NARESH R.NAIK, MUMBAI V. ITO WD 19(3)(3), MUMBAI

ITA 759/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8979 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Unexplained cash credit
• Section: 143(3); 10; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 759/MUM/2014 : (A.Y : 2007 - 08) NARESH R. NAIK D1 - 51/488, 3 RD FLOOR, MIG GROUP CHS, GANDHI NAGAR, BANDRA EAST, MUMBAI 400 051 PAN : AABPN1467H ( APPELLANT ) VS. ITO, WARD - 19(3)(3), MUMBAI (RESPONDENT) ASSESSEE BY : JITENDRA SINGH REVENUE BY : SUMAN KUMAR DATE OF HEARING : 03/01/2017 DATE OF PRONOUNCEMENT : 11 /01/2017 O R D E R PER JASON P. BOAZ , AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 18, MUMBAI DATED 20.11.2013 FOR A.Y 2007 - 08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESSEE, ENGAGED IN BUSINESS AS AN ESTATE AGENT AND PROVIDING ALLIED SERVICES, FILED HIS RETURN OF INCOME FOR A.Y 2007 - 08 ON 31.3.2009 DECLARING INCOME OF RS.90,290/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS 2 NARESH R. NAIK ITA NO. 759/MUM/2014 COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 7.12.2009 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.11,75,080/ - IN VIEW OF THE FOLLOWING ADDITIONS : - ( I ) UNEXPLAINED DEP OSITS IN BANK ACCOUNT U/S 69A RS.10,34,780/ - (II) BANK INTEREST RS.12/ - (III) UNSECUR E D LOAN U/S 68 RS.50,000/ - 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 7.12.2009 FOR A.Y 2007 - 08, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) - 18, MUMBAI . THE LD. CIT(A) DISPOSED THE APPEAL VIDE THE IMPUGNED ORDER DATED 20.11.2013 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3. AGGRIEVED BY THE ORDER OF THE CIT(A) - 18, MUMBAI DATED 20.11.2013 FOR A.Y 2007 - 08, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 18 COMMITTED A GROSS ERROR OF LAW AND FACT IN CONFIRMING TO THE EXTENT OF RS. 3,80,816/ - OUT OF ADDITION OF RS. 10,34,780/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 69A BEING THE UNEXPLAINED CREDIT IN THE BANK ACCOUNT OF THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAVING ACCEPTED THAT THE CREDIT IN THE BANK ACCOUNT BEING SALES PROCEEDS IN CASH OF APPELLANTS BUSINESS OF COOL STUFF, GROSSLY ERRED IN SUSTAI NING THE IMPUGNED ADDITION BY IGNORING OTHER EXPENDITURE INCURRED BY THE APPELLANT SUCH AS SHOP RENT, ELECTRICITY, TELEPHONE BILL ETC. IN CARRYING ON THE SAID BUSINESS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COMMITTED A GROSS ERROR OF LAW AND FACT IN CONFIRMING ADDITION OF RS. 50,000/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT BEING AN UNSECURED LOAN TAKEN BY THE APPELLANT DURING THE YEAR. 3 NARESH R. NAIK ITA NO. 759/MUM/2014 4. GROUND NO. 1 & 2 - ADDITION U/S 69A 4.1 IN THESE GROUNDS, THE ASSESSEE ASSAILS THE IMPUGNED ORDER OF THE LD. CIT(A) IN UPHOLDING THE ADDITION OF RS.10,34,780/ - MADE BY THE ASSESSING OFFICER (AO') U/S 69A OF THE ACT TO THE EXTENT OF RS.3,80,816/ - AS UNEXPLAINED CREDITS IN THE ASSESSEES BANK ACCOUNT WITH BHARAT CO - OP. BANK. IT IS F URTHER CONTENDED THAT WHILE THE LD. CIT(A) ACCEPTED THAT THE CR E DITS IN THE BANK ACCOUNT AS BEING SALES PROCEEDS OF THE ASSESSEES BUSINESS, HE ERRED IN NOT ALLOWING THE ASSESSEE SET OFF OF OTHER EXPENDITURE INCURRED FOR CARRYING ON THE SAID BUSINESS SUCH AS SHOP RENT, ELECTRICITY, TELEPHONE, ETC. THE LD. AR WAS HEARD IN SUPPORT OF THE GROUNDS RAISED AND REITERATED THE SUBMISSIONS PUT FORTH BY THE ASSESSEE BEFORE THE LD. CIT(A). THE LD. AR FOR THE ASSESSEE THEN DREW THE ATTENTION OF THE BENCH TO THE FINDI NG RENDERED BY THE LD. CIT(A) ON THIS ISSUE AT PARA 3.4 OF THE IMPUGNED ORDER. IT IS CONTENDED THAT AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND THE ASSESSING OFFICERS REMAND REPORT IN THE MATTER, AND AGREEING WITH THE CONTENTIONS OF THE ASSESSEE REG ARDING EVIDENCES FILED TO EXPLAIN THE PURCHASES/SALES AND DEBITS/CREDITS IN THE BHARAT CO - OP. BANK ACCOUNT, THE LD. CIT(A) FINALLY RENDERED A DECISION UPHOLDING THE ADDITION TO EXTENT OF RS.3,80,816/ - , WHICH IS CONTRADICTORY TO HIS FINDINGS. IT IS PRAYED THAT THE ADDITION MADE U/S 69A OF THE ACT BE DELETED IN ITS ENTIRETY. IT WAS ALSO SUB MITTED THAT THE ASSESSEE HAD CONTINUED THE SAME BUSINESS IN THE SUBSEQUENT YEARS AND IN THE ASSESSMENTS FOR A.YS 2008 - 09 AND 2009 - 10 COMPLETED U/S 143(3) OF THE ACT, NO SUCH ADDITIONS WERE MADE AS THE 4 NARESH R. NAIK ITA NO. 759/MUM/2014 ASSESSING OFFICER CONSIDERED THE CASH DEPOSITS INTO THE SAID BHARAT CO - OP. BANK ACCOUNT AS CASH SALES. 4.2 PER CONTRA, THE LD. D R SUPPORTED AND PLACED RELIANCE ON THE FINDING OF THE LD. CIT(A) IN THE IMPUGNED ORDER. 4 .3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS OF THE MATTER ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON EXAMINATION OF THE ASSESSEES DEPOSITS IN HIS ACCOUNT IN BHARAT CO - OP. BANK, WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN CERTAIN CREDITS THEREIN AND IN THAT VIEW OF THE MATTER TREATED CREDITS TO THE EXTENT OF RS. 10,34,780/ - AS UNEXPLAINED, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE UND ER THE HEAD OTHER SOURCES AS UNEXPLAINED MONEY U/S 69A OF THE ACT. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND THE ASSESSING OFFICERS REPORT DISPOSED OFF THE MATTER, AS UNDER, AT PARA 3.4 THEREOF : - FROM THE PERUSAL OF THE REMAND REPORT AND SUBMISSIONS OF THE APPELLANT IN RESPONSE TO THE REMAND REPORT AS STATED ABOVE IT IS CLEAR THAT THE ASSESSEE IS A SMALL BUSINESS MAN MAINTAINING NO BOOKS OF ACCOUNTS. AIL THE PURCHASES HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES BUT SALES ARE RETAIL SALES ON CASH BASIS AND THESE CASH HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. IT WAS MENTIONED THAT ASSESSEE IS RUNNING THE SAME BUSINESS IN THE YEAR UNDER CONSIDERATION AND IN THE SUBSEQUENT YEARS I.E. A.Y.2008 - 09 AND 2009 - 10 . THE ASSESSEE IS DEPOSITING CASH SALES IN HIS BANK ACCOUNT WHICH WERE ACCEPTED BY THE AO IN THE ASST. YEARS 2008 - 09 AND 2009 - 10 BY PASSING ORDER U/S.143(3) OF THE I.T. ACT. BUT IN THE YEAR UNDER CONSIDERATION THE AO HAS NOT ACCEPTED THE CASH SALES. FROM T HE 5 NARESH R. NAIK ITA NO. 759/MUM/2014 PERUSAL OF THE DOCUMENTS SUBMITTED BEFORE THE AO AND SUBMITTED BEFORE ME IT IS UNDISPUTED THAT ASSESSEE IS A SMALL BUSINESSMAN MAINTAINING NO BOOKS OF ACCOUNTS AND THE SALES ARE MADE IN CASH ON RETAIL BASIS. SINCE THE SALES ARE MADE ON CASH BASIS NATURA LLY CASH BILLS HAS TO BE DEPOSITED IN THE BANK ACCOUNT AND MOREOVER THE PURCHASES WERE MADE BY THE APPELLANT THROUGH ACCOUNT PAYEE CHEQUES WHICH WERE ISSUED FROM THE SAME BANK ACCOUNT. REGARDING THE CONFIRMATIONS THE AO HAS RAISED SOME OBJECTIONS BUT THE COPY OF THE REMAND REPORT SHOWS THAT IN CASE OF IDEAL DISTRIBUTOR EMAIL WAS SENT TO THE AO CONFIRMING THE TRANSACTION FOR AY.2006 - 07 AMOUNTING TO RS.5,07,806.98. THE ADDRESS AND PAN ARE ALSO MENTIONED PROPERLY. SIMILARLY THE OBJECTION RAISED BY THE AO TO P RODUCE DOCUMENTS TO PROVE THE SOURCE OF CASH DEPOSIT NOT PRODUCED IT IS CLEAR THAT NO SALES BILLS ARE ISSUED BY THE APPELLANT AND ALL SMALL PETTY SALES CASH RECEIVED IS DEPOSITED IN THE BANK ACCOUNT. MOREOVER, THE CASH DEPOSIT OF RS.10,34,780/ - IS NOT DEPO SITED ON A SINGLE DAY BUT IT IS A TOTAL SUM OF CASH DEPOSITED IN THE WHOLE YEAR. THE OBJECTION OF THE AO THAT SALES BILLS WERE NOT PRODUCED, REGISTER, DAILY CHALLANS WERE NOT PRODUCED IS WITHOUT ANY REASON BECAUSE THE ASSESEE IS A SMALL TRADER NOT ISSUING ANY SALES BILLS AND NOT MAINTAINING ANY BOOKS OF ACCOUNTS THEN HOW CAN HE PRODUCE OTHER EVIDENCES. THE COMPLETE CONFIRMATION OF PURCHASES HAVE BEEN PRODUCED BEFORE THE AO WHICH HE HAS NOT ACCEPTED ONLY BECAUSE OF MINOR OBJECTIONS OF PAN AND COMPLETE ADDRE SSES WERE NOT GIVEN PROPERLY. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES IT IS HELD THAT THE ASSESSEE HAS SUBMITTED THE CONFIRMATION OF PURCHASES IN THE FOLLOWING CASES. (I) IDEAL DISTRIBUTORS - RS.507806.98 (II) NAIK ENTERPRISES - RS. 62488.25 (III) ARPIT ENTERPRISES - RS. 54602.47 (IV) CHIC AGENCIES - RS. 12968.50 (V) NILESH BHASKAR - RS. 12500.00 (VI) SUNITA KHOSARE - RS. 3600.00 TOTALING TO RS.6,53,964/ - WHICH IS CLEAR EVIDENCE THAT THE ASSESSEE HAS MADE PURCHASES OUT OF THE CASH SALE PROCEED IN THE BANK ACCOUNT. 6 NARESH R. NAIK ITA NO. 759/MUM/2014 THEREFORE, THE ADDITION MADE TO THE AMOUNT OF RS.6,53,964/ - IS DELETED AND BALANCE IS CONFIRMED. THE GROUND OF APPEAL IS PARTLY ALLOWED. 4.3.2 FROM A PERUSAL OF THE FINDING OF THE LD. CIT(A) (SUPRA) IT IS SEEN THAT THE ASSESSEE HAS BEEN ALLOWED PARTIAL RELIEF OF RS.6,53,964/ - LEADING TO SUSTENANCE OF THE AFORESAID ADDITION U/S 69A OF THE ACT TO THE EXTENT OF RS.3,80,816 / - . A PERUSAL OF THE OPERATIVE PART OF THE IMPUGNED ORDER OF THE LD. CIT(A) (SUPRA) INDICATES THAT THE LD. CIT(A) AFTER CONSIDERING THE DOCUMENTS/MATERIAL ON RECORD OBSERVES THAT IT IS UNDISPUTED THAT THE ASSESSEE IS A SMALL BUSINESSMAN MAINTAINING NO BOO KS OF ACCOUNTS; THAT WHILE ALL PURCHASES ARE MADE BY ACCOUNT PAYEE CHEQUES, SALES ARE MADE ON CASH BASIS AND IT IS THIS CASH THAT HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. THE LD. CIT(A) ALSO NOTES THAT THE ASSESSEE HAS BEEN RUNNING THE SAME BUSINESS IN EARLIER YEARS AND SUBSEQUENT YEARS ALSO AND THAT THE DEPARTMENT HAS ACCEPTED THIS POSITION IN ORDERS OF ASSESSMENT PASSED AFTER SCRUTINY U/S 143(3) OF THE ACT FOR A.YS 2008 - 09 AND 2009 - 10. IT IS ALSO SEEN THAT APART FROM FINDING NO DISCREPAN CY WITH THE ASSESSEES PURCHASES WHICH ARE MADE THROUGH BANKING CHANNELS, THE LD. CIT(A) A L S O BRUSHED ASIDE THE ASSESSING OFFICERS OBSERVATIONS ON CONFIRMATIONS FROM PURCHASERS AND ON NON PRODUCTION OF SALE BILLS TO PROVE THE SOURCE OF CASH DEPOSITS BY NOTING THAT IT IS CLEAR THAT NO SALES BILLS ARE ISSUED BY THE ASSESSEE AND CASH RECEIVED ON SALES BEING SMALL/PETTY, ARE DEPOSITED IN THE SAID BANK ACCOUNT. THE LD. CIT(A) ALSO DISCOUNTED THE ASSESSING OFFICERS OBJECTIONS ON CONFIRMATIONS THAT SALES BILLS, REGI STER, DAILY CHALLANS WERE NOT PRODUCED, OBSERVING THAT IT IS IMPOSSIBLE FOR THE ASSESSEE TO 7 NARESH R. NAIK ITA NO. 759/MUM/2014 PRODUCE THE SAME SINCE HE IS NOT ISSUING SALE BILLS A N D NOT MAINTAINING ANY BOOKS OF ACCOUNT. AFTER MAKING THE ABOVE OBSERVATIONS, WE FIND IT STRANGE THAT THE LD . CIT(A) SHOULD PROCEED TO UPHOLD THE ADDITION TO THE EXTENT OF RS.3,80,816/ - ON THE BASIS THAT CONFIRMATIONS OF PURCHASES WERE RECEIVED FROM SIX PARTIES LISTED IN THE ORDER AMOUNTING TO RS.6,53,964/ - . THIS AFTER EXAMINING THE ASSESSEES PURCHASES AND REN DERING A FINDING THAT ALL THE PURCHASES HAVE BEEN MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES FROM THE SAID BANK ACCOUNT OF THE ASSESSEE. IN THESE PECULIAR FACTS AND CIRCUMSTANCES OF THE IMPUGNED ORDER OF LD. CIT(A) IN THE CASE ON HAND AS DISCUSSED ABOVE, WE FIND THAT THE ADDITION U/S 69A OF THE ACT UPHELD BY THE LD. CIT(A) TO THE EXTENT OF RS.3,80,816/ - IS UNSUSTAINABLE AS THEY GO AGAINST THE FINDINGS OF FACT RENDERED BY THE LD. CIT(A) HIMSELF ON THE PURCHASES AND SALES MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. MOREOVER, OUR VIEW DRAWS SUPPORT ALSO FROM THE OBSERVATION BY THE LD. CIT(A) IN HIS ORDER (SUPRA), THAT THE ASSESSEE WAS CARRYING OUT THE VERY SAME BUSINESS IN EARLIER YEARS AND SUBSEQUENT YEARS ALSO AND THE SAME HAS BEEN ACCEPTE D BY THE DEPARTMENT IN SCRUTINY ASSESSMENTS PASSED U/S 143(3) OF THE ACT FOR A.Y 2008 - 09 AND 2009 - 10. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.3,80,816/ - CONFIRMED BY THE LD. CIT(A) AS IT IS UNSUSTAINABLE IN THE LIGHT OF THE FINDINGS OF FACT RENDERED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. CONSEQUENTLY, GROUNDS NO. 1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED AS INDICATED ABOVE. 8 NARESH R. NAIK ITA NO. 759/MUM/2014 5. GROUND NO. 3 - ADDITION OF RS.5 0,000/ - U/S 68 OF THE ACT 5.1 IN THIS GROUND, THE ASSESSEE ASSAILS THE ORDER OF THE LD. CIT(A) IN CONFIRMING ADDITION ON ACCOUNT OF UNSECURED LOAN OF RS.50,000/ - MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. EXCEPT FOR RAISING THIS GROUND, THE SAME W AS NOT URGED BY THE LD. AR BEFORE US. WE, THEREFORE, DISMISS THIS GROUND NO. 3 AS BEING DEVOID OF MERIT AND UPHOLD THE ORDERS OF THE AUTHORITIES BELOW. 6. IN THE RESULT, THE ASSESSEES APPAL FOR A.Y 2007 - 08 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 T H JANUARY, 2017. SD/ - SD/ - (RAM LAL NEGI) JUDICIAL MEMBER ( JASON P. BOAZ ) ACCOUNTANT MEMBER MUMBAI, DATE : 1 1 T H JANUARY , 201 7 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, B BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI