Latha Devi, Mandya V. ITO, Mandya

ITA 638/BANG/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8663 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATAP SINGH
• Assessee Lawyers: H N KHINCHA
• Keywords: Unexplained cash credit; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.638/BANG/2010 ASSESSMENT YEAR : 2006-07 LATHA DEVI, PROPX. M/S. BABULAL ROOPAJI & CO., MANDYA, C/O. M/S. H.C. KHINCHA & CO., CHARTERED ACCOUNTANTS, NO.40, 1 ST FLOOR, LAKSHMI COMPLEX, FORT, K.R. ROAD, BANGALORE 560 002. : APPELLANT VS. THE INCOME TAX OFFICER, WARD-1, MANDYA. : RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA, C.A. RESPONDENT BY : SHRI PRATAP SINGH, ADDL. CIT(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(APPEALS), MYSORE IN ITA NO.176/CIT(APPE ALS)/MYS/08-09 DATED 28.1.2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THOUGH FOUR GROUNDS ARE RAISED IN THIS APPEAL BY THE ASSESSEE, THE ONLY ISSUE ARISING IN THIS APPEAL IS THE ADDITION O F RS.2,76,217 SUSTAINED BY ITA NO.638/BANG/10 PAGE 2 OF 4 THE LD. CIT(APPEALS) AS AGAINST RS.3,76,217 ADDED B Y THE ASSESSING OFFICER ON PEAK METHOD. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON WHOLESALE BUSINESS IN TEXTIL ES AS A DEALER AT MANDYA. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE F ILED HER RETURN OF INCOME DECLARING TAXABLE INCOME AT RS.1,95,424, WHI CH WAS INCLUSIVE OF RS.ONE LAKH OFFERED AS ADDITIONAL INCOME PURSUANT T O A SURVEY U/S. 133A. DURING THE COURSE OF SURVEY CONDUCTED ON ASSESSEES PREMISES ON 29.6.2006, IT WAS FOUND THAT THE ASSESSEE HAD DEFIC IT STOCK OF RS.4,32,354. THE ASSESSEE ADMITTED THE DEFICIT DUE TO NON-ACCOUN TING OF CERTAIN GOODS RETURNED TO SUPPLIER OR DUE TO UNDERVALUATION OF ST OCK AND AS A RESULT OFFERED AN ADDITIONAL INCOME OF RS. ONE LAKH. IT W AS FURTHER NOTICED BY THE LD. AO THAT THE CASH BOOK OF THE ASSESSEE WAS SHOWI NG DEFICIT BALANCE AND FURTHER FEW CASH DEPOSITS IN THE BANK ON VARIOUS DA TES WERE NOT REFLECTED IN THE CASH BOOK OR SHOWN A LESSER AMOUNT. THEREFORE THE ASSESSING OFFICER REJECTED THE ASSESSEES OFFER, TO COMPOUND THE MIST AKES OF THE ASSESSEE BY MAKING AN ADDITION OF RS.1,00,000 FOR THE A.Y. 2 006-07 AND. RS.2,00,000 FOR THE A.Y. 2007-08. INSTEAD HE MADE AN ADDITION OF RS.3,76,217 BEING THE MAXMIUM DEFICIT IN THE CASH B OOK AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT BY ADOPTING THE PEAK CREDIT METHOD. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY. IT WAS CONTENDED BEFORE THE L D. CIT(APPEALS) THAT THE ASSESSEE HERSELF HAVING OFFERED THE ADDITIONAL INCO ME OF RS.ONE LAKH OVER AND ABOVE THE REGULAR INCOME, THE PEAK DEFICIT GETS NARROWED DOWN TO RS.2,76,217. IT WAS FURTHER SUBMITTED THAT THE ST OCK DEFICIT AS ON THE DATE ITA NO.638/BANG/10 PAGE 3 OF 4 OF SURVEY WAS ONLY RS.3.07 LAKHS AFTER CONSIDERING THE STOCK WORTH OF RS.1.25 LAKHS TOWARDS SOILED AND DAMAGED STOCKS. A FTER CONSIDERING THE NORMAL GROSS PROFIT, THE UNDISCLOSED SALE WORKS OUT TO RS.3.29 LAKHS (F.Y. 2005=06: RS.2.79 LAKHS + RS.0.50 LAKHS IN F.Y. 2006 -07). THEREFORE AFTER CONSIDERING THESE SOURCES OF RS.3.79 LAKHS (I.E. RS . 1 LAKH + RS.2.79 LAKH), THE DEFICIT OF RS.3.76 LAKHS WILL GET ABSORBED. TH E ASSESSEE ALSO CONFIRMED THAT SINCE THE BOOKS WERE ALMOST CLOSED AS ON THE D ATE OF SURVEY, THE ABOVE TRANSACTIONS COULD NOT BE INCORPORATED IN THE BOOKS OF F.Y. 2005-06, BUT THE SAME WAS INCORPORATED IN THE BOOKS OF F.Y. 2006-07. 5. THE LD. CIT(APPEALS) ACCEPTED THE ASSESSEES SUB MISSION WITH REGARD TO ADDITIONAL INCOME OFFERED AND HELD THAT T HE ADDITIONAL INCOME OFFERED AT RS.ONE LAKH WOULD RESULT IN CASH GENERAT ION TO THE TO THAT EXTENT WHICH DID NOT FORM PART OF THE BOOKS OF ACCOUNT AND GRANTED RELIEF TO THE TUNE OF RS.ONE LAKH. HOWEVER, THE LD. CIT(APPEALS) REJECTED THE ASSESSEES EXPLANATION THAT THAT THE UNACCOUNTED AD DITIONAL SALES OF RS.2.79 LAKHS WOULD EXPLAIN THE CASH DEFICIT OBSERV ED BY THE AO SINCE THIS INCOME HAS BEEN ACCOUNTED ONLY DURING THE F.Y. 2006 -07 AND NOT OFFERED FOR TAX IN THE RELEVANT F.Y. 2005-06. HE HELD THAT EACH ASSESSMENT YEAR IS INDEPENDENT OF EACH OTHER AND INCOME MUST BE OFFERE D IN THE YEAR IN WHICH IT WAS EARNED. THEREFORE, THE LD. CIT(APPEALS) SUS TAINED THE ADDITION UNDER PEAK CREDIT TO THE TUNE OF RS.2,76,217. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS APPARENT FROM THE FINDINGS OF LD. A O AND LD. CIT(APPEALS), THAT THE ASSESSEE IS NOT IN A HABIT OF MAINTAINING PROPE R BOOKS OF ACCOUNTS. THERE ARE ALSO SALES OUTSIDE THE BOOKS OF ACCOUNTS, DEFICIT STOCK AND ITA NO.638/BANG/10 PAGE 4 OF 4 UNACCOUNTED CASH DEPOSITS. MORE OVER, ON PERUSING THE ORDERS OF THE LD. CIT(APPEALS) AND LD. AO, WE ARE OF THE OPINION THAT THE REVENUE HAD DELIBERATED UPON THE ISSUE ELABORATELY AND FURTHER LD. CIT(APPEALS) HAD JUDICIOUSLY GRANTED RELIEF TO THE ASSESSEE FOR RS.1 ,00,000 BASED UPON THE ASSESSEES VOLUNTARY DISCLOSURE. THEREFORE, WE AR E LEFT WITH NO OTHER OPTION, BUT TO CONFIRM THE ORDER OF THE LD. CIT(APP EALS). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH NOVEMBER, 2010. DS/- COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE