Sh. Paramjit Singh, Amritsar. V. The Income-tax Officer, Amritsar.

CO 9/ASR/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9805 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.54(ASR)/2014 ASSESSMENT YEAR:2009-10 PAN :BAEPS4550G INCOME TAX OFFICER, VS. SH.PARAMJIT SINGH WARD 5(3), C/O M/S. NEW RAKHI MEDICAL STORE, AMRITSAR. ADDA NATH DI KHUI, CHANANKE, AMRITSAR. (APPELLANT) (RESPONDENT) C.O. NO.09(ASR)/2014 (ARISING OUT OF I.T.A. NO.54(ASR)/2014_ ASSESSMENT YEAR:2009-10 PAN :BAEPS4550G INCOME TAX OFFICER, VS. SH.PARAMJIT SINGH WARD 5(3), C/O M/S. NEW RAKHI MEDICAL STORE, AMRITSAR. ADDA NATH DI KHUI, CHANANKE, AMRITSAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH.TARSEM LAL, DR ASSESSEE BY:SH.TARUN BANSAL, ADV. DATE OF HEARING: 05/08/2014 DATE OF PRONOUNCEMENT:06/08/2014 ORDER ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 2 PER B.P.JAIN, AM ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A), AMRITSAR DATED 14.11.2013 FOR THE ASSESSMENT YEAR 2009-10.THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN ADDING THE PEAK OF THE CASH CR EDITS APPEARING IN THE BANK ACCOUNT OF THE ASSESSEE INSTE AD OF WHOLE OF THE CASH CREDITS, TREATING THE CASH CREDITS IN T HE SAVING A/C OF ASSESSEE TO BE SALES RECEIPTS FROM HIS BUSINESS ACT IVITIES. 2. WHETHER THE LD. CIT(A), IS RIGHT IN PARTLY ALLOW ING THE APPEAL OF THE ASSESSEE IGNORING THE EVIDENCE BROUGHT ON RE CORD BY THE A.O. THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSIN ESS OF RETAIL TRADE OF AYURVEDIC MEDICINES. 3. APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY OR MO RE GROUNDS OF APPEAL. 2. THE ASSESSEE IN HIS C.O. HAS RAISED FOLLOWING GR OUNDS: 1. THAT THE LD. CIT(A) HAS RIGHTLY TREATED TOTAL C ASH DEPOSITS IN THE BANK AS SALES RECEIPTS FROM HIS BUSINESS ACTIVI TY INSTEAD OF WHOLE OF CASH CREDITS AS CASH CREDITS IN THE SAVING A/C OF THE ASSESSEE. 2. THAT LD. CIT(A) WAS RIGHTLY IN PARTLY ALLOWING T HE APPEAL OF THE ASSESSEE IGNORING THE EVIDENCE BROUGHT ON RECORDS B Y THE AO THAT ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF RE TAIL TRADE OF AYURVEDIC MEDICINE BY VERIFICATION OF ADDITIONAL EV IDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A). 3. THAT ON THE FACTS & CIRCUMSTANCES THE LD. CIT(A ) RIGHTLY POINTED OUT, IF THE ASSESSEE IS NOT ENGAGED IN RETA IL BUSINESS THEN ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 3 WHAT WAS THE USE OF CASH WITHDRAWAL AND CASH DEPOSI T IN THE BANK. 4. THAT ON THE FACTS & CIRCUMSTANCES THE LD. CIT(A ) RIGHTLY POINTED OUT THAT INSPITE OF ISSUING TWO REMAND LETT ERS, AO HAS NOT OFFERED ANY COMMENTS NOR CARRIED ON, ANY INVEST IGATION OF ADDITIONAL EVIDENCE PRODUCED BY ASSESSEE AND VERIFI ED THE ADDITIONAL EVIDENCE HIMSELF WITH NOTINGS OF NOTICE SERVER AND PHOTOGRAPHS ETC. 5. THAT ON THE FACTS & CIRCUMSTANCES THE LD. CIT(A ) HAS WRONGLY SUSTAINED ADDITION OF RS.2,67,000/- FIRSTLY BE CALC ULATING PROFIT BY TREATING ON TOTAL CASH DEPOSIT AS SALES AMOUNTIN G TO RS.2952300 AND SECONDLY CALCULATING PEAK ON THE BAS IS OF CASH DEPOSIT IN THE BANK DATED 08.05.2008. 6. THAT ON THE FACTS & CIRCUMSTANCES THE LD. CIT(A ) HAS WRONGLY TAKEN PEAK OF CASH DEPOSIT IN BANK, INSTEAD OF PEAK OF CASH ACCOUNT AT RS.20,017/- AS UNDER: PEAK CASH DTD 27/12/2008 RS.40017 LESS: OPENING CASH RS.20000 PEAK OF CASH RS.20017 7. THAT ON THE FACTS & CIRCUMSTANCES THE LD. CIT(A ) HAS NOT ALLOWED TELESCOPIC BENEFIT BY TREATING THE SAME FIG URE OF CASH DEPOSIT IN BANK AS TOTAL SALES, AS WELL AS CALCULAT ING PEAK OF CASH DEPOSIT IN THE BANK. 8. THAT THE ORDER MAY KINDLY BE MODIFIED OR ANY OTH ER CONSEQUENTIAL RELIEF BE ALLOWED. 9. THAT THE ASSESSEE CRAVES LEAVE TO ADD OR AMEND A NY GROUND OF C.O. TILL APPEAL AND C.O. IS FINALLY HEARD OR DIS POSED OFF. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEES CASE WAS SELECTED UNDER SCRUTINY THROUGH CASS ON ACCOUNT OF CASH DEPOSITS W ITH ICICI BANK AND HDFC BANK. IN RESPONSE TO SHOW CAUSE NOTICE DATED 1 43(2) AND 142(1), THE ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 4 ASSESSEE SUBMITTED THAT HE HAS DECLARED INCOME IN T HE RETURN OF INCOME UNDER SECTION 44AF OF THE INCOME TAX ACT, 1961 AT MORE TH AN 5% OF THE TOTAL TURNOVER DURING THE YEAR AND IT IS A NO ACCOUNT CA SE AND THE CASH AVAILABLE ON ACCOUNT OF SALES, MONEY RECEIVED IN ADVANCE FOR SALE OF GOODS IS DEPOSITED IN THE BANK ACCOUNT. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURINDER PAL ANAND (2010) 192 TAXMAN 264, WHERE IT HAS BEEN HELD THAT THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO EXPLAIN INDIVIDUAL ENTR Y OF CASH DEPOSIT IN THE BANK ACCOUNT. THOUGH THE SAID JUDGMENT RELATES TO S ECTION 44AD WHICH IS PARI MATERIA TO SECTION 44AF. THE ASSESSEE ALSO SUB MITTED THAT THE WITHDRAWALS REFLECT PURCHASES OF GOODS FROM TIME TO TIME FOR RUNNING THE BUSINESS. THE ASSESSEE WAS HAVING OPENING BALANCE IN ICICI BANK AT RS.1,00,000/- AND RS.3,44,592/- IN HDFC BANK. THE AO FURTHER SUBMITTED THE QUESTIONNAIRE AND THE CASE WAS ULTIMATELY ADJO URNED FOR 19.08.2011 AND THE ASSESSEE SUBMITTED A CHART SHOWING SALE AND FUR THER SUBMITTED THE EXPLANATION WITH REGARD TO THE QUERIES DATED 05.12. 2011. THE AO NOT BEING SATISFIED WITH THE EXPLANATION SUBMITTED, AS MENTIO NED HEREINABOVE AND IN THE ORDER AT PAGES 1 TO 5 AND NOT SATISFIED WITH T HE DETAILS SUBMITTED VIDE LETTER DATED 23.12.2011 AVAILABLE AT ASSESSMENT PAG ES 5 TO 7 CONSIDERING THE ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 5 CASH DEPOSITS IN BOTH ACCOUNTS AS INCOME OF THE ASS ESSEE AT RS.29,52,100/- FROM UNDISCLOSED SOURCES. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH E WRITTEN SUBMISSIONS, WHICH WERE SENT TO THE A.O. BEING THE ADDITIONAL E VIDENCE FOR COMMENTS. AFTER CONSIDERING THE COMMENTS OF THE A.O., THE LD. CIT(A) OBSERVED THAT THE AO HAS MADE THE ASSESSMENT IN A HURRIED MANNER FOR THE REASONS THAT THE QUESTIONNAIRE WAS PROVIDED TO THE ASSESSEE ON 23.12 .2011 AND IMMEDIATELY ASSESSMENT WAS COMPLETED ON 29.12.2011, THOUGH THE ASSESSEE HAD SUBMITTED THE EXPLANATION VIDE LETTER DATED 23.12.2 011 ITSELF. THOUGH THE ASSESSEE SUBMITTED THE AFFIDAVITS OF HIMSELF AND HI S BROTHER REGARDING CARRYING OUT RETAIL BUSINESS OF AYURVEDIC MEDICINES BUT THE SAME DOES NOT PROVE THAT THE ASSESSEE IS CARRYING OUT THE RETAIL BUSINESS OF AYURVEDIC MEDICINES. HOWEVER, THE LD. CIT(A) COMPUTED THE PRO FIT BY OBSERVING THAT THE BANK DEPOSIT AS SALE RECEIPT DURING THE YEAR OF ANY TYPE OF BUSINESS AND FURTHER MAKING THE ADDITION ON ACCOUNT OF ANY UNEXP LAINED INVESTMENT IN THE BUSINESS, AS ONE POSSIBILITY, WHEREAS THE OTHER POS SIBILITY WAS TO WORK OUT THE PEAK CASH CREDIT AND TREAT THE SAME UNEXPLAINED CASH CREDIT BEING UNEXPLAINED INCOME OF THE ASSESSEE. ACCORDINGLY, TH E LD. CIT(A) WORKED OUT 8% NET PROFIT ON THE BANK RECEIPTS OF RS.29,52,300 /- AND RS.2,36,184/- AND THEREFORE OBSERVED THAT NO ADDITION ON THIS ACCOUNT CAN BE MADE ONCE ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 6 OPENING CREDIT BALANCE OF RS.3,44,592/- IN HDFC BAN K ACCOUNT AND RS.1,00,000/- IN ICICI BANK ACCOUNT ON ACCOUNT OF U NEXPLAINED INVESTMENT. THE LD. CIT(A), THEREFORE, WORKED OUT THE PEAK AT R S.2,67,000/- ON THE BASIS OF CASH DEPOSIT IN THE BANKS DURING THE IMPUGNED YE AR AND FURTHER WORKED OUT NET PROFIT RATE AT 8% ON THE CASH DEPOSITS AT R S.1,69,784/- AND ACCORDINGLY ALLOWED A RELIEF OF RS.26,62,766/- TO THE ASSESSEE. 5. THE LD. DR, MR. TARSEM LAL, ON ONE HAND, ARGUED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE EITHER BEFORE THE LD. CIT(A) OR BEFORE THE A.O. THAT HE IS CARRYING OUT RETAIL BUSINESS OF AYURVED IC MEDICINES AND THE LD. CIT(A) IS NOT JUSTIFIED IN CONCLUDING THAT THE INC OME TO BE COMPUTED FOR ANY TYPE OF BUSINESS IN RETAIL TRADE. THEREFORE, H E SUPPORTED THE ORDER OF THE A.O. SINCE EACH DEPOSIT HAS NOT BEEN EXPLAINED BY T HE ASSESSEE. 6. THE LD. COUNSEL FOR THE ASSESSEE MR. TRUN BANSAL , ADVOCATE, AT THE OUTSET RELIED UPON THE ORDER OF THE LD. CIT(A) WITH REGARD TO REVENUES APPEAL BUT AT THE SAME WITH REGARD TO GROUNDS NO. 5 , 6 & 7 IN THE C.O. HE ARGUED THAT IT IS THE PEAK OF CASH ACCOUNT WHICH IS RS.20,017/-, WHICH SHOULD HAVE BEEN TAKEN INTO CONSIDERATION INSTEAD OF PEAK WHICH HAS BEEN TAKEN BY THE LD. CIT(A) AS CASH DEPOSIT IN THE BANK AS SALES OF RS. 29,52,300/- AND ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 7 ACCORDINGLY HAS WRONGLY SUSTAINED THE ADDITION OF R S.2,67,000/- AND THE LEARNED CIT(A) HAS NOT ALLOWED THE TELESCOPIC BENEF IT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, THE AO HAS MADE THE ASSESSMEN T AT THE FAG END OF THE YEAR WITHOUT PROVIDING SUFFICIENT OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES, THE AS SESSEE FILED THE ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A), WHICH WAS SENT TO THE A.O. FOR COMMENTS. THOUGH NOTHING SPECIFIC HAS BEEN POINTED OUT WITH REGARD TO THE REMAND REPORT BY ANY OF THE PARTIES APPEARING BEFORE US, B UT IT IS A FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT THE ASSESSEE IS CARRYING OUT THE BUSINESS OF AYURVEDIC MEDICINES IN RETAIL TRADE. TH E AFFIDAVITS PRODUCED BY THE ASSESSEE OF HIMSELF AND HIS BROTHER CANNOT HELP THE CLAIM OF THE ASSESSEE, AS RIGHTLY OBSERVED BY THE LD. CIT(A) IN THIS REGAR D. IN SUCH FACTS AND CIRCUMSTANCES, THE ASSESSEES ACCOUNTS IN TWO BANKS ARE HAVING CASH DEPOSITS AND THE WITHDRAWALS. THE TOTAL RECEIPTS IN THE BANK ACCOUNTS ARE RS.29,52,300/- AND THERE IS NO DISPUTE TO THAT EXTE NT. THOUGH THE AO AS WELL AS THE LD. CIT(A) WITHIN HIS POWER HAS NOT CONDUCT ED ANY INQUIRY WHETHER THE ASSESSEE AT ALL HAS BEEN TRADING IN RETAIL BUS INESS OF AYURVEDIC MEDICINES. THEREFORE, A REASONABLE PRESUMPTION HAS TO BE MADE INSPITE OF ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 8 THE AFFIDAVITS OF THE ASSESSEE AND HIS BROTHER WHIC H THOUGH HAS BEEN REJECTED BY THE LD. CIT(A). THE ASSESSEE IS CARRYING OUT RE TAIL BUSINESS OF AYURVEDIC MEDICINES OR ANY OTHER TYPE. HAVING CONCLUDED RETA IL BUSINESS BEING DONE BY THE ASSESSEE, THE ONLY WAY IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE IS TO WORK OUT THE PEAK WHICH AS AT 08.05.2008 COMES AT RS.2,67,000/- BEING THE HIGHEST BALANCES IN BOTH THE BANKS AFTER DEDUCTING OPENING BALANCE AT THE BEGINNING OF THE YEAR. THIS PEAK OF RS.2,67, 000/- IN FACT, INCLUDES NET PROFIT EARNED BY THE ASSESSEE DURING THE YEAR AND T HE LD. CITA) IS NOT JUSTIFIED IN ADDING NET PROFIT RATE OF 8% AT RS.1,6 9,784/- IN THE SAID PEAK OF RS.2,67,000/-. 9. AS REGARDS GROUNDS NO.1, 2, 3 & 4 IN THE C.O. O F THE ASSESSEE, THEY ARE SUPPORTIVE IN NATURE AND THEREFORE, DO NOT REQU IRE ANY ADJUDICATION. 10. GROUNDS NO. 8 & 10 OF THE C.O. ARE GENERAL IN N ATURE AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 11. AS REGARDS GROUNDS NO.5& 6 OF THE C.O. AND AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE, THE DISPUTE BEFORE US IS WITH REGARD TO CASH DEPOSITS IN THE BANKS AND IT WOULD BE QUITE IRRELEVANT TO T AKE PEAK OF CASH ACCOUNT AT RS.20,017/- AND ACCORDINGLY IN VIEW OF OUR FINDINGS IN REVENUES APPEAL HEREIN-ABOVE SUCH GROUND HAS NO MEANING AND THE SA ME IS REJECTED. THUS, GROUNDS NO. 5 & 6 OF THE C.O. OF ASSESSEE ARE DISMI SSED ITA NO.54(ASR)/2014 C.O.NO.09(ASR)/2014 9 12. AS REGARDS GROUNDS NO. 7, WE HAVE ALREADY HELD IN REVENUES APPEAL THAT THE LD. CIT(A) IS NOT JUSTIFIED IN MAKING A FU RTHER ADDITION OF RS.1,69,784/- BEING 8% OF THE PEAK DEPOSITS IN THE BANK AND ACCORDINGLY, ASSESSEE GETS A RELIEF AND GROUND NO. 7 OF THE C.O . IS PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH AUGUST, 2014. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6TH AUGUST, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.PARAMJIT SINGH, CHANANKE, AMRITSAR. 2. THE ITO WARD 5(3), AMRITSAR. 3. THE CIT(A), AMRITSAR. 4. THE CIT, AMRITSAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR