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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member)
The Revenue is aggrieved by the impugned order dated 12/01/2011 of the ld. First Appellate Authority, Mumbai, whereas, the assessee has preferred cross objection. First, we shall take up appeal of the Revenue, wherein, the only ground raised pertains to deleting the addition of Rs.39,75,727/- as unexplained credit and consequent addition u/s 68 of the Income Tax Act, 1961 (hereinafter the Act).
During hearing, the crux of argument advanced by Shri M. Murli, ld. DR, is that in the case of Ms. Renuka A. Maroo, wife of the assessee, vide order dated 06/07/2012 (ITA No.5464 & 4964/Mum/2010) for A.Y. 2006-07 itself, the Tribunal set aside the order of the ld. Commissioner of Income Tax (Appeals) and restored the dispute back to him for passing a fresh order after allowing
C.O. No.42/Mum/2011 Shri Ajay P Maroo proper opportunity of hearing to the assessee. This factual matrix was fairly consented to be correct by ld. counsel for the assessee, Ms. Neha Paranjape.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order dated 06/07/2012 of the Tribunal for ready reference and analysis:-
“These cross appeals are directed against the order dated 30.3.2010 of CIT(A) for the assessment year 2006-07. These are being disposed off by a single consolidated order for the sake of convenience.
The disputes raised in these appeals relate to addition on account of cash deposited in banks, on account of loans, on account of money received from share broker and nature of income from share transactions.
2. Facts in brief are that the assessee who was engaged in wedding card business had declared total income of Rs.3,10,290/- for assessment year 2006-07. The AO during the assessment proceedings obtained the bank statements of the assessee for the relevant year from Bharat Co-operative Bank and North Kanara GSP Co-operative Bank Limited. He noted from the statements that there was cash deposit of Rs.12,00,592/- and cheque deposits/ECS clearing of Rs.11,09,979/- aggregating to Rs.23,10,571/- in the North Kanara Bank. Similarly, there was cash deposit of Rs.2,90,775/- and cheque/ECS clearing of Rs.20,80,129/- aggregating to Rs.23,70,904/- in the Bharat Co-operative Bank. There were thus total deposits of Rs.46,81,475/- in the two bank accounts, whereas the assessee had only gross income of Rs.1,45,686/- from wedding cards sales, consultancy charges of Rs.4,32,352/-, dividend income of Rs.1,28,191/- and interest income of Rs.11,253/- aggregating to C.O. No.42/Mum/2011 Shri Ajay P Maroo Rs.7,17,478/-. The AO, therefore asked the assessee to explain the source of deposits. However, as per AO, the assessee could not give satisfactory explanation with documentary evidence. He, therefore made addition of Rs.46,81,475/- to the total income under section 68 of the Act.
3. In appeal the assessee furnished the details of deposits in the two bank accounts as under :-
3.1 The assessee explained that source of the cash deposits of Rs.16,19,550/- in the two bank accounts was gross receipts of Rs.7,17,478/- during the year and cash withdrawal of Rs.7,15,800/- from Bharat Co-operative Bank and Rs.3,54,650/- from North Kanara Bank GSB. The other deposits, it was pointed out, were through cheque on various accounts such as receipt from share brokers, loans, dividend, sale of card etc. as mentioned in the Table above. The dividend had been received from the shares held by the assessee.
3.2 CIT(A) remanded the matter to the AO for submission of report after examination of details furnished by the assessee. The AO in the remand report dated 5.3.2010 objected to the additional evidence submitted by the assessee on the ground that during the assessment
C.O. No.42/Mum/2011 Shri Ajay P Maroo proceedings the assessee had been provided several opportunities but had not given the details and evidences. The AO, however, gave his report on the various factual position mentioned in the submission of the assessee. In relation to cash deposit of Rs.16,19,550/- the AO submitted that the assessee had given the source of cash deposit as under :-
3.3 The AO pointed out that out of sales of wedding cards of Rs.1,45,686/-, a sum of Rs.79,192/- was by cheque as was clearly mentioned in the Table earlier. Further the assessee had incurred cash expenses of Rs.1,57,752/- on salary, conveyance, legal charges, drawings and payment to creditors etc. The AO also pointed out that the assessee had withdrawn cash to the tune of Rs.2,40,000/- on 23.3.2006 and Rs.59,500/- on 24.3.2006 from Bharat Co-op. Bank Ltd. totaling to Rs.2,99,500/-. There was no cash deposit in the said bank account after 24.3.2006. As regards North Kanara Bank, there was cash withdrawal of Rs.5,000/- on 24.3.2006 and thereafter there was cash deposit of Rs.39,750/- in that bank account and cash expenditure of Rs.32,615/-. Thus on 24.3.2006 there was total cash withdrawal from the two accounts of Rs.3,04,500/- and deposits were of Rs.39,750/- and Rs.32,675/-. Thus as on 31.3.2006, there was cash balance of Rs.2,32,075/- (304500 – 39750 -32675). Further, as per cash book there was cash in hand of Rs.23,302/- as on 31.3.2006. Thus, total cash in hand as on 31.3.2006 was Rs. 2,55,377/-.
3.4 The AO, therefore, in the remand report determined the unexplained cash of Rs.463,343/- as per detailed computation given below :-
C.O. No.42/Mum/2011 Shri Ajay P Maroo 3.5 In relation to receipt of Rs.9,60,962.77 from M/s. Suresh Rathi Securities Pvt. Ltd., the AO mentioned in the remand report that the assessee had shown total receipt of Rs.42,15,343.94 from the said broker and therefore, the sum of Rs.9,60,962.77 deposited in the bank account was explained. However, the claim of short term capital gain of Rs.1,48,175/- and long term capital gain of Rs.39,67,160/- from sale of shares was not verifiable in the absence of date of purchase of shares and price at which shares had been purchased etc. The assessee had shown only common date of purchase of 31.3.2004. The AO therefore observed that profit on sale of shares can not be ascertained. The AO also observed that the assessee was carrying on voluminous share transactions. The assessee had dealt in more than 283 scrips. The AO, therefore, concluded that the assessee was trading in shares and accordingly reported that the income from sale and purchase of shares should be treated as business income.
3.6 As regards, the receipt of Rs.8,95,971/- from Kedia Shares & Stock Brokers Ltd., the AO observed in the remand report that the assessee had furnished only ledger extract for the year and no documentary evidence
C.O. No.42/Mum/2011 Shri Ajay P Maroo was furnished for the receipt. The broker had credited the account of assessee on 16.3.2006 by Rs.8,95,971/- and thereafter debited the account on 20.3.2006 by the same amount. The assessee could not furnish the details and evidence regarding nature of credit and therefore genuineness of claim of the assessee was not verifiable.
3.7 In relation to loans, the AO reported that the assessee had shown receipt of Rs.2,22,000/- from Shridhar Biyani which was repaid during the year. The assessee could not furnish copies of income tax return, P.A. number etc. of the creditor and therefore the genuineness was not verifiable. Similarly, from Nitin Bhattad, the total receivable during the year including opening balance was Rs.3,26,242/- out of which a sum of Rs.1,55,000/- had been received during the year and, therefore, receivable at the end of the year was Rs.1,71,242.94 but no such balance was reflected in the balance sheet. The assessee had also not submitted any documentary evidence for verification of the claim. In case of Manoj Saboo, there was opening balance of Rs.75,000/- and during the year assessee received amount of Rs.1,00,000/- and therefore, closing balance at the end of the year should have been Rs.1,75,000/- but the balance reflected in the closing balance was only Rs.55,000/-
CIT(A) after considering the remand report of the AO agreed that source of cash of Rs.463,343/- was not explained and accordingly confirmed the addition. CIT(A) also confirmed the amount of Rs.8,95,971/- claimed to be received from Kedia Shares & Stock Brokers Ltd. in the absence of contract note, demat account etc. In regard to loans from Shridhar Biyani, Nitin Bhattad and Manoj Saboo CIT(A) observed that these were employees and relatives of assessee but assessee could not furnish evidence of their credit worthiness and genuineness of transactions by giving P.A. numbers. etc. It was also observed by him that mere filing of confirmation was not enough. He, therefore, confirmed the addition on account of loan. As regards the C.O. No.42/Mum/2011 Shri Ajay P Maroo capital gain from sale of shares through Suresh Rathi Securities Pvt. Ltd. CIT(A) observed that the assessee had shown short term capital gain of Rs.1,48,175/- and Rs.39,67,160/- as long term capital gain. CIT(A) observed that long term capital gain could not be assessed as business income as holding period was more that one year. He accordingly held that claim of long term capital gain should be accepted.
4.1 Aggrieved by the decision of CIT(A) both the parties are in appeal. Whereas the department has disputed the order of CIT(A) in relation to acceptance of the claim of long term capital gain, the assessee has challenged the confirmation of addition on account of unexplained cash, on account of loans and on account of receipt from Kedia shares.
Before us, the ld. AR at the outset submitted that the assessee during the assessment proceedings as well as during remand proceedings could not submit complete details regarding purchase and sale of shares, giving name of scrips, holding period etc. as all relevant records were washed away in unprecedented rains on 26.7.2005. It was pointed out that assessee had since obtained details from Stock Holding Corporation. The transaction details obtained from Stock Holding Corporation were placed at page 94-140 of the paper book. The assessee has also obtained contract notes from KDR shares and confirmation of accounts etc. which have been placed at pages 141 to 146 of the paper book and transaction details at pages 141 to 188 of the paper book. It has been requested that the same may be accepted as additional evidence in the interest of justice. It has also been pointed out that in assessment year 2005-06 also, similar additional evidences had been filed by the assessee which had been admitted by the Tribunal in order dated 29.7.2011 in ITA No.5463/Mum/2010. It was further submitted that the issue relating to unexplained cash and loans should also be sent back to CIT(A) as these also had not been properly examined with full opportunity to the assessee.
C.O. No.42/Mum/2011 Shri Ajay P Maroo 5.1 The ld. Departmental Representative had no objection if the matter was remanded to the CIT(A) for fresh examination.
We have perused the records and considered the rival contentions carefully. The assessee was engaged in the wedding card business had also purchased and sold shares. The AO noted that gross receipts of the assessee from Wedding card business, consultancy charges, interest and dividend etc. were to the tune of Rs.7,17,478/- but there were deposit of Rs.46,81,475/- in the tow bank accounts of the assessee which were not explained satisfactorily. The AO, therefore made an addition of Rs.46,81,475/-. During the appellate proceedings the assessee submitted details of deposits in the bank accounts which have been reproduced in para-3 of this order. The deposits of Rs.9,60,962.77 and Rs.8,91,971/- are on account of share transaction with Suresh Rathi Securities Pvt. Ltd. and Kedia Shares respectively. After detailed examination during the assessment proceedings, the AO has given a finding that there was total receipt of Rs.4,21,53,343.94 from Suresh Rathi Securities out of which a sum of Rs.1,48,175/- was shown by assessee as short term capital gain and Rs.39,67,160/- as long term capital gain. Since the assessee had not given details and evidence regarding date of purchase, purchase price etc., and also taking note of the fact that the assessee had entered into voluminous transactions in large numbers of scrips, the AO treated capital gain as business income. CIT(A) has accepted the claim of long term capital gain which has been challenged by the department. Similarly in respect of receipt of Rs.8,91,971/- from Kedia Shares, no details and evidence had been submitted by the assessee regarding nature of receopt except copy of ledger account and therefore, source of these receipt has not been accepted by the AO and CIT(A). The case of the assessee is that assessee could not furnish details and evidence in relation to shares as documents were lost in the unprecedented floods on 26.7.2005. The assessee has now obtained transaction details through Stock Holding Corporation of India Ltd. and contract notes of the C.O. No.42/Mum/2011 Shri Ajay P Maroo brokers, etc. and has requested the same to be admitted as additional evidence. We find the same problem had cropped up in assessment year 2005-06 in which the Tribunal vide order dated 29/7/2011 in had admitted the additional evidence in the interest of justice and restored the matter to the file of CIT(A). We, therefore, admit the additional evidences this year also. In our view only after detailed examination of these evidences any conclusion can be reached regarding addition on account of Kedia shares and regarding nature of income from purchase and sale of shares. The matter is thus restored to CIT(A).
6.1 As regards the addition on account of unexplained cash of Rs.4,63,343/- and addition on account of loans, we find that after remand report of AO, CIT(A) had not given any specific opportunity to the assessee . In relation to cash expenses, AO has given a finding that cash as on 24.3.2006 was Rs.2,32,075/- but in the cash book on 31.3.2006 cash was only Rs.23,302/-. It is therefore, required to be examined whether the balance cash as on 24.3.2006 had been used to meet the cash expenses of Rs.1,57,752/-. Regarding loans also, CIT(A) mentioned that there was no P.A. No. in the confirmations of Shri Shridhar Biyani but he has confirmed the addition in respect of all three loans without mentioning whether other loans were also not supported by confirmations and with P.A. No. Therefore, in our view, the issue of addition on account of unaccounted cash and loans also requires fresh examination at the level of CIT(A). We, therefore, set aside the order of CIT(A) and restore the dispute raised in this appeal back to him for passing a fresh order after allowing proper opportunity of hearing to the assessee.
In the result, both the appeals are allowed for statistical purposes.”
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion
C.O. No.42/Mum/2011 Shri Ajay P Maroo drawn in the impugned order, material available on record and the finding recorded in the aforesaid order of the Tribunal dated 06/07/2012, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that while coming to a particular conclusion, in the impugned order, the ld. First Appellate Authority, para 2.3 has made categorical finding that the facts are corroborated by the facts of Smt. Renuka A Maroo, wife of the assessee, wherein, vide order dated 30/03/2010, the ld. Commissioner of Income Tax (Appeals) has decided the appeal and on the basis of the same, the impugned addition was deleted. However, on appeal, before the Tribunal, vide aforesaid order dated 06/07/2012, the factual matrix was considered and it was found that for A.Y. 2005-06, similar additions were made and additional evidence was filed by the assessee (ITA No.5463/Mum/2010) order dated 29/07/2011, wherein, facts were not properly examined. Considering the totality of fats, the matter was restored to the file of the ld. Commissioner of Income Tax (Appeals). On the same reasoning, the order of the ld. Commissioner of Income Tax (Appeals) is set-aside and this file is remanded back to the file of the ld. First Appellate Authority to examine the claim of the assessee and after providing due opportunity of being heard, adjudicate in accordance with law. Thus, the appeal of the Revenue is allowed for statistical purposes only.
C.O. No.42/Mum/2011 Shri Ajay P Maroo
So far as, the cross objection no.42/Mum/2011 (arising out of ), is concerned, the ld. counsel for the assessee, withdrew the cross objection, to which the ld. DR had also no objection, consequently, the cross objection of the assessee is dismissed as withdrawn.
Finally, the appeal of the Revenue is allowed for statistical purposes, whereas, the cross objection of the assessee is dismissed as withdrawn.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 23/03/2016.