ITO, Ward-2(4), Bhubaneswar V. Bata Krishna Pani, Bhubaneswar

ITA 160/CTK/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0014 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 08-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHRO DAS ADL
• Assessee Lawyers: S K AGRAWALLA
• Keywords: Unexplained investment; Business income; Tax effect
• Section: 201; 143(2); 22; 68; 69; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 160 /CTK/20 18 ( / ASSESSMENT YEAR : 20 1 4 - 201 5 ) ITO WARD - 2(4), BHUBANESWAR VS. SRI BATA KRISHNA PANI, S/O RAJKISHORE PANI, C/O A. MOHANTY, K - 4, PLOT NO.LIG - 280, KALINGA NAGAR, BHUBANESWAR PAN NO. : BAVPP 8456 R AND CROSS OBJECTION NO. 29 /CTK/20 18 ( / ASSESSMENT YEAR :201 4 - 201 5 ) SRI BATA KRISHNA PANI, S/O RAJKISHORE PAN I, C/O A. MOHANTY, K - 4, PLOT NO.LIG - 280, KALINGA NAGAR, BHUBANESWAR VS. ITO WARD - 2(4), BHUBANESWAR PAN NO. : BAVPP 8456 R ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SUBHRO DAS, ADL.CIT - DR /ASSESSEE BY : SHRI S.K.AGRAWALLA, FCA / DATE OF HEARING : 1 8 / 0 6 /20 20 / DATE OF PRONOUNCEMENT : 22 / 06 /20 20 / O R D E R PER L.P.SAHU , A M : TH E REVENUE HAS FILED APPEAL AGAINST THE ORDER OF CIT(A) - 1, BHUBANESWA R , DATED 28.02.2018 FOR THE A.Y.2014 - 2015 AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER : - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW. ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 2 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT JUSTIFIED WITH HIS DECISION IN RESTRICTING THE ADDITION TO RS. 7,17,180/ - INSTEAD OF RS.1,29,44,999/ - MADE BY THE AO U/S.69 OF THE I.T. ACT, 1961 TOWARDS UNEXPLAINED CASH DEPOSITS. 3. ON THE FACTS AN D THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. C1T(A) IS NOT CORRECT TO ESTIMATE THE INCOME AT THE RATE OF 8.85% OF THE UNEXPLAINED CASH DEPOSITS WHEN THE UNEXPLAINED CASH DEPOSITS HAS NOT BEEN ASCERTAINED IF THE SAME REPRESENT ASSESSEE'S CONTRACT RECEIPT S. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT CORRECT WITH HIS DECISION PLACING RELIANCE ON THE DECISIONS OF HON'BLE COURTS WHICH MAY NOT BE APPLICABLE TO THE INSTANT CASE AS IN THIS CASE THE FACTS ARE DIFFERENT. 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT CORRECT WITH HIS DECISION HOLDING THAT CONSIDERING THE ENTIRE AMOUNT OF CASH DEPOSITS AS UNEXPLAINED INVESTMENT U/S.69 WOULD BE HARSH AND UNREASONABLE TO THE ASSESSEE, SINCE THE PROV ISIONS OF SECTION 69 SEEMS TO BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE TREATING THE ENTIRE CASH DEPOSITS AS INCOME OF THE ASSESSEE WHO FAILED TO EXPLAIN THE SOURCE AND GENUINENESS OF HIS CASH DEPOSITS IN THE BANK ACCOUNT. 6. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN COURSE OF THE APPEAL PROCEEDINGS. 3. THE ASSESSEE RAISED GROUNDS IN ITS IS CROSS OBJECTION WHICH READ AS UNDER : - 1. THAT, THE ASSESSMENT ORDER PASSED U/S 144 IS NOT SUSTAINABL E IN VIEW OF THE FACT THAT THE NOTICE U/S 143(2) WAS NOT ISSUED BY THE LD. ASSESSING OFFICER WHO HOLDS THE JURISDICTION OVER THE APPELLANT. THEREFORE THE ASSESSMENT ORDER IS LIABLE TO BE QUASHED. 2. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS COR RECT IN RESTRICTING THE ADDITIONS TO THE EXTENT OF RS. 7,17,180 IN VIEW OF THE FACT THAT THE PROFIT EMBEDDED IN THE UNDISCLOSED CONTRACT RECEIPTS ARE TO BE TAXED, NOT THE WHOLE OF THE CONTRACT RECEIPTS. 3. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS FACTUALLY AS WELL AS LEGALLY CORRECT IN ESTIMATING THE PROFITS EMBEDDED IN THE UNDISCLOSED CONTRACT RECEIPTS @8.85% AS THE APPELLANT HAD DISCLOSED THE PROFIT ON THE DISCLOSED CONTRACT RECEIPTS @8.85% WHICH WAS NOT DISPUTED BY THE LD. ASSESSING OFFICER. 4. THAT, THE APPELLANT CRAVES TO ALTER, AMEND, MODIFY OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN THE COURSE OF APPEAL PROCEEDING. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 05.10.2015 DECLARING TOTAL INCOME OF RS.3,06,550/ - . VARIOUS STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE FOR COMPLETING THE ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 3 SCRUTINY ASSESSMENT BUT THE ASSESSEE DID NOT APPEAR ON THE SAID DATE EVEN TILL COMPLETION OF THE ASSESSMENT, THEREFORE, THE AO COMPLETED THE ASSESSMENT U/S.144 OF T HE ACT, 1961. THE CASE OF THE ASSESSEE SELECTED FOR SCRUTINY THROUGH CASS TO VERIFY CASH DEPOSITS IN SAVINGS BANK ACCOUNTS IS MORE THAN THE TURNOVER. ON PERUSAL OF 26AS STATEMENT IT WAS NOTICED THAT A LARGE AMOUNT OF CASH HAS BEEN DEPOSITED IN ASSESSEES BANK ACCOUNT ON DIFFERENT DATES. THEREFORE, INFORMATION WAS COLLECTED FROM THE BANK AND ON VERIFICATION OF BANK ACCOUNT FOLLOWING CASH DEPOSITS WERE CREDITED TO THE ASSESSEES BANK ACCOUNTS DURING F.Y.2013 - 2014 : - NAME OF BANK A/C. NO. DATE OF DEPOSIT CAS H DEPOSIT ICICI BANK LIMITED, 242401500184 20.06.2013 25000 25.07.2013 5000 02,08.2013 200000 05.10.2013 300000 17.12.2013 150000 31.12.2014 800000 29.01.2014 900000 03.02.2014 365000 08.02.2014 400000 08.02.20 14 40000 13.02.2014 500000 17.02.2014 600000 25.02.2014 790000 ICICI BANK LIMITED 197101000007 02.04.2013 49999 10.04.2013 150000 15.04.2013 261000 17.04.2013 150000 22.04.2013 500000 ' 02.05.2013 380000 08.05. 2013 249500 22.05.2013 240000 24.05.2013 400000 11.01.2014 251000 ICICI BANK LIMITED 046401503075 21.03.2014 50000 AXIS BANK 912010029236519 05.04.2013 50000 13.04.2013 30000 24.04.2013 15000 07.06.2013 200000 10.06.2013 39000 11.06.2013 350000 14.06.2013 200000 29.06.2013 316000 ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 4 30.07.2013 100000 06.09.2013 1200000 13.09.2013 40O00 13.09.2013 30000 24.09.2013 20000 05.12.2013 300000 09.12.2013 23500 09.12.2013 1500 21.12.2013 150000 16.01. 2014 200000 27.01.2014 50000 19.03.2014 600000 25.03.2014 50000 AXIS BANK 914020000182919 11.01.2014 100000 16.01.2014 100000 28.02.2014 350000 04.03.2014 225000 04.03.2014 150000 19.03.2014 298500 TOTAL: 12944999 DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS GIVEN MANY OPPORTUNITIES FOR EXPLAINING THE CASH DEPOSIT BUT HE DID NOT APPEAR, THEREFORE, THE ENTIRE DEPOSIT WAS ADDED AS UNEXPLAINED INVESTMENT TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER IT WAS ALSO OB SERVED BY THE AO FROM THE SAVINGS BANK ACCOUNT THAT THE INTEREST CREDITED BY THE BANK WAS NOT OFFERED BY THE ASSESSEE FOR CALCULATING THE TAXABLE INCOME AMOUNTING TO RS.25,299/ - . THEREFORE, THE AO ADDED TO THE TOTAL INCOME OF THE ASSESSEE TO THE ENTIRE INT EREST OF RS.25,295/ - AND COMPLETED ASSESSMENT ACCORDINGLY. 5. FEELING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE APPEARED BEFORE THE CIT(A). THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AFTER OBSERVING AS UNDER : - ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 5 3. I HAVE CONSIDERED THE MATTER. IN THE RETURN FILED IN ITR - 4S, THE ASSESSEE HAS SHOWN THE GROSS RECEIPT AT RS.48,41,265/ - . THE ASSESSEE IS INVOLVED IN EXECU TING PRIVATE CONTRACT WORKS AND THE ENTIRE RECEIPT ON ACCOUNT OF CONTRACT BUSINESS APPEARS TO BE IN CASH. HENCE, IT IS REASONABLE TO PRESUME THAT OUT OF THE TOTAL CASH DEPOSITS OF RS. 1,29,44,999/ - , AN AMOUNT OF RS.48,41,265/ - WOULD HAVE COME FROM THE DISCL OSED CONTRACT BUSINESS. THIS LEAVES THE BALANCE CASH DEPOSITS OF RS.81,03,734/ - AS APPARENTLY UNEXPLAINED. TO CONSIDER THE ENTIRE AMOUNT OF CASH DEPOSITS OF RS.81,03,734/ - AS UNEXPLAINED INVESTMENT U/S.69 (THE AO HAS WRONGLY REFERRED TO SECTION 68 FOR MAKI NG THE ADDITION) WOULD BE TOO HARSH AND UNREASONABLE. SINCE NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE CASH DEPOSITS IN THE BANK HAD COME FROM SOME OTHER SOURCES, IT IS ALSO IN THE INTEREST OF JUSTICE TO PRESUME THAT THE SAME WOULD HAVE COME FROM THE CONTRACT BUSINESS OF THE ASSESSEE. IN THE CASE OF RR CARRYING CORPORATION REPORTED IN 126 TTJ (CTK) 240, THE HONBLE JURISDICTIONAL ITAT HAS HELD THAT IN CASES OF UNDISCLOSED TURNOVER, TO TAX THE ENTIRE TURNOVER AS INCOME OF THE ASSESSEE WOULD BE TOO H IGHHANDED AND UNREASONABLE AND, THEREFORE, ONLY THE PROFIT EMBEDDED IN THE TURNOVER CAN BE TAXED. THE SAME VIEW HAS BEEN TAKEN BY THE HON'BLE MP HIGH COURT IN THE CASE OF CIT V. BALCHAND AJIT KUMAR (2004) 186 CTR 419, THE HONBLE SUJAIRAT HIGH COURT HAS ALS O HELD IN THE CASE OF PRESIDENT INDUSTRY THAT IN CASE OF SUPPRESSION OF RECEIPTS, THE TOTAL RECEIPTS CANNOT BE ADDED TO THE TOTAL INCOME AND ONLY THE PROFIT EMBEDDED IN THE GROSS RECEIPTS SHOULD BE TAXED BY APPLYING THE PROFIT RATE. KEEPING IN VIEW THE ABO VE DECISIONS OF VARIOUS JUDICIAL AUTHORITIES, I AM OF THE VIEW THAT IT WOULD BE PROPER AND REASONABLE TO TAX THE PROFIT EMBEDDED IN THE UNEXPLAINED CONTRACT RECEIPTS OF RS.81,03,734/ - . THE ASSESSEE IS FOUND TO HAVE DISCLOSED A PROFIT RATE OF 8.85% IN THE R ETURN OF INCOME. APPLYING THE SAME PROFIT RATE, THE PROFIT ON THE UNDISCLOSED TURNOVER/CONTRACT RECEIPTS OF RS.81,03,734/ - WOULD COME TO RS.7,17,180/ - (8.85% OF RS.81,03,734). ACCORDINGLY, THE ADDITION OF RS.1,29,44,999/ - IS REDUCED TO RS.7,17,180/ - . 6. F ROM THE ABOVE ORDER OF CIT(A), THE REVENUE AGGRIEVED FROM THE DELETION OF ADDITION, WHEREAS THE ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING ON THE LEGAL ISSUE HOLDING THAT THERE WAS NO PROPER SERVICE OF NOTICE BY THE JURISDICTIONAL ASSESSING OFFICER AND HE ALSO FILED CROSS OBJECTION FOR SUSTAINING THE DELETION OF ADDITION OF RS.7,17,180/ - BY THE CIT(A). ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 6 7. SINCE THE ASSESSEE HAS FILED CROSS OBJECTION, THEREFORE, WE PROCEED TO DECIDE FIRST THE CROSS OBJECTION OF THE ASSESSEE. 8. AT THE OUTSET, LD. AR DID NOT PRESS THE LEGAL ISSUE RAISED BY HIM AND REQUESTED THAT FOR TAXING ON THE PROFIT CALCULATED BY THE CIT(A) OF RS.7,17,180/ - SHOULD BE TAXED ON NORMAL RATE OF TAX BECAUSE THE CIT(A) HAS ACCEPTED THE RECEIPTS FROM BUSINESS. FURTHER THE LD.AR SUBMITTED THA T THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE BECAUSE TAX EFFECT INVOLVED IN THE APPEAL OF REVENUE IS BELOW THE LIMITED PRESCRIBED BY THE CBDT CIRCULAR NO. 17/2019, DATED 8 TH AUGUST, 2019 . 9. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AO. 10. AFTER HEARING BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF AUTHORITIES BELOW, WE NOTICED THAT THE CIT(A) CONSIDERED THE BANK DEPOSITS IN THE ASSESSEES BANK ACCOUNT AS CONTRACT RECEIPTS AND HE HAS APPLIED @8.85% PROFIT O N THE SAME AS IS STATED SUPRA. THEREFORE, AS PER OUR CONSIDERED OPINION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). LD.AR BEFORE US SUBMITTED THAT THE ADDITIONS SUSTAINED BY THE CIT(A) SHOULD BE TAXED AT NORMAL RATE OF TAX, IS ACCEPTED BECAUSE TH E RECEIPTS FROM BUSINESS AND PROFESSION HAS BEEN CONSIDERED AS BUSINESS INCOME. IF THE RECEIPTS HAVE BEEN CONSIDERED AS TRADING RECEIPTS, THE TAX SHOULD BE CHARGED AT NORMAL RATE OF TAX. 11. ON GOING THROUGH THE APPEAL OF THE REVENUE, WE FIND THAT THE REVE NUE HAS CHALLENGED THE ADDITION DELETED BY THE CIT(A) AS PER THE ITA NO. 160 /CTK/20 18 CO NO.29/CTK/2018 7 GROUND OF APPEAL. WE FIND THAT LD. CIT(A) HAS DEALT THE ISSUE IN A VERY DETAILED MANNER AFTER RELYING SOME CASE LAWS AS NOTED IN THE FINDINGS RECORDED BY THE CIT(A) IN THIS REGARD, WHICH HAS BEEN INCORPORATED BY US IN THE ABOVE PARA, ACCORDINGLY, WE ENDORSE THE ORDER OF CIT(A) THAT IT IS A TRADING RECEIPT. EVEN OTHERWISE, THE APPEAL OF THE REVENUE IS ALSO NOT MAINTAINABLE AS THE TAX EFFECT IN THE APPEAL IS BELOW THE TAX LIMIT PRESCRIBED BY THE CBDT CIRCULAR NO.17/2019, DATED 8 TH AUGUST, 2019. THUS, WE DISMISS THE GROUNDS OF APPEAL OF THE REVENUE AND CONSEQUENTLY APPEAL OF THE REVENUE IS DISMISSED. 12 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 / 06 / 20 20 . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 22 / 06 /20 20 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDE R, ( SENIOR PRIVATE SECRETARY ) , /ITAT, CUTTACK 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//