Sunil Jain, Gwalior V. A.C.I.T.- Circle-1, Gwalior

ITA 161/AGR/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2497 (ITAT-AGRA)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-02-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJVANSH
• Assessee Lawyers: V BAPNA
• Keywords: Rejection of books of accounts; Business expenditure; Income from undisclosed sources; Search and seizure
• Section: 143(3); 133A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.161/AGR/2010 ASST. YEAR: 2008-09 SHRI SUNIL JAIN, VS. ASSTT. COMMISSIONER OF IN COME TAX, PROP. M/S. AHINSA DIAMOND JEWELLERY, CIRCLE - I, GWALIOR. SARAFA BAZAR, GWALIOR. (PAN : AESPJ 2872 D). ITA NO.269/AGR/2010 ASST. YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, VS. SHRI SUNIL JAIN, PROP. CIRCLE - I, GWALIOR. M/S. AHINSA DIAMOND JEWEL LERY, SARAFA BAZAR, GWALIOR. (PAN : AESPJ 2872 D). (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI V. BAPNA, C.A. REVENUE BY : SHRI HOMI RAJ VANSH, CIT D.R. ORDER PER BENCH : THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 30.03.2010 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IN ITS APPEAL HAS RAISED THE FOLLOW ING GROUND :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 7,00,000/- ON ACCOUNT OF UNEXPLAINED PURCHASE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HO NESTLY INCLUDED THE INCOME AS FOUND AND SURRENDERED DURING SEARCH, IN HIS INCOME TAX RETURN HENCE FURTHER ADDITION IS ILLEGAL UNJUSTIFIED AND BAD IN LAW. 2 3. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWI NG GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN ACCEPTING THE BOOKS WHEN PU RCHASES ARE NOT SUPPORTED BY BILLS AND INVOICES OF OTHER SUPPORTING DOCUMENTS WHICH ARE MOSTLY FROM UNREGISTERED DEALERS AND GIVING RELIEF TO THE ASSES SEE FOR ` 1,92,83,893/- (REDUCING G.P. ADDITION TO ` 7,00,000/-) AS AGAINST ADDITION OF ` 1,99,83,893/- MADE ON ACCOUNT OF ESTIMATED G.P. WHILE THE ASSESSI NG OFFICER MADE DETAILED DISCUSSION/FACTS IN HIS ASSESSMENT ORDER WHICH WAS AT ALL NOT CONSIDERED BY LD. CIT(A) . 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A) HAS ERRED IN DIRECTING TO RECOMPUTE THE INCOME BY TAKING THE RET URN INCOME OF ` 63,68,015/- IN PLACE OF ` 69,86,408/- INCOME AS PER STATEMENT RECORDED DURING THE COURSE OF SEARCH. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D., CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 3,05,323/- ON ACCOUNT OF UNRECORDED CASH FOUND DURI NG THE COURSE OF SEARCH ` 80,000/- ON ACCOUNT OF HOUSE HOLD EXPENSES NOT ENTE RED IN BOOKS FOUND DURING THE COURSE OF SEARCH AND ` 1,86,706/- ON ACCOUNT OF UNEXPLAINED EXPENSES FOUND DURING THE COURSE OF SEA RCH ON THE GROUND THAT THESE EXPENSES ARE INCLUDED IN DECLARED RETURN INCOME OF ` 63,68,015/- 4. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 28.10.2009 DECLARING INCOME OF ` 63,68,015/-. THE SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) WAS CO NVERTED INTO SEARCH ON 20.02.2008 AND DURING THE SEARCH THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS OF JEWELLERY AND ALSO SURRENDERED AMOUNT DURING SEARCH. THE ASSESSEE HAS DECLARED SALES OF ` 78,68,534/- AND G.P. OF 15.24%. THE ASSESSING OFFICER ISSUED QUESTIONNAIRE DATED 12.11.2009 WHICH WAS SERVED UPON THE ASSESSEE ON THE SAME DATE I.E. 12.11.2009. IN RESPONSE TO THE SAME, THE LD. A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAI LS AS REQUIRED BY THE ASSESSING OFFICER. DURING THE SEARCH PROCEEDINGS, INVENTORIES OF GOLD AND SILVER ORNAMENTS WERE PREPARED AND THE STOCK HAS BEEN VALUED BY THE APPROVED VALUER AND DI FFERENCE OF STOCK AMOUNTING TO ` 69,86,408/- 3 WAS FOUND. THE REVENUE AUTHORITIES FOUND THE TOTAL STOCK AMOUNTING TO ` 99,01,288/- AND AS PER THE STOCK BOOKS THAT WAS ` 29,14,880/-, THEREFORE, THE DIFFERENCE OF STOCK WAS OF ` 69,86,408/-. APART FROM THE DIFFERENCE OF STOCK FOUND AMOUNTING TO ` 69,86,408/-, THE ASSESSEE HAS ALSO SURRENDERED UNRECORDED CASH FOUND OF ` 3,05,323/- AND ` 1,86,706/- AS UNEXPLAINED EXPENSES OUT OF BOOKS, ` 80,000/- AS UNEXPLAINED HOUSEHOLD EXPENSES TOTALING TO ` 75,58,437/- AS INCOME FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER AS KED THE ASSESSEE TO FURNISH DETAILS OF SALES AND PURCHASES ITEM-WISE, QUANTITY-WISE, QUALITY-WIS E WITH VALUATION AND G.P. RATE ITEM-WISE PURCHASE AND SALE, OPENING AND CLOSING STOCK DETAIL S ITEM-WISE, QUALITY-WISE, QUANTITY-WISE WITH VALUATION ETC. ALONG WITH DOCUMENTARY EVIDENCE AS W ELL AS COMPLETE BOOKS OF ACCOUNTS. BUT THE ASSESSEE DID NOT FURNISH COPIES OF BILLS OF PURCHAS ES MADE FOR ` 7,00,000/- AND ` 3,28,594/- TOTALING TO ` 10,28,594/- AS CLAIMED BY HIM DURING SEARCH. THE A SSESSEE HAS ALSO NOT FURNISHED THE ENTRIES PASSED IN BOOKS OF ACCOUNTS RELATING TO THE SURRENDER MADE AND ALSO THE RELATED LEDGER ACCOUNTS EFFECTED BY THESE ENTRIES AND VARIOUS OTHE R DOCUMENTARY EVIDENCES ASKED BY THE ASSESSING OFFICER. IN ABSENCE OF AFORESAID DOCUMEN TARY EVIDENCES WHICH IS REQUIRED TO BE FILED BY THE ASSESSEE, AS DESIRED BY THE ASSESSING OFFICE R, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SECTION 145( 3) OF THE ACT AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 21.12.2009 BY OB SERVING AS UNDER VIDE PARA NO.4 :- IN VIEW OF THE ABOVE DISCUSSION, THE INCOME OF THE ASSESSEE IS ESTIMATED AS UNDER : THE ASSESSEE HAS DECLARED NET PROFIT OF ` 5,39,990/-. THE ASSESSEE HAS DECLARED SALES OF ` 78,68,534/- AND GROSS PROFIT OF 15.24%. AS DISCUSSED SUPRA, SALES ARE ESTIMATED AT ` 9,32,90,376/- ESTIMATE IS BASED ON STOCK TURNOVER RATIO OF 1:12 MEANING THERE BY TURNOVER OF THE YEAR IS PROPORTIONATE TO 12 MONTH STOCKS (GOODS/STOCK ON A GIVEN DATE IS USUALLY SOLD WITHIN ONE MONTH) WHICH IS NORMAL MARKET TREND FOR THIS LINE OF BUSINESS AND G.P. 4 RATE IS ESTIMATED AT 22% AS THE ASSESSEE HAS NOT GI VEN PROPER EXPLANATION REGARDING DETERMINATION OF GROSS PROFIT BY NOT SUBM ITTING THE RELEVANT BILLS AND VOUCHERS WITH EXPLANATION OF CONTENTS OF BILLS AND VOUCHERS, STOCK REGISTER, PURITY, RATE APPLIED FOR EACH ITEM OF STOCK ETC.. THUS G.P . COMES TO ` 2,05,23,883/-, THEREBY MEANING AN ADDITION OF ` 1,99,83,893/- ( ` 2,05,23,883/- MINUS ` 5,39,990/-) TO THE NET PROFIT OF TRADING RESULTS. IN VIEW OF THE ABOVE, INCOME OF THE ASSESSEE COMPUT ED AS UNDER : INCOME AS PER STATEMENT RECORDED DURING SEARCH ` 69,86,408/- (I) ADDITION ON ACCOUNT OF UNRECORDED CASH FOUND ` 3,05,323/- (II) ADDITION ON ACCOUNT OF UNEXPLAINED HOUSE HOLD EXPENSES NOT RECORDED IN BOOKS ` .80,000/- (III) ADDITION ON ACCOUNT OF UNEXPLAINED EXPENSES O UT OF BOOKS ` 1,86,706/- (IV) ADDITION AS DISCUSSED ABOVE ` 1,99,83,893/- TOTAL TAXABLE INCOME ` 2,75,42,330/- ASSESSED AT ` 2,75,42,330/-. ISSUE NECESSARY FORMS. CHARGE INTE RESTS U/S 234A, 234B AND 234C AS PER RULES. PENALTY PROCEEDI NGS U/S 271(1)(C) OF THE INCOME-TAX ACT 1961 IS INITIATED SEPARATELY. 5. AGGRIEVED BY THE ASSESSMENT ORDER DATED 21.12.20 09 THE ASSESSEE FIELD APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE THE IMPUGNED ORDER DATED 30.03.2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE SAME, THE ASSESSEE AND THE REVENUE HAVE FILED THE PRESENT APPEALS. 6. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY CONFIRMED THE ADDITION OF ` 7,00,000/- ON ACCOUNT OF UNEXPLAINED PURCHASES WITHOUT APPRECIATING THE FACTS OF THE CAS E ON HAND AND WRONGLY CONFIRMED THE ADDITION IN DISPUTE WHICH IS CONTRARY TO THE LAW AND FACTS O N THE FILE. HE FURTHER STATED THAT HE RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORI TY ON THE ADDITIONS DELETED BY HIM. ON THE CONTRARY, THE LD. D.R. RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY ON CONFIRMING THE ADDITION OF ` 7,00,000/- WHICH IS IN DISPUTE IN THE ASSESSEES AP PEAL. HE FURTHER 5 STATED THAT THE LD. FIRST APPELLATE AUTHORITY HAS W RONGLY DELETED THE ADDITIONS MENTIONED IN GROUND OF APPEAL FILED BY THE REVENUE AND FINALLY H E RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER ON THE ISSUE IN DISPUTE IN THE DE PARTMENTAL APPEAL. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US ESPECIALLY THE IMPUGNED ORDER. AS REGARDS TO THE A DDITION OF ` 7,00,000/- ON ACCOUNT OF UNEXPLAINED PURCHASES AGAINST WHICH THE ASSESSEE IS AGGRIEVED AND FILED THE APPEAL, IT IS ADMITTED FACT THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ONS BY ESTIMATING SALES BASED ON STOCK TURNOVER RATIO OF 1:12 ON WHICH FURTHER ESTIMATE OF PROBABLE G.P. OF 22%. THIS ESTIMATION HAS BEEN MADE ON THE GROUND THAT THE ASSESSEE HAS NOT P RODUCED THE RELEVANT BILLS AND VOUCHERS, STOCK REGISTER ETC. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS ON THE GROUND THAT THE TRADING ACCOUNT, PROFIT & LOSS ACCOUNT AND THE BALA NCE SHEET FURNISHED ALONG WITH ITS RETURN IS WITHOUT ANY SUPPORTING DOCUMENTARY EVIDENCE. IT IS ALSO ADMITTED FACT THAT SEARCH AND SEIZURE OPERATION HAS BEEN CARRIED OUT COVERING BOTH BUSINE SS AND RESIDENTIAL PREMISES OF THE ASSESSEE AND DURING THE COURSE OF SEARCH THE ASSESSEE HAS MA DE DISCLOSURE OF ` 53,07,814/- ON ACCOUNT OF VARIATION IN STOCK. THE ASSESSING OFFICER AS WELL AS THE LD. FIRST APPELLATE AUTHORITY HAS ACCEPTED THE DISCLOSURE OF ` 53,07,814/- ON ACCOUNT OF VARIATION IN STOCK WHICH THE ASSESSEE HAS OFFERED DURING SEARCH PERIOD. INSPITE OF THE SAME, THE REVENUE AUTHORITIES HAS MADE THE ADDITION OF ` 7,00,000/- BECAUSE THE ASSESSEE HAS NOT PRODUCED SO ME BILLS WHICH IS YET TO BE RECEIVED AT THE TIME OF SEARCH. IN OUR CONSIDERED OPINION, THE ADDITION OF ` 7,00,000/- HAS WRONGLY BEEN SUSTAINED BY THE LD. FIRST APPELLATE AUTHORITY WHEN THE TOTAL DISCLOSURE AMOUNT HAS BEEN ACCEPTED WHICH INCLUDES ` 7,00,000/-. THE LD. FIRST APPELLATE AUTHORITY HERS ELF ADMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY SPE CIFIC INSTANCE OF SALE OR PURCHASE WHICH HAS 6 BEEN FOUND UNRECORDED OR PERTAINING TO WHICH ANY DO CUMENTARY EVIDENCE WAS FOUND AND SEIZED EXCEPT THOSE ADMITTED DURING SEARCH IN RESPECT OF W HICH DISCLOSURE ALREADY MADE AND INCORPORATED IN THE RETURN. THE BOOKS OF ACCOUNTS PRODUCED AND EXAMINED DULY REFLECTED THE ENTRIES MADE IN RESPECT OF THE DISCLOSURE, PURCHASE S NOT FOUND RECORDED ON THE DATE OF SEARCH BUT IN RESPECT OF WHICH THE INVENTORY HAS BEEN MADE. K EEPING IN VIEW THE FINDING GIVEN BY THE LD. FIRST APPELLATE AUTHORITY, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION OF ` 7,00,000/- HAS WRONGLY BEEN CONFIRMED BY THE LD. FIRST APPELLATE A UTHORITY WHICH DESERVES TO BE DELETED AND WE DELETE THE SAME BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. 8. AS REGARDS TO THE APPEAL FIELD BY THE REVENUE IN WHICH THE REVENUE HAS CONTENDED THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY ACCEP TED THE BOOKS WHEN PURCHASES ARE NOT SUPPORTED BY BILLS AND INVOICES OR OTHER SUPPORTING DOCUMENTS WHICH ARE MOSTLY FROM UNREGISTERED DEALERS AND GIVING RELIEF TO THE ASSES SEE FOR ` 1,92,83,893/- (REDUCING G.P. ADDITION TO ` 7,00,000/-) AS AGAINST THE ADDITION OF ` 1,99,83,893/- MADE ON ACCOUNT OF ESTIMATED G.P. THE LD. FIRST APPELLATE AUTHORITY HAS CLEARLY MENTI ONED IN THE IMPUGNED ORDER THAT THIS IS THE FIRST YEAR OF OPERATION OF THE ASSESSEES BUSINESS AND HE HAS DECLARED SALES OF ` 78,68,534/- ON WHICH G.P. OF ` 11,99,728/- HAS BEEN EARNED THEREBY GIVING G.P. RAT E OF 15.24% AND THE ASSESSING OFFICER HAS ESTIMATED THE SAME @ 22% WITH OUT GIVING ANY BASIS FOR THE SAME. THE LD. FIRST APPELLATE AUTHORITY HAS ALSO SUPPORTED HER VI EW BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT, DELHI-I VS. BANSAL HIGH C ARBONS (P) LTD (2007) 165 TAXMAN 243. THE LD. FIRST APPELLATE AUTHORITY WHILE DELETING THE AD DITION IN DISPUTE IN THE APPEAL FILED BY THE REVENUE HERSELF HAS HELD THAT THERE ARE SOME DEFICI ENCIES AND DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE DURING THE COURSE OF SEARC H FOR WHICH THE ASSESSEE HAS MADE DISCLOSURE 7 OF ` 58,79,843/- FOR VARIATION IN STOCK, CASH, HOUSEHOLD EXPENSES AND BUSINESS EXPENSES WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AND DEL ETED THE REMAINING ADDITION IN DISPUTE. AFTER GOING THROUGH THE IMPUGNED ORDER, WE ARE OF THE CON SIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE ADDITION IN DISPU TE IN THE APPEAL FILED BY THE REVENUE ON THE BASIS OF DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE AS WELL AS THE DISCLOSURE STATEMENT MADE BY THE ASSESSEE DURING THE SEARCH WHICH HAS BEEN ACCEP TED BY THE ASSESSING OFFICER. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORD ER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. WE UPHOLD THE SAME BY DISMISSING THE APPEAL FILED B Y THE REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED AND THAT OF THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 10.03.2011 ). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 10 TH MARCH, 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY