Sanjay R. Shah, Surat V. The Income Tax Officer, Ward-3(4), Surat

ITA 1784/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1915 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHAILESH VAIDYA
• Keywords: Income from undisclosed sources; Onus to prove
• Section: 143(3); 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.1784/AHD/2013 ASST. YEAR: 2007-08 SHRI SANJAY R. SHAH, 4/702, RIVERA TOWER, OPP. LALJINAGAR, NEAR SARDAR BRIDGE, ADAJAN, SURAT. VS. ITO, WARD 3(4), SURAT. APPELLANT RESPONDENT PAN AFXPS 3512B APPELLANT BY SHRI SHAILESH VAIDYA, AR RESPONDENT BY SHRI ALOK KUMAR, SR.DR DATE OF HEARING: 19.1.2016 DATE OF PRONOUNCEMENT: 01/04 /2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) IV, SURAT DATED 14.03.2013 PASSED AGAINST O RDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FOR ASST. YE AR 2007-08 FRAMED BY ITO WARD 3(4), SURAT DATED 26.3.2011. ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACT ION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 1,97,871/- ON ESTIMATED B ASIS @ 10.55% OF THE TURNOVER OF RS. 18.75.554/- NOT BELONGING TO THE AS SESSEE. ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 2 2. IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION M ADE BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEAL S) MAY PLEASE BE DELETED. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE B USINESS OF TEXTILE AND CHEQUE DISCOUNTING UNDER THE NAME AND STYLE OF M/S DHAMI CORPORATION. RETURN OF INCOME WAS FILED ON 28.3.200 8 DECLARING TOTAL INCOME AT RS.1,42,370/-. SURVEY WAS CONDUCTED AT TH E PREMISES OF ASSESSEE U/S 133A OF THE ACT ON 6.3.2009 AND INCRIM INATING DOCUMENTS SHOWING UNACCOUNTED TRANSACTIONS WERE IMP OUNDED. THEREAFTER NOTICE U/S 148 OF THE ACT, WAS ISSUED ON 24.2.2011 AND ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF T HE ACR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DOCUMENTS AND BANK STATEMENTS RELATING TO VISHNU KUMAR AGARWAL WERE FO UND IN THE PREMISES OF ASSESSEE AND IN THE BANK ACCOUNT IN THE NAME OF VISHNU KUMAR AGARWAL TURNOVER OF RS.18,75,554/- WAS MADE. DURING ASSESSMENT PROCEEDINGS ASSESSEE SUBMITTED THAT ALL THE TRANSACTIONS SHOWN IN THE BANK ACCOUNT IN THE NAME OF VISHNU KUM AR AGARWAL RELATE TO ASSESSEE HIMSELF AND THEY ARE IN RELATION TO CHEQUE DISCOUNTING BUSINESS. ON THE OTHER HAND, LD. ASSES SING OFFICER WAS OF THE VIEW THAT TURNOVER OF RS.18,75,554/- DOES NO T RELATE TO BUSINESS OF CHEQUE DISCOUNTING BUT IS RELATING TO THE BUSINE SS OF TEXTILE BUSINESS OF ASSESSEE AND ACCORDINGLY APPLIED NET PR OFIT RATE OF 10.55% ON THIS TURNOVER OF RS.18,75,554/- AND MADE ADDITION OF RS.1,97,871/- TO THE INCOME OF THE ASSESSEE. LD. AS SESSING OFFICER ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 3 TOOK THE BASIS OF 10.55% NET PROFIT RATE ON THE BAS IS OF ASSESSEES RETURN OF INCOME WHEREIN HE HAS DISCLOSED NET PROFI T RATE @ 10.55% FROM THIS TEXTILE BUSINESS. APART FROM THE ADDITION OF RS.1,97,871/- ADDITION ON ACCOUNT OF DIFFERENCE IN COMMISSION INC OME AT RS.3,392/- AND ADDITION ON UNACCOUNTED INCOME OF RS.96,000/- W ERE MADE TO THE INCOME OF ASSESSEE AND THE INCOME WAS ASSESSED AT RS.4,39,630/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE BY DELETING A DDITION OF RS.3,392/- AND RS.96,000/- AND SUSTAINED THE ADDITI ON OF RS.1,97,871/-. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. LD. AR SUBMITTED FOLLOWING IN RELATION TO 1. ADDITION OF RS.L,97,87L/- BEING ESTIMATED NE T PROFIT @ 10.55 % ON TURNOVER OF RS.18,75,554/- IN THE IMPUGNED BANK ACC OUNT : A) THE APPELLANT WAS ENGAGED IN THE CHEQUE DI SCOUNTING BUSINESS. HE HAS SHOWN THE CHEQUE DISCOUNTING INCOME IN THE RETU RN OF INCOME FILED BY HIM FOR THE YEAR UNDER CONSIDERATION. B) THE LEARNED ITO HAS WRONGLY ADDED RS. L,97 ,871/- BEING THE ESTIMATED NET PROFIT @ 10.55% OF THE TURNOVER IN TH E BANK ACCOUNT IN THE NAME OF VISHNUKUMAR AGRAWAL CONSIDERING THE SAME AS THE TURNOVER OF TEXTILE BUSINESS. THE APPELLANT HAD VERY CATEGORICA LLY MENTIONED IN THE REPLY TO THE SHOW CAUSE NOTICE THAT HE HAD CARRIED OUT THE CHEQUE DISCOUNTING BUSINESS IN THE SAID BANK ACCOUNT WHICH WAS OPENED IN THE NAME OF VISHNUKUMAR AGRAWAL AND' THE TURNOVER WAS RELATE D TO THE CHEQUE DISCOUNTING BUSINESS ONLY. ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 4 C) THE LEARNED ITO WRONGLY ADDED THE NET PROF IT CONSIDERING THE FACT THAT SINCE THE APPELLANT HAD CARRIED OUT THE RETAIL BUSINESS OF CLOTH AND SHOWED THE NET PROFIT FROM THE SAID BUSINESS @ 10,5 5% DURING THE YEAR UNDER CONSIDERATION. D) THE LEARNED ITO HAD TOTALLY NEGLECTED THE FACTS THAT THE APPELLANT HAD ALSO CARRIED OUT THE CHEQUE DISCOUNTING BUSINESS AND THE CHEQUE DISCOUNTING INCOME EARNED DURING THE YEAR UNDER CONSIDERATION H AD ALSO BEEN SHOWN IN THE RETURN OF INCOME. THIS FACT HAD NOT BEEN CONTRO VERTED BY THE LEARNED ITO AT ANY TIME DURING THE COURSE OF THE ASSESSMENT. TH E LEARNED ITO HAD SIMPLY ESTIMATED THAT THE INCOME IS OF TEXTILE BUSINESS WI THOUT BRINGING ANY COGENT PIECE OF EVIDENCE ON RECORD TO SUPPORT HIS WHIMS. E) ON THE CONTRARY THE APPELLANT HAD FILED AN AFFIDAVIT ALSO DURING THE COURSE OF ASSESSMENT THAT HE HAD CARRIED OUT THE CH EQUE DISCOUNTING BUSINESS IN THE SAID ACCOUNT OF VISHUKUMAR AGRAWAL. THIS EVI DENCE HAD NOT BEEN TAKEN COGNIZANCE BY THE LEARNED ITO. NOR HE STATED TO THE AO REGARDING WHAT WAS STATED IN THE AFFIDAVIT WAS WRONG AND BASE LESS. F) THE APPELLANT HAD ALSO FILED THE AFFID AVIT OF VISHNUKUMAR AGRAWAL WHO HAD STATED AND CONFIRMED THEREIN THAT HE LEND ED THIS ACCOUNT TO THE APPELLANT FOR CARRYING OUT THE CHEQUE DISCOUNTI NG BUSINESS ONLY. THE SAID VISHNU KUMAR AGRAWAL HAD NEVER OPERATED THE SAID BANK ACCOUNT FOR HIS OWN BUSINESS. HE CARRIED OUT HIS BUSINESS O F TEXTILE AND YARN BROKERAGE ONLY. G) THE LEARNED ITO IN PARA 4.3 OF THE AO S TATED A WRONG FACT THAT THE SAID VLSHUKUMAR AGRAWAL HAD CONFIRMED THAT THE ACCOUNT B ELONGED TO HIM AND NOT TO THE APPELLANT. ON THE CONTRARY HE CONFIR MED THAT HE LENDED THE ACCOUNT TO THE APPELLANT TO CARRY OUT CHEQUE DISC OUNTING BUSINESS BY THE APPELLANT. THE APPELLANT HAD ALSO STATED THE SAME FACTS IN HIS REPLY TO THE SHOW CAUSE NOTICE. (COPY OF THE SAID LETTER IS ATTACHED HEREWITH FOR YOUR HONOUR'S READY REFERENCE.) THUS, THE LEARN ED ITO HAD TOTALLY MISLED HIMSELF WHILE ADDING THE AMOUNT OF RS.1,97,871/- B EING THE ESTIMATED PROFIT ON TOTAL TURNOVER OF RS.18,75,554/-. H ) THE LEARNED ITO HAD NEVER BROUGHT ON RECORD ANY SIN GLE PIECE OF THE EVIDENCE TO ESTABLISH THAT THE BANK ACCOUNT AND THE TRANSACTIONS CARRIED OUT ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 5 THEREIN WERE OF TEXTILE BUSINESS. ON THE CONTRARY T HE APPELLANT HAD FILED HIS OWN AFFIDAVIT AND THE AFFIDAVIT BY THE SAID VISHNUK UMAR AGRAWAL (I.E. THIRD PARTY) IN WHICH HE CONFIRMED THAT THE APPELLANT HAD USED THE SAID BANK ACCOUNT FOR HIS OWN CHEQUE DISCOUNTING BUSINESS ONL Y. I) THE APPELLANT HAD OFFERED DURING THE COUR SE OF THE ASSESSMENT THAT THE TRANSACTIONS CARRIED OUT IN THE SAID BANK ACCOUNT T O BE CONSIDERED AS THAT OF THE CHEQUE DISCOUNTING BUSINESS AND THE NET PROFIT RATE @ 0.1% WHICH IS ACCEPTED BY THE LD. ITO IN THE CASE OF THE CHEQUE D ISCOUNTING BUSINESS TO BE APPLIED ON THE TURNOVER WHICH WOULD COME TO RS. 1,8 76/- AND THE SAME TO BE ADDED TO THE TOTAL INCOME OF THE APPELLANT. THUS, IN VIEW OF THE ABOVE FACTS, ITS HUMBLY REQUE STED TO DELETE THE ADDITION OF RS. 1,97,87I/- WHICH WAS MADE ONLY ON THE BASIS OF THE PURE GUESS WORK AND BY COMPLETELY IGNORING THE FACTS AND EVIDENCES PRODUCED BEFORE THE LEARNED AO DURING THE COURSE OF THE ASSESSMENT. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ASSESSEE HAS CHALLENGED THE ACTION OF LD . CIT(A) IN CONFIRMING THE ADDITION OF RS.1,97,871/- WHICH WAS CALCULATED BY THE LD. ASSESSING OFFICER BY APPLYING 10.55% NET PROFIT RATE ON THE TOTAL TURNOVER SHOWN AT RS.18,75,554/- IN THE BANK ACCOUN T OPERATED BY ASSESSEE BUT HELD IN THE NAME OF MR. VISHNU KUMAR A GARWAL. WE OBSERVE FROM THE RECORD THAT VISHNUKUMAR AGARWAL HA S GIVEN AN AFFIDAVIT SUBMITTING THAT HE HAS LENT THE BANK ACCO UNT TO THE ASSESSEE FOR OPERATING HIS CHEQUE DISCOUNTING BUSINESS TO TH IS ACCOUNT AND ASSESSEE HAS ALSO ACCEPTED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THAT TRANSACTIONS ENTERED INTO IN THE I MPUGNED BANK ACCOUNT IN THE NAME OF VISHNU KUMAR AGARWAL BELONGS TO HIM WHICH ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 6 PROVES BEYOND DOUBT THAT INCOME RELATED TO THE BANK ACCOUNT IN THE NAME OF VISHNUKUMAR AGARWAL BELONGS TO ASSESSEE BUT THE LD. AR IS IMPRESSING THAT THE IMPUGNED BANK ACCOUNT HAS BEEN USED FOR RUNNING THE BUSINESS RELATING TO CHEQUE DISCOUNTING AND LD. ASSESSING OFFICER SHOULD HAVE APPLIED 0.1% RATE OF COMMISSION INCOME ON THE TURNOVER OF RS.18,75,554/- RATHER THA N NET PROFIT RATE OF 10.55% APPLIED BY HIM RELATING WHICH WAS HITHERTO S HOWN BY ASSESSEE OF HIS TEXTILE BUSINESS. 7.1 NOW WE ARE TO EXAMINE WHETHER THE IMPUGNED BANK ACCOUNT WAS ACTUALLY USED FOR RUNNING OF TEXTILE BUSINESS O R RUNNING OF CHEQUE DISCOUNTING BUSINESS BUT THE ONUS TO PROVE THE SAME IS SURELY DWELL UPON THE ASSESSEE AND HE HAS PLACED NO MATERIAL ON RECORD TO PROVE THAT THE TRANSACTIONS ENTERED INTO BY HIM IN THE BA NK ACCOUNT IN THE NAME OF VISHNU KUMAR AGARWAL WAS ACTUALLY USED FOR CHEQUE DISCOUNTING BUSINESS. WE FURTHER FIND THAT LD. CIT( A) HAS OBSERVED FOLLOWING WHILE CONFIRMING THE ADDITION OF RS.1,97, 871/- MADE BY THE ASSESSING OFFICER :- 2.4 DECISION: I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLAN T AND THE ASSESSMENT ORDER. THE CONTENTION OF THE APPELLANT T HAT HE WAS CARRYING ON CHEQUE DISCOUNTING BUSINESS IN THE BANK ACCOUNT OPENED IN THE NAME OF VISHNU KUMAR AGARWAL AND HENCE THE TRANSACTIONS OF THE SAID BANK ACCOUNT SHOULD BE TREATED AS PERTAINING TO HIS CHEQUE DISCOUNTING BUSINESS AND N OT OF ANY OTHER BUSINESS CANNOT BE ACCEPTED. FROM THE PERUSAL OF THE BANK ACCOUNT, IT IS SEEN THAT THE CHEQUES HAVE BEEN DEPOSITED IN REGULAR INTERVALS AND MONEY HAS BEEN W ITHDRAWN BY CASH FROM THAT ACCOUNT. HAD IT BEEN A GENUINE CHEQUE DISCOUNTING B USINESS THEN THE AMOUNT WITHDRAWN BY CASH WOULD HAVE BEEN MARGINALLY LESS T HAN THE AMOUNT DEPOSITED BY ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 7 CHEQUE TO TAKE CARE OF THE COMMISSION INVOLVED. HOW EVER, IN THE CASE OF THE APPELLANT, IT IS SEEN THAT THERE IS NO SUCH CO-RELA TION BETWEEN THE CHEQUE DEPOSITED AND THE CASH WITHDRAWN. FOR INSTANCE ON 12 TH JULY, 2006 THERE ARE TWO DEPOSITS OF RS.64,745/- AND RS.65,000/- BY CHEQUE IN THIS BANK ACCOUNT BUT THE CASH WITHDRAWN ON THAT DATE IS ONLY RS.60,000/-. SIMILARLY, ON 17 TH JULY, THERE ARE CHEQUE DEPOSITS OF RS.55,273/-, RS.69,000/-, RS.98,020/- BUT THE AMOUN T WITHDRAWN BY CASH ON THAT DAY IS ONLY RS.20,000/-. THE SAME STORY IS REPEATED THR OUGH THE YEAR. HAD THE APPELLANT BEING CARRYING ON GENUINE CHEQUE DISCOUNTING BUSINE SS THEN HE WOULD HAVE DISCOUNTED THE CHEQUE AND GIVEN A CHEQUE OF A LESSE R AMOUNT TO THE PARTY AFTER KEEPING HIS COMMISSION. THE TRANSACTIONS IN THE BAN K ACCOUNT DO NOT PERTAIN TO THE CHEQUE DISCOUNTING BUSINESS BEING CARRIED OUT BY TH E APPELLANT. HENCE, THE AO'S ACTION IN ADOPTING THE GP RATE OF 10.55% DISCLOSED BY THE APPELLANT IN HIS OTHER TRADING BUSINESS TO WORK OUT THE PROFIT FROM THE TR ANSACTIONS DONE THROUGH THIS BANK ACCOUNT IS UPHELD. HENCE THE ADDITION OF RS. 1,97,8 71/-- MADE BY THE AO IS SUSTAINED. THIS GROUND OF APPEAL IS DISMISSED. 8. FROM GOING THROUGH THE OBSERVATIONS OF THE LD. C IT(A) AND ALSO LOOKING TO THE IMPUGNED BANK ACCOUNT PLACED ON RECO RD, WE FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE TRANSACTIO NS IN THE BANK ACCOUNT DO NOT PERTAIN TO THE CHEQUE DISCOUNTING BU SINESS BEING CARRIED OUT BY THE APPELLANT; AS WE ALSO FIND THAT ASSESSEE IS MAINTAINING A CONSIDERABLE BANK BALANCE IN THIS BAN K ACCOUNT AND, THEREFORE, IN THE GIVEN CIRCUMSTANCES, WE CANNOT BE LIEVE THAT ASSESSEE WAS CARRYING ON CHEQUE DISCOUNTING BUSINES S THROUGH THIS ACCOUNT. IN THE GIVEN CIRCUMSTANCES, WHEN APPELLANT IS UNABLE TO PROVE THAT HE HAS CONDUCTED CHEQUE DISCOUNTING BUSI NESS AND THAT TOO IN A BANK ACCOUNT WHICH WAS NOT IN HIS NAME AND THE SAME WAS REVEALED DURING SURVEY PROCEEDINGS, WE ARE OF THE V IEW THAT LD. ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 8 CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION OF RS.1,9 7,871/- AND WE DO NOT FIND ANY REASON TO CALL FOR INTERFERENCE WITH T HE FINDING OF LD. CIT(A). IN THE RESULT, APPEAL OF ASSESSEE IS DISMIS SED. 9. OTHER GROUNDS ARE GENERAL IN NATURE, HENCE NO AD JUDICATION. 10. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/04/ 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 01/04/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1784/AHD/2013 ASST. YEAR 2007-08 9 1. DATE OF DICTATION: 17/03/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 21/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 1/4/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: