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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER SANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 16/10/2019, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by learned Commissioner of Income Tax (Appeals)–6, Mumbai, [“learned CIT(A)”], for the assessment year 2010–11.
In this appeal, the assessee has raised following grounds:
“The Grounds of Appeal mentioned hereunder are without prejudice to one another
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 “1. On the facts and circumstances of the case, the Learned Assessing officer erred in Issuance of Notice U/s 148 without bringing but any tangible material in the reasons recorded based on which the formation of belief as to Income has escaped Assessment. 2. On the facts and circumstances of the case, the Learned Assessing officer ought to have appreciated that only Non-filing of Return does not amounts to escapament of income and therefore, the reasons recorded for reopening only on the basis of Non-filling of Return is bad in law and therefore, the Notice issued U/s 148 is void-ab-initio 3. On the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs.23,05.222/- towards Cheques deposited in the Bank Account by the Assessee without appreciating that the Rs.8.15,000/ amount were transferred from another Bank Account of the Assessee and amount of Rs.14,00,000/- was received from his wife for which confirmation and all details were filed. 4. On the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs.13,51,500/- on account of Cash Deposited in the Savings Account without appreciating that the complete source of Cash along with the documentary evidences were produced before both the authorities. 5. On the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs 6,31,000/- in respect of Peak Cash Deposit in HDFC Bank Account without appreciating that the calculation of Peak itself is incorrect and moreover, the Cash Deposit was properly recorded in Cash Book and was emanating from the Accounts explain the source thereof. 6. On the facts and circumstances of the case, the Learned Commissioner of Income Tax [Appeals) erred in confirming the addition of Rs.1,68,764/-under Rule 8D sub-section Z Without appreciating that the Investment made in Mutual funds and shares were old Investment and out of saving funds.
The issue arising in grounds No. 1 and 2, raised in assessee‟s appeal, is pertaining to initiation of proceedings under section 147 of the Act.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and is engaged in the business of trading in shares. The assessee is also Director of M/s Sanghi Corporate Service Ltd. For the year under consideration, the assessee did not file his Page | 2
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 return of income. On the basis of information received from ITD systems, reassessment proceedings in the case of assessee was initiated and notice under section 148 of the Act was issued on 17/03/2015 after recording of reasons. In response, assessee filed electronically return of income on 02/04/2015, declaring NIL total income. Pursuant thereto, statutory notices under section 143(2) and 142(1) of the Act were issued and assessee filed its reply to the information/details sought. After considering the submissions of the assessee, the Assessing Officer („AO‟) vide order dated 10/02/2016, passed under section 143(3) r/w section 147 of the Act assessed the total income at Rs. 44,50,240, after making certain additions to the income returned by the assessee. We find that in its appeal before the learned CIT(A), the invocation of jurisdiction under section 147 was not challenged by the assessee and thus there are no findings on this aspect by the learned CIT(A). However, in the present appeal, the assessee has for the first time challenged invocation of proceedings under section 147 of the Act. Though, any issue which is raised for the first time is required to be taken by way of an additional ground. However, since the present issue is the legal issue and the basic facts for deciding the same are also on record, therefore, we proceed to decide the same. The learned Departmental Representative („learned DR’), in all fairness, did not raise this technicality either.
During the course of hearing, learned Authorised Representative („learned AR‟) submitted that the assessee had no taxable income during the year and therefore no return of income was filed. The learned AR further submitted that merely on the basis that cash has been deposited by the
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 assessee, proceedings under section 147 were initiated by the AO. The learned AR also submitted that the reasons recorded by the AO for issuing notice under section 148 of the Act doesn‟t provide the complete information on the basis of which such notice was issued and the same merely makes reference to some internal codes of the Department.
On the other hand, learned DR submitted that no return was filed by the assessee for the year under consideration and after receipt of the information from ITD system, facts were verified and it was noticed that assessee has entered into certain transactions viz. cash deposit of Rs. 50,000 and more, share transaction of Rs. 20,000, or more and TDS return in respect of interest other than interest on securities, during the year under consideration. Despite the said transactions, the assessee did not file the return of income. The learned DR also submitted that no objection was filed by the assessee against the initiation of proceedings under section 147 of the Act before the AO, even after receipt of the reasons recorded.
We have considered the rival submissions and perused the material available on record. In the present case, on the basis of information received from ITD systems regarding the non-filers of return of income for the assessment years 2010–11 and 2011–12, notice under section 148 of the Act was issued on 17/03/2015, after recording following reasons:
"The ITD system has generated the list of Non-filers of Returns of Income for A.Y. 2010-11 & 2011-12. After receipt of the information fron TTD system, the facts were verified & it was seen that the assessee has entered into the transaction during the F.Y. 2009-10 relevant to A.Y. 2010-11 as under: "TDS Return-Interest other than interest on securities (Section 194A) Page | 4
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 "Cash Deposit of Rs.50,000/- and more (CIB-184)” "Share Transaction of Rs.20,000/- or more (CIB-321)”
As seen from the above that inspite of the above referred transaction & the assessee did not file the Return of Income for A.Y. 2010-11. Since no return has been filed and also no Books Balance Sheet, Profit & Loss Account, computation of Income Tax is available on record; I have reason to believe that the income has escaped assessment. Therefore, the case has been reopened u/s 147 of the I.T. Act and accordingly notice u/s 148 of the Act dated 17/03/2015 has been issued.”
Thus, from the aforesaid it is evident that the proceedings under section 147 of the Act were initiated not only on the basis that cash has been deposited by the assessee but AO also had the information regarding the other transactions of the assessee, which in the absence of any return of income, were not disclosed by the assessee. In ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd, [2007] 291 ITR 500 (SC), the Hon‟ble Supreme Court observed as under:
“16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd.
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC).”
Thus, if there is reasonable information on the basis of which reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons. In the present case, it is undisputed that the assessee has not filed its return of income for the year under consideration. Since, no return was filed and no books, i.e. balance sheet, profit and loss account, computation of income, were available, the AO on the basis of information generated by ITD systems and verification of facts initiated proceedings under section 147 of the Act in the case of the assessee. It is the plea of the assessee that the complete information on the basis of which notice under section 148 of the Act was issued were not shared with the assessee as the reasons recorded mentions some codes of the Department. As per the learned DR, the codes links to the information available with the Department and the assessee never requested during the continuation of the proceedings under section 147 of the Act to share that information. The learned DR further submitted that extent of the information available with the Department will be clear when the issues on merits will be dealt. From the record, it is evident that even after receipt of the reasons recorded for issuing notice under section 148 of the Act, the assessee did not file any objections against same nor sought any other details. As noted above, the reasons recorded indicate the basis on which proceedings under section 147 Page | 6
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 of the Act were initiated in the case of the assessee. Therefore, we are of the considered view that AO had „reason to believe‟ on the basis of tangible material for initiating proceedings under section 147 of the Act. As a result, grounds No. 1 and 2, raised in assessee‟s appeal, are dismissed.
The issue arising in grounds No. 3 and 4, raised in assessee‟s appeal, is pertaining to addition on account of cheque and cash deposited in the bank accounts of the assessee.
The brief facts of the case pertaining to this issue, as emanating from the record, are: Vide notice issued under section 142 (1) of the Act assessee was asked to file the details of bank accounts held along with the copies of bank statements. The assessee was also asked to file copies of personal balance sheets, profit and loss account etc. In response, assessee disclosed the following bank accounts:
Ownership Name of Bank A/c No. A/c Type Single 1. HDFC Bank Ltd. (Malad West, Mumbai) 00471330003555 Saving A/c HDFC Bank Ltd. (Goregaon East, Single 02122100000104 Overdraft A/c 2. Mumbai) SVC Bank Ltd. (Goregaon West, Single 1519 Saving A/c 3. Mumbai)
The AO, on perusal of return of income filed by the assessee in response to notice issued under section 148 of the Act, found that the assessee had disclosed only the aforesaid 3 bank accounts. Verification of bank statements, submitted by the assessee, revealed that there were several entries of frequent fund transfers to and from certain accounts. The AO therefore asked the assessee‟s representative to give source and its identification of each deposit in the bank account. In response, the Page | 7
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 assessee‟s representative admitted to the 2 bank account Nos. 16650 and 6217 maintained with NKGSB Co-operative Bank Ltd and Vaishya Sahakari Bank Ltd, respectively, both in Dindoshi branches of the respective banks as not disclosed in the return of income brought on record. The AO therefore asked the assessee to file bank statement of such two undisclosed bank accounts and explain the source of deposits in such bank account along with the details of income. In reply, assessee filed statements of such undisclosed bank accounts, bank books narrating entries of debit/credit and explanation for the source of cash deposits found in such accounts. The AO found that these accounts have the following credit entries from both cash and cheque:
Interest / Total Name of Bank A/c No. Cash Cheque Dividend Vaishya Sahakari Bank 12,63,305 S.B. A/c 6217 3,88,000 8,75,222 83 Ltd. (Dindoshi Branch, Mumbai) NKGSB Co–op. Bank 23,98,256 S.B. A/c 16650 14,30,000 9,63,500 4756 Ltd. (Dindoshi Branch, Mumbai) 36,61,561 Total: 18,18,000 18,38,722 4839
Accordingly, the AO asked the assessee to show cause as to why the credits in these accounts should not be treated as income of the current year. In respect of the cheque deposits, the assessee submitted that same are mainly transferred from other bank accounts of the assessee and his wife except Rs. 90,000, Rs. 3,50,000, deposited with NKGSB Bank on 24/06/2009, and 25/09/2009, and Rs. 3,50,000, deposited with Vaishya Sahakari Bank on 25/09/2009, about which assessee agreed and admitted that he does not have any details of source. Regarding the cash deposits,
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 assessee submitted that same is out of personal savings and the corpus of Rs. 15,00,000, maintained by the family with him. Assessee further submitted that cash corpus was created to meet any emergency medical treatment of his wife and his brother. The AO vide order passed under section 143(3) r/w section 147 of the Act did not agree with the submissions of the assessee and held that the assessee transferred funds to/from these two undisclosed accounts to the disclose accounts but he took due care to square off the transactions to tally the balance sheet. The AO further held that the in respect of money transferred from wife‟s account, the assessee has not explained the nature of receipts nor filed her confirmation, bank statement, copy of return, her source of payment. Regarding the cash deposits in the aforesaid two undisclosed bank accounts, the AO observed as under:
“vii) The explanation of the assessee with regard to the source of cash deposits that these were sourced out of withdrawal by the daughters and brother is self serving and falls flat on logic and facts. The assessee is citing withdrawals by the daughters' made in FY 2007-08 and 2008-09 to explain the deposits by him in 2009-10. It is pertinent to mention that the assessee is regularly maintaining the books of accounts and such cash transfers from the daughters should have been recorded in the books if at all were genuine. It is also seen that one of the daughter of the assessee is not filing her return of income and her source of income is explained to be tuition. Most importantly the assessee lamely tried to explain that a cash corpus was kept ready by the family for the medical treatment of his brother and wife. This argument falls flat on the face of the fact that assessee invested in shares from those cash deposit. In the hearing held on 06/01/2016 the above fact was brought to the notice of the assessee and he was asked to justify the reason of medical treatment given by him. However, the assessee chose to maintain conspicuous silence on this point.”
Accordingly, the AO made addition of Rs. 36,61,561, as unexplained money of the assessee under section 69A of the Act.
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 14. The learned CIT(A) dismissed the appeal filed by the assessee on this issue, by observing as under:
“6.3.1 The assessee before the AO as well as during the instant proceedings without disputing the aforesaid facts have contended that the rest of the deposits except for Rs.90,000/-, Rs.3,50,000/- deposited with NKGSB Bank on 24.06.2009 and 25.09.2009 and Rs.3,50.000/- deposited in Vaishya Sahakari Bank on 25.09.2009 i.e., totaling to Rs.7,90,000/-, all other deposits are either explainable based on the contention that the cash etc., were taken from daughter, sourced from past saving of the self or cash corpus of Rs.15,00,000 for medical treaties of assessee's wife and brother and maintained by the family with him it can be seen that there is no details, documents or any plausible explanation which could lend credence to such story submitted by the assessee. Further thereto, if the sums so credited in the undisclosed bank accounts were in any ways explainable, there was no reason for the assessee to have not disclosed the said accounts, despite issue of notice u/s 148 of the Act and assessee clearly knowing that once the notice u/s 148 has been issued and the return has been filed only consequent to that, the case of the assessee shall be subjected to scrutiny. The assessee probably by filing the return of income declaring a loss, nurtured a belief that such losses declared and being very small, shall be accepted without much investigation. However, the AO has gone into the minor and finer details of the assessee's accounts and has been able to locate two undisclosed bank accounts of the assessee wherein sizeable transactions were done and which have no acceptable explanation by the assessee. The very fact that such accounts were undisclosed in the return filed consequent to the notice u/s 148, the credits therein shall have to be presumed as undisclosed, unless explained with credible evidences. The subsequent effort of the assessee to explain the sources out of the cash available with his daughter who does not file a return, savings from the year before or from the cash deposited by his brother for medical treatment or cash corpus of Rs.15,00,000/- credited for medical treatment of assessee's wife and brother and maintained by the family with him is clearly a story which is far-fetched, away from the facts and cannot be given much credence. It is also the fact that the assessee has tried his level best to keep these undisclosed accounts under the wraps and when faced with the investigation by the AO has made efforts to explain such money from the sources such as savings of daughter, wife, brother etc. In this regard, it is also mentioned that the assessee clearly maintains proper cash book, he has personal balance-sheet and trades and deals in stocks and shares. It is also noted that during the course of the instant proceedings, the assessee himself represented his case. These facts show that assessee is well aware of the nuances of the accounting and is familiar with the provisions of the Income- tax Act if all these transactions which have been found in the undisclosed bank accounts of the assessee were any ways there from the explained sources or explainable sources then there was no reason as to why these accounts were, at first place, not disclosed by the assessee and further thereto why the transactions reflected in such accounts are not reflected in assessee's cash book, his bank book or in the personal balance-sheet, In view of the facts and reasons mentioned hereinabove and the conclusion of the AO which has been pin-pointedly arrived at by him and mentioned herein Page | 10
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 above at pars 6.1.1, the contentions and submissions of the assessee are not found to be acceptable and are therefore, rejected. Similar is the position regarding credit of Rs.4,839/- as the assessee had shown interest of Rs.28/- and Rs.30/- credited in NKGSB Bank as dividend income and therefore the fact that Rs.4,839/- also represented exempt income is not found to be acceptable. In view of the facts and circumstances of the case and discussion hereinabove, the submissions of the assessee are not found to be acceptable and are rejected. Ground No. 1 is accordingly dismissed.
Being aggrieved, the assessee is in appeal before us.
During the course of hearing, learned AR by referring to the bank account statements of the assessee and his wife maintained with HDFC bank submitted that the cheque transaction of Rs. 22,15,000, in the aforesaid two undisclosed bank accounts, is from HDFC bank account. As regards the cash deposited in the aforesaid two undisclosed bank accounts, the learned AR reiterated the submissions made before the lower authorities. The learned AR also referred to the income tax return of the daughter of assessee, forming part of the paper book. On the other hand, the learned DR vehemently relied upon the orders passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. It is undisputed that the bank accounts maintained by the assessee in NKGSB Bank (account No. 16650) and Vaishya Sahakari Bank (account No. 6217) were not disclosed by the assessee in its return of income and books filed pursuant to issuance of notice under section 148 of the Act. Only during the course of assessment proceedings, upon AO‟s examination of each and every detail mentioned in the bank account statement disclosed by the assessee that the existence of aforesaid two undisclosed bank accounts came to light. The AO noted that in the aforesaid
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 two undisclosed bank accounts there are various credit transactions both through cash and cheque. As per the assessee, the amounts were deposited through cheque from the bank accounts maintained by him and his wife in HDFC bank, while the cash has been deposited from the personal savings and corpus generated to meet the medical treatment of his wife and his brother. In this regard, during the course of hearing, the learned AR referred to the bank account statements of the assessee and his wife maintained with HDFC Bank vide account no.02122100000104 and 0060210011578 respectively. During the appellate proceedings before the learned CIT(A), assessee provided following details of cheque received in aforesaid two undisclosed bank accounts:
ASHOK KUMAR SANGHI STATEMENT SHOWING CHEQUES RECEIVED FROM PARTIES IN NGGSB A/C–16650 & VAISHYA SAHAKARI BANK A/C–6217 Cheque Amount Party Name Bank Name Date S.N No. NKGSB Bank – A/c–16650 A)
1,40,000 HDFC OD A/C–104 85542 04/03/2010 1. A.K. Singhi 2,50,000 HDFC OD A/C–104 85545 12/03/2010 2. 3,90,000 SUB TOTAL– a 3,50,000 HDFC OD A/C–11578 961673 26/09/2009 3. 1,00,000 HDFC OD A/C–11578 46537 24/02/2010 4. 1,00,000 POONAM SANGHI HDFC OD A/C–11578 46539 05/03/2010 5. 2,00,000 HDFC OD A/C–11578 46543 20/03/2010 6. 2,00,000 HDFC OD A/C–11578 46548 30/03/2010 7. 9,50,000 SUB TOTAL– b UNEXPLAINED 90,000 24/06/2009 8. CHEQUES RECEIPT 90,000 SUB TOTAL– c 14,30,000 GRAND TOTAL (a+b+c) Vaishya Co.op. Bank – A/c 6217 1,45,000 HDFC OD A/C–104 88544 11/03/2010 9. 1,30,000 A.K. SANGHI HDFC OD A/C–104 85546 15/03/2010 10. 1,50,000 HDFC OD A/C–104 85548 20/03/2010 11. 4,25,000 SUB TOTAL– d POONAM SANGHI Page | 12
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019
ASHOK KUMAR SANGHI STATEMENT SHOWING CHEQUES RECEIVED FROM PARTIES IN NGGSB A/C–16650 & VAISHYA SAHAKARI BANK A/C–6217 Cheque Amount Party Name Bank Name Date S.N No. 250000 HDFC OD A/C–11578 961672 25/09/2008 12. 200000 HDFC OD A/C–11578 46547 30/03/2010 13. 450000 SUB TOTAL – e DIVIDEND 222 FROM COMPANY 14. RECEIVED 222 SUB TOTAL– f UNEXPLAINED 0 15. CHEQUES RECEIPT 0 SUB TOTAL– g 8,75,222 GRAND TOTAL (d+e+f+g)
From the perusal of statement of aforesaid accounts of the assessee and his wife maintained with HDFC Bank, at page 42–50 and page 91–93 of the paper book, we find that the cheque transactions mentioned at serial No. 1, 2, 3, 4, 5, 6 and 7 in NKGSB Bank (account No. 16650) are from assessee‟s and his wife‟s aforesaid bank accounts maintained with HDFC Bank. Further, the cheque transactions mentioned at serial No. 9, 10, 11, 12, 13 in Vaishya Sahakari Bank (account No. 6217) are also from assessee‟s and his wife‟s aforesaid bank accounts maintained with HDFC Bank.
Further, in the present case, it is not in dispute that assessee‟s bank account no.02122100000104 with HDFC Bank was an overdraft account and the closing overdraft balance on this account tallied with the „Bank OD A/c‟ on the liability side of the assessee‟s balance sheet. Further, in the return of income filed in response to notice issued under section 148 of the Act, the assessee returned the above figures of overdraft. Therefore, in view of the above, insofar as the cheque transactions amounting to Rs. 8,15,000 in the
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 aforesaid two undisclosed bank accounts, which are duly corroborated with the assessee‟s overdraft bank account maintained with HDFC bank, we find the same to be duly explained. Therefore, to this extent we direct the AO to delete the addition made under section 69A of the Act.
However, as regards wife‟s bank account no. 0060210011578, the nature of receipts and source of deposit in her account are not explained and the assessee merely submitted that the deposits in aforesaid two undisclosed bank accounts are also from wife‟s account maintained with HDFC Bank. Further, since the source of deposits in wife‟s bank account maintained with HDFC Bank, from where amount of Rs. 14,00,000 was transferred through cheque in the aforesaid two undisclosed bank accounts is not clear established, therefore, we deem it appropriate to remand this issue to the file of AO for necessary verification whether the deposits made in wife‟s account are genuine. We further direct the assessee to file necessary details before the AO for examination. We also direct that if source of deposits in wife‟s HDFC Bank account is found to be genuine then the addition to the extent of Rs. 14,00,000 be deleted.
As regards the transaction of Rs. 90,000 on 24/06/2009, in NKGSB Bank (account No. 16650), the assessee has already admitted before the lower authorities that source of same is not explainable. Thus, the findings of lower authorities, in this regard, are sustained.
As regards the cash deposited in the aforesaid two undisclosed bank accounts, it is the plea of the assessee that same is out of the personal
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 savings and corpus maintained to meet emergency medical treatment of his wife and his brother. It is the plea of the assessee that the cash deposit was taken from daughter, sourced from personal saving of the self or cash corpus of Rs. 15,00,000, maintain for medical treatment. We find that neither before the lower authorities nor before us apart from making a general submission no further details has been brought on record to substantiate the above claim. Before the lower authorities, the assessee merely mentioned the amount saved out of withdrawals (at para 5.3 of assessment order), however, the same has not be substantiated with any documentary evidence or bank statements from where the money was withdrawn and how much was spent and how much was saved thereafter. Further, the fact that these transactions were done in the two bank accounts, which were not disclosed by the assessee while filing its return of income pursuant to notice under section 148 of the Act, also raises doubt about the conduct of the assessee. From the perusal of bank statement of account maintained in Vaishya Sahakari Bank (account No. 6217), at page 102 of paper book, it is evident that these cash transactions are below Rs. 50,000 and same appears to be to avoid being reported upon by the bank. Thus, we do not agree with the plea of the assessee and upheld the orders passed by the lower authorities in respect of the cash deposits in the aforesaid two undisclosed bank accounts by the assessee.
As a result, ground No. 3 is partly allowed for statistical purpose, while ground No. 4 raised in assessee‟s appeal pertaining to cash deposit of Rs. 13,51,500 is dismissed.
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019
The issue arising in ground No. 5, raised in assessee‟s appeal, is pertaining to addition of Rs. 6,31,000 in respect of peak cash deposit in HDFC bank account.
The brief facts of the case pertaining to this issue, as emanating from the record, are: During the course of assessment pursuant to notice under section 148 of the Act, while examining the entries in the disclosed bank accounts of the assessee it was observed that there are several entries of cash deposits. The assessee was asked to file source of such cash deposits along with copy of cash book Ledger. In reply, the assessee filed two cash book Ledgers. One as per the books of account maintained and other accounting for the undisclosed bank accounts. The AO vide order passed under section 143(3) r/w section 147 of the Act observed that the cash book Ledger as per books maintained did not show any opening or closing balance. However, as on 21/07/2009 the assessee‟s cash book had peak credit balance of Rs. 6,31,000. Further, till 27/07/2090 has shown credit entries of cash payments totalling Rs. 7,24,000 and debit entries of cash receipts of Rs. 93,000. The AO further noted that despite being asked the assessee did not explain the source of net cash payment of Rs. 6,31,000 without having any cash in hand. Accordingly, the AO made the addition of peak credit balance of Rs. 6,31,000, by observing as under:
“9.1 A typical cash book should always have debit balance in the form of cash in hand. But, the cash book maintained by the assessee was unique in the way it always had credit balance. It means the assessee had an unaccounted cash in hand which be systematically deposited in the bank by passing contra credit entries in the cash book and by the year end all such cash, after utilization in the business, was withdrawn by passing debit entries in cash book. It needs no emphasis that onus lies on the assessee to explain Page | 16
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 the source of cash deposited by him In the bank accounts if there is no sufficient cash in hand to explain the contra entries Te also needs no expert to tell that for making payments from cash book the assessee first needed cash in cash book. Unfortunately, the assessee did not explain the source of above net cash deposits found in his bank accounts.”
In appeal, learned CIT(A) vide impugned order dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.
Having considered the rival submissions and perusal of the material available on record, we are of the considered view that the entries in the cash book have not been linked with the deposits in the bank account(s) maintained with HDFC. Therefore, we remand this issue to the file of AO for de novo adjudication. We further direct the assessee to furnish the necessary details before the AO for examination. We also direct that relief be granted to the assessee to the extent entries in the cash book are linked with the deposits in the HDFC bank account(s). As a result, ground No. 5 raised in assessee‟s appeal is allowed for statistical purpose.
As regards ground No. 6 raised in assessee‟s appeal, we find that during the course of appellate proceedings before the learned CIT(A), the assessee has submitted that total disallowance made under section 14A read with rule 8D(2) cannot exceed the amount of exempt income. Accordingly, accepting the aforesaid contention of the assessee, which was in lines with the prevailing jurisprudence, the learned CIT(A) directed the AO to restrict the disallowance under section 14A to the quantum of exempt income earned by the assessee i.e. Rs. 1,68,764. We find that Hon‟ble jurisdictional High Court in Nirved Traders (P.) Ltd. v/s Dy. CIT, I.T. Appeal No.149 of 2017, vide judgement dated 23.04.2019, has held that disallowance under Page | 17
Shri Ashok Kumar V. Sanghi ITA No.7952/Mum./2019 section 14A of the Act cannot be more than exempt income. Thus, we find no infirmity in the impugned order passed by the learned CIT(A). As a result, ground No. 6, raised in assessee‟s appeal is dismissed.
In the result, appeal by the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 26/09/2022 Sd/- Sd/- OM PRAKASH KANT SANDEEP SINGH KARHAIL JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, DATED: 26/09/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai