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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, VICE- & SHRI ARUN KHODPIA
order dated 01.07.2008; for the assessment year 2004-05 vide order dated 28.12.2006 & for the assessment year 2005-06 vide order dated 01.07.2008. Since, the facts & issues involved in these appeals are common, for the sake of convenience, we proceed to dispose off the above appeals by this consolidated order. (A.Y.2003-04): 2. The first issue in this appeal of the assessee is as regards to order of the CIT(A) confirming action of the Assessing Officer in making addition of unexplained investments in mutual funds / deposits amounting to Rs.20,03,417/- u/s.69 of the Act.
Brief facts relating to this issue are that the assessee trades in shares and mutual funds and a survey u/s.133A of the Act was conducted by the Income-tax department on assessee’s business premises on 09.02.2005. During the course of survey, the Revenue noticed that the assessee has made unaccounted investments in shares and mutual funds in the name of Vishwambar Jumani (a fictitious name) and Mrs.A.Sumathi, assessee’s maid servant. According to the Revenue, fictitious bank accounts were maintained and transactions were routed through these accounts. The Department also found during the course of survey, certain cheque books, passbooks and other documents pertaining to various banks held in the name of the assessee Mr. Bhagawandas H.Jumani, his family members and others, including Mr. Vishwambar Jumani and Mrs. A.Sumathi, who were inventorised vide Ann/PC/Bank Accts/NS dated 09.02.2005. The assessee could not provide any details of Vishwambar Jumani, including address or any other contract number or could not provide any details regarding transactions held in the name of Vishwambar Jumani. Similarly, Mrs.A.Sumathi, who worked with the assessee as servant maid. The Assessing Officer noted during course of assessment proceedings that the assessee could not explain any of the account held in the name of Vishwambar Jumani in State Bank of Trivancore and in the assessee’s bank account in HDFC Bank in the name of Bhagawandas H.Jumani and hence, he treated deposits in these bank accounts as unaccounted income and assessed u/s.69 of the Act. The following are the details of unaccounted income deposited in the banks:-
Name Bank account Amount Rs.
Vishwambar State Bank of 3,13,401 Jumani Trivancore BhagawanJumani HDFC, Anna Salai 16,82,060 BhagawanJumani HDFC, Anna Salai 7,956 Total 20,03,417
4. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) also confirmed action of the Assessing Officer. Aggrieved, now the assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee before the Assessing Officer as well as CIT(A) made submissions that the assessee had opening balance of Rs.22,73,000/- in D.S.P Merril Lynch Mutual Fund in the name of the assessee and another amount of Rs.9,36,000/- in Grindlays Supersaver Mutual Fund in the name of Latha Bhagawandas Jumani as on 31.03.2002. The assessee before the lower authorities contended that these amounts were withdrawn and invested in different names i.e., Vishwambar Jumani and Bhagawandas Jumani. But, neither the Assessing Officer nor the CIT(A) accepted explanation of the assessee.
Now, the learned counsel for the assessee filed details of redemption of GSSIF– IP- Growth Option and I Flex IPO on 09.06.2002 of Rs.3,06,200/- and deposited in HDFC bank account of Anna Nagar branch. Similarly, the assessee also filed details of 460 shares of I Flex allotted for a sum of Rs.2,43,800/-. The learned counsel for the assessee again drew our attention to the submissions made before the CIT(A) in regard to redemption of GSSIF – IP annual option that contains opening balance as on 01.04.2002 at Rs.6,36,000/-, out of which invested a sum of Rs.99,000/- on 15.04.2002 in the name of Lata B.Jumani. Similarly, redemption of D20 DSP Merrill Lynch Bond fund - retail growth having opening balance of units 10,923.546 were available, out of which a sum of Rs.5,000/-was received. Similarly, another amount of redemption of GSSIF ST Growth on 30.03.2003 for Rs.3,25,534/-, out of which entire funds were available. When it was pointed out to learned counsel for the assessee, entire investment of Rs.5.50 lakhs is out of redemption in I Flex IPO, another redemption of shares of I Flex of Rs.2,43,800/- and another redemption of GSSIF ST Growth on 30.03.2003 for Rs.3,25,534/- is available and explained before us. But, for balance amount, the assessee could not explain / produce any evidence or any details before us. This means that the assessee has source of Rs.11,19,334/- is available with the assessee to explain the source of deposits. The total investment in the bank deposits are to the tune of Rs.20,03,417/-, out of which the assessee is able to explain only Rs.11,19,334/- and balance amount of Rs.8,84,083/- remains unexplained. Hence, this amount is to be treated as unexplained investment u/s.69 of the Act. When these facts were confronted to ld.Sr.DR, he left the issue on Bench, but made submissions that evidences can be sent back to the Assessing Officer for verification. We noted that this being a very old matter pertains to assessment year 2003-04 and going by nature of evidences, it is better to partly accept here and allow relief to the extent the assessee is able to explain.
Hence, we treat the amount of Rs.11,19,334/- as explained and balance amount of Rs.Rs.8,84,083/- as unexplained. Therefore, we confirm addition to the extent of Rs.8,84,083/-. Accordingly, this issue of the assessee is partly allowed.
The next issue in the appeal of the assessee is as regards to order of the CIT(A) in confirming addition of Rs.2,53,400/- u/s.69 of the Act.
Brief facts are that the during the course of assessment proceedings, as noted above the issue, the Assessing Officer noted that out of seized bank accounts, there is a d-mat account in the name of Vishwambar Jumani, where unexplained investments of Rs.2,53,400/- is treated as unexplained investments u/s.69 of the Act, because, the assessee is unable to prove this amount.
We noted that the Assessing Officer, while framing assessment has not accepted contention of the assessee that investments in shares were not from the above unaccounted mutual funds, as the assessee failed to explain trail of funds.
The Assessing Officer treated this amount of Rs.2,53,400/- as unexplained investment u/s.69 of the Act. The CIT(A) also confirmed action of the Assessing Officer by observing in para 13 & 14 of his order as under:-
“13. 0n the addition of Rs.2,53,400/- being related to the shares acquired in the name of Vishamber Jumani, (600 shares of Union Bank), the Assessing Officer observed that the same was allotted in the above name for Rs.9,600/- and there was a refund of Rs.6,400/- as is evident from the SB A/c no.102850. Flex shares of Rs.2,43,800 (460 shares) were allotted which are unaccounted.
The AO had treated Rs.16,82,060/- deposited in the name of Bhagwan Jumani in HDFC A/c in Anna Salai as unaccounted since no source was explained. The Special Audit Report also concluded that Rs.16,82,060/- as unaccounted. The assessee stated that the deposits were made out of the redemption of mutual funds. The source was not clearly linked to the above investment.” Aggrieved, now the assessee is appeal before us.
After hearing both sides and going through facts and circumstances of the case, we note that the assessee has available funds on account of Application for I Flex IPO on 09.06.2002 for Rs.5.50 lakhs. The assessee claimed that it has received refund application I Flex IPO on 31.07.2002 for an amount of Rs.3,06,000/- and balance is allotment of 460 shares in I Flex Rs.2,43,800/- . The assessee claimed that this refund of application in I Flex IPO on Rs.3,06,200/- was re- deposited in D-mat account to the extent of Rs.2,53,400/-. We noted that the assessee made submissions and gave some details, but could not file any direct evidence that this amount is the same amount which is re-deposited in assessee’s D-mat account. Hence, this cannot be treated as explained and the Assessing Officer as well as CIT(A) has rightly treated this as unexplained and we confirm orders of the lower authorities on this issue. Therefore, this ground of appeal is dismissed.
In the result, appeal of the assessee is partly allowed.
(AY : 2004-05): 11. The first issue in the appeal of the assessee is as regards to order of the CIT(A) confirming action of the Assessing Officer in changing ‘head of income’ of trading in business, instead of taxing surplus arising out of sale and purchase of shares as long term capital gain. For this, the assessee has raised seven grounds which are argumentative and factual, hence, need not be reproduced.
Brief facts are that the assessee is engaged in trading in shares, units in addition to investment in equity and units. The assessee for the relevant assessment year 2004-05 declaring long term capital gain at Rs.1,43,58,040/- in the return of income on account of surplus arising out of sale of shares and mutual fund units. During the course of survey u/s.133A in the business and residential premises of the assessee on 09.02.2005, the Department noted that the assessee was indulging in large scale trading in shares and units of mutual funds, but not maintaining any books of account. Based on the report of investigation wing and documents found during the course of survey, the Assessing Officer completed assessment and assessed surplus arising out sale of shares as business profit, as against long term capital gain declared by the assessee amounting to Rs.1,43,58,040/-. The assessee claimed before the Assessing Officer that the assessee is engaged in trading of equity shares and mutual funds along with he is also an investor in equity shares and mutual funds.
The assessee before the Assessing Officer claimed that he has purchased shares under the head ‘investment’ and from sale of those shares, he has earned surplus of Rs.1,43,58,040/- which is declared as long term capital gain, because holding period is more than one year. He explained before the Assessing Officer that these shares are kept in D-Mat account.
The assessee before the Assessing Officer also explained that the assessee is engaged in trading also for which also a separate account is maintained and he has declared profit arising out of purchase and sale of shares in trading account as business income. But, the Assessing Officer re-drawn the entire activities of the assessee and assessed surplus as business profit by observing as under:-
“In the light of the above decisions and also In the light of the facts admitted by the assessee that his full time occupation was in trading in shares and in mutual funds and the volume of business carried on by the assessee will clearly indicate that the surplus derived from the activity could not have been created had the assessee treated the stocks as investments only. It has thus become clear that the surplus earned by the assesseefrom out of the trading in shares will constitute income from business and not Long Term Capital Gains as claimed by the assessee. I shall therefore, hold that the profit received by the assessee from out of the trading in shares has to be treated as income from business. and this will be taxed as such at the rates applicable to income from business.”
Aggrieved, the assessee preferred an appeal before the CIT(A).
The CIT(A) also confirmed action of the Assessing Officer observing as under:-
“9.1 The appellant has merely argued that he has maintained two separate books of accounts for Investment and Trading which are not substantiated. In case, the appellant had done trading in shares as a business, he was supposed to maintain the relevant books of accounts as required which are exclusive. It is not enough to enter the data at the time of scrutiny assessment and take a print out of the same and submit to the Income Tax Department. Especially in a case where the appellant claims to have done investment in shares, cash flow should be from his own bank accounts. Strangely the appellant has invested money in benami accounts and transacted in shares as found out by the Investigation Wing and the AO. Further, the transactions by the appellant are intermingled not only between the trading and investment, but also in respect of fund flow from the bank accounts held by him, and from accounts held in the name of others. 9.2 ……. 9.3……. 9.4 On the basis of facts of the appellant's case, I hold that the AO has rightly assessed Rs.1,43,58,040/- as Income from trading in business and the same is confirmed.”
Aggrieved, now the assessee is in appeal before the Tribunal.
14. We have heard rival submissions and gone through facts and circumstances of the case. We also noted facts from case records, including assessment order, order of the CIT(A), written submissions filed by the assessee and other documents filed. From all sides, it is gathered the assessee does trade in shares, but also purchases equity shares and hold the same as investment in its books of account. The assessee is getting books audited, as is evident from the audit report. The assessee claimed that he has maintained accounts in tally software and at the time of survey, laptop containing tally data was under repair and hence, at that particular point of time books of account could not be produced and that became basis of Assessing Officer’s finding that the assessee is not maintaining books of account. The assessee is following a consistent method of accounting and there is no dispute in respect of this aspect that in earlier years also the assessee is investor. Basically, the assessee is investor in shares and assessed to income-tax, since 1972-73 and declaring surplus arising out of sale and purchase of shares as long term capital gain, because he is holding shares for long term. The assessee in the present case has kept his shares in investment account and also these were available in D-mat account as narrated before the Assessing Officer, CIT(A) and even now before us. Hence, according to us, the assessee has rightly declared surplus arising out of sale of shares, which were held as investment, as long term capital gain. Therefore, we reverse findings of the lower authorities on this issue holding that surplus arising out of sale of shares as business income and accept the plea of the assessee.
The appeal of the assessee on this issue is allowed.
The next issue of the assessee is as regards to order of the CIT(A) confirming addition made by the Assessing Officer of consultancy service charges received in the shape of units from Birla group of companies amounting to Rs.23 lakhs as undisclosed income u/s.68 of the Act.
Brief facts are that the assessee claimed that he has invested amount with Birla Mutual Fund group in its Birla Cash Plus scheme. The assessee invested two amounts one for amount of Rs.25.00 lakhs and another for an amount of Rs.2,00,000/- with the fund on 25.01.2000. But, the fund was erroneously credited into assessee’s account with two amounts of Rs.25.00 lakhs each, thereby resulting in excess credit to his account of Rs.23.00 lakhs during the year ended 31.03.2000. It was explained by the assessee that corresponding units was also credited to the assessee’s account, a copy of fund account statement was enclosed in assessee’s paper book at pages 35 & 36 along with bank statement at page 37 of the paper book, which shows that credit was given wrongly twice for this amount of Rs.25.00 lakhs. The assessee before the Assessing Officer explained that this amount of Rs.23.00 lakhs was earned by the assessee in assessment year 2000-01 to 2003-04 and claimed same on account of rendering consultancy service and purchase units of Birla group cases in this year. The assessee received units from Birla group of companies and redeemed the units subsequently. The assessee during the course of survey, agreed to admit this income for assessment year 2004-05, but not offered the income in this year. Hence, the Assessing Officer treating the income as undisclosed income assessable u/s.68 of the Act for amount of Rs.23.00 lakhs. Aggrieved, the assessee preferred an appeal before the CIT(A).
The CIT(A) also confirmed action of the Assessing Officer observing as under:-
“9.5 Hence, the Assessing Officer added the above in AY 2004-05. Since the above addition is based on appellant’s own admission and the same is nothing but income of the appellant, the addition of Rs.23,00,000/- is confirmed.”
Aggrieved, now the assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee filed return of income for the assessment year 2000-01 to 2003- 04, but no income rendering consultancy services to Birla Mutual Fund group for a sum of Rs.23 lakhs was disclosed.
The assessee has received units from Birla group and redeemed units subsequently, because the assessee was not obliged to repay the amount to Birla group of companies as unit has been allotted to the assessee on account of services rendered by him to the said company. We noted that the assessee has disclosed any income and now, on the redeem of Birla Mutual Fund units, the assessee has not declared any income. The assessee admitted during the course of survey and stopped further enquiry. We noted that the assessee cannot escape from assessment of this amount of Rs.23 lakhs, because, he has redeemed Birla Mutual Fund units in the very same year, whereas there is no investment. Hence, the entire redeemed amount is to be assessed as taxable. The Assessing Officer has rightly assessed the same and we confirm the said addition.
In the result, appeal of the assessee is partly allowed.
ITA No.2253/Chny/2018 (AY : 2005-06):
At the outset, it is noticed that the assessee has raised various grounds of additions numbering into 1 to 9 which are inter-mixed and hence, the assessee has filed a chart of issues for consideration and additions made by the Assessing Officer and confirmed by the CIT(A) . The assessee has given chart in accordance with grounds of appeal and relevant issues raised in regard to additions are given in the chart which we will discuss point-wise.
The first issue of unexplained investments made u/s.69A of the Act is in regard to deposits made in bank account amounting to Rs.45,83,262/- and unexplained investment u/s.69A of the Act being deposits made in D-mat accounts.
The assessee has given complete details of nature of addition which are to be considered read as under:-
Unexplained Investments u/s 69A in BANK ACCOUNTS - Rs. 45,83,262 The entire investments were made (1) Investment in the name of Vishwamber out of the accounted funds of Jumani- Rs. 21,75,390/- the Assessee in different names (partly sustained to the tune of Rs. to increase the possibility of 12,66,532/-) allotment of IPOs. The consolidated cash book showing (2) Investment in the name of A. Sumathi- the trail of investments were Rs. 1,09,594/- placed before the lower authorities and enclosed herewith. (3) Investment in the name of BagwandasJumani - Rs. 22,97,846/- Unexplained Investments u/s 69A in D-MAT ACCOUNTS (1) Investment in the name of Vishwamber Jumani- Rs. 18,14,992/- (2) Investment in the name of A. Sumathi- Rs. 34,718
Brief facts relating to the above additions are that the Assessing Officer during verification of de-mat account of the assessee noticed that a list of shares as reported in page 3 of point 5(a) of audit report amounting to Rs.4,17,384/- were not recorded in the books and hence, he treated the same as unexplained investment of the assessee. Subsequently, the Assessing Officer noticed that the assessee has made unaccounted investments in the name of Mr. Vishwambar Jumani, Mrs. A.Sumathi and Mr. Bagwandas Jumani i.e., deposits made in bank accounts which were quantified by the Assessing Officer as under:-
Vishwambar Jumani Rs.21,75,390
A.Sumathi Rs. 1,09,594
3. Bagwandas Jumani Rs.22,97,846
Bagwandas Jumani 45,83,262
The Assessing Officer also noticed that there is investment in d-mat account maintained with Integrated Enterprises in the name of Mr. Vishwambar Jumani amounting to Rs.18,14,992/- and D-mat account maintained with Appollo Sindoori in the name of A. Sumathi of Rs. Rs.34,718/-, which was treated as unexplained investment and added as income from other sources. The Assessing Officer also required to explain investments made in the name of Mr. Vishwambar Jumani, Mrs. A.Sumathi and assessee himself Mr.Bagwandas Jumani amounting to Rs.21,75,390/-, 1,09,594/- and Rs.22,97,846/- respectively aggregating to Rs.45,82,830/-. The assessee before the Assessing Officer contended that the assessee is unable to prove that these amounts were used for circulating in investments,but could not file any evidences to prove inter-linking of investments. The Assessing Officer also rejected claim of the assessee that these shares were declared under VDIS’ 1997, as the assessee failed to file any proof or any evidence to explain source.
Similarly, the CIT(A) also confirmed addition just on the basis of his findings. Aggrieved, now the assessee is in appeal before the Tribunal.
Before us, the assessee now filed complete bank accounts for interlinking transactions to which ld. Sr.DR objected, because according to him, these are fresh evidences, but the learned counsel for the assessee contended that these are not fresh evidences, even these were filed before the Assessing Officer as well as CIT(A), but none of the authorities has gone into these details. We noted from written submissions filed before the CIT(A) on 18.08.2017 and noted that the assesseehas tried to explain these investments by filing various evidences. We have taken a close look on the evidences filed and noted that we have no mechanism to verify the transactions individually or we have no mechanism to ascertain veracity of the documents, hence, in the interest of justice, without speaking on merit, we remit this issue back to the file of the Assessing Officer for fresh adjudication, after considering all the evidences filed before the CIT(A) or even now filed before us. The Assessing Officer will also examine shares declared under VDIS’1997 and whatever sale proceeds out of the same, he can decide explanation of the assessee as per law. In term of the above, we restore the above issue back to the file of the Assessing Officer for fresh adjudication.
The next issue in this appeal of the assessee is as regards to order of the CIT(A) confirming action of the Assessing Officer in treating surplus arising out of sale of shares as business income, instead of short term capital gain amounting to Rs.20,13,370/-.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the Assessing Officer from the tax audit report noted that the assessee has claimed profit from the following IPOs:-
TCS Ltd Rs.11,21,359
NTPC Rs. 8,92,021
Total Profit : Rs.20,13,380/- According to the Assessing Officer, the assessee has disclosed income under head ‘short term capital gain’, but the Assessing Officer has treated the same as business income, just on the basis that SLP filed by the department against the decision of the Hon’ble Madras High Court in the case of Trishul Investments Ltd is pending. No citation of Trishul Investments Ltd., or any details were given and even now, nothing was argued neither by the learned counsel for the assessee nor learned D.R. The CIT(A) also confirmed action of the Assessing Officer in assessing surplus arising out of sale of shares at Rs.20,13,770/- as income from trading on business as against declared by the assessee as income from short term capital gain.
We noted that none of the authorities below have gone into detail and hence, we cannot decide this issue at this level.
Hence, we remand this issue back to the file of the Assessing Officer, who will consider what is actual nature of transaction and facts and then decide whether income is from short term capital gain or income from trading of shares. Hence, this issue is remitted back to the file of the Assessing Officer.
The next issue in this appeal of the assessee is as regards to shares of HDFC and investments made in the same was considered in the present assessment year amounting to Rs.2,35,500/. The learned counsel for the assessee before us stated that these shares were purchased in earlier years.
On going through the assessment order as well as order of the CIT(A), we could not find such issue in the orders of the lower authorities. Further, no argument was advanced by either side on this issue. Hence, the same is dismissed.
The next issue in this appeal of the assessee is as regards to order of the CIT(A) confirming addition of unexplained investments made u/s.69 of the Act amounting to Rs.10,20,000/-.
We have gone through order of the Assessing Officer and find that there is no such addition, but while going through order of the CIT(A),we noted that the CIT(A) has identified this credit amount of Rs.10,20,000/- and has confirmed this addition by observing as under:-
“9.1.5 On 10.04.2004, there was a credit of Rs.10,20,000/-. In the written submission the assessee has stated that this amount was added which is from redemption. On verification of this amount with reference to the evidence for investment a sum of Rs.10,20,000/- was refunded to Shri Vishamber Jumani and hence, the Assessing Officer has rightly added the same to the income of the assessee.”
Since no argument was advanced on either side and this was raised by the CIT(A) for the first time, we remit this issue back to the file of the Assessing Officer, who will verify and then decide according to law whether this particular entry of Rs.10,20,000/- on 10.04.2004 is explained or not. Accordingly, this issue is remitted back to the file of the Assessing Officer.
The next issue in this appeal of the assessee is as regards to investments made in the name of Smt. A.Sumathi for Rs.36,332/-. We noted that we have already considered this amount while sending back the issue of main ground of unexplained investments u/s.69 of the Act in the bank account and set aside this issue back to the file of the Assessing Officer, the same ratio will apply to this issue. Hence, this issue is already set aside to the file of the Assessing Officer and allowed for statistical purposes.
The next issue in this appeal of the assessee is as regards to disallowance of interest paid to Parameshwari Trust to the extent of Rs.48,600/- on the ground that no TDS was deducted on the payment. The CIT(A) simply confirmed action of the Assessing Officer and even before us, no explanation was submitted by the assessee as to how this interest paid is allowable. Hence, the same is dismissed.
The next issue in this appeal of the assessee is as regards to order of the CIT(A) not reducing income by Rs.23 lakhs as declared in the revised return of income. We noted that on the very same issue, we have already confirmed the addition hereinabove in for the assessment year 2004-05 vide para no. 18 of this order. Hence, this cannot be sustained, because that will tantamount to double addition. Hence in this year, we delete the addition.
Hence, this issue is allowed.
The next issue in this appeal of the assessee is as regards to order of the CIT(A) confirming claim of expenses of Rs.2,63,240/-. After hearing both sides and on going through facts, we noted that the assessee neither before the Assessing Officer nor before the CIT(A) , even nor before us, could not file any evidence in support of this expense. Hence, the same is dismissed.
In the result, appeal of the assessee is partly allowed for statistical purposes .