SMT. PARBATI DAS,KENDRAPADA vs. ITO, PARADEEP

This is an appeal filed by the assessee against the order of

the CIT(A), Cuttack dated 27.3.2015 for the assessment year

2010-2011.

separate adjudication.

“For that the ld CIT(A) has erred in resorting to the weighted average method when the appellant has shown gross receipts from retail trading on the basis of turnover, which is not disputed by the AO or the CIT(A) and has

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shown net profit @ 10% which is much higher than the minimum of 5% as has been provided under the statute.” 4. Ld counsel for the assessee submitted that the ld CIT(A) has

erred in resorting to weightage average method when the

assessee has shown gross receipts from retail trading as turnover

and on the basis of such turnover, the authorities below have

estimated @ 10% of the turnover, which is higher than the

minimum of 5% as has been provided under the provisions of the

Act. Ld counsel submitted that the assessee has shown income as

per provisions of section 44AF of the Income tax At (in short ‘the

Act’) in which she is required to maintain the books of account

which is the only requirement to show net profit @ 5% and thus,

there was no scope of considering the closing stock, opening stock

and withdrawal from the bank etc. Therefore, further addition on

account of closing stock was not called for. Ld counsel for the

assessee submitted that the assessee does not want to dispute

the estimation of profit @ 10% as has been done by the ld CIT(A).

Further, addition on account of closing stock cannot be made in

the hands of the assessee without considering the opening stock

and without any show cause notice to the assessee by the AO.

AO as well as ld CIT(A) and submitted that during the course of

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survey, stock of Rs.5,02,307/- and silvery jewellery was found

with the assessee. Therefore, this addition has been made and

confirmed.

I may point out that section 44AF of the Act is a special provision

for computing the profits and gains of retail business, which

provides that in case of an assessee engaged in retail trading in

any goods or merchandise, a sum equal to five per cent of the

total turnover in the previous year on account of such business or,

as the case may be, a sum higher than the aforesaid sum as

declared by the assessee in his return of income shall be deemed

to be the profits and gains of such business chargeable to tax

under the head “ profits and gains of business or profession”. This

provision applies only to the assessee whose turnover is less than

Rs.40 lakhs during the previous year.

showing total income of Rs.3,45,312/- as income from business

and professions without any further addition. However, the AO

made an addition of Rs.5,02,307/- by observing that during the

course of survey u/s.133A of the Act, a stock of silver ornament

was found in the business premises of M/s. Parbati Jewellers, a

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proprietor firm of the assessee. From the relevant assessment as

well as first appellate order, I find that the authorities below have

not show caused the assessee before making the addition on this

count. Further, undisputedly, for the relevant assessment year,

the appellant has disclosed total gross receipts of Rs.28,98,,562/-

and shown net profit @ 10% to arrive at business income of

Rs.2,89,856/-, which is higher than the rate of 5% prescribed by

the legislature for computing the profits and gains of retail

business, who have turnover less than Rs.40 lakhs during the

relevant financial period. Therefore, I noted that the assessee

herself has shown higher percentage of net profit of the turnover.

Since there is no dispute regarding estimation of net profit,

therefore, no further addition is required on this point. Further,

from the assessment as well first appellate order, I am unable to

see any valid reason or show cause to the assessee by the

authorities below before making any addition on account of closing

stock found during the survey. It is well established principle of

business of accounting that if the assessee’s income of the

assessee has been shown or estimated u/s.44AF of the Act, then

the assessee is not required to maintain any books of account and

no further addition or disallowance is called for regarding his

trading expenditure or any other account. Therefore, the addition

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made on the basis of closing stock found during the survey cannot

be held as sustainable. I may point out that even if the

authorities below want to tinker the point of closing stock found

during the survey, then they are also required to consider the

opening stock of the assessee at the beginning of the financial

year i.e. on 1.4.2009 otherwise, addition on account of closing

stock cannot be made in the hands of the assessee especially

when the assessee herself is showing higher percentage of net

profit on the turnover undertaken during the relevant financial

period. Accordingly, Ground No.B is allowed.

“ For that the ld CIT(A) has erred in confirming the addition on account of unexplained investment to the tune of Rs.17,76,662/- on the flimsy ground that the appellant could not produce any evidence before the CIT(A) to justified the source of such income, when the appellant in the written submission had in fact deliberated in detail regarding the source of the same.”

Officer has made addition of Rs.17,76,662/- on account of

unexplained investment without any justified reason and

sustainable basis. Ld counsel vehemently pointed out that the

appellant has invested the impugned amount out of her own

source of funds which were generated over a period of 15 years.

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Ld counsel drawing my attention towards written submission of

the assessee submitted that the assessee is consistently filing the

return of income from assessment year 1996-97, wherein, the

assessee has shown income of more than Rs.26 lakhs during 15

years.

be made to the income earned by the assessee herself from

jewellery business. She also received cash, jewellery and other

valuable from her parents being only child without any siblings.

Therefore, the amount invested by the assessee during the period

has to be held as properly explained. Ld counsel submitted that

the assessee is only child of her parents and her mother Late

Annapurna Mohanty died during the relevant period i.e. on

19.11.2009 and her parents used to reside with the assessee

during their old age as they did not have any other child to

support them. Ld counsel further submitted that the father of the

assessee died on 21.1.2014. He submitted that copies of death

certificate and legal heir certificates as Annexure-2 were filed

before the lower authorities. He submitted that all the money that

were accumulated by the parents of the assessee, in natural

course, came into the hands of the assessee, which forms a

substantial source for investment. Ld counsel further submitted

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that on 27.7.2005, the assessee had sold a property at Badahat,

Kendrapara to one Manoj Kuma Sahoo for an amount of

Rs.2,78,000/-, out of which amount, a part has been flowing in

the credit of the assessee. Thus, this is also another resource for

enabling the assessee for making the impugned investments.

Copy of sale deed is also on record as Annexure-3. Ld counsel

further submitted that the AO has referred to an amount of

Rs.3,26,832/- paid to Bajaj Allianz. As perusal of the relevant

bank statement reveals that this amount was received of the

assessee for her bank account on 27.4.2009 and on the same day

that exact amount was paid to another party through ICICI Bank.

Therefore, this amount cannot be treated as unexplained

investment of the assessee. He, accordingly, prayed that the

addition made by the AO and confirmed by the CIT(A) may kindly

be dismissed.

own amount received from her parents and amount received on

the sale of property during the assessment year 2006-07.

Therefore, the AO was not justified in making addition on account

of unexplained investment and the ld CIT(A) was not correct in

upholding the same.

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authorities and submitted that the assessee has not properly

explained the source of investment. Therefore, the addition on

account of unexplained investment may kindly be confirmed.

I find it appropriate to note down some uncontroverted and

undisputed facts, which are as under:

i) The assessee is filing return of income since 1996-97 till present assessment year 2010-2011 and has shown returned income of Rs.26,28,943/-.

ii) The assessee is only child of her parents and due to old age they used to stay with the assessee till their last time of life.

iii) The mother of the assessee Late Annapurna Mohanty died on 19.11.2009 during the financial period 2009-10 relevant to assessment year 2010-2011 and her father also died on 21.1.2014.

iv) Legal heir certificate shows that the assessee is the only legal heir of her parents and obviously in the natural course of practice all movable and immovable property has to be divulged in the hands of the assessee.

v) From copy of sale deed available at assessee’s paper book Annexure-3, it is gathered that the assessee has sold the property to Manoj Kuma Sahoo for a consideration of

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Rs.2,78,000/- which is part of amount of savings in the credit of the assessee, which cannot be ignored while making allegation of unexplained investment.

vi) From the copy of bank statement of the assessee at Annexure-4, I observe that the amount of Rs.3,26,832/- has been transferred to ICICI Bank and against which investment with Bajaj Allianz of Rs.3,26,832/- has been made and this amount has been picked up by the AO for making addition of Rs.17,76,662/- as unexplained investment u/s.69 of the Act, which is not justified approach of the AO.

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saving accumulated from the income earned by her during last 15 years and consideration received against sale of property during the previous year relevant to assessment year and cash, jewellery and other valuable received from her parents. Therefore, in the totality of the facts and circumstances of the case, I am of the view that allegation of unexplained cannot be made in the hands of the assessee u/s.69 of the Act.

Order pronounced on 24 /12/2019.

Sd/- (Chandra Mohan Garg) JUDICIAL MEMBER

Cuttack; Dated 24 /12/2019 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. The Appellant : Smt. Parbati Das, W/O. Jugal Kishore Das, Tinimuhani, Kendrapara

By order

Sr.Pvt.secretary ITAT, Cuttack

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