Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “SMC”: NEW DELHI
Before: SHRI C.M. GARG
This appeal has been filed by the assessee against the order passed by Ld. CIT (Appeals)-5, Delhi, datd 30.11.2016 for the Assessment Year 2009-10.
The grounds raised by the assessee in this appeal read as under:-
“1. That on the facts and in the circumstances and in provisions of law., Ld. CIT-A erred in not quashing the patently invalid action u/s 148 of the Income Tax Act, which is full of errors and omissions and in violation of jurisdictional conditions stipulated under the Income Tax Act, on the basis of Departmental information of NMS (Non- Filter Monitoring systems) on CTR (Cash transaction Report), of Assessee's Bank Account Axis Bank Janak Puri, New Delhi, as evident from: Assessee already filed his income tax return under the PAN AAACJ4345G and all
J.N. Jewellery House Pvt. Ltd. vs ITO Cash Transaction of Axis Bank duly Reported and accounted in to Audited Financials.
2. That on the facts and in the circumstances and in provisions of law, Ld. CIT erred in not fully deleting the additions, part addition sustained of Rs.1,97,566/- on the basis of arbitrary and mechanical estimate, and applied net profit rate 1.1%, on the accounted Reported turnover of Rs. 1,79,60,540/-, reported net profit of the Financial Year is 0.69% in Audited P & L Accounts, entire above herein action is without considering the facts and circumstances of the case.
3. That on the facts and in the circumstances of the case on law, Ld. CIT Appeal erred enhanced the turnover of the assessee of Rs.66,49,500/- of cash deposit of Bank Account (Andhra Bank, Janak Puri, New Delhi,) which one was already declared and all Deposit are duly Reported in Audited Financials of the assessee, action is arbitrary and without considering the facts and circumstances of the case.
4. That on the facts and in the circumstances of the case and on law, Ld. CIT Appeal erred in not fully deleting the additions, part addition sustained of Rs. 1,33,645/-, and applied net profit rate @ 1.1% on total cash deposits of the Banks Rs. 1,21,49,500/- (i.e. Rs.55,00,000/-in Axis Bank Janak Puri, New Delhi and Suomoto enhanced Cash Deposit of Rs.66,49,500/- in Andhra Bank Janak Puri), by treating them as unrecorded turnover, arbitrary and mechanical estimate and not accepting assessee's genuine and bonafide explanations, that all turnover of the Axis Banks is declared in audited P & L Account and no double addition of profits cannot be sustained in eyes of law.
5. That the appellant craves leave to add, to , amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of this Appeal.”
J.N. Jewellery House Pvt. Ltd. vs ITO
At the time of hearing, both the sides agreed that the issues involved in this appeal and the facts and circumstances of this case are mutatis mutandis similar to the issues involved in and the facts and circumstances of & 612/Del/2017 for assessment years 2010-11 and 2011-12 which were decided by the ITAT Delhi “C” Bench, to which I was a party (JM), vide order dated 18.05.2022 and, therefore, the said decision of the Tribunal dated 18.05.2022 would be squarely applicable to the instant appeal. The relevant part of the order of the Tribunal in ITA Nos. 611/Del/2017 and 612/Del/2017 reads as under:-
“4. Ground No. 1 The Ld. Counsel submitted that the Ld. CIT(A) has erred in not quashing the invalid action of the AO in invoking provision of section 148 of the Income Tax Act, 1961 (in short the Act) as the assessee has shown impugned bank account with Axis Bank, Janak Puri, New Delhi in the income tax return filed under PAN No. AAACJ4345G. Therefore, the initiation of reassessment proceedings under section 147 of the Act and notice under section 148 of the Act deserve to be quashed being initiated without application of mind and change of opinion. Ld. Counsel lastly submitted that all the relevant material was before the AO during assessment proceedings relating to operating PAN No. AAACJ4345G. Therefore no action can be taken against the assessee under section 147/148 of the Act.
5. Replying to the above the Ld. Sr. DR submitted that the assessee created two PAN Nos. i.e. PAN No. AAACJ4345G and AABCJ10858R simultaneous opened account by using second PAN Number AABCJ0858R and had submitted all KYC documents with the Axis Bank, Janak Puri showing the same name and address. Since the assessee had not filed any 3
J.N. Jewellery House Pvt. Ltd. vs ITO return of income under said PAN No. AABCJ10858R, the AO was validly entitled to initiate action under section 147 of the Act and to issue notice under section 148 of the Act.
On careful consideration and submission from the copy of the reasons recorded by the AO on 7.2.2014 it is clearly discernable that the AO initiated reassessment proceedings by alleging that for assessment year 2011-12 the assessee has not filed any return of income towards PAN No. AABCJ10858R. On being asked by the Bench the Ld. Counsel for the assessee simply stated that since the assessee was not using said PAN No. therefore there was no occasion and requirement for the assesee to file return against said PAN No. and assessee was regularly filing return of income under PAN AAACJ4345G.
It is also worth mentioning to note that on being asked by the Bench the Ld. Counsel for the assessee, in all fairness admitted that the assessee is surrendering second PAN No. AABCJ0858R during first appellate proceedings as per the directions of the Ld. CIT(A) and thus the same is not existing in the records on today. In my humble understanding when the assessee is obtained two PAN Nos. and opening account by using second PAN No. with Axis Bank Janak Puri and not filing return towards second PAN No. and only filing return by using first PAN No. AAACJ4345G. Merely because the assessee has shown and declared such bank account with Axis Bank, Janak Puri, New Delhi in the return of income filed by using first PAN No. then in absence of any return of income by the assessee pertaining to PAN No. AABCJ0858R the AO is well within his powers to assume valid jurisdiction for invoking the provisions of section 147 of the Act and calling the assessee to file return of income. Therefore, we hold that the AO has rightly invoked the provisions of section 147 and 148 of the Act in absence of return of income pertaining to PAN No. AABCJ0858R. Therefore, ground No. 1 of assessee is dismissed. Ground No. 2 to 4 8. The Ld. Counsel submitted that the Ld. CIT(A) has erred in enhancing the turnover of the assessee on account of cash deposit to the bank account and sustaining addition to the extent of 1.1% of the total cost deposit in the bank therefore the addition made by the AO and confirmed by the Ld. CIT(A) may kindly be deleted. The Ld. Counsel also submitted that when the assessee has J.N. Jewellery House Pvt. Ltd. vs ITO shown impugned bank account in the return of income fled under PAN No. AAACJ4345G then there is no need of further making any addition in the hands of the assessee by applying NP rate of 1.1%. Therefore addition may kindly be deleted. Replying to the above the Ld. Sr. DR strongly supported the assessment and first appellate order and submitted that the Ld. CIT(A) has taken a very balancing and justified approach in applying net profit @ 1.1% of total cash deposit to the impugned bank account to the assessee. Therefore, the same may kindly be confirmed.
On careful consideration and rival submissions first of all we note that the Ld. CIT(A) has upheld the addition with following observations :-
“3.7.1 have given careful consideration to the facts and find that in so far as the estimation of sales/turnover is concerned, the AO has increased the recorded turnover for all the three years by an arbitrary amount, i.e. Rs. 10,39,460/- for A.Y. 2009-10, Rs. 13,87,448 for A.Y. 2010-11 and Rs. 18,86,432 for A.Y. 2011-12. No reasons or justification has been given for increasing the turnover. Over and above the same, he has applied the net profit percentage of 5% on the entire cash deposits which he treated as unaccounted sale proceeds/turnover. This has resulted in double addition in the hands of the appellant. In the preceding para, this action on the part of the A.O has not been approved and he has been directed to apply the net profit results of earlier years to the declared turnover. However, keeping in mind that the appellant has not explained with regard to his books of accounts that the impugned cash deposits were part of his recorded turnover, which has led to rejection of books of accounts and which has been upheld in appeal, the action on the part of the AO in treating the cash deposits as not disclosed in the audited accounts, is approved. As already directed hereinbefore, in view of the past financial results of the appellant, the AO would apply the net profit percentage of 1.11% on the impugned amount of cash deposits, by treating them as unrecorded turnover. It is J.N. Jewellery House Pvt. Ltd. vs ITO further seen that the AO requisitioned information from Andhra Bank, Janak Puri [where the appellant maintained CC account no. 2049] by issuing summons dated 24.09.2014 and in response the Bank sent account opening form and the statement of account for the period 01.04.2008 to 31.03.2011. This aspect has not been discussed in the assessment order but the account statements shows that this bank account also has heavy cash deposits and the totals for the impugned years are Rs. 66,49,500, Rs. 63,34,500/- & Rs. 1,12,04,300/- respectively. The total cash deposits for all the three years is to the tune of Rs. 2,41,88,300/-. The total picture of the overall cash deposited in the appellant's bank account at Andhra Bank and Axis Bank Janakpuri vis-a-vis the recorded sales is as under; Assessment Cash deposit Cash deposit Total cash Recorded in Axis Bank in Andhra deposits sales Year Bank 2009-10 55,00,000 66,49,500 1,21,49,500 1,79,60,540 2010-11 2,05,35,500 63,34,500 2,68,70,000 2,36,12,552 2011-12 45,07,500 1,12,04,300 1,57,11,800 2,36,13,568 3.7.2 As can be seen from the table herein before the amount of cash deposits is in excess of the total turnover in the assessment year 2010-11 and is disproportionately high, between 66 to 67 percent of the total turnover, for A.Y. 2009-10 & 2011-12. It is therefore clear that the impugned cash deposits are not part of the recorded turnover, and not disclosed in the audited accounts. Keeping in mind the provisions of section 147, wherein the AO is empowered to assess any other income chargeable to tax which has escaped,, assessment and which comes to his notice subsequently in the course of proceeding, and also keeping in mind the fact that the CIT(A) in the discharge of his/her functions has powers co-terminus with that of the AO, and in the absence of the appellant to produce any evidence substantiating that all the receipts in bank account has been disclosed in the books and are 6
J.N. Jewellery House Pvt. Ltd. vs ITO part of the recorded turnover, these cash deposits are also to be treated as part of unrecorded turnover. The AO would apply the net profit percentage of 1.1 % on the total cash deposits i.e. Rs. 1,21,49,500/-, Rs. 2,68,70,000/- & Rs. 1,57,11,800/- for working out the profits. Since there is overall reduction in the N.P percentage and consequently profit assessed, there seems to be no requirement in law on the part of the undersigned to issue a notice of enhancement. Ground no. 3 is treated as partly allowed.”
In view of the above findings we are compelled to hold that in absence of any substantial evidence and cogent explanation by the assessee substantiating that all the receipts in the impugned bank account has been disclosed in the books of accounts and are part of the disclosed turn over, impugned cash deposits had to be treated as part of unaccounted turnover of the assessee. The Ld. CIT(A) rightly observed that the AO should have applied net profit percentage of 1.1% on the total cash deposits for working out the element of profit earned by the assessee out of unrecorded turnover. In our humble understanding the Ld. CIT(A) has taken a very balanced and justified approach in making addition of 1.1% of total impugned unrecorded turn over considering the profit element embedded therein only. We are also in agreement with the findings arrived by the Ld. CIT(A) since there was overall return of the NP percentage and consequently profit assessed therefore there was no requirement on the part of the Ld. CIT(A) to issue a notice of enhancement. In view of the foregoing discussion we come to the conclusion that the Ld. CIT(A) has rightly considered and adjudicated the grievance of assessee and has given a major part of relief by only making addition of 1.1% of total unrecorded turn over taking out the element of profit embedded therein. We therefore are unable to see any ambiguity perversity of any valid reason to interfere with the findings arrived by the Ld. CIT(A). Accordingly ground No. 2 to 4 of assessee are dismissed. Ground No. 3 is general in nature which requires no adjudication.
In the result, appeal of the assessee for assessment year 2010-11 is dismissed. 7
J.N. Jewellery House Pvt. Ltd. vs ITO
Since the facts and circumstances of the assessment year 2011-12 are quite similar and identical with the facts and circumstances in assessment year 2010-11 therefore, our findings recorded for assessment year 2010-11, in the earlier part of this order would apply mutatis mutandis to assessment year 2011-12. Consequently appeal of the assessee for assessment year 2011-12 is also dismissed.”
On careful consideration of the rival submissions, we find that the issues involved in the instant appeal is squarely covered by the decision of the ITAT Delhi Bench “C” vide and 612/Del/2017 for assessment years 2010-11 and 2011-12 which were decided by the ITAT Delhi “C” Bench, to which I was a party (JM), vide order dated 18.05.2022. Therefore, following the said order of the Tribunal, we dismiss the grounds raised by the assessee in the instant appeal.
In the result, the appeal of assessee is dismissed.
Order pronounced in the open court on 12th July, 2022.