Nirmal Kumar Jain, New Delhi V. ITO, New Delhi

ITA 1285/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7579 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 08-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Salary income; Revised return
• Section: 44AD; 143(3); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO: 1285/DEL/2016 AY : - 2011-12 NIRMAL KUMAR JAIN, VS. INCOME TAX OFFICER 195/2, PUNJA SHARIF, PREM GALI WARD 35(5), [OLD W- 20(2)] KASHMERE GATE, DELHI 110 006 NEW DELHI PAN AAEPJ6164C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI REPUDAMAN, CA DEPTT. BY : SHRI SHARVAN GOTRU, SR. DR DATE OF HEARING : 5.4. 2016 DATE OF PRONOUNCEMENT :2.6 .2016 O R D E R PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT(A)-32 NEW DELHI VIDE ORDER DATED 29.12.2015 ON THE FOLLOWING GROUNDS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION OF THE CIT(A) - 32, NEW DELHI, IS ARBITRARY, FALLACIOU S AND ILLEGAL ON THE FOLLOWING GROUNDS AND, THEREFORE, MERITS TO BE QUASHED WITH D IRECTIONS FOR APPROPRIATE RELIEF TO THE ASSESSEE:- 1) THAT CIT (A) ERRED IN CONFIRMING THE ORDER, ONLY BY PROVIDING PARTIAL RELIEF, BEING PASSED BY ASSESSING OFFICER U/S. 143(3) OF TH E ACT, AND FAILED TO APPRECIATE THAT: A) SCRUTINY THROUGH CASS, ON THE BASIS OF 'AIR INFO RMATION' IS HAVING A LIMITED SCOPE IN VIEW OF C.B.D.T GUIDELINES 1 INSTR UCTIONS AS REPORTED IN [2006] 157 TAXMAN 1(ST) AS WELL AS C.B.D.T INSTRUCT ION VIS-A-VIS AIR SCRUTINY [F.NO.225/26/2006-ITA.1I (PT.)], DATED THE 8TH SEPTEMBER, 2010; ITA NO. 1285/DEL/2016 2 B) SUCH SCRUTINY WAS PRETENDED TO BE REGULAR SCRUTI NY ASSESSMENT AND HENCE, THE ENTIRE INFORMATIONS 1 DOCUMENTARY EVIDENCES, BE ING COLLECTED, WERE EITHER IGNORED OR MISUSED; C) THE ISSUE, OF INCONSISTENCY OR CONTRADICTION IN THE RELEVANT PROVISIONS OF THE STATUTE AND THE INSTRUCTION, IS TO BE DECIDED BY TH E COURT AND NOT BY AN INCOME-TAX AUTHORITY U/S. 116 [SAY, CIT(A)], BEING SUBORDINATE TO CBDT; D) WHEN AN INSTRUCTION REMAINS IN OPERATION, THE RE VENUE IS BOUND BY IT AND CANNOT BE ALLOWED TO PLEAD THAT IT IS NOT VALID NOR THAT IT IS CONTRARY TO THE TERMS OF THE STATUTE; HENCE, THE ENTIRE PROCEEDINGS ARE IN VIOLATION OF S EC.119 OF THE INCOME-TAX ACT VIS-A-VIS ARTICLE 141 & 227 OF THE CONSTITUTION AND THEREFORE, VOID AB- INITIO. 2) THAT THE CIT(A) ERRED IN GIVING ONLY A PARTIAL R ELIEF AND FURTHER FAILED TO APPRECIATE THAT THE ASSESSING OFFICER ERRED : A) IN CALCULATING AND TREATING THE CASH DEPOSIT OF RS.1 ,30,99,337/- AS ADDITIONAL SALES AND FURTHER ESTIMATING PROFITS ON SUCH DEPOSITING @ 8% U/S. 44AD AND CONSIDERING SUCH PROFITS (RS.10,47,947/-) AS INCOME FROM UNDISCLOSED SOURCES U/S. 68 OF THE INCOME-TAX ACT, 1961; B) IN NOT ACCEPTING TURNOVER OF RS.40,58, 112/- U/S . 44AD; C) IN IGNORING THE STATUTORY PROVISION OF SEC.44AD( 5), I.E., EXEMPTION FROM MAINTAINING BOOKS OF ACCOUNT [SEC.44AA(2)(VI)] AND AUDIT [SEC.44AB]; D) IN NOT CONSIDERING THAT IN VIEW OF APPLICABILITY OF SEC.44AO, THE ASSESSEE WAS NOT UNDER OBLIGATION TO EXPLAIN INDIVIDUAL ENTR Y OF CASH DEPOSIT IN THE BANK UNLESS SUCH ENTRY HAD NO NEXUS WITH THE GROSS RECEIPTS; E) IN FAILING TO CONSIDER THAT THE REVISED RETURN S UBSTITUTE THE ORIGINAL RETURN FROM THE DATE OF FILING THE ORIGINAL RETURN FOR THE PURPOSE OF ASSESSMENT; F) IN NOT UNDERSTANDING THE BASIC PRINCIPLE OF TAXA TION THAT NEITHER THE RULE OF RES JUDICATA NOR THE RULE OF ESTOPPEL IS APPLICABLE TO AN ASSESSMENT PROCEEDING; HENCE, THE FINDING THAT ALL CREDIT ENTR IES WERE UNDISCLOSED SALE & THOSE AMOUNTS WERE INCOME FROM UNDISCLOSED SOURCES U/S. 68 WAS NOT BASED ON ANY EVIDENCE OR WAS, FOR OTHER REASONS, PERVERSE , BEING IN TOTAL DISREGARD OF FILING OF CASH BOOK, BANK BOOK, SALES BOOK AS WE LL AS LEDGERS (BEING PREPARED FROM MEMORANDUM RECORD) AND HENCE, SUCH AD DITION MUST BE DELETED IN TOTO. 3) THAT CIT(A) FAILED TO APPRECIATE THAT THE ASSESS ING OFFICER ERRED IN INVOKING TWO DEEMING PROVISIONS [I.E., SEC.44AD & SEC.68] IN RESPECT OF SAME TRANSACTIONS IN TOTAL DISREGARD OF DOCUMENTARY EVID ENCES [CASH BOOK, BANK BOOK, SALES BOOK AS WELL AS LEDGERS (BEING PREPARED FROM MEMORANDUM ITA NO. 1285/DEL/2016 3 RECORD)] BEING PRODUCED BEFORE BOTH AUTHORITIES [I. E., ASSESSING OFFICER & CIT(A)] AND THUS CONVERTING GOOD PROOF INTO NO PROO F. 4) THAT CIT(A) FAILED TO APPRECIATE THAT THE ASSESS MENT HAS BEEN COMPLETED U/S. 143(3) AND NOT U/S. 144 BY INVOKING THE PROVIS ION OF SEC.145(3) OF THE ACT (I.E., BOOKS REJECTION), BEING A PRIMA FACIE EV IDENCE OF GENUINENESS OF THE TRANSACTION. 5) THAT CIT(A) ERRED IN NOT DISMISSING THE GROUND O F INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 6) THAT CIT(A) ERRED IN NOT DISMISSING THE GROUND O F INITIATING PENALTY PROCEEDINGS U/S 271 B OF THE ACT. 7) THAT THE APPELLANT CRAVE LEAVE TO TAKE ADDITIONA L GROUND OR GROUNDS OF APPEAL OR TO ALTER OR VARY ANY OR ALL THE GROUNDS O F APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. ALL THE GROUNDS OF THE APPEAL ARE RELATING TO SINGL E ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF CASH DEPOSIT I N VARIOUS BANK ACCOUNTS AND PROFIT ESTIMATED THEREON. THEREFORE, WE DECIDE ALL THE GROUNDS TOGETHER. 3. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE FILED ITS RETURN OF INCOME ON 31.7.2011 DECLARING TOTAL INCOME OF RS. 2,20,572/-. IN THE RETURN OF INCOME ASSESSEE HAS SHOWN SALARY OF RS. 2,19,817/- AND INC OME FROM OTHER SOURCES OF RS. 755/-. THIS RETURN OF INCOME WAS REVISED ON 22 ND AUGUST 2012 WHEREIN INCOME OF RS. 5,52,486/- WAS SHOWN AND INCLUDED BUS INESS INCOME OF RS. 3,24,649/- WAS NOT COVERED IN THE ORIGINAL RETURN OF INCOME. T HE BUSINESS INCOME WAS COMPUTED BY THE ASSESSEE SHOWING HIS TOT AL SALES FROM THE BUSINESS IS RS. 40,58,112/- @ 8% PROFIT THEREON U /S 44AD OF THE ACT AMOUNTING TO RS. 3,24,649/-. 4. BASED ON INFORMATION RECEIVED ON ANNUAL INFORMATION RETURN, IT WAS FOUND THAT ASSESSEE HAS DEPOSITED RS. 1,50,05,020/- IN CASH IN HIS TWO BANK ACCOUNTS ITA NO. 1285/DEL/2016 4 MAINTAINED WITH THE ICICI BANK LTD. DURING THE YEAR . ASSESSEE WAS ASKED TO FILE COPIES OF VARIOUS BANK ACCOUNTS AND FROM THO SE BANK ACCOUNTS IT WAS FOUND THAT ASSESSEE HAS DEPOSITED CASH OF RS. 1,49, 27,092/- IN ICICI BANK, RS. 3,11,621/- IN ORIENTAL BANK OF COMMERCE , RS. 3 ,80,800/- IN STATE BANK OF INDIA AND RS. 1,83,500/- IN PUNJAB NATIONAL BANK. T HEREFORE TOTAL BANK DEPOSITS IN CASH AMOUNTED TO RS. 1,58,03,013/-. BEF ORE THE AO, THE LD. AR FAILED TO FURNISH THE EVIDENCES TO SUBSTANTIATE THE BUSINESS ACTIVITIES CARRIED OUT BY THE ASSESSEE DURING 1.4.2010 TO 31.3.2011. EVEN THEN THE LD. AO HAS ESTIMATED THE TOTAL PROFIT @ 8% ON RS. 1,30,99,337 /- ESTIMATED 8% PROFIT THEREON AND MADE ADDITION OF RS. 10,47,947/- TO THE TOTAL INCOME OF THE ASSESSE AND DETERMINED ASSESSED INCOME AT RS. 15,88 ,090/-. AGGRIEVED BY THE ORDER OF THE AO THE MATTER WAS CARRIED BEFORE L D. CIT(A). LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT CASH DEPOSIT OF RS. 1,30,99,337/- IS UNACCOUNTED TURNOVER OF THE ASSES SEE. HOWEVER HE REDUCED THE PERCENTAGE OF THE PROFIT FROM 8% TO 5% AND TH EREFORE OUT OF THE TOTAL ADDITION OF RS. 10,47,947/- HE GRANTED A RELIEF OF RS. 3,92,980/- AND CONFIRMED THE ADDITION OF RS. 6,54,967/-. AGGRIEVED BY THIS THE ASSESSEE HAS FILED APPEAL BEFORE US. 5. LD. AR OF THE APPELLANT SUBMITTED THAT THE CASE OF THE ASSESSEE IS SELECTED BASED ON AIR INFORMATION AND RELIED ON THE CBDT INS TRUCTION DATED 8 TH SEPTEMBER 2010, WHICH STATED THAT SCRUTINY OF SUCH CASES WOULD BE LIMITED ONLY TO THE ASPECTS OF INFORMATION RECEIVED THROUGH AIR. IN THE PRESENT CASE, LD. AO HAS GONE BEYOND THE AIR INFORMATION WITHOUT APPROVAL OF THE ADMINISTRATIVE COMMISSIONER AND THEREFORE THE ADDIT ION MADE SHOULD BE ITA NO. 1285/DEL/2016 5 DELETED. HE FURTHER SUBMITTED THAT ASSESSEE HAS ALR EADY SHOWN INCOME U/S 44AD OF THE INCOME TAX ACT WHERE HE HAS ALREADY INC LUDED THE SALES OF RS. 40,58,112/- AND THEREFORE THE ABOVE DEPOSIT OF CASH IS OUT OF SALES TURNOVER OF THE ASSESSEE. HE FURTHER STATED THAT CASH DEPOSI T OUT OF CASH IS CASH ON HAND, CASH DEPOSIT FROM OLD CUSTOMERS, ADVANCES REC EIVED ETC. CANNOT BE CONSIDERED AS GROSS RECEIPT. HE FURTHER SUBMITTED T HAT THE AO HAS BEEN GIVEN A CASH BOOK SHOWING SOURCE OF CASH RECEIPT AND PAY MENTS COVERING ALL THESE BANKS WHERE STATE BANK OF INDIA, PUNJAB NATIONAL BA NK, ORIENTAL BANK OF COMMERCE ARE ALSO DESCRIBED AND SOURCE OF THE CASH IS AVAILABLE IN THE CASH BOOK. HE THEREFORE STATED THAT WHEN ALL TRANSACTION S OF CASHBOOK ARE REFLECTED IN THE BOOKS OF ACCOUNTS PREPARED BY THE ASSESSEE F URTHER ADDITION MADE BY THE AO IS UNSUSTAINABLE. 6. AGAINST THIS LD. DR SUBMITTED THAT ASSESSEE HAS DEP OSITED CASH IN THE VARIOUS BANK ACCOUNTS. LD. AO AND LD. CIT(A) HAVE RIGHTLY C OMPUTED THE PROFIT THERE UNDER AND ADDITION IS MADE. HE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITY. HE FURTHER SUBMITTED THAT THE PROFIT A ND LOSS ACCOUNT AND BALANCE SHEET SUBMITTED WAS NOT BEFORE AO. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION. BASED ON THE AIR INFORMATION WHICH WAS FOUND THAT ASSESSEE HAS DEPOS ITED CASH OF RS. 1,50,05,020/- IN THE ICICI BANK. ON INQUIRY, LD. A O FOUND THAT IN OTHER THREE DIFFERENT BANKS SUM OF RS. 8,75,921/- IS CAS H DEPOSITED. BEFORE THE AO ASSESSEE SUBMITTED CONTENTIONS VIDE LETTER UNDATED FILED AT PAGE NO. 110-111 OF THE PAPER BOOK SHOWING CASHBOOK OF THE ASSESSE E FROM 1.4.2010 TO ITA NO. 1285/DEL/2016 6 31.3.2011. THIS LETTER ALSO CONTAINED BANK STATEMEN T SHOWING DEPOSITS AND WITHDRAWALS ALONG WITH SUMMARY OF SALES. IT IS AN A DMITTED FACT THAT ACCORDING TO THE PROFIT AND LOSS ACCOUNT SUBMITTED BY THE ASSESSEE AT PAGE NO. 106 OF THE PAPER BOOK SALES IS ONLY OF RS. 40 ,58,112/-. HOWEVER, THE ASSESSEE HAS EXPLAINED THE TOTAL CASH DEPOSIT OF RS . 1,58,03.013/- IN FIVE BANK ACCOUNT. THE CLAIM OF THE ASSESSEE IS THAT SAL ES OF THE ASSESSEE IS ONLY RS. 40,58,112/- AND OTHER RECEIPTS ARE ON ACCOUNT O F OTHER CASH TRANSACTIONS WHICH ARE INTERBANK TRANSACTIONS, I.E. CASH DEPOSIT FROM ONE BANK IS OUT OF CASH WITHDRAWAL FROM OTHER BANKS. THEREFORE SUCH TRANSACTION PRIMA FACIE CANNOT BE UNACCOUNTED TURNOVER OF THE ASSESSEE. UND ISPUTEDLY SUCH TRANSACTIONS CANNOT BE CONSIDERED FOR ESTIMATING TH E BUSINESS INCOME OF THE ASSESSEE. FURTHERMORE ASSESSEE HAS GIVEN A RECONCIL IATION OF THE AMOUNT OF CASH DEPOSITED OF RS. 1,49,27,029/- IN ICICI BANK S TATING THAT RS. 82,54,580/- IS CASH DEPOSIT OUT OF CASH WITHDRAWALS FROM VARIOU S BANKS. IT WAS FURTHER STATED THAT RS. 5,50,000/- IS RECEIVED IN CASH FROM DEBTORS OUTSTANDING. THE AO HAS NOT VERIFIED THESE CLAIMS SPECIFICALLY MADE BEFORE THE AO VIDE LETTER DATED 17.2.2014. FURTHERMORE THE LD. CIT(A) HAS AL SO NOT CONSIDERED THIS ASPECT BUT HAS MERELY STATING THAT CASH BOOK PREPA RED BY THE ASSESSEE IS NOT RELIABLE CANNOT LEAD TO THE ADDITION OF THE WHOLE C ASH DEPOSIT AS GROSS SALES OF THE ASSESSEE. FURTHERMORE ASSESSEE HAS SHOWN OPENIN G BALANCE AS ON 1.4.2010 IN THE CASH BOOK OF RS. 2,03,550/- WHICH A SSESSEE COULD NOT EXPLAIN HOW IT HAS COME INTO THE HANDS OF THE ASSESSEE WHE N IT HAS ONLY SALARY INCOME AND INTEREST INCOME. THEREFORE, IT IS APPARE NT THAT LD. AO HAS CONSIDERED THE TOTAL CASH DEPOSIT AS TURN OVER INCO RRECTLY. FURTHER BEFORE US ITA NO. 1285/DEL/2016 7 THE AR OF THE APPELLANT HAS SUBMITTED A CBDT INSTRU CTION DATED 8 TH SEPTEMBER 2010, WHICH ALSO SAYS THAT THE SCRUTINY IN CASES SE LECTED THROUGH AIR, WOULD BE RESTRICTED TO THAT INFORMATION ONLY. IN CASE THE ESCAPEMENT OF TOTAL INCOME OF MORE THAN RS. 10 LACS THEN ONLY THE CASE MAY BE TAKEN UP FOR WIDER SCRUTINY AFTER THE APPROVAL OF THE ADMINISTRATIVE C OMMISSIONER. IN THE PRESENT CASE THE ADDITION MADE BY THE AO U/S 44AD ON UNDIS CLOSED TURNOVER IS RS. 10,47,947/-. THEREFORE, IT SATISFIED THE FIRST COND ITION OF POTENTIAL ESCAPEMENT OF INCOME EXCEEDING RS. 10 LACS. HOWEVER IT IS NOT CLEAR WHETHER THE APPROVAL OF THE ADMINISTRATIVE COMMISSIONER HAS BEE N OBTAINED OR NOT. LD. DR ALSO COULD NOT SUBMIT THAT SUCH APPROVAL IS TAKE N. IN VIEW OF ABOVE FACTS IN THE INTEREST OF JUSTICE THE WHOLE ISSUE OF ADDIT ION OF RS. 6,54,967/- IS SET ASIDE TO THE FILE OF THE AO WITH THE FOLLOWING DIRE CTION :- A) TO DETERMINE THE EXACT TURNOVER OF THE ASSESSEE BA SED ON THE LETTER DATED 27.1.2014 AND 17.2.2014 WITH RESPECT TO THE CASH BOOK SUBMITTED BY THE ASSESSEE AND CASH DEPOSITED I N BANK ACCOUNTS AND THEN ESTIMATE PROFIT THEREON @ 5% NO T EXCEEDING RS 654967/- B) IN CASE APPROVAL OF THE ADMINISTRATIVE COMMISSIONER HAS NOT BEEN TAKEN IN TERMS OF INSTRUCTION DATED 8 TH SEPTEMBER, 2010 TO RESTRICT THE ADDITION WITH RESPECT TO TURN OVER CONTAINED IN ICICI BANK ACCOUNT OF THE ASSESSEE WHEREIN TOTAL CASH DEPOSIT IS RS. 1,49,27,092/-. ITA NO. 1285/DEL/2016 8 8. WHILE DETERMINING THE TOTAL INCOME OF THE ASSESSEE THE LD. AO SHALL PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIAT E IT BUSINESS RECEIPT IN CASH, WHICH IS DEPOSITED IN BANK AND ALSO INTERBANK CASH DEPOSIT, AND CASH WITHDRAWALS. 9. IN VIEW OF THE ABOVE APPEAL OF THE ASSESSEE IS AL LOWED WITH ABOVE DIRECTION. ORDER PRONOUNCED IN THE O PEN COURT ON 2 ND JUNE 2016 SD/- SD/- (H.S. SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 2 ND JUNE, 2016 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER AR REGISTRAR