Shri Rakesh S.Kapadia, Bharuch V. The Income tax Officer,Ward-2(4), Surat

ITA 1570/AHD/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9799 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NIRAJ A SURTI

Judgement Text

I.T.A. N O. 1570 /AHD/201 1 ASSESSMENT Y EA RS : 200 7 - 08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND MAHAVIR PRASAD , JM ] I.T.A. NO. 1570 /AHD/201 1 ASSESSMENT Y EAR: 200 7 - 08 RAKESH S. KAPADIA ..... ...... . ... . . APPELLANT NIRAJ A. SURI & AS SOCIATES, CHARTERED ACCOUNTANTS, 204, SHREE M ANGALAM COMPLEX, ABOVE IDBI BANK, KASAK CIRCLE, BHARUCH 392 002 (GUJARAT). [PAN: AAUPK 4420 G] VS. INCOME TAX OFFICER, WARD 2(4), SURAT. .................. . RESPONDENT APPEARANCES BY: NIRAJ A. SURTI FOR THE A PPELLANT KAMLESH MAKWANA FOR THE RE SPONDENT DATE OF CONCLUDING THE HEARING : 0 9 .0 9 .2016 DATE OF PRONOUNC ING THE ORDER : 07 . 1 2 .2016 O R D E R PER PRAMOD KUMAR , AM : 1 . THIS APPEAL, FILED BY THE A SSESS EE , IS DIRECTE D AGAINST THE ORDER DATED 23 RD MARCH, 2011, PASSED BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2007 - 08. 2. IN GROUND NO.1, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: - 1. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS E RRED IN LAW & IN FACTS IN SUSTAINING AN ADHOC ADDITION TO GROSS PROFIT RATIO @ 1.04% AND THEREBY MAKING AN ADDITION OF RS.66,722/ - TO THE GP WHICH IS WITHOUT ANY BASE. I.T.A. N O. 1570 /AHD/201 1 ASSESSMENT Y EA RS : 200 7 - 08 PAGE 2 OF 5 3. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF CHEMICAL TRADING. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS , THE A SSESSING O FFICER NOTED THAT THERE IS A FALL IN GROSS PROFIT RATE EARNED BY THE ASSESSEE INASMUCH AS , IN THE CURRENT PERIOD, THE GROSS PROFIT RATE WAS 13.96% AS AGAINST 18.28% IN THE IMMEDIATELY PRECEDING SIMI LAR PERIOD. THE A SSESSING OFFICER ALSO NOTED THAT IN RESPECT OF 10 ITEMS INCLUDED IN THE CLOSING BALANCE, THE VALUE ASSIGNED TO STOCK IS ZERO. ON THESE FACTS, THE A SSESSING OFFICER PROCEEDED TO ADOPT 15% AT ESTIMATED GP, AND MADE AN ADDITION OF RS. 66,722 / - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT ( A ) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF TH E CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT MERELY BECAUSE THERE IS A FALL IN THE GROSS PROFIT, BOOKS OF ACCOUNTS CANNOT BE REJECTED TO ADOPT A REASONABLE FROM PROFIT. AS FOR THE ISSUES IN VALUATION OF SOME SPECIFIC ITEMS, THE VALUE TAKEN AT ZERO DOES NOT MEAN THAT BOOKS CAN BE REJECTED. AT BEST, THE A SSESSING OFFICER COULD HAVE MADE AN ADDITION IN RESPECT OF VALUE OF SUCH ITEMS, BUT THE A SSESSING OFFICER HAS NOT EVEN ASSIGNED ANY VALUE TO THESE ITEMS. IN VIEW OF THE S E DISCUS SIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DELETE THE IMPUGNED ADDITION OF RS.66,722/ - . THE ASSESSEE GETS T HE RELIEF. 6. GROUND NO.1 IS THUS ALLOWED. 7. IN GROUND NOS.2 , 3 & 4, WHICH WE WILL T AKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLO WING GRIEVANCES: - 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD . CI T(APPEALS) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ADDITION UNDER SECTION 41(1) OF THE ACT MADE BY THE LD. AO IN AN ARBITRARY MANNER AND WHICH IS BASED ON SURMISES AN D SUSPICIONS. I.T.A. N O. 1570 /AHD/201 1 ASSESSMENT Y EA RS : 200 7 - 08 PAGE 3 OF 5 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW AND IN FACT IN ARRIVING AT A CONCLUSION THAT THE LIABILITY OF THE APPELLANT IN RESPECT OF HIS CREDITORS HAS CEASED TO EXIST. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW AND IN FACT IN SUSTAINING AN ADDITION OF RS.7,08,272/ - U/S. 41(1) OF THE ACT IN CASE OF AMOUNT PAYABLE TO CREDITORS WHICH IS WITHOUT ANY BASIS. 8. SO FAR AS THIS ADDITION IS CONCERNED , THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER NOTICED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE SHOW AMOUNTS PAYABLE TO AURO CHEM (RS.73,560/ - ), RELIANCE PLASTICS (RS.1,12,263/ - ), R. NAGAR DAS &A CO. (RS.1,12,449/ - ) AND SHRI KRISHNA ENTERPRISES (RS.4,10,000/ - ) BUT THE CONFIRMATIONS FILED BY THESE PARTIES DID NOT HAVE P AN NUMBERS. IT WAS ALSO NOTICED THAT CURRENT LIABILITIES DISCLOSED RS.63,128/ - PAYABLE TO CHOKSI ENGINEERING, BUT, AS PER ST ATEMENT OF SHRI ATUL CHOKSI, A MACHINE WAS SOLD TO THE ASSESSEE IN RESPECT OF WHICH FULL PAYMENT IS RECEIVED, AND THAT THE CONFIRMATION FILED BY THE ASSESSEE IS NOT GENUINE. ON THESE FACTS, THESE AMOUNTS, AGGREGATING TO RS.7,71,400/ - WERE BROUGHT TO TAX U NDER SECTION 41(1) IN THE HANDS OF THE ASSESSEE AS CEASED LIABILITIES. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 9. WE HAVE HEARD THE RIVAL CONTENTIONS , PER USED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 10. AS FOR THE STATEMENT OF SHRI ATUL CHOKSI, IT IS NOT EVEN IN DISPUTE THAT ASSESSEE WAS NOT AFFORDED ANY OPPORTUNITY TO CROSS EXAMINE THIS PERSON. THE STATEMENT, THEREFORE , HAS NO EVIDENTIARY VALUE. IN ANY EVENT, IT WAS A CASE OF PURCHASE OF MACHINERY WHEREAS SECTION 41(1) COMES INTO PLAY ONLY WHEN RELATED AMOUNT HAS BEEN ALLOWED AS A DEDUCTION IN EARLIER YEARS. THE ASSESSEE HAS FURNISHED COPIES OF ACCOUNTS I.T.A. N O. 1570 /AHD/201 1 ASSESSMENT Y EA RS : 200 7 - 08 PAGE 4 OF 5 OF THE REMAINING PERSONS I N THE BOOKS OF ACCOUNTS FOR LAST SEVERAL YEARS, AND THERE IS NOTHING ON RE CORD TO EVEN REMOTELY SUGGEST THAT THE LIABILITIES HAVE ACTUALLY CEASED. THESE FACTS, IN OUR CONSIDERED VIEW, ADDITIONS UNDER SECTION 41 (1) WAS NOT JUSTIFIED, NOR THE CONDITIONS PRECEDENT FOR INVOKING THIS SECTION AR5E SATISFIED. WE, THEREFORE, DELETE THIS ADDITION OF RS.7,71,400/ - . 11. GROUND NOS . 2 , 3 & 4 ARE THUS ALLOWED. 12. IN GROUND NO.5, THE ASSESSEE HAS RAISED THE FOLLOWING GRIE VANCE : - 5) O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND IN FACTS IN IGNORING THE DOCUMENTARY EVIDENCE AND THEREBY, SUSTAINING AN A D DITION OF RS.1,55,575/ - ON ACCOUNT OF CASH CREDIT ACCOUNT HOLDERS/DEPOSITOR S IN WHOSE CASES SIGNED CONFI RMATIONS , INCLUDING PANS, WERE GIVEN. 13. DURING THE COURSE OF ASSESSMENT PROCEEDING , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED CASH LOANS FROM EIGHT DIFFERENT PERSONS BUT AMOUNTS WERE AROUND RS.19,000/ - EA CH. NO PAN NUMBERS WERE GIVEN BUT CONFIRMATIONS WERE DULY FURNISHED. EVIDENCES IN SUPPORT OF GENUINENESS AND MEANS OF THESE DEPOSITORS WERE NOT FURNISHED. ON THESE FACTS, HE ASSESSING OFFICER ADDED THE AGGREGATE OF THESE DEPOSITS I.E. RS.1,55, 575/ - AS U NEXPLAINED CREDITS UNDER SECTION 68. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CI T(A ) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECO RD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 15. WE FIND THAT THERE IS NOTHING ON RECORD TO SHOW GENUINE NE SS OF THESE TRANSACTIONS OR MEANS OF THESE PERSONS. ALL THE TRANSACTIONS ARE IN CASH AND OF SOMEWHAT SIM ILAR AMOUNT WHICH IS FIRST WITHIN THE LIMIT OF PERMISSIBLE CASH TRANSACTIONS. I.T.A. N O. 1570 /AHD/201 1 ASSESSMENT Y EA RS : 200 7 - 08 PAGE 5 OF 5 THESE FACT OR S, TAKEN TO G ETHER, INSPIRE LITTLE CREDENCE TO THE EXPLANATION OF THE ASSESSEE . WE, THEREFORE, CONFIRM THE ACTION OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE I N THE MATTER. 1 6 . GROUND NO.5 IS THUS DISMISSED 1 7 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF DECEMBER , 2016. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 7 TH DAY OF DECEMBER , 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE T RIBUNAL AHMEDABAD BENCHES, AHMEDABAD