Income Tax Appellate Tribunal - Rajkot
Jitnedrakumar Bhailal Dodia,, ... vs Assessee on 21 November, 2013
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. 540/Rjt/2013 नधारण वष / Assessment Year : 2009-10 Jitendrakumar Bhailalbhai Dodia, The I.T.O., Prop. of Sandip Scale Co., Ward - 2(4), Shivaji Nagar, Savarkundla, Amreli Dist. Amreli PAN : ACFPD 1016 L (अपीलाथ /Appellant) यथ /Respondent नधा रतीक ओर से/ Assessee by Shri D. R. Adhia, AR राज व क ओर से/ Revenue by Dr. Jayant B. Jhaveri, DR सन ु वाई क तार ख / Date of Hearing 08.01.2014 घोषणा क तार ख / 07.03.2014 Date of Pronouncement आदे श / Order ट .के. शमा, या यक सद य / T. K. Sharma, J. M.: This appeal by the assessee is against the order dated 21.11.2013 of ld. CIT(A)-IV, Rajkot for the Assessment Year 2009-10.
2. The facts, in brief, are that the assessee is an individual, engaged in the business of manufacturing and trading of mechanical iron scale in his proprietorship concern namely Sandip Scale Co. For the assessment year under appeal, he filed the Return of Income on 23.09.2009 declaring total income at Rs.1,99,450/-. The Assessing Officer selected this case for scrutiny and on verification, he noticed that the assessee has adopted mercantile system of accounting of accounts and furnished an audit report u/s 44AB of the Act with Form No.3CB and 3CD. The Assessing Officer also observed that during the year under consideration the assessee has shown the turnover of Rs.42,25,417/- and shown profit of Rs.5,86,797/- i.e. 13.89% and net profit of Rs.2,21,545/- i.e. 5.24% as against last year's total turnover of Rs.29,18,184/-, gross profit of Rs.3,68,142/- and net profit of Rs.1,22,562 i.e. 4.20%. Thus the net profit during the year under consideration has shown a slight increase of 1.04%.
3. In paragraph 4 of the assessment order, the Assessing Officer observed that the assessee has deposited Rs.14,08,814/- in the savings bank account No. 30100920237 2 540-Rjt-2013 -
Jitendrakumar Bhailalbhai Dodia with State Bank of India, Station Road, Savarkundla which are not recorded in the books of accounts. In respect of this deposit, the assessee explained before the Assessing Officer that this bank account is of HUF. However, this explanation was rejected on the ground that the savings bank account was opened with the PAN of individual. He accordingly treated the entire deposit as unaccounted income u/s 69A of the Income-tax Act, 1961. In paragraph 5 of the assessment order, the Assessing Officer disallowed Rs.35,000/- on account of expenses which are of non-verifiable in nature. In paragraph 6 of the assessment order, the Assessing Officer disallowed Rs.10,820/- out of shop expenses, scooter expenses, telephone expenses and depreciation of scooter. To sum-up, in the assessment order the Assessing Officer made total addition/disallowance of Rs.14,54,634/- under the three heads which are as under:-
i. Unexplained deposit in account No. 30100920237 with State Bank of India, Station Road, Savarkundla - Rs.14,08,814/- ii. Disallowance of factory expenses out of Rs.7,30,460/-
due to non-verifiable bills/vouchers - Rs. 35,000/- iii. Disallowance out of shop expenses, scooter expenses, Telephone expenses and depreciation of scooter - Rs. 10,820/-
Total Rs.14,54,634/-
On appeal, in the impugned order, ld. CIT(A) confirmed all the aforesaid three additions/disallowances. Aggrieved with the order of ld. CIT(A), the assessee is now in appeal before this Tribunal, on the following grounds:-
"1. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/-. The addition needs deletion.
2. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/- without accepting explanation furnished. The addition needs deletion.
3. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/- without considering provisions of section 44AF. The addition needs deletion.
4. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/- without considering peak position of the transaction. The addition needs deletion.
5. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/- based on presumption and cermises. The addition needs deletion.
6. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.14,08,814/- without following guidelines framed by the Hon. ITAT, Rajkot. The addition needs deletion / reduction.
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Jitendrakumar Bhailalbhai Dodia
7. Taking into consideration the legal, statutory factual, accounting and administrative aspects, no addition amounting to Rs.14,08,814/- ought to have been confirmed. The addition needs deletion.
8. Taking into consideration the legal, statutory factual, accounting and administrative aspects, no addition amounting to Rs.14,08,814/- ought to have been confirmed. The addition needs suitable reduction.
9. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.35,000/- in respect of factory expenses. The addition needs deletion / suitable reduction.
10. The Ld. CIT(A) has erred in law and facts in confirming lump sum addition of Rs.10,820/-. The addition needs deletion / suitable reduction.
11. Without prejudice, the assessment made is bad in law and deserves annulment.
12. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while framing assessment. The assessment needs annulment.
13. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment.
14. The appellant craves leave to add / alter / amend and / or substitute any or all grounds of appeal before the actual hearing takes place."
4. At the time of hearing, on behalf of the assessee, Shri D.R. Adhia, AR, appeared and contended that though the savings bank account No. 30100920237 with State Bank of India, Station Road, Savarkundla was opened under the PAN of individual, all the deposits and withdrawals done in the accounts are of HUF which may be taxed separately in the hands of HUF as per the accounts of the assessee. Alternatively, he pleaded that it may be taxed u/s 44AF at 5%, because in such cases Department itself has taxed such amount u/s 44AF at 5% or the addition can be directed to be made on peak working basis. In support of this, the ld. Authorized Representative of the assessee relied upon the decision of the Hon'ble Gujarat High Court as also in the case of R.R. Carrying Corporation (126 TTJ (Ctk) 240) and the decision of the ITAT, Rajkot Bench in the case of Gopalbhai Gordhanbhai Garasia in ITA No.540/Rjt/2013. He further contended that when income is estimated @ 5%, no separate addition out of expenses can be made.
5. On the other hand, Dr. Jayant B. Jhaveri, DR, appeared for the Revenue vehemently supported the order of ld. CIT(A). He submitted that since the assessee has not disclosed the bank account with SBI, the entire deposits are to be treated as 4 540-Rjt-2013 -
Jitendrakumar Bhailalbhai Dodia unexplained u/s 69A of the Income-tax Act, 1961 and the assessee is not entitled to the benefit u/s 44AF or the peak theory.
6. In rejoinder, the ld. Authorized Representative of the assessee produced a bank statement of account No. 30100920237 with SBI, Savarkundla and pointed out that in this bank account the balance as on 31.03.2008 was Rs.40748/- and as on 31.03.2009 it was Rs.58,125/-. All the deposits and withdrawals in this account are nothing but transactions of business which is also carried out by the assessee in the individual capacity. Therefore, only profit can be taxed which is as per provisions contained in section 44AF @ 5%. He further reiterated that when the income is estimated u/s 44AF, no separate addition/disallowance out of expenses can be made.
7. Heard parties with reference to material available on record and case laws brought to our notice. The copy of bank account bearing No.30100920237 with SBI, Savarkundla, which is placed on record, reveals that the credit balance as on 31.03.2008 was Rs.40,748/- and at the end of the accounting year i.e. 31.03.2009, it was Rs.58,125/-. The entire deposits and withdrawals were claimed by the assessee related to the business of manufacturing and trading of mechanical iron scale which is carried out by assessee in his individual capacity. The documents on record with respect to HUF do not reveal disclosure of this account in the name of said HUF. Since the transactions of debit and credit related to manufacturing and trading of mechanical iron scale, the Assessing Officer should have applied the same appropriate net profit rate instead of taxing the entire gross receipts of Rs.14,08,814/-. Section 44AF of the Income-tax Act is applicable only for computing profits and gains of retail business. The assessee before us is engaged in the business of manufacturing of mechanical iron scale. The deposits in account No. 30100920237 with SBI, which is not disclosed by the assessee in the books of accounts, contained business transactions of this business i.e. business of manufacturing of mechanical iron scale. Since the assessee had discharged the onus to the fact that the transactions in the said bank account are relatable to the business of manufacturing and trading of mechanical iron scale, we consider it appropriate to assess the income by applying the net profit rate of 10% on entire deposit of Rs.14,08,814/- appearing in the said undeclared bank account by 5 540-Rjt-2013 -
Jitendrakumar Bhailalbhai Dodia treating the same as transactions of business carried by the assessee outside the books of account. Section 69A of the Act has no application to such transactions. Accordingly, the addition of Rs.1,40,881/- (10% of Rs.14,08,814/-) is sustained and balance of addition is directed to be deleted.
8. As regards to the assessee's grievance of sustaining the addition of Rs.35,000/- out of factory expenses amounting to Rs.7,30,460/- and lump-sum addition of Rs.10,820/- out of shop expenses (Rs.22,299/-), scooter expenses (Rs.12,540/-), telephone expenses (Rs.12,948/-) and depreciation of scooter (Rs.6,334/-); we are of the view that these additions are made from business of which accounts were produced before the Assessing Officer. These additions made are fair and reasonable and we, therefore, decline to interfere.
9. In the result, the appeal of the assessee is partly allowed.
10. Since one of us (the AM) is not available at Rajkot, this order shall be deemed to have been pronounced on the date on which it is notified on the Notice Board of Rajkot Bench in terms of Rule 34 of the Income-tax (Appellate Tribunal) Rules.
Sd/- Sd/-
(B. R. Jain) (T. K. Sharma)
लेखा सद य/ Accountant Member या यक सद य/Judicial Member
आदे श दनांक/Order Date 07.03.2014
राजकोट /Rajkot
*Bt
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. अपीलाथ /Appellant- Vijaykumar Mavjibhai Dodia, Prop. of Shri Jaynath Scale Co., Savaji Nagar, Savar Kundla, Dist. Amreli
2. यथ /Respondent- The I.T.O., Ward - 2(4),Amreli
3. संबं धत आयकर आयु त / CIT-III, Rajkot
4. आयकर आयु त- अपील / CIT(A)-IV, Rajkot
5. वभागीय त न ध, आयकर अपील य अ धकरण, राजकोट / DR, ITAT, Rajkot
6. गाड फाइल / Guard file.
आदे श से / By order, Private Secretary, आयकर अपील य अ धकरण, राजकोट Income tax Appellate Tribunal, Rajkot.