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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM]
ORDER Per Shri M. Balaganesh, AM: These appeals by assessee are arising out of separate orders of CIT(A)-XXXII, Kolkata vide Appeal Nos. 84 & 152/XXXII/10-11/49(1)/Kol dated 18.10.2012. Assessments were framed by ITO, Ward-49(1), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AYs 2008-09 & 2009-10 vide his separate orders dated 26.11.2010 and 19.12.2011. As the issues involved in both the appeals are identical, they are taken up together and disposed off by a common order for the sake of convenience.
Assessee Appeal
The assessee has raised the following grounds in Asst Year 2008-09:- “1. For that the initiation of proceeding and completion of assessment have been bad-in- law and void ab initio.
2. For that the completion of appeal by Ld. CIT on exparty without giving any reasonable opportunity to assessee which is bad-in-law.
3. For that the determination of profit on the basis of percentage is based on guess work which is bad-in- law.
4. For that the disallowance of Security deposit is based on guess work which is bad-in- law.
5. For that the disallowance of expensed on account of advertisement is bad-in-law.
2 & 2218/K/2013 Md. Shaifullah Mondal AYs 2008-09 & 2009-10 6. For that the disallowance of difference of Bank balance and Job charges the basis of NSDL statement is bad-in-law.
7. For that the disallowance of sundry creditors of Rs. 4,39,975.00 is based on guess work which is bad-in-law.
For that the disallowance of purchase of Rs.9,25,8l0.00 is based on guess work which is bad-in-law.
9. For that the addition of Rs.43,853.00 on account of low drawings is based on guess work which is bad-in-law.
10. For that Ld. ITO has determined profit but subsequently he added back some expenditure which is self contradictory & bad-in-law.”
The brief facts of the case is that the assessee is a trader as well as contractor carrying on business under the name and style of ‘M/s Mondal Construction & Electrical Works’ and ‘M/s Mondal Builders’. The assessee filed his return of income on 26.8.2008 for the Asst Year 2008-09 declaring taxable income of Rs. 1,45,030/- and agricultural income of Rs. 7,290/-. During the course of assessment proceedings, the Learned AO observed that the assessee deposited Rs. 67,85,600/- in the concealed savings bank account maintained with Axis Bank and Rs. 39,60,200/- in the concealed cash credit account maintained with State Bank of India. The assessee explained that the deposits made in these bank accounts represent sale proceeds as well as redeposit from withdrawals made earlier. The Learned AO found that no evidence was produced by the assessee for redeposit and hence the Learned AO treated the entire credits in bank accounts as derived from sale proceeds of the assessee. The Learned AO further observed that the assessee has shown sundry debtors of Rs. 2,66,907/- as no evidence was filed by the assessee to prove that the same are sundry debtors. The Learned AO treated the entire transactions as turnover of the assessee to the tune of Rs. 1,10,12,707/- (67,85,600 + 39,60,200 + 2,66,907) and the Learned AO determined the undisclosed turnover at Rs. 71,90,737/- after reducing the disclosed turnover in the books of Rs. 38,21,970/-. He applied the profit percentage offered by the assessee at 8.09% on the undisclosed turnover and brought to tax a sum of Rs. 5,81,730/- (71,90,737*8.09%) as income from undisclosed business of the assessee. The Learned AO however allowed the payment of interest on cash credit to State Bank of India amounting to Rs. 3,92,483/- as deduction.
3.1. The Learned AO obtained the ledger copy from the supplier of cements of the assessee M/s Ultratech Cement Ltd and found that the assessee had placed security deposit of Rs. 1,78,496/- with the said company which was not reflected in the balance sheet filed by the assessee as on 31.3.2008. The Learned AO also observed that the assessee had earned interest income of Rs. 11,447/- on the said security deposit from M/s Ultratech Cement Ltd which was also not offered by the assessee in the return. The Learned AO brought both the transactions to tax as income from undisclosed sources.
3.2. The Learned AO also observed that there was a difference in the bank balance with UCO Bank maintained by the assessee to the tune of Rs. 9,368/- (19568-10200) for which no proper explanation could be given by the assessee. Hence he brought the difference of Rs. 9,368/- to tax as income from undisclosed sources.
3.3. The Learned AO observed that the assessee received job charges of Rs. 20,234/- from Basirhat Municipality which was not disclosed in the returns and hence he applied the profit percentage of 8% on the same and brought a sum of Rs. 1,620/- to tax as income from undisclosed sources.
3.4. The Learned AO observed that the assessee has shown total purchases of Rs. 37,02,949/- in the return and whereas as per the information obtained and as per assessee’s submission, the following purchases were made by the assessee:-
M/s Ultratech Cement Ltd Rs. 28,27,500 M/s Grasim Industries Ltd Rs. 3,49,880 Stone Cheeps, Sand etc Rs. 98,303 Rod Rs. 13,52,446 ---------------------- Rs. 46,28,129 Less: Purchases disclosed by the assesee Rs. 37,02,949 ------------------ Difference Rs. 9,25,180 ------------------
4 & 2218/K/2013 Md. Shaifullah Mondal AYs 2008-09 & 2009-10 The Learned AO found that since no satisfactory explanation was offered by the assessee for the difference of Rs. 9,25,180/- as worked out above, he brought the same to tax as income from undisclosed sources.
3.5. The Learned AO observed that the ledger copies obtained from M/s Ultratech Cement Ltd and M/s Grasim Industries Ltd reflected the closing balance as on 31.3.2008 at Rs. 2,53,168/- and Rs. 1,06,887/- respectively, whereas the assessee had shown sundry creditors in its balance sheet at Rs. 3,50,000/- and Rs. 4,50,000/- respectively. Since the assessee could not reconcile the difference in the balances of sundry creditors, the Learned AO brought the difference in closing balance of Rs. 4,39,945/- to tax as income from undisclosed sources.
3.6. The Learned AO also observed that going by the family size of the assessee and heavy medical treatment of parents to be undertaken, the drawings shown by the assessee at Rs. 52,147/- was considered very low and hence he made an addition of Rs. 43,853/- on the ground that the family might require minimum of Rs. 8,000/- per month towards personal expenses.
3.7. The Learned AO also added a sum of Rs. 5,000/- towards donation included in the head ‘Miscellaneous Expenses’ for want of proof.
The Learned CITA disposed off the appeal ex parte for want of presence of the assessee or his authorized representative despite issuance of several notices and since no supporting evidences were available on record with regard to the additions made by the Learned AO, he dismissed the appeal. Aggrieved, the assessee is in appeal before us.
The Learned AR argued that since the Learned AO had resorted to estimation of profit @ 8.09% on the undisclosed turnover and made an addition of Rs. 5,81,730/- thereon, there is no need to make further addition towards difference in the balance of sundry creditors to the tune of Rs. 4,39,945/-; addition towards difference in purchase of materials amounting to Rs. 9,25,180/- as the same would get covered in the addition made in the sum of Rs. 5,81,730/- itself. His argument was that the assessee was buying materials from the same suppliers i.e M/s Ultratech Cement Ltd, M/s Grasim Industries
5 & 2218/K/2013 Md. Shaifullah Mondal AYs 2008-09 & 2009-10 Ltd etc for both its accounted and unaccounted transactions. Hence obviously there is bound to be difference in the closing balance of the suppliers account. Similarly there will be difference in value of purchases also. He argued that the difference in value of purchases would only get attributed towards unaccounted purchases and similarly with the closing balance of sundry creditors. Since the profit on undisclosed business was determined at Rs. 5,81,730/- , no separate addition need to be made on these accounts. He further argued that the undisclosed income determined at Rs. 5,81,730/- would explain the sources for making investment in security deposit with M/s Ultratech Cement Ltd to the tune of Rs. 1,78,496/- and addition made towards difference in bank balance to the tune of Rs. 9,368/- and hence the addition of Rs. 5,81,730/- would get telescoped to that extent as explained. However , he fairly agreed for the sustenance of the additions made in the sum of Rs. 11,447/ - towards interest earned on security deposit ; disallowance of donation of Rs. 5,000/- and addition made towards profit on job charges amounting to Rs. 1,620/-. In response to this, the Learned DR argued that the addition made towards investment in security deposit and difference in bank balances were made as income from other sources and hence the income from undisclosed business determined at Rs. 5,81,730/- would not be available for telescoping thereon. He accordingly relied on the order of the Learned AO. He did not advance any specific arguments with regard to the other additions contested by the assessee.
We have heard the rival submissions and from the facts and circumstances of the case, we find lot of force in the arguments of the Learned AR that the profit determined at Rs. 5,81,730/- is nothing but the income earned by the assessee from his undisclosed business. This receipt is outside the books of the assessee. Correspondingly, any payments / investments made outside the books of the assessee would be entitled for telescoping and hence we direct the Learned AO to delete the additions made in the sum of Rs. 1,78,496/- towards investment in security deposit with M/s Ultratech Cement Ltd and difference in bank balance to the tune of Rs. 9,368/-. Similarly we hold that since the profit determined at Rs. 5,81,730/- would be profit from undisclosed sources, there should not be any separate additions made towards excess purchases and difference in 6 & 2218/K/2013 Md. Shaifullah Mondal AYs 2008-09 & 2009-10 sundry creditors balances as the same are to be construed only for the undisclosed businesses. The Learned DR was not able to bring any contrary evidence to this effect before us. Hence we direct the Learned AO to delete the additions made in the sums of Rs. 9,25,180/- towards undisclosed purchases and Rs. 4,39,975/- towards difference in sundry creditors balances. With regard to the addition made towards drawings in the sum of Rs. 43,853/-, we find that the Learned AO had made this addition only on an estimation without any basis and hence we have no hesitation in directing the Learned AO to delete this addition. Accordingly , the grounds raised by the assessee are partly allowed.
In the result, the appeal of the assessee in Asst Year 2008-09 is partly allowed. – Asst Year 2009-10 – Assessee Appeal
8. The only issue to be decided in this appeal is as to whether the Learned AO is justified in making an addition of Rs. 19,86,370/- towards cash deposits made by the assessee in the Savings Bank Account No. 548010100000684 maintained with Axis Bank, Basirhat during the Financial Year 2008-09 based on AIR information. The Learned CITA disposed off the appeal ex parte for want of presence of the assessee or his authorized representative despite issuance of several notices and since no supporting evidences were available on record with regard to the addition made by the Learned AO, he dismissed the appeal. Aggrieved, the assessee is in appeal before us on the following grounds:- “
1. For that the initiation of proceeding and completion of assessment have been bad in law and void ab initio.
2. For that the completion of appeal by Ld. CIT on ex parte without giving any reasonable opportunity to assessee which is bad in law.
3. For that the addition of entire deposit of Rs.19,86,370.00 on account of cash deposit to bank is based on guess work and bad in law.”
The Learned AR argued that the credits in the Axis Bank account had been accepted by the Learned AO to be part of the sale proceeds of the assessee in Asst Year 2008-09. Accordingly, he requested the Bench to kindly set aside this issue to the file of 7 & 2218/K/2013 Md. Shaifullah Mondal AYs 2008-09 & 2009-10 the Learned AO to compare the credits with the turnover disclosed by the assessee in its books and make the addition towards net profit at an estimated percentage, if necessary. The Learned DR fairly conceded for the same.
We have heard the rival submissions. We find that both the parties have agreed for setting aside of this issue to the file of the Learned AO. We accordingly direct the Learned AO to compare the turnover disclosed by the assessee in its regular books and in the returns and compare the same with the cash deposits made in the bank account with Axis Bank. If the turnover disclosed is more than the cash deposits with Axis Bank, then no addition need to be made. If the turnover disclosed is less than the cash deposits, then the profit percentage on the difference amount is to be estimated and taxed accordingly. Hence the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee in Asst Year 2008-09 is partly allowed and appeal of the assessee in for Asst Year 2009-10 is allowed for statistical purposes.