Mohd. Tayyab, Delhi V. ITO, New Delhi

ITA 4203/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3441 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 29-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAFIQUE KHAN
• Keywords: Unexplained cash credit; Business income; Peak credit; Accommodation entries; Set aside
• Section: 68; 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.N.CHARY, JUDICIAL MEMBER ITA NO. 4203/ DEL/2016 (ASSESSMENT YEAR: 2009-10) MOHD. TAYYAB A-130 DDA LIG FLATS MOTI KHAN PAHARGANJ NEW DELHI 55 PAN: ACMPT7967K VS. THE INCOME TAX OFFICER WARD 46 (4) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. SAFIQUE KHAN ADV REVENUE BY: SMT RINKU SINGH , SR. DR DATE OF HEARING 29/08/2019 DATE OF PRONOUNCEMENT 27 /11/2019 O R D E R PER PRASHANT MAHARISHI, A. M. 01 THIS APPEAL IS FILED BY ASSESSEE APPELLANT AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) 16, NEW DELH I 2 DATED 16 TH /FILE/2016 WHEREIN APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ONLY GRIEVANCE THAT THE LEARNED CIT A HAS APPLIED THE PEAK THEORY APPROACH IN DETERMINING THE ASSESSABLE INCOME OF THE ASSESSEE ON THE ISSUE OF C ASH DEPOSITED IN THE BANK ACCOUNT WHERE THE ASSESSEE WA S FOUND TO BE CARRYING ON BUSINESS. 02 BRIEFLY STATED THE FACT SHOWS THAT ASSESSEE IS ENGA GED IN THE BUSINESS OF RETAIL TRADING OF FOOTWEAR A SOLE PROPR IETOR, FILED HIS RETURN OF INCOME ON 15/10/2010 DECLARING INCOME OF INR 1 81750/. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143 (3) OF THE INCOME TAX ACT WA S PASSED ON 27/12/2011 WHEREIN THE ADDITION OF INR 9 84332/ CONSIDERING THE NET INCOME AT THE RATE OF 15% ON SU RRENDERED SALES AMOUNT OF INR 6 562213/ WAS ADDED. THE FACT S RELATING TO THE SURRENDERED SALE AMOUNT WAS THAT CA SH DEPOSIT OF INR 4 707570/ WAS DEPOSITED WITH EXCESS BANK, C ASH DEPOSIT OF INR 1 005643 AND THE CHEQUE OF INR 8 500 00/ WORTH HS BY BANK LTD WAS CONSIDERED AS UNDISCLOSED SALES. ACCORDINGLY THE ASSESSMENT ORDER DETERMINED THE TAX ABLE INCOME OF INR 1 166082/. SUBSEQUENTLY THE LEARNED COMMISSIONER OF INCOME TAX NEW DELHI ASSUMED JURISD ICTION U/S 263 OF THE INCOME TAX ACT AND SET ASIDE THE ASS ESSMENT ORDER BACK TO THE FILE OF THE LEARNED ASSESSING OFF ICER ON 29/3/2014. THE LEARNED CIT DIRECTED THE ASSESSING OFFICER TO RE-EXAMINE THE SOURCE OF CASH DEPOSIT IN SAVINGS BA NK ACCOUNT AND THE SOURCE OF INVESTMENT IN PURCHASE OF MOTOR V EHICLE. HE WAS FURTHER DIRECTED TO PASS A SUITABLE ORDER THERE AFTER AFTER GRANTING ASSESSEE IS REASONABLE OPPORTUNITY OF HEAR ING. SUBSEQUENTLY THE LEARNED ASSESSING OFFICER ARE EXAM INED THE ISSUE PASSED AN ASSESSMENT ORDER ON 25/2/2015 AND A SSESS THE TOTAL TAXABLE INCOME AT INR 7 095784/ BY MAKIN G A TOTAL ADDITION OF INR 6 914034/ BY TREATING CASH DEPOSIT IN AXIS BANK AND HSBC BANK AND ALSO THE PAYMENT TOWARDS CRE DIT CARD ISSUED BY INDUCING BANK NEW DELHI AS UNDISCLOS ED INCOME U/S 68 OF THE INCOME TAX ACT. THE LEARNED A SSESSING OFFICER MADE AN ADDITION OF INR 6 562231// ON ACCO UNT OF CASH DEPOSITED TREATING THE CASH DEPOSIT OF INR 4 7 07750 IN AXIS BANK, INR 1 005643 AND THE CHEQUE OF INR 8 500 00/ IN HSBC UP BANK AMOUNTING TO INR 6 562213 AS UNEXPLAIN ED CASH CREDIT U/S 68 OF THE INCOME TAX ACT. THE LEAR NED AO FURTHER MADE AN ADDITION OF INR 3 51821 ON ACCOUNT OF REPAYMENT OF CREDIT CARD AS UNEXPLAINED INCOME. TH US THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT INR 7 095784/. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX. THE CIT A DIRECTED T HE ASSESSING OFFICER TO WORK OUT/ADOPT THE PEAK OF THE DEPOSITS IN AXIS BANK AND HSBC BANK AND BRING THE SAME TO TAX A ND ALSO TO VERIFY THE PAYMENT OF CREDIT CARD COMPANY. THER EFORE ASSESSEE IS AGGRIEVED WITH THE ORDER OF THE LEARNED CIT A IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE PEA K CREDIT OF DEPOSITS IN AXIS BANK AND HSBC BANK. 03 THE LEARNED AUTHORISED REPRESENTATIVE NOTED THAT WH EN IT WAS FOUND BY THE LEARNED ASSESSING OFFICER INITIALLY TH AT THE APPELLANT WAS ENGAGED IN THE BUSINESS ACTIVITY OUTS IDE THE BOOKS OF ACCOUNT AND FORMED THE OPINION THAT ASSESS EE HAS UNDISCLOSED SALES, WHICH WAS TAXED ON PRESUMPTIVE B ASIS, NOW THE REVENUE CANNOT TAKE A U-TURN AND CONSIDER THE A BOVE DEPOSITS AS UNEXPLAINED CASH CREDIT. HE FURTHER SU BMITTED THAT ALL THESE RECEIPTS ARE BUSINESS RECEIPTS AND T HERE IS NO OTHER EVIDENCE AVAILABLE WITH THE REVENUE THAT ABOV E CASH DEPOSIT WAS ON ACCOUNT OF OTHER THAN BUSINESS INCOM E OF THE ASSESSEE. HE SUBMITTED THAT IF THE ABOVE CASH DEPO SIT IS CONSIDERED AS THE BUSINESS INCOME OF THE ASSESSEE, THE SAME SHOULD BE TAXED ON PRESUMPTIVE BASIS. HE FURTHER S UBMITTED THAT THE PEAK PERIOD THEORY IS ADOPTED IN THE PR ESENT CASE BY THE LEARNED CIT A IS NOT TENABLE SINCE THE BUSINE SS RECEIPTS CAN BE TAXED ON PROFIT BASIS AND NOT ON PEAK BASIS. 04 THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT CAPITAL AN D SUBMITTED THAT WHEN THE ASSESSEE HAS DEPOSITED HUGE CASH IN H IS BANK ACCOUNT WITHOUT GIVING ANY PROOF OF THE UNACCOUNTED SALES IT IS REQUIRED TO BE TAXED ON PEAK BASIS ONLY. 05 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION A ND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ORIGINALLY TH E INFORMATION WAS RECEIVED THAT THE ASSESSEE HAS CASH DEPOSITS OF INR 4 707570 WITH EXCESS BANK LTD AND HAS PURCHASED THE M OTOR VEHICLE INR 4 508174/. THE ASSESSEE EXPLAINED BEF ORE THE AO THAT MOTOR VEHICLE IS FINANCED BY THE HDFC BANK LOA N. FOR THE SAME ASSESSEE