ASIF LATIFBHAI KHIMANI,,RAJKOT-GUJARAT vs. THE INCOME TAX OFFICER, WARD-2(4),, RAJKOT-GUJARAT

Facts on all vital points are common in both the assessment years, therefore, for the facility of reference we take up the facts from the Asstt.Year 2008-09.

Registry has pointed out that appeals filed by the assessee are time barred by 13 days. In order to explain the delay, the assessee has filed his affidavit deposing therein that after receipt of CIT(A)’s order, it was misplaced and lost sight off. When the tax consultant reminded the assessee

On due consideration of the above explanation, we are satisfied that the assessee has been prevented by sufficient reason for not filing the appeal within the time. Therefore, we condone the delay, and proceed to decide the appeals on merit.

In the Assessment year 2008-09, the assessee has challenged reopening of the assessment. Brief facts of the case are that the assessee has filed his return of income on 25.2.2009 declaring total income at Rs.1,12,890/-. The assessment was framed under section 143(3) of the Act on 22.12.2010. Thereafter, the AO got information that the assessee has deposited cash of Rs.23,21,102/- in saving bank account maintained with ICICI Bank. This bank account was not disclosed by the assessee in his return of income. Therefore, the ld.AO has recorded reasons and reopened the assessment. The reopening has been upheld by the ld.CIT(A). In response to the notice of hearing none has come present on behalf of the assessee.

With the assistance of the ld.DR, we have gone through the record carefully. After considering the fact a saving bank account maintained by the assessee was not disclosed in the return, and the assessee has deposited cash of Rs.23,21,102/- in saving bank account, we are of the view that the ld.AO was having sufficient information which enabled him to form a belief that income has escaped assessment. Therefore, there is no fault in reopening of the assessment. Thus, ground of appeal is rejected.

In the next fold of grievance raised by the assessee in both the years is common. Grievance of the assessee is that the ld.CIT(A) has erred in confirming peak credit in the saving bank account with ICICI Bank, and thereafter estimated net profit at 25% of the total turnover.

Brief facts of the case are that the assessee has deposited a sum of Rs.23,21,102/- and Rs.23,77,638/- in cash in saving bank account with ICICI bank in the Asstt.Year 2008-09 and 2009-10 respectively. When the assessee was confronted for the source of such deposits, then he has given the following submissions: "At outset, is respectfully submitted that assessee is engaged in the business of manufacturing of gas lighters on job work basis and major sources of income is job work receipts, besides profit on retail trading of defective or rejected goods. -

The ld.AO was satisfied with the explanation of the assessee to the extent that this account was being used by the assessee for depositing trading receipts from gas lighters, because the assessee was engaged in the business of manufacturing on job work basis. The ld.AO has observed that peak credit available in this account be added to the total income of the assessee in both the years. He made addition of Rs.8,03,773/- in the Asstt.Year 2008-09 and Rs.8,37,238/- in the Asstt.Year 2009-10. He also made addition of Rs.633/- and Rs.2,869/- on account of interest in the above bank account. On appeal, the ld.CIT(A) has observed that the AO should adopt 25% as profit on turnover in this account for both the years. He found that peak credit in the Asstt.Year 2008-09 was of Rs.2,48,833/- and Rs.2,53,873/- in the Asstt.Year 2009-10. Apart from this peak credit, the ld.CIT(A) further confirmed 25% estimated profit on the alleged deposits in the bank account, and he worked out addition of Rs.,5,80,766/- and Rs.5,94,410/- in the Asstt.Years 2008-09 and 2009-10 respectively. In this way, the ld.CIT(A) has confirmed the addition of Rs.8,29,109/- and Rs.8,48,283/- in the Asstt.Year 2008-09 and 2009-10 respectively. This method of computation of income has given rise to a little enhancement in the Asstt.Year 2009-10. But no show cause of notice was issued by the CIT(A) for enhancement of the income.

With the assistance of the ld.DR, we have gone through the record carefully. On due consideration of the above facts, we find that the ld.Revenue authorities are unanimous qua one aspect that this saving bank account was opened by the assessee for the purpose of business. He has deposited the trade receipts in this account. They have accepted it as a fact that trade receipts have been deposited in this account and it was used for making payment for purchase of raw-material. Otherwise, total cash deposits might have been added as unexplained income of the assessee. Once the assessee has admitted it that he was trading in gas lighters and his turnover was less than Rs.40 lakhs, then assuming that gross deposits in the saving bank account as trade receipts, the profit rate provided under section 44AF ought to be added, and accordingly, income of the assessee is to be assessed. Thus, this ground of appeal is partly. We direct the ld.AO to compute profit on these deposits at the rate provided in section 44AF of the Act.

In the results, both the appeals of the assessee are partly allowed. Order pronounced in the Court on 15th October, 2019 at Ahmedabad.