SHRI RAMNIKGIRI MAHARAJGIRI GAUSWAMI,RAJKOT vs. THE DCIT, CENTRAL CIRCLE, RAJKOT
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Income Tax Appellate Tribunal, Conducted through E-Court, Rajkot
Before: SHRI WASEEM AHMED
आयकरअपीलीयअधिकरण, अहमदाबादनायपीप IN THE INCOME TAX APPELLATE TRIBUNAL, (Conducted through E-Court, Rajkot) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकरअपीलसं./ITA Nos.91 & 92/Rjt/2019 निर्धररवरध/Asstt. Years: 2011-12 & 2012-13 & आयकरअपीलसं./ITA Nos.93 & 94/Rjt/2019 निर्धररवरध/Asstt. Years: 2014-15 & 2015-16 Shri Ramnikgiri Maharajgiri D.C.I.T, Gauswami, Vs. Circle-1, 403, Prince Tower, Rajkot. 16, Panchnath Plot, Rajkot-360001.
PAN: ACBPG1256B
(Applicant) (Respondent) Assessee by : Shri Mehul Ranpura, A.R Revenue by : Shri Ashish Kumar Pandey, Sr. D.R
सुिव्ईकीत्रीख/Date of Hearing : 18/10/2023 घोरर्कीत्रीख/Date of Pronouncement: 29/11/2023 आदेश/O R D E R PER BENCH: The captioned appeals have been filed at the instance of the assessee against the orders of the Learned Commissioner of Income Tax(Appeals)-11, Ahmedabad, (in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s.143(3) r.w.s 147 of the Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-12, 2012-13, 2014-15 & 2015-16.
ITA nos.91 to 94/Rjt/2019 Asstt. Years 2011-12, 2012-13, 2014-16 &2015-16 2
First, we take up ITA No. 91/Ahd/2019 for AY 2011-12
The assessee has raised following grounds of appeal:
The grounds of aappeal mentioned hereunder are without prejudice to one another. 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (CIT)A erred on facts are also in law in retaining addition of Rs.41,55,750/- by estimation 7.50% profit on sale of imlo. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 3. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (CIT)A erred on facts as also in law in retaining addition of Rs.1,50,000/- by estimating household expenditure. The addition retained in totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 4. The first issue raised by the assessee is that the learned CIT(A) erred in sustaining the addition of ₹ 41,55,750/- by estimating the profit @ 7.5% on sale of Imlo of old constructed building materials.
The facts in brief are that the assessee is an individual and claimed to be engaged in the activity of broking business. The assessee in the year under consideration has not filed any return of income under section 139 of the Act. A search proceeding under section 132 of the Act dated 19th September 2014 was carried out at the premises of “Angadiya” namely Shri Chetan Haribhai Bhalodiya proprietor of “Yes Enterprise”. During the search, it was found that the assessee has taken cheque amounting to ₹ 6.5 crore in lieu of cash from “Yesh Enterprise” out which an amount of ₹ 5.541 crore taken in the year under consideration and the remaining amount of ₹ 95.90 Lakh was taken in the immediate next year. Such a cheque was utilized for making payment to M/s Amidhara Developers Pvt Ltd against the purchases of Imlo of old constructed buildings.
5.1 Subsequently, a notice for making the income escaping assessment under section 148 of the Act was issued and the assessee was also summoned under section 131(1) of the Act and his statement was recorded. The assessee admitted
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that he has purchased old buildings from M/s Amidhara Developers Pvt Ltd for ₹ 6.5 crore on a due basis. Thereafter he sold the imlo of demolished part of building to local ceramic manufacturer and scrapper in cash. Out of such cash, generated from the sale of imlo, cheque and demand draft were purchased from Angadiya to make payment to M/s Amidhara Developers Pvt Ltd. In the process, he earned profit of ₹ 25 Lakh only. The assessee also stated that no formal account was maintained by him for the impugned transaction except rough noting.
5.2 However, the AO, in the absence of necessary supporting documents and books of accounts, proposed to estimate income @ 10% on the amount of cheque/ demand draft purchased from Angadiya Yesh Enterprises. The AO after rejecting explanation of the assessee which was identical to the statement given u/s 131(1) of the Act, finally made addition of ₹ 55.41 Lakh being 10% of the cheque or demand draft purchased by the assessee in lieu of cash in the year under consideration.
The aggrieved assessee preferred an appeal before the learned CIT(A) and made identical submission that he earned profit in the range of 4 to 5% only. However, the learned CIT(A) considering the fact that assessee has not maintained the books of account for the business carried by him and considering the deeming provision under section 44AD etc, estimated the profit of the assessee @ 7.5% only. The relevant finding of the learned CIT(A) reads as under:
In response to the show cause notice the appellant had reiterated his stand that he earned not more than 4-5% on sale of imlo. On perusal of the assessment order, I could not find any whisper on the part of AO to come to a conclusion to estimate the income at 10%. The AO also did not bring on record any comparable case to arrive at the estimation of 10%. No doubt in the absence of return of income and the books of account, income has to be estimated on the basis of turnover. In order to avoid hard ship to the tax payer public at large, the legislature had provided provisions of section 44AD to tax the income at eight percentage of total turnover of eligible business. No doubt the appellant's turnover does not come within the ambit of provision of section 44AD of the Act, however, it gives some sort of reasonableness in determining the income of an assessee. Any business other than plying, hiring or leasing goods carriage falls within the ambit of explanation of eligible business subject to limit of turnover prescribed therein. In the present case the wastage / debris obtained from demolition of building is a business of scrap dealer which is claimed to be of inferior in nature as such earning capacity is on lower side. In the absence oa any
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comparable case, on the analogy of section 44AD of the Act, the estimation of profit @7.5% would meet the end of justice. The AO is therefore directed to tax income of Rs.41,55,750/0 which is 7.5% of Rs.5,54,10,000/-. Thus, out of total addition of Rs.55,41,000/- the appellant gets relief of Rs.13,85,250/- and addition of Rs.41,55,750/- is confirmed. Thus ground of appeal is partly allowed. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 17 and contended that the profit has been estimated by the revenue without bringing any comparable cases and therefore the profit accepted by the assessee should only be subject to tax.
On the other hand, the learned DR vehemently supported the order of the AO authorities below.
We have heard the rival contentions of both the parties and perused the material available on record. From the preceding discussion, we note that the controversy in the given facts and circumstances relates to the estimation of profit. The AO has estimated the profit on the sale of IMLO at 10% of ₹6.50 crores in 2 different assessment years whereas the learned CIT-A restricted the same to the extent of 7.50%. The assessee has filed the appeal before us and therefore the onus lies upon the assessee in support of his contention that the income earned by him from the sale of IMLO was less than 7.50% of the value of cheque/demand draft purchased from the 3rd party being Aangdiay. Likewise, the assessee has also not given any basis for estimating the income at the rate of 4 to 5% which was agreed by him to have earned from the sale of IMLO. As such we note that, the assessee has not discharged the onus imposed upon him for estimating the income based on comparable cases. Admittedly, the revenue has also estimated the income but without referring to the comparable cases. However, the revenue had to estimate the income in the absence of documentary evidence which was supposed to be provided by the assessee. Indeed, for estimating the
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income, the element of guesswork is always involved but the same should not be unrealistic. However, the primary onus lies upon the assessee which he failed to fulfil and therefore we are of the view that the income estimated by the learned CIT-A in the given facts and circumstances is reasonable and commensurate if the other facts of the assessee are seen in aggregation. As such, the assessee in the later years has purchased expensive cars and has also shown borrowed money but the assessee failed to justify the source of money for the purchase of cars as well as justifying the source of deposits in the bank. Thus, we are of the view that the profit estimated by the learned CIT-A is reasonable and commensurate with the activities carried on by the assessee. Hence the ground of appeal of the assessee is hereby dismissed.
The next issue raised by the assessee is that the learned CIT(A) erred in estimating the household expenses at ₹ 1.5 lakh thereby confirming the addition to that extent.
The AO during the assessment proceeding proposed to estimate the household expense of the assessee at ₹ 3 Lakh from undisclosed sources. The assessee objected to the proposal of the AO by stating that his household expenses consist for only 2 persons which met out of the accumulated earning from brokerage income from earlier year as well profit earned on sale of imlo.
12.1 The AO did not accept the explanation of the assessee and estimated the household expenses from undisclosed sources at ₹ 3 Lakh and added the same to the total income of the assessee.
The aggrieved assessee preferred an appeal before the learned CIT(A). The learned CIT(A) provided part relief to the assessee by reducing the household expenses from undisclosed sources at ₹ 1.5 Lakh.
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Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us contended that the assessee has accepted sufficient income in the proceedings under section 147 of the Act and therefore no separate addition is warranted on account of low household expenses in the given facts and circumstances.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the AO has estimated the household expense of the assessee at ₹ 3 Lakh and held that same were incurred from undisclosed sources of income which was subsequently reduced by the learned CIT(A) at ₹ 1.5 Lakh. At the outset, we note that the AO and the learned CIT(A) found that the assessee has earned income from the sale of demolished material of building (imlo). As such the assessee claimed that that he earned net profit at ₹ 25 lakh after making payment of 6.5 crores whereas AO and CIT(A) estimated the profit @ 10% and 7.5% of ₹ 6.5 crore respectively. In either case, the assessee had sufficient income from the sale of imlo to meet his household expenses. Therefore, making separate addition on account of household expense in the given fact and circumstances will lead to double taxation which is not desirable under the provision of the Act. Thus, we hereby set-aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is hereby partly allowed.
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Coming to ITA No. 92/AHD/ 2019 for A.Y. 2012-13
The assessee has raised following grounds of appeal: 1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (CIT(A), erred on facts as also in law in retaining addition of Rs.7,19,250/- by estimating 7.50% profit on sale of imlo. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 3. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad (CITA) erred on facts as also in law in retaining addition of Rs.1,50,000/- by estimating household expenditure. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 20. At the outset, we note that the issues raised by the assessee in its grounds of appeal for AY 2012-13 are identical to the ground of appeal raised by the assessee for A.Y. 2011-12 in ITA No. 91/Ahd/2019. Therefore, the findings given in ITA No. 91/Ahd/2019 shall also be applicable for the year under consideration i.e. AY 2012-13. The grounds of appeal of the assessee for A.Y. 2011-12 has been decided by us vide paragraph Nos. 10 and 17 of this order wherein the issue of estimation of profit on sale of imlo has been decided against the assessee whereas issue of addition on account of household expenses has been decided in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the ground of appeal relating to the estimation of profit is dismissed whereas the ground of appeal relating the household expenses is allowed.
In the result, the appeal of the assessee is hereby partly allowed.
Coming to ITA No. 93/AHD/2019 for A.Y. 2014-15 22. The assessee raised following grounds of appeal: 1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 15,17,000/- on account of unexplained
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credits in bank account. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 3. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 21,25,000/- on account of unexplained expenditure incurred from undisclosed sources. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 4. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 1,50,000/- by estimating household expenditure. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. The first issue raised by the assessee is that the learned CIT(A) erred in 23. confirming the addition of ₹ 15,17,000/- by treating the credit in bank account as unexplained.
During the year, the saving bank account of the assessee with union bank (UB) got credited for ₹ 15.17 Lakh. The assessee explained the deposit was made out of brokerage income as well as loan from friend’s other person/concern. 24.1 However, the explanation was not accepted by the AO on the reasoning that the assessee has not filed any return of income and also not provided documentary evidence to support his claim. Thus, the AO treated credit of ₹ 15.17 lakh as unexplained and added to the total income of the assessee.
On appeal the learned CIT(A) also confirmed the same by observing as under: 6.2 The appellant in the course of present proceedings appellant had claimed that he carried out the business in imlo [scrap of building] during the financial year 2010- 11 and 2011-12 and the turnover was Rs. 6.50 crores. Out of the profit of Rs. 25 lacs earned on his business, this amount had been deposited in bank account. However, it is seen from the bank statement that the credits by transfer entries other than cash and the same remained unexplained. The addition therefore directed to be sustained. This ground of appeal is dismissed. 26. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
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The learned AR before us contended that the deposits in the bank represent brokerage income and loans from friends and therefore no addition in the given facts and circumstances is warranted.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there were deposits in the bank account of the assessee and therefore the onus lies upon the assessee to justify the source of the same. But the assessee has not justified the same based on the documentary evidence. Accordingly in the absence of any explanation by the assessee about the source of money in the bank account, we have no other alternative except to confirm the order of the authorities below. Hence the ground of appeal of the assessee is hereby dismissed.
30 The second issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of ₹ 21,25,000/- representing the purchase of a car from undisclosed sources.
The AO during the assessment proceedings found that the assessee has purchased a Ford Car for ₹ 21.25 lakhs and payment of the same was made by purchasing cheque from Angadiya namely “Yash Enterprises” in lieu of cash. The sources of money to the tune of ₹ 21.25 lakhs used against the purchase of car was not explained and therefore the AO made the addition to the total income of the assessee.
On appeal, the learned CIT-A also confirmed the same by observing as under: 7.2 The appellant purchased cheques of Rs. 21,25,000/- by paying similar cash for purchase of ford car. In the course of assessment proceedings as well present proceedings
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has claimed that the cheques were purchased from profit earned from imlo business as well from commission income etc. However, it is observed from the bank statement of the appellant that though he made various transactions from his bank account with Union Bank as well as with Bank of Baroda however, he did not routed through the funds from this account to purchase car but had obtained cheque by depositing equivalent cash. Under the circumstances the purchase of cheques of Rs. 21,25,000/- is held to be unexplained and as such the addition on this count is sustained. This ground of appeal is dismissed. 33. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us contended that the car was purchased out of the money earned by him in the earlier years which has also been suffered to tax. Therefore, the money earned in the earlier year has been applied for the purchase of a car and therefore no separate addition to the given facts and circumstances is warranted.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was income earned by the assessee in the earlier years which has also suffered to tax. The details of the same stand as under: A.Y. 2011-12 ₹ 41,55,750/- A.Y. 2012-13 ₹ 7,19,250/- Total ₹ 48,75,000/- 36.1 Out of the above income of the assessee, the household expenses for the earlier years have been estimated at ₹ 1,50,000/-per year. Accordingly, the aggregate of household expenses of the assessee for A.Y. 2011-12 to 2014-15 stands at ₹ 6 Lakhs only. Thus, it can be assumed that out of the income of ₹ 48.75 lakhs pertaining to earlier years (A.Y. 2011-12 and 2012-13) a sum of ₹6 Lakhs has only been utilized towards the household expenses. The revenue has
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not brought any iota of evidence suggesting that the earlier years income suffered to tax has been used for some other purposes either by way of making some investment or expenditure. Thus, in the absence of such information, it can be presumed that the amount of income which has suffered tax in the earlier year has been utilized for the purchase of the car. The earlier income after adjusting household expenses stands at ₹ 42.75 lakhs and the cost of the car purchased in the year comes at ₹ 21.25 lakhs only. Still the balance income available with the assessee stands at ₹ 21.50 Lakhs ( ₹ 42.75 lakhs - ₹ 21.25 lakhs). In view of the above, we hold that there was sufficient tax paid money available with the assessee which has been used for acquiring the car on hand. Therefore, no separate addition on account of purchase of car is required to be made. Hence, the ground of appeal of the assessee is hereby allowed.
The last issue raised by the assessee is that the learned CIT(A) erred in 37. estimating the household expenses at ₹ 1.5 lakh thereby confirming the addition to that extent.
At the outset, we note that the issues raised by the assessee in his grounds of appeal for AY 2014-15 are identical to the ground of appeal raised by the assessee for A.Y. 2011-12 in ITA No. 91/Ahd/2019. Therefore, the findings given in ITA No. 91/Ahd/2019 shall also be applicable for the year under consideration i.e. A.Y. 2014-15. The ground of appeal of the assessee for A.Y. 2011-12 has been decided by us vide paragraph No. 17 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2014-15. Hence, the ground of appeal filed by the assessee is hereby allowed.
In the result, the appeal filed by the assessee is hereby partly allowed.
Coming to ITA No. 94/AHD/2019 for A.Y. 2015-16
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The assessee has raised following grounds of appeal:
The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 1,938/- on account of unexplained credits in bank account. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 3. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 41,03,460/- on account of unexplained expenditure incurred from undisclosed sources. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 4. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in retaining addition of Rs. 1,50,000/- by estimating household expenditure. The addition retained is totally unjustified and uncalled for and deserves to be deleted and may kindly be deleted. 41. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of ₹ 1938/- on account of credit in bank.
At the outset, we note that captioned ground of appeal has not been pressed by the assessee due to smallness of amount involved in the dispute. Hence, the same is dismissed as not pressed.
The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of ₹ 41,03,460/- representing the purchase of a car from undisclosed sources.
The AO during the assessment proceedings found that the assessee has purchased Audi Car for ₹ 41,03,460/- and payment of the same was made by purchasing cheque from Angadiya namely “Yash Enterprises” in lieu of cash. The sources of money to the tune of ₹ 41,03,460/- used against the purchase of car was not explained and therefore the AO made the addition to the total income of the assessee.
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On appeal, the learned CIT-A also confirmed the same by observing as under:
7.2 The appellant purchased cheques of Rs.41,03,460/- by paying similar cash for purchase of ford car. In the course of assessment proceedings as well present proceedings has claimed that the cheques were purchased from profit earned from imlo business as well from commission income etc. However, it is observed from the bank statement of the appellant that though he made various transaction from his bank account with Union Bank as well as with Bank of Baroda however, he did not routed the funds from this account to purchase car but had obtained cheque by depositing equivalent cash. Under the circumstances the purchase of cheques of Rs.41,03,460/- is held to be unexplained and as such the addition on this account is sustained. This ground of appeal is dismissed. 46. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us contended that the car was purchased out of the money earned by him in the earlier years which has also been suffered to tax. Therefore, the money earned in the earlier year has been applied for the purchase of a car and therefore no separate addition to the given facts and circumstances is warranted.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that there was tax paid income available with the assessee from A.Y. 2011-12 and 2012-13 amounting to ₹ 21.50 Lakhs and further the income on account of deposit in bank account for ₹ 15.17 lakhs suffered tax in the hands of the assessee in immediate previous assessment year. Accordingly, the aggregate tax paid income available in the hands of the assessee from earlier years is at ₹ 36.67 Lakhs. There is no finding of the revenue that such income suffered to tax in earlier has been utilized somewhere else. At the most, it can be assumed that such income has been used for the purpose of household expenses in the year under consideration which
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cannot exceeds ₹ 1.5 Lakhs estimated by the learned CIT(A). Accordingly, the net amount available with the assessee stands at ₹ 35.15 Lakhs (₹ 36.67 Lakhs - ₹ 1.5 Lakhs).
49.1 The revenue has not brought any iota of evidence suggesting that the earlier money/ income which suffered to tax has been used for some other purposes either by way of making some investment or expenditure. Thus, in the absence of such information, it can be presumed that the amount of income which suffered tax in the earlier year has been utilized for the purpose of purchasing the car. The earlier income stands at ₹ 35.15 lakhs which should be adjusted against the cost of car purchased in the year under consideration which stand at ₹ 41,03,460/-. Accordingly, the net amount of car cost from unexplained sources remains at ₹ 5,88,460/- only.
49.2 In view of the above, we hold that only an amount of ₹ 5,88,460/- can be added to total income of the assessee on account of purchase of car from undisclosed/unexplained sources whereas remaining amount of Rs. ₹ 35.15 lakhs shall be presumed to be sourced from the earlier income already suffered to tax. Hence, the ground of appeal filed by the assessee is hereby partly allowed.
The last issue raised by the assessee is that the learned CIT(A) erred in estimating the household expense at ₹ 1.5 lakh thereby confirming the addition to that extent.
At the outset, we note that the issues raised by the assessee in its grounds of appeal for AY 2015-16 are identical to the ground of appeal raised by the assessee for A.Y. 2011-12 in ITA No. 91/Ahd/2019. Therefore, the findings given in ITA No. 91/Ahd/2019 shall also be applicable for the year under consideration i.e. A.Y. 2015-16. The ground of appeal of the assessee for A.Y. 2011-12 has been decided by us vide paragraph No. 17 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the
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assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2015-16. Hence, the ground of appeal filed by the assessee is hereby allowed.
In the result, the appeal filed by the assessee is hereby partly allowed.
In the combined result all the four appeals filed by the assessee are partly allowed.
Order pronounced in the Court on 29/11/2023 at Ahmedabad.
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 29/11/2023 Manish
