9911796707
TMI Blog2022 (6) TMI 1518X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 44AD of the Act. The only fetter provided under section 44AD of the Act is the applicability of the provisions of sections 32 to 38 of the Act. Since the assessee is involved in a small business activity and filed return of income under presumptive provisions under section 44AD of the Act and the assessee had already submitted sales account before the authorities below and the assessee had also filed capital position along with the return of income showing the cash balance kept in locker. Considering the same as abnormal profit, the Assessing Officer has not educed sufficient evidence to show that the income of the assessee which falls under the provisions of section 69A of the Act. Since the assessee is not maintaining any books of account and in such situation only net profit as per provisions of section 44AD of the Act is required to be estimated as a net profit and not the entire turnover. The assessee submitted that the cash deposited pertains to his retail business. The assessee filed the sales register which has not been discarded by any of the authorities below. Considering the total turnover sale of the assessee, net income determined under section 44AD of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax (Appeals) 3, Nagpur, [in short the learned CIT(A) ] under section 250 of the Income Tax Act, 1961 (in short the Act ) for the assessment year 2018-19. 2. The present appeal has been filed on the following grounds:- 1. The Commissioner of Income Tax (Appeals)-3, Nagpur erred in confirming addition, therefore order passed is illegal, invalid and bad in law. 2. On the fact and circumstances learned Commissioner of Income Tax (Appeals)-3, Nagpur erred in confirming income determined by the Assessing Officer at Rs. 13,45,300/- is illegal, invalid and bad in law. 3. On the fact and circumstances learned Commissioner of Income Tax (Appeals)-3, Nagpur ought to have accepted returned income and cash in hand shown by the assessee in the regular return of income and rejecting the contention of the assessee and treated the same as unexplained money U/s. 69A U/s. 68 is unjustified, unwarranted and excessive. 4. On the fact and circumstances learned Commissioner of Income Tax (Appeals)-3, Nagpur ought to have accepted returned income of Rs. 9,78,300/- were regular income of the assessee and without going into merits of the case treating the same U/s. 69A as unexplained money and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed reply in response to summons under section 131 of the Act before the Dy. Director of the Income Tax on 14th January 2019. The assessee s statement was recorded, and the contention of the Assessing Officer is that the assessee had shown abnormal profit under section 44AD of the Act. The assessee claimed that he has filed the return of income for the year under consideration declaring total income at Rs.9,78,300/- and claimed that cash of Rs.21,50,000/- found in the locker belongs to him and it is out of the income earned by him. The assessee has claimed that during the year under consideration, cash of Rs.10,00,000/- was deposited out of the business income of Rs.9,78,300/- and opening balance of previous year. During the year, the assessee has offered income from business at Rs.9,78,300/- under section 44AD of the Act and shown total turnover of Rs.19,32,500/- and out of this, turnover of Rs.9,78,300/- was offered for taxation which is more than 50% of the total turnover. The Assessing Officer noticed that the turnover shown was not supported by any bills and vouchers and has treated as not genuine either in respect of turnover or in respect of quantum of net income shown und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to explain the cash from the locker. Similarly, there is no documentary evidence in order to support the opening balance of Rs. 3,67,000/- as on 01-04-2017 in the capital account of the appellant. The appellant s AR despite numerous opportunities provided to him during the appellate proceedings has failed to submit any documentary evidence regarding the business activity done by the appellant. It is evident that the appellant is only helping his father in the Kirana store run under the proprietary concern, M/s. Shankar Kirana Stores, and is not doing any independent business activity at all. Therefore, the AO was correct to come to the conclusion that the appellant is not doing any business activity and has correctly held that the opening balance of Rs. 3,67,000/- is the appellant s unexplained cash credit. Similarly, the AO has correctly held that the business income of Rs.9,78,000/- shown by the appellant is his unexplained money u/s 69A of the Act. Therefore, the grounds of appeal No.2,3,4 5 are dismissed. 6.1 The assessee once again being unsuccessful, filed appeal before the Tribunal. 7. Before us, the learned Counsel, ShriManoj G. Moryani alongwith Shri Bhavesh M. Morya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 69A of the Act which is reproduced as under:- S. 69AWhere in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year 8. The learned Counsel submitted that a plain reading of the aforesaid provisions of section 69A of the Act, depicts that the provisions of the said section are applicable when there is unexplained money, etc., and which are not recorded in the books of account of the assessee maintained by the assessee for any source of income. However, in the present case, the assessee is not maintaining any books of accounts and return of income has been filed under section 44AD of the Act. Therefore, provisions of section 69A of the Act are not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l further submitted that the return of income filed by the assessee before the action taken by the Department. The learned Counsel has already filed copy of acknowledgment of return of income for the A.Y. 2018- 19 before the Dy. Director of Income Tax (Hqs.). The learned Counsel further has drawn our attention that the learned Counsel already submitted copy of capital position for the previous year relevant to the assessment year 2018-19 before the Dy. Director of Income Tax (Hqs.) showing the cash balance kept in locker. The learned Counsel further submitted that the assessee has already paid advance tax. The learned Counsel further has drawn our attention that as per question no.10 of the statement recorded on 26th October 2018, which is placed at Page-49C of the Paper Book, the assessee specifically stated that the aforesaid sum of Rs.21,50,000, belongs to the assessee. 11. The learned Departmental Representative relied upon the order of the authorities below. The learned departmental representative also filed written submission stating that the statement of AnkitTanwani U/s. 132(4) was recorded and same may kindly be considered. In the written submission the department has acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent and not applicable in the case of the assesse and distinguish on fact itself. b) In the case of Hon ble SC in Krishan Kumar vs. ITO (2019) 265 Taxman 227 (SC) relied upon by the departmental officers the ratio of the casespeaksabout non-furnishing of details and explanation of source of deposits wherein the assessing officer had made addition of peak cash in hand of Rs. 36,80,000/- under section 68. However, AO obtained the copy of VAT return from department and found that sales figures were shown at Rs. 9 lakhs only and assessee had also filed Trading and Profit and loss account in the balance sheet with VAT return. It was held that Assessee filed an income tax return showing gross receipts of Rs. 9 lakhs and there were cash deposits of more than Rs. 37 lakhs in saving bank account. Though assessee tried to explain the source of cash deposits by taking a stand that actual sales were Rs. 29 lakhs instead of Rs. 9 lakhs, in absence of any evidence furnished by assessee, the same deserves rejection. The said case law is clearly distinguishable from the Appellant s since, the Appellant has filed return of income under section 44AD whereas in the caselaw relied upon by departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s case no such obligation can be placed on account of section 44AD of the Income Tax Act, 1961. d) In the case of Hon ble Gujarat High Court in case of Fakir Mohmed Haji HasanVs CIT (2002) 120 Taxman 11 (Gujarat) theAssessee had been found in possession of gold and as such he was the owner of the said gold and value of the said gold was liable to be included in the income of Assessee because of the fact that no explanation regarding source from which investment in the said gold had been made, had been given by Assessee. It was held that Tribunal was perfectly right in holding that the value of the gold was liable to be included in the income of Assessee as the source of investment in the gold or of its acquisition was not explained and that Assessee was not entitled to claim that value of the gold should be allowed as a deduction from his income. The facts laid down are not applicable to Appellant s as can be inferred from the facts. e) In the case of Hon ble Delhi High Court in case of CIT v/s ArunMalhotra (2014) 47 taxmann 385, AO made addition under section 69A, keeping in view that purchase transactions from ST and RC were not genuine and export transactions relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) upheld the findings of the Assessing Officer. On further appeal, the Tribunal observed that the letters exchanged by the person who had sent foreign exchange to the assessee s only indicated that there was no love and affection between them and upheld the order of the Assessing Officer. The High Court re-appreciated the evidence available on record and substituted its own findings for that of the Tribunal and other authorities. The High Court came to the conclusion that reasons assigned by the Tribunal and other authorities were in the realm of surmises, conjectures and suspicions. In appeal to the Supreme Court, the revenue contended that re-appreciation of evidence and substitution of the findings by the High Court was impermissible and that when once explanation offered by the assessee s was found unsatisfactory, the sums credited in the books were to be charged to income-tax as the income of the assessee s. It was held by Hon ble Supreme Court that the opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. The factual matrix of the case is dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails submitted by the assessee. However, in the Appellant s case, all the required available details were submitted by the Appellant. In the case relied upon by departmental representative, the assessee has total contract receipts, as per Form 16AA, Rs. 3,03,04,527/- and it had wrongly estimated the profit as per section 44AD since, When the turnover is more than 40 lakhs then the provisions of section 44AD is not applicable. However, in the case, Assessing Officer, was inspired from section 44AD and applied the 8 percent net profit rate and made the addition on estimate basis on gross contract receipts. The assessee has shown the sundry creditors to the tune of Rs. 23,14,417. No information, as required by law, was furnished by the assessee pertaining to the sundry creditors. When it is so then further examination of the material is required. Further, as already mentioned above the assessee s case falls under section 44AD and hence, no obligation is there to maintain the books of accounts or documents. Therefore, the case law relied upon cannot be used against assesse. 15. We have considered the rival contentions perused the order of the authorities below and the material availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. According to the CIT(A), quoting of wrong section is not fatal to the addition made and hence, it was held that the unexplained deposits in the bank account are assessable under section 69A of the Act Further, it is fact on record that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD of the Act. The section also does not put obligation on the assessee to maintain the books of account, more so in view of the fact that his income has been assessed as per section 44AD of the Act. vi) KokkarnePrabhakara v/s ITO, ITA no.1239/Bang./2019, order dated 11.09.2020; The similar issue also came for consideration before coaching bench of the tribunal in case of ThomosEapen in ITA No 451/Coch/2019 wherein it has been held that since scheme of presumptive taxation has been found in order to avoid long drawn crosses of assessment in cases of small traders or in cases of those businesses where incomes are almost are static quantum of all businesses assessing officer could have made addition under section 69A once he had carved out case out of glitches of provisions of section 44AD-In view of above decision once assessment of assessee was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not profit computed in accordance with provisions of this Act or that the legislature was unaware of provision of ss. 68, 69, 269SS, 269T, 140(3)metc, in the enactment of s. 44AD. Thus, reading entire scheme of the Act one has to hold that profit computed as per s. 44AD of the Act by application of flat rate in one recognized method of computation of total income or part of total income. The learned Counsel for the assessee in support of his arguments further relied upon the following case laws:- i) Girish V. YalakkishettarSujatha Buildings v/s ITO [2020] 58 CCH 0073 (Bang.Trib) ii) Honey Rahulan v/s ITO, ITA No. 150/Coch/2020 dated 09/06/2020 iii) Syed Khalid Saifullah v/s. ITO, [2020] TaxPub(DT) 2006 (Del-Trib); iv) SaurabhMalhotra v/s. ITO, ITA No. 72/Agra/2016 dated 28/02/2018; v) Syed Maqsoodulla v/s. ITO, ITA No. 397/Bang/2019 dated 11/09/2020 vi) Om PrakashKarnani v/s. ACIT [2021] TaxPub(DT) 0841 (JP-Trib); vii) DineshkumarVerma v/s. ITO, ITA No. 1183/Mum/2019, dated 28/12/2020 16. It is admitted fact on record that the assessee has not been maintaining any books of account and opted to file return of income u/s 44AD of the Act. The assessee had already submitted copy of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below. Considering the total turnover sale of the assessee, net income determined under section 44AD of the Act shown by the assessee has to be accepted, as there is no provision in the Income Tax Act, 1961, to reduce the income of the assessee. It is also admitted fact that in the earlier years the department has accepted income U/s. 44AD of the Income Tax Act. The judicial precedences relied upon by the learned Counsel for the assessee also support the case of the assessee and the income determined under section 69A of the Act is directed to be treated as regular return of income of the assessee and returned income shown by the assessee is hereby directed to be accepted. Consequently, the grounds no.2, 3, 4, 5 and 7, are allowed in terms indicated above. 18. Regarding ground no.6, the Assessing Officer has made addition of Rs.3,67,000/- shown as opening balance as on 1st April 2017, in the capital position filed by the assessee before the Assessing Officer. The Assessing Officer stated that no supporting document was filed by the assessee regarding opening balance of Rs.3,67,000/- and, therefore, added the same under section 68 of the Act. 19. The learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The invoking of section 68 of the Act has to fail because as per the judgment of the Hon ble Bombay High Court in the case of ShriBhaichand Gandhi (supra), the bank pass book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purpose of section 68 of the Act. Therefore, on this account itself, the impugned addition deserves to be deleted. I hold so. 21. The leaned Departmental Representative relied upon the order of the authorities below on not submitted any reason for not considering of the fact. 22. We have considered the rival submissions, perused the order of the authorities below and the material available on record in the light of the decisions relied upon by the learned Counsel for the assessee. Ongoing through the arguments of the learned Counsel in the light of the facts stated above and the case laws relied upon, we find that there is no merit in making the addition of Rs.3,67,000/- on account of opening capital in the case of the assessee under section 68 of the Act, as we are of the considered opinion that the aforesaid provisions of section 68 of the Act are not applicable to the present case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
