ITO, WARD- 41(2), NEW DELHI V. LALIT KUMAR SUHAG, NEW DELHI

ITA 6042/DEL/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2432 (ITAT-DELHI)
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 25-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Reason to believe
• Section: 68; 148; 143(2); 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 6042/Del/2017 : Asstt. Year. 2009-10 ITA No. 6043/Del/2017 : Asstt. Year. 2010-11 Income Tax Officer, Ward-41(2), New Delhi-110002 Vs Lalit Kumar Suhag, Plot No. 346, Jahaj Apartment, New Delhi-110087 (APPELLANT) (RESPONDENT) PAN No. BBRPS3985F ITA No. 4938/Del/2018 : Asstt. Year. 2009-10 ITA No. 5512/Del/2017 : Asstt. Year. 2009-10 ITA No. 4939/Del/2018 : Asstt. Year. 2010-11 ITA No. 5513/Del/2017 : Asstt. Year. 2010-11 Lalit Kumar Suhag, Plot No. 346, Jahaj Apartment, New Delhi-110087 Vs Income Tax Officer, Ward-41(2), New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. BBRPS3985F Assessee by : Ms. Rano Jain, Adv. Revenue by : Sh. Girish Kr. Kohali, Sr. DR Date of Hearing: 26.07.2022 Date of Pronouncement: 27.09.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-14, New Delhi dated 26.07.2017. 2. In ITA No.6042/Del/2017, following grounds have been raised by the Revenue: “i. On the facts and in t he circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs.1,93,37,640/- out of total addition of ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 2 Rs.2,01,45,000/- made by the AO u/s 68 of the Act on account unexplained cash deposits by treating the cash deposits from sales turnover and estimated the net profit @ 5% on turnover of Rs.2,43,90,200/-. ii. On the facts and the circumstances of the case, the ld. CIT(A) has erred in deleting the addition made by AO u/s 68 of the Act without appreciating the facts that the assessee could not establish the genuineness of business activities and he was not even registered with VAT department in respect of turnover claimed by the assessee of Rs.2,43,90,200/-, even no books of accounts were audited as required u/s 44AB of the Act.” 3. In ITA No.5512/Del/2017, following grounds have been raised by the assessee: “1. That the Ld. AO has erred in the eyes of law by making assessment u/s 147/143(3) of the Act without issuing notice u/s 143(2) of the Act before completion of assessment proceedings. 2. That the Id. CIT(A) has erred in the eyes of law and facts by not considering the submission of the appellant that notice u/s 143(2) of the Act was issued only after the completion of assessment proceedings. 3. That without prejudice to the above grounds, the issue of notice u/s 143(2) of the Act immediately on the date of filing return of income in response to notice u/s 148 of the Act, is invalid as same appears to be ritualistic and mechanical rather than meaningful. 4. That the approval for issue of notice u/s 148 of the Act was accorded by the superior authority in a mechanical manner without recording satisfaction as per law. 5. That the Id. AO has erred in eyes of law and facts of the case by issuing notice u/s 148 of the Act at wrong address and thus the notice was not issued within the time limit prescribed u/s 149 of the Act and also not served the notice as required u/s 148 of the Act.” ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 3 4. In ITA No.4938/Del/2018, following grounds have been raised by the assessee: “1. On the facts and circumstances of the case, the learned Commissioner of Income Tax [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty amounting to Rs. 1,21,951/- under section 271B of the Act. 3. On the facts and circumstances of the case, the CIT(A) has erred both in the eyes of law and on facts in confirming the penalty under section 271B on account of not getting the books of accounts audited despite the fact that no books of accounts were maintained. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty under section 271B of the Act irrespective of the fact that there was a reasonable cause for not getting the accounts audited. 5. Without prejudice to the above and in the alternative, Ld. CIT(A) has erred both in the eyes of law and on facts in confirming the penalty u/s 271B ignoring the fact that the no penalty under section 271B can be levied on an addition made under section 68 of the Act.” ITA No. 4938/Del/2018 A.Y. 2009-10 ITA No. 5512/Del/2017 A.Y. 2009-10 ITA No. 4939/Del/2018 A.Y.2010-11 ITA No. 5513/Del/2017 A.Y. 2010-11 5. During the relevant assessment year, the assessee was engaged in the business of importing of computer hardware, audio/video accessories and its parts for reselling it in Indian market to retailers/wholesalers and most of the sales were effected in cash. Appellant has not filed his filed income tax return for the A Y 2009-10. The assessee was not maintaining ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 4 proper books of accounts. The return of income tax was filed on 22.12.2016 in response to notice u/s 148 of the income tax act 1961, declaring total income of Rs.3,12,150/-. The due date of notice u/s 143(2) was 30.09.2017. 6. Heard the arguments of both the parties and perused the material available on record. 7. Arguments have been taken against the issue of notice u/s 148, service of notice and issue of notice u/s 143(2) along with merits of the case. On merits: 8. Detailed facts relevant to the adjudication of the case are that the assessee had huge cash deposits totaling Rs.2,01,45,000/- in his Bank Accounts out which Rs.1,34,60,000/- cash deposit was made in Bank Account No. 000001501968 with Barclays Bank, Barakhamba Road, New Delhi and Rs.66,85,000/- in the Royal Bank of Scotland, New Delhi. Analysis of the Bank Accounts revealed that the above cash deposits were followed by cross boarder remittance to a single entity based in Hong Kong. The bank account revealed frequent transactions there was a reason to believe that income taxable has escaped assessment and hence assessment proceedings u/s 148 have been initiated. The assessee submitted that he is an importer dealing in import & sale of mobile phones and other accessories. The Assessing Officer held that in the import and export business it is mandatory to use the Banking Channel. Various licenses are also compulsory, however, the assessee could not even provide a single document to verify the genuineness of the claim of the assessee that he is doing the business of import of computer ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 5 parts. The AO held that according to the Import and Export (Registration) Regulations, every person who imports or exports any goods or articles (except exempt goods/articles) must file an Import/Export Declaration with the Commissioner of Customs and Excise, within 14 days after the goods or articles have been imported or exported. The documents that are required for import/export clearance include: • Manifests • Bill of lading, airway bill or any other similar document, • Invoice or packing list, and • Other documents such as import/export license, removal permit etc. • Letters of credit which is the most widely used trade finance instrument and is an effective means for Banks to finance import/export. A letter of credit issued by the buyer's Bank guarantees payment to the exporter. 9. Holding thus, the Assessing Officer brought the entire amount of cash deposit in the Barclays Bank and Royal Bank of Scotland to tax u/s 68 of the Income Tax Act, 1961. 10. Aggrieved, the assessee filed appeal before the ld. CIT(A) who after obtaining the remand report from the Assessing Officer has determined the profit @5% on the entire deposits. 11. Aggrieved, the revenue filed appeal before us. 12. We have gone through the entire facts examined the ledger account of Barclays Bank and RBS Bank. We have gone through the bank statements of both the banks with regard to the cash deposits and remittances. We have gone through the import invoices of Hong Kong based company in the airway bills ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 6 pertaining to report of computer hardware, mobiles, audio- video parts. We find that the remittances from the bank account are towards import advance bill and various transfer entries through RTGS. We find that the entire credit side of the bank account have been added without considering the debit side whereas the debits clearly shows the amounts paid to the Hong Kong based company which when compared with the invoices and airway bills prove that the amounts have utilized for import of goods which in turn have been sold in cash. 13. In this background, we have also examined the ratio of the ld. CIT(A) on this issue. “I have considered the findings & Remand Report of the AO, the submissions & comments on the Remand Report given by the Ld. AR of the appellant as well as the judicial pronouncements of the higher appellate authorities and the Hon’ble Courts and while going through the detailed reply filed by the Ld. AR it is seen that during assessment proceedings the appellant has submitted various document such as copy of purchase invoices, bill of entry etc. in support of purchases made from overseas and while going through the documents the assessee has already established that he was engaged in the business of import of goods and the same were sold in cash further more it is well established law where the assessee could not furnish the evidence regarding source of cash deposits in the bank account and where there are regular deposits and withdrawal and the assessing officer has not been able to find out any undisclosed investment of the assessee, then in such circumstances it is justifiable to accept the contention of the assessee being carrying out any business activity and the assessing officer ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 7 should accordingly proceed to estimate the income of the appellant. Keeping into consideration the entirety of the facts and circumstances of the appellant’s case and respectfully following the judicial pronouncements supra relied on by the Ld. AR on the same issue I am of the opinion that the AO is not justified in making the addition u/s 68 of the Act amounting to Rs.2,01,45,000/- on account of treating the entire cash deposit in the bank account of the assessee. On perusal of records and written submissions it is noticed that the assessee has filed his return of income for the year under consideration in response to the notice u/s 148 of the Act and has shown net profit at Rs.4,12,150/- on the total sales made by the assessee amounting to Rs.2,43,90,200/- which in terms of percentage comes at about 1.69%. In view of the various pronouncement the Hon’ble High Courts and the Hon’ble ITATs in cases where books of accounts are not properly maintained the profit of the assessee should be estimated reasonably in view of the provisions of the Act, we are of the opinion that since the appellant is not maintaining proper books of account therefore for the sake of substantive justice it will be reasonable and justified if the net profit @ of 5% on the total sales made by the assessee amounting to Rs.2,43,90,200/- is taken as profit/income of the appellant which comes at Rs. 12,19,510/- . Accordingly the addition of Rs. 8,07,360/- [12,19,510/- - Rs.4,12,150/- (already declared by the assessee)] is confirmed and the balance addition of Rs.1,93,37,640/- (2,01,45,000 – 8,07,360) is deleted. Hence, the ground No. 5 is partly allowed.” ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 8 14. Since, the ld. CIT(A) has diligently examined the issue in holistic perspective, taking into consideration, the cash deposits, the credits & debits in the bank account, the business of the assessee, the invoices which proves that the assessee is in the business import & selling the goods such as mobile and other accessories in cash, we hold that it would be only justifiable to tax the profit earned out of the entire business transactions. Hence, we decline to interfere with the order of the ld. CIT(A). 15. The appeal of the Revenue for the A.Y. 2009-10 and A.Y. 2010-11 dealing with the similar issue are hereby dismissed. The appeals of the assessee on the grounds of issue of notice u/s 143(2) would be infructuous as the appeals of the revenue have been dismissed on merits of the case. Any adjudication would only be academic in nature and hence not resorted to. ITA No. 4938/Del/2018 A.Y. 2009-10 ITA No. 4939/Del/2018 A.Y. 2010-11 16. Subsequent to the assessment proceeding concluded u/s 143(3), having brought on record that the assessee had a business turnover of Rs.2,43,90,200/- and since defaulted in getting the books of accounts audited in accordance with the provisions of Section 44AB, penalty proceedings u/s 271B have been initiated by the Assessing Officer. Accordingly, show cause notice has been issued on 29.12.2016 and penalty has been levied @ ½% of the total turnover. 17. Aggrieved, the ld. CIT(A) confirmed the order of the Assessing Officer. ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 9 18. Before us, the ld. AR filed the submissions which were hitherto before the ld. CIT(A) and argued that there was a reasonable cause for that said failure of not getting the books of accounts audited. It was further argued that the assessee was ill during the period and hence the books of accounts could not get audited. 19. Relying on the provisions of Section 271B, it was argued that no penalty shall be imposable on the person or the appellant, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. 20. In this background, we have also examined the ratio of the ld. CIT(A) on this issue. “I am of the view that the appellant cannot take shelter under the argument that since books of accounts were not maintained, there is no question of audit of non-existent books of accounts. One default cannot serve as a justification for committing another default. It is noticed that the assessee has himself submitted that he is engaged in the business of import. It has maintained bank accounts, cash deposits in which have been explained to represent the sale proceeds of computer/ mobile items and has remitted money abroad on account of import. Copies of certain import invoices were also produced during the assessment proceedings. From the materials on record, it appears to me that the assessee was very much in a position to maintain books of account for his business activities and get it audited to arrive at true and correct taxable income in which he has failed. It was mandatory on the part of the appellant to get his accounts audited under the Act as there is no denying of the fact that the turnover of the appellant during the year under consideration was Rs 2,43,90,200/- as admitted by the appellant. ITA Nos. 5512, 5513, 6042 & 6043/Del/2017 4938 & 4939/Del/2018 Lalit Kumar Suhag 10 4.1 As regards appellant’s submissions that there exists a reasonable cause for not maintaining proper books of accounts and not getting them audited, neither before the AO nor during the present appellate proceeding, the appellant has furnished any cogent explanation for not getting his accounts audited under the provisions 44AB of the Act Appellant’s submission that the business of the appellant was being handled by his employees due to severe health issues only suggests that severity of claimed health issue did not hamper the conduct of business as it was being carried out in a continuous and systematic manner. Clearly, the existence of reasonable cause for failure to comply with the requirements of getting the books of accounts audited has not been proven by the appellant. Rather, the facts and circumstances of the case reveal that this is a case of conscious disregard by the appellant of his legal obligation of getting the books of account audited.” 21. We have gone through the ratio given by the ld. CIT(A). While the entire affairs of the assessee have been taken care, the defense of the assessee for not getting the books audited on account of ill health cannot constitute a reasonable cause and hold no water. Hence, we decline to interfere with the reasoned order of the ld. CIT(A). 22. In the result, both the appeals of the assessee on account of Section 271B are dismissed. Order Pronounced in the Open Court on 27/09/2022. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 27/09/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR