Smt. Renu Poddar, Bettiah V. ITO, Bettiah

ITA 160/PAT/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1180 (ITAT-PATNA)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K MISHRA
• Assessee Lawyers: G P TULSIYAN
• Keywords: Unexplained expenditure; Business income; Opportunity of being heard

Judgement Text

1 ITA NO. 160/PAT/2013. IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 1 60 /PAT/2013. ASSESSMENT YEAR : 2009 - 10. SMT. RENU PODDAR, THE INCOME - TAX OFFICER, BETTAIH. VS. WARD BETTIAH. APPELLANT. RESPONDENT. APPELLANT BY : SHRI G.P. TULSIYAN. RESPONDENT BY : SHRI R .K. MISHRA. DATE OF HEARING : 03 - 08 - 2016 DATE OF PRONOUNCEMENT : 21 ST SEPT., 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) DATED 03 - 01 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUND S OF APPEAL READ AS UNDER : 1. THAT THE ORDER OF AO IS BAD IN LAW AND NOT BASED ON APPRECIATION OF FACTS. 2. AS THERE WERE SALE & PURCHASES OUT OF BOOKS PRODUCED BEFORE AO, FOUND AT THE TIME OF SURVEY , THE SALE, PROFIT AND EXPENDITURE ARE TO BE ESTIMATED TO THE BEST OF THE CIRCUMSTANTIAL EVIDENCES. THE AO HAD ESTIMATED THE SALE AS RS. 75 LACS AS COMPARED TO SALE IN THE BOOKS OF RS.23,49,877 MAINTAINED BY THE ASSESSEE AND APPLIED A 5% NP RATE ESTIMATING THE PROFIT OF RS.3,75,000, THOUGH IT IS ON THE HIGHER SIDE. 3. A) IN THE ABOVE CIRCUMSTANCES, WHEN THERE ARE OUT OF BOOKS TRANSACTIONS, A TELESCOPIC VIEW OF TOTAL TRANSACTIONS HAS TO BE TAKEN TO ARRIVE AT JUSTIFIED PROFIT. THE AO ARBITRARILY TREATED A SUM OF RS.6,71,241/ - AS THE UNEXPLAINED CAPITAL REQUIRED TO DO THI S BUSINESS WITHOUT CONSIDERING THE CAPITAL AVAILABLE IN BOOKS AS PRODUCED BEFORE THE AO AND ALSO THE UNEXPLAINED PROFIT OF THE EARLIER YEAR I.E. AY:2008 - 09, WHICH ALSO RESULTED FROM THE SURVEY OPERATION AND WAS 2 ITA NO. 160/PAT/2013. ASSESSED FOR A SUM OF RS.9,75,630/ - ALREADY P ENDING BEFORE CIT - A IN ANOTHER APPEAL CASE FILED PENDING FOR DECISION. B) ONCE THE AO HAS HIMSELF ASSESSED THE UNEXPLAINED INCOME OF RS.9,75,630/ - IN THE EARLIER YEAR THE SAME CAPITAL HAS ROLLED OVER TO SUBSEQUENT YEAR AND THE ASSESSEE WAS IN NO NEED TO BR ING THE ABOVE UNEXPLAINED CAPITAL TO DO OUT OF BOOKS BUSINESS. C) THIS CONTENTION OF AO HAS LED TO DOUBLE ADDITION OF THE SAME AMOUNT ON SIMILAR FACTS. THE LEARNED CIT - A HAS ALSO APPRECIATED THIS FACT BUT FAILED TO GIVE RELIEF. 4. A) AS REGARDS T HE STOCK FOUND AT THE TIME OF SURVEY AMOUNTING TO RS.14,34,393/ - AS AGAINST THE BOOK STOCK OF RS.7,13,914/ - , THE DIFFERENCE OF RS.7,24,479/ - HAS BEEN TREATED BY AO AS UNEXPLAINED AND AGAIN ADDED TO THE INCOME. B) WHEN THE FINDING OF THE AO AND SUBMISSIONS OF THE ASSESSEE CLEARLY ESTABLISH THAT THERE WAS OUT OF BOOKS BUSINESS, THE PROFIT EARNED ON SUCH OUT OF BOOKS BUSINESS HAS GONE TO ADD TO THE INCREASE OF INVENTORY WHICH CONSISTED OF BOTH BOOK INVENTORY AS WELL AS INVENTORY CREATED OUT OF INCOME EARNED FROM OUT OF BOOKS OF BUSINESS. C) ONCE THE TAXABLE INCOME HAS BEEN ASSESSED BY THE AO AS RS.3,75,000/ - AND ALSO CAPITAL EMPLOYED RS.6,71,241/ - REQUIRED TO DO OUT OF BOOK BUSINESS, THIS WILL ADEQUATELY COVER STOCK CREATION AND DIFFERENCE OF STOCK OF RS. 7,20,479/ - . THEREFORE THE ADDITION OF DIFFERENCE IN STOCK RS.7,20,479/ - IS UNWARRANTED AND UNJUSTIFIED MAKING IT DOUBLE ADDITION. 5. UNEXPLAINED EXPENDITURE ADDED TO INCOME UNDER THE HEAD COMMITTEE RS.1,25,100/ - ALSO PERTAINS TO THE BUSINESS OF THE ASSESSEE AND THEREF ORE ADEQUATELY COVERED BY THE PROFIT OF THE UNACCOUNTED BUSINESS AND THEREFORE ITS ADDITION IS NOT JUSTIFIED. 2. GROUND NOS. 1 AND 2 WERE NOT PRESSED BY THE LEARNED COUNSEL OF THE ASSESSEE. HENCE THEY ARE DISMISSED AS NOT PRESSED. 3. APROPOS ISSUE OF TREATMENT OF RS.6,71,241/ - AS UNEXPLAINED CAPITAL. BRIEF FACTS OF THE CASE ARE AS UNDER : 3 ITA NO. 160/PAT/2013. THE APPELLANT RUNS A PROPRIETARY CONCERN M/S SHREE LAXMI HARDWARE AT LAL BAZAR, BETTIAH. AS PER THE PROFIT & LOSS ACCOUNT SUBMITTED DURING ASSESSMENT PROCEEDINGS ON 14 - 11 - 2011, THE TOTAL SALE AND PURCHASES WERE SHOWN AT RS.23,49,877/ - AND RS.24,27,084/ - ONLY. HOWEVER, THE BOOKS OF ACCOUNT AND LOOSE SHEETS IMPOUNDED DURING SURVEY REVEALED THAT THE ASSESSEE WAS MAKING CLANDESTINE PURCHASES AND SALES THROUGHOUT THE YE AR. FROM THE NOTEBOOKS AND LOOSE SHEETS IMPOUNDED FROM THE BUSINESS PREMISES OF THE APPELLANT DURING THE COURSE OF SURVEY OPERATION, THE ASSESSING OFFICER WORKED OUT THE UNACCOUNTED PURCHASES OF THE APPELLANT AT RS.53,69,931/ - . THESE PURCHASES WERE NOT FOU ND RECORDED IN THE REGULAR BOOKS OF ACCOUNT IMPOUNDED AND MARKED PK - 26. THE TOTAL PURCHASES OF THE APPELLANT WERE WORKED OUT AS UNDER : ON THE BASIS OF IMPOUNDED BOOKS/LOOSE SHEETS - RS.53,69,931/ - PURCHASES AS PER P&L A/C SUBMITTED ON 14 - 11 - 2011 - RS.24,27,084/ - . OR RS. 53,69,931 + RS.24,27,084 = RS.77,97,015/ - . APPLYING THE RATIO OF 0.97 BETWEEN PURCHASES & SALES AS GIVEN IN P&L ACCOUNT SUBMITTED ON 14 - 11 - 2011, T HE AO ESTIMATED THE TOTAL SALES OR TURNOVER OF APPELLANT AT RS.75,00,000/ - . BY APPLYING THE NET PROFIT RATE OF 5% OF GROSS SALES, T HE AO ESTIMATED THE TAXABLE PROFIT I.E. 5% OF RS.75,00,000/ - = RS.375,000/ - THE A O ESTIMATED THE INITIAL CAPITAL OF THE APPE LLANT AT 1/8 TH OF THE TOTAL UNACCOUNTED PURCHASES AT RS.53,69,931/ - , OR RS.671,241/ - WHICH WAS ADDED BACK. 4. ON THE ISSUE OF TREATMENT OF RS.6,71,241/ - AS UNEXPLAINED CAPITAL, LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT UNEXPLAINED PROFIT OF RS.9, 75,630/ - WAS ADDED FOR ASSESSMENT YEAR 2008 - 09 WHICH ALSO RESULTED FROM SURVEY 4 ITA NO. 160/PAT/2013. OPERATION. HE SUBMITTED THAT THIS MATTER IS ALREADY PENDING BEFORE THE LEARNED CIT(APPEALS) IN ANOTHER APPEAL. LEARNED COUNSEL PLEADED THAT THIS SUM OF RS.6,71,241/ - SHOULD BE T ELESCOPED AGAINST THE ADDITION OF RS.9,75,630/ - AS UNEXPLAINED INCOME OF PREVIOUS YEAR. 5. I FIND THAT ABOVE SUBMISSION OF LEARNED COUNSEL WAS BEFORE THE LEARNED CIT(APPEALS) AS WELL. LEARNED CIT(APPEALS) HAS NOT CONSIDERED THE SAME BY NOTING THAT THIS A PPEAL WAS NOT BEFORE HIM. I DO NOT FIND THIS SUFFICIENT REASON TO IGNORE THE ASSESSEES REQUEST. HENCE I DEEM IT APPROPRIATE TO REMIT THE ISSUE TO THE LEARNED CIT(APPEALS). LEARNED CIT(APPEALS) SHALL CONSIDER THIS ISSUE ALONG WITH THE ISSUE OF 2008 - 09 WH ICH HAS BEEN CLAIMED BY THE LEARNED COUNSEL OF THE ASSESSEE TO BE PENDING BEFORE HIM. LEARNED CIT(APPEALS) SHALL CONSIDER THE ASSESSEES REQUEST AS PER LAW AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 6. APROPOS THE ISSUE OF ADDITION ON ACCOUNT OF DIFFERENCE IN STOCK OF RS.7,2 0 ,479/ - . 7. DURING THE COURSE OF SURVEY, STOCK WAS INVENTORISED AT RS.14,34,393/ - AS AGAINST ACTUAL STOCK OF RS.7,13,914/ - ON THE BASIS OF BOOKS OF ACCOUNTS. THE DIFFERENCE OF RS.7,20,479/ - WAS ADDED BACK. 7. ON THIS ISSUE THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE IS THAT PROPER BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY THE ASSESSEE. THE AO IS ALSO MAKING ADDITIONS FOR UNACCOUNTED PURCHASES AND SALES , THEN WITH COMPARISON TO WHICH FIGURES EXCESS STOCK IS ARRIVED AT IS NOT COMPREHENDIBLE. I FIND THIS SUBMISSION HAVING SOME COGENCY. WHEN THE AO HAS FOUND THE BOOKS OF ACCOUNTS TO BE INCOMPLETE AND HAS FOUND LOOSE SHEETS WHICH HAS LAID TO WORKING OUT OF UNACCOUNTED PURCHASES THEN WITH WHAT BOOKS THE PHYSICAL STOCK HAS BEEN COMPARED NEEDS TO BE ELABORATED. NO SUCH DISCUSSION IS THERE IN THE ORDERS OF 5 ITA NO. 160/PAT/2013. THE AUTHORITIES BELOW. HENC E I REMIT THIS ISSUE TO THE FILE OF THE AO. THE AO SHOULD EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE DISCUSSION AS ABOVE. 8. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF SEPT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 21 ST SEPT., 2016. COPY FORWARDED TO : 1. SMT. RENU PODDAR, PROP. SSHREE LAXMI HARDWARE, LAL BAZAR, BATTIAH. 2. I.T.O., WARD BATTIAH. 3. C.I.T. - 4. CIT(APPEALS) - 5. D.R., ITAT, PATNA. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. WAKODE .