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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM (A.Y:2009-10) The Income Tax Officer-16(3) Vs. Shri Bhagwanram K. Bishnoi, 16/19 Chandan Bhavan, 2nd (4),Matru Mandir, Tardeo Road, 4th Mumbai- 400 007 Floor, Lane, Khetwadi Back Lane, Khetwadi, Mumbai-4.PAN:ALAPB0261B Appellant .. Respondent Appellant by .. Sri A. Ramachandran, Sr. DR Respondent by .. None Date of hearing .. 17-10-2016 .. Date of pronouncement 17- 10- 2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of the CIT (A)-27, Mumbai in appeal No. CIT(A)-27/16(3)(4)/347/2011-12 dated 25-02-2013. Assessment was framed by the ITO, Ward 16(3)(4), Mumbai for the assessment year 2009-10 vide his order dated 30-12-2011 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first two interconnected issues in this appeal of the Revenue are against the order of the CIT (A) in restricting the commission receipts at 1% as against estimated by the AO at 5% and also setting off of the same against peak addition sustained by him at Rs.8,42,800/- as against the addition made by the AO of entire bank deposits of Rs.14,67,300/- treating the same as unexplained cash credit u/s 68 of the Act.
Briefly stated facts are that the assessee is deriving income from salary and commission from cheque discounting business and also income from supervision of loading and unloading of iron and steel. During the course of assessment proceedings, the AO noticed that the assessee has deposited a sum of Rs.14,67,300/- by way of cash deposits in his bank account of Bank of Baroda,
Zaveri Bazar Branch, Mumbai out of commission business of cheque discounting. The assessee could not explain these cash deposits and hence, the AO added these as undisclosed cash deposits u/s 68 of the Act. Simultaneously, according to the AO there are cheque deposits of Rs.5,72,33,000/- in assessee’s bank account and the assessee after deducting 1% commission, returned the balance amount to the parties and declared the commission income from cheque discounting business at Rs.6,01,000/- and Rs.54,000/- from supervision commission from loading and unloading of iron and steel. The AO in the absence of any documentary evidence, treated the commission at 5% of cheque discount and also added further amount of Rs.28,670/- from loading and unloading of iron and steel business. Aggrieved, the assessee preferred appeal before the CIT (A) who restricted the commission at 2.5% and set off the same against peak addition of cash deposits at Rs.8,42,800/-out of undisclosed cash deposits made in the bank account. While doing so, the CIT (A) observed in Para 4, 6 and 6.1 as under:-
“4. I have considered the appellant’s submissions. At the outset, as regards the impugned bank account in the Bank of Baroda, I note that the said bank account was opened on 09.05.2008 and for the year under consideration cash of Rs.14,67,300/- and the cheques worth Rs.5,72,33,000/- were deposited in the said account. The perusal of the said bank account shows that the appellant has deposited cash of Rs.8,42,800/- being the peak cash deposit as on 12.09.2008 in the aforesaid bank account. There were no cash withdrawals prior to the said date to e4xplain these deposits. The cash withdrawals were started from 15.09.2008 onwards and the subsequent deposits can only be explained from such withdrawals. Therefore, the appellant cannot take plea that the impugned peak cash deposits of Rs.8,42,000/- as on 12.09.2008 was out of the cash withdrawals. Secondly, appellant has deposited cheques worth Rs.1.41 crores in the said bank account as on 12.09.2008 and going by the appellant’s version that the commission earned in cheque discounting business is 1% of the turnover, appellant could have earned a maximum income of Rs.1.41 lacs from such transactions. Further, considering the expenses claimed against said commission earned by the appellant, it would not have possible that the entire amount of commission earned was available to the appellant to deposit in the form of cash. Thus, in my considered opinion, there is no satisfactory explanation placed on record before the A.O. or made available before me for the peak cash deposit of Rs.8,42,800/- made in the appellant’s bank account. Accordingly, I hold that the aforesaid amount of Rs.8,42,800/- by way of cash deposits in the bank stands unexplained and has to be assessed as appellant’s income u/s.68 of the Act. I direct the A.O. to assess the aforesaid amount of Rs.8,42,800/- in place of Rs.14,67,300/-. Appellant gets part relief on this issue.
6. As regards the commission earned in cheque discounting business at 1% of the turnover, while it is a fact that the A. O. has not brought on record any material to show that the same should be assessed at 5%, nevertheless, the appellant has also ot produced any books of accounts and other material to show that the same was actually earned at 1% of the turnover and not more. Further, the decision of the ITAT Mumbai Bench relied upon by the appellant in the case of Mohanlal Patel was rendered in respect of A.Ys. 1988 to 1998, being the block assessment. The A.Ys. involved therein being very old, the profit parameters accepted therein cannot be applied to the AYs as late as 2009-10. Secondly, ITAT, Hyderabad Bench in the case of Sunil Kumar Singhania held that the discounting charges offered at 0.28% by the appellant were on lower side and upheld the assessment made by the A. O. based on the seized materials. Thus, the impugned decisions are not of much relevance to the facts of the appellant’s case. 6.1 However, considering the fact that the appellant has indulged in cheque discounting business for the first time during the year under consideration and also the fact that the cash deposits of Rs.8,42,800/- were directed to be assessed as income u/s 68 of the Act and not ruling out the possibility that such cash could have earned by the appellant from the business of cheque discounting, I am of the considered opinion that no further addition is warranted in this regard. I other words, the commission receipts of Rs.6 lacs shown by the appellant on his own together with the unexplained cash deposits of Rs.8,42,800/- would result in an income of Rs.14.42 lacs on a turnover of Rs.5.72 crores which works out to 2.5% of the turnover in the cheque discounting business. In my considered opinion, such profit is reasonable and justified in the absence of any adverse material brought on record by the A.O. Accordingly, the addition made by the A. O. at 5% of the turnover is deleted as having no basis thereof.
Aggrieved, the assessee came in second appeal before the Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. First of all, we find that admittedly the cash deposits in the bank account i.e. Bank of Baroda at Rs.14,67,300/- and there are cash withdrawals as well as cash deposits. We find that the CIT (A) has examined the peak of cash deposits submitted by the assessee and the same was taken by the CIT (A) at Rs.8,42,800/-. Now, when confronted, the learned Sr. DR could not point out any discrepancy in the peak addition sustained by the CIT (A). Accordingly, we are of the view that the CIT (A) has rightly accepted the cash
Rs.8,42,800/- as peak addition and linked the same to the commission income after estimating the same at 2.5% of the turnover in the cheque discounting business of the assessee. Admittedly, the cheque discounting business turnover is to the tune of Rs.5.72 crores and on which 2.5% of the turnover will result into an income of Rs.14.42 lacs which is cash deposits in the assessee’s bank account. Accordingly, he estimated the peak of unexplained cash deposit at Rs.8,42,800/- and set off the same against the commission income at 2.5%. In view of these facts and circumstances, we find no infirmity in the order of the CIT (A) and hence, these two interlinked issues of the Revenue’s appeal are dismissed.
The next issue is against the order of the CIT (A) deleting the addition of unsecured loan added by the AO u/s 68 of the Act amounting to Rs.1.85 lacs.
We have head the rival submissions and gone through the facts and circumstances of the case. We find that the AO noticed from the balance sheet filed before him that there is unsecured loan creditors to the tune of Rs.1.85 lacs. As the assessee could not file any confirmation or genuineness of these loan creditors, the AO treated the same as income of the assessee from undisclosed sources. Aggrieved, the assessee preferred appeal before the CIT (A), who deleted the addition by observing in Para 7 of the appellate order as under:-
“7. As regards the unsecured loans of Rs.1,85,000/-, I note that the impugned amount was appearing in the balance sheet of the appellant for the A. Y. 2008-09 i.e. as on 31.03.2008. IN such case, the A. O. cannot treat the same as cash credit u/s 68 of the Act for the year under consideration. Accordingly, the aforesaid addition is also deleted.”
From the above findings of the CIT (A) and the observations of the AO, we are of the view that whether these unsecured loans pertain to the assessment year 2008-09 or 2009-10 i.e. the present year needs verification. Hence, we restore this issue back to the file of the AO wherein, the AO will examine whether these pertain to assessment year 2008-09 or 2009-10 and accordingly decide the issue. Resultantly, this issue of the Revenue’s appeal stands partly allowed for statistical purposes.
In the result, the appeal of the Revenue is partly allowed for statistical 7. purposes. Order pronounced in the open court on 17-10-2016.