ITO, CHENNAI V. H.Gouthamchand Jain, CHENNAI

ITA 1222/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73722 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: DEVENDRA KUM AR BHANDARI
• Section: 143(3); 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , !' , # $! % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NO.1222(MDS)/2013 # & '& / ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD I(2), CHENNAI - 600 034. V. SHRI H. GOUTHAMCHAND JAIN, NO.8, HASBHAW NIVAS, BAZAAR ROAD, MYLAPORE, CHENNAI - 600 004. PAN : AAFPC 0959 B (')) (APPELLANT) (+,')) (RESPONDENT) ') - / APPELLANT BY : SHRI SHAJI P. JACOB, IRS, ADDL.CIT +,') - / RESPONDENT BY : SHRI DEVENDRA KUMAR BHANDARI, CA . - /0 / DATE OF HEARING : 11 TH FEBRUARY, 2014 12' - /0 / DATE OF PRONOUNCEMENT : 12 TH FEBRUARY, 2014 / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V I AT CHENNAI, 2 I.T.A. NO. 1222/MDS/13 DATED 17.1.2013 AND ARISES OUT OF THE ASSESSMENT CO MPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THERE WAS A SURVEY OPERATION IN THE BUSINESS PRE MISES OF THE ASSESSEE ON 27.2.2008. IN THE COURSE OF SURVEY OPERATION, THE ASSESSEE HAD OFFERED AN ADDITIONAL INCOME OF ` 15 LAKHS FOR THE PURPOSE OF ASSESSMENT AND TO BE INCLUDED IN THE RET URN TO BE FILED BEFORE THE TAX AUTHORITIES. BUT, WHEN THE RETURN W AS FILED, THE ASSESSEE OFFERED A TOTAL INCOME OF ` 12,22,413/-. WHEN HE WAS QUESTIONED ON THE ADDITIONAL INCOME OF ` 15 LAKHS OFFERED AT THE TIME OF SURVEY OPERATION, THE ASSESSEE EXPLAINED TH AT THE SAID ADDITIONAL AMOUNT OF ` 15 LAKHS HAS ALREADY BEEN BROUGHT INTO THE ACCOUNTS BY CREDITING THE CAPITAL ACCOUNT OF THE AS SESSEE AND ACCORDINGLY THE SAID AMOUNT HAS FORMED PART OF THE COMPUTATION OF INCOME IN THE HANDS OF THE ASSESSEE. BUT, THE TOTA L INCOME HAS COME DOWN TO ` 12,22,413/- BECAUSE OF THE FACT THAT CORRESPONDIN G EXPENDITURES HAVE INCREASED. THE ASSESSEE EXPLAINE D THAT THERE IS NO OMISSION ON THE PART OF THE ASSESSEE TO OFFER TH E ADDITIONAL INCOME OF ` 15 LAKHS. 3. THE ASSESSING OFFICER, AFTER EXAMINING THE ISSUE IN A THOROUGH MANNER, HELD THAT THE ASSESSEE HAS INFLATE D THE QUANTUM OF EXPENDITURE JUST FOR THE PURPOSE OF NULLIFYING T HE EFFECT OF 3 I.T.A. NO. 1222/MDS/13 ADDITIONAL INCOME OF ` 15 LAKHS OFFERED BY HIM. THE ASSESSING OFFICER THEREFORE, MADE A SEPARATE ADDITION OF ` 15 LAKHS TO THE RETURNED INCOME. 4. AMONG OTHER THINGS, THIS ADDITION WAS ALSO TAKEN UP IN FIRST APPEAL. THE COMMISSIONER OF INCOME TAX (APPEALS) I N HIS ORDER OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED PROPE R BOOKS OF ACCOUNTS AND IN ORDER TO OVERCOME THE SAID DEFICIEN CY, HE HAD OFFERED AN ADDITIONAL INCOME OF ` 15 LAKHS OVER AND ABOVE HIS REGULAR INCOME. THE ASSESSEE HAS ACCORDINGLY OFFER ED THE SAID AMOUNT BY CREDITING THESE MONIES TO THE CAPITAL ACC OUNT AND THUS BROUGHT TO TAX. THE COMMISSIONER OF INCOME TAX (AP PEALS) OBSERVED THAT AS THE BOOKS WERE NOT MAINTAINED REGU LARLY AND ADDITIONAL INCOME BROUGHT TO TAX, IT WOULD NOT BE F AIR TO GO INTO EACH AND EVERY ITEM OF EXPENDITURE DEBITED IN PROFIT & L OSS ACCOUNT, ESPECIALLY, FOR ESTIMATING THE AMOUNT ADMITTED AS A DDITIONAL INCOME. ON THE ABOVE GROUND, THE SAID ADDITION OF ` 15 LAKHS WAS DELETED BY THE COMMISSIONER OF INCOME TAX (APPEALS). 5. THE REVENUE IS HIGHLY AGGRIEVED AND THEREFORE, S ECOND APPEAL BEFORE THE TRIBUNAL. 4 I.T.A. NO. 1222/MDS/13 6. WE EXTRACT THE DETAILED GROUNDS OF APPEAL RAISED BY THE REVENUE, AS FOLLOWS:- 2. THE LD CIT(A) ERRED IN HOLDING THAT SINCE BOOKS OF ACCOUNTS WERE NOT MAINTAINED REGULARLY AND ADDITIONAL INCOME WAS ALSO OFFERED UNDER THE SURVEY OPERATION U/S.133A OF THE ACT, IT WOULD NOT BE FAIR ON THE PART OF THE AO TO RESORT TO DISALLOWANCE OF THE EXPENSES SEPARATELY UNDER THE HEAD COMMISSION PAYMENTS, BUSINESS PROMOTION EXPENSES, DISCOUNT ALLOWED AND SUNDRY EXPENSES; 2.1 THE LD CIT(A) FAILED TO APPRECIATE THE FACT H. GAUTHAM CHAND JAIN IS AN ASSESSEE IN THE STATUS OF AN INDIVIDUAL AND ALSO RUNS A PROPRIETORSHIP CONCER N, IN THE NAME OF M/S GAUTHAM PHARMA, WHERE THE GROSS TURNOVER EXCEEDED ` 90 LAKHS AND TAX AUDIT REPORT HAS BEEN SUBMITTED IN THE CASE OF THE PROPRIETORSHIP CONCERN; 2.2 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE SURVEY WAS CONDUCTED U/S.133A ON 27.02.2008 AND THE ASSESSEE HAD FILED HIS RETURN OF INCOME ADMITTING TOTAL INCOME OF ` 13.76 LAKHS ALONG WITH TAX AUDIT REPORT IN FORM 3CD RELATING TO THE PROPRIETORSHIP CONCERN, M/S GAUTHAM PHARMA VIDE REPORT DATED 18.08.2008; 2.3 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE INDIVIDUALS COMPUTATION STATEMENT SUBMITTED FOR THE PURPOSE OF COMPUTING TAXABLE INCOME GIVES THE OVERALL AFFAIRS OF THE ASSESSEE, WHEREAS THE ASSESSEE HAD NOT ESTIMATED THE PROFIT FROM M/S GAUTHAM PHARMA AT ` 15.07 LAKHS WHICH WAS PREPARED IN ACCORDANCE WITH THE BOOKS OF ACCOUNTS MAINTAINED ACCORDING TO THE AUDIT REPORT CERTIFIED BY THE CHARTERED ACCOUNTANT; 2.4 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ABSENCE OF BILLS / VOUCHERS IN SUPPORT OF EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE PROPRIETORY CONCERN, GAUTHAM PHARMA WHICH WERE CERTIFIED BY A QUALIFIED CHARTERED ACCOUNTANT IS AN ISSUE INDEPENDENT OF THE ADDITIONAL INCOME ADMITTED UNDER SURVEY U/S.133A, AS THE SAID INCOME OF ` 15 LAKHS WAS VOLUNTARILY DISCLOSED BY THE ASSESSEE OVE R 5 I.T.A. NO. 1222/MDS/13 AND ABOVE THE REGULAR INCOME, WHICH MEANS THE REGULAR INCOME AS PER PROFIT AND LOSS ACCOUNT; 2.5 THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE TAX AUDIT REPORT CERTIFIED THE EXAMIN ATION OF THE FOLLOWING BOOKS OF ACCOUNTS/VOUCHER, VIZ., S ALES REGISTER, PURCHASE REGISTER, STOCK REGISTER, CASH B OOK, BANK PASS BOOK AND GENERAL LEDGER IN SUPPORT OF THE CLAIM OF EXPENDITURE. THE SAID REPORT IS CLEAN A ND NOT QUALIFIED AS TO THE CORRECTNESS OF THE CLAIM OF EXPENDITURE. IN THE LIGHT OF THIS, THE DISALLOWANC E BY THE AO ON THE SPECIFIC HEAD OF EXPENDITURE FOR NON PRODUCTION OF VOUCHERS WAS IN ACCORDANCE WITH LAW. 7. WE HEARD BOTH SIDES IN DETAIL AND EXAMINED THE R ECORDS OF THE CASE PLACED BEFORE US. THE ASSESSING OFFICER H AS DISCUSSED THE ISSUE OF ADDITIONAL INCOME OF ` 15 LAKHS IN A VERY DETAILED MANNER AT PAGES 2 AND 3 OF HIS ORDER. HE HAS POINT ED OUT THAT THE SURVEY WAS CARRIED OUT ON 27.2.2008 AND THE MAJOR P ORTION OF THE EXPENSES HAD BEEN BOOKED BY THE ASSESSEE ONLY AFTER THE SAID DATE OF SURVEY. HE COMPARED THE DETAILS OF THE IMPUGNED ASSESSMENT YEAR 2008-09 WITH EARLIER FOUR ASSESSMENT YEARS 200 4-05, 2005-06, 2006-07 AND 2007-08. THE ASSESSING OFFICER HAS POI NTED OUT THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE BY WAY OF COMMISSION PAYMENTS FOR THOSE EARLIER FOUR ASSESSME NT YEARS FROM 2004-05 TO 2007-08. BUT, FOR THE IMPUGNED ASSESSME NT YEAR, THE ASSESSEE HAS CLAIMED A COMMISSION PAYMENT OF ` 6 LAKHS. THE ASSESSING OFFICER HELD THAT THIS NEW ITEM OF EXPEND ITURE HAS BEEN BOOKED TO NULLIFY THE EFFECT OF ADDITIONAL INCOME O F ` 15 LAKHS OFFERED 6 I.T.A. NO. 1222/MDS/13 BY THE ASSESSEE AT THE TIME OF SURVEY. THE ASSESSI NG OFFICER HAS ALSO POINTED OUT THAT EVEN THOUGH THERE IS A REMARK ABLE INCREASE IN THE TURNOVER REPORTED FOR THE IMPUGNED ASSESSMENT Y EAR, THE INCREASE REFLECTED IN THE CORRESPONDING GROSS PROFI T IS NOT SATISFACTORY, WHICH GOES TO SHOW THAT THE ASSESSEE HAS INFLATED MANY OF THE EXPENDITURES, ESPECIALLY AFTER THE DATE OF SURVEY. THE ASSESSING OFFICER HAS COME TO A FORMIDABLE CONCLUSI ON THAT THE ASSESSEE HAS NULLIFIED THE EFFECT OF OFFERING ADDIT IONAL INCOME OF ` 15 LAKHS BY OVERSTATING THE EXPENDITURE, ESPECIALLY AFTER THE DATE OF SURVEY. 8. WE FIND THAT THE DETAILED FINDINGS ARRIVED AT BY THE ASSESSING OFFICER HAVE NOT BEEN CONSIDERED AT ALL BY THE COMM ISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME T AX (APPEALS) HIMSELF HAS CLEARLY STATED IN PARAGRAPH 11.2 OF HIS ORDER THAT THE ASSESSEE HAS OFFERED AN ADDITIONAL INCOME OF ` 15 LAKHS OVER AND ABOVE OF HIS REGULAR INCOME. WE EXTRACT THE EXACT OBSERVATION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS):- I HAD GONE THROUGH THE SUBMISSIONS MADE BY THE AR AND THE OBSERVATIONS OF THE A.O. IT IS A FACT ADMITTED BY THE ASSESSEE DURING THE COURSE OF SURVEY U/S 133A THAT THE BOOKS OF ACCOUNTS WERE NOT REGULARLY MAINTAINED. IN ORDER TO OVERCOME ITS DEFICIENCY, THE ASSESSEE HAS COME FORWARD BY 7 I.T.A. NO. 1222/MDS/13 DISCLOSING THE ADDITIONAL INCOME OF ` 15 LAKHS OVER AND ABOVE HIS REGULAR INCOME. 9. IT IS SEEN THAT THE ASSESSEE HAS NOT MAINTAINED PROPER ACCOUNTS. THEN, HOW IT IS POSSIBLE FOR THE ASSESSE E TO ESTABLISH THAT HE HAS INCURRED ADDITIONAL AMOUNT OF EXPENDITURE TH AT TOO AFTER THE DATE OF SURVEY? IT IS SEEN THAT THE ASSESSEE HAS B ROUGHT THE ADDITIONAL AMOUNT OF ` 15 LAKHS THROUGH HIS CAPITAL ACCOUNT. THE SOURCE OF ADDITIONAL INCOME OF ` 15 LAKHS IS FROM THE IMPUGNED BUSINESS CARRIED ON BY THE ASSESSEE. WHEN THE SAID AMOUNT OF ` 15 LAKHS IS ATTRIBUTABLE TO THE PROFITS AROSE OUT O F THE IMPUGNED BUSINESS, WHAT IS THE BASIS OF BRINGING ` 15 LAKHS THROUGH ASSESSEES CAPITAL ACCOUNT? THIS AMOUNT OF ` 15 LAKHS OUGHT TO HAVE BEEN OFFERED BY THE ASSESSEE OVER AND ABOVE TH E REGULAR PROFITS REFLECTED IN HIS STATEMENT OF ACCOUNTS. 10. THESE VITAL ASPECTS HAVE NOT BEEN EXAMINED BY T HE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSI ONER OF INCOME TAX (APPEALS) HAS ONLY STATED THAT ONCE THE ASSESSEE HAS TECHNICALLY OFFERED THIS INCOME OF ` 15 LAKHS FOR THE IMPUGNED ASSESSMENT YEAR, IT IS NOT NECESSARY TO EXAMINE THE BONAFIDES OF THE EXPENDITURE WORKED OUT ON ESTIMATED BASIS. THI S CANNOT BE A GOOD PROPOSITION IN THE MATTER OF ASSESSMENT. EVEN IF THE ASSESSEE HAS BROUGHT ADDITIONAL INCOME, IT IS INCUMBENT UPON THE ASSESSING 8 I.T.A. NO. 1222/MDS/13 OFFICER TO EXAMINE THE GENUINENESS OF THE EXPENDITU RE CLAIMED BY THE ASSESSEE. THIS IS MORE SO IMPORTANT IN A CASE WHERE THE ASSESSEE HAS DELIBERATELY MADE ATTEMPTS TO NULLIFY THE EFFECT OF THE ADDITIONAL INCOME OFFERED BY INFLATING THE QUANTUM OF EXPENDITURE. THEREFORE, WE FIND THAT THE ADDITION CANNOT BE DELE TED ONLY ON THE BASIS OF CERTAIN GENERAL PROPOSITION. ONE HAS TO B E METICULOUS WITH THE FACTS OF THE CASE. 11. FROM THE DETAILED EXAMINATION OF THE SURROUNDIN G FACTS OF THE CASE DISCUSSED BY THE ASSESSING AUTHORITY IN DETAIL , WE COME TO A FORMIDABLE CONCLUSION THAT THE ASSESSEE HAS MANIPUL ATED HIS CLAIM OF EXPENDITURE SO AS TO OFFSET THE REVENUE EFFECT O F ADDITIONAL INCOME OF ` 15 LAKHS OFFERED BY HIM IN THE COURSE OF SURVEY. IT IS AN UNDISPUTED FACT THAT THE AMOUNT OF ` 15 LAKHS WAS OFFERED BY THE ASSESSEE AS ADDITIONAL INCOME OVER AND ABOVE HIS RE GULAR INCOME FROM THE BUSINESS. THEREFORE, IT IS NOT PERMISSIBL E FOR THE ASSESSEE TO DILUTE THE SAID AMOUNT OF ADDITIONAL INCOME BY O VERSTATING THE EXPENDITURE. 12. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS RIGHTLY MADE AN ADDITION OF ` 15 LAKHS AND THE SAME HAS TO BE SUSTAINED. WE SET ASIDE THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF DELETING TH E ADDITION OF ` 15 9 I.T.A. NO. 1222/MDS/13 LAKHS. THE SAID ADDITION IS RESTORED. THE ASSESSI NG OFFICER SHALL REVISE THE ASSESSMENT. 13. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 12 TH OF FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K. NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 12 TH FEBRUARY, 2014. KRI. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT-IV, CH ENNAI 4. CIT(A)-VI, CHENNAI 5. DR 6. GF.