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Income Tax Appellate Tribunal, LUCKNOW BENCH “SMC”, LUCKNOW
Before: SHRI T.S. KAPOOR
This is an appeal filed by the assessee against the order of ld. CIT(A), Lucknow, dated 27.05.2020. The grounds of appeal taken by the assessee are reproduced below:
“1. Because the Learned "CIT (Appeal)" failed to appreciate the full facts and the circumstances of the case while completing the assessment on Rs.32,49,960/- against the returned income of Rs.2,15,330/-.
Because the Learned 'CIT (Appeal)' erred on facts and in law in making an Because both by the assessing officer and by the Learned "CIT (Appeal)" failed to appreciate the full facts and the circumstances of the case while completing the assessment on Rs.32,49,960/- against the returned income of Rs.2,15,330/-.
3. Because both by the assessing officer and by the Learned "CIT (Appeal)" erred on facts and in law in making an addition of Rs.30,34,627/- unexplained accounts credits in bank accounts.
4. Because no proper reasons has been forwarded both by the assessing officer and by the learned CIT (Appeal) IInd, Lucknow. In making and confirming and has relied on wrong facts and based on more presumption.
5. Because the order of the Learned CIT (Appeals) IInd, Lucknow, is without any merits and is simple based on mere hypothesis, conjuncture & surmises and needs to be cancelled and the income as returned by the appellant be accepted. 6. Because the order of the Learned CIT (Appeal) is arbitrary,. capricious, misconceived, erroneous and against the principal of natural justice.”
2. The ld. AR, at the outset submitted that assessee is a small time trader who owns a bakery shop and also enjoys income from trading in Khoya. It was submitted that the return of income was filed declaring gross receipts of Rs.22,95,763/- and Rs.2,15,330/- was declared as net income of the assessee. The ld. AR submitted that during the year under consideration, the Assessing Officer required the assessee to explain cash deposits of Rs.53,30,390/- in his saving bank account with United Bank of India and in reply the assessee submitted revised computation of income and declared a net profit of Rs.4,26,432/- on gross receipts of Rs.53,30,390/-. It was submitted that Assessing Officer did not accept the contention of the assessee and took the total deposits as gross receipts and after reducing the declared gross turnover of Rs.22,95,763/- arrived at undeclared investments of Rs.30,34,627/-. It was submitted that before ld. CIT(A) the assessee could not appear but a ground was taken that net profit 8% be applied to the gross turnover instead of making addition of the whole of the gross receipts as income of the assessee. The ld. AR in this respect submitted that all the records were available with the ld. CIT(A) and who could have passed the order on merits keeping in view the fact that assessee had not only deposited the cash in the said bank account but had withdrawn also a substantial amount in cash and had also made payments for purchase of Khoya and another articles and in this respect filed a detailed copy of statement of such bank account and also filed a list showing withdrawals in the form of cash as well as payments made to parties for making purchases. The ld. AR submitted that since the authorities below had accepted that assessee was dealing in Khoya was also earning income from bakery and had accepted the net income calculated on the basis of turnover therefore, there was no reason as to why this submission of the assessee was not accepted.
The ld. AR submitted that assessee is a very small time trader and is not financially sound also and it will be appropriate if the appeal of the assessee is decided here itself on the basis of documents already on record and there is no fresh evidence being filed as the bank statement was also available with the Assessing Officer and which he had relied for the purpose of making additions.
The ld. DR, fairly agreed that the entire amount of deposits could not have been added as there is clear evidence of making payments and for making substantial withdrawals from the said account.
I have heard the rival parties and have gone through the material placed on record. I find that the assessee had filed income tax return declaring income of Rs.2,15,330/- on gross receipts of Rs.22,95,763/-. The Assessing Officer observed that assessee had made cash deposits in his bank account with United Bank of India amounting to Rs.53,30,390/- therefore he treated the difference in turnover as unexplained investments of the assessee. However, while taking the difference of turnover declared by assessee and the cash deposits in the bank the Assessing Officer overlook the fact that assessee had withdrawn about Rs.14.00 lacs during the same financial year from the same bank account on different dates and had also made substantial payments to various person such as Rakesh Singh, Abhay Tiwari, Devendra Singh, Atul Shukla, Jyoti and Savita etc. The pattern of transactions in the bank account clearly suggest that assessee had both made deposits and withdrawals in cash as well as made payments through cheques to other persons. The pattern suggest that the assessee was using this bank account for making deposits of turnover and for utilizing such amount of turnover for making payments to various persons and for incurring various expenses to run his business. Therefore, the entire deposits cannot be added back to the income of the assessee and only profit element needs to be added back to the returned income of the assessee specifically in view of the fact that the authorities below has accepted that assessee was running a bakery shop and was earning income from Khoya business and has also accepted the net profit declared by the assessee on the basis of turnover therefore there is no reason to reject the contentions of the assessee that on the deposits in the bank account only net profit rate of 8% should have been applied. The Assessing Officer did not accept the contentions of the assessee by holding that the assessee failed to produce any evidence regarding his business activities and did not produce cash book day book etc. While holding so, the Assessing Officer ignored the provisions of Section 44AD of the Act, which allows the assessee to calculate his income on the basis of turnover and which enables assessee not to maintain books of account. The reasons cited by Assessing Officer that assessee had failed to file any evidence regarding his business activities is not a good reason as his return of income filed on the basis of same business has been accepted for making additions on account of cash deposits. The Assessing Officer has started with the returned income based on the basis of such business only. Therefore, I do not agree with the findings of Assessing Officer. Since all the documents supporting the argument of the assessee are available in the file and case is very old which relates to AY 2014-15 there is no point in setting aside the matter to ld. CIT(A) who had passed an exparte order and has not decided the issue on merits. Therefore, on the basis of documents available on record, I direct the Assessing Officer to calculate the income of the assessee by applying 8% N.P. rate on total deposits made by the assessee.