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Income Tax Appellate Tribunal, “ SMC ” BENCH, AHMEDABAD
Before: SHRI KUL BHARAT & SHRI WASEEM AHMED
O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)– Gandhinagar, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)/GNR/335/2015-16 dated 10/03/2017 arising in the assessment order passed under s.144 r.w.s.147 of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 31/12/2015 relevant to Assessment Year (AY) 2008-09.
The assessee has raised the following grounds of appeal:-
Jatinkumar Ganeshbhai Patel vs. ITO Asst.Year - 2008-09 - 2 - 1.1. The order passed u/s.250 on 10.03.2017 for A.Y. 2008-09 by CIT(A)- GNR, Abad confirming the addition to the extent of Rs.4,25,421/- is wholly illegal, unlawful and against the principles of natural justice. 1.2. The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made by the appellant. 2.1. The Ld.CIT(A) has grievously erred in law and or on facts in upholding the addition to the extent of Rs.4,25,421/- consisting of Rs.1,14,183/- being profit in respect of the business of recharge of SIM, mobile etc., Rs.2,21,238/- being opening cash balance and Rs.90,000/- being cash loan received from two parties. 2.2. That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in upholding the addition to the extent of Rs.4,25,421/- consisting of Rs.1,14,183/- being profit in respect of the business of recharge of SIM, mobile etc., Rs.2,21,238/- being opening cash balance and Rs.90,000/- being cash loan received from two parties. 3.1. Since, the appellant has not been issued notice u/s.143(2) within the statutory period, the impugned asst. Is illegal and unlawful. 3.1. Without prejudice to the above and in the alternative, the impugned addition of Rs.4,25,421/- confirmed by CIT(A) is highly excessive and calls for reduction as well as telescoping with net profit during the year.
The assessee has raised as many as 3 grounds of appeal but the issues raised in all the grounds of appeal are interconnected. Therefore we have clubbed all of them together for the purpose of adjudication and brevity.
The interconnected issue raised by the assessee in this appeal is that the learned CIT (A) erred in partly confirming the order of the AO to the extent of Rs. 4,25,421/- only on account of various addition.
Briefly stated facts are that the assessee in the present case is an individual and claimed to be engaged in the business of selling the Jatinkumar Ganeshbhai Patel vs. ITO Asst.Year - 2008-09 - 3 - Recharge Coupons- SIM Cards etc. The assessee in the year under consideration has deposited the cash of Rs. 21,82,000/- in his saving bank account but failed to justify the source of such deposit during the assessment proceedings. Therefore the entire amount was treated as unaccounted/undisclosed income of the assessee and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT(A) submitted that he has deposited the sale proceeds in the bank account for issuing cheques to the company namely Airtel and other communication companies. The assessee also claimed to have made a profit of Rs. 74,782/- out of its business transactions which is below the taxable limit. Therefore the return was not filed. The assessee in support of his claim also filed the copies of the annual accounts.
3.1 The details filed by the assessee were forwarded by the learned CIT-A to the AO for his remand report. The AO in turn submitted that the assessee failed to justify the opening cash balance of Rs. 2,21,238/- and the loan taken from the 2 parties namely Kanubhai Govindbhai Patel and Ganeshbhai Nathalal Patel for Rs. 45,000 each. The AO also submitted that such loan was taken in cash in contravention to the provisions of section 269SS of the Act.
Jatinkumar Ganeshbhai Patel vs. ITO Asst.Year - 2008-09 - 4 - 4. The learned CIT (A) after considering the submission of the assessee and the remand report of the AO worked out the profit at the rate of 5% of the cash deposited in the bank amounting to Rs. 1,10,884/- 4.1 The learned CIT (A) also confirmed the addition on account of opening cash balance of Rs. 2,21,238/- and the loan taken from the parties for Rs. 90,000/- in the absence of sufficient documentary evidence.
Being Aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us submitted as under:
As per annual account, the net profit from telecommunication business was Rs.74,782/-. It cannot be said to be a retail business wherein NP would be 5%.
2. The Assessing Officer has disputed the quantum of opening cash balance in his remand report but in view of nature of business, family status etc. the opg balance of Rs.221,238/- was reasonable. 3. It cannot be a case that there was no opening cash with him. 4. The books for the current year are not rejected by Assessing Officer.
Jatinkumar Ganeshbhai Patel vs. ITO Asst.Year - 2008-09 - 5 - 5. Rs.90,000/- is gift received from two parties of Rs.45,000/- each. Their confirmation, PAN, ITR and 7/12 are produced as additional evidence.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the business activity of the assessee has not been doubted and therefore in our considered view learned CIT (A) has correctly worked out the profit of the assessee at the rate of 5% on the cash deposited with bank. However, it is pertinent to note that the amount of opening cash balance of Rs. 2,21,238/- and the loan taken from the parties for Rs. 90,000/- to be excluded while determining the profit at the rate of 5% on the cash deposits. It is because; such amount has already been added independently by the authorities below.
7.1 Regarding the gift taken from the parties for Rs. 90,000, we note that the assessee has filed confirmation from both the parties before us which is the additional evidence. Therefore in the interest of justice and fair play we are inclined to set aside this issue to the file of the AO for fresh adjudication as per the provisions of law and in the light of the documents filed by the assessee.
Jatinkumar Ganeshbhai Patel vs. ITO Asst.Year - 2008-09 - 6 - 7.2 Regarding the addition of the opening cash balance, we set aside this issue to the file of the AO with the direction that the assessee shall furnish the cash flow statement and thereafter the AO will adjudicat the same afresh as per the provisions of law.
In view of the above, the appeal of the assessee is partly allowed for the statistical purposes.