Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Godara]
Appearances by: Shri V.N. Purohit, FCA, appeared on behalf of the assessee. Shri S. M. Das, Addl. CIT, DR appearing on behalf of the Revenue. Date of concluding the hearing : July 7th, 2018 Date of pronouncing the order : August 24th, 2018 O R D E R Per J. Sudhakar Reddy :- This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-10, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 15/01/2016, for the Assessment Year 2011-12.
Facts in brief:-
The assessee is an individual and is in the business of trading in cloth. He filed his return of income on 29/03/2012, disclosing total income at Rs.1,47,240/-. The Assessing Officer passed an order u/s 143(3) of the Act, on 21/03/2014, determining total income of the assessee at Rs.3,75,47,844/-. In this assessement he made an addition on account of difference in income declared from business and income assessable u/s 44AD of the Act, as well as on account of unexplained deposits in the bank account to the tune of Rs.3,72,91,200/-. Aggrieved the assessee carried the matter in appeal without success.
Further aggrieved, the assessee is in appeal before us on the following grounds:-
“1. That the Commissioner of Income Tax (Appeal) CIT has erred, both on the facts and in law, in confirming the addition of Rs.1,06,877/- made by the I.T.O. by wrong application of Section 44AD when assessee maintains regular books of accounts.
2. That likewise the CIT(A) has further erred in confirming the addition of Rs.3,72,45,200/- made by I.T.O. wrongfully applying provisions of section 68 holding deposits in disclosed bank accounts as unexplained.
3. That the assessee appellant craves leave to add, to amend to withdraw any of the above ground on or before the hearing of the appeal.”
The ld. Counsel for the assessee, moved an application under Rule 29 for admission of additional evidence which read as follows:- “Application under Rule 29 of the Income Tax (Appellate Tribunal) Rule 1963 It is most humbly and respectfully submitted as under on behalf of the appellant abovenamed:-
1) That papers at serial No.11 (Page No. 66 to 76) in 1st Paper Book were not placed before any authorities below. However, as name of these Companies at pages nos. 66 to 75 appear on page nO.5 and 3 of order of Ld. C.I.T (A) and AO. respectively, to prove that these are active/converted into LLP in three cases and one LLP dissolved and are not those Companies termed as 'shell' Companies whose names have been stricked off by respective Registrar of Companies, filing their status on MCA portal was necessary. 2) It is, therefore, most humbly and respectfully prayed to allow to refer these pages during the course of hearing for which the appellant shall always feel grateful and highly obliged.
Yours faithfully, (V. N. Purohit) Authorised Representative to Kanheyalal Tiwari”
The ld. Counsel for the assessee submitted that this application under Rule 29 has to be allowed, in view of the recordings of the Assessing Officer at page no. 3, wherein it was stated that, on an enquiry conducted through the Departmental Inspector, it was revealed that there is no existence of registered offices of such companies at the above addresses.
5.1. On merits, on Ground No.1, the ld. Counsel for the assessee relied on the wording in Section 44AD(5) of the Act, and submitted that the Section is not applicable in the assessee’s case as the income is less that the limit prescribed for bringing income to tax. On Ground No. 2, he submitted that the addition of the total deposits in the assessee’s personal SB A/c in Bank of Rajasthan (since merged with ICICI Bank Ltd.) and a proprietary concern M/s. Mahabir Traders’ current account in ICICI Bank Ltd, was wrong as the assessee had submitted the cash book, ledger accounts and bank statements to demonstrate to the Assessing Officer, in the remand proceedings and each and every entry in the bank statement are reflected in the books of account. He submitted that the Assessing Officer did not examine these evidences at all. He pointed out that the ld. CIT(A) has merely rejected the appeal of the assessee because, he was prejudiced with the facts that, the appeal of the karta of the HUF, who also happens to be the A/R, in this case was before him. He submitted that the findings in that appeal has no relation, whatsoever, to the facts of this case. He referred to page no. 5 of the order of the ld. CIT(A) and gave a note on 9 companies with whom, the assessee has transaction. He submitted that none of these companies were shell companies and are active or converted into LLP. He submitted that shares of 35 companies were purchased and re-sold within a few days and hence there was no requirement of investment as on 31/03/2010. He argued that, the assessee’s sales are almost in cash and the purchase and sale of shares were also partly through banking channels and partly in cash and sales were of Rs.3,40,00,000/-. He vehemently contented that, without examining the evidence filed by the assessee, the revenue authorities have arbitrarily made an addition of deposits in these bank accounts.
He submitted that the addition may be deleted or in the alternative the issue be remanded to the file of the Assessing Officer, for fresh adjudication, in accordance with law.
4 Assessment Year: 2011-12 Shri Kanhiyalal Tiwari 6. The ld. D/R, on the other hand opposed the contentions and submitted that adequate opportunity has been given to the assessee for submitting all evidences and he failed to do so. He submitted that there is no reason, whatsoever, which is cited by the assessee before the Tribunal as to why the assessee was not able to file the necessary documents/evidences before the lower authorities. On merits, he submitted that, the turnover of the assessee is less than Rs.40,00,000/- and hence, as the books of accounts were not produced, the income was rightly assessed on presumptive basis.
6.2. On Ground No. 2, he submitted that the turnover was around Rs.30 Lakhs/- and whereas the deposits were more than Rs.3 Crores. He drew the attention of the Bench of Page 8 of the ld. CIT(A)’s order, wherein, the remand report of the assessee has been extracted and it was re-iterated that on a perusal of the profit and loss account of the assessee for the period under consideration, it is seen that there is no reflection of purchase and sale of shares and also there is no opening and closing stock of shares. The Assessing Officer had observed that the investment in shares was only Rs.52,341/-, and the income from shares is a meager sum of Rs.8,273/-. He pointed out that the assessee claims to have dealt in shares of Private Limited Companies, which is surprising and no details of the same were furnished with third party evidence. He further pointed out that this theory of purchase and sale of non-listed shares and that too in cash was never mentioned before the Assessing Officer and it was only for the first time that such a claim was made before the ld. CIT(A). he relied on the order of the ld. CIT(A) and prayed that the same be upheld.
We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:-
On the first issue of applicability of Section 44AD of the Act, to cloth business, we are unable to accept the claim of the assessee that, the Section is not attracted as the total income does not exceed the maximum amount, which is not chargeable to income tax by relying on Section 44AD(5). Section 44AD as is applicable for the Assessment Year 2011- 12, reads as follows:-
5 Assessment Year: 2011-12 Shri Kanhiyalal Tiwari “44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession [Provided that this sub-section shall have effect as if for the words "eight per cent", the words "six per cent" had been substituted, in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.] (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. 17[***] (3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. 18[(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1). (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.] 19[(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to— (i) a person carrying on profession as referred to in sub- section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business.]
6 Assessment Year: 2011-12 Shri Kanhiyalal Tiwari Explanation.—For the purposes of this section,— (a) "eligible assessee" means,— (i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a 20limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C. - Deductions in respect of certain incomes" in the relevant assessment year; (b) "eligible business" means,— (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and (ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 21[two crore rupees].]”
8.1. Sub-section 5, is restricted to the assessees who fall under Sub-section 4. It is not the case o the assessee that it falls under Sub-section 4 of Section 44AD of the Act. We do not see, how this Section can be interpreted so as to stated that it does not apply to the assessee, whose total income does not exceed the maximum amount which is not chargeable to tax. In the case on hand, the assessee has not produced any books of account or vouchers before the Assessing Officer, despite several opportunities. He never made a claim before the ld. CIT(A) that he maintains books of accounts. When an assessee does not maintain any books of accounts or produce them before the authorities when he claims that based on the books of accounts, the profit in question has been declared, then the Assessing Officer has every right to estimate the profit. Thus, the Assessing Officer action of taking guidance from Section 44AD of the Act and estimating the income @ 8% of the total turnover is upheld. Hence we dismiss Ground No. 2 of the assessee.
On Ground No. 3, the assessee moved an application for admission of additional evidence. No reasons, whatsoever, has been given in the application under Rule 29 of the ITAT Rules, 1963, as to why, these papers were not produced before the Assessing Officer as well as the ld. CIT(A).
Rule 29 of the ITAT Rules, 1963, is extracted below for ready reference:- “29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or , if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”
9.1. As the application does not satisfy the requirements of Rule 29 of the ITAT Rules, we reject this application.
Coming to the merits of the case, the assessee has raised an unsubstantial argument that he has dealt in non-listed shares and that the transactions were done in cash. This plea was taken up for the first time before the ld. First Appellate Authority. A perusal of the profit and loss account of the assessee, does not reflect the claim of the assessee that, it had purchased and sold non-listed shares in cash, to the tune of more than Rs.3.72 Crores. There is neither opening balance nor closing stock balance of shares disclosed by the assessee. There is no investment in shares. The claims of the assessee are not backed by any evidences. Name of the persons from whom the purchases of non-listed shares have been made, copy of their bank accounts, copy of statement of accounts, confirmation letters of purchase and sales etc. have not been brought on record before the Assessing Officer along with their addresses. Even before us, only the fact of conversion of some of these entities into LLPs is being filed. All the documents that are sought to be filed are nothing but self serving documents, being extracts from the assessee’s books of accounts or that of third parties. Hence, in our view, the conclusion of the revenue authorities that these submissions of the assessee are an afterthought, has to be upheld. The factual mistake committed by the ld. CIT(A) that the assessee is the karta of the HUF, does not affect the decision in the matter. Under these circumstances, we uphold the order of the ld. First Appellate Authority and dismiss this ground of the assessee.
8 Assessment Year: 2011-12 Shri Kanhiyalal Tiwari Be it as it may, the total deposits in the bank accounts cannot be taken as the income of the assessee. Only the peak credit balance can be brought to tax as unexplained investment along with a percentage of total deposits as profits on turnover of the assessee. Hence, we direct the Assessing Officer to compute the income accordingly. In view of the above discussion, we dismiss Ground No. 1 of the assessee as well as the application for admission of additional evidence. On the issue of taxing the total unexplained deposit in the bank account of the assessee, we are of the considered opinion that in the interest of justice, the peak credit be calculated and brought to tax. The Assessing Officer, shall take the percentage of the total deposits as profit in addition to the peak investment and assess the income, accordingly.
In the result, this appeal of the assessee is allowed in part.
Kolkata, the 24th day of August, 2018.