ITO WD 21(1)(1), MUMBAI V. ABDUL QADEER AZIMULLA KHAN, MUMBAI

ITA 5039/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101187 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVEER MADNAPPA
• Keywords: Unexplained investment

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT ME MBER & SANJAY GARG,JUDICIAL MEMBER /.ITA NO.5039/MUM/2010, /ASSESSMENT YEAR-2007-08 INCOME TAX OFFICER-21(1)(1) ROOM NO.603, 6 TH FLOOR PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX, BANDRA MUMBAI. VS SHRI ABDUL QADEER AZIMULLA KHAN SAHAR LIME DEPOT, SAHAR VILLAGE, TALAV PAKHADE, VILE PARLE(E) MUMBAI-400 099. PAN:AACPK 7568 H /ASSESSEE BY : SH. JAYANT BHATT / REVENUE BY : SH. RAGHUVEER MADNAPPA / DATE OF HEARING :14 - 09 -2015 / DATE OF PRONOUNCEMENT :23 -09-2015 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 23.03.20102,OF THE CIT( A)-32,MUMBAI THE ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN SUSTAINING A DISALLOWANCE OF ONLY RS. 41,800/ - OUT OF TOTAL DISALLOWANCE OF RS.4,18,004/ - WORKED OUT BY THE AO AS TOTAL UNACCOUNTED CASH BALA NCE AVAILABLE OUT OF TOTAL CASH DEPOSIT OF RS.19,54,949/- FOUND IN THE BANK A/C. (I) IN DOING SO, THE LD. CIT(A) ERRED IN HOLDING TH AT 8% OF PROFIT & 10% OF TURNOVER (RS. 41,800/-) BE TREATED AS UNACCOUNTED INVESTMENT RES ULTING IN UNACCOUNTED SALES. (II) THE LD. CIT(A) HAS NOT APPRECIATED THE FACT TH E ASSESSEE HAS NOT PROVED BEFORE THE A.O. THAT THE RECEIPTS WERE PART OF HIS TURNOVER. (III) THE LD. CIT(A) HAS ERRED TO GIVE ANY FINDING ON THE ACCRUAL OF SUCH INCOME BEING THE TURNOVER OF THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN SUSTAINING A DISALLOWANCE OF RS. 24,894/- OUT OF TO TAL DISALLOWANCE OF RS.1 ,38,300/ - CASH DEPOSIT MADE IN BANK A/ C. (I) IN DOING SO, THE LD. CIT(A) ERRED IN HOLDING T HAT 8% OF PROFIT (RS. 11,064/-) AND 10% OF TURNOVER (RS.13,830/-) TOTALING OF RS.24,894/- BE T REATED AS UNACCOUNTED INVESTMENT RESULTING IN UNACCOUNTED SALES. (II) THE LD. CIT(A) HAS NOT APPRECIATED THE FACT TH E ASSESSEE HAS NOT PROVED BEFORE THE A.O. THAT THE RECEIPTS WERE PART OF HIS TURNOVER. (III) THE LD. CIT(A) HAS ERRED TO GIVE ANY FINDING ON THE ACCRUAL OF SUCH INCOME BEING THE TURNOVER OF THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 23,60,385/- BEING AMOUNT OF DEPOSIT MADE IN BANK A/ C 3676, ON THE GROUND THAT SON IS SEPARATELY ASSESSED TO TAX AND HENCE THIS AMOUNT SHOULD BE ASSESSED TO TAX IN THE SON'S HAND. (I) IN DOING SO, THE LD. CIT(A) HAS ERRED IN ADMI TTING NEW EVIDENCE, WHICH WAS NOT FURNISHED BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDINGS BEFORE HIM. (II) THE SOURCE OF SUCH CASH DEPOSITS NEEDS TO BE INVESTIGATED TO DECIDE THE PERSON WHO SHOULD BE TAXED IN RESPECT OF THIS AMOUNT. (III) THE LD. CIT(A) HAS ERRED IN STATING THAT ONC E A PERSON IS A MAJOR AS PER LAW, THEN THE AMOUNT SO CREDITED IN HIS BANK ACCOUNT SHOULD BE A SSESSED IN HIS HANDS. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 5039/ABDUL-AY.07-08 2 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. ASSESSEE,AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF T RADING IN CEMENT,TILES,BRICKS,FILED ITS RETURN OF INCOME ON 27.07.2007,DECLARING INCOME OF RS.1,28,150/-.THE AO COMPLETED THE ASSESSMENT ON 24.11.2009,U/S.143(3)OF THE ACT,DETER MINING THE INCOME OF THE ASSESSEE AT RS. 30,94,870/-. 2. FIRST EFFECTIVE GROUND OF APPEAL(GOA1-2)DEALS WITH DISALLOWANCE REDUCED FROM RS.5.18 LAKHS TO RS.41,800/-.ON VERIFICATION OF ANNUAL INFO RMATION REPORT THE AO FOUND THAT THE ASSESSEE HAD MADE CASH DEPOSIT OF RS.21.97 LAKHS JO INTLY WITH MOHAMMED FAROOQ KHAN (MFK),DURING THE YEAR.HE DIRECTED THE ASSESSEE TO F ILE EXPLANATION IN THAT REGARD.THE ASSESSEE FILED COPY OF BANK STATEMENT OF BANK ACCOUNT NO.38 OF CITIZEN COOPERATIVE BANK,WHEREIN CASH AND CHEQUE DEPOSITS TO THE TUNE OF RS.1.38 LAK HS WERE MADE.IT WAS FOUND THAT THE ASSESSEE HAD ANOTHER CURRENT BANK ACCOUNT I.E.ACCOU NT NO.793 IN THE NAME OF SAHAR LIME DEPOT(SLD)WHEREIN CASH AND CHEQUE TRANSACTIONS OF R S.19.54 LAKHS WERE MADE,THAT THE ASSESSEE HAD SHOWN BANK ACCOUNT OF SLD ONLY IN THE BOOKS OF ACCOUNTS,THAT OPENING BALANCE OF SLD WAS RS.3,217/-,THAT HE HAD SHOWN CASH SALES OF RS.15.33 LAKHS,THAT THERE WAS DIFFERENCE OF RS.4.18LAKHS(RS.19.54 LAKHS-15.33LAKH S-RS.3,217/-).THE AO ASKED THE ASSESSEE AS TO WHY RS.5.56 LAKHS(RS.4.18 LAKHS+RS.1.38 LAKHS )SHOULD NOT BE ADDED TO HIS INCOME.AS PER THE AO,THE ASSESSEE DID NOT FILE ANY EXPLANATIO N AND AGREED FOR THE ADDITION OF RS.5, 56,304/-. 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED T HAT THE ASSESSEE IF THE BALANCE SHEETS OF EARLIER AY.WAS COMPARED WITH THE BALANCE SHEET OF Y EAR UNDER APPEAL IT WOULD BE CLEAR THAT THE ASSESSEE WAS HAVING CASH BALANCE TO THE TUNE OF RS.4.97 LAKHS,THAT HE HAD USED RS.3.75 LAKHS OUT OF THE CASH BALANCE.HE PRODUCE THE SUMMAR Y OF BANK ACCOUNT.IT WAS FURTHER ARGUED THAT THE ASSESSEE WAS A ILLITERATE PERSON AND WAS N OT KNOWING ACCOUTING,THAT THE AO HAD IGNORED THE FACTS AVAILABLE ON RECORD,THAT HIS INCO ME WOULD FALL WITHIN THE PURVIEW OF PROVISIONS OF SECTION 44AF OF THE ACT.AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE ASSESSEE HAD NOT RAISED THE SAME ISSUE BEFORE THE AO,THAT THE AO HAD NO OPPORTUNITY TO VERIFY THE CLAIM MADE BY HIM, THAT V ERIFICATION COULD NOT BE CARRIED OUT BECAUSE OF NON CO-OPERATION OF THE ASSESSEE,THAT TH E ARGUMENTS OF THE ASSESSEE COULD NOT BE ACCEPTED FULLY.HOWEVER,HE ACCEPTED THE ALTERNATE SU BMISSION OF THE ASSESSEE AND HELD THAT WHEN THE CASE WAS BEING DEPOSITED AND WITHDRAWN AT THE SAME TIME AND SAME RELATED TO THE ASSESSEES TURNOVER IN THE BUSINESS THEN ONLY A REA SONABLE PERCENTAGE COULD BE TAKEN AS PROFIT NOT ACCOUNTED FOR.HE ESTIMATED THAT 8% OF THE DEPOS IT OF RS.4.18 LAKSH I.E. RS. 33,400/- WOULD BE AN APPROPRIATE ADDITION UNDER THE GIVEN FA CTS.HE FURTHER HELD THAT 10% OF THE TURNOVER WOULD BE REQUIRED AS ADDITIONAL INVESTMENT NOT ACCOUNTED FOR MAKING SUCH UNACCOUNTED SALES.FINALLY,HE DELETED THE ADDITION T O RS.3.76 LAKHS AND UPHELD THE ADDITION OF RS.41,800/- ONLY. WITH REGARD TO THE ADDITION OF RS.1.38,APPEARING TH E IN THE BANK ACCOUNT NO.38,THE FAA HELD THAT ONLY 8% OF THE DEPOSIT AND 10% OF THE TURNOVER SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE.ACCORDINGLY,AN ADDITION OF RS.24,894/-(RS. 11,064/- AND 13,830/-)WAS MADE TO THE INCOME OF THE ASSESSEE. 2.2. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER OF THE AO AND THE AUTHORISED REPRESENTATIVE(AR)RELIED UPON THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.WE ARE OF THE OPINION THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE PROVISIONS OF SECTION 44AF, THAT THE FAA HAS RIGHTLY APPLIED THE PROVISIONS OF THAT SECTION ,THAT HE HAD ACCEPTED TH E ALTERNATE GROUND OF THE ASSESSEE AS THE 5039/ABDUL-AY.07-08 3 ASSESSEE HAD NOT FILED THE NECESSARY DETAILS,THAT H E HAD ADDED 10% OF THE TURNOVER TO THE INCOME OF THE ASSESSEE BESIDES ADDING 8% OF THE DEP OSITS.EFFECTIVE GROUND NO.1 OF APPEAL IS DECIDED AGAINST THE AO. 3. NEXT GROUND PERTAINS TO DELETING THE ADDITION OF RS .23.60 LAKHS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT SB ACCOUNT NO.3676 WA S IN THE NAME OF MFK,THAT THE PAN USED FOR THE ACCOUNT WAS OF THE ASSESSEE.VIDE ORDER SHEET,DATED 23.11.09.,HE ASKED THE ASSESSEE AS TO WHY THE ACCOUNT SHOULD NOT BE TREATE D AS HIS ACCOUNT AS HE HAD PROVIDED HIS PAN FOR OPENING THE ACCOUNT.AS PER THE AO,THE ASSES SEE DID NOT OFFER ANY EXPLANATION IN THAT REGARD.THE AO FOUND THAT THE CREDIT ENTRY IN THE AC COUNT WERE TO THE TUNE OF RS.23.60 CRORES(RS.22.11LAKHS CASH+1.48 LAKHS CHEQUE).HE HEL D THAT THE ASSESSEE HAD NOT OFFERED ANY PROOF THAT THE AMOUNT IN QUESTION WAS APPEARING IN THE BOOKS OF MFK.THEREFORE,IN ABSENCE OF ANY DETAILS,HE MADE AN ADDITION OF RS.23,60,385/ - TO THE INCOME OF THE ASSESSEE. 3.1. DURING THE APPELLATE PROCEEDINGS,BEFORE THE FAA,THE ASSESSEE CONTENDED THAT MKF WAS AN INDEPENDENT ASSESSEE,THAT HE WAS FILING HIS RETU RN OF INCOME WITH ITO 20(2)(2),THAT THE AO DID NOT MAKE ANY INQUIRY WITH BANK,THAT HE DID NOT RECORD STATEMENT OF THE MKF BEFORE MAKING ADDITION.A COPY OF THE BALANCE SHEET AND P & L A/C.OF MKF WAS FILED BEFORE HIM. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,T HE FAA HELD THAT MKF WAS AN INDEPENDENT ASSESSEE,THAT HE WAS ASSESSED UNDER A S EPARATE PAN,THAT THE INCOME ARISING OUT OF THE BANK ACCOUNT IN QUESTION WAS REFLECTED IN HI S STATEMENTS OF AFFAIRS,THAT MISTAKE IN PAN COULD HAVE HAPPENED AS THE ASSESSEE WAS INTRODUCER OF THE ACCOUNT OF MKF,THAT THE ADDITION MADE BY THE AO WERE NOT SUSTAINABLE. 3.2. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO AND AR RELIED UPON THE ORDER OF THE FAA.WE FIND THAT THE FAA HAS GIVEN A FINDING OF FAC T THAT MKF IS AN INDEPENDENT ASSESSEE, THAT MKF HAD DISCLOSED THE BANK ACCOUNT IN HIS RETU RN.THE DR COULD NOT CONTROVERT THE FACTS NOTED BY THE FAA.THE AO HAD STARTED THE INVESTIGATI ON IN RIGHT DIRECTION BY FINDING OUT THE DISCREPANCY IN THE PAN.BUT,IT WAS NOT SUFFICIENT TO MAKE AN ADDITION.HE SHOULD HAVE MADE INQUIRIES WITH THE BANK AND WITH MKF.ONCE IT IS FOU ND THAT THE DISPUTED AMOUNT HAS ALREADY BEEN ASSESSED IN OTHER HANDS,SAME CANNOT BE ADDED T O THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL.SO,CONFIRMING THE ORDER OF THE FAA,WE DECIDE GROUND NO.3 AGAINST THE AO. AS A RESULT,APPE AL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER,2015. 23 ,2015 SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 23.09.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.