JITENDRA B SHAH, MUMBAI V. ITO 23(2)(3), MUMBAI

ITA 6954/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8326 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 17-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIVANLAL LAVIDIA
• Keywords: Unexplained investment; Source of fund

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE S/SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.6954 /MUM/2012 ( / ASSESSMENT YEAR : 2008-2009 SHRI JITENDRA B. SHAH, A/601, VIMAL APARTMENT, THE VISHWANANDHAN CHS LTD., JAIN TEMPLE ROAD, MULUND (WEST), MUMBAI 400 080. / VS. INCOME TAX OFFICER 23(2)(3), MUMBAI. ./ PAN : AAKPS 9934P ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI BHADRESH DOSHI R E SPONDENT BY : SHRI JIVANLAL LAVIDIA / DATE OF HEARING : 26-06-2014 / DATE OF PRONOUNCEMENT : 22-08-2014 [ !' / O R D E R PER SANJAY GARG, JUDICIAL MEMBER : . : # $$%, THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) -11, MUMBAI DATED 14-09-2012. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS IN ITS APPEAL . AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 6 & 7. ACCORDINGLY, GROUND NO. 6 & 7 ARE DISMIS SED AS NOT PRESSED. ITA 6954/M/12 2 3. GROUND NO. 1 TO 3 RELATES TO THE ADDITION OF RS. 1,84,612/- SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF LABOUR CHARGES. 4. THE FACTS GIVING RISE TO THESE GROUNDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF INTERI OR DESIGNING. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y HIM ON 23-03-2009 DECLARING TOTAL INCOME OF RS. 3,87,010/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAS P AID LABOUR CHARGES AGGREGATING TO RS. 7,07,612/- TO VARIOUS PARTIES. T HE A.O. ISSUED ENQUIRY LETTERS TO VERIFY THE PAYMENT OF SAID CHARGES TO AL L THE PARTIES. OUT OF THE NOTICES SO ISSUED, THE NOTICES ISSUED TO SEVEN PART IES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN. THE A.O. THUS DISALLOWED AN AMOUNT OF RS. 7.07,612/- ON ACCOUNT OF LABOUR CH ARGES PAID BY THE ASSESSEE TO THE SAID SEVEN PARTIES. ON APPEAL BEFOR E THE LD. CIT(A), THE ASSESSEE FURNISHED FURTHER DETAILS AND ACCORDINGLY THE SAME WAS SENT TO THE A.O. FOR HIS REMAND REPORT. IN THE REMAND REPORT, T HE ASSESSEE COULD VERIFY PAYMENTS TO ONLY FOUR PARTIES AND THE PAYMENTS IN R ESPECT OF REMAINING THREE PARTIES COULD NOT BE VERIFIED. THE LD. CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSE AS WELL AS THE REMAND REPORT SUBMITT ED BY THE A.O. HELD THAT MERE PAYMENT THROUGH BANKING CHANNEL WAS NOT ENOUGH TO SUBSTANTIATE THAT SERVICES HAVE BEEN RECEIVED BY THE ASSESSEE, HENCE HE UPHELD THE DISALLOWANCE OF LABOUR CHARGES ON ACCOUNT OF THREE PERSONS AND THE DELETED THE DISALLOWANCE OF LABOUR CHARGES ON ACCOUNT OF FO UR PERSONS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE PAYMENTS WERE MADE TO THE LABORERS WHO BELONGING TO UN-ORGANISED SECTOR. ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE GENUIN ENESS OF THE PAYMENTS WERE VERIFIED BY THE A.O. IN THE CASE OF ALMOST ALL THE PERSONS EXCEPT THREE ITA 6954/M/12 3 PERSONS. HE HAS FURTHER SUBMITTED THAT MERELY BECA USE THE PAYMENTS COULD NOT BE VERIFIED IN RESPECT OF THREE PERSONS ONLY TH AT ITSELF IS NOT ENOUGH TO MAKE THE DISALLOWANCE. 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT OUT OF SEVERAL PARTIES TO WHOM THE ASSESSEE HAD MADE PAYMENTS ON ACCOUNT OF L ABOUR CHARGES, THE GENUINENESS OF PAYMENT IN RESPECT OF SEVEN PARTIES COULD NOT BE VERIFIED BEFORE THE A.O. BEFORE THE LD. CIT(A) THE ASSESSEE PRODUCED FURTHER EVIDENCE IN SUPPORT OF HIS CLAIM AND FURTHER PROVED THE PAYMENT TO FOUR PERSONS OUT OF THE SAID SEVEN PERSONS. WE FIND FORCE IN THE CONTE NTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LABOURERS BELONG TO UNORGANIZ ED SECTOR AND THEY SHIFT FROM ONE PLACE TO ANOTHER FREQUENTLY AS PER THE REQ UIREMENT OF WORK. ALL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE RE IS NO DOUBT IN THE GENUINENESS OF THE PAYMENTS. UNDER THESE CIRCUMSTA NCES, MERELY BECAUSE THE PAYMENTS IN RESPECT OF THREE PERSONS COULD NOT BE VERIFIED, NO FAULT CAN BE ATTRIBUTED ON THE PART OF ASSESSEE IN THIS RESPECT. IT APPEARS THAT THE ASSESSEE HAS DISCHARGED HIS ONUS BY WAY OF PRODUCING THE EVI DENCE, CONFIRMATION ETC. REGARDING ALL THE PERSONS EXCEPT THE THREE PERSONS, WHICH WAS BEYOND HIS CONTROL. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFIABLE REASONS IN MAKING THE ADDITION ON THIS ISSUE BY THE A.O. AND T HE SAME ARE HEREBY ORDERED TO BE DELETED. 8. IN GROUND NO. 4 & 5, THE ASSESSEE HAS AGITATED T HE CONFIRMATION OF ADDITION OF RS. 4,43,557/- BY THE LD. CIT(A). ON S CRUTINY OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31-03-2008, THE A.O. NOTED TH AT AN AMOUNT OF RS. 4,43,557/- HAD BEEN SHOWN ON ACCOUNT OF RENOVATION CHARGES ON HIS RESIDENTIAL FLAT. THE A.O. DISALLOWED THE SAME ON T HE GROUND THAT THE PAYMENT ITA 6954/M/12 4 HAD BEEN MADE IN CASH IN THE YEAR 2005 AND THE SOUR CE OF SUCH EXPENDITURE WAS NOT SHOWN AND THE SAME WAS NOT RECORDED IN THE BALANCE SHEET FOR A.Y. 2006-07 AND 2007-08 BUT WAS RECORDED FOR THE FIRST TIME IN THE BALANCE SHEET AS ON 3 1-3-2008. HE HELD MAT THE ASSESSEE HAS FAIL ED TO DISCHARGE HIS ONUS IN PROVING THE GENUINENESS AND SOURCE OF EXPENDITUR E TO THE EXTENT OF RS. 4,43,557/ - ON ACCOUNT OF RENOVATION CHARGES OF THE FLAT. HE THEREFORE MADE AN ADDITION OF RS. 4,43,557/ TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE SOURCE O F FUNDS WAS LOAN TAKEN FROM ABN ARNRO BANK AND SUBSEQUENTLY IT WAS ACCOUNT ED FOR IN THE ACCOUNTS. IT WAS CONTENDED THAT NEITHER AN UNEXPLAINED INCOME NOR AN UNEXPLAINED INVESTMENT AND IT WAS ONLY THE AMOUNT WITHDRAWN FRO M THE BANK. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE HAS RELIED UPON TH E JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF FARKAMAL VS. CIT ( 296 ITR 585). THE LD. CIT(A), HOWEVER, WAS NOT SATISFIED WITH THE EXPLANA TION OFFERED BY THE ASSESSEE AND DISMISSED THE GROUND RAISED BY THE ASS ESSEE, AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSCE HAS PREFERRED THIS GROUND BEFORE THE TRIBUNAL. 9. THE ID. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) THAT MERELY BECAUSE THERE WAS SOME ERROR IN THE ACCOUNTING THAT ITSELF WAS NOT SUFFICIENT TO HOLD T HAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF FUNDS. HE HAS FURTHER SUBMITT ED THAT THE ASSESSEE HAS PROVED THE SOURCE OF FUNDS AS LOAN FROM ABN AMRO BA NK. HE HAS FURTHER RELIED UPON THE BANK ACCOUNT STATEMENT OF THE ROYAL BANK OF SCOTLAND (RBS) TO SHOW THE TRANSACTIONS RELATING TO DEPOSITS AS WE LL AS WITHDRAWALS OF FUNDS AND FURTHER SUBMITTED THAT THE SAID ENTRIES OF BANK ACCOUNT ITSELF EXPLAIN THE SOURCE OF THE RENOVATION EXPENSES. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES, CAREFULLY PERUSED THE RECORDS AVAILABLE INCLUDING THE LEDGER ACCOUNTS AND BANK STATEMENTS. IN OUR VIEW, THE ISSUE HAS NOT BEEN PROPERLY EXAMINED BY T HE LOWER AUTHORITIES. THE ITA 6954/M/12 5 ASSESSEE HAS PRODUCED DOCUMENTS IN THE FORM OF BANK STATEMENTS AND OTHER DOCUMENTS TO PROVE THE SOURCE OF INCOME FOR THE REN OVATION WORK WHICH NEED VERIFICATION. WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE OF A.O. WITH A DIRECTION TO EXAMINE THE DOCUMENTS PRODUCED BY THE ASSESSEE AND IF THE SAME ARE FOUND SATISFACTORY BY THE A.O., APPROPRIATE RELIEF MAY BE GIVEN TO THE ASSESSEE. N EEDLESS TO SAY THAT THE A.O. SHALL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSE E TO PRESENT HIS CASE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22-08-2014. !' ' () *! + 22-08-2014 $ , SD/- SD/- (D. KARUNAKARA RAO) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 7 MUMBAI ; *! DATED 22-08-2014 [ .8../ RK , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 () / THE CIT(A) 11,, MUMBAI 4. 9 / CIT CITY- 23, MUMBAI 5. <=$ 88>? , >? , ( 7 / DR, ITAT, MUMBAI J BENCH 6. $@% A / GUARD FILE. !' / BY ORDER, < 8 //TRUE COPY// )/* + ( DY./ASSTT. REGISTRAR) , ( 7 / ITAT, MUMBAI