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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. Pr.CIT, Sambalpur, dated 18.03.2022, passed in ITBA/REV/F/REV5/2021-22/1041011837(1) for the assessment year 2017-2018.
2. It was submitted by the ld. AR that the appeal filed by the assessee is delayed by 199 days. It was the submission that the delay was on account of medical treatment of the assessee’s father and assessee’s wife. It was the submission that the assessee is an individual engaged in trading of potatoes, onion and garlic in the remote area of the district of Deogarh, Odisha. It was the submission that the assessee was not well- versed in taxation issues and on account of the medical treatment of the assessee’s father as also the assessee’s wife, the assessee could not file the appeal within the time. The assessee has also filed necessary affidavit for condonation of delay of 199 days. Ld. CIT-DR has not raised any serious objection. Consequently, the delay in filing the appeal is condoned and the appeal is disposed off on merits.
3. On merits, it was the submission that the ld. AR that the original assessment order in the case of the assessee came to be completed u/s.144 of the Act on 30.12.2019, wherein the AO had estimated the income of the assessee at 8% of the cash deposited in the assessee’s bank account representing the sales. It was the submission that the assessee had filed first appeal before the ld. CIT(A) and in the meantime Vivad Se Vishwas Scheme, 2020 had been introduced and the assessee opted for the said scheme. It was the submission that Form No.5 under the Vivad Se Vishwas Scheme was issued on 29.11.2021. It was the submission that on 25.01.2022 a show cause notice u/s.263 of the Act came to be issued on the assessee and on 18.03.2022 an order u/s.263 of the Act came to be passed, wherein in para 5 of the order, the ld. Pr.CIT has given the following directions :- 5. I have carefully considered the submission vis-à-vis facts on record and proceed to determine the issues as follows : 5.1 Cash Deposit: The assessee is a trader in vegetables. As per information in SFT-004 (cash deposits) from the Insight Portal, the following transactions were made in respect of Sri Siva Shankar Sahu PAN: APEPS1706E Upload Person name Account Number Amount of Amount Accoun date Credit debit t Relatio nship 26/5/2017 Deepak Store 19644015002463 1,47,72,650 8,72,300 First/so le accoun t holder 26/5/2017 Shivashankar 19644015002463 1,47,72,650 8,72,300 Control Sahu Sadananda ling Sahu person 2,95,45,000 On perusal of trial balance filed and statement of income filed it is seen that the NP is Rs.3,98,600/-, the sales Rs. 1,58,23,571/-. Purchase: Rs. 1,48,09,973/. The audited Account for next year i.e. FY 17-18 shows the turnover at RS.1.54 Cr, GP @10.57% and NP @ 3.44%. During scrutiny, the assessee has submitted the purchase and sales ledger and cash book as seen from submission dated 16/9/2019. The Jt CIT observing that since the month wise cash deposits were compared by the AO with purchases (remittance to suppliers ) and the month-wise sales with deposits, she has directed the AO vide letter dated 27/12/2019 to estimate the net profit u/s 44AD of the Act. 5.2. Based on the information filed and examination of the case in the light of direction u/s 144A, the assessment was completed and the same is reproduced verbatim to appreciate the' issue in its true perspective, Assessment Order u/s 144 of the I.T.Act, 1961 dated 30/12/2019 The Assessee Sri SibasankarSahu is an individual engaged in trading of potatoes, onions and garlic, The Assessee filed his return of income for the A. y, 2014-15 to 2016-17, However, he has not furnished his return of income for the A. Y. 2017-18.Sri SibasankarSahu had maintained bank account bearing no. 19644015002463 & 19641131000538 at Oriental Bank of Commerce. As per information available on record in the departmental system data base, during the FlY 2016-17 the asses se had deposited aggregate cash of Rs. 2, 95,45,000/- in his bank accounts maintained at Oriental Bank of Commerce. Though the assesse was engaged in business activities and has earned income from it and had also deposited substantial cash in his bank accounts, he had not filed his Return of Income for the A/Y 2017-18. Therefore as per Board's Instructions, a Notice uls 142(1) of the Act dtd. 17.01.2018 was issued and served upon the assessee, asking him to file his Return of Income for the A/Y 2017-18, But the assessee did not filed his Return of Income for the A/Y 2017-18.
As a measure of enquiry notice u/s. 133(6) of the Act was issued to the Oriental Bank of Commerce, Deogarh on doted 01.05.2019 and copy of bank account statements and information on cash deposits made using old demonetized 'currency was collected, As per the bank account statement the assessee has in fact received an aggregate of Rs.1,78,71,965 in his bank account mentioned as above. Therefore, later a notice u/s. 142(1) of the Act as well as notice u/s 144(1) of the Act were issued to the assessee asking him to explain the source of cash deposits with documentary evidence. In response to the above, the assessee furnished the following documents on date 16.09.2019.
Statement of income for the Assessment Year 2017-18, 2. Current Account & CC Account statement from 01.04201610 31.03.2017, 3. Statement of Affairs & capital Bank Account for the F Y 2015- 16 and 2016-17. 4, Copy of Cash Book and CC Bank Book from 01.04,2016 to 31032017.
5. Purchase ledger & Sales Ledger from 01.04.2016, to 31.03.2017.
6. Un-uploaded Balance sheet and Profit & Loss account for the F.Y. 2016-17. Though these statements have been prepared same has neither been signed by any accountant nor has been uploaded electronically to the departmental sites and hence, the same has got no relevance.
Before completion of assessment, the trends of transaction records in the bank accounts of the assessee as well as the past income tax records of the assessee are analysed and following observation are made: (i) The records of transactions it;1 the bank accounts show that, the assessee was engaged in trading business. (ii) There are frequent self-cash deposits and transfer receipts from third parties in the bank accounts. The aggregate receipts are remitted to the possible suppliers. (iii) The cash deposits and transfer credits receipts from thirds parties in the bank accounts are possible sell proceeds of the business concern of the assessee. (iv) , The assessee has filed his ROI for the A.Y. 2015-16 and 2016-17 declaring income from business and profession. More over the assessee has also got his books audited for the A.Y. 2018-19 and the business code has been declared as "Wholesale Trading". In his ROI for the A.Y. 2016- 17, the assessee had declared following facts and figures: - Particulars Balance as on 31.03.2016 Sundry debtor Rs.1,96,350/- Sundry creditor Rs.85,928/- Closing stock Rs.12,47,589/- Cash in hand Rs.1,67,415/- Gross sales Rs.32,32,638/- Net profit (u/s 44AD) Rs.2,60,650/- (@8%) Income u/s.44AE Rs.1,80,000/-
4. the trends of month wise sales, purchase as furnished by the assessee and cash deposit in the bank accounts is presented in a tabular form as under :- Month Transfer out Purchases Sales Cash and deposit in bank account a b c d e April 10,47,773 945342 539380 4,02,400 only cash May 16,53,490 1750000 1293820 12,35,500 June 17,21,248 1433000 1529970 14,30,100 July 13,96,195 1622370 1399290 15,03,750 August 15,67,643 1497900 1699990 15,66,600 September 20,27,243 1702300 1897030 18,49,700 October 22,08,091 2082100 3146500 20,02,900 November 16,03,914 1479120 1097730 16,88,10 December 11,02,616 922800 92812 9,93,200 January 7,79,208 563414 735320 8,83,900 February 4,15,651 505900 812770 478900 March 13,41,198 582727 740150 1114621 1,68,64,270 14809973 1,58,23,571 17141100 5. Based on the above observation the bank account statement and the replies on various issues by the assessee, and the information collected from third parties, the following issues have crept in for consideration. Having heard the case and the following issues are considered and decided under separate heads: 6. Addition on account of undisclosed income from business or profession. (i) The receipts from business sales are first deposited in the bank account and then remitted to the supplier. In other words, the receipts in the bank account are nothing but the business receipts of the assessee. (ii) The assessee has declared that the gross sales for the year was Rs.1,58,23,571/-. The gross transfer out payments from the bank account of the assessee also shows that a sum of RS.1 ,68,64,270/- was transferred to different third parties accounts These payments are related to purchase payments made by the assessee during the F.Y. 2016-17. However, among these transfer payments some payment relating to automobile loans repayments are made. Aggregate of such payments is Rs.2,88,000/-(Rs.12000 per month per vehicle for two vehicles). As per ITR for the A.Y. 2016-17, the sundry creditor outstanding as on 31.03.2016 was Rs.85,928/-. Thus even if an amount of Rs.3,73,928/-(Rs.2,88,000/- + Rs.85.928/-) is debited from the transfer out payments, the aggregate purchase payments would be Rs.1,64,90,342/-(Rs.1,68,64,270 less Rs.3,73,928/-).
(iii) But the assessee in his compliance has stated that, gross purchase for the year was of Rs.1,48,09,973/- only. But the purchase payments made from the bank account to different parties shows that, the purchase was of RS.1 ,64,90,342/-. The assessee may argue that, this difference is because of inclusion of VAT component in the payment. But, vegetables items like potato, onion and garlic are exempt from VAT. Therefore the gross annual purchase of the assessee for the year is taken as Rs.1,64,90,342/- and the assessee's claim of purchase of Rs. 1,48,09,973/- for the F.Y. 2016-17 is not accepted. (iv) Even though, the gross purchase of the business concern of the assessee for the F.Y. 2016-17 was Rs.1,64,90,342/- he has not maintained proper books like sales register, purchase register or cash book. It means, neither books have been maintained nor the same have been audited u/s 44AB of the Act. Considering the purchase at Rs.1,64,90,342/- corresponding Sales for the year would be more than purchase. Therefore, the assessee was bounden under the provision u/s 44AB of the Act, to audit his books of accounts. But he has failed to do so and furnished C) self made un-audited balance sheet and Profit & loss account declaring gross sales of RS.1 ,58,23,571/- and Net profit of Rs.3,98,599/-. (v) As the assessee has not maintained any books, nor he has audited his books of accounts nor he has furnished a return of income for the A.Y. 2017 -18, nor even the purchase figure presented by him is matching with the bank transactions, the facts and figures presented in the self made un-audited P&L account cannot be relied upon and hence the same is rejected. (vi) Now considering the gross annual purchase at Rs.1,64,90,342/- (as derived above), the gross sales figure can be estimated by reverse calculation method. Taking reference of all relevant issues and non maintenance of books by the assessee, I reasonably estimate the net profit from the business concern is @8% of gross annual sales. Purchase value, must include profit to arrive at sales value. Applying reverse calculation method, the gross sales of the assessee for the F.Y. 2016-17 is determined as under:- Gross sales = Purchase X 100 92 = 1,64,90,342 X 100 92 = Rs. 1,79,24,285/- (vii) Taking gross sales for the F.Y. 2016-17 at Rs.1,79,24,285/- the presumptive net profit can be estimated u/s 44AD of the Act at Rs.14,33,943/- (being 8% of Rs.1,79,24,285/-). As the assessee has not filed hi's ROI income for the A.Y·, 2017-18 nor he has paid due tax on the income, he has evaded paying tax on the business income so earned. This income of Rs. 14,33,943/- is liable to be added to the income of the assessee for the A.Y 2017-18. Add:Rs.14,33,943/- 7. Addition on account of undisclosed income from hiring of vehicle u/s 44AE The assessee has also owned two goods carriage vehicles which were plyed on hiring business. Moreover, in the ITR for the A.Y. 2016-17 he had declared an income of RS.1 ,80 ,000/- (Rs.90,000/- per vehicle) u/s 44AE of the Act. As the assessee has not filed his ROI income for the A.Y. 2017-18 nor he has paid due tax on this income, he has evaded paying tax on the income earned from plying & hiring business. This income of RS.1 ,80,000/- is liable to be added to the income of the assessee for the A. Y 2017-18. Add: Rs.1,80,000/- 5.3 I have also perused the AIR information, it is found that cash deposits of Rs.1,47,72,650/- has been reported in the AIR twice. Wehreas an amount of Rs.1,47,72,650/- has been shown in the name of M/s Deepak Stores (first/sole account holder), an equivalent amount has also been reflected in the same account No.1644015002463 maintained with Oriental Bank of Commerce. Further, the date of uploading of both the information is the same, i.e. 26/5/2017. Thus, the actual cash deposit as per this information is Rs.1,47,72,650/- and not Rs.2,95,45,300/-. In absence of any detail with the department that he carries any other activity, the conclusion that it could be business receipt is not entirely without basis. 5.4 I have given my thoughtful consideration to the entire issue. Considering the fact that the deposits are Rs.1,47,72,650/- i.e. 1.47 Cr and the turnover for next FY is rs.1.54 Cr. and the GP and NP is 103% and 3.44%, the estimation at the rate of 8% for this year on the estimated turnover of Rs.1.79 Cr is not unreasonable. Substituting it with any other income may amount to a mere change of opinion. Moreover, the assessee has availed the benefit of Vivad Se viswas Scheme & has received form no.5 as confirmation as a beneficiary of the scheme.
It was the submission that the issue considered by the ld. Pr.CIT was in respect to the same cash deposit in the bank account of the assessee of Rs.2,95,45,300/-, which had been considered by the AO. It was further submitted that the ld. Pr.CIT has categorically admitted that Rs.1,47,72,650/- and not Rs.2,95,45,000/-. It was further submitted that the ld. Pr.CIT did not find anything specifically wrong with the findings of the ld. AO, therefore, restored the issue to the file of AO to have a second look at the issue and draw appropriate conclusions taking into account if any information is available, in the meantime that the assessee has any other source of income. It was the submission that this was not permissible under the provisions of Section 263 of the Act.
In reply, ld. CIT-DR placed reliance on the order of the ld. Pr.CIT passed u/s.263 of the Act.
We have considered the rival submissions. A perusal of the order of the ld. Pr.CIT shows that the ld. Pr.CIT in para 6 of his order has categorically mentioned that he has restored the matter to the AO to have a second look at the issue and draw appropriate conclusions. The requirement under the provisions of Section 263 of the Act is “prejudicial and erroneous order”. The ld. Pr.CIT has not shown how the original assessment order passed u/s.144 of the Act was erroneous or prejudicial to the interest of revenue for the purpose of relooking at the issue. Therefore, the provisions of Section 263 of the Act cannot be invoked. Consequently, the order u/s.263 of the Act passed by the ld. Pr.CIT stands quashed.