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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 21.02.2023 passed by learned Commissioner of Income-Tax (Appeals), N.F.A.C., Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 13.12.2018 passed by learned ACIT-5(1), Bhopal [“AO”] u/s 143(3) read with section 263 of Income-tax Act, 1961, the assessee has filed this appeal on following grounds:
“(1) The order of the learned CIT(A) is unjustified and is beyond the facts and circumstances of the case. (2) The scrutiny case u/s 143(3) cannot be reopened on basis of audit objection. (3) The jurisdiction of this case was the ITO-3(1) as per Act and order of Commissioner, whereas the assessment order was passed by ACIT, 5(1), Bhopal which is out of jurisdiction. Page 1 of 10 Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 (4) The appellant has deposited cash of Rs. 13,00,000 in bank account out of earlier cash withdrawn in the specified period of financial year from bank account which remained as cash in hand (cash deposited of Rs. 9,00,000/- in HDFC bank account no. 17681930000146 on 5.11.2012 and Rs. 4,00,000 in Axis Bank a/c no. 91201000182771562 on 19.01.2013 which is deposited by appellant out of earlier cash withdrawal from bank in different dates which is as under: 29.08.2022 vide cheque no. 9048 Rs. 9,00,000/- from Axis bank a/c 91201000182771562 which deposited in HDFC bank on 05.11.2012, 29.11.2012 vide cheque no. 97138 Rs. 8,00,000/- and 12.12.2012 vide cheque no. 100306 Rs. 6,00,000/- from Axis bank a/c no. 912010001827715. (5) Depreciation which was purely based on audit objection as no additional or extraneous material was available with AO to independently believe that there was escarpment of income. The first AO, aadesh rai, ACIT 3(1), Bhopal has not mentioned in record of reason for reopening the case that depreciation for assets of Rs. 2,10,081/- was inadmissible as he has no objection in this regard and allowed depreciation of Rs. 4,69,765.50 as per computation. (6) The appellant craves leave to add, to amend or alter any of the grounds of appeal as and when necessary. (7) The both AO has allowed the declared income which is more than 8% of Gross receipts which should be accepted against the provision u/s 44AD of Income-tax Act, 1961 and same has been done by CIT(A) in his order point no. 5.4 of page no.5.”
2. Heard the learned Representatives of both sides at length and case- records perused.
3. Briefly stated the facts are such that the original assessment was made by AO u/s 143(3) vide order dated 25.02.2016 after making an aggregate addition of Rs. 13,00,000/- in respect of cash-deposit of Rs. 9,00,000/- on 05.11.2012 in HDFC Bank (+) Rs. 4,00,000/- on 19.01.2013 in Axis Bank made by assessee, treating the same as unexplained. The assessee carried matter in first appeal to CIT(A) through appeal No. CIT(A)- 2/BPL/IT-328/15-16 filed on 17.03.2016. While the first appeal was pending, the PCIT-2, Bhopal, passed revision-order u/s 263 on 19.03.2018 whereby he set aside the aforesaid assessment-order dated 25.02.2016 terming the same as erroneous-cum-prejudicial to the interest of revenue and directing the AO to frame de novo assessment. When the first-appeal Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 came up for hearing, the assessee submitted a letter to CIT(A) withdrawing first-appeal for the reason that the assessment-order had already been set- aside and the AO had been directed to make de novo assessment. Considering such request of assessee, the CIT(A) allowed withdrawal of appeal and thereby dismissed assessee’s appeal vide order dated 10.07.2018.
4. Subsequently, following the direction given by PCIT-2 in revision- order, the AO passed a newer assessment-order dated 13.12.2018 u/s 143(3) read with section 263. The AO repeated the original addition of Rs. 13,00,000/- and at the same time, also made a newer disallowance of Rs. 2,10,081/- on account of depreciation. Aggrieved by action of AO, the assessee again went in first-appeal but could not succeed. Now the assessee has come up in this appeal before us on various grounds as re-produced earlier.
Ground No. 1, 2, 3, 6:
Ground No. 1 & 6 are general in nature. Ground No. 2 & 3 are not pleaded and no submission apropos to those grounds have been made during the course of hearing. Therefore, ground No. 1, 2, 3 and 6 do not require any adjudication by us being non-pleaded/non-pressed.
Ground No. 4 & 7:
By means of these grounds, the assessee challenges the addition of Rs. 13,00,000/- mad by AO u/s 69 on account of unexplained cash- deposits in bank a/cs.
Ld. AR for assessee made three-fold contentions to defend the case of assessee, as under:
(i) The first contention submitted by Ld. AR is such that the assessee was engaged in the business of civil contract work, the books of Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 account were duly audited and the bank accounts in which the impugned cash-deposits were made, were duly recorded in audited books. But, unfortunately, the assessee’s books of account were lost while carrying back from auditor’s office to assessee’s place by employee. In this regard, the assessee filed a complaint on 17.01.2014 to Police Station, copy of complaint is filed at Page No. 39-41 of Paper- Book. Further, the assessee issued advertisements in Dainik Bhaskar on 23.01.2014, 02.02.2014 and 09.03.2014 and also declared prize money for the finder, copies of newspaper cuttings are at Page 45-47 of Paper-Book. Therefore, during the course of scrutiny by AO, the assessee was unable to produce the books of account but the assessee explained this factual incident to AO. However, the AO rejected assessee’s explanation. Ld. AR submitted that when the account of assessee were duly audited and the bank accounts of assessee were included in audited accounts, the AO had no justification to disbelieve the source of cash deposits in bank accounts.
(ii) The second contention is such that the assessee had already declared a net profit of Rs. 12,09,805/- on turnover of Rs. 1,40,65,870/- giving a net profit rate of about 8.60%. Now, if an addition of Rs. 13,00,000/- is also sustained, it will lead to jumping the net profit to Rs. 25,09,805/- resulting into a net profit rate of 17.84%. Ld. AR submitted that expecting assessee to earn net profit as high as 17.84% is far from reality; in fact the net profit of 8.60% declared by assessee is already quite reasonable and fairly exceeds even the presumptive rate of 8% prescribed by Parliamentary wisdom in section 44AD. Therefore, the addition of Rs. 13,00,000/- could not have been made.
(iii) The third and last contention is such that the impugned cash deposits of Rs. 9,00,000/- on 05.11.2012 in HDFC Bank (+) Rs. 4,00,000/- on 19.01.2013 in Axis Bank are well-explained from withdrawls made by Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 assessee from respective banks itself. To demonstrate this, Ld. AR drew our attention to the copies of statements of HDFC bank and Axis Bank filed in Paper-Book. Ld. AR referred following withdrawal entries appearing in those bank accounts, to explain the sources of deposits:
Sources of deposit of Rs. 9,00,000/- on 05.11.2012 in HDFC Bank A/c: Date Narration Amount 09.08.2012 Farhan Khan 2,00,000 11.08.2012 Gulrej Khan 5,00,000 18.08.2012 Pravej Khan 72,000 17.09.2012 Harhan Malik 5,00,000
Ld. AR submitted that Farhan, Gulrej, Pravej, Harhan, etc. are assessee’s employees who used to withdraw moneys from bank and also re-deposit. Therefore, the money withdrawn by/through those employees from HDFC Bank on various dates were re-deposited subsequently. Ld. AR invited attention to Page 48-52 of Paper-Book where the assessee’s self-declaration of names of employees as well as declarations by respective employees are filed. Ld. AR, however, admitted that these declarations were not filed before lower authorities.
Sources of deposit of Rs. 4,00,000/- on 19.01.2013 in Axis Bank A/c: Date Narration Amount 12.12.2012 Self 6,00,000
Ld. AR submitted that the cash of Rs. 6,00,000/- withdrawn through self-cheque was re-deposited.
Per contra, Ld. DR for revenue vehemently supported the order of AO and also opposed every contention of Ld. AR, as under:
Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 (i) He submitted that even if the books of account were lost, as claimed by assessee, the assessee is not absolved from his duty to explain the source of cash-deposits in bank a/cs.
(ii) He submitted that the declaration of 8.60% net profit is nothing to do with cash-deposits in bank a/cs. Further, it is not a yardstick to give relief to assessee.
(iii) He referred to Para No. 6 of assessment-order and contended that the assessee is offering just speculated-submissions to explain cash- deposits but not making any concrete or authentic submission. He contended that it is the duty of assessee to prove at least some link of withdrawals and re-deposits. Therefore, the assessee’s submission cannot be accepted.
We have considered rival submissions of both sides and perused the material held on record including the assessment-order and the documents placed in Paper-Book. So far as first contention raised by Ld. AR is concerned, we find merit in the submission of Ld. DR for revenue that even if the books of account are claimed to have been lost, the assessee has to prove the sources of cash-deposits, more so when the deposits were of high amounts of Rs. 9,00,000/- and 4,00,000/- and not of petty amounts. Therefore, loss of books of account as claimed, cannot relieve assessee from the burden of explaining the nature and source of deposits in bank accounts. Then, the Ld. DR is very much correct in opposing the second contention of assessee by arguing that the declaration of 8.60% net profit is neither relevant not a yardstick to accept the sources of cash deposits in bank accounts; the assessee has to independently explain the sources. Hence first two contentions of Ld. AR are not impressing us.
Now, we are left with the last contention of Ld. AR according to which it is being claimed that the impugned deposits were made by utilizing cash withdrawn from those very banks. In this regard, on perusal of withdrawal Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 entries of HDFC bank a/c referred by Ld. AR, we find that those entries are not of “self-cheques” but in the personal names of Farhan, Gulrej, Pravej, Harhan. Now, the assessee claims that he has withdrawn moneys through those persons (claimed to be employees) and re-deposited subsequently in bank a/c. But this explanation is clearly contradictory to what was submitted by assessee before AO. The AO has noted in Para No. 6 of assessment-order:
“He (means assessee) stated that the deposits may be out of bookings by various customers but not able to substantiate his claim. Not a single document or supporting were produced by assessee. Hence, the source of above cash deposits in the account of assessee is not explained. The assessee has not shown booking advances or cash-book or agreements in support”. The CIT(A) also noted observation to same effect in para No. 5.5 of his order.
Thus, while the assessee claimed before AO that the deposits may be out of bookings by various customers, it is being claimed before us that the cash withdrawals from banks were re-deposited. Thus, there is a clear contradiction in the nature of deposits what to talk of source of deposits.
Further, it is also an unverified fact that the persons named Farhan, Gulrej, Pravej and Harhan were employees of assessee in that year for the reason that books of account are claimed to have been lost and the list of those persons, claimed to be employees, has been filed for the first time before us.
It is also not very convincing that entire moneys withdrawn as early as on 09.08.2012, 11.08.2012, 18.08.2012 and 17.09.2012 remained un-utilised; were accumulated; and then re-deposited on one fine day of 05.11.2012 after a gap of about 3 months. Looking to all these aspects, we are not convinced with the assessee’s explanation for deposit of Rs. 9,00,000/- in HDFC Bank.
Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 11. However, so far as deposit of Rs. 4,00,000/- in Axis Bank is concerned, we find and accept that the assessee has withdrawn cash of Rs. 6,00,000/- on 12.12.2012 from Axis Bank through self-cheque, therefore the same can be a source for making re-deposit of Rs. 4,00,000/- on 19.01.2013.
The above discussion brings us to conclude that the assessee has not been able to explain the source of Rs. 9,00,000/- deposited in HDFC Bank but the source of Rs. 4,00,000/- deposit in Axis Bank is explained.
Therefore, we are upholding the addition of Rs. 9,00,000/- qua the deposit made in HDFC Bank A/c but, however, deleting the addition of Rs. 4,00,000/- qua the deposit made in Axis Bank. Consequently, assessee gets part-relief.
Ground No. 5:
By means of this ground, the assessee challenges the disallowance of Rs. 2,10,081/- of depreciation made by AO and confirmed by CIT(A).
Actually, the issue of disallowance originated from revision-order wherein the PCIT mentioned that the assessee purchased 3 flats and claimed depreciation thereon but could not produce any evidence of business use and accordingly directed the AO to examine this issue.
Thereafter, vide Para No. 4 of assessment-order, the AO made disallowance with a very precise note that the assessee failed to establish the business use. The CIT(A) also observed that the assessee failed to support his claim.
Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 15. Before us, Ld. AR for assessee fairly agreed that the assessee is not having any documentary evidence but, however, he insisted that neither the assessee has let out those 3 flats nor used for residence purpose. He submitted that it is a fact that the assessee used impugned flats for business purposes although the assessee does not have any documentary evidence. He prayed to allow depreciation on the basis of factual and honest submission being made by assessee. Ld. DR for revenue opposed these submissions of Ld. AR. He argued that the nature of asset, namely flats, itself is such that the assessee is having a high burden to prove business use. He submitted that the assessee must give some evidence at least to establish business use but in the present case, there is no evidence whatsoever; hence the assessee does not deserve depreciation deduction.
We have considered rival contentions of both sides. On a careful consideration, we find that both of the lower-authorities have denied depreciation claim to assessee on the footing that the assessee has not provided any evidence to establish business use. We also find much weightage in the arguments of Ld. DR that the subject-asset on which the assessee is demanding depreciation is flats which is such an asset that the assessee must afford some cogent evidence to prove business use. In the present case, the assessee has not provided even the smallest piece of evidence to prove the depreciation claim and therefore firstly it prompted the Ld. PCIT to pass a revision-order to that effect and subsequently, the AO and CIT(A) had a concurrent view to disallow depreciation. In such Noorul Hasan Baig, Bhopal vs. ACIT 5(1), Bhopal Assessment year 2013-14 circumstance, we are not inclined to make any interference in the orders of lower-authorities merely on the basis of words of mouth of assessee regarding business use when there is no evidence whatsoever. Accordingly, the disallowance of depreciation is upheld and this ground is rejected.
Resultantly, this appeal of assessee is partly allowed.
Order pronounced in the open court on 22.09.2023.