I.T.O., Ward-2(3), Gwalior V. Sh. Navin Bajaj S/o. Sh.Ramesh Chandra Bajaj, Gwalior

ITA 295/AGR/2013

• Counselvise Citation: 29520314 RSA 2013
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BA TRA
• Assessee Lawyers: RAJENDRA SHARMA
• Keywords: Unexplained investment; Salary income
• Section: 69; 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO. 295/AGRA/2013 ASSTT. YEAR : 2009-10 INCOME-TAX OFFICER, VS. SHRI NAVIN BAJAJ, WARD 2(3), GWALIOR. S/O SHRI RAMESH CHANDRA BAJA J H. NO. 2, SHINDH VIHAR COLONY, LASHKAR, GWALIOR. (PAN: AGGPB 4578 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. BATRA, JR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA, ADVOCATE DATE OF HEARING : 21.01.2014 DATE OF PRONOUNCEMENT OF ORDER : 31.01.2014 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 07.05.2013 FOR THE ASSESSMENT YEAR 20 09-10, CHALLENGING THE DELETION OF ADDITION OF RS.16,94,500/- MADE BY THE AO U/S. 69 OF THE IT ACT ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT IN THE BANK ACC OUNT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS ENGAGED IN BUSINESS OF SUPPLY OF MATERIAL AND MACHINERY USED IN CIVIL CONS TRUCTION WORK. THE ASSESSEE FILED RETURN OF INCOME U/S. 44AD OF THE IT ACT DECL ARING INCOME OF RS.1,47,710/-. ITA NO. 295/AGRA/2013 2 THE AO OBSERVED THAT THE BUSINESS CARRIED ON BY THE ASSESSEE IS NOT COVERED UNDER THE PROVISIONS OF SECTION 44AD. HE HAS REJECT ED THE CLAIM OF THE ASSESSEE AND MADE ADDITION OF RS.16,94,500/- OF ENTIRE DEPOS ITS MADE IN THE BANK ACCOUNT OF ASSESSEE WITH AXIS BANK. THE ADDITION WAS CHALLE NGED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT THE ASSESSEE IS IN BUSINE SS OF SUPPLY OF MATERIAL AND MACHINERY TO THE PERSONS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE MADE TOTAL GROSS TURNOVER OF RS.25,56,850/ - AND DEPOSITED RS.16,94,500/- IN HIS BANK ACCOUNT MAINTAINED WITH AXIS BANK LTD. GWALIOR. THE ASSESSEE WAS UNDER THE IMPRESSION THAT HIS BUSINESS IS OF CIVIL CONSTRUCTION AND IS COVERED U/S. 44AD. THEREFORE, NO BOOKS OF ACCOUNT W ERE MAINTAINED AND PROFIT WAS DECLARED ON GROSS RECEIPTS OF THE BUSINESS. SIN CE BOOKS OF ACCOUNTS WERE NOT MAINTAINED, THEREFORE, THE AO MADE THIS ADDITION. I N FACT, CASH WAS DEPOSITED INTO THE BANK ACCOUNT OF THE ASSESSEE WHICH IS LESS THAN THE GROSS RECEIPTS. THE ENTIRE ADDITION OF BANK DEPOSIT IS WHOLLY UNJUSTIFIED. THE ASSESSEE RELIED UPON CERTAIN DECISIONS IN SUPPORT OF THE CONTENTION. THE LD. CIT (A) FOUND THE CONTENTION OF THE ASSESSEE TO BE CORRECT THAT THE DEPOSIT IN THE BANK ACCOUNT WAS LESS THAN THE TURNOVER. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE DEPOSIT IN THE BANK ACCOUNT CANNOT BE TAXED EVEN IF PROVISIONS OF SECTION 44AD WOULD NOT APPLY IN THIS CASE. THE LD. CIT(A) FOUND THAT THE AO HAS ESTIMATED GROSS TURNOVER AT RS.30 LACS AND APPLIED THE PROFIT RATE OF 10% TO ESTIMATE THE ITA NO. 295/AGRA/2013 3 BUSINESS PROFIT AT RS.3,00,000/-. THEREFORE, INSTEA D OF MAKING ADDITION ON ACCOUNT OF BANK DEPOSIT, THE REASONABLE PROFIT RATE SHOULD BE APPLIED AND ACCORDINGLY, THE AO WAS DIRECTED TO TAKE NET PROFIT OF RS.3,00,000/- AS COMPUTED IN THE ASSESSMENT ORDER AND DIRECTED TO MAKE ADDITION OF R S.95,452/- BEING THE DIFFERENCE OF RS.3,00,000/- MINUS RS.2,04,548/- DEC LARED BY THE ASSESSEE. THE REMAINING ADDITION WAS DELETED AND THE APPEAL OF TH E ASSESSEE WAS PARTLY ALLOWED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LD . DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R ELIED UPON THE ORDER OF THE ITAT, AGRA BENCH IN THE CASE OF KAMAL KUMAR VS. ITO IN ITA NO. 24/2012 DATED 19.10.2012 IN WHICH IN PARA 5 IT WAS HELD AS UNDER : 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS ADMITTED FACT THAT THE ASSESSEE OPENED THE BANK ACCOUNT IN QUESTION, IN WH ICH SEVERAL CASH DEPOSITS WERE MADE ON DIFFERENT DATES TOTALING TO R S.31,62,300/-. COPY OF THE BANK ACCOUNT IS FILED AT PAGE 1 TO 11 O F THE PAPER BOOK. THE STATEMENT OF ASSESSEE ON OATH WAS RECORDED AT T HE ASSESSMENT STAGE, IN WHICH IN ANSWER TO QUESTION NO. 8, THE AS SESSEE EXPLAINED THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSME NT YEAR UNDER APPEAL, HE HAD DEPOSITED CASH IN THE BANK ACCOUNT O N DIFFERENT DATES, WHICH PERTAINS TO HIS SMALL BUSINESS. WHATEV ER AMOUNTS WERE RECEIVED FROM THE BUSINESS PERSONS WERE DEPOSITED I N THE SAID BANK ACCOUNT AND SAME AMOUNT WAS PAID THROUGH CHEQUES TO DIFFERENT BUSINESSMEN FROM WHOM HE HAD PURCHASED THE GOODS ON CREDIT. HE HAS FURTHER EXPLAINED IN ANSWER TO QUESTION NO.9 TH AT SINCE THERE ITA NO. 295/AGRA/2013 4 WAS LOSS IN THIS RETAIL BUSINESS, SOURCE OF INCOME FROM SUCH BUSINESS WAS NOT SHOWN. HE HAD ALSO AGREED TO GIVE NAMES AND ADDRESSES OF THE PERSONS WITH WHOM SUCH BUSINESS WAS CONDUCTED. THE ASSESSEE ALSO MOVED BEFORE THE LD. ADDL. CIT U/S. 144A OF TH E ACT AND SUBMITTED BEFORE HIM THAT THE AMOUNT, WHICH THE ASS ESSEE DEPOSITED IN HIS BANK ACCOUNT REPRESENTS SALE PROCEEDS OF THE GOODS BROUGHT FROM SURAT FOR SELLING THEM AGAINST COMMISSION / DA LALI. THE AMOUNT DEPOSITED IN THE BANK ACCOUNT WAS LATER ON PAID TO DIFFERENT SHOP KEEPERS THROUGH CHEQUE FROM WHOM THE ASSESSEE HAD B ROUGHT THE GOODS FROM SURAT ON CREDIT. THE ASSESSEE ALSO EXPLA INED BEFORE THE ADDL. CIT THAT IF HE WAS NOT SATISFIED WITH THE EXP LANATION OF THE ASSESSEE, CONCERNED PERSONS MAY BE SUMMONED TO VERI FY THE BUSINESS OF ASSESSEE ON DALALI IN RESPECT OF PURCHA SE AND SALE OF LADIES SUITS AGAINST WHICH THE ASSESSEE WAS ENTITLE D FOR COMMISSIONER/DALALI ONLY. THE ADDL. CIT INSTEAD OF ISSUING SUMMONS TO CONCERNED PARTIES, DIRECTED THE ASSESSEE TO PRODUCE 10 PARTIES ALONG WITH THEIR BOOKS OF ACCOUNT AND CONFI RMATION. THE STATEMENT OF ASSESSEE ON OATH BEFORE THE AO AND THE STATEMENT BEFORE THE ADDL. CIT FIND SUPPORT FROM THE DETAILS NOTED IN THE BANK ACCOUNT OF THE ASSESSEE. ON PERUSAL OF THE DETAILS CONTAINED IN THE AFORESAID BANK ACCOUNT, WE FIND THAT ON CREDIT SIDE THERE ARE CASH DEPOSITS ON VARIOUS DATES IN THE FINANCIAL YEAR AND ON THE DEBIT SIDE, THE PAYMENTS HAVE BEEN MADE TO DIFFERENT PARTIES TH ROUGH BANKING CHANNEL. NAMES OF THE PARTIES AND CONCERNED BANK TH ROUGH WHOM THE PAYMENTS HAVE BEEN CLEARED ARE MENTIONED. THUS, THE PARTIES ARE IDENTIFIABLE TO WHOM THE ASSESSEE MADE PAYMENTS FRO M SAME BANK ACCOUNT. FURTHER, THE AMOUNTS HAVE BEEN DEPOSITED T IME TO TOME AND PAYMENTS HAVE BEEN MADE TO DIFFERENT PARTIES TIME T O TIME. THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT OF T HIS BUSINESS. THE DETAILS CONTAINED IN THE BANK ACCOUNT WOULD CLEARLY SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE WAS IN VOLVED IN DALALI BUSINESS OF SELLING LADIES SUITS AND WHATEVER AMOUN T WAS RECEIVED AGAINST THE SALE OF LADIES SUITS, THE ASSESSEE DEPO SITED THE AMOUNT IN THE BANK ACCOUNT AND THEREAFTER, THE AMOUNTS WERE T RANSFERRED TO THE CONCERNED PARTIES/BUSINESSMEN/TRADERS FROM WHOM THE GOODS WERE TAKEN BY THE ASSESSEE ON CREDIT. THE DETAILS NOTED IN THE BANK ACCOUNT ITSELF SUPPORT THE CASE OF THE ASSESSEE THA T THIS ACTIVITY HAS BEEN DONE BY THE ASSESSEE MERELY ON COMMISSION. THE ASSESSEE FILED CERTAIN CONFIRMATIONS BEFORE THE AUTHORITIES BELOW, COPIES OF WHICH ARE ALSO FILED IN THE PAPER BOOK TO SUPPORT THE CON TENTION OF THE ITA NO. 295/AGRA/2013 5 ASSESSEE THAT THE ASSESSEE WAS DEALING ON COMMISSIO N BASIS FOR SELLING LADIES SUITS. THE DETAILS CONTAINED IN THE BANK ACCOUNT SHOULD HAVE BEEN VERIFIED BY THE AO AND THE ADDL. CIT BEFO RE ARRIVING AT THE DECISION IN THE MATTER. WHEN THE ASSESSEE MADE SPECIFIC REQUEST TO THE ADDL. CIT THAT THE CONCERNED PARTIES MAY BE SUMMONED TO VERIFY THE COMMISSION BUSINESS OF ASSESSEE, BUT THE ADDL. CIT DID NOT DO SO IN ORDER TO VERIFY THE FACTS. MEAGER OPENING AND CLOSING BALANCE SHOWN IN THE BANK ACCOUNT CLEARLY PROVE THA T MONEY SO DEPOSITED IN THE BANK ACCOUNT WERE ONLY THE SALE PR OCEEDS OF GOODS SOLD BY THE ASSESSEE AGAINST WHOM PERIODICALLY AND CONSISTENTLY PAYMENTS HAVE BEEN MADE TO THE TRADERS THROUGH BANK ING CHANNEL. THEREFORE, THE AMOUNTS DEPOSITED IN THE BANK ACCOUN T SHOULD NOT HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT IN THE BANK ACCOUNT OF THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES NOTED ABOVE AND THE STAND OF ASSESSEE SINCE INITIAL STAGE OF ASSESSMENT CLEARLY PROVE THAT THE AMOUNT DEPOSITED IN THE BANK ACCOUNT WAS IN FACT SALE PROCEEDS OF THE GOODS, WHI CH WERE SOLD BY THE ASSESSEE FROM TIME TO TIME AGAINST WHOM THE ASS ESSEE ISSUED CHEQUES TO VARIOUS DEALERS AND EARNED COMMISSION. T HEREFORE, THE ADDITION U/S. 69 OF THE IT ACT IS WHOLLY UNWARRANTE D AND UNJUSTIFIED IN THE CASE OF THE ASSESSEE. OUR FINDINGS ARE ALSO SUPPORTED BY THE FACT THAT THE ASSESSEE HAS SHOWN MEAGER INCOME IN T HE RETURN OF INCOME AS INCOME FROM SALARY AND INTEREST. THE AUTH ORITIES BELOW, THEREFORE, SHOULD HAVE CONSIDERED THE TRUE NATURE O F THE TRANSACTION CARRIED OUT BY THE ASSESSEE. CONSIDERING THE TOTALI TY OF FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AUTHORIT IES BELOW ARE NOT JUSTIFIED IN MAKING ADDITION U/S. 69 OF THE IT ACT AGAINST THE ASSESSEE IN SUM OF RS.31,62,300/-. WHEN WE HAVE HELD ABOVE T HAT TOTAL DEPOSITS IN THE BANK ACCOUNT ARE THE SALE PROCEEDS OF THE ASSESSEE, THE PROFIT RATE SHOULD HAVE BEEN APPLIED INSTEAD OF CONSIDERING THE ENTIRE SALES OF INCOME OF THE ASSESSEE. WE ARE FORT IFIED IN OUR VIEW BY THE JUDGMENTS OF HONBLE GUJRAT HIGH COURT IN TH E CASE OF PRESIDENT INDUSTRIES (SUPRA) AND M.P. HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR (SUPRA) AND MANMOHAN SADANI VS. CIT (SUPRA). SINCE THE TOTAL DEPOSIT BEING THE TOTAL SA LES OF THE ASSESSEE ARE ONLY RS.31,62,300/-, THUS, THE TURNOVER OF THE ASSESSEE DID NOT EXCEED THE AMOUNT OF RS.40,00,000/- AND AS SUCH, TH E PROVISIONS OF SECTION 40AF OF THE ACT WOULD APPLY IN THE CASE OF ASSESSEE FOR THE PURPOSE OF COMPUTING THE PROFIT AND GAINS OF RETAIL BUSINESS, WHICH PROVIDES THAT SUM EQUAL TO 5% OF THE TOTAL TURNOVER IN THE PREVIOUS ITA NO. 295/AGRA/2013 6 YEAR ON ACCOUNT OF SUCH BUSINESS SHALL BE DEEMED TO BE THE PROFIT AND GAINS OF SUCH BUSINESS. WE ACCORDINGLY APPLY 5% OF THE PROFIT RATE AGAINST RS.31,62,300/- AND DIRECT THAT ADDITIO N OF RS.1,58,115/- MAY BE MADE AGAINST THE ASSESSEE INSTEAD OF ADDITIO N OF RS.31,62,300/-. THE ORDERS OF THE AUTHORITIES BELOW ARE ACCORDINGLY MODIFIED TO THE ABOVE EXTENT AND ADDITION IS RESTRI CTED TO RS.1,58,115/-. 4. ON GOING THROUGH THE FINDING OF THE LD. CIT(A) I N THE LIGHT OF THE ABOVE DECISION, IT IS CLEAR THAT THE ASSESSEE HAS DECLARE D TOTAL GROSS TURNOVER OF RS.25,56,850/- AND IN THE ABSENCE OF BOOKS OF ACCOU NT, THE AO ESTIMATED THE TOTAL RECEIPTS AT RS.30 LACS IN THE ASSESSMENT ORDER AND DID NOT ACCEPT THE APPLICABILITY OF PROVISIONS OF SECTION 44AD OF THE IT ACT BEING T HE NATURE OF BUSINESS OF THE ASSESSEE TO BE DIFFERENT. THE AO DIRECTED TO APPLY 10% PROFIT RATE AND DIRECTED TO MAKE ADDITION OF RS.95,492/-. THE AO SIMILARLY MADE ADDITION OF RS.16,94,500/- BEING THE AMOUNT DEPOSITED IN THE BANK ACCOUNT AND SINCE IT WAS A LARGER AMOUNT, THEREFORE, NO ADDITION ON ACCOUNT OF GROSS PROFIT W AS MADE. THESE FACTS CLEARLY SHOW THAT THE AMOUNT DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE WAS PART OF THE TOTAL TURNOVER, WHICH WAS ENHANCED TO RS.30 LAC S FROM THE TURNOVER DISCLOSED BY THE ASSESSEE IN THE ABSENCE OF THE PRODUCTION OF BOOKS OF ACCOUNT. THE LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN HOLDING THAT TH E ADDITION ON ACCOUNT OF UNEXPLAINED BANK DEPOSITS IS UNJUSTIFIED AND THE AD DITION ON ACCOUNT OF APPLYING REASONABLE PROFIT RATE HAS TO BE MADE. THE FINDING OF THE LD. CIT(A) ARE CLEARLY SUPPORTED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF KAMAL KUMAR (SUPRA). WE, ITA NO. 295/AGRA/2013 7 THEREFORE, DO NOT FIND ANY MERIT IN THE DEPARTMENTA L APPEAL. THE SAME IS ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY