ITO, Ward - 10(3), Kolkata, Kolkata V. Subhas Brothers Jewellers Pvt. Ltd., Kolkata

ITA 1736/KOL/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78336 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 12-10-2009
• Court: TRIBUNAL
• Department Lawyers: APURBA KR DASJCIT
• Assessee Lawyers: S L KOCHAR; ANIL KO
• Keywords: Unexplained investment
• Section: 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.1736/KOL/2009 ASSESSMENT YEAR : 2005-06 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-10(3), , -VS- SUBHAS BROTHERS JEWELL ERS PVT.LTD. KOLKATA KOLKATA ( PAN:AAECS 4384 E) FOR THE APPELLANT SHRI APURBA KR.DAS,JCIT SR.DR FOR THE RESPONDENT SHRI S.L.KOCHAR ADVOCATE & SHRI ANIL KOCHAR DATE OF HEARING : 05.06.2014 DATE OF PRONOUNCEMENT : 05. 06.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF LD. C.I.T.(A)- XII, KOLKATA DATED 23.07.2009 AND PERTAINS TO ASSESSMEN T YEAR 2005-06.. 2. THE GROUND OF APPEAL RAISED BY REVENUE READS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.62,20,986/- U/S 69A WHI CH WAS MADE ON THE BASIS OF VERIFICATION DURING THE COURSE OF SURVEY U/S 133A O F THE I.T.ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT M /S.SUBHAS BROTHERS JEWELLERS PVT. LTD., THE ASSESSEE COMPANY FILED ITS RETURN OF INCO ME DISCLOSING A TOTAL INCOME OF RS.8,19,780/-. IN THIS CASE A SURVEY WAS CONDUCTED AND CERTAIN DISCREPANCIES LIKE DEFICIT IN CASH, STOCKS ETC. NOTICED. ACCORDINGLY T HE ASSESSEE ADMITTED RS.14,00,000/-. WHILE FILING THE RETURN OF INCOME THE ASSESSEE ADMI TTED THIS ADDITIONAL INCOME UNDER THE INCOME FROM OTHER SOURCES. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E A.O. POINTED OUT THE FOLLOWING DISCREPANCIES NOTICED DURING THE SURVEY O PERATION : ITEM AS PER BOOKS AMOUNT/QUANTITY AS PER PHYSICAL INVENTORY DISCREPANCY (A-B) ADDITION MADE (IN RS.) ITA.NO.1736/KOL/2009 SUBHAS BROTHERS JEWELL ERS PVT.LTD. A.YR.2005-06 2 (A) AMOUNT/QUANTITY (B) CASH IN HAND RS.2495814/- RS.106280/- RS.2389534/- 239534.00 GOLD ORNAMENTS(22 CT.) 16734.187 GMS. 13947.088 GMS. (-)2787.099 GM 172794 5.58 GOLD ORNAMENTS (18 CT.) 1417.703 GMS. 800.717 GMS. (-)556.986 GMS. 278493.0 0 DIAMOND 152.255 CENTS 150.262 CENTS (-)1,993 GMS 19 93.00 SILVER 7948.59 GMS. 1596.810 GMS (-)6351.178 GMS. 95267.67 WITH REGARD TO THE ABOVE DISCREPANCIES THE ASSESSEE FURNISHED THE FOLLOWING EXPLANATION TO THE A.O. AS UNDER :- 1. THAT THE DISCREPANCY OF CASH AND JEWELLERY AT T HE TIME OF SURVEY ON 11.03.2005 WERE MADE DUE TO FOLLOWING REASONS : 2. THAT THE DISCREPANCY IN CASH WAS RS.23,89,534/- DUE TO PURCHASE OF GOLD IN CASH BUT DUE TO LACK OF PROPER MAINTENANCE OF BOOKS OF ACCOUNTS AS ONE OF THE DIRECTOR LATE SUBHAS CHANDRA DEY WAS A CANCER PATIE NT AND ALL THE MEMBERS WAS NOT IN A POSITION TO LOOK AFTER THE ACCOUNTANT AT T HAT TIME LACKING HIS DUTIES AND HE HAS SUBSEQUENTLY DISCHARGED FROM HIS SERVICE. THE D IRECTOR LATE SUBHAS CH.DEY ALREADY BEEN EXPIRED. 3. THAT THE DISCREPANCY IN GOLD ORNAMENTS WAS 556. 986 GM WAS DUE TO NON-ENTRY OF STOCK REGISTER. 4. THAT DISCREPANCY IN DIAMOND IS 1,993 CENTS AND SILVER IS 6351.1/8 GMS WHICH WAS NOT BEER PROPERTY ENTERED IN THE STOCK REGISTER . THE MAIN POINT IS THAT ALL THE JEWELLERY GOLD ORNAMENTS AND DIAMOND AND SILVER WER E PURCHASED BY CASH BUT PROPER ENTRY IN STOCK REGISTER WAS NOT MADE PROPERL Y DUE TO LACK OF KNOWLEDGE OF THE ACCOUNTANT OR THE TRANSACTION INTIMATION WAS NO T INTIMATED TO THE ACCOUNTANT. 5. WE HAVE ALREADY EXPLAINED THAT AN AMOUNT OF GOLD ORNAMENTS HAVING QUANTITY OF 827.6 GMS WERE ISSUED TO SISTER CONCERNS. SUBHAS BROTHERS JEWELLERS, AND NEW SUBHAS BROTHERS JEWELLERS FOR EXHIBITION AND PROCUR EMENT OF ORDERS, WHICH WERE NOT ENTERED IN THE BOOKS SINCE THE SAME DOES NOT RE PRESENT SALES. IN MY WRITTEN SUBMISSION I LIKE TO MENTION THAT THE DIFFERENCE MA Y BE TAKEN INTO ACCOUNT FOR ITA.NO.1736/KOL/2009 SUBHAS BROTHERS JEWELL ERS PVT.LTD. A.YR.2005-06 3 SALE AND PROPORTIONATE RATIO OF PROFIT MAY BE TAKEN INTO ACCOUNT FOR ASCERTAINED THE ACTUAL PROFIT FOR FINALIZING THE AY 2005-06. HAVING NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE, THE AO MADE THE FOLLOWING ADDITIONS CORRESPONDING TO THE DISCRE PANCIES NOTICED : 1. CASH IN HAND DEFICIENCY TREATED AS UNEXPLAINED INVESTMENT U/S 69 RS.23,89,534.00 2. GOLD ORNAMENT 22 CT. DEFICIENCY TREATED AS INC OME RS.17,27,945.00 3. GOLD ORNAMENT 18 CT. DEFICIENCY TREATED AS INC OME RS.2,78,493.00 4. DIAMOND DEFICIENCY TREATED AS INCOME - RS.1,9 93.00 5. SILVER DEFICIENCY OF 6351 GMS TREATED AS INCOM E RS.95,267.00 6. VALUE OF GOLD ORNAMENT OF 875 GM ISSUED TO SISTE R CONCERNS BUT NOT ENTERED IN BOOKS RS.5,13,112.00. .4. BEFORE THE LD. CIT(A) THE ASSESSEE HAD MADE ELA BORATE SUBMISSIONS. THE SUMMARY OF THE SAME IS AS UNDER :- 1. SECTION 69A HAS BEEN WRONGLY APPLIED BY THE A.O . IT HAS NO APPLICATION IN THE FACTS OF THE CASE OF THE APPELLANT AS NARRATED ABOVE. CAS H FOUND IS PART OF CASH BALANCE AS RECORDED IN BOOKS. CASH NOT FOUND BUT WHICH EXISTED AS PER CASH BOOK WAS UTILIZED TO DO BUSINESS AND INCOME OF RS.14 LACS WAS MUTUALLY D ISCUSSED WITH SEARCH PARTY AND ADMITTED AS INCOME WHICH DOES APPEAR IN ACCOUNTS AN D THE A.O. HAS ACCEPTED THE SAME. 2. WITHOUT PREJUDICE TO THE ABOVE, QUANTITY OF JEWE LLERY & ORNAMENTS FOUND LESS AT THE TIME OF SURVEY CANNOT BE CONVERTED IN TERM OF MONEY AND THUS CANNOT BE TREATED AS INCOME. UTMOST, IT MAY BE TAKEN AS SALES NOT RECORD ED IN BOOKS ON WHICH ONLY AN INCOME CAN BE CALCULATED WITH REFERENCE TO THE BUSI NESS OF THE APPELLANT. 3. AS THE FACTS ELABORATE ENTIRE MATTER WAS DISCUSS ED WITH THE SURVEY PARTY BY THE APPELLANT AND IT WAS NOTED AND ACCEPTED THAT RS.14 LACS WOULD BE THE INCOME EARNED BY THE APPELLANT BY UTILIZING ITS CASH AND MAKING PURC HASES AND SALES WHICH ARE NOT RECORDED IN ITS BOOKS. THIS INCOME OF RS.14 LACS DU LY APPEARS IN THE AUDITED ACCOUNTS SUBMITTED WITH THE RETURN AND THERE IS A NOTE BY TH RE AUDITORS ON THIS AS STATED ABOVE. 5. THE LD. CIT(A) CONSIDERING THE ABOVE SUBMISSIONS DELETED THE ADDITION. THE LD. CIT(A) HELD AS UNDER :- AS SEEN FROM THE RECORD A SURVEY OPERATION U/S 133 A WAS CONDUCTED ON THE BUSINESS PREMISES OF THE APPELLANT. DURING THE COURSE OF SUR VEY OPERATION, CERTAIN DISCREPANCIES WERE NOTICED. IN RESPECT OF FOLLOWING ITEMS THE AM OUNT/QUANTITY ENTERED IN BOOKS WAS MORE THAN AMOUNT/QUANTITY FOUND ON PHYSICAL INVENTO RY: SL.N O. ITEM AS PER BOOKS ACTUALLY FOUND DISCREPANCY REMARKS ADDITION MADE 1. CASH IN HAND RS.24,95,814/ RS.1,06,280 RS.23,89,53 4/ FOUND RS.23,89,534. ITA.NO.1736/KOL/2009 SUBHAS BROTHERS JEWELL ERS PVT.LTD. A.YR.2005-06 4 - /- - LESS 00 2. GOLD ORNAMENT: 22 CT. 18. CT. 16734.187GM 1417.703 GM 13947.088 GM 860.717 GM 2787.099 GM 556.965.GM FOUND LESS RS.17,27,945. 00 RS.2,78,493.0 0 3. DIAMOND ITEMS 152 CT. 150.262 CT. 1,993 CT. FOUN D LESS RS.1,993.00 4. SILVER ITEMS 7948.59 GM 1596,810 GM 6351.178 GM FOUND LESS RS.95,267.00 APART FROM THE ABOVE, THE AO ALSO NOTICED THAT GOLD ORNAMENTS OF 877 GMS IN QUANTITY WERE ISSUED GO SISTER CONCERNS. SINCE THE SAME WERE FOUND TO BE NOT ENTERED IN THE BOOKS, THE VALUE OF SUCH GOLD ORNAMENTS AMOUNTING T O RS.5,13,112/- WAS ALSO ADDED AS INCOME. WHEN POINTED OUT THESE DISCREPANCIES THE AP PELLANT ADMITTED RS.14,00,000/- TO COVER UP ALL THE ABOVE DISCREPANCIES AND ACCORDINGL Y FILED RETURN OF INCOME. HOWEVER WHILE COMPLETING THE SCRUTINY ASSESSMENT, THE A.O, ADDED THE AMOUNTS CORRESPONDING TO THESE DISCREPANCIES. JUDGING BY THE DISCREPANCIES N OTICED AND CORRESPONDING ADDITIONS MADE, I FIND THAT THE ADDITIONS MADE ARE IRRATIONAL AND UNJUSTIFIED. IF THE CASH IN HAND IS FOUND TO BE LESS WHEN COMPARED TO CASH AS PER BOOKS , IT IS NOT KNOWN AS TO HOW THE A.O, COULD MADE AN ADDITION U/S 69 AS UNEXPLAINED INVEST MENT. HAD IT BEEN A CASE OF EXCESS CASH THE A.O. JUSTIFIED IN ADDING SUCH EXCESS CASH BUT NOT IN A CASE WHERE THE CASH IN HAND FOUND TO BE LESS THAN THE CASH RECORDED IN THE BOOKS. AS ARGUED THE SAID CASH COULD HAVE BEEN UTILIZED FOR MAKING UNACCOUNTED PURCHASES . THE A.O. HAS NOT PROVED OTHERWISE THAT THE CASH HAD BEEN USED FOR ANY UNEXP LAINED INVESTMENT. IN SUCH A SITUATION THE A.O. COULD HAVE ONLY ADDED THE PROFIT EARNED OUT OF SUCH TRANSACTIONS. SAME IS THE CASE WITH GOLD, DIAMOND AND SILVER ORNA MENTS. THE STOCKS OF THESE ITEMS WERE FOUND TO BE LESS COMPARED TO THE STOCK RECORDS INDICATING THAT THESE STOCKS WOULD HAVE BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNTS. AGAIN THE AO COULD ADD ONLY THE PROFIT ARISING OUT OF SUCH TRANSACTIONS AND NOT THE AMOUNT EQUIVALENT TO DEFICIT STOCK. ON THE OTHER HAND THE APPELLANT ADMITTED RS.14 LAKSH DURIN G SURVEY OPERATIONS TO COVER UP DEFICIT CASH AND STOCKS VIS--VIS UNACCOUNTED PURCH ASES/SALES. ADMITTEDLY THE ADDITIONAL INCOME HAS BEEN RECORDED IN THE BOOKS AND ACCORDING LY FILED THE RETURN BY THE APPELLANT. THE AO HAS NEITHER REJECTED THE BOOKS NOR THE STOCK S SHOWN IN THE BOOKS. AS SUCH THE EXCESS ENTRIES IN THE BOOKS OF ACCOUNT CANNOT BE AD DED AGAIN AS UNDISCLOSED INCOME. NOW AS REGARDS UNDISCLOSED SALES OF RS.12,14,641/- AND VALUE OF GOLD ORNAMENTS ISSUED TO SISTER CONCERNS AND NOT ENTERED IN BOOKS (RS.5,1 3,112/-), I AGREE WITH THE SUBMISSIONS MADE BY THE APPELLANT IN THIS REGARD. IN VIEW OF THE FACTS, I FEEL THAT THE ENTIRE ADDIT ION UNDER VARIOUS HEADS FALLS THROUGH BECAUSE OF FACTUAL POSITION AS DISCUSSED ABOVE. AS SUCH I DIRECT THE A.O. TO DELETE THE VARIOUS ADDITIONS MADE UNDER THE VARIOUS HEADS. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT IN THE CASE OF THE ASSESSEE DURING THE COURSE OF SURVEY OP ERATIONS, CERTAIN SHORTAGES WERE ITA.NO.1736/KOL/2009 SUBHAS BROTHERS JEWELL ERS PVT.LTD. A.YR.2005-06 5 NOTICED. THESE SHORTAGES PERTAINED TO CASH IN HAND, GOLD ORNAMENTS, DIAMOND ITEMS AND SILVER ITEMS. SINCE SHORTAGES HAVE BEEN NOTICED AS COMPARED TO BOOKS IT CANNOT BE SAID THAT ANY UNDISCLOSED INVESTMENT/MONEY WAS MADE BY THE ASSESSEE. THUS WE AGREE WITH THE LD. CIT(A) THAT NO ADDITION CAN BE MADE AS UNDISCLOSED INVESTMENT MADE BY THE ASSESSEE. IN SUCH CIRCUMSTANCES ADDITION U/S 69 A OF THE IT ACT IS NOT WARRANTED. 6.1. AS REGARDS CASH SHORTAGES, SHORTAGE HAS BEEN F OUND AS COMPARED TO BOOKS. THE CASH MIGHT HAVE BEEN USED FOR MAKING UNACCOUNTED PU RCHASES OR OTHER PURPOSES FOR WHICH NO COGENT MATERIAL IS AVAILABLE. IN SUCH CIRC UMSTANCES MERELY ON CONJECTURES OR SURMISES ADDITION U/S 69A OF THE ACT CANNOT BE MADE . AS REGARDS SHORTAGE IN GOLD ORNAMENTS 22 CARAT AND THE GOLD ORNAMENT THAT IS SA ID TO HAVE GIVEN TO SISTER CONCERNS, ADDITION TO THE EXTENT OF RS.17,27,945/- AND RS.5,1 3,112/- RESPECTIVELY HAD BEEN MADE. IN THIS REGARD WE NOTE THAT THE SHORTAGE IN THE ABO VE GOLD ORNAMENTS CANNOT BE TREATED AS UNDISCLOSED INVESTMENT AND THE SHORTAGE CAN AT B EST BE TREATED AS UNDISCLOSED SALES. IN SUCH CIRCUMSTANCES ONLY PROFIT ELEMENTS ARISING OUT OF THE SAID SALE CAN BE ADDED IN THE HANDS OF THE ASSESSEE AND NOT THE ENTIRE UNDISC LOSED SALES. IN THIS REGARD THE ASSESSEE HAS OFFERED AN ADDITION OF RS.14 LAKHS. T HE LD. CIT(A) HAS ACCEPTED THE SAME AS SUFFICIENT. WE FIND OURSELVES IN AGREEMENT WITH THE FINDING OF THE LD. CIT(A) THAT THE OFFER MADE BY THE ASSESSEE IN THIS REGARD SUFFI CE THE ENDS OF JUSTICE. NOW WE COME TO THE ADDITION FOR SHORTAGE IN CASE OF THE FOLLOWI NG : 1) GOLD ORNAMENT 18 CARAT - ADDITION MADE FOR SHORTA GE RS.2,78,493/- 2) DIAMOND ITEMS ADDITIONS MADE RS.1993/- 3) SILVER ITEMS ADDITIONS MADE RS.95,267/- 6.2. WE FIND THAT THE ABOVE SHORTAGES CAN AT BEST B E TREATED AS UNDISCLOSED SALES. IN SUCH CIRCUMSTANCES THE ENTIRE AMOUNT CANNOT BE ADDE D. IN OUR CONSIDERED OPINION, AN ESTIMATED ADDITION OF 10% PROFIT ON THE ABOVE SALES WOULD BE SUFFICIENT AND WOULD SERVE THE ENDS OF JUSTICE. ACCORDINGLY WE CONFIRM T HE ORDER OF THE LD. CIT(A) WITH ONLY MODIFICATION THAT 10% PROFIT MAY BE ADDED FOR THE ITEMS MENTIONED ABOVE. ITA.NO.1736/KOL/2009 SUBHAS BROTHERS JEWELL ERS PVT.LTD. A.YR.2005-06 6 7. IN THE RESULT THE APPEAL OF THE REVENUE STANDS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.06.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05.06.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SUBHAS BROTHERS JEWELLERS PVT.LTD., 141/1A, RASH BE HARI AVENUE, KOLKATA- 700020. 2 I.T.O., WARD-10(3), KOLKATA 3 . CIT(A)-XII, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES