Shri Babubhai Ganpatram Painter, Surat V. The Income Tax Officer Ward-3(1)(1), ( Erstwhile Ward-7(1)), Surat

ITA 1363/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1826 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Business income; Income from undisclosed sources; Opportunity of being heard; Peak credit; Question of law
• Section: 147; 148; 144; 139

Judgement Text

BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 1363/AHD/2015: ASSESSMENT YEAR: 2008-09 SHRI BABUBHAI GANPATRAM PAINTER, A/1/101, SATYAM APARTMENT SIDDHARTH COMPLEX CITY LIGHT ROAD SURAT 395007 PAN: ADPPP8677A VS. INCOME TAX OFFICER, WARD- 3(1)(1) SURAT APPELLANT RESPONDENT ASSESSEE BY SHRI SAPNESH SHETH, CA REVENUE BY SHRI PRASOON KABRA, SR. D.R. DATE OF HEARING 27.02.2019 DATE OF PRONOUNCEMENT 28.02.2019 ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, SURAT (IN SHORT THE CIT (A)) DATED 05.03.2015 PERTAINING TO ASSESSMENT YEAR 2008-09 WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 144 READ WITH SECTION 147 DATED 28.03.2013 OF INCOME TAX ACT, 1961 (IN SHORT THE ACT) BY ERSTWHILE INCOME TAX OFFICER, WARD- 7(1), SURAT (IN SHORT THE AO). 2. GROUND NO. 1 STATES LD. CIT (A) HAS GROSSLY ERRED IN CONFIRMING ADDITION OF RS. 19,90,438 BEING ENTIRE SALE RECEIPTS DEPOSITED IN CASH IN BANK ACCOUNT BY TREATING AS UNEXPLAINED INCOME, WITHOUT APPRECIATING THAT THE SAID RECEIPTS ARE NOT INCOME BUT ARE THE SALE PROCEEDS HENCE, THE SAID ADDITION SHOULD HAVE BEEN DELETED AND THE PROFIT ON SALES AT RS. 92,940 EARNED THEREON AND DULY OFFERED BY THE APPELLANT NEEDS TO BE ACCEPTED. 3. BRIEF FACTS ARE THAT THE AIR INFORMATION REVEALED THAT THE ASSESSEE HAS CASH DEPOSITS OF RS. 19,90,400 IN HIS BANK ACCOUNT WITH SURAT PEOPLES CO- BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 2 OF 7 OPERATIVE BANK LTD. SURAT. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF CASH DEPOSITS. HOWEVER, IN SPITE OF NUMBER OF OPPORTUNITY OF BEING HEARD ALLOWED TO THE ASSESSEE, NO EXPLANATION WAS OFFERED. THE AO ALSO ISSUED A SHOW-CAUSE NOTICE, BUT SAME WAS ALSO REMAINED UN COMPLIED WITH. IN VIEW OF THIS MATTER, THE ASSESSMENT WAS MADE UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT AND THE ADDITION OF ENTIRE CASH DEPOSITS OF RS. 19,40,400 WAS MADE TO TOTAL INCOME. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). BEFORE WHOM IT WAS CONTENDED THAT THE ASSESSEE WAS AN EMPLOYEE OF SURAT MUNICIPAL CORPORATION WHO HAS RETIRED FROM SERVICE. THEREFORE, NOTICE SENT ON SMC ADDRESS WERE NOT RECEIVED BY HIM, HENCE, NO COMPLIANCE WAS MADE BEFORE THE AO. IT WAS FURTHER EXPLAINED THAT THE CASH DEPOSITS WITH TWO BANK ACCOUNTS WITH SURAT PEOPLES CO-OPERATIVE BANK LTD., SURAT WERE TRADING RECEIPTS OF TEXTILE TRADING BUSINESS. THE ASSESSEE HAS SHOWN THE TURNOVER OF BUSINESS AT RS. 15,58,800 ON WHICH NET PROFIT @ 5% WAS OFFERED AT RS. 92,940 IN THE RETURN FILED LATE BUT SAME WAS TREATED AS NONEST BY THE AO AS IT WAS FILED BEYOND THE TIME LIMIT PRESCRIBED. THE CIT (A) HAS ALSO CALLED FOR A REMAND REPORT FROM THE AO. AFTER GOING THROUGH THE SUBMISSIONS AND REMAND REPORT, THE CIT (A) OBSERVED THAT THE ASSESSEE HAS GIVEN MISLEADING STATEMENT AS NO RETURN OF INCOME WAS FILED UNDER SECTION 139 OR IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. AS REGARDS THE CLAIM OF TEXTILE BUSINESS, THE CLAIM THAT CASH DEPOSITS ARE PERTAINING TO TEXTILE BUSINESS IS NOT SUPPORTED BY ANY EVIDENCE. EVEN OTHERWISE, BUSINESS TRANSACTION IN SAVING BANK ACCOUNT ARE NOT PERMITTED. THEREFORE, THE CIT (A) HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE THAT CASH DEPOSITS SHOULD BE TREATED AS BUSINESS TURNOVER. THE BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 3 OF 7 APPELLANT IS PURSUING LITIGATION AGAINST HIS DISMISSAL FROM SURAT MUNICIPAL CORPORATION, BUT THERE IS NO MENTION OF OTHER LIVING EXPENSES. NOR THE BENEFIT OF WITHDRAWALS CAN BE GIVEN TO THE ASSESSEE. IN VIEW OF THIS MATTER, THE ADDITION OF RS. 19,40,400 WAS CAME TO BE CONFIRMED. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ENTIRE CASH DEPOSITS CANNOT BE TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE. THE ASSESSEE HAS CARRIED OUT TRADING BUSINESS OF FURNISHED FABRICS ON MEAGRE SCALE, WHICH IS COVERED BY SECTION 44AF OF THE ACT. THE ASSESSEE HAS SUBMITTED FEW INSTANCES OF TEXTILE BUSINESS THEREFORE, GROSS PROFIT SHOULD BE ESTIMATED. HOWEVER, WITHOUT PREJUDICE, THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED THE COPY OF BANK STATEMENT PLACED AT PAPER BOOK PAGE NO. 48 TO 52 AND SUBMITTED THAT MAXIM PEAK CREDIT OF RS. 2,56,590 CAN BE TAKEN FOR ADDITION AS THE BANK STATEMENT SHOWED CASH DEPOSITS AS WELL AS CASH WITHDRAWALS ON VARIOUS DATES. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL PLACED RELIANCE IN THE CASE OF CIT V. PRESIDENT INDUSTRIES [2002] 258 ITR 654 (GUJARAT) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY FINDING OF THE MATERIAL THAT THERE WAS SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH ARE SUBJECT OF UNDISCLOSED SALES, TRIBUNAL WAS JUSTIFIED IN HOLDING THAT ENTIRE UNDISCLOSED SALES COULD NOT BE TREATED AS INCOME OF THE ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS EMBEDDED IN SALES FOR WHICH THE NET PROFIT RATE WAS ADOPTED, NO REFERABLE QUESTION OF LAW ARISES. THE LEARNED COUNSEL FURTHER CITED DECISION OF HONOURABLE GUJARAT HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V. SHRI INDERJEET ZANDUSINGH TOMAR TAX APPEAL NO. 908 OF 2015 DATED 22.12.2015, WHEREIN IT WAS OBSERVED THAT IN OUR BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 4 OF 7 OPINION, THE CIT(A) AND TRIBUNAL COMMITTED NO ERROR. THERE WAS NOTHING WITH THE DEPARTMENT TO SUGGEST THAT ENTIRE DEPOSIT OF RS. 2.46 CRORES REPRESENTS THE INCOME OF THE ASSESSEE. CIT(A) INSTEAD OF ADDING 1% OF RS. 2.46 CRORES ADOPTED PEAK CREDIT OF THEORY, WHICH WAS ALSO UPHELD BY THE TRIBUNAL. NO QUESTION OF LAW ARISES. TAX APPEAL IS, THEREFORE, DISMISSED. 6. PER CONTRA, THE LD. SR. D.R. VEHEMENTLY RELIED ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF BANK ACCOUNT STATEMENT SHOWS THAT THE CASH DEPOSIT AS WELL AS CASH WITHDRAWALS IN THE BANK ACCOUNT STATEMENT PLACED AT PAPER BOOK PAGE NO. 48 TO 52. WE FIND THAT BOTH THE PARTIES BELOW HAVE FAILED TO APPRECIATE THE FACTS THAT ON VARIOUS OCCASIONS, THE ASSESSEE HAS WITHDRAWN CASH FROM THE SAME ACCOUNT AND DEPOSITED THE SAID CASH IN THE SAME BANK ACCOUNT AFTER THE INTERVAL OF TIME. THEREFORE, IN OUR CONSIDERED OPINION THE ENTIRE AMOUNT SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT IS SETTLED PROPOSITION OF LAW THAT ONLY UNEXPLAINED DEPOSITS COULD BE SUBJECTED TO TAX. IF AN ASSESSEE IS UNABLE TO DEMONSTRATE THAT HE DEPOSITED THE AMOUNT OF EARLIER WERE WITHDRAWN FROM THE SAME ACCOUNT, IN THAT CASE, THE AO COULD NOT BE JUSTIFIED TO SUBJECT BOTH CREDITS TO TAX. WE FIND THAT THE CLAIM OF THE ASSESSEE THAT THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS ARE TRADING RECEIPTS ON ACCOUNT OF TEXTILE BUSINESS. HOWEVER, THE ASSESSEE HAS FAILED TO PRODUCE NECESSARY DOCUMENTARY EVIDENCE BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE ITS CLAIM THAT CASH DEPOSITS REPRESENTED THE SALE PROCEEDS OF ITS BUSINESS INCOME. HOWEVER, ON THE SAME TIME, THE ENTIRE CASH DEPOSITS COULD NOT BE SUBJECTED TO TAX AS THE ASSESSEE EXPLANATION OF THE ASSESSEE IS BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 5 OF 7 UNSATISFACTORY. THE LEARNED COUNSEL FAIRLY CONCEDED THAT ONLY PEAK CREDIT AT RS. 2, 56, 590 AS APPEARING AS ON 18. 03. 2008 AT PAPER BOOK PAGE NO. 52 CAN BE CONSIDERED FOR ADDITION AS THE ASSESSEE HAS FAILED TO EXPLAIN THE CASH DEPOSITS APPEARING IN THE BANK ACCOUNTS MAINTAINED BY HIM WITH VARIOUS BANKS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO IS DIRECTED TO CONSIDER THE PEAK CREDITS OF RS.2, 56, 590 FOR ADDITIONS AS AGAINST THE ENTIRE CASH DEPOSITS OF RS. 19, 90 400 APPEARING IN VARIOUS BANK ACCOUNTS. OUR ABOVE VIEW IS ALSO SUPPORTED BY DECISION OF HONOURABLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT V. PRESIDENT INDUSTRIES [2002] 258 ITR 654 (GUJARAT) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY FINDING OF THE MATERIAL THAT THERE WAS SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH ARE SUBJECT OF UNDISCLOSED SALES, TRIBUNAL WAS JUSTIFIED IN HOLDING THAT ENTIRE UNDISCLOSED SALES COULD NOT BE TREATED AS INCOME OF THE ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS AND EMBEDDED IN SALES FOR WHICH THE NET PROFIT RATE WAS ADOPTED, NO REFERABLE QUESTION OF LAW ARISES. SIMILARLY, THE HON`BLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V. SHRI INDERJEET ZANDUSINGH TOMAR TAX APPEAL NO. 908 OF 2015 DATED 22.12.2015, HAS OBSERVED THAT IN OUR OPINION, THE CIT(A) AND TRIBUNAL COMMITTED NO ERROR. THERE WAS NOTHING WITH THE DEPARTMENT TO SUGGEST THAT ENTIRE DEPOSIT OF RS. 2.46 CRORES REPRESENTS THE INCOME OF THE ASSESSEE. CIT(A) INSTEAD OF ADDING 1% OF RS. 2.46 CRORES ADOPTED PEAK CREDIT OF THEORY, WHICH WAS ALSO UPHELD BY THE TRIBUNAL. NO QUESTION OF LAW ARISES. TAX APPEAL IS, THEREFORE, DISMISSED. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES, THIS GROUND OF APPEAL IS PARTLY ALLOWED. BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 6 OF 7 8. GROUND NO. 2: IS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IN THE HEARING BEFORE US, EX-CONSEQUENTI, IT IS TREATED AS DISMISSED AS NOT PRESSED. 9. GROUND NO. 3 STATES THAT THE LD. CIT(A) HAS ERRED IN ESTIMATING THE ADDITION OF RS. 2, 75, 459 AT THE RATE 20% OF SALES PROCEEDS OF SHARES FOR WANT OF DETAILS IN RESPECT OF SALE TRANSACTIONS, IN SUBSTITUTION OF THE ADDITION OF RS. 3, 05, 420 AS MADE BY THE AO ALLEGING UNEXPLAINED TRANSACTION OF SHARES. 10. FACTS APROPOS OF THIS GROUND ARE THAT THAT THE AO NOTICED THAT THE ASSESSEE HAS MADE INVESTMENT OF RS. 3, 05, 420, IN SHARES OF TCS LTD. NALCO. THE CLAIM OF THE ASSESSEE THAT INVESTMENT IN SHARES WAS MADE PARTLY BY FINANCE AND PARTLY OUT OF SALE PROCEEDS OF THE SHARES AND PARTLY FROM BANK ACCOUNT BY WAY WITHDRAWALS BY CHEQUE WAS NOT FIND FAVOUR OF THE ASSESSEE. 11. IN APPEAL, THE CIT (A) OBSERVED AFTER GOING THROUGH REMAND REPORT THAT THE AO HAS ACCEPTED THE NARRATIONS GIVEN BY THE APPELLANT IN RESPECT OF NATURE OF CHEQUE/TRANSFER DEPOSITS. HOWEVER, THE AO IN IN THE REMAND REPORT HAS SPECIFICALLY MENTIONED THAT PROFIT ELEMENT IN RESPECT OF SALE TRANSACTIONS SHOULD BE ENHANCED TO RS.13,77,296. THOUGH THE APPELLANT WAS GIVEN AN OPPORTUNITY TO REPLY ON THIS, HE DID NOT ADDRESS THIS ISSUE IN HIS REPLY AND EXPRESS INABILITY TO FURNISH ANY FURTHER INFORMATION. THEREFORE, PROFIT FROM SHARES WAS ESTIMATED AT 20% OF SALE PROCEEDS (CHEQUE/TRANSFER DEPOSITS OF RS. 13, 77, 296) RS. 2,75, 495. 12. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE PROFIT ELEMENT IN SHARES TRANSACTION REMAINS VERY LOW HENCE, THE ESTIMATION @ 20% OF SHARE TRANSACTION IS ON HIGHER SIDE HENCE, SAME MAY BE SCALED DOWN. BABUBHAI GANPATRAM PAINTER V. ITO 3(1)(1) SURAT /I.T.A. NO. 1363/AHD/2015/A.Y.08-09 PAGE 7 OF 7 13. PER CONTRA, THE LD. SR. D.R. RELIED ON LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE PROFIT ELEMENT IN SHARE TRANSACTION IS NOT STATIC AND FLUCTUATING ON THE MARKET CONDITIONS. THEREFORE, TAKING A HOLISTIC VIEW , WE ARE OF THE CONSIDERED OPINION THAT THE SHARE TRANSACTION PROFIT BE RESTRICTED TO 10% OF RS. 13,77,296 WHICH WORKED OUT TO RS. 1,37,730, HENCE, ADDITION IS RESTRICTED TO THIS EXTENT AND BALANCE IS DELETED. THIS GROUND OF APPEAL IS THEREFORE, PARTLY ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019 SD/- SD/- (KUL BHARAT) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 28 TH FEBRUARY, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TURE COPY / / ASSISTANT REGISTRAR, SURAT