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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश/O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by assessee is arising out of order of Commissioner of Income-Tax (Appeals)-XXXII, Kolkata in appeal No.2/CIT(A)XXXII/08- 09/Wd.49 (1)/Kol dated 28.01.2010. Assessment was framed by ITO Ward-49(1) Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 27.12.2007 for assessment year 2005-06.
RatanSarkar v. ITO Wd-49(1) Kol. Page 2 The assessee has filed appeal on the following grounds:- “
1 (a) That on the facts and in the circumstances of the case, Ld. CIT(A) having admitted that assessee’s recurring deposit A/.c Bi, 410299 with Tentulia, Sub-Post Office showed maturity proceed of Rs.81,115/- on 31.07.2004 is wrong in holding that purchase of K.V.P. of Rs.80,000/- from the same Post Office out of such maturity proceed does not amount to cogent evidence. (b) That the appellant now claims that K.V.P. of Rs.35,000/- was purchased from Tentulia, sub-Post Office in May’2004 out of maturity proceed of another recurring deposit No. 410273 with the same Post Office.
2. (a) That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in holding cash deposits sin overdraft A/.c No.32 with Allahabad Bank, Swarupnagar Branch as unexplained investment. (b) That on the facts and in the circumstances of the case, Ld. CIT(A) has failed to appreciate that cash deposits were made in O.D. A/c No. 32 out of cash sales of meat in order to keep the liability within the sanctioned limit. © That even assuming that cash Sales as represented by cash deposits in OD A/c No. 32 are not included in disclosed turnover, Ld. CIT(A) is wrong and unjustified in confirming the total deposit of Rs.19,58,770/- as undisclosed income instead of the profit element embedded in the such undisclosed sales.
3. That on the facts and in the circumstances of the case, and keeping in view similar logic as stated in ground No. 2 © Ld. CIT(A) is wrong in confirming addition of Rs.2,98,520/- as deposits in C.C A/c No. 345 and Saving A/c No. 8913 with Allahabad Bank without considering withdrawals from these accounts which represented business expenses.
4. That on the facts and in the circumstances of the case, Ld. CIT(A) while confirming the action of Assessing Officer to deny exemption of Rs.25,000/- as agricultural income has relied on irrelevant facts and extraneous considerations.”
2. First issue raised by assessee in this appeal is that Ld. CIT(A) has erred in confirming the order of Assessing Officer by way of making an addition of Rs.1,15,000/- on account of unexplained investment.
Briefly stated facts are that assessee is an individual and dealing in the business of broiler meat. During the year assessee has availed overdraft facility from Swarupngar Branch of Allahabad Bank by pledging RatanSarkar v. ITO Wd-49(1) Kol. Page 3 the KVP. On examination of the details of KVPs, it was found that the 12 Nos. of KVPs valued at Rs. 115000.00 were purchased during the financial year 2004-05 but this transaction was not recorded in the balance sheet for the year ending 31-03-2005. The assessee also could not explain the source of KVPs in spite of several reminders issued to him. Hence, AO added this income to assessee’s accounts.
Aggrieved, assessee preferred appeal before Ld. CIT(A) where Ld. AR of the assessee demonstrated that KVPs worth of Rs. 35,000/- was purchased in the month of May 2004 and KVPs worth of Rs. 80,000/- was purchased in the month of July 2004. The source of investment for the purchase of KVPs worth of Rs. 1,15,000/- were explained in the following manner :
1) Rs. 25,000/- was received on money back policy from LIC on dated 21-4-2004 in the saving bank account maintained with UBI. 2) Rs.10,000/- on cash available with the assessee. 3) Rs.80,000/- was out of the maturity recurring deposit with Post Office.
The CIT(A) sought the remand report from the AO on the above said source of investment and the AO has submitted in his remand report that the assessee did not produce any relevant documents in support of its claim that the money invested in KVPs was out of the said amount received from LIC and on maturity of post office recurring deposits. In the absence of any evidence that the money was invested out of the receipt from LIC and maturity of recurring deposits, the CIT(A) has disregarded the claim of the assessee and dismissed the appeal.
Aggrieved by this order of Ld. CIT(A) assessee preferred appeal before the Tribunal. Mr. S. Chatterjee, Ld. Authorized Representative RatanSarkar v. ITO Wd-49(1) Kol. Page 4 appearing on behalf of assessee and Mr. Pinaki Mukherjee, Ld. Departmental Representative appearing on behalf of Revenue.
We have heard the rival parties and perused the material available on record. Ld. AR has submitted a paper book running from page nos. 1 to 41. Before us the Ld. AR of assessee submitted the pass-book issued by post office in support of recurring deposit account no. 410299 wherein withdrawal of Rs.81,115/- was clearly recorded on dated 31-07- 2004. Out of this amount of money, a sum of Rs. 80,000/- was invested in the KVPs. The pass book of the post office for such FD account no. 410299 is placed at pages 16 to 25 of the paper book. However for the another investment of Rs. 35,000/- in the KVPs, the Ld AR has taken a new plea that the amount of money invested was out of the maturity of another recurring deposit vide no. 401273 with the post office for the amount of Rs. 40,557/-.The pass book of the post office for such FD account no. 410273 is placed at pages 26 to 35 of the paper book.In respect of this additional FD account no. 410273 the Ld. AR submitted that this FD statement amounts to additional evidence not submitted before authorities below so the Hon’ble Tribunal may confine the findings only in respect of disputed addition of Rs. 80,000/-. The Ld. DR supported the orders of lower authorities. A careful analysis reveals that the AO and Ld. CIT(A) rejected the claim of the assessee for the want of source of investment in KVPs and the assessee could not really produce the desired documents before the lower authorities. However, now the Ld. AR has produced the statement of the FD A/c for our consideration and request to delete the addition confirmed by the A.O. Therefore, in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee for justification of the source RatanSarkar v. ITO Wd-49(1) Kol. Page 5 of investment in KVPs to the AO. We also disregard the contention of the assessee to limit the finding of investment in KVPs to extent of Rs. 80,000/-. In our opinion, the assessee should not be deprived from the benefit given in the law and should not unnecessary be penalized. Hence we restore this ground of appeal to the AO to adjudicate afresh as per law. The ground of appeal of the assessee is allowed for the statistical purpose.
7. Coming to assessee’s second issue is that the CIT(A) has erred in confirming the order of AO by treating the deposit of Rs.19,58,770/- as income from undisclosed source. In this case, assessee has declared his turnover of Rs.6,42,359/- but as per the bank statement there was total deposit of Rs.21,51,420/-. On question by AO to the assessee about the deposits of the said money in excess of the turnover declared in his return income,the assessee replied that the out of the said sum Rs. 19,58,770/- belongs to his daughter, Smt Rama Sarkarwho is running a business under the name and style of Rama Broiler traders. It was also submitted that assessee is holding a joint account with his daughter. But assessee could not produce the supporting documents in support of his claim and the documents produced before AO were not relevant. Therefore, AO disallowed the claim of assessee and added to the income of assessee a sum of Rs.19,58,770/-. Aggrieved, assessee preferred appeal before Ld. CIT(A).
8. Before Ld. CIT(A), assessee pleaded that an amount of Rs. 19,58,770/- deposited in his bank account shows the turnover of the business of his wife. The assessee has submitted the income tax returns, profit and loss account, trade license of his wife. However the assessee could not substantiate his claim that the receipt of the money RatanSarkar v. ITO Wd-49(1) Kol. Page 6 in bank belongs to his wife. Hence the CIT(A) disregarded the claim of the assessee and upheld the order of the AO. Aggrieved assessee preferred appeal before the Tribunal.
9. Before us the Ld. AR of assessee has pleaded that treating the entire cash deposit as the income of the assessee is against the principal natural justice. The bank account where cash was deposited was a bank current account and used only for the business purpose. This account was duly reflected in the balance sheet of the assessee. So all the transactions should be treated business transactions. The Ld. AR prayed to tax the business receipt by applying GP ratio. The assessee also suggested some alternate method for applying the tax on the receipt of money in bank which was presented in the form of cash flow. On the other hand, Ld. DR relied on the orders of Authorities below.
We have heard rival contentions and examined the facts and circumstances of the case. The assessee failed to substantiate the argument that the cash deposit belongs to his wife/ daughter. It was observed that the Ld AR submitted before the AO that the cash receipt belongs to the daughter of the assessee but he changed his statement before CIT(A) by stating that the cash receipt belongs to his wife. So the assessee summarily failed to establish his claim. However for the sake of more clarity we are reproducing the relevant portion of AO order from page no. 4 middle para as under : “the credit in his OD a/c No. 32 to the tune of Rs. 19,58,770/-, as claimed by the assessee to be the business receipt of his daughter Smt Rama Sarkar and submitted through his letter on 16.11.2007, is considered to be nothing but his own business receipt in the guise of Rama Broiler Traders for the year under consideration. Hence, the amount of Rs. 19,58,770/- is added to the total income of the assessee without considering any further expenses whatsoever.”
RatanSarkar v. ITO Wd-49(1) Kol. Page 7 A careful analysis to the order of the AO reveals that the AO has recorded the cash deposit entries as business receipt. At the same time the AO treats the entire cash deposit as income without considering any further expenses whatsoever. Here we are of the view that the business receipt can be treated income only after deducting the relevant expenses in relation to business receipt. Besides it is important to note that all the cash was deposited in the business bank of the assessee and the same was duly disclosed in the balance sheet. On this basis we are inclined to apply the effective rate of income on the undisclosed receipts of the assessee. Hence we allow this ground of appeal to the file of AO with the direction to adjudicate this ground afresh as per law. Hence this ground of appeal is allowed for statistical purpose.
11. Next ground of assessee’s appeal is the addition of Rs.2,98,520/- as unexplained money. During the course of assessment the AO found that the assessee has failed to disclose the bank accounts in the income tax return. However, on question by the AO to the assessee about the source of money deposited with the banks, the assessee could not give satisfactory reply.So AO added the amount of Rs.2,98,520/- being peak credit balance in the total income of the assessee. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has upheld the order of AO. Now, assessee preferred second appeal before the Tribunal.
12. Before us Ld. AR of assessee prayed not to treat the entire sum of Rs.2,98,520/- to the income of assessee and offered to apply the gross profit rate on the sum deposited with the banks. However, the assessee could not explain the source of money deposited in the bank. It was also found that the same bank account was also not disclosed in the income of return. Therefore, in the absence of any documentary evidence from RatanSarkar v. ITO Wd-49(1) Kol. Page 8 the side of assessee we are of the view that the addition made by AO and confirmed by Ld. CIT(A) has been correctly done. Therefore we do not interfere into the orders of Authorities below. This ground of assessee’s appeal is dismissed.
13. Coming to last ground raised by assessee for the disallowance of agricultural income of Rs.25,000/-. During the assessment proceedings assessee has shown an income of Rs.25,000/-which the assessee claimed exempted from tax. The assessee treated the income from the broiler business as income from agricultural activity, hence claimed exemption. However, the AO disregarded the claim of the assessee and added this income of Rs. 25,000/- to the total income of the assessee. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has upheld the order of AO. Now, aggrieved by the order of CIT(A) , assessee preferred appeal before Tribunal.
Before us the Ld. AR submitted that the assessee has been showing the income from agricultural business for the last several years and the same was admitted by the Revenue. The observation of the AO that such exemption was claimed for the production of broiler chicken does not hold any merit. The Ld. AR has submitted the PARCHAS at the time of remand report in support of agricultural land along with other documents. The balance sheet of the assessee also shows the agricultural inherited land (without any value). The Ld. DR vehemently supported the order of the lower authorities. A careful analysis of the Ld. AR submission clearly shows that the assessee has been showing the income from agricultural activities in the return of income for the last many years. The balance sheet also contains the inherited agriculture RatanSarkar v. ITO Wd-49(1) Kol. Page 9 land. The assessee also pleaded that the agricultural income shown and claimed exemption from the tax is not from broiler business and the AO has wrongly treated the same from broiler business. The relevant detail of agricultural business has not been provided. However in the in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee to justify his claim before the lower authorities. Hence, this ground of appeal is restored to the file of the AO for fresh adjudication as per law. Hence this ground of assessee’s appeal is allowed for statistical purpose.