Shri Prakash Bhagwandas Jariwala, Surat V. The Income Tax Officer, Ward-5(3), Surat

ITA 1873/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9416 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Keywords: Presumptive income; Business income; Depreciation; Peak credit; Deemed to accrue or arise in india; Revised return
• Section: 44AD; 43B; 143(3); 142(1); 139(5); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1873/AHD/2013 ASST. YEAR: 2009-10 PRAKASH BHAGWANDAS JARIWALA, HOUSE NO.8-1889, A-4, SANGADIYAWAD, GOPIPURA, SURAT VS. INCOME-TAX OFFICER, WARD- 5(3), SURAT. APPELLANT RESPONDENT PAN ABUPJ 7906R APPELLANT BY SHRI MEHUL SHAH, AR RESPONDENT BY SRI VILAS V. SHINDE, DR DATE OF HEARING: 03/12/2015 DATE OF PRONOUNCEMENT: 2/03/2016 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)-I, SURAT, DATED 1.4.2013. ASSESSMENT FOR ASS T. YEAR 2009-10 WAS FRAMED U/S 143(3) OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) ON 22.10.2011 BY ITO, WARD-5(3), SURAT. ASSESSEE HA S RAISED FOLLOWING GROUNDS OF APPEAL :- GROUNDS OF APPEAL 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING ADDIT ION OF RS. 2,17,680/- BY ADOPTING NET PROFIT RATIO @ 8% INSTEAD OF 5% ON TUR NOVER OF RS. 16,87,380/- AS CLAIMED BY THE ASSESSES AND BY TAXING THE PEAK A MOUNT. ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN FURTHER ENHANCING THE INCOME BY RS. J 5,76,2897- BY ESTIMAT ING NET PROFIT @ 47% ON TURNOVER OF RS. 16,87,3807- AS UNACCOUNTED' JOB WOR K PROFIT. 3. IT IS THEREFORE PRAYED THAT ABOVE ADDITION M ADE BY ASSESSING OFFICER AND CONFIRMED BY ID. COMMISSIONER OF INCOME TAX (APPEAL S) AND ENHANCEMENT MADE BY CIT(APPEALS) MAY PLEASE BE DELETED. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELE TE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS AS CULLED OUT OF THE CASE A RE THAT THE ASSESSEE IS THE BUSINESS OF JARI LABOUR INCOME. HE FILED HIS ORIGINAL RETURN OF INCOME ON 31.12.2009 DECLARING TOTAL INCO ME AT RS.1,64,104/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER THE ASSESSEE FILED A REVISED RETURN ON 2 4.1.2011 DECLARING TOTAL INCOME OF RS.2,49,042/-. THE CASE WAS SELECTE D FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISS UED ON 25.8.2010. AS PER AIR INFORMATION ASSESSEE HAD DEPO SITED RS.16,87,380/- IN THE BANK ACCOUNT HELD WITH SBI, S OSYO CIRCLE BRANCH, SURAT AND THIS BANK ACCOUNT WAS NOT DISCLOS ED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. ON BEING ASKED B Y THE ASSESSING OFFICER ABOUT THE REASON FOR NOT DISCLOSING THESE T RANSACTIONS OF RS.16,87,380/- (BY CASH AS WELL AS BY CHEQUE) ASSES SEE SUBMITTED THAT THESE ALL ARE TRANSACTIONS RELATING TO THE BUS INESS OF TRADING IN SAREES AND DRESS MATERIALS CARRIED ON BY THE ASSESS EE AND THE SAME WAS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOU NT AND INCOME GENERATED FROM THE SAID BUSINESS WAS NOT OFFERED FO R TAXATION DURING THE YEAR. ACCORDINGLY LD. ASSESSING OFFICER FRAMED THE ASSESSMENT BY MAKING ADDITION OF PEAK BALANCE OF RS.82,690/- U/S 69 OF THE ACT AND ALSO CALCULATED NET PROFIT @ 8% ON THE TOTAL CREDIT OF RS.16,87,380/- ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 3 WHICH WORKS OUT AT RS.1,34,990/- AND ACCORDINGLY AD DED THE SAME TO THE INCOME OF THE ASSESSEE. ALSO THERE WAS A MINOR ADDITION OF UNDISCLOSED BANK INTEREST OF RS.569/- AND OVERALL T OTAL ADDITION OF RS.2,18,249/- WAS MADE AND INCOME OF THE ASSESSEE W AS ASSESSED AT RS.3,82,350/-. THE ASSESSING OFFICER DID NOT ACC EPT THE REVISED RETURN FILED UNDER SECTION 139(5) OF THE ACT BECAUS E THE RETURN WAS REVISED AFTER THE PROCESSING OF RETURN U/S 143(1) O F THE ACT. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) WHO ENHANCED THE ADDITION TO RS.7,93,969/- BY REPLACING THE TWO ADDITIONS FROM (RS.82,690/- + RS.1,34,990/-) BY THE ASSESSING OFFICER BY ESTIMATING THE NET PROFIT @ 47% OF UNDISCLOSED CRED IT OF RS.16,87,380/- AND THE ENHANCED ADDITION WORKS OUT AT RS.7,93,969/- BY OBSERVING AS UNDER:- 7. DECISION :- 7.] AT THE OUTSET, THE ASSESSING OFFICER *S ACTION OF TREATING THE REVISED RETURN FILED ON 24.01.201! AS 'NON- EST ' IS NOT IN ACCORDANCE W ITH LAW. THE ASSESSMENT IN THIS CASE HAS BEEN COMPLETED U/S 143 (3) ON 22.10.20) I UND U/S !39(5) OF THE ACT, THE APPELLANT HAD TIME TO FILE REVISED RETURN OF INCOME TILL 30.03.2011. HOWEVER, TREATING THE RETURN OF INCOME FILED ON 24.01.2011 A S VALID DOES NOT MEAN THAT PROFIT DISCLOSED THEREIN IN RESPECT OF DEPOSITS OF RS .16, 87, 380/- IS CORRECT. 7.2 THE SECTION 44AF PROVIDES FOR 5 % OF THE TOTAL TURNOVER TO BE TAKEN AS * PROFIT; AND GAINS ' OR ' PROFESSION ' FOR AN ASSESS EE ENGAGED IN THE RETAILS TRADE OF ANY GOODS OR MERCANTILE . HOWEVER, PRIMARY CONDITION FOR APPLICABILITY OF SEC TION IS THAT THE ASSESSEE MUST BE ENGAGED IN THE RETAIL TRADE OF ANY GOODS OR MERC ANTILE. UNLESS THE APPELLANT ESTABLISHES THE EXISTENCE OF RETAIL BUSINESS, HE CA NNOT TAKE SHELTER OF SECTION 44AF. THE APPELLANT -S BUSINESS IS OF A JOB WORK RE LATED TO WORK OF JARI, ON WHICH, 47% NET PROFIT HAS BEEN SHOWN IN THE RETURN FILED U/S 1 39(1). THIS UNACCOUNTED BANK ACCOUNT WAS NEVER DISCLOSED TO THE DEPARTMENT, TILL A NOTICE U/S 143(2) WAS ISSUED APART FROM NOTICE U/S 142(1) ASKING FOR VARI OUS DETAILS FROM THE APPELLANT. ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 4 7,3 IN THE REVISED RETURN FILED, THE APPELLANT CLAI MED THAT THE DEPOSITS IN UNDISCLOSED BANK ACCOUNT ARE SALES PROCEEDS OF UNAC COUNTED TRADING BUSINESS. HOWEVER, NO EVIDENCE OF EXISTENCE OF SAID RETAIL TR ADE HAS BEEN FURNISHED . AS MENTIONED EARLIER, MOST OF THE WITHDRAWALS FROM THE BANK ACCOUNT ARE ATM WITHDRAWALS, WHILE MOST OF THE DEPOSITS ARE IN CASH . 7.4 THE APPELLANT DID NOT FURNISH EVIDENCE TO L INK (HE WITHDRAWALS WITH THE EXPENDITURE AND DEPOSITS WITH SALE PROCEEDS OF TRAD ING BUSINESS. THE SECTION 44F EXEMPTS AN ASSESSEE FROM THE OPERATION OF THE PROVI SO TO SECTION 28 TO SECTION 43C AND SECTIONS 44AA AND SECTION 44AB. THEREFORE, IN S UCH CASES, WHERE SECTION 44AF IS APPLICABLE, -THE SECTION 44AA REGARDING MAINTENA NCE OF BOOKS OF ACCOUNT DOES NOT APPLY. HOWEVER, THE APPELLANT IS STILL REQUIRED TO ESTABLISH THE EXISTENCE OF RETAIL BUSINESS AND THE CORRECTNESS OF TURNOVER SHOWN. ONC E THE EXISTENCE OF RETAIL BUSINESS IS ESTABLISHED AND THE CORRECTNESS OF TURN OVER IS ALSO ESTABLISHED, THE PROFIT CAN BE TAKEN AT 5% OF THE TURNOVER PROVIDED THE BUS INESS DOES NOT EXCEED RS.40,00,000/-. 7.5 IN THE CASE OF THE APPELLANT, HE FAILED TO ESTA BLISH ANY EVIDENCE REGARDING EXISTENCE OF RETAIL TRADE. THEREFORE, THE DEPOSITS MADE IN THE UNDISCLOSED BANK ACCOUNT EITHER REPRESENT 'UNDISCLOSED JOB WORK RECE IPTS' OF THE APPELLANT OR 'UNACCOUNTED INCOME' FROM THE ACTIVITY OF JOB WORK RECEIPTS. IN CASE, THE DEPOSITS REPRESENT UNACCOUNTED JOB WORK INCOME, THE ADDITION MADE NEEDS TO BE ENHANCED TO RS 16, 37,380/- FROM ( RS 82,690/- + RS 1, 34,990/-) AND IN CASE OF DEPOSITS REPRESENT UNACCOUNTED RECEIPTS OF JOB WORK , THE ASSESSMENT IS REQUIRED TO BE ENHANCED TO 47% OF RS. 16,87,3807- ( I.E. NP DISCLOSED IN THE RETURN FILED U/S 139(1). THE APPELLANT HAVING FAILED TO ESTABLIS H ANY EVIDENCE THAT THE SO CALLED ATM WITHDRAWALS REPRESENT EXPENDITURE, THE M OST REASONABLE VIEW , WHICH CAN BE TAKEN IN THIS CASE IS AN ESTIMATION OF NET P ROFIT AT 47% OF RS. 16, 87,3807-. THEREFORE, THE TWO ADDITIONS MADE OF RS. I, 34, 990 /- AND RS. 82,690/- ARE REPLACED BY AN ADDITION OF RS. 7,93,969/- AND THE A SSESSMENT IS ENHANCED ACCORDINGLY. 7,6 IN THIS CASE, SEPARATE PENALTY PROCE EDINGS ARE NOT BEING INITIATED, FOR THE REASON THAT THE A.O HAS ALREADY INITIATED PENAL TY PROCEEDINGS, U/S 271 (1)(C.) OF THE ACT AND IN VIEW OF PROVISIONS TO SECTION 275 (IA) OF THE I T ACT, THE ENHANCEMENT MADE GETS COVERED BY THE SAID PENALTY 8. IN THE RESULT, APPEAL IS DISMISSED AND THE ASSES SMENT MADE BY THE AO IS ENHANCED. 4. AGGRIEVED THE ASSESSEE IS NOW IN APPEAL BEFORE T HE TRIBUNAL AGAINST THE ADDITION MADE BY ASSESSING OFFICER AS W ELL AS AGAINST THE ENHANCED ADDITION MADE BY LD. CIT(A). ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 5 5. LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE H AS BEEN REGULARLY FILING HIS RETURN AND SHOWING BUSINESS IN COME OF JARI LABOUR INCOME AND IN THE YEAR UNDER APPEAL HE HAS FILED HI S RETURN OF INCOME SHOWING BUSINESS INCOME FROM JARI LABOUR INCOME AND THE SAME HAS NOT BEEN CONTROVERTED BY THE REVENUE. IN OTHER WORD S IT HAS BEEN ACCEPTED BY THE REVENUE THAT ASSESSEE IS ENGAGED IN THE BUSINESS. LD. AR FURTHER SUBMITTED THAT ALL THE TRANSACTIONS IN THE IMPUGNED BANK ACCOUNT ARE RELATED TO BUSINESS OF TRADING SAR EES AND LABOUR INCOME AND FEW TRANSACTIONS ARE THROUGH CHEQUES ALS O. THEREFORE, LD. AR SUBMITTED THAT ASSESSING OFFICER OUGT TO HAVE AP PLIED THE NET PROFIT RATE OF 5% ON THE TOTAL TURNOVER OF THE ASSE SSEE AND IT WAS COMPLETELY WRONG ON THE PART OF LD. CIT(A) TO APPLY NET PROFIT RATE OF 47% ON THE UNDISCLOSED CASH CREDIT OF RS.16,87,380/ -. 6. LD. AR FURTHER SUBMITTED THAT IN THIS ASSESSMENT ORDER THE INCOME-TAX OFFICER HAS WRONGLY ADDED THE AMOUNT OF RS.L.34,900/- TAKING THE NET PROFIT OF 8 % OF THE. TOTAL TURNOVER OF RS, 1687380/- OF CLOTH BUSINESS, AS AGAINST CORRECT INCOME OF NET PROFIT OF 5 % ONLY AS PROVIDED U/S 44AF OF THE ACT. AGAIN HE HAS ALSO WRO NGLY ADDED AN AMOUNT OF RS.82,690/- BEING THE .PEAK CREDIT OF THE UNDISCLOSED BANK ACCOUNT NO, 30408683898 WITH STATE BANK OF INDIA, S OSYO CIRCLE BRANCH, SURAT. IN CONNECTION LD. AR STATED THAT ASS ESSEE HAS DEPOSITED RS.90.000/-(RS.40.000/- ON 30-06-2008. RS .25,000/-. ON 02-07-2008 AND RS.25.000/- ON 08/07/2008) .IN THE S AID BANK ACCOUNT WHICH IS ALREADY DEBITED IN CAPITAL ACCOUNT AND THE REFORE THERE IS NO QUESTION OF ADDITION OF PEAK. MOREOVER IN FACT ASSE SSEE HAS ALREADY ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 6 DISCLOSED AN INCOME OF RS.84.369/- AT 5% OF THE TOT AL : TURNOVER OF THE CLOTH BUSINESS OF RS,16,87.380/- U/S, 44AF OF THE A CT. IN THE REVISED RETURN OF INCOME FILED ON 24/01/2011. THUS THIS IS THE WRONG AND DOUBLE ADDITION TO THE INCOME DECLARED AS THE PROFI T ON THE UNDISCLOSED TURNOVER OF CLOTH BUSINESS REFLECTED IN THE BANK ACCOUNT IS CONSIDERED IN THE INCOME ASSESSED THEN THERE IS NO QUESTION OF FURTHER ADDING PEAK CREDIT OF THE SAID BANK ACCOUNT OF RS.82,690/- AND THE SAME IS REQUIRED TO BE DELETED. FURTHER IN LIGHT OF THE .ABOVE FACTS THE ACTION OF THE INCOME-TAX OFFICER TAKING 8 % NET PROFIT OF TOTAL TURNOVER OF RS. 16.87.380/- IS WRONG AGAINST THE NE T PROFIT OF 5 % ON SUCH TURNOVER DECLARED UNDER SECTION 44AF OF THE AC T AND THEREFORE, ON EXCESS PROFIT AT 3% AT RS.50,621/-SHOULD BE RED UCED AND DELTED FROM TOTAL INCOME. 7. IN SUPPORT OF HIS CLAIM LD. AR FURTHER RELIED ON VARIOUS DECISIONS WHICH ARE AS FOLLOWS :- 1. CIT VS. TIRUPATI CONSTRUCTION CO. 55 TAXMANN.COM 308 (HC)(GUJ) 2. CIT VS. PRADEEP SHANTILAL PATEL 42 TAXMANN.COM 2 (HC)(GUJ) 3. CIT VS. LOVISH OBEROI VS. 54 TAXMANN.COM 23 (HC) (DEL) 4. ITO VS. SHRI KISHOR C. PARMAR ITA NO.1069/AHD/2 012 (AHD TRIB) 5. SHRI NARPATSINGH A. RATHOD VS. ITO ITA NO.116/AH D/2011 (AHD TRIB) 6. SHRI MANJUBEN CHAMPAKLAL VS. ITO 1155/AHD/2011 ( AHD TRIB) 7. SHRI SANJAY KUMAR BUCHA VS. ITO ITA NO.1897/AHD/ 2011 (AHD TRIB) 8. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 7 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THERE ARE TWO ISSUES BEFORE US WHICH REL ATE TO PROFIT ESTIMATION ON THE UNDISCLOSED CREDITS OF RS.16,87,3 80/- AND APPLICATION OF PEAK THEORY FOR UNDISCLOSED INVESTME NT AT RS.82,690/-. UNDISPUTED FACTS BOTH ON THE PART OF ASSESSEE AND T HE REVENUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JAR I LABOUR INCOME AND HE HAS BEEN REGULARLY FILING ITS RETURN OF INCO ME AS BUSINESS INCOME AND FURTHER THERE IS A BANK ACCOUNT HELD WIT H SBI, SURAT HAVING CREDITS AT RS.16,87,380/- AND THE SAME HAS N OT BEEN DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT OF THE AS SESSEE. 10. WE FIND THAT IN THE CASE OF CIT VS. PRADEEP SHA NTILAL PATEL IN TAX APPEAL NO.899 OF 2013 VIDE ITS ORDER HONBLE GU JARAT HIGH COURT HAS DECIDED A SIMILAR ISSUE BY OBSERVING AS UNDER : - 7. AT THE OUTSET, IT IS REQUIRED TO BE NOTED THAT IN THE BANK ACCOUNT OF THE ASSESSEE THE ACTUAL CASH DEPOSIT WAS OF RS.35,33,414/-. THE LEAR NED CIT(A) ALSO CONFIRMED THE FINDING OF THE ASSESSING OFFICER THAT THE BANK ACCO UNT IN WHICH THE AFORESAID AMOUNT WAS DEPOSITED WAS NOT THE HUF ACCOUNT BUT IT WAS TH E BANK ACCOUNT OF THE ASSESSEE HIMSELF. HOWEVER, BY OBSERVING IN PARAS 4.2 AND 4.3 , THE LEARNED CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS. 1.80 L ACS BY WAY OF BUSINESS INCOME FROM RETAIL TRADE OF THE ASSESSEE. PARAS 4.2 AND 4.3 REA DS THUS: '4.2. I HAVE GONE THROUGH THE ASST. ORDER PASSED BY AO AND THE WRITTEN SUBMISSION FILED BY THE APPELLANT. I HAVE ALSO CONS IDERED THE EVIDENCE PRODUCED BY THE APPELLANT IN HIS PAPER BOOK. I FIND CONSIDERABLE FORCE IN THE CONTENTIONS RAISED BY AO THAT THE TRANSACTIONS RECO RDED IN THE BANK A/C NO. 2831 WITH AMARNATH CO-OP BANK LTD. DO NOT PERTAIN T O HIS HUF, THE CONTEMPORARY EVIDENCE BY WAY OF FILING THE RETURN O F INCOME IN THE STATUS OF HUF AFTER THE TIME ALLOWED U/S. 139(4) OF THE ACT A ND THAT TOO AFTER ISSUANCE OF FIRST SHOW CAUSE NOTICE BY AO, MAKING APPLICATION F OR PAN ON 28.07.2009, NEITHER GETTING REGISTERED UNDER GUJARAT VAT ACT NO R FILING ANY RETURNS UNDER IT, FAILURE TO FURNISH NAME AND ADDRESS OF THE SUPP LIERS IN RESPECT OF IRON SCRAP BUSINESS CLAIMED BY THE APPELLANT - ALL THESE FACTS CLEARLY ESTABLISH THAT CLAIM OF THE BUSINESS OF HUF WAS AN AFTERTHOUGHT AND IT W AS RIGHTLY REJECTED BY AO, ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 8 4.3. NOW, COMING TO THE NEXT CONTENTION OF THE APPE LLANT THAT THE TRANSACTIONS IN THE SAID BANK A/C WERE RELATED TO THE IRON SCRAP BUSINESS, IT WAS REJECTED BY AO SIMPLY FOR THE REASON THAT SALES CANNOT PRECEDE THE PURCHASES BECAUSE SALES (CREDIT) COMES FIRST BEFORE THE PURCHASE (DEBIT) IN THE BANK A/C. HOWEVER, FROM THE PERUSAL OF THE BANK STATEMENT AS PRODUCED IN TH E PAPER BOOK AT PAGE 3-7 THAT THE MODUS OPERAND! ADOPTED BY THE APPELLANT SE EMS TO BE DEPOSITING CASH EITHER A DAY BEFORE OR ON THE SAME DAY AND THE CHEQ UE FOR THE PAYMENT GETTING CLEARED AGAINST SUCH AMOUNT. IT IS ALSO OBSERVED TH AT THE CASH DEPOSITS ARE ALMOST EQUAL TO THE AMOUNTS TO BE PAID/CHEQUES TO B E CLEARED AND THE BANK BALANCE IS A MEAGER AMOUNT NOT EXCEEDING RS.1,000/- (EXCEPT IN COUPLE OF INSTANCES). THE MANNER OF CARRYING OUT BOTH CREDIT AND DEBIT TRANSACTIONS CLEARLY INDICATE THAT PAYMENTS HAVE BEEN MADE TO TH E DIFFERENT PARTIES OUT OF CASH DEPOSITED WHICH IS CLAIMED BY THE APPELLANT FR OM THE SALE PROCEEDS IN THIS VIEW OF THE MATTER, SALES (CREDIT) WILL PRECEDE THE PURCHASES (DEBIT) IN THE BANK ACCOUNT. THE CONTENTION OF THE APPELLANT IS THAT TH E CASH DEPOSITS HAVE BEEN MADE OUT OF SALE PROCEEDS OF RETAIL TRADE AND PURCH ASERS HAVE BEEN PAID OUT OF IT AT A LATER DATE. IT AFTER ALL DEPENDS UPON THE T ERMS AND CONDITIONS OF THE SALE BETWEEN THE TWO PARTIES. THE APPELLANT HAS RIGHTLY CONTENDED THAT THE PAYMENT FOR THE PURCHASE COULD BE AT LATER DATE BUT THE GOO DS CANNOT BE DELIVERED OR SOLD WITHOUT MAKING ITS PURCHASES UNLESS IT IS A FO RWARD TRANSACTION. THE PAYMENT FOR THE PURCHASES MAY PRECEDE THE SALE OR S UBSEQUENT TO IT DEPENDING UPON THE TERMS AND CONDITIONS BETWEEN THE CONCERNED PARTIES. THEREFORE IN THE PRESENT CASE THE CONTENTION OF THE APPELLANT THAT T HE TRANSACTIONS IN THIS BANK A/C PERTAIN TO HIS BUSINESS DESERVES TO BE ACCEPTED BUT STILL THERE WOULD BE A QUESTION OF DETERMINING INCOME IN RESPECT OF THESE TRANSACTIONS. THERE IS NO EVIDENCE ON RECORD EXCEPTS THE STATEMENT OF THE APP ELLANT WITH REGARD TO THE NATURE OF BUSINESS CARRIED ON BY HIM AND THE DETAIL S RELATING TO THE COMPUTATION OF INCOME. THE APPELLANT HAS RILED RETURN OF INCOME ON 13.08.2009 DECLARING INCOME OF RS.1,76,660/-U/S 44AF IN RESPECT OF THE T RANSACTIONS APPEARING IN THIS BANK A/C. IN VIEW OF SUCH STATEMENT MADE BY TH E APPELLANT IN HIS RETURN OF INCOME UNDER DUE VERIFICATION AND THERE BEING NO OT HER EVIDENCE TO DISBELIEVE IT, I AM INCLINED TO ACCEPT AS THE TRANSACTION RELA TING TO RETAIL TRADE. BUT THE DOCUMENTS RELATING TO THIS BUSINESS SUCH AS SALES P URCHASE INVOICES, BOOKS ETC. NEITHER MAINTAINED NOR PRODUCED BY THE APPELLANT, T HE BOOK RESULT DECLARED BY THE APPELLANT CANNOT BE ACCEPTED EVEN THE MOST OF T HE CREDITS (SALES) ARE MATCHING WITH THE DEBITS (PURCHASES) WHICH SHOWS TH AT THE APPELLANT HAS NOT DEPOSITED ENTIRE SALE PROCEEDS IN THIS BANK A/C. TH EREFORE I HAVE NO ALTERNATIVE BUT TO ESTIMATE INCOME BY ESTIMATING THE SALES. THE TOTAL TURNOVER OF THE APPELLANT IN THIS BUSINESS IS ESTIMATED AT RS.36 LA CS AND THE NET INCOME U/S 44AF WOULD WORK OUT TO RS.1.80 LACS. ACCORDINGLY TH E ADDITION OF RS.35,33,414/- IN RESPECT OF CASH DEPOSITED IN THE BANK A/C AS UNDISCLOSED INCOME IS HEREBY RESTRICTED TO RS.1.80 LACS BUT BY WAY OF BUSINESS INCOME FROM RETAIL TRADE OF THE APPELLANT.' ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 9 8. THE AFORESAID FINDING HAS BEEN CONFIRMED BY THE LEARNED ITAT BY PASSING THE IMPUGNED JUDGMENT AND ORDER AND THE ORDER PASSED BY THE LEARNED CIT(A) RESTRICTING THE ADDITION FROM RS.35,33,414/- TO RS.1.80 LACS HA S BEEN CONFIRMED BY THE LEARNED ITAT. 9. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARNED CIT(A) AS WELL AS LEARNED ITAT. THE LEARNED CIT(A) AS WELL AS LEAR NED ITAT HAVE RIGHTLY HELD THAT THE ENTIRE AMOUNT OF RS.35,33,414/- CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME. 10. CONSIDERING THE EVIDENCE ON RECORD AND THE TOTAL TU RNOVER OF THE ASSESSEE WHICH CAME TO BE ESTIMATED! AT RS.36 LACS, THE CIT(A) HAS WORKED OUT THE NET INCOME OF THE ASSESSEE UNDER SECTION 44AF TO RS.1.80 LACS. WE HAV E NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) AS WELL AS JUDGM ENT AND ORDER PASSED BY THE LEARNED ITAT. NO QUESTIONS OF LAW MUCH LESS ANY SUB STANTIAL QUESTIONS OF LAW ARISE II THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL DESER VES TO BE DISMISSED AND IS ACCORDINGLY DISMISSED. 11. WE FIND THAT FOR ASST. YEAR 2009-10 ASSESSEE IS ENGAGED IN RETAIL BUSINESS OF SAREES AS WELL AS JARI LAOUR WOR K HAVING ANNUAL TURNOVER OF LESS THAN RS. 60 LACS AND HAVING OPTION OF COMPUTATION OF PROFITS AND GAIN OF BUSINESS ON PRESUMPTIVE BASIS A S REFERRED IN THE PROVISIONS OF SECTION 44AD AND 44AF OF THE ACT. BEF ORE GOING FURTHER LET US GO THROUGH THE PROVISIONS OF THESE TWO SECTI ONS :- A. SECTION 44AD PRESUMPTIVE COMPUTATION OF PROFIT S FOR TAXATION FOR BUSINESS (PROVISIONS AS APPLICABLE FROM A.Y. 2011-12, THE OLD P ROVISIONS PERTAINING TO SECTION 44AD WILL CONTINUE TO APPLY TILL MARCH 2010) 1] APPLIES TO: ANY ELIGIBLE ASSESSEE ENGAGED IN AN ELIGIBLE BUSINESS. E LIGIBLE ASSESSEE IS DEFINED AS AN INDIVIDUAL, HUF, RESIDENT PARTNERSHIP FIRM, BUT EXCLUDE S AN LLP UNDER THE LLP ACT, 2008 AND ANY ASSESSEE WHO HAS CLAIMED A DEDUCTION UNDER SECT IONS 10A, 10AA, 10B, 10BA OR HEADING C OF CHAPTER VIA (SECTIONS 80I-A, 80-IB, ETC. ). AN ELIGIBLE BUSINESS MEANS ANY BUSINESS OTHER THAN THE BUSINESS OF PLYING, HIRING, OR LEASING OF GOODS CARRIAGE AS GIVEN IN SECTION 44AE AND WHOSE TURNOVER/GROSS RECEIPT IN THE PREVIOUS YEAR DOES NOT EXCEED RS. ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 10 60,00,000 IN A.Y. 2011-12 AND 2012-13 AND RS. 1,00,0 0,000 IN AY 2013-14 OR IN YEAR SUCCEEDING THE AY 2013-14. 2] DEEMED INCOME: 8% OF THE TOTAL TURNOVER OR GROSS RECEIPTS OF THE AS SESSEE ON ACCOUNT OF SUCH BUSINESS OR ANY HIGHER AMOUNT VOLUNTARILY DECLARED BY HIM SHALL BE DEEMED TO BE HIS INCOME CHARGEABLE TO TAX. REFER TO A] CONDITIONS AND B] COMPUTATION BELOW. PROVISIONS OF CHAPTER XVII C RELATING TO ADVANCE PAYM ENT OF TAXES WILL NOT APPLY TO THE ELIGIBLE ASSESSEE IN RESPECT OF ELIGIBLE BUSINESS ONLY. - SEE MORE AT: HTTP://TAXGURU.IN/INCOME-TAX/INCOME-T AX-PROVISIONS-RELATED-TO-PRESUMPTIVE- TAXATION-UNDER-SECTIONS-44AD-44AE-AND-44AF-IN-A-BRIEF. HTML#STHASH.G3BOQQ2A.DPUF E. SECTION 44AF BUSINESS OF RETAIL TRADING OF GOO DS (APPLICABLE TILL A.Y. 2010-11, THIS SECTION WILL BE COME INOPERATIVE FROM AY 2011-12 AND THE RETAIL TRADERS CAN CHOOSE TO BE GOVERNED BY SECTION 44AD F ROM A.Y. 2011-12 WHICH REQUIRES PRESUMPTIVE INCOME AT 8% OF GROSS RECEIPTS/TURNOVER ) 1] APPLIES TO: ANY PERSON ENGAGED IN THE BUSINESS OF RETAIL TRADE IN ANY GOODS OR MERCHANDISE SHALL BE COVERED BY THIS PROVISION. IF HIS TURNOVER FROM THE ABOVE B USINESS DO NOT EXCEED RS. 40 LAKHS. 2] DEEMED INCOME: 5% OF THE TOTAL TURNOVER OF SUCH PERSON OR A HIGHER SUM VOLUNTARILY DECLARED BY HIM SHALL BE DEEMED TO BE HIS INCOME FROM SUCH BUSINESS. REFER TO A] CONDITIONS AND B] COMPUTATION BELOW . COMMON CONDITIONS AND COMPUTATION METHOD: A. CONDITIONS: ALL DEDUCTIONS U/S. 30 TO 38 INCLUDING DEPRECIATION DEEMED TO BE ALLOWED. NO FURTHER DEDUCTION ALLOWED UNDER THOSE SECTIONS. THE WRITTEN DOWN VALUE OF ASSET USED IN THE BUSINES S WILL BE COMPUTED AS IF DEPRECIATION, AS APPLICABLE, WAS ALLOWED. IT WILL BE ASSUMED THAT DISALLOWANCES IF ANY U/SS. 40, 40A AND 43B WERE CONSIDERED BY CALCULATING THE INCOME ESTIMATED IN 2] ABOVE. IN THE CASE OF A FIRM, THE DEDUCTION IN RESPECT OF SALARY AND INTEREST TO PARTNERS U/S. 40(B) WILL BE ALLOWED. ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 11 IN RESPECT OF THIS BUSINESS THE ASSESSEE IS NOT REQ UIRED TO MAINTAIN BOOKS OF ACCOUNT AS PER THE PROVISIONS OF S. 44AA. THE ASSESSEE IS NOT REQUIRED TO GET THE BOOKS OF AC COUNT AUDITED U/S. 44AB IN RESPECT OF THE ABOVE BUSINESS. IF THE ASSESSEE WANTS TO DECLARE LOWER INCOME THAN THE DEEMED PROFITS AS CALCULATED ABOVE, HE WILL HAVE TO MAINTAIN THE BOOKS OF ACCOUNT AS PER S . 44AA AND GET THE ACCOUNTS AUDITED AS PER S. 44AB IRRESPECTIVE OF TURNOVER IF HIS TOTAL INCOME E XCEEDS BASIC EXEMPTION LIMIT. B. COMPUTATION: THE INCOME CALCULATED ABOVE SHALL BE AGGREGATED WIT H INCOME FROM ANY OTHER BUSINESS OR OTHER HEADS OF INCOME UNDER THE OTHER PROVISIONS OF THE I NCOME-TAX ACT. THE BROUGHT FORWARD BUSINESS LOSSES AND OTHER LOSSE S WILL BE DEDUCTED. ALL DEDUCTIONS U/SS. 80CCC TO 80U SHALL BE ALLOWED NOTE: 1. THE PROFIT AND LOSS FROM RELATED BUSINESSES COVE RED BY SECTIONS 44B, 44BB, 44BBA, 44BBB, NAMELY SHIPPING BUSINESS IN CASE OF NON-RESIDENTS, BUSINESS OF EXPLORATION, ETC. OF MINERAL OILS, OPERATION OF AIRCRAFT IN CASE OF NON-RESIDENTS, FOR EIGN COMPANIES ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, ETC., IN CERTAIN TURNKEY PROJECTS ARE NOT COVERED HERE AS THEY HAVE LOWER RELEVANCE AND USAGE. 12. FROM GOING THROUGH THE PROVISIONS OF ABOVE TWO SECTIONS WE FIND THAT A SUM EQUAL TO 8% OF GROSS RECEIPTS CAN B E SHOWN BY ASSESSEE FOR BEING ENGAGED IN THE WORK OF EXHIBITIO N OF WORK CONTRACT (CIVIL CONSTRUCTION WORK) AND AS PER THE PROVISIONS OF SECTION 44AF WHEN ASSESSEE IS ENGAGED IN A RETAIL BUSINESS THEN A SUM EQUAL TO 5% OF THE TOTAL TURNOVER CAN BE SHOWN AS INCOME IF THE TOTAL INCOME AS PER THE BOOKS OF ACCOUNTS IS LESS THAN THE PRESU MPTIVE PROFIT U/S 44AD/44AF OF THE ACT. 13. APPLYING THE PROVISIONS OF THESE SECTIONS TO TH E FACTS OF THE CASE OF ASSSSSEE WE FIND THAT THE ASSESSEE IS HAVIN G SOME INCOME FROM JARI LABOUR HAVING TOTAL RECEIPTS OF RS.4,10,5 60/-. WORK OF JARI ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 12 LABOUR INVOLVES THE WORK PERFORMED BY LABOURERS DOI NG WORK ON SAREES PUTTING JARI MEANING THEREBY THAT THERE IS S OME ELEMENT OF CONTRACTUAL WORK WHICH IS PERFORMED BY THE ASSESSEE ON BEHALF OF THE DEALER WHO GIVES SAREES/RAW MATERIALS TO THE ASSESS EE AND IN TURN ASSESSEE PERFORMS THE CONTRACTUAL WORK WITH THE HEL P OF LABOURERS ON THE SAREES. ON THE OTHER HAND, THE UNDISCLOSED CRED IT OF RS.16,87,380/- HAVE BEEN PLEADED BY THE ASSESSEE TO HAVE BEEN CARRIED ON IN THE COURSE OF BUSINESS OF TRADING IN SAREES AND DRESS MATERIALS AND SUCH TYPE OF BUSINESS COMES WITHIN TH E PURVIEW OF PROVISIONS OF SECTION 44AF RELATING TO PROFITS AND GAINS ON RETAIN BUSINESS. IN TOTAL THE TURNOVER OF THE ASSESSEE AT RS.20,97,940/- (RS.4,10,560/- + 16,87,380/-) HAS BEEN ACCEPTED BY BOTH THE LOWER AUTHORITIES. LD. CIT(A) HAS APPLIED THE NET PROFIT RATE SHOWN BY THE ASSESSEE ON HIS LABOUR CONTRACT INCOME I.E. 47% ON THE TOTAL UNDISCLOSED CREDITS OF RS.16,87,380/-.BY REPLACING THE TWO ADDITIONS MADE BY THE ASSESSING OFFICER INCLUDING ONE RELATED TO PEAK CREDIT. 14. FROM GOING THROUGH OUR ABOVE DISCUSSIONS WE FIN D THAT WHEN SEPARATE PROVISIONS ARE AVAILABLE FOR ESTIMATION OF PROFITS U/S 44AD AND 44AF OF THE ACT THEN IT WILL NOT BE PROPER TO A PPLY EXHORBITANT NET PROFITS RATE ON THE TOTAL UNDISCLOSED CREDIT WHICH TOO HAVE BEEN ACCEPTED BY BOTH THE LOWER AUTHORITIES AS BUSINESS RECEIPTS. ONCE THE BUSINESS HAS BEEN ESTABLISHED AND THERE IS A SPECIA L PROVISIONS FOR A BUSINESSMAN HAVING TURNOVER LESS THAN RS.60 LACS FO R APPLYING NET PROFIT @ 5%/8% OF THE GROSS TURNOVER AS THE CASE MA Y BE THEN WE DO NOT FIND THE ACTION OF LD. CIT(A) TO BE PROPER IN A PPLYING 47% RATE OF PROFIT. HOWEVER, LOOKING TO THE FACTS THAT ASSESSEE HAS NOT DISCLOSED ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 13 THE TURNOVER ROUTED THROUGH STATE BANK OF INDIA, SU RAT IN ITS REGULAR BOOKS OF ACCOUNT THEN IT WILL BE JUSTIFIABLE TO APP LY THE HIGHER OF THE TWO RATES I.E. OUT OF 5% AND 8% WHICH IS 8% IN THIS CASE ON THE TOTAL TURNOVER OF RS.16,87,380/- WHICH WORKS OUT AT 1.34. 990/- AND ALSO SUSTAINING ADDITION OF PEAK CREDIT AT RS.82,690/- B ECAUSE ASSESSEE HAS NOT GIVEN ANY SATISFACTORY EXPLANATION ABOUT TH E SOURCE OF INVESTMENT MADE TOWARDS THIS BUSINESS AND ALSO WE D O NOT FIND ANY BASIS IN THE SUBMISSIONS OF ASSESSEE THAT SOME AMOU NTS WERE DEBITED IN THE CAPITAL ACCOUNT AND HAS BEEN INVESTE D IN THIS ACCOUNT FOR THE VERY REASON THAT THE IMPUGNED BANK ACCOUNT WAS NOT DISCLOSED IN THE RETURN OF INCOME FILED. WE, THEREF ORE, QUASH THE ORDER OF LD. CIT(A) AND SUSTAIN THE ADDITIONS MADE BY THE ASSESSING OFFICER AT RS.2,18,249/-. ACCORDINGLY, THE APPEAL OF ASSESS EE IS PARTLY ALLOWED. 15. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 2/03/2016 MAHATA/- ITA NO. 1873/AHD/2013 ASST. YEAR2009-10 14 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 1. DATE OF DICTATION: 16/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17/02/2016 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: 2/3/16 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: