Income Tax Appellate Tribunal - Hyderabad
Khalid Bin Mahfooz Ahmed, Hyderabad vs Department Of Income Tax on 22 May, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B", HYDERABAD
BEFORE Smt. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
I.T.A. No. 1436/HYD/2014
Assessment Year: 2009-10
The Income Tax Officer, Sri Khalid Bin Mahfooz
Ward-5(1), Vs Ahmed,
HYDERABAD Badi Chowdi,
HYDERABAD
[PAN: AEYPM2698L]
(Appellant) (Respondent)
For Revenue : Ms. V. Rajitha, DR
For Assessee : Shri B. Shanti Kumar, AR
Date of Hearing : 19-05-2015
Date of Pronouncement : 22-05-2015
ORDER
PER INTURI RAMA RAO, A.M. :
This appeal is filed by the Revenue against the order of the Commissioner of Income Tax(Appeals)-V, Hyderabad, dated 20-03-2014 on the following grounds:
"1. The Ld. CIT(A)'s has erred in appreciating the fact that the assessee's credit card statements do not show any entry of credit card swiping for cash withdrawals.
2. The Ld. CIT(A)'s has erred in appreciating the fact that the assessee has failed to produce any evidence before the AO during assessment proceedings or during submission of remand report in support of credit card swiping for cash withdrawal.
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3. The Ld. CIT(A)'s has erred in appreciating the fact that the credit card statements show only personal expenses of the assessee and purchase of jewellery, clothes, vehicle, mobiles, furniture, flight tickets etc., and no entries other than these.
4. The Ld. CIT(A)'s has erred in appreciating that the assessee failed to produce any evidence with regard to sale of his wife's jewellery, motor vehicle for the purpose of cash balance and opening cash balance before the AO either during assessment proceedings or during submission of remand report.
5. The Ld. CIT(A) has erred in giving the peak credit benefit to the assessee on the cash withdrawals from the bank accounts. In absence of evidence the purpose of withdrawal and immediate re-depositing claim. The CIT(A) failed to appreciate that the cash withdrawals from the bank accounts were in fact utilized for the purpose of personal expenses.
6. The Ld. CIT(A) has erred in appreciating the fact that the assessee has failed to file clear evidence to substantiate his claim that the account statement does not belong to the Asst. Year under reference with regard to the addition of Rs. 4,90,000/- cash deposits in Standard Chartered Bank, saving bank account No. 44610327529.
7. Any other ground that may be raised during the course of appeal proceedings".
2. The brief facts of the case are as under:
The respondent-assessee is an individual, is in the business of trading 'readymade dupattas' and in dyeing of 'white dupattas' into 'coloured dupattas' of customer's choice and also running 'diagnostics' under name and style of 'SRK Diagnostics' situated near princess Durreshewar hospital in old city. He filed the return of income for the Assessment Year (AY) 2009-10 on 30-07-2009 admitting income of Rs. 2,23,540/-. Agianst said return of income, the assessment was completed u/s. 143(3) of the Income Tax Act, 1961 [Act] vide order dt. 29-12-2011 by the ITO, Ward-5(1), Hyderabad at a total income of :- 3 -: I.T.A. No. 1436/Hyd/2014 Sri Khalid Bin Mahfooz Ahmed Rs. 1,03,28,739/-. While doing so, the Ld. Assessing Officer (AO) made addition of Rs. 79,02,500/- on account of cash deposited in savings account of the bank held in the name of the respondent-assessee on the ground that the assessee could not properly explain the source for cash deposited. The AO also made a further addition of Rs. 22,02,699/- on the ground that the payments were made to the credit card for which no explanation for the sources for the payment was explained. Being aggrieved by the said assessment order, appeal was preferred before CIT(A)-V, Hyderabad, who vide order dt. 20-03-2014 allowed the appeal filed by the respondent-assessee.
3. During the course of proceedings before the CIT(A), the respondent-assessee filed the information such as cash flow statement wherein all the transactions and cash deposits are supposed to have been reflected. The CIT(A) had forwarded this information to the AO and called for the remand report. In response to which, the AO observed that the respondent-assessee failed to explain the sources for credit card bill payments and he further observed that the cash flow statement is not corroborated by the evidences like evidence for the sale of assessee's wife jewellery for Rs. 4,86,350/- and opening cash balance of Rs. 2,17,000/- and for sale of two wheeler for Rs. 84,500/- and the cash received from credit cards swiping of Rs. 32,93,952/-. Further, the Ld.AO observed that the credit cards were swiped to meet the personal expenses such as Caterers, Mobiles, Air ticket purchase, Harsha Toyota, Clothes purchases, Jewellery purchases, Latitudes Pro. Furniture purchases, Radio Guys & Gals, Shoes purchase, Fahion paradise, Cloub Mini Travels & Foreign Petrol purchases, Fenandez Maternity, Dimai Student Visa etc., which are in nature of personal use. Further, AO observed that the assessee had not provided complete addresses of all those :- 4 -: I.T.A. No. 1436/Hyd/2014 Sri Khalid Bin Mahfooz Ahmed business entities to examine whether those people are given cash against credit cards swiping which is an unusual practice.
4. The CIT(A) after considering the remand report of the AO as well as the information furnished by the respondent-assessee, held that the AO was not justified in rejecting the evidence produced in the form of cash flow statement, bank transactions etc., and deleted the addition by saying that the facts of the case justify the application of peak theory and discussed certain case laws in support of application of peak credit theory. Aggrieved, the Revenue had come up with the present appeal.
5. The Ld. DR argued that the CIT(A) was not justified in deleting the additions without properly appreciating the evidence that the credit card statement does not show any transaction of cash withdrawals and further more that the assessee failed to produce any evidence in support of sale of the jewelry of his wife and motor vehicle and opening cash balance. He further argued that the CIT(A) had misdirected himself in applying the peak credit theory in as much as the facts of the case does not justify the application of peak credit. Thus, CIT(A) failed to appreciate properly the evidence on record in support of the additions made by the AO.
6. On the other hand, the Ld. AR for the assessee relied upon the order of CIT(A) and submitted that the order of CIT(A) should be upheld.
7. We heard the rival parties and perused the orders of lower authorities. We find that the AO made addition because of failure of the respondent-assessee to furnish the evidence in support of the sources for cash deposit in the account of Rs. 79,02,500/- and as well as payment to credit card as Rs. 22,02,699/-. Apparently, it was only :- 5 -: I.T.A. No. 1436/Hyd/2014 Sri Khalid Bin Mahfooz Ahmed during the course of proceedings before the CIT(A), the respondent- assessee filed the cash flow statement, wherein the sources for the above are supposed to have been explained. However, the AO on remand report had not accepted the cash flow statement in the absence of evidence filed in support of the cash sources shown in the cash flow statement. Even during the course of remand proceedings, the Ld. AO was not satisfied about the explanation rendered for the sources for cash deposits in the bank and the payments made for credit cards. The Ld. CIT(A) without meeting the objections raised by the AO has simply accepted the explanation tendered by the respondent-assessee and he went on discussing about peak credit theory without discussing as to how the fact situation of the case fits into peak credit theory and we find from the grounds of appeal filed before him that no such ground was raised. The additions were made purely based on facts, unless the facts were duly verified by the AO, the addition should not have been deleted. Objections raised by AO in his remand report were not met by the CIT(A). The cash flow statement filed by the respondent-assessee before CIT(A) does not indicate the availability of cash on day to day basis. In the absence of this, it cannot be held that the cash deposits made in the savings bank account of the respondent-assessee are explained. Similarly, it cannot be held that the sources for payment of credit cards are explained.
8. The CIT(A) in the impugned order had not dealt with the facts of the case, he simply referred to certain case laws governing the peak credit theory which is not the germane to the issue on hand before him. The impugned order gives no reason which would indicate as to why the additions are deleted. The order is bereft of reasons and does not discuss the facts of the case. Therefore, the order suffers from the vice of being an order without reasons. The Hon'ble Supreme Court held in :- 6 -: I.T.A. No. 1436/Hyd/2014 Sri Khalid Bin Mahfooz Ahmed the case of CCT Vs. Shukla Brothers [2010 (4) SCC 785] held that, recording of reasons is an essential feature of providing justice and in fact is the soul of orders. Further, the Supreme Court in the case of Kranti Associates (P) Ltd. Vs. Masood Alam Khan [2010 (9) SCC 496] has summarized the principles for recording reasons as under:
(a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
(b) A quasi-judicial authority must record reasons in support of its conclusion.
(c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.
(d) Recording of reasons also operates as a valid restraint of any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
(e) Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.
(f) Reasons have virtually become as indispensable a competent of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
(g) Reasons facilitate the process of judicial review by superior Courts.
(h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.
(i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been :- 7 -: I.T.A. No. 1436/Hyd/2014 Sri Khalid Bin Mahfooz Ahmed objectively considered. This is important for sustaining the litigant's faith in the justice delivery system.
(j) Insistence on reason is a requirement for both judicial accountability and transparency.
(k) If a judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
(l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or 'rubber stamp reasons' is not to be equated with a valid decision making process.
(m) It cannot be doubted that transparency is the sine qua non of restraint on abuse or judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny.
(n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya Vs. University of oxford 2001 EWCA Civ. 405, wherein the court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".
(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of 'Due Process'.
Therefore, in the light of the above principles enunciated by the Hon'ble Supreme Court in the cases mentioned supra, we are of the considered opinion that the order of CIT(A) cannot be sustained in the eyes of law. Therefore, keeping in view the interest of justice, we remit the matter back to the file of CIT(Appeals) for fresh adjudication of the issue after affording a reasonable opportunity of hearing to the respondent- assessee.
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9. In the result, appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open Court on 22nd May, 2015 Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 22nd May, 2015 TNMM Copy to :
1. The Income Tax Officer, Ward-5(1), Room No. 604, 6th Floor, Aayakar Bhavan, Basheer Bagh, Hyderabad.
2. Sri Khalid Bin Mahfooz Ahmed, D.No. 4-2-579, Badi Chowdi, Hyderabad.
3. CIT(Appeals)-V, Hyderabad.
4. CIT-IV, Hyderabad.
5. D.R. ITAT, Hyderabad