Income Tax Appellate Tribunal - Ahmedabad
Sanjaysingh B.Gohil, Ahmedabad vs Income Tax Officer,Range-11(2),, ... on 22 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "SMC" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA No.3024/Ahd/2013
(Assessment Year:2007-08)
Shri Sanjaysingh B. Gohil
17, Gyan Mandir Society, Near Navkar
Flats, Nr. Vasna Telephone Exchange,
Vasna, Ahmedabad - 380007 Appellant
Vs.
The Income Tax Officer,
Range-11(2), Ahmedabad Respondent
PAN: AEEPG1755J
आवेदक क ओर से/By Assessee : None
राज व क ओर से/By Revenue : Shri Parveen Kumar, Sr. D.R.
सन
ु वाई क तार ख/Date of Hearing : 15.03.2017
घोषणा क तार ख/Date of
Pronouncement : 22.03.2017
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This assessee's appeal for assessment year 2007-08 is preferred against the CIT(A)-XVI, Ahmedabad's order dated 07.11.2013, passed in appeal no. CIT(A)-XVI/ITO/Wd.11(2)/653/11-12, upholding Assessing Officer's action I.T.A. No. 3024/Ahd/2013 (Shri Sanjaysingh B. Gohil vs. ITO) A.Y. 2007-08 -2- in imposing penalty of Rs.4,59,830/- in order dated 21.02.2012, in proceedings u/s.271(1)(c) of the Income Tax Act, 1961; in short "the Act".
Case called twice. None appears at assessee's behest. It is accordingly proceeded ex parte.
2. The assessee is stated to be a commission agent dealing with old vehicles. The Assessing Officer framed a regular assessment in his case on 29.12.2009. He found in course thereof that the assessee had made cash deposits of Rs.15,58,100/- in his Axis Bank Savings account without offering any explanation. He invoked Section 68 of the Act to treat the above deposits as unexplained cash credits. He further initiated the impugned penalty proceedings u/s.271(1)(c) of the Act alleging concealment of income.
3. The assessee preferred appeal. The CIT(A) upheld Assessing Officer's action in his order dated 29.12.2010. The assessee then filed ITA No.477/Ahd/2011 before this tribunal. A co-ordinate bench restricted the above quantum addition to Rs.11.40lacs in its order dated 11.01.2013 by observing as follows:
"3.2 With these submissions the assessee had argued before the learned CIT(A) that the aggregate of the credit side of the bank statement may be taken as the total turnover of the assessee and a reasonable profit of 5% may be estimated to be the income of the assessee.
3.3 The learned CIT(A) considering the submissions of the assessee and the observations made by the learned AO, restricted the addition to Rs.15,32,778/- and thereby partly allowed the appeal of the assessee. The findings of the learned CIT(A) in Para 2.3 of his order is reproduced herein under for reference:
"2.3. I have considered the submission made by the appellant and observation of the AO. The explanation given by the appellant even though the purchaser was some other person, is not at all believable and is not correct at all because the banks will only give cheques to the purchaser after hypothecating the vehicle and the cheques would normally be issued in the name of the seller and not in the name of the broker. Therefore this I.T.A. No. 3024/Ahd/2013 (Shri Sanjaysingh B. Gohil vs. ITO) A.Y. 2007-08 -3- story made by the appellant for explaining the deposit as above is not at all as per the practices followed by the banks. Therefore, these cheques issued by the banks or financial companies, has to be for sale proceeds of some vehicle. Further, with respect to the sale proceeds of Rs.7,16,709/- the appellant has not explained as to when was the vehicle purchased and for how much was the vehicle purchased. All the deposits made by the assessee are in respect of sale proceeds of various vehicles or commission received. Admittedly, there are cash withdrawals as well as cash deposits. On 17/5/2005 the assessee has deposited a cash of Rs.32,000/-, on 22/05/2006 the assessee has deposited a cash of Rs.3.5 lakh and on 23/05/2006 the assessee has deposited cash of Rs.1.1 lakh. Therefore, within a weeks time, the assessee has deposited Rs.4.92 lakhs of cash for which no explanation is there. Further after depositing the cash the total balance becomes Rs.6,05,164/- and the assessee has withdrawn by cheques a sum of Rs.6 lakh and paid to Bhagwati Caterers Private Ltd. The appellant has not explained as to for what purpose the assessee had paid the amount of Rs.6 lakh. Since the appellant has not explained this payment, therefore, it is clear that this amount of Rs.6 lakh is no more available to the appellant. Thereafter, it is seen that there is a peak deposit of Rs.7,03,440/- on 21/12/2006. Prior to that also the credit balance had increased to Rs.5,94,935/- on 19/10/2006 and also the credit balance of Rs.5,65,256/- on 25/07/2006. Since there are various cash withdrawals and cash deposit and since the assessee has been dealing in trading of old cars, as well as earning commission the theory of peak addition plus profit on the entire transactions would be the right thing to apply. However, before applying the theory of peak and profit it is necessary to see that the amount of Rs.6 lakh paid to Bhagwati Caterers Private Ltd. is not available for the deposit and hence, the unexplained cash deposit is taken as Rs.6 lakh plus Rs.7,03,440/- which totals to Rs.13,03,440/-. Further according to the table prepared by the assessee, the total of credit is Rs.45,76,131/- and total of debits is Rs.45,86,759/-. Therefore, if the turnover is taken to Rs.45,76,131/- then if the rate of 5% as admitted by the appellant is adopted for the purpose of profit then the profit amounts to Rs.2,29,338/-. Therefore, addition should have been Rs.15,32,778/- which is almost same as what the AO has added. In view of the above, the addition made by the AO is restricted to Rs.15,32,778/- and therefore this ground of appeal is partly allowed."
3.4 Aggrieved, the assessee is in appeal before us against the order of the learned CIT(A).
4. At the time of hearing the learned the learned AR reiterated the submissions made before the authorities below. On the other hand, the learned DR relied on the order of learned CIT(A).
5. We have heard the rival submissions and perused the orders of the authorities below and also carefully considered the paper book filed by the assessee along with other materials on record. In a nutshell the learned CIT(A) has sustained the additions based on the following reasons:-
I.T.A. No. 3024/Ahd/2013 (Shri Sanjaysingh B. Gohil vs. ITO) A.Y. 2007-08 -4-
(i) Payment made to Bhagwati Caterers Pvt. Ltd. Rs.6,00,000
(ii) Peak credit Rs.7,03,440
(iii) 5% profit on aggregate turnover of Rs.45,76,131/-
admitted by the assessee Rs.2,29,338
Total Rs.15,32,770
On analyzing the bank statement, we find that the opening balance of the bank as on 01-04-2006 is Rs.3,05,778.82 and the closing balance as on 31-03-2007 is Rs.2,95,150.82. Thus, there is an erosion of capital for Rs.10,628/-(Rs.3,05,778.82
- Rs.2,95,150.82). Further, the total aggregate of the credit side of the bank statement amounting to Rs.45,76,131.20 also includes the commission earned by the assessee from purchase and sale of second hand cars apart from the entire sale consideration received from sale of second hand cars which were purchased by the assessee by paying full purchase consideration. In such a situation, estimating 5% on Rs.45,76,131.20 being the aggregate of the credit side of the bank statement will not be appropriate because the element of profit in commission earned will be substantially more than the sale consideration deposited in bank. Moreover when profit is determined on the basis of drawings etc., once again addition based on estimated turn over will not be reasonable. From the facts before us, the peak credit of Rs.7,03,440/- can be considered as capital brought in by the assessee the source of which is unexplained coupled with an element of profit earned. Further, the amount of Rs.6,00,000/- paid to Bhagwati Caterers Pvt. Ltd. can be considered as the amount derived from the capital and profit earned by the assessee withdrawn from the business as drawings. At the same, time considering the return of income filed by the assessee wherein the income earned was declared at Rs.1,55,820/- for the relevant assessment year, previous three years' accumulated profit can be estimated at Rs.1,50,000/-. Accordingly, the income of the assessee can be estimated as follows:-
(i) Returned income Rs.1,55,820/-
(ii) Peak Credit Rs.7,03,440/-
(iii) Amount paid to Bhagwati Caterers Rs.6,00,000/-
Total Rs.14,59,260/-
Less: accumulated profit for the previous 3 years Rs. 1,50,000/-
Rs. 13,09.260/-
Less: Erosion in capital (O/B Rs.3,05,778.82 -
C/B Rs. 2,95,150.82) Rs. 10,628/-
Less: income already disclosed in the return Rs. 1,55,820/-
Rs. 11,42,812/-
Rounded off to Rs. 11,40,000/-
For the sake of clarity, the above statement is explained herein below by way of fund flow statement:-
SOURCE OF Amount APPLICATION Amount
FUNDS (Rs.) OF FUNDS (Rs.
I.T.A. No. 3024/Ahd/2013 (Shri Sanjaysingh B. Gohil vs. ITO) A.Y. 2007-08 -5-
Returned income 1,55,820 Peak credit 7,03,440
(unexplained capital in
business)
Accumulated 1,50,000 Payment to Bhagwati 6,00,000
profit brought Caterers(personal
forward (as Expenses being
explained drawings
hereinabove)
Erosion of 10,628 Drawings & 1,55,820
capital (as savings during the year
worked out
hereinabove)
Undisclosed 11,42,812
income
(balance in
figure
Total 14,59,260 Total 14,59,260
Based on the above computation, we sustain the addition of Rs.11,40,000/- as against Rs.15,32,778/- confirmed by the learned CIT(A)."
4. The Assessing Officer in the mean time took up the impugned penalty proceedings. He heavily relied upon the above quantum developments to reject assessee's explanation strongly contesting the penalty proposal in question alleging concealment of income to impose the impugned penalty of Rs.4,59,830/- in order dated 21.02.2012. The CIT(A) upholds the same in lower appellate order under challenge.
5. We have heard learned Departmental Representative strongly supporting the impugned penalty as levied by both the lower authorities by holding that the assessee has concealed its taxable income. It however emerges from this tribunal's quantum order that it is not an instance wherein the assessee had not offered any explanation or adduced altogether false explanation in order to state source of the impugned cash deposits. The fact remains that the assessee has already proved to have been engaged in commission business in automobile sector wherein it is not always possible to file all the relevant confirmations. Learned co-ordinate bench also appears to have benefit of opening balance, accumulated profit as well as peak credit I.T.A. No. 3024/Ahd/2013 (Shri Sanjaysingh B. Gohil vs. ITO) A.Y. 2007-08 -6- after preparing a fund flow statement. We take into account the same to conclude that this is not a fit case to invoke the impugned penalty provision as the assessee has not been able to substantiate his claim in quantum proceedings. We wish to observe here that the hon'ble apex court in Reliance Petroproducts' case 322 ITR 158 (SC) has already settled the law that quantum and penalty proceedings are separate and each and every disallowance / addition made in the course of former does not ipso facto attract the latter penal provision in the Act. We keep in mind the same and direct the Assessing Officer to delete the impugned penalty.
6. This assessee's appeal is allowed.
[Pronounced in the open Court on this the 22nd day of March, 2017.] Sd/- Sd/-
(MANISH BORAD) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 22/03/2017
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
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, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद ।