ASST CIT 7(2), MUMBAI V. SURENDERA M KHANDHAR, MUMBAI

ITA 5558/MUM/2014

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7221 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 1990-1991
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL SHAH
• Keywords: Unexplained cash credit; Peak credit; Set aside
• Section: 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “E” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON'BLE JUDICIAL MEMBER ITA NOs. 5556, 5557, 5558 & 5559/MUM/2014 (A.Ys: 1988-89, 1989-90, 1990-91 & 1991-92) & ITA NOs. 5560, 5561, 5562 & 5563/MUM/2014 (A.Ys: 1992-93, 1993-94, 1995-96 & 1996-97) DCIT – 8(2)(2) Room No. 348 Aayakar Bhavan, M.K. Road Mumbai - 400020 v. Surendra M. Khandhar 208, Parshaw Chambers 18/21, Essaji Street Vadgadi, Mumbai - 400003 PAN: AAEPK7408A (Appellant) (Respondent) Assessee by : Shri Vipul Shah Department by : Shri B.K. Bagchi Date of Hearing : 14.10.2021 Date of Pronouncement : 30.11.2021 O R D E R PER BENCH 1. These appeals are filed by the Revenue against common order of the Learned Commissioner of Income Tax (Appeals)–13, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 18.06.2021 for the A.Ys. 1988-89 to 1993-94, A.Y. 1995-96 and A.Y. 1996-97. 2 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar 2. Brief facts of the case are that, assessee filed return of income on 19.12.1988, declaring total income at Rs.NIL. The return of income was duly processed u/s.143(1) of the Income Tax Act, 1961 (for short “Act”). The assessee is engaged in the activities of providing financial and project consultancy. The assessee was also director in M/s. Suman Motels Ltd. Search action u/s.132 of the Act was conducted at the premises of the assessee on 18.02.1991. During the course of search action, list of 110 bank accounts operated by the assessee were found. In the statement u/s.132(4), the assessee admitted that he is operating all these benami accounts and he offered the peak amounts of credits/deposits in these accounts for taxation. However, later on the assessee retracted from his statement. The assessee obtained Bachelors Degree in Commerce and also appeared for the Chartered Accountants Examination but he did not obtain the degree. He started practice as an income-tax practitioner in October 1980. It is stated by the learned counsel for the assessee that he discontinued his profession in 1983. The assessee started a limited company "Suman Motels Pvt. Ltd.”". After obtaining the permission of the Controller of Capital Issues in 1989, this company is stated to have gone public and the shares were issued to the public in April/May 1990. This company, of which the assessee is a director, has its registered office at 3 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar 42, Ambedkar Marg, Wadala, Mumbai-31 and its corporate office is at 208-210, Parshva Chambers, Essaji Street, Vadgadi, Mumbai-3. The assessee has his residence at Telang Road, Matunga, Mumbai, and he has also an office at 208-210, Parshva Chambers, Vadgadi, Mumbai, where, Eshita Dye Chem Pvt. Ltd. and Suman Motels Ltd. also have their offices, which was searched by the Department. 3. Subsequently, the case of the assessee was reopened u/s.147. The assessment order was passed on 26.03.1996 assessing his total income at Rs. 19,25,38,623/-by way of making additions on account of ‘Unexplained cash credits of Rs.16,98,34,585/-, Loans and advances of Rs.26,50,289/- and Estimated Professional Fees Rs.78,749/-. Aggrieved by the said assessment order, the assessee preferred an appeal before the Ld. CIT(A). In the appellate order, the Ld.CIT(A) had confirmed the addition on account of Professional Fees. In respect of Loans & Advances, the Ld. CIT(A) confirmed the addition, however, has directed the Assessing Officer to verify the parties and if any party is also one of the parties reflected in the accounts of unexplained cash credits and work out the quantum accordingly. In respect of the addition on account of Unexplained Cash Credits, the Ld. CIT(A) vide order No.CIT(A) /Cent.VI/ 4 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar IT-204,205,207/96-97 dated 26.02.1997 had directed the Assessing Officer to verify the peak offered by the assessee as well as to follow the decision of Ld. CIT(A) in the assessee's own case for the A.Y.1991-92 dt.30.03.1995 & 23.09.1996 which has again been followed in the A.Y.1992-93 vide CIT(A) order dt.31.12.1995. The Department has not accepted the order of the CIT(A) and had preferred an appeal before the ITAT. For the Assessment Year 1991-92 and 1992-93 Ld.CIT(A) directed the Assessing Officer to make addition of the aggregate of the peak of the 110 bank account which appeared in the seized doument list (A.3). The Assessing Officer has given the effect to the order of the Ld.CIT(A) on 31.03.1997. The Assessing Officer had computed the income at Rs.5,25,77,498/- by way of recomputing additions on account of Professional Fees Rs.78,749/, Loans and advances of Rs.3,11,600/- and Unexplained cash credits’ Rs.5,22,59,336/- inclusive of ‘Peak filed by the assessee vide letter dt.25.03.1997 Rs.1,05,24,320/- and even after giving ample opportunities, peak not filed by assessee Rs.4,17,35,016/-. Subsequently, the assessee again preferred an appeal before Ld. CIT(A) stating that the Assessing Officer had not entertained the peak of 20 accounts. In response, the Ld. CIT(A) vide order dt.01.12.1998 directed the Assessing Officer to rectify the mistake. In this order, the Ld. CIT(A) 5 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar also confirmed the addition on account of Loans and Advances u/s.68 of the Act. While giving effect to this order of Ld. CIT(A), the Assessing Officer vide order dt.03.11.2000 has determined the peak of credits to Rs.1,15,68,388/- and had revised the total income to Rs.1,18,86,552/-. In respect of the appeal of the department, Coordinate Bench in ITA.No.3147/MUM/1997 dated 13.05.2005 as well as in respect of the assessee’s appeal, the Bench in ITA.No.3593/M/96 for the A.Y.1991-92 and ITA.No.3173 to 3175/M/97 dated 31.03.2005 for the A.Ys.1988-89, 1989-90 & 1990-91 has set-aside the order of the Assessing Officer. The Coordinate Bench has also directed Assessing Officer to follow the order of the ITAT ‘C’ bench in the assessee’s own case for the A.Y.1991-92 reported in the 76 ITD 121. In this order, the Bench has set-aside the order of the Assessing Officer and restored the matter to the file of the Assessing Officer for fresh assessment in the light of the observation made by the Coordinate Bench in its order for the A.Y.199 1-92. The Coordinate Bench in 72 ITD 121 (Mum.) has given a specific direction as under: - “We direct that the peak be worked out by arranging the transactions in the accounts datewise. The AO should first ascertain the bank accounts in respect of which there is evidence that they related to the assessee or were owned by him. Then such accounts should be considered for consolidation and datewise balances have to be worked out. The peak of all the deposits should be ascertained if the assessee is able to prove that the earlier withdrawals were not utilised elsewhere and such peak should be brought to tax after reducing the peak already brought to tax, if any, in the earlier year. 6 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar As already mentioned, it is for the assessee to adduce evidence to the satisfaction of the AO that the said 110 bank accounts figuring in Annexure A3 do not relate to him. The assessee should also work out the datewise balances and reference to the relevant bank accounts. ......................................After ascertaining such bank accounts, which according to the Assessing Officer, are owned by the assessee in benami names, he should work out the peak as per our remarks made earlier.” 4. In second round of proceedings, Assessing Officer considered the submissions of the assessee and directions of the ITAT and he completed the assessment and confirmed the peak credit by making the addition many fold upon the addition made in the original Assessment Order. Aggrieved assessee preferred appeal before the Ld.CIT(A) and the Ld.CIT(A) has confirmed the addition and again assessee preferred second round of appeal before the Ld.CIT(A) and Ld.CIT(A) once again remitted the issue back to the file of the Assessing Officer to follow the directions given in their order. The Assessing Officer in the third round of proceedings confirmed the addition made by the then Assessing Officer in the second round of appeal with the observation that assessee has not submitted relevant information. Aggrieved assessee preferred appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the various materials submitted by the assessee and directions of the Coordinate Bench in the earlier proceedings decided the issue as below: - “Having agreed in principle to tax peak amount in the hands of appellant now the J quantum is to be looked into. A look at the chart 7 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar shows that peak amount for the assessment year 1988 — 89 involved in appeal number 188/13-14 is Rs. 8,18,000/-, whereas the peak amount for A.Y 1989 -90 involved in appeal number 189/13-14 is 58 Rs. NIL. It also clearly shows that the highest peak amount is coming in A.Y. 1995-96 involved in appeal number 322/11-12. 3.33 It is noted that the appellant has taken effect of peak in assessment year 1984 - 85 of Rs.3,09,394/and again peak amount of Rs.28,089/- of A.Y 1986 - 87, by reducing these two amounts from the peak of Rs.11,55,483/- appearing for the A.Y 1988 - 89, and has taken the amount of peak to be taxed, of Rs.8,18,000/- only, for A.Y 1988—89. Since the appellant has not given any details/ status of assessment, if done, whether these peak amounts for the A.Y 1984 - 85 and A.Y 1986 — 87, were taxed as his income, obviously effect of peak worked out in the table in absence of any such information whether or not the peak amount reflected in A.Y 1984 - 85 of Rs.3,09,394/- was taxed so and again in absence of any detail given for the peak 1 amount of Rs. 28,089/- if taxed in the A.Y 1986-87, effect given by the appellant to reduce the same from the peak amount of Rs.11,55,485/- coming in A.Y 1988-89 is not accepted. Accordingly the peak for A.Y 1988 - 89 is taken at Rs.11,55,483/- only. The ground taken by appellant is partly allowed. 3.34 Coming to AY 1989 - 90 the peak balance has been reflected at Rs.10,91,610/-, which being less than the amount of peak Rs.11,55,483/- taken for AY 1988 — 89, no addition can be made in the income of the appellant on this issue, following the accepted method of working out peak. The ground taken by appellant is allowed. 3.35. As regards other A.Y. it is noted that quantum of peak is not matching. For A.Y 1990—91 the peak which is reflected at Rs.20,39,540/- by the appellant is actually found to be Rs.28,56,917/-. After reducing the peak amount of 6 Rs.11,55,483/- already taken for A.Y 1988 - 89 the net peak to be taxed for A.Y.1990-91 as to be taken at Rs.17,01,439/-. The ground taken by appellant is partly allowed. 3.36 As regards A.Y 1991-92 it is seen that the peak has been reflected at Rs.6,10,619/- by the appellant but is actually found to be Rs. 34,38,287/-. Accordingly, addition for net peak amount Rs.5,81,370/- is to be made in A.Y 1991- 92. As regards A.Y 1992- 93 the peak is reflected at Rs. 25,14,954/- by the appellant which is actually found to be Rs. 5414020/-. Hence, the balance amount of Rs.19,75,733/- has to be taxed in A.Y 1992 - 93. The ground taken by appellant is partly allowed. 8 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar 3.37 Coming to A.Y 1993 -94 the peak has been taken by the appellant at Rs. 25,74,957/- which is actually found to be Rs.50,29,096/-. Hence, the net peak being less than that of the A.Y.1992-93, no additions are made. The ground taken by appellant is allowed. 3.38 Then coming to A.Y 1994-95, for which the peak is being reflected at 30,06,898/- by the appellant, which is found to be Rs.61,09,613/-. Hence the peak amount of Rs.6,95,593/- has to be taxed in the A.Y 1994 - 95. The ground taken by appellant is partly allowed. 3.39 Then coming to A.Y 1995-96 the peak been reflected at Rs.46,67,956/- by the appellant, which is actually found to be Rs.72,19,381/-, hence the balance peak amount of Rs.18,05,361/- has to be taxed in this A.Y i.e. 1995-96. Accordingly the AO is directed to tax the peak amount, as reflected on the dates in the respective assessment years starting from 1988 - 89 to 1995-96, after verifying and satisfying himself once again;the peak amount reflected on the given dates in the respective financial year relevant to all these A.Ys involved in these appeals. The ground taken by appellant are allowed.” 5. Aggrieved revenue is in appeal before us raising the following grounds in its appeal: - “i). The Ld. CIT(A) has erred on facts and in law in reducing the peak amounts as compared to the peak amounts worked out by the Assessing Officer without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer in the assessment year. ii). The Ld. CIT(A) has erred on facts and in law in altering the method of working peak by the assessing officer without properly appreciating the factual and legal matrix of the case. iii). The Ld. CIT(A) has erred on facts and in law in not appreciating that as clearly noted by Ld. CIT(A) in paragraph 3.18 of the appellate order, these benami concerns were used by the appellant for arranging and providing bogus entries and therefore, this being a case of utter disregard and subversion of law, the burden of proof cast on assessee was of a very high degree and required production of reliable, relevant and cogent evidence which was not done by the assessee. 9 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar iv) The Ld. CIT(A) has erred on facts and in law in not giving effect to section 114(g) of the Indian evidence Act which clearly lays down that if a fact in knowledge of a party is not explained, adverse reference can be drawn against the party possessing the knowledge of facts/information. v.) The Ld. CIT(A) has erred on facts and in law in allowing the assessee the benefit of cash withdrawal for the purpose of working out peak even though the assessee has failed to prove by producing cogent, relevant and reliable evidence of its claim that such cash was applied towards deposit in these bank accounts.” 2) The Ld. C/T(A)’s order is contrary to law and facts and deserves to be set aside and A.O.’s order may be restored. 3) The appellant craves leave to amend or alter any ground or add a new ground that may be necessary.” 6. Considering the rival submissions and material placed on record, we noticed that this is a third round of proceedings initiated by the parties even in first round of appeal revenue filed before Coordinate Bench and Coordinate Bench found it appropriate to remit this issue back to the file of the Assessing Officer to follow the directions given by it in the first round of appeal. Now revenue is in appeal against order passed by Ld.CIT(A)–13, Mumbai dated 18.06.2014, we observe from the appellate order passed by the Ld.CIT(A) that he has considered the details submitted before him and verified the calculation of peak credit submitted by the assessee, after due verification of all the information for each year and he has come to the conclusion after given proper opportunity to the Assessing Officer in the remand proceedings. However, the Assessing 10 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar Officer did not agree with the peak credit calculation submitted by the assessee. However, we observe from the findings of the Ld.CIT(A) that he has analyzed 110 accounts found during search and analyzed the individual accounts and the peak in various accounts maintained by the assessee. We find that Ld.CIT(A) has given proper explanation and findings in each year and the issue cannot be allowed to escalate without their being finality. In our view, the order of Ld.CIT(A) is reasonable and proper. After considering the detailed findings of the Ld.CIT(A) we do not find any infirmity with the finding of the Ld.CIT(A), accordingly, we dismiss the appeals filed by the Revenue. 7. In the net result, appeals filed by the Revenue are dismissed. Order pronounced on 30.11.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (RAVISH SOOD) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 30.11.2021 Giridhar, Sr.PS 11 ITA NOs. 5556 to 5563/MUM/2014 Surendra M. Khandhar Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum