MOHD. TEHSEEN,MEERUT vs. ITO, MEERUT

O R D E R PER PRASHANT MAHARISHI, A. M. 01. This appeal is preferred by the assessee against the order of the CIT(A), Meerut dated 28.03.2014 for the Assessment Year 2009-10 on the following grounds : “

1. That Ld. A.O. as well as CIT(A) has not provided proper and reasonable opportunity of being heard, Hence, order passed by A.O. as well as CIT(A) is against the principle of natural justice.

2. That Ld. A.O. is in error that the difference of cash deposit in bank relates to the business receipt and applying a gross profit rate @ 15% and making addition of Rs.9,34,155/- is arbitrary, unjust and not according to law and CIT(A) is in error to confirm the same without any basis.

Mohd Tehseen Vs. ITO (ITA No. 4563/Del./2014 )

all related to addition of Rs.9,34,155/- being gross profit determined at the rate of 15% on estimated unaccounted sale of Rs.62,27,700/-.

03. Brief facts of the case are that assessee is an individual earning income from trading of clothes. He filed his return of income on 04/12/2009 showing income of Rs.159972/ –.It was found that assessee has deposited Rs. 9293900/-in his 3 bank accounts, one with Kotak Mahindra bank limited and another 2 accounts with ICICI bank limited. Assessee was asked to explain the reasons and source of this deposit as assessee has disclosed sales of Rs.3066200/- only and against this cash deposit in the bank account is Rs.9293900/-. Assessee explained before assessing officer that assessee was required to show turnover to the banker because a cash credit limit of Rs.15 Lacs was sanctioned and, therefore, to justify the bank limit the turnover was shown. Assessee also stated that on the same day he has deposits and withdrawals in this bank account and therefore credit of that transaction of withdrawal should be given to the assessee. Learned assessing officer noted that assessee has filed his return of income showing net profit at the rate of 6% of the turnover and assessee himself had admitted that he has filed his return of income as per provisions of section 44 AF of the income tax act. Assessee further stated before the assessing officer that he is maintaining proper books of accounts. Therefore, as the amount deposited in cash in about 3 bank accounts was not reflected in the books of the assessee, he rejected the books of Page 2 of 5 Mohd Tehseen Vs. ITO (ITA No. 4563/Del./2014 ) accounts of the assessee. The difference of Rs. 6227700/– is treated as unexplained sales of the assessee and on which AO applied a net profit rate of 15% and made an addition of Rs.9,34,155/-. Against this, assessee preferred appeal before the ld CIT(A). The ld CIT(A) confirmed the addition of Rs.9,34,155/-. Against this, assessee is in appeal before us.

4. Learned AR of the assessee submitted before us that that amount deposited in the bank account of the assessee is because of the reason that he was to show turnover as he has taken cash credit limit with the bank. He further submitted that that the assessing officer has not rejected the books of accounts of the assessee. Other argument was that the total amount deposited in the bank has been taken as sales without granting credit for withdrawals. He stated that there is no justification given by the assessing officer for adopting the net profit rate of 15% applied on estimation of unaccounted sales where the assessee’s net profit rate shown is 6%. He further submitted that according to section 44AF of the act prescribed rate is 5 %. Therefore, his argument that firstly the addition is wrongly made and secondly the adoption of higher profit rate compared to his own rate is not justified.

5. Against this learned departmental representative relied upon the order of the ld CIT (A) and assessing officer. He submitted that when the amount is deposited in cash in various bank accounts which are not reflected in the books of accounts of the assessee, books of accounts does not show the correct picture and it is incorrect to say that that the books of accounts have not been rejected by the assessing officer. He referred to the order of the assessing officer and submitted that that the cash deposited in the bank account was not at all reflected and similarly, the withdrawals also were not reflected in the books of the assessee. Therefore credit for withdrawal cannot be granted. He further submitted that higher rate of profit is justified because of the reason that assessee himself had Page 3 of 5 Mohd Tehseen Vs. ITO (ITA No. 4563/Del./2014 )

adopted net profit rate of 6% and all the expenditures have already been debited by the assessee in his books of accounts while calculating the 6% and for the unaccounted sales there cannot be any further expenditure. Therefore, he stated that the rate of 15% adopted by the AO is correct and the CIT (A) has upheld it. Therefore, he submitted that the addition may be confirmed.