TaxTMI 
TaxTMI 
2021 (9) TMI 881
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.... with IDBI Bank and HDFC Bank Ltd. and those accounts had not been disclosed to the department and the modus operandi of the assessee was that he used to purchase 'Rubber Chemicals' and which was sold to various parties and the sale proceeds was received on account of such sales through banking channel and deposited in the above said bank accounts in various years. It is also a fact as borne out from the copies of the bank account, which has been placed in the paper book for all the years that immediately after the sale proceeds are credited in the bank account of the assessee, the amount is withdrawn by self and that cash was utilized for making further purchases and, corresponding sales again were credited in the bank account in all the three years. It is also a fact that bank account, where there is a credit, the name of the parties is invariably mentioned in the bank account which were in the possession of the Assessing Officer and copies of the same are placed in the paper book. 3. The Assessing Officer based on such bank accounts and the various credit entries recorded the 'identical reasons' for reopening of case u/s 148 for the Assessment Year 2009-10, 2010-11 & 2011-12 ....
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.... "The transactions in the aforesaid bank accounts clearly indicate that assessee is carrying out business, and income from such business has not he disclosed in the return of income. " 5. During assessment proceedings, the assessee reiterated that he had been carrying on the business of retail trading of 'Rubber Chemicals' and, though, he had not disclosed the income from such business in his original return of income, but in the return filed in response to notice u/s 148, he had declared the following income on estimation basis from such business of trading of 'Rubber Chemicals' as under: Sr. No. Assessment Year Income declared from the trading of Rubber Chemicals Relevant page no of the paper book 1 2009-10 1,20,000 3-4 2 2010-11 6,00,000 4-5 3 2011-12 6,00,000 4-5 6. During the course of assessment proceedings, the Assessing Officer asked the assessee to justify the said credit entries in the bank account and the assessee replied that he is in the business of sale of 'Rubber Chemicals' and such receipts are business receipts and no record is available with the assessee and further the assessee has no VAT number and he had be....
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....ts complete name and address from whom sale/purchase has been made during the year is not available. In the absence of any record and your good self version on the basis of bank statements as to from where the credits has been received cannot be considered as income from undisclosed sources as these are not cash entries. In fact, all the credits are against sale of rubber chemicals and photocopies of the certain bills as available with the assessee are attached herewith for your good self-perusal. It is again submitted that to meet the end of justice and settlement the assessee is ready to offer additional tax subject to no penalty. " 9. However the assessing officer was not convinced with the explanation given by the assessee, the assessing officer had issued the notices under section 133 (6) of the Act, at the address given in the bills however of, as no reply was received by the assessing officer till date passing of the assessment order, the assessing officer had treated the entire deposit in the Bank as unexplained cash deposit and had made the additions of Rs. 2, 55, 18, 858/-( for AY 2009-10 ), 3,54,20,958( for AY 2010-11) and Rs. 3,51,92,970/-( for AY 2011-12) i....
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....ved. " 11. The CIT(A), though, allowed the part relief in order dated 20. 06. 2019 but later on, the assessing officer had filed the rectification application before the CIT(A), the CIT(A) passed the rectification order whereby, she has confirmed the addition as made by the Assessing Officer, by treating the entire Bank deposit as the income of the assessee. 12. The assessee had filed two separate set of appeals against the order passed by the CIT(A) on 20 June 2019 as well as the rectification order passed by the CIT(A) on 25 September 2019. 13. The assessee is in appeal against the confirmation of the total addition as made by the CIT(A). Beside the above assessee had filled amended/ revised grounds of appeal filed on 12. 07. 2021. the revised grounds filled by the assessee on 12. 7. 2021 are admitted, being legal in nature. SUBMISSIONS ON MERITS 14. The Ld. AR for the assessee had submitted that assessee is in the retail trading of 'Rubber Chemicals' and which fact has been mentioned by the Assessing Officer in the reasons recorded for all the years as mentioned below: "In KYC forms filed with the banks the assessee has declared himself as proprietor of M....
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....& 2011-12 and this has been recorded by CIT(A) at the last paragraph of page no. 7 and that party had even sent copy of account for all these years which has been placed at page no. 93 to 95 of the paper book and such entries match with the bank statements, where that remittance of the Rubber Chemical supplied to that party had been credited in the bank accounts of the assessee. Please refer to page no. 125, 126 & 127 of the paper book. The entries are self-explanatory. 20. Having verified such transactions, coupled with the other facts as mentioned above, and further, the assessee had made purchases from his sister concern which is a partnership concern and such payments have been made to the M/s. Aggarwal Chemical Industries for purchases, for which a chart has been placed at paper book page no. 125 to 127 for all the years, submitted on 12. 07. 2021 and, thus, purchase & sale transaction are proved, beyond any iota of doubt and for that, the assessee had declared the income on 'estimated basis' as stated above and, thus, the addition of the total 'sale proceeds' in the bank account of the assessee u/s 68 is totally uncalled for, as only resultant profit could be charged to ta....
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....counts in the return of income filed by the assessee in his individual capacity, wherein, he had only declared that he was a salaried person. DR submitted that on account of reopening the case, the bank accounts that the assessee did not disclose were surfaced and therefore the entire cash deposit was required to be treated as income of the assessee. D. R. submitted that the notices were issued to various persons under section 133(6) of the act, were return unserved, except one person. It was also submitted that the assessee had categorically admitted during the assessment proceedings that the assessee was not subjected to any VAT return and had wrongly filed the invoices showing the VAT No. of another concern. It was also submitted that the reopening made by the assessing officer and the sanction given by the appropriate authority as per law. It was submitted that the Bank passbook is akin to the books of account therefore the addition made by the lower authorities is by law. Findings 24. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the hearing by both parties. Duringthe argum....
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....ct the evidence to prove its case and enforce the attendance of six people to whom the lower authorities issued the notices under section 133. 27. In our opinion once the assessing officer had reopened and examined the case of the assessee by treating the receipt deposited in the bank accounts as the business receipts, then the assessing officer has two options either to reconcile the bank entries by drawing the trading account based on bank entries and compute profit of the assessee or treat the entire bank deposits as turnover of the assessee and apply gross profit over that. 28. The AR had drawn attention to trading account prepared for the assessee for all the three assessment years, which are as under Trading Ac/ as on 31. 03. 2009 Particulars Amount Particulars Amount To Purchase (As Per Bank) 24648355. 00 By total Sales (as Per bank) 25518858. 00 To purchase Aggarwal chemical (as per Submmission) 2678597. 00 aggarwal che 205869. 00 To Purchase others 21969758. 00 Azam Rubber (as per Submmission) 1828933. 00 ....
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....0 35192970. 00 35192970. 00 29. Based on the trading account, it was submitted that the lower authorities can tax only the profit earned by the assessee for the assessment years. Both credit and debit entries in the Bank were required to be considered and thereafter, the gain is needed to be taxed. In our considered opinion, once the assessment is made based on the undisclosed bank accounts, the debit and the credit in the bank accounts were required to be considered for making the addition under section 68 of the Act. The income that has accrued to the assessee is taxable as per law. What income has really occurred to be decided based on material available with the AO, not by reference to physical receipt of income (credit entry in Bank ), but by also giving the benefit/ adjustment of debit entry ( in the bank account ), the difference would solely represent the income of the assessee, in the present case. 30. It may be for the relevant to mention here that provisions of section 115BBE of....
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....ated as books of account. 34. Having stated the above, we may record that during argument, Ld. AR had submitted chart for computing the GP rate by taking the 5% of turnover, however the Ld. DR for the Revenue disputed that and submitted a higher rate should be applied to compute the assessee's profit. the Chart of AR provides as under SH. SARDARI LAL CHART SHOWING PROFIT EARNED FROM TRADING OF CHEMICAL AS PER SECTION 44AF Sr. No. Particulars Undisclosed Sales as per assessment order GP as per 44AF Profit Amount disclosed in return u/s 148 Balance undisclosed income on estimate basis a sales from 09. 07. 2008 to 31. 03. 2009 25518858. 00 5% 1275942. 90 120000 1155942. 90 b sales from 01. 04. 2009 to 31. 03. 2010 35420958. 00 5% 1771047. 90 600000 1171047. 90 c sales from 01. 04. 2010 to 31. 03. 2011 35192970. 00 5% 1759648. 50 600000 1159648. 50 Total 4806639. 30 1320000 3486639. 30 35. From the perusal of the Chart, it is a clear that the assessee had applied 5% rate by relying upon section 44AF of the Act. Section 44AF for the relevant year 44AF. (1) Notwithstan....
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....6. 3. 2021asunder "10. However, what the CIT(A) did, [which, in the given circumstances, insofar as the Revenue is concerned, was the best way forward] is to sustain a part of the addition by taking recourse to the methodology adopted in the assessee‟s case in an earlier AY i. e. 2006-2007. In that AY, concededly, addition had been made to the assessee‟s gross income by applying a GP rate of 5%. It is the same methodology that the CIT(A) has adopted and, accordingly, sustained the addition to the extent of Rs. 71,55,837/-. " 38. We may also rely upon the decision in the matter of ITA No. 1652/Ahd/2011Shri Pavankumar Bhagatram Sharma decided by Ahmedabad Tribunal wherein it was held as under :- "9. If this finding is weighed in the light of the finding recorded by the ld. AO, then scale would tilt in favour of this finding. The AO has not made detailed analysis of the account as well as other details submitted by the assessee. According to the ld. CIT(A) aggregate cash deposits in the said bank account is only of Rs. 21,23,800/-. The AO, on the other hand, observed that the cash deposits was of Rs. 50,48,055/-. The ld. CIT(A) thereafter made referenc....