The ITO, Ward-2(4), V. M/s Thakker Enterprise,

ITA 185/RJT/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50019 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: KALPESH DOSHIC A
• Keywords: Business income; Depreciation; Income from undisclosed sources
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.185/RJT/2006 (ASSESSMENT YEAR 2002-03) THE I.T.O., WARD -2(4), VS. M/S. THAKKER ENTERPRISE, RAJKOT. SANGANWA CHOWK,RA JKOT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KALPESH DOSHI,C.A. REVENUE BY : SHRI AVINASH KUMAR. O R D E R PER AL GEHLOT, AM: THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF C.I.T.(A) DATED 1 ST FEBRUARY,2006 FOR ASSESSMENT YEAR 2002-03. 2. THE GROUND RAISED IN THE APPEAL READS AS UNDER : - (1) THE LEARNED C.I.T.(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE SALES DIFFERENCE OF RS.4,001/ -. (2) THE LEARNED C.I.T.(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO TREAT THE BALANCE DI FFERENCE OF RS.1,53,725/- TO BE ASSESSABLE ASS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES ASSESSED BY A.O. (3) THE LEARNED C.I.T.(A)-III, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO TREAT THE INCOME DIS CLOSED THROUGH J.V.ENTRIES I.E RS.91,485/- ON ACCOUNT OF INCOME FR OM REPAIRS I TA 185/RJT/2006. AS SESSMENT YEAR 2002-03. 2 AND SERVICE CONTRACTORS TO BE ASSESSABLE AS BUSINES S INCOME INSTEAD OF INCOME FROM OTHER SOURCES ASSESSED BY TH E A.O. 3. A SURVEY U/S. 133A WAS CARRIED OUT ON 24-1-2002. DURING THE COURSE OF THE ASSESSMENT PROCEEDING, THE A.O. NOTIC ED THAT THE ASSESSEE HAS EXECUTED THE SALES OF RS.15,86,090/- W HEREAS, THE TRADING ACCOUNT PRODUCED IN TWO PARTS BY THE ASSESS EE, THE SALES SHOWN WAS RS.15,82,089/-. THUS, THERE WAS A DIFFER ENCE OF RS.4,001/-. THE A.O. HAS MADE AN ADDITION OF RS.4, 001/-. THE C.I.T.(A) DELETED THE SAID ADDITION WITH A FINDING THAT THERE WAS NO DISCREPANCIES IN RESPECT OF THE SALE ACCOUNT. HE F OUND THAT TOTAL SALES OF THE TWO PARTS BEFORE SURVEY AND AFTER SURV EY COMES TO RS.15,86,090/- AND THE SAME FIGURE IS SHOWN IN THE SALES ACCOUNT. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PA RTIES, WE FIND THE C.I.T.(A) HAS RECORDED A FACT THAT THERE WAS NO DIS CREPANCIES IN SALES ACCOUNT, EVEN OTHERWISE ALSO THIS IS A PETTY AMOUNT AND WE DO NOT WANT TO DISTURB THE FINDING OF C.I.T.(A). ACCORDIN GLY, THE ORDER OF THE C.I.T.(A) ON THIS ISSUE CONFIRMED. 4. GROUND NOS. 2 AND 3 ARE IN RESPECT OF WHETHER TH E INCOME OF RS.1,53,725/- BEING DIFFERENCE OF EXCESS STOCK AND RS.91,485/- SERVICE AND INCOME ASSESSABLE AS BUSINESS INCOME OR UNDER THE HEAD INCOME FROM OTHER SOURCES. DURING THE COURSE OF SURVEY, TOTAL EXCESS STOCK IN ALL THREE CONCERNS WAS WORKED OUT A T RS.6,00,708/-. RS.6,45,210/- WAS SHOWN AS UNACCOUNTED INCOME. THE ASSESSEE PASSED FOLLOWING JOURNAL ENTRIES IN BOOKS OF ACCOUN TS:- RS.4,00,000/- STOCK DIFFERENCE DECLARED BY ASSESSEE AT THE TIME O F SURVEY. I TA 185/RJT/2006. AS SESSMENT YEAR 2002-03. 3 RS. 91,485/- SERVICE & REPAIRING CONTRACT DONE BY THE ASSESSEE I N THE COURSE OF BUSINESS. RS.1,53,725/- THE STOCK AS PER BOOKS OF ACCOUNTS IGNORED BY SURVE Y PARTY AND CONSIDERED ONLY RS.79,039/- INSTEAD OF RS.2,32,764/-. THE DIFFERENCE OF STOCK RE-ENTERED B Y MAKING JV ENTRIES IN THE BOOKS. RS.6,45,210/- 5. THE A.O. WAS OF THE VIE THAT THIS UNACCOUNTED IN COME IS ASSESSABLE FROM THE INCOME FROM OTHER SOURCES THERE FORE, SAME WAS NOT ALLOWED TO BE SET OFF AGAINST THE BUSINESS LOSS OF THE CURRENT YEAR. THE TOTAL INCOME COMPUTED BY THE A.O. IS AS UNDER:- NET PROFIT AS PER P & L A/C. RS.1,68,893/- ADD: SALARY TO PARTNERS RS.2,00,094/- DEPRECIATION RS.1,18,478/- RS.3,18,572/- ADD AS DISCUSSED ABOVE 1)SALES DIFFERENCE RS. 4,001/- 2)CASH DIFFERENCE.. RS. 80,348/- 3)OUT OF TELE.EXPS. RS.6,667/- 4)OUT OF OFFICE.EXPS. RS.2,015/- 5)OUT OF VEHI.EXHPS. RS.4,350/- RS. 13,032/- RS. 97.381/- RS.4,15,953/- RS.5,84,846/- LESS:INCOME CONSIDERED SEPARATELY ( AS INCOME FROM UNDISCLOSED SOURCES) RS.6, 45,210/- (-)LOSS RS. 60.364/- LESS:DEPRECIATION AS PER WORKING RS.1,18,4 78/- BOOK PROFIT. (-)LOSS RS.1,78 ,842/- LESS:SALARY PAID TO PARTNERS(RESTRICTED RS. 50,000/- TO RS.50,000/-. LOSS TO BE CARRY FORWARD. (-) RS. 2,28,842/- OTHER INCOME (DISCLOSURE)(AS DISCUSSED RS.6, 45,210/- IN ABOVE).. ASSESSED INCOME. RS.6,45,210/- I TA 185/RJT/2006. AS SESSMENT YEAR 2002-03. 4 6. THE C.I.T.(A) HELD THAT INCOME OF RS.1,53,725/- AND RS. 91,485/- HAVE DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE, HENCE, SAME IS ASSESSABLE AS BUSINESS INCOME. THE C.I.T.(A ) HAS HELD THAT THE ASSESSEE IS ENTITLED TO BE SET OFF THE BUSINESS LOSS AGAINST THIS INCOME. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. THE LD. A.R. RELIED UPON THE ORDER OF THE ITAT, RAJKOT BENCH I.T.A.NO.1118/RJT/2009 ORDER DATED 30- 11-2010 WHEREIN IT HAS BEEN HELD THAT SUCH INCOME IS ASSESS ABLE AS BUSINESS INCOME. THE RELEVANT FINDING OF THE ITAT POINTED O UT BY LD. A.R. IS REPRODUCED AS UNDER :- WHETHER THE DECLARATION MADE AT THE TIME OF SURVEY ON ACCOUNT OF STOCK IS ASSESSABLE UNDER THE HEAD INCO ME FROM BUSINESS. THE UNDISPUTED FACT IS THAT THE ADDITION IS ON ACCOUNT OF STOCK. WE FIND THAT THE ISSUE IS SQUARELY COVERE D BY THE DECISION OF ITAT, RAJKOT BENCH IN THE CASE OF ITO V S. JAMNADAS MULJIBHAI 99 ITR (RJT) 197 WHEREIN IT HAS BEEN HELD THAT THE STOCK DECLARED DURING THE COURSE OF SURVEY IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AN D ACCORDINGLY SALARY TO PARTNERS U/S.40(B) IS ALLOWAB LE. IN THE LIGHT OF DECISION OF JURISDICTIONAL ITAT WE DO NO FIND AN Y INFIRMITY IN THE ORDER OF THE C.I.T.(A) AS HE FOLLOWED THE DECISION OF THE JURISDICTIONAL ITAT. WE ACCORDINGLY CONFIRM THE OR DER OF THE C.I.T.(A). ACCORDINGLY GROUNDS 1 & 2 OF THE REVENU E FAIL. 8. WE FIND THAT THE SHORT CONTROVERSIES IN BOTH THE GROUND NOS.2 AND 3 ARE WHETHER THE INCOME DECLARED BY THE ASSES SEE ON ACCOUNT OF SERVICES AND REPAIRS INCOME ON ACCOUNT OF THE ST OCK WHETHER IT IS ASSESSABLE AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. RAJKOT I TA 185/RJT/2006. AS SESSMENT YEAR 2002-03. 5 ITAT BENCH IN ITA NO.1118/RJT/2009 (SUPRA) HAS CLEA RLY HELD THAT UNDER THESE CIRCUMSTANCES, THE INCOME IS ASSESSABLE AS BUSINESS INCOME. THE SET OFF AND CARRY FORWARD IN BUSINESS L OSS IS DEPEND ON THE INCOME UNDER WHICH HEAD IT IS TO BE ASSESSED. FOLLOWING THE ABOVE ORDER OF ITAT, RAJKOT BENCH, SUCH INCOME IS A SSESSABLE AS BUSINESS INCOME. WE, THEREFORE, FIND THAT THE ORDE R OF THE C.I.T.(A) IS IN CONSONANCE WITH THE ORDER OF THE ITAT. WE, THER EFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE C.I.T.(A). 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011. SD/- SD/- (N.R.S. GANESAN) ( A. L. GEHLOT ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT, DT : 13-05-2011. NVA/- COPY TO: 1. THE I.T.O., WD.-2(4), RAJKOT. 2. M/S. THAKKER ENTERPRISE, RAJKOT. 3. THE CIT(A)- RAJKOT. 4. THE C.I.T. 5. THE D.R., RAJKOT. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT.