SHRI MEHUL ROHITKUMAR BHARTIA,VALSAD vs. THE INCOME TAX OFFICER, WARD-2, VAPI

Mehul Rohitkumar Bhartia v. ITO Wd-2 Vapi/I.T.A. No.1040/Ahd/2015/A.Y.06-07 Page 1 of 4

आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत INCOM TAX APPELLATE TRIBUNAL-SURAT-BENCH-SURAT �ी सी.एम.गग�, �याियक सद�य तथा �ी ओ.पी.मीना, लेखा सद�य के सम� BEFORE C .M. GARG, JM & O. P. MEENA, AM आ.अ.सं./I.T.A No. 1040Ahd/2015: िनधा�रण वष�/Assessment Year: 2006-07 Shri Mehul Rohitkumar Bhartia, V. Income Tax Officer Balahadi, Station Road, Taluka Ward-2, Vapi. Pardi, Valsad : PAN:AHRPB 3944L अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से Assessee by Shri Sapnesh Sheth, CA राज�व क� ओर से Revenue by Smt. Smitha V. Nair Sr. D.R. सुनवाई क� तारीख Date of hearing 21.08.2018 उ�ोषणा क� तारीख Date of pronouncement 18.09.2018 आदेश /ORDER PER O. P. MEENA, AM 1. This appeal at the instance of the Assessee is directed against an order dated

20.02.2015 passed by learned Commissioner of Income tax (Appeals)-Valsad (in

short “the CIT (A)”) for the Assessment Year 2006-07. 2. Ground no. 1 & 2 States that Ld. CIT (A) has erred in confirming the action of the AO in making addition of Rs. 12,60,183 unexplained cash deposits. 3. Succinct facts are that the Assessing Officer (AO) noticed that the assessee

has cash deposits of Rs. 12,60,183 in his saving bank account with Sardar Bhiladwala

Pardi Peoples Co-operative Bank Ltd., Vapi. The assessee has not filed any return of

income. Hence, case was reopened by issue of notice under section 148 of the Act of

the Act. In response to which, the assessee has filed return of income showing

income at Rs. 32,553. The source of cash deposits was explained as for retail trading

of mangos etc., which he forget to disclose under the impression that this is an

Mehul Rohitkumar Bhartia v. ITO Wd-2 Vapi/I.T.A. No.1040/Ahd/2015/A.Y.06-07 Page 2 of 4

agricultural income. It was submitted that fruits were sold for Rs. 12,55,700 and

entire amount was deposited in saving bank account. The assessee has also disclosed

some names from whom these fruits were purchased for sale. It was contended that

whole transaction should be treated as business income under section 44AF of the

Act of gross turnover of Rs.12,55,700 which worked out @5% to Rs.62,735 should

be brought to tax. However, the AO did not accept the version of the assessee, as the

assessee has failed to adduce any evidence regarding to business conducted.

contended that only 5% of profit be added under section 44AF of the Act. However,

Ld. CIT (A) observed that the appellant has not been filing his return due to total

salary being below the taxable limit. However, as no evidence has been adduced for

fruit business hence, the addition made on account of unexplained cash deposits

was upheld.

Tribunal by way of this appeal. The learned counsel for the assessee repeated the

same submissions as made before authorities below. He referred bank statement

placed at Paper Book Page No. 8 to 13 and submitted that perusal of pattern of cash

deposits and cash withdrawals appearing in the bank account indicates that the

assessee has done business activity on small scale. In such a situation, addition can

be made of profit and not the entire sales. The learned Counsel has placed reliance

in support of his plea in the case of CIT v. President Industries 158 CTR 372

(Gujarat) of Hon’ble Gujarat High Court, and claimed that the addition ought to have

Mehul Rohitkumar Bhartia v. ITO Wd-2 Vapi/I.T.A. No.1040/Ahd/2015/A.Y.06-07 Page 3 of 4

been made @5% of turnover as per provision of section 44AF of the Act. Without

prejudice to above, the learned counsel for the assessee further submitted that

addition if any can be made of peak credit balance of Rs. 1,34,328 as on 14.10.2005

appearing in said bank account as no unaccounted assets has been found by the AO.

The learned counsel also placed reliance in the case of Smt. Manjulaben Champaklal

v. ITO I.T.A.No. 1155/Ahd/ 2011, ACIT v. Baldev Raj Charla & Of Rs. 121 TTJ (Del)

366 and others as per his written submissions dtd. 10.02.2015.

record. The perusal of replied filed before the AO which is placed at Paper Book Page

No. 4 to 7 shows that the assessee had furnished names and address of 26 parties

from whom the fruits were purchased by him. Further, perusal of bank statement

placed at Paper Book Page No. 8 to 13 reveals that there are credit entries ranging

between Rs. 1000 to Rs. 19,000 by cash and there are cash and cheque withdrawals

were ranging between Rs. 1000 to Rs. 20,000. It is further seen that some of debit

entries are by cheques in the name of Thakorbhai, Dineshbhai, Mital, Jagdish,

Kaushal, Vinod, Tarun, Mehul and others of which names are also appearing in list

of purchaser submitted by the assessee before the AO during the course of

assessment proceedings. On careful consideration of these facts and patterns of cash

deposits and cash withdrawals and cheque withdrawals, leads to infer that the

assessee has was doing small business activity of purchase and sales of fruits. We

also find the this bank account was opened on 12.07.2005 and closing balance at the

Mehul Rohitkumar Bhartia v. ITO Wd-2 Vapi/I.T.A. No.1040/Ahd/2015/A.Y.06-07 Page 4 of 4

end of financial year as on 31.03.2006 was at Rs. 63,183 Considering these facts, we

are of the considered opinion, that beside salary income from private company, the

assessee was also doing small business of fruits, therefore, the entire cash deposits

cannot be treated as income of the assessee. The learned counsel for the assessee

submitted the provision of section 44AF be applied which gives 5% Net profit rate

on total sales. Accordingly, the AO is directed to calculate the addition @ 5% of net

profit as per section 44AF of total credits of Rs. 12,60,183 considering the gross

turnover. Thus, the addition is reduced to 5% credit entries. This ground of appeal

is thus, partly allowed. 8. In the result, the appeal of the assessee is partly allowed. 9. The order pronounced in the open Court on 18.09.2018

Sd/- Sd/- (सी.एम.गग� /C.M. GARG) (ओ.पी.मीना/O.P.MEENA) �याियकसद�यतथा/JUDICIAL MEMBER लेखासद�यकेसम� /ACCOUNTANT MEMBER सुरत Dated: 18-09-2018 आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to : 1.अपीलाथ�/ The Appellant; 2. ��थ�/ The Respondent; 3. आयकरआयु� (अपील) The CIT(A)4.आयकरआयु� / Pr. CIT 5.िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/D.R. (ITAT) 6. गाड�फाईल / Guard file ITAT. By order

/ / TRUE COPY / / Assistant Registrar, Surat