SANTOSH SUMATILAL MUTHA, NAVI MUMBAI V. A.C.I.T. 22(3), NAVI MUMBAI

ITA 4320/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3228 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 25-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DEVENDRA H JAIN
• Keywords: Unexplained investment; Gift; Opportunity of being heard; Additional evidence
• Section: 143(3); 37(1); 68; 69

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4320 /MUM/2012 ( / ASSESSMENT YEAR : 2008-09) MR. SANTOSH SUMATILAL MUTHA, C- 1201, GUNINA APARTMENTS, NEAR MORAJ RESIDENCY, SANPADA, NAVI MUMBAI 400 705. / V. ACIT 22 (3), 3 RD FLOOR, TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI 400 703. ./ PAN : ABIPM1279J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI DEVENDRA H. JAIN REVENUE BY : SHRI RITESH MISRA , DR / DATE OF HEARING : 01-03-2016 / DATE OF PRONOUNCEMENT : 27-05-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 4320/MUM/2012, IS DIRECTED AGAINST THE ORDER DATED 28-03-2012 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBAI (H EREINAFTER CALLED THE CIT(A) ), FOR THE ASSESSMENT YEAR 2008-09, THE APP ELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 28-12-2010 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLE D THE ACT). ITA 4320/MUM/2012 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READS AS UNDER:- 1. ADDITION OF RS. 23,07,000 U/S. 69 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT(A) HAS ERRED IN MAKING AN ADDITION OF RS. 23,07,000 U/S 69 BEING CASH DEPOSITED IN HDFC BANK AS UNEXPLAINED INVESTMENT WITHO UT APPRECIATING THAT THE SOURCE OF SAID AMOUNT IS A) RS. 19,50,592/- OUT OF CASH ON HAND AS ON 01.04. 2007 WHICH WAS MAINLY OUT OF CASH WITHDRAWALS FROM APPELLA NT'S PARTNERSHIP FIRM, M/S. DCC IN THE PREVIOUS YEAR. B) RS.3 LAKHS RECEIVED ON 19.04.2007 FROM MINOR SON SAAHIL MUTHA. C) RS.2 LAKHS RECEIVED ON 19.04.2007 FROM MINOR DAU GHTER RAASHI MUTHA. THE ADDITION OF THE SAID AMOUNT OF RS. 23,07,000/- MAY PLEASE BE DELETED. 2. DISALLOWANCE OF EXPENSES ON ADHOC BASIS (RS. 33, 991/-) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT(A) HAS ERRED IN DISALLOWING A SUM OF RS. 33,991/- (10% OF 3,39,917) BEING AGGREGATE EXPENSES INCURRED ON FREIGHT, LABOUR CHAR GES AND CLEANING EXPENSES ON ADHOC BASIS ASSUMING THAT THERE IS A PER SONAL ELEMENT AND THESE EXPENSES ARE ENTIRELY PAID IN CASH WHICH IS CO NTRARY TO THE FACTS. THE SAID DISALLOWANCE OF RS. 33,991/- MAY PLEASE BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL HAVING THE PROPRIETARY CONCERN, M/S RUSHABH PACKAGING, WHI CH IS ENGAGED IN THE BUSINESS OF GRADING, PACKAGING AND TRADING IN RICE AND PULSES. THE ASSESSEE IS ALSO A PARTNER IN M/S DHANRAJ CHHAGANLAL & CO. ( HEREINAFTER CALLED THE DCC) AND DRAWS SALARY FROM M/S. DELITE FOODS PVT. LTD. ITA 4320/MUM/2012 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT, IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAD INTRODUCED CAPITAL OF RS. 7,53,670/- INTO HIS PROPR IETARY CONCERN M/S RUSHABH PACKAGING. THE ASSESSEE WAS ASKED BY THE A O TO EXPLAIN THE SOURCE OF THE CAPITAL INTRODUCTION OF CAPITAL OF RS. 7,53, 670/- AND IN REPLY THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INTRODUCED CAPITAL OF RS. 30 LACS IN RUSHABH PACKAGING AND WITHDRAWN RS. 16,56,500/- FRO M THE PROPRIETARY CONCERN M/S RUSHAB PACKAGING AND THE INTRODUCTION O F CAPITAL INTO THE PROPRIETARY CONCERN IS VIDE DEPOSITS INTO THE BANK ACCOUNT OF RUSHABH PACKAGING MAINTAINED WITH HDFC BANK ACCOUNT. THE S AID CASH DEPOSITS IN HDFC BANK ACCOUNT ARE IN BETWEEN 10 TH APRIL, 2007 AND 20 TH APRIL, 2007 AND THESE ENTRIES OF CASH DEPOSIT IN THE HDFC BANK FORM S PART OF HIS AUDITED BANK ACCOUNT AND BOOKS OF ACCOUNT OF THE ASSESSEES PROPRIETARY CONCERN M/S. RUSHABH PACKAGING. THE AO OBSERVED THAT THE A SSESSEE FURNISHED THE HIS PERSONAL CASH ACCOUNT WHICH WAS NOT PART OF THE AUDITED ACCOUNTS FILED ALONG WITH RETURN OF INCOME WITH THE REVENUE AND WA S A NEW EVIDENCE BEFORE THE AO AS THE ASSESSEE HAS NOT FILED ANY WEALTH-TAX RETURN. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED OPENING CASH BALANCE IN HIS PERSONAL CAPACITY OF RS. 19,50,592/- AS ON 1ST APRIL, 2007 WHICH HAS RESULTED INTO PERSONAL CASH BALANCE IN HAND AS ON 31 ST MARCH, 2008 OF RS. 6,85,209/- WHICH AGAIN WAS NOT SUBMITTED BEFORE THE REVENUE . THE AO OBSER VED THAT NO DOCUMENTARY EVIDENCES WERE SUBMITTED WITH RESPECT T O THE OPENING BALANCE OF CASH OF RS. 19,50,592/- AND ALSO FOR CASH BALANCES OF RS. 2 LACS RECEIVED ON 19 TH APRIL, 2007 FROM HIS MINOR DAUGHTER KUM. RAASHI S. MUTHA AND RS. 3 LACS RECEIVED ON 19 TH APRIL, 2007 FROM HIS MINOR SON SAHIL S. MUTHA. IT IS AN UNDISPUTED FACT THAT NO WEALTH-TAX RETURN HAS BEEN FILED BY THE ASSESSEE AND AT THE SAME TIME THE ASSESSEE HAS CLAIMED OPENING C ASH BALANCE OF RS. 19,50,592/- AS ON 01-04-2007 WHICH HAD NOT BEEN DEC LARED BEFORE THE REVENUE. ITA 4320/MUM/2012 4 THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS WHERE MOBILITY OF FUNDS IS MUST AND THUS HE HAS TO MAINTAIN CASH BALA NCE AND THE ASSESSEE CERTIFIED THE CASH BALANCE AS ON 31 ST MARCH 2008 OF RS. 6,85,219/-. AS WELL AS 1ST APRIL, 2007 OF RS. 19,50,592/- . THE ASSESS EE SUBMITTED THAT THAT OPENING BALANCE OF CASH OF RS. 19,50,592/- AS ON 01 -04-2007 HAS PRIMARILY COME FROM THE NET WITHDRAWAL FROM PARTNERSHIP FIRM M/S DHANRAJ CHHAGANLAL & CO. (DCC) IN THE FINANCIAL YEAR 2006-07 AND PARTL Y FROM BANK WITHDRAWALS FROM ICICI BANK IN FINANCIAL YEAR 2006-07. THE ASS ESSEE SUBMITTED BEFORE THE AO THAT RS. 15,36,680/- WAS NET CASH WITHDRAWAL FROM THE PARTNERSHIP FIRM M/S DCC IN THE FINANCIAL YEAR 2006-07. THE AS SESSEE SUBMITTED BEFORE THE AO THE AUDITED FINANCIAL STATEMENTS ALONG WITH TAX-AUDIT REPORT OF DCC FOR THE FINANCIAL YEAR 2006-07 AND COPIES OF INCOME TAX RETURN BEFORE THE AO. THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE AUDITED STATEMENT OF DCC SHOW A TOTAL WITHDRAWAL OF RS. 46,04,139.24 WHICH INCLUDES THE NET CASH WITHDRAWAL OF RS. 15,36,680/-. THE CASH BOOK OF DCC FOR THE F INANCIAL YEAR 2006-07 WAS ALSO PRODUCED TO SHOW THE CASH WITHDRAWALS BY THE A SSESSEE. THERE WAS ALSO SCRUTINY ASSESSMENT U/S 143(3) OF M/S DCC FOR THE F INANCIAL YEAR 2006-07 WHEREIN THE BOOKS OF ACCOUNTS HAVE BEEN PRODUCED AN D EXAMINED BY THE REVENUE. THE ASSESSEE SUBMITTED THAT THERE WAS A N ET WITHDRAWAL OF RS. 3,56,800/- FROM ICICI BANK DURING THE FINANCIAL YEA R 2006-07 WHICH BANK STATEMENT WAS SUBMITTED BEFORE THE AO WHICH SHOWED THE ABOVE BANK WITHDRAWALS. THE ASSESSEE SUBMITTED THAT THERE W AS A CASH NEGATIVE OF RS. 7,27,281/- AS ON 12 TH SEPTEMBER, 2007 AS POINTED OUT BY THE A.O. , WHICH THE ASSESSEE SUBMITTED THAT THERE WAS AN ACCOUNTING ERR OR COMMITTED WHILE PASSING THE CAPITAL INTRODUCTION ENTRY OF THE ASSES SEE IN M/S DCC ON 12 TH SEPTEMBER, 2007 WHICH ENTRY ACTUALLY WAS RS. 5 LACS AND NOT RS. 12 LACS THEREBY RESULTING IN A NEGATIVE CASH BALANCE TO THE EXTENT OF RS. 7 LACS. THE ENTRY OF RS. 7 LACS CASH INTRODUCTION ENTRY INTO M/ S DCC WAS ACTUALLY ON 25 TH JANUARY, 2008. THE CORRECTED CASH BOOK PRINT OUT O F THE ASSESSEE WAS ENCLOSED. THE A.O. OBSERVED THAT EVEN IF IT IS ACC EPTED THAT THE ASSESSEE HAD ITA 4320/MUM/2012 5 HUGE WITHDRAWALS FROM HIS FIRM DCC AND ICICI BANK I N THE EARLIER YEARS , IT WAS OBSERVED BY THE AO THAT THE ASSESSEE IS IN THE HABIT OF EXPENDING HUGE WITHDRAWALS FOR HIS PERSONAL NEEDS WHICH IS REFLECT ED FROM THE OPENING CAPITAL OF THE EARLIER YEAR OF RS.13,16,543/-, OUT OF WHICH RS.12,00,000/- WAS WITHDRAWN BY THE ASSESSEE. THUS, THE AO OBSERVED T HAT IT IS IN THE REALM OF POSSIBILITY THAT THE ASSESSEE HAS ALREADY EXPENDED CASH FOR HIS PERSONAL NEEDS, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE THAT SUCH CASH WAS AVAILABLE WITH HIM. WITH RESPECT TO THE INTRODUCTIO N OF RS. 12 LAKHS BY THE ASSESSEE WHEREBY HE INTRODUCED THROUGH CASH DEPOSIT ONLY OF RS. 5 LAKHS ON 12 TH SEPTEMBER, 2007 IN THE BOOKS OF THE FIRM M/S DCC I NSTEAD OF EARLIER CLAIM OF RS 12 LACS AND THAT THE OTHER AMOUNT OF CA PITAL INTRODUCTION THROUGH CASH DEPOSITS IN M/S DCC OF RS. 7 LAKHS WAS ON 25 TH JANUARY, 2008 , BUT NOW IT IS STATED BY THE ASSESSEE TO BE THROUGH CASH FUNDS OF HIS WIFE MRS. DEEPA MUTHA OF RS 7 LACS INTRODUCTION IN DCC ON 12- 09-2007, THE OTHER PARTNER OF THE FIRM DCC. THE FACTS OF THE CASE AND THE CONTENTIONS OF THE ASSESSEE ARE SUMMARIZED BY THE A.O. IN HIS ASSESSME NT ORDER DATED 28.12.2010 PASSED U/S 143(3) OF THE ACT, VIDE PARA 5.2 ARE AS UNDER:- THE ASSESSEE HAS INTRODUCED AN AMOUNT OF RS. 7,53,67 0/- AS CAPITAL INTO HIS PROPRIETARY CONCERN. (I) PART OF THIS INTRODUCED CAPITAL IS VIDE CASH DEPOSITS IN TO HDFC BANK A/C OF THE PROPRIETARY CONCERN M/S RUSHABH PACK AGING OF RS. 25,00,000/- IN THE MONTH OF APRIL 2007. (II) THE ASSESSES VARIOUS SUBMISSION FOR THE SOURCE OF SUCH INTRODUCTION IS SUMMARIZED AS UNDER:- (A) FROM HIS ICICI RS. 14,000/- SB A/C NO. 015101531133 DURING THE YEAR. (B) FROM HIS PARTNERSHIP FIRM (01/04/07 TO 20/4/07 RS. 1,79,000/- (RS. 16,000 + RS. 48,000 + RS.1,00,000) DURING THE YEAR RS. 1,93,000/- (C) FROM ASSESSEES OPENING CAPITAL AND CASH ITA 4320/MUM/2012 6 FROM ASSESSEES MINOR CHILDREN (RS.25,00,000/- (-) /RS. 1,93,000/- RS. 23,07,000/ - THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE A S NO DOCUMENTARY EVIDENCES WERE SUBMITTED BY THE ASSESSEE THAT SUCH CASH BALANCE OF RS. 19,50,592/- WAS AVAILABLE WITH HIM AS ON 1ST APRIL, 2007. THE SAID CASH WERE NEVER PART OF AUDITED RETURN OF INCOME OF THE ASSESSEE FILED WITH THE REVENUE. NO WEALTH-TAX RETURN WAS FILED BY THE ASS ESSEE TILL DATE. THE A.O. OBSERVED THAT EVEN IF IN THE INTEREST OF NATURAL JU STICE THAT THE ASSESSEES OPENING BALANCE OF CASH OF RS 19,50,592/- AS ON 01- 04-2007 IS ACCEPTED HAVING RECEIVED ON VARIOUS DATES IN THE FINANCIAL Y EAR 2006-07 AS CLAIMED BY THE ASSESSEE, BUT ON 12 TH SEPTEMBER, 2007 THERE IS A NEGATIVE BALANCE OF RS. 6,97,280.50 EVEN IN THE SAID CASH FLOW STATEMENT OF THE PERSONAL ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS CHANGED HIS STAND TH AT THE ENTRY OF RS. 7 LACS CASH INTRODUCTION ENTRY IN M/S DCC WAS ACTUALLY ON 25 TH JANUARY, 2008 INSTEAD OF 12/9/2007 AND FROM THE ACCOUNTS OF THE D CC IT IS NOW SEEN THAT THE ASSESSEES WIFE HAS DEPOSITED THE CASH ON THE S AID DATE INTO THE PARTNERSHIP CONCERN AFTER THE ASSESSEE FILED CORREC TED CASH BOOK. THUS IN VIEW OF THE AO, IT IS NOT APPARENT AS TO WHICH SPOUSE DE POSITED SUCH FUNDS INTO PARTNERSHIP FIRM WHERE BOTH HUSBAND AND WIFE ARE PA RTNER. THE PERSONAL BALANCE SHEETS AND CAPITAL ACCOUNTS OF THE MINOR CH ILDREN HAD NEVER BEEN FURNISHED AND THE SOURCE OF SUCH HUGE CASH AVAILABI LITY WITH THE MINOR CHILDREN WAS NOT EXPLAINED BY THE ASSESSEE WITH RES PECT TO CLAIM OF THE ASSESSEE TO HAVE RECEIVED CASH GIFT OF RS 5 LACS FR OM THE MINOR CHILDREN ON 19- 04-2007. IN VIEW OF THE AO , THE DETAILS OF OPENIN G BALANCE AS ON 1ST APRIL, 2007 OF RS. 19,50,592/- AND THE CLOSING BALANCE AS ON 31 ST MARCH, 2008 OF RS. 6,85,219/- WAS NEVER SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNTIL THE SOURCE OF DEPOSITS OF CASH INTO THE BOOKS OF ACCOUNT OF THE PROPRIETARY CONCERN M/S RUSHABH PACK AGING THROUGH ITS HDFC BANK AMOUNTING TO RS. 25 LAKHS WAS ASKED BY TH E AO TO BE PROVED ITA 4320/MUM/2012 7 ALONG WITH DOCUMENTARY EVIDENCE , BUT THE ASSESSEE WAS NOT ABLE TO PROVE THAT SUCH CASH BALANCE EXISTED IN THE CASH BOOK OF M/S RUSHABH PACKAGING ON SUCH DATES. WITH RESPECT TO THE EXPLANATION OF T HE ASSESSEE OF THE OPENING CASH BALANCE OF RS. 19,50,592/-, IT WAS SUBMITTED T HAT OPENING BALANCE OF CASH RS. 19,50,592/- HAS PRIMARILY CAME FROM NET WI THDRAWAL FROM M/S DCC IN THE FINANCIAL YEAR 2006-07. IT WAS OBSERVED BY THE A.O. THAT THERE IS AN OPENING BALANCE OF RS. 13,16,543/- AS ON 1ST APRIL, 2006 FROM WHERE THE ASSESSEE HAS WITHDRAWN RS. 12 LAKHS HENCE THE AO OB SERVED THAT IT IS MOST PROBABLE THAT THE ASSESSEE UTILIZED THE AMOUNT WITH DRAWN FROM THE FIRM DCC FOR HIS PERSONAL NEEDS WHICH HAS NOT BEEN SHOWN TO THE REVENUE. THE A.O. HELD THAT THE EXPLANATION OF THE ASSESSEE IS A SELF SERVING AND WITHOUT ANY EVIDENTIARY VALUE, HENCE, ADDITION OF RS. 23,07,000 /- WAS MADE AND ADDED BACK TO THE INCOME OF THE ASSESSEE BY THE AO VIDE A SSESSMENT ORDERS DATED 28.12.2010 PASSED U/S. 143(3) OF THE ACT. 5. IT WAS OBSERVED BY THE AO FROM THE PROFIT & LOSS ACCOUNT BY THE A.O. THAT THE ASSESSEE HAD DEBITED THE FOLLOWING CASH EX PENSES/CREDIT CARD PAYMENTS ON SELF MADE VOUCHES WHICH ARE NOT SUPPORT ED BY RELEVANT BILLS AND HENCE NOT VERIFIABLE:- THUS, THE A.O. KEEPING IN VIEW THE CIRCUMSTANCES HE LD THAT SOME OF THE EXPENSES ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS WHICH AMOUNT IS NOT ASCERTAINABLE, HENCE 10% OF CAS H EXPENSES AMOUNTING TO RS. 33,991/- WAS ESTIMATED AND DISALLOWED BEING NOT INCURRED WHOLLY AND NATURE OF CASH EXPENSES AMOUNT RS. 1. CLEANING EXPENSES 90,120 2. LABOUR CHARGES 82,071 3. FREIGHT CHARGES 2,41,526 TOTAL 3,3 9,917/- ITA 4320/MUM/2012 8 EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, VIDE ASSESSMENT ORDERS DATED 28.12.2010 PASSED BY THE AO U/S 143(3) OF THE ACT. 6. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28.12.20 10 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE FILED FIRST APP EAL BEFORE THE LEARNED CIT(A). 7. BEFORE THE LEARNED CIT(A), THE ASSESSEE REITERAT ED ITS SUBMISSIONS AS WERE MADE BEFORE THE AO WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE LEARNED CIT(A) OBSERVED THAT NO DOCUMENTARY EVIDENC ES WERE SUBMITTED FOR OPENING BALANCE OF CASH OF RS. 19,50,592/- IN THE H ANDS OF THE ASSESSEE AS ON 01-04-2007 AND ALSO FOR CASH BALANCES OF RS. 2 LAK HS AND RS. 3 LAKHS RECEIVED FROM HIS MINOR CHILDREN AS CASH GIFT ON 19 -04-2007. NO WEALTH TAX RETURN HAD BEEN FILED BY THE ASSESSEE AND THAT EVEN IF HIS OPENING CASH BALANCE WAS CONSIDERED, THE AUTHENTICITY OF HIS PER SONAL CASH FLOW STATEMENT WAS NOT ACCEPTABLE SINCE IT SHOWED A NEGATIVE BALAN CE AS ON 31 ST AUGUST, 2007. THE ASSESSEE EXPLAINED THE SOURCE OF OPENING BALANCE OF RS. 19,50,592/- AS ON 1ST APRIL, 2007 WHICH IS AS UNDER :- SR NO PARTICULARS REFERENCE AMOUNT(RS) AMOUNT (RS) 1 CASH WITHDRAWALS FROM PARTNERSHIP FIRM M/S DHANRAJ CHHAGANLAL & CO. (MUMBAI) PAGE 9 (CAPITAL A/C OF APPELLANT IN THE BOOKS OF M/S DCM) AND PAGE 26 TO 36 (CAPITAL A/C TRANSACTIONS DATE WISE OF THE APPELLANT IN THE BOOKS OF M/S DCM) 2562510 LESS: RE-INTRODUCED DURING THE YEAR 1025830 2 NET CASH WITHDRAWALS FROM PARTNERSHIP FIRM M/S DHANRAJ CHHAGANLAL & CO. (MUMBAI) PAGE 37 SHOWING NET CASH WITHDRAWAL WITH BANKS STATEMENTS ON PAGE 38 TO 41 1536680 3 NET CASH WITHDRAWALS FROM ICICI SB A/C NO. 1133 356800 BALANCE CASH OUT OF OPENING BALANCE OF PREVIOUS YEAR 57112 TOTAL 1950592 ITA 4320/MUM/2012 9 THE ASSESSEE SUBMITTED THAT RS. 20 LAKHS WAS DEPOSI TED BETWEEN 10 TH APRIL TO 18 TH APRIL, 2007 WITH HDFC BANK OF RUSHAB PACKAGING , O UT OF WHICH THE OPENING BALANCE OF CASH IN HAND OF RS. 19,50,592/- IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE WAS UTILISED , WHILE RS. 5 LA KHS DEPOSITED ON 20 TH APRIL, 2007 WAS OUT OF THE CASH GIFT RECEIVED FROM THE MIN OR CHILDREN (MASTER SAAHIL MUTHA RS. 3 LACS AND MS. RAASHI MUTHA RS. 2LACS). THE ASSESSEE CONTENDED THAT THE A.O. ERRED IN NOT ACCEPTING THE OPENING BA LANCE OF RS. 19,50,592/- IN THE PERSONAL BALANCE OF THE ASSESSEE ON THE ASSUMPT ION THAT SUCH AMOUNT MIGHT HAVE BEEN SPENT FOR HIS PERSONAL EXPENSES. T HE AMOUNT OF CASH WITHDRAWN FROM M/S DCC IS AS PER AUDITED ACCOUNTS F OR FINANCIAL YEAR 2006- 07 WHICH CLEARLY CAN BE SEEN IN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S DCC AND FURTHER THE CLOSING CAPITAL ACCOUNT BALANCE OF RS. 14,76,593.16 IS SEEN IN THE SAID CAPITAL ACC OUNT IS CROSS VERIFIABLE FROM THE PERSONAL BALANCE SHEET OF THE ASSESSEE AS ON 31 ST MARCH, 2007. THE CONCERNED A.O. OF DCC DULY MADE ASSESSMENT U/S 143 (3) OF THE ACT WHEREBY DURING ASSESSMENT PROCEEDINGS , THE CONCERNED AO OF DCC SCRUTINIZED THE SUBJECT TRANSACTIONS INCLUDING CAPITAL ACCOUNT OF T HE ASSESSEE AND CASH BOOK. IT WAS SUBMITTED BY THE CONCERNED A.O. OF DCC THAT BOOKS OF ACCOUNT WERE VERIFIED. IT IS SUBMITTED THAT THE A.O. ALSO ERRED IN NOT ACCEPTING THE OPENING CASH BALANCE OF RS. 19,50,592/- BY ASSUMING THAT TH E ASSESSEE MIGHT HAVE UTILIZED THE SAID AMOUNT FOR HIS PERSONAL EXPENSES, WHICH IS PURELY BASED ON IMAGINATION, SURMISE AND CONJECTURE. IT IS SUBMITT ED THAT NON-FILING OF WEALTH-TAX RETURN BY THE ASSESSEE IS ADMITTEDLY A C ONTRAVENTION BUT THAT DOES NOT CHANGE THE FACTUAL POSITION OF CASH ON HAND, WH ICH HAS BEEN PROVED. THE ASSESSEE SUBMITTED THAT RS. 5 LAKHS RECEIVED AS CAS H GIFT FROM MINOR CHILDREN OVER A PERIOD OF TIME ON VARIOUS OCCASIONS, SUCH CA SH GIFTS ARE NOT UNUSUAL AS THE ASSESSEE BELONG TO A BUSINESS FAMILY. ITA 4320/MUM/2012 10 THE LEARNED CIT(A) AFTER GOING THROUGH THE ASSESSM ENT ORDER AND SUBMISSIONS OF THE ASSESSEE REJECTED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE WAS NOT ABLE TO NEGATE ANY OF THE FINDINGS MADE BY THE A.O. .THE ONUS WAS ON THE ASSESSEE TO EXPLAI N THE SOURCE OF CASH DEPOSIT OF RS 25 LACS IN HDFC BANK OF RUSHAB PACKAG ING. ALL THE CASH DEPOSITS WERE MADE BY THE THIRD PARTY IN MUMBAI AND VASHI EXTENSION. HE OBSERVED THAT THE ASSESSEE HAD TRIED TO EXPLAIN THE SOURCE OF THESE CASH DEPOSITS BY FURNISHING A CASH ACCOUNT IN HIS PERSON AL CAPACITY WHICH WAS NEVER PART OF AUDITED ACCOUNTS FILED WITH THE REVEN UE. NO DOCUMENTARY EVIDENCES , DATE, PURPOSE AS WELL AS GIFT MAKING CA PACITY OF THE TWO MINOR CHILDREN ALONG WITH THEIR TAX PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE AND RATHER A GENERAL SUBMISSIONS WERE MADE THAT THE SE CASH GIFTS WERE RECEIVED OVER A PERIOD OF TIME FROM MINOR CHILDREN AND IT IS NOT UN USUAL FOR THE ASSESSEE BELONGING TO BUSINESS FAMILY TO RECEIV E SUCH CASH GIFTS. THE LEARNED CIT(A) OBSERVED FROM THE ASSESSEES PERSONA L SAVING BANK ACCOUNT NO. 1133 WITH THE ICICI BANK, AN AMOUNT OF RS. 3,10,000 /- HAD BEEN DEPOSITED AND THE ASSESSEE HAS WITHDRAWN AN AMOUNT OF RS. 14, 05,000/- DURING THE YEAR WHICH HAS BEEN USED IN CASH FLOW FOR WHICH THE A.O. HAS DUE COGNIZANCE WHICH IS EVIDENT FROM THE WORKING OF CASH FLOW AND THE A.O. HAS RIGHTLY ACCEPTED THE SAME. THE ASSESSE HAS CHANGED HIS STA ND THAT RS. 12 LAKHS WAS SHOWED AS CAPITAL INTRODUCTION IN THE ACCOUNT OF M/ S DCC ON 12-09-2007 , WHEREAS THE CAPITAL INTRODUCTION WAS LATER CHANGED TO RS. 7 LAKHS ON 12-09- 2007 WHILE THE BALANCE WAS STATED TO BE ON 25-01-20 08 , AS THERE WAS REFLECTING NEGATIVE CASH BALANCE OF RS 7 LACS IF TH E OUFLOW OF RS 12 LACS ON 12- 9-2007 VIDE CAPITAL INTRODUCTION IN DCC IS CONSIDER ED. THE A.O. HAS DONE THE CALCULATION WHILE CONSIDERING THE OPENING BALANCE O F RS. 19,50,592/- AS ON 1ST APRIL, 2007 AND FOUND THAT IF THIS OPENING BALA NCE OF RS. 19,50,592/- AS ON 1ST APRIL, 2007 IS ALSO TAKEN INTO ACCOUNT STILL ON 31 ST AUGUST, 2007 THERE IS A NEGATIVE CASH BALANCE IN THE CASH FLOW STATEME NT SUBMITTED BY THE ASSESSEE. THE ASSESSEE HAS NOT MAINTAINED ANY BOOK S OF ACCOUNT FOR HIS ITA 4320/MUM/2012 11 PERSONAL TRANSACTIONS AND ALSO HE HAS NEVER FILED A NY PERSONAL BALANCE SHEET SHOWING HIS PERSONAL ASSETS AND LIABILITIES IN ANY OF THESE ASSESSMENT YEARS WITH THE REVENUE. THE ASSESSEE FILED DATE-WISE WOR KING OF ACTUAL CASH AVAILABLE WHEREBY OPENING BALANCE OF CASH OF RS.19, 50,592/- AS ON 01-04- 2007 WAS STATED TO BE AVAILABLE AND WAS BUILT OUT O F CASH WITHDRAWALS AND DEPOSITS OF EARLIER YEARS , BUT STILL THERE IS NEGA TIVE BALANCE AS ON 18.04.2007 WAS THE OBSERVATION OF THE LEARNED CIT(A). THE GIF T OF RS. 5 LAKHS RECEIVED FROM MINOR SON AND DAUGHTER ARE ALSO UNSUPPORTED HE NCE THE LEARNED CIT(A) CONFIRMED THE ADDITIONS OF RS.23,07,000/- MADE BY THE A.O. VIDE CIT(A) APPELLATE ORDER DATED 28.03.2012 . WITH RESPECT TO THE AD-HOC DISALLOWANCE OF 10% OF E XPENSES OF AN AMOUNT OF RS. 33,991/- OUT OF CASH EXPENSES OF RS. 3,39,917/- , THE ASSESSEE SUBMITTED THAT ALL THE EXPENSES WERE NOT PROPERLY SUPPORTED B Y BILLS AND ARE CLAIMED THROUGH SELF VOUCHERS BUT LOOKING INTO THE NATURE O F EXPENSES, THE DISALLOWANCE OF 10% SHOULD NOT BE MADE. THE LEARNE D CIT(A) HELD THAT THE EXPENSES CLAIMED WHICH ARE NOT SUPPORTED BY PROPER BILLS AND VOUCHES AND HENCE, THE ONUS HAS NOT BEEN DISCHARGED BY THE ASSE SSEE AS TO WHY HE HAS FAILED TO SUPPORT THE EXPENSES BY PROPER BILLS AND VOUCHERS AND HENCE THE LEARNED CIT(A) UPHELD THE DISALLOWANCE MADE BY THE A.O. VIDE CIT(A) APPELLATE ORDERS DATED 28.03.2012. 8. AGGRIEVED BY THE APPELLATE ORDERS DATED 28.03.20 12 OF THE LEARNED CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNA L. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS WHAT WERE MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NO T REPEATED FOR THE SAKE OF BREVITY. THE LD. COUNSEL SUBMITTED THAT THERE WAS A CASH DEPOSIT IN HDFC BANK OF PROPRIETARY CONCERN OF THE ASSESSEE M/S RUS HAB PACKAGING OF RS. 25 LAKHS BETWEEN 10 TH APRIL, 2007 TO 20 TH APRIL, 2007 WHICH WERE MADE MAINLY ITA 4320/MUM/2012 12 OUT OF OPENING CASH BALANCE AS ON 01-04-2007 OF RS. 19,50,592/- AND ALSO RS. 5 LAKHS WAS RECEIVED AS CASH GIFT FROM MINOR SO N AND DAUGHTER ON 19 TH APRIL, 2007 WHICH CASH WAS UTILIZED FOR DEPOSITING CASH IN HDFC BANK OF RUSHAB PACKAGING , THE PROPRIETARY CONCERN OF THE A SSESSEE. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS EXPLAINED T HE OPENING CASH BALANCE OF RS.19,50,592/- AS ON 01-04-2007 WHICH WAS MAINLY THROUGH WITHDRAWAL FROM PARTNERSHIP FIRM DCC IN FINANCIAL YEAR 2006-07 AND ALSO WITHDRAWAL FROM THE ICICI BANK IN FINANCIAL YEAR 2006-07. THE ENTIRE DETAILS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW. THE ACCOUN TS OF M/S DCC WERE DULY AUDITED WHICH WERE ALSO SUBMITTED. THE REVENUE HAS FRAMED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WITH RESPECT TO THE M/S DCC WHEREBY ALL THE BOOKS OF ACCOUNT WERE VERIFIED. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT (AUR ANGABAD BENCH) IN THE CASE OF GHAI CONSTRUCTION V. STATE OF MAHARASHTRA [ 2009] 184 TAXMAN 52 (BOM). THE LD. COUNSEL ALSO SUBMITTED THAT ADDITIO NAL EVIDENCES WERE SUBMITTED BEFORE THE LEARNED CIT(A) BUT THE LEARNED CIT(A) REJECTED THE SAME AND HAS NOT CALLED FOR REMAND REPORT FROM THE A.O.. THE SAID ADDITIONAL EVIDENCES WERE CASH BOOK OF THE ASSESSEE FOR FINANC IAL YEAR 2007-08 (PB/PAGE 1-2), LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS O F DCC FOR FINANCIAL YEAR 2006-07(PB/PAGE 7-17) , BALANCE SHEET OF THE ASSESS EE AS AT 31-03- 2007(PB/PAGE 23) AND DAILY CASH BALANCE SUMMARY FOR THE MONTH OF APRIL 2007 IN ASSESSEES BOOKS(PB/PAGE 24-25). WITH RESPECT TO AD-HOC DISALLOWANCE OF RS.33,991/- BEING 10% OF CASH EXPENSES OF RS.3,39,917/- , IT IS SUBMITTED BY LEAR NED COUNSEL THAT NO AD-HOC DISALLOWANCE CAN BE MADE BY THE REVENUE. 10. THE LD. D.R., ON THE OTHER HAND, RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT NO DOCUMENTARY EVIDENCE HA S BEEN FILED BY THE ASSESSEE WITH REGARD TO OPENING CASH BALANCE AS ON 01-04-2007 OF ITA 4320/MUM/2012 13 RS.19,50,592/- AS WELL AS THE CASH GIFT OF RS.5 L ACS RECEIVED FROM THE MINOR CHILDREN. NO WEALTH TAX RETURN WAS FILED BY THE AS SESSEE. WITH RESPECT TO AD- HOC DISALLOWANCE OF RS.33,991/- BEING 10% OF CASH E XPENSES OF RS.3,39,917/, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW AND SUBMITTED THAT THE ADDITIONS WERE RIGHTLY MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A). 11. THE LD. COUNSEL, IN THE REJOINDER, SUBMITTED TH AT EVEN IF WEALTH TAX RETURN IS NOT FILED BUT THAT DOES NOT MEAN THAT THE ASSESSEE DID NOT HAVE OPENING CASH BALANCE OF RS.19,50,592/- AS ON 01-04- 2007. ALL EVIDENCES AND COMPLETE DETAILS WERE DULY FURNISHED REGARDING WITH DRAWAL OF AMOUNT FROM ICICI BANK IN FINANCIAL YEAR 2006-07 AND WITHDRAWAL FROM DCC . 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON . WE HAVE OBSERVED THAT THE ASSESSEE HAS DEPOSITED CASH OF RS. 25 LAKHS FROM THE PERIOD 10 TH APRIL, 2007 TO 20 TH APRIL, 2007 IN HDFC BANK OF HIS PROPRIETARY CONCERN RUSHAB PACKAGING . ON BEING CALLED UPON TO EXPLAIN THE SAME, THE ASSESSEE EXPLA INED THAT THE SAID AMOUNT HAS BEEN DEPOSITED IN THE HDFC BANK ACCOUNT OF M/S RUSHABH PACKAGING , OUT OF WHICH RS. 20 LAKHS IS DEPOSITED FROM 10-04-2 007 TO 18-4-2007 WHICH WAS OUT OF THE OPENING CASH IN HAND OF RS. 19,50,5 92/- AS ON 01-04-2007 IN THE PERSONAL BALANCE OF THE ASSESSEE AND BALANCE OF RS. 5 LAKHS DEPOSITED ON 20 TH APRIL, 2007 WAS OUT OF CASH BELONGING TO ASSESSEE S MINOR CHILDREN RECEIVED AS CASH GIFT FROM TIME TO TIME. THE AMOUN T IS SHOWN IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE WHICH WAS NEVER FILED WITH THE REVENUE NOR WEALTH-TAX RETURNS WERE FILED WITH THE REVENUE. UND ER THESE CIRCUMSTANCES, THE BURDEN IS VERY HEAVY ON THE ASSESSEE AS THE SUM OF AMOUNT OF RS 25 LACS IS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE AS SESSEE VIDE CASH DEPOSIT IN THE HDFC BANK ACCOUNT OF THE ASSESSSEE PROPRIETARY CONCERN RUSHAB ITA 4320/MUM/2012 14 PACKAGING , IT IS MANIFEST UPON THE ASSESSEE TO EX PLAIN AND ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THESE CASH DEPOSIT TRANSACTIONS OF RS 25 LACS IN HIS HDFC BANK ACCOUNT . THE ASSESSEE HAS EXPLAINED WHEREBY HE PRODUCED THE AUDITED ACCOUNTS FOR THE FINANCIAL YEAR 2006-07 OF M/S DCC TO CONTEND THAT THERE WAS WITHD RAWALS FROM THE SAID FIRM DCC AND ALSO WITHDRAWAL FORM ICICI BANK IN FIN ANCIAL YEAR 2006-07 BUT THE COMPLETE AND PROPER DETAILS LINKING DIRECT CO-R ELATION WITH THE CASH GENERATION IN THE HANDS OF THE ASSESSEE LEADING TO THE OPENING BALANCE OF CASH OF RS.19,52,590/- ON 01-04-2007 NEEDS TO BE SU BMITTED BY THE ASSESSEE AND VERIFIED BY THE REVENUE. SIMILARLY FOR CASH GIF T OF RS 5 LACS FROM MINOR CHILDREN WE HAVE OBSERVED THAT THE ASSESSEE HAS CLU BBED MINOR CHILDREN INCOME U/S 64(1A) OF THE ACT WITH HIS OWN INCOME WH ILE FILING RETURN OF INCOME WITH THE REVENUE. THE MINOR SON HAD AN INCOM E OF RS.3,41,161/- WHILE MINOR DAUGHTER HAS INCOME OF RS.3,17,217/- WH ICH STOOD CLUBBED WITH THE ASSESSEE INCOME. THE ASSESSEE ALSO SUBMITTED A DDITIONAL EVIDENCES BEFORE THE LEARNED CIT(A) IN HIS DEFENSE WHICH WERE ALSO NOT FORWARDED BY THE LEARNED CIT(A) TO THE AO FOR HIS COMMENTS AS PER DE TAILS SET-OUT ABOVE. IN OUR CONSIDERED VIEW AND KEEPING IN VIEW THE INTERES T OF JUSTICE, THIS MATTER NEEDS TO BE SET ASIDE AND RESTORED TO THE FILE OF T HE A.O. FOR DE-NOVO DETERMINATION OF THE ISSUE BY THE AO AFTER EXAMININ G AND VERIFYING THE ADDITIONAL EVIDENCES ON MERITS AS SUBMITTED BY THE ASSESSEE IN HIS DEFENSE. THE ASSESSEE IS DIRECTED TO PRODUCE ALL RELEVANT EV IDENCES AND MATERIAL TO ESTABLISH THE GENUINENESS OF THE OPENING BALANCE OF CASH OF RS.19,50,592/- AS ON 01-04-2007 , AS WELL AS BONAFIDE AND GENUINEN ESS OF THE CASH GIFT OF RS. 5 LACS FROM MINOR CHILDREN . THE BURDEN ON THE ASSE SSEE IS HEAVY U/S 68 OF THE ACT AS THE OPENING BALANCE OF CASH IN HAND OF RS 19,50,592/- WAS NOT DISCLOSED TO THE REVENUE AS WELL CASH GIFT OF RS 5 LACS NEED TO BE CO-RELATED TO THE CASH WITHDRAWALS / OUTGO BY THE MINOR CHILDREN . THUS THE BURDEN IS ON THE ASSESSEE TO BRING ON RECORD COGENT EVIDENCES TO DISCHARGE HIS BURDEN AS CAST UPON THE ASSESSEE U/S 68 OF THE ACT. NEEDLESS TO SAY, PROPER AND ITA 4320/MUM/2012 15 ADEQUATE OPPORTUNITY OF BEING HEARD WILL BE PROVIDE D BY THE AO TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATUR AL JUSTICE. WE ORDER ACCORDINGLY. WITH RESPECT TO THE SECOND ISSUE OF DISALLOWANCE OF RS.33,991/- BEING 10% OF CASH EXPENSES OF RS.3,39,917/- CLAIMED BY THE ASSES SEE AS DEDUCTION FROM INCOME WHILE FILING RETURN OF INCOME, THE ADDITIONS HAVE BEEN MADE OWING TO THE FAILURE OF THE ASESSEE TO PRODUCE INVOICES AS T HE CASH VOUCHERS ARE SELF MADE , AND TO PROVE THAT THE EXPENSES ARE WHOLLY AN D EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS AS PER THE MANDATE OF SEC TION 37(1) OF THE ACT. IN OUR CONSIDERED VIEW KEEPING IN VIEW THE PECULIAR FA CTS AND CIRCUMSTANCES OF THE CASE, AS THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO BRING ON RECORD INVOICES FOR THE CASH EXPENSES OF RS.3,39,917/- SO CLAIMED AS WELL AS TO PROVE THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF BUSINESS, THE AO ESTIMATED THE DISALLOWANCE KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES SURROUNDING THE BUSINESS OF THE ASSES SEE AND THE ESTIMATE OF DISALLOWANCE OF 10% IN OUR CONSIDERED VIEW BY THE A O IS QUITE REASONABLE AND FAIR, WHICH IS HEREBY UPHELD BY US. WE DONOT FIND A NY INFIRMITY IN THE ORDERS OF THE LEARNED CIT(A) WHICH WE CONFIRM. WE ORDER AC CORDINGLY. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IN ITA N0. 4320/MUM/2012 FOR THE ASSESSMENT YEAR 2008-09 IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY , 2016. # $% &' 27-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 27-05-2016 ITA 4320/MUM/2012 16 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI