M/s. Periasamy Moopanar & Sons, CHENNAI V. ACIT, Kumbakonam

CO 89/CHNY/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6117 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N DEVANATHAN
• Assessee Lawyers: K E B RENGARAJAN JR
• Section: 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.1248/MDS/2010 ASSESSMENT YEAR : 2006-07 THE DY. CIT CIRCLE I KUMBAKONAM VS M/S S. PERIASAMY MOOPANAR & SONS NAGESWARAN NORTH STREET THIRUNARAYANAPURAM KUMBAKONAM [PAN AAHPM1930B ] (APPELLANT) (RESPONDENT) C.O. NO.89/MDS/2010 ASSESSMENT YEAR : 2006-07 M/S S. PERIASAMY MOOPANAR & SONS NAGESWARAN NORTH STREET THIRUNARAYANAPURAM KUMBAKONAM VS THE DY. CIT CIRCLE I KUMBAKONAM (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI K.E.B RENGARAJAN, JR. STANDING COUNSEL DEPARTMENT BY : SHRI N.DEVANATHAN O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE AND THE CROSS OBJEC TION BY THE ASSESSEE, FOR ASSESSMENT YEAR 2006-07, ARE DIRECTE D AGAINST THE ORDER OF THE LD. CIT(A), TIRUCHIRAPPALLI, DATED 14.5.201 0 ITA 1248/10 CO 89/10 :- 2 -: 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM CARRIES ON THE BUSINESS AS DEALER IN TEXTILES. FOR THE YEAR UNDER CONSIDERATION, IT FILED RETURN OF INCOME ON 31.10.2 006 ADMITTING TOTAL INCOME OF ` 9,36,650/-. SUBSEQUENTLY, A SURVEY U/S 133A WAS CONDUCTED ON 26.10.2007. DURING THE SURVEY CERTAIN DISCREPANCIES IN PURCHASES AND SALES WERE NOTICED. BASED ON THE SUR VEY RESULTS, ASSESSMENT WAS COMPLETED ON 18.12.2008. AGAINST V ARIOUS ADDITIONS MADE, THE ASSESSEE PREFERRED FIRST APPEAL AND THE L D. CIT(A) HAS PARTLY ALLOWED THE CLAIM OF THE ASSESSEE. HENCE, BOTH THE PARTIES ARE AGGRIEVED. 3. THE MAIN GROUND IN REVENUES APPEAL IS REGARDING DELETION OF GROSS PROFIT ADDITION OF ` 3,74,833/- MADE ON ACCOUNT OF UNACCOUNTED PURCHASES AND SALES. THE ASSESSING OFFICER HAD MAD E ENQUIRIES FROM 12 SUPPLIERS OF THE ASSESSEE-FIRM AND OBTAINED THEI R EXTRACTS OF LEDGER ACCOUNTS. THE ASSESSING OFFICER NOTICED DIFFERENCE S IN THESE ACCOUNTS AS PER THE BOOKS AND THE LEDGERS OF THE SUPPLIERS. WHEN TO DO SO, THE ASSESSEE EXPLAINED RECONCILIATION STATEMENT WITH A RIDER THAT IF FURTHER TIME IS ALLOWED, THE COMPLETE DETAILS SHALL BE FURN ISHED. ON 18.12.2008, ANOTHER RECONCILIATION WAS FILED. THE ASSESSEE TRIED TO EXPLAIN THE DIFFERENCES REGARDING PURCHASES UNACCOU NTED, PURCHASE ITA 1248/10 CO 89/10 :- 3 -: RETURNS NOT ACCOUNTED, CREDIT NOTES NOT ACCOUNTED A ND PURCHASE OF PACKING MATERIALS WHICH ARE NOT ACCOUNTED. BEING NOT SATISFIED, THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION. HOW EVER, AFTER HEARING THE DETAILED DISCUSSION, THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF ` 8,59,274/- AS AGAINST THE ADDITION MADE BY THE ASS ESSING OFFICER AT ` 28,35,274/- BY ACCEPTING RELIEF OF GROSS PROFIT AD DITION TO THE TUNE OF ` 2,60,000/-, RELIEF IN PURCHASE RETURNS AND CREDIT NOTES OF ` 16 LAKHS AND RELIEF IN STOCK OF PACKING MATERIALS OF ` 1,16,000/-. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE EVIDENCE ON RECORD. PARAGRAPHS 6,7,8,9,10 & 11 OF THE LD. CIT(A)S ORDER ARE RELEVANT ON THIS ISSUE. FOR READY REFERE NCE, WE EXTRACT THE SAME HEREIN BELOW: T 6. I AM OF THE OPINION THAT THE LEGAL POSIT ION IS VERY LUCID AND CLEAR HAT THE ASSESSING OFFICER SHOULD MAKE NEC ESSARY ENQUIRIES AND BRING EVIDENCE ON RECORD FOR JUSTIFIC ATION OF ADDITION. IN THIS CONNECTION IT IS APT TO QUOTE THE FOLLOWING DECISION OF THE SUPREME COURT IN THE CASE OF TARA D EVI AGGARWAL (SMT.) V. COMMISSIONER OF INCOME-TAX 88 IT R 323 SC WHEREIN THE SUPREME COURT UPHELD THE REVISION MA DE BY THE LEARNED CIT IN TERMS OF SECTION 263 OF THE ACT WHICH HEAD NOTE IS REPRODUCED BELOW. 7. WHERE AN ASSESSEE IS ASSESSED ON AN INCOME V OLUNTARILY RETURNED, IT IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY IF IT IS FOUND THAT THE ASSESSMENT WAS MADE ON THE BASIS THAT THE INCOME HAD BEEN EARNED BY THE ASSESSEE WHI CH WAS ASSESSABLE. WHERE AN INCOME HAS NOT BEEN EARNED AND IS NOT ASSESSABLE, MERELY BECAUSE THE ASSESSEE WANTS IT TO BE ASSESSED IN HIS OR HER HANDS IN .ORDER TO ASSIST SO MEONE ELSE WHO WOULD HAVE BEEN ASSESSED TO A LARGER AMOUNT, AN ASSESSMENT SO MADE WILL BE ERRONEOUS AND PREJUDICIA L TO THE REVENUE AND THE COMMISSIONER HAS JURISDICTION UNDER SECTION ITA 1248/10 CO 89/10 :- 4 -: 33B OF THE INDIAN INCOME-TAX ACT, 1922, TO CANCEL T HE ASSESSMENT AND PROCEEDINGS FOR ASSESSMENT MAY BE IN ITIATED UNDER THE PROVISIONS OF THE ACT AGAINST SOME OTHER ASSESSEE WHO ACCORDING TO THE INCOME-TAX AUTHORITIES WOULD B E LIABLE FOR THE INCOME THEREOF. 8. THE REPRESENTATIVE HAS PRODUCED RECORDS OF THE S ISTER CONCERNS LISTED BY THE APPELLANT AND SUBMITTED THAT DURING THE YEAR OF ASSESSMENT THE SISTER CONCERNS HAVE ACCOUNT ED CREDIT PURCHASES FROM THE LISTED PARTIES TO THE EXTENT OF ` 32,21,735/-. THEY HAVE ALSO ACCOUNTED FOR PURCHASE RETURNS / CRE DIT NOTES TO THE EXTENT OF ` 17,74,686.35. THE STATEMENT OF ACCOUNTS OF THE SISTER CONCERNS WITH THE BREAKUP OF CREDIT PURC HASES AND PURCHASE RETURNS IS DETAILED IN THE CHART, WHICH IS FURNISHED BELOW. /'' UNACCOUNTED PURCHASES AS PER ORDER 3,239,909.00 PURCHASES ACCOUNTED BY SISTER CONCERNS KALYANI RATHINAM M.UMAYAL P.UMAYAL PERIASAMY RAMESH SILKS 307,450.00 L.T.FASHIONS 245,191.00 ANAND TEX 322,622.00 MUKUND FASHIONS 480,270.00 243,695.00 VIJAY FABRICS 476,100.00 47,798.00 SORNAMUGI ENTERPRISES 287,896.00 TAVAKKAL TRADERS 502,613.00 SRI VINAYAKA ENTERPRISES 123,030.00 BHUPENDRA COMPANY 185,070.00 848,491.00 783,550.00 614,115.00 185,070.00 790,509.00 3,221,735.00 PURCHASE RETURNS NOT ACCOUNTED AS PER ORDER 1,689,997.00 CREDIT NOTES NOT ACCOUNTED AS PER ORDER 616,156.00 2,306,153.00 RETURNS/CREDIT NOTES ACCOUNTED BY SISTER CONCERNS KALYANI RATHINAM M. UMAYAL P. UMAYAL PERIASAMY RAMESH SILKS 284,000.00 L.T.FASHIONS 237,695.00 ANAND TEX 6,137.00 MUKUND FASHIONS 411,459.90 28,560.00 VIJAY FABRICS 163,221.20 ITA 1248/10 CO 89/10 :- 5 -: SORNAMUGI ENTERPRISES 195,743.75 TAVAKKAL TRADERS 295,491.00 SRI VINAYAKA ENTERPRISES 111,996.00 BHUPENDRA COMPANY 40,382.50 761,150.90 447,221.20 34,697.00 40,382.50 491,234.75 1,774,686.35 9. FURTHER IF THE TURNOVER OF THE SISTER CONC ERNS AND CREDIT NOTES ARE TAKEN IT WOULD GIVE MISLEADING RESULT OF G.P. S INCE THE FIRM IS KNOWN FOR SELLING AT LOW MARGIN OF SALES SO AS TO A CHIEVE MORE TURNOVER. THIS IS THE CHIEF CRITERION OF THE FIRM'S BUSINESS POLICY AND THE REASON FOR ITS SUCCESS. 10. WITH REGARD TO THE CLOSING STOCK OF PACKING MATERIALS, SINCE THE APPELLANT HAS ALREADY CONSIDERED ` 116,083/- AS CLOSING STOCK OF PACKING MATERIALS IN THEIR ACCOUNTS, THE DIFFERENCE AMOUNT OF ` 32,000/- AS ESTIMATED BY THE ASSESSING OFFICER IS B ROUGHT TO TAX. 11. IN THE LIGHT OF THE MATERIALS FURNISHED BY THE APPELLA NT WHICH IS NOT CONTRAVENED BY THE ASSESSING OFFICER THERE EXIS TS PRIMA-FACIE CASE FOR DELETION OF ALL THE ADDITIONS IN RESPECT O F ITEMS 1-4 CITED ABOVE. HOWEVER IN THE INTEREST OF JUSTICE AND FAIRN ESS I ORDER THAT THE FOLLOWING RELIEF BE GRANTED. 1. G.P. ADDITION ` 2,60,000 2. PURCHASE RETURNS AND CREDIT NOTES ` 16,00,000 3. STOCK OF PACKING MATERIALS ` 1,16,000 5. FROM THE ABOVE, WE FIND THAT THERE SEEMS TO BE NO M ISTAKE IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. THERE FORE, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 6. IN THE CROSS OBJECTION, THE ASSESSEE HAS DISPUTED THE ADDITION SUSTAINED AT ` 8,59,277/- VIDE PARA 12 OF HIS ORDER. SINCE WE HA VE FOUND THE CONCLUSION OF THE LD. CIT(A) TO BE CORREC T, BOTH THE REVENUES APPEAL AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ITA 1248/10 CO 89/10 :- 6 -: 7. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 19 TH JULY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR