ACIT 12(1), MUMBAI V. KISHOR J JANANI, MUMBAI

ITA 5037/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2627 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-12-2009
• Assessment Year: 1990-1991
• Appeal Filed On: 08-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OZHA
• Keywords: Unexplained cash credit; Business income; Loose papers; Opportunity of being heard; Set aside
• Section: 68; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, SR. VP & SHRI R.K. PANDA, AM I.T.A. NO. 5037/MUM/08 (ASSESSMENT YEAR 1990-91) ACIT-12(1) O/O. ACIT 12(1), ROOM NO. 117, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400 020 VS. SHRI KISHORE J. JANANI 29, BHUPAT BHAVAN, 23, VAJU KOTAK MARG, FORT, MUMBAI-400 001 PAN: AAQPJ0489A APPELLANT RESPONDENT APPELLANT BY: SHRI VIRENDRA OZHA RESPONDENT BY: SHRI VIJAY MEHTA O R D E R DATE OF HEARING: 01.12.2009 DATE OF ORDER: 07.12.2009 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 6 TH MAY, 2008 OF THE CIT(A)-XIII, MUMBAI RELATING TO T HE ASSESSMENT YEAR 1990-91. 2. IN GROUNDS OF APPEAL NO. 1 THE REVENUE HAS CHALLENG ED THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DE LETE THE ADDITION OF RS.3,50,000 MADE BY HIM ON ACCOUNT OF PURCHASE OF B SE CARD. 3. THIS IS THE SECOND ROUND OF LITIGATION BEFORE THE T RIBUNAL. THE FACTS RELATING TO THIS GROUND ARE THAT A SEARCH AND SEIZU RE ACTION U/S. 132(1) OF THE INCOME-TAX ACT, 1961 (THE ACT) WAS CONDUCTED ON 30 TH MARCH, 1995 AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESS EE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PURCHASED ME MBERSHIP CARD OF BSE ON 4 TH JANUARY, 1990 FROM ONE MR. R.K. MOTISHAH FOR A TOT AL CONSIDERATION OF RS. 9 LAKHS FOR WHICH THE PAYMENT WAS MADE THROU GH CHEQUES. DURING I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 2 THE COURSE OF SEARCH CASH BOOK A-17 WAS SEIZED FROM THE RESIDENCE OF SHRI MANOJ K. SHAH, EMPLOYEE OF THE ASSESSEE. ON PERUSA L OF THE SAME, THE ENTRIES AMOUNTING TO RS.12,50,000 WERE FOUND AND DU RING THE COURSE OF POST SEARCH PROCEEDINGS THE STATEMENT OF THE ASSESS EE WAS RECORDED WHEREIN HE WAS NOT ABLE TO EXPLAIN THE SAID TRANSAC TIONS. ACCORDINGLY THE THEN ASSESSING OFFICER WHILE PASSING THE ORDER U/S. 144 OF THE ACT HAD TREATED THE SAME AS UNACCOUNTED CASH FOR THE PURCHA SE OF BSE CARD AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE MATTER TRAVELLED UP TO THE TRIBUNAL. THE TRIBU NAL RESTORED THE MATTER VIDE ORDER DATED 20.6.2005 TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY THE ASSESSING OFFICER GAVE O PPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. IT WAS EXPLAIN ED BY THE ASSESSEE THAT HE PURCHASED THE MEMBERSHIP CARD FROM SHRI R.K. MOTISH AH FOR RS.9 LAKHS FOR WHICH PAYMENT WAS MADE BY CHEQUE ON 26 TH DECEMBER, 1989. THE ASSESSEE FURNISHED THE RECEIPT AND COPY OF THE BANK PASSBOOK IN SUPPORT OF THE ABOVE PAYMENT. AS REGARDS THE NOTING OF RS. 12,50,000 WHICH WAS TREATED BY THE ASSESSING OFFICER AS ADDITIONAL PAYM ENT IN THE ASSESSMENT ORDER, IT WAS SUBMITTED THAT THESE ENTRIES WERE MAD E BY THE ACCOUNTANT BEFORE THE PAYMENTS OF CHEQUE WHICH WERE PROJECTED ENTRIES FOR SCHEDULE OF PAYMENTS TO BE MADE TO R.K. MOTISHAH. IT WAS S UBMITTED THAT THESE ARE NOT THE CASH PAYMENTS AS ALLEGED. HOWEVER, THE ASS ESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E. HE REJECTED THE CONTENTION OF THE ASSESSEE REGARDING THE BALANCE PA YMENT FOR RS.3,50,000 WHICH ACCORDING TO THE ASSESSEE WAS PAID AS BROKERA GE AND REFURNISHING COST. HE OBSERVED THAT THIS AMOUNT OF RS.3.5 LAKHS HAS NOT BEEN REFLECTED IN THE BOOKS OF ACCOUNT. HE ACCORDINGLY MADE AN AD DITION OF RS.3.5 LAKHS AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND A DDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A) THE SAME ARGUMENTS AS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED. IT WAS SUBMITTED THAT THE RECEIPT FROM THE SELLER OF BSE CARD I.E., R.K. MOTISHAH IS NOT DISPUTED BY THE ASSESSING OFFICER NOR I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 3 HE WAS EXAMINED FOR THE ALLEGED CASH PAYMENT OF RS. 3.5 LAKHS. MERELY ON SUSPICION AND GUESS WORK THE ADDITION OF RS.3.5 LAK HS WAS MADE BY THE ASSESSING OFFICER U/S. 68 OF THE ACT WITHOUT ESTABL ISHING ANY CIRCUMSTANTIAL EVIDENCE LIKE PREVAILING MARKET PRIC E OF BSE CARD AT THE RELEVANT TIME OR ANY OTHER EVIDENCE AND THEREFORE, THE ADDITION CANNOT BE SUSTAINED. IT WAS SUBMITTED THAT MERE NOTING ON LO OSE PAPER DOES NOT EMPOWER THE ASSESSING OFFICER TO MAKE ADDITION U/S. 68 OF THE ACT SINCE THE LOOSE PAPERS ARE NOT THE BOOKS OF ACCOUNT OF TH E ASSESSEE. A NUMBER OF DECISIONS WERE ALSO CITED BEFORE THE CIT(A). 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, TH E CIT(A) DELETED THE ADDITION. WHILE DOING SO HE OBSERVED T HAT THE ONLY BASIS TO DISBELIEVE THE ASSESSEES CONTENTION IS THE NOTINGS IN A PAPER WHICH WAS FOUND AND SEIZED WHICH MENTIONS OF VARIOUS AMOUNTS TOTALLING TO OF RS.12,50,000 AGAINST R.K. MOTISHAH. THE NOTHING AL SO MENTIONED AN AMOUNT OF RS.92,000 AS BROKERAGE. THE PAYMENT OF R S. 9 LAKHS BY CHEQUE TO R.K. MOTISHAH FOR PURCHASE OF BSE CARD IS ALSO C ONFIRMED BY HIM. THEREFORE, WITHOUT ANY POSITIVE PROOF THAT THERE WA S UNDERHAND DEALING TO THE EXTENT OF RS.3,50,000, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION. HE ACCORDINGLY DELETED THE AD DITION. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DR WHILE RELYING ON THE ORDER OF THE AS SESSING OFFICER SUBMITTED THAT THE NOTING FOUND DURING THE SEARCH C OULD NOT BE PROPERLY EXPLAINED BY THE ASSESSEE. THEREFORE, THE CIT(A) W AS NOT JUSTIFIED IN DELETING THE ADDITION. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE CIT(A) REFERRED TO PAPE R BOOK PAGES 12 AND 13 WHICH IS THE ANNEXURE TO FIRST ASSESSMENT ORDER DATED 7 TH MARCH, 2001 AND WHICH IS THE ZEROX COPY OF THE SEIZED DOCUMENT CONTAINING THE ALLEGED ENTRY. REFERRING TO SAID PAGES HE SUBMITTED THAT A LTHOUGH THE OTHER AMOUNTS ARE NOT APPEARING IN THE BOOKS OF ACCOUNT N O SUCH ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER. HE SUBMITTED T HAT IT IS NOT THE CASE OF I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 4 THE DEPARTMENT THAT THESE ARE CASH PAYMENTS. REITE RATING THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER, H E AGAIN SUBMITTED THAT THESE ARE ONLY PROJECTED ENTRIES AND WHATEVER AMOUN T HAS BEEN PAID TO THE SELLER WAS PAID BY ACCOUNT PAYEE CHEQUE. HE F URTHER SUBMITTED THAT NO DATES ARE MENTIONED AGAINST ANY OF THE ENTRY. T HEREFORE, THIS IS A DUMB DOCUMENT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE SEIZED DOCUMENT FOUND FROM THE CASH BOOK A-17 M ENTIONS THE NAME OF R.K. MOTISHAH AGAINST WHOSE NAME AN AMOUNT OF R S.12,50,000 IS MENTIONED WHICH CONSISTS OF 5 ENTRIES. WE FIND IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(A) THAT THESE ARE ONLY PROJECTED ENTRIES AND ONLY AN AMOUNT OF RS . 9 LAKHS HAS BEEN PAID TO SHRI R.K. MOTISHAH TOWARDS PURCHASE OF BSE MEMBE RSHIP CARD. WE FIND ALTHOUGH SOME OTHER ENTRIES ARE APPEARING IN THE SE IZED DOCUMENT, THERE IS NO ADDITION OF THE SAME. WE FIND THE ASSESSING OFFICER HAS NOT SUMMONED MR. R.K. MOTISHAH, THE SELLER OF THE BSE C ARD TO FIND OUT AS TO WHETHER THE ENTRIES MENTIONED IN THE SEIZED DOCUMEN T ARE IN FACT PAID TO HIM. WE FIND THE DEPARTMENT HAS ALSO NOT PROVED BY ANY OTHER EVIDENCE THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE AMOUN T OF RS. 9 LAKHS WHICH HAS BEEN PAID BY CHEQUES TO THE SELLER OF THE BSE C ARD. FURTHER IT IS ALSO SEEN THAT NO DATES ARE MENTIONED AGAINST THE ENTRIE S IN THE SEIZED DOCUMENT. UNDER THESE CIRCUMSTANCES, THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS. 3,50,000 ON SUSP ICION AND GUESS WORK, IN OUR OPINION, CANNOT BE SUSTAINED. WE, THEREFORE , UPHOLD THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. IN GROUNDS OF APPEAL NO. 1 THE REVENUE HAS CHALLENG ED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.1,50,966 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE INVESTMENT. I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 5 11. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM THE BALANCE SHEET FILED THAT THE ASSESSEE HAS SHOWN BALANCE OF SHARES CARRI ED FORWARD TO THE TUNE OF RS.63,951. HE OBSERVED FROM THE SEIZED MATERIAL OF LEDGER A/7 ON PAGE 38 THAT THE BALANCE OF SHARES CARRIED FORWARD IS RS .2,14,914.30. HE THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE DIFFER ENCE OF RS.1,50,963. THE ASSESSEE FILED A RECONCILIATION STATEMENT ON ACCOUN T OF DIFFERENCE IN THE FIGURE OF INVESTMENT. IT WAS SUBMITTED THAT THE DI FFERENCE IS DUE TO ADOPTION OF THE FIGURE OF INVESTMENT IN THE MIDDLE OF THE YEAR AS COMPARED TO THE CLOSING FIGURE IN THE BALANCE SHEET AS ON 31 ST MARCH, 1990. HOWEVER, SINCE THE BOOKS OF ACCOUNT AND OTHER RECOR DS ARE NOT AVAILABLE AT THAT TIME, HE WAS NOT IN A POSITION TO RECONCILE THE DIFFERENCE. NOT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E THE ASSESSING OFFICER MADE THE ADDITION OF RS.1,50,963 U/S. 69 OF THE ACT . 12. BEFORE CIT(A) IT WAS EXPLAINED THAT THE RETURN OF I NCOME WAS FILED ON 5 TH SEPTEMBER, 1991 I.E., PRIOR TO THE DATE OF SEARCH AND THE BALANCE SHEET REFLECTS SHARES OF RS.63,961. IT WAS SUBMITT ED THAT THE ASSESSING OFFICER HAS CONSIDERED THE FIGURE WRITTEN IN THE BO OKS UP TO 9.12.1989. HOWEVER, THE ASSESSEE HAS CONSIDERED THE FIGURES UP TO 31 ST MARCH, 1990 AND FILED THE BALANCE SHEET. IT WAS SUBMITTED THAT SINCE THE INVESTMENTS MADE IS NOT RECORDED IN THE BOOKS OF ACCOUNT PROVIS IONS OF SECTION 69 ARE NOT APPLICABLE. IT WAS SUBMITTED THAT DUE TO MISSI NG OF ACCOUNTS FOR THE INTERVENING PERIOD I.E., 10 TH DECEMBER, 1989 TO 31 ST MARCH, 1990, THE ASSESSEE COULD NOT GIVE THE RECONCILIATION. 13. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, TH E LEARNED CIT(A) DELETED THE ADDITION. WHILE DOING SO HE OBS ERVED THAT NO UNRECORDED INVESTMENT OF SHARES WAS FOUND OR SHARES PURCHASED WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HE FURTHER O BSERVED THAT EVEN IF THERE IS SOME DISCREPANCY IN THE SEIZED PAPER THAT DIFFERENCE IS NOT ENOUGH TO CONCLUDE THAT THERE WAS SOMETHING IN THE NATURE OF INCOME WHICH HAS ESCAPED ASSESSMENT. HE ACCORDINGLY HELD THAT ADDITION MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT U/S. 69 AMOUNT ING TO RS.1,50,966 I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 6 CANNOT BE SUSTAINED. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 14. THE LEARNED DR SUBMITTED THAT THE ADDITION WAS MADE ON THE BASIS OF NOTINGS. THEREFORE, THE ASSESSING OFFICER WAS J USTIFIED IN MAKING THE ADDITION WHEN THE ASSESSEE WAS UNABLE TO THROW ANY LIGHT ON THE DIFFERENCE. HE ACCORDINGLY SUBMITTED THAT THE ORDE R OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 15. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REFERRED TO PAPER BOOK PAGE 16 AND DREW THE ATTENTION OF THE BENCH TO THE SHARE INVESTMENT ACCOUNT WRITTEN UP TO 9 TH DECEMBER, 1989 ACCORDING TO WHICH THE CLOSING STOCK OF SHARES CARRIED FORWARD IS RS.2 ,72,841.85. REFERRING TO THE COPY OF THE ASSESSMENT ORDER HE DREW THE ATTENT ION OF BENCH TO PARA 5 AT PAGE 4 OF THE ORDER AND SUBMITTED THAT THE ASSES SING OFFICER HAS COMPUTED CAPITAL GAIN AS PER ASSESSEES STATEMENT A T RS.21,008 AND NO OTHER ADDITION HAS BEEN MADE. HE SUBMITTED THAT TH E SALES DISCLOSED BY THE ASSESSEE ON ACCOUNT OF SALE OF SHARES ARE MUCH MORE THAN WHAT IS REFLECTED IN THE SEIZED DOCUMENT AND THEREFORE, NO ADDITION IS CALLED FOR. REFERRING TO THE CALCULATION OF LONG TERM CAPITAL G AIN DETAILS FOR THE YEAR ENDING 31 ST MARCH, 1990, HE DREW THE ATTENTION OF THE BENCH TO THE NET AMOUNT OF CAPITAL GAIN SHOWN AT RS.21,008.30 WHICH TALLIES WITH THE FIGURE IN THE ASSESSMENT ORDER. HE ACCORDINGLY SUBMITTED THAT THE CIT(A) IS JUSTIFIED. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF SEIZED DOCUMENT PAGE 3 8 OF LEDGER A/17 ACCORDING TO WHICH BALANCE OF SHARES CARRIED FORWAR D IS RS.2,14,914.30. ON A CAREFUL EXAMINATION OF THE SAID DOCUMENT IT IS SEEN THAT THE SHARE INVESTMENT ACCOUNT IS WRITTEN UP TO 9 TH DECEMBER, 1989 AND THE BALANCE CARRIED FORWARD ON 9 TH DECEMBER, 1989 IS RS.2,72,841.85 AND NOT RS.2,14,914.30 AS MENTIONED BY THE ASSESSING OFFICE R. WE FIND FROM THE I.T.A. NO. 5037/MUM/08 SHRI KISHORE J. JANANI ================== 7 DETAILS OF CALCULATION OF LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES FOR THE YEAR ENDING 31 ST MARCH, 1990 THAT THE NET CAPITAL GAIN HAS BEEN CALCULATED AT RS.21,008.20 WHICH TALLIES WITH THE F IGURES OF LONG TERM CAPITAL GAIN MENTIONED IN THE BODY OF THE ASSESSMEN T ORDER. A PERUSAL OF THE SAID DETAILS SHOWS THAT THE TOTAL SALES ON ACCO UNT OF SALE OF SHARES IS MUCH MORE THAN THE FIGURE APPEARING IN THE SEIZED D OCUMENT. WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT THE DIFFERENCE IS DUE TO MISSING FIGU RES WHICH ARE NOT RECORDED IN THE SEIZED DOCUMENT. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY UPHOLD T HE SAME. THIS GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 7 TH DECEMBER, 2009. SD/- (R.V. EASWAR) SR. VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 7 TH DECEMBER, 2009 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT (A)-XIII, MUMBAI, (4) THE CIT-13, MUMBAI, (5) THE DR, A BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO