Asstt.Commissioner of Income-tax 1(1), RAIPUR (CG) V. M/s Atul Enterprises, RAIPUR (CG)

ITA 22/BIL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2430 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P PHATAK
• Assessee Lawyers: SUNIL AGARWAL
• Keywords: Gross profit estimation; Business income
• Section: 133A

Judgement Text

, RA IPUR IN THE INCOME TA X A PPELLA TE TRIBUNA L, RA IPUR BEFORE S/SHRI MUKUL SHRAW AT (JM) SHAMIM YAHYA (AM) , , ./ I.T.A. NO.22/BLP/ 2 012 ( / ASSESSMENT YEAR : 2008 - 09) ASST. COMMISSIONER OF INCOME TAX 1(1), CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR / VS. ATUL ENTERPRISERS, GUDHIYARI, RAIPUR ./ ./PAN/GIR NO. : AAJFA 0293 L ( /A PPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SH O.P.PHATAK, DCIT / RESPONDENT BY : SHRI SUNIL AGARWAL / DATE OF HEARING : 09 - 02 - 2016 / DATE OF PRONOUNCEMENT : 19 - 02 - 2016 / O R D E R PER MUKUL SHRAWAT, JM THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM AN ORDER OF THE LD CIT(A), RAIPUR DATED.24.11.2011 FOR THE ASSESSMENT YEAR 2008 - 09. THE GROUNDS RAISED BY THE REVENUE ARE DECIDED AS FOLLOWS: 2. GROUND NO.1 READS AS UNDER: 2 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 W HETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.50,45,000/ - MADE BY THE AO ON ACCOUNT OF LOW GROSS PROFIT. 3. FA CTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 27.12.2010 WERE THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF TRADING IN OIL, VEG GHEE, SUGAR, BISCUITS, WASHING POWER, ETC . THE RETURN WAS FILED DECLARING AN INCOME OF RS.13,82,270/ - . A SURVEY UNDER SECTION 133A WAS CONDUCTED ON 8.8.2007/ 9.8.2007, BOTH IN THE BUSINESS PREMISES OF THE HEAD OFFICE AND BRANCH OFFICE OF THE ASSESSEE FIRM. T HE OBSERVATION OF THE AO WAS THAT THE SURVEY PARTY HAD FOUND EXCESSIVE STOCK OF RS.27,85,455/ - AND EXCESS CASH OF RS.5,53,030/ - TOTALING TO RS.33,38,485/ - . STATEMENT OF ONE OF THE PARTNERS WAS RECORDED ON 9.8.2007, WHEREIN, ABOVE AMOUNTS WERE STATED TO BE VOLUNTARILY SURRENDERED. T HE AO HAS FURTHER NOTED THAT THE TAX O N THE SURRENDERED AMOUNTS WAS PAID BY THE ASSESSEE. H OWEVER, ACCORDING TO HIM, IT WAS STRANGE THAT THE SURRENDERED AMOUNT WAS NULLIFIED BY CLAIMING LOSS WITHIN THE ACCOUNTING PERIOD AFTER THE SURVEY. H OW EV ER THEREAFTER, THE AO HAD NOT PROCEEDED ON THE ISSUE OF DISCREPANCY OF EXCESS STOCK OR EXCESS CASH FOUND BUT HE HAD PROCEEDED TO EXAMINE THE CORRECTNESS OF THE GROSS PROFIT DISCLOSED BY THE ASSESSEE IN THE POST SURVEY ACCOUNTING PERIOD.. T HE AO HAS MADE CERTAIN OBSERVATION AS UNDER: ANALYSIS OF THE TRADING ACCOUNT PREPARED BY THE ASSESSEE FOR THE PERIOD UPTO THE DATE OF SURVEY AND THE SAME PREPARED FOR THE POST SURVEY PERIOD REVEALED THAT ON SALES OF RS.5.40 CRORES ,THE G.P. SHOWN BEFORE SURVEY WAS RS.2.78% IN HEAD OFFICE AND 5.87% ON SALES OF RS.2.25 CRORES IN BRANCH OFFICE WHILE AFTER SURVEY ON TURNOVER OF RS.6.86 CRORES, THE ASSESSEE CLAIMED LOSS OF RS.8,67,181/ - IN HEAD OFFICE AND IN THE BRANCH 3 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 OFFICE GP SHOWN WORKED OUT AT .1.49% ON TURNOVER OF RS.3.58 CRORES AFTER SUR VE Y. N O EVIDENCE OR JUSTIFICATION WHATSOEVER WAS ASSIGNED TO PROVE THE LOSS CLAIMED IN HEAD OFFICE FOR THE POST SURVEY PERIOD. S IMILARLY, NO EVIDENCE WAS ADDUCED TO PROVE THE UNREASONABLE AND SUBSTANTIAL DECLINE OF GP IN THE BRANCH OFFICE FOR THE PERIOD AFTER SURVEY I.E. FROM 5.87% TO 1.49%. A LL THIS ADJUSTMENT WAS PLANNED DEVISED BY THE ASSESSEE ONLY TO NULLIFY AND ADJUST THE UNDISCLOSED INCOME SURRENDERED DURING SURVEY AND TO ESCAPE FR OM TAXATION OF REAL INCOME. I T IS UNBELIEVABLE IN THE ABSENCE OF CO RROBORATIVE EVIDENCE BROUGHT ON RECORD, THAT THE GP OF RS.14.99 LACS ON TURNOVER OF RS.5.40 CRORES PRIOR TO SURVEY, SUDDENLY STEPPED DOWN TO LOSS OF S.8,67,181/ - ON TURNOVER OF RS.6.86 CRORES F OR THE POST SURVEY PERIOD IN HEAD OFFICE. S IMILARLY, THE GP S HOWN AT RS.13.25 LACS ON TURNOVER OF RS.2.25 CRORES IN BRANCH OFFICE FOR THE PRE - SURVEY PERIOD WAS UNREASONABLY SUPPRESSED TO RS.5,34,640/ - ON SALES OF RS.3.58 CRORES IN BRANCH OFFICE FOR THE POST SURVEY PERIOD. I N THE OIL ACCOUNT, WASHING POWDER AND WASH ING SOAP ACCOUNT, THE G.P. IN TERMS OF PERCENTAGE, BEFORE SURVEY, WAS 3.3%, 8.71% AND 6.78% RESPECTIVELY AS AGAINST HEAVY LOSS CLAIMED IN OIL A/C AND GP OF 1.18%, 2.02% CLAIMED RESPECTIVELY, IN THE OTHER TWO ACCOUNTS NAMELY WASHING POWDER AND WASHING SOAP ACCOUNTS FOR THE POST SURVEY PERIOD. 4. IN THE OPINION OF THE AO, IN THE POST SURVEY PERIOD, THE PROFIT REMAINED UNSUBSTANTIATED AND PROFIT WAS MANIPULATED TO NULLIFY THE AMOUNT SURRENDERED. A CALCULATION HAS BEEN MADE BY THE AO AS UNDER: ITEMS BEFORE SU RVEY AFTER SURVEY ADDITION TO BE MADE (RS.) (4 - 7)*5 TURNOVER (IN RS.) GP (IN RS.) GP(%) TURNOVER (IN RS.) GP (IN RS GP(%) 1. 2. 3 4 5 6 7 8 OIL (HO) 518.41 LACS 17,13,315 3.3% 651.46 LACS 11,76,605 - 1.8% 33,22 LACS WA SHING POWDER 93.68 LACS 8,16,201 8.71% 172.79 LACS 2,04,687 1.18% 13,01 LACS WA SHING SOAP *BR) 77.03 LACS 5,22,583 6.78% 88.71 LACS 1,79,147 2.02% 4.22 LACS 4 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 TOTAL ADDITION TO BE MADE FOR SUPPRESSION IN GP IN POST - SURVEY PERIOD:50.45LACS 5. THE AO HAS THEREFORE, NOT ONLY TAXED THE AMOUNT WHICH WAS SURRENDERED OF RS.25,03,325/ - BUT ALSO TAXED AN AMOUNT OF RS.,50,45,000/ - AS SUPPRESSION OF GP IN POST SURVEY PERIOD. B EING AGGRIEVED BY THE ORDER OF THE A.O. , THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A). 6. BEFORE THE LD CIT(A) , THE ASSESSEE HAS DRAWN ATTENTION ON THE BILLS AND VOUCHERS MAINTAINED SO ALSO PLEADED THAT THE BOOKS OF ACCOUNT ALONGWITH T HE EVIDENCES WERE TEST CHECKED BY THE A.O.. DURING THE COURSE OF HEARING, A REMAND REPORT WAS ALSO CALLED FOR BY THE LD CIT(A). ON THAT BASIS, LD CIT(A) HAS HELD THAT NO DISCREPANCY IN THE BOOKS OF ACCOUNT OR THE BILLS PRODUCED WERE NOTED BY THE AO. THE AO HAS NOT OBJECTED THE MANNER IN WHICH THE ACCOUNTS ARE MAINTAINED. THERE WAS NO REJECTION OF BOOKS OF ACCOUNT U/S.145 OF THE I. T.A CT. ON THESE FACTS, IT WAS PLEADED THAT THE ASSESSEE WAS IN TRADING BUSINESS AND IN RESPECT OF TRADING RESULTS OF OIL, WASHING POWDER AND WASHING SOAP, IT WAS NOT CORRECT TO HOLD THAT GROSS PROFIT HAD GONE DOWN IN THE POST SURVEY PERIOD. T HE ASSESSEE HAS FURNISHED THE PRE - SURVEY AND POST SURVEY PERCENTAGE OF PROFIT OF THE THREE COMMODITIES AS UNDER: PARTICULARS OIL_______ PRE - POST - SURVEY SURVEY WA SHING POWDER PRE POST SURVEY SURVEY SOAP___ PRE POST SURVEY SURVEY G.P. RATE - 2.54 2.85 3.56 3.98` 0.97 2.98 5 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 7. LD CIT( A) HAS REFERRED FEW C ASE LAWS AND FINALLY HELD THAT IN THE ABSENCE OF ANY FINDINGS SUCH AS SUPPRESSION OF SALE OR INFLATION OF PURCHASE PRICE, THE AO HAD WITHOUT ANY COGENT BASIS MADE THE IMPUGNED ADDITION. T HE ACTION OF THE AO WAS THEREFORE REVERSED BY D ELETING THE ADDITION. A N APPEAL WAS FILED BY THE REVENUE CHALLENGING THE ORDER OF CIT(A) . 8. FROM THE SIDE OF THE REVENUE, LD D.R. SHRI O.P.PATHAK APPEARED AND SUPPORTED THE ACTION OF THE AO. H E HAS PLEADED THAT THE LD CIT(A) HAS A PPRECIATED CERTAIN AD DITIONAL EVIDENCES WHICH WERE NOT BEFORE THE AO. H E HAS ALSO PLEADED THAT THE ACCOUNTS WERE MANIPULATED TO ADJUST THE INCOME SURRENDERED BY THE ASSESSEE. T HERE WAS NO DISPUTE THAT IN RESPECT OF TRADING RESULT PERTAINING TO POST SURVEY PERIOD, THERE WAS A DRASTIC FALL IN THE PROFIT RATIO, BUT IT WAS NOT A NATURAL METHOD OF CONDUCTING THE BUSINESS, HENCE, THE AO HAS CORRECTLY DOUBTED THE BOOKS RESULTS WHICH SHOULD HAVE BEEN APPRECIATED BY THE LD CIT(A). H E HAS PLEADED TO REVERSE THE FINDINGS OF THE LD CIT( A). 9. FROM THE SIDE OF THE RESPONDENT - ASSESSEE, SHRI SUNIL AGARWAL, LD A.R. APPEARED AND AT THE OUTSET, PLEADED THAT THE ASSESSEE HAS CLOSED THE FIRM IN THE SUBSEQUENT ASSESSMENT YEAR AND STOPPED THE BUSINESS OF TRADING IN OIL BECAUSE THE ASSESSEE WAS NOT GETTING PROFITABLE RESULTS OF THE SAID BUSINESS, HENCE, THE STOCK WAS SOLD AT THE LOW PRICE AND LATER ON THE BUSINESS WAS CLOSED. FURTHER, HE HAS MENTIONED THAT THE AO HAD NOT CONSIDERED THE GP RATE OF ALL THE COMMODITIES OF THE ENTIRE PERIOD. O UR ATTENT ION WAS DRAWN ON THREE ACCOUNTS, NAMELY, OIL ACCOUNT, WASHING POWER ACCOUNT AND WASHING SOAP ACCOUNT. H E HAS FURTHER PLEADED THAT THE ASSESSMENT FOR A. Y. 2007 - 08 I.E. PRECEDING ASSESSMENT Y EAR, THE ORDER WAS PASSED U/S.143(3) OF THE INCOME TAX 6 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 AC T AND IN THAT ORDER, THE GP RATE AS DISCLOSED BY T HE ASSESSEE WAS NOT DISTURBED. THE GP .RATE FOR THE PERIOD ENDING ON 31.3.2007 WAS 1.05% WHICH WAS ACCEPTED IN THE PAST. I N SUPPORT OF THE CONTENTION THAT WITHOUT REJECTION OF BOOKS OF ACCOUNT, THE PROFIT RATE SHO ULD HAVE NOT BEEN DISTURBED, RELIANCE WAS PLACED ON FEW DECISIONS, KEEPING BREVITY IN MIND, NEED NOT TO BE REFERRED. 10. HAVING HEARD THE SUBMISSIONS OF THE PARTIES, WE ARE OF THE CONSIDERED OPINION THAT EVEN AFTER THE SURVEY OPERATION CONDUCTED U/S.133A O N 8.8.2007, NO SPECIFIC DEFECT WAS REFERRED BY THE AO PERTAINING TO BOOKS OF ACCOUNT OF THE ASSESSEE. T HERE WAS NO SUCH ALLEGATION THAT THERE WAS SUPPRESSION OF SALES OR INFLATED PURCHASES WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ALTHOUGH THERE WAS AN ALLEGATION OF SUPPRESSION OF STOCK AND EXCESS CASH WERE FOUND BUT THAT WAS NOT MADE THE BASIS OF THE IMPUGNED ADDITION BY THE AO. T HE AO HAD PROCEEDED TO COMPARE THE TRADING RESULTS OF PRE SURVEY AND POST SURVEY PERIOD. O N THIS POINT, THE CONTENTION BEF ORE US IS THAT THE AO SHOULD HAVE EXAMINED THE PROFIT OF THE ENTIRE FINANCIAL YEAR. T HAT PROFIT SHOULD HAVE BEEN COMPARED WITH THE PROFIT DISCLOSED AND ACCEPTED IN THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2007 - 08. T HIS FACT HAS ALSO NOT BEEN CHALLENGED BY THE REVENUE SIDE THAT ADDITION IN QUESTION WAS MADE WITHOUT REJECTION OF BOOKS OF ACCOUNT. ON THIS ISSUE, THERE ARE SEVERAL DECISIONS, WHEREIN, IT WAS CONSISTENTLY OPINED THAT THERE SHOULD BE SOME DEFECTS TO BE POINTED OUT BY THE REVENUE DEPARTMENT SO AS TO DISTURB THE PERCENTAGE OF PROFIT DISCLOSED. IN THE ABSENCE OF SUCH DISCREPANCY, THE ACTION OF THE AO REMAINED UN - SUBSTANTIATED. O NE MORE REASON ASSIGNED BY THE LD CIT(A) BEFORE GRANTING RELIEF WAS THAT THERE WAS NO UNIFORM DECREASE IN TRADING RESU LTS OF ALL THE COMMODITIES. RATHER IN SOME OF THE COMMODITIES, THE POST SURVEY PROFIT RATE WAS HIGHER 7 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 THAN THE RATE OF PROFIT ALREADY ASSESSED IN THE PAST YEARS. THEREFORE, WE HEREBY CONFIRM THE FINDINGS OF THE LD CIT(A) AND REJECT THIS GROUND OF APPEAL TAKEN BY THE REVENUE. 11. GROUND NO.2 IS AS UNDER: W HETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.11,60,165/ - MADE BY THE AO IN RESPECT OF REMUNERATION AND INTEREST PAID TO PARTNERS. 12. AS PER THE AO, THE INCOME SURRENDERED WAS ASSESSABLE U/S.69C OF I.,T.ACT, 1961 I.E. INCOME FROM OTHER SOURCES. T HEREFORE, DEDUCTION CLAIMED U/S.40(B) WAS NOT AN ADMISSIBLE EXPENDITURE. A S A RESULT, THE CLAIM OF PAYMENT OF INTEREST AND REMUNERATION TO P ARTNERS AMOUNTING TO RS.11,60,165/ - WAS TAXED IN THE HANDS OF THE ASSESSEE. 13. WH EN THE MATTER WAS CARRIED BEFORE THE LD CIT(A), HE HAS EXAMINED THE FACTUAL AS WELL AS LEGAL ASPECT AND THEREAFTER FOLLOWING FEW D ECISIONS, HAS HELD THAT THERE WAS NO OBSERVA TION THAT THE ASSESSEE WAS ENGAGED IN ANY OTHER BUSINESS OR EARNED INCOME FROM OTHER SOURCES EXCEPT BUSINESS INCOME AS DISCLOSED BY THE ASSESSEE. T HEREFORE, THE SURRENDERED AMOUNT WAS IN THE NATURE OF BUSINESS INCOME, HENCE THE EXPENDITURE CLAIMED WAS ADM ISSIBLE U/S.40(B) OF THE ACT. 14. ON THIS ISSUE, WE HAVE HEARD BOTH THE SIDES AND CAME TO KNOW THAT IN A NUMBER OF DECISIONS, A CONSISTENT VIEW HAS BEEN TAKEN THAT IF THE AMOUNT IS SURRENDERED PERTAINING TO STOCK OR BUSINESS RECEIPTS, DURING THE COURSE OF SURVEY, THEN SUCH SURRENDER WAS NOTHING BUT INCOME GENERATED FROM THE BUSINESS ACTIVITIES OF THE ASSESSEE. FEW CASE LAWS CITED ARE AS UNDER: I) CIT VS. S.K.SRIGIRI & BROS(2008) 298 ITR 13( KA R) 8 I.T.A. NO.22/BLP/012 ASSESSMENT YEAR : 2008 - 09 II) ITO VS. JAMNADAS MULJIBHAI ( 2006 ) 99 TTJ 197 ( RAJKOT) III) DEEPA AGRO AGENCIES VS ITO, 98 TTJ ( BANG ) 76 15. AS A RESULT, RESPECTFULLY FOLLOWING THE CASE LAWS AND ALSO CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE DISCUSSED ABOVE, WE FIND NO REASON TO INTERFERE WITH THE FINDING OF L D CIT(A) AND THE SAME IS HEREBY CONFIRMED. T HIS GROUND IS ACCORDINGLY REJECTED. 16. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /02/2016 . SD/ - SD/ - ( , ) ( , ) SHAMIM YAHYA, ACCOUNTANT MEMBER MUKUL SHRAW AT ,JUDICIAL MEMBER RAIPUR, DATED 19 / 02/2016 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT ASST. COMMISSIONER OF INCOME TAX 1(1), CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR 2. / THE RESPONDENT: ATUL ENTERPRISERS, GUDHIYARI, RAIPUR 3. ( ) / THE CIT(A) - RAIPUR 4. / CIT ,RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR