RAJESH AGASHE, MUMBAI V. ITO 17(2)(3), MUMBAI

ITA 634/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9977 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 08-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Retraction
• Section: 133A; 6; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.634/MUM/2016 ASSESSMENT YEAR: 2010-2011 SHRI RAJESH AGASHE, 15, JENABAI BUILDING, DADASAHEB PHALKE ROAD, DADAR, MUMBAI 400 014 PAN AAYPA7677H VS ITO 17(2)(3), MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI KIRIT SHETH RESPONDENT BY : SHRI RAM TIWARI DATE OF HEARING :02.01.2018 DATE OF PRONOUNCEMENT : 20.03.2018 O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER OF LEARNED CIT(A)- 32, MUMBAI, DATED 20.01.2016 AND PERTAINS TO ASSESS MENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED C.I.T. (A) HAS ERRED IN CONFIR MING ADDITION OF RS. 27,40,000 MADE BY THE LEARNED A.O AS UNACCOUNTED CA SH INCOME. YOUR APPELLANT RESPECTFULLY SUBMITS THAT, ON FACTS AND IN LAW, THE LEARNED C.I.T. (A) SHOULD HAVE DELETED IN TOTO THE SAID ADDITION OF RS. 27,40,000. 2. THE LEARNED C.I.T. (A) HAS ERRED IN NOT HOLDING THAT THERE IS NO FACTUAL AND LEGAL BASIS TO CONCLUDE THAT THE APP ELLANT HAD IN FACT MADE ANY UNEXPLAINED EXPENDITURE / INVESTMENT IN FU RNITURE TO THE EXTENT OF RS. 7,50,000. ITA NO.634/MUM/2016 RAJESH AGASHE. 2 YOUR APPELLANT RESPECTFULLY SUBMITS THAT, ON FACTS AND IN LAW, BY MERELY HOLDING THAT THE UNEXPLAINED EXPENDITURE / I NVESTMENT IN FURNITURE GETS COVERED AS AN APPLICATION OF UNEXPLA INED CASH INCOME SEPARATELY TAXED, THE LEARNED C.I.T. (A) HAS ERRED IN NOT RECORDING CATEGORICAL FINDING THAT NO SUCH EXPENDITURE / INVE STMENT WAS IN FACT EVER MADE. YOUR APPELLANT RESPECTFULLY SUBMITS THAT, ON FACTS AND IN LAW, THE LEARNED C.I.T. (A) SHOULD HAVE RECORDED CATEGORICAL FINDING THAT NO SUCH EXPENDITURE / INVESTMENT WAS IN FACT EVER MADE AND BASED ON SUCH CATEGORICAL FINDING THE LEARNED C.I.T. (A) SHO ULD HAVE DELETED IN TOTO THE ADDITION OF RS. 7,50,000 MADE BY THE LE ARNED A.O. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: 2.1 'IN THIS CASE, A SURVEY ACTION U/S 133A WAS CA RRIED OUT ON 16/02/2010 AT THE BUSINESS PREMISES OF THE APPELLAN T. DURING THE COURSE OF SURVEY ACTION, THE APPELLANT HAS DECLARED A SUM OF RS.37.40,000 AS ADDITIONAL INCOME OVER AND ABOVE TH E REGULAR INCOME FOR THE FY 2009-10. ON PERUSAL OF THE ROI IT WAS NOTICED BY THE AO, THAT THE SUM HAS NOT BEEN REFLECTED IN THE INCOME DECLARED BY THE APPELLANT AND HENCE, THE A.O. ASKED THE APPE LLANT TO FURNISH AN EXPLANATION IN THIS REGARD. IN RESPONSE, THE APP ELLANT FURNISHED AN AFFIDAVIT DATED 29/01/2013 CLAIMING THAT HE HAD NOT RECEIVED ANY FURTHER FEES IN CASH OTHER THAN THOSE DECLARED IN THE ROI AND THAT THE EVIDENCES (RECEIPTS) REGARDING RS.10,000 U NACCOUNTED CASH RECEIPTS WERE PREPARED AT THE TIME OF SURVEY AND HE WAS MADE TO SIGN THESE RECEIPTS BY THE SURVEY TEAM. THE APPELLA NT HAS FURTHER CLAIMED THAT HE HAD NEITHER PAID ANYTHING IN CASH T O ANY TEACHERS NOR INCURRED ANY UNACCOUNTED EXPENDITURE ON FURNITU RE AND THE DECLARATION OF RS.10,00,000 AS UNACCOUNTED INCOME I N FORM OF UNACCOUNTED PAYMENT OF SALARY IN CASH TO TEACHERS A ND RS.7 TO 8 LAKHS ON ACCOUNT OF UNACCOUNTED INVESTMENT IN FURNI TURE WAS ONLY AT THE INSTANCE OF THE SURVEY TEAM. 2.2 AS REGARDS THE APPELLANT'S CLAIM THAT THE STATE MENTS GIVEN BY HIM WERE OUT OF FORCE WAS NOT ACCEPTABLE TO THE A.O , AS THE APPELLANT HAS SIGNED THE DECLARATION THAT THE STATE MENTS ARE RECORDED WITHOUT ANY COMPULSION, COERCION OR ANY FO RCE. MOREOVER, THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE IN SUPP ORT OF THE ALLEGATION AGAINST THE SURVEY TEAM. THE A.O. NOTED THAT THE SURVEY TEAM HAD VERIFIED ALL THE DOCUMENTS AND ACCORDINGLY THE QUESTIONS ITA NO.634/MUM/2016 RAJESH AGASHE. 3 WERE PUT TO MR. RAJESH AGASHE ABOUT RECEIVING CASH PAYMENTS WHICH WERE NOT ACCOUNTED IN THE BOOKS AND ABOUT NON -GENUINE AND UNEXPLAINED EXPENDITURE. FROM THE STATEMENTS RECORD ED BY THE SURVEY TEAM AND ON THE BASIS OF THE MATERIAL COLLEC TED/IMPOUNDED FROM THE SURVEY PREMISES OF THE APPELLANT DURING TH E COURSE OF SURVEY ACTION U/S 133A OF THE ACT, THE A.O. CAME TO THE CONCLUSION THAT THE APPELLANT COLLECTED CASH FROM STUDENTS OVE R AND ABOVE THE CHEQUE PAYMENTS AND THAT SUCH PAYMENTS HAVE NOT BEE N RECORDED IN THE BOOKS OF THE APPELLANT. THE AO ALSO CONCLUDE D THAT THE APPELLANT HAS MADE SUBSTANTIAL PAYMENTS TO TEACHERS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS, AND THAT THE APP ELLANT HAS ALSO ADMITTED THAT NO SALARY/BONUS REGISTER WAS MAINTAIN ED BY HIM. IN THE CIRCUMSTANCES, THE CLAIM OF THE APPELLANT TO RE TRACT THE STATEMENT WAS REJECTED BY THE A.O. RELYING ON THE D ECISION IN THE CASE OF M/S DHAKESHWARI COTTON MILLS LTD. VS. C1T ( 26 ITR 775, 782 (SC)) AND SHRI VASANT LAL & CO. VS. CIT (45 ITR 20 6, 209 (SC)). ACCORDINGLY, THE AMOUNT OF RS .27,40,000 BEING ADDITIONAL INCOME IN RESPECT OF UNACCOUNTED CASH RECEIVED FROM STUDENTS, A SUM OF RS 10,00,000 BEING UNEXPLAINED PAYMENTS TO TEACHERS AN D A SUM OF RS 7,50,000 BEING UNEXPLAINED INVESTMENT IN FURNITURE & FIXTURES WAS ADDED TO THE INCOME OF THE APPELLANT. 4. AGAINST ABOVE ORDER, ASSESSEE PREFERRED APPEAL B EFORE THE LEARNED CIT(A). LEARNED CIT(A) ALSO OBTAINED REMAND REPORT FROM THE ASSESSING OFFICER. CONSIDERING THE ASSEESSEES SUBMISSION AND ASSESSING OFFICERS RESPONSE THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: 5.1.1 THE MAIN GRIEVANCE OF THE APPELLANT IS MENTIO NED BY HIM AT SL NO 6 IN HIS SUBMISSIONS REPRODUCED ABOVE. THE APPE LLANT STATES THAT NOTHING INCRIMINATING WAS FOUND DURING THE SUR VEY, BUT HE WAS MADE TO SIGN ON 3 RECEIPTS OF ` 10,000 EACH WHICH WAS HELD AS EVIDENCE OF HAVING RECEIVED CASH FROM HIS STUDENTS OVER AND ABOVE THE REGULAR FEES. THE APPELLANT SOUGHT THE AO TO M AKE WHAT HE CALLS INDEPENDENT ENQUIRIES IN THE MATTER. THE O THER SUBSTANTIAL GRIEVANCE IS IN SL NO 12 OF HIS SUBMISSIONS AS TO O N WHAT BASIS THE 3 DOCUMENTS OF CASH RECEIPTS WERE EXTRAPOLATED TO ALL 274 STUDENTS WHEN EVIDENCE IN RESPECT OF ONLY 3 STUDENTS IS CLAI MED TO HAVE BEEN UNEARTHED DURING THE SURVEY. THE AO IN HIS REM AND REPORT, HAS ADDRESSED ALL THE 17 POINTS RAISED BY THE APPEL LANT. THE ITA NO.634/MUM/2016 RAJESH AGASHE. 4 REMAND REPORT OF THE AO IS EQUALLY LENGHTHY AND IS THEREFORE NOT REPRODUCED IN TOTO IN THIS ORDER. I FIND THAT DURI NG REMAND PROCEEDINGS, THE AO HAS CATEGORICALLY STATED THAT T HE APPELLANT HAS FILED CONFIRMATIONS FROM 240 STUDENTS ONLY AS AGAIN ST 274 ADMITTEDLY ENROLLED BY HIM. THE AO HAS ALSO STATED THAT FEES HAVE BEEN RECEIVED IN CASH FROM 149 STUDENTS AND IN CHEQ UE FROM 91 STUDENTS. IT IS AMPLY CLEAR THEREFORE THAT A MAJOR ITY OF THE FEES ARE RECEIVED IN CASH AND THE CONTENTION OF THE APPELLAN T OF RECEIVING FEES IS CHEQUE IS CONTRADICTED AS PER HIS OWN BOOKS . THE FEES RECEIVED FROM THE BALANCE 34 STUDENTS REMAINS A MYS TERY TILL DATE. I HAVE ALSO PERUSED THE STATEMENT RECORDED FROM THE APPELLANT DURING SURVEY. THEREIN HE HAS CATEGORICALLY ADMITT ED THAT PAGES 4 TO 6 IMPOUNDED PERTAIN TO CASH OF RS 10,000 RECEIVE D FROM STUDENTS WHICH ARE NOT ACCOUNTED IN HIS BOOKS. DUR ING APPEAL, THE APPELLANT HAS MADE A SERIOUS ALLEGATION AGAINST THE SURVEY PARTY THAT THESE DOCUMENTS WERE PREPARED DURING COURSE OF SURVEY AND HE WAS MADE TO SIGN ON THEM. THIS ALLEGATION IS HO WEVER UNSUBSTANTIATED WITH ANY EVIDENCE WHATSOEVER. THE FACTS ON RECORD INDICATE THAT THE APPELLANT HAS RECEIVED CAS H FROM 149 STUDENTS AND CHEQUE FROM ONLY 91 STUDENTS. THERE I S IMPOUNDED MATERIAL TO INDICATE THAT CASH OVER AND ABOVE THE R EGULAR FEES HAS ALSO BEEN RECEIVED FROM AT LEAST 3 STUDENTS. AS ST ATED EARLIER, THE CONFIRMATION OF FEES RECEIVED FROM 34 STUDENTS IS S TILL A MYSTERY. IN ABSENCE OF ANY MALAFIDE ON PART OF THE SURVEY TEAM, THE CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED. I FURTHER FIN D THAT A SIMILAR TYPE OF ADDITION WAS MADE IN AY 2009-10 IN THE CASE OF THE APPELLANT. IN THAT YEAR AS A RESULT OF THE SAME SU RVEY, AN ADDITION OF RS 1,18,500 WAS MADE BEING THE DIFFERENCE OF FEE S DECLARED DURING SURVEY AND THOSE REFLECTED IN THE BOOKS OF A CCOUNT. THIS WAS CONFIRMED BY THE CIT(A) AND IN FURTHER APPEAL I N THE ITAT, THE ADDITION WAS PARTLY UPHELD. IN ITS ORDER FOR AY 20 09-10 IN ITA NO.3719/MUM/2014, THE HONBLE ITAT HAS HELD IN PARA 7 THAT THE APPELLANT HAS NO EXPLANATION TO OFFER REGARDING HIS CLAIM THAT LESSER FEES WERE COLLECTED FROM STUDENTS. SIMILAR IS THE CASE IN THIS YEAR. THE APPELLANT WOULD HAVE ME BELIEVE THAT THE IMPOUN DED MATERIAL BE GIVEN A GO BY AND HIS ALLEGATION AGAINST THE SUR VEY PARTY BE BELIEVED INSPITE OF NO EVIDENCE IN THAT REGARD. TH E AFFIDAVIT FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER IS NOT S UBSTANTIATED WITH ANY EVIDENCE AND IS THEREFORE RIGHTLY REJECTED BY T HE ASSESSING OFFICER AS SELF SERVING. I AM THEREFORE NOT INCLIN ED TO ACCEPT THE PLEA OF THE APPELLANT THAT NO CASH OVER AND ABOVE T HE REGULAR ACCOUNTED FEES WAS RECEIVED. I THEREFORE, UPHOLD T HE ACTION OF THE AO IN ASSESSING A SUM OF RS 27,40,000 AS UNACCOUN TED FEES RECEIVED BY THE APPELLANT. ITA NO.634/MUM/2016 RAJESH AGASHE. 5 5. AS REGARDS THE ISSUE OF ADDITION OF RS.7,50,000 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN FURNITURE ACCOUNT, THE LE ARNED CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : THIS IS AGAINST THE AO ASSESSING RS 7,50,000 AS UN EXPLAINED INVESTMENT IN FURNITURE. ONCE AGAIN I FIND THAT TH ERE IS NO MATERIAL EVIDENCE BEFORE THE AO FOR MAKING THIS ADDITION. T HE AO SEEMS TO HAVE RELIED ON THE ANSWER IN Q 20 OF THE STATEMENT OF THE APPELLANT. THEREIN THE APPELLANT STATES THAT MOST OF THE FURNITURE IS PURCHASED IN FY 2009-10 AND THE SAME IS SOURCED FRO M UNACCOUNTED CASH COLLECTED FROM STUDENTS. IN THE CI RCUMSTANCES, THE SOURCE OF MAKING INVESTMENT IN FURNITURE IS OUT OF THE UNACCOUNTED CASH FEES COLLECTED WHICH HAVE ALREADY BEEN TAXED. THE SAME CANNOT BE TAXED ONCE AGAIN AS INVESTMENT. THE AO HAS TAXED THE SOURCE OF INCOME (UNACCOUNTED FEES) AS WE LL AS THE APPLICATION BEING UNACCOUNTED INVESTMENT. THIS CAN NOT STAND AS IT RESULTS IN DOUBLE TAXATION. I THEREFORE DELETED TH E ADDITION OF RS 7,50,000 MADE TOWARDS UNEXPLAINED INVESTMENT IN FUR NITURE. AGGRIEVED, AGAINST ABOVE ORDER ASSESSEE IS IN APPEA L BEFORE THE ITAT. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSE E SUBMITTED THAT THIS ADDITION HAS BEEN MADE ON ACCOUNT OF A STATEMENT ON SURVEY EXTRACTED FROM THE ASSESSEE BY COERCION. HE SUBMITTED THAT THERE I S NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SURVEY. IN THIS REGARD H E PLACED RELIANCE UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S. KA DER KHAN. 7. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT COGENT MATE RIALS WERE FOUND AT THE TIME OF SURVEY WHICH LEAD THE ASSESSEE TO MAKE THE ADMISSION. HENCE HE SUBMITTED THAT THE SUBSEQUENT RETRACTION BY THE ASS ESSEE CANNOT BE GIVEN CREDENCE. HENCE, HE PLEADED THAT THE ADDITION BE SU STAINED. ITA NO.634/MUM/2016 RAJESH AGASHE. 6 8. UPON CAREFUL CONSIDERATION WE NOTE THAT THE ASSE SSING OFFICER HAS MADE THE ADDITION BY EXTRAPOLATING RS. 10,000 AS UN DERHAND RECEIPT FROM EACH STUDENT BY REFERRING TO THREE HAND NOTES BY TH E ASSESSEE WHERE SUCH RECEIPTS FROM THREE STUDENTS WERE MENTIONED. THE AS SESSEE'S PLEA IS THAT THESE NOTES WERE EXTRACTED BY THE SEARCH PARTY AT T HE TIME OF SURVEY. FURTHERMORE, IT IS THE PLEA THAT IT CANNOT BE EXTEN DED TO THE ENTIRE NUMBER OF STUDENTS. WE NOTE THAT THERE IS AN ADMISSION BY THE ASSESSEE AT THE TIME OF SURVEY. THERE HAS BEEN A CONSIDERABLE DELAY IN THE RETRACTION IF THE NONDISCLOSURE OF ADMITTED INCOME IN THE RETURN OF I NCOME IS CONSIDERED A RETRACTION AT ALL. I ALSO NOTE THAT EARLIER IN ASSE SSEE'S OWN CASE ITAT HAS SUSTAINED SOME ADDITION FOUND ON THE BASIS OF SURVE Y. THE APEX COURT DECISION IN THE CASE OF S KADER KHAN ALSO MANDATES THAT DEHORS COGENT MATERIAL FOUND ON SURVEY ADDITION MERELY ON THE BAS IS OF A STATEMENT ON SURVEY CANNOT BE SUSTAINED. 9. UPON CAREFUL CONSIDERATION AND OVERALL CONSIDERA TION OF THE FACTS OF THE CASE IN OUR CONSIDERED OPINION 25% ADDITION OUT OF THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER WOULD MEET THE ENDS OF JUS TICE. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THIS PROPOSITION. 10. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNED CIT (A) AND DIRECT THAT THE ADDITION BE RESTRICTED TO 25% IN THIS CASE, ON THIS ISSUE. 11. AS REGARDS THE ADDITION OF ` 7,50,000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN FURNITURE, WE FIND THAT THIS ADDITION HAS BEEN MADE ON ADHOC BASIS DEHORS ANY COGENT MATERIALS, HENCE WE SET ASI DE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THAT THIS ADDITION BE DELETED. ITA NO.634/MUM/2016 RAJESH AGASHE. 7 12. IN THE RESULT THIS APPEAL BY THE ASSESSEE STAND S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20 TH MARCH, 2018. SD/- SD/- (RAM LAL NEGI) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 20 TH MARCH , 2018. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), 4. THE C I T 5. THE DR, D BENCH BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI