Shri Rajesh V. Jhaveri, Surat V. The Income tax Officer, Ward-2(1), Surat

ITA 1480/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6126 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 31-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 28-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Gross profit estimation; Unexplained investment; Peak credit; Set aside
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.1480 AND 1481/AHD/2008 A. Y.: 2000-01 AND 2001-02 RAJESH VINODCHAND JHAVERI, PROP. M/S. RAJESH INDUSTRIAL ENTERPRISE, PLOT NO.16-17, MAHATMA GANDHI ROAD NO.12, UDYOGNAGAR, UDHNA, SURAT PA NO. ABHPJ 0680M VS THE INCOME TAX OFFICER, WARD 2(1), AAYAKAR BHAVAN, OPP. NEW CIVIL HOSPITAL, UDYOGNAGAR, UDHNA, SURAT (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MANISH J. SHAH, AR RESPONDENT BY SMT. NEETA SHAH, DR O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED CI T(A)-II, SURAT DATED 17 TH JANUARY, 2008 FOR ASSESSMENT YEARS 2000-01 AND 2001 -02. COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND WE DISPOSE OF THE SAME THROUGH T HIS COMMON CONSOLIDATED ORDER. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD. 3. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.1, 2 AND 3 IN BOTH THE APPEALS OF THE ASSESSEE REGARDI NG INITIATION OF RE- ASSESSMENT PROCEEDINGS U/S 147 OF THE IT ACT. ALL T HE GROUNDS IN BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED BEING NOT PRESSED. ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 2 4. IN BOTH THE APPEALS ON GROUND NO.4, THE ASSESSE E CHALLENGED THE ADDITIONS OF RS.3,40,602/- AND RS.1,64,666/- ON ACC OUNT OF INCOME FROM BENAMI ACCOUNTS. 5. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE DERIVES INCOME FROM TRADING IN IRON AND STEEL AND IS ALSO DIRECTOR OF SHREE VIKASH CO- OPERATIVE BANK LTD., SALABATPURA, SURAT. ON ENQUIRY IT WAS FOUND THAT THE ASSESSEE WAS HAVING 4 BENAMI UNACCOUNTED BANK A CCOUNTS IN SHREE VIKASH CO-OPERATIVE BANK LTD., SALABATPURA, SURAT. DURING THE ENQUIRY, IT WAS NOTICED THAT THE ASSESSEE HAS INTRODUCED SHR I ASHOK M. JOBALIYA TO THE BANK FOR OPENING OF BANK ACCOUNT. AFTER HIS SIGNATURE ON THE ACCOUNT OPENING FORM AS INTRODUCER, SHRI ASSHOK M. JOBALIYA HAS OPENED AN ACCOUNT AS PROPRIETOR OF M/S. NIPI TRADING. IT W AS FURTHER FOUND THAT AFTER OPENING THE BANK ACCOUNT IN THE BANK, IN TURN SHRI ASSHOK M. JOBALIYA HAS FURTHER INTRODUCED NON-EXISTENT PERSON S TO OPEN THE ACCOUNTS IN SHREE VIKASH CO-OPERATIVE BANK LTD. IN THE NAMES OF M/S. M. R. ENTERPRISES, PROPRIETOR SHRI PREM RAJ JAIN, M /S. R. N. TRADERS, PROPRIETOR SHRI RAKESH M. JAIN AND M/S. P. C. TEXTI LES, PROPRIETOR PREM C. CHOKSI. 6. ON PERUSAL OF THE STATEMENTS IN THE ABOVE BANK A CCOUNTS IT WAS NOTICED THAT THERE WAS HUGE TURNOVER IN EACH OF THE ACCOUNTS. ON ENQUIRY IT WAS FOUND THAT THESE PERSONS WERE NOT AVAILABLE AT THE GIVEN ADDRESS SINCE LONG TIME. SHRI ASHOK M. JOBALIYA WAS ALSO NO T TRACEABLE. IT WAS, THEREFORE, CONCLUDED THAT ALL THE ABOVE 4 ACCOUNTS WERE BENAMI ACCOUNTS OF THE ASSESSEE. THE AO ALSO NOTED THAT ON THE SAME REASONS SIMILAR BENAMI ACCOUNTS FOUND IN THE PRECEDING ASSESSMENT Y EAR 1999-2000 ON WHICH THE ADDITIONS HAVE BEEN MADE AFTER GIVING OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE WAS DIRECTED TO PRODUCE SHRI ASHOK M. JOBALIYA. THE ASSESSEE EXPLAINED THAT SINCE THIS MAN IS NOT CONNECTED WITH THE ASSESSEE, THEREFORE, IT IS NOT POSSIBLE TO PRODUCE HIM OR TO ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 3 SUBMIT ANY EXPLANATION. THE ASSESSEE SUBMITTED THAT NONE OF THE ABOVE BANK ACCOUNTS IS BENAMI ACCOUNT OF THE ASSESSEE. TH E AO HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE AND WORKED OUT PEAK BALANCE OF THE 4 BENAMI ACCOUNTS DURING THE PERIOD AND ALSO WO RKED OUT THE UNACCOUNTED INVESTMENTS. FURTHER, FROM THE TOTAL TU RNOVER THE AO WORKED OUT PROFIT AT 1% TO RS.4,52,658/- AND ALSO C ONSIDERED THE PEAK AT RS.3,40,260/- AND MADE ADDITION OF RS.7,93,260/-. T HE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD CONFIRMED THE ADDITION OF RS.3,40,602/- IN ASSESSME NT YEAR 2000-01. SIMILARLY, IN ASSESSMENT YEAR 2001-02 ON THE SAME F ACTS THE AO MADE THE ADDITION OF RS.2,72,881/- WHICH WAS REDUCED TO RS.1,64,666/- BY THE LEARNED CIT(A). 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 1999-2000 IN ITA NO.2384/AHD/2007 V IDE ORDER DATED 31-03-2010 DELETED THE ENTIRE ADDITION ON IDENTICAL ISSUE BY HOLDING THAT REVENUE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THAT THE BANK ACCOUNTS IN THE NAMES OF 4 DIFFERENT PERSONS W ERE BENAMI ACCOUNTS OF THE ASSESSEE. COPY OF THE ORDER IS FILED ON RECO RD. THE LEARNED DR DID NOT DISPUTE THE ORDER OF THE TRIBUNAL, HOWEVER, SUB MITTED THAT THE TRIBUNAL HAS NOT GIVEN ANY SPECIFIC FINDING ON THIS ISSUE AND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY E ARLIER ORDER OF THE TRIBUNAL DATED 31-03-2010. IN ASSESSMENT YEAR 1999- 2000 THE REVENUE TOOK UP THE SAME ISSUE OF BENAMI ACCOUNTS AGAINST T HE ASSESSEE IN RESPECT OF THE 4 ACCOUNTS WHICH ARE ALSO CONSIDERED IN THE ASSESSMENT YEAR UNDER APPEAL. THE MATTER IS AT THE SECOND APPE LLATE STAGE BEFORE THE TRIBUNAL AND THE TRIBUNAL IN APPELLATE ORDER VI DE ORDER DATED ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 4 31-03-2010 DELETED IDENTICAL ADDITION IN RESPECT OF THE 4 ABOVE ACCOUNTS BY HOLDING THAT THE REVENUE HAS FAILED TO PROVE THA T THE ABOVE 4 ACCOUNTS WERE BENAMI ACCOUNTS OF THE ASSESSEE. BY F OLLOWING THE SAME ORDER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES B ELOW IN BOTH THE ASSESSMENT YEARS UNDER APPEAL AND DELETE THE ADDITI ONS. AS A RESULT, GROUNDS NO.4 IN BOTH THE ASSESSMENT YEARS ARE ALLOW ED. 9. IN ASSESSMENT YEAR 2000-01, THE ASSESSEE RAISED GROUNDS NO.5, 6 AND 7 CHALLENGING THE ADDITIONS TO THE TUNE OF RS. 17,642/- ON ACCOUNT OF DISALLOWANCE OF TELEPHONE EXPENSES, RS.4,639/- ON A CCOUNT OF DISALLOWANCE OF VEHICLE EXPENSES AND RS.13,457/- ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES. THE AO DISALLOWED 20% OUT OF THE ABOVE EXPENSES BECAUSE THE ASSESSEE COMPLETELY FAIL ED TO PRODUCE DETAILS OF SUCH EXPENSES OR ANY BILLS/VOUCHERS IN SUPPORT O F THE EXPENSES. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE COULD NOT FURNISH THE DETAILS AND COULD NOT PRODUCE THE VOUCHERS/BILL S BEFORE THE AO BECAUSE OF SUFFICIENT CAUSE. THE LEARNED CIT(A) NO TED THAT THE ASSESSEE HAS ALSO NOT PRODUCED THE BOOKS OF ACCOUNTS AND THE OTHER DETAILS AND AS SUCH IT IS DIFFICULT TO ACCEPT THE CONTENTION OF TH E ASSESSEE. THE ADDITIONS WERE ACCORDINGLY CONFIRMED. THE LEARNED COUNSEL FOR THE ASSESSEE ADMITTED THAT THE APPEAL OF THE ASSESSEE IN THE PRE CEDING ASSESSMENT YEAR 1999-2000 ON IDENTICAL ISSUE HAS BEEN DISMISSE D BY THE TRIBUNAL VIDE PARA 20 AND 21 OF THE ORDER DATED 31-03-2010 ( SUPRA). BY FOLLOWING THE SAME ORDER OF THE TRIBUNAL AND CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE VOUCHERS/BILLS AND BOOKS OF ACCOU NT BEFORE THE AO, THERE IS NO NEED TO INTERFERE IN THE ORDERS OF THE AUTHORITIES BELOW. WE CONFIRM THE ORDERS OF THE AUTHORITIES BELOW IN CONF IRMING THE DISALLOWANCES OUT OF VARIOUS EXPENSES. GROUNDS NO. 5, 6 AND 7 OF THE APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 2000-01 A RE ACCORDINGLY DISMISSED. ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 5 10. IN ASSESSMENT YEAR 2001-02 ON GROUND NO.5 THE ASSESSEE CHALLENGED THE ADDITION OF RS.1,62,683/- ON ACCOUNT OF LOW GROSS PROFIT. IT WAS SUBMITTED BEFORE THE AO THAT BOOKS OF ACCOUNT H AD BEEN DESTROYED IN THE FLOOD IN AUGUST, 2006. THE AO OBSERVED THAT THE PREMISES AT WHICH THE ASSESSEE CLAIMED TO HAVE KEPT THE BOOKS W AS NOT OWNED BY THE ASSESSEE OR BY HIS SISTER CONCERN. IT WAS ALSO NOT PLACED AT THE RESIDENCE OF THE ASSESSEE. IN THE ABSENCE OF THE BOOKS OF ACC OUNT, BOOK RESULT COULD NOT BE VERIFIED. SAME WERE REJECTED U/S 145(3) OF T HE IT ACT. THE GROSS PROFIT RATE HAS ALSO FALLEN IN THE ASSESSMENT YEAR IN QUESTION. THE AO ALSO NOTED THAT THE ASSESSEE HAD BENAMI BANK ACCOUN TS AND THAT NO EVIDENCE IS FILED REGARDING ACTUAL DESTRUCTION OF T HE BOOKS OF ACCOUNT. THEREFORE, THE AO ADOPTED GROSS PROFIT RATE OF 5.34 % AS APPLIED IN THE PRECEDING ASSESSMENT YEAR AND WORKED OUT THE GROSS PROFIT AND MADE ADDITION ACCORDINGLY. THE AO NOTED THAT THE ASSESSE E HAS SHOWN GROSS PROFIT RATE AT 4.01% AS AGAINST 5.34% IN THE PRECED ING ASSESSMENT YEAR AND ACCORDINGLY ADDITION OF RS.1,62,683/- WAS MADE BY APPLYING GROSS PROFIT RATE OF PRECEDING ASSESSMENT YEAR. THE LEARN ED CIT(A) CONFIRMED THE ADDITION IN THE ABSENCE OF PRODUCTION OF BOOKS OF A/CS AND EVIDENCE OF DESTRUCTION OF THE BOOKS OF ACCOUNT. 11. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT AR GUE THIS GROUND OF APPEAL OF THE ASSESSEE. 12. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. IT IS ADMITT ED FACT THAT BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE THE AUTHORITIES BE LOW FOR VERIFICATION OF BOOK RESULTS. NO EVIDENCE OF ACTUAL DESTRUCTION OF THE BOOKS OF ACCOUNT HAS BEEN FILED. IN THE ABSENCE OF ANY PLAUSIBLE REA SON FOR NON-PRODUCTION OF THE BOOKS OF ACCOUNT AUTHORITIES BELOW WERE JUST IFIED IN APPLYING GROSS PROFIT RATE OF EARLIER YEAR WHICH IS REASONABLE AS COMPARED TO THE GROSS PROFIT RATE SHOWN IN THE ASSESSMENT YEAR UNDER APPE AL. WE MAY ALSO NOTE ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 6 HERE THAT IN THE PRECEDING ASSESSMENT YEAR 1999-200 0 ALSO THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND THE TRIBUN AL HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE ABOUT DESTRUCTION OF THE BOOKS OF ACCOUNT. IN ANOTHER CASE OF NIKHIL V. JHAVERI HUF IN ITA N O.2379/AHD/2007 VIDE ORDER DATED 31-03-2010, SIMILAR ADDITION HAS B EEN CONFIRMED BY THE TRIBUNAL. IN THIS VIEW OF THE MATTER, WE DO NOT FIN D IT TO BE A FIT CASE FOR INTERFERENCE AND DISMISS THIS GROUND OF APPEAL OF T HE ASSESSEE. 13. AS A RESULT, GROUND NO.5 OF THE APPEAL OF THE A SSESSEE IN ASSESSMENT YEAR 2001-02 IS DISMISSED. 14. ON GROUNDS NO.6, 7 AND 8 OF THE APPEAL OF THE A SSESSEE IN ASSESSMENT YEAR 2001-02, THE ASSESSEE CHALLENGED TH E ADDITIONS OF RS.23,262/- ON ACCOUNT OF TELEPHONE EXPENSES, RS.6, 869/- ON ACCOUNT OF VEHICLE EXPENSES AND RS.39,855/- ON ACCOUNT OF VARI OUS EXPENSES. THE AO DISALLOWED 20% OUT OF THE ABOVE EXPENSES BECAUSE OF NON-VERIFICATION AND NON-PRODUCTION OF THE DETAILS AND BILLS/VOUCHER S. THE LEARNED CIT(A) CONFIRMED THE ADDITIONS. THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT ONCE GROSS PROFIT RATE IS APPLIED AND CONFIRME D BY THE AUTHORITIES BELOW BY REJECTING THE BOOK RESULTS, THERE WAS NO N EED TO MAKE DISALLOWANCE OUT OF VARIOUS EXPENSE SEPARATELY. HE HAS RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF NIKHIL V. JHAV ERI HUF IN ITA NO.2379/AHD/2007 DATED 31-03-2010 WHEREBY THE TRIBU NAL CONSIDERING THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS BANWARI LAL BANSHIDHAR 229 ITR 229 HELD THAT ONCE B OOKS OF ACCOUNT ARE REJECTED AND GROSS PROFIT RATE IS APPLIED, THER E IS NO NEED TO DISALLOW EXPENDITURE SEPARATELY. THE ADDITIONS MADE ON ACCOU NT OF DISALLOWANCE OF THE EXPENDITURE HAVE BEEN DELETED. 15. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE ITAT AHMEDABAD BENCH IN THE GROUP CASES OF THE ASSESSEE, NIKHIL V. JHAVERY ITA NO.1480 AND 1481/AHD/2008 RAJESH VINODCHAND JHAVERI, SURAT VS ITO, SURAT 7 HUF (SUPRA) IN WHICH THE TRIBUNAL CONFIRMED THE ADD ITION ON ACCOUNT OF GROSS PROFIT AND DELETED THE ADDITIONS MADE ON ACCO UNT OF DISALLOWANCES OF THE EXPENDITURE SEPARATELY. BY FOLLOWING THE SAM E ORDER, WE DELETE THE ADDITIONS MADE BY THE AO ON ACCOUNT OF DISALLOWANCE S OF THE EXPENDITURE BECAUSE OF APPLICATION OF GROSS PROFIT RATE IN THE MATTER. AS A RESULT, GROUNDS NO.6, 7 AND 8 OF THE APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 2001-02 ARE ALLOWED. 16. NO OTHER POINT IS ARGUED OR PRESSED IN BOTH THE APPEALS. 17. AS A RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-06-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 04-06-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD