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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R.S. SYAL
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.
There is a delay of 845 days in presenting the appeal before the Tribunal. The assessee has given reasons by means of an affidavit which led to the belated filing of appeal. I am satisfied with such reasons. As such, the delay is condoned and the appeal is admitted for hearing.
2 ITA No.220/PUN/2019 Pravin Shrinivas Bharadiya
On merits, the assessee is aggrieved by the confirmation of
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.
Briefly stated, the facts of the case are that the Assessing
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.
I have heard both the sides and gone through the relevant
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.
In the result, the appeal is allowed.
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
6 ITA No.220/PUN/2019 Pravin Shrinivas Bharadiya
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. *