ANISH RAJNIKANT SHAH,AHMEDABAD, GUJARAT vs. INCOME TAX OFFICER, AHMEDABAD, GUJARAT

The grounds of appeal raised by the assessee in Memo of appeal filed with the Tribunal , reads as under:-

The brief facts of the case are that it was noticed by the AO from the ITS statement that the assessee has made cash deposit in his Saving Bank Account maintained with IDBI Bank, amounting to Rs.21,51,200/-. The assessee has not filed its return of income u/s 139, for the impugned assessment year, and the source of cash deposit remained unexplained. The assessment in the case of the assessee was reopened by the AO u/s.147 of the 1961 Act , after taking prior approval from ld. PCIT, and notice dated 29.03.2018 u/s.148 of the Act was issued by the AO to the assessee, which as per AO returned unserved. The reasons recorded by the AO for reopening of the assessment u/s 147, reads as under :

Further, the statutory notice(s) u/s.142(1) of the Act were also issued by the AO to assessee , from time to time, Page No. 4 Anish Rajnikant Shah v. ITO during the course of reassessment proceedings, which as per AO also remained un-complied with by the assessee. Hence, a show-cause notice (SCN) dated 30/10/2018 was issued by the AO to the assessee as to why cash deposit of Rs. 21,51,200/- shall not be treated as unexplained cash credit u/s 68 of the 1961 Act. The assesee filed its return of income in pursuance to the aforesaid show-cause notice , and paid tax of Rs. 23,790/-. The assessee submitted that the cash was deposited more-than 8 year back, and the assessee is not able to remember the debit as well as credit entries in the bank statement , and therefore not in a position to explain the cash deposit of Rs.21,51,200/- in the bank account maintained by the assessee with IDBI Bank. The assessee submitted that there are cash and cheque deposits made in the bank account to the tune of Rs.47,76,397/-, and the assessee prayed that the income @8% of cash and cheque deposited in the bank account during the year consideration be assessed to tax , and the same was offered for taxation i.e. Rs.3,82,112/- in the return of income filed by the assessee with the department in pursuance to notice u/s 148. The AO rejected the contentions of the assessee, and made the addition of Rs.21,51,200/- to the income of the assessee as unexplained cash credit u/s.68 of the Act, with respect to cash deposit of Rs. 21,51,200/- made by the assessee in its saving bank account number 085104000023913 maintained with IDBI Bank, Memnagar Page No. 5 Anish Rajnikant Shah v. ITO Branch, as the assessee failed to explain the sources of cash deposit to prove the creditworthiness and genuineness of the transaction.

The assessee filed second appeal before this Tribunal. The ld. Counsel for the assessee submitted that the AO invoked the provision of section 68 of the Act and made additions to the tune of 21,51,200/- to the income of the assessee w.r.t. cash being deposited in the bank account maintained by the assessee with IDBI Bank. It was submitted that no return of income was filed by the assessee u/s.139 of the Act. Further, it was submitted that the assessee duly filed return of income in pursuance to notice issued u/s.148 of the Act. It was submitted by the assessee that the assessee was in the business of selling fruits and vegetables during the year under consideration , and the assessee received cash from selling fruits and vegetables, which cash stood deposited in Page No. 7 Anish Rajnikant Shah v. ITO the saving bank account maintained by the assessee with IDBI Bank. The complete details of the receipts and payments are not available as the matter is very old. It was submitted that the assessee availed presumptive scheme of taxation u/s 44AD wherein there is no requirement of maintaining books of accounts . It was submitted that no books of account were maintained by the assessee. It was submitted that the assessee availed presumptive scheme of taxation u/s 44AD wherein the liability is to pay income-tax is @ 8% of the total turnover of the assessee. There is no requirement of maintaining books of accounts under the presumptive scheme of taxation. It was submitted that the assessee does not have any evidence of carrying on of the business , and there are no proof available of doing aforesaid business by the assessee. It was submitted that Section 68 of the 1961 Act cannot be invoked when there are no books of accounts maintained and also the assessee claimed that the bank pass book could not be treated as books of accounts , and hence Section 68 could not have been invoked by the AO to make additions to the income of the assessee w.r.t. cash deposit of Rs. 21,51,200/- made by the assessee in his bank account maintained with IDBI Bank. The ld. counsel for the assesssee relied upon the following decisions : a) ITAT , Gauhati in the case of Smt. Madhu Raitani v. ACIT, (2011) 45 SOT 231(Gau. TM)

I have considered the contention of both the parties and perused the materials available on record. I have observed that the assessee has not filed its return of income u/s.139 of the Act . The AO get information that there was a cash deposit in the saving bank account of the assesse maintained with IDBI Bank, Memnagar Branch , to the tune of Rs.21,51,200/-. Since, no return of income was filed by the assessee u/s 139, the source of cash deposit remained unexplained. The case of the assessee was re-opened by the AO u/s.147 of the Act, as the assessee has not filed the return of income u/s 139 and that there was a huge cash deposited by the assessee in his saving bank account maintained with IDBI bank. The statutory notices u/s. 148 and 142(1) of the Act were issued by the AO to the assessee, but there was no compliance made by the assessee. Thereafter, the AO issued show-cause notice(SCN) to the assessee , and at that stage the assessee filed its return of income . The assessee filed its return of income in pursuance to notice u/s 148, availing presumptive scheme of taxation u/s 44AD , wherein total turnover declared was Rs. 47,76,397/- and the presumptive income declared was 8% of the turnover which comes to Rs. 3,82,112/- and the income-tax paid by the assessee was to the tune of Rs. 23,790/- (including education cess , interest etc.) ( which is stated to be paid vide challan no. 0001 dated 06.12.2018 BSR code 0002651). The return of income filed by the assessee in Page No. 10 Anish Rajnikant Shah v. ITO ITR 4S is placed on record at Page number 9-11/PB( Acknowledgment of filing of return of income is not enclosed by the assessee , but acknowledgment number mentioned in Form No. 35 is 385442400061218 dated 06.12.2018). Thus, as could be seen Return of income was filed on 06.12.2018, and the AO passed reassessment order on 07.12.2018 u/s 143(3) read with Section 147, although notice u/s 148 was issued by AO on 29.03.2018. The assessee could not give any explanation/evidences before the AO regarding the business carried on by the assessee, which led AO to invoke provisions of Section 68 of the 1961 Act and additions to the tune of Rs. 21,51,200/- were made by the AO to the income of the assessee vide reassessment order dated 07.12.2018, being unexplained cash deposits in the saving bank account maintained by the assessee with IDBI bank. In the appellate proceedings before the Ld.CIT(A), the assessee submitted that he was carrying on retail business of fruits and vegetables and has received cash from the trading of fruits and vegetable, which sale proceeds received in cash were deposited in the saving bank account maintained by the assessee with IDBI Bank, but still the assessee did not submitted any evidences before ld. CIT(A) as to actual carrying of the business, licenses issued by the local authorities for carrying on business of fruits and vegetables, purchase and sale evidences, voucher etc. to prove that he was carrying on the business of trading Page No. 11 Anish Rajnikant Shah v. ITO in fruits and vegetables. The assessee has not filed any return of income for any of the assessment years prior to impugned assessment year , and for the impugned assessment year return of income was filed in pursuant to notice issued by the AO u/s 148. The Ld.CIT(A) confirmed the additions as were made by the AO. Before me, also this plea is taken that the assessee was carrying on trading in fruits and vegetables during the year under consideration. The assessee has availed the presumptive scheme of taxation u/s 44AD and offered for taxation income computed @8% of the total credits by way of cheque and cash deposit in bank account , aggregated to the tune of Rs.47.76,397/- , as the assessee is claiming that he is an eligible assessee as is stipulated u/s 44AD engaged in the eligible business. On careful perusal of the ITR filed by the assessee, I have observed that the assessee has declared nature of its business in ITR as ‘Share Trading (code 0204)’ and not business of trading in fruits and vegetables. The assessee did not file its return of income u/s 139. There were cash deposits made by the assessee with its bank account maintained with IDBI bank to the tune of Rs. 21,51,200/- . The return of income was filed for the first time in pursuance to notice u/s 148 , and no explanation/evidences were submitted by the assessee before the AO as to nature of business carried on by the assessee. It is for the first time before ld. CIT(A), that the assessee came out with explanation Page No. 12 Anish Rajnikant Shah v. ITO that he was carrying on business of trading of fruits and vegetables, and claim was made that the sale proceeds in this business are normally received in cash which stood deposited in the bank account maintained by the assessee with IDBI Bank , but however, no evidences whatsoever were submitted by the assessee to substantiate and prove the actual carrying out of the business of trading in fruits and vegetables even as of date. Thus, even before me, no evidence to substantiate the actual carrying of business of fruits and vegetable by the assessee during the year under consideration, are filed. Rather on perusal of the ITR, I found that nature of business declared in ITR is ‘Share Trading’. The share trading business is a highly regulated business which is regulated by SEBI , Stock Exchanges, MCA , RBI and other regulatory government authorities. There is a bar on making and receiving of payments towards share trading in cash and the transactions are carried out through registered brokers/sub- brokers(registered and approved by SEBI) who are members of Recognized Stock Exchanges , rather it is regulated to such an extent that there is a bar on share brokers from receiving bank payments even from third party bank accounts other than from the bank account of the person carrying on share trading. Thus, in nut-shell there are stringent regulations which govern share trading. The assessee is not coming out with the clean hands. In order to avail presumptive scheme of Page No. 13 Anish Rajnikant Shah v. ITO taxation u/s 44AD, the assessee has to be in an eligible assessee engaged in the eligible business. Thus, the primary onus is on the assessee to prove that he is an eligible assessee engaged in the eligible business, and revenue authorities are within their right to verify the facts as to nature of the business carried on by the assessee and to see whether the said business is an eligible business as is stipulated u/s 44AD, and that the income from undisclosed sources are not camouflaged as turnover/gross receipts etc to misuse the presumptive scheme of taxation u/s 44AD , which presumptive scheme of taxation is meant for small assessee in order to promote the policy of GOI to encourage ease of doing business, but no license is granted under the 1961 Act to misuse this presumptive scheme of taxation and camouflage undisclosed income from unexplained sources under the guise of turnover/gross receipt. The assessee has miserably failed to substantiate the nature of business carried on by him as there is no iota of evidence on record to prove that the assessee is infact engaged in the business of trading of fruits and vegetables. Thus, the apparent is not real. The assessee has claimed that since he availed presumptive scheme of taxation u/s 44AD and as per the provision which stood at that relevant time(now there is amendment in Sub-Section 5 of Section 44AD by Finance Act,2016 w.e.f. 01.04.2017), there were no requirement for maintaining books of accounts by the Page No. 14 Anish Rajnikant Shah v. ITO assessee , and claim is made that since there were no requirement to maintain books of accounts, the provisions of Section 68 of the Act could not have been invoked by the AO. It is an admitted fact by the assessee himself and that there is no dispute to that effect between rival parties, that the saving bank account no. 085104000023913 with IDBI Bank, Memnagar Branch belonged to the assessee, and the transactions in the said bank account are also not denied by the assessee. There is undisputedly and admittedly cash deposit of Rs. 21,51,200/- in the said bank account maintained by the assessee with IDBI Bank, Memnagar Branch, and the assessee has owned up such cash deposit . The primary onus is on the assessee to explain his state of affairs and transactions as it is within the exclusive domain and knowledge of the assessee, and if the assessee is claiming beneficial scheme of presumptive taxation, it is for the assessee to discharge his primary onus to prove with evidences that the assessee falls strictly within the four corners of this beneficial presumptive scheme of taxation u/s 44AD, as the scheme of presumptive taxation is meant towards ease of doing business for small assessee’s. Once the assessee is availing beneficial provisions/scheme of taxation, the onus is entirely on the assessee to prove that he falls within the four corners of the beneficial scheme as is contemplated by the applicable provisions of Section Page No. 15 Anish Rajnikant Shah v. ITO 44AD.Reference is drawn to Constitutional Bench judgment and order of Hon’ble Supreme Court in the case of Commissioner of Customs v. Dilip Kumar , in Civil Appeal no. 3327 of 2007 , dated 30.07.2018. Once the primary onus is discharged, then it is for the Revenue to rebut the contentions of the assessee with cogent evidences. In my considered view, based on the facts and circumstances in the instant case, the assessee has not discharged even its primary burden of explaining the nature of its business, his eligibility to avail the beneficial scheme of taxation u/s 44AD and also the admitted transactions in his bank account wrt cash deposits to the tune of Rs. 21,51,200/-, the sources of such cash deposits remained unexplained. The initial and primary burden is on the assesssee to explain sources of all the credits in his bank account and to substantiate genuineness of the transactions, creditworthiness and identity of the creditors. The Provisions of Sub-section 5 of Section 44AD as it was prevailing at the relevant time(now there is an amendment) that no books of accounts were required to be maintained by the assessee could have been pleaded/contended by the assessee only once the assessee had discharged its primary onus/burden that the assessee is an eligibile assessee carrying out eligible business as is stipulated u/s 44AD, which in the instant case the assessee failed to do so. The assessee cannot blow hot and cold at the same time, and the apparent Page No. 16 Anish Rajnikant Shah v. ITO is not real. All the transactions in the bank account are owned up by the assessee and it is for the assessee to have substantiated the said transactions of cash deposits in his IDBI Bank account, and in my considered view the assessee failed to explain the transactions of cash deposit of Rs. 21,51,200/- made by the assessee in his saving bank account with IDBI Bank. Once it is held , based on facts and circumstances of the instant case, that the assessee is not coming out with correct and complete facts and has failed to prove its eligibility to avail presumptive scheme of taxation u/s 44AD, the protection granted u/s 44AD(5) (as prevailing at relevant time before amendment by Finance Act, 2016) that no books of accounts were required to be maintained(on fulfilment of stipulated conditions) will also go away, and provisions of Section 44AA(2)(i) will come into play, and the assessee was , infact, liable to maintain books of accounts as are stipulated u/s 44AA. The assessee having not maintained its books of accounts in the instant case, although was liable to maintain such books of account as are stipulated u/s 44AA cannot take the plea that provisions of Section 68 cannot be applied, as the assessee cannot take benefit of his own wrong, as there cannot be premium on non compliance. Thus, I hold that the assessee was required to explain the sources of cash deposits to the tune of Rs. 21,51,200/- in his bank account maintained with IDBI Bank, genuineness of the transaction of Page No. 17 Anish Rajnikant Shah v. ITO the aforesaid cash deposits and creditworthiness as well identity of creditors, as are required under the deeming fiction of Section 68, which in the instant case , the assessee having failed to do so, and the authorities below have rightly invoked provisions of Section 68 and made the additions to the tune of Rs. 21,51,200/- as income of the assessee within the four corners of deeming fiction of Section 68. The case laws relied upon by the assessee were decided on their own facts and are not applicable to the instant case before me. Hence, the appeal filed by the assessee is hereby dismissed. I order accordingly.

In the result, the appeal filed by the assessee is dismissed.