Sudhir Kumar, Patna V. I.T.O., Patna

ITA 90/PAT/2014

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1041 (ITAT-PATNA)
• Duration Of Justice: 8 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Peak credit; Corroborative evidences; TDS; Set aside
• Section: 44AD; 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH VIRTUAL HEARING AT KOLKATA BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.90/PAT/2014 Assessment Year: 2010-11 Shri Sudhir Kumar, Patna. (PAN: AMLPK4871E) Vs. Income-tax Officer, Ward-6(1), Patna. (Appellant) (Respondent) Present for: Appellant by : Shri K. M. Mishra, Advocate Respondent by : Shri Sanjay Mukherjee, CIT(DR) Date of Hearing : 16.03.2022 Date of Pronouncement : 26.05.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is directed against the order of ld. CIT(A), Dhanbad, Camp office at Patna Appeal No. 71/CIT(A)-II/13-14 dated 25.02.2014 for A.Y. 2010-11 passed against the assessment order u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) by ITO, Ward-6(1), Patna, dated 26.03.2013. 2. Brief facts of the case are that assessee had filed return of income on 18.10.2010 reporting total income of Rs.3,01,260/-. In the course of assessment proceedings, the ld. AO sought details on various aspects of the income reported by the assessee and completed the assessment by making the additions as under: “Total Income as per return Rs. 3,01,260/- Add: As discussed in Para D Rs. 3,42,708/- Add: As discussed in Para E Rs. 14,03,744/- Add: As discussed in Para F Rs. 58,92,354/- Total Income Rs. 89,40,066/-“ ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 2 2.1. Assessee went into appeal before the ld. CIT(A) challenging the additions so made, who gave relief on certain additions and the appeal was partly allowed. Aggrieved, the assessee is in appeal before the Tribunal in respect of additions sustained by the ld. CIT(A). Assessee has taken as many as 14 grounds of appeal which are dealt in seriatim. 3. Ground nos. 1, 13 and 14 are general in nature and therefore, do not require any adjudication. 4. Ground no. 2 of the appeal of the assessee relates to addition of Rs.1,65,239/- confirmed by the ld. CIT(A) out of addition of Rs.3,40,732/- made by the ld. AO. In respect of this addition, in the course of assessment proceedings, ld. AO noted that Form 26AS contained receipts of Rs. 53,000/- in respect of fees for professional and technical services and Rs.16,60,755/- from contractors and sub- contractors. From the total receipts included in Form 26AS, ld. AO bifurcated the amount of interest of Rs.3,68,871/- and made a computation of income under the head “Profits & Gains of Business or Profession” by applying the percentage of 15.75 which was reported by the assessee to arrive at income of Rs. 2,61,569/- on the gross receipts of Rs.16,60,755/- + Rs.53,000/-. Ld. AO concluded that the total income of the assessee comes to Rs.6,83,440/- against which the assessee had reported his total income at Rs.3,40,732/-. Accordingly, ld. AO made an addition of Rs.3,42,708/- holding it as undisclosed income of the assessee. While dealing with this issue, on the claim of the assessee that he had filed his return under the provisions of section 44AD of the Act, ld. CIT(A) by accepting the said claim, recomputed the calculations made by the ld. AO by taking net profit rate of 8% which comes to Rs.1,37,100/-. Total income was thus re-computed by ld. CIT(A) by including interest income of Rs.3,68,871/- at Rs.5,05,971/-. ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 3 Accordingly, ld. CIT(A) confirmed the addition of Rs.1,65,239/- which is the difference between Rs.5,05,971/- and Rs.3,40,732/-. The submissions made by the assessee before the ld. CIT(A) and the finding arrived at by the ld. CIT(A) are reproduced for ease of reference: “2.1 The submissions of the appellant in this regard are as under: "1. The assessee is regular income tax assessee. It has filed return of income showing therein gross income of Rs.3,40,732.52. Out of total income Rs. 39,474.00 therefore total income was 3,01,258/-. The case was selected for scrutiny and statutory notices were issued. The assessee appeared and filed reply. 2. The assessing officer in the order of assessment has noted that the assessee has received Rs. 16,60,755/- as receipt from contract work, Rs. 53,000/- against technical and professional services and Rs. 3,68,871/- against interest on FD etc. Total receipt for the year therefore was Rs.20,82,626/-. The assessing officer has noted that the assessee has accepted net profit at the rate of 15.75% therefore the assessing officer made computation on the basis of assertion of the advocate. Accordingly A.O. computed income on business, as under: Head of income Receipt Net Income Contract business 16,60,755/- 2,61,569/- Professional income 53,000/- 53,000/- Interest on FD etc. 3,68,871/- 3,68,871/- Total 20,82,626/- 6,83,440/- Less income disclosed 3,40,732/- Undisclosed income 3,42,708/- 3. The assessing officer has erred in computing undisclosed income as above. It has been stated in the assessment order that the assessee has not submitted profit and loss account and balance sheet during the course of assessment nor books of account was produce. The assessee however has stated that the income has been computed under section 44AD and by stating so the representative of the assessee has argued that the total income disclosed by the assessee is equal to 15.75% of the total receipt of Rs. 20,82,626/-. The return of income and the computation sheet enclosed with the paper book and placed as page...... to ...... of P.B. established this fact. The assessing officer has taken the amount of gross income as total contract receipt and amount of TDS deducted against; the receipt were taken as total income therefore a mistake has been committed. The computation should be made as per the provision of 44AD. As per 44AD the total tax should have been computed as under: Contract Receipt: Rs. 16,60,755/- ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 4 Professional Receipt: Rs. 53,000/- Total: Rs. 17,13,755/- Income under business and profession 8% Rs. 1,37,100/- Add income from interest Rs. 3,68,871/- Less commission/ charge deducted by bank" 2.2 I have considered the facts of the case. The AO has taken the net profit @ 15.75% which was overall net profit rate taking into account interest income. As per above computation, the income of the appellant would come to Rs.1,37,100/-+ Rs. 3,68,871/- = Rs. 5,05,971/ - as against income disclosed at Rs. 3,40,732/ -. Therefore, addition of Rs.1,65,239/- is confirmed whereas, the balance addition is deleted.” 4.1 From the perusal of the above and considering the material on record, we do not find any reason to interfere with the factual finding given by the ld. CIT(A). Accordingly, we confirm the addition sustained by the ld. CIT(A). Therefore, this ground of appeal of the assessee is dismissed. 5. Ground no. 3 along with ground nos. 7, 8, 9 and 10 taken together relate to addition made by the AO in respect of deposits made in the bank accounts of the assessee by taking the peak credit balances in these accounts. In the course of assessment proceedings, ld. AO sought details of certain bank accounts which remained undisclosed by the assessee. Ld. AO found that assessee had failed to explain the sources of deposits in ICICI Bank Account No. 625905034919 and SBI Bank Account No. 10636208353. Ld. AO took the peak credit balance of Rs.31,31,713/- and Rs.1,67,600/- from the two bank accounts respectively and proceeded to make the addition as undisclosed investment. In the course of appeal before the ld. CIT(A), assessee made submissions explaining the deposits in the two bank accounts for which the details were tabulated in para 4.4 of the impugned order. After considering the nature of credit entries as explained by the assessee, the ld. CIT(A) gave partial relief and sustained the addition of ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 5 Rs.16,60,564/- and Rs.1,62,083/- in the two respective bank accounts for which the assessee is in appeal before the Tribunal. 5.1 In the course of hearing, ld. Counsel of the assessee referred to the bank statements placed in the paper book and clarified the nature of credits appearing in the two bank statements of the said bank accounts. From the explanation furnished, we find that against the addition made by the ld. AO of peak credit balance of Rs.31,31,713/- and Rs.1,67,600/- in the respect of two bank accounts, instead of sustaining the amounts of deposits as such, it will be fair and justified to apply the same rate of net profit at 8% on the deposits of Rs.14,31,683/- (in ICICI bank account – Rs.10,00,000/-, Rs.19,700/-, Rs.2,00,000/- and Rs.53,000; in SBI bank account – Rs.7,200/- and Rs.1,51,083/-, totaling to Rs.14,31,683/-) made in these two bank accounts by considering them as undisclosed receipts forming part of the business carried on by the assessee. By applying the rate of 8% on Rs.14,31,683/-, income component of these deposits comes to Rs.1,14,535/-. Further, on 14.10.2009 there is a credit of Rs.5,65,751/- twice in the ICICI Bank account towards closure proceeds of fixed deposits. Since this bank account is an undisclosed bank account by the assessee, the closure proceeds of these two fixed deposits are also subjected to addition as undisclosed investments of the assessee. For the interest component of Rs.65,751/- each in the said closure proceeds of the two fixed deposits, it needs to be ascertained if this is included in the interest income of Rs.3,68,871/- dealt in ground no. 2 above. Since this fact is not readily discernible from the material on record, it is proper to remit the matter to the file of ld. AO for the limited purpose of its verification. If this interest component is already included in the interest income of Rs.3,68,871/- then, no further addition will be made towards interest component ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 6 forming part of the closure proceeds of the two fixed deposits. However, the addition in respect of principal amount of Rs.5 lacs each for two fixed deposits shall continue as addition to the total income of the assessee. 5.2 Considering the above observations and findings, we set aside the addition of Rs.16,60,564/- and Rs.1,62,083/- confirmed by the ld. CIT(A) and instead direct for an addition of Rs.1,14,535/- by taking net profit rate of 8% on the deposits of Rs.14,31,683/- in the two bank accounts. Also, addition of Rs. 10 lacs (Rs. 5 lacs each for two fixed deposits) in respect of the principal value of the two fixed deposits for the closure proceeds which were credited in the said two bank accounts is sustained. From the remaining portion of closure proceeds, for the interest component of Rs.65,751/- each for the two fixed deposits, we remit the matter back to the file of ld. AO for the limited purpose of verification as directed above. Accordingly, these grounds of appeal are partly allowed. 6. Ground no. 4 relates to confirmation of addition of Rs.13,62,000/- in respect of cash credits for unsecured loan taken by the assessee. In the course of assessment proceedings, ld. AO noted that assessee had purchased a piece of land for Rs.70,91,774/-. For the source of this investment, entire amount was shown to be arranged as loans and gifts for the purpose of making this investment. Out of all the loans and gifts, substantial amounts have been accepted by the ld. AO and the ld. CIT(A) except for loans taken by the assessee from six persons. In respect of loan taken from these six persons which comes to a total of Rs.13,62,000/-, they were not accepted on the ground that cash was deposited in the bank account of the cash creditors before issuing cheque to the assessee for the impugned loan transactions. In the ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 7 course of appellate proceeding before the ld. CIT(A), it was noted by him that there was no apparent source of cash in hand of these persons nor there was anything placed on record for substantiating the availability of cash and establish creditworthiness of these persons for the loan transactions. Further, these persons could not be produced before the ld. AO for the purpose of enquiry. Ld. CIT(A) also noted that though deposit of cash in bank accounts prior to issue of cheques for loan by itself is not a conclusively proof that the loans are bogus but at the same time no documents have been filed by the assessee to show and demonstrate the availability of cash in hand of such loan creditors. He also noted that no details of income tax assessment of these persons have been placed on record. 6.1 In the course of hearing before us, the ld. Counsel reiterated the submissions made before the authorities below, referring to the bank statements of these six loan creditors which are placed at page 5 to 10 of the paper book. From the perusal of these bank statements of the loan creditors, it is noted that there is deposit of cash immediately prior to the issue of cheque by the loan creditors to the assessee towards the impugned loan transactions. It is also noted that prior to the deposit of cash and issuance of cheque, the balance in these accounts have been either of meager amount or have remained stable. Nothing further has been brought on record to controvert the observations and findings of the authorities below. In the light of these facts and material on record, we confirm the addition made in this respect. Accordingly, this ground of appeal is dismissed. 7. Ground no. 5 and 6 relates to addition of Rs.6,50,774/- sustained by the ld. CIT(A) out of the addition of Rs.10,41,744/- made by the ld. AO which formed part of the investment made by the assessee for ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 8 purchase of land. In this respect, ld. AO noted that assessee claimed to have made this investment of Rs.10,41,744/- from past savings for which no details / evidences were submitted in the assessment proceedings. He also noted that no agriculture income was reported in the return of income for the impugned year by the assessee. Ld. AO show caused the assessee why this amount should not be treated as unexplained investment and added to the total income of the assessee. Nothing corroborative was furnished during the assessment and ld. AO proceeded to make this addition. In the course of appeal before the ld. CIT(A), even though no plausible explanation was submitted, a relief of Rs.3,90,970/- was granted by considering it to be out of past savings by analyzing the transactions executed from the bank accounts of the assessee and the balance Rs.6,50,774/- was sustained as the addition. 7.1 Considering the observations given by the ld. CIT(A) and in absence of any plausible explanation by the assessee along with corroborative evidences to support the claim, we do not find any reason to interfere with the factual finding of the ld. CIT(A) of sustaining the addition of Rs.6,50,774/-. Accordingly, these grounds of appeal are dismissed. 8. Ground no. 11 deals with addition confirmed by the ld. CIT(A) for Rs.13,88,516/- in respect of investment in mutual funds made by the assessee. 8.1 In course of hearing, ld. AO had called for details of investments made by the assessee in fixed deposits, NSCs, mutual funds etc. Statements of mutual fund investments made by the assessee were placed on record, from where ld. AO noted that in the mutual fund account no. 154-036487 an investment of Rs.13,88,516/- has been ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 9 made by the assessee for which no explanation for the source of these investments were made by the assessee. Accordingly, this was added as undisclosed investment. In the course of the appeal before the ld. CIT(A), this was sustained with the observation that assessee has not come out with clean hands and no details were furnished before him in respect of source of its investments. 8.2 Ld. Counsel for the assessee referred to the statements of mutual fund account forming part of the paper book from page no. 39 to 58 and submitted that no investments in the mutual fund has been made in the current year rather it was coming from last several years as opening balance. During the year, only value additions were made on account of increase in the value of units. From the perusal of these statements on record, we find that there is no investment which has been made in the current year towards mutual funds. Both the authorities below have failed to take note of this verifiable fact. From this factual observation from the mutual funds account statements, we find that no addition is called for towards the undisclosed investment of Rs.13,80,516/- which has been added and confirmed by the authorities below. Accordingly, we direct the ld. AO to delete the addition of Rs.13,80,516/- made in respect of investment in mutual funds account. Accordingly, this ground of appeal is allowed. 9. Ground no. 12 is in respect of confirming the addition of Rs.6 lacs for investment made in fixed deposits with bank. In the course of assessment proceedings, ld. AO had called for details of investment made by the assessee in fixed deposits with HSBC bank account. No satisfactory explanation was filed in the assessment proceedings which led the ld. AO to make this addition of Rs.6 lacs as unexplained investment. In the appellate proceedings before the ld. CIT(A), this ITA No.90/PAT/2014 Sudhir Kumar A.Y. 2010-11 10 addition was confirmed since no satisfactory explanation was submitted except for explanation that this investment was made from withdrawal from the bank account which was temporarily deposited as a fixed deposit. In the course of hearing before us, ld. Counsel for the assessee could not corroborate the submission made before the ld. CIT(A) to demonstrate that this investment was made from withdrawal from Bank account. Accordingly, we do not find any reason to interfere with the finding given by the ld. CIT(A) and sustain the addition so made. Accordingly, this ground of appeal is dismissed. 10. In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 26.05.2022. Sd/- Sd/- (RAJPAL YADAV) (GIRISH AGRAWAL) VICE-PRESIDENT ACCOUNTANT MEMBER Kolkata, Dated: 26.05.2022 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT, Dhanbad 4. The CIT (A) Dhanbad 5. The DR, Patna Bench, Patna //True Copy// [ By Order Assistant Registrar/DDO ITAT, Patna Benches, Patna