NISAR K. HIRANI, MUMBAI V. ITO WD 19(3)(3), MUMBAI

ITA 6054/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75550 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 15-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: A P SINHA
• Keywords: Business income
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 6054/MUM/2013 (ASSESSMENT YEAR: 2008-09) MR. NISAR K. HIRANI INCOME TAX OFFICER - 19(3)(3) 401 PETER APARTMENT PIRAMAL CHAMBERS DR. PETER DIAS ROAD VS. PAREL, MUMBAI 400013 BANDRA (W), MUMBAI 400050 PAN - AAYPH1079E APPELLANT RESPONDENT APPELLANT BY: SHRI A.P. SINHA RESPONDENT BY: MS. SONIA KUMAR DATE OF HEARING: 30.01.2014 DATE OF PRONOUNCEMENT: 12.02.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.07.2013 PASSED BY THE CIT(A)-18, MUMBAI AND IT P ERTAINS TO A.Y. 2008-09. 2. ASSESSEE, IN HIS INDIVIDUAL STATUS, IS ENGAGED IN T HE BUSINESS OF MANAGING PHOTO LAB, I.E. RUNNING A PHOTO STUDIO WHE REIN PHOTOS ARE CLICKED AND THEY ARE DEVELOPED WHEREBY HE EARNS DEVELOPING CHARGES. THE ASSESSEE HAS ALSO EARNED INTEREST INCOME IN THE YEAR UNDER C ONSIDERATION. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2008-09 THE A SSESSEE DECLARED TOTAL INCOME OF ` 1,28,224/-. THE CASE WAS SELECTED FOR SCRUTINY. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T THE ASSESSEE MADE CERTAIN CASH DEPOSITS AND WITHDRAWALS IN THE BANK A CCOUNT WHICH ARE EXTRACTED IN PARA 3 OF HIS ORDER FROM WHICH HE INFE RRED THAT THERE IS NEGATIVE CASH BALANCE AMOUNTING TO ` 1,46,281/- IN THE MONTH OF OCTOBER, 2007, WHICH DESERVES TO BE ADDED UNDER SECTION 68 OF THE ACT. IN ADDITION THERETO HE OBSERVED THAT UPON A CORRECT BANK ACCOUNT DRAWN, THE CLOSING BALANCE WORKS OUT TO ` 94,719/- WHEREAS THE ASSESSEE SHOWED THE CASH IN HA ND AT ` 32,294/-, WHICH RESULTS IN A DIFFERENCE OF CLOSING BALANCE OF CASH IN HAND TO ITA NO. 6054/MUM/2013 MR. NISAR K. HIRANI 2 THE TUNE OF ` 62,425/- WHICH ALSO DESERVES TO BE ADDED AND ACCORD INGLY HE COMPLETED HE ASSESSMENT ON A TOTAL INCOME OF ` 3,36,930/-. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T THE AO ERRED IN HOLDING THAT THERE IS A NEGATIVE CASH BALANCE. IT W AS SUBMITTED THAT THE ASSESSEE RECEIVED DEVELOPING CHARGES, ETC. TO THE T UNE OF ` 6,92,000/- AND TELEPHONE CHARGES OF ` 28,500/-. IN THE NORMAL COURSE OF BUSINESS IN A PHO TO LAB THE AMOUNTS ARE RECEIVED IN SMALL DENOMINATIONS IN CASH AND THE GENUINENESS OF SUCH RECEIPTS CANNOT BE DISPUTED. TH E CASH GENERATED FROM THE BUSINESS WAS DEPOSITED IN SAVING BANK ACCOUNT W ITH DEVELOPMENT CREDIT BANK AND ALSO WITHDREW A SUM OF ` 4,52,000/- FROM THE SAME BANK, WHICH IS REDEPOSITED WITHIN FEW DAYS. THE AO ERRED IN NOT ACCOUNTING THE CASH INCOME EARNED BY THE APPELLANT DURING THE YEAR AND FRAMED THE ASSESSMENT MERELY ON ASSUMPTIONS AND SURMISES, WHIC H IS NOT JUSTIFIED. HE THUS CONTENDED THAT THE ADDITIONS MADE BY THE AO AR E NOT IN ACCORDANCE WITH LAW. THE CONTENTION OF THE ASSESSEE, HOWEVER, DID NOT FIND FAVOUR WITH THE LEARNED CIT(A). IN HIS ORDER THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF DEPOSIT S BUT NO SPECIFIC INFORMATION WAS SUBMITTED TO PROVE THE SOURCE OF TH ESE DEPOSITS. AS PER THE AIR INFORMATION THE ASSESSEE HAS DEPOSITED CASH IN ITS BANK ACCOUNT AND HENCE THE BURDEN IS UPON THE ASSESSEE TO PROVE THE SOURCE OF DEPOSITS AS PER SECTION 68 OF THE ACT. IN THE PRESENT CASE NOT SUCH EVIDENCE WAS FILED AND HENCE THE AO WAS JUSTIFIED IN MAKING THE IMPUGNED A DDITION. ACCORDINGLY THE ADDITION MADE BY THE AO WAS UPHELD. 4. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED A COPY O F THE CASH BOOK FROM 1 ST APRIL, 2007 TO 31 ST MARCH, 2008 TO HIGHLIGHT THAT THE ASSESSEE IS IN R ECEIPT OF SMALL DENOMINATIONS ON DAILY BASIS IN THE FORM OF D EVELOPMENT CHARGES. DAILY RECEIPTS ARE SMALL, IN THE RANGE OF ` 1,000/- TO ` 3,000/-. THE AO HAS NOT DOUBTED THE FACT THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF PHOTO LAB. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS NOT RECEIVED THE AMOUNTS SPECIFIED IN THE CASH BOOK ON THE RESPECTIV E DATES. THUS THE AMOUNTS REFLECTED IN THE CASH BOOK HAVE BEEN TAKEN AS CORRECT AND DEPOSITS WERE MADE MOSTLY FROM THE BALANCE AVAILABLE IN THE CASH BOOK AND HENCE NO ITA NO. 6054/MUM/2013 MR. NISAR K. HIRANI 3 ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT ON MERE ASSUMPTIONS. HE ALSO REFERRED TO SECTION 68 OF THE ACT TO SUBMIT TH AT IT COMES INTO PICTURE ONLY WHEN THERE IS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF AN ENTRY/ SUM FOUND CREDITED IN THE BOOKS OF AN ASSESSEE WHER EAS IN THE INSTANT CASE THE MAIN SOURCE IS BUSINESS INCOME EARNED BY THE AS SESSEE ON DAILY BASIS, WHICH IS NOT DISPUTED BY THE AO AND HENCE HE IS NOT JUSTIFIED IN INVOKING SECTION 68 OF THE ACT BASED ON THE CASH DEPOSITS IN THE BANK ACCOUNT, BECAUSE THE BANK ACCOUNT CANNOT BE CONSIDERED AS BO OKS OF ACCOUNT. HE RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION: - I. ITO VS. KAMAL KISHORE 143 ITD 684 (LUCKNOW) II. CIT VS. BANVI CHAND 141 ITR 67 (BOM) 5. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. UNDISPUTEDLY, THE ASSESSEE WAS ENGAGED IN T HE BUSINESS OF PHOTO LAB, I.E. DEVELOPING PHOTOS AND EARNING DEVELOPING CHARGES. NOWHERE IN THE ASSESSMENT ORDER OR IN THE APPELLATE ORDER THE GENU INENESS OF THE RECEIPTS WERE DISPUTED BY THE TAX AUTHORITIES. THE DEPOSITS WERE MADE ONLY FROM THE SAID CASH BOOK AND WITHDRAWALS ARE ALSO EFFECTED IN THE SAME CASH BOOK AND HENCE, IN MY CONSIDERED OPINION, NO CASE WAS MADE O UT BY THE AO TO HOLD THAT THE ASSESSEE HAD MADE DEPOSITS FROM SOURCE UNE XPLAINED BEFORE THE TAX AUTHORITIES. UNDER THE PECULIAR CIRCUMSTANCES OF TH E CASE I AM OF THE VIEW THAT THE ADDITIONS MADE BY THE AO AND CONFIRMED BY THE CIT(A) ARE NOT CALLED FOR. ACCORDINGLY I SET ASIDE THE ORDER OF TH E CIT(A) AND DIRECT THE AO TO COMPLETE THE ASSESSMENT WITHOUT MAKING THE IMPUGNED ADDITIONS. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 12TH FEBRUARY, 2014 ITA NO. 6054/MUM/2013 MR. NISAR K. HIRANI 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 18, MUMBAI 4. THE CIT 19, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.