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IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE S/SHRI P.M.JAGTAP (AM) AND SANJAY GARG, (JM)
.. , ,,
./I.T.A.No.4132/Mum/2012
( / Assessment Year: 2008-09)
M.A. Shahul Hameed / Income Tax Officer-21(3)(3),
New Sansar Restaurant and Vs. Room No.507, 5th floor,,
Stores, C-11,Pratyakshakar Bhavan,
Station Road, Bandra-Kurla Complex,
Kurla (W), Bandra (E),
Mumbai-400070 Mumbai-400051.
. / . /PAN/GIR No. : AAJPM6709K
( /Appellant) .. ( / Respondent)
/ Appellant by : S/Shri K Gopal and Jitendra Singh
/Assessee by Shri Ravi Prakash
/ Date of Hearing
: 13.3.2014
/Date of Pronouncement : 7. 5.2014
/ O R D E R
PER P.M.JAGTAP,AM:
This appeal is filed by the assessee against the order of ld. CIT(A)-32, Mumbai
dated 21.12.2011 whereby he confirmed /sustained the following
additions/disallowances made by AO:
A: Disallowance of interest expenditure Rs.37,521/-
B: Addition on account of short term capital gain Rs.1,56,599/-
C: Addition on account of unexplained cash deposits
under section 69 of the Income Tax Act, 1961 (the Act) Rs.13,40,750/-
2. We have heard the arguments of both the sides on the issues involved in this
appeal and also perused the relevant material available on record. As regards, the
issue involved in Ground "A" regarding disallowance of interest, it is observed that the
loan taken by the assessee on interest from the bank was found by the AO to have
2 I.T.A.No.4132/Mum/2012
been parked in the interest free mutual funds, cash in hand and cash in bank account.
He, therefore, disallowed the interest attributable to the said loans worked out at
Rs.1,56,582/-. On appeal, the ld. CIT(A) held that the assessee having his own funds
sufficient to make investment in the interest free mutual funds as well as to cover cash
in hand and cash at bank, there was no case of utilization of interest bearing loans by
the assessee for the said purposes. He however found that the assessee had paid
interest at the rate of 14% to the bank on one hand and it had advanced money in the
form of his capital in the partnership firms on the other hand, at interest rate of 12%
only. He held that this excess amount of interest paid by assessee at the rate of 2%
therefore was disallowable and accordingly the disallowance made by AO on account of
interest was sustained by him to the extent of Rs.37,521/-
3. At the time of hearing before us, the ld. counsel for the assessee has not been
able to bring anything on record to controvert or rebut the findings recorded by ld.
CIT(A) that the loan taken by the assessee from bank at the interest rate of 14% was
utilized to make investment by the assessee as his capital in the partnership firms at the
rate of 12% only and this being so, we find no justifiable reason to interfere with the
impugned order of ld. CIT(A) sustaining the disallowance made on account of interest to
the extent of Rs.37,521/-. Ground "A" of assessee's appeal is accordingly dismissed.
4. As regards the issue raised in Ground "B", it is observed that the AO during the
assessment proceedings for the year under consideration noticed that the assessee had
received a sum of Rs.2,56,699/- from Life Insurance Corporation against the investment
of Rs.1 lakh made earlier. Although the assessee claimed that this entire amount was
exempt u/s 10(10D) of the Income Tax Act, 1961 (the Act) being maturity value of the
LIC policy, no evidence could be produced by the assessee to show that the said
amount represented maturity value of any LIC policy taken by him. The AO, therefore,
treated the difference of Rs.1,56,599/- as "Short Term Capital Gain" (STCG)
3 I.T.A.No.4132/Mum/2012
chargeable to tax in the hands of the assessee and the ld. CIT(A) upheld the action of
the AO on this issue.
5. At the time of hearing before us, the ld. counsel for the assessee has not been
able to is unable to produce any evidence to show that the amount in question received
by assessee from LIC was on account of maturity proceeds of any policy taken by
assessee. In the absence of such evidence to substantiate the claim of the assessee
for exemption u/s 10(10D) of the Act, we do not find any infirmity in the impugned
order of ld. CIT(A) confirming the addition made by AO treating the difference of
Rs.1,56,590/- as STCG arisen from sale of units of LIC mutual fund. Ground "B" of the
assessee's appeal is accordingly dismissed.
6. As regards Ground "C" relating to the issue of addition of Rs.13,40,750/- made
by AO and sustained by ld. CIT(A) on account of unexplained cash deposits, it is
observed that in the joint account held by assessee with his wife in Axis Bank at
Trichur, cash deposits of Rs.25,20,000/- were found to be made on various dates.
Simultaneously, there were cash withdrawals also from the said account to the tune of
Rs.22,05,000/-. In the absence of any explanation offered by assessee, the difference
between the total cash deposits and total cash withdrawals amounting to Rs.3,15,000/-
was added by the AO to the total income of the assessee. The AO also found that there
were cash deposits of Rs.15,99,446/- on various dates in the said account and in the
absence of any explanation forthcoming from the assessee, this amount was also added
by AO to the total income of the assessee.
7. Before the ld.CIT(A), it was contended on behalf of the assessee that there was
double addition made by AO by adding the difference of Rs.3,15,000/- between total
cash deposits and total cash withdrawals and also Rs.15,99,446/- on account of cash
deposits found to be made in the same bank account. It was also contended that some
of the cash deposits made in the bank accounts were related to the wife of the
4 I.T.A.No.4132/Mum/2012
assessee and the same were made out of loans of Rs.4 lakhs and Rs.6 lakhs taken by
the wife of the assessee from ICICI bank and private party.
8. After considering the submissions made by the assessee as well as material
available on record, the ld. CIT(A) decided this issue vide para 7.3 of his impugned
order which reads as under :
"7.3 I have considered the above arguments of the ld.AR. During the
appellate proceedings the ld. AR was requested to give the date wise details of
the cash withdrawn and cash deposited in the bank account which is summarized
as under :-
Date Op bal.of cash in Cash Cash deposits in Closing bal of
hand withdrawals bank cash in hand
10.4.2007 300000 0 300000 0
(assuming )
16.5.2007 0 50000 50000
24.5.2007 50000 500000 550000
8.6.2007 550000 200000 530000
13.06.2007 350000 300000 50000
16.8.2007 50000 100000 150000
4.9.2007 150000 19750 130250
4.9.2007 130250 64000 66250
5.10.2007 66250 7000 59250
16.10.2007 59250 200000 -140750
18.10.2007 -140750 200000 -340750
27.10.2007 -340750 50000 -290750
30.10.2007 -290750 35000 -255750
6.11.2007 -255750 100000 -155750
24.12.2007 -155750 50000 -105750
7.1.2008 -105750 500000 394250
14.1.2008 394250 100000 494250
25.1.2008 494250 100000 594250
28.1.2008 594250 200000 794250
6.2.2008 794250 30000 764250
22.2.2008 764250 200000 564250
26.2.2008 564250 600000 -35750
28.2.2008 -35750 500000 464250
13.3.2008 464250 400000 64250
Total 2285000 2520750
From the above summary, it is noted that on 3 occasions cash was deposited in
bank account totaling to Rs.10,00,000/- when the assessee had a negative
balance of cash in hand which suggest that there was no cash available out of
the earlier withdrawals made for being deposited on those three occasions.
The Assessee had negative balance at 7 occasions that too when Rs.3,00,000
deposited on 10.4.2007 is presumed to be availed as opening balance though
no evidence has been provided. Hence the source of Rs.10,00,000/-
straightway becomes unexplained. Further from the pattern of withdrawals and
deposits in the above chart it is also noted that the assessee has made very
5 I.T.A.No.4132/Mum/2012
small deposits of cash in bank account though as on said dates he was supposed
to have huge cash balance with him. Similarly he claims to have withdrawn
cash though he had enough cash in hand as per earlier withdrawals . Such
abnormal patterns of withdrawals/deposits of cash suggests that there was not
enough cash balance lying actually with the assessee out of the earlier
withdrawals from bank because one would deposits of the cash in bank account
leaving only small amounts as cash in hand whereas the assessee has on
several occasions deposited only small amounts when he was showing to have
huge cash in hand. Further there is no correlation in amounts of deposits with
any of the withdrawals made. Mere withdrawals made on earlier dates does not
prove the physical availability of cash in hand unless the assessee is able to
justify that such cash withdrawn was available with him and not spent any
where for other purposes. The negative cash balance proves that the cash
withdrawn on earlier dates was actually never available with assessee for being
re-deposited. There is no justification of holding such huge cash in hand when
no expenditure/investment has been claimed to be made out of cash withdrawals
even though on as many as 12 occasions cash has been withdrawn. Hence the
source of cash of Rs.22,85,000/- deposited in bank cannot be said to be fully
explained. Considering the cash of Rs.10,00,000/- deposited on dates when
assessee had negative cash balances and the assessee has peak negative cash
balance of Rs.340750/-, the total unexplained cash will be Rs.13,40,750
(Rs.10,00,000/- + 340750).
The ld. CIT(A), thus, sustained the addition made by AO on account of unexplained
cash deposit found to be made in the bank account of the assessee to the extent o
Rs.13,40,750/-.
9. We have heard the arguments of both the parties on this issue and also perused
the material available on record. As rightly pointed out by the ld. counsel for the
assessee, when there are cash deposits made in the bank account and also cash
withdrawals made from the same account, the additions on accounts of unexplained
cash deposits made in the said account has to be done on the basis of peak credit
which actually indicates the unexplained investment made by assessee in his bank
account in the form of cash deposits. As per details given by ld. CIT(A) in his
impugned order, which are already reproduced hereinabove, such peak credit was
shown at Rs.3,40,750/- as on 18.10.2007. It is further observed that while working
out of the said peak credit, the amount of Rs.3 lakhs deposited by the assessee as
on 10.4.2007 was not taken into consideration. Explanation offered by ld. counsel for
the assessee in this regard before us is that the said amount was deposited by the
6 I.T.A.No.4132/Mum/2012
assessee out of opening cash balance available with him. In this regard, he has invited
our attention to the copy of balance sheet of the assessee as on 31.3.2007 placed at
page 14 of the paper book to show that the cash in hand and at bank as on 31.3.2007
was Rs.65,750/-. The breakup of the said amount, however, is not available in order
to ascertain the exact availability of cash as on 31.3.2007. In our opinion, this matter
therefore requires verification in order to ascertain the exact availability of cash with the
assessee as on 31.3.2007 as well as to find out whether the cash so available was
not utilized by assessee somewhere else and the same was utilized to make deposits of
Rs.3 lakhs in the bank account as on 10.4.2007. We, therefore, restore this issue to the
file of AO with a direction to work out the peak credit of cash of deposits and cash
withdrawals of the bank account of the assessee after ascertaining the availability of
opening cash balance to make deposits of Rs.3 lakhs as on 10.4.2007 and make
addition on this issue u/s 69 of the Act to the extent of peak credit so worked out.
Ground "C" of the assessee's appeal is accordingly treated as partly allowed for
statistical purpose.
10. In the result, the appeal of the assessee is treated as partly allowed for
statistical purpose.
Order pronounced in the open court on 7th May, 2014
7th May, 2014
Sd sd
( ,/SANJAY GARG) (.. / P.M.JAGTAP)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai:
on this 7th day of May, 2014
. ../ SRL , Sr. PS
7 I.T.A.No.4132/Mum/2012
/Copy of the Order forwarded to :
1. / The Appellant /Applicant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , /
DR, ITAT, Mumbai
6. / Guard file.
True copy / BY ORDER,
(Asstt. Registrar)
, /ITAT, Mumbai
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