ITO, WARD-3(2)(1), SURAT V. ANILBHAI NATHABHAI HIRAPARA, SURAT

ITA 170/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2366 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: KIREN K SHAH
• Keywords: Salary income; Reason to believe
• Section: 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 170/SRT/2020 (AY 2010-11) (Hearing in Virtual Court) Income Tax Officer, Ward- 3(2)(1), Room No.415, Aayakar Bhavan, Majura Gate, Surat-395001 Vs Anilbhai Nathabhai Hirpara, 215, Xshama Society, Opp. Dharam Nagar, A.K. Road, Surat-95008 PAN : AAVPH 8714 P Appellant / Revenue Respondent / assessee Assessee by Shri Kiren K Shah, C.A Revenue by Ms. Anupama Singla, Sr-DR Date of hearing 14.03.2022 Date of pronouncement 25.03.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-3, Surat [for short to as ‘CIT(A)’] dated 19.03.2020 for assessment year (AY) 2010-11, which in turn arises out assessment order passed by the Assessing Officer under section 147 r.w.s. 144 of the Income Tax, 1961 (hereinafter referred to as ‘the Act’). The Revenue has raised following grounds of appeal:- “1.Whether on facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs.1,91,42,608/- out of addition made by the AO at Rs.219,00,000/- on account of unexplained transactions / money, by estimating the profit of Rs.27,57,392./-,being @ 8% of ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 2 gross transactions, without appreciating the facts that the assessee has failed to furnish the required details to establish the sources of such transactions/money as also the exact nature of business carried out by him during the assessment as well as remand proceedings? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in estimating 8% as profit on the total transaction of Rs.3,44,67,421/- on the basis of a certificate issued by the Bank, in spite of the fact that during the assessment as well as remand proceedings, the assessee has failed to furnish the required details to establish the exact nature of business carried out by him? 3.Without prejudice to ground No.1 & 2, whether on the facts and circumstances of the case, Ld. CIT(A) erred in only estimating profit @ 8% of total transactions, without considering the fact that no business can be carried out without capital/adequate capital, which in this case remained fully unexplained and therefore remained untaxed?. 4. On the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.” 2. Brief facts of the case are that assessee is an individual filed his original return of income on 31.01.2011 declaring income of Rs.1,64,379/-. The case of assessee was re-opened on the basis of information received from DDIT (Inv.)-1, Surat ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 3 regarding Financial Intelligent Unit (‘FIU’) report for financial transactions. On perusal of such details, the Assessing Officer recorded that assessee has provided RTGS entries to Raj Trading Co. (prop. Bharatkumar J Mehta) and these entries were followed by multiple debits on the same day cumulating to the amount of deposits through RTGS and ere repeated by the same parties. In the FIU transactions created suspicious and the assessee carried out total transactions with Raj Trading Co. Though, the assessee filed his return of income showing total taxable income of Rs.1.64 lakh only, which does not match with such huge transactions of Rs.2.19 crores. On examination of such suspicious transactions, the Assessing Officer has a reason to believe that amount of Rs.2.19 crores has escaped assessment. The Assessing Officer after recording reasons under section 147 issued notice under section 148 dated 27.03.2015.The notice was duly served upon the assessee. The Assessing Officer recorded that 12 notice(s) were sent to assessee as recorded in para-2 of assessment order but no compliances were made by the assessee. The Assessing Officer levied penalty under section 271(1)(b) of the Act of ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 4 Rs.10,000/- and decided to finalize ex parte assessment. The Assessing Officer on the basis of such information received from DDIT(Inv.)-I, Surat that assessee was involved transactions of Rs.2.19 crores. The assessee failed to discharge his onus to substantiate the validity of such transactions. Therefore, in absence of documentary evidence of entire transactions carried out trading activities was treated as unexplained in the hands of assessee and entire amount of Rs.2.19 crores was added to the income of assessee in the assessment order dated 29.03.2016 passed under section 147 r.w.s. 144 of the Act. 3. Aggrieved by the addition in the assessment order, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee challenged the additions of Rs.2.19 crores only. The assessee filed his detailed written submission as recorded in para-4 of the order of Ld. CIT(A). The assessee in his submission, in sum & substance stated that the Assessing Officer made addition on the basis amount paid to Raj trading Co. from business account which was carried out by third- party. The Assessing Officer made addition of Rs.2.19 crores ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 5 on the basis of bank statement of State Bank of Mysore as unexplained transactions. The Assessing Officer made addition as no explanation was filed by assessee. The assessee specifically stated that he was working as an employee of Rajesh Bhai S Bhojani of Biswas Textiles at Shop No.1242, New Bombay Market, Surat. The address of his employer at Flat No.201/202, Gardenia Apartment, Kandiwali (West) Mumbai. His employer used his name and had done transactions in the name of Jay Jalaram Fashion for which assessee was getting Rs.10,000/- for signing the bank cheques etc. The assessee also stated that his employer had agreed that account would be prepared & audited and to file return showing income of Jay Jalaram Fashion. His employer used to keep all the documents like purchase / sales bill and other related papers. No papers relating to such transactions of Jay Jalaram Fashion was given to assessee. His employer abruptly left Surat and settled in Mumbai. The assessee tried to contract with him in new address and found that some Government notices were pasted on his door and photographs of such notices are filed before Ld. CIT(A). The assessee ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 6 reiterated that he had not carried out any business in the name of Jay Jalaram Fashion and he was merely name lender and therefore entire income to be taxed in the hands of the employer Joy Jalaram Fashion. 4. The assessee in alternative submission, submitted that the Assessing Officer’s ex parte order taxed the entire transactions instead of taxing income of transactions. The assessee further stated that on verification of bank accounts, it was found that either deposits are by way of remittance which is in dollar converted into rupees. Therefore, the said employer carried out export of textile goods and such export the realization was received in his account and therefore there are payments for purchase. The assessee has no knowledge of such transactions. 5. On the submission of assessee, Ld. CIT(A) called for remand report from Assessing Officer. The Assessing Officer furnished his remand report alongwith his letter dated 10.10.2017. In the remand report Assessing Officer stated that assessee was granted ample opportunities during assessment, but the assessee has not submitted the details called for. The ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 7 Assessing Officer on merit submits that during the remand proceedings, the assessee was asked to furnish the business activities carried out and principal place of business. To furnish complete details of business premises, owned or rented, copy of bank statement and computation of income, and income tax return for AY 2009-10 to 2013-14. Party-wise details, the postal address with opening and closing balance. The assessee in his letter dated 10.10.2017 submitted that he was not doing any business and his name was used by his employer. The employer has done textile business in his name. The assessee filed his affidavit and submitted that his employer left Surat and is residing at Flat No.201/202 Gardenia Apartment, Kandiwali (West) Mumbai. In case any books of account or record were maintained it would lie with him. He was a benamidar, has no records of transaction carried out in the name of Jay Jalaram Fashion. The Assessing Officer made enquiry on the basis inquiry carried by the DDIT(Inv.)-I, Surat and he may be allowed to provide copy of statements recorded during investigation as well as material collected by them. The assessee in alternative submissions ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 8 submitted that he is filing copy of bank statement for relevant period, showing that there are payments to Raj Trading Co. against remittance of export and there was no deposit of any cash, which apparently proves that there is no undisclosed investment. The assessee also stated that there should to be assessment of profits on transactions of textile rather than taxing the transaction, itself. 6. The Assessing Officer on the basis of submission of assessee submitted that analysis of submission and facts available on record shows that the statement of assessee is self- contradictory. On one hand, the assessee said he was not doing any business whereas on the other hand, the assessee has done some textile business. No details of exact nature of business activities carried out by assessee is not provided. The details of business premises is not provided. Verification of profit and loss accounts and computation of income reveals that assessee had done some business with turnover of Rs.10,60,050/- and made total purchase of Rs.9,06,538/-, having net profit of Rs.1,33,870/-. The assessee was also a partner in firm Big Impex and earned remuneration of ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 9 Rs.65,000/- and share of profit Rs.1584/-. The assessee made investment of Rs.1 lakh in Sreenath Cosmetic. This business activities exposed that assessee is a prudent businessman and not fool, allowed his employer to use his name for another business activities and singed bank cheques for Rs.10,000/-. Thus, affidavit filed by assessee is nothing but cooked-up story. On the other statement filed by assessee in the affidavit that he was employee of Rajeshbhai Sureshbhai Bhojani (Biswas Textiles) is complexly false as the assessee has not shown salary income in his income tax return. The assessee’s submission that total turnover as per bank account is Rs.3.44 crores and the assessing officer objected for estimation of profit @ 1% and submitted that the assessee completely failed to explain nature and source and accordingly provision of Section 68 is attracted. The assessee filed his objection to the remand report and reiterated his earlier contention. The contents of remand report and rejoinder / objection is recorded in page No.4 to 7 of order of Ld. CIT(A). 7. The Ld. CIT(A) after considering the submission of assessee, remand report furnished by Assessing Officer and the ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 10 objections of the assessee held that assessee had carried out some textile business transactions and all transactions value should not be taken as income of assessee. It is settled principle that only profit element should be taxed and not the gross receipts. The Ld. CIT(A) estimated @ 8% profit on gross transactions of Rs.3,44,67,421/- which comes to Rs.27,57,392/-. Aggrieved, the Revenue has filed present appeal before the Tribunal. 8. We have heard the submission of Ld. Sr. Departmental Representative (Sr. DR) for the Revenue and Ld. Authorized Representative for the assessee. The Ld. Sr.DR for the Revenue submits that the case of assessee was re-opened on the basis of report of DDIT(Inv.)-I Surat about FIU transaction carried out by assessee with Raj Trading Co. The assessee made total transaction of Rs.2.19 crores however, the assessee has shown income of Rs.1.64 crores while filing his return of income. The Assessing Officer after serving notice under section 148, served numerous notices to the assessee to provide various details about the transaction carried out by him. None of the notice was replied by assessee. The assessee remained silent before ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 11 the Assessing Officer. The Assessing Officer completed the assessment complete under section 144 and made addition of Rs.2.19 crores which remained unexplained on the part of assessee. Before Ld. CIT(A) took a plea that entire transactions in the bank account of the assessee was carried out by his employer, who run away from Surat and prayed for making estimated addition on the basis of turnover. The Ld. CIT(A) accepted the plea of assessee and estimated profit @ 8%. The stand of the assessee before Ld. CIT(A) was contradicted, on one hand the assessee has claimed that he was employed with Rajeshbhai, on the other hand, the assessee has not shown any income from salary rather he has offered income from business. The Ld. CIT(A) accepted the plea of assessee and made addition of 8% of the total transactions / credit in the bank account in the name of assessee. The Ld. Sr. DR for the revenue submits that the addition made by Assessing Officer is liable to be upheld. 9. On the other hand, Ld. AR for the assessee submits that assessee has brought true and correct fact before the Ld. CIT(A) and made alternative prayer that Rajesh Bhai Bhojani ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 12 had carried out business activities of textile trading / export in the name of Jay Jalaram Fashion by using his PAN. His employer left the city and the assessee was unable to file any details except bank statements and certificate of bank that current account No.64036468165 belongs to Jay Jalaram Fashion and some credit entries shown remittance from export. The submission of assessee was remanded to the Assessing Office for his comments. The Assessing Officer filed his remand report. The Ld. CIT(A) after considering the submission of assessee and the remand report furnished by Assessing Officer, estimated 8% profit on gross transaction of Rs.3.44 crores reflected in bank account of assessee. The Ld. AR of the assessee submits that appeal of Revenue may be dismissed. 10. We have considered the rival submission of both the parties and perused the orders of lower authorities. No details of transactions were furnished by the assessee before assessing officer. The assessing officer completed assessment under section 144. We find that the Assessing Officer made addition of Rs.2.19 crores on the basis of report of DDIT(Inv.)-I Surat regarding FIU. Before Ld. CIT(A) the assessee stated that he is ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 13 ignorant about the transactions carried out through his bank account by his employer Rajesh Bhai Bhojani, who used the assessee’s bank account, his employer has left the city. The assessee in alternative plea prayed before Ld. CIT(A) that 1% of profit may be estimated on the basis of total transactions reflected in the bank account in the name of Jay Jalaram Fashion. We find that the Ld. CIT(A) after perusal of credit entries & foreign remittance in the bank account of Jai Jalaram Fashion find that there was total gross transaction of Rs.3.44 crores. The Ld. CIT(A) estimated the profit @ 8% of total transaction and accordingly restricted the addition to the extent of Rs. 27,57,392/-, against the addition of Rs.2,19,00,00/- made by Assessing Officer. We find that Ld. CAIT(A) has estimated profit element embedded in the total transaction reflected in the bank account of Jay Jalaram Fashion. In our view, the Ld. CIT(A) has rightly appreciated the fact of assessee and brought the profit element of transaction to tax, which we affirm. No contrary fact or law is brought to our notice to take other view. Hence, the grounds of appeal raised by Revenue are dismissed. ITA No.170/SRT/2020 (A.Y.10-11) Sh. Anilbhai N Hirpara 14 11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 25/03/2022 by placing the result on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 25/03/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // TRUE COPY // Assistant Registrar, ITAT, Surat True copy/