JATIN K. BHUTA,MUMBAI vs. ITO WD 25 (1)(1), MUMBAI

The assessee has raised the following grounds of appeal: -

As the Grounds of appeal reveal, the solitary dispute in this appeal is with regard to addition of `4,12,28,000/- made by the AO treating the entire cash deposits in the bank account as unexplained within the meaning of section 68 of the Income Tax Act (hereinafter “the Act”).

In this context, the relevant facts are that the assessee is an individual who carries on the business of dealer in readymade garments and rendering services relating to octroi and clearing agents through proprietary concerns, M/s. Shree Jalaram Octroi Services, M/s. Sashi Engineering Works, M/s. Hitesh Events and M/s. Jay Enterprises. For the assessment year under consideration, he has filed return of income declaring a net income of `9,18,207/- which was subject to scrutiny assessment. The assessment order reveals that the AO took note of an AIR information which showed that the assessee has made cash deposits totalling to `4,12,28,000/- n the savings account maintained with Jain Sahakari Bank Ltd. On being show caused, the assessee furnished a reply dated 11.03.2014, which has been reproduced by the AO in the assessment order. The assessee explained therein that he was carrying out commission activities whereby he assisted his clients for selling various products, viz., cars, jewelleries, paintings and other personal belongings,

Before us, the learned counsel for the assessee pointed out that in the bank account maintained by the assessee there were cash and draft/ cheque deposits totalling to `14,00,34,433/- and cash/cheque withdrawals of `14,00,32,274/- which established that the deposits and the withdrawals were more or less equal. The learned A.R. pointed that the assessee was suffering from serious heart ailment and therefore at the requisite point of time complete bank statements and complete documents could not be furnished before the lower authorities which would have demonstrated the proximity of deposits and cash withdrawals. The learned A.R. also referred to an application made by the assessee under Rule 29 of the Appellate Tribunal Rules, 1963 for admission of fresh evidence which were hitherto not before the lower authorities, which is as under: -

Apart there from, an affidavit justifying the admission of additional evidence under Rule 29 of the Rules as well as documents evidencing medical illness of the assessee have also been referred to. It is explained by the assessee that non filing of the aforesaid documents was primarily on account of medical ailment and also due to existence of dispute between family members, and the relevant bank statement and documents were not handed over to the assessee. The learned counsel for the assessee explained that the assessee was carrying out business along with his father who had later died on 12.08.2012 and thereafter dispute arose between the family members who did not cooperate with the assessee and therefore there was a delay in obtaining all the requisite details by the assessee in as much as the assessee had to approach the banks to obtain copies of the bank statements, etc. An alternate plea was also made, by referring to the additional evidence to the effect that even the peak credit in the bank account be added so as to arrive at the estimated income but certainly the entire cash deposits in the bank account could not be considered as income of the assessee. It was pointed out that the AO himself has not considered the deposits made by cheques as unexplained and has merely considered the cash deposits as unexplained even when the nature of both kind of deposits was similar. On being asked, the learned A.R. has furnished a written prayer of the assessee to estimate the income by considering the peak credit method (telescoping) and admit the additional evidences under Rule 29 of the Appellate Tribunal Rules. The said prayer/application dated 17.04.2018 reads as under: - “THAT, I was holding the 4 banks accounts in the names of M/s Shree Jalaram Octroi Service, M/s Sashi Engineering Works, M/s Hitech Events and M/s Jay Enterprises and the aggregated deposits and withdrawals made in such bank accounts are as under :- Cash and cheque deposits Rs.14,00,34,433/- Cash and cheque withdrawal Rs.14,00,32,274/- Shri Jatin K. Bhuta THAT, the deposits made in the abovestated bank accounts are circular in nature and there exists corresponding debits (cash withdrawals and cheque issued) against the credits (cash and cheque deposits) in such bank accounts. There is a recycling of the same funds rotated for several times and does not involve the deployment of fresh funds. I am a man of meager resource and had deployed nominal amounts in such bank accounts; 3.0 THAT due to my serious illness of heart ailment, the bank statements and relevant documents could not be furnished before Ld. AO and Ld.CIT(A). I respectfully make a prayer to allow the benefit of telescoping and estimate the total income on allowing the telescoping (peak credits)and in support, the day-wise balance, statement disclosing nexus of deposits with withdrawals and all brink statements and other documents had been filed before Hon'ble ITAT.”

The learned A.R. pointed out that the assessee would be satisfied if the matter is restored back to the file of the AO for appropriate adjudication in this matter.

The learned D.R. for the Revenue reiterated that the assessee has been allowed adequate opportunities, but did not seriously oppose the plea of the assessee for restoring back the matter to the file of the AO.

We have carefully considered the rival submissions. Firstly, from the circumstances explained by the assessee, which are averred in the affidavit, it is clearly emerging that there was inadequacy of representation at the level of the AO. Though the inadequacy on the part of the assessee may attract penal consequences, but it should not result in an assessment which is grossly disproportionate to a given situation. Notably, in the instant case, the return of income was filed on a meagre income of `9,18,207/- whereas the final assessment has been made at `4,20,46,210/-. The assessment is based on cash deposits made in one of the bank accounts. Though the assessee had explained his business operations but the same was found to be lacking in substantiation and therefore the AO proceeded to treat the cash deposits as unexplained. Incidentally, the claim of the assessee was that the cheque as well as the cash deposits in the bank account were related to his business activity of commission agency. While the AO, on the same set of facts and material

In the result, the appeal filed by the assessee is allowed for statistical purposes.