IKRAM AHMED NISAR KHAN,MUMBAI vs. ITO 21(3)(1), MUMBAI

Only issue raised in the ground No.1 is regarding confirmation of additions of Rs.16,68,300/- and Rs.1,98,820/- being on account of cash and credit deposits into the Punjab and Maharashtra Bank account No.1101/3362 by the assessee during the year.

The brief facts of the case are that the assessee filed his return of income for the assessment year 2009-10 on 31.03.2010 declaring total income of Rs.1,76,934/-. The case of the assessee was selected for scrutiny and statutory notices u/s 143(2) of the Act dated 16.9.2010 and 142(1) dated 15.9.2011 were issued and duly served upon the assessee. The AO allowed several opportunities to the assessee to appear before him with documentary evidence but neither the assessee nor his authorized representative appeared before the AO on the various dates fixed for hearing and finally the AO proceeded to complete the assessment u/s 144 of the Act. Accordingly, vide order dated 14.12.2011 completed the assessment at an amount of Rs.23,50,542/- by making various additions amounting to Rs.21,73,408/- including the cash credit deposits of Rs.18,70,110/-. Aggrieved by the order of AO the assessee filed an appeal before the ld.CIT(A), who in turn confirmed the action of the AO. Hence the assessee is in second appeal before us.

The AO on the basis of Annual Information Return (AIR) filed by ICICI Bank Ltd, Marol Maroshi Road, Mumbai found that the assessee has deposited cash amounting to Rs.16,68,300/- and credit of Rs.1,98,820/- in the saving bank account which was not explained by the assessee despite having specifically been asked vide notice dated 18.11.2011. The AO further observed that the said bank account maintained with the ICICI Bank was not disclosed by the assessee in the return of income and therefore the AO presumed that the assessee has concealed the income and furnished inaccurate particulars of income including transactions appearing therein were totally unaccounted which were deposited on various dates and consequently treated the entire amount of cash/ credit deposits of Rs.18,67,120/- as unexplained cash /credit and added to the total income of the assessee. The AO also found that the assessee has also deposited self assessment tax of Rs.2,990/-, the source of which was not explained by the assessee and consequently, the same was also added to the total income of the assessee. Being aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority challenging the findings given by the AO in the assessment order saying that the findings of the AO were factually incorrect as the account of the assessee with ICICI Bank stood disclosed in the return of income filed with the department. The detailed reply of the assessee has been incorporated in para 2.5 of the appellate order.

The ld. AR vehemently submitted before us that the ld. CIT(A) has grossly ignored the submission as made by the assessee before the CIT(A) and recorded findings which were factually incorrect and wrong and dismissed the appeal of the assessee without passing any speaking order. The FAA has not given any finding on the submissions that the saving bank account maintained with the ICICI bank on the basis of which the addition of Rs.18,67,120/- was 5 2704/Mum/2014 made was fully disclosed in the return of income filed by the assessee. The ld.AR further submitted that the assessee was engaged in the business of cutting the garments into various sizes as per the requirement of the party and stitching it by engaging the labour for doing its work both contractual and regular for which the labours were paid labour charges. The ld.Counsel argued that the cash credit deposited in the bank account by the assessee maintained with the ICICI Bank were purely out of business receipts of the assessee and likewise the withdrawals were for the purposes of incurring the expenditure on the payment of labour charges and other expenses. During the year, total receipts were was to the tune of Rs.20,98,720/- which were deposited into two bank account of the assessee maintained with the ICICI Bank and Punjab and Maharashtra Co- operative Bank Limited on the various dates during the year. The total job work charges paid to the outside labour were Rs.14,68,340/- and thus Rs.6,30,381/-- pertaining to the assessee’s own industrial unit for which the assessee was having machinery and regular employees on the pay roll of the assessee. Finally the ld AR submitted that the case of the assessee be set aside to the file of the AO so that the deposits and withdrawals from the bank accounts of the assessee can be explained with bill and supporting record.

The ld.DR on the other hand, objected to the arguments of the ld.AR by submitting that the various opportunities were afforded to the assessee but neither the assessee nor his ld.AR attended the proceeding before the AO and 6 2704/Mum/2014 prayed that the order of the ld.CIT(A) be confirmed by dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material placed before us including the orders of authorities below and bank statements submitted by the ld.AR. From the close examination of the bank statement submitted by the assessee, we find that the assessee has regularly deposited the amounts into these two bank account and simultaneously making withdrawals on regular basis. In view of the submissions of the ld.AR and bank statements of the assessee, we find that the assessee is a small entrepreneur who deposited the cash and cheques into his bank account and also made withdrawals regularly for the purpose of business. We further find from the records that the AO made assessment u/s 144 of the Act also and assessee could not appear before the AO to explain the deposits made therein and cash withdrawn from the bank accounts. We, therefore, are of the considered view that ends of justice would meet if the case of the assessee is restored back to the file of the AO to decide afresh after allowing the opportunity of being heard to the assessee, and no prejudice would be caused to the revenue thereby. Accordingly, we set aside the order of ld CIT(A) and restore the case back to the file of the AO. The assessee is also directed to produce relevant supporting documents before the AO and co-operate with the AO for speedy disposal of the issue.