Income Tax Officer, Bardoli V. Sudhirkumar kaushalkishor prajapati, Bardoli

ITA 95/SRT/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3081 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-04-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 28-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH R. MALPANI
• Keywords: Business income; Additional evidence; Tax effect; Set aside
• Section: 144; 142(1); 69A; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.95/SRT/2024 Assessment Year: (2017-18) (Physical Hearing) The ITO, Ward – 1, Bardoli Vs. Sudhirkumar Kaushalkishor Prajapati, At & Post – Akoti, Post – Akoti, Via- Rayam, Tal: Bardoli, Dist – Surat, 394335, Gujarat èथायीलेखासं./जीआइआरसं./PAN/GIR No: BFPPP3203R (Appellant) (Respondent) Appellant by Shri Manish R. Malpani, CA Respondent by Shri Vinod Kumar, Sr. DR Date of Hearing 02/04/2024 Date of Pronouncement 08/04/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘NFAC’), Delhi, dated 01.12.2023 which in turn arises out of as assessment order passed by Assessing Officer u/s 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 08.10.2019. 2. The grounds of appeal raised by the Revenue are as follows: “1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in admitting additional evidences as the AO has not got an opportunity to verify the documents submitted by the assessee under Rule 46A(3) of Income-Tax Rules, 1962 before the Ld. CIT(A),therefore, the order of the Ld CIT(A) is bad in law on account of violation of the provisions of Rule 46A(1), 46A(2) and 46A(3)of the Income Tax Act Rules, 1962. 2 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) has violated the principles of natural justice while admitting the additional evidences and not providing opportunity of being heard to the Assessing Officer as per the Rule 46A(3) of the Income Tax Rules, 1962. 3. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition made by AO of Rs.1,27,62,105/- on account section 69A of the Act, as the assessee neither in the assessment proceedings nor in the appeal proceedings produced any cogent evidences to prove that the deposits made in the Bank account pertains to his business receipts. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition when the assessee has totally failed to establish his business alongwith documentary evidences from which he has deposited such a huge amount in a single bank account. 5. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 6. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored.” 3. The facts which can be stated quite shortly are as follows: During the assessment proceedings, the assessing officer received information from AIMS module on ITBA, to the effect that the assessee had deposited cash amounting to Rs.19,11,400/- during demonetization period in his bank account No.46311031002 with the Dena Bank, Sevni, Kamrej Branch. Further, it was observed that the assessee had not filed his return of income by due date as stipulated u/s 139(1) of the Act. Accordingly, notice u/s 142(1) of the Act was issued on 06.02.2018 requiring therein to prepare a true and correct return of income in respect of which it was assessable under the Income Tax Act for assessment year 2017-18. However, the assessee has failed, in toto, to comply with the terms of the notice issued u/s 142(1) of the Act. 4. Thereafter, the assessing officer issued notice u/s 142(1) of the Act, on dated 12.08.2019, which is reproduced by the assessing officer on page no. 3 of assessment order. In response to show cause notice, assessee vide his response received by AO through ITBA e-assessment 3 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati portal on 09.09.2019 wherein the assessee requested adjournment for 30 days. Then after, in response to the notice, assessee vide his response received by AO through ITBA e-assessment portal on 21.09.2019 submitted that he was engaged in trading of Recharge Coupons of Vodafone on retail and semi wholesale basis and earning commission income from such activity. The Assessee also submitted bank book and copy of bank statement of the relevant period. The details submitted by the assessee have been perused by the AO, and the AO noted that these are not sufficient documentary evidence. The AO noted that Assessee has not provided any documentary evidences which can justify existence of business activity of sale of recharge coupons. Thereafter, final opportunity was afforded to the assessee by way of issuance of show cause notice on 23.09.2019 requiring the assessee to submit documentary evidence to justify the source of cash deposits and credit entries in his bank account. In response to the show cause notice, assessee submitted ledger of M/s Sati marketing showing transactions by the assessee in it books. Assessee also submitted Balance Sheet and profit and loss account before Assessing Officer. 5. However, assessing officer rejected these documents and evidences of the assessee and observed that as per information available in AIMS module on ITBA, that the assessee had deposited cash amounting to Rs.19,11,400/- during demonetization period in-his bank account No.46311031002 with the Dena Bank, Sevni, Kamrej Branch. However, on perusal of account statement of the said account for the F.Y.2016-17, a total cash deposits of Rs.1,27,39,930/- and other credits of Rs.22,175/-, totaling of Rs.1,27,62,105/- (Rs.1,27,39,930 + Rs.22,175) have been observed and the assessee has not filed his return of income for A.Y.2017-18 as per provisions of section 139(1) of the 4 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati Act and has also failed to file its return of income in response to the notice issued u/s 142(1) of the Act dated 06.02.2018. Therefore, the credit entries including cash deposits into the above mentioned bank accounts to the tune of Rs.1,27,62,105/- remained unexplained. Accordingly, the same amount of Rs.1,27,62,105/- was treated as Unexplained Money under Section 69A r.w.s 115BBE of the Income Tax Act, 1961. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has allowed the appeal of the assessee. The ld CIT(A) examined the bank statement of Bank of Baroda account no. 046311031002, filed by the assessee, during the course of assessment proceedings and also at the appellate stage that the same is in the name of proprietary concern M/s BK Telecom and the customer status of the account is shown as ‘business’. The ld CIT(A) noted that it is evident from the bank statement that cash was deposited in this bank account on day to day/periodical basis which indicate that the same is on account of daily sale of mobile recharge coupon. It was further noted that regular payments have been made to M/s Sati Marketing against the cash deposits towards purchase of mobile recharge coupons. The assessee also stated before AO that there was 3% margin on the value of mobile recharge coupon, therefore, based on these facts, the ld CIT(A) deleted the addition. 7. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 8. The learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) for the Revenue submitted that assessee has submitted the additional evidences before the ld. CIT(A), therefore there 5 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati is a violation of provisions of Rule 46A of Income Tax Rules, therefore, matter may be set aside to the file of the Assessing Officer to examine the additional evidences. 9. On merit, ld. CIT-DR for the Revenue submitted that the assessee has failed to explain source of the money deposited in the bank account therefore order of the Assessing Officer may be upheld. 10. On the other hand, Ld. Counsel for the assessee, at the outset, pointed out that disputed addition made by the assessing officer is below the tax limit, that is, below Rs.50,00,000/-, which was prescribed by the CBDT in its circular, hence the appeal of the Revenue may be dismissed on account of low tax effect. 11. On merit, ld Counsel for the assessee, argued that no additional evidences were submitted during the appellate proceeding before the ld. CIT(A), the assessee has submitted only some bills to prove 3% of margin by way of some sample copies of bills, however, this 3% margin issue was already argued before the Assessing Officer by the assessee. Just to substantiate the 3% (percentage) which was argued before the Assessing Officer, the assessee has submitted some sample copies of bills to prove the percentage only, and the entire documents and evidences were submitted before assessing officer, hence there is no violation of provisions of Rule 46A of the Rules. Further, Learned Counsel submitted that since the ld. CIT(A) has passed the speaking order taking into consideration all the evidences submitted before the assessing officer, on merit, therefore order passed by the ld. CIT(A) may be upheld. 6 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati 12. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that Ld. DR for the Revenue is factually wrong in mentioning that assessee has failed to furnish documentary evidences before the assessing officer. As we have mentioned in the facts narrated above, in this order, that during the assessment proceedings, the assessee has submitted each and every document and evidence before the assessing officer and also argued that the margin on the coupon was 3%, and the cash deposited in bank accounts were sale proceeds of his business of selling of recharge coupons. From the assessee’s ledger in books of dealer (M/s. SATI MARKETING), it is evident that the assessee has made purchases from him against which payments were made from the bank account. He is the authorized dealer (supplier) of recharge coupons and agreement is between him (dealer) and the telecom company (Vodafone). The Assessee, being a small retail vendor in a small village cannot directly enter into agreement with Telecom Company therefore the Assessee used to purchase from dealer and sells in retail/ semi-wholesale basis in his village. It is clearly proved from the ledger account and bank statement that the assessee has consistently made purchases from the dealer and made payments for the same and hence that itself proves the sale of recharge coupons. Thus, the cash deposited in the bank account are clearly sale proceeds of this business of assessee and only net profit from such business can be assessed as income. The Assessee had fixed margin/ commission of 3% from this business. As per profit and loss account of assessee, the net profit earned during the assessment year is Rs.2,28,448/-. Hence, this net profit can be assessed as income of 7 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati assessee. Making addition of whole of the sale proceeds of Rs.1,27,62,105/- by wrongly assuming the same as unexplained money u/s 69A of the Act is clearly wrong and unjustified. The assessee has submitted, some sample copies of bills, only to prove 3% margin as this 3% margin was already argued by the assessee before the assessing officer, hence no additional evidences were submitted before the ld CIT(A) therefore, there is no violation of provisions of Rule 46A of the Income Tax Rules. 13. The ld. CIT(A) observed that assessee is carrying out the retail business of sale of mobile recharge coupon in the name of proprietary concern, M/s. B. K. Telecom. The modus operandi as explained by the assessee is that he used to purchase mobile recharge coupons from M/s. Sati Marketing who is the distributor of Vodafone and sale the same to the local customers on retail basis. It was noted by ld. CIT(A) from the bank statement of Bank of Baroda, account no.046311031002, filed by the assessee, during the course of assessment proceedings and also at the appellate stage that the same is in the name of proprietary concern M/s. BK Telecom and the customer status of the account is shown as ‘business’. It is evident from the bank statement that cash was deposited in this bank account on day to day/periodical basis which indicate that the same is on account of daily sale of mobile recharge coupon. It is further noted that regular payments have been made to M/s. Sati Marketing against the cash deposits towards purchase of mobile recharge coupons. The bank statement thus shows that the debits and credits appearing in the bank account is related to the said business activity carried out by the assessee. Considering these facts, the ld. CIT(A) observed that cash deposits and other credits found credited in the assessee's said bank account is related to the business of the assessee 8 95/SRT/2024/AY.2017-18 Sudhirkumar K. Prajapati and out of sale of mobile recharge coupon, therefore, ld CIT(A) deleted the addition. The ld CIT(A) also directed the assessing officer that net profit of Rs.2,28,448/- declared by the assessee, as per the profit and loss account submitted is liable to be taxed as business income of the assessee on sale of recharge coupons for the current assessment year and hence no question arises to charge the said income of the assessee u/s 115BBE of the Act. We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A).That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the all grounds of appeal of the Revenue are dismissed. 14. In the result, appeal filed by the Revenue is dismissed. Order is pronounced on 08/04/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 08/04/2024 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat