IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI Before Shri Joginder Singh, Judicial Member, ITA No.1596/Mum/2014 Assessment Year: 2005-06 Smt. Kusum Manohar Ahuja, Income Tax Officer-19(1)(1) M/s Mehta Kothari & Co. Vile Parle (West), Mumbai-400056 Assessee Revenue P.A. No.AEEPR6515B Assessee by Shri V.P. Kothari Revenue by Shri Sumit Kumar-DR Date of Hearing 07/09/2016 Date of Order: 03/10/2016 O R D E R assessee is aggrieved by impugned order dated 18/02/2015 of Ld. First Appellate Authority, Mumbai. 2 ITA No.1596/Mum/2015 Kusum Manohar Ahuja only ground raised in present appeal pertains to confirming penalty levied u/s 271(1)(c) of Income Tax Act, 1961 (hereinafter Act) for alleged addition of cash credits of Rs.16,18,000/- without considering factual matrix, more specifically when assessee partly explained cash deposit during assessment proceedings, which was not accepted by Assessing Officer and confirmed by Ld. Commissioner of Income Tax (Appeal). 2. During hearing of this appeal, ld. counsel for assessee, Shri V.P. Kothari, contended that Tribunal vide order dated 17/08/2016 (ITA No.2412/Mum/2011) remanded quantum addition to file of Assessing Officer. This factual matrix was not controverted by ld. DR, Shri Sumit Kumar. 2.1. I have considered rival submissions and perused material available on record. It is noted that on quantum addition, Tribunal remanded matter back to file of Assessing Officer, relevant portion from aforesaid order of Tribunal is reproduced hereunder for ready reference and analysis:- This appeal, filed by assessee , being ITA No. 2412/Mum/2011, is directed against appellate order dated 14th January, 2011 passed by learned Commissioner of Income Tax (Appeals)- 30, Mumbai (hereinafter called CIT(A) ), for assessment year 2005-06, appellate proceedings before learned CIT(A) arising from assessment order dated 18th December, 2007 passed by learned Assessing Officer (hereinafter called AO ) u/s 3 ITA No.1596/Mum/2015 Kusum Manohar Ahuja 143(3) of Income Tax Act,1961 (Hereinafter called Act ). 2. grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai (hereinafter called Tribunal ) reads as under:- 1) Learned Commissioner of Income Tax, (Appeals) has erred in up holding disallowances made by Learned Income Tax Officer of a) Society Charges 29292 b) Electricity Charges 6340 c) Telephone Charges 5000 TOTAL : 51699 appellant is doing her business of dress designing from her residence and hence part of expenses like society charges, electricity charges, telephone charges have been debited to Profit & Loss A.O and are allowable as expenses against business income and should be allowed. 2) Learned Commissioner of Income Tax, (Appeals) has erred in confirming Rs.1618000/- being cash deposit unexplained cash credits. It is submitted that cash a/c summary was filed with assessing officer which consisted of business income and cash deposits out of cash withdrawn from bank account interest income received in cash total deposits of cash has been explained so question of making any additions does not arise and should be deleted. 4 ITA No.1596/Mum/2015 Kusum Manohar Ahuja 3. At outset, ld. Counsel for assessee submitted that assessee is not pressing ground No. 1 and same may be dismissed as not pressed . ld. D.R. has also not raised any objection to afore-stated submission of assessee . We accordingly dismiss ground No. 1 as not pressed. 4. Regarding ground No. 2, brief facts of case are that assessee is individual and involved in profession of dress designing. assessee has shown total receipts from profession of Rs. 6,77,865/- and after deducting expenses , net profit from business has been shown at Rs.2,09,591/- in return of income filed with Revenue. assessee also showed interest income from Sh. Manohar Ahuja of Rs.78,094/- which has been credited to Profit and Loss Account. assessee has also shown capital gains on sale of share both long term and short term earned during previous year relevant to assessment year which was offered for taxation. 5. During course of assessment proceedings u/s 143(3) read with Section 143(2) of Act, A.O. observed from date-wise bank summary as well as bank statements maintained by assessee during year, that assessee has deposited cash amounting to Rs. 16,18,000/- in her bank accounts of which details are as under:- (a) Standard Chartered Bank (225-0-549348-5) 7,41,000/- (b) ABN Amro Bank 8,02,000/- (c) Standard Chartered Bank(225-1-064758-4) 75,000/- 16,18,000/- 5 ITA No.1596/Mum/2015 Kusum Manohar Ahuja assessee was asked by AO to explain source of these cash deposits in bank accounts. assessee submitted that source of cash deposits were receipts from sale to parties of dress designing business and cash withdrawn from bank accounts which was deposited back in bank accounts. assessee was confronted during course of hearing that total receipts shown by assessee during year was Rs. 6,77,865/- from her business of dress designing whereas cash deposits far exceed said receipts. It was further observed by AO that cash withdrawals shown by assessee from bank accounts were still not enough to cover entire cash deposits. assessee was asked to give details of receipts from her dress designing business shown in Profit and Loss Account alongwith list of all parties with name and address , dates and modes of receipts , bills raised in respect of such payments and relevant bank extracts and ledger extracts to support and evidence same. In reply assessee submitted that most of payments from her dress designing business were received in cash and deposited in bank accounts . No evidence of any kind had been furnished by assessee before AO to substantiate that sale proceeds from parties with respect to dress designing business were deposited in bank and thus claim of assessee that business receipts had been deposited in bank accounts was rejected by AO. assessee s further claimed that cash withdrawn from bank was used to deposit same back to bank account, A.O. noted that assessee had shown several cash withdrawals from her accounts as per bank summary submitted by assessee whereas entries shown by assessee as cash withdrawals in bank summary were actually not cash withdrawals. analysis of relevant entries were made by AO as under:- 6 ITA No.1596/Mum/2015 Kusum Manohar Ahuja SN Name of Bank Date of Amount Narration in bank Withdrawal statement 1 ABN Amro 07-09-2004 2,50,000 ABN Amro Equity Fund 2 ABN Amro 27-09-2007 1,50,000 Inward Clearing 3 ABN Amro 07-03-2005 1,00,000 DD/CC issued 4 SCB (549348-5) 02-11-2004 15,000 Cash Withdrawals 5 HSBC 08-02-2005 2,50,000 Investment in Franklin India Flexi Cap fund Div/R 6 CITI Bank 12-10-2004 3,00,000 Fund Transfer Thus, from above entries, it was concluded by AO that as against claim of assessee that above six entries reflected cash withdrawal from bank is only partially true as only entry at S. No. 4 reflects cash withdrawal of Rs.15,000/- from bank , while rest of five entries were not cash withdrawal from bank account and claim of assessee is not correct was observation of AO. With respect to assessee s claim that she had withdrawn amount of Rs. 15,000/- from her bank account which has been deposited back in bank accounts, it was observed by AO that however, no evidence has been submitted by assessee in this respect. Further, assessee has shown withdrawals of Rs. 95,319/- from her capital account which must include some cash withdrawals from bank accounts. Therefore, this amount of Rs. 15,000/- may be part of same withdrawals since no other cash withdrawals were reflected in bank accounts of assessee. Thus, AO observed that cash withdrawals shown by assessee in her bank summaries have been found to be bogus except one cash withdrawal of Rs. 15,000/- which may be part of withdrawal of Rs.95.319/- by assessee from her capital account. Hence, amount of cash deposits in bank accounts as mentioned above i.e. Rs. 16,18,000/- was added to total income of assessee as unexplained cash credits u/s 68 of Act by AO vide assessment order dated 18-12-2007 passed by AO u/s 143(3) of Act. 6. Aggrieved by assessment order dated 18-12-2007 passed by A.O. u/s 143(3) of Act, assessee filed first appeal before learned CIT(A). 7 ITA No.1596/Mum/2015 Kusum Manohar Ahuja 7. Before ld. CIT(A), assessee contended that as regards addition of Rs. 16,18,000/- u/s 68 of Act, representing cash deposits made in bank account, represents receipts from sale to parties of her dress designing business and cash withdrawn from bank which were deposited back in bank accounts. It was submitted that summary of cash account was given by assessee before AO vide letter dated 17-12-2007 submitted on 20-12-2007 but same did not appear to have been taken into consideration by AO while passing assessment order dated 18- 12-2007 u/s 143(3) of Act . assessee submitted that certain inadvertent mistake crept in bank summary furnished earlier and on account of these mistakes, as analyzed and highlighted in assessment order, A.O. had come to conclusion that cash withdrawals shown in summary are bogus except Rs. 15000/-. assessee submitted that it is fact on record that assessee is carrying on business of dress designing for last many years and receipts are in cash which had been explained. assessee prepared fresh cash flow statement and submitted before learned CIT(A) which is as under:- XXXXXXXXXXXXXXXXXXXXXX Based on above, assessee submitted that total cash available with assessee was Rs.12,11,048 (Rs.570048 + 641000) and cash deposited and expended was Rs. 1640500/- resulting in shortage of cash of Rs. 4,29,452/- and copies of all bank account highlighting cash deposits and withdrawals were submitted before learned CIT(A). In circumstances, it was submitted that there was no shortage of cash of Rs. 16,18,000/- as found by A.O. in assessment order dated 18-12-2007 passed u/s. 143(3) of Act but actual shortage of cash is only of Rs. 4,29,452/- which may kindly be added to income of assessee was prayer of assessee before learned CIT(A). However, ld. CIT(A) rejected plea of assessee on ground that assessee has not furnished complete details of all 8 ITA No.1596/Mum/2015 Kusum Manohar Ahuja parties with name and address from whom business receipts from dress designing business were received by assessee , dates and modes of receipts, bills raised in respect of these receipts and relevant ledger/bank extracts were not submitted by assessee as called for by AO . learned CIT(A) held that AO has rightly rejected claim of assessee that business receipts were deposited in bank account of assessee and also wrong claim was made by assessee about cash withdrawal from bank while assesssee only withdrew Rs.15000/- from bank which could be part of withdrawal made by assessee shown in her capital account. Accordingly addition made by A.O. of Rs. 16,18,000/- u/s 68 of Act was confirmed by learned CIT(A) vide appellate orders dated 14.1.2011 passed by learned CIT(A). 8. Aggrieved by appellate order dated 14.1.2011 passed by ld. CIT(A) assessee filed second appeal before Tribunal. 9. ld. Counsel for assessee submitted that assessee has received income from dress designing to tune of Rs. 6,77,865/- which was received in cash and also there was receipt of interest of Rs.78,094/- in cash from Mr Manohar Ahuja, out of which net profit transferred to capital account was Rs. 209591.75. profit and loss account of assessee is placed in paper book page 3 filed with Tribunal . ld. Counsel submitted that assessee has withdrawn amount of Rs. 3,00,000/- (paper book / 4-bank statement placed on record) in cash on 12th October, 2004 from Citi Bank whereby there is remark Fund Transfer- Intercity cash payments which is in-fact cash withdrawal by assessee from bank and which was wrongly rejected by authorities below. He also invited our attention to paper book page 5 whereby bank statement is placed on record and submitted that assessee had further withdrawn amount of Rs. 15,000/- in cash from Standard Chartered Bank on 02-11-2004 which was accepted by AO as cash withdrawal . assessee has also received interest to tune 9 ITA No.1596/Mum/2015 Kusum Manohar Ahuja of Rs. 78,094/- in cash from Mr. Manohar Ahuja which should also be considered while computing cash deposits in bank and arriving at shortfall of cash in hand to arrive at income to be brought to tax on this count. ld. Counsel submitted that as per cash flow statement (paper book page 62), total cash available with assessee was Rs. 12,11,048/- and cash deposited and expended was Rs. 16,40,500/- resulted in shortage of cash to tune of Rs. 4,29,452/- which could be brought to tax , hence there is no shortage of cash of Rs.16,18,000/- as alleged by A.O. in his assessment order dated 18.12.2007 passed u/s 143(3) of Act as confirmed by learned CIT(A) in his appellate orders 14.1.2011. 10. ld. D.R. relied on orders of learned CIT(A) and submitted in alternative that verification is required with respect to cash flow statement, bank statement etc. submitted by assessee , hence matter may be set aside to file of A.O. for verification and de-novo determination of issue on merits. 11. We have considered rival contentions and also perused material available on record. We have observed that assessee has deposited cash in bank to tune of Rs. 16,18,000/- for which assessee has explained by way of cash flow statements , cash book , bank book/summary, bank statements etc. to justify sources of cash deposit which mainly is claimed by assessee to have arisen from business receipts from dress designing business, receipt of interest income in cash from Manohar Ahuja and re-deposit of cash withdrawn from bank accounts as set out above. assessee has submitted paper book which contained various bank statements, cash book and summary charts to explain that shortage of cash was only to tune of Rs.4,29,452/- and not Rs.16,18,000/- as alleged by authorities below and submitted that to extent of Rs.4,29,452/- addition is sustainable and acceptable to assessee . These contentions along with documents and cash flow/summaries submitted have not been verified by 10 ITA No.1596/Mum/2015 Kusum Manohar Ahuja authorities below. In our considered view and in interest of justice and fair play, we set aside and restore this issue back to file of A.O. for verification , examination and enquiry of claim of assessee , in light of cash flow statement , summaries, cash book, bank statement and other relevant evidences which assessee files to support her contentions in her defense with respect to deposit of cash in bank , and also in light of any other explanation which AO may require for proper adjudication of issue on merits . A.O. shall thereafter frame assessment de-novo on merits after considering all evidences and explanation furnished by assessee on merits. Needless to say proper and adequate opportunity of being heard shall be provided by AO to assessee in accordance with principles of natural justice in accordance with law. We order accordingly. 12. In result, assessee s appeal in ITA No 2412/Mum/2011 for assessment year 2005-06 is allowed for statistical purpose. 2.2. Before this Tribunal, assessee has also filed death certificate of husband of assessee by contending that her husband was aged person, therefore, lenient view may be taken as assessee was very much perturbed. It is noted that Tribunal on quantum addition has made elaborate discussion and found that even before Assessing Officer date-wise bank summary as well as bank statement, maintained by assessee, with respect to deposit of cash was produced. source of cash deposit was receipt from sale to parties from dress designing business and cash withdrawals from bank accounts, which was deposited back. It is not case that no explanation was furnished by assessee. detailed discussion has 11 ITA No.1596/Mum/2015 Kusum Manohar Ahuja been made by Tribunal in Para-9 onwards of order of Tribunal. There is finding that factual matrix was not examined properly by Assessing Officer, therefore, matter was restored to file of Assessing Officer. In view of this factual matrix, death of husband of assessee, I am of view, firstly, Assessing Officer himself did not made elaborate examination of facts, therefore, by taking lenient view, I feel that it may be or may not be case of quantum addition but not for imposing penalty u/s 271(1)(c) of Act. Hon'ble Apex Court in Reliance Petro Products Ltd. (322 ITR 158)(SC) held that even if wrong claim is made that itself does not tantamount to concealment of income or furnishing of inaccurate particulars of such income. For imposing penalty u/s 271(1)(c) either there should be concealment of income or furnished inaccurate particulars of such income. In light of foregoing discussion, ld. Assessing Officer is directed to delete penalty. Finally, appeal of assessee is allowed. This order was pronounced in open in presence of ld. representative from both sides at conclusion of hearing on 07/09/2016. Sd/- (Joginder Singh) JUDICIAL MEMBER Mumbai; Dated : 03/10/2016 P.S 12 ITA No.1596/Mum/2015 Kusum Manohar Ahuja Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT, Mumbai. 4. CIT- Mumbai 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Kusum Manohar Ahuja v. Income Tax Officer-19(1)(1), Mumbai