Shri Mansukh K. Vaghasia, Surat V. The Income Tax Officer, Ward-8(3), Surat

ITA 1070/AHD/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2326 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-02-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 26-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Keywords: Business income; Condonation of delay; Reason to believe; Reassessment proceedings
• Section: 148; 28; 44AD; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.1070/AHD/2015 (Ǔनधा[रणवष[ / Assessment Years: (2010-11) (Virtual Court Hearing) Mansukh K. Vaghasia, Surat C-1-102, Subham Residency, B/H Natvar Nagar, Nana Varachha, Surat-395008. Vs. The ITO, Ward-8(3), Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ACJPV4517A (Assessee) (Respondent) Assessee by: Shri Mehul Shah, CA Revenue by: Shri Sita Ram Meena, Sr. DR स ु नवाईकȧतारȣख/ Date of Hearing : 25/02/2022 घोषणाकȧतारȣख/Date of Pronouncement : 05/04/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to Assessment Year 2010-11, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-V, Surat [in short ‘ld. CIT ‘(A)’], in Appeal No. CAS/V/24/2013-14, dated 22.09.2014, which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 18.03.2013. 2. Grounds of appeal raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in reopening assessment by issuing notice u/s 148 of the IT Act, 1961 and thereby erred in framing assessment u/s 143(3) r.w.s 147 of the I.T. Act, 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making an addition of Rs.13,87,000/- by treating the cash deposit in bank account as Income other Source. Page | 2 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia 3. It is therefore prayed that the above disallowance made by Assessing Officer and confirmed by learned Commissioner of Income-tax (Appeals) may please be deleted. 4. Assessee craves to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. The appeal filed by assessee for Assessment Year 2010-11, is barred by limitation by 132 days. The assessee has moved a petition along with affidavit, requesting the Bench to condone the delay. The main contents of the affidavit, filed before the Bench, are as follows: “1) The assessee begs to prefer this application for condonation of delay in relation to Appeal filed against the order of the Commissioner of Income Tax (Appeals) which is received by the assessee on 15.10.2014. There is a delay of 132 days in filing the appeal before Honourable Tribunal against the order passed by CIT(A)-V, Surat. 2) The delay was caused owing to the fact that the assessee’s counsel received the order of the CIT(A), however mistakenly he forgot to communicate the said fact of receipt of order to assessee as the order remained in the file of the assessee and file was not checked by any partner or staff member of the counsel of the assessee for long. Thereafter on inquiry about the case by assessee, the fact of non-filing of appeal against the said order came to the notice and immediately the appeal was filed thereafter. 3) The issue in this appeal is against the addition of Rs.13,87,000/- by treating cash deposit in bank account as income from other sources made by assessing officer and confirmed by Ld. CIT(A). 4) The assessee submits that the case is a meritorious one and requires consideration. If the delay is not condoned, it would cause irreparable loss to the applicant. 5) Therefore, in the fact and circumstances of the case, the applicant prays to this Honourable Income Tax Appellate Tribunal. (a) to condone the delay of 132 days in filing the Appeal No. 1070/A/2015 and to extend the time for filing the same inclusive and upto the date of filing the appeal. (b) to grant such other and further relief as deemed fit by Honourable Income Tax Appellate Tribunal. 4. The Learned Counsel contended that based on the reasons given in the affidavit the delay may be condoned. Page | 3 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia 5. However, Learned Departmental Representative (ld. DR) for the Revenue, on the other hand, has strongly objected to the prayer for condonation of delay and submitted that the delay cannot be condoned on the mere plea that assessee’s Counsel received the order of the CIT(A), and the Counsel forgot to communicate (the said fact of receipt of order) to the assessee. 6. We have heard both the parties on this preliminary issue.We note that assessee has explained the delay and the reasons for delay which is given in the affidavit. The reasons so explained are satisfactory in nature. We note that because of negligence/ wrong advice of the Tax Professional, the assessee should not be penalized. Hence, we note that reasons given in the affidavit for condonation of delay are convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Having gone through the affidavit as well the delay condonation, application, as noted above, we are of the considered opinion that in the interest of justice, the delay deserves to be condoned. We, accordingly, condone the delay and admit the appeal for hearing on merits. 7. Brief facts of the issue in dispute are stated as under. Before us, assessee is an individual and filed his return of income on 15.03.2011, declaring total income of Rs.1,54,310/- and the same was processed by the Income Tax Department accepting the returned income. 8. Later on, assessee`s case was reopened under section 147 of the Income Tax Act, on the basis of information received from the AIR that assessee has deposited cash of Rs.13,87,000/- in state bank of India. Accordingly, a notice under section 148 of the Act, along with reasons recorded was issued on 21.02.2012 and duly served upon the assessee. Subsequently notices u/s 142(1) was issued on 04.10.2012 and 08.11.2012 and duly served upon the assessee. In response to the above notices, assessee attended and submitted the required details from time to time. During the course of scrutiny proceeding, it was observed that assessee has deposited cash of Rs. 13,87,000/- in the state bank of India in assessment year 2010-11. Therefore, the assessee was asked to explain Page | 4 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia the source of above cash deposit. The assessee appeared before the assessing officer on 17/01/2013 and replied that income of Rs.13,87,000/- was from proceeds of Retail jobwork. However, the assessing officer rejected the contention of the assessee and made addition to the tune of Rs.13,87,000/-. 9. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 10. Shri Mehul Shah, Learned Counsel for the assessee pleads before the Bench stating that assessing officer must have 'reason to believe’ that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Ld. Assessing Officer which may trigger reason to suspect. The ld Counsel pointed out that “reason to believe” must have a rational connection with or relevant bearing on the formation of the belief, i.e, there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the assessment was reopened based on AIR information that assessee has deposited cash in his bank account, however, such cash deposit is out of his business income. Besides, the deposit in the bank account may be out of past savings, therefore, reason to believe, is only kind of a reason to suspect and hence reopening proceedings initiated by the assessing officer is not in accordance with the provisions of section 147 of the Act. 11. On merits, Learned Counsel submits that assessee is a very small trader and filed his return of income under section 44AD of the Act. Since the assessee has filed his return of income under section 44AD of the Act, therefore, the assessee does not supposed to maintain books of accounts. However, the assessee has been maintaining, memorandum books of accounts for his own purpose and the same were submitted before the assessing officer to prove the bona-fide of the Page | 5 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia transactions. Therefore, assessee filed all possible documents before the assessing officer, hence addition made by the assessing officer may be deleted. 12. On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submits that reasons recorded by the Assessing Officer are valid in the eye of law, therefore reassessment proceedings initiated by the Assessing Officer is valid. On merits, ld DR submits that assessee has not explained the transactions properly, therefore addition made by the assessing officer may be confirmed. 13. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessing officer made addition of Rs.13,87,000/-, (cash deposited in bank account), as the assessee could not furnish satisfactory evidence regarding his income from job- work and retail trading. We note that assessee is a small trader, having turnover of Rs. 16,02,300/- only, therefore he filed his return of income under section 44AD of the Act. Section 44AD provides that where the assessee is engaged in eligible business as proprietor under that section, a sum equal to 8% of the gross receipts shall be deemed to be the profits and gains of such business. Section 44AD exempts the assessee from maintenance of books of accounts. Once the income of the assessee is accepted u/s 44AD, then in that circumstances the Assessing Officer could make further additions. The provisions of section 44AD of the Act, is reproduced below( to the extent applicable to our analysis): “ Special provision for computing profits and gains of business on presumptive basis. 44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits Page | 6 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia and gains of such business chargeable to tax under the head "Profits and gains of business or profession" 14. In the light of the provisions of section 44AD of the Act, we note that assessee has filed his return of income under section 44AD of the Act and shown turnover of Rs. 16,02,300/-, which falls in the scope of provisions of section 44AD of the Act. The cash deposit in the bank account is to the tune of Rs.13,87,000/-, as noted by the assessing officer. As per assessee, the said cash deposited in bank account is out of cash turnover of Rs. 16,02,300/-, as declared by the assessee, therefore, we note that such small assessee has proved his bona fide, about the cash so deposited in the bank account. The ld Counsel pleads before us that while filing return of income, the assessee has selected wrong Income Tax Return form (ITR form), that does not mean that assessee is not covered by the provisions of section 44AD of the Act. Moreover, the assessee had disclosed the said bank account while filing the belated return of income for retail job-work and trading income on the basis of estimated profit on turnover of Rs. 16,02,300/-. The ld Counsel submitted that assessee had shown Gross Profit of Rs.2,56,230/- and net profit of Rs.1,58,395/- on his turnover. The net profit ratio comes to 9.88% of the turnover, which is greater than the 8% of profit in cases of section 44AD of the Act. Therefore, we note that based on this factual position, the addition made by the assessing officer should be deleted. 15.Moreover, the assessee submitted memorandum Trading and Profit and Loss account and Balance Sheet. We note that assessing officer has not made any adverse finding in any of these documents even, though all the details were furnished by the assessee before him. The assessing officer ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable and how these are fabricated documents. It is a well settled Law that when an assessee has all the possible Page | 7 ITA No.1070/AHD/2015 Assessment Year. 2010-11 Mansukh K. Vaghasia evidence in support of its claim, they cannot be brushed aside based on surmises. Therefore, based on the facts and circumstances, as narrated above, we delete the addition. 16. As we have adjudicated the issue on merits and allowed the appeal of the assessee, therefore grounds raised by the assessee challenging the reopening the assessment under section 147 of the Act, do not require adjudication. 17. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 05/04/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / Ǒदनांक/ Date: 05/04/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat