RAJASHRI D. MEHTA, MUMBAI V. DCIT OSD-II CEN RG 7, MUMBAI

ITA 980/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8708 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1997-1998
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: SHARAD PATEL
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI R P TOLANI, JUDICIAL MEMBER ITA NOS.980/MUM/2016 ASSESSMENT YEAR : 1997-98 RAJSHRI D MEHTA, 206 ARRIA B WING, ACKRUTI NIHARIAKA COMPLEX, N S PHALKE MARG, ANDHERI (E) MUMBAI 400 069 PAN AFNPM2498G VS. DCIT OSD II CEN RG 7, MUMBAI (APPELLANT) RESPONDENT) ITA NOS.981/MUM/2016 ASSESSMENT YEAR : 1997-98 PRAMILA D MEHTA, 206 ARRIA B WING, ACKRUTI NIHARIAKA COMPLEX, N S PHALKE MARG, ANDHERI (E) MUMBAI 400 069 PAN AZAPM8367H VS. DCIT OSD II CEN RG 7, MUMBAI (APPELLANT) RESPONDENT) APPELLANTS BY : SHRI SHARAD PATEL RESPONDENT BY : MS. BEENA SANTOSH DATE OF HEARING : 30.01.2017 DATE OF PRONOUNCEMENT : 30 .0 1 . 201 7 O R D E R PER R P TOLANI, JUDICIAL MEMBER THESE ARE TWO APPEALS BY RELATED ASSESSEES, ONE BE ING DAUGHTER MS. RAJSHRI D MEHTA AND MOTHER MRS. PRAMILA D MEHTA. COMMON GR OUND RAISED IS AS UNDER: ITA NO.980 & 981/MUM/2016 RAJSHRI D MEHTA & PRAMILA D MEHTA 2 IN THE CASE RAJSHRI D MEHTA THE CIT(A) HAS ERRED IN LAW & ON FACTS OF THE CASE BY CONFIRMING THE ADDITION ON ESTIMATION BASIS @1% OF TOTAL DEPOSITS/ WITHDRAWALS IN THE ALLEGED BANK ACCOUNT OPENED FRAUDULENTLY BY THIRD P ERSON IN ASSESSEES NAME AND MAKING ADDITION OF RS.4,00,000/- THE ADDITION SO MADE IN THE CASE OF PRAMILA D MEHTA IS RS.4,13,120/-. 2. THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN BOT H THE APPEALS, WHICH ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. THE LEARNED AO MADE TWO ADDITIONS ON PROTECTIVE BASIS IN RESPECT O F DIVIDEND INCOME AND ESTIMATED POSSIBLE BENEFIT @1% ON THE DEPOSITS/WITHDRAWAL IN THE ALLEGED BANK ACCOUNTS. BOTH THESE ASSESSMENTS WERE REOPENED U/S. 127/128. FOLLOWING RELEVANT PARA FROM THE ORDER OF THE LEARNED CIT(A) WILL BRIEFLY HIGHLI GHT THE FACTS AND THE ISSUES INVOLVED (LEAD CASE OF MS. RAJSHRI D MEHTA IS TAKEN ) 9. THE NEXT ISSUE RELATES TO ADDITION OF RS.4,00,0 00/- MADE BY THE AO, AS CONSIDERATION RECEIVED BY THE ASSESSEE FOR A LLOWING THE BANK ACCOUNT WITH BANK OF BARODA, COLABA BRANCH, TO BE O PERATED BY KFL GROUP ENTITIES. IT IS GATHERED THAT THE ASSESSEE W AS MAINTAINING A BANK ACCOUNT (NO. 59561) WITH BANK OF BARODA, COLABA BRA NCH, AND HUGE AMOUNTS WERE BEING DEPOSITED IN AND WITHDRAWN OUT O F THIS BANK ACCOUNT, DURING THE YEAR. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED BEFORE THE AO THAT SHE WAS TOT ALLY UNAWARE OF THE FACT THAT THE ABOVE BANK ACCOUNT WAS BEING OPERATED BY KFL GROUP HEADED BY SHRI SATYANARAYAN AGARWAL. THE ASSESSEE ALSO CLAIMED THAT HER PHOTOGRAPH WAS TAKEN BY KFL GROUP BY FRAUDULENT MEANS FOR OPENING THIS ACCOUNT. HOWEVER, THE AO WAS NOT SATISFIED WI TH THE EXPLANATION OF THE ASSESSEE. THE AO NOTED THAT DURING THE YEAR, A TOTAL AMOUNT OF RS.1,49,98,505/- WAS DEPOSITED IN THE ABOVE ACCOUNT AND AN AMOUNT OF RS.1,49,98,000/- WAS WITHDRAWN. THE AO HELD THAT T HE ASSESSEE WOULD NOT HAVE PERMITTED ANYBODY TO OPEN A BANK ACCOUNT I N HER NAME WITHOUT HER TACIT SUPPORT AND THAT SHE MUST HAVE RECEIVED S OME BENEFIT OR REMUNERATION FOR ALLOWING KFL GROUP TO USE HER NAME AND BANK ACCOUNT. THE AO, ACCORDINGLY, ESTIMATED INCOME OF THE ASSESS EE FOR ALLOWING SUCH ACCOUNT TO BE OPERATED BY KFL GROUP AT 1% OF THE TO TAL TRANSACTIONS FROM THE BANK ACCOUNT, WHICH WORKED OUT AT RS.4,00,000/- . HE, ACCORDINGLY, MADE AN ADDITION OF RS.4,00,000/- IN THE HANDS OF T HE ASSESSEE. ITA NO.980 & 981/MUM/2016 RAJSHRI D MEHTA & PRAMILA D MEHTA 3 THE OTHER ADDITION QUA THE BENAMI INCOME WAS DELETE D IN BOTH THE HANDS. IT SHALL BE PERTINENT TO MENTION THAT THE ADDITIONS TH AT THE ADDITIONS IN THESE TWO CASES WERE MADE ON PROTECTIVE BASIS AND THE SUBSTAN TIVE ADDITION HAS BEEN IN THE CASE OF ONE SATYANARAYAN AGRAWAL HUF, WHICH HAS OWNED UP THE INCOME IN THIS BEHALF. THE LEARNED CIT(A) THOUGHT IN BOTH CASES DELETED THE DIVIDEND INCOME, HOWEVER UPHELD THE ESTIMATED POSSIBLE INCOM E IN THE HANDS OF THESE ASSESSEES. AGGRIEVED, BOTH THE ASSESSEES ARE IN SE COND APPEAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT I) IT IS UNDISPUTED THAT BOTH THE ADDITIONS IN THES E TWO CASES WERE MADE ON PROTECTIVE BASIS. SUBSTANTIVE INCOME HAS BEEN O WNED UP AND ACCEPTED BY THE SAID SHRI SATYNANARAYAN AGRAWAL HUF IN VDIS. II) THE DELETION OF DIVIDEND INCOME HAS NOT BEEN AP PEALED AGAINST BY THE REVENUE. THE RELEVANT OBSERVATIONS ARE AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIO NS AND CONTENTIONS OF THE APPELLANT, AS ALSO THE ORDER OF THE AO. IT IS GATHERED THAT 1,06,600 SHARES OF KRISHNA FILAMENTS LTD. WERE PURCHASED IN THE NAME OF THE ASSESSEE, ON WHICH DIVIDEND OF RS.3,12,200/- WAS RE CEIVED DURING THE YEAR. THE NET DIVIDEND OF RS.3,12,200/- WAS RECEIV ED DURING THE YEAR. THE NET DIVIDEND AMOUNT WAS CREDITED IN THE BANK AC COUNT OF THE ASSESSEE (BEARING NO. 59561) WITH BANK OF BARODA, C OLABA BRANCH. THIS BANK ACCOUNT WAS BEING OPERATED BY KFL GROUP AND SH RI SATYANARAYAN G AGARWAL HUF WAS HELD TO BE THE BENEFICIAL OWNER OF ABOVE SHARES AND HE HIMSELF OWNED UP THE INVESTMENT IN SUCH SHARES. BU T THE AO ADDED THE AMOUNT OF DIVIDEND INCOME OF RS.3,12,200/- IN THE H ANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS, TREATING IT AS CONSIDERATION RECEIVED FOR ALLOWING TO USE HER NAME FOR HOLDING THE SHARES OF KFL. THE IS SUE OF INVESTMENT IN 1,06,600 SHARES OF KFL (ON WHICH THE DIVIDEND INCOM E OF RS. 3,12,200/- HAS ARISEN) HAS BEEN DISCUSSED IN GREAT DETAIL IN M Y APPELLATE ORDER DATED 24/2/2015 IN THE CASE OF THE ASSESSEE FOR A.Y. 1996 -97, WHEREIN I HAVE ITA NO.980 & 981/MUM/2016 RAJSHRI D MEHTA & PRAMILA D MEHTA 4 HELD THAT THE ABOVE BANK ACCOUNT WAS BEING OPERATED BY KFL GROUP AND THE REAL BENEFICIARY OF THE 1,06,600 SHARES OF KFL, PURCHASED IN THE NAME OF THE ASSESSEE THROUGH THIS BANK ACCOUNT, WAS SATY ANARAYAN G AGARWAL HUF. THE INVESTMENT IN THESE SHARES HAD ALREADY BE EN SURRENDERED BY SHRI SATYANARAYAN AGARWAL HUF UNDER VDIS, 1997 AND SUCH DECLARATION WAS ACCEPTED BY THE COMPETENT AUTHORITY (COMMISSION ER OF INCOME-TAX CONCERNED). FURTHER, THE HONBLE SETTLEMENT COMMIS SION, MUMBAI BENCH, VIDE ORDER DATED 28/3/2014 IN KFL GROUP OF C ASES, INCLUDING SATYANARAYAN AGARWAL HUF, ALSO CONSIDERED THESE SHA RES IN THE NAME OF SATYANARAYAN AGARWAL HUF ONLY. FURTHER, THE AO HAD ALSO MADE ADDITION IN RESPECT OF INVESTMENT IN THESE SHARES ONLY ON PR OTECTIVE BASIS IN THE HANDS OF THE ASSESSEE AND SUBSTANTIVE ADDITIONS WER E MADE IN THE HANDS OF SATYANARAYAN AGARWAL HUF, WHICH HE HAS MENTIONED IN THE BODY OF THE IMPUGNED ORDER. IN THE CIRCUMSTANCES, IT IS NO T CLEAR AS TO ON WHAT BASIS THE AO WANTED TO ADD THE DIVIDEND INCOME IN T HE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. THERE IS NO DISPUTE TO THE FACT THAT THIS BANK ACCOUNT WAS BEING OPERATED BY SATYANARAYAN AGA RWAL HUF AND KFL GROUP AND APPARENTLY, ALL TRANSACTIONS FROM THE SAM E WERE BEING DONE BY THEM. THEREFORE, IT CANNOT BE HELD THAT EITHER THE ASSESSEE RECEIVED THE DIVIDEND INCOME OR ENJOYED SUCH DIVIDEND INCOME. A CCORDINGLY, THE DIVIDEND INCOME OF RS.3,12,200/- ON SUCH SHARES, CA NNOT BE TREATED AS INCOME OF THE ASSESSEE. ACCORDINGLY, THE ADDITION OF RS.3,12,200/- MADE BY THE AO IS DIRECTED TO BE DELETED AND THE GROUNDS TAKEN BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. THUS, IN THE SAME SET OF FACTS AND CIRCUMSTANCES TH E ADDITION QUA THE DIVIDEND INCOME MADE ON PROTECTIVE BASIS HAS BEEN DELETED HO LDING THAT SUBSTANTIVE INCOME HAS BEEN ASSESSED IN THE HANDS OF SHRI SATYANARAYAN AGARWAL, HUF. HOWEVER, WHEN IT COMES TO THE BOGUS ACCOUNTS OPERATED BY HUF , FOR WHICH THE ASSESSEE HAD NO KNOWLEDGE, ABOUT THE ACCOUNTS FOR POSSIBLE ESTIM ATED INCOME AS HAS BEEN HYPOTHETICALLY ADDED, THE ACTION OF THE CIT(A) IS U NJUSTIFIED ON THE FOLLOWING GROUNDS: I) THE ENTIRE INCOME REMAINS ASSESSED IN THE HANDS OF SHRI SATYANARAYAN AGRAWAL, HUF, THERE IS NO DISPUTE ABOU T IT. ITA NO.980 & 981/MUM/2016 RAJSHRI D MEHTA & PRAMILA D MEHTA 5 II) THE AFFIDAVITS FILED BY BOTH THE ASSESSEES CATEGORI CALLY DEPOSING THAT THEY HAD NO IDEA THAT FRAUDULENT ACCOUNTS WERE OPEN ED IN THE NAME OF THESE TWO LADY ASSESSEES IN VIEW OF THESE TWO VITAL FACTORS, THERE IS NO JUS TIFICATION IN UPHOLDING PART OF ADDITION ON THE BASIS OF ESTIMATED POSSIBILITY ON H YPOTHETICAL BASIS. THE ADDITION NEEDS TO BE DELETED. 4. THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHO RITIES BELOW. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERU SED THE MATERIAL ON RECORD. IN MY CONSIDERED VIEW: I. IT IS UNDISPUTED THAT THE ADDITION IN THE HANDS OF THESE TWO ASSESSEES WERE MADE ON ACCOUNT OF PROTECTIVE BASIS AND THE SU BSTANTIVE ADDITIONS IN THE HANDS OF HUF REMAINS OWNED UP AND TAXES THER EON PAID IN ACCORDANCE WITH LAW. II. THE LEARNED CIT(A) ON ONE HAND HAS ACCEPTED THE ASS ESSEES VERSION IN RESPECT OF DIVIDEND INCOME BUT ON ASSUMPTION HAS UP HELD THE OTHER ADDITIONS, WHICH AMOUNTS TO GIVING CONTRARY FINDING S. THE ORDER OF THE LEARNED CIT(A) APROPOS DIVIDEND INCOME HAS NOT BEEN CHALLENGED BY THE REVENUE. III. THE AFFIDAVITS FILED BY THE ASSESSEES DEPOSE HAVING NO ROLE OR KNOWLEDGE ABOUT THE ACCOUNTS, HAS NOT BEEN CONTROVE RTED AND STANDS CORROBORATED BY THE ABOVE FACTS. ITA NO.980 & 981/MUM/2016 RAJSHRI D MEHTA & PRAMILA D MEHTA 6 IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE C ASE, I FIND NO JUSTIFICATION IN THE IMPUGNED ADDITIONS, AND ARE HEREBY DELETED. 6. IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0 TH JANUARY, 2017. SD/- (R P TOLANI) J UDICIAL MEMBER MUMBAI, DATED : 30 TH JANUARY, 2017. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI +