C. MAHENDRA CAPITAL P. LTD, MUMBAI v. DCIT 5(1), MUMBAI

ITA 1439/MUM/2009 | 2005-2006
Pronouncement Date: 07-05-2010 | Result: Allowed

Appeal Details

RSA Number 143919914 RSA 2009
Assessee PAN AAACC4375K
Bench Mumbai
Appeal Number ITA 1439/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 4 day(s)
Appellant C. MAHENDRA CAPITAL P. LTD, MUMBAI
Respondent DCIT 5(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 07-05-2010
Date Of Final Hearing 28-04-2010
Next Hearing Date 28-04-2010
Assessment Year 2005-2006
Appeal Filed On 03-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI T.R. SOOD (AM) ITA NO.1439/MUM/2009 ASSESSMENT YEAR : 2005-06 C. MAHENDRA PRIVATE LIMITED 1204 PANCHRATNA OPERA HOUSE MUMBAI-400 004. ..( APPELLANT ) P.A. NO. (AAACC 4375 K) VS. DY. COMMISSIONER OF INCOME TAX -5(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI KIRAN MEHTA RESPONDENT BY : SHRI SUM EET KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 19.1.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND ALSO DE RIVES INCOME FROM INVESTMENTS. RETURN WAS FILED DECLARING TOTAL INCO ME U/S.115 JB OF THE INCOME TAX ACT 1961 (THE ACT) AT RS.12 45 772 /-. DURING THE COURSE OF ASSESSMENT PROCEEDING ON PERUSAL OF BANK STATEMENT OF ITA NO.1439/M/09 A.Y:05-06 2 BANK OF INDIA FILED BY THE ASSESSEE IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEPOSITED CASH OF RS.4.50 LACS O N 18.1.2005 AND RS.3.00 LACS ON 24.1.2005. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF SUCH CASH DEPOSITS. THE ASSESSEE IN H IS WRITTEN REPLY SUBMITTED THAT CASH OF RS.8.00 LACS WAS WITH DRAWN ON 28.10.2004 FROM THE BANK OF INDIA FOR PAYMENT OF TO KEN (EARNEST MONEY) FOR ACQUIRING PROPERTY NEAR SURAT GUJARAT AN D USUALLY THE TOKEN AMOUNT IS PAID IN CASH BEFORE FINALISING THE AGRE EMENT AND OTHER TERMS. HOWEVER THE DEAL COULD NOT BE COMPLETED FOR VA RIOUS REASONS. HENCE OUT OF THE ABOVE RS.4.50 LACS AND RS.3.00 LACS WAS D EPOSITED ON 18.1.2005 AND 24.1.2005 RESPECTIVELY AND THE BALAN CE AMOUNT WAS RETAINED AS CASH IN HAND. HOWEVER THE ASSESSING OFFICER D ID NOT ACCEPT THE ASSESSEES EXPLANATION FOR THE REASONS THAT (I) THAT THERE IS QUITE A LONG TIME GAP BETWEEN THE WITHDRAWALS AND DE POSITS (II) THE WITHDRAWAL OF CASH OF HUGE AMOUNT FOR GIVING TOKEN(E ARNEST MONEY) ITSELF IS DUBIOUS IN NATURE (III) THE ASSESSEE BEING INV ESTMENT COMPANY AND ALL TRANSACTIONS ARE ENTERED IN CHEQUES AND DRAFTS A ND (IV) THE NATURE AND ACTIVITY OF ASSESSEE COMPANY IN NO WAY SUPPOR TS THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY HE PRESUMED THAT THE ASSESSEE COMPANY HAS INVESTED/SPENT THE SAID AMOUNT IN UNDI SCLOSED ASSETS AND HENCE HE TREATED THE CASH DEPOSIT OF RS.7.50 L ACS AS UNDISCLOSED INCOME AND ADDED TO THE INCOME OF THE ASSESSEE AND ITA NO.1439/M/09 A.Y:05-06 3 COMPLETED THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.6 89 570/- UNDER NORMAL PROVISIONS OF THE ACT AND AT AN INCOME OF RS.12 45 772/- U/S. 115JB OF THE ACT VIDE ORDER DATED 20.11.2007 PASSED U/S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A ) WHILE OBSERVING THAT IN THE ABSENCE OF ANY COPY OF AGREEMENT FOR PURCHASE OF IMMOVABLE PROPERTY THE CLAIM OF THE APPELLANT CAN NOT BE SAID AS GENUINE HELD THAT THE ASSESSING OFFICER HAS RIGHTLY TREA TED THE DEPOSITS AS UNEXPLAINED INCOME AS PER PROVISIONS OF SECTION 68 OF THE ACT AND ACCORDINGLY UPHELD THE ADDITION MADE BY THE ASSE SSING OFFICER. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF ADDITION OF RS.7.50 LACS. 4. 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 THE AM OUNT OF RS.4.50 LACS AND RS.3.00 LACS WAS DEPOSITED INTO THE BANK ACCOUNT OF THE ASSESSEE ON 18.1.2005 AND 24.1.2005 OUT OF CASH AVAILABL E IN THE CASH BOOK WHEREIN THE AMOUNT OF CASH OF RS.8.00 LACS WITHD RAWN FROM THE SAME BANK ACCOUNT ON 28.10.2004 WAS CREDITED. HE FURT HER SUBMITS THAT THE DEAL OF THE IMMOVABLE PROPERTY COULD NOT BE COMPLETED FOR VARIOUS REASONS THEREFORE NO SUCH AGREEME NT WAS ITA NO.1439/M/09 A.Y:05-06 4 EXECUTED. HE FURTHER SUBMITS THAT SINCE THE ASSESSING OFFICE R HAS ACCEPTED THE ENTRIES RECORDED IN THE CASH BOOK THEREFORE THE ADDITION OF RS.7.50 LACS MADE BY THE ASSESSING OFFICER ON PRESUMPTIO N BASIS IS BAD IN LAW AND FOR THIS PROPOSITION THE RELIANCE WAS AL SO PLACED IN MEHTA PARIKH AND CO. VS. CIT (1956) 30 ITR 181(SC) W HEREIN IT HAS BEEN HELD THAT WHEN THE CASH BOOK OF THE ASSESSEE WAS ACCEP TED AND THE ENTRIES THEREIN WERE NOT CHALLENGED IT WAS NOT OP EN TO REVENUE TO CHALLENGE THE CORRECTNESS OF CASH BOOK ENTRIES. HE THEREFOR E SUBMITS THAT THE ADDITION OF RS.7.50 LACS MADE BY THE ASSESSING OF FICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 5. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO SECTION 68 OF THE ACT WHERE ANY SUM IS FOUND CREDITED IN THE BOOK S OF AN ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AN D SOURCE THEREOF IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISFACTORY. IN THE CASE BEFORE US THERE IS NO DISPUTE THAT THE ASSESSEE HA S WITHDRAWN RS.8.00 LACS ON 28.10.2004 FROM HIS BANK ACCOUNT WITH BAN K OF INDIA ITA NO.1439/M/09 A.Y:05-06 5 FOR PAYMENT OF TOKEN EARNEST MONEY FOR ACQUIRING PROP ERTY NEAR SURAT AND PASSED NECESSARY ENTRY IN HIS CASH BOOK. HOWEVER ACCORD ING TO THE ASSESSEE THE DEAL COULD NOT BE COMPLETED FOR VARIOUS REASONS THE ASSESSEE AFTER MAKING NECESSARY ENTRIES IN ITS CASH BOOK DEPOSI TED RS.4.50 LACS AND RS.3.00 LACS ON 18.1.2005 AND 24.1.2005 RESPECTIVELY IN CASH IN THE SAME BANK ACCOUNT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION ON THE GROUND TH AT THE NATURE AND ACTIVITY OF THE ASSESSEE COMPANY IN NO WAY SUP PORTS THE CONTENTION OF THE ASSESSEE AND THERE IS A LONG GAP BETWEE N THE WITHDRAWAL AND DEPOSIT OF CASH. ON APPEAL THE LD. CI T(A) HAS ALSO UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER IN VI EW OF THE PROVISIONS OF SECTION 68 OF THE ACT. 7. IN MEHTA PARIKH AND CO. (SUPRA) IT HAS BEEN INTERALIA HELD (HEADNOTE ): (II) AS THE CASH BOOK OF THE APPELLANTS WAS ACCEPTE D AND THE ENTRIES THEREIN WERE NOT CHALLENGED AND NEITHE R FURTHER ACCOUNTS NOR VOUCHERS WERE CALLED FOR AND THE PERSONS WHO GAVE THE AFFIDAVITS WERE NOT CROSS-EXAM INED IT WAS NOT OPEN TO THE REVENUE TO CHALLENGE THE CORRECTNESS OF THE CASH BOOK ENTRIES OR THE STATEME NTS MADE IN THE AFFIDAVIT. WHEREAS IN THE CASE BEFORE US THE REVENUE HAS CHALLENGED THE SOURCE OF DEPOSIT OF RS.7.50 LACS IN THE BANK ACCOUNT AND THERE IS NO AFFIDAVIT IN SUPPORT OF THE ENTRIES THEREFORE THE DECISION REL IED ON BY THE LD. ITA NO.1439/M/09 A.Y:05-06 6 COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE AND NOT APP LICABLE TO THE FACTS OF THE PRESENT CASE. 8. IN CHATURVEDI & PITHISARIAS INCOME TAX LAW FIFTH E DITION (VOL. 2) THE CASE OF SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (S C) HAS BEEN DISCUSSED AS UNDER :- IN SUMATI DAYAL VS. CIT (1995) 214 ITR 801 806 8 08- 09 (SC) CERTAIN AMOUNTS WERE CREDITED IN THE CAPIT AL ACCOUNT OF THE ASSESSEE-APPELLANT IN HER BOOKS OF A CCOUNT FOR THE ASSESSMENT YEARS 1971-72 AND 1972-73. THE APPELLANT OFFERED HER EXPLANATION ABOUT THE SAID RE CEIPTS BEING HER WINNING FROM RACES. THE DISPUTE WAS WHE THER THE RECEIPTS WERE REALLY THE WINNINGS OF THE APPELL ANT FROM THE RACES. THIS RAISES THE QUESTION WHETHER T HE APPARENT CAN BE CONSIDERED AS REAL. AS LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 545 547 (SC) APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO DISBELIEVE THAT THE APPARENT IS NOT THE REAL AND TH AT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SU RROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. IT HAS BEEN HELD BY THE SUPREME CO URT THAT HAVING REGARD TO THE CONDUCT OF THE APPELLANT AS DISCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER M ATERIAL ON THE RECORD AN INFERENCE CAN REASONABLY BE DRAWN THAT THE WINNING TICKETS WERE PURCHASED BY THE APPELLANT AFTER EVENT. THEREFORE THE MAJORITY OPINION OF THE SETT LEMENT COMMISSION AFTER CONSIDERING SURROUNDING CIRCUMSTAN CES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAS RI GHTLY CONCLUDED THAT THE APPELLANTS CLAIM ABOUT THE AMOU NTS BEING HER WINNINGS FROM RACES IS NOT GENUINE. IT C ANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLA NT IN RESPECT OF THE SAID AMOUNTS HAS BEEN REJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMO UNTS ARE INCOME OF THE APPELLANT FROM OTHER SOURCES IS N OT BASED ON EVIDENCE. ITA NO.1439/M/09 A.Y:05-06 7 HOWEVER IN THE CASE BEFORE US IT IS NOT THE CASE OF THE R EVENUE THAT THE ASSESSEE HAS NOT WITHDRAWN THE AMOUNT OF RS.8.00 LACS F ROM THE BANK ACCOUNT ON 28.10.2004 OR THE SAME AFTER WITHDRAWA L HAS BEEN INVESTED/SPENT BY THE ASSESSEE OTHER THAN THE DEPOSIT OF RS.7.50 LACS IN THE SAME BANK ACCOUNT ON 18.1.2005 AND 24.1.2005. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE RELEVANT ENTRIES RECOR DED IN THE CASH BOOK ARE FOUND TO BE FALSE OR UNTRUE INASMUCH AS THE REVENUE HAS NOT DISBELIEVED THE ENTRY OF BALANCE AMOUNT OF RS.50 000/ -. MERELY BECAUSE THERE IS A TIME GAP OF LESS THAN THREE MONTHS BE TWEEN THE WITHDRAWALS OF RS.8.00 LACS AND DEPOSIT OF RS.7.50 LACS DOE S NOT MEAN THAT DEPOSIT MADE BY THE ASSESSEE IS NOT GENUINE OR THE A SSESSEE HAS NO CAPACITY TO DEPOSIT RS.7.50 LACS IN ITS REGULAR BANK ACCOUNT. IN FACT THERE WAS NO FURTHER NEED ON THE PART OF THE ASSE SSEE TO PROVE THE DEPOSIT. THE ONUS WAS ON THE REVENUE TO DISPROVE T HE SAME WHICH HAS NOT BEEN DISCHARGED. IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT THE ASSESSEE NOT ONLY DISCHARGED THE ONUS PLACED UPON HIM U/S.68 OF THE ACT IN ORDER TO PROVE THE SOURCE OF MONEY INTRODUCED IN THE BANK ACCOUNT BUT ALSO ADDUCED POSITIVE EVIDENCE/NEXUS REQUIRED FOR THE PURPOSE. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION IN ADDITIONAL CIT VS. MOHAN ENGINEERING CO. (1985) 151 ITR 571(PAT.) WHEREIN IT HAS BEEN HELD (PAGE-582) :- ITA NO.1439/M/09 A.Y:05-06 8 IN THE PRESENT CASE THE TRIBUNAL FOUND AS A MATT ER OF FACT AS FOLLOWS : ' THE DEPOSIT OF RS. 62 500 WAS WITHDRAWN BETWEEN NOVEMBER 28 1961 TO FEBRUARY 6 1963. THE DEPOSITS IN THE NAME OF MR. SUREKA CAME BETWEEN APR IL 26 1963 AND SEPTEMBER 2 1963. ' THE TRIBUNAL HAS FURTHER FOUND THAT THIS AMOUNT OF RS.62 500 FOUND IN THE NAME OF RAJ KUMAR JAIN AND COMPANY WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR AND HAD BELONGED TO T HE ASSESSEE. THUS IN MY OPINION THE ASSESSEE ADDUCED SATISFACTORY EVIDENCE FULLY LINKED WITH RS. 62 500 BELONGING TO THE ASSESSEE WHICH WAS TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR AND THIS BEING A MATTER OF RECORD WITH THE DEPARTME NT THE TRIBUNAL BEING SATISFIED WITH REGARD TO THE WIT HDRAWAL AND DEPOSIT BETWEEN THE DATES AS MENTIONED ABOVE POSITIVELY CAME TO THE FINDING THAT THE DEPOSIT CAM E OUT OF THE FUND WITHDRAWN IN THE IMMEDIATELY PRECEDING YEAR AND THE ALTERNATIVE PLEA OF THE ASSESSEE WAS ON VERIFICATION OF THE RECORDS WITH THE DEPARTMENT HE LD TO BE A GENUINE PLEA AND THE TRIBUNAL DELETED THE ADDI TION. THUS I HOLD THAT THE ASSESSEE NOT ONLY DISCHARGED THE ONUS PLACED UPON HIM UNDER S. 68 OF THE ACT IN ORDE R TO PROVE THE SOURCE OF MONEY INTRODUCED IN THE ACCOUNT BUT ALSO ADDUCED POSITIVE EVIDENCE REQUIRED FOR THE PUR POSE I FURTHER HOLD THAT THE ASSESSEE IN LAW WAS NOT DEBA RRED FROM TAKING AN ALTERNATIVE PLEA EVEN THOUGH THE ASS ESSEE HAD FAILED TO PROVE THE PLEA INITIALLY TAKEN BY HIM AND I FURTHER HOLD THAT IN THE PRESENT CASE THERE WAS P OSITIVE EVIDENCE IN SUPPORT OF THE ALTERNATIVE PLEA TAKEN B Y THE ASSESSEE AND NO LINK IS MISSING AS SUBMITTED BY THE SENIOR STANDING COUNSEL FOR THE DEPARTMENT. IN MY OPINION THE TRIBUNAL HAVING BELIEVED THE ASSESSEE'S ALTERNATIVE PLEA (WHICH WAS A PURE QUEST ION OF FACT) THERE WAS AN END OF THE MATTER IN SO FAR AS THAT FACT WAS CONCERNED AND THE FINDING OF THE TRIBUNAL BEING BASED UPON A STATEMENT WHICH WAS GOOD MATERIAL ON WHICH IT COULD BE BASED NO QUESTION OF LAW REALLY AROSE. THUS IN VIEW OF WHAT I HAVE HELD ABOVE I HOLD THA T ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE TH E ORDER OF THE APPELLATE TRIBUNAL DELETING FROM THE ASSESSE E'S INCOME THE AMOUNT OF RS. 28 000 FOUND CREDITED IN T HE NAME OF THE DURGA PRASAD SUREKA IN THE ACCOUNT BOOK S OF ITA NO.1439/M/09 A.Y:05-06 9 THE ASSESSEE WAS CORRECT IN LAW AND IN ACCORDANCE W ITH THE PROVISIONS UNDER S. 68 OF THE 1961 ACT. FOR THE REASONS AS DISCUSSED ABOVE WE ARE OF THE VIEW THA T THE ADDITION OF RS.7.50 LACS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDIN GLY THE SAME IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREF ORE ALLOWED. 9. IN THE RESULT ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.5.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 7.5.2010. 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.1439/M/09 A.Y:05-06 10 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 28.4.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 29.4.10 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 7.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 11.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER