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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
O R D E R PER RAJESH KUMAR, A.M:
These two appeals filed by the assessee are directed against the order(s) of the Commissioner of Income Tax(Appeals)-25, Mumbai, dated 21-10-2013, for the AYs.2009-10 & 2010-11. Since common issues are involved in both these appeals, except the amounts mentioned therein, these appeals are heard together and decided by this common order.
The only issue raised by assessee is against confirmation of addition of Rs.23,22,865/- by the CIT(A) as made by the : 2 : & 7467/Mum/2013 Assessing Officer (AO) u/s.68 of the Income Tax Act (Act) as un-explained cash credit.
2.1. The facts in brief are that the AO received AIR information that assessee has deposited a sum of Rs.23,22,865/- in the SB A/c with ICICI Bank. The case of the assessee was selected for scrutiny and during the assessment proceedings, the AO asked the assessee to explain the sources of funds along with documentary evidences, which was replied by assessee vide letter dt.26-12-2012, by submitting as under:
“a) The assessee has deposited Rs.24,70,700/- in the bank Ltd, Zaveri Bazar branch having A/C. No. 026101505331 is in relation to our business of Bangles. We are in the business of supply of Bangles to various places in the state of UP and Bihar." b) The customer deposit the said cash in our account and then we send the goods through transport to various such customers under their instruction. c) The said deposit of Rs.24,70,000/- is in relation to receipts against the sales made to various such parties and the same are duly reflected in the accounts of the said business submitted herewith for your record and reference. d) Further we offer business income of Rs. 2,00,000/~ instead of Rs. 1,75,800/- as mentioned in the original computation being more than 8% on presumptive basis as required under 44AD of the Income Tax Act, 1962 on the turnover of Rs. 24,70,000/- for the purpose of the assessment. Thus we are not liable to maintain any accounting records on our part. e) With respect to the revision, we would like to your kind notice that said income was inadvertently shown as income from other sources as commission income in the original return which should have been shown as income from Business since the same is actually from business transactions as can be seen from the final accounts already submitted with your goodself. f) Further the peak in the account is also only Rs. 1,10,999/- which is less than the income offered by us of Rs. 2,00,000/-”.
: 3 : & 7467/Mum/2013 2.2. Thus, the assessee submitted before the AO that the said cash was deposited out of receipts from business of bangles trading. The AO thereafter observed that assessee has not disclosed the business income in the return and upon enquiry by the AO, ICICI Bank stated that the account is closed on 24-12-2008 by the assessee. The AO, therefore, added the entire amount deposited into bank as ‘un- explained cash credit’.
2.3. In the appellate proceedings, Ld.CIT(A) also dismissed the appeal of assessee by observing and holding as under:
“5. I have perused the assessment order, submissions of the appellant and the facts and circumstances of the case. It is an undisputed fact that no business income was declared by the appellant. The contention of appellant that the income from sale of bangles was offered as "Commission income" under the head Income from Other Sources is not acceptable by any stretch of imagination, and seems to be a cooked up story. If the contention of the appellant is to be accepted, he must have purchased goods from some parties, sold to some other parties, and also might be in possession of some opening and closing stock. The appellant has not maintained any details as to the counter parties for purchases and sales made, and also any quantitative details in respect of the alleged business of bangles. Further, the reliance of the appellant on Section 44AD also cannot come to his rescue, since the scope of section 44AD was extended by Finance Act, 2009 w.e.f. 01.04.2011, and prior to such amendment it was applicable only to "Civil Constructions etc.", and hence not applicable to the appellant's business in the A.Y.2009-10. In view of the above, the addition made u/s.68 of Rs.23,22,865/- is confirmed and the ground of appeal is dismissed.”
2.4. After hearing rival contentions and perusing the material on record, we observe that the AO made addition u/s.68 of the Act qua the cash deposited by the assessee in ICICI Bank which according to the AO, was not disclosed to the department nor any business, shown from the said business.
: 4 : & 7467/Mum/2013 As per the assessee, the said deposits were made out of trading in bangle business. The assessee submitted that earlier assessee was trading under the name and style of M/s. Mahalaxmi Bangles but the same is being done in the name of M/s. Sovan Bangles. During the year, assessee filed return of income showing the interest income and other income, as under:
Sr. A.Y. Date of filing of Particulars Amount Total No. return (Rs) Income (Rs) 1. 2009-10 31.08.2009 Income from other (Page No.01 to sources 1,77,318 08 of the Paper 1) Interest Book) (Rs.2,297/-) 2) Other Income (Rs.1,75,800/-) Less: Deductions under Chp-VIA 44,938 1,32,380 2. 2010-11 26.07.2010 Income from other (Page No.09 to sources 2,48,023 12 of the Paper 1) Interest Book) (Rs.2,006/-) 2) Other Income (Rs.2,46,017/-) Less: Deductions under Chp-VIA 1,04,200 1,43,823 2.5. Assessee has shown the income from trading in bangles as other income, the assessee is also not maintaining books of account on the ground that income is being shown u/s.44AD of the Act and therefore, no books of account are required to be maintained. We observe that assessee has filed revised computation of income, P&L A/c and Balance Sheet before the AO and stated that the said deposits were inadvertently shown as ‘commission income’ in the return of income as advised by : 5 : & 7467/Mum/2013 the Legal Advisor of the assessee and offered that the said deposits may be taxed @8% in both the years u/s.44AF of the Act. However, the same was not accepted by the AO. The assessee even submitted that the income may be taxed on the peak balance basis which in AY.2009-10 was Rs.1,10,999/- and in AY.2010-11 was Rs.1,51,744/-. However, AO did not accept the submissions of assessee and added the entire income to the income of assessee. Similarly, CIT(A) upheld the same. Now, after perusing the bank details, bank statement and background of assessee, we are of the opinion that the entire deposits into bank cannot be added to the income of the assessee and at the most by following the peak credit i.e., highest balance theory during the year in the bank account can only be added as income of assessee. We also find merit in the contentions of Ld.AR that the addition u/s.68 of the Act cannot be made when the assessee is not maintaining any books of account and the sum is not credited in the books of assessee. The assessee relied on a couple of decisions viz., Baladin Ram Vs. CIT [71 ITR 427], CIT Vs. Bhichand Gandhi [141 ITR 0067] (Bom) and Ms. Mayawati Vs. DCIT [19 SOT 460] (Bom). We are fully in agreement with the arguments of Ld.AR, the amounts were not credited in the books of account of assessee, the same cannot be added u/s.68 of the Act. Section 68 of the Act contemplates that any sum of money, which is found to be credited in the books of account can only be added in the income of assessee. Finally, in this type of circumstances, only peak balance can only be added to the income of assessee. We, therefore, are not in agreement with the conclusion of Ld. CIT(A) on this issue and hold that peak : 6 : ITA Nos. 7466 & 7467/Mum/2013 balance can only be brought to tax. Accordingly, we direct the AO to add Rs.1,10,999/- as income on peak credit basis and assessee gets a relief of Rs. 22,11,866/-. The ground raised by assessee is partly allowed.
In the result, this appeal of assessee is partly allowed.
As far as the appeal of assessee for the AY.2010-11 is concerned, since the identical issue has been decided by us in by holding that the only peak balance has to be added to the income of assessee. Accordingly, our decision in the said decision would, mutatis mutandi, apply to this assessment year also. Accordingly, we direct the AO to add a sum of Rs.1,51,744/- to the income of assessee, as income on peak credit basis and assessee gets relief of Rs.31,72,991/-. The ground raised by assessee is partly allowed.
In the result, this appeal of assessee is partly allowed.
To sum-up, both the appeals of assessee are partly allowed.
Order pronounced in the open court on 9th July, 2019 (MAHAVIR SINGH) (RAJESH KUMAR) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER मुंबई/Mumbai; "दनांक/Dated : 9th July, 2019 TNMM