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Income Tax Appellate Tribunal, “DB” BENCH,
Before: SHRI BR BASKARAN & SHRI AMIT SHUKLA
Appellant by : Shri. Ashish Bansal Respondent by : Shri. A. K. Singh Date of Hearing 29.09.2023 Date of Pronouncement 21.11.2023 आदेश / O R D E R PER AMIT SHUKLA :-
Aforesaid appeal has been filed by the revenue against the order dated 21.09.2020 passed by the Ld. Commissioner of Income Tax(Appeal), Gorakhpur, for the quantum of the assessment passed u/s 143(3) for the assessment year 2017-18. 2. In the grounds of appeal the department has raised following grounds:
P a g e | 2 A.Y. 2017-18 Shri. Sujit Kumar Yadav 1. “The Ld. CIT(A) has erred in law and fact in deleting the addition of Rs. 68,00,000/- made u/s 69A of the Income-tax Act, 1961 without appreciating the facts discussed by the AO.
The Ld. CIT(A) has erred in law and fact in deleting the addition of Rs. 7,26,000/- as extra profit earned during the year under consideration without appreciating the facts discussed by the AO.
3. Information was received that the assessee had deposited huge amount during demonetization period in his bank A/c 50200019684701. During assessment proceedings assessee denied the ownership of said bank account whereas during verification it was found that the assessee was only the person who is the owner of the above said bank A/c During appellate proceedings the assessee filed new facts that the deposited amount was given from his father and mother as gifts. The Ld. CIT(A) has accepted new facts and deleted the whole additions without giving any opportunity to the AO under Rule 46A of Income-tax Rules, 1962. Additional evidences cannot be accepted without allowing AO a reasonable opportunity to examine and rebut the said evidences.”
The brief facts are that the assessee is an individual and deriving income from retail trading of cloth. During the assessment year the assessee computed his income u/s 44AD showing total income of ₹ 3,65,530/-, on a total turnover of ₹ 42,09,100/-. During the course of the assessment proceedings the AO noted that the assessee has 2 bank accounts with HDFC in which cash was deposited by him. When confronted, the assessee submitted that one of the accounts was used by his father, Shri Ram Kumar who was proprietor of Ram Kumar Vastralya who had separate PAN and was filing ITR in which income pertaining to trading cloths from this firm was separately disclosed.
P a g e | 3 A.Y. 2017-18 Shri. Sujit Kumar Yadav The AO noted that one of the account held with HDFC bank account No. 50200019684701, it was noted that assessee had deposited of ₹ 68 lacs on 29.01.2016 and 30.08.2016. Accordingly, the AO has added the sum u/s 69A of the Act and levied taxes at the rate of 16% and u/s 115EBE.
The Ld. AO further noted that in both accounts the aggregate deposit was ₹ 1,58,86,258/- out of which he has already added sum of ₹ 68 lacs and for the balance amount of ₹ 90,86,258/-. He held that it is to be treated as business receipts and applying 8% of net profit rate u/s 44AD he made addition at ₹ 7,26,900/-. The relevant observation of the AO reads as under “The assessee has shown his income u/s 44AD on total receipts of Rs 42,09,100/-. The assessee has accepted only one bank account (HDFC bank account No. 50100085158422) and credit entries are taken as total receipts. But during assessment proceedings another bank account of same bank bearing account no. 50200019684701 is also found in the name of the assessee, wherein total deposit are found to the tune of Rs 1,58,86,258/-. Out of the total deposits of Rs 1,58,86,258/-, Rs 68,00,000/- has been taken as unexplained money on which addition has already been made, remaining amount of credit entries i.e. Rs 90,86,258/- (15886258-6800000) is being taken as business receipts in this account which has to be added in the receipts of bank account no. 50100085158422 showing Rs 42,09,100/-.”
P a g e | 4 A.Y. 2017-18 Shri. Sujit Kumar Yadav 6.1 Thus total receipt is worked out to Rs 1,32,95,358/-(90,86,258/- deposit in bank account No. 50200019684701 + 42,09,100/- deposit in bank account No. 50100085158422) 6.2 By applying 8% of net profit u/s 44AD on total receipt of Rs 1,32,95,358/- income of the assesse is being worked out to Rs 10,63,628/-. Difference of shown income and this worked out income i.e. Rs. 7,26,900/- (1063628-336728) is added to the income of the assessee being extra profit of his business.
Before the Ld. CIT, it was submitted that the amount of deposit of ₹ 68 lacs in account No. 50200019684701 with HDFC belong to his father, Shri Ram Kumar who was the proprietor of M/s Ram Kumar Vastralaya and the same has been disclosed in the ITR of Shri Ram Kumar and in the books of the account of said concern. However, the bank account was inadvertently mentions the PAN of the assessee which wrongly updated to this account instead of his father. This fact was also duly informed to the AO. Regarding source of deposits, it was submitted that the same was deposited out of sale proceed from sale of agriculture land made by his father and mother and in support of copy of sale deed is also filed. The relevant submissions and decision of CIT (A) reads as under; “During the appellate proceeding it was submitted that the bank account belonged to his father Shri Ram Kumar who was the proprietor of M/s Ram Kumar Vastralaya. The bank account was P a g e | 5 A.Y. 2017-18 Shri. Sujit Kumar Yadav inadvertently opened in the name of the appellant, with regard to the source of deposit of ₹ 68,00,000/0. It was submitted that the same was deposited out of the sale proceeds received from the sale of agriculture land made by his father and mother. Copy of sale deed and gift deed were submitted in support of contention. It was further submitted that ₹ 20,00,000/- were withdrawn a day prior to the deposit and rest ₹ 9,60,000/- were received out of sale proceeds of the cloth business. The appellant also disputed the estimation of turnover and stated that the A had made calculation mistake in the estimation of his turnover. The AO applied NP rate on the above said turnover and reduced the amount of NP disclosed by the appellant. It was further submitted that there was a totalling mistake of Rs. 878898/- made by the AO, while calculating total credits in the two accounts. The AO is directed to recalculate the credits in the two bank accounts and allow the claim of the appellant if found correct. The contention made by the appellant was perused and found to be partially correct. The claim of the appellant that this amount of turnover was inclusive of Rs. 68,00,000/- was apparently incorrect. It was contended that interaccount transfers of Rs. 22,49,796/- were added to the turnover of the appellant resulting in double addition of the same. It was supported by a chart of inter bank and inter account transfer for Rs, 22,49,796/. The contention made by the appellant was found to be correct as appearing from the bank statement. The AO is directed to allow the credit of the same and re compute the turnover of the appellant for determining the business income.
In this result, the appeal is partly allowed.”
P a g e | 6 A.Y. 2017-18 Shri. Sujit Kumar Yadav 6. Before us the Ld. DR submitted that the ITR of the assessee for the various year shows that HDFC account No. 50200019684701 in HDFC Bank wherein deposit of ₹ 68 lacs was made in the month of June 2016 and this has been constantly owned and declared by the assessee as his own. The assessee himself has declared cash deposits in the extent of ₹ 4,15,000/- during the demonetization period (09.11.2016 – 30.12.2016) and the same has also been declared for A.Y. 2017-18. Therefore, the AO has rightly taxed the unexplained tax deposit in said bank account. Further submitted that ld. CIT (A) has erred in admitting additional evidence violation of rule 46A and did not obtain any report from the AO. Therefore, his order is erroneous in violation of rule 46A.
On the other hand, the Ld. Counsel for the assessee submitted that the HDFC bank account No. 50200019685701 was the current account in the name of Shri. Ram Kumar Vastralay which was proprietary concern of Shri Ram Kumar, father of the assessee. In support he has filed registration certificate of Shri. Ram Kumar Vastralay. He further pointed out that the bank account was also in the name of M/s Ram Kumar Vastralaya. Apart from that, it was also submitted that due to inadvertent error on the part of the bank the PAN of the assessee was updated in this account whereas the assessee’s bank account was 50100085158422. Otherwise this bank
P a g e | 7 A.Y. 2017-18 Shri. Sujit Kumar Yadav account has been disclosed in the ITR of M/s Ram Kumar Vastralaya. Thus, once bank account itself did not belong to the assessee and were disclosed and declared in the case of the M/s Ram Kumar Vastralaya, then any deposit made cannot be added in the hands of the assessee, simply because the PAN of the assessee was mentioned in bank instead of Shri Ram Kumar. In the said bank account belonging to Shri Ram Kumar, there were total cash deposits of ₹ 1.04 crore which was out of sale proceeds of agriculture land and form the business of the proprietary concern. Proof of cash deposit in the bank account was also furnished and one of the major source was on account of sale of agriculture land belonging to his father and his mother wherein the sale proceeds were deposited.
He further submitted that even during the course of assessment proceedings, the assessee has specifically stated before the department in response to query on 31.03.2018 that this account does not belonging to him. Apart from that, it was also brought on record that this assessee bank account has been disclosed in the ITR of Shri Ram Kumar along with the copy of the ITR which was furnished before the AO. Once this fact brought on record then deposit in the said bank cannot be added in the hand of the assessee. In so far as the contention of the Ld. DR at this bank account was shown in the ITR of the assessee, he submitted that it was simple for the reason that with P a g e | 8 A.Y. 2017-18 Shri. Sujit Kumar Yadav the bank assessee’s PAN was disclosed in the said account, however, the fact of the matter is that same bank was also disclosed in the proprietary concern of Shri. Ram Kumar Yadav who has not only owned up this bank account but also disclosed in the ITR and disclosed his business receipts. Thus, no adverse reference can be drawn simply for the reason.
We have the submission and perused the material placed before us. On perusal of material placed on record, it is seen that, firstly the bank account is current account; No. 50200019684701 with HDFC Bank Ltd., Khasra No. 875, Village Jatakas, Tahsil Khata, District Khushinagar, Uttar Pradesh. The account is in the name of M/s Ram Kumar Vastralay. This bank account has also been disclosed in the ITR of Shri Ram Kumar proprietor of M/s Ram Kumar Vastralaya, wherein the sales from the said business has been deposited in the bank account and same has been assessed to tax in the case of M/s Ram Kumar Vastralaya. The assessee has a different bank account with HDFC being account no. 50100085158422 with the same branch which is a saving bank account wherein the assessee has been showing it for his own business purpose. This fact was also brought to the notice of the AO in the course of assessment proceedings, however, the AO has proceeded to made addition without verifying whether this bank account belongs to the assessee or not. If this P a g e | 9 A.Y. 2017-18 Shri. Sujit Kumar Yadav account belongs to different assessee on the face of the record then any adverse inference for making any addition for the cash deposit u/s 68 or 69A cannot be made in the hands of the present assessee. So far as the contention of the Ld. DR that this bank account has also been disclosed in the ITR of the assessee, it has been stated that while updating information, PAN of the assessee was uploaded by the bank. Though the assessee might have has disclosed in his own ITR as second account alongwith account no. 50100085158422, but at the same time it has also been disclosed in the ITR of Shri Ram Kumar Yadav. Disclosure of bank account in ITR of the assessee in the present fact cannot lead to inference that cash deposited belong to the assessee, when the bank account is in the name of different assessee which was also disclosed in ITR belonging to a separate proprietary concern of Shri Ram Kumar Yadav who was running the business of retail cloth since year 1985. Thus, any addition on account cash deposited u/s 69A is not applicable in the case of the assessee and same is deleted.
In so far as the source of cash deposited in aforesaid bank account that it was out of sale proceed, the assessee had filed copy of sale deeds, etc. before Ld. CIT(A), which department has challenged is in violation of Rule 46A of IT Rules, we are not adjudicating the same, because, once at the threshold we hold that this bank does not belong
P a g e | 10 A.Y. 2017-18 Shri. Sujit Kumar Yadav to the assessee, then no addition on account cash deposit can be made u/s 69A of the act in the hand of the assessee and same has been directed and deleted. This ground is purely academic.
Coming to the second issue, it has clarified before the Ld. CIT(A) and also before us, that total credit entries in the HDFC bank account belonging to the assessee was ₹ 1,15,,07,367/-. The AO has erroneously taken total credit of ₹ 1,58,86,258/-. Thus, there is prima facie error of difference of amount of ₹ 8,78,898/-. It has been further submitted that there was inter account transfer of ₹ 22,49,796/- made from HDFC bank saving account to HDFC bank current account which also could not be included in the estimation of turnover. It was further submitted that the deposit out of cash withdrawal in the HDFC bank’s current account was ₹ 29,24,000/- between 27.06.2016 and 06.07.2016, therefore, credit of this amount should have been given and be excluded estimation from the turnover.
Before the Ld. CIT (A) following narration was given about the deposit in the bank account which is the basis of estimation of turnover. Narration Amount Turnover in Current Account (as per AO) 1,58,86,258 Turnover in Current Account (as per AO) 41,26,235 Total (A) 2,00,12,493 Less : Deposit out of cash withdrawal 29,24,000 Less : Deposit out of sale proceeds of agricultural 38,40,000 land P a g e | 11 A.Y. 2017-18 Shri. Sujit Kumar Yadav Less : Inter-account transfers 22,49,796 Less : Incorrect Calculation of total credit by AO 8,78,898 Total (B) 98,92,694 Maximum estimated turnover (A-B) 1,01,19,799 Thus, it was submitted that the above amount of ₹ 1,01,19,799/- includes ₹ 68,00,000/- which was excluded by the AO in the estimation of turnover.
Based on perusal of this explanation the Ld. CIT (A) has given direction to the AO to work out the estimation of turnover for the purpose of estimating the profit. Thus, we do not find any reason to deviate from such direction which appears to be correct. Accordingly, order of Ld. CIT (A) has upheld and ground of appeal
raised by the revenue is dismissed.
14. In the result this appeal of the revenue is dismissed.
Order Pronounced in Open Court on 21.11.2023 Sd/- Sd/- (B R BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Place: Mumbai Date 21.11.2023 ANIKET SINGH RAJPUT/STENO आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant प्रत्यर्थी / The Respondent. 2. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.