The ITO, Ward-5(3), Baroda V. Shri Kantilal M.Sharma, Baroda

ITA 1540/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63012 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI
• Keywords: Income from undisclosed sources; Corroborative evidences
• Section: 131

Judgement Text

, , , , C , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI , ACCOUNTANT MEMBER) ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 [ASSTT.YEAR : 2005-2006, 2006-2007 AND 2007-2008] ITO, WARD-5(3) BARODA. /VS. SHRI KANTILAL M. SHARMA 302, SHANKER BAUG COMPLEX BARODA DAIRY ROAD NR. ONGC, BARODA. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI D.C.PATWARI 4& 1 2 )/ ASSESSEE BY : NONE 5 1 &(*/ DATE OF HEARING : 19 TH SEPTEMBER, 2012 678 1 &(*/ DATE OF PRONOUNCEMENT : 12-10-2012 )9 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER : THESE THREE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) FOR A.Y.2005-06, 2006-2007 AND 2007-08. SINCE THE ISSU ES IN ALL THE APPEALS ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 ARE COMMON, THEREFORE FOR THE SAKE OF CONVENIENCE, ALL THREE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. ACCORD INGLY, WE PROCEED TO DISPOSE OF ALL THE APPEALS EXPARTE QUA THE ASSES SEE, AFTER HEARING THE LEARNED DR AND CONSIDERING THE MATERIAL AVAILABLE O N RECORD. ITA NO.1540/AHD/2009 (A.Y.2005-2006) 4. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF SCRAP DEALINGS. HE FILED HIS RETURN OF INCOME ON 31.03.20 06 DECLARING TOTAL INCOME OF RS.99,720/- THE CASE WAS SELECTED FOR SCR UTINY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED IN THE ASSESSEES BANK ACCOUNT WITH HDFC BANK THAT THE RE WERE HUGE DEPOSITS AND INQUIRIES WERE CONDUCTED BY DDIT. DURI NG THE INQUIRY IT WAS GATHERED BY DDIT THAT THE ASSESSEE WAS ENGAGED IN I SSUE OF BOGUS SALES BILLS WITHOUT EFFECTING ACTUAL SALES. ASSESSEES S TATEMENT U/S. 131 WAS RECORDED ON 12.9.2006 WHEREIN HE ADMITTED THAT HE H AD ISSUED BOGUS BILLS TO VARIOUS PERSONS ON COMMISSION BASIS. FOR THE ISS UE OF BILLS THE ASSESSEE WAS EARNING COMMISSION OF RS.150/- ON A BOGUS BILL TRANSACTION OF RS.10,000. FROM THE DETAILS OF DEPOSITS AND WITHDRA WALS FROM THE BANK ACCOUNT THE AO NOTICED THAT THE TOTAL DEPOSITS IN T HE BANK ACCOUNTS WAS OF RS.3,85,92,798/- AND THE TOTAL WITHDRAWALS DURING T HE YEAR WAS RS.3,76,52,605/-. THE ASSESSEE WAS ASKED TO FILE DE TAILS OF DEPOSITS AND WITHDRAWALS FROM HIS BANK ACCOUNTS WITH SUPPORTING EVIDENCES WHICH ACCORDING TO AO WAS NOT FILED BY THE ASSESSEE. HE C ONSIDERED THE ENTIRE AMOUNT OF RS.3,85,92,798/- CREDITED IN HIS BANK ACC OUNT AS INCOME FROM UNDISCLOSED SOURCES AND AFTER MAKING VARIOUS OTHER ADDITIONS, THE TOTAL ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 INCOME WAS DETERMINED AT RS.3,87,52,520/-. AGGRIEVE D BY THE ACTION OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND THE REMAND REP ORT SUBMITTED BY THE AO, CIT(A) PARTLY ALLOWED THE APPEAL BY HOLDING AS UNDER: 4.3 SINCE BOOKS WERE NOT PROPERLY MAINTAINED AND M ANY DISCREPANCIES WERE POINTED OUT BY THE AO IT IS A CASE FOR PROPER ESTIMATION OF INCOME AS FAR AS COMMISSION INCOME IS CONCERNED FROM ISSUE OF BOGUS BILLS. THE APPELLANT HAS BEEN STATING BEFORE DIFFERENT AUTHORI TIES OF THE DEPARTMENT THAT HE IS A PETTY SCRAP DEALER AND THAT HE HAS INV OLVED IN ISSUING BOGUS BILLS FOR COMMISSION HAS NOT BEEN REFUTED BY THE AO WITH COGENT MATERIAL. THE AO IN THE BODY OF THE ASSESSMENT ORDE R AND AS WELL AS IN THE REMAND REPORT STATED THAT THERE WERE DEPOSITS A S WELL AS WITHDRAWALS IN THE BANK ACCOUNTS MAINTAINED BY THE APPELLANT, STRENGTHENS THE STAND OF THE APPELLANT. AS PER THE APPELLANT ON ISSUING BOGUS BILL, HE RECEIVES THE CHEQUE FOR THE VALUE OF THE BILL WHICH WAS DEPOSITED IN HIS BANK ACCOUNT AND ALMOST THE SAME A MOUNT OF BEARER CHEQUE IS ISSUED TO THE PARTY CONCERNED, WHICH WAS WITHDRAWN IMMEDIATELY ON WHICH HE EARNS A COMMISSION AT THE R ATE OF RS.150/- PER RS.10,000/-, HAS NOT BEEN REFUTED BY THE DEPARTMENT WITH POSITIVE MATERIAL. IT MAY BE NOTED HERE THAT THE AO HAS SUBJ ECTED ALL THE CREDITS TO TAX, WHICH SHOULD NOT BE THE CASE. ALL RECEIPTS CANNOT BE TAXED. IT IS SOMETHING LIKE TAXING SALES WITHOUT TAKING INTO ACC OUNT OF PURCHASES. SINCE BOOKS ARE NOT RELIABLE, AS OBSERVED ALREADY, A PROPER ESTIMATION HAS TO BE MADE. THE AR'S PLEA THAT THE APPELLANT US ED TO ISSUE ACCOMMODATION BILLS BY CHARGING RS.150/- PER TEN TH OUSAND, HAS TO BE PRIMA-FACIE ACCEPTED AS THE AO HAS NOT REPORTED ANY OTHER FINDING IN THE REMAND REPORT, REGARDING THE AMOUNTS EARNED BY THE APPELLANT. IN CASE THE APPELLANT WAS APPROPRIATING WHOLE OF THE A MOUNT (DEPOSITS), THEN IT MUST RESULT IN THE SHAPE OF HUGE ASSETS ON WHICH THE AO HAS NOT MADE ANY COMMENTS, INDICATING THAT IT WAS NOT THE C ASE HERE. IN THE CIRCUMSTANCES, IN THE ABSENCE OF ANY OTHER MATERIAL , AN APPROPRIATE METHOD TO TAX THE APPELLANT IS ONLY BY ESTIMATING H IS INCOME. IN THIS CONTEXT, IT IS IMPORTANT TO CONSIDER THE STATEMENTS GIVEN TO THE DDIT (INV) AND AO U/S 131, WHERE IN IT HAS BEEN ADMITTED BY THE APPELLANT THAT HE USED TO CHARGE RS.150/- PER TEN THOUSAND OF BILL AMOUNT, WHICH WAS NEITHER REFUTED AT THE ASSESSMENT STAGE OR AT R EMAND STAGE. IN THIS CONTEXT, THE AR'S PLEA THAT APPROPRIATE EXPENSES BE ALLOWED, WHILE ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 ESTIMATING THE COMMISSION AT 1.5% CANNOT BE ACCEDED TO, AS THE ESTIMATION OF INCOME PRE SUPPOSES THAT THE EXPENSES WERE TAKEN CARE OF, IN SO FAR AS THE ISSUE OF BOGUS BILLS ARE CONCERNED . TAKING TOTALITY OF FACTS AND CIRCUMSTANCES INTO ACCOUNT, IN THE GIVEN FACTUAL MATRIX, THE AO IS DIRECTED TO TREAT THE AMOUNT OF COMMISSION AT 2.5% ON THE TOTAL AMOUNT OF CHEQUES CREDITED IN APPELLANT'S BANK ACCO UNT, I.E., ON TOTAL DEPOSITS OF RS.3,85,92,798/-. THUS, THE AO IS DIREC TED TO SUBSTITUTE THE FIRST ADDITION ACCORDINGLY. IN AS MUCH AS THE OTHER ADDITION IS CONCERNED, NO FORCEFUL ARGUMENTS WERE MADE BY THE A R AND AS SUCH I REFUSE TO INTERVENE IN THE ACTION OF THE AO. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT IN THE ABSENCE OF BO OKS OF ACCOUNTS AND CORRESPONDING RECORDS THE AO WAS RIGHT IN MAKING TH E NECESSARY ADDITION. ON THE CONTRARY, HE SUBMITTED THAT THE ACT HAS MADE SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF RETAIL BUSINESS. AS PER PROVISIONS OF SECTION 44AF OF THE ACT, 5% OF THE TOTAL TURNOVER I S DEEMED TO BE PROFITS AND GAINS OF BUSINESS. HE THEREFORE SUBMITTED THAT IN THE PRESENT CASE, IN THE ABSENCE OF BOOKS OF ACCOUNTS ESTIMATION OF INCO ME BE MADE @5% OF THE TOTAL CREDITS APPEARING IN THE BANK ACCOUNT. 8. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA L ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE WAS FOUND TO H AVE BEEN ENGAGED IN THE BUSINESS OF ISSUING BILLS ON COMMISSION BASIS WITHO UT THERE BEING ACTUAL SALE/PURCHASE OF GOODS. THE ASSESSEE HAS ADMITTED T O THE FACT THAT HE IS ENGAGED IN THE BUSINESS OF ISSUING BOGUS BILLS. ASS ESSEE HAS ALSO ADMITTED THAT ON ISSUING BOGUS BILL, HE RECEIVES THE CHEQUE FOR THE VALUE OF THE BILL WHICH WAS LATER DEPOSITED IN HIS BANK ACCOUNT AND A LMOST THE SAME AMOUNT OF BEARER CHEQUE WAS ISSUED TO THE PARTY CONCERNED, WHICH WAS WITHDRAWN ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 IMMEDIATELY ON WHICH HE EARNED A COMMISSION OF RS.1 50 PER RS.10,000/-. THESE FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE B Y BRINGING ANY CONTRARY MATERIAL ON RECORD. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS. IT IS ALSO A FACT THAT THE ENTIRE CREDITS MADE IN THE BANK ACCOUNT CANNOT BE CONSIDER ED AS INCOME AND BE TAXED. IN VIEW OF THESE FACTS CIT(A) HAS HELD THAT AN APPROPRIATE METHOD TO TAX THE ASSESSEE WAS ONLY BY ESTIMATING INCOME. CIT(A) HAS ESTIMATED THE COMMISSION INCOME AT 2.5% OF THE TOTAL AMOUNTS OF CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. WE ARE OF THE VI EW THAT THE SUBMISSION MADE BY THE LD. D.R. THAT THE ADDITION MADE BY THE AO BE UPHELD CANNOT BE ACCEPTED IN VIEW OF THE SETTLED LAW THAT THE ENT IRE RECEIPTS CANNOT BE TREATED AS INCOME FOR THE PURPOSE OF TAXATION. EVEN THE ALTERNATIVE SUBMISSION THAT THE INCOME BE ESTIMATED AT 5% OF TH E TURNOVER AS HAS BEEN DONE UNDER THE PROVISIONS OF S. 44AF OF THE ACT, CA NNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE FOR THE REASON THAT THE P ROVISIONS OF S. 44AF ARE APPLICABLE ONLY TO THE TRADERS WHOSE AGGREGATE ANNU AL TURNOVER IS LESS THAN RS.40 LACS. IN THE CASE OF THE ASSESSEE, THE CREDIT S IN THE BANK ACCOUNT ARE IN EXCESS OF RS.40 LAKHS. IT IS ALSO A FACT THAT A GAINST THE ORDER OF CIT(A), WHEREIN HE HAD ESTIMATED THE INCOME AT 2.5% OF THE TOTAL CREDITS, THE ASSESSEE HAS NOT PREFERRED ANY APPEAL BEFORE THE TR IBUNAL AND THE ASSESSEE HAS THEREFORE ACCEPTED THE ORDER OF THE CIT(A). THU S CONSIDERING THE TOTALITY OF FACTS, WE ARE OF THE VIEW IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, CIT(A) HAS MADE A REASONABLE ESTIMATI ON AND THEREFORE NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). WE THUS UPHOLD HIS ORDER. THUS THE GROUND OF THE REVENUE IS DISMISSED. ITA NO.3150/AHD/2009 AND 1271/AHD/2010 (A.Y.2006-20 07 & 2007- 2008) ITA NO.1540, 3150/AHD/2009 AND 1271/AHD/2010 9. THE LEARNED DR HAS SUBMITTED DURING THE COURSE O F ARGUMENTS IN THE CASE OF ITA NO.1540/AHD/2009 THAT THE FACTS OF THE PRESENT CASES ARE EXACTLY IDENTICAL TO THE FACTS OF PRESENT CASE EXCE PT FOR THE AMOUNT WHICH HAS BEEN CONSIDERED AS INCOME. THE ISSUE INVOLVED IN THE PRESENT APPEALS HAS ALREADY BEEN DECIDED BY US HEREINABOVE BY DISMI SSING THE GROUND OF THE APPEAL OF THE REVENUE FOR A.Y.2005-2006 IN ITA NO.1540/AHD/2009. THUS FOR SIMILAR REASON, WE DISMISS THE GROUND OF T HE PRESENT APPEALS OF THE REVENUE. 10. IN THE RESULT, ALL THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD