ITO, New Delhi V. Sh Naresh Chhabra, New Delhi

ITA 4590/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3297 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 28-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 29-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Assessee Lawyers: K SAMPAT SHRI RAJ KUMAR ADVS
• Keywords: Peak credit; Additional evidence; Reassessment proceedings
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 4590 /DEL/201 6 [A.Y. 20 0 4 - 0 5 ] THE I . T .O VS. SHRI NARESH CHHABRA WARD 1 7 ( 3 1 ) 161, AGCR ENCLAVE, NEW DELHI O PP. KARKARDUMA COURT N EW DELHI PAN : A AAP C 2646 L [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 1 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 06 .0 3 .201 8 ASSESSEE BY : SHRI K. SAMPAT, SHRI RAJ KUMAR , ADVS REVENUE BY : SHRI V.K. JIWANI , SR. DR ORDER THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE LD. CIT(A) - 42 , NEW DELHI VIDE ORDER DATED 2 1 .0 6 .201 6 FOR A.Y . 200 4 - 0 5 . 2 . T HE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN PARTIALLY DELETING ADDITION OF RS.38,33,757/ - ON ACCOUNT OF DEPOSITS IN UNEXPLAINED BANK 2 ITA NO. 4590 /DEL/201 6 AC COUNT OF THE ASSESSEE EVEN WHEN THE ASSESSEE DID NOT DISCLOSE THE BANK ACCOUNT AND DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS? 2. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN PARTIALLY DELETING ADDITION OF RS. 38,33 ,757/ - ON ACCOUNT OF UNEXPLAINED DEPOSITS IN UNDISCLOSED BANK ACCOUNT OF THE ASSESSEE BY LINKING TRANSACTION IN THE BANK ACCOUNT WITH THE DISCLOSED BUSINESS OF THE ASSESSEE WITHOUT ANY MATERIAL EVIDENCE? 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN ACCEPTING ADDITIONAL EVIDENCE EVEN WHEN THE FACTS OF THE CASE WERE NOT COVERED WITHIN THE EXCEPTIONS PROVIDED UNDER RULE 46A OF INCOME TAX RULES 1962 (THE RULES) 4. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT SOME KIND OF ILLNESS OF THE ASSESSEE WAS COVERED UNDER THE EXCEPTIONS PROVIDED UNDER RULE 46A EVEN WHEN THE ASSESSEE HAD APPOINTED AN AUTHORISED REPRESENTATIVE TO REPRESENT HIS CASE BEFORE THE AO? 5. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN APPLYING PRINCIPLES OF RES - JUDICATA OR ESTOPPEL BY RECORD TO THE INCOME TAX PROCEEDINGS? 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR FORGO ANY GROUND/(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3 ITA NO. 4590 /DEL/201 6 3 . GROUND NOS. 1 AND 2 ARE AGAINST THE DELETION OF ADDITION IN A SUM OF RS. 38,33,757/ - . 4. GROUND NOS. 3 AND 4 ASSAIL ADMISSION OF ADDITIONAL EVIDENCE. 5 . GROUND NO. 5 IS REGARDING THE APPLICATION OF PRINCIPLES OF RES JUDICATA AND ESTOPPELS BY THE LD. CIT(A). 6 . GROUND NO. 6 IS GENERAL IN NATURE. 7 . THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR AY 2005 - 06 AN UNDECLARED S AVING BANK ACCOUNT NO. 16791 OF THE APPELLANT MAINTAINED WITH UTI (AXIS) BANK, SWASTHYA VIHAR, DELHI WAS DISCOVERED. THE APPELLANT ADMITTED IN THE STATEMENT BEFORE THE ASSESSING OFFICER THAT HE HAD NOT CONSIDERED THIS ACCOUNT WHILE COMPUTING HIS TAXABLE I NCOME. IN THE ASSESSMENT PROCEEDINGS FOR THAT YEAR, THE ASSESSING OFFICER AFTER ENQUIRY HELD THAT THE ASSESSEE WAS CARRYING OUT BUSINESS OF RETAIL TRADING OF BALL BEARINGS THROUGH THIS UNDISCLOSED ACCOUNT AND ESTIMATED 9% OF THE SALES AS TAXABLE INCOME OF THE ASSESSEE IN THE ABSENCE OF BOOKS OF ACCOUNT. 4 ITA NO. 4590 /DEL/201 6 THE ASSESSING OFFICER FOUND THAT THE SAME ACCOUNT WAS ALSO OPERATIONAL IN THE SUBJECT YEAR. BASED ON THE FINDINGS FOR AY 2005 - 06 THE ASSESSING OFFICER SO STATED TO HAVE ISSUED NOTICE U/S 148 OF THE INCOME - TAX ACT, 1961 (THE ACT) TO THE ASSESSEE ON 24.03.2011. THAT REPORTEDLY REMAINED UNCOMPLIED WITH AND SO AN ASSESSMENT ORDER U/S 144/147 OF THE ACT WAS PASSED ON 19.12.2011 IN WHICH THE CREDITS APPEARING IN THE UNDER - MENTIONED FIVE BANK ACCOUNTS OF THE A PPELLANT WERE ADDED TO THE INCOME AS UNEXPLAINED INCOME U/S 69A OF THE ACT AS UNDER: - S. NO . PARTICULARS ACCOUNT NO. AMOUNT OF CREDIT DURING THE YEAR 1 UTI (AXIS) BANK, SWASTHYA VIHAR, DELHI 16791 35,20,790 2 PNB, PREET VIHAR, DELHI 19181 54.855 3 PNB, PREET VIHAR, DELHI 22411 4,17,444 4 KARUR VYSYA BANK, KASHMERE GATE, DELHI 235 5,35,838 5 KARUR VYSYA BANK, KASHMERE GATE, DELHI 1142 49,300 TOTAL 45,78,527 8. IN APPEAL BEFORE THE LD. CIT(A) - 42, NEW DELHI THE ASSESSEE FILED FRESH EVIDENCE AND DETAI LED SUBMISSIONS BOTH ON FACTS AND IN LAW 5 ITA NO. 4590 /DEL/201 6 INCLUDING A CHALLENGE TO THE ACTION OF THE ASSESSING OFFICER U/S 147/148 OF THE ACT. THE CIT(A) UPHELD THE ASSESSING OFFICERS ACTION IN INITIATING REASSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT. HOWEVER, ON MERI TS THE CIT(A), AFTER OBTAINING A REMAND REPORT FROM THE ASSESSING OFFICER AND CONSIDERING THE EXPLANATIONS OF THE ASSESSEE AND THE MATERIAL ADDUCED BY THE ASSESSEE TO SUPPORT HIS VERSION AND ALSO AFTER PURSUING THE ORDER OF THE TRIBUNAL FOR THE AY 2002 - 03 HELD AS UNDER: - 7.2.4 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) - XVI, NEW DELHI HAD GIVEN SPECIFIC DIRECTIONS TO THE AO TO CONDUCT ENQUIRIES FROM THE SUPPLIERS IN RESPECT OF WHICH THE APPELLANT HAD FILED CONFIRMATION, COPY OF ACCOUNT AND THE RELEVANT BANK STATEMENTS. THESE WERE INITIALLY EXAMINED BY THE LD. AO IN THE PRELIMINARY REPORT. LATER ON, IN THE FINAL REMAND REPORT DATED 11.12.2013, THE LD. AO GAVE DETAILS OF ENQUIRIES MADE WITH 17 PARTIES, WHICH HAVE BEEN REPRODUCED IN PARA 5.11 OF THIS ORDER. IT IS EVIDENT THAT THE INITIAL ENQUIRIES WERE MADE BY THE AO IN THE NAME OF THE APPELLANT (SH. NARESH CHHABRA), WHEREAS THE BUSINESS DEALINGS WITH THESE SUPPLIERS WAS CONDUCTED IN THE NAME OF THE APPELLANTS PROP. CONCERN, NKT BEARINGS. S ECONDLY, IN THE REPORT, THE AO HAS ALSO CONFIRMED HAVING RECEIVED CONFIRMATION FROM 9 PARTIES AND IN RESPECT OF OTHER PARTIES THE APPELLANT HAD PRODUCED C - FORM OF SALES - TAX 6 ITA NO. 4590 /DEL/201 6 AND RELEVANT INVOICES AND CONFIRMATION. THEREFORE, BASED ON THE ENQUIRIES CONDUCTE D BY THE AO HIMSELF, THE SUSPICION RAISED BY THE LD. CIT(A) - XVI, NEW DELHI WHILE PASSING THE ORDER FOR AY 2002 - 03 THAT THERE WAS NO EVIDENCE THE APPELLANT WAS CARRYING OUT ANY BUSINESS ACTIVITY OUT OF BOOKS, STANDS RESOLVED. THE AO HAS OBSERVED THAT THESE PAYMENTS WERE RECEIVED IN THE HANDS OF THE NKT BEARINGS PVT. LTD. HOWEVER, WHILE THIS OBSERVATION MAY BE APPLICABLE FOR SOME SUPPLIERS, IT CANNOT BE MADE FOR ALL SUPPLIERS, SOME OF WHOM CONFIRMED HAVING SUPPLIED TO M/S NKC BEARING ALSO. IT IS EVIDENCE T HAT THE AO DID NOT EXAMINE C - FORM OF SALES - TAX ISSUED IN THEIR NAMES. IN ANY CASE, SUCH AN OBSERVATION LOOSES SIGNIFICANCE, KEEPING IN VIEW THE DIRECTIONS OF THE HONBLE ITAT GIVEN IN AY 2002 - 03, BY WHICH IT WAS HELD THAT THE ADDITIONS MADE BASED ON PEAK AMOUNT IN RESPECT OF BANK STATEMENTS OF THE APPELLANT WOULD BE THE RIGHT METHOD TO COMPUTE THE INCOME OF THE APPELLANT FROM THE UNDISCLOSED BUSINESS ACTIVITY. THEREFORE, THE DETAILED ENQUIRY MADE BY THE AO FROM SUPPLIERS LOOSES SIGNIFICANCE. IN ANY CASE, THE ENQUIRY SUFFICIENTLY PROVES THAT THE APPELLANT WAS CARRYING OUT UNDISCLOSED RETAIL TRADING OF BALL BEARING, AND THE PREPONDERANCE OF PROBABILITIES SUGGEST THAT THE CREDITS IN A/C NO. 16791 WERE OUT OF THE PROCEEDS OF THAT ACTIVITY ONLY. THERE IS NO A LTERNATIVE EXPLANATION BASED ON ANY EVIDENCE GIVEN BY THE AO. 7.2.5 THE APPELLANT COULD DEMONSTRATE THAT IT HAS BEEN TRANSFERRING AVAILABLE FUNDS FOR SHORT TERMS FDRS, WHICH WERE 7 ITA NO. 4590 /DEL/201 6 REDEEMED FREQUENTLY. IT IS ALSO HELD THAT IN DETERMINING THE PEAK CREDIT, ALL BANK ACCOUNTS OF THE APPELLANT NEED TO BE TAKEN INTO ACCOUNT, AS THE PROCEEDS OF UNDISCLOSED BUSINESS AS ALSO THE PAYMENT FOR PURCHASES WAS MADE THROUGH THESE BANK ACCOUNTS AND THE FUNDS WERE TRANSFERRED FROM ONE ACCOUNT TO ANOTHER. THEREFORE, THE PLE A OF THE APPELLANT TO RESTRICT ADDITION TO ONLY UTI BANK A/C NO. 16791 CANNOT BE ACCEDED TO. 7.2.6 IN VIEW OF THE ABOVE, FOLLOWING THE DIRECTIONS OF THE HONBLE ITAT, THE APPELLANT WAS DIRECTED TO PREPARE THE CASH FLOW CHART IN RESPECT OF ALL BANK ACCOUNT S AND OTHER UNDISCLOSED BUSINESS ACTIVITY. THE CASH BOOK SO PREPARED SHOWS THE PEAL DEFICIT OF RS.4,44,770/ - AS ON 03.11.2003. FURTHER, IT WAS OBSERVED THAT FOR PREPARING THE CASH FLOW, THE APPELLANT HAD DISCLOSED DRAWINGS FOR HOUSEHOLD PURPOSES TO THE EX TENT OF RS. 2,664/ - ONLY. THIS IS CONSIDERED HIGHLY INADEQUATE KEEPING IN VIEW THE HIGH STANDARD OF THE FAMILY OF THE APPELLANT AND THE LIFESTYLE OF THE APPELLANT, EVIDENT BY THE FACT THAT HE WAS MAINTAINING CAR IN FY 2001 - 02. IN VIEW OF THIS, I MAKE EST IMATED ADDITION OF RS. 2 LAKHS TOWARDS HOUSEHOLD EXPENSES, WHICH WILL ACCORDINGLY INCREASE THE CASH FLOW DEFICIT FURTHER. IN VIEW OF THIS, NET ADDITION IN RESPECT OF UNEXPLAINED CASH DEPOSIT OF RS. 6,44,770/ - IS CONFIRMED. THE APPELLANT GETS RELIEF IN RE SPECT OF THE BALANCE AMOUNT. 8 ITA NO. 4590 /DEL/201 6 THE ACTION OF THE CIT(A) WITH THE AFORE - CITED GROUNDS HAVE BEEN RAISED BY THE REVENUE. 9. DURING THE HEARING BEFORE ME THE LD. SR. DR APPEARING FOR THE REVENUE VEHEMENTLY CONTESTED THE ACTION OF THE LD. CIT(A) IN ADMITTING F RESH EVIDENCE IN VIOLATION OF THE NORMS STATED UNDER RULE 46A OF THE INCOME - TAX RULES 1962. HIS STRONG OBJECTION WAS THAT THE LD. CIT(A) ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE EVEN WHEN THE FACTS OF THE CASE WERE NOT COVERED UNDER ANY OF THE EXCEPTION S PROVIDED UNDER RULE 46A OF THE INCOME - TAX RULES. THE LD. SR. DR ALSO SUBMITTED THAT THE FINDINGS ON MERITS AS RECORDED BY THE LD. CIT(A) WERE UNACCEPTABLE FOR THE REASON THAT THE PURCHASES SEEM TO HAVE BEEN ACCOUNTED FOR IN THE REGULAR ACCOUNTS MAINTAIN ED BY THE ASSESSEE. 10. PER CONTRA, THE LD. SR. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO ERROR ON THE PART OF THE LD. CIT(A) IN ADMITTING THE ADDITIONAL EVIDENCE. HE CITED THE DECISION OF THE APEX COURT IN TEK RAM (DEAD) VS. CIT (2013) 357 IT R 133 TO SUBMIT THAT SO LONG AS THE ADDITIONAL EVIDENCE SUBMITTED WAS OF RELEVANCE TO THE ISSUE AT HAND IT WAS REQUIRED TO BE ADMITTED. THE LD. COUNSEL ALSO POINTED OUT THAT 9 ITA NO. 4590 /DEL/201 6 THE DELHI HIGH COURT IN CIT VS. VIRGIN SECURITIES & CREDITS (P) LTD. (2011) 332 I TR 396 HAD HELD THAT WHERE THE ADDITIONAL EVIDENCE FILED WAS CRUCIAL TO THE DISPOSAL OF THE APPEAL AND HAD A DIRECT BEARING ON THE QUANTUM OF CLAIM MADE BY THE ASSESSEE, IT WAS REQUIRED TO BE ADMITTED AND CONSIDERED. THE LD. COUNSEL ALSO REFERRED TO ANOTH ER DECISION OF THE DELHI HIGH COURT IN DI VS. MODERN CHARITABLE FOUNDATION (2011) 335 ITR 105 TO SAY THAT SO LONG AS OPPORTUNITY WAS PROVIDED TO THE ASSESSING OFFICER TO SCRUTINIZE THE ADDITIONAL EVIDENCE, NO OBJECTION COULD BE SUSTAINED IN RESPECT OF ITS ADMISSION AND CONSIDERATION. ON MERITS THE LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER HAD ADMITTED THAT NO DOCUMENTARY EVIDENCE HAD BEEN FILED TO PROVE THE BUSINESS ACTIVITIES. THE PURCHASES AS RECORDED WERE APPERTAI NING TO THE SALES AS RECORDED IN THE REGULAR BOOKS YIELDING THE STATED GROSS PROFIT AND SO THE SUBMISSION THAT THE UNRECORDED SALES WERE OUT OF THE PURCHASES WHICH STOOD RECORDED IN THE REGULAR BOOKS WAS TOTALLY WRONG AND CONTRARY TO THE FACTS RECORDED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS HAS REPORTED THAT HE HAD EXAMINED SOME OF THE SUPPLIERS ALSO. THE LD. COUNSEL SUPPORTED THE ORDER OF THE CIT(A). 10 ITA NO. 4590 /DEL/201 6 11 . I HAVE CONSIDERED THE ASSESSMENT ORDER, THE IMPUGNED ORDER, THE MA TERIAL ON RECORD AND HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL FOR THE AY 2002 - 03. SO FAR AS ADMISSION OF THE ADDITIONAL EVIDENCE IS CONCERNED I SEE NO FLAW IN THE LD. CIT(A) DOING SO, PARTICULARLY AFTER HE FOUND THEM RELEVANT FOR THE PURPOSE OF DISPENS ING THE JUSTICE AND CONSIDERED IT AFTER OBTAINING A REMAND REPORT FROM THE ASSESSING OFFICER. 12. AS TO THE MERIT OF THE CASE, THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN AY 2002 - 03 IN THE ASSESSEES OWN CASE AND HAS RULED IN FAVOUR OF SUSTAINING TH E ADDITION BASED ON YIELD SUBJECT FURTHER TO CERTAIN ADJUSTMENTS FOR THE OVER - LAPPING FUND TRANSFERS AND CROSS TRANSACTIONS. IN THE SUBJECT YEAR FOLLOWING THE PROCEDURE ADOPTED BY THE TRIBUNAL IN AY 2002 - 03 THE LD. CIT(A) AFTER A DEEP AND DETAILED EXAMINA TION HAS FOLLOWED THE SAME AND COMPUTED THE NET ADDITION OF RS. 6,44,770/ - WHICH IS INCLUSIVE OF A CUSHION OF RS. 2 LAKH WHICH POINT HAS NOT BEEN CONTESTED IN APPEAL BY THE APPEAL. ALL THAT HAS BEEN DONE BY THE LD. CIT(A) AFTER A DETAILED EXAMINATION OF T HE FIVE BANK ACCOUNTS. BEING SO I DO NOT SEE ANY ERROR OR DISCREPANCY IN THE ORDER OF THE LD. CIT(A), WHOSE OPERATIVE PORTION HAS BEEN EXTRACTED HERE - ABOVE FOR READY REFERENCE. 11 ITA NO. 4590 /DEL/201 6 13 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRO NOUN CED IN THE OPEN COURT ON 06 . 0 3 .201 8 . SD/ - [B.P. JAIN ACCOUNTANT MEMBER DATED: 06 TH MARCH, 2018 VL/ COPY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDENT 3 . CIT ASSISTANT REGISTRAR 4 . CIT(A) ITAT, NEW DELHI 5 . DR