Income Tax Officer 6(4), Lucknow V. Shri Shabi Haider, Lucknow

ITA 767/LKW/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83381 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH AGARWAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Additional evidence; Capital expenditure
• Section: 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.767/LKW/2013 ASSESSMENT YEAR:2009 - 10 SHRI SHABI HAIDER, 21 - C/21 - D, NANAK NAGAR, NAPIER ROAD/ - II, THAKURGANJ, CHOWK, LUCKNOW. PAN:ABDPH1730J VS. INCOME TAX OFFICER - 6(4), LUCKNOW. (RESPONDENT) (APPELLANT) SHRI ALOK MITRA, D. R. APPELLANT BY SHRI YOGESH AGARWAL, ADVOCATE RESPONDENT BY 05/09/2014 DATE OF HEARING 10 /11 /2014 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, LUCKNOW, DATED 26/09/2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE COMMISSIONER OF INCOME - TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN TREATING THE UNEXPLAINED CASH DEPOSITS AS TRADE TRANSACTIONS AND SUSTAINED THE ADDITION TO RS.2,23,333/ - AGAINST RS.19,62,500/ - . 2. THE COMMISSIONER OF INCOME - TAX (APPEALS) - II, LUCKNOW FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAD FAILED TO FURNISH ANY EXPLANATION TO THE ASSESSING OFFICER REGARDING CASH DEPOSIT OF 2 RS.19,62,500/ - IN BANK ACCOUNT DURING THE COURSE OF ASSESSMENT. 3 . THE COMMISSIONER OF INCOME - TAX (APPEALS) - II, LUCKNOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF SALE/PURCHASE BILLS AND VOUCHERS WITHOUT ALLOWING THE ASSESSING OFFICER ANY OPPORTUNITY OR CALLING FOR ANY REMA ND REPORT. IN DOING SO, THE COMMISSIONER OF INCOME - TAX (APPEALS) - II, LUCKNOW FAILED TO OBSERVE THE PROVISIONS OF SECTION 46A OF THE INCOME TAX RULES, 1962. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT THE EXPENS ES ARE ALREADY ACCOUNTED FOR BY THE ASSESSEE AND HENCE, INSTEAD OF MAKING ADDITION OF ONLY GROSS PROFIT, AS HAS BEEN HELD BY LEARNED CIT(A), THE ENTIRE AMOUNT CREDITED IN THE BANK ACCOUNT SHOULD BE ADDED. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE BOM BAY HIGH COURT RENDERED IN THE CASE OF COOPER ENGINEERING LTD. VS COMMISSIONER OF INCOME - TAX [1982] 135 ITR 597 (BOM). 4. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. W E FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS.19,52,500/ - ON THE BASIS THAT THIS MUCH AMOUNT WAS DEPOSITED IN BANK ACCOUNT FOR WHICH THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION/JUSTIFICATION. THIS ADDITION WAS MADE BY HIM U/S 68 OF THE INCOME TAX ACT. 6. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO HAS HELD THAT SINCE THE AMOUNT WAS NOT CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, NO ADDITION IS JUSTIFIED U/S 68 OF THE ACT HOWEVER, THE ASSESSING OFFICE R COULD HAVE CONSIDERED SUCH ADDITION U/S 69 OF THE ACT. THEREAFTER, HE HAS FURTHER HELD THAT HE IS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE 3 AGAINST SALES OR FROM THE DEBTOR AGAINST CREDIT SALES AND THER EFORE, ENTIRE AMOUNT CANNOT BE ADDED AND HE HAS CONFIRMED THE ADDITION TO THE EXTENT OF GROSS PROFIT ON THIS MUCH AMOUNT CONSIDERING THIS AMOUNT AS SALE PROCEEDS. IN ADDITION TO THAT, HE HAS ALSO MADE ADDITION OF RS.50,000/ - ON THE BASIS THAT THIS MUCH AM OUNT WAS ASSESSEES INITIAL INVESTMENT IN CARRYING OUT THESE TRANSACTIONS OUTSIDE BOOKS. IN THIS MANNER HE CONFIRMED ADDITION OF RS.2,73,333/ - AS AGAINST TOTAL ADDITION OF RS.19,62,500/ - AND IN THIS MANNER, ALLOWED RELIEF OF RS.16,89,167/ - . THE RELEVANT PARAS FROM THE ORDER OF CIT(A) ARE PARA NO. 6 TO 11, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 6. GROUND NO. 1 RELATES TO ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CREDIT ENTRIES OF RS.19,62,500/ - . I HAVE CAREFULLY GONE THROUG H THE WRITTEN SUBMISSION OF ASSESSEE FILED DURING APPELLATE PROCEEDINGS AND FINDING GIVEN BY ASSESSING OFFICER IN ASSESSMENT ORDER AND OTHER RELEVANT MATERIAL AVAILABLE ON RECORD AND I FOUND THAT THE ASSESSING OFFICER DID NOT APPRECIATE THE FACTS OF ASSESS EE CASE PROPERLY. THE ASSESSING OFFICER HAD WRONGLY CONSIDERED UNEXPLAINED CREDIT ENTRIES OF RS.19,62,500/ - U/S 68 OF I.T.ACT, 1961. SECTION 68 IS APPLICABLE ONLY WHERE THE ENTRIES ARE RECORDED IN REGULAR BOOKS OF ACCOUNTS OF ASSESSEE BUT THE ASSESSEE FAIL S TO OFFER NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF A.O. SATISFACTORY; THEN ONLY THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX, AS THE INCOME OF ASSESSEE OF THAT PREVIOUS YEAR. 7. IN ASSESSEE CASE IT IS NOT IN DISPUTE THAT THE ENTRIES REFLECTED IN SAID BANK ACCOUNT HAD NOT REFLECTED IN HIS REGULAR BOOKS OF ACCOUNTS. THEREFORE, TRANSACTIONS APPEARS IN THE SAID BANK ACCOUNT HAVE CONSIDERED BY ASSESSING OFFICER AS UNEXPLAINED ENTRIES REFL ECTED IN THE SAID BANK ACCOUNT SHOULD HAVE BEEN CONSIDERED U/S 69 OF I.T.ACT. RATHER THAN INVOKING PROVISIONS OF SECTION 68 OF I.T.ACT, IF THE A.O. FOUND THAT THE EXPLANATION OFFERED BY A.O. WAS NOT SATISFACTORY. THE ASSESSEE'S SAVING BANK A/C. NO. 9104000 038483 ALSO CONTAINS ENTRIES CASH DEPOSITED IN DIFFERENT DATES DURING ASSESSMENT YEAR UNDER CONSIDERATION. THE A.O. HAS CONSIDERED THESE DEPOSITS UNEXPLAINED IN THE HANDS OF ASSESSEE, WITHOUT VERIFYING THE SOURCE OF CASH DEPOSITS BY ASSESSEE, WHETHER THE D EPOSITS WERE 4 MADE OUT OF REALIZATION FROM TRADE TRANSACTIONS (SALES)/RECOVERIES FROM TRADE DEBTORS) OR OTHER THAN TRADE TRANSACTION. DURING APPELLATE PROCEEDINGS THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSION AND CONTENDED THAT THE SUM TAKEN BY A.O. AS HIS UNEXPLAINED DEPOSITS IN HIS SAID BANK ACCOUNT RELATED TO TRADE TRANSACTIONS ( RECOVERY FROM SALES OF GOODS & TRADE DEBTORS) ONLY. HE HAS FURTHER EXPLAINED THAT THE ASSESSING OFFICER HAD WRONGLY TAKEN AND ADDED THESE SUM REFLECTED IN HIS BANK ACCOUNT U/S 68 TREATING THE SAME AS UNEXPLAINED CREDITS. HE HAS FURNISHED THE RECORDS/ PAPERS BEFORE A.O. AND ALSO IN APPELLATE PROCEEDINGS, WHICH PROVE THAT THESE CREDIT IN BANK ACCOUNT WAS NOTHING BUT THE ENTIRE DEPOSITS OUT OF REALIZATION FROM HIS TRADING ACTI VITIES I.E. PURCHASES AND SALES AND REALIZATION FROM TRADE DEBTORS. THE ASSESSEE FURTHER CONTENDED THAT THE A.O. SHOULD HAVE UTMOST TAKEN THE PROFIT @11.38% ON THE TOTAL SALES EFFECTED IN SAID BANK AMOUNTING TO RS.19,62,500/ - INSTEAD OF ADDITION MADE OF R S.19,62,500/ - TO HIS TOTAL INCOME. I HAVE CONSIDERED THE WRITTEN SUBMISSION OF ASSESSEE AND FINDING GIVEN BY A.O. IN ASSESSMENT ORDER AND FOUND FORCE IN THE CONTENTION OF ASSESSEE THAT THE TRADING TRANSACTION (UNRECORDED SALES) OF RS.19,62,500/ - CANNOT BE ADDED IN TOTO AND ONLY ADDITION IS JUSTIFIABLE TO THE EXTENT OF PROFIT EARNED BY ASSESSEE ON THE UNRECORDED TURNOVER. THE ASSESSEE HIMSELF DECLARED GROSS PROFIT RATE OF 11.38% ON RECORDED SALES THEREFORE IT WOULD BE FAIR AND REASONABLE IF THE PROFIT TAK EN @11.38% ON TURNOVER RS.19,62,500/ - TREATING THESE CREDIT ENTRIES FOUND RECORDED IN THE S.B. ACCOUNT OF ASSESSEE, COLLECTED OUT OF SALE PROCEEDS OF GOODS AND RECOVERY FROM TRADE DEBTORS NOT RECORDED IN REGULAR BOOKS OF ACCOUNTS OF ASSESSEE DURING ASS ESSMENT YEAR UNDER CONSIDERATION. SINCE THESE TRANSACTIONS CONSIDERED AND TAKEN UNRECORDED SALES OF ASSESSEE EFFECTED DURING ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE AND FURTHER AN ADDITION AMOUNTING TO RS.50,000/ - IS ALSO CONSIDERED JUSTIFIED FOR INITIAL INVESTMENT IN CIRCULATING CAPITAL IN THE HANDS OF ASSESSEE FOR UNRECORDED PURCHASE EFFECTED DURING ASSESSMENT YEAR UNDER CONSIDERATION. 8. THUS TOTAL ADDITION OF RS.2,73,333/ - ON ACCOUNT OF PROFIT ON UNRECORDED SALES WORKS OUT TO 11.38% ON RS.19, 62,500/ - I.E. RS.2,23,333/ - PLUS ADDITION ON ACCOUNT OF INITIAL INVESTMENT IN CIRCULATING CAPITAL RS.50,000/ - IS HEREBY CONFIRMED. THUS THE ASSESSEE GETS RELIEF OF RS.16,89,167/ - (19,62,500 - 2,73,333). 5 9. AS DISCUSSED ABOVE THE A.O. HAS NOT JUSTIFIED IN MAKING THE ADDITION U/S 68 TREATING THE DEPOSIT IN SAID BANK OF ASSESSEE AS UNEXPLAINED. HE HAS ALSO NOT GIVEN ANY CONTRARY AND BROUGHT ANY EVIDENCE WHICH COULD BE ESTABLISHED THAT THE ASSESSEE CLAIM IN RESP ECT OF CREDIT ENTRIES IN BANK ACCOUNT DID NOT RELATE TO HIS TRADING ACTIVITY ( PURCHASES & SALES). CONTRARY, ASSESSEE HAS FURNISHED EVIDENCES WHICH PROVE THAT THE TRANSACTIONS REFLECTED IN HIS S.B. ACCOUNT PERTAIN TO TRADING ACTIVITIES ( PURCHASES AND SALE S ) EFFECTED DURING YEAR UNDER CONSIDERATION. 10. KEEPING IN VIEW OF FACTS AND CIRCUMSTANCES, WRITTEN SUBMISSION FILED BY ASSESSEE, EVIDENCES FURNISHED BY ASSESSEE IN SUPPORT OF HIS CONTENTION AND FINDING GIVEN BY A.O. IN ASSESSMENT ORDER, I AM OF THE CON SIDERED OPINION THAT THE TRANSACTIONS REFLECTED IN SAID S.B. ACCOUNT OF ASSESSEE, WERE TRADING ( PURCHASES/SALES) TRANSACTIONS EFFECTED DURING ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE THE ADDITIONS WERE MADE BY ASSESSEE U/S 68 OF I.T.ACT 1961 IS M ODIFIED AND SUSTAINED AS DISCUSSED ABOVE SUPRA PARA 6 & 7 OF THIS ORDER. RELIANCE IS PLACED ON THE DECISION OF ASSESSING OFFICER VS. GANESH CO - OPERATIVE ( L&C) SOCIETY LTD 1998 67 ITD 436 (ASR) 11. IT HAS BEEN HELD IN SAID DECISION THAT 'IT IS NOW SETTLED LAW THAT ENTIRE ASSESSMENT IS OPEN BEFORE CIT(A) AND CIT (APPEAL) IS EMPOWERED TO DEVIATE THE METHOD OF ESTIMATING INCOME OF THE ASSESSEE'. THUS I HOLD THAT THESE ENTRIES ARE RELA TE TO BUSINESS/TRADE ACTIVITIES AND NET PROFIT RATE OF 11.38% IS APPLIED WHICH COMES TO RS.2,23,333/ - PLUS UNEXPLAINED INVESTMENT IN CIRCULATING CAPITAL OF RS.50,000/ - AS DISCUSSED ABOVE IN THIS ORDER. I, THEREFORE, ALLOWED RELIEF OF RS.16,89,167/ - ( RS.19, 62,500/ - - RS.2,73,333/ - ) ON ACCOUNT OF UNEXPLAINED CREDIT ENTRIES AS ADDITION MADE BY THE A.O. 6.1 FROM PARA 7 OF THE ORDER OF CIT(A), WE FIND THAT IT IS NOTED IN THIS PARA THAT IT WAS SUBMITTED BEFORE HIM BY THE LEARNED A.R. OF THE ASSESSEE THAT THE AS SESSEE HAS FURNISHED THE RECORDS/ PAPERS BEFORE A.O. AND ALSO IN APPELLATE PROCEEDINGS, WHICH PROVES THAT THESE CREDIT IN BANK ACCOUNT WAS NOTHING BUT DEPOSITS OUT OF REALIZATION FROM HIS TRADING ACTIVITIES I.E. PURCHASES AND SALES AND REALIZATION FROM TRA DE DEBTORS. HENCE, IT IS SEEN THAT THE EVIDENCE BROUGHT BY THE ASSESSEE BEFORE THE CIT(A) WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER AS PER THIS SUBMISSIONS BEFORE THE 6 CIT(A) AND ON THIS ASPECT, NOTHING HAS BEEN BROUGHT ON RECORD BY LEARNED D.R. OF T HE REVENUE TO SHOW THAT THIS SUBMISSION OF THE ASSESSEE IS NOT CORRECT. HENCE, THERE IS NO MERIT IN GROUND NO. 3. 7. REGARDING THE FINDING OF CIT(A) THAT THESE DEPOSITS IN BANK ACCOUNT ARE AGAINST SALES OF THE ASSESSEE, NO EVIDENCE HAS BEEN PRODUCED BEF ORE US TO CONTROVERT THIS FINDING OF CIT(A). REGARDING THIS ARGUMENT OF LEARNED D.R. OF THE REVENUE THAT SINCE THE ASSESSEE HAS ACCOUNTED FOR THE EXPENSES, ENTIRE AMOUNT OF SALES SHOULD BE ADDED, WE DO NOT FIND ANY MERIT IN THIS SUBMISSION OF LEARNED D.R. OF THE REVENUE. ADMITTEDLY, ADMINISTRATIVE EXPENDITURE ETC. WERE ACCOUNTED FOR BY THE ASSESSEE IN FULL AND THEREFORE, ADDITION IN RESPECT OF UNACCOUNTED SALES HAS TO BE MADE TO THE EXTENT OF GROSS PROFIT AND IT CANNOT BE ONLY FOR NET PROFIT. THE CIT(A) HAS ADDED THE ENTIRE GROSS PROFIT IN RESPECT OF UNACCOUNTED SALES WITHOUT ALLOWING ANY EXPENDITURE IN RESPECT OF ADMINISTRATIVE AND OTHER EXPENSES. REGARDING THE CONTENTION OF THE LEARNED D.R. OF THE REVENUE THAT THE ENTIRE SALE PROCEEDS SHOULD BE ADDED, IT SHOULD HAVE BEEN ESTABLISHED BY THE REVENUE THAT PURCHASE IN RESPECT OF UNACCOUNTED SALES WERE DEBITED BY THE ASSESSEE IN REGULAR BOOKS OF ACCOUNT BUT THIS HAS NOT BEEN DONE BY REVENUE AND THEREFORE, IN THE FACTS OF THE PRESENT CASE, ENTIRE SALE PROCEED S CANNOT BE ADDED AND CIT(A) HAS RIGHTLY CONFIRMED ADDITION TO THE EXTENT OF GROSS PROFIT OF UNACCOUNTED SALES. IN ADDITION TO CONFIRMING ADDITION TO THE EXTENT OF GROSS PROFIT ON ACCOUNT OF UNRECORDED SALES, THE CIT(A) HAS ALSO CONFIRMED AN ADDITION OF R S.50,000/ - ON ACCOUNT OF INITIAL INVESTMENT IN RESPECT OF TRADING TRANSACTIONS OUTSIDE THE BOOKS. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND HENCE, WE DECLINE TO INTERFERE IN HIS ORDER. 8. REGARDING THE RELIANCE P LACED BY LEARNED D.R. OF THE REVENUE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COOPER ENGINEERING LTD. VS COMMISSIONER OF INCOME - TAX [1982] 135 ITR 597 (BOM), WE FIND 7 THAT THIS JUDGMENT IS NOT AT ALL RELEVANT IN THE PRESENT CASE. IN THIS CASE, THE ISSUE IN DISPUTE BEFORE THE HON'BLE HIGH COURT WAS THAT AS TO WHETHER THE DISALLOWANCE OF 2/3 RD FOREIGN TOUR EXPENSES OF THE DIRECTORS OF THE ASSESSEE COMPANY WAS JUSTIFIED IN LAW ON THE PLEA THAT THE EXPENDITURE WAS IN THE NATURE OF CAPITAL EXP ENDITURE AND THE SECOND DISPUTE WAS THAT AS TO WHETHER THE DISALLOWANCE OF RS.16,029/ - PAID TO M/S G. PERRY & SONS LTD., ENGLAND, ON THE PLEA THAT THIS EXPENDITURE IS OF THE NATURE OF CAPITAL EXPENDITURE, IS JUSTIFIED IN LAW. IN THE PRESENT CASE, THE DISP UTE IS ENTIRELY DIFFERENT AND THEREFORE, THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT IS NOT RELEVANT IN THE PRESENT CASE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 /11/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5 .D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR