Ankur Nohria, Rajpura vs Assessee

Ankur Nohria, Vs. The Income Tax Officer, Prop.Diamond Incorporate, Ward Rajpura Rajpura. PAN: ADCPN1112A (Appellant) (Respondent)

Appellant by : S/Shri Ashok Goyal & Vikas Aggarwal Respondent by : Shri Manjit Singh, DR

Date of hearing : 04.02.2015 Date of Pronouncement : 10.02.2015

Per BHAVNESH SAINI, J.M. :

This appeal filed by the assessee is directed against

the order of learned Commissioner of Income Tax

(Appeals), Patiala dated 24.12.2013 for assessment year

2008-09.

2. On ground No.1 and 2 the assessee challenged the addition o f

Rs.17,35,200/- under section 69A of the Act on account of

cash deposits in the bank account.

3. Briefly, the facts are that the assessee filed return of

income at Rs.1,40,950/-. The main source of income of the 2

assessee is "income from profit and gains from business".

The assessee is a wholesale trader of ball bearings and

machinery parts. The assessee has declared net profit of

Rs.2,00,944/- from sales of Rs.39,00,875/-. As per the

balance sheet, the assessee is maintaining a cash credit

account with Oriental Bank of Commerce, Rajpura. The

assessee was to furnish details of the bank account

maintained by him either individually or jointly with any other

person. The assessee furnished copies of three bank

accounts maintained by him; i) Cash credit bank account

maintained with Oriental Bank of Commerce, Rajpura; ii)

Saving bank account with HDFC Bank, Rajpura; iii) Current

bank account with ICICI, Rajpura. As per Annual Information

Report (AIR), the assessee had made cash deposits of

Rs.17,35,200/- in his saving bank account No.0284010003170

maintained with Kotak Mahindra Bank, Rajpura. The

assessee has not disclosed this account through out the

assessment proceedings. The assessee in the return of

income stated that the income is filed on estimate basis being

no accounts case. The assessee explained before the

Assessing Officer that he has made total sales of

Rs.39,00,875/- and earned net profit after deducting all

expenses. The net profit is about 5.15% approximately,

which is higher than the prescribed percentage under section

44AF of the Act for the requirement of books. It is explained

that the assessee maintained only cash book and ledger.

The assessee did not produce books of account or any other

document other than copies of debtors and creditors account. 3

The Assessing Officer obtained copy of the bank account of

the assessee with Kotak Mahjindra Bank, Rajpura from the

bank and explanation of the assessee was sought to furnish

all the entries contained therein. The assessee explained that

the bank account with Kotak Mahjindra Bank, Rajpura has

been shown in the books of account but due to mistake the

balance was transferred to expenses account instead of the

balance being taken to balance sheet. The printout of

computerized cash book and ledger was also produced. The

Assessing Officer noted that the perusal of the same shows

that there is credit entry of Rs.3010/- on 31.3.2008 in the

miscellaneous income account with the narration indicating

transfer of the amount from Kotak Mahjindra Bank, Rajpura.

As per bank statement obtained from the bank, there is credit

closing balance of Rs.5,988/-, against which there has to be

debit balance as per assessee's books of account. The

Assessing Officer found that there are various cash deposits

totaling Rs.17,35,200/- in this bank account in the year

under consideration. Each deposit is less than Rs.50,000/-.

Same amount as deposited in cash has been withdrawn

immediately thereafter either on the same day or the next day.

All the entries appearing in the bank statement have been put

by the assessee in the cash book also. The Assessing Officer

found it to be abnormal for making cash deposits and

withdrawing the cash on the same day. Further information

was also gathered to show that the cash has been deposited at

Rajpura but had been withdrawn at Delhi. The Assessing

Officer found that the entries put in the cash book are only 4

after thought and the assessee could not explain the deposits

in the bank account with Kotak Mahjindra Bank, Rajpura and

accordingly, treated the said money as from un-disclosed

sources under section 69A of the Act and addition of

Rs.17,35,200/- was made against the assessee.

4. The assessee submitted before the learned CIT (Appeals)

that he was looking after his ailing father. His employee

would deposit the cash in hand in bank which he would

withdraw and carry from Delhi on his way back As the

employees were new they were under instructions to deposit

the amount in the bank at the end of the day. This way, it

was the same amount which was rotating in the bank as well

as in the books of account and additions if at all should be of

peak amount. The Assessing Officer in counter comment

stated that the assessee has failed to explain the source of

the bank deposits. Therefore, the addition may be maintained.

5. The learned CIT (Appeals) observed that the assessee has

not disclosed this bank account to the Revenue Department

and rejected the contention of the assessee and confirmed the

addition.

6. We have heard the learned representatives of both the

parties and perused the material available on record. The

learned counsel for assessee reiterated the submissions made

before the authorities below and submitted that copy of Kotak

Mahindra Bank Account, Rajpura would show that the

amounts were deposited in the bank account and also 5

withdrawn the same were shown in the cash book also.

Therefore, it was the rotation of money of the assessee only

and since the assessee did not maintain any regular books of

account and income was offered in the return of income under

section 44AF of the Act. Therefore, the assessee need not to

maintain books of account and addition is, therefore, wholly

unjustified. He has relied upon the decision of the Hon'ble

Punjab & Haryana High Court in the case CIT Vs. Surinder Pal

Anand, 242 CTR 61 in which it was held as under :

" A s s e s s me n t b e i n g u n d e r s . 4 4 A D , t h e a s s e s s e e wa s n o t under obligation to explain individual entry of cash d e p o s i t i n t h e b a n k u n l e s s s u c h e n t r y h a d n o n e x u s wi t h the gross receipts and theref ore no addition under s. 68 was called for."

7. On the other hand, the learned D.R for the Revenue

relied upon the orders of the authorities below and submitted

that the assessee failed to disclose the bank account

maintained with Kotak Mahindra Bank, Rajpura and the

source of deposits was also not explained. Therefore, the

addition is justified.

8. We have considered the rival submissions. It is not in

dispute that the total sales of the assessee were of

Rs.39,00,875/-. The assessee is the trader of ball bearings

and machinery parts and explained before the Assessing

Officer that the return of income was filed under special

provisions contained under section 44AF of the Act.

Therefore, the assessee is not required to maintain the books 6

of account. Even then according to the submission of the

assessee, the assessee maintained only cash book and ledger.

The printout of computerized cash book and ledger were also

produced before the Assessing Officer. It was also explained

that the bank account of Kotak Mahindra Bank, Rajpura has

been shown in the books of account but due to mistake the

balance was transferred to expenses account instead of the

balance being taken to balance sheet. The Assessing Officer

also noted the fact that the amount deposited in cash in this

bank account has small deposits as well as withdrawal of the

cash immediately either on the same day or the next day of

the deposits. The Assessing Officer also noted that all the

entries appearing in the bank statement have been put by the

assessee in cash book also, though the Assessing Officer

disbelieved the entries contained in the cash book and

considered it to be an after thought. In this background, it is

clear that the assessee is a retailer and filed return of income

with the aid of section 44AF of the Act. Therefore, the

assessee need not to maintain any regular books of account.

It is a fact that in the assessment year under appeal the

assessee made various cash deposits in the bank account

maintained with Kotak Mahindra Bank, Rajpura but the

details of the same shows that these were small deposits in

this bank account. Same amount as deposited in cash in this

bank account has been withdrawn immediately either on the

same day or the next day. The assessee has failed to

reconcile whether the same deposits were from the sale

proceeds of the assessee. It is also fact that initially the 7

assessee did not disclose the bank account maintained with

Kotak Mahindra Bank, Rajpura to the Revenue Authorities and

the Assessing Officer also called for the information from the

concerned bank as well as information was received from AIR

that there are cash deposits in the bank account of the

assessee with Kotak Mahindra Bank, Rajpura. Therefore, the

decision of the Hon'ble Punjab & Haryana High Court in the

case Surinder Pal Anand (supra) would not support the case of

the assessee because the assessee has not proved nexus of the

cash deposited in the bank with the gross deposits. However,

considering the fact that the assessee made small deposits in

the bank account with Kotak Mahindra Bank, Rajpura on

various dates and after depositing the cash to this account,

the assessee also withdrawn the same amount either on the

same day or on the next day, would disclose that the assessee

was having availability of the cash for further deposit in the

same bank account maintained with Kotak Mahindra Bank,

Rajpura. The A.O. has not brought any evidence on

record to prove that the assessee has spent the amount

withdrawn somewhere else. The theory of peak credit is not

applicable in the case of the assessee because the assessee

never accepted it to be unexplained money. Therefore, in the

absence of complete details and considering the fact that the

amount of cash was rotating in the bank account of the

assessee with Kotak Mahindra Bank, Rajpura by making cash

deposits and immediately withdrawing the same would show

that the entire cash deposits in the bank account may not be

unexplained amount of the assessee. Therefore, considering 8

the totality of the facts and circumstances, it would be

reasonable and proper to give some substantial benefit to the

assessee for the purpose of deleting part of addition on this

issue. In view of the above discussion, we are of the view that

ends of justice would meet if the addition of Rs.10 lacs is

deleted. The addition may be restricted to Rs.7,35,200/-

only. We accordingly, modify the orders of the authorities

below and delete the addition of Rs.10 lacs, the addition

would now be restricted to Rs.7,35,000/-. The ground Nos. 1

and 2 of the appeal of the assessee are partly allowed.

9. On ground Nos.3 the assessee challenged the addition of

Rs.3,07,790/- on account of higher closing stock. The

Assessing Officer as per column 6-c (No account case) on page

3 of ITR-4 filed by the assessee noted the closing stock at

Rs.13,10,524/-. However, in the trading account ending

31.3.2008 and balance sheet ending 31.3.2008, the closing

stock was shown at Rs.10.02.734/-. The Assessing Officer in

view of this difference made addition of Rs.3,07,790/-. The

learned CIT (Appeals) also confirmed the addition.

10. On consideration of the facts of the case, we are of the

view that the addition is wholly unjustified. Since the return

is filed under section 44AF of the Act, the assessee need not

to maintain any books of account. Whatsoever cash book or

ledger was prepared by the assessee, was not believed by

the Assessing Officer while making the addition on account of

unexplained cash with Kotak Mahindra Bank, Rajpura. In

the balance sheet filed with the return of income, lesser 9

closing stock was shown but it appears that inadvertently the

assessee has maintained wrong figure in the income tax

return of the closing stock. Therefore, on such basis, the

addition need not to be made against the assessee. Further

when income is declared on presumptive basis under section

44AF of the Act, no further trading addition should be made

against the assessee. We accordingly, set aside the orders of

the authorities below and delete the addition of Rs.3,07,790/-

The ground No.3 of the appeal of the assessee is, therefore,

allowed.

11. On ground No.4 the assessee challenged charging of

interest under section 234B of the Act, which is mandatory

and consequential in nature. This ground of appeal of the

assessee is, therefore, dismissed.

12. On ground No.5 the assessee challenged the orders of the

authorities below in not canceling penalty under section 271D

of the Act. The Assessing Officer in the assessment order

initiated penalty proceedings under section 271D of the Act

separately.

13. The learned CIT (Appeals) has not discussed this issue in

the appellate order as no such ground was raised before him.

Since the Assessing Officer has not levied penalty against the

assessee and merely initiated penalty proceedings would show

this ground is premature and is liable to be dismissed. The

penalty proceedings are distinct and separate, which is noted

by the Assessing Officer in the assessment order. Therefore, 10

no further interference is called for in the matter. This

ground of appeal of the assessee is, therefore, dismissed.

14. In the result, the appeal filed by the assessee is

partly allowed.

Order pronounced in the open court on this 10th day of

February, 2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 10 t h Februray, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh