SARIKA CHANDRAKANT JAIN,NANDURBAR vs. INCOME-TAX OFFICER, DHULE

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-1,

Nashik, dated 12-01-2017 for the Assessment Year 2011-12.

“1. In the fact, circumstances and position of law, Ld.CIT(A)-1, Nashik erred in confirming 50%of the cash deposit of Rs.12,56,000/- as unexplained and in directing the AO to restrict the addition to Rs.6,28,000/-.”

engaged in the business of Grocery & provision as a wholesaler under the name

and style “M/s. Ramdev Trading Company”. Assessee filed the return of income

2 ITA No.977/PUN/2017 Sarika Chandrakant Jain, L/H of Chandrakant Parasmal Jain

on 31-03-2012 declaring total income of Rs.1,82,266/-. Assessee maintained 3

bank accounts, the details of which are as under :

Name of the Bank Branch A/c. No. Name of the Balance at account the end of the year Hasti Co-op. Bank Nandurbar 4880 Saving 3126 State Bank of India Nandurbar 11386095980 Saving 3385 Hasti Cooperative Nandurbar 552 Current A/c. 6321 Bank Ltd.

AO noticed that assessee deposited the cash amounting to Rs.12,56,000/- in

the current account bearing No. 004001100000724 maintained with Hasti

Cooperative Bank Ltd., Nandurbar. On finding that the said bank accounts

were not reflected in the balance sheet, the assessee was asked to explain the

debit/credit entries in the said accounts, source of deposits, nature of the

deposits and use of withdrawals appearing in the bank accounts of the

assessee. In the absence of satisfactory explanation by the assessee on the

issue of sources of cash deposits and the reasons for non-disclosure, the AO

eventually made addition of Rs.12,56,000/- u/s.68 of the Act. CIT(A) confirmed

the addition in the first round.

subject matter for adjudication before the Pune Bench of the Tribunal vide ITA

No.1712/PUN/2015 and the Tribunal in its order dated 15-06-2016 has restored

the issue to the file of CIT(A) for considering the additional evidences and

deciding the issue as per the law. Accordingly, after admitting the additional

evidences, the same were forwarded to the AO for his comments. The AO

submitted the remand report on 21-11-2016 to the CIT(A). Subsequently, the

assessee in reply to the copy of the remand report dated 21-11-2016 submitted

counter comments on the remand report of the AO on 06-12-2016. Contents of

3 ITA No.977/PUN/2017 Sarika Chandrakant Jain, L/H of Chandrakant Parasmal Jain

Para No.3 of the order of CIT(A) are relevant. Eventually, in the second round,

the First Appellate authority granted relief partly to the assessee.

deposit of Rs.12,56,000/- on adhoc basis. Thus, the First appellate authority

granted relief of Rs.6,28,000/- to the assessee and the same is accepted by the

Revenue. However, aggrieved with the order of CIT(A), the assessee filed the

present appeal raising the aforesaid solitary ground.

there is no case for confirming any amount of addition on account of the cash

deposits. According to the Ld. Counsel, the profit from the business in the

name and style of M/s. Vimalnath Udyog works to only few thousands on the

turnover of Rs.5,29,290/-. Total purchases of this business is Rs.5,14,090/-.

The net profit out of this business is only Rs.2,766/- (item No 5 on page 3 of

the paper book). On this issue, Ld. Counsel submitted out of the said cash of

Rs.12,56,000/-, sum of Rs.7,91,483/- constitutes an opening balance of cash.

The same need to be added in the relevant year and not in the year under

consideration. Ld. Counsel for the assessee submitted that the day-to-day cash

book of M/s. Vimalnath Udyog is filed for the first time vide Page Nos. 19 to 23

of the paper book. Referring to these papers, he submitted that the cash

deposits of Rs.12,56,000/- constitute only the business receipts or the sale

proceeds. Thus, in view of the above submissions, Ld. Counsel prayed for

deleting the addition of Rs.12,56,000/-.

disclose the income received from M/s. Vimalnath Udyog. The transactions

recorded in the impugned bank account are outside the books of account. The

4 ITA No.977/PUN/2017 Sarika Chandrakant Jain, L/H of Chandrakant Parasmal Jain

cash deposited in the said bank accounts are said to be out of business

transactions. However, there is no evidence from the assessee’s side to

demonstrate the same. Therefore, the AO made the entire such cash deposits

amounting to Rs.12,56,000/-. After hearing the assessee and his arguments,

the CIT(A) restricted the disallowance to 50% of said cash deposit on

estimation basis.

I have considered the arguments of the Ld. Counsel for the assessee and

also perused the financial statements prepared by the assessee and find the

relevant profit and loss account (page 36 of the paper book) reflects the

meager income of around Rs.2,000/- on the total turnover of around Rs.5

lakhs. It is not clear from the records as to how the turnover from this line of

business is only around Rs.5 lakhs when the cash remittances are much more.

According to the CIT(A), Rs.6,28,000/- is the amount which needs to be

confirmed. No conclusive evidences are available in support of the opening

balance centric explanation of the assessee.

On considering the submissions and the evidences placed before me, I

am of the view that making addition of 50% of cash deposits, since on the

higher side, is not fair considering the fact that these amounts have linked to

the business activities of the assessee. In that case, only the profit segments

can be added. Alternatively, the peak cash credit can only be made and not the

entire amount of cash deposits. Considering the overall facts of the case, i.e.

the fact that assessee expired & the legal heir of the assessee is not having

much knowledge of the business, I am of the view that restricting the

disallowance to 25% of the cash deposits towards the slated irregularities as

well as the profit earned in this line of unreported business activity, would meet

the ends of justice. Accordingly, the AO is directed to restrict the disallowance

5 ITA No.977/PUN/2017 Sarika Chandrakant Jain, L/H of Chandrakant Parasmal Jain

to Rs.3,14,000/- (Rs.12,56,000 X ¼) instead of Rs.6,28,000/- adopted by the

CIT(A) on adhoc basis. Thus, the solitary ground raised by the assessee is

partly allowed.

Order pronounced on this 23rd day of May, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 23rd May, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune