The ACIT, Circle-2(2), Baroda V. Vaishali Electricals, Baroda

ITA 1525/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1717 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 02-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMARD R
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 69C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM ITA NO.1525/AHD/2008 (ASSESSMENT YEAR:-2001-02) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA V/S M/S VAISHALI ELECTRICALS, 115/B, RADHA KRISHNA FLATS, NEAR AKOTA GARDEN, AKOTA, BARODA PAN: AABFV 1414 C [APPELLANT] [RESPONDENT] ITA NO.1609/AHD/2008 (ASSESSMENT YEAR:-2001-02) M/S VAISHALI ELECTRICALS, 115/B, RADHA KRISHNA FLATS, NEAR AKOTA GARDEN, AKOTA, BARODA V/S ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI ANIL KUMAR,DR ASSESSEE BY:- SHRI J P SHAH, AR O R D E R A N PAHUJA: THESE CROSS APPEALS DIRECTED AGAINST AN ORDER DATE D 15-02-2008 OF THE LD. CIT(APPEALS)-II, BARODA, FOR THE ASSESSMENT YEAR (AY) 2001-02, RAISE THE FOLLOWING GROUNDS:- ITA NO.1525/AHD/2008[REVENUE] 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.21,55,6 56/- OUT OF TOTAL ADDITION MADE BY THE AO OF RS.38,29,335/- ON ACCOUN T OF UNACCOUNTED SALES. 2 THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR AL TER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL . ITA NOS.1525 & 1609/AHD/2008 2 THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE MAY BE S ET ASIDE AND THAT OF THE AO BE RESTORED . ITA NO.1609/AHD/2008[ASSESSEE] 1. LEARNED C.I.T. (APPEALS) HAS ERRED IN LAW AS WELL A S ON FACTS IN MAKING ADDITION ON ACCOUNT OF EXCISE DUTY AND SALES TAX COLLECTED ON UNDISCLOSED SALES WITHOUT GIVING A DEDUCTION FOR EXCISE DUTY AND SALES TAX PAID ON PURCHASES MADE FOR MANUFACTUR ING THE GOODS WHOSE SALES WERE NOT DISCLOSED. 2. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING AN ADDITION OF RS.484198 U/S. 69C AS ESTIMAT ED INVESTMENT MADE OUT OF UNDISCLOSED SOURCES FOR MAKING PURCHASE S OUTSIDE THE BOOKS OF ACCOUNTS. 2.1 IT IS PRAYED THAT ONCE GROSS PROFIT ADDITION IS MAKE ON THE UNDISCLOSED SALES AND THE FACT OF PURCHASES MADE EX PLAINED AND ACCEPTED, ADDITION CANNOT BE MADE ONCE AGAIN BASED ON PRESUMED UNACCOUNTED INVESTMENT 3. IF THE GROUND NO. 2 ABOVE IS NOT ALLOWED IN FAVO UR OF THE ASSESSEE, IT IS FURTHER CONTENDED THAT A SIMILAR ADDITION OF RS.11,33,329 WAS MADE BY THE LEARNED CIT(APPEALS) U/S. 69C FOR AY 20 02-03. IT IS PRAYED THAT ONCE ADDITION U/S. 69C IS MADE IN ONE Y EAR, AN AMOUNT LESSER THAN AMOUNT OF ADDITION ALREADY MADE U/S. 69 C CANNOT BE ONCE AGAIN ADDED IN ANOTHER YEAR. 3.1 ONCE IT IS PRESUMED AGAINST THE ASSESSEE AS TO HAVING UNEXPLAINED SOURCES OF RS.11,33,329 IN A YEAR, A LESSER AMOUNT OF RS.484198 CANNOT ONCE AGAIN BE PRESUMED TO HAVE BEEN GENERATE D OUT OF UNEXPLAINED SOURCES IN ANOTHER YEAR. 3.2 CONSIDERING THE ADDITIONS MADE IN THE PROCEEDIN G YEAR, LEARNED CIT(APPEALS) OUGHT NOT TO HAVE MADE THE SAID ADDITI ON. 4. APPELLANT PRAYS LEAVE TO ADD, ALTER OR AMEND ANY OF THE GROUNDS SET FORTH ABOVE. 2. ADVERTING TO GROUND NO.1 IN THE APPEAL OF THE RE VENUE AND GROUND NOS. 1 TO 3.2 IN THE APPEAL OF THE ASSESSEE, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING I NCOME OF RS.1,00,710/- FILED ON 28-09-2001 BY THE ASSESSEE, MANUFACTURING CABLES & CONDUCTORS, WAS PROCESSED U/S 143(1) OF TH E INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. THEREAFTER, THE ITA NOS.1525 & 1609/AHD/2008 3 ASSESSMENT WAS REOPENED U/S 147 OF THE ACT WITH THE SERVICE OF A NOTICE U/S 148 OF THE ACT ON 21.3.2006.IN RESPONSE, THE ASSESSEE COMMUNICATED VIDE LETTER DATED 4.5.2006 THAT RETURN FILED ORIGINALLY MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 2002-03, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASS ESSEE DEPOSITED SALES PROCEEDS RECEIVED ON SALES TO GEB IN THE FOLL OWING TWO BANK ACCOUNTS.:- A) CA 1497 WITH VIJAYA BANK, RAOPURA BRANCH, BARODA . B) CD SSI 310 WITH STATE BANK OF INDIA, KALOL BRANC H, KALOL, DIST. PANCHMAHAL. THESE SALE PROCEEDS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, ACCORDINGLY, THE AO ADDED THE TOTAL OF THE CREDIT ENTRIES DURING F.Y. 2001-02 IN BOTH THE BANK ACCOUN TS, TO THE INCOME OF THE ASSESSEE. FOR THE YEAR UNDER CONSIDERATION, A COPY OF THE BANK STATEMENTS OF THE ABOVE-MENTIONED TWO BANK ACC OUNTS WERE CALLED AND THE ASSESSEE WAS SHOWCAUSED AS TO WHY T HE DEPOSITS APPEARING IN THESE BANK ACCOUNTS FOR FINANCIAL YEAR 2000-2001 SHOULD NOT BE ADDED TO THEIR INCOME, THE PROCEEDS OF SALES MADE TO THE GEB DEPOSITED IN THESE BANK ACCOUNTS HAVING NOT BEEN DISCLOSED IN THE BOOKS. IN RESPONSE, THE ASSESSEE VIDE LETTERS DATED 27-12-2006 AND 29.12.2006, SUBMITTED THAT ALL THE RECEIPTS CREDITED IN VIJAYA BANK ACCOUNT & SBI ACCOUNT WERE RECEIPTS FR OM GEB TOWARDS SALES MADE BUT NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. SINCE I N THE AY 02-03,ADDITION WAS SUSTAINED TO THE EXTENT OF GROSS PROFIT ON THE U NDISCLOSED SALES BASED ON THE MATERIAL CONSUMPTION ( WORKED OUT TO 84.71%) AND ON THE EXCISE AND SALES TAX INCLUDED IN THE ABOVE RECEIPTS, THE ASSESSEE OFFERE D THE ENTIRE RECEIPTS OF RS.17,45,172/- CREDITED IN THE VIJAYA BANK ACCOUNT AND RS. 20,84,163/- CREDITED IN SBI ACCOUNT DURING AY 01-02 TO TAX ON SIMILAR BA SIS AS HAD BEEN ADOPTED FINALLY IN THE AY 2002-03. IN THE LIGHT OF THESE SU BMISSIONS, THE AO, HOWEVER, BROUGHT TO TAX THE ENTIRE PROCEEDS OF RS.38,29,335/ - FROM THE UNACCOUNTED SALES MADE TO GEB , TREATING IT AS UNACCOUNTED INCOME OF THE ASSESSEE. ITA NOS.1525 & 1609/AHD/2008 4 3. ON APPEAL, THE LEARNED CIT(A),FOLLOWING THE BASI S ADOPTED BY HIS PREDECESSOR IN THE AY 2002-03 , UPHELD THE FOLL OWING ADDITION SUBJECT TO VERIFICATION OF THE COMPUTATION: EXCISE DUTY, SALES TAX, FREIGHT ETC. ON UNDISCLOSED SALES RS.7,13,130 MARGIN OF PROFIT AFTER REDUCING MATERIAL CONSUMPTION RS.4,76,350 INVESTMENT IN PURCHASES BASED ON CAPITAL AND RESERVES RATIO RS.4,84,198 --------------- RS.16,73,677 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LEARNED CIT(A) IN DELETING THE ADDI TION OF RS.21,55,658/- WHILE THE ASSESSEE IS IN APPEAL FOR UPHOLDING THE BALANCE ADDITION. AT THE OUTSET , BOTH THE PARTIES AGREED THAT THE ISSUES ARE COVERED BY THE DECISION DATED 8-1-2010 OF THE ITAT AHMEDABAD BENCH-C IN THE ASSESSEES OWN CASE FOR TH E AY 2002-03 IN ITA NOS.1043 & 1046/AHD/2006 . 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF THE ITAT . WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE , THE ITAT IN T HEIR AFORESAID ORDER DATED 8.1.2010 CONCLUDED AS UNDER: 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN MANUFACTURING OF VARIOUS TYPES OF CABLES. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE MADE UNRECOR DED SALES OF RS.71,13,861/- AND THE GROSS PROFIT THEREON WAS RS. 10,24,965/- AND UNPAID EXCISE DUTY AND SALES-TAX COLLECTED THEREON WAS RS.14,21,710/-. THE BALANCE REMAINING COST OF GOODS WHICH WORKED OU T TO RS.58,77,158/-. ACCORDING TO THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THE UNEXPLAINED INVESTMENT OF THE ASSESSEE IN THIS SALE OF RS.71,13,861/- WAS RS.11,33,329/- AND THEREFORE HE RESTRICTED THE DISA LLOWANCE TO RS.11,33,329/- AND DELETED THE REMAINING AMOUNT OF RS.47,43.829/-. ITA NOS.1525 & 1609/AHD/2008 5 ACCORDING TO THE REVENUE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THIS ADDITI ON OF RS.47,43,829/- AND ACCORDING TO THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN RESTRICTING THE ADDI TION TO RS.11,33,329/-. WE FIND THAT IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE UNRECORDED SALES OF RS.83,23, 833/- AND NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT ANY INV ESTMENT WAS MADE BY THE ASSESSEE WHICH WAS FROM ANY UNEXPLAINED SOURCES . THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ESTIMATED UNEX PLAINED INVESTMENT OF RS.11,33,329/- ON THE BASIS OF PROPORTION OF CAP ITAL AND RESERVE OF THE ASSESSEE VIS-A-VIS THE REGULAR SALES RECORDED IN TH E BOOKS OF ACCOUNT ONLY. WE FIND THAT THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S M OMER 107 CTR (CAL) 272 HELD TO THE EFFECT THAT WHEN MATERIAL IN RESPECT OF UNDISCLOSED SALES ARE FOUND THEN ONLY PROFIT EMBEDD ED IN THESE SALES CAN ONLY BE ADDED TO THE INCOME OF THE ASSESSEE AND UND ISCLOSED SALES BY ITSELF DOES NOT AUTHORIZE TO PRESUME THAT ANY UNEXP LAINED INVESTMENT WAS MADE IN RESPECT OF WHICH ADDITION U/S 69 CAN BE MAD E.. IT IS ALSO OBSERVED THAT THE HON'BLE GUJARAT HIGH COURT IN THE-CASE OF CIT VS. GURUBACHHAN SINGH J JUNEJA (2008) 308 ITR 63 (GUJ) HAS HELD AS UNDER: 'THAT THE REVENUE HAD NOT PROVED BY BRINING ANY MAT ERIAL ON RECORD THAT THE ASSESSEE HAD MADE ANY INVESTMENT TO MAKE T HE ALLEGED UNACCOUNTED SALES. THEREFORE THE FINDING OF T HE TRIBUNAL THAT ONLY THE GROSS PROFIT COULD BE BROUGHT TO TAX DID N OT CALL FOR ANY INTERFERENCE. IN VIEW OF THE ABOVE SETTLED POSITION OF LAW. IN OU R CONSIDERED OPINION, THE CONTENTION OF THE REVENUE TO THE EFFECT THAT THE EN TIRE SALE PROCEEDS SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE CANNO T BE ACCEPTED. FURTHER, WE FIND THAT NO MATERIAL WAS BROUGHT ON RE CORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAS IN FACT MADE INVESTMENT OF RS.11,33,329/- FROM ANY UNEXPLAINED SOURCE TO EFFECT UNRECORDED SA LES OF RS.83,23,833/-. THUS, IN OUR CONSIDERED OPINION THE LEARNED COMMISS IONER OF INCOME-TAX (APPEALS) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.11,33,329/- U/S 69 OF THE ACT ON THE BASIS OF A PRESUMPTION. WE, THEREFORE, DELETE THE ADDITION OF RS.11,33,329/- MA DE ON ACCOUNT OF UNEXPLAINED INVESTMENT. THUS, THE APPEAL OF THE REV ENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. FOLLOWING THE VIEW TAKEN BY THE ITAT IN THEIR AFORESAID DECISION, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETI NG THE ADDITION OF RS.21,55,656/- AND FURTHER DELETE THE ADDITION OF RS.4,84,198/- ON ACCOUNT OF UNEXPLAINED INVESTMENT. THE REMAINING AD DITIONS OF RS.7,13,130/- & RS.4,76,350/- , HAVING BEEN MADE O N SIMILAR BASIS AS HAD BEEN ADOPTED BY THE LD. CIT(A) IN THE AY 200 2-03, ARE UPHELD, FINDINGS OF THE LD. CIT(A) IN THE PRECEDING YEAR HAVING ITA NOS.1525 & 1609/AHD/2008 6 BECOME FINAL AND NO FURTHER SUBMISSIONS HAVING BEE N MADE BEFORE US BY THE LD. AR ON BEHALF OF THE ASSESSEE. THERE FORE GROUND NO.1 IN THE APPEAL OF THE REVENUE AND GROUND NOS. 1 ,3,3 .1 & 3.2 IN THE APPEAL OF THE ASSESSEE ARE DISMISSED WHILE GROUND N OS. 2 & 2.1 IN THE APPEAL OF THE ASSESSEE ARE ALLOWED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL OF THE REVENUE OR GROUND NO.4 IN THE APPEAL OF THE ASSESSEE, THESE GROUNDS ARE D ISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMIS SED WHILE THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 18 -03-2011 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 18-03-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S VAISHALI ELECTRICALS, 115/B, RADHA KRISHNA F LATS, NEAR AKOTA GARDEN, AKOTA, BARODA 2. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2 ), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA 3. CIT CONCERNED 4. CIT(A)-II, BARODA 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD