Ved Parkash, Chandigarh vs Assessee

Shri Ved Parkash, Vs. The ITO, Ward 5(3), C/o Jagdamba Tyre Service, Chandigarh Chandigarh

PAN No. AKMPP5965H

(Appellant) (Respondent)

Appellant By : Shri Ved Parkash (assessee) Respondent By : Shri S.K.Mittal

Date of hearing : 01.04.2015 Date of Pronouncement : 10.04.2015

ORDER

PER T.R.SOOD, A.M.

The appeal by the assessee is directed against the order dated 01.03.2013

passed by the CIT(A), Chandigarh.

2. In this appeal the assessee has raised the following grounds:-

1. That the Order dated 01-03-2013 passed by the C1T (Appeals) Chandigarh and the order dated 12-12-2011 passed by the ITO, Ward 5(3), Chandigarh for the above referred year are both bad in law and against the facts of the case.

2. That the Ld. C1T (Appeals) has greatly erred in law and against facts of the case in :-

a) In sustaining the addition of Rs. 11,04,167/- as cash deposit in his saving Bank Account and taxing the same as 'Business Income'.

Appeal is partly allowed without appreciating the facts of the case & not relying, upon the submission made.

b) In sustaining the addition of Rs.25,01,880/- against the total demand of Rs. 37,84,380/- which was made by the ITO treating it as short term capital gain on account of sale of house against utter disregard of all accounting practices and book keeping entries & not understanding the logic & the accounting treatment of this 2

entry and dismissing the submissions of the Appellant on frivolous grounds, without appreciating the complete facts & legal position of the matter.

3. That the addition partly upheld by the C1T (Appeals) is bad, unjust, arbitrary and outside the scope of natural justice and accountings practices and has been sustained without appreciating the proper provisions of the Income Tax Act & accounting practices.

3. Ground No.1 is of general nature and does not require separate

adjudication.

4. Ground Nos 2 (a): After hearing both the parties we find that during

assessment proceedings the Assessing Officer noticed that assessee had

deposited some cash amount to Rs. 11,04,167/- in his bank account whereas the

gross turnover was shown onl y at Rs. 4,21,855/-. In response to the query it was

mainl y stated that amount have came from business transactions and assessee

was a illiterate person doing business of 'kabari'. Some of his friends have also

done certain transactions in his name. The Assessing Officer observed that since

turnover was of Rs. 4,21,855/-, therefore, the cash cannot be related to business

transactions particularl y in the absence of any sale/purchase deals and,

therefore, made addition of Rs. 11,04,167/-.

5. On appeal, written submissions were made and the relevant portion of

written submissions has been extracted by Ld. C IT(A) as under:-

"ii) It is pointed out that the assessee didn't presented the books of accounts to the counsel to produce the same before the Assessing Officer because of a heart attack few months before the assessment proceedings.

The assesses was on complete bed rest and was not able to look after his day to day affairs of the business and income tax proceedings.

iii) The books of accounts are complete and were maintained by the assessee at the first place. The cash was withdrawn and deposited into the same hank in the subsequent dates for which cash book is enclosed for your kind reference. By reviewing the books of accounts it is understood that the, cash was deposited partly out of the cash withdrawals from the bank and partly from the sale proceeds of the business.

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iv) The action of the Id. AO in adding all the cash deposits as income of the assessee without considering the cash withdrawals from the same bank is totally unwarranted and outside the scope of natural justice and accounting practices and has been made without resorting to proper provision, of the Income Tax Act. The action of the AO in this respect may be kindly reversed."

The Ld. CIT(A) after considering the submissions partly agreed and directed Assessing Officer

to make addition on peak credit basis.

6. Before us, the assessee Shri Ved Parkash appeared in person and he has

field written submissions. The submissions in respect of this amount reads as

under:-

"1. That the Hon'ble CIT(A) has stated in his order dated

01..3.2013 that he has considered the submissions of Ld. Counsel regarding wrongful action of the Assessing Officer in treating the entire cash deposit as income without considering the cash withdrawal from the same bank is acceptable. The CIT(A) hasdirected the Assessing Officer to make addition of only the peak of the deposits in the bank account after getting the details from the appellant / otherwise and allowed the appeal partially.

In view of the direction of CIT(A) the Assessing Officer revised the assessment accordingly vide order dated 11.05.2013. Copy of the demand is enclosed. We have no argument against the order of Hon'ble CIT(A) on this ground."

7. On the other hand Ld. DR submitted that CIT(A) has already allowed

reasonable relief by directing the Assessing Officer to make addition on the

basis of peak credit and, therefore, no further interference is required.

8. After considering the rival submissions we find that Ld. CIT(A) has

decided this issue vide para 3.3, which is as under:-

"3.3 I have considered the submission of the Ld. Counsel for the appellant. The appellant had submitted before the Assessing Officer that he was not maintaining any regular books of accounts, but now it has been submitted that the books of accounts are complete and in the name of the books of accounts, a computerized 4

cash book has been filed without any bills/vouchers for purchase of sales, which are required as per Explanation-(i) below section 139(9) of the Act. Hence, the appellant's story that he is maintaining such accounts is not acceptable, However, the contention of the appellant that the action of the Assessing Officer in treating the entire cash deposit as income without considering the cash withdrawals from the same bank is acceptable, but the appellant has not submitted complete details in this regard, The Assessing Officer is directed to make addition of only the peak of the deposits in the bank account after getting the details from the appellant/ otherwise. Grounds of appeal Nos. 2(a) and 2(b) are partly allowed."

Since the assessee has clearl y admitted that he has nothing to say about the

order of Ld. CIT(A) as shown in the highlighted portion above and the Ld.

CIT(A) has allowed reasonable relief, we find nothing wrong with the order of

Ld. C IT(A).

9. Ground No.2(b) : After hearing both the parties we find that during

assessment proceedings it was further noticed that assessee had deposited a sum

of Rs. 12,30,500/- in the bank account with Rajasthan Bank Limited. In response

to the query it was submitted that this amount was deposited out of the sale

consideration of plot No. 522, Milk Colony, Dhanas (Chandigarh ) which was

sold for Rs. 75,68,761/-. The assessee had half share and, therefore, money

came from that sale. It was further stated that this plot was purchased earlier by

selling his old house in Burail of Rs. 12 lakhs. Since no details were filed

regarding purchase of earlier house, the Assessing Officer did not accept the

fact of sale of old house and subjected the sale consideration amounting to Rs.

37,84,380/- as short term capital gain.

10. On appeal, again written submissions were given through which it was

stated that propert y was sold for Rs. 24,30,000/- by two persons but stamp dut y

was paid by the purchaser at Rs. 75,68,761/- but conveyance deed was made by

Shri Ved Parkash with Ishwar Chand as General Power of Attorney holder in

favour of the original allottee at Rs. 24,30,000/-, therefore, onl y actual sale 5

consideration should be considered. Some case laws were also quoted that

provisions of section 50C were not applicable if land was held as 'stock in

trade'.

11. The Ld. C IT(A) after considering the submissions, directed the Assessing

Officer to allow a sum of Rs. 12,85,500/- on account of cost of acquisition and

thus this ground was partl y allowed.

12. Before us, the submissions as made before Ld. CIT(A) has been reiterated

in the written submissions and it has been emphasized that propert y was sold for

Rs. 24,30,000/- and since it was an asset in stock in trade, therefore, section

50C was not applicable.

13. On the other hand Ld. DR strongl y relied on the order of C IT(A).

14. We have considered the rival submissions carefull y and find that this

issue has been adjudicated by Ld. CIT(A) vide paras 4.3 and 4.4 which are as

under:-

"4.3 1 have considered the submission of the Ld. Counsel. The contention of the appellant that the sale of the property was a single transaction and so it constitutes an adventure in the nature of trade, is not acceptable on the facts and circumstances of the case, since the appellant had purchased this house after sale of his old house in January, 2007 and so it must have certainly been purchased for residential purposes. Hence, income from sale of this house is to be taxed as short term capital gain and provisions of section 50C will be applicable.

4.4 The impugned property was purchased by the appellant alongwith one more person for Rs. 24,30,000/- as per conveyance deed dated06.02.2008 and cost of stamp duty was Rs. 1,35,000/-. Hence, the total cost of acquisition comes to Rs. 25,65,000/- {24,30,000 + 1,35,000). The appellant was the owner of one half share in this property, which is also proved from the fact that half of the sale proceeds have been deposited in his bank account and no payment has been shown to any other co-owner. Thus, the cost of acquisition in the hands of the appellant is for one half share of the impugned property, which is 6

Rs. 12,85,500/-. This cost of acquisition has to be reduced from half of the sale price taxed by the Assessing Officer as capital gain. The short term capital gain will thus be Rs. 25,01,880/- (37,84,380 - 12,82,500). The Assessing Officer is directed to tax this amount of Rs. 25,01,880/- as short term capital gain instead of Rs. 37,84,380/-. Ground of appeal No. 2(c) is partly allowed."

15. In our opinion the Ld. CIT(A) has correctl y adjudicated the issue. No

evidence was filed before CIT(A) or even before us to show that assessee was

holding the plot as stock in trade and, therefore, has been rightl y assessed as

'short term capital gain'. Therefore, we find nothing wrong with the order of

Ld. C IT(A) and confirm the same.

16. In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 10.04.2015.

Sd/- Sd/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 10 t h April, 2015 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR