Income Tax Appellate Tribunal - Rajkot
Abdul Sarfaraz Sattar,, Jamnagar vs Department Of Income Tax on 18 June, 2012
आयकर अपील य अ धकरण, राजकोट यायपीठ राजकोट IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT.
Before Shri T. K. Sharma, JM and Shri B.R.Jain, AM ITA No. 496/Rjt/2012 नधारण वष / Assessment Year 2006-07 Income Tax Officer, Vs. Shri Sarfaraz Abdul Ward 3(2) Sattar, Jamnagar Nagar Naka Road, (अपीलाथ /Appellant) Bhanvad Dist:Jamnagar PAN:AHRPG5335N यथ /Respondent A राज व क ओर से/ Revenue by Shri. Avinash Kumar A नधा रतीक ओर से/ Assessee by Shri Chetan Agarwal सुनवाई क तार ख/Date of Hearing 4.12.2012 घोषणा क तार ख / 14.12.2012 Date of Pronouncement आदेश / Order ट .के. शमा, या यक सद य / T. K. Sharma, J. M. This appeal by the Revenue is against the order dated 18.6.2012 of CIT(A)-Jamnagar deleting :-
(i) the addition of Rs.11,05,600/- made by the AO on account of unexplained cash deposits in the bank of the assessee and
(ii) deleting the disallowance of Rs.23,877/- made by the AO on account of non-verification of the expenses for the assessment year 2006-07.2 ITA No. 496/Rjt/2012
2. Briefly stated facts are that the assessee is an individual. For the assessment year under appeal, he filed return of income on 30.11.2006 declaring total income at Rs.94,593/-. The AO framed the assessment under section 144 of the Income Tax Act, 1961 (the Act) on 30.9.2010 at a total income of Rs.12,24,070/-. In this assessment order, the AO, on verification of profit and loss account the AO noticed that the assessee has debited Rs.23,877/- as expenses in his accounts. The AO disallowed the entire expenses of Rs.23,877/-. Further from the above information gathered from AIR the AO noticed that the assessee has deposited Rs.11,05,600/- in SB account in HDFC Bank Ltd on 31.3.2006. The AO added this amount also to the total income of the assessee.
3. On appeal, before the ld. CIT(A), the assessee contended that he handed over all the notices to his consultant who made no compliance of the various notices. Only on receipt of assessment order, the assessee come to know about non compliance of the various notices. It was explained that the assessee has deposited sale proceeds in the bank account and issued cheque for purchases made by him. The assessee has done trading business and disclosed net profit of Rs.1,18,470/- In support of this, the assessee has produced copy of balance sheet, profit and loss account and trading account. It was also submitted that these were available before the AO. Therefore, only profit is taxable. With reference to the disallowance of expenditure debited to the profit and loss account, it was contended that the assessee engaged in retail business and disclosed profit is 3 ITA No. 496/Rjt/2012 more than 5% as required u/s 44AF of the Act. Therefore, there was no necessity for making disallowances of expenditure.
4. After considering the aforesaid submissions, in the impugned order the ld. CIT(A) deleted both the additions for the detailed reasons given in paragraph 4.2 of his order which read as under :
"4.2 I have carefully considered the issue, gone through submission of AR and discussion made by AO in the assessment order. In assessment proceedings since no explanation was furnished, AO has made an addition of Rs.11,05,600/- as unexplained investment being cash deposited in bank account as per information received from AIR and also disallowed expenses of Rs.23,877/- debited to profit and loss account. AR has contended that the appellant has deposited sales as disclosed in trading account in bank. It is seen that total sales during the year under consideration was Rs.18,26,012 on which net profit of Rs.94,593/-, in percentage terms which comes to 5.18%. Hence the appellant has declared more profit as prescribed u/s 44AF of the Act for retail and small business. Considering the facts the appellant has deposited sales proceeds in bank account, addition of Rs.11,05,600/- made as unexplained investment is deleted an also appellant has declared more profit than prescribed u/s44AF of the Act, hence addition of Rs.23,877/- made on account of disallowance of expenditure debited to profit and loss account is also deleted"
Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us.
5. At the time of hearing, Shri Avinash Kumar , the ld. DR appeared on behalf of the Revenue and contended that while deleting both the addition, the ld. CIT(A) failed to appreciate that the assessee never produced evidence before the AO, therefore, the ld.CIT(A) should not have admitted any further evidences and should not have decided the issue on its basis without affording an opportunity to the 4 ITA No. 496/Rjt/2012 AO under Rule 46A of the Income Rules, 1962. He accordingly contended that impugned order of the ld. CIT(A) be set aside and the matter be restored to the file of the AO for making the fresh assessment in accordance with law after considering the fresh evidence which are submitted by the assessee for the first time before the ld. CIT(A).
6. Shri Chetan Agarwal, the ld. counsel appearing on behalf of the assessee vehemently supported the orders of the authorities below. He submitted that no fresh evidence has been furnished before the ld. CIT(A). The assessee merely invited the attention of the ld. CIT(A) to the balance sheet, profit and loss account and trading account. He contended that the assessee has deposited Rs.11,05,600/- in SB account in HDFC Bank Ltd on 31.3.2006 out of sale proceeds. The ld. counsel for the assessee further submits that even if the books of account are rejected, the AO has no option but to estimate the income. The gross receipt in this year was less than Rs.40 lakhs and the assessee declared more profits as prescribed u/s 44AF of the Act and involved in small business. Therefore, keeping in view the facts and circumstances of the case, the view taken by the ld. CIT(A) deleting the both the addition be upheld.
7. Having heard both sides, we have carefully gone through the authorities below . Prima facie it appears that before the ld. CIT(A), the assessee has not filed any fresh documents. He merely invited the 5 ITA No. 496/Rjt/2012 attention of the ld. CIT(A) to the profit and loss account, balancesheet and trading account and the facts and figures available therein.
8. As per the provisions contained in section 44AF of the Act, the assessee having turnover less than Rs.40 lakhs can declare net profit at the rate of 5% in the excess of books of account. Admittedly, the total receipt of the assessee is less than Rs.40 lakhs. Therefore, even if the books of account are rejected, the AO has no option but to estimate the income of the assessee. For estimating the income, the AO can adopt 5% of gross receipt of retail business. Keeping in view this peculiar facts and provisions contained in section 44AF of the Act, we are of the view that ld. CIT(A) is legally and factually correct in deleting both the additions as the profit declared by the assessee is more than 5% of the total receipt as prescribed under section 44AF of the Act. We, therefore, inclined to uphold the order of the ld. CIT(A).
9. In the result, the appeal of the Revenue is dismissed.
This order is pronounced in the open Court on the date mentioned hereinabove.
Sd sd
( B.R.JAIN) (T. K. Sharma)
लेखा सद य/ Accountant Member या यक सद य/Judicial
Member
आदेश दनांक/Order Date 14.12.2012.
राजकोट /Rajkot
SRL
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
6 ITA No. 496/Rjt/2012
1. अपीलाथ / Appellant-,
2. यथ / Respondent-
3. संबं धत आयकर आयु त / Concerned CIT.
4. आयकर आयु त- अपील / CIT (A).
5. वभागीय त न ध, आयकर अपील य अ धकरण, राजोकट / DR, ITAT, Rajkot
6. गाड फाइल / Guard file.
आदेश से / By order, True copy Senior Private Secretary Income tax Appellate Tribunal, Rajkot.