SAKALCHAND G. GANDHI, Kolhapur V. ITO,Wd. 1(1), Kolhapur

ITA 1607/PUN/2004

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49857 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 29-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Keywords: Unexplained investment; Unexplained expenditure; Gift; Business income; Income from undisclosed sources; Retraction
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI APPELLANT PROP. OF ARCHIES GALARY, 3 RD LANE, RAJARAMPURI, KOLHAPUR PAN ABCPG6289L VS. ITO, WARD 1(1), KOLHAPUR RESPONDENT APPELLANT BY: SHRI M.K. KULKARNI RESPONDENT BY: SHRI SANJAY SINGH ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) KOLHAPUR DATED 20/09/2004 FOR A .Y. 2001-02 ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE APPELLANT RIGHTLY RETRACTED THE STATEMENT GIVEN BY SHRI LATIF GANDHI GENERAL MANAGER AND SON OF THE APPELLA NT ADMITTING ADDITIONAL INCOME FOR A.Y. 2001-02 AS IT WAS BASED ON ERRONEOUS ASSUMPTION AND CONTRADICTIONS AND PRES SURE BROUGHT ON HIM. THE SAID ADMISSION HAS NO EVIDENTIA RY VALUE AND IT BE HELD ACCORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE ADDITION OF UNACCOUNTED CASH OF RS. 81,000/- WA S I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 2 UNJUSTIFIED, CONTRARY TO PROVISIONS OF LAW AND THE ADDITION SUSTAINED BY THE LD. C.I.T. (A) KOLHAPUR BE DELETED . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. C.I.T. (A) KOLHAPUR IS NOT JUSTIFIED IN SUS TAINING THE ADDITION OF RS. 3,90,000/- ON ACCOUNT OF ALLEGED UNACCOUNTED INCOME DUE TO UNRECORDED SALES COMMENTING THAT THE A.O. HAD WRONGLY MENTIONED AS UNRECORDED SALES, AND THE ADDI TION OF RS. 3,90,000/- BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. C.I.T.(A) WAS NOT JUSTIFIED IN CONFIRMING T HE ADDITION OF RS. 1,30,000/- BEING ESTIMATION OF EXPENDITURE ON F URNITURE AT RS. 2,55,000/- LOCATED AT THE RESIDENCE AT THE TIME OF SURVEY U/S. 133-A OF THE ACT AND THE ADDITION RESULTING IN TO ASSUMING OF EXCESSIVE JURISDICTION AND CONTRARY TO PROVISION S OF LAW BE DELETED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. C.I.T. (A) KOLHAPUR WAS NOT JUSTIFIED IN CO NFIRMING THE ADDITION OF RS. 11,57,106/- ON ACCOUNT OF EXCESS ST OCK FOUND AT THE TIME OF THE SURVEY U/S. 133-A IN SPITE OF AP PELLANT'S REPRESENTATIVE THAT THE STOCK WAS NOT CORRECTLY INV ENTORISED. IT IS CARDINAL PRINCIPLE OF LAW THAT NO ADDITION CAN B E MADE OF THE VALUE OF ALLEGED STOCK ITSELF AS INCOME AND, THEREF ORE, THE ADDITION BE DELETED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE APPELLANT DENIES HIS LIABILITY TO PAY INTEREST U/S. 234- A/234-B AND 234-C OF THE ACT AND SUCH LEVY BE DELET ED. 2. ASSESSEE IS A PROPRIETORSHIP CONCERN ENGAGED IN A BUSINESS OF PURCHASE AND SALES OF GREETINGS, GOGGL ES, GIFT ARTICLES, TOYS, CROCKERY, CLOCKS, ETC. ON RETAIL BA SIS. THE ASSESSEE HAS NOT FILED RETURNS O INCOME FOR A.Y. 19 99-2000 I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 3 AND 2000-01 IN TIME PRESCRIBED UNDER SECTION 139(1) OF THE ACT. LATER ON, A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 13/02/2001 AND DURING THE COURSE OF SURVEY, PHYSICA L VERIFICATION OF STOCK AND CASH WAS MADE. DURING T HE COURSE OF SURVEY VARIOUS INCRIMINATING DOCUMENTS FO UND AT THE BUSINESS PREMISES WERE SCRUTINIZED. THE PHYSICA L VERIFICATION OF STOCK AND CASH REVEALED EXCESS STOC K OF RS.11,57,106/- AND 81,000/- RESPECTIVELY. IT WAS ALSO NOTED THAT THAT ASSESSEE WAS NOT ISSUING THE SALE B ILLS. SHRI LALIT GANDHI, GENERAL MANAGER AND SON OF THE ASSESSEE WHO LOOKS AFTER THE BUSINESS ON BEHALF OF THE ASSESSEE HAVING EXAMINED THESE DISCREPANCIES HAS MA DE FOLLOWING ADDITIONAL INCOME FOR A.Y. 2001-02. 1) UNACCOUNTED INCOME DUE TO UNRECORDED SALES OF RS.3,90,000/-. 2) EXCESS CASH OF RS.81,000/-. 3) UNACCOUNTED EXPENDITURE ON FURNITURE OF RS.1,30,000/-. 4) EXCESS STOCK FOUND OF RS.11,57,106/-. I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 4 3. AFTER ABOUT 1 MONTHS ASSESSEE FILED A RETRACT ION LETTER ON 07/04/2001, WHICH WAS EXAMINED BY THE A.O . AND HE DID NOT ACCEPT THE RETRACTION FOR THE REASONS ME NTIONED IN THE LETTER SENT TO THE ASSESSEE ON 02/05/2001. AFTER HAVING EXAMINED THE REPLY FILED DURING THE COURSE O F ACTION A.O. HAS BROUGHT THE ABOVE REFERRED TO DISPUTED INC OME TO TAX. THE MATTER WAS CARRIED BEFORE THE FIRST APPE LLATE AUTHORITY WHO AFTER CONSIDERING THE SUBMISSIONS MAD E ON BEHALF OF THE ASSESSEE UPHELD THE ORDER OF THE ASSE SSING OFFICER ON ALL ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE ASSESSEE. 4. FIRST GENERAL ISSUE IS WITH REGARD TO RETRACTION RAISED ON BEHALF OF THE ASSESSEE WAS THAT THE STATEMENT OF SHRI LALIT GANDHI, COULD NOT BE RELIED UPON AS HE WAS NO T BEING THE OWNER OF ARCHIES GALLARY. THE SAME HAS BEEN RIGHTLY REJECTED BY THE CIT(A) BY OBSERVING THAT SHRI LALIT GANDHI WAS INCHARGE OF THE PROPRIETARY CONCERN AND HE WAS IN POSITION TO MAKE A STATEMENT BEFORE THE SURVEY PART Y WITH REFERENCE TO EXCESS STOCK, CASH AND VARIOUS INCRIMI NATING DOCUMENTS FOUND DURING THE COURSE OF SURVEY. IT W AS ALSO OBSERVED BY THE CIT(A) THAT SHRI LALIT GANDHI HAD I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 5 CONSULTED HIS FATHER ON TELEPHONE AT MOUNT ABU AT RAJASTHAN BEFORE MAKING SUCH UNACCOUNTED INCOME. IT IS EVIDENT FROM THE FOLLOWING DEPOSITIONS IN QUESTION NO.26. ANS. 26. I AGREE TO THE FACT THAT THE STOCK AS DETECTED BY INCOME TAX SURVEY PARTY IS OF RS.27,68,858/-. AFTER DISCUSSING TELEPHONICALLY TH E MATTER WITH MY FATHER SHRI SAKALCHAND GOMRAJ GANDHI (PROPRIETOR) AS PRESENTLY HE IS AT ABU(RAJASTHAN) I AM DECLARING THIS EXCESS STOCK AS ADDITIONAL INCOME OF RS.11,57,106/- FOR F.Y.2000-01. SINCE HE IS OUT O F STATION, I HAVE BRIEFED HIM ABOUT THE SITUATION AND THE DETECTION OF EXCESS STOCK AND AS TOLD BY HIM, I AM DECLARING THIS ADDITIONAL INCOME ON BEHALF OF HIM. I AM GIVING THIS STATEMENT ON BEHALF OF SHRI SAKALCHA ND GANDHI. IN VIEW OF THE ABOVE THE CIT(A) WAS JUSTIFIED IN HO LDING THAT THE STATEMENT OF SHRI LALIT GANDHI, SON AND MANAGER INCHARGE OF ASSESSEE COULD BE RELIED UPON IN DETER MINING UNDISCLOSED INCOME OF THE ASSESSEE AS SAID LALIT GA NDHI WAS RUNNING THE BUSINESS OF ASSESSEE AND HE DISCLOSED/ADMITTED UNDISCLOSED INCOME ONLY AFTER DISCUSSIONS WITH ASSESSEE ON TELEPHONE AT MOUNT ABU . 4.1 FURTHER, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS NEITHER MADE ALLEGATION OF COERCION, PRESSURE OR D URESS ON SHRI LALIT GANDHI FOR EXTRACTING ADMISSION DISCUSSE D I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 6 ABOVE. MOREOVER SHRI LALIT GANDHI MADE DECLARATIO NS AFTER CONSULTATION WITH ASSESSEE. APART FROM THIS, THE C HARTERED ACCOUNTANT OF ASSESSEE WAS PRESENT DURING COURSE OF SURVEY. THE CIT(A) HAVING ANALYZED ALL ASPECTS OF R ETRACTION HAS RIGHTLY COME TO CONCLUSION THAT RETRACTION IN L ETTER DATED 07/04/2001 WAS MERELY AN AFTERTHOUGHT AND IT IS NOT CORROBORATED BY ANY MATERIAL EVIDENCE IN SUPPORT OF SUCH ALLEGATION. THIS FACTUAL REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE AT OUR HANDS. WE UPHOLD THE SAME. 4.2 FURTHER, SHRI LALIT GANDHI FILED AN AFFIDAVIT T O SUPPORT RETRACTION WHICH HAS BEEN ANALYZED. HAVING ANALYZE D THE SAME IN THE LIGHT OF LEGAL AND FACTUAL DISCUSSION, THE CIT(A) OBSERVED THAT ADMISSION OF UNDISCLOSED INCOME OF RS.17,58,106/- WAS CORROBORATED WITH INDEPENDENT EVIDENCE IN FORM OF STOCK INVENTORY, BOOKS OF ACCO UNT FOUND DURING THE COURSE OF SURVEY WHEREAS THE ASSES SEE HAS FAILED TO ESTABLISH THAT RETRACTION FILED ON 07 /04/2001 AND AFFIDAVIT SWORN ON 18/12/2003 WAS CORROBORATED WITH MATERIAL EVIDENCE. ACCORDINGLY, THE SAME WAS RIGHTL Y REJECTED BY THE CIT(A). WE UPHOLD THE SAME. I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 7 5. THE LAST ISSUE ON MERIT IS REGARDING UNACCOUNTED INCOME ON ACCOUNT OF UNRECORDED SALES OF RS.3,90,00 0/-. THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF UNRECORDED SALES. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE ISSUE WAS ANALYZED BY THE CIT(A) WHICH WAS REPRODUCED AS UNDER. Q.30 AS TOLD ABOVE, IF YOU ARE NOT GIVING BILLS F OR ALL THE SALE TRANSACTION TO CUSTOMER, THEN IN THAT CASE DO YOU ESTIMATE OR DECIDE YOUR DAILY SALES AND WRIT E THEM IN THE REGISTER? IF THIS IS SO, WHY IT SHOULDN T BE CONSTRUED THAT YOU ARE RECORDING LOW AMOUNT SALES I N YOUR REGISTER ? ANS. I ACCEPT THAT I CANT SHOW YOU ALL THE SALES DURING THE YEAR BASED ON BILLS. ALSO, AS POINTED B Y YOU, I AM NOT DENYING THE FACT THAT THERE MAY BE A POSSIBILITY OF ONLY A SMALL PORTION OF SALES BEING RECORDED AS COMPARED TO ACTUAL SALE. AS SUCH, SINC E I AM NOT IN A POSITION TO GIVE PROPER EXPLANATION FOR THESE UNRECORDED SALES, I AM DECLARING RS.3,90,000/ - AS MY FATHERS ADDITIONAL BUSINESS INCOME FOR FINAN CIAL YEAR 2000-01 AGAINST THE SAME. I AM READY TO PAY ADVANCE TAX AGAINST THE SAME. FROM ABOVE IT WAS FOUND EVIDENT THAT THE ASSESSEE WAS NOT ISSUING THE CASH BILLS IN RESPECT OF ALL THE SALES. SHRI LALIT GANDHI HAD ADMITTED THAT PART OF SALE WAS NOT RECOR DED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ON BEING QUESTIONED, SHRI LALIT GANDHI HAS NOT QUANTIFIED TH E QUANTUM OF UNRECORDED SALE BUT HAD ADMITTED THE I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 8 ADDITIONAL INCOME OF RS.3,90,000/- OUT OF SUCH UNRE CORDED SALES. SO IT IS EVIDENT THAT SHRI LALIT GANDHI HAD EARNED UNACCOUNTED INCOME OF RS.3,90,000/- ON ACCOUNT OF UNRECORDED SALES. IN VIEW OF THIS THE ADDITION BASED ON ADMISSION ON BEHALF OF ASSESSEE AND MATERIAL ON REC ORD AS ANALYZED ABOVE ADDITION IN QUESTION HAVE RIGHTLY BE EN MADE ON ACCOUNT OF EARNING OF UNACCOUNTED SALES. WE UPHO LD THE SAME. 6. THE NEXT ISSUE IS REGARDING ADDITION ON ACCOUNT OF EXCESS CASH. ON PHYSICAL VERIFICATION, SURVEY PARTY FOUND AND INVENTORISED THE CASH OF RS.88,377/- WHEREAS TH E CASH BALANCE ON THE DATE OF SURVEY AS PER CASHBOOK WAS O NLY AT RS.7,297/-. ON BEING QUESTIONED THE SAID SHRI LAL IT GANDHI HAS DEPOSED THAT THIS REPRESENTED ADDITIONAL INCOME OF THE ASSESSEE. THERE IS NOTHING ON RECOR D OF THAT SOURCE OF SUCH CASH WAS ESTABLISHED BY WAY OF ANY EVIDENCE EXCEPT FOR PLEADING THIS STATEMENT OF RETR ACTED. IN ABSENCE OF ANY CREDIBLE EVIDENCE THE CIT(A) WAS JUS TIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF UNEXPLAINED CASH. WE UPHOLD THE SAME. HOWEVER, WE AGREEING TO THE CONTENTION OF THE LEARN ED AR I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 9 FOR THE ASSESSEE WITH REGARDS TO TELESCOPY OF ADDIT ION ON ACCOUNT OF EXCESS CASH AMOUNT IN QUESTION FROM UNACCOUNTED INCOME ON UNRECORDED SALES OF RS. 3,90, 000/- WHICH HAS BEEN UPHELD BY US, WE ARE OF THE VIEW THA T THE EXCESS CASH OF RS. 81,000/- MIGHT HAVE COME FROM UNRECORDED SALES OF RS. 3,90,000/-. 7. THE NEXT IS ISSUE IS WITH REGARD TO UNEXPLAINED EXPENDITURE ON FURNITURE AT RS.1,30,000/-. DURING THE COURSE OF SURVEY IT WAS NOTED THAT THE ASSESSEE HAS MADE INVESTMENT IN FURNITURE AT HIS RESIDENTIAL PREMISES AT RS.2,55,000/- AND SOURCE OF SUCH EXPENDITURE WAS EXPLAINED OUT OF WITHDRAWALS MADE FROM THE BUSINESS OF ASSESSEE AT RS.1,25,000/-. HOWEVER, SOURCE OF BALA NCE EXPENDITURE OF RS.1,30,000/- COULD NOT BE EXPLAINED DURING THE COURSE OF SURVEY PROCEEDING. LATER ON, THE A SSESSEE HAS ONLY PLACED RELIANCE ONLY ON THE RETRACTION OF THE ASSESSEE ON THIS ACCOUNT. THERE IS NOTHING ON RECOR D TO SUGGEST THAT HOW THE FURNITURE AT RESIDENCE HAS BEE N LOOKED INTO BY SURVEY PARTY IN SURVEY ACTION AT THE PREMISES. WITHOUT PREJUDICE TO ABOVE WE FIND THAT ASSESSEE HAD INCOME ON ACCOUNT OF UNACCOUNTED SALES AT I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 10 RS.3,90,000/- WHICH HAS BEEN UPHELD. TELESCOPY O F THE SAME SHOULD BE ALLOWED. THE ASSESSING OFFICER IS DI RECTED ACCORDINGLY. 8. THE LAST ISSUE IS WITH REGARD TO ADDITION ON ACC OUNT OF EXCESS STOCK. DURING THE COURSE OF SURVEY ON PHYSI CAL VERIFICATION, A STOCK OF RS.27,68,858/- ( AT COST P RICE WAS FOUND AS EVIDENT FROM STOCK INVENTORY DRAWN AND SIG NED BY THE GENERAL MANAGER OF THE CONCERN WHEREAS STOCK ON THE BASIS OF THE BOOKS OF ACCOUNT WAS CALCULATED AT RS.16,11,752/-. DURING THE COURSE OF SURVEY, WHEN G ENERAL MANAGER WAS CONFRONTED WITH THIS FACT OF EXCESS STO CK, HE ADMITTED UNEXPLAINED INVESTMENT IN EXCESS STOCK AT RS. 11,57,106/- AS ADDITIONAL INCOME OF THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION. THE STATEMENT OF TH E SAID GENERAL MANAGER/SON OF THE ASSESSEE DURING THE COUR SE OF SURVEY WAS FOUND RELIABLE AS DISCUSSED ABOVE BECAUS E THE SAME WAS CORROBORATED WITH INVENTORY OF EXCESS STOC K FOUND DURING THE COURSE OF SURVEY. CIT(A) HAVING ANALYZED THE LEGAL AND FACTUAL ARGUMENTS HAS RIGHTLY COME TO THE CONCLUSION THAT THE ADDITION ON ACCOUNT OF EXCESS S TOCK AT RS.11,57,106/-, WHICH HAS BEEN ESTABLISHED ON THE B ASIS OF I.T.A. NO. 1607/PN/2004 A.Y. 2001-02 SHRI SAKALCHAND G.GANDHI 11 EVIDENCE FOUND DURING SURVEY COUPLED WITH STATEMENT OF GENERAL MANAGER/SON OF ASSESSEE DURING SURVEY. SO ADDITION OF RS.11,57,106/- ON ACCOUNT OF UNEXPLAINE D INVESTMENT IN STOCK HAS BEEN RIGHTLY CONFIRMED, BY THE CIT(A). WE UPHOLD THE SAME. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AS INDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE 2011 SD/- SD/- ( D.KARUNAKARA RAO ) ACCOUNTANT MEMBER ( SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 29 TH JUNE 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A) KOLHAPUR 4. THE CIT KOLHAPUR 4. THE D.R, A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE