ITO, Davangere V. Sri. S.M. Rafiq, Davangere

ITA 6/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9219 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 20-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-01-2016
• Court: TRIBUNAL
• Keywords: Peak credit
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.6 (BANG) 2016 (ASSESSMENT YEAR : 2009-10) THE INCOME TAX OFFICER, WARD-1(4), DAVANAGERE APPELLANT VS SHRI S.M.RAFIQ, PROP: GHOUSIA TRANSPORT & TRADERS, NO.4000, 1-B4, 2 ND MAIN, 12 TH CROSS, VINOBHANAGAR, DAVANAGERE PAN NO.AFCPR1589L RESPONDENT REVENUE BY : SHRI M.K.BIJU, JCIT ASSESEE BY : SHRI V. SRINIVASAN, ADVOCATE DATE OF HEARING : 13-12-2016 DATE OF PRONOUNCEMENT: : 28-12-2016 O R D E R PER SHRI A.K.GARODIA, AM THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DAVANAGERE DATED 30-09-2015 FOR THE ASSESSM ENT YEAR 2009-10. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE ORDER OF THE CIT(A), DAVANAGER4E, IS OPPOSE D TO LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE. ITA NO.6(B)2016 2 2. THE CIT(A) IS NOT RIGHT IN GRANTING RELIEF TO TH E ASSSESSEE ON THE ADDITION MAD ON ACCOUNT OF UNACCOUNTED LORRY RECEIPTS, WHEN THE ASSESSEE DELIBERATELY NOT PRODUCED ANY BOOKS OF ACCOUNTS, VOUCHERS, INVOICES ETC. IN SUPPORT OF GROSS RECEIPT S OR EXPENSES IN SPITE OF SEVERAL OPPORTUNITIES GIVEN TO THE ASSESEE. 3. THE CIT(A) IS NOT RIGHT IN GRANTING RELIEF TO TH E ASSESSEE ON THE ADDITION MADE ON ACCOUNT OF PEAK CASH CREDIT , WHEN THE ASSESSEE HAS NOT DECLARED THE ENTIRE TRANSACTIONS OF BANK ACCOUNTS IN HIS BOOKS OF ACCOU NTS. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UP ON, THE ORDER OF THE CIT(A) MAY BE REVERSED THAT ASSESS MENT ORDER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF TH E APPEAL. 3. THE LD. AR OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER. HE ALSO SUBMITTED THAT THERE IS NO DETAILS OF EXPENSES SUBMITTED BY THE ASSESSEE BEFORE ANY OF THE AUTHORITIES BLOW OR BEFO RE THE TRIBUNAL AND THEREFORE, THE ENTIRE ADDITIONAL RECEIPTS SHOULD BE TAXED, AS HAS BEEN DONE BY THE AO. HE ALSO SUBMITTED THAT EVEN IF THE PROFITS HAS TO BE TAXED THAN ALSO, GROSS PROFITS HAS TO BE TAXED AND NOT NET PROFIT AS HAS BEEN HELD BY THE LD. CIT(A). 4. AS AGAINST THIS, THE LD. AR OF THE ASSESSEE SUP PORTED THE ORDER OF THE LD. CIT(A) ON BOTH THE ISSUES. ITA NO.6(B)2016 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE PRESENT APPEAL OF THE REVENUE, TWO ISSUES ARE INVOL VED. THE ONE ISSUE IS REGARDING DIRECTION OF THE LD.CIT(A) TO THE AO TO T AX ONLY RS.3,44,787/- BEING 5% OF UNDISCLOSED LORRY HIRE CHARGES RECEIPTS OF RS.68,98,745/- WHEREAS THE AO HAS TAXED THE WHOLE AMOUNT OF UNDISC LOSED LORRY HIRE CHARGES RECEIPTS OF RS.68,98,745/-. THE SECOND ISS UE IS REGARDING GRANTING OF TELESCOPING BENEFIT OF RS.7.20 LAKHS. REGARDING THE FIRST ASPECT, WE FIND THAT THE LD. CIT(A) HAS NOTED THE J UDGMENT OF THE HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF BALRAM SAHA VS CIT AS REPORTED IN 334 ITR 3383 (CAL.) WHEREIN IT WAS HEL D THAT ONLY GROSS PROFIT SHOULD BE TAXED INSTEAD OF TREATING ENTIRE S UPPRESSED SALES AS ASSESSEES INCOME. HE HAS ALSO REFERRED TO VARIOUS OTHER JUDGMENTS IN SUPPORT OF THE SAME ASPECT. IN THE PRESENT CASE, AS PER THE P&L ACCOUNT FOR THE YEAR ENDING AS ON 31-03-2009 I.E. T HE PRESENT YEAR APPEARING ON PAGE-28 OF THE PAPER BOOK, THE AMOUNT OF LORRY HIRE CHARGES RECEIVED IS RS.143.05 LAKHS AND THE AMOUNT OF LORRY HIRE CHARGES PAID IS RS.136.44 LAKHS RESULTING INTO A GR OSS PROFIT OF RS.6.61 LAKHS BEING 4.62% OF TOTAL LORRY HIRE CHARGES RECEI VED AND CREDITED IN THE P&L ACCOUNT. HENCE, THE ARGUMENT OF THE LD. DR OF THE REVENUE THAT THE GROSS PROFIT HAS TO BE ADOPTED AND NOT NET PROFIT W HICH IS NOT HELPING THE REVENUE IN THE PRESENT CASE BECAUSE LEARNED CIT (A) HAS ALSO DIRECTED THE A.O. TO TAX GROSS PROFIT BEING 5% AS AGAINST ACTUAL GROSS PROFIT OF 4.62%. THE TAXING OF ENTIRE RECEIPT IS NOT VALID AS PER TH IS JUDGMENT AND NO CONTRARY JUDGMENT IS BROUGHT BEFORE US IN SUPPORT O F TAXING THE ENTIRE ITA NO.6(B)2016 4 UNDISCLOSED RECEIPTS. HENCE, WE HOLD THAT THIS ASP ECT AS TO WHETHER THE GROSS UNDISCLOSED RECEIPTS SHOULD BE TAXED OR ONLY GROSS PROFITS ON UNDISCLOSED RECEIPTS, WE FIND THAT THIS ASPECT IS C OVERED IN FAVOUR OF THE ASSESEE BY VARIOUS JUDGMENTS OF THE VARIOUS HIGH CO URTS AS NOTED BY THE LD. CIT(A) ON PGE-19 OF HIS ORDER. HENCE, ON THIS A SPECT, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). 6. REGARDING THE SECOND ASPECT I.E. TELESCOPING BE NEFIT OF PEAK CREDIT OF RS.7.20 LAKHS, WE REPRODUCE THE RELEVANT PARAS FROM THE ORDER OF THE LD.CIT(A) ON PAGES 23 & 24 OF HIS ORDER. TH E SAME READ AS UNDER: I HAVE CONSIDERED THE ARGUMENTS OF BOTH I.E. OF THE AO AND THE ASSESSEE ON THE ISSUE OF ALLOWING TELESC OPING. THE AO FOUND THAT THE ASSESSEE DID NOT DISCLOSE THE BANK ACCOUNT BEARING SB 8260 AT ALL IN THE RETURN OF INC OME WITH THE RESULT, THE TOTAL CREDIT BALANCE STANDING TO THE CREDIT OF THIS ACCOUNT OF RS.17,08,216/- WAS NOT SH OWN IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31/03/2009. THE AO ALSO NOTICE THAT THERE WERE CREDITS AND DEBT S IN OTHER 2 BANK ACCOUNTS VIZ.SCC708 AND SCC 648. THE TOTAL CREDITS ERE RS.29,21,000/- FROM ALL THESE 3 A CCOUNTS. OUT OF THIS RS.29,21,000/- ONLY RS.1,50,000/- WAS F ROM SCC 648 AND RS.3,00,000/ + 2,96,000= 5,96,000/- WAS FROM SCC 708. THUS, RS.21,75,000/- WAS THE CREDIT FROM SB A/C8260 ONLY. THE PEAK CREDIT WORKED OUT BY TH E AO WAS RS.7,20,000/- WHICH HAS BEEN AGREED TO BY THE ASSESSEE. SINCE SUBSTANTIAL AMOUNT HAS COME FROM SB A/C8260 ONLY, WHERE THE CLOSING CASH BALANCE FOUND WAS RS.17,08,126/-, BULK OF THE PEAK CREDIT REPRESENTED TO THIS ACCOUNT ONLY AND THEREFORE, TELESCOPING BENEFI T ITA NO.6(B)2016 5 SHOULD BE GIVEN FOR RS.7,20,000/- AS ALREADY RS.17,08,126/- HAS BEEN ADDED FROM SB 8260 WHICH INCLUDES SUM OF RS.7,20,000/- BEING CREDITS APPEARI NG IN THESE ACCOUNTS TELESCOPING BENEFIT HAS TO BE GIVEN NECESSARILY. OTHERWISE IT BECOMES TAXING THE SAME AMOUNT OF RS.7,20,000/- TWICE. BECAUSE ALL THE CASH DEPOSITS MADE IN SB A/C REPRESENT THE SUPPRESSED SA LE PROCEEDS ONLY (IT MAY BE NOTED THAT THE AGGREGATE TRANSFER OF CREDITS APPEARING IN SB A/C NO.8260 IS RS.45,40,321/- WHICH IS NOTHING BUT LORRY HIRE CHAR GES ONLY. A REFERENCE NEEDS TO BE MADE TO THE DECISION OF TH E MADRAS HIGH COURT IN THE CASE OF CIT, T.N VS K>S>M GURUSWAMY NADAR & SONS (MAD.) 149 ITR (1984) 127. THE HIGH COURT IN THIS CASE HAS REFERRED TO THE FOL LOWING CASES DECIDED BY VARIOUS COURTS. 1. CIT VS DEVI PRASAD VISHWANATH PRASAD (199) 72 ITR 1949SC) 2. CIT VS DURGA PRASAD MORE (1969) 72 ITR 807(SC) 3. CIT VS GANAPATHY MUDALIAR (M) (1964) 53 ITR 623 9SC) 4. CIT VS NELLIAPPAN (S) (1967) 66 ITR 7229SC) ALL THESE REFERRED CASES MAY NOT BE RESEMBLING TO THE FACTS OF THE ASSESSEE. BUT IN THESE CASES, IT HAS B EEN HELD THAT, WHEN 2 ADDITIONS ARE MADE I.E. SUPPRESSION OF SALES AND CASH CREDITS FOUND, THE SUPPRESSED BOOK PROFIT SHOULD BE TELESCOPED WITH THE ADDITIONS MADE TOWARD S CASH CREDITS. THE ASSESSEE HAS ALSO RELIED ON THE SAME DECISIONS. ITA NO.6(B)2016 6 IN VIEW OF THE ABOVE REASONING, IT IS HELD THAT, W HILE PEAK CREDIT WORKED OUT AT RS.7,20,000/- AS UNDISCLO SED CASH CREDITS IN THE BANK ACCOUNT, IT HAS TO BE BROU GHT TO TAX U/S 69 OF THE ACT, TELESCOPING BENEFIT HAS TO B E GIVEN TO THE SUM OF RS.17,08,126/- ALREADY BROUGHT TO TAX RIGHTLY. RELIEF GRANTED TO THE ASSESSEE IS RS.7,20, 000/-. THE ADDITION MADE OF RS.17,08,126/- IS SUSTAINED. FROM THE ABOVE PARAS RE-PRODUCED FROM THE ORDER OF THE LD. CIT(A), WE FIND THAT A CATEGORICAL FINDING HAS BEEN GIVEN B Y THE LD. CIT(A) THAT OUT OF THE TOTAL CREDITS OF RS.29.21 LAKHS IN THREE BANK ACCOUNTS, ONLY RS.1.50 LAKHS WAS IN A DIFFERENT BANK ACCOUNT I.E. SCC648 AND RS.5.96 LAKHS IN SCC708. THE WORKING OF PEAK CREDIT IS AVAI LABLE IN ANNEXURE-F TO THE ASSESSMENT ORDER AS PER WHICH, BEFORE THE DA TE OF PEAK CREDIT, ONLY IN ONE ACCOUNT, AN AMOUNT OF RS.1.50 LAKH IS DEPOSI TED IN BANK ACCOUNT NO.SCC 648. HENCE, IT IS SEEN THAT THE REMAINING AM OUNT OF PEAK CREDIT OF RS.5.70 LAKHS IS DEPOSITED IN BANK ACCOUNT NO.SB 8260 OF WHICH THE CLOSING BALANCE OF RS.17,08,126/- HAS BEEN SEPARATE LY ADDED BY THE AO AND THIS ADDITION HAS BEEN SUSTAINED BY THE LD.CIT( A). HENCE, THE PEAK CREDIT IN THIS BANK ACCOUNT NO.SB 8260 CANNOT BE AD DED AGAIN AFTER MAKING ADDITION OF CLOSING BALANCE OF THIS BANK ACC OUNT OF RS.17,08,126/-. 7. REGARDING THE CREDIT OF RS.1.50 LAKHS ON 07-05- 2008 IN BANK ACCOUNT NO.SCC 648, WE ARE OF THE CONSIDERED OPINIO N THAT WHEN THE GROSS PROFIT ON UNDISCLOSED SALES HAS BEEN SEPARATE LY TAXED, THE SAME SHOULD BE CONSIDERED FOR TELESCOPING AGAINST PEAK C REDIT OF RS.7.20 LAKHS ITA NO.6(B)2016 7 ON 27-09-2008 AS PER ANNEXURE-F TO THE ASSESSMENT O RDER. IN VIEW OF THIS FACT, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) TO GRANT TELESCOPING BENEFIT ON THIS AMOUNT OF RS.7.20 LAKHS AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ON THIS ASPECT ALSO. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (VIJAY PAL RAO) SD/- (A.K. GARODIA) JUDICAL MEMBER ACCOUN TANT MEMBER PLACE: BANGALORE: D A T E D : 28.12.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NO.6(B)2016 8 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .