Ashwinkumar Laxmanbhai Kavathia, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(2), RAJKOT-GUJARAT

ITA 460/RJT/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6695 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 05-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARVIND N SONTAKKE
• Assessee Lawyers: DM RINDANI
• Keywords: Business income; Peak credit; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO.460/RJT/2011 (ASSESSMENT YEAR:2005-06) ASHWINKUMAR LAXMANBHAI KAVATHIA, YOGRAJ PAN STREET, KRISHNANAGAR, BEHIND HOUSING BOARD, GONDAL, DIST. RAJKOT APPELLANT VS. INCOME TAX OFFICER, WARD 1(2), RAJKOT RESPONDENT PAN: AITPK7996A /BY ASSESSEE : SHRI D. M. RINDANI, A.R. /BY REVENUE : SHRI ARVIND N. SONTAKKE, SR. D.R. /DATE OF HEARING : 16.02.2017 /DATE OF PRONOUNCEMENT : 27.02.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06 ARISES AGAINST THE CIT(A)-I, RAJKOTS ORDER DATED 15.09.2011 PASSED IN APPEAL NO. CIT(A)- I/RJT/0154/10-11, IN PROCEEDINGS U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 460/RJT/2011 (ASHWINKUMAR L. KAVATHIA VS. I TO) A.Y. 2005-06 - 2 - 2. THE ASSESSEES SOLE SUBSTANTIVE GROUND CHALLENGE S BOTH THE LOWER AUTHORITIES ACTION IN ADDING PEAK CREDIT AMOUNT OF RS.26,92,085/- QUA ASSESSEES DEPOSITS MADE IN HIS CO-OPERATIVE BANK A CCOUNT AT RAJKOT TO THE TUNE OF RS.1,38,18,000/-. WE NOTICE AT THE OUTSET THAT THE CIT(A)S FINDINGS UNDER CHALLENGE DISCUSS ASSESSING OFFICERS OBSERVA TIONS AS WELL AS ASSESSEES SUBMISSIONS MADE IN THE COURSE OF THE LO WER APPELLATE PROCEEDINGS AS FOLLOWS: 3. FACTS OF THE APPELLANT'S CASE, IN BRIEF, ARE TH AT THE APPELLANT IS A COMMISSION AGENT AND ALSO ENGAGED IN TRADING OF AGRICULTURAL C OMMODITIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT TH E APPELLANT HAS MADE CASH DEPOSITS AMOUNTING TO RS.13818000/- IN ACCOUNT NO. 1087, WITH THE CO-OPERATIVE BANK OF RAJKOT LTD., GONDAL. THE APPELLANT EXPLAINE D BEFORE THE A.O. THAT THIS IS NOTHING BUT THE BUSINESS TRANSACTIONS OF WHEAT CARR IED OUT DURING THE YEAR. HOWEVER, THE A.O. VIEWED THAT AS THE APPELLANT FAIL ED TO EXPLAIN THE SOURCES OF CASH DEPOSITED IN THE BANK ACCOUNT ON VARIOUS DATES WITH RAJ BANK LTD., GONDAL, HE DETERMINED THE PEAK CREDIT AT RS.34,79,979/- ON 5/5/2004 AND AFTER DEDUCTING THE OPENING BALANCE OF RS.7,87,894/- THE PEAK VALUE WORKED OUT BY A.O. WAS AT MS.26,92,085/-, WHICH WAS TREATED AS UNEXPLAINED CA SH DEPOSIT. 3.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT FILED A WRITTEN SUBMISSION ON 30/8/2011 AS UNDER: '1. GROUND NO IS THAT LEARNED INCOME TAX OFFICER HA S ERRED IN ADDING PEAK CREDIT IN THE BANK ACCOUNT EVEN THOUGH BUSINES S WAS CONSIDERED. IT IS THEREFORE PRAYED THAT WHEN THE BUSINESS INCOME IS A CCEPTED AND THE ADDITION MADE ON THE BASIS OF WORKING OF THE PEAK F OR PARTICULAR PERIOD OF RS.2692085/- IS UNCALLED FOR AND UNWARRANTED AND MA Y PLEASE BE CANCELLED IN THE INTEREST OF JUSTICE. THAT THE MAIN BUSINESS OF THE APPELLANT IS THE COMM ISSION AGENT IN MARKETING YARD, GONDAL. DURING THE YEAR UNDER CONSI DERATION HE HAS DONE BUSINESS OF RETAIL SALE OF WHEAT TO THE TUNE OF RS. 1389664/- ON WHICH EARNED GP OF RS. 368464 WHICH IN TERMS OF PC COMES TO 2.65. THAT APPELLANT HAS MADE THIS BUSINESS FROM HIS UNDISCLOS ED BANK A/C NO. 01087 WITH THE CO-OPERATIVE BANK OF RAJKOT LTD, GONDAL BR ANCH. LEARNED ASSESSING OFFICER (LD.AO) FOR THE REASONS BEST KNOW N TO HIM ASKED THE APPELLANT TO PREPARE THE TRADING A/C FROM 06/05/200 4 TO 31/03/2005. ACCORDINGLY THE ACCOUNTS FOR THAT PERIOD WAS PREPAR ED AND FILED BEFORE HIM UNDER PROTEST WHICH IS DISCUSSED BY LD. AO ON PAGE NO 4 OF THE ORDER. THERE WAS NO LOGIC IN PREPARING THE ACCOUNTS FROM 0 6/05/2004 TO 31/03/2005 BECAUSE THE SALE AND TRANSACTIONS IN THE BANK ACCOUNT HAS BEEN MADE THROUGHOUT THE YEAR. AT THE MOST LD. AO SHOULD HAVE TAKEN GP FOR THE ENTIRE YEAR AND DISALLOW REASONABLE EXPENSES DE BITED TO THE P & L A/C. THERE WAS NO NECESSITY TO WORK OUT THE PEAK IN THE BANK A/C UP TO 05/05/2004 AND ALSO THE ESTIMATION OF GP SEPARATELY . EITHER HE SHOULD ITA NO. 460/RJT/2011 (ASHWINKUMAR L. KAVATHIA VS. I TO) A.Y. 2005-06 - 3 - HAVE TAKEN THE PEAK IN THE BANK A/C OR ACCEPT THE B OOKS OF ACCOUNTS ACCORDING TO THE BUSINESS TRANSACTION. HERE HE CHOO SES TO ADD BOTH THE ITEMS VIZ. PEAK AS WELL AS GP. WHEN IN PRINCIPLE HE ACCEPTED THE TRADING A/C FROM 06/05/2004 THERE WAS NO NECESSITY TO ADD P EAK CREDIT SEPARATELY OF THE BANK ACCOUNT. WHILE DOING SO LD. AO HAS REDUCED THE SALES OF RS. 13889664 TO 10306664 AND ESTIMATED GP @ 1.21% AS PE R GP SHOWN ON THE BUSINESS OF COMMISSION AND TRADING AS PER AUDIT REPORT. THE APPELLANT HAS NO OBJECTION WHAT SO EVER IN TAKING GP AS PER T HE TRANSACTIONS RECORDED IN THE AUDITED BOOKS OF ACCOUNTS. IT IS TH EREFORE PRAYER OF THE APPELLANT THAT THE ADDITION OF PEAK CREDIT OF RS. 2 692085 IS UNCALLED FOR AND UNWARRANTED REQUIRES TO BE DELETED. THE ADDITIO N OF GP MADE OF RS. 124711 ARE ALSO MADE WITHOUT CONSIDERED THE FACTS T HAT BUSINESS OF WHEAT WAS DONE IN THE ENTIRE YEAR. AS LD. AO DID'NT PROVE S THAT THE TRANSACTION MADE IN THE BANK ACCOUNT BETWEEN 06/05/2004 TO 31/0 3/2005 WAS NOT FOR THE KNOWN BUSINESS. THE GP SHOULD BE TAKEN FOR THE ENTIRE YEAR 2004-05 ON SALE OF RS. 138896664 AND NOT ON 10306664 TAKEN BY LD. AO. HERE IT IS PERTINENT TO NOTE THAT THE APPELLANT HIMSELF HAS SH OWN THE GP ON THE WHEAT BUSINESS @ 2.65%. THEREFORE THERE IS NO NEED TO MAK E ANY ADDITION TOWARDS GP. IT IS THEREFORE PRAYED THAT BOTH THE AD DITION AT RS.2692085 AND RS. 124711 MAY PLEASE BE CANCELLED IN THE INTER EST OF JUSTICE.. 3.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN B Y THE ASSESSING OFFICER AND THE CONTENTIONS OF THE AR OF THE APPELLANT. I FIND THAT THE CASH DEPOSITS IN BANK ACCOUNT NO. 1087 WITH CO-OPERATIVE BANK OF RAJKOT L TD. IS AT RS. 1,38,18,000/-. THERE WAS CONSEQUENT WITHDRAWALS IN THAT ACCOUNT AT RS.1,44,95,000/-. THERE WAS OPENING BALANCE OF RS.7,87,893/- AS ON 1/4/2004, WH ICH WAS MERGED IN THE WITHDRAWALS. ONCE THE CREDITS ARE FOUND RECORDED IN THE BOOKS OF ACCOUNT, IT IS FOR THE ASSESSEE TO EXPLAIN THE SOURCE. IN THE EVENT OF HIS FAILURE TO DO SO THE AMOUNTS HAVE GOT TO BE TREATED AS INCOME FROM UNDISCLOSED S OURCES AND HAVE TO BE ASSESSED ACCORDINGLY. THE APPELLANT'S CLAIM THAT HE MADE HIS BUSINESS TRANSACTIONS FROM HIS UNDISCLOSED BANK ACCOUNT NO. 1087 WITH COOPERATIVE BANK OF RAJKOT LTD. HAS NOT BEEN PROVED FULLY. APPELLANT HAS TO PROVE THAT THE TRANSACTIONS SHOWN IN BANK ACCOUNT ARE ALSO REFLECTED IN REGULAR SET OF BOOKS OF ACCOUNTS. IN ABSENCE OF ANY SUCH NEXUS PROVED ONLY COURSE LEFT IS TO APPLY PEAK THEORY. THE THEORY OF PEAK CAN BE APPLIED ONLY WHEN ASSESSEE ADMITS TO HAVE MADE W ITHDRAWALS IN CASH AND REDEPOSITS THE SAME IN THE BANK ACCOUNT WITHOUT THE RE BEING ANY OUTFLOW IN ANY OTHER EXPENDITURE OR INVESTMENT. IN THE INSTANT CAS E, I FIND THAT THE APPELLANT HAS MISERABLY FAILED IN DISCHARGING HIS ONUS OF PROVING THE SOURCE OF CASH DEPOSITS IN BANK WITH SUPPORTING EVIDENCES. THEREFORE, THE ADDI TION MADE BY THE A.O. OF RS.26,92,085/- IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 3. HEARD BOTH SIDES REITERATING THEIR RESPECTIVE ST ANDS IN THE COURSE OF HEARING. SHRI RINDANI VEHEMENTLY ARGUES THAT BOTH THE AUTHORITIES BELOW HAVE ERRED IN NOT ADDING THE PROFIT COMPONENT EMBEDDED I N ASSESSEES ABOVE STATED PEAK CREDIT SUM AND THEREFORE, THE IMPUGNED ADDITIO N OF RS.26,92,085/- IS NOT SUSTAINABLE. WE ASKED SHRI RINDANI TO PLACE ON REC ORD ANY COGENT EVIDENCE ITA NO. 460/RJT/2011 (ASHWINKUMAR L. KAVATHIA VS. I TO) A.Y. 2005-06 - 4 - THAT THE IMPUGNED DEPOSITS ARE ASSESSEES BUSINESS RECEIPT OR THEY PROVE ANY DIRECT NEXUS STRONGLY INDICATING THE PEAK AMOUNT IN QUESTION IS IN FACT IN THE NATURE OF TRADING RECEIPTS. HE CONCEDES VERY FAIRLY THAT THERE IS NOT EVEN A REMOTE EVIDENCE MUCH LESS THAN A SUBSTANTIVE ONE PR OVING ASSESSEES CASE TO THE ABOVE EFFECT. WE THUS FIND NO REASON TO INTERF ERE WITH BOTH THE LOWER AUTHORITIES ACTION ADDING PEAK SUM OF RS.26,92,085 /- IN QUESTION. 4. THIS ASSESSEES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF FEBRUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 27/02/2017 TRUE COPY S.K.SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT