The ITO, Ward-5(3), Baroda V. Shri Amrathbhai P.Prajapati, Baroda

ITA 1541/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63015 (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
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Corroborative evidences
• Section: 131

Judgement Text

1 , , , , 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.1541 AND 3151/AHD/2009 [ASSTT.YEAR : 2005-2006 AND 2006-2007] ITO, WARD-5(3) BARODA. /VS. SHRI AMRATHBHAI P. PRAJAPTI 233, RAJRATAN SOCIETY OPP: POLOGROUND NR. BAGHIKHANA, BARODA. PAN : ABLPP 8814 E ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI D.C.PATWARI 4& 1 2 )/ ASSESSEE BY : SHRI MUKESH M. PATEL 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 TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A). ITA NO.1541 & 3151/2009 2 2. BOTH THE PARTIES AGREED THAT THE FACTS STATED I N BOTH THE APPEALS ARE SIMILAR EXCEPT QUANTUM, AND THEREFORE WE TAKE T HE FACTS STATED IN ITA NO.1541/AHD/2009 AND BOTH THE APPEALS ARE ACCORDING LY HEARD TOGETHER AND DECIDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF SCRAP DEALINGS. HE FILED HIS RETURN OF INCOME ON 3.10.200 5 DISCLOSING PROFIT U/S.44AF ON SALE OF RS.19,78,690/- AND DECLARING TO TAL INCOME OF RS.98940/-. THE CASE WAS SELECTED FOR SCRUTINY. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT IN THE ASSESSEES BANK ACCOUNT IN THE NAME OF BHAGY ODAY ENTERPRISES AND BHAVANA TRADING WITH HDFC BANK, THERE WERE HUGE DEP OSITS AND INQUIRIES WERE CONDUCTED BY DDIT. DURING THE INQUIRY IT WAS G ATHERED BY DDIT THAT THE ASSESSEE WAS ENGAGED IN ISSUE OF BOGUS SALES BI LLS WITHOUT EFFECTING ACTUAL SALES. ASSESSEES STATEMENT U/S. 131 WAS RE CORDED ON 8.9.2006 WHEREIN HE ADMITTED THAT HE HAD ISSUED BOGUS BILLS TO VARIOUS PERSONS ON COMMISSION BASIS. FOR THE ISSUE OF BILLS THE ASSESS EE WAS EARNING COMMISSION OF RS.150/- ON A BOGUS BILL TRANSACTION OF RS.10,000. FROM THE DETAILS OF DEPOSITS AND WITHDRAWALS FROM THE BANK A CCOUNT AO NOTICED THAT THE TOTAL DEPOSITS IN THE 2 BANK ACCOUNTS WAS OF RS .2,25,79,933/- AND THE TOTAL WITHDRAWALS DURING THE YEAR WAS RS.2,25,71,64 1/-. THE ASSESSEE WAS ASKED TO FILE DETAILS OF DEPOSITS AND WITHDRAWALS F ROM HIS BANK ACCOUNTS WITH SUPPORTING EVIDENCES WHICH ACCORDING TO AO WAS NOT FILED BY THE ASSESSEE. THE AO ALSO NOTICED THAT IN HIS RETURN OF INCOME, THE ASSESSEE HAD SHOWN PROFIT U/S 44AF ON THE DISCLOSED SALE OF RS.19,78,690/-. THE AO WAS OF THE VIEW THAT IN THE ABSENCE OF ANY SUPPO RTING EVIDENCES ETC IN SUPPORT OF THE PROFIT DECLARED, THE PROFIT DISCLOSE D BY THE ASSESSEE CANNOT ITA NO.1541 & 3151/2009 3 BE ACCEPTED. HE THUS CONSIDERED THE ENTIRE AMOUNT O F RS.2,25,79,933/- CREDITED IN HIS BANK ACCOUNT AS INCOME FROM UNDISCL OSED SOURCES. THUS AFTER MAKING VARIOUS OTHER ADDITIONS, THE TOTAL INC OME WAS DETERMINED AT RS.2,27,38,870/- . AGGRIEVED BY THE ACTION OF AO, T HE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). AFTER CONSIDERING THE SUBMISS IONS MADE BY THE ASSESSEE AND THE REMAND REPORT SUBMITTED BY THE AO, CIT(A) PARTLY ALLOWED THE APPEAL BY HOLDING AS UNDER: 4.3 SINCE BOOKS WERE NOT PROPERLY MAINTAINED AND MANY DISCREPANCIES WERE POINTED OUT BY THE AO, IT IS A C ASE FOR PROPER ESTIMATION OF INCOME AS FAR AS COMMISSION INCOME IS CONCERNED FROM ISSUE OF BOGUS BILLS. THE APPELLANT HAS BEEN STATIN G BEFORE DIFFERENT AUTHORITIES OF THE DEPARTMENT THAT HE IS A PETTY SC RAP DEALER AND THAT HE HAS INVOLVED IN ISSUING BOGUS BILLS FOR COMMISSI ON HAS NOT BEEN REFUTED BY THE AO WITH COGENT MATERIAL. THE AO IN T HE BODY OF THE ASSESSMENT ORDER AND AS WELL AS IN THE REMAND REPOR T STATED THAT THERE WERE DEPOSITS AS WELL AS WITHDRAWALS IN THE B ANK ACCOUNTS MAINTAINED BY THE APPELLANT, STRENGTHENS THE SPAN O F THE APPELLANT. AS PER THE APPELLANT ON ISSUING BOGUS BILL, HE RECE IVES THE CHEQUE FOR THE VALUE OF THE BILL WHICH WAS DEPOSITED IN HIS BA NK ACCOUNT AND ALMOST THE SAME AMOUNT OF BEARER CHEQUE IS ISSUED T O THE PARTY CONCERNED, WHICH WAS WITHDRAWN IMMEDIATELY ON WHICH HE EARNS A COMMISSION AT THE RATE OF RS.150/- PER RS.10,000/-, HAS NOT BEEN REFUTED BY THE DEPARTMENT WITH POSITIVE MATERIAL. I T MAY BE NOTED HERE THAT THE AO HAS SUBJECTED ALL THE CREDITS TO T AX, WHICH SHOULD NOT BE THE CASE. ALL RECEIPTS CANNOT BE TAXED. IT I S SOMETHING LIKE TAXING SALES WITHOUT TAKING INTO ACCOUNT OF PURCHAS ES. SINCE BOOKS ARE NOT RELIABLE, AS OBSERVED ALREADY, A PROPER EST IMATION HAS TO BE MADE. THE AR'S PLEA THAT THE APPELLANT USED TO ISSU E ACCOMMODATION BILLS BY CHARGING RS.150/- PER TEN THOUSAND, HAS TO BE PRIMA-FACIE ACCEPTED AS THE AO HAS NOT REPORTED ANY OTHER FINDI NG IN THE REMAND REPORT, REGARDING THE AMOUNTS EARNED BY THE APPELLA NT. IN CASE THE APPELLANT WAS APPROPRIATING WHOLE OF THE AMOUNT (DE POSITS), THEN IT MUST RESULT IN THE SHAPE OF HUGE ASSETS ON WHICH TH E 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 ITA NO.1541 & 3151/2009 4 (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 O R AT REMAND STAGE. IN THIS CONTEXT, THE AR'S PLEA THAT APPROPRI ATE EXPENSES BE ALLOWED, WHILE ESTIMATING THE COMMISSION AT 1.5% CA NNOT BE ACCEDED TO, AS THE ESTIMATION OF INCOME PRE SUPPOSE S THAT THE EXPENSES WERE TAKEN CARE OF, IN SO FAR AS THE ISSUE OF BOGUS BILLS ARE CONCERNED. TAKING TOTALITY OF FACTS AND CIRCUMSTANC ES 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 C REDITED IN APPELLANT'S, BANK ACCOUNT, I.E., ON TOTAL DEPOSITS OF RS.2,88,45,289/- (RS.2,25,79,933 AS PER THE ASSESSMENT ORDER AND RS. 62,65,356/- AS PER THE REMAND REPORT). THUS, THE AO IS DIRECTED 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. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD.A.R. POINTED TO THE FINDINGS O F CIT(A) WHEREIN CIT(A) HAS STATED THAT THE ASSESSEE HAS ACCEPTED TH AT IT WAS EARNING COMMISSION AT THE RATE OF RS.150/- PER RS.10,000/- OF BILL AMOUNT AND WHICH HAS NOT BEEN REFUTED BY THE AO. HE FURTHER SU BMITTED THAT CIT(A) HAS GIVEN A FINDING THAT AO HAS NOT REPORTED ANY OT HER FINDING IN THE REMAND REPORT REGARDING THE AMOUNTS EARNED BY THE A SSESSEE. IN VIEW OF THESE FACTS, THE LD. A.R. SUBMITTED THAT THE ADDITI ON MADE ON THE BASIS OF 2.5% OF THE CREDITS APPEARING IN THE ASSESSEES BAN K ACCOUNT IS NOT CALLED FOR AND IS ON HIGHER SIDE. HE HOWEVER SUBMITTED THA T THE ADDITION BE RESTRICTED TO 1.5% OF THE BANK CREDITS. 7. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT IN THE ABSENCE OF BOOKS OF ACCOUNTS AND CORRESPONDING RECORDS THE AO WAS RIGHT IN MAKING THE NECESSARY ADDITION. ON THE CONTRARY, HE SUBMITT ED THAT THE ACT HAS ITA NO.1541 & 3151/2009 5 MADE SPECIAL PROVISION FOR COMPUTING PROFITS AND GA INS OF RETAIL BUSINESS. AS PER PROVISIONS OF SECTION 44AF OF THE ACT, 5% OF THE TOTAL TURNOVER IS DEEMED TO BE PROFITS AND GAINS OF BUSINESS. HE THE REFORE SUBMITTED THAT SINCE IN THE PRESENT CASE, IN THE ABSENCE OF BOOKS OF ACCOUNTS ESTIMATION OF INCOME BE MADE @5% OF THE TOTAL CREDITS APPEARING I N THE BANK ACCOUNT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE WAS FOUND TO HAVE BEEN ENGAGED IN THE BUSINESS OF ISSUING BILLS ON COMMISS ION BASIS WITHOUT THERE BEING ACTUAL SALE/PURCHASE OF GOODS. THE ASSESSEE H AS ADMITTED TO THE FACT THAT HE IS ENGAGED IN THE BUSINESS OF ISSUING BOGUS BILLS. ASSESSEE HAS ALSO ADMITTED THAT ON ISSUING BOGUS BILL, HE RECEIVES TH E CHEQUE FOR THE VALUE OF THE BILL WHICH WAS LATER DEPOSITED IN HIS BANK ACCO UNT AND ALMOST THE SAME AMOUNT OF BEARER CHEQUE WAS ISSUED TO THE PARTY CON CERNED, WHICH WAS WITHDRAWN IMMEDIATELY ON WHICH HE EARNED A COMMISSI ON OF RS.150 PER RS.10,000/-. THESE FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IT IS ALS O 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 C ONSIDERED AS INCOME AND BE TAXED. IN VIEW OF THESE FACTS CIT(A) HAS HE LD THAT AN APPROPRIATE METHOD TO TAX THE ASSESSEE WAS ONLY BY ESTIMATING I NCOME. CIT(A) HAS ESTIMATED THE COMMISSION INCOME AT 2.5% OF THE TOTA L AMOUNTS OF CHEQUES CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. WE A RE OF THE VIEW THAT THE SUBMISSION MADE BY THE LD. D.R. THAT THE ADDITION M ADE BY THE AO BE UPHELD CANNOT BE ACCEPTED IN VIEW OF THE SETTLED LA W THAT THE ENTIRE RECEIPTS CANNOT BE TREATED AS INCOME FOR THE PURPOSE OF TAXA TION. EVEN THE ALTERNATIVE SUBMISSION THAT THE INCOME BE ESTIMATED AT 5% OF THE TURNOVER AS HAS BEEN DONE UNDER THE PROVISIONS OF S. 44AF OF THE ACT, CANNOT BE ITA NO.1541 & 3151/2009 6 APPLIED TO THE FACTS OF THE PRESENT CASE FOR THE RE ASON THAT THE PROVISIONS OF S. 44AF ARE APPLICABLE ONLY TO THE TRADERS WHOSE AG GREGATE ANNUAL TURNOVER IS LESS THAN RS.40 LACS. IN THE CASE OF THE ASSESSE E, THE CREDITS IN THE BANK ACCOUNT ARE IN EXCESS OF RS.40 LAKHS. IT IS ALSO A FACT THAT AGAINST 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 TRIBUNAL AND THE ASSESSEE HAS THEREFORE ACCEPTED THE ORDER OF TH E CIT(A). THUS CONSIDERING THE TOTALITY OF FACTS, WE ARE OF THE VI EW THAT CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE, CIT(A) HAS MADE A REASONABLE ESTIMATION AND THEREFORE NO INTER FERENCE IS CALLED FOR IN THE ORDER OF CIT(A). WE THUS UPHOLD HIS ORDER. THUS THE GROUND OF THE REVENUE IS DISMISSED. ITA NO.3151/AHD/2009 (A.Y.2006-2007) 9. BOTH THE LEARNED AR AS WELL AS LEARNED DR HAVE S UBMITTED DURING THE COURSE OF ARGUMENTS IN THE CASE OF ITA NO.1541/ AHD/2009 THAT THE FACTS OF THE PRESENT CASE ARE EXACTLY IDENTICAL TO THE FACTS OF EARLIER YEAR EXCEPT FOR THE AMOUNT WHICH HAS BEEN CONSIDERED AS INCOME. THE ISSUE INVOLVED IN THE PRESENT APPEALS HAS ALREADY BEEN DE CIDED BY US HEREINABOVE BY DISMISSING THE GROUND OF THE APPEAL OF THE REVENUE FOR A.Y.2005-2006 IN ITA NO.1541/AHD/2009. THUS FOR S IMILAR REASON, WE DISMISS THE GROUND OF THE APPEAL OF THE REVENUE. 10. IN THE RESULT, BOTH THE 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