SANJAY J. DHOLKIIA, MUMBAI V. ITO 23(3)(3), MUMBAI

ITA 5772/MUM/2010

• Counselvise Citation: 577219914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALEXANDER CHANDY
• Assessee Lawyers: H S PARIKH
• Keywords: Business income; Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI R.K. PANDA (AM ) I.T.A. NO.5772/MUM/2010 (A.Y. 2006-07) SHRI SANJAY J. DHOLAKIA, 7, HANSRAJ MEGHJI CHAWL, ZAVER RD., MULUND (W), MUMBAI-400 080. PAN: AAQPD2147P. VS. INCOME-TAX OFFICER-23(3)(3), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI H.S. PARIKH. RESPONDENT BY SHRI A LEXANDER CHANDY. DATE OF H EARING 17 - 11 - 2011 DATE OF PRONOUNCEMENT 25 - 11 - 2011 O R D E R PER D.K. AGARWAL, JM : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27-04-2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSM ENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE, AN INDIVIDUAL, DERIVES INCOME FROM BUSINESS AS A RETAIL TRADER OF ELECTRON IC ITEMS, INTEREST AND HOUSE PROPERTY. THE RETURN WAS FILED DECLARING TOTAL INCO ME AT RS.1,14,945/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS DECLARED TOTAL SALES OF RS.18,74,839/-, ON WHICH THE ASSESS EE HAS SHOWN NET PROFIT OF RS.1,86,317/-. HE FURTHER NOTED THAT THE P & L ACCO UNT WAS DRAWN ON THE BASIS OF TWO BANK ACCOUNTS VIZ. MAHANAGAR CO-OP. BANK CURREN T A/C. NO.2925 AND MANDVI ITA NO.5772/MUM/2010 SANJAY J. DHOLAKIA 2 BANK. HE FURTHER NOTED THAT THE ENTIRE SALES ARE SA ID TO BE MADE IN CASH WHICH WAS OFTEN DEPOSITED IN THE SAID TWO BANK ACCOUNTS. SUBSEQUENTLY, IT CAME TO NOTICE OF THE AO THAT THE ASSESSEE IS DEPOSITING E XCESSIVE CASH IN MAHANAGAR CO-OP. BANK S.B. A/C. NO. 14125 AS PER ANNUAL INFOR MATION REPORT (AIR). THE ASSESSEE WAS ASKED TO STATE THE SOURCES OF THE DEPO SITS IN THE SAID BANK ACCOUNT. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DEPOSITS IN THE BANK ACCOUNT REPRESENTED SALES MADE BY THE ASSESSEE. IT WAS FURT HER EXPLAINED BY THE ASSESSEE THAT WHILE FILING THE RETURN, DUE TO OVERS IGHT, THE BANK ACCOUNT OF MAHANAGAR CO-OP. BANK LTD., MULUND BRANCH, WAS NOT TAKEN INTO CONSIDERATION AS THE SAME WAS CLOSED DURING THE RELEVANT ASSESSMENT YEAR. AS A RESULT, THE SALES/PURCHASES OCCURRED THROUGH THE SAID BANK ACC OUNT WERE NOT REFLECTED IN THE RETURN OF INCOME. ADDITIONAL SALES ARE RS.19,14 ,450/- AGAINST WHICH PURCHASES ARE RS.18,08,447/-. AS THE ASSESSEE IS A RETAILER AND HIS TURNOVER IS BELOW RS.40 LAKHS, HE IS NOT REQUIRED TO MAINTAIN B OOKS OF ACCOUNT AS PER SEC. 44AF OF THE INCOME-TAX ACT, 1961 (THE ACT). HOWEVER , THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS.95,722/- BEING 5% OF ADDITI ONAL SALES OF RS.19,14,450/-. THE ASSESSEE FURTHER OFFERED ADDITIONAL INCOME OF R S.1,90,254/- AFTER APPLYING UNIFORM RATE OF NET PROFIT OF 9.94% ON RS.19,14,45 0/-. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION. ACCORDING TO THE AO, SINCE THE ASSESSEE HAS NOT DISCLOSED THE SAID BANK ACCOUNT, THEREFORE, THE ENTIRE TRANSACTIONS GONE THROUGH THE SAID BANK ACCOUNT SHALL BE TREATED AS U NDISCLOSED INCOME AS A WHOLE AND NOT THE PERCENTAGE OF PROFIT OF THE DEPOSITS. S INCE THE ASSESSEE HAS DEPOSITED RS.22,27,050/- IN THE SAID BANK ACCOUNT, THE AO, AFTER GIVING CREDITS OF THE DEBTORS AND THE REPAYMENT OF LOAN, CONSIDERED T HE NET AMOUNT OF RS.19,14,450/- AS UNDISCLOSED INCOME OF THE ASSESSE E U/S.68 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL BEFORE THE LD. ITA NO.5772/MUM/2010 SANJAY J. DHOLAKIA 3 CIT(A), IT WAS, INTER ALIA, SUBMITTED BY THE ASSESS EE THAT DUE TO OVERSIGHT OF THE ACCOUNTANT, BANK DETAILS OF THIS ACCOUNT WERE NOT I NCLUDED WHILE PREPARING THE FINAL ACCOUNT, THEREFORE, THE TRANSACTIONS OF SALES AND PURCHASES ARE ALSO NOT REFLECTED IN THE TRADING ACCOUNT. IT WAS FURTHER SU BMITTED THAT THE ASSESSEE HAS MADE PURCHASES FROM GENUINE PARTIES, THE PURCHASE B ILLS ARE AVAILABLE FOR VERIFICATION AND THE PAYMENTS WERE MADE BY CHEQUES, THEREFORE, THE AO HAS ERRED IN MAKING THE ADDITION OF RS.19,14,450/- U/S. 68 WITHOUT GIVING BENEFIT OF PURCHASES. HOWEVER, THE LD. CIT(A), WHILE OBSERVING THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT AND HAS FAILED T O RECONCILE THE PURCHASES, UPHELD THE ADDITION MADE BY THE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTEN ANCE OF ADDITION OF RS.19,14,450/- MADE BY THE AO U/S.68 OF THE ACT. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE MADE A REQUEST TO ADMIT ADDITIONAL EVIDENCE IN THE FORM OF PAPER BOOK CONTAINING COPY OF BANK STATEMENT, DETAILS OF VENDORS TO WHOM THE PAYMENT W AS MADE, BILLWISE DETAILS AND INVOICES AGAINST WHICH THE CHEQUE PAYMENTS WERE MADE. HE SUBMITS THAT THE ABOVE ADDITIONAL EVIDENCE MAY BE ADMITTED IN VIEW O F THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. HE FURTHER S UBMITS THAT SINCE THE AFORESAID ADDITIONAL EVIDENCE WAS NOT BEFORE THE AO AND THE LD. CIT(A), THEREFORE, IN THE INTEREST OF JUSTICE, THE ISSUE MA Y BE SET ASIDE TO THE FILE OF THE AO. 5. ON THE OTHER HAND, THE LD. D.R., WHILE RELYING O N THE ORDERS OF THE AO AND CIT(A), SUBMITS THAT HE HAS NO OBJECTION IF THE ISS UE IS SET ASIDE TO THE FILE OF AO. ITA NO.5772/MUM/2010 SANJAY J. DHOLAKIA 4 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT DISCLOSED THE SAVINGS BANK ACC OUNT NO.14125 WITH MAHANAGAR CO-OP. BANK LTD., MULUND BRANCH. IT WAS STATED BY THE ASSESSEE THAT IN THE SAID ACCOUNT THE TRANSACTIONS ARE IN THE NAT URE OF PURCHASES AND SALES OF THE GOODS, THEREFORE, NET PROFIT AT 9.93% OF RS.19, 14,450/- MAY BE ASSESSED. HOWEVER, THE AO DID NOT ACCEPT THE SAME. HE TREATED THE ENTIRE DEPOSITS OF RS.22,27,050/- IN THE BANK ACCOUNT AS UNDISCLOSED INCOME AND AFTER GIVING CREDITS OF DEBTORS AND REPAYMENT OF LOAN ADDED THE NET AMOUNT OF RS.19,14,450/- AS UNDISCLOSED INCOME. ON APPEAL, TH E LD. CIT(A), WHILE OBSERVING THAT THE AMOUNT OF RS.19,14,450/- AS UNDISCLOSED S ALES, DID NOT ACCEPT THE ASSESSEES PLEA THAT OUT OF THE AMOUNT OF RS.19,14, 450/- THE BENEFIT OF PURCHASES SHOULD BE GIVEN AND RESULTANT PROFIT SHO ULD BE TAXED ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS O F ACCOUNT AND HAS ALSO FAILED TO RECONCILE THE PURCHASES. NOW, AT THIS STAGE, THE ASSESSEE HAS FILED THE AFORESAID ADDITIONAL EVIDENCE SHOWING THE PURCHASE S WITH BILLS AND INVOICES MADE BY THE ASSESSEE, THE PAYMENT OF WHICH WAS MADE THR OUGH THE SAID BANK ACCOUNT. SINCE THE PAYMENT TO THE PARTIES WAS MADE FROM THE SAID BANK ACCOUNT AND THE AO WITHOUT CONSIDERING THE DEBIT SIDE OF TH E SAID BANK ACCOUNT HAS TREATED THE TOTAL OF CREDIT SIDE OF THE SAID BANK A CCOUNT AS ASSESSEES UNDISCLOSED INCOME AND AFTER GIVING DEDUCTION OF DEBTORS AND RE PAYMENT OF LOAN, THE NET AMOUNT OF RS.19,14,450/- WAS TREATED AS UNDISCLOSE D INCOME OF THE ASSESSEE, WHICH IS AGAINST THE PRINCIPLE OF ACCOUNTANCY. THER EFORE, IN THE INTEREST OF JUSTICE, WE, AFTER ADMITTING THE ADDITIONAL EVIDENCE FILED B Y THE ASSESSEE, WHICH GOES TO THE ROOT OF THE MATTER, CONSIDER IT FAIR AND REASON ABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND, ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY THE ITA NO.5772/MUM/2010 SANJAY J. DHOLAKIA 5 REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK T HE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE OB SERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE, TH EREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE ASSESSEES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES. ` ORDER PRONOUNCED IN THE OPEN COURT ON THE 25TH DA Y OF NOVEMBER, 2011. SD/- SD/- (R.K. PANDA) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 25TH NOVEMBER , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-33,MUMBAI. 4 CIT,CITY-23,MUMBAI. 5.DR,H BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NO.5772/MUM/2010 SANJAY J. DHOLAKIA 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 17-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 17-11-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER