Gardenia India Ltd., New Delhi V. DCIT, New Delhi

ITA 1464/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2754 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: AMIT GOEL
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Documents seized
• Section: 143(3); 142(1); 153A; 56; 132

Judgement Text

ITA NO.1464/DEL/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO . 1464 /DEL /20 1 4 A.Y. : 20 0 7 - 20 0 8 M/S GARDENIA INDIA LIMITED, R-19, 3 RD , FLOOR, MAIN SAKARPUR MARKET, VIKAS MARG, DELHI 110 092 (PAN: AACCG7503M) V S . DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, NEW DELHI ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. AMIT GOEL, ADV. DEPARTMENT BY : SH. A.K. SAROHA, CIT(DR) DATE OF HEARING: DATE OF HEARING: DATE OF HEARING: DATE OF HEARING: 03 0303 03. .. .1 11 12 22 2.201 .201 .201 .2015 55 5 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 04 0404 04. .. .1 11 1.201 .201 .201 .2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU, H.S. SIDHU, H.S. SIDHU, H.S. SIDHU, J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI D ATED 24.12.2013 PERTAINING TO ASSESSMENT YEAR 2007-08 ON THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIR MING THE ADDITION OF RS. 14,00,000/- AS INCOME FROM OTHER SO URCES. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDITION OF RS. ITA NO.1464/DEL/2014 2 14,00,000/- MADE BY THE AO IS ERRONEOUS AND CIT(A) SHOULD HAVE DELETED THE SAME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER PASSED BY THE AO U/S. 143(3) R.W.S . 153A IS ILLEGAL AND WITHOUT JURISDICTIONAL AND COMMISSIONE R OF INCOME TAX (A) SHOULD HAVE HELD SO. THE APPELLANT CRAVES LEAVE TO ADD ONE OR MORE GROUN D OF APPEAL OR TO ALTER/ MODIFY THE EXISTING GROUND OF APPEAL OR T O ALTER/ MODIFY THE EXISTING GROUND BEFORE OR AT THE TIME OF HEARIN G OF APPEAL. THE AFORESAID GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S. 132 OF THE INCOME TAX ACT, 1961 IN THE GARDENIA GROUP OF CASES ON 9.9.2010. THE ASSESSEE WAS ALSO COVERED IN SEAR CH. NOTICE U/S. 143(2) AND 142(1) WERE ISSUED ALONG WITH THE QUESTIONNAIRE DAT ED 27.9.2012. THE CASE WAS ASSESSED AT AN INCOME OF RS. 14,00,000/- AFTER CONS IDERING THE AMOUNT ADMITTED AS UNDISCLOSED RECEIPTS PERTAINING TO THI S PREVIOUS YEAR AS INCOME TO BE CHARGED TO TAX IN THIS ASSESSMENT YEAR ITSELF VI DE ORDER DATED 31.3.2013 PASSED U/S. 153A R.W.S. 143(3) OF THE I.T. ACT, 196 1. 3. AGAINST THE ASSESSMENT ORDER DATED 31.3.2013, AS SESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 24.12 .2013 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 5. LD. COUNSEL FOR THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING PAGES 1 TO 13 WHICH CONTAINS THE PAPER BOOK FILED BEFORE THE LD. CIT(A) AND ALSO ANOTHER ITA NO.1464/DEL/2014 3 PAPER BOOK HAVING PAGES 1 TO 69 CONSISTING OF VARIO US JUDGMENTS OF THE HONBLE HIGH COURTS AND ITAT FAVOURING THE ASSESSEES CASE . 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASON ED ORDER, WHICH DOES NOT NEED ANY INTERFERENCE, HENCE THE SAME MAY BE UPHEL D. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS MADE BY THE LD. COUNSEL AND THE CASE LAWS RELIED UPON BY HIM. FOR THE SAKE OF C ONVENIENCE, WE ARE REPRODUCING THE RELEVANT FINDINGS VIDE PARA NO. 4.2 TO 4.7 AT PAGES 6 TO 8 OF THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AS UNDER:- 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND T HE SUBMISSIONS MADE. FACTS ARE THAT DURING SEARCH AND SEIZURE INCRIMINAT ING DOCUMENTS INDICATING UNACCOUNTED CASH RECEIPTS FROM CUSTOMERS , INFLATED PURCHASES AND OTHER RECEIPTS WERE SEIZED RELATING TO VARIOUS PERSONS OF THE APPELLANT GROUP. THE APPELLANTS, WHEN CONFRONTED WITH THE CON TENTS OF THESE DOCUMENTS, ADMITTED UNACCOUNTED INCOME AMOUNTING IN ALL TO RS.4,78,05,701/-, INCLUDING THE AMOUNT OF RS.2,99,0 5,70I/- RELATING TO THE APPELLANT COMPANY FOR VARIOUS ASSESSMENT YEARS. THE AMOUNT OF RS. I 4,00,000/- PRESENTLY IN DISPUTE IS PART OF THE UNDI SCLOSED INCOME OF RS.2,99,05,70I /- ADMITTED AS PERTAINING TO THE APP ELLANT COMPANY. THERE IS NO DISPUTE AS TO THE NATURE OR QUANTUM OF THE AMOUNTS. THE ONLY DISPUTE IS REGARDING THE YEAR OF TAXABILITY WHEREIN THE APPELLANT HAS OFFERED THE AMOUNTS TO TAX IN THE RESPECTIVE YEARS AS PER THE POC METHOD WHEREAS THE REVENUE HAS TAXED THE AMOUNTS U/S 69A I N THE RESPECTIVE YEARS OF RECEIPT. THE YEAR-WISE COMPARATIVE FIGURES HAVE BEEN TABULATED ITA NO.1464/DEL/2014 4 IN THE SUBMISSIONS FILED BY LD. AR REPRODUCED ABOVE . 4.3 SECTION 69 A READS AS UNDER: UNEXPLAINED MONEY, ETC. 69A. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FO UND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECOR DED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE O F INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION OF THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE MONEY AND THE VALUE OF THE BULL I ON, JEWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR.' 4.4 SECTION 69A IS APPLICABLE WHERE THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VAL UABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NO T RECORDED IN THE BOOKS OF ACCOUNT, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION, OR THE EXPLANATION OFFERED B Y HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER, THEN THE M ONEY AND THE VALUE OF THE BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE MA Y BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. FOR THIS SECTION TO COME INTO OPERATION, THE ASSESSEE MUST BE FOUND TO BE THE OWN ER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE. THE T ERMS MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE SIGNIFY CONCRET E THINGS AND DO NOT MEAN AMOUNTS RECORDED IN BOOKS OF ACCOUNT OR DOCUMENTS. THEREFORE, IN SUCH ITA NO.1464/DEL/2014 5 CASES WHERE UNACCOUNTED ENTRIES ARE FOUND RECORDED IN THE BOOKS OR DOCUMENTS SEIZED, SECTION 69A CANNOT BE INVOKED. TH IS PROVISION CAN BE INVOKED ONLY WHEN UNACCOUNTED CASH, BULLION, JEWELL ERY OR ANY OTHER VALUABLE ARTICLE OR THING IS FOUND DURING SEARCH OR OTHERWISE. THEREFORE, IT WAS NOT APPROPRIATE FOR THE REVENUE TO INVOKE SECTI ON 69A TO CHARGE THE AMOUNT TO TAX. 4.5 ACCORDINGLY, DURING APPEAL, THE APPELLANT WAS A DDRESSED A LETTER ON 28.11.2013 ASKING THE APPELLANT AS TO WHY THE UNACC OUNTED MONEY RECEIVED SHOULD NOT BE TAXED AS INCOME FROM OTHER SOURCES U/S 56 AS THE BUSINESS OF THE APPELLANT DID NOT CONSTITUTE RECEI VING UNACCOUNTED SUMS OF MONEY, WHICH WAS ALSO CONTRARY TO THE LAW. IN REPL Y IT WAS SUBMITTED THAT THE APPELLANT MERELY REITERATED ITS EARLIER OSITION AND SUBMITTED AS UNDER: 'IN RESPECT OF THE ABOVE, IT IS RESPECTFULLY SUBMIT TED THAT THE AMOUNT SHOULD BE CONSIDERED FOR ASSESSMENT UNDER TH E HEAD 'BUSINESS & PROFESSION' AS PER THE PERCENTAGE OF CO MPLETION METHOD FOLLOWED BY THE COMPANY. THE AMOUNT REPRESEN TS BUSINESS RECEIPTS AS THE SAME HAS BEEN RECEIVED FRO M THE CUSTOMERS. THEREFORE, THE SAME SHOULD BE CONSIDERED UNDER THE HEAD 'BUSINESS & PROFESSION.' 4.6 I HAVE CONSIDERED THE ABOVE SUBMISSION OF THE A PPELLANT. IT IS NOT IN DISPUTE THAT THE AMOUNTS RECEIVED WERE NOT ACCOUNTE D FOR IN THE BOOKS OF THE APPELLANT. THEREFORE, THE AMOUNT WAS RECEIVED O VER AND ABOVE WHAT WAS RECORDED BY THE APPELLANT IN THE BOOKS. SINCE T HE AMOUNT WAS NOT RECORDED IN THE BOOKS, IT DID NOT FORM PART OF THE REVENUE RECEIPT OF THE APPELLANT. THE AMOUNT WAS ENJOYED BY THE APPELLANT UPON RECEIPT. THEREFORE, THE AMOUNT HAS TO BE TAXED ON RECEIPT BA SIS AND NOT ON THE ITA NO.1464/DEL/2014 6 BASIS OF POC METHOD. IT IS ALSO TO BE NOTED THAT RE GULAR BUSINESS, DULY ACCOUNTED FOR REGULARLY IN THE BOOKS OF ACCOUNT, AN D BUSINESS TRANSACTIONS NOT RECORDED IN THE BOOKS OF ACCOUNT CANNOT BE TREA TED ON AN EQUAL FOOTING. WHILE INCOME FROM REGULAR BUSINESS TRANSAC TIONS IS TO BE TAXED UNDER THE BUSINESS HEAD, INCOME FROM UNACCOUNTED I UNDISCLOSED BUSINESS TRANSACTIONS ARE NOT MANDATED BY THE LAW AND ARE TO BE TREATED ON DIFFERENT FOOTING AND TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. I HOLD ACCORDINGLY. 4.7 IN VIEW OF THE ABOVE, THE UNACCOUNTED AMOUNT OF RS.14,00,000/- IS TAXABLE U/S 56 AS INCOME OF THE APPELLANT UNDER THE HEAD 'OTHER SOURCES' FOR AY 2007~08.THE AO IS DIRECTED ACCORDINGLY. 7.1 TO DECIDE THE ISSUE IN DIPSUTE, WE CAN GAINFUL LY REFER THE PROVISIONS OF SECTION 69A HEREUNDER:- UNEXPLAINED MONEY, ETC. 69A. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FO UND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECOR DED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE O F INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION OF THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE MONEY AND THE VALUE OF THE BULL I ON, JEWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR.' ITA NO.1464/DEL/2014 7 7.2 FROM THE ABOVE, WE FIND THAT SECTION 69A IS APP LICABLE WHERE THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION, OR THE EXPLAN ATION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICE R, THEN THE MONEY AND THE VALUE OF THE BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. FOR THIS SECTION TO COME INTO OPERATION, THE ASSESSEE MUST BE FOUND TO BE THE OWN ER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE. THE TERMS MONE Y, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE SIGNIFY CONCRETE THINGS AND DO NOT MEAN AMOUNTS RECORDED IN BOOKS OF ACCOUNT OR DOCUMENTS. THEREFORE, IN SUCH C ASES WHERE UNACCOUNTED ENTRIES ARE FOUND RECORDED IN THE BOOKS OR DOCUMENT S SEIZED, SECTION 69A CANNOT BE INVOKED. THIS PROVISION CAN BE INVOKED ON LY WHEN UNACCOUNTED CASH, BULLION, JEWELLERY OR ANY OTHER VALUABLE ARTICLE OR THING IS FOUND DURING SEARCH OR OTHERWISE. WE FIND THAT IT IS NOT THE CASE OF A.O . THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION. IT IS ALSO NOT THE CASE OF A.O. THAT EXPLANATION OFFERED BY HIM WITH 'REGARD TO SOURCE AND ACQUISITION OF MO NEY IS NOT SATISFACTORY. THE NATURE OF RECEIPT IS BUSINESS INCOME BEING ADVANCE AGAINST SALES AND SOURCE OF RECEIPT IS THE RESPECTIVE CUSTOMERS. THE A.O. IS VE RY MUCH SATISFIED WITH THE ITA NO.1464/DEL/2014 8 NATURE AND SOURCE OF AMOUNT. INFACT THE NATURE AND SOURCE OF THE UNACCOUNTED RECEIPTS IS SELF-ESTABLISHED FROM THE SEIZED MATERI AL ITSELF. THUS, THE NATURE AND SOURCE STANDS DULY EXPLAINED. THEREFORE, THERE IS N O APPLICABILITY OF PROVISION OF SECTION 69A OF THE ACT. WE ARE OF THE VIEW THAT THE INCOME IS DIFFERENT FROM 'RECEIPT'. EVEN WHEN THE RECEIPT IS UNACCOUNTED, IT IS ONLY THE INCOME WHICH IS TAXABLE AND INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION OF ACT AND IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REG ULARLY FOLLOWED BY ASSESSEE. THE ASSESSEE HAS BEEN FOLLOWING THE PERCE NTAGE OF COMPLETION METHOD REGULARLY SINCE INCEPTION. THE A.O. HAS DULY ACCEPTED THE METHOD EVEN IN ASSESSMENT DONE ULS 153A. IT IS A SETTLED LAW TH AT INCE THE METHOD FOLLOWED BY ASSESSEE HAS BEEN ACCEPTED, THE INCOME HAS TO BE CO MPUTED IN ACCORDANCE WITH THAT REGULARLY FOLLOWED METHOD. THEREFORE, IT WAS NOT APPROPRIATE FOR THE REVENUE TO INVOKE SECTION 69A TO CHARGE THE AMOUNT TO TAX. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, WE ARE OF THE VIEW THAT AO HAS WRONGLY MADE THE ADDITION IN DISPUTE AND SIMILARLY, LD.CIT(A) HAS ALSO WRONGLY CONFIRMED THE SAME WITHOUT GOING THROUGH THE FAC TS AND CIRCUMSTANCES OF THE CASE OF ASSESSEE. THEREFORE, WE ARE UNABLE TO UPHE LD THE IMPUGNED ORDER AND, HENCE, CANCEL THE IMPUGNED ORDER BY DELETING THE AD DITION IN DISPUTE. ACCORDINGLY, WE DELETE THE ADDITION IN DISPUTE AM OUNTING TO RS. 14,00,000/- ITA NO.1464/DEL/2014 9 MADE BY THE AO AND LATER CONFIRMED BY THE LD. CITA( A). THEREFORE, THE ISSUE RAISED IN GROUND NO. 1 IS ALLOWED. 8. SINCE WE HAVE ALREADY DELETED THE ADDITION IN DI SPUTE, AS AFORESAID, THE OTHER ISSUES RAISED BY THE ASSESSEE ARE NOT BEING A DJUDICATED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2016. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [O.P. KANT O.P. KANT O.P. KANT O.P. KANT] ]] ] [H.S. SIDHU] [H.S. SIDHU] [H.S. SIDHU] [H.S. SIDHU] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATE: DATE: DATE: DATE: 04 0404 04- -- -1 11 1- -- -201 201 201 2016 66 6 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY COPY COPY COPY FORWARDED TO: FORWARDED TO: FORWARDED TO: FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NO.1464/DEL/2014 10