ACIT(OSD), W-32(4), Kol, Kolkata V. Razi Ahmed, Kolkata

ITA 1640/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6208 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: P N KHANDELWAL
• Keywords: Business income; Peak credit
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI S. S. GODARA, JM & SHRI M. BALAGANESH, AM] I.T.A. NO. 1640/KOL/2016 ASSESSMENT YEAR: 2011-12 ASSISTANT COMMISSIONER OF INCOME-TAX, (OSD), WARD-32(4), KOLKATA. VS. RAZI AHMED (PAN: ADCPA3713B) APPELLANT RESPONDENT DATE OF HEARING 14.06.2018 DATE OF PRONOUNCEMENT 04.07.2018 FOR THE APPELLANT SHRI A. BHATTACHARJEE , ADDL. CI T FOR THE RESPONDENT SHRI P. N. KHANDELWAL, AR ORDER PER SHRI M. BALAGANESH, AM THIS APPEAL FILED BY REVENUE IS ARISING OUT OF ORDE R OF CIT(A)-9, KOLKATA VIDE APPEAL NO. 423/CIT(A)-9/WD-32(4)/2014-15/KOL DATED 15.05.2016. ASSESSMENT WAS FRAMED BY ITO, WARD-32(4), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2011- 12 VIDE HIS ORDER DATED 25.03.2014. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION OF RS 50,08,005/- TOWARDS UNEXPLAINED CASH DEPOSIT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS AN INDIVIDUAL RUNNING ITS BUSINESS OF RESALE OF FOOTWEAR. THE RETURN OF INCOME FOR TH E ASST YEAR 2011-12 WAS FILED ON 29.3.2012 DECLARING TOTAL INCOME OF RS 1,53,363/-. THE LD AO STATED IN HIS ORDER THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEA RED FROM TIME TO TIME AND FURNISHED THE DETAILS AS CALLED FOR. THE LD AO OBSERVED FROM AIR INFORMATION, THAT THE ASSESSEE HAD MADE HUGE DEPOSITS IN VARIOUS BANK ACCOUNTS AS UNDER:- 2 ITA NO. 1640/K/2016 RAZI AHMED., AY 2011-12 SL. NO. BANK ACCOUNT AMOUNT (RS.) CASH/OTHER THAN C ASH 1. STATE BANK OF INDIA AC NO.20020195053 99,58,155/ - CASH 2. STATE BANK OF INDIA AC NO.20020195053 7,35,486 /- OTHER THAN CASH 3. STATE BANK OF INDIA AC NO.31142186492 70,80 0/- CASH 4. STATE BANK OF INDIA AC NO.31299580679 53,10 0/- CASH 5. STATE BANK OF INDIA AC NO.31113553594 64,90 0/- CASH A SHOW CAUSE NOTICE WAS ACCORDINGLY ISSUED TO THE A SSESSEE AS TO WHY THE SAID DEPOSITS BE NOT TREATED AS UNEXPLAINED INCOME OF THE ASSESSE E. THE ASSESSEE SUBMITTED A REPLY ON 10.12.2013 THAT OUT OF RS 99,58,155/- , A SUM OF RS 50,08,005/- WAS DEPOSITED FROM HIS CASH IN HAND AND RS 49,50,150/- WAS DEPOSIT ON ACCO UNT OF SALE PROCEEDS OF THE ASSESSEE. WITH RESPECT TO ITEMS IN ABOVE TABLE SERIAL NUMBERS 2 TO 5, THE ASSESSEE COULD NOT OFFER ANY ACCEPTABLE EXPLANATION REGARDING THE SOURCE OF RECEIPT. THE LD AO ISSUED ANOTHER SHOW CAUSE NOTICE ON 13.12.2013 ASKING THE ASSESSEE TO PRODUCE THE BILLS AND VOUCHERS FROM THE SALE AND PURCHASE. THERE WAS NO RESPONSE FROM THE ASSESSEE TO THIS SECOND SHOW CAUSE NOTICE. THE LD AO THEREAFTER GAVE TWO RE MINDERS TO THE ASSESSEE FOR COMPLIANCE. THE LD AO ACCORDINGLY PROCEEDED TO CO MPLETE THE ASSESSMENT BASED ON MATERIALS AVAILABLE ON RECORD BY OBSERVING THAT WIT H REGARD TO DEPOSIT OF RS 99,58,155/- IN SBI A/C NO. 20020195053 IN CASH, THE ASSESSEE CO ULD NOT EXPLAIN THE EXISTENCE OF CASH IN HAND AS PER HIS ACCOUNTS TO THE TUNE OF RS 50,08,005/- AND ACCORDINGLY REJECTED THE SAID EXPLANATION OF THE ASSESSEE. HENCE THIS S UM OF RS 50,08,005/- WAS ADDED BY THE LD AO AS UNEXPLAINED CASH DEPOSIT IN THE ASSESSMENT . 3.1. WITH REGARD TO REMAINING SUM OF RS 49,50,150/- THE LD AO ACCEPTED THE SAME TO BE EMANATING OUT OF TRADING BUSINESS OF THE ASSESSEE A ND ACCORDINGLY ESTIMATED GROSS PROFIT @ 31.90% AND MADE AN ADDITION OF RS 15,79,097/- THE REON AS NET PROFIT FROM UNDISCLOSED TRADING ACTIVITY. 3.2. REGARDING CHEQUE DEPOSIT OF RS 7,35,486/- AND CASH DEPOSIT IN RECURRING DEPOSIT ACCOUNTS TO THE TUNE OF RS 70,800/- , RS 53,100/- A ND RS 64,900/- TOTALING TO RS 1,88,800/-, THE LD AO ADDED THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE FOR WANT OF EXPLANATIONS FROM THE ASSESSEE. 3 ITA NO. 1640/K/2016 RAZI AHMED., AY 2011-12 4. THE ASSESSEE MADE VARIOUS OBJECTIONS BEFORE THE LD CITA, WHO IN TURN, SOUGHT A REMAND REPORT FROM THE LD AO. THE ASSESSEE FILED OB JECTIONS TO THE REMAND REPORT BY STATING THAT IN THE COURSE OF HEARING, THE CASH BOO K SHOWING THE RECEIPTS AND PAYMENTS INCLUDING SALES AND PURCHASES WAS SHOWN BEFORE THE LD AO AND THE LD AO WAS NOT CONVINCED WITH THE CASH BOOK AND ACCORDINGLY IGNORE D THE SAME. IT WAS STATED THAT A SUM OF RS 50,08,005/- WAS NOT DEPOSITED IN THE BANK ACC OUNT IN A DAY BUT WAS DEPOSITED AND WITHDRAWN IN TITS AND BITS OF RS 10,000/- TO RS 73, 132/- BEING THE MAXIMUM AMOUNT DEPOSITED IN THE BANK. IT WAS STATED THAT THE CASH BOOK ALONG WITH THE SUPPORTING VOUCHERS WERE PRODUCED BEFORE THE LD AO BUT HE IGNO RED THE SAME AND REJECTED THE BOOKS OF THE ASSESSEE. THE ASSESSEE PLEADED TO CONS IDER THE PEAK CREDIT OF ALL THE ENTRIES IN THE BANK ACCOUNTS AND AGREED TO OFFER THE SAME A S HIS INCOME. THE ASSESSEE REQUESTED THAT THE MAXIMUM DEPOSIT MADE BY THE ASSE SSEE ON 28.2.2011 IN THE SUM OF RS 73,132/- MAY BE ADDED AS HIS UNEXPLAINED INCOME. IT WAS PLEADED THAT THE PROFIT RATE AT 31.90% APPLIED BY THE LD AO WAS VERY UNREASONABL E COMPARED TO THE ACTUAL FIGURES OF ASSESSEE, IN AS MUCH AS THE NET PROFITS OF THE PAST ASSESSMENT YEARS , WERE OF RETAIL SALES ONLY AND THE PRESENT SALES IS OF WHOLESALE ONE WITH LESSER PROFIT. THE ENTIRE BILLS AND VOUCHERS WERE PRODUCED BEFORE THE LD AO FOR HIS VER IFICATION. THE ASSESSEE PLEADED THAT THE RETAIL SALES PROFIT PERCENTAGE OF 28.85% AND 32 .18% WAS DEDUCED FROM THE SALES OF ASST YEARS 2010-11 AND 2009-10 AND APPLIED IT TO TH E WHOLESALE TRANSACTIONS WHICH NORMALLY STANDS AT 2 TO 3%. 5. THE LD CITA OBSERVED THAT THE ENTIRE CREDITS IN THE BANK ACCOUNTS WERE ONLY EMANATING OUT OF TRADING RECEIPTS OF THE ASSESSEE E NGAGED IN THE BUSINESS OF FOOTWEAR IN AN UNORGANIZED MARKET. HE OBSERVED THAT THE LD AO EITHER IN THE ORIGINAL ASSESSMENT PROCEEDINGS OR IN THE REMAND PROCEEDINGS WAS NOT AB LE TO IDENTIFY ANY NEW SOURCE OF INCOME OF THE ASSESSEE. ACCORDINGLY, HE HELD THAT THE CREDITS IN THE BANK ACCOUNTS ARE THE SALE PROCEEDS OF CHAPPALS AND THERE ARE WITHDRW ALS FOR PURCHASE OF CHAPPALS. HENCE HE DIRECTED THE LD AO TO TREAT THE ENTIRE CREDITS I N THE BANK ACCOUNTS AS SALE PROCEEDS OF THE ASSESSEE AND ADOPT A NET PROFIT OF 5% AND BRING TO TAX THE SAME AS BUSINESS INCOME 4 ITA NO. 1640/K/2016 RAZI AHMED., AY 2011-12 OF THE ASSESSEE BY REJECTING THE BOOKS AND BOOK RES ULTS OF THE ASSESSEE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND FRO M THE PERUSAL OF THE BANK STATEMENTS ENCLOSED IN THE PAPER BOOK BEFORE US, THAT THERE AR E VARIOUS CASH DEPOSITS AND CASH WITHDRAWALS MADE BY THE ASSESSEE. THE LD CITA HAD GIVEN A CATEGORICAL FINDING THAT THE SAID DEPOSITS AND WITHDRAWALS REPRESENT AS ONE EMAN ATING ONLY OUT OF TRADING ACTIVITIES OF THE ASSESSEE, ENGAGED IN THE BUSINESS OF FOOTWEA R. THIS FINDING REMAINS UNCONTROVERTED BY THE REVENUE BEFORE US. IT IS NOT IN DISPUTE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BOTH BY THE LD AO AS WELL AS BY THE LD CITA. IN THESE CIRCUMSTANCES, THE LD CITA HAD RESORTED TO ESTIMATI ON OF NET PROFIT OF 5% TO MEET THE ENDS OF JUSTICE. WE DO NOT FIND ANY INFIRMITY IN THE SAID ORDER OF DETERMINATION OF NET PROFIT AT 5% BY THE LD CITA AND ACCORDINGLY HOLD TH AT THE SAID ORDER DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.07.201 8 SD/- SD/- (S. S. GODARA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :4 TH JULY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ACIT(OSD), WARD-32(4), KOLKATA. 2 RESPONDENT SHRI RAZI AHMED, 153, PARK STREET, KO LKATA-17. 3 . THE CIT(A)-9, KOLKATA (SENT THROUGH E-MAIL) 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .