The ACIT, Circle-9, Surat V. M/s. Vasudev Electrical Corporation, Surat

ITA 1168/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0566 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Business expenditure; Income from undisclosed sources; Deemed to accrue or arise in india; Retraction
• Section: 69C; 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER THE ACIT, CIRCLE - 9, SURAT (APPELLANT) VS M/S. VASUDEV ELECTRICAL CORPORATION, 1 ST FLOOR, UMIYA NIWAS, NR. RESHAM BHAVAN, LALDARWAJA, STATION ROAD, SURAT - 395001 PAN: AACFV9238P (RESPONDENT) REVENUE BY : S H RI S ATISH SOLANKI , SR. D . R. ASSESSEE BY: S H RI M.K. PATEL , A.R. DATE OF HEARING : 22 - 07 - 2 016 DATE OF PRONOUNCEMENT : 16 - 09 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2009 - 10 , AR IS ES FROM ORDER OF THE CIT(A) - V, SURAT, DATED 28 - 02 - 2012 IN APPEAL NO. CAS/V/204/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1168 / A HD/20 12 A SSESSMENT YEAR 200 9 - 10 I.T.A NO.1168 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. VASUDEV ELECTRICAL CORPORATION 2 2. THE REVENUE S SOLE SUBSTANTIVE GROUND PLEADS THE CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 36,59,832/ - MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 29 - 12 - 2011 THEREBY DECLIN IN G EXPENSES CLAIMED AGAINST UNACCOUNTED INCOME DISCLOSED DURING SURVEY OF RS. 2,04,36,558/ - . 3. WE COME TO THE RELEVANT FACTS FIRST. THE ASSESSEE FIRM TRADES IN ELECTRICAL GOODS AND EXECUTES ELECTRICAL LABOUR CONTRACTS AS WELL. THE DEPARTMENT CONDUCTED A SURVEY IN ITS CASE ON 25 - 06 - 2008. THE ASSESSEE S PARTNER SHRI JASWANTBH AI MANUBHAI PATEL DISCLOSED UNACCOUNTED INCOME OF RS. 2,04,36,558/ - COMPRISING CASH, STOCK, RENOVATION EXPENSES AND SALES IN COURSE THEREOF. 4. THE ASSESSEE FILED ITS RETURN ON 30 - 09 - 2009 STATING INCOME OF RS. 1,03,79,960/ - . THIS FOLLOWED A REVISED RE TURN DATED 07 - 09 - 2010 ENHANCING THE ABOVE STATED INCOME TO RS. 1,43,97,610/ - . THE SAME WAS PROCESSED. THE ASSESSING OFFICER TOOK UP SCRUTINY THEREAFTER. HE CAME ACROSS ASSESSEE S INCOME DECLARED COMING TO BE LESS THAN THE SURVEY DISCLOSURE HER EINABOVE. THE ASSESSEE PLEADED INTER ALIA THAT ITS GP @ 15.63% WAS ALREADY HIGHER THAN THAT @ 4.33% IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR AND IT SOUGHT TO JUSTIFY ITS INCOME COMING TO BE LESS THAN SURVEY DISCLOSURE TO LEGITIMATE INCREASE IN DEPRECIATION COST. THE ASSESSING OFFICER TREATED THE SAME AS RETRACTION OF THE SURVEY DISCLOSURE TO ADD THE IMPUGNED DIFFERENTIAL SUM OF RS . 36,59,832/ - IN THE NATURE OF VARIOUS EXPENSES I.T.A NO.1168 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. VASUDEV ELECTRICAL CORPORATION 3 CLAIMED AGAINST THE DIFFERENTIAL AMOUNT OF INCOME DECLARED DURING SURVEY AND THE ONE RE TURNED. 5. THE CIT(A) REVERSES ASSESSING OFFICER S FINDINGS AS FOLLOWS: - 4.3. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION OF THE AR. AFTER CONSIDERING FACTS OF THE CASES I FOUND .THAT THE A.O. HIGHLY RELIED ON THE GROU ND THAT THE APPELLANT SURREPTITIOUS RETRACTED FROM THE STATEMENT ON OATH RECORDED DURING THE SURVEY AND DISCLOSED LESS INCOME IN THE RETURN FILED BY HIM THEN WHAT IS DISCLOSED DURING THE SURVEY. IN CASE OF THE APPELLANT, ON VERIFICATION OF THE COPY OF ACCO UNT SUBMITTED BEFORE ME, I FOUND THAT THE APPELLANT DISCLOSED TOTAL AMOUNT OF RS. 2,05,36,558/ - AND CLAIMED VARIOUS EXPENSES AGAINST THE SAME. THEREFORE, AS THE APPELLANT DULY DISCLOSED TOTAL ADDITION INCOME DECLARED AT THE TIME OF SURVEY WHICH IS DULY REF LECTED IN THE BOOKS OF THE APPELLANT, THE SAME CANNOT BE TREATED AS RETRACTION. FURTHER, THE DISCLOSURE INCLUDES OF CASH, STOCK, SALES ETC AND THE APPELLANT HAS RIGHT TO CLAIM GENUINE BUSINESS EXPENDITURE AGAINST THE UNACCOUNTED SALES AND STOCK WHICH ULTIM ATELY RESULTED IN GROSS PROFIT EARNED ON SUCH UNACCOUNTED SALES/STOCK. THE APPELLANT SUBMITTED BEFORE THE A.O. CALCULATION SHOWING HEAD WISE INCREASE IN VARIOUS EXPENSES. HE FURTHER EXPLAINED THE REASONS FOR INCREASE IN ALL SUCH EXPENDITURES VIDE ANNEXU RE ATTACHED WITH THE SUBMISSION. THE MAJOR INCREASE IN EXPENDITURES ARE IN THE NATURE OF DEPRECIATION, PARTNER'S SALARY AND INTEREST TO PARTNER'S AS WELL AS BANKS. ALL THESE EXPENDITURE IS MERE RESULT OF CALCULATION AND THE A.O. ALSO ACCEPTED THE SAME AS G ENUINE. THE .SECOND MAJOR PART OF THE EXPENDITURE IS IN NATURE OF SALARY TO STAFF. REGARDING THE SAME, THE APPELLANT PRODUCED COPY OF SALARY AND WAGES REGISTERS AND EXPLAINED THAT THE INCREASE IN THIS EXPENSE DUE TO EMPLOYMENT OF ADDITIONAL WORKERS AT NEW SITE AT BHIWANDI AND AS IT IS FIRST YEAR OF BUSINESS AT BHIWANDI ALL THE COST OF SALARY NOT RECOVERED WHICH DIRECTLY RESULTED IN DECLINE OF NET PROFIT OF THE ASSESSEE. I FOUND THAT AS THE CLAIM OF THE APPELLANT IS GENUINE IN NATURE AND PROVED WITH SUPPORTI NG EVIDENCES LIKE SALARY AND WAGES REGISTER. THE A.O., DURING THE ASSESSMENT PROCEEDINGS, ALSO DID NOT COMMENT ABOUT ANY INACCURACY OR INCOMPLETENESS IN THE ACCOUNTING RECORDS OF THE APPELLANT. FURTHER I.T.A NO.1168 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. VASUDEV ELECTRICAL CORPORATION 4 THE GROSS PROFIT RATIO OF THE APPELLANT ALSO SHOWING I NCREASING TREND COMPARED TO THE PRECEDING PREVIOUS YEAR IN TERM OF OVERALL GROSS PROFIT AS WELL AS PRE SURVEY AND POST SURVEY RATE; HENCE, THERE WAS NO POINT OF DOUBT IN THE DECLARED RESULT OF THE APPELLANT. FURTHER, IT IS FOUND THAT THE A.O. DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS, METHOD OF ACCOUNTING AND DID NOT REJECT BOOKS OF THE APPELLANT. THE ADDITION MADE BY THE AO MERELY BASED ON FACTS THAT THE RETURNED PROFIT IS LESS THAN DISCLOSED INCOME BY APPLYING DECISION OF ITAT AHMEDABAD IN CAS E OF WHITELINE CHEMICALS. IN CASE OF WHITELINE CHEMICALS THE GP SHOWN BY THE ASSESSEE WAS DRASTICALLY REDUCED AND HENCE BASED ON THE ABOVE FINDINGS THE A.O. REJECTED BOOKS OF THE APPELLANT BY POINTING OUT SEVERAL DEFICIENCIES AND ESTIMATED GP. THE SAME CAS E IS NOT APPLICABLE IN THE C ASE OF THE APPELLANT, AS IN CASE OF APPELLANT, THE GP RATE IS INCREASING COMPARED TO LAST YEAR AND ALSO THE A.O. DID NOT REJECT THE BOOKS OF THE APPELLANT. MERELY LOWER RETURNED INCOME THAN THE DISCLOSED INCOME DOES NOT ITSELF J USTIFY IN HOLDING THAT THE BOOKS RESULTED DISCLOSED BY THE APPELLANT WAS INCORRECT. HENCE, IN VIEW OF THE ABOVE, THE ADDITION MADE ON THIS ACCOUNT IS NOT JUSTIFIED. THEREFORE, THE ADDITION MADE IS HEREBY DELETED AND THE GROUND OF APPEAL IS ALLOWED. 6. H EARD BOTH SIDES. THE RE VENUE STRONGLY ARGUES IN SUPPORT OF THE ASSESSING OFFICER S ACTION DISALLOWING VARIOUS EXPENSES OF DEPRECIATION EXPENSES, PARTNERS REMUNERATION AND INTEREST TO PARTNERS CLAIMED AT ASSESSEE S BEHEST AGAINST THE SURVEY DISCLOSURE HERE INABOVE. WE NOTICE FROM PAPER BOOK PA GE 24 THAT THE ASSESSEE HAS IN FACT NOT REDUC ED ITS INCOME AS DISCLOSED DURING SURVEY VIS - - VIS THAT STATING IN THE RETURN SINCE THE FORMER ONE DULY STANDS INCORPORATED IN ITS TRADING ACCOUNT. THE REVENUE IS FAIR ENOU GH IN NOT DISPUTING ITS BOOKS AND OTHER EVIDENCE IN SUPPORT AS THERE IS NO QUESTION OF GENUINENESS OF THE EXPENSES BEFORE US. WE FIND IN THESE FACTS THAT A CO - ORDINATE IN ITA 767/AHD/2011 ACIT VS. SALONI I.T.A NO.1168 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. VASUDEV ELECTRICAL CORPORATION 5 INDUSTRIES UPHOLDS SIMILAR ASSESSEE S CLAIM OF EXPE NDITURE AGAINST UNACCOUNTED INCOME DISCLOSURE DURING SURVEY AS UNDER: - 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. RELEVANT FACTS STATED IN THE PRECEDING PARAGRAPHS ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE REVENUE SEEKS TO ASS ESS ASSESSEE S ADDITIONAL INCOME OF RS. 75,16,725/ - AS DEEMED INCOME U/S. 69 TO 69C OF THE ACT NOT ENTITLED FOR ANY DEDUCTION ALIKE THE ONES U/S 14 OF THE ACT. ITS CASE IS THAT THE SAME WAS UNEARTHED ONLY DURING SURVEY NOT STATED IN ANY OF THE BOOKS. IT PLEADS THAT THIS ADDITIONAL INCOME IS NOT ENTITLED FOR ANY DEDUCTION PRESCRIBED U/S. 14 OF THE ACT. THE ASSESSEE STRONGLY SUPPORTS LOWER APPELLATE FINDINGS UNDER CHALLENGE. THE DISPUTE BETWEEN THE PARTIES IS QUA TREATMENT OF ASSESSEE S ADDITIONAL UNACCO UNTED INCOME DISCLOSED DURING SURVEY HEREINABOVE. IN OTHER WORDS, WHETHER THIS INCOME IS TO BE TREATED UNDER THE HEADS PRESCRIBED IN SECTION 14 SO AS TO BE ELIGIBLE PARTNERS REMUNERATION U/S. 40B(V) OF THE ACT. THE HON BLE JURISDICTIONAL HIGH COURT IN ( 2010) 329 ITR 01 (GUJ) CIT VS. M/S RADHE DEVELOPERS CONSIDER THE EARLIER CASE LAW OF FAKIR MOHD (SUPRA) AND HOLD THAT PROVISIONS OF THE ACT DO NOT ENVISAGE ANY INCOME NOT FALLING UNDER VARIOUS HEADS PRESCRIBED U/S. 14 OF THE ACT. THE VERY VIEW IS REITERAT ED IN (2013) 219 TAXMANN 279 (GUJ) CIT VS. SHILPA DYING AND PRINTING PVT. LTD. A CO - ORDINATE BENCH OF THE TRIBUNAL IN DCIT VS. M/S NEW UMIYA VIJAY SAW MILL (2012) 40 CCH 413 HOLDS THAT SUCH A BIFURCATION OF AN ADDITIONAL INCOME DISCLOSED IN SURVEY IS NO T PERMISSIBLE. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. WE THEREFORE FOLLOW THE ABOVE STATED JUDICIAL PRECEDENCE AND UPHOLD THE CIT(A) S FINDINGS UNDER CHALLENGE. THE REVENUE S ARGUMENTS ON ITS BOTH SUBSTANTIVE GROUNDS FAIL. T HE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. WE ACCORDINGLY CONCLUDE THAT ONCE THE ASSESSEE HAS ALREADY DECLARED ITS UNACCOUNTED INCOME FOLLOWED BY ITS INCORPORATION IN TRADING ACCOUNT, IT IS VERY MUCH ENTITLED TO CLAIM VARIOUS BUSINESS EXPENSES AGAINST THE SAME AS HELD BY THE CO - ORDINATE BENCH HEREINABOVE. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS. I.T.A NO.1168 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. VASUDEV ELECTRICAL CORPORATION 6 7. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 16 - 09 - 201 6 SD/ - SD/ - ( MANISH BORAD ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 16 /09 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6 . GUARD FILE. BY ORDER/ , / ,