PRODUCED THE LOAN AGREEMENT AS WE LL AS THE BANK STATEMENT. FURTHER IT WAS ALSO FOUND DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THAT ASSESSEE HAS ANOTHER BANK ACCOUNT WITH HSBC BANK WHERE THE CASH DEPOSIT WAS F OUND OF INR 1 005643 AND THE CHEQUE OF INR 8 50000/ THE AS SESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THIS DEPOSITS. THE ASSESSEE SUBMITTED ITS REPLY ON 22/12/2001 AND SERVED SURREN DERED AN AMOUNT OF INR 6 562213 AS UNDISCLOSED SALES ON WHIC H THE PROFIT WAS CALCULATED AT THE RATE OF 15% BY THE ASS ESSEE AS THE ASSESSEE HAS ALREADY OPTED FOR THE PROVISIONS OF SE CTION 44AF IN DECLARED PROFIT AT THAT RATE. THUS THE UNDISCLO SED SALE OF INR 6 562213/ WAS DETERMINED AND 15% PROFIT THEREO N OF INR 9 84332/ WAS ADDED TO THE TAXABLE INCOME OF TH E ASSESSEE. SUBSEQUENTLY THE ORDER U/S 263 OF THE IN COME TAX ACT WAS PASSED BY THE COMMISSIONER OF INCOME TAX NE W DELHI ON 29/03/2014. IT WAS NOTED THAT AS THE TURNOVER O F ASSESSEE IS MORE THAN INR 4,000,000 THEREFORE, THE PROVISION S OF SECTION 44 AB ARE APPLICABLE AND PROVISIONS OF SECTION 44AF DO NOT APPLY IN THE PRESENT CASE. IT WAS FURTHER HELD THA T THE ASSESSEE HAS TO PROVE THAT THE DEPOSITS IN THE BANK ACCOUNTS ARE OUT OF SALES. THE CIT WAS OF THE VIEW THAT AO HAS NOT MADE ADEQUATE ENQUIRY WITH RESPECT TO THE ABOVE AMO UNT OF CASH DEPOSITED IN THE BANK ACCOUNT AND IT IS TAXABI LITY WHETHER ON PEAK BASIS OR THE WHOLE OF THE SUM. THE REFORE ON THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE ACT READ WITH SECTION 263 OF THE INCOME TAX ACT THE LEARNED ASSES SING OFFICER HELD THAT ASSESSEE COULD NOT BRING ON RECORD ANY CO GENT EVIDENCE WHICH PROVES THAT THE CASH DEPOSIT OF INR 6 562213/ ARE OUT OF THE SALE PROCEEDS. MOREOVER, I T WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LEARNED C IT A WERE SHOWN THE COPIES OF CASH MEMOS WHICH WERE REJECTED BY HIM STATING THAT THE ALLEGED BILL HAS BEEN MADE PROBABL Y PURPOSEFULLY IN VERY ILLEGIBLE HANDWRITING TO SHOW THAT THE CASH DEPOSITED IS SALES PROCEEDS. HE FURTHER HELD THAT ASSESSEE HAS NOT BEEN ABLE TO PROVE THE EXISTENCE O F PERIL UNACCOUNTED BUSINESS ACTIVITY. HE FURTHER HELD THA T IT IS MORE PLAUSIBLE THAT ASSESSEE HAS INDULGED IN ANY BUSINES S ACTIVITY, WHICH IS NOT DISCLOSED TO THE INCOME TAX DEPARTMENT . HE FURTHER HELD THAT APPELLANT DID INDULGE IN BUSINESS ACTIVITY OUTSIDE THE BOOKS OF ACCOUNTS. HOWEVER, HE DIRECTE D THE AO TO TREAT THE PEAK CREDIT AS THE INCOME OF THE ASSESSEE AND TO MAKE ADDITION ACCORDINGLY. WHEN THE LEARNED CIT A HAS ACCEPTED THAT ASSESSEE IS INDULGING IN ANY BUSINESS ACTIVITY, THERE IS NO NEED TO TAX THE WHOLE OF THE INCOME OF THE ASSESSEE EITHER OR TO TAX HIM ON THE PEAK CREDIT BASIS ON TH E ABOVE SUM, MORE SO, WHEN THERE IS NO EVIDENCE AVAILABLE WITH T HE REVENUE THAT ASSESSEE IS DEPOSITING CASH WHICH HAS NOT BEEN GENERATED FROM THE SALES OF THE ASSESSEE. THE CIT IN THE TIM E OF INVOKING PROVISIONS OF SECTION 263 HAS DIRECTED THE LOWER AU THORITIES TO LOOK INTO THE DEBIT AND CREDIT BOTH OF THE BANK STA TEMENT TO KNOW ABOUT THE NATURE OF ACTIVITIES CARRIED ON BY T HE ASSESSEE. NEITHER THE ASSESSING OFFICER NOR THE LEARNED CIT A HAS LOOKED INTO THE BANK STATEMENT OF THE ASSESSEE. BE FORE US AT PAGE NUMBER 36 ONWARDS THE ASSESSEE HAS SHOWN THE B ANK STATEMENT WITH THE BANKS IN WHICH CASH IS DEPOSITED . ON LOOKING AT THE CASHBOOK, IT IS APPARENT THAT CASH I S DEPOSITED IN THE BANK ACCOUNT AND SUBSTANTIAL SUM HAS GONE TO THE ASSESSEE HIMSELF OR FOR THE PURPOSE OF WITHDRAWAL F ROM ATM. PART OF THE WITHDRAWAL IS ALSO TO PUBLIC SCHOOL FEE S. PART OF THE WITHDRAWAL HAS ALSO GONE INTO THE DEPOSIT OF THE MU TUAL FUNDS. THUS LOOKING AT THE BANK STATEMENT OF THE ASSESSEE IT IS APPARENT THAT ASSESSEE IS DEPOSITING CASH IN THE BA NK ACCOUNT TO DISCHARGE HIS PAYMENTS FOR SCHOOL FEES AND INVES TMENT IN MUTUAL FUND AS WELL AS WITHDRAWAL IN CASH THROUGH V ARIOUS AUTOMATED TELLER MACHINES. ON PERUSAL OF THE BANK ACCOUNT, IT IS NOT FOUND THAT ASSESSEE IS DEPOSITING HUGE CA SH IN HIS BANK ACCOUNT AND USING THAT SUM FOR GIVING SOME ACCOMMODATION ENTRIES ET CETERA. THE LEARNED CIT A HAS ALSO REACHED AT A CONCLUSION THAT THE AMOUNT OF CASH DEP OSIT IN THE BANK ACCOUNT IS OUT OF SALE PROCEEDS, WHICH IS NOT DISCLOSED, TO THE DEPARTMENT. WHEN ONCE IT HAS BEEN HELD BY T HE REVENUE THAT THE ABOVE SUM IS CASH DEPOSIT BECAUSE OF UNDISCLOSED SALES OF THE ASSESSEE, NATURAL COROLLAR Y WOULD BE TO ESTIMATE PROFIT THEREON. THE LEARNED ASSESSING OFFICER HAS ESTIMATED THE PROFIT AT THE RATE OF 15% THEREON IN THE EARLIER ASSESSMENT ORDERS. IT HAS NOT BEEN HELD THAT THE A BOVE NET PROFIT RATE ADOPTED BY THE ASSESSEE IS LOWER OR NOT ON BY THE ASSESSEE IN HIS RECORDED BOOKS OF ACCOUNT SALES. T HUS, WE ARE OF THE VIEW THAT ABOVE CASH DEPOSIT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE NOR IT CAN BE ADDED ON THE PE AK BASIS BUT ONLY NET PROFIT RATIO SHOULD BE APPLIED TO THE ABOVE SUM, WHICH CAN BE ADDED TO THE TOTAL INCOME OF THE ASSES SEE. IN VIEW OF THIS, WE DIRECT THE LEARNED ASSESSING OFFIC ER TO TREAT 15% OF THE CASH DEPOSITED IN THE BANK ACCOUNT AS IN COME OF THE ASSESSEE. ACCORDINGLY, ALL THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE ARE ALLOWED. 06 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2019. SD/- SD/- (K.N.CHARY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED: 27/11/2019 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 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