Sri. K.P. Nagaraju, M/s. N.J. Plastics, Mysore V. ITO, Mysore

ITA 177/BANG/2011

• Counselvise Citation: 17721114 RSA 2011
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIZWI
• Assessee Lawyers: V CHANDRASEKHAR
• Section: 142(1); 133A; 234B; 69; 148; 2

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NOS.177 TO 181(BANG.)/2011 (ASSESSMENT YEARS : 2003-04 TO 2007-08) SHRI K.P.NAGARAJU, M/S N.J.PLASTICS, NO.11/B, CHAMUNDESHWARI IND.COMPUND, VISHWESHWARA NAGAR, MYSORE-570 002. PAN NO.ACJPN3856A APPELLANT VS THE INCOME-TAX OFFICER, WARD-2(2), MYSORE. RESPONDENT ASSESSEE BY : SHRI V. CHANDRASEKHAR, ADVOCATE REVENUE BY : SHRI S.H.RIZWI, JCIT DATE OF HEARING : 01-11-2011 DATE OF PRONOUNCEMENT : 09-11-20 11 O R D E R PER BENCH ; THE ASSESSEE HEREIN HAS RAISED VARIOUS GROUNDS OF A PPEAL WHICH ARE IDENTICAL TO THE GROUNDS OF APPEAL RAISED BY SHRI T.D.JAYACHANDRA URS & SHRI DASARAJ URS, IN ITA NOS. 169 TO 176(B)/2011. 2. BOTH THE PARTIES HAVE AGREED THAT THE FACTS AND CIRCUMSTANCES ARE SIMILAR IN THESE CASES ALSO. THER EFORE, ITA NOS.177 TO 181(B)11 S 2 RESPECTIVELY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE ABOVE CASES VIDE ORDERS DATED 09-11 -2011, WE ALLOW THESE APPEALS OF THE ASSESSEE ALSO. FOR THE SAKE O F CONVENIENCE, THE DECISION IN THE AFORESAID CASE OF SHRI T.D.JAYA CHANDRA URS & SHRI DASARAJ URS, IS REPRODUCED HERE UNDER; 3. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS GROUND NOS . 9 TO 11 IN ALL THE APPEALS AND THEY ARE ACCORDINGLY, REJECTED AS N OT PRESSED. 4. AS REGARDS THE OTHER GROUNDS, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSES HEREIN ARE INDIVIDUALS AND ARE IN THE BUSINESS OF MANUFACTURING OF OFFICE STATIONERY PRODUCTS LIKE OF FICE FILES, DOCUMENTS PRESENTATION FOLDERS, DOCUMENTS PROTECTOR , VISITING CARDS, PHOTO ALBUMS ETC., THE ASSESSEES FILED THEIR ORIGI NAL RETURNS OF INCOME DECLARING INCOME FROM BUSINESS. SUBSEQUENTL Y, A SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEES AND IT WAS FOUND THAT THE ASSESSEES WERE HAVING CER TAIN BANK ACCOUNTS WHICH WERE NOT DISCLOSED IN THEIR BOOKS OF ACCOUNTS. IN VIEW OF THE SAME, THE ASSESSMENTS WERE RE-OPENED BY ISSUING NOTICES U/S 148 OF THE ACT, REQUIRING THE ASSESEES TO FILE RETURN OF INCOME. IN RESPONSE TO THE SAME, THE ASSESSEES FI LED THEIR RETURNS OF INCOME BY OFFERING AN ADDITIONAL INCOME BEING PU RCHASE AND SALES MADE BY THE ASSESSEE DURING THE SAID ASSESSME NT YEAR. THE AO THEREAFTER SERVED A NOTICE U/S 142(1) OF THE ACT ON THE ASSESSEES TO PRODUCE THEIR BOOKS OF ACCOUNTS AND OTHER DETAIL S IN CONNECTION WITH THE RETURNS FILED BY THEM. THE AO FOUND THAT THERE WERE CERTAIN CREDITS IN THE BANK ACCOUNTS OF THE ASSESSE ES AND THEREFORE, HE BROUGHT THE ENTIRE CREDITS TO TAX AS UNACCOUNTED CASH DEPOSITS U/S 69 OF THE IT ACT. ITA NOS.177 TO 181(B)11 S 3 4.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A), WHO GRANTED PARTIAL RELIEF AS REGARDS THE AMOUNTS D EPOSITED BY CHEQUE. AGGRIEVED BY THE CONFIRMATION MADE BY THE C IT(A), THE ASSESSEES ARE IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A.SHAN KAR, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORI TIES BELOW, SUBMITTED THAT THE ASSESSEE WAS MANUFACTURING AND S ELLING THE PRODUCTS THROUGHOUT THE STATE OF KARNATAKA AND ALSO OTHER PLACES LIKE CHENNAI & HYDERABAD AND ALSO ACROSS THE OTHER PARTS OF THE COUNTRY THROUGH ITS DEALERS. THE PAYMENTS ARE RECE IVED THROUGH RTGS( REAL TIME GROSS SETTLEMENT) AND ONLINE TRANSF ERS FROM HIS RETAILERS ACROSS THE COUNTRY INTO THE BANK ACCOUNTS WHICH WERE NOT DISCLOSED IN THEIR BOOKS OF ACCOUNTS. HE SUBMITTED THAT THIS ARRANGEMENT IS MADE BY THE ASSESSEES FOR THE PURPOS E OF EASY CLEARANCE AND RECEIPT OF THE MONEY AND ALSO CONVENI ENCE OF THE CUSTOMERS AS WELL AS CUSTOMERS OF THE ASSESSEE. 6. HE SUBMITTED THAT THE AO MADE THE ADDITION OF TH E ENTIRE CREDITS IN THE BANK ACCOUNTS AND THE SAME HAS BEEN CONFIRME D BY THE CIT(A) WITHOUT APPLYING THEIR MIND TO THE FACT THAT THERE CANNOT BE ANY SALES WITHOUT ANY PURCHASES. HE SUBMITTED THA T THE EXPENSES INCURRED BY THE ASSESSEE FOR THE PURPOSE OF PURCHAS E SHOULD BE EXCLUDED FROM THE SALES BEFORE MAKING THE ADDITION. THUS, ACCORDING TO HIM, IF AT ALL ANY ADDITION HAS TO BE MADE, THAT HAS TO BE MADE ONLY OF THE PROFIT AND NOT OF THE ENTIRE CREDITS MA DE INTO THE BANK ACCOUNTS. HE ALSO FILED A CHART SHOWING GP RATE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08. HE ALSO PL ACED RELIANCE UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT N THE CASE OF CIT VS PRESIDENT INDUSTRIES (REPORTED IN 258 ITR 65 4), WHEREIN IT HAS BEEN HELD THAT THE SALES ONLY REPRESENTED THE P RICE RECEIVED BY THE SELLER OF THE GOODS AND THEREFORE, ONLY THE PRO FITS ENTERED IN ITA NOS.177 TO 181(B)11 S 4 SALES PROCEEDS CAN BE TAXED. THE OTHER DECISION REL IED UPON BY HIM IS IN THE CASE OF MAN MOHAN SADANI VS CIT REPORTED IN 304 ITR 52(MP)(2008) AND KUSHALRAJ DEVI CHAND OSWAL VS ACI T REPORTED IN VO.5 ITR(TRIB.) 118 (BANG.) TO THE SAME EFFECT. TH E LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BE LOW AND SUBMITTED THAT ALL THE CONTENTIONS OF THE ASSESSEES HAVE BEEN DULY AND WELL CONSIDERED BY THE REVENUE AUTHORITIES BEFO RE MAKING THE ADDITIONS. HE SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOURCE OF CASH CREDITS IN THE BANK ACCO UNTS AND THEREFORE, THE ENTIRE CASH CREDITS HAVE BEEN RIGHTL Y ADDED TO THE INCOME OF THE ASSESSEE. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS AND ALSO THE JUDICIAL PRECEDENTS RELIED UPON BY THEM, WE FIND THAT THE AO HAS MADE THE ADDITION OF THE EN TIRE CASH CREDITS IN TO UNDISCLOSED BANK ACCOUNTS OF THE ASSESSEES. IT IS NOT DISPUTED BY THE REVENUE THAT THESE CASH CREDITS OR PAYMENTS ARE MADE BY CUSTOMERS OF THE ASSESSEES FROM VARIOUS PARTS OF TH E COUNTRY THROUGH RTGS. IN SUCH A CASE, WE FIND STRENGTH IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTIR E SALE PROCEEDINGS CANNOT BE THE INCOME OF THE ASSESSEE, A S THERE ARE EXPENSES FOR THE PURCHASES ALSO WHICH ARE INCLUDED IN THE SALE PROCEEDINGS. THESE EXPENDITURES HAVE TO BE REDUCED FROM THE SALE PROCEEDINGS FOR ARRIVING AT THE GROSS PROFIT OF THE ASSESSEE. THE HONBLE GUJARAT HIGH COURT AND ALSO THE HONBLE MAD HAYA PRADESH HIGH COURT IN THE CASES CITED SUPRA, HAVE HELD THAT THE ADDITIONS CANNOT BE OF THE ENTIRE PROCEEDS BUT CAN BE OF ONLY THE PROFITS EMBEDDED IN SALE PROCEEDS. RESPECTIVELY FOLLOWING T HE ABOVE DECISIONS AND FOR THE REASONS STATED ABOVE, WE HOLD THAT ONLY THE GROSS PROFITS OF THE ASSESSEEE CAN BE ADDED TO THE RETURNED INCOME OF THE ASSESSEE. THE ASSESSEE HAS FILED A CHART SH OWING THE GROSS ITA NOS.177 TO 181(B)11 S 5 PROFIT RATIO OF THE ASSESSEE FOR THE SALES OF THE R ELEVANT ASSESSMENT YEARS. THE AO MAY TAKE THE SAME INTO CONSIDERATION AND MAKE THE ADDITION ACCORDINGLY. 8. AS REGARDS THE INTEREST U/S 234B AND 234C OF THE ACT IS CONCERNED, THE ASSESSEE HAS SUBMITTED THAT THE PERI OD FOR WHICH THE SAID INTEREST IS TO QUANTIFIED AND ALSO THE RATE OF INTEREST IS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. IN VIEW OF T HE SAME, WE DIRECT THE AO TO MAKE THE CONSEQUENTIAL CHANGES TO THE ASSESSMENT ORDER IN ACCORDANCE WITH LAW. 3. IN THE RESULT, THE APPEALS OF THE ASSESSEE AR E PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH OF NOVEMBER, 2011. SD/- SD/- ( N.K.SAINI) (SMT. P. MADHA VI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED: 09-11-2011 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR, ITAT, BANGALORE