TaxTMI 
TaxTMI 
2018 (4) TMI 312
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 271(1)(c) of the Act. Shri T.P. Kar, Ld. Authorized Representative appeared on behalf of assessee and Shri Arindam Bhattacherjee, Ld. Departmental Representative appeared on behalf of Revenue. First we decide to proceed to adjudicate assessee's appeal in ITA No.600/Kol/2016 for A.Y. 2009-10. 2. The solitary issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by treating the cash deposit in the bank as undisclosed income of assessee. 3. Briefly, stated facts are that assessee in the present case is an individual and engaged in distributorship business of herbal cosmetic items of different companies under the name as M/s New Enterprise. During the course of assessment proceedings, AO observed that the assessee failed to disclose certain bank accounts in his income tax return where there were certain cash deposits in those bank accounts. The necessary details of the bank accounts as well as details of cash deposits stand as under:- i) Axis Bank Dunlop Br. SB A/c No.236010100136723 Rs.3,29,000/- ii) Unite Bank of India, Baranagar SB a/c No.0078010318043 Rs.2,71,600/- iii) ABN AMRO Bank,Kolkata SB a/c No.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....posited with the bank without giving effect to the withdrawals made by the assessee from the bank. In such a situation, the AO should have applied the peak credit theory. There were other bank accounts of the assessee which were not disclosed in the income tax returns. But the AO has treated the cash deposit in other undisclosed bank account as undisclosed sale of assessee and accordingly he worked out the undisclosed income after applying the gross profit ratio declared by assessee. Thus the AO in these undisclosed bank accounts should have applied the GP ratio. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- "Ground number 1,2,3,4 & 5 relates to the addition of Rs. 1101549/- on account of cash deposit made in various bank accounts as narrated by the AO in his assessment order. The AO found that on various date cash in financial year 2008-09 has been deposited to the tune of Rs. 170110/- in different Bank. The assessee during the course of assessment proceeding submitted that the cash deposit was made from his credit card withdrawal and he further stated that he made personal expenditure through credit ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count. It is not controverted that all the banks accounts which are part of addition has not been disclosed to the department. The withdrawals were also made for personal expenditure. Hence contention of applying GP is not acceptable. I agree with the order of the AO and I appreciate his rationality over allowing the corresponding withdrawals as claimed by the appellant. Nothing has been left out further to grant any relief for the appellant. Hence Is upheld and the ground of the appeal is dismissed." Aggrieved by this, the assessee has come up in appeal before us. 5. Before us Ld. AR for the assessee filed written submission which is reproduced hereunder:- (a) The appellant is carrying on a proprietary business of wholesale trading of herbal and cosmetic products under the name and style of "New Enterprise". During the year under assessment it is found that he has done his business mainly through credit card system on taking credit facilities in his personal name against those cards. The appellant took credit facility against one card but he repaid to that loan on taking loan from another card and so on. The Assessing Officer contended those loans as his undisclosed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... outstanding at the year end from the amount of total cash deposits made in the undisclosed bank account. From the action of the AO it is transpired that there is link between the amount withdrawn from the credit card and the money deposited in the undisclosed saving accounts of the assessee. Accordingly the AO held that the money withdrawn through the credit card was used in the bank accounts of the assessee. Thus the amount of unexplained cash credit was reduced by the AO. Now the same analogy can be applied for amount withdrawn by the assessee during the year from the credit card and deposited in the saving bank account of the assessee for the repayment of the credit card dues. But we observe that the AO has not applied the same analogy for the amount deposited in the impugned saving bank accounts to clear the dues of the credit card during the year. Thus in our considered view the AO has applied contradictory approach in determining and treating the amount of cash deposit in the bank as unexplained cash credit. 6.1 As per assessee the amount withdrawn from one credit card account was deposited in other credit card liability. Thus, the same amount of money was in circulation.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Kol/2016 for A.Y. 08-09. 8. In this appeal the assessee has challenged the order of CIT(A) whereby the CIT(A) deleted the penalty imposed by the AO on the assessee u/s 271(1)(c) of the Income Tax Act, 1961 (Act). 9. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by the AO are as follows :- The Assessee is an individual and carries on the business of herbal cosmetics under the name & style of New Enterprises. The assessment was framed after making the addition of the following income : 1. Interest on undisclosed bank account Rs. 9,123.00 2. Unexplained Money Rs. 8,03,002.00 3. Cessation of liability Rs. 31,041.00 In respect of the aforesaid addition made in the course of assessment proceedings, the AO initiated penalty proceedings u/s 271(1)(c) of the Act. 4. In the penalty proceedings the assessee agreed for the penalty on interest income as it was not disclosed. Regarding unexplained money addition of Rs. 8,03,002 it was submitted that the amount was in-fact representing the loan on credit cards but the addition of the same was not challenged to buy the peace of mind. Moreover, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has considered the sum of Rs. 8,03,022/- as income on presumption even the details of cash were furnished and has mentioned in the table in his order. Further in his quantum assessment order the Assessing Officer has mentioned in Para-16 of Page -5 that Quote - "During the hearing made on 14-12-2010, the AR on behalf of the assessee in good Spirit continued to admit regarding the unexplained amount of money that are found from the transactions made from and to of the undisclosed bank A/c and payment to credit card bankers. Discussed further, and an amount of Rs. 8,03,022/- is therefore treated as assessee's unexplained money and added to the total income as per the provisions of Section 69 A of the Act. .... Unquote Now your appellant submits the following decisions for your consideration in respect of applicability of the penalty proceedings when the appellant agreed to make additions to income - (a) CIT -vs- Sankaran(S) - 241 ITR 825(Mad) The Madras High COUl1 in the above Case held that- Mere addition to income of the instance of the assesse can not lead to the conclusion of concealment of income and penalty U/s 271 (1)(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and flat rate of Profit is applied to arrive gross Profit. (i) CIT vs. Calcutta Credit Corporation - 166 ITR 29 (Cal) The Calcutta High Court held that mere addition does not automatically lead to Penalty, more particulars where two opinions on the same facts possible. (j) CIT vs. PMP Soundara Pandian & Bros. - 140 ITR 385(Mad) The Madras High Court held that - addition towards unexplained cash credit on agreed basis - in favour of assessee. (k) Roshan Lal Madan vs. ACIT - reported in 245 ITR(AT)36 (Chand) Where held that an addition made on the basis of presumption under deeming provisions u/s 69, 69(A), 69(8), 69(C) need not necessarily lead to a conclusion that income had been concealed. Levy of penalty u/s 271 (c) is not justified in every such case. (I) Your appellant further submits that the Assessing Officer has added the sum of Rs. 31,0411/- on his own presumption on account of cessation of liability u/s 41(1). In this respect your appellant submits that the Assessing Officer has himself considered that liability to creditors are extinguished because of its period of limitation. The appellant has not co....