Shri Nathi Lal Gupta, 61/13A. Ramjas Road, Karol Bagh, New Delhi. Vs Income Tax Officer, Ward 33(2), New Delhi.
May, 08th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E' NEW DELHI
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
Shri Nathi Lal Gupta, vs Income Tax Officer,
61/13A. Ramjas Road, Ward 33(2), New Delhi.
Appellant by: Shri C.L. Arora, Adv.
Respondent by: Shri P. Dam Kanunjna, Sr. DR
Date of Hearing: 01.04.2015
Date of Pronouncement:
PER C.M. GARG, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order of the
CIT(A)-XXVI, New Delhi dated 19.04.2010 in Appeal No. 132/08-09 for AY
2006-07. Although the assessee has raised six grounds in this appeal but except
ground no. 4, other grounds are argumentative and supportive to the main
ground no. 4 which reads as under:-
"That the ld. CIT grossly erred in not accepting the
explanation of receiving the payment from debtors and ignoring
the confirmations of the debtors. In fact he further erred in not
adopting the usual practice of confirming the stated position
from the debtors, when full particulars of the debtors were
available with him."
2. Briefly stated the facts giving rise to this appeal are that the case was
selected for scrutiny on the basis of AIR information that the assessee has
deposited cash of Rs. 2 lakh on 29.7.2005 in Standard Chartered Bank.
Replying to the query raised by the AO, the assessee submitted that he had more
than Rs. 3 lakh as cash in hand and deposited Rs.2 lakh in the bank account out
of this cash. The AO also noted that from the balance sheet for the period
ending on 31.3.2005 the assessee had Rs.4,72,174 under the head of cash-in-
hand & debtors and for the period ending on 31.3.2005 the assessee had
Rs.3,75,928 under the same head. The AO noted that there is no bifurcation of
cash-in-hand & debtors and, therefore, it is not ascertainable how much cash
was available with the assessee on the date of deposit of Rs. 2 lakh i.e.
29.7.2005. The AO rejected the explanation of the assessee and added the
impugned amount to the taxable income of the assessee u/s 68 of the Income
Tax Act, 1961.
3. The aggrieved assessee preferred an appeal before the CIT(A) which was
also dismissed granting part relief for the assessee and the addition made by the
AO was confirmed to the extent of Rs.1.49 lakh. Now, the empty handed
assessee is before this Tribunal in the second appeal.
4. We have heard arguments of both the sides and carefully perused the
relevant material placed on record. From the assessment order, it is clear that
the AO made impugned disallowance by holding that the bifurcation of cash in
hand and debtors has not been submitted, therefore, the exact amount of cash in
hand cannot be ascertained on the date of impugned deposit of Rs. 2 lakh i.e. on
25.7.2005. From careful reading of the impugned order of the CIT(A) from
para 4, we note that the assessee's counsel submitted break up of cash-in-hand
& debtors and closing balance of cash on 31.3.2005 was Rs.45,974 which
became opening cash balance on 1.4.2005 for the year under consideration i.e.
2006-07. The CIT(A) further noted that the business receipts of the assessee
during the period 1.4.2005 to 29.7.2005 were Rs.1,53,360 and against this
receipt, expenses of Rs.33,250 were incurred. The CIT(A) also noted that the
assessee had received repayment of debts in cash amounting to Rs.94,000
during 26.7.2005 till 29.7.2005. The assessee, in the background of aforesaid
facts, contended that from the said three sources, the assessee had cash-in-hand
of Rs.2,26,570 on 29.7.2005 and out of this cash in hand, the assessee deposited
Rs.2 lakh to the bank account of Standard Chartered Bank.
5. From bare reading of impugned order, we note that the CIT(A) rejected
the explanation of the assessee with following observations and conclusion:-
"6. I have carefully considered the facts and
circumstances of the case. I find that contrary to the stand
taken in scrutiny proceedings for assessment year 2005-06, the
appellant could not produce books of account for AY 2006-07.
The appellant has now given break up of "debtors" and "cash
in hand". However, the appellant has changed the explanation
before me as compared to what was given before the AO and
has submitted that an amount of Rs.94 000/- was on account of
repayment from debtors. On examination of confirmation from
the debtors which are all in one to two lines sentences written
in hand, I find that it is surprising that all these debtors
preferred to repay liabilities in cash during the same period
i.e. 26/7/2005 to 28/7/2005. No PAN was given in the case of
three of such debtors and all these payments were kept less
than Rs.20,000/-. Further, the appellant has shown very high
profit by showing meager expenses of Rs.33,520/- against the
business receipts of Rs.153600/- in order to enhance the cash
available on 29/7/2005. In the absence of books of account,
which were surprisingly not maintained during this year
contrary to preceding year, the contentions of appellant are
6.2 On careful consideration, lam of the view that the
appellant could not explain the genuineness of sources of cash
deposits before me in total. On taking into account the opening
balance of Rs.45,974/- and also computing the house hold
withdrawals @ Rs.10,000/- per month and by keeping G.P.
rate in the business of mobile repairing, at 25%, and by
treating the confirmation from sundry debtors as ingenuine, I
hold the appellant was short by Rs.1.49 lakhs as on 29/7/2005
for making cash deposit of Rs.2 lakhs in his bank account.
Accordingly, the addition made by the AO is confirmed to the
extent of Rs.l.49 lakhs."
6. In view of above observations and conclusion of the CIT(A), we note that
the CIT(A) went on to consider the quantum of receipts and expenses and also
the GP rate for the period from 1.4.2005 to 29.7.2005 which is only
approximately 1/3rd period of the financial year. The CIT(A) considering all
irrelevant facts and aspects held that the assessee was short by Rs.1.49 lakh cash
as on 29.7.2005 and the addition was confirmed up to this extent which is not a
proper and justified approach. We may point out that for considering the
explanation offered by the assessee, the only fact to be seen was that whether
the assessee had sufficient cash in hand on 29.7.2005 to deposit Rs. 2 lakh cash
to his bank account? The GP rate and proportion of receipts and expenses is not
relevant to decide this issue in the middle of financial year. Hence, we are of
the considered view that the CIT(A) could not demolish this explanation of the
assessee that the assessee had cash in hand of more than Rs.2 lakh as on
29.7.2005 and out of this amount, the assessee deposited impugned cash to his
bank account with Standard Chartered Bank. Therefore, we decline to accept
the conclusion of the CIT(A) which confirms the addition u/s 68 of the Act to
the extent of Rs.1.49 lakh and we set aside the same. Accordingly, main ground
of the assessee is allowed and the AO is directed to delete the entire addition
made u/s 68 of the Act.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06/05/2015.
(J.S. REDDY) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 06th May, 2015
Copy forwarded to:-
4. C.I.T. 5. DR