TaxTMI 
TaxTMI 
2004 (7) TMI 268
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.... the Act as the assessee had no liability under s. 208 to pay advance tax and the estimate of income at higher rate could not have been anticipated. (c) Because the levy of interest is not justified as the Supreme Court decision in CIT vs. Anjum M.H. Ghaswala & Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC) is not applicable to the facts of the case." 2. At the time of hearing, learned counsel for the assessee submitted that he was not pressing ground Nos. 5 (a), (b) and (c) and, therefore, the same stands dismissed as such. 3. So far as ground Nos. 1 to 4 are concerned, the learned counsel for the assessee submitted that the issues involved in this appeal are as under: (i) The first issue is against the rejection of assessee's books of account and consequential determination of assessee's income from commission received on account of discounting of demand drafts (DDs) by applying the net rate of Rs. 3.50 per Rs. 1,000. (ii) The other issue is against the addition of Rs. 35,000 because as per assessee, the income of Rs. 35,000 shown as income from other sources was part of the income from commission. 4. I have heard the learned counsel for the assessee as well....
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.... rate of 0.35 per cent (Rs. 3.50 per Rs. 1,000) on the total value of the drafts discounted by the assessee which resulted in the assessment of assessee's income from commission at Rs. 4,26,091 as against income of Rs. 61,067 declared by the assessee on this account. The AO effected the addition of Rs. 35,000 also as shown by the assessee. The assessee went in appeal before the CIT(A) and submitted the written submissions which read as under: "This appeal is against the assessment order under s. 143(3) of the Act, dt. 5th Dec., 2001. 2.1...... 2.2 The AO has taken the view that the commission at Rs. 5 per thousand would be reasonable. From this he has allowed Rs. 1.5 per thousand for expenses. The net commission at Rs. 3.50 per thousand has been worked out at Rs. 4,26,091. For the rate of 0.5 per cent he has relied on the Tribunal's decision dt. 24th July, 2001 in the case of C.K. Telang vs. Asstt. CIT for the asst. yr. 1990-91 carrying on similar business at Firozabad. In the case of C.K. Telang, net income of Rs. 12,312 at Re. 1 per thousand had been shown which was accepted by the Department. The AO had made addition of peak credits in bank under s. 69 and against this ....
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....;35,000 1,62,481 1.35 96,066 3.2 The income returned by the assessee in all the earlier assessment years has been accepted by the Department. The commission receipts this year are at higher rates as compared to immediately preceding assessment years. The net profit from commission, after deducting all expenses, is also significantly better. The AO has not brought on record any comparable cases showing receipt at Rs. 5 per thousand. The decision of Tribunal in Telang's case is not applicable because: (i) the issue regarding business income did not arise from the orders of AO or CIT(A) and was not raised in grounds of appeal before Tribunal. The rate was increased without even hearing the appellant on this issue. (ii) The turnover was only Rs. 1.23 crores as against Rs. 12.17 crores of the assessee. (iii) The business income was found adequate to meet the day-to-day expenses whereas the assessee has accounted for all the expenses and none of the expenses have been found to be inflated. (iv) The assessment year involved in the case of Telang is 1990-91 when there was no competition but now there are several persons carrying on this type of business and charging....
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....that case the AO had considered the deposits in the bank account of Shri C.K. Telang as unexplained and it was the reason that the peak amount of such deposits in bank account, which came to be Rs. 1,96,629, was considered for arriving at the peak amount of undisclosed deposits in bank and since the opening balance in the bank was at Rs. 75,847 the AO considered the balance amount of Rs. 1,21,282 as unexplained deposit in bank and added the same as deemed income under s. 69 of the IT Act. The learned counsel strongly stressing on the aforesaid facts further submitted that so far as assessee's case is concerned, there is no such addition, i.e., the Revenue authorities have not disputed the genuineness of deposits in assessee's bank account which are on account of demand drafts brought by various customers from outside Firozabad and discounted by the assessee. Referring to para 5 of the order of the Tribunal the learned counsel further submitted that the Tribunal was pleased to delete that addition. 6.2 According to the counsel, the only issue in that case before the Tribunal being addition of Rs. 1,21,282 having been made under s. 69 of the Act by considering the peak of deposit ....
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....intained in 4 pages and either in the loose form or in binding form. So far as assessee's case is concerned, the learned counsel submitted that the assessee had maintained complete records of draft discounted by it, deposit slips for having deposited the same in assessee's bank account, and so far as expenses are concerned, the salary was paid to only one person, who used to go to bank to deposit the drafts and to bring the cash, whereas bank charges were verifiable from the bank statements. So far as general expenses and conveyance expenses are concerned, the learned counsel submitted that though the assessee had maintained the record of the same yet even if it is assumed that there was no record for these expenses, then the defect was not of such nature so as to authorise the AO to invoke the provisions of s. 145(2) of the Act. The learned counsel's plea was that even if it is assumed that these two types of expenses were not verifiable, what the maximum could be done was to disallow the same which could have resulted in addition of an amount of Rs. 17,729 only. The learned counsel, again referring to the application of rate of 0.35 per cent by the AO, submitted that if the AO wa....
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.... endorsed in his name. After depositing, the assessee encashes these drafts either the same day or immediately thereafter. The assessee withdraws the money from the bank and disburses it to the persons, who had brought the bank drafts. For such services, the assessee gets a commission of Re. 1 per thousand. The deposits of such bank drafts in assessee's account aggregated to Rs. 1,23,12,916. Working out the commission Re. 1 per thousand, the assessee worked out his commission at Rs. 12,300 and declared the same as business income. At the time of assessment proceedings, the modus operandi was explained to the AO. However, the AO did not accept the contention of the assessee. He held that the peak deposits in the bank account of the assessee amounted to Rs. 1,96,629 on 3rd Aug., 1989. After giving credit for opening deposits of Rs. 75,847, the AO made an addition of Rs. 1,21,282 to the income of the assessee as deemed income under s. 69 of the Act. 4. Aggrieved by the order of the AO, the appeal was filed. The CIT(A) also confirmed the same. The assessee is in appeal before us against the findings of the CIT(A). The learned counsel reiterated the facts as mentioned above. He state....
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....ul thought to the issue and found that the commission charged by the assessee comes 0.1 per cent which is inconceivable. We, therefore, hold that the assessee has earned a commission of 0.5 per cent on such draft discounting business. We, therefore, direct the AO to calculate the income from draft discounting business by applying 0.5 per cent commission on the value of drafts deposited in the bank account of the assessee. For this limited purpose, the issue goes back to the file of the AO. 7. In the result, the appeal filed by the assessee is partly allowed." 8.2 A careful analysis of the aforesaid order of the Hon'ble Tribunal leads me to agree with the submissions of the learned counsel for the assessee that the only issue before the Hon'ble Tribunal was with respect to the addition of Rs. 1,21,282 having been made by the AO [and confirmed by the CIT(A)] by considering the peak amount of deposits in assessee's bank account as unexplained which was deleted by the Hon'ble Tribunal. So far as question of rate of commission charged by Shri C.K. Telang is concerned, there is nothing in the order which may go to suggest that either the Revenue authorities had tinkered with the sa....
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....ad the assessee charged commission @ Re. 1 per Rs. 1,000, then its daily income would have been only Rs. 50 per day which in the opinion of the Tribunal, was not sufficient for survival of the assessee. But, so far as the present case is concerned, the facts are quite different. In the present case, the assessee's turnover is Rs. 12,17,40,268 on which the assessee himself has declared an income of Rs. 61,067 + Rs. 35,000 as income from other sources. The assessee's case is, therefore, not of such nature where its income may be enhanced on the ground of assessee's survival. 10. Proceeding further, I am of the opinion that though both the authorities have stated that the assessee has not maintained the books of account, this observation, in my opinion, in the peculiar facts relating to the nature of business carried on by the assessee, is not sufficient so as to penalise the assessee by determining its income in an arbitrary manner. From the income and expenditure account, copy of which is placed by the assessee at p. 2 of its paper book, and as has been pleaded by the learned counsel for the assessee, so far as quantum of commission, bank charges and total turnover of DDs discoun....