Jayesh N Barad, Ahmedabad V. The DCIT, Circle-1(1)(1), Ahmedabad

ITA 529/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1349 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Assessee Lawyers: K H SHAH; AMAN SHAH A RS
• Keywords: Reopening of assessment; Unexplained cash credit; Presumptive income; Business income; Set aside
• Section: 143(3); 69A; 148

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 529/AHD/2018 & 40/AHD/2019 ( ASSESSMENT YEARS : 2010-11 & 2009-10) JAYESH N BARAD C/O JHS & ASSOCIATES LLP CHARTERED ACCOUNTANTS 206, SHITAL VARSHA, OPP. P C JEWELLERS, SHIVRANJANI CROSS ROAD, SATELITE, AHMEDABAD - 380015 / VS. THE DY. COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), AHMEDABAD ./ ./ PAN/GIR NO. : AUYPB8944Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI K. H. SHAH & SHRI AMAN SHAH, A.RS. / RESPONDENT BY : SHRI VIRENDER SINGH, SR.D.R. DATE OF HEARING 08 & 09/08/2019 !'# / DATE OF PRONOUNCEMENT 11/09/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TA X (APPEALS)-1, AHMEDABAD (CIT(A) IN SHORT), DATED 12.01.2018 ARI SING IN THE ASSESSMENT ORDER DATED 15.11.2016 PASSED BY THE ASSESSING OFFI CER (AO) UNDER S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AYS. 2010-11 & 2009-10. ITA NO. 529/AHD/18 & 40/AHD/19 [JAYESH N BARAD VS. DCIT] A.Y. 2010-11 & 2009-10 - 2 - 2. THE GRIEVANCES RAISED BEING COMMON, BOTH CASES W ERE HEARD TOGETHER AND DISPOSED OF BY THE COMMON ORDER. 3. WE SHALL FIRST TAKE UP ASSESSEES APPEAL IN ITA NO. 529/AHD/2018 CONCERNING AY 2010-11. ITA NO. 529/AHD/2018-AY-2010-11 (ASSESSEES APPEAL) 4. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1.00 RE-OPENING IS BAD IN LAW. 1.01 ON THE FACTS AND CIRCUMSTANCES OF APPELLANT'S CASE AS WELL AS IN LAW, THE HON'BLE CIT (A) HAS ERRED IN CONFIRMING ER RONEOUS ACTION OF ID AO OF REOPENING OF ASSESSMENT PROCEEDINGS AS IT LACKS JURISDICTION, RE-OPENED WITHOUT BRINING ON RECORD I NDEPENDENT REASON / SATISFACTION FOR REOPENING AND MAINLY RE-O PENED BASED ON REASON / SATISFACTION OF THIRD PARTY. 1.02 YOUR APPELLANT PRAYS YOUR HONOUR TO HOLD SO NO W AND TREAT THE REOPENING AS BAD IN LAW AND SET ASIDE THE ASSESSMEN T. 2.00 ADDITION OF RS. 33,42,622/- U/S 68 / 69A TREAT ING CASH DESPOSIT FROM BUSINESS ACTIVITIES AS UNEXPLAINED CASH CREDIT. 2.01 ON THE FACTS AND CIRCUMSTANCES OF APPELLANT'S CASE AND IN LAW, THE HON'BLE CIT (A) HAS ERRED IN CLASSIFYING SOURCE OF CASH DEPOSIT / CASH WITHDRAWAL AS UNEXPLAINED CASH CREDIT / CASH W ITHDRAWAL THOUGH NECESSARY DOCUMENTS SUCH AS BILLS, CONFIRMAT IONS, BOOKS OF ACCOUNTS ETC. ARE AVAILABLE TO SUBSTANTIATE THE SAM E. 2.02 YOUR APPELLANT PRAYS YOUR HONOUR TO HOLD SO NO W AND TREAT THE SOURCE OF CASH DEPOSIT AS EMANATING FROM BUSINESS T RANSACTIONS ONLY AND NOT AS UNEXPLAINED CASH CREDIT. 5. GROUND NO.1 OF THE APPEAL IS DISMISSED AS NOT PR ESSED. 6. GROUND NO.2 CONCERNS ADDITION OF RS.33,42,622/- UNDER S.68/69A TREATING THE CASH DEPOSITS AS UNEXPLAINED CASH CRED IT. ITA NO. 529/AHD/18 & 40/AHD/19 [JAYESH N BARAD VS. DCIT] A.Y. 2010-11 & 2009-10 - 3 - 7. BRIEFLY STATED, ON THE BASIS OF CERTAIN INFORMAT ION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT, IT WAS GATHER ED BY THE AO THAT THE ASSESSEE HAS CARRIED OUT HUGE CASH TRANSACTIONS THR OUGH A BANK ACCOUNT WITH CENTRAL BANK OF INDIA DURING FY 2010-11. IT WAS NO TICED THAT THE ASSESSEE HAS DEPOSITED AGGREGATE CASH OF RS.33,42,622/- ON T HE ONE HAND AND WITHDRAWN CASH OF RS.30,50,000/- IN AGGREGATE ON TH E OTHER HAND. IT WAS FURTHER NOTICED BY THE AO THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR AY 2010-11 AT ALL. CONSEQUENTLY, A NOTICE UNDER S. 148 OF THE ACT WAS ISSUED AND RE-ASSESSMENT PROCEEDINGS WERE UNDERTAKE N UNDER S.147 OF THE ACT. IN SCRUTINY ASSESSMENT, PURSUANT TO THE EXERC ISE OF POWERS UNDER S.147 OF THE ACT, IT WAS HELD BY THE AO THAT VARIOU S CASH DEPOSITS WERE MADE IN THE ASSESSEES BANK ACCOUNT AGGREGATING TO RS.33,42,622/- REMAINED UNEXPLAINED. THE AO ACCORDINGLY MADE ADDI TIONS TOWARDS UNEXPLAINED CASH DEPOSITS IN BANK TO THE AFORESAID EXTENT. 8. IN THE FIRST APPEAL BEFORE THE CIT(A), THE ASSES SEE SUBMITTED THAT TRANSACTIONS IN THE BANK ACCOUNT PERTAINED TO HIS R ETAIL BUSINESS (WHEAT). HOWEVER, AS THE NATURE AND DETAILS OF BUSINESS OF T HE ASSESSEE WERE NOT EXPLAINED, THE CIT(A) REFUSED TO INTERFERE WITH THE ORDER OF THE AO. 9. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 10. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEA RNED AR FOR THE ASSESSEE REFERRED TO MONTH-WISE QUANTITATIVE DETAIL S OF PURCHASE AND SALE TOGETHER WITH VALUE THEREOF IN RELATION TO IN RETAI L BUSINESS IN WHEAT. IT WAS FURTHER POINTED OUT THAT THE ASSESSEE HAS RE-CYCLED THE CASH DEPOSITS BY WAY OF SIMULTANEOUSLY WITHDRAWAL OF ALMOST SIMILAR AMOU NT WHICH GOES TO PROVE THAT THE ASSESSEE IS IN RETAIL BUSINESS. THE LEARN ED AR THEREAFTER REFERRED TO PAGE NO.20 OF THE ORDER OF THE CIT(A) AND SUBMIT TED THAT EVEN IN THE STATEMENT RECORDED UNDER S.132(4) OF THE ACT BY THE INVESTIGATION WING, THE ASSESSEE HAD ASSERTED THAT THE BANK ACCOUNT WAS USE D FOR TRADING AGRICULTURAL PRODUCT, WHEAT, CUMIN SEEDS, CORIANDER ETC. IT WAS SUBMITTED THAT DURING FY 2008-09 TO 2010-11, THE ASSESSEE HAS ALSO EXPLAINED BEFORE ITA NO. 529/AHD/18 & 40/AHD/19 [JAYESH N BARAD VS. DCIT] A.Y. 2010-11 & 2009-10 - 4 - THE REVENUE AUTHORITIES THAT HE PURCHASED AGRICULTU RAL PRODUCTS FROM NEARBY VILLAGE OF VERAVAL, TALUKA I.E. NATIVE PLACE OF ASSESSEE AND SOLD IT IN THE RESIDENTIAL AREAS OF GANDHINAGAR OF AHMEDABA D. IT WAS POINTED OUT BY THE LEARNED AR FOR THE ASSESSEE THAT ASSESSEE HA D ALSO SUBMITTED THE CONFIRMATION OF FARMERS ALONG WITH FORM NO. 7/12 AN D 8A CERTIFICATES IN SUPPORT OF CLAIM OF BEING ENGAGED IN RETAIL BUSINES S. THE LEARNED AR THUS SUBMITTED THAT HAVING REGARD TO THE CONTINUITY OF D EPOSITS AND WITHDRAWALS, IT IS OBVIOUS THAT THE ASSESSEE HAS RE-CYCLED THE S AME MONEY AND HAS NO WHEREWITHAL TO GENERATE SUCH KIND OF CASH DEPOSITS. THE LEARNED AR THUS SUBMITTED THAT THE ACTION OF THE REVENUE IN MAKING ADDITIONS TOWARDS AGGREGATE AMOUNT OF CASH DEPOSITS WHILE COMPLETELY IGNORING THE SIMULTANEOUS CASH WITHDRAWALS IS TOTALLY UNJUSTIFIE D IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED AR HOWEVER SUBMITTED THAT THE GRIEVANCE OF THE ASSESSEE WOULD BE MET IF THE PROVI SIONS OF SECTION 44AF OF THE ACT IS INVOKED AS APPLICABLE TO THE PERSONS ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE AND THE SUM EQUAL TO 5% OF THE TOTAL TURNOVER OF SUCH BUSINESS BE DEEMED TO BE PROFITS AND GAINS OF SUCH BUSINESS. 11. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HA ND, RELIED UPON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED IN FUR THERANCE THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE THAT THE CASH WA S GENERATED IN RETAIL SALE AS CLAIMED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER DEPOSITS IN THE BANK A CCOUNT OF THE ASSESSEE CAN BE RECORDED AS TRADING ASSET OR WHETHER SUCH DE POSITS ARE TO BE RECORDED AS THE INCOME FROM UNEXPLAINED SOURCE UNDE R S.68/69 IF THE ACT. IN THIS REGARD, WE OBSERVE AT THE FIRST PLACE THAT WHILE TOTAL DEPOSIT IN CASH WAS FOUND TO BE RS.33,42,622/-, THERE IS SIMULTANEO US WITHDRAWAL TO THE EXTENT OF RS.30,50,000/- DURING THE YEAR. THE CASH BOOK FILED BY THE ASSESSEE SHOWING DAY-TO-DAY GENERATION OF CASH AND DEPOSITS THEREOF ALSO MAKES IT CLEAR THAT THE ASSESSEE IS ENGAGED IN SYST EMATIC ACTIVITY OF RETAIL BUSINESS. THE WITHDRAWAL OF SIMILAR AMOUNT OF CASH SUBSTANTIATES THE CLAIM OF THE ASSESSEE TO BE ENGAGED IN RETAIL BUSINESS TO A GREAT EXTENT. COUPLED ITA NO. 529/AHD/18 & 40/AHD/19 [JAYESH N BARAD VS. DCIT] A.Y. 2010-11 & 2009-10 - 5 - WITH THIS, THE CLAIM OF THE ASSESSEE ALSO GAINS SUP PORT FROM THE STATEMENT RECORDED BY THE INVESTIGATION WING UNDER S.132(4) O F THE ACT. THE ASSESSEE HAS ALSO SUPPORTED ITS CLAIM OF BEING ENGA GED IN RETAIL BUSINESS BY MONTH-WISE SUMMARY OF RETAIL TRANSACTIONS SHOWING Q UANTITY AND VALUE. IN THE CIRCUMSTANCES, WE ARE INCLINED TO ACCEPT THE CA SH DEPOSIT TO BE ARISING AND ATTRIBUTABLE TO RETAIL TRADE. THIS BEING SO AN D IN VIEW OF THE AVERMENTS MADE ON BEHALF OF THE ASSESSEE, THE BUSINESS INCOME FROM RETAIL TRADE MAY BE ESTIMATED BY INVOKING SECTION 44AF OF THE ACT. S IMILAR VIEW HAS BEEN ECHOED IN CIT VS. PRADEEP SHANTILAL PATEL (2014) 42 TAXMANN.C OM 2 (GUJ) AND CIT VS. SURINDER PAL ANAND (2011) 242 CTR 61 (P&H) . 13. AS PER THE SCHEME OF PRESUMPTIVE TAXATION PROVI DED UNDER S.44AF OF THE ACT, THE ESTIMATED BUSINESS INCOME FROM AGGREGA TE CASH DEPOSITS / TURNOVER WORKS OUT TO RS.1,67,131/- BY APPLYING 5% THEREON. THE ESTIMATED INCOME FROM THE CASH DEPOSITS IN THE BANK IS THUS R EQUIRES TO BE RESTRICTED TO THE AFORESAID AMOUNT. THE AO IS DIRECTED TO DO SO. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A Y 2010-11 IS PARTLY ALLOWED. ITA NO. 40/AHD/2019-AY-2009-10 (ASSESSEES APPEAL) 15. IDENTICAL MATTER WITH SIMILAR GRIEVANCE OF THE ASSESSEE ARISING IN AY 2009-10 WAS HEARD ON NEXT DAY I.E. 09.08.2019 AS WE LL. IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE FACTS IN ISSUE A ND THE GRIEVANCE OF THE ASSESSEE ARE IDENTICAL CONCERNING AY 2009-10 WHERE INSTANCE OF SIMILAR CASH DEPOSIT OF AGGREGATE AMOUNT OF RS.37,48,036/- WAS SIMILARLY OBSERVED. SIMULTANEOUSLY, CASH WITHDRAWAL OF RS.35 LAKHS WAS ALSO FOUND. ON THESE FACTS, THE CASE WAS RE-OPENED AKIN TO 2010-11 (SUPR A). THE REVENUE DID NOT REBUT THE ASSERTIONS MADE ON BEHALF OF THE ASSE SSEE. 16. IN VIEW OF THE SIMILARITY OF THE MATTER, OUR OB SERVATIONS IN AY 2010- 11 WOULD APPLY MUTATIS MUTANDIS . ACCORDINGLY, THE ORDER OF THE CIT(A) IS ITA NO. 529/AHD/18 & 40/AHD/19 [JAYESH N BARAD VS. DCIT] A.Y. 2010-11 & 2009-10 - 6 - SET ASIDE AND THE AO IS DIRECTED TO ESTIMATE THE IN COME @ 5% OF THE CASH DEPOSITS AS PROVIDED UNDER S.44AF OF THE ACT. 17. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 20 09-10 IS PARTLY ALLOWED. 18. IN THE COMBINED RESULT, BOTH THE APPEALS FILED BY ASSESSEE ARE PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 11/09/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 11/09/20 19