ITO 5(2)(3), MUMBAI V. M N G BUSINESS ENTERPARISES P.LTD, MUMBAI

ITA 642/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9963 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: K SHIVARAM
• Keywords: Source of fund
• Section: 68

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 642/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) ITO, OFFICE OF THE ITO 5(2)(3), ROOM NO. 525, 5 TH FLOOR, AAYKAR BHAVAN, MUMBAI - 400 020 / VS. M.N.G. BUSINESS ENTERPRISES PRIVATE LTD. 19, SURYA SADAN, NEPEAN SEA ROAD, MUMBAI - 400 036 ./ ./ PAN/GIR NO. A ABCC 1523 G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI V. JENARDHANAN / RESPONDENT BY : SHRI K. SHIVARAM & MS. NEELAM JADHAV / DATE OF HEARING : 27.06.2017 / DATE OF PRONOUNCEMENT : 01.09 . 2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI (CIT(A) FOR SHORT) DATED 31.10.2016 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2012 - 13. 2. T HE GROUNDS OF APPEAL READ AS UNDER: 1 I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE ASSESSEES APPEAL BY DELETING THE ADDITION OF RS.34, 73,765/ - MADE BY THE A.O. U/S. 68 BY MERELY RELYING ON ASSESSEES SUBMISSIONS. 2 ITA NO. 642/MUM/2017 (A.Y. 2012 - 13) ITO VS. M.N.G. BUSINESS ENTERPRISES PRIVATE LTD. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE ASSESSEES APPEAL WITHOUT REMANDING THE MATTER TO A.O. ON QUANT UM ADDITION U/S. 68 FOR CROSS VERIFICATION OF BILLS/VOUCHERS, RECEIPTS BEING NEW EVIDENCE NOT FURNISHED DURING SCRUTINY PROCEEDINGS. 3. B RIEF FACTS OF THE CASE ARE AS UNDER: AS PER AIR INFORMATION RECEIVED IN THIS CASE, THE ASSESSEE DURING THE F.Y. 2011 - 12 DEPOSITED CASH OF RS.34,73,765/ - IN BANK ACCOUNT MAINTAINED WITH THE HDFC BANK. IT WAS ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF FUNDS FOR CASH DEPOSITS MADE. THE A.R. VIDE HIS LETTER DATED 11.02.2015 EXPLAINED THAT THE SOURCE OF CASH DEPOSITS ARE SA LES RECEIPTS WHICH IS DULY CONSIDERED AS SALE IN PROFIT & LOSS A/C. THE RELEVANT PARAGRAPHS OF SUBMISSION MADE BY THE AR OF THE ASSESSEE IS REPRODUCED AS UNDER: EXPLANATION FOR CASH DEPOSITED IN BANK REFLECTED IN AIR THE ASSESSEE COMPANY WAS EARLIER ENGAG ED IN THE BUSINESS OF RETAIL SELLING OF ARTS AND CRAFTS MERCHANDISE WHICH WAS DISCONTINUED W.E.F. 06.08.2011 AND STARTED BUSINESS IN REAL ESTATE. IT HAD ANNOUNCED DISCOUNT SALE FOR CLEARANCE OF ITS STOCK IN THE MONTH OF JULY, 2011 , AND HAD DULY BEEN CONSID ERED AS SALES IN AUDITED PROFIT AND LOSS ACCOUNT. THESE CASH DEPOSIT ARE DULY CONSIDERED AS SALES IN SCHEDULE - 12 OF THE AUDITED FINANCIALS. THE TOTAL AMOUNT OF SALES IS RS.146.05 LAKHS AND CASH DEPOSITED IS OF RS.34,73,765/ - WHICH IS MUCH LESS THAN TOTAL S ALES. WE HAVE ALREADY SUBMITTED LEDGER ACCOUNT OF COUNTER CASH BOOK AND BANK STATEMENT DULY HIGHLIGHTING CASH DEPOSITED IN HDFC BANK THE ASSESSEE HAS NOT SUBMITTED THE DETAILS OF CASH SALE TO LIKE NAME, ADDRESS, PAN OF THE PARTY, SALE BILL/INVOICES, PARTICULARS OF ITEM/GOODS SOLD, DATE OF SALE, DATE OF DELIVERY, ETC. THE AR DID NOT PRODUCED THESE EVIDENCES IN SUPPORT OF THE CASH SALE. 4. T HE A SSESSING O FFICER (A.O.) DID NOT ACCEPT THE ASSESSEE'S SUBMISSIONS ON THE GROUND THAT ASSESSEE HAS NOT SUBMI TTED TH E DETAILS OF CASH SALES LIKE NAME, ADDRESS, 3 ITA NO. 642/MUM/2017 (A.Y. 2012 - 13) ITO VS. M.N.G. BUSINESS ENTERPRISES PRIVATE LTD. PAN OF THE PARTY, SALE BILL, INVOICES, PARTICULARS OF ITEM, DATE OF SALE, DATE OF DELIVERY , ETC. UPON THE ASSESSEE'S APPEAL , THE LEARNED CIT - A ACCEPTED THE ASSESSEE S SUBMISSIONS THAT THE SE ARE SALES RECEI PT WITHOUT ANY CORROBORATING EVIDENCE. HE FOUND THAT IT WAS NATURAL FOR THE ASSESSEE TO MAKE DISCOUNT SALE MELA AS IT WAS CHANGING ITS LINE OF BUSINESS. THE FINDINGS OF LEARNED CIT (A) ARE AS UNDER: 4.2. I H AVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS OF THE L D.AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE A O AND THE L D.AR. IT IS EVIDENT FROM THE FACTS THAT THE APPELLANT WAS CARRYING OUT BUSINESS IN BUYING AND SELLING OF ART AND CRAFTS MERCHANDISE PRIOR TO 6 - 8 - 2011 AND F ROM THIS DATE THE APPELLANT STARTED BUSINESS IN REAL ESTATE. SINCE IT HAS DISCONTINUED THE EARLIER ACTIVITY IT WANTED TO CLEAR THE STOCK BY CONDUCTING DISCOUNT SALES WHICH WAS DONE BETWEEN 1 6.7.2011 TO 31.7.2011. THE SALE WAS BOTH IN CASH AS WELL AS THROUG H CREDIT CARDS AND THE CASH RECEIVED WAS DEPOSITED IN THE BANK. SINCE THE CASH DEPOSITS EXCEEDING TWO LAKHS ARE FOUND IN THE BANK ACCOUNT OF THE APPELLANT, IT WENT INTO THE RADAR OF AIR INFORMATION AND THE CASE WAS PICKED UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT HAS FURNISHED ALL THE DETAILS INCLUDING THE BANK ACCOUNT COPY OF HDFC BANK WHERE THE CASH WAS DEPOSITED, STOCK AND SALES DETAILS, SALES TAX RETURN ETC. HOWEVER THE A O HAS MADE THE DISALLOWANCE AS THE APPELLANT AS NO T FURNISHED THE DETAILS LIKE NAME OF THE PARTY, ADDRESS, PAN ETC. WHO HAVE BOUGHT THE ITEMS DURING THAT DISCOUNT SALE PERIOD. AS THESE DETAILS WERE NOT FILED THE AO HAS CONSTRUED THE DEPOSITS IN THE BANK AS UNEXPLAINED CASH DEPOSITS AND AS THE APPELLANT HA S NOT SUBMITTED THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THOSE DEPOSITS, HE HAS MADE THE DISALLOWANCE U/S 68 OF THE ACT. 4.2.1 I DO NOT FIND ANY MERIT IN THE ACTION OF THE AO. THERE WAS NO DISPUTE WITH REGARD TO THE EARLIER ACTIVITY CARRIED OU T BY THE APPELLANT IN ARTS AND CRAFTS IN THE NAME OF M /S. CONTEMPORARY ARTS AND CRAFTS LTD. IT IS NATURAL THAT WHEN A COMPANY GOES INTO A DIFFERENT LINE OF ACTIVITY BY DISCONTINUING THE EARLIER ACTIVITY IT HAS TO CLEAR ITS STOCK OUT OF EARLIER ACTIVITY. IN THE INSTANT CASE THE APPELLANT HAS SUBMITTED SUFFICIENT EVIDENCE TO SHOW THAT THERE WAS A DISCOUNT SALE MELA WHICH TOOK PLACE FROM 16.7.2011 TO 31.7.2011 AND RECEIVED CASH WHICH HAS BEEN DULY DEPOSITED IN THE BANK AND THE RECEIPTS WERE DISCLOSED IN THE RE TURN OF INCOME. THERE IS NO REASON TO CONSTRUE SUCH DEPOSITS AS UNEXPLAINED CASH DEPOSITS WHICH CAN INVITE THE PROVISIONS OF SECTION 68 OF THE ACT. I'M CONVINCED THAT THE CASH DEPOSITS IN THE BANK ACCOUNT ARE OUT OF SALE PROCEEDS AND NOT FROM UNEXPLAINED C ASH DEPOSITS. I THEREFORE DIRECT THE AO TO 4 ITA NO. 642/MUM/2017 (A.Y. 2012 - 13) ITO VS. M.N.G. BUSINESS ENTERPRISES PRIVATE LTD. WITHDRAW THE ADDITION MADE UNDER SECTION 68 OF THE ACT. THE GROUND IS ALLOWED. 5. AGAINST THE ABOVE ORDER , THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT THE MAIN ISSUE IN DISPUTE IS THE DEPOSIT IN HDFC BANK BY THE ASSESSEE IN CASH AMOUNTING TO RS. 34 , 73,765 / - . THE ASSESSEE'S EXPLANATION IS THAT IT HAS MADE A STOCK CLEARANCE SALE AND THE CASH RECEIVED WAS DEPOSITED IN THE BANK. THE A.O. HAS DISBEL IEVED THIS ON THE GROUND THAT THE DETAILS OF SALES INCLUDING THE SALE BILL/INVOICES WERE NOT PRODUCED. THE LD. CIT ( A ) , ON THE OTHER HAND , HAS ACCEPTED THE ASSESSEE SUBMISSION WITHOUT ANY CORROBORATING EVIDENCE. I FIND THAT ASSESSEE HAS FAILED TO SUBSTANTIA TE THAT THESE ARE ACTUAL SALES. IN THE PAPER BOOK SUBMITTED AT PAPER BOOK PAGE NUMBER 43 ONLY ONE SALE BILL NO. 27603 HAS BEEN ATTACHED. THERE IS ALSO AN ILLUSTRATIVE LIST OF PRODUCT RETAILED WITHOUT ANY REFERENCE TO THE SALE BILLS. IN THESE CIRCUMSTANCES , WITHOUT NECESSARY CORROBORATIVE EVIDENCE , IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE , THESE CASH DEPOSITS CANNOT BE TAKEN AS CASH SALE. 7 . IN MY CONSIDERED OPINION , THE INTEREST OF JUSTICE MANDATES THAT THE ISSUE BE REMITTED TO THE FILE OF THE A.O. ASSESSEE IS GRANTED ONE MORE OPPORTUNITY TO PRODUCE BEFORE THE LEARNED ASSESSING OFFICER THE NECESSARY CORROBORATIVE EVIDENCE TO PROVE THAT THESE CASH DEPOSITS ARE ACTUAL LY CASH SALES. NEEDLESS TO ADD, THE A SSE SSEE SHOULD BE GRANTED ADEQUATE OPPO RTUNITY OF BEING HEARD. 5 ITA NO. 642/MUM/2017 (A.Y. 2012 - 13) ITO VS. M.N.G. BUSINESS ENTERPRISES PRIVATE LTD. 8 . IN THE RESULT , THIS APPEAL FILED BY THE R EVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017 SD/ - (S HAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI ; DATED : 01/09/2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASS TT. REGISTRAR) , / ITAT, MUMBAI