SHRI SAMIR KAMRUDDIN MAKHANI,,RAJKOT-GUJARAT vs. THE ASSTT. COMMR. OF INCOME TAX, CEN. CIR.-1,, RAJKOT-GUJARAT

The assessee has raised the following grounds of appeal: “1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The learned Commissioner of Income Tax (Appeals)-H, Rajkot [hereinafter referred to as the "CIT(A)" erred on facts as also in law in confirming the reopening of assessment as valid. That on facts as also in law, initiation of action

The issue raised by the assessee in Ground No. 4 is that the Ld. CIT(A) erred in confirming the addition of Rs. 3,84,57,514/- representing the cash deposit in the bank treating the same as unexplained cash credit under Section 68 of the Act.

The facts in brief are that the assessee in the present case is an individual and filed return of income declaring an income of Rs. 1,04,892/- only. There was huge cash deposit in the bank account of the assessee amounting to Rs. 3,84,57,714/-. On question by the Ld. AO about the source of cash, the assessee explained that he is employed with the firm namely M/s. Bhagwati Enterprise and Shri Lalitmal Asumal Gangvani is the proprietor and the impugned bank account was opened at the behest of such person. Thus, the entire cash deposits in the bank account belongs to Shri Lalitmal Asumal Gangvani. However, the AO disregarded the contention of the assessee and made the addition of Rs. 3,84,57,714/- representing the cash deposit in the bank, treating the same as unexplained cash under Section 68 of the Act.

Aggrieved assessee preferred an appeal before the Ld. CIT(A) who confirmed the order of the AO by observing as under: “ In the appeal proceedings, the AR of the appellant contended that the assessee could know about cash deposit in his bank accounts only after search action in the case of tiles manufacturer. The assessee was a person of no means and was serving with Shri Lalitmal Ashumal Gangwani and he opened bank account at the instance of Shri Lalitmal Ashumal Gangwani. Therefore, the assessee was only a name lender, the addition in his case was totally wrong and unjustified. He relied on some decisions. The decisions were perused and it was

Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. The Ld. A.R. before us filed a Paper Book running from Pages 1 to 83 and contended that the cash deposits in his bank account does not belong to him. As such he was merely acting at the behest of Shri Lalitmal Asumal Gangvani.

On the other hand, the Ld. DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the identical issue was raised in the own case of the assessee in ITA Nos. 138 and 119/RJT/2017 for the A.Ys. 2011-12 where the ITAT was pleased to delete the addition made by the authorities below. The relevant extract of the order is reproduced as under: “24. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there were huge cash deposit in the account of the assessee. But at the same time there were huge withdrawals from the bank in cash. Thus, we are of the view that if the cash deposits are treated as income of the assessee then at the same time cash withdrawal from the bank should be treated as expenses. As such the AO cannot take a view which is benefiting the Revenue without considering the fact for the withdrawal of cash. In this regard we have perused the bank statement of the assessee which is available on record and find from-the same that there were continuous cash deposits and withdrawals.

We also note that as per the accounting rule all the withdrawal of cash goes into cash book and if it is unspent it would bear the character of cash in hand so that if any amount is deposited into the bank it would undoubtedly correspond to the available cash in hand. Moreover, the Income tax law does not contain any provision to maintain record of reason or purpose of each withdrawal in cash from the bank. Thus the assessee should be given a benefit of doubt to relate the deposits in cash out of previous withdrawal from the banks.

We also find that there is no iota of evidence suggesting that the assessee has made any investments or incurred any expenditure of personal nature out of the cash withdrawn from the bank. Thus we are of the view that the amount of cash deposits alone cannot be treated as income of the assessee. Thus the action of the AO of making addition on accounts of all deposits made in the bank accounts of the appellant is without any justification and resulting to the high pitch assessment.

In addition to the above, it is also pertinent to note that the assessee in the statement furnished under section 132(4) of the Act, has disclosed the name of certain/major parties of the ceramic manufacturers on whose behalf he was accepting the money from the dealers which was finally returned to such manufacturers. The relevant question raised to the assessee and its answer by the assessee is reproduced as under:

However, the authorities below has not carried out any verification from such parties despite having sufficient powers with them granted under the statute. As such, the assessee discharged his onus by furnishing the details of the parties as discussed above and the onus was shifted upon the revenue to disprove the contention of the assessee that he was not working on behalf of such ceramic manufacturers.

We also find that the case of the assessee was taken under the income escaping assessment under section 147 of the Act for the assessment year 2006- 07 on the basis of the letter issued by DDIT (Inv), Ahmedabad dated 4-3-2013 after recording the reason that the assessee is engaged in the activity of Shroff. Thus, in our considered view such reason recorded by the revenue under section 148 of the Act also supports the contention of the assessee that he is engaged in the activity of money transfer. Indeed, the assessee was doing such business

We also note that the learned CIT(A) has given contradictory finding in his order. As such the learned CIT(A) has observed the fact that the entire amount of deposit cannot be treated as income without considering the withdrawal from the bank. Such relevant finding of the learned CIT (A) is reproduced as under:

However, the learned CIT (A) without cogent reason has changed his stand by concluding that the amount of deposit of cash represents the turnover of the business of the assessee. Accordingly, he estimated the income of the assessee at the rate of 25% of the cash deposits in the bank. Such finding of the learned CIT (A) was not based on any scientific information. As such the learned CIT (A) has assumed the profit of the parties engaged as dealer of ceramic manufacturer at the rate of 25% of the turnover without bringing any material on record. Accordingly, we are not inclined to make any reference to such finding of the learned CIT (A).

There was no material found during the course of search proceedings suggesting that the assessee was acting as a dealer of ceramic manufacturer. Therefore, the question of making any investment in such business does not arise. Accordingly we are of the view that there cannot be any addition on account of investment of Rs. 13,53,224/- in such undisclosed business of the assessee.

The next question arises what should be the rate to be applied determining the income of the assessee from its activities of money transfer. As such, none of the authority below has brought anything on record suggesting the rate to be applied for determining the income of the assessee from its activities. Accordingly, in the absence of such information available on record, we accept the rate of the income disclosed by the assessee in his income tax return.

In view of the above and after considering the facts in totality we hold that the assessee was acting as money transfer agent on behalf of the parties engaged in ceramic manufacturers. Accordingly, we allow the ground of appeal of the assessee and dismiss the ground of appeal of the revenue.

In the result the appeal filed by the assessee is allowed whereas theappeal filed by the revenue is dismissed.”

Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal in the own case of the assessee as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support.The doctrines of judicial precedent have been evolved to ensure stability, consistency and conformity in law otherwise a judge could take any view in the

As the assessee succeeds on the issue raised by him on merit, we refrain ourselves from adjudicating the issue raised on the validity of the reassessment proceedings under the provisions of Section 147 of the Act. As such the ground raised by the assessee on the validity of the re-assessment proceedings becomes infructuous. Thus the same is dismissed as infructuous.

In the result, the appeal filed by the assessee is partly allowed.