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TMI Blog2004 (7) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... and the estimate of income at higher rate could not have been anticipated. (c) Because the levy of interest is not justified as the Supreme Court decision in CIT vs. Anjum M.H. Ghaswala Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC) is not applicable to the facts of the case." 2. At the time of hearing, learned counsel for the assessee submitted that he was not pressing ground Nos. 5 (a), (b) and (c) and, therefore, the same stands dismissed as such. 3. So far as ground Nos. 1 to 4 are concerned, the learned counsel for the assessee submitted that the issues involved in this appeal are as under: (i) The first issue is against the rejection of assessee's books of account and consequential determination of assessee's income from commission received on account of discounting of demand drafts (DDs) by applying the net rate of Rs. 3.50 per Rs. 1,000. (ii) The other issue is against the addition of Rs. 35,000 because as per assessee, the income of Rs. 35,000 shown as income from other sources was part of the income from commission. 4. I have heard the learned counsel for the assessee as well as the learned Departmental Representative. 5.1 So far as facts relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drafts discounted by the assessee which resulted in the assessment of assessee's income from commission at Rs. 4,26,091 as against income of Rs. 61,067 declared by the assessee on this account. The AO effected the addition of Rs. 35,000 also as shown by the assessee. The assessee went in appeal before the CIT(A) and submitted the written submissions which read as under: "This appeal is against the assessment order under s. 143(3) of the Act, dt. 5th Dec., 2001. 2.1...... 2.2 The AO has taken the view that the commission at Rs. 5 per thousand would be reasonable. From this he has allowed Rs. 1.5 per thousand for expenses. The net commission at Rs. 3.50 per thousand has been worked out at Rs. 4,26,091. For the rate of 0.5 per cent he has relied on the Tribunal's decision dt. 24th July, 2001 in the case of C.K. Telang vs. Asstt. CIT for the asst. yr. 1990-91 carrying on similar business at Firozabad. In the case of C.K. Telang, net income of Rs. 12,312 at Re. 1 per thousand had been shown which was accepted by the Department. The AO had made addition of peak credits in bank under s. 69 and against this addition, appeal was filed with CIT(A). There was no ground of appeal rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom commission, after deducting all expenses, is also significantly better. The AO has not brought on record any comparable cases showing receipt at Rs. 5 per thousand. The decision of Tribunal in Telang's case is not applicable because: (i) the issue regarding business income did not arise from the orders of AO or CIT(A) and was not raised in grounds of appeal before Tribunal. The rate was increased without even hearing the appellant on this issue. (ii) The turnover was only Rs. 1.23 crores as against Rs. 12.17 crores of the assessee. (iii) The business income was found adequate to meet the day-to-day expenses whereas the assessee has accounted for all the expenses and none of the expenses have been found to be inflated. (iv) The assessment year involved in the case of Telang is 1990-91 when there was no competition but now there are several persons carrying on this type of business and charging commission at Re. 1 or Re. 1 per thousand. The assessee cannot charge more than this. (v) Reference is invited to Allahabad High Court decision in CIT vs. Ram Narain Heeralal (1997) 143 CTR (All) 97 : (1997) 227 ITR 401 (All) wherein the Court observed that it must be shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in bank and since the opening balance in the bank was at Rs. 75,847 the AO considered the balance amount of Rs. 1,21,282 as unexplained deposit in bank and added the same as deemed income under s. 69 of the IT Act. The learned counsel strongly stressing on the aforesaid facts further submitted that so far as assessee's case is concerned, there is no such addition, i.e., the Revenue authorities have not disputed the genuineness of deposits in assessee's bank account which are on account of demand drafts brought by various customers from outside Firozabad and discounted by the assessee. Referring to para 5 of the order of the Tribunal the learned counsel further submitted that the Tribunal was pleased to delete that addition. 6.2 According to the counsel, the only issue in that case before the Tribunal being addition of Rs. 1,21,282 having been made under s. 69 of the Act by considering the peak of deposit in the bank account of Shri C.K. Telang as unexplained, the Tribunal had no jurisdiction, after having deleted the addition of Rs. 1,21,282, to deal with the issue relating to the rate of commission charged by the assessee and the findings of the Tribunal, where the Hon'ble Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, and so far as expenses are concerned, the salary was paid to only one person, who used to go to bank to deposit the drafts and to bring the cash, whereas bank charges were verifiable from the bank statements. So far as general expenses and conveyance expenses are concerned, the learned counsel submitted that though the assessee had maintained the record of the same yet even if it is assumed that there was no record for these expenses, then the defect was not of such nature so as to authorise the AO to invoke the provisions of s. 145(2) of the Act. The learned counsel's plea was that even if it is assumed that these two types of expenses were not verifiable, what the maximum could be done was to disallow the same which could have resulted in addition of an amount of Rs. 17,729 only. The learned counsel, again referring to the application of rate of 0.35 per cent by the AO, submitted that if the AO was to follow the Tribunal's order then why he did not apply a rate of 0.5 per cent. According to the learned counsel, the application of rate of 0.35 per cent is absolutely arbitrary, on ad hoc basis and without there being any material to justify application of such rate. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Re. 1 per thousand. The deposits of such bank drafts in assessee's account aggregated to Rs. 1,23,12,916. Working out the commission Re. 1 per thousand, the assessee worked out his commission at Rs. 12,300 and declared the same as business income. At the time of assessment proceedings, the modus operandi was explained to the AO. However, the AO did not accept the contention of the assessee. He held that the peak deposits in the bank account of the assessee amounted to Rs. 1,96,629 on 3rd Aug., 1989. After giving credit for opening deposits of Rs. 75,847, the AO made an addition of Rs. 1,21,282 to the income of the assessee as deemed income under s. 69 of the Act. 4. Aggrieved by the order of the AO, the appeal was filed. The CIT(A) also confirmed the same. The assessee is in appeal before us against the findings of the CIT(A). The learned counsel reiterated the facts as mentioned above. He stated that under s. 69 of the Act, primary onus lay on the Department to bring on record necessary evidence that the deposits of bank drafts in the bank account are assessee's investment assessable as his income. Reliance was placed on the decisions reported in CIT vs. Smt. P.K. Noorj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from draft discounting business by applying 0.5 per cent commission on the value of drafts deposited in the bank account of the assessee. For this limited purpose, the issue goes back to the file of the AO. 7. In the result, the appeal filed by the assessee is partly allowed." 8.2 A careful analysis of the aforesaid order of the Hon'ble Tribunal leads me to agree with the submissions of the learned counsel for the assessee that the only issue before the Hon'ble Tribunal was with respect to the addition of Rs. 1,21,282 having been made by the AO [and confirmed by the CIT(A)] by considering the peak amount of deposits in assessee's bank account as unexplained which was deleted by the Hon'ble Tribunal. So far as question of rate of commission charged by Shri C.K. Telang is concerned, there is nothing in the order which may go to suggest that either the Revenue authorities had tinkered with the same or the assessee had taken any such ground and it seems to be due to the reason that when the Revenue authorities have not made any other addition, there was no reason for the assessee to raise any ground with respect to the commission. Had there been any addition on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, the assessee's turnover is Rs. 12,17,40,268 on which the assessee himself has declared an income of Rs. 61,067 + Rs. 35,000 as income from other sources. The assessee's case is, therefore, not of such nature where its income may be enhanced on the ground of assessee's survival. 10. Proceeding further, I am of the opinion that though both the authorities have stated that the assessee has not maintained the books of account, this observation, in my opinion, in the peculiar facts relating to the nature of business carried on by the assessee, is not sufficient so as to penalise the assessee by determining its income in an arbitrary manner. From the income and expenditure account, copy of which is placed by the assessee at p. 2 of its paper book, and as has been pleaded by the learned counsel for the assessee, so far as quantum of commission, bank charges and total turnover of DDs discounted by the assessee were concerned, the same were verifiable from assessee's bank account itself because, had there been more turnover or more commission, the amount would remain deposited in the bank, or would have found invested but the Revenue authorities have not claimed so. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he compact form, so that the Revenue authorities can compute the position of cash or receipts or investments on a particular date which, in the present case, was not possible. None of the Revenue authorities has given a finding that from the details maintained by the assessee, it was not possible for them to deduce the correct income so far as the details maintained by the assessee can make one to deduce the correct income, there is no case of non-maintenance of books of account. 13. In view of above facts and circumstances, I am of the opinion that Revenue authorities were not justified in rejecting the assessee's version and applying a net profit rate of 0.35 per cent, and the addition made on this account, in my opinion is, therefore, liable to be deleted and I delete the same; however, keeping in view that the expenditure on account of "general expenses" and conveyance expenses may be consisting of some expenses of personal nature or may not be supported by proper voucher, I am of the opinion that disallowance of expenditure of Rs. 5,000 from each of these expenses will meet the ends of justice. 14. So far as ground relating to the addition of Rs. 35,000 is concerned, I a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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