ITO, Ambala V. Sh. Parmod Mittal, Ambala Cantt.

ITA 704/CHANDI/2013

• Counselvise Citation: 70421514 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJINDER KAUR
• Assessee Lawyers: RAVI SHANKAR
• Keywords: Business income; Peak credit
• Section: 2; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.704/CHD/2013 (ASSESSMENT YEAR : 2009-10) THE INCOME TAX OFFICER, VS. SH. PARMOD MITTAL, WARD 4, PROP.M/S MAHALUXMI TRADERS, AMBALA. KABIR NAGAR, AMBALA CANTT. PAN: AWMPM6493P (APPELLANT) (RESPONDENT) APPELLANT BY : MS.RAJINDER KAUR DR RESPONDENT BY : SHRI RAVI SHANKAR DATE OF HEARING : 28.09.2015 DATE OF PRONOUNCEMENT : 05.10.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DATED 28.3.2013 FOR ASSESSMENT YEAR 2009-10. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE FILED RETURN OF INCOME AS ON 30.7.2009 DECLARING AN INCOME OF RS.1,32,500/- AS PER SECTION 44AF OF THE ACT @ 7.5% OF HIS TOTAL SALES SHOWN AT RS.17,53,541/-, SHOWING HIS ON LY SOURCE OF INCOME AS THE RETAIL TRADE OF CEMENT AND SCRAP. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, INFORMATION UNDER SECTION 2 133(6) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) WAS CALLED BY THE ASSESSING OFFICER FROM ASSESSEES BAN K. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE A NUMBER OF CASH DEPOSITS DURING THE RELEVANT YEAR AMOUNTING TO RS.33,38,700/-. THE ASSESSING OFFICER FURTHER NOTED THAT THE TOTAL DEPOSITS IN THIS ACCOUNT WAS FAR MORE THA N THE AMOUNT OF TOTAL SALES AMOUNTING TO RS.17,53,541/- S HOWN IN THE RETURN OF INCOME. THEREFORE, THE EXCESS OF CAS H DEPOSITS OVER THE SALES I.E. RS.15,85,159/- (RS.33,38,700/- - RS.17,53,541/-) WAS ADDED BY THE ASSESSING OFFICE R IN THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE ASSESSEE INVARIABL Y RECEIVED ADVANCES IN CASH WHICH WERE ADJUSTED AGAINST SUPPLY OF GOODS IN DUE COURSE. IN THE MEANTIME BETWEEN THE RECEIPT OF ADVANCES AND ITS USE THEREOF FOR THE PURCHASE OF GO ODS, THE ASSESSEE USED TO DEPOSIT THE SAME IN HIS BANK ACCOU NT TO BE WITHDRAWN AT A FUTURE DATE DEPENDING ON THE CIRCUMS TANCES. THIS WAS A CONTINUOUS PROCESS FOLLOWED BY THE ASSES SEE. THEREFORE, THE AMOUNT DEPOSITED IN ALL CASES DID NO T REPRESENT SALE PROCEEDS BUT WAS, IN FACT, SURPLUS CASH AVAILA BLE WITH THE ASSESSEE WHICH WAS DEPOSITED IN THE BANK ACCOUNT. AS SUCH, IT WAS STATED THAT THE ENTIRE AMOUNT DEPOSITED DOES NOT REPRESENT CASH SALES AND THE ENTIRE SALE PROCEEDS W ERE DULY DISCLOSED IN THE RETURN OF INCOME. IN THE ALTERNA TIVE, IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAD BEEN CONTINUO USLY DEPOSITING CASH AND WITHDRAWING THE SAME FROM HIS B ANK 3 ACCOUNT, EVEN IF THE DIFFERENCE BETWEEN THE CASH DE POSITED AND THE SALES DISCLOSED IS TO BE TREATED AS UNDISCLOSED SALES, THE ADDITION CAN ONLY BE MADE EITHER OF THE GROSS PROFI T ATTRIBUTABLE TO THE ALLEGED UNDISCLOSED SALES OR TO THE PEAK CREDIT ARRIVED AT AFTER CONSIDERING THE DEPOSITS AN D WITHDRAWALS FOR THE ENTIRE YEAR. AS SUCH, PRAYER O F THE ASSESSEE WAS THAT THE ADDITION, IF AT ALL, CAN ONLY BE LIMITED TO THE GROSS PROFIT ATTRIBUTABLE TO THE ALLEGED UNDISC LOSED SALES. 4. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONCLUDED THAT IT IS A FACT THAT THE ASSESSEE HAD MADE MORE CASH DEPOSITS THAN THE T OTAL SALES SHOWN IN THE RETURN. THE ASSESSEE MAKES BOTH PUR CHASES AND SALES IN CASH. SINCE THE CASH DEPOSITS HAVE BE EN CLAIMED TO BE MADE OUT OF PREVIOUS WITHDRAWALS BY THE ASSES SEE, THE LEARNED CIT (APPEALS) DID NOT AGREE WITH THE SUBMIS SIONS OF THE ASSESSEE. ON ALTERNATIVE SUBMISSION OF THE AS SESSEE, SHE HELD THAT ALL THE CASH DEPOSITS AND SALES CAN B E TAXED ONLY TO THE EXTENT OF GROSS PROFIT ON THE CASH DEPO SITS. IN THIS WAY, SHE DIRECTED THE ASSESSING OFFICER TO INCLUDE ALL CASH DEPOSITS IN THE SALE OF THE ASSESSEE AND TO APPLY G P RATE DECLARED IN THE RETURN OF INCOME. 5. AGGRIEVED BY THE SAID FINDING OF THE LEARNED CI T (APPEALS), THE DEPARTMENT HAS COME UP IN APPEAL BEF ORE US, RAISING FOLLOWING GROUNDS OF APPEAL : 1. THE ID CIT (APPEALS) HAS ERRED IN FACTS IN DIRECTING T O TREAT THE UNEXPLAINED CASH DEPOSITS TO BE THE SALES, WHEN THE AGGREGATE OF CASH DEPOSITS IS MUCH MORE THAN THE SA LES SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME AS WE LL AS IN 4 THE RETURN OF SALES-TAX PLACED ON RECORD BY THE ASSE SSEE, AND THE ADDITION HAD BEEN MADE IN RESPECT OF THE EXCESS AMOUN TS ONLY; 2. THE ID CIT (APPEALS) HAS ERRED IN LAW IN ACCEPTIN G ONE PLEA OUT OF THE ASSESSEE' S TWO CONTRADICTORY PLEAS, WITHOU T ASSIGNING ANY BASIS FOR DOING SO; 3. THE APPELLANT CRAVES FOR LEAVE TO ADD, DELETE OR AM END ANY GROUNDS OF APPEAL DURING PENDENCY OF APPEAL. 6. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REQUESTED THAT SINCE HUGE CAS H DEPOSITS WERE MADE BY THE ASSESSEE IN HIS BANK ACCOUNT, WHIC H HE COULD NOT EXPLAIN TO THE SATISFACTION OF ANY OF THE LOWER AUTHORITIES, THE ADDITION OF DIFFERENCE BETWEEN THE SAID CASH DEPOSITS AND THE CASH SALES SHOWN BY THE ASSESSEE I N HIS RETURN OF INCOME HAS RIGHTLY BEEN MADE BY THE ASSES SING OFFICER. 7. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE LEARNED CIT (APPEALS) AND AGREED THAT THE ASSESSEE IS NOT IN APPEAL, HENCE THE FINDING OF THE LEARNED CIT (APPEALS) SUSTAINING THE ADDITION TO THE EXTENT OF GROSS PROFIT RATE ON CASH DEPOSITS IS QUITE REASONABLE. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE FI ND OURSELVES IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LEARNED CIT (APPEALS). IT IS A FACT THAT THE ASSES SEE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT AND HAS DISCLOSED INC OME @ 7.5% OF THE TOTAL SALES AS PER THE PROVISIONS OF SE CTION 44AF OF 5 THE ACT. STILL, HE HAS DEPOSITED CASH IN HIS BANK ACCOUNT WHICH IS FAR MORE THAN WHAT HE HAS DECLARED IN HIS RETURN OF INCOME AS SALES. THEREFORE, IT IS QUITE EVIDENT T HAT THERE ARE CERTAIN INCOMES WHICH THE ASSESSEE HAS NOT DECLARED IN HIS REGULAR RETURN OF INCOME. SINCE THIS IS A CASE OF NO BOOKS, THE DEPOSITS MADE IN THE BANK CAN VERY WELL BE TAKEN AS SALES MADE BY THE ASSESSEE. HOWEVER, IT IS ALSO A TRITE LAW THAT THE TAX HAS TO BE LEVIED ONLY ON THE INCOME COMPONENT E MBEDDED IN THE AMOUNT OF SALE. THEREFORE, NO ADDITION ON A CCOUNT OF TOTAL SALES CAN BE MADE. THE ADDITION ONLY TO THE EXTENT OF INCOME ON THESE SALES CAN BE MADE WHICH HAS RIGHTLY BEEN HELD BY THE LEARNED CIT (APPEALS) TO BE EQUAL TO GP SHOWN BY THE ASSESSEE IN HIS DECLARED SALES AS PER THE MANDA TE OF SECTION 44AF OF THE ACT. IN SUCH CASES WHERE NO BO OKS OF ACCOUNT ARE MAINTAINED, THERE IS NO HISTORY OR NO C OMPARABLE INSTANCE TO FORM AN ESTIMATION OF RATE OF INCOME EA RNED, IT IS QUITE REASONABLE TO BE GUIDED BY THE PROVISIONS OF SECTION 44AF OF THE ACT. THEREFORE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) AND CONFIRM THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF OCTOBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 5 TH OCTOBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6