V Bheem Shankar, Hyderabad V. ITO, Vikarabad

ITA 1359/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53846 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Search and seizure; Question of law; Reassessment proceedings
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I .T.A. NO. 1359/HYD/2010 (ASSESSMENT YEAR : 2004-05) SHRI V. BHEEM SHANKAR VIKARABAD PAN: ACBPV5249H VS. INCOME-TAX OFFICER WARD-1 VIKARABAD APPELLANT RESPONDENT APPELLANT BY: SHRI A.V. RAGHU RAM RESPONDENT BY: SHRI B.V. PRASAD REDDY DATE OF HEARING: 22.11.2011 DATE OF PRONOUNCEMENT: O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III, HYDERABAD DATED 27.08.2010 FOR THE ASSESSMENT YEAR 2004-05. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O SUSTAINING OF ADDITION OF RS. 5,34,502 ON ACCOUNT OF UNACCOUNTED PURCHASES. 3. BRIEF FACTS OF THE ISSUE ARE THAT IN THIS CASE T HERE WAS A SURVEY U/S. 133A OF THE INCOME-TAX ACT, 161 ON 28.3.2008. IN T HE COURSE OF SURVEY A STATEMENT WAS RECORDED FROM THE ASSESSEE. THE ASSE SSEE WAS ASKED EXPLANATION REGARDING UNACCOUNTED PURCHASES. IN TH E COURSE OF RECORDING THE STATEMENT, THE ASSESSEE STATED THAT PURCHASES F OR THE PERIOD FROM 28.5.2003 TO 16.12.2003 WERE AT RS. 55,97,919. HE ALSO STATED THAT SALES PER MONTH WOULD BE AROUND RS. 7 TO 8 LAKHS AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE SALES ARE AT AROUND RS. 85 LAKHS. AS PER THE IMPOUNDED DOCUMENTS MARKED AS BS-6, BS-7, BS-9, THE TOTAL PURCHASES FOR THE PERIOD IS AROUND RS. 56,19,072. FURTHER TH E ASSESSEE STATED AS ANSWER TO QUESTION NO. 15 THAT THE AVERAGE PURCHASE S FOR EVERY YEARS WOULD BE AROUND RS. 85 LAKHS AS IN FY 2003-04. ON THAT BASIS THE ASSESSING OFFICER ESTIMATED THE UNACCOUNTED PURCHAS ES AT RS. 85 LAKHS I.T.A. NO. 1359/HYD/2010 SHRI V. BHEEM SHANKAR =================== 2 AND ESTIMATED THE INCOME AT RS. 10,20,000 AND DEDUC TED RS. 4,85,498 WHICH WAS RETURNED BY THE ASSESSEE. THUS, HE MADE FURTHER ADDITION OF RS. 5,34,502 ON THIS COUNT. AGAINST THIS, THE ASSE SSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THERE IS NO EVIDENCE OTHER THAN THE STATEMENT RECORDED FROM THE ASSESSEE. THE ASSESSIN G OFFICER CANNOT MAKE ANY ADDITION WITHOUT ANY MATERIAL IN HAND. TH ERE IS ONLY IMPOUNDED MATERIAL TO THAT EXTENT OF PURCHASE OF RS. 55,97,91 9 AS AGAINST THE PURCHASES SHOWN BY THE ASSESSEE AT RS. 7,64,240. A CCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, AT BEST, THE ASSE SSING OFFICER CAN CONSIDER ONLY TO THE EXTENT OF RS. 55,97,919 FOR ES TIMATING THE PROFIT OF THE ASSESSEE AT 12%. HE SUBMITTED THAT THE STATEMENT R ECORDED BY THE ASSESSEE CANNOT BE USED FOR ESTIMATING THE PURCHASE S. THERE IS NO MATERIAL IN THE FORM OF PURCHASE BILLS. HE RELIED ON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. DHINGRA MET AL WORKS [328 ITR 384 (DEL.)] WHEREIN IT WAS HELD AS FOLLOWS: ' HELD , DISMISSING THE APPEAL, THAT FOR A STATEMENT TO HA VE EVIDENTIARY VALUE, THE SURVEY OFFICER SHOULD HAVE B EEN AUTHORISED TO ADMINISTER AN OATH AND TO RECORD A SWORN STATEMENT. WHILE SECTION 132(4) OF THE ACT SPECIFICALLY AUTHORIZES AN OFFICE R TO EXAMINE A PERSON ON OATH, SECTION 133A DID NOT PERMIT THE SAM E. MOREOVER, THE WORD 'MAY' USED IN SECTION 133A(3)(III) OF THE ACT CLARIFIES BEYOND DOUBT THAT THE MATERIAL COLLECTED AND THE ST ATEMENT RECORDED DURING THE SURVEY WAS NOT A CONCLUSIVE PIE CE OF EVIDENCE BY ITSELF. IT WAS SETTLED LAW THAT THOUGH AN ADMIS SION WAS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE, IT COULD NOT BE SAID TO BE CONCLUSIVE AND IT WAS OPEN TO THE PERSON WHO HAD MA DE THE ADMISSION TO SHOW THAT IT WAS INCORRECT. SINCE THE ASSESSEE HAD BEEN ABLE TO EXPLAIN THE DISCREPANCY IN THE STOCK F OUND DURING THE COURSE OF SURVEY BY PRODUCTION OF RELEVANT RECORD I NCLUDING THE EXCISE REGISTER OF ITS ASSOCIATE COMPANY, THE ASSES SING OFFICER COULD NOT HAVE MADE THE ADDITION SOLELY ON THE BASI S OF THE STATEMENT MADE ON BEHALF OF THE ASSESSEE DURING THE COURSE OF SURVEY.' 5. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE CIRCULAR NO. 286/2/2003-IT(INV.), DATED 10.2.2003 WHICH READ S AS FOLLOWS: 'SEARCH & SEIZURE CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATION I.T.A. NO. 1359/HYD/2010 SHRI V. BHEEM SHANKAR =================== 3 INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED T O CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BA SED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCE RNED ASSESSEES WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTA NCES, ON CONFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATIO N ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEF ORE THE INCOME-TAX DEPARTMENTS, SIMILARLY, WHILE RECORDING STATEMENT D URING THE COURSE OF SEARCH AND SEIZURES AND SURVEY OPERATIONS NO ATT EMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INC OME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDI NGS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDE NCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATI ONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT OR DERS.' 6. ON THE OTHER HAND, THE LEARNED DR WHILE OPPOSING THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE, RELIED ON THE JUD GEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT, [251 IT R 561 (AP)], WHEREIN THE HIGH COURT HELD AS FOLLOWS: ' HELD , THAT THE ASSESSEE WAS NOT ABLE TO DISPUTE THE FIN DINGS OF THE ASSESSING OFFICER AS WELL AS THE TRIBUNAL WHERE THE SEIZED MATERIAL HAD SHOWN THAT THERE WAS SUPPRESSION FOR A PERIOD O F 24 DAYS DURING THE ASSESSMENT YEAR 1996-97 AND 15 DAYS FOR 1997-98 AND ALSO THAT THE SUPPRESSIONS WERE ON A DAY-TO-DAY BAS IS AND THE EVIDENCE RECORDED FROM THE PARTNER HAD SHOWN THAT T HE SAME METHOD WAS ADOPTED THROUGHOUT THE ASSESSMENT YEARS FOR THE ENTIRE BLOCK PERIOD. WHERE THE ASSESSEE HAD CARRIE D ON THE BUSINESS FOR THE FULL YEAR, THE ADDITION WAS MADE A T SIX TIMES THE SUPPRESSION FOUND DURING THAT YEAR AND FOR THE ASSE SSMENT YEAR 1997-98 THE ADDITION WAS RESTRICTED TO ONLY THREE T IMES, AS THE ASSESSEE HAD CARRIED ON THE BUSINESS ONLY FOR HALF OF THE PERIOD WITH REFERENCE TO THE EARLIER YEAR, WHERE SIX TIMES ADDITION WAS MADE. IT WAS CLEAR FROM THE ORDER OF THE TRIBUNAL THAT THE ESTIMATIONS OF THE UNDISCLOSED INCOME MADE WERE BAS ED ON RELEVANT MATERIAL AND THERE WAS ABSOLUTELY NO UNREA SONABLENESS OR ARBITRARINESS WHILE MAKING SUCH ADDITION. THOUGH T HERE WAS NO MATERIAL WITH REFERENCE TO THE ADDITION MADE FOR TH E ASSESSMENT YEARS 1986-87 TO 1995-96, YET IT WAS ADMITTED BY TH E PARTNER OF THE ASSESSEE-FIRM THAT THE ASSESSEE HAD PRACTISED SUPPR ESSION OF SALES TURNOVER EVEN IN THOSE YEARS AND TAKING THE Q UANTUM OF BUSINESS THE SUPPRESSION WAS ESTIMATED AT 20 PER CE NT, AND THE GROSS PROFIT RATE RETURNED BY THE ASSESSEE WAS ACCE PTED. THE TRIBUNAL HAD RIGHTLY FOUND THAT THE ESTIMATION OF T HE SUPPRESSED TURNOVER AS WELL AS UNDISCLOSED INCOME BY THE ASSES SING OFFICER WAS ON THE HIGHER SIDE AND THE TRIBUNAL ON CONSIDER ATION OF THE I.T.A. NO. 1359/HYD/2010 SHRI V. BHEEM SHANKAR =================== 4 MATERIAL ON RECORD RE-DETERMINED THE SUPPRESSED TUR NOVER AS WELL AS THE UNDISCLOSED INCOME WHICH WAS REASONABLE AND PROPER.' 7. THE LEARNED DR ALSO RELIED ON THE JUDGEMENT IN T HE CASE OF CIT VS. HOTEL SAMRAT [323 ITR 353 (KER)] WHEREIN IT WAS HELD AS U NDER: ' HELD , ALLOWING THE APPEALS IN PART, THAT THE TRIBUNAL H AD NOT ONLY REJECTED THE STATEMENTS AS HAVING NO EVIDENTIARY VA LUE, BUT HAD NOT EVEN CONSIDERED THE CONTENTS OF THE DOCUMENTS SEIZE D BY THE DEPARTMENT. WHEN THE CONTENTS OF THE DOCUMENTS SEI ZED WERE PROVED THROUGH CORROBORATIVE EVIDENCE OF THE MANAGI NG PARTNER, THE MANAGER AND THE SUPPLIER THERE WAS NO REASON TO REJECT THEM. FOR THE SAKE OF FINALITY, THE GROSS PROFIT RATE EST IMATED BY THE TRIBUNAL IN THE FIRST ROUND AT 40 PER CENT FOR THE YEAR 1997-98 COULD BE APPLIED FOR ALL THE THREE YEARS.' 8. THE LEARNED DR FURTHER RELIED ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF H.V. VENUGOPAL CHETTIAR V. CIT [153 ITR 376 (MAD)] WHEREIN THE HIGH COURT HELD AS UNDER: ' HELD , DISMISSING THE APPLICATION, THAT THOUGH THE REASS ESSMENT PROCEEDINGS SHOULD BE TAKEN TO BE INDEPENDENT OF TH E PENALTY PROCEEDINGS AND THE MERE FACT THAT CERTAIN ADDITION S HAD BEEN MADE IN THE ASSESSMENT PROCEEDINGS COULD NOT AUTOMA TICALLY BE TAKEN AS A GROUND FOR LEVYING PENALTY, IN THE INSTA NT CASE, THE ASSESSEE HAD MADE A STATEMENT ADMITTING SUPPRESSION OF RS. 15,000 PER YEAR AND THIS ADMISSION MADE AT THE STAG E OF THE REASSESSMENT PROCEEDINGS HAD NOT BEEN RETRACTED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, IT WAS NOT NECESS ARY FOR THE DEPARTMENT TO MAKE ANY INDEPENDENT ENQUIRY TO FIND OUT WHETHER THERE WAS, IN FACT, ANY SUPPRESSION AND WHETHER SUC H SUPPRESSION WAS DUE TO ANY DISHONEST INTENTION ON THE PART OF T HE ASSESSEE. MERELY BECAUSE PENALTY PROCEEDINGS ARE INDEPENDENT OF ASSESSMENT PROCEEDINGS, IT CANNOT BE SAID THAT THE ASSESSING AUTHORITY SHOULD IGNORE ALL THE MATERIALS COLLECTED AT THE ASSESSMENT STAGE INCLUDING THE ADMISSION MADE BY TH E ASSESSEE. THE TRIBUNAL WAS, ACCORDINGLY, JUSTIFIED IN CONFIRM ING THE LEVY OF PENALTY. NO QUESTION OF LAW AROSE OUT OF ITS ORDER .' 9. THE LEARNED DR ALSO RELIED ON THE JUDGEMENT OF A LLAHABAD HIGH COURT IN THE CASE OF DR. S.C. GUPTA V. CIT, [248 ITR 782 (AL L)] WHEREIN THE COURT HELD AS UNDER: ' HELD , THAT A STATEMENT MADE VOLUNTARILY BY THE ASSESSEE COULD FORM THE BASIS OF ASSESSMENT. THE MERE FACT THAT T HE ASSESSEE RETRACTED THE STATEMENT COULD NOT MAKE THE STATEMEN T UNACCEPTABLE. THE BURDEN LAY ON THE ASSESSEE TO ES TABLISH THAT THE ADMISSION MADE IN THE STATEMENT AT THE TIME OF SURVEY WAS WRONG AND IN FACT THERE WAS NO ADDITIONAL INCOME. THIS BURDEN WAS NOT EVEN ATTEMPTED TO BE DISCHARGED. THE ORDER OF THE TRIBUNAL WAS BASED ON FACTS AND NO QUESTION OF LAW AROSE FRO M IT.' I.T.A. NO. 1359/HYD/2010 SHRI V. BHEEM SHANKAR =================== 5 10. WE HAVE HEARD BOTH THE PARTIES AND ALSO CONSIDE RED THE MATERIAL AVAILABLE ON RECORD. COMING TO THE FACTS OF THE PRESENT CASE , THE ASSESSEE HIMSELF STATED DURING THE COURSE OF SURVEY HE HAS PREPARED THE RET URN OF INCOME ON ESTIMATE BASIS AND HE HAS NOT MAINTAINED PROPER BOOKS OF ACC OUNT. HIS AVERAGE PURCHASES PER MONTH WOULD BE RS. 7 TO 8 LAKHS AND A VERAGE PROFIT EARNED IS AT 12 TO 14% AND HIS PURCHASES FOR THE FY 2003-04 WOULD B E RS. 85 LAKHS AND HE RETURNED ONLY RS. 7,64,240 BUT THE IMPOUNDED MATERI ALS SUGGEST THAT THE PURCHASES FROM 28.5.2003 TO 16.12.2003 WORKS OUT TO RS. 55,97,919. BEING SO, THERE SHOULD UNACCOUNTED PURCHASES FOR THE REMAININ G PERIOD OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THEREFORE, THE ASSESSING OFFICER CONSIDERED THE TOTAL PURCHASES AT RS. 85 LA KHS AND ARRIVED AT A PROFIT OF 12% ON THIS PURCHASES WHICH WORKED OUT TO RS. 10,20 ,000. THE ASSESSING OFFICER DEDUCTED THE AMOUNT OF INCOME DECLARED BY THE ASSES SEE AT RS. 4,85,498 AND MADE AN ADDITION TOWARDS THE BALANCE AMOUNT OF RS. 5,34,502. IN THIS CASE, AS SEEN FROM THE FACTS OF THE CASE, THERE IS MATERIAL IN THE FORM OF PURCHASE BILLS FOR THE PERIOD COVERING FROM 28.5.2003 TO 16.12.2003 AT RS. 55,01,064 AND ON THIS BASIS THE PURCHASES OF THE WHOLE YEAR ARE ESTIMATED AT RS. 85 LAKHS. THE ARGUMENT OF THE ASSESSEE'S COUNSEL HOLDS GOOD ONLY IN THE CIRCUMSTANCES IF THERE IS NO MATERIAL RELATING TO ESTIMATION OF PURCHASES IN ANY ASSESSMENT YEAR. HOWEVER, WHEN THERE IS A VALID MATERIAL IN THE ASSE SSMENT YEAR UNDER CONSIDERATION FOUND DURING THE COURSE OF SURVEY IT IS TO BE USED FOR ESTIMATION OF THE TOTAL PURCHASES OF THIS ASSESSMENT YEAR. THERE BEING POSITIVE MATERIAL IN THE FORM OF PURCHASE BILLS TO DETERMINE THE PURCHASE OF THE WHOLE YEAR IS JUSTIFIED IN THIS ASSESSMENT YEAR UNDER CONSIDERATION. THIS VIEW OF OURS IS SUPPORTED BY THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF RAJNIK & CO. (SUPRA). ACCORDINGLY, WE HAVE NOT CONSIDERED THE OTHER JUDGE MENT AS WELL AS CIRCULAR CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. HOWEVER, WE DIRECT THE AO TO ESTIMATE THE NET PROFIT ON ADDITIONAL TURNOVER SO ESTIMATED AT THE RATE OF NET PROFIT DECLARED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. THIS GROUN D IS PARTLY ALLOWED. 11. THE NEXT GROUND IS WITH REGARD TO THE ADDITION OF RS. 15 LAKHS TOWARDS UNEXPLAINED INVESTMENT. 12. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE W HILE REPLYING TO QUESTION NO. 16 STATED THAT UNACCOUNTED PURCHASES WERE MADE OUT OF PROFIT OF EARLIER YEAR AT AROUND RS. 15 LAKHS. THE ASSESSING OFFICER MADE AN ADDITION OF RS. 15 LAKHS I.T.A. NO. 1359/HYD/2010 SHRI V. BHEEM SHANKAR =================== 6 TOWARDS THIS UNEXPLAINED INVESTMENT. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD BOTH THE PARTIES AND ALSO CONSIDE RED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLEARLY STATED WHILE RECOR DING THE STATEMENT THAT RS. 15 LAKHS OF UNACCOUNTED INVESTMENT IS FROM EARLIER YEA R'S PROFIT. THAT MEANS THE PROFIT EARNED IN THE EARLIER YEAR IS NOT THE ASSESS MENT YEAR UNDER CONSIDERATION. BEING SO, IF THERE IS UNACCOUNTED INVESTMENT TOWARD S UNACCOUNTED PURCHASES THAT AMOUNT CANNOT BE CONSIDERED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IF SO WARRANTED THE SAME WILL BE CONSIDERED IN THE EARLIE R ASSESSMENT YEAR. ACCORDINGLY THIS ADDITION IS DELETED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON _27 TH DECEMBER, 2011. SD/- SD/- SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 27 TH DECEMBER, 2011 COPY FORWARDED TO: 1. SHRI V. BHEEM SHANKAR, C/O. SRI K. VASANT KUMAR, A.V. RAGHU RAM, P. VINOD & B. PEDDI RAJULU, ADVOCATES, FLAT NO . 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD-500 001. 2. THE INCOME-TAX OFFICER, WARD-1, VIKARABAD. 3. THE CIT(A)-III, HYDERABAD. 4. THE CIT-2, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD TPRAO