ROSHANLAL B. MEHTA,MUMBAI vs. ITO 25(3)(3), MUMBAI

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:-

The brief facts of the case are that assessee is a proprietor of M/s Mahavir Colour Company, engaged in the business of retail trading in paintings and hardware material. The assessee has also earned income from salary and income from other sources. AIR information was available with the AO regarding the cash deposit of Rs. 18,83,500/- in the ING Vysya Bank, Mira Road Branch, Thane. Notice u/s 133(6) of the Act was issued to the ING Vysya Bank, Mira Road,Thane and bank account statement of the assessee for the relevant period was obtained and from which it was revealed that assessee is maintaining a savings bank account No. 540010060878. The ITA 6389/Mum/2014 3 assessee was asked by the AO to furnish bank book and cash book for the relevant previous year including bank accounts held in the personal name. In response, the assessee furnished the details but failed to furnish the bank account statement of ING Vysya Bank. The assessee submitted that there were no transactions in the personal savings account and the account is in- operative from a long period. It was further submitted that there were no other assets and liabilities in his personal capacity. The assessee was confronted with the AIR information whereby there was cash deposit of Rs. 18,83,500/- in the said ING Vysya Bank,Mira Road Branch, Thane. The assessee was again asked to explain the discrepancy and to submit the evidences along with source of cash deposit in the bank account maintained with the ING Vysya Bank. However, the assessee failed to disclose the bank account maintained with the ING Vysya Bank, Mira Road, Thane. The assessee was asked to furnish the explanation in regard to the above. The assessee submitted that the personal savings account in ING Vysya Bank was not disclosed in the return of income and the assessee has deposited an amount of Rs. 24,48,166/- out of which Rs. 18,83,500/- was cash deposited and the remaining amount was cheque deposits. It was submitted that if the same were considered then the debtors balance would reduced from Rs. 37,67,788.75 to Rs. 14,75,597.75. The assessee enclosed the statement of debtors and cash book whereby disclosing the cash receipt from debtors were furnished. The copy of ING Vysya Bank book was also enclosed by the assessee. Thus, it was held by the A.O. that assessee has deliberately concealed his source of cash deposit. The assessee had also submitted that assessee’s books results have been audited as per the provisions of section 44AB of the Act. Thus the A.O. came to the conclusion that assessee has failed to explain the cash deposit of Rs. 18,83,500/- and treated the same as unexplained cash credit u/s 68 of the Act and added the same to the income of the assessee vide assessment orders dated 24.12.2010 passed u/s. 143(3) of the Act.

Aggrieved by the assessment orders dated 24.12.2010 passed by the A.O. u/s. 143(3) of the Act, the assessee filed his first appeal before the ld. CIT(A).

Before the learned CIT(A) , the assessee contended that the said account was operated by one Mr. Arvind Pokhrana who undertook the painting contracts and the goods were supplied to him by the assessee. An affidavit from Mr Arvind Pokharana to this effect was placed before the learned CIT(A) whereby it was stated that the said Mr Arvind Pokharana is carrying on business of color painting contracts, that the assessee is a well wisher associate and also a close relative had suggested to start the colour painting job on contractual basis for which goods were supplied by the assessee and labour was arranged by the assessee. The said bank account with ING Vysya Bank is in the name of the assessee but the assessee allowed Mr Arvind Pokhrana to use his bank account with a view to monitor, recover and transfer amounts upto the extent of material supplied by the assessee and the entire amount deposited and withdrawn belonged to Mr Arvind Pokharana was the deposition made by Arvind Pokharana in the said affidavit.

Aggrieved by the appellate order dated 22.08.2014 of the learned CIT(A), the assessee is in second appeal before the Tribunal.

The ld. Counsel for the assessee contended that there was a cash deposit of Rs. 18,83,500/- in ING Vysya Bank, Mira Road Branch. The A.O. made the addition u/s 68 of the Act. The assessee is in the business of trading in colour paints. The painting materials were purchased by Mr. Arvind Pokharana from the assessee. The ld. Counsel submitted that the bank account was maintained by Mr. Arvind Pokharana whereas the addition was made in the hands of the assessee. Affidavit from Mr. Arvind Pokharana is duly submitted before the ld. CIT(A) and also filed before the Tribunal, hence, the onus was discharged by the assessee. The ld. Counsel relied on the decision of the Tribunal in the case of Mr. Jayesh D. Shah v. DCIT in for the assessment year 1992-93 dated 8th October, 2004 and also the decision of Hon’ble Bombay High Court in the case of CIT v. Bhaichand H. Gandhi- 1983 53 CompCas 400 Bom.

The ld. D.R. submitted that the powers of CIT(A) are co-terminus with the powers of the A.O. The A.O. has made the addition u/s 68 of the Act.

We have heard the rival contentions and also perused the material placed on record. We have observed that the assessee is having bank account in his personal name with ING Vysya Bank,Mira Road Branch, Thane which was not incorporated in the books of accounts of the assessee and was not disclosed to the Revenue in the return of income filed by the assessee with the Revenue, where in there was cash deposit of Rs.18,83,500/- while total deposits were Rs.24,48,166/-. It was stated by the assessee for the first time before the learned CIT(A) that the said bank account with ING Vysya bank is being operated by Mr. Arvind Pokharana who is close relative and associate of the assessee , and whom the assessee allowed to operate the said bank account whereby business of painting contract was carried on by the said Arvind Pokharana with the help of the assessee and wherein material was supplied by the assessee along with arranging of labour for the contract work to be executed by Arvind Pokharana. An affidavit of Mr Arvind Pokharana to this effect was also filed before the learned CIT(A) as well before the Tribunal. It is stated that payments for the materials were recovered by the assessee from this bank account and the said bank account was monitored by the assessee. It is also the say of the assessee that the CA of the assessee did not represented him properly before the AO and the assessee being illiterate , trusted the CA who did not performed his duties properly while preparing return of income , as per the say of the assessee before authorities below and ITA 6389/Mum/2014 10 also before us. The Revenue authorities rejected the contentions of the assessee and during appellate proceedings before the learned CIT(A) , the additional evidences were remanded to the A.O. for verification and comments. The AO rejected the contentions and evidences in remand report as the whole story brought in by the assessee was held to be afterthought as well the said Mr. Arvind Pokharana did not filed return of income with the Revenue for the impugned assessment year. It is the say of the assessee that no enquiry has been made by the AO as well additions were wrongly made u/s 68 of the Act because the bank statement/pass book is not books of accounts of the assessee as the bank is not maintaining its books as agent of the assessee rather the relation is of debtor and creditor relying on the decisions of Mumbai ITAT in the case of Jayesh D Shah v DCIT in dated 08-10-2004 as well judgment of Hon’ble Bombay High Court in the case of CIT v. Bhaichand H Gandhi(supra) , while learned DR stated that the learned CIT(A) whose powers are co-terminus with the AO has confirmed the additions u/s 69 of the Act and in any case the assessee is not able to explain the source of deposit of cash of Rs.18,83,500/- and hence primary onus is not discharged by the assessee relying on decision of ITAT, Bangalore in the case of S R Rajendra Kumar v. ITO(Supra). In our considered view keeping in view factual matrix as is emerging from the records, this matter needs to be set aside to the file of A.O. for de-novo determination of the issue on merits after considering the entire evidences and explanations submitted by the assessee in support of his contentions . It is the say of the ld. Counsel that the assessee has supplied material to Mr Arvind Pokharan for which payments have been made from time to time from this bank account to the assessee. The A.O. may verify the contentions of the assessee from the bank statement as well books of accounts of the assessee submitted before him whether Mr Arvind Pokharana is reflected as the buyer of the material from the assessee or not, including whether VAT has been collected from Mr Arvind Pokharana by the assessee and declared in the VAT returns ITA 6389/Mum/2014 11 filed by the assessee with VAT department wherein Mr Arvind Pokharana must be listed as the buyer of paints and other material supplied and sold by the assessee to the said Mr Arvind Pokharana. The primary onus is on the assessee to prove with the cogent evidences and corroboratory material that the said bank account with ING Vysya bank held in the name of the assessee was infact used by the said Mr Arvind Pokharana with respect to painting contract transaction carried on by him with cogent evidences and to prove that merely bank account was used to facilitate transactions and the fruits of such business was in-fact belonged to the said Mr Arvind Pokharana. This could also be brought on record by way of tax deducted at source by various clients for whom Mr Arvind Pokharana did painting contracts and payments were received in this bank accounts, also viewing other material purchased by Mr Arvind Pokharana in his own account in his own name from the parties wherein the invoices must have been raised by suppliers in the name of Mr Arvind Pokharana , other than the supplies made by the assessee and other evidences to conclusively prove that the said Mr Arvind Pokharana was running a separate painting contract business on his own account for which profit or loss pertains to him and not to the assessee and merely bank account of the assessee with ING Vysya Bank was used to facilitate transactions. The primary burden is heavy on the assessee which the assessee is directed to discharge in set aside proceedings before the AO. Needless to say that the A.O. shall provide proper and sufficient opportunity of being heard to the assessee in accordance with the principles of natural justice in accordance with law before adjudicating the issue on merits. We order accordingly.

In the result, the appeal filed by the assessee in ITA N0. 6389/Mum/2014 for the assessment year 2008-09 is allowed for statistical purposes.