ACIT CIR 12(3), MUMBAI vs. CHIRAG JAYANT MEHTA, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) This bunch of four appeals is by the different assessee. In the case of Shri Chirag Jayant Mehta, there is cross appeal for Assessment Year 2008-09 (ITA No.8871/Mum/2011 and ITA 8548/Mum/2011). This assessee is also in appeal for Assessment Year 2009-10 (ITA No.2230/Mum/2013). In ITA

2. First, we shall take up the cross appeal for Assessment Year 2008-09, wherein, in the case of assessee (ITA No.8871/Mum/2011), the only ground pertains to confirming the addition of Rs.1,5,08,500/- in respect of cash deposit, with Standard Chartered Bank (Account. No. 231-1- 016504-1). The Ld. counsel for the assessee, Shri Mani Jain, explained that the cash deposited in the account was earlier withdrawn in the current year and earlier year (Page-10 of the paper book), the details of which were filed before the Assessing Officer, for purchase of land. It was contended that since the deal could not materialize, therefore, the same was again deposited. The crux of the argument is that the source of cash was duly proved. Reliance was placed upon the decision in Mr. C. Vamsi Mohan Nandyal, order dated 27/03/2015. Our attention was also invited the copy of the cash book summary (pages 10 to 30 of the paper book), copy of the capital account ledger of the assessee in the books of M/s Trance Ocean Agency (pages 31 to 39 of the paper book), copy of the cash book Summary in the case of Snehal Mehta along with the bank statement for the period 01/04/2005 to 31/03/2008 (pages 40 to 92 of the paper book), copy of the cash deposit details along with certificate from the bank (pages 93 to 96 of the paper book), copy of ITR acknowledgment for Assessment

ITA Nos.8548 & 8871/Mum/2011 & 4 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta Year 2008-09, 2006-07 and 2003-04 (pages 97 to 100 of the paper book) along with various pages like pages 104 and 121 of the paper book, containing 141 pages. All these documents were claimed to be either part of assessment record or before the Ld. Commissioner of Income Tax (Appeal). On the other hand, the Ld. DR, contended that no corroborative evidence was filed by the assessee to prove the source of cash, therefore, the addition was rightly made.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, an individual and also partner in a partnership firm declaring income of Rs.44,35,000/- in his return filed on 30/01/2009, which was processed u/s 143(10 of the Income Tax Act, 1961 (hereinafter the Act). The case of the assessee was selected for scrutiny under CASS, therefore, notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued on different dates and served upon the assessee. The assessee attended the proceedings from time to time and filed the details called for and the case was also discussed (as is evident from page-1 of the assessment order passed u/s 143(3) of the Act). As per the Revenue, there was an information, received through AIR, that there is cash deposit exceeding Rs.10 lakh in the saving bank account of the assessee. As per the Revenue, the cash was stated to be Rs.10,99,23,512/- in the Standard Chartered Bank. The assessee was asked to furnish the necessary

ITA Nos.8548 & 8871/Mum/2011 & 5 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta evidences to which the assessee filed letter dated 13/12/2010 claiming that the amount of Rs.4,61,29,980/- and Rs.4,23,53,032/- (total Rs.8,84,83,012/-) does not pertain to the assessee. Thus, the information with respect to the amount of Rs.10,99,23,512/- got reduced to Rs.2,14,40,500/-, in view of revision made by the Standard Chartered Bank. The assessee vide letter dated 24/10/2010 explained that the assessee was planning to purchase agricultural land, therefore, the amount was withdrawn in cash from the bank accounts for the payments. Since, the deal could not materialize, therefore, the cash withdrawn from bank was re-deposited. The assessee also explained that the cash deposit of Rs.99,32,000/- was from the account which was jointly with Shri Snehal Mehta. As per the Revenue, this claim of the assessee is merely an afterthought and no corroborative evidence of withdrawal was produced. The sum and substance of making the addition is that onus to prove the withdrawal/source is upon the assessee, which has not been discharged. It was also observed by the Assessing Officer that no prudent businessman would keep huge amount of cash unutilized. It is also observed that the assessee withdrew the cash for some other purpose, no disclosed to the Department and the same has been twisted to justify the cash deposit of Rs.2,14,40,500/- (page-4 of the assessment order). Finally, the Ld. Assessing Officer observed as under:-

ITA Nos.8548 & 8871/Mum/2011 & 6 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta

“4.3 The assessee has failed to furnish the following: a) Balance sheet as on 31.03.2008, 31.03.2007, 31.03.2006. b) Capital account for the year ended 31.03.2008, 31.03.2007, 31.03.2006. c) Wealth tax records for such huge cash on hand. d) Even the list of properties given on rent was never submitted till the query was raised during the course of assessment. e) No statement of affairs for all the three years viz. for A. Y.2006-07, 2007 -08 & 2008-09 were any time filed till conclusion of assessment. f) Mere filing of bank: summary or letters neither justifies the source of cash deposit nor does it prove the genuineness of explanation claimed by the assessee. g) In the matter of cash credit the Supreme Court has held that on preponderance of probability, the additions can be made wherever the onus is not discharged by the assessee [Sumati Daya180 TAXMANN 89 (SC)].”

In the light of the above observation, the amount of Rs.2,14,40,500/- was held as income from undisclosed sources under the head ‘income from other sources’.

ITA Nos.8548 & 8871/Mum/2011 & 7 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta 2.2. The assessee challenged the addition before the Ld. Commissioner of Income Tax (Appeal), wherein, the observation made by the Assessing Officer along with the submissions of the assessee were considered like cash summary, opening cash balance as on 01/04/2005 and claim of the assessee that the amount of Rs.1,85,82,000/- was withdrawn from the bank account up to the Financial Year relevant to Assessment Year 2008-09 and during the year under consideration, the amount of Rs.10 lakh from M/s Trance Ocean Agencies, where the assessee was a partner, etc. and finally deleted the addition of Rs.99,32,000/- (joint account operated with his brother). The Revenue is in appeal against the aforesaid deletion and the assessee for the remaining, which was sustained by the Ld. Commissioner of Income Tax (Appeal).

2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, before adverting further, we are expected to analyze the factual matrix and contentions raised from both sides. Before us, the main grievance of the Revenue is that no wise businessman will keep such a cash unutilized for longer period. The observation made at page 3 and 4 of the assessment order is reproduced hereunder:-

ITA Nos.8548 & 8871/Mum/2011 & 8 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta

“This also shows that the contention of the assessee is not justified. No prudent businessman would keep such huge amount of cash unutilized. Therefore, the natural corollary is that said cash was used by the assessee for the reasons and applications not mentioned in the details submitted. This clearly shows that the assessee has withdrawn cash for some other purposes not disclosed to the Department and now being confronted with AIR information, the same has been twisted to justify the cash deposit of Rs.2,14,40,500/-.”

If the aforesaid observation (highlighted portion) is analyzed, one clear fact is oozing out that even the Ld. Assessing Officer has admitted that the cash amount was withdrawn by the assessee but for some other purpose no disclosed to the Department. In such a situation, it can be said that factum of withdrawal of cash was not even disputed by the Revenue. The only point which has to be considered the purpose of withdrawal. Right from beginning i.e. assessment stage and till before this Tribunal, the assessee has been claiming that the amount was withdrawn for purchasing some land, which finally could not materialize and the same amount was re- deposited. The Ld. Assessing Officer as well as the Ld. DR has relied upon the decision from Hon'ble Apex Court in Sumati Dayal 80 taxman 89 (SC), which speaks about human probabilities. We add here that the human probabilities applies to both sides. So far as, keeping the cash unutilized or keeping the same in the bank is purely the decision of an individual and the Department is not expected

ITA Nos.8548 & 8871/Mum/2011 & 9 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta to guide. The businessman knows his interest and the compelling situations best.

2.4. Now, we shall analyze the claim of the assessee. During hearing, the Ld. counsel for the assessee invited our attention to various pages of the paper book. At page-40 of the paper book, there is a cash summary in the case of Snehal Mehta (PAN, AFBPM7557E), which is showing Rs.51,16,000/- closing cash on 31/03/2006, Rs.70,53,000/- cash balance as on 31/03/2007 and the cash summary for the period 2007-08 as on 31/03/2008, Rs.3,56,000/-, meaning thereby, there was cash balance with the assessee as discussed hereinabove. It is also noted that except observing by the Assessing Officer that the cash was withdrawn for some other purpose is not substantiated by the Department. No evidence has been brought on record by the Assessing Officer that the assessee in fact used the unutilized cash for any other purpose. Neither there is such claim by the assessee. The earlier year returns of the assessee are with the Department on the basis of which it could have been established that the unutilized cash was used in earlier years. No such evidence was mentioned by the Department while presuming so. In such a situation, we are of the view that presumption cannot take the shape of evidence, however strong it may be. As mentioned earlier even the Ld. Assessing Officer has presumed that the cash was, though withdrawn, but might have used for other

ITA Nos.8548 & 8871/Mum/2011 & 10 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta purposes, which has not been established by the Revenue. Identically, the Hyderabad Bench of the Tribunal in the case of Mr. C. Vamsi Mohan Nandyal, order dated 27/03/2015 held as under:-

“This appeal filed by the assessee is directed against the Order of Ld. CIT(A)-IV, Hyderabad dated 10.01.2014 whereby he confirmed the addition of Rs.21 lakhs made by the A.O. on account of cash deposit of Rs. 21 lakhs found to be made in the bank account of the assessee treating the same as unexplained cash credit.

3. Against the order passed by the A.O. under section 143(3), an appeal was preferred by the assessee before the Ld. CIT(A) and the submission as made before the A.O. was reiterated on behalf of the assessee while explaining the cash deposit of Rs. 21 lakhs found to be made in his bank account on 24.12.2008. The Ld. CIT(A)

ITA Nos.8548 & 8871/Mum/2011 & 11 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta however, did not find the same to be acceptable and confirmed the addition of Rs. 21 lakhs made by the A.O. for the following reasons given in paras 4.2 to 4.4 of his impugned order.

“4.2. I have considered the facts on record and the submissions of the A.R. I have also examined the cash flow statement prepared by the appellant on the basis of the bank transactions. The explanation of the A.R. is based entirely on the claim that the deposits had been made out of the cash withdrawals earlier made from the same account. However, contrary to the A.R’s claim, I do not find any proximity between the withdrawals and the deposits. For example, the appellant made a series of five withdrawals ranging from Rs.2,00,000 to Rs.4,00,000 aggregating to Rs.12,50,000 between the period 02.05.2008 and withdrew another sum of Rs.8,00,000 on 31.06.2008. There was no reason for the appellant to make the repeated withdrawals if he had the amounts withdrawn earlier available with him. Indeed the transactions follow a similar pattern through the year.

4.3. Similarly, the appellant had made a deposit of Rs.21,00,000 on 24.12.2008. There was a withdrawal of Rs.13,00,000 on 17.12.2008 before the deposit and of Rs.16,00,000 on 30.12.2008 after it. The appellant has failed to explain why a substantial sum of Rs.13,00,000 was withdrawn from the bank merely to keep it idle as cash only to redeposit it a week later. The appellant has also failed to explain why the appellant needed to continue withdrawing cash even when apparently large cash balance were available with him.

4.4. The logical explanation for such large withdrawals would be that the appellant needed the money either for his business or personal expenses or for making investments, in which case the cash withdrawn would have been utilized and not be available for redeposit. The appellant would have me believe that he had nothing

ITA Nos.8548 & 8871/Mum/2011 & 12 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta better to do than to withdraw and deposit cash in a random manner apparently as a pastime. The explanation of the appellant is contrary to the probabilities of human behavior and is, therefore, rejected.”

Aggrieved by the order of Ld. CIT(A), assessee has preferred this appeal before the Tribunal.

4. We have heard the arguments of both the sides and also perused the relevant material on record. Ld. Counsel for the assessee has submitted that although there was no cash book maintained by the assessee to show that the deposit of Rs. 21 lakhs made in the bank account on 24.12.2008 was out of the withdrawals made on earlier dates, withdrawal of Rs. 13 lakhs made from the same bank account just a week before i.e., on 17.12.2008 should atleast be treated as the source of cash deposit made on 24.12.2008. Although learned D.R. in this regard has contended that the assessee might have utilized the amount of Rs. 13 lakhs withdrawn on 17.12.2008 for some other purpose, we find that there is nothing on record to show that the amount of Rs. 13 lakhs withdrawn by the assessee on 17.12.2008 was used for some other purpose. In our opinion, the said withdrawal having been made by the assessee just before a week i.e. on 17.12.2008, the same can reasonably be treated as available with the assessee for cash deposit of Rs.21 lakhs made on 24.12.2008 especially when there is nothing to show that the amount of Rs. 13 lakhs withdrawn on 17.12.2008 was utilized by the assessee for some other purpose. We, therefore, treat the cash deposit of Rs. 21 lakhs made by the assessee in the bank account on 24.12.2008 as explained to the extent of Rs. 13 lakhs and sustain the addition made by the A.O. and confirmed by the Ld. CIT(A) on this issue to the extent of Rs. 8 lakhs.

ITA Nos.8548 & 8871/Mum/2011 & 13 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta

In the light of the foregoing discussion, we allow the appeal of the assessee.

ITA Nos.8548 & 8871/Mum/2011 & 14 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta (Appeal) produced various opportunities as is evident from page-1 of the impugned order from 24/04/2012 to 09/11/2012, adjournment were sought by the assessee and last two dates, the assessee could not attend. In the absence of non-attendance, an ex-parte order was passed even nobody was representing the department. The mandate of Article-265 of Constitution of India is to levy and collect due taxes, therefore, to safeguard the interest of both sides, we deem it appropriate to send this issue to the file of the Ld. Commissioner of Income Tax (Appeal) to adjudicate the same afresh on merit. The assessee be given opportunity of being heard with further liberty to furnish evidence, if any, to substantiate his claim, thus, this appeal of the assessee is allowed for statistical purposes.

5. Now, we shall take up appeal in Assessment Year 2009-10, the first and second ground, raised by the assessee, pertains to passing an ex-parte order without providing adequate opportunity of being heard to the assessee and thereby confirming the addition of Rs.64,41,000/- in respect of cash deposited in the Standard Chartered Bank and further confirming the addition of Rs.30,212/- on account of alleged undisclosed interest income.

5.1. The crux of argument on behalf of the assessee is that the assessee was having sufficient cash in hand at the time of depositing the same in the bank account. As per the ITA Nos.8548 & 8871/Mum/2011 & 15 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta Revenue, there was AIR information with respect to the cash deposited in the bank account, therefore, in response to show cause notice, the assessee could not prove the genuineness of deposit, with evidence.

5.2. We have considered the rival submissions and perused the material available on record. In this appeal also, the plea of the assessee is that the assessee was planning to by agriculture land, therefore, he started withdrawing the cash from the bank account to pay the agriculturist and since, the deal could not be materialize, the same was deposited in the bank. Though, we have adjudicated identical ground, while adjudicating the appeal of the Revenue ( ), still in the interest of the justice, we deem it appropriate to examine the factual matrix whether the assessee, during the relevant period, in fact, withdrew the amounts and if it was withdrawn whether it was used for any other purposes. This aspect has not been examined by the Department. The assessee is directed to examine the factual matrix and after providing due opportunity of being heard decide afresh in accordance with law. The assessee is at liberty to furnish necessary evidence, if any, in support of his claim. Thus, this appeal of the assessee is allowed for statistical purposes.

ITA Nos.8548 & 8871/Mum/2011 & 16 & 2231/Mum/2013 Chirag Jayant Mehta & Snehal Jaynat Mehta The ld. Assessing Officer is directed to examine the factual matrix and after providing due opportunity to the assessee, decide afresh in accordance with law. Identical is the situation for ground no.4. Thus, ground no. 3 and 4 are allowed for statistical purposes.

Finally, i. Appeal of the Revenue ( Assessment Year 2008-09 is dismissed ii. Appeal of the assessee (ITA NO.8871/Mum/2011) Assessment Year 2008-09 is allowed. iii. Appeal of the assessee (ITA No. 2230/Mum/2011) Assessment Year 2009-10 is allowed for statistical purposes. iv. Appeal of the assessee (ITA No. 2231/Mum/2011), Snehal Jayant Mehta, Assessment Year 2009-10 is allowed for statistical purposes. Order pronounced in the open court on 31st, May, 2017.