Income Tax Officer, Ward - 1(2), Belagavi V. Shri Girish Prakash Vernekar, Belagavi

ITA 227/PAN/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 6797 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 31-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S PATIL
• Assessee Lawyers: Y V RAVIRAJ
• Keywords: Bogus purchase; Gross profit estimation; Corroborative evidences; Retraction
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI , J M ITA NO. 227 / PAN . / 2017 (ASSESSMENT YEAR: 2011 - 12 ) INCOME TAX OFFICER, WARD - 1(2), F. K. COMMERCIAL COMPLEX, DR. B. R. AMBEDKAR ROAD, OPPOSITE: CIVIL HOSPITAL, BELAGAVI - 590 001 VS. SHRI GIRISH PRAKASH VERNEKAR NO. 264, MAHALASA KRUPA, SHASTRI NAGAR, VADAGAON, BELAGAVI PAN/GIR NO. ADNPP 5618 F ( REVENUE ) : ( ASSESSEE ) & CO NO. 26/PAN./2017 (ARISING OUT OF ITA NO. 227/PAN. / 2017) (ASSESSMENT YEAR: 2011 - 12 ) SHRI GIRISH PRAKASH VERNEKAR NO. 264, MAHALASA KRUPA, SHASTRI NAGAR, VADAGAON, BELAGAVI VS. INCOME TAX OFFICER, WARD - 1(2), F. K. COMMERCIAL COMPLEX, DR. B. R. AMBEDKAR ROAD, OPPOSITE: CIVIL HOSPITAL, BELAGAVI - 590 001 PAN/GIR NO. ( C ROSS OBJECTOR ) : ( RE VENUE ) APPELLANT BY : SHRI A. S. PATIL RESPONDENT BY : SHRI Y. V. RAVIRAJ DATE OF HEARING : 13.11.2018 DATE OF PRONOUNCEMENT : 19.12 .2018 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BELAGAVI VIDE ORDER DATED 28.06.2017 , PERTAIN S TO THE ASSESSMENT YEAR 201 1 - 1 2 . 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: ADDITIONAL INCOME DECLARED TOWARDS VALUE OF EXCESS STOCK OF GOLD OF RS . 25, 1 7,500/ - (1) THE ID. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS MADE VOLUNTARY DECLARATION OF RS 25,17,700/ - TOWARDS EXCESS STOCK NOT AT THE TIME OF SURVEY BUT IN 2 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 A STATEMENT RECORDED IN OFFICE ON OATH U7S 131 ON 27/09/2010, WHICH WAS FOLLOWED BY AN OTHER CONFIRMATION VIDE LETTER DTD. 27/09/2010 FILED IN THE OFFICE ON 29/09/2010. (2) THE ID. CIT(A) HAS FAILED TO APPRECIATE THAT RETRACTION WITHOUT SUPPORTING EVIDEN CES WAS NOT VALID. (3) THE ID.CIT(A) HAS FAILED TO APPRECIATE THAT ASSESSEE FAILED TO PROVE THAT THE EXCESS GOLD FOUND AT THE TIME OF SURVEY WAS THE SAME GOLD WHICH WAS PURCHASED FROM BANGALORE REFINERY PVT. LTD. ADDITION ON ACCOUN T OF LOW GROSS PR OFIT OF RS 60,74 , 117 / - (5) THE ID.CIT(A) FAILED TO APPRECIATE THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN MAINTAINED BY ASSESSEE PROPERLY AND HAS BEEN MANIPULATED TO SUPPRESS THE PROFIT. (6) THE ID. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THA T THE BOOKS OF A/C HAVE BEEN REJECTED BY THE AO CITING DEFECTS IN THE BOOKS OF ACCOUNTS AND HENCE GROSS PROFIT UNDER ., GOLD TRADING ACCOUNT AND SILVER TRADING ACCOUNT HAVE BEEN ESTIMATED BASED ON THE DECISION OF HON'BLE ITAT, PANAJI BENCH, PANAJI VIDE 1TA NO. 07/PNJ/2012 DATED 20/04/2012. 3. (7) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READS AS UNDER: 1] DEPARTMENTAL APPEAL IS AGAINST LAW AND FACTS OF THE CASE. HENCE, DEPARTMENTAL APPEAL IS REQUIRED TO BE QUASHED. 2] LEARNED COMMISSIONER [APPEALS] IS FULLY JUSTIFIED IN DELETING ADDITIONS OF RS.25,17,700/ - INCOME DECLARED DURING SURVEY IN PARA 6 OF PAGE 6 OF THE ORDER CLEARLY HELD THAT FACTS CLEARLY ESTABLISH THAT DISCLOSURE MADE IN SURVEY HAD BEEN PROPERLY EXPLAINED AND APPELLANT HAD RIGHTLY RETRACTED DUE TO CLINCHING EVIDENCE. HENCE, THE DE CISION OF THE COMMISSIONER [APPEALS] BE RESTORED. 3] LEARNED COMMISSIONER [APPEALS] IS FULLY JUSTIFIED IN DELETING GP ADDITION OF RS.60,74,117/ - ON THE GROUND THAT IN REASSESSMENT ORDER GENERAL ADDITIONS ARE UNWARRANTED HENCE GP ADDITION OF RS.60,74,117/ - IS RIGHTLY DELETED AND THE DECISION OF THE COMMISSIONER [APPEALS] BE RESTORED. 4] LEARNED COMMISSIONER [APPEALS] IS NOT JUSTIFIED IN DIRECTING INCOME - TAX OFFICER TO MAKE ADDITION @ 7.40% ON URD CASH PURCHASES OF RS.23,32,623/ - . THE OF RS.1,72,614/ - ON URD CASH PURCHASES IS NOT JUSTIFIED AS COMMISSIONER [APPEALS] HELD IN DECIDING GROUNDS OF APPEAL NUMBER 3 THAT GENERAL ADDITIONS ARE UNWARRANTED IN REASSESSMENT. HENCE, ADDITIONS OF RS. 1,72,614/ - SUSTAINED REQUIRES TO BE DELETED. APROPOS ADDITION TOWA RDS EXCESS VALUE OF STOCK ON SURVEY: 4 . BRIEF FACTS OF THE CASE ARE AS UNDER: 3 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 IN THE A SSESSMENT ORDER U/S. 143(3) R.W.SEC.147 THE ASSESSING OFFICER ( A.O . FOR SHORT) STATED THAT THE ASSESSEE DECLARED INCOME OF RS.4,19,646/ - ONLY AND HAD NOT DISCLOSED TH E ADDITIONAL INCOME OF RS.25,17,500 / - VOLUNTARILY DECLARED CONSEQUENT ON THE SURVEY PROCEEDINGS U/S 133 O N ACCOUNT OF EXCESS STOCK GOLD BULLION WEIGHING 1325 GRAMS. SINCE THE INCOME OF RS.25,17,500 / - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE RE - ASSESSM ENT PROCEEDINGS WERE COMPLETED MAKING AN ADDITIONS OF RS.99,44,924/ - TO THE INCOME RETURNED. THE FOLLOWING ADDITIONS MADE ON VARIOUS ISSUES ARE AS UNDER: SI.NO. DETAILS OF ADDITION MADE AMOUNT IN RS. TOTAL INCOME RETURNED 5,45,950 1 ADDITIONAL INCOME DECLARED TOWARDS VALUE OF EXCESS STOCK FOUND DURING SURVEY U/S 133A 25,17,500 2 DISALLOWANCE OF URD PURCHASES 11,27,006 3 ADDITION ON ACCOUNT OF LOW GROSS PROFIT 60,74,117 4 DISALLOWANCES OF EXPENSES TOWARDS PERSONAL USE 1,00,000 TOTAL ASSESSED INCOME RS. 1,03,64,570 5 . UPON THE ASSESSEES APPEAL, THE LD. C IT(A) CONSIDERED THE ASSESSEES SUBMISSIONS AND ALSO OBTAINED REMAND REPORT FROM THE A.O. THE LD. CIT(A) FOUND THAT IN THE REMAND PROCEEDINGS, THE A.O. HAS ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDINGLY, HE DIRECTED FOR ADDITION OF THE DELETION. THE ORDER OF THE LD. C IT(A) IN THIS REGARD MAY BE GAINFULLY REFERRED AS UNDER: REMAND REPORT ANSWERED THREE QUESTIONS RAISED BY THE CIT(A), VERY CLEARLY STATES THAT (A) EVIDENCE FURNISHED BY THE ASSESSEE IS GENUINE AND CORRECT IN RELATION TO PURCHASE OF GOLD ON 22/09/2010 FROM BANGALORE REFINERY PVT LTD. (B) ASSESSEE HAD PAID RS.28,88,433/ - ON 22/09/2010 BY RTGS WHICH W AS REFLECTED IN BANK STATEMENT ( C) THAT PARTICULAR INVOICE OF GOLD PURCHAS ED ON 22/09/2010 WAS NOT ENTERED PRIOR TO SURVEY IN TO THE STOCK BOOK. HOWEVER, AO IN REMAND REPORT BROUGHT OUT A NEW THEORY THAT THE GOLD FOUND DURING THE SURVEY MAY NOT BE THE GOLD PURCHASED AS PER THIS INVOICE WITHOUT ANY SUPPORTING EVIDENCE. ENQUIRY BY AO CLEARLY REVEALED A FACT THAT ONE INVOICE OF GOLD PURCHASED BY RTGS HAD NOT ACCOUNTED AS STOCK GOES TO STRENGTHEN AR'S ARGUMENT AND MUST BE GIVEN DUE CONSIDERATION AS IT WAS THROUGH ACCOUNTED CHANNEL OF THE ASSESSEE THROUGH BANKING SYSTEM. 4 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 THESE FACTS C LEARLY ESTABLISH THAT DISCLOSURE MADE DURING SURVEY HAD BEEN PROPERLY EXPLAINED AND APPELLANT HAD RIGHTLY RETRACTED DUE TO CLINCHING EVIDENCE IN HIS FAVOUR ESTABLISHING THAT GOLD PURCHASED EARLIER THROUGH RTGS WAS NOT ENTERED IN STOCK BOOK PRIOR TO SURVEY. HENCE, ADDITION OF RS.25,17,500 / - MADE BY AO IS DELETED. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION ON THE BASIS OF THE REMAND REPORT WHEREIN THE ASSESSEES EXPLANATION FOR THE ADDITION OF STOCK FOUND HAS BEEN ACCEPTED. HENCE, THE RETRACTION BY TH E ASSESSEE HAS BEEN DULY CORROBORATED BY PROPER EVIDENCE. IN ANY CASE, THE STATEMENT OBTAINED ON SURVEY DE HORS ANY CORROBORATE MATERIAL CANNOT LEAD TO ADDITION AS HELD BY THE HONBLE APEX COURT IN THE CASE OF CIT V. S. KHADER KHAN SON [2012] 25 TAXMANN.CO M 413 (SC) . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LD. CIT(A). APROPOS ADDITION ON ACCOUNT OF LOW GROSS PROFIT: 8. BRIEF FACTS OF THE CASE ARE AS UNDER: AO MADE THE ADDITION OF RS.60,18,223/ - ON ACCOUNT OF LOW GROSS PROFIT. THE PERCENTAGE OF GROSS PROFIT SHOWN THE ASSESSEE IS 1.70 % TO 0.47% ON SALE OF GOLD AND 3.77% TO 0.18% ON SALE OF SILVER FOR THE ASSESSMENT YEARS 2006 - 07 TO 2011 - 12. ACCORDING TO AO ON THE BASIS VERIFICATION OF EARLIER YEAR SALES MADE BY THE ASSESSEE, THE GRO SS PROFIT SHOWN WAS VERY LOW ON SALE OF GOLD AND SILVER. THE ASSESSEE'S ARGUMENT WAS THAT THERE IS SLIGHT FALL IN GP DUE TO COMPETITION AND MARKET CONDITION. THE AO HAD NOT SATISFIED AND NOT ACCEPTED THE ASSESSEE'S EXPLANATION AND ADDED RS.60,18,228/ - ON A CCOUNT OF LOW GROSS PROFIT. 5 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 9. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY CONSIDERING THAT NO GROSS PROFIT ADDITION HAS EVER BEEN MADE AND THE A.O. HAS NOT BROUGHT ON RECORD PROPER REASONING FOR MAKING THE ADDITION. THE ORDER OF TH E LD. CIT(A) IN THIS REGARD READS AS UNDER: THIS IS A RE - ASSESSMENT ORDER AND GENERAL ADDITION WITHOUT PROPER EVIDENCE IS NOT A GOOD PRACTICE. AO DID NOT BROUGHT OUT ANY NEW EVIDENCE TO SUPPORT FOR HIGHER GROSS PROFIT. GROSS PROFITS FOR DIFFERENT KINDS OF TRADES ARE DIFFERENT. IN EARLIER YEARS GP SHOWN BY APPELLANT IS ACCEPTED BY THE DEPARTMENT. IN RELATION TO SUBSEQUENT RE - ASSESSMENT MADE BY AO FOR THE ASSESSMENT YEARS 2009 - 10 TO 2013 - 14, AO ACCEPTED GP SHOWN BY THE APPELLANT IN RELATION TO CASH PURCHASES ALLEGEDLY TO HAVE BEEN MADE FROM M/S RAJESH EXPORTS FOR WORKING OUT UN ACCOUNTED INCOME. AO HAD NOT BROUGHT OUT ANY EVIDENCE OR COMPARED WITH ANY OTHER SIMILAR NATURE OF BUSINESS TO SHOW THAT GP SHOWN BY APPELLANT IS LOW. HENCE, I FEEL GROSS PROFIT ADDITI ON MADE BY AO IS UNWARRANTED, SPECIFICALLY, IN RE - OPENING PROCEEDINGS WITHOUT ANY MATERIAL EVIDENCE OR BASIS FOR THE SAME. HENCE, GROSS PROFIT ADDITION MADE BY AO OF RS.60,74,117/ - IS DELETED. 10. APART FROM THE ABOVE, WE ARE OF THE CONSIDERED OPINION FIR STLY THE VARIATION IN GROSS PROFIT IS NOT SIGNIFICANT. AS THERE IS NO LAW THAT THE GP RATE SHOULD FOLLOW MATHE MA TICAL PRECISION EVERY YEAR. MOREOVER , EVEN IF THERE IS SOME VARIATION, IT CANNOT LEAD TO ANY ADHOC ADDITION UNLESS THE A.O. HAS MADE THE PROPER INVESTIGATION AND FOUND ANY MATERIAL TO THE CONTRARY. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) IN THIS REGARD. APROPOS ISSUE OF ADDITION ON ACCOUNT OF UNREGISTERED DEALER (URD) AND PURCHA SES: 11. ON THIS ISSUE, THE A.O. NOTED THAT THE ASSESSEE HAD PURCHASES FROM UNREGISTERED DEALERS AMOUNTING TO RS.1 , 12 , 70 , 066/ - . ON ENQUIRY IN THIS REGARD, THE ASSESSEE SUBMITTED THAT ON SIMILAR ISSUE THE ITAT HAD EARLIER DELETED THE ADDITIONS. HOWEVER, TH E A.O. WAS NOT CONVINCED. HE HELD AS UNDER: HOWEVER, FOR THE ASST. YEAR 2011 - 12, THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO PRODUCE THE PERSONS FROM WHOM URD PURCHASES WERE MADE BUT THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PRODUCING THE PARTIES FOR CROSS - EXAMINATION. AS STATED ABOVE, SOME OF THE PARTIES RESPONDED THE SUMMONS, SOME DID NOT RESPOND AND 6 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 SOME OF THE SUMMONS COULD NOT BE SERVED ON THE PARTIES. THIS BEING THE CASE THE GENUINENESS AND CORRECTNESS OF URD PU RCHASES CANNOT BE ASCERTAINED. AS A RESU LT, THE CORRECTNESS OF THE STOCK ALSO CANNOT BE ASCERTAINED. MOREOVER, IN THE SAID ORDER OF THE HON BLE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI HAS CONFIRMED THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER FOR THE ASST. YEAR 2008 - 09 TO THE EXTENT OF RS.75,000/ - WHICH WORKS OUT T O 7.40%. HOWEVER, CONSIDERING THE FACT THAT THE URD PURCHASES ARE PAID BY CASH OF THE AMOUNTS LESS THAN RS.20,000/ - TOTALING TO RS.23,32,623/ - , I FEEL IT APPROPRIATE TO DISALLOW THE URD PURCHASES TO THE EXTENT OF 10% OF THE TOTAL URD PURCHASES OF RS.1 ,12,70,066/ - BOTH CASH AS WELL AS CREDIT AS INFLATION OF PURCHASES . THE DISALLOWANCE OF SUCH URD PURCHASES WORKS OUT TO RS. 11 ,27,006/ - . 12. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 13. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 7.40% OF THE PURCHASES CONSIDERING THE SAME TO BE A REASONABLE DISALLOWANCE. 14. AGAINST THE ABOVE ORDER, THE ASSESSEE HAS FILED CROSS OBJECTION BEFORE US. 15. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ADDITION IN THIS REGARD HAS SUMMARILY BEEN MADE ON THE BASIS THAT THE ASSESSEE HAS NOT PRODUCED THE PARTIES FOR CROSS EXAMINATIONS AND TH AT SOME OF THE PARTIES DID NOT RESPONDED TO SUMMONS. WE FIND THAT NO DEFECT WHATSOEVER HAS B EEN FOUND IN THE PURCHASE DOCUMENTS SUBMITTED BY THE ASSESSEE. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, NO DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES IS SUSTAINABLE. HENCE, IN THIS CASE WE FIND THAT SINCE NO DEFECT WHATSOEVER HAS BEEN FOUND IN TH E PURCHASE DOCUMENTATION AND THERE IS NO DOUBT IN THE VERACITY OF THE PAYMENT MADE AND THERE IS NO DOUBT EXPRESSED REGARDING SALES. THE DISALLOWANCE OF 7.40% ON THIS PURCHASE IS NOT SUSTAINABLE AS BEING BASED ON SURMISE AND CONJECTURE . H ENCE, WE DIRECT FOR THE DELETION OF THE DISALLOWANCE IN THIS REGARD. 7 ITA NO. 227/PAN./2017 & CO NO. 26/PAN./2017 16. IN THE RESULT, THIS APPEAL BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION BY THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 1 9 . 1 2 . 2 0 1 8 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PANJI CITY CONCERNED; (5) THE DR, ITAT, PANJI ; (6) GUARD FILE . BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT