Mansukh Govabhai Khara, Jamnagar. V. Income Tax Officer, Ward-1(1), Jamnagar.

ITA 58/RJT/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0124 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit; Set aside
• Section: 44AD; 143(3); 69A; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT ] ] BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No. 58/Rjt/2018 Assessment Year : 2009-10 Shri Mansukh Govabhai Khara, Office No.S-33, City Arcade, Near DSP Bungalow, Jamnagar PAN : AQSPK 9783 C Vs Income Tax Officer, Ward-1(1), Jamnagar / (Appellant) / (Respondent) Assessee by : Shri Mehul Ranpura, AR Revenue by : Shri S.S. Rathi, Sr DR स ु नवाई ा /Date of Hearing : 18/05/2022 घोषणा ा /Date of Pronouncement: 16/08/2022 आदेश/O R D E R PER WASEEM AHMED : The captioned appeal has been filed at the instance of the assessee against the appellate order of the learned Commissioner of Income-tax (Appeals), Jamnagar [“CIT(A)” in short] vide appeal No.CIT(A)/Jam/ 404/2016-17/1028 dated 15.12.2017 arising from the assessment order passed under Section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 23.12.2016 relevant to Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: 1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The Id. Commissioner of Income Tax (Appeals), Jamnagar [hereinafter referred as to the "CIT(A)'] has erred on facts as also in law in confirming addition of net profit estimated at 10% of sales of Rs.13,13,760/- amounting to Rs.1,31,376/-.The addition totally unjustified and deserves to be deleted and may kindly be deleted. 3.0 The Ld. CIT(A) erred on facts as also in law in confirming addition of Rs.31,06,594/- u/s. 69A of the Income Tax Act, 1961 on account of alleged unexplained cash deposits in bank accounts. The addition may kindly be deleted. ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 2 4.0 The ld.CIT(A) erred on facts as also in law in retaining addition of Rs.50,000/- out of total addition of Rs.1,00,000/- made on account of alleged low household withdrawals. The addition may kindly be deleted.” 3. The 1 st issue raised by the assessee is that the learned CIT(A) erred in confirming the addition by estimating the net profit at the rate of 10% of sales at ₹ 13,13,760.00 and thereby confirming the addition of Rs. 8,948.00 only. 4. The facts in brief are that the assessee in the present case is an individual and claimed to be engaged in the business of being a small contractor of providing the Labour work. The assessee has filed the return of income declaring an income of ₹1,22,428.00 only against the turnover of ₹13,13,760.00 only. However, the assessee during the assessment proceedings failed to furnish the documentary evidences for the expenses claimed in the return of income. Thus, the AO in the absence of sufficient documentary evidences estimated the income of at Rs. 2,62,752.00 being 20% of the turnover. The AO made the addition of ₹1,40,324.00 after deducting the income disclosed by the assessee. 5. On appeal the learned CIT(A) estimated the income at the rate of 10% of the turnover. As such, the learned CIT(A) confirmed the addition of ₹8,948 only. 6. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 7. The learned AR before us filed a paper book containing pages 1 to 36 and contended that there is no basis adopted by the authorities below for estimating the income at the rate of 10% of the turnover. According to the learned AR the income declared by the assessee in his return of income should be admitted. 8. On the contrary the learned DR vehemently supported the order of the authorities below. ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 3 9. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee has already declared an income at the rate of 9.34% in his return of income. Even under the provisions of section 44AD of the Act, the presumptive rate specified therein is 8% of the turnover whereas the assessee has declared income more than 8 percent. Likewise, there was no basis provided by the authorities below for estimating the income at the rate of 10% of the turnover. Accordingly, we are not convinced with the finding of the learned CIT(A) and reverse the same with the direction to the AO delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 10. The 2 nd issue raised by the assessee is that the learned CIT(A) in confirming the addition made by the AO for ₹31,06,594.00 being the peak credit of the amount shown in the bank accounts. 11. There were cash deposits in the bank account of the assessee to the tune of Rs. 4,46,55,797.00 only. On question by the AO, the assessee submitted that on the advice of some person he has deposited the cash and withdrawn the same in order to show high turnover in his bank account with a view to obtain the contracts from the Government. According to the assessee, the amount of cash deposits does not represent the income of the assessee. 12. The AO was convinced with the contention of the assessee that the entire amount of cash deposits which is supported by the subsequent withdrawals cannot be made subject to the addition. As per the AO, the peak credit theory can be applied for determining the income in the given facts and circumstances. Accordingly the AO worked out the peak balance of both the banks at ₹ 31,06,594 and added to the total income of the assessee. 13. Aggrieved assessee preferred an appeal to the learned CIT(A) who confirmed the same by observing as under: ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 4 “5.3 Thus the AO has correctly worked out the peak balance of Rs.31,06,594/- in respect of deposits of cash and withdrawals of cash as appearing in the above two bank accounts of the appellant in view of the fact that working of peak credit was not given by the appellant to the AO at the time of assessment proceedings. Further at appellate stage also, working of peak credit has not been given by the appellant to me. In view of the discussion of the facts of the case as made in this para as well as in preceding paragraphs of this appeal order, the addition Of Rs. 31,06,594/- as made by the AO to the total income of the appellant in his assessment order is hereby confirmed u/s. 69A of the IT Act by holding that the appellant was having unaccounted and unexplained money of Rs.31,06,594/- with him and which were deposited by him in the bank accounts. At this place it is mentioned that though the AO has made the addition of Rs.31,06,594/- on account of unexplained cash deposits, but this addition is confirmed by me u/s. 69A of the Act as the appellant is found to be owner of money (i.e. cash of Rs. 31,06,594/-) on the dates on which the same were deposited in the bank and such money or cash amounts of Rs.31,06,594/- are from undisclosed sources and are unaccounted. In this regard support is drawn from the decision of Hon'ble High Court of Punjab and Haryana also as given in the case of Swam Singh Vs. CIT, Patiyala, 82 taxmann.com 213. The fact is that this addition of Rs.31,06,594/- as made by the AO to the total income of the appellant is fully justified on merit. However, even if the AO has not invoked any section while making this addition of Rs.31,06,594/-, then also the merit of the case cannot be diluted and the appellate authorities i.e. CIT(A) and ITAT can uphold the addition under correct section. In this regard, the support is drawn from the decision of Hon'ble High Court of Punjab and Haryana as given in the case of Namdev Arora Vs. CIT, Jalandhar 72 taxmann.com 124. In this regard the relevant part of decision of Hon’ble High Court of Punjab and Haryana is reproduced hereunder for reference. \ "The assessee has not been prejudiced in any manner whatsoever on account of the Assessing Officer having mentioned the wrong section. Where in the assessment proceedings the enquiries are made by the Assessing Officer of facts and the Assessing Officer after considering the facts and circumstances of the case including the assessee's response, if any, thereto, makes an addition, which is justified and permissible under the provisions of the Act but inadvertently or even wrongly mentions a wrong provision of the Act, the assessment order cannot be set aside on that ground. It is open in such circumstances to the Appellate Authority or to CIT (A) or the Tribunal to uphold the addition under the correct section. This of course would be in circumstances where the error has not prejudiced the assessee in any manner whatsoever. At the cost of repetition it is not even the assessee's case that during the assessment proceedings he was given to understand that the queries were raised by the Assessing Officer and/or that he responded to the same only on the basis of the provisions of section 69-A of the Act. ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 5 17. In this view of the matter, it is not necessary to consider the applicability of section 292-B of the Act." 5.4 Support may be drawn from the decision of Hon'ble ITAT Mumbai as given in the case of Alliance Hotels Vs. ACIT, 41 taxmann.com 123. In view of the discussion as made in earlier paragraphs of this appeal order, the ground of appeal No. 3 of the appellant as reproduced in initial paragraph of this appeal order is hereby dismissed.” 14. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 15. The learned AR before us contended that the amount of cash deposit does not represent the income of the assessee. According to the learned AR no addition is warranted. 16. On the contrary the learned DR vehemently supported the order of the authorities below. 17. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the huge amount of cash was deposited and withdrawn from the bank account of the assessee. It is the onus upon the assessee to explain each and every transaction of the cash deposit and withdrawn. But the assessee failed to explain the same. It is also true that the entire amount of cash deposit cannot be treated as income of the assessee in a situation where there is a subsequent withdrawal and deposit in the bank account of the assessee. In other words the amount withdrawn from the bank is available with the assessee for subsequent deposit in the bank account. In such facts and circumstances the Hon’ble Courts in series of cases has held that the peak amount lying in the bank account should be treated as income of the assessee. Accordingly we note that there is no infirmity in the order of the authorities below. Before parting, we note that the assessee has not given his working for the amount of the peak credit. Accordingly, in the interest of justice and fair play we are inclined to give one opportunity to the assessee to work out the peak-credit and provide the same to the AO. It is also important to note that the opening ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 6 balance of in bank should be adjusted against the amount of credit. It is for the reason that the amount shown as opening balance in the bank will certainly be available in the amount of peak-credit if the peak credit is over and above the opening balance. Thus, with this observation, we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. 18. The next issue raised by the assessee is that the learned CIT(A)erred in restricting the addition made by the AO for ₹50,000 on account of low household withdrawals instead of deleting the same in entirety. 19. The AO during the assessment proceedings found that the assessee has not furnished the details of the family members and the household expenses. Therefore, he proposed to make the disallowance of ₹1 lakh towards the household expenses but the assessee has not made any compliance thereto. Thus, the AO made the disallowance of ₹1 lakh by adding to the total income of the assessee which was restricted to ₹50,000 by the learned CIT(A). 20. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 21. The learned AR before us contended that the assessee has already shown the household expenses of ₹1,02,687.00 and therefore there should not be any further disallowance. 22. On the contrary the learned DR vehemently supported the order of the authorities below. 23. We have heard the rival contentions of both the parties and perused the materials available on record. It is the onus upon the assessee to furnish the necessary details as desired by the AO. From the preceding discussion we note that the assessee has not furnished the details of the family members Therefore ITA No. 58/Rjt/2018 Mansukh Govabhai Khara Vs. ITO AY : 2009-10 7 the addition was made on account of low withdrawal of household expenses. However, we note that there is no basis of making the disallowance on ad-hoc basis. However in the interest of justice and fair play we restrict the disallowance to the tune of 25,000.00 only. Thus the ground of appeal of the assessee is partly allowed. 24. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 16 th August 2022 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad, Dated 16/08/2022 आदेश े ष /Copy of the Order forwarded to : 1. ा / The Appellant 2. ! / The Respondent. 3. स"#"$% आ! आ! ु & / Concerned CIT 4. आ! आ! ु & ) (/ The CIT(A)- 5. व'ा( ! न$% ,आ! ! $% ण/DR,ITAT, Rajkot, 6. (ा)* फाई /Guard file. आदेशान ु सा / BY ORDER, TRUE COPY सहा! "ज ा (Asstt. Registrar) आ! ! $% ण ITAT, Rajkot 1. Date of dictation- .... Words processed by Hon’ble AM on his laptop....16.08.2022 2. Date on which the typed draft is placed before the Dictating Member ............ Other member ..................... 3. Date on which the approved draft comes to the Sr.P.S./P.S. - .................. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement .... 5. Date on which the file goes to the Bench Clerk............ 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order..................