ITO 25(2)(4), MUMBAI V. LEENA SUDHIR SHAH, MUMBAI

ITA 5984/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59792 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR SR
• Keywords: Unexplained cash credit; Peak credit; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI T.R. SOOD, A.M. I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 I.T.O. 25(2)(4) C-11, BLDG. R.NO.103, P.K. BHAVAN, B.K.C., BANDRA (E), MUMBAI - 400 051. SMT. LEENA SUDHIR SHAH 404, TARA APARTMENT, S.V. ROAD, BORIVALI (W), MUMBAI 400092. PAN : AGZPS9972N (APPELLANT) VS. (RESPONDENT) DATE OF HEARING : 16.01.2012 DATE OF PRONOUNCEMENT : 20.1.2012 APPELLANT BY : SHRI C.G.K. NAIR (SR. AR) RESPONDENT BY : SHRI HIRO RAI ORDER PER D.K. AGARWAL (JM ) : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 26.08.2009 PASSED BY THE LD CIT(A) FOR THE A. Y. 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE, AN INDIVIDUAL, DRIVES INCOME FROM SALE OF HANDICRAFT ARTICLES, TUI TION FEES AND DIVIDEND INCOME. SHE FILED RETURN DECLARING TOTAL INCOME AT RS.1,54,841/-. DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSE SSEE FILED REVISED P & L A/C. SHOWING RECEIPT ON ACCOUNT OF SALE OF SHAR ES, BANK INTEREST, DISCOUNT, DIVIDEND, HANDICRAFT ARTICLE AND TUITION INCOME AND AFTER CLAIMING OUT GOINGS I.E. PURCHASE OF SHARES, BANK C HARGES, AND LONG TERM CAPITAL LOSS, THE NET PROFIT WAS SHOWN AT RS.11,67, 993/-. IN RESPECT OF CASH DEPOSIT IN THE BANK ACCOUNT WITH KAPOL CO-OP B ANK HAVING ACCOUNT I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 2 NO.10218, THE ASSESSEE SUBMITTED THAT THE SOURCE OF CASH RECEIPTS ARE BY WAY OF SALE OF SHARES AND THE ENTIRE CASH DEPOSIT I S ALREADY TAKEN AS INCOME OF THE ASSESSEE IN THE P & L A/C. DURING T HE COURSE OF ASSESSMENT PROCEEDING THE AO OBTAINED LEDGER COPY O F A/C. OF BROKERS NAMELY M/S. LARK CONSULTANCY PVT. LTD. AND ASHWIN R . SHAH FOR THE PERIOD OF 01.04.2005 TO 31.03.2006. ON GOING THROU GH THE SAME, THE AO NOTED THAT THE ACCOUNTS WERE OPERATED IN THE NAME O F MR. JATIN SHAH WHEREAS THE BANK ACCOUNT IS IN THE NAME OF THE ASSE SSEE. ON BEING ASKED IT WAS INTERALIA SUBMITTED BY THE ASSESSEE TH AT IN THE STATEMENT ON OATH THE ASSESSEE STATED THAT ALL THE CREDITS IN TH E BANK ACCOUNT MAY BE TREATED AS SALE TRANSACTION OF THE ASSESSEE. HOW EVER, THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION. HE NOTED THAT T HE TOTAL DEPOSITS IN THE BANK ACCOUNT ARE RS.1,30,85,747/-, OUT OF WHICH RS. 44,46,300/- IS IN CASH AND RS.86,39,447/- IS OTHER DEPOSITS. THE AO OBSERVED THAT THE SAID BANK ACCOUNT WAS NEITHER DISCLOSED IN THE RETU RN OF INCOME NOR AT THE TIME OF SUBMISSION DURING THE SCRUTINY PROCEEDI NG TILL ASSESSEE WAS CONFRONTED WITH THE FACT, COPY OF THE DEMAT ACCOUNT ON RECORD DOES NOT MENTION THE NAME OF THE ASSESSEE AND THERE IS NO SU PPORTING MATERIAL THAT THE CASH DEPOSIT REPRESENT SALE OF SHARE. HE FURTHER OBSERVED THAT THE ASSESSEE HAS COOKED UP A STORY AFTER SHE WAS CO NFRONTED WITH THE FACT OF CREDIT ENTRIES/CASH DEPOSITS MADE IN HER BANK AC COUNT WITH KAPOL CO- OP BANK FOR A.YS. 2005-06 & 2006-07 AND ACCORDINGLY HE ADDED THE ENTIRE CREDITS OF RS.1,30,85,747/- TO THE INCOME OF THE ASSESSEE U/S.68 OF THE ACT AND THEREBY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.1,32,40,588/- VIDE ORDER DATED 31.12.2008 PASSED U/S.143(3) OF THE ACT. 3. ON APPEAL, THE LD CIT(A) AFTER CONSIDERING THE U NEXPLAINED CREDITS IN THE SAME BANK ACCOUNT FROM A.Y.2004-05 AND 2005- 06 DIRECTED THE AO TO ASSESS THE TOTAL INCOME OF THE ASSESSEE AT RS .12,31,348/- AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 3 4. BEING AGGRIEVED BY THE ORDER OF THE LD CIT(A), R EVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL : (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,30, 85,747/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,30,85 ,747/- WITHOUT APPRECIATING THE FACT THAT CIT(A) CONFIRMED THE ACTION O F THE AO FOR A.Y. 2004-05, THOUGH HE HAS DIRECTED THE AO TO ASSESS THE UNEXPLAINED CASH CREDIT BY APPLYING THE PEAK CREDIT THEORY. THUS, ADM ITTEDLY, THE LD CIT(A) ACCEPTED THE FACT THAT THE ENTIRE DEPOSITS INCLUDING THE CASH AND CHEQUES DEPOSITS IN ASSESSEES BANK ACCOUNT FOR A.Y.2004-05 ARE UNEXPLAINED. NOW, IT IS CONTRADICTORY TO TAKE A DIFFERENT DECISION IN A.Y.2006-07 BASED ON THE ASSESSMENT ORDER FOR A.Y. 2005-06, WHICH IS VE RY WELL AVAILABLE BEFORE THE CIT(A) WHILE DISPOSING THE ASSESSEES APP EAL FOR A.Y.2004-05 ALSO. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS NOT APPRECIATED THE FACT THAT THE PRINCI PLE OF CONSISTENCY IS NOT APPLICABLE TO THE INCOME-TAX PROCEEDINGS AND EACH ASSESSMENT IS AN INDIVIDUAL ASSESSMENT YEAR. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT(A) ERRED IN OBSERVING THAT THE CASH DEPOSITS OF RS.44,46,300/- ARE EXPLAINABLE OUT OF THE INCOME OF ASSESSEE FOR A.Y.200 4-05 AND A.Y.2005- 06 AND THE CHEQUES DEPOSITS HAVE TO BE TREATED AS SAL E PROCEEDS OF SHARES, WITHOUT APPRECIATING THE FACT THAT THE SAME ARE WITHOUT AN Y SUPPORTING & CORROBORATIVE EVIDENCE. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE TOTAL INCOME ON THE BASIS OF PROFIT & LOSS A/C. SUBMITTED BY THE ASSESSEE AT RS.12,31,348/-. (VI) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) O N THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. AT THE TIME OF HEARING THE LD DR SUBMITS THAT FO R THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER, THE LD CIT(A) WA S NOT JUSTIFIED IN DIRECTING THE AO TO ASSESS THE INCOME OF THE ASSESS EE AT RS.12,31,348/- AS AGAINST RS.1,32,40,588/- ASSESSED BY THE AO. H E, THEREFORE, SUBMITS THAT ADDITION MADE BY THE AO BE RESTORED. 6. ON THE OTHER HAND THE LD COUNSEL FOR THE ASSESSE E WHILE RELYING ON THE ORDER OF THE LD CIT(A) SUBMITS THAT THE DEPOSIT S IN THE SAID BANK ACCOUNT REPRESENT SALE PROCEEDS OF SHARES AND WITHD RAWALS REPRESENTS I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 4 PAYMENT FOR PURCHASE OF SHARES, THEREFORE THE LD CI T(A) WAS FULLY JUSTIFIED IN CONSIDERING THE SAME AS INCOME FROM PURCHASE AND SALE OF SHARES AND DIRECTING THE AO TO ASSESS THE ASSESSEES INCOME AT RS.12,31,348/-. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD CIT(A) BE UPHELD. HE ALSO PLACED ON RECORD COPY OF THE ORDER OF THE TRIB UNAL IN THE ASSESSEES OWN CASE FOR THE A.Y.2005-06 TO SHOW THAT THE AO AF TER CONSIDERING ALL DEBITS AND CREDITS ENTRIES IN THE SAID BANK ACCOUNT HAS MADE AN ADDITION OF RS.29,93,2515/- AS SHARE TRADING INCOME OF THE A SSESSEE AND ADDITION OF THE PEAK CREDIT MADE BY THE AO RS.9,57,954/- WAS DELETED BY THE LD CIT(A) AND THE SAID ORDER OF THE LD CIT(A) WAS UPHE LD BY THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE TRANSACTIONS IN THE KAPOL CO-OP BA NK ACCOUNT NO.10218 HAVE NOT BEEN DISCLOSED BY THE ASSESSEE WHILE FILIN G THE RETURN FOR THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN DISPUT E THAT THE SAID BANK ACCOUNT WAS CONSIDERED BY THE AO IN A.YS. 2003-04, 2004-05, 2005-06 AND THE AO AFTER CONSIDERING THE TRANSACTIONS IN TH E SAID BANK ACCOUNT HAS MADE ADDITION IN THE RESPECTIVE A.YS. WHICH THE LD CIT(A) HAS PARTLY DELETED. WE FURTHER FIND THAT FOR THE YEAR UNDER CONSIDERATION THE LD CIT(A) AFTER CONSIDERING THE NATURE OF THE DEPOSITS AND WITHDRAWALS IN THE SAID BANK ACCOUNT HAS OBSERVED AS UNDER: 1) THE APPELLANT WAS MAINTAINING BANK ACCOUNT (A/C.NO. 10218)WITH KAPOL CO-OP BANK AND THIS ACCOUNT WAS NOT DISCLOSED IN THE BALANCE SHEET BY THE APPELLANT IN THE RETURN FILED ON 24.07.2006. 2) THE APPELLANT HAD DEPOSITED RS.44,46,300/- IN CAS H AND RS.86,39,447/- BY WAY OF DEPOSITS OTHER THAN CASH. THE APPELLANT SUBMITTED THAT SHE CARRIED OUT BUSINESS IN PURCHASE A ND SALE OF SHARES AND THE DEPOSITS REPRESENTS SALE PROCEEDS OF SHARES AN D THE WITHDRAWALS REPRESENT PAYMENTS FOR PURCHASE OF SHARES. 3) REGARDING PAYMENTS, THE AO ACCEPTED THAT THE PAYMENTS W ERE MADE TO MR. ASHWIN SHAH AND LARK CONSULTANCY (P) LTD AND EVEN FOR AY 2005-06 THIS FACT IS ACCEPTED AFTER CONDUCTING CROS S VERIFICATION WITH THEM. 4) FOR A.Y.2005-06, THE AO EXAMINED THE CASE IN DETAI L BY RECORDING SWORN STATEMENT FROM THE APPELLANT AND STATEMENT FROM THE SHARE BROKERS, MR. ASHWIN SHAH AND M/S. LARK CONSULTANCY ( P) LTD. WHO HAD I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 5 CONFIRMED THE SHARE TRANSACTIONS WITH JATIN SHAH, JOINT ACCOUNT HOLDER OF THE APPELLANT (PARA 3.8 OF THE ASSESSMENT ORDER) 5) THE APPELLANT ALSO EXPLAINED IN THE STATEMENT RECO RDED ON 30.11.2007 AS TO HOW THE SHARES COULD BE SOLD IN CASH BY OFF MARKET DELIVERY AS MENTIONED IN PARA 3.7 OF THE ASSESSMENT OR DER FOR A.Y.2005- 06. 6) THE AO WHILE COMPLETING THE ASSESSMENT FOR A.Y.200 5-06 ACCEPTED THE CLAIM OF THE APPELLANT THAT THE DEPOSITS IN BANK ACCOU NT REPRESENT THE SALE PROCEEDS AND THE CASH WITHDRAWALS REPRESENT PAY MENT TOWARDS PURCHASE OF SHARES AND ASSESSED THE INCOME FROM THE BUSINESS OF PURCHASE AND SALE OF SHARES AS PER PROFIT AND LOSS A CCOUNT PREPARED AND SUBMITTED BEFORE THE AO SUBJECT TO ESTIMATED DISALLOWAN CES IN RESPECT OF CERTAIN ITEMS OF EXPENDITURE CLAIMED. 7) IN VIEW OF THE ABOVE UNDISPUTED FACTS, I FIND THA T THERE IS NO JUSTIFICATION FOR DEVIATING FROM THE STAND TAKEN BY THE D EPARTMENT IN THE EARLIER YEAR WHEN THE FACTS ARE IDENTICAL. AS HELD BY THE AO IN THE ASSESSMENT ORDER FOR A.Y.2005-06, THE APPELLANT HAS N O OTHER SOURCE OF INCOME WHICH WOULD JUSTIFY SUCH LARGE AMOUNT OF CAS H CREDIT. THE LD CIT(A) AFTER RELYING ON THE RATIO OF THE DEC ISIONS IN THE CASE OF C.I.T. VS. P.K. NOORJAHAN (237 ITR 570) (SC) AND GO PAL PUROHIT VS. JCIT (29 SOT 117) (TRIBUNAL) HAS DIRECTED BY THE AO TO A SSESS THE TOTAL INCOME OF THE ASSESSEE AT RS.12,31,348/- VIDE FINDING RECO RDED IN PARA 7.1 AS UNDER: 7.1 EVEN OTHERWISE I FIND THAT THE CASH DEPOSIT IS ONLY RS.44,46,300/- DURING THIS YEAR. BUT IN THIS CASE, A SUM OF RS.24, 14,627/- WAS ASSESSED AS UNEXPLAINED CREDIT IN THE SAME BANK ACCOUNT FOR A. Y.2004-05 OUT OF WHICH I HAVE CONFIRMED THE ADDITION OF RS.20,27,454/ -. APART FROM THIS, THE AO HAS ASSESSED RS.29,93,215/- AS INCOME FROM SH ARE TRADING FOR A.Y.2005-06. WITH THE ABOVE INCOME ASSESSED FOR A.Y. 2004-05 AND 2005- 06, THE APPELLANT CAN EASILY EXPLAIN THE CASH DEPOSITS DURING THIS YEAR. REGARDING THE OTHER CHEQUES DEPOSITS THE SAME HAS TO B E TREATED AS SALE PROCEEDS OF SHARES. THUS IN ANY CASE THERE IS NO JUSTIFICATION FOR ADDING THE ENTIRE DEPOSITS IN THE BANK AS UNEXPLAINED CREDITS. IT IS SEEN FROM THE PROFIT AND HAS ACCOUNT FILED BY THE APPELLANT THAT THE PROFIT AS PER PROFIT AND LOSS ACCOUNT INCLUDING SALE OF HANDICRAFT AND TUITI ON FEES IS RS.11,67,992/-. ACCORDINGLY THE AO IS DIRECTED TO CO MPUTE THE TOTAL INCOME AS FOLLOWS: . . RS.12,31,34 8/- 8. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED O N RECORD BY THE REVENUE AGAINST FINDING OF THE LD CIT(A) AND KEEPIN G IN VIEW THAT IN THE I.T.A. NO.5984/MUM/2009 ASSESSMENT YEAR : 2006-07 6 IMMEDIATELY PRECEDING YEAR I.E. A.Y.2005-06 THE AO AFTER CONSIDERING ALL THE DEBIT AND CREDIT ENTRIES IN THE SAID BANK ACCOU NT HAS MADE THE ADDITION OF RS.29,93,215/- TOWARDS SHARE TRADING IN COME OF THE ASSESSEE, THEREFORE IN THE ABSENCE OF ANY MATERIAL PLACED ON RECORD BY THE REVENUE TO SHOW THAT THE DEBITS AND CREDITS ENTRIES IN THE SAID BANK ACCOUNT DO NOT REPRESENT THE SHARE TRANSACTIONS OR THE ASSESSE E HAS NOT ACCOUNTED FOR SUCH INCOME IN THE REVISED PROFIT AND LOSS A/C. AND KEEPING IN VIEW THE RULE OF CONSISTENCY WE ARE OF THE VIEW THAT THE LD CIT(A) WAS FULLY JUSTIFIED IN DIRECTING THE AO TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE AT RS.12,31,348/-. THE GROUNDS TAKEN BY THE REVEN UE ARE, THEREFORE, REJECTED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 20TH JANUARY , 2012. SD (T.R. SOOD) ACCOUNTANT MEMBER SD (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, ON THIS 20TH DAY OF JANUARY, 2012. JANHAVI COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, D- BENCH, ITAT, MUMBAI 6. GUARD FILE. BY ORDER TRUE COPY ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI