Bhavesh Indravadan Gandhi, Surat vs Assessee

सन ु वाई क तार ख/Date of Hearing : 15-6-2015 घोषणा क तार ख /Date of Pronouncement: 19-6-2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This an appeal filed by

the assessee against order of the CIT (A)-IV, Surat, dated 12-7-2011. for Assessment Year 2007-08.

2. The only ground of appeal taken by the assessee in this appeal reads as under:-

"The A.O. has erred in law and on facts to make addition u/s. 69A of the Act for peak credit of Rs.9,62,184/- in bank account No.2041 with Bank of Baroda, Areth, though he, already accepted trading activities for which 5% NP was assessed on total credit of ITA No. 2997/Ahd/2011 Assessment Year 2007-08 2

Rs.17,45,468/- of the same bank account as gross turnover of appellant's business. Ld. CIT (A)-IV, Surat has also erred in confirming addition of peak credit as against business profits of appellant's business."

3. The brief facts of the case are that the assessee was maintaining a Bank account with Bank of Baroda, Areth being account No.2041. Te assessee was asked to explain the source of credit in the Bank account but no explanation was furnished. The A.O. issued show cause notice on 19-11-2009 requiring the assessee to show cause why the credit of Rs.17,45,468/- in the said Bank account be not treated as unexplained money u/s. 69A of the Act. It was submitted that the assessee was doing business of sale and purchase of food-grains in the market yard and was under the impression that this was agricultural income and exempt from tax. It was accepted that the transactions in the bank account pertained to trading and it was offered that 3% of such turnover be considered as income. This explanation of the assessee did not found favour with the A.O. as the assessee previous hearings submitted that he does not maintain books as he had income from salary, interest and share of profit only whereas after discovery of bank account and issue of show cause, books of accounts showing cash sales and purchases were produced which could be nothing but an afterthought. The assessee had not mentioned the existence of any agricultural income in the return or trading in agricultural products till the issue of show cause. The books produced showed sales made on all 365 days from September to January, there were deposits in the bank account of Rs.7,79,000/- with negligible withdrawals of Rs.2,000/- which shows that the business was not genuine. A.O. therefore, held that the assessee failed to provide explanation about the source and nature of deposit in the undisclosed bank account. He therefore, made addition of peak credit in the bank account appearing on 22-3-2007 which was Rs.9,62,184/- as unexplained money u/s. 69A. A.O. also ITA No. 2997/Ahd/2011 Assessment Year 2007-08 3

made addition of Rs.87,273/- on account of profits calculated at 5% of total deposits in the bank during the year amounting to Rs.17,45,468/- treating the deposits as turnover.

4. On appeal, the CIT (A) observed that the assessee had not disclosed the bank account No.2041 with Bank of Baroda, Areth ether in the return of income or during the assessment proceedings till the time it was discovered by the department and show cause notice was issued. In the return of income assessee had not sown any agricultural income for rate purpose. This shows that the claim of belief of exempted income and production of related books of accounts incorporating the said bank accounts was an afterthought. The account was never intended to be disclosed was clear from the fact that the interest earned in the bank account was not offered for taxation. The A.O. analysed the bank account and has shown that the transactions therein did not appear to be genuine because of heavy deposits and negligible withdrawals during September and January period since the bank account was undisclosed and the genuineness of the trading activity was not established beyond reasonable doubt, the account is held as unexplained. The action of the A.O., in considering the peak credit as unexplained income of the appellant u/s. 69A is upheld. However, the CIT (A) deleted the addition on account of estimate of profit of Rs.87,273/- treating the deposits as turnover because the existence of business was not accepted by the A.O. while making the addition on account of peak credit.

5. Before us, assessee filed an adjournment application seeking adjournment of the hearing fixed on the ground that A.R. of the assessee was out of station and it was not possible to represent the case for him.

ITA No. 2997/Ahd/2011 Assessment Year 2007-08 4

6. We find that the reason given in the adjournment application by the assessee is not plausible and therefore, the adjournment was rejected and the appeal was heard ex-parte qua the assessee and disposed of after considering the submissions of the Departmental Representative and the material available on record.

7. The Departmental Representative submitted that the assessee had not disclosed the bank account maintained by it with Bank of Baroda, Areth being account No.2041. The same was detected by the department. The assessee had also now shown any agricultural income for rate purposes. Therefore, the explanation of the assessee that the deposit of Rs.17,45,468/- in the bank account was the receipts iof business of Food grains don e by the assessee during the year was an afterthought and the books of accounts produced before the A.O. were also an afterthought.

8. Therefore, the A.O. was justified in making addition on peak deposits of Rs.9,62,184/- to the income of the assessee.

9. We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case the A.O. found that the assessee was having a bank account with Bank of Baroda, Areth being account No.2041 which was not disclosed in the return of income filed by the assessee. The A.O. found that total deposit in this bank account was Rs.17,45,468/- and therefore he made addition of the peak balance in the account amounting to Rs.9,62,184/- as unexplained income u/s. 69A of the Act.

10. The assessee had explained before the A.O. by filing the books of accounts that the amounts deposited in the said bank account represents sale proceeds of food-grain as the assessee was doing the business of sale and purchase of food-grain in the market yard and that the assessee under the impression that this was agricultural income and exempt from tax had not disclosed the same in the return of income.

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The Assessing Officer did not accept the explanation by observing that it was an afterthought.

11. On appeal, the CIT (A) confirmed the action of the Assessing Officer.

12. In the above facts and circumstances, we are of the considered opinion that the Assessing Officer was not justified in rejecting the explanation of the assessee who had presented the books of accounts showing the receipts of undisclosed bank account from sale of food- grain merely on the ground that it being an afterthought. It was incumbent upon the Assessing Officer to examine the books of accounts with the related evidences and documents and thereafter should have arrived at a decision. Without verification of books of accounts produced before him and bringing any material on record, the Assessing Officer was not justified in rejecting the books of accounts of the assessee as an afterthought and the CIT (A) was not justified in confirming the same. We therefore set aside the orders of the lower authorities and remand the matter back to the file of the Assessing Officer and direct him to decide the issue afresh after examining the books of accounts and related documents as per law. Needless to mention that he shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue. Thus the ground of appeal is allowed for statistical purpose.

13. In the result, appeal is allowed for statistical purpose.

Order pronounced in the Court on Friday, the 19th day of June 2015 at Ahmedabad.

Sd/- Sd/- (S.S. GODARA) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA No. 2997/Ahd/2011 Assessment Year 2007-08 6

Patki

आदे श क त ल प अ!े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आयु!त / Concerned CIT 4. आयकर आयु!त(अपील) / The CIT(A)IV, Surat.

5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड- फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील&य अ'धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation- 16 / 17-06-2015

2. Date on which the typed draft is placed before the Dictating Member :16/17-06-2015

3. Date on which the approved draft comes to the Sr.P.S./P.S. 18-6-2015 4 Date on which the fair order is placed before the Dictating Member for Pronouncement 19-6-2015

5. Date on which the file goes to the Bench Clerk: 19-6-2015

6. Date on which the file goes to the Head Clerk..................................

7. The date on which the file goes to the Assistant Registrar for signature on the order..........................

8. Date of Despatch of the Order..................