Shri Amal Saha, Kolkata V. ITO, WD-50(2), KOLKATA, Kolkata

ITA 724/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9215 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 09-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2016
• Court: TRIBUNAL
• Department Lawyers: V N PUROHIT
• Assessee Lawyers: SUBRO DAS
• Keywords: Business income; Peak credit
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.724/KOL/2016 ( / ASSESSMENT YEAR :2008-2009) SHRI AMAL SAHA, NEAR KARBALA BRIDGE, WEST CHANDIGARH, KORA CHANDIGARH, MADHYAMGRAM, KOLKATA-700130 VS. ITO, WARD-50(2)/KOLKATA, UTTARPAN COMPLEX, ULTADANGA, KOLKATA-700054 ./ ./PAN/GIR NO. : AWHPS 4079 E ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI V.N.PUROHIT, FCA /ASSESSEE BY : SHRI SUBRO DAS, JCIT / DATE OF HEARING : 24/02/2017 /DATE OF PRONOUNCEMENT 22/03/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAI NING TO THE ASSESSMENT YEAR 2008-2009, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKAT A, IN APPEAL NO.65/CIT(A)-15/14-15/WED-50(2)/KOL, DATED 27.01.20 16, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE AO U/S.144 OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.12.2010. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE HAS SUBMITTED HIS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2008-09 ON 28- 07-2008 DISCLOSING TOTAL INCOME OF RS.1,29,460/-. T HE RETURN OF ASSESSEE WAS PROCESSED U/S.143(1) OF THE I.T.ACT ON 23.06.20 09. LATER ON, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S.143(3 ) OF THE ACT AND THE AO COMPLETED THE ASSESSMENT BY MAKING ADDITION ON A CCOUNT OF ITA NO.724/KOL/2016 SHRI AMAL SAHA 2 UNDISCLOSED CASH DEPOSIT IN THE BANK AT RS.20,12,40 0/-. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE HAS DEPOSITED CASH AMOUNTING TO RS.20,12,400/- IN THE UNDISCLOSED BANK WHICH WAS NOT DISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT F OR ASSESSMENT YEAR 2008-09. SINCE, THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTS AND EXPLANATION REGARDING THE SOURCE OF SUCH CASH DEPOS IT, THEREFORE, THE AO ADDED THE CASH DEPOSIT OF RS.20,12,400/- TO THE TOT AL INCOME OF THE ASSESSEE. 3. NOT BEING SATISFIED WITH THE ORDER PASSED BY TH E AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD CIT(A), WHO HAS CONFI RMED THE ORDER PASSED BY THE AO OBSERVING THE FOLLOWINGS :- I HAVE GONE THROUGH THE REPLY OF THE ASSESSEE BUT I AM NOT CONVINCED. IT IS SEEN FROM THE P&L ACCOUNT OF THE A SSESSEE THAT ON A TOTAL SALES OF RS.1,71,65,782/- HE HAS SHOWN GROS S PROFIT OF RS.6,53,581/- ONLY WHICH MAKES THE GP 3.80%. THE SA ME IS VERY LOW AS COMPARED TO THE GP PERCENTAGE SHOWN BY THE A SSESSEE IN EARLIER YEARS. THE AO HAS TAKEN THE AVERAGE OF GP O F ASSESSMENT YEARS 2006-07, 2007-08 AND ASSESSMENT YEAR 2008-09. INSTEAD THE AO SHOULD HAVE TAKEN THE AVERAGE OF GP OF ASSESSMEN T YEARS 2005-06, 2006-07 AND ASSESSMENT YEAR 2007-08. REGARDING THE SOURCE OF CASH DEPOSITS IN THE AXIS B ANK IN ACCOUNT NO. 47454 THE REPLY OF THE ASSESSEE IS NOT SATISFACTORY. PERUSAL OF BANK STATEMENT SHOWS THAT THE ASSESSEE H AS BEEN DEPOSITING CASH ON A PARTICULAR DAY AND SAME AMOUNT OR ALMOST SIMILAR AMOUNT HAS BEEN WITHDRAWN THROUGH BEARER CH EQUES OR THROUGH ATM WITHDRAWALS ON THE SAME DAY. THE ASSESS EE HAS NOT DISCLOSED ANYTHING REGARDING THE REASON FOR ISSUE O F BEARER CHEQUES WHICH ARE SOMETIME EXCEEDING RS.20,000/-. T HERE IS NO EVIDENCE SUBMITTED BY THE ASSESSEE THAT THE DEPOSIT S AND WITHDRAWALS ARE LINKED WITH THE BUSINESS OF THE ASS ESSEE. IN ABSENCE OF ANY DETAILS SUBMITTED BY THE ASSESSEE, T HE DESTINATION OF THE CHEQUES ISSUED COULD NOT BE ASCERTAINED AS M ENTIONED EARLIER. THE CASH DEPOSITS AND CASH WITHDRAWALS ARE MOSTLY ON THE SAME DATES. THE CASH DEPOSITS ARE DONE IN THE BANK WHEREAS THE BANK STATEMENTS REVEALS THAT THE AMOUNTS HAVE BEEN WITHDRAWN BY THE BEARER CHEQUES FROM OTHER PLACES. THERE IS NO N EED TO DEPOSIT A PARTICULAR AMOUNT IN THE BANK IN ONE DAY AND WITH DRAW THE SAME ITA NO.724/KOL/2016 SHRI AMAL SAHA 3 BY WAY OF BEARER CHEQUES OR ATM UNLESS THE SOURCE O F CASH DEPOSITS ARE DIFFERENT FROM THE DESTINATION OF THE CASH WITHDRAWALS. IF WE ACCEPT THE THEORY THAT THIS CASH DEPOSITS AND WITHDRAWALS ARE PERTAINING TO THE BUSINESS OF THE ASSESSEE, THEN TH E WITHDRAWALS WOULD BE HIT BY SECTION 40A(3) BECAUSE MANY A TIME THE WITHDRAWALS THROUGH BEARER CHEQUES ARE EXCEEDING RS .20,000/-. THUS THE AO HAD RIGHTLY ADDED THE ENTIRE CASH DEPOS ITS OF RS. 20,12,400/- AND THE SAME IS CONFIRMED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- 1) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS. 20,12,400/- BEING GROSS SALES PROCEEDS OF M/S GOLAP L & SATHI DRESSES, DEPOSITED IN TO THE BANK WRONGLY AS NET IN COME OF THE APPELLANT. 2) THE APPELLANT CRAVES LEAVE TO ADD / MODIFY THE GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APP EAL. 5. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT ASSESSEE DEALS IN READYMADE GARMENTS AS PROPRIETOR OF M/S. G OLAPI & SATHI DRESS IN AROUND BARASAT SUB-DIVISION OF 24 PARAGANAS (NOR TH DIST.) WHICH IS MAINLY AGRICULTURAL AREA MUCH NEAR TO BANGLADESH BO RDER. IMPORTANT BUSINESS RELATED FIGURES ARE SUBMITTED BY THE ASSES SEE AS FOLLOWS:- I) OPENING STOCK - RS. 7,98,752/- II) PURCHASES - RS. 1,68,47,660/- III) SALES - RS. 1,71,65,782/- IV) CLOSING STOCK - RS. 17,21,532/- V) GROSS PROFIT - RS. 6,53,581/-(3.81 % OF SALES) VI) NET PROFIT - RS. 2,15,9541- (I.E. 1.26% OF S ALES ) THOUGH TAX AUDIT REPORT WERE FILED WITH AO BUT BOO KS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE BEFORE AO THEREFORE TH E ASSESSMENT WAS COMPLETED U/S.144 OF THE ACT BY ESTIMATING G.P. @ 8 .6% AGAINST DISCLOSED G.P. 3.81%. ITA NO.724/KOL/2016 SHRI AMAL SAHA 4 THE LD AR FOR THE ASSESSEE SUBMITTED THAT THE ASSES SEES DECLARED GP IN LAST THREE YEARS AND ONE NEXT YEAR ARE AS FOLLOWS : - FINANCIAL YEAR GP RATE 2005-06 14.04 2006-07 7.98 2007-08 3.80(SALES RS.1,71,65,782/-) 2008-09 3.42(SALES RS.2,38,92,714/-) ASSESSING OFFICER HAS AVERAGED THESE THREE RATES AN D ESTIMATED THIS YEAR'S G.P. AT 8.60% BECAUSE THE ASSESSEE DID NOT P RODUCE THE BOOKS OF ACCOUNTS. LD. AR RELIED ON THE DECISION OF COORDINATE BENCH ' A' IN CASE OF SRI KARTICK CH. ROY VS. INCOME TAX OFFICER IN ITA NO. 2030/KO1/ 2013 WHERE IT HAS BEEN HELD THAT WHEN ASSESSEE HAS NO OTHER BUSINESS, CASH DEPOSIT IN BANK ARE NOTHING BUT PART OF SALES. ACCORDINGLY HON 'BLE BENCH CONFIRMED THE ADDITION TO THE EXTENT OF EXCESS OF DEPOSIT AMO UNT THEN GROSS SALES. RELEVANT PORTION IS REPRODUCED BELOW :- 'ONCE THE TURNOVER AND THE PROFIT ON SUCH TURNOVER HAS BEEN ACCEPTED THEN FURTHER ADDING PEAK CREDIT WILL AMOUN T TO DOUBLE FIXATION IN THE HANDS OF ASSESSEE. ONCE, A.O. HAS A PPLIED THE PEAK CREDIT THEORY ON THE BASIS OF NON-AVAILABILITY OF D OCUMENTS THEN THE PROFIT ALONG ON PEAK CREDIT CAN BE APPLIED IN THE C ASE IN HAND. IN THIS CASE, THE DECLARED INCOME HAS BEEN ACCEPTED WH ICH JUSTIFY THE TURNOVER OF RS. 21,44,625/-. THEREFORE, AT THE MOST THE DIFFERENCE BETWEEN PEAK CREDIT BALANCE AND TURNOVER DECLARED B Y ASSESSEE CAN ALONE BE ADDED TO THE TOTAL INCOME OR- ASSESSEE I.E. RS. 5,05,375/- (26,50,000 - 21,44,625). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION FOR THE U NDISCLOSED INCOME OF RS. 5,05,375/-. A.O. IS DIRECTED ACCORDINGLY. HE NCE, THIS GROUND OF ASSESSEE'S APPEAL IS PARTLY ALLOWED. THE LD AR SUBMITTED THAT ALTERNATIVELY AND ONLY IF DEPOSITS ARE NOT ACCEPTED AS PART OF SALES, THEN PEAK CREDIT OF UN-E XPLAINED CASH DEPOSIT ITA NO.724/KOL/2016 SHRI AMAL SAHA 5 IN AXIS BANK WHICH IS RS. 60375/- ON 19-11-07 MAY B E DIRECTED TO ADDED TO TOTAL INCOME IN PLACE OF TOTAL DEPOSIT OF RS. 20 ,12,400/-. 6. LD. DR FOR THE REVENUE HAS PRIMARILY RELIED ON THE FINDINGS OF THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. HAVING HEARD THE SUBMISSIONS OF LD AR FOR THE ASSES SEE AND PERUSED THE MATERIAL AVAILABLE ON RECORDS, WE ARE O F THE VIEW THAT THERE IS LITTLE MERIT IN THE SUBMISSIONS OF THE ASSESSE, AS THE PROPOSITIONS CANVASSED BY THE LD AR FOR THE ASSESSE ARE SUPPORTE D BY THE FACTS NARRATED BY HIM ABOVE AS WELL AS THE JUDGMENT CITED BY HIM ABOVE. NO DOUBT, THE BANK ACCOUNT CONTAINING CASH DEPOSIT OF RS.20,12,400/- WAS NOT DISCLOSED BY THE ASSESSEE BEFORE THE AO. THEREF ORE, HE ADDED THE CASH DEPOSIT AS AN UNDISCLOSED INCOME OF THE ASSESS EE. THE ASSESSEE ALSO NOT PRODUCED ANY EXPLANATION BEFORE THE LD. CI T(A), THEREFORE, HE HAS ALSO CONFIRMED THE ORDER PASSED BY THE AO. BEFORE U S, LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE TOTAL UNDISCLOSED A MOUNT OF RS.20,12,400/- MAY BE TAXED @3.80%, THE GROSS PROFI T RATE DISCLOSED BY THE ASSESSEE IN ASSESSMENT YEAR 2008-09. THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED BEFORE US THAT IN THIS UNDISCLOSED B ANK ACCOUNT THE PEAK CREDIT I.E. PEAK CASH DEPOSIT AT RS.60,375/- AND TH E SAME MAY BE TREATED AS AN INCOME OF THE ASSESSEE. LD. AR ALSO SUBMITTED THAT WITHOUT PREJUDICE TO THE ALTERNATIVE THAT IF DEPOSITS ARE N OT TREATED AS PART OF DISCLOSED SALES, THEN GP RATE OF 5% AS PER SECTION 44AF OF THE ACT MAY BE APPLIED. IN ADDITION TO THIS, LD. AR FOR THE ASS ESSEE HAS RELIED ON THE ITA NO.724/KOL/2016 SHRI AMAL SAHA 6 JUDGMENT OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SRI KARTICK CH. ROY, ITA NO.2030/KOL/2013 (SUPRA), THE CASH DEPOSIT IN BANK ACCOUNT ARE NOTHING BUT PART OF SALES, THEREFORE, THE GP RATE W HICH IS APPLICABLE TO THE ASSESSEE SHOULD BE APPLIED ON THE UNDISCLOSED AMOUN T OF RS.20,12,400/-. WE ARE OF THE VIEW THAT ON TOTAL DEPOSIT OF RS.20,1 2,400/- THE GP RATE @3.81% SHOULD BE APPLIED AND TO BE TREATED AS INCO ME OF THE ASSESSEE. THEREFORE, WE DIRECT THE AO TO ADD 3.81% OF RS.20,1 2,400/- TO THE TOTAL INCOME OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/0 3/2017. SD/ - (S.S.VISWANETHRA RAVI) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 22/03/2017 & ()* /PRAKASH MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) & ' , / ITAT, KOLKATA 1. / THE APPELLANT- SRI AMAL SAHA 2. / THE RESPONDENT.-ITO, WD-50(2), KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//