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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Assessee, pertaining to the assessment year 2008-2009, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-15, Kolkata, in Appeal No.65/CIT(A)-15/14-15/Wed-50(2)/Kol, dated 27.01.2016, which in turn arises out of an order passed by the AO u/s.144 of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 28.12.2010.
Brief facts of the case qua the assessee are that the assessee has submitted his return of income for the assessment year 2008-09 on 28- 07-2008 disclosing total income of Rs.1,29,460/-. The return of assessee was processed u/s.143(1) of the I.T.Act on 23.06.2009. Later on, the assessee’s case was selected for scrutiny u/s.143(3) of the Act and the AO completed the assessment by making addition on account of undisclosed cash deposit in the bank at Rs.20,12,400/-. During the assessment proceedings, the AO found that the assessee has deposited cash amounting to Rs.20,12,400/- in the undisclosed bank which was not disclosed by the assessee in its books of account for assessment year 2008-09. Since, the assessee could not furnish any documents and explanation regarding the source of such cash deposit, therefore, the AO added the cash deposit of Rs.20,12,400/- to the total income of the assessee.
Not being satisfied with the order passed by the AO, the assessee filed an appeal before the ld CIT(A), who has confirmed the order passed by the AO observing the followings :-
“I have gone through the reply of the assessee but I am not convinced. It is seen from the P&L account of the assessee that on a total sales of Rs.1,71,65,782/- he has shown gross profit of Rs.6,53,581/- only which makes the GP 3.80%. the same is very low as compared to the GP percentage shown by the assessee in earlier years. The AO has taken the average of GP of assessment years 2006-07, 2007-08 and assessment year 2008-09. Instead the AO should have taken the average of GP of assessment years 2005-06, 2006-07 and assessment year 2007-08. Regarding the source of cash deposits in the Axis Bank in account no. 47454 the reply of the assessee is not satisfactory. Perusal of Bank Statement shows that the assessee has been depositing cash on a particular day and same amount or almost similar amount has been withdrawn through bearer cheques or through ATM withdrawals on the same day. The assessee has not disclosed anything regarding the reason for issue of bearer cheques which are sometime exceeding Rs.20,000/-. There is no evidence submitted by the assessee that the deposits and withdrawals are linked with the business of the assessee. In absence of any details submitted by the assessee, the destination of the cheques issued could not be ascertained as mentioned earlier. The cash deposits and cash withdrawals are mostly on the same dates. The cash deposits are done in the bank whereas the bank statements reveals that the amounts have been withdrawn by the bearer cheques from other places. There is no need to deposit a particular amount in the bank in one day and withdraw the same by way of bearer cheques or ATM unless the source of cash deposits are different from the destination of the cash withdrawals. If we accept the theory that this cash deposits and withdrawals are pertaining to the business of the assessee, then the withdrawals would be hit by section 40A(3) because many a time the withdrawals through bearer cheques are exceeding Rs.20,000/-. Thus the AO had rightly added the entire cash deposits of Rs. 20,12,400/- and the same is confirmed.”
Not being satisfied with the order of ld. CIT(A), the assessee is in further appeal before us and has taken the following grounds of appeal :-
1) For that on the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in confirming the addition of Rs. 20,12,400/- being Gross Sales Proceeds of M/s Golapl & Sathi Dresses, deposited in to the Bank wrongly as net income of the appellant. 2) The appellant craves leave to add / modify the grounds of appeal at the time or before the hearing of the appeal.
5. Ld. AR for the assessee has submitted before us that assessee deals in readymade garments as Proprietor of M/s. Golapi & Sathi Dress in around Barasat sub-division of 24 Paraganas (North Dist.) which is mainly agricultural area much near to Bangladesh border. Important business related figures are submitted by the assessee as follows:- i) Opening Stock - Rs. 7,98,752/- ii) Purchases - Rs. 1,68,47,660/- iii) Sales - Rs. 1,71,65,782/- iv) Closing Stock - Rs. 17,21,532/- v) Gross Profit - Rs. 6,53,581/-(3.81 % of sales) vi) Net Profit - Rs. 2,15,9541- (i.e. 1.26% of sales)
Though Tax Audit Report were filed with AO but books of accounts were not produced by the assessee before AO therefore the assessment was completed u/s.144 of the Act by estimating G.P. @ 8.6% against disclosed G.P. 3.81%.
The ld AR for the assessee submitted that the assessee’s declared GP in last three years and one next year are as follows :-
Financial Year GP Rate 2005-06 14.04 2006-07 7.98 2007-08 3.80(Sales Rs.1,71,65,782/-) 3.42(Sales Rs.2,38,92,714/-) 2008-09 Assessing Officer has averaged these three rates and estimated this year's G.P. at 8.60% because the assessee did not produce the books of accounts.
Ld. AR relied on the decision of coordinate Bench 'A' in case of Sri Kartick Ch. Roy vs. Income Tax Officer in where it has been held that when assessee has no other business, cash deposit in bank are nothing but part of sales. Accordingly Hon'ble Bench confirmed the addition to the extent of excess of deposit amount then gross sales.
Relevant portion is reproduced below :-
"Once the turnover and the profit on such turnover has been accepted then further adding peak credit will amount to double fixation in the hands of assessee. Once, A.O. has applied the peak credit theory on the basis of non-availability of documents then the profit along on peak credit can be applied in the case in hand. In this case, the declared income has been accepted which justify the turnover of Rs. 21,44,625/-. Therefore, at the most the difference between peak credit balance and turnover declared by assessee can alone be added to the total Income or- assessee i.e. Rs. 5,05,375/- (26,50,000 - 21,44,625). Accordingly, we direct the Assessing Officer to sustain the addition for the undisclosed income of Rs. 5,05,375/-. A.O. is directed accordingly. Hence, this ground of assessee's appeal is partly allowed.
The ld AR submitted that alternatively and only if deposits are not accepted as part of sales, then Peak Credit of un-explained cash deposit in Axis Bank which is Rs. 60375/- on 19-11-07 may be directed to added to total income in place of total deposit of Rs. 20,12,400/-.
Ld. DR for the Revenue has primarily relied on the findings of the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
Having heard the submissions of ld AR for the assessee and perused the material available on records, we are of the view that there is little merit in the submissions of the assesse, as the propositions canvassed by the ld AR for the assesse are supported by the facts narrated by him above as well as the judgment cited by him above. No doubt, the bank account containing cash deposit of Rs.20,12,400/- was not disclosed by the assessee before the AO. Therefore, he added the cash deposit as an undisclosed income of the assessee. The assessee also not produced any explanation before the ld. CIT(A), therefore, he has also confirmed the order passed by the AO. Before us, ld. AR for the assessee has submitted that the total undisclosed amount of Rs.20,12,400/- may be taxed @3.80%, the gross profit rate disclosed by the assessee in assessment year 2008-09. The Ld. AR for the assessee also submitted before us that in this undisclosed bank account the peak credit i.e. peak cash deposit at Rs.60,375/- and the same may be treated as an income of the assessee. Ld. AR also submitted that without prejudice to the alternative that if deposits are not treated as part of disclosed sales, then GP rate of 5% as per Section 44AF of the Act may be applied. In addition to this, ld. AR for the assessee has relied on the judgment of coordinate bench of the Tribunal in the case of Sri Kartick Ch. Roy, (supra), the cash deposit in bank account are nothing but part of sales, therefore, the GP rate which is applicable to the assessee should be applied on the undisclosed amount of Rs.20,12,400/-.
We are of the view that on total deposit of Rs.20,12,400/- the GP rate @3.81% should be applied and to be treated as income of the assessee. Therefore, we direct the AO to add 3.81% of Rs.20,12,400/- to the total income of the assessee. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this 22/03/2017.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (DR. A.L.SAINI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक Dated 22/03/2017 �काश �म�ा/Prakash Mishra,Sr.PS. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- Sri Amal Saha 1. 2. ��यथ� / The Respondent.-ITO, Wd-50(2), Kolkata 3. आयकर आयु�त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु�त / CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. देशानुसार/ BY 6. गाड� फाईल / Guard file. ORDER, स�या�पत ��त //True Copy//