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TMI Blog2021 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the learned CIT - A is legally justified in deleting the addition of Rs. 59,303,873/- on account of cash deposits in bank account by ignoring the provisions of Section 68 of the act in this regard and by ignoring the fact that the assessee has failed to discharge its initial onus laid down u/s 68 of the act iii. whether on the facts and circumstances of the case, the learned CIT (A) is legally justified in deleting the addition of Rs. 59,303,873 u/s 68 of the act 1961 on account of cash deposits in bank account made on the basis of credible information by accepting submissions filed by the assessee during appellate proceedings even when the assessee had not fulfilled conditions as laid down Under rule 46 - A of The Income Tax Rules, 1962 (The Rule) and no opportunity was provided to the assessing officer of being heard. 02 Brief facts of the case shows that that assessee is a company who filed its return of income on 27/9/2011 declaring an income of Rs. 421,835/-. It is also revised its return of income on 12/2/2013 declaring taxable income of Rs. 1,014,894. Reasons behind revising return of income is stated to include 1% commission on accounted turnover in ICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompared to the price in the market so advance payment has been received from the buyer has and issued cheque and transfers the funds to the party account as per the instructions. In all these, process the assessee is entitled for amount equal to 1% of the order-received money deposited as commission. Thus, the assessee has revised the income tax return for assessment year 2011 - 12 and assessment year 2012 - 13 stating that the transaction in the bank account number 3344 is the commission income of the company from selling the laptops on behalf of the other parties. This commission income from the transaction in the bank account number 3344 has been offered as income from other sources in the revised income tax return filed by the assessee company for assessment year 2011 - 12 at the rate of 1%. The total cash deposit in the bank account and commission income offered by the assessee company for financial year 2010 - 11 i.e. assessment year 11 - 12 was Rs. 59,303,873 and the commission income thereon was Rs. 593,039/-. The assessee company also deposited the additional income tax on the commission income offered. 05 The learned assessing officer on that basis was of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the commission basis of laptops and accessories from different parties and provided the address of the above parties. The learned assessing officer issued notices u/s 133 (6) of the act to the parties to whom amount was transferred but all the notices returned with the postal remark that no such party at the given address. Therefore, the show cause notice was also issued to the assessee to explain the return of the above notices. The assessee submitted that it does not have any documentary evidence with respect to these transaction as far as the justification of 1% of the commission is concerned and electronic item in today's scenario the retail margin is only 1% - 2% whereas this was the bulk sale transaction and therefore the margin shown by the assessee at the rate of 1% was quite healthy margin at that time. Assessee also submitted that to buy peace of mind the assessee has declared this income and revised his return of income. The learned assessing officer then noted that assessee company has failed to provide the source of cash deposited with the ICICI bank account and also the existence of the business of trading of laptop and accessories has claimed and therefore he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in any form. The AO has failed to appreciate that the income tax is a tax on real income and not on the turnover as done by the AO in both the assessment year 2011 - 12 and 2012 - 13. 5.18 After considering all the facts and circumstances of the case of both the assessment years of assessment year 2011 - 12 and 2012 - 13, I am of the view that AO is not justified to make the additions of the entire cash deposits without considering the withdrawals in the form of cheque payments to suppliers and the ends of justice will be met if the peak theory income of the assessee is accepted of Rs. 6,329,851/- as on 15/4/2011 as the transactions falling in the two assessment years are running on integrated or composite transactions in the same ICICI bank account and the peak amount as on 15/4/2011 comes to Rs. 6,329,851/- just after the peak balance of Rs. 3,918,897/- as on 31/3/2011 and accordingly the additions made by the AO are deleted and the income for both the assessment year is recomputed as Under:- 5.19 Assessment Year 2011 - 12:- The AO is directed to accept the revised return of income of Rs. 1,014,894/- for the assessment year 2011 - 12 and all the additions deleted whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 148 of the income tax act was issued on 15/4/2013. He further noted that assessment order there is a specific reference of revision of the return filed by the assessee. He further referred to the para number 4.16 passed by the learned CIT - A and stated that the assessing officer is not aggrieved with the above order and has not challenged the same. He therefore submitted that for assessment year 2011 - 12 the time limit for issuing notice u/s 143 (2) of the Act was available up to 30 September 2013 and therefore the notice issued u/s 148 of the income tax act on 15/4/2013 within the time available for the issue of notice u/s 143 (2) is bad in law and therefore the assessment is required to be void ab initio. For invocation of rule 27 he heavily relied on the decision of the honourable Delhi High Court in case of Sanjeev sawhnwy in ITA number 834/2019 dated 18/05/2020. He further submitted that the revised return filed u/s 139 (5) has the effect of replacing the original return filed u/s 139 (1) by revised return provided it is timely filed within the stipulated time limit. He submitted that assessee has accordingly filed the revised return within the time allowed. He also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber [13]. He also explained the major brands dealt with by the assessee in response to question number [14] are Dell, HP, Lenovo, and Acer. In response to question number [15] he submitted that assessee used to purchase Dell and HP laptops from these two parties. He also submitted that even note of investigation wing also states that assessee is a company dealing in computer accessories and computers. Therefore, doubt created by LD Ao is devoid of any merit. He also submitted that when the director has stated that company has not done any business with the parties for last two years, it is therefore not possible for assessee now to trace them as 133 (6) notices have come back. He also relied on various para of orders of ld CIT (A). In view of this he submitted that there is no doubt that, the assessee is carrying on the business of computer peripherals and computers. Thus, he stated that there is no infirmity in the order of the learned CIT - A on merits. 13 He also supported the order of the learned CIT appeal stating that from the bank account of the ICICI bank, the learned CIT - A has upheld the addition of Rs. 70 lakhs based on the peak theory of income. The peak balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,- (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: 34[Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: 35[Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ASSISTANT DIRECTOR OF INCOME-TAX where in it has been held that Where an assessment has not been framed at all, it is not possible to posit that income has escaped assessment. 19 In view of this we also held that when the revised return is pending before ld AO, Time limit for picking that return for scrutiny is pending u/s 143 (2) of the act, the ld AO could not have multiplied the proceedings and initiated proceedings u/s 148 of the act. 20 Even otherwise on the merits of the case the learned CIT - A has noted that there were 887 instances of cash deposits during the year and similarly 1135 instances of cash deposits in the next year for assessment year 2011 - 12 the maximum cash deposit was of Rs. 4 lakhs. He also noted that the entire amount of cash deposits, which was made on various dates in the bank account, was in smaller amounts. The cash deposits were also made from different parts of the country. He also noted that there are subsequent check payments from the same and bank account in which the cash has been deposited. He further held that the income tax is a tax on real income and not on the turnover. Further, the DDIT (investigation) has also conducted certain inquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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