ITO, NEW DELHI vs. SMT. SEEMA KHANNA, NEW DELHI

Date of Hearing : 18-08-2016 Date of Order : 31-08-2016

ORDER PER H.S. SIDHU, J.M.

The Department has filed the Appeal against the impugned order dated 08.9.2015 of Ld. CIT(A)-20, New Delhi pertaining to assessment year 2009-10. The grounds raised in the revenue’s appeal reads as under:- “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the following additions:

1. In the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in accepting the contention made by the assessee that total cash deposited in bank may be treated as business receipt and applied provision of section 44AD, and total business profit may be taken @8% of the total receipts/ deposits as against the addition made u/s. 68 on account of cash deposit of Rs. 36,14,384/-, without appreciating the fact that assessee failed to substantiate her claim regarding cash deposits of RS. 36,14,384/-.

The appellant craves, leave to add or amend or modify the grounds of appeal at any time. It is prayed that the order of the CIT(A) is contrary to the facts on record and the settled position of law; and the order of the AO deserves to be restored.

In support of bill nobody give any confirmation in the name of assessee.

Therefore, AO observed that no business done by the assessee and the cash deposit made by the assessee in their bank was treated as an undisclosed income and added u/s. 68 of the Income Tax Act of the assessee. The AO has completed the assessment at Rs. 37,59,560/- by making the addition of Rs. 36,14,384/- vide his order dated 18.3.2014 passed u/s. 143(3) of the I.T. Act, 1961.

3. Aggrieved with the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 08.9.2015 has deleted the addition in dispute and partly allowed the appeal of the assessee.

4. Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.

In this case, Notice of hearing to the parties were sent, in spite of the 5. same, Department Representative not appeared to prosecute the matter in dispute, nor filed any application for adjournment by the Department. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, I am of the view that no useful purpose would be served to issue notice again and again to the Revenue, therefore, I am deciding the present appeal exparte qua Revenue, after hearing the Ld. Counsel of the Assessee and perusing the records.

6. 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 does not need any interference on our part, hence, the same may be upheld and accordingly, the appeal of the Revenue may be dismissed.

“5.3 I have carefully considered the assessment order and submissions thereof. On the facts and circumstances of the case, following points have emerged;

1. That the appellant is an Employee with Kapoor Goyal & Co drawing salary and also doing part time business of trading of Auto Tyres.

2. That during the year under consideration, the appellant has not shown any income from the business.

3. That during the course of assessment proceedings, the A.O has found an undisclosed bank accounts in the name of the appellant maintained at Punjab National Bank New Kirti Nagar, New Delhi.

5.4 During the course of appellate proceedings, bills and vouchers showing sale/purchases were also produced. Such bills/vouchers were also produced before the A.O also during assessment proceedings.

There is a reasonable inference that the appellant was doing sale/purchase of auto tyres during the relevant period. The cash deposits and withdrawals are found to be in the range of Rs.4,OOO/- to Rs.50,OOO/-.

{5.5} Taking into the facts and circumstances of the case following 3 alternatives have emerged;

1. Scenario No.1: Treat the entire cash found deposited in the undisclosed bank account as unexplained u/s 69 of the Act and tax accordingly.

(undisclosed income; Rs. 36,14,384/-)

2. Scenario No.2: Take the cash receipts as business receipts and accordingly estimate gross Profit rate as under; i. At the rate of 8% of the gross receipt as per section 44AD then the income comes to Rs.2,89,150/- ii. If The Hon'ble High Court of Gujarat in the case of CIT vs President Industries as relied upon in the Hon'ble ITAT Delhi bench judgment in the case of Assessment year: 2009-10 Shri Kayyum Ahamed is followed then 12% of Gross Profit rate is to be added. It means, in relevant case the addition on account of undisclosed income would be estimated at Rs.4,33,726/-.

2. Scenario no.3: Relying on the following judgments,

2. IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, "B" BENCH IT ANo.1155/Ahd/2011 [Asstt.Year: 2007-2008] Smt. Manjulaben Champak!al

3. IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI 894, 895, 896 & 1487/Mum.l2011 (AYs : 2003-04, 2005-06, 2006-07, 2008-09 & 2007-08)

{5.5.2} Scenario NO.3 is also not found to be reasonable in the present case as cash Withdrawal were found almost simultaneously and very frequently.

{5.5.3} That leaves Scenario No.2 as the most reasonable scenario in determining the profit in the present case. In this regard it is worthwhile to take a cue from the judgment in the case of THE INCOME TAX APPELLA TE TRIBUNAL (DELHI BENCH 'D " NEW DELHI) Assessment year: 2009-10 Shri Kayyum Ahamed, Date of pronouncement: 22.05.2015 During the year under consideration, the assessee claimed that due to fault in the data in computer, the balance sheet and P & L account prepared and submitted to income tax Department contained wrong figures. We find that the A.O. on the basis of the figures contained in Form 26AS had cornered the assessee and, therefore the assessee had Prepared revised P & L, account declaring reconciled turn over and also claimed revised expenses. The A. O. without considering the increase in expenses, made the addition of entire turnover whereas the fact remains that if there was concealed turnover, there must have been some concealed expenses also which must have been incurred' and the A. O. should have considered the claim of expenses also. Though the assessee did not furnish vouchers and bills for the expense yet the AO should have taken guidance from the provisions of Section 44AD which provides determination of net profits on the basis of 8% of gross receipt in the case of small traders. From the figures of turnover of assessee, we find that assessee also falls in the category of small traders and his undisclosed income should have been calculated on the basis of certain percentage on undisclosed turnover. The Hon'ble High Court of Gujarat in the case of CIT vs President Industries as relied upon by Ld. AR. placed at paper book page 45 has held that the amount of undisclosed sales by itself cannot represent the income of the assessee and the sales only represent price received by seller of goods but for achieving of such sales, it had already incurred the cost. The above case law relied upon by Ld. AR. squarely covers the facts and circumstances of the case, therefore, following the Hon'ble Gujarat High Court we hold that entire turnover cannot be added to the income of assessee and profits embedded in the turnover can only be taxed. The assessee did not produce vouchers / bills to support the increase in expenditure in his revised P & L account. Therefore, instead of 8% of turnover to be included as profits on undisclosed turnover, we hold that an amount equivalent to 12% of turnover be included in the income of the assessee. In view of the above, the A O. is directed to delete the addition on account of unrecorded turnover and instead, make an addition equivalent to 12% of undisclosed turnover. In the present case, although the appellant has not disclosed the income from the business in her return of income filed for A Y 2009-10 and it is only after the AO has unearthed the undisclosed bank accounts and confronted with the facts, that the appellant had disclosed it before the AO. But later in the assessment proceedings bills and vouchers-were produced before the AO, although the bills/vouchers do not contain any names etc. Therefore, I am of considered view that relying on the Hon'ble Gujarat High Court judgment in the case of CIT vs. President Industries, it is reasonable that the appellant is taxed at the rate of 8% of gross receipt under section 44AD of the Act. I have also taken into account the fact that the appellant is a part time businesswoman and this is the first year of her business venture and bills/vouchers were produced. Accordingly, taxable income from business is estimated at Rs.2,89,150/.” {6}. In the result, the appeal is partly allowed.

7.1 After going through the findings of the Ld.CIT(A), as aforesaid, I find that in the present case, the assessee has not disclosed the income from the business in her return of income filed for AY 2009-10 and it is only after the AO has unearthed the undisclosed bank accounts and confronted with the facts, that the assessee had disclosed it before the AO. But later in the assessment proceedings bills and vouchers were produced before the AO, although the bills/vouchers do not contain any names etc. Therefore, Ld. CIT(A) has rightly relied on the Hon'ble Gujarat High Court judgment in the case of CIT vs. President Industries, and held that it was reasonable that the assessee is taxed at the rate of 8% of gross receipt under section 44AD of the Act. I further find that Ld. CIT(A) has taken into account the fact that the assesssee is a part time businesswoman and this is the first year of her business venture and bills/vouchers were produced. Accordingly, taxable income from business was rightly estimated at Rs.2,89,150/ by the Ld. CIT(A) which does not need any interference on my part, hence, I uphold the same and dismiss the ground raised by the Revenue.

Order pronounced in the Open Court on 31/8/2016.