MITHALAL VAGATAJI MALI, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 3786/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5829 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 02-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWARUP
• Keywords: Business income; Peak credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 3786 /MUM/20 16 (ASSESSMENT YEAR 20 11 - 12 ) MITHALAL VAGTAJI MALI SHOP NO. 21, RANGOLI TIME COMPLEX, DR. B.A. ROAD, PAREL (EAST) MUMBAI - 400 012. PAN : AFJPM4760P V S . ITO 20(2)(2) MUMBAI ( APPELLANT ) ( RESPONDENT ) A SSESSEE BY SHRI AKASH KUMAR DEPARTMENT BY MS. POOJA SWARUP DATE OF HEARING 14 . 0 6 . 201 8 DATE OF PRONOUNCEMENT 06 . 0 7 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.3.2016 PASSED BY THE LEARNED CIT(A) - 32, MUMBAI AND IT RELATES TO A.Y. 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 212.2 4 LAKHS , BEING CASH DEPOSIT S MADE INTO THE BANK ACCOUNT S OF THE ASSESSEE. 2. FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE FILED HI S RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF ` 2,05,210/ - . DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED FROM THE AIR INFORMATION THAT THE ASSESSEE HAS DEPOSITED CASH AGGREGATING TO ` 212.24 LAKHS INTO HIS SAVINGS BANK ACCOUNT S MAINTAINED WITH ICICI BANK. THE ASSESSING OFFICER CALLED FOR EXPLANATION F ROM THE ASSESSEE IN RESPECT OF THE CASH DEPOSITED INTO HIS BANK ACCOUNT. THE ASSESSEE SUBM ITTED THAT HE IS DEALING IN MOBILE ACCESSORIES, LEATHER GOODS ETC. ON COMMISSION BASIS. HE SUBMITTED THAT ALL DOCUMENT RELATING TO HIS BUSINESS ACTIVITIES WERE DESTRO YED IN NOVEMBER 2011 IN THE FIRE THAT BROKE DOWN AT SAHARA MARKET, MITHALAL VAGTAJI MALI 2 WHERE HIS SHOP WAS LOCATED. HE SUBMITTED THAT HE WAS GETTING COMMISSION @ 2% ON THE SALE AFFECTED BY HIM. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION S FURNISHED BY THE ASS ESSEE AND ACCORDINGLY TREATED THE ABOVE SAID DEPOSIT OF ` 212.24 LAKHS AS UNEXPLAINED INCOME OF THE ASSESSEE. 3. BEFORE THE LEARNED CIT(A), THE ASSESSEE PLEADED THAT THE DEPOSITS WERE MADE BY HIM AS WELL AS BY HIS CUSTOMER S SPREA D OUTS IDE MUMBAI ALSO. HE SUBMITTED THAT C ASH WAS WITHDRAWN IMMEDIATELY THEREAFTER AND GIVEN TO THE SUPPLIERS. PLACING RELIANCE ON THE TRANSACTIONS OF DEPOSITS AND WITHDRAWALS MADE, THE ASSESSEE SUBMITTED THAT THE DEPOSITS REPRESENT HIS BUSINESS PROCEEDS ONLY. THE ASSESSEE, IN TH E ALTERNATIVE, SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE ADDED PEAK CASH CREDIT INSTE A D OF ASSESSING ENTIRE DEPOSITS , SINCE THERE WAS CONTINUOUS TRANSACTION OF DEPOSITS AS WELL AS WITHDRAWALS. THE LEARNED CIT(A) WAS ALSO NOT CONVINCED WITH THE CON TENTION S OF THE ASSESSEE. A CCORDINGLY HE CONFIRMED THE ASSESSMENT MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ACTED AS COMMISSION AGENT FOR MOBILE ACCESSORIES A ND LEATHER GOODS AND WAS GETTING 2% OF SALES AMOUNT AS HI S COMMISSION INCOME. HE SUBMITTED THAT THE DEPOSITS HAVE BEEN MADE FROM MANY CITIES AWAY FROM MUMBAI AND THIS FACT SUBSTANTIATES THE SUBMISSION OF THE ASSESSEE THAT THEY REPRESENT SALE PROCEEDS. HE S UBMITTED THAT ALL RECORDS OF THE ASSESSEE HAVE BEEN DESTROYED IN FIRE AND HENCE THE ASSESSEE COULD NOT BRING ANY DOCUMENT TO SUPPORT HIS EXPLANATION S . HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER , IN THE ALTERNATIVE, SHOULD HAVE ASSESSED PEAK AMOUNT OF CASH CREDIT INSTEAD OF ASSESSING ENTIRE DEPOSITS , SINCE THERE IS CONTINUOUS TRANSACTION OF DEPOSITS AND WITHDRAWALS. HE FURTHER SUBMITTED THAT THE PEAK CREDIT CONCEPT HAS BEEN APPROVED BY HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. PURUSHOTTAM JHAWAR (2013) 40 TAXAMNN.COM 533 (AP) AND ALSO BY HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. FERTILIZER TRADERS (2014) 42 TAXMNN.COM 476 (ALL). MITHALAL VAGTAJI MALI 3 5. THE LEARNED DR, ON THE CONTRARY, STRONGLY SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). THE LE ARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT SUBSTANTIATED HIS EXPLANATION THAT THE DEPOSITS REPRESENT SALE PROCEEDS. SHE FURTHER SUBMITTED THAT THE RESPONSIBILITY TO PROVE CASH CREDIT PLACED UPON THE ASSESSEE U/S. 68 OF THE ACT. SHE SUBMITTED THAT THE ASS ESSEE HAS FAILED IN HIS RESPONSIBILITY AND HENCE THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. THE LEARNED DR FURTHER SUBMITTED THAT THAT THE PEAK CREDIT CONCEPT CANNOT BE APPLIED , WHEN THE ASSESSEE UNABLE TO EX PLAIN SOURCES OF DEPOSIT AND CORRESPONDING PAYMENTS, AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. D.K. GARG (ITA NO. 115/2005 DATED 4.8.2017). ACCORDINGLY, SHE SUBMITTED THAT THE ORDER PASSED BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERF ERENCE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS THE CONTENTION OF THE ASSESSEE THAT THE DEPOSITS MADE INTO HIS BANK ACCOUNT REPRESENT SALE PROCEEDS OF MOBILE ACCESSORIES, LEATHER GOODS ETC. , IN WHICH HE WAS DEALING AS COMMISS ION AGENT AND WAS GETTING COMMISSION OF 2% ONLY ON SUCH SALES. IT WAS FURTHER SUBMITTED THAT THE CASH SO DEPOSITED WAS WITHDRAWN IMMEDIATELY AND GIVEN TO THE CONCERNED SUPPLIERS. IT IS THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE ABOVE SAID EXPLA NATION S BY BRINGING ON RECORD ANY SUPPORTING DOCUMENTS. IN THIS REGARD, EXPLANATION GIVEN BY THE ASSESSEE IS THAT ALL RECORDS WERE DESTROYED BY FIRE THAT OCCURRED IN THE BUILDING WHERE HIS OFFICE WAS LOCATED. 7. THE ASSESSEE HAS FILED COPIES OF BANK ACCOU NT S . PERUSAL OF THE SAME WOULD SHOW THAT CASH DEPOSITS ARE MADE NOT ONLY FROM MUMBAI BU T ALSO FROM VARIOUS OTHER PLACES INCLUDING FARWAY PLACES LIKE DINDIGU L LOCATED IN TAMIL NADU, THIRU AND PALGHAT LOCATED IN KERALA ETC. THE DEPOSITS SO MADE FROM FARAWAY PLACES, IN A WAY, SUPPORT THE EXPLANATION OF THE ASSESSEE THAT THE SAME REPRESENTS SALE PROCEEDS. HENCE, I N OUR VIEW , THE ABOVE SAID EXPLANATIONS CANNOT BE BRUSH ED ASIDE ALTOGETHER. THE LEARNED CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS NOT GIVEN ANY COGENT REASON FOR MAKING MITHALAL VAGTAJI MALI 4 DEPOSITS AND THEREAFTER WITHDRAWING THE SAME. IT IS POSSIBLE THAT THE CUSTOMERS OF THE ASSESSEE HAVE MADE DEPOSITS INTO THE BANK ACCOUNT. WE HAVE NOTICED THAT THERE HAS BEEN DEPOSITS OF CASH AND WITHDRAWAL OF CASH ON EVERY DAY. FURTHE R, THE DEPOSITS/ WITHDRAWALS HAVE BEEN MADE ON MORE THAN ONE OCCASION IN A DAY. THERE SHOULD NOT BE ANY DISPUTE THAT NOBODY WILL MAKE DEPOSITS AND WITHDRAW THE SAME ON THE SAME DAY , FOR THE SAKE OF PLEASURE. ACCORDINGLY, IN OUR VIEW, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE DEPOSITS SO MADE REPRESENT SALE S PROCEED S, SINCE THERE ARE DEPOSITS /WITHDRAWALS ON EVERY DAY . 8. THE LD D.R CONTENDED BEFORE US, BY PLACING RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. D.K.GARG (SUPRA) THAT THE PEAK CREDIT THEORY COULD BE APPLIED ONLY WHEN THE ASSESSEE IS ABLE TO EXPLAIN THE SOURCES OF DEPOSITS AND CORRESPONDING PAYMENTS. WE NOTICE THAT THE HONBLE DELHI HIGH COURT HAS RENDERED ITS DECISION BY FOLLOWING T HE DECISIONS RENDERED IN THE CASE OF CIT VS. VIJAY AGRICULTURAL INDUSTRIES (2007)(294 ITR 610) AND BHAIYALAL SHYAM BIHARI VS. CIT (2005)(276 ITR 38). ON THE CONTRARY, THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF PURUSHOTTAM JHAWAR (SUPRA) AND ALSO ANOTHER DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF FERTILIZER TRADERS (SUPRA) TO SUPPORT HIS CLAIM FOR APPLYING PEAK CREDIT THEORY . BE THAT AS IT MAY, WE HAVE COME TO THE CONCLUSION THAT THE DEPOSITS MADE BY THE ASSESSEE MAY REPRESENT HIS BUSINESS RECEIPTS AND HENCE THE QUESTION OF APPLYING PEAK CREDIT THEORY IN THE INSTANT CASE DOES NOT APPLY. 9. THE LD D.R ALSO CONTENDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE RESPONSIBILITY PLACE D ON HIM U/S 68 OF THE ACT AND HENCE THE TAX AUTHORITIES ARE JUSTIFIED IN ASSESSING THE ENTIRE DEPOSITS AS INCOME OF THE ASSESSEE. EVEN THOUGH THE PROVISIONS OF SEC.68 PLACES INITIAL ONUS ON THE SHOULDERS OF THE ASSESSEE, YET THE SAID SECTION GIVES A DISC RETION TO THE AO NOT TO ASSESS THE ENTIRE CASH CREDITS AS INCOME OF THE ASSESSEE, AS HELD BY HONBLE SUPREME COURT IN THE CASE OF P.K.NOORJAHAN (237 ITR 570). HENCE THE FACTS AND MITHALAL VAGTAJI MALI 5 CIRCUMSTANCES OF THE CASE PLAY AN IMPORTANT ROLE IN APPLICATION OF PROVISION S OF SEC.68 OF THE ACT. IN THE INSTANT CASE, WE HAVE NOTICED THAT THERE ARE MULTIPLE DEPOSITS AND MULTIPLE WITHDRAWALS ON A SINGLE DAY . HENCE ASSESSING THE DEPOSITS ALONE, WITHOUT CONSIDERING THE WITHDRAWALS AND ALSO CONTENTIONS OF THE ASSESSEE WITH REGA RD TO THE SOURCES OF DEPOSITS, MAY LEAD TO RENDERING INJUSTICE TO THE ASSESSEE. IN THE PRECEDING PARAGRAPHS, WE HAVE HELD THAT THE DEPOSITS MAY REPRESENT BUSINESS RECEIPTS. IN THAT CASE, WHAT IS REQUIRED TO BE ASSESSED IS THE PROFIT ELEMENT INVOLVED IN T HOSE RECEIPTS. THE ASSESSEE HAS SUBMITTED THAT HE IS GETTING COMMISSION INCOME OF 2% ON THE SALE RECEIPTS. HOWEVER, THE ASSESSEE COULD NOT SUBSTANTIATE THE SAME WITH ANY CREDIBLE EVIDENCE. HENCE WE ARE UNABLE TO AGREE WITH THE PERCENTAGE OF PROFIT CLAIM ED BY THE ASSESSEE. THE FACT THAT THE RECEIPTS ARE COMING FROM FARAWAY PLACES ALSO SHOW THAT THE ASSESSEE SHOULD BE INCURRING EXPENSES IN HIS BUSINESS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE MAY BE PUT TO REST, IF THE NET INCOME, I.E., NET OF ALL EXPENSES IS ESTIMATED AT 5% OF THE AGGREGATE AMOUNT OF DEPOSITS. ACCORDINGLY WE DIRECT THE AO TO ESTIMATE THE BUSINESS INCOME OF THE ASSESSEE @ 5% OF AGGREGATE AMOUNT OF DEPOSITS. THE ASSESSEE HAS ALREADY DECLARED A SUM OF RS.2,04,525/ - AS HIS BUSINESS INCOME. HENCE THE DIFFERENCE BETWEEN THE BUSINESS INCOME ESTIMATED AT 5% OF AGGREGATE AMOUNT OF DEPOSITS AND THE BUSINESS INCOME DECLARED BY THE ASSESSEE SHALL BE ADDED BY THE AO. WE ORDER ACCORDINGLY. THE ORDER PASSED BY LD CIT(A) WOULD BE MODIFIED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 7 .201 8 . SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER M UMBAI ; DATED : 6 / 7 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT MITHALAL VAGTAJI MALI 6 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// SENIOR P RIVATE S ECRETARY PS ITAT, MUMBAI