Jitnedrakumar Bhailal Dodia, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2(4), AMRELI

ITA 540/RJT/2013

• Counselvise Citation: 54024914 RSA 2013
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT B JHAVERI DR
• Assessee Lawyers: DR ADHIA
• Keywords: Depreciation; Income from undisclosed sources; Peak credit

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 540/RJT/2013 / ASSESSMENT YEAR : 2009-10 JITENDRAKUMAR BHAILALBHAI DODIA, PROP. OF SANDIP SCALE CO., SHIVAJI NAGAR, SAVARKUNDLA, DIST. AMRELI PAN : ACFPD 1016 L ( / APPELLANT) THE I.T.O., WARD 2(4), AMRELI / RESPONDENT ! ' #$ / ASSESSEE BY SHRI D. R. ADHIA, AR % ! ' #$ / REVENUE BY DR. JAYANT B. JHAVERI, DR # & ' ! ( / DATE OF HEARING 08.01.2014 ) ! ( / DATE OF PRONOUNCEMENT 07.03.2014 / ORDER .. , / T. K. SHARMA, J. M.: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 21.11.2013 OF LD. CIT(A) -IV, RAJKOT FOR THE ASSESSMENT YEAR 2009-10. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF MECHANICAL IRON SCALE IN HIS PROPRIETORSHIP CONCERN NAMELY SANDIP SCALE CO. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 23.09.2009 DECLARING TOTAL INCO ME AT RS.1,99,450/-. THE ASSESSING OFFICER SELECTED THIS CASE FOR SCRUTINY A ND ON VERIFICATION, HE NOTICED THAT THE ASSESSEE HAS ADOPTED MERCANTILE SYSTEM OF ACCOUNTIN G OF ACCOUNTS AND FURNISHED AN AUDIT REPORT U/S 44AB OF THE ACT WITH FORM NO.3CB A ND 3CD. THE ASSESSING OFFICER ALSO OBSERVED THAT DURING THE YEAR UNDER CONSIDERAT ION THE ASSESSEE HAS SHOWN THE TURNOVER OF RS.42,25,417/- AND SHOWN PROFIT OF RS.5 ,86,797/- I.E. 13.89% AND NET PROFIT OF RS.2,21,545/- I.E. 5.24% AS AGAINST LAST YEARS TOTAL TURNOVER OF RS.29,18,184/-, GROSS PROFIT OF RS.3,68,142/- AND NET PROFIT OF RS.1,22,5 62 I.E. 4.20%. THUS THE NET PROFIT DURING THE YEAR UNDER CONSIDERATION HAS SHOWN A SLIGHT INC REASE OF 1.04%. 3. IN PARAGRAPH 4 OF THE ASSESSMENT ORDER, THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEPOSITED RS.14,08,814/- IN THE SAVING S BANK ACCOUNT NO. 30100920237 540-RJT-2013 JITENDRAKUMAR BHAILALBHAI DODIA 2 WITH STATE BANK OF INDIA, STATION ROAD, SAVARKUNDLA WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN RESPECT OF THIS DEPOSIT, THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THIS BANK ACCOUNT IS OF HUF. HOWEVER, THIS EXPLANATION WAS REJECTED ON THE GROUND THAT THE SAVINGS BANK ACCOUN T WAS OPENED WITH THE PAN OF INDIVIDUAL. HE ACCORDINGLY TREATED THE ENTIRE DEPO SIT AS UNACCOUNTED INCOME U/S 69A OF THE INCOME-TAX ACT, 1961. IN PARAGRAPH 5 OF THE AS SESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED RS.35,000/- ON ACCOUNT OF EXPENS ES WHICH ARE OF NON-VERIFIABLE IN NATURE. IN PARAGRAPH 6 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED RS.10,820/- OUT OF SHOP EXPENSES, SCOOTER EXPENSES, TELEPHONE EXPENSES AND DEPRECIATION OF SCOOTER. TO SUM-UP, IN THE ASSESSM ENT ORDER THE ASSESSING OFFICER MADE TOTAL ADDITION/DISALLOWANCE OF RS.14,54,634/- UNDER THE THREE HEADS WHICH ARE AS UNDER:- I. UNEXPLAINED DEPOSIT IN ACCOUNT NO. 30100920237 W ITH STATE BANK OF INDIA, STATION ROAD , SAVARKUNDLA - RS.14,08,814/- II. DISALLOWANCE OF FACTORY EXPENSES OUT OF RS.7,30 ,460/- DUE TO NON-VERIFIABLE BILLS/VOUCHERS - RS. 35,000/- III. DISALLOWANCE OUT OF SHOP EXPENSES, SCOOTER EXP ENSES, TELEPHONE EXPENSES AND DEPRECIATION OF SCOOTER - RS. 10,820/- TOTAL RS.14,54,634/- ON APPEAL, IN THE IMPUGNED ORDER, LD. CIT(A) CONFI RMED ALL THE AFORESAID THREE ADDITIONS/DISALLOWANCES. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL, ON THE FOLLOWING GROUN DS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CO NFIRMING ADDITION OF RS.14,08,814/-. THE ADDITION NEEDS DELETION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.14,08,814/- WITHOUT ACCEPTING EXPLANATION FURNIS HED. THE ADDITION NEEDS DELETION. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.14,08,814/- WITHOUT CONSIDERING PROVISIONS OF SE CTION 44AF. THE ADDITION NEEDS DELETION. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.14,08,814/- WITHOUT CONSIDERING PEAK POSITION OF THE TRANSACTION. THE ADDITION NEEDS DELETION. 5. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.14,08,814/- BASED ON PRESUMPTION AND CERMISES. T HE ADDITION NEEDS DELETION. 6. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.14,08,814/- WITHOUT FOLLOWING GUIDELINES FRAMED BY THE HON. ITAT, RAJKOT. THE ADDITION NEEDS DELETION / REDUCTION. 540-RJT-2013 JITENDRAKUMAR BHAILALBHAI DODIA 3 7. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY F ACTUAL, ACCOUNTING AND ADMINISTRATIVE ASPECTS, NO ADDITION AMOUNTING TO RS .14,08,814/- OUGHT TO HAVE BEEN CONFIRMED. THE ADDITION NEEDS DELETION. 8. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY F ACTUAL, ACCOUNTING AND ADMINISTRATIVE ASPECTS, NO ADDITION AMOUNTING TO RS .14,08,814/- OUGHT TO HAVE BEEN CONFIRMED. THE ADDITION NEEDS SUITABLE REDUCTI ON. 9. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS.35,000/- IN RESPECT OF FACTORY EXPENSES. THE ADD ITION NEEDS DELETION / SUITABLE REDUCTION. 10. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CO NFIRMING LUMP SUM ADDITION OF RS.10,820/-. THE ADDITION NEEDS DELETION / SUITA BLE REDUCTION. 11. WITHOUT PREJUDICE, THE ASSESSMENT MADE IS BAD IN LAW AND DESERVES ANNULMENT. 12. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE FRAMING ASSESSMENT. THE ASSESSM ENT NEEDS ANNULMENT. 13. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING APPEAL ORDER. THE ASSES SMENT NEEDS ANNULMENT. 14. THE APPELLANT CRAVES LEAVE TO ADD / ALTER / AM END AND / OR SUBSTITUTE ANY OR ALL GROUNDS OF APPEAL BEFORE THE ACTUAL HEARING TAK ES PLACE. 4. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E, SHRI D.R. ADHIA, AR, APPEARED AND CONTENDED THAT THOUGH THE SAVINGS BANK ACCOUNT NO. 30100920237 WITH STATE BANK OF INDIA, STATION ROAD, SAVARKUNDLA WAS OPENED UNDE R THE PAN OF INDIVIDUAL, ALL THE DEPOSITS AND WITHDRAWALS DONE IN THE ACCOUNTS ARE O F HUF WHICH MAY BE TAXED SEPARATELY IN THE HANDS OF HUF AS PER THE ACCOUNTS OF THE ASSESSEE. ALTERNATIVELY, HE PLEADED THAT IT MAY BE TAXED U/S 44AF AT 5%, BECAUS E IN SUCH CASES DEPARTMENT ITSELF HAS TAXED SUCH AMOUNT U/S 44AF AT 5% OR THE ADDITIO N CAN BE DIRECTED TO BE MADE ON PEAK WORKING BASIS. IN SUPPORT OF THIS, THE LD. AU THORIZED REPRESENTATIVE OF THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE GU JARAT HIGH COURT AS ALSO IN THE CASE OF R.R. CARRYING CORPORATION (126 TTJ (CTK) 240) AN D THE DECISION OF THE ITAT, RAJKOT BENCH IN THE CASE OF GOPALBHAI GORDHANBHAI GARASIA IN ITA NO.540/RJT/2013. HE FURTHER CONTENDED THAT WHEN INCOME IS ESTIMATED @ 5 %, NO SEPARATE ADDITION OUT OF EXPENSES CAN BE MADE. 5. ON THE OTHER HAND, DR. JAYANT B. JHAVERI, DR, AP PEARED FOR THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). HE S UBMITTED THAT SINCE THE ASSESSEE HAS NOT DISCLOSED THE BANK ACCOUNT WITH SBI, THE EN TIRE DEPOSITS ARE TO BE TREATED AS 540-RJT-2013 JITENDRAKUMAR BHAILALBHAI DODIA 4 UNEXPLAINED U/S 69A OF THE INCOME-TAX ACT, 1961 AND THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT U/S 44AF OR THE PEAK THEORY. 6. IN REJOINDER, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PRODUCED A BANK STATEMENT OF ACCOUNT NO. 30100920237 WITH SBI, SAVA RKUNDLA AND POINTED OUT THAT IN THIS BANK ACCOUNT THE BALANCE AS ON 31.03.2008 WAS RS.40748/- AND AS ON 31.03.2009 IT WAS RS.58,125/-. ALL THE DEPOSITS AND WITHDRAWA LS IN THIS ACCOUNT ARE NOTHING BUT TRANSACTIONS OF BUSINESS WHICH IS ALSO CARRIED OUT BY THE ASSESSEE IN THE INDIVIDUAL CAPACITY. THEREFORE, ONLY PROFIT CAN BE TAXED WHIC H IS AS PER PROVISIONS CONTAINED IN SECTION 44AF @ 5%. HE FURTHER REITERATED THAT WHEN THE INCOME IS ESTIMATED U/S 44AF, NO SEPARATE ADDITION/DISALLOWANCE OUT OF EXPENSES C AN BE MADE. 7. HEARD PARTIES WITH REFERENCE TO MATERIAL AVAILAB LE ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE COPY OF BANK ACCOUNT BEA RING NO.30100920237 WITH SBI, SAVARKUNDLA, WHICH IS PLACED ON RECORD, REVEALS THA T THE CREDIT BALANCE AS ON 31.03.2008 WAS RS.40,748/- AND AT THE END OF THE AC COUNTING YEAR I.E. 31.03.2009, IT WAS RS.58,125/-. THE ENTIRE DEPOSITS AND WITHDRAWA LS WERE CLAIMED BY THE ASSESSEE RELATED TO THE BUSINESS OF MANUFACTURING AND TRADIN G OF MECHANICAL IRON SCALE WHICH IS CARRIED OUT BY ASSESSEE IN HIS INDIVIDUAL CAPACITY. THE DOCUMENTS ON RECORD WITH RESPECT TO HUF DO NOT REVEAL DISCLOSURE OF THIS ACC OUNT IN THE NAME OF SAID HUF. SINCE THE TRANSACTIONS OF DEBIT AND CREDIT RELATED TO MAN UFACTURING AND TRADING OF MECHANICAL IRON SCALE, THE ASSESSING OFFICER SHOULD HAVE APPLI ED THE SAME APPROPRIATE NET PROFIT RATE INSTEAD OF TAXING THE ENTIRE GROSS RECEIPTS OF RS.14,08,814/-. SECTION 44AF OF THE INCOME-TAX ACT IS APPLICABLE ONLY FOR COMPUTING PRO FITS AND GAINS OF RETAIL BUSINESS. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF MA NUFACTURING OF MECHANICAL IRON SCALE. THE DEPOSITS IN ACCOUNT NO. 30100920237 WITH SBI, WHICH IS NOT DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS, CONTAINED BUSINE SS TRANSACTIONS OF THIS BUSINESS I.E. BUSINESS OF MANUFACTURING OF MECHANICAL IRON SCALE. SINCE THE ASSESSEE HAD DISCHARGED THE ONUS TO THE FACT THAT THE TRANSACTIO NS IN THE SAID BANK ACCOUNT ARE RELATABLE TO THE BUSINESS OF MANUFACTURING AND TRAD ING OF MECHANICAL IRON SCALE, WE CONSIDER IT APPROPRIATE TO ASSESS THE INCOME BY APP LYING THE NET PROFIT RATE OF 10% ON ENTIRE DEPOSIT OF RS.14,08,814/- APPEARING IN THE SAID UNDECLARED BANK ACCOUNT BY 540-RJT-2013 JITENDRAKUMAR BHAILALBHAI DODIA 5 TREATING THE SAME AS TRANSACTIONS OF BUSINESS CARRI ED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT. SECTION 69A OF THE ACT HAS NO APPLICATION TO SUCH TRANSACTIONS. ACCORDINGLY, THE ADDITION OF RS.1,40, 881/- (10% OF RS.14,08,814/-) IS SUSTAINED AND BALANCE OF ADDITION IS DIRECTED TO BE DELETED. 8. AS REGARDS TO THE ASSESSEES GRIEVANCE OF SUSTAININ G THE ADDITION OF RS.35,000/- OUT OF FACTORY EXPENSES AMOUNTING TO RS.7,30,460/- AND LUMP-SUM ADDITION OF RS.10,820/- OUT OF SHOP EXPENSES (RS.22,299/-), SCO OTER EXPENSES (RS.12,540/-), TELEPHONE EXPENSES (RS.12,948/-) AND DEPRECIATION O F SCOOTER (RS.6,334/-); WE ARE OF THE VIEW THAT THESE ADDITIONS ARE MADE FROM BUSINES S OF WHICH ACCOUNTS WERE PRODUCED BEFORE THE ASSESSING OFFICER. THESE ADDITIONS MADE ARE FAIR AND REASONABLE AND WE, THEREFORE, DECLINE TO INTERFERE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 10. SINCE ONE OF US (THE AM) IS NOT AVAILABLE AT RA JKOT, THIS ORDER SHALL BE DEEMED TO HAVE BEEN PRONOUNCED ON THE DATE ON WHICH IT IS NOT IFIED ON THE NOTICE BOARD OF RAJKOT BENCH IN TERMS OF RULE 34 OF THE INCOME-TAX (APPELL ATE TRIBUNAL) RULES. SD/- SD/- (B. R. JAIN) (T. K. SHARM A) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 07.03.2014 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- VIJAYKUMAR MAVJIBHAI DODIA, PROP. OF S HRI JAYNATH SCALE CO., SAVAJI NAGAR, SAVAR KUNDLA, DIST. AMRELI 2. /RESPONDENT- THE I.T.O., WARD 2(4),AMRELI 3. #-2- & 3 / CIT-III, RAJKOT 4. & 3 - / CIT(A)-IV, RAJKOT 5 . 678 , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *$+ #$ / BY ORDER , PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.