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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRIRAJPAL YADAV & SHRI WASEEM AHMED
आदेश / O R D E R
PER WASEEM AHMED ACCOUNTANTMEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)- IV, Rajkot [Ld.CIT(A) in short] dated 23/12/2013, arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 27/12/2011relevant to Assessment Years (A.Y.) 2009-10.
- 2 - The assessee has raised the following grounds of appeal: “(1) The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 22,59,223/-. The addition needs deletion.
(2) The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 22,59,223/-. Without accepting explanation furnished. The addition needs deletion.
(3) The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 22,59,223/-. Without considering provisions of section 44AF. The addition needs deletion. (4) The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 22,59,223/-. Without considering peak position of the transactions. The addition needs deletion/suitable reduction.
(5) The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 22,59,223/- based on presumption and cermises. The addition needs deletion.
(6.1) Taking into consideration the legal, statutory, factual and administrative aspects, no addition of an amount of Rs. 22,59,223/- ought to have been confirmed. The addition needs deletion. (6.2) Taking into consideration the legal, statutory, factual and administrative aspects, no addition of an amount of Rs. 22,59,223/- ought to have been made. The addition needs suitable reduction.
(7) Without prejudice, the assessment made is bad in law and deserves annulment. (8) Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing assessment order. The assessment needs annulment.
(9) Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment.
3 - (10) The appellant craves leave to add/alter/amend and/or substitute any or all ground of appeal before the actual hearing takes place.”
2. The interconnected raised by the assessee in all the grounds of appeal is that the learned CIT (A) erred in confirming the addition of Rs. 22,59,223/- made under section 69A of the Act without considering the provision of the section 44AF and explanation furnished by him(the assessee).
Briefly stated facts are that the assessee is an individual working as LIC agent and earning commission and salary from private firm. The assessee declared total income of Rs. 44,110/- in his return of income for the year under consideration. The assessee during the year under consideration has made aggregate deposits of Rs. 22,59,223/- in his saving bank account held with SBI. Out of which, the sum of Rs. 21,69,453/- was deposited in the form of cash. This account was not mentioned by the assessee in his return. Accordingly the AO show caused the assessee for treating the impugned deposits as his income.
The assessee in response to the show cause notice submitted that during the year under consideration he was engaged in business of sale & purchase of Mechanical Iron Scale, and the cash deposits represent its receipt from such business. The assessee also submitted that due to some mistake on his part these receipt and withdrawal were treated as contra entries instead of treating the same as sale and purchase transactions.
4 - 5. Accordingly the assessee prayed to treat such deposit and withdrawal as sale & purchases and offered estimated profit of Rs. 1,14,624/- under section 44AF of the Act. Alternatively the assessee also offered peak cash of Rs. 1,19,324/- if the above profit of Rs. 1,14,624/- under section 44AF is not acceptable.
However, the AO disagreed with the submission of the assessee and held that the assessee’s claim of business activity is a concocted story as he failed to furnish any documentary evidence such as Trading & P/L account, Balance sheet and other books of account and also failed to disclose this saving bank while furnishing the return. Accordingly the AO treated the total deposit of Rs. 22,59,223/- as unexplained income under section 69A of the Act, and added to the total income of the assessee.
Aggrieved assessee preferred an appeal before learned CIT (A) who confirmed the order of the AO by holding as under:
“2. I have considered carefully, the submissions made by the appellant and the assessment order passed by the assessing officer. At paragraph 4.2 of the assessment order, the assessing officer has given detailed reasons for making the addition of Rs. 22,59,223/- on account of unexplained cash deposits in the impugned bank account maintained with State Bank of India, Savar Kundla branch, which are as under:- i) The assessee has worked out income of Rs. 1,14,624/- from business on a plain paper. However, he has not furnished any provisional Profit and Los account, Trading Account,Capital Account, Balance sheet and books of account. Therefore, this claim of the assessee is not acceptable. As per the norms of the IT Act under the provisions of section 28, the assessee has to maintain regular books of accounts and on the basis of the books, the trading account, profit and loss account and balance sheet of the assessee - 5 - can give clear picture of income of the assessee for his business: Not mere on working on plain paper and estimate basis. ii) The assessee has offered peak amount of Rs. 1,19,324/- .However, he had not furnished the funds flow statement and the basis for availing peak balance. Therefore, his claim is not acceptable. iii) As the assessee has accepted vide his reply dated 26.11.2011 that he had engaged in the business of trading in mechanical iron scale and he was making URD purchases. iv) The assessee’s claim of business of manufacturing of mechanical iron scale cannot be acceptable without nay basic evidence or books of accounts. This is a fabricated story of the assessee giving the colour of cash transaction in his account as business turnover.
3. During the course of appellate proceedings, the authorized representative could not produce any evidence to demonstrate the fact that the appellant was doing business of manufacturing of mechanical iron scale during the assessment year under consideration. Available facts on record establish that the appellant is a LIC agent derives income from salary and commission. The appellant did not maintained any books of accounts or do not have any such evidence to show that he was carrying out business as claimed. Based on the AIR information, the assessing officer has obtained the details of transactions in the impugned bank account maintained with Savar Kundla branch u/s. 133(6) of the IT Act, 1961. In the absence of any evidence with the appellant to show that he was carrying out business during the previous year under consideration, the plea take by the appellant that he has carried out business cannot be accepted. Therefore, all the cash deposits totaling to Rs. 22,59,223/- constitute appellant’s undisclosed income in terms of provisions contained u/s. 69A of the IT Act, 1961. Hence I decline to interfere with the assessment made in this case u/s. 143(3) of the IT Act, 1961. The addition made at Rs. 22,59,223/- u/s. 69A of the IT Act, 1961 stands confirmed.”
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR for the assessee before us, besides reiterating the fact as submitted before lower authorities, submitted copy of SBI Bank
6 - Statement, working of peak credit and copies of various case laws which are available on record
On the contrary the learned DR vehemently supported the finding of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the AO treated the deposits made by the assessee for the sum of Rs. 22,59,223/- in his bank account as unexplained money under the provisions of section 69A of the Act. The view taken by the AO was subsequently confirmed by the learned CIT-A.
The learned AR before us has made two fold contentions. The 1st 11. contention of the assessee is that the impugned amount represents assessee’s business transaction and the 2nd fold contention of the assessee is that there were cash withdrawals as well against the deposit made with the impugned bank. Therefore the learned AR contended to apply the peak credit theory.
However, we find that the learned AR before us has not filed any documentary evidence suggesting that the assessee was engaged in the business of carrying sale & purchase of Mechanical Iron Scale. Thus in the absence of documentary evidence, we reject the 1st fold contention of the learned AR for the assessee.
7 - However, we find force in the alternate/2nd fold contention of the assessee. The provision of section 69A of the Act requires addition of the unrecorded money owned by the assessee. The relevant provision of section 69A of the Act reads as under:
69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
From the preceding discussion we note that the assessee should be the owner of money, bullion, jewellery etc which was not recorded in the books of accounts. Indeed the amount of cash owned by the assessee was not disclosed in the income tax return/ books of accounts. Thus the provision of section 69A of the Act is attracted in the present facts and circumstances.
The next controversy arises about the quantification of the money owned by the assessee. In this regard there is no specific mentioned under the Act for treating the particular amount as unexplained money under section 69A of the Act. On perusal of the bank statement, we note that there were frequent withdrawals from and deposits in the Bank of the assessee. Therefore, we are of the view that the entire cash deposit cannot be treated as unexplained money on the ground that the amount withdrawn has been utilized for the re-deposits. It is because the Revenue
8 - has not brought anything on record suggesting that the money withdrawn from the bank by the assessee was incurred as an expenditure or investment. Accordingly, in the absence of the information, we are presuming that the money withdrawn from the bank was utilized for the purpose of the deposit. Thus in such a situation we are of the view that the peak credit should be applied while working out the income under section 69A of the Act. Accordingly we set aside the issue to the file of the AO for working out the peak credit from the bank of the assessee to determine undisclosed income. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
In the result the appeal of the assessee is allowed for statistical purpose.