SANJIOB S PRADHAN, MUMBAI V. INCOME TAX OFFICER W-33(3) (3), MUMBAI, MUMBAI

ITA 5862/MUM/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5527 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 10-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SWAPNIL NEWASKAR
• Keywords: Business income
• Section: 68; 44AD

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri Shamim Yahya (AM) I.T.A. No. 5862/Mum/2019 (Assessment Year 2014-15) Sanjiob S. Pradhan 2108, Meet Niketan Tower, Thakur Complex Kandivali-East Mumbai-400 101. PAN : AKIPP8300J Vs. ITO,Ward-33(3)(3) Kautilya Bhawan Bandra Kurla Complex Bandra East Mumbai-400 051. (Appellant) (Respondent) Assessee by Shri Swapnil Newaskar Department by Shri Prakash Mane Date of Hearing 20.10.2021 Date of Pronouncement 27.12.2021 O R D E R This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 12.6.2019 pertains to A.Y. 2014-15. 2. Ground of appeal read as under :- 1.0 On facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of suppressed income on trading of fabrics on estimating the profit margin @ 35.15% on disputed gross receipts of Rs.12,31,665/-. 2.0 Without Prejudice, Ld. CIT (A) ought to estimated the suppressed profit of Rs.98,533/- @ 8% of disputed turnover of Rs.12,31,665/- or at least ought to have considered the estimation of profits made in earlier 2 year viz. A.Y.2007-08 and 2008-09 @ 17.33 % and 13.51 % respectively. 3. Brief facts of the case are that the Assessing Officer mentioned in the order that during the assessment proceedings the assessee submitted that “there is no income” and the assessee failed to submit any documents. When the copy of bank statements were procured from United Bank of India, the assessee then filed copy of bank statement of Federal Bank and Shamrao Sanjiob S. Pradhan 2 Vithal Co-op Bank. On perusal, AO noticed that there were frequent cash deposits and deposits by cheques. Bank account wise deposits are listed by the AO in the assessment order. AO found that the total deposits in the assessee's above accounts amounts to Rs.22,07,900 in cash and Rs. 6,87,000 in cheques. The assessee was asked to explain the sources of deposits including the cash deposits appearing in his bank accounts. The assessee explained that the cash deposits were sale receipts of his textile business received in cash. Further he stated that the amount of Rs.6,87,000 received in cheques were loans taken from relatives & friends. In support of his claim, he produced loan confirmations from the lender parties. A.O. noticed that the assessee showed total receipts of Rs.9,76,232 only in his Return of Income out of the cash deposits of Rs.22,07,900 in the bank accounts. During the assessment proceedings,, when he was asked to explain, the assessee submitted that the excess cash deposits may be considered as his business receipts and the profit on the same may be considered taking into consideration the provisions of sec. 44AD of the Act. Therefore, the A.O. held the difference of Rs. 12,31,665 (difference between the cash deposit of Rs.22,07,900 and the receipts offered by the assessee of Rs.9,76,235) as unaccounted business receipts. The A.O. mentioned that the assessee has shown net profit in his .Return of income at 35.15%. Therefore, he calculated revised net profit at 35.15% of the revised Gross Receipts, which worked out to Rs.7,76,077 (35.15% of 22,07,900). 4. Upon assessee’s appeal learned CIT(A) rejected the assessee’s plea that 8% profit rate should be adopted by holding as under :- “From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get then audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts. However, u/s 44AD the profit can be 8% or more when the books are not maintained. In this case the assessee himself shown 35.15% profit on his business in the return. When he is caught for the undeclared turnover from his bank accounts, he cannot ask the AO to apply 8% for his advantage, depriving the revenue the tax which is due. Therefore, contention of the assessee for adopting the provision of section 44AD on the Sanjiob S. Pradhan 3 total business receipts is not acceptable. In view of the above, I do not find any infirmity in the order of the A.O., calculating net profit at 35.15% of the revised Gross Receipts.” 5. Against the above order the assessee is in appeal before the ITAT. 6. Learned Counsel of the assessee referred to the ITAT decision in Girish V. Valakkishettar Sujatha Buildings Vs. ITO (ITA No. 354 & 355/Bang/2019 dated 27.1.2020, wherein Hon'ble Bombay High Court decision in CIT Vs. Bhaichand H. Gandhi (141 ITR 67) was also referred for the proposition that deposits in bank statement cannot be added under section 68 of the I.T. Act. Alternatively he pleads that 8% profit rate should estimated on the entire receipts. 7. Per contra learned Departmental Representative relied upon the orders of the authorities below. 8. Upon careful consideration I find that this plea of bank deposit not liable to addition under section 68 of the Act is not applicable here in as much as assessee has accepted the same to be his business turnover. However, the application of profit rate of 35.15% is very high and without any cogent basis. On the facts and circumstances of the case in the interest of justice I accept the alternative contention that profit should be estimated @ 8%. I direct accordingly. 9. In the result, assessee’s appeal is partly allowed. Pronounced in the open court on 27.12.2021 Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 27 /12/2021 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent Sanjiob S. Pradhan 4 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai