Smt Lilben Hiralal Adhiya, Bandara V. I.T.O.Ward-1, Bandara

ITA 115/NAG/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2946 (ITAT-NAGPUR)
• Duration Of Justice: 8 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 16-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI; D P TIWARI JT
• Assessee Lawyers: V V SARANJAME
• Keywords: Gross profit estimation
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D. T. GARASIA, HONBLE JUDICIAL MEMBER I.T.A. NOS.113,114 & 115/NAG/10 ASSESSMENT YEARS: 01-02, 02-03 & 03-04 SMT. LILABEN HIRALAL ADHIYA, VS. INCOME TAX OFFICER, L/H LATE SHRI HIRALAL MOHANLAL ADHIYA, WARD-1, C/O M/S SHREE KRISHRAYA KIRANA STORES, BANDARA. MAIN ROAD, BANDARA. PAN:ABHPA7323C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. V. SARANJAME, C. A. RESPONDENT BY : SHRI D. P. TIWARI, JT. C.I.T. & DR. MILIND BHUSARI, C.I.T. (D.R.) DATE OF HEARING :17/10/2012 DATE OF PRONOUNCEMENT :30/11/2012 ORDER PER D. T. GARASIA: ALL THESE APPEALS RELATE TO THE SAME ASSESSEE, THEREFORE, THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. THESE APPEALS ARE FILED AGAINST THE CONSOLIDATED ORDER OF CIT(A)-II, NAGPUR DATED 12/03/2010 FOR THE ASSESSMENT YEARS 2001-2002, 2002-2003 & 2003-2004. 2. THE ONLY EFFECTIVE GROUND IN THESE APPEALS IS CONFIRMING THE PENALTY OF RS.83,487/-, RS.7,28,599/- AND RS.2,33,483/- FOR ASSESSMENT YEARS 2001-2002, 2002-2003 AND 2003-2004 RESPECTIVELY. THE SHORT FACTS OF THE CASE FOR ALL THESE ASSESSMENT YEARS ARE AS UNDER. IN THIS CASE, INVOLVING THREE ASSESSMENT YEARS I.E. ASSESSMENT YEAR 2001-2002, 2002-2003 AND 2003-2004, CERTAIN MATERIAL MICROSOFT 2 WERE COLLECTED BY THE DEPARTMENT DURING SURVEY OPERATION U/S 133A OF THE I. T. ACT CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 11 TH JULY, 2002. THE SURVEY OPERATION BROUGHT TO THE LIGHT THAT FOUR ROUGH DIARIES WERE IN POSSESSION OF THE ASSESSEE IN WHICH CREDIT SALES AND CASH RECEIPTS, IN CODED LANGUAGE, WERE RECORDED AND SAME TRANSACTIONS WERE NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE ASSESSEE TOOK STAND THAT HE HAS TO INCORPORATE THE SALE TRANSACTIONS NOTED IN THE DIARIES IN THE REGULAR BOOKS OF ACCOUNT AND, THEREFORE, HE NEEDED FURTHER TIME TO RECONCILE ALL THE TRANSACTIONS AND EXPLAIN THE CORRECT FIGURES OF SALES, SUNDRY DEBTORS AND THE PROFIT THEREOF. SINCE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATIONS OFFERED BY THE ASSESSEE AND THE PROCESS OF RECONCILIATION WAS NOT GETTING COMPLETED IN ANY DEFINITE TIME FRAME DUE TO COMPLEXITY INVOLVED IN ARRIVING AT THE CORRECT FIGURES OF PROFITS FOR EACH OF THE ASSESSMENT YEARS INVOLVED, A SPECIAL AUDIT WAS CONDUCTED, WITH THE NECESSARY PRIOR APPROVAL OF CIT U/S 142(2A) OF THE ACT. THE SPECIAL AUDIT REPORT HAD DEALT WITH THE MATERIALS FOUND DURING THE SURVEY OPERATION I.E. DIARIES INVOLVING SEVERAL UNRECORDED SALE TRANSACTIONS, UNDISCLOSED DEBTORS AND THE NECESSARY FINANCIAL YEAR-WISE BREAK-UP OF THE FIGURES DERIVED FROM THE MATERIALS AVAILABLE. BASED ON SPECIAL AUDIT REPORT, THE ASSESSING OFFICER HAD CONCLUDED THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE APPEALED AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE CIT(A) HAS DISPOSED OF THE APPEALS FOR ALL THESE THREE ASSESSMENT YEARS WHEREIN HE HAS GIVEN THE FOLLOWING FINDINGS: (I) THE ASSESSEE WAS ENGAGED IN UNACCOUNTED BUSINESS TRANSACTIONS YIELDING UNDISCLOSED INCOME. THE TRANSACTIONS UNEARTHED FROM THE DIARIES WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. (II) THE UNACCOUNTED CIRCULATING CAPITAL REQUIRED TO CARRY ON THE UNACCOUNTED PART OF THE BUSINESS WAS ESTIMATED BY THE CIT(A) AT ONE WEEK OF THE SALES FIGURES, AS AGAINST ONE MONTH OF THE SALES FIGURES ADOPTED BY THE ASSESSING OFFICER. (III) @10.26% OF THE UNRECORDED DEBTORS HAS BEEN ADOPTED AS THE UNDISCLOSED PROFIT IN THE APPEAL ORDER. 2 MICROSOFT 3 2.1 BASED ON THESE THE ASSESSING OFFICER HAS LEVIED THE PENALTY ON THE GROUND THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME FOR THE RELEVANT ASSESSMENT YEARS AND PENALTIES U/S 271B OF THE ACT HAVE BEEN LEVIED ON THE BASIS OF ADDITION CONFIRMED BY THE CIT(A). 3. THE ASSESSEE HAS FILED THE APPEAL BEFORE US. 4. THE LEARNED A. R. SUBMITTED THAT THE SURVEY OPERATIONS WERE CARRIED OUT U/S 133A OF THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 11/07/2002. DURING THE SURVEY PROCEEDINGS CERTAIN DIARIES WERE FOUND IN POSSESSION OF THE ASSESSEE. SUCH DIARIES WERE IMPOUNDED AND ASSESSEE WAS ASKED TO RECONCILE THE FIGURE IN ROUGH DIARIES WITH REGULAR BOOKS OF ACCOUNT. THESE DIARIES WERE BELONGING TO THREE CONCERNS THAT CARRIED OUT THE BUSINESS IN THE SAME PREMISES BUT THE CUSTODY AND CONTROL OF CASH, STOCK AND THE BUSINESS WERE SEPARATELY IDENTIFIABLE. THE ASSESSEE WAS CARRYING WHOLESALE BUSINESS IN OIL AND ALL HIS TRANSACTIONS FIGURES IN THE SAID DIARIES. HIS FATHER AND OTHER BROTHER SHRI KISHORKUMAR HIRALAL ADHIYA WERE CARRYING OUT THEIR OWN BUSINESS. LATE SHRI HIRALAL M. ADHIYA WAS CARRYING ON KIRANA BUSINESS ON RETAIL BASIS AND HIS TRANSACTIONS WERE NOT MARKED ANYWHERE IN THE DIARIES BUT COULD BE IDENTIFIED WITH REFERENCE TO THE NAME OF THE PARTIES. THE TRANSACTIONS PERTAINING TO THE ASSESSEE UNDER THE NAME OF M/S VALLBHASHRAY TRADING CO. WERE MARKED AS T. OTHER BROTHER OF THE ASSESSEE SHRI KISHORE H. ADHIYA WAS CARRYING ON BUSINESS OF SALT, GRAIN AND BIDIS UNDER THE NAME M/S SHREEKRISHNASHRAY TRADING CO. THE TRANSACTIONS PERTAINING TO HIM WERE MARKED AS N. ALL THE TRANSACTIONS WERE ENTERED INTO ALL THE DIARIES CONCERNING TO ALL THE THREE ASSESSEES MENTIONED ABOVE. AFTER THE SURVEY, THE SPECIAL AUDIT WAS CARRIED OUT AND THE ASSESSING OFFICER MADE THE ADDITIONS. THE ASSESSING OFFICER MADE THE ADDITION ON THREE COUNTS NAMELY; RS.20,72,695/- ON ACCOUNT OF GROSS PROFIT ON UNDISCLOSED SALE, RS.16,83,475/- ON ACCOUNT OF MINIMUM CAPITAL REQUIRED FOR ALLEGED UNRECORDED PURCHASES AND RS.1,05,944/- ON ACCOUNT OF CASH SHORTAGE. THE CIT(A) HAS 3 MICROSOFT 4 REDUCED THIS ADDITION ON ESTIMATED BASIS. THE ASSESSING OFFICER HAS ESTIMATED GROSS PROFIT AT RS.70,228/- AND THE CIT(A) REDUCED THE SAME TO RS.65,840/-, RS.56,024/- WERE ESTIMATED AT MINIMUM CAPITAL INVESTMENT REQUIRED FOR PURCHASES AS AGAINST RS.2,60,975/- DETERMINED BY THE ASSESSING OFFICER, RS.21,473/- WERE DETERMINED AS UNDISCLOSED DEBTORS ON ESTIMATED BASIS AS AGAINST RS.9,12,297/- DETERMINED BY ASSESSING OFFICER. THEREFORE, ALL THE ADDITIONS WERE CONFIRMED BY THE CIT(A) ON ESTIMATED BASIS. WHEN THE ADDITION IS CONFIRMED ON ESTIMATED BASIS, NO PENALTY CAN BE LEVIED U/S 271C. THE CIT(A) HAS REVISED THE ESTIMATION OF ASSESSING OFFICER BY SUSTAINING SOME ADDITION ON THE BASIS OF SAME ESTIMATE. THE ASSESSEE HAS ESTIMATED THE FIGURE OF UNDISCLOSED SALE ON THE BASIS OF DIRECTION GIVEN BY THE CIT AND ALL SUCH ADDITIONS WERE CONFIRMED ON THE BASIS OF ESTIMATE. THEREFORE, THERE ARE THREE ESTIMATES BY THREE DIFFERENT PERSONS. THEREFORE, NO PENALTY CAN BE LEVIED U/S 271C OF THE ACT. THE LEARNED A.R. SUBMITTED THAT IN ALL THESE ASSESSMENT YEARS THE ADDITIONS HAVE BEEN REDUCED BY CIT(A) ON ESTIMATED BASIS, THEREFORE, PENALTY SHOULD BE DELETED AS PER THE DECISION OF HON'BLE ALLAHABAD COURT IN THE CASE OF CIT VS. RAJBANS SINGH 276 ITR 351 (ALL) AND IN THE CASE OF COMMISSIONER OF INCOME-TAX V. DHILLON RICE MILLS [2002] 256 ITR 447 (P&H). 5. ON THE OTHER HAND LEARNED D. R. RELIED UPON THE ORDER OF THE REVENUE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT CONCEALMENT OF INCOME IS PRESUMED IN EVERY CASE OF DIFFERENCE BETWEEN REPORTED AND ASSESSED INCOME UNDER EXPLANATION 1 TO SECTION 271C BUT SUCH PRESUMPTION IS REBUTTABLE. THE EXPLANATION ITSELF PROVIDES FOR SUCH REBUTTABLE IN CASE WHERE THE TAXPAYER HAS AN EXPLANATION FOR THE DIFFERENCE, PRODUCED ALL THE MATERIAL AVAILABLE WITH HIM AND SUCH EXPLANATION IS NOT FOUND TO BE MALAFIDE. IN CASE OF COMMISSIONER OF INCOME-TAX V. DHILLON RICE MILLS [2002] 256 ITR 447 (P&H), THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT IN CASE OF ADDITION BASED ON ESTIMATED HIGHER YIELD IN MANUFACTURE AND LOW GROSS PROFIT, THERE CAN BE NO PENALTY UNLESS THE 4 MICROSOFT 5 DEPARTMENT BRINGS SOMETHING ON RECORD TO INDICATE THAT THERE HAVE BEEN CONCEALMENT ON THE PART OF THE ASSESSEE. THE PENALTY SHOULD NOT BE LEVIED MERELY BECAUSE INCOME IS ESTIMATED DUE TO INABILITY OF ASSESSEE TO PROVE ITS INCOME. THE ADDITIONAL INCOME OFFERED IN COURSE OF SURVEY WAS ASSESSED ON ESTIMATED BASIS. THERE IS NO CASE FOR CONCEALMENT ON THE PART OF THE ASSESSEE WITH REFERENCE TO DOCUMENTS FOUND AND EXPLANATION OFFERED FOR THE ADDITION. WE FIND THAT IN ALL THESE ASSESSEES THE ADDITIONS WERE MADE ON ACCOUNT OF GROSS PROFIT OF UNRECORDED SALES, ADDITION ON ACCOUNT OF MINIMUM CAPITAL REQUIRED FOR UNRECORDED PURCHASE, ADDITION ON ACCOUNT OF UNRECORDED DEBTORS. THE CIT(A) HAS GIVEN THE RELIEF TO ASSESSEE IN ALL THESE ASSESSMENT YEARS AS UNDER: A.Y. INCOME RETURNED BY THE APPELLANT INCOME ASSESSED REDUCTION GRANTED BY CIT(A) 2001-2002 1,75,740 25,12,630 20,80,442 2002-2003 3,37,329 40,72,770 13,35,521 2003-2004 2,47,690 15,38,360 6,67,592 ESTIMATED G.P. ON SALES A.Y. ADDITION AS PER A.O. AS PER CIT(A) DIFFERENCE (RELIEF) TOTAL RELIEF 2002-2003 2003-2004 20,72,695 7,55,080 20,38,554 6,74,375 34,141 80,703 1,14,846 ADDITIONS ON ACCOUNT OF MINIMUM CAPITAL FOR UNRECORDED PURCHASES A.Y. ADDITION AS PER A.O. AS PER CIT(A) DIFFERENCE (RELIEF) TOTAL RELIEF 2002-2003 2003-2004 16,83,475 6,13,288 3,82,095 26,401 13,01,380 5,86,887 18,88,267 UNRECORDED DEBTORS A.Y. ADDITION AS PER A.O. AS PER CIT(A) DIFFERENCE (RELIEF) TOTAL RELIEF 2001-2002 23,18,299 2,37,857 20,80,442 20,80,442 5 MICROSOFT 6 7. WE FIND THAT DURING THE SURVEY OPERATION CARRIED OUT U/S 133 IN THE BUSINESS PREMISES OF THE ASSESSEE ON 11 TH JULY, 202. DURING THE SURVEY CERTAIN ROUGH DIARIES WERE FOUND IN POSSESSION OF THE ASSESSEE. THE SAID DIARIES WERE IMPOUNDED AND ASSESSEE WAS ASKED TO RECONCILE THE ROUGH DIARIES WITH REGULAR BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSEE, THE ROUGH RECORDS WERE NOTHING BUT RECORDING OF SALES TO BE POSTED IN THE REGULAR BOOKS IN THE SALE ACCOUNTS. THE ASSESSEE HAS RECONCILED THE FIGURE AND THEREAFTER SPECIAL AUDIT WAS CARRIED OUT AND ADDITIONS WERE MADE. WE FIND THAT THE ADDITIONS WERE MADE ON ACCOUNT OF UNDISCLOSED SALES, ADDITION ON THE BASIS OF GROSS PROFIT ON UNDISCLOSED SALES AND ADDITIONS WERE MADE ON ACCOUNT OF MINIMUM CAPITAL REQUIRED FOR PURCHASES MADE OUTSIDE THE BOOK. WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD SUMMONED VARIOUS PARTIES WHO HAD SOLD GOODS TO THE ASSESSEE AND NO UNDISCLOSED PURCHASE OR UNRECORDED PURCHASES WERE FOUND. THERE WERE NO DISCREPANCY. THE ASSESSING OFFICER HAS MADE THE ADDITION BEYOND THE MATERIAL AVAILABLE ON THE RECORD AND HAS PROCEEDED TO MAKE THE ADDITION ON HIS ACCOUNT. THE CIT(A), ON THE BASIS OF EVIDENCE ON RECORD, HAS ESTIMATED THE INCOME AND ADDITIONS MADE ON ESTIMATED INCOME WERE REVISED BY CIT(A). THE ASSESSING OFFICER HAS ESTIMATED THE UNDISCLOSED SALES ON THE BASIS OF DIRECTION GIVEN BY ADDL. CIT, NAGPUR AND AS SUCH ALL THE ADDITIONS WERE BASED ON ESTIMATE, THEREFORE, PENALTY CANNOT BE LEVIED. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY. WE FIND THAT THE CIT(A) 6 MICROSOFT 7 HAS CONFIRMED THE PENALTY ON THE BASIS OF ESTIMATED INCOME WHICH IS REDUCED BY CIT(A). BUT MERELY THERE WAS ADDITION ON THE BASIS OF CASH SHORTAGE WAS MADE BUT WE ARE OF THE VIEW THAT MERELY THERE WAS CASH SHORTAGE, NO PENALTY CAN BE LEVIED. IN VIEW OF THIS, WE DELETED THE PENALTY IN ALL THE ASSESSMENT YEARS. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2012) SD/. SD/. ( P. K. BANSAL ) ( D. T. GARASIA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/11/2012 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR 7