Sri. Mohammed Sadiq Tonse, Bangalore V. ITO, Bangalore

ITA 1384/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63811 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: GURUSWAMY ITP
• Keywords: Onus to prove
• Section: 44AD; 142(1); 68; 144

Judgement Text

PAGE 1 OF 9 ITA NO.138 4/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SHRI N V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1384/BANG/2011 (ASST. YEAR 2006-07) SRI MOHAMMED SADIQ TONSE, NO.98, 4 TH CROSS, KALASIPALAYAM NEW EXTENSION, BANGALORE-2. PA NO.ABRPT 5459 Q VS THE INCOME-TAX OFFICER, WARD-1(4), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 31.10.2012 DATE OF PRONOUNCEMENT : 30.11.2012 APPELLANT BY : SHRI GURUSWAMY, ITP RESPONDENT BY : SHRI A SUNDAR RAJAN, JCIT OR DER PER JASON P BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A)-I, BANGALORE, DATED 27.10.2011 FOR THE ASSE SSMENT YEAR 2006-07. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER: 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA NSPORT CONTRACT SUCH AS ARRANGING VEHICLES FOR CUSTOMERS TO TRANSPO RT GOODS AND UNDERTAKES ASSIGNMENTS FOR LOADING AND UNLOADING OF GOODS AND MAINLY HANDLES THE WORK FOR M/S R K MOVERS PVT. LTD., SITUATED AT SRI SAI K RUPA ICE CREAM CORNER, NEAR CHETANA COLLEGE, GOVERNMENT COLONY, BANDRA (EAS T), MUMBAI-400051. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED HIS RETURN OF INCOME PAGE 2 OF 9 ITA NO.138 4/BANG/2011 2 ON 12/9/2006 DECLARING INCOME OF RS.1,27,938/-. TH E RETURN WAS PROCESSED AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY B Y ISSUE OF NOTICES UNDER SECTION 143(2) AND 142(1) OF THE I T ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSMENT WAS COMPLETED BY A N EX-PARTE ORDER UNDER SECTION 144 OF THE ACT ON 19/11/2008 DETERMINING TH E INCOME OF THE ASSESSEE AT RS.6,02,650/- AS AGAINST THE RETURNED I NCOME OF RS.1,27,938/- BY VIRTUE OF AN ADDITION OF RS.4,74,712/- ON THE GRO UND THAT THE SAID AMOUNT REPRESENTS UNEXPLAINED CASH DEPOSITS IN THE ASSESSE ES BANK ACCOUNT NUMBER 071521124-006 WITH HSBC BANK. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR THE AS SESSMENT YEAR 2006-07 DATED 19/11/2008, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT(A)- I, BANGALORE WHO DISMISSED THE ASSESSEES APPEAL BY ORDER DATED 27/10/2011. 3.0 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A)-I, BANGALORE DATED 27/10/2011, THE ASSESSEE IS NOW IN APPEAL BEF ORE US. IN THE GROUNDS RAISED IN THIS APPEAL, THE ASSESSEE HAS SUBMITTED A S UNDER:- 1. THE APPELLATE ORDER DATED 27/10/2011 IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A)-I, BANGALORE OUGHT TO HAVE HELD THE ENTIRE BANK REMITTANCE OF RS.14,32,000/- AS TURNOVE R OF THE APPELLANT AND THE BENEFIT OF PROVISIONS OF SECTION4 4AD OF THE ACT OUGHT TO HAVE ALLOWED FOR COMPUTING THE INC OME AS THE APPELLANT HAS CARRIED ON THE ELIGIBLE BUSINESS AS DEFINED UNDER SECTION 44AD OF THE ACT. 3. THE LEARNED CIT(A)-I, BANGALORE OUGHT TO HAVE NOT H ELD THE TURNOVER DIFFERENCE OF RS.4,74,709/- (RS.14,32,000 PAGE 3 OF 9 ITA NO.138 4/BANG/2011 3 RS.9,57,291) AS UNEXPLAINED INCOME OF THE APPELLANT AS HAS BEEN HELD BY THE LEARNED ASSESSING OFFICER. 4. THE LEARNED CIT(A)-I, BANGALORE OUGHT TO HAVE FOLLO WED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF CIT V BHAI CHAND H GANDHI (1983) 141 ITR 67 (BOM.) 5. THE LEARNED CIT(A)-I, BANGALORE OUGHT TO HAVE HELD THAT THE APPELLANT IS NOT REQUIRED TO KEEP AND MAINTAIN THE BOOKS OF ACCOUNT UNDER SUB-SECTION 2 OF SECTION 44AA OF THE ACT, SINCE THE PROFIT IS LIABLE TO BE COMPUTED UNDER SEC TION 44AD OF THE ACT. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND DELETE ANY OF THE GROUNDS AT THE TIME OF HEARING. 4.0 THE GROUNDS RAISED AT SL.NO.1 AND 6 (SUPRA) ARE GENERAL IN NATURE AND THEREFORE, NO ADJUDICATION IS CALLED FOR THEREO N. 5.0 ALL THE OTHER GROUNDS AT SL.NO.2 TO 5 (SUPRA) RAISED CHALLENGE THE ORDER OF THE AUTHORITIES BELOW IN RESPECT TO TH E ADDITION OF RS.4,74,709/- TO THE ASSESSEES INCOME AS UNEXPLAIN ED CASH DEPOSITS IN THE ASSESSEES BANK ACCOUNT WITH HSBC BANK AND THE ASSE SSEES ALTERNATE CLAIM TO BE ASSESSED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44AD OF THE ACT AT 8% EVEN IF HIS TURNOVER IS TAKEN AT RS.14,32,000 /-. 5.1 THE FACTS OF THE MATTER AS EMANATE FROM THE RE CORD ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSI NG OFFICER ON FINDING THAT CASH REMITTANCES WERE MADE INTO THE ASSESSEES HSBC ACCOUNT NO.071- 521124-006 AMOUNTING TO RS.14,32,000/-, CALLED UPON THE ASSESSEE TO EXPLAIN THE SOURCES OF REMITTANCES THEREIN. THE ASSESSEE D ID NOT RESPOND TO OR FURNISH THE DETAILS CALLED FOR AND THEREFORE, THE A SSESSING OFFICER COMPLETED THE ASSESSMENT EX-PARTE UNDER SECTION 144 OF THE ACT. WHILE CONCLUDING THE ASSESSMENT, THE ASSESSING OFFICER AC CEPTED THE SOURCE OF PAGE 4 OF 9 ITA NO.138 4/BANG/2011 4 CASH REMITTANCES INTO THE SAID HSBC BANK ACCOUNT TO THE EXTENT OF RS.9,57,291/-, WHICH WAS THE TURNOVER DISCLOSED BY T HE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT, AND THE REMAINING DEPOSITS AMOUNTING TO RS.4,74,709/- (I.E. RS.14,32,000 LESS RS.9,57,291/- ) WAS HELD TO BE UNEXPLAINED CASH DEPOSITS AND BROUGHT TO TAX AS INC OME OF THE ASSESSEE. THIS VIEW WAS CONFIRMED BY THE LEARNED CIT(A). 5.1.1 THE LEARNED AR SUBMITTED THAT THE ASSESSEE I S ENGAGED IN TRANSPORTATION BUSINESS AND IS MAINLY RENDERING CONT RACT SERVICES TO M/S R K MOVERS PVT. LTD., MUMBAI. IT WAS SUBMITTED THAT TH IS COMPANY HAD ASSIGNED CONTRACT WORK OF LOADING GOODS AT BANGALORE TO THE ASSESSEE AND IN THIS CONNECTION HAD DEPOSITED THE ENTIRE AMOUNT OF RS.14 ,32,000/- TO THE ASSESSEES BANK ACCOUNT NO.071-521124-006 WITH HSBC BANK IN ORDER TO MEET DAY TO DAY EXPENSES, SUCH AS ADVANCE AMOUNTS PAYA BLE TO TRUCK OWNERS, LABOUR CHARGES FOR LOADING AND UNLOADING GOODS ETC. A MAJOR PORTION OF THIS AMOUNT OF RS.14,32,000/- WAS IN THE NATURE OF REIMB URSEMENT OF EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF M/S R K MOVERS PVT. LTD., MUMBAI AND OUT OF THIS, THE ASSESSEE HAD DECLARED RS.9,57,291/ - AS HIS TURNOVER AND THE BALANCE OF RS.4,74,709/- WAS RELATED TO REIMBURSEME NT FOR THE EXPENSES INCURRED ON BEHALF OF M/S R K MOVERS PVT. LTD. IT WAS SUBMITTED BY THE LEARNED AR THAT THE NATURE OF EXPENSES INCURRED BY T HE ASSESSEE ON BEHALF OF M/S R K MOVERS PVT. LTD. WERE CASH PAYMENTS TO DR IVERS FOR FILLING UP PETROL/DIESEL REQUIRED DURING THE JOURNEY FROM BANG ALORE TO MUMBAI, LOADING CHARGES TO LABOUR, BATA TO DRIVERS AND OTHER MISCEL LANEOUS EXPENSES. THE LEARNED AR CONTENDED THAT THESE EXPENSES AMOUNTING TO RS.4,74,709/- PAGE 5 OF 9 ITA NO.138 4/BANG/2011 5 INCURRED ON BEHALF OF M/S R K MOVERS PVT. LTD. WERE REIMBURSABLE IN NATURE AND THEREFORE, DID NOT FORM PART OF HIS TURNOVER OF RS.9,57,291/-. 5.1.2 IT WAS CONTENDED BY THE LEARNED AR THAT THE E NTIRE AMOUNT OF RS.14,32,000/- WAS REMITTED TO THE ASSESSEES BANK ACCOUNT NO.071-521124- 006 WITH HSBC BANK BY M/S R K MOVERS PVT. LTD. AS CO NFIRMED BY THEIR LETTER DATED 16.10.2009 AND NOT BY THE ASSESSEE HIMS ELF AND THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT TH E ASSESSEE HAD NOT EXPLAINED THE SOURCE OF DEPOSITS OR THE IDENTITY OF THE DEPOSITOR OF THE CASH IN THE BANK ACCOUNT. IN VIEW OF THIS, IT WAS ARGUE D THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT A SUM OF RS.4,74, 709/- WAS UNEXPLAINED DEPOSITS AND IN TREATING THE SAME AS THE ASSESSEES INCOME. 5.1.3 IT WAS ALSO ARGUED BY THE LEARNED AR THAT THE ASSESSING AUTHORITYS ACTION IN MAKING THE SAID ADDITION TO IN COME WAS ERRONEOUS AS HE HAS NOT SPECIFIED THE PROVISION UNDER WHICH IT WAS BROUGHT TO TAX. ACCORDING TO THE LEARNED AR, PROVISION OF SECTION 68 OF THE A CT WOULD NOT APPLY IN THIS CASE AS THE DEPOSITS WERE NOT DETECTED IN THE ASSES SEES BOOKS OF ACCOUNT BUT RATHER IN A BANK PASSBOOK WHICH DOES NOT CONSTI TUTE BOOKS OF ACCOUNT AS LAID OUT IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V BHAI CHAND H GANDHI (1983) 141 ITR 67 (BOM.). 5.1.4 THE LEARNED AR CONTENDED THAT THE ASSESSEE H AD SUBMITTED BEFORE THE LEARNED CIT(A) AN ALTERNATE CLAIM THAT T HE ENTIRE CASH REMITTANCES OF RS.14,32,000/- BE CONSIDERED AS TURN OVER FROM HIS TRANSPORTATION BUSINESS, WHICH IS IN THE NATURE OF CONTRACT WORK, AND THEREFORE, HE WOULD BE ENTITLED TO DECLARE HIS INCO ME UNDER SECTION 44AD OF PAGE 6 OF 9 ITA NO.138 4/BANG/2011 6 THE ACT AS APPLICABLE TO CONTRACTORS. ACCORDINGLY, IN THESE CIRCUMSTANCES, IT WAS SUBMITTED BY THE LEARNED AR THAT THE ASSESSEE IS ENTITLED TO DECLARE HIS INCOME AT 8% OF THE TOTAL TURNOVER AND CONSEQUENTLY, ASSESSEES INCOME WOULD BE RS.1,14,560/-, WHEREAS THE NET INCOME DECL ARED WAS RS.1,27,983/-. IN THIS VIEW OF THE MATTER, THE LEARNED AR ARGUED T HAT NO FURTHER ADDITION TO INCOME DECLARED IN THE RETURN OF INCOME FOR THE RELEVANT YEAR IS CALLED FOR. 5.1.5 PER CONTRA, THE LEARNED DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW AND CONTENDED THAT THE GROUNDS RA ISED BY THE ASSESSEE OUGHT TO BE DISMISSED. 5.1.6 WE HAVE HEARD BOTH THE PARTIES AND HAVE CARE FULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. ON PERUSAL OF T HE DOCUMENTS/SUBMISSIONS, WE ARE OF THE OPINION THAT T HE FOLLOWING TWO ISSUES ARISE FOR ADJUDICATION:- I) WHETHER THE ASSESSING AUTHORITY WAS JUSTIFIED IN HOLDING THAT AN AMOUNT OF RS.4,74,709/- WAS UNEXPLAINED DEPOSITS, CHARGEABLE TO TAX? II) WHETHER THE ASSESSEE WOULD BE ENTITLED TO AVAIL THE BENEFIT OF SECTION 44AD OF THE ACT TO COMPUTE THE INCOME @ 8% ON THE ENTIRE CASH DEPOSITS AMOUNTING T O RS.14,32,000/-. 5.1.7 THE ALTERNATE CLAIM OF THE ASSESSEE AT SL.NO .2 AND 5 OF THE GROUNDS WAS THAT HE IS ENTITLED TO AVAIL THE BENEFI T OF SECTION 44AD OF THE ACT TO COMPUTE HIS INCOME @ 8% ON THE ENTIRE CASH D EPOSITS OF RS.14,32,000/- IF IT IS TAKEN AS THE TURNOVER FOR T HE RELEVANT PERIOD. THE PAGE 7 OF 9 ITA NO.138 4/BANG/2011 7 LEARNED AR HAD ARGUED THAT IN SUCH CIRCUMSTANCES, T HE ASSESSEE WOULD NOT BE REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT UNDER S ECTION 44AA(2) OF THE ACT AND AS THE TURNOVER IN THE RELEVANT PERIOD IS L ESS THAN RS.40,00,000/- WAS NOT LIABLE FOR TAX AUDIT UNDER SECTION 44AB OF THE ACT. IT WAS FURTHER SUBMITTED THAT THIS GROUND WAS RAISED BEFORE THE LE ARNED CIT(A), WHO DISMISSED IT SUMMARILY AS NOT APPLICABLE IN DEEMED I NCOME CASES. 5.1.8 WE HAVE PERUSED AND CONSIDERED THE MATERIAL ON RECORD. THE LEARNED CIT(A) CONFIRMED THE ADDITION OF RS.4,74,70 9/- HOLDING IT TO BE UNEXPLAINED CASH DEPOSITS AND INCOME OF THE ASSESSE E IN THE RELEVANT PERIOD. IT IS A MATTER OF RECORD THAT THE TOTAL DEPOSITS IN THE ASSESSEES BANK ACCOUNT WITH HSBC BANK WAS RS.14,32,000/-. IT IS A LSO NOT IN DISPUTE THAT THE ASSESSEE HAS FILED A CONFIRMATION DATED 16.10.2 009 BEFORE THE LEARNED CIT(A) FROM M/S R K MOVERS PVT. LTD. STATING THAT I T WAS THEY AND NOT THE ASSESSEE WHO HAD MADE THESE DEPOSITS IN THE ASSESSE ES ACCOUNT WITH HSBC BANK FOR REIMBURSEMENT OF VARIOUS EXPENSES AND CHAR GES OF THE ASSESSEE FOR WORK ON THEIR BEHALF. THE LEARNED CIT(A) HAS N OT DISPUTED THE VERACITY OF THE CONFIRMATION FILED BEFORE HIM BY M/S R K MOVE RS PVT. LTD. NOR ANY ADVERSE FINDING BEEN GIVEN BY THE LEARNED CIT(A) IN RESPECT THERETO EXCEPT FOR FINDING FAULT WITH THE ASSESSEES TREATING OF A SUM OF RS.4,74,709/- AS REIMBURSEMENT OF EXPENSES AND THE BALANCE OF RS.9,5 7,291./- AS HIS TURNOVER. NOWHERE HAS THE ASSESSING OFFICER PROVED THAT THE ASSESSEE HAD EARNED UNDISCLOSED INCOME AMOUNTING TO RS.4,74,709/ -. WE FIND FROM THE DETAILS ON RECORD THAT THE SOURCE OF THE CASH DEPOS ITS TOTALING RS.14,32,000/- IN THE ASSESSEES BANK ACCOUNT IN HS BC BANK IS EXPLAINED AS PAGE 8 OF 9 ITA NO.138 4/BANG/2011 8 BEING FROM OUT OF DEPOSITS MADE THEREIN BY M/S R K M OVERS PVT. LTD. AS CONFIRMED BY THEM IN THEIR LETTER DT.16/10/2009. THE IDENTITY OF THE DEPOSITOR HAS ALSO BEEN ESTABLISHED TO BE THAT OF M /S R K MOVERS PVT. LTD. THIS IS THE FACTUAL POSITION ON RECORD AS THE AUTHO RITIES BELOW HAVE NEITHER ESTABLISHED THAT THE CONFIRMATION OF CASH DEPOSITS FILED WAS ERRONEOUS OR FULFILLED THE BURDEN OF PROOF IN ESTABLISHING THAT THE ASSESSEE HAD IN FACT EARNED INCOME AMOUNTING TO RS.4,74,709/-. EVEN FOR A MOMENT, IT WOULD BE RIDICULOUS TO SUGGEST THAT THE ASSESSEE, HAD EARNED INCOME OF RS.6,02,650/-, OUT OF TURNOVER OF RS.14,32,000/- AND THEREFORE, IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW HAVE NOT ESTABLISHED THAT THE ASS ESSEE HAS EARNED INCOME AS ASSESSED. 5.1.9 TAKING INTO ACCOUNT THE TOTAL FACTUAL MATRIX OF THE CASE AS DISCUSSED, IN OUR CONSIDERED OPINION, THE ASSESSEE, BEING A TRANSPORT CONTRACTOR AND HIS TURNOVER EVEN IF TAKEN AT RS.14, 32,000/- (RS.9,57,291 + RS.4,74,209/-) BEING LESS THAN THE PRESCRIBED LIMIT OF RS.40,00,000/- UNDER SECTION 44AB OF THE ACT, HE IS ENTITLED TO DECLARE HIS INCOME UNDER SECTION 44AD OF THE ACT @ 8% ON THE ENTIRE TURNOVER. THE A SSESSING OFFICER IS THEREFORE DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 44AD OF THE ACT. IN THE EVEN T THE RESULTANT INCOME WORKS OUT TO LESS THAN THE RETURNED INCOME OF RS.1, 27,938/-, THE ASSESSED INCOME WOULD BE RETAINED AT RS.1,27,938/- AS DECLAR ED BY THE ASSESSEE. ACCORDINGLY, THE ALTERNATE GROUND/CLAIM MADE BY THE A SSESSEE IS ALLOWED. PAGE 9 OF 9 ITA NO.138 4/BANG/2011 9 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER, 2012 SD/- SD/- (N V VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.