Narendra P. Musale, Nashik V. Income-tax Officer,

ITA 1518/PUN/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9405 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Assessee Lawyers: SANKET M JOSHI
• Keywords: Peak credit; Revised return
• Section: 44AD; 143(3); 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / I TA NOS. 1517 TO 1519 /PUN/201 6 / ASSESSMENT YEAR S : 2008 - 09 TO 2010 - 11 NARENDRA P. MUSALE 1 ST FLOOR, GANESH APARTMENT, NEAR BUS STAND, SATPUR. NASHIK - 422 007 PAN : AFFPM 7810N ....... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 1(4 ), NASHIK. / RESPONDENT APPELLANT BY : SHRI SANKET M. JOSHI RESPONDENT BY : SHRI ALOK MALVIYA / DATE OF HEARING : 2 5 .05.2017 / DATE OF PRONOUNCEMENT : 31. 05.2017 / ORDER PER SUSHMA CHOWLA , JM THESE THREE APPEAL S FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE CIT(A) - 1, NASHIK DATED 19.05.2016 RELATING TO ASSESSMENT YEAR S 2008 - 09 TO 2010 - 11 AGAINST THE OR DER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ASSESSMENT YEAR 2008 - 09 : - 2 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 1) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN PASSING EX - PARTE ORDER BY ISSUING ONLY ONE NOTICE OF HEARING WHICH COULD NOT BE COMPLIED WITH DUE TO ILL HEALTH OF THE ASSESSEE. 2) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,95,573/ - ( RS.9,49,953 - RS.1,54,380/ - ) TO THE REVISED INCOME RETURNED. 3) ON THE FACTS AND IN LAW THE CIT(A) AND A.O HAVE ERRED IN CONSIDERING THE TOTAL DEPOSITS IN BANK AS INCOME OF THE APPELLANT WITHOUT CONSIDERING THE FACT THAT CHEQUES DEPOSITS WERE DIS - HONORED TO THE EXTENT OF RS.36,544/ - . 4) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN NOT ACCEPTING THE FACT THAT THE UNDISCLOSED DEPOSITS IN BANK ACCOUNTS REPRESENTS SALE PROCEEDS OF THE GOODS TRADED AND HENCE ONLY PROFIT @ 11% SHOULD BE ADDED AS INCOME AND NOT ENTIRE DEPOSITS IN BANKS. 5) ON THE FACTS AND IN L AW, THE CIT(A) SHOULD HAVE AT THE MOST CONFIRMED THE ADDITION OF PEAK DEPOSITS I.E PEAK BALANCE IN THE BANK ACCOUNTS NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. 6) THE APPELLANT CRAVES LEAVE TO ADD, ALTER ABOVE OR ANY OTHER GROUND/S OF APPEAL. 3. THE ASSESSE E IN ASSESSMENT YEAR 2010 - 11 HAS RAISED GROUND OF APPEAL NO. 5 AS UNDER: 5. ON THE FACTS AND IN LAW, THE CIT(A) SHOULD HAVE AT THE MOST CONFIRMED THE ADDITION OF PEAK DEPOSITS I.E PEAK BALANCE IN THE BANK ACCOUNTS NOT DISCLOSED IN THE BOOKS OF ACCOUNTS AF TER REDUCING THE PEAK BALANCE IN UNDISCLOSED BANK ACCOUNTS TO BE TAXED IN PRECEDING YEARS AND INCOME OFFERED TO TAX IN THE PRECEDING YEARS AND CURRENT YEAR. 4. THESE BUNCH OF APPEALS ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS OF ITA NO. 1517/PUN/2016 TO ADJUDICATE THE ISSUE. 5 . BRIEFLY, IN THE FACTS OF THE CASE OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS THAT THE ASSESSEE HAD FURNI SHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4,47,710/ - . THE ASSESSEE HAD SHOWN INCOME FROM BUSINESS OF TRADING IN HARDWARE AND ELECTRICAL GOODS FROM HIS SHOP M/S OM HARDWARE AND ELECTRICALS LOCATED AT SATPUR, NASHIK. HE HAS ALSO SHOWN INCOME FROM O THER SOURCES I.E INTEREST FROM THE SAVING BANK ACCOU NT AND COMMISSION INCOME. THE 3 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 CASE OF THE ASSESSEE WAS RE - OPENED U/S 147/148 OF THE ACT. THE ASSESSEE HAD NOT DISCLOSED THE BANK ACCOUNTS WITH BANK OF BARODA, PIMPALGAON BAHULA BRANCH AND VISHWAS CO - OPERA TIVE BANK. THE ASSESSEE HAD DECLARED ONLY ONE BANK ACCOUNT IN BANK BALANCE SHEET I.E N.D MAHILA BANK. DURING THE YEAR UNDER CONSIDERATION, SUM OF RS. 9,49,953/ - WAS CREDITED IN ASSESSEES ACCOUNT IN BANK OF BARODA AND VISHWAS CO - OPERATIVE BANK. THE ASSESS EE WAS CONFRONTED WITH THE SAME. THE ASSESSEE IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT HAD REVISED THE RETURN OF INCOME AND HAD OFFERED ADDITIONAL INCOME OF RS. 59,958/ - . THE ASSESSING OFFICER WAS O F THE VIEW THAT THE ASSESSEE SHOULD HAVE OFFERED SUM OF RS. 9,49,953/ - I.E RECEIPTS IN THE UNDISCLOSED BANK ACCOUNTS. THE ASSESSEE WAS SHOW CAUSED IN THIS REGARD. IN REPLY, THE ASSESSEE POINTED OUT THAT IT WAS MAINTAINING A SEPARATE BANK ACCOUNT FOR UNACCOUNTED SALES AND PURCHASES AND AS PER REV ISED RETURN; HE HAD OFFERED INCOME ON PRESUMPTIVE BASIS UNDER THE PROVISION OF SECTION 44AD OF THE ACT. THE ASSESSING OFFICER REJECTED PLE A OF THE ASSESSEE AND ADDED SUM OF RS. 7,95,573/ - AFTER EXCLUDING EXTRA INCOME OFFERED BY THE ASSESSEE IN REVISED RETU RN OF INCOME AT RS. 1,54,380/ - . 6. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT ADMITTEDLY THE ASSESSEE WAS MAINTAINING A BANK ACCOUNT WITH BAN K OF BARODA WHICH WAS NOT DISCLOSED IN THE RETURN OF INCOME. HE DRAWS THE ATTENTION TO THE ENTRIES IN THE SAID BANK ACCOUNT WHERE IN AGAINST CREDITS; DEBITS WERE ALSO MADE DU RING THE YEAR UNDER CONSIDERATION. HE EXPLAINED THAT THE SAID DEBITS WERE ON ACCOU NT OF PAYMENT FOR PURCHASING OF GOODS WHICH WERE SOLD AND THE SALES RECEIPTS WERE DEPOSITED IN THE SAID BANK ACCOUNT. THE LD. AR FOR THE ASSESSEE STRESSES THAT IN SUCH CIRCUMSTANCES, TOTAL DEPOSITS COULD NOT BE ADDED IN THE HANDS OF THE ASSESSEE 4 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 AND ONLY PROFIT RATE HAD TO BE APPLIED ON THE SAID CREDITS. THE LD. AR FOR THE ASSESSEE ALSO POINTED OUT THAT IN ASSESSMENT YEAR 2010 - 11, FURTHER ADDITION WAS MADE ON ACCOUNT OF DEPOSITS IN VISHWAS CO - OPERATIVE BANK WHEREIN IN ADDITION TO CASH DEPOSITS , CR EDIT WAS ON ACCOUNT OF EN C ASHMENT FDR ISSUED IN THE EARLIER YEARS. THE LD. AR FOR THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCES OF THE SAID FDRS AND THE SAME COULD NOT BE EXPLAINED. 8. THE LD. DR FOR THE REVENUE ON THE OTHER HAND STRESSE D THAT ALL THE BANK ACCOUNTS HA D NOT BEEN DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. NO BENEFIT SHOULD BE GIVEN TO THE ASSESSEE IN THIS REGARD AND TOTAL DEPOSITS IN THE SAID BANK ACCOUNT SHOULD BE ASSESSED IN THE HAND OF THE ASSESSEE. 9 . ON PERUSAL OF THE RECORD AND A FTER HEARING RIVAL CONTENTIONS, THE ISSUE WHICH IS RAISED FOR ADJUDICATION IS ON ACCOUNT OF CREDITS IN THE BANK ACCOUNTS MAINTAINED BY THE ASSESSEE, BUT UNDISCLOSED IN THE RETURN OF INCOME. THE A SSESSEE EXPLAINED THE NATURE OF CREDITS AND DEBITS OF THE SAID BANK ACCOUNTS A SSESSEE EXPLAINED THE NATURE OF CREDITS AND DEBITS OF THE SAID BANK ACCOUNTS AND CLAIMED THAT THE SAME RELATED TO HIS BUSINESS OF SALE AND PURCHASE OF HARDWARE ITEMS. UNDISPUTEDLY, THE SAID BANK ACCOUNT WITH BANK OF BARODA WAS UNDISCLOSED BANK ACCOUNT AND THE SAID RECEIPTS NEED TO BE IN CLUDED IN THE TOTAL RECEIPTS DECLARED FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT, HAD DECLARED GROSS PROFIT ON THE SAID RECEIPTS AND HAD FILED ADDITIONAL INCOME IN THIS REGARD. IN THE ASSESSMENT YEAR 2008 - 09, THE GP DECLARED IN THE BOOKS OF ACCOUNT WAS 9.03% AND ON THE ADDITIONAL SALES, ASSESSEE DECLARED GP OF 8%. SIMILARLY, IN ASSESSMENT YEAR 2009 - 10, THE GP ORIGINALLY DECLARED BY THE ASSESSEE ON ACCOUNT OF SALES WAS 9.40% AND IN ASSESSMENT YEAR 2010 - 11, IT WAS 9.38%. HOWEVER, THE GP DECLARED ON THE ADDITIONAL SALES IN BOTH THESE ASSESSMENT YEARS WAS AT THE RATE OF 11%. THE ASSESSEE HAS FILED THE COPY OF BANK STATEMENTS AT PAGE NO. 26 - 39 OF THE PAPER BOOK. ON PERUSAL OF THE SAID BANK STATEMENT REFLECTS THAT AGAINST 5 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 THE CREDITS ON DIFFERENT DATE S , THERE WE RE WITHDRAWALS ALSO FROM SAID BANK ACCOUNT ON DAY TO DAY BASIS. SOME OF THE WITHDRAWALS WE RE IN CHEQUES ISSUED TO DIFFERENT PARTI ES AND SOME OF THE WITHDRAWALS WE RE ON ACCOUNT OF CASH WITHDRAWAL. THE AS SESSEE SYSTEMATICALLY FOLLOWED THIS PROCEDURE FROM M ONTH TO MONTH AND YEAR TO YEAR. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, THERE IS MERIT IN THE PLEA OF THE ASSESSEE THAT SAID BANK ACCOUNT I.E BANK OF BARODA WAS USED FOR BOTH UNACCOUNTE D SALES AND PURCHASE S . ACCORDINGLY, CREDIT OF PURCHASE S MADE FROM THAT ACCOUNT IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. H OWEVER, SINCE COMPLETE DETAILS WE RE NOT AVAILABLE, THE INCOME IN THE HANDS OF THE ASSESSEE ON ACCOUNTS OF SAID UNACCOUNTED BUSINE SS NEEDS TO BE ESTIMATED. 10 . THE ASSESSEE IN THE DIFFERENT YEARS UNDER APPEAL HAD DECLARED GP RATE OF 9.03% TO 9.40%. ON THE ADDITIONAL INCOME, THE ASSESSEE HAD ALSO DECLARED VARYING RATES OF GP I.E 8% TO 11% AND OFFERED THE SAME IN THE REVISED RETURN OF INCOME. HOWEVER, IN FAIRNESS GP RATE OF 15% NEEDS TO BE APPLIED TO WORK OUT THE ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE. 11 . THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. BABULAL K. D AGA REPORTED IN 387 ITR 114, GUJRAT HAD HELD THAT: EVEN IN THE CASE OF UNACCOUNTED RECEIPTS OF A BUSINESSMAN, IT IS ONLY THE PROFIT ELEMENT EMBEDDED IN THE BUSINESS WHICH CAN BE TAXED AND NOT THE ENTIRE AMOUNT. IN OTHER WORDS, IF THE ASSESSEE CAN POINT OU T THAT EVEN ON UNACCOUNTED RECEIPTS, EXPENDITURE WAS ALSO INCURRED FOR THE PURPOSE OF BUSINESS; IT WOULD BE ONLY THE REASONABLE PROFIT ON SUCH RECEIPTS WHICH SHOULD BE TAXED. 12. A PPLYING THE ABOVE PROPOSITION TO THE PRESENT FACTS OF THE CASE , I DIRECT THE ASSESSING OFFICER TO APPLY GP RATE OF 15% ON THE CREDITS IN TH E BANK OF BARODA ACCOUNT . IT MAY BE POINTED OUT HERE IN ITSELF THAT THE SAID BANK OF BARODA ACCOUNT IS OPERATED BY THE ASSESSEE IN ASSESSMENT YEAR S 2008 - 09 TO 2010 - 11. BEFORE CONCLUSION, IT MAY ALSO BE POINTED OUT THAT THE ASSESSEE HAS RAISED AN 6 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 ISSUE IN THE APPEAL THAT WHILE CALCULATING TOTAL DEPOSITS, THE ASSESSING OFFICER HAD FAILED TO CONSIDER CHEQUE DEPOSITS, WHICH WERE DISHONORED. THE ASSESSING OFFICER IS DIRECTED TO VERIFY CLAIM OF TH E ASSESSEE IN THIS REGARD AND ALLOW BENEFIT OF DISHONORED CHEQUES. 13 . NOW COMING TO THE OTHER TWO BANK ACCOUNTS I.E VISHWAS CO - OPERATIVE BANK BEING ACCOUNT NO. 2259 AND 2322, WHERE THERE ARE NO DEPOSITS IN ASSESSMENT YEAR 2008 - 09 AND 2009 - 10 EXCEPT BANK I NTEREST ENTRIES. HOWEVER, IN ASSESSMENT YEAR 2010 - 11, IN THE FIRST ACCOUNT NO. 2259, THERE IS CASH DEPOSITS OF RS. 70,000/ - AND THERE IS ALSO ENTRY IN THE SAID ACCOUNT REGARDING MATURITY OF FDR OF RS. 3,04,981/ - . THE LD. AR FOR THE ASSESSEE WAS ASKED TO EX PLAIN THE SOURCE OF INCOME OF THE SAID FDR WHICH HAD MATURED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS UNABLE TO FURNISH REPLY IN THIS REGARD. THE SAID BANK ACCOUNT ALSO REFLECTS THE CASH WITHDRAWAL OF RS.3,70,000/ - ON 15.12. 20 09. HOWEVER, THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF CASH DEPOSITS AND ALSO SOURCES OF DEPOSI TS IN FDR. ACCORDINGLY, THE ADDITION OF SAID CASH OF RS.70,000/ - AND THE FDR OF RS.3,04,981/ - IS TO BE UPHELD IN THE HANDS OF THE ASSESSEE. HOWEVER, THE SUM OF RS. 70,000/ - AS PEAK DEPOSITS OF THE RELEVANT YEAR UNDER CONSIDERATION AND FURTHER FDR OF RS. 3,04,981/ - FROM OTHER SOURCES IS TO BE ADDED IN THE HANDS OF THE ASSESSEE. HOWEVER, THE ASSESSEE IS ENTITLED TO CLAIM THE BENEFIT OF THE UNDISCLOSED INCOME IN PRECEDING YEARS AN D IN THE CURRENT YEAR . ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE AFORESAID BENEFIT TO THE ASSESSEE. 14. NOW I N THE THIRD BANK ACCOUNT, MAINTAINED BY THE ASSESSEE WITH VISHWAS CO - OPERATIVE BANK WAS SAVING ACCOUNT BE AR ING NO. 2322. THE DEP OSITS IN THE SAID BANK ACCOUNT WE RE ON ACCOUNT OF CASH AND MATURITY OF FDR . F OLLOWING THE SAME DIRECTION IN RESPECT OF OTHER BANK ACCOUNT WHERE SIMI LAR CREDITS WERE MADE, THE ADDITION OF CASH RS. 53,000/ - AND MATURITY PROCEEDS FDR OF 7 ITA NO S. 1517 TO 1519 /PUN/2016 A.YS. 2008 - 09 TO 2010 - 11 RS.1 , 06 , 277/ - + RS. 2 , 03 , 288/ - ARE UPHELD . THE ASSESSEE HAS WITHDRAWN THE SUM OF RS. 3 , 60 ,000/ - ON 14.12.2009 OUT OF DEPOSITS MADE AND HENCE, THE CREDIT ON ACCOUNT OF SUCH WITHDRAWAL CANNOT BE ALLOWED. THE ASSESSING OFFICER IS THUS, DIRECTED TO RE - COMPUTE INCOME IN THE HANDS OF THE ASSESSEE UNDER ALL ASSESSMENT YEARS. ACCORDINGLY, GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 1 5 . IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRO NOUNCED ON 31 ST DAY OF MAY , 201 7 . SD/ - ( SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE; / DATED : 31 ST MAY , 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 2. / THE RESPONDENT. 3. THE CIT (A ) - 1 , NASHIK . 4. THE PR. CI T - 1, NASHIK. 5 . , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, /ASSISTANT REGISTRAR , / ITAT, PUNE .