Sh Ajay Kumar, Rohtak V. ITO, Rohtak

ITA 1943/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7099 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: NARINDER CHHILAR
• Keywords: Unexplained investment; Opportunity of being heard; Peak credit

Judgement Text

ITA NO.1943/D/2010 & 2237/D/2010 1 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.1943/DEL/2010 ASSTT. YEAR: 2007-08 SHRI AJAY KUMAR, VS INCOME TAX OF FICER, 312/22, DEV COLONY, WARD 2, ROHTA K-124001 ROHTAK 124001 ITA NO.2237/DEL/2010 ASSTT. YEAR: 2007-08 INCOME TAX OFFICER, VS SHRI AJAY KUMAR, ROHTAK. R OHTAK. (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI NARINDER CHHILAR RESPONDENT BY: MRS. ANUSHA KHUR ANA, SR. DR O R D E R PER G.D. AGRAWAL, V.P. THESE CROSS APPEALS ARISE OUT OF THE ORDER DATED 9. 3.2010 OF THE CIT(A), ROHTAK FOR ASSTT. YEAR 2007-08. 2. IN THE ASSESSEES APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE A DDITION OF RS.192114/-. 2. THAT THE ASSESSEE HAS BEEN FILING THE CAPITAL A/C S INCE A/Y 2002-03 AND AS ON 31.3.2006, THE ASSESSEE HAD A CAP ITAL OF ITA NO.1943/D/2010 & 2237/D/2010 2 RS.298267, THE CREDIT OF WHICH SHOULD HAVE BEEN GIV EN WHILE COMPUTING PEAK IN S/B A/C NO. 204010100030940 WITH AXIS BANK. 2.1 IN THE REVENUES APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED;_ 1. IN THE FACTS AND UNDER THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION ON ACC OUNT OF UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT TO TH E PEAK AMOUNT WITHOUT THERE BEING ANY FINDING THAT THERE W AS ROTATION OF FUNDS. 2. IN THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) DELETED THE ADDITION OF RS.212674/- IN THE A BSENCE OF ANY DOCUMENTARY EVIDENCE OR EXPLANATION OF THE ASSESSEE . 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION, WHEN THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION REGARDING SOURCES OF BANK DEPOSITS AND IT IS ONUS ON THE PART OF THE ASS ESSEE TO EXPLAIN EACH AND EVERY BANK ENTRY, EVEN IF HE IS NOT MAINTA INING ANY BOOKS OF ACCOUNT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM PURCHASE AND SALE OF OLD VEHICLES. DURING THE ASSE SSMENT PROCEEDINGS, THE AO OBTAINED THE ASSESSEES BANK ACCOUNT FROM AXIX B ANK AND DIRECTED THE ASSESSEE TO EXPLAIN THE AMOUNT DEPOSITED THEREIN. HOWEVER, SINCE THE ASSESSEE FAILED TO EXPLAIN THE DEPOSIT, THE AO TREA TED THE ENTIRE DEPOSIT IN THE BANK ACCOUNT, WHICH WAS RS.23,18,388, AS UNEXPLAINE D INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) REDUCED THE ADDITI ON TO RS.1,92,114 WITH THE FOLLOWING FINDING:- ITA NO.1943/D/2010 & 2237/D/2010 3 THE APPELLANT HAS SUBMITTED THAT THE AO HAS NOTED IN THE ASSESSMENT ORDER AS TO THE BUSINESS ACTIVITY BEING CARRIED OUT BY THE APPELLANT IN PARA 3 OF THE ASSESSMENT ORDER T RADING IN OLD VEHICLES. THE ENTRIES IN THE AXIX BANK NOTED IN DE TAIL BY THE AO HAVE BEEN SUBMITTED TO BE PERTAINING TO THE REGULAR BUSINESS ACTIVITY. THERE IS SERIES OF CASH DEPOSITS AND WIT HDRAWALS. HOWEVER, SINCE THE APPELLANT HAS NOT BEEN MAINTAINI NG BOOKS OF ACCOUNTS AND HAS ALSO NOT EXPLAINED THE SOURCE OF D EPOSITS, THE ENDS OF JUSTICE WOULD BE MET IF ADDITION OF PEAK CR EDIT IS MADE. THE BANK ACCOUNT SHOWS OPENING BALANCE AS ON 1.1.06 AT RS.182.33 AND CLOSING BALANCE AS ON 31.3.2007 AT RS .43.83. THERE IS A SERIES OF TRANSACTION SHOWING WITHDRAWAL S AND DEPOSITS IN THE BANK ACCOUNT; THE HIGHEST AMOUNT ST ANDING IN THE CREDIT IS RS.2,90,855.90 ON 22.1.2007. THE PEAK CR EDIT WORKS OUT TO RS.2,90,673.57 (2,90,855.90 182.33) I.E. 2,90, 674/-. THE APPELLANT HAS SHOWN ITS INCOME ON ESTIMATED BASIS A T RS.98,560/-. THE ADDITION WHICH DESERVES TO BE CONFIRMED AS INCO ME OF THE APPELLANT WORKS OUT TO RS.1,92,114 (2,90,674 98,5 60). ACCORDINGLY, ADDITION TO THE EXTENT OF RS.1,92,114/ - IS CONFIRMED AND THE GROUND OF APPEAL IS PARTLY ALLOWED. 4. BOTH THE PARTIES ARE AGGRIEVED WITH THE ORDER OF THE CIT(A). THE ASSESSEE IS AGGRIEVED WITH THE ADDITION SUSTAINED T O THE EXTENT OF RS.1,92,114/- WHILE THE REVENUE IS AGGRIEVED BECAUS E OF THE RELIEF ALLOWED BY THE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE LD. DR VEHEMENTLY CONTENDED THAT NO EXPLAN ATION WAS FURNISHED BEFORE THE AO DESPITE ADEQUATE OPPORTUNITY HAVING B EEN ALLOWED TO THE ASSESSEE. SHE FURTHER STATED THAT THERE IS NO EVID ENCE OF THE ROTATION OF FUND AND, THEREFORE, THE THEORY OF PEAK CREDIT APPLIED B Y THE CIT(A) IS INCORRECT AND THE AO RIGHTLY TREATED THE ENTIRE DEPOSIT IN TH E BANK ACCOUNT TO BE ITA NO.1943/D/2010 & 2237/D/2010 4 UNEXPLAINED. SHE, THEREFORE, STATED THAT THE ORDER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO MAY BE RESTORED. THE L D. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STATED THAT THE ASSESS EE DERIVES INCOME FROM PETTY BUSINESS OF PURCHASE AND SALE OF OLD VEHICLES . THE ENTIRE RECEIPT DURING THE YEAR UNDER CONSIDERATION FROM THE SALE OF VEHIC LE IS DEPOSITED IN THE BANK ACCOUNT, WHILE THE AMOUNT IS WITHDRAWN FOR MAKING P AYMENT FOR PURCHASE OF VEHICLES. HE REFERRED TO THE COPY OF BANK STATEMEN T WHICH IS AT PAGES 17-19 OF THE ASSESSEES PAPER BOOK AND POINTED OUT THAT T HERE IS FREQUENT DEPOSIT AND WITHDRAWAL IN THE BANK ACCOUNT. HE ALSO STATED THAT THE ASSESSEE IS FURNISHING THE REGULAR RETURN OF INCOME FROM AY 200 2-03 FOR HIS INCOME FROM PURCHASE AND SALE OF OLD VEHICLES AND HIS CAPI TAL BALANCE AT THE BEGINNING OF THE YEAR WAS RS. 2,98,267. THUS, THE PEAK CREDIT OF THE ASSESSEE IS EXPLAINED FROM THE OPENING CAPITAL ITSE LF. HE, THEREFORE, SUBMITTED THAT ADDITION MADE BY THE AO SHOULD BE DE LETED. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENT OF BOT H SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS TRUE THAT THE ASSESSEE DID NOT FURNISH PROPER EXPLANATION FOR THE SOURCE OF CREDIT IN THE BANK ACCOUNT BEFORE THE AO. HOWEVER, THE BANK ACCOUNT WAS DULY AVAILABLE W ITH THE AO. FROM THE PERUSAL OF BANK ACCOUNT, IT IS EVIDENT THAT THERE I S FREQUENT DEPOSIT AS WELL AS WITHDRAWAL IN CASH IN THE BANK ACCOUNT. IN THE ABO VE CIRCUMSTANCES, IN OUR ITA NO.1943/D/2010 & 2237/D/2010 5 OPINION, ENTIRE DEPOSIT, IGNORING THE WITHDRAWAL, C ANNOT BE TREATED TO BE UNEXPLAINED INCOME OF THE ASSESSEE. WE, THEREFORE, AGREE WITH THE LD. CIT(A) THAT IT IS THE PEAK CREDIT IN THE ASSESSEES BANK ACCOUNT WHICH NEEDS TO BE EXPLAINED BY THE ASSESSEE. AS RECORDED BY TH E CIT(A), THE PEAK CREDIT AS ON 22 ND JANUARY, 2007 IS RS. 2,90,855. THE CIT(A) ALLOWED THE CREDIT OF THIS YEARS INCOME TO EXPLAIN THE SOURCE OF THE DEP OSIT OF THE PEAK CREDIT. HOWEVER, IN OUR OPINION, THE ENTIRE INCOME OF THE Y EAR CANNOT BE CONSIDERED TO EXPLAIN THE BANK DEPOSIT BECAUSE PART OF THE INC OME IS CERTAINLY UTILIZED BY THE ASSESSEE FOR HOUSEHOLD PURPOSES. THE ASSESS EE CLAIMED THE OPENING BALANCE OF RS.2,98,267/- IN THE CAPITAL ACCOUNT. H OWEVER, THE COPY OF CAPITAL ACCOUNT FOR THE PERIOD ENDED ON 31 ST MARCH, 2006 IS NOT FURNISHED BEFORE US. IN VIEW OF ABOVE, WE DEEM IT FIT TO SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND RESTORE THE MATER TO THE FILE OF THE AO. WE DIRECT HIM TO CONSIDER THE PEAK CREDIT IN THE ASSESSEES BANK ACCOUNT FOR CONSIDERING THE INVESTMENT BY THE ASSESSEE. THUS, THE ASSESSEE SHO ULD BE ASKED TO EXPLAIN THE PEAK CREDIT. WHILE CONSIDERING THE EXPLANATION IF THE ASSESSEE IS ABLE TO PROVE THAT HE HAD OPENING BALANCE IN THE CAPITAL AC COUNT WHICH WAS NOT INVESTED IN ANY OTHER ASSET, THE SAME IS ALSO TO BE CONSIDERED FOR EXPLAINING THE CREDIT IN THE BANK ACCOUNT. THE CURRENT YEARS INCOME, AFTER REDUCING THE SAME BY THE WITHDRAWAL FOR HOUSEHOLD EXPENDITURE, C AN ONLY BE CONSIDERED ITA NO.1943/D/2010 & 2237/D/2010 6 FOR EXPLAINING THE PEAK CREDIT. THE AO WILL RE-WOR K THE UNEXPLAINED INVESTMENT, IF ANY, KEEPING IN VIEW OUR ABOVE DIREC TIONS. HE IS ALSO DIRECTED TO ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE GIVING EFFECT TO OUR ORDER. 7. IN THE RESULT, BOTH THE APPEALS ARE DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2011. SD/- SD/- ( I.P. BANSAL ) ( G.D. AGRAWAL ) JUDICIAL MEMBER VICE PRESIDENT DT. 29TH DECEMBER, 2011 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DY. REGISTRAR ITA NO.1943/D/2010 & 2237/D/2010 7