The ITO, Ward-1(1), Bhavnagar V. Shri Pavankumar Bhagatram Sharma, Bhavnagar

ITA 1652/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6207 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Bonafide mistake
• Section: 68

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.1652/AHD/2011 WITH CO NO.166/AHD/2011 / ASSTT. YEAR: 2008-2009 ITO, WARD - 1(1) BHAVNAGAR. VS SHRI PAVANKUMAR BHAGATRAM SHARMA OPP: MANGAL VIHAR VADAV TALAVDI, BHAVNAGAR. PAN : AHGPS 9635 N ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : MS.SONIA KUMAR, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 20/03/2017 / DATE OF PRONOUNCEMENT: 11/04/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST ORDER OF THE LD.CIT(A)- XX DATED 12.4.2011 PASSED FOR THE ASSTT.YEAR 2008-0 9. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, THE ASSESSEE HAS FI LED CROSS-OBJECTION BEARING NO.166/AHD/2011. 2. IT EMERGES OUT FROM THE RECORD THAT ASSESSEE, SH RI PAVANKUMAR SHARMA EXPIRED ON 29.5.2013 NOTICE OF HEARING WAS SERVED UPON THE ASSESSEE AND IN RESPONSE TO THAT NOTICE, THE ASSESS EE HAS FILED CO ON ITA NO.1652/AHD/2011 WITH CO 2 13.7.2011. M/S.B.R. POPAT & CO. PUT AN APPEARANCE ON BEHALF OF THE ASSESSEE. BUT, OVER A PERIOD OF TIME, SHRI BHARAT R. BOPAT, PARTNER OF M/S.B.R.POPAT & CO., STOPPED APPEARING BEFORE THE T RIBUNAL. THE ASSESSEE HAS NOT FILED APPLICATION FOR IMPLEADING L EGAL HEIRS. EFFORT TO SERVE NOTICE UPON THE ASSESSEE COULD NOT BE SUCCEED ED BECAUSE AT THE GIVEN ADDRESS NONE WAS RESIDING. A REPORT TO THIS EFFECT HAS BEEN SUBMITTED BY THE INCOME TAX OFFICER, WARD-1(1), BHA VNAGAR WITH THE STATUS REPORT OF THE INSPECTOR. 3. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD CAREFULLY. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE, WE THEREFORE, WE DID NOT EXPLORE SERVICE OF NOTICE BY ALTERNATIVE MODE UPON THE ASSESSEE IN THE APPEAL OF THE REVENUE. AS FAR AS CO IS CONCERNED, IT IS FOR THE L/RS. OF THE ASSESSEE TO COME FORWARD AN D IMPLEAD THEMSELVES AS CROSS-OBJECTOR IN PLACE OF THE ASSESSEE. THEY H AVE NOT TAKEN ANY SUCH EFFORT. THEREFORE, CO WOULD BE REJECTED FOR WANT O F PROSECUTION. 4. NOW LET US DEAL WITH THE ISSUE ON MERIT IN THE A PPEAL OF THE REVENUE. THE ASSESSEE AT THE RELEVANT TIME WAS ENG AGED IN THE BUSINESS OF PURCHASE OF PLASTIC GRADUALS WASTE AND PRODUCE Y ARN THROUGH JOB WORK. HE HAS FIELD HIS RETURN OF INCOME ON 30.9.20 09 DECLARING TOTAL INCOME AT RS.1,40,610/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY O F THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS A BANK ACC OUNT OF PUNJAB NATIONAL BANK, RAMVADI BRANCH, BHAVNAGAR. THE ASSE SSEE HAS DEPOSITED CASH OF RS.50,48,055/- IN THE SAID BANK A CCOUNT. THE AO WAS ITA NO.1652/AHD/2011 WITH CO 3 NOT SATISFIED WITH THE QUALITY OF EVIDENCE SUBMITTE D BY THE ASSESSEE IN SUPPORT OF HIS EXPLANATION FOR SOURCE OF DEPOSITS I N THE BANK ACCOUNT. ACCORDINGLY, THE AO HAS MADE AN ADDITION OF RS.50,4 8,055/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LD.CIT(A) HAS RE-APPRECIATED THE CONTROVERSY AND OBSERVED THAT A SUM OF RS.50,48,055/- DEPOSITED IN THE BANK ACCOUNT WAS NOT A CASH DEPOSITS, RATHER IT WAS SALE PROCEEDS OF THE BUSINESS OF THE ASSESSEE, AND ONLY ELEMENT OF PROFIT INVOLVED IN TH ESE GROSS RECEIPTS COULD BE ASSESSED IN THE HANDS OF THE ASSESSEE. AC CORDINGLY, THE LD.CIT(A) WORKED OUT TOTAL TURNOVER OF THE ASSESSEE AT RS.43,77,595/- AND ESTIMATED NET PROFIT IN THIS TURNOVER AT THE RA TE OF 8%. HE CONFIRMED THE ADDITION TO THE EXTENT OF RS.3,50,208/- AND DEL ETED REST OF THE ADDITIONS MADE BY THE AO. 6. THE REVENUE IN ITS APPEAL HAS PLEADED THAT THE L D.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.3,50,210/- AS AGA INST THE ADDITION OF RS.50,48,055/- MADE BY THE AO. THE ASSESSEE IN HI S CO IS IMPUGNING THE ESTIMATION OF NET PROFIT AT RS.3,50,208/-. 7. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD CAREFULLY. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS IN DETAIL, WE WOULD LIKE TO MAKE REFERENCE TO THE REASONING GIVEN BY THE LD.CIT(A) WHILE DELETING THE ADDITION MADE BY THE AO WITH THE AID OF SECTION 68 OF THE ACT. 8. BRIEF FINDING RECORDED BY THE LD.CIT(A) IS AS UN DER: 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE AR OF THE APPELLANT CAREFULLY. IT IS SEEN FR OM THE DETAILS FILED ITA NO.1652/AHD/2011 WITH CO 4 THAT ALL THE TRANSACTIONS ARE CARRIED OUT THROUGH T HE BANK ACCOUNT OF THE APPELLANT AND ARE REFLECTED IN THE REGULAR BOOK S OF ACCOUNT MAINTAINED BY THE APPELLANT. IT IS ALSO SEEN THAT T HE CLOSING BALANCE OF THIS BANK ACCOUNT IS REFLECTED IN THE BALANCE SH EET OF THE APPELLANT FILED ALONG WITH THE AUDIT REPORT. WHEN THE TRANSAC TIONS ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNT AND ARE STATED TO B E SALE PROCEEDS THE AO WITHOUT MAKING ANY ENQUIRY INTO THE SOURCE O F THE SAME, IS NOT EMPOWERED TO MAKE AN ADDITION UNDER SECTION 68 OF THE IT ACT. THE BANK ACCOUNT OF THE APPELLANT HAS BEEN EXAMINED . IT IS ALSO SEEN THAT THE AGGREGATE CASH DEPOSITED IN THE SAID BANK ACCOUNT IS ONLY RS. 21,23,8007-THOUGH THE AMOUNT MENTIONED IN THE A SSESSMENT ORDER IS RS. 50,48,0557-. MANY DEPOSITS IN THE BANK ACCOUNT ARE BY WAY OF CHEQUES DEPOSITED. THE AO HAS FAILED TO CORR ECTLY ASCERTAIN THE CASH DEPOSITED IN THE BANK ACCOUNT. THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE EXAMINE D. IT IS SEEN THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT AR E CLEARLY DEFECTIVE AND CERTAIN GLARING DISCREPANCIES ARE NOT ICED. AS POINTED OUT BY THE AO THE CASH TURNED NEGATIVE AT RS.42,439 7- ON 3/4/2007. THE AR OF THE APPELLANT WAS NOT ABLE TO EXPLAIN HOW THE CASH BALANCE IN THE CASH BOOK COULD BE NEGATIVE. THE CLA IM OF THE AR OF THE APPELLANT THAT DUE TO WRONG DATING OF CERTAIN T RANSACTIONS COMMITTED BY THE ACCOUNTANT OF THE APPELLANT CERTAI N BONAFIDE MISTAKES HAVE OCCURRED IS WITHOUT ANY EVIDENCE AND IS NOT ACCEPTABLE. THE AR OF THE APPELLANT HAS NOT BEEN AB LE TO SHOW WHAT THE BONAFIDE MISTAKES WERE AND WHY THE MISTAKE OCCU RRED. SIMILARLY, DURING THE EXAMINATION OF THE CASH BOOK, IT WAS NOT ICED THAT THERE ARE SEVERAL CASH RECEIPTS OF RS.16,000/-TO RS. 18,0 007- ALMOST ON DAY-TO-DAY BASIS WHICH ARE CREDITED IN THE ACCOUNT OF M/S. SUMITI TRADING CO., AMRITSAR. THESE RECEIPTS ARE NOT IN TH E NATURE OF LOAN AND DEPOSITS BUT ARE OF REALIZATION OF SALE PROCEED S FROM DEBTORS IN RESPECT OF THE SALES AFFECTED. IT IS NOT UNDERSTOOD WHY THE PERSON BASED IN AMRITSAR WOULD COME DOWN ALL THE WAY TO BH AVNAGAR AND STAY THERE AT A STRETCH, SO AS TO MAKE PAYMENT OF R S.16,000/- TO RS.18,000/- DAILY OVER A PERIOD OF SEVERAL DAYS AT A STRETCH. ALL THESE DEFECTS CLEARLY INDICATE THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE. EVEN IF THE CASH DEPOSITED IN THE BANK ACCOUNT IS R EFLECTED IN THE CASH BOOK, SINCE THE BOOKS ITSELF ARE NOT RELIABLE, THE RESULTS SHOWN IN THE BOOKS OF ACCOUNTS CANNOT BE ACCEPTED. ITA NO.1652/AHD/2011 WITH CO 5 SINCE THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE IN CORRECT, AND UNRELIABLE, THE PROPER COURSE TO BE ADOPTED BY THE AO WAS TO REJECT THE BOOKS AND ESTIMATE THE INCOME OF THE APPELLANT ON A REASONABLE BASIS. IT IS OBVIOUS THAT THE DEPOSITS IN THE BANK ACCOUNT ARE SALE PROCEEDS OF THE APPELLANT. THE MERE FACT THAT THE B OOKS OF ACCOUNTS WERE NOT CORRECT WOULD NOT EMPOWER THE AO TO MAKE A N ADDITION OF THE ENTIRE DEPOSITS IN THE BANK ACCOUNT AS UNACCOUN TED INCOME OF THE APPELLANT U/S 68 OF THE IT ACT. 3.3(I) IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE A O WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.50,48,055/- BY INVOKING SECTI ON 68 OF THE IT ACT 1961. SINCE THE BOOKS OF ACCOUNTS OF THE APPELL ANT ARE HOT RELIABLE AND DO NOT SHOW THE CORRECT PROFIT THE SAM E ARE REJECTED. THE INCOME IS ESTIMATED BY TAKING THE NET PROFIT TO BE 8% OF THE TOTAL TURNOVER. FROM THE TRADING ACCOUNT FILED ALONG WITH THE AUDIT REPORT, IT IS SEEN THAT THE TURNOVER OF THE APPELLA NT IS OF RS.43,77,5957-. NET PROFIT AT THE RATE OF 8% OF THI S AMOUNT WORKS OUT TO RS.3,50,208/-. THE AO IS DIRECTED TO ASSESS THE INCOME OF TH E APPELLANT AT RS. 3,50,2107-. 9. IF THIS FINDING IS WEIGHED IN THE LIGHT OF THE F INDING RECORDED BY THE LD.AO, THEN SCALE WOULD TILT IN FAVOUR OF THIS FIND ING. THE AO HAS NOT MADE DETAILED ANALYSIS OF THE ACCOUNT AS WELL AS OT HER DETAILS SUBMITTED BY THE ASSESSEE. ACCORDING TO THE LD.CIT(A) AGGREG ATE CASH DEPOSITS IN THE SAID BANK ACCOUNT IS ONLY OF RS.21,23,800/-. T HE AO, ON THE OTHER HAND, OBSERVED THAT THE CASH DEPOSITS WAS OF RS.50, 48,055/-. THE LD.CIT(A) THEREAFTER MADE REFERENCE TO OTHER MATERI ALS PRODUCED BEFORE THE AO TO POINT OUT THAT THIS BANK ACCOUNT WAS USED FOR THE PURPOSE OF BUSINESS AND SALE PROCEEDS WERE DEPOSITED IN THIS B ANK ACCOUNT. ON THE OTHER HAND, THE LD.AO DID NOT MAKE ANY SUCH INVESTI GATION. HE SIMPLY TREATED THE DEPOSITS MADE IN THE BANK ACCOUNT AS UN EXPLAINED CASH CREDITS. CONTRARY TO THIS, THE REVENUE HAS NOT BRO UGHT ANY EVIDENCE ON RECORD TO DEMONSTRATE THE FACT THAT OPINION FORMED BY THE LD.CIT(A) IS ITA NO.1652/AHD/2011 WITH CO 6 CONTRARY TO THE DETAILS AVAILABLE ON RECORD. IN WO RDS, IT HAS NOT BROUGHT TO OUR NOTICE THAT INFERENCE DRAWN BY THE LD.CIT(A) ARE FACTUALLY INCORRECT. THE LD.CIT(A) HAS RIGHT OBSERVED THAT T OTAL AMOUNT APPEARING AS A DEPOSIT IN THE ACCOUNT WAS NOT CASH CREDITS, R ATHER SALE PROCEEDS OF THE ASSESSEE. TURNOVER OF THE ASSESSEE IS TO BE CO MPUTED ON THE BASIS OF ALL THESE DETAILS AND AT THE MOST, AN ESTIMATED NET PROFIT CAN BE COMPUTED AS AN INCOME OF THE ASSESSEE. ACCORDINGLY, THE LD. CIT(A) HAS CONFIRMED AN ADDITION OF RS.3,50,208/-. WE DO NOT FIND ANY E RROR IN THE DETAILED REASONING OF THE LD.CIT(A), AND ACCORDINGLY, THE AP PEAL OF THE REVENUE IS DISMISSED. FOR DISMISSAL OF THIS APPEAL, WE DO NOT REQUIRE THE PRESENCE OF THE ASSESSEE. 10. SO FAR AS THE CO OF THE ASSESSEE IS CONCERNED, NO ONE HAS COME FORWARD FROM THE SIDE OF ASSESSEE TO BE IMPLEADED T HEMSELVES AS LEGAL HIRES OF THE ASSESSEE. IT WAS AN OBLIGATION UPON T HE CROSS-OBJECTOR TO IMPLEAD THEMSELVES AS A LEGAL HIRE IN CASE OF DEATH OF CROSS-OBJECTOR AND PROSECUTE THE CROSS OBJECTION. NO SUCH STEPS HAVE BEEN TAKEN. THE CO IS LYING IN THE TRIBUNAL FOR THE LAST SIX YEARS. WE F IND THAT OBJECTORS ARE NOT KNOWN. ACCORDINGLY, CO IS DISMISSED FOR WANT OF PR OSECUTION. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CO, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 11 TH APRIL, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/04/2016