Ankur Jain, Ghaziabad V. PrCIT, Ghaziabad

ITA 3360/DEL/2019

AI Insights

The case involves Ankur Jain, who appealed against the order of the Pr. CIT, Ghaziabad, which enhanced his income assessment under section 263 of the Income Tax Act, 1961. The original assessment by the ITO included an 8% profit on unexplained cash deposits under section 44AD, which the Pr. CIT later contested, viewing the assessment as erroneous and prejudicial to the revenue's interest. The Tribunal examined whether the Revisional Authority was justified in its enhancement of the income assessment, ultimately deciding in favor of the assessee, Ankur Jain, based on the thorough examination and assessment already conducted by the ITO.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 131147 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-11-2022
• Assessment Year: misc
• Appeal Filed On: 17-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEEPANSHU AGGARWAL; AMOUNT OF RS.; . TOTAL CASH DEPOSIT
• Keywords: Peak credit; Set aside
• Section: 148; 263; 44AD; 48; 22

Judgement Text

Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 3360/Del/2019 (Assessment Year: 2011-12) Ankur Jain, C/o. L. M. Agarwal & Co, CAs, KA-32, Kavi Nagar, Ghaziabad Vs. Pr. CIT, Ghaziabad (Appellant) (Respondent) PAN: AFLPJ5483L Assessee by : Deepanshu Aggarwal, CA L. M. Aggarwal, CA Revenue by: Shri P. Praveen Sidharth, CIT DR Date of Hearing 22/11/2022 Date of pronouncement 22/12/2022 O R D E R PER ANUBHAV SHARMA, J. M.: 1. The present appeal has been preferred by the Assessee against the order u/s 263, dated 30.03.2019 of Ld. Pr. CIT(A), Ghaziabad (hereinafter referred as Ld. Revisional Authority ) arising out of an assessment order dated 13.12.2016 passed u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the Assessing Officer, ITO, Ward-1(1), Ghaziabad (hereinafter referred as the Ld. AO). 2. The appellant had filed return of income on 28.09.2011 of Rs. 1,86,430/- and the assessment was completed by the Ld. AO u/s 147/ 143(3) of the Act on 13.12.2016 at total income of Rs. 3,91,980/- after making addition of Rs. 2,05,550/- offered by the assessee on agreed Page | 2 basis, being profit working out @8% on the aforesaid cash deposit of Rs. 25,65,812/-. In this context the ld AO had received information, therefore, notice u/s 148 of the Act was issued on 19.09.2015. 3. The ld Pr. CIT, Ghaziabad however considered this order erroneous and prejudicial to the interest of revenue as it observed that the assessee revised computation of income beyond time limit. Ld. revisional authority was of the view that there was though substantial evidence placed on record showing the source of cash deposited of Rs. 25,65,812/-. The ld Revisional Authority was of the view that the assessee had already worked out the profit as per audited profit and loss account at Rs. 18,46,180/- and mentioned in the return that the entire expenses have been taken into account while arriving at the profit of Rs. 1,86,430/-. Therefore, surrendering a profit @8% on the balance unexplained cash deposited at Rs. 25,65,812/- by applying provisions of section 44AD of the Act was not permissible under the law for the reason that assessee could not exercise two different option for business receipts of the year under consideration. Thus, the ld Revisional Authority was of the view that the entire cash deposit in bank deserves to be treated as unexplained income for the year under consideration. 4. In the reply to the show cause notice the assessee tried to make out the case that merely to get the assessment closed at the insistence of the tax authorities the deposit was surrendered @8% profit. It was submitted that the deposit were profit and payment of Kirana business belonging to Ankur Jain HUF having PAN No. AALHA3364C for which a separate return was filed. It was submitted that the ld AO had not accepted this request as the said bank account was opened with the PAN of Ankur Jain individual and therefore at the insistence the ld AO the assessee had surrendered the deposit at 8% on profit. 5. The ld Revisionary Authority however, observed that the assessee had disclosed bank account maintained with Bank of Baroda meaning thereby that the business transaction were from the bank account held in Page | 3 Bank of Baroda. While the deposit were made in the PNB Bank, Ambedkar Road, Ghaziabad Branch. The Revisional Authority observed that on one hand the cash deposit of Rs. 25,65,812/- in the disclosed bank account was offered by the assessee @8% as per provision of section 44AD of the Act and on the other hand the assessee worked out net profit of Rs. 2,22,912/- on the sale of Rs. 6282017.76 shown in the Profit and Loss Account of his source. Ld Revisional Authority was of the view that on one hand income as per Profit and Loss Account and other hand as per provision 44AD of the Act cannot be accepted. Accordingly, the cash deposit was considered to be unexplained cash deposit liable to be added u/s 68 of the Act and the failure of the ld AO to do so and to accept the same as additional income being 8% of Rs. 205550/- was not sustainable and accordingly, the ld AO was directed to enhance the income of the assessee by an amount of Rs. 23,60,547/-, that was arrived by reducing the disputed deposit of Rs. 2565812/- less addition made at Rs. 2,05,550/-. 6. The assessee is in appeal against the order u/s263 of the Act, raising following grounds of appeal:- “1. That the learned Principal Commissioner of Income. Tax erred in law to issue direction to enhance the income of the assessee by amount of Rs. 23,60,547.00 (Total cash Deposit of Rs. 25,65,812.00 (-) Addition of Rs. 2,05,550.00) made by ITO in assessment order pass U/s 147/143(3) dt. 13.12.2016. 2. Whether the learned PCIT has rightly cancelled the valid order as passed U/s 147/143(3) by the then ITO with the direction of higher authority at that time which is reflected in the body of assessment order due to that the evidence of such direction now not available on the records. 3. That in response to show cause notice U/s 263 of I. Tax Act the assessee submit strong reply with evidence which is knowingly thrashed out in to dustbin by the learned PCIT Ghaziabad including the case judgment of higher authority on this issue. Page | 4 4. That in any case invoking the provision of section 263 of I. Tax Act and the order U/s 263 of I. Tax Act is wrong and illegal and without any jurisdiction and liable to be canceled.” 7. Heard and perused the record. 8. On behalf of the assessee it was submitted that the Ld. Revisional Authority has fallen in error to consider the entire cash deposit as unexplained income. It was submitted that Ld. AO had made due inquiry into alleged cash deposit and after taking into consideration the submissions of assessee, Ld. AO added 8% of the cash deposits surrendered as sales. It was submitted that at 8% of the profit u/s 44AD, addition of Rs. 2,05,265/- was made and Ld. PCIT has wrongly arrived on a conclusion of loss of revenue because in fact as per P & L account net profit was 3.62% only. It was also submitted that if peak credit theory is applied than also addition would have been Rs. 1,41,579/- which is lower than what is added by Ld. AO and thus it was submitted the assessment order was not prejudicial to the interest of the revenue. 9. On the other hand, Ld. DR submitted that the Ld. PCIT has rightly invoked the revisional powers as Ld. AO had fallen in error to give benefit of Section 44AD of the Act and also accepting some part of the income by way of accounting in P & L Accounts. 10. Giving thoughtful consideration to the matter on record, it can be appreciated from the paper book filed by the appellant that the reasons for notice u/s 148 of the Act available at page no. 48 of the paper book mention that Ld. AO had concluded that the account with PNB, Ambedkar Road, Ghaziabad relates to individual and has not been opened in HUF capacity. No ITR has been filed by the assessee/ appellant in individual capacity. Thus, the source of cash deposit were considered to be unexplained. 11. Assessee however, claimed vide reply to notice u/s 147/148 of the Act, that the assessee is the proprietor of M/s Aadi Nath Trading Page | 5 Company 383B/1 Kirana Mandi, Ghaziabad, in the Individual capacity and file the Tax Audit return under the Pan No. AFLPJ5483L vide R.No. 18767 dt. 28/09/2011. copy of computation of Income, trading, Profit & Loss account Balance Sheet, Form 3CB, Form 3CD, Tax Challan. So it was wrongly mentioned in the reasons recorded that the assessee not filed any return of income. 12. That in respect of reasons that the Punjab National Bank Account related to Individual and has not been opened in HUF capacity. It was submitted that at the time of opening such saving bank account with Punjab National Bank. Bank objected to open the SB Account in HUF capacity hence in order to run the HUF business smoothly apart the business run in his individual capacity the assessee open such account in his personal name but transaction recorded in the above account belong to HUF business and subsequently the assessee open saving bank account with Bank of Baroda on 15/04/2011. The return of Ankur Jain HUF for A.Y. 2011-12 was filed under the provision of section 44AD of I.Tax Act. 13. So in view of above it was submitted that transaction recorded in SB A/c Punjab National Bank belong to business run by the assessee in his HUF capacity and HUF return was regularly filed since A.Y. 2009-10 in addition to business run in the individual capacity and Tax Audited return was already filed in time and that opening the bank account in the individual Name is not the conclusive evidence that transaction recorded belong to individual case only. 14. Considering the aforesaid submission and relying the same, Ld. AO has considered surrendered income of Rs. 2,05,551/-. The assessment order reflects that in para no. 2 Ld. AO had taken into account the peak credit balance factor also. Thus, there appears to be an erroneous exercise of jurisdiction by Ld. Revisional Authority as the issue was thoroughly examined by the Ld. AO and taking into consideration the facts and circumstances assessment order was passed. Page | 6 15. There is force in the submission of Ld AR, that when Ld. AO had examined the issue of deposit of cash and accepted it to be business income then Ld. PCIT was in error in setting aside the assessment order on the ground that one part of the income was assessed as per P & L account and the other part of income was assessed as per the provisions of section 44AD of the Act, because as such there was no loss of revenue and rather the P & L Account profit percentage being lower, the revenue only gained. 16. That being so, the assessment order cannot be considered to be one prejudicial to the interest of revenue and accordingly invoking of the jurisdiction u/s 263 by Ld. PCIT is not justified. The ground raised are decided in favour of the appellant. The appeal of assessee is allowed. The impugned order of ld. Revisional Authority is set aside. Order pronounced in the open court on 22/12/2022. -Sd/- -Sd/- (SHAMIM YAHYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22 /12/2022 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Page | 7 Date of dictation Date on which the typed draft is placed before the dictating member Date on which the typed draft is placed before the other member Date on which the approved draft comes to the Sr. PS/ PS Date on which the fair order is placed before the dictating member for pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order