Shri Bakul Chaturbhai Patel(Limbasia), Surat V. The Income tax Officer,Ward-9(1), Surat

ITA 2141/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9085 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 08-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT MOHRA SRDR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2141/AHD/2008 ASSESSMENT YEAR:2004-05 DATE OF HEARING:8.1210 DRAFTED:123.12.10 BAKUL CHATURBHAI PATEL (LIMBASIA), A-19, NAGINAWADI, SUMUL DAIRY ROAD, SURAT PAN NO.AAOPP1945M V/S . INCOME TAX OFFICER, WARD-9(1), SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI HARDIK VORA, AR RESPONDENT BY:- SHRI ROHIT MOHRA, SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT IN APPEAL NO.CAS-V/49 4/2006-07 DATED 27-03-2008. THE ASSESSMENT WAS FRAMED BY ITO WARD-9(1), SURAT U /S143(3) R.W.S. 145(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE ORDER DATED 29-12- 2006 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REJEC TING THE BOOKS OF ACCOUNT U/S.145(3) OF THE ACT. FOR THIS, ASSESSEE HAS RAISE D THE FOLLOWING GROUND NO.1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN R EJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE I.T. ACT AND HAS ERRED I N FINALIZING ASSESSMENT IN THE MANNER PROVIDED U/S.144 OF THE I.T. ACT. ITA NO.2141/AHD.2008 A.Y 2004-05 BAKUL C PATEL (LIMBASIA) V. ITO WD-9(1) SRT PAGE 2 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE, SHRI HARDIK VORA STATED THAT HE HAS INSTRUCTIONS FROM THE ASSESSEE NOT TO PRESS THI S ISSUE AND ACCORDINGLY, HE HAS NOT PRESSED THIS ISSUE. HENCE, WE DISMISS THE SAME AS NOT PRESSED. 4. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER ON ACCOU NT OF MAKING ADDITION OF RS.12,450/- U/S.68 OF THE ACT. FOR THIS, ASSESSEE H AS RAISED THE FOLLOWING GROUND NO.2 :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS.12,450/- AS ALLEGED UNEXPLAINED AGRICULTURE RECE IPT U/S.68 OF THE ACT. 5. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE IS MAINTAINING HIS BOOKS OF ACCOUNT ON MERCANTILE BASIS AND PRIOR TO 01-04-2003 THERE IS NO STOCK OF AGRICULTURAL PRODUCE IN THE BOOKS OF ACCOUNT. ACCOR DINGLY, HE TREATED AGRICULTURAL RECEIPT OF RS.12,450/- CLAIMED TO HAVE SOLD ON 01-0 4-2003 AS UNEXPLAINED AND ADDED U/S.68 OF THE ACT. AGGRIEVED, ASSESSEE PREFER RED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICE R BY GIVING FOLLOWING FINDINGS:- DURING THE COURSE OF APPELLANT PROCEEDINGS, THE LD . AR REPEATED THE ARGUMENTS MADE IN THE COURSE OF ASSESSMENT PROCEEDI NGS. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE PARTIES, I FIND THAT ASSE SSEE FAILED TO BRING ANY COGENT EVIDENCE WHICH INDICATES THAT SALE OF SUNDRY ITEMS REMAINING IN HAND WERE MADE ON THE FIRST DAY OF FINANCIAL YEAR. THE A SSESSEE HAS ALSO NOT SHOWN ANY CLOSING STOCK OF SUNDRY ITEMS IN PRECEDIN G YEAR & AS SUCH THE ARGUMENT OF ASSESSEE CANNOT BE ACCEPTED. THE ADDITI ON IS CONFIRMED & ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE BEFORE US C LAIMED THAT AGRICULTURAL IS NOT THE BUSINESS OF THE ASSESSEE AND THE BOOKS OF ACCOU NT ARE MAINTAINED BY THE ASSESSEE FOR HIS BUSINESS OF TRADING IN YARN. THE A SSESSEE CLAIMED THAT AGRICULTURAL PRODUCE CANNOT BE PART OF CLOSING STOCK. WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT AGRICULTURAL PRODUCE EARNED BY ASSESSEE IS NOT RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE AN D IT BEING AN INDEPENDENT SOURCE, THERE IS NO RESTRICTION THAT THE ASSESSEE CANNOT SE LL ON 1 ST DAY OF APRIL OF ANY YEAR. ACCORDINGLY, WE DELETE THE ADDITION AND THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. ITA NO.2141/AHD.2008 A.Y 2004-05 BAKUL C PATEL (LIMBASIA) V. ITO WD-9(1) SRT PAGE 3 7. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISAL LOWING TRAVELING EXPENSES OF RS.72,703/-. 8. WE HAVE HARED THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT THE CIT(A) HAS CONFIRMED THE ADDITION IN THE ABSENCE OF ANY EVIDENCE ON RECORD WHICH SUGGESTS THAT THE TOUR WAS UNDERTAK EN FOR BUSINESS PURPOSE. THE CIT(A) HELD AS UNDER:- I HAVE CONSIDERED THE REASONS ADVANCED BY ASSESSIN G OFFICER AS ALSO THE SUBMISSIONS OF ASSESSEE. AFTER CAREFULLY ANALYZING THE SAME, I FIND THAT ASSESSING OFFICER HAS RIGHTLY MADE THE DISALLOWANCE AS THERE IS NO EVIDENCE ON RECORD WHICH INDICATES THAT TOUR WAS UNDERTAKEN FOR BUSINESS PURPOSE ONLY. THE ASSESSEE SHOULD HAVE AT LEAST FILE BROCHURES OR LITERATURE RELATING TO THE EXHIBITION. IN ABSENCE OF THE SAME, IT IS VERY DIFF ICULT TO ACCEPT THE CONTENTION OF ASSESSEE THAT THE TOUR WAS RELATING TO BUSINESS PURPOSE ONLY. THE DISALLOWANCE IS ACCORDINGLY CONFIRMED. IN VIEW OF THE ABOVE FACTS, EVEN NOW THE ASSESSEE C OULD NOT ADDUCE ANYTHING BEFORE US IN SUPPORT OF THE CLAIM THAT THE FOREIGN TRAVEL EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS, WE CONFIRM THE ORDER OF CIT(A) CONFIRMING THE ADDITION. THIS ISSUE OF ASSESSEES APPEAL IS DISMISSED. 9. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) PARTLY CONFIRMED THE ADDITION OF RS.2.20 LAKH FOR A LLEGED SUPPRESSED PRODUCTION OF CLOTH. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.4 :- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE ADDITION OF RS.2,20,000/- OUT OF TOT AL ADDITION OF RS.6,58,992/- MADE BY ASSESSING OFFICER FOR ALLEGED SUPPRESSED PR ODUCTION OF CLOTH. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT CIT(A) HAS PARTLY SUSTAINED THE ADDITION AT RS.2.20 LAKHS BY GIVING FOLLOWING FINDINGS:- I HAVE CAREFULLY CONSIDERED THE REASONING GIVE BY ASSESSING OFFICER & ALSO THE SUBMISSIONS OF ASSESSEE. AS REGARDS DIFFERENCE IN P RODUCTION OF 28223 METERS COMPUTED ON THE BASIS OF VARIATION IN ELECTR ICITY CONSUMPTION, I AGREE WITH THE SUBMISSIONS OF LD. AR THAT ADDITION CANNOT BE PLACED ON THE DECISION OF KERALA HIGH COURT CITED SUPRA. APART FROM THIS, I ALSO FIND THAT THERE VARIATION COULD ALSO OCCUR IF COMPARISON IS MADE ON MOUTH WISE BASIS AS CLOSING STOCK OF EACH MONTH IS NOT TAKEN INTO CONSI DERATION. BESIDES THIS, THE ITA NO.2141/AHD.2008 A.Y 2004-05 BAKUL C PATEL (LIMBASIA) V. ITO WD-9(1) SRT PAGE 4 STAGE OF COMPLETION OF GOODS ALSO AFFECTS THE CONSU MPTION. THE OTHER REASON RELATES TO THE NATURE OF MANUFACTURING ACTIVITY AS WHEN TWISTING WORK IS CARRIED OUT THE CONSUMPTION OF ELECTRICITY WILL NOT PROVIDE A VALID BASIS FOR MAKING COMPARISON AS PER UNIT CONSUMPTION OF ELECTRICITY W ILL BE ON HIGHER SIDE IF PRODUCTION QUANTITY IS LOW & VICE VERSA. AS REGARDS , WASTAGE/SHORTAGE ASPECTS CONCERNED THE ASSESSING OFFICER HAS NOT SUPPLIED DE TAILS RELATING TO COMPARABLE CASES & AS SUCH THE SAME CANNOT BE RELIE D UPON. HOWEVER, IT IS ALSO A FACT THAT ASSESSEE HAS SNOT MAINTAINED QUALI TY WISE RECORDS & ASSESSEE IS ALSO NOT IN A POSITION TO SUBSTANTIATE ITS CLAIM OF WASTAGE WHICH SEEMS TO BE ON HIGHER SIDE. AS SUCH BOOK RESULTS CA NNOT BE RELIED UPON. AFTER CONSIDERING THE TOTALITY OF FACTS & CIRCUMSTANCES O F THE CASE & IN ORDER TO MEET THE ENDS OF JUSTICE, I FIND IT REASONABLE TO SUSTAI N ADDITION ON ACCOUNT OF WASTAGE AT THE RATE OF 1% AS AGAINST 3% ADOPTED BY ASSESSING OFFICER. ACCORDINGLY, ADDITION TO THE EXTENT OF RS.2,20,000/ - IS SUSTAINED & BALANCE ADDITION OF RS.4,38,992/- IS DELETED. WE ARE IN AGREEMENT WITH THE FINDINGS OF CIT(A) THA T THE CONSUMPTION OF ELECTRICITY IS NOT A VALID BASIS FOR MAKING COMPARISON FOR PER/UNI T CONSUMPTION OF ELECTRICITY ON QUANTITY PRODUCED. WE ALSO AGREED WITH THE FINDINGS OF CIT(A) THAT THE ASSESSEE HAS NOT MAINTAINED QUALITY-WISE RECORDS AND ACCORDINGLY HE IS NOT IN A POSITION TO SUBSTANTIATE HIS CLAIM FOR WASTAGE, WHICH SEEMS TO BE ON HIGHER SIDE. ON THIS REASONING, THE CIT(A) HAS CONFIRMED THE ADDITION OF RS.2.20 LAKH BUT TAKING A REASONABLE VIEW, WE RESTRICT THE ADDITION AT RS.1.5 0 LAKHS. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS PARTLY ALLOWED. 11. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER ON ACCOU NT OF ALLEGED AGRICULTURE EXPENSES. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWI NG GROUND NO.5 :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN MAKING ADDITION OF RS.1,40,232/- FOR ALLEGED AGRICU LTURE EXPENSES INCURRED OUT OF UNDISCLOSED SOURCES. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) AFTER DISCUSSING THE FACTS OF THE CASE HAS ESTIMATED THE AGRICULTURAL EXPENSES AT 40% OF THE GROSS INCOME AND MADE DISALLOWANCE BY GIVING FOLLOWING FINDINGS:- THE NEXT GROUND OF APPEAL RELATES TO ADDITION OF R S.1,40,2332/- AS AGRICULTURE EXPENSES INCURRED OUT OF UNDISCLOSED SOURCES. THE A SSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT SHOWN ANY EXPENDITUR E FOR EARNING AGRICULTURAL INCOME 3,63,050/- & ACCORDINGLY HE EST IMATED THE SAME AT 40% OF ITA NO.2141/AHD.2008 A.Y 2004-05 BAKUL C PATEL (LIMBASIA) V. ITO WD-9(1) SRT PAGE 5 INCOME I.E. RS.1,40,232/-. DURING THE COURSE OF APP ELLATE PROCEEDINGS, IT WAS ARGUED THAT ASSESSEE HAS NOT KEPT DETAILED ACCOUNTS RELATING TO AGRICULTURAL INCOME AS BOOKS OF ACCOUNTS IN RESPECT OF AGRICULTU RAL ACTIVITY ARE NOT REQUIRED TO BE MAINTAINED. THE LD. AR REQUEST TO DELETE THE ADDITION AS THE SAME IS MADE ON THE BASIS OF ESTIMATION. I HAVE CONSIDERED ARGUMENTS OF BOTH THE PARTIES & F IND THAT ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. THE ASSESSEE COULD N OT FILE ANY EVIDENCE AS TO HOW MUCH EXPENDITURE HAS BEEN INCURRED FOR EARNING AGRICULTURAL INCOME. THE ASSESSING OFFICER IS THEREFORE NOT LEFT WITH ANY AL TERNATIVE & AS SUCH THE ADDITION IS CONFIRMED. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN VIEW OF THE ABOVE REASONS, AS THE CIT(A) HAS RIGHTLY ESTIMATED THE AGRICULTURAL EXPEN SES AT 40% OF GROSS AGRICULTURAL RECEIPTS. THIS ISSUE OF THE ASSESSEES APPEAL IS DI SMISSED. 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24/12/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 24/12/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-V, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD