PRASHANT KUMAR SINGH,JAMSHEDPUR vs. ITO WD-2(1), JAMSHEDPUR

These are appeals filed by the assessee against the separate

orders of the CIT(A), Jamshedpur, both dated 21.2.2017 for the

assessment years 2009-2010 & 2011-12.

appeal, the grievance of the assessee is that the CIT(A) was not

was not justified in estimating the income at 8% of the

receipts/turnover of the assessee.

observed that during the year under consideration, the assessee

P a g e 1 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

deposited ₹2,00,668/- into the bank account No.9905 and

₹18,67,000/- in two bank account No.6762 with ICICI Bank,

Bistupur, Jamshedpur on various dates. The assessee failed to

explain the source of deposits. Therefore, the Assessing Officer

treated the total cash deposit in the bank accounts as undisclosed

income and added ₹20,67,668/- to the income of the assessee

treating it as income from undisclosed sources.

order of the Assessing Officer, the remand report and submission

of the assessee. He observed that the Assessing Officer has

considered the nature of business as trading deposits for the

assessment year 2010-2011 despite having passed the order

u/s.144 of the Act of the Act and estimated the income on such

deposit whereas the Assessing Officer has taken altogether

different view in the assessment year under consideration. Based

on the Assessing Officer’s observation for the assessment year

2010-2011, he directed the Assessing Officer to treat the deposit

as trade deposit and further directed to estimate the income

therefrom at 8% of the total receipts, which comes to ₹1,65,413/-

and thereby allowed relief of ₹19,02,255/-.

P a g e 2 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

section 44AD of the Act and submitted that the assessee had

shown turnover of ₹20,84,630/-,which was more than the amount

deposited in bank of ₹20,67,668/- and, therefore, no separate

addition by estimating the profit was called for. For this, he relied

on the decision of Hon’ble P&H High Court in the case of CIT vs.

Surinder Pal Anand, 242 CTR 61(P&H).

of lower authorities and materials available on record. In the

instant case, the Assessing Officer found that the assessee has

made cash deposit of ₹20,67,668/- in two bank accounts

maintained with ICICI Bank. The Assessing Officer observed that

since the assessee failed to explain the source of deposits, he

added the same to the income of the assessee under the head

“income from undisclosed sources”.

deposits of the assessee and directed the Assessing Officer to

estimate the income therefrom by applying the rate of 8% which

worked out to ₹1,65,413/-.

P a g e 3 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

filed return of income for the year u/s.44AD of the Act by showing

the turnover of ₹20,84,630/-- which was more than the cash

deposit of ₹20,67,668/- in two bank accounts of the assessee with

ICICI Bank and, therefore, no separate addition was required to

be made to the income of the assessee by estimating the income

by applying rate of 8%. For this, the assessee relied on the

judgment of Hon’ble P&H High Court in the case of Surinder Pal

Anand(supra), wherein, it was held as under:

“The assessee filed his return of income showing certain business income under section 44 AD. The AO did not accept the return and made an addition in respect of the cash deposited in the bank account during the year. On appeal, the Commissioner (Appeals) held that the assessee was not required to maintain regular books of account as the return had been filed under section 44AD and the turnover was below ₹40 lakhs. It was also recorded that since the cash deposits in the bank statement were lower than the business receipts shown by the assessee and in the bank statement there were withdrawals as well as the deposits, the addition was unjustified. The Tribunal upheld the order of the Commissioner (Appeals). On revenue’s appeal, the Hon’ble High Court held as under: Sub-section (1) of section 44AD clearly provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent of the gross amount paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C. This income is to be deemed to be the profits and gains of said business chargeable of tax under

P a g e 4 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

the head 'Profits and gains of business or profession'. However, the said provisions are applicable where the gross amount paid or payable does not exceed Rs. 40 lakhs. Once under the special provision, exemption from maintenance of books of account has been provided and presumptive tax at the rate of 8 per cent of the gross receipt itself is the basis for determining the taxable income, the assessee is not under any obligation to explain individual entry of cash deposit in the bank, unless such entry has no nexus with the gross receipts. In the instant case, the stand of the assessee before the Commissioner (Appeals) and the Tribunal that the amount in question was on account of business receipts had been accepted. The revenue could not show with reference to any material on record that the cash deposits were unexplained or undisclosed income of the assessee. Therefore, no question of law arose from the Tribunal's order and the revenue's appeal was to be dismissed.” 10. In the instant case also, the CIT(A) on the basis of the

assessment order passed for assessment year 2010-2011 has held

that the deposits in the bank account to be the trade deposits of

the assessee for which, the revenue is not in appeal before me.

On the accepted facts, the decision of the Hon’ble P&H High Court

in the case of Surinder Pal Anand (supra) squarely applies to the

facts of the case of the assessee. Respectfully following the same,

I set aside the order of the CIT(A) and delete the addition of

₹1,65,413/- and allow the appeal of the assessee.

Ground No.1 to 3 is that the CIT(A) was not justified in estimating the profit

P a g e 5 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

@ 5% by taking the deposits in the bank account as total receipts not

reflected in the profit and loss account,.

that the assessee has made cash deposits of ₹14,50,704/- and ₹42,34,975/-

into saving account No.9905 & 6762 with ICICI Bank, Bistupur,

Jamshedpur, ₹43,35,920/- in A/c No.7714 with Central Bank of India,

Sonari, Jamshedpur and ₹2,14,79,400/- in a/c No.1429 with Punjab National

Bank, Asiana Trade Centre Branch, Adityapur. He further observed that on

perusal of the record, it is noted that the assessee was doing trading

business and payments were received through cash and same were

deposited into Bank. Apart from that the payments were made through

RTGS and other mode. Therefore, the Assessing Officer treated the

deposits in the bank account of ₹3,15,00,999/- as trade receipts and

estimated the income by applying rate of 15% and arrived at the income of

₹47,25,149/-,which was added to the income of the assessee.

income at 5% ,,which worked out to ₹ 15,75,050/- and allowed relief of

₹31,50,100/- to the assessee.

income at 5% is on higher side and same should be reduced.

P a g e 6 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

of lower authorities and materials available on record. In the

instant case, the Assessing Officer found that the assessee has

made cash deposit of ₹3,15,00,999/- in four bank accounts. Since

the assessee failed to explain the source of deposit, he held the

same to be trade deposits of the assessee and estimated the

income therefrom by applying rate of 15%, which worked out to

₹47,25,149/-.

cash deposits, which worked out to ₹15,75,050/- thereby allowing

relief of ₹31,50,100/- to the assessee.

estimation of income from cash deposits made in the bank

account by applying the rate of 5% is excessive and same should

be reduced. The contention of the assesse is that the assessee

has shown net profit of 3% in the return of income filed and,

therefore, the income from the deposits made in bank account

should be computed by applying rate of 3%. In the above facts

and circumstances of the case, I am of the considered view that

since the assessee failed to explain the source of deposit before

the Assessing Officer as well as CIT(A, therefore, income came to

be estimated by accepting deposits made in bank accounts as

P a g e 7 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

trade deposits of the assessee. Therefore, in the given facts and

circumstances of the case, I am of the considered view that it

would meet the ends of justice if the income is estimated at 4% of

the deposits made in the bank accounts. I modify the order of the

CIT(A) accordingly and partly allow the appeal of the assessee.

Ground No.4 of appeal for assessment year 2011-12 is common,

which reads as under:

“ For that interest charged u/s 234A and 234B should be charged on the returned income and not on the assessed income following the decision of Hon'ble Jharkhand High Court.’

of lower authorities below, I find that the Hon'ble Jharkhand High

Court in the case of Ajay Prakash Verma (supra) held as under:-

“23. Learned counsel for the appellant submitted that it has been ordered by the A.O. that interest be charged as per rule. Interest can be levied under sections 234A & 234B of the Act. It is submitted that in view of the judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vs. CIT reported in (2001) 114 Taxman 404 (PAT) (FB), the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred S.L.P. before the Hon'ble Supreme Court against the said judgment of the Full Bench of Patna High Court which was dismissed by the Hon'ble Supreme Court on merits vide order dated 01/08/2000 by saying that there is no merit in the appeal.

P a g e 8 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

this appeal that whether the interest could have been levied against the assessed income of the assessee under section 234A & 234B is concerned, in view of the Full Bench judgment of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari, the revenue can levy the interest only on the total income declared in the returns and not on the income assessed and determined by the A.O. to that extent. The orders passed by the authorities below are accordingly modified and interest shall be chargeable in the light of the Full Bench judgment referred above.”

Jurisdictional High Court in the case of Ajay Prakash Verma

(supra), I direct the Assessing Officer to charge the interest on the

income declared in the return and not on assessed income and

allow the ground of appal of the assessee for both the assessment

years under appeal.

2009-10 is allowed and appeal for assessment year 2011-12is

partly allowed.

Order pronounced on 27 /11/2018.

Sd/- (N.S Saini) ACCOUNTANT MEMBER Ranchi; Dated 27/11/2018 B.K.Parida, SPS

P a g e 9 | 10

ITA No. 131 & 132/Ran /2017 Asse ssment Year :20 09- 10

:

Copy of the Order forwarded to : 1. The Appellant : Sri Prashant Kumar Singh, 34, Balajee Nagar, Chhota Govindpur, Jamshedpur

Sr. Pvt. Secretary, ITAT, Ranchi on tour

P a g e 10 | 10