BIPIN CHANDRA MEHTA, MUMBAI V. ITO 24(3)(4), MUMBAI

ITA 8466/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8216 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 08-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA P YADAV
• Assessee Lawyers: IN PERSON
• Keywords: Reopening of assessment; Unexplained investment
• Section: 133A; 148; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./I.T.A. NOS 8462 TO 8467/MUM/2010 ( ! ' / ASSESSMENT YEARS : 2002-03 TO 2007-08) MR.BIPIN CHANDRA MEHTA, A-1 WING, FLAT NOS.101 & 102, PHASE-II, BHOOMI PARK, MARVE ROAD, FIRE BRIGADE LANE, NEAR JANKALYAN NAGAR, MALAD (W), MUMBAI-400095 / VS. INCOME TAX OFFICER-24(3)(4), PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) # ./ '( ./ PAN/GIRNO.:ACKPM9203F #$ ) / APPELLANT BY : ASSESSEE IN PERSON %&#$ * ) /RESPONDENT BY: SHRI AKHILENDRA P YADAV + , * -. / DATE OF HEARING : 8.10.2014 /'! * -. /DATE OF PRONOUNCEMENT : 31.10.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THE SIX APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS PASSED BY LD CIT(A)-34, MUMBAI AND THEY RELA TE TO THE ASSESSMENT YEARS 2002-03 TO 2007-08. SINCE THE ISSUES AGITATED IN T HESE APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. THE ASSESSEE A PPEARED IN PERSON AND SOUGHT ADJOURNMENT. SINCE NO CONVINCING REASON WAS FURNISHED FOR SEEKING ADJOURNMENT, THE BENCH REJECTED HIS REQUEST. THE A SSESSEE WAS DIRECTED TO FURNISH WRITTEN SUBMISSIONS, IF ANY BY 09-10-2014. WE ALSO HEARD LD D.R AND I.T.A. NOS 8462 TO 8467/MUM/2010 2 PERUSED THE RECORD. SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY WRITTEN SUBMISSIONS, WE PROCEED TO DISPOSE OF THE APPEALS O N THE BASIS OF AVAILABLE MATERIALS. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BR IEF. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961(THE ACT) AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COUR SE OF SURVEY OPERATION, CASH OF RS.3,59,260/- AND JEWELLERY WORTH RS.83,86,813/- WERE FOUND. BESIDES THE ABOVE, THE DEPARTMENT ALSO FOUND CERTAIN INCRIMINAT ING DOCUMENTS EVIDENCING MONEY LENDING MONEY ACTIVITY OF THE ASSESSEE WERE A LSO FOUND. ON THE BASIS OF SURVEY REPORT, THE ASSESSING OFFICER REOPENED THE A SSESSMENTS OF ALL THE ASSESSMENT YEARS UNDER CONSIDERATION BY ISSUING NOT ICES DATED 11.8.2008 U/S 148 OF THE ACT BY AFFIXTURE, SINCE THE WHEREABOUTS OF THE ASSESSEE WAS NOT KNOWN AT THAT POINT OF TIME. AFTER ASCERTAINING TH E CORRECT ADDRESS OF THE ASSESSEE, THE AO ISSUED FRESH NOTICES TO THE ASSESS EE. IN RESPONSE TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER SEEKI NG DETAILS ON THE INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SURVEY OPERATI ON, THE ASSESSEE DID NOT FURNISH ANY REPLY, BUT SIMPLY FILED LETTERS SEEKING TIME. SUBSEQUENTLY, THE ASSESSEE MADE CERTAIN SUBMISSIONS. WITH REGARD TO THE ADVANCING OF LOANS TO VARIOUS PARTIES, WHICH WERE NOTICED FROM THE INCRIM INATING MATERIALS, THE ASSESSEE CLAIMED THAT HE HAD ACTED MERELY AS A MEDI ATOR/AGENT IN ARRANGING LOANS AND IN THAT PROCESS EARNED ONLY COMMISSION IN COME. HOWEVER, THE ASSESSEE COULD NOT FURNISH THE NAMES OF THE PERSONS WHO HAD ACTUALLY GIVEN LOANS SHOWN IN THE INCRIMINATING MATERIALS. THE AO ALSO ISSUED SUMMONS TO THE PERSONS WHOSE NAME FOUND PLACE THEREIN, BUT NONE, E XCEPT ONE M/S TRIMURTI JEWELLERY RESPONDED. M/S TRIMURTI JEWELLERY CONFIR MED THAT HE HAS TAKEN LOAN FROM THE ASSESSEE AND PAID INTEREST @ 24%. FURTHER , THE ASSESSEE HAD AGREED TO OFFER A SUM OF RS.27.05 LAKHS IN THE STATEMENT T AKEN FROM HIM DURING THE COURSE OF SURVEY OPERATION BY ADMITTING THAT HIS IN VESTMENT IN MONEY LENDING BUSINESS WAS ABOUT RS.27.05 LAKHS. SINCE NO FURTHE R DETAILS WERE FORTHCOMING FROM THE ASSESSEE, THE AO PROCEEDED TO COMPLETE THE ASSESSMENT TO BE BEST OF HIS JUDGMENT U/S 144 OF THE ACT. ACCORDINGLY, THE AO ASSESSED THE AGGREGATE AMOUNT OF LOANS SHOWN AS ADVANCED IN THE INCRIMINAT ING MATERIALS, INTEREST REALIZED THEREON, UNEXPLAINED BANK DEPOSITS, CASH F OUND DURING THE COURSE OF SURVEY, JEWELLERY FOUND DURING THE COURSE OF SURVEY , THE AMOUNT OF RS.27.05 I.T.A. NOS 8462 TO 8467/MUM/2010 3 LAKHS ADMITTED BY THE ASSESSEE IN THE STATEMENT TAK EN FROM HIM. THE DETAILS OF ADDITIONS MADE BY THE ASSESSING OFFICER ARE TABULAT ED BELOW:- A.Y LOAN GIVEN IN RS. INTEREST RECEIVED ON LOAN IN RS. DEPOSITS IN BANKS IN RS. 2002-03 49,53,953 10,70,723 18,000 2003-04 1,07,61,704 11,47,467 2,00,415 2004-05 1,53,65,850 5,20,752 1,88,780 2005-06 1,88,82,400 2,51,105 3,40,223 2006-07 2,01,18,440 9,51,000 6,31,449 2007-08 1,77,19,980 19,25,260 2,02,376 BESIDES THE ABOVE, FOLLOWING ADDITIONS HAVE BEEN M ADE IN ASSESSMENT YEAR 2007-08: A) UNEXPLAINED CASH RS.3,59,260/-; B) UNEXPLAINED JEWELLERY RS.83,86,813/-; AND C) UNEXPLAINED INVESTMENT ADMITTED DURING SURVEY RS.27,05,000/- 3. THE LD CIT(A) CONFIRMED ALL THE ADDITIONS MAD E BY THE ASSESSING OFFICER. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD SOUGHT FOR TELESCOPING OF INCOME ASSESSED IN THE EARLIER YEARS, BUT THE SAID PLEA WAS ALSO REJECTED. AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS BEF ORE US. 4. THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT AND ALSO VALIDITY OF PASSING ASSESSMENT ORDERS U/S 144 OF THE ACT. ON A PERUSAL OF DETAILED DISCUSSIONS MADE BY THE ASSESSING OFFIC ER, THE LD CIT(A) HAS UPHELD THE ORDERS OF AO IN ALL THE YEARS ON THE ABOVE SAID TWO LEGAL ISSUES. WE ALSO NOTICE THAT THE ASSESSING OFFICER HAS ENTERTAINED R EASONABLE BELIEF ABOUT THE ESCAPEMENT OF INCOME ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SURVEY. FURTHER, THE AO WAS CONSTRAINED TO PASS THE ASSESSMENT ORDERS TO THE BEST OF HIS JUDGMENT U/S 144 OF THE A CT, SINCE THE ASSESSEE HAS FAILED TO CO-OPERATE WITH THE ASSESSING OFFICER. H ENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION TAKEN BY LD CIT(A) ON BOT H THE LEGAL ISSUES REFERRED SUPRA. 5. WE SHALL NOW PROCEED TO DISPOSE THE GROUNDS UR GED ON MERITS. THE FIRST ADDITION PERTAINS TO THE ASSESSMENT OF AGGREGATE AM OUNT OF LOANS AND ADVANCES GIVEN BY THE ASSESSEE. THOUGH THE ASSESSEE HAS CLA IMED THAT HE HAS ACTED ONLY I.T.A. NOS 8462 TO 8467/MUM/2010 4 AS A MEDIATOR/AGENT FOR ARRANGING LOANS, YET HE DID NOT FURNISH ANY MATERIAL OR EVIDENCE TO SUBSTANTIATE THE SAID CLAIM, MORE PARTI CULARLY, HE HAS NOT IDENTIFIED THE PARTIES WHO HAVE ACTUALLY ADVANCED THE MONEY. HENCE, THE SAID CLAIM OF THE ASSESSEE IS LIABLE TO BE REJECTED. WE NOTICE THAT THE ASSESSING OFFICER HAS ASSESSED THE AGGREGATE AMOUNT OF LOANS AND ADVANCES OUTSTANDING AT THE END OF EACH FINANCIAL YEAR AS THE INCOME OF THE RESPECTIVE YEAR, I.E., THE ASSESSING OFFICER DID NOT TELESCOPE THE AMOUNT ASSESSED IN TH E EARLIER YEARS AGAINST THE OUTSTANDING LOAN AMOUNTS, WITHOUT SHOWING THAT THE INCOME ASSESSED IN THE EARLIER YEARS WAS NOT AVAILABLE WITH THE ASSESSEE F OR GIVING LOANS IN THE SUBSEQUENT YEARS. THIS APPROACH OF THE ASSESSING O FFICER, IN OUR VIEW, DOES NOT APPEAR TO BE CORRECT. THE INCOME ASSESSED IN AN EA RLIER YEAR OR EARLIER YEARS WOULD NATURALLY GENERATE CASH INFLOW AND HENCE THE INCOME SO ASSESSED AS REDUCED BY THE REASONABLE OUTGOING TOWARDS DOMESTIC EXPENSES AND/ OR INVESTMENTS FOUND TO HAVE BEEN MADE, WOULD BE AVAIL ABLE AS A SOURCE FOR GIVING LOANS AND ADVANCES IN THE SUBSEQUENT YEAR / YEARS. HENCE THE CORRECT APPROACH, IN OUR VIEW, IS TO PREPARE A CASH FLOW ST ATEMENT FOR EACH OF THE YEAR AND ASSESS THE DEFICIT AS THE INCOME OF THE ASSESSE E. WHILE PREPARING THE CASH FLOW STATEMENT, THE ASSESSING OFFICER SHOULD CONSID ER ONLY THE INCREMENTAL AMOUNT OF LOANS AND ADVANCES AS CASH OUTFLOW. TH IS APPROACH WILL AUTOMATICALLY GIVE TELESCOPING BENEFIT AND WOULD AL SO TAKE INTO ACCOUNT THE CASH OUTFLOWS ALSO AND THUS, THE SAME WOULD LEAD TO DETE RMINATION OF INCOME OF THE EVERY YEAR IN A SCIENTIFIC WAY. ACCORDINGLY, WE S ET THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DETERMINE THE INCOME OF THE ASSESSEE BY PREPARING CASH FLOW STATEMENT FOR EVERY YEAR AND ASSESS THE SAME ACCORDINGLY. 6. THE NEXT ADDITION PERTAINS TO ASSESSMENT OF I NTEREST INCOME. SINCE THE INTEREST INCOME RECEIVED BY THE ASSESSEE WAS SHOWN IN THE INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH AND SIN CE THE ASSESSEE COULD NOT FURNISH ANY MATERIAL TO CONTROVERT THE SAME, IN OUR VIEW, THE TAX AUTHORITIES ARE JUSTIFIED IN ASSESSING THE SAME AS INCOME OF THE AS SESSEE IN RESPECTIVE YEARS. HOWEVER, THE ASSESSING OFFICER SHOULD TAKE THE INTE REST INCOME AS CASH INFLOW WHILE PREPARING THE CASH FLOW STATEMENT. I.T.A. NOS 8462 TO 8467/MUM/2010 5 7. IN ASSESSMENT YEAR 2005-06 TO 2007-08, THE ASSE SSEE IS CHALLENGING THE ADDITION PERTAINING TO DEPOSITS FOUND IN THE BANK A CCOUNT. IF ALL THESE DEPOSITS WERE INCLUDED IN THE CASH FLOW STATEMENT, NO SEPARA TE ADDITION WOULD BE REQUIRED TO BE MADE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS AND DIRECT THE AO TO INCLUDE THEM I N THE PREPARATION OF CASH FLOW STATEMENT. 8. IN ASSESSMENT YEAR 2007-08, THE ASSESSEE IS CH ALLENGING THE ASSESSMENT OF PHYSICAL CASH OF RS.3,59,260/- FOUND DURING THE COU RSE OF SEARCH. THOUGH THE ASSESSEE CLAIMS THAT A SUM OF RS.3,00,000/- BELONG TO HIS SISTER, YET NO DOCUMENT WAS FURNISHED TO SUBSTANTIATE THE SAID CLA IM. HOWEVER, THE CASH FLOW STATEMENT THAT IS GOING TO BE PREPARED MAY SOMETIME EXPLAIN THE AVAILABILITY OF PHYSICAL CASH BALANCE. HENCE, WE SET ASIDE THE ORD ER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FOR EXAM INING THE SAME AFRESH IN THE LIGHT OF CASH FLOW STATEMENTS. 9. IN AY 2007-08, THE ASSESSEE IS ALSO CHALLENG ING THE ASSESSMENT OF VALUE OF JEWELLERY FOUND AT THE TIME OF SURVEY OPERATION. T HE CLAIM OF THE ASSESSEE IS THAT THE GOLD JEWELLERY BELONG TO PERSONS WHO HAD OBTAIN ED LOAN ON PLEDGE OF JEWELLERY. WE NOTICE THAT THIS CLAIM OF THE ASSESS EE HAS NOT BEEN PROPERLY EXAMINED. HENCE, IN OUR VIEW, THIS ADDITION ALSO R EQUIRES FRESH EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH EXAMINATION. 10. IN AY 2007-08, THE ASSESSEE IS ALSO CHALLENG ING THE ADDITION OF RS.27.05 LAKHS MADE ON THE BASIS OF OFFER MADE IN THE SWORN STATEMENT TAKEN DURING THE COURSE OF SURVEY. SINCE WE HAVE DIRECTED THE AO TO PREPARE THE CASH FLOW STATEMENT, THE OFFER OF RS.27.05 LAKHS MADE BY THE ASSESSEE WOULD LOSE SIGNIFICANCE, SINCE THE AGGREGATE AMOUNT OF LOANS A ND ADVANCES FOUND IN AY 2002-03 WAS MORE THAN THE ABOVE SAID OFFER OF RS.27 .05 LAKHS. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.27.05 LAKHS. I.T.A. NOS 8462 TO 8467/MUM/2010 6 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPE N COURT ON 31ST OCT, 2014. /'! + 0 1 2 3 31 ST OCT , 2014 * ;, < SD SD ( . / D. MANMOHAN ) ( . . ,/ B.R. BASKARAN) / VICE- PRESIDENT / ACCOUNTANT MEMBER + , MUMBAI: 31ST OCT,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. + =- ( ) / THE CIT(A)- CONCERNED 4. + =- / CIT CONCERNED 5. 6. >?; %- @ , . @ ! , + , / DR, ITAT, MUMBAI CONCERNED ; A, / GUARD FILE. B + / BY ORDER, TRUE COPY ' (ASSTT. REGISTRAR) . @ ! , + , /ITAT, MUMBAI