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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 27/12/2013 of the Ld. First Appellate Authority, Mumbai. The first ground raised pertains to suppression of net profit amounting to Rs.1,89,990/-.
The crux of argument advanced by Shri S. M. Bandi, ld. counsel for the assessee, is that the Ld. Commissioner of Income Tax (Appeal) did not appreciate the facts in proper prospective as there is reduction in net profit despite sales increased to Rs.89,50,140/- from Rs.43,98,330/- from the preceding years. It was contended that decline in the net profit percentage is due to fall in the gross profit rate from 31.83% to 16.67%. On the other hand, the ld. DR, Ms. Beena Santosh, strongly defended the addition sustained by the Ld. Commissioner of Income Tax (Appeal) by explaining that the assessee did not furnish necessary details before the ld. Assessing Officer and he was constrained to frame the assessment u/s 144 of the Income Tax Act, 1961 (hereinafter the Act) due to non-cooperation from the assessee and further the Ld. Commissioner of Income Tax (Appeal) took a justified view.
2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, is a proprietor of M/s Rangoli Enterprises, engaged in the business of trading in Ceramic Tiles, filed its return electronically declaring income of Rs.2,79,476/- on 29/09/2008. The case of the assessee was selected for scrutiny, therefore, notices u/s 143(2) and 142(1), along with questionnaire were issued and served upon the assessee. In spite of repeated opportunities, the assessee did not furnish the complete details except the audit report, therefore, the Assessing Officer completed the assessment u/s 144 of the Act. The assessee showed total sales at Rs.89,50,140/-, declaring net profit of Rs.4,73,215/-, which comes to 5.29% of the sales. In the preceding year, the assessee declared net profit of 7.42%. The ld. Assessing Officer observed that the total sales, during the relevant period increased more than 100%, whereas, there was decrease in the net profit for which no explanation was furnished by the assessee. In the absence of such explanation, the Assessing Officer estimated the net profit at 10%, resulting into addition of Rs.4,21,799/-. The assessee preferred appeal before the Ld. First Appellate Authority, wherein, considering the submissions of the assessee, remand report was sought from the Assessing Officer, even on additional evidences filed by the assessee. The ld. Assessing Officer vide letter dated 06/03/2013, send the remand reports and the reason for making the addition. The comments from the assessee were also sought on the remand report sent by the assessee. The Ld. Commissioner of Income Tax (Appeal) considering the totality of facts, found that in Assessment Year 2007-08, the net profit was declared at 7.41% as against the profit of 5.29%. On the basis of difference of the two Assessment Years, the addition was restricted to Rs.1,89,990/-. The assessee is in further appeal before this Tribunal.
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, there is no dispute to the fact that the assessee did not furnish the necessary details/plausible explanation for fall of net profit rate from 7.41% (Assessment Year 2007-08) to 5.29% in the year under consideration. Even otherwise, there is no corresponding entries in the total expenses. In principle, we are in agreement with the conclusion of the Ld. Commissioner of Income Tax (Appeal), which is based upon factual matrix. However, considering the totality of facts and by taking a lenient view, we upheld the addition to the extent of Rs.1,39,990/- against Rs.1,89,990/-, sustained by the Ld. Commissioner of Income Tax (Appeal), thus, this ground of the assessee is partly allowed.
The next ground pertains to addition of Rs.6 lakh made/sustained on account of unsecured loans. The crux of argument on behalf of the assessee that cash loan was received from the wife of the assessee, for which confirmation were filed by the assessee. It was explained that originally, the ld. Assessing Officer added Rs.18.64 lakhs, which was reduced to Rs.6 lakh by the Ld. Commissioner of Income Tax (Appeal). On the other hand, the ld. DR, strongly defended the addition by placing reliance upon the conclusion drawn in the impugned order.
3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that there was an AIR information that the assessee has made cash deposit of Rs.15,60,000/- in his saving bank account maintained with Sarsawat Cooperative Bank. As per the Revenue, no details in respect to the cash deposit by furnished by the assessee. In the absence of necessary details, that too after providing due opportunity to the assessee, the ld. Assessing Officer made addition u/s 68 of the Act. On appeal before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered and the addition was reduced to the Rs. 6 lakhs. The assessee is in further appeal before this Tribunal.
We find that from the audit report, filed by the assessee, it was observed that unsecured loans increased to Rs.39,04,000/- from Rs.20,40,000/-, during the relevant period. In the absence of any explanation, details, the ld. Assessing Officer added the differential amount of Rs.18,64,000/- to the total income of the assessee, treating the same unexplained cash credit. Before the Ld. Commissioner of Income Tax (Appeal), it was explained that the assessee received fresh unsecured loans from different persons, which is summarized hereunder:-
Sl. No. Name of the person/party Amount (In Rs.) 1. Shri Pankaj Kalyani, Savings 11,04,000 Account 2. Ms. Netra Kalyani Saving Account 1,15,000 3. Ms. Aasha Kalyani Savings Account 45,000 4. Third Party 6,00,000 Total 18,64,000 It is noted that in the absence of confirmation, the ld. Assessing Officer added the amount of Rs.18,64,000/- as unexplained cash credit. The assessee filed confirmation, for the first time, before the Ld. Commissioner of Income Tax (Appeal), therefore, this additional evidence was remanded back to the file of the Assessing Officer for his comments, which were furnished vide letter of the Assessing Officer dated 06/03/2013. The remand report is reproduced at page-5 onwards of the impugned order. The Ld. Commissioner of Income Tax (Appeal) examined the source/genuineness of the loans and found that except Rs.6 lakh, the remaining amount was explained by the assessee, therefore, to this extent the addition was retained. There is uncontroverted finding in para-22 of the impugned order that the assessee could not proof the source, nature and genuineness of the transaction amounting to Rs.6 lakh shown to have been received, therefore, the addition to this extent was confirmed. Before this Tribunal also, the assessee neither controverted the finding of the Ld. Commissioner of Income Tax (Appeal) nor produced any evidence to explain the genuineness of the amount, therefore, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), on the issue under hand, therefore, this ground of the assessee is having no merit, consequently, the stand taken by the First Appellate Authority is affirmed.
The last ground raised by the assessee is with respect to relief on account of investment in shares amounting to Rs.23,32,428/-. The crux of argument advanced on behalf of the assessee is that the assessee suffered loss of Rs.31,242/- on the transactions in shares and the investment was made through banking channel. Our attention was invited to page-40 of the paper book. On the other hand, the ld. DR, strongly defended the addition by contending that the source of investment by the assessee was not explained.
4.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that during assessment proceedings, in spite of opportunities provided to the assessee, necessary details with respect to share transactions amounting to Rs.1,07,46,790/- were not furnished by the assessee, therefore, he treated the impugned amount as unexplained investment and added to the total income. Before the Ld. Commissioner of Income Tax (Appeal), the action of the Assessing Officer was opposed by claiming that the assessee suffered loss of Rs.31,242/-, therefore, there is no question of any unexplained income on account of the share transactions. Before the Ld. Commissioner of Income Tax (Appeal), the assessee placed on record the details of share transactions along with brokers note. Since, this was additional evidence, filed for the first time, before the Ld. Commissioner of Income Tax (Appeal), it was forwarded to the file of the Assessing Officer for examination. The ld. Assessing Officer commented upon the transactions and after analyzing the same. The Ld. Commissioner of Income Tax (Appeal) took peak credit on account of these investments at Rs.23,32,428/-, which was taken as maximum investment made during the year under consideration and this peak amount was directed to be added back to the income of the assessee as unexplained investment u/s 69 of the Act. We are of the view that the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal) is not fully substantiated as the material facts have been ignored. Firstly, the assessee has to explain the source of the invested amount in shares and if it is found to be explainable then there is no question of taking the peak amount as addition, because the assessee has suffered a loss. Totality of facts requires that the ld. Assessing Officer is to satisfy himself with respect to the source of the invested amount, genuineness of the share transactions and then to decide in accordance with law. The assessee is directed to explain the same, for which due opportunity of being heard be provided to the assessee. Even otherwise, the mandate of the Constitution of India is to levy and collect due taxes. This ground of the assessee, is therefore, allowed for statistical purposes.
Finally, the appeal of the assessee is partly allowed for statistical purposes.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 21/11/2016.