The ITO, Ward-9(3), Surat V. Shri Rakesh Hasmukhlal Bogawala, Surat

ITA 1802/AHD/2008

• Counselvise Citation: 180220514 RSA 2008
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 143(3); 145

Judgement Text

ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH , AHMEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI A.K. GA RODIA, A.M.) I.T.A. NO. 18 02/AHD/2008. (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER, WARD 9(3), ROOM NO.420, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) VS. SHRI RAKESH HASMUKHLAL BOGAWALA, PROP. RAVI FABRICS, 304, GUNATITNAGAR APARTMENTS, SUMUL DAIRY ROAD, SURAT. (RESPONDENT) PAN: ACHPB9355Q APPELLANT BY : SHRI MUDIT NAGPAL, SR. D.R. RESPONDENT BY : SHRI M.K. PATEL.. ( )/ ORDER DATE OF HEARING : 6-2-12 DATE OF PRONOUNCEMENT : 23-3-2012 PER: SHRI A.K. GARODIA, ACCOUNTANT MEMBER. THIS IS REVENUES APPEAL DIRECTED AGAINST ORDER OF LD. CIT ( A)-V, SURAT DATED 27-3-2008 FOR THE ASSESSMENT YEAR 2005- 06. 2. GROUND NO.1 IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING AN ADDITION OF RS. 34,56,384/- MADE BY THE A.O. VIDE A SSESSMENT ORDER U/S. 143(3) OF THE I.T. ACT,1961 DATED 20-12-2007 O N ACCOUNT OF ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 2 UNACCOUNTED INVESTMENT IN THE FORM OF UNACCOUNTED P URCHASES AND SALES OUTSIDE THE BOOKS OF ACCOUNT. 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTICED B Y THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FURNISHED QU ANTITATIVE DETAILS FOR PURCHASE, CONSUMPTION, PRODUCTION, SALES ETC. HE FU RTHER NOTED THAT WHILE VERIFYING THE SAME WITH THE FIGURES REPORTED IN THE AUDIT REPORT, IT WAS NOTICED THAT THERE IS DIFFERENCE IN PURCHASE OF YAR N, CONSUMPTION OF YARN, SALES OF YARN, PRODUCTION OF GREY CLOTH AND SALE OF GREY CLOTH. THE A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED THE ASSESSEE T O EXPLAIN THIS DIFFERENCE. THE A.O. FURTHER NOTED THE SUBMISSION O F THE ASSESSEE THAT IN THE AUDIT REPORT, THE QUANTITATIVE DETAILS WERE WRO NGLY PRINTED BECAUSE OF CLERICAL MISTAKE OF THE STAFF OF THE AUDITOR AND TH E ASSESSEE HAS FURNISHED CORRECT FIGURES. HE FURTHER, NOTED THAT IN RESPONS E TO A QUESTION IN THE STATEMENT RECORDED ON OATH U/S. 131 OF THE ACT ON 22-8-2007, THE AUDITOR IN HIS STATEMENT HAD CATEGORICALLY CONFIRMED THAT WHAT EVER HE HAS REPORTED WAS TRUE AND WAS PREPARED ON THE BASIS OF INFORMATI ON PROVIDED BY THE ASSESSEE. HE FURTHER NOTED THAT THE AUDITORS ALSO PRODUCED THE ORIGINAL PAPER CONTAINING QUANTITATIVE DETAILS OF YARN AND G REY CLOTH, STATED TO BE PREPARED AND GIVEN TO HIM BY THE ASSESSEE FOR THE P URPOSE OF AUDIT. HE FURTHER NOTED THAT AUDITOR HAD CONFIRMED THAT THERE IS NO CLERICAL ERROR AT ALL ON HIS PART AS ALLEGED BY THE ASSESSEE. A.O. AGAIN ISSUED A SHOW CAUSE NOTICE. IN REPLY, THE ASSESSEE AGAIN FURNISHED A WR ITTEN EXPLANATION VIDE LETTER DATED 12-12-2007, THE CONTENTS OF WHICH ARE REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER BUT THE A.O. WAS NOT SATISF IED. THE A.O. HAS NOTED THAT INITIALLY, THERE WAS REPLY OF THE ASSESSEE THA T THERE WAS CLERICAL MISTAKE IN THE AUDIT REPORT BUT WHEN THE ASSESSEE WAS PROVI DED WITH THE STATEMENT ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 3 OF THE AUDITOR IN WHICH HE HAD STATED THAT THERE I S NO CLERICAL ERROR IN THE AUDIT REPORT, THE ASSESSEE HAS GIVEN THE DIFFERENT STORY THAT THE ASSESSE HAS NOT SUPPLIED ANY INFORMATION TO THE AUDITOR. UN DER THESE FACTS, THE A.O. REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROV ISIONS OF SECTION 145 (3) AND MADE ADDITION OF RS.34,56,384/- BEING THE VALUE OF UNDISCLOSED GREY CLOTH OF 216023 MTRS. BY APPLYING THE RATE OF RS.16 /- PER METER. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LD. CIT (A), WHO DELETED THIS ADDITION AND NOW THE REVENUE IS IN APPEAL BEFORE US. 4. LD. DR SUPPORTED THE ORDER OF THE A.O. WHEREAS T HE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT (A). HE FURTHER SUBMITTED THAT THE SALES TO SISTER CONCERN WAS IGNORED. HE FURTHER SUBMITTED THAT THE MATTER MAY GO BACK TO THE FILE OF THE CIT (A) FOR A FRESH DECISIO N. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT AT PAGE 8 OF HIS ORDER, THE LD. CIT (A) NOTED A CHART CONTAINING THE FIGURE OF FORM NO.3CD AND THE ACTUAL FIGURES OF PUR CHASE OF YARN AND ITS CONSUMPTION IN KGS. ALONG WITH GREY CLOTH MANUFACTU RED AND SOLD IN METERS. HE HAS ALSO WORKED OUT THE DIFFERENCE OF GR EY CLOTH QUANTITY AT 21063 MTRS. THEREAFTER, IT IS NOTED BY THE LD. CIT (A) THAT IN THE AUDIT REPORT THERE IS NO SALES OF YARN WHEREAS THE ASSESSEE HAS SOLD 13015 KGS OF YARN TO SISTER CONCERN. WE FAIL TO UNDERSTAND THAT WHEN ALLEGATION OF THE A.O. IS REGARDING DIFFERENCE IN GREY CLOTH QUANTITY MANUFAC TURED THEN HOW THE DIFFERENCE IN SALE OF YARN TO SISTER CONCERN CAN EX PLAIN THE ALLEGATION OF THE A.O. THE TAX AUDITOR IN COL. NO.28 OF THE REPORT S AYS THAT GREY CLOTH OF 813103 MTRS HAS BEEN MANUFACTURED AS NOTED BY THE C IT (A) ON PAGE 8 OF ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 4 HIS ORDER. THE SALE QUANTITY OF GREY CLOTH NOTED IN COL. NO.28 IS 852477.25 MTRS. IN THE PROFIT AND LOSS ACCOUNT, SALE OF GREY CLOTH HAS BEEN ACCOUNTED FOR TO THE EXTENT OF RS.102.29 LACS. THERE IS NO DE TAILS AVAILABLE ALONG WITH THE AUDITED ACCOUNTS ABOUT THIS SALE OF GREY CLOTH OF RS.102.29 AND LACS THERE IS NO SALE OF YARN APPEARING IN THE P & L ACC OUNT. IN SCHEDULE 12 ALSO, WHICH IS COST OF GOODS SOLD I.E. GREY CLOTH S ALE, THERE IS NO REDUCTION ON ACCOUNT OF SALE OF YARN TO SISTER CONCERNS. THER E IS NO FINDING GIVEN BY THE LD. CIT (A) N THIS REGARD AND UNDER THESE FACTS , WE FEEL THAT THIS ORDER OF THE LD. CIT (A) IS NOT SUSTAINABLE. IN THE INTE REST OF JUSTICE, WE FEEL THAT ONE MORE OPPORTUNITY SHOULD BE PROVIDED TO THE ASSE SSEE TO MAKE OUT HIS CASE PROPERLY AND HENCE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO CIT (A) FOR FRESH DE CISION AFTER EXAMINING THE COMPLETE FACTS AND IF IT IS FOUND THAT THE SALE S SHOWN IN THE PROFIT AND LOSS ACCOUNT OF RS.102.29 LACS IS FOR GREY CLOTH S ALES OF 852477.25 MTRS. AS PER SALE QUANTITY MENTIONED IN AUDIT REPORT, THA N THERE CANNOT BE ANY GREY CLOTH SALE OUTSIDE THE BOOKS. THE LD. CIT (A) SHOULD PASS NECESSARY ORDER IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVID ING ADEQUATE OPPORTUNITY TO BOTH THE SIDES. IN THE RESULT GROUND NO.1 OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSE. 6. GROUND NO.2 IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A), WITHOUT APPRECIATING THE FACTS, HA S ERRED IN DELETING THE ADDITION OF RS.25,48,673/- MADE BY THE A.O. VID E ASSESSMENT ORDER U/S. 143(3) OF THE I. T. ACT, 1961 DATED 20-1 2-2007 ON ACCOUNT OF BOGUS LIABILITY U/S. 41(1) OF THE ACT. ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 5 7. BRIEF FACTS ARE THAT IT IS NOTED IN PARA 2 OF TH E ASSESSMENT ORDER THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS.31,60 ,404/- IN THE NAMES OF 25 CREDITORS. THE A.O. ASKED THE ASSESSEE TO FURNIS H THE NAMES AND ADDRESSES OF THE SAID CREDITORS. THE A.O. FURTHER N OTED THAT THE ASSESSEE HAS FAILED TO FURNISH THE SAME. HE FURTHER NOTED TH AT OUT OF 25 CREDITORS, THE ASSESSEE HAS FURNISHED DETAILS OF ONLY 2 CREDITORS AND ONE CREDITOR WAS VERIFIED FROM THE BANK BUT FOR THE REMAINING CREDIT ORS, THE ASSESSEE FAILED TO FURNISH THE NAMES AND ADDRESSES. THE A.O. MADE T HE ADDITION OF THESE 21 CREDITORS TO THE EXTENT OF RS. 25,48,673/- AND A DDED THE SAME U/S. 41(1) OF THE ACT. BEING AGGRIEVED BY THE ORDER OF THE A. O., THE ASSESSEE CARRIED THE MATTER TO THE CIT (A) WHO HAD DELETED THIS ADDI TION, BY FOLLOWING VARIOUS CITED DECISIONS AND ALSO A JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SILVER COTTON MILLS CO. 254 ITR 728 (GUJ). NOW THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. DR SUPPORTED THE ASSESSMENT ORDER, WHERE AS THE LD. AR SUPPORTED THE ORDER OF THE CIT (A). HE ALSO RELIED ON THE DECISION OF AHMEDABAD BENCH-D OF ITAT IN ITA NO.339/AHD/2009 DA TED 5-8-2011. HE SUBMITTED THE COPY OF THIS TRIBUNAL ORDER AND THE S AME IS PLACED ON RECORD. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE LOWE R AUTHORITIES AND THE TRIBUNAL DECISION CITE BY THE LD. A.R. OF THE ASSES SEE. 10. WE FIND THAT IN THIS CASE, THE TRIBUNAL HAS HEL D THAT THE LIABILITIES REFLECTED IN THE BALANCE SHEET CANNOT BE TREATED AS CESSATION OF LIABILITY. WHILE HOLDING SO, THE TRIBUNAL HAS FOLLOWED ANOTHER TRIBUNAL DECISION ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 6 RENDERED IN THE CASE OF SHRI NITIN S. GARG VS. ACIT IN ITA NOS.169 TO 172/AHD/2009 DATED 4-6-2010 (REPORTED IN 40 SOT 25 3). IN THE PRESENT CASE, THIS CASE IS SQUARELY COVERED AND HENCE, IT C ANNOT BE ACCEPTED THAT THERE IS CESSATION OF LIABILITY SINCE THE LIABILITY IS APPEARING IN THE BALANCE SHEET. HENCE, WE DO NOT INTERFERE IN THE ORDER OF THE CIT (A)ON THIS ISSUE. THIS GROUND NO.2 IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 23 03 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) (A.K. GARODIA) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-V, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.1802 /AHD/2008 A.Y.. 2005- 06. 7 1.DATE OF DICTATION 15 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 21 / 3 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 21 - 3 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 23 - 3 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 26 - 3 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26 - 3 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..