Nagendra Prashad, Amritsar. vs Department Of Income Tax

Income Tax Officer, vs. Sh. Nagendra Prashad Prop. Ward 3(3), Amritsar. M/s.A.B.C. Trading Company, 7-A, Shopping Centre, East Mohan Nagar, Amritsar. (Appellant) (Respondent)

Appellant by: Smt. Tarundeep Kaur, DR Respondent by:Sh.P.N.Arora, Advocate

Date of hearing:19/01/2015 Date of pronouncement:28/01/2015

ORDER

PER B.P. JAIN:

This appeal of the Revenue arises from the order of the CIT(A),

Amritsar, dated 07.02.2014 for the assessment year 2009-10. The Revenue

has raised the following grounds of appeal:

"1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting addition of Rs.17,32,750/-( correct figure Rs.11,49,520/-) made by the AO on account of unexplained cash deposits in saving bank account.

2. That the Ld. CIT(A) has not appreciated the facts that the assessee failed to disclose the bank A/c maintained with Axis Bank in his books of A/c and also failed to explain the purpose 2 ITA No.200(Asr)/2014

of cash deposits made on different dates from cash withdrawn from the same saving bank account on earlier dates.

3. The appellant craves leave to amend or add any or more ground(s) of appeal."

2. The brief facts of the case are that the assessee derives income from

trading of screw, nail etc. Due to non-compliance of assessment proceedings

and non-furnishing of information, notice u/s 133(6) of the Income Tax Act,

1961 (In short, the 'Act') was issued to the Manager, Axis Bank,

Muzaffarpur to furnish the bank statement of the assessee, which was

received on 05.12.2011. The assessee was found to have cash deposits of

Rs.15,38,300/- on different dates, details of which are available at page 2 &

3 of AO's order. A show cause notice dated 23.12.2011 was issued to the

assessee for explaining the source of said deposit but none attended. Further,

opportunities were given from time to time but no one attended.

Accordingly, the AO treated all the cash deposits in the Axis Bank as

undisclosed income of the assessee.

3. Before the Ld. CIT(A), the ld. Counsel for the assessee submitted that

the assessee has ventured the work on day to day basis between the period

01.04.2008 to 31.03.2009 and cash flow statement was also submitted for

the period from 01.04.2008 to 31.03.2009. The AO has not given any set off

to the corresponding debit entries/withdrawals as well as cash in hand

available with the assessee in the business cash flow of the sole 3 ITA No.200(Asr)/2014

proprietorship concern. The assessee worked out the peak amount at

Rs.2,48,000/- on 22.04.2008 out of which assessee claimed cash in hand

already available at Rs.49,095/- and requested the ld. CIT(A) to work out the

peak at Rs.1,98,905/-. The Ld. Counsel submitted before the ld. CIT(A) that

it is the peak amount which at the best can be added after giving set off to

the withdrawals made from the account. He relied upon the decisions of

various courts of law as under:

"A) In the case of M/s. Mansrover Enterprises vs. ITO Ward 5(3)/Asr in ITA No.108(Asr)/2005, the honorable ITAT Asr Bench at para 9 & 10 of the order has held as under:

"As regards the second ground, it is clear from page 10 of the paper book that there were credits and debits in the accounts of two employees during the period from 11.04.2000 to 19.02.2001. Even if it is assumed that it was assessee's own money, the same was in circulation and, therefore, for the purpose of making an addition on this account only peak credit was required to be considered. Such peak credit amounted to Rs. 33,315/- on 6.7.2000. Therefore, addition if any, could have been made only to the extent of Rs. 33,315/-. We have already upheld the trading addition of Rs. 1,40,000/- in trading account. The addition of Rs. 33,315/- would get covered under the trading addition by allowing the benefit of telescoping. Therefore, no addition in this respect would at all be called for. In this view of the matter, we set aside the order of the CIT(A) and delete the entire addition of Rs. 1,32,621/- sustained by the CIT(A).This ground of appeal is allowed."

B) Further, in the case of Sh. Ashwani Aggarwal vs. ACIT circle 2(2)/Jalandhar in ITA No.228(Asr)/1997, the case was held as under:

"The assessee is in appeal against the sustenance of the balance addition whereas the revenue is aggrieved against the 4 ITA No.200(Asr)/2014

deletion of part addition having heard rival submissions in extensor and perused the relevant material on record, it is palpable that the assessee had not satisfactorily discharged the burden showing the genuineness of the transactions. Inspite of several opportunities granted by the AO, the assessee could produce only three persons out of eight picked up by the AO. On recording of their statements it transpired that the version of the assessee was not tallying with the assertion made by such persons before the AO. Other five persons could not be produced and as such there was no occasion to verify the veracity of the assessee's stand. Having held that the transactions in the accounts of these eight persons were not genuine, the next question that arises for consideration is the determination of amount unexplained investment. It was put forth on behalf of the assessee that only peak balance drawn out of a consolidated account of all the eight persons was required to be considered for making such addition. We are satisfied that the only addition to this extent was called for. The AO made an addition for all the transactions ignoring that ultimately it is a peak balance (after taking into consideration the debits and credits) that can be the subject matter of addition. We are satisfied that the ld. CIT(A) rightly proceed by sustaining the addition to this extent."

Further, reliance is also placed on the following case laws:

i) ITA No.108(ASR)/2005 in the case of M/s. Mansrover Enterprises vs. ITO ward 5(3), Amritsar - Decision of ITAT Bench of Amritsar. (copy attached)

ii) ITA No.329(Asr)/2003 In the case of M/s. Harsimran Textiles, Bathinda vs. ITO Ward 1(1), Bathinda. (copy attached)

iii) ITA No.231(Asr)/1997 in the case of Sh. Ashwani Aggarwal, Jalandhar vs. ACIT Circle 2(2), Jalandhar.

iv) ITA No.21(Asr)/2004 In the case of Sh. Ravinder Singh vs. ACIT Range-III(Asr.) (copy attached)

v) ITAT Chandigarh Bench (SMC) in the case of Gujrati Mal Pran Nath vs. ACIT ITA No.1017 and 1018 of 1994 (copy attached)

vi) CIT vs. Chetan Dass 99 ITR 46 (Del)

vii) CIT vs. Mohan Engg. Co. 151 ITR 571 (Pat) 5 ITA No.200(Asr)/2014

viii) CIT vs. K.S.M. Guruswamy Nadar & Sons 149 ITR 127 (Mad)

In the above judgments, it has been held that only peak amount of deposit is to be added and also benefit of telescoping is to be given to the assessee. In the light of above facts and case laws it is submitted that no addition for alleged deposit in Axis bank is required to be made and as such, it is requested that addition made by the Ld. AO may please be deleted and necessary relief may kindly be allowed to the appellant."

4. The Ld. CIT(A) after considering the submissions of the assessee,

cash-flow peak statement from 01.04.2008 to 31.03.2009 accepted the peak

at Rs.2,48,000/- as on 22.04.2008, which pertains to unaccounted investment

of the assessee. The AO in addition worked out a gross profit on the

remaining turnover of Rs.13,68,300/- and applied a GP rate of 11.10% at

Rs.1,40,780/-. The same was added to the peak amount and accordingly a

total addition of Rs.3,88,780/- was sustained and remaining addition made

by the AO was directed to be deleted. The Ld. CIT(A) observed that the AO

has not given any treatment to frequent cash withdrawal and addition was

made in the absence of any purchase of unaccounted assets or investments

and no evidence in this regard has been brought on record. In such facts and

circumstances, the unaccounted peak of Rs.2,48,000/- is treated as

investment required to carry out unaccounted trade activity to which GP

addition of Rs.1,40,780/- as computed hereinabove, has been added to 6 ITA No.200(Asr)/2014

sustain the total addition at Rs.3,88,780/- and remaining addition of

Rs.11,49,520/- was deleted.

5. The Ld. DR, Dr. Tarundeep Kaur argued that the assessee has not

explained the cash flow deposits in the bank and therefore, the AO has

rightly added the cash deposits in the bank and there was no requirement to

give set off of the withdrawals made in the bank in the absence of

unexplained cash deposits. She prayed to reverse the order of the ld. CIT(A)

and confirm the order of the Assessing Officer.

6. The Ld. Counsel for the assessee, Mr. P.N.Arora, Advocate strongly

relied upon the submissions made before the ld. CIT(A) and the order of the

ld. CIT(A). Further, he relied upon the order of the ITAT, Amritsar Bench in

the case of ITO Ward 5(3), Amritsar vs. Sh. Ranbir Singh in ITA

No.473(Asr)/2012 dated 31.10.2012.

7. We have heard the rival contentions and perused the facts of the case.

The undisputed facts in the present case are that an ex-parte assessment u/s

144 of the Act was made due to non attendance of the assessee on different

dates. The AO treated all the cash deposits of Rs.15,38,300/- as undisclosed

income of the assessee. Before the ld. CIT(A) it was submitted that these are

debit entries or the withdrawals from the said bank account and all the

deposits and withdrawals pertain to the business of the assessee. Though the 7 ITA No.200(Asr)/2014

same was not disclosed by the assessee in the regular books of account but

there has to be on record some investment equal to withdrawals made from

the said undisclosed bank account, but nothing has been brought on record

by the AO. No other activity of the assessee has been brought on record.

Books of account of the assessee are audited, which is not under dispute. In

the facts and circumstances of the case and on similar facts, ITAT, Amritsar

Bench in the case of M/s. Mansrover Enterprises vs. ITO Ward 5(3),

Amritsar in ITA No.108(Asr)/2005 has held that even if it is assumed that it

was assessee's own money, the same was in circulation and, therefore, for

the purpose of making an addition, peak credit was required to be considered

for making such addition. In the case of ITO, Ward 5(3), Amritsar vs. Ranbir

Singh in ITA No.473(Asr)/2012 dated 31.10.2014, on similar facts, the

assessee had submitted cash flow statement and it was observed by the

ITAT, Amritsar Bench that the best possible way to find out unexplained

credit is to work out the maximum peak when there is nothing on record that

money has been used elsewhere. In the present case also, the assessee has

submitted cash flow statement and submitted sources of cash deposits as

business receipts and accordingly in the facts and circumstances of the case,

we find no infirmity in the order of the ld. CIT(A) who has rightly worked

out the peak at Rs.2,48,000/- and moreover, the ld. CIT(A) has added 8 ITA No.200(Asr)/2014

11.10% of GP on the turnover of Rs.13,68,300/- apart from addition of

Rs.2,48,000/-. In view of the above discussion, we find no infirmity in the

well reasoned order of the ld. CIT(A). Accordingly, all the grounds of the

Revenue are dismissed.

8. In the result, the appeal of the Revenue in ITA No.200(Asr)2014 is

dismissed.

Order pronounced in the open court on 28th January, 2015.

Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28th January, 2015 /SKR/ Copy of the order forwarded to:

1. The Assessee:Sh.Nagendra Prashad Prop. M/s. ABC Trading, Amritsar.

2. The ITO Ward 3(3), Amritsar.

3. The CIT(A), Asr.

4. The CIT, Asr.

5. The SR DR, ITAT, Amritsar.

True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.