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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-1, Raipur dated 01.02.2016, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income- tax Act, 1961 (for short ‘the Act’) dated 19.03.2014 for assessment year 2011-12. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. On the facts and circumstances of the case, that the ld. CIT(A) has erred in sustaining the addition made by the ld. AO at Rs.58,48,324/- as unexplained investment (i.e. u/s.69) for the cash deposits into saving bank account. 2. That the assessee craves leave to add, urge, alter, modify and without any ground/grounds before or at the time of hearing of the appeal.”
Succinctly stated, the assessee had e-filed his return of income for A.Y.2011-12 on 26.12.2011 declaring an income of Rs.16,23,000/-. Thereafter, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act.
During the course of assessment proceedings, it was observed by the A.O that as per AIR information the assessee had over the year made cash deposits of Rs.58,48,324/- in his savings bank account with State Bank of India. As the assessee had failed to come forth with any plausible
3 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 explanation as regards the nature and source of the aforesaid cash deposits, the A.O held the entire amount as unexplained investment of the assessee and made an addition of the same to his returned income.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. Although it was the claim of the assessee before the CIT(Appeals) that the cash deposits of Rs.58.48 lac in his bank account was the unaccounted turnover that was garnered from cash sales made over the year in remote areas but the same did not find favour with him. It was observed by the CIT(Appeals) that as the assessee had failed to substantiate his aforesaid claim by placing on record purchase/sale bills, therefore, the same could not be accepted on the very face of it.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
The Ld. Authorized Representative ( for short ‘AR’) for the assessee at the very outset submitted that the cash deposits in his bank account were sourced out of the cash sale proceeds that were deposited by customers based in remote areas in the course of assessee’s business of trading of electrical appliances. It was averred by the Ld. AR that cash deposits in the assessee’s SB account No.30938960938 with State Bank of India, Branch-
4 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 Ramsagarpara had been accepted by the A.O as unaccounted trading receipt while framing assessment in his case for the immediately succeeding year i.e. A.Y.2012-13. In order to buttress his aforesaid contention, the Ld. AR had taken us through the order passed by the A.O u/s.143(3) dated 18.03.2015 in the case of the assessee for A.Y.2012-13, Page 72-73 of APB. Our attention was drawn by the Ld. AR to the observations of the A.O wherein he had called upon the assessee to explain as to why cash deposits in his aforesaid bank account i.e. SB account No.30938960938 with State Bank of India, Branch- Ramsagarpara may not be treated as his unaccounted turnover from sale of unbranded electrical items followed with consequential addition of gross profit @18.05% on the said undisclosed turnover during the aforesaid succeeding year i.e. A.Y.2012-13. It was submitted by the Ld. AR that the A.O had thereafter, while framing the assessment for A.Y.2012-13 held the cash deposits in his bank account as his unaccounted turnover from sale of unbranded electrical items and restricted the addition by applying gross profit @18.05% to the said undisclosed turnover. It was further submitted by the Ld. AR that the aforesaid addition that was made by the A.O @18.05% was scaled down by the CIT(Appeals) to 10%. It was also submitted by the Ld. AR that now when the department had held the cash deposits in his aforesaid bank account as assessee’s unaccounted turnover, therefore, adopting a consistent approach a similar view as 5 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 regards the cash deposits of Rs.58,48,324/- (supra) could only have been drawn during the year under consideration. At the same time, it was submitted by the Ld. AR that considering the fact that profit on the sale of the unbranded electrical items varied between 5%-6%, therefore, addition should be restricted to the said extent.
The Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities.
We have heard the Ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record.
As is discernible from the records, it transpires that the assessee had made cash deposits of Rs.58,48,324/- (supra) in his savings bank account No.30938960938 with State Bank of India, Branch- Ramsagarpara. Admittedly, it is a matter of fact borne from record that the assessee had though claimed that the amount of cash deposits in his bank account were sourced out of cash sale proceeds of unbranded electrical appliances but he had failed to substantiate his said claim by placing on record any documentary evidence. Considering the fact that the assessee could not substantiate his aforesaid claim on the basis of any supporting documentary evidence, both the lower authorities had rejected his
6 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 explanation and had refrained from treating the cash deposits as his unaccounted sales. On a perusal of the records, it transpires that though the assessee had failed to irrefutably substantiate his claim that the cash deposits in his bank account were the sale proceeds of unbranded electrical items which were deposited by the customers who were based in remote areas, but at the same time we cannot remain oblivion of the fact that the said explanation of the assessee had found favour with the A.O while framing the assessment in his case for the immediately succeeding year i.e. A.Y.2012-13.
On a perusal of the assessment order passed by the A.O u/s.143(3) dated 18.03.2015 for A.Y.2012-13, we find that involving identical facts though the assessee had inter alia claimed that cash deposits in his aforesaid bank account No. 30938960938 with State Bank of India, Branch- Ramsagarpara was his unaccounted turnover from sale of unbranded electrical items but he could not substantiate the same by producing supporting bills or any other evidence. Considering the aforesaid factual matrix, the A.O while framing the assessment for A.Y.2012-13 had though found favour with the claim of the assessee that the cash deposits in his bank account was his unaccounted turnover that was generated in the course of his business of trading of unbranded electrical items for which bills were not available, but rejected his offer that 7 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 corresponding income therefrom be determined @ 2% of the amount of such undisclosed turnover. On a perusal of the records, we find that the A.O had applied gross profit rate of 18.05% that was disclosed by the assessee in A.Y.2012-13 w.r.t. his accounted turnover for the said year and made a consequential addition in the hands of the assessee. For the sake of clarity the observations recorded by the A.O while treating the cash deposits in the bank account as unaccounted turnover of the assessee and restricting the addition to 18.05% (supra) are culled out as under: “4. Based on AIR information received, the assessee was asked to explain the source of cash deposited in his bank accounts in SBI, Ramsagarpara bearing no.30938960938 and PNB, Jaistambh Chowk bearing No.0399000101179796. The assessee admitted that the cash deposited in is bank accounts represents unaccounted turnover from sale of unbranded electrical items for which bills are not available and the aggregate turnover of Rs.1,15,39,697/- (i.e. Rs.63,61,745/- in SBI and Rs.51,77,952/- in PNB) reflected in the said bank accounts was not disclosed in the audited books of accounts. The assessee was asked to show cause why the addition @ 18.05% on said undisclosed turnover of Rs.1,15,39,697/- should not be made considering the fact that the assessee achieved GP rate of 18.05% on disclosed turnover and the items being similar i.e. electrical items and also that all the indirect expenses already stood claimed and debited in audited Profit & Loss A/c. The assessee offered income @ 2% of the turnover of Rs.1,15,39,697/- claiming that the margins in unbranded items is very low due to competition. The assessee was asked to substantiate his claim by producing the bills, however, the assessee did not produce any evidence in support of his contention. Therefore, the assessee cannot be allowed to take advantage of his wrong doing, it is a fair presumption that all indirect expenses already stood claimed and for achieving undisclosed turnover the assessee was not required to incur any additional expenses. Hence, the addition of Rs.20,82,915/- is hereby made to the total income by estimating income @18.05% of undisclosed turnover i.e. Rs.1,15,39,697/-. Since the assessee concealed the particulars of his income and furnished inaccurate particulars of his income, hence, penalty proceedings u/s 271(1)(c) is initiated.”
8 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016
On appeal, the CIT(Appeals) taking cognizance of the fact that there was cut throat competition in trading of unbranded goods a/w. the fact that the assessee would have also incurred expenses on salary, freight and other routine expenses in the course of his unaccounted business transactions, restricted the addition in the aforesaid succeeding year i.e. A.Y.2012-13 to 10% of the amount of unaccounted turnover ( i.e. cash deposits in his bank account). For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: “3.3 On going through the assessment order and considering the assessee's submission, I find that it is a fact that the bank accounts with SBI and PNB were undisclosed and credit in these accounts remained unverifiable. AO has worked out GP in respect of these credits by the adopting rate of 18.05%. The appellant has stated that credit in the accounts represents receipts from trade of unbranded items. There is market in the western part of Orissa for unbranded items in the villages. However it is a very competitive market and profit is very low. He has offered profit of 2% which has not been accepted by the AO. Unbranded goods is gate way to the trade in western Orissa and the market in this region is very competitive. The purchases from these places have deposited cash in the two bank accounts from their respective places of business. Appellant also has to incur expenses on salary, freight and other routine expenses. In respect of these facts put forward by the appellant the profit margin of 2 percent offered by him is abysmally low, Looking to the GP of 18.05 percent in the other Section of his business regarding branded items, I consider a GP of 10 percent as profit to meet the justice. Hence, disallowance of Rs.11,53,939/- is confirmed and the balance disallowance is deleted.
Considering the aforesaid factual position, we find substance in the claim of the Ld. AR that now when the Department while framing assessment in the case of the assessee for the immediately succeeding year i.e. A.Y.2012-13 had itself held the cash deposits in assessee’s bank
9 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 account No.30938960938 with State Bank of India, Branch- Ramsagarpara as his unaccounted turnover, therefore, there could be no justification in adopting an inconsistent approach and rejecting his said explanation during the year under consideration. Our aforesaid view that the department is required to adopt a consistent view is fortified by the judgment of the Hon’ble Apex Court in the case of Radhasoami Satsang Vs. CIT 193 ITR 321 (SC). We, thus, in terms of our aforesaid observations are of the considered view that cash deposits in the assessee’s bank account during the year under consideration in an alike manner as in the immediately succeeding year i.e. A.Y.2012-13, are to be held as his unaccounted turnover from the sale of unbranded electrical appliances and the addition in his hands be restricted to the extent of the profit generated from such unaccounted business transactions.
Apropos the profit element on the aforesaid unaccounted turnover of unbranded electrical items is concerned, in our considered view the profit of the assessee from his unaccounted turnover can safely be taken @10% i.e. as had been adopted by the CIT(Appeals) while disposing off the appeal of the assessee for the immediately succeeding year i.e. A.Y.2012-13. Although it is the claim of the Ld. AR that as the profit on the sale of the unbranded electrical items fluctuated between 5%-6%, therefore, addition
10 Harish Kumar Chhabada Vs. DCIT-1(1) ITA No. 91/RPR/2016 should be restricted to the said extent, we do not find any basis for subscribing to his said unsubstantiated claim.
We, thus, in terms of our aforesaid observations and in the backdrop of the view taken by the A.O in the assessee’s case for A.Y.2012-13, therein hold the cash deposits of Rs.58.48 lac (supra) in his bank account as his unaccounted turnover, and restrict the consequential addition to Rs.5,84,832/- (i.e. @10% of Rs.58,48,324/-).