Sri Ankit Agrawal, Nawada V. ACIT, Patna

ITA 191/PAT/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1183 (ITAT-PATNA)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 28-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BABU
• Assessee Lawyers: S K NARAYAN
• Keywords: Rejection of books of accounts
• Section: 145

Judgement Text

1 ITA NO. 191/PAT/2013. IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 191/PAT/2013. ASSESSMENT YEAR : 2009 - 10. SRI ANKIT AGRAWAL, ASSTT. COMMISSIONER OF INCOME - TAX, PROP. M/S SAGARMAL & SONS, VS. CIRCLE - 2, PATNA. SABZI BAZAR, NAWADA, BIHAR - 850110. APPELLANT. RESPONDENT. APPELLANT BY : SHRI S.K. NARAYAN. RESPONDENT BY : S HRI RAM BABU. DATE OF HEARING : 04 - 08 - 2016 DATE OF PRONOUNCEMENT : 19 TH SEPT., 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) DATED 18 - 03 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS FAILED TO ADJUDICATE THE CORRECTNESS OF REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE I.T. ACT, 1961. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN SUSTAINING THE ALLEGED UNACCOUNTED PURCHASES OF RS.26,18,782 ON SUSPICION, SURMISES AND CONJECTURES. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN ESTIMATING ALLEGED CAPITAL REQUIRED AT RS.3,00,057 FOR THE ALLEGED UNACCOUNTED PURCHASES. 2 ITA NO. 191/PAT/2013. 4. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) H AS ERRED IN ESTIMATING THE ADDITIONAL GROSS PROFIT OF RS.3,37,378 ON ALLEGED UNACCOUNTED PURCHASES ON SUSPICION, SURMISES AND CONJECTURES. 5. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN ES TIMATING THE ADDITIONAL GROSS PROFIT OF RS.3,37,378 AGAINST THE ESTIMATED ADDITIONAL GROSS PROFIT ESTIMATED BY THE ASSESSING OFFICER OF RS.28,540 IN VIOLATION OF SECTION 251(2) OF THE I.T. ACT, 1961. 2. IN THIS CASE A SURVEY WAS CONDUCTED ON 14 - 05 - 2009. A STATEMENT WAS PREPARED BY THE REVENUE TEAM NOTING MONTHLY FIGURES OF SALES AND PURCHASES FROM APRIL, 2008 TO MARCH, 2009 ON THE BASIS OF SALES AND PURCHASE MEMO REPORTEDLY MAINTAINED MANUALLY. NO FURTHER DETAIL WAS PREPARED. THOSE SALES AND PURCHASE MEMOS WERE ALSO NOT IMPOUNDED. NO DETAIL OR ANY CORROBORATION OF THE CONTENT OF THE SAID STATEMENT WAS MAINTAINED. THE ASSESSEE FILED ITS RETURN FOR ASSESSMENT YEAR 2008 - 09 ON 30 - 10 - 2009. IN THE COURSE OF ASSESSMENT THE AO REFERRED TO THIS STA TEMENT. THE AO OBSERVED THAT AS PER THE RETURN TOTAL PURCHASES & SALES ARE RS.2,39,95,225/ - , RS.2,31,91,173/ - RESPECTIVELY. AS SUCH, UNACCOUNTED PURCHASE TO THE TUNE OF RS.26,18,782/ - AND UNACCOUNTED SALE TO THE TUNE OF RS.2,77,631/ - ARE DETECTED. THEREFO RE, VIDE ORDER SHEET ENTRY DATED 07 - 12 - 2011, THE A.R. WAS REQUESTED TO EXPLAIN THE DISCREPANC Y . THAT THE ASSESSEE RESPONDED AS UNDER : 1. THE SALE AND PURCHASE FIGURED CALCULATED AT THE TIME OF SURVEY WAS NEVER ACCEPTED BY THE ASSESSEE AND WAS DENIED DURING THE COURSE OF HEARING BEFORE THE ADIT (INV) AND AS SUCH TO SAY THAT THE FIGURES WERE ENDORSED BY THE ASSESSEE IS NOT JUSTIFIED. 2. THE SALE MEMO AND PURCHASE BILL FILE WAS MADE AVAILABLE TO THE SURVEY TEAM DURING THE COURSE OF SURVEY AND IF THE SAME WERE NOT IMPOUNDED BY THEM, THE SAME CANNOT BE HELD AGAINST THE ASSESSEE. 3. SINCE YOU INTEND TO USE THE FIGURES OF PURCHASE AND SALE CALCULATED BY THE SURVEY TEAM, THE PETITIONER HAS A RIGHT VERIFY THE SAME AND AS SUCH REQUEST YOU TO PROVIDE THE BASIS ON WHICH THE PU RCHASE AND SALE FIGURE WAS CALCULATED AND TO GIVE PETITIONER A CERTIFIED COPY OF THE SAME FOR WHICH THE PETITIONER IS READY TO DEPOSIT THE REQUISITE FEES. 3 ITA NO. 191/PAT/2013. 4. IN FACT IN THE ORDER SHEET YOU HAVE YOURSELF MENTIONED THAT THE SALE FIGURE AND PURCHASE FIGURE CANNOT BE COMPARED AS NEITHER THE SALE MEMOS ARE IMPOUNDED NOR THERE ARE MARKED WITH IDENTIFICATION. UNDER SUCH CIRCUMSTANCES THE PETITIONER SUBMITS THAT UNDER SUCH CIRCUMSTANCES THE UNVERIFIABLE FIGURES OF PURCHASES AND SALE CANNOT BE USED FOR THE PURPOS E OF ASSESSMENT. 5. WITHOUT PREJUDICE TO ABOVE PETITIONER WOULD FURTHER LIKE TO STATE THAT THE SURVEY WAS CONDUCTED IN F.Y. 2009 - 10 AND NHENCE THE ASSESSMENT FOR 2010 - 11 IS UNDER COMPULSORY SCRUTINY BEING THE YEAR OF SURVEY. THE ACCOUNTS OF THE PETITIONER WA S UNDER SCRUTINY FOR A.Y. 2008 - 09 AS WELL AS A.Y. 2009 - 10 . ANY ADDITION IN THESE ASSESSMENT ON THE BASIS OF WRONG FINDING OF SURVEY IS UNWARRANTED, UNJUSTIFIED AND ILLEGAL. 3. THE AO DID NOT ACCEPT THIS CONTENTION AND HELD AS UNDER : I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE. FIGURES OF PURCHASES AND SALES WERE WORKED OUT DURING THE COURSE OF SURVEY AND SAME IS SIGNED BY SRI ANKIT AGRAWAL (COPY ENCLOSED AS ANNEXURE I) THOSE MATERIALS WERE NEITHER IMPOUNDED NOR MARKED FOR IDENTIFICATION. AS SUCH THE FIGURES CANNOT BE VERIFIED NOW. THE ASSESSEE HAD ALSO RECEIVED COPY OF THE WORKING DURING THE COURSE OF SURVEY . IT IS ALSO CLEAR FROM THE STATEMENT OF SRI SHEO HARI AGRAWAL, FATHER OF ANKIT AGRAWAL RECORDED DURING THE SURVEY THAT BOOKS OF ACCOUNT WAS N OT MAINTAINED FOR F.Y. 2008 - 09. THIS STATEMENT WAS ALSO ENDORSED BY THE STATEMENT OF ANKIT AGRAWAL RECORDED DURING THE COURSE OF SURVEY. THEREFORE, PLEA OF THE A.R. IS NOT ACCEPTED. IN VIEW OF ABOVE DISCUSSION, BOOKS OF ACCOUNT OF THE ASSESSEE IS REJECTED AS PER THE PROVISIONS OF SECTION 145 OF THE I.T. ACT 1961 AND UNACCOUNTED PURCHASE TO THE TUNE OF RS.26,18,782/ - IS ADDED IN TOTAL INCOME OF THE ASSESSEE. UNACCOUNTED SALE WORKS OUT TO BE RS.2,77,631D/ - . THE ASSESSEE HAS DECLARED GROSS PROFIT MARGIN OF 10. 28%. UNACCOUNTED G.P. ON THIS SALE WORKS OUT TO BE RS.28,540/ - WHICH IS ALSO ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL , LEARNED CIT(APPEALS) PRINCIPALLY UPHELD THE ACTION OF THE AO BUT GRANTED SOME RELIEF AS UNDER : I HAVE CO NSIDERED THE FACTS OF THE CASE. I AGREE WITH THE OBSERVATION OF THE AO THAT HAVING MADE NO OBJECTION TO THE FIGURES OF SALES AND PURCHASES AT THE TIME OF SURVEY. THE APPELLANT CANNOT CLAIM NOW THAT SUCH 4 ITA NO. 191/PAT/2013. FIGURES WERE NOT CORRECT. SINCE THE RELEVANT DOCUMEN TS WERE NOT IMPOUNDED DURING THE SURVEY AS THE APPELLANT HAD NOT MADE ANY OBJECTION TO THE CORRECTNESS OF THE SALES AND PURCHASES, AT THE TIME OF ASSESSMENT PROCEEDINGS, IT IS NOT POSSIBLE TO VERIFY THE ABOVE FIGURES. THE APPELLANT HAS SUBMITTED THAT THE F IGURES CAN BE VERIFIED FROM THE SUNDRY CREDITORS REGISTER. IT IS POSSIBLE THAT APPELLANT HAVE MADE OTHER PURCHASES WHICH MAY HAVE BEEN RECORDED IN SOME OF PURCHASES CANNOT BE VERIFIED AT THIS STAGE. HOWEVER, THE ACTION OF THE AO IN MAKING THE ADDITION OF E NTIRE PURCHASES IS NOT CORRECT. IF IT IS HELD THAT THERE WERE UNACCOUNTED PURCHASES, IT WOULD LEAD TO THE INEVITABLE INFERENCE THAT UNACCOUNTED SALES HAVE ALSO BEEN MADE. OTHERWISE, THE STOCK POSITION WOULD INCREASE BY THE AMOUNT OF SUCH UNACCOUNTED PURCHASES AND THE SUBMISSION OF THE APPELLANT IS T HAT ON THE DATE OF THE SURVEY I.E. ON 14.05.2009, THERE WAS NO EXCESS STOCK. FURTHER, THE AO HAS HIMSELF OBSERVED THAT THERE ARE UNACCOUNTED SALES OF RS.2,77,631/ - AS ABOVE WHICH IS FURTHER INDICATION OF UNACCOUNTED SALES BEING THERE THOUGH, IT IS POSSIBL E THAT ENTIRE UNACCOUNTED SALES MAY NOT HAVE BEEN FOUND DURING THE SURVEY. THEREFORE, IT WOULD BE APPROPRIATE TO ESTIMATE THE UNDISCLOSED SALES ON THE ENTIRE SUCH AMOUNT OF UNRECORDED PURCHASES BY APPLYING THE G.P. RATE SHOWN. ACCORDINGLY, SUCH SALES WOULD COME TO RS.29,18,839/ - TAKING THE G.P. RATE AT 10.28 PERCENT. THE UNDISCLOSED GROSS PROFIT ON SUCH UNDISCLOSED SALES WOULD COME TO RS.3,00,057/ - . FURTHER, ELEMENT OF UNDISCLOSED CAPITAL IS ALSO REQUIRED TO BE CONSIDERED. THE AO HAS MADE THE ADDITION OF TH E ENTIRE PURCHASES WHICH MEANS THAT HE HAS TREATED THE AMOUNT OF ENTIRE PURCHASE WHICH MEANS THAT HE HAS TREATED THE AMOUNT OF ENTIRE PURCHASES AS UNDISCLOSED CAPITAL. A MORE RATIONAL APPROACH WOULD BE TO TAKE THE UNDISCLOSED CAPITAL IN THE SAME RATIO OF U NDISCLOSED SALES AS DISCLOSED CIRCULATING CAPITAL TO THE DISCLOSED TURNOVER. THE DISCLOSED CIRCULATING CAPITAL CAN BE ESTIMATED AS CURRENT ASSETS RS.90,41,279/ - . CURRENT LIABILITIES RS.63,60,698/ - = RS.26,80,581/ - AND THE DISCLOSED TURNOVER IS RS.2,31,91,1 73/ - . ACCORDINGLY, UNDISCLOSED CAPITAL WOULD COME TO RS.3,37,378/ - . THUS OUT OF ADDITION MADE BY THE AO AT RS.26,18,782/ - AND RS.28,540/ - = RS.26,45,322/ - , TOTAL ADDITION CONFIRMED IS AT RS.3,00,057/ - + RS. 3,37,378 = RS.6,37,435/ - . 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT NO DETAIL OF THE SALE MEMOS ETC. NOTED BY THE REVENUE HAS BEEN KEPT OR PRODUCED OR IMPOUNDED. IN ABSENCE OF ANY DETAIL IT IS NOT POSSIBLE FOR THE ASSESSEE TO PROVIDE ANY RECONCILIATION WHAT SO EVER. 5 ITA NO. 191/PAT/2013. 7. HE FURTHER SUBMITTED THAT THIS STATEMENT ALONE WITHOUT ANY DETAIL OR CORROBORATING MATERIAL CANNOT BE A BASIS FOR REJECTION OF BOOKS OF ACCOUNTS. IN THIS REGA RD LEARNED COUNSEL ALSO PLACED RELIANCE UPON THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. S. KADAR KHAN SON 352 ITR 480 FOR THE PROPOSITION THAT STATEMENT OBTAINED ON SURVEY DEHORSE ANY CORROBORATING MATERIAL CANNOT BE THE S O LE BASIS OF AD DITION. 8. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. HOWEVER, HE ADMITTED THAT EXCEPT FOR THE SAID STATEMENT SHOWING MONTHLY DETAIL OF ALLEGED SALES AND PURCHASES NO DETAIL IS AVAILABLE WITH THE REVENUE. 9. UPON CAREFUL CO NSIDERATION I FIND THAT IN THIS CASE A STATEMENT HAS BEEN PREPARED BY THE REVENUE OF TOTAL MONTHLY SALES AND PURCHASES , O N TH E BASIS OF ALLEGED SALES AND PURCHASES MEMO FOUND , THE DETAIL OF WHICH WAS N EITHER NOTED NOR IMPOUNDED. NO DOCUMENT WAS IMPOUNDED DURING SURVEY. NO MEMO - WISE DETAIL WAS PREPARED. IN THESE CIRCUMSTANCES THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE IS CORRECT THAT DEHORSE ANY CORROBORATING OR IMPOUNDED MATERIAL THE SAID STATEMENT ALONE C ANNOT BE A BASIS FOR REJECTION OF BOOKS OF ACCOUN T S OF THE ASSESSEE AND MAKING OF ANY AD HOC ADDITION. IN THIS REGA R D THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. S. KADAR KHAN (SUPRA) SUPPORTS THE CASE OF THE ASSESSEE. 10. ACCORDINGLY IN MY C ONSIDERED OPINION, DEHORSE ANY FINDING OF DEFECT IN THE BOOKS OF ACCOUNTS SUBMITTED BY THE ASSESSEE, THE SAID STATEMENT ALONE CANNOT BE A BASIS OF REJECTION OF BOOKS OF ACCOUNTS AND ADDITION OF UNDISCLOSED SALES AND PURCHASES. 11. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT I SET ASIDE THE ORDER OF THE LEARNED CIT(APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6 ITA NO. 191/PAT/2013. 1 2 . IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF SEPT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 19 TH SEPT., 2016. COPY FORWARDED TO : 1. SRI ANKIT AGRAWAL , PROP. M/S SAGARMAL & SONS, SABZI BAZAR, NAWADA, BIHAR 850110. 2. A.C.I.T., CIRCLE - 2, PATNA. 3. C.I.T .. 4. CIT(APPEALS), - 5. D.R., ITAT, PATNA. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. WAKODE.