NIRMALA M PATEL, MUMBAI V. ITO WD 21(1)(3), MUMBAI

ITA 4245/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3947 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Unexplained cash credit; Principle of natural justice; Peak credit; Transactions in derivatives
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4245/MUM/2013 ASSESSMENT YEAR: 2008-09 SMT. NIRMALA M. PATEL, C/O. SHIRISH H. SHAH & CO., , MANGROL MANSION, 6, RUSTOM SIDHWA MARG, FORT, 608, REGENT CHAMBERS, MUMBAI-400001. PAN: AACPP5697A VS. ITO- WARD (21)(1)(3), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY R. PA RIKH (AR) REVENUE BY : SHRI SACHCHIDANAND DUBE (DR) DATE OF HEARING : 03.02.2016 DATE OF PRONOUNCEMENT : 03.05.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-... DATED 26.02.2013 RAISING THE FOLLOWING GROUNDS OF APPEAL: A) PRINCIPLES OF NATURAL JUSTICE VIOLATED 1. THE LD. C.LT. APPEALS ERRED IN STATING THAT THE APPELLANT FILED REVISED COMPUTATION OF INCOME AND OTHER DETAILS AFTER COMPL ETION OF ASSESSMENT PROCEEDINGS. B) ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN AXIS BANK RS. 19,52,000/- 2. THE LD. C.LT. 'APPEALS ERRED IN FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE A.O. MAKING AN ADDITION OF RS. 19,52,000/- AS UNEXP LAINED CASH DEPOSITS IN AXIS BANK INSTEAD OF RESTRICTING THE SAME TO RS. 3,67,00 0/- BEING THE PEAK BALANCE OFFERED TO TAX BY THE APPELLANT. 3. THE LD. C.I.T. APPEALS ERRED IN STATING THAT NO REASON HAS BEEN STATED AS TO WHY THE APPELLANT KEPT ON WITHDRAWING CASH WHEN CASH WI THDRAWN ON NONE OF THE OCCASION WAS USED FOR ANY PURPOSE. 2 ITA NO. 4245/M/2013- SMT. NIRMALA M. PATEL 4. THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE ADDITION UNDER SECTION 68 AMOUNTING TO RS. 32,11,0000/- IS UNCALLED FOR AND H ENCE, THE SAME MAY BE RESTRICTED TO RS. 3,67,000/-. C) BUSSINESS LOSS OF (-) RS. 6,51,927/-. 5. THE LD. C.LT. APPEALS ERRED ON FACTS AND IN LAW IN NOT GRANTING THE SET OFF OF BUSINESS LOSS OF (-) RS. 6,51,927/- AGAINST THE INC OME UNDER THE HEAD SHORT TERM CAPITAL GAINS ON SALE OF SHARES (LIABLE TO STT) OR INCOME FROM OTHER SOURCES OR AGAINST INCOME ASSESSED U/S 68. 6. THE APPELLANT PRAYS YOUR HONOUR THAT THE SAID BU SINESS LOSS OF (-) RS. 6,51,927/- BE ORDERED TO BE SET OFF AGAINST THE INCOME UNDER T HE HEAD SHORT TERM CAPITAL GAINS ON SALE OF SHARES (LIABLE TO STT) OR INCOME F ROM OTHER SOURCES OR AGAINST INCOME ASSESSED U/S 68. D) GENERAL 7. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE RELEVANT AY ON 15.07.2008 DECLARING TOTAL INCOME OF RS. 1,72 ,380/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT THE AO OBSERVED THAT IN AIR INFORMATION IT WAS DISCLOSED THAT ASSESSEE HAS DEPO SITED CASH DEPOSIT OF RS. 19,52,000/- IN AXIS BANK. THE ASSESSEE WAS ASKED TO PRODUCE THE DETAIL OF THE CASH DEPOSIT IN THE BANK. ASSESSEE NOT COMPLIED WITH THE DIRECTION OF AO. AO SUMMONED THE BANK AUTHORITIES TO PRODUCE THE DETAIL S OF ASSESSEES BANK ACCOUNT. AFTER SUBMISSION OF DETAILS BY BANK AO FURTHER NOTI CED THAT THERE WERE CREDIT ENTRIES OF RS. 19,07,201/-, CASH DEPOSIT OF RS. 19, 52,000/- AND BANK INTEREST OF RS. 1995/-. THE ASSESSEE WAS AGAIN ASKED TO EXPLAIN THE DETAILS OF VARIOUS ENTRIES. SINCE ASSESSEE DID NOT FILE ANY SATISFACTORY REPLY THE AO MADE AN ADDITION OF RS. 19,52,000/- AS CASH DEPOSIT IN AXIS BANK, RS. 19,07 ,201/- AS CREDITS IN AXIS BANK, RS. 1995/- ON ACCOUNT OF INTEREST AND RS. 52,785/- FROM SHARE KHAN IN UNION BANK AS AN UNEXPLAINED CREDIT IN THE ASSESSMENT ORDER. 3. AGGRIEVED BY THE ORDER OF AO, ASSESSEE FILED AN APP EAL BEFORE THE CIT(A). CIT(A) AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE RE STRICTED THE ADDITION OF RS. 19,07,201/- TO RS. 5,81,968/- AND TREATED IT AS A S HORT TERM CAPITAL GAIN (STCG) AND RS. 25,688/- AS UNEXPLAINED CREDIT U/S. 68/69A OF THE ACT AND THE ADDITION OF RS. 19,52,000/- WAS SUSTAINED. HOWEVER, CREDIT ENTR Y OF RS. 52,785/- THROUGH CHEQUES FROM SHARE KHAN DEPOSITED IN BANK OF INDIA WAS DELETED IN THE IMPUGNED ORDER DATED 26.02.2013. AGGRIEVED BY THE ORDER OF C IT(A) THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 3 ITA NO. 4245/M/2013- SMT. NIRMALA M. PATEL 4. WE HAVE HEARD LD. AR FOR ASSESSEE AND DR FOR REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 5. FIRST WE WILL CONSIDER THE GROUND NO.1, RAISED IN T HE PRESENT APPEAL. IN GROUND NO. 1, THE ASSESSEE URGED THAT THE PRINCIPLE OF NATURAL JUSTICE WAS VIOLATED BY CIT(A) IN HOLDING THAT ASSESSEE FILED REVISED COMPUTATION OF INCOME AND OTHER DETAILS AFTER COMPLETION OF ASSESSMENT PROCEEDING. WE HAVE NOTICE D THAT AR OF ASSESSEE HAS NOT ARGUED IN RESPECT OF THIS GROUND, SO WE HOLD THAT T HIS GROUND IS NOT PRESSED AND THE SAME IS DISMISSED. 6. NEXT GROUND FOR OUR CONSIDERATION IS ADDITION OF RS . 19,52,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT. LD. AR OF ASSESSEE ARGUED THAT CIT(A) ERRED IN LAW IN UPHOLDING THE ORDER OF AO INSTEAD OF RESTRICTING TH E SAME TO RS. 3,67,000/- BEING THE PEAK BALANCE OFFERED TO TAX BY THE ASSESSEE. LD . DR SUPPORTED THE ORDER OF AUTHORITIES BELOW. WE HAVE PERUSED THE DATE-WISE DE TAILS OF DEPOSITS AND WITHDRAWAL OF THE CASH IN THE SAVING BANK ACCOUNT O F THE ASSESSEE (AS MENTIONED IN PARA 3.4.3 OF CIT(A) ORDER) AND NOTICED THAT PEAK B ALANCE IN THE BANK ACCOUNT OF ASSESSEE IS RS. 3,67,000/- DURING THE ASSESSMENT YE AR. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE STATEMENT OF BANK ACCOUNT OF THE ASSESSEE. IN OUR OPINION IT MA Y NOT BE PROPER ON THE PART OF REVENUE TO CONSIDER THE AMOUNTS OF DEPOSIT ONLY AND NOT TO GIVE THE CONSIDERATION FOR THE AMOUNT WITHDRAWN FROM TIME TO TIME. THE CO- ORDINATE BENCH OF ITAT, AHMADABAD IN CASE TITLED AS SUDHIRBHAI PREEVINKANT THAKKAR VS. ITO REPORTED VIDE (2015) 44 ITR(TRIB.) 135 AHMADABAD WHILE DEALING WI TH THE IDENTICAL GROUND HELD AS UNDER: IN OUR CONSIDERED VIEW, WHEN THE ASSESSEE HAS DEMO NSTRATED THAT HE HAD WITHDRAWN CASH FROM THE BANK AND THERE IS NO FINDING BY THE AUTHORITIES BELOW THAT THIS CASH AVAILABLE WITH THE ASSESSEE WAS INVESTED OR UTILIZED FOR ANY OTHER PURPOSE, IN THAT EVENT, IT IS NOT OPEN TO THE AUTHORITIES TO MAKE THE ADDITION ON THE BASI S THAT ASSESSEE FAILED TO EXPLAIN THE SOURCE OF DEPOSIT. MOREOVER, THE AUTHORITIES BELOW HAVE NOT DISPUTED THE FACT THAT THE ASSESSEE HAD WITHDRAWN AND AMOUNT OF RS. 9,10,000/- BEFORE THE DEPOSITS MA DE ON VARIOUS DATES DURING THE FINANCIAL YEAR2007-08. THEREFORE, THE ORDER OF AUTHORITIES BELOW ARE SET-ASIDE AND THE AO IS DIREC TED TO DELETE THE ADDITION. 8. NOW COMING TO THE FACTS OF THE CASE, WE HAVE SEEN THAT THE AMOUNTS DEPOSITED AND WITHDRAWN ARE VERY SMALL. AND WHEREAS AR FOR ASSES SEE ARGUED FOR RESTRICTING THE ADDITION OF CASH DEPOSIT EQUIVALENT TO THE PEAK BAL ANCE. ACCORDINGLY, IN VIEW OF THE 4 ITA NO. 4245/M/2013- SMT. NIRMALA M. PATEL ABOVE LEGAL DISCUSSION, WE SET-ASIDE THE ORDER OF C IT(A) AND DIRECT THE AO TO RESTRICT THIS ADDITION TO RS. 3,67,000/- BEING PEAK BALANCE OFFERED BY THE ASSESSEE AFTER CARRYING OUT NECESSARY VERIFICATION. 9. NEXT GROUND FOR OUR CONSIDERATION IS BUSINESS LOSS OF RS. 6,51,927/-. AR OF THE ASSESSEE ARGUED THAT DURING THE COURSE OF ASSESSMEN T PROCEEDING IT WAS BROUGHT TO THE NOTICE OF AO THAT ASSESSEE IS ENGAGED IN THE BU SINESS OF NSE FUTURES AND OPTIONS AND HAD SOLD THE CERTAIN SHARES FROM WHICH SHE HAD INCOME FROM STCG AND LONG TERM CAPITAL LOSS (LTCL). BESIDE INCOME WA S NOT DECLARED AT THE TIME OF FILING OF RETURN. DURING THE COURSE OF ASSESSMEN T PROCEEDING ASSESSEE FILED REVISED STATEMENT OF INCOME WITH COPY OF LEDGER ACC OUNT OF SAVING BANK ACCOUNT OF ASSESSEE IN AXIS BANK ALONG WITH NARRATION OF DEPOS ITS AND WITHDRAWALS, STATEMENT SHOWING DATE WISE CASH DEPOSITS AND WITHDRAWALS AND STATEMENT OF FUTURES AND OPTIONS (NSE) WHEREIN ASSESSEE HAS INCURRED LOSS OF RS. 6,51,927/- AND QUARTERLY SUMMARY OF STCG AND LTCL ON SALES OF SHARES. DR FOR THE REVENUE RELIED UPON THE ORDER OF AO. 10. WE HAVE NOTICED THAT DURING FIRST APPELLATE STAGE A SSESSEE ARGUED THAT NO PROPER AND FAIR OPPORTUNITY WAS GIVEN BY AO. CIT (A) SEEK REMAND REPORT ON THE CONTENTION OF ASSESSEE WITH RESPECT TO THE LTCL. TH E AO SUBMITTED HIS REPORT, WHEREIN AO HAS NOT DISPUTED THE CORRECTNESS OF COMP UTATION OF BUSINESS LOSS (LTCL) ON SALES OF SHARE AND ON STCG. DESPITE THIS FACT THE CIT(A) HAS NOT GIVEN THE SET OFF LOSS AGAINST THE STCG. DR FOR REVENUE S UPPORTED THE FINDING OF AUTHORITIES BELOW. WE HAVE CONSIDERED THE RIVAL CON TENTIONS OF THE AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE BEFORE US INCLUDING REVISED COMPUTATION OF TOTAL INCOME. THOUGH THE ASSESSEE W AS RAISING NEW CLAIM BEFORE THE AO, WHICH WAS NOT CLAIMED ORIGINALLY, BUT, IF T HE CLAIM IS RAISED FOR BONAFIDE CONSIDERATION AS PER LAW THE APPELLATE AUTHORITY IS ENTITLED TO ADMIT SUCH CLAIM. THE ASSESSEE WHILE MAKING THE REVISED COMPUTATION HAS SHOWN LOSS FROM FUTURE AND OPTIONS (NSE) AND STCG OF RS. 5,81,967/- AND INCOME FROM OTHER SOURCES OF RS. 3,92,000/-. THUS THE ASSESSEE WAS ENTITLED FOR SET OFF LOSS AGAINST THE STCG, THOUGH IT WAS NOT CLAIMED ORIGINALLY. WE HAVE ALSO NOTICE THAT IN THE REMAND REPORT THE AO HAS NOT DISPUTED THE CORRECTNESS OF COMPUTATION OF BUSINESS LOSS AND STCG. CIT (A) HAS NOT DOUBTED THE F&O LOSS AND LTCL AFTER REC EIPT OF REMAND REPORT. IN THESE CIRCUMSTANCES, WE DIRECT THE AO TO ADMIT THE CLAIM AND EXAMINE THE SAME IN ACCORDANCE WITH LAW. 5 ITA NO. 4245/M/2013- SMT. NIRMALA M. PATEL 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATICAL PURPOSE. ORDER PRONOUNCED IN THE OP EN COURT ON THIS 3 RD MAY, 2016. SD/- SD/- ( B. R. BASKARAN ) ( PAWAN SINGH) ACCOUNTAN MEMBER JUDICIAL MEMBER MUMBAI; DATED 03/05/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) (/ THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/