NAYANA PANCHAL,MUMBAI vs. ITO WD- 25(1)(4), MUMBAI

This appeal, filed by the assessee, being 30-03-2016 passed by the learned Commissioner of Income Tax (Appeals)- 44, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2007-08, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 19th March, 2014 passed by learned Assessing Officer(hereinafter called “ the AO”) u/s 143(3) r.w.s. 147 of the Income-tax Act,1961 (Hereinafter called “the Act”).

The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-

Brief facts of the case are that it was observed by the A.O. during the course of remand proceedings for earlier year that the assessee had made deposits aggregating to Rs. 24,17,025/- including cash deposits of Rs. 16,30,000/- in his saving account No. 22585 maintained with Saraswat Cooperative Bank Ltd., Samuel Street Branch, Mumbai during the relevant previous year. It was observed by the A.O. that the assessee has not furnished her return of income the assessment year 2007-08 as provided u/s 139(1) or 139(4) of the Act . Accordingly. the proceedings in this case were reopened by the AO u/s 147 of the Act after recording reasons for re-opening and notice u/s 148 of the Act was issued on 27th February, 2013 to the assessee by the AO which was duly served upon the assessee. In reply, the assessee stated as under:-

Aggrieved by the assessment order dated 19-03-2014 passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, the assessee preferred first appeal before the ld. CIT(A) who accepted that the assessee’s case falls u/s 44AF of the Act and brought to tax income computed at 8% of the cash deposits in Bank of Rs. 16,30,000/- (by treating the cash deposit as turnover of the assessee ) wherein income was computed at Rs. 1,30,400/- vide appellate order dated 30-03-2016 passed by learned CIT(A). The learned CIT(A) relied upon the finding of learned CIT(A) for the immediately preceding assessment year 2006- 07 which was confirmed by the Mumbai Benches of the tribunal. This finding has been now set at rest as no further appeal has been filed by the Revenue to challenge the said finding of learned CIT(A). However, The ld. CIT(A) confirmed the addition of Rs. 7,87,025/- with respect to the other deposits (other than cash deposits) in the bank account as unexplained income of the assessee as the assessee failed to furnish any explanation regarding source of these deposits vide appellate order dated 30-03-2016 passed by learned CIT(A).

Aggrieved by the appellate order dated 30-03-2016 passed by the ld. CIT(A), the assessee filed second appeal before the Tribunal.

The ld. Counsel for the assessee, at the outset submitted that these deposits were in the nature of loan raised or are in the nature of return of loans advanced by the assessee to various parties. The ld. Counsel drew our attention to the copy of balance sheet placed at paper book page 3 & 4 to contend that unsecured loans outstanding as on 31st March 2007 were ITA 2269/Mum/2016 5 Rs.2,50,000/- . He further drew our attention to the loan confirmations which were filed in the paper book pages 17 to 20. It was contended that the authorities below erred to bring to tax these cheque deposits of Rs. 7,87,025/- in Bank account which were merely in the nature of loan transactions and it was submitted if the matter is set aside , the assessee will submit all necessary evidences and explanation to establish identity, creditworthiness and genuineness of these transactions to comply with mandate of Section 68 and other applicable provisions of the Act.

The ld. D.R. submitted that as per facts emerging from the orders of authorities below these loan confirmations were not filed before the lower authorities and this contention of the assessee were not scrutinized by the authorities below and hence the matter may be set aside for necessary verification and enquiry as to the bonafide of the assessee and also to verify that the assessee complied with provisions of Section 68 and other applicable provisions of the Act.

We have considered rival contentions and also perused the material available on record. We have observed that the A.O. has made additions of Rs. 24,17,025/- which were confirmed by the ld. CIT(A) to the extent of Rs. 7,87,025/- being other deposits(other than cash deposit) in Bank account of the assessee. The additions of Rs.16,30,000/- made by the AO to the income of the assessee being cash deposit in Bank account of the assessee is held to be turnover of the assessee from business by learned CIT(A) in his appellate order and accordingly 8% of the said turnover of Rs.16,30,000/- was brought to tax as income u/s 44AF of the Act by learned CIT(A) in his appellate order which has attained finality as the learned DR could not point that the Revenue has challenged the aforesaid relief granted by the learned CIT(A). The assessee contended with respect to other deposits of Rs. 7,87,025/- in the Bank account of the assessee which was confirmed by learned CIT(A) that ITA 2269/Mum/2016 6 these deposits are loan transaction which were received by the assessee from various parties or they are loans granted by the assessee which were received back by the assessee from lenders, during the relevant previous year. The assessee had brought to our notice Balance Sheet wherein unsecured loans of Rs. 2,50,000/- are reflected as payable as on 31-03-2007(paper book/page 3) as also loan confirmations are filed by the assessee before the tribunal which are placed in paper book /page 17-20 . The paper book contains a certificate dated 30-01-2017 signed by the assessee wherein it is mentioned that these afore-stated documents were filed before lower authorities and these documents do not constitute additional evidences. However, we find that no such discussions about these loans are coming out of the orders of the authorities below nor is there any reference to these documents in the orders of the authorities below . Rather, It is the finding of the ld. CIT(A) that with respect to the other deposit of Rs. 7,87,025/- (other than cash deposit) in Bank Account , the assessee had failed to furnish any explanation regarding the source of these deposits. Under these circumstances in order to do justice to both the parties , we are inclined to set aside and restore this matter back to the file of the A.O. for de-novo determination of the issue on merits. The assessee is directed to produce all loan confirmations and other evidences/explanations before the AO in set aside remand proceedings with respect to the deposit of Rs. 7,87,025/- in her bank account to satisfy the ingredients and mandate of Section 68 and other applicable provisions of the Act, so that necessary verification and enquiry can be done by the A.O. with respect to the genuineness of the loan transactions, identity of the loan creditors as well creditworthiness of the parties in order to ensure that these deposits comply with mandate and ingredients of Section 68 as well other applicable provisions of the Act. Needless to say, the AO shall grant assessee in remand proceedings sufficient opportunity of being heard in accordance with principles of natural justice in accordance with law. We order accordingly.

In the result, appeal of the assessee in 2007-08 is allowed for statistical purpose.