Sh. Jitender Arora S/o Sh. Ram Nath Arora, Kurukshetra V. ITO, Kurukshetra

ITA 683/CHANDI/2017

AI Insights

The case involves Shri Jitetnder Arora, a fruit and vegetable commission agent, who appealed against the order of the Commissioner of Income Tax (Appeals), Karnal, which confirmed the addition of Rs.83,00,093 as negative cash in hand for the assessment year 2011-12. The Assessing Officer had initially treated unexplained deposits of Rs.1,74,29,970 in the assessee's bank account as unexplained income. The CIT(A) accepted the AO's addition of Rs.13,94,400 as net profit at 8% on the turnover but also confirmed the addition of Rs.83,00,093 as negative cash. The Tribunal, however, found that the addition of both the profit on turnover and the peak credit would lead to double taxation and thus restricted the addition only to the profit on turnover.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127857 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 18-07-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “A” CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.683/CHD/2017 नधा रण वष / Assessment Year : 2011-12 Shri Jitetnder Arora, S/o Shri Ram Nath Arora, Vaishno Fruit Company, New Sabji Mandi, Kurukshetra. बनाम The ITO, Ward-1, Kurukshetra. थायी लेखा सं./PAN NO: AENPA2744L अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri B.M.Monga & Shri Rohit Kaura, Advocates राज व क! ओर से/ Revenue by : Smt. Amanpreet Kaur,Sr.DR स ु नवाई क! तार&ख/Date of Hearing : 19.07.2023 उदघोषणा क! तार&ख/Date of Pronouncement : 07.08.2023 आदेश/ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 02.02.2017 of the Commissioner of Income Tax (Appeals), Karnal [in short ‘ the CIT(A)’] pertaining to 2011-12 assessment year. 2. The assessee in this appeal is aggrieved by the action of the CIT(A) in confirming the addition made by the Assessing ITA No.683/CHD/2017 A.Y. 2011-12 Page 2 of 5 Officer (in short ‘the AO’) of Rs.83,00,093/- on account of negative cash in hand. 3. The brief facts of the case are that the AO noted that there was unexplained deposit of Rs.1,74,29,970/- in the bank account of the assessee. Since the assessee had failed to satisfactorily explain the source of deposits in the bank accounts of the assessee, the AO treated the said amount of deposits of Rs.1,74,29,970/- as unexplained income of the assessee and added the same into the income of the assessee. 4. In appeal before the ld. CIT(A), the assessee submitted that the assessee was a fruit and vegetable Commission Agent and had shown a net profit of Rs.1,59,120/- under the head ‘business & profession’. It was also submitted that various cash deposits into the bank account of the assessee was out of the sale proceeds/business turnover of the assessee and that the entire cash deposits cannot be added, rather, only the profit element on the turnover should be added as income of the assessee. The assessee alternatively offered that only the peak of the deposits may be added as there were recurring deposits and withdrawals. The ld. CIT(A) called for remand report from the AO in this respect. The AO, however, came to the conclusion that the combined peek of negative cash in hand of the assessee was amounting to Rs.83,00,093/-, he, ITA No.683/CHD/2017 A.Y. 2011-12 Page 3 of 5 therefore, proposed that as per the peak credit theory, the amount should be taken as Rs.83,00,093/-. However, the assessee countered the said report by making the following submissions : " Kindly refer to the remand report dated 08.09.2016 of Ld. Assessing Officer, Ward-01, Kurukshetra wherein peak credit investment is calculated at Rs. 90,25,893/-. In this connection, I wish to submit as under :- It is pertinent to note the withdrawals made in cash or through Cheque/transfer from both the saving accounts are used to make the payments to suppliers from whom the purchases are made by the assessee on behalf of his principal. This fact can be verified from the Bank statement of both accounts where name of such fruit growers appears as recipient of payment. So, in no way the cash credit peak calculated by the Ld. AO is acceptable in the present case. Where the cash is deposited by the assessee from the sales proceeds and the withdrawals/transfer are used to make the payment of purchases, the peak credit theory is not applicable in such a case. The only possibility to calculate the untaxed income is to calculate Gross Profit on such sales by treating the whole deposit as unaccounted sales.” 5. The ld. CIT(A), though, accepting the above contention, computed the net profit @ 8% on the total turnover of Rs.1,74,29,970/- and made the addition of Rs.13,94,400/-, yet, he further made the addition of Rs.83,00,093/- on account of peak of the negative cash in hand. 6. Before us, ld. Counsel for the assessee has submitted that the cash flow statement was furnished before the ld. CIT(A). That there was no negative peak as alleged by the AO/CIT(A). That the erroneous peak of Rs.83,00,093/- has been calculated by the AO by taking only cash deposits and cash withdrawals in ITA No.683/CHD/2017 A.Y. 2011-12 Page 4 of 5 the bank account, totally ignoring the cash sales and payments made through cheque/transfer to make the payments to the suppliers from whom the purchases were made by the assessee. That if the cash sales and purchases were taken into consideration, there will be no negative peak as alleged by the AO. The ld. counsel has further submitted addition has already been made by taking the deposits out of turnover of the assessee and there upon the profits @ 8% has been assessed, making the addition of Rs.13,94,400/-. That the ld. CIT(A) was not justified in confirming the addition on both counts i.e. on account of negative peak as well as on account of net profit. 7. After considering the rival submissions, we are of the view that once the deposits of the assessee have been taken out of the sales/turnover of the assessee and the profit rate @ 8% has been assessed on the said turnover, there was no question of making further addition on account of peak credit theory as it would amount to double addition. Moreover, the assessee has explained that the AO has failed to take note of the cash sales as well as purchases made through banking channel. 8. Considering the above submissions, the addition is restricted only to the amount of Rs.13,94,400/- on account of profits on turnover @ 8%. The remaining addition of peak of negative cash is ordered to be deleted. ITA No.683/CHD/2017 A.Y. 2011-12 Page 5 of 5 9. In the result, appeal of the assessee is partly allowed. Order pronounced on 07 th Aug.,2023. Sd/- Sd/- ( VIKRAM SINGH YADAV) लेखा सद य/ Accountant Member ( SANJAY GARG) या यक सद य/ Judicial Member “Poonam.” आदेशक! त,ल-पअ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकरआय ु /त/ CIT 4. -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar