The ACIT, Central Circle-2, Surat V. M/s. Mehsana Steel Suppliers, Vapi

ITA 1809/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9246 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 22-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Corroborative evidences
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1809/AHD/2005 & C.O. NO.202/AHD/2005 (A/O ITA NO.1809/AHD/2005) ASSESSMENT YEAR:2002-05 DATE OF HEARING:31.7.09 DRAFTED:17,.8,09 ACIT, CENTRAL CIRCLE-2, SURAT M/S MEHSANA STEEL, SUPPLIERS, PLOT NO.A1- 17, 3 RD PHASE ROAD, GIDC, VAPI V/S. V/S. M/S. MEHSANA STEEL SUPPLIERS, PLOT NO.A-1- 17, 3 RD PHASE ROAD, GIDC, VAPI PAN NO.AAEFM131N ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI TUSHAR P HEMANI, AR REVENUE BY:- SHRI SANJEEV KASHYAP, SR. DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION (CO ) BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-II AHMEDABAD IN APPEAL NO. CIT(A)-II/CC.2/38/05-06 DATED 05-05-2005 . THE ASSESSMENT WAS FRAMED BY THE ACIT CENTRAL CIRCLE-2, SURAT U/S.143(3) OF T HE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 31-03-2005 FOR THE ASSESSMENT YEAR 2002-03. ITA NO.1809/AHD/05 & CO 202/AHD/2005 A.Y. 2002-03 ACIT CC-2 SURAT V. M/S. MEHSANA STEEL SUPPLIERS PAGE 2 2. THE FIRST ISSUE THE REVENUES APPEAL RELATES TO RESTRICTION OF AN ADDITION OF RS.3,40,387/- MADE ON ACCOUNT OF GROSS PROFIT ON UN ACCOUNTED SALES TO RS.21,340/-, FOR WHICH THE REVENUE HAS RAISED THE FOLLOWING GROU ND:- 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REST RICTING THE ADDITION OF RS.3,40,387/- MADE ON ACCOUNT OF GROSS PROFIT ON UN ACCOUNTED SALES TO RS.21,340/-. 3 THE BRIEF FACT OF THE CASE ARE THAT A SURVEY U/S 133A OF THE INCOME-TAX ACT, 1961 [THE ACT FOR SHORT] WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 01-08-2002. DURING THE COURSE OF SURVEY , STATEMENT OF ACCOUNTANT SHRI MINESH R PATEL WAS RECORDED, WHO STATED IN ANSWER T O QUESTION NO.12 THAT RS.4,89,636/- WAS SHOWN OUTSTANDING AS ON 03-07-200 2 FROM 23 PARTIES FOR WHICH NO BILLS OR RECEIPTS WERE PREPARED. HE ALSO STATED THA T THE SAID AMOUNT OF RS.4,89,636/- IS FOR ONE MONTH ONLY AND IN THIS WAY THE TOTAL UNA CCOUNTED SALE FOR THE WHOLE YEAR COMES TO RS.58,75,632/-. ON THE BASIS OF THIS STATE MENT, THE AO WORKED OUT THE GROSS PROFIT AT RS.3,40,387/- AT THE RATE OF 5.43% AND MADE AN ADDITION OF RS.3,40,387/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), AND CONTENDED THAT THE ADDITION HAS BEEN MADE ON THE BA SIS OF PRESUMPTIONS. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE, PARTLY ALLOWED THE APPEAL, BY OBSERVING AS UNDER:- 05 I HAVE CAREFULLY CONSIDERED THE FIRST LIMB OF T HE BASIS OF GROSS PROFIT RATE ADDITION. THE AO HAS MULTIPLIED THE FIGURE TO ARRIV E AT A TURNOVER OF RS.58,75,632/- WHICH IS ON THE BASIS OF LIST OF OUT STANDING AT RS.4,89,636/- FOUND DURING THE SURVEY UNDER SECTION 133A ON 3.7.2 002 RELEVANT TO FINANCIAL YEAR 2002-02 (AY 2003-04). FIRST OF ALL THE ADDITIO N IF ANY IS REQUIRED TO BE MADE ONLY IN THE ASSESSMENT YEAR 2003-04. SECONDLY THE AO CAN NOT ESTIMATE AN IMAGINARY FIGURE WITHOUT ANY SUPPORTING EVIDENCE. CONTENTIONS RAISED BY THE APPELLANT HAVE CONSIDERABLE FORCE. TH E AOS ACTION IS HASTY AND DEVOID OF APPRECIATION OF THE FACTS. IN VIEW OF THE FACTS OF THIS CASE ADDITION ON ACCOUNT OF GROSS PROFIT PERTAINING TO THE ABOVE TUR NOVER IS DELETED. HOWEVER, THE AO MAY TAKE SUITABLE ACTION IN THE RELEVANT ASS ESSMENT YEAR I.E. 2003-04. THE GROUND IS ALLOWED. 06 COMING TO THE SECOND LIMB OF THE BASIS OF ADDITI ON, TURNOVER OF RS.3,93,008/- IS REQUIRED TO BE EXAMINED. THIS TURN OVER IS QUITE DIFFERENT THAN THE EARLIER ONE. THE AO HAS TAKEN THE ABOVE AS UNAC COUNTED SALES TO SATADHAR ENTERPRISES BECAUSE THE SAME IS NOT REFLEC TED IN THE BOOKS OF ACCOUNT. THE APPELLANT SUBMITTED THAT GOODS WORTH R S.3,93,008/- WERE SENT ON APPROVAL BASIS TO THE ABOVE PARTY OUT OF THE OFF ICIAL STOCK. HOWEVER, THESE GOODS WERE RECEIVED BACK DUE TO NON-APPROVAL AND AS SUCH THE SAME BECAME PART OF THE STORE ONLY. THE APPELLANT HAD EX PLAINED BEFORE THE AO ITA NO.1809/AHD/05 & CO 202/AHD/2005 A.Y. 2002-03 ACIT CC-2 SURAT V. M/S. MEHSANA STEEL SUPPLIERS PAGE 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT TH ERE WAS ACTUALLY NO SALE OF SUCH GOODS. HOWEVER, THE AO DID NOT ACCEPT THE VERSION AND MADE THE SAME ON ASSUMPTION BASIS. THE APPELLANT PLEADED THAT ADDITI ON ON ACCOUNT OF INVESTMENT IN UNACCOUNTED PURCHASES CANNOT BE MADE MERELY ON PRESUMPTION AND WITHOUT BRINGING ON RECORD SUFFICIE NT AND SUPPORTING MATERIAL. THE APPELLANT RELIED UPON THE FOLLOWING JUDICIAL PR ONOUNCEMENTS: I) CIT V PRESIDENT INDUSTRIES 158 CTR (GUJ) 372 II) B & BROTHERS ENGINEERING WORKS V DCIT (2003) 78 TTJ (AHD) (TM) 876 III) CIT V BALCHAND AJITKUMAR 186 CTR (MP) 419 I HAVE CAREFULLY PERUSED THE FACTS AND CIRCUMSTANCE S OF THIS CASE. THE AO WAS QUITE ARBITRARY IN MAKING ABOVE ADDITION ON THE BASIS OF ESTIMATED AND WITHOUT APPRECIATING THE EXPLANATION OF THE APPELLA NT. AS PER FACTS OF THIS CASE AND GROSS PROFIT OF 5.43% INVOLVED IN THE APPELLANT S CASE THE AO IS DIRECTED TO MAKE ADDITION OF RS.21,340/- ON ACCOUNT OF GROSS PR OFIT @ 5.43% AND BALANCE ADDITION STANDS DELETED. THUS THE GROUND IS PARTLY ALLOWED. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V PRE SIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ). AS REGARDS ADDITION ATTRI BUTABLE TO ESTIMATED SALE OF RS. 58,75,632/- IS CONCERNED , WE FIND THA T THE SAID ADDITION WAS BASED ON STATEMENT OF THE ASSESSEE DURING THE C OURSE OF SURVEY UNDERTAKEN ON 1.8.2002, WHEN IT WAS ADMITTED THAT AN AMOUNT OF RS.4,89,636/- OUTSTANDING ON 3.7.2002 RELATED TO 23 PARTIES FOR WHICH NO BILLS OR RECEIPTS WERE PREPARED. THE LD. CIT(A) DELETED THE ADDITION IN THE YEAR UNDER CONSIDERATION ON THE GROUND THAT ADDITION, IF ANY COULD HAVE BEEN IN THE AY 2003-04,OUTSTANDINGS BEING REL ATED TO THE PERIOD FALLING IN THE SAID ASSESSMENT YEAR. THEREFORE, THE LD. CIT(A) OBSERVED THAT THE AO MAY INITIATE SUITABLE ACTION IN THE AY 2003-04. BEFORE US, THE REVENUE HAVE NOT PLACED ANY MATERIAL, SUGGESTIN G THAT THE AMOUNT OF RS.4,89,636/- OUTSTANDING AS ON 3.7.2002 RELATED TO SALE IN THE YEAR UNDER CONSIDERATION. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS AND DIRECTIONS OF THE LD. CIT(A). THEREFORE, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION OF RS.5,22,386/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PUR CHASES. ITA NO.1809/AHD/05 & CO 202/AHD/2005 A.Y. 2002-03 ACIT CC-2 SURAT V. M/S. MEHSANA STEEL SUPPLIERS PAGE 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A ) HAS CATEGORICALLY GIVEN A FINDING OF FACT THAT THE ASSESSEE SENT GOODS WORTH OF RS.3, 93,008/- FOR APPROVAL BASIS OUT OF THE OFFICIAL STOCK AND THE AO ON THE BASIS OF INVES TMENT IN UNACCOUNTED PURCHASES MADE ADDITION ON PRESUMPTIONS WITHOUT BRINGING ON R ECORD ANY EVIDENCE. WE ALSO FIND FROM THE ASSESSMENT ORDER THAT THE AO HAS SIMP LY ACCOUNTED THE UNACCOUNTED SALES AT RS.15 LAKH PER ANNUM AND MADE ESTIMATE OF UNACCOUNTED SALES FOR THE FINANCIAL YEAR 2001-02 AT RS.58,75,632/- AND ACCORD INGLY ESTIMATED THE INVESTMENT IN SUCH UNACCOUNTED PURCHASES AT RS.5,22,386/-. THIS IS PURELY ON PRESUMPTION AND NOTHING HAS BEEN BROUGHT ON RECORD THAT HOW THE AO HAS ESTIMATED THE PURCHASES. IN THE ABSENCE OF ANY MATERIAL, AND EVEN NOW BEFORE US, THE LD. DR COULD NOT POINT OUT ANYTHING IN THIS RESPECT. ACCORDINGLY, WE CONF IRM THE ORDER OF CIT(A) DELETING THE ADDITION. THIS ISSUE OF THE REVENUES APPEAL IS AL SO DISMISSED. 7. COMING TO THE CROSS OBJECTION OF THE ASSESSEE, I T IS NOTICED THAT THE SAME IS SUPPORTIVE OF THE ORDER OF CIT(A) AND THE ASSESSEE S COUNSEL HAS NOT PRESSED THE SAME. ACCORDINGLY, THE SAME HAS BECOME INFRUCTUOUS AS THE REVENUES APPEAL HAS ALREADY BEEN DISMISSED. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF ASSESSEES CO IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON 28/08/2009 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :28/09/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-II, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR AHMEDABAD