Sri.K.C.Davis, Trichur V. The ITO, Trichur

ITA 784/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77450 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: V VINOD KAMATH
• Keywords: Unexplained investment; Peak credit
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 784/COCH/2013 ASSESSMENT YEAR : 2005-06 SHRI K.C. DAVIS, KARAPARAMBAN HOUSE, LOURDUPURAM, EAST FORT, THRISSUR-680 005. [PAN:ABPPD 1763C] VS. THE INCOME TAX OFFICER, WARD- 2(1), TRICHUR. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI V. VINOD KAMATH, CA REVENUE BY SMT. LATHA V. KUMAR, JR. DR DATE OF HEARING 06/05/2014 DATE OF PRONOUNCEMENT 06/06/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 23.10.2013 PASSED BY LD CIT(A)-V, KOCHI AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF RS.12,73,150/-RELATING TO THE PEAK CREDIT OF BALANC E AVAILABLE IN THE S.B ACCOUNT OF THE ASSESSEE AS UNEXPLAINED INCOME U/S 69 OF THE ACT. 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. THE ASSESSEE RUNS TWO JEWELLERY SHOPS. BESIDES THE ABOVE, THE ASSESS EE WAS ALSO DECLARING INCOME FROM JOB WORKS UNDERTAKEN FOR JEWELLERY MANUFACTURING. AS PER THE ANNUAL INFORMATION RETURN, IT WAS NOTICED BY THE ASSESSING OFFICER THA T THE ASSESSEE HAS DEPOSITED AN I.T.A. NO.784/COCH/2013 2 AGGREGATE AMOUNT OF RS.19.63 LAKHS IN A SB ACCOUNT MAINTAINED WITH SOUTH INDIAN BANK LTD. THE ASSESSEE EXPLAINED THAT (A) HE HAD DECLARED A SUM OF RS.11.00 LAKHS AS HIS INCOME SINCE AY 1996-97 AND FURTHER A SUM OF RS.5.53 LAKHS IN THE FORM OF G OLD JEWELLERY WAS DECLARED UNDER VDIS SCHEME. (B) HE HAS WON KURI AMOUNT TO THE TUNE OF RS.4.80 LAKHS DURING THE IMMEDIATELY PRECEDING YEAR AND THE SAID PROCEEDS WERE ALSO DEPO SITED IN THE VERY SAME BANK ACCOUNT. (C) HE HAS BEEN CONVERTING HIS GOLD STOCK INTO CAS H AND RECONVERTING THE SAME FROM CASH TO GOLD, DEPENDING UPON HIS BUSINESS CONV ENIENCE. (D) HE HAS USED HIS PAST SAVINGS, GOLD STOCK AND K URI AMOUNT FOR MAKING DEPOSITS INTO THE BANK ACCOUNT. THE EARLIER WITHDR AWALS WERE ALSO USED FOR MAKING FUTURE DEPOSITS. THE AO DID NOT ACCEPT THE ABOVE SAID EXPLANATIONS F URNISHED BY THE ASSESSEE, SINCE THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO SUBSTANTIA TE HIS EXPLANATIONS AND FURTHER THE ASSESSEE HAS FAILED TO PROVE THAT THERE IS DIRECT N EXUS BETWEEN THE KURI PROCEEDS OF RS.4,80,000/- WON ON 23.5.2003 AND THE DEPOSITS MAD E IN THE FINANCIAL YEAR 2004-05. HOWEVER, THE AO ACCEPTED THE CONTENTIONS OF THE ASS ESSEE THAT THE EARLIER WITHDRAWALS MADE FROM THE BANK ACCOUNT WERE UTILISED FOR MAKING SUBSEQUENT DEPOSITS. ACCORDINGLY, THE AO PROCEEDED TO COMPUTE PEAK CREDI T OF THE DEPOSITS AND NOTICED THAT THE BANK ACCOUNT WAS HAVING PEAK CREDIT BALANCE OF RS.12,73,150/- ON 09.11.2004. ACCORDINGLY, THE AO ASSESSED THE ABOVE SAID AMOUNT AS UNACCOUNTED INVESTMENT U/S 69 OF THE ACT. 3. THE ASSESSEE CHALLENGED THE ABOVE SAID ADDIT ION BY FILING APPEAL BEFORE LD CIT(A). HOWEVER, THE FIRST APPELLATE AUTHORITY TOOK THE VIE W THAT THE ASSESSING OFFICER HAS BEEN VERY METICULOUS IN HIS FINDINGS AND FURTHER THE ASS ESSEE HAS FAILED TO SHOW THAT THE I.T.A. NO.784/COCH/2013 3 AMOUNTS DECLARED IN THE PAST AND ALSO UNDER VDIS SC HEME WERE USED FOR MAKING THE IMPUGNED DEPOSITS BY BRINGING ANY BOOKS OF ACCOUNT ON RECORD. ACCORDINGLY, THE LD CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OF FICER. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LD COUNSEL APPEARING FOR THE ASSESSEE RE ITERATED THE CONTENTIONS MADE BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSES SEE HAS DEPOSITED THE KURI RECEIPTS AGGREGATING TO RS.4,80,000/- INTO THE VERY SAME BAN K ACCOUNT ON 26.05.2003 AND THE BANK BALANCE AS ON THAT DATE STOOD AT RS.4,84,771/- . THE ASSESSEE HAS WITHDRAWN THE SAID AMOUNT ON VARIOUS DATES DURING THE COURSE OF Y EAR. IN THE MEAN TIME, HE ALSO RE- DEPOSITED THE SAME DURING THE COURSE OF FINANCIAL Y EAR 2003-04, I.E., IN THE IMMEDIATELY PRECEDING YEAR. THE BANK BALANCE AS ON 31.3.2004 WA S RS.170/- ONLY. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS WITHDRAWN EN TIRE AMOUNT IN THE IMMEDIATELY PRECEDING YEAR AND ALSO USED THE SAME FOR MAKING DE POSITS IN THE SUCCEEDING YEAR. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN IGNORING THE WITHDRAWALS MADE IN THE IMMEDIATELY PRECEDING YEAR. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE HAS DECLARED A SUM OF RS.11.00 LAKHS A S HIS INCOME OVER THE YEARS AND USED SAVINGS MADE OUT OF THE SAME AND ALSO THE GOLD STOCK OF RS.5.53 LAKHS DECLARED UNDER VDIS SCHEME FOR MAKING DEPOSITS ON VARIOUS DA TES. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DEPOSITED A SUM OF RS.57,500/- AS KURI PAYMENTS DURING THE FINANCIAL YEARS 2003-04 AND 2004-05. ACCORDINGLY HE SUBMITTE D THAT THE ASSESSEE SHOULD BE GIVEN CREDIT FOR THE CASH BALANCE AVAILABLE WITH HI M. I.T.A. NO.784/COCH/2013 4 5. ON THE CONTRARY, THE LD D.R STRONGLY SUPPORT ED THE ORDER PASSED BY THE TAX AUTHORITIES. THE LD D.R REITERATED THAT THE ASSESS EE HAS FAILED TO PROVE THE NEXUS BETWEEN THE KURI RECEIPTS AND THE DEPOSITS MADE IN THE BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATION. THE LD D.R FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO FAILED TO SHOW THAT HE WAS HAVING PAST SAVINGS FOR MAKING THE IMPUGNED DEPOSITS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREF ULLY PERUSED THE RECORD. WE HAVE ALREADY SEEN THAT THE ASSESSING OFFICER HAS ACCEPTE D THE CONTENTIONS OF THE ASSESSEE THAT THE PAST WITHDRAWALS MIGHT HAVE BEEN USED FOR MAKING FUTURE DEPOSITS. ACCORDINGLY, THE ASSESSING OFFICER HAS COMPUTED PEA K CREDIT OF THE BANK ACCOUNT AND DETERMINED THAT THE BALANCE AVAILABLE IN THE BANK A CCOUNT AS ON 09.11.2004, I.E. RS.12,73,150/- IS THE PEAK AMOUNT AND ASSESSED THE SAME. IT IS PERTINENT TO NOTE THAT THE AGGREGATE AMOUNT OF DEPOSITS MADE IN THE BANK A CCOUNT WAS RS.19,63,000/-. AS AGAINST THIS AMOUNT THE ASSESSING OFFICER HAS ASSES SED ONLY THE PEAK CREDIT AMOUNT. 7. WE NOTICE THAT THE ASSESSING OFFICER HAS COMP UTED THE PEAK CREDIT AMOUNT BY CONSIDERING THE BANK ACCOUNT FROM 1.4.2004 TO 31.3. 2005 ONLY. THE CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT WITHDRAWN FROM THE VERY SAME BANK ACCOUNT IN THE IMMEDIATELY PRECEDING YEAR, I.E., IN FINANCIAL YEAR 2003-04 SHOULD ALSO BE GIVEN CREDIT. THE ASSESSEE HAS FURNISHED COPY OF BANK ACCOUNT FOR THE IMMEDIATELY PRECEDING YEAR AND WE NOTICE THAT THE PEAK CREDIT BALANCE IN THAT YEAR WAS RS.4,84,771/- AND IT WAS AVAILABLE ON 26.05.2003. THE ASSESSEE HAS EXPLAINE D THAT THE KURI RECEIPTS OF RS.4,80,000/- WAS DEPOSITED ON THAT DATE AND THE AS SESSEE HAS FURNISHED EVIDENCES I.T.A. NO.784/COCH/2013 5 SHOWING KURI RECEIPTS OF RS.4,80,000/- IN THE PAPER BOOK. BESIDES THE ABOVE, THE ASSESSEE IS PLEADING THAT THE PAST SAVINGS MADE AND ALSO THE GOLD STOCK DECLARED UNDER VDIS SCHEME WERE ALSO UTILISED IN MAKING DEPOSITS A ND WITHDRAWALS. HOWEVER, AS FOUND BY THE TAX AUTHORITIES, THE ASSESSEE COULD NO T FURNISH ANY MATERIAL TO SUBSTANTIATE THE SAID CLAIM. 8. WE FIND MERIT IN THE CONTENTIONS OF THE ASSES SEE WITH REGARD TO THE CLAIM OF RECEIPT OF KURI AMOUNT OF RS.4,80,000/-. AS NOTICED EARLIE R, THE ASSESSEE HAS DEPOSITED THE ABOVE SAID AMOUNT IN THE VERY SAME BANK ACCOUNT AND WITHDRAWN ENTIRE AMOUNT IN VARIOUS INSTALMENTS. WE ALSO NOTICE THAT THERE ARE SUBSEQUENT DEPOSITS AND WITHDRAWALS IN THE FINANCIAL YEAR 2003-04 ALSO AND THE BANK BALANCE AS ON 31.3.2004 STOOD AT A MINIMUM AMOUNT OF RS.170/- ONLY, MEANING THEREBY THE ENTIRE AMOUNT OF RS.4,80,000/- WAS WITHDRAWN BY THE END OF THAT YEAR . THE ASSESSEE HAS SUBMITTED THAT HE HAS CONTRIBUTED A SUM OF RS.57,500/- TOWARDS KUR I PAYMENTS. DEDUCTING THE SAID AMOUNT WOULD LEAVE THE ASSESSEE WITH A BALANCE OF R S.4,22,500/-. BESIDES THE ABOVE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS BEEN D ECLARING INCOME FROM JOB WORKS OVER THE YEARS AND IT IS STATED THAT THE ASSESSEE HAS NO T MAINTAINED REGULAR BOOKS OF ACCOUNT FOR THIS BUSINESS. THE POSSIBILITY OF MAKING SAVIN GS OUT OF JOB WORKS BUSINESS CANNOT BE ALTOGETHER RULED OUT. IN THIS KIND OF CIRCUMSTANCE S, PARTICULARLY WHEN EVIDENCES ARE NOT AVAILABLE TO SUBSTANTIATE THE CLAIM PUT FORTH BY TH E ASSESSEE, THE COURTS HAVE APPLIED THE TEST OF HUMAN PROBABILITIES TO DECIDE THE ISSUE BEFORE IT. THE VERY FACT THAT THE ASSESSING OFFICER HAS ASSESSED THE PEAK CREDIT AMO UNT SHOWS THAT HE HAS ALSO ACCEPTED THE THEORY OF HUMAN PROBABILITIES, I.E., T HE ASSESSING OFFICER HAS ACCEPTED THE I.T.A. NO.784/COCH/2013 6 FACT THAT THE PAST WITHDRAWALS WERE UTILISED TO MAK E FUTURE DEPOSITS, WHICH IS A NORMAL HUMAN BEHAVIOUR. BY EXTENDING THE SAME, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE THAT HE HAS USED THE WITHDRAWALS MADE IN T HE FINANCIAL YEAR 2003-04 ALSO FOR MAKING DEPOSITS IN THE FINANCIAL YEAR 2004-05 SHOUL D BE ACCEPTED. FURTHER THE CLAIM THAT HE WAS HAVING SAVINGS OUT OF HIS PAST INCOME C OULD NOT ALSO BE RULED OUT. HOWEVER, THE CLAIM THAT THE GOLD STOCK WAS CONVERTE D INTO CASH AND THEN RECONVERTED INTO GOLD STOCK IS HARD TO BELIEVE. 9. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASS ESSEE MAY BE GIVEN CREDIT FOR THE CLAIM OF PAST SAVINGS AND FOR WITHDRAWALS MADE FROM THE BANK ACCOUNT IN THE FINANCIAL YEAR 2003-04. HENCE, ON A CONSPECTUS OF MATTER, TH E DISPUTE BEFORE US WOULD MEET THE ENDS OF JUSTICE, IF THE AMOUNT AVAILABLE WITH THE A SSESSEE AS ON 1.4.2004 OUT OF PAST SAVINGS AND ALSO FROM OUT OF BANK WITHDRAWALS MADE IN FY 2003-04 IS ESTIMATED AT RS.6.00 LAKHS. ACCORDINGLY, WE DIRECT THE ASSESSIN G OFFICER TO ALLOW CREDIT OF RS.6.00 LAKHS AND ASSESS THE BALANCE AMOUNT OF RS.6,73,150/ - U/S 69 OF THE ACT. THE ORDER PASSED BY LD CIT(A) STANDS MODIFIED ACCORDINGLY. I.T.A. NO.784/COCH/2013 7 10. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 06-06-2 014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 6 TH JUNE, 2014 GJ COPY TO: 1. SHRI K.C. DAVIS, KARAPARAMBAN HOUSE, LOURDUPURAM , EAST FORT, THRISSUR-680 005. . THE INCOME TAX OFFICER, WARD-2(1), TRICHUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NO.784/COCH/2013 8