The ITO, Ward-6(2), Ahmedabad V. Smt. Jyotsnaben Ambalal Patel, Ahmedabad

ITA 1373/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51041 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M MOTHIVANAN SRAR
• Keywords: Gift; Business income; Opportunity of being heard; Principle of natural justice; Peak credit; Revised return
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH BEFORE SHRI G.C.GUPTA, VICE-PRESIDENT (AZ) AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.1373/AHD/2011 ASSESSMENT YEAR:2007-08 INCOME TAX OFFICER WARD-6(2), 1 ST FLOOR, C.U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD / V/S . SMT. JYOTSNABEN AMBALAL PATEL, A-52, VALLABH TOWER, OPP. SWAGAT PARTY PLOT, BHUYANGDEV, AHMEDABAD PAN NO.ACTPP1248A / APPELLANT .. / RESPONDENT /APPELLANT BY SHRI M. MOTHIVANAN SR-AR /RESPONDENT BY NONE / DATE OF HEARING 14-12-2001 / DATE OF PRONOUNCEMENT 16-12-2001 !' !' !' !' / / / / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD DATED 09-03-2011 FOR THE ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL. 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DIRECTING THE AO TO ACCEPT THE REVISED RETURN OF IN COME FILED BY THE ASSESSEE ON 31.03.2009 AFTER THE SERVICE OF NOTICES U/S.143( 2) AND 142(1) AND AFTER ENQUIRES WERE MADE WITH THE BANK U/S.133(6) OF THE INCOME TAX ACT. ITA NO.1373/AHD/2011 A.Y. 2007-08 ITO WD-6(2) ABD V. SMT. JYOTSNABEN A PATEL PAGE 2 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ADOPT PEAK CREDIT METHOD FOR MAKING ADDITION IN RESPECT OF UNDISCLOSED CASH DEPOSITS IN BANK ACCOUNT, INSTE AD OF THE TOTAL CASH DEPOSITS DETECTED IN THE BANK ACCOUNT WHICH WAS NOT DISCLOSED FOR INCOME-TAX PURPOSES, THEREBY RESTRICTING THE ADDITION OF RS.41 ,02,300/- TO RS.1,53,346/-. 3. WITHOUT PREJUDICE, THE LD. COMMISSIONER OF INCOM E TAX (A) HAS ERRED IN LAW AND ON FACTS IN NOT TAKING INTO ACCOUNT THE FACT TH AT THE UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT INCLUDED GIFTS TOTALIN G TO RS.2 LAKHS WHICH WERE NOT PROVED TO BE GENUINE. 4. WITHOUT PREJUDICE, THE LD. COMMISSIONER OF INCOM E TAX (A) HAS ERRED IN LAW AND ON FACTS IN NOT TAKING INTO ACCOUNT THE FACT TH AT THE EXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT INCLUDED UNSECURED LOA NS/DEPOSITS WHICH WERE SHOWN IN THE BALANCE SHEET, BUT WHICH WERE NOT PROV ED TO BE GENUINE. 5. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AO DID NOT BRING ANY MATERIAL ON R ECORD TO SHOW THAT THE ASSESSEES TRADING BUSINESS IN CHINDI WASTE WAS BOGUS. 2. NONE APPEARED IN SPITE OF VALID SERVICE OF NOTIC E. THEREFORE, WE ARE PROCEEDING TO DECIDE THE APPEAL AFTER HEARING LD. D R OF THE REVENUE AND THE MATERIALS AVAILABLE ON RECORD. 3. THE BRIEF FACTS OF THE CASE IN THE PRESENT APPEA L ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 26-11-2007 DECLARING TOTAL INCOME OF RS.1,01,549/- AND NOTICE U/S 143(2) AND 142(1) OF THE INCOME-TAX ACT, 1961 WAS SERVED UPON THE ASSESSEE CALLING FOR VARIOUS DETAILS/INFORMATION. T HE NOTICES WERE NOT COMPLIED WITH INSTEAD, THE ASSESSEE FILED THE REVISED RETURN OF I NCOME AND THEREAFTER THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS. 4. IN THIS CASE, THE CASE WAS SELECTED FOR SCRUTINY ON THE BASIS OF ANNUAL INFORMATION REPORT RECEIVED FROM AHMEDABAD MERCANTI LE CO-OP BANK LTD. GIRDHARNAGAR BRANCH, AHMEDABAD. THE ASSESSEE HAD DE POSITED CASH OF RS.41,02,300/- IN HER SB ACCOUNT NO.9547. THE BANK STATEMENT OF THE ASSESSEE WAS CALLED FOR FROM THE BANK U/S.133(6) OF THE ACT. THE ASSESSEE FILED THE REVISED RETURN ON 31-03-2009 DECLARING TOTAL INCOME OF RS.2,39,520 /-. IN THE REVISED RETURN, THE ITA NO.1373/AHD/2011 A.Y. 2007-08 ITO WD-6(2) ABD V. SMT. JYOTSNABEN A PATEL PAGE 3 ASSESSEE HAS DECLARED PROFITS AND GAINS OF BUSINESS U/S.44AF @ 5% OF GROSS RECEIPTS OF RS.39,20,641/-. THE ASSESSING OFFICER W AS OF THE VIEW THAT THE ASSESSEE HAD DELIBERATELY NOT COMPLIED WITH THE NOTICES ISSU ED U/S.143(2) AND 142(1) OF THE ACT AND IT IS ONLY AFTER-THOUGHT SHE HAD FILED THE REVISED RETURN INCOME DECLARING PROFITS AND GAINS OF BUSINESS U/S 44AF OF THE ACT. THE CASH DEPOSITED IN HER BANK WAS CLAIMED AS BUSINESS RECEIPTS. THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED THE EXPLANATION THAT SHE WAS ENGAGED IN TRADING OF CHINDI WASTE AND STITCHING & STRINGING INCOME AND THE INCOME WAS DECLARED U/S 44AF OF THE ACT. THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCO UNT, BILLS OR VOUCHERS OR ANY MATERIAL EVIDENCES ON WHICH SHE COULD RELY UPON IN SUPPORT OF HER RETURN OF INCOME TO EXPLAIN THE SOURCE OF CASH DEPOSITED AMOUNTING T O RS.41,02,300/- IN HER SB ACCOUNT IN THE AHMEDABAD MERCANTILE CO-OP BANK LTD. THE ASSESSEE ULTIMATELY PRODUCED THE SALE BILLS BUT DID NOT PRODUCE ANY PUR CHASE BILLS OR CONFIRMATION OR PAN OR ADDRESS OF ANY OF THE PARTY FROM WHOM THE PURCHA SES ARE CLAIMED TO HAVE BEEN MADE. THE ASSESSEE HAD BEEN SHOWING THE CHEQUE IMME DIATELY AFTER DEPOSITING OF THE CASH. THE SALES DECLARED BY THE ASSESSEE WERE A T RS.39,20,641/- FROM THE BUSINESS OF CHINDI WASTE AND STITCHING . THE ENTIRE SALES HAVE BEEN MADE IN THE CASH AND WHEREAS ENTIRE PURCHASES HAVE BEEN SHOWN ON CRE DIT. THE PAYMENTS TO THE CREDITORS HAVE BEEN MADE THROUGH CHEQUES. THE OPENI NG AND CLOSING BALANCES DECLARED IN THE PROFIT AND LOSS ACCOUNT ARE NIL, WH ICH IS UNUSUAL FEATURE NOTICED BY THE AO. THE CASH DEPOSITED BY THE ASSESSEE DURING T HE IMPUGNED YEAR WAS AT RS.41,02,300/-, WHEREAS THE ASSESSEE HAD DECLARED A TOTAL TURNOVER OF RS.39,20,641/- AND DEEMED PROFIT @ 5% U/S.44AF OF T HE ACT AT RS.1,96,032/-. IT IS CLEAR THAT THE ASSESSEE HAS AN AFTER-THOUGHT DECLAR ED THE TURNOVER AT RS.39,29,641/- IN THE REVISED RETURN SO AS TO AVOID THE PROVISION OF SECTION 44AF OF THE ACT. THE ASSESSEE HAS NOT PRODUCED ANY COPY OF LICENSE UNDER THE SHOP & ESTABLISHMENTS ACT, WHICH IS MANDATORY FOR THE ASSESSEE FOR CARRYI NG OUT ANY BUSINESS ACTIVITIES IN AHMEDABAD. NO RECEIPT OF THE PROFESSIONAL TAX IF AN Y PAID BY THE ASSESSEE WHICH IS MANDATORY FOR HER TO PAY IF SHE WAS ENGAGED IN SUCH BUSINESS OF CHINDI WASTE IN AHMEDABAD WAS PRODUCED. THE AO RELIED UPON THE JUDG MENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF ROSHAN DI HATTI V. CIT (1977) AS REPORTED IN 107 ITR 938 (SC) AND IN THE CASE OF KALE KHAN MOHAMMAD HANIF V. CIT (1963) 50 ITR 1 (SC), WHERE IT HAS BEEN HELD THAT WHERE NATURE AND SOURCE OF RECEIPT, WHETHER IT BE ON MONEY OR OTHER PROPERTY CAN BE SATISFACTORILY EX PLAINED BY THE ASSESSEE, IT IS ITA NO.1373/AHD/2011 A.Y. 2007-08 ITO WD-6(2) ABD V. SMT. JYOTSNABEN A PATEL PAGE 4 OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME O F THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SO THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. AS REGARDS TO UNSECURED LOAN DECLARED IN THE BALANCE-S HEET, THE ASSESSEE HAD FILED THE CONFIRMATIONS BUT NONE OF THE DEPOSITOR IS ASSESSED TO INCOME TAX AND NO PAN IS MENTIONED IN THE CONFIRMATION AND EVEN THE ADDRESS IS NOT MENTIONED IN THE CONFIRMATION. THE AO OBSERVED THAT ASSESSEE HAD FAI LED TO DISCHARGE THE ONUS OF PROVING THE IDENTITY OF THE DEPOSITORS AND THEIR CR EDITWORTHINESS. THE AO DID NOT MAKE ANY SEPARATE ADDITION OF THE SAME, SINCE THE S AME IS COVERED BY THE ADDITION OF RS.41,02,300/-. SIMILARLY, THE ASSESSEE HAD DECL ARED TWO GIFTS OF RS.1 LAKH EACH AND NO PROOF OR EVIDENCE OF SUCH GIFTS WAS SUBMITTE D BY THE ASSESSEE. THE GIFTS WERE ALSO WELL TREATED AS UNEXPLAINED. NO SEPARATE ADDITION WAS MADE BY THE AO WITH REGARD TO SAID UNEXPLAINED GIFTS. SINCE THE SA ID UNEXPLAINED GIFTS WERE INCLUDED IN THE ADDITION OF RS.41,02,300/-, THE AO CONCLUDED THE ASSESSMENT BY MAKING THE ADDITION OF RS.41,02,300/-. THE LD. CIT(A) RESTRICT ED THE ADDITION AT RS.1,53,346/- AND ACCORDINGLY PARTLY ALLOWED THE APPEAL OF ASSESS EE. LD. CIT(A) WHILE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE OBSERVED VIDE PA RA-3.1, 3.1.2, 3.1.3, 3.1.4 AND 3.1.5, WHICH ARE REPRODUCED FOR THE SAKE OF CLARITY AS UNDER:- 3.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER. IN THE INSTANT CASE ROI WAS FILED ADMITTING INCOME OF RS.1 ,01,549/- (FROM STICHING AND STRINGING). REVISED ROI WAS FIELD ADMITTING INC OME OF RS.2,39,520/- (INCLUDING INCOME FROM TRADING IN CHINDI-WASTE). A. OS OBSERVATIONS IN BRIEF ARE THAT AS PER AIR INFORMATION APPELLANT MADE CASH DEP OSITS OF RS.41,02,300/- IN THE BANK ACCOUNT; THE INFORMATION WAS RECEIVED VIDE BANKS LETTER DATED 13- 01-2009, REVISED ROI WAS FILED AS AN AFTERTHOUGHT O N 31-03-2009; BOOKS OF ACCOUNTS AND SALE-BILLS WERE PRODUCED, BUT PURCHASE BILLS AND FREIGHT VOUCHER WERE NOT PRODUCED; NO SUCH BUSINESS IN CHINDI-WASTE WAS DONE IN THE EARLIER OR LATER YEARS; SALES WERE MADE IN CASH WHILE PURCH ASES WERE PAID FOR BY CHEQUES; NAMES AND ADDRESSES OF PURCHASERS AND SELL ERS WERE NOT FURNISHED; THEREFORE THE APPELLANTS BUSINESS IS BOGUS. ACCORD INGLY HE IGNORED THE REVISED ROI AND MADE THE IMPUGNED ADDITION TO THE I NCOME RETURNED IN THE ORIGINAL ROI. 3.1.2 THE CONTENTIONS OF THE LEARNED A.R ARE THAT T HE IMPUGNED ADDITION IS MADE ON SURMISES AND CONJECTURES; REJECTION OF BOOK S IS WITHOUT ANY BASIS; WHEN THE SALES ARE IN CASH, THERE IS NO NEED FOR TH E APPELLANT TO KNOW THE NAMES AND ADDRESSES OF PURCHASERS; AS REGARDS THE P ARTIES FROM WHOM CREDIT PURCHASES WERE MADE, NAMES AND ADDRESSES WERE APPEA RING IN THE BOOKS OF ACCOUNTS PRODUCED BEFORE THE A.O; MORE-OVER, VIDE S L. NO.7 OF THE LETTER DATED 06-05-2009, NAMES AND ADDRESSES OF ALL SUCH S QUARED UP CREDITORS (IN RESPECT OF PURCHASES MADE) WERE FURNISHED; A.O DID NOT CONDUCT ANY INQUIRY WITH ANY OF THE PARTIES; A.OS OBSERVATION (AT PARA 2 OF PAGE 7) THAT NO ITA NO.1373/AHD/2011 A.Y. 2007-08 ITO WD-6(2) ABD V. SMT. JYOTSNABEN A PATEL PAGE 5 CONFIRMATIONS FROM CREDITORS APPEARING IN THE BALAN CE SHEET WERE FILED IS FACTUALLY INCORRECT, SINCE CREDITORS IN THE BALANCE SHEET WERE SHOWN AT NIL; AS REGARDS TWO GIFTS OF RS.1 LAKH EACH RECEIVED, AFFID AVITS OF DONORS WERE FILED BEFORE THE A.O; AND A.OS OBSERVATION (THAT SHOWING TURNOVER IN CHINDI-WASTE AT RS.39,20,641/- WAS TO AVOID THE PROVISIONS OF SE C. 44AB) WAS A MERE GUESS-WORK. 3.1.3 AS SEEN FROM THE APPELLANTS SAVINGS BANK ACC OUNT NO.9547 WITH THE AHMEDABAD MERCANTILE CO.OP BANK LTD. GIRDJARMAGAR B RANCH, THERE ARE CASH DEPOSITS, CASH WITHDRAWALS, DEPOSITS AND WITHDRAWAL S THROUGH CLEARING . THE PEAK CREDIT IN THE SAID ACCOUNT WAS RS.1,53,346/- O N 26-03-2007. THE INCOME RETURNED FROM TRADING IN CHINDI-WASTE (IN THE REVIS ED ROI) WAS RS.1,96,032/- U/S. 44AF, BEING 5% OF THE TOTAL TURNOVER OF RS.39, 20,641/-. 3.1.4 A.O DID NOT BRING ANY MATERIAL ON RECORD TO S HOW THAT APPELLANTS TRADING IN CHINDI-WASTE IS BOGUS. APPELLANT FILED THE REVIS ED ROI SUO-MOTU. IT IS NOT THE CASE OF THE A.O THAT THE REVISED ROI WAS FILED AFTE R THE APPELLANT WAS CONFRONTED WITH OR SHOW-CAUSED REGARDING CASH DEPOS ITS IN BANK ACCOUNT. HIS OBSERVATIONS ARE GENERAL AND VAGUE. PRESUMING FOR A MOMENT THAT THE SAID BUSINESS WAS BOGUS, ONLY THE PEAK CREDIT OF RS.1,53 ,346/- IS ASSESSABLE TO TAX. 3.1.5 KEEPING IN VIEW THE FACTS OF THE CASE, I AM O F THE CONSIDERED VIEW THAT THE ADDITION BE RESTRICTED TO THE PEAK-CREDIT OF RS .1,53,346/-. THE INCOME RETURNED IN THE REVISED ROI IS RS.2,39,520/-. THUS THE A.O IS DIRECTED TO COMPUTE THE INCOME AT RS.3,92,866/- (RS.2,39,520 + 1,53,346/-). THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA LS AVAILABLE ON RECORD. THE ALLEGATION OF THE ASSESSING OFFICER WAS THAT TH E ASSESSEE HAS NOT PRODUCED THE PURCHASES BILLS. THE LD. CIT(A) IN PARA-3.1.2 HAS O BSERVED THAT NAMES AND ADDRESS OF THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE ASSESSEE ARE APPEARING IN THE BOOKS OF ACCOUNT PRODUCED BEFORE THE AO WHER EAS THE AO HAS ALLEGED THAT ASSESSEE HAS NOT PRODUCED ANY NAMES AND ADDRESS OF SUCH PARTIES. THE LD. CIT(A) IN HIS ORDER HAS OBSERVED THAT AO HAS NOT CONDUCTED ANY ENQUIRY FROM ANY OF THE PARTIES. THE ALLEGATION OF THE AO THAT THE ASSESSEE HAS NOT FILED THE CONFIRMATIONS OF THE CREDITORS WHEREAS LD. CIT(A) OBSERVED THAT CRED ITORS IN THE BALANCE-SHEET ARE NIL. AS REGARDS THE ALLEGATION OF THE AO THE ASSESSEE HA S NOT FILED ANY DETAILS OR CONFIRMATION OF THE GIFTS RECEIVED, WHEREAS LD. CIT (A) IN HIS ORDER CONFIRMED OF FILING THE AFFIDAVITS OF DONORS BEFORE THE AO. ITA NO.1373/AHD/2011 A.Y. 2007-08 ITO WD-6(2) ABD V. SMT. JYOTSNABEN A PATEL PAGE 6 6. THERE ARE MANY CONTROVERSIES BETWEEN THE ORDER O F THE LD. CIT(A) WHO CONFIRMED OF FILING ALMOST ALL THE EVIDENCES AND TH E EXPLANATION BEFORE THE ASSESSING OFFICER WHEREAS AO IN HIS ORDER HAS MADE THE ALLEGA TION THAT EXCEPT THE CASH SALE BILLS NOTHING HAD BEEN PRODUCED TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE. MOREOVER, THE LD. CIT(A) HAS NOT CALLED FOR ANY REMAND REPORT OR ANY COMMENT IN THE MATTER FROM THE AO. THEREFORE, IN THE CIRCUMSTANCES AND FA CTS OF THE CASE AND IN THE INTEREST OF NATURAL JUSTICE WE REMIT THE MATTER TO THE FILE OF AO WHO WILL DECIDE THE ISSUE DE NOVO BUT BY AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, ALL THE GROUNDS OF REVENUE ARE ALLOWED FOR ST ATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED FOR STA TISTICAL PURPOSES. # !' $!%& 16 / 12 /2011 * + , - THIS ORDER PRONOUNCED IN OPEN COURT ON 16/12/ 2011 . SD/- SD/- ( G.C.GUPTA ) ( B.P. JAIN ) (VICE PRESIDENT) (ACCOUNTANT MEMBER) $!%&- 16/12/2011 /!! - DKP* !' !' !' !' 001 001 001 001 21 21 21 21 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. %%05 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 19, 0005, 05, /!! / DR, ITAT, AHMEDABAD 6. ,<= ># / GUARD FILE. BY ORDER/ !' , /TRUE COPY/ ?// %@ 05, /!! -