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Income Tax Appellate Tribunal, BANGALORE BENCH ‘C’, BANGALORE
Before: SHRI A. K. GARODIA & SHRI VIJAY PAL RAO
This is revenue’s appeal directed against the order of the ld.
CIT(A), Davanagere dated 30-09-2015 for the assessment year 2009-10.
The grounds raised by the assessee are as under:
“1. The order of the CIT(A), Davanager4e, is opposed to law and not on the facts and circumstances of the case.
2. The CIT(A) is not right in granting relief to the asssessee on the addition mad on account of unaccounted lorry receipts, when the assessee deliberately not produced any books of accounts, vouchers, invoices etc. in support of gross receipts or expenses in spite of several opportunities given to the assesee.
3. The CIT(A) is not right in granting relief to the assessee on the addition made on account of peak cash credit, when the assessee has not declared the entire transactions of bank accounts in his books of accounts.
4. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed that assessment order be restored.
5. The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.
The ld. AR of the revenue supported the assessment order. He also submitted that there is no details of expenses submitted by the assessee before any of the authorities blow or before the Tribunal and therefore, the entire additional receipts should be taxed, as has been done by the AO. He also submitted that even if the profits has to be taxed than also, gross profits has to be taxed and not net profit as has been held by the ld. CIT(A).
As against this, the ld. AR of the assessee supported the order of the ld. CIT(A) on both the issues.
We have considered the rival submissions. We find that in the present appeal of the revenue, two issues are involved. The one issue is regarding direction of the ld.CIT(A) to the AO to tax only Rs.3,44,787/- being 5% of undisclosed Lorry Hire Charges Receipts of Rs.68,98,745/- whereas the AO has taxed the whole amount of undisclosed Lorry Hire Charges Receipts of Rs.68,98,745/-. The second issue is regarding granting of telescoping benefit of Rs.7.20 lakhs. Regarding the first aspect, we find that the ld. CIT(A) has noted the judgment of the Hon’ble Calcutta High Court rendered in the case of Balram Saha Vs CIT as reported in 334 ITR 3383 (Cal.) wherein it was held that only gross profit should be taxed instead of treating entire suppressed sales as assessee’s income. He has also referred to various other judgments in support of the same aspect. In the present case, as per the P&L account for the year ending as on 31-03-2009 i.e. the present year appearing on page-28 of the paper book, the amount of lorry hire charges received is Rs.143.05 lakhs and the amount of lorry hire charges paid is Rs.136.44 lakhs resulting into a gross profit of Rs.6.61 lakhs being 4.62% of total lorry hire charges received and credited in the P&L account. Hence, the argument of the ld. DR of the revenue that the gross profit has to be adopted and not net profit which is not helping the revenue in the present case because learned CIT (A) has also directed the A.O. to tax Gross Profit being 5% as against actual Gross Profit of 4.62%.
The taxing of entire receipt is not valid as per this judgment and no contrary judgment is brought before us in support of taxing the entire undisclosed receipts. Hence, we hold that this aspect as to whether the gross undisclosed receipts should be taxed or only gross profits on undisclosed receipts, we find that this aspect is covered in favour of the assesee by various judgments of the various High Courts as noted by the ld. CIT(A) on pge-19 of his order. Hence, on this aspect, we find no reason to interfere in the order of the ld.CIT(A).
Regarding the second aspect i.e. telescoping benefit of peak credit of Rs.7.20 lakhs, we reproduce the relevant paras from the order of the ld.CIT(A) on pages 23 & 24 of his order. The same read as under:
“ I have considered the arguments of both i.e. of the AO and the assessee on the issue of allowing telescoping. The AO found that the assessee did not disclose the bank account bearing SB 8260 at all in the return of income with the result, the total credit balance standing to the credit of this account of Rs.17,08,216/- was not shown in the balance sheet of the assessee as on 31/03/2009. The AO also notice that there were credits and debts in other 2 bank accounts viz.SCC708 and SCC 648. The total credits ere Rs.29,21,000/- from all these 3 accounts. Out of this Rs.29,21,000/- only Rs.1,50,000/- was from SCC 648 and Rs.3,00,000/ + 2,96,000= 5,96,000/- was from SCC 708. Thus, Rs.21,75,000/- was the credit from SB a/c8260 only. The peak credit worked out by the AO was Rs.7,20,000/- which has been agreed to by the assessee. Since substantial amount has come from SB a/c8260 only, where the closing cash balance found was Rs.17,08,126/-, bulk of the peak credit represented to this account only and therefore, telescoping benefit should be given for Rs.7,20,000/- as already Rs.17,08,126/- has been added from SB 8260 which includes sum of Rs.7,20,000/- being credits appearing in these accounts telescoping benefit has to be given necessarily. Otherwise it becomes taxing the same amount of Rs.7,20,000/- twice. Because all the cash deposits made in SB a/c represent the suppressed sale proceeds only (it may be noted that the aggregate transfer of credits appearing in SB a/c no.8260 is Rs.45,40,321/- which is nothing but lorry hire charges only. A reference needs to be made to the decision of the Madras High Court in the case of CIT, T.N Vs K>S>M Guruswamy Nadar & Sons (Mad.) 149 ITR (1984) 127. The High Court in this case has referred to the following cases decided by various courts.
CIT Vs Devi Prasad Vishwanath Prasad (199) 72 ITR 1949SC) 2. CIT Vs Durga Prasad More (1969) 72 ITR 807(SC) 3. CIT Vs Ganapathy Mudaliar (M) (1964) 53 ITR 623 9SC) 4. CIT Vs Nelliappan (S) (1967) 66 ITR 7229SC)
All these referred cases may not be resembling to the facts of the assessee. But in these cases, it has been held that, when 2 additions are made i.e. suppression of sales and cash credits found, the suppressed book profit should be telescoped with the additions made towards cash credits. The assessee has also relied on the same decisions.
In view of the above reasoning, it is held that, while peak credit worked out at Rs.7,20,000/- as undisclosed cash credits in the bank account, it has to be brought to tax u/s 69 of the Act, telescoping benefit has to be given to the sum of Rs.17,08,126/- already brought to tax rightly. Relief granted to the assessee is Rs.7,20,000/-. The addition made of Rs.17,08,126/- is sustained”.
From the above paras re-produced from the order of the ld. CIT(A), we find that a categorical finding has been given by the ld. CIT(A) that out of the total credits of Rs.29.21 lakhs in three bank accounts, only Rs.1.50 lakhs was in a different bank account i.e. SCC648 and Rs.5.96 lakhs in SCC708. The working of peak credit is available in Annexure-F to the assessment order as per which, before the date of peak credit, only in one account, an amount of Rs.1.50 lakh is deposited in bank account no.SCC 648. Hence, it is seen that the remaining amount of peak credit of Rs.5.70 lakhs is deposited in bank account no.SB8260 of which the closing balance of Rs.17,08,126/- has been separately added by the AO and this addition has been sustained by the ld.CIT(A). Hence, the peak credit in this bank account no.SB 8260 cannot be added again after making addition of closing balance of this bank account of Rs.17,08,126/-.
Regarding the credit of Rs.1.50 lakhs on 07-05-2008 in bank account no.SCC 648, we are of the considered opinion that when the gross profit on undisclosed sales has been separately taxed, the same should be considered for telescoping against peak credit of Rs.7.20 lakhs on 27-09-2008 as per Annexure-F to the assessment order. In view of this fact, we find no infirmity in the order of the ld. CIT(A) to grant telescoping benefit on this amount of Rs.7.20 lakhs and therefore, we decline to interfere in the order of the ld. CIT(A) on this aspect also.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on the date mentioned on the caption page.