AMIT JAIN,FIROZABAD vs. ITO-2(2)(1), FIROZABAD

In the Income-Tax Appellate Tribunal, Agra Bench, Agra

Before: Shri Sudhanshu Srivastava, Judicial Member And Dr. Mitha Lal Meena, Accountant Member

ITA No. 287/Agr/2017 Assessment Year: 2013-14

Sh. Amit Jain, 17/4, vs. Income-tax Officer, Hanuman Road, Firozabad 2(2)(1), Firozabad. PAN – ACYPJ7566Q (Respondent) (Appellant)

Appellant by Sh. Anurag Sinha, Advocate Respondent by Sh. Waseem Arshad, Sr. DR

Date of Hearing 21.02.2019 Date of Pronouncement 22 .03.2019

ORDER PER SUDHANSHU SRIVASTAVA J.M.: This appeal is filed by the assessee against the order dated 10.03.2017 passed by the Ld. CIT (Appeals)-I, Agra {CIT (A) } for the assessment year 2013-14. 2.0 Brief facts of the case, as mentioned in the assessment order, are that the assessee, during the year under consideration, derived income from remuneration and interest from three partnership firms and also derived income from glass bangle business. The return of income was filed declaring income of Rs. 2,13,850/- . The case was subsequently selected for scrutiny under ‘CASS’. During the course of assessment proceedings the Assessing Officer (AO) noted that the

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assessee had deposited cash of Rs.8,45,000/ in Account No 0344104000025267

with ICICI Bank and Rs. 25,000/- in Account No 344104000005388 with IDBI Bank,

aggregating to Rs. 8,70,000/-. The Assessing officer was of the opinion that the

assessee had failed to prove that the above cash deposit represented his business

turnover. An addition of Rs. 7,99,950/- was made under section 69 of the Income

Tax Act, 1961 (hereinafter called ‘the Act’) after allowing credit of the business

income of Rs. 70,050/- as shown by the assessee under section 44AD of the Act.

2.1 Aggrieved, the assessee filed appeal before the learned CIT (A).

However, being unconvinced, the learned CIT (A) rejected all the contentions of the

assessee and dismissed the appeal. Now, the assessee is before this Tribunal (ITAT)

and has raised the following grounds of appeal:

“1. Because, upon due consideration of facts and in the overall circumstances of the case assessment order dated 14.01.2016 is void-ab-initio having been framed on the basis of illegal Notice under section 143(2) issued by ITO 44(1), Kolkata. The assessment therefore is void ab initio and a nullity.

2.1. Because, the authorities below were highly unjustified in making and sustaining addition of Rs. 8,70,000/- ignoring the facts and circumstances of the case and material evidences suggesting that the same represents turnover of the assessee from glass bangle business.

2.2. Because, the rejection of explanation is arbitrary based on no evidence brought on records, confronted to the assessee and the entire exercise is based on pure guess work.

2.3. Because, even if complete records up to the satisfaction of the Assessing Officer was not produced the natural and legal consequence would lead to best

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judgment assessment under section 144 but certainly cannot be a ground for making addition in respect of entire deposits without giving benefit of withdrawals made from such account.

2.4. Because, the action of the authorities below is perverse, illegal and without any legal basis and due consideration of the past history of the assessee’s own case. 2.5. Because, the Ld. CIT(A) was not justified in failing to consider the argument advanced by the assessee that after having allowed set-off of Rs.70,050/- from the impugned addition of Rs.8,70,000/- proves that the AO has accepted the source of receipts.

2.6. Because, observation of the Ld. CIT(A) that the set off of Rs.70,050/- was inadvertently allowed to be set-off from the amount added is without any evidence or even suggestion from the AO in this regard. Because, the judgment of the Hon’ble Gujrat High court in the case of 2.7. Sarwan Kumar Sharma (2014) 49 taxmann.com 101 (Guj) is on materially different grounds and has no application to the facts of the case before Ld CIT (A) and therefore, has been wrongly applied.

2.8. Because, in any view of the matter action of the Ld CIT(A) was not bonafide when he transgressed his jurisdiction in giving findings in para 7.3.3 observing that the assessee is guilty for the charges provided under section 271(1)(c) and thereby directing the AO for imposition of penalty under secton 271(1)(c). Thus, the CIT (A) exceeded his jurisdiction in adjudicating the issue of penalty under section 271(1)(c) causing prejudice and taking away the right of the assessee to raise the issue in first appeal as and when penalty is levied. Because, while making the assessment the ‘AO’ and while sustaining 3. addition Ld. ‘CIT(A)’ made various observations/conclusions which are contrary to facts available on records. 4. Because the appellant denies liability of interest under section 234B of the Act.

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3.0 Shri Anurag Sinha, the learned Authorised Representative (AR) for the

assessee submitted that ground No.1 is not being pressed and the same be treated

as withdrawn.

3.1 With regard to ground Nos. 2.1 to 3 the Ld. AR submitted that the

addition had wrongly been made and wrongly been sustained by the authorities

below ignoring the fact that identical similar issue had been raised by the

Department in AY 2011-12 and identical addition had been made by the AO but, on

appeal, the learned CIT (A) had sustained the addition by applying Net Profit rate of

5%. It was further submitted that the Department went into appeal against the order of the Ld. CIT (A) but the department’s appeal was dismissed by the ITAT in

ITA No. 271/Agr/2016 vide order dated 01.05.2018.

3.2 The Ld. AR further submitted that without prejudice to the above no

addition could be legally made by treating the entire bank deposits as the income of

the assessee ignoring the fact of withdrawals made from the bank account/s. He placed reliance to the Judgment of the Hon’ble Gujarat High Court in the case of CIT

Vs Pradeep Shati Lal Patel (2014) 42 taxman.com 2 (Guj.) and submitted that in the

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subsequent Judgment of Sarwan Kumar Sharma (2014) 49 taxman.com 101, as

relied by upon by the learned CIT (A) in the impugned order, the Hon’ble Gujarat

High Court had not taken note of its earlier Judgment in the case of Pradeep Shanti

Lal Patel (supra). It was submitted that the subsequent judgment in the case of

Sarwan Kumar Sharma (supra) was per incuriam and, therefore, the same could not

be followed.

4.0 Per contra, the Learned Senior Departmental Representative (Sr. DR)

Shri Waseem Arshad submitted that the addition has rightly sustained by the

learned CIT (A). The Ld. Sr. DR, placing reliance to the findings of Learned CIT (A),

submitted that: (a)no books of account have been maintained by the assessee even

though his Partnership Firms, from where he is deriving income do so and even

such books are audited; (b) all transactions related to the assessee’s business have

been made in cash for no apparent reason; (c) no formal or informal record of the

business was produced by the assessee either during the assessment proceedings or

during the first appellate proceedings; (d) it is very relevant to note that no

confirmation/s from any customer/s or transporter/s have been produced by the

assessee in support of his contention that the cash deposits in his saving bank

accounts were indeed sale proceeds from his own genuine business activities. It was

further submitted that the purchase bills submitted were not backed by any banking

transactions and provide little strength to the assessee’s submissions; (e) the sale

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bills produced by the assessee, when considered along with the entries of cash

deposits in the assessee's two bank accounts, conclusively establish that the

explanation of the assessee is false.

4.1 The Ld. Sr. DR also submitted that the case for A.Y 2011-12, as decided

by the learned CIT(A), is distinguishable as in that year the assessee had claimed

that the turnover in A.Y 2011-12 was represented by sale of bangles out of which he

used to earn commission income @ 0.3% to 0.4% . Though, as noted in the present

order the then learned CIT (A) in A.Y 2011-12 also found the explanation of the

assessee to be untrue and held that the cash deposited in the bank accounts

aggregating to Rs. 97,15,747/- was the turnover of the assessee. The Learned Sr. D.R

also placed reliance upon the judgment of Hon’ble Gujarat High Court in the case of

Sarwan Kumar Sharma (supra) as was relied upon by the learned CIT (A) in the

impugned order.

5.0 We have heard the rival submissions, carefully perused the material on record

and have also considered the case laws relied upon by both the parties. It is seen

that the learned CIT (A) has held that case of the of the assessee was distinguishable

from Assessment Year (AY) 2011-12 for the reasons as noted in his order that in A.Y

2011-12, though the explanation furnished by the assessee regarding the bank

deposits to be part of business turnover was found to be untrue, yet the learned CIT

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(A) in A.Y 2011-12, had chosen to hold cash deposits as sale consideration of glass

trading business. These findings of the learned CIT (A) advances the case of the

assessee because in the case on hand even if the explanation of business is found to

be untrue , following the findings for A.Y 2011-12, net profit rate was to be applied.

Thus, the attempt made by the learned CIT (A) to distinguish the order passed by his

predecessor in A.Y 2011-12 was a feeble attempt on his part. We have also gone

through the order passed by the ITAT, in the case of the assessee for A.Y 2011-12

wherein the revenue had challenged the order passed by the learned CIT (A) on the

ground that no evidence of business was furnished by the assessee and, thus, the

learned CIT (A) had committed an error in holding bank deposits to be the turnover

of the assessee and directing that on such deposits net profit @5% be applied by the

Assessing officer. Since, the order of the ITAT was passed on 10.05.2018, whereas

the impugned order was passed on 10.03.2017, therefore, the learned CIT (A) did

not have the advantage of ITAT order passed in the case of the assessee wherein an

identical addition was made by the Assessing officer.

5.1 The ITAT, vide para-6, has held as under:

“6. We have heard the rival submission of the parties and carefully considered the material available on records, including the impugned order and case laws relied by the parties and we find no justification to interfere with the impugned order. The records reveals that before the Ld

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CIT(A) assessee made due representation, furnished written submission along with sworn affidavits of four of its customers to whom he supplied the glass bangles and all of them have confirmed business transaction with the assessee. The assessee has supported his contention of doing business by referring to the pattern of deposit and withdrawals made through the said bank accounts wherein the customers to whom sales were made, located in different parts of the country, were allowed to deposit cash and the said amounts were withdrawn from banks for the purpose of making payments to dealers of glass bangles business of firms namely M/s Raja Enterprises, M/s Biharji Decorators and M/s Raja Bangles Stores where assessee is one of the partners, their ITR’s and Balance Sheets were also brought on records along with Computation of Income filed before the AO showing income from trading of glass bangles. This further fortifies the claim of the assessee that the deposits in the bank accounts had accrued to the assessee from business activity of glass bangles trading. In the light of peculiar facts of the case and in view of the evidences brought on records by the assessee, particularly the Affidavits by four of its customer, the action of the Ld CIT(A) in holding bank Deposits to be from the business activities of glass bangle trading business cannot be said to be unjustified. Moreover, no other source of income is demonstration by the Assessing Officer either from the attending facts of the present case or as a result of scrutiny of bank accounts.

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purchase, but he denied transaction with the assessee. In this context, we have examined the remand report submitted by the AO and objections of time assessee thereon. The Remand Report dated 01.03.2016 furnished by the AO to the Ld. CIT(A) is reproduced in the appellate order on Page-7, Para-9, which was objected by the assessee that the enquiry conducted was for A.Y 2013-14, whereas case of the assessee pertains A.Y 2012-13; that even the reply by M/s Shiv Charan Lal Ambika Prasad was incorrectly understood, in as much as, the said customer had replied that it has made no sale by the name of the assessee or no credit; .and -that it was further told by him that he has no ledger account in the name of the assessee, This objection of the Ld DR, when examined in' the light of reply furnished by the assessee in its rejoinder dated 22.03.2016, it is found that the assessee was making cash purchase from the said Firm and assessee had also filed duly verified cash purchase bills from the above Firm before ld CIT(A). In such state of affairs, when the said party was making sales to the assessee on cash basis i.e after realizing cash against the sales, there was no reason for him either to maintain the Ledger Account of the assessee or to issue bills in his name. Moreover, the bills of the said party, furnished by the assessee, were cash purchase bills only, duly verified, the authenticity of which has nowhere been doubted by the Assessing Officer. In such view of the matter, the adverse inference drawn by the AO on this count, in our opinion, is not tenable.

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Rejoinder dated 22.03.2006 objected to the above assertion of the AO made in the Remand Report dated 01.03.2016, stating that photocopy of the business dairies amongst other evidences, showing deposits to be the business receipts, were furnished before the AO. The AO has nowhere raised any objection as to the non-production of photocopies of said diaries or the veracity of their contents. It is also not evident from record that the AO ever demanded original customer diaries to verily the contents of it photocopies. Hence, this objection of the AO also does not hold good.

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assessee has raised no plea before us for being assessed on peak basis, rather CIT(A) on page 16 of its order has specifically observed that assessee's case is not a case for being assessed at peak balance and moreover assessee has owned the credits to be its turnover from business transaction. Therefore, the decision relied on by the Id. DR does not render any help to the case of Revenue.

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amount of Rs.35,33,414/- as a total income of the assessee by treating the income from undisclosed source.” 11. The learned CIT(A) partly allowed the appeal filed by the assessee in that case by restricting the addition of Rs.35,33,414/- to Rs.1.80 lacs under Section 44AF of the I.T. Act and the appeal filed by the Revenue before the Tribunal against the order of Id. CIT(A) stood dismissed. The Revenue, therefore, filed appeal before Hon'ble Gujrat High Court raising following question of law:

"Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in considering in law, the deposits in the saving bank account of the assessee as "Trading Receipts" without any evidence of the existence of business on record?" "Whether on the facts and circumstances of the case, the ITAT was right in restricting the addition from Rs.35,33,414/- to Rs.1.80 lacs by way of business income from retail trade u/s. 44AF of the Act where the assessee failed to furnish name and addresses of the suppliers?" 12. While deciding the aforesaid questions, Hon'ble Gujrat High Court Confirmed the view taken by the Id. CIT(A) and the Tribunal holding that no substantial question of law arises in the present appeal. The facts of this case, in our opinion, rather stand on parity of those attending to the case at hand. It is seen that in the present case, assessee before LdCIT(A) had furnished affidavit of the assessee, affidavits of few of its customers, confirmation from few customers; that the adverse enquiry elicited from one of its customer under section 133(6) was wrongly inferred by the AO; that the memoranda of business was maintain in the shape of customer diary and assessee has also detailed out its role and place in the process of

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glass manufacturing business. In the light of overwhelming evidences on records, uncontroverted testimony of the assessee on oath and its customers, the view adopted by the Ld CIT(A), in our opinion, cannot be faulted with.

5.2 The facts of the case being identical, therefore, finding our self in agreement with the view adopted by the co-ordinate Bench in assessee’s own case (supra), we

allow the appeal filed by the assessee and directsthe Assessing officer to apply net

profit rate of 5% on bank deposits of Rs.8,70,000/- which works out to Rs.43,500/-

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giving credit to the income of Rs.70,050/- already shown under section 44AD of the

Act, credit of which was rightly allowed by the Assessing officer. In effect no

addition over and above the returned income would be warranted. Ground Nos. 2.1

to 2.7, accordingly, stand allowed.

In view of our allowing the assessee’s ground on the substantive addition and 5.3

the concurrence of the Ld. AR in not pressing the other grounds, the remaining

grounds are dismissed as not pressed.

6.0 In the final result, the appeal of the assessee stands partly allowed.

Sd/- Sd/- (Dr. Mitha Lal Meena) (Sudhanshu Srivastava) Accountant Member Judicial member

Dated: 22.03.1019 Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra