ITO, CHENNAI V. Smt. Chandra, CHENNAI

ITA 1097/CHNY/2012

• Counselvise Citation: 109721714 RSA 2012
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM IRS
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Cost of acquisition
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1097/MDS/2012 ASSESSMENT YEAR : 2006-07 & C.O. NO. 106/MDS/2012 [IN I.T.A. NO.1097/MDS/2012] THE INCOME TAX OFFICER, BUSINESS WARD III(2), CHENNAI 34. VS. SMT. CHANDRA, PROPX. M/S. BOTTLE POINT, 12, 2 ND STREET, DHANALAKSHMI NAGAR, SHAIK MANIAM, PORUR, CHENNAI 116. [PAN:ARDPC1425L] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI GURU BASHYAM, IRS, JCIT RESPONDENT BY : SHRI K. BALASUBRAMANIAN, ADVOCATE DATE OF HEARING : 30.10.2012 DATE OF PRONOUNCEMENT : 30.10.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THE INSTANT APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION ON BEHALF OF THE ASSESSEE, ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VIII, CHENNAI DATED 22.02.2012 IN ITA NO. 87 & 88/10-11(A)- III FOR THE ASSESSMENT YEAR 2006-07 IN PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT 1961 [I N SHORT THE ACT]. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 2 2. THE DR ON BEHALF OF THE REVENUE HAS SUBMITTED B EFORE US THAT THE CIT(A) HAS WRONGLY DELETED THE ADDITION OF ` .13,73,577/- AS MADE BY THE ASSESSING OFFICER TOWARDS INFLATED PURCHASE OF BOTT LES TO THE EXTENT OF ` .12,66,284/-. ON THE OTHER HAND, THE SUBMISSION OF THE ASSESSEE IS THAT IN DELETING THE ADDITION IN PART AS STATED ABOVE, THE CIT(A) DID NOT CONSIDER THE MATERIAL ON RECORD AND PROCEEDED MERELY ON ASSUMPTI ON BY INCREASING THE GROSS PROFIT OF THE ASSESSEE AT THE RATE OF 0.5%. H ENCE, THE PRAYER OF THE REVENUE IS FOR RESTORING THE ASSESSING OFFICERS OR DER MAKING ADDITION OF ` .13,73,577/-, WHEREAS, THE CONTENTION OF THE ASSESS EE IS TO DELETE THE ENTIRE ADDITION. THEREFORE FOR PROPER ADJUDICATION OF THE MATTER, WE FRAME THE FOLLOWING SOLE ISSUE: WHETHER THE CIT(A) ERRED IN PARTLY DELETING ADDITI ON TO THE EXTENT OF ` .12,66,284/- OUT OF THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER OF ` .13,73,577/- TOWARDS INFLATED PURCHASES. IF SO, WHE THER THE ADDITION IN TOTALITY DESERVES TO BE UPHELD OR DELETED? 3. FACTS PERTAINING TO THE ISSUE ARE THAT THE ASSE SSEE (INDIVIDUAL) IS ENGAGED IN TRADING OF EMPTY AND WASTE BOTTLES, WHIC H ARE SOLD TO IMFL MANUFACTURERS. ON 26.10.2006, THE DEPARTMENT CONDUC TED A SURVEY UNDER SECTION 133A OF THE ACT IN ASSESSEES PREMISES AN D WASHING PLANT ETC. FROM THE INFORMATION COLLATED, THE DEPARTMENT CAME TO CONCLUSION THAT FOR THE FINANCIAL YEAR 2005-06, THE ASSESSEES TURNOVE R WAS ` .2,14,58,758/- I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 3 LEADING TO NET PROFIT OF ` .3,74,171/- @ 1.74%. POST SURVEY, THE ASSESSEE FILED HER RETURN DECLARING INCOME OF ` .3,60,800/- ON 31.10.2006. IN THE ASSESSMENT PROCEEDINGS AND IN VIEW OF THE INFORMATI ON COLLECTED DURING SURVEY, THE DEPARTMENT FOUND THAT THE ASSESSEE HA D PURCHASED BOTTLES FROM TWO SOURCES I.E. STREET VENDORS/NON-DESCRIPT T RADER BY WAY OF SELF MADE VOUCHERS @ ` . 210/- PER BAG AND PAID THEM IN CASH. THE OTHER SOUR CE STATED BY THE ASSESSEE WAS ESTABLISHED SUPPLIERS, WHO USED TO SELL THE ASSESSEE THROUGH PROPER BILLS @ ` .100/- TO ` .150/- PER BAG. THE ASSESSEE USED TO PAY THESE SUPPLIERS BY WAY OF CHEQUES. IN THE OPINION OF THE ASSESSING OFFICER, THE RATE S IN QUESTION TO BOTH THE ABOVE SAID SOURCES WERE NOT ON IDENTICAL LINES AS THERE WAS DIFFERENCE BETWEEN THE MODES OF PAYMENT AS WELL AS THE CONSIDE RATION INVOLVED IN PER BAG BASIS. WE ALSO NOTICE FROM THE ASSESSMENT ORDER THAT THE ASSESSEE USED TO PURCHASE BOTTLES OF 3 CLASSIFICATIONS I.E. 180 ML, 375 ML AND 750 ML. THE ASSESSING OFFICER, IN VIEW OF THE ABOVE SAID AL LEGED DISCREPANCY QUA THE RATES PAID BY THE ASSESSEE, WAS OF THE OPINION THAT IN CASE OF FIRST SOURCE, THE ASSESSEE HAD INFLATED THE BILLS OF ` .13,73,577/-. ACCORDINGLY, HE ISSUED NOTICE OF UNDER SECTION 148 OF THE ACT ON 13.08.2009. A PERUSAL OF THE PAPER BOOK REVEALS THAT THE ASSESSEE HAD FILED HER REPLY. HOWEVER, DECLINING TO AGREE WITH ASSESSEES SUBMISSIONS EXPL AINING THE DIFFERENCE IN RATES QUOTED (SUPRA) THAT THERE WAS JUSTIFIABLE REA SON IN SUPPORT, THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 4 ASSESSING OFFICER ADDED THE ABOVE SAID AMOUNT OF ` .13,73,577/- IN ASSESSEES TOTAL INCOME VIDE ASSESSMENT ORDER DATED 31.12.2010. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE CIT(A) HAS PARTLY ALLOWED THE ASSESSEES APPEAL BY DELETING THE ABOVE ADDITION OF ` .13,73,577/- TO THE EXTENT OF ` .12,66,284/- AND PARTLY ACCEPTED THE ASSESSEES CONTENTION AFTER TAKING NOTE OF THE FACT THAT THE SO-CALLED NON- DESCRIPTIVE TRADERS AS WELL AS PURCHASES MADE FROM THEM BY THE ASSESSEE ARE NON-VERIFIABLE. SIMILARLY, QUA THE METHODOLOGY ADOPTED IN DETERMINING THE ALLEGED INFLATED PURCHASE COST ARRIVED AT BY TH E ASSESSING OFFICER AS WELL, IT HAS BEEN HELD THAT THE SAME WAS ALSO ON AN INCORRECT ASSUMPTION. THE CIT(A), THEREAFTER HAS PROCEEDED TO INCREASE TH E GROSS PROFIT RATE OF THE ASSESSEE @ 0.5% WHICH WAS @ 9.04% IN THE ASSESSMENT YEAR 2006-07 AND 9.84% IN THE ASSESSMENT YEAR 2007-08. IN VIEW OF THE ABOVE SAID METHODOLOGY ADOPTED BY T HE CIT(A), THE ADDITION MADE BY THE ASSESSING OFFICER (SUPRA) STAN DS DELETED IN ASSESSEES FAVOUR ONLY TO THE EXTENT OF ` .12,66,284/-. IN THIS BACKGROUND, THE PARTIES ARE AGGRIEVED AND IN APPEAL AND CO RESPECTIVELY BEFORE US. 6. THE DR HAS DRAWN OUR ATTENTION TO THE ASSESSMEN T ORDER AND SUBMITTED THAT SINCE THERE WAS DIFFERENCE IN RATES DISCLOSED BY THE ASSESSEE QUA NON-DESCRIPTIVE TRADERS AND ESTABLISHED SUPPLIE RS WITHOUT ANY PLAUSIBLE EXPLANATION THAT THE ASSESSING OFFICER HAD PREFERRE D TO MAKE THE ADDITION I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 5 ABOVE SAID IN THE ASSESSEES TAXABLE INCOME. PER DR , THE CIT(A) HAS ERRED IN DELETING THE ABOVE SAID ADDITION MADE BY THE ASS ESSING OFFICER BY TAKING INTO CONSIDERATION THE GROSS PROFIT RATE. ACCORDING LY, HE PRAYED FOR RESTORING THE ADDITION MADE BY THE ASSESSING OFFICER. 7. OPPOSING THE ARGUMENT OF THE REVENUE, IT HAS BE EN SUBMITTED BY THE AR REPRESENTING HE ASSESSEE THAT THE ASSESSING OFFI CER HAD WRONGLY MADE THE ADDITION, WHICH HAS BEEN WRONGLY UPHELD IN PART BY THE CIT(A). IN SUPPORT OF HIS PLEA, THE AR HAS PRODUCED BEFORE US COPY OF THE ORDER OF THE CHENNAI ITAT IN I.T.A. NOS. 1110 & 1111/MDS/2012 AND C.O. N OS. 108 & 109/2012 DATED 25.09.2012, WHEREIN IN CASE OF ASSESSEES HUS BAND NAMELY SHRI M. SHANMUGAM INVOLVING SIMILAR ISSUE, THE ADDITION WAS DELETED IN TOTO BY DISMISSING THE REVENUES APPEALS AND ALLOWING THE C ROSS OBJECTIONS FILED BY THE ASSESSEE, ASSESSEES HUSBAND. IT HAS ALSO BEEN STATED BY THE AR THAT THE FACTS OF SAID CASE ARE VERY MUCH IDENTICAL TO T HE PRESENT CASE AS THE ASSESSEES HUSBAND WAS ALSO INVOLVED IN THE VERY SA ME BUSINESS AND THE SURVEY WAS ALSO CONDUCTED ON THE VERY SAME DAY. I N THE LIGHT THEREOF, THE AR PRAYED FOR REJECTION OF REVENUES APPEAL AND ALL OWING ASSESSEES CROSS OBJECTION. THE REVENUE HAS NOT BEEN ABLE TO SERIOUSLY CONTROV ERT THE SUBMISSIONS OF THE AR REGARDING THE ORDER OF THE CO ORDINATE BENCH AS WELL AS THE FACTS INVOLVED THEREIN. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 6 8. WE HAVE GIVEN OUT THOUGHTFUL CONSIDERATION TO T HE ISSUE INVOLVED AND HAVE ALSO PERUSED RELEVANT FINDINGS AS WELL AS CASE LAW CITED (SUPRA). AS STATED HEREINABOVE, THE ONLY GROUND OF ADDITION MAD E BY THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD QUOTED DIFFERENT R ATES PAID TO NON- DESCRIPTIVE TRADERS AND ESTABLISHED SUPPLIERS QUA B OTTLES PURCHASED FROM THEM. THE ASSESSING OFFICER COMPUTED THE ADDITION O N THE BASIS OF DIFFERENCE OF RATES IN QUESTION AND THE MATERIAL DI SCLOSED DURING ASSESSMENT PROCEEDINGS. IN APPEAL, THE CIT(A) HAS NOT FOUND TH E ASSESSING OFFICERS ADDITION APPROPRIATE. THEREFORE, HE TOOK INTO CONSI DERATION THE GROSS PROFIT RATIO IN THE IMPUGNED ASSESSMENT YEAR AS WELL AS AS SESSMENT YEAR 2007-08 AND PARTLY UPHELD THE ADDITION. IT IS NOT IN DISPUT E THAT IN THE CASE OF ASSESSEES HUSBAND STATED ABOVE (SUPRA), THE SAME V ERY ISSUE WAS INVOLVED AND THE COORDINATE BENCH WHILST DISMISSING THE APPE ALS OF THE REVENUE AND ALLOWING ASSESSEES COS HAS HELD AS FOLLOWS: 9. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTEN TIONS. MAIN GROUND OF THE ASSESSEE AS WELL AS REVENUE IS ON THE ADDITION MADE FOR ALLEGED INFLATION IN COST OF PURCHASE OF OLD BOTTLE S. ASSESSING OFFICER HAD APPLIED THE AVERAGE COST OF PURCHASE FROM ESTAB LISHED SUPPLIERS, ON THE PURCHASES EFFECTED FROM STREET HAWKERS, DISCARD ING THE COST SHOWN BY THE ASSESSEE FOR SUCH PURCHASES MADE. AS AGAINST THIS, THE CIT(APPEALS) WORKED OUT THE GP FOR BOTH THE YEARS U NDER APPEAL, AVERAGED SUCH GP AND APPLIED SUCH GP FOR JUDGING WH ETHER THE DISALLOWANCES WERE WARRANTED AND IF WARRANTED TO WH AT EXTENT. THIS APPROACH OF LD. CIT(APPEALS), OF-COURSE, RESULTED I N THE ADDITION FOR THE YEAR IN WHICH GP WAS HIGHER BEING DELETED VIZ., ASST. YEAR 2006-07 AND SCALING DOWN OF THE ADDITION FOR A.Y. 2007-08. WHAT WE FIND IS THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NEVER R EJECTED. ADMITTEDLY, ASSESSEE WAS MAINTAINING ATLEAST SELF-MADE VOUCHERS FOR PURCHASES EFFECTED FROM STREET HAWKERS. IN THE TRADE OF OLD BOTTLES, TO EXPECT THAT I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 7 STREET HAWKERS WILL PROVIDE PRINTED BILLS FOR PURCH ASES WILL BE UNREASONABLE. COMPARING THE COST OF PURCHASE FROM STREET HAWKERS WITH COST OF PURCHASE FROM ESTABLISHED SUPPLIERS, I N OUR OPINION, WAS NOT BASED ON ANY RATIONALE AT ALL. ASSESSEE WAS SHO WING GP RATES WHICH WERE COMPARABLE WITH OTHER ASSESSEES SIMILARL Y PLACED. WITHOUT FINDING ANY DEFECT IN THE BOOKS OF ACCOUNTS, IN OUR OPINION, ADDITION FOR INFLATION ON PURCHASE OUGHT NOT HAVE BEEN MADE, JUS T FOR A REASON THAT SELF MADE VOUCHERS ALONE WERE AVAILABLE FOR PURCHAS ES FROM STREET HAWKERS. IN THE NATURE OF THE TRADE OF THE ASSESSEE IF SELF-VOUCHERS WERE ONLY MAINTAINED FOR PURCHASE OF BOTTLES FROM STREET HAWKERS, IN OUR OPINION, ASSESSEE COULD NOT BE FAULTED. NO ASSESSE E CAN BE EXPECTED TO DO AN IMPOSSIBLE THING. AS FOR THE ADDITION MADE I N A.Y. 2006-07 FOR ALLEGED STOCK DISCREPANCY IT MAY BE TRUE THAT THE A SSESSEE HAD NOT MAINTAINED ANY STOCK REGISTER. NEVERTHELESS THE QU ANTITY OF PURCHASES MADE BY THE ASSESSEE WAS AVAILABLE SINCE ASSESSING OFFICER HAD HIMSELF ARRIVED AT THE COST OF PURCHASE BASED ON SUCH QUANT ITIES. HOWEVER, RECONCILIATION OF STOCK OF BOTTLES BETWEEN THE OPE NING STOCK AS ON 1.4.2006 AND AS ON THE DATE OF SURVEY ON 26.1.2006 , WAS DONE IN A REVERSE MANNER BY APPLYING AN ESTIMATED GP RATE ON THE SALES DURING THE INTERVENING PERIOD TO ARRIVE AT THE COST OF SAL ES. THIS DEFINITELY WILL NOT GIVE ANY SCIENTIFIC RESULT. VARIATION WORKED O UT BASED ON SUCH METHOD WAS ONLY OF A SUM OF . 1,27,796/-, FOR WHICH ADDITION HAS BEEN DONE. THIS VARIATION WILL GO INTO THIN AIR EVEN WI TH A SLIGHT CHANGE IN THE GP RATE. GP RATE FOR BOTH THE YEARS SHOWN BY THE ASSESSEE WAS MUCH LOWER THAN 14.53% ADOPTED BY THE A.O FOR THE W ORK OUT. CONSIDERING NATURE OF BUSINESS OF THE ASSESSEE, WE ARE OF THE OPINION THAT THERE IS NOTHING ON RECORD WHICH CALLED FOR AN ADDITION FOR ANY INFLATION IN PURCHASES NOR FOR ANY SUPPRESSION OF S TOCK OF BOTTLES. 9. IN THE RESULT APPEALS OF THE REVENUE FOR BOTH Y EARS ARE DISMISSED WHEREAS THE CROSS OBJECTIONS OF THE ASSESSEE ARE AL LOWED. AFTER PERUSING THE OBSERVATIONS OF THE COORDINATE B ENCH, THERE IS HARDLY ANY IOTA OF DOUBT THAT THE ISSUE IN HAND STANDS SQUAREL Y COVERED. THEREFORE, WE ARE ALSO OF THE OPINION THAT THE ASSESSEES BOOKS O F ACCOUNTS WERE NEVER REJECTED EITHER BY THE ASSESSING OFFICER OR THE CIT (A). ONCE THAT IS SO, THERE WAS NO OCCASION TO DISBELIEVE THE RATES STATED BY T HE ASSESSEE WHILE MAKING THE PAYMENTS TO THE SO-CALLED NON-DESCRIPTIVE TRADE RS. THEREFORE, WE ARE OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1097 1097 1097 1097/M/ /M/ /M/ /M/12 1212 12 & & & & C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 C.O. NO. 106/M/12 8 THE VIEW THAT THE ADDITION IN QUESTION, WHICH HAS B EEN PARTLY UPHELD BY THE CIT(A) IS LIABLE TO BE DELETED IN TOTO. ACCORDINGLY , WE ALLOW ASSESSEES CROSS OBJECTION AND DISMISS REVENUES APPEAL. 9. TO SUM UP, THE APPEAL OF THE REVENUE IS DISMISS ED AND ASSESSEES CROSS OBJECTION IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 30 TH OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 30.10.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.