ITO, New Delhi V. Shri Hemant Kumar, New Delhi

ITA 51/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86812 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 17-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: MOHIT SACHDEVA
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO. - 51 /DEL/201 3 (ASSESSMENT YEAR - 2 009 - 10 ) ITO, WARD - 26(4),E - 2, 18 TH FLOOR, CIVIC CENTRE, NEW DELHI. (APPELLANT) VS SH. HEMANT KUMAR, F - 82A, MOHAN GARDEN, PEEPAL ROAD, UTTAM NAGAR, NEW DELHI - 110059 PAN - ANJPK7489B (RESPONDENT) C.O. - 35/DEL/2013 (IN I.T.A .NO. - 51/DEL/2013) (ASSESSMENT YEAR - 2 009 - 10 ) SH. HEMANT KUMAR, F - 82A, MOHAN GARDEN, PEEPAL ROAD, UTTAM NAGAR, NEW DELHI - 110059 (APPELLANT) VS ITO, WARD - 26(4),E - 2, 18 TH FLOOR, CIVIC CENTRE, NEW DELHI. (RESPONDENT) APPELLANT BY SH.GAURAV DUDEJA, SR. DR RESPONDENT BY SH. MOHIT SACHDEVA, ADV. ORDER PER DIVA SINGH, JM BY THE PRESENT A PPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 22. 1 0 . 2012 OF CIT(A) - XXIV , NEW DELHI PERTAINING TO 200 9 - 1 0 ASSESSMENT YEAR. THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. DELETING THE ADDITION OF RS.31,27,000/ - MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT IN ICICI BANK. 2. RESTRICTING THE ADDITION OF RS.16,95,943/ - TO RS.4,23,873/ - BY APPLYING THE GP RATE OF RS.15% AGAINST THE RATE OF 60% APPLIED BY THE ASSESSEE IN RETURN OF INCOME AND BY THE AO IN ASSESSMENT ORDER. 3. THE A PPELLANT CRAVES THE RIGHT TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL. 2 I.T.A .NO. - 51 /DEL/201 3 & C.O. - 35/DEL/2013 2. AGAINST THE ADDITIONS SUSTAINED BY THE CIT(A) THE ASSESSEE IN ITS CO HAD RAISED FOLLOWING GROUNDS: - 1. THAT THE LD. CIT(A GROSSLY ERRED IN ALLOWING THE APPEAL OF THE CROSS - OBJECTION PARTIALLY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPEAL MIGHT HAVE BEEN ALLOWED BY THE LD. CIT(A) IN FULL. 2. THAT THE LD. CIT(A) HAS ERRED IN NOT COMPLETELY REVERSING THE ADDITION OF RS.16,95,493/ - MADE BY LD. ASSESSING OFFICER. THE LD. CIT(A) WHILE ESTIMATING THE INCOME OF THE ASSESSEE AT RS.4,23,873/ - APPLIED NET PROFIT RATE OF 15 PER CENT OF THE TURNOVER WHICH IS HIGHLY EXCESSIVE KEEPING IN VIEW THE NATURE OF BUSINESS AND THE FACT THAT THE APPELLANT HAS STARTED THE BUSINESS O NLY RECENTLY. 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE DECLARED AN INCOME OF RS. 1,74,900/ - BY WAY OF FILING ITS RETURN. THE SOURCE OF INCOME WA S ATTRIBUTED TO RUNNING OF BUSINESS OF INTERIOR DECORATORS. THE AO IN HIS ORDER PASSED U/S 143(3) PROCEEDINGS TOOK COGNIZANCE OF THE FACT THAT THE ASSESSEE HAD MADE CASH DEPOSITS AS PER AIR INFORMATION OF RS.31,27,000/ - IN ITS ACCOUNT WITH ICICI BANK . ACCORDINGLY QUESTIONNAIRE WAS ISSUED REQUIRING THE ASSESSEE TO EXPLAIN THE SAME. IN THE A B S ENCE OF ANY EVIDENCE EXPLAINING THE SAME ADDITION OF THE SAID AMOUNT WAS MADE. APART FROM THAT THE AO TAKING INTO CONSIDERATION THE FACT THAT THIS WAS A NO ACCOUNT CASE WHERE THE GROSS RECEIPT SHOWN W A S RS.3,11,871/ - CONCLUDED THAT THE ASSESSEE IS SHOWIN G ITS RECEIPT AS ITS WHIMS AND FANCY SINCE AS PER THE COPY OF THE P&L ACCOUNT FILED THE GROSS RECEIPT S WERE DISCLOSED OF RS.28,25,823/ ACCORDINGLY ACCEPTING THE GROSS RECEIPT OF RS.28,25,823/ - THE INCOME OF THE ASSESSEE WAS ESTIMATED 60% OF THE SAME. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY IT WAS EXPLAINED THAT THE DEPOSITS IN THE SAVING BANK A/C I N ICICI BANK, DWARKA, NEW DELHI WERE PARTLY FROM GROSS RECEIPTS FROM INTERIOR DECORATION BUSINESS AND PARTLY FROM CASH WITHDRAWN DURING THE YEAR. RELIAN CE WAS PLACED UPON CIT VS AGGARWAL ENGINEERING CO. ( 2006 ) 206 CTR 648 (P&H). CONSIDERING WHICH THE CIT(A) PROCEEDED TO DELETE THE ADDITION MADE HOLDING THAT ONCE THE A O HAS PROCEED ED TO ESTIMATE THE INCOME OF THE ASSESSEE AT A CERTAIN PERCENTAGE OF GROSS RECEIPTS THEREBY MAKING A BEST JUDGEMENT ASSESSMENT, NO 3 I.T.A .NO. - 51 /DEL/201 3 & C.O. - 35/DEL/2013 FURTHER ADDITION WAS REQUIRED TO BE MADE. CONSIDERING THE ESTIMATE OF INCOME OF 60% THE CIT(A) ACCEPTED THE ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE HAD S TART ED A SMALL TIME BUSINESS IN THE YEAR UNDER CONSIDERATION AND RELYING UPON BRIJ BHUSHAN LAL PARDUMAN KUMAR VS CIT (1978) 115 ITR 524 (SC) AND CIT VS RANI CHERRA TEA CO. LTD. (1994) 207 ITR 979 (CAL.) AND STATE OF KERALA VS C.VELUKUTTY (1966) 60 ITR 239 (SC). HE CAME TO THE FOLLOWING CONCLUSIO N: - 4.4 IN THE INSTANT CASE, THE AO HAS NOT TAKEN COGNIZANCE OF THE CASH BOOK, P&L A/C AND THE BANK STATEMENT OF THE APPELLANT AND HAS GONE ON TO ESTIMATE THE INCOME OF THE APPELLANT AT 60% OF HIS GROSS RECEIPTS, WHICH APPEARS TO BE HIGHLY EXAGGERATED, K EEPING IN VIEW THE NATURE OF THE BUSINESS OF THE APPELLANT, WHICH IS OF INTERIOR DECORATES. IN THE LIGHT OF THE AFORESAID CASE LAWS, THE NATURE OF THE BUSINESS OF THE APPELLANT, THE SMALL TURNOVER/GROSS RECEIPTS (RS.28,25,823/ - ), AND THE FACT THAT THE APP ELLANT HAS STARTED THE BUSINESS ONLY RECENTLY, IN MY OPINION THE ENDS OF JUSTICE SHALL BE MET IF THE TAXABLE INCOME OF THE APPELLANT IS RESTRICTED TO 15% OF THE TOTAL TURNOVER, AMOUNTING TO RS.4,23,873/ - . 4. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE THE TRIBUNAL AND THE ASSESSEE IS AGGRIEVED BY THE ADDITION SUSTAINED TO THE EXTENT OF RS.4,23,873/ - . 5. THE LD. SR. DR INVITING ATTENTION TO SECTION 44 AA OF THE INCOME TAX ACT, 1961 SUBMITTED THAT THE ASSESSEE WAS MAN DATORILY REQUIRED TO MAINTAIN THE BOOKS OF ACCOUNTS WHICH HAS NOT BEEN DONE. IN THESE CIRCUMSTANCES ESTIMATE OF THE ASSESSEE S INCOME WAS WARRANTED ON FACTS. ADDRESSING THE PAPER BOOK FILED BY THE ASSESSEE SPECIFIC PAGE 1 TO 8 CONTAINS COPY OF THE SPECIFIC BANK ACCOUNT O F THE ASSESSEE IT WAS HIS SUBMISSION THAT ON 29.04.2008 AND 30.04.2008 ASSESSEE HAS DEPOSITED RS.2 LAC AND RS.6 LAC BY CASH AND MADE WITHDRAWALS OF RS.3,25,000/ - ; RS.1,75,000/ - & RS.3,00,000/ - ON 03.05.2008 FOR SH.R.SURENDER REDDY , R.SURENDER READY AND D R. R.INDRA REDDY, THE PURPOSE OF WHICH HAS NOT BEEN EXPLAINED. THE REASONING ADOPTED BY THE CIT(A) THAT ONCE INCOME IS ESTIMATED THE DEPOSITS STANDS EXPLAINED IT WAS SUBMITTED IS AGAINST THE VERY PURPOSE OF THE ACT AND THE POLICY AS WHAT ARE THE SOURCES O F DEPOSIT AND HOW THEY CAN BE SAID TO BE USED BY A SMALL INTERIOR DECORATOR STANDS COMPLETELY UNEXPLAINED. ATTENTION WAS ALSO INVITED TO SIMILAR CASH DEPOSITS OF RS.2 LACS ON 5 4 I.T.A .NO. - 51 /DEL/201 3 & C.O. - 35/DEL/2013 OTHER DIFFERENT OCCASIONS AND APART FROM THAT CASH DEPOSITS OF RS.1 LAC, 80 ,000/ - , 50,000/ - ETC WERE MADE AND WITHDRAWN ON 17.06.2008 FOR D.SAM SINGH OF RS.1 LAC AND ON 26.06.2008 OF RS.2 LAC FOR S.N.BHARTI AND AS ON 23.07.2008 RS.1,50,000/ - FOR SANSAD V I HAR CGHS ETC. THESE DEPOSITS AND WITHDRAWALS PER SE IT WAS ARGUED ARE NOT F OR BUSINESS OF THE ASSESSEE AND NEED TO BE EXPLAINED BY THE ASSESSEE FOR WHICH PURPOSES THE ISSUE MAY BE RESTORED. ON FACTS SIMPLY STATING THAT THE DEPOSITS STAND ADDRESSED IT WAS ARGUED CANNOT BE ACCEPTED. 6. LD. AR ON THE OTHER HAND INVITING ATTENTION T O THE PAPER BOOK FILED SUBMITTED THAT THE ASSESSEE HAD MAINTAINED CASH BOOK, P&L A/C ETC AND IN THESE CIRCUMSTANCES THE ADDITION MADE BY WAY OF AN ESTIMATE TO THE EXTENT SUSTAINED BY THE CIT(A) IS WRONG ON FACTS AND INFACT THE ENTIRE ADDITION SHOULD HAVE BEEN DELETED. HOWEVER NO SPECIFIC PAPER OR DOCUMENT IN SUPPORT OF THE SAID ASSERTION WAS RELIED UPON BEFORE US. ADDRESSING THE ADDITION MADE ON THE BASIS OF THE DEPOSITS IN THE SPECIFIC BANK ACCOUNT, LD. AR PLEADED HIS INABILITY TO EXPLAIN THE SAME IN TH E FACE OF THE SPEAKING ARGUMENTS OF THE LD. SR. DR. 6.1. IN REPLY THE LD. SR. DR STATED IN ALL FAIRNESS T H A T THE ISSUE MAY BE RESTORED DIRECTING THE ASSESSEE TO EXPLAIN DETAILS IN THE SPECIFIC BANK ACCOUNT AS HOW THEY CAN BE STATED TO BE RELATABLE TO THE ASSESS EE S BUSINESS OF INTERIOR DECORATORS WHICH HAS BEEN WRONGLY CONCLUDED BY THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADDRESSING THE SECOND ISSUE FIRST, W E ARE O F THE VIEW THAT IN THE PECULIAR FACTS AND C IRCUMSTANCES THE ESTIMATE ARRIVED AT BY THE CIT(A) DESERVES TO BE ACCEPTED. KEEPING IN MIND THE FACT THAT THESE WERE INITIAL YEARS OF THE ASSESSEE S BUSINESS AND THERE IS NO REASONING AVAILABLE ON RECORD TO SHOW HOW AND WH Y THE ESTIMATE @ 60% OF THE GROSS RECEIPTS IS JUSTIFIED ON FACTS , WE ACCEPT THE ESTIMATE OF THE CIT(A) AS REASONABLE ON FACTS . THE ARGUMENTS OF THE ASSESSEE THAT THE BOOKS OF THE ACCOUNTS HAVE BEEN MAINTAINED AND THE ACCOUNTS ARE VERIFIABLE BEING MERE ASSERTION S BEING UNSUPPORTED BY ANY FACT OR EVIDENCE ON RECORD IS R EJECTED. 5 I.T.A .NO. - 51 /DEL/201 3 & C.O. - 35/DEL/2013 8. ADDRESSING THE FIRST GROUND RAISED BY THE REVENUE ON A CONSIDERATION O F THE ENTIRE FACTS AND CIRCUMSTANCES, WE FIND THAT THE REASONING OF THE CIT(A) ON FACTS QUA THE SPECIFIC CASH DEPOSITS TAKEN NOTE OF IN THE AI R INFORMATION WHEN SEEN AGAINST THE WITHDRAWALS MADE WHICH ON THE FACE OF IT DOES NOT SHOW THAT THESE ARE BUSINESS RELATED EXPENDITURES. ACCORDINGLY I N THE ABSENCE OF ANY EVIDENCE OR EXPLANATION THE ASSESSEE CAN BE SAID TO HAVING LENT ITS BANK ACCOUNTS F OR CASH DEPOSITS AND WITHDRAWALS FOR PURPOSES OTHER THAN THE BUSINESS PURPOSES. THE SAID OBSERVATION IS NOT A FINDING ARRIVED AT BY US AND IS MERELY TO ADDRESS THE NEED TO HAVE RELEVANT FACTS AND EVIDENCES CONSIDERED. IN VIEW OF THE FACT THAT THE ASSESSEE HAS NOT EXPLAINED THE SPECIFIC DEPOSITS WHICH THE LD. AR PLEADED H I S INABILITY TO EXPLAIN THE SAME , WE C ONSIDERIN G THE OVERALL FACTUAL MATRIX, DEEM IT APPROPRIATE TO ACCEPT THE ARGUMENTS OF THE LD. SR. DR AND DEEM IT A P P R O P R I A T E TO RESTORE THE FILE BACK TO THE AO WITH THE DIRECTION TO THE ASSESSEE TO EXPLAIN THE SPECIFIC ENTRIES IN THE BANK ACCOUNT. IN THE ABSENCE OF WHICH THE AO SHALL BE AT LIBERTY TO MAKE THE ADDITION IF SO WARRANTED ON FACTS . NEEDLESS TO SAY THAT THE AO SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD . GROUND NO - 1 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CO FILED BY T HE ASSESSEE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 0 T H OF FEBRUARY 2015 . S D / - S D / - ( J.S.REDDY ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 0 / 02 /201 5 *AMIT KUMAR* 6 I.T.A .NO. - 51 /DEL/201 3 & C.O. - 35/DEL/2013 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI