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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI H.S. SIDHU
the impugned order dated 16/1/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-Rohtak on the following grounds:-
On the facts and circumstances of the case, the Ld.
Commissioner of Income tax (Appeals) has erred in law and facts in deleting the addition of Rs. 15,79,000/- made on account of unexplained cash deposits in Kotak
Mahendra Bank Ltd. Indore relying upon the submission of the assessee that the cash deposits in bank were made out of the sales of Branch Office of Indore whereas as per Audit report no branch office has been mentioned and no sales and purchases have been shown in the return of income from the alleged branch.
2. On the facts and circumstances of the case, the Ld.
Commissioner of Income tax (Appeals) has erred in law and facts in deleting the addition of Rs. 11,801/- made on account of low G.P. on the grounds that the books of accounts were subject to audit and no discrepancies were pointed out whereas addition was made after rejecting the book version.
On the facts and circumstances of the case, the Ld.
Commissioner of Income tax (Appeal) has erred in law and facts in deleting the addition of Rs. 65,000/- made on account of low house hold withdrawals on the ground that the wife of the assessee has made withdrawals of Rs. 1,02,000/- for house hold expenses whereas no such plea was taken during the assessment proceedings and no such proof was filed.
4. That the appellant craves for permission to add,
delete or amend the grounds of appeal before or at the time of hearing of appeal.
The facts in brief are that the assessee filed return of income declaring total income of Rs. 2,63,818/- from commission and purchase and sale of cotton seed and cotton seed cake. During the course of assessment proceedings, the AO asked the assessee to furnish complete details and copies of all bank accounts in response to which the assessee enclosed copies of bank accounts of State Bank of Patiala (SBOP), Mahendergarh, SBOP, Bawana and Cooperative Bank, Bawana, has reflected in the audited balance sheet. The AO noted from the IT return of the assessee for the AY 2010-11 that he was having one more bank a/c with SBI, Dhamnod for which the assessee stated that it was opened by him only on 31.3.2010. Thereupon, as per the information available, the AO asked the assessee to explain the sources for the cash deposits of Rs. 35,79,000/- in the SB A/c with Kotak Mahendra Bank, Indore.
The Assessee in response to his reply has stated that the transactions in Kotak Mahindra Bank related to the business in BO at Indore and cotton seed cake was purchase from M/s Ashu & Co., Dhamnod for Rs. 35,70,000/- and the payments were showing the said bank account. Assessee further stated before the AO that purchase and sales at BO were not showing the return of income as the profit was in excess of the rate specified in section 44AF, as he is not an educated person and has no knowledge about accounting principles and as such no particulars of income were concealed. AO did not find the reply satisfactorily and therefore, made addition of entire cash deposits in Kotak Mahindra Bank A/c, Indore of Rs. 35,70,000/- u/s. 69 of the I.T. Act vide his order dated 28.12.2011 passed u/s. 143(3) of the I.T. Act, 1961 and assessed the income of the assessee at Rs. 39,24,780/-.
3. Aggrieved with the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned Order dated 16.1.2013 has deleted additions and allowed the appeal of the assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that Appeal of the Revenue may be allowed.
On the contrary, Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which needs to be upheld and accordingly, the appeal of the Revenue may be dismissed.
7. I have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). I find that Ld. CIT(A) has elaborately adjudicated the issue raised in ground no. 1, 2 & 3 in dispute vide para no. 6 to 9.2 at page no. 7 to 9 of the impugned order as under:-
“6. I have carefully considered the issue and the submissions made by the AR. The turnover of the assessee (HO & BO) exceeded Rs 40.00 lacs and therefore the provisions of section 44AF are not available. The action of the assessee in subjecting only the books of accounts of HO to audit for declaring profit below the prescribed rate u/s. 44AF and not getting the books of BO audited on the ground that the profit of the BO exceeded the prescribed rate u/s. 44AF is erroneous. Further, crediting the profits of the BO in the capital a/c under the head 'Misc. receipts' without taking it to the P&L a/c is again erroneous. The above mentioned instances show that the affairs of the assessee are not properly managed. Be that as it may, the addition of Rs. 35,79,000/- is adjudicated as under:-
6.1 The assessee started the business at Indore BO from 01.12.2008 for trading in cotton seed cake and opened SB a/c with Kotak Mahindra Bank, Indore. As per the books of accounts, bills/vouchers etc. it is seen that the assessee purchased cotton seed cake from M/s Ashu & Co., a proprietary concern of his wife. It is seen from the audited books of accounts, IT return of M/ s Ashu &
Co. that it has a turnover of more than Rs
4.62 Crores of which the turnover on account of cotton seed cake is Rs 47,87,500/- and the sales to the assessee is to the tune of Rs
35,70,000/-. M/s Ashu & Co. is separately assessed to tax and the books of accounts are audited by a different CA. As per the books of accounts of the assessee, the sale of cotton seed cake was made in cash, deposited in the bank a/c with Kotak Mahindra Bank from which cheques were issued towards payment to M/ s Ashu & Co. These transactions are supported by the purchase/ sale bills and the entries in the books of accounts. The AO has not noticed any discrepancy/inconsistency of the above mentioned claim while examining the books of accounts, bills/vouchers, bank statements etc. during remand proceedings.
The doubt expressed by the AO of sale bills of M/ s Ashu & Co. to the assessee not bearing
TIN numbers and other doubts have been duly explained by the assessee, as mentioned in para 5 above. All the above mentioned evidences/facts indicate that the entries in Kotak Mahindra Bank a/c reflect the business transactions of the Indore BO dealing in cotton seed cake and no contrary view is plausible.
In view of the above, it is held that the cash deposits in Kotak Mahindra Bank a/ c reflect the sale proceeds of the Indore BO and as such the addition made by the AO of Rs
35,70,000/- u/s 69 is deleted and the ground of appeal is allowed.
The AO noted that on the HO turnover of Rs.
15,18,970/-, GP@ 2.31% of Rs 35,135/- was declared whereas in the preceding year, on a turnover of Rs. 11,80,510/-, GP rate of 3.09% was declared. The AO held that the explanation offered by the assessee for the fall in GP rate is not acceptable and rejected the books of accounts and estimated the GP @ 3.09% and made an addition of Rs 11.801/-.
8. This action of the AO was contested in ground no. 2 of appeal. Before me the AR stated that the sales have increased, the quantitative details in the form of stock register have been maintained, books
of accounts. were subject to audit and the complete bills/vouchers were produced before the AO. The action of the AO in summarily rejecting the books of accounts and estimating the profit as per the previous year result is unjustified.
8.1 I have considered the issue and the submissions made by the AR. The books of accounts have been subject to audit and all the relevant bills/vouchers and stock register have been produced before the AO. Under these circumstances, rejecting the audited books of accounts without pointing any deficiency/discrepancy and estimating the profit as
per previous year result is nor justified. The
addition made by the AO is therefore deleted and the ground of appeal is allowed.
The assessee has shown withdrawal for house
hold expenses of Rs. 55,000/-. Having regard to the family consisting of self, wife and two children and the status of living of the assessee, the AO estimated the house hold expenses at Rs 10,000/- p.m. and made an addition of Rs 65,000/- on account of low house hold expenses.
9.1 This action of the AO was contested in ground no. 3 of appeal and the AR submitted before me that the wife of the appellant Smt. Sunita Mittal, an IT assessee has shown withdrawals of Rs 1,02,000/
- and therefore the withdrawals of the family amounts to Rs 1,57,000/-, much above the expenditure estimated by the AO of Rs 1,20,000/-.
The AR furnished copies of the capital a/ c of Smt.
Sunita Mittal.
9.2 Since the withdrawals for house hold expenses by the assessee and his wife amount to Rs
1,57,000/-, no addition is called for since the AO himself estimated the expenditure at Rs 1,20,000/-.
As such the addition is deleted and the ground of appeal is allowed.”
7.1 After going through the findings of the Ld. CIT(A), as aforesaid, with regard to ground no. 1 relating to deletion of addition of Rs. 35,79,000 made on account of unexplained cash deposits in Kotak Mahindra Bank Ltd., Indore is concerned, I find that the assessee started the business at Indore BO from 01.12.2008 for trading in cotton seed cake and opened SB a/c with Kotak Mahindra Bank, Indore. As per the books of accounts, bills/vouchers etc. it is seen that the assessee purchased cotton seed cake from M/s Ashu & Co., a proprietary concern of his wife. It is seen from the audited books of accounts, IT return of M/ s Ashu & Co. that it has a turnover of more than Rs 4.62 Crores of which the turnover on account of cotton seed cake is Rs 47,87,500/- and the sales to the assessee is to the tune of Rs 35,70,000/-. M/s Ashu & Co. is separately assessed to tax and the books of accounts are audited by a different CA. As per the books of accounts of the assessee, the sale of cotton seed cake was made in cash, deposited in the bank a/c with Kotak Mahindra Bank from which cheques were issued towards payment to M/ s Ashu & Co. These transactions are supported by the purchase/ sale bills and the entries in the books of accounts. I further find that the AO has not noticed any discrepancy/inconsistency of the above mentioned claim while examining the books of accounts, bills/vouchers, bank statements etc. during remand proceedings. The doubt expressed by the AO of sale bills of M/ s Ashu & Co. to the assessee not bearing TIN numbers and other doubts have been duly explained by the assessee, as mentioned in para 5 above. All the above mentioned evidences/facts indicate that the entries in Kotak Mahindra Bank a/c reflect the business transactions of the Indore BO dealing in cotton seed cake and no contrary view is plausible. In view of the above, Ld. CIT(A) has rightly held that cash deposits in Kotak Mahindra Bank a/c reflect the sale proceeds of the Indore BO and as such the addition made by the AO of Rs. 35,70,000/- u/s 69 was rightly deleted, which does not need any interference on my part, hence, I affirm the order of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 1 raised by the Revenue.
7.2 With regard to ground no. 2 relating to deletion of addition of Rs. 11,801/- made on account of low GP is concerned, I find that the books of accounts have been subject to audit and all the relevant bills/ vouchers and stock register have been produced before the AO. Under these circumstances, rejecting the audited books of accounts without pointing any deficiency/ discrepancy and estimating the profit as per previous year results is not justified, hence, the Ld. CIT(A) has deleted the addition in dispute, which does not need any interference on my part, therefore, I uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 2 raised by the Revenue.
7.3 With regard to ground no. 3 relating to deletion of addition of Rs. 65,000/- made on account of low house hold withdrawals is concerned, I find that withdrawals for house hold expenses by the assessee and his wife amount to Rs 1,57,000/-, no addition is called for since the AO himself estimated the expenditure at Rs 1,20,000/- As such the addition was rightly deleted by the Ld. CIT(A) which does not need any interference on my part, hence, I uphold the action of the Ld. CIT(A) on the issue in dispute. Accordingly, the ground no.3 is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 10/02/2017.