AJAY RAMESH SANGHVI, MUMBAI V. ASST CIT RG 16(2), MUMBAI

ITA 5114/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9513 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 26-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Unexplained cash credit; Sale consideration of property below Jantri Value; Unexplained expenditure; Fair market value; Corroborative evidences
• Section: 69C; 143(3); 50C; 142(1); 234B; 68

Judgement Text

1 ITA 5114/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5114/MUM/2015 (ASSESSMENT YEAR 2010-11) AJAY RAMESH SANGHVI 2 ND FLOOR, SHANTI SADAN 3, VATCHA GANDHI ROAD MUMBAI 400 007 PAN : ASGPS0172H VS ACIT,RANGE 16(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI MADHUR AGARWAL RESPONDENT BY SHRI RAJAT MITTAL DATE OF HEARING 27-07-2017 DATE OF PRONOUNCEMENT 15-09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE CIT(A)- 30, MUMBAI DATED 31-08-2015 AND IT PERTAINS TO AY 2 010-11. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED REJECTING THE APPELLANT'S CON TENTION AND DISALLOWING THE LONG TERM LOSS ON SALE OF CAR. THE LEARNED CIT (A) THUS ERRED IN NOT ALLOWING THE SET OFF THE LOSS SO INCURRED ON SALE OF CAR. SUCH DISALLOWANCES IS BAD-IN-LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE 2 ITA 5114/MUM/2015 LEARNED CIT (A) ERRED IN CONFIRMING THE PART OF THE ADDITION ON ACCOUNT OF DIFFERENCE IN THE VALUATION ARRIVED BY THE DEPAR TMENT VALUATION OFFICER & THE SALE CONSIDERATION BY INVOKING THE PR OVISION OF THE SECTION \ ' SOC OF THE INCOME TAX ACT, 1961. IT IS PRAYED THAT THE ADDITION ON ACCOUNT OF ALLEGED DIFFERENCE IN THE SA LE VALUE & FAIR MARKET VALUE OF RS. 10,17,900/- MAY BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE PART OF THE ADDITION ON ACCOUNT OF CASH DEPOSITED INTO BANK U/S 68 OF THE INCOME TA X ACT, 1961. IT IS PRAYED THAT THE ADDITION ON ACCOUNT OF SUCH CASH DEPOSIT OF RS.3,35,000/- MAY BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN MAKING AN ENHANCEMENT OF R S 18,00,000 BY WAY OF FRESH ADDITION U/S 69C OF THE INCOME TAX ACT , 1961 ON ACCOUNT OF ALLEGED UNEXPLAINED PERSONAL EXPENSES. THE LEARN ED CIT(A) ERRED IN A) COMPLCTELY IGNORING THE FACT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED A.O., WHO WAS AWARE OF THE FACTS ON RECORD, HAD NOT MADE ANY SUCH ADDITION; B) IGNORING THE FACT APPELLANT, A DIVORCEE, HAS BEEN L IVING IN A JOINT FAMILY WITH PARENTS; C) THE ESTIMATION OF UNEXPLAINED EXPENDITURE OF RS , 18.,00,000 WAS ARRIVED AT ON THE BASIS OF CONJECTURES AND SURMISES WITHOUT HAVING REGARD TO ANY CONCRETE MATERIAL WHATSOEVER THAT WOU LD JUSTIFY THE SAID ESTIMATE; D) MAKING THE IMPUGNED ENHANCEMENT ON THE BASIS OF ERR ONEOUS AND IRRELEVANT OBSERVATIONS, WITHOUT GIVING THE APP ELLANT AN OPPORTUNITY TO SHOW CAUSE AS STIPULATED IN SECTION 251(2). IT IS, THEREFORE, PRAYED THAT THE ERRONEOUS OBSERVA TIONS OF THE HON'BLE CIT (A) MAY KINDLY BE IGNORED AND THE IMPUGNED ENHA NCEMENT, WHICH HAS BEEN MADE IN CONTRAVENTION OF THE PROVISI ONS OF SECTION 251(2) AND IS, THEREFORE, NOT BASED IN LAW, BE DELE TED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE CH ARGE OF INTEREST U/S 234B AND 234C OF THE ACT, HAVING REGARD TO THE FACT OF THE CASE. THE APPELLANT DENIES ITS LIABILITY FOR PAYME NT OF INTEREST U/S 234B & 234C OF THE ACT. 3 ITA 5114/MUM/2015 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND INCOME FROM OTHER SOURCES, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1 ON 20-07-2010 DECLARING TOTAL INCOME OF RS.1,30,69,630. THE CASE WAS SELEC TED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE I SSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS, AS CALLED FOR. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 22-02-2013 DETERMINING TOT AL INCOME AT RS.1,80,33,340, BY MAKING ADDITION TOWARDS DIFFEREN CE IN SALE CONSIDERATION AS PER SECTION 50C IN RESPECT OF SALE OF PROPERTY, UNE XPLAINED CASH CREDIT U/S 68 OF THE IT ACT, 1961. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERR ED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS CHALLE NGED THE ADDITION MADE BY THE AO TOWARDS RECOMPUTATION OF LONG TERM CAPITAL G AINS BY TAKING INTO ACCOUNT GUIDANCE VALUE OF THE SALE OF PROPERTY AS PER THE P ROVISIONS OF SECTION 50C AND ADDITION MADE BY THE AO TOWARDS CASH DEPOSIT INTO B ANK ACCOUNT U/S 68 OF THE INCOME-TAX ACT, 1961. THE CIT(A), AFTER CONSIDERIN G THE ASSESSEES SUBMISSIONS AND ALSO RELYING UPON CERTAIN JUDICIAL PRECEDENTS, PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE WHEREIN THE CIT(A) PARTLY ALLOWED GROU NDS RAISED BY THE ASSESSEE CHALLENGING ADDITION MADE BY THE AO TOWARDS RECOMPU TATION OF LONG TERM 4 ITA 5114/MUM/2015 CAPITAL GAIN BY ADOPTING SALE CONSIDERATION AS PER PROVISIONS OF SECTION 50C OF THE ACT. INSOFAR AS ADDITIONS TOWARDS CASH DEPOSIT IN BANK ACCOUNT U/S 68 OF THE I.T. ACT, 1961, THE CIT(A) ALLOWED RELIEF TO TH E EXTENT OF RS.15 LAKHS OUT OF TOTAL ADDITIONS MADE BY THE AO OF RS.18,35,000 BY H OLDING THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF CASH DEPOSIT OF RS.15 L AKHS OUT OF CASH WITHDRAWAL FROM SAME BANK ACCOUNT IN EARLIER OCCASIONS. THE B ALANCE AMOUNT OF RS.3,35,000 HAS BEEN CONFIRMED BY HOLDING THAT THOU GH ASSESSEE CLAIMS TO HAVE BROUGHT FORWARD OPENING BALANCE FROM PREVIOUS FINAN CIAL YEAR, FAILED TO FURNISH SUPPORTING EVIDENCE EXPLAINING THE SOURCE OF INCOME FOR OPENING CASH BALANCE BROUGHT FORWARD FROM EARLIER YEAR. IN ADDITION, TH E CIT(A) ENHANCED THE ASSESSMENT IN RESPECT OF PERSONAL DRAWINGS BY STATI NG THAT THE ASSESSEE HAS SHOWN A MEAGER DRAWING OF RS.24,000 PER ANNUM WHICH IS QUITE LOW COMPARED TO HIS STATUS AND INCOME DECLARED BY THE ASSESSEE F OR THE RELEVANT ASSESSMENT YEAR. THEREFORE, CONSIDERING THE STATUS OF THE ASS ESSEE AND ALSO THE FACT THAT HE IS RESIDING IN A POSH AREA IN THE COSTLIEST CITY OF MUMBAI DIRECTED THE AO TO ESTIMATE HOUSEHOLD EXPENSES AT RS.1,50,000 PER MONT H AND ACCORDINGLY MADE ADDITIONS OF RSW.18 LAKHS U/S 69C OF THE I.T. AC6, 1961. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE ASSESSEE HAS CHALLENGED ADDITIONS SUSTAINED BY THE CIT(A) TOWARDS RECOMPUTATION OF LONG TERM CAPITAL GAIN BY ADOPTING SALE CONSIDERATION AS PER 5 ITA 5114/MUM/2015 THE PROVISIONS OF SECTION 50C OF THE INCOME-TAX ACT , 1961. DURING THE COURSE OF HEARING THE LD.AR FOR THE ASSESSEE SUBMITTED THAT H E DID NOT WANT TO PRESS GROUNDS 1 & 2 CHALLENGING THE ADDITION SUSTAINED BY THE CIT(A) TOWARDS RECOMPUTATION OF LONG TERM CAPITAL GAIN. HENCE, GR OUNDS 1 & 2 ARE DISMISSED AS NOT PRESSED. 5. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S ADDITION SUSTAINED BY THE CIT(A) TOWARDS UNEXPLAINED CASH DEPOSIT IN B ANK ACCOUNT U/S 68 OF THE INCOME-TAX ACT, 1961. THE LD.CIT(A) SUSTAINED ADDI TION TO THE EXTENT OF RS.3,35,000 OUT OF TOTAL ADDITIONS MADE BY THE AO O F RS.18,35,000 BY HOLDING THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE FOR THE BALANCE AMOUNT WITH NECESSARY EVIDENCE. THE ASSESSEE CLAIMS THAT HE HA S BROUGHT FORWARD A SUM OF RS.3,17,000 FROM PREVIOUS FINANCIAL YEAR, THE SOURC E FOR WHICH HAS BEEN EXPLAINED BEFORE THE AO BY FILING BANK STATEMENT AN D ALSO CASH BOOK. THE ASSESSEE FURTHER CONTENDED THAT THE OPENING CASH BR OUGHT FORWARD FROM PREVIOUS FINANCIAL YEAR WAS DULY REFLECTED IN BALAN CE-SHEET ALONG WITH RETURN OF INCOME. THE AO MADE ADDITIONS MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT FILED WEALTH-TAX RETURNS TO PROVE THE SOURCE AV AILABLE TOWARDS OPENING CASH BALANCE BROUGHT FORWARD FROM EARLIER YEARS. THE AS SESSEE REFERRING TO THE PAPER BOOK FILED SUBMITTED THAT THE OPENING BALANCE BROUGHT FORWARD FROM EARLIER YEAR WAS EXPLAINED WITH CASH WITHDRAWALS FR OM CITI BANK ACCOUNT IN THE 6 ITA 5114/MUM/2015 PREVIOUS FINANCIAL YEAR FOR WHICH BANK STATEMENT AS WELL AS CASH BOOK HAS BEEN FURNISHED BEFORE THE AO. 6. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS EXPLAINED CASH DEPOSI T OF RS.2,50,000 ON 07-05- 2009 OUT OF OPENING CASH BALANCE BROUGHT FORWARD FR OM PREVIOUS FINANCIAL YEAR. WE FIND THT OPENING CASH BALANCE OF RS.3,17, 000 HAS BEEN EXPLAINED AS OUT OF CASH WITHDRAWAL FROM CITI BANK IN FEBRUARY, 2011. WE FURTHER OBSERVE THAT THESE BANK ACCOUNTS ARE DECLARED IN THE REGULA R RETURN FILED FOR THE RELEVANT ASSESSMENT YEAR. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO EXPLAIN THE SOURCE OF CASH DEPOSIT FOR RS.2,50,000; HENCE, WE DIRECT THE AO TO DELETE ADDITIONS OF RS.2 ,50,000 OUT OF TOTAL ADDITION SUSTAINED BY THE CIT(A) OF RS.3,35,000. INSOFAR AS BALANCE AMOUNT, THOUGH THE ASSESSEE CLAIMS TO HAVE SOURCE, FAILED TO FILE NECE SSARY EVIDENCE TO EXPLAIN CASH DEPOSIT ON VARIOUS DATES. THEREFORE, WE SUSTAIN TH E BALANCE AMOUNT OF RS.85,000 AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. AC6, 1961. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S ENHANCEMENT MADE BY THE CIT(A) TOWARDS LOW HOUSEHOLD EXPENSES BY EST IMATING THE SAME. THE CIT(A) ESTIMATED THE SAME AT RS.18 LAKHS PER ANNUM ON THE GROUND THAT THE ASSESSEE HAS SHOWN A MEAGER DRAWING OF RS.24,000 PE R ANNUM WHICH IS 7 ITA 5114/MUM/2015 INSUFFICIENT WHEN COMPARED TO HIS INCOME AND STATUS . THE LD.CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IS RESIDING IN A POSH AR EA OF COSTLIEST CITY OF MUMBAI FOR WHICH RS.2,000 PER MONTH IS INSUFFICIENT. THE ASSESSEE CLAIMS THAT HE IS PART OF A JOINT FAMILY AND HIS HOUSEHOLD EXPENSES ARE TA KEN CARE OF BY HIS JOINT FAMILY MEMBERS INCLUDING HIS FATHER AND MOTHER. TH EREFORE, THERE IS NO REASON FOR THE CIT(A) TO ESTIMATE HOUSEHOLD EXPENSES OF RS .1,50,000 PER MONTH MERELY ON SUSPICIONS AND SURMISES. THE ASSESSEE FU RTHER SUBMITTED THT HIS MOTHER HAS WITHDRAWN A SUM OF RS.1,56,950 FROM HER BANK ACCOUNT TOWARDS HOUSEHOLD EXPENSES AND OTHER FAMILY MEMBERS ALSO WI THDRAWN SIMILAR AMOUNTS AND WHATEVER DRAWINGS ARE SHOWN BY HIM IS O NLY HIS PERSONAL EXPENSES AND NOT FOR MAINTAINING HIS FAMILY. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT WHEN AN ASSESSEE IS HAVING A TOTAL INCOME OF RS.1,30,69,630 AS INCOME, AN EXPDEN DITURE OF RS.24,000 PER ANNUM FOR HIS HOUSEHOLD EXPENSES CANNOT BE RELIED U PON. AS RIGHTLY OBSERVED BY THE CIT(A), THE ASSESSEE IS RESIDING IN POSH ARE OF MUMBAI CITY FOR WHICH RS.2,000 PM IS NOT AT ALL SUFFICIENT TO MANAGE HIS HOUSEHOLD EXPENSES. AT THE SAME TIME, THE ESTIMATE MADE BY THE LD.CIT(A) IS AL SO ON HIGHER SIDE. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE FACT THAT THE ASSESSEE IS A MEMBER OF JOINT FAMILY, A REASONABLE ESTIMATE TOWARDS HOUSEHOLD EXPENSES WOULD MEET THE ENDS OF JUSTICE. ACCORDING LY, WE DIRECT THE AO TO 8 ITA 5114/MUM/2015 ESTIMATE RS.30,000 PER MONTH TOWARD HOUSEHOLD EXPEN SES OF THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS P ARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER , 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI