M/s. Tariq Marbles (P) Ltd., JAIPUR V. ACIT, UDAIPUR

ITA 136/JODH/2010

• Counselvise Citation: 13623314 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Keywords: Unexplained investment; Business income; Additional evidence
• Section: 145

Judgement Text

1 ITA 136(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 136/JODH/2010 ASSTT. YEAR : 2006-07. M/S. TARIQ MARBLES PVT. LTD., VS. THE ACIT, CENTR AL CIRCLE-2, GB 21 TO 24, RIICO INDUSTRIAL AREA, UDAIPUR. RAJSAMAND. ITA NO. 137/JODH/2010 ASSTT. YEAR : 2006-07. THE DCIT, CENTRAL CIRCLE-2, VS. M/S. TARIQ MARBLE S PVT. LTD., UDAIPUR. DIST. RAJSAMAND. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI SANDEEP JHANWAR DEPARTMENT BY : SHRI R.H. GOHEL DATE OF HEARING : 07.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THESE TWO CROSS APPEALS ARE FILED BY THE ASSESSEE A ND DEPARTMENT RESPECTIVELY AGAINST THE ORDER OF CIT(A), UDAIPUR DATED 12/01/20 10 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO. 1 OF THE ASSESSEES APPEAL IS AGAINST UPHOLDING THE VALIDITY OF THE ORDER PASSED BY THE ASSESSING OFFICER WHILE THE DEP ARTMENT HAS TAKEN GROUND NO. 1 AGAINST THE ADMISSION OF ADDITIONAL EVIDENCES DURING THE CO URSE OF APPELLATE PROCEEDINGS. 2 3. THE CIT(A) IN THE APPELLATE PROCEEDINGS FOUND TH AT DATE OF ASSESSMENT ORDER IS SHOWN AS 21.11.2008 BUT THE SAME WAS DISPATCHED TO ASSESSEE ONLY ON 20.12.2008 AS CONFIRMED FROM THE ACKNOWLEDGMENT GIVEN BY THE POST AL AUTHORITIES WHEREAS THE ASSESSEE SUBMITTED THE REPLIES TO THE ASSESSING OFFICER ON 1 5.12.2008 ALONGWITH SUPPORTING PAPERS AND DOCUMENTS. THE ASSESSEE FILED PAPERS ALONGWITH THE COPIES OF REPLIES SO IN THE APPELLATE PROCEEDINGS. THE CIT(A) PROCEEDED TO DEC IDE THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE BEFORE HIM ON THE BASIS OF THESE PAPER S AFTER ALLOWING THE REASONABLE OPPORTUNITY FOR EXAMINING THESE PAPERS TO THE ASSES SING OFFICER BY WAY OF CALLING HIS REMAND REPORT. 4. WE FIND SUCH ACTION OF CIT(A) JUST AND REASONABL E AND MEETS END OF JUSTICE AT BOTH ENDS. WE THEREFORE, DISMISS GROUND NO. 1 OF B OTH THE APPEALS OF THE ASSESSEE AND THE DEPARTMENT. 5. IN GROUND NO. 2 OF THE ASSESSEES APPEAL, ASSESS EE HAS CHALLENGED THE TRADING ADDITION OF RS. 5,20,068/- SUSTAINED BY THE CIT(A) OUT OF THE TOTAL ADDITION OF RS. 20,10,710/- MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND, GROUND NO. 2 OF THE DEPARTMENTAL APPEAL IS AGAINST THE REDUCTION IN THE AMOUNT OF ADDITION. 6. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED A GROSS PROFIT OF RS.37,03,466/- ON THE TOTAL SALES OF RS.1,75,98,057 /- GIVING A G P RATE OF 21.04% AS AGAINST GP RATE OF 27.25% ON THE TOTAL SALES OF RS. 1,06,91,394/- DECLARED IN LAST YEAR. THE ASSESSING OFFICER HOWEVER CALCULATED THE GP RAT E OF THE ASSESSEE FOR THE YEAR AT 17.53%. IN CALCULATING THE G P RATE, HE HAS INCLUD ED THE AMOUNT OF OTHER INCOME OF RS.35,18,630/- IN THE AMOUNT OF TURNOVER AND TAKEN THE AMOUNT OF TURNOVER AT RS.2,11,16,687/- AS AGAINST SALES OF RS.1,75,98,057 /-. THE LD. AO APPLIED THE PRECEDING 3 YEARS GP RATE OF 27.25% ON TOTAL TURNOVER CALCULAT ED BY HIM AT RS.2,11,16,687/- AND CALCULATED THE GROSS PROFIT AT RS.57,14,176 AND ACC ORDINGLY MADE TRADING ADDITION OF RS.20,10,710/-. THE CIT(A) UPHELD THE APPLICATION OF PROVISIONS OF SECTION 145 FOR THE REASON THAT UNEXPLAINED INVESTMENT IN STOCK WAS FOU ND DURING THE COURSE OF SURVEY AT ASSESSEES PREMISES. HOWEVER, HE FOUND THE ESTIMATI ON OF GROSS PROFIT BY THE ASSESSING OFFICER ON HIGHER SIDE. FIRSTLY, HE HAS NOT APPROV ED THE INCLUSION OF OTHER INCOME IN THE AMOUNT OF TURNOVER FOR THE PURPOSE OF CALCULATING T HE GROSS PROFIT. THE OTHER INCOME INCLUDES A SUM OF RS.33,08,494/- IN RESPECT SURREND ER MADE ON ACCOUNT OF UNEXPLAINED STOCK FOUND DURING THE COURSE OF SURVEY. SECONDLY, HE CONSIDERED THE EXPLANATION GIVEN BY THE ASSESSEE IN RESPECT OF THE REDUCTION IN MARG INS DURING THE YEAR. HE ACCORDINGLY APPLIED A GROSS PROFIT RATE OF 24% AND ESTIMATED TH E GROSS PROFIT AT RS.42,23,534/- ON THE SALES OF RS.1,75,98,057/-. 7. BEFORE US, THE LD. A/R OF THE ASSESSEE POINTED O UT THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED ALONGWITH QUANTITATIVE DETAILS AND THUS GIVES A CORRECT PICTURE OF THE GROSS PROFIT SHOWN. HE SUBMITTED THAT THE SALES AS DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED AND IN SUCH CASE THE INCREASED GROSS PROFI T RATE CANNOT BE APPLIED AS NO FINDING AS TO ANY UNVOUCHED OR UNVERIFIABLE EXPENDITURE HAS BEEN GIVEN BY THE AUTHORITIES BELOW. HE ALSO RELIED UPON INSTANCES OF COMPARATIVE SELLIN G RATE PLACED IN THE PAPER BOOK TO SHOW THAT THE SELLING RATE DURING THE YEAR UNDER CO NSIDERATION WERE LOW AS COMPARED TO PRECEDING YEARS. HE ACCORDINGLY REQUESTED FOR DELE TION OF ENTIRE ADDITION AND LD. D/R ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFF ICER AND REQUESTED TO SUSTAIN THE ENTIRE ADDITION MADE BY HIM. 4 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE FOUND THAT BOTH THE ASSESSING OFFICER AND THE CIT(A) HAVE NOT GIVEN ANY FINDING REGARDING ANY UNVOUCHED SALES. THE STOCK FOUND IN EXCESS DURING SURVEY HAS BEEN SURRENDERED BY THE ASSESSEE AS HIS INCOME FOR THE YEAR UNDER CONSIDERA TION. THERE IS NO FINDING IN RESPECT OF CLAIMING ANY EXCESSIVE EXPENDITURE. IT IS ALSO FOU ND THAT THE ASSESSEE HAS INCLUDED THE COMPLETE QUANTITATIVE DETAILS IN HIS ANNUAL REPORT. THE ASSESSEE HAS ALSO GIVEN THE INSTANCES OF REDUCTION IN SELLING RATE DURING THE Y EAR TO EXPLAIN THE REASONS FOR REDUCTION IN THE GROSS PROFIT RATE DURING THE YEAR AS COMPARE D TO THE EARLIER YEAR. IN THESE FACTS AND CIRCUMSTANCES, THE APPLICATION OF ENHANCED GROSS PR OFIT RATE IS NOT JUSTIFIED. IN OUR CONSIDERED VIEW, IT IS JUST AND REASONABLE TO SUSTA IN A LUMP SUM ADDITION OF RS.1,00,000/- ON THIS ACCOUNT WHICH WILL COVER THE POSSIBILITIES OF ANY LEAKAGES. THE GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY PARTLY ALLOWED AND THE GROUND NO. 2 OF THE DEPARTMENTAL APPEAL IS DISMISSED. 9. GROUND NO. 3 IN THE ASSESSEES APPEAL IS TAKEN A GAINST SUSTAINING THE ADDITION OF RS. 3,31,200/- IN RESPECT OF ALLEGED UNEXPLAINED ST OCK OF LUFFERS/BLOCKS FOUND DURING THE COURSE OF SURVEY AT ITS DHOLIKHAN MINES. 10. THE ADDITION MADE WAS FOR A SUM OF RS.19,60,325 /- AND THE DEPARTMENT HAS TAKEN GROUND NO. 3 AGAINST THE REDUCTION IN THE AMOUNT OF ADDITION. 11. THE ASSESSING OFFICER HAS FOUND THAT THERE WAS A STOCK OF TOTAL 94 BLOCKS/ LUFFERS AT THE TIME OF SURVEY AT THE DHOLIKHAN MINES OF THE AS SESSEE. HE CALCULATED THE VALUE OF THESE BLOCKS AT RS.19,60,325/- BY APPLYING A RATE O F RS. 20635 ON THE BASIS OF EVIDENCE OF SALE FOUND DURING THE COURSE OF SEARCH AT THE RESID ENCE OF DIRECTOR OF ASSESSEE COMPANY. HE FOUND THE SAID STOCK AS UNRECORDED STOCK OF THE ASSESSEE AND ACCORDINGLY MADE AN 5 ADDITION OF RS.19,60,325/- AS UNEXPLAINED INVESTMEN T. THE CIT(A) HAS HOWEVER FOUND OUT OF THE TOTAL 94 BLOCKS, 87 BLOCKS WERE OF SECON D QUALITY AS STATED BY THE MR. B. L. SHARMA, FOREMAN AT THE TIME OF TAKING INVENTORY DUR ING SURVEY. HE ALSO FOUND THE VALUE OF OTHER 7 BLOCKS TAKEN BY THE LD. AO AT HIGHER SID E. HE VALUED 87 BLOCKS @ 2600 ON THE BASIS OF AVERAGE SELLING RATE OF 2 ND QUALITY LUFFERS AND BALANCE 7 BLCOKS @ RS.15,000/- AND SUSTAINED THE ADDITION TO THE EXTENT OF RS.3,31,200 /-. 12. BEFORE US, THE LD. A/R HAS POINTED OUT THAT THE ALL THE BLOCKS WERE FOUND AT ASSESSEES OWN MINES AND THE SAID BLOCKS/ LUFFERS W ERE TAKEN OUT FROM THESE MINES ONLY. ACCORDING TO HIM THERE WAS NO INVESTMENT MADE FOR P URCHASE OF THESE BLOCKS AND THE EXPENDITURE INCURRED FOR MINING OF THE SAME HAS ALR EADY BEEN DEBITED IN THE BOOKS OF THE ASSESSEE. HE THEREFORE, SUBMITTED THAT THE QUESTIO N OF ANY UNEXPLAINED INVESTMENT DOES NOT ARISE AND IN NO CASE THE VALUE OF INVESTMENT CA N BE ESTIMATED BY APPLYING THE SELLING RATE. HE ALSO SUBMITTED THAT THERE IS NO VALUE OF T HE WASTE 87 BLOCKS AS PER THE STATEMENT OF THE FOREMAN WRITTEN IN THE INVENTORY SHEET ITSEL F. HE THEREFORE REQUESTED FOR DELETION OF ENTIRE ADDITION. THE LD. D/R ON THE OTHER HAND RELI ED ON THE FINDINGS GIVEN BY THE ASSESSING OFFICER AND OPPOSED THE DELETION OF ADDIT ION 13. AFTER HEARING THE PARTIES AND PERUSAL OF MATERI AL ON RECORD, WE FIND FORCE IN THE SUBMISSIONS MADE BY THE LD. A/R OF THE ASSESSEE THA T ADDITION IN RESPECT OF VALUE OF THE SAID STOCK OF MARBLE LUFFER AND BLOCKS FOUND AT THE MINES OF THE ASSESSEE CANNOT BE MADE FOR THE REASON THAT ASSESSEE IS A MINER. THE ASSESS EE HAS RECORDED MINING EXPENSES IN HIS BOOKS OF ACCOUNT. TOTAL 87 OUT OF 94 BLOCKS SO FOUN D WERE WASTE AS PER THE STATEMENT MADE BY THE FOREMAN AT THE TIME OF TAKING INVENTORY ITSELF DURING THE COURSE OF SURVEY. THERE IS NO FINDING OF ANY MATERIAL FOUND EVIDENCIN G PURCHASES MADE OF THESE BLOCKS BY 6 THE ASSESSEE. THEREFORE, THE ADDITION MADE FOR THE REASON OF UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IS UNWARRANTED. ANY POSSIBILITY OF NON-INCLUSION OF COST OF MINING OF THE FRESH BLOCKS IN THE VALUE OF STOCK AS AT THE END OF THE YEAR IS ALSO COVERED BY THE SUSTAINED TRADING ADDITION OF RS.1,00,000/- ABOVE. WE THEREFO RE, ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND DISMISS THE GROUND TAKEN BY THE DEPART MENT. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. 15. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- M/S. TARIQ MARBLWES PVT. LTD., RAJSAMAND. THE ACIT/DCIT, CENTRAL CIRCLE-2, UDAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 136(2)/JODH/2010) BY ORDER, AR ITAT JODHPUR.