ITO 33(2)(2), MUMBAI vs. KANITLAL V. PARMAR, MUMBAI

We have heard the parties and perused the record. The assessee is engaged in the business of trading in marble and granite under the name of M/s. Maa Ambika Granites. The assessee filed its return of income declaring a total income of ` 4,63,494/-. During the course of assessment proceedings, the Assessing Officer asked the assessee to furnish details of all bank accounts maintained by him. The assessee furnished details of savings bank account

The Assessing Officer also received AIR information to the effect that the assessee is also maintaining a bank account with IDBI in the name of Laxmi Granites. It was noticed that the assessee has deposited ` 7.51 lakhs by way of cash. When questioned about the same, the assessee explained that the bank account in the name of Laxmi Granites was operated by a person named Mr. Manish Vora and he has died two years ago. Since the assessee did not furnish copies of bank statement and also did not explain sources of cash deposits of ` 7.51 lakhs, the Assessing Officer assessed the same as income of the assessee.

In the appellate proceedings, the learned CIT(A) took the view that the deposits may represent sale proceeds of the assessee and hence the AO should have assessed only the profit element involved therein. The Ld CIT(A) took the profit rate @ 5% and accordingly sustained addition to the extent of 5% of ` 53.55 lakhs as well ` 7.51 lakhs. Accordingly, the learned CIT(A) granted major relief to the assessee in respect of above said two additions.

From the bank accounts, the Assessing Officer noticed that the assessee has paid a cheque of ` 5 lakhs on 29.9.2010 to M/s. Shanti Enterprise and received ` 5 lakhs from Shanti Developers on 6.10.2010. The assessee claimed that the payment and receipt has been squared off. However, the Assessing Officer noticed that both the parties were different. The assessee could not furnish any document to show that both concerns, viz., Shanti Enterprise and 3 Shri Kantilal V. Parmar Shanti Developers belong to same party. Accordingly, the Assessing Officer treated the amount of ` 5 lakhs as unexplained cash credit.

The Assessing Officer also noticed that the assessee has received ` 15 lakhs from Pratik Jain on 8.7.2010 and repaid the same on 12.7.2010. Since the assessee did not prove the cash credit to his satisfaction, the Assessing Officer assessed the same as income of the assessee as unexplained cash credit.

In the appellate proceedings, the learned CIT(A) deleted both additions on the ground that both receipts and payments were reflected in the bank account. Aggrieved by the order passed by the learned CIT(A) the Revenue has filed this appeal before us.

The Learned DR submitted that the assessee declared a turnover of ` 10.36 lakhs only and hence cash deposit of ` 53.55 lakhs cannot be taken as generated from sales. Thus the assessee has failed to explain sources thereof. Learned DR further submitted that the learned CIT(A) has applied provisions of section 44AF to the above said deposit and accordingly adopted 5% of the deposit as income of the assessee. Learned DR submitted that provisions of section 44AF can be applied only in those cases, where turnover is less than 40 lakhs. Accordingly, learned DR contended that the learned CIT(A) was not justified in treating the deposits as sales turnover of the assessee. He submitted that the assessee has not given any evidence to show that the deposits represent his sales turnover. With regard to the addition of ` 7.51 lakhs relating to the bank account maintained in the name of Laxmi Granite, learned DR submitted that the learned CIT(A) was not justified in treating the amount as sales of the assessee. With regard to cash credit of ` 5 lakhs and ` 15 lakhs, learned DR submitted that the assessee has not furnished any details to prove identity and creditworthiness of the parties.

On the contrary, learned AR submitted that the assessee has been making deposits and withdrawing amounts by way of cash. He submitted that 4 Shri Kantilal V. Parmar the Assessing Officer has not given credit for the cash withdrawals made by the assessee. Learned AR submitted that the assessee is dealing with customers who are coming from rural areas, who deal mostly in cash. Hence there were cash transactions of deposits and withdrawals. Accordingly, he submitted that the Assessing Officer should have given credit for the cash withdrawals. He submitted that net cash deposits will be in the range of ` 7 lakhs only. In respect of cheque deposits, the learned AR submitted that there are many contra entries due to dishonor of cheques. With regard to bank account maintained with Laxmi Granite, the learned AR submitted that the same was operated by Mr. Manish Vora, who has since died. With regard to cash credits, the learned AR submitted that the assessee has furnished confirmation letters from the concerned parties and the transactions have been carried through bank accounts.

When it was pointed out to learned AR that the learned CIT(A) has adopted different approach in deciding this issue, whereas it is being contended before the Tribunal in a different manner. It was also pointed out that the sales turnover reported by the assessee do not justify the view taken by the Ld CIT(A). The argument of Ld A.R is also different from the methodology followed by Ld CIT(A). Further, it was pointed out that the assessee has not furnished any document to prove the creditworthiness of the parties in respect of credits. At this stage, learned AR submitted that the assessee may be provided with an opportunity to explain the entries found in the bank account as well to prove cash credit to the satisfaction of the Assessing Officer. Learned DR did not object to the plea put forth by learned AR.

Having regard to the rival submissions, we are of the view that, in the interest of natural justice, the assessee may be provided with one more opportunity to present his case in respect of all the additions made by the Assessing Officer. Accordingly, we set aside the order passed by Ld CIT(A) and 5 Shri Kantilal V. Parmar restore all the issues to the file of the Assessing Officer for examining them afresh, after affording adequate opportunity of being heard to the assessee.

In the result, appeal filed by the Revenue is treated as allowed for statistical purposes. Order has been pronounced in the Court on 09.10.2018.