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Income Tax Appellate Tribunal, “B”
Before: HON’BLE SH. SANDEEP GOSAIN, JM & HON’BLE SH. G. MANJUNATHA, AM
2 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present two Appeals have been filed by the revenue and assessee against the order of Commissioner of Income Tax (Appeals)-28 & 24, Mumbai, dated 21.03.16 & 01.10.13 for AY 2011-12 and 2010-11 respectively.
Since the issues raised in both the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order.
(AY 2011-12) 3. First of all we take up revenue’s appeal in (AY 2011-12) on the grounds mentioned herein below:- 1. "On the facts and circumstances of the case and in law, the learned CIT (A) has erred in directing to assess the undisclosed income of the assessee @ 13.87% of Rs. 1,95,02,2777-which works out to Rs. 27,04,9667- and granted relief of Rs. 1,67,97,3117- to the assessee, without appreciating the facts that – 3 I.T.A. No. 3833/Mum/2017 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, (i) during the assessment proceedings, the assessee has consented to treat the difference of Rs. 74,01,8977- (Rs. 1,37,77,3757- - Rs. 63,75,4787-), as sales and apply the gross profit ratio on Rs. 74,01,8977-. Thus, the assessee has already admitted the concealment of sales to the extent of Rs. 74,01,8977- represented by the cash deposits in the bank account with the ICICI Bank and has not offered any explanation for the same.
(ii) the cash deposits in question are not reflected anywhere in the Profit & Loss Account and the proof of corresponding purchases even by way of debit/withdrawals to the bank account is also not reflected,
(iii) the assessee has not disclosed the bank account no. 026101506741 in the ICICI Bank in which cash deposits of Rs. 1,39,27,6757- were made during the year under consideration. The said account was detected during the course of assessment proceedings only otherwise, the same would have remained hidden / concealed by the assessee. Even the learned CIT (A) has stated in his order that the said account has not been disclosed by the assessee.
4 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, (iv) even after giving benefit of doubt to the assessee that the entire sale proceeds are deposited into the bank account, the AO had added only the difference between the cash deposits into the bank accounts and the sale disclosed by the assessee, as the assessee has failed to offer any explanation regarding the source of cash deposits into the bank accounts.
(v) in assessee's own case, in A.Y. 2010-11, an identical addition was made by the A.O. i.e. difference between the cash deposits in bank accounts and sale disclosed by the assessee was treated as unexplained cash credit u/s. 68 of the IT. Act, 1961. The learned CIT (A) vide his order dated 01/10/2013 has held that the additions made by the AO u/s. 68 are justified and confirmed and accordingly dismissed the appeal filed by the assessee."
2. "The appellant prays that the order of the A.O. should be restored and order of the CIT (A) should be set aside."
"The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
5 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, 4. As per the facts of the present case, the assessee is an individual engaged in trading of mobile accessories. The return of income for the year under consideration was filed on 23.09.2011 declaring total income at Rs. 1,88,847/-. However, the AIR details revealed that assessee had made cash deposit of Rs. 1,37,77,375/- in his saving bank account in ICICI Bank. During the assessment proceeding, it came to the notice of the AO that the assessee had held three bank accounts in ICICI bank account. However, the assessee had shown only two bank accounts. In all the three accounts, total cash deposits were made to the extent of Rs. 2,58,77,755/-. Since the assessee could not explain the source of cash deposits, therefore addition to the extent of Rs. 1,95,02,277/- was made u/s 68 of the Act on account of unexplained cash credit, on the difference in cash deposit and cash sales.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee.
6 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, 6. Aggrieved by the order of Ld. CIT(A), the revenue has filed the present appeal before us on the grounds mentioned herein above.
Ground No. 1(i) to (v) 7. These grounds raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in directing to assess the undisclosed income of the assessee @ 13.87% of Rs. 1,95,02,277/- which works out to Rs. 27,04,966 and granted relief of Rs. 1,67,97,311/- to the assessee, therefore we thought it fit to dispose of the same by this common order.
We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 4 5.1. Ground No.1 : This ground is relates to the action of the AO in making the addition of Rs. 1,95,02,277 on account of cash deposits in bank accounts. I find that the total cash withdrawals from various bank accounts on different dates amount to Rs.2,73,25,200 and at the same time the total cash deposited on different dates in these bank accounts was Rs.2,58,77,755. Out of the total amount of cash deposits of Rs.2,58,77,755 the AO has reduced the amount of sales of Rs.63,75,478 and added the resultant amount of Rs. 1,95,02,277 as unexplained cash credit u/s.68 of the Act. While doing do the AO has considered only the total cash deposits in the bank accounts and completely ignored the cash withdrawals from the said bank accounts. I also find that the appellant has deposited cash in a total of 4 bank accounts, three of which have been disclosed in the balance sheet. The AO himself has given credit to the recorded sales of the appellant being Rs 63,75,478. I find that the sates of the appellant are entirely in cash and so are the purchases. The cash received from the sales are deposited in these four accounts, three of which have been disclosed in the balance sheet. The AO has overlooked the fact that the appellant has 8 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, disclosed the bank accounts in his balance sheet. The AO has held that cash to the extent of recorded sales is sufficiently explained and the balance cash deposited is unexplained. I am of the view that this is a contradiction. The bank accounts as a whole form evidence. The AO seems to have partially believed the evidence before him. Admittedly the cash deposits in these bank accounts are partially explained by the cash sales made and the AO has admitted this position. It naturally follows that the balance cash deposits would also be out of the sales made albeit unrecorded. It is also a fact that the recorded purchases of Rs 5310317 are far less that the total withdrawals from these bank accounts. It is amply clear therefore that the appellant is making cash sales and cash purchases and this fact has also been admitted by both the appellant as well as the AO. I am therefore of the view that the total cash deposit in the bank accounts are to be held as the cash sales of the appellant. The appellant is only trying to side track the issue by arguing that the peak credit is a lower figure etc. The cash deposits represent the cash sales and the cash withdrawals are used for cash purchases The AO having accepted this position should have taxed only the profit arising from the undisclosed sales. Admittedly the undisclosed sales are Rs. 1,95,02,277 and the recorded GP is 13.87%. I 9 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, therefore direct the AO to assess the undisclosed income of the appellant @ 13.87% of Rs. 1,95,02,277 which works out to Rs. 27,04,966. The appellant gets a relief of Rs. 1,67,97,311. Ground 1 is partly allowed.
After having gone through the facts of the present case and hearing the parties at length, we find that Ld. CIT(A) while restricting the additions, concluded that AO fail in error by only considering the total cash deposits in the bank account and completely ignoring the cash withdrawals from the said bank accounts. According to Ld. CIT(A), the AO had only given credit of recorded sales of Rs. 63,75,478/- and thus presumed that the source of balance cash deposits were also from sales made albeit unrecorded.
Therefore, keeping in view the above situation, Ld. CIT(A) directed the AO to tax only the profit arising out from the undisclosed sales. To our mind, this presumption drawn by Ld. CIT(A) is not supported by any documentary either direct or indirect evidence. It is a settled proposition of law that 10 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, presumption howsoever strong may be, but cannot take place of proof.
While reaching to the conclusion, Ld. CIT(A) had not considered the facts that the cash deposits were not reflected anywhere in the Profit & Loss Account and the proof of corresponding purchases even by way of debit/withdrawals to the bank account were also not reflected. Ld. CIT(A) had also lost sight of the fact that assessee had not disclosed the bank account no. 026101506741 in the ICICI Bank in which cash deposits of Rs. 1,39,27,675/- were made in his return during the year under consideration. It is an undisputed fact that the said account was detected during the course of assessment proceedings that to when notice u/s 133(6) of the Act was issued to ICICI bank thereby calling for the details of bank accounts of the assessee, otherwise the same would have remained hidden / concealed. The assessee had failed to offer any plausible explanation regarding the ‘source of cash deposits’ into the bank account.
We have considered the fact that in Assessee's own case, in A.Y. 2010-11, an identical addition was made by the A.O. i.e. 11 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, difference between the cash deposits in bank accounts and sale disclosed by the assessee were treated as unexplained cash credit u/s. 68 of the Act, which were confirmed by Ld. CIT (A).
During the year under consideration, the assessee had failed to disclose the source of cash deposits, hence the tax authorities are empowered to go behind and find out the reality before passing the order. The Coordinate Bench of ITAT in the case of Bombay Oil Industries Ltd Vrs. DCIT (2002) 82 ITD 626 (Mum) had held that Income Tax Authorities are empowered to go behind and to find out the reality of source of cash deposits. In the present case, Ld. CIT(A) had made presumption, but according to us, the source have to be explained and not to be presumed.
In the present case, the AO had rightly concluded that assessee had not made any explanation regarding source of cash deposits and had only shown purchases of Rs. 53,10,317/- and sales of Rs. 63,75,478/- in P & L account. The loans taken by the assessee were also not reflected in the bank statements. Keeping in view the conduct of the assessee in not furnishing any 12 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, explanation and in concealing one bank account from the I.T. Department in which cash deposits of Rs. 13,92,7675/-, therefore difference in cash deposits and cash sales was rightly treated as unexplained cash credit u/s 68 of the Act. The deposit of excess cash did not find in the audited accounts, balance sheet and P & L account. Therefore, the presumption drawn by Ld. CIT(A) that the said amount was deposited on account of cash sales is not sustainable. The facts contained in the present case are identical to the facts in assessee’s own case for AY 2010-11, wherein Ld. CIT(A) had already upheld the difference between the cash deposits in the bank accounts and sales disclosed by the assessee and treated the same as unexplained cash credit u/s 68 of the Act.
Hence, in our view, the conclusion drawn by Ld. CIT(A) on the basis of presumption is unsustainable in law. Therefore, we set aside the order of Ld. CIT(A) and upheld the order of AO. We ordered accordingly. Resultantly, these grounds raised by the revenue stands allowed.
13 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, Ground No. 2 & 3 16. These grounds raised by the revenue are general in nature, thus requires no specific adjudication.
17. Consequently, the appeal filed by the revenue stands allowed.
18. Now we take up assessee’s appeals in ITA No. 558/Mum/2014 (AY 2010-11).
The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the addition of Rs. 37,20,765/- made by the AO u/s 68 of the I.T. Act.
We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities.
14 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the assessee in para no. 4.1 to 4.1.6 of its order and the same is reproduced below:-
4.1.1 Crux of the matter arising from all the three grounds of appeal is the addition of Rs. 37,20,765/- made by Assessing Officer u/s 68 of I.T. Act 1961 and it has been submitted that cash deposits of Rs. 37,20,765/- made in the bank account remained to be accounted for sales in the audited accounts and has requested for assessing only the gross profits only in respect of the same and deleting the main additions of Rs. 37,20,765/-.
4.1.2 It appears from the assessment order dated 20/12/2012 that Assessing Officer had noticed from the ITS date of the I. T. Department that assessee had made total cash deposits of Rs. 2,21,56,870/- in his savings bank account in ICICI Bank, Bandra-Kurla Complex Branch, Mumbai during previous year relevant to A.Y. 2010-11 and assessee was asked to furnish the source of funds with supporting evidence. Assessee vide letter dated 23/10/2012 and 10/12/2012 submitted that "my stock of goods and documents and books of account was destroyed in the fire in Sara 15 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, Sahara Complex, Mumbai on 26/11/2011 and therefore he was unable to produce the same and the difference of sales amount and cash deposits in bank account is out of cash withdrawals from the bank". Assessing Officer examined the same and concluded that the difference of Rs. 37,20,7651- (Cash deposits of Rs. 2,21,56,870/- - Sales shown in 1,84,36,105) represented assessee's undisclosed income u/s. 68 of IT. Act, 1961 and added the same to assessee's total income and computed the taxes accordingly.
4.1.3 Assessee and his advocates have filed copies of P&L Account and Balance Sheet for the year ended 31/3/2010 and copies of two accounts with ICICI Bank and one account with HDFC Bank and these documents reflect following details:-
Name of the Bank - A/c Number - Credits - Debits - Interest HDFC Bank Colaba - 00851000078883 - Rs. 8,05,000/- Rs.5,00,882/- Rs. 3,678/- ICICI Zavero Bazar - 026101506474 - Rs. 65,09,490/ Rs. 68,51,424/- Rs. 17/- ICICI Zaveri Bazar - 087401500014 - Rs. 53,00,330;'- Rs. 63,80,438/- Rs. 11/- Total: Rs. 1,36,14,820/- Rs. 1,37,32,744/- Rs. 3,706/- Assessee has disclosed following cash deposits amounts in the cash flow statement filed during appellate proceedings:- Bank/Item Deposit Withdrawals HDFC Bank Rs. Rs. 1,54,000/- Rs. Nil ICICI Bank 026101506474 Rs. 72,49,090/- Rs. 72,49,090/- ICICI Bank 087401500014 Rs. 63,78,600/- Rs. 63,68,540/- Cash sales/purchase Rs. 4,65,44,159/- (Sales) Rs. 33,12,381/- (Purchase) Total sales/purchase Rs. 1,84,36,105/- (Sales) Rs.1,69,16,421/- (Purchase)
16 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, Assessee has shown total purchases of Rs. 1,69,16,421/- and total sales of Rs. 1,84,36,105/- in the P&L Account for the period 01/4/2009 to 31/3/2010 and this statement was filed with the return of income and Assessing Officer has taken cognizance of it in the assessment order. Apparently assessee accounted for cash sales in his P&L Account and worked out the gross profit at Rs. 17,75,734/-, net profit at Rs. 5,91,5027- and disclosed net capital closing balance of Rs. 11,47,754/- and balances in three bank accounts totalling Rs. 3,66,008/- as on 31/03/2010. Closing balances in the three bank accounts shown in balance sheet as on 31/03/2010 tally with the actual cash balances in the three bank accounts as on 31/03/2010. 4.1.4 However, it appears from the assessment order that Assessing Officer has referred to Cash deposits totalling Rs. 2,21,56,870/- in assessee's bank account with ICICI Bank, Bandra-Kurla Complex Branch, Mumbai and neither the assessee nor his advocate has referred to this account and filed documents relating to this bank account with ICICI Bandra-Kurla, Mumbai branch for verification and records. Assessee has repeatedly referred to cash sales of Rs. 37,20,765/- (2,21,56,870 - 1,84,36,105) only and has admitted to 17 I.T.A. No. 3833/Mum/2017 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, its non disclosure as sales in P&L Account and has requested for applying gross profits ratio on sales of 17.75% on cash sales of Rs. 37,20,765/- and delete the additions of Rs. 37,20,765/- made u/s. 68 of U. Act, 1961. Obviously assessee has concealed the basic data and information regarding cash deposits totalling Rs. 2,21,56,870/- and has not explained as to what happened to the cash flow of Rs. 37,20,765/- which is neither reflected in the P&L account nor in the cash on hand and bank balances/stock on hand. Assessee has made a passing reference and stated that the cash deposits may have come out of cash withdrawals but that is in contradiction to the assessee's own admissions in statement of facts and letter dated 17/09/2013 that deposits represent cash sales and withdrawals represent cash purchases. If these are the facts of the case, then deposits exceed sales by Rs. 37,20,765/- and these cash deposits do not find any mention about in audited books of account and balance sheet and P&L Account.
4.1.5 In this connection, assessee's letter dated 17/09/2013 addressed to CIT(A)-24 is also material and is reproduced as follows:-
"777e brief facts of the case are that the business of the appellant is that of sale of mobile phone 18 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, accessories on the wholesale basis and his shop is located in the Crawford Market, Mumbai. It is well know in Mumbai that the purchases and sales are done in the Crawford Market on the cash basis only. Even the Income Tax Officer has accepted this fact in his order. The appellant generally used to make the purchases by withdrawing the amounts form the bank account & used to deposit the amount of cash sales in his bank accounts. IN the year under appeal, the appellant withdrew Rs. 1,36,04,040/- fro his bank for making the purchase and deposited Rs. 1,37,81,690/- in his bank account as shown in cash flow statement filed before the Income Tax Officer. Apart form such purchases and sales, it was also shown in cash flow statement that the appellant made other cash purchases to the extent of Rs. 33,12,381/-and other case sales to the extent of Rs. 46,54,415/-.
It is submitted that by virtue of an accounting error, the sales to the extent of Rs. 37,20,765/- remained to be shown in the figure of cash sales though the amounts were duly deposited in the bank accounts as noted by the Income Tax Officer. If the appellant had any intention on 19 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, conceal the sales or income he would not have deposited the impugned amount of Rs. 37,20,765/- in his bank accounts. It is submitted that the Income Tax Officer was required to apply only the gross profit ratio on unaccounted sales ofRs. 37,20,765/-. The gross profit rate shown by the appellant in the preceding year was 9.75% and in the year under appeal, it was 9.63%.
It is further submitted that in the year under appeal, by Income Tax Officer's action in making addition u/s 68 of Income Tax Act, 1961, the appellant's gross profit would work out to Rs. 54,96,500/- which would give the gross profit rate of 29.81% which is impossible in wholesale market in this line of business.
It is noted that occurrence of fire accident in the Crawford Market (including appellant's shop) in undisputed by the Assessing Officer in view of the evidence filed before her. The Assessing Officer has mentioned in the order the "assessee by letter dated 23d Oct, 2012 has filed affidavit along witii newspaper cutting & photograph stating that the shop at Sara-Sahara Shopping Complex, Crawford Market, Mumbai - 400001 caught huge fire at about 4 a.m. on 26^ Nov, 2011 wherein all 20 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, his goods & documents including all books of accounts, bank statement, sales & purchases vouchers, bills & confirmations also gutted into the fire." The audited profit & loss account & balance sheet and cash flow statement filed before the Assessing Officer are available with the appellant and are included in the compilation of documents enclosed herewith.
It is to be noted that net assets as shown by appellant in the balance sheet are only to the extent of Rs. 11,47,755/- and hence it is submitted that the huge addition of Rs. 37,20,765/- made by the Assessing Officer is without any justification and deserves to be deleted.
A compilation containing documents from pages 01 to 49 is enclosed herewith. All these documents are dully furnished before the Assessing Officer."
This letter contains the same submissions as the facts stated in statement of facts filed along with the appeal memo.
4.1.6 Thus, assessee has already admitted the concealment of sales to the extent of Rs. 37,20,765/- 21 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, represented by the cash deposits in the bank account with ICICI Bandra Kurla Complex Branch, Mumbai and has not offered any explanation for the same. It may be mentioned here that assessee's accounts were audited for tax audit purposes by the tax auditors on 17/09/2011 much prior to the date of fire on 26/11/2011 in assessee's office complex and even though some evidence/stock might have been destroyed in the fire on 26/11/2011, no adverse inference is being drawn in absence of the destroyed records, if any, and reliance is placed on the Assessing Officer's assessment order, cash deposits totalling Rs. 2,21,56,870/- in ICICI Bandra-Kurla Complex, Branch, Mumbai and admission by the assessee of cash deposits and concealment of sales. Assessee's submissions that only gross profits ratio of 17.75% should be applied, is also irrelevant because these cash deposits are not reflected any where in P&L Account and the proof of corresponding purchases even by way of debit/withdrawals to the bank account is also not reflected. Therefore, assessee's and his advocate's submissions to adopt gross profits at 17.75% instead of the total value of cash deposits of Rs. 37,20,765/- is rejected and additions of Rs. 37,20,765/- made by the Assessing Officer u/s. 68 are justified and confirmed.
After having gone through the facts of the present case, we find that assessee had made total cash deposits of Rs. 2,21,56,870/- in his savings bank account in ICICI Bank, Mumbai, but was unable to produce the records for verification in respect of source of funds. Although assessee had filed cash flow statement which depicts the total purchases made by assessee of Rs. 1,69,16,421/- and total sales of Rs. 1,84,36,105/- in the P&L Account. The assessee admitted that the difference cash of Rs. 37,20,765/- was not disclosed as sales in P & L account and thus requested for applying gross profits ratio on sales of 17.75% on cash sales of Rs. 37,20,765/- . Ld. CIT(A) after considering the facts of the present case had rightly concluded that since the assessee had concealed the basic data and information regarding cash deposits totalling Rs. 2,21,56,870/- and had not explained as to what happened to the cash flow of Rs. 37,20,765/- which were neither reflected in the P&L account nor in the cash in hand and bank balances/stock in 23 & ITA No. 558/Mum/2014 Shri Maganaram J. Choudhary, hand, thus made the additions of the said amount of Rs. 37,20,765/- as unexplained cash credit u/s 68 of the Act. As these cash deposits do not find any mention about in audited books of account, balance sheet and P&L Account. Therefore keeping in view the totality of the facts of the present case, submissions of the assessee to adopt gross profit at 17.75% instead of total value of cash deposit of Rs. 37,20,765/- was rightly rejected and consequently additions made by the AO u/s 68 of the Act was rightly upheld by Ld. CIT(A)
Even before us, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed.