Shri Vishwanath Ambalal Mehta, Bharuch V. The Income Tax Officer, Ward-1, Bharuch

ITA 2771/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6355 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 01-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Peak credit; Initiation of penalty proceedings
• Section: 271(1)(c); 44AD; 68

Judgement Text

PAGE 1 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2771/AHD/2015 / ASSESSMENT YEAR: 2010-11 SHRI VISHWNATH AMBALAL MEHTA, C/O M/S. DUTT CHEMICAL INDUSTRIES, SHED NO.125, NEAR MADA NAGAR GIDC ESTATE, BHARUCH -392 015 PAN: ADFPM 4523 J V. INCOME TAX OFFICER, WARD-1, BHARUCH APPELLANT /RESPONDENT ASSESSEE BY SHRI RASESH SHAH, CA REVENUE BY SHRI R. P. RASTOGI, SR. D.R. DATE OF HEARING 16.07.2019 DATE OF PRONOUNCEMENT 19.07.2019 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3; VADODARA (IN SHORT THE CIT(A)) DATED10.07.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. GROUND NO.1 STATES THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 17,79,960 OF CASH DEPOSITS PERTAINING TO DEBTORS OF THE FIRM IN SAVING BANK ACCOUNT OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 3. SUCCINCT FACTS ARE THAT THE ASSESSEE HAS FILED A BANK STATEMENT OF SBI BRANCH,IN WHICH CASH DEPOSITS OF RS.17,79,960 WERE DEPOSITED AS PER ITS DETAILS. IT WAS EXPLAINED THAT THE ASSESSEE IS A PARTNER IN M/S. DUTT CHEMICAL INDUSTRIES ALONG WITH HIS BROTHER SHRI YAGNESH AMBALAL MEHTA. PAGE 2 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 FURTHER, HIS BROTHER IS ALSO PARTNER OF M/S. NUTAN SALE CORPORATION. IT WAS SUBMITTED THAT M/S. DUTT CHEMICAL INDUSTRIES AND M/S. NUTAN SALES CORPORATION DOES NOT HAVE CBS FACILITIES AND THEREFORE, PARTIES NAMELY SHRI SANGAM SAHNI, SHRI KANUBHAI PARMAR, SHRI HEMANT JADAV AND SHRI MAHAVEER R ZALA, WHO ARE ENGAGED IN PAINTING AND SMALL CONTRACTOR AT VERY MICRO LEVEL, HAVE PURCHASED MATERIAL FROM THE ABOVE FIRMS, DEPOSITED CASH IN THE SAVING BANK ACCOUNT OF THE ASSESSEE AS THE ASSESSEE WAS HAVING CBS FACILITY IN HIS BANK ACCOUNT. THE ASSESSEE HAS ALSO FILED CONFIRMATION AND AFFIDAVITS FROM THE ABOVE FOUR PERSONS IN SUPPORT OF HIS CLAIM. HOWEVER, THE AO WAS NOT SATISFIED WITH EXPLANATION AND AFTER ANALYZING THE QUANTITY OF SALES MADE AND BOOKS OF ACCOUNTS OF M/S. DUTT CHEMICAL INDUSTRIES AND M/S. NUTAN SALES CORPORATION OBSERVED THAT THE EXPLANATION IS AFTERTHOUGHT. HENCE, THE AO TREATED THE CASH DEPOSITS OF RS. 17,79,960 AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). HOWEVER, CIT (A) OBSERVED THAT THE SUBMISSION OF THE ASSESSEE IS NOT TENABLE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED TO PRODUCE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS OF ABOVE CONCERNS BUT SAME WERE NOT PRODUCED THOUGH THE ASSESSEE HAS SHOWN LEDGER ACCOUNT OF ABOVE CONCERNS, THEREFORE, THE CIT (A) OBSERVED THAT THIS IS NOT SUFFICIENT. THE CIT (A) OBSERVED THAT THE CLAIM OF THE APPELLANT THAT THE MATERIAL WAS PURCHASED BY THE FOUR PERSONS BUT UNLESS SAME IS ESTABLISHED BY BILLS AND VOUCHERS. FURTHER THE ABOVE FOUR PERSON ARE NOT ASSESSED TO TAX. HENCE, THE CIT (A) UPHELD THE ACTION OF THE AO. PAGE 3 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CUSTOMERS OF M/S. DUTT CHEMICAL INDUSTRIES AND M/S. NUTAN SALES CORPORATION HAVE ASKED FOR THE FACILITY OF DEPOSIT OF PAYMENT IN THE BANK ACCOUNT OF RESPECTIVE CONCERNS. HOWEVER, THE BANK ACCOUNT OF BOTH THE CONCERNS HAD NO FACILITY OF ANYWHERE BANKING, BUT THE SAVING BANK ACCOUNT WITH SBI OF THE ASSESSEE WAS HAVING ANYWHERE FACILITY. THEREFORE, HE GAVE HIS BANK ACCOUNT NUMBER TO THOSE CUSTOMERS FOR USE OF SUCH FACILITY. THEREFORE, THE CUSTOMERS OF BOTH THE CONCERNS HAVE DEPOSITED CASH IN HIS SAVING BANK ACCOUNT. THE ASSESSEE USED TO WITHDRAW CASH FOR HIS BANK ACCOUNT AND PAYING TO BOTH THE CONCERNS. ON RECEIPTS OF CASH, HIS ACCOUNT WAS DEBITED AND AMOUNT WAS CREDITED IN THOSE BOOKS OF ACCOUNTS OF M/S. DUTT CHEMICAL INDUSTRIES AND M/S. NUTAN SALES CORPORATION. A JOURNAL ENTRY WILL BE PASSED DEBITING ACCOUNTS OF DUTT CHEMICALS INDUSTRIES AND CREDITING RESPECTIVE SMALL TYPE OF CUSTOMERS ACCOUNT. IN SUPPORT OF HIS CLAIM, THE ASSESSEE HAS FILED CONFIRMATION AS WELL AS AFFIDAVITS FROM SHRI SANGAM SAHANI, SHRI KANUBHAI PARMAR, SHRI HEMANT YADAV AND SHRI MAHENDRA R ZALA BEFORE THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED COPY OF LEDGER ACCOUNT PLACED AT PAPER BOOK PAGE NO. 58 TO 63, CONFIRMATION AT PAGE NO. 19 TO 57 OF PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT CROSS-EXAMINED THE PERSON WHO HAS MADE AFFIDAVIT BEFORE HIM. THEREFORE, ADDITION MADE WITHOUT EXAMINATION OF THE PERSON WHOSE AFFIDAVIT IS FILED, CANNOT BE SUSTAINED AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. V. CIT [1956] 30 ITR 181 (SC) PAGE 4 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 WHEREIN IT WAS HELD THAT WHERE DEPONENT WHO MADE AFFIDAVIT WERE NOT EXAMINED NOR CROSS EXAMINED, THE SAME CANNOT BE CHALLENGED BY THE REVENUE FOR THE CONTENTIONS OF THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE CASH DEPOSITS REPRESENT SALE PROCEEDS OF ABOVE CONCERNS. THEREFORE, THE ENTIRE CASH DEPOSITS CANNOT BE ADDED TO TOTAL INCOME. IT WAS FURTHER CLAIMED THAT IF THE BOOKS OF ACCOUNTS CANNOT BE PRODUCED, THEN IT IS A CASE OF NO BOOKS OF ACCOUNTS, HENCE, PROVISIONS OF SECTION 44AD WOULD BE APPLICABLE. THEREFORE, NET PROFIT COULD BE ESTIMATED @8% OF TOTAL DEPOSITS AS PER PROVISIONS OF SECTION 44AD OF THE ACT. HOWEVER, NO ADDITION COULD BE MADE OF ENTIRE CASH DEPOSITS OR AT MOST, PEAK CREDIT OF CASH-DEPOSITS CAN BE MADE. 6. PER CONTRA, THE LD. SR. D.R. SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE HAS TRIED TO LINK THE CASH DEPOSITS WITH SALE PROCEEDS BUT COULD NOT SUBSTANTIATED THE SAME; HENCE, THE AO WAS RIGHT IN HIS ACTION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE OBSERVE THAT THE ASSESSEE HAS FILED COPY OF LEDGER ACCOUNT, CONFIRMATIONS AND AFFIDAVITS FROM SHRI SANGAM SAHANI, SHRI KANUBHAI PARMAR, SHRI HEMANT YADAV AND SHRI MAHENDRA R ZALA BEFORE THE AO. THE COPIES OF LEDGER ACCOUNT PLACED ARE AT PAPER BOOK PAGE NO. 58 TO 63 AND CONFIRMATIONS ARE PLACED AT PAGE NO. 19 TO 57 OF PAPER BOOK. WE FIND THAT THE AO HAS NOT CROSS-EXAMINED FOUR PERSONS WHO HAVE FILED AFFIDAVIT BEFORE HIM. THEREFORE, ADDITION IS MADE WITHOUT EXAMINATION OF THE PERSON WHOSE AFFIDAVIT IS FILED CANNOT BE SUSTAINED AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. V. PAGE 5 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 CIT [1956] 30 ITR 181 (SC) WHEREIN IT WAS HELD THAT WHERE DEPONENT WHO MADE AFFIDAVIT WERE NOT EXAMINED NOR CROSS EXAMINED, THE SAME CANNOT BE CHALLENGED BY THE REVENUE FOR THE CONTENTIONS OF THE SAME. WE FURTHER NOTE THAT THE ASSESSEE WAS HAVING CBS FACILITY THEREFORE, HE ALLOWED THESE PERSON TO DEPOSIT CASH IN HIS SAVING BANK ACCOUNT AS AGAINST SALE PROCEEDS MADE TO THEM BY M/S. DUTT CHEMICAL INDUSTRIES AND M/S. NUTAN SALE CORPORATION IN WHICH THE ASSESSEE AND HIS BROTHER ARE PARTNERS AND WHO ARE DEALING IN SALE OF CHEMICAL AND COLORS FOR PAINT ETC. THE AO HAS ALSO NOT POINTED OUT ANY OTHER SOURCE OF THE BUSINESS OF THE ASSESSEE. MEANING THEREBY, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CHEMICAL IN THE NAME OF THE ABOVE CONCERNS. THE AO HAS NOT EXAMINED NOR IS IT THE CASE OF THE AO THAT CASH WITHDRAWALS MADE FROM THE SAVING BANK ACCOUNT WERE NOT UTILIZED IN PAYMENTS TO ABOVE CONCERNS OR IT MIGHT HAVE UTILIZED FOR OTHER PURPOSE. THEREFORE, IT CAN BE CONCLUDED THAT THE CASH DEPOSITS REPRESENT SALE PROCEEDS OF ABOVE CONCERNS. IN VIEW OF THIS MATTER, THE ENTIRE CASH DEPOSITS CANNOT BE ADDED AS TOTAL INCOME. SINCE THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE PROVISIONS OF SECTION 44AD CAN BE APPLIED TO SUCH TURNOVER. WE THEREFORE, ESTIMATE THE NET PROFIT @8% OF TOTAL DEPOSITS AS PER PROVISIONS OF SECTION 44AD OF THE ACT. ACCORDINGLY, NET PROFIT @8% IS WORKED OUT AT RS.1,42,396 I.E. [8% OF 17,79,960]. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ADDITION OF RS. RS.17,79,960 IS RESTRICTED TO RS.1,42,396 AND BALANCE ADDITION IS DELETED. THIS GROUND OF APPEAL IS THEREFORE, PARTLY ALLOWED. PAGE 6 OF 6 VISHWNATH AMBALAL MEHTA V. ITO-WD1- BHARUCH /I.T.A. NO.2771 /AHD/2015/A.Y.10-11 8. GROUND NO. 3 REGARDING CONFIRMING ADDITION OF RS. 13,500 IN BANK ACCOUNT OF CANA BANK AND GROUND NO. 4 RELATING TO UNEXPLAINED EXPENSE OF RS. 1,06,867 ON ACCOUNT OF HOUSE HOLD EXPENSES AND LIC DEDUCTION U/S. 80C, WERE NOT PRESSED BEFORE CIT (A) DUE TO SMALL AMOUNT HENCE, SAME IS CONFIRMED. HOWEVER, THE SAID ADDITION IS ALLOWED AS TELESCOPING OF THE AGAINST THE ADDITION OF RS.1,42,396 SUSTAINED IN GROUND NO. 1 ABOVE. HENCE, THEREFORE, NO SEPARATE ADDITION IS REQUIRED, THEREFORE, THESE ADDITIONS ARE DELETED AND BOTH GROUNDS OF APPEAL ARE ALLOWED. 9. GROUND NO. 5 &6 ARE RELATING TO CHARGE OF INTEREST UNDER SECTION 234A/B/C/D AND INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WHICH ARE CONSEQUENTIAL IN NATURE, HENCE, NO ADJUDICATION IS REQUIRED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.07.2019. SD/- SD/- (H. S. SIDHU) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 19TH JULY, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, SURAT