ITO 25(2)(1), MUMBAI V. JAYESH C. SHAH, MUMBAI

ITA 6057/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48454 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 26-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 17-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH BEFORE SHRI R.V.EASWAR (PRESIDENT) & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.6057/MUM/2009 A.Y 2006-07 THE INCOME TAX OFFICER 25(2)(1), MUMBAI. VS. SHRI JAYESH C. SHAH, D WING, 601 ADINATH TOWER, NANCY COLONY, BORIVALI (E), MUMBAI 400 066. PAN: ALZPS 4748 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY KUMAR. RESPONDENT BY : SHRI VIMAL PUNMIYA. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GR OUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT[A] ERRED IN RESTRICTING THE ADDITION TO THE TUN E OF ` `` ` .5,84,321/- OUT OF TOTAL ADDITION OF ` `` ` .37,06,125/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NEITHER DISCLOSED SUCH BANK ACCOUNT WI TH DEPARTMENT NOR HAS DISCHARGED THE PRIMARY ONUS OF PROVING SOURCES OF SUCH DEPOSITS IN THE BANK ACCOUNT. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT SOM E INFORMATION FROM AIR CAME TO THE AO WHICH REVEALED THAT ASSESSE E HAS MADE CASH DEPOSITS TO THE TUNE OF RS.11,49,700/- IN HIS S.B. A/C. WITH ING VYASA BANK. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THE DEPOSIT. THE ASSESSING OFFICER NOTED THAT ASSESSEE DID NOT S UBMIT ANY DETAILS. MOREOVER, THIS ACCOUNT ITSELF WAS NOT DECLARED IN T HE BALANCE-SHEET OF THE ASSESSEE. ACCORDINGLY, AO TREATED WHOLE OF THE DEPOSIT AMOUNTING TO RS.37,06,125/- AS ASSESSEES INCOME FROM UNDISCL OSED SOURCES. 2 3. BEFORE THE LD. CIT(A) IT WAS ADMITTED THAT THIS ACCOUNT WAS NOT DISCLOSED TO THE DEPARTMENT IN THE BALANCE SHEET. I T WAS FURTHER EXPLAINED THAT THERE WERE MANY WITHDRAWALS FROM THE SAME ACCOUNT. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS IN THE BUSI NESS OF COMMISSION AGENCY AND AMOUNTS DEPOSITED AND WITHDRAWN REPRESEN TED ELEMENT OF COMMISSION AND WITHDRAWALS REPRESENTED PAYMENTS TO THE PERSONS FROM WHOM PURCHASES AND SALES WERE MADE. IT WAS ALS O SUBMITTED THAT ASSESSEE HAD STARTED HIS OWN BUSINESS ALSO IN GARME NTS AND, IN FACT, DEPOSITS AND WITHDRAWALS WERE IN CONNECTION WITH TH AT BUSINESS ONLY. IT WAS ACCEPTED THAT ASSESSEE IS NOT IN A POSITION TO GIVE FURTHER DETAILS. ALTERNATIVELY, IT WAS CONTENDED THAT AN ADDITION CO ULD BE MADE ONLY ON THE PEAK CREDIT BASIS. THE LD. CIT(A) AFTER EXAMINI NG THE ISSUE, DECIDED THE SAME VIDE PARA 3.6 WHICH IS AS UNDER: 3.6 THE CONTENTION OF THE APPELLANT IS THAT THE WI THDRAWALS SHOULD BE REDUCED FROM THE CREDIT ENTRIES TOWARDS PURCHASE OF READY MADE GARMENTS WHICH WERE SOLD ON COMMISSION BASIS BUT AS THE WITHDRAWALS WERE MADE IN CASH, THE APPELLANT WAS NOT IN A POSIT ION TO PROVE AS TO WHOM THE PAYMENTS WERE MADE. IN THE ABSENCE OF SUCH PROOF, IT CANNOT BE ACCEPTED THAT THE ENTIRE WITHDRAWALS WERE USED F OR THE PURPOSE OF BUSINESS. IN THE CIRCUMSTANCES, I DO NOT ACCEPT THE PLEA OF THE REPRESENTATIVE THAT ONLY THE NET AMOUNT BETWEEN THE CREDIT ENTRIES AND THE DEBIT ENTRIES SHOULD BE ASSESSED. HOWEVER, THER E IS MERIT IN THE ALTERNATIVE CONTENTION OF THE REPRESENTATIVE THAT O NLY PEAK CREDIT SHOULD BE ASSESSED. ADMITTEDLY, THE ENTIRE WITHDRAWALS WER E ONLY IN CASH AND IN SUCH A CASE ONLY PEAK CREDIT SHOULD BE ADDED. IT IS TRUE THAT THE APPELLANT DID NOT FILE ANY EXPLANATION BEFORE THE A O IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY HIM. BUT THAT WOULD NOT ENTITLE THE AO TO ADD THE ENTIRE CREDIT BALANCE IGNORING THE WITHDRAW ALS MADE BY THE APPELLANT. THE AO IS EXPECTED TO MAKE A REASONABLE ADDITION WITH THE MATERIALS AVAILABLE WITH HIM AND, THEREFORE, HE HIM SELF OUGHT TO HAVE WORKED OUT THE PEAK CREDIT AND ADDED THE SAME INSTE AD OF ADDING THE ENTIRE DEPOSITS. THUS, EVEN IF THE DEPOSITS WERE TO THE EXTENT OF ` `` ` .37,06,125/-, THE APPELLANT HAS WITHDRAWN IN CASH I N BETWEEN ON VARIOUS DATES AND THE SAME IS AVAILABLE FOR REDEPOS IT IN THE SAME BANK ACCOUNT AND, THEREFORE, ONLY PEAK AMOUNT SHOULD BE ADDED. IN THE 3 CIRCUMSTANCES, I DIRECT THE AO TO RESTRICT THE ADDI TION OF ` `` ` .5,84,321/- WHICH APPEARS AS PEAK CREDIT ON 18-01-2006. THIS AD DITION WILL TAKE CARE OF ANY INCOME EARNED BY THE APPELLANT IN THE R EADYMADE GARMENT BUSINESS WHICH NOT DISCLOSED BY THE APPELLANT IN TH E RETURNED FILED BY HIM. ACCORDINGLY, THE ADDITION OF ` `` ` .37,06,125/- IS RESTRICTED TO ` `` ` .5,84,321/-. 4. BEFORE US, LD.DR SUBMITTED THAT ASSESSEE HAD NOT DISCLOSED THIS BANK ACCOUNT TO THE DEPARTMENT AND IF NOT COMING OU T CLEAN BY DISCLOSING THE SOURCE OF DEPOSITS. THE ASSESSEE HAD SIMPLY MADE GENERAL CONTENTIONS THAT DEPOSITS WERE OUT OF THE S ALE PROCEEDS OF GARMENTS. HE ARGUED THAT THERE WAS NO FORCE IN THE SUBMISSION THAT PEAK CREDITS SHOULD BE ACCEPTED BECAUSE THERE ARE M ANY WITHDRAWALS WHICH WERE OF ODD AMOUNTS, FOR EXAMPLE, WITHDRAWALS OF RS.1,08,167/- VIDE CHEQUE NO.587651 DATED 12-09-2005, ` `` ` .91,964/- VIDE CHEQUE NO.587655 DATED 28-09-2005 AND ` `` ` .2,38,920/- VIDE CHEQUE NO.587664 DATED 10-11-2005. IN VIEW OF THESE ODD AMOUNTS, THE WITHDRAWALS MADE MAY HAVE BEEN USED AS ELSEWHERE AND, THEREFORE , LD. CIT(A) WAS NOT CORRECT BY ACCEPTING THE PEAK CREDITS. 5. ON THE OTHER HAND, LD.COUNSEL OF THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND EMPHASIZED T HAT WHILE CARRYING OUT THE AGENCY BUSINESS ASSESSEE STARTED H IS OWN BUSINESS OF BUYING AND SELLING OF GARMENTS AND DEPOSITS AS WELL AS WITHDRAWALS IN THE ACCOUNTS OF ING VYASA BANK WERE ON ACCOUNT OF S UCH SALE AND PURCHASE OF GARMENTS. HOWEVER, BEFORE US ALSO HE AC CEPTED THAT ASSESSEE IS NOT IN A POSITION TO FURNISH ANY OTHER DETAILS REGARDING GARMENT BUSINESS. HE ALSO COULD NOT EXPLAIN WHY THE SE ODD AMOUNTS 4 HAVE BEEN WITHDRAWN. HOWEVER, HE ARGUED THAT SINCE ASSESSEE HAS NOT FILED ANY APPEAL AND IN ALL FAIRNESS ACCEPTED THE A DDITION OF RS.5.84 LAKHS, THE REVENUES APPEAL SHOULD BE DISMISSED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT FIRST OF ALL ASSESSEE HAS NOT DISCLOSED HIS BANK AC COUNT IN THE BALANCE- SHEET WHICH MEANS ASSESSEE WAS TRYING TO HIDE THE W HOLE OPERATION OF THIS ACCOUNT FROM THE DEPARTMENT. FURTHER, EVEN IF ASSUMING THAT ASSESSEE WAS DOING THE BUSINESS OF SOME GARMENTS, H E IS NOT IN A POSITION TO FILE ANY DETAILS AS STATED BEFORE THE L D. CIT(A) AND EVEN BEFORE US. FINALLY, LD.COUNSEL OF THE ASSESSEE COUL D NOT EXPLAIN WHY WITHDRAWALS OF ODD AMOUNTS WERE MADE ON VARIOUS DAT ES I.E. WITHDRAWALS OF RS.1,08,167/- VIDE CHEQUE NO.587651 DATED 12-09- 2005, ` `` ` .91,964/- VIDE CHEQUE NO.587655 DATED 28-09-2005 AN D ` `` ` .2,38,920/- VIDE CHEQUE NO.587664 DATED 10-11-2005, SUCH WITHDRAWALS CANNOT BE TAKEN AS A SOURCE AVAILABLE F OR RE-DEPOSITING THE SAME IN BANK ACCOUNT. THE BASIS OF PEAK CREDIT TH EORY IS BASED ON ASSUMPTION THAT IF SOMEBODY IS DEPOSITING THE MONEY IN CASH, AND WITHDRAWING THE SAME IN CASH, THEN IN THE ABSENCE O F DETAILS IT COULD BE SAID THAT CASH WITHDRAWALS ARE AVAILABLE FOR RED EPOSITING. BUT IF THE WITHDRAWALS ARE MADE BY CHEQUE THEN IT CAN BE SAID THAT THEY MIGHT HAVE BEEN USED ELSEWHERE. THEREFORE, WITHDRAWALS OF ODD AMOUNTS CANNOT BE IGNORED. HOWEVER, AT THE SAME TIME IN THE CASE BEFORE US SOME OF THE DEPOSITS HAVE ALSO BEEN MADE BY DEPOSIT ING CHEQUES. THEREFORE, THERE MAY BE SOME FORCE IN THE SUBMISSIO N OF THE 5 LD.COUNSEL OF THE ASSESSEE THAT ASSESSEE WAS IN SOM E BUSINESS OF GARMENTS OF SALE AND PURCHASE. SOME CASH WITHDRAWAL S ARE ALSO THERE WHICH PERHAPS WOULD BE AVAILABLE FOR EXPLAINING THE DEPOSITS. THEREFORE, CONSIDERING THE OVER ALL FACTS OF THE CA SE, WE ARE OF THE VIEW THAT ENDS OF JUSTICE WOULD MEET IF ADDITION OF ONLY CASH DEPOSITS IS MADE. ACCORDING TO THE AO THE CASH DEPOSITS MADE BY THE ASSESSEE ARE OF RS.11,49,700. THEREFORE, WE SET ASIDE THE OR DER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE ADDITION OF RS.11, 49,700/- ON ACCOUNT OF UNDISCLOSED INCOME. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 8 /42011. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) PRESIDENT ACCOUNTANT MEMBER MUMBAI:8/4/2011. P/-*