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Income Tax Appellate Tribunal - Ahmedabad

Jiteshkumar Bharatlal Jariwala, Surat vs Assessee on 21 July, 2015

ITA No.505/Ahd/2013 Assessment Year: 2009-10 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD "A" BENCH, AHMEDABAD [Coram: Pramod Kumar AM and S.S. Godara JM] ITA No.505/Ahd/2013 Assessment Year: 2009-10 Jiteshkumar Bharatlal Jariwala, ............................Appellant 8/202, Modeshwar Mahadev, Ni-Pole, Gopipura, Surat.

[PAN: ADXPJ 5088 R] Vs. Income Tax Officer, ........................Respondent Ward - 5(2), Surat.

Appearances by:

M.K. Patel, for the appellant P.L. Kureel, for the respondent Date of concluding the hearing : April 24, 2015 Date of pronouncing the order : July 21 , 2015 O R D E R Per Pramod Kumar:

1. By way of this appeal, the assessee appellant has called into question correctness of the ld. CIT(A)'s order dated 26 th December, 2012, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2009-10.

2. Ground no. 1 is not pressed, and is, as such, dismissed for want of prosecution.

3. In the second, third and fourth grounds of appeal, which we will take up together, the assesse has raised the following grievance:-

2. That on facts and in law, the learned CIT(A) has grievously erred in making enhancement in respect of peak balance and gross profit without any specific show-cause notice for the same.

Assessment Year: 2009-10 Page 2 of 4

3. That on facts and in law, the learned CIT(A) has grievously erred in confirming and enhancing the addition of unaccounted use of capital form Rs.1,19,490/- to Rs.3,12,620/-

4. That on facts and in law, the learned CIT(A) has grievously erred in confirming and enhancing the gross profit from 16.35% to 20% on estimate basis only, and thereby enhancing the addition from Rs.6,13,360/- to Rs,.7,50,288/-.

4. So far as these grievances are concerned, the relevant material facts are as follows. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assesse was operating a bank account with ICICI Bank Surat in which cheques and cash aggregating to Rs 37,51,439 were deposited. It was admitted by the assesse that these deposits represent unaccounted Sales. It was in this backdrop the Assessing Officer mad e an addition of Rs 1,19,419 representing its peak balance, as on 26.8.2011, at Rs 1,19,419. The Assessing Officer also made an addition of Rs 6,13,360 representing 16.35% profits, as was earned on accounted sales made by the assesse, in respect of unaccounted sales of Rs 37,51,439. Aggrieved by these additions, assesse carried the matter in appeal before the CIT(A) but not only the action of the Assessing Officer was confirmed in principle, enhancements in income were also made by the CIT(A). Learned CIT(A) held that instead of an addition of Rs 1,19,419 in respect of peak credit, an addition at 1/12 th of the sales turnover will be more appropriate which worked out to Rs 3,12,620. The reasoning adopted by him for this enhancement was that since sale proceeds are deposited in distant southern part of India, and since of dispatch of goods was made from Surat, a minimum rotation of one month's sales was required as circulating capital. He also held that if the cash withdrawals are excluded, the correct peak balance is Rs 10,54,551. Learned CIT(A) also enhanced the gross profit from estimated 16.35% to 20%. The assesse is aggrieved and is in appeal before us.

5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

Assessment Year: 2009-10 Page 3 of 4

6. We are unable to see any legally sustainable reasons for assuming that minimum of one month's sales was required by the assesse as his capital for making unaccounted sales. There is no scientific basis for this stand at all. In any case, there is no reason to exclude cash withdrawals in computation of peak balance in the bank account. The enhancement made by the CIT(A) simply proceeds on surmises and conjectures. We have also noted that the gross profit rate of 20% as adopted by the CIT(A) is without any basis. Once it is found that the assesse has earned gross profit @ 16.35% from his accounted sales in respect of the same line of activity, there is no good reason to disturb the same rate having been adopted by the Assessing Officer in computation of profits in respect of the unaccounted sales. As for the notice for enhancement, it is not really necessary to deal with that aspect as the enhancement is deleted on merits. In view of these discussions, as also bearing in mind entirety of the case, we delete the enhancements made by the CIT(A) and thus restore the order of the Assessing Officer on these issues.

7. Ground nos. 2,3 and 4 are thus allowed in effect in the terms indicated above.

8. In ground no. 5, the assesse has raised the following grievance:

5. That on facts and in law, the learned CIT(A) has grievously erred in not deleting the addition of Rs.1,08,000/- made on account of low house hold withdrawal, and erred in giving only benefit of telescoping against other additions confirmed.

9. Learned counsel for the assesse did not press this ground of appeal as it is purely academic inasmuch as there is sufficient surviving addition to the income returned by the assesse so as to cover these low withdrawals. Whether this addition is confirmed or deleted, it has no impact on the taxable income of the assesse. It is, therefore, dismissed as infructuous.

Assessment Year: 2009-10 Page 4 of 4

10. Ground no. 5 is thus dismissed.

11. In the result, the appeal is partly allowed in the terms indicated above. Pronounced in the open court today on 21day of July, 2015 Sd/- Sd/-

S. S. Godara                                                      Pramod Kumar

(Judicial Member)                                         (Accountant Member)

Ahmedabad, the       21 day of June, 2015



Copies to:     (1)   The appellant                 (2)    The respondent
               (3)   Commissioner                  (4)    CIT(A)
               (5)   Departmental Representative
               (6)   Guard File
                                                                           By order etc

                                                          Assistant/Deputy Registrar
                                                       Income Tax Appellate Tribunal
                                                     Ahmedabad benches, Ahmedabad