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Income Tax Appellate Tribunal, DELHI BENCHES : “F” NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER
This appeal is filed by the assessee against the order of Ld. CIT(A)-32 New Delhi vide order dated 29.12.2015 on the following grounds :
“On the facts and in the circumstances of the case and in law the action of the CIT(A) - 32, New Delhi, is arbitrary, fallacious and illegal on the following grounds and, therefore, merits to be quashed with directions for appropriate relief to the assessee:- 1) That CIT (A) erred in confirming the order, only by providing partial relief, being passed by Assessing Officer u/s. 143(3) of the Act, and failed to appreciate that: a) Scrutiny through CASS, on the basis of "AIR Information" is having a limited scope in view of C.B.D.T guidelines 1 instructions as reported in [2006] 157 Taxman 1(ST) as well as C.B.D.T INSTRUCTION vis-a-vis AIR SCRUTINY [F.No.225/26/2006-ITA.1I (Pt.)], dated the 8th September, 2010; b) Such scrutiny was pretended to be regular scrutiny assessment and hence, the entire informations 1 documentary evidences, being collected, were either ignored or misused; c) The issue, of inconsistency or contradiction in the relevant provisions of the statute and the instruction, is to be decided by the Court and not by an Income-tax Authority u/s. 116 [Say, CIT(A)], being subordinate to CBDT; d) When an instruction remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute; Hence, the entire proceedings are in violation of Sec.119 of the Income-tax Act vis-a-vis Article 141 & 227 of the Constitution and therefore, void ab- initio. 2) That the CIT(A) erred in giving only a partial relief and further failed to appreciate that the Assessing Officer erred : a) in calculating and treating the cash deposit of Rs.1 ,30,99,337/- as additional sales and further estimating profits on such depositing @ 8% u/s. 44AD and considering such profits (Rs.10,47,947/-) as income from undisclosed sources u/s. 68 of the Income-tax Act, 1961; b) in not accepting turnover of Rs.40,58, 112/- u/s. 44AD; c) in ignoring the statutory provision of Sec.44AD(5), i.e., exemption from maintaining books of account [Sec.44AA(2)(vi)] and audit [Sec.44AB]; d) in not considering that in view of applicability of Sec.44AO, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts; e) in failing to consider that the revised return substitute the original return from the date of filing the original return for the purpose of assessment; f) in not understanding the basic principle of taxation that neither the rule of res judicata nor the rule of estoppel is applicable to an assessment proceeding; Hence, the finding that all credit entries were undisclosed sale & those amounts were income from undisclosed sources u/s. 68 was not based on any evidence or was, for other reasons, perverse, being in total disregard of filing of cash book, bank book, sales book as well as ledgers (being prepared from memorandum record) and hence, such addition must be deleted in toto. 3) That CIT(A) failed to appreciate that the Assessing Officer erred in invoking two deeming provisions [i.e., Sec.44AD & Sec.68] in respect of same transactions in total disregard of documentary evidences [cash book, bank book, sales book as well as ledgers (being prepared from memorandum record)] being produced before both authorities [i.e., Assessing Officer & CIT(A)] and thus converting good proof into no proof. 4) That CIT(A) failed to appreciate that the assessment has been completed u/s. 143(3) and not u/s. 144 by invoking the provision of Sec.145(3) of the Act (i.e., books rejection), being a prima facie evidence of genuineness of the transaction. 5) That CIT(A) erred in not dismissing the ground of initiating penalty proceedings u/s 271(1)(c) of the Act. 6) That CIT(A) erred in not dismissing the ground of initiating penalty proceedings u/s 271 B of the Act. 7) That the appellant crave leave to take additional ground or grounds of appeal or to alter or vary any or all the grounds of appeal before or at the time of hearing of the appeal. ”
2. All the grounds of the appeal are relating to single addition to the total income of the assessee on account of cash deposit in various bank accounts and profit estimated thereon. Therefore, we decide all the grounds together.
The brief facts of the case is that assessee filed its return of income on 31.7.2011 declaring total income of Rs. 2,20,572/-. In the return of income assessee has shown salary of Rs. 2,19,817/- and income from other sources of Rs. 755/-. This return of income was revised on 22nd August 2012 wherein income of Rs. 5,52,486/- was shown and included business income of Rs. 3,24,649/- was not covered in the original return of income. The business income was computed by the assessee showing his total sales from the business is Rs. 40,58,112/- @ 8% profit thereon u/s 44AD of the Act amounting to Rs. 3,24,649/-.
Based on information received on annual information return, it was found that assessee has deposited Rs. 1,50,05,020/- in cash in his two bank accounts maintained with the ICICI Bank Ltd. during the year. Assessee was asked to file copies of various bank accounts and from those bank accounts it was found that assessee has deposited cash of Rs. 1,49,27,092/- in ICICI Bank, Rs. 3,11,621/- in Oriental Bank of Commerce , Rs. 3,80,800/- in State Bank of India and Rs. 1,83,500/- in Punjab National Bank. Therefore total bank deposits in cash amounted to Rs. 1,58,03,013/-. Before the AO, the Ld. AR failed to furnish the evidences to substantiate the business activities carried out by the assessee during 1.4.2010 to 31.3.2011. Even then the Ld. AO has estimated the total profit @ 8% on Rs. 1,30,99,337/- estimated 8% profit thereon and made addition of Rs. 10,47,947/- to the total income of the assesse and determined assessed income at Rs. 15,88,090/-. Aggrieved by the order of the AO the matter was carried before Ld. CIT(A). Ld. CIT(A) rejected the contention of the assessee and held that cash deposit of Rs. 1,30,99,337/- is unaccounted turnover of the assessee. However he reduced the percentage of the profit from 8% to 5% and therefore out of the total addition of Rs. 10,47,947/- he granted a relief of Rs. 3,92,980/- and confirmed the addition of Rs. 6,54,967/-. Aggrieved by this the assessee has filed appeal before us.
Ld. AR of the appellant submitted that the case of the assessee is selected based on AIR information and relied on the CBDT instruction dated 8th September 2010, which stated that scrutiny of such cases would be limited only to the aspects of information received through AIR. In the present case, Ld. AO has gone beyond the AIR information without approval of the administrative Commissioner and therefore the addition made should be 4 deleted. He further submitted that assessee has already shown income u/s 44AD of the Income Tax Act where he has already included the sales of Rs. 40,58,112/- and therefore the above deposit of cash is out of sales turnover of the assessee. He further stated that cash deposit out of cash is cash on hand, cash deposit from old customers, advances received etc. cannot be considered as gross receipt. He further submitted that the AO has been given a cash book showing source of cash receipt and payments covering all these banks where State Bank of India, Punjab National Bank, Oriental Bank of Commerce are also described and source of the cash is available in the cash book. He therefore stated that when all transactions of cashbook are reflected in the books of accounts prepared by the assessee further addition made by the AO is unsustainable.
Against this Ld. DR submitted that assessee has deposited cash in the various bank accounts. Ld. AO and Ld. CIT(A) have rightly computed the profit there under and addition is made. He vehemently supported the orders of the lower authority. He further submitted that the profit and loss account and balance sheet submitted was not before AO.
We have carefully considered the rival contention. Based on the AIR information which was found that assessee has deposited cash of Rs. 1,50,05,020/- in the ICICI bank. On inquiry, Ld. AO found that in other three different banks sum of Rs. 8,75,921/- is cash deposited. Before the AO assessee submitted contentions vide letter undated filed at page No. 110-111 of the paper book showing cashbook of the assessee from 1.4.2010 to 31.3.2011. This letter also contained bank statement showing deposits and withdrawals along with summary of sales. It is an admitted fact that according to the profit and loss account submitted by the assessee at page No. 106 of the paper book sales is only of Rs. 40,58,112/-. However, the assessee has explained the total cash deposit of Rs. 1,58,03.013/- in five bank account. The claim of the assessee is that sales of the assessee is only Rs. 40,58,112/- and other receipts are on account of other cash transactions which are interbank transactions, i.e. cash deposit from one bank is out of cash withdrawal from other banks. Therefore such transaction prima facie cannot be unaccounted turnover of the assessee. Undisputedly such transactions cannot be considered for estimating the business income of the assessee. Furthermore assessee has given a reconciliation of the amount of cash deposited of Rs. 1,49,27,029/- in ICICI Bank stating that Rs. 82,54,580/- is cash deposit out of cash withdrawals from various banks. It was further stated that Rs. 5,50,000/- is received in cash from debtor’s outstanding. The AO has not verified these claims specifically made before the AO vide letter dated 17.2.2014. Furthermore the Ld. CIT(A) has also not considered this aspect but has merely stating that cash book prepared by the assessee is not reliable cannot lead to the addition of the whole cash deposit as gross sales of the assessee. Furthermore assessee has shown opening balance as on 1.4.2010 in the cash book of Rs. 2,03,550/- which assessee could not explain how it has come into the hands of the assessee when it has only salary income and interest income. Therefore, it is apparent that Ld. AO has considered the total cash deposit as turn over incorrectly. Further before us the AR of the appellant has submitted a CBDT instruction dated 8th September 2010, which also says that the scrutiny in cases selected through AIR, would be restricted to that information only. In case the escapement of total income of more than Rs. 10 lacs then only the case may be taken up for wider scrutiny after the approval of the administrative Commissioner. In the present case the addition made by the AO u/s 44AD on undisclosed turnover is Rs. 10,47,947/-. Therefore, it satisfied the first condition of potential escapement of income exceeding Rs. 10 lacs. However it is not clear whether the approval of the administrative Commissioner has been obtained or not. Ld. DR also could not submit that such approval is taken. In view of above facts in the interest of justice the whole issue of addition of Rs. 6,54,967/- is set aside to the file of the AO with the following direction :-
a) To determine the exact turnover of the assessee based on the letter dated 27.1.2014 and 17.2.2014 with respect to the cash book submitted by the assessee and cash deposited in bank accounts and then estimate profit thereon @ 5% not exceeding
Rs 654967/- b) In case approval of the administrative Commissioner has not been taken in terms of instruction dated 8th September, 2010 to restrict the addition with respect to turn over contained in ICICI bank account of the assessee wherein total cash deposit is Rs.
1,49,27,092/-.
While determining the total income of the assessee the Ld. AO shall provide adequate opportunity to the assessee to substantiate it business receipt in cash, which is deposited in bank and also interbank cash deposit, and cash withdrawals.
In view of the above appeal of the assessee is allowed with above direction.