Income-tax Officer, V. Mr. Mustansir Mohammdali Kantawala, Raigad

ITA 718/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1621 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: K SRINIVASAN
• Keywords: Unexplained cash credit; Business income; Business expenditure; Peak credit
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.718/PN/2014 '% % / ASSESSMENT YEAR : 2010-11 ITO, WARD - 3, RAIGAD . / APPELLANT V/S MR. MUSTANSIR MOHAMMEDALI KANTAWALA, PLOT NO.16, SHETRA VIKAS YOJNA NO.3, BEHIND S.T. ROAD, ALIBAG, DIST. RAIGAD. PAN NO.ADNPK2097H . / RESPONDENT / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : SHRI K. SRINIVASAN / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 09-12-2013 OF THE CIT(A)-I, THANE RELATING TO ASS ESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS THE PARTNER OF M/S. TAHA METAL AND M/S. K ONKAN TIMBER AND PLYWOOD MART. HE DERIVES SHARE OF PROFIT ALON G WITH INTEREST AND REMUNERATION FROM THESE FIRMS. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSE SSEE WAS HAVING A SAVINGS BANK ACCOUNT WITH HDFC BANK LTD. BEAR ING / DATE OF HEARING :29.06.2016 / DATE OF PRONOUNCEMENT:30.06.2016 2 ITA NO.718/PN/2014 ACCOUNT NO.01041920001989 WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT. THE TOTAL DEPOSITS IN THE SAID BANK ACCOUNT AMOUNTS TO RS.75,44,655/- OUT OF WHICH RS.57,98,00 0/- HAS BEEN DEPOSITED IN CASH AND RS.17,46,655/- BY CHEQUE. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF S UCH CASH AND CHEQUE DEPOSITS MADE IN THE SAID UNDISCLOSED SAVINGS BANK ACCOUNT. IT WAS SUBMITTED BY THE ASSESSEE THAT THE C REDIT ENTRIES IN THE BANK ACCOUNT REPRESENTED SALE PROCEEDS OF TIMBER A ND WOOD TRADING BUSINESS DONE BY HIM IN HIS PROPRIETARY CAPACITY. THE DEBIT ENTRIES IN THE ACCOUNT REPRESENTED PAYMENTS MADE BY T HE ASSESSEE FOR PURCHASES AND OTHER BUSINESS EXPENSES. THE ASSESS EE FILED THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ON THE BASIS O F ENTRIES IN THE SAID BANK ACCOUNT FOR THE YEAR ENDED 31-03-2010 A S PER WHICH THE GROSS PROFIT WAS WORKED OUT AT RS.7,47,771/- ON THE TOTAL SALES OF RS.75,44,653/-. THE NET PROFIT WAS WORKED OUT AT RS.6,03 ,973/- WHICH AMOUNTS TO 8.01% OF THE TURNOVER. IT WAS ACCORDIN GLY REQUESTED THAT THE PROFIT OF RS.6,03,973/- REPRESENTING HIS INCOME FROM SALE PROCEEDS OF HIS UNDISCLOSED BUSINESS MAY BE TAXED. 3. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE SAID BANK ACCO UNT WAS NEVER DISCLOSED AND THE TRANSACTIONS CARRIED OUT IN THE BANK A CCOUNT WAS ALSO NOT DISCLOSED. AS REGARDS THE REPLY OF THE ASSESSE E THAT HE HAS DEPOSITED THE AMOUNT FROM TIME TO TIME IS CONCERNED, THE AO HELD THAT THE SAME IS ALSO NOT JUSTIFIABLE IN VIEW OF THE FACT THA T THE ASSESSEE IS NOT ENGAGED IN ANY BUSINESS ACTIVITY IN INDIVID UAL CAPACITY WHICH NECESSITATES SUCH CASH DEPOSITS. THE ASS ESSEE HAS SHOWN ITS SOURCE OF INCOME FROM THE 2 PARTNERSHIP FIRMS AN D MISCELLANEOUS INCOME BESIDES SHARE OF PROFIT AND REMUNERATIO N AND 3 ITA NO.718/PN/2014 INTEREST FROM THE ABOVE FIRMS. THEREFORE, THERE IS POSSIBILITY THAT THE UNACCOUNTED PROFIT FROM THE FIRM HAS BEEN DEPOSITED IN THE UNDISCLOSED BANK ACCOUNT. HE FURTHER NOTED THAT THE AS SESSEE HAS DEPOSITED CASH ON 146 OCCASIONS DURING THE YEAR WHICH S HOWS THAT THE ASSESSEE PREFERS NOT TO HOLD CASH IN HAND AND RATH ER TO DEPOSIT CASH IN THE BANK ACCOUNT AS AND WHEN RAISED/EARNED. F URTHER, THE DEPOSITS ARE ALSO IN BIGGER DENOMINATIONS. REJECTING THE V ARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND INVOKING THE PROV ISIONS OF SECTION 68 THE AO MADE ADDITION OF RS.75,44,775/- WHICH IS T HE AMOUNT DEPOSITED IN THE BANK ACCOUNT. 4. BEFORE CIT(A) IT WAS SUBMITTED THAT DURING THE COURSE OF IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E. 2009-10 THE SA ME SAVINGS BANK ACCOUNT WITH HDFC BANK WAS NOT DISCLOSED W HEREIN THE TOTAL CREDITS WERE RS.48,39,641/-. THE PROFIT AND LOSS A CCOUNT WAS PREPARED ON THE BASIS OF CREDIT ENTRIES IN THE BANK ACCOUNT. THE GROSS PROFIT WAS DETERMINED AT RS.3,67,163/- AND NET PROFIT WAS SHOWN AT RS.2,99,273/-. THE AO IN THE ASSESSMENT PROCEE DINGS FOR A.Y. 2009-10 HAD MADE TOTAL ADDITION OF RS.5,21,990/- WHICH AMOUNTED TO 10.79% OF THE TOTAL CREDITS IN THE BANK ACCO UNT AMOUNTING TO RS.48,39,641/-. THE ABOVE AMOUNT WAS DETER MINED BY DISALLOWING AN AMOUNT OF RS.2,22,717/- BEING 5% OF THE PURCHASES OVER AND ABOVE THE NET PROFIT OF RS.2,99,273/- DE TERMINED BY THE ASSESSEE ON ACCOUNT OF SUCH CREDIT ENTRIES. SINC E IN THE IMPUGNED ASSESSMENT YEAR SUCH PROFIT WORKS OUT TO RS.6,0 3,973/- THE SAME SHOULD HAVE BEEN ACCEPTED BY THE AO BY MAKIN G THE DISALLOWANCE OF 5% OF THE PURCHASES, I.E. RS.3,38,615/- AND THE REBY MAKING A NET ADDITION OF RS.9,42,588/-. RELYING ON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASAOMI SATSAN G VS. CIT 4 ITA NO.718/PN/2014 REPORTED IN 193 ITR 321 IT WAS SUBMITTED THAT PRINCIPLE O F RESJUDICATA SHOULD BE OBSERVED IN TAX PROCEEDINGS ALSO U NLESS THERE WAS SIGNIFICANT REASON TO DEPART FROM THE SAME. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) RESTRICTED SUCH DISALLOWANCE TO RS.15,30,602/- AS A GAINST RS.75,44,655/- ADDED BY THE AO BY OBSERVING AS UNDER : 12. I HAVE CONSIDERED THE APPELLANTS SUBMISSIONS, THE OBSERVATIONS OF THE A.O. IN THE ASSESSMENT ORDER AND THE FACTS OF TH E CASE. ADMITTEDLY, THE BANK ACCOUNT WITH HDFC BEARING ACCOUNT NO.01041 930001989 WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT OR IN THE RETURN OF INCOME. THE CREDIT ENTRIES IN THE BANK ACCOUNT AMOUNTING TO RS.75 ,44,655/- HAVE BEEN STATED TO BE THE SALE PROCEEDS OF THE APPELLANTS UNDISCLOSED BUSINESS OF SALE OF TIMBER AND PLYWOOD DONE IN HIS PROPR IETARY CAPACITY. THE PROFIT & LOSS ACCOUNT ON THE BASIS OF ENTRIES IN THE BANK ACCOUNT HAS BEEN PREPARED BY THE APPELLANT AND FILED BEFORE THE AO., WORKING OUT THE NET PROFIT FROM THIS UNDISCLOSED BUSINESS OF RS. 6 ,03,973/-. IN THIS REGARD, IT IS SEEN THAT THOUGH THE A.O. HAD ACCE PTED THE APPELLANT'S CONTENTION REGARDING THE CREDITS IN THE BANK ACCOUNT WITH HDFC BEING THE SALE PROCEEDS FROM HIS BUSINESS OF SALE OF TIMBER AND PLYWOOD IN THE IMMEDIATELY PRECEDING YEAR BUT ON WHAT BASIS THE AO. HAD ACCEPTED THIS CONTENTION OF THE APPELLANT HAS NOT BEEN MENTIONED I N THE ASSESSMENT ORDER FOR THE A.Y. 2009-10. DURING THE YEAR UNDER C ONSIDERATION ALSO, NO DOCUMENTARY EVIDENCE OR ANY OTHER DETAILS ARE AVAILA BLE ON RECORD TO SHOW THAT THE CREDIT ENTRIES IN THE APPELLANT'S ACCOUN T WITH HDFC BANK REPRESENT THE SALE PROCEEDS OF HIS BUSINESS OF SALE OF TIM BER AND PLYWOOD. THEREFORE, THE CREDIT ENTRIES IN THE BANK A CCOUNT REMAINED UNEXPLAINED AND UNSUBSTANTIATED. HOWEVER, THE WHOLE O F THE CREDIT ENTRIES CANNOT BE ADDED TO THE APPELLANT'S INCOME BEC AUSE THERE ARE DEBIT ENTRIES ALSO, WHICH HAVE TO BE TAKEN INTO ACCO UNT. FROM A PERUSAL OF THE BANK ACCOUNT, IT IS SEEN THAT THE PEAK CREDIT IN THE BANK ACCOUNT FOR THE YEAR UNDER CONSIDERATION IS RS. 15,30,602/- A S ON 29.12.2009. THEREFORE, THE ADDITION ON ACCOUNT OF UNEXPLAINED E NTRIES IN THE BANK ACCOUNT OF THE APPELLANT SHOULD HAVE BEEN MADE FOR T HIS AMOUNT. THEREFORE, THE ADDITION ON ACCOUNT OF UNEXPLAINED E NTRIES IN THE APPELLANT'S BANK ACCOUNT IS RESTRICTED TO RS. 15,30,602 /-. THE A.O. IS DIRECTED ACCORDINGLY. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A)-I, THANE HAS ERRED IN RESTRICTING THE ADDIT ION OF RS.75,44,775/- MADE U/S.68 ON ACCOUNT OF UNEXPLAINED CREDITS IN ASSESSEES BANK ACCOUNT TO RS.15,30,602/-, OVERLOOKING TH E FACT THAT THE BANK ACCOUNT WITH HDFC BANK LTD. WAS NOT DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME AND THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES OF CASH/CHEQUE DEPOSITS IN HIS UNDISCLOSED BANK ACC OUNT. 5 ITA NO.718/PN/2014 2. THE APPELLANT PRAYS THE ORDER OF THE LD.CIT(A)-I, THANE, MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY GROUND/GROUNDS, WHICH MAY BE NECESSARY. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CHALLENG ED THE ORDER OF THE CIT(A). HE SUBMITTED THAT WHEN THE ASSESSE E HAD NOT DISCLOSED THE BANK ACCOUNT WHERE SUBSTANTIAL DEPOSITS WE RE MADE THE LD.CIT(A) WAS NOT JUSTIFIED IN BRINGING TO TAX ONLY PEA K AMOUNT INSTEAD OF TAXING THE ENTIRE DEPOSITS MADE IN THE SAID BAN K ACCOUNT WHICH WAS NOT DISCLOSED TO THE DEPARTMENT. FURTHER, TH E ASSESSEE HAS ALSO FAILED TO EXPLAIN THE SOURCE OF SUCH CASH AND CHE QUE DEPOSITS IN HIS UNDISCLOSED BANK ACCOUNT. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF TH E AO BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT IN TH E IMMEDIATELY PRECEDING ASSESSMENT YEAR ALSO THE SAME AO HAS ACCEPTED THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE ON THE BASIS OF THE CREDIT ENTRIES IN THE SAID HDFC BANK ACCOUN T AND FURTHER DISALLOWED 5% OF THE PURCHASES SHOWN BY THE ASSESSEE IN THE SAID TRADING ACCOUNT AND THEREBY HAD MADE ADDITION OF RS.5,21,990/- ONLY AS AGAINST THE TOTAL DEPOSITS OF RS.48,39,641/-. 9. REFERRING TO THE COPY OF THE BANK ACCOUNT HE SUBMITT ED THAT THERE WERE VARIOUS DEBIT ENTRIES AND CREDIT ENTRIES APAR T FROM CERTAIN CASH DEPOSITS. THE DEPOSITS IN THE SAID BANK ACCOUNT HA S BEEN TREATED AS SALE PROCEEDS BY THE SAME AO IN THE PRECED ING ASSESSMENT YEARS. THEREFORE, UNDER IDENTICAL FACTS AND 6 ITA NO.718/PN/2014 CIRCUMSTANCES THE AO CANNOT HELD THAT THE DEPOSITS IN T HE IMPUGNED ASSESSMENT YEAR ARE NOT THE SALE PROCEEDS. H E SUBMITTED THAT THE LD.CIT(A) HAS TAKEN A REASONABLE VIEW BY TAXING ONLY THE PEAK CREDIT AND THE ASSESSEE HAS NOT GONE IN APPEAL AN D HAS ACCEPTED THE SAME. HE FURTHER SUBMITTED THAT THE AO H AS INVOKED THE PROVISIONS OF SECTION 68 TO TAX THE DEPOSITS MADE IN THE BANK ACCOUNT. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND N. GANDHI REPORTED IN 141 I TR 67 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N HAS HELD THAT BANK PASSBOOK IS NOT A BOOK MAINTAINED BY THE ASS ESSEE OR AT HIS INSTRUCTIONS AND THEREFORE THE CASH CREDIT FOR THE PR EVIOUS YEAR SHOWN IN THE ASSESSEES BANK PASSBOOK BUT NOT SHOWN IN THE CASH BOOK MAINTAINED BY THE ASSESSEE IN THAT YEAR DOES NOT FA LL WITHIN THE AMBIT OF SECTION 68 OF THE I.T. ACT AND THEREFORE THE AMO UNT SO CREDITED IS NOT CHARGEABLE TO TAX AS THE INCOME OF THE A SSESSEE OF THAT PREVIOUS YEAR. HE ACCORDINGLY SUBMITTED THAT NO D ISALLOWANCE U/S.68 SHOULD HAVE BEEN MADE BY THE AO ON ACCOUNT OF DEPOSITS MADE IN THE BANK PASSBOOK. HOWEVER, SINCE THE ASSESSEE HAS NOT CHALLENGED THE AMOUNT SUSTAINED BY THE LD.CIT(A) AND SINCE THE LD.CIT(A) HAS RESTRICTED THE ADDITION ONLY TO THE PEAK CR EDIT, THEREFORE, THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUN D RAISED BY THE REVENUE SHOULD BE DISMISSED. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INST ANT CASE HAS NOT DISCLOSED THE BANK ACCOUNT MAINTAINED WITH HDFC BANK LTD., WHERE SUBSTANTIAL DEPOSITS WERE MADE IN CASH AS WELL AS 7 ITA NO.718/PN/2014 CHEQUE. THERE ARE ALSO VARIOUS WITHDRAWALS FROM THE SAID BANK ACCOUNT. WE FIND THE AO REJECTING THE EXPLANATION GIVEN B Y THE ASSESSEE THAT ONLY PROFIT SHOULD BE TAXED ON THE DEPOS ITS, MADE ADDITION OF RS.75,44,775/- U/S.68 OF THE I.T. ACT BEING THE UNEXPLAINED CASH CREDITS IN THE BANK ACCOUNT MAINTAINED W ITH HDFC BANK LTD., THE ACCOUNT NUMBER OF WHICH HAS ALREADY BEEN GIVEN EARLIER. WE FIND THE LD.CIT(A) RESTRICTED SUCH ADDITION TO RS.15,30,602/- BEING THE PEAK CREDIT IN THE SAID BANK ACCO UNT AS ON 29-12-2009. HE HAS ALSO GIVEN A FINDING THAT IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR THE SAME AO HAS ONLY MADE DISALLOWANCE OF 5% OF THE PURCHASES AND ADDED THE SAME T O THE PROFIT DETERMINED BY THE ASSESSEE ON THE BASIS OF SUCH D EPOSITS IN THE SAID BANK ACCOUNT. UNDER THESE CIRCUMSTANCES, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ADMITTEDLY, THE BA NK ACCOUNT MAINTAINED WITH HDFC BANK LTD., WHICH WAS NOT DIS CLOSED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR, WAS A LSO NOT DISCLOSED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING AS SESSMENT YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE PRECEDIN G ASSESSMENT YEAR THE AO HAD CONFRONTED THE SAME TO TH E ASSESSEE AND THE ASSESSEE HAD PREPARED A PROFIT AND LOSS ACCOU NT ON THE BASIS OF THOSE DEPOSITS IN THE SAID BANK ACCOUNT AND HAD DISCLOSED NET PROFIT OF RS.2,99,273/-. THE AO HAD DETERMINED THE INCO ME AT RS.5,21,990/- ON ACCOUNT OF SUCH BANK DEPOSITS OF RS.48,39,6 41/- BY MAKING DISALLOWANCE OF RS.2,22,717/- BEING 5% OF THE PURCHASES. THEREFORE, WHEN THE VERY SAME BANK ACCOUNT WAS NOT DISCLOSED FOR THIS YEAR ALSO, WE DO NOT FIND ANY REASON AS TO WHY THE AO HAS TAXED THE ENTIRE DEPOSIT OF RS.75,44,655/- ESPECIALL Y WHEN THE BANK ACCOUNT CONTAINS BOTH DEBIT ENTRIES AND CREDIT ENTRIES. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THOSE D EBIT ENTRIES 8 ITA NO.718/PN/2014 CANNOT BE IGNORED ALTOGETHER. SINCE THE LD.CIT(A) AFTER C ONSIDERING THE TOTALITY OF THE FACTS OF THE CASE HAS SUSTAINED ADDIT ION OF RS.15,30,602/- WHICH IS THE PEAK CREDIT IN THE BANK ACCOUN T AS ON 29-12-2009, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A). ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND R AISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-06-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED :30 TH JUNE, 2016. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - 1, THANE 4. 5. 6. THE CIT-1, THANE $ ''(, (, / DR, ITAT, A PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE