Rajesh Hanumant Pawar, Pune V. Income tax Officer,

ITA 2910/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3037 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-05-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Business income; Additional evidence; Reasonable cause
• Section: 133(6); 144

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO. 2910/PUN/2016 !' # $# / ASSESSMENT YEAR : 2009-10 SHRI RAJESH HANUMANT PAWAR, FLAT NO. B-15, ANAND LAXMI HILLS, NEAR WATER TANK CHARWAD VASTI, SINHAGAD ROAD, VADGAON BR, PUNE-411 041. PAN : APYPP1265M ....... / APPELLANT %' / V/S. THE INCOME TAX OFFICER, WARD 1(3), PUNE. / RESPONDENT APPELLANT BY : SMT. DEEPA KHARE RESPONDENT BY : SHRI PANKAJ GARG. / DATE OF HEARING : 16.05.2018 / DATE OF PRONOUNCEMENT : 25.05.2018 & / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE DATED 13.10.2 016 FOR ASSESSMENT YEAR 2009-10. 2 ITA NO.2910/PUN/2016 A.Y.2009-10 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT RS.17,35, 789/- BEING CASH DEPOSITED IN BANK ACCOUN T AS ADDITION TURNOVER WHEN THE SAME WAS FORMING PART OF THE REGU LAR BANK ACCOUNT MAINTAINED FOR THE BUSINESS OF THE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ESTIMATING PROFIT AT 20% ON THE ADDITIONAL TURNOVER OF RS.17,35,789/- WH ICH AMOUNT TO DOUBLE ADDITION. 3. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SU BSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE ASSESSEE HAS RAISED NEW AND REVISED GROUNDS OF APP EAL WHICH READS AS UNDER: 1 . THE ADDITIONS MADE BY WAY OF ESTIMATING THE INCOME OF RS.17, 35,787/- BY THE LEARNED OFFICER IS CONTRARY TO BOTH FACTS AND LAW, ILLOGICAL, IMPRACTICABLE AND HENCE NOT JUS TIFIED. 2. THE ESTIMATION OF INCOME OF RS.4,84,735/- ON ACC OUNT OF EXPENSES CLAIMED FOR COMMUTATING BUSINESS INCOME UN DER PROFIT AND LOSS ACCOUNT, IN MAKING ADDITION THERE IS ELEME NT OF GUESS AND ESTIMATED WORK. 3. THE ESTIMATED OF INCOME OF RS.1,59,821/- ON GROU ND OF NON SUBMISSION OF RETURN OF INCOME BUT THE ASSESSEE HAS FILED THE RETURN OF INCOME. 4. THE ESTIMATED OF INCOME OF RS 1,38,135/- ON ACCO UNT GP RATIO, THE LEARNED ASSESSING OFFICER DOES NOT TAKE THE FAC T AND RATIONAL THINKING WHILE CALCULATING GP RATIO. 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DEL ETE ANY THE GROUND OF APPEAL ALSO WE HEREBY REQUEST YOUR HONOUR TO MAKE ANY OTHER SUITABLE MEASURES WHICH IS BENEFICIAL TO THE ASSESSEE. 4. BRIEFLY STATED RELEVANT FACTS INCLUDE, THE ASSESSEE IS EN GAGED IN THE BUSINESS OF TRADING AND REPAIRING OF ELECTRONIC GOODS NAMED NAMRATA ELECTRONICS AND FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.2,66,740/-. AS PER THE DATA AVAILABLE ON THE RETURN, TH E ASSESSEE RECORDED THE TOTAL SALES AMOUNTING TO RS.23,46,110/- AND EARNED NET PROFIT AT RS.3,01,130/-, WHERE GROSS PROFIT RATE IS WORKED OUT @ 12.84%. 3 ITA NO.2910/PUN/2016 A.Y.2009-10 THEREAFTER, THIS CASE WAS SELECTED FOR SCRUTINY UNDER CAS S. AS PER THE AIR INFORMATION, ASSESSEE OWNS A BANK ACCOUNT WITH VISHWESHW AR SAHKAR BANK LTD, PUNE AND THE ASSESSEE DEPOSITED CASH TOTALING TO R S.15,66,500/- IN THE SAID SAVINGS BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATION. 5. DURING SCRUTINY ASSESSMENT PROCEEDINGS, ASSESSING OFFICE R ISSUED NOTICE U/S.142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND CALLED FOR RELEVANT DETAILS AND INFORMATION. ON FIND ING, THE ABSENCE OF ANY COMPLIANCE, THE ASSESSING OFFICER PASSED ORDER U/S. 1 44 OF THE ACT. THE ASSESSEE DID NOT CO-OPERATE IN RESPECT OF FURNISHING OF RELEVANT DETAILS AND INFORMATION. THE VISHWESHWAR CO-OP. BANK, SINHAGAD ROAD , PUNE WAS REQUIRED TO FURNISH THE ACCOUNT EXTRACT, ACCOUNT OPENING FORM DOCUMENTS ETC. AND FOR THIS, ASSESSING OFFICER ISSUED NOTICE U/S.133(6) OF THE ACT. VIDE LETTER DATED 13.10.2011, THE BANK CONFIRMED THE CASH DEPO SIT IN THE SAID ACCOUNT AND AMOUNT IS RS.17,35,787/-. IN ABSENCE OF ANY SATISFACTORY EXPLANATION IN RESPECT OF SOURCES OF CASH DEPOSITS FROM T HE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE AMOUNT OF RS.1 7,35,787/- AS UNEXPLAINED CASH. FURTHER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED EXPENDITURE IN P & L ACCOUNT AMOUNTING TO RS.19,39 ,740/- AGAINST THE GROSS RECEIPT OF RS.23,46,110/-. FOR WANT OF DETAILS, TH E ASSESSING OFFICER DISALLOWED 1/4 TH OF THE SAME AND MADE ADDITION OF RS.4,84,935/-. FURTHER, ASSESSING OFFICER MADE OTHER ADDITIONS OF RS.1,59,821 /-, RS.1,38,185/- AND RS.34,387/- TOO. THUS, THE ENTIRE GROSS ADDITION IS WORKED OUT AT RS.25,18,728/- AND MAJOR ADDITION RELATES T O CASH DEPOSITS. AGGRIEVED WITH THE MAJOR ADDITION TO THE TUNE OF RS.17,35,7 87/-, ASSESSEE FILED APPEAL BEFORE CIT(A). 4 ITA NO.2910/PUN/2016 A.Y.2009-10 6. IN THE FIRST APPELLATE PROCEEDINGS BEFORE CIT(A), THE L D. COUNSEL PRAYED FOR GRANTING AN OPPORTUNITY TO THE ASSESSEE TO FILE WRITTEN SUBMISSIONS ALONG WITH ADDITIONAL EVIDENCES AGAINST EACH OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. THE ASSESSEE SUBMITTED THA T THE ENTIRE CASH DEPOSITS RELATE TO THE SALES PROCEEDS OF THE BUSINESS OF THE ASSESSEE. REFERRING TO THE CASH WITHDRAWALS, THE ASSESSEE SUBMITTED THAT SAME WERE WITHDRAWN FROM THE BANKS FOR MAKING PAYMENTS TO THE SUP PLIERS. THE ASSESSEE IS ENGAGED IN SALES OF GOODS AND PREPARING ELEC TRONIC ITEMS. ASSESSEES FILED ADDITIONAL EVIDENCES AND MADE A PRAYER FOR ADMITTING. AFTER CONSIDERING THE FACTS THAT THE ASSESSEE HAD REASONABLE CAUSE I.E. ILLNESS/ACCIDENT OF THE ASSESSEE AND HOSPITALIZATION ETC, FOR NOT SUBMITTING THE SAID EVIDENCES, THE CIT(A) CONSIDERED THE ADDITIONAL EV IDENCES, ADMITTED THE SAME AND ADJUDICATED THE GROUNDS RAISED BY THE AS SESSEE AFTER CONSIDERING THEM. IN THE IMPUGNED ORDER, DEVIATING FROM THE ASSESSING OFFICERS LINE OF ASSESSMENT, THE CIT(A) CONSIDERED THE SAID C ASH DEPOSITS OF RS.17,35,787/-AS ADDITIONAL UNEXPLAINED TURNOVER OF THE ASSE SSEE AND DETERMINED GROSS TURNOVER AT RS.40,81,899/- ( RS.23,46,110 /- OF SALES AS ACCOUNTED IN BOOKS PLUS THE SUM OF RS.17,35,789/- OF CASH DEPOSITS AS ADDITIONAL TURNOVER). FURTHER, IGNORING THE APPROACH OF AS SESSING OFFICER OF MAKING ITEMIZED ADDITIONS, THE CIT(A) ESTIMATED THE PROFIT @ 2 0% OF THE SAID GROSS TURNOVER OF RS.40,81,899/- AS DERIVED BY HIM. ACCORD ING TO HIS CALCULATION, THE INCOME ASSESSABLE FROM THE BUSINESS OF THE ASSESSEE WORKED OUT AT RS.8,16,380/- ONLY. THE CIT(A) DELETED THE OTHER ITEMIZED ADDITIONS IN VIEW OF DISCUSSION GIVEN IN PARA 6 TO 8 OF IMPUGNED ORDER. 7. BEFORE ME, LD. COUNSEL FOR THE ASSESSEE BROUGHT MY AT TENTION TO THE GROUNDS AND SUBMITTED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ESTIMATIONS MADE BY THE CIT(A) ARE NOT SUSTAINA BLE. REFERRING TO THE 5 ITA NO.2910/PUN/2016 A.Y.2009-10 CASH DEPOSIT ADDITION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME CONSTITUTES THE ACCOUNTED TURNOVER OF SALES OF THE ASSESSEE AND THE SALE PROCEEDS ARE DEPOSITED WITH THE BANK FROM TIME TO T IME. FURTHER, BRINGING MY ATTENTION TO THE GP RATES, THE LD. COUNSEL SU BMITTED THAT WITH ITEMIZED ADDITIONS MADE BY THE ASSESSING OFFICER, THE NP RAT E WAS ABOVE 40% AGAINST THE DECLARED NP RATE @12.84%. THE SAID NP R ATE IS NO EXISTENCE AT ALL IN THE LINE OF BUSINESS OF TRADING/ REPAIRING OF ELECTR ONIC ITEMS. REFERRING TO THE ADDITION CONFIRMED BY THE CIT(A) TO THE EX TENT OF RS.8,16,380/-, LD. COUNSEL SUBMITTED THAT CIT(A) ERRED IN ES TIMATING TOTAL PROFIT AROUND RS.8,16,380/- (20% TOTAL TURNOVER AT RS.40,81, 899/-) AND THE ACCOUNTED NP RATE WORKED OUT AT RS. 3,01,130/- @12.84% . WITH THE ADDITION OF RS.8,16,380/-, THE TOTAL GP WORKS OUT @32% WHICH IS ALSO NOT IN EXISTENCE IN THE LINE OF ELECTRONIC BUSINESS OF THE ASSESSE E. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE PRAYED FOR CONSIDERING THE R EASONABLENESS OF THE RECORDED GP RATE @ 12.84% AND DELETE THE ENTIRE ADDITION. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE PLACE D RELIANCE HEAVILY ON THE ORDERS OF ASSESSING OFFICER AND CIT(A). 9. I HAVE HEARD BOTH THE PARTIES AND THE ORDER OF ITEM IZED ADDITIONS MADE BY THE ASSESSING OFFICER ON ONE SIDE AND ESTIMATION OF CIT(A) OF TOTAL TURNOVER AT RS.40,81,899/- ON THE OTHER. I HAVE ALSO EX AMINED ADOPTION OF NP RATE OF @20% AGAINST 12.84% AS PER BOOKS OF ASSESSE E. ON CONSIDERING THE SAME, I FIND ITEMIZED ADDITIONS MADE BY THE ASSESSING OFFICER ARE UNSUSTAINABLE AS THEY WERE DONE IN THE ABSENCE OF THE EXPLANATION, EVIDENCES ETC. FROM THE ASSESSEE IN THE EX-PARTE ASSES SMENT MADE U/S.144 OF THE ACT. THEREFORE, IN PRINCIPLE, THE SAID ADDITIONS ARE UNS USTAINABLE IN LAW. REGARDING CASH DEPOSITS, THE INFORMATION WAS RECEIVED BY THE 6 ITA NO.2910/PUN/2016 A.Y.2009-10 ASSESSING OFFICER THROUGH ANNUAL INFORMATION RETURN AND TH E ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 133(6) OF THE ACT AN D QUANTIFIED THE ACTUAL CASH DEPOSIT AT RS.17,35,787/-. THE SOURCE OF CAS H DEPOSIT IS A MAJOR CONTENTION BETWEEN THE REVENUE AND THE ASSESSE E. ACCORDING TO THE ASSESSEE, ACCOUNTED SALES PROCEEDS EXPLAIN THE SOURCE O F THE SAID REMITTANCE. WITHOUT DECIDING THE ISSUE BY SCRUTINIZING THE S ALE DEEDS AND VARIOUS SALES DOCUMENTS DUE TO NON CO-OPERATION, THE A SSESSING OFFICER PROCEEDED TO MAKE ADDITION AT RS.17,35,787/-. FURTHER, IN F IRST APPELLATE PROCEEDINGS, WITHOUT PERUSING THE BOOKS OF ACCOUNT, THE C IT(A) TREATED THE CASH DEPOSIT AS UNEXPLAINED ADDITIONAL TURNOVER OF THE ASS ESSEE. CIT(A) HAS NO EVIDENCE TO BACK HIS FINDINGS. CIT(A) DID NOT EXPLAIN HOW THE SOURCE IS UNACCOUNTED ADDITIONAL TURNOVER WHEN THE AMOUNTS ARE R EFLECTED IN THE SAVING BANK ACCOUNT/BOOKS OF ACCOUNT OF THE ASSESSEE. IN PRINCIPLE, THIS KIND OF ASSESSMENT MADE BY THE ASSESSING OFFICER AND ADJU DICATION BY THE CIT(A) IS UNSUSTAINABLE IN LAW. FURTHER, I FIND MAKING AD-HOC A DDITION, ADOPTION OF PROFIT RATE OF @20% ON THE ENTIRE TURNOVER AT RS.40,81,899/- ALSO HAS NO BASIS. ON FINDINGS, THE CIT(A) HAS ANTICIPATED IN ADOPTING SAID PERCENTAGE WITHOUT BRINING COMPARABLES CASES. RELEVANT SU BMISSIONS MADE BY ASSESSEE IS REPRODUCED AT PAGE 9 OF THE ORDER OF CI T(A) AND SAME IS REPRODUCED AS UNDER: 4.ADDITIONS OF RS.1,38,185/- IS MADE ON ACCOUNT OF 40% GP RATIO TO BE TAKEN DISALLOWANCE . THE LEARNED ASSESSING OFFICER MADE ADDITIONS WITHOU T STATING BASIS OF ESTIMATION OF GP RATIO FOR THE PAST RECORD ALSO, HE CANNOT ACT CAPAROIUS MANNER WHILE ESTIMATING THE INCOME, AS COMPARED TO LAST 2 YRS DATA PRECEDING TO THIS ACCOUNTING YEAR 2008-09 ( VIDE PO INT NO. 6D OF THE ASSESSMENT ORDER). THE FOLLOWING INFORMATION IN TAB ULATED FORMAT SHOWS THE ACTUAL POSITION OF GP AND NET PROFIT OF L AST 2 PRECEDING YEARS ON RETURNS FILED BASIS . S. NO. ASSESSMENT YEAR TURNOVER IN RS. GROSS PROFIT RATIO NET PROFIT RATIO % TAX PAID IN RS. 7 ITA NO.2910/PUN/2016 A.Y.2009-10 AS CHART SHOWS THAT THE RATIO OF GP SHOWN IN THE RE TURNED FILED FOR AY 2009-10 BY THE ME IS NOT MORE THAN 14.92% AND THE L EARNED ASSESSING OFFICER HAD CALCULATED GP RATION WAS 34.11% BUT IT HAS BEEN DETERMINED FOR ADDITIONS IS 40% GP AND HENCE DIFFER ENTIAL AMOUNT HAS BEEN TAKEN FOR THE BASIS OF DISALLOWANCE. IT IS TOT ALLY ABSURD FINDINGS AND NO RATIONAL THINKING AND TOTALLY BASED ON CONJE CTURES & SURMISES BECAUSE ASSESSEE IS TRADING IN THE ELECTRONIC GOODS AND POST SERVICES TO CLIENTS AS LABOUR CHARGES AND OTHER CUSTOMERS THOSE HAD BEEN COME FOR REPAIRING AND SERVICES, NET PROFIT AS SHOWN IN THE RETURN IS HIGH BECAUSE OF LABOUR SERVICES AND NOT BY TRADING IN EL ECTRONIC GOODS. I HAVE EXAMINED THE ABOVE SUBMISSIONS AND FIND THAT ABOVE EXTRACTED CHART INDICATES NET PROFIT RATE OF THE ASSESSEE AND THE NET PROFIT RATE OF 17.28% FOR THE A.Y.2007-08 IN ASSESSEES OWN CASE IS THE HIGHEST. AS SUCH, THE REVENUE DID NOT MANAGE TO BRING ANY COMPARABLE CAS ES WHERE NET PROFIT RATE IS @20% OR MORE. FURTHER, THE ADDITION OF CASH DEPO SIT OF RS.17,35,787/- ON ACCOUNT OF UNEXPLAINED CASH HAS NO LEGS TO STAND FOR THE REASON THAT THEY BORNE OUT OF THE ACCOUNTED SAVING BA NK ACCOUNT OF THE ASSESSEE ITSELF. THEREFORE, I AM OF THE OPINION THAT THERE IS NO CASE FOR MAKING ADDITION OF RS.17,35,787/- WHERE THE ASSESSING OFFICER FAILED TO ESTABLISH ANY EXTRA SOURCE OF INCOME. THE ASSESSING OFFICER AND CIT(A) CANNOT RESORT TO SUCH IMAGINATIONS. IN VIEW OF THE ABSENCE OF ANY TH IRD PARTY COMPARABLES, THE PROFIT RATE OF THE ASSESSEE IS THE LAST R ESORT. IN MY VIEW, THE PROFIT RATE OF THE OWN CASE FOR THE A.Y.2007-08 MUST HELP FOR ADJUDICATION OF THE ISSUE UNDER CONSIDERATION. ACCORDINGLY , REJECTING THE BOOK RESULTS AS DONE BY THE REVENUE, I DIRECT THE ASSE SSING OFFICER TO CALCULATE THE INCOME OF THE ASSESSEE AT NET PROFIT @15.40% (AVERAGE TO A.YS.2007-08, 2008-09 AND 2009-10). THUS, GROUNDS RAISED BY ASSESSEE ARE PARTLY ALLOWED. 1 2007-08 868617.00 31.38 17.28 2239 2 2008-09 12,56,367.47 26.76 16.10 9747 3 2009-10 23,46,110.00 14.92 12.84 12828 8 ITA NO.2910/PUN/2016 A.Y.2009-10 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 25 TH DAY OF MAY, 2018. SD/- ( . / D. KARUNAKARA RAO ) / ACCOUNTANT MEMBER / PUNE; ! ' / DATED : 25 TH MAY, 2018. SB &'(!)*+,+$) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, PUNE. 4. THE PR. CIT-1, PUNE. 5. %&' (( )* , + )* , - ,-. , / DR, ITAT, SMC BENCH, PUNE. 6. '/ 01 / GUARD FILE. // TRUE COPY // +2 / BY ORDER, ( 3 ). /PRIVATE SECRETARY + )* , / ITAT, PUNE.