Shri Jiteshkumar Bharatlal Jariwala, Surat V. The Income tax Officer,Ward-5(2), Surat

ITA 505/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89737 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: M K PATEL
• Keywords: Peak credit
• Section: 143(3)

Judgement Text

ITA NO.505/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO.505/AHD/2013 ASSESSMENT YEAR: 2009-10 JITESHKUMAR BHARATLAL JARIWALA, ............. APPELLANT 8/202, MODESHWAR MAHADEV, NI-POLE, GOPIPURA, SURAT. [PAN: ADXPJ 5088 R] VS. INCOME TAX OFFICER, ........................RE SPONDENT WARD - 5(2), SURAT. APPEARANCES BY: M.K. PATEL , FOR THE APPELLANT P.L. KUREEL, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 24, 2015 DATE OF PRONOUNCING THE ORDER : JULY 21 , 2015 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF THE LD. CIT(A)S ORDER DATED 26 TH DECEMBER, 2012, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR THE ASSESSMENT YEAR 2009-10. 2. GROUND NO. 1 IS NOT PRESSED, AND IS, AS SUCH, DI SMISSED FOR WANT OF PROSECUTION. 3. IN THE SECOND, THIRD AND FOURTH GROUNDS OF APPEA L, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSE HAS RAISED THE FOLLOWING GRIE VANCE:- 2. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HA S GRIEVOUSLY ERRED IN MAKING ENHANCEMENT IN RESPECT OF PEAK BALANCE AND G ROSS PROFIT WITHOUT ANY SPECIFIC SHOW-CAUSE NOTICE FOR THE SAME . ITA NO.505/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 4 3. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMING AND ENHANCING THE ADDITION OF UNACCOUNTE D USE OF CAPITAL FORM RS.1,19,490/- TO RS.3,12,620/- 4. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMING AND ENHANCING THE GROSS PROFIT FROM 16.3 5% TO 20% ON ESTIMATE BASIS ONLY, AND THEREBY ENHANCING THE ADDI TION FROM RS.6,13,360/- TO RS,.7,50,288/-. 4. SO FAR AS THESE GRIEVANCES ARE CONCERNED, THE RE LEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE SCRUTINY ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE WAS OPER ATING A BANK ACCOUNT WITH ICICI BANK SURAT IN WHICH CHEQUES AND CASH AGGREGA TING TO RS 37,51,439 WERE DEPOSITED. IT WAS ADMITTED BY THE ASSESSE THAT THES E DEPOSITS REPRESENT UNACCOUNTED SALES. IT WAS IN THIS BACKDROP THE ASSE SSING OFFICER MAD E AN ADDITION OF RS 1,19,419 REPRESENTING ITS PEAK BALAN CE, AS ON 26.8.2011, AT RS 1,19,419. THE ASSESSING OFFICER ALSO MADE AN ADDIT ION OF RS 6,13,360 REPRESENTING 16.35% PROFITS, AS WAS EARNED ON ACCOU NTED SALES MADE BY THE ASSESSE, IN RESPECT OF UNACCOUNTED SALES OF RS 37,5 1,439. AGGRIEVED BY THESE ADDITIONS, ASSESSE CARRIED THE MATTER IN APPEAL BEF ORE THE CIT(A) BUT NOT ONLY THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED I N PRINCIPLE, ENHANCEMENTS IN INCOME WERE ALSO MADE BY THE CIT(A). LEARNED CIT(A) HELD THAT INSTEAD OF AN ADDITION OF RS 1,19,419 IN RESPECT OF PEAK CREDIT, AN ADDITION AT 1/12 TH OF THE SALES TURNOVER WILL BE MORE APPROPRIATE WHICH WORKE D OUT TO RS 3,12,620. THE REASONING ADOPTED BY HIM FOR THIS ENHANCEMENT WAS T HAT SINCE SALE PROCEEDS ARE DEPOSITED IN DISTANT SOUTHERN PART OF INDIA, AND SI NCE OF DISPATCH OF GOODS WAS MADE FROM SURAT, A MINIMUM ROTATION OF ONE MONTHS SALES WAS REQUIRED AS CIRCULATING CAPITAL. HE ALSO HELD THAT IF THE CASH WITHDRAWALS ARE EXCLUDED, THE CORRECT PEAK BALANCE IS RS 10,54,551. LEARNED CIT(A ) ALSO ENHANCED THE GROSS PROFIT FROM ESTIMATED 16.35% TO 20%. THE ASSESSE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. ITA NO.505/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 4 6. WE ARE UNABLE TO SEE ANY LEGALLY SUSTAINABLE REA SONS FOR ASSUMING THAT MINIMUM OF ONE MONTHS SALES WAS REQUIRED BY THE AS SESSE AS HIS CAPITAL FOR MAKING UNACCOUNTED SALES. THERE IS NO SCIENTIFIC BA SIS FOR THIS STAND AT ALL. IN ANY CASE, THERE IS NO REASON TO EXCLUDE CASH WITHDR AWALS IN COMPUTATION OF PEAK BALANCE IN THE BANK ACCOUNT. THE ENHANCEMENT MADE B Y THE CIT(A) SIMPLY PROCEEDS ON SURMISES AND CONJECTURES. WE HAVE ALSO NOTED THAT THE GROSS PROFIT RATE OF 20% AS ADOPTED BY THE CIT(A) IS WITHOUT ANY BASIS. ONCE IT IS FOUND THAT THE ASSESSE HAS EARNED GROSS PROFIT @ 16.35% FROM H IS ACCOUNTED SALES IN RESPECT OF THE SAME LINE OF ACTIVITY, THERE IS NO G OOD REASON TO DISTURB THE SAME RATE HAVING BEEN ADOPTED BY THE ASSESSING OFFICER I N COMPUTATION OF PROFITS IN RESPECT OF THE UNACCOUNTED SALES. AS FOR THE NOTICE FOR ENHANCEMENT, IT IS NOT REALLY NECESSARY TO DEAL WITH THAT ASPECT AS THE EN HANCEMENT IS DELETED ON MERITS. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE DELETE THE ENHANCEMENTS MADE BY THE CIT(A) AND T HUS RESTORE THE ORDER OF THE ASSESSING OFFICER ON THESE ISSUES. 7. GROUND NOS. 2,3 AND 4 ARE THUS ALLOWED IN EFFECT IN THE TERMS INDICATED ABOVE. 8. IN GROUND NO. 5, THE ASSESSE HAS RAISED THE FOLL OWING GRIEVANCE: 5. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN NOT DELETING THE ADDITION OF RS.1,08,000/- MADE ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWAL, AND ERRED IN GIVING ONLY BEN EFIT OF TELESCOPING AGAINST OTHER ADDITIONS CONFIRMED. 9. LEARNED COUNSEL FOR THE ASSESSE DID NOT PRESS TH IS GROUND OF APPEAL AS IT IS PURELY ACADEMIC INASMUCH AS THERE IS SUFFI CIENT SURVIVING ADDITION TO THE INCOME RETURNED BY THE ASSESSE SO AS TO COVE R THESE LOW WITHDRAWALS. WHETHER THIS ADDITION IS CONFIRMED OR DELETED, IT HAS NO IMPACT ON THE TAXABLE INCOME OF THE ASSESSE. IT IS, THEREFORE, DISMISSED AS INFRUCTUOUS. ITA NO.505/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 4 OF 4 10. GROUND NO. 5 IS THUS DISMISSED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 21DAY OF JULY, 2015 SD/- S D/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 21 DAY OF JUNE, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD