Karim Ismail Bhai Ratnani, Hyderabad V. ITO,Ward 8(2), Hyderabad

ITA 46/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82351 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Business income; Opportunity of being heard; Additional evidence; Corroborative evidences
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 46/HYD/2014 ASSESSMENT YEAR : 2008-09 KARIM ISMAIL BHAI RATNANI, R.R. DISTRICT. PAN AIZPB 7158B INCOME-TAX OFFICER, WARD 8(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI A.V. RAGHU RAM REVENUE BY SHRI R.MOHAN REDDY DATE OF HEARING 03-09-2014 DATE OF PRONOUNCEMENT -09-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26/11/13 PASSED BY LEARNED CIT(A), VIJAYAWADA FOR T HE AY 2008-09. 2. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF POPCORN. FOR TH E AY UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 23/ 03/08 DECLARING TOTAL INCOME OF RS. 1,25,825. DURING SCRUTINY ASSES SMENT PROCEEDING, WHILE EXAMINING ASSESSEES BANK ACCOUNT MAINTAINED WITH ING VYSYA BANK, SIDDIAMBAR BAZAR BRANCH, AO NOTICED THAT ASSE SSEE HAS MADE DEPOSITS OF RS. 39,43,516 FOR THE PERIOD FROM 01/04 /07 TO 31/03/08. HOWEVER, AS PER P&L ACCOUNT FILED ALONG WITH RETURN OF INCOME, ASSESSEE HAS SHOWN GROSS RECEIPTS TO THE EXTENT OF RS. 6,42,108 AS AGAINST THE RECEIPTS OF RS. 39,43,516. AO WAS OF TH E VIEW THAT ENTIRE 2 ITA NO.46/HYD/2014 KARIM ISMAIL BHAI RATNANI AMOUNT/DEPOSITS MADE BY THE ASSESSEE IN THE BANK AC COUNT ARE NOTHING BUT EARNINGS FROM HIS BUSINESS, HENCE, WHAT EVER RECEIPTS/DEPOSITS AVAILABLE IN THE BANK ACCOUNT SHO ULD BE TREATED AS BUSINESS INCOME OF ASSESSEE. AS THE ASSESSEE HAS SH OWN THE RECEIPTS OF RS. 6,42,108 IN THE RETURN OF INCOME, A O OPINED THAT REDUCING THE SAID AMOUNT FROM THE TOTAL DEPOSITS OF RS. 39,43,516, BALANCE AMOUNT OF RS. 33,01,408 SHOULD BE TREATED A S INCOME OF THE ASSESSEE. ACCORDINGLY, HE ASKED THE ASSESSEE TO EXP LAIN. AS NOTED BY AO IN THE ASSESSMENT ORDER, IN SPITE OF OPPORTUN ITY BEING GIVEN TO ASSESSEE TO EXPLAIN, SINCE ASSESSEE DID NOT EXPLAIN THE SOURCE OF DEPOSITS WITH PROPER EVIDENCE, HE TREATED THE AMOUN T OF RS. 33,01,408 AS UNEXPLAINED DEPOSITS U/S 69 OF THE ACT AND ADDED IT TO THE INCOME OF ASSESSEE FOR THE IMPUGNED AY. BEING AGGRIEVED OF THE ADDITION SO MADE ASSESSEE PREFERRED APPEAL BEFORE T HE CIT(A). 3. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT(A) , ASSESSEE FILED AN AFFIDAVIT FROM ONE SHRI MEHABOOB RASNANI AND REQUESTED FOR TREATING THE SAME AS ADDITIONAL EVIDENCE. IN THE SA ID AFFIDAVIT, IT WAS STATED THAT ASSESSEE WAS CARRYING ON BUSINESS IN JO INT VENTURE WITH THE SAID MEHABOOB RASNANI AND THE DEPOSITS IN THE B ANK ACCOUNTS RELATE TO THE JOINT VENTURE BUSINESS, WHICH HAS RES ULTED IN LOSS. ON THE BASIS OF THE SUBMISSIONS MADE BY ASSESSEE AND ADDIT IONAL EVIDENCE FILED, CIT(A) CALLED FOR A REMAND REPORT FROM THE A O. AFTER CONSIDERING THE COMMENTS OF THE AO IN THE REMAND REPORT, CIT(A) CONFIRMED THE ADDITION MADE WITH THE FOLLOWING OBSERVATIONS: 5.1 THERE WERE DEPOSITS OF RS. 39,43,516/- IN THE I NG VYSYA BANK. THE ONUS IS CAST ON THE APPELLANT TO EXPLAIN EACH AND EVERY DEPOSIT. HOWEVER, THE APPELLANT HAD FAILED TO EXPLAIN THE SOURCES DURING THE ASSESSMENT PROCEEDINGS. IN APPEA L BEFORE ME, THE APPELLANT PRODUCED AFFIDAVIT FROM THIRD PAR TY AND STATED THAT THE DEPOSITS IN THE SAID BANK RELATES TO A JOI NT VENTURE. EXCEPT FILING THIS AFFIDAVIT, THE APPELLANT HAS NOT PRODUCED ANY DETAILS WITH REGARD TO THE JOINT VENTURE BUSINESS N OR EXPLAINED PROPERLY THE SOURCES FOR THE DEPOSITS IN THE BANK A CCOUNT. ALL AMOUNTS ARE DEPOSITED AS SELF AS OBSERVED. THEREFOR E, THE CONTENTION OF THE APPELLANT THAT THEY BELONG TO THI RD PARTY JOINT 3 ITA NO.46/HYD/2014 KARIM ISMAIL BHAI RATNANI VENTURE SEEMS TO BE NOT GENUINE. HENCE, THE APPELLA NT FAILED TO PROVE THE SOURCES FOR THE DEPOSITS. ACCORDINGLY, TH E ADDITION MADE BY THE AO U/S 69 OF THE ACT IS HEREBY CONFIRME D. 4. LEARNED AR SUBMITTED BEFORE US THAT DURING THE A SSESSMENT PROCEEDING AS WELL AS BEFORE THE FIRST APPELLATE AU THORITY, ASSESSEE HAS STATED THAT THE DEPOSITS IN THE BANK ACCOUNTS A RE NOTHING BUT, TRADE RECEIPTS OF THE JOINT VENTURE BUSINESS CARRIE D ON WITH HIS BROTHER MEHABOOB RASNANI. IN THIS CONTEXT, LEARNED AR REFER RED TO THE AFFIDAVIT FILED BEFORE THE CIT(A) BY MEHABOOB RASNA NI, A COPY OF WHICH IS PLACED AT PAGE 5 OF THE PAPER BOOK. IT WAS SUBMITTED BY THE LEARNED AR THAT IN THE AFFIDAVIT, THE FACTS HAVE BE EN CLEARLY MADE OUT AS TO HOW THE DEPOSITS HAVE COME TO THE BANK ACCOUN T. LEARNED AR SUBMITTED THAT EVEN EXAMINATION OF THE BANK ACCOUNT WOULD REVEAL THAT FACT STATED IN THE AFFIDAVIT ARE CORRECT AS TH E CASH DEPOSITS ARE MADE BY CERTAIN TRADERS OF DIFFERENT AREA. IT WAS, THEREFORE, SUBMITTED BY THE LEARNED AR, WITHOUT PROPERLY EXAMINING THE N ATURE OF THE CASH DEPOSITS IN THE BANK ACCOUNT, IT CANNOT BE PRESUMED THAT THEY ARE UNEXPLAINED INVESTMENTS OF THE ASSESSEE. ALTERNATIV ELY, IT WAS CONTENDED BY THE LEARNED AR EVEN ASSUMING THEY ARE TRADE RECEIPTS/BUSINESS RECEIPTS OF THE ASSESSEE, THE ENT IRE AMOUNT CANNOT BE TREATED AS INCOME AS ONLY THE PROFIT ELEMENT EMB EDDED IN SUCH RECEIPTS CAN BE CONSIDERED AS INCOME OF THE ASSESSE E. IN THIS CONTEXT, LEARNED AR RELIED UPON A DECISION OF HONB LE GUJARAT HIGH COURT IN CASE OF DCIT VS. PANNA CORPORATION 74 DTR 89. 5. LEARNED DR, ON THE OTHER HAND, SUBMITTED, AS TH E ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDING AS WELL AS BEFORE THE CIT(A) HAS FAILED TO PROVE WITH SUPPORTING EVIDENCE THE SOURCE OF DEPOSITS INTO THE BANK ACCOUNT, ADDITION MADE WAS PROPER. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES. IT IS VERY MUCH EVIDENT FROM THE OBSER VATIONS MADE BY THE 4 ITA NO.46/HYD/2014 KARIM ISMAIL BHAI RATNANI AO THAT HE CONSIDERS THE DEPOSITS IN THE BANK ACCOU NT AS BUSINESS/TRADE RECEIPTS OF THE ASSESSEE. THUS, IN A WAY, AO ACCEPTS THE CLAIM OF THE ASSESSEE THAT THE DEPOSITS ARE BUS INESS RECEIPTS. HOWEVER, AS CAN BE SEEN FROM THE ORDER OF THE CIT(A ), SHE HAS REJECTED THE CONTENTIONS OF THE ASSESSEE WITHOUT PR OPERLY EXAMINING THE SAME. FROM THE EVIDENCE SUBMITTED BEFORE CIT(A ) AND THE SUBMISSIONS MADE BY THE ASSESSEE, IT APPEARS THAT T HE CLAIM OF THE ASSESSEE IS THAT CASH DEPOSITS REPRESENT TRADE RECE IPTS FROM PURCHASERS AT DIFFERENT PLACES WHO DIRECTLY DEPOSIT ED THEM TO ASSESSEES BANK ACCOUNT. ON A PERUSAL OF THE BANK S TATEMENT, A COPY OF WHICH IS PLACED AT PAGES 10 TO 33 OF THE ASSESSE ES PAPER BOOK, IT APPEARS THAT AGAINST EACH ENTRY OF CASH DEPOSITS SO ME NAME HAS BEEN MENTIONED. THEREFORE, ASSESSEES CONTENTION TH AT THE DEPOSITS WERE MADE BY PURCHASERS OF ASSESSEES PRODUCT, TO S OME EXTENT APPEARS TO BE CORRECT. HOWEVER, FOR ASCERTAINING TH E TRUE NATURE OF THE DEPOSITS, AO SHOULD HAVE CONDUCTED NECESSARY EN QUIRY WITH THE BANK AS AGAINST EACH CASH DEPOSIT OF SOME NAME IS A PPEARING. WITHOUT DOING SO, AO CANNOT PRESUME THAT THEY ARE U NEXPLAINED INVESTMENT BY THE ASSESSEE. THE CIT(A) HAS ALSO NOT PROPERLY APPRECIATED THE FACT. AS IT APPEARS FROM THE OBSERV ATION OF THE LEARNED CIT(A) TO THE EFFECT ALL AMOUNTS ARE DEPOS ITED AS SELF, SHE HAS NOT PROPERLY APPRECIATED THE FACTS AND HAS CONF USED HERSELF BETWEEN DEPOSITS AND WITHDRAWALS AS THERE CANNOT BE DEPOSITS TERMED AS SELF'. FURTHER, IT IS OBVIOUS FROM THE OBSERVATION OF THE AO THAT HE CONSIDERS THE DEPOSITS IN THE BANK ACCOUNT AS TRADE RECEIPTS. FURTHER, WHILE REDUCING THE RECEIPTS OF RS. 6,42,10 8 FROM THE TOTAL DEPOSITS OF RS. 39,43,516, AO HAS ACCEPTED THE PROF IT ELEMENT DECLARED BY THE ASSESSEE ON SUCH RECEIPT. THEREFORE , ASSESSEES CONTENTION THAT ONLY PROFIT EMBEDDED TO THE RECEIPT S IS TO BE TAXED NEEDS TO BE CONSIDERED IN PROPER PERSPECTIVE. IN TH E AFORESAID VIEW OF THE MATTER, SINCE THE ISSUE RELATING TO THE DEPOSIT S IN THE BANK ACCOUNT HAS NOT BEEN PROPERLY ENQUIRED INTO AND CON SIDERED BY THE AO AS WELL AS CIT(A), WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE 5 ITA NO.46/HYD/2014 KARIM ISMAIL BHAI RATNANI FILE OF THE AO FOR CONSIDERING AFRESH AFTER AFFORDI NG A REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12/09/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 12 TH SEPTEMBER, 2014 KV COPY TO:- 1) KARIM ISMAIL BHAI RATNANI, C/O K. VASANTHKUMAR & AV RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001 2) THE ITO, WARD 8(2), HYDERABAD 3) CIT(A), VIJAYAWADA 4) CIT-II, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.