Nathi Lal Gupta, New Delhi vs Assessee

Shri Nathi Lal Gupta, vs Income Tax Officer, 61/13A. Ramjas Road, Ward 33(2), New Delhi. Karol Bagh, New Delhi. (PAN: AAAG2613B) (Appellant) (Respondent) Appellant by: Shri C.L. Arora, Adv. Respondent by: Shri P. Dam Kanunjna, Sr. DR Date of Hearing: 01.04.2015 Date of Pronouncement: ORDER

PER C.M. GARG, JUDICIAL MEMBER

This appeal has been preferred by the assessee against the order of the

CIT(A)-XXVI, New Delhi dated 19.04.2010 in Appeal No. 132/08-09 for AY

2006-07. Although the assessee has raised six grounds in this appeal but except

ground no. 4, other grounds are argumentative and supportive to the main

ground no. 4 which reads as under:-

"That the ld. CIT grossly erred in not accepting the explanation of receiving the payment from debtors and ignoring the confirmations of the debtors. In fact he further erred in not adopting the usual practice of confirming the stated position from the debtors, when full particulars of the debtors were available with him."

1 ITA No.3535/Del/2010 Asstt.Year: 2006-07 2. Briefly stated the facts giving rise to this appeal are that the case was

selected for scrutiny on the basis of AIR information that the assessee has

deposited cash of Rs. 2 lakh on 29.7.2005 in Standard Chartered Bank.

Replying to the query raised by the AO, the assessee submitted that he had more

than Rs. 3 lakh as cash in hand and deposited Rs.2 lakh in the bank account out

of this cash. The AO also noted that from the balance sheet for the period

ending on 31.3.2005 the assessee had Rs.4,72,174 under the head of cash-in-

hand & debtors and for the period ending on 31.3.2005 the assessee had

Rs.3,75,928 under the same head. The AO noted that there is no bifurcation of

cash-in-hand & debtors and, therefore, it is not ascertainable how much cash

was available with the assessee on the date of deposit of Rs. 2 lakh i.e.

29.7.2005. The AO rejected the explanation of the assessee and added the

impugned amount to the taxable income of the assessee u/s 68 of the Income

Tax Act, 1961.

3. The aggrieved assessee preferred an appeal before the CIT(A) which was

also dismissed granting part relief for the assessee and the addition made by the

AO was confirmed to the extent of Rs.1.49 lakh. Now, the empty handed

assessee is before this Tribunal in the second appeal.

4. We have heard arguments of both the sides and carefully perused the

relevant material placed on record. From the assessment order, it is clear that

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the AO made impugned disallowance by holding that the bifurcation of cash in

hand and debtors has not been submitted, therefore, the exact amount of cash in

hand cannot be ascertained on the date of impugned deposit of Rs. 2 lakh i.e. on

25.7.2005. From careful reading of the impugned order of the CIT(A) from

para 4, we note that the assessee's counsel submitted break up of cash-in-hand

& debtors and closing balance of cash on 31.3.2005 was Rs.45,974 which

became opening cash balance on 1.4.2005 for the year under consideration i.e.

2006-07. The CIT(A) further noted that the business receipts of the assessee

during the period 1.4.2005 to 29.7.2005 were Rs.1,53,360 and against this

receipt, expenses of Rs.33,250 were incurred. The CIT(A) also noted that the

assessee had received repayment of debts in cash amounting to Rs.94,000

during 26.7.2005 till 29.7.2005. The assessee, in the background of aforesaid

facts, contended that from the said three sources, the assessee had cash-in-hand

of Rs.2,26,570 on 29.7.2005 and out of this cash in hand, the assessee deposited

Rs.2 lakh to the bank account of Standard Chartered Bank.

5. From bare reading of impugned order, we note that the CIT(A) rejected

the explanation of the assessee with following observations and conclusion:-

"6. I have carefully considered the facts and circumstances of the case. I find that contrary to the stand taken in scrutiny proceedings for assessment year 2005-06, the appellant could not produce books of account for AY 2006-07. The appellant has now given break up of "debtors" and "cash in hand". However, the appellant has changed the explanation before me as compared to what was given before the AO and

3 ITA No.3535/Del/2010 Asstt.Year: 2006-07

has submitted that an amount of Rs.94 000/- was on account of repayment from debtors. On examination of confirmation from the debtors which are all in one to two lines sentences written in hand, I find that it is surprising that all these debtors preferred to repay liabilities in cash during the same period i.e. 26/7/2005 to 28/7/2005. No PAN was given in the case of three of such debtors and all these payments were kept less than Rs.20,000/-. Further, the appellant has shown very high profit by showing meager expenses of Rs.33,520/- against the business receipts of Rs.153600/- in order to enhance the cash available on 29/7/2005. In the absence of books of account, which were surprisingly not maintained during this year contrary to preceding year, the contentions of appellant are not verifiable.

6.2 On careful consideration, lam of the view that the appellant could not explain the genuineness of sources of cash deposits before me in total. On taking into account the opening balance of Rs.45,974/- and also computing the house hold withdrawals @ Rs.10,000/- per month and by keeping G.P. rate in the business of mobile repairing, at 25%, and by treating the confirmation from sundry debtors as ingenuine, I hold the appellant was short by Rs.1.49 lakhs as on 29/7/2005 for making cash deposit of Rs.2 lakhs in his bank account. Accordingly, the addition made by the AO is confirmed to the extent of Rs.l.49 lakhs."

6. In view of above observations and conclusion of the CIT(A), we note that

the CIT(A) went on to consider the quantum of receipts and expenses and also

the GP rate for the period from 1.4.2005 to 29.7.2005 which is only

approximately 1/3rd period of the financial year. The CIT(A) considering all

irrelevant facts and aspects held that the assessee was short by Rs.1.49 lakh cash

as on 29.7.2005 and the addition was confirmed up to this extent which is not a

proper and justified approach. We may point out that for considering the

explanation offered by the assessee, the only fact to be seen was that whether

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the assessee had sufficient cash in hand on 29.7.2005 to deposit Rs. 2 lakh cash

to his bank account? The GP rate and proportion of receipts and expenses is not

relevant to decide this issue in the middle of financial year. Hence, we are of

the considered view that the CIT(A) could not demolish this explanation of the

assessee that the assessee had cash in hand of more than Rs.2 lakh as on

29.7.2005 and out of this amount, the assessee deposited impugned cash to his

bank account with Standard Chartered Bank. Therefore, we decline to accept

the conclusion of the CIT(A) which confirms the addition u/s 68 of the Act to

the extent of Rs.1.49 lakh and we set aside the same. Accordingly, main ground

of the assessee is allowed and the AO is directed to delete the entire addition

made u/s 68 of the Act.

7. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 06/05/2015.

Sd/- Sd/-

(J.S. REDDY) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 06th May, 2015 'GS'

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Copy forwarded to:-

1. Appellant 2. Respondent 3. CIT(A) 4. C.I.T. 5. DR By Order

Asstt. Registrar

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