Shri Pradeepkumar Biyani,., Surat V. The Income Tax Officer, Ward-3(1), Surat

ITA 1103/AHD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80462 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: R N VEPARI
• Keywords: Gross profit estimation; Business income; Income from undisclosed sources
• Section: 131; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER ITA NO . 1 103 /AHD/20 1 4 A. Y. 200 9 - 10 PRADEEPKUMAR BIYANI, SHOP NO.28/29, VARDHMAN COMPLEX, BHATAR ROAD, S URAT. PAN: AASPB9593R VS THE ITO, WARD 3(1), SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V .K. SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI R.N. VEPARI, A.R. / DATE OF HEARING : 30 / 09 /201 4 / DATE OF PRONOUNCEMENT: 31 / 10 /201 4 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF T HE L EARNED CIT (A ) - I V , SURAT , DAT ED 2 5 / 0 2 /201 4 FOR A.Y. 200 9 - 10. 2. AT THE OUTSET, LEARNED AR HAS INFORMED THAT THE GROUND ORIGINALLY RAISED AS PER GROUNDS OF APPEAL WERE ARGUMENTATIVE AND NOT IN ACCORDANCE WITH RULE 8 OF INCOME TAX APPELLATE TRIBUNAL RULES , 1963, THEREFORE, A REVISED AND CONCISED GROUNDS HAVE BEEN RAISED. HE HAS PLEADED THAT THIS APPEAL IS , THEREFORE, BE DECIDED AS PER THE CONCISED GROUNDS, THE SUBSTANTIVE GROUND ARGUED BEFORE US IS REPRODUCED BELOW : ENHANCEMENT OF INCOME: (1) THE LEARNE D COMMISSIONER OF INCOME - TAX (APPEALS) HAVING ACCEPTED THE OBJECTION TO THE ADDITION ON THE BASIS OF DISCLOSURE MADE BY THE BROTHER AND THEREFORE, DELETED ADDITION MADE, HE COULD NOT HAVE MADE ADDITION ON ANY OTHER GROUND WITHOUT GIVING ANY NOTICE U/S.251( 2) OF THE ACT FOR ENHANCEMENT. ITA NO. 1 103 /AHD/201 4 PRADEEPKUMAR BIYANI VS. ITO, WARD - 3 ( 1 ), SURAT. FOR A.Y. 200 9 - 10 - 2 (2) SINCE NEITHER NOTICE U/S.251(2) NOR SHOW CAUSE NOTICE ON ENHANCEMENT HAVING BEEN GIVEN, ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) IS REQUIRED TO BE SET ASIDE. (3) THE APPELLANT FURTHER SUBMITS THAT SIMILARLY A SSUMPTION OF SUPPRESSION OF SALE OF 75% IN PLACE OF 37% MADE BY THE ASSESSING OFFICER WITHOUT ISSUE OF ENHANCEMENT NOTICE WAS NOT JUSTIFIED AND IS REQUIRED TO BE DELETED. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143 (3) DATED 30 TH SEPTEMBER, 2011 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS STATED TO BE IN THE BUSINESS OF MANUFACTURING AND SELLING OF SWEETS, SNACKS, FARSHAN, ETC. HE IS A PROPRIETOR OF M/S. GANGOUR. A SURVEY U/S.133A WAS CARRIED AT THE BUSINESS PRE MISES OF THE ASSESSEE ON 24 TH AND 25 TH OF FEBRUARY, 2009. DURING THE COURSE OF SURVEY CERTAIN DOCUMENTS WERE IMPOUNDED. THE ADMITTED FACTUAL POSITION WAS THAT ON THE DATE OF SURVEY THE ASSESSEE WAS NOT AVAILABLE AT THE BUSINESS PREMISES. HIS ELDER BROTHER SRI MAHESH BIYANI WAS PRESENT AND HIS STATEMENT WAS RECORDED. IT WAS FURTHER NOTED BY THE AO THAT A DISCLOSURE OF RS.59,40,000/ - WAS MADE DURING THE SURVEY PROCEEDINGS. THESE FACTS WERE RECORDED BY THE AO IN THE ASSESSMENT ORDER VIDE PARAGRAPH 7(III) AT PA GE 9, RELEVANT PORTION IS REPRODUCED BELOW: DURING THE COURSE OF SURVEY PROCEEDINGS, THE ELDER BROTHER OF THE ASSESSEE, SHRI MAHESH D. BIYANI WAS PRESENT AT THE PREMISES. SHRI MAHESH BIYANI IS ALSO GETTING SALARY FROM THE PROPRIETARY FIRM 'GANGOR'. AT THE TIME OF SURVEY PROCEEDINGS, THE STATEMENT OF SHRI MAHESH BIYANI WAS RECORDED ON OATH U/S 131 OF THE ACT. HE INTERALIA ADMITTED THAT THE FIRM WAS INDULGED IN UNACCOUNTED SALE OF GOODS ON DAILY BASIS AND THEY HAVE MADE UNACCOUNTED SALE TO THE TUNE OF RS. 18 ,000/ - PER DAY. HE ALSO ADDED THAT THIS UNACCOUNTED SALE WAS NOWHERE ENTERED NEITHER ANY DETAILS/NOTING WERE RECORDED TO THIS EXTENT. AFTER SEPARATING THE AMOUNT OF UNACCOUNTED SALE OF RS. 18,000/ - PER DAY, THE REMAINING FIGURE OF THE SALE WAS ENTERED IN T HEIR REGULAR BOOKS OF ACCOUNTS. SHRI MAHESH BIYANI ALSO STATED AS THEY HAVE RECORDED ALL THE EXPENDITURE INCURRED RELATED TO THE ENTIRE SALE IN THEIR BOOKS OF ACCOUNT, THEREFORE THE UNACCOUNTED SALE OF RS. 18,000/ - PER DAY WAS THEIR NET UNACCOUNTED SALE WH ICH WAS NOT RECORDED IN THEIR REGULAR BOOKS OF ACCOUNTS. ACCORDINGLY, HE HAD MADE THE DISCLOSURE OF UNACCOUNTED INCOME OVER AND ABOVE THEIR REGULAR INCOME AT RS, 59,40,000/ - (18000X330 DAYS) FOR THE F.Y. 2008 - 09 RELEVANT TO A.Y. 2009 - 10. IN ANSWER TO QUEST ION NO. 43, SHRI MAHESH ITA NO. 1 103 /AHD/201 4 PRADEEPKUMAR BIYANI VS. ITO, WARD - 3 ( 1 ), SURAT. FOR A.Y. 200 9 - 10 - 3 D. BIYANI VOLUNTARILY MADE THE DISCLOSURE OF UNACCOUNTED INCOME OF RS. 59.40.000/ - AND ALSO ASSURED TO PAY THE TAX ON IT. THE SECTION 131 OF THE ACT GIVES ASSESSING OFFICERS, THE POWER OF COURT OF LAW AND POWERS VESTED IN A COURT UN DER THE CODE OF CIVIL PROCEDURE, 1908 AND STATEMENT RECORDED UNDER SECTION 131 OF THE ACT HAVE LEGAL SANCTITY. IT IS ALSO BINDING UPON HIM AND CANNOT BE DENIED IN ANY RESPECT. 3.1 AFTER DISCUSSING FEW CASE LAWS AN ADDITION OF THE AMOUNT DISCLOSED AT THE TIME OF SURVEY WAS MADE IN THE HANDS OF THE ASSESSEE AS PER THE FINDINGS RECORDED IN THE ASSESSMENT ORDER, RELEVANT PORTION REPRODUCED BELOW: IN VIEW OF THE ABOVE DISCUSSION AND THE SUBMISSION MADE BY THE ASSES SEE AND CONSIDERING ALL THE RELEVANT PAPERS, STATEMENT OF THE ASSESSEE RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS, IMPOUNDED MATERIALS AND IN THE ABSENCE OF ANY PRIMARY DOCUMENT IN RESPECT OF SALES OF THE ASSESSEE AND THE DISCREPANCIES POINTED OUT IN THE PRECEDING PARA S I HAVE NO ALTERNATIVE EX CEPT TO REJECT THE BOOKS OF ACCOUNTS U/S . 145(3) OF THE I. T. ACT AND DETERMINE THE SALES AS WELL AS GROSS PROFIT OF THE ASSESSEE IN THE MANNER PROVIDED U/S 144 OF THE I.T. ACT. IT HAS BEEN CONCLUSIVELY PROVED THAT ASSESSEE IS N O T MAINTAINING ANY DOCUMENTS OF SALES MADE BY HIM AND HE IS INDULGING IN UNACCOUNTED SALES. ACCORDINGLY IN VIEW OF THE ABOVE DISCUSSION, FACTS OF THE CASE, CONSIDERING ALL THE ASPECTS AND MATERIAL AVAILABLE ON RECORD I ESTIMATE SALE OF THE ASSESSEE OF RS. 2,90 ,6 9,346 / - WHICH INCLUDES RS. 1,60,29 , 346 / - BEING SALE S SHOWN IN THE BOOKS OF ACCOUNTS PLUS UNACCOUNTED NET INCOME OF RS. 59,40,000 / - AS DISCLOSED DURING THE COURSE OF SURVEY. THEREFORE AN AMOUNT OF RS. RS.5 9,40,000/ - IS ADDED TO T HE TOTAL INCOME OF THE ASSESSEE CONSIDERING IT AS UNACCOUNTED NET SALES OF THE ASSESSEE EARNED DURING THE YEAR EARLIE R CLAIMING ALL THE EXPENSES. 4 . WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(A) HAS MADE AN ENHANCEMENT AS FOLLOWS: 4.3. ONCE THE BOOKS HAVE BEEN REJECTE D, THE INCOME OF THE APPELLANT IS REQUIRED TO BE ESTIMATED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE A.O. ON THE BASIS OF THE STATEMENT OF THE EMPLOYEE HANDLING THE CASH COUNTER AT THE VARDHAMAN COMPLEX SHOP ESTIMATED THAT THE UNACCOUNTED SALES WOU LD BE 60% OF THE RECORDED SALES. HE ALSO MENTIONS THAT THE GP OF 26% SHOWN BY THE ASSESSEE WAS MUCH LOWER THAN THE NORMAL GP IN THIS LINE OF BUSINESS WHICH WAS STATED TO BE 50% ON THE BASIS OF MARKET INFORMATION. HOWEVER, THE A.O, ULTIMATELY MADE AN ADDITI ON OF RS. 59,40,000 / - ON THE BASIS OF DISCLOSURE MADE IN THE STATEMENT. THE APPELLANT HAS OBJECTED TO THE ADDITION ON THE GROUND THAT SHRI MAHESH BIYANI , THE BROTHER, WHO MADE THE DISCLOSURE WAS NOT AUTHORIZED TO DO SO. HE HAS ALSO OBJECTED TO THE OBSERVATI ON OF THE A.O. ITA NO. 1 103 /AHD/201 4 PRADEEPKUMAR BIYANI VS. ITO, WARD - 3 ( 1 ), SURAT. FOR A.Y. 200 9 - 10 - 4 WITH REGARD TO LOW GP ON THE GROUND THAT THE GP OF 20.63% WAS ACCEPTED IN A EARLIER YEAR UNDER SECTION 143(3), THAT THE GP HAS MOVED IN A SMALL RANGE AND THAT THE BASIS OF NORMAL GP BEING 50% HAS NOT BEEN COMMUNICATED TO HIM. IT IS ALSO CLAI MED THAT NOTHING COMES OUT FROM THE STATEMENT OF THE EMPLOYEE STATING THAT SALES WAS RS. 13,100/ - AS THE AVERAGE DAILY SALES OF THE APPELLANT WAS RS. 48,000/ - ( RS. 1,60,29,346/ - DIVIDED BY 330 DAYS) . I N MY OPINION BASING THE ADDITION ON THE DISCLOSURE MADE BY THE BROTHER WOULD NOT BE THE CORRECT THING AS IT PERTAINS TO ANOTHER PERSON AND THE OBJECTION TO THIS EXTENT IS REQUIRED TO BE SUSTAINED. HOWEVER, THIS IN NO WAY CAN BE INTERPRETED TO MEAN THAT WHAT WAS STATED IN THE STATEMENTS CANNOT BE RELIED UPON AS EV IDENCE AS IT STILL IS A GOOD PIECE OF EVIDENCE AND THE OBJECTION IS SUSTAINED ONLY ON THE GROUND THAT DISCLOSURE OF ADDITIONAL INCOME MADE BY ANOTHER PERSON IS NOT BINDING ON THE ASSESSEE, HOWEVER CLOSE THAT PERSON MIGHT BE. THE SAME CANNOT BE SAID ABOUT T HE OTHER TWO OBJECTIONS. IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE A.O. MADE AN ANALYSIS OF AT LEAST ONE ITEM (PANIPURI) AND THE GP RATE FOR THIS WORKED OUT TO 67%. THIS ANALYSIS HAS NOT BEEN COUNTERED BY THE APPELLANT BUT IT IS CLAIMED THAT THE AV ERAGE GP ACROSS ALL ITEMS IS CORRECTLY SHOWN. THERE IS NO WAY TO ACTUALLY ARRIVE AT AN ITEM BY ITEM GP AS BASIC DATA IN THIS REGARD IS NOT AVAILABLE AS PRODUCTION DETAILS OF EACH ITEM, THOUGH PROMISED, WAS NOT PROVIDED. THE FACT THAT A LOWER GP HAD BEEN AC CEPTED IN AN EARLIER YEAR AND THE GP MOVES IN A SHORT RANGE DO SUPPORT THE CASE OF THE APPELLANT BUT THIS CANNOT BE TAKEN TO MEAN THAT THE GP IN ALL EARLIER YEARS WERE CORRECTLY SHOWN AS THE EVIDENCES OBTAINED IN SURVEY WERE NOT WITH THE A.O. WHEN GP WAS A CCEPTED. IN ANY CASE IN A BEST JUDGMENT ASSESSMENT, ESTIMATION IS REQUIRED TO BE MADE. IN MY OPINION, AN AVERAGE GP RATE OF 35% WOULD BE REASONABLE. THE CLAIM OF THE APPELLANT THAT IT HAD AVERAGE DAILY SALE OF RS. 48,000/ - AND ON THE BASIS OF SALES OF RS. 13 ,100/ - UNACCOUNTED SALES CANNOT BE CONCLUDED IS REQUIRED TO BE REJECTED. THE SALES OF RS. 13,100/ - IS ONLY FOR THE SHOP AT VARDHAMAN COMPLEX AND THIS WAS CATEGORICALLY STATED BY THE PERSON HANDLING CASH AT THAT SHOP. THE DAILY SALES ESTIMATE FOR THIS SHOP W AS GIVEN BY SHRI MAHESH BIYANI AS RS. 8,000/ - TO RS. 9 , 000/ - AND BY THE EMPLOYEE AS RS. 7,000/ - TO RS. 8,000/ - . THE AVERAGE DAILY SALES OF THIS SHOP WORKED OUT FROM THE SALES RECORDED IN THE BOOKS IS RS. 9,635/ - PER DAY. THE SALES OF RS. 13 , 100/ - WAS ONLY UPTO T HE TIME OF ENTRY OF THE SURVEY PARTY, I.E. 5.00PM. THE USUAL TREND IN THIS LINE OF BUSINESS IS THAT THE SALES ARE HIGHER IN THE EVENINGS. IT WOULD BE FAIR TO TAKE THE SALES FOR THE DAY OF THIS SHOP TO BE RS. 20,000/ - WHICH WOULD GIVE A SUPPRESSION OF APPROX . 100% AND TO THIS EXTENT THE ESTIMATE OF UNACCOUNTED SALES MADE BY THE A.O. WAS WRONG AS HE DID NOT COMPARE THE FULL DAY SALES. THERE IS NO REASON TO ASSUME THAT SIMILAR SITUATION WOULD NOT OBTAIN AT THE OTHER SHOP OF THE ASSESSEE. AT THE SAME TIME ALLOWA NCE IS REQUIRED TO BE MADE FOR VARIATIONS ON DIFFERENT DAYS AND TO ACCOMMODATE FOR ANY SPIKE ON THE DAY OF SURVEY. IT WOULD BE FAIR TO ASSUME A SUPPRESSION OF SALES OF 75%. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITIONAL INCOME OF THE APPELLANT IS REQUIRED TO BE COMPUTED BY CONSIDERING UNACCOUNTED SALES @ 75% OF RECORDED SALES AND AFTER APPLYING GP OF 35% TO THE TOTAL SALES AND REDUCING THE DISCLOSED GP. THE GROSS PROFIT OF THE ASSESSEE IS ACCORDINGLY DETERMINED AT RS. 98,17,974/ - . THE DISCLOSED GP IS RS. 42, 20,638/ - . THE UNACCOUNTED INCOME WORKS OUT TO ITA NO. 1 103 /AHD/201 4 PRADEEPKUMAR BIYANI VS. ITO, WARD - 3 ( 1 ), SURAT. FOR A.Y. 200 9 - 10 - 5 RS. 55,97,336/ - , ROUNDED OFF TO RS. 56,00,000/ - . THE APPELLANT GETS RELIEF ACCORDINGLY. 4 .1 SINCE, LEARNED CIT(A) HAS DIRECTED TO RECOMPUTED THE INCOME OF THE ASSESSEE IN THE LIGHT OF THE OBSERVATIONS MADE; THE REFORE, LEARNED AR HAS CONTENDED THAT SUCH DIRECTION OF LEARNED CIT(A) WERE NOTHING BUT AN ENHANCEMENT IN THE INCOME. HE HAS, THEREFORE, PLEADED THAT WITHOUT PROVIDING AN OPPORTUNITY OF HEARING IN RESPECT OF ENHANCEMENT THE LEARNED CIT(A) HAS INFRINGED THE PROCEDURE AS PRESCRIBED U/S.251(2) OF IT ACT. HE HAS PLEADED THAT DUE TO THE SAID INFRINGEMENT THE RIGHT RECOURSE IS TO REFER THIS ISSUE BACK TO THE FILE OF LEARNED CIT(A). 6. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., SRI V.K. SINGH HAS SUPPORTED TH E ACTION OF THE REVENUE AUTHORITIES AND PLEADED THAT IN A SITUATION WHEN AN OFFER WAS MADE AT THE TIME OF SURVEY AND THEREUPON ON THAT BASIS THE LEARNED CIT(A) WANTED TO RECOMPUTE THE INCOME THEN SUCH DIRECTION SHOULD NOT BE CONSIDERED AS AN ENHANCEMENT IN THE INCOME. HOWEVER, HE HAS NOT DISPUTED THAT NO SUCH NOTICE AS PRESCRIBED U/S.251(2) WAS ISSUED BY LEARNED CIT(A) BECAUSE THERE WAS NO DIRECT ENHANCEMENT WHICH WAS MADE BY HIM. 7. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO THE DECISION OF HON BLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF GEDORE TOOLS PVT. LTD. VS. CIT, 238 ITR 68 (DEL) , WE HEREBY HOLD THAT FROM THE ORDER OF LEARNED CIT(A) IT IS EVIDENT THAT THE GROSS PROFIT FIGURE AS WELL AS THE TOTAL TURNOVER FIGURE HAVE BEEN DISTURBED WHICH RESULTED INTO AN ENHANCEMENT, AS CLAIMED BEFORE US. BECAUSE OF THAT REASON, WE HEREBY HOLD THAT THERE WAS AN INFRINGEMENT OF THE ITA NO. 1 103 /AHD/201 4 PRADEEPKUMAR BIYANI VS. ITO, WARD - 3 ( 1 ), SURAT. FOR A.Y. 200 9 - 10 - 6 PROVISIONS OF SECTION 251(2) OF IT ACT. AS HELD BY THE HON BLE COURT IN THE DECISION CITED ABOVE SECT ION 251(2) CLEARLY PRESCRIBES THAT CIT(A) SHALL NOT ENHANCE AN ASSESSMENT UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT. WE, THEREFORE, DEEM IT PROPER AS WELL AS JUSTIFIABLE T O RESTORE THE ENTIRE ISSUE BAC K TO HIM TO BE DECIDED DENOVO NEEDLESS TO SAY AFTER PROVIDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE, SO THAT THE SAID LAPSE AS OCCURRED EARLIER SHOULD NOT BE REPEATED . T HIS APPEAL THEREUPON CAN BE DECIDED ON MERITS. WITH THESE DIRECTIONS, WE HEREBY RE STORE THIS ISSUE ; HENCE, THE GROUNDS RAISED BEFORE US MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE ONLY. 8. IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSE ONLY. SD/ - SD/ - ( ANIL CHATURVEDI ) ( MUKUL KR. SHR AWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31 / 10 / 20 1 4 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED T O : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD