Jayesh C. Shah, Mumbai vs Department Of Income Tax

ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा सद य के सम ।

BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM

आयकर अपील सं./I.T.A. No. 3205/Mum/2012 ( नधारण वष / Assessment Year: 2008-09) ITO-25(2)(1), Jayesh C. Shah C-11 Building, Room No. 107, बनाम/ D-Wing, 601, Adinath Tower, P. K. Bhavan, B.K.C., Bandra (E), Vs. Nancy Colony, Borivali (E), Mumbai-400 051 Mumbai-400 066 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. ALZPS 4743 C (अपीलाथ /Appellant) : ( यथ / Respondent)

अपीलाथ क ओर से / Appellant by : Shri Vivek Batra

यथ क ओर से/Respondent by : None

सनु वाई क तार ख / : 21.10.2014 Date of Hearing घोषणा क तार ख / : 07.01.2015 Date of Pronouncement आदे श / O R D E R Per Sanjay Arora, A. M.:

This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-35, Mumbai ('CIT(A)' for short) dated 23.02.2012, partly allowing the Assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2008-09 vide order dated 20.12.2010.

2. None appeared for and on behalf of the assessee-respondent when the appeal was called out for hearing. The assessee stands duly informed of the date of hearing through the listings at the notice board of the Tribunal. There has in fact been no representation 2 ITA No. 3205/Mum/2012 (A.Y. 2008-09) ITO vs. Jayesh C. Shah

on any of the several occasions, viz. 24.10.2013, 06.03.2014, 05.05.2014 and 20.10.2014, on which the appeal was posted for hearing. Under the circumstances, it was only considered fit and proper to proceed with the matter, deciding the appeal after hearing the party before us.

3. The only issue arising in this appeal is the validity or otherwise in law, and in facts and circumstances of the case, of the restriction of the addition in the sum of Rs.32,41,475/- in respect of unexplained cash deposits in the assessee's undisclosed bank account, to Rs.3,48,666/- by the ld. CIT(A).

4. The assessee was during the course of the assessment proceedings observed to have an undisclosed savings bank (s/b) account with Oriental Bank of Commerce, Byculla Branch, Mumbai (# 52572011001268). The assessee, who had disclosed his income for the year by way of commission, capital gains and income from other sources, explained the said account to be in fact belonging to his wife, Amisha Jayesh Shah, the second holder of the account, in whose name the said account could not be opened for want of proper documents. The transactions in the said account were duly incorporated in her regular books of account and, further, disclosed per her return of income for the year, also furnishing a copy of her statement of income. The same was found unacceptable by the Assessing Officer (AO). Amisha Jayesh Shah had a savings bank account (# 3985) with Saraswati Cooperative Bank Ltd., which was in fact since prior to the year 2006, while the bank account with Oriental Bank of Commerce (OBC) was opened only in May, 2007. Her income details, as submitted, were at variance with her return of income for the year as filed with ITO-25(1)(3), Mumbai. The story of income by way of commission on sale of readymade garments by his wife, which the cash deposited in and withdrawn from the said bank account was stated to represent, had been cooked up as an alibi by the assessee. The entire cash deposit of Rs.34.91 lacs in the OBC bank account was added as income by way of unexplained deposit, relying on the decision by the Tribunal in Aluminum Small Industries vs. ITO [2006] 103 ITD 142 (Kol). In appeal, the assessee's contention that in-as-much as the deposits and withdrawals in the OBC bank 3 ITA No. 3205/Mum/2012 (A.Y. 2008-09) ITO vs. Jayesh C. Shah

account, both in cash, represented purchase and sale of readymade garments, only the net, i.e., the excess of the deposit (credits) over withdrawls (debits, at Rs.3230394/-), or Rs.11081/-, represent his income and ought to be assessed, was not found acceptable in the absence of any proof that the entire withdrawal was made for the purposes of business. However, only the peak credit could be brought to tax. He, accordingly, directed for the restriction of the addition to the peak credit in the said bank account for the relevant year, i.e., at Rs. 3,48,666/-. Aggrieved, the Revenue is in appeal.

5. We have the parties, and perused the material on record.

Our first observation in the matter is that the bank account with the Oriental Bank of Commerce under reference is undisclosed, both in the hands of assessee and his wife, so that no income qua the said account stands returned by either, and would therefore merit being brought to tax. The question or the issue that arises is the income that could properly and reasonably be ascribed to the said account. While the Revenue insists on the entire cash deposited therein during the year as representing income, the first appellate authority, accepting the said account as a channel of routing the funds of the assessee's business of readymade garments, restricted it to the peak credit as reflected in the said account.

Towards this, we observe that, firstly, the bank account stands opened during the relevant previous year, so that it would have no opening balance, which, where so, would require exclusion in-as-much as the same represents (cash) deposit/s during a prior period. Further, we consider it reasonable on the part of the ld. CIT(A) to infer the cash withdrawals in the said bank account, which are in self, while cannot be considered as wholly for business purposes, to represent a systematic business activity, so that they are available for re-deposit and, therefore, only the peak credit as reflected in the said account could be said to be the unexplained deposit or funds of the business. The Revenue's challenge, contesting the said inference in the view of absence of any documentary evidence/s, would fail on account of the very profile of and behavior reflected by the said account, i.e., a systematic activity.

4 ITA No. 3205/Mum/2012 (A.Y. 2008-09) ITO vs. Jayesh C. Shah

So, however, in-as-much as the withdrawals are for business, i.e., as for purchase of readymade garments, the deposits arise on sale thereof, duly banked. The profit arising on the sales would therefore stand to be brought to tax. It needs to be appreciated that this flows from and is a natural corollary to the assessee's contention of only the net credit (deposit) in the bank account as income, or the ld. CIT(A)'s finding of the withdrawals as being subject to recycling, so that it is only the peak credit that can be considered as unexplained. That is, it is only the inference of a systematic business activity that could sustain and support the finding of only the peak credit, and not the entire cash deposit, in the assessee's undisclosed bank account, the source of which is otherwise unexplained, as being liable to tax as unexplained income per the said bank account.

Further, the receipt of sales on commission basis, as contended by the assessee, would not stand to be credited to the assessee's bank account, and that too his personal account. While, therefore, a business activity is inferable, the claim of it being on commission basis is neither borne out from the record nor consistent with the incidents of such business. To this extent, therefore, the impugned order is deficient. The assessee, who was also not represented before us, as also the assessing authority, would need to be heard before any final conclusion is drawn. We, accordingly, consider it fit and proper to restore the matter to the file of the first appellate authority to, consistent with his finding of the peak credit as being liable to be taxed, also examine the issue of the profits arising on the business activity of purchase and sale of goods, that the debits and credits in the undisclosed bank account respectively are considered and taken as representing. We decide accordingly.

6. In the result, the Revenue's appeal is partly allowed for statistical purposes.

प रणामतः राज व क अपील सां यक य उ े य के लए आं शक वीकृत क जाती है ।

Order pronounced in the open court on January 07, 2015 Sd/- Sd/-

(D. Manmohan) (Sanjay Arora) उपा य / Vice President लेखा सद य / Accountant Member 5 ITA No. 3205/Mum/2012 (A.Y. 2008-09) ITO vs. Jayesh C. Shah

मुंबई Mumbai; दनांक Dated : 07.01.2015 व. न.स./Roshani, Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आयु त(अपील) / The CIT(A) 4. आयकर आयु त / CIT - concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / DR, ITAT, Mumbai 6. गाड फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai