Moti Lal Gupta, New Delhi V. ITO, New Delhi

ITA 1607/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7231 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UC DUBEY
• Keywords: Ignorance of law
• Section: 44AD

Judgement Text

PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH - E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADI N. MISHRA, ACCOUNTANT MEMBER ITA NO. 1607/DEL/2012 AY: 2008-09 MOTI LAL GUPTA VS. ITO, 16/82-C, GALI NO. 3, WARD 38(2), JOSHI ROAD, KAROL BAGH C.R. BUILDING, NEW DELHI 110 005. NEW DELHI. PAN AFNPG9287K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH, AD V. . RESPONDENT BY : SHRI U.C. DUBEY, SR. DR ORDER PER ANADI N. MISHRA, ACCOUNTANT MEMBER (A) THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 17.1.2012 OF LD. CIT(A) XXVIII, NEW DELHI. THE GROUNDS OF A PPEAL ARE AS UNDER: 1. THAT THE LEARNED AUTHORITY BELOW GROSSLY ERRED IN PASSING THE ORDER ON ERRONEOUS AND INSUFFICIENT GROUNDS. 2. THAT THE LEARNED AUTHORITY BELOW GROSSLY ERRED I N MAKING AN ADDITION OF RS.12,59,446/- ON ACCOUNT OF ESTIMATING INCOME @ 8% ON GROSS RECEIPTS ON ERRONEOUS AND INSUFFICIENT GROUNDS. ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 2 OF 9 3. THAT THE LEARNED AUTHORITY BELOW FURTHER ERRED I N MAKING AN ADDITION OF RS.1,29,74,300/- IN RETURNED INCOME ON ACCOUNT OF CASH DEPOSITS IN BANK ON ERRONEOUS AND INSUFFICIENT GROUNDS WHEREAS THE SAME WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS. 4. THAT IN ANY EVENT THE ORDER PASSED IS ILLEGAL, U N-LAWFUL AND UNJUSTIFIED TAKING INTO CONSIDERATION THE FACTS OF T HE CASE APPARENT ON RECORDS. (B) THE ASSESSEE IS PROPRIETOR OF M/S. M. B. CONTRA CTOR. THE ASSESSEE FILED RETURN OF INCOME ON 15.12.2008 DECLARING A TO TAL INCOME OF RS. 1,26,207/-. THE LD. AO NOTICED THAT THE GROSS RECEI PTS DECLARED BY THE ASSESSEE WERE RS. 61,00,552/- ON WHICH THE ASSESSEE DECLARED NET PROFIT OF RS. 2,05,707/- AFTER CLAIMING EXPENSES OF RS. 58,94 ,845/-. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE, VIDE LETTER DA TED 16.11.2010, FILED UNAUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT . THE LD. AO HAS NOTED IN PARAGRAPHS 2 AND 3.3 OF THE ASSESSMENT ORD ER THAT THE ASSESSEE HAD DEPOSITED HUGE AMOUNT OF CASH TO THE TUNE OF RS . 1,29,74,300/- IN BANK ACCOUNT. DURING THE ASSESSMENT PROCEEDINGS, TH E LD. AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF CASH DEPOSITS. AS PER PARAGRAPH 3.6 OF THE ASSESSMENT ORDER THE ASSESSEE STATED THAT CASH WAS RECEIVED FROM SALE OF FURNITURE, AND THE FURNITURE SOLD WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN PURCHASED FROM M/S. SHARMA CONSTRUCTION. THE L D. AO HAS ALSO TAKEN NOTE THAT THE ENTIRE AMOUNT OF RS. 1,29,74,300/- DE POSITED IN CASH IN THE BANK ACCOUNT OF THE ASSESSEE WAS WITHDRAWN THROUGH CHEQUES DRAWN IN FAVOUR OF M/S. SHARMA CONSTRUCTION. IN THESE FACTS AND CIRCUMSTANCES THE ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 3 OF 9 LD. AO MADE A PROTECTIVE ADDITION OF THE AFORESAID AMOUNT OF RS. 1,29,74,300/- IN THE HANDS OF THE ASSESSEE ; AND FO R SUBSTANTIVE ENQUIRY AND INVESTIGATION, INFORMATION WAS FORWARDED TO THE LD. AO OF MR. RAMESH SHARMA (PROPRIETOR : M/S. SHARMA CONSTRUCTION) HAV ING PAN : AKYP3876J). VIDE A NOTICE DATED 18.11.2010 ISSUED BY THE LD. AO THE ASSESSEE WAS ASKED TO PRODUCE STATEMENT OF AFFAIRS AND EXPLAIN THE SOURCE OF CASH DEPOSITS TOTALING RS. 1,29,74,300/- ALONGWI TH DOCUMENTARY EVIDENCE. ON 13.12.2010 THE ASSESSEE FILED A DIFFER ENT SET OF FINANCIAL STATEMENT AND COMPUTATION OF INCOME WHICH WAS AT VA RIANCE WITH THE RETURN OF INCOME EARLIER FILED ON 15.12.2008. IN T HE SECOND SET OF FINANCIAL STATEMENT AND COMPUTATION OF INCOME, THE ASSESSEE D ECLARED TURNOVER OF RS. 2,07,56,738/-, NET PROFIT OF RS. 4,01,093/- AND TOTAL INCOME OF RS. 3,24,303/-. THE ASSESSEE ALSO SUBMITTED A TAX AUDIT REPORT DATED 12.06.2008 WHEREUNDER TURNOVER WAS DECLARED AT RS. 2,07,56,738/- (EARLIER SHOWN AT RS. 61,00,552/-) AND NET PROFIT WAS SHOWN AT RS. 4,01,093/- (EARLIER SHOWN AT RS. 2,05,707/-). THUS THE DIFFER ENCE AMOUNTING TO RS. 1,46,56,186/- ( I.E. RS. 2,07,56,738/- MINUS RS. 61 ,00,552/-) WAS SHOWN BY THE ASSESSEE AS INCREASED BUSINESS TURNOVER. TH E LD. AO ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE AFORESAID AMOUNT OF RS. 1,46,56,186/-. AND THE LD. AO FURTHER ACCEPTED THE CLAIM OF THE ASSESS EE REGARDING AMENDED FIGURE OF BUSINESS TURNOVER OF RS. 2,07,56,738/- AS AGAINST THE AMOUNT OF RS. 61,00,552/- INITIALLY SHOWN BY ASSESSEE IN RETU RN OF INCOME AS BUSINESS TURNOVER. VIDE PARAGRAPH 3.9 OF THE ASSESSMENT ORDE R LD. AO NOTED CERTAIN DEFICIENCIES AND INFIRMITIES. TAKING NOTE O F THESE DEFICIENCIES AND INFIRMITIES THE AO REJECTED THE BOOKS OF THE ASSESSE E BY APPLYING SECTION 145(3) OF I.T. ACT AND ESTIMATED PROFIT OF THE ASSE SSEE @ 8% OF GROSS RECEIPTS OF RS. 2,07,56,738/- DECLARED BY THE ASSES SEE. GIVING THE ASSESSEE ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 4 OF 9 CREDIT FOR RS. 4,01,093/- EARLIER DECLARED BY THE A SSESSEE AS NET PROFIT, THE AO MADE AN ADDITION OF RS. 12,59,446/-. (B.1) LD. CIT(A) IN HER IMPUGNED ORDER DATED 17.01.2012 A GREED WITH THE LD. AO AS FAR AS THE AFORESAID ADDITION OF RS. 12,5 9,446/- IS CONCERNED. AS FAR AS THE PROTECTIVE ADDITION OF THE AFORESAID OF RS. 1,29,74,300/- IS CONCERNED SHE NOTED THAT THE AMOUNT WAS NOT ADDED I N THE HANDS OF THE AFORESAID MR. RAMESH SHARMA, PROPRIETOR M/S. SHARMA CONSTRUCTION, AND THE AMOUNT OF RS. 1,29,74,300/- INITIALLY MADE BY A O ON PROTECTIVE BASIS IN ASSESSMENT ORDER DATED 31.12.2010, WAS SUSTAINED B Y THE LD. CIT(A) AS SUBSTANTIVE ADDITION. THE ASSESSEE IS NOW IN APPEAL AGAINST THE ORDER OF THE LD. CIT(A). (B.2) DURING APPELLATE PROCEEDINGS IN ITAT THE ASSESSEE F ILED DETAILED PAPER BOOK. AT THE TIME OF HEARING BEFORE US, ASSES SEE DREW OUR ATTENTION TO THE CONTENTS OF THIS PAPER BOOK. IN PARTICULAR O UR ATTENTION WAS DRAWN TO DUPLICATE COPIES OF PURCHASE INVOICES ISSUED BY M/S . SHARMA CONSTRUCTION, IN RESPECT OF THE PURCHASES CLAIMED TO HAVE BEEN MA DE BY THE ASSESSEE FROM THEM. OUR ATTENTION WAS ALSO DRAWN TO AFFIDAVI TS OF THE ASSESSEE AND OF MR. RAMESH SHARMA (PROPRIETOR M/S. SHARMA CONST RUCTION) ; AND TO THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER A UTHORITIES. THESE ARE PART OF THE PAPER BOOK FILED BY THE ASSESSEE. OUR A TTENTION WAS ALSO DRAWN TO THE DETAILS FILED BEFORE THE LOWER AUTHORITIES, WHICH IS ALSO PART OF THE PAPER BOOK FILED BY THE ASSESSEE. BASED ON MATERIAL S ON RECORD AND SUBMISSIONS MADE BY LD. AR OF THE ASSESEE AT THE TI ME OF HEARING ; THE CASE OF THE ASSESSEE CAN BE THUS SUMMARIZED :THE AS SESSEE CLAIMS THAT MORE THAN 80% OF PURCHASES (ITEMS OF FURNITURE) WER E MADE FROM MR. ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 5 OF 9 RAMESH SHARMA (PROPRIETOR M/S. SHARMA CONSTRUCTION) FROM THE GOA PREMISES OF M/S. SHARMA CONSTRUCTION WHICH WAS HAN DLING VARIOUS ITEMS OF GINGER HOTEL PROJECT AT GOA ; AND THAT THE ASSESS EE SOLD MAINLY IN CASH TO THE CUSTOMERS ; THAT THE SALE PROCEEDS WERE RECE IVED BY THE ASSESSEE FROM THE CUSTOMERS NOT IN GOA IN DELHI ; THAT CART AGE ON GOODS SOLD BY ASSESSEE WERE PAID BY THE PURCHASING CUSTOMERS ; TH AT OCTROI WAS NOT PAID AND SALES TAX / VAT WAS ALSO NOT PAID IN RESPECT OF SALES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE BECAUSE SALES WERE MADE I N GOA ITSELF WHERE VAT IS NOT APPLICABLE AND OCTROI WAS ALSO NOT APPLI CABLE ; THAT THREE PERSONS WERE ENGAGED AT GOA FOR LOOKING AFTER SALES , PURCHASE AND OTHER RELATED JOBS ; THAT CASH ARISING FROM SALES IN GOA WAS EITHER RECEIVED BY THE ASSESEE IN DELHI, OR WAS BROUGHT TO DELHI FROM GOA AND AS PER REQUIREMENT THE SAME WAS DEPOSITED IN BANK ACCOUNT IN DELHI ; T HAT THE BUSINESS WAS CARRIED OUT FROM BUSINESS PREMISES OF M/S. SHARMA C ONSTRUCTION FOR WHICH THE ASSESSEE WAS NOT PAYING ANY CHARGES EXCEPT SECU RITY CHARGES TO SECURITY PERSONS ; THAT NO TRANSPORTATION CHARGES W ERE INCURRED ON ACCOUNT OF GOODS PURCHASED / SOLD BECAUSE OF SAME LOCATION / PREMISES AND ON ACCOUNT OF TRANSPORTATION CHARGES BEING MET BY THE PURCHASERS ; THAT FIGURES OF TURNOVER AND PROFIT OF BUSINESS WERE WRO NGLY REPORTED IN THE RETURN OF INCOME ON THE ADVICE OF ONE MR. TIWARI WH O MISGUIDED THE ASSESSEE AND FILED THE ASSESSEES RETURN ON ESTIMAT E BASIS WITHOUT CONSIDERING THE RELEVANT DOCUMENTS ; THAT THE ASSES SEE HAD TO APPROACH MR. TIWARI BECAUSE THE EARLIER CA OF THE ASSESSEE D EMANDED A FEE WHICH WAS CONSIDERED VERY HIGH ; THAT AUDIT REPORT U/S 44 AB WAS ALREADY PREPARED BY CA SHRI R.P. GROVER BUT COULD NOT BE CO NSIDERED AND FILED WHEN THE ASSESSEE SUBMITTED RETURN OF INCOME ; THAT THE DIFFERENCE OF AFORESAID AMOUNT OF RS. 1,46,56,186/- IN SALES FIGU RES MAY BE DUE TO ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 6 OF 9 OMISSION OF GOA SALE, BEING THE SALE CONDUCTED UNDE R THE SUPERVISION OF THE ASSESSEES SON, DUE TO CLERICAL MISTAKE OR MAY BE DUE TO IGNORANCE OF LAW OF MR. TIWARI OR THE REASON BEST KNOWN TO HIM . THE LD. AR OF ASSESSE EMPHASIZED THAT DUPLICATE COPIES OF PURCHASE BILLS REGARDING PURCHASES FROM M/S. SHARMA CONSTRUCTION WERE PRODUCED BEFORE LD. AO ALONGWITH COPY OF LEDGER ACCOUNT AND REJECTION OF BOOK RESULTS U/S 145(3) WAS NOT WARRANTED. LD. AR OF THE ASSESSEE ALSO ARGUED THAT THE NET PROFIT 8% OF TURNOVER ADOPTED BY THE AO WAS INCORRECT BECAUSE U/ S 44AD OF I.T. ACT THIS RATE OF PROFIT IS APPLICABLE FOR TURNOVER BELO W RS. 40 LACS WHEREAS THE TURNOVER OF THE ASSESEE IS MORE THAN RS. 40 LACS. L D. AR OF THE ASSESEE STRONGLY CONTENDED AT THE TIME OF HEARING BEFORE US , THAT THE LOWER AUTHORITIES DID NOT FULLY APPRECIATE THESE FACTS OF THE CASE AND THE CASE SHOULD BE RESTORED BACK TO THE LD. AO FOR REMOVAL OF ANY DOUBTS REGARDING FACTS OF THE CASE AND FOR DENOVO ASSESSMENT .ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF THE LD. CIT(A). HE CONTENDE D THAT THE AO WAS JUSTIFIED, IN REJECTING THE BOOK RESULTS U/S 145(3) O F I.T. ACT IN VIEW OF THE DEFICIENCIES AND INFIRMITIES HIGHLIGHTED IN THE ASS ESSMENT ORDER ;THAT ESTIMATION OF PROFIT @ 8% OF THE TURNOVER WAS A REA SONABLE ESTIMATE AND THAT THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 1,29,74,300/- ON SUBSTANTIVE BASIS BECAUSE AS NOTED BY LD. CIT(A), THIS AMOUNT WAS NOT CONSIDERED FOR ADDITION IN THE HANDS OF MR. RAMESH SHARMA (PROPRIETOR M/S. SHARMA CONSTRUCTION). (C) WE HAVE HEARD BOTH SIDES. WE HAVE ALSO PERUSED THE MATERIALS ON RECORD CAREFULLY. AS FAR AS ADDITION OF RS. 1,29,74 ,300/- ON ACCOUNT OF CASH DEPOSITS IN BANK ACCOUNT IS CONCERNED, PERUSAL OF P ARAGRAPH 3.6 OF ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 7 OF 9 ASSESSMENT ORDER DATED 31.12.2010 SHOWS THAT THIS A DDITION WAS MADE BY AO ON PROTECTIVE BASIS WHILE HOLDING THAT M/S. SHAR MA CONSTRUCTION (PROPRIETOR : MR. RAMESH SHARMA) WAS THE REAL BENEF ICIARY OF CASH DEPOSITED IN BANK ACCOUNT. FOR SUBSTANTIVE ENQUIRY AND INVESTIGATION, INFORMATION WAS FORWARDED BY LD. AO OF ASSESSEE TO LD. AO OF M/S. SHARMA CONSTRUCTION (PROPRIETOR : MR. RAMESH SHARMA). LD. CIT(A), BEFORE CONVERTING THIS PROTECTIVE ADDITION TO SUBSTANTIVE ADDITION SHOULD HAVE CONSIDERED INQUIRIES AND INVESTIGATIONS CONDUCTED I N THE CASE OF MR. RAMESH SHARMA, PROPRIETOR OF M/S. SHARMA CONSTRUCTI ON. HOWEVER, SHE BASED HER DECISION ON A MUCH EARLIER ASSESSMENT ORD ER DATED 16.4.2010 (PASSED MUCH EARLIER THAN ASSESSMENT ORDER DATED 31 .12.2010 OF THE APPELLANT ASSESEE) WHICH COULD NOT HAVE TAKEN THE I NFORMATION FORWARDED BY THE LD. AO OF THE APPELLANT ASSESSEE, INTO CONSI DERATION. LD. CIT(A) CONVERTED PROTECTIVE ADDITION OF RS. 1,29,74,300/- INTO SUBSTANTIVE ADDITION MERELY BECAUSE IN THE AFORESAID EARLIER ORDER DATED 16.4.2010 THE ADDITION OF RS. 1,29,74,300/- WAS NOT MADE IN THE CASE OF MR . RAMESH SHARMA PROPRIETOR OF M/S. SHARMA PROPRIETOR OF M/S. SHARMA CONSTRUCTION. MOREOVER, NEITHER THE LD. AO NOR THE LD. CIT(A) HAV E TAKEN CARE TO ASCERTAIN THE EXTENT TO WHICH CASH DEPOSITS IN BANK ACCOUNT, TOTALING RS. 1,29,74,300/- WAS INCLUDED IN THE SALES TURNOVER OF THE ASSESSEE, ORIGINALLY SHOWN BY ASSESSEE AT RS. 61,00,552/- AND CHANGED LA TER TO RS. 2,07,56,738/-. THUS, TO THAT EXTENT, NOT ONLY THE A MOUNT IS FULLY ADDED ON ACCOUNT OF CASH DEPOSITED IN BANK ACCOUNT ; BUT BUS INESS PROFIT @ 8% IS ALSO ADDED TO THE INCOME OF THE ASSESSEE. THIS HAS, THEREFORE, RESULTED IN DOUBLE ADDITION, WHICH CANNOT BE UPHELD. WHEN AN AP PELLATE AUTHORITY CONVERTS A PROTECTIVE ADDITION INTO SUBSTANTIVE ADD ITION ; THERE MUST BE GOOD REASONS FOR IT. IT CANNOT BE DONE LIGHTLY WIT HOUT CONSIDERATION OF ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 8 OF 9 RELEVANT FACTS AND CIRCUMSTANCES, WITHOUT DUE APPLI CATION OF MIND, AND WITHOUT SOUND BASIS. ALSO PROTECTIVE ADDITION CANNO T BE CONVERTED INTO SUBSTANTIVE ADDITION IN THE HANDS OF AN ASSESSEE ME RELY BECAUSE SUBSTANTIVE ADDITION WAS NOT MADE IN THE HANDS OF A NOTHER ASSESSEE. WHAT HAS TO BE SEEN IS WHETHER SUBSTANTIVE ADDITIONS IN THE HANDS OF THE ASSESEE IS JUST AND REASONABLE IN THE OVERALL FACTS AND CIRC UMSTANCES OF THE CASE. FURTHER, DOUBLE TAXATION OF SAME AMOUNT IS AGAINST BASIC TENETS OF TAXATION. MOREOVER, NEITHER THE LD. AO NOR LD. CIT( A) HAVE ,IN THEIR RESPECTIVE ORDERS ADEQUATELY DEALT WITH OR SPECIFIC ALLY REJECTED THE FACTS (SUMMARIZED IN PARAGRAPH 3.2 OF THIS ORDER) CLAIMED BY THE APPELLANT IN THE PROCEEDINGS BEFORE LOWER AUTHORITIES. ON CUMULATIVE CONSIDERATION OF THE AFORESAID FACTS AND CIRCUMSTANCES, WE SET ASIDE TH E IMPUGNED ORDER OF LD. CIT(A) AND RESTORE THE CASE TO THE FILE OF LD. AO F OR DENOVO ASSESSMENT. THE LD. AO IN THE PROCEEDINGS FOR DENOVO ASSESSMENT WILL BE FREE TO MAKE ANY INQUIRIES AND INVESTIGATIONS. ALSO, THE ASSESSE E WILL BE FREE TO FURNISH ANY EVIDENCES AND EXPLANATIONS. (D) IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2016. SD/- SD/- ( H.S. SIDHU ) ( ANADI N. MISHRA ) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 30 TH AUGUST,2016 *VEENA* ITA NO.1607/DEL/2012 FOR AY 2008-09 IN THE CASE OF MOTI LAL GUPTA VS. ITO PAGE 9 OF 9 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. PRINCIPAL CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR