Shri Gandhi Dhanraj & Co., Ahmedabad V. The ACIT., Circle-11, Ahmedabad

ITA 1023/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8667 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-03-2010
• Assessment Year: 1994-1995
• Appeal Filed On: 08-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Bogus purchase; Unexplained investment; Income from undisclosed sources; Document seized; Documents seized

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI T.K. SHARMA, JM AND D.C.AGRAWAL, AM M/S. GANDHI DHANRAJ & CO., 503 NEW CLOTH MARKET, AHMEDABAD-380 002. V/S . ASSISTANT COMMISSIONER OF INCOME TAX,CIR.11, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD. PAN NO.AAHFG 1287 A (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI GAURAV NAHTA. RESPONDENT BY:- SHRI M.C. PANDIT,SR.D.R. O R D E R PER SHRI D.C. AGRAWAL, J.M . THIS IS AN APPEAL BY THE ASSESSEE RAISING FOLLOWIN G GROUND :- THE LD. C.I.T.(A)-XVII HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION ON ACCOUNT OF SALE OUT OF BOOKS TO THE EXTENT OF RS.2,23,564/- OUT OF THE DISALLOWANCES MADE BY THE A.O. OF RS. 3,50,696/-. ITA NO.1023/AHD/2007. ASST. YEAR :1994-95 2 2. THE FACTS OF THE CASE ARE THAT SEARCH IN THE GAN DHI GROUP WAS CARRIED OUT ON 20.12.2003 ON THE BASIS OF SEIZED MATERIAL A SSESSMENT WAS COMPLETED AFTER MAKING FOLLOWING ADDITIONS :- (I) UNEXPLAINED INVESTMENT IN PURCHASES .. RS. 45,895/- (II) BOGUS PURCHASE. .. RS. 2,64,232/- (III) SALES OUT OF BOOKS. .. RS. 3,50,696/- 3. THE LD. C.I.T.(A) DELETED ALL THE ADDITIONS BUT THE CASE WAS RESTORED TO THE LD. C.I.T.(A) FOR DECIDING AFRESH AND TO PASS S PEAKING ORDER. ACCORDINGLY, THE LD. C.I.T.(A) HAS PASSED THIS IMPU GNED ORDER ON 1.11.2006. 4. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F WHOLESALE TRADING IN CLOTH. ON THE BASIS OF SEIZED DOCUMENTS, THE A.O. F OUND THAT PURCHASES FOR THE MONTHS FROM MAY TO NOVEMBER WERE 869 BALES WHER EAS IN THE REGULAR BOOKS ASSESSEE HAS RECORDED 870 BALES. FURTHER, A C OMPARISON OF SEIZED MATERIAL WITH THE REGULAR BOOKS SHOWED THAT THE ASS ESSEE HAS MADE MORE SALES OF BALES. THE DATA NOTED BY THE A.O. IN THE A SSESSMENT ORDER WAS AS UNDER :- SALES. SEIZED MATERIAL . REGULAR BOOKS . MONTH. AMOUNT. BALES. AMOUNT. BALE S DIFFERENCE. APRIL 9,82,547 148 9,59,276 146 (-) 23,271 MAY 5,98,350 76 5,79 ,469 76 (-) 18,881 JUNE 26,38,972 190 25,18,522 190 ( -) 20,400 JULY 9,10,693 63 9,08,060 63 (-) 2,633 AUGUST 3,07,765 43 2,66,685 41 (-) 41,080 SEPTEMBER 13,60,077 108 13,42,088 108 (-) 17,989 OCTOBER 7,22,208 81 6,88,956 81 (-) 33,252 NOVEMBER 14,06,480 157 12,13,290 139 (-) 1,93,190 ------------- ----- ------------- ----- ---------------- 89,27,092 866 85,76,396 844 (- ) 3,50,696 3 5. ON THE BASIS OF THIS DATA A.O. MADE THE FOLLOWIN G ADDITIONS :- ( I ) DISALLOWANCE OUT OF SHOP EXP. 3,000 (II ) PROFIT ON SALE OF UNACCOUNTED STOCK 14,000 (III) UNEXPLAINED INVESTMENT IN PURCHASE 45,895 (IV ) BOGUS PURCHASE 2,64,232 (V) SALE OUT OF BOOKS. 3,50,696 TOTAL 6,77,823 6. THE LD. CIT (A) IN THE IMPUGNED ORDER DELETED AL L THE ADDITIONS EXCEPT SUSTAINING ADDITION OF RS.2,23,564/- BEING SALE PRICE OF 22 BALES SOLD OUT-SIDE THE BOOKS WORKED OUT AT RATE OF RS.10,162/ - PER BALE. THE FIGURE OF 22 WAS OBTAINED BY SUBTRACTING NUMBERS 844 BEING BA LES RECORDED IN THE BOOKS, FROM 866 BEING THE BALES FOUND SOLD AS PER S EIZED MATERIAL. 7. BEFORE US THE LD. A.R. FOR THE ASSESSEE SUBMITTE D THAT IT IS NOT THE CASE WHERE ALL THE BALES WERE SOLD AT ONE TIME. IN THE M ONTH OF APRIL ASSESSEE HAS SOLD 2 BALES MORE. SIMILARLY, IN THE MONTH OF AUGUS T IT HAS FURTHER SOLD 2 BALES MORE. IT IS ONLY IN THE MONTH OF NOVEMBER THA T 18 BALES WERE FOUND SOLD MORE. IN ANY CASE, ONLY GROSS PROFIT ADDITION SHOULD BE MADE ON THE BALES SOLD OUT-SIDE THE BOOKS. 8. THE LD. D.R. ON THE OTHER HAND RELIED UPON THE O RDER OF A.O. AND LD. CIT(A). 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL ON RECORDS, WE ARE OF THE CONSIDERED VIEW THAT SALE PR OCEEDS OF 22 BALES AS ABOVE WOULD NOT BE AVAILABLE TO THE ASSESSEE AT ONE POINT OF TIME OR IN ONE MONTH BECAUSE HE HAS BEEN REGULARLY PURCHASING THE BALES OUT-SIDE THE BOOKS 4 AND SELLING THEM OUT-SIDE THE BOOKS. THE SALE PROCE EDS OF ONE EARLIER MONTH WOULD BE AVAILABLE FOR MAKING INVESTMENT IN PURCHAS ES OF BALES IN SUBSEQUENT MONTH WHICH WERE SOLD IN THOSE SUBSEQUEN T MONTHS. THUS, ROTATION OF PURCHASE AND SALE OUT-SIDE THE BOOKS CO NTINUED THROUGH OUT THE PERIOD OF APRIL TO NOVEMBER. THEREFORE, THE PEAK IN VESTMENT AND PROFIT THEREON HAS TO BE DETERMINED. SINCE THE DATA AVAILA BLE WITH THE AUTHORITIES WAS ON MONTHLY BASIS, THEREFORE MONTHLY PEAK ALONE CAN BE WORKED OUT. THUS, IT WAS ONLY IN THE MONTH OF NOVEMBER THE ASSE SSEE HAD SOLD 18 BALES MORE AND HE HAD THUS AVAILABLE WITH HIM UNACCOUNTED RECEIPT OF RS.1,82,916/- (10162 BEING SALE PRICE OF ONE BALE M ULTIPLIED BY 18 BALES SOLD IN THE MONTH OF NOVEMBER OUT-SIDE THE BOOKS). THIS IS THE PEAK UNACCOUNTED MONEY AVAILABLE WITH THE ASSESSEE IN THE MONTH OF N OVEMBER. WITH THIS MONEY EARLIER INVESTMENT IN PURCHASES OR RECEIPTS O F SALE PROCEEDS WOULD BE COVERED. ACCORDINGLY IT IS ONLY THE SUM OF RS.1,82, 916 IS REQUIRED TO BE TAXED AS UNACCOUNTED INCOME OF THE ASSESSEE. AS A R ESULT ADDITION OFRS.1,82,916/- IS CONFIRMED. THE ASSESSEE GETS THE CONSEQUENTIAL RELIEF. THE APPEAL OF THE ASSESSEE PARTLY ALLOWED. SD/- SD/- (T. K. SHARMA) (D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 26-03-2010 PATKI. ORDER PRONOUNCED IN OPEN COURT ON 26-03-2010 5 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD