JAGDISH N THAKKAR, MUMBAI v. ITO 23(2)(3), MUMBAI

ITA 1475/MUM/2009 | 2005-2006
Pronouncement Date: 31-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 147519914 RSA 2009
Assessee PAN AABPT4165C
Bench Mumbai
Appeal Number ITA 1475/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 27 day(s)
Appellant JAGDISH N THAKKAR, MUMBAI
Respondent ITO 23(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 31-05-2010
Date Of Final Hearing 18-05-2010
Next Hearing Date 18-05-2010
Assessment Year 2005-2006
Appeal Filed On 04-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKOT AIAH (AM) ITA NO.1475/MUM/2009 ASSESSMENT YEAR : 2005-06 JAGDISH N. THAKKAR A-19A BLUE BELLS DEVIDAYAL ROAD MULUND(W) MUMBAI-400 080. ..( APPELLANT ) P.A. NO. (AABPT 4165 C) VS. INCOME TAX OFFICER-23(2)(3) PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX MUMBAI-400 051. ..( RESPONDENT ) APPELLANT BY : SHRI HARI S. RAHEJA RESPONDENT BY : SHRI L. K. AGRAWAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 26.12.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM SALARY SHARE IN PARTN ERSHIP FIRM AND COMMISSION INCOME. THE RETURN WAS FILED DECLARING TOTAL INCOME OF RS.97 120/-. DURING THE COURSE OF ASSESSMENT IT WAS OBSE RVED BY THE ASSESSING OFFICER THAT UNDER CASS BASED ON AIR INFORMATI ON THE ITA NO.1475/M/09 A.Y:05-06 2 ASSESSEE HAS DEPOSITED CASH IN HIS SAVING BANK ACCOUNT TO THE TUNE OF RS.27 55 000/-. ACCORDINGLY THE ASSESSEE WAS ASKED TO FURNI SH THE SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNT WITH SUPPORTING EVIDENCES IN RESPECT OF CLAIM MADE IN THIS REGARD. IN RESPONSE THE ASSESSEE'S REPRESENTATIVE SUBMITTED DAILY CASH SUMMARY INDICATING THE DATES OF DEPOSITS IN BANK AND WITHDRAWALS FROM THE BANK. IN R ESPECT OF FREQUENT CASH DEPOSITS AND WITHDRAWALS THE ASSESSEE VIDE WR ITTEN SUBMISSION DATED 11.12.2007 SUBMITTED AS UNDER (EXTRACTED FROM PARA-2 OF ASSESSMENT ORDER) : - THIS HAS REFERENCE TO YOUR QUERY AS TO WHY THERE ARE SEVERAL CASH DEPOSITS AND WITHDRAWALS TO AND FR OM THE BANK. IN THIS REGARD I WISH TO CLARIFY THAT I HAVE BEEN PLANNING TO BUY AN AGRICULTURAL PROPERTY AT MY NATI VE PLACE IN GUJARAT. OF AND ON I HAVE BEEN GETTING THE PROPOSALS FOR SALE OF PROPERTY. THE SELLERS OF THE SE PROPERTIES BEING RESIDENTS OF RURAL AREA DO NOT ACC EPT MONEY BY CHEQUE IN GENERAL. HENCE WITH A VIEW TO BE IN A POSITION TO PAY THEM IMMEDIATELY IF I GOT A GOOD CHOICE OF AGRICULTURAL PROPERTY I USED TO HOLD MONEY IN CA SH. DURING THE INTERREGNUM I USED TO APPLY FOR PUBLIC I SSUE OF SHARES/INVESTMENT IN SHARES AND WHENEVER A GOOD ISSUE/SHARE WAS RECOMMENDED TO ME I USED TO DEPOSIT THE CASH IN ACCOUNT SO AS TO APPLY FOR THE ISSUE AN D WHENEVER THE REFUND IS THERE AND GOOD PROPOSAL OF AGRICULTURE LAND I USED TO WITHDRAW IN LINE WITH MY DESIRE TO BUY AGRICULTURAL PROPERTY. WITHOUT PREJUDICE TO ABOVE I MAY ALSO POINT OUT THAT THERE IS NO FISCAL ECONOMIC OR BANKING LAW WH ICH PROHIBITS HOLDING MONEY IN CASH AND DEPOSITING AND WITHDRAWING THE SAME FROM THE BANK. HOWEVER THE ASSESSING OFFICER WHILE OBSERVING THAT AS PER DAILY CASH FLOW STATEMENT FILED BY THE ASSESSEE THE OPENING CASH IN H AND IS NOT ITA NO.1475/M/09 A.Y:05-06 3 VERIFIABLE IN THE ABSENCE OF ANY BALANCE SHEET AND THE ASSESSEE HAS FAILED TO FILE CAPITAL ACCOUNTS FOR THE EARLIER YEARS DE SPITE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE VIDE NOTICE U/S.142(1) DATED 30.4.2007 AND THERE IS NO CONNECTION OR NEXUS OF THE WITHDRAWALS AND THE DEPOSITS TREATED THE ENTIRE CASH DEPOSITS OF RS.27 55 000 /- IN THE ASSESSEE'S BANK ACCOUNT AS UNEXPLAINED CASH DEPOSITS IN THE H ANDS OF THE ASSESSEE AND ADDED TO THE INCOME OF THE ASSESSEE AND ACCOR DINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.28 52 120/- V IDE ORDER DATED 31.12.2007 PASSED U/S.143(3) OF THE INCOME TAX AC T 1961(THE ACT). 3. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE CONTEND ED THAT [EXTRACTED FROM PARA-4 OF THE ORDER OF THE LD. CIT( A)] AS UNDER : THE APPELLANT IN APPEAL STATED THAT HE HAD FILED A DAILY CASH SUMMARY FOR THE PERIOD 01.04.2004 TO 31.03.2005 WHICH REFLECTS EACH OF THE CASH DEPOSITS MADE IN THE BANK ACCOUNT. THE CASH DEPOSITS WERE OUT OF OPENING CASH IN HAND AND WITHDRAWALS MADE DURING TH E YEAR SALARY EARNINGS COMMISSION INCOME AND WITHDRAWALS FROM PARTNERSHIP FIRM. IT WAS ARGUED T HAT THERE HAD NEVER BEEN A SITUATION OF CASH HAVING BEE N DEPOSITED IN EXCESS OF THE CASH IN HAND AND THEREFO RE THE ISSUE OF UNEXPLAINED CASH DEPOSIT DOES NOT ARISE. AS REGARDS THE OBSERVATION OF THE ASSESSING OFFICER TH AT THE APPELLANT HAD SUBMITTED A PEAK WORKING OF CASH DEPOSITS IT WAS STATED THAT HE NEVER FILED SUCH A STATEMENT AND THAT HE HAD NEVER CONCEDED TO THE WOR KING OF PEAK. THE APPELLANT FURTHER ARGUED THAT THERE WAS NO QUESTION OF APPLICATION OF PEAK THEORY BECAUSE AL L CASH DEPOSITS HAD BEEN PROPERLY EXPLAINED AS ARISING OUT OF EXISTING BALANCES. AS REGARDS THE OBSERVATION OF T HE ASSESSING OFFICER ABOUT NON FILING OF CAPITAL ACCOU NT IT WAS POINTED OUT THAT THE ASSESSING OFFICER AT NO PO INT OF ITA NO.1475/M/09 A.Y:05-06 4 TIME REQUIRED HIM TO FILE SUCH A STATEMENT. THE SA ME WAS THE POSITION WITH REFERENCE TO THE OBSERVATION OF NON FILING OF BALANCE SHEET AND EVIDENCE FOR APPELLANT HAVING CASH BALANCE AT THE END OF THE YEAR. MORE IMPORTAN TLY THE APPELLANT STATED THAT THE ASSESSING OFFICER DID NOT BRING ON RECORD ANY EVIDENCE TO DISREGARD THE FACT THAT THE APPELLANT HAD SUFFICIENT CASH BALANCE IN HAND A S ON THE DAY OF CASH DEPOSITS. THE ASSESSING OFFICER HA S NOT ALLEGED THAT CASH WITHDRAWALS HAVE BEEN UTILIZED FO R ANY OTHER PURPOSE NOT HAS SHE BROUGHT ANY MATERIAL ON R ECORD TO SHOW THAT APPELLANT DID NOT HAVE CASH IN HAND ON THE DAYS WHEN DEPOSITS WERE MADE. IN VIEW OF ALL THESE THE APPELLANT CONTENDED THE ADDITION BE DELETED. 4. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEE'S SUBMISSION AND OTHER MATERIAL AVAILABLE ON RECORD INCLUDING THE ASSESSE E'S BANK ACCOUNT OBSERVED AND HELD AS UNDER : .....THE APPELLANT ALSO FAILED TO EXPLAIN THE SOU RCE OF OPENING BALANCE INSPITE OF SPECIFICALLY REQUESTING FOR IT BY LETTER DATED 25.11.2008. IN VIEW OF ALL THESE NON E OF THE EXPLANATION OFFERED BY THE APPELLANT IS ACCEPTABLE. THEREFORE THE ONLY OPTION LEFT IS TO TREAT THE WIT HDRAWALS AND DEPOSITS AS UNEXPLAINED. THERE IS A CASE AS T HE ASSESSING OFFICER HAS DONE TO TREAT ALL THE DEPOSI TS AS UNEXPLAINED AND ASSESS IT AS UNEXPLAINED INCOME. B UT TO BE FAIR AND JUST IT IS BETTER TO TREAT THE PEAK OF THE DEPOSITS AND WITHDRAWALS AS THE UNEXPLAINED INCOME. THIS IS BECAUSE THERE IS A POSSIBILITY THAT AT LEAS T SOME OF THE WITHDRAWALS WERE RE-DEPOSITED IN THE SAME ACCOU NT. THEREFORE THE PEAK OF THE WITHDRAWALS AND DEPOSI TS IS TAKEN IN THIS EXERCISE. THE OPENING BALANCE IS ALS O CONSIDERED AS THE APPELLANT FAILED TO EXPLAIN THE S OURCE DESPITE THIS OFFICE SPECIFICALLY REQUIRING HIM TO D O SO BY LETTER DATED 25 TH NOV. 2008. THE APPELLANT HAD FILED A STATEMENT OF CASH FLOW WITH THE ASSESSING OFFICER. ACCORDINGLY TO THIS THE PEAK OF THE CASH BALANCE I S RS.15 12 225/- AS ON 24.4.2004. THIS IS TAKEN AS T HE UNEXPLAINED CASH DEPOSIT IN THE PLACE OF RS.27 55 0 00/- ASSESSED BY THE ASSESSING OFFICER. THE ASSESSING OF FICER IS DIRECTED TO ADOPT THE FIGURE OF RS.15 12 225/- I N THE PLACE OF RS.27 55 000/- ADOPTED IN THE ASSESSMENT ORDER. ITA NO.1475/M/09 A.Y:05-06 5 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF ADDITION OF UNEXPLAINED BANK DEPOSITS RS.15 12 225/-. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT AS P ER CASH SUMMARY APPEARING AT PAGE 4-5 OF THE ASSESSEE'S PAPER BOOK THER E HAD NEVER BEEN A SITUATION OF CASH HAVING DEPOSITED IN EXCESS OF THE CASH IN HAND THEREFORE THE ISSUE OF UNEXPLAINED CASH DEPOSIT D OES NOT ARISE. WITH REGARD TO THE OPENING CASH BALANCE RS.6 85 325/- A PPEARING IN THE SAID CASH SUMMARY THE LD. COUNSEL FOR THE ASSESSEE SUB MITS THAT IT IS OUT OF BANK WITHDRAWALS OF THE EARLIER YEAR. HE FURTHER SUBMITS THAT BANK WITHDRAWALS WERE MADE FOR PURCHASE OF PROPER TY IN GUJARAT HOWEVER THE DEAL COULD NOT BE FINALISED THEREFORE T HE CASH WITHDRAWALS FROM THE BANKS WERE DEPOSITED IN THE BAN K ACCOUNT AND IN SUPPORT THE RELIANCE WAS ALSO PLACED ON THE CONFIRMATION LETTER FROM SHRI VIRAL THAKKAR APPEARING AT PAGE-12 OF ASSESSEE'S PA PER BOOK. HE THEREFORE SUBMITS THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. ITA NO.1475/M/09 A.Y:05-06 6 7. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOU NTS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT FILED ANY I NCOME AND EXPENDITURE ACCOUNT CAPITAL ACCOUNT AND STATEMENT OF AFF AIRS (BALANCE SHEET). THE ASSESSING OFFICER UNDER CASS BASED ON AIR IN FORMATION FOUND THAT THE ASSESSEE HAS DEPOSITED RS.27 55 000/- IN CA SH IN HIS SAVINGS BANK ACCOUNT WITH THE BHARAT CO-OPERATIVE BANK (MUMBAI). ON BEING ASKED IT WAS EXPLAINED BY THE ASSESSEE THAT THE DEPOSITS IN THE SAID BANK ACCOUNT ARE OUT OF OPENING CASH IN HAND R S.6.85 325/- AND CURRENT YEARS BANK WITHDRAWALS. IT WAS ALSO SUBMI TTED BY THE ASSESSEE THAT THERE HAD NEVER BEEN A SITUATION OF CASH HA VING DEPOSITED IN EXCESS OF THE CASH IN HAND THEREFORE THE I SSUE OF UNEXPLAINED CASH DEPOSIT DOES NOT ARISE. HOWEVER THE A SSESSING OFFICER IN THE ABSENCE OF ANY EVIDENCE OF OPENING CASH I N HAND RS.6 85 325/- AND CAPITAL ACCOUNT AND ALSO IN THE ABSENCE OF ANY NEXUS OF THE WITHDRAWALS WITH THE DEPOSIT TREATED THE CASH DEPOSIT OF RS.27 55 000/- IN THE BANK ACCOUNT AS UNEXPLAINED CASH DE POSIT. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT THE APPE LLANT FAILED TO EXPLAIN THE SOURCE OF OPENING BALANCE DESPITE HIS OFFI CE SPECIFICALLY ITA NO.1475/M/09 A.Y:05-06 7 REQUIRING HIM TO DO SO BY LETTER DATED 25.11.2008 WO RKED OUT PEAK OF THE CASH BALANCE RS.15 12 225/- FROM THE STATEMENT OF CAS H FLOW FILED BY THE ASSESSEE AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO ADOPT THE FIGURE OF RS.15 12 225/- IN PLACE OF RS.27 55 000/-. 9. WE FURTHER FIND THAT EVEN AT THIS STAGE THE LD. COUNSEL FOR THE ASSESSEE WHILE SUBMITTING THAT THE OPENING CASH BALANCE OF RS.6 85 325/- IS OUT OF PREVIOUS WITHDRAWALS FROM THE B ANK ACCOUNTS HAS FAILED TO FILE ANY SUPPORTING EVIDENCE. UNDER THE SE CIRCUMSTANCES AND IN THE ABSENCE OF ANY MATERIAL PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE TO PROVE THE OPENING CASH BALANCE OF RS.6 85 325/- AND THE NEXUS OF WITHDRAWALS AND DEPOSITS IN THE BANK A CCOUNT WE AFTER REJECTING THE WORKING OF PEAK OF CASH BALANCE ADO PTED BY THE LD. CIT(A) WORKED OUT UNEXPLAINED CASH DEPOSITS WITH T HE BANK AS UNDER:- DATE DR. AMOUNT(RS.) DATE CR. AMOUNT(RS.) EXCESS AM OUNT DEPOSITED/UNEXPLAINED CASH DEPOSIT 10.4.04 4 55 000 8.4.04 2 25 000 15.4.04 1 00 000 28.4.04 1 00 000 24.4.04 5 00 000 22.5.04 30 000 26.6.04 1 25 000 28.5.04 1 70 000 1.6.04 30 000 9.6.04 2 70 000 10.6.04 30 000 16.6.04 2 00 000 17.6.04 25 000 30.6.04 25 000 2.7.04 1 25 000 6.7.04 65 000 7.7.04 1 00 000 9.7.04 1 00 000 12.7.04 1 00 000 ITA NO.1475/M/09 A.Y:05-06 8 TOTAL 11 80 000 15 95 000 4 15 000 6.9.04 20 000 6.10.04 2 00 000 4.10.04 50 000 TOTAL 70 000 2 00 000 1 30 000 14.10.04 60 000 60 000 TOTAL 6 05 000 LESS OLD CASH AVAILABLE WITH THE ASSESSEE BY ESTIMA TE IN THE ABSENCE OF ANY EVIDENCE 25 000 TOTAL UNEXPLAINED CASH DEPOSIT 5 80 000 ACCORDINGLY THE EXCESS AMOUNT DEPOSITED IN THE BANK RS.5 8 0 000/- IS TREATED AS UNEXPLAINED AMOUNT. THE ASSESSING OFFICER IS D IRECTED TO ADOPT THE FIGURE OF RS.5 80 00/- IN PLACE OF RS.15.12 225/- ADOPTED AND SUSTAINED BY THE LD. CIT(A). THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED. 10. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.5.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 31.5.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.1475/M/09 A.Y:05-06 9 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18.5.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19.5.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 31.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 31.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER