Jayanthilal Bansilal Jain, CHENNAI V. ITO, CHENNAI

ITA 566/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8256 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: C S SEETHARAMAN
• Keywords: Source of fund

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . . ' #$ , % &' ( [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER ] ./ I.T.A.NO.566/MDS/2016 / ASSESSMENT YEAR : 2010-11 SHRI JAYANTHILAL BANSILAL JAIN NO.65, G.A ROAD OLD WASHERMENPET CHENNAI 600 021 VS. THE INCOME TAX OFFICER NON-CORPORATE WARD4(3) CHENNAI [PAN AAPPJ 5730 M] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI C.S SEETHARAMAN, CA /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT / DATE OF HEARING : 28 - 09 - 2016 ! / DATE OF PRONOUNCEMENT : 26 - 10 - 2016 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHENNA I, DATED 22.12.2015 FOR ASSESSMENT YEAR 2010-11. 2. IT WAS NOTICED THAT THERE WAS A DELAY OF 16 DAYS IN FILING THIS APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR CONDONATION DELAY. WE HAVE HEARD THE LD. AR AND TH E LD. DR. WE FIND ITA NO. 566/16 :- 2 -: THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL WITHIN THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY A ND ADMIT THE APPEAL. 3. ALL THE GROUNDS ARE RELATED TO THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH DE POSITS IN THE BANK ACCOUNTS. 4. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS MADE CASH DEPOSITS OF ` 4,41,000/- IN VIJAYA BANK AND ` 42,72,000/- IN KARUR VYSYA BANK AGGREGATING TO ` 47,13,000/- WHICH WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT. DURING THE ASSESSMENT PROCE EDINGS, THE ASSESSEE DID NOT OFFER ANY EXPLANATION FOR THE NATU RE AND SOURCE FOR CASH DEPOSITS MADE IN THE BANK ACCOUNTS. THEREFOR E, THE ASSESSING OFFICER MADE ADDITION OF ` 47,13,000/- U/S 68 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE C IT(A) CONFIRMED THE ADDITION SINCE THE ASSESSEE FAILED TO PROVE TH E NATURE AND SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNTS. BEFORE THE CIT(A), THE ASSESSEE ARGUED THAT THE CASH DEPOSITS MADE IN THE BANK ACCOUNT REPRESENTED THE UNACCOUNTED SALES MADE BY THE ASSE SSEE AND FROM THE SALE PROCEEDS OF UNACCOUNTED SALES DEPOSITED IN THE BANK. THE ASSESSEE HAD WITHDRAWN THE MONEY AND MADE THE PAYME NTS TOWARDS ITA NO. 566/16 :- 3 -: UNACCOUNTED PURCHASES MADE BY THE ASSESSEE. HOWEV ER, THE ASSESSEE COULD NOT PRODUCE THE RELEVANT EVIDENCES T O PROVE THAT THE DEPOSITS WERE MADE FROM THE SALE PROCEEDS OF UNACCO UNTED SALES AND THE UNACCOUNTED PURCHASES WERE MADE FOR WHICH THE P AYMENTS WERE MADE BY WAY OF DEMAND DRAFTS. THEREFORE, THE CIT(A ) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. THE LD. AR OF THE ASS ESSEE ARGUED THAT THE DEPOSITS MADE IN KARUR VYSYA BANK AND VIJAYA BA NK WERE RELATED TO THE UNACCOUNTED SALES AND THE SAME WAS NOT INCLU DED IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER AS WELL AS THE C IT(A) HAVE ERRED IN MAKING THE ADDITION OF ENTIRE UNACCOUNTED SALES INS TEAD OF GROSS PROFIT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE W AS IN THE TEXTILE BUSINESS AND MAKING UNACCOUNTED PURCHASES AND SALES , AND ACCORDING TO THE LD.AR, ONLY THE PROFIT ELEMENT IS REQUIRED T O BE ADDED. HE RELIED ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN TH E CASE OF CIT VS GURUBACHHAN SINGH F. FUNEJA, 302 ITR 63, DCIT VS HV AC SYSTEMS P. LTD, 44 SOT 81 AND DECISION OF ITAT LUCKNOW BENCH I N THE CASE OF ITO VS SHRI VISHAN LAL IN I.T.A.NO. 634/LKO/2014 DA TED 22.6.2015 AND CONTENDED THAT ADDITION TOWARDS GROSS PROFIT IS RE QUIRED TO BE MADE BUT NOT THE ENTIRE SALES. FURTHER, THE LD. AR SUB MITTED THE SUPPLIERS ITA NO. 566/16 :- 4 -: DO NOT ISSUE PROPER BILLS FOR THE SALES AND CONSEQU ENTLY THE ASSESSEE COULD NOT GET THE PROPER PURCHASE BILLS AND THE ME MOS WERE ISSUED BY THE SUPPLIERS. THE A.R FURNISHED THE COPIES OF MEMO S ALONG WITH PAPER BOOK. THE MEMOS DO NOT CONTAIN ANY DETAILS OF ADDR ESS OF THE SUPPLERS EXCEPT THE NAME AND DESCRIPTION OF GOODS. THERE WAS NO ADDRESS, AND SALES TAX NO AND THE FULL NAME AND ADD RESS OF THE BENEFICIARY ALSO WAS NOT WRITTEN ON THE MEMOS. MOST OF THE MEMOS ARE APPROVAL SLIPS AND NONE OF THEM WERE THE PURCHASE B ILLS. WHEN ASSESSEE WAS PURCHASING ON CREDIT BASIS AND MAKING THE PAYMENT SUBSEQUENTLY, NONE OF THE SUPPLIERS ISSUE SUCH MEMO S WHICH DO NOT HAVE ANY EVIDENTIARY VALUE OF DEBT. IN A NUTSHELL, THE LD. AR ARGUED THAT THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS RE PRESENT THE TURNOVER OF UNACCOUNTED SALES. 7. ON THE OTHER HAND, THE LD. DR ARGUED THAT BOTH THE CIT(A) AND THE ASSESSING OFFICER HAD GIVEN SUFFICIENT OPPO RTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES AND SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS. INSPITE OF GIVING R EPEATED OPPORTUNITIES, THE ASSESSEE HAS NOT PROVED THAT T HE CASH DEPOSITS REPRESENT THE UNACCOUNTED SALES AND PURCHASES. THER E WAS NO EVIDENCE TO PROVE THAT DDS WERE SENT TOWARDS THE PU RCHASES. THEREFORE, THE LD. DR ARGUED THAT THERE IS NO CASE FOR DISTURBING THE ITA NO. 566/16 :- 5 -: ORDERS OF THE LOWER AUTHORITIES AND THE ADDITION MA DE IS TO BE CONFIRMED. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL PLACED BEFORE US. THE ASSESSEE HAS MADE CASH DEPO SITS OF ` 4,41,000/- IN VIJAYA BANK AND RS.42,72,000/- IN KAR UR VYSYA BANK AGGREGATING TO ` 47,13,000/- AND THE SAME WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THA T THE SOURCE OF THE CASH DEPOSITS WAS FROM UNACCOUNTED SALES AND FROM T HE SALE PROCEEDS DDS WERE PURCHASED AND SENT TO THE SUPPLIERS OF THE GOODS TOWARDS UNACCOUNTED PURCHASES. HOWEVER, THE ASSESSEE COUL D NOT FURNISH ANY EVIDENCE TO PROVE THAT THE DEPOSITS WERE ON ACCOUNT OF UNACCOUNTED SALES MADE BY THE ASSESSEE. SIMILARLY, THOUGH THE ASSESSEE HAS PRODUCED CASH MEMOS FROM VARIOUS PARTIES, IT DOES N OT CONTAIN ANY DETAILS WHICH CAN BE VERIFIED. THERE IS NO ADDRESS AND DATE ON THE CASH MEMOS AND IT WAS NOT SUPPORTED BY ANY LR OR RR NOS. IN NUTSHELL, THE CASH MEMOS ARE TOTALLY UNVERIFIABLE W ITH RESPECT TO THE GENUINENESS OF THE SUPPLIER AND CREDITWORTHINESS, A DDRESS OF THE SUPPLIERS. SIMILARLY, NO PROPER DETAILS WERE ALSO WRITTEN ON THE CASH MEMOS. SOME OF THE MEMOS WERE NOT CASH MEMOS BUT O NLY APPROVAL SLIPS WHICH ARE LIKE QUOTATIONS. THEREFORE, PURCHA SE VOUCHERS FURNISHED BY THE LD. AR ALONGWITH THE PAPER BOOK CA NNOT BE RELIED ITA NO. 566/16 :- 6 -: UPON. THE ASSESSEE ALSO COULD NOT PRODUCE THE DET AILS OF DDS PURCHASED FROM THE BANK IN WHOSE FAVOUR THE DDS WER E OBTAINED. THEREFORE, NEITHER THE GENUINENESS OF THE SUPPLIERS NOR THE PAYMENTS COULD BE VERIFIED FROM THE DETAILS FURNISHED BY THE LD. AR OF THE ASSESSEE. THE LD. AR DID NOT FURNISH ANY EVIDENCE REGARDING THE SALES. NO SALE BILLS WERE PRODUCED BY ASSESSE. THEREFORE, AS RIGHTLY OBSERVED BY THE CIT(A), THE ASSESSEE FAILED TO PROVE THE NA TURE AND SOURCE OF THE DEPOSITS MADE IN THE BANK ACCOUNT. 9. THE ASSESSEE RELIED ON THE DECISION OF ITAT LUCKN OW BENCH IN THE CASE OF SHRI VISHAN LAL (SUPRA). IN THE SAI D CASE THE CIT(A) HAS GIVEN A FINDING THAT THE CASH DEPOSITS AND WITHDRAW ALS REPRESENT THE TURNOVER OF THE ASSESSEE AND ACCORDINGLY, GROSS PR OFIT WAS ESTIMATED. THEREFORE, THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). IN THE ASSESSEES CASE BEFORE US, BOTH THE ASSESSING OFFIC ER AND THE CIT(A) HELD THAT THE SOURCE OF DEPOSITS COULD NOT BE EXPLA INED BY THE ASSESSEE. IN THE CASE OF HVC SYSTEMS (P) LTD.(SUPR A), THE ITAT BANGALORE BENCH FOUND THAT THERE WAS A DIFFERENCE O F ` 85,73,697/- WHICH WAS EXPLAINED BY THE ASSESSEE AS THE METHOD OF ACCOUNTING FOLLOWED BY THE PAYER AND PAYEE I.E HVAC HAS NOT RE COGNIZED THE INCOME ATTRIBUTABLE TO THE WORK WHEREAS THE OTHER P ARTY SCDL HAD FULLY ACCOUNTED THE AMOUNT EVEN BEFORE THE FINAL DE TERMINATION OF THE ITA NO. 566/16 :- 7 -: ACCEPTANCE OF THE WORK AS WELL AS ACCEPTANCE OF THE BILLS. THEREFORE, IT WAS EXPLAINED THAT THE DIFFERENCE IN THE ACCOUNT B ALANCES EXISTED FOR THE REASON THAT EVEN THOUGH THE SERVICES RENDERED B Y THE ASSESSEE THE BILLS WERE NOT SETTLED AND, THEREFORE THE ASSESSEE HAS NOT RECOGNIZED THE INCOME ATTRIBUTABLE TO THE WORK WHEREAS THE OTH ER PARTY SCDL HAD FULLY ACCOUNTED FOR THE AMOUNT EVEN BEFORE THE FINA L DETERMINATION OF ACCEPTANCE OF THE WORK AS WELL AS ACCEPTANCE OF BIL LS. THEREFORE IT WAS EXPLAINED THAT THIS WAS A QUESTION OF RECOGNITION O F INCOME FOR SERVICES RENDERED WHICH IS GOVERNED BY ACCOUNTING STANDARD 9 WHERE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAS ISS UED GUIDELINES FOR THE PURPOSE OF RECOGNIZING THE INCOME IN SUCH CIR CUMSTANCES. THE ISSUE BEFORE US IS NOT ON SIMILAR FACTS THEREFORE T HE CASE LAW RELIED UP ON BY THE ASSESSEE IS OF NO HELP. SIMILARLY, IN THE CASE OF MAN MOHAN SADANI, 304 ITR 52, THE QUESTION RAISED BEFORE THE M.P HIGH COURT WAS WHETHER THE ENTIRE SALES WERE LIABLE TO BE ASSESSED AS INCOME EVEN WHEN THE PURCHASES WERE RECORDED IN THE BOOKS OF AC COUNT. IN THE ASSESSEES CASE, BOTH THE PURCHASES AS WELL AS SALE S WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS AND THE CASE LA W RELIED BY THE ASSESSEE IS ALSO NOT APPLICABLE IN THE ASSESSEES C ASE. 10. THE ASSESSEE HAS MADE DEPOSITS IN THE BANK ACCOUNT AND THE SOURCE WAS NOT EXPLAINED WITH PLAUSIBLE EVIDENCE. T HOUGH THE ITA NO. 566/16 :- 8 -: ASSESSEE EXPLAINED THAT THE DEPOSITS WERE ON ACCOUN T OF UNACCOUNTED SALES THERE WAS NO EVIDENCE TO PROVE THE SAME. SIMI LARLY, PURCHASES WERE ALSO NOT SUPPORTED BY ANY EVIDENCE. THEREFORE , NEITHER THE PURCHASES NOR THE SALES AWERE PROVED BY THE ASSESS EE. THE SOURCE OF DEPOSITS MADE IN THE BANK ACCOUNT REMAINED UNEXPLAI NED. IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPO SIT MADE IN THE BANK ACCOUNT WITH IDENTITY OF THE CREDITOR, CAPACIT Y AND GENUINENESS OF THE TRANSACTION. THIS VIEW HAS BEEN UPHELD BY THE DELHI HIGH COURT IN THE CASE OF CIT VS OASIS HOSPITALITIES PVT. LTD. 33 3 ITR 119, RELIED UPON BY THE CIT(A). FURTHER THE CIT(A) ALSO RELIED ON THE JUDGMENT OF APEX COURT IN THE CASE OF KALE KHAN MOHAMMAD HANIF VS CIT, 50 ITR 1 AND ROSHAN DI HATTI VS CIT, 107 ITR 938, WHEREIN IT HAS BEEN HELD THAT THE LAW IS WELL SETTLED THAT THE ONUS OF PROVI NG THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASS ESSEE, IS ON HIM. WHERE THE NATURE AND SOURCE THEREOF CANNOT BE EXPLA INED SATISFACTORILY, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN IS ON THE REVEN UE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. THE LD. AR OF THE ASSESSEE HAS NOT FURNISHED ANY DECISION TO CONTROVERT THE DE CISIONS RELIED UPON BY THE CIT(A). THE ASSESSEE FAILED TO PROVE THE S OURCE OF THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS WITH RELEVANT SA LE BILLS, NAMES AND ADDRESSES TO WHOM THE SALES WERE MADE. THE LD. AR ALSO FAILED TO ITA NO. 566/16 :- 9 -: FURNISH ANY EVIDENCE OF THE SUPPLIERS OF THE GOODS. THE UNACCOUNTED SALES CANNOT BE EQUATED WITH THE ACCOUNTED SALES AN D TO ESTIMATE THE GROSS PROFIT, BECAUSE THE BUSINESS MAN INDULGING IN UNACCOUNTED SALES NOT ONLY EVADES THE INCOME TAX BUT ALSO EVADES THE COMMERCIAL TAX AND GOES SCOT FREE WITHOUT EXPLAINING THE SOURCE OF FUNDS. HE ALSO BECOMES THE INSPIRATION AND MOTIVATING FACTOR FOR U NACCOUNTED SUPPLIERS. IT IS NECESSARY TO CURB SUCH UNHEALTHY P RACTICES IN THE INTEREST OF PREVENTING THE CIRCULATION OF BLACK MON EY IN THE ECONOMY . THEREFORE, WE DO NOT FIND ANY REASON TO DIFFER FROM THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE ADDITION MADE BY THE AS SESSING OFFICER IS SUSTAINED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . . ' #$ ) (D.S. SUNDER SINGH) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 26 TH OCTOBER, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF