PAWAN KUMAR AGARWAL, MUMBAI v. ITO WD 4(3)(3), MUMBAI

ITA 1801/MUM/2009 | 2005-2006
Pronouncement Date: 30-12-2010 | Result: Allowed

Appeal Details

RSA Number 180119914 RSA 2009
Assessee PAN AABPA4319F
Bench Mumbai
Appeal Number ITA 1801/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 11 day(s)
Appellant PAWAN KUMAR AGARWAL, MUMBAI
Respondent ITO WD 4(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 30-12-2010
Date Of Final Hearing 10-12-2010
Next Hearing Date 10-12-2010
Assessment Year 2005-2006
Appeal Filed On 19-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1801/MUM/2009 (ASSESSMENT YEAR: 2005-06) SHRI PAWAN KUMAR AGARWAL INCOME TAX OFFICER - 4(3)( 3) 51 AGARWAL SADAN DADI SETH 6TH FLOOR AAYAKAR BHA VAN AGIARY LANE KALBADEVI ROAD VS. M.K. ROAD MUMBAI 400020 MUMBAI 400002 PAN - AABPA 4319 F APPELLANT RESPONDENT APPELLANT BY: SHRI RAKESH JOSHI RESPONDENT BY: SHRI SUMEET KUMAR O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XV MUMBAI DATED 27.02.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING THREE GROUNDS ON ONLY ONE ISSUE OF TREATING THE DEPOSITS IN THE BANK ACCOUNT AS UNEXPL AINED MONIES UNDER SECTION 69A OF THE I.T. ACT: - 1) THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ADDITION OF SUM OF RS.54 67 850/- B Y TREATING AS UNEXPLAINED MONIES U/S. 69A OF THE INCOME TAX ACT 1961 BEING THE CASH AND CROSS BEARER CHEQUES DEPOSITED INTO TH E BANK ACCOUNT OF THE APPELLANT ON ACCOUNT OF THE CASH SALES DONE BY HIS CONCERNS THE NEXUS FOR WHICH HAD BEEN CLEARLY ESTABLISHED. 2) THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS O N FACTS IN CONFIRMING THE ADDITION OF SUM OF RS.54 67 850/- BY HOLDING THAT THE SAID DEPOSITS WERE NOT SATISFACTORILY EXPLAINED WHICH FINDING IS CONTRARY TO THE MATERIAL AND EVIDENCE ON RECORD. 3) THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS O N FACTS IN CONFIRMING THE ADDITION OF SUM OF RS.54 67 850/- BY HOLDING THAT THE BURDEN WHICH LAY UPON THE APPELLANT TO PROVE TH E SOURCE OF DEPOSITS AS ABOVE WAS NOT DISCHARGED. 3. BRIEFLY STATED THE ASSESSEE IS A DIRECTOR IN M/S. KISHANCHAND TEXTILES LTD. AND M/S. UNICORN TEXTILES PVT. LTD. BOTH COMP ANIES ARE ENGAGED IN THE ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 2 BUSINESS OF SALE OF FABRICS TO VARIOUS LOCAL AND OU TSTATION PARTIES. DURING THE FINANCIAL YEAR 2004-05 THERE WERE CASH DEPOSITS TO THE TUNE OF ` 47 15 000/- AND CROSSED BEARER CHEQUES TO THE TUNE OF ` 7 52 850/- TOTALLING TO ` 54 67 850/- IN THE BANK ACCOUNT MAINTAINED WITH COS MOS CO-OPERATIVE BANK. IN ITD COMPUTER SYSTEM (AIR) THE FACT THAT CA SH DEPOSIT TO THE EXTENT OF ` 47 15 000/- WERE MADE IN THE SAVING BANK ACCOUNT WE RE MADE AVAILABLE TO THE A.O. CONSEQUENT TO WHICH SUMMONS WERE ISSUE D AND A COPY OF THE BANK ACCOUNT NO. 990209 WITH ZAVERI BAZAR BRANCH WA S OBTAINED. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAID CASH DEPOSIT . ASSESSEE EXPLAINED THAT AT THAT POINT OF TIME THEY WERE DEALING IN GRE Y FABRICS. THE PREVAILING CONDITION IN THE MARKET WAS THAT OUTSTATION PARTIES IN ORDER TO AVOID SALES TAX LEVIES AND OTHER DUTIES IN THEIR STATE INSISTED ON BUYING THE GREY FABRICS IN CASH ONLY. SINCE IT IS NECESSARY FOR SELLING GRE Y FABRICS TO THE PARTIES THE GREY FABRICS WERE SOLD IN CASH WITHOUT ANY SUPPORTI NG DOCUMENTS. SINCE THE MONEY WAS RECEIVED IN CASH SALE PROCEEDS WERE DEPOS ITED IN THE JOINT SAVING ACCOUNT IN COSMOS BANK FROM WHICH CHEQUES WERE ISSU ED IN FAVOUR OF THE COMPANIES TO WHICH GOODS SOLD BELONGED. IT WAS ALSO EXPLAINED THAT THE SOLE EXERCISE WAS DONE UNDER THE MISTAKEN BELIEF THAT SA LES EXCEEDING ` 20 000/- COULD NOT BE INCURRED IN CASH. IT WAS FURTHER SUBMI TTED THAT SUCH CASH SALES HAVE OCCURRED ONLY IN F.Y. 2004-05. CONSEQUENT TO T HE EXPLANATION IN ORDER TO VERIFY THE CLAIM SURVEY UNDER SECTION 133A WAS C ONDUCTED IN THE CASE OF THE TWO COMPANIES THE BENEFICIARIES TO WHOM CHEQUE S WERE MADE OUT OF CASH DEPOSITS. DURING THE SURVEY THE ASSESSEE SEEMS TO HAVE DISCLOSED AN AMOUNT OF ` 50 00 000/- AS ADDITIONAL INCOME FOR F.Y. 2006-07. HOWEVER THE A.O. DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE WITH REFERENCE TO CASH DEPOSITS AND SUBSEQUENT ISSUE OF CHEQUES TO TH E SAID COMPANIES TOWARDS THEIR SALES AND TREATED BOTH CASH DEPOSITED IN BANK ACCOUNT AS WELL AS CROSSED BEARER CHEQUES TOTALLING TO ` 54 67 850/- AS UNEXPLAINED MONEY OF THE ASSESSEE UNDER SECTION 69A OF THE I.T. ACT. 4. BEFORE THE CIT(A) THE ASSESSEE HAS SUBMITTED ADDITI ONAL DETAILS WITH REFERENCE TO ISSUANCE OF CHEQUES VIS--VIS CORRELAT ION WITH THE SALES BILLS AND SALES ACCOUNT MAINTAINED IN THE COMPANY AND SUBMITT ED THAT THE ENTIRE CASH DEPOSITS AND BEARER CHEQUES OF THE SAME AMOUNT WERE ACCOUNTED FOR ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 3 AS INCOME IN THE HANDS OF THE ASSESSEE COMPANIES IN THE SAME ASSESSMENT YEAR AS UNDER: - STATEMENT OF TOTAL DEPOSITS AND CHEQUE ISSUED : TOTAL CASH DEPOSITS 4715000 TOTAL CROSS BEARER CHEQUES DEPOSITS 752850 5467850 LESS CHEQUES ISSUED TO P. KISHANCHAND TEXTILES PVT. LTD. 1807500 UNICORN TEXTILE PVT. LTD. 3660350 5467850 0 ======== 5. IT FILED ADDITIONAL EVIDENCE BEFORE THE CIT(A) INCL UDING THE DETAILS OF PURCHASES AND SALES OF THE WHOLE PERIOD AND HOW THE AMOUNTS WERE ACCOUNTED IN THE COMPANIES AS SALES. THE CIT(A) SEN T THE MATTER ON REMAND TO THE A.O. WHO SUBMITTED THE REPORT DATED 01.12.20 08. ASSESSEE WAS GIVEN ANOTHER OPPORTUNITY AND AFTER CONSIDERING THE EXPLA NATION THE CIT(A) CONFIRMED THE ADDITION SO MADE VIDE PARA 3.4 OF HIS ORDER WHICH IS VERY ELABORATE RUNNING FROM PAGE 8 TO 16 OF THE ORDER. T HE GIST OF THE REASONS GIVEN FOR CONFIRMING THE ADDITION ARE (A) THAT THE CIT(A) DID NOT FIND ANY MERIT REGARDING CLAIM OF SATISFACTORY EXPLANATION O F SOURCE OF DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE (B) THE SO CALLED SAL ES BILLS SUBMITTED EVIDENCES THE FALSITY OF THE CLAIM OF THE SO CALLED SALE BILLS AS NO ADDRESS OF ANY SUCH PURCHASE PARTIES HAS BEEN GIVEN AND THESE BILLS ARE PREPARED BY THE SAME PERSON AND THE MODUS OPERANDI OF THE BILLS ARE ALIKE (C) THAT ALL THE SALES BILLS HAVE NO PRINTED NUMBER THERE IS NO REF ERENCE OF DESPATCH AND THESE ARE PREPARED IN FEW SITTINGS BY ONE PERSON AN D FURTHER (D) THE ACCOUNT OF ASSESSEE MAINTAINED IN THE BANK WERE NEVER DISCL OSED AS THE INFORMATION WAS UNEARTHED BY THE A.O. BECAUSE OF AVAILABILITY O F INFORMATION IN ITD COMPUTER SYSTEM AND THIS IS CONCEALMENT OF VITAL IN FORMATION OF ACCOUNT (E) THE EXPLANATION IN ORDER TO OVER COME THE DIFFICULT Y OF ACCEPTING PAYMENTS IN CASH OR THROUGH BEARER CHEQUES FOR CONDUCTING COMPA NIES BUSINESS ASSESSEE HAS OPENED SAVING BANK ACCOUNT AND SALES P ROCEEDS HAVE BEEN DEPOSITED FOR ISSUANCE OF CHEQUES TO COMPANIES COUL D NOT BE RELIED UPON (F) THAT THERE IS NO SATISFACTORY EXPLANATION FROM THE ASSESSEE AS ASSESSEE HAS USED SAID BANK ACCOUNT TO CHANNELISE UNACCOUNTED CA SH AVAILABLE WITH HIM ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 4 IN THE GUISE OF SALES. THE CIT(A) ALSO VERIFIED TH E DEPOSITS ON 08.04.2004. FOUR CHEQUES WERE ISSUED BY THE ASSESSEE OF ` 1 69 000/- 1 50 000/- 1 40 000/- AND 1 15 000/- RESPECTIVELY TO UNICORN T EXTILES LTD. AND THERE IS ONLY ONE DEPOSIT OF ` 1 87 050/- WHICH APPEARS TO BE NOT OF SALE PROCEEDS . THEREFORE THE CIT(A) WAS OF THE OPINION THAT THE EX PLANATION THAT THREE PARTIES HAVE GIVEN BEARER CHEQUES WHICH WERE DEPOS ITED ON THAT DAY TO AN EXTENT OF ` 3 78 300/- FOR ISSUANCE OF CHEQUES IS NOT ACCEPTABL E. ON THE BASIS OF THE OBSERVATION MADE THEREIN THE CIT(A) FINALLY CONCLUDED AS UNDER: - ALL THE ABOVE DISCUSSION AND REASONING GIVE RISE T O THE CONCLUSION THAT UNDISCLOSED BANK ACCOUNT OF THE APPELLANT POSSESSES HUGE DEPOSIT OF CASH WHICH SOURCE HAS NOT BEEN PROVED BY THE APPELL ANT AT ANY STAGE OF PROCEEDING AND THE STORY OF CASH SALES OF THE APPEL LANT IS FOUND UNRELIABLE. THE ARGUMENT THAT IF THESE SALES PROCEE DS ARE NOT ACCEPTED THEN HOW CAN ONE SAY THAT PURCHASES & SALES OF THE COMPANIES ARE CORRECT OR GENUINE ONE. LD. AR HAS ALSO REFERRED TH E ORDER OF THE AO OF M/S. P. KISHANCHAND TEXTILES LTD. THAT SALES HAS BE EN ADMITTED BY THE AO. THIS ARGUMENT IS NOT TENABLE BECAUSE OF THE RE ASON THAT AO HAS NOT GIVEN ANY CERTIFICATE ABOUT THE GENUINENESS OF THE SALE PROCEEDS OR PURCHASES OF GOODS TO M/S. P. KISHANCHAND TEXTILES LTD. AGAINST THE ARGUMENT OF THE LD. AR THERE CAN BE COUNTER ARGUMEN T THAT THESE COMPANIES MIGHT HAVE ALSO BE DOING UNACCOUNTED SALE S AT HIGHER PRICE AND ONLY WITH A VIEW TO SUPPRESS THE G.P. SUCH ARRA NGEMENTS OF TAKING ACCOUNT PAYEE CHEQUE FROM THE APPELLANT MIGHT HAVE BEEN MADE OTHERWISE THERE WAS NO VALID REASON NOT TO WHO THE SALE PROCEEDS BY THE COMPANIES FOR THEIR SALES. THE SUPPRESSION OF GROSS PROFIT BY THE COMPANIES CAN BE VISUALISED FROM THE SALE BILLS ITS ELF WHERE NO QUALITATIVE DETAILS HAVE BEEN MENTIONED AND SELLING RATES ARE VARYING SUBSTANTIALLY. SINCE THIS MATTER IS NOT RELEVANT HE RE DETAILS OF SUCH EVIDENCES APPEARING IN SUCH SALES BILLS ARE NOT ADD UCED. AS IT HAS BEEN REFERRED TO WITH A VIEW TO MEET OUT THE THEORETICAL ARGUMENTS OF THE LD. AR. THEREFORE THE TOTALITY OF THE FACTS & CIRCUMST ANCES PROVES THAT THERE IS UNACCOUNTED AND UNEXPLAINED DEPOSIT OF CASH IN B ANK WHICH IS REQUIRED TO BE TAX U/S. 68/69 OF I.T. ACT. AS SUCH THE TOTAL ADDITION MADE BY THE AO OF RS.54 67 850/- IS CONFIRMED. THUS THE CIT(A) CONFIRMED THE ADDITION UNDER SECTIO N 68 & 69 OF THE I.T. ACT. 6. THE LEARNED COUNSEL REFERRED TO THE PAPER BOOK AND REMAND REPORT TO SUBMIT THAT THE ASSESSEE HAS DEPOSITED CASH OUT OF THE SALE PROCEEDS AND ISSUED CHEQUES TO RESPECTIVE COMPANIES IMMEDIATELY AND ALL THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE COMPANY AS EXPLAINED TO THE AUTHORITIES AND THE SOURCE OF FUNDS IS NOTHING BUT CASH SALES MADE TO OUTSTATION PARTIES WHICH WERE IN FACT ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE TWO COMPANIES IN WHICH THE ASSESSEE IS A DIRECT OR AND THESE AMOUNTS ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 5 HAVE BEEN ISSUED BY WAY OF CHEQUES AND CREDITED TO RESPECTIVE PARTYS ACCOUNT AND FULLY ACCOUNTED IN THE HANDS OF THE COM PANY. HE THEN REFERRED TO THE REMAND