ITO 17(2)(2), MUMBAI V. KAMLESH KESWARWANI, MUMBAI

ITA 4122/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2278 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 44AD; 68; 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.4122/MUM/2014 ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER, WARD-17(2)(2), R. NO.212, PIRAMAL CHAMBERS, LALBAUG, MUMBAI-400012 / VS. SHRI KAMLESH KESARWANI, 90, L.B.S. MARKET, MATUNGA (EAST), MUMBAI-400019 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AOBPK3553K % & ' $ ( / DATE OF HEARING : 07/12/2015 ' $ ( / DATE OF ORDER: 07/12/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 20/03/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO DIREC TING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.15,6 6,003/- ! / REVENUE BY MOHAMMED RIZWAN !'# $ ! / ASSESSEE BY SHRI R.B. POPAL SHRI KAMLESH KESARWANI ITA NO.4122/MUM/2014 2 WHICH FALLS WITHIN THE PURVIEW OF AN UNEXPLAINED CA SH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) APPLYING THE RATE OF 9.52% TO THE UNEXPLAINED CASH CREDIT OF RS.17,13,772/-, ACCEPTING THE SUBMISSIONS OF THE AS SESSEE FILED DURING APPELLATE PROCEEDINGS, IGNORING THE SU RROUNDING CIRCUMSTANCES. 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI MOHAMMAD RIZWAN, ADVANCED ARGUMENTS, WHICH IS IDENT ICAL TO THE GROUND RAISED BY CONTENDING THAT SOURCE OF C ASH DEPOSIT IN THE BANK WAS NOT EXPLAINED BY THE ASSESSEE, THER EFORE, THE DEPARTMENT WAS PRECLUDED FROM GETTING THE DUE TAXES . 2.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE, SHRI R.B. POPAT, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT THE ASSESSEE HIMS ELF DECLARED THE CHARGEABLE PROFIT AT THE RATE OF 9.52% WHICH IS FAR ABOVE THE PERCENTAGE MENTIONED IN SECTION 44AF OF T HE ACT BY FURTHER SUBMITTING THAT THE TURNOVER OF THE ASSESSE E IS BELOW RS. 40 LAKH. IT WAS ALSO CONTENDED THAT THE ASSESS EE IS A SMALL RETAIL TRADERS IN READYMADE GARMENTS AND DULY PRODUCED EVIDENCES IN THE FORM OF BILLS AND VOUCHERS OF PURC HASES AND SALES. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DEALS IN READYMADE GARMENTS A S A RETAIL TRADER. THE ASSESSEE DISCLOSED TURNOVER OF RS.14,75 ,380/-. SHRI KAMLESH KESARWANI ITA NO.4122/MUM/2014 3 THE LD. ASSESSING OFFICER RECEIVED INFORMATION THAT THE ASSESSEE HAD MADE SUBSTANTIAL CASH DEPOSITS TOTALIN G RS.32,06,152/- IN HIS TWO BANK ACCOUNTS OF CITY COO PERATIVE BANK LTD., MATUNGA BRANCH AND INDIAN BANK MATUNGA. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF CASH DE POSITS AND ALSO AS TO WHY THE SAME SHOULD NOT BE TREATED AS UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASSESSEE VIDE LE TTER DATED 08/12/2010 CLAIMED THAT HE IS A RETAIL TRADER IN RE ADYMADE GARMENTS, HIS TURNOVER IS LESS THAN RS.40 LAKH AND DEPOSIT THE SALE PROCEEDS IN THE BANK AS HE IS NOT A MUCH LITER ATE PERSON. HOWEVER, THE LD. ASSESSING OFFICER DID NOT FIND FAV OUR WITH THE EXPLANATION OF THE ASSESSEE AND ADDED THE IMPUGNED AMOUNT AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 2.3. ON APPEAL, BEFORE THE LD. FIRST APPELLATE AUT HORITY, THE FACTUAL MATRIX WAS CONSIDERED AND FOUND THAT TH E ASSESSEE HIMSELF DECLARED THE CHARGEABLE PROFIT AT 9.52% AND EVEN AS PER THE PROVISIONS OF SECTION 44AF, A SUM OF RS.5% IS MENTIONED IN THE RETAIL BUSINESS, THEREFORE, GRANTE D RELIEF TO THE ASSESSEE. THE ADDITION WAS RESTRICTED TO THE RS .1,64,769/-. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE TH IS TRIBUNAL. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, BEFORE ADVERTING FURTHE R, WE ARE SHRI KAMLESH KESARWANI ITA NO.4122/MUM/2014 4 REPRODUCING HEREUNDER THE SPECIAL PROVISION OF SECT ION 44AF OF THE ACT FOR READY REFERENCE:- 44AF. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTA INED IN SECTIONS 28 TO 43C , IN THE CASE OF AN ASSESSEE ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE, A SUM EQUAL TO F IVE PER CENT OF THE TOTAL TURNOVER IN THE PREVIOUS YEAR ON ACCOUNT OF S UCH BUSINESS OR, AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SU M AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME SHALL BE DEEME D TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' : PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL AP PLY IN RESPECT OF AN ASSESSEE WHOSE TOTAL TURNOVER EXCEEDS AN AMOUNT OF FORTY LAKH RUPEES IN THE PREVIOUS YEAR. (2) ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL, FOR THE PURPOSES OF SUB-SECTION (1), BE DEE MED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DE DUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED : PROVIDED THAT WHERE THE ASSESSEE IS A FIRM, THE SALARY AND I NTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FROM THE INC OME COMPUTED UNDER SUB-SECTION (1) SUBJECT TO THE CONDITIONS AND LIMITS SPECIFIED IN CLAUSE (B) OF SECTION 40 . (3) THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR TH E PURPOSE OF THE BUSINESS REFERRED TO IN SUB-SECTION (1) SHALL BE DE EMED TO HAVE BEEN CALCULATED AS IF THE ASSESSEE HAD CLAIMED AND HAD B EEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF THE DEPRECIATIO N FOR EACH OF THE RELEVANT ASSESSMENT YEARS. (4) THE PROVISIONS OF SECTIONS 44AA AND 44AB SHALL NOT APPLY IN SO FAR AS THEY RELATE TO THE BUSINESS REFERRED TO IN SUB-S ECTION (1) AND IN COMPUTING THE MONETARY LIMITS UNDER THOSE SECTIONS, THE TOTAL TURNOVER OR, AS THE CASE MAY BE, THE INCOME FROM THE SAID BU SINESS SHALL BE EXCLUDED. (5) NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREG OING PROVISIONS OF THIS SECTION, AN ASSESSEE MAY CLAIM LOWER PROFITS A ND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN SUB-SECTION (1), IF HE KEEPS AND MAINTAINS SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-SECTION (2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUDIT AS REQUIRED UN DER SECTION 44AB . (6) NOTHING CONTAINED IN THIS SECTION SHALL APPLY T O ANY ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY OF APRIL, 20 11. SHRI KAMLESH KESARWANI ITA NO.4122/MUM/2014 5 WE FIND THAT SECTION 44AF WAS INSERTED W.E.F. 01/04/1998 BY THE FINANCE ACT, 1997, MAKING SPECIAL PROVISION FOR COMPUTING PROFIT & GAINS OF RETAIL BU SINESS ON A PRESUMPTIVE BASIS. THE PROVISIONS OF THIS SECTION W AS ENACTED ON THE LINES OF THE PROVISION OF SECTION 44AD AND 4 4AE OF THE ACT, WHICH HAS BEEN ELABORATED IN CIRCULAR NO.763, DATED 18/12/1998, IN ORDER TO SIMPLIFY THE PROCEDURES OF COMPUTATION OF INCOME OF RETAIL TRADERS, A NEW SCHE ME OF COMPUTING PROFIT & GAINS OF SUCH BUSINESS PRESUMPTI VELY AT 5% OF THE GROSS RECEIPTS, THUS, THE PROVISIONS OF S ECTION 44AF(1) IS OPERATIVE FROM A.Y. 1998-99 TO A.Y. 2010 -11. THUS, IF THE AFORESAID PROVISIONS IS APPLIED TO T HE FACTS OF THE CASE AS NARRATED, HEREINABOVE, ADMITTEDLY, THE ASSESSEE IS A RETAIL TRADER IN GARMENTS AND AS PER SPECIAL PROV ISIONS FOR COMPUTING PROFIT AND GAINS OF RETAIL BUSINESS, AS P ER SECTION 44AF OF THE ACT, A SUM EQUAL TO 5% OF THE TOTAL TUR NOVER IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS, OR AS TH E CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM, AS DECLARE D BY THE ASSESSEE, IN HIS RETURN OF INCOME, SHALL BE DEEMED TO BE THE PROFIT AND GAINS OF SUCH BUSINESS, PROVIDED THE TOT AL TURNOVER DOES NOT EXCEED RS.40 LAKH IN THE SAID PREVIOUS YEA R. IN THE PRESENT APPEAL, UNDISPUTEDLY, THE TOTAL TURNOVER IS BELOW PRESCRIBED LIMIT, THEREFORE, WE FIND MERIT IN THE C ONCLUSION OF THE LD. CIT(A) AS THE ASSESSEE HIMSELF DISCLOSED TH E TURNOVER AND THE PROFIT AND THE RATE OF 9.52%, WHICH IS FAR ABOVE, THE PRESCRIBED LIMIT OF 5%. THIS IS ALSO A FACT, AS MEN TIONED SHRI KAMLESH KESARWANI ITA NO.4122/MUM/2014 6 EARLIER, THE ASSESSEE IS A RETAIL TRADER AND NO CON TRARY FACTS WERE BROUGHT ON RECORD BY THE ASSESSING OFFICER. TH ERE IS NO OTHER SOURCE OF INCOME TO THE ASSESSEE, THUS, THE A SSESSEE HAS ALREADY DECLARED HIGHER PROFIT RATE, THEREFORE, THE RE IS NO LOSS TO THE REVENUE. THE STAND OF THE LD. COMMISSIONER O F INCOME TAX (APPEALS), IS THEREFORE, AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF THE LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/12/2015 SD/- SD/- ( SANJAY ARORA ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % & MUMBAI; * DATED : 07/12/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 % 2$ ( , ) / THE CIT, MUMBAI. 4. 1 1 % 2$ / CIT(A)- , MUMBAI 5. 45 /$ ! , 1 ,( ! 6 , % & / DR, ITAT, MUMBAI 6. ' 8& / GUARD FILE. ! / BY ORDER, 04,$ /$ //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI