ITO, Ward-39(2), Kolkata, Kolkata V. Md. Ibrahim, Kolkata

ITA 464/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87672 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2012
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: MIHIR BANDYOPADHYAY
• Keywords: Unexplained cash credit; Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA AM ] I.T.A NO.464 /KOL/2012 ASSESSMENT YEAR: 2006 - 07 I.T.O., WARD - 39(2), VS. MD.IBRAHIM KOLKATA KOLKATA (APPELLANT) ( RESPONDENT) (PAN: AAHPI 6540 E) FOR THE APPELLANT : SHRI K.L.KANAK, JCIT.SR.DR FOR THE RESPONDENT : SHRI MIHIR BANDYOPADHYAY DATE OF HEARING : 15 .01.2015. DATE OF PRONOUNCEMENT: 5.2.2015. ORDER PER SHRI SHAMIM YAHYA, AM : THIS APPEAL BY THE DEPA RTMENT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) - IV, KOLKATA DATED 30.09.2011 AND PERTAIN S TO ASSESSMENT YEAR 2006 - 07. 2. THE GROUNDS OF APPEAL READ AS UNDER : - 1. LD. CIT(A) ERRED IN LAW AS WELL AS ON FACT IN DELETING THE ADDITION OF RS.15,07,954/ - BY MERELY ACCEPTING THE ASSESSEE S CONTENTION BUT WITHOUT PROVING WITH THE HELP OF COGENT EVIDENCE AS TO HOW THE DEPOSITS IN THE S.B.A/C NO.5530189224 REPRESENTED THE SALE PROCEED ARISING OUT OF THE SHOE TRADING BUSINESS. 2. LD. CIT(A) ERRED IN LAW AS WE LL AS ON FACT IN DELETING THE ADDITION OF RS.6,36,537/ - AND RS.1,09,537/ - BY SIMPLY CONCURRING WITH THE ASSESSEE CONTENTION, BUT BY IGNORING AOS FINDING ABOUT THE ABSURDITY IN THE TRADING RESULTS. 3. LD.CIT(A) ERRED IN LAW AS WELL AS ON FACT IN DELETING TH E ADDITION OF RS.80000/ - BY MERELY INVOKING THE PRINCIPLE OF PREPONDERANCE OF PROBABILITY. HE HAS FAILED TO ADDUCE ANY EVIDENCE TO SHOW AS TO HOW THE ASSESSEE WAS IN A POSITION TO ACCUMULATE SAVINGS OUT OF HIS INCOME IN PRECEDING YEARS. 4. THAT THE APPELLA NT CRAVES LEAVE TO ADD OR MODIFY, INCLUDES ANY OTHER GROUNDS OF APPEAL. 3. IN THIS CASE THE ASSESSEE FILED THE RETURN OF INCOME DISCLOSING INCOME OF R S.75,914/ - . THE CASE WAS TAKEN AS SCRUTINY CASE ON THE BASIS OF CASS AND AIR INFORMATION. THE INFORMATI ON W ERE THAT THE ASSESSEE HAD THREE SAVINGS ACCOUNT AND ONE ITA NO. 464 /KOL/2012 MD.IBRAHIM A.YR. 2006 - 07 2 CURRENT WITH ING VAISYA BANK. FROM STATEMENT OF AFFAIRS FILED BY THE ASSESSEE, THE AO FOUND THAT THE ASSESSEE HAD DISCLOSED ITS ACCOUNT ONLY WITH CENTRAL BANK OF INDIA AND NO OTHER BANK ACCOUNT WA S DISCLOSED. AS PER AIR INFORMATION THE TOTAL DEPOSIT IN THESE BANK ACCOUNTS WERE RS.24,38,082 OUT OF WHICH DEPOSIT TO THE EXTENT OF RS.9,30,128 IN THE BANK ACCOUNT NO.55301105366 CURRENT A/C AS PROPRIETOR OF WORLD FREE TRADING. THE BALANCE OF RS.15,07,954 / - WAS TREATED AS UNEXPLAINED CASH DEPOSIT BY THE A.O. 3.1. THE AO OBSERVED THAT IN WORLD FREE TRADING CO. THE ASSESSEE HAD SHOWN A TURN OVER OF RS.13,64,114 BUT MANY OF CASH SALES ON DIFFERENT DATES MENTIONED IN THE ASSESSMENT ORDER APPEAR TO BE BOGUS SA LES WHICH AMOUNTED TO RS.6,36,537. THE AO REJECTED THE SALE FIGURE SHOWN BY THE ASSESSEE AS THERE WAS NO DOCUMENTARY EVIDENCE OF THESE SALES AND ESTIMATED THE SALES AT 10% ABOVE PURCHASE PRICE. HE ESTIMATED THE GROSS PROFIT AT RS.1,33,940 AGAINST RS.24,713 DECLARED BY THE ASSES SEE RESULTING INTO ADDITION OF R S.1,09,327. 3.2. THE AO ALSO ADDED RS.1,20,000 THE AMOUNT SHOWN BY THE ASSESSEE AS INTRODUCTION OF CASH IN CASH FLOW STATEMENT. THESE AMOUNTS (RS.15,07,954 + RS.6,36,357 + RS.1,20,000) I.E. RS.22,64,31 1 WAS ADDED AS UNEXPLAINED CASH CREDIT AND RS.1,09,327 AS GROSS PROFIT. 3.3. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE LD. CIT(A). CONSIDERING THE SUBMISSION S OF THE ASSESSEE THE LD. CIT(A) HELD AS UNDER : - 3.1. COMING TO THE SUBMISSIONS OF THE APPELLANT IN RESPECT OF ADDITION OF RS.6,36,537 AS BOGUS SALES AND ADDITION OF R S.1,09,537 IN TRADING ACCOUNT, I AM OF THE OPINION THAT THE ACTION OF THE AO ARE CONTRADICTORY. I AGREE WITH THE APPELLANT WHEN THE SALES SHOWN BY THE APPELLANT IS MORE THAN THE SALES ESTIMATED BY THE AO, NO ADDITION CAN BE MADE AS BOGUS SALES. I ALSO AGREE WITH THE APPELLANT WHEN THERE IS NO DISPUTE ABOUT THE OPENING STOCK, PURCHASE OF GOODS AND SALES SHOWN BY THE APPELLANT NOT LESS THAN ESTIMATED BY THE AO AND THERE IS NO CLOSING STOCK, ANY ADDITION IS UNCALLED FOR. THE ADDITIONS OF RS.6,36,537 AND RS.1,09,537. 3.2. IN RESPECT OF ADDITION OF RS.1,20,000 FROM SAVING WITHDRAWAL OF RS.2,95,000 IN LAST FIVE YEARS, I AM OF THE OPINION THAT SUBMISSIONS OF THE APPELLANT THOUGH CANNOT BE FULLY ACCEPTABLE IN RESPECT OF QUANTUM, SOME BENEFIT OF SAVINGS SHOULD BE MADE ON THE BASIS OF PREPONDERANCE OF PROBABILITY. IT IS IMPOSSIBLE AND IMPROBABLE THAT WHATEVER THE DRAWINGS HAD BEEN MADE, HAD BEEN FULLY SPENT. THE AO DID NOT BR ING ANY MATERIAL TO ITA NO. 464 /KOL/2012 MD.IBRAHIM A.YR. 2006 - 07 3 INDICATE THAT THE APPELLANT HAD MADE ANY INVESTMENT. IN VIEW OF THE MATTER, I FEEL THAT THE SAVINGS OF RS.10,000 PER YEAR MAY BE ACCEPTED AND IN THE PROCESS ADDITION IS REDUCED BY RS.40,000. APPELLANT GETS RELIEF OF 80,000/ - . 3.3. IN R ESPECT OF TRANSACTIONS IN ACCOUNT NO.55301892243 (SB), I AGREE WITH THE SUBMISSION OF THE APPELLANT THAT HE WAS ENGAGED IN SEPARATE BUSINESS OF SHOE DEALINGS. THE ENTRIES IN THE BANK ACCOUNT CLEARLY SHOW THAT IT INDICATES THE TRADING TRANSACTIONS THEREIN. HAD BEEN THE ACCOUNTS FOR INTRODUCING THE CONCEALED INCOME, THERE WAS NO NECESSITY OF MAKING LARGE WITHDRAWALS. I AGREE WITH THE APPELLANT THAT THE ACCOUNT OF THIS BUSINESS SHOULD BE ACCEPTED AS CASH METHOD. BY THIS WAY THE INCOME CAN BE DETERMINED AT RS.5 ,774 WHICH IS THE CLOSING BALANCE BUT I AM UNABLE TO AGREE WITH THE APPELLANT THAT THE EXPENDITURE CLAIM OF RS.1000 PER MONTH SHOULD BE ALLOWED IN VIEW OF THE FACT WHEN THE ACCOUNTING METHOD IS CASH, NO EXPENDITURE CAN ALLOWED UNLESS IT IS PAID. IN RESPECT OF ACCOUNT NO.553010018043 NO ADDITION CAN BE MADE AS THE TRANSACTIONS NOT RELATING TO YEAR UNDER APPEAL. IN RESPECT OF THE DEPOSITS IN MINOR SON S NAME, THIS CANNOT BE ADDED TO THE INCOME OF THE APPELLANT BECAUSE SAVINGS OF RS.5000 FOR CEREMONIAL GIFT IS REASONABLE. 3.4. THE ADDITION OF RS.80000 AND RS. 5774 ARE SUSTAINED AND OTHER ADDITIONS ARE DELETED. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PERUSED THE RECORDS. FIRST OF ALL WE WILL DEAL WITH THE ADDITION OF RS.6,36,537/ - AS BOGUS SALES AS WELL AS ADDITION OF RS.1,09,537/ - IN TRADING ACCOUNT. WE FIND THAT THE AO HAD ASKED FOR AN EXPLANATION FROM ASSESSEE FOR HIS DEPOSITS IN THE BANK ACCOUNT. IN THIS CONNECTION THE ASSESSEE HAS SUBMITTED H IS STATEMENT OF AFFAIRS. IN THE MEANTIME THE ASSESSEE HAD SHOWN A TURN OVER OF RS.13,64,114/ - . THE ASSESSEE ALSO HAD A CURRENT ACCOUNT IN WHICH RS.9,30,128/ - WAS SHOWN. AO HAD PROCEEDED TO COMPUTE CASH SALES ON DIFFERENT DATES AND TREATED THEM AS BOGUS SAL ES AMOUNTING TO RS.6,36,537/ - . AO ALSO ESTIMATED THE GROSS PROFIT AT RS.1,33,940 AGAINST RS.24,713/ - DECLARED BY THE ASSESSEE RESULTING INTO ADDITION OF RS.1,09,327/ - . 4.1. AS REGARDS BOGUS SALE IS CONCERNED WE FIND THAT THE LD. CIT(A) IS CORRECT IN HOLD ING THAT THERE IS NO BASIS FOR THE SAME WHEN THE ASSESSEE HIMSELF IS SHOWING A TURN OVER OF RS.13,64,114/ - . HENCE THERE IS NO BASIS FOR ADDITION OF BOGUS SALES OF RS.6,36,537/ - . WE UPHOLD THE DELETION OF THIS AMOUNT BY LD.CIT(A). AS REGARDS THE ESTIMATION OF GROSS PROFIT IS CONCERNED WE FIND THE AO IS CORRECT IN HOLDING THAT THE GROSS PROFIT IS SHOWN AT 1.81% WHICH IS VERY LOW. THE SAME IS NOT SUPPORTED BY ITA NO. 464 /KOL/2012 MD.IBRAHIM A.YR. 2006 - 07 4 APPROPRIATE EVIDENCE. HENCE, IN OUR CONSIDERED OPINION ESTIMATION OF PROFIT @10% OF THE TURN OVER SHO WN BY THE ASSESSEE MEETS THE ENDS OF JUSTICE. 4.2. AS REGARDS ADDITION OF RS.1,20,000/ - WE FIND THE LD. CIT(A) S ESTIMATING THE ADDITION OF RS.40,000/ - IS REASONABLE ENOUGH. IN OUR CONSIDERED OPINION THE ASSESSEE COULD BE GRANTED SOME RELIEF ON ACCOUNT OF SAVINGS FROM PAST WITHDRAWALS. ACCORDINGLY THIS ASPECT OF LD. CIT(A) S ORDER ALSO SUSTAINS. 4.3. WE FIND THAT THE LD. CIT(A) IS CORRECT IN HOLDING THAT DEPOSITS IN MINOR SON S NAME CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE BECAUSE SAVINGS OF RS.5,000/ - FOR CEREMONIAL GIFT IS REASONABLE. 4.4. AS REGARDS ADDITION OF TRANSACTIONS IN ACCOUNT NO.55301892243 WE FIND THAT THE AO HAS TREATED T HE SAID DEPOSIT AMOUNTING TO RS.15,07,954/ - AS UNDISCLOSED INCOME. 4.5 . AS REGARDS TREATING THE DEPOSITS AS UNDISCLOSE D INCOME OF THE ASSESSEE WE FIND THAT THE AO HAS ACCEPTED THAT THE ASSESSEE IS DEALING IN SHOE. WHEN THE AO IS ACCEPTING ONE OF THE UN DISCLOS ED ACCOUNTS AS RELATING TO SHOE BUSINESS , NO COGENT EVIDENCE IS BROUGHT ON RECORD AS TO WHY THE OTHER UNDISCLOSED A CCOUNT SHOULD ALSO BE NOT TREATED PERTAINING TO SHOE BUSINESS. MOREOVER A PERUSAL OF THE CONCERNED BANK ACCOUNT SHOWS THAT THERE ARE DEPOSITS OF SMALL DENOMINATION ON VARIOUS DATES WHEREIN 139 DEPOSITS HAVE BEEN MADE. IN OUR CONSIDERED OPINION TAKING THE F ACTS AND CIRCUMSTANCES OF THE CASE THAT THE ASSESSEE IS A SMALL SHOE BUSINESS MAN THE DEPOSITS IN THIS ACCOUNT HAS BEEN RIGHTLY ACCEPTED BY THE LD. CIT(A) AS ARISING OUT OF SHOE BUSINESS. HOWEVER WE ARE NOT IN AGREEMENT WITH THE LD. CIT(A) THAT THE CLOSIN G BALANCE OF THE SAID ACCOUNT OF RS.5,774/ - SHOULD ONLY BE TREATED AS ASSESSEE S INCOME. IN OUR CONSIDERED OPINION, 10% OF THE DEPOSITS IN THIS ACCOUNT CAN BE REASONABLE TAKEN AS PROFIT OF THE ASSESSEE. IN THE RESULT WE MODIFY THE ORDER OF THE LD. CIT(A) A S ABOVE. 5. IN THE RESULT THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. ORDE R PRONOUNCED IN THE COURT ON 5.2.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 5.2.2015. R.G.(.P.S.) ITA NO. 464 /KOL/2012 MD.IBRAHIM A.YR. 2006 - 07 5 COPY OF THE ORDER FORWARDED TO: 1 . MD.IBRAHIM, 2, SUNYAT SEN STREET, KOLKATA - 7000012. 2 I.T.O., WARD - 39(2), KOLKATA. 3 . CIT(A) - IV , KOLKATA 4. CIT - KOLKATA. 5. CIT - DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES