Income Tax Appellate Tribunal - Agra
Sanjeev Kumar Gupta, Shivpuri vs Department Of Income Tax on 20 November, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.206/Agr/2012
Assessment Year: 2007-08
Income Tax Officer, vs. Shri Sanjeev Kumar Gupta,
Shivpuri. Prop. Sanjeev Traders,
Bhonti, Distt. Shivpuri.
(PAN: AHLPG 0656 N)
(Appellant) (Respondent)
Appellant by : Shri Waseem Arshad, Sr. D.R.
Respondent by : None
Date of Hearing : 20.11.2012
Date of Pronouncement of order : 23.11.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order dated 15.02.2012 passed by the ld. CIT(A), Gwalior for the Assessment Year 2007-08.
2. The Revenue has raised the following grounds of appeal;:-
"(i) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.2,81,284/- made on account of suppressed gross profit.
(ii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.1,05,663/- made on account of unexplained increase of capital.2 ITA No.206/Agr/2012
A.Y. 2007-08
(iii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.13,00,123/- made on account of unexplained investment."
3. None was present on behalf of the assessee inspite of service of notice.
4. After hearing the ld. Departmental Representative, we proceed to decide the case on merit.
5. The brief facts of the first ground are that the assessee is engaged in the business of oil seeds on wholesale basis. During the assessment proceedings, the A.O. noticed that the assessee has declared sale of Rs.37,96,005/- as per the return whereas the details furnished during the assessment shows total sales at Rs.38,10,895/-. The A.O. noticed that the sales to M/s. Radha Krishan Flour Milling Corporation, M/s. Sharda Solvent Limited, M/s. K.P. Solvex Limited and M/s. Agro Solvent Pvt. Ltd. have been shown less by Rs.2,81,184/- as per the details given by respective parties. The A.O. was of the view that the assessee has shown gross profit less by this amount, therefore, he made the addition of Rs.2,81,184/-. The CIT(A) has made ex-parte assessment as nobody attended on the date of hearing on 09.10.2009. However, the CIT(A) noted that the total turnover at Rs.38,10,895/- including sale to four parties. As per the reasons recorded for initiating proceedings under section 148 of the Act, the A.O. himself 3 ITA No.206/Agr/2012 A.Y. 2007-08 has computed extra income of Rs.84,601/- by applying net profit rate of 5% as per provision of Section 44AF of the Act. The assessee has also submitted application of said rate of 5% on the turnover subject to non-imposition of penalty. The A.O. rejected the assessee's contention on the ground that the assessee is engaged in the business on wholesale basis and not a retail trader. The CIT(A) noted that the A.O. has made the addition of the entire amount of sale difference. The CIT(A) was of the view that 5% profit on turnover of Rs.38,10,895/- of which calculation comes to Rs.1,90,544/- which is reasonable and justifiable. Since the assessee did not maintain regular books of account, therefore, business income of the assessee was accordingly assessed at Rs.1,90,545/- in place of Rs.98,979/- declared by the assessee in the return of income. The CIT(A) held that the income assessed at Rs.1,90,545/- will take care of the impugned addition which has been made by the A.O. for entire sale difference in place of application of profit rate on such sale.
6. We find that the CIT(A) has rightly held that gross amount of the sale cannot be added. Only relevant profit on such sale is required to be taxed. The CIT(A), after considering the AO's action in computing the escaped income by applying net profit rate of 5% and after considering assessee's submission but also agreed for application of profit rate of 5% on the turnover. When the books of accounts is rejected and income is estimated by applying a particular rate of profit in that circumstances, the A.O. cannot reject the contention of the assessee merely on the 4 ITA No.206/Agr/2012 A.Y. 2007-08 ground that the assessee is engaged in the business on wholesale basis and not a retail trader. The A.O. did not bring on record that how the gross amount of sale is to be added. We find that the order of CIT(A) is reasonable and requires no interference, accordingly order of the CIT(A) on the issue is confirmed.
7. The second ground is in respect of addition of Rs.1,05,663/- made by the A.O. for increase of capital. During the assessment proceedings, the A.O. on the basis of return and details furnished by the assessee has drawn tentative statement of affairs of the assessee as on 31.03.2007. According to the said statement of affairs excess of assets over liabilities has been worked out at Rs.1,05,663/-. The assessee did not furnish satisfactory explanation or evidence regarding this increase in capital by Rs.1,05,663/- before the A.O. The A.O. accordingly made addition of the said amount. In the remand report also the A.O. has reiterated the finding made in the Assessment Order. The CIT(A) has reduced the addition to the extent of Rs.91,566/- as under:- (Paragraph No.6.2) "6.2 Appellant's submissions have been considered carefully. A.O. has computed this excess on the basis of tentative statement of affairs drawn by him as per the assessment order on the basis of appellant's return and details furnished during the course of assessment proceedings. However, on perusal of same, it is seen that he has taken household expenses at Rs.36,000/- which are stated to be same as shown for A.Y. 2006-07. In fact, for A.Y. 2006-07, the appellant has declared household expenses at Rs.30,000/- only. A.O. has taken the said figure at Rs.36,000/- without giving any basis or justification for the same. Similarly, cash balance and bank balance have been taken separately at Rs.1,26,329/- and Rs.8,269/- respectively on the 5 ITA No.206/Agr/2012 A.Y. 2007-08 basis of return and bank statements. In my view, amount of Rs.8,269/- should not be added again as Rs.1,26,329/- is inclusive of bank balance as at the end of the year. Thus, the difference remains of Rs.91,394/-. Since the business income has been assessed at Rs.1,90,545/- and thereby addition of Rs.91,566/- (Rs.190545 - 98,979 i.e. return income) has been confirmed in the preceding paras, thus difference of Rs.91,394/- on account of capital is not found sustained particularly when the same itself has been held to be tentative without any other adverse supporting material on record. The same is, hereby, deleted."
8. We find that the case of the A.O. was that the assessee has not satisfactorily explained the difference between the assets over liabilities worked out as per statement of affairs prepared by the A.O. on the basis of details available on record. The CIT(A) was of the view that the cash balance and bank balance should not have been taken separately since the business income has been estimated at Rs.1,90,545/- as against income declared in return Rs.98,979/-. The CIT(A) found that the difference of Rs.91,394/- on account of capital was not found sustainable particularly when the same itself has been held to be tentative without any adverse supporting material. Considering the case made out by the A.O. on the basis of statement of affairs prepared by him at the end of the F.Y., in the said statement of affairs there was excess assets over liability by Rs.1,05,663/-. The CIT(A) went on different direction and given a finding regarding presentation of cash balance and bank balance separately. The CIT(A) allowed set off of the income estimated for the year under consideration on presumption that this amount of income was available with the assessee as his capital but we find that the finding of the CIT(A) 6 ITA No.206/Agr/2012 A.Y. 2007-08 does not support by any material available on recorded. There is no material on record on the basis of which it can be said that the business income assessed during the year was available with the assessee for increase in the assets. Since the assessee did not put his presence and there is no material on record, based on which it can be said that the finding of CIT(A) was correct, contrary to the fact, the order of the A.O. is based on material that he has calculated the capital by preparing statement of affairs as at the end of the year which is the correct method of calculation of the capital. The assessee did not furnish any explanation before the A.O. Before the CIT(A) it was submitted by the assessee that no regular books of accounts has been maintained by him during the year, therefore, the question of preparation of statement of affairs and resulting computation of increase in capital was not justified. Thus, even before he CIT(A) the assessee has failed to furnish the necessary explanation and evidence in respect of difference between assets and liabilities. In absence of necessary explanation and evidence, we find that the CIT(A) has allowed set of income for the year on the basis of presumption which is not sustainable. In the light of above discussion, order of the CIT(A) is set aside and he order of the A.O. is resorted. Accordingly, addition of Rs.1,05,663/- made by the A.O. is confirmed.
9. The brief facts of the third ground are that during the assessment proceedings the A.O. noticed that the payment of Rs.4,63,255/- was on account of 7 ITA No.206/Agr/2012 A.Y. 2007-08 sale to K.P. Solvex Pvt. Ltd. and Rs.9,05,298/- on account of sale to Agro Solvent Product Pvt. Ltd. both was found credited in assessee's bank account. The A.O. noticed that the assessee did not disclose the relevant sale in the books of account. In the absence of explanation from the assessee, the A.O. made the addition of entire amount of Rs.13,68,553/-
10. Before the CIT(A), it was contended on behalf of the assessee that the relevant sale pointed out by the A.O. has been declared by the assessee which included in total turnover. Therefore, separate addition for the entire amount made by the A.O. was not justified. He CIT(A) restricted the addition to the extent of Rs.68,428/- by applying 5% profit rate on Rs.13,68,553/-. The case of the A.O. is that the payment of Rs.4,63,255/- from M/s. K.P. Solvex Pvt. Ltd. and payment of Rs.9,05,298/- from M/s. Agro Solvent Products Pvt. Ltd. have been received through cheques/drafts. The A.O. noticed that copy of the bank account reveals that no such cheques or drafts have been credited in the bank account. The assessee during the course of recording of statement on oath on 17.09.2009 has denied having any other bank account. The A.O. noted that the statement of the assessee was not correct as the said amounts have been received through cheques/drafts as detailed below:- (A.P. page no.6) "K.P. Solvex Pvt. Ltd.
Cheque No.677886 dated 19/07/2006 for Rs.2,34,634/-
8 ITA No.206/Agr/2012
A.Y. 2007-08 Cheque No.070410 dated 31/07/2006 for Rs.2,28,621/-
Total Rs.4,63,255/-
Agro Solvent Products Pvt. Ltd.
Cheque No.678555 dated 10/07/2006 for Rs.4,64,946/-
DD No.019009 dated 22/08/2006 for Rs.2,25,860/-
DD No.019040 dated 12/09/2006 for Rs.2,14,492/-
Total Rs.9,05,298/-"
11. The A.O. has given his finding that the payment of above cheques and drafts have been obtained which has not been disclosed by the assessee. In this regard, the A.O. specifically requested vide notice under section 142(1) dated 30.09.09 to clarify the correct position and in case no satisfactory explanation is furnished the same will be treated as unexplained investment. Since the assessee did not furnish the same inspite of specific directions, the A.O. made addition of Rs.13,68,553/- treating it as unexplained investment. The CIT(A) held that the A.O. has failed to bring any material on record to prove that the assessee has undisclosed bank accounts or that the alleged payments received in respect of these amounts are undisclosed income of the assessee. On consideration of the facts of the case, we find that some cheques and drafts have been received by the assessee from two parties, detailed as above. The case of the A.O. is that these were unexplained investments. When the amount has been received from two parties that should be on credit side and not on asset side. Therefore, the case of the A.O. is not correct that these were unexplained investments. Finding of the A.O. was on presumption that there was undisclosed bank accounts. The assessee received the cheques and 9 ITA No.206/Agr/2012 A.Y. 2007-08 drafts from parties, such transaction cannot be held to be unexplained investments. At the most this may be cash credits subject to section 68 of the Act as the assessee received cheques and drafts from the parties. However, the CIT(A) after appreciating the facts of the case found that at the most it is unaccounted sales. The CIT(A) has rejected the assessee's contention that the said sale has been included in the total turnover. When there is a sale, the addition to the extent of profit is warranted. We, therefore, find that the CIT(A) has rightly sustained the addition to the extent of profit of Rs.68,428/-. We, therefore, do not find any infirmity in the order of CIT(A). Order of the CIT(A) is confirmed on the issue.
12. In the result, appeal of the Revenue is partly allowed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File.
By Order
Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy