The ITO, Ward-2(1), Bhavnagar V. Shri Hareshbhai Pritamdas Sahitya, Bhavnagar

ITA 1430/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6486 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of being heard
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D.AGRAWAL, V.P. & HONBLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 1430/AHD./2009 ASSESSMENT YEAR : 2005-2006 I.T.O., WARD-2(1), BHAVNAGAR -VS- SHRI HAR ESHBHAI PRITAMDAS SAHITYA, BNAGAR (PAN : AGBPS 8546E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. RESPONDENT BY : SHRI S.N.DIVATIA, A.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 22-01-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XX, AHM EDABAD FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE WAS CARRYING ON PROPRIETARY BUSINESS OF EDIBLE OIL ON SEMI-WHOLE SALE BASIS AT BHAVNAGAR IN THE NAME OF M/S. SAURASHTRA TRADING CO. FOR THE ASSESSM ENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME AT RS.1,49,734/-. THE AO FRAMED THE ASSESSMENT UNDER SECTION 144 OF THE I.T. ACT ON 26.12.2007 AT TOTAL INCOME OF RS.30,08,740/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE LETTER DATED 12.11.2007, THE SR. MANAGER OF DENA BANK, BHAVNAGAR SUPPLIED THE INFORMATION TO THE AO WHEREIN IT WAS STATED THAT THE ASSESSEE HAS SHOW N BEFORE THE BANK AUTHORITIES LTHE VALUE OF STOCK AT RS.25,75,220/- WHEREAS IN AUDITED TRADING AND PROFIT & LOSS A/C., THE ASSESSEE HAS SHOWN THE CLOSING STOCK OF RS.2,19,773 /-. ON THIS BASIS, IN THE ASSESSMENT ORDER, THE AO MADE ADDITION OF RS.24,81,168/- FOR T HE DETAILED REASONS GIVEN IN PARA 5 OF THE ASSESSMENT ORDER. APART FROM THIS, IN THE AS SESSMENT ORDER, THE AO MADE ADDITION OF RS.2,50,000/- BY TREATING THE LOAN FROM SHRI CHANDRASINGH M. JADEJA AS ITA NO.1430/AHD/2009 2 INCOME FROM UNDISCLOSED SOURCES. FINALLY THE AO DIS ALLOWED RS.1,26,877/- OUT OF TELEPHONE, LEGAL AND PROFESSION, SALARY & BONUS, PO STAGE & TELEGRAM, VEHICLE AND PRINTING & STATIONERY EXPENSES AS MENTIONED IN PARA 7 OF THE ASSESSMENT ORDER. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS.24,81,168/- MADE BY THE AO ON ACCOUNT OF DIFFERE NCE IN STOCK AND ADDITION OF RS.2,50,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAI NED CASH CREDIT. FURTHER, THE LD. CIT(A) RESTRICTED THE ADDITION OF RS.1,26,877/- TO RS.25,375/-. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: 1. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.24,81,1687- MADE BY THE AO ON AC COUNT OF DIFFERENCE IN STOCK, WITHOUT PROPERLY APPRECIATING THE FACTS OF T HE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. 1.2 IN DOING SO, THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN OBSERVING THAT THERE IS NO MATERIAL TO SHOW THAT THE STOCK BALANCE DECLARED BY THE ASSESSEE TO THE BANK WAS AS PER THE ACTUAL Q UANTITIES, WITHOUT APPRECIATING THE FINDING OF THE AO IN PARA 5.3 OF T HE ASSESSMENT ORDER THAT THE BANK HAD ACTUALLY CARRIED OUT THE INSPECTION OF THE STOCK AND THE STOCK INSPECTION REPORTS OF THE BANK WERE ALSO DISCUSSED IN THE ASSESSMENT ORDER. 1.3 IN DOING SO, THE LD. CIT(A)-XX, AHMEDABAD HAS E RRED IN LAW AND ON FACTS IN OBSERVING THAT EVEN THE BOOKS OF ACCOUNTS HAD NO T BEEN REJECTED BY THE AO WITHOUT APPRECIATING THE SPECIFIC FINDING GIVEN BY THE AO IN PARA 6.4 OF THE ASSESSMENT ORDER, REJECTING THE BOOK RESULTS U/S. 1 45 OF THE ACT. 1.4 IN DOING ' SO, THE LD. CIT(A)-XX, AHMEDABAD HAS NOT KINDLY APPRECIATED THAT THE FACTS OF THE DECISIONS REPORTED IN 241 ITR 363 AND 236 ITR 342 RELIED UPON BY HIM IN THE APPELLATE ORDER ARE ENTIRELY DI FFERENT AS IN THE SAID CASES, NO INSPECTION OF THE STOCK WAS CARRIED OUT BY THE B ANK. 1.5 IN DOING SO, THE ID. CIT{A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN NOT FOLLOWING THE RATIO OF THE FOLLOWING JUDI CIAL DECISIONS WHICH ARE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE: (I) DHANSI RAM AGARWAL VS. CIT 201 ITR 192 (GUA); AND (II) CIT VS. CHEMMEENS 207 ITR 909 (KER.) ITA NO.1430/AHD/2009 3 2. THE LD. CIT(A)-XX. AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.2,50,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CAST AND THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. 2.1 IN DOING SO, THE LD. CIT(A)-XX, AHMEDABAD HAS E RRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE COULD NOT PRO DUCE THE SAID CREDITOR BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS INSPITE OF SEVERAL NOTICES ISSUED AND THEREFORE THE SAID ADDITION WAS RIGHTLY MADE BY THE AO. 3. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN RESTRICTING THE ADDITION OF RS.1,26,877/- MADE BY THE AO ON ACC OUNT OF DISALLOWANCE OUT OF TELEPHONE, VEHICLE AND OTHER EXPENSES TO RS.25,3757 -ONLY, WITHOUT APPRECIATING THAT THE SAID ADDITION WAS RIGHTLY MADE BY THE AO A S THE ASSESSEE COULD NOT SUBMIT THE VOUCHERS, CASH BOOK, ETC. IN SUPPORT OF THE SAID CLAIM OF EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF A.O. BE RESTORED TO THE ABOVE EXTENT. 5. AT THE TIME OF HEARING BEFORE US, SHRI SAMIR TEK RIWALA, SR.D.R., APPEARED ON BEHALF OF THE REVENUE AND FILED A PAPER BOOK CONTAI NING 27 PAGES WHICH, INTER ALIA, INCLUDE COPY OF THE REMAND REPORT AND CORRESPONDENC E WITH THE LD. CIT(A), AUDIT REPORT AND THE INSPECTION REPORT OF THE BANK. HE PO INTED OUT THAT IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS OBSERVED THAT THERE IS NO MATERIAL TO SHOW THAT THE STOCK BALANCE DECLARED BY THE ASSESSEE TO THE BANK WAS AS PER ACTUAL QUANTITY. IN OBSERVING SO, THE LD. CIT(A) IGNORED THE FINDINGS OF THE AO I N PARA 5.3 OF THE ASSESSMENT ORDER WHEREIN IT IS MENTIONED THAT THE BANK HAD ACTUALLY CARRIED OUT THE INSPECTION OF THE STOCK AND STOCK INSPECTION REPORT OF THE BANK WAS A LSO DISCUSSED IN THE ASSESSMENT ORDER. HE SUBMITTED THAT THIS INSPECTION REPORT OF THE BANK WAS SUFFICIENT TO REJECT THE BOOK RESULT UNDER SECTION 145. THE ADDITION MADE OF RS.24,81,168/- BY THE AO, THEREFORE, BE RESTORED. 6. ON THE OTHER HAND, ON BEHALF OF THE ASSESSEE, SH RI S.N.DIVATIA APPEARED AND POINTED OUT THAT INSPECTION REPORT WAS NEVER MADE A VAILABLE TO THE ASSESSEE. FOR THIS ITA NO.1430/AHD/2009 4 REASON, HE CONTENDED THAT EITHER SOMETIME BE ALLOWE D OR THIS ISSUE BE REMANDED TO THE FILE OF THE LD. CIT(A). 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN PARA 3.1 OF THE IMPUGNED ORDER, THE LD. CIT(A) HAS STATED THAT THE AO MADE ENQUIRY WITH DEN A BANK, LOKHAND BAZAR BRANCH, BHAVNAGAR, WITH WHOM THE ASSESSEE HAD CREDIT FACILI TY ON HYPOTHECATION OF STOCK, THE AO FOUND THAT THE STOCK STATEMENT FURNISHED TO THE BANK SHOWED THE VALUE OF FINISHED GOODS AS ON 31.03.2005 AT RS.25,75,220/- WHEREAS TH E ASSESSEE HAS DISCLOSED CLOSING STOCK IN THE BALANCE-SHEET AT ONLY RS.2,19,773/- AN D THUS THERE WAS A DIFFERENCE OF RS.24,81,168/-. THIS STOCK STATEMENT HAS BEEN PRODU CED BY THE DEPARTMENT IN THE PAPER BOOK AT PAGES 22 TO 27. THIS STOCK STATEMENT IS AS ON 31.03.2005. THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF ACCOUNTS. HOWEVER, ALL THE SALES AND PURCHASE BILLS ARE AVAILABLE. IN THESE CIRCUMSTANCES, WE REMAND THIS M ATTER TO THE FILE OF THE LD. CIT(A) WITH THE DIRECTION THAT THE ASSESSEE SHALL RECONCIL E THE STOCK DIFFERENCE BECAUSE IN THE INSPECTION REPORT OF DENA BANK, QUANTITY DETAILS AR E AVAILABLE AND ALL THE SALES AND PURCHASE VOUCHERS FOR THE PERIOD 11.03.2005 TO 31.0 3.2005 ARE ALSO AVAILABLE WITH THE ASSESSEE. THE LD. CIT(A) WILL VERIFY THE RECONCILED STATEMENT WITH THE BILLS AND VOUCHERS WITH PURCHASE AND SALES AND RE-ADJUDICATE THE SAME AFRESH, AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. RESUL TANTLY, FOR STATISTICAL PURPOSES, THIS ISSUE IS TREATED AS ALLOWED. 8. WITH REGARD TO GROUND NO.2, WE HAVE HEARD BOTH T HE SIDES. THE ASSESSEE HAD RECEIVED LOAN OF RS.2,50,000/- FROM CHANDRASINGH M. JADEJA. SHRI CHANDRASINGH M. JADEJA IS ASSESSED TO TAX AND THE ASSESSEE HAS FURN ISHED A COPY OF THE PROFIT & LOSS A/C. AND THE BALANCE-SHEET. ON VERIFICATION OF THE BALAN CE-SHEET, THE LD. CIT(A) NOTED THAT ADVANCE GIVEN TO THE ASSESSEE IS DULY REFLECTED IN THE BALANCE-SHEET OF SHRI CHANDRASINGH M. JADEJA. THIS IS NOT DISPUTED BY THE AO IN THE REMAND REPORT. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT( A) IS LEGALLY AND FACTUALLY JUSTIFIED IN DELETING THE ADDITION OF RS.2,50,000/- MADE BY T HE AO BY TREATING THIS LOAN AS ITA NO.1430/AHD/2009 5 UNEXPLAINED INCOME OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. RESULTANTLY, GROUND NO.2 IS REJECTED . 9. IN RESPECT OF GROUND NO.3, WE HAVE HEARD BOTH TH E SIDES. IN THE ASSESSMENT ORDER, THE AO DISALLOWED THE FOLLOWING EXPENSES FOR WANT OF PROOF AND IN THE ABSENCE OF VOUCHERS AND CASH BOOK. TELEPHONE EXPENSES RS. 5,828/- LEGAL & PROFESSIONAL EXPENSES RS. 4,100/- SALARY & BONUS EXPENSES RS. 93,600/- POSTAGE, TELEGRAM EXPENSES RS. 89/- VEHICLE EXPENSES RUNNING RS. 3,890/- PRINTING & STATIONERY RS. 9,370/- TOTAL RS.1,26,877/- 9.1 IN THE IMPUGNED ORDER, THE LD. CIT(A) RESTRICTE D THE AFORESAID DISALLOWANCE OF RS.1,26,877/- TO RS.25,375/-. LOOKING TO THE NATURE OF THE BUSINESS, HUGE TURNOVER OF RS.3.48 CRORES, BOOKS OF ACCOUNTS ARE AUDITED UNDER SECTION 44AB, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE LD. CIT(A) IS FA IR AND REASONABLE. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OP EN COURT ON 15.06.2011 SD/- SD/- (G.D.AGRAWAL) (T.K. SHARMA) VICE-PRESIDENT JUDICIAL MEMBER DATED : 15/06/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.