Shri Shashikant Tansukhlal Mandlesara, Surat V. The Income Tax Officer, Ward-5(4), Surat

ITA 571/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2167 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITHA V NAIR
• Assessee Lawyers: P M JAGASETH
• Keywords: Unexplained investment; Peak credit
• Section: 44AD

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NOS.571 & 572/AHD/2015/SRT / ASSESSMENT YEAR: 2006-07 & 2007-08 SHASHIKANT TANSUKHLAL MANDLESARA, MANOLESHARA JARI WORKS, 4/360, VADWALI SHERI, BEGUMPURA, SURAT 395 003. [PAN: ABPPM 8843D] VS. INCOME TAX OFFICER WARD-5(4), SURAT. ( ' / APPELLANT) ( #$' /RESPONDENT) / ASSESSEE BY : SHRI P.M.JAGASETH, C.A /REVENUE BY : SMT. SMITHA V. NAIR, SR. D.R /DATE OF HEARING : 21-08-2018 / DATE OF PRONOUNCEMENT : 18-09-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT (CIT(A) FOR SHORT) DATED 09.02.2015 FOR THE ASSESSMENT YEARS (A.YS) 2006-07 & 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO.571 /AHD/2015/ SRT FOR AY 2006-07 READ AS FOLLOWS: 2 ITA NOS.571 & 572/AHD/2015/SRT (A.Y: 2006-07 & 2007 -08) SHRI SHASHIKANT TANSUKHLAL MANDLESARA 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INC OME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND CALCULATING OF PEAK CREDIT BALANCE OF R S.74,494/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INC OME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND CALCULATING OF GROSS PROFIT OF RS.3,15, 190/-, WHICH IS PRODUCT OF 26.62% OF TURNOVER OF RS. 11,84,036/- (B ETWEEN THE PERIOD OF 07.07.2005 TO 31.03.2006 OF BANK STATEMEN T). ITA NO.571/AHD/2015/ SRT FOR AY 2006-07: 3. BOTH THE PARTIES AGREED TO THE SITUATION THAT TH E FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR AND IDE NTICAL THEREFORE, WE ARE TAKING UP APPEAL FOR AY 2006-07 AS LEAD CASE FO R THE SAKE OF CONVENIENCE AND BREVITY. WE HAVE HEARD THE ARGUMEN TS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) S UBMITTED THAT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND CALCULATING OF PEAK CREDIT BALANCE OF RS.74,494/-. THE LD. AR FURTHER SUBMITTED THAT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND CALCULATING OF GROSS PROFIT OF RS.3,15,190/-, WHICH IS PRODUCT OF 26.62% OF TURNOVER OF RS. 11,84,036/- DURING THE RELEVANT FINANCIAL PERIOD OF 07.07.2005 TO 31.03.2006. 4. THE LD. AR HAS ALSO SUBMITTED THAT AS PER ORDER OF ITAT (SMC) A BENCH DATED 09.12.2015 IN ASSESSEES OWN CASE FOR A Y 2008-09 I.E ., ITO 3 ITA NOS.571 & 572/AHD/2015/SRT (A.Y: 2006-07 & 2007 -08) SHRI SHASHIKANT TANSUKHLAL MANDLESARA VS. SHRI SHASIKANT TANSUKHLAL MANDLESARA , THE TRIBUNAL HAS DISMISSED APPEAL OF THE REVENUE BY CONFIRMING THE CONCLUSION DRAWN BY THE LD. CIT(A), WHEREIN PEAK BALANCE DURING THE YEAR AND ES TIMATED ADDITIONAL CAPITAL REQUIREMENT AS UNEXPLAINED INVESTMENT HAS B EEN TREATED AS INCOME OF THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR. THE LD. AR ALSO POINTED OUT THAT IN THAT YEAR ALSO THE ASSESSE E UNDERTOOK TURNOVER OF RS. 11,89,200/- FROM JARI MANUFACTURING AND SELLING BUSINESS WHICH IS ALSO IDENTICAL FACTS OF THE PRESENT CASES. 5. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT THE AO WAS RIGHT IN MAKING ADDITION AND THE LD. CIT(A) HAS CONSIDERED ENTIRE FACTS AND CIRCUMSTANCES AND WAS RIGHT IN GIVING PART RELI EF TO THE ASSESSEE. THE LD. DR FURTHER POINTED OUT THAT FROM PARA 6.2 O F THE FIRST APPELLATE ORDER, IT IS CLEAR THAT THE LD. CIT(A) HAS TAKEN PE AK AND AFTER CONSIDERING THE GP RATE OF 26.62% ON THE DECLARED TURNOVER OF J ARI BUSINESS OF THE ASSESSEE MADE ADDITION OF GP ON UNDISCLOSED TURNOVE R AT RS. 3,89,684/-, WHICH IS QUITE REASONABLE AND JUSTIFIED THEREFORE, IMPUGNED ORDER MAY KINDLY BE UPHELD. 6. PLACING REJOINDER TO THE ABOVE, THE LD. AR SUBMI TTED THAT THE ASSESSEE MADE SALES IN THE SOUTHERN PART OF INDIA A ND SALE PROCEED WAS DEPOSITED BY THE RESPECTIVE BUYERS TO THE BANK ACCO UNT OF THE ASSESSEE, 4 ITA NOS.571 & 572/AHD/2015/SRT (A.Y: 2006-07 & 2007 -08) SHRI SHASHIKANT TANSUKHLAL MANDLESARA WHICH WAS WITHDRAWN BY THE ASSESSEE FOR MAKING FURT HER PAYMENT TO THE SUPPLIERS AND WAGES ETC. THEREFORE, ENTIRE AMOUNT O F SALE PROCEED CANNOT BE TREATED AS INCOME OF THE ASSESSEE BECAUSE THERE COULD BE NO SALES WITHOUT PURCHASES AND ONLY ELEMENT OF INCOME MAY BE TAXED IN THE HANDS OF THE ASSESSEE. THE LD. AR ALSO SUBMITTED THAT EV EN IF IT IS ACCEPTED THAT THE ASSESSEE UNDERTOOK SALES OUT OF BOOKS OF ACCOUN TS, BUT HIS TURNOVER IS LESS THAN RS. 40 LAKHS WHICH COVERS UNDER THE PR OVISION OF S. 44AD OF THE ACT AND UNDER THIS PROVISION 8% OF TURNOVER CAN BE TREATED AS INCOME OF THE ASSESSEE THEREFORE, THERE WAS NO JUSTIFICATI ON OF ESTIMATING THE INCOME FROM UNDISCLOSED TURNOVER @ 26.62%. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, THE LD. AO AS WELL AS THE LD. CIT(A) HAS NOT DISPUTED THE FACT TH AT THE ASSESSEE IS IN THE JARI SALE BUSINESS AND HE IS SELLING GOODS TO THE P URCHASERS LOCATED IN THE SOUTH INDIA AND EXCEPT AMOUNT DEPOSITED TO HIS BANK ACCOUNT NO OTHER TRANSACTION HAVE BEEN TRACED OR BROUGHT ON RECORD. IN THIS SITUATION, WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. AR THAT THIS AMOUNT WAS RECEIVED THROUGH BANK ACCOUNT FROM THE PURCHASERS L OCATED IN THE SOUTH INDIA AND THIS AMOUNT IS SALE PROCEED OF SALE OF JA RI, WHICH WAS USED FURTHER FOR MAKING PAYMENT TO THE SUPPLIERS OF GOOD S WHICH WAS SOLD BY THE ASSESSEE IN SOUTH INDIA. DEFINITELY, ASSESSEE BELONGS TO A CATEGORY OF TRADER WHICH FALLS WITHIN THE AMBIT OF PROVISION OF S. 44AD OF THE ACT HAVING TURNOVER OF LESS THAN RS. 40,00,000/-. AS P ER PROVISION OF S. 44AD 5 ITA NOS.571 & 572/AHD/2015/SRT (A.Y: 2006-07 & 2007 -08) SHRI SHASHIKANT TANSUKHLAL MANDLESARA OF THE ACT, 8% OF TURNOVER OR GROSS RECEIPTS OF THE ASSESSEE IN THE PREVIOUS YEARS ON ACCOUNT OF SUCH BUSINESS SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. FROM THE PARA 6.2 OF THE ORDER OF LD. CIT(A), THE PEAK BALANCE DURING THE RE LEVANT PERIOD WAS RS. 74,494/- WHICH HAS NOT BEEN DISPUTED BY THE PARTIES AND AS PER ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 DATE D 09.12.2015 (SUPRA) PEAK HAS TO BE TREATED AS INCOME OF THE ASS ESSEE. HOWEVER, THE TRIBUNAL HAS UPHOLD THE CONCLUSION OF THE LD. CIT(A ) WHEREIN THE LD. CIT(A) HAS FOR AY 2008-09 HAS SUSTAINED THE ADDITIO N OF RS. 25,000/- ON ACCOUNT OF ADDITION CAPITAL REQUIREMENTS AS UNEXPLA INED INVESTMENT, BUT WE ARE UNABLE TO SEE ANY BASIS FOR THIS ESTIMATION, PERHAPS THIS ESTIMATION WAS MADE ON THE BASIS OF FACTS AND CIRCUMSTANCES OF AY 2008-09 WHICH CANNOT BE APPLIED BLINDLY TO THE PRESENT CASE. 8. HOWEVER, KEEPING IN VIEW THE PROVISION OF S. 44A D OF THE ACT AND AMOUNT OF TURNOVER UNDERTAKEN BY THE ASSESSEE DURIN G THE RELEVANT PERIOD, WE ARE OF THE CONSIDERED OPINION THAT THE E NTIRE AMOUNT DEPOSITED TO THE BANK ACCOUNT OF THE ASSESSEE BY THE RESPECTI VE PURCHASERS CANNOT BE TREATED AS INCOME OF THE ASSESSEE ONLY PROFIT EL EMENT THEREIN CAN BE TREATED AS INCOME OF THE ASSESSEE FROM JARI BUSINES S. THEREFORE, IN OUR CONSIDERED OPINION, THE ALL POSSIBLE LEAKAGE OF REV ENUE WOULD BE COVERED IF, THE PROFIT/INCOME EARNED FROM THE JARI BUSINESS IS ESTIMATED @ 10% OF 6 ITA NOS.571 & 572/AHD/2015/SRT (A.Y: 2006-07 & 2007 -08) SHRI SHASHIKANT TANSUKHLAL MANDLESARA TOTAL TURNOVER OF THE ASSESSEE AND WE DIRECT THE AO TO CALCULATE THE INCOME OF THE ASSESSEE ACCORDINGLY ON THE TURNOVER OF RS. 11,84,036/-. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEE IS DISMISS ED AND GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED. 9. SINCE, FACTS AND CIRCUMSTANCES OF AY 2006-07 ARE QUITE IDENTICAL AND SIMILAR TO THE FACTS OF AY 2007-08 THEREFORE, O UR CONCLUSION DRAWN FOR AY 2006-07 WOULD BE APPLIED MUTATIS MUTANDIS TO AY 2007-08 ALSO AND AO IS DIRECTED TO CALCULATE THE INCOME OF THE ASSES SEE BY TAKING PEAK CREDIT BALANCE OF RS. 22,271/- AND 10% OF UNDISCLOS ED TURNOVER OF RS. 11,94,528/- FOR AY 2007-08. ACCORDINGLY, FOR AY 20 07-08 ALSO THE GROUND NO.1 OF ASSESSEE IS DISMISSED AND GROUND NO.2 IS PA RTLY ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 8 TH SEPTEMBER, 2018. / SURAT ; DATED : 18 TH SEPTEMBER, 2018 / EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER