Shri Vinod Jethalal Modi, V. The Income tax Officer, Ward-1,

ITA 2228/AHD/2004

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9712 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-08-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 15-07-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Unexplained investment; Set aside
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2228/AHD/2004 [ASSTT.YEAR: 2001-02] SHRI VINODJETHALAL MODI -VS- INCOME TAX OFFICER PROP. OF DHANSHYAM TRADING CO. WARD-1, PATAN ZAVERI BAZAR, PATAN PAN NO.ABUPM7266R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R.K. DHANESTA, DR ASSESSEE BY: SHRI TUSHAR P HEMANI, AR 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), GANDHINAGAR IN APPEAL NO. CIT (A)/GNR/68/2003-04 DATED 30- 03-2004. THE ASSESSMENT WAS FRAMED BY ITO, WARD-1, PATAN U/S.143(3) OF THE INCOME-TAX ACT, 1961(HEREINAFTER REFERRED TO AS TH E ACT) VIDE HIS ORDER DATED 31-03- 2003 FOR ASSESSMENT YEAR 2001-02/ 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARD TO THE ORDER OF CIT(A) IS BAD IN LAW AND EVIDENCE ON RECORDS. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE, SHRI TUSHAR P HEMANI HAS STATED THAT HE HAS INSTRUCTIONS FROM THE ASSESSEE NOT TO P RESS THIS ISSUE. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. THE SECOND ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY ASSESSING OFFICER O N ACCOUNT OF VARIATION IN GROSS RECEIPTS FROM PROFESSION AT RS.98,626/-. ITA NO.2228/AHD/2004 A.Y 2001-02 SH. VINOD J MODI V. ITO WD-1, PATAN PAGE 2 5. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM T HE BOOKS OF ACCOUNT THAT THE ASSESSEE HAS DISCLOSED GROSS RECEIPTS AT RS.3,79,24 0/- ON ACCOUNT OF ACCOUNTANCY PROFESSION. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO RECORDED THE STATEMENT OF THE ASSESSEE ON OATH U/S 131 OF THE AC T ON 08-10-2002, WHEREBY HE STATED THAT HE WRITES BOOKS OF ACCOUNT OF 600 TO 65 0 PARTIES, BUT THE AO NOTED THAT THE ASSESSEE HAS DISCLOSED GROSS RECEIPTS FROM ACCO UNTING WORK AT RS.3,79,240/- FROM 496 PARTIES. ACCORDINGLY, AO APPLYING THE SAME RATIO TO 625 PARTIES WORKED OUT THE GROSS RECEIPTS AT RS.4,97,840/- AND MADE ADDITI ON OF UNACCOUNTED RECEIPTS BY ESTIMATING AT RS.98,626/-. AGGRIEVED, ASSESSEE PREF ERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING OFFIC ER ONLY ON ONE PREMISE THAT THE ASSESSEE ADMITTED TO WRITING THE BOOKS OF 600 TO 65 0 PARTIES AND ACCORDING TO HIM, AO WAS FULLY JUSTIFIED IN ADOPTING 625 PARTIES ON E STIMATE BASIS. AGGRIEVED, NOW ASSESSEE CAME IN SECOND APPEAL BEFORE US. 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE, SHRI TUS HAR P HEMANI STATED THAT THE STATEMENT WAS RECORDED ON 08-10-2002 AND THE ASSESS EE ANSWERED TO QUESTION THAT HE IS PRACTICING ACCOUNTING WORK AND TAKEN UP WORK OF 650 PARTIES FOR THE YEAR 2002- 2003 AND THE AO MISUNDERSTOOD THE ANSWER OF THE ASS ESSEE AS THE ASSESSEE WAS MEANT TO HAVE WORKED OUT FOR 600 PARTIES FOR THE AC COUNTING YEAR 2002-03 AND NOT TO THE RELEVANT ASSESSMENT YEAR I.E. 2001-02. ACCORDIN G TO LD. COUNSEL, APART FROM THIS STATEMENT THERE IS NOTHING TO SHOW THAT THE ASSESSE E HAS EARNED PROFESSIONAL RECEIPTS OVER AND ABOVE WHAT IS DECLARED IN THE BOO KS OF ACCOUNT. WE FURTHER FIND FROM THE ARGUMENT OF LD. SR-DR THAT ENTIRE PREMISE OF REVENUE FOR MAKE ADDITION WAS ON STATEMENT OF THE ASSESSEE, WHEREBY HE ADMITT ED WRITING BOOKS OF ACCOUNT FOR THESE 650 PARTIES, WHEREAS HE HAS DECLARED THE RECE IPTS ONLY FROM 496 PARTIES. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW THAT REVENU E HAS INCLUDED THE RECEIPTS WHICH THE ASSESSEE HAD NEVER EARNED, WHAT THE ASSESSEE HA S NOT EARNED OVER AND ABOVE THEN DECLARED IN THE BOOKS OF ACCOUNT. ACCORDINGLY, WE HAVE NO HESITATION IN REVERSING THE ORDERS OF THE LOWER AUTHORITIES SUSTA INING THE ADDITION. HENCE, WE DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASSESSE ES APPEAL. ITA NO.2228/AHD/2004 A.Y 2001-02 SH. VINOD J MODI V. ITO WD-1, PATAN PAGE 3 7. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION MADE BY ASSESSING OFFICER O N ACCOUNT OF DISALLOWANCE OF SALARY PAID TO ACCOUNTS AT RS.76,432/-. 8. THE BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED DE DUCTION OF SALARY OF RS.1.62 LAKH TO NINE PERSONS. THE ASSESSEE FAILED TO PRODUC E THESE PERSONS AND OUT OF NINE PERSONS ONLY 3 PERSONS WERE PRODUCED AND ACCORDINGL Y ASSESSING OFFICER MADE DISALLOWANCE OF RS.1.23 LAKH. AGGRIEVED, ASSESSEE P REFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF AO PARTLY B UT ON ENTIRELY DIFFERENT PREMISES THAT THE SALARY CAN BE DISALLOWED AT 20% OF THE GRO SS RECEIPTS AND ACCORDINGLY HE ESTIMATED THE ALLOWANCE AT RS.39,000/- AND FURTHER DEDUCTED AT RS.46,568/-. THE BALANCE DISALLOWANCE OF RS.76,432/- WAS CONFIRMED. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE US. 9. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ARGUMENTS OF BOTH THE SIDES THAT THE REVENUE CO ULD NOT SUBSTANTIATE ITS CASE AS TO WHY THE DISALLOWANCE OF RS.1.23 LAKH WAS MADE BY ASSESSING OFFICER OUT OF WHICH A SUM OF RS.76,432/- WAS CONFIRMED BY CIT(A). WE FI ND FORCE IN THE ARGUMENT OF LD. COUNSEL OF THE ASSESSEE THAT THE ASSESSEE HAS UNDER TOOK THE ACCOUNTING WORK OF 496 PARTIES AND FOR THIS AT LEAST NINE PERSONS ARE REQUIRED TO COMPLETE THE JOB. HE NARRATED AN EXAMPLE THAT IN CASE ONE PARTY PAYS RS. 6,000/- PER ANNUM AND FOR THIS AT LEAST 20 DAYS ONE PERSON HAS TO VISIT AND ACCORD INGLY THE NINE PERSONS CAN ONLY COVER 496 PARTIES NOT THREE PERSONS. WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF LD. COUNSEL THAT TO UNDERTAKE THE WORK OF 496 PARTI ES, THE ASSESSEE HAS TO EMPLOY NINE PERSONS. WE FIND NO INCRIMINATING MATERIAL WHI CH SUPPORT REVENUES CASE. ACCORDINGLY, WE HAVE NO OPTION EXCEPT TO DELETE THE ADDITION. ACCORDINGLY WE DELETE THIS ADDITION AND THE ISSUE OF ASSESSEES APPEAL IS ALLOWED. 10. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION MADE BY ASSESSING OFFICER O N ACCOUNT OF UNDERSTATEMENT OF SALES AT RS.92,276/-. 11. THE BRIEF FACTS ARE THAT APART FROM WRITING OF BOOKS OF ACCOUNT OF OTHER PARTIES, ASSESSEE IS TO CARRY ON BUSINESS OF GOLD AND SILVER ORNAMENTS UNDER THE NAME AND STYLE OF M/S DHANSHYAM TRADING CO. AT PATAN. THE AS SESSING OFFICER DURING THE ITA NO.2228/AHD/2004 A.Y 2001-02 SH. VINOD J MODI V. ITO WD-1, PATAN PAGE 4 COURSE OF ASSESSMENT PROCEEDINGS FOUND FROM THE REC ORDS AND OTHER DOCUMENTS THAT THE REAL SALE OF THE ASSESSEE IS AT RS.4,05,463/-. FOR THIS THE FINDINGS OF AO AT PAGE- 12, WHICH READS AS UNDER:- AS THE BOLAS DOES NOT REFLECTS A FAIR AND REAL SAL ES DURING THE YEAR UNDER CONSIDERATION AND IN THE INTEREST OF NATURAL JUSTIC E, FAIR AND REASONABILITY OF THE SALES. I HOLD THAT THE ASSESSEE CORRECTLY SHOWN SAL ES IN HIS SALES TAX RETURN OF RS.4,05,643/- WHICH IS QUITE FAIR AND NATURAL AND T HE ASSESSEE UNDER ESTIMATED SALES RECEIPT TO THE EXTENT OF RS.92,276/ -. THEREFORE, THE SAME OF RS.92,276/- IS TO BE ADDED IN THE TOTAL INCOME OF T HE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO NOT CONTESTED THAT THE SALES ARE NOT TO BE ADDED TO THE ASSESSEE, BUT HE REQUESTED THAT ONLY G ROSS PROFIT RATE IS TO BE ADDED AND NOT THE ENTIRE SALES. 12. WE FIND THAT NONE OF THE AUTHORITIES BELOW HAS GIVEN ANY FINDING IN RESPECT OF UNACCOUNTED SALES ARE ON ACCOUNT OF UNACCOUNTED PUR CHASES, ACCORDINGLY, WE ARE OF THE VIEW THAT ONLY GP RATE IS TO BE APPLIED AND ACC ORDINGLY THE ADDITION OF THE SAME MAY BE MADE. IN VIEW OF THE FACTS AND CIRCUMSTANCES , WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE GP AS DECLARED BY ASSESSE E IN ITS BOOKS OF ACCOUNT AND ACCORDINGLY APPLY TO THE UNACCOUNTED SALES ESTIMATE D AT RS.92,276/- AND ACCORDINGLY MAKE AN ADDITION. THIS ISSUE OF THE ASSESSEES APPE AL IS ALLOWED PARTLY AS INDICATED ABOVE. 13. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION MADE BY ASSESSING OFFICER O N ACCOUNT OF UNDISCLOSED PURCHASE U/S.69 OF THE ACT. 14. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER ON VERIFICATION OF INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES U/S.133(6) OF THE ACT NOTED THAT THE ASSESSEE HAS FILED ITS SALES TAX RETURN FOR FINANCI AL YEAR 2000-01 IN THE NAME OF M/S. DHANSHYAM TRADING CO. SALES TAX REGISTRATION NO.260 15561 ON DATED 26-06-2001, WHEREIN THE ASSESSEE HAS SHOWN PURCHASE OF RS.3,42, 140/- AND SALES OF RS.4,05,643/-. THE ASSESSEE SUBMITTED THE EXPLANATI ON THAT THE UNEXPLAINED PURCHASES ARE MADE IN THE IMMEDIATE PRECEDING YEAR, WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AND ACCORDINGLY THE VALUE OF INVES TMENT MAY BE THE INCOME OF THE ASSESSEE FOR THAT FINANCIAL YEAR. THE AO DISBELIEVE D THE EXPLANATION OF THE ASSESSEE ITA NO.2228/AHD/2004 A.Y 2001-02 SH. VINOD J MODI V. ITO WD-1, PATAN PAGE 5 AND MADE ADDITION OF UNEXPLAINED PURCHASE AT RS.3,4 2,140/- BY GIVING FOLLOWING FINDING IN PAGE-13 OF HIS ASSESSMENT ORDER:- IN VIEW OF THE ABOVE DISCUSSION, RS.3,42,140/- PUR CHASES SHOWN IN THE SALES TAX RETURN WHICH IS NOT RECORDED AND SHOWN IN THE B OOKS OF ACCOUNTS TO THE YEAR UNDER CONSIDERATION IS TREATED AS UNEXPLAINED INVESTMENTS U/S.69 OF THE I.T. ACT AND BROUGHT TO TAX. THEREFORE, RS.3,42,140 /- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT U/ S.69 OF THE I.T. ACT FOR PURCHASES SHOWN IN THE SALES TAX RETURN. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING OFFICER EXACTLY ON IDENTICAL FI NDINGS. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE ES SALES ARE CONSIDERED BY THE ASSESSING OFFICER AS CORRECT SALES AT RS.4,05,643/- AND ADDITION TO THAT EFFECT WAS ALSO MADE AND THE SAME IS DELETED BY US IN PARA-12 OF THIS ORDER. HOWEVER, WE HAVE RESTRICTED THE ADDITION TO THE EXTENT OF GP ON THE ABOVE SALES, THAT MEANS THE SALES OF RS.4,05,643/- IS CONSIDERED AS GENUINE SALES. TH E ASSESSING OFFICER HIMSELF ADMITTED THAT THE PURCHASES ARE TO THE TUNE OF RS.3 ,42,142/- AS UNACCOUNTED. AS THE LD. COUNSEL FOR THE ASSESSEE BEFORE US STATED THAT THE SALE OF RS.4,05,643/- IS FOR THE ENTIRE YEAR AND IF AT ALL ADDITION CAN BE MADE TO T HE EXTENT OF 1/4 TH OR 1/5 TH OF THE SALES BECAUSE THE PURCHASES ARE MADE OUT OF THE SALE PROC EEDS. HE STATED THAT THE PURCHASES OF RS.3,42,140/- IS NOT IN ONE GO, RATHER IT IS REGULAR PURCHASES OUT OF THE SAME SALES MADE. WE FIND THE ARGUMENTS OF THE LD. C OUNSEL FOR THE ASSESSEE AS PLAUSIBLE AND NO PURPOSES WILL BE SERVED, IN CASE T HE MATTER IS SET ASIDE TO THE FILE OF LOWER AUTHORITIES AND THAT FOR TOO SMALL AN AMOUNT. ACCORDINGLY, WE PROCEEDS TO ESTIMATE A REASONABLE UNEXPLAINED INVESTMENT ON ACC OUNT PURCHASES ON AD HOC BASIS AT RS.1 LAKH, BECAUSE THERE WILL DEFINITELY B E CIRCULATION OF SALE AND PURCHASES AND THERE WILL BE ROTATION OF MONEY AT LEAST THREE TO FOUR TIMES. ACCORDINGLY ESTIMATION OF RS.1 LAKH WILL MEET THE ENDS OF JUSTI CE. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED AB OVE. 16. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 17 TH SEPT,2010 ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 17/09/2010 ITA NO.2228/AHD/2004 A.Y 2001-02 SH. VINOD J MODI V. ITO WD-1, PATAN PAGE 6 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-GNR 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD