DCIT CEN CIR 2, MUMBAI V. FAISAL ABBAS, PUNE

ITA 6934/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3498 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 05-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Keywords: Unexplained cash credit
• Section: 153A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM ./ I.T.A. NO. 6934/MUM/2010 ( / ASSESSMENT YEAR: 2003 - 04 ) DY. CIT, CENTRAL CIRCLE - 2, OLD CGO BLDG., ANNEXE, 9 TH FLOOR, M. K. ROAD, MUMBAI - 20 / VS. FAISAL ABBAS 405, VENUS APTS., LANE - A, NORTH MAIN ROAD, KOREGAON PARK, PUNE - 411 001 ./ ./ PAN/GIR NO. ACPPA 6146 G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI A. K. SRIVASTAVA & SHRI GIRISH DAVE / RESPONDENT BY : SHRI K. GOPAL / DATE OF HEARING : 1 7 .0 2 .201 6 / DATE OF PRONOUNCEMENT : 29 .0 2 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 36, MUMBAI (CIT(A) FOR SHORT ) DATED 28.07.2010 , ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) R/W S. 153A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2003 - 04 VIDE ORDER DATED 31.12.2008 . 2. THE SOLE ISSUE ARISING IN THIS A PPEAL IS THE VALIDITY OR OTHERWISE IN LAW OF THE DELETION OF THE PROTECTIVE ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT /S IN THE HANDS OF 2 ITA NO. 6934/MUM/2010 (A.Y.2003 - 04) DY. CIT VS. FAISAL ABB AS THE ASSESSEE. THE BASIS OF THE DELETION IS THAT THE SAME AMOUNT HAD BEEN CONFIRMED FOR ASSESSMENT U/S. 68 OF THE ACT, I. E., BY WAY OF UNEXPLAINED CREDIT, IN THE HANDS OF RHEEMA HASSAN ALI KHAN (RHAK), THE ASSESSEES SISTER. SURELY, THEREFORE, IN VIEW OF THE LD. CIT(A) THE PROTECTIVE ASSESSMENT COULD NOT HOLD, HOLDING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLATE. REMAND REPORT OF THE A.O. AND THE ORDER OF THE A.O. I FOUND THAT THE ADDITION ON THE SAME ISSUE FOR SAME AMOUNT FOR THE SAME A.Y. HAS BEEN UPHELD IN THE HANDS OF MS. RHEEMA HASSAN ALI KHAN AS PER GROUND NO. 16 OF A.Y. 2003 - 04. SINCE THE ADDITION WAS PROTECTIVE IN THE HANDS OF THE APPELLANT, IT DESERVES TO BE DELETED. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. NO DOUBT, THE PROTECTIVE ASSESSMENTS CAN, AND ARE INDEED COMMONLY MADE BY THE REVENUE, TO PROTECT IT S INTEREST, AND CANNOT BE QUESTIONED ON THAT BASIS, AS CLARIFIED BY THE HONBLE APEX COURT IN LALJI HARIDAS VS. ITO [1961] 43 ITR 387 (SC) . THEY, IN FACT, SERVE A USEFUL PURPOSE IN RESERVING THE REVENUES RIGHT TO COLLECT TAX WHERE THERE IS DOUBT WITH REGARD TO THE PERSO N IN WHOSE HANDS THE INCOME IS TO BE RIGHTLY TAXED, WHILE CAUSING NO PREJUDICE IN - AS - MUCH AS NO TAX CAN BE COLLECTED, OR PUNITIVE MEASURE PROCEEDED WITH, QUA THE PROTECTIVE ASSESSMENT, DURING ITS SUBS ISTENCE . IT IS ONLY WHEN THE SAME ASSUMES A SUBSTANTIVE NATURE, ON THE SUBSTANTIVE ASSESSMENT FOUND OR CONSIDERED AS BEING NOT ON THE RIGHT PERSON, AND THE ASSESSMENT FAILS, THAT THE SAME SHALL HAVE EFFECT. WE ARE, THUS, NOT IN AGREEMENT WITH THE LD. CIT(A) WHEN HE DELETES THE IMPUGNED ASSESSMENT ON ACCOUNT OF THE SAME AMOUNT HAVING BEEN BROUGHT TO TAX IN THE HANDS OF RHAK THAT BEING, RATHER, AS EXPLAINED, THE RATIONAL E OR THE RAISON DETRE OF A PROTECTIVE ASSESSMENT. AT THE SAME TIME, HOWEVER, IN OUR CONSIDERED OPINION, THIS IS NOT A FIT CASE FOR A PROTECTIVE ASSESSMENT. THE SAME IS ONLY WHERE THERE IS SOME GENUINE DOUBT, ON ACCOUNT OF COMPLEXITY OF FACTS AND/OR OF LAW, WITH REGARD TO THE RIGHT PERSON, I.E., IN WHOS HANDS THE INCOME IS RIGHTLY TAXABLE. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A MAN O F, AT BEST, MOD EST MEANS, DERIVING INCOME AS A HORSE TRAINER BY RENDERING SERVICES TO VARIOUS HORSE OWNERS, THROUGH ROYAL WESTERN 3 ITA NO. 6934/MUM/2010 (A.Y.2003 - 04) DY. CIT VS. FAISAL ABB AS INDIA TURF CLUB (RWITC) (REFER PARA 2 OF THE ASSESSMENT ORDER). THERE IS NO REFERENCE TO HIS EARNINGS IN THE PAST, AND WHICH T HE RE FORE HAVE TO BE CONSIDERED AS IN TANDEM WITH THAT RETURNED FOR THE CURRENT YEAR, I.E., AT RS.1.63 LACS, A T WHICH IT STANDS ASSESSED , SO THAT HIS REGULAR INCOME STANDS ACCEPTED BY THE REVENUE. H IS CAPITAL, AS PER HIS BALANCE - SHEET AS ON 31.3.2003 ( ENCLO SED ALONG WITH THE RETURN OF INCOME FOR THE YEAR FILED ON 17.8.2007) IS IN THE NEGATIVE AT RS.20.67 LACS , IMPLYING HIS LIABILITIES EX CEEDI NG HIS ASSETS TO THAT EXTENT . THE IMPUGNED CREDIT, STATED AS A LOAN RECEIVED FROM DHANSHREE FINCAPS LTD. (DFL) , HAS BE EN TAKEN WITH THE AVOWED AND STATED PURPOSE OF RE - LENDING IT TO HIS SISTER, FOR THE PURCHASE OF A RESIDENTIAL FLAT AT MUMBAI BY HER. THIS IS IN FACT NOT DISPUTED BY THE REVENUE, THE SAME BEING IN FACT APPARENT FROM THE STATEMENT OF THE ASSESSEES SAVING S B ANK ACCOUNT (NO. 25574) WITH BANK OF INDIA, MAHALAXMI, MUMBAI, THROUGH WHICH BOTH - THE SUMS RECEIVED FROM DFL AND TRANSMITTED TO RHAK, WERE ROUTED, WITH THE RESPECTIVE DATES, LISTED AT PARA 6 OF THE ASSESSMENT ORDER, B EING PROXIMATE IN TIME. THAT IS, THE ASSESSEE ACTED AS AN INTERMEDIARY, AS ALSO HELD BY THE TRIBUNAL IN THE CASE OF RHAK, CONFIRMING THE ASSESSMENT OF THE IMPUGNED SUM IN HER HANDS, AND TOWARD WHICH REFERENCE MAY BE MADE TO PARA 30 OF THE SAID ORDER (IN ITA NOS. 4163 TO 4169/MUM/2010 DATED 29.02.2016 ), TO WHICH REFERENCE IS DRAWN. WHERE A CREDIT IS NOT PROVED OR SATISFACTORILY EXPLAINED AS TO I T S NATURE AND SOURCE, THE SAME CAN BE DEEMED AS INCOME, AND THE REVENUE IS NOT OBLIGED TO LOCATE THE SOURCE OF THE RECEIPT AND , AS SUCH, THERE IS NO FU RTHER BURDEN ON THE REVENUE TO SHOW THAT THE INCOME IS FROM A PARTICULAR SOURCE (REFER : ROSHAN DI HATTI V. CI T [ 1977 ] 107 ITR 938 (SC) ; CIT VS. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC) ; A. GOVINDARAJULU MUDALIAR V S. CIT [ 1958 ] 34 ITR 807 (SC) ). AT TH E SAME TIME, HOWEVER, THE WORD USED IN SECTION 68 IS MAY, AND NOT SHALL. AS SUCH, THE ASSESSMENT OF INCOM E MAY NOT NECESSARILY FOLLOW AN UNSATISFACTORY EXPLANATION WITH REGARD TO A CREDIT IN ACCOUNTS , AND THE A SSESSING OFFICER (A .O. ) IS OBLIGED TO CONSIDER, 4 ITA NO. 6934/MUM/2010 (A.Y.2003 - 04) DY. CIT VS. FAISAL ABB AS FOR THE PURPOSE OF ITS ASSESSMENT AS INCOME, THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS, IN THE FACTS OF THE PRESENT CASE, NO INDICATION OF THE ASSESSEE HAVING ANY SOURCE OF INCOME, I.E., OTHER THAN THAT DISCLOS ED, OR AS HAVING NOT REPORTED HIS INCOME, AT LEAST TO ANY MATERIAL EXTENT, WITH IT BEING IN FACT NOT DIST UR BED BY THE REVENUE FOR THE CURRENT YEAR, NOR IS THE ASSESSEE THE BENEFICIARY OF THE IMPUGNED CREDIT. BOTH THESE ASPECTS , ON THE OTHER HAND, ARE FOUND TO OBTAIN FOR RHAK, IN WHOSE HANDS, ACCORDINGLY, THE INCOME QUA THE SAME WAS DEEMED, AND STANDS FURTHER CONFIRMED FOR ASSESSMENT BY US. TRUE, THE CREDIT IN THE ACCOUNTS OF RHAK IS TO FAISAL ABBAS, THE ASSESSEE. H OWEVER, IT IS THE NATURE AND SOURCE THEREOF , ASCRIBED TO A RECEIPT BY WAY OF A LOAN TO HIM FROM DFL, THAT IS CONSIDERED AS NOT SATISFACTORILY EXPLAINED, MUCH LESS PROVED, I.E., IN TERMS OF IDENTITY AND C APACITY (OF THE CREDITOR) AND THE GENUINENESS OF THE TRANSACTION. IF THE EXPLANATION OF THE SAID CREDIT IS CONSIDERED AS PROVED, THE SAME BY ITSELF EXPLAINS THE NATURE AND SOURCE OF THE CREDIT ARISING TO RHAK, BEING ONLY A TRANSMISSION OF THE FUNDS RECEIVED BY THE ASSESSEE FROM DFL. THE TRANSACTION IN FACT RAISES MORE DOUBTS AND QUESTIONS THAN IT ANSWERS OR EX PLAINS. WHAT ARE, FIRSTLY, THE CREDENTIALS OF THE ASSESSEE, OR EVEN RHAK FOR THAT MATTER, FOR ANY LENDER, WHO IS PRIMARILY CONCERNED WITH THE INTEGRITY AND THE REPAYMENT CAPACITY OF THE PROPOSED BORROWER , FOR DFL TO HAVE CONSIDERED L E NDING HIM. WHY SHOUL D NOT DFL, THE OSTENSIBLE LENDER , AND AS ANY LENDER WOULD, LEND MONIES DIRECTLY TO RHAK, THE PERSON WHO REQUIRES THE MONIES, AND I T S BENEFICIARY , OR THE REAL OR DE FACTO BORROWER ? WHY IS NOT AGREEMENT EXECUTED, ALSO REGISTER ING IT AS WELL? HOW WOULD, IN IT S ABSENCE, THE DEPOSIT OF TITLE DEEDS WITH IT (DFL) , AS STATED BY RHAK, BE OF ANY ASSISTANCE TO DFL, THE STATED CREDITOR? W HAT A RE THE TERMS AND CONDITIONS OF THE LOAN, INCLUDING AS TO ITS REPAYMENT AND INTEREST THEREON, AND WHICH WOULD IN FACT FORM THE CO NSIDERATION FOR THE LOAN. WHY, THEN, ARE THE FUNDS NOT PROVIDED BY WAY OF A SINGLE SUM, BUT IN SPLIT AMOUNTS, ALL WITHIN FEW DAY OF EACH OTHER? SURELY , THE BORROWER WOULD BE ABLE TO TRANSMIT FUNDS TO THE S E LLER (OF THE RESIDENTIAL FLAT), PAYING 5 ITA NO. 6934/MUM/2010 (A.Y.2003 - 04) DY. CIT VS. FAISAL ABB AS THUS THE PU RCHASE PRICE, ONLY ON THE RECEIPT OF THE ENTIRE SUM. HA S ANY TITLE CL EARANCE OF THE SAID PROPERTY BE INSISTED UPON BY DFL, PRIOR TO RELEASING THE LOAN, AS ANY GENUINE LENDER WOULD, AS THE SAME ONLY WOULD BE AN ASSURANCE WITH REGARD TO THE LOAN. WAS MR. FAS IAL ABBAS, THE PERSON TO WHOM THE FUNDS WERE GIVEN IN THE FIRST INSTANCE, CO - O PTED AS A PART Y TO THE ARRANGEMENT, ALSO ACTING AS A SURETY? WHY WAS, RATHER, HASSAN ALI KHAN ( HAK ), RHAKS HUSBAND, A CO - BENEFICIARY IN - AS - MUCH AS THE HOUSE PROPERTY WOULD BE EQ UALLY ENJOYED BY HIM AS A CO - HABITANT AND A MAN OF MUCH HIGHER MEANS THAN BOTH THE ASSESSEE AND THE RHAK, ALSO NOT CO - O PTED AS A SURETY? THE MORE CLOSELY WE EXAMINE THE TRANSACTION, THE MORE SERIOUS DOUBTS AS TO ITS GENUINENESS ARISE, NONE OF WHICH ARE EXP LAINED OR ADDRESSED, THE EXPLANATION BEING SANS ANY REFERENCE TO TH E S E INCIDENTS, MUCH LESS ACCOMPANIED BY FURNISHING OF ANY MATERIALS. IN FACT, THE SAME APPEARS, EX FACI E , A MAKE BELIEVE TRANSACTION, WITH THE ASSESSEE BEING INCL UDED JUST TO ADD A LAYER, P ROVIDING A VEN EER OF CREDIBILITY TO THE TRANSACTION. WE, ACCORDINGLY, FIND NO MERIT IN THE EXPLANATION OF THE CREDIT AS A LOAN FROM DFL. FAR FROM THE SAME IMPUGNING THE ASSESSEES CASE, HOWEVER, IT FORTIFIES THE REVENUES STAND IN ASSESSING THE SAID CRED IT IN THE HANDS OF RHAK, THE ONLY BENEFICIARY OR THE RECIPIENT OF THE IMPUGNED SUM (REFER : SREELEKHA BANERJEE V. CIT [ 1963 ] 49 ITR 112 (SC) ). WE, THEREFORE, THOUGH NOT IN AGREEMENT WITH THE LD. CIT(A) , FOR THE REASONS AFORE - STATED CONFIRM HIS DELETION OF T HE PROTECTIVE ASSESSMENT IN THE HANDS OF THE ASSESSEE, A MERE NAME LENDER. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 29 , 201 6 SD/ - SD/ - ( D. MANMOHAN ) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 29 . 0 2 .201 6 6 ITA NO. 6934/MUM/2010 (A.Y.2003 - 04) DY. CIT VS. FAISAL ABB AS . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERN ED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI