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TMI Blog2021 (9) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... examine, and collect the evidence to prove its case and enforce the attendance of six people to whom the lower authorities issued the notices under section 133. In our opinion once the assessing officer had reopened and examined the case of the assessee by treating the receipt deposited in the bank accounts as the business receipts, then the assessing officer has two options either to reconcile the bank entries by drawing the trading account based on bank entries and compute profit of the assessee or treat the entire bank deposits as turnover of the assessee and apply gross profit over that. Once the assessment is made based on the undisclosed bank accounts, the debit and the credit in the bank accounts were required to be considered for making the addition u/s 68 - The income that has accrued to the assessee is taxable as per law. What income has really occurred to be decided based on material available with the AO, not by reference to physical receipt of income(credit entry in Bank ), but by also giving the benefit/ adjustment of debit entry ( in the bank account ), the difference would solely represent the income of the assessee, in the present case. Being the amount p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, if we compute the profit based on trading accounts for all three years , it will come to ₹ 38,99,852/- Undoubtedly the assessing officer in the assessment order, had accepted the return of income, declaring business income, filed by the assessee after receipt of the notice under section 148 and had given the credit while computing the income of the assessee based on the bank deposits.Income of the assessee shall be as under for all three assessment years after giving the benefit of the amounts declared by the assessee during all these assessment years and after applying 8% for all these assessment years. - ITA Nos. 588 to 590/Amr/2019 - - - Dated:- 16-8-2021 - Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member For the Appellant : Sh. Sudhir Sehgal, Adv. For the Respondent : Smt. Jatindra Kaur, D. R. ORDER PER LALIET KUMAR, J. M. These are three appeal filed by the assessee feeling aggrieved by the order passed by the CIT(A) for the assessment year 2009 2010 to 2011 2012 on the grounds/ revised grounds mentioned in the memo of appeals/ revised grounds dated 12/7/2021. BACKGROUND 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Ltd. A/c No. 00352000004815 Of HDFC Bank Ltd. A/c No. 13792560000276 Of HDFC Bank Ltd. A/c No. 117402000004985 of HDFC Bank Ltd. Cash NIL - 40000 - - By clearing 15168448 165000 31780 - 8941906 Cheque 50000 - 3235866 444922 100000 Others 997600 - - 821329 200000 Total 16216048 165000 3307646 1266251 9241906 In KYC forms filed with the banks the assessee has declared himself as proprietor of 31/s Aggarwal Chemical Industries, 173, Industrial Area, Phase-2, Chandigarh, wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee replied that he is in the business of sale of Rubber Chemicals and such receipts are business receipts and no record is available with the assessee and further the assessee has no VAT number and he had been carrying on the business as proprietor of M/s. Aggarwal Chemical Industries and neither he has any books of accounts. 7. The assessing Ofc wide show cause notice dated 2 December 2016, had asked the assessee to submit the reply on the following points: 4. Vide your reply dated 23. 11. 2016 it has been stated that your business activities are trading in rubber chemicals. It has further been stated that you have lost all your books of account including the data put on computer due to virus and now you does not have any books of account to be produced for verification. In the light of your above reply and non explanation of the bank credits, the following points are required to be clarified: 1. Please produce original purchase/sale bills to substantiate your claim regarding business activity of trading in rubber chemicals. 2. Provide your VAT Number and VAT return filed for the year 2008-09 and other registration number with other State/Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire deposit in the Bank as unexplained cash deposit and had made the additions of ₹ 2, 55, 18, 858/-( for AY 2009-10 ), 3,54,20,958( for AY 2010-11) and ₹ 3,51,92,970/-( for AY 2011-12) in the hands of the assessee, however the AO had accepted the returned income disclosed by the assessee in pursuance to notice under section 148 of the ACT. The assessing officer is mentioned in paragraph 4. 2 as under 4. 2 In the absence of any confirmation from the customer, the claim of the assessee that he was trading in rubber chemicals and the credits are on account of sales made does not proves the contention. Especially, the assessee has admitted that he has no books of accounts to be produced for verification. No purchase/sale bills produced for verification. The name and address from whom sale/purchase has been made during the year were not provided. The assessee has not obtained VAT number though the item traded comes under the purview of VAT. Assessee has even denied to have the name address of the creditor/debtor. Simply saying by the assessee that these credits are his business transactions from trading of rubber chemicals without any corroborating documentary ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer in the reasons recorded for all the years as mentioned below: In KYC forms filed with the banks the assessee has declared himself as proprietor of M/s. Aggarwal Chemical Industries, 173, Industrial Area, Phase-2, Chandigarh, whereas no business income has been shown by him in the return of income filed for the assessment year 2009-10 . In the return, the assessee has declared income under the head Salaries only. The transactions in the aforesaid bank accounts clearly indicates that assessee is carrying out business, and income from such business has not be disclosed in the return of income. 15. Ld. AR had submitted, during the course of assessment proceedings and before the CIT(A) also, it has been reiterated in the written submission reproduced at page no. 3 of the order of the CIT(A) and further explained in detail that the credit entries represented sales to the customer, based at various places of the country and it is not a case of cash deposits. 16. It has also been submitted that separate current bank accounts showing proprietor had been maintained and the assessee had declared the business income in response to notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on estimated basis as stated above and, thus, the addition of the total sale proceeds in the bank account of the assessee u/s 68 is totally uncalled for, as only resultant profit could be charged to tax and which is not much is this trade. The chart at pages 125 to 127 is self-explanatory and, therefore, the addition of the total deposits cannot be made and the CIT(A) has wrongly mentioned at page no. 8 of the order, that these are cash deposits, which are incorrect finding. 21. Another submission is that no addition could be made u/s 68 of the Income Tax Act, 1961 as made by the Assessing Officer and confirmed by the CIT(A), because addition u/s 68 can be made only, if the assessee is maintaining books of accounts and bank account of the assessee is not the books of accounts and, as such, the very basis of making the addition is uncalled for. The reliance is being placed in the judgment of Bombay High Court in the case of Bhai Chand and others relevant judgment at serial no. 8 to 12 of the judgment Set-II and, thus, the very basis of addition made by the AO and confirmed by the CIT(A) is void-ab-initio and, therefore, the addition on this account is uncalled for. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities is by law. Findings 24. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the hearing by both parties. Duringthe argument, by the Ld. AR for the assessee, the only emphasis laid down by the Ld. AR was that the assessing officer/the CIT(A) took the entire Bank deposits as income of the assessee. He submitted that the assessing officer had provided reasons for reopening , wherein AO categorically admitted that the assessee was carrying out the business activities. The deposits were made in these undisclosed bank accounts. The perusal of these five bank accounts shows that besides the cash deposit, the assessee was also receiving the amount by way of cheques from various persons. Similarly, the assessee was also withdrawing the amount by cash and issuing the cheques to multiple persons. The officer in the reasons to reopen had given the tabulation of the various bank account, and it was categorically mentioned that Mode of transaction A/c No. 003102000015570 of IDBI Bank Ltd. A/c No. 003102000003407 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the receipt deposited in the bank accounts as the business receipts, then the assessing officer has two options either to reconcile the bank entries by drawing the trading account based on bank entries and compute profit of the assessee or treat the entire bank deposits as turnover of the assessee and apply gross profit over that. 28. The AR had drawn attention to trading account prepared for the assessee for all the three assessment years, which are as under Trading Ac/ as on 31. 03. 2009 Particulars Amount Particulars Amount To Purchase (As Per Bank) 24648355. 00 By total Sales (as Per bank) 25518858. 00 To purchase Aggarwal chemical (as per Submmission) 2678597. 00 aggarwal che 205869. 00 To Purchase others 21969758. 00 Azam Rubber (as per Submmission) 1828933. 00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To purchase Aggarwal chemical (as per Submission) 1453222. 00 Azam Rubber (as per Submission) 4821763. 00 To Purchase others 31339758. 00 Thakar Dass CO. 161382. 00 Other Sales through Bank 30209825. 00 Gross Profit 23,99,990. 00 35192970. 00 35192970. 00 29. Based on the trading account, it was submitted that the lower authorities can tax only the profit earned by the assessee for the assessment years. Both credit and debit entries in the Bank were required to be considered and thereafter, the gain is needed to be taxed. In our considered opinion, once the assessment is made based on the undisclosed bank accounts, the debit and the credit in the bank accounts were required to be considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of invoking section 68, it is essential to have the existence of the books of account, In other words when a deeming fiction like section 68 here is applied, it is not allowable for the AO to presume or deem the existence books of account or credit of amount in the said deemed books of account, especially when the books of account otherwise lack ex-facie. AO order had categorically mentioned non-maintenance of books of account by the assessee, nor it is the case of AO that Bank accounts of the assessee would be treated as books of account. 34. Having stated the above, we may record that during argument, Ld. AR had submitted chart for computing the GP rate by taking the 5% of turnover, however the Ld. DR for the Revenue disputed that and submitted a higher rate should be applied to compute the assessee's profit. the Chart of AR provides as under SH. SARDARI LAL CHART SHOWING PROFIT EARNED FROM TRADING OF CHEMICAL AS PER SECTION 44AF Sr. No. Particulars Undisclosed Sales as per assessment order GP as per 44AF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees. In the present case as mentioned hereinabove turnover the assessee, as per the case of the assessee as well as of the assessing officer was more than 40 lakhs, therefore the rate of 5% cannot be applied as claimed by the assessee. The assessing officer has not brought on record that the assessee is having any other source of income other than doing the business, as mentioned by the assessing officer in the reasons to reopen the assessment. Therefore, only the GP addition can be made on the bank deposits, treating it as a business turnover. 37. In our opinion the best rate which can be applied in the given set of facts would be 8% GP on the turnover in all the assessment years. This will be tune with the 44AD of the IT Act. The profit for all three years, after applying GP rate of 8% would come to ₹ 76,90,622. 88/-, however, if we compute the profit based on trading accounts for all three years, it will come to ₹ 38,99,852/-. Further, we are supported by the decision in the matter of M/S BANSAL STRIPS PRIVATE LTD in ITA 103/2021, CM APPLs. 12292-93/2021 held by Delhi High Court vide order dated 26. 3. 2021asunder 10. However, what the CIT(A) did, [whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order, had accepted the return of income, declaring business income, filed by the assessee after receipt of the notice under section 148 and had given the credit while computing the income of the assessee based on the bank deposits. Income of the assessee shall be as under for all three assessment years after giving the benefit of the amounts declared by the assessee during all these assessment years and after applying 8% GP on the turnover for all these assessment years:- Sr. No. Particulars Undisclosed Sales as per assessment order GP as per 44AF Profit Amount disclosed in return u/s 148 Balance undisclosed income on estimate basis a sales from 09. 07. 2008 to 31. 03. 2009 25518858. 00 8% 2041508. 64 120000 1921508. 64 b sales from 01. 04. 2009 to 31. 03. 2010 35420958. 00 8% 28336 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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