SH. HANSRAJ S/O SH. ISHRIA,FARIDABAD vs. ITO, FARIDABAD

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ITA 1139/DEL/2014Status: DisposedITAT Delhi29 June 2016AY 2009-105 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the entire bank deposits could not be assessed to tax without considering withdrawals. Given the assessee's business and the lack of other identified income sources or investments, the peak credit surrendered by the assessee should have been accepted.

What were the facts?

The assessee, engaged in the cattle feed business, filed a return declaring a modest income. However, the Assessing Officer (AO) noticed significant cash deposits in the assessee's bank accounts totaling Rs. 65,42,800/-, which were not adequately explained. The AO completed the assessment under Section 144 due to non-compliance with notices.

What were the issues?

Whether the entire unexplained cash deposits in bank accounts can be added to income, disregarding withdrawals and the assessee's business explanation. Whether the assessee's surrender of peak credit should have been accepted by the revenue authorities.

Which sections of the Income-tax Act were involved?

Section 144,Section 44AF,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI

Before: SHRI S.V. MEHROTRA : & SMT. BEENA A. PILLAI:

For Appellant: Shri Suresh Bansal CA &, Shri Jitender Wadhwa CA
For Respondent: Smt. Ritu Sharma Sr. DR
Hearing: 09/06/2016

This is assessee’s appeal against the order dated 20.12.2013 passed by the ld. CIT(A), Faridabad in appeal no. 317/2011-12, relating to AY 2009-10. 2. Grounds of appeal raised by the revenue are as under:

1) That the order of the Ld. CIT (A) Faridabad is bad in law and on facts.

2 ITA 1139/Del/2014 2) That on the facts and in the circumstance of the case the appellant denies his liability to be assessed u/s 144 and consequently to pay tax on thereon. 3) That on the facts and in the circumstance of the case the Ld. CIT (A) Faridabad erred in : A) Rejecting the claim of the appellant for surrender of peak credit of the cash deposited in to the bank accounts to the tune of Rs. 9, 20, 934/- made before the Ld. A. O. in good faith and which was duly accepted by the Ld. A.O. B) Confirming the addition of Rs. 65, 42, 800/- without pursuit the facts of the case fully and properly. 4) That having regards to the facts and circumstances of the case, Ld CIT (A) has erred in law and on facts in not reversing the action of Ld AO in charging interest u/s 234 Band 234C of the Income Tax Act, 1961. 5) That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.

3. Brief facts of the case are that the assessee had filed return declaring income at Rs. 1,59,040/-. The AO noticed that assessee was doing some business of cattle feed. He noticed that gross receipts/ sale during the year was shown at Rs. 38,25,200/- only, declaring business gain of Rs. 2,18,400/- and the return was filed as retail traders u/s 44AF. AO obtained an information from the bank. After examination of the same and on the basis of AIR information noted that assessee had deposited cash of Rs. 65,42,800/- in the HDFC bank, Agra Chowk, Palwal and ICICI Bank Ltd.,

3 ITA 1139/Del/2014 Booth no. 104-105, District Centre, Sector-16, Faridabad. As the assessee did not comply with various notices issued by AO, the AO completed the assessment u/s 144. He noticed that assessee had not declared any sale declaring business gain of Rs. 1,59,044/-. He further observed that no details in this regard were furnished. He observed that the said transactions could not pertain to business since no regular trading pattern of business was reflected in the bank statement but only lump sum deposits and payments were there. He, accordingly, made addition of Rs. 65,42,800/-.

4.

Before ld. CIT(A), the assessee filed additional evidence under Rule 46A, which was forwarded to AO for examination, both with regard to the admissibility of additional evidence and the merit of additions made in the light of additional evidence, submitted by the assessee. AO’s report has been reproduced in the CIT(A)’s order, after considering which ld. CIT(A) confirmed the addition of Rs. 65,42,800/- on account of unexplained cash deposit in the bank account, rejecting the assessee’s surrender of peak credit balance of Rs. 9,20,934/- before AO in remand proceedings, inter alia, observing that on one hand the AO had recommended rejection of additional evidence and has conclusively tried to establish the fact that source of cash deposit could not be satisfactorily explained, on the other, he has referred to the surrender of peak credit balance in his bank account and 4 ITA 1139/Del/2014 payment of tax thereon by the assessee. He pointed out that since AO has not been able to substantiate in his report as to why peak credit balance may be accepted, the assessee’s contention was to be rejected.

5.

We have considered the submissions of both the parties and have perused the record of the case . It is not disputed that assesse was doing the business of cattle feeds. In the statement of facts, filed before ld. CIT(A), the assessee had pointed out that it was in the business of retail trading of cattle feeds e.g. peddy, khal, choori, chilka, gud, jawar and barsam etc. and assessed with ITO, Ward 11(3), Faridabad. Return of income had been filed u/s 44AF, by declaring business income of Rs. 2,18,040/- and turnover of Rs. 30,25,200/-. It was also submitted in the statement of facts that the assessee deposited the cash of Rs. 72,65,400/- and at the same time withdrew cash of Rs. 64,04,556/- during the relevant assessment year.

Deposits were primarily from withdrawal from bank, sale proceeds and realization debtors. Assessee had not maintained any books of a/c.

6.

Now the issue is whether entire deposits in the bank could be assessed to tax, disregarding the amounts withdrawn by assessee or not. Admittedly, neither any other source of income has been pointed out by AO nor any investment out of withdrawals from bank has been shown. Under such circumstances, assessee’s explanation that both the bank accounts were in 5 ITA 1139/Del/2014 relation to its business, cannot be doubted. In our opinion, the peak surrendered by assessee should have been accepted by lower revenue authorities, in the absence of books of a/c. We order accordingly.

7.

In the result, assessee’s appeal is allowed accordingly.

Order pronouncement in open court on 29/06/2016.

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