ITO,WARD-1(1), HALDIA, PURBA MEDINIPUR vs. MD. ABDUL SEIKH, PURBA MEDINIPUR

This appeal by revenue is arising out of order of CIT(A)-XXXIII, Kolkata vide Appeal No. 235/CIT(A)-XXXIII/ITO,Wd.1/Hal/10-11 dated 13.03.2012. Assessment was framed by ITO, Ward-1, Haldia u/s. 144/143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2008-09 vide his order dated 30.12.2010.

The only issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained deposits in cash in undisclosed bank account and also allowing excess expenses.

Briefly stated facts are that the assessee is engaged in the business of transportation. During the course of assessment proceedings, the AO issued notice u/s. 133(6) of the Act to AXIS Bank to give details of transaction made by assessee in these two bank accounts viz., A/c. No.261010100036643 and A/c. No. 261010200006057. According to AO, these two bank accounts are undisclosed accounts and there are total deposits in the bank account to the extent of Rs.42,53,557/- i.e. one having Rs.21,43,057/- and another Rs.21,10,500/-, the closing balance in these accounts are at Rs.51,127/- and Rs.27,523/- only. As the assessee failed to explain the deposits and withdrawal from these bank accounts, he treated the entire deposits of Rs.42,53,557/- as bank transaction suppressed and added to the returned income of the assessee. Aggrieved, assessee preferred appeal before CIT(A), who after considering the submission of the assessee and also seeking remand report from the AO and considering the remand report by the AO vide letter No. Wd.1/Remand Report/BISPS2013N/2011-12 dated 31.01.2012 deleted the addition by observing in para 6 and 7 as under: “6. I have considered facts of the case. The total of deposits made in the two accounts of the appellant comes to Rs. 42,53,557/-. It has been explained that a part of the same has came from receipts of business. The assessing officer has, after verification, found the contention to be correct. As per the statement given in the appellate proceedings, total amount of them for the year was of Rs. 21,18,960/- (wrongly mentioned as Rs.20,18,962/- by the assessing officer in the remand report). Thus, deposits to the extent of Rs. 21,18,960/- are explained from turnover of business. It may be mentioned here that in its profit and loss account filed with the return, the appellant has shown hire charges of Rs. 16,34,280/- only on which net profit was shown at Rs. 1,50,260/- which comes to 9.19 %. The appellant has accepted that the real turnover of business was higher at Rs. 21,18,960/-. It is clear that accounts of the appellant are un-reliable because they have grossly under-stated the receipts. The case is reported by the assessing officer to be a 'no accounts case' meaning that there are no books of accounts to back the profit and loss account. Considering these facts, the final accounts of the appellant cannot be accepted as complete and correct and are liable to be rejected under section 145(3) of IT Act, 1961. In my view, profit from business can reasonably be taken by applying net profit rate of 9.19 % disclosed by the appellant himself on the correct turnover of Rs. 21,18,960/-. The profit accordingly comes to Rs. 1,94,823/-.

Coming to the balance deposits in the two bank accounts, the explanation has been given that they have come from rotation of cash. It has been stated that there are withdrawals of more than Rs. 40 lakhs from the two accounts and they are mostly in cash. The amount withdrawn is utilized partly to make deposit at a later point of time. The appellant has prepared a combined cash transaction statement for the two accounts, which was produced by the assessing officer and he has given no adverse finding on the same. It is also noted that the withdrawals made are sufficient, even after taking into account the expenses and drawings shown by the appellant, to explain the deposits of Rs. 21,34,597/- (Total deposits of Rs 42,53,557/- less turnover of Rs. 21,18,960/-) other than the deposits made out of business receipt and here are no net deposits over and above the deposits explained by the turnover.” Aggrieved, now revenue is in appeal before Tribunal.

We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has disclosed gross receipt of Rs.16,34,280/- from hiring and utilizing of trucks, mini trucks, lorries etc. for transporting of goods. Further, the assessee has also disclosed receipts from freight bills amounting to Rs.21,18,916/- and pattern of deposits have also withdrawals and fund rotation in these two bank accounts. These facts were confronted to AO by the CIT(A) during remand proceedings and the AO himself admitted in the remand report that the freight bills produced belongs to four parties out of which three confirmed having made transactions with the assessee and the fourth could not be served notice. The CIT(A) co-related the amounts deposited in the banks with the receipts and deleted the addition. We find that the AO in his remand report could not controvert the evidence and even now before us Ld. Sr. DR could not controvert the 3 Md. Abdul Seikh, AY 2008-09 findings of the CIT(A). In view of these facts and circumstances, we confirm the order of CIT(A) in deleting the addition. Appeal of revenue is dismissed. 5. In the result, appeal of revenue is dismissed. Order pronounced in the open court on 03.03.2016