Dcit Central Circle Xxviii Kolkata Kolkata v. Shri Chandra Prakash Banthia Kolkata

In The Income Tax Appellate Tribunal A Be Nch Kolkata Before Shri P M Jagtap Accountant Memb Er And Shri S S Viswanethra Ravi Judicial Member Ita No 2404 Kol 2013 A Y 2011 12 Deputy Commissioner Vs Chandra Prakash Banthia Of Income Tax Prop M S Sardar Stores Cc Xxviii Pan Adppb 7714 C Kolkata Appellant Respondent Appellant By Shri Sallong Yaden Addl Cit L D Sr Dr Respondent By Shri A K Upadhyay Advocate Ld Ar Date Of Hearing 13 09 2017 Date Of Pronouncement 06 12 2017 Order Shri S S Viswanethra Ravi Jm This Appeal By The Revenue Is Against The Order Dt 12 07 2013 Of The Cit A 10 Kolkata For The A Y 2011 12 2 Ground No 1 Is Relating To Addition Made On Acc Ount Of Difference Between Income Surrendered And Returned Income To An Extent Of Rs 90 773 3 Brief Facts Relating To The Issue Are That A Sea Rch Seizure Operation Was Conducted U S 132 Of The Act On 13 0 1 2011 At The Business Premises Of The Assessee Notices U S 143 2 And 142 1 Of The Act Were Issued In Response To Which The Asses See Appeared And Filed Written Submissions And Documents In Respons E To Questionnaire Issued U S 142 1 Of The Act Durin G The Course Of Examination The Ao Found That The Assessee Declare D A Sum Of Rs 1 00 00 000 As Undisclosed Income Whereas In The Return Of Income It Was Found That The Assessee Declared A Su M Of Rs 99 09 227 For Non Submission Of Any Explanati On The Ao Added Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 2 The Sum Of Rs 1 00 00 000 Under The Head Income From Business By His Order Dt 21 03 2013 Passed U S 143 3 Of T He Act 4 Aggrieved The Assessee Filed Appeal Before The Cit A Before Him The Assessee Contended That The Assessee Filed A Letter With The Assistant Director Of Investigation Stating That In Come Surrendered Was On Best Estimate Basis And It Is Subjected To Minor Variations And Prayed To Delete The Impugned Addition Made In This Regard 5 The Cit A Considering The Above Deleted The Said Addition Relevant Portion Of Cit A Order Is Reproduced Herei N Below In The First Instance The Appellant Submits That T He Income Of Rs 1 00 00 000 Surrendered By Him Formed Part Of The Business Inco Me Declared At Rs 99 09 227 The Ao Failed To Appreciate That The Appellant Apart Fr Om The Business Of Handling Cash Was Also Involved In Other Business Activities Includin G Running A Departmental Store The Net Outcome Of The Profits Losses From All The Busine Ss Activities Was Rs 99 09 927 The Ao However Arbitrarily Presumed That The Appellan Ts Only Source Of Income During The Year Was Handling Of Cash Which Yielded Commission Income Of Rs 1 00 00 000 And Thereby Assessed The Same To Tax On Perusal Of The Computation Of Income Along With The Profit Loss Account For The Year Ended 31 St March 2011 It Would However Be Amply Clear That The Appellant Had Offered Income Of Rs 1 00 26 000 With Reference To Entries In Seized Documents And The Statement Reco Rded U S 132 4 The Ao Erroneously Presumed That The Business Income Of Rs 99 09 227 Comprised Only Of Income From The Business Of Handling Cash The App Ellant Submits That The Returned Income Of Rs 99 09 227 Represented Net Income Ar Rived At After Setting Off Incidental And Administrative Expenses Incurred For Earning T He Same All These Facts Are Evident From The Fact Of The Profit Loss Account And The Computation Of Income For The Financial Year 2010 11 Filed Along With The Return Of Income Copy Of Which Is Attached And Marked As Annexure A The Ao Therefore Grossl Y Erred In Arbitrarily Enhancing Business Income From Rs 99 09 227 To Rs 1 00 00 0 00 The Appellant Thus Prays That The Ao Be Directed To Kindly Assess The Busine Ss Income As Declared By Him In The Return Of Income The Appellant Further Submits That No Cogent Basis Was Given By The Ao To Enhance The Income From Rs 99 09 227 To Rs 1 00 0 0 000 In Para 2 1 1 Of The Impugned Order The Ao Has Discussed In Detail The Manner Adopted By Him For Arriving At The Income Of Rs 70 51 670 From Cash Handling Business Neither In The Course Of Assessment Nor In The Impugned Order Did The Ao Poi Nt Any Other Instance Which Would Even Remotely Indicate Earning Of Any Additional Undisclosed Income Even In The Course Of Search Apart From Cash Of Rs 27 84 190 No Other Unexplained Assets Or Investments Were Found In The Circumstances Set Ou T In The Foregoing It Confounds The Appellant As To On What Basis Was The Income Assess Ed At Rs 1 00 00 000 It Is Not A Case That The Appellant Did Not Offer To Tax The In Come Of Rs 1 00 00 000 Surrendered Under Section 132 4 Of The Income Tax Act 1961 I N The Submissions Filed Before The Asst Dir Of Investigation And The Assessing Office R It Was Clearly Stated That The Income Computed With Reference To The Seized Materi Al Was Lower Than The Income Surrendered And It Was Only To Honour The Statemen T Given In The Course Of Search That The Sum Of Rs 1 00 00 000 Was Being Offered To Ta X This Fact Has Not Been Disputed By The Assessing Officer Even The Ao In His Impugned Order Categorically Mentioned That The Income From Cash Handling Was Only Rs 70 51 670 And No Other Source Of Undisclosed Income Was Pointed Out By The Assessing Officer The Said Disclosure Formed Part Of His Profit Loss Account For The Year Ende D 31 St March 2011 The Business Income Declared At Rs 99 09 927 Inter Alia Includ Ed Undisclosed Income Of Rs 1 00 26 000 The Business Income Of Rs 99 09 927 Was Arrived At After Adjusting The Establishment Administrative Expenses Incurre D During The Year The Details Of The Said Expenses Were Also Produced Before The Assessi Ng Officer And Relevant Documents Were Filed The Ao Did Not Point Out Any Specific I Nfirmity Or Falsity In The Expenses Incurred By The Appellant During The Relevant Ay 2 011 12 In The Circumstances It Is Submitted That Business Income Was Rightly Declared And Rs 99 09 927 And The Aos Action Of Enhancing The Business Income Of Rs 1 00 00 000 Without Giving Any Cogent Logic Or Reasoning Was Bad In Law And In Violation Of The Provisions Of The Income Tax Act 1961 Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 3 The Appellant Submits That The Ao Arbitrarily Enhan Ced The Income From Rs 99 09 227 To Rs 1 00 00 000 Despite The Fact T Hat The Commission Income Which The Ao Himself Computed And Assessee Was Rs 70 51 670 Was Much Lower That The Income Returned By The Assessee The Appellant Submits Tha T It Was Not A Case Of Retraction From Statement Recorded Under Section 132 4 Of The Income Tax Act 1961 The Appellant Had Only Offered The Surrendered Income O F Rs 1 00 00 000 To Tax In Fact The Amount Actually Disclosed In The Return Was Rs 1 00 26 000 It Is Submitted That An Assessee Is Not Bound To Declare The Exact Same Amo Unt As Disclosed In The Amendment U S 132 4 As The Income Returned And There May Be Deviations Variations Having Regard To The Income Loss Incurred In Other Busines S Activities In Such Circumstance The Ao Cannot Bring To Tax The Difference Between The Income Surrendered And Income Finally Returned Solely Relying On The Statement U S 132 4 And Without Bringing Any Corroborative Material Or Evidence To Support Such Addition In The Facts Of The Present Case The Ao With Reference To The Seized Material W As Only Able To Ascertain Undisclosed Income Of Rs 70 51 670 The Appellant However In Good Faith And To Honour The Commitment To The Department Made Through His Sta Tement Recorded Under Section 132 4 Of The Income Tax Act 1961 Had Offered Rs 1 00 26 000 To Tax Which Formed Part Of The Declared Business Income Of Rs 99 09 22 7 Complete Break Up Of Income Earned During The Year Along With Expenses Incurred Were Filed In The Course Of Assessment The Books Of Accounts And Other Relevan T Supporting Documents Explanations Were Also Furnished No Infi Rmity Or Falsity Was Pointed Out In The Books Of Accounts And Other Relevant Evidences The Ao Did Not Dispute Or Disapprove Any Specific Instance Of Any Expense Deb Ited In The Profit Loss Account The Addition Of Rs 90 773 Was Made Solely To Cover Th E Difference Between The Income Surrendered And The Business Income Finally Returne D It Is Submitted That The Difference Of Rs 90 773 Assessed By The Ao Was Factually As Well As Legally Incorrect And Deserves To Be Deleted 6 Before Us The Ld Dr Relied On The Order Of The A O On The Other Hand The Ld Ar Supported The Impugned Order Of The Cit A In Deleting The Impugned Addition And Reiterated His S Ubmissions Made Before The Ao As Well As Before The Cit A That A Le Tter Was Filed Before The Asstt Director Of Investigation Was Tha T The Assessee Voluntarily Disclosed Income Of Rs 1 00 00 000 Wi Th Reference To Entries Found In The Seized Documents And It Is Not Final As It Is Made On The Basis Of Estimation The Amount Shown In The Return Of Income Is Correct The Ld Ar Submits That The Ao Without M Aking Any Adverse Remark In Respect Of The Books Of Account And Showi Ng Any Defects Thereon Added The Impugned Difference Is Bad Under Law He Prayed To Dismiss The Ground S Raised By The Revenue 7 Heard Both The Parties And Perused The Records We Find That The Addition Of Rs 90 773 Is The Difference Betw Een The Assessees Offered Amount And Returned Amount The Cit A Consi Dering The Submission In Respect Of Said Letter Filed By The A Ssessee Before Asstt Director Agreed That The Offered Amount As Disclos Ed Is Subject To Minor Variations The Cit A Observed That The Books Of Accounts And Other Relevant Supporting Documents And Explanation S Were Also Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 4 Furnished And Offered No Infirmity Or Falsity Was Pointed Out In The Books Of Accounts And Other Relevant Evidences The Ao Did Not Dispute Or Disapprove Any Specific Instance Of Any Expense Debited In The Profit Loss Account The Cit A Found That The Addition Made By The Ao Is Illegal And Incorrect The Cit A Examine D The P L Account And Other Relevant Details And Found No Defect And Granted Relief To The Assessee In Deleting The Impugned Addition The Refore We Find No Infirmity In The Impugned Order Of The Cit A And It Is Justified Ground No 1 Raised By The Revenue Is Dismissed 8 Ground Nos Ii To V Are Similar In Nature Rel Ating To Addition Of Rs 41 62 010 Made U S 68 Of The Act 9 During The Course Of Assessment Proceedings The Ao Found That Cash Was Credited In The Account Of Assessee During The Period 5 11 2010 To 13 01 2011 The Assessee Explained The Obje Ction Raised By The Ao That The Cash Was Received During The Year F Rom His Clients And At The Same Time The Cash Was Paid By Him To Some Other Clients The Ao Not Accepted The Submissions Of As Sessee And Failure To Give Complete Identification Particulars Of The Said Clients Thereby Added The Said Amount U S 69 Of The Act By Applyin G Peak Credit Method 10 Before The Cit A It Was Submitted That The Ass Essee Mainly Engaged In The Business Of Handling Of Cash On Whic H Commission 0 3 Was Earned Therefore The Cash As Noted By Th E Ao In The Account Of Assessee Does Not Belong To Assessee Bu T It Belongs To Various Parties Who Paid Service Charges And Commi Ssion To The Assessee For Handling Their Cash The Assessee Also Contended That The Ao Already Assessed The Commission Income Of Rs 70 51 670 And By Computing The Commission Earnings The Ao Ar Rived At The Income Of Assessee As On 25 11 2010 At Rs 46 17 48 0 Wherein Impugned Addition Made On Account Of Peak Credit Ba Lance Is Part And Covered By Income In Computing The Commission E Arnings The Assessee Also Contended That The Said Addition Is O N Peak Credit Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 5 Balance And The Additions On Commission Income And Peak Credit Balance Cannot Be Simultaneously Made 11 Considering The Above The Cit A Deleted The Sai D Addition By Observing That There Was No Need To Make Further A Ddition On Account Of Unexplained Peak Cash Balance By Telesco Ping Such Income The Cit A Placed Reliance On The Decision O F Honble Supreme Court In The Case Of Anantharam Veerasingha Iah Co Vs Cit Reported In 123 Itr 457 Which Was Followed By The Honble Bombay High Court Punjab Haryana High Court In The Cases Of Cit Vs Jawanmal Gemaji Gandhi Reported In 151 Itr 353 And Cit Vs Prem Chand Jain Reported In 189 Itr 320 Respect Ively Relevant Portion Of Cit A Order Is Reproduced Herein Below 11 I Also Find Merit And Substance In The Altern Ate Submission Of The Assessee By Aos Own Admission The Assessee Conducted Activity Of Money Handling Throughout The Financial Year 2010 11 And The Commission From Cash Handlin G During The Financial Year 2010 11 Was Worked Out By The Ao Himself At Rs 70 51 670 Acc Ording To Aos Own Admission The Activity Of Cash Handling And Consequent Earning Of Commissi On Occurred Evently Throughout The Year Going By Aos Own Hypothesis Therefore The Assessee S Commission Earning From The Cash Handling Activity During The Period 01 04 2010 To 24 11 2010 I E For 238 Days Works Out To Be Rs 45 98 075 No Evidence Was Found By The Inv Estigation Wing Of The Department Or By The Ao That The Income So Earned During The Period 04 04 2010 To 24 11 2010 Was Utilized Elsewhere By Way Of Investment Or Expenditure In T He Circumstances If The Aos Presumption About Earning Of Commission Throughout The Year Is Accepted At Its Face Value And If It Is Accepted For The Sake Of Argument That The Entries Recorded In The Seized Documents Pertained To Movement Of Assessees Own Funds Even Then Hav Ing Regard To The Fact That The Ao Himself Assessed Rs 70 51 650 As Undisclosed Commission I Ncome Of The Assessee For The Entire Period Of 365 Days It Was Imperative That The Set Off Was Allowed In Respect Of The Income Which The Assessee Earned During The Period 01 04 2 011 To 24 11 2010 If The Commission Of Rs 70 51 670 Is Apportioned Over A Period Of 365 Days Then The Commission Income Earned By The Appellant During The Relevant Year Before 2 5 11 2010 On Which Date The Peak Of Rs 41 62 010 Appeared Works Out To Rs 45 98 075 Which Was In Excess Of The Peak Balance Of Rs 41 62 010 As On 25 11 2010 In This Factual Background Allowing The Benefit Of Telescoping Of Such Income There Was No Need To Ma Ke Further Addition On Account Of Unexplained Peak Cash Balance The Assessees Such Alternative Claim Is Supported By The Judgment Of The Supreme Court In The Case Of Ananth Aram Veerasinghaiah Co Vs Cit 123 Itr 457 Which Was Followed By The Bombay High Cour T In The Case Of Cit Vs Jawanmal Gemaji Gandhi 151 Itr 353 And Also By The Punjab Harya Na High Court In The Case Of Cit Vs Prem Chand Jain 189 Itr 320 Thus Viewed From Any An Gle The Addition Of Rs 41 62 010 Made By The Ao On Account Of Alleged Peak Cash Balance W As Factually As Well As Legally Unjustified The Addition Of Rs 41 62 010 Is Therefore Directe D To Be Deleted 12 The Ld Dr Relied On The Order Of The Ao He Sub Mits That The Ao Treated The Entire Cash As Commission On The Other Hand The Ld Ar Of The Assessee Reiterated His Same Submissions As Made Before The Cit A And Challenged The Action Of The Ao In Making Both The Additions On Account Of Commission As Well As Peak Credit Balance Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 6 And Argued That Both The Additions Simultaneously C Annot Be Made And Prayed To Delete The Same 13 Heard Rival Parties And Perused The Record We Find That The Assessee Declared An Amount Of Rs 70 51 670 As Co Mmission Income And The Ao Did Not Accept Such Claim As The Assessee Did Not Furnish The Names And Other Particulars Of The Pers Ons From Whom Such Commission Income Was Received But However Taking Into Consideration The Cash Representing Inflow As Well As Outflow The Ao Taxed The Same Under The Head Income From Other So Urces And The Assessee Accepted The Same It Is Pertinent To Note That The Ao Did Not Believe The Statement Of Assessee In Respect Of Inflow And Outflow To Show The Cash Received By Him And At The Same Ti Me The Cash Was Paid To Some Clients For Not Offering Proper Expla Nation And By Taking Into Consideration The Seized Documents The Ao Was Of The Opinion That It Was Possible That The Outflow Of Ca Sh Was Received By The Assessee On Subsequent Date And Proceeded To Ad Opt The Peak Credit Of The Cash Transactions The Ao Has Taken T He Peak Balance On 25 11 2010 And Added The Said Amount U S 69 Of The Act The Contention Of The Assessee Was That The Said Inflow And Outflow Are Out Of Cash Transactions Between Himself And Client S And On Which The Assessee Earned Commission 0 3 And Accordingly A Commission Of Rs 70 51 670 Was Accepted By The Ao Again Th E Ao Cannot Adopt The Peak Credit Of The Transactions On Inflow And Outflow Cash Transaction Involving Commission Income Therefore In Our Opinion The Ao Made Double Addition On Account Of Commissio N Earned As Income From Other Sources And On The Basis Of Inf Low And Out Flow Cash Transactions The Addition Of Rs 41 62 010 A S Unexplained Investment U S 69 Of The Act Are Not Maintainable Therefore We Find No Infirmity In The Impugned Order Of The Cit A And Accordingly It Is Justified Therefore The Grounds Ii To V Involving The Same Are Dismissed Ita No 2404 Kol 2013 Sri Chandra Prakash Banthia 7 14 In The Result The Appeal Of The Revenue Is Di Smissed Order Pronounced In The Open Court On 0 6 12 2017 Sd Sd P M Jagtap S S Viswanethra Ravi Accountant Member Judicial Member Dated 06 12 2017 Pp Sr P S Copy Of The Order Forwarded To 1 Applicant Department The Dcit Cc Xxviii Kolkata Aaykar Bhavan Poorva 110 Shanti Palli E M Bye Pas S 4 Th Floor Kolkata 107 2 Respondent Assessee Shri Chandra Prakash Banthia Pr Op Sardar Stores Shop No 3 37 Canning Street Kolkata 1 3 The Cit A Kolkata 4 5 Cit Kolkata Dr Kolkata Benches Kolkata True Copy By Order Sr P S Head Of Office Itat Kolkata