Mr. M.L. Krupal (HUF), Somwarpet V. ITO, Madikeri

ITA 230/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63843 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN JT
• Assessee Lawyers: K Y NINGOJI RAO
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.230/BANG/2012 ASSESSMENT YEAR : 2007-08 SHRI M.L. KRUPAL (HUF), PROP. M/S. ASSOCIATED COFFEE, BLV COMPLEX, I.B. ROAD, SOMWARPET 571 236. KODAGU DISTRICT. PAN : AAFHK 0753B VS. THE INCOME TAX OFFICER, WARD 1, MADIKERE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.Y. NINGOJI RAO, C.A. RESPONDENT BY : SHRI A. SUNDARARAJAN, JT.CIT (DR) DATE OF HEARING : 26.12.2012 DATE OF PRONOUNCEMENT : 26.12.2012 O R D E R PER SMT. P. MADHAVI DEVI, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2007-08 IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS), MYS ORE DATED 29.11.2011. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS OF APPEAL, BUT THE ONLY GRIEVANCE IS AGAINST THE ORDER OF THE CIT(APPEALS) IN CONFIRMING THE ADDITION OF Q 25,64,832 BEING ON ACCOUNT OF DIFFERENCES IN ACCOUNTING THE PURCHASES AND SALES IN BOOKS OF ACCO UNTS PRODUCED DURING THE COURSE OF SURVEY. ITA NO.230/BANG/2012 PAGE 2 OF 5 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A HUF TRADING IN COFFEE SEEDS. FOR THE RELEVANT ASSESSMENT YEAR, IT FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF Q 1,31,940. A SURVEY U/S. 133A WAS CONDUCTED ON 09.03.2007 AND CONSEQUENT TO THE SAME, ASSESSMEN T PROCEEDINGS U/S. 143(3) WERE INITIATED. VARIOUS DETAILS WERE CALLED FOR AND THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS ON 10.12.2009. ON A PERUSAL OF THE BOOKS OF ACCOUNTS AND PURCHASE REGISTER IMPOUNDED DURING THE COURSE OF SURVEY, THE ASSESSING OFFICER NOTICED THAT PURCHASES TO THE EXTENT OF Q 1,43,64,108 WAS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOU NTS PRODUCED BY THE ASSESSEE. HE ALSO FOUND THAT SALES TO THE EXTENT O F Q 1,69,28,140 WAS ALSO NOT ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS PROD UCED BY THE ASSESSEE. THE ASSESSEES EXPLANATION REGARDING THESE DISCREPA NCIES WAS CALLED FOR. THE ASSESSEE FILED HIS SUBMISSIONS ON 31.12.2009 EX PLAINING THE NATURE OF HIS BUSINESS AND THE DISCREPANCIES IN THE BOOKS OF ACCOUNTS IS ONLY DUE TO WRONG ENTRIES MADE BY HIS SEMI-SKILLED EMPLOYEES, W HO MIXED UP THE TRANSACTIONS AND INTERCHANGING THE ENTRIES BETWEEN HIS INDIVIDUAL BUSINESS AND HUF BUSINESS. HE THEREFORE TRIED TO JUSTIFY TH E DISCREPANCIES IN THE BOOKS OF ACCOUNTS RELATING TO BOTH PURCHASES AND SA LES. THE AO WAS, HOWEVER, NOT CONVINCED/SATISFIED WITH THE ASSESSEE S SUBMISSIONS. HE HELD THAT ASSESSEE IS RUNNING A WELL ORGANIZED BUSI NESS AND THAT THE SALE INVOICES CLEARLY SHOW THAT SALE IS MADE BY THE ASSE SSEE DIRECTLY TO THE PRINCIPAL BUYERS. HE HELD THAT BOOKS OF ACCOUNTS P RODUCED BY THE ASSESSEE DID NOT SHOW ANY COMMISSION RECEIVED FROM THE BUYERS AND THE CLAIM OF MIXING UP OF ENTRIES BY THE EMPLOYEES OF T HE ASSESSEE CANNOT BE ACCEPTED FOR THE REASON THAT PERSONS WHO HAVE WRITT EN THE BOOKS OF ITA NO.230/BANG/2012 PAGE 3 OF 5 ACCOUNTS FOR THE TWO CONCERNS ARE DIFFERENT. HE TH EREFORE MADE THE ADDITION OF THE DIFFERENCE BETWEEN THE SALES AND PU RCHASES OF Q 25,64,032 AS SUPPRESSED PROFIT AND BROUGHT IT TO TAX. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALS) REITERATING THE SUBMISSIONS MADE BY IT BEFORE THE AO. HE ALSO FILED A RECAST STATEMENT OF ACCOUNTS WHEREIN T HE PROFIT WAS WORKED OUT AT Q 11,01,256 AS AGAINST THE INCOME OF Q 1,31,940 AS PER THE AUDITED ACCOUNTS OF THE ASSESSEE. THE CIT(APPEALS) FORWARD ED THE SAID RECAST STATEMENT TO THE AO FOR HIS REPORT AND THE REPORT O F THE AO WAS ALSO GIVEN TO THE ASSESSEE FOR HIS REJOINDER. THE ASSESSEE FI LED HIS REJOINDER TO THE AOS REMAND REPORT AND AFTER CONSIDERING THE SAME, THE CIT(APPEALS) CAME TO THE CONCLUSION THAT THE ACTUAL SALES AND PU RCHASE FIGURES ARE CULLED OUT BY THE AO FROM THE REGISTERS IMPOUNDED D URING THE COURSE OF SURVEY WHICH REFLECTS THE TRUE AND CORRECT TRANSACT IONS DONE BY THE APPELLANT AND MAINTAINED FOR PERSONAL REFERENCE AND CONTROL. HE HELD THAT THESE FIGURES ARE FROM THE AUDITED PROFIT & LOSS AC COUNT OF THE ASSESSEE AND THEREFORE THE ADDITION IS JUSTIFIED. HE THUS C ONFIRMED THE ADDITION MADE BY THE AO AND ASSESSEE IS IN SECOND APPEAL BEFORE U S. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. K.Y. NINGO JI RAO, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSEE BE FORE THE AUTHORITIES BELOW, TRIED TO CONVINCE THE BENCH THAT THE RECAST STATEMENT OF ACCOUNTS FURNISHED BY THE ASSESSEE IS THE CORRECT STATE OF A FFAIRS AND THE CIT(APPEALS) OUGHT TO HAVE ACCEPTED THE SAME. ITA NO.230/BANG/2012 PAGE 4 OF 5 6. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ERS OF AUTHORITIES BELOW. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE AO HAS MADE THE ADDIT ION ON DIFFERENCE BETWEEN THE PURCHASES AND SALES. BOTH THE AUTHORIT IES BELOW SEEM TO HAVE OVERLOOKED THE FACT THAT THE SALES ALSO INCLUD ED THE GROSS PROFIT AND THAT THE SAME WILL HAVE TO BE EXCLUDED FROM THE SAL ES FOR ARRIVING AT THE NET TAXABLE INCOME. NEITHER THE AO NOR THE CIT(APPEALS ) HAVE REALLY APPLIED THEIR MIND TO THE ABOVE LEGAL POSITION. IN VIEW OF THE SAME AND IN THE INTEREST OF JUSTICE, WE DEEM IT FIT AND PROPER TO R EMAND THE ISSUE TO THE FILE OF THE CIT(APPEALS) TO VERIFY THE STATEMENT OF THE ASSESSEE WITH REGARD TO THE WRONG ENTRIES MADE IN ITS BOOKS OF ACCOUNTS AND AFTER EXAMINATION OF THE SAME TO ALSO LOOK INTO THE PROPORTION OF THE GR OSS PROFIT EMBEDDED IN THE SALES. NEEDLESS TO MENTION THAT THE ASSESSEE S HALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF DECEMBER 2012. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( P. MADHAV I DEVI ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 26 TH DECEMBER , 2012. DS/- ITA NO.230/BANG/2012 PAGE 5 OF 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.