Case Law Details
Prakash Praveen Kumar Vs ITO (ITAT Bangalore)
Assessee is an individual engaged in contract works who had a GST proceeding against Asst. Commissioner of Commercial Taxes for issuing bogus sale bills without actual movement of goods or services & had taken benefit of GST Input. Assessee had been appraised of making purchases from a firm for which assessee has categorically denied by producing purchase registers as well as bank statements which shows no transactions with such firm. AO, on credible information from Regional Economic Intelligence Committee had added such purchase amounts as Undisclosed Bank credits & also considered investments in Time Deposits as Undisclosed Investments u/s 69.
CIT dismissed the appeal of assessee on grounds that assessee has failed to substantiate the source & considered no merit in the grounds raised by assessee.
ITAT considered the contentions of assessee that he filed his return of income u/s 44AD & therefore, the additions made u/s 69 is illegal & bad in law as assessee is not required to maintain any books of accounts. This section is a deeming section & it overrides the provisions of section 28 to 43C of the Act provided that the total receipt does not exceed Rs.2 crores. ITAT also agreed with the contention of assessee that information called for by the Dept. of Commercial Taxes was with regard to bogus purchase transactions & it had nothing to do with bogus/ fictitious sales as alleged by AO. ITAT also held that additions were purely based on misinformation & without any evidence brought on record by AO.
With regard to additions made on investments in Fixed Deposits, assessee made a contention that since he has declared income under presumptive basis, there is no scope of declaring fixed deposits. Interest from such deposits was received & declared in subsequent year. ITAT upheld that they found no merits in additions u/s 69.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the Order of the learned CIT(A)/NFAC vide DIN and Order No. ITBA/ NFAC/S/250/2023-24/1062487523(1) dated 12.03.2024 for the Assessment Year (in short “AY”) 2018-19 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
2. The assessee has raised following grounds of appeal:
3. The assessee is an Individual who is engaged in the business of electrical contract works under the name & style of: M/S INDUSTRIAL SERVICES. During the year under consideration, the assessee has supplied and installed electrical works on contract basis to Government banks and other institutions. The assessee raised the invoice on actual contract work done, correspondingly the contractee party makes the payment after deducting the TDS u/s 194C.
3.1 For the year under appeal, the assessee has e-filed his return of income in ITR-4 on 30-07-2018 declaring total income of Rs.3,58,610/-. Thereafter, the case was selected under the guideline of the CBDT letter in F. NO.225/169/ 2019/ITA-II, dated 5th September 2019. Under the above guidelines the case was selected with approval of PCIT / CIT on 28/09/2019, and accordingly notice under section 143(2) of the Act was issued by the Jurisdictional Assessing Officer, and it was served through e-filing account of the assessee on 28/09/2019, as well as an intimation issue of notice was served through SMS alert on the registered mobile number to the assessee on 28/09/2019 and the assessee replied the said notice on 08/10/2019. Thereafter notice u/s. 142(1) of the Act along with questionnaires were issued on and the assessee filed part responses time to time. However, the last questionnaires dated 16/04/2021 was not replied by the assessee. Eventually, a show cause notice (SCN) with the proposal of addition of Rs. 92,75,710/-, was issued on 20-4-2021, and the assessee did not respond due to covid Pandemic.
3.2 Thereupon, the A.O. has concluded the assessment proceedings by passing the impugned order u/s. 143(3) r.w.s. 144B of the Act, dated 22/04/2021 by making a solitary disallowance of Rs.96,34,320/- u/s 69 of the Act under various heads as stated below:
Total income as per ITR…. Rs.3,58,610/-
Undisclosed Bank Credits u/s 69…Rs.60,56,515/-
Undisclosed Investments u/s 69… Rs.20,09,195/-
Undisclosed Time Deposits u/s 69… Rs.12,10,000/-
3.3 Aggreived by the assessment completed u/s 143(3) r.w.s. 144B of the Act dated 22.4.2021 the assessee preferred an appeal before the ld. CIT(A)/NFAC. The ld. CIT(A) dismissed the appeal of the assessee on the ground that assessee has failed to substantiate the source and therefore, there is no merit in the ground raised by the assessee.
4. Before us, ld. A.R. of the assessee submitted that assessee is in the business of electrical contract work and filed his return of income u/s 44AD of the Act on presumptive basis. Therefore, the addition made u/s 69 of the Act is illegal and bad in law as the assessee is not required to maintain any books of accounts. Further, ld. AR submitted that the GST case was with regard to alleged availing of the input tax credit by showing bogus purchase which the assessee has categorically denied by appearing before the GST authority but the ld. AO on a wrong presumptions treated the assessee as bogus seller and had added once in the head of “Bank credits” of Rs.60,56,515/- and another as unexplained investment of Rs.20,09,195/- for issuing fake invoice. Further, the ld. A.R. of the assessee submitted that since the assessee has declared its income under presumptive basis, there is no scope of declaring fixed deposits in the return of income and further as the interest income during the financial year 2017-18 was not received and accordingly, the same has been declared in the next year.
5. The ld. D.R. on the other hand supported the orders of the authorities below.
6. We have heard the rival submissions and perused the materials available on record. The Assessee has filed his return of Income disclosing the business income of Rs. 3,58,610/-. The assessee has opted for the deeming provision of Sec. 44AD of the Act by declaring the total turnover at Rs. 56,55,989/- out of which Rs. 46,93,809/- was through banking channel & rest Rs. 9,62,180/- was through other than banking channel. The assessee has made Taxable turnover of Rs.51,40,774/- as per GST Records and Rs.5,15,215/- as per VAT Records, which includes bank as well as cash receipts.
6.1 The ld AO on the basis of credible information from Regional Economic Intelligence Committee that the assessee had issued bogus billing of sale of goods and for which the relevant parties had taken benefit of GST input had added total sale bills amounting to Rs.60,56,515/-treating the same fictitious bills without actual movement of goods or services and accordingly added the same as unexplained investment u/s 69 of the Act. However, on going through the proceedings before Asst. Commissioner of Commercial Taxes (Enforcement) – 11 South zone, Bangalore placed at page 57 of the paper book, we find that the assessee have been appraised of making purchases from M/s. Supreme International, which the assessee has categorically denied by producing the purchase register for the month of March, 2018 as well as bank statement in which there is no transaction details recorded pertaining to M/s. Supreme International. Therefore, we agree with the contention of the ld. A.R. of the assessee that the information called for by the department of Commercial Taxes was with regard to bogus purchase for which the assessee has been summoned for making bogus purchase transaction. The assessee by submitting all the documents had categorically denied the purchase from M/s. Supreme International and therefore, it has nothing to do with the bogus/fictitious sales as alleged by the AO. Therefore, we find no merits on the addition made by AO amounting to Rs.60,56,515/-on the alleged ground of fictitious bills/invoices issued by the assessee without actual movement of goods or services. The revenue has also not brought any adverse material on record to show that assessee has made sales over and above the sales declared u/s 44AD of the Act. Taking all these into consideration, we are of the opinion that mere amounts credited in the bank accounts cannot be considered as unexplained investments u/s 69 of the Act amounting to Rs.60,56,515/- which is purely based on misinformation that too without any corroborative evidence brought on record by the AO.
6.2 Further, we also find no merits for the additions amounting to Rs. Rs.20,09,195/- on the ground of issuing total amount of bogus bills of Rs.20,09,195/- without any evidence brought on record by the AO, which in our opinion, cannot be treated as unexplained investment even stretch of imagination. The assessee has declared income by applying section 44AD of the Act i.e. by applying presumptive taxation. The assessee had declared the turnover of Rs. 56,55,989/- out of which Rs. 46,93,809/- was through banking channel & rest Rs. 9,62,180/- was through other than banking channel . Admittedly, the assessee is a electrical contractor and the total contract receipts are below Rs.2,00,00,000/-. In such a situation, section 44AD of the Act provides that the profit chargeable to tax would be 8%/6% of the gross receipts declared by the assessee or the higher sum declared by the assessee in the return. This section is a deeming section and it over rides the provisions of section 28 to 43C of the Act provided that the total receipt does not exceed Rs.2 Crore.
6.3 Further, with regard to total time deposits amounting to Rs.12,10,000/- the ld. AO has added the entire amount u/s 69 of the Act on the ground that assessee has not disclosed the time deposit in his return of income and assessee was unable to explain the source of investment. We are of the considered opinion that if an assessee has opted for presumptive taxation, no aacounts are required to filled up in the return of Income by the assessee except statement indicating the amount of turnover/gross receipts, gross profit, expenses and net profit of the business along with disclosing the amounts of total sundry debtors, sundry creditors, stock in trade and cash balance at the end of the year. On going through the bank statement, we find that the assessee has made the fixed deposit through banking channels, therefore, we find no merits in the addition made u/s 69 of the Act separately as undisclosed investment as the assessee has opted for presumptive taxation u/s 44AD of the Act.
7. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 24th Feb, 2025
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