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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
Both the appeals filed by assessee are against consolidated order of CIT(A)-2, Kolhapur, dated 15.12.2016 relating to assessment years 2010-11 and 2011-12 against respective orders passed under section 147 r.w.s. 144 of the Income-tax Act, 1961 (in short ‘the Act’).
Both the appeals of same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of
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convenience. However, in order to adjudicate the issue, reference is being made to the facts in ITA No.586/PUN/2017, relating to assessment year 2010- 11.
The assessee in ITA No.586/PUN/2017, relating to assessment year 2010-11 has raised the following grounds of appeal:- 1. The Commissioner of Income Tax, (Appeals)-2, Kolhapur (Herein after referred to as the ‘CIT(A)’ erred in sustaining the addition to the extent of Rs.18,59,454/- being the estimated Gross Profit @ 8.76% on the cash deposits of Rs.2,12,26,647/- in the three saving accounts of the appellant. The appellant submits as under, without prejudice to each other: a. The appellant having filed his return of income declaring income under section 44AF the CIT(A) ought to have accepted the explanation of the appellant that the turnover as disclosed in the return of income is appropriate and it is incorrect to estimate the turnover on the basis of the transactions in the bank account. b. Without prejudice to the above the Gross Profit Ratio estimated @ 8.76% is very much on the higher side and is unheard of in the line of gold-jewellery dealing, it being very high value commodity. The percentage adopted by the CIT(A) is thus incorrect.
In both the years under appeal, the assessee is aggrieved by the addition made by estimating Gross Profit @ 8.76% on cash deposits in three Savings Bank Accounts of assessee totaling ₹ 2,12,26,647/-. The assessee has first objected to the estimation of turnover and on without prejudice basis has agitated estimation of Gross Profit ratio @ 8.76% being on higher side.
Briefly, in the facts of the case, the assessee was an individual and was engaged in goldsmith business on majuri (labour) basis under the name and style ‘Yesh Jewellers’ at Kolhapur. For the year under consideration, the assessee had shown turnover of ₹ 35,79,450/-, on which it had declared net profit at ₹ 3,13,637/-. The assessee had furnished the return of income declaring total income of ₹ 2,73,640/-. During investigation, the Investigation
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Wing found that there were cash deposits and withdrawals in three different bank accounts maintained by the assessee. The statement of assessee was recorded by the DDIT(Inv), Kolhapur on 22.01.2013. At the time of recording the statement, the assessee was asked to explain deposits and withdrawals of cash in different bank accounts. The assessee explained that he was engaged in such nature of business and pointed out that the deposits were out of amounts collected by selling gold bids door-to-door in Gorakhpur & Raibareli and then after arriving at Kolhapur, the amounts were withdrawn in cash. The Assessing Officer received information about cash deposits in three bank accounts maintained by the assessee totaling about ₹ 2.48 crores in financial year 2009-10 and about ₹ 2.30 crores in financial year 2010-11. After going through the information and statement recorded, the conclusion was that cash deposits and withdrawals in the bank accounts constitute turnover of assessee’s goldsmith business. The Assessing Officer noted that assessment for assessment year 2009-10 was completed under section 143(3) of the Act. The assessee had filed return of income declaring income of ₹ 1,59,730/-. However, the Assessing Officer adopted Gross Profit of assessee @ 10.15% of turnover and the income from business was estimated at ₹ 3,90,775/-. The Assessing Officer while completing assessment for the instant assessment year i.e. assessment year 2010-11 adopted the assessee’s turnover on the basis of cash deposits in the bank accounts totaling about ₹ 2.48 crores and the profit @ 10.15% on this turnover was worked out at ₹ 26,66,655/-, which was added as income of the assessee.
In appeal, first objection raised by the assessee was that the Assessing Officer had not considered the turnover already declared by the assessee and second objection was the GP rate applied for estimation of profit being very
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high. The CIT(A) noted the claim of assessee that on turnover of ₹ 35,79,450/-, he had declared profits under section 44AF of the Act. However, the said averment of the assessee was found to be not correct as under section 44AF of the Act it was provided that 5% of the total turnover, in case of turnover below ₹ 40 lakhs was presumed to be the income of the assessee. However, the assessee had declared higher rate of GP rate which worked out to 8.76% of the turnover. The CIT(A) first held that the turnover be adopted after excluding the turnover already declared by the assessee in the return of income and with regard to GP rate, he directed that the same be adopted at 8.76% of the turnover.
The assessee is in appeal against the same.
The first issue raised by the assessee of adoption of turnover was strongly objected by the learned Authorized Representative for the assessee. However, there is no merit in the stand of assessee in this regard, where the turnover has been calculated on the basis of cash deposits in the bank accounts maintained by the assessee. The assessee had confirmed that the deposits in the said bank accounts were from his goldsmith business. Further, the assessee has failed to explain the nature of cash deposits in the bank accounts. In the absence of the same, I uphold the order of CIT(A) in adopting the turnover at the figure of about ₹ 2.12 crores.
Now, coming to the GP rate applied. The plea of assessee is that GP rate applied is higher, wherein the Assessing Officer had applied GP rate of 10.5% and the CIT(A) has reduced the same to 8.76%. In the totality of the above said facts and circumstances, the Assessing Officer is directed to apply
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the rate of 7% to work out the additional income in the hands of assessee. The grounds of appeal raised by the assessee are thus, partly allowed.
The facts and issues in ITA No.587/PUN/2017 are identical to the facts and issues in ITA No.586/PUN/2017 and the decision in ITA No.586/PUN/2017 shall apply mutatis mutandis to ITA No.587/PUN/2017.
In the result, both the appeals of assessee are partly allowed.
Order pronounced on this 28th day of August, 2018.
Sd/- (SUSHMA CHOWLA) न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 28th August, 2018. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. प्रत्यथी / The Respondent; 2. आयकर आयुक्त(अऩीऱ) / The CIT(A)-2, Kolhapur; 3. 4. The Pr.CIT-2, Kolhapur; ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-सदस्य 5. मामऱा / DR ‘SMC’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune