ITO, RAJSAMAND V. Shri Bajrang Lal Kankani, RAJSAMAND

ITA 396/JODH/2013

• Counselvise Citation: 39623314 RSA 2013
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: P K CHHAPARWAL
• Keywords: Business income; Opportunity of being heard; Peak credit
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.396/JODH/2013 (A.Y. 2008-09) ITO, WARD-1, VS. SHRI BAJRANG LAL KANKANI, RAJSAMAND. BUS STAND, RAJNAGAR, RAJSAMAND. PAN NO. ALJPK 1498 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.K. CHHAPARWAL DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 06/01/2014. DATE OF PRONOUNCEMENT : 08/01/2014. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 28/03/2013 OF LD. CIT (A), UDAIPUR. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) HAS ERRED IN:- 1. HOLDING THE UNDISCLOSED CASH DEPOSIT IN BANK ACC OUNT AS TURNOVER AND APPLYING NET PROFIT RATE AND THEREBY RESTRICTING TH E ADDITION FROM RS. 2 12,35,262/- TO RS. 12,245/- MADE BY THE AO ON ACCOU NT OF UNDISCLOSED CASH DEPOSITS IN BANK ACCOUNT NAMELY WITH THE IDBI WHICH WAS NOT AT ALL DISCLOSED & WAS FOUND OUT BY THE AO. 2. DELETING ADDITION OF RS. 10,000/- UNDER THE HEAD INCOME FROM OTHER SOURCES DESPITE THE FACT THAT NO DOCUMENTARY EVIDEN CES WERE PRODUCED BY THE ASSESSEE BEFORE THE AO. 2 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME ON 30/03/2009 DECLARING AN INCOME OF RS. 1,0 4,200/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE I.T. ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) ON 18/05/2009. LATER ON CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER OBTAINED BANK ACCOUNT STATEMENT UNDER SECTI ON 133(6) OF THE ACT FROM IDBI RAJSAMAND WHICH REVEALED THAT THE ASSESSE E HAD DEPOSITED RS. 12,35,262/- IN HIS BANK ACCOUNT NO. 104104000004671 IN CASH. HE ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE CASH DEPO SIT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT FURNISHE D ANY REPLY AND HAD NOT DISCLOSED THIS BANK ACCOUNT IN THE BALANCE SHEE T. THE CONTENTION OF THE ASSESSEE WAS THAT THE CASH DEPOSITED IN BANK FR OM VARIOUS PLACES WAS THE SALE CONSIDERATION OF MARBLE, BUT THE ASSESSING OFFICER DID NOT ACCEPT THE SAID CONTENTION BY OBSERVING THAT THE ASSESSEE HAD NOT PRODUCED ANY DOCUMENTARY EVIDENCE. ACCORDINGLY, THE ADDITION OF RS. 12,35,262/- WAS MADE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAD 3 DISCLOSED MISCELLANEOUS INCOME AMOUNTING TO RS. 80, 400/- AND INTEREST INCOME OF RS. 23,800/- IN HIS RETURN OF INCOME, BUT THE INCOME SHOWN BY THE ASSESSEE WAS NOT SUBJECT TO VERIFICATION. HE M ADE A LUMP SUM ADDITION OF RS. 10,000/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM AS INCORPORATED IN PAGES 3 & 4 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER :- IT IS SUBMITTED THAT THE ASSESSEE AFTER COMPLETING HIS GRADUATION IN 1998 FROM GOVERNMENT COLLEGE NAGORE HE HAS JOINED A MARBLE TRADING COMPANY IN MUMBAI UPTO YEAR 2000 AND THEREAFTER HE CAME TO RAJNAGAR AND STARTED SUPPLY OF MARBLE ON COMMISSION BASIS. LN THIS ACTIVITY, THE ASSESSEE ON BEHALF OF THE PURCHASER / BUYER LOCATED AT MUMBAI, THANE, HYDERABAD, KANPUR, ETC. PURCHASED MATERIAL FROM THE LOCAL MARBLE TRADING/ GANG SAW UNIT AS PER THE REQUIREMENT OF THE CUSTOME R. THE BILL WAS PREPARED DIRECTLY IN THE NAME OF THE BUYER/PURCHASE R. GENERALLY THE PAYMENT HAS BEEN DIRECTLY MADE TO THE TRADER/ GANG SAW UNIT BY THE CUSTOMER, SOMETIMES THE ASSESSEE RECEIVES PAYMENT I N HIS BANK A/C AND IN TURN HE PAID TO THE TRADER/MARBLE UNITS. THE ASSESS EE CHARGED APPROXIMATELY RS. 1 TO RS. 2 PER SQUARE FEET FOR HI S SERVICES AND WAS FILING HIS ITR DECLARING THIS INCOME REGULARLY. DURING THE COURSE OF ASSESSMENT THE ASSESSEE HAS FULLY EXPLAINED THE NATURE OF SUCH CASH & CHEQUES DEPOSITED IN HIS BANK A/C WITH LDBL BY THE CUSTOMERS LOCATED IN DIFFERENT CITIES. LT IS SUBMIT TED THAT THE AO WAS FULLY CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSE E DURING HIS STATEMENT U/S 131 THAT THE CASH DEPOSITED IN HIS BANK ACCOUNT IS RELATED WITH THE SUPPLY OF MARBLE THROUGH THE ASSESSEE. IN THIS SITU ATION WHERE CASH IS DEPOSITED FIRST BY CUSTOMERS IN THE BANK ACCOUNT OF THE ASSESSEE, THEN AFTER THE ASSESSEE HAS WITHDRAWN THE MONEY AND PAID TO TH E SUPPLIER, THE QUESTION OF CALCULATION OF PEAK CASH DOES NOT ARISE . BUT THE AO UNDER MISCONCEPTION AND MISUNDERSTANDING THE FACT HAS ASK ED THE ASSESSEE TO PAY TAX ON THE PEAK CASH OF RS. 1,26,461/-. LN REP LY TO THIS QUESTION OF AO 4 THE ASSESSEE HAS SAID THAT THE INCOME OUT OF THESE TRANSACTIONS HAS ALREADY BEEN DECLARED IN THE RETURN AND WHATEVER BALANCE IN THE BANK ACCOUNT IS THE RESULTANT OF PAST 4-5 YEARS BUSINESS ACTIVITY S O NO TAX IS LEVIABLE. THESE STATEMENTS HAVE BEEN TAKEN ON 26.08.2010. THE COPY OF THE STATEMENTS ARE ENCLOSED AND THE AO HAS WITHOUT ALLOWING ANY OPPORT UNITY OF BEING HEARD HAS ADDED RS. 12,35,260/- ON ACCOUNT OF CASH DEPOSI TED IN BANK BY THE BUYER/CUSTOMERS LOCATED IN DIFFERENT CITIES AND RS. 10,000/- LUMP SUM ADDITION WAS MADE IN THE COMMISSION INCOME SHOWN BY THE ASSESSEE OF RS. 88, 620/- BY MAKING WRONG OBSERVATION THAT THE BANK ACCOUNT HAS NOT BEEN SHOWN IN THE BALANCE SHEET. WE ARE ENCLOSING HEREWITH THE COPY OF THE ORDER SHEET AND BANK ACCOUNT SHOWING CASH DEPOS ITED BY THE DIFFERENT MARBLE COMPANIES OF DIFFERENT CITIES. LN VIEW OF THE ABOVE IT IS CLEAR THAT THE ADDITIO N MADE BY THE AO IS ARBITRARY WITHOUT ANY BASIS AND AGAINST- NATURAL JU STICE BEING MADE WITHOUT ALLOWING ANY OPPORTUNITY OF BEING HEARD. 4. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER ASKE D THE QUESTIONS TO THE ASSESSEE REGARDING THE CASH DEPOSITS AND ABOUT THE PEAK CASH OF RS. 1,26,861/- INVOLVED IN THE UNACCOUNTED SALES AN D IN REPLY, THE ASSESSEE HAD ADMITTED THAT THE CASH DEPOSITS WERE R ELATED TO MARBLE TRADING DONE BY HIM AND REGARDING THE PEAK CASH HE HAD REPLIED THAT THE SAME WAS RELATED WITH AN INVESTMENT MADE IN THE EAR LIER YEARS. LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER ON THE BASIS OF STATEMENTS TAKEN HAD PASSED THE ASSESSMENT ORDER, I N WHICH HE HIMSELF HAD OBSERVED THAT THE PEAK THEORY COULD NOT BE APPL IED IN THIS CASE AND MADE THE ADDITION OF THE TOTAL CASH DEPOSITS/TURNOV ER OF THE ASSESSEE TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. LD. CIT (A) OPINED THAT THE 5 TOTAL CASH DEPOSITS/TURNOVER COULD NOT BE CONSIDERE D AS THE INCOME OF THE ASSESSEE. HE, THEREFORE, APPLIED NET PROFIT RATE O F 7.5% TO THE TOTAL TURNOVER WHICH CAME TO RS. 92,645/-. HE ALLOWED TH E CREDIT OF THE INCOME AMOUNTING TO RS.80,400/- DECLARED BY THE ASS ESSEE IN HIS RETURN OF INCOME. ACCORDINGLY, NET ADDITION OF RS. 12,245 /- WAS SUSTAINED. 5. AS REGARDS TO THE ANOTHER ADDITION OF RS. 10,000/- MADE BY THE ASSESSING OFFICER, THE LD. CIT(A) OBSERVED THAT THE ADDITION WAS MADE WITHOUT BRINGING ANY ADVERSE MATERIAL ON THE RECORD AND MERELY ON ESTIMATE BASIS, HE THEREFORE, DELETED THE SAME. NO W THE DEPARTMENT IS IN APPEAL. 6 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT E XPLAIN THE SOURCE OF CASH DEPOSIT IN HIS BANK ACCOUNT, THEREFORE, THE AD DITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE INSTANT 6 CASE, THE EXPLANATION OF THE ASSESSEE AS REGARDS TO THE CASH DEPOSIT IN THE BANK ACCOUNT WAS THAT THE SAID AMOUNT WAS RECEIVED FROM PURCHASERS/BUYERS LOCATED AT VARIOUS PLACES LIKE MU MBAI, THANE, HYDERABAD, KANPUR ETC. HE ALSO EXPLAINED THAT HE W AS SUPPLYING MARBLE ON COMMISSION BASIS. THE SAID EXPLANATION OF THE A SSESSEE WAS NOT REBUTTED, THEREFORE, WE ARE OF THE VIEW THAT THE AS SESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE TOTAL DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE AS HIS UNDISCLOSED INCOME AND THE LD. CIT( A) RIGHTLY WORKED OUT THE INCOME BY APPLYING THE NET PROFIT RATE ON THE T OTAL RECEIPTS RELATING TO THE BUSINESS OF THE ASSESSEE. IN OUR OPINION, L D. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 12,245/- BECAUSE THE ASSESSEE HAD DECLARED ONLY AN INCOME OF RS. 80,400/- FROM HIS BUSINESS AN D THE LD. CIT(A) WORKED OUT THE BUSINESS INCOME AT RS. 92,645/- BY A PPLYING THE NET PROFIT RATE ON THE TOTAL TURNOVER OF THE ASSESSEE. 9 . AS REGARDS TO THE LUMP SUM ADDITION OF RS. 10,000 /- MADE BY THE ASSESSING OFFICER IS CONCERNED, IT IS NOTICED THAT THE ASSESSING OFFICER MADE THE ADDITION MERELY ON ESTIMATE BASIS WITHOUT BRINGING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE SAID INCOME WAS EARNED BY THE ASSESSEE. WE THEREFORE, CONSIDERING THE TOTALITY O F THE FACTS, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 7 10 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMIS SED. (ORDER PRONOUNCED IN THE COURT ON 08 TH JANUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH JANUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.