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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Revenue is directed against CIT(A), Kurnool’s order dated 09/02/2018 for AY 2013-14 involving proceedings u/s 144 of the Income Tax Act, 1961 ; in short “the Act on the following grounds of appeal:
1) The order of the learned CIT(A) is bad both on facts and in law. 2) Whether the learned CIT(A) erred in admitting additional evidence from assessee in contravention of :- 2 -: Smt. Lebaka Nagamani, Kadapa provisions of Rule 46A, without giving opportunity to AO to verify the same, especially when Learned CIT(A) has upheld completion of assessment proceeding ix] s.144, by dismissing ground raised by assessee. 3) Whether the Learned CIT(A) erred in directing to treat cash deposits in bank accounts as sales turnover when the assessee has shown sales of only Rs.43,43,640/-, whereas the cash deposits in bank account works out to Rs.2,64,22,100/- 4) Whether the CIT(A) erred in directing the AD to work out estimated net profit at 8% of total cash deposit in bank account and deleting addition u/s.68 ofRs.2,64,22,1001- without assigning any cogent reason. 5) Any other ground that may be urged at the time of hearing.”
Briefly, the facts of the case are that the assessee deriving income from house property and income from business filed her return of income for the AY 2013-14 on 31/03/2015 admitting total income of Rs. 2,79,180/-, which was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS for FY 2015- 16 with a reason that cash deposits in savings bank account(s) is more than the turnover. Accordingly, statutory notices were issued to the assessee, but, there was no compliance from the assessee.
2.1 During the course of scrutiny proceedings, the AO obtained bank account statement of the assessee vide
:- 3 -: Smt. Lebaka Nagamani, Kadapa Account No. 07041070035926 from HDFC, Kadapa Branch. On scrutiny of the bank statement, the AO noticed that the assessee deposited in cash on various dates during FY from 1st April, 2012 to 31st March, 2013 to the tune of Rs. 2,64,22,100/-. Since the assessee failed to appear and explain the source for cash deposits of Rs. 2,64,22,100/-, the AO treated the same as unexplained cash deposits and added to the income of the assessee by passing order u/s 144 of the Act.
When the assessee preferred an appeal before the CIT(A), the CIT(A) with regard to the addition of Rs. 2,64,22,100/- deposited in the bank, held that considering the nature of business, circumstance of the case and profit margin in similar business, the whole of Rs. 2,64,22,100/- cash deposited in bank cannot be the income of the assessee and, therefore, he directed the AO to delete the addition and estimate the net profit @ 8% of total cash deposit of Rs. 2,64,22,100/- into the bank account.
Aggrieved by the order of the CIT(A), revenue is in appeal before the ITAT.
Before us, the ld. DR submitted that the CIT(A) has accepted additional evidence which is a violation under rule 46A of IT Act. He contended that ample opportunities were given by the AO, but, the assessee failed to appear
:- 4 -: Smt. Lebaka Nagamani, Kadapa before the AO, hence, the AO passed exparte order. He submitted that even before accepting additional evidence filed by the assessee, the CIT(A) ought to have remanded to the same to AO for examination. Further, he submitted that the direction of the CIT(A) to AO that estimate the net profit @ 8% of total cash deposit of Rs. 264,22,100/- is not proper and, therefore, he requested the Bench to uphold the order of the AO.
On the other hand, the ld. AR of the assessee besides relying on the order of the CIT(A) submitted that no new evidences were filed before the CIT(A) which could be considered as additional evidence, as the documents filed before the CIT(A) were part of the transactions/ records, which are cash book , ledger etc. and, therefore, it cannot be considered as additional evidence. He therefore submitted that the CIT(A) has rightly taken the bank deposit as turnover.
After considering the submissions of both the parties and perusing the material on record, we observe that the revenue has taken ground No. 2 against the action of the CIT(A) in accepting additional evidence without giving opportunity to the AO to examine and verify the same, whereas, the assessment was completed u/s 144 of the Act. In this regard, we observe from the order of CIT(A) that documents submitted before him were cash book and :- 5 -: Smt. Lebaka Nagamani, Kadapa ledger only, and, therefore, the same cannot be treated as additional evidence. Therefore, ground No.2 of the revenue on this issue is dismissed.
7.1 As regards ground Nos. 3 & 4, it is observed that from the P&L Account, we find that there is a total sales of fruits of Rs. 36,77,770/- and commission on sales was Rs. 6,65,817/-. Out of the total turnover, the assessee calculated net profit of Rs. 2,15,982/-. Once the CIT(A) has accepted the submission of the assessee that the assessee achieved 1% commission on sales of Rs. 6,65,87,000/-, which has been considered as total turnover. On the contrary, the CIT(A) directed the AO to estimate the profit @ 8% on the entire deposits in the bank of Rs. 2,64,22,100/-, is not proper or not correct. In the assessment order, the AO observed that there was a reason for selection of scrutiny in the case of the assessee that the difference in the turnover and deposits in the savings bank account. Once the revenue has pointed out that there is a difference in deposits made in the bank and turnover disclosed in the income tax return, it would be considered that the deposits made in the bank account are part of the amount from the deposits i.e. sale of fruits of Rs. 36,77,770 + commission on sales of Rs. 6,65,870, totalling to Rs. 43,43,640/- and the same has been accepted by the Revenue. Now the amount left is Rs. 2,20,78,640/- (Rs. 2,64,22,100 – Rs. 43,43,640). The contention of the :- 6 -: Smt. Lebaka Nagamani, Kadapa assessee is that since the assessee is acting as an agent on behalf of the owners of fruit, the deposited amount is belonged to the owners, but, the assessee has not filed any documentary evidence in this regard. Therefore, we set aside the order of the CIT(A) and remit this issue to the file of the AO with a direction to verify the claim of the assessee and decide the issue in accordance with law after giving reasonable opportunity to the assessee for the amount of Rs. 2,20,78,640/- . The Assessee is directed to appear before the AO with necessary documents to establish that the entire withdrawals from the bank is given to owners for purchase/supply of goods. Accordingly, ground Nos. 3 & 4 are treated as partly allowed for statistical purposes.
In the result, appeal of the revenue is treated as partly allowed for statistical purposes in above terms.
Pronounced in the open court on 22nd December, 2021.