REPORT OF THE A.O. WHICH WAS EXRACTE D BY THE CIT(A) IN PARA 3.2 IN PAGE 4 OF HIS ORDER WHEREIN THE A.O. HAS GI VEN THE FOLLOWING STATEMENT THE FACT THAT THERE IS ONE TO ONE TALLY BETWEEN CASH DEPOSIT IN SHRI PAWAN KUMAR AGARWALS BANK ACCOUNT WITH COSMOS CO-OPERATIVE BANK & SALES EFFECTED BY THE TWO COMPANIES CANNOT BE DEN IED. THE COUNSEL ALSO EXPLAINED TRANSACTION OF SALES INVOICES AND SALES W ITH REFERENCE TO THE DATE OF CASH DEPOSIT AND DATE OF CHEQUE ISSUE AND DATE O F RECEIPT AND SALES BILL WHOSE ACCOUNT THE SAME WAS CREDITED IN THE RESPECTI VE COMPANIES AND REFERRING TO VARIOUS DETAILS SUBMITTED THAT THE A. O. HAS THOROUGHLY EXAMINED ONE TO ONE RELATIONSHIP BETWEEN CASH DEPOS ITS AND CONSEQUENT ISSUANCE OF CHEQUES TO THE COMPANY IN WHICH THE CHE QUES ARE ACCOUNTED FOR AS SALES PROCEEDS. HE FURTHER REFERRED TO THE BALAN CE SHEET AND PURCHASES AND SALES DURING THE YEAR AND ASSESSMENT ORDER OF T HE COMPANY CONSEQUENT TO THE SURVEY TO SUBMIT THAT THERE IS NO CLAIM OF A NY UNACCOUNTED TRANSACTIONS IN THOSE CASES. WITH REFERENCE TO THE ARGUMENT OF THE CIT(A) THAT SALES BILLS ARE UNNUMBERED AND WRITTEN IN ONE HAND WRITING IT WAS HIS SUBMISSION THAT THE SALES BILLS ARE SERIALLY NUMBER ED IN HAND AND THE ONLY EMPLOYEE OF THE COMPANY WHO PREPARED THE SALES BILL S IN HIS HAND WRITING AND THAT CANNOT BE THE REASON DISALLOWING THE CLAIM OF THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT THE CIT(A) ALSO WAS WRONG IN ANALYSING THE TRANSACTIONS OF 08.04.2004 WHERE CHEQUES WERE ISSUE D BUT THERE IS ONLY ONE CREDIT OF THE AMOUNT OF ` 3 78 300/- OF THREE PARTIES OF POONAM TRADING CO. SUMIT FABRICS & DAMODAR FABRICS. THEN HE REFERRED T O THE RESPECTIVE ACCOUNTS IN WHICH THESE CHEQUES WERE ISSUED AND ACC OUNTED FOR AND SUBMITTED THAT ALL THE THREE BEARER CHEQUES WERE FR OM DIFFERENT PARTIES DEPOSITED ON THE SAME DATE IN THE BANK AND THAT IS WHY THERE WAS ONLY ONE CLEARANCE AMOUNT OF THE AMOUNT OF ` 3 78 300/- WHICH THE CIT(A) DID NOT ACCEPT AS FROM THREE PARTIES. HE REFERRED TO THE TR ANSACTIONS WITH THREE PARTIES BEFORE 23.03.2004 AND ISSUANCE OF BEARER CH EQUES. IT WAS EXPLAINED THAT MANY OF THE PARTIES WHO TRANSACTED IN GREY FAB RICS HOLD BEARER CHEQUES WITH ENDORSEMENT FROM ONE PARTY TO OTHER AND THESE ENDORSED BEARER CHEQUES ARE NOT ACCEPTED BY THE SCHEDULED BANKS AND THAT IS WHY THE ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 6 ASSESSEE HAD TO OPEN SEPARATE ACCOUNT IN A COOPERAT IVE BANK WHEREAS THE ASSESSEES MAIN BANKER WAS UNION BANK OF INDIA. IT WAS HIS SUBMISSION THAT ON THE BASIS OF THE EXPLANATION AND DOCUMENTS AND O NE TO ONE TALLY OF THE SALES PROCEEDS ACCOUNTED FOR IN THE COMPANIES THE E XPLANATION OF THE ASSESSEE SHOULD HAVE BEEN ACCEPTED AND THE ORDERS O F THE A.O. AND THE CIT(A) SHOULD REVERSED. 7. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE A.O. AND FINDINGS OF THE CIT(A) IN SUPPORTING THE SAME. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMIN ED THE DOCUMENT PLACED IN THE PAPER BOOK REMAND REPORT AND ORDERS OF THE REVENUE AUTHORITIES. WE ARE UNABLE TO ACCEPT THE ACTION OF THE REVENUE AUTHORITIES IN TREATING THE CASH DEPOSITS AND CHEQUE DEPOSITS AS I NCOME OF THE ASSESSEE. FIRST OF ALL THE A.O. HAVING RECEIVED THE INFORMAT ION THAT THERE WERE CASH DEPOSITS TREATED THE ACCOUNT AS UNACCOUNTED AND UND ISCLOSED BANK ACCOUNT. THERE IS NO PROVISION IN THE RETURN TO MEN TION ALL THE BANK ACCOUNTS AT THE TIME OF FILING THE RETURN. ASSESSEE IS OWNING BANK ACCOUNTS AND ADMITS THAT THE TRANSACTIONS ARE UNDERTAKEN BY HIM ON BEHALF OF THE TWO COMPANIES IN WHICH THE ENTIRE PROCEEDS HAVE BEE N ACCOUNTED FOR. THEREFORE THE ACCOUNT BEING UNDISCLOSED CANNOT BE T HE REASON FOR DENYING THE GENUINENESS OF TRANSACTIONS IN THE BANK ACCOUNT . WE ALSO ENQUIRED THE LEARNED D.R. HOW THE BANK ACCOUNTS MAINTAINED BY TH E ASSESSEE ARE TO BE DISCLOSED IN THE RETURN OF INCOME AS THE RETURN OF INCOME DOES NOT MENTION ABOUT DISCLOSURE OF BANK ACCOUNTS AT THE RELEVANT P OINT OF TIME. EVEN AT PRESENT FOR CLAIMING OF REFUND ONLY ONE BANK IS TO BE MENTIONED WHICH IS ALSO NOT MANDATORY. IN VIEW OF THIS THE ALLEGATION THAT ASSESSEE HAS NOT DISCLOSED THE BANK ACCOUNT ITSELF IS NOT CORRECT AN D CAN NOT BE TAKEN AS A REASON FOR NOT ACCEPTING THE EXPLANATION. 9. THE A.O. AFTER ELABORATELY DISCUSSING THE ISSUE INV OKED PROVISIONS OF SECTION 69A WHILE TREATING THE AMOUNTS AS INCOME IN THE HANDS OF THE ASSESSEE. PROVISIONS OF SECTION 69A WILL COME INTO PICTURE ONLY WHEN THE ASSESSEE IS FOUND TO BE THE OWNER OF THE MONEY BUL LION JEWELLERY OR OTHER ARTICLES AND THESE ARE NOT ACCOUNTED FOR AND NO EXP LANATION ABOUT THE NATURE AND SOURCE ACQUISITION OF THE ASSET IN THE OPINION OF THE A.O. WAS ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 7 NOT SATISFACTORILY EXPLAINED. IN THIS PARTICULAR CA SE NO ASSETS WHATSOEVER HAS BEEN FOUND. WHAT HAS COME TO THE KNOWLEDGE IS A BANK ACCOUNT MAINTAINED IN WHICH CASH WAS DEPOSITED AND CHEQUES WERE ISSUED TO OTHER COMPANIES NULLIFYING EACH DEPOSIT. HOW PROVISIONS O F SECTION 69A ARE APPLICABLE TO THIS IS NOT EXPLAINED. CONSIDERING TH IS LEGAL LACUNAE THE CIT(A) IN HIS ORDER HAS CONFIRMED THE ADDITION AS ADDITION UNDER SECTION 68/69. WHILE APPRECIATING THE ACTION OF THE CIT(A) IN MODI FYING THE SECTION UNDER WHICH THE ADDITION WAS MADE PROVISIONS OF SECTION 69 ARE NOT APPLICABLE AS THERE IS NO UNEXPLAINED INVESTMENT FOR WHICH SECTIO N 69 IS APPLICABLE. THE ONLY PROVISION WHICH ATTRACTS IN THIS PARTICULAR CA SE IS SECTION 68 WITH REFERENCE TO CASH CREDITS. THE A.O. IN HIS WISDOM N OT ONLY CONSIDERED THE CASH DEPOSIT OF ` 47 15 000/- AS INCOME OF THE ASSESSEE BUT ALSO CROS S BEARER CHEQUES OF ` 7 62 850/- WHICH WERE IN FACT RECEIVED BY THE SAID COMPANIES BUT ENDORSED IN INDIVIDUAL NAME AND AGAIN ACCOUNTED FOR IN THE COMPANIES TOWARDS SALE PROCEEDS. TO THE EXTENT OF ` 7 15 850/- CERTAINLY PROVISIONS OF SECTION 68 ARE NOT APPLICABLE. CONFIRMATION BY THE CIT(A) INVOKING PROVISIONS OF SECTION 68/69 ON DEPOSITS OF CROSS BEARER CHEQUE S CANNOT BE SUSTAINED. 10. THAT LEAVES US WITH CASH DEPOSIT OF ` 47 15 000/- IT IS ASSESSEES EXPLANATION THAT GOODS WERE SOLD TO PRIVATE/OUTSIDE PARTIES IN CASH UNDER THE MISTAKEN IMPRESSION THAT SALES PROCEEDS UPTO ` 20 000/- COULD BE UNDERTAKEN IN CASH. CASH RECEIVED WAS DEPOSITED IN THE BANK ACCOUNT AND CORRESPONDING CHEQUES WERE ISSUED TO THE COMPANIES. THERE WAS ONE TO ONE MATCHING TALLY BETWEEN CASH DEPOSITS SALES BILLS A ND ACCOUNTING OF SALES BY WAY OF CHEQUES IN THE HANDS OF THE RESPECTIVE COMPA NIES. THE A.O. ALSO GIVES A FINDING THAT THERE IS ONE TO ONE MATCHING. IN SPI TE OF EXPLAINING THAT THE CASH DEPOSITS ARE NOTING BUT SALES PROCEEDS AND ALS O EXPLAINING ONE TO ONE MATCHING WITH RESPECT TO CHEQUES ISSUED AND ACCOUNT ED FOR IN THE COMPANY THE A.O. STILL WAS NOT SATISFIED ABOUT THE CASH DEP OSITS IN THE BANK ACCOUNT. WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHAR GED HIS ONUS OF EXPLAINING AND PROVING THE NATURE OF SOURCE OF THE CASH DEPOSITS IN THE BANK ACCOUNT. IT IS ALSO A FACT THAT THE CHEQUES ISSUED FROM THE BANK ACCOUNT WERE ACCOUNTED FOR BY THE COMPANY AS CREDIT OF SALE S AND THE A.O. HAS NOT DISTURBED THE OVERALL SALES AND PURCHASES OF THE CO MPANY AT ALL. IN VIEW OF ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 8 THIS WE ARE OF THE OPINION THAT THE ASSESSEE HAS OF FERED AN EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF AND THE EXPLANATION O FFERED BY THE ASSESSEE IS SATISFACTORY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO EXPLAINED THE SALES BILLS SALES ACCOUNTED IN THE COMPANIES AND THE ACC OUNTS OF RESPECTIVE PARTIES AND ALSO HOW THREE BEARER CHEQUES WERE ISSU ED ON BEHALF OF POONAM TRADING CO. SUMIT FABRICS & DAMODAR FABRICS WHICH WERE CLEARED ON A SINGLE DAY AND ONLY ONE CREDIT ENTRY WAS GIVEN BY T HE BANK. ON VERIFICATION OF THESE TRANSACTIONS WE ARE OF THE OPINION THAT T HE CIT(A) WAS WRONG IN COMING TO THE CONCLUSION THAT THREE PARTIES CANNOT ISSUE ONE CROSS BEARER CHEQUE. ACTUALLY THE THREE BEARER CHEQUES WERE DEPO SITED ON A SINGLE DAY AND CREDITED AS SINGLE AMOUNT BY THE BANK. WE ARE O F THE OPINION THAT BOTH THE A.O. AND THE CIT(A) HAVE CONSIDERED THE ADDITIO N WRONGLY BOTH ON FACTS AS WELL AS ON LAW. THEREFORE WE HAVE NO HESITATION IN ALLOWING THE GROUNDS AND DELETE THE ADDITION SO MADE IN THE HANDS OF THE ASSESSEE. 11. BEFORE PARTING WITH THIS WE ARE ALSO OF THE OPINIO N THAT THE SUBSEQUENT ADMISSION OF INCOME OF ` 50 00 000/- BY THE DIRECTORS CONSEQUENT TO THE SURVEY FOR F.Y. 2006-07 AND WITHD RAWAL OF THE SAME CONSEQUENT TO THE CORRELATION OF SALES IN STOCK BEF ORE THE A.O. SHOULD NOT HAVE ANY BEARING ON THE ISSUE IN CONSIDERATION. BOT H THE A.O. AND THE CIT(A) SEEMS TO HAVE CARRIED AWAY BY THE ADMISSION DURING THE SURVEY PROCEEDINGS AND SUBSEQUENT WITHDRAWAL WHICH MOSTLY PERTAINS TO A.Y. 2007-08 AND NOT TO A.Y. 2005-06. THERE IS NO EVIDENCE WHATSOEVER TO DIFFER FROM THE EXPLANATION GIVEN BY THE ASSESSEE AND SINCE THE ENT IRE SALES PROCEEDS FOR WHICH THE CHEQUES WERE ISSUED HAVE BEEN ACCOUNTED B Y THE TWO COMPANIES IN THE SAME ASSESSMENT YEAR THE EXPLANATION OF THE ASSESSEE THAT THE CASH DEPOSITS WERE NOTHING BUT SALES PROCEEDS OF COMPANI ES WHICH ARE DEPOSITED IN THE BANK ACCOUNT FOR ISSUANCE OF CHEQUES CANNOT BE BRUSHED ASIDE. IT IS A JUDICIALLY ACCEPTED FACT THAT THE ENTIRE GREY FAB RIC MARKET IS UNORGANISED AND NONE OF THE AUTHORITIES BOTH STATE GOVERNMENT OR CENTRAL GOVERNMENT COULD NOT CONTROL THE GREY CLOTH TRADING FROM THE B HIWANDI AREA WHICH IS MOSTLY IN CASH AND COULD NOT BE SUBJECTED TO ANY VE RIFICATION. SINCE THE ASSESSEE IS DEALING IN GREY FABRICS AND TRIED TO AC COUNT FOR ALL THE TRANSACTIONS BY WAY OF CHEQUES ASSESSEES ACTION I N ACCOUNTING FOR THE ITA NO. 1801/MUM/2009 SHRI PAWAN KUMAR AGARWAL 9 CHEQUE TRANSACTION IN THE COMPANY IN RESPECT OF SAL ES IN CASH SHOULD HAVE BEEN APPRECIATED IN THE CORRECT PERSPECTIVE. IN VIE W OF THIS WE DELETE THE ADDITION SO MADE AND ALLOW THE GROUNDS OF THE ASSES SEE. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 30 TH DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XV MUMBAI 4. THE CIT IV MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.