Arunkumar J. Muchhala vs The Commissioner Of Income-Tax-8
2017 Latest Caselaw 6510 Bom

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              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                  ORDINARY ORIGINAL CIVIL JURISDICTION


                      INCOME TAX APPEAL No. 363 of 2015


Shri. Arunkumar J. Muchhala                                            .... Appellant
          Versus
The Commissioner of Income-Tax - 8                                     .... Respondent
                                             ... 
Mr. D. C. Jain for the Appellant.
Mr. N. C. Mohanty for the Respondent.


                           CORAM   : S. C. DHARMADHIKARI &
                                      SMT. VIBHA KANKANWADI, J. J.


DATE ON WHICH THE JUDGMENT IS RESERVED: 14.08.2017

DATE ON WHICH THE JUDGMENT IS PRONOUNCED: 24.08.2017


JUDGMENT (PER: SMT. VIBHA KANKANWADI, J)

1. This appeal challenges an order of the Income Tax

Appellate Tribunal dated 30-07-2014.

2. Shri. D. C. Jain, appearing for appellate has submitted that

the questions of law at page No. 20 & 21 of the paper-book are

substantial questions of law deserving admission of this appeal.

3. The factual matrix leading to the appeal, as noted by

Assessing Officer are that appellant had filed return for the Assessment

Year 1996-97 on 27-12-1996 declaring total income at Rs.6,00,570/-.

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The return was processed u/s. 143 (1) (a) of the Income Tax Act, 1961

(for short I. T. Act), the case was taken up for scrutiny. The assessee had

got income from rent, share of profit from R. F., Salary and income from

other sources. Assessee had also returned the income of his minor

children amounting to Rs.3,15,459/-. Notice u/s. 143 (2) of the I. T. Act

was issued on 8-07-1998 fixing the date of hearing on 28-07-1998.

Nobody appeared on behalf of assessee. A notice u/s. 274 (1) (b) of the

I. T. Act was therefore, issued for said default fixing hearing on 7-8-

1998 and another notice dated 30-07-1998 u/s. 142 (1), fixing the

hearing on 07-08-1998 was issued. Appellant was called upon to furnish

information. Again, nobody attended the hearing, however, a letter

dated 06-08-1998, addressed by M/s. D. C. Jain, Advocates was received

by the office on 12-08-1998. It was mentioned by the Advocate that his

client would require 15 days to comply with details. Said Advocate

attended the hearing on adjourned date and again sought time for the

preparation. Nobody attended the next adjourned date i. e. 10-09-1998.

Once again, notice u/s. 271 (1) (b) r/w. 274 of I. T. Act was issued and

next date of hearing was informed. Some details were filed on 24-09-

1998. However, the details in respect of points Nos. (I), (ii) and (ix) to

(xix) of notice u/s. 142 (1) dated 30-07-1998 were not filed. Learned

Advocate was asked to file proof of NRI gift received. There was no

compliance of the same on 07-10-1998, but thereafter a letter was

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received on 23-10-1998, stating that details are under preparation.

Again there was no compliance on 06-11-1998 and therefore, notice

was issued. Advocate attended the date of hearing on 19-11-1998. He

was requested to give details as under :

I) Details of N. R. I. Gift alongwith nature of relationship with donee

i.e. the assessee.

(ii) Details in respect of the following remaining items in the notice

u/s. 142 (1) dated 30-07-1998; item Nos. (i), (ii), (ix) to (xix),

(iii) Letter of Authority

Thereafter, also on some occasions, the matter was not

attended and then when notices were issued, the assessee took time on

the point of preparation. Further information was called from the

Assessee through Advocate on 21-01-1999. However, same response

was received from the Assessee. It was submitted on behalf of assessee

on 11-03-1999, that the loan and interest statement was under

preparation and copy of the account of 8 parties from whom loans were

taken with confirmations were under preparation. Further opportunity

was not given by the Assessing Officer, taking into consideration the

response and attitude of the appellant.

4. The facts emerged further were that the assessee had

received NIR gift of Rs.33.82,224/- by way of India Development Bonds

from one Shri. Ashok Dhirajlal Parikh, who was friend of the assessee.

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Further, the assessee had taken loan from Shri. Ajay Shah to the tune of

Rs.18,00,000/-, M/s. Pooja Corporation Rs. 9,00,000/-, Shri. Ashok

Mehta Rs. 21,00,000/-, Saibaba International Rs.2,40,000/-, Shri. Ashok

Shah Rs. 3,00,000/-, Suraj Maticland (P) Ltd. Rs. 10,00,000/-,

Muchhala Magicland Rs.6,06,000/-, Arunkumar & Associates

Rs.2,60,000/-, Continental Corporation Rs.3,00,000/-, M/s. Muchhal

Magicland Pvt. Ltd. Rs.1,00,000/-, Shri. Chandulal C. Patel

Rs.3,00,000/-. The Assessing Officer had come to the conclusion that

since no confirmations have been given in respect of these amounts,

they will have to be treated as unexplained cash credits and therefore

the said amounts were added to the total income of the assessee. After

the calculation the total gross income of the assessee was held at

Rs.1,26,88,794/-.

5. The Appellant preferred appeal to the Commissioner of

Income-Tax (Appeals), bearing No. CIT (A)XIX/IT/ROT-46/99-00 and

challenged the said decision of the Assessing Officer. Appeal came to be

partly allowed on 29-11-2010. It was found that explanation has been

given in respect of some of the loan amounts and therefore, the said

entries came to be deleted. Other entries were considered and no relief

was given in respect of those remaining amounts.

6. Being aggrieved by the said order, Petitioner preferred

further appeal to the Income-Tax Appellate Tribunal bearing No. ITA

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No.1341/Mum/2011. The said appeal came to be dismissed on 30-07-

2014. Present appeal challenges the said order.

7. It has been vehemently argued on behalf of appellant that

Books of accounts have not been maintained by the Petitioner and

therefore Sec. 68 of I. T. Act will not be applicable. Though it is a fact

that certain amounts were taken by the Petitioner from those persons,

yet, when entries of the same have not been taken in the books of

accounts, they can not be added to the income of the Appellant for the

assessment of tax. These entries have been found by the Assessing

Officer on the basis of Bank Statement. No other document was

considered by him, before issuing order. Reliance has been placed on

the decision in Baladin Ram v/s. Commissioner of Income-Tax, U. P.

reported in 1969 (71) ITR 427; wherein it has been held that, "Even

under the provisions embodied in Section 68 of Income-Tax Act, 1961,

it is only when any amount is found credited in the books of the

assessee for any previous year that the section will apply, and the

amount so credited may be charged to tax as the income of that

previous year, if the assessee offers no explanation or the explanation

offered by him is not satisfactory". Similar ratio has been laid down in

Commissioner of Income-Tax, Poona v/s. Bhaichand H. Gandhi

reported in 1983 (141) ITR 67, Anand Ram Raitani v/s.

Commissioner of Income-Tax reported in 1997 (223) ITR 544,

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Commissioner of Income-Tax v/s. Smt. Usha Jain reported in 1990

(182) ITR 487.

8. It has been further submitted that Sec. 68 of Income-Tax

Act is a charging section and it is also a deeming provision. Learned

Counsel appearing for appellant relied on the decision in Commissioner

of Income-Tax v/s. Taj Borewells reported in 2007 (291) ITR 232;

wherein it has been observed that, " Unless the following circumstances

exist, the Revenue cannot rely on Section 68 of the Act : (a) Credit in

the books of an assessee maintained for the year, (b) the assessee offers

no explanation or if the assessee offers an explanation the Assessing

Officer is of the opinion that it is not satisfactory, and the sum so

credited is chargeable to tax as "income from other sources". The

assessee alone has to offer an explanation. If the assessee makes an

explanation, it is for the Assessing Officer to accept it or reject it".

9. It has been further submitted on behalf of appellant that the

authorities below have failed to take into consideration the documents

produced by the Appellant. The loan amounts were received by cheques

and some of them were in respect of booking of the flats. The booking

could not be materialized and therefore, cheques were returned and

there was no credit at the end of the year. The amount ought not to

have been held to be liable to be added in the income of the Petitioner.

10. Per contra, it has been submitted on behalf of Revenue that

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the orders passed by the said Authorities are correct. Many

opportunities were given to the Appellant to produce relevant

document/ documents in order to substantiate and prove his version.

Appellant had failed to give the further details of the persons from

whom the loan was allegedly taken. It was the bounden duty of the

assessee to explain the nature and source of cash deposits. It has been

therefore, rightly held that assessee can not take any advantage of the

transaction as he had not kept any books of accounts. Reliance has been

placed on the decision in Sudhir Kumar Sharma (HUF) v/s.

Commissioner of Income-Tax - III, Ludhiana reported in [2014] 224

Taxmann 178. It has been held that, "When during the assessment

proceedings, Assessment Officer noticed that assessee had deposited

huge amount of cash in his bank account; the addition of the said

amount in the income of the assessee by invoking the provisions of Sec.

68 of Income Tax Act is justified. The ouns is on the assessee to explain

nature and source of said cash deposits". A Special Leave Petition was

preferred challenging the above judgment; however, Supreme Court has

dismissed the same and it has been reported in [2016] 69 taxmann.com

219 (SC).

11. The facts as emerged before the Assessing Officer appears

to be not in dispute. The Appellant has not denied that he has received

the said loan amount / cash deposits from those persons whose list has

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been given in the order of Assessing Officer. He has revealed those

names from the Bank account of the Appellant. Now, Appellant intends

to say that he has not maintained books of accounts and therefore, those

amounts can not be considered. When Appellant is doing business, then

it was incumbent on him to maintain proper books and/ or books of

account. It may be in any form. Therefore, if he had not maintained it,

then he can not be allowed to take advantage of his own wrong. Burden

lies on him to show from where he has received the amount and what is

its nature. Unless this fact is explained he can not claim or have

deduction of the said amount from the income tax. Sec. 68 of I. T. Act

provides that where the assessee offers no explanation about the nature

and source of the credits in the books of account, all the amounts so

credited or where the explanation offered by the assessee is not

satisfactory in relation to the same then such credits may be charged to

tax as income of the assessee for that particular previous year. It is to be

noted here in this case that huge amounts have been credited in the

account of the Appellant and he has not explained the nature of the

same. The source of the said amount has been discovered by the

Assessing Officer from Bank Pass Book. It is to be noted that when the

source and nature has been held to have been explained, the said

amount has been deleted by the appellate forums. Now the dispute has

remained in respect of amount of Rs.9,00,000/- from M/s. Pooja

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Corporation, Rs.7,00,000/- from M/s. Pooja Enterprises, Rs.24,00,000/-

from Shri. Ashok Mehta, Rs.18,00,000/- from Mr. Ajay Shah. No

document was produced in respect of these transactions nor the

amounts have been confirmed from those persons, who are shown to

have lent them. The authorities below have therefore, rightly held that

nature of the transaction has not been properly shown by the Appellant.

12. The ratio of the authorities relied by the learned Counsel

appearing for Appellant is not applicable here. In those cases, either the

entries were confirmed by the parties in whose name they were

standing or books of accounts were showing the cash credits from

undisclosed source. Here in this case, at no earlier point of time, a firm

stand was taken by the Appellant that he has not maintained books of

account. Whenever a direction was given to produce the same in any

form, it was replied by the Appellant that he wants time to prepare.

Many opportunities were given by the Assessing Officer for the

production of relevant documents including books of account in the

form of ledger, balance sheet, etc. However, such documents were never

produced. Non-production of the document is different from not

maintaining the Books of Account. The Appellant has raised the said

point of "books of accounts not maintained" for the first time before this

Court. The facts in the case of Sudhir Kumar Sharma (supra) are

almost similar and therefore, the observations are binding.

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13. When even after giving opportunities, The Appellant had failed to

produce relevant documents and explain the nature and source of the

amount received by him as narrated above; the order of the Assessment

officer and the appellate authorities in respect of those amounts is

justified. We do not find any substantial question of law raised by the

Appellant in this appeal and therefore, we proceed to pass following

order.

ORDER

1. Appeal is hereby dismissed.

2. No order as to costs.

(Vibha Kankanwadi. J.) (S. C. Dharmadhikari. J.)