Shri Sanjaysingh B.Gohil, Ahmedabad V. The Income tax Officer,Range-11(2), Ahmedabad

ITA 3024/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8918 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Peak credit; Source of fund
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.3024/AHD/2013 (ASSESSMENT YEAR:2007-08) SHRI SANJAYSINGH B. GOHIL 17, GYAN MANDIR SOCIETY, NEAR NAVKAR FLATS, NR. VASNA TELEPHONE EXCHANGE, VASNA, AHMEDABAD - 380007 APPELLANT VS. THE INCOME TAX OFFICER, RANGE-11(2), AHMEDABAD RESPONDENT PAN: AEEPG1755J /BY ASSESSEE : NONE /BY REVENUE : SHRI PARVEEN KUMAR, SR. D.R. /DATE OF HEARING : 15.03.2017 /DATE OF PRONOUNCEMENT : 22.03.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08 IS PREFERRED AGAINST THE CIT(A)-XVI, AHMEDABADS ORDER DATED 07.11.2013, PASSED IN APPEAL NO. CIT(A)-XVI/ITO/WD.11(2)/653/11-12, UPHOLDING ASSESS ING OFFICERS ACTION I.T.A. NO. 3024/AHD/2013 (SHRI SANJAYSINGH B. GOHIL VS. ITO) A.Y. 2007-08 - 2 - IN IMPOSING PENALTY OF RS.4,59,830/- IN ORDER DATED 21.02.2012, IN PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 19 61; IN SHORT THE ACT. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES BEH EST. IT IS ACCORDINGLY PROCEEDED EX PARTE. 2. THE ASSESSEE IS STATED TO BE A COMMISSION AGENT DEALING WITH OLD VEHICLES. THE ASSESSING OFFICER FRAMED A REGULAR A SSESSMENT IN HIS CASE ON 29.12.2009. HE FOUND IN COURSE THEREOF THAT THE AS SESSEE HAD MADE CASH DEPOSITS OF RS.15,58,100/- IN HIS AXIS BANK SAVINGS ACCOUNT WITHOUT OFFERING ANY EXPLANATION. HE INVOKED SECTION 68 OF THE ACT TO TREAT THE ABOVE DEPOSITS AS UNEXPLAINED CASH CREDITS. HE FURTHER I NITIATED THE IMPUGNED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ALLEGI NG CONCEALMENT OF INCOME. 3. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) UPHEL D ASSESSING OFFICERS ACTION IN HIS ORDER DATED 29.12.2010. THE ASSESSEE THEN FILED ITA NO.477/AHD/2011 BEFORE THIS TRIBUNAL. A CO-ORDINAT E BENCH RESTRICTED THE ABOVE QUANTUM ADDITION TO RS.11.40LACS IN ITS ORDER DATED 11.01.2013 BY OBSERVING AS FOLLOWS: 3.2 WITH THESE SUBMISSIONS THE ASSESSEE HAD ARGUED BEFORE THE LEARNED CIT(A) THAT THE AGGREGATE OF THE CREDIT SIDE OF THE BANK S TATEMENT MAY BE TAKEN AS THE TOTAL TURNOVER OF THE ASSESSEE AND A REASONABLE PROFIT OF 5% MAY BE ESTIMATED TO BE THE INCOME OF THE ASSESSEE. 3.3 THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE OBSERVATIONS MADE BY THE LEARNED AO, RESTRICTED THE ADDITION TO RS.15,32,778/- AND THEREBY PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 2.3 OF HIS ORDER IS REPRODUCED HEREI N UNDER FOR REFERENCE: '2.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. THE EXPLANATION GIVEN BY THE APPELLANT EVEN THOUGH THE PURCHASER WAS SOME OTHER PERSON, IS NOT AT ALL BELIEVABLE AND IS NOT CORRECT AT ALL BECAUSE THE BANKS WILL ONLY GIVE CHE QUES TO THE PURCHASER AFTER HYPOTHECATING THE VEHICLE AND THE CHEQUES WOU LD NORMALLY BE ISSUED IN THE NAME OF THE SELLER AND NOT IN THE NAME OF TH E BROKER. THEREFORE THIS I.T.A. NO. 3024/AHD/2013 (SHRI SANJAYSINGH B. GOHIL VS. ITO) A.Y. 2007-08 - 3 - STORY MADE BY THE APPELLANT FOR EXPLAINING THE DEPO SIT AS ABOVE IS NOT AT ALL AS PER THE PRACTICES FOLLOWED BY THE BANKS. THEREFO RE, THESE CHEQUES ISSUED BY THE BANKS OR FINANCIAL COMPANIES, HAS TO BE FOR SALE PROCEEDS OF SOME VEHICLE. FURTHER, WITH RESPECT TO THE SALE PROCEEDS OF RS.7,16,709/- THE APPELLANT HAS NOT EXPLAINED AS TO WHEN WAS THE VEHI CLE PURCHASED AND FOR HOW MUCH WAS THE VEHICLE PURCHASED. ALL THE DEPOSIT S MADE BY THE ASSESSEE ARE IN RESPECT OF SALE PROCEEDS OF VARIOUS VEHICLES OR COMMISSION RECEIVED. ADMITTEDLY, THERE ARE CASH WITHDRAWALS AS WELL AS C ASH DEPOSITS. ON 17/5/2005 THE ASSESSEE HAS DEPOSITED A CASH OF RS.3 2,000/-, ON 22/05/2006 THE ASSESSEE HAS DEPOSITED A CASH OF RS.3.5 LAKH AN D ON 23/05/2006 THE ASSESSEE HAS DEPOSITED CASH OF RS.1.1 LAKH. THEREFO RE, WITHIN A WEEKS TIME, THE ASSESSEE HAS DEPOSITED RS.4.92 LAKHS OF CASH FO R WHICH NO EXPLANATION IS THERE. FURTHER AFTER DEPOSITING THE CASH THE TOT AL BALANCE BECOMES RS.6,05,164/- AND THE ASSESSEE HAS WITHDRAWN BY CHE QUES A SUM OF RS.6 LAKH AND PAID TO BHAGWATI CATERERS PRIVATE LTD. THE APPELLANT HAS NOT EXPLAINED AS TO FOR WHAT PURPOSE THE ASSESSEE HAD P AID THE AMOUNT OF RS.6 LAKH. SINCE THE APPELLANT HAS NOT EXPLAINED THIS PA YMENT, THEREFORE, IT IS CLEAR THAT THIS AMOUNT OF RS.6 LAKH IS NO MORE AVAI LABLE TO THE APPELLANT. THEREAFTER, IT IS SEEN THAT THERE IS A PEAK DEPOSIT OF RS.7,03,440/- ON 21/12/2006. PRIOR TO THAT ALSO THE CREDIT BALANCE H AD INCREASED TO RS.5,94,935/- ON 19/10/2006 AND ALSO THE CREDIT BAL ANCE OF RS.5,65,256/- ON 25/07/2006. SINCE THERE ARE VARIOUS CASH WITHDRA WALS AND CASH DEPOSIT AND SINCE THE ASSESSEE HAS BEEN DEALING IN TRADING OF OLD CARS, AS WELL AS EARNING COMMISSION THE THEORY OF PEAK ADDITION PLUS PROFIT ON THE ENTIRE TRANSACTIONS WOULD BE THE RIGHT THING TO APPLY. HOW EVER, BEFORE APPLYING THE THEORY OF PEAK AND PROFIT IT IS NECESSARY TO SE E THAT THE AMOUNT OF RS.6 LAKH PAID TO BHAGWATI CATERERS PRIVATE LTD. IS NOT AVAILABLE FOR THE DEPOSIT AND HENCE, THE UNEXPLAINED CASH DEPOSIT IS TAKEN AS RS.6 LAKH PLUS RS.7,03,440/- WHICH TOTALS TO RS.13,03,440/-. FURTH ER ACCORDING TO THE TABLE PREPARED BY THE ASSESSEE, THE TOTAL OF CREDIT IS RS .45,76,131/- AND TOTAL OF DEBITS IS RS.45,86,759/-. THEREFORE, IF THE TURNOVE R IS TAKEN TO RS.45,76,131/- THEN IF THE RATE OF 5% AS ADMITTED B Y THE APPELLANT IS ADOPTED FOR THE PURPOSE OF PROFIT THEN THE PROFIT A MOUNTS TO RS.2,29,338/-. THEREFORE, ADDITION SHOULD HAVE BEEN RS.15,32,778/- WHICH IS ALMOST SAME AS WHAT THE AO HAS ADDED. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO IS RESTRICTED TO RS.15,32,778/- AND THEREFORE TH IS GROUND OF APPEAL IS PARTLY ALLOWED.' 3.4 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE LEARNED CIT(A). 4. AT THE TIME OF HEARING THE LEARNED THE LEARNED A R REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAN D, THE LEARNED DR RELIED ON THE ORDER OF LEARNED CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO CAREFULLY CONSIDERED THE PAPER BOOK FILED BY THE ASSESSEE ALONG WITH OTHER MATERIALS ON RECORD. IN A NUTSHELL THE L EARNED CIT(A) HAS SUSTAINED THE ADDITIONS BASED ON THE FOLLOWING REASONS:- I.T.A. NO. 3024/AHD/2013 (SHRI SANJAYSINGH B. GOHIL VS. ITO) A.Y. 2007-08 - 4 - (I) PAYMENT MADE TO BHAGWATI CATERERS PVT. LTD. RS .6,00,000 (II) PEAK CREDIT RS.7,03,440 (III) 5% PROFIT ON AGGREGATE TURNOVER OF RS.45,76,1 31/- ADMITTED BY THE ASSESSEE RS.2,29,338 TOTAL RS.15,32,770 ON ANALYZING THE BANK STATEMENT, WE FIND THAT THE O PENING BALANCE OF THE BANK AS ON 01-04-2006 IS RS.3,05,778.82 AND THE CLOSING BAL ANCE AS ON 31-03-2007 IS RS.2,95,150.82. THUS, THERE IS AN EROSION OF CAPITA L FOR RS.10,628/-(RS.3,05,778.82 - RS.2,95,150.82). FURTHER, THE TOTAL AGGREGATE OF THE CREDIT SIDE OF THE BANK STATEMENT AMOUNTING TO RS.45,76,131.20 ALSO INCLUDE S THE COMMISSION EARNED BY THE ASSESSEE FROM PURCHASE AND SALE OF SECOND HAND CARS APART FROM THE ENTIRE SALE CONSIDERATION RECEIVED FROM SALE OF SECOND HAND CAR S WHICH WERE PURCHASED BY THE ASSESSEE BY PAYING FULL PURCHASE CONSIDERATION. IN SUCH A SITUATION, ESTIMATING 5% ON RS.45,76,131.20 BEING THE AGGREGATE OF THE CREDI T SIDE OF THE BANK STATEMENT WILL NOT BE APPROPRIATE BECAUSE THE ELEMENT OF PROF IT IN COMMISSION EARNED WILL BE SUBSTANTIALLY MORE THAN THE SALE CONSIDERATION DEPO SITED IN BANK. MOREOVER WHEN PROFIT IS DETERMINED ON THE BASIS OF DRAWINGS ETC., ONCE AGAIN ADDITION BASED ON ESTIMATED TURN OVER WILL NOT BE REASONABLE. FROM TH E FACTS BEFORE US, THE PEAK CREDIT OF RS.7,03,440/- CAN BE CONSIDERED AS CAPITA L BROUGHT IN BY THE ASSESSEE THE SOURCE OF WHICH IS UNEXPLAINED COUPLED WITH AN ELEM ENT OF PROFIT EARNED. FURTHER, THE AMOUNT OF RS.6,00,000/- PAID TO BHAGWATI CATERE RS PVT. LTD. CAN BE CONSIDERED AS THE AMOUNT DERIVED FROM THE CAPITAL AND PROFIT E ARNED BY THE ASSESSEE WITHDRAWN FROM THE BUSINESS AS DRAWINGS. AT THE SAM E, TIME CONSIDERING THE RETURN OF INCOME FILED BY THE ASSESSEE WHEREIN THE INCOME EARNED WAS DECLARED AT RS.1,55,820/- FOR THE RELEVANT ASSESSMENT YEAR, PRE VIOUS THREE YEARS' ACCUMULATED PROFIT CAN BE ESTIMATED AT RS.1,50,000/-. ACCORDING LY, THE INCOME OF THE ASSESSEE CAN BE ESTIMATED AS FOLLOWS:- (I) RETURNED INCOME RS.1,55,820/- (II) PEAK CREDIT RS.7,03,440/- (III) AMOUNT PAID TO BHAGWATI CATERERS RS. 6,00,000/- TOTAL RS.14,59,260/- LESS: ACCUMULATED PROFIT FOR THE PREVIOUS 3 YEARS R S. 1,50,000/- RS. 13,09.260/- LESS: EROSION IN CAPITAL (O/B RS.3,05,778.82 - C/B RS. 2,95,150.82) RS. 10,628/- LESS: INCOME ALREADY DISCLOSED IN THE RETURN RS. 1,55,820/- RS. 11,42,812/- ROUNDED OFF TO RS. 11,40,000/- FOR THE SAKE OF CLARITY, THE ABOVE STATEMENT IS EXP LAINED HEREIN BELOW BY WAY OF FUND FLOW STATEMENT:- SOURCE OF FUNDS AMOUNT (RS.) APPLICATION OF FUNDS AMOUNT (RS. I.T.A. NO. 3024/AHD/2013 (SHRI SANJAYSINGH B. GOHIL VS. ITO) A.Y. 2007-08 - 5 - RETURNED INCOME 1,55,820 PEAK CREDIT (UNEXPLAINED CAPITAL IN BUSINESS) 7,03,440 ACCUMULATED PROFIT BROUGHT FORWARD (AS EXPLAINED HEREINABOVE) 1,50,000 PAYMENT TO BHAGWATI CATERERS(PERSONAL EXPENSES BEING DRAWINGS 6,00,000 EROSION OF CAPITAL (AS WORKED OUT HEREINABOVE) 10,628 DRAWINGS & SAVINGS DURING THE YEAR 1,55,820 UNDISCLOSED INCOME (BALANCE IN FIGURE 11,42,812 TOTAL 14,59,260 TOTAL 14,59,260 BASED ON THE ABOVE COMPUTATION, WE SUSTAIN THE ADDI TION OF RS.11,40,000/- AS AGAINST RS.15,32,778/- CONFIRMED BY THE LEARNED CIT (A). 4. THE ASSESSING OFFICER IN THE MEAN TIME TOOK UP T HE IMPUGNED PENALTY PROCEEDINGS. HE HEAVILY RELIED UPON THE ABOVE QUAN TUM DEVELOPMENTS TO REJECT ASSESSEES EXPLANATION STRONGLY CONTESTING T HE PENALTY PROPOSAL IN QUESTION ALLEGING CONCEALMENT OF INCOME TO IMPOSE T HE IMPUGNED PENALTY OF RS.4,59,830/- IN ORDER DATED 21.02.2012. THE CIT(A ) UPHOLDS THE SAME IN LOWER APPELLATE ORDER UNDER CHALLENGE. 5. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY SUPPORTING THE IMPUGNED PENALTY AS LEVIED BY BOTH T HE LOWER AUTHORITIES BY HOLDING THAT THE ASSESSEE HAS CONCEALED ITS TAXABLE INCOME. IT HOWEVER EMERGES FROM THIS TRIBUNALS QUANTUM ORDER THAT IT IS NOT AN INSTANCE WHEREIN THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION OR ADD UCED ALTOGETHER FALSE EXPLANATION IN ORDER TO STATE SOURCE OF THE IMPUGNE D CASH DEPOSITS. THE FACT REMAINS THAT THE ASSESSEE HAS ALREADY PROVED TO HAV E BEEN ENGAGED IN COMMISSION BUSINESS IN AUTOMOBILE SECTOR WHEREIN IT IS NOT ALWAYS POSSIBLE TO FILE ALL THE RELEVANT CONFIRMATIONS. LEARNED CO -ORDINATE BENCH ALSO APPEARS TO HAVE BENEFIT OF OPENING BALANCE, ACCUMULATED PRO FIT AS WELL AS PEAK CREDIT I.T.A. NO. 3024/AHD/2013 (SHRI SANJAYSINGH B. GOHIL VS. ITO) A.Y. 2007-08 - 6 - AFTER PREPARING A FUND FLOW STATEMENT. WE TAKE INT O ACCOUNT THE SAME TO CONCLUDE THAT THIS IS NOT A FIT CASE TO INVOKE THE IMPUGNED PENALTY PROVISION AS THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE H IS CLAIM IN QUANTUM PROCEEDINGS. WE WISH TO OBSERVE HERE THAT THE HON BLE APEX COURT IN RELIANCE PETROPRODUCTS CASE 322 ITR 158 (SC) HAS A LREADY SETTLED THE LAW THAT QUANTUM AND PENALTY PROCEEDINGS ARE SEPARATE A ND EACH AND EVERY DISALLOWANCE / ADDITION MADE IN THE COURSE OF FORME R DOES NOT IPSO FACTO ATTRACT THE LATTER PENAL PROVISION IN THE ACT. WE KEEP IN MIND THE SAME AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. 6. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF MARCH, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 22/03/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0