ITO WD 19(3)3, MUMBAI V. NISHA DANISH MERCHANT, MUMBAI

ITA 4329/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VANDNA SAGAR
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.4329/MUM/2009 A.Y 2006-07 INCOME TAX OFFICER -19(3)(3), MUMBAI. VS. MS. NISHA DANISH MERCHANT, 1-ROCK DALE, STOCK-IN-TRADE. SEBASTIAN ROAD, BANDRA (WEST), MUMBAI 400 050. PAN: ACSPM 2141 G (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VANDNA SAGAR/ RESPONDENT BY : SHRI VIJAY MEHTA. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GR OUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT[A] HAS ERRED IN DELETING THE ADDITION M ADE BY AO ON ACCOUNT OF CASH CREDIT U/S.68 OF THE INCOME TAX ACT. OF ` `` ` .13,05,037/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT[A] FAILED TO APPRECIATE THE FACT THE DE POSIT OF ` `` ` .15,91,508/- TO HDFC BANK LTD. BANK WAS NEITHER DEC LARED IN THE RETURN OF INCOME NOR THE SOURCES OF DEPOSITS WA S EXPLAINED TO THE ASSESSING OFFICER . 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT IT CAME TO THE LIGHT THAT THE ASSESSEE WAS MAINTAINING A BANK ACCOUNT IN HDFC BANK, HILL ROAD, BANDRA WEST, MUMBAI. IN THIS ACCOUNT A TOTAL SUM OF ` `` ` .15.13 LAKHS WAS DEPOSITED. ON QUERY IT WAS MAINLY SUBMITT ED THAT THE SOURCE OF THE DEPOSIT IS MAINLY FROM SALE. HOWEVER, SINCE NO EVIDENCE WAS PRODUCED AND MORE OVER THIS ACCOUNT WAS NOT ORIGINA LLY DISCLOSED, AO 2 ADDED THE TOTAL DEPOSIT OF ` `` ` .15,91,508/- AS UNEXPLAINED INCOME OF THE ASSESSEE. 3. ON APPEAL, SOME DETAILS WERE FILED WHICH WERE SE NT TO THE AO FOR FURNISHING A REMAND REPORT. ULTIMATELY, THE ISS UE WAS DECIDED BY THE LD. CIT[A] VIDE PARA-12 WHICH IS AS UNDER: 12. IT IS NOT EVERY FIGURE OF CREDIT FOUND IN BANK ACCOUNTS WHICH MAY CONSTITUTE INCOME WHERE THE APPELLANT IS MAKING SALES OUTSIDE THE ACCOUNTS BUT HAS TO ESTIMATE THE PROFIT IN A REASON ABLE MANNER. THE CUMULATIVE RECEIPTS ON THE CREDIT SIDE OF THE BANK ACCOUNTS CANNOT BE TREATED AS INCOME WHEN THERE ARE CORRESPONDING DEBI TS THROUGHOUT THE YEAR. THE WEIGHTAGE WILL HAVE TO BE GIVEN TO ITS NA TURE AND THE BANK ACCOUNT IS TO BE VIEWED AS A WHOLE. THE FACT THAT T HE DEBITS ARE CHEQUES FURTHER STRENGTHENS THE CASE OF THE APPELLANT. THE NATURE OF THESE DEBTS BY CHEQUE WAS HIGHLIGHTED IN THE APPELLATE STAGE AN D MADE AVAILABLE TO THE AO AND IN THE ABSENCE OF ANY MATERIAL TO THE CO NTRARY ARE HELD TO BE BUSINESS EXPENDITURES. IT IS ALSO RELEVANT TO ADD T HAT THE APPELLANT HAS NOT CREATED ANY ASSET FROM THE BANK ACCOUNT AND SO IT CAN BE REASONABLY BE ACCEPTED THAT DEBITS RELATE TO ITS BUSINESS ONLY . 4. BEFORE US LD. DR SUBMITTED THAT INITIALLY ASSESS EE DID NOT DISCLOSE HER ACCOUNT AND THEN EVIDENCE WAS NOT PROD UCED BEFORE THE AO FOR SHOWING THAT DEPOSITS WERE OUT OF THE SALE. SHE FURTHER SUBMITTED THAT CIT[A] HAS GONE WRONG IN OBSERVING T HAT THERE HAVE BEEN REGULAR WITHDRAWALS FOR PURCHASES. SHE INVITED OUR ATTENTION TO PAGES 4 TO 10 OF THE PAPER BOOK AND POINTED OUT THA T MOST OF THE WITHDRAWALS WERE THROUGH ATM WHICH CANNOT BE FOR TH E PURPOSE OF PURCHASES. SHE ALSO POINTED OUT THAT ON 16-6-2005 A CHEQUE HAS BEEN SHOWN TO BE ISSUED TO M/S SOLE TO SOUL WHICH IS BAS ICALLY A RETAIL SHOW- ROOM DEALING IN SHOES AND PERHAPS ASSESSEE HAS MADE PERSONAL PURCHASES WHICH CANNOT BE RELATED TO THE BUSINESS. SIMILARLY, ON 20-09- 3 2005 A SUM OF ` `` ` .5895/- HAS BEEN PAID TO JUICE HAIR WHICH IS AGAIN A BEAUTY PARLOR AND THIS EXPENDITURE COULD NOT BE REL ATED TO THE BUSINESS EXPENDITURE. THERE MAY BE OTHER EXAMPLES LIKE THIS AND, THEREFORE, THE MATTER NEEDS FURTHER VERIFICATION. 5. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE S UBMITTED THAT ASSESSEE HAD FILED EVIDENCE THAT DEPOSITS WERE MADE OUT OF SALE BEFORE THE CIT[A] AND THE SAME WERE SENT FOR VERIFICATION OF THE AO. HE SUBMITTED THAT THERE MAY BE SOME PERSONAL EXPENSES, BUT THAT DOES NOT MEAN THAT ALL THE WITHDRAWALS ARE PERSONAL. TOT AL SALES CANNOT BE SUBJECTED TO TAX AND THE CIT[A] HAS CORRECTLY ESTIM ATED THE PROFITS AT 18% OF THE SALE DEPOSITED IN HDFC BANK. HOWEVER, HE LEFT THE MATTER TO THE DISCRETION OF THE BENCH FOR MAKING ANY FURTH ER ADDITION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT SOME EVIDENCE WAS AVAILABLE THAT DEPOSITS HAVE BEEN MADE OUT OF THE SALES. THE WHOLE AMOUNT OF SUCH SALES CANNOT BE SUB JECTED TO TAX. AT THE SAME TIME, LD. DR HAS POINTED OUT CLEARLY THAT SOME OF THE EXPENSES MAY BE OF PERSONAL NATURE. THEREFORE, WE A RE OF THE VIEW THAT THE PROFIT ESTIMATED BY THE LD. CIT[A] AT 18% OF THE SUPPRESSED SALES IS ON LOWER SIDE AND, THEREFORE, WE PROPOSE T O ENHANCE THE ADDITION BY A FURTHER SUM OF ` `` ` .1 LAC WHICH HAS BEEN ACCEPTED BY THE LD. COUNSEL OF THE ASSESSEE. THEREFORE, WE SET ASID E THE ORDER OF THE LD. CIT[A] AND DIRECT THE AO TO MAKE THE ADDITION O F ` `` ` .3,86,471/- I.E. 4 ADDITION PROPOSED BY THE LD. CIT[A] AT ` `` ` .2,86,471/- PLUS FURTHER ADDITION OF ` `` ` .1 LAC MADE BY US. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7/4/2011. SD/- SD/- (D.K.AGARWAL) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 27/4/2011. P/-*