH DEPOSITS MADE IN THE SAID ACCOUNT HAS TO BE DO NE ON THE BASIS OF PEAK CREDIT WHICH ACTUALLY INDICATES THE UNEXPLAINED INVESTMEN T MADE BY ASSESSEE IN HIS BANK ACCOUNT IN THE FORM OF CASH DEPOSITS. AS PER DET AILS GIVEN BY LD. CIT(A) IN HIS IMPUGNED ORDER, WHICH ARE ALREADY REPRODUCED HEREI NABOVE, SUCH PEAK CREDIT WAS SHOWN AT RS.3,40,750/- AS ON 18.10.2007. IT IS FU RTHER OBSERVED THAT WHILE WORKING OUT OF THE SAID PEAK CREDIT, THE AMOUNT OF RS.3 LAKHS DEPOSITED BY THE ASSESSEE AS ON 10.4.2007 WAS NOT TAKEN INTO CONSIDERATION. EX PLANATION OFFERED BY LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD BEFORE US IS THAT THE S AID AMOUNT WAS DEPOSITED BY THE I.T.A.NO.4132/MUM/2012 6 ASSESSEE OUT OF OPENING CASH BALANCE AVAILABLE WITH HIM. IN THIS REGARD, HE HAS INVITED OUR ATTENTION TO THE COPY OF BALANCE SHEET OF THE A SSESSEE AS ON 31.3.2007 PLACED AT PAGE 14 OF THE PAPER BOOK TO SHOW THAT THE CASH IN HAND AND AT BANK AS ON 31.3.2007 WAS RS.65,750/-. THE BREAKUP OF THE SAID AMOUNT, HOWEVER, IS NOT AVAILABLE IN ORDER TO ASCERTAIN THE EXACT AVAILABILITY OF CASH AS ON 31.3.2007. IN OUR OPINION, THIS MATTER THEREFORE REQUIRES VERIFICATION IN ORDER TO ASCERT AIN THE EXACT AVAILABILITY OF CASH WITH THE ASSESSEE AS ON 31.3.2007 AS WELL AS TO FIND OUT WHETHER THE CASH SO AVAILABLE WAS NOT UTILIZED BY ASSESSEE SOMEWHERE ELSE AND THE SAM E WAS UTILIZED TO MAKE DEPOSITS OF RS.3 LAKHS IN THE BANK ACCOUNT AS ON 10.4.2007. WE , THEREFORE, RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO WORK OUT THE PEAK C REDIT OF CASH OF DEPOSITS AND CASH WITHDRAWALS OF THE BANK ACCOUNT OF THE ASSESSEE AFT ER ASCERTAINING THE AVAILABILITY OF OPENING CASH BALANCE TO MAKE DEPOSITS OF RS.3 LA KHS AS ON 10.4.2007 AND MAKE ADDITION ON THIS ISSUE U/S 69 OF THE ACT TO THE EXT ENT OF PEAK CREDIT SO WORKED OUT. GROUND C OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH MAY, 2014 ( / 0 7TH MAY, 2014 ( SD SD ( , / SANJAY GARG ) ( . . / P.M.JAGTAP) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 7TH DAY OF MAY, 2014 . . ./ SRL , SR. PS I.T.A.NO.4132/MUM/2012 7 ' #$&' (' / COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT /APPLICANT 2. %&$ / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. < %> , + > , / DR, ITAT, MUMBAI 6. / GUARD FILE. TRUE COPY / BY ORDER, (ASSTT. REGISTRAR) + > , /ITAT, MUMBAI