Farzana Md.Amin Qureshi, Surat vs Department Of Income Tax

ITO, Ward-5(1) Smt.Farzana Md. Amin Qureshi Surat. Vs 4/4777, Hazi Manzil, Taiyabi Mohallo, Zampa Bazar, Surat.

PAN : AACPQ 0557 E

अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)

Revenue by : Shri Dinesh Singh, Sr.DR Assessee(s) by : None (Written Submissions)

सन ु वाई क तार ख/ Date of Hearing : 18/06/2015 घोषणा क तार ख / Date of Pronouncement: 25/06/2015

आदे श/O RDER

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

filed by the Revenue against the order of the CIT(A)-IV, Surat dated 17.8.2011.

2. The sole ground of appeal taken by the Revenue is that the CIT(A) erred in deleting addition of Rs.12,49,586/- made by the AO on account of unexplained cash/cheque deposited in the bank account.

ITA No.3186/Ahd/2011 2 3. Brief facts of the case are that the AO observed that the assessee has maintained saving bank account no.1180727 with The Royal Bank of Scotland, Surat in which there was cash/cheque deposits of Rs.14,24,265/-. The assessee was required by the AO to explain the credit entries as well as withdrawals from the account, but there was no response from the assessee. The AO observed that the assessee has shown income from trading and it was not commensurate with cash deposits in the bank account. He concluded that it was a case of manipulation of records by not disclosing true and fair affairs of business. Since no explanation regarding credit entries in bank account were given, these were treated as unexplained investments under section 69 of the Act.

4. Before the CIT(A), the assessee filed a copy of bank statement and submitted that the said bank account was reflected in the balance sheet prepared by the accountant, and therefore, it is to be taken as duly considered while filing return of income. It was further submitted that cash was often withdrawn from the account and re-deposited, if remaining unused. It was also submitted that the assessee had deposited loan amounts of Rs.59,630/- and Rs.1,17,316/- on 1.9.2007 and on 3.12.2007 respectively, and these have also been considered as unexplained. It was further submitted that the bank account was part of personal accounts which were attached along with the return of income, and therefore, no addition u/s.69 was called for. It was alternatively submitted that the AO was obliged to pass a judicious order and ought to have taxed only real income and therefore, if the transactions in the accounts were considered as unaccounted, only profit determined as per provision of section ITA No.3186/Ahd/2011 3

44AF should have been added. It was submitted that the income therefore should have been determined at Rs.65,365/- only being 5% of Rs.12,47,319/-, being deposits of Rs.14,24,265/- less loans of Rs.59,630/- and Rs.1,17,316/-. The CIT(A) after considering the submissions made by the assessee observed that the bank account was undisclosed, and the credits in the bank account have not been explained, and therefore, the income in the nature of unexplained investments arises in the hands of the assessee, in addition to profits on the transactions in the bank account, as it has been accepted in his submissions that business was conducted through the bank. The assessee has offered income from stitching and embroidery. The peak credit of Rs.1,35,476/- appeared on 5.11.2007. The profits upto the date on which peak appeared was included in the peak and therefore, only profits on subsequent credit transactions were required to be added over and above the peak. According to the CIT(A), reasonable profit at the rate of 5% on all subsequent credits in the account during the year plus any interest credited in the account after the date of peak. Accordingly, he directed the AO to determine the profit and interest and partly allowed the ground of the appeal of the assessee.

5. DR supported the order of the AO, whereas the AR has filed written submissions and reiterated submissions made before the lower authorities.

6. After considering rival submissions and perused material on record, we find that the AO found that the assessee had a bank account no.1180727 with Royal Bank of Scotland, Surat wherein ITA No.3186/Ahd/2011 4

cash/cheque deposits of Rs.14,24,265/- were made during the year by the assessee. The assessee was required to explain credit entries as well as withdrawals, but the assessee failed to comply with the requirements of the AO, therefore, the AO made addition of Rs.14,24,265/- as unexplained investment under section 69 of the Act.

7. On appeal, the CIT(A) observed that the assessee was in the business of stitching and embroidery work, and has explained that it was conducting the business through bank account. Therefore, the CIT(A) concluded that the deposits were the business receipts of the assessee. Accordingly, the CIT(A) took peak credit as on 5.11.2007 being Rs.1,35,476/- and 5% of the amount deposited in the bank account subsequent to the determination peak as the income of the assessee plus any interest credit in the said bank account, and accordingly, the AO directed to compute the income of the assessee from the said bank account.

8. The DR supported the order of the AO. He could not point out any specific mistake in the order of the CIT(A).

9. In our considered view, under the Income Tax Act, the income of the assessee is to be taxed and not the receipts of the assessee during the year. The CIT(A) has determined the income out of the deposits in the bank account of the assessee by taking the peak deposits plus 5% of the deposits subsequent to the determination of the peak and interest paid in the bank account as income of the assessee, which in our considered view, is quite reasonable in the facts of the case. We, therefore, find no ITA No.3186/Ahd/2011 5

infirmity in the order of the CIT(A), which is hereby confirmed, and the ground appeal of the Revenue is rejected.

10. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on Thursday the 25th June, 2015 at Ahmedabad.

Sd/- Sd/- (S.S. GODARA) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated /06/2015