Bisheswar Sharma,, Hyderabad vs Assessee

Sri Bisheswar Sharma, Income Tax Officer, HYDERABAD Vs Ward-6(3) [PAN: AJEPS4456R] HYDERABAD

(Appellant) (Respondent)

For Assessee : Shri S. Rama Rao, AR For Revenue : Shri Rajat Mitra, DR

Date of Hearing : 19-03-2015 Date of Pronouncement : 17-04-2015

ORDER

PER B. RAMAKOTAIAH, A.M. :

This is an assessee's appeal filed against the order of the Commissioner of Income Tax(Appeals)-IV, Hyderabad dated 11-06-2013. Assessee is aggrieved on addition of cash deposits in bank account which are stated to be business receipts. Assessee is also aggrieved on disbelieving the agricultural income admitted of Rs.1,20,000/-. Eventhough, assessee has raised a ground with reference to addition of Rs.61,380/- made by Assessing Officer [AO] towards interest of FDs, the same was not pressed.

I.T.A. No. 1241/Hyd/2013 :- 2 -: Bisheswar Sharma

2. Briefly stated, assessee is engaged in the business of fabrication of furniture and wall fittings and also a partner in a firm in similar line of business. Assessee filed his return of income admitting gross total income of Rs.4,22,214/-. In view of the AIR data received that assessee has deposited various amounts in Oriental Bank of Commerce and State Bank of Bikaner & Jaipur, the case was selected for scrutiny and in the course of assessment proceedings, assessee was asked to explain the deposits vide letter dt.23-12-2011. Assessee submitted an un-audited P&L A/c and Balance Sheet for the business of fabrication of customized furniture and wall fittings and stated that the source of deposits in the bank account are those receipts and withdrawals are for the business of fabrication. He further stated that un-audited P&L A/c indicate the profit of Rs.3,44,500/- which was more than 8% on the gross receipts of Rs.37,62,006/- and requested to adopt the above amount. AO however, did not accept on the contention that the turnover exceeds limits specified under Income Tax Act [Act] and is not covered by the provisions of Section 44AD (sic). Therefore, he estimated peak credit of the cash deposits which worked out to Rs.18,52,900/-. Further, cheque deposits totaling to Rs.4,22,477/- were also taken as un-explained investment in bank account (sic). On the reason that assessee has not furnished any proof of ownership or agricultural activity, the income earned at Rs.1,20,000/- declared by assessee was treated as 'Income from Other Sources'. In addition, AO also added an amount of Rs.61,380/- as FDR interest and also bank interest of Rs.14,239/- on which there is no dispute. AO also disallowed part of the claim of 80C of Rs.27,042/- on the reason that interest on mortgage was not allowable as deduction u/s. 80C. Even though assessee claimed various amounts and restricted the claim to Rs.1 Lakh under the provisions of Section 80C, AO thought to disallow the entire amount and added to the total income like a deduction u/s. 37(1). In fact even gross total income returned at I.T.A. No. 1241/Hyd/2013 :- 3 -: Bisheswar Sharma

Rs.4,22,214/- was taken as total income thereby, an amount of Rs.1 Lakh was additionally brought to tax in the assessment order.

3. Assessee contested various additions before the CIT(A) but Ld.CIT(A) confirmed the action of the AO in making the cash deposits and cheque deposits as un-explained and also dismissed other grounds raised by assessee. CIT(A) rejected all the contentions and dismissed the appeal.

4. Before us, Ld. Counsel filed a Paper Book containing 147 pages with a prayer to admit additional evidence with reference to land- holding. It was submitted that assessee in the business of fabrication and has migrated from Bihar to Hyderabad. It was submitted that he was also a partner in M/s. Sharma Furniture with his brother and most of the deposits are the business receipts. In addition to the partnership activity, assessee also has proprietary job work business. Further, assessee also receives rent which was deposited by way of cheques in the bank account. With reference to agricultural income, assessee owns properties in Bihar and therefore could not furnish the evidence immediately before the CIT(A), therefore, filed additional evidence. It was submitted that both AO and CIT(A) has not considered assessee's submissions and therefore, has no objection if the matters were set aside to AO for fresh examination. Ld.DR while admitting that there are certain mistakes in the order however, supported the CIT(A)'s order.

5. We have considered the issue and perused the Paper Book placed on record. As per the return of income furnished by assessee, assessee has in fact shown share of profit from M/s. Sharma Furniture, remuneration from the firm along with interest and Rents received from M/s.Reliance Communications Ltd., on which there was TDS and also I.T.A. No. 1241/Hyd/2013 :- 4 -: Bisheswar Sharma

estimated job works in carpentry on which income of Rs.62,450/- was offered by assessee. Out of the gross total income of Rs. 4,22,214/- assessee claimed deduction of Rs.1 Lakh u/s. 80C and offered taxable income at Rs.3,22,214/-. As seen from the assessment order, AO took the gross total income as declared total income and started the computation from the above amount. In addition, even though assessee was explaining that the deposits were from the proprietary business of carpenting and offered income of Rs.3,44,500/- on gross receipts of Rs.37,62,006/-, AO simply ignored the offered income and accepted only Rs.62,450/- stated in the return of income. AO also wrongly considered that the turnover of Rs.37,62,006/- was exceeding the limits provided under Sec 44AD of Income Tax Act. We are unable to understand the logic of the AO as the turnover for small businesses is fixed at Rs.40 Lakhs and assessee's turnover is less than that. Regarding the cheque payments, assessee explained that they pertain to rent receipts, agricultural income and other transfers from the firm. This explanation was also not even examined by the AO and added as un-explained investment in bank account. How the transfers into the bank account can be considered the un-explained investment is not explained by the AO. Unfortunately, in spite of furnishing necessary clarification before the CIT(A), the CIT(A) also ignored the same. Assessee in the Paper Book also filed evidence of owning agricultural land to explain the source of agricultural income. Assessee also had certain share transactions and form 26AS was filed. As seen from the assessment order, none of these activities were examined by the AO. Just because AIR information was received that there were deposits in the bank account, without examining the nature of receipts, the AO took the peak credit which in our view is not correct. It is assessee's explanation that these are business receipts and he has more profit than what was declared in the return of income. Even protectively also the I.T.A. No. 1241/Hyd/2013 :- 5 -: Bisheswar Sharma

offered income was not accepted by the AO. Leave alone these obvious errors, when assessee claimed a total of Rs.1,17,414/- as deduction u/s. 80C out of which interest on mortgage of house was claimed at Rs.27,042/-, instead of restricting the claim u/s. 80C to the actual other amounts claimed in the return, AO simply added the above amount to the gross total income, thereby committing another mistake. As seen from the above order of AO, there is no rhyme or reason in making the additions. Just because the same was confirmed by the CIT(A), We are not in a position to accept the orders of the authorities. Since assessment of assessee was not done in correct perspective and assessee has filed additional evidence in support of agricultural income, we are of the opinion that order of the AO and CIT(A) are to be set aside with a direction to AO to do the assessment after due examination of the issues properly, according to the provisions of law. With these directions, the orders of the authorities are set aside and assessment is restored to the file of AO for fresh consideration. Assessee should be given due opportunity and his submissions should be considered.

6. Assessee's grounds are accordingly allowed for statistical purposes. In the result appeal is allowed for statistical purposes.

Order pronounced in open Court on 17th April, 2015.

Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 17th April, 2015

TNMM I.T.A. No. 1241/Hyd/2013 :- 6 -: Bisheswar Sharma

Copy to :

1. Sri Bisheswar Sharma, C/o. Sri S. Rama Rao, Advocate, Flat No.102, Shriya's Elegance, H.No.3-6-643, St.No.9, Himayatnagar, Hyderabad.

2. Income Tax Officer, Ward-6(3), Hyderabad.

3. CIT(Appeals)-IV, Hyderabad

4. CIT-III, Hyderabad

5. D.R. ITAT, Hyderabad