The ITO, Ward-3(4), Surat V. Shri Rajpal Singh Shekhawt, Surat

ITA 1399/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89713 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Depreciation; Peak credit; Corroborative evidences
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE S/SHRI N. S. SAINI, AM & RAJPAL YADAV, JM. ITA NO. 1399/AHD/2011 ALONG WITH CO NO.142/AHD/2011 ASST. YEAR 2007-08 .INCOME-TAX OFFICER, WARD 3(4), SURAT. VS SHRI RAJPAL SINGH SHEKHAWAT PROP. OF MONU INDUSTRIAL SECURITY, G-9, NAV MANGALAM COMPLEX, NR. MAHARAJA AGRESEN BHAVAN, CITY LIGHT AREA, SURAT. (APPELLANT) (RESPONDENT) PA NO.ASPPS 3053C APPELLANT BY SHRI NIMESH YADAV, SR.DR RESPONDENT BY SHRI RASESH SHAH, AR DATE OF HEARING: 04/06/2015 DATE OF PRONOUNCEMENT: 24/06/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 21 ST FEBRUARY, 2011 PASSED FOR AY 2007-08. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, ASSESSEE HAS FIL ED CROSS OBJECTION BEARING NO.142/AHD/2011. 2. THE REVENUE HAS TAKEN THREE GROUNDS OF APPEAL BU T ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE WHICH IS C OMMON GROUND ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 2 NO.3 OF THE CO FILED BY THE ASSESSEE. THE COMMON IS SUE IN BOTH THESE GROUNDS IS THAT LD. AO HAS MADE AN ADDITION O F RS.68,51,309/- ON ACCOUNT OF UNEXPLAINED DEPOSIT IN BANK ACCOUNT. THE LD. CIT(A) AFTER APPLYING THE PEAK CREDIT THEORY ON THE BANK A CCOUNT RESTRICTED THIS ADDITION TO RS.9,41,557/-. THE REVENUE IS AGGR IEVED WITH DELETION OF ADDITION WHEREAS ASSESSEE IS AGGRIEVED WITH CONF IRMATION OF ADDITION AT RS.9,41,557/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME AT R S.2,85,966/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND A NOTICE UNDER SECTION 143(2) DATED 4 TH AUGUST, 2008 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS RUNNING A TEXTILE TRADING BUSINESS, IN THE ACCOUNTING YEARS RELEVANT TO AYS 2003-04 AND 2004-05. HE DISCONTINUED THIS BUSINESS AND STAR TED THE BUSINESS OF PROVIDING SECURITY SERVICES. ON SCRUTINY OF THE ACCOUNTS LD. AO HAS NOTICED TWO BANK ACCOUNTS WITH DENA BANK, NANPURA, SURAT. ACCOUNT NO.CA 25397 WAS CURRENT ACCOUNT AND A/C SB NO.29271 WAS A SAVINGS BANK ACCOUNT. THE ASSESSEE HAS MADE DEPOSIT S OF RS.1,12,93,090/- IN THE CURRENT ACCOUNT AND RS.28, 41,085 IN THE ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 3 SAVINGS BANK ACCOUNT. THUS A TOTAL DEPOSITS OF RS.1 ,41,34,175/- WAS MADE BY THE ASSESSEE IN THESE TWO ACCOUNTS DURING T HE ACCOUNTING PERIOD RELEVANT TO THIS AY. ON AN ANALYSIS OF THE A CCOUNT THE LD. AO FOUND THAT A SUM OF RS.61,79,940/- WAS DEPOSITED BY THE ASSESSEE IN CASH ON VARIOUS DATES. HE DIRECTED THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPOSITS. THE ASSESSEE CONTENDED THAT HE WAS RUNNING A TEXTILE TRADING BUSINESS DURING THE ACCOUNTING YEAR S RELEVANT TO AYS 2003-04 & 2004-05. THE SAID BUSINESS WAS DISCONTINU ED AND ALL THE DEBTORS AND CREDITORS OF THAT BUSINESS WERE TRANSFE RRED TO HIS PERSONAL BALANCE SHEET. HE RECEIVED PAYMENT FROM TH E DEBTORS DURING THE PREVIOUS YEAR AND ALSO PAID THE AMOUNT T O THE CREDITORS. THE ASSESSEE HAS SUBMITTED COPY OF THE PROFIT AND L OSS ACCOUNT, BALANCE SHEET, AUDIT REPORT, SERVICE TAX RECEIPTS E TC. THE AO HAS DIRECTED THE ASSESSEE TO SUBMIT THE LIST OF CREDITO RS AS WELL AS DEBTORS AND CONFIRMATIONS FROM THEM. HE FAILED TO SUBMIT. A CCORDINGLY LD. AO REJECTED THE CONTENTION OF ASSESSEE. HE WORKED OUT INTRA DEPOSITS AND WITHDRAWALS OF THESE BANK ACCOUNTS AND MADE ADD ITION OF RS.68,51,309/- UNDER SECTION 68 OF THE INCOME-TAX A CT, 1961 (HEREAFTER THE ACT). ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 4 4. DISSATISFIED WITH THE ACTION OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). HE CONTENDED THAT AFTER C OLLECTING THE COMPLETE EVIDENCE FROM THE BANK INCLUDING THE DETAI LS OF CHEQUE NUMBERS IT WAS GATHERED BY HIM THAT HE HAD RECEIVED CHEQUES FROM HIS CLIENTS IN THE BUSINESS OF PROVIDING THE SECURI TY. THESE CHEQUES WERE DISCOUNTED BY HIM FROM THE FINANCIER AND THE A MOUNTS WERE DEPOSITED IN CASH. THEREFORE, THERE IS A VARIATION BETWEEN THE DEPOSITS AND THE CHEQUES ISSUED BY HIM. THE FIRST A PPELLATE AUTHORITY HAS APPRECIATED THE CONTENTION OF THE ASSESSEE BUT DID NOT CONCUR WITH HIS SUBMISSIONS. THE LD. CIT(A) HAS OBSERVED T HAT ASSESSEE FAILED TO PROVE THE FACT THAT HE HAS RECEIVED CASH BY DISCOUNTING OF HIS CHEQUES FROM THE FINANCIERS. THE LD. FIRST APPELLAT E AUTHORITY, HOWEVER, HAS OBSERVED THAT THE DETAIL ANALYSIS OF THE BANK A CCOUNTS WOULD INDICATE THAT THESE BANK ACCOUNTS WERE USED BY THE ASSESSEE FOR MAKING PAYMENTS AS WELL AS DEPOSITING CHEQUES AND C ASH. ACCORDING THE LD. CIT(A) THE UNEXPLAINED AMOUNT AND THE PROFI TS THEREON COULD BE WORKED OUT BY APPLYING PEAK CREDIT THEORY. FINDI NG OF THE LD. CIT(A) IN THIS CONNECTION READS AS UNDER :- 5.2 UPON CONSIDERATION OF ALL THE FACTS DISCUSSED ABOVE, I FIND THAT IT IS NOT DISPUTED BY THE APPELLANT THAT THE CASH DEPO SITS IN THE TWO BANK ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 5 ACCOUNTS ARE UNACCOUNTED, THAT IS NOT APPEARING IN HIS BOOKS OF ACCOUNTS, AND THE APPELLANTS CONTENTION THAT THE C ASH DEPOSITED IN THE TWO ACCOUNTS HAS BEEN RECEIVED BY DISCOUNTING O F CHEQUES, IS ALSO NOT SUPPORTED BY ANY CONFIRMATION FROM THE FIN ANCIERS, HOWEVER, A DETAILED STUDY OF THE TWO BANK ACCOUNTS SHOW THAT THERE IS DEBT OF EQUAL OR MORE OR LESS OF THE SAME AMOUNTS OF THE CA SH DEPOSITED IN THE BANK ACCOUNTS AT REGULAR INTERVALS, WHICH LENDS SOME CREDENCE TO THE SUBMISSION OF THE APPELLANT THAT HE HAS BEEN AR RANGING FUNDS FROM THE FINANCIERS IN CASH AGAINST CHEQUES DISCOUN TED BY THEM. THE ASSESSING OFFICER HAS REJECTED THE ALTERNATE SUBMIS SION OF THE APPELLANT TO ADOPT PEAK OF THE CASH DEPOSITS IN THE TWO BANK ACCOUNTS TO ARRIVE AT THE INCOME NOT ACCOUNTED IN HIS BOOKS OF ACCOUNTS ON THE GROUND THAT THE WITHDRAWALS MADE FROM THE TWO BANK ACCOUNTS SHOW THAT THE CHEQUES HAVE BEEN ISSUED TO DIFFERENT PART IES. THE ASSESSING OFFICER HAS HOWEVER, WHILE REJECTING THE ABOVE ALTE RNATE SUBMISSION OF THE APPELLANT, HAS NOT EXPLAINED AS TO HOW WHEN THE CHEQUES HAVE BEEN ISSUED TO DIFFERENT PARTIES, REPRESENTING THE DEBITS IN THE ABOVE TWO ACCOUNTS THE SAME WILL HAVE A BEARING THE PEAK OF THE CASH DEPOSITS, IF IT IS SO ACCEPTED. 5.3 IN VIEW OF THE DISCUSSION MADE ABOVE, I HOLD TH AT THE ENTIRE DEPOSITS CANNOT BE TAKEN AS INCOME OF THE APPELLANT , AS THE TWO BANK ACCOUNTS WHEREIN THE CASH DEPOSITS HAVE BEEN MADE A LSO SHOW DEBITS OF REGULAR INTERVALS. THEREFORE, IN THE FITN ESS OF THINGS, IT WILL BE APPROPRIATE TO TAKE THE PEAK OF THE CASH DEPOSITS IN THE ABOVE TWO BANK ACCOUNTS AND THE GROSS PROFIT DECLARED IN THE RETURN OF INCOME ON THE CASH DEPOSITS APPEARING IN THE TWO ACCOUNTS SUBSEQUENT TO THE DATE OF PEAK CREDIT. THE POSITION OF THE SAME , AS VERIFIED DURING THE COURSE OF APPELLATE PROCEEDINGS, IS AS FOLLOWS: - (I) CA A/C NO.25397 PEAK CREDIT OF CASH DEPOSITS ( 14.07.2006) RS.2,78,934/-, (II) SAVINGS A/C NO.29271 PEAK CREDIT OF CASH DEPO SITS (27.1.2007) RS.1,03,751/-. TOTAL OF PEAK CREDIT OF CASH DEPOSITS RS.3,82,685 . ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 6 G.P. ON TURNOVER (CASH DEPOSITS) AFTER 14.07.2006 I N CURRENT ACCOUNT @ 15.58% ON RS.18,52,810/- AND AFTER 27.1.2007 IN S AVINGS A/C @ 15.58% ON RS.17,34,300, THAT IS @ 15.58% ON RS.35,8 7,110/- RS.5,58,872/-. IN VIEW THAT PEAKCREDIT OF CASH DEPOSITS IN THE T WO ACCOUNTS HAS BEEN TAKEN, THE G>P. ELEMENT IN THE CASH DEPOSITS ( TURNOVER) IN THE TWO ACCOUNTS UPTO THE DATE OF PEAKCREDIT IS INCLU DED IN THE AMOUNT OF RS.3,82,685/-. I, THEREFORE, UPHOLD THE ADDITION MA DE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN THE TWO BANK ACCOUNTS TO THE EXTENT OF RS.9,41,557/-. THE FIRST GROUND OF APPEAL IS, ACCOR DINGLY, PARTLY ALLOWED. 5. BEFORE US, THE REVENUE HAS CONTENDED THAT THE TH EORY OF PEAK CREDIT IS NOT APPLICABLE IN THIS CASE BECAUSE THE S AME AMOUNT OF WITHDRAWAL HAS NOT BEEN DEPOSITED AGAIN AND AGAIN. A PERUSAL OF THE BANK STATEMENT WOULD SHOW THAT SEVERAL DEPOSITS HAV E BEEN MADE IN CASH ON DIFFERENT DATES BUT THE WITHDRAWALS HAVE BE EN MADE THROUGH CHEQUES ISSUED TO DIFFERENT PARTIES. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF CIT(A) AS WELL AS HE PUT RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. T IRUPATI CONSTRUCTION CO. 55 TAXMANN.COM 308 (GUJARAT). THIS DECISION HAS BEEN RENDERED ON 3 RD NOVEMBER, 2014 IN TAX APPEAL NOS. 1010 TO 1012 OF 2014. HE PLACED ON RECORD A COPY OF THE HON BLE HIGH COURTS ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 7 DECISION. IN THIS CASE DURING THE COURSE OF SEARCH A PAPER EXHIBITING DEBIT AND CREDIT ENTRIES WAS FOUND. THE CIT(A) APPL IED PEAK CREDIT THEORY. THE VIEW OF THE CIT(A) HAS BEEN UPHELD BY T HE TRIBUNAL. THE HONBLE HIGH COURT HAS ALSO DISMISSED THE APPEAL OF REVENUE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED ON RECO RD COPIES OF BANK STATEMENT FOR THE PERIOD FROM 1.4.2006 TO 31 ST MARCH, 2007. REFERRING TO THE SAVINGS BANK ACCOUNT, HE POINTED OUT THAT FO R EXAMPLE A SUM OF RS.1,00,000/- WAS WITHDRAWN VIDE CHEQUE NO.62204 0 ON 6 TH MARCH, 2007, FURTHER SUM OF RS.1,00,000/- WAS DEPOSITED. O N 5 TH MARCH, 2007 RS.99,000/- WERE DEPOSITED. THERE IS A COMPLET E CHAIN OF DEPOSIT AND WITHDRAWAL. 7. ON THE STRENGTH OF THESE DETAILS HE SUBMITTED TH AT LD. CIT(A) HAS RIGHTLY APPLIED THE PEAK THEORY AND HAS WORKED OUT THE PROFIT ELEMENT. 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE LD. FIRST APPELLA TE AUTHORITY HAS REJECTED BOTH THE CONTENTIONS OF THE ASSESSEE THAT HE HAS RECEIVED THE AMOUNTS FROM HIS DEBTORS FROM DISCONTINUED BUSI NESS IN TEXTILE TRADING. THE LD. CIT(A) HAS ALSO REJECTED THE CONTE NTION THAT ASSESSEE ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 8 HAS DISCOUNTED THE CHEQUES FROM THE FINANCIERS RECE IVED IN RESPECT OF HIS BUSINESS OF PROVIDING SECURITY SERVICES. HOWEVE R ON AN ANALYSIS OF THE ACCOUNT LD. FIRST APPELLATE AUTHORITY HAD AR RIVED AT A CONCLUSION THAT THE ACCOUNT WAS USED FOR THE PURPOSE OF SOME B USINESS, BECAUSE THERE ARE DEBIT AND CREDIT ENTRIES IN A SYS TEMATIC MANNER. THE DEBIT OF EQUAL OR MORE OR LESS OF THE SAME AMOU NT OF THE CASH DEPOSIT IN THE BANK ACCOUNT AT REGULAR INTERVAL IS AVAILABLE. THE TOTAL OF THE CASH DEPOSITS IN SUCH CIRCUMSTANCES CANNOT B E CONSIDERED AS UNEXPLAINED INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS WORKED OUT THE PEAK CREDIT IN BOTH THE ACCOUNTS. THESE CREDITS ARE ON 14 TH JULY, 2006 IN THE CURRENT ACCOUNT AND 27 TH JANUARY, 2007. HE WORKED OUT THE TOTAL OF THE CASH DEPOSITS AND THEREAFTER COMPU TED THE GP ON TURNOVER OF CASH DEPOSITS AFTER 14 TH JULY, 2006 IN CURRENT ACCOUNT AND AFTER 27 TH JANUARY, 2007 IN SAVINGS ACCOUNT. THE CIT(A) HAS W ORKED OUT THE GP ELEMENT IN THESE TRANSACTIONS. HE HAS AD DED THE PROFIT EARNED BY THE ASSESSEE IN THE BUSINESS AFTER WORKIN G OUT THE PEAK CREDIT. IN OTHER WORDS THE MAXIMUM AMOUNT OF THE PE AK DEPOSITS IS RS.3,82,688/-. THIS WAS CONSIDERED AS REPRESENTING THE INVESTMENT IN THIS ACTIVITY WHICH HAS BEEN CARRIED OUT WITH THESE TWO BANK AND THEREAFTER WORKED OUT THE PROFIT ELEMENT. HE MADE A N ADDITION OF ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 9 RS.9,41,557/- WHICH IS TOTAL OF RS, 5,58,872/- + RS .3,82,685/- I.E. PROFIT ON THE TURNOVER + ALLEGED INITIAL INVESTMENT IN THE SHAPE OF PEAK CREDIT. THIS FACTOR CAN TAKE CARE OF BOTH THESE ISS UES. 9. THE ASSESSEE IN HIS C.O. HAS SUBMITTED THAT NET PROFIT SHOWN BY HIM IS 3.36% IN AY 2007-08. THE MAXIMUM PROFIT S HOWN BY HIM IS 5.05% IN AY 2010-2011 WHEREAS THE LOWEST IS 1.94% I N 2014-2015. CONSIDERING THIS SUBSEQUENT HISTORY OF THE ASSESSEE THE PROFIT OUGHT TO BE WORKED OUT BY ADOPTING A REASONABLE FIGURE AN D NOT AS HIGH AS 15.50% CONSIDERED BY THE CIT(A). HOWEVER, WE DO NOT SEE ANY MERIT IN THIS CONTENTION OF ASSESSEE BECAUSE HE IS UNABLE TO SUPPORT HIS CLAIM WITH ANY AUTHENTIC BOOKS OF ACCOUNT. IT IS NO T DISCERNIBLE WHETHER THESE NET PROFITS HAVE BEEN ACCEPTED IN THE SCRUTINY ASSESSMENT OR NOT. CONSIDERING THE FACTS AND CIRCUM STANCES OF THE CASE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). THE SOLITARY GROUND RAISED BY THE REVENUE AS WELL AS GR OUND NO.3 RAISED BY THE ASSESSEE IN THE CO ARE REJECTED. 10. IN GROUND NOS.1 & 2 OF THE C.O. ASSESSEE HAS PL EADED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.14,200 OUT OF TELEPHONE AND MOBILE EXPENDITURE. HE FURTHER PLEADE D THAT LD. CIT(A) ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 10 HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.39,310/- OUT OF VEHICLE EXPENSES, DEPRECIATION AND PETROL EXPENSES. WE FIND THAT ASSESSEE HAS FAILED TO SUBMIT THE SUPPORTING EVIDENCE IN RES PECT OF THESE EXPENDITURES. THE LD. AO HAS MADE AN AD HOC DISALLO WANCE AT 20% OF THE EXPENSES. THE LD. FIRST APPELLATE AUTHORITY HAS CONFIRMED THE DISALLOWANCE. SINCE THE ASSESSEE IS RUNNING A PROPR IETORSHIP CONCERN, ELEMENT OF PERSONAL BENEFITS OUT OF THE US E OF THESE FACILITIES I.E. PHONE(S) AND CAR CANNOT BE RULED OUT. THE ASSE SSEE WAS NOT MAINTAINING ANY LOG BOOK NOR PRODUCED ANY OTHER DET AILS, IN SUPPORT OF HIS CLAIM. THEREFORE, LD. REVENUE AUTHORITIES HA VE RIGHTLY DISALLOWED THE EXPENDITURE ON AN ESTIMATE BASIS. WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A). BOTH THE GROUND S ARE REJECTED. 11. IN THE RESULT, THE APPEAL OF REVENUE AND C.O. O F THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/6/2015 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER DATED 24/6/2015 MAHATA/- ITA NO. 1399/AHD/2011 & CO NO.142/AHD/2011 ASST. YEAR 2007-08 11 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 23.6.2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 24.6.2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 24/6/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: