The ITO, Ward -6(3), Surat V. Shri Pramod Somabhai Patel, Surat

ITA 2224/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0875 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 02-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA SHUKLA
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , ITA. NOS.2224 & 2225/AHD/2013 (ASSESSMENT YEARS:2007-08 & 2008-09) THE INCOME-TAX OFFICER, WARD 6(3), ROOM NO.616, AAYAKAR BHAVAN, MAJURA GATE, SURAT APPELLANT VS. PRAMOD SOMABHAI PATEL, PROP. OF. M/S. PRINCE ELECTRONICS, 133, NAGAR FALIYA, AT & PO : DAMKA, TALUKA: CHORYASHI, DIST. SURAT RESPONDENT PAN: AOWPP7879L / BY REVENUE : SHRI ADITYA SHUKLA, SR. D.R. / BY ASSESSEE : NONE /DATE OF HEARING : 13.07.2016 /DATE OF PRONOUNCEMENT : 19.07.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE TWO APPEALS FILED BY REVENUE ARE AGAINST THE COMMON ORDER OF CIT(A)-I, SURAT, DATED 12 TH JUNE, 2013 FOR BOTH ASSESSMENT YEARS. SINCE BOTH APPEALS PERTAIN TO SAME ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 2 ASSESSEE AND SIMILAR ISSUES WERE RAISED IN BOTH APP EALS; THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. IN ITA NO.2224/AHD/2013 FOR A.Y. 2007-08, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.24,61,651/-TO RS.8,65,000/- MADE BY THE A.O. ON ACCOUNT OF UNDISCLOSED INCOME ARISING OUT OF UNRECORDED SALES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE STATEMENT OF THE ASSESSEE GIVEN BEFORE THE POLICE DEPARTMENT BASED ON WHICH THE UNDISCLOSED INCOME OF RS.24,61,651/-OF THE ASSESSEE WAS WORKED OUT BY THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN ADOPTING THE RATE OF NET PROFIT @ 2.3% FOR RECHARGE COUPON AS TH E SAME IS WITHOUT ANY BASIS AND ARBITRARLY ADOPTED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A), SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 3. ASSESSING OFFICER MADE ADDITION OF RS.24,61,651/ - WHICH WAS RESTRICTED TO RS.8,65,000/- BY CIT(A) ON ACCOUNT OF UNDISCLOSED INCOME ARISING OUT OF UNRECORDED SAL ES. THE INVESTIGATION WING OF THE DEPARTMENT HAD RECEIVED A COPY OF FIR FROM ICHHAPORE POLICE STATION. IN SAID FIR, AS SESSEE HAD ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 3 REPORTED THEFT OF 324 MOBILE INSTRUMENTS COSTING RS . 7,60,250/- FROM WHICH, AVERAGE VALUE PER MOBILE HAN DSETS COMES TO RS.2346/-. THE ACTUAL COST OF MOBILE SETS RANGES FROM RS.1,272 TO RS.13,119/-. APART FROM THE SAME THEFT OF CASH OF RS.50,000/- WAS ALSO REPORTED. ON THE BASI S OF SAID REPORT, STATEMENT OF ASSESSEE WAS RECORDED BY THE D DIT (INVESTIGATION). ACCORDING TO ASSESSING OFFICER, A SSESSEE ADMITTED BEFORE THE DDIT (INVESTIGATION) THAT HE DI D NOT MAINTAIN ANY RECORD OF I.M.E.I. NUMBERS, SALES, PUR CHASE, STOCK OF MOBILE HANDSETS AND MOBILE RECHARGE COUPON S AND HAD NOT FILED ANY SALES TAX RETURN. SO, ASSESSING OFFICER AFTER TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATI ON MADE AN ADDITION OF RS.24,61,651/-. 3.1 IN APPEAL, CIT(A) OBSERVED THAT ASSESSING OFFIC ER IN THE REASONS RECORDED FOR ISSUE OF NOTICE U/S.148 OF THE ACT HAS MENTIONED THAT THE ESTIMATION OF TURNOVER AND NET P ROFIT OF 5% DONE BY DDIT(INVESTIGATION) ARE ON THE BASIS OF STATEMENTS AND EVIDENCE BEFORE THE DDIT WHILE THIS INFORMATION WAS SUFFICIENT FOR ASSESSING OFFICER TO FORM REASONABLE CAUSE FOR ISSUE OF NOTICE. ASSESSING OF FICER WAS INDEPENDENTLY EXPECTED TO EXAMINE THE EVIDENCE AND SUBMISSIONS FOR ARRIVING AT THE ESTIMATION OF INCOM E DURING THE RE-ASSESSMENT PROCEEDINGS. THE ESTIMATION OF T URNOVER OF RS.1.92 CRORES LEAD TO DAILY TURNOVER OF RS.1.35 LAKHS WHICH WAS NOWHERE ADMITTED IN THE STATEMENTS OF ASS ESSEE. CIT(A) FURTHER OBSERVED THAT ESTIMATION CANNOT BE S OLELY ON THE BASIS OF SUBMISSION OF ASSESSEE. THE QUANTUM O F CASH ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 4 DEPOSITS IN THE BANK ACCOUNTS IN RESPECTIVE YEARS W AS AN INDICATION IN PART OF THE QUANTUM OF TURNOVER/INCOM E OF ASSESSEE. BUT, IT MAY NOT INDICATE COMPLETE TURNOV ER/ INCOME, AS ALL AS SALE PROCEEDS/INCOME WERE NOT DEP OSITED IN THE SAID BANK ACCOUNT AND SOME SALE PROCEEDS MIGHT HAVE BEEN RE-INVESTED IN BUSINESS BY WAY OF PURCHASE OF MOBILE INSTRUMENT/RECHARGE COUPONS AND FOR MEETING PERSONA L EXPENSES. 3.2 FROM A COPY OF THE FIR FILED, IT WAS ALSO OBS ERVED THAT THE PRICES OF MOBILES RANGE FROM RS.1,272/- TO RS.1 3,119/- AND IT CANNOT BE ACCEPTED THAT THE PROFIT MARGIN IS ONLY RS.30 PER MOBILE HAND SET FOR THE ENTIRE RANGE OF MOBILES. THE INCOME SHOWN BY ASSESSEE PERTAINS TO ONLY INCOM E FROM REPAIRING OF MOBILE AS ADMITTED BY ASSESSEE. THE B ANK ACCOUNT IS STATED TO HAVE BEEN OPENED ON 20.07.2006 I.E. IN A.Y. 2007-08. IT WAS ALSO ADMITTED THAT MOBILE I NSTRUMENTS AMOUNTING TO RS.7,60,250/- WERE STOLEN FROM THE SHO P OF ASSESSEE FOR WHICH, AN FIR WAS FILED. THEREFORE, TH E TOTAL STOCK OF UNACCOUNTED MOBILES INSTRUMENTS AVAILABLE IN THE SHOP OF ASSESSEE AS ON 14.01.2009 WAS RS.7,60,250/- . IF ASSESSEES STATEMENT RECORDED ON 21.12.2009 REGARDI NG DAILY TURNOVER OF RS.25,000/- IS BELIEVED, IT LEADS TO A STOCK OF APPROXIMATELY 30 DAYS SALES BEING STOLEN, I.E. IF A SSESSEES STATEMENT OF DAILY TURNOVER OF MOBILE HAND SETS OF RS.25,000/- WAS ACCEPTED, AND IT WAS PRESUMED THAT THE COST OF MOBILE INSTRUMENT STOLEN PERTAINED TO ALL T HE MOBILES AVAILABLE. THUS, THE FIGURE OF 30 DAYS OF INVENTOR Y IN SHOP ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 5 (RS.7,60,250/- DIVIDED BY RS.25,000/-) WHICH WAS FO UND AN ACCEPTABLE FIGURE. FROM A DAILY SALES OF RS.25,000, THE YEARLY TURNOVER COMES TO RS.91,25,000/- ( RS.25,000/- X 36 5 DAYS). ON THE BASIS OF THIS DATA, ASSESSEES TURNOVER FROM SALE OF MOBILE INSTRUMENT WAS ESTIMATED AT RS.1.5 CRORE FOR EACH OF THE ASSESSMENT YEARS IE. ASSTT YEAR 2007-08, 2008-0 9 AND 2009-10) AND THE NET PROFIT FROM THE SAME WAS ESTIM ATED AT 5% AS DONE BY ASSESSING OFFICER. CONSEQUENTLY, THE INCOME FROM SALE OF MOBILE INSTRUMENT HANDSETS WAS ESTIMAT ED AT RS.7.5 LAKHS FOR EACH OF THE ASSESSMENT YEARS INCLU DING ASSESSMENT YEAR IN QUESTION BEFORE ME. AS REGARDS RECHARGE OF COUPONS, ASSESSEE ADMITTED THAT THE DAILY BUSINE SS OF RS 12,000/- (AS PER HIS STATEMENT DATED 21.12.2009), W HICH COMES YEARLY TURNOVER OF RS.43,80,000/-. THE ABSEN CE OF ANY OTHER DETAILS, THE ESTIMATED TURNOVER IN RESPEC T OF RE- CHARGING OF COUPON WAS TAKEN AT RS.50 LAKHS PER YEA R EACH ASSESSMENT YEARS INCLUDING ASSESSMENT YEAR UNDER CONSIDERATION. 3.3 THE NET PROFIT IN RESPECT OF RECHARGE COUPONS W AS TAKEN AT 2.3 % WHICH HAD BEEN GIVEN AN ESTIMATED INCOME O F RS.1.5 LAKH EACH OF ABOVE THREE ASSESSMENT YEARS INCLUDING ASSESSMENT YEAR IN QUESTION BEFORE ME. THEREFORE, TOTAL ESTIMATED TURNOVER OF MOBILE HANDSETS/RECHARGE COUP ONS CAME TO RS. 2 CRORES (RS 1.5 + .5), WHICH WAS IN AC CORDANCE WITH THE STATEMENT OF ASSESSEE THAT ITS PURCHASES WERE IN THE RANGE OF RS.1 LAC TO RS.1.5 LAKHS EVERY ALTERNA TE DAY. CONSEQUENTLY, THE ADDITION SUSTAINED FOR EACH OF TH E ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 6 ASSESSMENT YEARS WAS TO THE EXTENT OF RS.8,65,000/- (RS 7,50,000 + RS 1,15,000). THE INCOME AS PER RETURNE D INCOME WAS TAKEN AS INCOME PERTAINING TO REPAIRING WORK AND NOT INCLUSIVE OF SALES FROM MOBILE INSTRUMENT A ND SALE OF RECHARGE COUPONS. NO SEPARATE ADDITION WAS FOUND R EQUIRED IN RESPECT OF DEPOSITS IN BANK ACCOUNT AS IT GOT TE LESCOPED AGAINST THE ESTIMATION OF TURNOVER. AS SUCH, ASSES SEES GROUND WAS PARTLY ALLOWED. THIS REASONED FINDING O F CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. I UPHOLD THE SAME. 4. SIMILAR ISSUE AROSE IN ITA NO.2225/AHD/2013 FOR A.Y. 2008-09, WHEREIN ASSESSING OFFICER MADE ADDITION OF RS. 24,61,651/- WHICH WAS RESTRICTED TO RS.8,65,000/- B Y CIT(A). FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, I AM NOT INCLINED TO INTERFERE WITH THE ORDER OF CIT(A) WHO HAS RESTRICTED THE ADDITION TO RS.8,65,000/-. I UPHOLD THE SAME. 5. IN THE RESULT, THE REVENUES BOTH APPEALS ARE DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF JULY, 2016. SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD: DATED 19/07/2016 TRUE COPY S.K.SINHA ! / COPY OF ORDER FORWARDED TO:- $% / REVENUE 2% / ASSESSEE '%()(*+ , / CONCERNED CIT ITA NOS.2224 & 2225/AHD/13 A.YS. 07-08 & 08-09 [ITO VS. PRAMOD SOMABHAI PATEL] PAGE 7 4% ,- / CIT (A) 1%23 45*+6 *+67 ) / DR, ITAT, AHMEDABAD 8%4 9:; < / GUARD FILE. BY ORDER / 6 /7 ( *+67 )