GOUTAM DAS,HOWRAH vs. DCIT,CIR-48,KOLKATA, KOLKATA

1 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri Partha Sarathi Chaudhury, JM]

I.T.A Nos.1209 & 1235/Kol/2012 Assessment Years: 2006-07 & 2007-08

Goutam Das (PAN:ADVPD8295Q) Vs. Deputy Commissioner of Income-tax, Circle-48, Kolkata. (Appellant) (Respondent)

Date of hearing: 02.02.2017 Date of pronouncement: 08.03.2017

For the Appellant: Shri soumitra Choudhury, Advocate For the Respondent: N o n e

ORDER Per Shri M. Balaganesh, AM: Both these appeals by assessee are arising out of separate orders of CIT(A)-XXX, Kolkata vide Appeal No. 402/CIT(A)-XXX/Cir-48/2008-09 & 106/CIT(A)-XXX/Cir- 48/2009-10 dated 27.02.2012. Assessments were framed by DCIT, Circle-48, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AYs 2006-07 and 2007-08 vide his separate orders dated 31.12.2008 and 25.11.2009 respectively. Since some of the issues are common and facts are identical, we dispose of both these appeals by this consolidated order for the sake of convenience.

2.1. The brief facts of this issue is that the assessee is deriving income from trading and export of leather goods and raw leather under the name and style of “Arjun Associates”.

Relevant facts for Asst Year 2006-07

2 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 The ld AO observed that there were certain cash deposits made by the assessee to the tune of Rs. 10,89,507/- in Asst Year 2006-07 in Standard Chartered Bank Savings A/c No. 32210392324 . The assessee filed before the ld AO the copy of bank statements and bank book together wihe analysis of date wise statement for cash deposit with bank vis a vis cash withdrawals from bank and it was explained that the said bank account was used by the assessee for his business transactions and the surplus business cash was deposited in the said bank account. The ld AO however, not convinced the explanation proceeded to hold that the cash deposits in bank account were not properly explained and hence brought the same to tax as unexplained cash credit u/s 68 of the Act to the tune of Rs. 10,89,507/- .

Relevant facts for Asst Year 2007-08 The ld AO observed that there were certain cash deposits made by the assessee to the tune of Rs. 12,95,000/- in Asst Year 2007-08 in Standard Chartered Bank A/c No. 32210392324 ; Rs. 1,66,000/- in Asst Year 2007-08 in Standard Chartered Bank A/c No. 33005030082; and Rs. 3,23,000/- in Asst Year 2007-08 in Standard Chartered Bank A/c No. 33010088204. The assessee when asked to explain the sources for cash deposits in the aforesaid bank accounts replied that the cash was deposited out of surplus cash in business. Moreover, he replied that all the bank accounts were already disclosed in the balance sheet of the assessee as on 31.3.2007. The ld AO however, not convinced the explanation proceeded to hold that the cash deposits in bank account were not properly explained and hence brought the same to tax as unexplained cash credit u/s 68 of the Act to the tune of Rs. 17,84,000/- .

2.2. Before the ld CITA, the assessee stated that the cash deposits are explained by cash withdrawals from the bank and out of cash flow statement of the assessee . Moreover, the copies of bank book, bank statements together with cash analysis statement were filed before the ld AO which had not been properly appreciated by the ld AO. It was also explained that the assessee in order to reflect huge banking turnover for the purpose of availing higher credit limits for the purpose of his business, had to resort to this circulation transactions in the bank accounts by frequent withdrawals and frequent deposit of cash in

3 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 bank account. This was done only to achieve a targeted credit turnover to uplift the account’s status to get various financial assistances from the bank. Most of the times, cash was withdrawn the previous day and deposited the next day. Sometimes cash was withdrawn from one bank account and deposited in another bank account of the assessee . Both the bank accounts were used for business purposes and both the bank accounts were duly disclosed in the balance sheet of the assessee. In support of all transactions, the assessee also filed a cash flow statement along with the relevant statement of bank account. Though all these transactions and evidences were subject matter of remand proceedings before the ld AO, the ld AO reiterated the stand taken at the time of assessment proceedings. It was further stated that the first cash deposit in the bank account had started only on 2.11.2005 on which date the cash balance was sufficiently available with the assessee.

2.2.1. The ld CITA observed that these deposits were admittedly being made in the personal savings bank account of the assessee in the Standard Chartered Bank Account No. 33210392324 which was not disclosed in the balance sheet of the proprietorship firm but in the personal balance sheet. With regard to the consolidated cash book furnished by the assessee, he stated that the said cash book has no relevance and as this cash book is part of business activities of the assessee or the books of accounts of the proprietorship concern and therefore appears to have been prepared only to bolster the arguments of business purpose of these transaction. Accordingly he concluded that the cash flow statement is not supported by any document or evidence in support of the requirement for cash withdrawals and subsequently the deposits. He observed that these are not transactions related to the business of the assessee but cash deposits in his personal savings bank account. Based on these observations, he upheld the action of the ld AO.

2.3. For the Asst Year 2007-08 , before the ld CITA , the assessee argued that the ld AO had stated that the assessee had not maintained books of accounts and having said so, he ought not to have invoked the provisions of section 68 of the Act as admittedly the said section is applicable only if any sum is found credited in the books of accounts of the assessee. It was also argued that the bank pass books cannot be treated as books of

4 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 accounts as contemplated u/s 68 of the Act. In support of this proposition, the assessee placed reliance on the following decisions :- Hon’ble Gauhati High Court in the case of Anandram Raitani vs CIT reported in (1997) 223 ITR 544 (Gau) Hon’ble Bombay High Court in the case of CIT vs Bhaichand H Gandhi reported in (1983) 141 ITR 67 (Bom) Hon’ble Madras High Court in the case of CIT vs Taj Borewells reported in (2008) 202 Taxman 413 (Mad).

Apart from the above, the assessee reiterated the submissions made before the ld AO that the entire cash deposits are met out of previous cash withdrawals and available surplus cash in the business of the assessee and that the entire transactions are duly reflected in the balance sheet of the assessee. It was stated that the ld AO had not properly appreciated the cash flow statement furnished before him. The ld CITA observed that the tax auditor had stated that the books of accounts were maintained by the assessee in his tax audit report. But the said books of accounts were only not produced by the assessee before the ld AO. Accordingly he concluded that the assessee cannot claim that the entries were not there in his books of accounts and upheld the addition made by the ld AO.

2.4. Aggrieved, the assessee is in appeal before us on the following ground :- “2. That on facts and circumstances and legal position of the case the CIT(A) has erred in confirming addition made by Id AO wherein he had erred in making addition of Rs.1 0,89,507/- by erroneously holding that the cash deposit in bank is undisclosed income of the appellant on tire following grounds • That the above addition is erroneous since the source of each cash deposit was duly explained. • That the cash deposit in bank is out of withdrawals either from same bank account or other bank account (s). • All such bank accounts are disclosed by the appellant in his annual statement of accounts duly submits in the course of the assessment. • That the addition made without finding out any utilization of withdrawals of cash is illegal. • That the above addition is against the provisions of law and facts”

The same ground is raised for Asst Year 2007-08 also except with variance in figures.

5 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 2.5. We have heard the ld AR and perused the materials available on record including the paper book comprising of details of cash deposits in Standard Chartered Bank, analysis of source of cash deposits in bank account, cash flow statement , bank statements of Standard Chartered Bank, balance sheet of Arjun Associates (business balance sheet) , balance sheet of assessee (including personal transactions) among others. None appeared on behalf of the revenue and we find that the ld DR had sought adjournment for 11 out of 19 cases listed for hearing due to illness. Since all the details required were available in the paper book which is part of the records before us, we proceed to dispose of these appeals on hearing the ld AR. The ld AR only referred to the relevant pages of the paper book apart from reiterating the submissions made before the lower authorities that the cash deposits were duly explained out of available cash balance with the assessee as could be evident from the cash flow statement. We have gone through the entire paper book and we are convinced that the assessee had made huge cash withdrawals on a frequent basis and had made cash deposits on a frequent basis. We also find that sometimes the assessee had withdrawn the cash on the previous day and had deposited the same in the next day. Sometimes cash is withdrawn from one bank account and the same is deposited in another bank account of the assessee maintained with Standard Chartered Bank. Hence it could be safely concluded that the assessee had merely resorted to circulation of cash transactions in various bank accounts of the assessee which are disclosed in the balance sheet. It is not in dispute that the entire bank accounts are duly disclosed by the assessee in his balance sheet comprising of both personal and business transactions. We have gone through all the bank statements together with the cash book and the cash flow statement clearly depicting the available cash balance on each day of deposit and we find that the assessee has got sufficient sources for cash deposits made in the bank accounts and no part of the same is unexplained. The cash flow statement is admittedly prepared taking assistance from the bank statements. It is not the case of the revenue that the cash withdrawals made by the assessee were utilized for some other purpose so as to prove that the said cash is not available to meet the subsequent deposits. We find that the explanation offered by the assessee that he had resorted to circulation in bank transactions only to reflect the higher banking turnover in order to avail

6 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 higher credit facilities from banks is acceptable. In any case, there is no element of income involved therein as the cash deposits are duly explained. Hence we hold that the lower authorities had erroneously invoked the provisions of section 68 in the instant case and we hold that the additions made in this regard in the sums of Rs. 10,89,507/- and Rs. 17,84,000/- for Asst Years 2006-07 and 2007-08 respectively are hereby directed to be deleted. Accordingly , the Ground No. 2 raised by the assessee for the Asst Years 2006-07 and 2007-08 is allowed.

5.1. The brief facts of this issue is that the ld AO observed that the assessee had debited Rs. 60,000/- as accounting charges in the profit and loss account. The ld AO observed that the same was paid without deduction of tax at source u/s 194J of the Act and accordingly disallowed the same u/s 40(a)(ia) of the Act. The assessee explained that he had made payment only for accounting charges who does not exhibit any professional skill while preparing the accounts and hence the same does not fall under the ambit of professional services contemplated u/s 194J of the Act. This explanation did not find favour in the mind of the ld CITA and hence the action of the ld AO was upheld in this regard. Aggrieved, the assessee is in appeal before us on the following ground:-

7 ITA Nos. 1209 & 1235 of 2012 Goutam Das, AY 2006-07 & 2007-08 “3. That on facts and circumstances and legal position of the case the CIT(A) has erred in upholding the alleged disallowance of Rs.60,000/- u/s. 40(a)(ia) on account of charges which had already ‘paid’ in the relevant year by ignoring the text of the section wherein it had stated that sec. 40(a)(ia) is only applicable on the amount ‘payable’.”

5.2. We have heard the ld AR and we find lot of force in the argument advanced by the ld AR that the payment made for accounting charges does not fall under the ambit of ‘fee for professional services’ u/s 194J of the Act as the said person rendering accounting services does not possess any professional qualification for rendering the said accounting services. Accordingly, we direct the ld AO to delete the disallowance made in this regard u/s 40(a)(ia) of the Act. The Ground No. 3 raised for Asst Year 2007-08 is allowed.

Order is pronounced in the open court on 08.03.2017 Sd/- Sd/- (Partha Sarathi Chaudhury) (M. Balaganesh) Judicial Member Accountant Member Dated : 8th March, 2017

Jd.(Sr.P.S.) Copy of the order forwarded to: APPELLANT – Shri Goutam Das, Bally, Durgapur, Howrah-711205. 1. 2 Respondent –DCIT, Circle-48, Kolkata. 3. The CIT(A), Kolkata 4. CIT, Kolkata. 5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.