Kiran Vallabhbhai Ahir, Surat V. Income Tax Officer, Ward - 3(3)(3), Surat

ITA 65/SRT/2017

• Counselvise Citation: [2020] 129 COUNSELVISE.COM (IT) 9877 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 23-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANUPAMA SINGLA
• Assessee Lawyers: RAMESH MALAPANI
• Keywords: Unexplained cash credit; Unexplained investment; Peak credit; Additional evidence
• Section: 44AD

Judgement Text

KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL-SURAT-BENCH-SU RAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUTANT MEMBER . . /. I.T.A NO.65/SRT/2017 / ASSESSMENT YEAR:2013-14 SMT. KIRAN VALLABHAI AHIR, 299,KAMAL PARK SOCIETY, MATAVADI, L.H. ROAD VARACHHA SURAT 395006 PAN: AJKPA 9068 P V. INCOME TAX OFFICER, WARD- 3(3)(3)SURAT APPELLANT / RESPONDENT /ASSESSEE BY SHRI RAMESH MALAPANI, CA /REVENUE BY MRS. ANUPAMA SINGLA, SR.D.R. / DATE OF HEARING: 10.02.2020 /PRONOUNCEMENT ON 10 .02.2020 /O R D E R PER O. P. MEENA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, SURAT(IN SH ORT THE CIT (A)) DATED 06.06.2017 PERTAINING TO ASSESSMENT YEAR 2013 -14, WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT ORDER PASSED UNDER SECTI ON 143 (3) DATED 17.02.2016 OF INCOME TAX ACT, 1961 (IN SHORT THE A CT) BY THE INCOME TAX OFFICER, WARD- 3(3)(3)SURAT(IN SHORT THE AO). 2. GROUND NO.1 TO 3 STATES THAT LD. CIT (A) HAS ERRED IN SUSTAINING ADDITION OF RS. 53,32,345 MADE BY THE AO TREATING T HE ENTIRE CASH DEPOSITS IN BANK ACCOUNT AS UNEXPLAINED CASH DEPOSI TS, WHEREAS ENTIRE CASH DEPOSITS ARE SALE PROCEEDS OF THE ASSESSEE ON WHICH PROFIT CAN BE KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 2 OF 6 ESTIMATED AND WITHOUT PREJUDICE EVEN IF CASH DEPOSI TS IS NOT ACCEPTED AS BUSINESS TRANSACTIONS, THEN ALSO CIT (A) ERRED I N SUSTAINING ENTIRE CASH DEPOSITS IN BANK ACCOUNT AS INCOME OF THE APPE LLANT WHEREAS ONLY PEAK CREDIT BALANCE OF THE BANK ACCOUNT SHOULD BE T REATED AS NET UNEXPLAINED CASH CREDIT. 3. SUCCINCT FACTS ARE THAT AIR INFORMATION REVEALED TH AT THE ASSESSEE HAD A BANK ACCOUNT IN HDFC VARACHHA BRANCH SURAT WH EREIN CASH DEPOSITS OF RS. 53,27,345 WERE REFLECTED BESIDE CASH DEPOSIT S OF RS.5,000 IN BANK ACCOUNT WITH OBC ICHHAPOR, SURAT. THESE BANK ACCOUN TS HAVE NOT BEEN DISCLOSED IN RETURN OF INCOME OF THE ASSESSEE. THER EFORE, A SHOW-CAUSE NOTICE WAS ISSUED ON 21.01.2016 TO EXPLAIN THE SOUR CE OF BANK DEPOSITS BY 27.01.2016. BUT, NO EXPLANATION WAS FILED, THEREFOR E, THE AO TREATED THE ENTIRE BANK DEPOSITS AS UNEXPLAINED CASH DEPOSITS A ND ADDED TO TOTAL INCOME. 4. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). WHEREIN THE ASSESSEE SUBMITTED THAT THE DEPOSI TS IN BANK ACCOUNT COMPRISES MAINLY FOR CASH DEPOSITS AND THE SAME DEP OSIT REPRESENTS SALE PROCEEDS OF ITEMS SOLD BY THE ASSESSEE AND CASH WIT HDRAWN FROM BANK. IT WAS FURTHER SUBMITTED THAT AN AMOUNT OF RS.7,46,000 WAS WITHDRAWN IN CASH AND ALSO CHEQUE AMOUNTING TO RS.1,21,500 HAVE BEEN RETURNED. THEREFORE, THESE SHOULD NOT BE CONSIDERED WHILE CAL CULATING THE TOTAL DEPOSITS IN THE BANK ACCOUNT. HERE IT IS TO BE NOTE D THAT CASH WITHDRAWN FROM THIS BANK ACCOUNT HAVE BEEN USED TO BE REDEPOS ITED AGAIN IN THE SAME KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 3 OF 6 BANK AND ACCORDINGLY CASH WITH THE FROM THIS BANK A CCOUNT SHOULD ALSO REDUCED FROM THE TOTAL ADDITIONS MADE. THEREFORE, E FFECTIVELY TOTAL DEPOSITS MADE IN HDFC BANK ACCOUNT WOULD WORK OUT T O BE RS.45, 58,845. IT WAS FURTHER SUBMITTED THAT ESTIMATION OF PROFIT RATE IS THE ONLY LOGICAL OPTION UNDER THE FACTS OF THE CASE, SINCE, THE ASSE SSEE HAS NOT MADE ANY UNEXPLAINED INVESTMENT TO THE EXTENT OF ADDITION OF RS.53,32,345 MADE BY THE AO OUT OF ABOVE BANK ACCOUNTS. THE TRANSACTION IN SAID BANK ACCOUNT PERTAINS TO TRADING ACTIVITY ONLY, AND IN ORDER TO OVERCOME ANY CONTROVERSY AND PUT AN END TO THE LITIGATION, THE DEPOSITS IN B ANK ACCOUNT EXCLUDING THE CASH WITHDRAWN FROM THIS BANK ACCOUNT AND CHEQU E RETURNED WHICH AMOUNTS TO RS 45,58,845 MAY BE TREATED AS TURNOVER AND PROFIT AT THE RATE OF 8%, BE ESTIMATED AS PROVIDED UNDER SECTION 44AD OF THE ACT. THE ASSESSEE HAS READY TO PAY TAX ON THE NET PROFIT, WH ICH IS WORKED OUT TO RS. 3,64,707. WITHOUT PREJUDICE, IT WAS FURTHER SUBMITT ED, THAT IF THE ABOVE PLEA OF THE ASSESSEE IS NOT ACCEPTED, THE ADDITION IF ANY, CAN BE MADE ONLY IN RESPECT OF PEAK CREDIT SINCE CASH DEPOSITS IN BA NK ACCOUNT HAS BEEN UTILISED IN THE MANNER AS EXPLAINED ABOVE, AND IF T HE SAME IS NOT RECORDED AS EXPENDITURE OF ASSESSEE IN THAT CASE, THE OBVIOU S CONCLUSION IS THAT THE ASSESSEE HAS NOT PARTED WITH THE CASH AND THE SAME IS AVAILABLE WITH HIM FOR REDEPOSIT IN THE BANK ACCOUNT. THEREFORE, IT IS THE PEAK CREDIT OF THE BANK ACCOUNT WHICH COMES TO RS.6,60, 603 AS ON 21. 01. 2013. HENCE, ONLY PEAK CREDIT BALANCE CAN BE ADDED FOR WHICH RELIANCE WAS PLACED ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF VISHAL CH UG I.T.A.NO. KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 4 OF 6 866/AHD/2013. HOWEVER, CIT (A) DID NOT ACCEPT THE P LEAS OF THE ASSESSEE ON THE GROUND THAT NO VAT NO., BUSINESS ADDRESS WAS SUBMITTED AND NO EVIDENCE TO SHOW WHETHER BUSINESS HAS BEEN ACTUALLY DONE WAS FILED. THEREFORE, THE ADDITION MADE BY THE AO WAS CONFIRME D. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT MOST OF CASH DEPOSITS HAVE BEEN MADE FROM PLACES OUT OF SURAT. IF THE BAN K ACCOUNT IS PROPERLY ANALYZED, IT IS EVIDENT THAT CASH HAS BEEN DEPOSITE D AT SAHARANPUR (UP), DALHOUSIE , CHANDANI CHOWK DELHI , REWARI , MUZZAFA R NAGAR, PHILKUWA , JABALPUR , GWALIOR ETC. THIS FACTS PROVED THAT CASH DEPOSITS ARE OUT OF SALE PROCEEDS OF TEXTILE TRADING. FURTHER, THE PAYMENT H AVE BEEN MADE TO VARIOUS TEXTILE FIRMS SUCH AS RAJLAXMI FABRICS, RAJ LAXMI FAB, CHIRAG SYNTHETICS, SHYAM TEXTILE. SIMILARLY, THERE ARE DEB ITS IN BANK ACCOUNT, WHICH ARE IN RESPECT OF TEXTILE TRADING OF BUSINESS . THUS, ONLY ESTIMATED PROFIT FOR SUCH TURNOVER COULD BE ADDED. THE LEARNE D COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF CIT-VII V. PRADEEP SHANTILAL PATEL [ 2014] 42 TAXMANN.COM WHEREIN IT WAS HELD THAT IN SUCH CASE AT THE MOST ESTIMATED PROFIT OF SUCH TURNOVER CAN BE ADDED. THEREFORE, ADDITION OF THE E NTIRE TURNOVER AMOUNT IS CLEARLY UNJUSTIFIED. LEARNED COUNSEL SUBMITTED T HAT THOUGH THE DEPARTMENT IS ACCEPTING NET PROFIT OF 2% TO 5% IN THIS LINE OF BUSINESS , BUT SINCE THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS HENCE, AT THE MOST NET PROFIT @8% AS PER SECTION 44AD CAN BE SUS TAINED AND NOT THE KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 5 OF 6 WHOLE ADDITION MADE BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED ADDITIONAL EVIDENCE IN RESPECT OF BUSINESS TR ANSACTION IN THE FORM OF CONFIRMATION AND OR PURCHASE BILLS OF TWO SUPPLIERS . 6. PER CONTRA , THE LD. SR. D.R. SUBMITTED THAT NO PROPER APPLICA TION HAS BEEN MADE FOR ADDITIONAL EVIDENCE HENCE, SAME IS NO T ADMISSIBLE. FURTHERMORE, THE ASSESSEE HAS NOT FILED ANY SUBMISS ION DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HENCE, CIT (A) HAS RIGHT LY UPHELD THE ORDER OF THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF ASSESSMENT ORDER REVEALS THAT THE ASSESSEE HAS NOT FILED ANY DETAILS BEFORE THE AO. H OWEVER, BEFORE CIT (A) THE CLAIM WAS MADE THAT THE CASH DEPOSITS IN BANK A CCOUNT PERTAINED TO TEXTILE BUSINESS CARRIED OUT BY THE ASSESSEE, THOUG H NO BOOKS OF ACCOUNTS WERE MAINTAINED NOR THE BANK ACCOUNT WERE DISCLOSED IN RETURN OF INCOME. HOWEVER, IT IS DISCERNIBLE FROM BANK ACCOUNT THAT C ASH DEPOSITS WERE MADE FOR VARIOUS OUT STATIONS LIKE DELHI AND UP. THE BAN K ACCOUNT ALSO REFLECTS PAYMENTS MADE TO TEXTILE CONCERNS. THEREFORE, IT IS CLEARLY APPARENT THAT CASH DEPOSITS ARE LINKED WITH BUSINESS TRANSACTION OF THE ASSESSEE. SINCE THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUN TS, HENCE, IN SUCH SITUATION ONLY NET PROFIT AS PER PROVISIONS OF SEC TION 44AD OF THE ACT IS REQUIRED TO BE ESTIMATED AS NET PROFIT AND NOT ENT IRE TURNOVER OR CASH DEPOSITS REFLECTED IN THE BANK ACCOUNT. THEREFORE, FOLLOWING THE RATIO LAID DOWN IN THE CASE OF CIT V. PRADEEP SHANTILAL PATEL [2014] 42 TAXMANN.COM KIRAN VALLABHAI AHIR V. ITO-WD-3(3)(3) SURAT/I.T.A. NO. 65/SRT/2017/A.Y. 13-14 PAGE 6 OF 6 2 (GUJARAT) WHEREIN IT WAS HELD THAT WHERE ASSESSEE ADMITTED THAT CASH DEPOSITS PERTAINED TO HIS RETAIL BUSINESS BUT DETAI LS AND NATURE OF BUSINESS WERE NOT FORTHCOMING FROM RECORD, CONSIDERING TOTAL TURNOVER OF ASSESSEE, NET INCOME TO BE DETERMINED UNDER SECTION 44AD OF T HE ACT, THE AO IS DIRECTED TO ESTIMATE NET PROFIT @ 8% OF TOTAL TURN OVER OF RS. 53,32,345 BEING CASH DEPOSITS IN BANK ACCOUNT. ACCORDINGLY, G ROUND NO. 1 TO 3 OF APPEAL ARE PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.2020. SD/- SD/- (SANDEEP GOSAIN) (O.P.MEENA) JUDICIAL MEMBER ACCOUN TANT MEMBER SURAT: DATED: 10 TH FEBRUARY, 2020/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/ GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, SURAT