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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-II’ NEW DELHI
Before: SMT DIVA SINGH
ORDER These are cross appeals filed by the assessee and the Revenue assailing the correctness of the order dated 02.02.2015 of CIT(A)-16, New Delhi pertaining to 2010–11 assessment year on the following grounds:-
1. “On facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in treating the cash deposit as receipts from undisclosed business.
On facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in assessing the income at 15% of the gross receipts instead of 5% as provided u/s 44AF of the Act.
On facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in not applying the peak credit basis which is a settled principle of law for determine the income in such cases.”
ITA No.-2694/Del/2015 1. "Whether on the facts and in the circumstances of the case the CIT(A) has erred in directing the AO to adopt Gross Profit @ 15 of Rs.39,15,I50/- instead of treating the cash deposits of Rs.39,15,150/- in the ICICI Bank as unexplained income. 2. "Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in treating it as business income and ignoring the fact that the assessee has not shown any income under the head of Income from Business and profession except share of profit." 3. "The order of the CIT (A) is erroneous and not tenable in law and on facts."
The appellant craves to amend, alter or modify any ground of appeal.
I.T.A .No.-2225 & 2694/Del/2015 Subhash Sachdeva vs ITO
Page 2 of 4 2. The relevant facts of the case are that the assessee in the year under consideration was a partner in the firm M/s Marshal Electronics at Shop No.18(72A), Lajpat Rai Market, Chandni Chowk, Delhi. The assessee’s return was picked up for scrutiny wherein the assessee was required to explain the cash deposit of Rs.25,25,250/- in his ICICI Bank, Chandni Chowk, Delhi. As per explanation dated 22.12.2012 before the AO it was stated that the assessee trades in small electronics like leads, wires, sockets, switches, emergency lights etc. The assessee apart from trading in partnership in the name of M/s Marshall was also trading in the name and style of Sachdeva Enterprises and since it is covered u/s 44AF of the I.T.Act as a layman unguided by any professional he returned the actual profit. In cross questioning, the assessee was found to be contradicting himself as a result thereof the addition of Rs.29,15,150/- and another addition of Rs.10,53,600/- found deposited in ICICI Bank, A/c No.629201509384 and 629201509107 was made by the AO.
Aggrieved, the issue was taken in appeal before the CIT(A). As per record, the assessee re-iterated at page 6 of the impugned order that it carries on a small trading business of electronic items. The purchase of the goods, it has been stated was made from the local market (Delhi) in small quantities and it has been sold to customers who mainly come from outside Delhi. The payment of the goods it is stated is received in cash and directly deposited in the bank account of the assessee by them from outside Delhi. The assessee’s case it is stated is covered u/s 44AF as a result thereof he has not maintained any regular books of accounts. It has been submitted that the assessee is not registered under Sales Tax and has produced copies of sale invoices for verification before the AO copies of both the bank accounts. The cash it was stated is deposited in small amounts and is withdrawn immediately (even on the same day it is being deposited by the customer) for making the purchases. It was argued that there is complete circulation of the same money in the bank account which can be verified from the bank statement. It was submitted that the cash deposited in the bank account is nothing but the sale proceeds deposited by the customers which is withdrawn from these accounts for purchasing the I.T.A .No.-2225 & 2694/Del/2015 Subhash Sachdeva vs ITO
Page 3 of 4 goods. In support of the fresh evidences were filed before the CIT(A). The evidences were forwarded to the AO requiring him to issue notice to the concerned parties. In view of the fact since only some replies were not received the reply was found to be insufficient.
Considering the same, the CIT(A) granted part relief.
Aggrieved by this, both the assessee and the Revenue are in appeal before the ITAT.
5.1. The Ld.AR submitted that the original claim of the assessee which is addressed in Ground No.-2 in the present proceedings, has not been decided or addressed by the CIT(A).
5.2. Accordingly, it was his submission that the issue has not been addressed. The Ld.Sr.DR on the other hand submitted that the part relief granted by the CIT(A) on facts is not justified. Even otherwise, it was argued in order to address Ground No.2 of the assessee, it would be necessary to hold that there was a genuine legitimate business of the assessee which on facts has been found to be wanting.
5.3. The Ld.AR in reply submitted that the argument is devoid of facts as even today, the assessee continues to run the same business from the very same premises which is the electronics market hub of North India. Addressing the evidence filed by New Nepal Electronics, Akarshan Gali Bank Road, Raxaul, Bihar wherein reply has been received from the parties, copy of which is placed at page 23 which has been addressed by the Ld.Sr.DR.
It was his submission that the said acknowledgement of business transaction has been sent from Bihar-Nepal Border and all petty shop keepers are not aware about the manner in which format the information sought was required to be filed. The issue it was submitted was whether the assessee has done business from the said premises. Relying upon the order dated 31.08.2016 in in the case of ITO, Ward-61(1), New Delhi vs Smt. Seema Khana wherein the additions made u/s 68 had been treated as business receipt applying the provision of section 44AD, similar relief on facts is prayed for.
Ld. Sr. DR in principle agreed that if the assessee demonstrates that it was a genuine
I.T.A .No.-2225 & 2694/Del/2015 Subhash Sachdeva vs ITO
Page 4 of 4 business then it has to be considered u/s 44AF, relief allowable has to be allowed. Accordingly after considering the submissions of the parties before the Bench, I find that the prayer of the parties to set aside the issue deserves to be allowed as the primary issue before the tax authorities, it is seen remains undecided. Accordingly, the impugned order is set aside and the issue is restored back to the file of the AO to consider the applicability of section 44AF which is the primary claim of the assessee on the basis of the material available on record. The assessee would have liberty to move fresh evidence to demonstrate if need be there that it is still carrying on the same business from the very same premises. 6. In the result, the appeals of the assessee and the Revenue are allowed for statistical purposes. The order is pronounced in the open court on 01st of February 2017. Sd/- (DIVA SINGH) JUDICIAL MEMBER *Amit Kumar*