Income Tax Appellate Tribunal - Chennai
S S Mohamed Ibrahim, Chennai vs Acit Company Circle 1 (2), Chennai on 24 January, 2019
आयकर अपीलीय अिधकरण, ए' यायपीठ,
अिधकरण 'ए यायपीठ चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH : CHENNAI
[BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER]
आयकर अपील सं. I.T.A. Nos. 1224 & 1344/CHNY/2018
िनधा रण वष /Assessment year : 2009-2010.
S S Mohamed Ibrahim, Vs. The Assistant Commissioner of
Old No.7, New No.19, Income Tax,
Akbarabad Street, Corporate Circle 1(2),
Kodambakkam, Chennai
Chennai 600 024.
[PAN AAAPI 7526B ]
अपीलाथ /Appellant)
अपीलाथ
(अपीलाथ यथ /Respondent)
यथ
( यथ
अपीलाथ क ओर से/ Appellant by : Shri.N. Quadir Hoseyn, Advocate
यथ क ओर से /Respondent by : Shri. AR.V. Sreenivasan, JCIT.
सुनवाई क तारीख/Date of Hearing : 22-1-2019
घोषणा क तारीख /Date of : 24-1-2019
Pronouncement
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
These are appeals filed by the assessee directed against orders dated 19.02.2018 and 30.03.2018 of ld. Commissioner of Income Tax(A)-1, Chennai.
2. First is an appeal made against addition/disallowances made for the impugned assessment year, whereas second is an appeal :- 2 -: ITA No. 1224 & 1344/2018 against levy of penalty u/s.271(1) (c) of the Income Tax Act, 1961 (in short ''the Act'') for the same year.
3. Facts apropos are that assessee had filed his return for the impugned assessment year declaring income of Rs.11,14,850/- comprising salary of Rs.2,70,000/- and house property income of Rs.8,44,850/-. Ld. Assessing Officer during the course of assessment proceedings, examined the bank accounts of the assessee and found that there were two bank accounts, one with M/s. Bank of India and other with Central Bank of India, which carried following cash/ clearing credits.
(a) Cash credits in A/c No.8012101 10000477 with Bank of India: Rs.22,47,000
(b) Clearing credits in A/c No.801210110000477 with Bank of India; Rs.66,74,500
(c) Cash credits in A/c No.1010256476 with Central Bank of India: Rs. 8,47,295
(d) Clearing credits in A/c No.1010256476 with Central Bank of India: Rs. 4,60,717 Assessee was required to explain the source of the credits. Explanation of the assessee was that the credits were out of drawings from one M/s. Baba Foundations P. Ltd where he was a Managing Director. Ld. AO however did not accept the said explanation. According to him, the credits listed in the table above already excluded cheques received :- 3 -: ITA No. 1224 & 1344/2018 from M/s. Baba Foundations P. Ltd. As per the ld. AO account copies of the assessee in the books of M/s. Baba Foundations P. Ltd were verified and such exclusions correctly done by him. He held that the credits aggregating Rs.1,02,29,512/- was unexplained and an addition was made u/s.69 of the Act.
4. Apart from the above, ld. AO on verification of the running account assessee had in M/s. Baba Foundations P. Ltd, found that assessee had repaid Rs.34,10,000/- against loans aggregating to Rs.40,25,000/- received from M/s. Baba Foundations P. Ltd. According to the ld. AO there was no explanation for the source for making the repayments. An addition of Rs.34,10,000/- was made u/s.69 of the Act also.
5. Aggrieved, assessee moved in appeal before ld. CIT(A). Ld. CIT(A) dismissed such appeal for a reason that assessee failed to produce necessary evidence in support its contentions. Thereupon assessee moved this Tribunal and this Tribunal through its order in ITA 968/Mds/2014, dated 4.02.2015 remitted the issues back to the ld. CIT(A) with the following observations.
''We have heard rival contentions and perused the records. Admittedly, the learned Commissioner of Income Tax (Appeals) has passed impugned order on the basis of material available on record, without hearing the assessee. We noticed that the learned Commissioner of Income Tax (Appeals) has given more than one opportunity to the assessee to furnish materials called :- 4 -: ITA No. 1224 & 1344/2018 for by him. However, the assessee failed to furnish the same and hence the learned Commissioner of Income Tax (A) was constrained to pass order. At the same time, we find some merit in the plea of the learned Authorised Representative. Hence, in the interest of justice, we are inclined to accept the plea of the learned Authorised Representative subject to payment of cost. Accordingly, we direct the assessee to pay the cost of ₹5,000/- (Rupees Five Thousand Only) to the credit of Income Tax Department on or before 16th February, 2015. Subject to the payment of above said amount, we set aside the order of the learned Commissioner of Income Tax (Appeals) and restore all the material to his file with a direction to examine them afresh after giving adequate opportunity of hearing being heard to the assessee. We also direct the assessee to furnish all the details that may be called by the learned Commissioner of Income Tax (A) without fail''.
6. Accordingly, ld.CIT(A) considered the matter afresh. Submission of the assessee before ld. CIT(A) in the fresh proceedings were that he had earned income on account of civil construction business and the credits appearing in the bank account represented receipts from such business. Assessee also argued before ld. CIT(A) that a revised computation of income, admitting income of Rs.1,24,400/- for business, was filed before ld. AO during the course of original proceedings. As per the assessee such income was computed at 8% of the gross receipts in contract activity. Ld. CIT(A) sought a remand report from the ld. AO. Ld. AO and in the remand report, ld. AO stated as under:-
''"A) The revised computation of income flied on 29.12.2011 was not considered as it was computation u/s.44AD that too for business income which was not at all originally shown in return fled on 21.05.2010. The same was processed u/s. 143(l) on 09.11.2011. Had there been no scrutiny proceedings, no revised statements of income :- 5 -: ITA No. 1224 & 1344/2018 were to have filed. This revised statement is after thought. The issue, to be considered here, is explained credits in banks, repayment of loans without explaining the source for repayment In these circumstances, it is submitted that it was not ignorance on the part of AO to consider revised memo but non compliance on the part of the assessee to furnish evidences in support of claim during the assessment proceedings wherein the assessee was based to do so.
B) Cash credits Rs. 30,94,295/- peak credit has been worked out by the assessee at Rs.4,00,000/- on 22.04.2008. It is reiterated that peak credit has to be calculated by the AO, if he thinks so, and not by the assessee. Instead of explaining the sources for this entire Rs.30,94,295/-, assessee has resorted to the aid of peak credit. It is stated in additional evidence that the assessee has received cash to tune of Rs.33.50 lakhs from M/s.Baba Foundation. Here the question is on proving the source of repayment to M/s Baa Foundations. Even today, the sources have not been explained. This is not to be allowed as per the Income Tax Act, 1961 and therefore the offer of Rs. 4,00,000/- is not to be accepted."
7. After perusing the explanation of the assessee and remand report given by ld. AO, ld. CIT(A) accepted the claim of the assessee that the credits in the bank account were on account of civil construction business carried on by him. As per the ld. CI(A) the clearing entries appearing in the bank account were sub contract payments to one Shri. Manavalan. This, as per the ld. CIT(A) was also supported by the tax return and Balance sheet filed by Shri. Manavalan. According to the ld. CIT(A) explanation of the asseessee that the credits in the bank account where from its contract business was acceptable. However, according to him, gross receipts from such contract business for the purpose of applying 8% rate could not be :- 6 -: ITA No. 1224 & 1344/2018 limited to clearing credits alone. According to him, the total receipts from the civil construction business were as under:-
" Cash deposits in Bank account Rs,30,94,295
Clearing deposit in Bank account Rs.71,35,217
Amounts received from Baba Foundation Ltd. Rs .40,25,000
Rs.142,54,512
Ld. CIT(A) deleted the addition made by the ld. AO on unexplained cash credits and unexplained repayment of loan and instead made an addition of Rs.11,40,360/- being income estimated at the rate of 8% on civil construction contract receipts of Rs.1,42,54,512/-. However, apart from this, ld. CIT(A) also arrived at a finding that assessee would have invested a sum of Rs.4,00,000/- as initial investment in its business and sum of Rs.28,00,000/- for funding its working capital repayment. For estimating the working capital required ld. CIT(A) relied on the accounts of M/s. Baba Foundations P. Ltd, which reflected working capital of 23% of the turnover. After excluding Rs.4,00,000/- considered for addition as initial investment in an business, an addition of Rs.24,00,000/- was made as unexplained investment in working capital. Aggregate total income of the assessee as computed by the ld. CIT(A) read as under:-
:- 7 -: ITA No. 1224 & 1344/2018
a) Income from civil construction business Rs. 11,40,360 @ 8%of total receipts of Rs.1,42,54,512/-
b) Unexplained cash investment in business Rs. 4,00,000 (being peak investment admitted by appellant)
c) Unexplained investment in working capital (Rs.28 lakhs less cash investment of Rs.4 lakhs) Rs.24,00,000
-------------------
Total undisclosed income from civil construction business Rs. 39,40,360___
8. Based on the above findings, ld. CIT(A) also proceeded to levy penalty under Section 271(1)(c) of the Act on the sum of Rs.39,40,360/- which he considered to be concealed income of the assessee.
9. Now before us, assessee in its appeal against the quantum additions has raised five grounds. Ld. Counsel for the assessee at the outset submitted that he was not pressing ground No.1.
10. Vide its ground 2, assessee assails the addition of Rs.24,00,000/- made towards working capital.
11. We have considered the rival contentions. Reason why the addition of Rs.24,00,000/- was made by the ld. CIT(A) appears at para 18 of his order which is reproduced hereunder:-
"18. Further, in a civil construction business minimum working capital is required to carry on the business. The appellant has not maintained any books of accounts. In the case of Baba :- 8 -: ITA No. 1224 & 1344/2018 Foundation Ltd. the working capital is 23% of the turnover, as per the Balance Sheet furnished by the appellant. Taking the same ratio, the undisclosed investment in working capital by the appellant is estimated at Rs 28 Iakhs (20% of Rs 142,54,512) which includes cash of Rs.4 lakhs and other net receivables of Rs.24 lakhs. Thus, the appellants undisclosed investment in civil construction business disclosed for the first time is determined at Rs.28 lakhs."
We find that asseessee is not in appeal against estimation of 8% on its receipts of Rs.1,42,54,512/-, as income from civil construction business. Once an addition on estimate basis is made, in our opinion a further estimate for investments in working capital will be superfluous. There is nothing on record to show that assessee had any working capital or work in progress. Estimation of Rs.24,00,000/- , as net receivables of the assessee was purely an assumption. We have no hesitation in deleting this addition. Ground No.2 of the assessee is allowed.
12. Ground No.3 is against initiating levy of penalty u/s.271(1)
(c) of the Act, which is consequential in nature, needing no specific adjudication.
13. Vide its ground 4, assessee assails the addition of Rs.4,00,000/- considered as unexplained investment in business. Through its ground No.5, which is related to this issue, assessee seeks telescoping of such investment against the income estimated at 8% on contract receipts.
:- 9 -: ITA No. 1224 & 1344/2018
14. We have heard the rival contentions carefully. Para 17 of the order of the ld. CIT(A) is reproduced hereunder:-
''While explaining the source for the cash deposits in the bank account the appellant has calculated a peak investment of Rs.4 lakh, which he has admitted s undisclosed income. This represents the undisclosed cash component invested in the business, which when taken into account explains all the remaining cash transactions. This is hence treated as unexplained cash invested in business''.
15. It is clear that assessee itself had admitted a sum of Rs.4,00,000/- as peak investment in bank account which was not disclosed. Having done so, assessee cannot turn around and say that such addition ought not have been made by the ld. CIT(A). Assessee cannot plead for telescoping of admitted income with what is found by the Assessing authority to be undisclosed income. We thus do not find any reason to interfere with the order of the ld. CIT(A). Grounds 4 and 5 of the assessee stand dismissed.
16. Now we take up the appeal of the assessee against levy of penalty u/s.271(1) (c) of the Act. Its plea is that there was no concealment, since the income was arrived at estimated basis.
17. We have heard the rival contentions carefully. It is true that the income of the assessee was arrived on an estimated basis. However, assessee in its original return of income had shown only income from salary and income from house property and never :- 10 -: ITA No. 1224 & 1344/2018 revealed that it was doing any business, much less a civil contract business. It also did not show any income from such business. It was only when the ld. AO brought to the notice of the assessee the credits in its bank accounts, assessee came up with the idea of a civil contract business. Even this explanation was brought up by the assessee, first time before ld. CIT(A) and never made before the ld. AO. In the first round of proceedings, claim of the assessee was that cash credits included income disclosed on account of salary and house property income. It is true that the assessee had filed revised memo showing income of Rs.1,24,400/- from civil contract business during the course of the assessment before ld. AO. However, ld. AO in the remand report clearly stated that such revised memo was filed pursuant to scrutiny proceedings undertaken and when assessee was put on notice regarding the credits appearing in his bank accounts. Question of concealment and furnishing of inaccurate particulars has to be answered with reference to the original return filed by the assessee, and not based subsequent computations or revised return filed when assessee became aware that Assessing Officer was having information on income not disclosed in the original returns. Thus, in our opinion there was clear furnishing of inaccurate particulars as well as concealment of income. Even in the revised computation filed, during the course of assessment proceedings, assessee had admitted :- 11 -: ITA No. 1224 & 1344/2018 income of only Rs.1,24,400/- that too, on estimate basis. We are therefore of the opinion that lower authorities were justified in levying penalty under Section 271(1) (c) of the Act. Nevertheless, since we have deleted the addition of Rs.24,00,000/- considered as unexplained investment in working capital, the penalty levied also requires to be reduced proportionately. Ld. AO shall rework the penalty considering the undisclosed income as Rs.15,40,360/-. Ordered accordingly.
18. . In the result, the appeal of the assessee are partly allowed. Order pronounced on Thursday, the 24th day of January, 2019, at Chennai.
Sd/- Sd/-
(DUVVURU RL REDDY) (ABRAHAM P. GEORGE)
याियक सद य/
सद य JUDICIAL MEMBER लेखा सद य /ACCOUNTANT MEMBER
चे ई/Chennai
दनांक/Dated:24th January, 2019.
KV
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant 4. आयकर आयु /CIT
2. यथ /Respondent 5. िवभागीय ितिनिध/DR
3. आयकर आयु (अपील)/CIT(A) 6. गाड फाईल/GF