M/S. NAVRATAN MISTRY, MUMBAI v. THE ITO WD 19(3)(3), MUMBAI

ITA 564/MUM/2008 | 2004-2005
Pronouncement Date: 21-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 56419914 RSA 2008
Assessee PAN AALPM3039Q
Bench Mumbai
Appeal Number ITA 564/MUM/2008
Duration Of Justice 1 year(s) 11 month(s) 27 day(s)
Appellant M/S. NAVRATAN MISTRY, MUMBAI
Respondent THE ITO WD 19(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 21-01-2010
Date Of Final Hearing 19-01-2010
Next Hearing Date 19-01-2010
Assessment Year 2004-2005
Appeal Filed On 24-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI BEFORE SHRI D. MANMOHAN VP & SHRI R.K. PANDA AM I.T.A. NO. 564/MUM/2008 (ASSESSMENT YEAR 2004-05) SHRI NAVRATAN MISTRY FLAT NO. 5 & 6 2 ND FLOOR KRISHNA COMPLEX A WING BEHIND GARWARE HOUSE VILE PARLE (E) MUMBAI-400 057 PAN: AALPM3039Q VS. INCOME-TAX OFFICER 19(3)(3) 303 3 RD FLOOR PIRAMAL CHAMBERS PAREL MUMBAI-400 012 APPELLANT RESPONDENT I.T.A. NO. 707/MUM/2008 (ASSESSMENT YEAR 2004-05) INCOME-TAX OFFICER 19(3)(3) 303 3 RD FLOOR PIRAMAL CHAMBERS PAREL MUMBAI-400 012 VS. SHRI NAVRATAN MISTRY FLAT NO. 5 & 6 2 ND FLOOR KRISHNA COMPLEX A WING BEHIND GARWARE HOUSE VILE PARLE (E) MUMBAI-400 057 PAN: AALPM3039Q APPELLANT RESPONDENT ASSESSEE BY: SHRI I.P. RATHI REVENUE BY: SMT. VANDANA SAGAR O R D E R DATE OF HEARING: 19.01.2010 DATE OF ORDER: 21.01.2010 PER R.K. PANDA AM: THESE ARE CROSS APPEALS THE FIRST ONE FILED BY TH E ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AN D ARE DIRECTED AGAINST THE ORDER DATED 20.11.2007 OF THE CIT(A)- XIX MUMBAI RELATING TO ASSESSMENT YEAR 2004-05. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEAR D TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 2 2. THE REVISED GROUNDS OF APPEAL NO. 1 BY THE ASSESSEE AND THE GROUNDS OF APPEAL NO. 1(1) BY THE REVENUE A RE AS UNDER: ASSESSEES GROUND OF APPEAL: 1(A) THE LEARNED ASSESSING OFFICER HAS ERRED IN REJECTING THE BOOKS AND MAKING ADDITION U/S. 145(3) AND ESTIMATING THE GROSS PROFIT AT HIGHER RATES. 1(B) WITHOUT PREJUDICE TO THE ABOVE EVEN IF THE BOOK RESULTS ARE BEING REJECTED THE PROFIT SHOULD BE ESTIMATED LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER THESE CIRCUMSTANCES THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.3 91 600 TO THE TOTAL INCOME OF THE APPELLANT. REVENUES GROUNDS OF APPEAL: 1(1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO ADOPT THE GROSS PROFIT AT 10.19% AS AGAINST 13.88% ADOPTED BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT HE HAS UPHELD THE FINDING OF THE ASSESSING OFFICER ABOUT THE DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. DHAMU FURNITURES WHICH ACTS AS A FURNITURE CONTRACTOR. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE ASSESSING OFFICER ON THE BASIS OF INFORMATION COLLECTED THROUGH ISSUING NOTICE U/S. 1 33(6) OF THE INCOME-TAX ACT 1961 (THE ACT) AND EXAMINATION OF BOOKS OF ACCOUNT OF THE ASSESSEE FOUND THE FOLLOWIN G DISCREPANCIES: (A) THE ASSESSEE CLAIMED PURCHASES VIDE BILL NO. 8957 DATED 17 TH MAY 2003 FROM M/S. ARSIWALA I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 3 & CO. FOR RS.15 921 WHICH HAS BEEN WRONGLY ENTERED IN THE PURCHASE REGISTER AS RS.1 59 212. (B) ENTRIES DATED 8.11.2003 17.11.2003 AND 8.12.2003 HAVE BEEN MADE IN THE PURCHASE REGISTER OF PURCHASES TOTALLING TO RS.2 72 836 IN THE NAME OF M/S. RASHMI PLYWOOD. HOWEVER THERE WAS NO BILL OR DELIVERY CHALLAN AVAILABLE WITH THE ASSESSEE AT THE TIME OF EXAMINATION OF THE BILLS. ON BEING QUESTIONED BY THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE PURCHASE WAS INCLUDED IN THE CLOSING STOCK. HOWEVER THE ASSESSING OFFICER OBSERVED THAT THIS STAND OF THE ASSESSEE IS NOT TENABLE AS HE HAS NOT MAINTAINED STOCK REGISTER NOR HE HAS SUBMITTED ANY DETAILS OF WORK-IN-PROGRESS AS ASKED BY NOTICE U/S. 142(1) DATED 8 TH AUGUST 2006. THE ASSESSING OFFICER FURTHER OBSERVED FROM THE REPLY RECEIVED FROM M/S. RASHMI PLYWOOD IN RESPONSE TO NOTICE U/S. 133(6) OF THE ACT THAT THEY HAVE NOT MADE ANY SALES TO THE ASSESSEE. THE ASSESSING OFFICER ACCORDINGLY HELD THAT THE CLAIM OF PURCHASE BY THE ASSESSEE FROM M/S. RASHMI PLYWOOD IS BOGUS. C) ON VERIFICATION OF THE BILLS OF PURCHASE FROM M/S. KIRTI TRADING CO. THE ASSESSING OFFICER OBSERVED SOME OF THE BILLS WERE ACTUALLY ISSUED IN THE NAME OF M/S. RUNWALA DEVELOPER PVT. LTD. BUT THE CORRESPONDING ENTRIES WERE MADE IN THE PURCHASE REGISTER OF THE ASSESSEE. ON I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 4 BEING QUESTIONED BY THE ASSESSING OFFICER THE ASSESSEE VIDE ITS SUBMISSIONS DATED 26.12.2006 SUBMITTED THAT THIS IS A MINOR AMOUNT AND THEY INTENTIONALLY DID NOT ACCOUNT THE BILLS. SINCE THE PURCHASE AND PAYMENT WERE MADE BY M/S. RUNWALA DEVELOPER PVT. LTD. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT HAVE ENTERED THE PURCHASE IN HIS BOOKS. D) THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE WAS UNABLE TO RECONCILE THE DIFFERENCE BETWEEN THE SUNDRY DEBTORS AND THE SALE. E) FURTHER THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF WORK- IN-PROGRESS ACCOUNTING OF WORK-IN-PROGRESS VALUE-WISE AND QUANTITY WISE WORK-IN-PROGRESS. SIMILARLY THE ASSESSEE DID NOT FILE ANY DETAILS REGARDING THE SPECIFIC DATE OF BILLS RECEIVED MODE OF TRANSPORT TRUCK NO. LORRY NO. ETC. F) SIMILARLY THE ASSESSEE HAS NOT OFFERED THE ADVANCE RECEIVED DURING THE YEAR FOR TAXATION. THEREFORE THE CLAIM OF TDS ON THE RECEIPT OF ADVANCES IS NOT ALLOWABLE TO THE ASSESSEE DURING THE YEAR. ACCORDING TO THE ASSESSING OFFICER THE CREDIT OF THE TDS WILL BE ALLOWED TO THE ASSESSEE WHEN HE ACCOUNTS FOR THE ADVANCES IN HIS SALE. 4. IN THE LIGHT OF THE ABOVE DISCREPANCIES IN THE BOOK S OF ACCOUNT OF THE ASSESSEE AND IN ABSENCE OF ANY SATIS FACTORY EXPLANATION GIVEN BY THE ASSESSEE THE ASSESSING OF FICER I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 5 REJECTED THE BOOK RESULTS. CONSIDERING THE GP RATE OF 25.09% FOR THE A.Y. 2001-02 22.77% FOR THE A.Y. 20 02-03 10.19% FOR THE A.Y. 2003-04 AND 8.69% SHOWN BY THE ASSESSEE FOR THE A.Y. 2004-05 THE ASSESSING OFFICE R HELD THAT ESTIMATION OF GP RATE AT 13.88% BEING THE AVER AGE GP FOR A.YS. 2002-03 TO 2004-05 ON A TURNOVER OF RS.2 61 84 541 WILL BE REASONABLE. HE ACCORDINGLY MADE AN ADDITION OF RS.13 57 810 TO THE TOTAL INCOME OF THE ASSESSEE BEING THE DIFFERENCE IN GROSS PROFIT. 5. BEFORE THE CIT(A) IT WAS SUBMITTED THAT ALL THE DOUBTS RAISED BY THE ASSESSING OFFICER HAVE BEEN RE CONCILED AND THE GENUINENESS OF BOOKS OF ACCOUNT WAS ESTABLI SHED BEFORE HIM. IT WAS SUBMITTED THAT PROPER OPPORTUNI TY WAS NOT PROVIDED BY THE ASSESSING OFFICER BEFORE REJECT ING THE BOOKS OF ACCOUNT AND ESTIMATING THE GP RATE. AS RE GARDS THE ESTIMATION OF GP MARGIN AT 13.88% IT WAS SUBMIT TED THAT THE TURNOVER FOR THE IMPUGNED ASSESSMENT YEAR IS MORE WHEREAS THE TURNOVER FOR THE EARLIER YEARS IS LESS. IT WAS FURTHER SUBMITTED THAT WHEN THE TURNOVER IS MOR E THE GP RATE IS LESS. THEREFORE THE ASSESSING OFFICER IS NOT JUSTIFIED IN ADOPTING THE AVERAGE GP RATE OF LAST F OUR YEARS. 6. ON THE BASIS OF THE VARIOUS SUBMISSIONS ADVANCED BY THE ASSESSEE THE CIT(A) CALLED FOR A REMAND REPOR T FROM THE ASSESSING OFFICER WHO REITERATED THAT THE GP RA TE WAS ADOPTED ON THE BASIS OF AVERAGE RATE OF GROSS PROFI T OF LAST THREE YEARS. CONSIDERING THE ARGUMENTS THAT THE RA TE OF GP DEPENDS ON THE VOLUME OF TURNOVER HE DIRECTED THE ASSESSING OFFICER TO ADOPT THE GP RATE OF 10.19% AS DECLARED BY THE ASSESSEE FOR THE A.Y. 2003-04 AS REASONABLE FOR THE IMPUGNED ASSESSMENT YEAR. AGGRI EVED I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 6 WITH SUCH PART RELIEF BY THE CIT(A) THE ASSESSEE A S WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 1 OF THE PAPER BOOK WHICH CONTAINS THE INVOICE RECEIVED FROM M/S. ARSIWALA & CO. SUBMITTED THAT T HE INVOICE VALUE FOR RS.15 921 HAS WRONGLY BEEN ENTERE D AS 1 59 212 AND THAT IS A CLERICAL ERROR. HE SUBMITTE D THAT THE ASSESSEE HAS ADMITTED THIS MISTAKE AND HAD REQUESTE D THE ASSESSING OFFICER TO ADD THE DIFFERENCE TO THE TOTA L INCOME OF THE ASSESSEE. HOWEVER THE ACCOUNTS CANNOT BE R EJECTED FOR THIS MISTAKE. AS REGARDS THE BILL OF M/S. RASH MI PLYWOOD HE SUBMITTED THE GOODS WERE RECEIVED ON AP PROVAL MEMO AND THE SAME WERE NOT RECEIVED TILL THE END OF THE ASSESSMENT YEAR. AS REGARDS THE BILL OF M/S. KIRT I TRADING CO. HE SUBMITTED THAT THE BILLS COULD NOT BE REVER SED DUE TO OVERSIGHT. AS REGARDS THE DIFFERENCE OF RS.1 12 511 RELATING TO M/S. MAERSK INDIA PVT. LTD. HE SUBMITT ED THAT THE DISCREPANCY WAS DUE TO DISCOUNT ALLOWED AND ACCOUNTED IN BOOKS BY JOURNAL VOUCHER. AS REGARDS THE PRODUCTION OF DELIVERY CHALLAN IN RESPECT OF PURCHA SE HE SUBMITTED THAT DELIVERY CHALLANS WERE ATTACHED TO T HEM AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. AS REGARDS THE ESTIMATION OF GP MARGIN IT WAS SUBMITTE D THAT DURING THE A.Y. 2001-02 AND 2002-03 THE GP RATE WAS HIGHER ON ACCOUNT OF RELATIVELY LOWER TURNOVER. H OWEVER AS THE VOLUME OF TURNOVER GOES UP THE RATE OF GP FA LLS DOWN. REFERRING TO THE ORDER PASSED U/S. 143(3) FO R THE A.Y. 2005-06 HE SUBMITTED THAT THE ASSESSING OFFIC ER HAS ACCEPTED THE GP DECLARED BY THE ASSESSEE AT 9.75% A ND THERE IS NO ADDITION ON ACCOUNT OF SUCH GP RATE. S IMILARLY NO ADDITION HAS BEEN MADE FOR THE A.Y. 2003-04 ALSO . I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 7 8. HE ACCORDINGLY SUBMITTED THAT ONLY SPECIFIC ADDITIO N ON ACCOUNT OF DISCREPANCY SHOULD BE MADE AND THE BO OK RESULTS CANNOT BE DISTURBED. 9. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. SHE SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE COULD NOT RECONCILE THE VARIOUS DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER. THE INVOICE FROM ARSIWALA & CO. FOR RS.15 921 HAS B EEN WRONGLY ENTERED IN THE PURCHASE REGISTER AS RS.1 59 212. SIMILARLY THE PURCHASES FORM RASHMI PLYWOOD BILLS AND VOUCHERS OF WHICH ARE PLACED AT PAPER BOOK PAGE 14 ARE ON THE BASIS OF PROFORMA INVOICE ON WHICH SALES TAX HAS BEEN CHARGED. THEREFORE HOW IT IS NOT ENTERED IN THE BOOKS OF THE ASSESSEE REMAINS UNEXPLAINED. DESPITE OPPORTUNITIES GIVEN BY THE ASSESSING OFFICER THE AS SESSEE FAILED TO RECONCILE THE VARIOUS DISCREPANCIES. AS REGARDS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT MORE IS THE TURNOVER LESS IS THE GP RATIO SHE SUBM ITTED THAT THIS IS ALWAYS NOT CORRECT SINCE THE ASSESSEE HIMSELF HAS DISCLOSED GP RATIO OF 9.7% ON THE TURNOVER OF R S.2.6 CRORES FOR THE A.Y. 2005-06. THEREFORE THE CIT(A ) WAS NOT JUSTIFIED IN REDUCING THE GP RATE TO 10.19% AS AGAI NST 13.88% DETERMINED BY THE ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF O F THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT CER TAIN DISCREPANCIES WERE FOUND BY THE ASSESSING OFFICER O N THE BASIS OF EXAMINATION OF BOOKS OF ACCOUNT AND ON THE BASIS OF REPLY RECEIVED IN RESPONSE TO NOTICE U/S. 133(6) OF THE ACT. THERE IS ALSO NO DISPUTE TO THE FACT THAT DES PITE I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 8 OPPORTUNITIES GIVEN BY THE ASSESSING OFFICER THE A SSESSEE WAS UNABLE TO SATISFY THE ASSESSING OFFICER REGARDI NG THE VARIOUS DISCREPANCIES POINTED OUT BY HIM. FURTHER THE ASSESSEE ALSO FAILED IN FURNISHING THE SPECIFIC DAT E OF GOODS RECEIVED MODE OF TRANSPORT TRUCK NO. LORRY NO. ETC. DETAILS OF WORK-IN-PROGRESS VALUE WISE AND QUANTIT Y WISE WORK-IN-PROGRESS ETC. THEREFORE WE DO NOT FIND M UCH FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ONLY SPECIFIC ADDITION SHOULD HAVE BE EN MADE ON ACCOUNT OF DISCREPANCY IN THE INVOICE AND THE BO OK RESULTS SHOULD NOT HAVE BEEN DISTURBED. ACCORDINGL Y WE HOLD THAT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER AS REGARDS THE REJECTION OF T HE BOOK RESULT IS CONCERNED. HOWEVER CONSIDERING THE TOT ALITY OF THE FACTS OF THE CASE WE ARE OF THE CONCERNED OPIN ION THAT ADOPTION OF 10% GP RATE AS AGAINST 10.19% HELD BY T HE CIT(A) IN OUR OPINION WILL MEET THE ENDS OF JUSTI CE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE REVENUE IS DISMISSED AND THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 11. GROUNDS OF APPEAL NO. 2 BY THE ASSESSEE READS AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME-TAX HAS FURTHER ERRED IN CONFIRMING THE ADDITION OF RS.1 00 000 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF GIFT BEING CONSIDERED AS UNEXPLAINED CASH CREDIT THOUGH THE DONOR HAS CONFIRMED THE TRANSACTION. 12. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS SHOWN TO HAVE RECEIVED GIFT OF RS. 1 LAKH FROM HIS SUBCONTRACTOR SHRI GAURISHANKAR MISTRI. TO VERIFY THE GENUINENESS OF THE GIFT THE ASSESSING OFFICER RECOR DED THE I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 9 STATEMENT OF SHRI MISTRY U/S. 131 ON 22 ND DECEMBER 2006. THE DONOR IN REPLY TO QUESTION NO. 3 BY THE ASSESSI NG OFFICER STATED THAT HIS AVERAGE INCOME IS RS. 2 LAK HS TO RS.2.3 LAKHS AND HE DOES NOT HAVE ANY IMMOVABLE OR VALUABLE MOVABLE PROPERTIES. IN REPLY TO QUESTION NO. 4 HE STATED THAT HE HAS HIS WIFE TWO SONS AT 18 AND 19 YEARS OLD WHO ARE FINANCIALLY DEPENDENT ON HIM AND HE SENDS RS.5 000 PER MONTH FOR THEIR LIVELIHOOD. SIMILARLY HE ALSO SENDS RS.1500 TO RS.2000 TO HIS PARENTS AT BIKANER. SIMILARLY IN REPLY TO QUESTION NO. 5 HE STATED THAT HE INCURS EXPENDITURE OF RS.4000 PER MONTH FOR HIS MOBILE EXP ENSES AND RS.4000 PER MONTH FOR RENT OF HIS RESIDENCE AND INCURS AN EXPENDITURE OF RS.2000 TO 3000 FOR HIS PERSONAL EXPENSES. THE ASSESSING OFFICER FURTHER NOTED TH AT THE ASSESSEE IN HIS REPLY TO QUESTION NO. 6 COULD NOT E XPLAIN PROPERLY AS TO HOW HE HAD GIVEN A GIFT OF RS. 1 LAK H WHEN HE IS NOT LEFT WITH ENOUGH MONEY. SIMILARLY THE DO NOR ALSO COULD NOT EXPLAIN AS TO WHY THERE ARE IMMEDIATE WITHDRAWALS AFTER THE PAYMENTS WERE CREDITED TO HIS ACCOUNT APART FROM TELLING THAT THESE ARE FOR PAYME NTS TO LABOURERS. NOT BEING SATISFIED WITH THE VARIOUS EXPLANATIONS GIVEN BY THE DONOR THE ASSESSING OFFIC ER HELD THAT THE RECEIPT OF GIFT OF RS. 1 LAKH IS A MERE FA RCE. HE ACCORDINGLY MADE ADDITION OF RS.1 LAKH U/S. 68 OF T HE ACT. 13. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE DONOR WAS ASSESSED TO INCOME-TAX AND WAS HAVING SUFFICIEN T BALANCE IN HIS ACCOUNT FOR GIVING THE GIFT. IT WAS SUBMITTED THAT THE IDENTITY GENUINENESS AND CAPACITY OF THE DONOR WAS ESTABLISHED AND THE TRANSACTION HAS BEEN MADE THROUGH BANK ACCOUNT. IT WAS FURTHER SUBMITTED THA T ADEQUATE OPPORTUNITY WAS NOT PROVIDED TO THE ASSESS EE TO EXPLAIN FOR SUCH CREDIT BEFORE TREATING THE SAME AS I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 10 UNEXPLAINED CASH CREDIT. HOWEVER THE CIT(A) WAS N OT SATISFIED WITH THE GENERAL EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THERE IS CLOSE CONNECTI ON/ NEXUS BETWEEN THE ASSESSEE AND SHRI GAURISHANKAR MI STRI AND THE THE ASSESSING OFFICER RIGHTLY CAME TO THE CONCLUSION THAT THE CREDITWORTHINESS OF SHRI GAURIS HANKAR MISTRI IS DOUBTFUL. HE ACCORDINGLY UPHELD THE ACTI ON OF THE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF TH E CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE VARIOUS DECISIONS CITED BEFO RE US. IT IS BY NOW THE SETTLED LAW THAT FOR ACCEPTING A GIFT AS GENUINE THE ONUS IS ALWAYS ON THE ASSESSEE TO PROVE TO THE SATISFACTION OF THE ASSESSING OFFICER REGARDING THE IDENTITY AND CREDITWORTHINESS OF THE DONOR AND THE GENUINENE SS OF THE TRANSACTION. IN THE INSTANT CASE THE ASSESSING OFFICER HAS RECORDED THE STATEMENT OF THE DONOR WHO HIMSELF HAS STATED THAT HIS AVERAGE INCOME IS ONLY RS.2 TO 2.3 LAKHS OUT OF WHICH HE SENDS AN AMOUNT OF RS.5000/P.M. TO HIS FAMILY MEMBERS RS.1500 TO RS.2000/P.M. TO HIS PARENTS APA RT FROM RS.4000 PER MONTH FOR HIS HOUSE RENT AND RS.20 00 TO RS.3000 FOR HIS PERSONAL EXPENSES. FURTHER THE DON OR ALSO STATED TO HAVE INCURRED EXPENSES OF RS.4000 PER MON TH TOWARDS HIS MOBILE PHONE. WE FURTHER FIND FROM THE RECORDS OF ASSESSMENT PRODUCED BEFORE US BY THE LEA RNED DR THAT THERE IS IMMEDIATE CASH DEPOSIT OF RS.1 LAK H BEFORE MAKING THE GIFT OF RS. 1 LAKH TO THE ASSESSEE. IT IS ALSO A FACT THAT THE DONOR DOES NOT HAVE ANY IMMOVABLE PRO PERTY NOR ANY VALUABLE MOVABLE PROPERTY. THEREFORE WE F IND MERIT IN THE SUBMISSION OF THE LEARNED DR THAT THE GIFT OF RS.1 LAKH IS AGAINST HUMAN PROBABILITY. THE VARIO US I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 11 DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE. RATHE R DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 AND CIT VS. DURGA P RASAD MORE REPORTED IN 82 ITR 540 ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE THEREFORE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.1 00 000 MADE BY THE ASSESSING OFFIC ER U/S. 68 OF THE I.T. ACT AND THE SAME IS ACCORDINGLY UPHE LD. THIS GROUND BY THE ASSESSEE IS THEREFORE DISMISSED. 15. GROUNDS OF APPEAL NO. 3 BY THE ASSESSEE READS AS UNDER: THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS FURTHER ERRED IN TREATING THE INTEREST U/S. 234C AS CONSEQUENTIAL WHEREAS IN OUR GROUND OF APPEAL WE HAD CHALLENGED THE CALCULATION OF INTEREST U/S. 234C BASED ON ASSESSED INCOME AT RS.30 562 AS AGAINST LIABILITY OF INTEREST U/S. 234C AS RS. NIL BASED ON RETURNED INCOME. 16. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSING OFFICER HAS CHARGED INTEREST OF RS.30 560/- U/S. 23 4C OF THE I.T. ACT IN THE I.T. COMPUTATION FORM. WE FIND THE CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE HOLDING THE SAME TO BE CONSEQUENTIAL. WE FIN D THE ASSESSING OFFICER IN THE INCOME-TAX COMPUTATION FOR M HAS GIVEN A CREDIT OF RS.2 93 995 AS CREDIT FOR TDS ON THE ASSESSED INCOME OF RS.34 80 610. AS PER THE PROVIS IONS OF SECTION 234C INTEREST HAS TO BE CALCULATED ON ACCOU NT OF DEFERMENT OF ADVANCE TAX DUE ON THE RETURNED INCOME . HOWEVER WE FIND THE ASSESSING OFFICER HAS CALCULAT ED THE INTEREST U/S. 234C ON THE BASIS OF THE ASSESSED INC OME. WE THEREFORE RESTORE THIS MATTER TO THE FILE OF T HE ASSESSING OFFICER WITH A DIRECTION TO CALCULATE THE INTEREST I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 12 U/S. 234C FOR DEFERMENT OF ADVANCE TAX ON THE BASIS OF THE RETURNED INCOME. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 17. GROUNDS OF APPEAL NO. 1(2) BY THE REVENUE READS AS UNDER: 1(II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF R?S.10 40 000/- MADE U/S. 68 OF THE I.T. ACT 1961 AFTER VERIFICATION WITHOUT APPRECIATING THE COMPLETE FACTS OF THE CASE THAT THE ASSESSEE HAS FAILED TO FULFIL ALL THE CONDITIONS LAID DOWN UNDER SEC. 68 OF THE I.T. ACT 1961 TO THE SATISFACTION OF THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. 18. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSING OFFICER OBSERVED FROM THE BANK STATEMENT OF THE SAV INGS BANK ACCOUNT 2154 MAINTAINED BY THE ASSESSEE WITH B ANK OF BARODA BANDRA (E) BRANCH MUMBAI THAT THE ASSES SEE HAS DEPOSITED AN AMOUNT OF RS.10 40 000 ON 23 RD MARCH 2004 WHICH HAS BEEN TRANSFERRED TO HIS CURRENT ACCO UNT MAINTAINED IN THE NAME OF M/S. DHAMU FURNITURE ON T HE SAME DAY. ON BEING QUESTIONED BY THE ASSESSING OFF ICER IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAS NEITHER T AKEN ANY LOAN OTHER THAN THAT MENTIONED IN THE AUDITED ACCOUNTS NOR TAKEN ANY GIFT FROM ANYBODY OTHER THAN RS. 1 LAKH DECLARED BY HIM. THE ASSESSING OFFICER RECORD ED THE STATEMENT OF THE ASSESSEE WHO STATED THAT ALL HIS R ECEIPTS OF BUSINESS INCOME ARE THROUGH ACCOUNT PAYEE CHEQUES O NLY. HE HAS ALSO NOTED THE REPLY OF THE ASSESSEE WHO STA TED THAT HE DOES NOT KNOW THE SOURCE OF DEPOSIT OF RS.10 40 000. NOT BEING SATISFIED WITH THE EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER HELD THAT THE DEPOS IT OF RS.10 40 000 IS NOTHING BUT UNEXPLAINED CASH CREDIT I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 13 WITHIN THE MEANING OF SECTION 68 OF THE ACT. HE AC CORDINGLY MADE AN ADDITION OF RS.10 40 000 U/S. 68 OF THE ACT . 19. IN APPEAL THE LEARNED CIT(A) RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE GENUINENESS OF THE CASH BALANCE ON THE BASIS OF THE BALANCE SHEET ON RECORD AS ON 31 ST MARCH 2003. THE RELEVANT OPERATIVE PART OF THE CIT(A)S ORDER REDS AS UNDER: 16. THE CONTENTIONS OF THE APPELLANT AND THE AO ALONG WITH VARIOUS FACTS AND CIRCUMSTANCES WERE DULY CONSIDERED. THE AO HAS PRIMARILY RELIED ON THE STATEMENT OF THE APPELLANT U/S. 131 IN WHICH ADEQUATE EXPLANATION FOR CASH DEPOSIT OF RS.10 40 000/- HAS NOT BEEN SPECIFICALLY ELABORATED. AT THE SAME TIME THE APPELLANT HAS ARGUED THAT HE HAD ADEQUATE CASH BALANCE OUT OF WHICH DEPOSIT OF RS.10 40 000 HAS BEEN MADE IN HIS SAVINGS BANK ACCOUNT. THE AO HAS ACCEPTED THAT THE BALANCE SHEET AS ON 21.03.2003 WAS ON RECORD. THE ARGUMENT OF THE APPELLANT THAT THE EXPLANATION OF RS.10 40 000 LIES IN THE CASH BALANCE OF RS.10 72 124/- HAS NOT BEEN DISPUTED BY THE AO. I AM INCLINED TO ACCEPT THE LOGIC AND ARGUMENT OF THE APPELLANT THAT IF THE ASSESSEE HAD A GE3NUINE CASH BALANCE AND THE AMOUNT HAS BEEN DEPOSITED IN THE BANK ACCOUNT OUT OF THIS BALANCE THE ADDITION MADE BY THE AO WILL NOT BE JUSTIFIED. ACCORDINGLY THE AO IS DIRECTED TO VERIFY THE GENUINENESS OF THE CASH BALANCE ON THE BASIS OF THE BALANCE SHEET ON RECORD WITH THE AO AS CONTENDED BY THE APPELLANT AS ON 31.3.2003 AND ON THE BASIS OF THE SAME THE ADDITION OF RS.10 40 000 MAY BE DELETED. ACCORDINGLY THE APPELLANT GETS RELIEF SUBJECT TO VERIFICATION AS DISCUSSED ABOVE. 20. AT THE TIME OF HEARING IT WAS STATED BY BOTH THE SI DES THAT THE ASSESSING OFFICER HAS NOT YET GIVEN EFFECT TO THE DIRECTION OF THE CIT(A). SINCE THE CIT(A) HAS GIV EN A DIRECTION TO THE ASSESSING OFFICER TO VERIFY THE AV AILABILITY OF CASH BALANCES AND TAKE A DECISION ACCORDINGLY WE THEREFORE DO NOT FIND ANY INFIRMITY IN HIS ORDER A ND THE I.T.A. NOS. 564 & 707/MUM/2008 MR. NAVRATAN MISTRY ======================== 14 SAME IS ACCORDINGLY UPHELD. THIS GROUND BY THE REV ENUE IS ACCORDINGLY DISMISSED. 21. GROUNDS OF APPEAL NOS. 2 AND 3 BEING GENERAL IN NATURE ARE DISMISSED. 22. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 21 ST JANUARY 2010. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 21 ST JANUARY 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A)-XIX MUMBAI (4) THE CIT CITY-19 MUMBAI (5) THE DR I BENCH ITAT MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO