ITO, New Delhi V. Sh. Subhash Chander Khanna, New Delhi

ITA 2148/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2990 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Unexplained cash credit
• Section: 68; 148; 144

Judgement Text

1 ITA NO. 2148/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2148/DEL/201 4 ( A.Y 2005-06) ITO WARD-33(4) NEW DELHI (APPELLANT) VS SUBHASH CHANDER KHANNA H-352, NEW RAJINDER NAGAR NEW DELHI AIRPK2900N (RESPONDENT) APPELLANT BY SH. KAUSHLENDRA TIWARI, SR. DR RESPONDENT BY SH. ASHISH CHADHA, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER DATED 15/01/2014 PASSED BY CIT(A)-XXVI, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE CIT(A) HAS ERRED IN DELETING ALL THE ADDITI ONS MERELY ON RELYING UPON OF THE AFFIDAVIT FILED BY THE ASSESSEE WITHOUT APPR ECIATING THE FACT THAT IN ABSENCE OF THE VERIFYING DOCUMENTS IN THE FORM OF B OOKS OF ACCOUNTS, THE FACTS STATED VIDE AFFIDAVIT HAVE NO LEGAL SANCTITY AND AR E LIABLE TO BE REJECTED. 2. THE CIT(A) HAS ERRED IN DELETING ALL THE ADDITIO NS WITHOUT APPRECIATING THE FACT THAT DURING ASSESSMENT PROCEEDINGS DESPITE BEI NG GIVEN 9 OPPORTUNITIES, THE ASSESSEE COULD NOT FILE COMPLETE BOOKS OF ACCOU NTS/SUBMISSIONS AND DATE OF HEARING 07.03.2018 DATE OF PRONOUNCEMENT 14.03.2018 2 ITA NO. 2148/DEL/2014 DETAILS W.R.T ITS CLAIM, IN VIEW OF WHICH AO HAS CO RRECTLY MADE ADDITIONS ON ESTIMATION BASIS AND ADDED CASH CREDITS IN BANK ACC OUNT U/S 68 OF THE IT ACT. 3. THE CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.5,00,000/- MADE ON THE ESTIMATION BA SIS WITHOUT APPRECIATING THE FACT THAT IN THE ABSEN CE OF COMPLETED BOOKS OF ACCOUNTS/SUBMISSIONS AND DETAILS AND OTHER DOCUMENTARY EVIDENCES, ASSESSEE CANNOT BE ALLOWED ANY OF HIS CL AIM AND AO IS FREE TO MAKE ADDITION ON ESTIMATION BASIS. 4. THE CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.5,00,000/- MADE ON THE ESTIMATION BASIS IN THE FIVE PROPRIETARY CONCERNS OF THE ASSESSEE ( I.E 1 LAC IN EACH PROPRIETARY CONCERN) WITHOUT APPRECIATING T HE FACT THAT IN THE ABSENCE OF COMPLETED BOOKS OF ACCOUNTS/SUBMISSIONS AND DETA ILS AND OTHER DOCUMENTARY EVIDENCES, ASSESSEE CANNOT BE ALLOWED A NY OF HIS CLAIM AND AO IS FREE TO MAKE ADDITION ON ESTIMATION BASIS. 5. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,19,27,196/- OUT OF THE ADDITION OF RS.1,52,10,935/- MADE U/S 58 OF THE IT ACT ON ACCOUNT OF CASH CREDITS WITHOUT APPRECIATING THE FACT THAT IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNT/SUBMISSIONS AND DETAILS AND OTHER DOCUMENTARY EVIDENCES ONUS OF THE PROVING SOURCE THE CASH CREDITS AND REL ATION THEROF WITH THE BUSINESS ,HAS NOT BEEN DISCHARGED BY THE AO. 3. THE ASSESSING OFFICER ON THE BASIS OF REPORT FRO M THE INVESTIGATION WING OF THE DEPARTMENT, CAME TO KNOW THAT THE ASSESSEE H AS NOT DISCLOSED INCOME DERIVED FROM HIS FOLLOWING PROPRIETARY BUSINESS CON CERNS WHERE IN THE AGGREGATE BANK DEPOSITS/CREDITS ARE RS.1,52,10,935/ -. SR. NO. NAME OF THE CONCERN (M/S) BANKER A/C NO. TOTAL CREDITS APPEARING DURING THE PERIOD RELEVANT TO THE A.Y 2005-06 (RS.) 1 TIRUPATI TEXTILES PNB, NEW DELHI 3070021100043881 28,35,524 2 SHREE BALAJEE FABRICS -DO- 3075002100044154 31,41,164 3 BHAGWATI TEXTILES -DO- 3075002102003300 9,51,164 3 ITA NO. 2148/DEL/2014 4 SARASWATI TEXTILES -DO- 3075002100044604 33,87,521 5 SHREE MAHALAXMI FABRICS -DO- 3075008302003060 48,95,445 TOTAL - 1,52,10,935 THEREFORE, THE ASSESSING OFFICER REOPENED THE ASSES SMENT AFTER RECORDING REASONS ON 23.03.2012 AND TAKING APPROVAL OF THE AD DL. CIT. THE NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 26.03 .2012. IN RESPONSE TO THE NOTICE U/S 148 AND OTHER STATUTORY NOTICE, THE ASSE SSEE, FILED LETTER AND AFFIDAVIT DATED 26.11.2012. THE ASSESSING OFFICER O BSERVED THAT THE ASSESSEE FAILED TO AVAIL THE OPPORTUNITIES OF BEING HEARD AN D DID NOT EXPLAINED THE CREDITS APPEARING IN THE ABOVE MENTIONED BANK ACCOU NTS. THUS, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 144 ON THE BAS IS OF INFORMATION AVAILABLE ON THE RECORD. THE ASSESSING OFFICER TOOK THE AGGRE GATE BANK DEPOSITS/CREDITS OF RS.1,52,10,935/- IN ADDITION TO WORKING OUT BUSI NESS INCOME OF RS. 1.00 LAKH PER CONCERN OF THE ABOVE MENTIONED UNDISCLOSED 5 BUSINESS CONCERNS. FURTHER, THE ASSESSING OFFICER ALSO ENHANCED THE BU SINESS INCOME OF DISCLOSED CONCERN NAMELY, M/S TUSHAR FABRICS BY RS. 5.00 LAKH S. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL. 5. THE LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED I N DELETING ALL THE ADDITIONS MERELY ON RELYING UPON THE AFFIDAVIT FILE D BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT IN ABSENCE OF THE VERIFY ING DOCUMENTS IN THE FORM OF BOOKS OF ACCOUNTS, THE FACTS STATED VIDE AFFIDAVIT HAVE NO LEGAL SANCTITY AND ARE LIABLE TO BE REJECTED. THE CIT(A) HAS ERRED IN DEL ETING ALL THE ADDITIONS WITHOUT APPRECIATING THE FACT THAT DURING ASSESSMEN T PROCEEDINGS DESPITE BEING GIVEN 9 OPPORTUNITIES, THE ASSESSEE COULD NOT FILE COMPLETE BOOKS OF 4 ITA NO. 2148/DEL/2014 ACCOUNTS/SUBMISSIONS AND DETAILS WITH RESPECT TO IT S CLAIM, IN VIEW OF WHICH ASSESSING OFFICER CORRECTLY MADE ADDITIONS ON ESTIM ATION BASIS AND ADDED CASH CREDITS IN BANK ACCOUNT U/S 68 OF THE INCOME TAX AC T. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADD ITION OF RS.5,00,000/- MADE ON THE ESTIMATION BA SIS WITHOUT APPRECIATING THE FACT THAT IN THE ABSEN CE OF COMPLETE BOOKS OF ACCOUNTS/SUBMISSIONS AND DETAILS AND OTHER DOCUMENTARY EVIDENCES, THE CLAIM OF THE ASSESSEE CANNOT BE ALLO WED AND ASSESSING OFFICER RIGHTLY MADE ADDITION ON ESTIMATION BASIS. THE CIT( A) ERRED IN DELETING THE ADDITION OF RS. 1,19,27,196/- OUT OF THE ADDITION O F RS.1,52,10,935/- MADE U/S 58 OF THE INCOME TAX ACT ON ACCOUNT OF CASH CREDITS WITHOUT APPRECIATING THE FACT THAT IN THE ABSENCE OF COMPLETE BOOKS OF ACCOU NT/SUBMISSIONS AND DETAILS AND OTHER DOCUMENTARY EVIDENCES ONUS OF THE PROVING SOURCE THE CASH CREDITS AND RELATION THEREOF WITH THE BUSINESS , WHICH WAS NOT DISCHARGED BY THE ASSESSEE. 6. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) A ND FURTHER SUBMITTED THAT FOR ASSESSMENT YEAR 2005-06, THE TRIBUNAL HAS ALREA DY TAKEN A VIEW AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. (SUBHASH CHAND ER KHANNA VS. ITO ITA NO.1819/DEL/2014 ORDER DATED 16/02/2016). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN THE ASSESSEES OWN CASE HA S DECIDED THE ISSUE CONTESTED HEREIN. THIS TRIBUNAL VIDE ORDER DATED 16 .12.2016 IN ITA NO. 1819/DEL/2014, HAS DECIDED THE ISSUE PARTLY IN FAVO UR OF THE ASSESSEE, AND AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCE S OF THE CASE, HAS RESTRICTED THE ADDITION TO RS.18,25,312/-, AS AGAINST RS.32,83 ,739/- SUSTAINED BY THE CIT(A). THE FINDINGS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDER OF THE LD. CIT(A). WE FIND THAT THE AO HAS MA DE THE ADDITION OF RS.1,52,10,935/- TO THE RETURNED INCOME OF THE ASSE SSEE, HOLDING THE COMPLETE CREDITS APPEARING IN THE BANK ACCOUNT OF T HE ASSESSEE ARE 5 ITA NO. 2148/DEL/2014 UNEXPLAINED CREDITS U/S 68 OF THE INCOME TAX ACT, 1 961. HOWEVER, THE LD. CIT(A), HAS RESTRICTED THE ADDITION MADE BY THE AO TO RS.32,83,739/- BY CONCLUDING THAT MOST OF THE CREDITS APPEARING IN TH E BANK ACCOUNT WERE TRANSFER ENTRIES BY CLEARING AND VERY FEW WERE IN C ASH, AND THUS, THE ENTIRE DEPOSITS COULD NOT HAVE BEEN HELD AS INCOME OF THE ASSESSEE. WE FURTHER FIND THAT LD. CIT(A) HAS HELD THAT SINCE THE ASSESS EE WAS HAVING CLOSING STOCK AND DEBTORS RECORDED IN THE BOOKS OF ACCOUNTS , THE ASSESSEE WOULD ALSO BE HAVING CLOSING STOCK AND DEBTORS IN RESPECT OF THE ALLEGED UNACCOUNTED BUSINESS, WHOSE TURNOVER TO THE TUNE OF RS.1,52,10,935/- WAS DEPOSITED IN THE BANK ACCOUNT. HE COMPUTED SUCH INVESTMENT AT RS. 31,60,480/-. WE FURTHER NOTE THAT LD. CIT(A) HAS FU RTHER SUSTAINED THE ADDITION OF RS.1,23,259/- ALLEGING THAT THE INCREAS E IN THE BALANCE OF THE BANK ACCOUNTS ALSO REPRESENTS THE INCOME OF THE ASS ESSEE, AND THEREFORE, THE TOTAL ADDITION SUSTAINED BY THE LD. CIT(A) WAS FOR RS.32,83,739/-. THE LD. CIT(A) FURTHER BY APPLYING GROSS PROFIT RATE OF @20.78%, HAS ESTIMATED THE INCOME AT RS.31,60,480/-. WE FURTHER NOTE THAT LD. CIT(A) HAS MADE ADDITION TAKING INTO CONSIDERATION INVESTMENT THE S TOCK, DEBTORS AND BANK BALANCES AND APPLYING A GROSS PROFIT RATE OF @20.78 %. AS STATED HEREINABOVE THE GP RATE MENTIONED BY LD. CIT(A), HI MSELF IS @12% IN PARA 6 ON PAGE 13-14 OF THE IMPUGNED ORDER. THEREFORE, I N OUR OPINION, THE GP RATE TO BE APPLIED @12% ON TURNOVER OF RS.152,10,93 5/- WHICH COMES TO RS.18,25,313/-. HENCE, WE RESTRICT THE ADDITION AT RS.18,25,313/- ONLY AS AGAINST RS.32,83,739/- SUSTAINED BY THE LD. CIT(A) AND ACCORDINGLY, THE ASSESSEE GETS PART RELIEF ON THIS GROUND. IN OUR CO NSIDERED OPINION, FURTHER NO ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF IN VESTMENT IN STOCK DEBTORS AND BANK BALANCE ETC. AS THIS IS NOT BE FIR ST YEAR OF SUCH TRANSACTIONS. AS SIMILAR BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS H AVE BEEN CARRIED IN EARLIER YEARS AND SUCH INVESTMENTS GET C OVERED BY THE ADDITION MADE IN PRECEDING ASSESSMENT YEAR 2004-05.' SINCE THE APPEAL FILED BY THE ASSESSEE HAS ALREADY BEEN DECIDED AND THE ISSUES 6 ITA NO. 2148/DEL/2014 ARE PARTLY ALLOWED, THEREFORE, THE PRESENT APPEAL F ILED BY THE REVENUE BECOMES INFRUCTUOUS AND HENCE DISMISSED. 9. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 14/03/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 2148/DEL/2014 DATE 1. DRAFT DICTATED ON 06/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 07/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 14.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 1 4 .03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.