PRAVIN SHRINIVAS BHARADIYA,AHMEDNAGAR vs. INCOME-TAX OFFICER, WARD - 4, AHMEDNAGAR

आदेश / ORDER

PER R.S.SYAL, VP : This appeal by the assessee arises out of the order passed by the CIT(A)-2, Pune on 15-06-2016 in relation to the assessment year 2009-10.

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addition on the basis of application of 8% gross profit rate on

bank deposits amounting to Rs.21,94,000/- treated by the AO as

his sale and also the enhancement made by the ld. CIT(A) to the tune of Rs.4,38,800/-, estimating 1/5th of Rs.21.94 lakh as

additional capital required.

Officer (AO) got some information about the assessee having

deposited cash amounting to Rs.21,94,000/- in his saving bank

account maintained with Nagar Urban Cooperative Bank Ltd.

Vambori branch. On being called upon to explain the source of

the deposit, it was submitted that the assessee was not doing any

business of trading. The assessee further explained, by means of

confirmation letters from small vendors, that they were not

financially capable of purchasing goods in cash and it was the

assessee who was purchasing goods on credit on their behalf,

and returning money to his suppliers after receiving cash from

them. Not convinced with the assessee’s submissions, the AO

held that the assessee was engaged in his own business as the

purchases were made by him as principal. Applying 8% gross

profit rate on such deposits of Rs.21.94 lakh, by treating the

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same as assessee’s turnover, the AO worked out and made an

addition at Rs.1,75,520/-. The ld. CIT(A) made enhancement by opining that 1/5th of the amount of such sales made by the

assessee outside books of account, was required as additional

capital. He, therefore, enhanced the income by a further sum of

Rs.4,38,000/-. The assessee is in appeal before the Tribunal.

material on record. It is an admitted position that the assessee,

in fact, deposited a sum of Rs.21.94 lakh in his bank account. In

support of the source of such deposits, the assessee submitted

that he was purchasing goods from certain suppliers for onward

supply to small vendors who were not capable of purchasing

goods on credit. After receiving the amounts from such small

vendors, the assessee was making payment to his suppliers. For

this act, the assessee was charging commission @ 3%. The fact

that the assessee purchased goods and then passed them over to

small vendors has been admitted by such small vendors by

means of confirmation letters, as called for by the AO. Page 26

of the paper book is a copy of bank account maintained by the

assessee in which such cash received from small vendors was

deposited. It can be seen that the opening balance in this bank

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account was Rs.1292.49. On 15-07-2008, a sum of

Rs.1,70,000/- was deposited and thereafter there are withdrawals

for the equal amount through transfer entries to the suppliers.

Similar pattern of transactions is prevailing throughout the year.

After every cash deposit, there are withdrawals by journal

entries. Balance in the account has almost remained similar after

every transaction of squaring up. Giving effect to certain interest

income etc., the closing balance in the bank account was still at

Rs.3,703.64. The nature of transactions recorded in the bank

account fortifies the assessee’s stand that he was collecting cash

from small vendors and then passing it over to his suppliers.

Ledger account of the assessee in the books of M/s. Simratmal

Chunilal Mutha, one of the suppliers of the assessee, is available

at page 29 of the paper book. Blueprint of transactions in the

said account deciphers that firstly, sales were made to the

assessee and then amount was received from assessee through

banking channel. A copy of some of the pages of cash book of

the assessee has been placed at page 69 onwards of the paper

book. It is thus clearly established that the assessee was

purchasing goods and then handing over the same to small

vendors. Against every sale to small vendors, there is a charge

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of commission @ 3%. The above narration of facts amply

proves that the stand taken by the assessee before the authorities

below is not devoid of substance. Even though technically, these

were transactions of purchases by the assessee, but such

purchases were, in fact, made for onward supply to the small

vendors from the very beginning. In my considered opinion, the

authorities below were not justified in negativing the assessee’s

stand and taking the entire amount of deposits in the bank

account of the assessee as his own sale liable to tax @8%. At

this stage, it is relevant to mention that the assessee did declare

commission income at the rate of 3% in his books of account,

which fact has not been denied by the AO. I, therefore, overturn

the impugned order and order to delete the addition made by the

Assessing Officer as further enhanced in the first appeal.

Order pronounced in the Open Court on 03rd May, 2019.

Sd/- (R.S.SYAL) उपा�य�/ VICE PRESIDENT उपा�य� उपा�य� उपा�य�

पुणे Pune; �दनांक Dated : 03rd May, 2019 सतीश

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आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत / Copy of the Order is forwarded to : अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / 3. The CIT (Appeals)-2, Pune 4. The Pr. CIT-1, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. // True copy // आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 02-05-2019 Sr.PS 2. Draft placed before author 02-05-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *