Smt. Vasantben Anilkumar Patel, Surat V. The Income tax Officer,Ward-9(4), Surat

ITA 1154/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9765 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-08-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: R N PAREKH
• Keywords: Reopening of assessment; Principle of natural justice
• Section: 133A; 148

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND D.C.AGRAWAL , AM SMT. VASANTBEN ANILKUMAR PATEL, BLOCK NO.1, GALA NO.3, ASHWIN SOCIETY, BHAT NI WADI, VARACHCHA ROAD, SURAT. VS. INCOME-TAX OFFICER, WARD 9(4), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. N. PAREKH, AR RESPONDENT BY:- SHRI R. K. DHANESTA, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE AO HAS ERRED IN APPLYING PROVISION S OF SEC.147 & 148 OF THE ACT AND GIVING REASONS FOR REOPENING O F THE CASE, REASONS FOR REOPENING WAS ITSELF UNLAWFUL AND UNDUE WHICH IS AGAINST LAW OF NATURAL JUSTICE. (2) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE AO HAS ERRED IN TREATING BUSINESS OF THE ASSESSEE AND NOT APPLYING PROVISIONS OF SEC.44AF OF THE ACT. (3) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE AO HAS ERRED IN ADDITION OF BUSINE SS DEBTORS OF RS.31,254/- AND THEREBY MADE ADDITION AND TAXING TH E SAME AS INCOME OF THE ASSESSEE. ITA NO.1154/AHD/2010 ASST. YEAR :2003-04 ITA NO.1154/AHD/2010 ASST. YEAR 2003-04 2 (4) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE AO HAS ERRED IN ADDITION OF DIFFER ENCE IN CLOSING STOCK OF RS.3,999/- AND THEREBY MADE ADDITION AND T AXING THE SAME AS INCOME OF THE ASSESSEE. (5) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE AO HAS ERRED IN ADDITION OF CASH O N HAND OF RS.25,998/- AND THEREBY MADE ADDITION AND TAXING TH E SAME AS INCOME OF THE ASSESSEE. 2. THE LD. AR FOR THE ASSESSEE DID NOT PRESS GROUND NO.1 RELATING TO REOPENING OF ASSESSMENT AND HENCE IT IS REJECTED. I N RESPECT OF OTHER GROUNDS DISCUSSION FOLLOWS AS UNDER: 3. A SURVEY UNDER SECTION 133A WAS CARRIED OUT AT T HE PREMISES OF SHRI PANKAJ DANAWALA, C.A. IT WAS FOUND THAT SHRI D ANAWALA WAS SHOWING IN THE BALANCE SHEET OF HIS CLIENTS, FICTIT IOUS ASSETS LIKE LOANS, ADVANCES, `SUNDRY DEBTORS ETC. AND ACCORDINGLY BUIL DING UP FICTITIOUS CAPITAL FOR THEM. SUBSEQUENTLY, SUCH FICTITIOUS CAP ITAL WAS ADJUSTED AGAINST REAL ASSETS LIKE CASH, DEBTORS, IMMOVABL E PROPERTIES ETC. IN THE CASE OF ASSESSEE AO FOUND THAT ASSESSEE HAS SHOWN E NHANCED BUSINESS DEBTORS, CLOSING STOCK, CASH IN HAND BY THE FOLLOWI NG SUM:- (I) BUSINESS DEBTORS RS.31,254/- (II) DIFFERENCE IN CLOSING STOCK RS.3,699/- (III) CASH ON HAND RS.25998/- TOTAL RS.60,551/- IT WAS EXPLAINED TO THE AO THAT DIFFERENCE IN FIGUR ES IN THE BALANCE SHEET AT THE END OF F.YRS I. E. BETWEEN 31.3.2003 AND 3 1.3.2002 COULD NOT BE ADDED AS INCOME BUT AO DID NOT AGREE. IT WAS ALSO P LEADED THAT ASSESSEE IS A SMALL TRADER, THEREFORE, PROVISIONS OF SECTION 44AF SHOULD BE APPLIED AND INCOME SHOULD BE ESTIMATED. THE AO ALSO DID NOT AGREE WITH THE ABOVE SUBMISSIONS AND PROPOSED AN ADDITION OF RS.60 ,551/-TO THE TOTAL ITA NO.1154/AHD/2010 ASST. YEAR 2003-04 3 INCOME OF THE ASSESSEE. THE LD. CIT(A) ANY HOW DID NOT APPRECIATE THE ACCOUNTING MISTAKES AND CONFIRMED THE ADDITION. 4. BEFORE US, LD. AR SUBMITTED THAT FIRSTLY THE ASS ESSEE IS A SMALL TRADER AND ITS INCOME SHOULD BE ESTIMATED UNDER SEC TION 44AF ON A PERCENTAGE BASIS AND IT WILL COVER ALL OTHER DISCRE PANCIES AND OR DISALLOWANCES. SECONDLY IN THE ALTERNATIVE HE SUBMI TTED THAT ADDITION AS MADE BY THE AO CANNOT BE MADE BECAUSE CLOSING BALAN CE OF STOCK, SUNDRY DEBTORS OR CASH IN HAND WILL ALWAYS VARY AS AT THE END OF THE ACCOUNTING YEAR. HE POINTED OUT THAT AO HAS MADE THE ADDITION IN THE FOLLOWING MANNER:- SL.NO. PARTICULARS 31.3.2002 (CLOSING FIGURE) AMOUNT (RS.) 31.3.2003 (CLOSING FIGURE) AMOUNT (RS.) DIFFERENCE AMOUNT (RS.) 1. BUSINESS DEBTORS 186421/- 217675/- 31,254/- 2. CLOSING STOCK 59999/- 63698/- 3,600/- 3. CASH ON HAND 72948/- 98546/- 25,998/- TOTAL 60,551/- HE SUBMITTED THAT IT IS NOT A CASE THAT CLOSING BAL ANCE AS ON 31.3.2002 IS LOWERN AND OPENING BALANCE AS ON 1.4.2002 IS HIGHER . ONCE CERTAIN ADDITION OR A SUB-TRACTION TAKES PLACE IN THE OPENI NG FIGURES TO THESE ASSETS THEN AT THE END OF THE YEAR CLOSING BALANCES ARE LI KELY TO BE DIFFERENT THAN THE CLOSING BALANCE IN THE PREVIOUS YEAR, WHICH CAN NOT BE A MATTER OF ADDITION. 5. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT AUTHORITIES BELOW HAVE NOT APPRECIATED TH E ACCOUNTING MISTAKE ITA NO.1154/AHD/2010 ASST. YEAR 2003-04 4 IN MAKING THE ADDITION. THE LD. AR IS RIGHT THAT IT IS NOT A CASE OF DIFFERENCE IN CLOSING BALANCE AS ON 31.3.2002 AND O PENING BALANCE AS ON 1.4.2002. BUT THEY THE CLOSING BALANCES AS PER BALA NCE SHEET AND ARE BALANCED BY CORRESPONDING LIABILITIES, WHICH ARE LI KELY TO VARY ON ACCOUNT OF ASSESSEE DOING BUSINESS AND EARNING INCOME WHICH HAS BEEN DECLARED BY THE ASSESSEE IN THE RETURN. SINCE BASIC PREMISES FOR MAKING ADDITION ARE FAULTY, ADDITIONS CANNOT BE SUSTAINED AND THE S AME ARE THEREFORE DELETED. APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17/9/10. SD/- SD/- (MUKUL KR. SHRAWAT) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 17/9/10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.1154/AHD/2010 ASST. YEAR 2003-04 5 1.DATE OF DICTATION 30/8/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 16.9.2010 MEMBER.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 DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..