Asstt.CIT, Cir.1, Nashik, Nashik V. M/s. Adeep Enterprises, Nashik

ITA 1323/PUN/2009

• Counselvise Citation: 132324514 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 19-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANN KAPUSTHAMA
• Keywords: Unexplained investment
• Section: 69C; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 1323/PN/09 (ASSTT. YEAR: 2006-07) ASSTT. COMMISSIONER OF INCOME-TAX, .. APPELLANT CIR. 1, NASHIK VS. M/S ADEEP ENTERPRISES, .. RESPONDENT 130/4 SHRUSHTI, DSOUZA COLONY, COLLEGE ROAD, NASHIK PAN AAGFA 5276J APPELLANT BY: MRS ANN KAPUSTHAMA RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 23.12.2011 DATE OF PRONOUNCEMENT : 19.01.2012 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, NASHIK DATED 14.9 .2009, WHICH IN TURN, HAS ARISEN FROM THE ORDER OF THE ASSESSING OFFICER DATED 2 9.12.2008 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SH ORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2 2. THE ISSUE RAISED IN THIS APPEAL BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING T HE ADDITION OF RS 9,71,675/- AND RS 3,50,000/- MADE BY THE ASSESSING OFFICER UNDER SEC TION 69C OF THE ACT BEING UN ACCOUNTED ADVANCES AND INFLATION OF EXPENDITUR E RESPECTIVELY. 3. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNE RSHIP FIRM CARRYING ON BUSINESS OF GOVERNMENT CONTRACTOR. A SURVEY ACTION UNDER S ECTION 133A OF THE ACT WAS CARRIED OUT AGAINST THE ASSESSEE ON 3.3.2008 AND T HE BOOKS OF ACCOUNTS WERE IMPOUNDED. DURING THE COURSE OF SURVEY ACTION, STAT EMENT OF ONE OF THE PARTNER OF THE FIRM SHRI SUHAS SHELAR WAS RECORDED, W HO DECLARED ADDITIONAL INCOME OF RS 22,01,027/-, COMPRISING OF RS 1,00,000/- T OWARDS INVESTMENT IN FURNITURE; RS 7,79,352/- AS UNEXPLAINED RECEIPTS; RS 9,7 1,675/- AS UNACCOUNTED ADVANCES PAID; AND, RS 3,50,000/- TOWARDS INFLATION O F EXPENDITURE. IN THE RETURN OF INCOME FILED, THE ASSESSEE DECLARED ADDITIONAL INCOM E TOWARDS INVESTMENT IN FURNITURE RS 1,00,000/- AND UNEXPLAINED RECEIPTS OF RS 7,79,352/- IN THE STATEMENT OF COMPUTATION OF INCOME FILED. THE REMAIN ING AMOUNT OF RS 9,71,675/- TOWARDS UNACCOUNTED ADVANCES AND RS 3,50,000/- TOWARDS I NFLATION OF EXPENDITURE WAS OFFERED TO TAX BY CREDITING THE SAME T O THE PROFIT AND LOSS ACCOUNT. THE RETURN OF INCOME WAS FILED IN THE ABOVE M ANNER BY DECLARING AN INCOME OF RS 13,78,241/-. WHILE ASSESSING THE INCOME OF THE ASSESSEE FIRM, THE ASSESSING OFFICER MADE ADDITIONS OF RS 9,71,675/- AND RS 3, 50,000/- UNDER SECTION 69C OF THE ACT ON THE GROUND THAT SUCH AMOUNTS R EPRESENTED UNACCOUNTED ADVANCES AND EXPENSES. AGAINST THE ABOVE DISA LLOWANCES, THE ASSESSEE PREFERRED APPEAL TO THE COMMISSIONER OF INCOME-TA X (APPEALS). 4. DURING THE COURSE OF APPELLATE PROCEEDINGS AND ALSO IN THE STATEMENT OF FACTS FILED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEA LS), ASSESSEE SUBMITTED THAT THE INCOME OFFERED TO TAX DURING SURVEY ACTION BO TH ON THE ABOVE COUNTS WAS OFFERED TO TAX IN THE COMPUTATION OF INCOME AND/OR IN THE PROFIT & LOSS ACCOUNT FILED WITH THE RETURN OF INCOME. THE ASSESSEE ALSO FILE D COPY OF STATEMENT OF 3 COMPUTATION OF INCOME SHOWING INCOME OFFERED TO TAX AL ONGWITH ACKNOWLEDGMENT OF RETURN. THE PROFIT & LOSS ACCOUNT SHOWING INCOME OFFE RED TO TAX BY CREDITING THE SAME TO PROFIT & LOSS ACCOUNT ALONGWITH BALANCE SHEET; EXTRACT OF CAPITAL ACCOUNT SHOWING DEBITS TOWARDS INCOME OFFERED TO TAX BY CR EDITING PROFIT & LOSS ACCOUNT, ETC., WAS ALSO FILED IN SUPPORT. THE COMMISSIONER OF INCOME-TAX (APPEALS) CONSIDERED THE SUBMISSIONS AS WELL AS THE DOCUMENT S FILED BEFORE HIM AND DELETED THE IMPUGNED ADDITIONS OF RS 9,71,675/- T OWARDS UNACCOUNTED ADVANCES AND INFLATION OF EXPENDITURE RS 3,50,000/- UN DER SECTION 69C OF THE ACT. THE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (AP PEALS) AS CONTAINED IN PARA 6 OF THE APPELLATE ORDER IS AS FOLLOWS: 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R OF THE AO AND SUBMISSION OF THE APPELLANT. THE APPELLANT HAS OFFERED ADDITIONAL INC OME OF RS 22,01,027/- DURING ACTION U/S 133A AND ALSO IN THE RETURN OF INCOME FILED. THE IN COME TOWARDS UNEXPLAINED INVESTMENT IN FURNITURE RS 1,00,000/- AND UNEXPLAINED RECEIPTS RS 7,79,352/- WAS OFFERED TO TAX BY THE APPELLANT IN STATEMENT OF COMPUTATION OF INCOME . THE UNACCOUNTED ADVANCES OF RS 9,71,675/- WERE OFFERED TO TAX BY THE APPELLANT BY CREDITING THE SAME TO CONTRACT PROFIT AND LOSS ACCOUNT AND DEBITING THE SAME TO ADVANCE ACCOU NT APPEARING IN THE BALANCE SHEET AS ON 31.3.2006 ON ASSET SIDE. THE INFLATED EXPENDI TURE OF RS 3,50,000/- WAS OFFERED TO TAX BY THE APPELLANT BY CREDITING THE SAME TO CONTR ACT PROFIT AND LOSS ACCOUNT AND DEBITING THE SAME TO PARTNERS CAPITAL ACCOUNTS. THE AO HAS E RRED IN AGAIN ADDING THE UNACCOUNTED ADVANCES, WHICH WERE OFFERED TO TAX BY THE APPELLANT BY CREDITING THE SAME TO PROFIT AND LOSS ACCOUNT. THE AO HAS ALSO ERRED I N ADDING INFLATED EXPENDITURE ALREADY OFFERED TO TAX BY THE APPELLANT BY CREDITING THE SA ME TO THE CONTRACT PROFIT AND LOSS ACCOUNT. THE AMOUNT WAS OFFERED TO TAX DURING SURVE Y ACTION, ON ACCOUNT OF ALLEGED INFLATION OF EXPENDITURE IN THE BOOKS OF ACCOUNTS M AINTAINED. THIS INFLATION OF EXPENDITURE IS NULLIFIED AS THE APPELLANT HAS OFFERED THE SAME AS INCOME BY CREDITING HE SAME TO THE CONTRACT PROFIT AND LOSS ACCOUNT. THE AO HAS INCORR ECTLY ADDED RS 3,50,000/- TOWARDS ALLEGED INFLATED EXPENDITURE U/S 69C OF THE ACT. TH E APPELLANT HAS RIGHTLY POINTED OUT THAT WITHOUT CLAIMING EXCESSIVE EXPENDITURE IN THE BOOKS OF ACCOUNTS, THERE CANNOT BE INFLATION OF EXPENDITURE AND HENCE THE SAID EXPENDITURE CAN N EVER BE OUT OF THE BOOKS AS CLAIMED BY THE AO WHILE MAKING ADDITION U/S 69C. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED VIEW THAT, THE AO IS NOT JUSTIFIED IN MA KING ADDITIONS OF RS 9,71,675/- TOWARDS UNACCOUNTED ADVANCES AND INFLATION OF EXPENDITURE R S 3,50,000/- U/S 69C OF THE ACT. THE ADDITIONS ARE THEREFORE DELETED. GROUND NOS. 1 & 2 THEREFORE STAND ALLOWED. AS GROUND NOS. 1 & 2 ARE ALLOWED AND THE ADDITIONS MADE TO IN COME RETURNED ARE DELETED, GROUND NO. 3 NEEDS NOT ADJUDICATION. AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS), REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIV E HAS ASSAILED THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) BY POINTING OUT THAT MERE CREDITING OF THE IMPUGNED SUMS IN THE PROFIT & LOSS ACCOUN T DOES NOT TANTAMOUNT 4 TO OFFERING OF SUCH INCOME TO TAX INASMUCH AS THE ULTI MATE PROFITABILITY HAS BEEN REDUCED ON ACCOUNT OF EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE HAS DEFENDED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) B Y POINTING OUT THAT THE SUMS AGREED TO BE SURRENDERED AT THE TIME OF SURVEY HAV E BEEN DULY DECLARED IN THE RETURN OF INCOME AND, THEREFORE, THERE WAS NO JU STIFICATION FOR THE ASSESSING OFFICER TO HAVE MADE THE IMPUGNED ADDITION. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT, ASSESSE E OFFERED TO TAX ADDITIONAL INCOME OF RS 22,01,127/- IN THE FORM OF IN VESTMENT IN FURNITURE, UNEXPLAINED RECEIPTS, UNACCOUNTED ADVANCES AND EXCESS EXPE NDITURE AMOUNTING TO RS 1,00,000/-, RS 7,79,352/-, RS 9,71,675/- AND RS 3 ,50,000/- RESPECTIVELY. WHILE FILING THE RETURN OF INCOME, AMOUNTS OF RS 1, 00,000/- AND RS 7,79,352/- REPRESENTING INVESTMENT IN FURNITURE AND UNEXPLAINED RECEIPTS RESPECTIVELY WAS OFFERED AS SUCH IN THE COMPUTATION OF INCOME. THE BALA NCE SUMS OF RS 9,71,675/- AND RS 3,50,000/- ON ACCOUNT OF UNACCOUNTE D ADVANCES AND EXCESS EXPENDITURE RESPECTIVELY WERE CREDITED IN THE PROFIT & LOSS ACCOUNT AND DEBITED TO THE CAPITAL ACCOUNT OF THE PARTNERS. THE ASSESSING OFFI CER WHILE COMPLETING THE ASSESSMENT FURTHER ADDED A SUM OF RS 9,71,675/- PLUS RS 3,5 0,000/- FOR THE REASON THAT SUCH INCOMES AGREED TO BE OFFERED AT THE T IME OF SURVEY WERE NOT IN- FACT OFFERED IN THE RETURN OF INCOME FILED. IN OUR CO NSIDERED OPINION, THE AFORESAID ASSERTION OF THE ASSESSING OFFICER IS FACTUALLY INCORRECT AS RIGHTLY BROUGHT OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT SUCH AMOU NTS HAVE BEEN CREDITED TO THE PROFIT & LOSS ACCOUNT ANNEXED WITH THE RETURN OF INCOME. THE CASE MADE OUT BY THE REVENUE IS THAT AFTER HAVING CREDI TED SUCH INCOME IN THE PROFIT AND LOSS ACCOUNT, THE ULTIMATE INCOME DECLARED IS LOWER, INASMUCH AS EXPENSES HAVE ALSO BEEN DEBITED IN THE PROFIT & LOSS ACCO UNT, WHICH HAVE NULLIFIED SUCH DECLARATION. IN FACT, IT IS SOUGHT TO BE M ADE OUT THAT THE NET PROFIT 5 AFTER PAYMENT OF INTEREST AND SALARY TO PARTNERS WAS ON LY RS 4,98,889/-WHICH INCLUDED THE INCOME ON ACCOUNT OF INFLATED EXPENSES OF R S 3,50,000/- AND UNACCOUNTED ADVANCES OF RS 9,71,675/- CREDITED TO THE PR OFIT & LOSS ACCOUNT. IT IS POINTED OUT THAT IF SUCH ITEMS ARE REMOVED FROM THE CREDIT SIDE OF THE PROFIT & LOSS ACCOUNT, IT WILL RESULT INTO LOSS OF RS 8,22,786/-, W HICH HAS THE EFFECT OF NULLIFYING SUCH SURRENDER. IN THIS CONTEXT, WHAT IS OF RE LEVANCE IS TO EXAMINE THE JUSTIFIABILITY OF THE LOSS SO CLAIMED AND IN HIS REGARD, THE FOLLOWING OPERATIVE PART OF THE COMMISSIONER OF INCOME-TAX (APPEALS)S ORDER IS WO RTHY OF NOTICE: BEFORE PARTING, IT IS WORTHWHILE TO MENTION HERE T HAT, THOUGH THE INCOME OFFERED TO TAX BY THE APPELLANT IN THE RETURN OF INCOME FOR AY 2006-0 7 IS RS 22,01,027/-, THE INCOME RETURNED WAS ONLY RS 13,78,241/-. THIS IS FOR THE R EASON THAT, THE NET PROFIT AFTER PAYMENT OF INTEREST AND SALARY TO PARTNERS DECLARED BY THE APPELLANT FIRM IN RETURN WAS RS 4,98,889/-, WHICH INCLUDES THE INCOME OFFERED TO TA X BY THE APPELLANT ON ACCOUNT OF INFLATED EXPENDITURE RS 3,50,000/- AND UNACCOUNTED ADVANCES RS 9,71,675/-. IF THESE ITEMS OFFERED TO TAX IN PROFIT AND LOSS ACCOUNT ARE REMOVED, THE CONTRACT PROFIT AND LOSS ACCOUNT SHALL REFLECT LOSS OF RS 8,22,786/-. IN SUP PORT OF THIS LOSS, THE APPELLANT HAS FILED LETTER DATED 19.11.2008 WITH THE AO ALONGWITH DETAI LS OF EXPENSES CLAIMED IN CONTRACT PROFIT AND LOSS ACCOUNT GIVING DETAILS OF SUCH EXPE NSES RECORDED IN THE BOOKS OF ACCOUNTS FOUND AND SEIZED UP TO THE DATE OF SURVEY I.E. 3.3. 2006 AS PER BOOKS OF ACCOUNTS MAINTAINED. THE APPELLANT HAS POINTED OUT IN THE SA ID LETTER THAT, THE DIFFERENCE IN SUCH EXPENDITURE RECORDED IN BOOKS UPTO 3.3.2006 IS RS 2 ,86,576/- IS DUE TO THE REASON THAT IN THE BOOKS IMPOUNDED ENTRIES OF EXPENDITURE FOR THE PERIOD 1.4.2005 TO 31.7.2005 WERE NOT RECORDED. IN RESPECT OF EXPENDITURE DEBITED IN THE BOOKS OF ACCOUNTS AFTER 3.3.2006, THE APPELLANT HAS POINTED OUT THAT, ON 31.3.2006 DE PRECIATION IS DEBITED ON ASSETS OWNED AND ALSO PAYMENT TO SUB-CONTRACTORS AMOUNTING TO RS 20,83,698/- WERE DEBITED TO CONTRACT PROFIT AND LOSS ACCOUNT, THE SAID EXPENDIT URE OF R 20,83,698/- IS INCLUDED IN W.I.P APPEARING IN THE CREDIT SIDE OF CONTRACT PROF IT AND LOSS ACCOUNT RS 31,85,360/-. THE APPELLANT THEREFORE FILED REASONABLE SUBMISSION WIT H THE AO FOR EXPENDITURE CLAIMED IN CONTRACT PROFIT AND LOSS ACCOUNT. IN TERMS OF THE AFORESAID FACTUAL FINDINGS OF THE COMM ISSIONER OF INCOME-TAX (APPEALS), TO WHICH THERE IS NO REBUTTAL FROM THE SIDE OF THE REVENUE, WE FIND THAT THE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEAL S) TO DELETE THE IMPUGNED SUM CANNOT BE FAULTED. APPARENTLY, THE LOSS I N THE PROFIT & LOSS ACCOUNT (I.E. AFTER REMOVING THE IMPUGNED SUMS FROM CRE DIT SIDE OF THE PROFIT & LOSS ACCOUNT) HAS NOT BEEN FOUND TO BE INGENUINE OR OTH ERWISE UNTENABLE AND, THEREFORE, THE NET INCOME DECLARED AFTER CONSIDERING SUCH LOSS IS LIABLE TO BE ACCEPTED. IN THIS VIEW OF THE MATTER, THE COMMISSIONER O F INCOME-TAX (APPEALS) MADE NO MISTAKE IN THIS REGARD AND ACCORDINGLY WE AFFIR M THE DECISION OF THE 6 COMMISSIONER OF INCOME-TAX (APPEALS) AND FIND NO MERIT IN THE GROUND OF APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON THE 19 TH DAY OF JANUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 19 TH JANUARY, 2012 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT (A)-I, NASHIK 4) CIT-I NASHIK 5) DR, B BENCH, ITAT, PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, I.T.A.T., PUNE