INCOME TAX OFFICER 30(3)(5), MUMBAI V. VIPUL RAMESHCHANDRA SHAH, MUMBAI

ITA 77/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4984 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SATYANARYAN RAJU
• Keywords: Rejection of books of accounts; Unexplained investment; Depreciation; Income from undisclosed sources; Source of fund; Additional evidence
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI JOGINDER SINGH (VICE PRESIDENT) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 77/MUM/2018 ASSESSMENT YEAR: 2012 - 13 INCOME TAX OFFICER - 30(3)(5), ROOM NO. 605, 6 TH FLOOR, C - 13, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051. VS. SHRI VIPUL RAMESHCHANDRA SHAH, 502 B MATRUKRUPA CHS, PANDIT SOLICITOR RD, OPP. ELEPHANTA BLDG. PODDAR ROAD, MUMBAI - 400064. PAN NO. AAIPS6159C APPELLANT RESPONDENT REVENUE BY : M R. B. SATYANARYAN RAJU , DR ASSESSEE BY : NONE DATE OF HEARING : 17/01/2019 DATE OF PRONOUNCEMENT : 22/01/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2012 - 1 3 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 41 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 144 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THOUGH THE CASE WAS FIXED FOR HEARING ON 17.01.2019, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE TRIBUNAL ON THE ABOVE DATE. THE ASSESSEE HAS N OT FILED ANY ADJOURNMENT PETITION. THUS WE PROCEED TO DISPOSE OF F THIS ORDER ON MERIT . SHRI VIPUL ITA NO. 77/MUM/2018 2 3 . THE GROUNDS RAISED BY THE REVENUE IN THIS IS APPEAL IS THAT (I) THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER (AO) TO DELETE THE ADDITION OF RS.78,00,000/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT, EVEN THOUGH THE AO IN REMAND REPORT, FOUND THAT THE LOAN ACCOUNT WAS UNDISCLOSED AND SOURCE OF REPAYMENT REMAINED UNEXPLAINED, AND (II) THE LD. CIT(A) ERRED IN DIRECTING THE AO TO RESTRICT THE ADDITION ON ESTIMATION O F GP @ 5.15% INSTEAD OF 6.50% WITHOUT GIVING ANY SPECIFIC REASON FOR RELIEF. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME OF THE ASSESSMENT YEAR (AY) 2012 - 13 ON 29.03.2013 DECLARING TOTAL INCOME OF RS.18,29,060/ - . THE NATURE OF BUSINESS OF THE ASSESSEE IS TRADING, MANUFACTURING AND JOB WORKING OF GARMENTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAD PURCHASED IMMOVABLE PROPERTY OF RS.97,20,000/ - ON 29.0 4.2011. AS THERE WAS NO COMPLIANCE BY THE ASSESSEE TO THE LETTER OF THE AO REQUESTING FOR FURNISHING DETAILS OF PROPERTY PURCHASED, COPY OF AGREEMENT, SOURCE OF FUND, COPY OF BANK PASSBOOK, NAME OF THE PERSON FROM WHOM THE PROPERTY WAS PURCHASED, THE AO MA DE AN ADDITION OF THE ABOVE SUM OF RS.97,20,000/ - AS UNEXPLAINED INVESTMENT TO THE INCOME SHOWN BY THE ASSESSEE. 4.1 THE AO FURTHER FOUND THAT THE ASSESSEE HAD DEPOSITED RS. 9,19,59,672/ - IN CASH IN HIS BANK ACCOUNTS AND ISSUED CHEQUES TO VARIOUS PARTIES. A S THE ASSESSEE FAILED TO PRODUCE (I) THE BOOKS OF ACCOUNTS AS DOCUMENTS ON THE BASIS OF WHICH TOTAL INCOME HAS BEEN COMPUTED, (II) SHRI VIPUL ITA NO. 77/MUM/2018 3 DETAILS WITH REGARD TO HIS SALES, PURCHASES, EXPENSES, SUNDRY DEBTORS, SUNDRY CREDITORS, CASH DEPOSIT IN BANK ACCOUNTS, OPE NING STOCK, CLOSING STOCK INVENTORY AND DETAILS OF DEPRECIATION CLAIMED, THE AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMATED THE GROSS PROFIT @ 6.50% WHICH WORKS OUT TO RS.83,18,616/ - . THUS THE AO BROUGHT TO TAX THE DIFFERENCE OF RS.3 0,54,482/ - . AS THE ASSESSEE FAILED TO PRODUCE THE DOCUMENTS CALLED FOR, THE AO MADE THE ADDITION U/S 144 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). IT HAS BEEN NOTED BY THE LD. CIT(A) THAT ONLY DU RING THE APPELLATE PROCEEDINGS, THE NECESSARY DOCUMENTS WERE SUBMITTED BY THE ASSESSEE AS ADDITIONAL EVIDENCE. THE LD. CIT(A) SENT A COPY OF THE ADDITIONAL EVIDENCE TO THE AO FOR EXAMINATION AND SUBMISSION OF A REMAND REPORT. HAVING GONE THROUGH THE REMAND REPORT RECEIVED FROM THE AO, THE LD. CIT(A) HELD THAT : (I) THE SOURCES OF THE FUND FOR INVESTMENT IN THE IMMOVABLE PROPERTY OF RS.97,20,000/ - WERE LOAN FROM CITIBANK OF RS.78 LAKH AND WITHDRAWAL FROM THE PROPRIETARY CONCERN, M/S PADMAVATI TRADERS. THE AO HAS NOT DISPUTED THIS FUND FLOW FOR INVESTMENT IN THE FLAT. H OWEVER, IT HAS BEEN HIGHLIGHTED IN THE REMAND REPORT THAT DURING THE FY 2011 - 1 2 RELEVANT TO THE AY 2012 - 13, THERE WERE REPAYMENT OF LOAN FROM ACCOUNTED SOURCES 10 THE EXTENT OF RS.6,82,434/ - ONLY. IN THE APPELLATE PROCEEDING, THE APPELLANT HAS CLAIMED T HAT THE BALANCE LOAN WAS REPAID IN THE CITIBANK IN SUBSEQUENT YEARS. THE AO IS THEREFORE, DIRECTED LO CALL FOR THE COPIES OF RETURNS OF INCOME OF THE APPELLANT, DETAILS OF REPAYMENT MADE FOR THE BALANCE LOAN FROM THE CITIBANK OF SUBSEQUENT YEARS AND ASCERT AIN ITS SOURCE AND ACCOUNTABILITY. IF IT SHRI VIPUL ITA NO. 77/MUM/2018 4 ISOBSERVED THAT THE REPAYMENTS ARE NOT ACCOUNTED FOR FROM THE EXPLAINED AND ACCOUNTED SOURCES, THE CASES OF SUCH YEARS MAY BE REOPENED TO BRING INTO TAX SUCH UNACCOUNTED INCOME OF THE APPELLANT. HOWEVER, LOOKING LO THE FACT THAT DURING THE YEAR LOAN OF RS.78 LAKH WAS TAKEN FROM CITIBANK FOR INVESTMENT IN THE FLAT, THE SOURCE TO THE EXTENT OF RS.78 LAKH, DURING THE YEAR UNDER CONSIDERATION, CANNOT BE HELD TO BE UNACCOUNTED OR UNEXPLAINED. (II) WITH RESPECT TO BALANCE FUND OF RS.19,20,000/ - THE AO HAS VERIFIED THE CLAIM OF THE APPELLANT THAT THE SAME WAS PAID FROM THE CURRENT A/C OF M/S PADMAVATI TRADERS, A PROPRIETARY CONCERN OF MR. VIPUL R. SHAH. IT IS ALSO VERIFIED FROM THE BANK STATEMENT OF THE BANK OF INDIA FOR THE MONTH APRIL 2011 AND MAY 2011 THAT THE ASSESSEE HAD MADE PAYMENT OF RS.19,20,000/ - TO MR. NIRMAL FALGUNIA TOWARDS THE PURCHASE OF FLAT. HOWEVER, THE AO HAS ALSO HIGHLIGHTED THE FACT THAT THIS PAYMENT OF RS.19,20,000/ - IS HIS PERSONAL WITHDRAWAL AND AN INV ESTMENT MADE IN THE INDIVIDUAL CAPACITY THAT WAS REQUIRED TO BE DEBITED IN HIS CAPITAL ACCOUNT OF THE PROPRIETARY CONCERN. INSTEAD OF DOING THAT, THE APPELLANT HAS DEBITED THIS AMOUNT IN HIS PROFIT AND LOSS ACCOUNT AND THEREBY REDUCING THE PROFIT BY RS.19, 20,000/ - . IT IS ALSO OBSERVED BY THE AO THAT DURING THE ORIGINAL ASSESSMENT PROCEEDING, THE APPELLANT HAD SHOWN OPENING CAPITAL BALANCE OF RS.28,57,296/ - AND THERE WAS NO MENTIONED OF ANY PURCHASE OF FLAT, WHEREAS THE OPENING BALANCE OF THE CAPITAL A/C SUB MITTED DURING REMAND PROCEEDING HAS BEEN CHANGED TO RS.52,45,906/ - FROM WHICH THE COST OF FLAT OF RS.19,20,000/ - WAS DEBITED. IT IS ALSO BROUGHT ON RECORD THAT THIS CHANGE IN THE CAPITAL ACCOUNT WAS WITHOUT ANY BASIS AND THE ADJUSTMENT WAS MADE IN SECLUSIO N WHILE OTHER FIGURES OF THE ACCOUNTS REMAINED THE SAME. HENCE, THE SUBSEQUENT ADJUSTMENT MADE IN THE CAPITAL ACCOUNT IS UNACCEPTABLE AND NEEDS TO BE REJECTED, FOR WHICH I AM IN AGREEMENT WITH THE AO. IN THE LIGHT OF THE ABOVE FACTS, IN MY CONSIDERED OPINI ON, THE PERSONAL INVESTMENT OF RS.19 ,20,000/ - WILL BE UNACCOUNTED AND UNEXPLAINED INVESTMENT IN THE FLAT, AS THE SAME IS NOT REFLECTED IN THE CAPITAL SHRI VIPUL ITA NO. 77/MUM/2018 5 ACCOUNT FILED DURING THE ASSESSMENT PROCEEDING. HENCE, THE BUSINESS PROFIT HAS SIMULTANEOUSLY BEEN SUPPRESS ED TO THAT EXTENT. THUS, THE ADDITION TO THE EXTENT OF RS.19,20,000/ - IS CONFIRMED. AS STATED ABOVE, THE APPELLANT GETS RELIEF OF THE BALANCE AMOUNT. THE GROUND OF APPEAL NUMBER 2 IS ACCORDINGLY PARTLY ALLOWED. 5.1 IN RESPECT OF THE ESTIMATION OF GROSS PRO FIT BY THE AO, THE LD. CIT(A) HELD AS UNDER: 10. THE GROUND OF APPEAL NUMBER 3RELATES LO ESTIMATION OF GROSS PROFIT BY THE AO DURING ASSESSMENT PROCEEDINGS FROM 4.11% AS DISCLOSED BY THE APPELLANT LO 6.50% AFTER REJECTION OF BOOKS OF ACCOUNTS UNDER SECTIO N 145(3) OF THE IT ACT, ON OBSERVING THAT NO DETAILS WERE PRODUCED BY THE APPELLANT, WITH RESPECT TO CASH DEPOSITS OF RS.9.19 CRORE AND SUBSEQUENT ISSUANCE OF CHEQUE FROM THE BANK ACCOUNT OF THE APPELLANT. IN THIS REGARD, IT IS OBSERVED THAT THE AO HAS NOT SPECIFIED THE BASIS OF ADAPTION OF GP OF 6.50% WHITE MAKING THE ESTIMATION. EVEN DURING THE REMAND REPORT, THE ISSUE HAS NOT BEEN EXPLAINED BY THE AO. AT THE SAME TIME THE APPELLANT HAS ALSO NOT EXPLAINED THE REASONS FOR NONE SUBMISSION OF DETAIL DURING A SSESSMENT PROCEEDINGS. HE HAS MERELY STALED THAT ALL CASH DEPOSITS ARE MAINLY AGAINST CASH SALES & CHEQUES ISSUED TO VARIOUS PARTIES ARE AGAINST THE PURCHASES MADE FROM THEM. TT IS ALSO ARGUED THAT ESTIMATION MADE BY THE AO IS AT A HIGHER SIDE. IN THIS REG ARD, DURING APPELLATE PROCEEDINGS, ON ENQUIRY, IT IS EXPLAINED BY THE APPELLANT MAT THE GP IN THE PRECEDING YEAR I.E., AY 2011 - 12 WAS 5.146% ONLY. CONSIDERING THE TOTALITY OF FACTS THAT NO BASIS HAS BEEN GIVEN BY THE AO FOR ESTIMATION OF GP @ 6.50%, IN MY OPINION A MORE REASONABLE ESTIMATION WILL BE THE GP OF THE PRECEDING YEAR I.E., 5.15% SINCE SOME ESTIMATION IS REQUIRED IN THIS CASE. HENCE, THE AO IS DIRECTED TO CONFINE ME ESTIMATION OF GP @ 5.15% INSTEAD OF 6.50% AND ADD THE DIFFERENCE SHRI VIPUL ITA NO. 77/MUM/2018 6 AMOUNT TO THE TOT AL INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. THUS, THE GROUND OF APPEAL NUMBER 3 IS PARTLY ALLOWED. 6. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO AND SUBMITS THAT THE SAME MAY BE RESTORED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS FOUND THAT THE ASSESSEE COULD NOT FILE DETAILS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, HE FILED THE DETAILS BEFORE THE LD. CIT(A). THEREAFTER, THE DETAILS WERE SENT BY THE LD. CIT(A) TO TH E AO TO MAKE FURTHER INQUIRY AND SUBMIT A REMAND REPORT. AFTER R ECEIPT OF THE REMAND REPORT AND HAVING EXAMINED IT, THE LD. CIT(A) HAS RIGHTLY HELD THAT AS DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA D TAKEN A LOAN OF RS.78,00,000/ - FROM CITI BANK FOR INVESTMENT IN THE FLAT, THE SAME CANNOT BE HELD TO BE UNACCOUNTED OR UNEXPLAINED. REGARDING THE BALANCE OF RS.19,20,000/ - , WE FIND THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT THE PERSONAL INVESTMENT OF RS. 19,20,000/ - WILL BE UNACCOUNTED AND UNEXPLAINED INVESTMENT IN THE FLAT, AS THE SAME IS NOT REFLECTED IN THE CAPITAL ACCOUNT FILED DURING THE ASSESSMENT PROCEEDINGS. 7.1 NOW WE DEAL WITH THE ISSUE THAT NO DETAILS WERE PRODUCED BY THE ASSESSEE WITH RESPECT OF CASH DEPOSITS OF RS.9.19 CRORES AND SUBSEQUENT ISSUANCE OF CHEQUES FROM BANK ACCOUNT OF THE ASSESSMENT. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE GP @ 6.50% ADOPTED BY THE AO SHRI VIPUL ITA NO. 77/MUM/2018 7 T O @ 5.15% OF THE PRECEDING YEAR. THE SAME BEING REASONABLE, WE U PHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2019. SD/ - SD/ - (JOGINDER SINGH) (N.K. PRADHAN) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 22/01/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI