Mr. Mahadevappa Basappa Edaramani, Koppal V. Assistant Commissioner Of Income Tax, Circle- 1, Bellary

ITA 2480/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8973 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 04-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Rejection of books of accounts; Business income; Source of fund; TDS; FORM 26AS
• Section: 244A; 201; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE ` BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT ITA NO. 2480/ BANG / 2019 ASSESSMENT YEAR : 201 5 - 1 6 SHRI MAHADEVAPPA BASAPPA EDARAMANI, H.NO.7/7/644, NEAR MARUTHI TEMPLE, DEVARAJ COLONY, KOPPAL 583 231. KARNATAKA. PAN: AA DPE 4376L VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. APPELLANT RESPONDENT APPELLANT BY : SHRI R .E. BALASUBRAMAN YAM, CA RESPONDENT BY : SHRI GANESH R. GHALE, STANDING COUNSEL FOR DEPT. SHRI JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 0 2. 0 1 .20 20 D ATE O F PRONOUNCEMENT : 10 . 0 1 .20 20 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 30.9.2019 OF THE CIT(APPEALS), KALABURAGI IN RELATI ON TO ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE IS AN INDIVIDUAL. HE IS A PWD CONTR ACTOR EXECUTING VARIOUS CIVIL WORK. FOR AY 2015-16, THE ASSESSEE F ILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.16,55,650. THE AO COM PLETED THE ASSESSMENT U/S.144 OF THE INCOME TAX ACT, 1961 (THE ACT) I.E., BEST JUDGMENT ASSESSMENT BECAUSE THE ASSESSEE DID NOT RE SPOND TO THE VARIOUS NOTICES ISSUED BY THE AO CALLING FOR VARIOU S DETAILS. IN THE ASSESSMENT SO COMPLETED, THE AO NOTICED THAT THE CO NTRACT RECEIPTS OF THE ITA NO. 2480/BANG/2019 PAGE 2 OF 7 ASSESSEE AS PER FORM 26AS I.E., THE DETAILS OF TAX DEDUCTION AT SOURCE (TDS) THE RECEIPTS OF THE ASSESSEE FROM CONTRACTS W AS RS.3,28,21,904 AS AGAINST THE CONTRACT RECEIPTS OF RS.2,78,98,724 DEC LARED BY THE ASSESSEE IN THE RETURN OF INCOME. THE AO ADDED 10% OF THE D IFFERENCE OF RS.49,23,180 VIZ., A SUM OF RS.4,92,318 AS PROFIT O N CONTRACT RECEIPTS NOT DISCLOSED. THE AO ALSO ADDED A SUM OF RS.1,16,269/ - WHICH WAS INTEREST ON INCOME TAX REFUND RECEIVED BY THE ASSESSEE. THE AO ALSO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS.27,616/- BEING CONTRIBUTION TO CONTRACTORS BENEVOLENT FUND (CBF) O N THE GROUND THAT THE SAID SUM IS NOT ALLOWABLE U/S.36(1) OF THE ACT. TH E AO FOUND THAT THE ASSESSEE HAD DEPOSITED CASH TOTALLING RS.51,34,000/ IN HIS BANK ACCOUNT. SINCE THE SOURCE OF FUNDS REMAINED UNEXPLAINED THE AO ADDED 50% OF THE CASH DEPOSITED IN THE BANK ACCOUNT VIZ., A SUM OF R S.25,67,000/-. THE AO ACCORDING DETERMINED THE TOTAL INCOME OF THE ASSESS EE AS FOLLOWS:- COMPUTATION OF ASSESSED INCOME INCOME RETURNED 165565 0 ADD: ADDITION ON ACCOUNT OF DIFFERENCE IN TURNOVER 492318 ADDITION ON ACCOUNT OF INTEREST RECEIVED U/S 244A 116269 DISALLOWANCE OF EXPENDITURE UNDER THE HEAD CONTRACTORS BENEVOLENT FUND (CBF) 27616 ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN BANK ACCOUNTS 2567000 3203203 ASSESSED INCOME 4858853 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE CIT(APPEALS). THE CIT(A) DELETED THE ADDITI ON MADE ON ACCOUNT OF DISALLOWANCE OF CONTRIBUTION TO CBF OF RS.1,16,269 AND RESTRICTED THE ADDITION ON ACCOUNT OF INTEREST U/S.244A OF THE ACT TO RS.30,603. WITH ITA NO. 2480/BANG/2019 PAGE 3 OF 7 REGARD TO THE ADDITION OF 10% PROFIT BEING DIFFERE NCE IN CONTRACT RECEIPTS DISCLOSED IN FORM 26AS AND AS PER THE BOOKS OF ACCO UNTS OF THE ASSESSEE VIZ., A SUM OF RS.4,92,318 BEING 10% OF RS.49,23,18 0/-, THE PLEA OF THE ASSESSEE BEFORE CIT(A) WAS THAT THE ADDITION SHOULD HAVE BEEN @ 5.39% WHICH WAS THE NET PROFIT DECLARED BY THE ASSESSEE I N THE RETURN OF INCOME ON THE CONTRACT RECEIPTS AS PER THE BOOKS OF ACCOUN TS. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE AO IN HIS REM AND REPORT POINTED OUT SEVERAL DEFECTS/DISCREPANCIES IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT THE BOOKS OF ACCOUN TS OF THE ASSESSEE HAVE TO BE REJECTED AND HE ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVISIONS OF SEC.145(3) O F THE ACT AND ESTIMATED THE INCOME OF THE ASSESSEE @ 8% OF THE CONTRACT REC EIPTS AS PER FORM AS 26 VIZ., A SUM OF RS.3,28,21,904/- WHICH RESULTED I N THE INCOME FROM BUSINESS BEING ESTIMATED AT 26,25,752. INCOME FROM BUSINESS WAS ACCORDINGLY DETERMINED BY THE AO AT RS.26,25,752 AN D THE OTHER ADDITIONS TO INCOME UNDER THE HEAD INCOME FROM BUSINESS WAS D ELETED BY THE CIT(A). 4. AS FAR AS THE ADDITION OF RS.25,45,279, WHICH WA S ADDED BY THE AO AS UNEXPLAINED CASH DEPOSITED IN BANK ACCOUNT, THE ASSESSEE CLAIMED BEFORE CIT(A) THAT THE SOURCE OF FUNDS WAS OUT OF C ASH RECEIVED IN THE COURSE OF BUSINESS WHICH IS DULY REFLECTED IN THE C ASH BOOK OF THE ASSESSEE. THE CIT(A) CALLED FOR A REMAND REPORT FR OM THE AO ON THE CLAIM OF THE ASSESSEE THAT THE SOURCE OF FUNDS FOR DEPOSI T OF CASH TO THE BANK ACCOUNT WAS CASH FROM THE CASH BOOK OF THE ASSESSEE . THE AO AFTER EXAMINATION OF THE CLAIM OF THE ASSESSEE AND BOOKS OF ACCOUNTS OF THE ASSESSEE GAVE A REMAND REPORT DATED 4.1.2019 IN WHI CH IN PARAGRAPH 6 AND THE FIRST SENTENCE OF PARAGRAPH-7 OF THE REMAND REPORT, THE AO ACCEPTED THAT THE SOURCE FOR CASH DEPOSITS MADE BY THE ASSESSEE STANDS EXPLAINED. THE AO, HOWEVER, SUBMITTED IN THE REMAN D REPORT THAT HE HAS ITA NO. 2480/BANG/2019 PAGE 4 OF 7 SOME DOUBTS ABOUT THE GENUINENESS OF CASH BALANCE A S PER BOOKS AND ALSO SUBMITTED THAT HE IS UNABLE TO VOUCH THE VERAC ITY OF BOOKS OF ACCOUNTS PRODUCED BEFORE HIM BY THE ASSESSEE IN THE REMAND P ROCEEDINGS. THE DISCREPANCIES POINTED OUT BY THE AO IN THE REMAND R EPORT IS AS FOLLOWS:- 6. DURING THE COURSE OF REMAND PROCEEDINGS, THE A SSESSEE HAS PRODUCED THE COMPUTERISED BOOKS OF ACCOUNTS LIK E DAY BOOK, CASH BOOK, LEDGERS AND BANK ACCOUNT STATEMEN TS. ON VERIFICATION OF SAID BOOKS OF ACCOUNTS AND BANK STA TEMENTS (INCLUDING THE STATEMENT OF BANK ACCOUNT NO. 211701 00006945, FEDERAL BANK LIMITED KOPPAL), IT IS OBSERVED THAT: A) ALL CASH DEPOSITS MADE IN BANK ACCOUNT NO. 21170100006945, FEDERAL BANK LIMITED, KOPPAL ARE PROPERLY REFLECTED IN THE CASH BOOK MAINTAINED BY T HE ASSESSEE. B) THE CLOSING BALANCE IN SAID ACCOUNT RS.48,111/- HAS BEEN SHOWN UNDER THE HEAD CASH AT BANK (RS,25,45,279/-) IN THE BALANCE SHEET FILED ALONG WITH ROI. 7. IN VIEW OF THE ABOVE, THE SOURCES FOR CASH DEP OSITS MADE BY THE ASSESSEE STANDS EXPLAINED. HOWEVER, I WOULD LIKE TO BRING IT ON RECORD THAT THE BOOKS OF ACCOUNTS CLAIMED TO BE MAINTAINED BY THE ASSESSEE AND PRODUCED FOR VERIFICATION FOUND O DEFECTIVE, NOT RELIABLE AND SUFFERS FROM FOLLOWING MAJOR DEFEC TS: I) CONSIDERING THE MEAGRE OPENING AND CLOSING CASH BALANCE OF RS 41,468/- AND RS.8,222/- RESPECTIVELY, THE ASS ESSEE PURPORTED TO HAVE MAINTAINED DISPROPORTIONATELY HUG E CASH BALANCE DURING THE PERIOD FROM 04/04/2014 (RS. 21,9 7,468) TO 24/02/2015. II) WITH HUGE CASH BALANCE IN BOOKS, THE ASSESSEE KEEP ON DRAWING THE CASH FROM BANK WHICH CREATES DOUBT ABOUT CORRECTNES S CASH BALANCE AS PER BOOKS. FEW OF SUCH INSTANCES ARE PRODUCED AS UNDER: DATE CASH BALANCE CASH WITHDRAWN FROM BANK 25/08/2014 RS.44,40,845/- RS.1,00,000/- 19/09/2014 RS 42,38 87 5 / - R'S.1,70,000/ - ITA NO. 2480/BANG/2019 PAGE 5 OF 7 03/11/2014 RS.45,59.135/- RS 1,00,000/- 02/01/2015 RS.44,76,955/- RS.76,000/- 27/01/2015 RS.39,03,205/- RS.50,000/- III) IT IS ALSO NOTICED FROM THE BOOKS OF ACCOUNT THAT T HE ASSESSEE DID HARDLY MADE ANY PAYMENTS TOWARDS DIRECT EXPENSE S WHICH RESULTED IN HUGE SUNDRY CREDITORS AND PAYABLE S AMOUNTING TO RS.1,96,88,450/- A THE YEAR END. IN VI EW OF THIS, UTILISATION OF CASH FOR PAYMENT TO THESE EXPENSES, FOR MAKING DEPOSITS INTO BANK ACCOUNTS, AND THE BALANCE SHOWN IN THE BOOKS APPEARS TO BE MERE BOOK BALANCE WITHOUT EXIST ENCE OF ANY PHYSICAL CASH.\ IV) THE GENUINENESS OF THE HUGE SUNDRY CREDITORS AN D OTHER PAYABLE COULD NOT BE VERIFIED DUE TO LIMITED SCOPE OF SCRUT INY. THIS RENDERS THE CASH BALANCE AS PER BOOKS OF ACCOUNTS DOUBTFUL FOR THE REASON THAT THE GENUINENESS OF TRADE PAYABLE WERE NOT CROS S VERIFIED AND CONFIRMED. 8. IN VIEW OF THE ABOVE DISCREPANCIES, I HAVE MY OWN D OUBT ABOUT THE GENUINENESS OF CASH BALANCE AS PER BOOKS WHICH THE ASSESSEE EXPLAINED AS SOURCE FOR CASH DEPOSITED INT O BANK ACCOUNT. IN VIEW OF THIS, I AM UNABLE TO VOUCH THE VERACITY OF BOOKS OF ACCOUNTS PRODUCED BEFORE ME FOR VERIFICATI ON. ACCORDINGLY. I REQUEST THE CIT(A) TO DISPOSE OFF TH E CASE ON ITS MERITS. 5. THE CIT(A) ACCEPTED THE REMAND REPORT AND HELD T HAT THE SOURCE OF FUNDS TO THE EXTENT OF RS.25,67,000/- BEING CASH DE POSITS IN THE BANK ACCOUNT REMAINED UNEXPLAINED. THE CIT(A) HOWEVER G AVE BENEFIT OF THE TELESCOPING THE ADDITION SUSTAINED BY HIM WHEREBY 8 % PROFIT RATE WAS APPLIED ON THE TURNOVER OF RS.3.28,21,904/-, WHICH RESULTED IN AN ADDITION OF RS.11,20,584/-. TO THE EXTENT OF RS.11,20,584 WHIC H WAS THE INCREASE IN BUSINESS INCOME OF THE ASSESSEE CONSEQUENT TO REJEC TION OF BOOKS AND ESTIMATION OF PROFITS OF BUSINESS OF THE ASSESSEE, THE CIT(A) GAVE BENEFIT OF SET OFF AGAINST THE ADDITION OF RS.26,57,000/- BEIN G UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT. THUS THE ADDITION MADE B Y THE AO OF RS.26,57,000/- WAS REDUCED TO A SUM OF RS.14,46,416 (RS.26,25,752 ITA NO. 2480/BANG/2019 PAGE 6 OF 7 RS.11,20,584) BY THE CIT(A). AGGRIEVED BY THE ORDE R OF CIT(A) SUSTAINING ADDITION TO THE EXTENT OF RS.14,46,416/- AS UNEXPLA INED CASH DEPOSITS IN THE BANK ACCOUNT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO HAVING ACCEPTED THE CORRECTNESS OF THE CASH BOOK IN PARAGR APH-6 OF HIS REMAND REPORT WAS NOT JUSTIFIED IN EXPRESSING SOME DOUBTS ON THE GENUINENESS OF THE CASH BOOK MAINTAINED BY THE ASSESSEE. HE POINT ED OUT THAT LOW CASH BALANCE DURING THE OPENING AND CLOSING DAYS OF THE FINANCIAL YEAR AND MAINTENANCE OF HUGE BALANCE IN A PARTICULAR PERIOD CANNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE CASH BOOK. SO ALSO TH E FACT THAT CASH WAS WITHDRAWN FROM BANK DESPITE CASH BALANCES BEING AVA ILABLE IN THE CASH BOOK, CANNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE CASH BOOK. IT WAS ALSO POINTED THAT PRESENCE OF SUNDRY CREDITORS AND THE FACT THAT THE ASSESSEE COULD HAVE DISCHARGED SUNDRY CREDITORS INS TEAD OF HAVING CASH IN HAND CANNOT ALSO BE THE BASIS TO DOUBT THE GENUINEN ESS OF THE CASH AVAILABILITY AS PER CASH BOOK. HE THEREFORE SUBMIT TED THAT THE ADDITION OF RS.26,57,000/- DESERVES TO BE DELETED AS THE SOURCE OF FUNDS FOR CASH DEPOSIT IN THE BANK ACCOUNT STANDS DULY EXPLAINED A ND THEREFORE THE ADDITION SUSTAINED BY THE CIT(A) SHOULD BE DELETED. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 7. I HAVE CONSIDERED THE RIVAL SUBMISSION AND AM OF THE VIEW THAT THE ADDITION OF RS.26,57,000/- SUSTAINED BY THE CIT(A) DESERVES TO BE DELETED AND THEREFORE THE QUESTION OF ALLOWING TELESCOPING BENEFIT DOES NOT ARISE FOR CONSIDERATION AT ALL. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR ASSESSEE, THE AO HAVING ACCEPTED THE CORRECTNESS OF THE CASH BOOK IN PARAGRAPH-6 OF HIS REMAND REPORT WAS NOT JUSTIFIED IN EXPRESSING SOME DOUBTS ON THE GENUINENESS OF THE CASH BOOK MAINTAIN ED BY THE ASSESSEE. AS ARGUED BY HIM, THE FACT THAT THERE WAS LOW CASH BALANCE DURING THE ITA NO. 2480/BANG/2019 PAGE 7 OF 7 OPENING AND CLOSING DAYS OF THE FINANCIAL YEAR AND MAINTENANCE OF HUGE BALANCE IN A PARTICULAR PERIOD CANNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE CASH BOOK. SO ALSO THE FACT THAT CASH WAS W ITHDRAWN FROM BANK DESPITE CASH BALANCES BEING AVAILABLE IN THE CASH B OOK, CANNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE CASH BOOK. T HE PRESENCE OF SUNDRY CREDITORS AND THE FACT THAT THE ASSESSEE COULD HAVE DISCHARGED SUNDRY CREDITORS INSTEAD OF HAVING CASH IN HAND CANNOT ALS O BE THE BASIS TO DOUBT THE GENUINENESS OF THE CASH AVAILABILITY AS PER CAS H BOOK. THEREFORE THE ADDITION OF RS.26,57,000/- DESERVES TO BE DELETED A S THE SOURCE OF FUNDS FOR CASH DEPOSIT IN THE BANK ACCOUNT STANDS DULY EXPLAI NED AND THEREFORE THE ADDITION SUSTAINED BY THE CIT(A) DESERVES TO BE DEL ETED AND IS HEREBY DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JANUARY, 2020. ( N.V. VASUDEVAN ) VICE PRESIDENT BANGALORE, DATED, THE 10 TH JANUARY, 2020. / DESAI SMURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.