K.D. KOTHARI & CO, MUMBAI V. ACIT 16(1), MUMBAI

ITA 2286/MUM/2010

• Counselvise Citation: 228619914 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: USHA NAIR
• Assessee Lawyers: B V JHAVERI

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI S.S.GODARA, JM ITA NO.2286/MUM/2010 : ASST. YEAR 2007-2008 M/S.K.D.KOTHARI & CO. 1215, PRASAD CHAMBERS, OPERA HOUSE MUMBAI 400 004. PAN : AAAFK1373N. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 16(1) MUMBAI. (APPELLANT) VS. (RESPONDENT) ITA NO.3742/MUM/2010 : ASST. YEAR 2007-2008 THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 16(1) MUMBAI. M/S.K.D.KOTHARI & CO. 1215, PRASAD CHAMBERS, OPERA HOUSE MUMBAI 400 004. (APPELLANT) VS. (RESPONDENT) REVENUE BY : SMT.USHA NAIR ASSESSEE BY : SHRI B.V.JHAVERI DATE OF HEARING : 23.04.2012 DATE OF PRONOUNCEMENT : 25.04.2012 O R D E R PER R.S.SYAL, AM : THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE COMM ISSIONER OF INCOME-TAX (APPEALS) ON 19.02.2010 IN RELATION TO THE ASSESSME NT YEAR 2007-2008. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE THROUGH VA RIOUS GROUNDS IS AGAINST THE CONFIRMATION OF ADDITION ON ACCOUNT OF COMMISSI ON AT 10%. THE REVENUE IS AGGRIEVED AGAINST THE RELIEF ALLOWED IN THE FIRST A PPEAL ON THIS ISSUE THROUGH GROUND NOS. 1 AND 3. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE, AT THE MATERIAL TIME, WAS ENGAGED IN PURCHASE OF ROUGH DIAMONDS, MA NUFACTURING AND SALE OF FINISHED DIAMONDS. A SURVEY ACTION WAS TAKEN U/S 13 3A ON 13.12.2006. IT TRANSPIRED DURING THE SURVEY THAT THE ASSESSEE WAS CARRYING ON SOME PART OF THE BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. ON THE BASIS OF IMPOUNDED DOCUMENTS, ITA NOS.2286 & 3742/MUM/2010 M/S.K.D.KOTHARI & CO. 2 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE EF FECTED SALES OUTSIDE THE BOOKS OF ACCOUNT TO THE TUNE OF ` 18,37,35,881. IT WAS HELD THAT THE ASSESSEE EARNED TOTAL COMMISSION ON SUCH BUSINESS AT THE RAT E OF 20%, WHICH RESULTED INTO ADDITION OF ` 3,67,47,146. THE LEARNED CIT(A) REDUCED SUCH ADDITI ON TO 10%. BOTH SIDES ARE IN APPEAL AGAINST THEIR RESPECT IVE STANDS. WHEREAS THE ASSESSEE IS PRAYING FOR THE DELETION OF THE REMAINI NG ADDITION SUSTAINED IN THE FIRST APPEAL AND THE REVENUE IS URGING FOR THE RES TORATION OF ADDITION AT THE RATE OF 20% MADE BY THE AO. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT ON THE BASIS OF SURVEY C ONDUCTED ON THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE CARRIED ON BUSINESS OUTSIDE BOOKS OF ACCOUNT NOT ONLY IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, BUT ALSO IN THE PRECEDING YEAR. IN SUCH PRECEDING YEAR, THE A.O. MADE ADDITION ON THE SAME PATTERN AT THE RATE OF 20% ON UNRECORDED SALES . WHEN THE MATTER FINALLY CAME UP BEFORE THE TRIBUNAL, IT RESTRICTED THE ADDI TION TO 3%. COPY OF THE TRIBUNAL ORDER SUSTAINING THE ADDITION AT THE RATE OF 3% HAS BEEN PLACED ON RECORD. BOTH THE SIDES ARE IN AGREEMENT THAT THE FA CTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SUSTAIN TH E ADDITION AT THE RATE OF 3% ON UNACCOUNTED SALES AT ` 18.37 CRORE, WHICH WILL AMOUNT TO AN ADDITION OF ` 55,12,076. RESULTANTLY GROUNDS OF THE REVENUE IN TH IS REGARD ARE DISMISSED AND THOSE OF THE ASSESSEE ARE PARTLY ALLOWED. 5. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST T HE DELETION OF ADDITION TOWARDS EXCESS STOCK. THE FACTS APROPOS THIS GROUND ARE THAT DURING THE SURVEY ACTION, EXCESS STOCK TO THE TUNE OF 655.69 CARATS WORTH ` 60,73,726 WAS FOUND. THE ASSESSING OFFICER MADE ADDITION FOR THIS SUM. T HE LEARNED CIT(A) DELETED THE ADDITION. ITA NOS.2286 & 3742/MUM/2010 M/S.K.D.KOTHARI & CO. 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE EARNED COMM ISSION INCOME IN RESPECT OF BUSINESS NOT DISCLOSED IN THE BOOKS OF ACCOUNT. ADD ITION TOWARDS SUCH COMMISSION INCOME HAS BEEN SUSTAINED BY US AT ` 55,12,076. THE SUBJECT MATTER OF THIS GROUND IS THE EXCESS STOCK WORTH ` 60.73 LAKH FOUND AT THE TIME OF SURVEY. THE CASE OF THE ASSESSEE IS THAT SUCH EXCESS STOCK WAS FOUND OUT OF THE UNACCOUNTED COMMISSION INCOME. IT IS AXIOMATIC THAT ONCE AN INCOME IS EARNED OUTSIDE THE BOOKS OF ACCOUNT, WHICH HAS BEEN TAXED, UTILIZATION OF THE SAME CANNOT BE AGAIN BROUGHT TO TAX. THERE IS NO MATERIA L TO INDICATE THAT THE COMMISSION INCOME SO EARNED BY THE ASSESSEE WAS SPE NT ELSEWHERE. IN VIEW OF THESE FACTS THE ASSESSEE IS ENTITLED TO BENEFIT OF TELESCOPING. AS AGAINST THE EXCESS STOCK WORTH ` 60.73 LAKH, WE HAVE SUSTAINED ADDITION ON ACCOUNT O F COMMISSION AT ` 55,12,076. RESULTANTLY THE AMOUNT OF EXCESS STOCK O VER AND ABOVE SUCH AMOUNT OF ` 55,12,076 IS REQUIRED TO BE ADDED. WE, THEREFORE, O RDER FOR THE SUSTENANCE OF ADDITION ON THIS ISSUE AT ` 5,61,650. THIS GROUND OF THE REVENUES APPEAL IS PARTLY ALLOWED. 7. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED. ORDER PRONOUNCED ON THIS 25 TH DAY OF APRIL, 2012. SD/- SD/- (S.S.GODARA) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 25 TH APRIL, 2012. DEVDAS* ITA NOS.2286 & 3742/MUM/2010 M/S.K.D.KOTHARI & CO. 4 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXVII, MUMBAI 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.