LATIF EBRAHIM PATEL,MUMBAI vs. ITO 17(1)(1), MUMBAI

सुनवाई की तायीख/ : 20.03.2018 Date of Hearing घोषणा की तायीख / : 23.03.2018 Date of Pronouncement आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER:

P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) “1. The Learned Income Tax Officer 17(1)1 Mumbai erred in the adding of unexplained cash credit u/s.68 of Income Tax Act Rs.6,84,000/- and C.I.T (Appeal) erred in confirming the addition.

3. The Learned Income Tax Officer 17(1) 1, Mumbai has not gone through the facts and the circumstances of the case properly.

9. Reliance is placed on various Tribunals, High Courts and Supreme Court decision wherein it has been decide d that the A.O i.e. Assessing Officer should make proper enquiry and it is only then that the addition can be sustained in which the Ld. A.O has not done and the Ld. CIT (Appeal) has confirmed the addition.

11. That the Appellant craves leave to amend, alter or add a new ground of Appeal

which may be necessary at any time before the hearing.

2. Briefly stated, the facts of the case are that the A.O on the basis of certain AIR information issued a notice under Sec. 142(1), dated 07.09.2007, calling upon the assessee to file his return of income for A.Y 2005-06. The assessee in compliance to the aforesaid notice filed his return of income on 12.02.2008, declaring total income of Rs.2,010/-. Thereafter, a notice under Sec.148 dated 23.03.2009 was issued and served on the assessee calling upon him to file his return of income declaring the correct income for A.Y 2005-06. The assessee P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) submitted before the A.O that his return of income filed in compliance to notice under Sec. 142(1) on 12.02.2008 may be treated as the return of income filed in response to the notice issued under Sec.

4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The assessee explaining the source of the cash deposit of Rs. 6,84,000/- in his bank account submitted that the same was comprised of a loan of Rs. 4 lac received from Mr. Asif Supariwala, while for the an amount of Rs. 2,85,000/- was received by him from his mother Mrs. Khatija Usman Patel. The CIT(A) during the course of the appellate proceedings after perusing the submissions filed by the assessee before him called for a remand report from the A.O. The A.O in his remand report submitted that though during the course of the proceedings a letter was issued to the assessee and also information P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) under Sec. 133(6) was called from Mrs. Khatija Usman Patel in respect of the unsecured loans, but however, no reply was received from the assessee. The A.O in his remand report observed that as not only the identity and creditworthiness of the party from whom loan was received was not proved, but rather, the fact that the assessee had not shown any agricultural income in his return of income filed for the year under consideration thus proved to the hilt that the assessee had no agricultural land in possession. The A.O further submitted in his report that during the course of the assessment proceedings the assessee on being called upon to explain the source of his share of investment of Rs.10,00,000/- made in purchase of the property, viz. Flat no. 202 on the 2nfd floor of Sarkar Tower-III, Mazagaon, Mumbai, had claimed that he had received an unsecured loan of Rs.4 lac from Mr. Aasif Supariwala, Rs.2 lacs as unsecured loan from M/s Sarkar builders and Rs.4 lac was invested from his own sources. The A.O observed that during the course of the assessment proceedings the assessee could not furnish a plausible explanation as regards the source of cash deposits of Rs.6,84,000/- in his bank account with State Bank of India. The A.O observed that during the course of the appellate proceedings the assessee in his attempt to explain the source of Rs.6,84,000/- deposited in his bank account, had placed on record additional evidence as per which it was claimed that the same comprised of a loans received from Mr. Aasif Supariwala and Mrs. Khatija Usman Patel of Rs.4,00,000/- and Rs. 2,85,000/-, respectively. The A.O rebutting the aforesaid claim of the assessee submitted in his remand report that as the amount of Rs.4,00,000/- was earlier claimed by the assessee during the course of the assessment proceedings to have been directly paid by Mr. Aasif Supariwala on his behalf to the builders, viz. Sarkar builders towards his share of investment made in Flat No. 202 on the second floor of P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) Sarkar Tower-III, Mazagaon, Mumbai, therefore, the claim to the contrary raised by the assessee during the course of the appellate proceedings that the said amount of Rs. 4 lac received from Mr. Asif Supariwala was part of the cash deposit of Rs.6,84,000/- made in his bank account during the year under consideration could not be accepted. The A.O further observed in his remand report that the claim of the assessee that he had raised a loan of Rs.2,85,000/- from his mother, viz. Mrs. Khatija Usman Patel also could not be accepted, for the reason that the identity of the person from whom the aforesaid loan was claimed by the assessee to have been raised had not been established. The A.O further rebutting the claim of the assessee that he was an agriculturist, observed that as neither the ownership of an agricultural land was revealed from the balance sheet of the assessee, nor any documentary evidence had been placed on record in respect of agricultural sale proceeds and expenses incurred in the course of carrying out such agricultural activities, therefore, it could safely be concluded that the assessee did not possess any agricultural land.

4. That during the course of the appellate proceedings it was submitted by the assessee before the CIT(A) that he was an agriculturist and was purely receiving his income from agricultural activities and had no other source of income. It was brought to the notice of the CIT(A) that the assessee who was deaf and dumb had no other source of income except from agricultural activities and was totally dependant on his family and relatives for his livelihood. It was submitted before the CIT(A) that the amount of Rs.6,84,000/- which was deposited in his bank account was as a matter of fact amounts received as loans from the relatives and the name of the assessee was stated in the purchase agreement only for the sake of convenience, as the assessee was absolutely dependant on his aforesaid relatives.

P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) 5. The CIT(A) after deliberating on the contentions raised by the assessee before him was however not persuaded to be in agreement with the contentions of the assessee. The CIT(A) held a conviction that now when the assessee while explaining the source of investment of Rs.10,00,000/- made towards his share in the aforesaid property, viz. Flat No. 202 on the second floor, Sarkar Tower-III, Mazagaon, Mumbai, had stated that Mr. Asif Supariwala had made payment of Rs.4,00,000/- directly to the builder on his behalf, therefore, the explanation of the assessee that the cash deposit of Rs.6,84,000/- in his bank account during the year under consideration comprised of the loan of Rs.4,00,000/- received from Asif Supariwala clearly militated against his earlier claim and thus could not be accepted. The CIT(A) further observed that the claim of the assessee that he had received an amount of Rs.2,85,000/-from his mother Mrs. Khatija Usman Patel also could not be accepted, for the reason that as she was an 82 years old lady, therefore, she would not be in a position to earn income from which the aforesaid amounts could have been advanced to the assessee. The CIT(A) on the basis of his aforesaid deliberations not finding favour with the explanation tendered by the assessee, dismissed the appeal.

6. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee at the very outset submitted that the addition of Rs.6,84,000/- made by the A.O under Sec. 68 in respect of cash deposits in the bank account of the assessee could not be sustained in the eyes of law. The ld. A.R sought to canvass that as a „bank account‟ could not be construed as the „books‟ of the assessee, therefore, an addition in respect of a cash deposit in the said bank account, san any such correlating credit found in the P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) books of the assessee could not be made under Sec.68 of the Act. It was submitted by the ld. A.R that as the addition in the hands of the assessee was not based on a credit entry appearing in the books of accounts of the assessee, but rather, only on the basis of a cash deposit in his bank account, therefore, the addition made in his hands under Sec. 68 could not be sustained and was liable to be vacated on the said count itself. The ld. A.R in support of his aforesaid contention relied on the orders of the coordinate benches of the Tribunal in the case of Mehul V. Vyas Vs. I.T.O-23(2)(3), Mumbai (2017) 164 ITD 296 (Mum) and the order of the “SMC” bench, Mumbai in the case of Smt. Mansi Mahindra Pitkar Vs. I.T.O. 1(2), Thane (2016) 160 ITD 605 (Mum). The ld. A.R further adverting to the merits of the case submitted that now when it remained as a matter of fact that the assessee who was deaf and dumb and was totally dependent for his livelihood on his family and relatives had no other source of income except for income from agricultural activities, therefore, the lower authorities had gravely erred in treating the cash deposit in the bank account as his undisclosed income for the year under consideration. It was the contention of the ld. A.R that the lower authorities without dislodging or disproving the claim of the assessee that he was absolutely dependant on his family members for his livelihood, had however on the basis of whimsical observations drawn adverse inferences in his hands and most arbitrarily made an addition of Rs. 6,84,000/- as the unexplained income of the assessee. Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities.

7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first deal with the objection raised by P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) the Id. A.R as regards the addition of Rs.6,84,000/- made by the A.O under Section 68 in respect of the cash deposit in the bank account of the assessee. We find substantial force in the contention of the ld. A.R that an addition under Section 68 can only be made where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee either offers no explanation about the nature and source as regards the same or the explanation offered by him in the opinion of the assessing officer is not found to be satisfactory. We find that even in the course of the appellate proceedings the CIT(A) after recording his observations at length in respect of the scope and gamut of Sec. 68 had thereafter sustained the addition made by the A.O under the aforesaid statutory provision, as such. The ld. D.R could not point out any perversity as regards the contention advanced by the ld. A.R before us that the addition made under Sec. 68 being beyond the purview of the said statutory provision could not be sustained in the eyes of law. That before adverting further, we herein reproduce the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: - “Cash Credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory, the sum so credited may be charged.; to income-tax as the income of the assessee of that previous year..................”

That a bare perusal of the aforesaid deeming section reveals that an addition under the said statutory provision can only be made where any sum is found credited in the books of an assessee maintained for any previous year. Thus, the very sine qua non for making of an P a g e | Mr. Latif Ebrahim Patel Vs. I.T.O-17(1)(1) addition under Section 68 presupposes a credit of the aforesaid amount in the books of an assessee maintained for the previous year. We not being oblivious of the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature, thus, confining ourselves within the realm of our jurisdiction, construe the scope and gamut of the aforesaid statutory provision by according a plain meaning to the language used in Sec.

10. We thus in terms of our aforesaid observations set aside the order of the CIT(A) and quash the addition of Rs.6,84,000/- made in the hands of the assessee.