Shri Shree BhagawanAgarwa, Agra V. ACIT-Rage-4, Agra

ITA 175/AGR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62864 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: ROOP KISHORE AGARWAL
• Keywords: Unexplained expenditure; Business income
• Section: 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.175/AGR/2011 ASSESSMENT YEAR: 2004-05 SHREE BHAGWAN AGARWAL, VS. ASSTT. COMMISSIONER OF INCOME TAX, PROP. M/S KELA ENTERPRISES, RANGE-4, AGRA. B-660, KAMLA NAGAR, AGRA (PAN: ABCPA 2167 R). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROOP KISHORE AGARWAL, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 19.10.2012 DATE OF PRONOUNCEMENT OF ORDER : 23.11.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21.01.2011 PASSED BY THE LD. CIT(A)-II, DEHRADUN (CAMP: AGRA) FOR THE ASSESSMENT YEAR 2004-05. 2. THE FIRST EFFECTIVE GROUND RAISED IN THE APPEAL ARE IN RESPECT OF CONFIRMING ADDITION OF RS.10,78,232/- ON ACCOUNT OF EXCESS CON SUMPTION OF PAPER AGAINST THE AMOUNT SURRENDERED BY THE ASSESSEE OF RS.7,00,000/- . THE SECOND EFFECTIVE GROUND ITA NO.175/AGR/2011 A.Y. 2004-05. 2 OF APPEAL IS IN RESPECT OF DISALLOWANCE OF EXPENSES OF RS.15,000/- AND THE THIRD ONE IS IN RESPECT OF INITIATION OF PENALTY UNDER SECTIO N 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF CONFIDENTIAL PRINTING OF EXAMINATION PAPERS OF VARI OUS UNIVERSITIES. ON EXAMINATION OF BOOKS OF ACCOUNT, THE A.O. NOTICED T HE FOLLOWING DISCREPANCIES :- (PAGE NOS.1 & 2) (I) THAT THE CLOSING STOCK OF PAPERS WAS SHOWN AT RS.1,20,609/-. THE ASSESSEE HAD MADE PURCHASES OF PAPER FROM M/S H IRA LAL GARG & SONS WORTH RS.3,51,700 ON 15.03.2004 VIDE BILL NO.3 818 BUT NO BILL FOR JOB WORK OR ANY OTHER BILL WAS RAISED W.E.F. 15 .03.2004 TO 31.03.2004. THEREFORE, THE ASSESSEE WAS REQUIRED T O EXPLAIN WHY CLOSING STOCK OF PAPER HAS BEEN SHOWN AT RS.1,20,60 9/-, THOUGH THE SAME SHOULD HAVE BEEN ATLEAST RS.3,51,700/-. (II) THAT TILL JUNE, 2003 JOB WORK BILLS AMOUNTING TO RS.48.54 LACS WERE RAISED AS AGAINST WHICH CONSUMPTION OF PAPER W AS OF RS.7.50 LACS APPROXIMATELY (EVEN PRESUMING THAT NO CLOSING STOCK WAS LEFT AT THE END OF THE JUNE, 2003), WHEREAS THE CONSUMPTION OF PAPER TILL THE END OF THE YEAR HAS BEEN SHOWN AT RS.23,52,172/- AS AGAINST TOTAL JOB WORK BILLS AMOUNTING TO RS.89,07,504/-. THUS, IT W AS OBSERVED THAT CONSUMPTION OF PAPER WAS ABNORMALLY HIGH IN RESPECT OF JOB WORK DONE TILL JUNE, 2003. (III) THAT BILLS, VOUCHERS AND OTHER SUPPORTING EVI DENCE IN RESPECT OF TRAVELLING EXPENSES AND DELIVERY OF GOODS EXPENSES ARE ADMITTEDLY NOT AVAILABLE WITH THE ASSESSEE. 4. THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE DISCR EPANCIES NOTICED BY HIM. THE ASSESSEE DID NOT FURNISH THE REQUIRED DETAILS R EGARDING COMMISSION OF PAPER IN ITA NO.175/AGR/2011 A.Y. 2004-05. 3 PRINTING WORK AND OTHERS. HOWEVER, THE ASSESSEE MAD E A VOLUNTARY SURRENDER OF RS.7,00,000/- AS BUSINESS INCOME VIDE ASSESSEES LE TTER DATED 08.12.2006. THE RELEVANT ABSTRACT OF THE SAID LETTER REPRODUCED BY THE A.O. AT PAGE NO.2 IS AS UNDER:- WITHOUT PREJUDICE TO ABOVE CORRECT STATUS OF PAPER CONSUMPTION AND WITHOUT ACCEPTING ANY SUPPRESSION, THE APPLICANT VOLUNTARILY SURRENDERING EXTRA INCOME OF RS.700000/ - AS BUSINESS INCOME PURCHASE PEACE AND TO AVOID DEPARTMENTAL LIT IGATION INCLUDING PENALTY PROCEEDINGS U/S 271(1)(C). 5. THE A.O. IN ORDER TO VERIFY THE GENUINENESS OF A SSESSEES SUBMISSION ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO UNIVERSIT IES CALLING FOR THE DETAILS. AFTER CONSIDERING THE ASSESSEES REPLY, THE A.O. FOUND TH AT THE TRADING RESULTS SHOWN BY THE ASSESSEE ARE NOT CORRECT. THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJECTED ON THE BASIS OF DISCREPANCIES FOUND AND NON-FURNISHING OF REQUIRED INFORMATION. HOWEVER, THE A.O. CALCULATED THE AMOUNT OF ADDITION OF RS.10,78,232/- AS UNDER :- (PAGE NOS.3 & 4) AVAILABILITY OF PAPER TILL JUNE, 2003 OPENING STOCK OF PAPER RS.99,800/- PURCHASE TILL JUNE, 2003 RS.6,48,796/- TOTAL VALUE OF PAPER AVAILABLE TILL JUNE, 2003 RS.7,48,596/- BILLS RAISED UPTO JUNE 2003 SL. NO. PARTICULAR JOB WORK BILL 1 AMBEY SERIES 11,19,935 2 DEVI SERIES 12,50,163 3 KRISHNA SERIES 11,48,700 ITA NO.175/AGR/2011 A.Y. 2004-05. 4 4 K. SERIES 13,35,296 TOTAL 48,54,094 THUS, EVEN PRESUMING THAT TILL JUNE, 2003, ENTIRE P APER AVAILABLE WITH ASSESSEE WAS CONSUMED FOR PRINTING A ND THERE WAS NO CLOSING STOCK LIST, THE MAXIMUM CONSUMPTION OF PAPE R WORKS OUT AS UNDER :- 748596 X 8907504 = 13,73,710/- 4854094 AS AGAINST RS.13,73,710/-, ASSESSEE HAS SHOWN CONSU MPTION OF (99800 + 2472781) = 2572581 120609 = RS.24,51,942 /-. THUS, ASSESSEE HAS SHOWN EXCESS CONSUMPTION OF PAPE R BY RS.10,78,232/- AND IN RESPECT OF THIS EXCESS CONSUM PTION ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION. THERE FORE, AN AMOUNT OF RS.10,78,232/- IS ADDED TO THE INCOME OF THE ASSESS EE AS UNEXPLAINED EXPENDITURE U/S 69C OF THE I.T. ACT. (ADDITION RS.10,78,232/-) 6. IN ADDITION TO ABOVE ADDITION OF RS.10,78,232/-, THE A.O. HAS ALSO DISALLOWED 50% OUT OF SALE PROMOTION, VEHICLE EXPENSES, CAR AN D TELEPHONE EXPENSES ON THE GROUND THAT SOME EXPENSES OF PERSONAL IN NATURE WHI CH IS INADMISSIBLE. THE A.O. MADE DISALLOWANCE OF RS.50,000/-. 7. THE CIT(A) CONFIRMED THE ORDER OF THE A.O. ON TH E GROUND THAT THE WORKING OF A.O. HAS NOT BEEN REBUTTED BY THE ASSESSEE BY AN Y CONTRARY EVIDENCE. THE CIT(A) REDUCED THE DISALLOWANCE OUT OF EXPENSES FRO M RS.50,000/- TO RS.15,000/- ON THE GROUND THAT TO THAT EXTENT THE EXPENDITURE I S PERSONAL IN NATURE OR FOR NON- ITA NO.175/AGR/2011 A.Y. 2004-05. 5 BUSINESS PURPOSES. IN RESPECT OF INITIATION OF PEN ALTY, THE CIT(A) HELD THAT THE ISSUE ITSELF IS PREMATURE. 8. THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTEN TION TO PAPER BOOK PAGE NO.8 AND SUBMITTED THAT THE ASSESSEE FURNISHED THE RECONCILIATION OF JOB WORK AND PAPER CONSUMPTION AS PER BILLS. AS PER BOOKS OF AC COUNT, THERE WAS DEFICIENCY FOR THE PERIOD 01.04.2003 TO 30.06.2003 OF RS.6,76,768/ -, WHEREAS, IN THE SECOND HALF FROM 01.07.2003 TO 31.03.2004 THERE WAS A SURPLUS O F RS.6,76,768/-. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT NET RESULT AFTER CONSIDERING PLUS MINUS OF DIFFERENCE FIGURE IS NIL. HOWEVER, THE LD. AUTHORI SED REPRESENTATIVE SUBMITTED THAT AT THE WORST, THE ADDITION TO THE EXTENT OF RS.6,76 ,768/- CAN BE MADE BUT AGAINST WHICH THE ASSESSEE HAS ALREADY SURRENDERED RS.7,00, 000/-. THEREFORE, THE ADDITION MADE BY THE A.O. OF RS.10,86,178/- IS ON THE BASIS OF INCORRECT AND ARBITRARY CALCULATION. 9. LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HA ND, RELIED UPON THE ORDER OF CIT(A). 10. WE HAVE HEARD THE LD. REPRESENTATIVE OF THE PAR TIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THERE WAS S OME DISCREPANCIES IN THE PAPER CONSUMPTION. THE ASSESSEE IN HIS RECONCILIATION AD MITTED THAT THE ADDITION TO THE ITA NO.175/AGR/2011 A.Y. 2004-05. 6 EXTENT OF RS.6,76,768/- AT THE MOST CAN BE MADE. T HE ASSESSEE HAS SURRENDERED RS.7,00,000/- ON THIS ACCOUNT. WE FIND THAT THE DI SCREPANCIES IN THE PAPER CONSUMPTION COUPLED WITH THE FACT THAT THE ASSESSEE HAS SURRENDERED RS.7,00,000/-, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN RIGHT LY REJECTED BY THE A.O. ACTION OF THE A.O. ON THE ISSUE IS CONFIRMED. 11. IN RESPECT OF MERIT OF THE CASE, WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE RECONCILIATION OF PAPER CONSUMPTION AND HAVE SURREN DERED RS.7,00,000/-, THE AMOUNT OF ADDITION CALCULATED BY THE A.O. IS ARBITR ARY. THE ASSESSEE HAS ALREADY SURRENDERED RS.7,00,000/- TO COVER THE DEFICIENCIES IN THE BOOKS OF ACCOUNT. THE SAID RS.7,00,000/- EXTRA INCOME HAS BEEN SURRENDERE D BY THE ASSESSEE VOLUNTARILY DURING THE ASSESSMENT PROCEEDINGS AND THE CALCULATI ON OF THE A.O. HAS SOME ARBITRARINESS. THEREFORE, THE ADDITION TO THE EXTE NT OF RS.7,00,000/- IS FAIR AND REASONABLE WHICH HAS BEEN VOLUNTARILY SURRENDERED B Y THE ASSESSEE. THE ADDITION TO THE EXTENT OF RS.7,00,000/- IS SUSTAINED OUT OF THE TOTAL ADDITION MADE BY THE A.O. OF RS.10,78,232/-. THE ASSESSEE GETS RELIEF O F RS.3,78,232/-. ORDERS OF THE REVENUE AUTHORITIES ARE ACCORDINGLY MODIFIED AND TH E ADDITION TO THE EXTENT OF RS.7,00,000/- IS SUSTAINED OUT OF THE TOTAL ADDITIO N OF RS.10,78,232 MADE BY THE A.O. ITA NO.175/AGR/2011 A.Y. 2004-05. 7 12. AS REGARDS THE ADDITION SUSTAINED BY THE CIT(A) OF RS.15,000/- OUT OF ADDITION MADE BY THE A.O. AT RS.50,000/- OUT OF EXP ENSES ON ACCOUNT OF PERSONAL USE OF CAR AND OTHERS, WE FIND THAT THE PERSONAL US E OF CAR, TELEPHONE AND OTHER FACILITIES CANNOT BE RULED OUT. IN THE LIGHT OF TH E FACT, WE FIND THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION TO THE EXTENT OF RS. 15,000/-. ORDER OF THE CIT(A) ON THE ISSUE IS CONFIRMED IN SUSTAINING THE ADDITION T O THE EXTENT OF RS.15,000/-. 13. AS REGARDS TO INITIATION OF PENALTY, WE FIND TH AT THE CIT(A) HAS RIGHTLY HELD THAT THIS GROUND OF LEVY OF PENALTY UNDER SECTION 2 71(1)(C) OF THE ACT IS A PRE- MATURE GROUND. ORDER OF CIT(A) ON THIS ISSUE IS CO NFIRMED. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY