Naresh Kumar Verma, Meerut V. ITO, Ward-2(1), Meerut

ITA 5751/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3918 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Competent authority; Assessment record; Tax effect; Reassessment proceedings
• Section: 201; 22; 147; 148

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER ITA NO . 5751 /DEL/20 1 8 ASSESSMENT YEAR : 20 1 0 - 11 NARESH KUMAR VERMA, C/O VINOD KUMAR GOEL, 282, BOUNDRY ROAD, CIVIL LINES, MEERUT. PAN: A CJPV718 8D VS. ITO, WARD - 2(1), MEERUT. (APPELLANT ) (RESPONDENT) A SSESSEE BY : SHRI VINOD KUMAR GOEL, ADVOCATE RE VENUE BY : SHRI R AJESH KUMAR DHANESTA, S R. DR DATE OF HEARING : 26 . 0 7 . 20 21 DATE OF PRONOUNCEMENT : 07 . 10 . 20 21 ORDER TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 2 4 TH JULY, 201 8 OF THE CIT(A) , MEERUT, RELATIN G TO ASSESSMENT YEAR 20 1 0 - 11 . 2 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S VERMA JEWELLERS & SONS ENGAGED IN THE BUSINESS OF JEWELLERY. AS PER AIR INFORMATION THAT THE ASSESSEE HAS MADE CASH DEPOSIT OF RS.29,55,045/ - IN HIS SAVINGS BANK ACCOUNT, THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE ACT AND NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 17 TH MARCH, 2017 WHICH WAS ITA NO. 5751 /DEL/201 8 2 SERVED ON HIM ON 22 ND MARCH, 2018. THE ASSESSEE FILED RETURN IN RESPONSE TO NOTICE U/S 148 ON 14 TH SEPTEMBER, 2017 DECLARING THE TOTAL INCOME AT RS.2,20,020/ - . 3. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE AO ASKED THE ASSESSEE TO PROVE THE SOURCE OF CASH DEPOSIT OF RS.29,55,045/ - . THE ASSESSEE SUBMITTED THAT HE IS ENGAGED IN THE BUSINESS OF M/S VERMA JEWELLERS & SONS AT 240, SUBHASHPURI, KANKERKHERA, MEERUT. IT WAS SUBMITTED THAT THE ASSESSEE HAS THREE BANK ACCOUNTS WITH PNB, ICICI BANK AND ALLAHABAD BANK AND THE CASH HAS BEEN DEPOSITED OUT OF SALE OF JEWELLERY ON COMMISSION BASIS AND THROUGH JOB WORK AND THIS IS THE ONLY SOURCE OF CASH DEPOSIT. IT WAS FURTHER SUBMITTED THAT CASH WAS DEPOSITED AND WITHDRAWN TO SHOW HUGE TRANSACTIONS FOR OBTAINING LOAN. HOWEVER, THE AO DID NOT ACCEPT THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAS DEPOSITED CASH, BUT, THERE ARE NO SUBSTANTIAL WITHDRAWALS TO JUSTIFY THE HUGE CASH DEPOSITS. THE ASSESSEE COULD NOT PROVE WITH EVIDENCE TO HIS SATISFACTION THAT THE DEPOSITS ARE OUT OF BUSINESS RECEIPTS. THE AO, THEREFORE, MADE ADDITION OF RS.29,85,045/ - TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT IN THE BANK ACCO UNT. SINCE THE AO HAD MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT, HE DID NOT MAKE ANY SEPARATE ADDITION ON ACCOUNT OF THE FOLLOWING PAYMENTS FROM THE SAID BANK ACCOUNT: - ITA NO. 5751 /DEL/201 8 3 3.1 . ACCORDINGLY, THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSE E AT RS.32,05,070/ - . 4. BEFORE THE CIT(A), THE ASSESSEE, APART FROM CHALLENGING THE ADDITION ON MERIT, CHALLENGED THE VALIDITY OF REASSESSMENT PROCEEDINGS. HOWEVER, THE LD.CIT(A) WAS NOT FULLY SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND W ITHHELD THE VALIDITY OF REASSESSMENT PROCEEDINGS . SO FAR AS THE MERIT OF THE ADDITION IS CONCERNED, THE LD.CIT(A) RESTRICTED THE ADDITION TO RS.27,05,938/ - BY DIRECTING THE AO TO REDUCE THE INCOME OFFERED BY THE ASSESSEE AT RS.2 , 79 , 107 / - FROM THE TOTAL AD DITION OF RS.29,85,045/ - . THE RELEVANT OBSERVATIONS OF THE CIT(A) READ AS UNDER: - 5. DECISION AND REASONS: IN GROUND NO. 1 THE APPELLANT HAS CHALLENGED THE PROCEEDINGS U/S 148 OF THE ACT BY STATING THAT AS PER THE ASSESSMENT ORDER THE AO HAS NOT MENTION ED WHETHER HE HAS TAKEN APPROVAL FROM PR. CIT, MEERUT WHICH IS THE COMPETENT AUTHORITY TO APPROVE THE ISSUANCE OF NOTICE U/S 148 OF THE' IT ACT FOR THE SAID ASSESSMENT YEAR 2010 - 11. THE AR STATES, 'IT APPEARS THAT NOTICE ISSUED U/S 148 OF THE IT ACT 1961WI HTOUT APPROVAL OF PR. CIT, MEERUT, THEREFORE NOTICE ISSUED U/S 148 OF THE ACT IS BAD IN LAW.' I HAVE PERUSED THE ASSESSMENT RECORD AND I FIND THAT ON PAGE 5 & 6 OF THE ASSESSMENT RECORD THE APPROVAL OF PR. CIT, MEERUT HAS BEEN TAKEN ON 8 MARCH 2017 AND TH EREAFTER NOTICE U/S 148 OF THE IT ACT HAS BEEN ISSUED ON 17.03.2017 AND THE SAME HAS BEEN SERVED ON 22.03.2017. CONSIDERING THESE FACTS, I FIND NO FORCE IN THE CONTENTION OF THE ID. AR, THAT THERE IS LEGAL INFIRMITY IN TAKING APPROVAL OF THE COMPETENT AUTH ORITY AS IT IS NOT BORNE OUT ITA NO. 5751 /DEL/201 8 4 OF THE FACTS AVAILABLE ON THE ASSESSMENT RECORD. THUS, GROUND NO. 1 IS ACCORDINGLY DISMISSED. ALL THE OTHER GROUNDS RELATES TO ADDITION OF RS. 29,85,045/ - WHICH HAS BEEN DEALT WITH HEREUNDER: I HAVE CONSIDERED THE RIVAL CONTEN TION OF THE AO AND THE AR OF THE APPELLANT. THE AO AS MADE ADDITION OF RS. 29,85,045/ - BY DEPENDING UPON ON A SPECIFIC PROVISION OF LAW WHEREIN, AS PER SECTION 139(9)(F) ASSESSEE IS REQUIRED TO FURNISH THE AMOUNT OF GROSS RECEIPTS, GROSS PROFIT, EXPENSES A ND NET PROFIT OF THE BUSINESS OR PROFESSION AND THE BASIS ON WHICH SUCH AMOUNTS HAVE BEEN COMPUTED AND ALSO DISCLOSING THE AMOUNTS OF TOTAL SUNDRY DEBTORS, SUNDRY CREDITORS, STOCK - IN - TRADE AND CASH BALANCE AS THE END OF THE PREVIOUS YEAR. THE ID. AR HAS S TATED THAT THE ASSESSEE HAS BEEN DOING BUSINESS THERE IS NO CHANGE IN THE BUSINESS OF THE ASSESSEE AND FOR THE YEAR UNDER CONSIDERATION HE HAS FILED REGULAR RETURN DECLARING INCOME OF RS. 2,20,014/ - . IN THE INCOME TAX RETURN THE ASSESSEE HAS SHOWN INCOME F ROM PROPRIETY CONCERN M/S VERMA JEWELERS & SONS OF RS. 2,79,107/ - @ 5% OF GROSS RECEIPT OF RS. 55,82,140/ - . FURTHER, A CAREFUL EXAMINATION OF THE IMPUGNED BANK ACCOUNT PNB S/B A/C TO WHICH THE ID. AR REFERS TO IN HIS SUBMISSIONS. THE ID. AR IS TRYING TO M ISREAD THE OBSERVATION OF THE AO IN PARA 3.1 OF THE ASSESSMENT ORDER WHERE IN THE AO HAS STATED THAT, 'DURING THE YEAR ASSESSEE HAS MADE HEAVY AMOUNTS OF CASH DEPOSITS IN THE ACCOUNT WITH PNB, SOME OF THE HEAVY DEPOSITS ARE UNDER: THE SUM OF SAMPLE QUOTED BY THE AO COMES TO RS. 16,70,000/ - . WHEREAS, I HAVE PERSONALLY EXAMINED THE TOTAL AMOUNT DEPOSITED IN PNB S/B A/C WHICH COMES TO RS. 29,85,045/ - . THE ASSESSEE HAS FURTHER DEPOSITED RS. 30,000/ - IN HAVING LOAN WITH ALLAHABAD BANK, MEERUT CANTT. BRANCH. TH US, THE ARGUMENT OF THE ID. AR REGARDING CONFUSION ON ACCOUNT OF DEPOSITS IN PNB SAVINGS ACCOUNT OF THE ASSESSEE IS TO TALLY MISCONSTRUED ON FACTS. THE SUM AND SUBSTANCE OF THE MATTER IS THAT THE APPELLANT HAS NOT FOLLOWED THE PROVISIONS OF SECTION 139(9) (F) OF THE IT ACT AND HAS NOT PROVIDED THE REQUISITE DETAIL EITHER DURING ASSESSMENT OR DURING THE PRESENT APPEAL PROCEEDINGS. IT IS PERTINENT TO NOTE, THAT THE AO HAS RECORDED A FINDING REGARDING UNEXPLAINED INVESTMENT AND HOUSEHOLD DRAWINGS OF RS. 15,55 ,745/ - FOR WHICH HE HAS NOT MADE ANY SEPARATE ADDITION IN THE ASSESSMENT ORDER. IN SUCH A SITUATION THE CORRECTNESS OF BUSINESS PROFIT BEING DECLARED U/S 44AF LOSES ITS RELEVANCE WHEN IT IS APPARENT FROM THE RECORD THAT THE ASSESSEE HAS ITA NO. 5751 /DEL/201 8 5 MADE INVESTMENT TO THE TUNE OF RS. 15,55,745/ - AND THIS FACT HAS NOT BEEN DISPUTED BY THE APPELLANT IN APPEAL. HOWEVER TO BE FAIR TO THE ASSESSEE, I DIRECT THE AO TO REDUCE THE 5% OF INCOME ALREADY OFFERED UNDER SECTION 44AF OF THE INCOME TAX ACT, AMOUNTING TO RS. 2,79,107/ - BY THE ASSESSEE FROM THE TOTAL ADDITION OF RS. 29,85,045/ - AND CONFIRM THE ADDITION OF RS. 27,05,938/ - . 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5 . AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL BY RAISIN G THE FOLLOWING GROUNDS: - 1. THAT ON GOING THROUGH THE ASSESSMENT ORDER IT APPEARS THAT NOTICE U/S 148 WAS ISSUED ON 17 - 03 - 2017 BUT IT DOES NOT SHOWS THAT APPROVAL OF THE SAME WAS OBTAINED BY THE PR. CIT, MEERUT. THEREFORE, WITHOUT APPROVAL OF REASONS U/S 148 BY PR. CIT, MEERUT IS BAD IN LAW AND CIT(A) IS IN ERROR TO CONFIRM THE SAME WITHOUT VERIFYING THE FACTS. 2. THAT THE ADDITION WAS MADE BY THE A.O. OF RS. 29,55,045/ - ON THE BASIS OF CASH DEPOSIT, HOWEVER THE ASSESSEE CLEARLY STATED THAT THE CASH DEPO SIT AND WITHDRAWALS WERE MADE BY THE ASSESSEE FOR THE BUSINESS PURPOSES. THE A.O. HAS NOT CONSIDERED THE REPLY OF THE ASSESSEE AND MADE ADDITION OF ENTIRE CASH DEPOSIT IN THE BANK ACCOUNT IS BAD IN LAW AND CIT (A) IS IN ERROR IN CONFIRMING THE ADDITION AFT ER REJECTION NET PROFIT, WHICH IS NOT ACCORDING TO LAW. 3. THAT THE ASSESSEE HAS SHOWN TOTAL INCOME AT THE RATE OF 5 PERCENT ON THE GROSS RECEIPTS OF RS. 55,82,140/ - FROM VERMA JEWELLERS AND SHOWN NET PROFIT OF RS. 2,79,107/ - IN THE INCOME TAX RETURN. HOW EVER A.O. HAS MADE ENTIRE CASH DEPOSIT WHICH WAS PART OF CASH RECEIPTS DEPOSITED IN THE BANK ACCOUNT. THEREFORE, THE A.O. IS IN ERROR IN MAKING ADDITION OF RS. 29,58,045/ - TREATED AS UNEXPLAINED INCOME AND CIT(A) IS IN ERROR NOT FOLLOWING THE EARLIER ORDER , WHICH IS CONFIRMED BY THE HON BLE I.T.A.T. (ON TAX EFFECT) 4. THAT THE ASSESSEE HAS RIGHT TO ADD, MODIFY OR DELETE ANY GROUND DURING THE APPEAL PROCEEDING. 6 . THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMI NG THE ADDITION MADE BY THE AO AS WELL AS UPHOLDING THE VALIDITY OF REASSESSMENT. SO FAR AS THE VALIDITY OF REASSESSMENT PROCEEDINGS IS ITA NO. 5751 /DEL/201 8 6 CONCERNED, HE SUBMITTED THAT ALTHOUGH THE AO HAS MENTIONED THAT NOTICE U/S 148 OF THE ACT WAS ISSUED ON 17 TH MARCH, 201 7 AND SERVED ON 22 ND MARCH, 2017, HOWEVER, NOWHERE IT IS MENTIONED THAT APPROVAL OF THE PCIT WAS OBTAINED. THEREFORE, IN ABSENCE OF ANY SUCH APPROVAL, THE NOTICE ISSUED U/S 148 IS NOT VALID. SO FAR AS THE ADDITION OF RS.27,05,138 SUSTAINED BY THE CIT(A) I S CONCERNED, HE SUBMITTED THE TOTAL DEPOSIT IN THE BANK ACCOUNT INCLUDES THE CASH DEPOSIT OF RS.29,55,045/ - . HE SUBMITTED THAT THE ASSESSEE HAS DECLARED THE GROSS RECEIPT AT RS.55,82,140/ - AND HAS DECLARED PROFIT @ 5% U/S 44AF AT RS.2,79,107/ - . HE SUBMIT TED THAT THE VARIOUS WITHDRAWALS IN CASH MADE BY THE ASSESSEE FROM THE BANK ACCOUNT HAS BEEN RE - DEPOSITED TO SHOW HIGHER TURNOVER TO THE BANK. THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS NOT JUSTIFIED. 7 . THE LD. DR, ON THE OTHE R HAND, HEAVILY RELIED ON THE ORDER OF THE CIT(A). 8 . I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE RECORD. SO FAR AS THE VALIDITY OF REASSESSMENT PROCEEDINGS IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE, APART FROM STATI NG THAT THE AO HAD NOT SUPPLIED HIM COPY OF THE APPROVAL OF PCIT, COULD NOT POINT OUT ANY OTHER DEFECT IN THE REOPENING OF THE ASSESSMENT. IN MY OPINION, THE ASSESSEE COULD NOT SUBSTANTIATE AS TO HOW THE REOPENING IS BAD IN LAW. THEREFORE, IN ABSENCE OF ANY MERIT IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE, THE GROUND CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS IS DISMISSED. ITA NO. 5751 /DEL/201 8 7 8.1 SO FAR AS THE CASH DEPOSIT OF RS.29,55,045/ - IS CONCERNED, I FIND, THE ASSESSEE HAS SUBMITTED THAT HE IS OPTING FOR PRESUMPTIVE TAX U/S 44AF AND THE CASH WITHDRAWAL ON DIFFERENT OCCASIONS HAVE BEEN RE - DEPOSITED IN THE SAND BANK ACCOUNT TO SHOW HIGHER TURNOVER FOR OBTAINING LOAN FROM THE BANK. A PERUSAL OF THE BANK ACCOUNT SHOWS THAT ON CERTAIN DATES, T HERE ARE SUBSTANTIAL CASH WITHDRAWALS. HOWEVER, NEITHER THE AO NOR THE CIT(A) HAS CONSIDERED THE SAME PROPERLY AS TO WHAT IS THE EXTENT OF CASH WITHDRAWN FROM THE BANK ACCOUNT SO AS TO ENABLE THE ASSESSEE TO RE - DEPOSIT THE SAME AFTER MEETING HIS PERSONAL EXPENSES, ETC. FURTHER, THERE ARE VARIOUS OTHER INVESTMENTS AND DEPOSITS MADE BY THE ASSESSEE OUT OF THE SAID BANK ACCOUNT. THEREFORE, IN MY OPINION, THE MATTER NEEDS FRESH ADJUDICATION BY THE AO. HE SHALL ALSO VERIFY THE PAST AND SUBSEQUENT RECORDS AS TO WHETHER THE ASSESSEE IS OPTING FOR PRESUMPTIVE TAX U/S 44AF. THE AO IS DIRECTED TO VERIFY THE TOTAL CASH WITHDRAWALS FROM THE SAID BANK ACCOUNT AND AFTER TAKING INTO ACCOUNT REASONABLE PERSONAL EXPENSES AND INVESTMENTS, ETC., MAY CONSIDER THE BENEF IT O F REDEPOSIT IN THE BANK ACCOUNT FROM THE SAID CASH WITHDRAWALS. THE ASSESSEE IS ALSO HEREBY DIRECTED TO APPEAR BEFORE THE AO AND SUBSTANTIATE HIS CASE TO JUSTIFY THE CASH DEPOSIT IN THE BANK ACCOUNT. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 5751 /DEL/201 8 8 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 07 . 10 . 20 21 . SD/ - ( R. K. PANDA ) ACCOUNTANT MEMBER DATED: 07 TH OCTOBER, 2 0 21 DK COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI