RAMAN KUMAR MALHOTRA,KOLKATA vs. ITO, WARD-36(1), KOLKATA, KOLKATA

The assessee in the present case is an individual, who is engaged in the business of trading under the name and style of his proprietary concern M/s. Indian Cork Industry. As per the information received by the Assessing Officer, the assessee had deposited substantial cash in his Bank account maintained with Axis Bank Limited during the financial year 2006-07 relevant to assessment year 2007-08. Since no return of income for the said year was filed by the assessee, a notice under section ./2014 Assessment year: 2007-2008 Page 2 of 4 148 was issued by the Assessing Officer on 12.07.2011. In response to the said notice, the return of income for the year under consideration was filed by the assessee declaring total income of Rs.99,929/-. In the said return, the turnover of his proprietary concern was shown by the assessee at Rs.12,11,312/- on which Gross Profit and not Net Profit was declared by the assessee at Rs.1,60,571/- and Rs.5,223/- respectively. During the course of assessment proceedings, the assessee could not produce either the books of account or the relevant documentary evidence in the form of bills, vouchers, etc. for the verification of the Assessing Officer. It was also noticed by the Assessing Officer that the assessee had deposited a total sum of Rs.57,47,567/- in the Bank Account maintained in the name of his proprietary concern with Jammu & Kashmir Bank, Kolkata Branch. The Assessing Officer, therefore, took the said amount of deposits as turnover of the proprietary concern of the assessee and estimated the business income of the assessee by applying the Net Profit rate of 5% at Rs.2,87,378/-. He also made further additions of Rs.1,92,320/- under section 41(1), Rs.2,31,000/- on account of unexplained deposits found to be made by the assessee in his Bank account, Rs.44,500/- on account of unexplained cash receipts and Rs.16,400/- on account of unexplained cash credit. Accordingly, the total income of the assessee was determined by the Assessing Officer at Rs.8,66,310/- in the assessment completed under section 143(3) read with section 147 vide an order dated 16.12.2011.

Against the order passed by the Assessing Officer under section 143(3) read with section 147, an appeal was preferred by the assessee before the ld. CIT(Appeals) and since the ld. CIT(Appeals) did not find any merit in the submissions made by the assessee in support of his case, he proceeded to uphold the action of the Assessing Officer in estimating the income of the assessee from business by applying a Net Profit rate of 5% and also confirmed the other additions made by the Assessing Officer to the total income of the assessee. Accordingly, the appeal of the assessee was dismissed by the ld. CIT(Appeals) by his appellate order ./2014 Assessment year: 2007-2008 Page 3 of 4 dated 04.03.2014, which is impugned by the assessee in the present appeal filed before the ld. CIT(Appeals).

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that neither the relevant books of account nor any supporting documents were produced by the assessee before the Assessing Officer in support of the trading results shown to his proprietary concern M/s. Indian Cork Industry. In trading results so declared, the turnover of his proprietary concern was shown by the assessee at Rs.12,11,312/- while in the Bank account of the said concern maintained with Jammu & Kashmir Bank, deposits aggregating Rs.57,47,567/- were made by the assessee as found by the Assessing Officer. Since no satisfactory explanation could be offered by the assessee in this regard, the Assessing Officer took the amount of such deposits as the gross turnover of the proprietary concern of the assessee and determined the business income of the assessee on estimated basis by applying the Net Profit rate of 5%. Before the ld. CIT(Appeals) as well as before the Tribunal, nothing has been brought on record on behalf of the assessee to show that the estimate made by the Assessing Officer is excessive or unreasonable. It is also observed that the turnover of the proprietary concern of the assessee has been taken by the Assessing Officer on the basis of total deposits found to be made in the Bank account of the said concern during the year under consideration and even the Net Profit rate of 5% has been applied by him by placing reliance on the provisions of section 44A of the Act. The estimate of business income of the assessee as made by the Assessing Officer thus is well founded and even the ld. counsel for the assessee has not been able to dispute this position. He, however, has contended that once the books of account of the assessee are rejected and the income of the assessee is determined on estimated basis by applying some percentage of profit, there is no justification on the part of the Revenue authorities to make further additions separately on account of sundry creditors written back under section 41(1), unexplained cash credit under section 68 etc. by relying on ./2014 Assessment year: 2007-2008 Page 4 of 4 the books of account of the assessee, which have been rejected. I find merit in this contention of the ld. counsel for the assessee. In my opinion, once the income of the assessee is determined on estimated basis after rejecting the books of account, the entries in the said books of account again cannot be relied upon to make additions on account of sundry creditors written back under section 41(1), unexplained cash credit under section 68 as well as other additions as made by the Assessing Officer and confirmed by the ld. CIT(Appeals). I, therefore, delete the said additions and allow partly this appeal filed by the assessee.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on October 21, 2016.