Cash withdrawals from bank could not be taxed when credit receipts in bank were already taxed

By | October 6, 2015
(Last Updated On: October 6, 2015)

when receipts in bank account were taxed, then payments from that very bank account have nexus with receipt and, therefore, addition could not be sustained


Commissioner of Income-tax – 21


Jalaj Batra


IT APPEAL NO. 638 OF 2012

NOVEMBER  12, 2014

Abhay Ahuja for the Appellant. Sahil Kapoor and C.S. Anand for the Respondent.


1. This Appeal by the Revenue challenges the order passed on 3rd June, 2011 by the Income Tax Appellate Tribunal Bench at Mumbai in Income Tax Appeal No. 1971/Mum/2009 of the assessment year 2006-2007. The Tribunal dealt with two Appeals and the other one is Income Tax Appeal no. 1931/Mum/2009 which was preferred by the Assessee.

2. These Appeals were directed against the order of the Commissioner of Income Tax (Appeals), Central-III, Mumbai dated 19th January 2009.

3. Mr. Ahuja appearing on behalf of Revenue submits that the questions of law at pages 7 and 8 of the paper book are substantial because the Tribunal’s order is perverse. It does not take into consideration the issue of telescopic benefit of Rs. 3.52 Crores. That benefit has been granted without considering the fact that the Assessee admittedly does not maintain any books of accounts. He has nothing to support his oral stand that the investment in assets and expenditure had been incurred out of disclosure made after search operation. Similarly with regards to the question (c) Mr. Ahuja complains that the order of the Tribunal is perverse because in the absence of any evidence or supporting material the claim has been granted.

4. On the other hand, the Assessee’s advocate would submit that there are pure findings of fact rendered by the Tribunal after duly considering the order of the Assessing Officer and the findings therein. Further the documents which were before the Assessing Officer only have been noted. There is no substance in the Complaint that such of the claims or grounds which have been given up before the First Appellate Authority are allowed to be raised in the Tribunal. In that regard the Counsel submits that question (a) has been framed and termed as substantial question of law without appreciating that no benefit has been given to the Assessee with regard to the transactions or the dealings with M/s. Sonal Fin. Cap. Pvt. Ltd. All that the Tribunal has done is to have a look at the Bank Account, the deposits and the withdrawals therefrom and deducted such of the items which led to double taxation. Meaning thereby when both the receipts and withdrawals from the Bank Account have been taxed the Tribunal found that this is a case of double taxation and which could not have been permitted in the given facts and circumstances. Therefore, this Appeal does not raise any substantial question of law and deserves to be dismissed.

5. With the assistance of the learned Advocates appearing for both sides, we have perused the Memo of Appeal and all Annexures thereto. There is a group called Jalaj Batra Group, a search operation was carried out under section 132 of the Act on 25th October, 2005. The Assessee and his Associates are also covered. The Assessee is stated to be involved in off the market transactions of Penny stocks. There were direct transfers from one beneficiary account to another and that is managed with the help of money lenders. The Complaint is that benami Bank Accounts and D.P. Accounts were opened in the name of several persons involved in this group. The prices of the scripts were manipulated by these persons and bulk deals in such scripts were utilized for bench marking of prices. Such type of transactions were carried out by the Assessee and that is why during the course of survey several documents were impounded. The assets or shares equivalent to Rs. 317.49 lacs were found and seized which were got sold and adjusted against the tax liability of the disclosed income.

6. It is stated in the Memo of Appeal itself that the Assessee filed his return of income on 31st December 2007 declaring income at Rs. 10 Crores but without any basis. Various notices were issued but there was no compliance. Since the return of income was filed but no supporting documents such as capital account, balance sheet and profit and loss account, the Assessee was once again directed to file a true and correct return of income. He did not comply with the notices. No further opportunities were given to him and since nothing was produced by him. The Assessing Officer finalized the assessment on the basis of material gathered and enquiries carried out including the statements of the investigating authorities and worked out the additional income of Rs. 3,42,34,399/- and passed an Assessment Order under section 153A read with section 144 of the Income Tax Act, 1961.

7. The Assessee approached the Commissioner of Income Tax (Appeals) and though it raised several grounds including liability of M/s. Sonal Fin. Cap. Pvt. Ltd. and addition of on account of unexplained stock these were not pressed and withdrawn. The Assessee’s Appeal was partly allowed by the Commissioner of Income Tax (Appeals) and deleted the addition of Rs. 12 lacs as salary paid to staff, estimated addition of Rs. 10 lacs on account of non-business income/expenditure and addition of Rs. 21,51,723/- on account of withdrawal attributable to consumption of income for non-business purpose and dismissed other grounds.

8. That is how the cross Appeals to the Tribunal.

9. What we find from the Tribunal’s order is that this entire material together with the rival contentions have been exhaustively noted. Thereafter, as rightly pointed out by the Counsel for the Assessee, no relief has been granted to the Assessee in relation to the grounds which were given up and particularly about M/s. Sonal Fin. Cap. Pvt. Ltd. The undisputed factual position has been noted by the Tribunal in as much as if there were no books of accounts and yet the Assessing Officer referred to the Bank statements and details of the accounts then, the exercise carried out by him of bringing to tax investment in closing stock as well as withdrawal from the bank account was not proper. The Tribunal found that the Assessee declared income from the Assessment Year 2000-2001 to 2006-2007 of Rs. 12,26,90,630/-. Investment in closing stock was brought to tax to the tune of Rs. 7,02,11,084/-. The balance sum of Rs. 5,24,79,546/- and in relation to which the claim for telescopic has been examined reveals that there is no substance in the contention of Mr. Ahuja that without any application of mind or materials the claim of telescopic benefit has been allowed. We find that the Tribunal has extensively referred to the Assessing Officer’s order and the exercise carried out by him. It has taken the matter item wise/addition wise and found that the Assessing Officer had before him the Bank statements/the inflows in to the Bank Account. He had in his order observed that he would consider the investment after the Assessee has offered Rs. 10 Crores as income. However, he has not considered the same. That refusal has been commented upon by the Tribunal in para 9 of the order under challenge and found that when receipts in the bank account are taxed then the payment from that very bank account have nexus with the receipt therefore, the addition could not be sustained by the First Appellate Authority. With regard to expenses relating to service apartment at Hotel Hilton a similar exercise is carried out and the Assessee’s contentions have been accepted. With regard to expenditure on household items that aspect also has been considered and the Tribunal concluded that the declaration of income is more than sufficient to take care of the expenditure. This could not have been a matter and which is not covered by the disclosure. From paras 9 to 15 we find that every single item or addition has been considered and with extensive reference to the findings of the Assessing Officer and that of the Commissioner. The materials in support of this claims or additions have also been noted. The finding of double taxation has been rendered after examining the matter in details namely, scrutiny of the bank accounts. Either the inflows have been explained with evidence and then the question of taxing the withdrawals will not arise or because there is no evidence, the taxing of the deposits in the bank was justified. That is the conclusion reached and the Tribunal holds that both inflow and outflow cannot be taxed. This is the basis and essential foundation when it sums up in para 17 the reliefs granted to the Assessee. We do not find that any substantial relief has been granted as complained by Mr. Ahuja particularly with regard to items or grounds which have been given up before the First Appellate Authority. In the circumstances, the cross Appeals have been decided by the Tribunal strictly in consonance with the factual materials produced. The findings of fact based thereon are therefore reflecting a possible view of the Tribunal. Such a view does not raise any substantial question of law particularly when it is not perverse as complained. The Appeal is therefore devoid of merits and is dismissed. No costs.

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