Shri Ashokkumar B.Modi, Surat V. The Addl.CIT.,Circle-6, Surat

ITA 1060/AHD/2008

• Counselvise Citation: 106020514 RSA 2008
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 24-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SETH
• Keywords: Income from undisclosed sources
• Section: 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.1060 / AHD/2008 (ASSESSMENT YEAR 2004-05) ASHOK KUMAR B MODI, 97-98, GIDC, PANDESARA, SURAT VS. ADDL. CIT, RANGE 6, SURAT I.T.A.NO. 1061/AHD/2008 (ASSESSMENT YEAR 2004-05) ASHISH MODI (HUF), VS. ADDL. CIT, RANGE 6, PROP. NAKODA TEXTILES, SURAT 2, GIDC, PANDESARA, SURAT PAN/GIR NO. : ABPPM9008A (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SAPNESH SETH, AR RESPONDENT BY: SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 10.04.2012 DATE OF PRONOUNCEMENT: 20.04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- BOTH THESE APPEALS ARE FIELD BY TWO DIFFERENT ASSE SSEES I.E. SHRI ASHOK KUMAR B MODI AND SHRI ASHISH B MODI (HUF), WH ICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF CIT(A) IV, SURAT BOTH DATED 21.12.2007 FOR THE ASSESSMENT YEAR 2004-05. SINCE THE ISSUE INVOLVED IS CONNECTED AND SIMILAR, BOTH THESE APPEALS WERE HEAR D TOGETHER AND ARE I.T.A.NOS.1060,1061 /AHD/2008 2 BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. AS AGREED BY BOTH THE SIDES, WE FIRST DECIDE THE APPEAL IN THE CASE OF SHRI ASHOK B MODI I.E. I.T.A.NO. 1060/A HD/2008. 2. GROUND NOS. 1 & 2 WERE NOT PRESSED BY THE LD. A. R. OF THE ASSESSEE AND ACCORDINGLY, REJECTED AS NOT PRESSED. 3. GROUND NO.3 IS AS UNDER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN ESTIMATING GROSS PROFIT @ 13.38% FOR FULL Y EAR BY NOT ACCEPTING LOSS SHOWN FOR PER SURVEY PERIOD. 4. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. THAT A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 WAS CON DUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 21.01.2004. T HE ASSESSEE DECLARED UNACCOUNTED INCOME OF RS.105 LACS. HE FURTHER NOTE D THAT THE SAID DISCLOSURE WAS TO BE BIFURCATED WITH REGARD TO FAMI LY AND INVESTMENT BY VARIOUS PERSONS OF THE GROUP. HE FURTHER NOTED THA T HOWEVER THE EFFECT OF THE SURVEY WAS NULLIFIED BY WAY OF SUPPRESSING THE GROSS PROFIT OF THE NORMAL BUSINESS. THE A.O. ALSO POINTED OUT THAT QU ANTITATIVE DETAILS WERE NOT MAINTAINED AND NO PRODUCTION REGISTER WAS PRODU CED AND THERE WAS NO CORRELATION BETWEEN CONSUMPTION OF YARN AND PRODUCT ION OF GREY CLOTH. HE ALSO OBSERVED THAT THE TRADING ACCOUNT FOR THE P RE AND POST SURVEY PERIOD ARE ALSO HAVING DISCREPANCY. HE ALSO OBSERV ED THAT THE ASSESSEE HAD SHOWN GP OF RS.32,85,648 ONLY AGAINST THE DECLA RATION OF RS.39.85 LACS MADE AT THE TIME OF SURVEY. THE A.O. OBSERVED THAT THE LOSS CLAIMED IN THE PRE SURVEY PERIOD WAS AT RS.5,46,108/- AND T HE SAME WAS NOT SUBSTANTIATED. THE A.O. ALSO OBSERVED THAT PRODUCT ION OF GREY CLOTH WAS NOT RELIABLE. HE REJECTED THE BOOK RESULTS U/S 145 (3) OF THE INCOME TAX ACT, 1961. HE REJECTED THE CLAIM OF THE ASSESSEE RE GARDING LOSS IN LATER I.T.A.NOS.1060,1061 /AHD/2008 3 PERIOD AND PRE SURVEY PERIOD. HE APPLIED GP RATE @ 13.38% ON THE TURNOVER FOR BOTH PERIODS AND IN THIS MANNER, HE CO MPUTED THE NORMAL INCOME OF THE ASSESSEE AT RS.2,65,104/- AS AGAINST LOSS DECLARED BY THE ASSESSEE IN THE P & L ACCOUNT BEFORE CONSIDERING T HE INCOME OF RS.39.85 LACS DECLARED IN SURVEY. SUCH LOSS AS PER P & L AC COUNT OF THE ASSESSEE WAS RS.14,40,085/- AND THE EFFECTIVE ADDITION MADE BY THE A.O. IS OF RS.17,82,565/-. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 6. IT IS SUBMITTED BY THE LD. A.R. THAT IF GP PERCE NTAGE IS APPLIED FOR THE PRE SURVEY PERIOD, THEN THE DISCLOSED AMOUNT BY THE ASSESSEE SHOULD NOT BE ADDED AGAIN BECAUSE THE DISCLOSURE IS WITH R EGARD TO DEFICIENCY IN THE BOOKS DURING PRE SURVEY PERIOD AND IF THE DISCL OSURE AMOUNT IS CONSIDERED TO BE ADDED IN THE TOTAL INCOME OF THE A SSESSEE, THEN, THE BOOK RESULTS OF THE ASSESSEE FOR THE PRE SURVEY PERIOD S HOULD BE ACCEPTED ALTHOUGH HE AGREED THAT GP RATE CAN BE APPLIED FOR THE POST SURVEY PERIOD AS HAS BEEN DONE BY THE A.O. 7. AS AGAINST THIS, IT IS SUBMITTED BY THE LD. D.R. THAT LOSS AS PER BOOKS IS UNSUBSTANTIATED AS HAS BEEN FOUND BY THE A .O. AND LD. CIT(A) AND, THEREFORE, SUCH LOSS CANNOT BE ACCEPTED AND AD JUSTED AND, THEREFORE, GP RATE WAS RIGHTLY APPLIED BY THE A.O. AFTER REJEC TING THE BOOK RESULT AND DISCLOSURE IS TO BE ADDED SEPARATELY. HE ALSO SUBM ITTED THAT SALE PRICES ARE ARBITRARY AND NOT SUBSTANTIATED AS NOTED BY THE A.O. IN REJOINDER, IT WAS SUBMITTED BY THE LD. A.R. THAT BOOK STOCK WAS W ORKED OUT BY THE SURVEY TEAM AND HENCE, IT CANNOT BE SAID THAT BOOK RESULT FOR THE PRE SURVEY PERIOD WAS NOT CHECKED BY THE SURVEY PARTY. I.T.A.NOS.1060,1061 /AHD/2008 4 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IN THE COURSE OF SURVEY, STATEMENT WAS RECORDE D OF SHRI A B MODI AND QUESSTION NO.29 OF HIS STATEMENT WAS THAT THERE IS YARN OF RS.1,18,620/- AS PER BOOKS OF ACCOUNTS AND THERE IS STOCK OF GREY CLOTH OF RS.9265.50 WHICH MAKES THE TOTAL OF RS.129885.50 WH EREAS PHYSICAL STOCK IS RS.31.50 LACS AND HENCE, THERE IS STOCK DI FFERENCE OF RS.30,22,652/-. THE DISCLOSURE MADE BY THE ASSESSE E IN SURVEY IS MAINLY WITH REGARD TO THIS WORKING OF EXCESS STOCK BY THE SURVEY TEAM BECAUSE AGAINST EXCESS STOCK WORKED OUT BY THE SURVEY TEAM OF RS.30.32 LACS, DISCLOSURE MADE BY THE ASSESSEE IN THE COURSE OF SU RVEY WAS OF RS.39.85 LACS. THEREFORE, IN OUR CONSIDERED OPINION, IT IS NOT JUSTIFIED TO DISTURB THE BOOK RESULTS FOR THE PRE SURVEY PERIOD BECAUSE IF WE CONSIDER THE DISCLOSURE MADE IN THE COURSE OF SURVEY AND ALSO DI STURB THE BOOK RESULTS BY ADOPTING GP RATE THEN IT AMOUNTS TO DOUBLE ADDIT ION BECAUSE THE DISCLOSURE IN THE COURSE OF SURVEY IS FOR THE PURPO SE OF COVERING THE MISTAKE/ UNDISCLOSED INCOME OF PRE SURVEY PERIOD AN D, THEREFORE, EITHER THE GP RATE CAN BE APPLIED OR THE ADDITION CAN BE M ADE FOR THE AMOUNT DISCLOSED IN THE COURSE OF DISCLOSURE OF SURVEY AND SINCE THE IMPACT OF INCOME BY APPLYING GP RATE FOR THE PRE SURVEY PERIO D IS LESS THAN INCOME DISCLOSED BY THE ASSESSEE, THE AMOUNT DISCLOSED BY THE ASSESSEE IN SURVEY SHOULD BE CONSIDERED AS ADDITIONAL INCOME AND THE BOOK RESULTS SHOULD BE ACCEPTED BECAUSE ON THE BASIS OF THE SAME BOOK RESU LTS, THE SURVEY TEAM HAS WORKED OUT THE DIFFERENCE IN STOCK WHICH HAS BE EN INCLUDED IN DISCLOSURE MADE BY THE ASSESSEE IN THE COURSE OF SU RVEY. ALL THE DEFICIENCY REGARDING NON MAINTENANCE OF STOCK REGIS TER AND DEFICIENCY IN SALE PRICE ETC ARE TAKEN CARE OF BY THE DISCLOSURE IN THE COURSE OF SURVEY BECAUSE THE IMPACT OF PROFIT BY APPLYING GP RATE IS MUCH LESS THAN THE I.T.A.NOS.1060,1061 /AHD/2008 5 DISCLOSURE MADE BY THE ASSESSEE. WE, THEREFORE, HO LD THAT FOR THE PRE SURVEY PERIOD BOOK RESULTS OF THE ASSESSEE SHOULD B E ACCEPTED. FOR THE POST SURVEY PERIOD, WE APPROVE THE STAND TAKEN BY T HE A.O. FOR APPLYING GP RATE. THE TURNOVER OF POST SURVEY PERIOD IS OF RS.21,67,704/- AND IF THE GP RATE OF 13.38% IS APPLIED, THE GP OF POST SU RVEY PERIOD COMES TO RS.2,90,039/-. THE GP DECLARED BY THE ASSESSEE IN THE P & L ACCOUNT IN POST SURVEY PERIOD IS LOSS OF RS.1,53,294/-. HENCE , AN ADDITION OF RS.4,43,283/- IS CALLED FOR, FOR THE POST SURVEY PE RIOD. WE DIRECT THE A.O. ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. NOW, WE TAKE UP THE REMAINING APPEAL IN THE CAS E OF ASHISH B MODI (HUF) IN I.T.A.NO.1061/AHD/2008 FOR THE ASSESS MENT YEAR 2004- 05. 11. IN THIS CASE ALSO, GROUNDS NO.1, 2 & 3 ARE NOT PRESSED BY THE ASSESSEE AND HENCE, THE SAME ARE ACCORDINGLY REJECT ED AS NOT PRESSED. 12. GROUND NO.4 IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HA ERRED IN CONFIRMING THE ACTION OF THE A.O. IN ESTIMATING GROSS PROFIT @ 13.62% FOR FULL Y EAR BY NOT ACCEPTING LOSS SHOWN FOR PRE SURVEY PERIOD. 13. IT WAS AGREED BY BOTH THE SIDES THAT THE FACTS ARE IDENTICAL AND HENCE, THIS ISSUE CAN BE DECIDED ON THE SAME LINES AS IN THE CASE OF ASHOK B MODI. IN THAT CASE, WE HAVE HELD THAT BOOK RESU LTS OF THE PRE SURVEY PERIOD SHOULD BE ACCEPTED AND FOR THE POST SURVEY P ERIOD, GP RATE SHOULD BE APPLIED. ACCORDINGLY IN THIS CASE ALSO, WE HOLD THAT FOR THE PRE SURVEY PERIOD, BOOK RESULTS SHOULD BE ACCEPTED AND FOR THE POST SURVEY PERIOD, GP RATE SHOULD BE APPLIED. FOR THE POST SURVEY PER IOD IN THIS CASE, THE TURNOVER IS OF RS.22,61,135/- AND THE GP RATE IN TH IS CASE IS APPLIED BY THE I.T.A.NOS.1060,1061 /AHD/2008 6 A.O. OF 13.62%. BY APPLYING THIS GP RATE ON THIS T URNOVER, THE GP OF POST SURVEY PERIOD WORKS OUT TO RS.3,07,967/- AS AG AINST THIS, THE ASSESSEE HAS DISCLOSED A GROSS PROFIT OF RS.3,65,595/- WHICH IS MORE THAN GP WORKED OUT FOR THE POST SURVEY PERIOD BY APPLYING G P RATE OF 13.62% AND HENCE, NO SEPARATE ADDITION IS CALLED FOR IN RESPEC T OF POST SURVEY PERIOD ALSO IN THE PRESENT CASE. WE DIRECT THE A.O. ACCOR DINGLY. 14. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS A LSO PARTLY ALLOWED. 15. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED. 16. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 16/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 20/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.20/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20/ 4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER.