2016 (10) TMI 1046 - AT - Income Tax

Unexplained cash found deposited in the bank accounts - Held that - It is crystal clear that where the cash is found in possession of the assessee by virtue of deposits in her bank accounts maintained and operated by her, the onus is on the assessee to discharge the burden that cash doesn t belong to her and belong to the marble traders. Further, the assessee has to adduce necessary evidence to substantiate her claim. Whether the assessee has discharged her onus in terms of explaining the nature and source of deposits and withdrawals in various bank accounts throughout the year? - Held that - The matter requires a deeper and a coordinated examination by the authorities at the higher level to bring the correct facts on record which should conclusively establish that either the assessee is the owner of the money found deposited in her bank accounts as claimed by the AO or the assessee is merely a facilitator and earns commission income as claimed by the assessee. Accordingly, we set-aside the matter to the file of the ld CIT(A) to examine the matter afresh and the assessee shall provide all the requisite details in terms of names and address and other requisite particulars of the depositors as well as of the beneficiaries, the assessee has to explain the nature and source of the transactions in terms of deposits and establish the necessary linkage between the deposits and the subsequent withdrawals to various individual beneficiaries. The ld CIT(A) shall call for the records maintained by the Investigation Wing in respect of the survey proceedings and confront the same to the assessee to provide her a suitable opportunity.

Issues Involved:
1. Modification of Gross Profit (G.P.) addition by CIT(A).
2. Failure to produce depositors and beneficiaries.
3. Allegation of engagement in marble trading.
4. Estimation of income and application of gross profit rate.

Issue-Wise Detailed Analysis:

1. Modification of Gross Profit (G.P.) Addition by CIT(A):

The Revenue questioned whether the CIT(A) was right in modifying the G.P. addition made by the AO on transactions facilitated by the assessee, by holding that only net commission income of ?225 per ?1 lakh could be taxed on the bank deposits taken by the AO as turnover. The CIT(A) concluded that the assessee was merely a facilitator earning commission, not engaged in marble trading. The CIT(A) relied on survey reports and statements recorded, observing that the prevailing practice in the marble trading business involved under-invoicing and the use of facilitators' bank accounts for unrecorded sales proceeds. The CIT(A) determined that a net commission of ?225 per ?1 lakh of transactions facilitated was reasonable, considering the limited role of the assessee and allowing for expenses incurred.

2. Failure to Produce Depositors and Beneficiaries:

The AO held that the assessee failed to produce depositors who deposited cash in bank accounts and did not provide names and addresses of the beneficiaries. The AO thus concluded that the deposits represented the assessee's own trading receipts. The CIT(A), however, noted that the assessee had provided details of marble traders and beneficiaries to the Investigation Wing. The Tribunal emphasized that the onus was on the assessee to explain the nature and source of deposits and withdrawals, and to provide necessary linkage between deposits and subsequent withdrawals to beneficiaries. The Tribunal directed the CIT(A) to examine the matter afresh, calling for records from the Investigation Wing and confronting the assessee with the details for a suitable opportunity to explain.

3. Allegation of Engagement in Marble Trading:

The AO alleged that the assessee was engaged in marble trading, treating the deposits in bank accounts as trading receipts. The CIT(A) found no evidence supporting this claim, noting that the assessee had no infrastructure for marble trading, such as sales tax registration, excise registration, or business premises. The CIT(A) observed that the assessee was not registered with the Sales Tax Department, had no purchase and sales account, and maintained no books of accounts. The Tribunal directed a deeper examination to conclusively establish whether the assessee was the owner of the money or merely a facilitator earning commission.

4. Estimation of Income and Application of Gross Profit Rate:

The AO applied a gross profit rate of 13% on the turnover of ?11,37,60,458, adding ?1,47,88,860 to the assessee's income. The CIT(A) modified this, upholding only the net commission income. The Tribunal noted the need for a coordinated examination to determine the correct facts and establish whether the deposits represented the assessee's trading receipts or commission income from facilitating transactions. The Tribunal set aside the matter to the CIT(A) for a fresh examination, directing the assessee to provide requisite details of depositors and beneficiaries and to explain the nature and source of transactions.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, directing the CIT(A) to re-examine the matter with specific instructions to verify details of depositors and beneficiaries, corroborate statements with survey records, and provide both parties suitable opportunities to present their cases. The Tribunal's decision applied mutatis mutandis to similar appeals involving other assessees.

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