ITO WD 16(3)(1), MUMBAI V. GEMCRAFT, MUMBAI

ITA 4860/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70649 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DHAVALJEET KAPOOR
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 4860/MUM/2011 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER - 16(3)(1) M/S. GEM CRAFT ROOM NO. 219, 2ND FLOOR 4A/5A, DREAMLAND BUILDING MATRU MANDIR, TARDEO ROAD VS. NEW QUEENS ROAD, M.P. MARG MUMBAI 400007 OPERA HOUSE, MUMBAI 400004 PAN - AACFG7610E PAN - AACFG7610E APPELLANT RESPONDENT APPELLANT BY: SHRI DHAVALJEET KAPOOR RESPONDENT BY: NONE DATE OF HEARING: 01.08.2013 DATE OF PRONOUNCEMENT: 07.08.2013 O R D E R PER D. MANMOHAN, V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE REVE NUE AND IT PERTAINS TO A.Y. 2007-08. 2. THE FOLLOWING GROUNDS WERE URGED BY THE REVENUE: - 1. THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.45,391/- INSTEAD OF RS.29,40,609/- MADE ON ACCOU NT OF UNEXPLAINED CASH DEPOSIT. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THERE WAS NEGATIVE CASH BALANCE IN CASH BOOK WHICH WAS NO T EVEN COMMENTED UPON BY THE AUDITOR, AND THEREFORE, THE C ASH BOOK PRODUCED BY THE ASSESSEE CANNOT BE RELIED UPON AND THE CASH DEPOSITS REMAIN UNEXPLAINED. 3. AT THE TIME OF HEARING NONE APPEARED ON BEHALF OF T HE ASSESSEE. WE HAVE HEARD THE LEARNED D.R. AND CAREFULLY PERUSED T HE RECORD. THE SHORT ISSUE IS WITH REGARD TO THE DELETION OF ADDITION MA DE BY THE AO REFERABLE TO UNEXPLAINED CASH DEPOSITS. THE ASSESSEE FIRM IS ENG AGED IN THE BUSINESS OF MANUFACTURE OF DIAMONDS, PRECIOUS STONES, ETC. FOR THE YEAR UNDER CONSIDERATION IT DECLARED TOTAL INCOME OF ` 2,54,477/-, WHICH WAS ORIGINALLY ITA NO. 4860/MUM/2011 M/S. GEM CRAFT 2 ACCEPTED UNDER SECTION 143(1) OF THE ACT BUT SUBSEQ UENTLY SELECTED FOR SCRUTINY AND ACCORDINGLY THE ASSESSEE WAS CALLED UP ON TO FURNISH DETAILS WITH REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACC OUNT. WE ARE CONCERNED HEREIN WITH THE DEPOSITS AGGREGATING TO ` 29,86,000/- MADE BY THE ASSESSEE ON DIFFERENT DATES, WHICH IS REFLECTED IN THE BANK STATEMENT OF M/S. GEM CRAFT OF BANK OF BARODA. THE ASSESSEE WAS DIRECTED TO PRODUCE THE BOOKS OF ACCOUNT, CASH BOOK, ETC. TO VERIFY THE SOURCE OF CA SH DEPOSITS. SINCE THE ASSESSEE DID NOT PRODUCE THE BOOKS FOR VERIFICATION THE AO ASSUMED THAT IT HAS NO EXPLANATION TO OFFER AND ACCORDINGLY TREATED THE IMPUGNED SUM AS UNEXPLAINED CASH DEPOSIT AND ADDED THE SAME TO THE INCOME DECLARED BY THE ASSESSEE. 4. BEFORE THE LEARNED CIT(A) THE ASSESSEE FURNISHED AD DITIONAL EVIDENCE ALONGWITH WRITTEN SUBMISSION TO SUBMIT THAT THE ASS ESSEE IS IN POSSESSION OF SUBSTANTIAL CASH WHICH WAS DEPOSITED FROM TIME TO T IME AND IT CAN BE PROPERLY EXPLAINED. THE ASSESSEE FURNISHED ADDITION AL EVIDENCE WHICH MERELY CONSISTS OF VARIOUS LEDGER ACCOUNTS. THE LEARNED CI T(A) CALLED FOR A REMAND REPORT FROM THE AO. IN THE REMAND REPORT DATED 12.0 1.2011 THE ADDITIONAL CIT OBSERVED AS UNDER: - 5. THE ADDITION WAS MADE ON ACCOUNT OF CASH DEPOSI TS IN THE BANK OF BARODA FOR RS.29,86,000/-. THE OPPORTUNITY WAS G IVEN TO THE ASSESSEE TO EXPLAIN THE SOURCE OF SUCH DEPOSIT. THE ASSESSEE HAS NOT COMPLIED AND HENCE THE ADDITION WAS MADE. NOW THE C ASH BOOK IS THE PART OF PAPER BOOK FORWARDED BY YOUR HONOUR. THIS I S THE ADDITIONAL EVIDENCE WHICH WAS NOT FILED DURING THE ASSESSMENT PROCEEDINGS. THE ADMISSION OF THIS ADDITIONAL EVIDENCE IS STRONGLY O BJECTED. HOWEVER WITHOUT PREJUDICE TO THE ABOVE, THE CASH BO OK HAS BEEN VERIFIED AND ALSO THE BANK STATEMENT OF BANK OF BAR ODA HAS BEEN VERIFIED. IT IS FOUND THAT THERE ARE VARIOUS CASH W ITHDRAWALS FROM THE BANK WHICH ARE DEPOSITED IN THE BANK. THEREFORE CAS H DEPOSITS FOR RS.29,86,000/- IS FOUND TO BE IN ORDER. 5. IN THE FORWARDING LETTER DATED 15.01.2011 THE ADDIT IONAL CIT SUBMITTED THAT THE ADDITIONAL EVIDENCE IS NOT ADMIS SIBLE SINCE THE SAME WAS NOT PRODUCED BEFORE THE AO IN SPITE OF VARIOUS OPPO RTUNITIES GIVEN TO THE ASSESSEE. IT WAS ALSO CONTENDED THAT AFTER PAYMENT OF RS.5,000/- ON 01.02.2007, THERE IS NEGATIVE CASH BALANCE OF ` 4,011/-. FURTHER, THE ITA NO. 4860/MUM/2011 M/S. GEM CRAFT 3 ASSESSEE MADE PAYMENT ON 03.02.2007 ALTHOUGH IT WAS HAVING NEGATIVE BALANCE. IN VIEW THEREOF, AS WELL AS THE FACT THAT THE CASH BOOK WAS NOT PRODUCED BEFORE THE AO, THE CASH BOOK FILED BEFORE THE LEARNED CIT(A) IS NOT RELIABLE AND ENTRIES MADE THEREIN APPEARS TO HAVE B EEN MADE JUST TO EXPLAIN THE SOURCE OF CASH DEPOSITS. IT WAS ALSO STATED THA T THE ASSESSEE IS HAVING BALANCE BUT IT IS WITHDRAWING CASH FROM BANK ACCOUN T BY MAKING SEVERAL WITHDRAWALS WITHOUT MAKING ANY PAYMENTS. MOREOVER, THE WITHDRAWALS AND CASH DEPOSITS IN THE BANK ACCOUNT DO NOT SEEM TO HA VE ANY RELATION WITH BUSINESS TRANSACTIONS MADE BY THE ASSESSEE AS THE W ITHDRAWALS ARE MADE DESPITE THE FACT THAT HUGE CASH BALANCE WAS AVAILAB LE AND NO CASH PAYMENTS WERE SHOWN. IT WAS ALSO POINTED OUT THAT THE ASSESS EE CLAIMED TO HAVE DEPOSITED CASH IN THE BANK ACCOUNT AFTER SUBSTANTIA L LAPSE OF TIME AND THAT TOO IN FRAGMENTED DEPOSITS OVER A PERIOD OF TIME. T HEREFORE, THERE IS NO LINK OF CASH WITHDRAWALS AND CASH DEPOSITS. ALL THESE FA CTS SHOW THAT THE ENTRIES IN THE CASH BOOK ARE APPARENTLY MADE TO JUSTIFY THE CASH DEPOSITS. 6. THE LEARNED CIT(A) DID NOT DISPUTE THE FACT THAT NO NE APPEARED ON BEHALF OF THE ASSESSEE. IN THIS REGARD HE OBSERVED THAT THE ASSESSEE FILED THE DETAILS REQUIRED IN THE TAPAL FROM TIME TO TIME BUT NONE APPEARED BEFORE THE AO ALONGWITH THE BOOKS OF ACCOUNT. HE ALSO NOTED TH E CONTENTION OF THE ASSESSEE THAT ON ACCOUNT OF HUGE FINANCIAL CRUNCH A T THE MATERIAL POINT OF TIME THEY WERE NOT IN A POSITION TO PAY SALARIES OF THE PROFESSIONALS. THE PARTNERS OF THE FIRM ARE LAY PERSONS AS FAR AS KNOW LEDGE OF ACCOUNTS AND TAXATION IS CONCERNED AND MR. VIJAY BAROT, EMPLOYEE OF THE APPELLANTS FIRM, TRIED TO COMPILE THE DETAILS FOR ASSESSMENT PURPOSE TO THE BEST OF HIS ABILITY. HE ALSO OBSERVED THAT THE ADDITIONAL EVIDENCE PRODU CED AT PRESENT IS NOTHING BUT BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT AN D HENCE THE ADDITIONAL EVIDENCE DESERVES TO BE ADMITTED. HE ALSO NOTICED T HAT AS PER AOS REPORT DATED 12.01.2011 THE AO WAS OF THE OPINION THAT THE ADDITIONS MADE BY HIM IN THE ASSESSMENT YEAR WERE NOT WARRANTED. THOUGH T HE LEARNED ADDL. CIT, IN HIS FORWARDING REPORT, HAS POINTED OUT THAT THE CASH BOOK PRODUCED BY THE ASSESSEE AT PRESENT SHOWS NEGATIVE BALANCE ON C ERTAIN DATES WHICH RAISED A SUSPICION WITH REGARD TO THE CORRECTNESS O F THE CLAIM, THE LEARNED CIT(A) PROCEEDED TO ACCEPT ASSESSEES CONTENTION ON THE GROUND THAT PARENTS ITA NO. 4860/MUM/2011 M/S. GEM CRAFT 4 OF THE PARTNERS WERE KEEPING INDIFFERENT HEALTH AT THE MATERIAL POINT OF TIME AND IN APPREHENSION OF EMERGENCY HOSPITALISATION, W HICH INVOLVED HIGH COST, THEY USED TO MAINTAIN HIGH CASH BALANCE WITH THEM. IT IS ALSO OBSERVED THAT THE CASH BOOK PRODUCED BEFORE THE AO AT PRESENT IS ONE OF THE PRIMARY BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH W ERE AUDITED BY A CHARTERED ACCOUNTANT AND HENCE IT CANNOT BE STATED THAT THE CASH BOOK IS UNRELIABLE. FURTHER, IT IS NOT THE CASE THAT THE CA SH BALANCE AVAILABLE WITH THE ASSESSEE OUT OF WITHDRAWAL WAS EITHER SPENT OR INVESTED ELSEWHERE. IN THE ABSENCE OF ANY SUCH EVIDENCE, THE ASSESSEES CO NTENTION THAT THE CASH WITHDRAWALS FROM THE BANK ACCOUNT ARE THE SOURCE OF DEPOSITS THEREIN DESERVES TO BE ACCEPTED. NEVERTHELESS, HAVING REGAR D TO THE NEGATIVE CASH BALANCE APPEARING ON CERTAIN DATES THE LEARNED CIT( A) DIRECTED THE AO TO RESTRICT THE ADDITION TO A SUM OF ` 45,391/- AS AGAINST ` 29,86,000/- MADE BY THE AO. 7. THOUGH THE CASE WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE ON 22.05.2013, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THIS DATE AND HENCE WE PROCEEDED TO DISPOSE OF THE APPEAL EXPARTE, QUA ASSESSEE. 8. THE LEARNED D.R. SUBMITTED THAT IN THE REMAND REPOR T THE AO HAS GIVEN SPECIFIC REASONS AS TO WHY THE SO CALLED BOOK S MAINTAINED BY THE ASSESSEE SHOULD NOT BE ACCEPTED AND ALSO HIGHLIGHTE D THE FACT THAT THOUGH THE ASSESSEE WAS CLAIMING TO HAVING SUFFICIENT CASH BALANCE, THERE WAS WITHDRAWAL FROM BANK AND EVEN THE SUM WAS NOT DEPOS ITED AT A TIME BUT IN FRAGMENTED INSTALMENTS. ALL THESE ASPECTS COUPLED W ITH THE FACT THAT THERE IS NEGATIVE CASH BALANCE INDICATE THAT THE SO CALLED B OOKS ARE NOT RELIABLE AND HENCE THE INITIAL ONUS IS UPON THE ASSESSEE TO PROV E THE SOURCE OF CASH DEPOSITS. 9. HAVING REGARD TO THE SUBMISSIONS OF THE LEARNED D.R . WE ARE OF THE VIEW THAT THE ISSUE REQUIRES RECONSIDERATION IN THE HANDS OF THE AO. SINCE THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE BEFORE THE AO, THE AO HAD NO ALTERNATIVE EXCEPT TO MAKE THE IMPUGNED ADDITION. T HOUGH THE ASSESSEE FURNISHED ADDITIONAL EVIDENCE BEFORE THE CIT(A), TH E AO, IN HIS REMAND REPORT, CATEGORICALLY STATED THAT THE CIRCUMSTANCES DO NOT INDICATE THAT THE ITA NO. 4860/MUM/2011 M/S. GEM CRAFT 5 CASH BOOK MAINTAINED BY THE ASSESSEE IS RELIABLE AN D ALSO FURNISHED DETAILED REASONS FOR THE SAME WHEREAS THE LEARNED CIT(A) PRO CEEDED TO ACCEPT THE SUBMISSION OF THE ASSESSEE WITH REGARD TO FINANCIAL STRINGENCY, ETC. WITHOUT CROSS VERIFYING THE PLEA RAISED BY THE AO IN HIS RE MAND REPORT. THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE WE DEEM IT FAIR AND REASONABLE TO SET ASIDE THE MATTER TO THE FILE OF THE AO, WHO IS DIRECTED T O RE-EXAMINE THE ISSUE IN ACCORDANCE WITH LAW. IN OTHER WORDS, THE ORDER PASS ED BY THE LEARNED CIT(A) IS SET ASIDE AND THE AO IS DIRECTED TO RE-EXAMINE T HE ISSUE AFRESH. NEEDLESS TO OBSERVE THAT THE ASSESSEE SHOULD BE GIVEN REASON ABLE OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICA L PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2013. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 7 TH AUGUST, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 27, MUMBAI 4. THE CIT 16, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.