Prakash Rameshbhai Nanda, Jamnagar V. Income Tax Officer, Ward-3(1), Jamnagar

ITA 13/RJT/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8886 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit; Validity of assessment; Reassessment proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] .., ! '#$%,#&#''( BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 13/RAJ/2018 2009-10 PRAKASH RAMESHBHAI NANDA HASMUKH KUNJ 50, DIGVIJAY PLOT JAMNAGAR PAN:ABFPN 6778A THE INCOME TAX OFFICER WARD-3(1) JAMNAGAR 2. 14/RAJ/2018 2010-11 -DO- ASSESSEE -REVENUE- 3. 15/RAJ/2018 2011-12 -DO- ASSESSEE -REVENUE- 4. 16/RAJ/2018 2012-13 -DO- ASSESSEE -REVENUE- ASSESSEE BY : SHRI CHETAN L.AGRAWAL, AR REVENUE BY : SMT. USHA N. SHROTE, SR.DR ! )*+,& / DATE OF HEARING 14/02/2018 -. +,& / DATE OF PRONOUNCEMENT 01/ 03/2018 #/ O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- JAMNAGAR [CIT(A) IN SHORT] ARISING FROM THE RESPECTIVE ASSE SSMENT ORDERS PASSED UNDER S.147 R.W.S. 143 OF THE INCOME TAX ACT, 1961 ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 2 - (HEREINAFTER REFERRED TO AS 'THE ACT') CONCERNING A SSESSMENT YEARS 2009- 10, 2010-11, 2011-12 & 2012-13 RESPECTIVELY AS TABU LATED BELOW:- SR.NO. ASSTT.YEAR CIT(A)S ORDER DATED AOS ORDER DATED PASSED U/S.147 R.W.S.143 1. 2009-10 18/12/2017 07/12/2016 2. 2010-11 18/12/2017 07/12/2016 3. 2011-12 18/12/2017 07/12/2016 4. 2012-13 18/12/2017 07/12/2016 2. SINCE ALL THE APPEALS RELATE TO THE SAME ASSES SEE SPANNING OVER DIFFERENT ASSESSMENT YEARS INVOLVING SIMILAR ISSUES AND SIMILAR FACTS, ALL THE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSE OF BY THUS COMMON ORDER. 3. WE SHALL TAKE FIRST TAKE UP THE APPEAL OF THE AS SESSEE IN ITA NO.13/RJT/2018 CONCERNING AY 2009-10 FOR ADJUDICATI ON PURPOSES. ITA NO.13/RJT/2018 AY 2009-10 4. THE GROUND OF APPEAL RAISED BY THE ASSESSEE READ S AS UNDER:- 1. LD.CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT IN C ONFIRMING ADDITION F RS.15,45,135 MADE U/S.68 BY LD.AO BEING ENTIRE CASH DEPOSITED IN BANK ACCOUNT OF APPELLANT. HE OUGHT TO HAVE RESTRICTED ADDITION EITHER TO PEAK BALANCE OR TO ESTIMATE REASONABLE PERCENT OF PROFIT EMBEDDED I N GROSS ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 3 - TURNOVER MADE IN SAID BANK ACCOUNT CONSIDERING FACT S AND CIRCUMSTANCES OF THE CASE. 5. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL IN TERMS OF RULE 11 OF THE ITAT RULES 1963 WHICH READS AS UN DER:- 1. LD. AO HAD ERRED IN LAW AS WELL AS ON FACTS IN PA SSING ORDER U/S.143(3) R.W.S.147 WITHOUT ISSUING MANDATORY NOTI CE U/S.143(2) OF THE ACT. 6. AS CAN BE NOTICED, THE ASSESSEE HAS RAISED LEGAL GROUND CHALLENGING THE VALIDITY OF ASSESSMENT PASSED UNDER S.143(3) R. W.S.147 BY WAY OF ADDITIONAL GROUNDS OF APPEAL. SINCE THE ISSUE IS L EGAL AND GOES TO THE ROOT OF THE MATTER, WE SHALL FIRST DISPOSE OF THE S AME. 7. ADDRESSING THE LEGAL GROUND, THE LD.AR FOR THE A SSESSEE MR.CHETAN L.AGRAWAL SUBMITTED THAT THE CASE WAS REO PENED UNDER S.147 BY ISSUANCE OF NOTICE ON 23/03/2016 UNDER S.148 OF THE ACT. IN THIS CONNECTION, THE LD.AR ADVERTED OUR ATTENTION TO THE ASSESSMENT ORDER AND POINTED OUT THAT THERE IS NO REFERENCE TO THE ISSUA NCE OF NOTICE UNDER S.143(2) OF THE ACT WHILE INITIATING REASSESSMENT P ROCEEDINGS IN CONSEQUENCE OF SUCH NOTICE ISSUED UNDER S.148 OF TH E ACT. THEREFORE THE JURISDICTION ASSUMED FOR COMPLETION OF REASSESSMENT UNDER S.147 PURSUANT TO NOTICE UNDER S.148 IS BAD IN LAW. THE LD.AR VEHEMENTLY CONTENDED THAT THE ASSESSMENT FINALIZED UNDER S.143 (3) R.W.S.147 IS NOT ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 4 - SUSTAINABLE IN THE ABSENCE OF FULFILLMENT OF MANDAT ORY REQUIREMENT OF ISSUANCE OF NOTICE UNDER S.143(2) OF THE ACT. THE LD.AR ALSO REFERRED TO THE CERTIFIED COPY OF THE ORDER-SHEET FOR REASSESSM ENT TO SUPPORT ITS CONTENTION THAT NO NOTICE UNDER S.143(2) OF THE ACT WAS EVER ISSUED BEFORE COMPLETION OF THE REASSESSMENT PROCEEDINGS. THE LD.AR ACCORDINGLY SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SUKHINI P.MODI RE PORTED AT (2014) 367 ITR 682, THE IMPUGNED REASSESSMENT ORDER PASSED UND ER S.143(3) R.W.S.147 APPEALED AGAINST, REQUIRES TO BE QUASHED. THE LD.AR ALSO SUPPORTED ITS CASE BY THE DECISION OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF PR.CIT VS. SHRI JAI SHIV SHANKAR TRADERS (P )LTD. (2015) 64 TAXMANN.COM 220 (DELHI) AND CIT VS. PANORAMA BUILDE RS (P) LTD. (2014) 45 TAXMANN.COM 159 (GUJ.) TO BUTTRESS THE AFORESAID PROPOSITION. 8. NOTWITHSTANDING AND WITHOUT PREJUDICE, ADDRESSIN G THE MERITS, THE LD.AR ADVERTED OUR ATTENTION TO THE REASSESSMENT OR DER AND SUBMITTED THAT THE BASIS OF ADDITION OF RS.15,45,135/- TOWARD S UNEXPLAINED CASH DEPOSIT IS OBSERVATION OF ASSESSING OFFICER (AO) TH AT CERTAIN DEPOSITS WERE MADE WITH ICICI BANK JAMNAGAR. THE LD.AR SUBMI TTED THAT THE CASH DEPOSITS WERE MADE IN THE COURSE OF TRADING BU SINESS OF BRASS PARTS WHERE THE CASH DEPOSITS WERE MADE AS RECEIVED FROM CUSTOMERS FROM TIME TO TIME AND WERE ALSO WITHDRAWN FOR UTILIZATION IN THE BUSINESS. THE LD.AR SUBMITTED THAT BOTH THE LOWER AUTHORITIES FAI LED TO APPRECIATE SUCH ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 5 - CASH DEPOSITS OF VERY SMALL AMOUNTS ARISING IN THE COURSE OF BUSINESS OVER A PERIOD OF TIME CANNOT BE REGARDED AS INCOME OF THE ASSESSEE OUTRIGHT. THE CASH SO DEPOSITED WERE SIMULTANEOUSL Y WITHDRAWN AND RE-DEPOSITED SUBSEQUENTLY IN TUNE WITH TRADING ACTI VITIES THUS, THE SUBSEQUENT DEPOSITS WERE MADE OUT OF WITHDRAWALS FR OM THE EARLIER DEPOSITS AND IT IS A CASE OF REUTILIZATION OF THE S AME CASH GENERATED IN THE TRADING BUSINESS. THE LD.AR ACCORDINGLY SUBMITTED THAT IN VIEW OF THE LONG LINE OF JUDICIAL PRECEDENTS, A FAIR PROFIT EST IMATES (AS ARISE IN TRADING BUSINESS WHERE THE MARGINS ARE WAFER THIN) AT BEST IS PLAUSIBLE. THE LD.AR SUBMITTED THAT THE PROFIT IN SUCH BUSINESS HA RDLY RANGES BETWEEN 1% TO 3% OF SUCH ALLEGED UNACCOUNTED SALES. 9. IN SUMMATION, THE LD.AR SUBMITTED THAT THE REAS SESSMENT ORDER ITSELF IS REQUIRED TO BE QUASHED DUE TO INCURABLE LEGAL DE FECT AND WITHOUT PREJUDICE, ON MERITS, A REASONABLE FAIR ESTIMATE O F GROSS PROFIT ONLY IS PLAUSIBLE. THE LD.AR ACCORDINGLY PLEADED FOR SUIT ABLE RELIEF. 10. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MATERIAL PL ACED ON RECORD. ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 6 - 12. AT THE OUTSET, WE FIND SUBSTANTIAL MERIT IN THE LEGAL PLEA RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND OF APPEAL. THE ASSESSEE HAS CLAIMED THAT NO NOTICE UNDER S.143(2) OF THE ACT HA S BEEN ISSUED TO THE ASSESSEE TO ENABLE THE REVENUE TO FRAME THE REASSES SMENT ORDER UNDER S.143(3) RWS 147 OF THE ACT. IN THIS REGARD, WE FIND NO REFERENCE TO THE ISSUANCE OF SUCH NOTICE UNDER S.143(2) OF THE ACT E ITHER IN THE REASSESSMENT ORDER OR IN THE ORDER-SHEET MAINTAINED BY THE AO LISTING THE SEQUENCE OF EVENTS. THE REVENUE COULD NOT BRING A NYTHING TO CONTRADICT THE ALLEGATION OF NON-ISSUANCE OF NOTICE. THUS, IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SUKHI NI P.MODI (SUPRA), THE REASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S. 147 OF THE ACT IS WITHOUT AUTHORITY OF LAW AND THUS REQUIRES TO BE QU ASHED. CONSEQUENTLY, ADDITIONAL GROUND RAISED BY THE ASSESSEE CHALLENGIN G THE VALIDITY OF THE REASSESSMENT ORDER IS ALLOWED. 13. WITHOUT PREJUDICE AND FOR THE COMPLETENESS OF T HE REDRESSAL OF GRIEVANCES, WE ALSO TURN TO THE GRIEVANCES RAISED B Y THE ASSESSEE ON MERITS. 14. ON PERUSAL OF THE ASSESSMENT ORDER AND THE FIRS T APPELLATE ORDER, WE NOTICE THAT THE ASSESSEE HAS CONSISTENTLY TAKEN A P LEA THAT THE CASH DEPOSITS HAVE BEEN RECYCLED AFTER WITHDRAWALS FOR T HE PURPOSES OF ITS TRADING BUSINESS IN BRASS PARTS. IT IS ALSO AN ADM ITTED POSITION BY THE ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 7 - REVENUE THAT THE DEPOSITS MADE IN THE BANK ARE ALLE GED TO BE UNACCOUNTED SALES OF THE ASSESSEE. THIS BEING SO AND HAVING R EGARD TO THE NATURE OF TRADE BUSINESS, SOME REASONABLE ESTIMATES TOWARDS P ROFITS ARISING FROM SUCH UNACCOUNTED SALES IS REQUIRED TO BE MADE AS PE R SEVERAL DECISIONS OF THE HONBLE HIGH COURT AS WELL AS COORDINATE BENCH OF TRIBUNAL VIZ: (I) CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ) (II) CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 6 10 (MP) (III) M/S.BALKRISHNA DWARKADAS VS. ITO IN ITA NO.92 3/RJT/2010 ORDER DATED 01/01/2010 RAJKOT BENCH. (IV) SHRI RAKESH S.CHHAPARWAL (HUF) VS. ITO IN ITA NOD.502 & 503/RJT/08 ORDER DATED 28/08/2009, RAJKOT BENCH. 15. ON PERUSAL OF THE PRECEDENTS NOTED ABOVE, WE AR E INCLINED TO AGREE WITH THE CONTENTION OF THE ASSESSEE IN PRINCIPLE. THE ISSUE OF PROFITS ON UNACCOUNTED SALES REQUIRES TO BE SEEN IN FACTUAL PE RSPECTIVE QUA THE TRADING BUSINESS RUN BY THE ASSESSEE. THE ENTIRE AMOUNT OF UNACCOUNTED SALES/DEPOSITS THUS CANNOT THUS BE ADDED TO THE TOT AL INCOME OF THE ASSESSEE AS WRONGLY DONE BY THE REVENUE AUTHORITIE S. MANY OF THE PRECEDENTS IN SUCH FACTS SITUATION HAVE RESTRICTED THE ADDITIONS TO 1 TO 2% OF THE UNACCOUNTED SALES HOLDING THE SAME TO BE REA SONABLE. SOME OTHER HAVE ESTIMATED PROFITS @ 5% OF THE UNACCOUNTED SALE S. IT IS COMMON KNOWLEDGE THAT TRADING BUSINESS GENERATES COMPARATI VELY LESSER MARGINS OF PROFITS. IN OUR VIEW, A PROFIT ESTIMATE @ 5% WO ULD BE JUST AND FAIR TO MEET THE ENDS OF JUSTICE. THEREFORE, WHEN ADJUDICA TED ON MERITS, WE DO ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 8 - NOT SEE ANY POSSIBILITY OF ADDITIONS BEYOND 5% OF THE ALLEGED UNACCOUNTED SALES/CASH DEPOSITS IN THE GIVEN SET OF FACTS. BE IT AS IT MAY, IN VIEW OF THE REASSESSMENT ORDER ITSELF BEING HELD TO BE BAD IN LAW, THE SCALING DOWN OF ADDITIONS ON MERITS DOES NOT REQUIR E ANY EXCESSIVE DELIBERATION. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .13/RJT/2018 FOR AY 2009-10 IS ALLOWED. 17. WE SHALL NOW TURN TO REMAINING APPEALS IN ITA N OS.14/RJT/2018, 15/RJT/2018 AND 16/RJT/2018 RELEVANT TO AYS 2010-11 , 2011-12 & 2012- 13 RESPECTIVELY AS CAPTIONED ABOVE. 18. WE FIND THAT THE FACTS INVOLVED IN REMAINING AL L THESE APPEALS ARE BROADLY SIMILAR. IN VIEW OF THE FACTUAL SIMILARITY , THE FINDINGS ARRIVED IN ITA NO.13/RJT/2018 FOR AY 2009-10 WILL APPLY MUTATIS MUTANDIS TO THE REMAINING APPEALS NOTED ABOVE. 19. IN THE RESULT, APPEALS IN ITA NOS.14 TO 16/RJT/ 2018 FOR AYS 2010- 11, 2011-12 & 2012-13 ARE ALLOWED. ITA NOS.13 TO 1 6/RJT/2018 PRAKASH RAMESHBHAI NANDA VS. ITO ASST.YEARS 2009-10 TO 2012-13 - 9 - 20. IN THE COMBINED RESULT, ALL THE FOUR APPEALS FI LED BY THE ASSESSEE ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 01 / 03 /2018 (..) ( ! '#$%) #& ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/ 03 /2018 ..),.)../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 534 / THE RESPONDENT. 3. 6 , ! 7, / CONCERNED CIT 4. ! 7, ( ) / THE CIT(A)-JAMNAGAR 5. 9: ,) , , /DR,ITAT,RAJKOT 6. %E* / GUARD FILE. / BY ORDER, 59, , //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !', / ITAT, RAJKOT 1. DATE OF DICTATION .. 21.2.18 (DICTATION-PAD 25 -PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 22.2.18 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 5.3.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.3.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER