SMT.KOMAL SHREERAM MALHOTRA, MUMBAI V. ITO 33(2)(2), MUMBAI

ITA 6136/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6488 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UDAY BHASKAR JAKKA
• Keywords: Business income; Salary income; Principle of natural justice; Peak credit
• Section: 69A; 147; 68; 148; 6; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI M. BALAGANESH (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 6136/MUM/2018 ASSESSMENT YEAR: 2009 - 2010 ITA NO. 61 37/MUM/2018 ASSESSMENT YEAR: 2010 - 2011 & ITA NO. 6138/MUM/2018 ASSESSMEN T YEAR: 2011 - 2012 SMT. KOMAL SHREERAM MALHOTRA, 403, BLDG. NO. 15, EVERSHINE MILLENIUM PARADISE THAKUR VILLAGE, KANDIVALI (E), MUMBAI - 400101 PAN: AMZPM2750Q VS. THE INCOME TAX OFFICER, WARD 33(2)(2), 609, C - 12, PRATAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA - (E), MUMBAI - 400051 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV KHANDELWAL (A R) REVENUE BY : SHRI UDAY BHASKAR JAKKA (D R) DATE OF HEARING: 28 /01 /201 9 DATE OF PRONOUNCEMENT : 13 / 02 /201 9 O R D E R PER RAM LAL NEGI, JM THE ASSESSEE HAS FILED THESE APPEALS AGAINST THE THREE SEPARATE ORDERS DATED 06.09.2018 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 45, MUMBAI (FOR SHORT THE CIT (A)) , PERTAINING T O THE ASSESSMENT YEAR 2009 - 10, 2010 - 11 AND 2011 - 12, WHEREBY THE LD. CIT (A) DISMISSED THE APPEALS FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDERS PASSED U/S 144 R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) SINCE, ALL THE APPEALS PERTAIN TO THE 2 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 SAME ASSESSEE AND ISSUES INVOLVED ARE IDENTICAL, THESE WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. SINCE, THE FACTS AND THE ISSUES INVOLVED IN ALL THE THREE APPEALS ARE I DENTICAL EXCEPT THE AMOUNT OF THE TOTAL INCOME DETERMINED BY THE AO, WE TAKE THE FACTS OF THE APPEAL PERTAINING TO THE A.Y. 2009 - 10 AS A LEAD CASE. 2. BRIEF FACTS OF THE CASE ARE THAT FROM THE BANK STATEMENTS OF THE ASSESSEE MAINTAINED IN THE ICICI BANK, I T CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD DEPOSITED CASH OF RS. 5,99,600/ - IN HER BANK ACCOUNTS DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS. 71,300/ - FROM ICICI PRUDENTIAL LIFE INSURANCE COMPANY. SINCE, THE ASSESSEE HAD NOT FILED HER RETURN OF INCOME , THE AO ISSUED NOTICE U/S 148 READ WITH SECTION 147 OF THE ACT. BUT THE ASSESSEE DID NOT FILE ANY RETURN IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE REAFTER THE AO ISSUED NOTICE U/S 142 (1) OF THE ACT , HOWEVER , HE DID NOT RECEIVE ANY RESPONSE ON BEHALF OF THE ASSESSEE. ACCORDINGLY, THE AO IMPOSED PENALTY U/S 271 (B) AND AGAIN ISSUED NOTICE U/S 142 (1). SINCE, NO RESPONSE WAS RECEIVED THE AO FU RTHER ISSUED ONE MORE NOTICE FOR GRANTING LAST OPPORTUNITY TO THE ASSESSE E . BUT NEITHER THE ASSESSEE NOR HER REPRESENTATIVE ATTENDED OR SUBMITTED ANY DOCUMENT. ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT PROCEEDINGS 144 OF THE ACT ON THE BASIS OF MATERIAL AVAILABLE ON THE RECORD AND DETERMINED THE INCOME OF THE ASSESSEE AT RS. 6,70,900/ - UNDER THE HEAD INCOME FROM SALARY, INCOME FROM BUSINESS AND PROFESSION AND INCOME FROM OTHER SOURCES. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER PASSED U/S 144 R.W.S. 14 7 OF THE ACT, BEFORE THE LD. CIT (A) - 45 MUMBAI . THE LD. CIT (A ) AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION OF RS. 5,99,600/ - MADE BY THE AO U/S 69A OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 3 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 3. THE ASSES S EE H AS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. THE ORDER DATED 06/09/2018 BEARING NO. CIT [A] - 45/ITO - 33[2][2]/ITA - 105/2017 - 18 BY THE CIT [A] - 45, MUMBAI IS ARBITRARY, AGAINST NATURAL JUSTICE, UNLAWFUL, AGAINST THE PROVISIONS OF INCOME TAX ACT, 1961, INVALID AND THEREFORE LIABLE TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE C.I.T. (A) - 45, MUMBAI HAS ERRED IN CONFIRMING THE ADDITION OF RS. 5,99,600/ - MADE BY ASSESSING OFFICER UNDE R SECTION 68 OF THE INCOME TAX ACT, 1961 UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE AO HAS PASSED THE ASSESSMENT ORDER IN CONTRAVENTION OF THE PROVISION OF THE ACT OF THE LD. CIT (A) OUGHT TO HAVE DELETED THE ADDITION MADE BY THE AO U/S 69A OF THE ACT. MOREOVER, THE PROCEEDING U/S 147 WAS INITIATED BY THE AO ON THE BASIS OF ASSUMPTION AND PRESUMPTION. SINCE, THE ASSESSEE WAS DOING A SMALL BUSINESS, THE ENTIRE AMOUNT DEPOSITED IN THE BA NK ACCOUNT OF THE ASSESSEE CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE PARTICULARLY IN VIEW OF THE FACT THAT THERE ARE SIMULTANEOUS WITHDRAWAL S IN THE ACCOUNT. 5. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE WAS DOING THE BUSINESS OF VARIOUS EL ECTRONICS ITEMS AS RETAILER. THE ASSESSEE USED TO PROCURE GOODS ON BEHALF OF THE CUSTOMERS HANDOVER THE SAME AFTER CHARGING 2% PROFIT FOR THE SERVICES RENDERED . T HE RECEIPT FROM CUSTOMERS AND PAYMENTS TO THE SUPPLIERS IS IN THE FORM OF TRADE RECEIPT/PAYMEN T. THE APPELLANT ACTED AS AN AGENT IN PROCURING GOODS AS PER THE REQUIREMENTS OF THE VARIOUS PERSONS KNOWN TO HER . THE CUSTOMERS USED TO DEPOSIT THE AMOUNT S IN HER BANK ACCOUNT. AFTER THE FULL AMOUNT IS RECEIVED ASSESSEE USED TO PROCURE GOODS FROM LOCAL MA RKET AND HANDOVER THE SAME TO THE BUYER S . THEREAFTER THE ASSESSEE USED TO MAKE PAYMENT TO THE SUPPLIER BY WITHDRAWING THE AMOUNT FROM HER BANK ACCOUNT . 4 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 THE LD. COUNSEL FURTHER CONTENDED THAT THE ASSESSMENT MADE BY THE AO IS NOT IN ACCORDANCE WITH THE PROVI SIONS OF THE INCOME TAX ACT. THE LD. COUNSEL RELYING ON THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MITHALAL VAGTAJI MALI VS. ITO, ITA NO. 3786/MUM/ 2016 A.Y. 2011 - 12 SUBMITTED THAT IN THE SIMILAR SET OF FACTS, THE TRIBUNAL HAS ESTIM ATED THE BUSINESS INCOME OF THE ASSESSEE @ 5% OF T HE AGGREGATE AMOUNT OF DEPOSITS. SO ON THE SAME LINES, THE ADDITION IN THE PRESENT CASE MAY BE RESTRICTED TO 5% OF THE AGGREGATE AMOUNT OF DEPOSITS. 6. ON THE HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE FINDINGS OF THE AUTHORITIES BELOW SUBMITTED SINCE, THE ASSESSEE DID NOT APPEAR BEFORE THE AO DESPITE A REASONABLE OPPORTUNITY AFFORDED BY THE AO, THE AO HAS RIGHTLY FRAMED THE ASSESSMENT ORDER U/S 144 R.W.S. 147 OF THE ACT. HENCE, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. WE NOTICE THAT THE CASH DEPOSITS IN THE ACCOUNT OF THE ASSESSEE ARE MADE NOT ONLY FROM MUMBAI BUT ALSO FROM OTHER PLACES INCLUDING AMRITSAR (PUNJAB) WHICH FACT SUGGEST S THAT THE DEPOSITS HAVE BEEN MADE IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. SINCE, THE ASSESSEE HAS ALSO WITHDRAWN THE AMOUNTS ON DIFFERENT DATES, THE ENTIRE AMOU NT OF DEPOSIT S CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE COORDINATE BENCH HAS DEALT WITH THE SIMILAR ISSUE IN THE CASE OF MITHALAL VAGTAJI MALI VS. ITO (SUPRA). THE FINDINGS OF THE COORDINATE BENCH ARE AS UNDER: - 7. THE ASSESSEE HAS FILED COPIES OF BANK ACCOUNTS. PERUSAL OF THE SAME WOULD SHOW THAT CASH DEPOSITS ARE MADE NOT ONLY FROM MUMBAI BUT ALSO FROM VARIOUS OTHER PLACES INCLUDING FARA WAY PLACES LIKE DINDIGUL LOCATED IN TAMIL NADU, THIRU AND PALGHAT LOCATED IN KERALA ETC. THE DEPOSITS SO MA DE FROM FARAWAY PLACES, IN A WAY, SUPPORT THE EXPLANATION OF THE ASSESSEE THAT THE SAME REPRESENTS SALE PROCEEDS. HENCE, IN OUR VIEW, THE ABOVE SAID EXPLANATIONS CANNOT BE BRUSHED ASIDE 5 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 ALTOGETHER. THE LEARNED CIT (A) HAS OBSERVED THAT THE ASSESSEE HAS NOT GIVEN ANY COGENT REASON FOR MAKING DEPOSITS AND THEREAFTER WITHDRAWING THE SAME. IT IS POSSIBLE THAT THE CUSTOMERS OF THE ASSESSEE HAVE MADE DEPOSITS INTO THE BANK ACCOUNT. WE HAVE NOTICED THAT THERE HAS BEEN DEPOSITS OF CASH AND WITHDRAWAL OF CASH ON EVE RY DAY. FURTHER, THE DEPOSITS/WITHDRAWALS HAVE BEEN MADE ON MORE THAN ONE OCCASION IN A DAY. THERE SHOULD NOT BE ANY DISPUTE THAT NOBODY WILL MAKE DEPOSITS AND WITHDRAW THE SAME ON THE SAME DAY, FOR TH E SAKE OF PLEASURE. ACCORDINGLY, IN OUR VIEW, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE DEPOSITS SO MADE REPRESENT SALES PROCEEDS, SINCE THERE ARE DEPOSITS/WITHDRAWALS ON EVERY DAY. 8. THE LD. DR CONTENDED BEFORE US, BY PLACING RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. D.K. GARG (SUPRA) THAT THE PEAK CREDIT THEORY COULD BE APPLIED ONLY WHEN THE ASSESSEE IS ABLE TO EXPLAIN THE SOURCES OF DEPOSITS AND CORRESPONDING PAYMENTS. WE NOTICE THAT THE HONBLE DELHI HIGH COURT HAS RENDERED ITS DECISION BY FOLLO WING THE DECISIONS RENDERED IN THE CASE OF CIT VS. VIJAY AGRICULTURAL INDUSTRIES (2207) (294 ITR 610) AND BHAIYALAL SHYAM BIHARI VS. CIT (2205) (276 ITR 38). ON THE CONTRARY, THE LD. A.R. PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE ANDHRA PRADESH H IGH COURT IN THE CASE OF PURUSHOTTAM JHAWAR (SUPRA) AND ALSO ANOTHER DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF FERTILIZER TRADERS (SUPRA) TO SUPPORT HIS CLAIM FOR APPLYING PEAK CREDIT THEORY. BE THAT AS IT MAY, WE HAVE COME TO THE CONCLUS ION THAT THE DEPOSITS MADE BY THE ASSESSEE MAY REPRESENT HIS BUSINESS RECEIPTS AND HENCE THE QUESTION OF APPLYING PEAK CREDIT THEORY IN THE INSTANT CASE DOES NOT APPLY. 9. THE LD. DR ALSO CONTENDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE RESPONSIBILIT Y PLACED ON HIM U/S 68 OF THE ACT AND HENCE THE TAX AUTHORITIES ARE JUSTIFIED IN ASSESSING THE ENTIRE DEPOSITS AS INCOME OF THE ASSESSEE. EVEN THOUGH THE PROVISIONS OF SEC. 68 PLACES INITIAL ONUS ON THE SHOULDERS OF THE ASSESSEE, YET THE SAID SECTION GIVES A DISCRETION, AS HELD BY 6 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 HONBLE SUPREME COURT IN THE CASE OF P.K. NOORJAHAN (237 ITR 570). HENCE THE FACTS AND CIRCUMSTANCES OF THE CASE PLAY AN IMPORTANT ROLE IN APPLICATION OF PROVISIONS OF SEC. 68 OF THE ACT IN THE INSTANT CASE, WE HAVE NOTICED THAT THERE ARE MULTIPLE DEPOSITS AND MULTIPLE WITHDRAWALS ON A SINGLE DAY. HENCE ASSESSING THE DEPOSITS ALONE, WITHOUT CONSIDERING THE WITHDRAWALS AND ALSO CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE SOURCES OF DEPOSITS, MAY LEAD TO RENDERING INJUSTICE TO T HE ASSESSEE. IN THE PRECEDING PARAGRAPHS, WE HAVE HELD THAT THE DEPOSITS MAY REPRESENT BUSINESS RECEIPTS. IN THAT CASE, WHAT IS REQUIRED TO BE ASSESSED IS THE PROFIT ELEMENT INVOLVED IN THOSE RECEIPTS. THE ASSESSE E HAS SUBMITTED THAT HE IS GETTING COMMISSI ON INCOME OF 2% ON THE SALE RECEIPTS. HOWEVER, THE ASSESSEE COULD NOT SUBSTANTIATE THE SAME WITH ANY CREDIBLE EVIDENCE, HENCE WE ARE UNABLE TO AGREE WITH THE PERCENTAGE OF PROFIT CLAIMED BY THE ASSESSEE. THE FACT THAT THE RECEIPTS ARE COMING FROM FARAWAY P LACES ALSO SHOW THAT THE ASSESSEE SHOULD BE INCURRING EXPENSES IN HIS BUSINESS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE MAY BE PUT TO REST, IF THE NET INCOME , NET OF ALL EXPENSES IS ESTIMATED AT 5% OF THE AGGREGATE AMOUNT OF DEPOSI TS. ACCORDINGLY, WE DIRECT THE AO TO ESTIMATE THE BUSINESS INCOME OF THE ASSESSEE @ 5% OF AGGREGATE AMOUNT OF DEPOSITS. THE ASSESSEE HAS ALREADY DECLARED AS SUM OF RS. 2,04,525/ - AS HIS BUSINESS INCOME. HENCE THE DIFFERENCE BETWEEN THE BUSINESS INCOME ESTI MATED AT 5% OF AGGREGATE AMOUNT OF DEPOSITS AND THE BUSINESS INCOME DECLARED BY THE ASSESSEE SHALL BE ADDED BY THE AO. WE ORDER ACCORDINGLY. THE ORDER PASSED BY THE LD.CIT (A) WOULD BE MODIFIED ACCORDINGLY. 8. THE FACTS OF THE PRESENT CASE ARE ALMOST SIM ILAR TO THE FACTS OF THE CASE RELIED UPON BY THE ASSESSEE. SINCE, THE COORDINATE BENCH HAS TREATED THE DEPOSITS AS THE PROCEEDS OF THE BUSINESS CARRIED ON BY THE ASSESSEE, DIRECTED THE AO TO ESTIMATE THE BUSINESS INCOME OF THE ASSESSEE @ 5% OF THE AGGREGAT E AMOUNT OF DEPOSITS, WE RESPECTFULLY FOLLOWING THE DECISIONS OF THE COORDINATE 7 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 BENCH , MODIFY THE ORDER PASSED BY THE LD.CIT (A ) AND DIRECT THE AO TO MAKE ADDITION OF 5% OF THE AGGREGATE AMOUNT OF DEPOSITS. 9. THE FACTS OF THE CASE AND THE ISSUES INVOLVED IN THE ASSESSEES APPEAL ITA NO. 6137/MUM/2018 FOR THE A.Y. 2010 - 11 AND THE APPEAL ITA NO. 6138/MUM/2018 FOR THE A.Y. 2011 - 12 ARE IDENTICAL TO THE FACTS OF THE CASE AND THE ISSUES INVOLVED IN THE CASE OF THE ASSESSEE ITA NO. 6136/MUM/2018 FOR THE A.Y. 200 9 - 10. SINCE, WE HAVE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE IN THE ASSESSEES APPEAL FOR THE A.Y. 2009 - 10 AFORESAID AND DIRECTED THE AO TO RESTRICT THE ADDITION TO 5% OF THE DEPOSIT , CONSISTENT WITH OUR FINDINGS, WE PARTLY ALLOW THE APPEALS FILED BY THE ASSESSEE FOR THE A.Y. 2010 - 11 AND 2011 - 12 AND DIRECT THE AO TO RESTRICT THE ADDITION U/S 68 OF THE ACT TO 5% OF THE AGGREGATE AMOUNTS OF THE DEPOSITS IN THE RESPECTIVE ASSESSMENT YEARS. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSESSEE FOR AS SESSMENT YEAR S 2009 - 10, 2010 - 11 AND 2011 - 12 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY , 2019 . SD/ - SD/ - ( M.BALAGANESH ) ( RAM LAL NEGI ) ACCO UNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 13 / 02 / 2019 ALINDRA PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 8 ITA NO S . 6136, 6137 & 6138/MUM/2018 ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 AND 2011 - 12 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI