IMTIYAZ AMIRULLAH KHAN,MUMBAI vs. ITO 17(2)(4), MUMBAI

The sole issue arising in the instant case is the extent of income liable to be brought to tax against undisclosed cash deposits in the assessee’s bank account with ICICI Bank, Bandra Kurla Complex, Mumbai (Account Number 087401500061).

(A.Y. 2010-11) Imtiyaz Amirullah Khan vs. ITO 3.1 The assessee-individual filed his return of income for the current year on 30.3.2012, declaring an income at Rs.2,45,330/- from, as stated, garment business, carried out in the name and style ‘Jannat Garments’. In explanation of the cash deposits of Rs.88,45,200/- in his bank account (supra) during the year, observed by the Assessing Officer (A.O.) in the course of the assessment proceedings, it was submitted that the same represents the sale proceeds of the sale of garments as received from customers, who, being small dealers, remitted the same in cash. There were corresponding withdrawals for and toward purchases as well. The Accountant, had, as against the actual turnover and purchases at Rs.92.30 lacs and Rs.89.31 lacs respectively, incorrectly shown the purchase and sale at Rs.12,62,774/- and Rs.15,62,310/- respectively. The assessee being, however, unable to furnish the names and addresses of the parties from whom the purchases and sales were claimed, the said explanation was found not acceptable by the A.O. who, relying on the decisions in the case of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC); CIT vs. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC); Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC); and Nanak Chandra Laxman Das vs. CIT [1983] 140 ITR 151 (All), treated the entire cash deposited (Rs. 88.45 lacs) as income assessable u/s. 68 of the Act. However, as the assessee had already disclosed the turnover of Rs.15.62 lacs, credit for the same was allowed and only the excess turnover of Rs.72,82,890/- (Rs.88,45,200 – Rs.15,62,310) added as income from other sources.

We have heard the parties, and perused the material on record. Before us also the assessee’s case remained the same, i.e., of the credits in his bank account as representing the turnover of his garment business, against which withdrawals for purchases stand also made. And that therefore only the peak amount of Rs.4,45,381/- could be brought to tax. The ld. Departmental Representative (DR), on the other hand, emphasized that there was no basis to arrive at a finding of it being so, with the conduct of the business itself being completely un-evidenced. From the extract of the assessee’s bank account, furnished during hearing, it is found that there are regular withdrawals. The same clearly indicate a regular activity. The Revenue, in our opinion, erred in proceedings de hors this vital fact. What that activity though is, is not certain? The reluctance of the assessee to furnish the names and addresses of the suppliers and customers (of his business) is though understandable in-as-much their trade/activity is undisclosed. At the same time, the assessee also cannot, while pleading for acceptance of its’ case of being in business, refrain from furnishing any evidence toward the same. Why, we observe that there are withdrawals by way of cheques, against which the name of the payee/s, which includes one by the name ‘Devang Apparels’ (at Rs.15,000/-, on 08.4.2009), and which can surely be disclosed. Without doubt, some evidence toward the business being undertaken by the assessee, stated as manufacture of garments by the ld. AR, while the assessment order records it as retail business in garments, could surely be, and would definitely be required to be, brought on record. In view of the foregoing, the matter would require being restored back to the file of the assessing authority to provide an opportunity to the assessee to substantiate (A.Y. 2010-11) Imtiyaz Amirullah Khan vs. ITO his case in some manner. The AO, where prima facie satisfied of the same, i.e., of the assessee being in the garment trade at the relevant time, i.e., on the basis of the evidences led by the assessee, record his finding of the business carried on by the assessee, toward which the ld. AR has also placed the return of the assessee for the preceding years on record. We are not issuing any definite findings in the matter, yet the AO would necessarily decide the same on some objective basis in-as-much as, as afore-stated, the conduct of the bank account itself reveals a regular churning of funds. On quantum, apart from the peak value, the normal profit earned would also be required to be brought to tax. The same, on the basis of preliminary enquiries made during hearing, is between 10 to 15 per cent. In this regard, we may also add that the entire withdrawals cannot be taken as on account of purchases as there are withdrawals for personal purposes as well and, besides, some of the purchases would result in closing stock with the assessee. That is, while the assessee’s - who pleads for being assessed on peak amount in the bank account, stand merits acceptance where he is found to be in business, the amount of stock-in-trade would also require to be similarly brought to tax. We may though hasten to add that there appears scope for telescoping of the profit (of the business) against the amount assessable on account of unexplained deposit (in the bank account) and as well as stock-in-trade, both of which would be u/s. 69/69A of the Act and not u/s.

The AO shall examine these aspects, and decide by issuing definite findings of fact. The AO, we may reiterate, is bound to act reasonably, and by drawing inferences as permissible in law. Lest we be considered as having travelled outside the scope of this appeal, we may advert to the decisions, inter alia, in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC) and Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom)(FB). We decide accordingly.