Mohd. Afzal, Hyd, Hyderabad V. ITO, Ward-5(2), Hyd, Hyderabad

ITA 1294/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6156 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 16-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: HARIKISHAN ASWA
• Keywords: Peak credit
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1294/HYD/2015 ASSESSMENT YEAR: 2008-09 SHRI MOHD. AFZAL, HYDERABAD PAN ABMPM 7176 L VS. INCOME-TAX OFFICER, WARD 5(2), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARIKISHAN ASWA REVENUE BY : SHRI M. SITARAM DATE OF HEARING 06-01-2016 DATE OF PRONOUNCEMENT 22-01-2016 O R D E R PER P. MADHAVI DEVI, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 18/09/2015 OF LD. CIT(A)-4, HYDERABAD, FOR THE ASSE SSMENT YEAR 2008- 09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, TRADING IN COPPER WIRE, FILED HIS RETURN OF INCOME FOR THE AY UNDER CONSIDERATION ON 16/02/2009 DECLARING TOTAL INCOME OF RS. 1,36,536/-. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT, ASSESSEE WAS ASKED TO FURNISH DETAILS OF HIS BANK A CCOUNTS. THE ASSESSEE FILED THE COPY OF THE ABN AMRO BANK STATEM ENT FOR THE PERIOD FROM 01/04/2007 TO 31/03/2008. ON PERUSAL OF THE SAID STATEMENT, AO NOTICED THAT ASSESSEE MADE CASH DEPOS ITS TO THE TUNE OF RS. 24,25,000 ON VARIOUS DATES INTO THIS BANK A/ C. ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE FOR THE SAID CASH DEPOS ITS. IN RESPONSE TO 2 ITA NO. 1294 /HYD/2015 MOHD. AFZAL THE SAME, ASSESSEE FILED A LETTER ON 20/08/2010 STA TING THAT THE DEPOSITS IN TO THE ACCOUNT WERE SMALL AMOUNTS OUT O F THE WITHDRAWALS FROM THE BANK ACCOUNT ITSELF AND THE PEAK CREDIT WA S NIL AND THAT THERE WAS NO PURCHASE AND SALE INVOLVED IN THE SAID DEPOS ITS AND, THEREFORE, THERE WAS NO INCOME OUT OF IT. AO, HOWEV ER, DID NOT ACCEPT ASSESSEES CONTENTION, AS ACCORDING TO HIM, THE DEP OSITS AND THE WITHDRAWALS DID NOT CORRESPOND WITH EACH OTHER. HE OBSERVED THAT THE WITHDRAWALS IN THE BANK ACCOUNT REPRESENT INWARD CL EARING OF CHEQUES ISSUED TO A THIRD PARTY AND THERE WAS NO CASH WITHD RAWALS AT ALL. AS REGARDS CASH DEPOSITS, HE OBSERVED THAT THEY WERE M ADE WITHIN THE SPAN OF 10 DAYS. SINCE THE ASSESSEE ADMITTED THAT T HERE ARE NO SALES AND PURCHASES AND THEY ARE REPRESENTING THE CASH DE POSITS, AO TREATED THE ENTIRE AMOUNT OF RS. 24,25,000/- AS UNE XPLAINED INCOME OF THE ASSESSEE AND BROUGHT THE SAME TO TAX. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A), WHO CONFIRMED THE ORDER OF AO AND THE ASSESSEE IS I N SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEA L: 1. ADDITION OF RS. 24,25,000/-: THIS IS ADDITION MADE UNDER THE HEAD OTHER SOURCES I.E. ENTIRE DEPOSITS MADE IN AB M AMRO BANK DURING FINANCIAL YEAR WITHOUT GIVING WEIGHT TO THE WITHDRAWALS IN THE SAID BANK ACCOUNT. CIT(A) CONFIRMED THE SAME W ITHOUT GIVING ANY REASONS AS TO WHY AND HOW HE IS NOT SAT ISFIED. THE ORDER OF THE CIT(A) IS WITHOUT ANY REASONING AND N OT A SPEAKING ORDER. ON PERUSAL TO THE BANK STATEMENT THERE IS A B/F CR EDIT OF RS. 29,169/- AND C/F FIGURE IS RS. 24,581/-. SO THE ENTIRE DEPOSITS OF RS. 24,25,000/- IS NEUTRALIZED BY WAY OF WITHDR AWALS DURING THE YEAR ITSELF. THIS IS NOT A INCOME MUCH LESS A REAL INCOME TO BE TAXED. IT IS SUBMITTED THAT PAYMENTS ARE MADE MOSTLY BY C HEQUES OR TRANSFER IN THE BANK STATEMENT. WITHDRAWALS ARE TH ERE AND THE SAME BE TREATED AS PAYMENTS TO VENDORS AND LIKEWIS E TOTAL DEPOSITS TO BE TREATED AS SALES AND ENTIRE WITHDRA WALS TO BE TREATED FOR PURCHASES MADE. PAYMENTS ARE THERE (C LEARING) THROUGH BANK. FINALLY THE B/F BALANCE AND C/F - BALANCE IS ALMOST THE SAME. NEXT ALTERNATIVE SUBMISSION IS TH AT IF ENTIRE DEPOSITS TAKEN AS SALES THEN NET PROFIT OF 10% MAX IMUM WILL BE THERE. 3 ITA NO. 1294 /HYD/2015 MOHD. AFZAL 2. THERE IS PERSONAL LOANS TAKEN FROM BANK BUT NOT REPAID AND INCOME FROM PROPERTY FOR LAST 10 YEARS NOT UTI LIZED ANY WHERE AND LOAN FROM BANK OF RS. 8,66,181/- (ALL TH IS BE CONSIDERED TO SHOW THAT FUNDS WERE THERE TO DEPOSI T ETC. 4. THE LD. COUNSEL FOR THE ASSESSEE, SHRI HARIKISHA N ASAWA, WHILE REITERATING ASSESSEES SUBMISSIONS BEFORE THE AUTHO RITIES BELOW, SUBMITTED THAT ASSESSEE HAD TAKEN PERSONAL LOANS FR OM BANK WHICH WAS NOT REPAID AND WAS IN HIS POSSESSION DURING THE ABOVE PERIOD, AND ALSO WAS HAVING THE INCOME FOR THE LAST 10 YEAR S, WHICH WAS UTILIZED FOR MAKING DEPOSIT INTO THE BANK. THUS, HE EXPLAINED THE SOURCE FOR A SUM OF RS. 8,66,181/-. FURTHER, HE SUB MITTED THAT THE AO HAS TAKEN NOTE OF ONLY THE DEPOSITS INTO THE BANK A CCOUNT, BUT, HAS NOT CONSIDERED THE WITHDRAWALS FROM THE BANK ACCOUN T AND THEREFORE CREDIT FOR THE WITHDRAWALS SHOULD ALSO BE GIVEN. AL TERNATIVELY, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E HAS REPORTED 5% TO 6% OF ITS GROSS RECEIPTS AS ITS INCOME IN THE EARLIER AYS AND IS WILLING TO OFFER 10% OF THESE CASH DEPOSITS OF RS. 24,25,000/- AS HIS INCOME DURING THE YEAR. HE, THEREFORE, PRAYED THAT THE ADDITION OF RS. 24,25,000/- MAY BE DELETED AND 10% OF SUCH DEPOSITS MAY BE TREATED AS HIS UNDISCLOSED INCOME. 5. LD. DR, SHRI M. SITARAM, ON THE OTHER HAND, SUPP ORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS, MATERIAL ON RECORD AND THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, WE FIND THAT THE ASSESSEE ADMITS TO HAVE DEPOSITED HIS UNDISCLOSED I NCOME INTO THE BANK ACCOUNT. HOWEVER, WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT EVEN IF DEPOSITS INTO THE BANK ACCOUNT ARE TO BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE, CREDIT SHOULD B E GIVEN FOR THE EXPENDITURE FOR EARNING OF SUCH INCOME AND THE ENTI RE RECEIPTS CANNOT BE CONSIDERED AS INCOME OF ASSESSEE. THE AUTHORITIE S BELOW HAVE NOT ACCEPTED THE WITHDRAWALS OF THE ASSESSEE AS EXPENDI TURE OF ASSESSEE. HOWEVER, WE FIND FROM THE ASSESSMENT ORDE R THAT THE WITHDRAWALS ARE BY VIRTUE OF INWARD CLEARING OF CHE QUES ISSUED IN 4 ITA NO. 1294 /HYD/2015 MOHD. AFZAL FAVOUR OF THIRD PARTIES AND, THEREFORE, THE SAME HA VE TO BE CONSIDERED AS CERTAIN EXPENDITURE RELATING TO THE UNDISCLOSED BUSINESS/SOURCE OF THE ASSESSEE. SINCE THIS EXPENDITURE IS NOT VERIFIA BLE, WE ARE INCLINED TO ACCEPT ALTERNATE CONTENTION OF ASSESSEE TO TREAT A PERCENTAGE OF THE DEPOSITS AS UNDISCLOSED INCOME OF THE ASSESSEE. WE DIRECT THE AO TO CONSIDER 10% OF THE GROSS RECEIPTS AS UNDISCL OSED INCOME OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2016. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER J UDICIAL MEMBER HYDERABAD, DATED: 22 ND JANUARY, 2016 KV COPY TO:- 1) MOHD. AFZAL, NO. 5-1-488, C/O, M/S M.K. BROS., JAMBAGH ROAD, HYDERABAD. 2) ITO, WARD 5(2), HYDERABAD. 3 CIT(A)- 4, HYDERABAD 4) PR. CIT - 4, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.