Nikhil Jatinkumar Lapsiwala, Surat V. Income Tax Officer, Wd.1(3)(8), Surat

ITA 219/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1681 (ITAT-SURAT)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 13-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Peak credit; Condonation of delay; Set aside
• Section: 69; 148; 234B; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 219/Srt/2021 (Assessment Year: 2012-13) (Physical hearing) Nikhil Jatinkumar Lapsiwala, 10, Anuradha Apartment, Radhakrishna Society-3, Palanpur Road, Surat-395009. PAN No. AETPL 2932 D Vs. I.T.O. Ward- 1(3)(8), Aayakar Bhawan, Majura Gate, Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri P M Jagasheth, CA Department represented by Shri Vinod Kumar, Sr.DR Date of hearing 14/09/2022 Date of pronouncement 16/09/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC) dated 02/09/2021 for the Assessment year 2012-13. The assessee has raised following grounds of appeal: “1. The Assessment Order of the Ld. AO is arbitrary, illegal, excessive perverse and bad in law. 2. The notice u/s.148 of the Act is bad and. illegal as the reason or re- opening was that the assessee had made time deposit amounting to Rs.54,05,001/- and cash deposit of Rs. 12,95,250/- but the reason is wrong as actual time deposit was Rs. 13,93,000/-, so it shows that the reopening was done without verifying the data and only for making fishing inquiries. ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 2 3. The Notice u/s.148 is bad, illegal as the sanctioned given by the Pr. CIT-1 was of mechanical sanctioned and without following the procedures (SOP) prescribed by CBDT on dtd.10.01.2018. 4. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax. (Appeals) has erred in confirming the action of the assessing officer in re-opening the assessment u/s.147 of the Income Tax Act, 1961 and notice issued u/s.148 of the Income Tax Act, 1961. 5. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in making addition of Rs.14,46,181/- on account of cash deposits of Rs. 12,95,250/- and Cheque Deposits of Rs. 1,50,931 /- treated as alleged unexplained investment u/s.69 of the Income Tax Act, 1961. In fact, these are the business receipts which are already offered for taxation u/s.44AD of the Income Tax Act, 1961. 6. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer that the Ld. AO has erred in taking same receipts twice, the AO has taxed the Income of Rs. 1,74,40/- on the turnover of Rs.9,79,130/-. The Ld. AO has added the same income twice without any evidence and without considering the nature of business of the assessee. The assessee has also withdrawn the cash of Rs. 13,90,000/- form the bank account which was not taken into the consideration by the AO. 7. On the facts and in the circumstances of the case as well as law on the subject, the Ld. AO has erred in issuing a demand notice under section 156 of the Act demanding a sum of Rs9,52,980/-which included interest of Rs.3,01,506/- under section 234B of the Act. 8. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has not provided the ample opportunities to hear the case, hence the case may please be allowed and set aside to the CIT(A), Surat.] ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 3 9. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 10. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal. 2. Perusal of record shows that the impugned order was passed by the ld. NFAC/CIT(A) on 02/09/2021 and the assessee was required to file appeal on or before 01/11/2021. However, this appeal was filed before the Tribunal on 18/11/2021, thus, there was delay of 17 days in filing the present appeal. 3. The ld. Authorised Representative (ld. AR) of the assessee submits that the delay in filing of the appeal was occurred due to the Covid-19 pandemic period prevailing at the relevant time and the assessee was prevented in filing appeal before the Tribunal. There is no intentional delay in filing the appeal, rather it occurred due to the situation, which was out of control of the assessee. The ld AR for the assessee submits that the Hon’ble Supreme Court in Suo Moto Writ Petition No. (C) No. 3 of 2022 has directed to condone the delay between the period of 15.03.2020 to 28.02.2022 and further allowed 90 days’ time from 01.03.2022 in filing appeal before various forums. The assessee has filed its appeal within the grace period allowed by Apex Court. The ld AR for the assessee prayed to condone the delay. ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 4 4. On the other hand, the ld. Senior departmental representative (Sr-DR) for the Revenue submits that the Bench may take decision in accordance with law. 5. I have considered the rival submissions of both the parties on the plea of condonation of delay and find that the assessee has filed its appeal within the grace period allowed by Hon’ble Apex Court in Suo Moto Writ Petition No. (C) No. 3 of 2022, vide order dated 10.01.2022. Therefore, respectfully following the directions of the Hon’ble Apex Court, the delay in filing the present appeal is condoned. 6. Brief facts of the case are that no return of income was filed by the assessee for A.Y. 2012-13. The Assessing Officer was having information that the assessee has made cash deposit of Rs. 12,95,250/- in his bank account with Textile Co-Op Bank. The case of assessee was reopened with the prior approval of competent authorities. Notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) dated 30/3/2018 was issued to the assessee. The Assessing Officer noted that despite service of notice under Section 148, the assessee failed to file his return of income for the A.Y. 2011-12. The Assessing officer after serving statutory notices under Section ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 5 142(1) & 143(2) of the Act proceeded for assessment. The Assessing Officer noted that the assessee filed return of income on 23/11/2019 declaring income of Rs. 1,74,543/-. Copy of reasons recorded were provided to the assessee. In response to show cause notice, the assessee stated that he is engaged in the business of “Lapsi” as his family business. The assessee has deposited cash of sale consideration in his bank account. The submission of assessee was not accepted by the Assessing Officer. The Assessing Officer noted that the assessee has not furnished cash book and details of sales and purchase of goods. The assessee failed to establish the business in absence of any documentary evidence, therefore, an amount of Rs. 14,46,181/- was added as an unexplained investment under Section 69 while passing the assessment order on 03/12/2019. 7. On appeal before the ld. CIT(A), the addition was confirmed. The ld. CIT(A) while confirming the additions held that during the appellate stage, the assessee failed to justify the cash deposit during the relevant assessment period. The assessee has not submitted any documentary evidence regarding business of Lapsi. No books of account were furnished. The assessee has not proved the genuineness of source of cash deposits. ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 6 Further aggrieved, the assessee has filed the present appeal before this Tribunal. 8. I have heard the submissions of learned authorised representative (ld AR) of the assessee and the learned Senior Departmental Representative (Sr.DR) for the Revenue. At the outset of hearing, the ld. AR of the assessee submits that he is not pressing grounds of appeal relating to validity of reopening. The ld. Sr. DR for revenue has no objection in not pressing the grounds relating to validity of reopening. Therefore, considering the contention of ld. AR of the assessee, grounds of appeal related to validity of reopening is dismissed as not pressed. 9. On the merit of addition, the ld. AR of the assessee submits that the assessee is a salaried person and was also doing a small business of “Lapsi” at a very small level as a retailer. The assessee filed his return under Section 44AD of the Act and offered a taxable income of Rs. 1,74,543/-. The Assessing Officer made addition of entire cash deposit as well as cheque deposits. The assessee before the lower authorities has explained the source of cash as well as cheque received from customers on sale of lapsi. The assessee was doing a very small business and was not liable to ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 7 maintain books of account. The ld AR for the assessee submits that surname of the assessee is also derived from their traditional business. The profit margin in the trade of assessee is very low ranging from 4 to 6% of the turnover. The assessee has already offered the income from such business in the return of income filed in response to the notice under section 148 and no addition is liable to be sustained. 10. In alternative submissions the ld. AR for the assessee submits that to avoid the protracted litigation, a reasonable estimation of the income form such cash deposits may be made. To support his submission, the ld. AR has relied on the following case laws: (i) CIT-VII Vs Pradeep Shantilal Patel (2014) 42 taxmann.com 2 (Guj) (ii) Smt. Krushangi Keyur Bhagat Vs ITO, ITA No. 1434/Ahd/2013 dated 26/09/2018 (iii) Mukesh Gamanbhai Patel Vs ITO ITA No. 1636/Ahd/2013 dated 16/10/2018 (iv) Jagdishbhai Savjibhai Patel Vs ITO ITA No. 67 & 68/srt/2019 dated 27/07/2022. 11. On the other hand, the ld. Sr. DR for the revenue has vehemently supported the orders of the lower authorities. The ld Sr DR for the revenue further submits that even if it is considered that the assessee was doing some business as claimed, the entire deposits in the bank account is net profit of the assessee. ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 8 12. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I find that the during the assessment, the Assessing officer made addition of aggregate of cash as well as cheque deposit in the bank account of assessee. The ld. CIT(A), confirmed the additions by taking a view that assessee has not filed any evidence to substantiate that assessee was doing business of “Lapsi”. Before us, the ld. AR of the assessee vehemently submitted that assessee was doing a business of ‘Lapsi’ on very small scale. The family of assessee is in this traditional business, inherited from his predecessors and that the deposits made in the bank accounts are part of sale proceed or transaction of family business of Lapsi. I find that pattern of deposits in bank account shows that there are certain cheque deposits, deposits in cash and regular withdrawal of amount. The lower authorities have confirmed the entire aggregate of deposits and have not considered the withdrawal. I am of the view that entire amount of deposits cannot be considered for addition. The frequent deposit and withdrawal shows that the bank account in dispute was used for unreported bossiness transactions. As recorded above the ld AR for the assessee before us claimed that the assessee was doing a small traditional business of lapsi, which the assessee inherited and the surname of the assessee is also derived from their traditional business. Thus, considering the ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 9 submissions of the ld AR for the assessee, I find merit in his submission that the assessee was doing some business activity, though it was not disclosed to the department. In my view, taxing the entire credit is not justified, thus, it would be justified if only profit element in such business activities from where the assessee generated the credit found in the bank account. Therefore, 7% of total addition is considered as profit from such business activities. Accordingly, the Assessing Officer is directed to consider 7% of total deposit of Rs. 14,46,181/-. 13. The Hon’ble Gujarat High Court in CIT Vs Pradeep Shantilal Patel (supra) held that where assessee admitted that cash deposit pertains to his retail business but details and nature of business were not forthcoming from record, considering the total turnover of assessee, net income had to be determined under Section 44AF. Further the Coordinate Bench of this Tribunal in Smt. Krushangi Keyur Bhagat Vs ITO (supra) almost on similar set of facts wherein cash credit of Rs. 183207/- was found credited in the bank account of that assessee, the assessee took plea before lower authorities that transaction in bank account pertained to her textile business. The assessee claimed that only peak credit appearing in the bank account should be considered which was not accepted and the amount after reducing the cheque deposits, remaining was treated as unexplained. However, on appeal ITA No.219/Srt/2021 Nikhil Jatinkumar Lapsiwala Vs ITO 10 before Tribunal, the plea of assessee that amount credited in the bank was a part of textile business and only profit element @ 5% of total deposit including of credit by way of cheque was considered as a profit element on the total deposits. Considering the fact of the case and the legal view taken by Hon’ble High Court as well as by Coordinate Bench of this Tribunal, I direct the Assessing Officer to restrict the addition @ 7% of credit in the bank account of assessee. In the result, ground No. 2, 5 and 6 of appeal raised by assessee are allowed. 14. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 16 th September, 2022 in open court and the result was placed on notice Board. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 16/09/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat