KIRAN VALLABHBHAI AHIR,SURAT vs. INCOME TAX OFFICER, WARD - 3(3)(3), SURAT

आदेश /O R D E R

PER O. P. MEENA, AM:

Therefore, these should not be considered while calculating the total deposits in the bank account. Here it is to be noted that cash withdrawn from this bank account have been used to be redeposited again in the same Kiran Vallabhai Ahir v. ITO-WD-3(3)(3) Surat/I.T.A.No. 65/SRT/2017/A.Y. 13-14 Page 3 of 6 bank and accordingly cash with the from this bank account should also reduced from the total additions made. Therefore, effectively total deposits made in HDFC bank account would work out to be Rs.45, 58,845.

It was further submitted that estimation of profit rate is the only logical option under the facts of the case, since, the assessee has not made any unexplained investment to the extent of addition of Rs.53,32,345 made by the AO out of above bank accounts. The transaction in said bank account pertains to trading activity only, and in order to overcome any controversy and put an end to the litigation, the deposits in bank account excluding the cash withdrawn from this bank account and cheque returned which amounts to Rs 45,58,845 may be treated as turnover and profit at the rate of 8%, be estimated as provided under section 44AD of the Act. The assessee has ready to pay tax on the net profit, which is worked out to Rs. 3,64,707. Without prejudice, it was further submitted, that if the above plea of the assessee is not accepted, the addition if any, can be made only in respect of peak credit since cash deposits in bank account has been utilised in the manner as explained above, and if the same is not recorded as expenditure of assessee in that case, the obvious conclusion is that the assessee has not parted with the cash and the same is available with him for redeposit in the bank account. Therefore, it is the peak credit of the bank account which comes to Rs.6,60, 603 as on 21. 01. 2013. Hence, only peak credit balance can be added for which reliance was placed on the decision of ITAT Ahmedabad in the case of Vishal Chug I.T.A.No.

Kiran Vallabhai Ahir v. ITO-WD-3(3)(3) Surat/I.T.A.No. 65/SRT/2017/A.Y. 13-14 Page 4 of 6 866/Ahd/2013. However, CIT (A) did not accept the pleas of the assessee on the ground that no VAT No., business address was submitted and no evidence to show whether business has been actually done was filed.

Therefore, the addition made by the AO was confirmed. 5. Being, aggrieved the assessee filed this appeal before the Tribunal.

The learned counsel for the assessee submitted that most of cash deposits have been made from places out of Surat. If the bank account is properly analyzed, it is evident that cash has been deposited at Saharanpur (UP), Dalhousie , Chandani Chowk Delhi , Rewari , Muzzafar Nagar, Philkuwa , Jabalpur , Gwalior etc. This facts proved that cash deposits are out of sale proceeds of textile trading. Further, the payment have been made to various textile firms such as Rajlaxmi Fabrics, Rajlaxmi Fab, Chirag Synthetics, Shyam Textile. Similarly, there are debits in bank account, which are in respect of textile trading of business. Thus, only estimated profit for such turnover could be added. The learned counsel for the assessee also placed reliance on the decision of Hon’ble Gujarat High Court in the case of CIT-VII v. Pradeep Shantilal Patel [2014] 42 taxmann.com wherein it was held that in such case at the most estimated profit of such turnover can be added. Therefore, addition of the entire turnover amount is clearly unjustified. Learned Counsel submitted that though the Department is accepting net profit of 2% to 5% in this line of business , but since the assessee has not maintained books of accounts hence, at the most net profit @8% as per section 44AD can be sustained and not the Kiran Vallabhai Ahir v. ITO-WD-3(3)(3) Surat/I.T.A.No. 65/SRT/2017/A.Y. 13-14 Page 5 of 6 whole addition made by the AO. The learned counsel for the assessee also filed additional evidence in respect of business transaction in the form of confirmation and or purchase bills of two suppliers.

However, it is discernible from bank account that cash deposits were made for various out stations like Delhi and UP. The bank account also reflects payments made to textile concerns. Therefore, it is clearly apparent that cash deposits are linked with business transaction of the assessee. Since the assessee has not maintained any books of accounts, hence, in such situation only net profit as per provisions of section 44AD of the Act is required to be estimated as net profit and not entire turnover or cash deposits reflected in the bank account. Therefore, following the ratio laid down in the case of CIT V. Pradeep Shantilal Patel [2014] 42 taxmann.com Kiran Vallabhai Ahir v. ITO-WD-3(3)(3) Surat/I.T.A.No. 65/SRT/2017/A.Y. 13-14 Page 6 of 6 2 (Gujarat) wherein it was held that where assessee admitted that cash deposits pertained to his retail business but details and nature of business were not forthcoming from record, considering total turnover of assessee, net income to be determined under section 44AD of the Act, the AO is directed to estimate net profit @ 8% of total turnover of Rs. 53,32,345 being cash deposits in bank account. Accordingly, Ground No. 1 to 3 of appeal are partly allowed.