ITO, New Delhi V. Sh. Ajay Kumar Aggarwal, New Delhi

ITA 2210/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66006 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: B C GUPTA
• Keywords: Cost of acquisition
• Section: 133A

Judgement Text

ITA NO. 2210/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2210/DEL/2011 A.Y. : 2007-08 I.T.O., WARD - 32(2), ROOM NO. 332-B, CR BUILDING, NEW DELHI VS. SH. AJAY KUMAR AGGARWAL, C-7, GURUDWARA ROAD, HOUSING SOCIETY, N.D.S.E.-I, NEW DELHI (PAN/GIR NO. : AAGPA8915Q) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. B.C. GUPTA, CA & MANJU GOEL CA DEPARTMENT BY : SH. BHIM SINGH, D .R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXVI, NEW D ELHI DATED 24.2.2011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED READ AS UNDER:- I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF ` 8,02,700/- ON ACCOUNT OF EXCESS CASH FOUND AND ACCEPTED BY THE ASSESSEE IN HIS STATEMENT DURING THE COURSE OF SURVEY U/S. 133A . ITA NO. 2210/DEL/2011 2 II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF ` 18,20,000/- ON ACCOUNT OF RENOVATION OF SHOP FROM UNACCOUNTED SOURCES BEING ACCEPTED BY THE ASSESSEE DURING THE COURSE OF SURVE Y U/S. 133A. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF ` 8,17,962/- ON ACCOUNT OF EXCESS STOCK FOUND AT THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SURVEY U/S. 133A. IV) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE CO URSE OF HEARING OF THE APPEAL. 3. THE ASSESSEE IN THIS CASE IS AN INDIVIDUAL AND PROPRIETOR OF M/S CERAMIQUE POINT. A SURVEY U/S. 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURV EY A SURRENDER OF ` 4000526/- WAS MADE BY THE ASSESSEE VIDE HIS STATEMEN T RECORDED ON 8.3.2007. 3.1 AS REGARDS ISSUE OF EXCESS CASH FOUND OF ` 8, 02,700/-, ASSESSING OFFICER OBSERVED THAT DURING THE COURSE OF SURVEY CASH OF ` 842161/- WAS STATED TO HAVE BEEN FOUND WHEREAS THE CASH BOO K RECORDED THE AVAILABILITY ONLY ` 39461/-. ASSESSEE SURRENDERED THE EXCESS CASH. HOWEVER, IN THE RETURN OF INCOME, ASSESSEE HAS NOT D ISCLOSED THIS AMOUNT OF SURRENDER ON THE GROUND THAT THE STATEMENT WAS OBTAINED UNDER COMPULSION. ITA NO. 2210/DEL/2011 3 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGH T ON RECORD THE DETAILED INVENTORY OF THE CASH FOUND. HE NOTED T HAT INFACT LD. COUNSEL OF THE ASSESSEE STATED THAT NO SUCH INVENTORY WAS P REPARED. LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE ASSESSI NG OFFICER HAS NOT REFERRED TO THE EXISTENCE OF ANY SUCH CASH INVE NTORY. IN THE ABSENCE OF INVENTORY OF CASH STATED TO HAVE BEEN DR AWN, BUT NOT EVIDENCED BY ANY RECORD, HE HELD THAT THE FINDING O F EXCESS CASH FOUND DURING THE SURVEY IS FALSE. IN THIS BACKGROUND LD. COMMISSIONER OF INCOME TAX (A) DELETED THE ADDITION. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT F OLLOWING WAS A DETAIL OF CASH FOUND DURING THE SURVEY, COPY OF STA TEMENT WAS DULY SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE. THE SAME INVENTORY READ AS UNDER:- (RS.) I) 1000X100 = 1,00,000 II) 500X1362 = 6,81,000 III) 100 X 519 = 51,900 IV) 500 X 50 = 7,500 V) 20 X 15 = 300 VI) 10 X 132 = 1,320 VII) COINS = 141 = ` 8,42,161/- ITA NO. 2210/DEL/2011 4 FROM THE ABOVE, WE NOTE THAT LD. COMMISSIONER OF IN COME TAX (A) HAS CLEARLY ERRED IN HOLDING THAT THERE NO INVE NTORY OF CASH FOUND. THE INVENTORY OF CASH WAS DULY FOUND AT THE TIME OF SURVEY AND EXCESS CASH WAS NOTED. THE CASH INVENTORY PREPARED WAS DULY SIGNED BY THE ASSESSEE. UNDER THE CIRCUMSTANCES, THE ADDITION RE GARDING THE EXCESS CASH FOUND IS SUSTAINABLE. THE CASE LAW RELIED UP ON BY THE LD. COUNSEL OF THE ASSESSEE IN THE CASE OF C.I.T. VS. S. KHADER KHAN SON 254 CTR 228 (SC) IS NOT APPLICABLE ON THE FACTS OF THE PRES ENT CASE. IN THE SAID DECISION, IT WAS THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH AND, THEREFORE, ANY AD MISSION MADE IN A STATEMENT RECORDED DURING SURVEY CANNOT, BY ITSEL F, BE MADE THE BASIS FOR ADDITION. WE FIND IN THIS CASE THAT T HE ADDITION IS NOT SOLELY BASED ON STATEMENT RECORDED U/S. 133A. THE ADDITIO NS WERE DULY BACKED BY CASH INVENTORY PREPARED AT THE TIME SURVE Y. THE BALANCE IN THE CASH BOOK WAS ALSO NOTED AT THE TIME OF SURV EY. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ADDITI ON IN THIS REGARD IS SUSTAINABLE. HENCE, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND RESTORE OF THE ASS ESSING OFFICER IN THIS REGARD. 7. APROPOS ADDITION OF ` 18,20,000/- MADE ON ACCOUNT OF OFFICE RENOVATION EXPENSES. ON THIS ISSUE ON THE BASIS OF STATEMENT GIVEN AT TH E TIME OF SURVEY, ASSESSING OFFICER OBSERVED THAT HUGE EXPEN DITURE OF ` 18,20,000/- WAS INCURRED ON THE RENOVATION OF SHOP. THE ASSESSING OFFICER MADE THE ADDITION IN THIS REGARD BASED UPON THE SURVEY STATEMENT. ITA NO. 2210/DEL/2011 5 8. ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) AND THE LD. COMMISSIONER OF INCOME TAX (A) OBSER VED THAT THERE IS NO EVIDENCE ON RECORD WHICH WOULD EVEN REMOTELY SU GGEST THAT HUGE EXPENDITURE OF 18,20,000/- HAS BEEN INCURRED IN REN OVATION OF THE SHOP. LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT EARLIER IN THE SURRENDER STATEMENT ON THIS ACCOUNT THE ASSESSE E HAS STATED NO MAJOR RENOVATION HAS BEEN DONE IN THIS PREMISES, IT I S IN THE NATURE OF NORMAL REPAIRS. HOWEVER, TO BUY PEACE I AM SURREND ERING ` 18,20,000/- ON ACCOUNT OF RENOVATION OF THIS SHOP . 8.1 FROM THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT IT IS EVIDENT THAT ADDITION OF ` 18,20,000/- W AS NOT BASED ON ANY MATERIAL OR EVIDENCE. THE PREMISES ARE STATED TO BE ON RENT. AT THE TIME OF SURVEY NO UNACCOUNTED BILLS OR VOUCHERS REL ATING TO THIS EXPENDITURE HAVE BEEN FOUND OR IDENTIFIED. ACCORD INGLY, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE ADDITIO N WAS UNJUSTIFIED AND ACCORDINGLY, HE DELETED THE SAME. 9. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT AT THE TIME OF SURVEY NO EVIDENCE WAS FOUND REGARDING THE ASSESSEE S ALLEGED HUGE EXPENDITURE OF ` 18,20,000/- ON THE RENOVATION OF S HOP. WE FIND THAT DURING THE SURVEY NO UNACCOUNTED BILLS OR VOUC HERS RELATING TO THIS EXPENDITURE HAVE BEEN FOUND. THE ADDITION WAS TO TALLY BASED ON THE STATEMENT RECORDED DURING THE SURVEY. WE FIND T HAT THE CASE LAW FROM THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS. S. KHADER KHAN SON 254 CTR 228 (SC) (SUPRA) IS APPLICABLE ON THE C ASE THAT WITHOUT ANY CORROBORATIVE MATERIAL MERELY ON THE BASIS OF ST ATEMENT RECORDED ITA NO. 2210/DEL/2011 6 ON SURVEY, THE ADDITION IS NOT JUSTIFIED. ACCORDI NGLY, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THI S ISSUE. 11. APROPOS ADDITION ON ACCOUNT EXCESS STOCK FOUND . ON THIS ISSUE THE STOCK WAS INVENTORISED AT THE TI ME OF SURVEY AND WAS DETERMINED AT ` 8072465/- AFTER REDUCING THE GR OSS PROFIT OF 4.98%. A DIFFERENCE OF ` 8,36,677/- OF THE STOCK AS PER BOOKS AND STOCK ACTUALLY FOUND WAS DETERMINED. ASSESSEE HAS SURRENDERED THE SAME AMOUNT. 12. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) IT W AS SUBMITTED THAT THE ADDITION IN THIS REGARD IS TOTALLY UNJUSTIF IED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE VALUED CLOSING STOCK AT COST PRICE AND MARKET PRICE WHICHEVER IS LOWER. IT WAS FURTHER SU BMITTED THAT THE AVERAGE DISCOUNT PROVIDED IN THIS REGARD ON THE PU RCHASE WAS 18 TO 24% APPROX. ON THE RATE MENTIONED IN THE BILL. A CCORDINGLY, IT WAS SUBMITTED THAT THE VALUATION AS TAKEN BY THE SURVEY TEAM ON THE MRP OF ITEMS WAS MISLEADING AND UNJUSTIFIED. CONSIDE RING THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT ON BEIN G CONFRONTED WITH THE EXCESS STOCK FOUND IN REPLY TO QUERY NO. 1 9 THE ASSESSEE HAS CLARIFIED THAT PHYSICAL INVENTORY HAS BEEN VALUED AT MRP. IF IT IS TAKEN AT COST PRICE THERE SHOULD NOT BE ANY DIFFERENCE. HOWEVER, AS PER THE ASSESSEES OWN ADMISSION STOCK REGISTER WAS NOT MAI NTAINED. HENCE, IT WAS NOT POSSIBLE TO SHOW THE COST PRICE OF EACH AND EVERY ITEM BECAUSE OF NUMEROUS ITEMS. LD. COMMISSIONER OF INC OME TAX (A) OBSERVED THAT STOCK INVENTORY PREPARED DURING THE S URVEY HAS BEEN PERUSED AND IT IS SEEN THAT THE VALUE HAS BEEN TAKE N ON MRP. THE COPY OF VARIOUS PURCHASES BILLS FILED BY THE ASSESS EES COUNSEL CLEARLY SHOWS THAT AS PER THE PURCHASE BILLS DISCOUNT RANG ING TO 18 TO 30% HAS ITA NO. 2210/DEL/2011 7 BEEN PROVIDED TO THE ASSESSEE. LD. COMMISSIONER OF INCOME TAX (A) CONCLUDED AS UNDER:- THEREFORE, TAKING ALL FACTORS INTO CONSIDERATION, INCLUDING THE WIDE VARIETY OF ITEMS AS ALSO THE DISCOUNT ON PURCHASES, IT WOULD BE REASONABLE TO AL LOW A FURTHER DEDUCTION OF 20% ON THE MRP VALUE. ON T HE MRP VALUE A FURTHER DEDUCTION @ 20% OF ` 1614493/- IS ALLOWED TO THE APPELLANT. THE POSITION OF STOCK AS PER TRADING ACCOUNT ON THE DATE OF SURVEY THEREFOR E WORKS OUT TO BE ` 6457972/-. THE STOCK AS PER BOOK S IS SUPPOSED TO BE ` 6833779/-. THUS THERE IS A SHORTAGE OF STOCK OF ` 375807/-. IN VIEW OF SHORTA GE THE ONLY POSSIBILITY IS THAT THE APPELLANT HAS INDU LGED IN SALES OUTSIDE BOOKS. AS THE APPELLANT HAS DECLARED A GP RATE OF 4.98% IN THE PRECEDING YEAR, APPLYING THE SAME RATE OF 4.98% THE SUM OF ` 18715/ - IS TREATED AS UNDISCLOSED PROFIT OUTSIDE BOOKS OF ACCOUNT. THEREFORE, AS DISCUSSED THERE IS NO CASE FOR MAKING AN ADDITION ON ACCOUNT OF EXCESS STOCK AND TH E ADDITION OF ` 836677/- IS IN PRINCIPLE DELETED; HOW EVER THE ADDITION IS PARTLY SUBSTITUTED BY THE ADDITION OF ` 18715/- BEING UNDISCLOSED PROFITS ON THE SALE OUT SIDE THE BOOKS. THE APPELLANT ACCORDINGLY GETS A RELIEF OF ` 817962/-. 13. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT IT IS THE CONTENTION ITA NO. 2210/DEL/2011 8 OF THE ASSESSEE ON THIS ISSUE THAT THE STOCK AT THE TIME OF SURVEY WAS VALUED AT MRP. IF THE NECESSARY VALUATION IS DONE B Y APPLYING THE AVERAGE PURCHASE COST THE SAME WOULD NOT RESULT ANY DISCREPANCY IN STOCK. IN OUR CONSIDERED OPINION, LD. COMMISSIONER OF INCOME TAX (A) HAS CORRECTLY OBSERVED THAT IT WOULD BE REASONABLE TO ALLOW 20% DISCOUNT ON THE MRP VALUE. IN OUR CONSIDERED OPINIO N, LD. COMMISSIONER OF INCOME TAX (A) HAS TAKEN A CORRECT V IEW OF THE MATTER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME T AX (A) ON THIS ISSUE. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/12/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 19/12/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES