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Assessee represented by Shri P M Jagasheth, CA Department represented by Shri Vinod Kumar, Sr.DR Date of hearing 23/09/2022 Date of pronouncement 28/09/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC) dated 30/04/2022 for the Assessment year 2012-13. The assessee has raised following grounds of appeal:
“1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in reopening the assessment u/s 147 of the Income Tax Act, 1961 and issuing notice u/s 148 of the Act, 1961.
2. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs. Bharatkumar Ganpatram Vyas Vs ITO 32,55,324/- on account of cash deposited of Rs. 13,72,000/- and credit of Rs. 18,83,324/- into saving bank account treated as alleged unexplained money u/s 69A of the Act.
On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has not offered ample opportunities to hear the case and passed ex-parte order, hence, the case may please be set aside and restored back to the CIT(A) or A.O.
4. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper.
Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.
Brief facts of the case are that the assessee filed return of income for the Assessment Year (AY) 2012-13 on 18/02/2013 declaring income of Rs. 2,43,048/-. Subsequently, the case of assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) on 27/03/2019. Notice under Section 148 of the Act dated 27/03/2019 was served upon the assessee. In response to notice under Section 148, the assessee filed his return of income on 01/05/2019 declaring total income of Rs. 2,65,303/-. The Assessing Officer recorded that the reasons recorded were provided to the assessee on 07/08/2019. The Assessing Officer after serving notice under Section 143(2) and 142(1) proceeded for assessment. The Assessing Officer recorded that on verification of details available on record, it is seen Bharatkumar Ganpatram Vyas Vs ITO that the assessee has made cash deposit of Rs. 13,72,000/- and there is further credit of Rs. 18,83,324/- in his savings bank account with Kotak Mahindra Bank. The said bank account is not disclosed in the books of assessee. This bank account was in the joint name of assessee with her wife Smt. Vinaben B Vyas. On verification of details pertaining to assessment of Vinaben B Vyas, it was also noted that the said account is also not disclosed in her books as well. The Assessing Officer issued show cause notice dated 05/10/2019 in fixing the date of hearing on 11/10/2019. In the show cause notice, the Assessing Officer issued show cause as to why total credit of Rs. 32,55,324/- should not be treated as unexplained money and be added to the total income of the assessee. The Assessing Officer recorded that no reply was received by assessee despite giving sufficient time. The Assessing officer while passing assessment order added the total credit of Rs. 32,55,324/- in the bank account, as unexplained money under Section 69A of the Act.
3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A)/NFAC. The assessee in his statement of fact filed before the ld. CIT(A)/NFAC has stated that the assessee was engaged Bharatkumar Ganpatram Vyas Vs ITO in the business of trading of plastic materials and filed his return of income on 18/02/2013 declaring income of Rs. 2,43,048/-. During the year, the assessee made cash deposit on various dates aggregating to Rs. 13,72,000/- also made various credits in his savings bank account aggregating of Rs. 18,83,324/- in his savings bank account jointly held with his wife. The Assessing officer on the basis of information of deposit, initiated proceedings under Section 147 of the Act. These credits of cash and cheques were genuine and bonafide receipt of business of assessee and not the income from undisclosed source. During the assessment, the assessee was unable to make necessary submission for bonafide reasons. The ld. CIT(A) after considering the submissions of assessee, upheld the addition by taking a view that no compliance was made before the Assessing officer. The Assessing officer correctly made the addition in the assessment and he has no reason to deviate from the findings of the Assessing Officer. Further aggrieved the assessee has filed present appeal before this Tribunal.
I have heard the submissions of learned authorised representative (ld AR) of the assessee and the learned Senior Departmental Representative (Sr.DR)
Bharatkumar Ganpatram Vyas Vs ITO for the Revenue. The ld. AR of the assessee submits that the assessee filed his regular return of income for assessment year under consideration on 18/02/2013. Copy of acknowledgement of return is filed and the same is available on record. In the return of income, the assessee has offered business income as reflected in the return of income. The assessee was running his business in the name of ‘Varsha Packaging and Plastic Industry’. The assessee was in the business of trading of plastic items. The assessee has offered 8% income under Section 44AD of the Act on the total receipt of Rs. 41,83,221/-. The cash deposited on various dates in the bank account was unreported business receipts. There were certain entries through cheques. The Assessing Officer added aggregate of entire cash deposit and cheque deposit in the bank account. The Assessing Officer has not considered periodical withdrawal from the said bank account. The transaction reflected in the bank account is on account of unrecorded business transaction of assessee. The Assessing Officer was not correct in adding the entire deposit and only net profit on unrecorded transaction could only be brought to tax. The assessee has offered 8% income from the recorded transaction, therefore, at the worst, 8% of addition could be made Bharatkumar Ganpatram Vyas Vs ITO and not the entire deposit. To support his submission, the ld. AR relied on the various case laws as under: (i) Sunrise Education Trust Vs ITO (Exemption) (2018) 92 Taxmann.com 74 (Guj) (ii) Shri Vishal Dilip Rai Vs ITO (ITAT Surat) (iii) Ashish Natvarlal Vashi Vs ITO ITA No. 3522/Ahd/2016 (ITAT Surat) (iv) Shri Hasmukhbhai B Patel Vs ITO ITA No. 193/Srt/2019 (v) Shri Rinakumar A Shah Vs ITO ITA No. 172 /Ahd/2017 (ITAT Surat) (vi) CIT-IV Vs Pradeep Shantilal Patel (2014) 42 Taxmann.co, 2 (Guj) (vii) Nikhil Jatinkumar Lapsiwala Vs ITO ITA No. 219/Srt/2021] (viii) Smt. Krushangi Keyur Bhagat Vs ITO ITA No. 1434/Ahd/2013 (ITAT, Surat) (ix) Shri Mukesh Gamanlal Patel Vs ITO ITA No. 1636/Ahd/2013 (ITAT, Surat) 5. On the other hand, the ld. Sr. DR for the revenue submits that the assessee has not disclosed his bank account in his books of account, nor disclosed it with department while filing return of income, therefore, the Assessing officer was right and justified in adding the entire deposit in the impugned bank account as it was the additional and unrecorded income of assessee. Now, the assessee cannot take the plea of taxing profit margin on the cash deposit in the bank account.
I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I find that the during the assessment, the Assessing officer made addition of aggregate of cash as well as cheque deposit in the bank account of assessee. The ld. CIT(A), Bharatkumar Ganpatram Vyas Vs ITO confirmed the additions by taking a view that despite being given ample opportunities during appellate proceedings, the assessee failed to explain about the nature and source of the cash deposits and other credit entries amounting to Rs. 32,55,324/- in the bank account. I find that pattern of deposits in bank account shows that there are certain cheque deposits, deposits in cash and regular withdrawal of amount. The frequent deposit and withdrawal shows that the bank account in dispute was used for unreported business transactions. As recorded above the ld AR for the assessee before us claimed that the assessee was doing a business of plastic items, thus, considering the submissions of the ld AR for the assessee, I find merit in his submission that the assessee was doing some business activity, though it was not disclosed to the department. In my view, taxing the entire credit is not justified, thus, it would be justified if only profit element in such business activities from where the assessee generated the credit found in the bank account. The lower authorities have confirmed the entire aggregate of deposits and have not considered the withdrawal.
The Hon’ble Gujarat High Court in CIT Vs Pradeep Shantilal Patel (supra) held that where assessee admitted that cash deposit pertains to his retail business but details and nature of business were not forthcoming from record, considering the total turnover of assessee, net income had to be Bharatkumar Ganpatram Vyas Vs ITO determined under Section 44AF. Further the Coordinate Bench of this Tribunal in Smt. Krushangi Keyur Bhagat Vs ITO (supra) almost on similar set of facts wherein cash credit of Rs. 1,83,207/- was found credited in the bank account of that assessee, the assessee took plea before lower authorities that transaction in bank account pertained to her textile business. The assessee claimed that only peak credit appearing in the bank account should be considered which was not accepted and the amount after reducing the cheque deposits, remaining was treated as unexplained. However, on appeal before Tribunal, the plea of assessee that amount credited in the bank was a part of textile business and only profit element @ 5% of total deposit including of credit by way of cheque was considered as a profit element on the total deposits.
I am of the view that entire amount of deposits cannot be considered for addition, when the assessee is specifically contended before ld CIT(A) that the credit in the bank account if his unreported income. Therefore, 8% of total addition is considered as profit from such business activities. Accordingly, the Assessing Officer is directed to consider 8% of total deposit of Rs. 32,55,324/-. In the result, ground No. 2 of appeal raised by assessee is party allowed.
Bharatkumar Ganpatram Vyas Vs ITO 9. Ground No. 1 of the appeal relates to validity of reopening. I find that no submission was made by the ld. AR of the assessee, therefore, this ground of appeal is treated as dismissed being not pressed.
10. Grounds No. 3 to 5 are general in nature and do not require any adjudication.
11. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 28th September, 2022 and the result was placed on notice Board.