SANJAY KUMAR BUCHA V. INCOME TAX OFFICER

TAXAP/256/2015

AI Insights

The case revolves around the appellant, Sanjay Kumar Bucha, who contested the Income Tax Officer's addition of Rs.37,75,000 to his income as unexplained money under Section 69A of the Income Tax Act. The addition was based on substantial cash deposits in his bank account, which the Assessing Officer found unexplained. Bucha's appeals through the CIT(A) and the Tribunal resulted in partial relief, with some additions being deleted but others confirmed as income. The High Court's dismissal of the appeal affirmed the Tribunal's decision, emphasizing the lack of credible evidence to support Bucha's claims of losses from share transactions.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 753694 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 20-04-2015
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: KETAN SHAH
• Keywords: Assessment; Cash deposit; F & O Transactions; Income; Income Tax; Loss; Tax appeal; Unexplained money
• Section: 143(2); 143(1); 133(6); 69A; 44AB

Judgement Text

"O/TAXAP/256/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 256 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== SANJAY KUMAR BUCHA....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) ====================================== Appearance: MR KETAN H SHAH, ADVOCATE for the Appellant(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 20/04/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, “B” Bench, Ahmedabad (hereinafter referred to as the “Tribunal”) dated 06/02/2015 in ITA No.1897/Ahd/2011 for the Assessment Year 2008-09, the Page 1 of 11 O/TAXAP/256/2015 JUDGMENT appellant-assessee has preferred the present Tax Appeal with the following proposed substantial questions of law; (A) Whether on the facts and in the circumstances of the case the learned Tribunal was right in law in not appreciating the fact that the appellant has discharged the onus regarding the actual loss incurred in F & O transaction worth Rs.56,99,495/-? (B) Whether on the facts and in the circumstances of the case the learned Tribunal was right in law in making addition of peak credit and also gross profit on cash deposit in bank account? (C) Whether on the facts and in the circumstances of the case the learned Tribunal was right in law in not appreciating the facts that this is a case of only gross profit addition of Rs.1,88,750/- even if loss of Rs.56,99,495/- is not believed? (D) Whether on the facts and in the circumstances of the case, the learned Tribunal has justified in not allowing the set off of addition of Rs.14,19,919/- as against the loss incurred of Rs.56,99,495/- (without prejudice)? [2.0] The assessee claiming to be engaged in the business of dealing in shares and derivatives (Future & Option) during the year besides the business of textile trading activities filed the return of income for the Assessment Year 2008-09 declaring the total income at Rs.2,95,019/-. The case Page 2 of 11 O/TAXAP/256/2015 JUDGMENT was process under Section 143(1) of the Income Tax Act (hereinafter referred to as the “Act”) and subsequently the case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 28/08/2009. During the course of the assessment and on the basis of the AIR information it was found that the assessee was holding a bank account with Prime Co-operative Bank Ltd, Main Branch, Khatodra, Surat and had deposited the cash totaling to Rs.37,75,000/- on various dates and, therefore, letter under Section 133(6) of the Act was issued to the said Bank on 30/09/2010 asking to furnish the bank statement of account held by the assessee. As per the details furnished by the said bank it was found that the assessee was holding the bank account bearing No.10011001005255, in which the cash deposits on various dates were made. The assessee was served upon the show cause notice dated 21/12/2010 and was asked to show cause as to how the cash deposit of Rs.37,75,000/- should not be added to the assessee total income as unexplained money under Section 69A of the Act. In response to the show cause notice, the assessee submitted his reply. The Assessing Officer was not satisfied and / or convinced by the explanation furnished by the assessee with respect to the cash deposit of Rs.37,75,000/- deposited in the unaccounted bank account and, therefore, the Assessing Officer made the addition of Rs.37,75,000/- under Section 69A of the Act. [2.1] Feeling aggrieved and dissatisfied with the assessment order making the addition of Rs.37,75,000/- under Section 69A of the Act, the assessee preferred appeal before the learned CIT(A). Page 3 of 11 O/TAXAP/256/2015 JUDGMENT [2.2] Before the learned CIT(A) the assessee also submitted, without prejudice, that the Assessing Officer ought to have simultaneously allowed the loss of Rs.56,99,495/- arising out of the share transactions routed through the bank account. The assessee also furnished relevant proof in support of the loss incurred by him. The learned CIT(A) dismissed the said appeal sustaining the addition of Rs.37,75,000/- to the income of the assessee under Section 69A of the Act. The learned CIT(A) did not agree with the submission on behalf of the assessee with respect to the alleged claim of loss amounting to Rs.56,99,495/-. [2.3] Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), the assessee preferred appeal before the learned Tribunal and by the impugned judgment and order the learned Tribunal has partly allowed the said appeal deleting the addition to the extent of Rs.23,55,080.12 by treating Rs.14,19,919.98.99 as income of the assessee in respect of the unaccounted bank account. The learned Tribunal has confirmed the order passed by the learned CIT(A) with respect to the alleged claim of the assessee with respect to the alleged loss of Rs.56,99,495/-. [2.4] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal, the assessee has preferred the present Tax Appeal with the aforesaid proposed substantial questions of law. [3.0] Shri Ketan Shah, learned advocate appearing on behalf of the assessee has vehemently submitted that the learned Tribunal has materially erred in confirming the order Page 4 of 11 O/TAXAP/256/2015 JUDGMENT passed by the learned CIT(A) with respect to the claim of the assessee with respect to loss of Rs.56,99,495/-. It is further submitted that the learned Tribunal has not properly appreciated the fact that as such the assessee had discharged the onus for incurring the loss in reference to the share transactions of F & O by way of furnishing contract note, address and PAN No. of the respective two parties with whom the transactions were done. It is submitted that since the appellant had discharged the onus regarding the loss incurred of Rs.56,99,495/-, the learned Tribunal ought not to have worked out the peak as well as the profit at the rate of 5%. [3.1] It is submitted that even otherwise since the the addition made at Rs.14,19,919/- is against the loss incurred and, therefore, there is no justification in making the addition of Rs.14,19,919/-. [3.2] Shri Shah, learned advocate appearing on behalf of the appellant-assessee has relied upon the decision of the Hon’ble Supreme Court as well as the decisions of various High Courts in support of his submission that it is not open to the revenue to pick and choose some of the material / registers. [3.3] Making the above submissions and relying upon the decisions of the Hon’ble Supreme Court and various High Courts, it is requested to admit / allow the present Tax Appeal. [4.0] Heard the learned advocates appearing on behalf of the appellant-assessee at length. We have perused and considered the original assessment order; the order of the learned CIT(A) as well as the impugned judgment and order Page 5 of 11 O/TAXAP/256/2015 JUDGMENT passed by the learned Tribunal. At the outset, it is required to be noted that during the course of the assessment the Assessing Officer found that the assessee was having unaccounted bank account with one Prime Co-operative Bank Ltd., Surat and had deposited cash totaling to Rs.37,75,000/- on various dates and, therefore, the assessee was called upon to show cause as to why the cash deposit of Rs.37,75,000/- should not be added to the total income as unexplained money under Section 69A of the Act. The assessee submitted the explanation. However, the Assessing Officer was not convinced with the explanation and, therefore, made the addition of Rs.37,75,000/- under Section 69A of the Act. At this stage, it is required to be noted that the assessee never claimed the loss of Rs.56,99,495/- at the time of assessment. Before the learned CIT(A) the assessee challenged the addition of Rs.37,75,000/- made under Section 69A of the Act and also submitted that the Assessing Officer ought to have allowed the loss of Rs.56,99,495/- arising out of the said bank account wherein cash was deposited. The same came to be negatived by the learned CIT(A) in detail by observing as under; “The submissions of appellant and reasons advanced by A.O. in the assessment order has been considered. It is seen that appellant has miserably failed in pointing out any defect in the action of A.O. whereby he has added a sum of Rs.37,75,000/- u/s.69 of the I.T. Act. The assessee has stated that the cash deposit in bank account is out of money received from friends, relatives and money lenders. Despite opportunity granted by A.O., the appellant could not provide even the names / addresses of Page 6 of 11 O/TAXAP/256/2015 JUDGMENT alleged persons who advanced cash to him. The appellant failed to explain the sources of cash deposit in bank account. Thus, there is no dispute that cash deposited in bank is unexplained. This being so, the action of A.O. in making addition of Rs.37,75,000/- to the income of assessee is justified. A.O.’s action is upheld and ground No.II is dismissed. Ground No.III is interlinked with Ground No.II, wherein the appellant has alleged that A.O. followed pick and choose method and focused only on unexplained cash deposit. The A.O., as alleged by appellant, did not consider the share transactions routed through this bank which resulted in net loss of Rs.56,99,495/-. In this regard, appellant’s submissions and A.O.’s arguments have been considered. Considering the totality of facts and circumstances and the provision of law, the action of the A.O. in disregarding appellant’s claim of loss at Rs.56,99,495/- is justified in view of the following:- i. The said loss has not been claimed in return of income as mandated law. ii. The appellant has not prepared any income / expenditure account or profit/loss a/c to support the figures of alleged loss of Rs.56,99,495/-. iii. The appellant has not established genuineness of share transactions leading to the alleged loss. The appellant has not proved original Page 7 of 11 O/TAXAP/256/2015 JUDGMENT document of alleged share transactions. Merely filing photo copies and saying that it if for A.O. to disprove these papers does not amount to discharging the onus cast on the appellant. iv. Even if we consider the alleged share transactions, it appears that these are speculative transactions and thus speculation loss cannot be allowed to be set-off against other incomes and certainly not against income u/s.69 of the Act. v. The appellant has not even whispered as to how he has arrived at the alleged loss of Rs.56,99,495/-. vi. At the end of the year, the appellant might have been left with some shares, if he has carried on delivery based business. Then what has happened to closing stock? vii. The alleged transaction in bank account are more than Rs.40 lacs. Thus, appellant ought to have filed Tax Audit Report u/s.44AB of the Act. Then only genuineness of the transaction could have been ascertained. viii. The appellant has not prepared accounts as to from whom shares purchased to whom sold and what is the closing stock. In the absence of such basic documents, A.O. cannot be expected to fish out evidence from sea. In view of the above and the position of law in this regard, it is unequivocally held that A.O. was perfectly justified in ignoring the alleged claim of loss amounting to Rs.56,99,495/-. Thus, ground No.III is dismissed.” [4.1] However, on further appeal to the learned Tribunal considering the peak deposits in the unaccounted bank account of Rs.12,31,169.88, on the basis of the reasonable estimate, the learned Tribunal has directed to treat the same as business income of the assessee and estimated the Page 8 of 11 O/TAXAP/256/2015 JUDGMENT assessee’s profit from such business at the rate of 5% of Rs.37,75,000/-, which comes to Rs.1,88,750/-. By the impugned judgment and order the learned Tribunal has sustained the addition to the extent of Rs.14,19,919.88 as the income of the assessee in respect of the bank account in question and consequently deleted the addition to the extent of Rs.23,55,080.12. While holding so, the learned Tribunal in paragraph 14 has observed and held as under; “14. Further, we find that the copy of th statement of account of bank in question was filed by the assessee before us. A perusal of the same shows that deposit of Rs.37,75 lakhs was not made in the said bank account at a time, but, the same amount represents the aggregate amount of deposit, which was made in the said bank account during previous year. A perusal of the bank account shows that there were regular withdrawals from the said bank account itself. No material has been brought on record by the revenue to show why the withdrawals made from the same bank account could not have been available with assessee for making subsequent deposits in the bank account. In above facts, in our considered view, adoption of entire aggregate deposits during the year of Rs.37.75 lakhs as income, by ignoring the withdrawals, was not justified. We find that the peak deposits in the said bank was Rs.12,31,169.88 on 17.01.2008. Further, the frequency of deposit and withdrawal indicates that the assessee was carrying on certain undisclosed deposits. Therefore, it would be Page 9 of 11 O/TAXAP/256/2015 JUDGMENT reasonable to estimate the said business income, and also to treat the same as business income of the assessee. We, therefore, estimate the assessee’s profit from such business at the rate of 5% of Rs.37.75 lakhs, which comes to Rs.1,88,750/-. Therefore, in our considered opinion, it would be just and fair to treat Rs.14,19,919.88 (Rs.12,31,169.88 plus Rs.1,88,750/-) as income of the assessee in respect of the bank account in question. We, therefore, delete the addition to the extent of Rs.23,55,080.12 (Rs.37,75,000/- minus Rs.14,19,919.88) and confirm the addition to the extent of Rs.14,19,919.88, accordingly, the appeal of the assessee is partly allowed.” [4.2] Having heard Shri Shah, learned advocate appearing on behalf of the appellant and considering the reasoning given by the learned Tribunal, we are in complete agreement with the view taken by the learned Tribunal. It is required to be noted that the learned Tribunal has first considered the peak deposit for the unaccounted bank account and after noting that the frequency of the deposit and the withdrawal from the account indicates that the assessee was carrying on certain undisclosed deposits and, therefore, even considering the profit at the rate of 5% of Rs.37,75,000/- when the learned Tribunal has confirmed the addition to the extent of Rs.14,19,919/- (Rs.12,31,169.88 + Rs.1,88,750/-) as income of the assessee in respect of the unaccounted bank account in question, it cannot be said that there is any error committed by the learned Tribunal, which calls for the interference of this Court. Now so far as the contention on behalf of the appellant Page 10 of 11 O/TAXAP/256/2015 JUDGMENT with respect to the alleged claim of the assessee with respect to the loss of Rs.56,99,495/- is concerned, as rightly observed by the learned CIT(A), as such the assessee failed to justify the said loss. Before the learned Assessing Officer there was no whisper by the assessee as to how he has arrived at the alleged loss of Rs.56,99,495/-. Thus, as such, the assessee miserably failed to establish the genuineness of the said transactions regarding the alleged loss. Under the circumstances, for the reasons assigned by the learned CIT(A) with respect to the claim of the assessee with respect to the alleged loss of Rs.56,99,495/- reproduced hereinabove, we see no reason to interfere with the same. [4.3] Now so far as the reliance placed upon the decisions of the Hon’ble Supreme Court as well as various High Courts by the learned advocate appearing on behalf of the appellant-assessee referred to hereinabove are concerned, on considering the above and in the facts and circumstances of the case narrated hereinabove, we are of the opinion that none of the decisions shall be applicable to the facts of the case on hand. [5.0] No question of law, much less substantial question of law, arise in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R. SHAH, J.) (S.H. VORA, J.) Siji Page 11 of 11 "