ACIT, CHANDRAPUR CIRCLE, Chandrapur V. M/S HASAN ELECTRICALS, Chandrapur

ITA 189/NAG/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3158 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R MEENA
• Keywords: Income from undisclosed sources
• Section: 143(3); 147

Judgement Text

1 ITA NO.189/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO. 189 /NAG/201 3 ASSESSMENT YEAR : 20 09 - 10. ASSTT. COMMISSIONER OF INCOME - TAX, M/S HASAN ELECTRICALS, CHANDRAPUR CIRCLE, CHANDRAPUR. VS. CHANDRAPUR. PAN AAAFH8213L APPELLANT. RESPONDENT. APPELLANT BY : S HRI A.R. MEENA. RESPONDENT BY : SHRI MUKESH AGRAWAL. DATE OF HEARING : 0 8 - 12 - 2015. DATE OF PRONOUNCEMENT : 15 TH JAN., 2016. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 14 - 02 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10 . THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS CORRECT IN RELYING UPON THE CASE LAWS MENTIONED IN APPELLATE ORDER THOUGH THE FACTS OF THE CASE DIFFER. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS CORRECT WHETHER INCOME FROM UNACCOUNTED SALES IS TO BE ESTIMATED AT GP RATE INSPITE OF THE FACT THAT THE COST PRICE OF ALL THE PURCHASES, INCLUDING THE PURCHASES CORRESPONDING TO THE UNACCOUNTED SALES HAVE BEEN DEBITED TO THE TRADING ACCOUNT. 2. IN THIS CASE A SURVEY WAS CONDUCTED A T THE BUSINESS PREMISES OF THE ASSESSEE ON 12 - 11 - 2008. UNACCOUNTED SALES WERE DETECTED DURING THE COURSE OF 2 ITA NO.189/NAG/2013 SURVEY. SUBSEQUENTLY VIDE LETTER DATED 29 - 01 - 2009 SUBMITTED BY THE ASSESSEE AFTER THE SURVEY, THE ASSESSEE HAS ADMITTED BEFORE THE AO THAT THERE WER E CERTAIN UNACCOUNTED SALES MADE DURING THE COURSE OF FINANCIAL YEAR 2006 - 07, 2007 - 08 & 2008 - 09 AND OFFERED INCOME FOR TAXATION AS UNDER : AY 2007 - 08 RS. 13,21,000/ - AY 2008 - 09 RS. 16,63,000/ - AY 2009 - 10 RS. 57,00,000 / - RS.35,54,000/ - ============= THE ASSESSEE ALSO GAVE THE DETAILED WORKING ON THE BASIS OF WHICH THE ABOVE OFFER OF UNDISCLOSED INCOME WAS MADE THE SAID DETAILED WORKING IS PART OF THE ASSESSMENT ORDER AS ANNEXURE - 2. IT WAS FURTHER NOTED BY THE AO THAT AS PER THE SAID WORKING, THE UNACCOUNTED SALES FOR THE YEAR UNDER CONSIDERATION WAS RS.55,84,656/ - . THE ASSESSEE SUBMITTED DURING THE SURVEY PROCEEDINGS AND POST SURVEY PROCEEDINGS THAT 15% OF THE SAID SALES ARE ACCOUNTED FOR. THIS CONTENTION OF THE ASSESSEE WAS ACCEPTED BY THE AO. THE NET UNACCOUNTED SALES WAS, THEREFORE, WORKED OUT AT RS.47,46,958/ - . THE AO FURTHER NOTED IN PARA 4 AND 5 OF THE ASSESSMENT ORDER AS UNDER : IT IS NOW SUBMITTED BY THE ASSESSEE THAT THE INCOME COMPONENT OUT OF SUCH UN RECORDED SALES WOULD BE ABOUT RS.5,69,700/ - . THE ASSESSEE HAS WORKED OUT THIS FIGURE ON THE GROUND THAT THE UNACCOUNTED SALES INCLUDE THE PROFIT COMPONENT (G.P. 12%) AND THERE BY THE PUR CHASE COST OF SUCH UN RECORDED SWALES IS RS.41,77,323/ - (4746958 - 12 % G.P. ON 4746958 I.E. 47,46,958 5,69,635/ - ). THE ASSESSEE FURTHER CONTENDED HAT TO MAKE, THIS MUCH OF INVESTMENT (PURCHASE) OVER A PERIOD, IT REQUIRES IT REQUIRES AN INITIAL INVEST MENT OF ABOUT 1/3 OF TOTAL COST (I.E. 1/3 OF 4177323 = 1392441). AS PER ASSESSEE ADDITIONAL FUNDS WOULD HAVE BEEN FLOWN IN (AS PROFIT) OVER THE YEARS THROUGH SALE OF SUCH UNACCOUNTED SALES (OVER THE PAST YEAR) AND THE ASSESSEE HAS WORKED OUT THIS VALUE AT RS.5,69,644/ - , 3 ITA NO.189/NAG/2013 FINALLY STATING THAT IT WOULD HAVE REQUIRED A FUND OF RS. 13,92,441/ - - 5,69,644/ - = RS.8,22,797/ - FOR THE YEAR UNDER CONSIDERATION. AS PER ASSESSEE THIS AMOUNT WAS ALREADY GENERATED BY IT IN THE PRECEDING 2 YEARS (AGAIN THROUGH SUCH U N RECORDED SALES VIDE THE WORKING GIVEN BY ASSESSEE ANNEXED TO THIS ORDER, AS AANNEXURE - 2) AND HENCE NO EXTRA FUNDS WOULD HAVE BEEN REQUIRED FOR THE CURRENT YEARS. IT IS ASSESSEES ARGUMENT THAT IT ONLY NEEDS TO DECLARE THE PROFIT COMPONENT OF RS.5,69,700/ - AS ADDITIONAL INCOME FOR THE CURRENT YEAR. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ACCORDINGLY. THE AO FURTHER CONCL UDED THAT ALL THE PURCHASES THAT HAVE BEEN MADE TO AFFECT THE UNRECORDED SALES HAVE ALREADY BEEN ACCOUNTED FOR BY THE ASSESSEE AND STAND DEBITED TO ITS P&L ACCOUNT. HE FURTHER CONCLUDED THAT THE CORRESPONDING FIGURES ON THE CREDIT SIDE BEING TOTAL SALE RECEIPTS OF RS.47,46,958/ - REPRESENTS THE INCOME OF THE ASSE SSEE AS AGAINST RS.57,00,000/ - OFFERED AS THE UNACCOUNTED INCOME FOR THE YEAR. HE, THEREFORE, ADDED AN AMOUNT OF RS.41,46,958/ - AS INCOME FROM UNRECORDED SALES. 4. UPON ASSESSEE APPEAL, LEARNED CIT(APPEALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. LEARNED CIT(APPEALS) HELD AS UNDER : THE WORKING OF THE FIGURES OF INCOME OF FERED IN RESPECT OF THE YEARS WAS ALSO FURNISHED BY THE ASSESSEE ON 29 - 01 - 2009 WHICH IS ANNEXURE 2 OF THE ASSESSMENT ORDER. THE APPELLANT OFFERED THE TOTAL OF THE GP% @ 12% AND THE INVESTMENT BEING 1/3 RD OF THE SALES AS THE UNACCOUNTED INCOME OF EACH OF TH E THREE YEARS FOR WHICH DISCLOSURE HAS BEEN MADE. IT CAN BE SEEN FROM THE SAID WORKING THAT THE NET UNRECORDED SALES FOR THE YEAR UNDER CONSIDERATION ARE RS.4746958/ - . THE GP @ 12% AMOUNTING TO RS.569635/ - HAS BEEN OFFERED BY THE ASSESSEE AS ITS UNACCOUNTE D INCOME FOR THE YEAR. AFTER DEDUCTING THE SAID GP FROM THE NET UNRECORDED SALES, THE COST OF SAID UNRECORDED SALES IS WORKED OUT TO RS.4177323/ - . 1/3 RD OF THE SAID AMOUNT I.E. RS.1392441/ - IS THE INVESTMENT THAT WOULD BE REQUIRED FOR EFFECTING THE SALES AS SPECIFIED ABOVE. ON REDUCING THE GP OF RS.569644/ - FROM THE ABOVE FIGURE THE NET INVESTMENT REQU IRED COMES TO RS.822797/ - . AS PER THE WORKING GIVEN BY THE ASSESSEE 4 ITA NO.189/NAG/2013 FOR THE 3 FINANCIAL YEARS THE INCOME ALREADY SURRENDERED IN THE EARLIER ASSESSMENT YEARS WOULD GO TO EXPLAIN THE SOURCE OF THE SAID NET INVESTMENT AMOUNTING TO RS.822797/ - AND IT IS FOR THIS REASON THAT NO DISCLOSURE IS REQUIRED TO BE MADE BY THE APPELLANT ON ACCOUNT OF INVESTMENT. IT IS IMPORTANT TO NOTE THAT THIS WORKING WAS GIVEN BY THE APPELLANT TO THE DEPARTMENT SOON AFTER THE SURVEY. A CONSISTENT METHOD OF WORKING OUT THE UNACCOUNTED INCOME WAS ADOPTED BY THE APPELLANT AND IT WAS ON T HIS BASIS ONLY THAT THE INCOME WAS OFFERED TO TAX BY THE ASSESSEE FOR ALL THE 3 YEARS. THERE IS NO DEPARTURE IN AY 2009 - 10 FOR COMPUTING THE UNACCOUNTED INCOME VIS - A - VIS AY 2007 - 08 AND AY 2008 - 09. THE DISCLOSURE MADE BY THE ABOVE METHOD IN AY 2007 - 08 & AY 2008 - 09 AMOUNTING TO RS.1321000/ - AND RS. 1663000/ - HAS BEEN ACCEPTED BY THE DEPARTMENT U/S 143(3) RWS 147 . I SEE NO INFIRMITY IN THE SAID METHOD AND HENCE THERE IS NO REASON FOR DEPARTING FROM THE SAME DURING THE YEAR UNDER CONSIDERATION. LEARNED CIT(APP EALS) FURTHER REFERRED TO CASE LAWS FROM HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF MAN MOHAN SADANI VS. CIT 304 ITR 052 AND CIT VS. BALCHAND AJIT KUMAR 263 ITR 610 FOR THE PROPOSITION THAT THE ENTIRE UNDISCLOSED SALES CANNOT BE ADDED AS UNDISCLOSE D INCOME BUT IT IS A PROFIT EMBEDDED THEREIN THAT HAS TO BE TAXED. CONSIDERING THIS CASE LAW, LEARNED CIT(APPEALS) HELD AS UNDER : THUS IT IS THE PROFIT EMBEDDED IN THE SALES AND THE INITIAL INVESTMENT TO AFFECT SUCH UNACCOUNTED INCOME. THE WORKING OF THE ASSESSEE HAS SPELLED OUT IN ANNEXURE - 1 DOES PRECISELY THIS. IT SEEKS TO TAX THE GP ON SUCH UNACCOUNTED SALES AND THE INVESTMENT REQUIRED TO AFFECT SUCH UNACCOUNTED SALES. AS PER THE SAID WORKING, THE AMOUNT OF UNACCOUNTED INCOME GENERATED IN THE YEAR U NDER CONSIDERATION COMES TO RS.5,70,000/ - WHICH THE APPELLANT HAS ALREADY OFFERED FOR TAX. THIS METHOD OF CALCULATING UNACCOUNTED INCOME HAS BEEN ACCEPTED IN AY 2007 - 08 & AY 2008 - 09. IT IS NOT THAT ENTIRE SALES HAVE BEEN ADDED IN THE EARLIER TWO YEARS. CON SIDERING THE TOTALITY OF THE ABOVE FACTS THE ADDITION OF RS.4746958/ - IS UNCALLED FOR AND IS LIABLE TO BE DELETED. 5 ITA NO.189/NAG/2013 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE AO I N HIS CASE HAS HELD THAT THE ENTIRE UNDISCLOSED SALES IS UNDISCLOSED INCOME OF THE ASSESSEE. LEARNED CIT(APPEALS) HAS REFERRED TO CERTAIN CASE LAWS AND HELD THAT IT IS PROFIT EMBEDDED IN THE UNDISCLOSED SALES THAT CAN BE ADDED TO THE INCOME AND NOT THE ENT IRE UNDISCLOSED SALES. THIS IS A WELL SETTLED PROPOSITION. MOREOVER IT IS ALSO CORRECT THAT THE AO HAVING ACCEPTED THE ASSESSEES SUBMISSION IN EARLIER TWO YEARS CANNOT DEVIATE AND ADD THE ENTIRE UNACCOUNTED SALES AS INCOME OF THE ASSESSEE IN THE CURRENT A SSESSMENT YEAR. WE FIND NOTHING IN THE AOS ORDER WHICH SHOWS THAT THE AO HAS FOUND THAT ALL THE PURCHASES AND EXPENSES RELATING TO UNDISCLOSED SALES WERE BOOKED IN THE PROFIT AND LOSS ACCOUNT. H ENCE THE BASIS OF SUCH A GROUND RELATING TO THIS EFFECT WHIC H HAS BEEN RAISED BY THE REVENUE IS BEYOND OUR COMPREHENSION. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 7. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JAN. , 201 6 . SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 15 TH JANUARY, 2016. 6 ITA NO.189/NAG/2013 COPY FORWARDED TO : 1. M/S HASAN ELECTRICALS, EKORI WARD, GANDHI CHOWK, CHANDRAPUR - 442402. 2. A.C.I.T., CHANDRAPUR CIRCLE, CHANDRAPUR. 3. COMMISSIONER OF INCOME - TAX - , NAG PUR. 4. CIT(APPEALS) - I I , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.