Income-tax Officer, Pune V. Shri sudkdev G. Basantani, Pune

ITA 992/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9805 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: N T ADWANI

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 992/PN/2011 (ASSESSMENT YEAR 2007-08) INCOME TAX OFFICER, WARD-8(1), PRATYAKSHAKAR BHAVAN, AKURDI, PUNE 411 044. .. APPELLANT VS. SUKHDEV G. BASANTANI, PLOT NO.303, FLAT NO.7, MONIKA APARTMENT, PIMPRI, PUNE 411 017. PAN NO. AAJBP 8721C .. RESPONDENT ASSESSEE BY : SRI N.T. ADWANI DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 22-11-2012 DATE OF PRONOUNCEMENT : 23-11-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 30-05- 2011OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YE AR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE, AN INDIVIDUAL, IS ENGAGED IN RETAIL BUSINESS IN ELECTRICAL AND ELECTRONIC GOODS IN THE NAME AND STYLE OF MX ELECTRONICS. IT FILED ITS RETURN OF INCOME ON 14- 08-2007 DECLARING TOTAL INCOME AT RS.3,24,261/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE AO NOTED THAT AS PER AIR INFORMATION AVAILABLE THE ASSESSEE HAS DEPO SITED CASH OF RS.17,61,000/- IN A SAVINGS BANK ACCOUNT. ON BEING QUESTIONED BY THE AO, IT WAS SUBMITTED BY THE ASSESSEE THAT HE IS HAVING SAVINGS BANK ACCOUNT AT SBI, PIMPRI, PUNE BEARING ACCOUNT NO. 01190030659 AND WITH IDBI, PIMPRI, PUNE BEARING ACCOUNT NO.103010100325639. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE IS HAVING ONE MORE BANK ACC OUNT BEARING ACCOUNT NO.103010100325679 AT AXIS BANK, CHINCHWAD, PUNE WH ICH HAS NOT BEEN DISCLOSED TO THE DEPARTMENT. 2 2.1 THE AO NOTED THAT THERE IS A DEPOSIT OF RS.17,6 3,900/- IN THIS BANK ACCOUNT WHICH WAS OPENED BY THE ASSESSEE ON 05-12-2006. HE NOTED THAT THE ASSESSEE HAS NOT SHOWN BANK TRANSACTIONS OF THIS BANK ACCOUNT AN D THE CLOSING BALANCE OF THIS BANK ACCOUNT HAS NOT BEEN SHOWN IN THE BALANCE SHEE T. THE AO RECORDED THE STATEMENT ON OATH OF THE ASSESSEE. THEREAFTER, THE AO SOUGHT DIRECTION U/S.144A FROM THE ADDL. CIT WHO GAVE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE AND THEREAFTER DIRECTED THE AO TO COMPLETE THE SCRUTINY ASSESSMENT WITH CERTAIN DIRECTIONS AS PER HIS LETTER DATED 24-12-2009. IN STATEMENT ON OATH RECORDED BY THE AO THE ASSESSEE CLAIMED THAT DEPOSIT OF RS.17,63,90 0/- ARE INCLUSIVE OF TOTAL TURNOVER OF RS.25,87,397/-. SINCE NET PROFIT DERIV ED IS MORE THAN 5% OF THE TURNOVER, THEREFORE, IN VIEW OF PROVISIONS OF SECTI ON 44AF NO FURTHER ADDITION IS CALLED FOR. 2.2 HOWEVER, THE AO WAS OF THE OPINION THAT THE ASS ESSEE HAS NOT CLAIMED THE INCOME U/S.44AF. ACCORDING TO HIM AS PER THE PROVI SIONS OF SECTION 44AF THE ASSESSEE IS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOU NT AND HAS TO SIMPLY SHOW THE TOTAL TURNOVER AND WORK OUT 5% PROFIT ON THE TURNOV ER. HOWEVER, IN CASE OF THE ASSESSEE HE HAS PREPARED TRADING PROFIT AND LOSS AC COUNT AND BALANCE SHEET WHICH WAS SUBMITTED WITH THE RETURN OF INCOME. SINCE THE ASSESSEE NEITHER AT THE TIME OF FILING OF RETURN OF INCOME NOR AT THE TIME OF ASSES SMENT PROCEEDINGS DISCLOSED HIS SAVINGS BANK ACCOUNT WITH AXIS BANK, THEREFORE, THE AO CAME TO THE CONCLUSION THAT THE STAND OF THE ASSESSEE IS AN AFTERTHOUGHT. THE AO ACCORDINGLY TREATED THE AMOUNT OF RS.17,63,900/- AS UNDISCLOSED INCOME OF T HE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS.20,88,160/- AS AGAINST RS.3, 24,261/- DECLARED BY THE ASSESSEE. 3. IN APPEAL THE LEARNED CIT(A) DELETED THE ADDITIO N BY HOLDING AS UNDER : 11. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND MATERIAL AVAILABLE ON RECORD. THE BASIC EXPLANATION IS THAT THE INDIVIDU AL CREDITS IN THE BANK ACCOUNT IN AXIS 3 BANK HAS ALREADY BEEN INCLUDED AS PART OF SALES. T HIS EXPLANATION OF THE APPELLANT WAS NOT CONSIDERED BY THE AO IN THE PROCEEDINGS U/S.143 (3)/144A. SAME EXPLANATION WAS GIVEN HERE ALSO DURING THE APPELLATE PROCEEDINGS. VIDE ORDER UNDER SECTION 250(4) THE AO WAS GIVEN ONE MORE OPPORTUNITY TO VERIFY THE APP ELLANTS EXPLANATION. THE APPELLANTS SUBMISSION FILED ON 22-02-2011 ALONG WI TH NECESSARY DETAILS OF PURCHASES AND SALES WERE FORWARDED TO THE AO ALONG WITH BANK STATEMENT TO VERIFY AND POINT OUT THE DISCREPANCIES IN THE ASSESSEES EXPLANATION, IF ANY . IT WAS ALSO POINTED OUT BY THE APPELLANT THAT WHILE THE TURNOVER DURING THE YEAR W AS RS.25,87,397/- AND THE MONTHLY DETAILS OF SALES WERE ALSO GIVEN, THE DEPOSIT IN TH E BANK ACCOUNT AMOUNTED TO RS.17,63,900/- ONLY. FURTHER, IT IS STATED THAT TH E APPELLANT DID NOT HAVE ANY CURRENT ACCOUNT AND THE ENTIRE TURNOVER WAS CREDITED IN THE SAVING ACCOUNT IN SBI AND AXIS BANK. MOREOVER, IT IS CONTENDED THAT SECTION 44AF OF THE IT ACT WAS APPLICABLE TO THE APPELLANTS CASE, BEING A RETAIL TRADER, WHICH ALLO WED ADOPTION OF NET INCOME OF 5% OF THE TURNOVER; WHILE, DUE TO THIS ADDITION, THE NET PROFIT HAS BECOME 16.39%. IN FACT, THE APPELLANT FURTHER POINTED OUT THAT IN A.Y. 2008-09, SAME MISTAKE WAS COMMITTED BY THE APPELLANT, I.E., THE AXIS BANK ACCOUNT BALANCE WAS NOT MENTIONED IN THE BALANCE SHEET. HOWEVER, THE SAME AO HAS ACCEPTED THIS EXPLANATION AND HAS ADDED ONLY THE BANK BALANCE AS ON 31-03-2008, WITHOUT ADDING THE INDIVI DUAL DEPOSITS IN THE BANK ACCOUNT. THE AO WAS CONFRONTED WITH THESE SPECIFIC POINTS RA ISED BY THE APPELLANT IN THE SUBMISSION FILED ON 22-02-2011 BY WAY OF AN ORDER U /S.250(4). HOWEVER, IN THE LETTER DATED 15-03-2011, THE AO HAS MERELY REITERATED THE EARLIER OBSERVATIONS IN THE ASSESSMENT ORDER. IN FACT THIS REPORT GIVES AN IMP RESSION THAT THE AO HAS ADDED THE DEPOSITS OF RS.17,63,900/- IN THE BANK ACCOUNT AS T HE BANK BALANCE AS ON 31-03-2007, AND JUSTIFIED THE ADDITION ACCORDINGLY. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPOSITS IN UNDISCLOSED BANK ACCOUNT IN AXIS BANK, NOT DISCLOSED IN THE RET URN OR EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSE ES CASE IS COVERED BY THE PROVISION OF SECTION 44AF OF THE I.T. ACT, 1961, WH EN INFACT NO SUCH CLAIM WAS MADE BY THE ASSESSEE IN THE RETURN FILED, WHEREIN A PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WERE ALSO ENCLOSED. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT PROVE THAT THE CASH DEPOSITED IN THE ACCOUNT WITH AXIS BANK REPRESENTED CASH SALES EVIDENCED BY VOUCHERS IN THE ABSENCES OF ANY PURCHASES EVIDENCED BY ANY PURCHASE VOUCHERS OR PROOF OF PAYMENT OF SUC H PURCHASES THEREOF. 5. THE LEARNED DR STRONGLY RELIED ON THE ORDER OF T HE AO AND SUBMITTED THAT THE OBSERVATIONS OF THE CIT(A) ARE CONTRARY TO THE FACTS ON RECORD. SHE SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE DURING THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS THAT THE TURNOVER OF RS.25,87,397/- INCLUDES THE DEPOSIT OF RS.17,63,900/- EVEN THOUGH THE AO HAD PR OVIDED AN OPPORTUNITY TO THE ASSESSEE. ACCORDING TO HER, THE ONUS WAS ON THE AS SESSEE TO SUBSTANTIATE HIS CLAIM THAT ALL THE TRANSACTIONS NARRATED IN THE BANK STAT EMENTS ARE DISCLOSED TO THE 4 DEPARTMENT AND ARE INCLUDED IN THE TURNOVER, I.E. R ECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. SHE SUBMITTED THAT THE ASSESSEE IN HIS STATEMENT RECORDED ON 23-11-2009 HAD ADMITTED TO HAVE MAINTAI NED SALES AND PURCHASE REGISTER AS WELL AS THE PURCHASE BILLS. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE DEPOSITS IN THE SAID ACCOUNTS ARE DULY SUBSTANTIATE D BY ENTRIES IN SALES AND PURCHASES OF THE ASSESSEE IS NOT CORRECT SINCE THE SAME WAS NEITHER PROVED BEFORE THE AO IN REMAND PROCEEDINGS NOR BEFORE THE CIT(A). SHE SUBMITTED THAT THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT REL IED ON BY THE CIT(A) IN THE CASE OF CIT VS. SURINDER PAL ANAND IS NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE SINCE IN THAT CASE INCOME WAS DETERMINED U/S.4 4AD WHEREAS IN THE INSTANT CASE THE INCOME HAS NEITHER BEEN DISCLOSED U/S.44AD NOR U/S.44AF. SHE FURTHER SUBMITTED THAT THE CONTENTION OF THE ASSESSEE THAT HE WAS NOT HAVING ANY CURRENT ACCOUNT DURING THE RELEVANT PERIOD IS ALSO NOT CORR ECT SINCE THE ASSESSEE WAS MAINTAINING A CURRENT ACCOUNT BEARING ACCOUNT NO.29 48 WITH THE SEVA VIKAS COOPERATIVE BANK, PIMPRI, PUNE DURING THE YEAR WHIC H WAS OPENED ON 05-08-1991. SHE ACCORDINGLY SUBMITTED THAT CIT(A) WAS NOT JUSTI FIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT HE HAD NO SEPARATE BANK ACCOUNT. SHE SUBMITTED THAT THE ORDER OF THE AO BE RESTORED AND THE ORDER OF THE CIT(A) BE SET-ASIDE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO THE COPY OF THE BANK ACCOUNT MAINTAINED WITH THE SEVA VIKAS COOPERATIVE BANK, PIMPRI, PUNE HE SU BMITTED THAT THE CURRENT ACCOUNT IS IN THE NAME OF MX ELECTRONICS AND ELECTR ICALS WHICH BELONGS TO THE BROTHER OF THE ASSESSEE MR. PAHALAJ BASANTANI WHO I S THE PROPRIETOR. THE ASSESSEE HAS NO CONNECTION WITH THIS BANK ACCOUNT. THEREFOR E, THE LEARNED DR IS NOT CORRECT IN SAYING THAT THE SAID CURRENT ACCOUNT BELONGS TO THE ASSESSEE. HE SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE SAME AO IN HIS ORDER PASSED U/S.143(3) FOR A.Y. 2008-09 HAD ADDED ONLY THE BALANCE AMOUNT APPEARING AS ON 31-03-2008 5 AT RS.39,698/-. DURING THE CURRENT YEAR, THE BALAN CE IS ONLY RS.38,847/-. THEREFORE, AT BEST, THE AMOUNT OF RS.38,847/- CAN B E ADDED. HE SUBMITTED THAT SINCE THE TURNOVER OF THE ASSESSEE IS LESS THAN 40 LAKHS AND SINCE THE PROFIT DISCLOSED IS MUCH MORE THAN 5% OF THE TURNOVER, THE REFORE, NO FURTHER ADDITION IS CALLED FOR. HE ACCORDINGLY SUBMITTED THAT THE ORDE R OF THE CIT(A) BEING IN CONFORMITY WITH THE LEGAL PROVISIONS SHOULD BE UPHE LD. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE CASE DECISIO N RELIED ON BY THE ASSESSEE BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT TH E TURNOVER OF THE ASSESSEE IS LESS THAN RS. 40 LAKHS. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS DISCLOSED PROFIT OF MORE THAN 5% OF THE TURNOVER. WE FIND THE AO MADE ADDITION OF RS.17,63,900/- TO THE TOTAL INCOME OF THE ASSESS EE ON THE GROUND THAT THE DEPOSITS IN THE AXIS BANK WAS NOT DISCLOSED TO THE DEPARTMEN T. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TURNOVER OF RS.25,87,397/- INCLUDES THE DEPOSIT OF RS.17,63,900/-. WE FIND FROM THE ASSESS MENT ORDER THAT THE AO AT NO POINT OF TIME HAS BROUGHT ON RECORD THAT THE TOTAL DEPOSITS IN BOTH DISCLOSED AND UNDISCLOSED BANK ACCOUNTS EXCEED THE TURNOVER OF RS .25,87,397/- AS DISCLOSED BY THE ASSESSEE. 7.1 THE INCOME TAX ACT, 1961 PROVIDES PRESUMPTIVE T AX ON SMALL TRADERS. UNDISPUTEDLY, THE ASSESSEE HERE IS A SMALL TRADER S INCE TURNOVER IS ONLY RS.25,87,397/-. HE HAS DISCLOSED NET PROFIT OF RS. 3,24,261/- WHICH IS MUCH MORE THAN THE 5% PRESCRIBED U/S.44AF. THE LOGIC OF THE R EVENUE THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT AND THEREFORE DEPOSITS IN THIS UNDISCLOSED BANK ACCOUNT SHOULD BE ADDED, IN OUR OPINION, DOES NOT F IND MUCH FORCE. WE ALSO FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT DUE TO SOME 6 TYPOGRAPHICAL ERROR THE BALANCE OF RS.38,847/- COUL D NOT BE REFLECTED IN THE BALANCE SHEET. SINCE THE ASSESSEE IS A SMALL TRADER, STRIC T COMPLIANCE TO MAINTENANCE OF BOOKS OF ACCOUNT CANNOT BE EXPECTED. WE FURTHER FI ND THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE SAME AO IN THE ORDER PASSED U /S.143(3) FOR A.Y. 2008-09 HAD MADE ADDITION OF RS.39,698, BEING THE BALANCE A S ON 31-03-2008. FURTHER, THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SO CALLED CURRENT ACCOUNT MAINTAINED WITH THE SEVA VIKAS COOPERATIVE BANK BELONGS TO THE BROTHER OF THE ASSESSEE AND THE ACCOUNT IS IN THE NAME OF M X ELECTRONICS AND ELECTRICALS WHEREAS THE ASSESSEE OPERATES IN THE NAME AND STYLE OF MX ELECTRONICS COULD NOT BE CONTROVERTED BY THE LEARNED DR. UNDER THESE CIR CUMSTANCES AND CONSIDERING THE FACT THAT THE ASSESSEE IS A SMALL TRADER, ADDITION OF RS.17,63,900/-, IN OUR OPINION, WAS UNCALLED FOR. HOWEVER, SINCE THE ASSESSEE HAS UNDOUBTEDLY PREPARED A BALANCE SHEET AND NOT DISCLOSED THE BALANCE OF RS.38,847/- AS ON 31-03-2007, THEREFORE, THE SAME IN OUR OPINION HAS TO BE ADDED TO THE TOTAL IN COME OF THE ASSESSEE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE AO TO RESTRICT THE ADDITION TO RS.38,847/-. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY-ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF NOVEMBER, 2012. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 23 RD NOVEMBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE