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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & 5621/Del/2018 Assessment Years: 2014-15 & 2015-16 Vikrant Jain, Vs. ITO, B-294, First Floor, Ward-56(1), Prashant Vihar, New Delhi. Near Sector 14 Road, Rohini, New Delhi. PAN: AHRPJ0070F (Appellant) (Respondent) Assessee by : Shri Rajesh Jain, CA Revenue by : Shri Amit Jain, Sr.DR Date of Hearing : 13.03.2019 Date of Pronouncement : 05.04.2019 ORDER
15th March, 2018 of the CIT(A)-19, New Delhi, relating to Assessment Year 2014-15. is directed against the order dated 8th June, 2018 of the CIT(A)-12, New Delhi, relating to Assessment Year 2015-16. For the sake of convenience, both the appeals were heard together and are being disposed of by this common order.
(A.Y. 2014-15) 2. Facts of the case, in brief, are that the assessee is an individual and proprietor of Shri Ganesh Polymers engaged in the business of manufacturing of PVC pipes, etc. He filed his return of income on 25th September, 2014 declaring total income of Rs.2,70,200/-. The Assessing Officer, during the course of assessment proceedings, observed that the assessee has maintained many bank accounts either in his name or in the joint name with others. Since it was becoming difficult to ascertain the total number of bank accounts maintained by the assessee during the relevant year, he asked the assessee to submit an affidavit showing details of all accounts maintained by him either in his own name or in the joint names with others. From the details furnished by the assessee, he noted that the assessee has maintained five bank accounts wherein substantial deposits have been made. He, therefore, asked the assessee to explain the reasons for deposits in his accounts in excess of the turnover claimed by him. It was explained that he has savings accumulated from past years and the same amount has been deposited and withdrawn frequently from his bank accounts. The Assessing Officer inferred that the pattern of the deposits and the withdrawals in the bank account statements shows that these are business transactions because it does not serve any purpose by depositing and withdrawing same amounts so frequently in and from the bank accounts. He, therefore, treated the deposits in the bank account amounting to Rs.1,92,78,425/- as his undisclosed turnover.
After considering the disclosed turnover of Rs.72,12,226/- and undisclosed 2 turnover as determined above, the Assessing Officer applied 8% profit on the total turnover and accordingly made addition of Rs.15,42,274/-.
Before CIT(A), it was argued that the assessee has already filed revised computation of income and offered 5% profit on the turnover of Rs.1,95,16,567/-.
However, the Assessing Officer has estimated the profit at 8%. Since the assessee has already paid tax on the additional income by surrendering Rs.9,63,921/-, therefore, no addition is called for. However, the ld.CIT(A) was not fully satisfied with the arguments advanced by the assessee and sustained an amount of Rs.2,06,384 by observing as under:-
“6. I have considered the facts and circumstances of the case, submission of the appellant and perused the order of the Assessing Officer. I find that the appellant himself surrendered additional income of Rs. 9,63,921/- on which tax was also paid. However, I find that the regular transactions in the bank accounts as credits & withdrawals do not represent the sale/purchase only but also certain unaccounted income of the appellant which was given & received in the form of loan/advance to the friends/relatives. On perusal of the bank statements, I find that the peak amount appearing in the bank statement of Axis Bank comes as on 28.05.2013 of Rs. 2,06,384/-. After careful consideration of the facts, I am of the view that over & above the profit of the business shown by the appellant of Rs. 12,43,339/-, it was also an unaccounted income of Rs. 2,06,384/- pertains for the year under consideration, thereby, the Assessing Officer is directed to restrict the addition to Rs. 2,06,384/- only.”
4. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:-
“1. Under the facts & circumstances of the case & as per law, the Learned CIT(A) erred in rejecting the ground of appeal challenging the validity of the Assessment Order as no notice u/s 143(2) of the Act was served on the appellant within the time prescribed under the law, in view of Judgment of Hon. Supreme Court in the case of Hotel Blue Moon.
Without Prejudice to the above Ground 2. Under the facts & circumstances of the case & as per law, the Learned CIT(A) erred in sustaining addition of Rs.2,06,384/- on account of peak credit of the Bank Statement whereas the Appellant already surrendered Rs.9,63,921/- i.e. 5% of undisclosed credit entries in the Bank Statement. Separate addition of Rs.2,06,384/-, on the facts of the case and as per law should not have been made.
3. That the appellant craves leave to add, amend or alter any of the grounds of the appeal.”
So far as ground of appeal No.1 is concerned, the ld. counsel for the assessee did not press the same for which the ground of appeal No.1 is dismissed as not pressed.
So far as ground of appeal No.2 is concerned, it is the submission of the ld. counsel for the assessee that the assessee has already surrendered an amount of Rs.9,63,921/- being 5% of the undisclosed credit entry in the bank statement, therefore, no separate addition of Rs.2,06,384/- is called for.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I find the Assessing Officer estimated the profit @ 8% on the undisclosed turnover of Rs.1,92,78,425/- and made addition of Rs.15,42,274/-. I find the ld.CIT(A) restricted the addition to Rs.2,06,384/- being the peak credit appearing in the bank statement for the reasons already reproduced in the preceding paragraphs. It is the submission of the ld. counsel for the assessee that since the assessee has already surrendered additional income of 4 Rs.9,63,921/- on which tax has been paid and the same being more than the peak credit considered by the CIT(A), therefore, no addition is called for. I find merit in the above argument of the ld. counsel for the assessee. I find the ld.CIT(A) in the order has given a finding that the regular transactions in the bank accounts as credits and withdrawals do not represent the sale/purchase only, but, also certain unaccounted incomes of the assessee which were given and received in the form of loans and advances to the friends and relatives. The Revenue is not in appeal against the above finding of the CIT(A). If loans and advances are given and the same are received back and again given, then, in that case, the peak credit is to be taxed which has been done by the ld.CIT(A) in the instant case. However, the assessee has already surrendered additional income of Rs.9,63,921/- which is much more than the peak credit. I, therefore, agree with the submission of the ld. counsel for the assessee that no addition is called for. I accordingly set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. The second ground raised
by the assessee is accordingly allowed. (A.Y. 2015-16)
8. After hearing both the sides, I find the Assessing Officer in the instant case has made an addition of Rs.10,82,580/- by estimating the profit @ 10% on the undisclosed turnover being the deposits in bank accounts. I find the ld.CIT(A) upheld the action of the Assessing Officer by observing as under:-
“8.4 I have considered the facts of the case and submission of the Appellant. The Appellant has accepted that he does not have explanation to various cash deposits amounting to Rs. 1,08,25,793/-. The Appellant's case does not fall within the purview of section 44AD because the turnover has exceeded Rs.l Crore. The Appellant has failed to substantiate that some of the cash receipts may belong to the turnover of the preceding financial year or some of the receipts may be capital in nature. The Appellant has not rebutted the observation of the Assessing Officer that on the similar facts and in the circumstances the Assessee declared gross profit of 10.56% in the immediately preceding financial year. The principle of peak credit cannot be held to be applicable in this case because the deposits in the bank account are related to the business of the Assessee and there is no immediate link between credit and debit entries. I observe that the Assessing Officer has been very reasonable to apply the gross profit of 10% only on the additional business receipts. On these facts and in the circumstances, I find that the addition made by the Assessing Officer is quite justified, reasonable and in accordance with law. The Assessee does not have any strength in the grounds of appeal taken by him. Accordingly, the above grounds of appeal are dismissed and the addition is confirmed.”
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:-
“1. That the learned CIT(A) erred in upholding the Assessment Order assessing the Income of the Appellant at Rs. 14,79,780/- against total income revised vide return filed u/s 139(5) of the Act on 27-06-2016 at Rs. 9,23,300/-, without appreciating the facts and law. The Learned CIT(A) erred in not following the Appellate Order for the Assessment Year 2014-15, preceding the year under Appeal, having the similar facts.
On the facts & circumstances of the case the learned CIT(A) erred in upholding the Order of the Assessing Officer who adopted 10% gross profit arbitrarily on total amount Rs. 1,08,25,793/- credited in the Bank Account during the year in the multiple of small amounts of Rs. 3,000- 4,000/- to Rs. 40,000 - 50,000/- and immediately withdrawal of the same amount in cash, whereas the appellant had already surrendered an amount for taxation which is more than peak credit of Rs. 5,24,985/- available anytime during the relevant Assessment Year in the Axis Bank Saving Account of the Appellant.
3. That the appellant craves leave to add, amend or alter any of the grounds of the appeal.”
The ld. counsel for the assessee submitted that the assessee has already surrendered additional income of Rs.5,26,100/- by filing the revised total income of Rs.9,23,300/- on 16th July, 2016 as against the returned income of Rs.3,97,200/-. Since the assessee was applying the provisions of section 44AD and the undisclosed turnover according to the Assessing Officer was Rs.1,08,25,793/-, then, applying the provision of profit rate of 5%, the net profit comes to Rs.5,41,290/-. However, the assessee has already surrendered additional income of Rs.5,26,100/-, therefore, addition, if any, at best can be confined to Rs.15,190/-. In any case, since the amount surrendered at Rs.5,26,100/- is much more than the peak credit of Rs.5,24,985/-, therefore, no addition is called for.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
I have considered the rival arguments made by both the sides and perused the orders of the authorities below. It is an admitted fact that the assessee was unable to explain the various cash deposits amounting to Rs.1,08,25,793/-. In the preceding year, the income surrendered was much more than the peak credit. However, this year, the amount surrendered is not substantially higher than the peak credit. Therefore, the submission of the ld. counsel for the assessee cannot be accepted. However, since the Assessing Officer has estimated profit at 10% which has been upheld by the CIT(A), I direct the Assessing Officer to restrict the profit on the estimated turnover at 5% of Rs.1,08,27,793/- which comes toi Rs.5,41,290/-. Since the assessee has already declared additional income of 7 Rs.5,26,100/-, the differential amount of Rs.15,190/- should be added to the total income as his undisclosed income. I accordingly modify the order of the CIT(A) and direct the Assessing Officer to restrict the addition to Rs.15,190/-. The grounds raised by the assessee are partly allowed.