DHIMANT A. SANGHAVI, MUMBAI V. ITO-33(1)(4), MUMBAI

ITA 567/MUM/2019

AI Insights

The case involves Dhimant A. Sanghavi, a proprietor of M/s Global Enterprises, who was assessed for unexplained cash deposits amounting to Rs. 3,95,46,000 in his bank accounts for the assessment year 2009-10. The AO initially added this amount to the assessee's income as unexplained cash under section 69A of the Income Tax Act. The CIT(A) upheld this decision, leading to the current appeal before the ITAT. The ITAT dismissed the appeal, noting the assessee's failure to produce necessary evidence and comply with procedural requirements despite being given multiple opportunities to do so.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125878 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-01-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2019
• Other Referred Cases: Mehta Parekh & Co. Vs. CIT (SC) 30 ITR 181, A.K.K. Namblar Vs. Union of India AIR 1970 SC 652 pp 654, Gunwantibal Rabial Vs. CIT (MP) 146 ITR 140, Silk Museum Vs. CIT (Gu) 257 ITR 22
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FILING A COPY OF AN OLD AFFIDAVIT DATED
• Keywords: Opportunity of being heard; Additional evidence; Corroborative evidences; Set aside
• Section: 131; 271(1)(c); 143(3); 250; 274; 69A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.567/Mum./2019 (Assessment Year : 2009–10) Dhimant A. Sanghavi 606/C, Chintaman, S.V.P. Road Opp. Shankar Lane, Kandivali (West) Mumbai 400 067 PAN – AAFPS7194C ................ Appellant v/s Income Tax Officer Ward–33(1)(4), Mumbai ................Respondent Assessee by : Shri Prayag Jha Revenue by : Smt. Mahita Nair Date of Hearing – 09/01/2023 Date of Order – 11/01/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 19/09/2018, passed under section 250 of the Income Tax Act (‘the Act’) by the learned Commissioner of Income Tax (Appeals)-45, Mumbai [‘learned CIT(A)’], for the assessment year 2009–10. 2. In this appeal, the assessee has raised following grounds:– “1. The Ld Commissioner of Income Tax (Appeals)-45, Mumbai, (hereinafter 'CIT(A)') erred both on facts and in law in passing the impugned order dated 19.09.2018 and the same is liable to be set aside. Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 2 2. The Ld CIT(A) erred in rejecting the affidavit filed by the assessee wherein he had specifically stated that he was not converting his black money into white but was receiving commission for accepting cash from others and issuing cheques in return thereof. The impugned order has been passed in complete disregard of the facts of the case and is liable to be set aside. 3. The Ld CIT(A) erred in not appreciating that the assessee had discharged his onus by submitting the source and nature of deposits of Rs.3,95,46,000/-. 4. The Ld CIT(A) erred in not appreciating that the assessee had discharged his onus by submitting the source and nature of deposits of Rs.3,95,46,000/- made in his accounts with Punjab National Bank, Greater Bombay Co-Operative Bank by furnishing name, address and PAN of the concern depositors and thus had offered sufficient explanation. 5. The Ld CIT(A) erred in upholding the addition of Rs.3,51,000/- in respect of deposits made in Karnataka Bank Ltd without appreciating that the assessee had furnished a valid explanation in respect of this amount. 6. The Ld CIT(A) erred in not appreciating that none of the ingredients specified in section 69A of the IT Act was satisfied in the facts of the case and the addition of Rs.3,98,97,000/- made contrary to the provisions of law is liable to be set aside 7. The Ld CIT(A) erred in not appreciating that the Ld AO had rejected the assessee's valid explanation and factual submission without carrying out any verification and had made addition only on surmises and conjectures which was not permissible under the Income Tax Act. 8. The above grounds of appeal are without prejudice to one another. 9. The appellant craves leave to furnish Additional Evidence which may be relevant to the above Grounds of Appeal in course of the appeal proceedings.” The appellant craves leave to amend or alter any of the above Grounds of Appeal or to add new Grounds of Appeal during the course of appeal proceedings.” 2. The brief facts of the case as emanating from the record are: The assessee is an individual and is a proprietor of M/s Global Enterprises, engaged in the business of reselling of engineering tools and hardware iron and steel. For the year under consideration, the assessee filed its return of income on 30/03/2010, declaring a total income of Rs. 63,660. Vide order dated 23/12/2011, passed under section 143(3) of the Act, the Assessing Officer (‘AO’) determined the total income of the assessee at Rs.3,99,60,790. In Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 3 further appeal, the learned CIT(A) vide order dated 22/02/2013, dismissed the appeal filed by the assessee. Aggrieved by the order passed by the learned CIT(A), the assessee preferred an appeal before the Tribunal. The coordinate bench of the Tribunal vide its order dated 10/10/2014, set aside the order passed by the learned CIT(A) and restored the issue to the file of the AO with a direction to examine them afresh. The coordinate bench also directed the assessee to fully cooperate with the AO in completing the assessment by furnishing all details that will be called for and by producing the parties as required by the AO. In compliance with the directions issued by the coordinate bench of the Tribunal, the AO issued various notices to the assessee requesting to produce all the parties from whom the cash was received and cheques were issued and also to produce cash book and bank book for the relevant period to verify the source of cash deposited by the assessee in its bank accounts. However, the assessee could not produce any document to substantiate its claim and failed to submit the details. The AO also issued summons under section 131 of the Act to the assessee, however, no detail was again submitted by the assessee. The AO issued a final show cause notice as to why the cash deposited in assessee’s bank account be not treated as an unexplained cash deposit. After considering assessee’s reply to the aforesaid show cause notice, the AO vide order dated 30/01/2015, passed under section 143(3) r/w 254 of the Act held that the assessee failed to comply with the directions of the Tribunal and thus could not discharge the onus cast upon him by not producing the parties and has not established the alleged source of cash deposited by the assessee in his bank account. Accordingly, the AO treated the cash amounting to Rs. 3,98,97,133, as unaccounted cash under Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 4 section 69A and added the same to the total income of the assessee. The relevant findings of the AO, in this regard, are as under: “Decisions 5.0 The contentions of the assessee are considered, but are found to be not acceptable on the basis of following facts and circumstances: i) The details filed by the assessee is examined and verified, in the pursuance of Hon'ble ITAT direction. The assessee has heavily relied on the affidavit dt. 16.11.2011. Further, to verify the truthfulness and correctness of affirmation made in affidavit substantiated with evidence summons also issued. In response to summons the assessee did not produce the required supporting evidence. ii) It is also important to note that on the basis of affidavit, the assessee was given an opportunity to explain and prove the claim made by producing relevant parties who has given cash to the assessee and to whom cheques were issued, as directed by Hon'ble ITAT. Thus, the onus to produce parties and explain the claim is on assessee. The assessee completely failed to discharge the onus and tried to shift the onus on department regarding producing parties from whom cash was taken and cheques were given as claimed an evidence undertaken before Hon'ble ITAT. iii) The affidavit filed by the assessee is also taken for consideration and the assessee was given opportunity to establish the truthfulness and correctness of the statement made in the affidavit. In this case, the assesse himself as deponent and by issuing summons an opportunity for cross examination of deponent is availed. The assessee failed to substantiate the statement with any evidence and failed to produce parties. iv) The assessee in response to final show cause notice dated 23.01.2015 submitted that "money was put in aforesaid two banks A/c and commission was not declared because they have told me to do the same (complete details of these parties is submitted to your honour vide my C.A. letter dt. 05.01.2015) and they convince me that nothing happened to them till today as they are regular hawala dealers.". The acceptance of the assesse clearly shows that he was very much aware about the unaccounted illegal transactions done by him with a clear Intention to evade taxable Income by using various means. v) The affidavit filed by the assessee cannot be taken as evidence as per Hon'ble Supreme Court decision in the case of Mehta Parekh & Co. Vs. CIT (SC) 30 ITR 181. In this case the assessee failed to produce any supporting evidence and parties to prove the truthfulness and correctness of statement made in affidavit. Again the Hon'ble Supreme Court stated in the case A.K.K. Namblar Vs. Union of India AIR 1970 SC 652 pp 654 that If the affidavit is not properly verified it cannot be admitted in evidence as It is not evidence in the eyes of law. In the case of Gunwantibal Rabial Vs. CIT (MP) 146 ITR 140 and Silk Museum Vs. CIT (Gu)] 257 ITR 22 it is held that an affidavit is a piece of evidence, which along with other material on record, has to be taken into consideration before arriving at a finding. A statement by a deponent can be held to be unreliable either on the basis of cross examination of the deponent or by reference to other material on record. vi) In this case certain cash deposits are made in the Bank accounts. The nature and source of the deposits made is not proved by the assessee after having ample opportunities. It is important to mention that the assessee is also involved in other business activities. The assessee has full knowledge of law and facts. He submitted on oath that he has maintained books of accounts for business. But not taken into account in books of accounts of the cash received. It is also noted that cash deposits were Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 5 made in more than one bank. This indicates the clear intention and planned manner to evade the tax liability. Those transactions of cash deposits and cheques issued were done for commission income is also not supported the truthful and correct facts. In the return of income filed by the assessee, did not offer the commission income for taxation. Therefore, it seems to be afterthought of the assessee to justify the cash deposits found in his bank account. In the light of above facts and circumstances the statement made in affidavit is liable to be rejected. vii) There is an AIR information available with the department on which basis the case was selected under scrutiny. If the case were not selected for scrutiny the assessee would have succeeded in his intention. It is a fact that the assessee could not substantiate his claim at any stage of assessment proceedings and even the facts and circumstances of the case does not justify the affirmation of the statement made in affidavit. The assessee also failed to comply the direction of Hon'ble ITAT. viii) It is pertinent to note here that the Hon'ble ITAT had carefully considered revenue's contention that the assessee had failed to produce parties before the A.O. during the regular assessment proceedings. But after considering the unconditional undertaking given by the assessee it thought of giving one more opportunity to him. While doing so the Hon'ble ITAT had cast onus to produce the parties squarely on the assessee. The assessee has failed to discharge the onus cast upon him by not producing the parties. The assessee did not establish the alleged source of the deposit of cash made by him in his bank accounts under reference. 6.0 It is therefore concluded that the assessee during the accounting period relevant to this assessment year is found to be the owner of the unaccounted cash of amount of Rs.3,95,46,000/- under reference and the provisions of section 69A of the Act are attracted in his case. Hence, this amount of cash of Rs.3,95,46,000/- under reference is added to his returned income for this assessment year as his income from undisclosed sources. Also the penalty proceedings u/s 271(1)(c) of the Act are initiated for the same. A notice u/s 274 rws 271(1)(c) of the Act is issued separately.” 3. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and held that the AO has correctly come to the conclusion that the assessee failed to discharge the onus cast on him by not filing confirmations, other documentary evidence, and not producing the parties in support of his claim that he received cash from the parties and that the cash doesn’t belong to him. The relevant findings of the learned CIT(A), in the impugned order, are as under: “5.5 I have carefully gone through the assessment order and submission of the assessee made during the appellate proceedings. There is no dispute that the bank accounts in which cash was deposited belong to the assessee and were operated by him. He also accepted that the cash was deposited by him. The bank accounts and the transactions were not disclosed by him to the department in the returns filed. The transactions came to the notice of the department because of AIR information. It is the assessee who made these huge transactions in his own account and not shown to the Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 6 department. It is his claim that he deposited cash belonging to other persons in his bank accounts and gave cheques to them. If this is the explanation of the assessee, it needs to be supported by evidence. The entire onus is on the assessee to explain the transactions in the bank accounts: Only PAN numbers of the parties and cheque numbers of cheques given by him are not supporting documents to prove his version of explanation. If the story is to be believed, the following documents/actions are required to be filed/produced by the assessee on the record. (1) Copies of Income tax Returns/Assessments of the parties. (2) Accounts of the parties to prove the source for the cash given by the parties (received by him and deposited in his bank account). (3) Confirmation of parties who gave him cash. (4) Production of parties before the AO, who can give statement to support the assessee's claim; (4) Hon'ble ITAT also directed the assessee following a letter filed that the assessee to fully co-operate with the AO in completing the assessment by furnishing all the details that may be called for and by producing the parties as may be required by the AO. 5.6 Assessee instead of filing confirmation, evidence for source of cash in the hands of the parties and producing the said parties before the AO in support of his argument, wanted to shift onus to the department by filing a copy of an old affidavit dated 16.11.2011 and wanted the AO to enquire each and every detail given by him with the parties. During the remand report in the first round of litigation, the AO issued summons to the 3 major parties as per the address details given by the assessee; but there was no reply. If the parties do not reply, it is the responsibility of the assessee to produce them and prove that the said parties actually exist and gave him the cash which is the bone of contention, because, it is his claim that cash does not belong to him, but belongs to some other people. The person who makes a claim that money deposited in his own account actually does not belong to him, has to prove to the satisfaction of the AO by filing confirmations, sufficient documentary evidence and producing the parties: The parties are assessee's witnesses; it is for him to produce. Department cannot be asked to produce them because they are not department witnesses. 5.7 An affidavit cannot be accepted unless it is supported by sufficient supporting evidence. The earlier CIT(A) in his order dt. 22.02.2013 has dealt in depth about the non-acceptability of the affidavit filed by the assessee Reliance is placed on following case laws....” Being aggrieved, the assessee is in appeal before us. 4. During the hearing, the learned Authorised Representative (‘learned AR’) submitted that the assessee allowed his bank account to be used for the deposit of cash and in turn issued cheques in favour of the parties from cash was received. The learned AR submitted that the assessee earned commission, however, the same was not offered for taxation by the assessee. Learned AR Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 7 further submitted that the assessee provided the name and PAN No. of the parties, which were available with him. However, the assessee could not produce the parties before the AO, in compliance with notices, in order to substantiate its claim. 5. On the other hand, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities. 6. We have considered the rival submissions and perused the material available on record. During the year under consideration, on the basis of AIR information, it was found that the assessee had deposited a huge amount of cash in its bank account. Accordingly, during the 1 st round of assessment proceedings, the assessee was asked to submit the source of the cash deposit. In reply, the assessee submitted that he deposited the cash belonging to the parties in his bank account and gave cheques to them for the same. The assessee provided the details of the parties but could not substantiate the same by producing the confirmation from the parties or producing the parties before the AO. Accordingly, the AO treated the entire cash amount deposited in assessee’s bank account as unexplained and added the same to the total income of the assessee. In its appeal before the coordinate bench of the Tribunal against the order passed by the learned CIT(A), which upheld the addition made by the AO, the assessee submitted that he will be in a position to produce all the parties if one more opportunity is given. Accordingly, in the interest of justice, the coordinate bench of the Tribunal, vide order dated 10/10/2014, passed in ITA No. 3483/Mum./2013, set aside the order passed by the learned CIT(A) and restored the issue to the file of AO with a direction Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 8 to examine them afresh. The relevant findings of the coordinate bench of the Tribunal, vide aforesaid order, are as under: “7. We have heard the rival contentions and perused the record. At the time of hearing, the Ld A.R submitted that the assessee has furnished all the details pertaining to the parties from whom the funds were received. She further submitted that the assessee has also made one to one reconciliation linking the deposits with the cheques issued. On the contrary, the Ld D.R submitted that the assessee could not produce the concerned parties before the assessing officer. In the rejoinder, the Ld A.R submitted that the assessee shall be in a position to produce all the parties, if one more opportunity is given. In support of the same, the Ld AR furnished a letter dated 09-10- 2014 written by the assessee. In the said letter, the assessee has undertaken to fully co-operate with the tax authorities and also agreed to produce all the relevant parties who have given cash to the assessee and to whom cheques were issued. Further the assessee has also agreed to furnish all other details. Under these set of facts, we are of the view that, in the interest of natural justice, the assessee may be given one more opportunity to prove the cash deposits made into the bank accounts. Accordingly, we set aside the order of Ld CIT(A) on these two issues and restore them to the file of the assessing officer with the direction to examine them afresh after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law. However, we prefer to set time frame for completion of the assessment. Accordingly, we direct the assessing officer to complete the assessment within three months from the date of receipt of this order. The assessee is also directed to fully co- operate with the assessing officer in completing the assessment by furnishing all the details that may be called for and by producing the parties as may be required by the assessing officer.” 7. It is pertinent to note that the lower authorities had already treated the cash deposited in the bank accounts of the assessee as unexplained and only on the basis of submission of the assessee, the coordinate bench of the Tribunal vide order dated 10/10/2014, in the interest of justice, granted one more opportunity to the assessee to prove the source of cash deposited in his bank account. We further find that the coordinate bench of the Tribunal specifically directed the assessee to fully cooperate with the AO in completing the assessment by furnishing all the details as may be called for. We further find that the Tribunal also directed the assessee to produce the parties as may be required by the AO. However, as is evident from the findings recorded by the lower authorities, in the 2 nd round of proceedings, the assessee failed to furnish all the details as sought by the AO. Even in the proceedings before us, Dhimant A. Sanghavi ITA no.567/Mum./2019 Page | 9 the assessee has merely placed reliance upon the documents, which were already considered during the 1 st round proceedings. Thus, due to the failure of the assessee in not complying with the directions issued by the coordinate bench of the Tribunal in ITA No. 3483/Mum/2013, vide order dated 10/10/2014, we find no infirmity in the impugned order passed by the learned CIT(A). Accordingly, the addition made by the AO is upheld. As a result, grounds raised by the assessee are dismissed. 8. In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 11/01/2023 Sd/- OM PRAKASH KANT ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 11/01/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai