Sri. Atul Dinesh Seth, Bangalore V. Income Tax Officer, Ward-2(3)(3), Bangalore

ITA 400/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1882 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-03-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 18-05-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAVISHANKAR S V
• Keywords: Reopening of assessment; Business income; Reason to believe
• Section: 69C; 234B; 44AB; 13; 147; 68; 148; 6

Judgement Text

ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NOS.399 TO 401/BANG/2020 ASSESSMENT YEAR: 2010-11 TO 2012-13 SRI ATUL DINESH SETH NO.10.2, IBRAHIM COMPLEX S.P. ROAD BENGALURU-560002 PAN NO : AFGPS6398E VS. ITO WARD-2(3)(3) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI RAVISHANKAR S.V., A.R. RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL, D.R. DATE OF HEARING : 04.03.2021 DATE OF PRONOUNCEMENT : 08.03.2021 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST DIFFERENT ORDERS OF CIT(A) FOR THE ABOVE ASSESSMENT YEARS. THE GROUNDS IN THESE APPEALS ARE COMMON AND THERE IS ON LY CHANGE IN THE FIGURES IN RESPECT OF DIFFERENT ASSESSMENT YEAR S, WHICH ARE AS FOLLOWS: 1. THE ORDER OF THE LEARNED CIT(A) IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY AND WEIGHT OF EVIDENCE, NATU RAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT DENIES HIMSELF TO BE LIABLE TO A ASSE SSED TO AN INCOME OF RS. 53,75,793/-UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 2 OF 7 LEGAL GROUNDS: 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE MA NDATORY CONDITIONS TO ASSUME JURISDICTION UNDER SECTION 148 DOES NOT EXIS T AND CONSEQUENTLY THE ASSESSMENT MADE IS BAD IN LAW ON THE FACTS AND CIRC UMSTANCES OF THE CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE RE ASONS RECORDED BY THE LEARNED ASSESSING OFFICER AMOUNTS TO REASON TO SUSP ECT AND DO NOT AMOUNT TO REASON TO BELIEVE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS ON MERITS: 5. THE LEARNED CIT(A) IS NOT JUSTIFIED IN LAW AND ON F ACTS IN CONFIRMING THE ESTIMATION OF THE BUSINESS PROFIT OF THE APPELLANT AT IO% ON THE TOTAL TURNOVER OF RS. 2,05,45,006/ - WHICH WORKED OUT TO RS.20,54,500/- AS BUSINESS INCO ME UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. WITHOUT PREJUDICE THE ESTIMATION OF THE PROFIT AT 1 0% ON THE TOTAL TURNOVER OF RS. 2,05,45,006/- IS HIGHLY EXCESSIVE AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY. THE AUTHORITIES BELOW FAILED TO APPR ECIATE THE FACT THAT THE BUSINESS OF THE APPELLANT AND LIKE CANNOT ACHIEVE A NET PROFIT OF ABOUT 10% AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY, AS PER THE INDUSTRY AVERAGE, UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE. 7. THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT ONCE THE INCOME IS ESTIMATED NO OTHER ADDITION SHALL BE MADE AND FURTH ER THE AUTHORITIES BELOW OUGHT TO HAVE TELESCOPED OTHER ADDITIONS WITH THAT OF THE INCOME FROM BUSINESS ESTIMATED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING T HE ADDITION OF RS. 16,18,606/- BY INVOKING THE PROVISIONS OF SECTION 6 9C OF THE ACT TREATING THE PAYMENT MADE THROUGH THE CREDIT CARDS AS UNEXPLAINE D EXPENDITURE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE LEARNED CIT(A) IS NOT JUSTIFIED IN LAW AND IN F ACTS IN CONFIRMING THE ADDITION OF RS. 13,42,500/- AS UNEXPLAINED CASH CRE DITS UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THE APPELLANT DENIES THE LIABILITY TO PAY INTEREST UNDER SECTION 234A AND 234B OF THE ACT IN VIEW OF THE FACT THAT THERE IS NO LIA BILITY TO ADDITIONAL TAX AS DETERMINED BY THE ASSESSING OFFICER. WITHOUT PREJUD ICE, THE RATE, PERIOD AND ON WHAT QUANTUM THE INTEREST HAS BEEN LEVIED ARE NO T IN ACCORDANCE WITH THE LAW AND ARE NOT DISCERNABLE FROM THE ORDER AND HENC E DESERVES TO BE CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE, S UBSTITUTE OR MODIFY ANY OF THE GROUNDS URGED ABOVE. ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 3 OF 7 12. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. 2. THE REGISTRY NOTED THE DELAY IN FILING THESE APP EALS. THE FIRST APPEAL ORDER RECEIVED BY THE ASSESSEE IN THESE CASE S ARE DATED 12.2.2020. APPEALS ARE FILED BY ASSESSEE IN ALL TH ESE ASSESSMENT YEARS ON 18.5.2020. IN THIS CASE, THE ASSESSEE IS REQUIRED TO FILE THE APPEAL WITHIN 60 DAYS FROM THE DATE OF RECEIPT OF O RDER OF CIT(A). HOWEVER, THESE ARE FILED ON 18.5.2020. THUS, REGIS TRY HAS NOTED THE DELAY OF 36 DAYS. HOWEVER, WE FIND THAT IN VIEW OF SUSPENSION OF LIMITATION ACT BY HONBLE SUPREME COURT VIDE ITS JU DGEMENT SUO MOTO WP (CIVIL) NO.3/2020 DATED 23.3.2020 DUE TO COVID-1 9 PANDEMIC, IT CANNOT BE SAID THAT THERE IS A DELAY IN FILING THES E APPEALS. ACCORDINGLY, WE OBSERVE THAT THERE IS NO DELAY IN F ILING THESE APPEALS. 3. THE FIRST GROUND IN THESE APPEALS IS WITH REGARD TO THE ASSESSEE CHALLENGING THE REOPENING OF ASSESSMENT U/S 147 R.W .S. 148 OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. THIS GR OUND WAS NOT PRESSED BEFORE US. ACCORDINGLY, THIS GROUND IN ALL THESE APPEALS ARE DISMISSED AS NOT PRESSED. 4. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO THE ESTIMATION OF INCOME @ 10% OF THE TOTAL TURNOVER. THE DETAILS OF THE ADDITIONS OF A.O. IS AS FOLLOWS: PARTICULARS AY 2010 - 11 AY 2011 - 12 AY 2012 - 13 GROSS TURNOVER 1,98,90,176 68,20,153 1,01,43,265 TURNOVER ADOPTED BY THE A.O. 2,05,45,006 85,70,401 1,01,43,265 ESTIMATION ON SALES BY AO @ 10% 20,54,500 8,57,040 10,14,326 INCOME COMPUTED BY THE APPELLANT 8,11,380 5,40,083 7,62,168 % OF TURNOVER AS PER COMPUTATION 4.08 7.91 7.51 ADDITIONS IN APPEAL 12,43,120 3,16,957 2,52,158 ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 4 OF 7 IN THESE ASSESSMENT YEARS, THE INCOME OF THE ASSESS EE ESTIMATED AT 10% OF GROSS TURNOVER. THE CONTENTION OF THE LD. A .R. IS THAT IT IS TOO HIGH AND IT SHOULD BE RESTRICTED TO THE INCOME OFFE RED BY THE ASSESSEE AND THE PERCENTAGE OF INCOME OFFERED BY THE ASSESSE E IS MORE THE TRADE NORMS IN THIS KIND OF ASSESSEE. 5. LD. D.R. SUBMITTED THAT THE ASSESSEES ARGUMENT IS NOT BASED ON ANY DOCUMENTS OR EVIDENCE TO SUPPORT THE SAME. ACCORDINGLY, IT WAS SUBMITTED THAT ASSESSEES BOOKS OF ACCOUNTS IS NOT VERIFIABLE AS SUCH, A.O. MADE A REASONABLE ESTIMATE OF 10% OF THE TOTAL TURNOVER OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, IT WAS NOTICED THAT THE ASSES SEE IS NOT MAINTAINING BOOKS OF ACCOUNTS, AS SUCH, THE INCOME OF THE ASSESSEE WAS ESTIMATED BY A.O. BY INVOKING THE PROVISIONS OF SECTION 44AF OF THE ACT @ 10% OF THE TOTAL TURNOVER AS INCOME OF TH E ASSESSEE AS FOLLOWS: PARTICULARS AY 2010 - 11 AY 2011 - 12 AY 2012 - 13 GROSS TURNOVER 2,05,45,006 85,70,401 1,01,43,265 RATE OF PROFIT ADOPTED BY ASSESSEE 4.08 7.91 7.51 RATE OF PROFIT ADOPTED BY A.O. 10% 10% 10% RATE OF PROFIT TO BE ADOPTED 8% 8% 8% THE ASSESSEE HAS ADOPTED THE NET PROFIT RATE AT 4. 08% TO 7.91% FROM ONE YEAR TO ANOTHER. THERE IS HIGH VOLATILITY IN ADOPTING THE RATE OF PROFIT BY THE ASSESSEE. IN OUR OPINION, TO MEET THE ENDS OF JUSTICE, IT IS APPROPRIATE TO ESTIMATE THE INCOME OF THE ASS ESSEE AT 8% OF THE GROSS TURNOVER INSTEAD OF 10% ADOPTED BY THE A.O. ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 5 OF 7 7. NEXT GROUND IN THIS APPEAL IS WITH REGARD TO THE ADDITION MADE IN THIS ASSESSMENT YEAR U/S 69C/68 OF THE ACT AS FO LLOWS: SL.NO. ASSESSMENT YEAR ADDITION U/S 69C OF THE ACT (RS.) ADDITION U/S 68 OF THE ACT (RS.) 1 2010 - 11 16,18,606/ - 13,42,500/ - 2 2011 - 12 7,99,339/ - 4,77,243/ - 3 2012 - 13 8,02,469/ - 4,00,053/ - 8. THE CONTENTION OF THE A.R. IS THAT ONCE THE INCO ME OF THE ASSESSEE ESTIMATED BY APPLYING THE SECTION 44AF OF THE ACT, THERE CANNOT BE ANY FURTHER ADDITION FOR ANY LAPSE IN THE BOOKS OF ACCOUNTS. IN THESE ASSESSMENT YEARS, EXCEPT AY 2011-12, THE T URNOVER OF THE ASSESSEE IS MORE THAN RS.1 CRORE STRICTLY SPEAKING PROVISION OF SECTION 44AF OF THE ACT CANNOT BE APPLIED. SINCE THE ASSES SEE IS NOT MAINTAINING THE BOOKS OF ACCOUNTS, THE A.O. ESTIMAT ED THE INCOME OF THE ASSESSEE BY TAKING THE CLUE FROM THE SECTION 44 AF OF THE ACT. AS SUCH IN OUR OPINION THE ASSESSEE CANNOT PLEAD THAT ONCE THE INCOME ESTIMATED NO OTHER ADDITION COULD BE MADE EITHER U/ S 68/69C OF THE ACT OR BY ANY OTHER PROVISIONS OF THE ACT. THERE I S NO RULE THAT WHEN AN AMOUNT IS CREDITED IN THE BANK ACCOUNT, IT MUST BE TAKEN AS RECEIPT FROM THE BUSINESS. THE AMOUNT DEPOSITED IN TO BANK ACCOUNT IS RECEIVED FROM BUSINESS OR INCOME OR FROM OTHER S OURCES DEPENDS ON THE EVIDENCE AND EXPLANATION FURNISHED BY THE AS SESSEE. IF THE DEPOSITS ARE FOUND IN THE BANK ACCOUNT OF THE ASSES SEE AND THE EXPLANATION AS TO THE NATURE AND SOURCE OF THE AMOU NT IS REJECTED BY THE A.O., IN SUCH OCCASION, THE A.O. IS ENTITLED TO TREAT THE DEPOSITS AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. IT IS MERELY BECAUSE THE ASSESSEE IS RUNNING A BUSINES S IN WHICH EVENT CERTAIN UNEXPLAINED DEPOSITS, IT IS NOT NECESSARY T O SHOW THAT SUCH DEPOSITS REPRESENT THE SUPPRESSED BUSINESS RECEIPTS AND THERE WOULD BE NO ERROR OF LAW IN TREATING THE UNEXPLAINED DEPO SIT INCOME OF THE ASSESSEE FROM OTHER SOURCES. UNLESS THERE ARE STRON G REASONS FOR ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 6 OF 7 GIVING UNEXPLAINED DEPOSITS WITH KNOWN SOURCE OF IN COME OF THE ASSESSEE, THERE WILL BE NO ALTERNATIVE TO TREAT THE SAME AS INCOME FROM OTHER SOURCES. IN THE PRESENT CASE, THE PLEA OF THE ASSESSEE THAT PAYMENT TOWARDS VARIOUS CARDS LIKE CITI BANK C ARD, ICICI CARD, AMERICAN EXPRESS CARD OUT OF EARLIER WITHDRAWALS US ED FOR THE BUSINESS PURPOSE AND SAME WAS REDEPOSITED TOWARDS C REDIT CARD PAYMENTS AND THERE SHOULD BE DUE CREDIT TO BE GIVEN . IN OUR OPINION, WHERE THE CREDIT CARD WITHDRAWALS ON EARLIER OCCASI ON FROM VARIOUS CREDIT CARDS WAS USED FOR BUSINESS PURPOSE ARE TO B E ESTABLISHED BY THE ASSESSEE BY FILING NECESSARY EVIDENCE AND ESTAB LISHING THAT ASSESSEE HAS USED THE CREDIT CARD WITHDRAWALS FOR B USINESS PURPOSE AND THEREAFTER IT HAS WITHDRAWN THE MONEY FROM THE BUSINESS TO CLEAR CREDIT CARD DUES. ACCORDINGLY, WE REMIT THIS ISSUE FOR THE PURPOSE OF ESTABLISHING THE NEXUS BETWEEN CREDIT CARD WITHDRAW ALS AND BY USING IT FOR BUSINESS PURPOSES AND REPAY THE CARD DUES OU T OF BUSINESS RECEIPTS. 9. FURTHER, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGEMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF DELU X ROADLINES PVT. LTD. IN ITA NO.213/BANG/2014 DATED 14.10.2014 FOR T HE PROPOSITION THAT WITHOUT ANY REASONS, THE ASSESSING AUTHORITY C ANNOT ESTIMATE THE PROFIT OF THE ASSESSEE WITHOUT TAKING INTO ACCO UNT THE EARLIER YEAR RETURN OF INCOME. THIS PROPOSITION CANNOT BE APPLI ED TO THE PRESENT CASE SINCE IN THE CASE BEFORE HONBLE HIGH COURT, T HE ASSESSEE MAINTAINED BOOKS OF ACCOUNTS AND WERE AUDITED U/S 44AB OF THE ACT IN EACH YEAR AND THE ASSESSING AUTHORITY AS WELL AS APPELLATE AUTHORITY DO NOT DISPUTE TOTAL TURNOVER FURNISHED B Y THE ASSESSEE BUT IN THE PRESENT CASE, THE A.O. NOT ACCEPTED THE TURN OVER DECLARED WITH ASSESSEE AND HE CONSIDERED THE TURNOVER ON THE BASI S OF VAT RETURN, WHICH IS EVIDENT FROM THE TABLE REPRODUCED IN PARA 6 OF THIS ORDER. ACCORDINGLY, WE ARE NOT CONSIDERED THE ABOVE JUDGEM ENT IN THE CASE ITA NOS.399 TO 401/BANG/2020 SHRI ATUL DINESH SETH, BENGALURU PAGE 7 OF 7 OF DELUX ROADLINES PVT. LTD. (SUPRA). FURTHER, ASS ESSEES COUNSEL RELIED ON THE JUDGEMENT OF INDWELL CONSTRUCTIONS 23 2 ITR 776 FOR THE PROPOSITION THAT WHERE THE BOOKS OF ACCOUNTS HAVE B EEN REJECTED, REVENUE CANNOT RELY ON THE SAME BOOKS FOR ADDITIONS OF AN EXACT ITEM IN THE PROFIT & LOSS ACCOUNT. IN THE PRESENT CASE, THE FACTS ARE ENTIRELY DIFFERENT. THE ASSESSEE IS NOT MAINTAINED ANY BOOK S OF ACCOUNTS AND THE INCOME OF THE ASSESSEE WAS ESTIMATED ON THE BAS IS OF TURNOVER DECLARED IN THE VAT RETURNS. THEREAFTER, A.O. CONS IDERED THE BANK STATEMENTS AND CREDIT CARD STATEMENTS TO MAKE ADDIT ION U/S 68/69C OF THE ACT. BEING SO, THE JUDGEMENT RELIED BY THE A SSESSEES COUNSEL IN THE CASE OF INDWELL CONSTRUCTIONS HAVE NO APPLIC ATION. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MAR, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER BANGALORE, DATED 8 TH MAR, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.