Sorabh Kumar, New Delhi V. ITO, Ward-46(4), New Delhi

ITA 113/DEL/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2117 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 06-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Peak credit; Tangible material; Reason to believe; Reassessment proceedings
• Section: 44AD; 143(3); 142(1); 69A; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, SMC-1: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.113/DEL/2020 [ASSESSMENT YEAR: 2011-12] SHRI SORABH KUMAR, 1111, KUCHA HARJUSMAL, SITA RAM BAZAR, NEAR BIDYA MANDIR SCHOOL, NEW DELHI-110006 INCOME TAX OFFICER, WARDE-46(4), NEW DELHI PAN-BCJPK5035K ASSESSEE REVENUE ASSESSEE BY SH. RAJEEV SABHARWAL, FCA REVENUE BY SHRI R. K. GUPTA, SR. DR DATE OF HEARING 15.06.2021 DATE OF PRONOUNCEMENT 24.06.2021 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 10.10.2019 OF THE LEARNED CIT(A)-16, NE W DELHI, RELATING TO ASSESSMENT YEAR 2011-12. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND HAD NOT FILED HIS RETURN OF INCOME. IN THIS CASE, INFORMATION WAS AVAILABLE WITH THE DEPARTMENT THAT THE ASSESSEE HAS DEPOSITED CASH OF RS.38,91,055/- IN TH E BANK 2 ITA NO.113/DEL/2020 ACCOUNT DURING THE FINANCIAL YEAR 2010-11. SINCE, THE ASSESSEE HAD NOT FILED HIS RETURN OF INCOME AND ALSO NO ASSE SSMENT U/S 143(3) OF THE ACT HAS TAKEN IN THE CASE OF THE ASSE SSEE FOR THE RELEVANT ASSESSMENT YEAR, THEREFORE, THE AO REOPENE D THE ASSESSMENT OF THE CASE OF THE ASSESSEE U/S 147 OF T HE ACT BY RECORDING REASONS AND AFTER OBTAINING NECESSARY APP ROVAL FROM THE COMPETENT AUTHORITIES. NOTICE U/S 148 OF THE A CT DATED 31.03.2018 WAS ISSUED AND SERVED ON THE ASSESSEE. I N RESPONSE TO THE NOTICE, NO REPLY WAS FILED BY THE ASSESSEE. THE AO, THEREAFTER, ISSUED NOTICE U/S 142(1) OF THE ACT. H OWEVER, THE SAME ALSO REMAINED UNCOMPILED WITH. THE AO, THEREAF TER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING HIM TO EXPLAIN AS TO WHY THE ASSESSMENT SHOULD NOT BE PASSED U/S 1 44 OF THE ACT AND ADDITION OF RS.38,91,055/- BE MADE TO THE T OTAL INCOME OF THE ASSESSEE ALONG WITH THE INTEREST ON THE SAID BANK ACCOUNT. 3. THE ASSESSEE SOUGHT ADJOURNMENT AND THEREAFTER ATTENDED THE PROCEEDINGS WITHOUT ANY DOCUMENTS. SI NCE, ON THE LAST DATE OF HEARING, THERE WAS NO COMPLIANCE F ROM THE SIDE OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE HAS NO EXPLANATION FOR EXPLAINING THE SOURCE OF THE CASH D EPOSITS. HE, 3 ITA NO.113/DEL/2020 THEREFORE, MADE ADDITION OF RS.38,91,055/- TO THE T OTAL INCOME OF THE ASSESSEE AS UNEXPLAINED MONEY U/S 69A OF THE ACT. 5. THE AO FURTHER MADE ADDITION OF RS.2,313/- BEIN G INTEREST FROM THE SAVINGS BANK ACCOUNT. THUS, THE AO COMPLETED THE ASSESSMENT ON THE TOTAL INCOME OF THE ASSESSEE AT RS.38,93,368/-. 6. BEFORE THE LEARNED CIT(A), IT WAS ARGUED THAT T HE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SMAL L BUSINESS OF PURCHASE AND SALE OF OLD DHOTI USED IN POLISHING OF FURNITURE AND PAINT. THE GOODS DEALT WITH THE ASSESSEE ARE E XEMPTED FROM VAT AT ALL TIME AND THEREFORE, THE ASSESSEE WA S NOT LIABLE FOR ANY REGISTRATION UNDER VAT. IT WAS EXPLAINED TH AT THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME SINCE H IS TAXABLE INCOME WAS BELOW THE LIMIT PRESCRIBED UNDER THE ACT . THE ASSESSEE FILED THE SCANNED COPIES OF PURCHASES AND SALES INVOICES FOR THE IMPUGNED ASSESSMENT YEAR. IT WAS ARGUED THAT THE CASH DEPOSITED IN THE BANK ACCOUNT REPRESENTED THE MONEY COLLECTED FROM THE CUSTOMERS AND WITHDRAWAL IS THE PAYMENT TO THE VENDORS AND TO THE SHOPKEEPERS. IT WAS ARGUED THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE CASH DEPOSI TS IN THE 4 ITA NO.113/DEL/2020 SAVING BANK ACCOUNT REPRESENT THE CASH SALES AND CO LLECTION FROM THE CUSTOMERS. IT WAS ACCORDINGLY REQUESTED FOR DELETION OF THE ADDITION. 7. HOWEVER, THE LEARNED CIT(A) WAS NOT SATISFIED W ITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE HELD THA T THE ASSESSEE COULD NOT SUBSTANTIATE BEFORE HIM THAT THE CASH DEPOSITS AND WITHDRAWALS ARE ON ACCOUNT OF ONGOING BUSINESS ACTIVITY, SINCE, THE ASSESSEE COULD NOT SUBSTANTIAT E BY ANY CORROBORATING DOCUMENTS OR EVIDENCE IN THE NATURE O F SALE BILLS, PURCHASE BILLS AND THE LEDGER ACCOUNT OF PURCHASE O R SALE. ACCORDING TO HIM, THE CLAIM OF THE ASSESSEE THAT HE IS TRADING IN OLD DHOTI USED IN POLISHING OF FURNITURE AND PAINT IS NOT SUBSTANTIATED WITH ANY EVIDENCE WHATSOEVER. HE ALS O EXAMINED THE APPLICABILITY OF SECTION 44AD AND HELD THAT THE SAME CANNOT BE ACCEPTED. THE THEORY OF THE PEAK CREDIT WAS ALSO REJECTED BY THE LEARNED CIT(A). HE ACCORDINGLY UPHELD THE ACTI ON OF THE AO. 8. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISIN G THE FOLLOWING GROUNDS:- 5 ITA NO.113/DEL/2020 1 THAT BOTH THE INITIATION OF PROCEEDINGS UNDER SECTI ON 147 OF THE ACT AND, COMPLETION OF ASSESSMENT UNDER SECTION 147 /143(3) OF THE ACT WERE WITHOUT JURISDICTION AND HENCE DESERVE TO BE QUASHED AS SUCH. 1.1 THAT SINCE THERE WAS NO SPECIFIC RELEVANT, RELIABLE AND TANGIBLE MATERIAL ON RECORD TO FORM A REASON TO BELIEVE TH AT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT AND IN VIEW THEREO F THE PROCEEDINGS INITIATED ARE ILLE GAL INVALID, UNTENABLE AND THEREFORE UNSUSTAINABLE. 1.2 THAT REASONS WERE RECORDED MECHANICALLY WITHOUT APP LICATION OF MIND AND THEREFORE DO NOT CONSTITUTE VALID REASON TO BELIEVE FOR ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. 1.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT MERE CASH DEPOSIT ALONE T OGETHER WITH NON FILING OF THE RETURN BY THE APPELLANT FOR THE I NSTANT YEAR COULD NOT BE A BASIS IN ABSENCE OF ANY ENQUIRIES PRIOR TO ISSUE OF NOTICE U/S 148 OF THE ACT TO ASSUME JURISDICTION U/S 147 OF THE ACT AND FRAME THE IMPUGNED ORDER U/S 147/143(3) OF THE ACT. 1.4 THAT IN ABSENCE OF ANY VALID APPROVAL OBTAINED UNDE R SECTION 151 OF THE ACT, INITIATION OF PROCEEDINGS U/S 147 OF TH E ACT AND ASSESSMENT FRAMED U/S 147/143(3) OF THE ACT ARE INVALID AND DESERVE TO BE QUASHED AS SUCH. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMIN G AN ADDITION OF RS. 38,93,368/- REPRESENTING ALLEGED UNEXPLAINED CA SH DEPO SITS IN THE BANK ACCOUNT OF THE APPELLANT AND BROUGHT TO TAX UNDER SECTION 69A OF THE ACT. 2.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FAILED TO APPRECIATE THAT ASSESSEE WAS ENGAGED IN T HE BUSINESS OF PURCHASE AND SALE OF OLD DHOTI USED IN POLISHING OF FURNITURE AND PAINTS AND THEREFORE INCOME OUGHT TO HAVE BEEN COMPUTED U/S 44 AD OF THE ACT AND THUS ADDITION MADE U/S 69A OF THE ACT IS MISCONCEIVED, MISPLACED AND NOT IN ACCORDANCE WI TH LAW. 2.2 THAT THE FINDING OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) THAT CASH DEPOSITS AND WITHDRAWALS WERE REFLECTIVE OF ONGOING BUSINESS ACTIVITY IS NOT SUBSTANTIATED BY A NY CORROBORATING DOCUMENTARY EVIDENCE IN THE NATURE OF SALE BILLS, PURCHASE BILLS OR LEDGER ACCOUNTS OF PURCHASE OR SA LES' FACTUALLY INCORRECT, IS LEGALLY MISCONCEIVED AND WHOLLY UNTEN ABLE. 2.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FAILED TO APPRECIATE THAT EVEN ASSUMING THERE WAS N O BUSINESS CASH DEPOSITS WERE EXPLAINED OUT OF CASH WITHDRAWAL S AND HENCE EVEN OTHERWISE ADDITION MADE AND SUSTAINED IS UNTEN ABLE. 2.4 THAT FURTHER MORE THE FINDING THAT THEORY OF PEAK C REDIT IS NOT APPLICABLE TO THE FACTS OF THE CASE IS ALSO NOT IN ACCORDANCE WITH LAW. 6 ITA NO.113/DEL/2020 9. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PR ESS THE GROUND CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS. SO FAR AS THE MERITS OF THE CASE IS C ONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAM E ARGUMENTS AS MADE BEFORE THE LEARNED CIT(A). REFERRING TO PAG E-28 TO 75 OF THE PAPERBOOK, HE SUBMITTED THAT DETAILS OF COPY OF SALE BILLS WERE SUBMITTED BEFORE THE LEARNED CIT(A). SIMILARL Y, REFERRING TO PAGES 76 TO 101 OF THE PAPER BOOK, HE SUBMITTED THAT COPY OF PURCHASE BILLS WERE SUBMITTED BEFORE THE LEARNED CI T(A). REFERRING TO PAGES 106 TO 109 OF THE PAPER BOOK, TH E LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE ORDER PASSED U/S 143(3) OF THE ACT DATED 28 TH JUNE, 2019 FOR AY 2012-13 BY THE SAME AO I.E MR. D.S. NEGI, ITO, WARD -46(4), WHEREIN HE HAS ACCEPTED THE INCOME BASED ON SECTION 44AD AS PER RETURN OF INCOME FILED AT RS.1,70,800/-, WHICH IS 10.5% OF THE CASH DEPOSITS OF RS.16,12,224/-. HE SUBMITTED T HAT IN THE SUCCEEDING YEAR ALSO THE CASE WAS REOPENED FOR CASH DEPOSIT IN THE SAVING BANK ACCOUNT. HE SUBMITTED THAT THE DEP ARTMENT CANNOT HAVE TWO DIFFERENT VIEWS AND SHOULD BE CONSI STENT IN ITS APPROACH AND ADOPT THE SAME CRITERIA OF ASSESSMENT DONE IN SUBSEQUENT YEARS ON SAME FACTS AND CIRCUMSTANCES OF THE CASE. 7 ITA NO.113/DEL/2020 HE AGAIN SUBMITTED THAT THE CASH TRANSACTIONS PERTA INING TO THE BANK ACCOUNT ARE RELATED TO THE DAY TO DAY SALE PRO CEEDS OF THE ASSESSEE, WHICH ARE FULLY EXPLAINABLE. HE ACCORDING LY SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY T HE LEARNED CIT(A) IS NOT JUSTIFIED. HE ALSO RELIED ON VARIOUS DECISIONS. 10. THE LEARNED DR ON THE OTHER HAND HEAVILY RELIE D ON THE ORDER OF THE LEARNED CIT(A). 11. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LEA RNED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE AO IN THE INSTANT CASE MADE ADDITION OF 38,91,055/- U/ S 69A OF THE ACT AS UNEXPLAINED MONEY ON THE GROUND THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE SOURCE OF CASH DEPOSITS OF THE ABOVE AMOUNT IN THE BANK ACCOUNT MAINTAINED WITH HDFC BAN K, INDARPURI BRANCH. I FIND THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT SU BSTANTIATE THAT THE DEPOSITS AND WITHDRAWALS ARE ON ACCOUNT OF SALE AND PURCHASE, SINCE, THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENT OR EVIDENCE IN THE NATURE OF SALE BILLS, PURCHASE B ILLS AND LEDGER ACCOUNT OF SALE AND PURCHASE. HE ALSO REJECTED THE THEORY OF 8 ITA NO.113/DEL/2020 PEAK CREDIT AND THEORY OF PREVIOUS CASH WITHDRAWALS ELIGIBLE FOR SUBSEQUENT DEPOSITS. IT IS THE SUBMISSION OF THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS ENGAG ED IN THE SMALL BUSINESS OF SALE AND PURCHASE OF OLD DHOTI US ED IN POLISHING OF FURNITURE AND PAINT. THE ASSESSEE IS NOT LIABLE FOR ANY REGISTRATION UNDER VAT AS THE GOODS IN WHICH TH E ASSESSEE DEALS WITH FALL UNDER THE EXEMPTED GOODS UNDER THE ACT. SINCE, THE INCOME OF THE ASSESSEE IS BELOW THE TAXABLE LIM IT, THE ASSESSEE DID NOT FILE RETURN OF INCOME. IT IS ALSO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT HE HAS PRODUCED THE NECESSARY PURCHASE AND SALE BILLS BEFORE THE AO AND THE CIT(A) AND IN THE SUBSEQUENT YEAR, THE AO HAD PASSE D THE ORDER U/S 147/143(3) OF THE ACT DETERMINING THE TOT AL INCOME OF THE ASSESSEE AT RS.1,70,800/- ON THE TOTAL CASH DEP OSITS OF RS.16,12,224/- WHICH COMES TO 10.57%. 12. I FIND SOME FORCE IN THE ABOVE ARGUMENTS OF TH E LEARNED COUNSEL FOR THE ASSESSEE. THE PAPER BOOK FI LED ON BEHALF OF THE ASSESSEE SHOWS THAT THE ASSESSEE HAS FILED T HE COPY OF SALE BILLS AND THE PURCHASE BILLS BEFORE THE LEARNE D CIT(A) TO SUBSTANTIATE THE SALE AND PURCHASE. FURTHER IN THE SUBSEQUENT ASSESSMENT YEAR, THE CASE OF THE ASSESSEE WAS RE-OP ENED ON 9 ITA NO.113/DEL/2020 ACCOUNT OF CASH DEPOSITS OF RS.16,12,224/- IN UNION BANK OF INDIA AND THE AO PASSED THE ORDER U/S 143(3) OF THE ACT ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.1, 70,800/- WHICH COMES TO 10.59% OF THE TOTAL DEPOSITS. THE RE LEVANT ASSESSMENT ORDER PASSED BY THE SAME ASSESSING OFFIC ER WHO HAS PASSED THE ORDER FOR THE IMPUGNED ASSESSMENT YE AR READS AS UNDER:- 10 ITA NO.113/DEL/2020 13. SINCE, THE AO IN THE SUBSEQUENT YEAR HAS ACCEP TED THE SUBMISSION OF THE ASSESSEE THAT IT IS ENGAGED I N THE BUSINESS OF HARDWARE AND TOOLS, THEREFORE, CONSIDER ING THE TOTALITY OF FACTS OF THE CASE, I AM OF THE CONSIDER ED OPINION THAT BUSINESS ACTIVITIES CARRIED OUT BY THE ASSESSEE CAN NOT BE SIMPLY REJECTED AND THE ENTIRE CASH DEPOSITS CANNOT BE BRO UGHT TO TAX AS UNEXPLAINED INCOME. SINCE, THE ASSESSEE IN THE INSTANT CASE HAS FILED PURCHASE AND SALE BILLS BEFORE THE L EARNED CIT(A), THEREFORE, THE BUSINESS ACTIVITY IS ESTABLISHED. FURTHER, THERE IS NO QUERY EITHER BY THE AO OR BY THE LEARNED CIT( A) REGARDING THE UTILIZATION OF THE SUBSTANTIAL WITHDRAWALS FROM THE SAID BANK ACCOUNT TO THE EXTENT OF RS.37,40,100/-. LOOK ING TO THE FACTS OF THE PRESENT CASE AND IN VIEW OF VARIOUS DO CUMENTS FILED IN THE PAPER BOOK CONTAINING SCANNED COPIES OF PURC HASE AND SALE BILLS, I AM OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 38,91,055/- MADE BY THE AO ON ACCOUNT OF CASH DEPOSITS IN THE B ANK ACCOUNT. SINCE, THE SAME AO IN THE SUBSEQUENT ASSE SSMENT YEAR HAS ACCEPTED THE PROFIT RATE OF 10.59% U/S 44A D OF THE ACT, THEREFORE, CONSIDERING THE TOTALITY OF THE FAC TS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT ADOPTION OF NET P ROFIT @ 11% 11 ITA NO.113/DEL/2020 ON THE TOTAL BANK DEPOSITS OF RS.38,91,055/- WILL M EET THE ENDS OF THE JUSTICE. I HOLD AND DIRECT ACCORDINGLY. GROU NDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 24/06/202 1. SD/- [K.N. CHARY] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 24/06/2021. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI