Shree Krishna Processors, Ahmedabad V. The Income tax Officer,Ward-12(1), Ahmedabad

ITA 154/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76665 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 17-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Assessee Lawyers: M J SHAH
• Keywords: Unexplained investment; Depreciation; Valuation report
• Section: 143(3); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.154/AHD/2011 A.Y. 2004-05 SHREE KRISHNA PROCESSORS, C 4&5, RAMKUMAR MILL COMPOUND, SARASPUR, AHMEDABAD. PAN: AAGFS 9576F VS ITO, WARD-12(1), AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M. MATHIVANAN, SR.D.R., ASSESSEE(S) BY : SHRI M.J. SHAH, AR / DATE OF HEARING : 17/04/2014 / DATE OF PRONOUNCEMENT: 25/04/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-XX, AHMEDABAD, DATED 22.09.2010. THE GROUNDS RAISED ARE AS UNDER: 1. THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF R S.3,38,463/- BY HOLDING THAT THE APPELLANT ATTEMPTED TO REDUCE THE TOTAL IN COME BY THE SAID AMOUNT. 2. THE CIT(A) ERRED IN OVERLOOKING THE OVERALL FACT S AND CIRCUMSTANCES OF THE CASE AND IN THE PROCESS CONFIRMED THE ABOVE MENTION ED ADDITION. 3. THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF UN EXPLAINED JEWELLERY WITHOUT CONSIDERING THE SUBMISSIONS/PLEA OF THE ASS ESSEE. THE CIT(A) ALLOWED A SMALL PORTION OF JEWELLERY AS EXPLAINED WHILE THE REST OF THE JEWELLERY WAS ADDED AS UNEXPLAINED INVESTMENT IN JEWELLERY. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 263 OF IT ACT, DATED 31.12 .2009 WERE THAT A SURVEY WAS CONDUCTED AT THE PREMISES OF THE FIRM WH ICH IS PARTLY USED FOR ITA NO.154/AHD/2011 SHREE KRISHNA PROCESSOR VS. ITO, WARD-12(1), AHMED ABAD A.Y.2004-05 - 2 - THE PURPOSE OF THE BUSINESS AND PARTLY AS A RESIDEN CE OF THE PARTNER, NAMELY, SRI P. SUNDER RAJ SHETTY AND HIS FAMILY. TH E IMPUGNED GOLD ORNAMENTS WERE FOUND AT THE RESIDENTIAL PORTION OF THE PREMISES. THE CONTENTION OF THE ASSESSEE WAS THAT GOLD ORNAMENTS BELONGED TO THE FAMILY MEMBERS. IT WAS ALSO CONTESTED THAT THE VALU E OF THE GOLD ORNAMENTS WERE SHOWN BY THE FAMILY MEMBERS IN THEIR RESPECTIVE BALANCE SHEETS AS ON 31 ST MARCH, 2004. IT WAS INFORMED THAT THE BALANCE SHEE TS OF THOSE PARTNERS HAVE BEEN FURNISHED ALONG WITH THE R ETURN FILED BY THEM RESPECTIVELY. THE ASSESSEE HAS FURNISHED THE DETAIL S OF THE GOLD ORNAMENTS RESPECTIVELY BY THE PARTNERS AS UNDER: SL NO. NAME AND P>A. NUMBER PAN/ASSESSMENT WARD/CIRCLE ORNAMENTS RS. ANNEXURE NO. 1. DWARKANATH R. GUPTA ADXPG0608G/WARD 12(2) 216570.85 ANNEXURE 1 2. MADHUMATI D. GUPTA ABQPG3880M/WARD 12(1) 136895.00 ANNEXURE 2 3. K. S. PRASANNAKUMAR ACEPP2019/WARD 12(2) 64150.00 ANNEXURE 3 4. SHOBHA P. KUMAR AFUPP9924P/WARD 12(1) 182930.00 ANNEXURE 4 5. SMT. P.S. SARVANI AKIPS9250N/WARD 12(1) 41506.00 ANNEXURE 5 6. P. SUNDER RAJ SHETTY ACQPC 4724M 13513.23 ANNEXURE 6 TOTAL 655565.08 2.1 CASE LAW RELIED UPON WAS RADHA KISHAN SONI VS. CIT, 197 CTR 34 (RAJ). THE ASSESSEE HAS ALSO FURNISHED THE VALUA TION REPORT OF THE GOLD ORNAMENTS IN RESPECT OF SIX PERSONS. HOWEVER, THE A O WAS NOT CONVINCED AND TAXED AN AMOUNT OF RS.1,81,643/- AS UNEXPLAINE D JEWELLERY ON THE GROUND THAT THE DESCRIPTION AS PER THE VALUATION RE PORT HAD NOT TALLIED WITH ITA NO.154/AHD/2011 SHREE KRISHNA PROCESSOR VS. ITO, WARD-12(1), AHMED ABAD A.Y.2004-05 - 3 - THE ORNAMENTS FOUND. THE INVESTMENT WAS TAXED BY IN VOKING THE PROVISIONS OF SECTION 69A OF IT ACT. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE EXPLANATION OF THE ASSESSEE WAS AS UNDER: 4.3(I) SERIAL NO.1 AND 3 IN THE JEWELLERY FOUND DU RING HE SEARCH IS ONE GOLD CHAIN (TWO LINE) WITH THE GROSS WEIGHT OF 24.160 G AND NET WEIGHT OF 24.160 G AND GOLD CHAIN OF GROSS WEIGHT 66.160 G AND NET WEI GHT OF 66.160 G RESPECTIVELY. THE AR TRIED TO EXPLAIN THAT THIS JEW ELLERY BELONGED TO K.S. PRASANNA, SINCE IN THE VALUATION REPORT IN HIS CASE AT SERIAL NUMBER 1 FOUR GOLD CHAINS (ONE WITH A.D. PENDANT) OF GROSS WEIGHT OF 103.1G AND THE NET WEIGHT OF 103.1G WAS SHOWN. THUS IT WOULD BE SEEN T HAT THE TOTAL WEIGHT OF THE JEWELLERY MENTIONED AT SERIAL NUMBER 1 AND 3 IN THE LIST OF JEWELLERY FOUND DURING THE COURSE OF SURVEY WAS 90.320G WHICH WAS W ELL WITHIN THE RATE OF 103.1G OF CHAINS SHOWN IN THE VALUATION REPORT IN T HE CASE OF K S PRASANNA. THUS THE AO WAS NOT RIGHT IN NOT ACCEPTING THE CONT ENTION OF THE APPELLANT IN RELATION TO THIS JEWELLERY. THE AO SHOULD HAVE TREA TED THIS JEWELLERY AS BELONGING TO KS PRASANNA. 4.3 (II) SERIAL NO.2 IN THE LIST OF JEWELLERY FOUND DURING THE COURSE OF SURVEY CONSISTS OF JATADHAR (3 LINE) BUT THE GROSS WEIGHT OF 99.300G AND THE NET WEIGHT OF 95.300G. THE AR TIRED TO EXPLAIN THAT THI S JEWELLERY BELONGED TO DWARKANATH R. GUPTA IN WHOSE VALUATION REPORT AT SE RIAL NUMBER 1, PHIROZA BEADS NECKLACE, TWO EAR-RINGS AND ON RIGHT WITH THE GROSS WEIGHT OF 100.72G AND NET WEIGHT OF 80G WERE SHOWN. 4.3(IV) SERIAL NO.9 IN THE LIST OF JEWELLERY FOUND DURING THE COURSE OF SURVEY CONSISTS OF EIGHT EARRINGS AND THE GROSS WEIGHT OF 24.801G AS A NET WEIGHT OF 16.801G. THE AR TRIED TO EXPLAIN THAT THIS JEWELLER Y CONSISTED OF JEWELLERY BELONGING TO SHOBHA P. KUMAR IN WHOSE CASE THE VALU ATION REPORT AT SERIAL NUMBER 6 SHOWS DIAMOND NECKLACE AND EARRINGS THAT T HE GROSS WEIGHT OF 43.1G AND A NET WEIGHT OF 41G AND TO P.S. SARVANI I N WHOSE CASE AT SERIAL NUMBER 3, SIX EARRINGS WITH THE GROSS WEIGHT OF 34. 8G AND NET WEIGHT OF 30G IS SHOWN. THE CONTENTION OF THE AR IS NOT ACCEPTABLE B ECAUSE AS PER THE VALUATION REPORT OF JEWELLERY FOUND DURING THE COUR SE OF SURVEY, THE ENTIRE NET WEIGHT OF ALL EARRINGS WAS ONLY 16.801G WHEREAS IN THE CASE OF PS SARVANI ONLY SIX EARRINGS HAVE A NET WEIGHT OF 30 G. 3.1 HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED A ND HELD THAT THE JEWELLERY DID NOT MATCH WITH THE JEWELLERY BELONGED TO ANY OF THE PERSON. THE ACTION OF THE AO WAS CONFIRMED. ITA NO.154/AHD/2011 SHREE KRISHNA PROCESSOR VS. ITO, WARD-12(1), AHMED ABAD A.Y.2004-05 - 4 - 4. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE HAVE CAREFULLY PERUSED THE LIST OF THE GOLD ORNAMENTS BE LONGING TO SEVERAL FAMILY MEMBERS OF THE ASSESSEE FIRM. SINCE, THE REV ENUE DEPARTMENT HAS NOT CONTROVERTED THIS FACT THAT THE BUSINESS PREMIS ES AND THE PERSONAL RESIDENTIAL PREMISES, BOTH, WERE SITUATED IN A SING LE BUILDING, THEREFORE, WHY THE GOLD JEWELLERY WAS TAXED IN THE HANDS OF TH E ASSESSEE-FIRM AND WHY NOT IN THE HANDS OF THE RESPECTIVE PARTNERS? TH E PARTNERS HAVE DECLARED THE VALUE OF ORNAMENTS AS PER THE RESPECTI VE BALANCE SHEET AND THAT FACT COULD HAVE BEEN VERIFIED FROM THEIR ASSES SMENT RECORDS. THE ASSESSEE HAS INFORMED THE PAN NUMBERS OF THOSE PART NERS. IN THE CASE OF CIT VS. PRAFULBHAI @ ROHITBHAI J. SHAH, 33 TAXMANN. COM 147 (GUJ.), ORDER DATED 20 TH OF MARCH, 2013 HAS HELD THAT IN A SITUATION WHEN T HE JEWELLERY BELONGED TO DIFFERENT FAMILY MEMBERS AND IT WAS A CUSTOMARY OF OWNING THE JEWELLERY AS PERMITTED BY THE CBDT CI RCULAR, THE ADDITION WAS DELETED. THERE ARE SEVERAL DECISIONS ON THIS SU BJECT, WHEREIN IT WAS HELD THAT THE PROVISIONS OF CBDT CIRCULAR ARE REQUI RED TO BE APPLIED ESPECIALLY WHEN THE PARTNERS ARE SUBJECT TO TAX IND EPENDENTLY. FURTHER LEARNED AR HAS ALSO CONTESTED THAT THE WEIGHT OF TH E JEWELLERY HAD NOT EXCEEDED 400 GMS. PER LADY AS ALLOWED BY CBDT, THER EFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT, WE HEREBY DIRECT THAT THE ADDITION SHOULD BE DELETED. THIS GR OUND IS ALLOWED. 5. APROPOS TO GROUND NO.1, THE AO HAD MADE THE ADDI TION OF RS.3,38,463/- INITIALLY IN RESPECT OF SALE VALUE OF THE SAID UNDISCLOSED STOCK VIDE AN ORDER U/S.143(3) DATED 28.12.2006 IN THE FOLLOWING MANNER: NET PROFIT AS PER P&L AS SHOWN IN RETURN AFTER CONSIDERING DISALLOWABLE RS.13,25,945/- LESS: SALES VALUE ALREADY SHOWN BY ASSESSEE RS. 3, 38,463/- RS. 9,87,482/- ITA NO.154/AHD/2011 SHREE KRISHNA PROCESSOR VS. ITO, WARD-12(1), AHMED ABAD A.Y.2004-05 - 5 - ADD: UNCOUNTED STOCK VALUE U/S.69 B RS. 2,91,756 RS.12,79,238 LESS: DEPRECIATION AS PER ACT RS.11,26,097 TOTAL INCOME RS.1,53,141 ADD: ON ACCOUNT OF UNEXPLAINED INVESTMENT RS. 8539 TOTAL TAXABLE INCOME RS. 1,61,680/- IN THIS ORDER, THE AO HAS FIRST REDUCED THE SALE VA LUE OF THE STOCK AND THEN TAXED U/S.69 THE VALUE OF THE UNACCOUNTED STOCK. 6. THEREAFTER, IN THE LIGHT OF THE ORDER PASSED U/S .263, THE AO HAS PASSED THE IMPUGNED ORDER U/S.143(3) R.W.S. 263 DAT ED 31.12.2009 AND COMPUTED THE INCOME AS UNDER: SUBJECT TO ABOVE REMARKS TOTAL INCOME OF THE ASSE SSEE IS COMPUTED AS UNDER: TOTAL TAXABLE INCOME AS PER ORDER U/S. RS.1,61,68 0/- 143(3) OF THE ACT 28/12/2006 ADD : SALES VALUE REDUCED RS.3,38,463/- UNEXPLAINED JEWELLERY RS.1,81,643/- RS.5,20,106/- ASSESSED TOTAL INCOME RS.6,81,786/- I.E. RS.6,81,790/- 7. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE ACTION OF THE AO WAS CONFIRMED IN THE FOLLOWING CRYPTIC MANNER: IN VIEW OF SUCH CATEGORICAL STATEMENT OF THE AR IT IS CLEAR THAT THERE IS NO EVIDENCE IN POSSESSION OF THE ASSESSEE TO SHOW THAT THE SALES OF UNACCOUNTED STOCK WAS REFLECTED IN THE REGULAR BOOKS OF ACCOUNT S. THE AR HAS ALSO STATED THE BOOKS OF ACCOUNTS AND VOUCHERS CANNOT BE PRODUC ED WHICH CLEARLY INDICATES THAT THE APPELLANT DOES NOT WANT TO PRODU CE THE BOOKS OF ACCOUNTS BECAUSE THE SALE OF UNACCOUNTED STOCK HAS NOT BEEN REFLECTED IN THE PROFIT AND LOSS ACCOUNT AND INCLUDED IN THE GROSS SALES. IN VI EW OF THE ABOVE IT IS CLEAR THAT THE APPELLANT HAD ATTEMPTED TO REDUCE ITS TOTA L INCOME BY REDUCING THE SALE OF RS.3,38,463/- FROM THE PROFIT DERIVED AS PE R THE PROFIT AND LOSS ACCOUNT. 7. WITH THE AFOREMENTIONED FACTUAL BACKGROUND, WE H AVE HEARD BOTH THE SIDES. AFTER EXAMINING BOTH THE COMPUTATIONS A S REPRODUCED ABOVE, ITA NO.154/AHD/2011 SHREE KRISHNA PROCESSOR VS. ITO, WARD-12(1), AHMED ABAD A.Y.2004-05 - 6 - WE ARE OF THE VIEW THAT IN A SITUATION WHEN THE UNA CCOUNTED STOCK HAD BEEN TAXED BY TREATING AS TAXED U/S.69B OF IT ACT, ON ONE HAND, AND ON THE OTHER HAND THE SALE VALUE OF THE STOCK WAS ALSO TAXED TO THE EXTENT OF RS.3,38,463/- THEN THE CORRECT POSITION OUGHT TO BE THAT THE DIFFERENCE BETWEEN THE TWO OF RS.46,707/- (RS.3,38,463 2,91, 750) REQUIRED TO BE TAXED IN THE HANDS OF THE ASSESSEE. WE THEREFORE DI RECT THAT IN THE IMPUGNED ASSESSMENT ORDER INSTEAD OF TAXING RS.3,38 ,463/- AN AMOUNT OF RS.46,707/- IS TO BE TAXED IN THE HANDS OF THE ASSE SSEE. WE DIRECT ACCORDINGLY. RESULTANTLY, GROUND NO.1 OF THE ASSESS EE MAY BE TREATED AS PARTLY ALLOWED. 8. REST OF THE GROUND IS SIMPLY NARRATIVE; HENCE, D O NOT REQUIRE ANY JUDICIAL ADJUDICATION. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 25/04/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD