Shri Shyamsunder H.Khishinchandani, Ahmedabad V. The Income tax officer,Ward-2(3), Ahmedabad

ITA 1256/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9368 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 20-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA SENIOR
• Assessee Lawyers: S N DIVATIA
• Section: 133A; 6; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.1256/AHD/2009 (ASSESSMENT YEAR: 2003-04) SHRI SHYAMSUNDER H KISHINCHANDANI, NOVELTY MAHENDI CENTRE, 145/1, 1 ST FLOOR, SINDHI COMMERCIAL MARKET, KALUPUR, AHMEDABAD V/S THE INCOME-TAX OFFICER, WARD-2(3), AHMEDABAD [APPELLANT] [RESPONDENT] PAN NO.: ACVPK 0372 N APPELLANT BY :- SHRI S N DIVATIA, ADVOCATE RESPONDENT BY:- SHRI P M SHUKLA, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A) DATED 06-11- 2007 BY TAKING THE FOLLOWING EFFECTIVE GROUND OF AP PEAL:- THE LEARNED COMMISSIONER OF INCOME TAX OFFICER HAS ERRED IN FACTS AND ON LAW IN UP-HOLDING THAT BOOKS RESULTS ARE UN- REALIABLE. THEREFORE, AOS, IS CORRECT IN REJECTING THE BOOKS O F ACCOUNTS AND ESTIMATING SALES AT RS.95.00 LAKHS AND ESTIMATING G .P. AT RS.10.95% AND THIS WAY MAKING ADDITION OF RS.1,65,362/-. 2 THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY AC TION U/S 133A OF THE INCOME-TAX ACT, 1961 [THE ACT FOR SHO RT] WAS 2 CARRIED ON 18-09-2002 AT THE BUSINESS PREMISES OF T HE ASSESSEE AND FOLLOWING DISCREPANCIES WERE FOUND: (1) DIFFERENCE IN CASH:- DIFFERENCE IN CASH BALANCE AS PER CASH BOOK AND AS PHYSICALLY FOUND ON DATE OF SURVEY. THE CASH AS PER CASH BALANCE WAS FOUND TO RS.52,965/- AS AGAINST NO CASH WAS FOUND DURING THE COURSE OF SURVEY. (2) DIFFERENCE IN STOCK:- THE STOCK AS PER BOOKS IS FOU ND AT RS.4,42,386/- AS AGAINST PHYSICAL STOCK FOUND AT RS .3,10,255/-. THUS THERE IS DIFFERENCE IN STOCK OF RS.1,32,131/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS REQUESTED TO PRODUCE BOOKS OF ACCOUNTS AND PRELIMIN ARY RECORDS. THE AO FOUND THAT THE ASSESSEE IS NOT MAINTAINING D AY TO DAY STOCK REGISTER. NO DELIVERY CHALLANS ARE BEING MAIN TAINED. CERTAIN VOUCHERS DO NOT CONTAIN EXACT DESCRIPTION OF THE EX PENSES INCURRED AND CERTAIN EXPENSES WERE NOT FOUND VERIFI ABLE. DISCREPANCIES DURING THE COURSE OF SURVEY WERE FOUN D AS MENTIONED ABOVE. THE AO ALSO FOUND THAT ON RANDOM B ASIS PURCHASE AND SALE BILL HAVE BEEN VERIFIED WHICH IND ICATES MORE PROFIT IN AFTER DEDUCTION FREIGHT TRANSPORT EXPENSE S AS AGAINST G.P. OF 9.41% DECLARED BY THE ASSESSEE. THE AO NOTED THAT THE GROSS PROFIT RATE WAS SHOWN A T 3.80% FOR THE PERIOD FROM 01-04-2002 TO 18-09-2002 I.E. DATE OF SURVEY AS AGAINST G P SHOWN AT 15.06% FOR THE PERIOD FROM 19- 09-2002 TO 31-03-2003. IN VIEW OF THESE AFORESAID DISCREPANCIE S A SHOW CAUSE NOTICE DATED 20-02-2006 WAS ISSUED REQUIRING THE ASSESSEE TO FURNISH INFORMATION / EXPLANATION ON 27-02-2006. 3 3 THE AO, AFTER REJECTING THE BOOKS OF ACCOUNTS U/ S 145, ESTIMATED THE GROSS PROFIT AT THE RATE OF 10.95% ON THE ESTIMATED TURNOVER OF RS.95 LACS AND WORKED OUT THE GROSS PRO FIT AT RS.10,40,250/- AFTER REDUCING THERE-FROM THE GROSS PROFIT SHOWN BY THE ASSESSEE AMOUNTING TO RS.8,34,880/-. THE ADD ITION OF RS.1,65,362/- WAS MADE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE UNDER PARA-5 OF HIS ORDER CONFIRMED THE AD DITION MADE BY THE AO. 4 THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT BEFORE THE SURVEY PERIOD, THE GROSS PROFIT UPTO 30- 09-2002 WAS AT THE RATE OF 6.93% WHILE FROM 1-10-2002 TO 31-03-200 3 IT WAS 12.28% AND THE AVERAGE FOR THE ENTIRE YEAR WAS 9.57 %. HE STATED THAT THE GROSS PROFIT PRIOR TO THE SURVEY COULD NOT HAVE BEEN DISTURBED. THE DATA SUBMITTED BY HIM ARE GIVEN AS U NDER:- PARTICULARS 1-4-02 TO 30-9-02 1-10-02 TO 31-3-03 FOR THE ENTIRE YEAR PARTICULARS 1-4-02 TO 30-9-02 1-10-02 TO 31-3-03 FOR THE ENTIRE YEAR OP. STOCK 650640 310255 650640 SALES 4925083 4343855 9136807 PURCHASES 4114879 4095643 8210522 CL. STOCK 310255 698134 698134 FREIGHT / OCTROI 128656 102366 231022 DIFFERENCE IN STOCK - - 132131 TOTAL 5235338 5041898 9967072 5235338 5041989 9967072 GP RATE 6.93% 12.28% 9.57% ON A QUERY FROM THE BENCH, HE AGREED THAT AT THE TI ME OF SURVEY, THERE WAS DIFFERENCE IN CASH IN HAND TO THE EXTENT OF RS.52,965/- AND THERE WAS DIFFERENCE IN THE STOCK TO THE EXTENT OF RS.1,32,131/-. THE ASSESSEE HAS DULY CREDITED THE D IFFERENCE IN 4 THE STOCK IN THE SUBSEQUENT PERIOD BY SHOWING THE S ALES. THE ASSESSEE HAS DULY EXPLAINED THE REASONS BEFORE THE AO AND THE BOOKS PRIOR TO THE SURVEY MUST HAVE BEEN ACCEPTED. RELIANCE WAS PLACED ON THE SUBMISSIONS MADE BEFORE THE CIT(A) WH ICH ARE REPRODUCED UNDER PARA-4 OF THE ORDER OF THE CIT(A) POINTING OUT THAT THE ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNTS AND THE BOOKS WERE DULY AUDITED U/S 44AB OF THE ACT. TH E AO HAS CROSS-CONFIRMED THE ACCOUNTS OF SUNDRY CREDITORS AN D DEBTORS BUT NO DIFFERENCE WAS FOUND IN CROSS-CONFIRMATION. IT W AS VEHEMENTLY CONTENDED THAT THE ADDITION MADE MUST BE DELETED. T HE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE A O. 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO G ONE THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW. THIS IS AN ADMITTED FACT THAT DURING THE COURSE OF SURVEY THERE WAS DISCREPA NCY IN THE CASH IN HAND AS WELL AS DIFFERENCE IN THE STOCK. TH IS, ITSELF, IN OUR OPINION, PROVES THAT THE BOOKS OF ACCOUNTS MAINTAIN ED BY THE ASSESSEE WERE NOT CORRECT OR COMPLETE. THEREFORE, I N OUR OPINION, THE AO WAS CORRECT IN LAW IN INVOKING THE PROVISION S OF SECTION 145(3) OF THE ACT BY REJECTING THE BOOKS OF ACCOUNT S. 6 NOW THE QUESTIONS ARISES, ONCE THE BOOKS STAND REJECTED, THE ASSESSMENT HAS TO BE MADE IN THE MANN ER AS LAID DOWN U/S 144 ON THE BASIS OF MATERIAL AVAILABLE WIT H THE AO. THE ASSESSEE HAS DECLARED THE GROSS PROFIT DURING THE L AST THREE YEARS AS UNDER:- AY 2001-02 10.94 % 5 AY 2002-03 9.82 % AY 2003-04 9.44 % THE ASSESSEE HAS SHOWN THE DIFFERENCE IN THE STOCK FOUND DURING THE COURSE OF SURVEY AMOUNTING TO RS.1,32,131/- AS THE SALES AND CREDITED TO THE P&L ACCOUNT. THE SALES AS PER THE B OOKS OF ACCOUNT OF THE ASSESSEE AS POINTED OUT BY THE LEARN ED AR IN THE CHART WERE RS.91,36,807/- AND IF THE DIFFERENCE IN THE STOCK TREATING IT TO BE THE SALE IS ADDED, THE TOTAL SALE S WILL BE RS.92,68,938/-. THE AVERAGE OF THE GROSS PROFIT DEC LARED BY THE ASSESSEE IN THE PRECEDING THREE YEARS COMES TO 10.0 7%. IN OUR OPINION, IF THE SAID GROSS PROFIT RATE IS APPLIED T O THE SALES OF RS.92,68,938/-, THE GROSS PROFITS WILL COME TO RS.9 ,33,382/-. SINCE THE ASSESSEE HAS ALREADY SHOWN THE GROSS PROF ITS OF RS.8,74,888/-, THE ADDITION SHOULD BE RESTRICTED TO RS.9,33,382 RS.8,74,888 = RS.58,494/-. WE ACCORDINGLY REDUCE TH E ADDITION TO RS.58,494/-. 7 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 21-08-2 009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 21-08-2009 COPY OF THE ORDER FORWARDED TO : 6 1. SHRI SHYAMSUNDER H KISHINCHANDANI, NOVELTY MAHEN DI CENTRE, 145/1, 1 ST FLOOR, SINDHI COMMERCIAL MARKET, KALUPUR, AHMEDABAD 2. THE ITO, WARD-2(3), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA