HARMEET SINGH SABLOK,MUMBAI vs. ITO WD 19(2)(3), MUMBAI

This appeal by the assessee is directed against the order passed by CIT(A)-32, Mumbai and it pertains to A.Y. 2008-09.

Shri Harmeet Singh Sablok and repair of scooters. He also submitted that he was having two bank accounts and the total deposits therein works out to `12,17,189/- out of which the assessee disclosed income of `1,41,757/-. In other words, the income declared works out to 11.61% of the total receipt, which is more than 8% return on gross receipts, if provisions of sections 44AF/44AD are applied. He thus contended that the addition of the entire amount is not in accordance with law. The learned CIT(A) was of the opinion that the assessee’s explanation is not convincing. He therefore confirmed the addition made by the AO, though under section 69A of the Act, by observing as under: -

“I, however find that the Hon'ble Bombay High Court in the case of CIT vs. Bhaichand N. Gandhi 141 ITR 67 has held that the pass books is maintained by the bank, neither as an agent of the constituent, nor under the instructions of the constituent, hence the passbook cannot be regarded as book maintained by the assessee. I find that since for addition u/s 68, the unexplained credit should essentially be found in the books of accounts of the assessee, and in present case, the appellant has not maintained the books of accounts at all, the addition made cannot be confirmed u/s 68 of the Act. This however does not exonerate the appellant scot-free, simply because the quoted section for addition made is not applicable, when all other facts of the case are against the appellant. I find that in the case of Anup Sharma vs. ACIT (ITA No. 161/CHD/2012, the Hon'ble ITAT, Chandigarh had dealt with similar case, wherein the unexplained credits found in assessee’s pass book were confirmed by Assessing Officer u/s 68 of the Act, however, in appeal before CIT(A), the assessee relied upon the same judgment of Bhaichand N. Gandhi (supra). Hence, the CIT(A), by applying provisions of section 292B, confirmed the said additions u/s 69A of the Act. The ground of appeal before Hon'ble ITAT was that the CIT(A) had grossly erred in treating the addition made u/s 68 as unexplained investment u/s 69A by applying the provisions of section 292B of the Act. The Hon'ble ITAT observed that assessment even if made under the wrong provision is protected by the provision of section 292B. The Hon'ble ITAT held that merely because the bank pass book cannot be treated as books of account on the basis of certain decisions does not mean that addition is not protected u/s 292B and has been rightly confirmed by the CIT(A) u/s 69A of the Act. I find that the facts of present case of the appellant is identical, hence by invoking the provisions of section 292B, I confirm the addition made of Rs.8,54,926/- u/s 69A of the Act. Therefore, the ground no. 2 of the appeal is dismissed.”

6. Further aggrieved, assessee is in appeal before the Tribunal. The learned counsel for the assessee submitted that in this line of Shri Harmeet Singh Sablok business of purchase and sale of cars assessee merely receives commission and if the entire amount is added, the total income works out to more than 20% of the turnover and therefore the addition would be excessive in the circumstances of the case. He, however, admitted that in assessee’s own case for 2009-10 the Appellate Tribunal, under identical circumstances, held that the addition has to be restricted to 25% of the total deposit in the Standard Chartered Bank. However, he submitted that if 25% is added as income, in addition to the income already declared, it works out to almost 50% of the amount deposited in the banks and thus it is excessive.

7. On the other hand, the learned D.R. submitted that the assessee has not maintained books of account and he admitted that he acted merely as a commission agent in some cases and in few cases he must have purchased the cars and without getting it registered in his name he has transferred the cars/scooters to third parties and the margin between the purchase consideration and sale consideration would be the income of the assessee. In the absence of maintenance of books of account it is difficult to estimate as to what is the total turnover of the assessee and thus it cannot be said that the estimate is excessive. According to him the entire amount has to be added under section 69A of the Act, as has been done by the CIT(A). In the alternative he submitted that the ITAT, in assessee’s own case, having confirmed addition of 25% of the total deposit (ITA No. 7580/Mum/2013 dated 30.06.2015), the same method can be followed in this case also.

Shri Harmeet Singh Sablok Chartered Bank and it is only when the AO obtained information about the deposits being made in Standard Chartered Bank he had no other alternative but to accept the fact that the account was maintained by him. During the course of hearing the assessee was also asked to inform as to what are the deposits and withdrawals made but even that statement was not furnished. Under these circumstances I have no other alternative except to follow the decision of the ITAT in assessee’s on case for subsequent year and, consistent with the view taken therein, I hold that 25% of the total deposit made in Standard Chartered Bank deserves to be treated as income of the assessee. AO is directed accordingly.