Sh. Jaswinder Singh, Ludhiana V. ITO-Ward-V-(2), Ludhiana

ITA 182/CHANDI/2021

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6024 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 04-09-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 26-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Reason to believe; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 147; 148; 144; 44AD; 80C; 142(1); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 182/Chd/2021 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 Shri Jaswinder Singh H.No. 197, ST. No. 10, Mair Colony Shimla Puri, Ludhiana बनाम The ITO Ward-V(2), Ludhiana ̾थायी लेखा सं./PAN NO: CLLPS6888J अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज᭭व कᳱ ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 05/09/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 30/10/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-2, Ludhiana dt. 14/07/2016 pertaining to Assessment Year 2010-11. 2. In the present appeal, the Assessee has raised the following grounds of appeal: “1. That the Ld. Assessing Officer has erred in taking recourse to section 148 as there was no reason to believe that the income of assessee has escaped assessment. 2. (a). That before mandatory issuance of notice u/s 148, the approval of the Addl. Commissioner of Income Tax Range-V, Ludhiana was required which appears to have not been taken as no copy of the same was provided despite inspection of the file. (b). that even, otherwise, the mechanical approval as may have been given by the addl. CIT cannot be said to be proper, in view of the binding judgments of the jurisdictional bench of the ITAT & of Apex Court. 3. That the Ld. CIT(A) has erred in confirming the addition of Rs. 31,42,300/- on account of cash deposits from alleged unexplained source, which is against the facts and circumstances of the case. 2 4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 3. During the course of hearing, the ld AR submitted that this is the case of an individual who has been filing his return of income since past many years. The assessee filed his return of income in response to the notice issued u/s 148 of The Income Tax Act, 1961 on 11.02.2014 vide acknowledgment no. 076110214052508. In the said return of income, the assessee declared a total income of Rs. 2,53,810/-. It was submitted that the assessee is engaged in the business of Retail Trading of Ready-made Garments and the income has been disclosed in the return of income filed by the assessee for the relevant year under the head “Profit and Gains from Business or Profession”. For the relevant year, the assessee opted for “Presumptive Basis of Taxation” for disclosing the income under head “Profit and Gains from Business or Profession”. It was submitted that the assessee was issued a notice u/s 148 of the Act on 02.01.2014 and the copy of the reasons recorded by the Ld. AO for reopening the case of the assessee is placed on page no. 5 of the paper book. The assessee filed his return of income in response to the said notice on 11.02.2014. Thereafter, a notice u/s 143(2) of the Act was issued to the assessee on 29.09.2014. Thereafter, notice u/s 142(1) of the Act was issued upon the assessee which was served upon the assessee on 07.11.2014. Again, notice u/s 142(1) of the Act was issued. On 09.02.2015, Show Cause Notice was issued to the assessee. The assessee was not able to comply with the notices due to prolonged illness of his father. Thereafter, on 19.03.2015 the case of the assessee was concluded and order u/s 144 of the Act was passed. In the assessment order, the additions were made by the AO on account of cash deposit in the bank account of the assessee amounting to Rs. 31,42,300/- and disallowance of deduction u/s 80C of the Act amounting to Rs. 1,218/-. The total income of the assessee was assessed at Rs. 33,97,330/- as against the returned income of Rs. 2,53,810/-. Therefore, the total amount of additions made were of Rs. 31,43,520/-. 3 4. It was submitted that thereafter, the assessee filed an appeal against the order of the AO before the Ld. CIT(A). The Ld. CIT(A) without considering the fact that the assessee is engaged in the business of retail trading of garments and the sales have been entered on cash basis which only is deposited in the bank account of the assessee and the same has been duly considered while filing his return of income dismissed the appeal on the grounds that the assessee failed to prove the genuineness of the credits in the bank account of the assessee and there is lack of proof of identity of creditors, capacity of creditors to advance money & genuineness of the transactions. Against the order passed by the Ld. CIT(A), the assessee is in appeal before us. 5. In the aforesaid factual background, it was submitted that the case of the assessee has been reopened u/s 148 of the Act on the account that the assessee has made cash deposit in his Saving bank account maintained in Axis Bank amounting to Rs. 31,42,300/- on various dates. Thereafter, the notice u/s 148 of the Act was issued upon the assessee. In response to the said notice, the assessee filed his return of income wherein, income under head “Profit & Gains from Business or Profession” has been duly disclosed. In the said return of income, the assessee has duly disclosed his receipts from business amounting to Rs. 31,87,800/- and income from the said business at Rs. 2,55,024/-. The assessee has paid applicable taxes on the said income amounting to Rs. 13,690/-. It is also submitted that cash deposited in the bank account of the assessee is only on account of sales of ready-made garments which have been duly disclosed in the Income Tax Return filed by the assessee and the applicable tax has also been paid on the same. 6. It was further submitted that as per the copy of the reasons placed in the paper book, it is very clear that only reason for reopening is that certain information was received from the Investigation Wing that the assessee had deposited a sum of Rs. 31,42,300/- in the bank account and which had led to 4 reason to believe about the alleged escapement of income. It was submitted that it is a case of only borrowed satisfaction and on which, no such reopening can be made. Reliance is being placed on the following judgments:- a) Sh. Gopal Sharan vs. ITO in ITA no. 51/Asr/2012 vide order dated 05.09.2012 (Amritsar ITAT): “As regards the reason recorded, nothing has been brought on record by the revenue that the A.O has applied his mind to the information of the ADIT, Amritsar independently and arrived at belief on the basis of material placed before him that income had escaped assessment. On such borrowed satisfaction of the ADIT, Amritsar, section 147 does not confer power on the A.O to initiate reassessment proceedings.” b) Sh. Mohd Yousuf Wani vs. ITO in ITA No. 372/Asr/2009(Amritsar ITAT): “In our considered view, reliance placed by the A.O on the letter of Vigilance Department was not sufficient to make a belief that the income of the Assessee has escaped assessment. In the present case, the reason for formation of belief was only the information received from the vigilance Organization. In our opinion, the so-called reason recorded by the A.O could not be held the reason for proceedings under section 147/148 of the Act, since it was only an information and was not at all discernible as to whether the A.O has applied his mind to the information and independently arrived at a belief on the basis of material which he has before him the income of the assessee had escaped assessment”. c). M/s Holy Faith International vs DCIT in ITA No. 181/Asr/2017 order dated 15.01.2019 (Amritsar Bench) “In the present case also, the AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/sec 147 by issuing the notice u/sec 148 of the Act only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is quashed.” d) Reliance is also placed on the judgment of the Amritsar Bench of the ITAT in the case of Amrik Singh vs Income Tax Officer in ITA No. 630(Asr)/2015which covers squarely covers the case of the Appellant, wherein the Ld. AO has reopened the case of the assessee, merely on the basis of the fact that as there was cash deposits in the bank account of the assessee and as the assessee had not filed the return of income, thus, the income amounting to the cash deposited by the assessee had escaped assessment. However, the Hon’ble Bench of the ITAT held that 5 “50. Thus, it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither Assessment year : 2006-07 countenanced, nor sustainable in law. Too, the AO proceeded on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee. That being so, in keeping with 'Bir Bahadur Singh Sijwali' (supra), the reasons recorded to initiate assessment proceedings under section 147of the Act and all proceedings pursuant thereto, culminating in the impugned order, are cancelled.” e) Bir Bahadur Singh Sijwali vs. Income-tax Officer, Ward -1, Haldwani in ITA NO. 3814 (DELHI) OF 2011 dated 20.01.2015 – ITAT DELHI “Section 68, read with sections 147 and 148, of the Income-tax Act, 1961 - Cash credits (Bank deposit) - Assessment year 2008-09 - Assessee deposited certain sum in his saving bank account but no return of income was filed by him - Assessing Officer issued notice under section 148 on ground that there was an escapement of income - Whether where Assessing Officer proceeded on fallacious assumption that bank deposits constituted undisclosed income and overlooked fact that source of deposit need not necessarily be income of assessee, reassessment proceedings was to be set aside - Held, yes [Paras 8 & 10]” f). COMMISSIONER OF INCOME TAX vs. SMT. PARAMJIT KAUR as reported in 311 ITR 038 P&H-HC dated 06.08.2007 “Reassessment—Reason to believe—Information from Survey Wing of the Department—AO can assume jurisdiction under s. 147 provided there is sufficient material before him and the existence of material must be real— Further, there must be nexus between the material and the escapement of income—AO has to record reasons showing due application of mind before taking recourse to reassessment proceedings—AO cannot take recourse to reassessment proceedings merely on the basis of reasons to suspect—In the instant case, AO had initiated reassessment proceedings simply on the basis of information received from the survey circle that the assessee had got prepared a demand draft for a sum of Rs. 83,040 which was not accounted in her books of account— AO had not examined and corroborated the said information before recording his own satisfaction of escaped income and initiating reassessment proceedings—Thus, it cannot be said that the reassessment proceedings were based on belief that income chargeable to tax has escaped assessment— Therefore, issuance of notice under s. 148 was not valid” 7. It was submitted that in view of the above said facts and circumstances, the reopening u/s 148 is bad in law and, therefore, the assessment framed u/s 148/144 is void ab-initio. 6 8. On merits of the case, it was submitted that the assessee has duly disclosed the cash receipts in the return of income filed by the assessee in response to the notice issued u/s 148 of the Act. The total cash receipts have been disclosed at Rs. 31,87,800/- and the cash deposited in the bank account out of such cash receipts is Rs. 31,42,300. Moreover, it is a case where in the assessee has deposited amount of cash in his bank account over the period of year as and when the same is realized from sale of garments. Hence, taking the telescopic view, once the assessee has paid tax on the cash receipts which are being duly reflected in the Return of Income, there do not arise any further question of taxability of the cash deposited in the bank account out of such receipts only. The copy of the bank statement of the account of the assessee is placed in the paper book at page nos. 8-18. 9. It was further submitted that the ld CIT(A) did not appreciate the fact that the nature of business of the assessee is such that a large number of customers visit assessee’s shop on daily basis and on sale of garments, the consideration is received in cash only and it is nearly impossible to maintain such a voluminous individual data as to from whom the cash has been received on sale of goods. Therefore, the contention of AO that the amount of Rs. 31,42,300/- deposited in the bank account of the assessee has escaped assessment is invalid and the additions made on such basis are uncalled for. 10. It was further submitted that where the cash has been deposited in the bank account and the amount has been withdrawn on day to day basis, only the peak amount is liable to be assessed and the peak chart has been placed in the Paper Book pages at pages 19-25 and all such working is borne out from the copy of the bank statement, which was submitted before the Assessing Officer and the peak as on 06.02.2010 comes to Rs. 1,02,300/- . This view is supported by the judgment of Jurisdictional Bench of the ITAT in the case of Satya Bhama Bindal (ITA No. 713/Chd/2012), where under similar facts and 7 circumstances, the peak theory has been applied to various entries of cash withdrawn during the year under consideration. The same view has been by the Lucknow Bench of the ITAT in the case of Vakeel Ahmed Mohd. Shekhupura (ITA No. 447/Lkw/2019) and copies of the said judgments are placed in the paperbook at pages 26 to 32. 11. Per contra the Ld. DR submitted that during the course of assessment proceedings, the assessee has failed to explain the source of cash deposits in the bank account maintained by him and the order has been passed under section 144 of the Act. Even during the appellate proceedings, there is no explanation furnished by the assessee to prove the identity, capacity and the genuineness of the sale transactions. It was submitted that it is highly improbable that the appellant does not know the names and addresses of the persons with whom he is claiming regular business transactions. In the normal course, the department would have made enquiries from those persons from whom appellant has claimed to have received cash and to whom appellant has claimed to have paid the cheques. By not disclosing the complete particulars of those persons, it could not be verified whether these are really business transactions or the cash credit introduced by the assessee under the garb of business transactions. It was further submitted that the appellant has not maintained books of accounts with regard to these so called business transactions. Therefore, it was impossible for the Assessing Officer to make headway for further investigation. The cash deposits found credited in the bank accounts can also not be linked with any business transaction. In a nut shell, the nature of cash credits could not be fully explained. The conduct of the appellant is not bonafide. It is the finding of the Assessing Officer that appellant did not furnish information inspite of specific query. The deposits made in the bank accounts could not be explained satisfactorily, therefore the Assessing Officer was justified in making additions and which has been rightly upheld by the ld CIT(A). 8 12. We have heard the rival contentions and purused the material available on record. In response to the notice issued u/s 148 of the Act, the assessee has filed his return of income declaring total income of Rs. 2,53,810/- after claiming deduction u/s 80C of Rs 1,218/-. From the return of income available at pages 1-3 of assessee’s paper book, it is noted that the assessee has shown gross turnover of his business at Rs. 31,87,800/- and has determined deemed profit @ 8% u/s 44AD at Rs 2,55,024/- which has been offered to tax under the head “Profit and Gains from Business /Profession”. The disclosure made in the said return of income has been accepted by the Assessing officer and at the same time, an addition of Rs 31,42,300/- has been made by the AO in terms of unexplained cash deposits made in the bank account maintained by the assessee. The fact that the disclosure made in the return of income has been accepted by the AO without any adverse findings, it shows that the assessee’s assertion that he is engaged in eligible business as so defined u/s 44AD and the turnover so disclosed is from his eligible business has been accepted. As a necessary corollary thereof, it is also accepted by the AO that the assessee is not required to maintain books of accounts. In the said background, if we look at the explanation furnished by the assessee that the receipts so deposited in the bank account to the tune of Rs 31,42,300/- are out of his business receipts to the tune of Rs 31,87,800/- and being in retail trading of garments where the transactions are undertaken on cash basis and it is difficult to maintain customers details, we find that the said explanation to be reasonable which deserve to be accepted. There is variation of Rs 45,500/- in the amount deposited in the bank account and the gross turnover reported by the assessee. There is thus no wide variation between the two figures and infact, the assessee has reported a higher turnover than the deposits in the bank account and where the business turnover has been accepted, there cannot be any further addition of cash deposited in the bank account. In the result, the addition of Rs 31,42,300/- is hereby directed to be deleted. 9 13. In view of the above, where we have directed the addition to be deleted on merits of the case, the ground challenging the jurisdiction to invoke provisions of section 147 has become academic in nature. Hence, the same is dismissed as infructious. 14. Ground no. 2 (a) and 2 (b) were not pressed during the course of hearing. Hence, the same are dismissed as not pressed. 15. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 30/10/2023. Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 30/10/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar