The ACIT, Circle-6, Surat V. M/s. Saga Lifestyles, Surat

ITA 1848/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94786 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RN VEPARIAR
• Keywords: Income from undisclosed sources
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1848/AHD/2012 ( / ASSESSMENT YEAR : 2008-09) THE ASST.CIT CIRCLE-6 AAYAKAR BHAVAN, MAJURA GATE,SURAT / VS. M/S.SAGA LIFESTYLES A-17/18, CENTRAL PARK, GIDC NR.PANDESERA POLICE STATION SURAT-394 221 % & ./ ./ PAN/GIR NO. : ABEFS 5918 G ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : SHRI RAKESH JHA, SR.DR )*%( , + / RESPONDENT BY : SHRI R.N.VEPARI, AR -. , /& / DATE OF HEARING 30/09/2015 0123 , /& / DATE OF PRONOUNCEMENT 30/11/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-IV, SURAT [CIT(A) IN SHORT] DATED 11/05/2012 PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE O N ACCOUNT OF ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 2 - SUPPRESSION OF SALES BY THE ASSESSEE TO THE TUNE OF RS.23,54,825/- AS PER IMPOUNDED ANNEX.BF-15. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A), HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF SUPPRESSION OF SALES BY THE ASSESSEE TO THE TUNE OF RS.6,47,300/- AS PER IMPOUNDED ANNEX. BF-4. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A)-IV, SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER' S ORDER MAY BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE ELECT RONICALLY FILED THE RETURN OF INCOME FOR AY 2008-0-9 SHOWING TOTAL INCO ME OF RS.54,64,450/- ON 30/09/2008. A SURVEY ACTION U/S. 133A OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED AT THE CONSTRUCTION SITE PREMISES OF THE ASSESSEE ON 25/02 /2008. IT IS RECORDED BY THE ASSESSING OFFICER (AO) THAT DURING THE COURS E OF SURVEY PROCEEDINGS, A STATEMENT UNDER OATH OF SHRI KEYURBH AI, PARTNER OF THE ASSESSEE-CONCERN WAS RECORDED AND VIDE LETTER DATED 05/03/2008, SHRI KEYURBHAI VOLUNTARILY DISCLOSED INCOME OF RS.50,00, 000/- AS UNACCOUNTED INCOME OF THE RELEVANT FINANCIAL YEAR U NDER CONSIDERATION. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) OF THE ACT WAS FRAMED VIDE OR DER DATED 30/12/2010. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 3 - OBSERVED CERTAIN DEFECTS IN THE BOOKS OF ACCOUNT AN D PROCEEDED TO REJECT THE BOOK RESULTS. WHILE FRAMING THE ASSESSMENT, TH E AO MADE ADDITION ON ACCOUNT OF SUPPRESSION OF SALES OF RS.23,54,825/ - AS PER ANNEXURE BF-15. THE AO FURTHER MADE ADDITION OF RS.6,47,300 /- ON ACCOUNT OF SUPPRESSION OF SALES AS PER ANNEXURE BF-4. THE ASS ESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER, PREFERRED AN APP EAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION OF RS.23,54,825/- AND ALSO DELETED THE ADDITION OF RS.6,47,300/-. AGGRIEVED BY THE ORDER OF THE LD .CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 3. GROUND NOS.1 & 2 IN THIS APPEAL ARE AGAINST DELE TION OF ADDITION(S) OF RS.23,54,825/- AND OF RS.6,47,300/-. THE LD.SR. DR VEHEMENTLY ARGUED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING TH E ADDITION. HE REITERATED THE SUBMISSIONS AS WERE MADE IN THE STAT EMENT OF FACTS. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE ASSESSEE DERIV ES INCOME FROM TRADING ACTIVITIES IN FURNITURE, ARTIFICIAL ITEMS, TILES AND CEILINGS. A SURVEY ACTION U/S.133A WAS CONDUCTED ON 25/02/2008 AND PAR TNER OF THE ASSESSEE-CONCERN, SHRI KEYURBHAI DISCLOSED INCOME O F RS.50 LAKHS WHICH HAS BEEN DULY DISCLOSED IN THE RETURN OF INCOME. H E SUBMITTED THAT THE AO ERRONEOUSLY REJECTED THE BOOK RESULT ON THE MATE RIAL FOUND DURING THE ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 4 - COURSE OF SURVEY PROCEEDINGS. THE LD.COUNSEL FOR T HE ASSESSEE SUBMITTED THAT ACCOUNTS WERE REJECTED ON THE BASIS OF ANNEXUR E BF-4 & ANNEXURE BF-15. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THESE ARE PAPERS CONTAINING TELEPHONE NUMBERS OF VARIOUS PARTIES AND VISITING CARDS OF SEVERAL PEOPLE. MOST OF THE VISITING CARDS DO NOT MENTION ANYTHING. ACCORDING TO THE AO, HOWEVER, ON PAGE-16 OF SWASTIK CONSTRUCTION, THERE IS MENTION OF SOFA SET RS.2,96,500/-. AGAIN ON PAGE 31 ON CARD OF PATEL FIBRE SOFA, THERE IS MENTION OF RS.2,55,000/- . ON PAGE 37, SALES MADE TO SHRI BHARAT MEVADA OF T T AT RS.29,500/-. ANNEXURE B-4 CONTAINING TELEPHONE NUMBERS AND BUSINESS CARDS AND THEY CANNOT BE INTERPRETED AS SALES AS THE AO CONTENDS. HE SUBMI TTED THAT ANNEXURE B- 15 IS A CATALOGUE SHOWING VARIOUS ITEMS SOLD BUT IN VERY FEW ITEMS, THE SELLING PRICE IS MENTIONED. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS WORKED OUT SELLING PRICE OF RELAX CHAIR ON PAGE-10 AT RS.60,000/- WHEN THE PURCHASE PRICE WAS RS.7,500/-. SIMILARLY, ON PAGE- 12, HE REFERS TO ARM CHAIR AND BED MENTIONED AT RS. 9,000/-, RS.24,000/- & RS.18,500/- AND THERE IS NO MENTION ABOUT RS.9,000/ -. ON THE BASIS OF THE ABOVE, THE AO WORKED OUT POST-DISCOUNT PROFITABILIT Y AT 189.54% WORKING OUT PROFIT AT RS.1,21,89,338/- IT IS NOT CLEAR HOW 189.54% IS WORKED OUT SINCE THE GROSS PROFIT HAS BEEN SHOWN AT RS.48,34,563/-, THE INCOME TO BE ADDED HAS BEEN DETERMINED AT RS.73,54, 825/, WHEREAS DISCLOSURE WAS RS.50 LACS AND, THEREFORE, ADDITION OF RS.23,54,825/- HAS BEEN MADE. HE SUBMITTED THAT ANOTHER REASON FOR RE JECTION IS THAT COPIES ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 5 - OF SALES BILL REMAINED UNSIGNED. HE SUBMITTED THAT FROM THE ABOVE, IT WOULD BE CLEAR THAT THESE CANNOT BE GROUNDS FOR REJ ECTION OF BOOKS AND, THEREFORE, THE LD.CIT(A) IN PARA-2.2, PAGES 4 & 5 H ELD THAT BOOKS CANNOT BE REJECTED. ACCORDING TO THE LD.CIT(A), IT HAS NOT BEEN SHOWN BY THE AO THAT THE ASSESSEE HAS WRONGLY RECORDED THE SALE PRICE IN THE BOOKS. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEPARTMENT HAS ACCEPTED THE ABOVE FINDING OF THE LDCIT(A) AND HAS NOT RAISED ANY GROUND OF APPEAL IN RELATION THERETO. IN FACT, ONC E THE BOOKS CANNOT BE REJECTED, THERE CANNOT BE ANY ADDITION. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THE ISSUE RE GARDING ADDITION OF RS.23,54,825/- IN PARA-2.2 OF HIS ORDER BY OBSERVIN G AS UNDER:- 2.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. T HE CASE OF THE A.O. FOR REJECTING THE BOOKS IS BASED MAINLY ON THE FACT THAT THERE WAS HUGE DIFFERENCE IN THE PRICE MENTIONED IN THE CATALOGUE AND THE PRICE RECORDED IN THE BOOKS AND THE FACT THAT THE SALE BI LL COPY REMAINING WITH THE ASSESSEE WAS UNSIGNED. IT IS SEEN THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE BOOKS WERE PRODUCED FOR VERIFICATION. THE SALE BILL COPIES WERE WITH THE A.O. FROM THE SAMPLE COPY OF THE SALE BILL, IT IS SEEN THAT IT BEARS THE NAME OF THE BUYE R. THE ASSESSEE ON THE OTHER HAND HAS ARGUED THAT THE PRICES MENTIONED IN THE CATALOGUE ARE ONLY FOR MAKING A QUOTE TO THE CUSTOMER AND THE ACT UAL SALE PRICE DEPENDS ON SEVERAL FACTORS INCLUDING DISCOUNTS, NUM BER OF PIECES AND MATERIAL. UNDER SUCH CIRCUMSTANCES, THE MATERIAL WI TH THE A.O. COULD AT BEST RAISE DOUBTS ABOUT THE BOOKS BUT CANNOT BE SAI D TO BE CONCLUSIVE ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 6 - EVIDENCE OF DEFECTS IN THE BOOKS. IT IS NOT BEEN SH OWN BY THE A.O. THAT THE ASSESSEE HAD WRONGLY RECORDED THE SALE PRICE IN THE BOOKS. HIS OBSERVATION LEADS TO SUSPICION AND CAN BE THE START ING POINT FOR INVESTIGATION BUT THIS CANNOT BE THE BASIS FOR REJE CTING THE BOOKS. THE A.O. SHOULD HAVE CARRIED OUT INQUIRIES WITH THE BUY ERS TO CONFIRM HIS SUSPICION BEFORE CONCLUDING THAT THE BOOKS WERE DEF ECTIVE. AS NO SPECIFIC DEFECT HAS BEEN SHOWN IN THE BOOKS, THEY COULD NOT BE REJECTED. 2.2.1. IT HAS BEEN ALSO ARGUED BY THE ASSESSEE THAT IN THE COMPUTATION FOR DETERMINING THE PROFITABILITY, THE A.O. HAS WRO NGLY ADOPTED A DISCOUNT RATE OF ONLY 20% WHEREAS THE RATES OF DISC OUNT VARY AND COULD BE AS HIGH AS 50%. IN THIS REGARD, THE ASSESSEE SUB MITTED PHOTOGRAPHS OF BANNERS PUT UP AT DIFFERENT PLACES IN THE CITY. IT ALSO ARGUED THAT THE PROFIT MARGIN DETERMINED BY THE A.O. WAS ON A LIMIT ED SAMPLE AND WITHOUT REGARD TO THE ACTUAL SALE PRICE AND THEREFO RE RESULTED HI ABNORMAL PROFIT MARGINS. IT HAS ALSO ARGUED THAT HI HIS CALCULATIONS THE A.O. HAS FAILED TO TAKE GENUINE DIRECT EXPENSES LIK E CUSTOMS, TRANSPORTATION AND OCTROI AND IF THESE ARE CONSIDER ED THEN EVEN WITH THE METHOD ADOPTED BY THE A.O. THERE WOULD BE NO EXCESS INCOME AFTER CONSIDERING THE BOOK PROFITS AND ADDITIONAL INCOME DISCLOSED DURING SURVEY. EVEN IF THE OBJECTIONS RAISED BY THE ASSESS EE REGARDING DISCOUNT RATE, UNDULY HIGH PROFITS, LIMITED SAMPLE AND SALE PRICE RECORDED IN THE BILLS ARE NOT ACCEPTED, IT HAS TO BE ALLOWED DIRECT EXPENSES LIKE CUSTOMS, TRANSPORTATION AND OCTROI WHILE DETERMINING THE PRO FITABILITY. THESE EXPENSES, BASED ON THE FIGURES HI THE P&L ACCOUNT, WORK OUT TO 27% OF THE PURCHASES AND THEREFORE WITH THE SAME SAMPLE, C ATALOGUE PRICES AND DISCOUNT RATE AS ADOPTED BY THE A.O., THE PROFITABI LITY WORKS OUT TO 127%. IF THIS IS APPLIED TO THE 'COST OF GOODS CONS UMED (AS ADOPTED BY THE A.O. AT 64,31,0897-), THE GROSS PROFIT WOULD BE APPROX. 82 LAKHS WHICH IS LESS THAN THE AGGREGATE OF GROSS PROFIT SH OWN IN THE BOOKS AND ADDITIONAL INCOME OFFERED DURING SURVEY ( 48,34,563/- PLUS 50,00,000/-.). THEREFORE, THERE WAS NO REASON FOR MAKING ANY ADDITION FOR LOWER PROFITS/SUPPRESSION OF SALES. HENCE, FOR THIS REASON ALSO THE ADDITION OF 23,24,825/- IS REQUIRED TO BE DELETED. THE A.O. IS DIRECTED TO DELETE THE ADDITION OF 23,54,825/-. THIS GROUND IS ALLOWED. ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 7 - 3.3 WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING THAT IT HAS NOT BEEN SHOWN BY THE AO THAT THE ASSESSEE HAS WRONGLY RECOR DED THE SALE PRICE IN THE BOOKS. HE FURTHER OBSERVED THAT THIS OBSERVATION LEADS TO SUSPICION AND CAN BE THE STARTING POINT FOR INVESTIGATION BUT THIS CANNOT BE THE BASIS FOR REJECTING THE BOOKS. THE A.O. SHOULD HAVE CARR IED OUT INQUIRIES WITH THE BUYERS TO CONFIRM HIS SUSPICION BEFORE CONCLUDI NG THAT THE BOOKS WERE DEFECTIVE. AS NO SPECIFIC DEFECT HAS BEEN SHOW N IN THE BOOKS, THEY COULD NOT BE REJECTED. WE FIND MERIT INTO THIS CON TENTION OF THE LD.CIT(A) THAT THE AO HAS NOT MADE ANY ENQUIRY FROM THE BUYER S TO VERIFY THE ACTUAL SALE PRICE. IN THE ABSENCE OF THE SAME, IN OUR CONSIDERED VIEW, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCO UNT AND MAKING THE ADDITION. THEREFORE, WE DO NOT SEE ANY REASON TO I NTERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, THI S GROUND (AGAINST DELETION OF ADDITION OF RS.23,54,825/-) OF REVENUE S APPEAL IS REJECTED. 3.4. IN RESPECT OF ADDITION OF RS.6,47,300/-, WE F IND THAT THE LD.CIT(A) HAS DECIDED THE ISSUE IN PARA 3.2 OF HIS ORDER, BY OBSERVING AS UNDER:- 3.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. IN FURNITURE TRADE, USUALLY THE CUSTOMER VISITS A NUMBER OF SHOPS BEFOR E FINALISING THE PURCHASE. THE PRICE NEGOTIATED HAS TO BE RECORDED F OR FUTURE REFERENCES WHEN THE CUSTOMER RETURNS FOR THE ACTUAL PURCHASE A ND THEREFORE THE EXPLANATION OF THE APPELLANT THAT THE VISITING CARD S RECORDED SUCH PRICE AND THE ACTUAL SALES WAS RECORDED IN THE BOOKS APPE ARS PLAUSIBLE. IN ANY CASE, BEFORE MAKING THE ADDITION, THE A.O. SHOU LD HAVE CONFIRMED THE SALES FROM THE PERSONS WHOSE VISITING CARDS WER E FOUND. NO SUCH ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 8 - INQUIRIES WERE MADE BY THE A.O. SUSPICION, HOWEVER STRONG, CANNOT BE THE BASIS FOR ADDITION. EVEN OTHERWISE, THE ASSESSE E HAD VOLUNTARILY OFFERED ADDITION INCOME OF 50 LAKHS DURING THE COURSE OF SURVEY AND HAS OFFERED THIS AMOUNT SEPARATELY IN THE RETURN AL SO. IN MY OPINION, THIS AMOUNT IS SUFFICIENT TO COVER THE AMOUNT OF SALES S UPPRESSION DETECTED BY THE A.O. ON ACCOUNT OF RECORDINGS ON THE VISITIN G CARDS IN ADDITION TO ANY SUPPRESSION OF PROFITS CONSIDERED IN GROUND NO. 1. THE ADDITION MADE IS THEREFORE DELETED. THIS GROUND IS ALLOWED. 3.5. IN THIS CASE ALSO, THE AO HAS NOT CARRIED OUT ANY ENQUIRY, THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, THIS GROUND OF REVEN UES APPEAL IS ALSO REJECTED. AS A RESULT, GROUND NOS.1 & 2 OF REVENUE S APPEAL ARE DISMISSED. 4. GROUND NO.3. & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 5. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE COURT ON MONDAY, THE 30 TH DAY OF NOVEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED / 11 /2015 6/..-, .-../ T.C. NAIR, SR. PS ITA NO.1848/AHD /2012 ACIT VS. M/S.SAGA LIFESTYLES ASST.YEAR 2008-09 - 9 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-IV, SURAT 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. ! / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12.10.2015(DICTATION-PAD 9- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..21.10.2015 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 30.11.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER