Shri Beni Madhav Gupta, V. Income Tax Officer,

ITA 200/JAB/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82725 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHIR KUMAR
• Assessee Lawyers: A P SHRIVASTAVA; SAPAN USRETHE
• Keywords: Unexplained investment
• Section: 147; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR S.M.C. BENCH, JABALPUR BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO.200/JAB/2013 ASSESSMENT YEAR: 2004-05 BENI MADHAV GUPTA, VS. INCOME TAX OFFICER, PROP. SATYAM TRADING COMPANY, SHAHDOL (M.P.) JANAKPUR ROAD, JAISINGH NAGAR, SHAHDOL (M.P.) (PAN: ALSPG 3855 A). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.P. SHRIVASTAVA & SHRI SAPAN USRETHE RESPONDENT BY : SHRI SUDHIR KUMAR DATE OF HEARING : 25.09.2014 DATE OF PRONOUNCEMENT : 30.09.2014 ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRE CTED AGAINST THE ORDER DATED 22.02.2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) READ WITH SECTIO N 147 OF THE INCOME TAX ACT, 1961 FOR THE A.Y. 2004-05. 2. THE GRIEVANCE OF THE ASSESSEE IN SUBSTANCE IS AG AINST LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING ADDITION OF RS.94,0 40/- IN RESPECT OF CAPITAL 2 ITA NO.200/JAB/2013 A.Y. 2004-05 INVESTMENT EVEN THOUGH ASSESSING OFFICER HAS MADE A SSESSMENT BY ESTIMATING NET PROFIT AT 5%. 3. BRIEFLY STATED, THE MATERIAL FACTS ARE LIKE THIS . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF MAHUA. IN THE COURSE OF REO PENING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA NOTED THAT THE ASS ESSEE HAS PURCHASED THE INGREDIENTS OF MAHUA DURING RELEVANT A.Y. AT RS.28, 35,000/- BUT THE ASSESSEE HAS SHOWN INTRODUCTION OF CAPITAL AT RS.3,78,460/- ONLY . THE ASSESSING OFFICER WAS OF THE VIEW THAT WITH THIS MEAGER CAPITAL IT IS NOT PO SSIBLE TO PURCHASE MAHUA FOR A HUGE AMOUNT OF RS.28,35,000/-. HE WAS OF THE VIEW THAT AT LEAST ONE SIXTH OF THE AMOUNT SHOWN IN THE PURCHASE REQUIRED AS AN INITIAL CAPITAL TO START THE BUSINESS. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER REC OMPUTED THE MINIMUM CAPITAL REQUIRED BY THE ASSESSEE AT RS.4,72,500/- (BEING ON E SIXTH OF RS.28,35,000/-) AS AGAINST ASSESSEES DECLARED MINIMUM CAPITAL OF RS.3 ,78,460/-. ON THE BASIS OF THIS COMPUTATION, THE ASSESSING OFFICER MADE ADDITION OF RS.94,040/- AS UNEXPLAINED INVESTMENT FROM UNDISCLOSED SOURCES IN THE CAPITAL. AGGRIEVED BY THE ADDITION SO MADE, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEF ORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSIONER OF INCOME T AX (APPEALS) ALSO CONCURRED WITH THE FINDING OF ASSESSING OFFICER AND BY APPLIC ATION UPHELD THE STAND THAT AT 3 ITA NO.200/JAB/2013 A.Y. 2004-05 ONE SIXTH OF THE TOTAL PURCHASE IS REQUIRED. THE A SSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. IN THIS MATTER I FIND THAT THE CASE OF T HE ASSESSING OFFICER PROCEEDS ON THE PRESUMPTION THAT MINIMUM CAPITAL REQUIREMENT FOR CA RRYING ON TRADING BUSINESS IN MAHUA IS ONE SIXTH OF THE TOTAL PURCHASE DURING THE YEAR BUT THEN I AM UNABLE TO FIND ANY SUPPORT FOR THIS SWEEPING GENERALIZATION A S CAN BE EASILY NOTICED FROM PERUSAL OF THE ASSESSMENT ORDER. THE ASSESSING OFF ICER HAS ALL THE DETAILS OF PURCHASES OF MAHUA FROM KRISHI UPAJ MANDI AND IT WA S OPEN TO HIM TO COMPUTE THE ACTUAL REQUIREMENT OF CAPITAL BUT INSTEAD OF DO ING SO HE PROCEEDED TO FRAME THE ASSESSMENT BASED ON SWEEPING GENERALIZATION FOR CAR RYING OUT TRADING BUSINESS. THIS KIND OF APPROACH IN MY HUMBLE VIEW IS WHOLLY U NSUSTAINABLE IN LAW. I HAVE ALSO NOTICED THAT A DIRECT DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR, 263 ITR 610 (M.P.) WHEREIN THEIR LORDSHIPS HAS OBSERVED THAT TOTAL UNRECORDED SALES CANNOT BE REGA RDED AS THE PROFIT OF THE ASSESSEE AND NET PROFIT RATE HAS TO BE ADOPTED. THEIR LORDS HIPS HAS FURTHER OBSERVED THAT ONCE A NET PROFIT RATE IS ADOPTED FOR MAKING ADDITI ON, SUCH AN APPROACH CANNOT BE SAID TO BE PERVERSE. THAT IS PRECISELY WHAT HAS BE EN SHOWN IN THE CASE OF THE 4 ITA NO.200/JAB/2013 A.Y. 2004-05 ASSESSEE IN AS MUCH AS A NET PROFIT ON SALE HAS BEE N ADOPTED AT THE RATE OF 5% WHICH HAS BEEN BROUGHT TO TAX, YET AN ADDITIONAL ADDITION IN RESPECT OF ESTIMATED UNEXPLAINED INVESTMENT IN CAPITAL HAS BEEN MADE AT RS.94,040/- WHICH IS IN CHALLENGE BEFORE ME. THE ASSESSING OFFICER HAS ALR EADY BROUGHT TO TAX 5% OF THE SALES I.E. RS.1,48,838/-. IN MY CONSIDERED VIEW AN D IN THE ABSENCE OF ANY SPECIFIC FINDING ABOUT INADEQUACY OF CAPITAL TO MAKE NECESSA RY PURCHASES, I AM OF THE VIEW THAT THE IMPUGNED ADDITION DESERVES TO BE DELETED A ND THAT SUCH ADDITION IS WHOLLY UNSUSTAINABLE IN LAW. IT HAS NO LEGALLY SUSTAINABL E BASIS AND THE VAGUE AND SWEEPING GENERALIZATION THAT A.O. HAS RESORTED TO C ANNOT JUSTIFY THE IMPUGNED ADDITION. I, THEREFORE, DIRECT THE ASSESSING OFFIC ER TO DELETE THE SAME. THE ASSESSEE GETS RELIEF ACCORDINGLY. 5. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF SEPTEMBER, 2014. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER DATE: 30 TH SEPTEMBER, 2014 PBN/* 5 ITA NO.200/JAB/2013 A.Y. 2004-05 COPY OF THE ORDER FORWARDED TO :- 1) APPELLANT 2) RESPONDENT 3) CIT (APPEALS) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, JABALPUR BENCH, JABALPUR 6) GUARD FILE. BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, JABALPUR