Satish Kumar, Ambala Cantt. V. DCIT, Ambala

ITA 1/CHANDI/2015

• Counselvise Citation: 121514 RSA 2015
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJINDER KAUR
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Unexplained investment; Business income; Loose papers; Deemed to accrue or arise in india
• Section: 69; 69C; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1/CHD/2015 (ASSESSMENT YEAR : 2008-09) SATISH KUMAR VS. THE D.C.I.T., PROP. M/S KUMAR, METALS, AMBALA. 10 NAGAR PALIKA MARKET, AMBALA CANTT. PAN: ADSPK5127H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SMT.RAJINDER KAUR, DR DATE OF HEARING : 13.10.2015 DATE OF PRONOUNCEMENT : 15.12.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH DATED 27.11.2014 FOR ASSESSMENT YEAR 2008-09. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT A SURVE Y UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE AS ON 13.9.2007. ON THE BASIS OF LOOSE PAPERS, WHICH REPRESENT UNACCOUNTED PURCHASES AND SALES, THE 2 ASSESSEE SURRENDERED AN AMOUNT OF RS.35 LACS BEING ON ACCOUNT OF CASH OF RS.2,97,271/-, ON ACCOUNT OF STO CK RS.10,65,788/-, RS.18,46,000/- ON ACCOUNT OF INVEST MENT IN UNACCOUNTED PURCHASES AND ELEMENT OF PROFIT THER EON AND RS.2,90,941/- ON ACCOUNT OF MISCELLANEOUS INCOM E TO COVER OTHER DISCREPANCIES IN BOOKS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD INCORPORATED ONLY RS.20 LACS SURRENDERED AT THE TIME OF SURVEY. THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF RS.15 LACS BE ING RS.35 LACS MINUS RS.20 LACS AND ALSO MADE AN ADDITI ON OF RS.1,21,671/- ON ACCOUNT OF GP RATE. THE ADDITION ON ACCOUNT OF GP RATE AMOUNTING TO RS.1,21,671/- WAS DELETED BY THE I.T.A.T., CHANDIGARH BENCH IN ASSESS EES OWN CASE IN ITA NO.660/CHD/2012 DATED 9.6.2014, WHI LE THE ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN THE SURRENDERED INCOME AND RETURNED INCOME OR RS.15 LAC S WAS UPHELD BY THE I.T.A.T., CHANDIGARH BENCH AND AL SO BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. IN THE BACKGROUND OF THESE FACTS, THE ASSESSING OFFICER IN ITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND ALSO LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS.11,73,222/-. 3. THE LEARNED CIT (APPEALS) AFTER GIVING EFFECT T O THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH THOUGH DELETED THE PENALTY LEVIED BY THE ASSESSING OF FICER ON 3 ACCOUNT OF GP RATE ADDITION, HOWEVER, SUSTAINED THE PENALTY TO THE EXTENT OF ADDITION OF RS.15 LACS IMP OSED BY THE ASSESSING OFFICER. 4. BEFORE THE LEARNED CIT (APPEALS) THE CONTENTION OF THE ASSESSEE WAS THAT IT HAS NOT CONCEALED THE PARTICULARS OF HIS INCOME AND HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF SUCH INCOME. FURTHER, IT WAS SUBMITTED THAT THE AMOUNT OF RS.15 LACS WAS ON ACCO UNT OF UNACCOUNTED PURCHASE, WHICH WAS VERY WELL COVERE D UNDER THE SURRENDER MADE ON ACCOUNT OF EXCESS STOCK AND ON ACCOUNT OF ANY OTHER DISCREPANCIES. REJECTING T HE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT (APPEA LS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN LE VYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON A CCOUNT OF ADDITION MADE BY THE ASSESSING OFFICER FOR DIFFE RENCE OF AMOUNT SURRENDERED AND THAT OF RETURNED INCOME. 5. AGGRIEVED BY THIS ACTION OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS COME UP IN APPEAL BEFOR E US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED BEFORE US THAT THE UNACCOUNTED PURCHASES ARE ALWAYS PART OF EXCESS STOCK. THEREFORE, THE INCOME ON ACCOUNT OF UNACCOUNTED PURCHASES AND SIMULTANEOUSLY ON ACCOUNT OF EXCESS STOCK AMOUNTS TO DOUBLE ADDITION. THIS WAS THE REASON WHY THE ASSESSEE DID NOT DISCLOSE THE AMOUNT OF RS.15 LACS WHILE FILING ITS RETURN OF INCOME. TH OUGH THE 4 ADDITION HAS BEEN CONFIRMED, HOWEVER, BY ANY OF THE AUTHORITIES BELOW, THE EXPLANATION GIVEN BY THE ASS ESSEE IS NOT FOUND TO BE FALSE. THEREFORE, EVEN IF THE ASSE SSEE HAS BEEN HELD TO BE LIABLE FOR TAX ON THIS AMOUNT OF RS .15 LACS, HE SHOULD NOT BE PENALIZED UNDER SECTION 271( 1)(C) OF THE ACT. OUR ATTENTION WAS INVITED TO THE ORDER OF THE I.T.A.T. IN THIS REGARD. IT WAS ALSO STATED THAT E VEN IN THE ORDER OF THE I.T.A.T. IN QUANTUM, THE ADDITION WAS SUSTAINED ONLY FOR LACK OF RECONCILIATION. THEREFO RE, IN THIS MANNER, AFTER PAYING TAXES THE ASSESSEE CANNOT BE IMPOSED WITH THE ADDED BURDEN OF PENALTY. 7. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ONLY QUESTION TO BE DECIDED BY US IN THIS APPEA L IS WHETHER PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE LEVIED ON ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE BETWEEN THE INCOME SURRENDERE D BY THE ASSESSEE DURING THE COURSE OF SURVEY AND INCOME RETURNED BY HIM. THE ADDITION HAS BEEN CONFIRMED T O THE LEVEL OF HIGH COURT. HOWEVER, THIS IS ALSO AN UNDI SPUTED FACT THAT ALL ALONG THE CONTENTION OF THE ASSESSEE HAS BEEN THAT THOUGH THE SEPARATE SURRENDER ON ACCOUNT OF EXCESS 5 STOCK AND UNACCOUNTED PURCHASES WAS MADE BY HIM DURING THE COURSE OF SURVEY, THE UNACCOUNTED PURCHA SES ARE IN FACT REPRESENTED BY THE EXCESS STOCK. THERE FORE, SHOWING BOTH THE UNACCOUNTED PURCHASES AS WELL AS EXCESS STOCK IN HIS INCOME WOULD AMOUNT TO ADDING T HE SAME INCOME TWICE. THEREFORE, IN ORDER TO AMEND TH E SAID FALLACY THE ASSESSEE HAD NOT DISCLOSED THIS AMOUNT OF RS.15 LACS IN HIS RETURN OF INCOME. THE QUESTION O F RECONCILING THE AMOUNT OF UNACCOUNTED PURCHASES WIT H THE EXCESS STOCK HAS THOUGH ARISEN BEFORE THE LOWER AUTHORITIES, IT COULD NOT BE EXECUTED THEREIN. HOW EVER, WE ARE INCLINED TO AGREE WITH THE CONTENTION OF THE AS SESSEE THAT THIS EXPLANATION GIVEN BY HIM HAS NOT BEEN FOU ND TO BE FALSE BY ANY OF THE AUTHORITIES BELOW. IN THIS REGARD, WE ARE REPRODUCING PARA 9 OF THE I.T.A.T. ORDER IN QUANTUM, WHICH READS AS UNDER : 9 THE ASSESSEE HAS NEVER RETRACTED FROM SURRENDER MADE DURING SURVEY AND HAS SIMPLY REDUCED THE AMOUN T OF INCOME OFFERED IN THE RETURN. THE ASSESSING OFFICE R HAS CLEARLY NOTED THAT THE ASSESSEE HAS FAILED TO RECON CILE THAT EXCESS STOCK HAS COME FROM SOME ITEMS OF PURCH ASES AGAINST WHICH AMOUNT OF INVESTMENT FOR SUCH PURCHAS ES AMOUNTING TO RS. 1846000/- WAS SURRENDERED. THE DE TAILS OF SURRENDERED AMOUNT DURING SURVEY READS AS UNDER: I EXCESS CASH 297271/- II EXCESS STOCK 1065788/- III INVESTMENT IN UNACCOUNTED PURCHAE AND ELEMENT OF PROFIT THEREON 1846000/- IV MISC INCOME TO COVER OTHER DISCREPANCIES IN BOOKS 290941/- 3500000/- 6 THE ASSESSING OFFICER HAS MADE FOLLOWING OBSERVATIONS WHICH SHOWS FOLLOWING DETAILS: 3.2 THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTAB LE. DURING THE COURSE OF SURVEY, THE DISCREPANCY REGARD ING UNRECORDED PURCHASES AS WELL AS EXCESS STOCK WERE F OUND AND THE SAME WERE CONFRONTED TO THE ASSESSEE. ON T HE BASIS OF THESE DISCREPANCIES THE ASSESSEE HAD VOLU NTARILY AND WITHOUT ANY PRESSURE ACCEPTED THAT BOTH THESE DISCREPANCIES WERE SEPARATE AND PERTAINED TO DIFFER ENT TRANSACTIONS. ACCORDINGLY THE ASSESSEE HAD MADE S EPARATE DECLARATION OF UNDISCLOSED INCOME ON BOTH HEADS. T HEREFORE AT THIS STAGE THE CLAIM OF THE ASSESSEE THAT BOTH THE DISCREPANCIES PERTAINED TO THE SAME TRANSACTION AND HENCE DECLARATION IN ONE SHOULD BE ALLOWED TO BE TELESCOP ED IN THE OTHER CAN NOT BE ACCEPTED. FURTHER THE DOCUMENTS R ELATING TO UN RECORDED PURCHASES FOUND CONTAINED CLEAR DESC RIPTIONS OF THE ITEMS AS WELL AS AMOUNTS INVOLVED. IF THESE WERE THE SAME AS THE EXCESS STOCK FOUND THEN THE ONUS WAS ON THE ASSESSEE TO MATCH THE ITEMS IN THE PAPERS WITH THE STOCK PRESENT AT THE TIME OF SURVEY. THE ASSESSEE HAS A LSO FAILED TO CORELATE THE UNACCOUNTED PURCHASE WITH REFERENCE TO THE INVENTORY OF S TOCKS PREPARED PHYSICALLY AT THE TIM E OF SURVEY. 3.3 MOREOVER THE ASSESSEE HIMSELF AT THE TIME OF SU RVEY ACCEPTED THE FACT THAT THE DOCUMENTS FOUND RELATED TO UNRECORDED PURCHASES. HENCE AT THIS STAGE NO FURTH ER CORROBORATIVE EVIDENCE IS REQUIRED TO BE GIVEN. 3.4 IN THIS CASE AN ADDITIONAL INCOME OF RS. 350000 0/- WAS DECLARED AT THE TIME OF SURVEY ON 13.9.2007 AND THI S ADDITIONAL INCOME OF RS. 3500000/- EARNED BY ASSESS EE IS NOT ITS REGULAR BUSINESS INCOME FROM THE DISCLOSED SOURCES AND IS, THEREFORE ASSESSABLE AS DEEMED INCOME U/SS 69, 69A, 69B AND 69C OF THE ACT AS THE SAME REPRESENTS THE ASSESSEES UNACCOUNTED INVESTMENT (STOCK) AND EXPLA INED CASH RESPECTIVELY. IT HAS BEEN EXPLICITLY HELD BY T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHD. HAJI HASARN (SUPRA) THAT SECTIONS 69, 69A, 69B AND 69C ARE DEEM ING PROVISIONS AND NO DEDUCTION UNDER THE OTHER SECTION S IS PERMITTED. THE CLASSIFICATION OF HEAD OF INCOME IS GOVERNED BY SECTION 14 OF THE ACT THE INCOME DETERMINED U/S 69, 69A,69B AND 69C ARE TO BE TREATED SEPARATELY AS DE EMED INCOME AND SUCH DEEMED INCOME IS NEITHER INCOME FR OM SALARY NOR HOUSE PROPERTY NOR PROFIT OR GAIN OF BUS INESS OR PROFESSION OR CAPITAL GAIN AND NOR IT IS INCOME FRO M OTHER SOURCES, BUT IS THE CASE OF THE SPECIFIC PROVISIONS OF SECTION 69, 69A, 69B & 69C. HAVING REGARD TO THE ABOVE FACT UAL POSITION, NO FURTHER DEDUCTION OR SET OFF OF ANY KI ND IS APPLICABLE TO SUCH INCOMES ASSESSED / ASSESSABLE U/ S 69, 69A, 69B & 69C OF THE ACT. 3.5 IN THE CASE OF THE ASSESSEE, INCOME HAS BEEN SURRENDERED ON ACCOUNT OF UNACCOUNTED STOCK OF RS. 1065788/-, UNACCOUNTED CASH OF RS. 297271/- AND UNACCOUNTED INVESTMENT IN PURCHASES AND ELEMENT OF PROFIT THEREON OF RS. 1846000/- AND MISC INCOME TO COVER O THER DISCREPANCIES IN THE BOOKS AT RS. 290941/- WHICH AR E ASSESSABLE U/S 69, 69A, 69B AND 69C OF THE ACT. I T IS ALSO SEEN FROM THE FACTS THAT THERE IS NO EVIDENCE ON RE CORD EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE 7 COURSE OF SURVEY INDICATING THAT THE SOURCE OF T HE SAID INVESTMENTS/ MONEY / EXPENDITURE WAS EVER EXPLA INED. THERE IS NO SUBMISSION REGARDING ANY PARTICULAR PUR CHASE OR SALE TRANSACTIONS WHICH WAS BUSINESS IN NATURE, WHI CH GENERATED THE SAID UNACCOUNTED STOCK, UNACCOUNTED C ASH, UNACCOUNTED INVESTMENT ETC. THIS BEING SO, HAVING REGARD TO THE RATIO OF THE DECISION OF HON'BLE GUJARAT HIG H COURT WHICH IS CLEAR ON THE RELEVANT POINT THAT INCOMES H AVING BEEN ASSESSED U/S 69, 69A, 69B AND 69C OF THE ACT, NO SET OFF OF ANY KIND OR NO DEDUCTION OF ANY KIND IS ADMI SSIBLE AGAINST THE SAID INCOME. 3.6 IN VIEW OF THE FACT THAT AT THE TIME OF SURVEY U/S 133AS, DISCREPANCIES IN THE STOCK, CASH, PURCHASE A ND MISC ITEMS WAS FOUND, THESE ARE CONSIDERED SPECIFIC DEFE CTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WITHIN THE MEA NING OF SECTION 145(3) OF THE ACT. THEREFORE BOOKS OF ACCO UNT OF THE ASSESSEE ARE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. HENCE THIS ADDITIONAL INCOME OF RS. 35,00,000/- IS ASSESSED AS DEEMED INCOME U/S 69 AND 69A IN VIEW OF THE HON'BLE GUJARAT HIGH COURTS ABOVE N OTED DECISION AS THE ASSESSEE HAS NOT BEEN ABLE TO EXPLA IN THE SOURCES OF THIS ADDITIONAL INCOME WITH SUPPORTIVE E VIDENCE EITHER AT THE TIME OF SURVEY OR DURING THE COURSE O F ASSESSMENT PROCEEDINGS . ABOVE CLEARLY SHOW THAT IT CANNOT BE SAID THAT EXCE SS CLOSING STOCK WAS AGAINST SOME ITEMS FOR WHICH DOCUMENTS WERE FOUND FOR UNACCOUNTED PURCHASE. NO EFFORTS HAVE BEEN MADE BEFORE THE AO OR EVEN BEFORE US TO RECONCILE THE UNACCOUNTED PURCHASES WITHOUT EXCE SS STOCK. THEREFORE IN OUR OPINION, ADDITION HAS BEE N CORRECTLY MADE BY THE AO AND CONFIRMED BY THE LD. C IT(A) AND ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT (A). 9. FROM THE PERUSAL OF THE ABOVE, WE SEE THAT THOUGH THE EXPLANATION GIVEN BY THE ASSESSEE IN REL ATION TO THE ADDITION HAS NOT BEEN REJECTED OUT RIGHTLY, HOWEVER, SINCE THE RECONCILIATION COULD NOT BE DONE, THEREFO RE, THE ADDITION HAS BEEN CONFIRMED. HOWEVER, IN SUCH CIRCUMSTANCES, WE ARE NOT INCLINED TO CONFIRM THE P ENALTY ON THE SAID ADDITION LEVIED BY THE ASSESSING OFFICE R. THIS KIND OF SITUATION MAY LEAD TO CONFIRMING THE DISALL OWANCE 8 OR ADDITION. HOWEVER, PENALTY ON THE SAME CANNOT B E CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF DECEMBER, 2015. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH