ITO, Ward-3, Ratnagiri V. Shri Rajesh Sudhakar Butala, Ratnagiri

ITA 582/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79709 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: RAJESH S BUTALA
• Keywords: Unexplained cash credit; Unexplained investment; Initiation of penalty proceedings
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 582/PN/2013 (ASSESSMENT YEAR 2005-06) ITO, WARD-3, RATNAGIRI .. APPELLANT VS. SHRI RAJESH SUDHAKAR BUTALA, SONAR LANE, KHED, DISTRICT : RATNAGIRI .. RESPONDENT PAN NO. AIKPB4831G ASSESSEE BY : SHRI RAJESH S. BUTALA (ASSESSEE) REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 07-04-2014 DATE OF PRONOUNCEMENT : 11-04-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 17-12-2012 OF THE CIT(A), KOLHAPUR RELATING T O ASSESSMENT YEAR 2005-06. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF TRADING IN RECHARGE V OUCHERS OF BSNL AT KHED DIST : RATNAGIRI AND RUNNING ONE STD BOOTH. T HE ASSESSING OFFICER OBSERVED FROM THE AIR INFORMATION FURNISHED U/S.285BA OF THE INCOME TAX ACT THAT THE ASSESSEE HAS MADE DEPOSITS IN CASH IN HIS SAVINGS BANK ACCOUNT AGGREGATING TO RS.21,48,450/- DURING F.Y. 2004- 05 RELEVANT TO A.Y. 2005-06. ON THE BASIS OF THIS INFORMATION, THE ASSESSING OFFICER ISSUED NOTICE U/S.142(1) TO THE A SSESSEE CALLING FOR THE RETURN OF INCOME FOR THE ASSESSMENT YEAR. SINCE TH E ASSESSEE NEITHER 2 COMPLIED WITH THE NOTICE NOR FURNISHED ANY REPLY TH E ASSESSING OFFICER ISSUED ANOTHER NOTICE U/S.142(1) TO THE ASSESSEE CA LLING FOR THE FOLLOWING DETAILS : I. SOURCE OF INCOME FOR CASH DEPOSITS ALONG WITH NE CESSARY DOCUMENTS. II. DETAILS OF BANK ACCOUNTS MAINTAINED ALONG WITH PASS BOOK/BANK ACCOUNT STATEMENTS. III. STATEMENT OF ASSETS AND LIABILITIES 2.1 SINCE THERE WAS NO COMPLIANCE FROM THE ASSESSEE THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.144 DETERMININ G THE TOTAL INCOME AT RS.21,48,450/-. 2.2 THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AFTER A GAP OF 2 YEARS AND 8 MONTHS ALONG WITH A REQUEST FOR CONDONA TION OF THE DELAY. THE LD.CIT(A) CONDONED THE DELAY. 2.3 BEFORE CIT(A) IT WAS SUBMITTED THAT HE WAS DOIN G BUSINESS OF SELLING BSNL RECHARGE VOUCHERS ON WHOLESALE BASIS. DEPOSITS IN IDBI BANK AS PER AIR INFORMATION WAS NOTHING BUT THE SAL E PROCEEDS OF MOBILE RECHARGE VOUCHERS DEPOSITED BY THE ASSESSEE. THE SAID AMOUNT WAS TRANSFERRED IN THE NAME OF ONE SHRI SANJAY SHAH , PROPRIETOR OF M/S. SHRI SAI AGENCY, KOLHAPUR, WHO WAS THE AUTHORISED B SNL VOUCHER DISTRIBUTOR, EITHER ON THE SAME DAY OF DEPOSIT OR A FTER A DAY OR TWO. THE ASSESSEE IN SUPPORT OF HIS CONTENTION FILED COPY OF PROFIT AND LOSS ACCOUNT, BALANCE SHEET, BANK ACCOUNT STATEMENT AND LEDGER ACCOUNT OF SHRI SAI AGENCY. 3 2.4 BASED ON THE SUBMISSIONS FILED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER WHO VIDE HIS REMAND REPORT DATED 14-03-2012 CONFIRMED THAT THE C ASH DEPOSIT OF RS.21,48,450/- WAS OUT OF ASSESSEES CASH SALES OF RECHARGE VOUCHERS MADE DURING THE YEAR. HE, HOWEVER, STATED THAT THE AUTHENTICITY OF THE SALES FIGURE REPORTED BY THE ASSESSEE WAS SUSPICIOU S AS HE HAD EXPRESSED HIS INABILITY TO FURNISH QUANTITATIVE DETAILS OF PU RCHASES, SALES AND OPENING AND CLOSING STOCK. HE ALSO STATED THAT THE PROFITS SHOWN BY THE ASSESSEE AT RS.60,836/- WAS TOO MEAGRE ON A TOTAL T URNOVER OF RS.82,00,374/- WHICH WORKS OUT TO JUST 0.74% AND TH EREFORE THIS SHOWS THAT THE SALES WERE SUPPRESSED IN ORDER TO REDUCE T HE PROFIT. THE ASSESSING OFFICER ACCORDINGLY SUGGESTED THAT THE BO OK RESULTS WERE NOT RELIABLE AND DESIRES TO BE REJECTED. 3. THE ASSESSEE IN HIS REJOINDER STATED BEFORE THE LD.CIT(A) THAT THE ASSESSEE GETS COMMISSION OF 0.5% TO 1% WHICH IS PAS SED ON TO HIM BY THE AUTHORISED DISTRIBUTOR. ON AN AVERAGE, THE ASS ESSEE EARNS COMMISSION @ 0.74%. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 10. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELL ANT WITH REFERENCE TO THE FACTS OF THE CASE. THE ONLY ISSUE INV OLVED IS WHETHER THE ADDITION OF RS.21,18,510/- SHOULD BE SUSTAINED IN THE I NSTANT CASE OR NOT. THE ASSESSING OFFICER HAS, IN HIS REMAND REPORT, EXAMINED THE ASSESSEE'S CASH BOOK AND BANK BOOK AND UPON VERIFICATION, HE HA S FOUND THAT CASH DEPOSITS ARE MADE OUT OF SALES OF RECHARGE VOUCHERS. THE SE CASH DEPOSITS ARE IMMEDIATELY OR WITHIN A FEW DAYS SENT TO A WHOLESA LE DEALER AT KOLHAPUR. THEREFORE, THE AMOUNT ADDED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 STANDS SUITABLY EXPLAINED AND THE SAME IS DELETED. 4 11. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE GROSS P ROFIT OF RS.60,836/- WHICH IS 0.74% OF THE TOTAL SALES. ACCORDI NG TO HIM, THE BOOK RESULTS OF THE APPELLANT ARE NOT SATISFACTORY AND SALES H AVE BEEN SUPPRESSED. HE HAS BASED THESE OBSERVATIONS ON THE GROUND T HAT SALE BILLS AND QUANTITATIVE DETAILS OF PURCHASE, SALES, OPENI NG AND CLOSING STOCK COULD NOT BE PROVIDED BY THE APPELLANT. HOWEVER, TH E ASSESSING OFFICER HAS NOT SUGGESTED ANY REMEDIAL ACTION TO BE TAKEN IN T HIS REGARD AND HAS NOT PROVIDED ME WITH ANY EVIDENCE TO HOLD THAT THE INCOME SHOWN BY THE APPELLANT SHOULD BE ENHANCED. IN FACT, THE ASSESSING OFF ICER HAS NOT PROVIDED ME WITH THE FIGURE BY WHICH THE INCOME SHOU LD BE ENHANCED. UNDER THESE CIRCUMSTANCES, I AM NOT TAKING ANY FURTHER ACTION ON THE OPINION OF THE ASSESSING OFFICER THAT THE BOOK RESULTS A PPEAR TO BE CONCOCTED. 12. IN THE RESULT, APPEAL IS ALLOWED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : WITHOUT PREJUDICE TO EACH OTHER (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS NOT MENTIONED IN THE REMAND REPORT REGARDING LESS GROSS PR OFIT SHOWN BY THE ASSESSES WHICH IS NOT VERIFIABLE IN ABSENCES OF SALE BILLS & QUANTITATIVE DETAILS OF PURCHASES, SALES, OPENING & CLOSING STOCK. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN NOT DIRECTING THE AO TO INITIATE P ENALTY U/S 271B WHEN THE AO IN HIS REMAND REPORT, CLEARLY BROUGHT TO HIS N OTICE THAT THE FIGURES REPORTED BY ASSESSES FOR PURCHASES, SALES AND GROSS PROFIT D URING THE FINANCIAL YEAR RELEVANT TO AY UNDER CONSIDERATION SHO WED THAT ALTHOUGH THE TURNOVER FOR THE AY 2005-06 EXCEEDED RS.40 LACS A ND THE ASSESSES HAS NOT GOT HIS ACCOUNTS AUDITED AS PER PROVISION OF SECT ION 44 AB. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IGNORING THE FACT MENTIONED BY THE AO IN T HE REMAND REPORT THAT THE AUTHENTICITY OF THE SALES FIGURES REPORTED BY ASSESSES IS SUSPECTED IN ABSENCE OF SALE BILLS & QUANTITATIVE DETAILS OF PURCHA SES, SALES, OPENING & CLOSING STOCK. (4) THE APPELLANT PRAYS THAT THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS), KOLHAPUR BE VACATED AND THE MATTER BE RESTORED BACK TO THE FILE OF AO FOR FRESH RE-ADJUDICATION OF THE ABOV E ISSUES. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDE AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). T HERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE IS T RADING IN RECHARGE VOUCHERS OF BSNL THROUGH THE AUTHORISED DISTRIBUTOR SHRI SANJAY SHAH, 5 PROPRIETOR OF M/S. SHRI SAI AGENCY, KOLHAPUR. WE F IND ON THE BASIS OF THE AIR INFORMATION THAT ASSESSEE HAS DEPOSITED CAS H IN SAVINGS BANK ACCOUNT AGGREGATING TO RS.21,48,450/-, THE ASSESSIN G OFFICER ISSUED NOTICE U/S.142(1) TO THE ASSESSEE TO FILE HIS RETUR N OF INCOME. SINCE THERE WAS NON-COMPLIANCE TO THE NOTICE, THE ASSESSING OFF ICER COMPLETED THE ASSESSMENT U/S.144 TREATING THE CASH DEPOSIT OF RS. 21,48,450/- AS UNEXPLAINED INVESTMENT AND BROUGHT TO TAX THE SAME AS INCOME FROM OTHER SOURCES. WE FIND BEFORE THE LD.CIT(A) THE AS SESSEE FURNISHED CERTAIN DETAILS WHICH WAS REMANDED TO THE ASSESSING OFFICER. SINCE THE ASSESSING OFFICER IN HIS REMAND REPORT AFTER EXAMIN ING THE ASSESSEES CASH BOOK AND BANK BOOK CONFIRMED THAT THE CASH DEP OSITS OF RS.21,48,450/- WAS OUT OF ASSESSEES CASH SALES OF RECHARGE VOUCHERS MADE DURING THE YEAR, CIT(A) DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT. IN THE S AID REMAND REPORT, ALTHOUGH THE ASSESSING OFFICER HAS MENTIONED THAT T HE PROFIT SHOWN BY THE ASSESSEE AT RS.60,836/- WAS TOO MEAGRE ON A TOT AL TURNOVER OF RS.82,00,374/-, HE HAS NOT SUGGESTED ANY REMEDIAL A CTION TO BE TAKEN. THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO WHI CH ARE THE EXPENSES WHICH THE ASSESSEE HAS CLAIMED TO BE FALSE OR NOT F OR BUSINESS PURPOSES. MERELY STATING THAT 0.74% OF PROFIT IS TOO MEAGRE I S NOT SUFFICIENT TO DOUBT THE BOOK RESULTS, IN ABSENCE OF ANY DEFECTS BEING POINTED OUT BY THE ASSESSING OFFICER OR GIVING ANY COMPARABLE CASE WHERE THE PROFIT EARNED IN SIMILAR BUSINESS IS HIGHER. WE ALSO FIND FROM THE ORDER OF THE CIT(A) THAT THE ASSESSING OFFICER HAS NOT PROVIDED HIM WITH FIGURE BY WHICH THE INCOME SHOULD BE ENHANCED. THERE WAS ALS O NO PROPOSAL FROM 6 THE ASSESSING OFFICER REQUESTING THE LD.CIT(A) TO DIRECT HIM TO INITIATE PENALTY PROCEEDINGS U/S.271B. 5.1 IN OUR OPINION, ONCE THE ASSESSING OFFICER COME S TO KNOW OF THE SALES FIGURE WHICH ACCORDING TO HIM IS MORE THAN RS . 40 LAKHS, HE HIMSELF COULD HAVE INITIATED PENALTY PROCEEDINGS U/S.271B I NSTEAD OF WAITING FOR THE DIRECTION OF THE CIT(A) TO INITIATE PENALTY PRO CEEDINGS U/S.271B. THE ASSESSING OFFICER HAS ALSO NOT GIVEN ANY COMPARATIV E CHART SHOWING HIGHER PROFIT BY OTHER DEALERS/AGENTS OF RECHARGE V OUCHERS OF OTHER TELECOM COMPANIES. IN THIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DIRECTING THE ASSESSING OFF ICER TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. FURTHER, I N VIEW OF OUR OBSERVATIONS EARLIER, WE FIND NO MERIT IN THE GROUN DS RAISED BY THE REVENUE REGARDING INITIATION OF PENALTY PROCEEDINGS U/S.271B BY THE ASSESSING OFFICER AT THE INSTANCE OF THE LD.CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED PRONOUNCED IN THE OPEN COURT ON 11-04-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 11 TH APRIL, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), KOLHAPUR 4 CIT, KOLHAPUR 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE