TEJAS DHARAMDAS SODHA, MUMBAI V. ITO 14(2)(1), MUMBAI

ITA 779/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75894 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 07-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 779/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) TEJAS DHARAMDAS SODHA FLAT NO.602, 6 TH FLOOR, COMET BUILDING BHAKTI PARK, NEAR IMAX THEATRE, WADALA (E), MUMBAI-400 037 / VS. INCOME TAX OFFICER 14(2)(1), 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021 ' ./# ./PAN/GIR NO. AAXPS 7039 N ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ ' ( / APPELLANT BY : DR. K. SHIVARAM SHRI AJAY R. SINGH %&'$ ' ( / RESPONDENT BY : SHRI A. RAMCHANDRAN )* + ' , / DATE OF HEARING : 04.03.2014 -./ ' , / DATE OF PRONOUNCEMENT : 14.03.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI (CIT(A) FOR SH ORT) DATED 27.12.2011, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2007-08 VIDE ORDER DATED 24.12.2009. 2. THE APPEAL RAISES TWO ISSUES. IT WOULD BE RELEVA NT TO RECOUNT THE BACKGROUND FACTS OF THE CASE. THE ASSESSEE, AN INDIVIDUAL, RUNS A CO MMUNICATION CENTRE IN THE NAME OF M/S. 2 ITA NO. 779/MUM/2012 (A.Y. 2007-08) TEJAS DHARAMDAS SODHA VS. ITO SONAL COMMUNICATION, I.E., IS IN THE RETAIL BUSINES S OF MOBILE PHONES, AND ALSO A PARTNER IN M/S. CONNECTION AND MORE. HE RETURNED HIS INCOME FOR THE YEAR, DISCLOSING A GROSS RECEIPT OF RS.36.01 LACS, WITH A GROSS PROFIT OF 16 %. THE STATEMENT OF THE ASSESSEES BANK ACCOUNT WITH BANK OF BARODA (BOB FOR SHORT), HOWE VER, REFLECTED DEPOSITS TO THE TUNE OF RS.89.20 LACS, ALL OF WHICH, EXCEPT A LOAN OF RS .72,000/-, WERE APPARENTLY RECEIPTS OF HIS BUSINESS. THE ASSESSEE, WHEN CONFRONTED THEREWI TH, FILED A REVISED OPERATING STATEMENT, DISCLOSING SALES AT RS.83.39 LACS, WITH A NET PROFIT OF RS.1.87 LACS, I.E., AS AGAINST RS.2.40 LACS AS PER THE ORIGINAL PROFIT AND LOSS ACCOUNT. THE PROVISION OF SECTION 44AB WAS, THEREFORE, ATTRACTED. THE ASSESSEE THEREB Y ADMITTING TO HAVE SUPPRESSED HIS TURNOVER, PROFIT ON THE ADDITIONAL TURNOVER OF RS.5 3.19 LACS (RS.89,20,008 RS.36,01,336) WAS BROUGHT TO TAX IN THE SUM OF RS.8,50,986/-, I.E ., AT THE DISCLOSED GROSS PROFIT RATE OF 16%. FURTHER, THE ASSESSEES SAVING BANK ACCOUNT WI TH ORIENTAL BANK OF COMMERCE (OBC FOR SHORT), AGAIN, REVEALED CASH DEPOSITS AT RS.16.67 LACS DURING THE YEAR. THE ASSESSEE NOT FURNISHING ANY EXPLANATION IN RESPECT THEREOF; HAVING IN FACT NOT DISCLOSED THE SAID BANK ACCOUNT, THE ENTIRE CASH DEPOSITS STO OD ASSESSED AS INCOME FROM UNDISCLOSED SOURCES U/S.69A. THE LD. CIT(A) CONFIRMED THE SAME, EVEN AS THE ASSESSEE FURNISHED ANOTHER PROFIT AND LOSS ACCOUNT ALONG WITH THE AUDI T REPORT THEREON, DISCLOSING SALES AT RS.262.79 LACS WITH A GROSS PROFIT RATE OF 6.8%. TH E ASSESSEES REQUEST FOR A FRESH VERIFICATION WAS FOUND NOT ACCEPTABLE IN-AS-MUCH AS HE HAD STATED UNTRUTH AT EVERY STAGE. ESTIMATION IS INTEGRAL TO ASSESSMENT, AS CLARIFIED BY THE APEX COURT IN CST VS. H. M. ESUFALI, H. M. ABDULALI [1973] 90 ITR 271 (SC), SO THAT THE ASSESSING OFFI CERS (A.O.) ESTIMATION BASED ON THE ASSESSEES OWN DISCLOSED RE SULTS CANNOT BE FAULTED WITH. SIMILARLY, THE ASSESSEES BANK ACCOUNT WITH BOB WAS NOT DISCLOSED, SO THAT THE ENTIRE CASH DEPOSITS THEREIN, THEREFORE, STOOD RIGHTLY CON SIDERED AS UNEXPLAINED AND BROUGHT TO TAX U/S.69A. AGGRIEVED, THE ASSESSEE IS IN SECOND A PPEAL. 3. THE ASSESSEE BEFORE US DISPUTES BOTH THE ADDITIO NS, I.E., QUA THE GROSS PROFIT ON THE ADDITIONAL SALES OF RS.53.19 LACS, ESTIMATED AT 16% , AS ALSO THAT IN RESPECT OF CASH DEPOSITS IN THE SAVING BANK ACCOUNT WITH OBC AT RS.16.67 LAC S. THE ASSESSEES CASE AS MADE OUT BEFORE US WAS PRIMARILY IN TERMS OF THE TELESCOPING EFFECT OF THE TWO ADDITIONS. 3 ITA NO. 779/MUM/2012 (A.Y. 2007-08) TEJAS DHARAMDAS SODHA VS. ITO 4. WE HAVE HEARD THE PARTIES, PERUSED THE MATERIAL ON RECORD, AND GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER. 4.1 THE ASSESSEE IN OUR VIEW HAS NO CASE QUA ITS FIRST GROUND, I.E., IN RESPECT OF THE ADDITION TO ITS INCOME TOWARD PROFIT ON THE UNDISCL OSED TURNOVER. THE SAME IS REFLECTED IN THE BANK ACCOUNT (WITH BOB) IN THE NAME OF THE ASSE SSEES PROPRIETARY CONCERN, WITH THE ASSESSEE ITSELF STATING IT TO BE ON ACCOUNT OF HIS BUSINESS, REPRESENTING RECEIPTS THEREOF. THE GROSS PROFIT RATE ADOPTED IS, AGAIN, AS THAT DI SCLOSED BY THE ASSESSEE PER ITS RETURN OF INCOME. IN FACT, NO MATERIAL TO THE CONTRARY HAS BE EN LED BY THE ASSESSEE AT ANY STAGE. NO IMPROVEMENT IN ITS CASE BEING MADE BEFORE US, WE CO NFIRM THE SAME. 4.2 WITH REGARD TO THE SECOND ADDITION, A PERUSAL O F THE BANK ACCOUNT WITH OBC (PB PGS.51-74) EXHIBITS CREDITS BY WAY OF CASH SALES AN D WITHDRAWALS BY WAY OF PAYMENTS TO, IN THE MAIN, CREDITORS FOR PURCHASES. WHY, THEREFORE, WE ARE UNABLE TO SEE, COULD THE SAI D ACCOUNT BE NOT SIMILARLY REGARDED AS AN UNDISCLOSED BANK ACCOUNT OF THE ASSESSEES BUSINESS ? MERELY BECAUSE THE SAID ACCOUNT IS A SAVINGS BANK ACCOUNT IS NOT DETERMINATIVE OF THE MATTER, MORE PARTICULARLY WHEN THE ACCOUNT S TATEMENT STATES THE NAMES OF THE PARTIES TO WHOM THE PAYMENTS ARE MADE, WHICH COULD HAVE BEEN SUBJECT TO VERIFICATION, I.E., IN CASE OF DOUBT, BY THE REVENUE. WE, THEREFO RE, CONSIDER IT AS MUCH A PART OF THE ASSESSEES BUSINESS AS ANY OTHER. ACCORDINGLY, TREA TING THE ENTIRE CASH DEPOSITS THEREIN AS ARISING FROM THE SALE PROCEEDS OF HIS BUSINESS, AS CLAIMED BY THE ASSESSEE, WE, FOLLOWING OUR DECISION QUA GROUND NO. 1, CONFIRM THE PROFIT ELEMENT THEREIN AT 16%. THE CASH DEPOSIT IN THE ASSESSEES SAID BANK ACCOUNT, WHICH WE OBSERVE TO BE AT RS.17.40 LACS, ADMITTED AS CASH SALES, SHALL, SUBJECT TO THE CONFI RMATION AS TO THE AGGREGATE AMOUNT THEREOF, FORM PART OF THE ASSESSEES INCOME TO THE EXTENT OF THE PROFIT ELEMENT THEREIN, ESTIMATED AT 16%. WE DIRECT ACCORDINGLY. THIS WOULD, HOWEVER, LEAVE US WITH ONE ADDITION, I. E., QUA THE UNEXPLAINED CASH DEPOSIT IN THE SAID BANK ACCOUNT. WE SAY SO AS THOU GH A PART THEREOF REPRESENTS PROFIT, WHICH STANDS SEPARATELY ASSESSED, THE BALANCE DOES THE COST (OF THE GOODS SOLD), SO THAT TO THE EXTENT OF THE CAPITAL INVESTED THEREIN, THE SAM E WOULD WARRANT BEING CONFIRMED FOR ADDITION U/S.69A, I.E., AS AGAINST THE TOTAL AMOUNT DEPOSITED IN THE ACCOUNT, AS CONSIDERED 4 ITA NO. 779/MUM/2012 (A.Y. 2007-08) TEJAS DHARAMDAS SODHA VS. ITO BY THE REVENUE. TOWARD THIS, IN OUR VIEW, TAKING TH E OPERATING CYCLE AS ONE MONTH, 1/12 OF 84% OF THE TURNOVER IN THE SAID ACCOUNT WOULD BE A FAIR ESTIMATE THEREOF. THE ADDITION U/S.69A IS CONFIRMED TO THAT EXTENT. WITH REGARD TO TELESCOPING, THE ASSESSEES CASE IS WITHOUT ANY BASIS OR ARGUMENT, MUCH LESS MATERIALS TOWARD THE SAME; THE ASSESSEES ALTERNATE CLAIM (PER GD. #3) BEING IN FACT IN RESPECT OF ADDITION QUA THE PEAK AMOUNT IN THE ACCOUNT (AT ANY GIVEN POINT OF TIME DURING THE YEAR), WHICH WOULD OBTAIN NO LONGER IN V IEW OF OUR HAVING ACCEPTED THE CASH DEPOSITS IN ACCOUNT AS REPRESENTING HIS BUSINESS TU RNOVER. THE ADDITIONS SUSTAINED BY US ARE IN RESPECT OF, FIRSTLY, THE PROFIT ARISING DURI NG THE YEAR ON THE UNDISCLOSED TURNOVER AND, TWO, THE CAPITAL THAT COULD REASONABLY BE CONS IDERED AS EMPLOYED THEREFOR, I.E., A PART OF THE UNDISCLOSED BUSINESS (AS, IN FACT, ROUTED TH ROUGH ONE ACCOUNT ONLY), SO THAT NO CASE FOR THEIR TELESCOPING THUS ARISES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. 0/ 1 )2 30 ' * 4 ' 56 ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 14, 201 4 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 7+ MUMBAI; 8) DATED : 14.03.2014 *.)../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ;*< = %)>2 , , >2/ , 7+ / DR, ITAT, MUMBAI 6. = ?3 @ + / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , 7+ / ITAT, MUMBAI