Vikrant Jain, Delhi V. ITO, Ward- 36(3), New Delhi

ITA 5621/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8710 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 30-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Peak credit; Set aside
• Section: 44AD; 139(5); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.3484 & 5621/DEL/2018 ASSESSMENT YEARS: 2014-15 & 2015-16 VIKRANT JAIN, B-294, FIRST FLOOR, PRASHANT VIHAR, NEAR SECTOR 14 ROAD, ROHINI, NEW DELHI. PAN: AHRPJ0070F VS. ITO, WARD-56(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH JAIN, CA REVENUE BY : SHRI AMIT JAIN, SR.DR DATE OF HEARING : 13.03.2019 DATE OF PRONOUNCEMENT : 05.04.2019 ORDER ITA NO.3484/DEL/2018 IS DIRECTED AGAINST THE ORDER DATED 15 TH MARCH, 2018 OF THE CIT(A)-19, NEW DELHI, RELATING TO ASSESSMENT YEAR 2014-15. ITA NO.5621/DEL/2018 IS DIRECTED AGAINST THE ORDER DATE D 8 TH JUNE, 2018 OF THE CIT(A)-12, NEW DELHI, RELATING TO ASSESSMENT YEAR 2 015-16. FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NOS.3484 & 5621/DEL/2018 2 ITA NO.3484/DEL/2018 (A.Y. 2014-15) 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND PROPRIETOR OF SHRI GANESH POLYMERS ENGAGED IN THE B USINESS OF MANUFACTURING OF PVC PIPES, ETC. HE FILED HIS RETURN OF INCOME ON 25 TH SEPTEMBER, 2014 DECLARING TOTAL INCOME OF RS.2,70,200/-. THE ASSESSING OFFIC ER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS MAINTAINED MANY BANK ACCOUNTS EITHER IN HIS NAME OR IN THE JOINT NAME WI TH OTHERS. SINCE IT WAS BECOMING DIFFICULT TO ASCERTAIN THE TOTAL NUMBER OF BANK ACCOUNTS MAINTAINED BY THE ASSESSEE DURING THE RELEVANT YEAR, HE ASKED THE ASSESSEE TO SUBMIT AN AFFIDAVIT SHOWING DETAILS OF ALL ACCOUNTS MAINTAINED BY HIM E ITHER IN HIS OWN NAME OR IN THE JOINT NAMES WITH OTHERS. FROM THE DETAILS FURN ISHED BY THE ASSESSEE, HE NOTED THAT THE ASSESSEE HAS MAINTAINED FIVE BANK ACCOUNTS WHEREIN SUBSTANTIAL DEPOSITS HAVE BEEN MADE. HE, THEREFORE, ASKED THE ASSESSEE T O EXPLAIN THE REASONS FOR DEPOSITS IN HIS ACCOUNTS IN EXCESS OF THE TURNOVER CLAIMED BY HIM. IT WAS EXPLAINED THAT HE HAS SAVINGS ACCUMULATED FROM PAST YEARS AND THE SAME AMOUNT HAS BEEN DEPOSITED AND WITHDRAWN FREQUENTLY FROM HI S BANK ACCOUNTS. THE ASSESSING OFFICER INFERRED THAT THE PATTERN OF THE DEPOSITS AND THE WITHDRAWALS IN THE BANK ACCOUNT STATEMENTS SHOWS THAT THESE ARE BU SINESS TRANSACTIONS BECAUSE IT DOES NOT SERVE ANY PURPOSE BY DEPOSITING AND WITHDR AWING SAME AMOUNTS SO FREQUENTLY IN AND FROM THE BANK ACCOUNTS. HE, THE REFORE, TREATED THE DEPOSITS IN THE BANK ACCOUNT AMOUNTING TO RS.1,92,78,425/- AS H IS UNDISCLOSED TURNOVER. AFTER CONSIDERING THE DISCLOSED TURNOVER OF RS.72,1 2,226/- AND UNDISCLOSED ITA NOS.3484 & 5621/DEL/2018 3 TURNOVER AS DETERMINED ABOVE, THE ASSESSING OFFICER APPLIED 8% PROFIT ON THE TOTAL TURNOVER AND ACCORDINGLY MADE ADDITION OF RS.15,42, 274/-. 3. BEFORE CIT(A), IT WAS ARGUED THAT THE ASSESSEE H AS ALREADY FILED REVISED COMPUTATION OF INCOME AND OFFERED 5% PROFIT ON THE TURNOVER OF RS.1,95,16,567/-. HOWEVER, THE ASSESSING OFFICER HAS ESTIMATED THE PR OFIT AT 8%. SINCE THE ASSESSEE HAS ALREADY PAID TAX ON THE ADDITIONAL INCOME BY SU RRENDERING RS.9,63,921/-, THEREFORE, NO ADDITION IS CALLED FOR. HOWEVER, THE LD.CIT(A) WAS NOT FULLY SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESS EE AND SUSTAINED AN AMOUNT OF RS.2,06,384 BY OBSERVING AS UNDER:- 6. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES O F THE CASE, SUBMISSION OF THE APPELLANT AND PERUSED THE ORDER OF THE ASSESSIN G OFFICER. I FIND THAT THE APPELLANT HIMSELF SURRENDERED ADDITIONAL INCOME OF RS. 9,63,921/- ON WHICH TAX WAS ALSO PAID. HOWEVER, I FIND THAT THE REGULAR TRANSACTIONS IN THE BANK ACCOUNTS AS CREDITS & WITHDRAWALS DO NOT REPRESENT THE SALE/PURCHASE ONLY BUT ALSO CERTAIN UNACCOUNTED INCOME OF THE APPELLAN T WHICH WAS GIVEN & RECEIVED IN THE FORM OF LOAN/ADVANCE TO THE FRIENDS /RELATIVES. ON PERUSAL OF THE BANK STATEMENTS, I FIND THAT THE PEAK AMOUNT AP PEARING IN THE BANK STATEMENT OF AXIS BANK COMES AS ON 28.05.2013 OF RS . 2,06,384/-. AFTER CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE VIE W THAT OVER & ABOVE THE PROFIT OF THE BUSINESS SHOWN BY THE APPELLANT OF RS . 12,43,339/-, IT WAS ALSO AN UNACCOUNTED INCOME OF RS. 2,06,384/- PERTAI NS FOR THE YEAR UNDER CONSIDERATION, THEREBY, THE ASSESSING OFFICER IS DI RECTED TO RESTRICT THE ADDITION TO RS. 2,06,384/- ONLY. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. UNDER THE FACTS & CIRCUMSTANCES OF THE CASE & A S PER LAW, THE LEARNED CIT(A) ERRED IN REJECTING THE GROUND OF APPEAL CHAL LENGING THE VALIDITY OF THE ASSESSMENT ORDER AS NO NOTICE U/S 143(2) OF THE ACT WAS SERVED ON THE APPELLANT WITHIN THE TIME PRESCRIBED UNDER THE LAW, IN VIEW OF JUDGMENT OF HON. SUPREME COURT IN THE CASE OF HOTEL BLUE MOON. ITA NOS.3484 & 5621/DEL/2018 4 WITHOUT PREJUDICE TO THE ABOVE GROUND 2. UNDER THE FACTS & CIRCUMSTANCES OF THE CASE & AS PE R LAW, THE LEARNED CIT(A) ERRED IN SUSTAINING ADDITION OF RS.2,06,384/ - ON ACCOUNT OF PEAK CREDIT OF THE BANK STATEMENT WHEREAS THE APPELLANT ALREADY SURRENDERED RS.9,63,921/- I.E. 5% OF UNDISCLOSED CREDIT ENTRIES IN THE BANK STATEMENT. SEPARATE ADDITION OF RS.2,06,384/-, ON THE FACTS OF THE CASE AND AS PER LAW SHOULD NOT HAVE BEEN MADE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR A LTER ANY OF THE GROUNDS OF THE APPEAL. 4. SO FAR AS GROUND OF APPEAL NO.1 IS CONCERNED, THE L D. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAME FOR WHICH THE GROUN D OF APPEAL NO.1 IS DISMISSED AS NOT PRESSED. 5. SO FAR AS GROUND OF APPEAL NO.2 IS CONCERNED, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS ALRE ADY SURRENDERED AN AMOUNT OF RS.9,63,921/- BEING 5% OF THE UNDISCLOSED CREDIT EN TRY IN THE BANK STATEMENT, THEREFORE, NO SEPARATE ADDITION OF RS.2,06,384/- IS CALLED FOR. 6. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON TH E ORDER OF THE CIT(A). 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. I FIND THE AS SESSING OFFICER ESTIMATED THE PROFIT @ 8% ON THE UNDISCLOSED TURNOVER OF RS.1,92, 78,425/- AND MADE ADDITION OF RS.15,42,274/-. I FIND THE LD.CIT(A) RESTRICTED THE ADDITION TO RS.2,06,384/- BEING THE PEAK CREDIT APPEARING IN THE BANK STATEME NT FOR THE REASONS ALREADY REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE HAS ALREADY SU RRENDERED ADDITIONAL INCOME OF ITA NOS.3484 & 5621/DEL/2018 5 RS.9,63,921/- ON WHICH TAX HAS BEEN PAID AND THE SA ME BEING MORE THAN THE PEAK CREDIT CONSIDERED BY THE CIT(A), THEREFORE, NO ADDI TION IS CALLED FOR. I FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE AS SESSEE. I FIND THE LD.CIT(A) IN THE ORDER HAS GIVEN A FINDING THAT THE REGULAR TRAN SACTIONS IN THE BANK ACCOUNTS AS CREDITS AND WITHDRAWALS DO NOT REPRESENT THE SALE/P URCHASE ONLY, BUT, ALSO CERTAIN UNACCOUNTED INCOMES OF THE ASSESSEE WHICH WERE GIVE N AND RECEIVED IN THE FORM OF LOANS AND ADVANCES TO THE FRIENDS AND RELATIVES. THE REVENUE IS NOT IN APPEAL AGAINST THE ABOVE FINDING OF THE CIT(A). IF LOANS AND ADVANCES ARE GIVEN AND THE SAME ARE RECEIVED BACK AND AGAIN GIVEN, THEN, IN TH AT CASE, THE PEAK CREDIT IS TO BE TAXED WHICH HAS BEEN DONE BY THE LD.CIT(A) IN THE I NSTANT CASE. HOWEVER, THE ASSESSEE HAS ALREADY SURRENDERED ADDITIONAL INCOME OF RS.9,63,921/- WHICH IS MUCH MORE THAN THE PEAK CREDIT. I, THEREFORE, AGRE E WITH THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO ADDITION IS CALLED FOR. I ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO DELETE THE ADDITION. THE SECOND GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ITA NO.5621/DEL/2018 (A.Y. 2015-16) 8. AFTER HEARING BOTH THE SIDES, I FIND THE ASSESSING OFFICER IN THE INSTANT CASE HAS MADE AN ADDITION OF RS.10,82,580/- BY ESTIMATIN G THE PROFIT @ 10% ON THE UNDISCLOSED TURNOVER BEING THE DEPOSITS IN BANK ACC OUNTS. I FIND THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY OBSER VING AS UNDER:- ITA NOS.3484 & 5621/DEL/2018 6 8.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION OF THE APPELLANT. THE APPELLANT HAS ACCEPTED THAT HE DOES NOT HAVE EXPLANATION TO VARIOUS CASH DEPOSITS AMOUNTING TO RS. 1,08,25,793/ -. THE APPELLANT'S CASE DOES NOT FALL WITHIN THE PURVIEW OF SECTION 44AD BE CAUSE THE TURNOVER HAS EXCEEDED RS.L CRORE. THE APPELLANT HAS FAILED TO S UBSTANTIATE THAT SOME OF THE CASH RECEIPTS MAY BELONG TO THE TURNOVER OF THE PRE CEDING FINANCIAL YEAR OR SOME OF THE RECEIPTS MAY BE CAPITAL IN NATURE. THE APPELLANT HAS NOT REBUTTED THE OBSERVATION OF THE ASSESSING OFFICER THAT ON TH E SIMILAR FACTS AND IN THE CIRCUMSTANCES THE ASSESSEE DECLARED GROSS PROFIT OF 10.56% IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR. THE PRINCIPLE OF PEAK CREDIT CANNOT BE HELD TO BE APPLICABLE IN THIS CASE BECAUSE THE DEPO SITS IN THE BANK ACCOUNT ARE RELATED TO THE BUSINESS OF THE ASSESSEE AND THERE IS NO IMMEDIATE LINK BETWEEN CREDIT AND DEBIT ENTRIES. I OBSERVE THAT THE ASSESS ING OFFICER HAS BEEN VERY REASONABLE TO APPLY THE GROSS PROFIT OF 10% ONLY ON THE ADDITIONAL BUSINESS RECEIPTS. ON THESE FACTS AND IN THE CIRCUMSTANCES, I FIND THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS QUITE JUSTIFIED, REASON ABLE AND IN ACCORDANCE WITH LAW. THE ASSESSEE DOES NOT HAVE ANY STRENGTH IN THE GROUNDS OF APPEAL TAKEN BY HIM. ACCORDINGLY, THE ABOVE GROUNDS OF APPEAL AR E DISMISSED AND THE ADDITION IS CONFIRMED. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSESSMENT ORDER ASSESSING THE INCOME OF THE APPELLANT AT RS. 14,79, 780/- AGAINST TOTAL INCOME REVISED VIDE RETURN FILED U/S 139(5) OF THE ACT ON 27-06-2016 AT RS. 9,23,300/-, WITHOUT APPRECIATING THE FACTS AND LAW. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YE AR 2014-15, PRECEDING THE YEAR UNDER APPEAL, HAVING THE SIMILAR FACTS. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARN ED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER WHO AD OPTED 10% GROSS PROFIT ARBITRARILY ON TOTAL AMOUNT RS. 1,08,25,793/- CREDI TED IN THE BANK ACCOUNT DURING THE YEAR IN THE MULTIPLE OF SMALL AMOUNTS OF RS. 3,000- 4,000/- TO RS. 40,000 - 50,000/- AND IMMEDIATELY WITHDRAWAL OF THE SAME AMOUNT IN CASH, WHEREAS THE APPELLANT HAD ALREADY SURRENDERED AN AM OUNT FOR TAXATION WHICH IS MORE THAN PEAK CREDIT OF RS. 5,24,985/- AVAILABLE A NYTIME DURING THE RELEVANT ASSESSMENT YEAR IN THE AXIS BANK SAVING ACCOUNT OF THE APPELLANT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER ANY OF THE GROUNDS OF THE APPEAL. ITA NOS.3484 & 5621/DEL/2018 7 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS ALREADY SURRENDERED ADDITIONAL INCOME OF RS.5,26,100/- BY F ILING THE REVISED TOTAL INCOME OF RS.9,23,300/- ON 16 TH JULY, 2016 AS AGAINST THE RETURNED INCOME OF RS.3,97,200/-. SINCE THE ASSESSEE WAS APPLYING THE PROVISIONS OF SECTION 44AD AND THE UNDISCLOSED TURNOVER ACCORDING TO THE ASSES SING OFFICER WAS RS.1,08,25,793/-, THEN, APPLYING THE PROVISION OF P ROFIT RATE OF 5%, THE NET PROFIT COMES TO RS.5,41,290/-. HOWEVER, THE ASSESSEE HAS ALREADY SURRENDERED ADDITIONAL INCOME OF RS.5,26,100/-, THEREFORE, ADDITION, IF AN Y, AT BEST CAN BE CONFINED TO RS.15,190/-. IN ANY CASE, SINCE THE AMOUNT SURRENDE RED AT RS.5,26,100/- IS MUCH MORE THAN THE PEAK CREDIT OF RS.5,24,985/-, THEREFO RE, NO ADDITION IS CALLED FOR. 11. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON TH E ORDER OF THE CIT(A). 12. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMI TTED FACT THAT THE ASSESSEE WAS UNABLE TO EXPLAIN THE VARIOUS CASH DEPOSITS AMOUNTI NG TO RS.1,08,25,793/-. IN THE PRECEDING YEAR, THE INCOME SURRENDERED WAS MUCH MOR E THAN THE PEAK CREDIT. HOWEVER, THIS YEAR, THE AMOUNT SURRENDERED IS NOT S UBSTANTIALLY HIGHER THAN THE PEAK CREDIT. THEREFORE, THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE CANNOT BE ACCEPTED. HOWEVER, SINCE THE ASSESSING OFFICER HAS ESTIMATED PROFIT AT 10% WHICH HAS BEEN UPHELD BY THE CIT(A), I DIRECT THE A SSESSING OFFICER TO RESTRICT THE PROFIT ON THE ESTIMATED TURNOVER AT 5% OF RS.1,08,2 7,793/- WHICH COMES TOI RS.5,41,290/-. SINCE THE ASSESSEE HAS ALREADY DECL ARED ADDITIONAL INCOME OF ITA NOS.3484 & 5621/DEL/2018 8 RS.5,26,100/-, THE DIFFERENTIAL AMOUNT OF RS.15,190 /- SHOULD BE ADDED TO THE TOTAL INCOME AS HIS UNDISCLOSED INCOME. I ACCORDINGLY MO DIFY THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE AD DITION TO RS.15,190/-. THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 13. IN THE RESULT, ITA NO.3484/DEL/2018 IS ALLOW ED AND ITA NO.5621/DEL/2018 IS PARTLY ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 5.04.2019. SD/- (R.K. P ANDA) ACCOUNTANT MEMFBER DATED: 05 TH APRIL, 2019 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI