MAYUR VALJI BHAYAANI, MUMBAI V. ITO 22(1)(3), NAVI MUMBAI

ITA 7079/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 24-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Unexplained cash credit; Peak credit
• Section: 143(3); 147; 68

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI R.C . SHARMA, A M AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 7079/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI 7, SAMTA CO - O. HOUSING SOCI ETY, N.P. ROAD, ASALPHA VILLAGE, GHATKOPAR (WEST), M UMBAI - 400 086 . / VS. INCOME TAX OFFICER - 22(1)(3), TOWER NO.6, 4 TH FLOOR, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 400 703 . ./ ./ PAN/GIR NO. ATHPB 9503B ( / APPELLANT ) : ( / RESPONDENT ) / ASSESSEE BY : SHRI NEELKANTH KHANDELWAL / RESPONDENT BY : SHRI NEIL PHILIP / DATE OF HEARING : 21 /07 /2016 / DATE OF PRONOUNCEMENT : 12/08/2016 / O R D E R PER R.C. SHARMA , A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 33 , MU MB AI (CIT(A) FOR SHORT) DATED 12.09 . 2014 FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10 , IN THE MATTER OF OR DER PASSED U/S 143(3) OF THE ACT. 2 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO 2. ASSESSEE IS AGGRIEVED FOR REOPENING ASSESSMENT U/S 147 A ND ADDITION OF RS.62,59,692 / - MADE U/S 68 OF THE ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING IN NOVELTY ITEMS INCLUDING TOYS, FANCY ITEMS, PLASTIC RELATED STATIONERY, ETC. THE RETURN OF INCOME WAS FILED ON 25 - 2 - 2011 SHOWING TOTAL INCOME OF RS.1,88,242/ - AND THE SAME WAS PROCESSED U/S.143(1) ACCEPTING THE RET URNED INCOME. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY ISSUING A NOTICE U/S.148 ON 10 - 10 - 2011 IN VIEW OF CIB INFORMATION OF CASH DEPOSITED IN SAVING BANK ACCOUNTS. IN MAKING THE ASSESSMENT U/S.143(3), THE LEARNED INCOME TAX OFFICER MADE AN ADDITION OF RS.62,59,692/ - TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 ARBITRARILY WITHOUT APPRECIATING THE FACTS OF THE CASE IN ITS PROPER PERSPECTIVE . BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF AO AGAINST WHICH ASSESSEE IS FURTHER APPEAL BEFORE US. 4. IT WAS ARGUED BY LD. AR THAT A SSESSEE IN HIS BUSINESS FIRST OBTAINS ORDER ON THE BASIS OF SAMPLES AND AFTER CONFIRMATION OF THE ORDER, HE PURCHASES THE REQUIRED GOODS FROM THE LOCAL MARKET AND SELLS THE SAME MAKING DELIVERY OF THE REQUIRED GOODS. THE PAYMENTS ARE RECEIVED FROM THE DEBTORS AND THE SAME ARE BEING 3 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO DEPOSITED IN THE SAVING BANK ACCOUNTS . DURING THE PREVIOUS YEAR ASSESSEE HAD DEPOSITED CASH OF RS.35,24,652/ - AND RS.27,35,040/ - IN THE SAVING BANK ACCOUNT WITH ICICI BA NK AND HDFC BANK RESPECTIVELY. IN PARA 2 OF THE ASSESSMENT ORDER, THE LD. AO CLAIMED THAT THE ASSESSEE HAD NOT FURNISHED INFORMATION IN THE MANDATORY COLUMN OF SR.NO.6 OF PART A BALANCE SHEET IN RESPECT OF SUNDRY DEBTORS, SUNDRY CREDITORS, STOCK IN TRADE O N THE GROUND THAT THESE ITEMS ARE SHOWN AS NIL IN THE RETURN OF INCOME. THE LD. AO ALSO CLAIMED THAT THE ASSESSEE HAS NOT FURNISHED THE INFORMATION IN RESPECT OF GROSS RECEIPTS, GROSS PROFIT AND EXPENSES AND THE ASSESSEE HAS ONLY DISCLOSED NET PROFIT OF RS .1,87,351/ - . THE ASSESSEE WAS THEREFORE INFORMED THAT THE RETURN OF INCOME FILED BY HIM IS DEFECTIVE AND CANNOT BE ADMITTED. 5. IT WAS FURTHER CONTENDED THAT THE INFORMATION OF GROSS RECEIPTS, GROSS PROFIT AND EXPENSES ARE FURNISHED VIDE LETTER DATED 01. 01.2013 RELATED TO THE A.Y.2009 - 10 BUT A TYPING ERROR HAS CREPT IN WRITING IN THE PREVIOUS YEAR. THE LD. AO WITHOUT ASKING ANY EXPLANATION FROM THE ASSESSEE STRAIGHTAWAY TREATED THE RETURN OF INCOME AS DEFECTIVE INSPITE OF THE FACT THE SO CALLED DEFECTS HAV E BEEN RECTIFIED BY THE ASSESSEE . 4 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO 6 . AS PER LD. AR T HE ADDITION MADE TO THE INCOME OF ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/ S.68 IS INCORRECT AND INVALID FOR THE FOLLOWING AMONGST OTHER REASONS: - THE ADDITION ON ACCOUNT OF TOTAL CASH DEPOS ITS IN THE BANK ACCOUNTS IS MADE ON THE BELIEF THAT THE ASSESSEE WAS NOT CARRYING OUT ANY BUSINESS INSPITE OF THE FACT THAT HE WAS ENGAGED IN THE RETAIL BUSINESS. THE ADDITION IN RESPECT OF CASH CREDIT CAN BE MADE IF AND ONLY IF ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. ADMITTEDLY NO SUCH SUM WAS CREDITED IN THE BOOKS OF YOUR APPELLANT. HENCE NO SUCH ADDITION COULD BE MADE EVEN OTHERWISE ALSO. 7 . AS PER LD. AR IT WAS EXPLAINED BEFORE AO THAT CASH WAS DEPOSITED I N THE SAVING BANK ACCOUNTS OUT OF REALIZATION FROM SUNDRY DEBTORS AND CASH WITHDRAWN AT EARLIER OCCASIONS. FURTHERMORE IT WAS EXPLAINED BY THE ASSESSEE BEFORE AO AND CIT(A) THAT THE CASH WAS DEPOSITED IN THE SAVING BANK ACCOUNTS OUT OF CASH RECOVERED FROM SUNDRY DEBTORS OF HIS BUSINESS AND CASH WITHDRAWN FROM THE BANKS AT EARLIER OCCASIONS. ACCORDINGLY IT WAS CONTENDED THAT IN NO CIRCUMSTANCES ADDITION COULD EXCEED TO THE PEAK CREDIT OF RS.2,11,284/ - 5 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO 9 . ON THE OTHER HAND IT WAS CONTENDED BY LD. DR THAT A SSESSEE COULD NOT PROVE REALIZATION OF CASH FROM THE DEBTORS AND ITS DEPOSIT IN THE BANK ACCOUNT, ACCORDINGLY AO WAS JUSTIFIED IN MAKING ADDITION OF THE CASH DEPOSIT IN THE BANK ACCOUNT U/S 68 OF THE A CT . 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREF ULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM RECORD THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TOYS AND IN PLASTIC NOVELTY ITEMS ETC. OUT OF SALES AND REALIZATION FROM DEBTORS CASH W AS DEPOSITED IN BANK ACCOUNT. WE ALSO FOUND FROM THE BANK STATEMENTS THAT CASH WAS BEING DEPOSITED IN THE BANK ACCOUNTS AT SEVERAL PLACES I.E. JODHPUR, BOKARO, COCHIN, MADURAI, INDORE, SHILLONG, ASANSOL, BANGLORE, ETC. IT SHOWS THAT THE DEBTORS HAVE DEPOSITED CASH IN THE BANK ACCOUNTS OF THE ASSESSEE AS CON SIDERATION FOR PURCHASES MADE BY THEM. IT IS BEYOND IMAGINATION THAT THE ASSESSEE WOULD HAVE VISITED SUCH PLACES FOR DEPOSITING ANY CASH IN THE BANK ACCOUNTS. IT IS LOGICAL AND RATIONAL THAT CASH WITHDRAWN FROM THE BANK AND CASH RECOVERED FROM THE SUNDRY D EBTORS WOULD BE AVAILABLE FOR CASH DEPOSIT IN THE BANK ACCOUNT ON LATTER DATE UNLESS IT IS SHOWN THAT SUCH CASH WAS EITHER UTILISED BY THE ASSESSEE FOR ANY OTHER PURPOSES OR WAS SPENT. MERELY BECAUSE IN MANY CASES THE CASH WAS WITHDRAWN FROM ATM IT CANNOT BE PRESUMED THAT THE SAME WAS NOT AVAILABLE WITH THE ASSESSEE APPELLANT. IN THIS CASE THE LD. AO COULD NOT ESTABLISH 6 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO THAT THE CASH WAS DEPOSITED IN THE BANK ACCOUNT OUT OF ANY OTHER INCOME FROM UNDISCLOSED SOURCE. AGAIN THE AO HAS NOT DOUBTED THE WITHDRAWA LS OF SUCH CASH FROM THE BANK. HENCE, THE AO OUGHT TO HAVE ALLOWED SET OFF OF SUCH CASH AVAILABLE WITH THE A SSESSEE . IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS DULY EXPLAINED THE THEORY OF RECYCLING OF FUNDS. THE THEORY OF RECYCLING SO SUBMITTED WAS LOGICAL AND RATIONAL. THE AO COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THE CASH DEPOSITED IN THE BANK ACCOUNT WAS OUT OF ANY OTHER INCOME FROM UNDISCLOSED SOURCE. TELESCOPING IS ONE TYPE OF TECHNIQUE BY WHICH ONE DE LINKS ALL SUBSEQUENT TRANSACTIO NS OR AMOUNTS WHICH HAVE MERELY ROTATED, RECYCLED AND CONVERTED FROM ONE INTO ANOTHER. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE APPARENT AND OBVIOUS AND AS SUCH DEMAND FOR SUCH SET OFF MORE PARTICULARLY WHEN THE ASSESSING OFFICER COULD NOT PROVE IT OTH ERWISE. IN THE CASE OF ASSESSEE THE AO HAS SIMPLY IGNORED AND BRUSHED ASIDE THE EXPLANATION OF ASSESSEE ON IRRELEVANT FACTORS. WE HAD ALSO VERIFIED THE BANK STATEMENT SO FILE D BEFORE THE AO, WHEREIN BOTH DEPOSIT OF CASH AND WITHDRAWAL OF CASH WAS INDICATED , T HE DETAILS OF CASH DEPOSITED AND WITHDRAWN FROM THE BANKS HAS BEEN PERUSED, THE COMBINED PEAK OF SUCH DEPOSITS WORKS OUT TO BE RS.2,11,284/ - . HOWEVER, THE AO HAS IGNORED AND BRUSHED ASIDE THESE VITAL FACTS OF THE CASE AND IT IS WELL ESTABLISHED PROPOSI TION OF THE LAW THAT WHILE MAKING THE ASSESSMENT U/S 143(3), THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO 7 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO EVIDENCE OR ANY MATERIAL PLACED ON RECORD. THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT U/S 143(3) OF THE ACT (DHAKESHWARI COTTON MILLS LIMITED V / S. CIT 26 ITR 775, 782 - SC). IN OTHER WORDS, THE ASSESSMENT OF ANY PARTICULAR YEAR MUST NOT BE BASED ON MERE SUSPICION OR BARE GUESS WORK BUT ON LEGITIMATE MATERIAL FROM WHICH REASONABLE INFERENCE OF THE INCOME HAVING BEEN EARNED DURING THE ACCOUNTING YEAR COULD BE DRAWN . 11. ON O VER ALL CONSIDERATION OF ENTIRE MATERIAL S PLACED ON RECORD , IT WOULD BE REASONABLE TO UPH O LD ADDITION OF THE PEAK CREDIT OF RS. 2, 11, 2 84/ - . A C CORDINGLY TOTAL ADDITION SO UPHELD AMOUNT OF RS.2, 1 1,284/ - OUT OF TOTAL ADDITION OF RS.62,59,692/ - SO MADE BY AO . 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOU NCED IN THE OPEN COURT ON 12 AUG , 201 6 SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C. SHARMA) / JUD I C I AL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DAT ED : 12 . 0 7 .201 6 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE ASSESSEE 2. / THE RESPONDENT 8 ITA NO. 7079 / M UM/2014 (A.Y. 2009 - 10 ) SHRI MAYUR VALJI BHAYAANI VS. ITO 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBA I.