INCOME TAX OFFICER 20(2)(3), MUMBAI V. MR.KHALID MUSTAFA VASAIWALA, MUMBAI

ITA 4259/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9128 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 19-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALD
• Keywords: Salary income; Additional evidence; Deemed dividend; Onus to prove
• Section: 143(3); 2(22)(e); 69; 68

Judgement Text

ITA NO. 4259/MUM2018 KHALID MUSTAFA VASAIWALA 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4259/MUM/2018 (ASSESSMENT YEAR : 2014-15) ITO-20(2)(3), ROOM NO. 210, 2 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI -08 VS MR. KHALID MUSTAFA VASAIWALA 5 TH FLOOR, ROOM NO. C/52, GORDON HALL APARTMENTS, 10, SOFIA ZUBER ROAD, NAGPADA, MUMBAI-08 PAN : AAAPV5098F APPELLANT RESPONDEDNT APPELLANT BY SHRI S MICHAEL JERALD RESPONDENT BY NONE DATE OF HEARING 16-09-2019 DATE OF PRONOUNCEMENT 25-09-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF CIT(A)- 32, MUMBAI DATED 09-03-2018, WHICH IN TURN, ARISES FROM ASSESSMENT ORDER COMPLETED U/S 143(3) DATED 22-02-2016 FOR AY 2014-15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENES S AND TRUE NATURE OF THE SUFFICIENT CASH BALANCE TO JUSTIFY THE CASH DEPOSIT S OF RS. 88,88,000/-.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT(A) RELIED ON THE DECISION OF HON'BLE PU NJAB AND HARYANA HIGH COURT IN THE CASE OF KAVITA CHANDRA VS. CIT(A) 398 ITR 0641, (P & H) BUT ERRED IN CONCLUDING THAT IN THE ABOVE SAID C ASE HON'BLE HIGH COURT HAS HELD THE CASH DEPOSITS AS UNEXPLAINED INCOME U/ S 69 AND ADDITIONS WAS NOT DELETED. ' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT(A) ERRED DELETING THE ADDITION OF RS. 5 0,00,000/- U/S. 68 WITHOUT APPRECIATING THE FACTS THAT THE PAYMENTS MA DE VIA BANKING CHANNEL ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 2 CAN NOT PROVE THE GAMINESS OF THE TRANSACTIONS AND THE ASSESSEE DID NOT DISCHARGE THE ONUS TO PROVE THE GAMINESS OF THE TRA NSACTIONS. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT(A) ERRED IN ADMITTING THE ADDITIONAL EV IDENCE AT THE APPELLATE STAGE WITHOUT TAKING THE CONSENT OR INTIMATING THE A.O. AND DELETING THE ADDITION OF RS. 50,00,000/-. 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT(A) ERRED IN CONSIDERING THE PROVISIONS OF SECTION 2(22)(E), WITHOUT CONSIDERING THE FACT THAT ASSESSEE IS NOT I N A BUSINESS OF LENDING MONEY, AND DELETING THE ADDITION OF RS. 29,94,481/- - AS DEEMED DIVIDEND. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS BUILDER AND DEVELOPER. THE ASSESSEE IS PROPRIETOR OF M/S KV REA LITY, A PARTNER IN A FIRM. THE ASSESSEE DRIVES INCOME FROM SALARY , INCOME FROM PROPRIETARY CONCERN AND OTHER SOURCES . FOR AY 2014-15, THE ASSESSEE FILED HIS RETURN OF INCOME ON 01-12-2014 D ECLARING TOTAL INCOME AT RS.12,45,940/-. THE ASSESSMENT WAS COMPL ETED U/S 143(3) ON 22-12-2016 DETERMINING TOTAL INCOME AT RS.1,80,4 0,420/-. THE AO, WHILE PASSING THE ASSESSMENT ORDER MADE ADDITION OF RS.88,88,000/- ON ACCOUNT OF CASH DEPOSIT, ADDITION U/S 68 OF RS.50 L AKHS AND ADDITION U/S 2(22)(E) OF RS.29,94,281/- AS DEEMED DIVIDEND. ON APPEAL BEFORE CIT(A) ALL THE ADDITIONS / DISALLOWANCES WERE DELET ED. THEREBY AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE SERV ICE OF NOTICE OF HEARING OF APPEAL. PERUSAL OF RECORDS REVEALS THAT ON 7 TH AUGUST, 2018 ADJOURNMENT WAS SOUGHT ON BEHALF OF ASSESSEE FROM T HE OFFICE OF AP & CO, CAS ON THE GROUND THAT THEY WERE COMPILING PAPE R BOOK. ON 16- ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 3 09-2019, NEITHER THE ASSESSEE NOR HIS REPRESENTATIV E APPEARED NOR DID FILE ANY APPLICATION FOR ADJOURNMENT. THEREFORE, W E ARE LEFT WITH NO OPTION EXCEPT TO HEAR THE SUBMISSIONS OF THE LD. DR FOR THE REVENUE AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL A VAILABLE ON RECORD. 4. GROUNDS 1 & 2 RELATE TO DELETION OF ADDITION OF RS.88,88,000/- ON ACCOUNT OF INSUFFICIENT CASH BALANCE TO JUSTIFY THE DEPOSIT IN BANK ACCOUNT. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO. THE LD. DR FURTHER SUBMITS THAT DURING THE ASSESSMENT T HE AO NOTED THAT ASSESSEE HAS HUGE CASH DEPOSITS IN HIS BANK ACCOUNT . THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF CASH DEPOSIT. THER EFORE, THE AO MADE THE ADDITION. THE LD. CIT(A) DELETED THE ADDITION BY ACCEPTING THE EXPLANATION FURNISHED BY ASSESSEE WITHOUT GIVING OP PORTUNITY TO THE AO. 5. WE HAVE CONSIDERED THE SUBMISSION OF THE LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE HAVE NOTED THAT DURING THE ASSESSMENT, THE AO NOTED THAT THERE WERE HUGE CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE WITH S TATE BANK OF INDIA. ON SHOW CAUSE, THE ASSESSEE STATED THAT THE DEPOSIT S WERE MADE THROUGH WITHDRAWALS AND WERE DEPOSITED IN ACCOUNT. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED. THE AO MADE ADDITION BY TAKING VIEW THAT ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 4 ASSESSEE FAILED TO EXPLAIN THE CASH DEPOSIT / CASH CREDIT. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED THE FOLLOWING EXPLAN ATIONS:- I) DEPOSITS IN HIS ACCOUNT WITH STATE BANK OF INDIA A/C NO.30818461494 DATE AMOUNT SOURCE 21 - 05 - 2013 7,00,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 23-05-2013 7,00,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 24-05-2013 43,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 04-07-2013 3,00,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 24-09-2013 5,00,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 24 - 10 - 2013 50,00,000 THIS AMOUNT WAS WITHDRAWN FROM HIS ACCOUNT NO.30818461494 WITH STATE BANK OF INDIA ON 23.10.2013 AND RE- DEPOSITED INTO THE SAID BANK ACCOUNT ON 24.10.2013 13-11-2013 4,99,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 05 - 12 - 2013 25,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 20 - 01 - 2014 22,000 OUT OF CASH BALANCE AS APPEARING IN CASH BOOK 6. THE ASSESSEE ALSO FURNISHED THE BANK ACCOUNT AS WELL AS CASH BOOK FOR THE PERIOD FROM 01-04-1993 TO 31-03-2014 F OR VERIFICATION OF ENTRIES AND STATED THAT AO MERELY MADE A BALD STATE MENT BY TAKING VIEW THERE ARE MANY CASH DEPOSITS UNEXPLAINED AND ASSESS EE S EXPLANATION IS VERY GENERIC IN EXPLAINING EACH ENTR Y . IT WAS EXPLAINED THAT FROM THE CASH BOOK IT IS CLEAR THAT ENTIRE CASH DEPOSIT IS FULLY EXPLAINED. THE AO HAS NOT CONTROVERTED ANY E NTRY IN THE CASH BOOK OR IN THE BANK PASSBOOK. THE LD. CIT(A), AFTE R CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE, EXAMINING TH E CASH BOOK AND THE STATEMENT OF BANK ACCOUNT OBSERVED THAT DURING THE ASSESSMENT THE AO HELD THAT ASSESSEE HAD NOT PROVIDED ANY EXPLANATION AND THAT NO ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 5 SATISFACTORY EXPLANATION WAS PROVIDED. THE LD. CIT (A) FURTHER OBSERVED THAT ON PERUSAL OF CASH BOOK AND BANK PASS BOOK OF M/S KV REALTY, PROPRIETORSHIP OF THE ASSESSEE HAS SUFFICIE NT CASH WITHDRAWALS WHICH WERE DEPOSITED. THE CAPITAL WAS INTRODUCED I NTO PARTNERSHIP CONCERN FROM CASH WITHDRAWALS FROM PERSONAL ACCOUNT . ALL THE DETAILS WERE SUBMITTED BEFORE AO DURING ASSESSMENT PROCEEDI NGS AND THAT AO HAS ALSO NOTED THE CASH DEPOSIT OF RS.50 LAKHS ON 2 4-10-2013 WAS OUT OF CASH WITHDRAWAL ON 23-10-2013, WHICH IS CONVINCI NG THAT ASSESSEE, WAS DOING SUCH TRANSACTIONS FREQUENTLY. THE LD. CI T(A) ON PERUSAL OF BANK STATEMENT AND CASH BOOK ALSO NOTED THAT ON WIT HDRAWAL OF CASH, IT WAS IMMEDIATELY DEPOSITED IN THE BANK ACCOUNT. THE LD.CIT(A) FURTHER OBSERVED THAT AT NO POINT OF TIME, THE AO H AS BEEN ABLE TO PROVE THAT CASH WITHDRAWALS AND DEPOSITS ARE SEPARATE TO EACH OTHER. THE AO, WITHOUT BRINGING ANY CORROBORATIVE EVIDENCE ON RECO RD, MADE THE ADDITION ON THE BASIS OF SUSPICION AND SURMISES. H OWEVER, THE DETAILED ANALYSIS OF BANK STATEMENT WITH CASH FLOW STATEMENT GIVEN BY ASSESSEE LEFT NO AMBIGUITY THAT ASSESSEE EXPLAINED EVERY NAT URE OF CASH DEPOSIT MADE IN THE BANK FROM CASH AVAILABLE WITH HIM, THER EFORE, THE LD.CIT(A) DELETED THE ADDITION OF R.88,88,000/-. 7. WE HAVE ALSO NOTED THAT THE LD. CIT(A) BEFORE GR ANTING RELIEF TO THE ASSESSEE, HAS EXAMINED THE CASH BOOK, BANK PASS BOOK AND ON THE ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 6 BASIS OF MATERIAL PLACED BEFORE HIM, WHICH WAS ALSO PLACED BEFORE THE AO, CONCLUDED THAT ASSESSEE HAS DISCHARGED HIS ONUS IN RESPECT OF TRANSACTION IN HIS BANK ACCOUNT. BEFORE US, THE LD . DR FAILED TO BRING ANY FACT OR LAW TO OUR NOTICE FOR CONVINCING EVIDEN CE TO DEVIATE FROM THE ORDER GIVEN BY LD.CIT(A), WHICH WE AFFIRM. IN THE RESULT THE GROUNDS 1 & 2 OF THE APPEAL ARE DISMISSED. 8. GROUNDS 3&4 RELATE TO DELETION OF ADDITION OF RS .50 LAKHS MADE U/S 68. THE LD. DR FOR THE REVENUE SUPPORTED THE O RDER OF AO. THE LD. DR FURTHER SUBMITS THAT DURING THE APPELLATE PR OCEEDINGS, THE ASSESSEE FILED APPLICATION UNDER RULE 46A OF INCOME TAX RULES FOR ADMISSION OF ADDITIONAL EVIDENCE. THE LD. CIT (A) ACCEPTED THE ADDITIONAL EVIDENCE WITHOUT GIVING ANY OPPORTUNITY TO THE AO. THE LD. DR FURTHER SUBMITS THAT DURING THE ASSESSMENT, THE ASSESSEE FAILED TO SUBSTANTIATE THE LOAN ALLEGEDLY TAKEN FROM ABDUL KA DAR A VADGAMA. SIMILARLY FOR GROUND 5, WHICH RELATES TO DELETION O F ADDITION U/S 2(22)(E) ON ACCOUNT OF DEEMED DIVIDEND, THE LD. DR SUBMITS THAT LD.CIT(A) ALLOWED RELIEF TO THE ASSESSEE ON FURNISH ING ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY TO THE AO. THE LD. DR, THEREFORE, SUBMITS THAT THE ADDITION U/S 68 AS WELL AS ADDITIO N U/S 2(22)(E) BE RESTORED BY SETTING ASIDE THE ORDER OF LD.CIT(A). ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 7 9. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO MADE ADDITION OF RS.50 LAKHS ON ACCOUNT OF LOAN TAKEN FROM ABDUL KAD AR A VADGAMA BY TAKING VIEW THAT ASSESSEE HAS FAILED TO FILE INCOME -TAX RETURN OF LENDER AND TO PRODUCE THE PARTY FOR VERIFICATION. SIMILAR LY, THE ADDITION U/S 2(22)(E) WAS MADE BY TAKING VIEW THAT ASSESSEE HAS 16% SHARE IN M/S HICONS DEVELOPERS P LTD. M/S HICONS DEVELOPERS P L TD WERE HAVING SURPLUS AS ON 31-03-2013 AND 31-03-2014. SINCE HIC ONS DEVELOPERS P LTD WAS HAVING ACCUMULATED PROFITS AND THE LOAN AVA ILED FROM HICONS DEVELOPERS P LTD WAS TREATED AS DEEMED DIVIDEND. D URING FIRST APPELLATE STAGE, THE ASSESSEE FILED APPLICATION UND ER RULE 46A OF INCOME TAX RULES FOR ADMITTING ADDITIONAL EVIDENCE IN RESPECT OF THESE TWO ADDITIONS. THE LD. CIT(A) ACCEPTED THE ADDITIO NAL EVIDENCE AND ALLOWED RELIEF TO THE ASSESSEE. WE HAVE NOTED THAT NO OPPORTUNITY WAS GIVEN TO THE AO FOR HIS VERIFICATION OF FACT AND EV IDENCE FURNISHED BY ASSESSEE. THEREFORE, IN OUR VIEW, THE LD.CIT(A) WA S NOT JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE AND IN ACCEPTING T HE ADDITIONAL EVIDENCE. THEREFORE, GROUNDS 3, 4 & 5 ARE RESTORED TO THE FIL E OF THE AO TO DECIDE THE ISSUES AFRESH AFTER VERIFICATION OF ADDITIONAL EVIDENCE AND SUBMISSIONS MADE BY ASSESSEE. NEEDLESS TO ORDER THA T BEFORE PASSING ITA NO. 4259/MUM/2018 KHALID MUSTAFA VASAIWALA 8 THE ORDER AFRESH THE AO SHALL GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT THE GROUND NO. 3 TO 5 ARE A LLOWED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-09-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 25 TH SEPTEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI