Pravin Shrinivas Bharadiya, Ahmednagar V. Income-tax Officer, Ward - 4, Ahmednagar

ITA 220/PUN/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7504 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.220/PUN/2019 / ASSESSMENT YEAR : 2009-10 PRAVIN SHRINIVAS BHARADIYA, A/P. VOMBORI, TAL. RAHURI, AHMEDNAGAR PAN :ABQPB4836N VS. ITO, WARD-4, AHMEDNAGAR (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-2, PUNE ON 15-06-2016 IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2. THERE IS A DELAY OF 845 DAYS IN PRESENTING THE APPEAL B EFORE THE TRIBUNAL. THE ASSESSEE HAS GIVEN REASONS BY MEANS OF AN AFFIDAVIT WHICH LED TO THE BELATED FILING OF APPEAL. I AM SATISFIE D WITH SUCH REASONS. AS SUCH, THE DELAY IS CONDONED AND TH E APPEAL IS ADMITTED FOR HEARING. APPELLANT BY SHRI PRASAD BHANDARI RESPONDENT BY SHRI M.K.VERMA DATE OF HEARING 02-05-2019 DATE OF PRONOUNCEMENT 03-05-2019 ITA NO.220/PUN/2019 PRAVIN SHRINIVAS BHARADIYA 2 3. ON MERITS, THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION OF ADDITION ON THE BASIS OF APPLICATION OF 8% GROSS PROFIT RATE O N BANK DEPOSITS AMOUNTING TO RS.21,94,000/- TREATED BY THE AO AS HIS SALE AND ALSO THE ENHANCEMENT MADE BY THE LD. CIT(A) TO THE TUNE OF RS.4,38,800/-, ESTIMATING 1/5 TH OF RS.21.94 LAKH AS ADDITIONAL CAPITAL REQUIRED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSIN G OFFICER (AO) GOT SOME INFORMATION ABOUT THE ASSESSEE HAVIN G DEPOSITED CASH AMOUNTING TO RS.21,94,000/- IN HIS SAVING B ANK ACCOUNT MAINTAINED WITH NAGAR URBAN COOPERATIVE BANK LTD. VAMBORI BRANCH. ON BEING CALLED UPON TO EXPLAIN THE SOURC E OF THE DEPOSIT, IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT DOING AN Y BUSINESS OF TRADING. THE ASSESSEE FURTHER EXPLAINED, BY MEANS OF CONFIRMATION LETTERS FROM SMALL VENDORS, THAT THEY WERE NOT FINANCIALLY CAPABLE OF PURCHASING GOODS IN CASH AND IT WAS TH E ASSESSEE WHO WAS PURCHASING GOODS ON CREDIT ON THEIR BE HALF, AND RETURNING MONEY TO HIS SUPPLIERS AFTER RECEIVING CASH FR OM THEM. NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS, THE AO HELD THAT THE ASSESSEE WAS ENGAGED IN HIS OWN BUSINESS AS THE PURCHASES WERE MADE BY HIM AS PRINCIPAL. APPLYING 8% G ROSS PROFIT RATE ON SUCH DEPOSITS OF RS.21.94 LAKH, BY TREATING TH E ITA NO.220/PUN/2019 PRAVIN SHRINIVAS BHARADIYA 3 SAME AS ASSESSEES TURNOVER, THE AO WORKED OUT AND MAD E AN ADDITION AT RS.1,75,520/-. THE LD. CIT(A) MADE ENHANCEM ENT BY OPINING THAT 1/5 TH OF THE AMOUNT OF SUCH SALES MADE BY THE ASSESSEE OUTSIDE BOOKS OF ACCOUNT, WAS REQUIRED AS ADD ITIONAL CAPITAL. HE, THEREFORE, ENHANCED THE INCOME BY A FURTHER SUM OF RS.4,38,000/-. THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL. 5. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. IT IS AN ADMITTED POSITION THAT THE ASSESSE E, IN FACT, DEPOSITED A SUM OF RS.21.94 LAKH IN HIS BANK AC COUNT. IN SUPPORT OF THE SOURCE OF SUCH DEPOSITS, THE ASSESSEE SUB MITTED THAT HE WAS PURCHASING GOODS FROM CERTAIN SUPPLIERS FOR ON WARD SUPPLY TO SMALL VENDORS WHO WERE NOT CAPABLE OF PURCHASING GOODS ON CREDIT. AFTER RECEIVING THE AMOUNTS FROM SUCH SM ALL VENDORS, THE ASSESSEE WAS MAKING PAYMENT TO HIS SUPPLIERS . FOR THIS ACT, THE ASSESSEE WAS CHARGING COMMISSION @ 3%. THE FACT THAT THE ASSESSEE PURCHASED GOODS AND THEN PASSED THEM O VER TO SMALL VENDORS HAS BEEN ADMITTED BY SUCH SMALL VENDORS BY MEANS OF CONFIRMATION LETTERS, AS CALLED FOR BY THE AO. PA GE 26 OF THE PAPER BOOK IS A COPY OF BANK ACCOUNT MAINTAINED BY THE ASSESSEE IN WHICH SUCH CASH RECEIVED FROM SMALL VENDORS WAS DEPOSITED. IT CAN BE SEEN THAT THE OPENING BALANCE IN THIS BA NK ITA NO.220/PUN/2019 PRAVIN SHRINIVAS BHARADIYA 4 ACCOUNT WAS RS.1292.49. ON 15-07-2008, A SUM OF RS.1,70,000/- WAS DEPOSITED AND THEREAFTER THERE ARE WITHD RAWALS FOR THE EQUAL AMOUNT THROUGH TRANSFER ENTRIES TO THE SUPPLIERS . SIMILAR PATTERN OF TRANSACTIONS IS PREVAILING THROUGHOUT THE YEA R. AFTER EVERY CASH DEPOSIT, THERE ARE WITHDRAWALS BY JOURNAL ENTRIES. BALANCE IN THE ACCOUNT HAS ALMOST REMAINED SIMI LAR AFTER EVERY TRANSACTION OF SQUARING UP. GIVING EFFECT TO CERTAIN INTEREST INCOME ETC., THE CLOSING BALANCE IN THE BANK ACCOUNT WAS S TILL AT RS.3,703.64. THE NATURE OF TRANSACTIONS RECORDED IN THE BANK ACCOUNT FORTIFIES THE ASSESSEES STAND THAT HE WAS COLLECTING CASH FROM SMALL VENDORS AND THEN PASSING IT OVER TO HIS SUPPLIERS . LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. SIMR ATMAL CHUNILAL MUTHA, ONE OF THE SUPPLIERS OF THE ASSESSEE, IS AVA ILABLE AT PAGE 29 OF THE PAPER BOOK. BLUEPRINT OF TRANSACTIONS IN THE SAID ACCOUNT DECIPHERS THAT FIRSTLY, SALES WERE MADE TO THE ASSESSEE AND THEN AMOUNT WAS RECEIVED FROM ASSESSEE THR OUGH BANKING CHANNEL. A COPY OF SOME OF THE PAGES OF CASH BOOK OF THE ASSESSEE HAS BEEN PLACED AT PAGE 69 ONWARDS OF THE PAPER BOOK. IT IS THUS CLEARLY ESTABLISHED THAT THE ASSESSEE WAS PURCHASING GOODS AND THEN HANDING OVER THE SAME TO SMALL VENDORS. AGAINST EVERY SALE TO SMALL VENDORS, THERE IS A CHARGE ITA NO.220/PUN/2019 PRAVIN SHRINIVAS BHARADIYA 5 OF COMMISSION @ 3%. THE ABOVE NARRATION OF FACTS AMPLY PROVES THAT THE STAND TAKEN BY THE ASSESSEE BEFORE THE AUTH ORITIES BELOW IS NOT DEVOID OF SUBSTANCE. EVEN THOUGH TECHNICALLY, THESE WERE TRANSACTIONS OF PURCHASES BY THE ASSESSEE, BUT SUCH PURCHASES WERE, IN FACT, MADE FOR ONWARD SUPPLY TO THE SMALL VENDORS FROM THE VERY BEGINNING. IN MY CONSIDERED OPINION , THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN NEGATIVING THE ASSESSEES STAND AND TAKING THE ENTIRE AMOUNT OF DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE AS HIS OWN SALE LIABLE TO TAX @8%. AT THIS STAGE, IT IS RELEVANT TO MENTION THAT THE ASSESSEE DID DEC LARE COMMISSION INCOME AT THE RATE OF 3% IN HIS BOOKS OF ACCOUN T, WHICH FACT HAS NOT BEEN DENIED BY THE AO. I, THEREFORE, OVERTURN THE IMPUGNED ORDER AND ORDER TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AS FURTHER ENHANCED IN THE FIRST APPEAL. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD MAY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 03 RD MAY, 2019 ITA NO.220/PUN/2019 PRAVIN SHRINIVAS BHARADIYA 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, PUNE 4. THE PR. CIT-1, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 02-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 02-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *