ACIT, New Delhi V. Smt. Madhu Seth, Delhi

ITA 2298/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2121 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 12-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT M GOVIL
• Assessee Lawyers: ASHWANI TANEJA; DR RAKESH GUPTA
• Keywords: Unexplained expenditure
• Section: 69C; 133A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.2298/DEL/2009 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX, SMT. MADHU SE TH, CIRCLE 35(1), NEW DELHI. VS. PROP. M/S. EM ES S ENTERPRISES, C-6, PREET VIHAR, DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT M. GOVIL, SR. DR. RESPONDENT BY : DR. RAKESH GUPTA & SH. ASHWANI TA NEJA. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXVII, NEW DEL HI, DATED 27.02.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS BEF ORE US:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.13,00,0 00/- MADE ON ACCOUNT OF EXCESS CASH FOUND DURING THE SURVEY A ND THE ASSESSEE ADMITTED THAT THE EXCESS CASH FOUND WAS IN DEED FROM UNDISCLOSED SOURCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.52,14,9 18/- MADE ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY CONDUCTED U/S 133A OF THE IT ACT. 2 3. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME DECLARING INCOME OF RS.50,48,471/- WAS FILED ON 30.10.2005. A SURVEY U NDER SEC.133A HAS BEEN CONDUCTED ON 21.12.2004 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE SURVEY PROCEEDINGS, THE CASH STATEMENT WAS ALSO DRAWN BY THE ASSESSEE AS ON DATE, THEREIN DECLARED CASH IN HAND AT RS.1,24,2 67/-, BUT ON PHYSICAL VERIFICATION, IT WAS FOUND THAT THE ACTUAL CASH LYI NG WITH THE ASSESSEE WAS RS.14,24,267/-. THE ASSESSEE OFFERED RS.13 LAKHS T O TAX ON ACCOUNT OF UNEXPLAINED CASH FOUND AS PER THE STATEMENT OF SH. JOGINDER KUMAR SETH, HUSBAND OF SMT. MADHU SETH, RECORDED DURING THE SUR VEY PROCEEDINGS. THE ASSESSEE WAS ASKED AS TO WHY THE EXCESSIVE CASH OF RS.13 LAKHS FOUND DURING THE SURVEY ACTION AND WHICH WAS OFFERED TO T AX, BE NOT ADDED TO THE INCOME OF THE ASSESSEE. IN RESPONSE TO THE SHOW CA USE NOTICE, THE ASSESSEE VIDE ITS REPLY DATED 27.12.2007 EXPLAINED THAT THE EXCESS CASH FOUND AT THE TIME OF SURVEY BELONGS TO MRS. MADHU SETH, PROP. OF THE FIRM AND SHE WITHDRAW THE SAME FROM THE FIRM ON 14.12.2004. THE SE ENTRIES WERE DULY REFLECTED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE H AS GIVEN THE EXPLANATION REGARDING EXCESSIVE CASH IN HAND FOUND DURING THE S URVEY ACTION, THAT RS.12,00,000/- WAS WITHDRAWN ON 14.12.2004 FROM THE ACCOUNT OF MRS. MADHU SETH VIDE ACCOUNT NO.CA 970 MAINTAINED AT SYN DICATE BANK. BUT THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND CONV INCING BY THE A.O. SINCE 3 THE ENTRY IN THE CASHBOOK REGARDING THIS CASH WAS R ECORDED ON 27.12.2004, I.E., AFTER ONE WEEK FROM SURVEY ACTION. IN NORMAL CASE, THIS ENTRY SHOULD BE RECORDED ON THE SAME DATE, I.E. 14.12.2004. AFTER THE ONE WEEK OF SURVEY ASSESSEE RECORDED THIS ENTRY IN THE CASHBOOK WITH M ALA FIDE INTENTION OF BACK TRACKING THE SURRENDER MADE DURING THE SURVEY ACTIO N. THE ASSESSEES MAXIMUM OF MANUFACTURING EXPENSES ARE PAID IN CASH, THEN WHY SUCH A HUGE AMOUNT OF CASH WITHDRAWN FROM BANK REMAINED UNUSED. ASSESSEE COULD NOT EXPLAIN ANY OTHER MOTIVE OF SUCH A HUGE CASH WITHDR AWAL. THEREFORE, RS.13,00,000/- ON ACCOUNT OF UNEXPLAINED CASH FOUND IS ADDED BACK TO THE INCOME OF THE ASSESSEE. BEFORE THE CIT(A) IT HAS BEEN SUBMITTED BY THE LEA RNED AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. EM ESS ENTERPRISES. M/S. EM ESS ENTERPRISES IS ENGAGED IN THE MANUFACTU RING AND EXPORT OF GARMENTS. A SURVEY UNDER SEC. 133A WAS CONDUCTED O N 21.12.2004 AT THE BUSINESS PREMISES OF M/S. EM ESS ENTERPRISES. THE SURVEY ACTION STARTED IN THE MORNING OF 21.12.2004 AND WAS CARRIED OUT THE W HOLE DAY AND DURING THE NIGHT TILL NEXT MORNING. ON 20.12.2004, SISTER OF THE ASSESSEE, MRS. VEENA BIRLA HAD UNFORTUNATELY EXPIRED DUE TO SEVERE LUNG INFECTION AND ASTHMA ATTACK AND THE ASSESSEE HAD GONE TO ATTEND CREMATIO N ON 21.12.2004. WHEN THE SURVEY ACTION TOOK PLACE, ASSESSEES HUSBAND NA MELY LATE SHRI J.K. SETH 4 WAS CALLED BY THE SURVEY TEAM AND HE WAS ASKED TO R EMAIN PRESENT AT THE TIME OF PROCEEDINGS THROUGH OUT THE DAY AND NIGHT, DESPITE HIS HUMBLE REQUEST THAT HE WAS DISTURBED EMOTIONALLY DUE TO TH E SUDDEN DEATH OF SISTER- IN-LAW AND WAS NOT FEELING WELL. LATE MR. J.K. SET H HIMSELF WAS A PATIENT OF SEVERE DISEASES. HE WAS SUFFERING FROM CANCER IN I NTESTINE FOR WHICH HE HAD UNDERGONE SURGERY. HIS LIVER ALSO GOT DAMAGED DUE TO HEPATITIS B. DUE TO ALL THESE REASONS, HE WAS NOT MENTALLY AND PHYSICAL LY FIR TO WITHSTAND THE PRESSURE OF THE INVESTIGATION BEING CARRIED OUT BY THE SURVEY TEAM (EVIDENCES IN THIS REGARD ARE ENCLOSED). FINALLY, IN THE MID NIGHT, IT WAS ASKED BY THE SURVEY OFFICIAL THAT THE SURVEY TEAM WOULD NOT LEAV E THE PREMISES OF THE ASSESSEE UNLESS SOME SURRENDER WAS MADE BY THE ASSE SSEE. BOWING DOWN TO THE PRESSURE, THE HUSBAND OF THE ASSESSEE AGREED FO R RECORDING OF HIS STATEMENT AS PER THE DESIRE OF THE SURVEY OFFICIALS . FINALLY, ROUGHLY AT 2.55 AM HIS STATEMENT WAS RECORDED IN WHICH HE OFFERED T O BRING TO TAX SOME ALLEGED DISCREPANCIES POINTED OUT BY THE SURVEY OFF ICIALS WITH REGARD TO CASH AND STOCK. IN THESE CIRCUMSTANCES THE SO CALLED SU RRENDER WAS MADE. SUCH KIND OF SURRENDER CANNOT BE MADE BINDING UPON THE A SSESSEE. FOR THIS PROPOSITION RELIANCE IS PLACED ON THE FOLLOWING JUD GMENTS:- 1. SRIKANT G. SHAH VS. IT( (2007) 108 ITD 577 (MUM. ); 5 2. PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA & ANR., 91 ITR 18 (SC) IT WAS HELD BY THE HONBLE SUPREME COURT THAT EVEN IF THE ASSESSEE FILED ITS RETURNS ON THE BASIS OF SOME ENT RIES IN HIS ACCOUNTS IT WAS STILL OPEN TO THE ASSESSEE TO SHOW THAT THE ENTRIES IN THE ACCOUNTS WERE INCORRECT. IT WAS HELD VIDE PARA 2 THAT AN ADMISSI ON IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID T HAT IT IS CONCLUSIVE. IT WAS FURTHER HELD THAT IT WAS OPEN TO THE PERSON WHO MAD E THE ADMISSION TO SHOW THAT IT WAS INCORRECT. 3. S. ARJAN SINGH VS. CWT, 175 ITR 91 (DEL); 4. FEDERAL BANK LTD. VS. STATE OF KERALA, 124 CTR 3 55 (KER.); 5. DCIT VS. RATAN CORPORATION, 197 CTR 536 (GUJ.); 6. CIT VS. BHARAT GENERAL REINSURANCE CO. LTD., 81 ITR 303 (DEL); 7. ACIT VS. SUNIL KUMAR JAIN, 110 TTJ 731 (JP); 8. S.K. JAIN VS. JOINT CIT, 108 TTJ 575 (NAG.); 9. CIT VS. A.T. ASSOCIATES, 99 TTJ 74 (NAGPUR); 10. ITO VS. VARDHMAN INDUSTRIES, 99 TTJ 509 (JODHPU R); 11. RAJESH KANAGRAJ VS. DCIT, 73 TTJ 731 (CHENNAI); & 12. G. KANAGARAJ VS. DCIT, 73 TTJ 731 (CHENNAI). AFTER THE SURVEY TEAM HAD LEFT THE PREMISES AND AS SESSEES HUSBAND GOT PROPER MEDICAL TREATMENT AND SUBSEQUENTLY, THE ACCOUNTING RECORDS WERE CAREFULLY EXAMINED, IT WAS FOUND THAT THERE WAS NO DISCREPANCY OF CASH AS ALLEGED BY THE SURVEY TEAM. 6 THEREFORE, ON 27.12.2004, LATE SHRI J.K. SETH APPE ARED BEFORE THE ASSESSING OFFICER AND PRODUCED PRINT OUT OF THE BOO KS OF ACCOUNTS WHICH WERE KEPT IN COMPUTER AND EXAMINED BY THE SURVEY TE AM AND THE BACK UP WAS ALSO TAKEN BY THE SURVEY TEAM. THE STATEMENT M ADE BY LATE SH. J.K. SETH WAS RETRACTED VIDE LETTER DATED 27.12.2004 WITHDRAW ING THE OFFER OF RS.13 LAKHS. ON THIS DATE, THE ENTIRE BOOKS OF ACCOUNTS PRODUCED BEFORE THE ASSESSING OFFICER WERE EXAMINED BY HIM AND RECONCIL ED WITH BACKUP OF COMPUTER. THE ASSESSING OFFICER AUTHENTICATED AND IDENTIFIED ALSO THESE BOOKS AND OTHER RECORDS, COPIES OF WHICH ARE ENCLOS ED IN PAPER BOOK. ALL THESE BOOKS ARE PRODUCED BEFORE THE CIT(A) ALSO. L ATE SHRI J.K. SETH FELT SEVERELY ILL AND FINALLY, HE UNFORTUNATELY EXPIRED ON 26.07.05. IN THESE CIRCUMSTANCES, IT WAS SUBMITTED THAT THE STATEMENT OF LATE MR. J.K. SETH CANNOT BE MADE BINDING UPON THE ASSESSEE ON ACCOUNT OF VARIOUS AFORESAID REASONS. IT IS FURTHER SUBMITTED THAT EVEN ON MERITS NO ADD ITION COULD HAVE BEEN MADE IN THE CASE OF ASSESSEE AS THE CASH FOUND WAS PROPERLY EXPLAINED AND OUT OF THE BOOKS OF THE ASSESSEE WHICH WERE PROPERL Y EXAMINE DBY THE SURVEY TEAM AT THE TIME OF SURVEY PROCEEDINGS AS WE LL AS BY THE A.O. SUBSEQUENTLY. 7 THE LEARNED CIT(A) HELD THAT THE SOLE BASIS OF ADD ITION IS THE SURRENDER MADE BY SHRI J.K. SETH, HUSBAND OF THE AS SESSEE RECORDED DURING THE COURSE OF SURVEY. HOWEVER, THE SAME CANNOT BE TAKEN AS SUFFICIENT GROUND FOR MAKING SUCH ADDITION IN ABSENCE OF ANY C OGENT REASON OR EVIDENCE TO THE CONTRARY BROUGHT ON RECORD. THE AS SESSEE HAS EXPLAIN THE CIRCUMSTANCES UNDER WHICH THE SURRENDER WAS MADE AN D LATER ON HOW IT WAS FOUND TO BE INCORRECT. IT WAS ALSO HELD THAT THE A MOUNT WITHDRAWN FROM THE BANK ON 14.12.2004 WAS NOT CONSIDERED WHILE CONSIDE RING THE AVAILABILITY OF CASH ON THE DATE OF SURVEY. LATER ON WHEN THESE FA CTS ARE AVAILABLE, IT PROVES THAT THE CASH OF RS.13 LAKHS WITHDRAWAN FROM BANK W AS AVAILABLE AND HENCE THERE IS NO DISCREPANCY BETWEEN THE CASH FOUND DURI NG THE SURVEY AND AVAILABILITY OF CASH AS PER CASH BOOK. 4. ON THIS GROUND WE FIND THAT AVAILABILITY OF CASH HAS BEEN PROPERLY PROVED. THE WITHDRAWAL FROM THE BANK IS PROVED BY THE ENTRY IN THE BANK BOOK AND BANK STATEMENT. THEREFORE, THE ADDITION W AS RIGHTLY DELETED BY THE LEARNED CIT(A). THE ASSESSEE HAD FILED FOLLOWING D OCUMENTS NOT ONLY TO THE ASSESSING OFFICER BUT TO THE COMMISSIONER (APPEALS) ALSO:- I) ASSESSEES LETTER DATED 09.08.2007 SUBMITTED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS GIVING COMPLETE STATEMENT OF AFFAIRS OF THE ASSESSEE INCLUDING CAPITAL ACCOUNT O F THE ASSESSEE AND COPY OF ACCOUNT OF WITHDRAWALS OF THE ASSESSEE. 8 II) CAPITAL ACCOUNT OF THE ASSESSEE. III) DRAWINGS ACCOUNT OF THE ASSESSEE. IV) CASH BOOK OF M/S. EM ESS ENTERPRISES SHOWING TH AT ON 14.12.2004 A SUM OF RS.13 LAKHS HAS BEEN PAID TO MRS. MADHU SETH AND THE SOURCE OF THIS CASH IS WITHDRAWAL FROM SYNDICATE BANK OF RS.12,00,000- ON THE SAME DATE AND RS.1,00,000/- OUT OF THE OPENING BALANCE OF RS.2,60 ,832/-. THUS, THE TRANSACTION STOOD DULY RECORDED IN THE BOOKS OF ACC OUNTS ALONG WITH EXPLANATION OF ITS SOURCE WHICH WAS DULY INSPECTED BY THE SURVEY TEAM AND SUBSEQUENTLY BY ASSESSING OFFICER ON 27.12.2004. V) BANK BOOK OF THE ASSESSEE SHOWING WITHDRAWAL OF CASH OF RS.12,00,000/-. VI) BANK STATEMENT OF SYNDICATE BANK SHOWING WITHDR AWAL OF RS.12,00,000/- VII) LETTER DATED 26.12.2007 SUBMITTED TO ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. ITS PARA NO.3 IS REPRODUCE D BELOW:- WE HAVE ALREADY EXPLAINED THAT EXCESS CASH FOUND AT THE TIME OF SURVEY BELONGS TO MRS. MADHU SETH, PROPRIET OR OF THE FIRM AND SHE WITHDREW THE SAME FROM THE FIRM ON 14. 12.2004 OUT OF THE BANK WITHDRAWAL AS ON DATE, THESE ENTRIE S WERE DULY REFLECTED IN BOOKS OF ACCOUNTS DULY AUTHENTICATED B Y THE DEPARTMENT ALSO AT THE TIME OF SURVEY PROCEEDINGS. SINCE THESE DOCUMENTS REMAINED UNCONTROVERTED AND T HE SOLE BASIS OF ADDITION IS THE ORAL STATEMENT OF HUSBAND OF ASSESS EE, THE DOCUMENTARY EVIDENCE OUTWEIGHS THE ORAL SUBMISSION MADE. THERE FORE, THE ADDITION WAS RIGHTLY DELETED BY THE LEARNED CIT(A). GROUND NO.1 FAILS. 5. AS REGARDS GROUND NO.2 THE FACTS ARE THAT DURING THE SURVEY PROCEEDINGS, IT WAS FOUND THAT THE ACTUAL STOCK WAS OF WORTH 9 RS.2,29,58,836/- BUT ASSESSEE DECLARED OF RS.1,77,4 4,418/- AS PER TRADING ACCOUNT DRAWN BY THE ASSESSEE. THUS, THERE WAS A D IFFERENCE IN STOCK OF RS.52,14,418/- AND THE SAME WAS OFFERED TO TAX BY T HE ASSESSEE AS PER THE STATEMENT OF SH. JOGINDER KUMAR SETH, HUSBAND OF SM T. MADHU SETH, AT PAGE NO.58 RECORDED DURING THE SURVEY PROCEEDINGS SHRI JOGINDER KUMAR SETH WHO WAS DULY AUTHORIZED BY THE ASSESSEE TO ACT ON H ER BEHALF AS IT IS MENTIONED IN STATEMENT OF SHRI JOGINDER SETH RECORD ED DURING THE SURVEY ACTION. THE ASSESSEE ACCEPTED THE DISCREPANCY OF E XCESS STOCK FOUND AND CONSIDERED THIS AVAILABILITY OF STOCK AS ON THE DAT E OF SURVEY AS FOUND. FOR THIS PURPOSE TRADING AND PROFIT & LOSS ACCOUNT WAS PREPARED FOR THE PERIOD UPTO THE DATE OF SURVEY AND AFTER THE DATE OF SURVE Y TILL THE FINANCIAL YEAR. BEFORE THE ASSESSING OFFICER IT WAS ALSO EXPLAINED THAT THE DIFFERENCE OF CLOSING STOCK ARRIVED AT, AT THE TIME OF SURVEY IS ALREADY INCLUDE DIN VALUE OF STOCK. THE ASSESSEE ALSO SUBMITTED THAT WHILE PREP ARING THE TRADING ACCOUNT, THE OTHER EXPENSES ON ACCOUNT OF MANUFACTURING EXPE NSES LIKE FABRICATION, EMBROIDERY, DYEING, WASHING, FINISHING ETC. WERE NO T CONSIDERED BUT THEY ARE PART OF THE ACCOUNTS AND HENCE THE PROFIT WAS COMPU TED ACCORDINGLY. THE ASSESSING OFFICER HELD THAT WHEN THE ASSESSEE HAS S URRENDERED THE AMOUNT OF RS.52,14,418/-, HOW THE SAME IS ACCOUNTED IN THE RE TURN OF INCOME IS NOT EXPLAINED. THEREFORE, THE AMOUNT IS TO BE ADDED AS UNEXPLAINED EXPENDITURE 10 UNDER SECTION 69C OF THE ACT. THE LEARNED CIT(A) H ELD THAT THE EXCESS STOCK IS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS. FOR TH IS PURPOSE SEPARATE TRADING AND PROFIT & LOSS ACCOUNT WERE PREPARED WHICH INCLU DES THE VALUE OF EXCESS CLOSING STOCK FOUND. THEREFORE, NO FURTHER ADDITIO N WAS WARRANTED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A DDITION IS MADE ON ACCOUNT OF EXCESS STOCK FOUND AND THE ASSESSING OFF ICER HAS OBSERVED THAT HOW THE EXCESS STOCK FOUND HAS BEEN ACCOUNTED FOR I N THE RETURN OF INCOME IS NOT EXPLAINED. THE ASSESSING OFFICER HAS NOT DOUBT ED VARIOUS OTHER MANUFACTURING EXPENSES CLAIMED IN THE RETURN AND IN RESPECT OF WHICH NECESSARY EVIDENCES WERE ALSO FILED. HOWEVER, WE F IND THAT AS PER THE TRADING AND PROFIT & LOSS ACCOUNT FOR THE PERIOD UP TO THE DATE OF SURVEY, THE CLOSING STOCK ADOPTED IS THE SAME FIGURE AS FOUND D URING THE COURSE OF SURVEY. THE TRADING ACCOUNT WAS PREPARED FOR THE L IMITED PURPOSE OF COMPUTING THE VALUE OF CLOSING STOCK BUT VARIOUS OT HER MANUFACTURING EXPENSES WHICH WERE PART OF RECORD WERE NOT INCLUDE D IN THE SAME. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT MANUFACTURING EXPENSES, THE ASSESSING OFFICER COULD HAVE DISALLOWED SUCH EXPENS ES BUT THE ADDITION IS MADE ONLY ON ACCOUNT OF EXCESS STOCK FOUND. SINCE THE STOCK IS ALREADY DECLARED AS FOUND DURING SURVEY, THE GRIEVANCE OF T HE ASSESSING OFFICER NO 11 MORE SURVIVES. THEREFORE, THE ADDITION WAS RIGHTLY DELETED BY THE LEARNED COMMISSIONER (APPEALS). 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11 TH DECEMBER, 2009. SD/- SD/- (A.D. JAIN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH DECEMBER, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.