Gujarat High Court
Commissioner Of Income Tax I vs Sarwankumar Sharma....Opponent(S) on 15 July, 2014
Bench: M.R. Shah, K.J.Thaker
O/TAXAP/252/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 252 of 2014
For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/
and
HONOURABLE MR.JUSTICE K.J.THAKER Sd/
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1. Whether Reporters of Local Papers may be allowed to see No
the judgment ?
2. To be referred to the Reporter or not ? No
3. Whether their Lordships wish to see the fair copy of the No
judgment ?
4. Whether this case involves a substantial question of law as to No
the interpretation of the constitution of India, 1950 or any
order made thereunder ?
5. Whether it is to be circulated to the civil judge ? No
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COMMISSIONER OF INCOME TAX I....Appellant(s)
Versus
SARWANKUMAR SHARMA....Opponent(s)
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Appearance:
MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1
MR DIPAK SHAH with MR TEJ SHAH, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 15/07/2014
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 14.08.2013 passed by the learned Income Tax Appellate Tribunal, CBench, Ahmedabad [hereinafter referred to as "Tribunal"] in Page 1 of 12 O/TAXAP/252/2014 CAV JUDGMENT ITA No.2302/Ahd/2011 for AY 200809 by which the learned Tribunal has partly allowed the said appeal preferred by the assessee quashing and setting aside the order passed by the learned CIT(A) and the Assessing Officer and treating the entire deposits of Rs.45,85,861/ made by the assessee in his bank account as total turnover of the assessee with respect to his undisclosed business of trading in art silk cloth and accordingly the income of the assessee shall be estimated at 8% of the total turnover, the Revenue has preferred the present tax appeal to consider the following substantial questions of law.
[A] "Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in accepting the amount of Rs.45,85,861/ as trading receipt of the assessee though the same was never substantiated / proved by the assessee either at the time of assessment proceeding or appellate proceeding?
[B] Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in holding that the onus of proving source of credit entries in an unaccounted bank account is on Revenue?"
[2.0] Facts leading to the present tax appeal in nutshell are as under:
[2.1] The assessee and individual earning earning income from salary interest filed his return of income for the AY 200809 on 09.03.2009 declaring total income of Rs.1,07,160/. The case was subsequently selected for scrutiny and a notice under Section 143(2) of the Income Tax Act, 1961 [hereinafter referred to as "IT Act"] was issued on 17.02.2010 alongwith a questionnaire requiring the assessee to file various details mentioned therein alongwith books of accounts. It was found by the assessee that AIR information shows that the assessee had a bank account with Punjab National Bank, Surat and had deposited cash totaling to Rs.45,16,192/ on various dates. Therefore, a letter under Section 133(6) of the IT Act was issued to the said Bank on Page 2 of 12 O/TAXAP/252/2014 CAV JUDGMENT 19.09.2010 asking to furnish certain details including bank statement of the account held by the assessee. As per the details furnished by the said Bank it was found that the assessee held a bank account No.3102000100093025, in which, such cash were found to have been deposited on various dates. It was found that when the assessee filed the return on income in ITR2 form wherein the details of the said bank name and the account number was not reflected. During the course of assessment, it was found by the AO on perusal of the bank statement of the said bank account that the assessee had deposited total amount of Rs.66,75,030/ including the sum of Rs.45,16,192/ in cash. In view of the above, vide office showcause notice dated 08.12.2010, the assessee was called upon to show cause as to why the cash deposit of Rs.45,16,192/ should not be added to his total income as unexplained money under Section 69A of the IT Act. That in response to the above showcause notice the assessee submitted that the transactions in saving account belong to business transactions sales and purchases of art silk cloth. It was also submitted that cash was deposited by outside party from different places against sale. It was submitted that as he has done business, it was requested to consider gross profit as income.
[2.2] The AO was not satisfied by the reply / explanation given by the assessee and thereby treating the aforesaid amount of Rs.45,16,192/ as unexplained money under Section 69A of the IT Act and added the aforesaid amount of Rs.45,16,192/ into the total income of the assessee. That while making addition of the aforesaid amount of Rs.45,16,192/ into total income of the assessee as unexplained money under Section 69A of the IT Act, the AO observed as under:
"3.3 The reply furnished by the assessee is not convincing one and an afterthought and not acceptable for the following reasons:
(i) In the first submission, the assessee has stated that the source of income is salary and interest and he has maintained the Page 3 of 12 O/TAXAP/252/2014 CAV JUDGMENT saving bank account with Federal Bank A/c. No.1988. However, when the show cause regarding cash deposit was issued, the assessee has changed his stand and stated that the transaction in saving account belong to business transaction of art silk cloth.
(ii) As per section 69A of the Act, "wherein in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
(iii) The assessee has maintained an undisclosed bank account and deposited such cash, out of unaccounted income earned during the year under consideration. It is worthwhile to mention here that the details regarding the debit entries of the said bank account have been called for from the said bank shows that the assessee has made unaccounted investment in various assets and incurred unaccounted expenditure out of such unaccounted income reflected at the credit side of the said bank account.
(iv) The assessee was repeatedly asked to produce source of acquisition of such money and nature of cash deposit. But assessee failed to provide such details even though sufficient opportunity is given. This proves that assessee is nothing to produce as said amount of money owned by him in form of cash deposit is unexplainable."
[2.3] That feeling aggrieved and dissatisfied with the order passed by the AO in making addition to the aforesaid amount of Rs.45,16,192/ into the total income as unexplained money under Section 69A of the IT Act, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) dismissed the said appeal by the assessee and has upheld the order passed by the AO by observing in paras 6.1 and 6.2 as under:
"6.1 The arguments of the Assessing Officer as well as appellant have Page 4 of 12 O/TAXAP/252/2014 CAV JUDGMENT been considered. The appellant has contended that he is a Trader and that deposit in the Bank A/c. is in the nature of sales receipt deposited by various customers at different places. However, the appellant has given no supporting evidences to substantiate its contention. On the contrary, in the return of income, the appellant had shown income from salary and no income from so called business activity, was disclosed in the return. Even during the course of appellate proceedings, the appellant was asked to adduce evidence in support of its claim that he is carrying out trading activity. However, the appellant has not produced any such evidence even at the appellate stage.
6.2 In view of the above, it is clear that the entire story as proposed by the appellant that the deposit in the bank a/c is in the nature of trading receipts is at best a figment of imagination. The strong reasoning given by the Assessing Officer in the assessment order as mentioned above clearly indicates that the cash deposit in the Bank A/c is out of 'undisclosed sources'. In view of the reasoning given by the A.O., it is held that the entire amount of cash deposit in the bank is 'Unaccounted Income' of the appellant during the year."
[2.4] Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) in dismissing the appeal preferred by the assessee and upholding the order passed by the AO, the assessee preferred appeal before the learned Tribunal and by impugned judgment and order the learned Tribunal has partly allowed the said appeal and has directed to treat the entire deposit of Rs.45,85,861/ made by the assessee in his bank account as undisclosed business income of trading in art silk cloth and directed that the income of the assessee shall be estimated at 8% of the total turnover.
[2.5] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal, the Revenue has preferred the present tax appeal with aforesaid substantial questions of law.
[3.0] Shri Sudhir Mehta, learned advocate appearing on behalf of the appellant - Revenue has submitted that the learned Tribunal has materially erred in directing to treat the entire deposits of Page 5 of 12 O/TAXAP/252/2014 CAV JUDGMENT Rs.45,85,861/ made by the assessee in his bank account as his undisclosed business income of trading in art silk cloth. It is submitted that as such the learned Tribunal has not properly appreciated the facts and the findings recorded by the learned AO as well as learned CIT(A) that as such there was no evidence and/or material produced by the assessee in support of his case that he was in the business of trading in art silk cloth and that the aforesaid deposits of Rs.45,85,861/ was out of his undisclosed business of trading in art silk cloth. It is submitted that as such the finding recorded by the learned Tribunal that the assessee was in the business of trading in art silk cloth and the entire deposits of Rs.45,85,861/ made by the assessee in his bank account was an undisclosed business of trading in art silk cloth is absolutely perverse and as such not appreciated by any cogent evidence.
[3.1] It is submitted that as such the AO as well as the learned CIT(A) both specifically observed that the assessee had not produced any evidence whatsoever to show that as such he was also in the business of trading in art silk cloth. It is submitted that as such when the assessee filed the return of income, he stated that the source of income is salary and interest and he declared the saving bank account with Federal Bank only. It is submitted that as such his bank account in the Punjab National Bank was unearthed on the basis of AIR information and it was found that out of total amount of Rs.66,75,030/ deposited by the assessee, the amount of Rs.45,16,192/ was deposited in cash.
[3.2] It is further submitted that as such the learned Tribunal though agreed that the onus is on the assessee to establish his trading activity which he failed to do, the learned Tribunal has proceeded to delete the additions confirmed by the learned CIT(A) by observing that "however, the revenue has also not brought anything on record to show that the cash deposited in the bank account of the assessee is from his income Page 6 of 12 O/TAXAP/252/2014 CAV JUDGMENT from undisclosed sources without commenting on the cash withdrawals made by the assessee. It is submitted that the learned Tribunal has materially erred in shifting the onus/burden upon the Department to prove contrary. It is submitted that as such and as per the settled proposition of law, it was for the assessee to prove / establish his claim of trading activity of art silk cloth by leading cogent evidence. It is submitted that as such the learned Tribunal has materially erred in shifting the said onus/burden upon the department.
[3.3] It is further submitted that even the learned Tribunal has erred in holding the activity carried out by the assessee was also related to business. It is submitted that aforesaid finding has been arrived at by the learned Tribunal by observing that there was some activity carried on by the assessee relating to business. It is submitted that as such the aforesaid finding and observation is absolutely based on no evidence and on surmises and conjectures only, which cannot be sustained.
[3.4] Shri Mehta, learned advocate appearing on behalf of the Revenue has heavily relied upon the decision of the Delhi High Court in the case of Commissioner of IncomeTax v. Modi Stone Ltd. reported in [2011]15 Taxmann.com 112 (Delhi) as well as the decisions of the Punjab & Haryana High Court in the case of Dayal Singh and Sons v. Commissioner of IncomeTax reported in [2011] 335 ITR 90 (P&H) and in the case of Commissioner of IncomeTax v. Sanjay Chhabra, Proprietor of Sanjay Chhabra Traders reported in [2011] 3336 ITR 71 (P&H).
Relying upon the above decisions and making above submissions, it is requested to allow the present tax appeal.
[4.0] Present appeal is opposed by Shri Dipak Shah, learned advocate appearing for Shri Tej Shah, learned advocate appearing on behalf of the Page 7 of 12 O/TAXAP/252/2014 CAV JUDGMENT assessee. It is submitted that in the facts and circumstances of the case the learned Tribunal has not committed any error and in arriving at a conclusion that the entire deposits of Rs.45,85,861/ made by the assessee in his bank account was with respect to the undisclosed business of trading in art silk cloth. It is submitted that as such by holding so as such the learned Tribunal has given cogent reasons and has considered the relevant entries in the bank account. It is submitted that therefore thereafter the learned Tribunal has rightly directed that the said income of the assessee shall be estimated at 8% of the total turnover working out pick credit and sustaining addition only to the extent of pick credit. In support of his above submissions and to dismiss the present appeal by confirming the impugned judgment and order passed by the learned Tribunal, Shri Shah, learned advocate appearing on behalf of the assessee has heavily relied upon the decision of Rajasthan High Court in the case of Commissioner of IncomeTax v. Ishwardass Mutha reported in (2004) Vol. 270 597. However, Shri Shah, learned advocate appearing on behalf of the assessee has fairly conceded that as such the learned Tribunal is not right in issuing the onus/burden upon the Department to show that cash deposit in the bank account of the assessee was his income from undisclosed sources.
Making above submissions and relying upon above decisions, it is requested to dismiss the present tax appeal.
[5.0] Heard learned advocate appearing on behalf of the respective parties at length.
At the outset it is required to be noted that the assessee filed his return of income for the year under consideration declaring total income of Rs.1,07,160/ and the assessee specifically stated that he has derived the income from salary and interest during the year. The assessee as such never declared that he is also in the business of trading of art silk cloth. It is also required to be noted that in the return the assessee Page 8 of 12 O/TAXAP/252/2014 CAV JUDGMENT declared only one bank account in Federal Bank. However, on AIR information it was found that the assessee held a bank account with Punjab National Bank, Surat and it was also found that he has deposited the total amount of Rs.66,75,030/ out of which a sum of Rs.45,16,192/ was deposited in cash. It was also found from the statement of the said bank account that the assessee had deposited the aforesaid amount of Rs.45,16,192/ in cash. Though subsequently the assessee came up with a case that the aforesaid deposit of Rs.45,16,192/ in cash in the Punjab National Bank account was the sale proceeds of the goods sold during his trading activities of art silk cloth and out of the said amount, the assessee had also made various payments towards purchase of the art silk cloth to various suppliers, the assessee had not produced a single document and/or evidence to establish and prove his above case and to substantiate his case that he was also in the business of trading activities of art silk cloth. Even before the appellate stage also, the assessee could not produce any evidence to substantiate his above case. Considering the above facts and circumstances both the learned AO as well as learned CIT(A) rightly held that the entire amount of cash deposit in the Punjab National Bank account was an unaccounted income and was rightly added in the total income of the assessee under Section 69A of the IT Act.
[5.1] However, on appeal before the learned Tribunal, the learned Tribunal has directed to treat the entire deposit of Rs.45,85,861/ made by the assessee in his bank account with respect to his undisclosed business of trading in art silk cloth by observing in para 6 as under:
"6. On examining the bank account submitted by the assessee we find that the assessee had withdrawn cash in most of the instances by way of issuing cheques to various parties from Surat and other places. Similarly, cash was deposited from various places in the assessee's bank account. This points out that there was some activity carried on by the assessee relating to business. The revenue has it means to find out the nature of transactions transacted in the bank accounts of the Page 9 of 12 O/TAXAP/252/2014 CAV JUDGMENT assessee. However, the revenue has failed to make such exercise and simply presumed the facts to its convenience that the entire cash deposited by the assessee was the income of the assessee. We do not subscribe to this view of the revenue. The revenue has also not brought anything on record before us stating that the assessee had made any investment from such income. Further, considering the particulars oft transactions reflected in the bank statement one can presume that the assessee was indulging in trading activities probably of art silk cloth as claimed by the assessee. No doubt, the onus is on the assessee to establish his claim which he has not complied fully. However, the revenue has also not brought anything on record to show that the cash deposited in the bank account of the assessee was his income from undisclosed sources without commenting on the cash withdrawals made by the assessee. In these circumstances and drawing strength from the case laws cited by the assessee, supra, we are of the considered view that the entire deposits of Rs.45,85,861/ made by the assessee in his bank account as observed by the learned AO has to be treated as total turnover of the assessee with respect to his undisclosed business of trading in art silk cloth and accordingly the income of the assessee shall be estimated at 8% of the total turnover."
However, it is required to be noted that while holding so the learned Tribunal has shifted the onus/burden upon the department to show that the cash deposited in the bank account of the assessee was an income from undisclosed sources and that too without commenting on the cash withdrawals made by the assessee. The learned Tribunal has not properly appreciated the fact that when it was case and/or defence on behalf of the assessee that the cash deposited in the bank account of the assessee was his undisclosed income from the business of trading in art silk cloth, in that case, it was for the assessee to establish and prove by leading evidences and producing relevant material and documentary evidences that the aforesaid cash deposits in the bank account was his undisclosed income with respect to the undisclosed business of trading in art silk cloth.
[5.2] It also appears from the impugned order and the reasoning given by the learned Tribunal in para 6 reproduced hereinabove and while holding that the assessee was also indulging in trading activities, the said Page 10 of 12 O/TAXAP/252/2014 CAV JUDGMENT finding is absolutely on surmises and conjectures. It appears that basically the learned Tribunal has wrongly shifted the burden upon the Revenue and has materially erred in observing that the Revenue has failed to find out the nature of the transactions transacted in the bank account of the assessee.
[5.3] In the case of Modi Stone Ltd. (Supra), the Delhi High Court has observed and held that the onus is upon the assessee to prove the alleged payment. In the said case, the assessee claimed deduction of commission payments under head "commission/discount". A similar view has been taken by the Punjab & Haryana High Court in the cases of Dayal Singh and Sons (Supra) and Sanjay Chhabra, Proprietor of Sanjay Chhabra Traders (Supra). In the aforesaid two decisions the Punjab & Haryana High Court has held that when unexplained investment / unaccounted sales are not substantiated, the entire investment is to be added under Section 69A of the IT Act and not merely sales commission.
[6.0] In view of the above as such the impugned order passed by the learned Tribunal directing to treat the entire deposit of Rs.45,85,861/ made by the assessee in his bank account in cash. As total turnover of the assessee with respect to his undisclosed business of trading in art silk cloth cannot be sustained and the same deserves to be quashed and set aside. If that be so in that case there was no question of considering the income of the assessee on estimation at 8% of the total turnover by working out pick credit and thereby sustaining addition only to the extent of pick credit. The working out pick credit and sustaining addition to the extent of pick credit would arise if it is established by the assessee that his undisclosed income is relatable to the trading in art silk cloth. When it has been found that the assessee has miserably failed to establish and prove that he was in the business of trading in art silk cloth and that the aforesaid deposit of Rs.45,85,861/ made in cash in his Page 11 of 12 O/TAXAP/252/2014 CAV JUDGMENT bank account was with respect to his undisclosed business of trading in art silk cloth, there is no question of further making addition on the basis of estimation at 8% of the total turnover working out pick credit. It is required to be noted that in the present case even there is no such discussion and/or the reasons assigned by the learned Tribunal on the directions that the income of the assessee shall be estimated at 8% of the total turnover. Even nothing is on record how and on what basis the learned Tribunal has even estimated the income at 8% of the total turnover. Under the circumstances also, the impugned order directing that the income of the assessee shall be estimated at 8% cannot be sustained.
[6.1] In view of the above and for the reasons stated above, present Tax Appeal succeeds. Impugned judgment and order dated 14.08.2013 passed by the learned Income Tax Appellate Tribunal, CBench, Ahmedabad in ITA No.2302/Ahd/2011 is hereby quashed and set aside and the orders passed by the learned CIT(A) as well as the learned Assessing Officer in making addition of Rs.45,85,861/ in his total income of the assessee under Section 69A of the IT Act for the year under consideration are hereby restored. Present tax appeal is allowed. In the facts and circumstances of the case, no order as to costs.
Sd/ (M.R. SHAH, J.) Sd/ (K.J. THAKER, J.) Ajay Page 12 of 12