ZARINA NOORALI GOVANI,NAVI MUMBAI vs. ITO 19(3)(3), MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 20/03/2015 of Ld. Commissioner of Income Tax, Mumbai confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act) amounting to Rs.16,20,884/-. 2. During hearing Shri Tahabootwala, appeared for the assessee and contended that while disposing of the appeal of the assessee on quantum addition the Tribunal vide order dated 13th May, 2015 (ITA Nos. 7782 &7783 Mum/2011 remanded the matter back to the file of the Assessing Officer for fresh adjudication, therefore, the penalty may also be sent to the file of the Assessing Officer. The learned D.R. Shri Rajesh Ojha, defended the imposition/confirmation of the penalty but had no objection if the penalty appeal may be sent to the file of the Assessing Officer. 3. I have considered the rival submissions and perused the material available on record. I find that the Tribunal vide order dated 13th May, 2015 remanded the quantum addition to the file of the learned Assessing Officer for fresh adjudication. The relevant portion of the order is reproduced hereunder for ready reference and analysis: - “These are the appeals filed by assessee against the order of CIT(A)-30, Mumbai dated 2-9-2011, for the assessment years 2005-06 & 2006-2007, in the matter of order passed under Section 143(3) of the I.T. Act.

3 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

4 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

earlier stated that she is engaged in the business of wholesale of ladies boutique items supply, garments etc. Now, suddenly she is stating that the income is by way of commission income. If the product were procured through Silveriline and sold on cash basis then why the proceeds were deposited in assessee’s account. It has to be deposited in Silverline Marketing account. Assessee’s contention that she retains an amount of 5% towards service charge is not acceptable as assessee has not submitted any documentary evidence for claiming 5% commission. Regarding the balance sale of Rs.19,06,130/-, assessee is stating that the same is sold on behalf of Silverline Marketing is also not acceptable. Silverline Marketing has not filed their return and the income has not been offered for taxation by Silverline Marketing. With regard to transfer of funds to M/s Silverline Marketing, the AO observed that the same also remained unexplained and therefore the claim with regard to payment/allowance of expenditure to M/s Silverline is rejected. In view of the above discussion, the AO made an addition of Rs.25,13,090/- as unexplained money u/s.69A. 3. Similarly in the assessment year 2006-07 the AO made addition of Rs.27,86,639/- u/s.68 and on account of short term capital gains at Rs.16,07,157/-. 4. In appeal filed before the CIT(A), the CIT(A) called for a remand report from AO and after considering the same, held as under :- 8. I have carefully considered the assessment order and submission of the appellant's AR.. The appellant has not disclosed her stated business of marketing of Hindustan Coco Cola Marketing on commission basis through Silverline Marketing in her return of income. It was only after the A.O., enquired about the deposits in her bank account that she revealed these transactions. No confirmation/documentary evidence of these transactions were filed. M/s. Silverline Marketing did not file its return of income and its proprietor did not attend the proceedings in response to the summons issued. Service of summons and PAN themselves do not prove that the transactions are genuine. The A.O., had given sufficient opportunity to" prove her claim to furnish details/supporting evidence on

5 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

or before 19.12.2007, but the appellant filed her reply on 27.12.2007 on the date of completion of assessment. In remand report the Assessing Officer submitted that in the none of the cash memos, full address were given and none of them was signed. The appellant had submitted that all the sales were in cash therefore, "no address were written to invoices but she herself is stating that Rs.26,000/- deposited in her bank account is from sundry debtors. The appellant has not been able to explain the deposits in her account and therefore, the AO has rightly added Rs.25,13,090/- to her income. The appellant's request for assessing the income u/s.44AF of the Act, cannot be accepted since she had not disclosed the facts fully and truly in her return of income as is not able to explain the deposits in her bank account too. In view of these facts, the addition made by the A.O., is accordingly confirmed.” 5. Similarly, in the assessment year 2006-07, the CIT(A) has called for a remand report from the AO and concluded a sunder:- “1.6 I have carefully gone through the Assessment Order and the submissions made by the A.R. of the appellant. The A.O. had added Rs.27,86,639/- u/s 68 as unexplained deposits in bank accounts. In his remand report the A.O. has accepted deposit of RS.2 lakhs out of partial encashment of FDR and stated that balance amount is unexplained credit. However, the appellant has only given narrations without giving corresponding documentary evidence/details. The appellant has claimed to have deposited Rs.6,45,000/- in her bank account from cash-in-hand but no details are given regarding date of deposit and amount of deposit alongwith copy of cash book. Therefore, the deposits amounting to Rs.25,86,639/- remain unexplained. The addition of Rs.25,86,639/- made by the A.O. is confirmed and the appellant gets relief of Rs.2,00,000/-. This ground of appeal is partly allowed.” 6. By the impugned order the CIT(A) after calling the remand report confirmed the addition of Rs.16,07,157/- on account of short term capital gains earned by the assessee during the year after having the following observations :- “3.6 I have carefully gone through the Assessment Order and the submissions made by the A.R. of the appellant. The cost of shop is shown at Rs.7,60,623/- in the appellant's balance sheet and loan is shown by Nizar Govani of Rs.4,00,000/-. Besides, the appellant has claimed interest of Rs.56,503/- for F.Y.2003-04,

6 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

Rs.1,44,721/- in F.Y. 2004-05 and Rs.1,36,679/- in F.Y. 2005-06, which is not shown to be related to the property which is sold. Even loan of Nizar Govani is shown at Rs.3,00,0001-. No documentary evidence is filed. The appellant has furnished copies of repairs and renewals as well as brokerage but the proof and source of payment has not been submitted. Similarly, no proof as well as source of stamp duty and registration is filed. The AO in his remand report, has observed that the shop sold is different from asset declared in balance sheet and entire deemed consideration should be taxed. However, a perusal of balance sheet as on 31/03/2006 filed during appellant proceedings and forwarded to the AO shows only furniture under the head „Fixed Assets‟. Therefore, the entire deemed consideration cannot be taxed. In my view, the AO in his assessment order has correctly worked out the Long Term Capital Gains of Rs.16,67,157/- The additions made by the AO are confirmed and these grounds of appeal are dismissed.” 7. Against the above order of CIT(A), assessee is in further appeal before us. 8. We have considered rival contentions, carefully gone through the orders of the authorities below as well as remand report called by the CIT(A). From the record we found that in the assessment year 2005-06 the assessee had found to be deposited in her bank account of Rs.19,25,590/- in cash and Rs.5,87,500/- through cheques or transfer. Payment was alleged to be made to Silverline Marketing. However, the assessee did not produce any documentary evidence to substantiate her claim of payment made to Silverline Marketing for purchase of material. The AO issued summons u/s.131 to the proprietor of Silverline Marketing but she did not appear. Accordingly, the AO rejected the claim of assessee for making payment to Silverline Marketing in absence of any proof and added Rs.25,13,090/- (19,25,590 + 5,87,500/-) as unexplained money u/s.69 of the IT Act. 9. We found that before the CIT(A) assessee has furnished copy of invoices issued by Hindustan Coco Cola Manufacturing Company Ltd. to M/s Silverline and Mrs Zarina Noorali Govani to Yashin Sisters. However, the AO has rejected the cash memo on the plea that they were not signed/authenticated by the

7 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

recipient of the goods. It was also observed that none of the invoices gives full address of the recipient, location of the goods delivered etc. In view of these observation, the AO also rejected assessee’s contention for computing profit u/s.44AF. We do not find any justification in the action of the AO for rejecting the cash memo merely on the plea that these were not signed/authenticated by the recipient of the goods. In case of retail trade, there is no practice of getting the signature in sales bills. Furthermore, in case of cash sales there is no need to give full details of the buyer and the recipient of goods, insofar as assessee delivers the goods only after receipt of entire sale consideration. Since the deposit in bank account was much more than sales shown by assessee, onus is on the assessee to show the source of excess money deposited in bank account either in cash or through cheques. In the interest of justice and fairplay, we restore the appeal for assessment year 2005-06 to the file of AO for deciding afresh after giving due opportunity of hearing to the assessee. 10. In the assessment year 2006-07, the addition of Rs.27,86,639/- was made by the AO u/s.68 of the Act by observing that there were cash deposits and other deposits in different bank account a sunder :- Sr. Bank & A/c. No. Cash Other Total No. Deposit Deposits 1 Development Credit 6,54,000 27,25,139 33.70,139 bank A/c. No. 10078 2 Shamaro Vithal Co- 1,36,700 7,25,000 8,61,700 op Bank Ltd. 3 Development Credit 53,800 1,78,900 2,32,890 Bank No. 3087 Total 44,64,729

The deposits were stated to be from sale proceeds of shop, FORs, sundry debtors, cash on hand, receipts from Nizar Govani, Noorali Govani, Rozina , Silverline Marketing, dividend and deposits by way of transfer. However, the assessee did not file any documentary

8 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

evidence except for sale and purchase of shop. The assessee filed loan confirmation of Nizar Govani of Rs.5,81,541/- but the assessee's balance sheet as well as return of Nizar Govani does not show any such loan. Out of Rs.44,64,729/- RS.13 lakhs was alleged to be received from sale proceeds and Rs.3,78,0901- by way of transfer from one bank to another. The AO. added balance Rs.27,86,639/- u/s 68 of the I.T.Act. The explanation filed by the assessee is as under :- “During the course of assessment proceeding our client had furnished letter dtd. 19. 11.2008 wherein the entire details of income comprising of capital gains and business income being income from distribution of Hindustan Coco Cola Manufacturing Company products received by our client through their agent M/s. Silverline Marketing. The assessing officer has wrongly stated that the details were not furnished as the above letter comprising of computation of income, balance sheet, profit & loss account alongwith bank statements, Xerox copies of sale and purchase documents of shop and investments were furnished. Further, bank summaries were also furnished alongwith loan confirmation of Mr. Nizar Govani and details of monthwise sale and purchase were also furnished. 5) The total amount of income treated as unexplained cash credit u/s 68 at Rs.27,86,639/- has been accepted by the Assessing Officer as partly incorrect in para 2 of the remand report wherein the sum of Rs. 2,00,000/-has been accepted as proceeds of partial encashment of FDR”. It was further submitted that the sale consideration of Rs. 13,00,000/- is received in respect of sale of shop in Dheeraj heritage. The capital gains in respect of the same is reflected at Rs. 277, 357/- in the computation of income. Fixed deposits with Development Credit Bank was alleged to be encashed amounting to Rs. 6,50,000/-. The confirmation of Development Credit Bank was alleged to be filed before AO. Fixed deposit with Bank Co-operative Society of Rs.2,00,000/- was alleged to be encashed out of total FDR of Rs. 6,50,000/- made during the year. The confirmation of Bandra Co-operative Credit Society was alleged to be filed. Sundry debtors of Rs.24,12,249/- was alleged to be recovered which were reflected as outstanding on 31.03.2005 at Rs. 25,155/-. It was also brought on

9 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

record that Rs.51,500/- is transferred from saving account No. 3087 with Development Credit Bank, summary of which is enclosed above. Rs.50,000/- is received from the estate of her late husband Noorali Govani who expired on 31.12.1992. Rs. 2,500/- is received from our client's daughter Rozina Govani whose loan confirmation is enclosed herewith. The summary of transaction of Silverline Marketing is enclosed from which it can be evidenced that a sum of 2,75,000/- is received from them. 11. It was further explained that credit in the bank account was on account of Rs.119,900/- received from assessee’s son Nizarali Govani whose loan confirmation was also filed. Further a sum of Rs.3.25,000/- was transferred from saving account No.10078 with Development Credit Bank. Rs.3,00,000/- is received from client’s daughter Rozina Govani whose loan confirmation was also enclosed. However, to substantiate the claim of various deposits and withdrawals the assessee has not filed any cash-flow/fund-flow statement. From the orders of lower authorities it is not clear that documentary evidences with respect to source of funds were filed before them. 12. In view of the above discussion, the addition made during the assessment year 2006-07 u/s.68 as well as on account of short term capital gains is also restored to the file the AO for deciding afresh after giving due opportunity to the assessee. 13. In the result, both appeals of the assessee are allowed for statistical purposes.” 4. I find that the Tribunal vide aforesaid order dated 13.04.2015 remanded the quantum addition for fresh adjudication to the file of the Assessing Officer, therefore, I am of the view that the resultant addition will decide the leviability/non-leviability, as the case may be, of the penalty also. Therefore in all fairness the penalty appeal is also remanded back to the file of the learned Assessing

10 ITA No.2850/Mum/2015 Mrs. Zarina Noorali Govani

Officer for his fresh consideration in accordance with law. Thus this appeal of the assessee is allowed for statistical purposes. Finally the appeal of the assessee is allowed for statistical purposes. This order was pronounced in the open court in the presence of Ld. D.R. at the conclusion of the hearing on 14/07/2016. Sd/- (Joginder Singh) �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 14/07/2016 ÇAÑA? P.S //.�न.स.

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT-19, Mumbai. 4. आयकर आयु�त / CIT(A)-30, Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, SMC Bench, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai