Hasmukhbhai Ravjibhai Chaudhari, Mandvi V. Income Tax Officer, Ward - 2, Bardoli

ITA 325/SRT/2022

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Hasmukhbhai Ravjibhai Chaudhari appealed against the order of the National Faceless Appeal Centre (NFAC), which upheld the additions made by the Assessing Officer for the assessment year 2011-12. The additions were based on unexplained cash deposits and contract receipts noted in the assessee's bank account, for which no return of income was filed. The Tribunal considered the submissions and the precedents, particularly focusing on the nature of the deposits and the business activities of the assessee, which were not adequately documented but were admitted to be related to contract and carting business.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134684 (ITAT-SURAT)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 29-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 06-11-2022
• Other Referred Cases: Commissioner of Income-tax- Vs. Pradeep Shantilal Patel
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; TDS; FORM 26AS
• Section: 148; 144; 194C

Judgement Text

आयकर अपीलीय अिधकरण, सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, “SMC” BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA No.325/SRT/2022 (AY 2011-12) (Hearing in Physical Court) Hasmukhbhai Ravjibhai Chaudhari, Choramba, AT Post Choramba Taluka Mandvi, Surat-394440 PAN No: AMIPC 8927 C Vs Income Tax Officer, Ward-2, Bardoli-394601 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Sapnesh R Sheth, CA राजˢ की ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of hearing 30.08.2023 उद्घोषणा की तारीख/Date of pronouncement 30.08.2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld.CIT(A)”] dated 06.09.2022 for assessment year 2011-12, which in turn arises from the addition made by the Income Tax Officer, Ward-2, Bardoli /Assessing Officer in assessment order dated 24.12.2018. The assessee has raised the following ground of appeal:- “1. On the facts and in the circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer of reopening assessment by issuing notice u/s 148 of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case as well as law, on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer of passing ex-parte order u/s 144 of the I.T. Act, 1961. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by making addition of Rs.14,29,763/- as unexplained income u/s 68 of the I.T. Act, 1961. ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 2 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by making addition of Rs.8,064/- as 8% of Contract income u/s 44AD of the I.T. Act, 1961 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Brief facts of the case are that no return of income was filed by assessee for the year under consideration, i.e., 2011-12. The Assessing Officer was having information as per details in the ITD systems that assessee has made cash deposit of Rs.13,27,000/- in his bank account with the State Bank of India Branch and also received an amount of Rs.1,00,800/- on account of contract receipts on which Tax Deducted at Source (TDS) under section 194C was deducted. On the basis of such information, the Assessing Officer was having belief that the income chargeable to tax had escaped assessment to the extent of Rs.14,27,800/-. The Assessing Officer after recording the reasons of re-opening issued notice under section 148 on 23.03.2018. The Assessing Officer recorded that despite service of notice under section 148 no return of income was filed by the assessee. The Assessing Officer issued show cause notice as to why assessment be not completed under section 144 of the Act vide notice issued dated 05.12.2018. The contents of such show cause notice was recorded in para-2 of the assessment order. The Assessing Officer recorded that neither assessee filed any submission nor filed return of income on 24.12.2018. The Assessing Officer completed assessment under section 144 and made addition of Rs.14,29,763/- on account of credit ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 3 in the bank account of assessee. The Assessing Officer further added @ 8% of contract receipt of Rs.1,00,800/- being Rs. 8,064/- while passing the assessment order under section 144 r.w.s 147 of the Act on 24.12.2018. 3. Aggrieved by both the additions in the assessment order, assessee filed appeal before Ld. CIT(A). Before NFAC/Ld. CIT(A) assessee submitted that he is an individual and earning income from contract and carting and interest on savings account. The assessee resides at Bardoli and no notice during assessment was served upon him. The notice was sent at the address mentioned in his PAN, which was collected by his parent, who are illiterate. The assessee submitted that deposit in the bank account was on account of contract income. During assessment, assessee was unable to furnish document as the notices were sent at the address mentioned in PAN of assessee, which was collected by his parent. In the grounds of appeal, assessee challenged the validity of re-opening as well as additions on merit. 4. The NFAC/Ld. CIT(A) after considering the submission of assessee upheld the validity of re-opening as well as additions on merit. While upholding the validity of re-opening, Ld. CIT(A) held that neither assessee disputed the issuance of notices nor filed return of income for the impugned assessment year. At the stage of reopening, only a reasonable belief is required that income has escaped assessment. The reopening is based on basic and valid information of cash deposit. The Ld. CIT(A) also rejected the contention of assessee that assessment order was passed beyond the limitation. The Ld. CIT(A) held that ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 4 assessment order was passed within nine months from the end of financial year, in which notice under section 148 was served upon assessee. 5. On merit, the Ld. CIT(A) held that assessee failed to explain the nature and source of such credit and deposited in his bank account. The Assessing Officer has computed contract income @ 8%, however, as no return of income was filed by assessee and assessee has explained the nature of source of such credit. Thus, remaining addition of Rs.13,27,000/- was upheld. Further aggrieved the assessee has filed present appeal before the Tribunal. 6. I have heard the submission of Ld. Authorized Representative (Ld. AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr- DR) for the Revenue. The Ld. AR for the assessee submits that he has a very limited prayer before the Bench that assessee has explained before Ld. CIT(A) that he could not contest the assessment proceedings as notice was served at the address mentioned in PAN of assessee. However, Ld. AR for the assessee submits that credit in the bank account are from the contract receipt, carting income and interest earned on savings bank account and he has filed copy of bank statement, which was admittedly available before Assessing Officer also. The patterns of deposits as well as withdrawals in the bank account of assessee clearly showed that assessee’s bank account was used for small business of contract and carting income. The assessee has incurred expenses which is duly reflected and can be ascertained from various debit entries in assessee’s bank account. The Ld. AR for ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 5 the assessee submits that Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax- Vs. Pradeep Shantilal Patel (2014) 42 tamann.com 2 (Guj)/[2014] 221 Taxman 436 (Guj)[19-11- 2013] held that where assessee admitted that cash deposits pertained to his retail business but details and nature of business were not forthcoming from record, considering total turnover of assessee, net income had to be determined under section 44AF. The Ld. AR for the assessee submits that Assessing Officer has already taxed @ 8% of contract receipt, therefor on reasonable estimation of income may be upheld and not the entire transaction. The Ld. AR for the assessee further submits that even if the assessee was unable to discharge his onus, hence, the entire transactions on deposits / credit in the bank account of assessee can never be held as income though only a reasonable estimation addition income on account of estimation of addition can be made. 7. On the other hand, Ld. Sr-DR for the Revenue submits that assessee has not furnished any details before Assessing Officer and now come to before Bench with the plea that only a reasonable estimation may be made. The Ld. Sr-DR for the Revenue submits that assessee is not eligible for getting any relief as assessee has not filed any corroborative evidence to substantiate his nature of business. In alternative, Ld. Sr- DR for the Revenue submits that without prejudice the matter may be restored back to the file of Assessing Officer to examine afresh the issues with a direction that assessee to substantiate his plea before Assessing Officer. ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 6 8. In short rejoinder submission, Ld. AR for the assessee submits that Assessing Officer was having complete details of bank statement as well as Form 26AS and as per details in Form-26AS, the assessee has received about Rs.1.00 lakh on account of contract receipt which has already been taxed. The Ld. AR for the assessee submits that under the provision of Income Tax file of income of the citizen is to be taxed and not entire asset or total turnover of business. On the prayer of restoration by ld SR DR for the revenue, the ld AR for the assessee submits that this case relates to AY 2011-12 and no useful purpose will be served in sending the matter back to the assessing officer, if reasonable estimation of income is made by the Tribunal. 9. I have considered the submission of both the parties and perused the order of lower authorities carefully. I have also deliberated case law relied by Ld. AR for the assessee. Though I find that assessee has raised specific ground of appeal regarding validity of re-opening, however, no submission was made against such ground of appeal before me. Therefore, Ground Nos. 1 & 2 are treated as not pressed and thereby dismissed. 10. Ground No.3 relates to addition of Rs.14,29,763/-. I find that Assessing Officer made addition of entire credit in the bank account of assessee by taking view that no response or explanation was furnished by assessee despite services of various notices. I further find though before Ld. CIT(A) assessee has categorically contended that he has in the business in contract and carting. The Ld. CIT(A) upheld the addition by taking view that assessee has failed to explain his source ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 7 of income. I find that the Assessing Officer has made addition @ 8% on contract receipts of Rs.1,00,800/-. The Hon'ble jurisdictional High Court in the case of Pradeep Shantilal Patel (supra) while considering the issue of cash credit / deposits in savings bank account when the nature of business was not forthcoming from the record, held that when the assessee admitted the cash deposits pertaining to his retail business and nature of business was not forthcoming on record, the net income has to be determined on the basis of turnover of assessee. Thus, keeping in view the binding precedent of Hon'ble jurisdictional High Court and further keeping in view that the total deposits in bank account of assessee, therefore I deem it fit and proper to estimate the income of assessee @ 10% of credit / deposits in assessee’s bank account. With this observation, the ground of assessee’s appeal is partly allowed. The assessing officer is directed accordingly. In the result, this ground of appeal is allowed. 11. In the result, the appeal of the assessee is partly allowed. Order pronounced in the court at the close of the hearing on Wednesday, 30 th August, 2023. Sd/- (PAWAN SINGH) [Ɋाियक सद˟ JUDICIAL MEMBER] सूरत /Surat, Dated: 30/08/2023 Dkp. Out Sourcing Sr.P.S ITA No.325/SRT/2022 (A.Y 11-12) Hasmukhbhai R Chaudhari 8 Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT By order 5. DR 6. Guard File // True Copy // Senior Private Secretary/ Private Secretary/Assistant Registrar, ITAT, Surat True copy/