Parag Hanumant Tambe, Pune V. Income-tax Officer, Ward - 3(1), , Pune

ITA 1518/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4940 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: PRATIK B SANDBHOR
• Keywords: Unexplained cash credit; Presumptive income; Gift; Business income; Additional evidence
• Section: 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE MS. SUSHMA CHOWLA, JM ./ ITA NO.1518/PUN/2017 / ASSESSMENT YEAR : 2013-14 SHRI PARAG HANUMANT TAMBE, 16/6, RAGHUDURGA APARTMENTS, OPP. KARVE ROAD, ERANDWANE, PUNE-411 004. PAN : ACRPT9327L ....... / APPELLANT ! / V/S. THE INCOME TAX OFFICER, WARD 3(1), PUNE. / RESPONDENT APPELLANT BY : SHRI PRATIK B. SANDBHOR RESPONDENT BY : SHRI M.K.VERMA / DATE OF HEARING : 09.10.2018 / DATE OF PRONOUNCEMENT : 22.10.2018 ' / ORDER PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE DATED 09.01.2017 RELAT ING TO ASSESSMENT YEAR 2013-14 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 2 ITA NO.1518/PUN/2017 A.Y.2013-14 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 1,50,000/- THAT REPRESENTS RENT CREDITED TO CAPITAL ACCOUNT OF THE APPELLANT, GROSS LY IGNORING THE FACTUAL SUBMISSION THAT THIS AMOUNT CONSTITUTES REIMBURSEME NT OF RENT IN RESPECT OF ALTERNATIVE ACCOMMODATION PROVIDED BY THE BUILDER, ON ACCOUNT OF DEVELOPMENT OF APPELLANT'S PROPERTY AND THEREOF IS NOT INCOME IN THE HANDS OF APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN DISREGARDING THE GROSS PROFIT DISCLOSED BY THE APPELLANT @ 14.84% AND ERRONEOUSLY ESTIMATING THE SAME @ 24.78% WITHOUT THERE BEING ANY JUSTIFICATION FOR REJECTING THE BOOKS RESULT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND WITHOUT PREJUDICE TO ABOVEGROUND NO. 2 THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE APPELLANT IS A SMALL ASSESSEE ELIGIBLE FOR PRESUMPTIVE TAXATION U/S.44AD, DESPITE OF WHICH APPELLANT HAS HIMSELF DE CLARED A NET PROFIT MARGIN @ 13.79% AS AGAINST MANDATORY 8% OF TURNOVER U/S. 44AD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 27,68,500/- U/S. 68 ASSUMING AND HOLDING THAT IT IS GIFT FROM APPELLANT'S FATHER OVE RLOOKING THE FACT THAT THE SAME IS SUBSTANTIATED WITH CONFIRMATION AND THAT TH E AMOUNT IS PAID BY CROSSED CHEQUE. THE ABOVE GROUNDS OF APPEAL MAY KINDLY BE ALLOWED T O BE AMENDED, ALTERED OR MODIFIED IN THE INTEREST OF NATURAL JUST ICE. 3. THE ISSUE RAISED IN THE GROUND OF APPEAL NO.1 IS AGAINST ADDITION OF RS.1,50,000/-. 4. BRIEFLY IN THE FACTS OF THE CASE, DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING T OTAL INCOME OF RS.3,59,700/-. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF MILK. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT SUM OF RS.1,83,333/- WAS CREDITED TO THE CAPITAL ACCOUNT O N ACCOUNT OF RENT RECEIVED. HOWEVER, THE ASSESSEE HAD NOT INCLUDED THE SAME IN THE RETURN OF INCOME FILED. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON. IN RE PLY, THE ASSESSEE POINTED OUT THAT HE HAD GIVEN THE PROPERTY FOR DEVELOPMENT TO T HE BUILDER AND IN TURN, THE BUILDER HAD OFFERED RENT FREE ACCOMMODATION TO THE ASSESSEE. HE POINTED OUT THAT THE BUILDER HAD SHOWN IT AS EXPENDITURE AND THE PER SON, FROM WHOM HE HAD TAKEN THE PREMISES ON RENT, HAD SHOWN IT AS INCOME AND TH ERE WAS NO INCOME IN THE 3 ITA NO.1518/PUN/2017 A.Y.2013-14 HANDS OF ASSESSEE. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD CLAIMED THE CREDIT FOR THE TDS. THE ASSESSING OFFIC ER, THUS, ADDED THE SUM OF RS.1,83,333/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE FILED APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE ADDITION TO RS.150,00 0/-. 6. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL AGAINST THE FINDINGS OF CIT(A). 7. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT AMOUN T RECEIVED IS NOT THE INCOME IN THE HANDS OF THE ASSESSEE AND NO PART OF THE SAME IS TO BE ASSESSED IN HIS HANDS. HE ALSO POINTED OUT THAT IT WAS REIMBURS EMENT OF EXPENDITURE. THE LD. AR FOR THE ASSESSEE WAS ASKED TO FILE DETAILS OF MO NTH-WISE REIMBURSEMENT AND RENT PAID DURING THE YEAR. IN REPLY, ASSESSEE FURNI SHED INFORMATION AS PER WHICH, THE REIMBURSEMENT OF RENT WAS RS.1,83,334/- AND REN T PAID WAS RS.1,51,000/-. THE LD. AR FOR THE ASSESSEE STATED THAT THOUGH THER E WAS CASH REIMBURSEMENT OF RS.32,334/- BUT THE SAME WAS NOT THE INCOME OF THE ASSESSEE. 8. THE LD. DR FOR THE REVENUE HAS PLACED RELIANCE O N THE ORDERS OF AUTHORITIES BELOW. 9. ON PERUSAL OF THE RECORD AND AFTER HEARING BOTH THE AUTHORIZED REPRESENTATIVES, THE FIRST ISSUE ARISING IN THE PRE SENT APPEAL IS WITH REGARD TO THE AMOUNT RECEIVED BY ASSESSEE FROM DEVELOPER. AS PER DEVELOPMENT AGREEMENT, THE ASSESSEE WAS ENTITLED FOR RENT FREE ACCOMMODATI ON FOR THE PERIOD OF DEVELOPMENT. HOWEVER, THE ASSESSEE RECEIVED SUM OF RS.1,83,334/- FROM BUILDER AGAINST WHICH, THE ASSESSEE PAID RENT TO THE FLAT O WNERS TOTALING RS.1,51,000/-. ON THE RENT PAID, THE DEVELOPER HAD DEDUCTED TAX AT SO URCE WHICH WAS CLAIMED BY 4 ITA NO.1518/PUN/2017 A.Y.2013-14 ASSESSEE AS PART OF TAXES PAID. THE ISSUE WHICH AR ISES IS ASSESSIBILITY OF AMOUNT RECEIVED BY ASSESSEE FROM DEVELOPER. THE CASE OF TH E ASSESSEE IS THAT THE SAID AMOUNT IS REIMBURSEMENT OF RENT PAID AND NOT TAXABL E IN HIS HAND. THERE IS MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. HOWEVER , THE BALANCE CASH REIMBURSEMENT, IF ANY, IS TO BE ADDED IN THE HANDS OF THE ASSESSEE AS HIS INCOME FOR THE YEAR. AS PER DETAILS FILED, THE TOTAL RENT PAID WAS RS.1,51,000/- AGAINST WHICH THE ASSESSEE HAD BEEN REIMBURSED THE SUM OF R S.1,83,334/-. HENCE, THE BALANCE OF RS.32,334/- IS TO BE ADDED AS INCOME OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO INCLUDE THE SUM OF RS.32,334/- AS INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, GROUND OF APPEA L NO. 1 RAISED BY ASSESSEE IS PARTLY ALLOWED. 10. THE GROUND OF APPEAL NO. 2 IS AGAINST THE ADDI TION MADE ON ACCOUNT OF GROSS PROFIT ON THE BUSINESS RECEIPTS OF THE ASSESS EE. AS POINTED OUT EARLIER, THE ASSESSEE WAS CARRYING ON TRADING MILK. THE ASSESSEE HAD SHOWN TOTAL SALES OF RS.33,71,840/- DECLARING GROSS PROFIT OF RS.5,00,53 0/-, GP RATES @ 14.84% OF THE TOTAL TURNOVER. THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE WAS DEALING IN MILK WHICH WAS A PERISHABLE ITEM; THE ASSESSEE HAD NOT S HOWN ANY STOCK OF THE MILK WITH HIM. FROM THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE WAS NOT ACCOUNTING FOR THE SALES CORRECTLY AND THE SURPLUS BETWEEN SALES AND PURCHASES FROM MONTH TO MONTH, WAS NOT CO MPARABLE. THE ASSESSING OFFICER SUMMARIZED MONTH-WISE SURPLUS BETWEEN SALES AND PURCHASES AS GENERATED FROM BOOKS OF ACCOUNT WHICH IS TABULATED AND REPRODUCED AT PAGE 5 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED T HAT THE ASSESSEE WAS NOT SHOWING THE SURPLUS/MARGIN CORRECTLY AND GP RATES V ARIES MONTH-WISE; HE ADOPTED AVERAGE MARGIN RATIO OF @24.78% AND THE DIFFERENCE OF RS.3,35,068/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 5 ITA NO.1518/PUN/2017 A.Y.2013-14 11. THE CIT(A) REDUCED THE SAID GP RATE @20% ON THE TOTAL TURNOVER DURING THE YEAR. 12. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL AGAINST THE ORDER OF CIT(A). 13. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT AS AGAINST GP RATES DECLARED BY THE ASSESSEE @14.84%, ESTIMATION MADE BY THE CIT (A) @ 20%, WAS VERY HIGH. HE FURTHER POINTED OUT THAT IN THE CASE OF SM ALL ASSESSEE WHO WAS RUNNING TRADE OF MILK, HIGHER GP RATES IN THE TOTAL TURNOVE R SHOULD NOT BE APPLICABLE. 14. THE LD. DR FOR THE REVENUE HAS PLACED RELIANCE ON THE ORDER OF CIT(A). 15. ON PERUSAL OF THE RECORD AND AFTER HEARING BOTH THE AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES BY WAY OF G ROUND OF APPEAL NO. 2 & 3 IS AGAINST ESTIMATION OF GP RATE OF THE MILK BUSINESS CARRIED ON BY THE ASSESSEE. A PERUSAL OF THE TABULATED DETAILS AT PAGE 5 OF THE A SSESSMENT ORDER REVEALS VARIATION OF GP RATES FROM NEGATIVE UP TO 40%. THE ASSESSEE IS ENGAGED IN TRADING OF PERISHABLE ITEM I.E. MILK AND THE SAID V ARIATION OF GP RATE, IS NOT ACCEPTABLE. HENCE, IT IS A FIT CASE FOR ESTIMATION OF GP RATE SINCE THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT CORRECTLY. ACCORDIN GLY, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION BY APPLYING GP RAT E OF @ 18% ON THE TOTAL TURNOVER. THUS, GROUNDS OF APPEAL NO. 2 AND 3 RAISED BY ASSESSEE ARE PARTLY ALLOWED . 16. WITH REGARD TO THE GROUND OF APPEAL NO.4, THE A SSESSING OFFICER NOTED THAT SUM OF RS.27,68,500/- WAS CREDITED TO THE CAPITAL ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT HIS FATHER GAVE HIM THE SAI D AMOUNT AS GIFT FOR PURCHASE OF FLATS. HE HAD SHOWN IT AS ADDITION TO CAPITAL AC COUNT. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY DOCUMENTARY PROOF IN THIS REG ARD. NO CONFIRMATION WAS FILED 6 ITA NO.1518/PUN/2017 A.Y.2013-14 FOR THE ALLEGED GIFT AND NO COPIES OF INCOME TAX RE TURN AND BANK STATEMENT OF HIS FATHER WAS SUBMITTED BY THE ASSESSEE. HENCE THE ASS ESSING OFFICER TREATED THE SAID AMOUNT AS UNEXPLAINED CREDIT IN THE HANDS OF T HE ASSESSEE AND ADDITION OF RS.27,68,500/- WAS MADE. 17. THE CIT(A) UPHELD THE SAID ADDITION MADE BY THE ASSESSING OFFICER. 18. THE LD. AR FOR THE ASSESSEE DURING THE COURSE O F HEARING HAS FURNISHED ADDITIONAL EVIDENCES IN THE FORM OF BANK STATEMENT OF HIS FATHER OF BANK OF MAHARASHTRA WHICH ARE PLACED AT PAGE 57 TO 59 OF TH E PAPER BOOK, BANK STATEMENT OF PUNE PEOPLES CO-OP. BANK LTD. WHICH ARE PLACED AT PAGE 60 TO 66 OF THE PAPER BOOK, INCOME TAX RETURN OF HIS FATHER FOR ASS ESSMENT YEAR 2012-13 WHICH ARE PLACED AT PAGE 67 TO 69 OF THE PAPER BOOK AND A LSO CONFIRMATION OF GIFT FROM HIS FATHER WHICH IS PLACED AT PAGE 70 OF THE PAPER BOOK ALONG WITH APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES. HE ALSO FILED BA NK STATEMENT OF BANK OF BARODA. REFERRING TO THE ADDITIONAL EVIDENCES, LD. AR POINTED OUT THAT THE SUM OF RS.17,68,000/- WAS PAID BY HIS FATHER TO THE ASSESS EE THROUGH CHEQUES DURING THE YEAR AND THE BALANCE SUM OF RS.10,00,000/- WAS DIR ECTLY PAID TO THE DEVELOPER. HE THUS STRESSED THAT SINCE IT WAS GIFT RECEIVED FR OM HIS FATHER, THEN THE SAME MERITS TO BE ACCEPTED. THE LD. AR FOR THE ASSESSEE ALSO FURNISHED COMPUTATION OF INCOME OF ASSESSEES FATHER ALONG WITH BALANCE SHEE T WHEREIN THE SAID BANK ACCOUNTS HAD BEEN DISCLOSED. 19. THE LD. DR FOR THE REVENUE HEAVILY OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE. 20. ON PERUSAL OF THE RECORD AND AFTER HEARING BOTH THE AUTHORIZED REPRESENTATIVES, THE ISSUE RAISED BY ASSESSEE IN GR OUND OF APPEAL NO. 4 IS AGAINST ADDITION OF RS.27,58,000/-. THE ASSESSEE STATED THA T HE HAD RECEIVED GIFT FROM HIS 7 ITA NO.1518/PUN/2017 A.Y.2013-14 FATHER FOR PURCHASE OF FLAT. HOWEVER, ASSESSEE COUL D NOT FURNISH EVIDENCE OF CREDITWORTHINESS OF HIS FATHER NEITHER BEFORE THE A SSESSING OFFICER NOR BEFORE THE CIT(A). HOWEVER, NOW, BY WAY OF ADDITIONAL EVIDENCE S, THE ASSESSEE HAS FURNISHED THE EVIDENCES BEFORE ME WHICH ARE PLACED IN THE PAPER BOOK AT PAGE 57 TO 70 AND COPY OF BANK STATEMENT OF BANK OF BARODA HAS ALSO BEEN FILED. THE ASSESSEE MOVED AN APPLICATION FOR ADMISSION OF ADDI TIONAL EVIDENCE WHICH ACCORDING TO HIM SHOULD BE ADMITTED AS IT GOES TO T HE ROOT OF THE ISSUE. THERE IS MERIT IN THE PLEA OF THE ASSESSEE ESPECIALLY WHERE THE ALLEGED GIFT HAS BEEN RECEIVED FROM HIS FATHER. HENCE, ADDITIONAL EVIDENC ES FILED BY THE ASSESSEE, ARE ADMITTED. THE ADDITIONAL EVIDENCES CONSISTS OF THE BANK STATEMENT OF HIS FATHER WHERE DIFFERENT CHEQUES HAVE BEEN ISSUED TOTALING R S.17,68,000/-. UNDISPUTEDLY, THE WHOLE AMOUNT HAS BEEN PAID THROUGH BANKING CHAN NELS TO THE ASSESSEE EXCEPT THE SUM OF RS.10,00,000/-. WITH REGARD TO TH E SAID SUM OF RS.10,00,000/-, CLAIM OF THE ASSESSEE WAS THAT IT WAS DIRECTLY PAID TO THE DEVELOPER. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE REGARDING D EBIT OF RS.5,00,000/-. IN VIEW OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE B EFORE ME, SPECIALLY WHERE TRANSACTION HAS BEEN MADE THROUGH BANKING CHANNELS AND GIFT HAVING BEEN RECEIVED FROM FAMILY MEMBER I.E. FATHER OF THE ASSE SSEE, ADDITIONAL EVIDENCES FILED BY THE ASSESSEE SHOULD BE ACCEPTED WHILE DECIDING T HE ISSUE IN RESPECT OF PAYMENT OF RS.17,68,000/- AND PAYMENT OF RS.5,00,00 0/- TO THE BUILDER DIRECTLY. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO VERIF Y THE AFORESAID DOCUMENTS IN ORDER TO ADJUDICATE THE CREDITWORTHINESS OF THE PER SON AND ALSO GENUINENESS OF THE TRANSACTION. THE ADDITIONAL EVIDENCE FILED BY ASSES SEE BEFORE ME WOULD BE FILED BEFORE ASSESSING OFFICER WHO SHALL VERIFY THE CLAIM OF THE ASSESSEE AND AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH LAW, DECIDE THE ISSUE. THE ASSESSEE IS UNABLE TO FU RNISH ANY DOCUMENT WITH REGARD TO RS.5,00,000/- WHICH HE CLAIMS THAT HIS FA THER HAD DIRECTLY PAID TO THE BUILDER. IN THE ABSENCE OF THE ANY DOCUMENTARY EVID ENCE AVAILABLE OF RS.5,00,000/- BEING PAID BY FATHER OF THE ASSESSEE TO THE BUILDER OR TO THE 8 ITA NO.1518/PUN/2017 A.Y.2013-14 ASSESSEE, SUCH AMOUNT IS ADDED IN THE HANDS OF THE ASSESSEE. HENCE, THE SUM OF RS.5,00,000/- IS ADDED AS INCOME OF THE ASSESSE E AND IN RESPECT OF THE BALANCE AMOUNT, THE ISSUE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER WHO SHALL DETERMINE THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE ACCORDINGLY. HENCE, GROUND OF APPEAL NO. 4 RAISED IN APPEAL BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 22 ND DAY OF OCTOBER, 2018. SD/- (SUSHMA CHOWLA) /JUDICIAL MEMBER / PUNE; / DATED : 22 ND OCTOBER, 2018. SB ' # $%&' ('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-2, PUNE. 4. THE PR. CIT-2, PUNE. 5. !'# $% , & $% , - '() , / DR, ITAT, SMC BENCH, PUNE. 6. #*+ ,- / GUARD FILE. // TRUE COPY // &. / BY ORDER, / $) /PRIVATE SECRETARY & $% , / ITAT, PUNE.