JCIT(OSD) Central Circle-4, Hyderabad V. M/s Spectrum Pearls & Exports Pvt. Ltd., Secunderabad

ITA 2111/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61816 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Keywords: Search and seizure
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 2107 TO 2113/HYD/ 2011 ASSTT. YEARS: 2003-04 TO 2009-10 JCIT (OSD), C.C - 4, HYDERABAD. VS M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. (PAN:AAECS 3671 G) ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SRI V. SRINIVAS RESPONDENT BY : SRI SAI PRASAD DATE OF HEARING : 02-04-2012. DATE OF PRONOUNCEMENT : 04 -04-2012. ORDER PER SAKTIJIT DEY, J.M. THESE ARE SEVEN APPEALS BY THE REVENUE DIRECTED AGAINST THE COMMON ORDER DATED 24-10-2011 IN THE CA SE OF SAME ASSESSEE-RESPONDENT PASSED IN ITA NOS. 1118 TO 1124/DCIT CC-4/CIT (A)-VII/2010-11 PERTAINING TO TH E ASSESSMENT YEARS 2003-04 TO 2009-10. THE ASSESSEE RAISED COMMON AND IDENTICAL GROUNDS OF APPEALS FOR THESE ASSESSMENT YEARS. HENCE, THESE ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 2 2. ALL THESE APPEALS HAVE BEEN TIME BARRED BY 44 DAYS. THE REVENUE HAS NOT FILED ANY PETITION FOR CONDONING THIS DELAY FOR ALL THE YEARS UNDER CONSIDERATION. SINCE THE DELAY IS VERY SHORT AND WE ARE CONVINCED WITH THE EXPLANATION GIVEN DURING THE COURSE OF HEARING BY THE LEARNED DR, WE CONDONE TH E DELAY FOR ALL THE YEARS UNDER DISPUTE AND ADMIT THE SAME FOR DISPOSAL. 2. SINCE THE GROUNDS RAISED FOR THESE YEARS ARE QUI TE IDENTICAL, FOR THE SAKE OF BREVITY, WE EXTRACT HERE UNDER THE GROUNDS RAISED IN ITA NO.2107/HYD/2011 AND ALSO DEAL WITH THE FACTS AS MENTIONED FOR THIS ASSESSMEN T YEAR 2003-04. 1. 1.1. 1. THE CIT (A) HAS HELD THAT THE APPELLANT MAINTAINED BOOKS OF ACCOUNT AND THE INCOME WAS ESTIMATED WITHOUT ASSIGNING THE REASONS AND THE BASIS. THE ESTIMATION WITHOUT VALID REASON IS NOT JUSTIFIABLE. BUT THE ASSESSEE HAS NOT SUBMITTED BOOKS OF ACCOUNT AT THE TIME OF ASSESSMENT. THE TURNOVER OF THE ASSESSEE FOR THE A.Y 2003-04 IS RS.22,60,643/- AND ASSESSEE FILED ROI FOR THE A.Y 2003-04 AS NIL INCOME WHICH IS NOT ACCEPTABLE BECAUSE IN THE BUSINESS OF PEARLS, PROFIT MARGIN IS VERY HIGH. 2. 2.2. 2. THE THE THE THE CIT (A) HAS ERRED IN RELYING CIT (A) HAS ERRED IN RELYING CIT (A) HAS ERRED IN RELYING CIT (A) HAS ERRED IN RELYING SOLELY ON A GENERAL SOLELY ON A GENERAL SOLELY ON A GENERAL SOLELY ON A GENERAL LETTER DT. 9 LETTER DT. 9 LETTER DT. 9 LETTER DT. 9- -- -12 1212 12- -- -2010 FILED BY 2010 FILED BY 2010 FILED BY 2010 FILED BY THE THETHE THE ASSESSEE IN THE THICK OF ASSESSEE IN THE THICK OF ASSESSEE IN THE THICK OF ASSESSEE IN THE THICK OF THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT PROCEEDINGS PROCEEDINGS PROCEEDINGS PROCEEDINGS AND CONCLUDED THAT THE AO AND CONCLUDED THAT THE AO AND CONCLUDED THAT THE AO AND CONCLUDED THAT THE AO HAD DULY EXAMINED THE BOOKS OF ACCOUNTS WHICH THE HAD DULY EXAMINED THE BOOKS OF ACCOUNTS WHICH THE HAD DULY EXAMINED THE BOOKS OF ACCOUNTS WHICH THE HAD DULY EXAMINED THE BOOKS OF ACCOUNTS WHICH THE AO DISCLAIMED AND WITHOUT ALLOWING THE AO ONE MORE AO DISCLAIMED AND WITHOUT ALLOWING THE AO ONE MORE AO DISCLAIMED AND WITHOUT ALLOWING THE AO ONE MORE AO DISCLAIMED AND WITHOUT ALLOWING THE AO ONE MORE ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 3 OPPORTUNITY TO SCRUTINIZE THE BOOKS OF ACCOUNTS DUR ING OPPORTUNITY TO SCRUTINIZE THE BOOKS OF ACCOUNTS DUR ING OPPORTUNITY TO SCRUTINIZE THE BOOKS OF ACCOUNTS DUR ING OPPORTUNITY TO SCRUTINIZE THE BOOKS OF ACCOUNTS DUR ING THE APPELLATE PROCEEDINGS. THE APPELLATE PROCEEDINGS. THE APPELLATE PROCEEDINGS. THE APPELLATE PROCEEDINGS. 3. THE CIT (A) HAS ACCEPTED THE TRADING RESULTS OF THE ASSESSEE WHEREIN HE HAS REFLECTED LOSS/NOMINAL INCOME FROM TRADING IN PEARLS WITHOUT ANY VERIFICATION BEING DONE BY THE AO OR BY THE CIT (A) HIMSELF. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A COMPANY, INVOLVED IN THE BUSINESS OF TRADING IN PEARLS AND JEWELLERY, HAS FILED THE RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2003-04 ON 1-11-2004 ADMITTING AN INCOME OF RS. NIL. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE I T ACT, 1961 WAS CONDUCTED AT T HE BUSINESS PREMISES OF THE ASSESSEE ON 30-3-2009 ASA SEQUEL TO THE SEARCH OPERATIONS MOUNTED IN THE GROU P CASES OF SHRI SURENDRRA KUMAR & OTHERS. SUBSEQUENT TO THE SEARCH, NOTICES UNDER SECTION 153A OF THE I T ACT, 1961 WERE ISSUED ON 17-8-2009 FOR ASSESSMENT YEAR 2003-04 TO 2008-09. IN RESPONSE TO THE SAID NOTIC E THE ASSESSEE FILED THE RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION ON 30-9-2009 ADMITTING THE SAME INCOM E OF RS.NIL WHICH WAS ORIGINALLY ADMITTED. THE AO OBSERV ED IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNTS WE RE NOT PRODUCED FOR VERIFICATION BY THE ASSESSEE, THE AO WAS LEFT HAS LEFT WITH NO OTHER OPTION EXCEPT ESTIMATIN G INCOME OF THE ASSESSEE BASING ON THE TURNOVER. THE AO F OUND THAT THE GROSS PROFIT MARGIN IN THIS LINE OF BUSINE SS IS TOO HIGH AND AT TIMES IT IS MORE THAN 150% ALSO. ACCORDINGLY, THE AO PROCEEDED TO ESTIMATE THE INCOM E OF ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 4 THE ASSESSEE AT THE RATE OF 68% ON THE TURNOVER OF THE ASSESSEE. ON VERIFICATION, THE AO OBSERVED THAT DU RING THE YEAR UNDER DISPUTE THE TURNOVER OF THE ASSESSEE WAS RS.33,24,475/- AND THE INCOME OF THE ASSESSEE AS ESTIMATED ABOVE WORKED OUT TO RS.22,60,643/- AND THEREFORE THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.22,60,643/-. AGGRIEVED AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). 5. ON APPEAL, THE CIT (A) BY DISCUSSING TH E ISSUES INVOLVED SEPARATELY IN HIS ORDER DATED 24-10-2011 ALLOWED THE CLAIMS OF THE ASSESSEE. AGGRIEVED AGA INST THE ORDER OF THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT THE CIT (A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE BEC AUSE THE ASSESSEE HAS NOT SUBMITTED BOOKS OF ACCOUNTS FOR VERIFICATION OF THE AO AT THE TIME OF ASSESSMENT AN D THE TURNOVER OF THE ASSESSEE WAS SHOWN AT A LOWER FIGUR E AND RETURN OF INCOME WAS SHOWN AT NIL. THIS IS NOT ACCE PTABLE IN THE BUSINESS OF PEARLS BECAUSE PROFIT MARGIN IS VERY HIGH. IT IS FURTHER SUBMITTED THAT THE CIT (A) IS NOT JUSTIFIED IN RELYING SOLELY ON A GENERAL LETTER DAT ED 9-12- 2010 FILED BY THE ASSESSEE AND HE IS WRONG IN ACCEP TING THE TRADING RESULTS OF THE ASSESSEE WHEREIN HE HAS REFLECTED LOSS/NOMINAL INCOME FROM TRADING IN PEARL S WITHOUT ANY VERIFICATION BEING DONE BY THE AO OR BY HIM. ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 5 7. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSE E WHILE SUPPORTING THE ORDER OF THE CIT (A) SUBMITTED THAT THE AO IS NOT CORRECT IN ESTIMATING THE RATE OF PRO FIT WITHOUT ANY REASONABLE BASIS AND HIS ORDER IS TO BE QUASHED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND FROM THE CIT (A)S ORDER THAT THE ASSESSEE BEI NG A COMPANY HAVE MAINTAINED THE BOOKS OF ACCOUNT AND AUDITED THE SAME FOR THE PURPOSE OF COMPANIES ACT A ND INCOME-TAX ACT. IT IS ALSO A FACT THAT THE ASSESSE E HAS FILED THE RETURNS OF INCOME, COMPUTING THE PROFITS, ON THE BASIS OF THE BOOK RESULTS INDICATE THAT THE ASSESSE E COMPANY MAINTAINED THE BOOKS OF ACCOUNT IN ONE OR T HE OTHER FORMAT. THE LEARNED AR PRODUCED BEFORE US ON E OF THE ASSESSMENT ORDER PASSED U/S 143(3) FOR ASSESSME NT YEAR 2006-07 WHEREIN THE AO HAS CLEARLY MENTIONED T HAT THE ASSESSEE COMPANY HAD PRODUCED BOOKS FOR VERIFICATION. IN ONE OF THE SWORN STATEMENTS RECOR DED FROM THE DIRECTORS OF THE ASSESSEE COMPANY ON 30-3- 2009, IT WAS STATED THAT THE MAINTENANCE OF THE BOO KS OF ACCOUNT OF THE COMPANY ARE BEING OUTSOURCED. ACCOR DING TO THE CIT (A), THE FINDINGS OF THE AO REGARDING NO N- PRODUCTION OF BOOKS ACCOUNT ARE REFUTED BY THE ASSE SSEE AND RELIED ON THE LETTER DATED 9-12-2010 WHEREIN IT WAS SHOWN THAT THE BOOKS OF ACCOUNTS HAVE BEEN SUBMITTE D BEFORE THE AO IN RESPONSE TO THE LETTER DATED 7-10- 2010 ISSUED BY THE AO. THAT BEING THE CASE , THE CIT (A ) WAS RIGHT IN HOLDING THAT IT IS NOT CORRECT ON THE PART OF THE AO ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 6 TO ABRUPTLY COME TO A CONCLUSION THAT SINCE THE ASS ESSEE DID NOT PRODUCE BOOKS OF ACCOUNT, BOOK RESULTS CANN OT BE ACCEPTED. WHEN THE ASSESSEE MAINTAINS BOOKS OF ACCO UNTS IN REGULAR COURSE OF BUSINESS, THEY CANNOT BE REJEC TED ON CONJECTURE AND SURMISE. AS THE CIT (A) HAS OBSERVE D THE AO HAS AMPLE SCOPE AND POWER TO ENQUIRE AND FIND OU T REGARDING THE MAINTENANCE OF THE BOOKS OF ACCOUNTS OR OTHERWISE BY THE ASSESSEE. WE ALSO FIND THAT ESTIM ATION OF PROFIT RESORTED TO BY THE AO AT THE RATE OF 68% IS ALSO WITHOUT ANY REASONABLE BASIS. MORE SO, THIS IS THE ASSESSMENT UNDER SECTION 153C OF THE ACT CONSEQUENT TO SEARCH ACTION U/S 132 OF THE ACT.. THE CASE RECOR DS REVEAL THAT NO INCRIMINATING MATERIAL WAS FOUND DUR ING THE COURSE OF SEARCH OPERATIONS. THE DETERMINATION OF UNDISCLOSED INCOME CONSEQUENT TO SEARCH ACTION AND FRAMING ASSESSMENT UNDER SECTION 153C OF THE ACT IS DIFFERENT FROM REGULAR ASSESSMENT OR IT IS NOT SUBS TITUTE FOR REGULAR ASSESSMENT. BEING SO, THE AO SHALL FRA ME ASSESSMENT ON THE BASIS OF INCRIMINATING MATERIAL F OUND DURING THE COURSE OF SEARCH ACTION UNDER SEC. 153C OF THE ACT. THE AO WITHOUT BRINGING ANY INCRIMINATING MAT ERIAL ON RECORD FOR THE PURPOSE OF DETERMINATION OF UNDIS CLOSED INCOME ON ESTIMATE BASIS IS NOT POSSIBLE IN THE PRE SENT CIRCUMSTANCES TO FRAME THE ASSESSMENT UNDER SECTION 153C OF THE ACT. THEREFORE,, AFTER CONSIDERING TH E TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE AND AFTE R GOING THROUGH THE ORDER OF THE CIT (A) IN THE INSTANT CAS E, WE ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 7 FIND THE CIT (A) IS PERFECTLY JUSTIFIED IN ALLOWING THE CLAIMS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, WE REJECT THE GROUNDS RAISED BY THE REVENUE FOR ALL THE YEARS UND ER CONSIDERATION AS THE GROUNDS RAISED IN ALL THESE AP PEALS ARE QUITE IDENTICAL AND SIMILAR. 9. IN THE RESULT, WE UPHOLD THE FINDINGS OF THE CIT (A) FOR ALL THE YEARS UNDER CONSIDERATION AND DISMISS T HE APPEALS FILED BY THE REVENUE. ORDER PRONOUNCED IN THE COURT ON 04 -04-2012. SD/- - SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 4 TH APRIL, 2012. COPY FORWARDED TO: 1. M/S. SPECTRUM PEARLS & EXPORTS PVT. LTD., 714, 7 TH FLOOR, CHENOY TRADE CENTRE, PARK LANE, SECUNDERABAD. 2. JCIT, CC-4, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. CIT (A)-VII, HYDERABAD. 4. THE CIT CONCERNED, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR* ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 8 ITA NOS. 2107 TO 2113 OF 2011 M/S SPECTRUM PEARLS & EXPORTS PVT. LTD., SECUNDERABAD. =============================== 9