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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Sanjay Arora
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 20/03/2014 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to directing the Assessing Officer to delete the addition of Rs.15,66,003/- which falls within the purview of an unexplained cash credit u/s 68 of the Income Tax Act, 1961 (hereinafter the Act) applying the rate of 9.52% to the unexplained cash credit of Rs.17,13,772/-, accepting the submissions of the assessee filed during appellate proceedings, ignoring the surrounding circumstances.
During hearing of this appeal, the ld. DR, Shri Mohammad Rizwan, advanced arguments, which is identical to the ground raised by contending that source of cash deposit in the bank was not explained by the assessee, therefore, the Department was precluded from getting the due taxes.
2.1. On the other hand, the ld. counsel for the assessee, Shri R.B. Popat, defended the conclusion arrived at in the impugned order by contending that the assessee himself declared the chargeable profit at the rate of 9.52% which is far above the percentage mentioned in section 44AF of the Act by further submitting that the turnover of the assessee is below Rs. 40 lakh. It was also contended that the assessee is a small retail traders in readymade garments and duly produced evidences in the form of bills and vouchers of purchases and sales.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee deals in readymade garments as a retail trader. The assessee disclosed turnover of Rs.14,75,380/-.
The ld. Assessing Officer received information that the assessee had made substantial cash deposits totaling Rs.32,06,152/- in his two bank accounts of City Cooperative Bank Ltd., Matunga Branch and Indian Bank Matunga. The assessee was asked to explain the source of cash deposits and also as to why the same should not be treated as unexplained cash credit u/s 68 of the Act. The assessee vide letter dated 08/12/2010 claimed that he is a retail trader in readymade garments, his turnover is less than Rs.40 lakh and deposit the sale proceeds in the bank as he is not a much literate person. However, the ld. Assessing Officer did not find favour with the explanation of the assessee and added the impugned amount as income of the assessee u/s 68 of the Act.
2.3. On appeal, before the ld. First Appellate Authority, the factual matrix was considered and found that the assessee himself declared the chargeable profit at 9.52% and even as per the provisions of section 44AF, a sum of Rs.5% is mentioned in the retail business, therefore, granted relief to the assessee. The addition was restricted to the Rs.1,64,769/-. The Revenue is aggrieved and is in appeal before this Tribunal.
2.4. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, before adverting further, we are reproducing hereunder the special provision of section 44AF of the Act for ready reference:-
“44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year. (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed : Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40. (3) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. (4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover or, as the case may be, the income from the said business shall be excluded. (5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB. (6) Nothing contained in this section shall apply to any assessment year beginning on or after the 1st day of April, 2011.”
We find that section 44AF was inserted w.e.f. 01/04/1998 by the Finance Act, 1997, making special provision for computing profit & gains of retail business on a presumptive basis. The provisions of this section was enacted on the lines of the provision of section 44AD and 44AE of the Act, which has been elaborated in Circular No.763, dated 18/12/1998, in order to simplify the procedures of computation of income of retail traders, a new scheme of computing profit & gains of such business presumptively at 5% of the gross receipts, thus, the provisions of section 44AF(1) is operative from A.Y. 1998-99 to A.Y. 2010-11.
Thus, if the aforesaid provisions is applied to the facts of the case as narrated, hereinabove, admittedly, the assessee is a retail trader in garments and as per special provisions for computing profit and gains of retail business, as per section 44AF of the Act, a sum equal to 5% of the total turnover in the previous year on account of such business, or as the case may be, a sum higher than the aforesaid sum, as declared by the assessee, in his return of income, shall be deemed to be the profit and gains of such business, provided the total turnover does not exceed Rs.40 lakh in the said previous year. In the present appeal, undisputedly, the total turnover is below prescribed limit, therefore, we find merit in the conclusion of the ld. CIT(A) as the assessee himself disclosed the turnover and the profit and the rate of 9.52%, which is far above, the prescribed limit of 5%. This is also a fact, as mentioned earlier, the assessee is a retail trader and no contrary facts were brought on record by the Assessing Officer. There is no other source of income to the assessee, thus, the assessee has already declared higher profit rate, therefore, there is no loss to the Revenue. The stand of the ld. Commissioner of Income Tax (Appeals), is therefore, affirmed.
Finally, the appeal of the Revenue is dismissed.
This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 07/12/2015
Sd/- Sd/- (Sanjay Arora) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 07/12/2015 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.