Ritesh Kumar Boyed, Kolkata V. C.I.T-XIV, Kolkata -, Kolkata

ITA 2300/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4553 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: VARSHA JALAN
• Keywords: Source of fund
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, KO LKATA [BEFORE HONBLE SHRI M. BALAGANESH, A.M. & SHRI S.S .VISWANETHRA RAVI, J.M .] ITA NO.2300/KOL/2013 ASSESSMENT YEAR : 2008-09 RITESH KUMAR BOYED -VERSUS- C.I.T., KOLKA TA-XIV, KOLKATA (PAN:AEAPB 7186 C KOLKATA (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SMT. VARSHA JALAN, A.R. FOR THE RESPONDENT : SHRI G. MALLIKARJUNA, CIT(DR ) DATE OF HEARING : 27.06.2016. DATE OF PRONOUNCEMENT : 08.07.2016. ORDER PER SHRI S.S.VISWANETHRA RAVI, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.3.2013 BY THE CIT, KOLKATA-XIV-KOLKATA, PASSED U/S.263 OF THE ACT , RELATING TO AY 2008-09. 2. THE ASSESSEE IS AN INDIVIDUAL. HE CARRIES ON THE BUSINESS OF DEALING IN AUTO PARTS UNDER THE NAME AND STYLE M/S.SURENDRA MO TOR. FOR AY 2008-09, THE ASSESSEE FILED RETURN OF INCOME ON 29.09.2008 DECLA RING TOTAL INCOME OF RS.2,77,976/-. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT ON 31.03.2010. 3. THERE WAS A SURVEY CONDUCTED BY THE REVENUE U/ S.133A OF THE INCOME TAX ACT, 1961 (ACT) IN THE BUSINESS PREMISES OF THE ASSESSEE ON 25.1.2008. IN THE COURSE OF SURVEY THE MATERIAL FOUND BY THE REVE NUE WAS THAT THE ASSESSEE RECORDED SALES OF RS.2,46,23,315/-. BUT IN THE P/L ACCOUNT IT WAS SHOWN ONLY AT ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 2 RS.2,07,65,620/- AND THE SALE TRANSACTIONS NOT REC ORDED IN THE REGULAR BOOKS OF ACCOUNTS WERE TO THE EXTENT OF RS.38,57,695/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXAMINED THE ASSESSEE AND CONFR ONTED THE ASSESSEE WITH THE MATERIAL FOUND IN THE COURSE OF SURVEY WHICH SH OWED THAT TRANSACTIONS OF SALE WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCO UNTS MAINTAINED BY THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE AO THA T IT WAS USUAL PRACTICE IN THE TRADE THAT MECHANIC OR GARAGE OWNERS TAKE AUTOM OBILE PARTS FROM THE SHOP AND IT IS ONLY WHEN THE PARTS SUIT THEIR NEEDS THEY PURCHASE AUTOMOBILE PARTS. THEY MAY RETURN THE GOODS IF THE AUTOMOBILE PARTS D O NOT SUIT THEIR PURPOSE. THE SALE TRANSACTION IN SUCH CASE IS NOT RECORDED I N THE BOOKS OF ACCOUNTS AND ONLY ON CUSTOMERS APPROVAL THE SALE IS RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE THERE WAS NO TRANSACTION OF SALE WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. 4. THIS PLEA OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO IN THE COURSE OF ASSESSMENT. HE HELD THAT THE ASSESSEE NEITHER PROD UCED DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CONTENTION REGARDING EXISTENCE OF SUCH PRACTICE NOR DID HE MAINTAIN ANY OTHER HAND BOOK OR RECORD OF SUCH TRAN SACTIONS NOR WAS SUCH HAND BOOK OR RECORD FOUND IN THE COURSE OF SURVEY. THE AO THEREFORE CONCLUDED THAT THE ASSESSEE HAD IN FACT DONE TRANSACTION OF SALE O F AUTO PARTS AND SUCH TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCO UNTS MAINTAINED BY THE ASSESSEE. 5. THE AO FOUND THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE ON SALES RECORDED IN THE BOOKS OF ACCOUNTS WAS 7.53%. HOWEV ER IN THE STATEMENT RECORDED AT THE TIME OF SURVEY THE ASSESSEE HAD IN ANSWER TO QUESTION NO.2 STATED THAT THE GROSS PROFIT IN HIS BUSINESS WOULD VARY BETWEEN 15.5% AND 53%. THE AO THEREFORE APPLIED 17% GROSS PROFIT ON UNRECO RDED SALES OF ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 3 RS.6,55,808/- AND MADE AN ADDITION TO THE TOTAL INC OME OF THE ASSESSEE. THE AO PASSED THE ORDER U/S.143(3) OF THE ACT ON 22-12- 2010. 6. THE CIT IN EXERCISE OF HIS POWERS U/S.263 OF T HE ACT, WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THE MAIN POINT OF DISPUTE WHICH IS SUBJEC T MATTER IN THIS APPEAL AS RAISED BY THE CIT IN THE PROCEEDINGS U/S.263 OF THE ACT WAS AS THAT THE AO SHOULD NOT HAVE STOPPED BY JUST ADDING GROSS PROFIT ON UNRECORDED SALES. ACCORDING TO CIT THE ENTIRE SALE SHOULD HAVE BEEN A DDED AS INCOME OF THE ASSESSEE. ALTERNATIVELY, THE PURCHASES OR PEAK PUR CHASE, RELATED TO THE UNRECORDED SALES, OUGHT TO HAVE ALSO BEEN ADDED AS INCOME OF THE ASSESSEE. 7. IN REPLY TO THE PROPOSAL OF THE CIT STATED ABO VE, THE ASSESSEE SUBMITTED THAT THE AO WAS IN POSSESSION OF THE ENTIRE DOCUMEN TS, RECORDS AND BOOKS OF ACCOUNTS FOUND AT THE TIME OF SURVEY AND ONLY ON EX AMINATION OF ALL THOSE DOCUMENTS THE AO HAS COME TO A CONCLUSION THAT AN A DDITION OF GROSS PROFIT ON SALES NOT RECORDED IN THE BOOKS OF ACCOUNTS COULD B E ADDED AS INCOME. THE ASSESSEE POINTED OUT THAT WHEN THE AO IN EXERCISE O F HIS POWERS AFTER DUE ENQUIRY HAD COME TO A CONCLUSION, WHICH IS A POSSIB LE CONCLUSION, THE CIT CANNOT EXERCISE OF HIS POWERS U/S.263 OF THE ACT, J UST BECAUSE HE DOES NOT FEEL SATISFIED WITH THE CONCLUSIONS REACHED BY THE AO. I N OTHER WORDS IT WAS SUBMITTED THAT JURISDICTION U/S.263 OF THE ACT CANN OT BE INVOKED TO SUBSTITUTE THE VIEW OF THE AO WITH THAT OF THE CIT. IT WAS SUBMIT TED THAT THE JURISDICTION CAN BE INVOKED ONLY WHEN TWO CONDITIONS VIZ., THE ORDER IN QUESTION BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE ESTABLISHED. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (BOM.) FO R THE ABOVE PROPOSITION. THE ASSESSEE ALSO POINTED OUT THAT SINCE UNRECORDED SALES ARE MADE THROUGHOUT THE YEAR, UNRECORDED PURCHASES WERE ALSO MADE THROU GHOUT THE YEAR. THE PROFIT ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 4 MARGIN ON SALE AND THE REALIZATION FROM SALE WOULD BE SUFFICIENT SOURCE OF FUNDS OUT OF WHICH THE ASSESSEE WOULD HAVE MADE PURCHASES AND HENCE NO SEPARATE ADDITION OF INCOME ON ACCOUNT OF UNRECORDED PURCHAS ES SHOULD BE MADE. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES LTD. 258 ITR 654 ( GUJ.) AND THE ITAT DELHI IN THE CASE OF INDIA SEED HOUSE VS. ACIT (2001) 69 TTJ (DELHI) 241 FOR THE PROPOSITION THAT ONLY GROSS PROFIT ON UNRECORDED SA LES HAVE TO BE TREATED AS INCOME AND NOT THE ENTIRE UNDISCLOSED SALE. 8. THE CIT HOWEVER DID NOT DEAL WITH ANY OF THE A FORESAID SUBMISSIONS BUT NEVERTHELESS CONCLUDED THAT THE GROSS PROFIT ADOPTE D BY THE AO FOR MAKING ADDITION ON ACCOUNT OF INCOME FROM UNRECORDED SALES WAS PROPER. HE WENT ON FURTHER TO ADD THAT THE ELEMENT OF UNACCOUNTED PURC HASE OUGHT TO HAVE BEEN ADDED BY THE AO AND THE ORDER OF THE AO WITHOUT GOI NG INTO THIS ASPECT HAS RESULTED IN UNDERASSESSMENT OF INCOME. THE CIT FUR THER HELD THAT IF PURCHASES AND SALES RECORDED IN THE BOOKS OF ACCOUNTS ARE COR RELATED THEN GROSS PROFIT RATE CAN BE APPLIED AND INCOME FROM UNRECORDED SALES EST IMATED. SINCE THE AO HAS NOT VERIFIED THE ABOVE ASPECT THE ORDER OF THE AO I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT ACCORDINGLY P ASSED ORDER U/S.263 OF THE ACT SETTING ASIDE THE ASSESSMENT ORDER DATED 25.03.2013 WITH A DIRECTION TO PASS A FRESH ASSESSMENT ORDER AFTER EXAMINING THE EVIDENCE AND DOCUMENTS IN RESPECT OF VARIOUS ISSUES RAISED AFTER GIVING OPPORTUNITY T O THE ASSESSEE AND IN ACCORDANCE WITH LAW. 9. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSE E IS IN APPEAL BEFORE THE TRIBUNAL. 10. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER DATED 15.01.2016 PASSED BY THIS TRIBUNAL IN ITA NO.2299/KOL/13 AND T HE LD. D.R. RELIED ON THE ORDER OF THE C.I.T. ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 5 11. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE AFORESAID ORDER AS RELIED ON BY THE ASSESS EE AND THE ISSUE THEREIN IS IDENTICAL TO THE FACTS OF THE CASE ON HAND. WE ALSO FIND THAT THE ADDITION MADE WAS CONSEQUENT TO THE SURVEY DATED 25.01.2008. S R IGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE D BENCH OF KOLK ATA TRIBUNAL ( SUPRA ) DEALT THE ISSUE ELABORATELY AND DECIDED THE SAME IN FAVOU R OF THE ASSESSEE BY QUASHING THE ORDER OF C.I.T., THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREINBELOW: 11. AT THE TIME OF HEARING IT WAS BROUGHT TO OUR NOTICE THAT IN RESPECT OF SIMILAR ADDITION MADE IN AY 2007-08 ON T HE BASIS OF MATERIAL FOUND AT THE TIME OF SURVEY, AN ASSESSMENT WAS MADE BY THE AO BY ORDER DATED 21.12.2009 ADDING GROSS PROFI T ON UNRECORDED SALES. THAT ORDER WAS REVISED BY THE CI T IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT BY AN ORDER DATED 23. 3.2012. IN THE SAID ORDER THE CIT GAVE SIMILAR DIRECTIONS AS WAS D ONE IN AY 2006- 07. THE SAID ORDER WAS CHALLENGED BY THE ASSESSEE BEFORE THE ITAT IN ITA NO. 1245/KOL/12 AND THIS TRIBUNAL BY ITS ORD ER DATED 16.5.2013 WAS PLEASE TO QUASH THE ORDER OF THE CIT U/S.263 OF THE ACT. THE SAID ORDER OF THE TRIBUNAL HAS HOWEVER BE EN REVERSED BY THE HONBLE CALCUTTA HIGH COURT IN G.A.NO.3284 OF 2 013 DATED 4.4.2014. THE ASSESSEE PREFERRED SLP BEFORE THE H ONBLE SUPREME COURT AGAINST THE ORDER OF THE HONBLE CAL CUTTA HIGH COURT AND THE HONBLE SUPREME COURT IN CIVIL APPEAL NO.3113 OF 2015 BY ITS JUDGMENT DATED 23.3.2015. THE HONBLE SUPREME COURT SET ASIDE THE ORDER OF THE HONBLE CALCUTTA H IGH COURT AND REMITTED THE MATTER TO THE HONBLE HIGH COURT TO PR OCEED IN ACCORDANCE WITH LAW I.E., FRAME SUBSTANTIAL QUESTIO NS OF LAW AND THEREAFTER PROCEED WITH THE MATTER. 12. THE POINT FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE CIT RIGHTLY INVOKED JURISDICTION U/S.263 OF THE ACT . WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE AND THE LEARNED DR. THE LEARNED COUNSEL FOR THE ASSESSEE R EITERATED SUBMISSIONS MADE BEFORE THE CIT AND THE LEARNED DR RELIED ON THE ORDER OF THE CIT. 13. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS. IT IS SEEN FROM THE ORDER OF THE AO T HAT THE AO ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 6 REJECTED THE CLAIM OF THE ASSESSEE THAT THE UNRECOR DED SALES WERE GOODS GIVEN TO CUSTOMERS AND THE CUSTOMERS MAY APPR OVE OR MAY RETURN SUCH GOODS. IT IS ONLY ON APPROVAL SALES AR E RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE, THERE WERE NO SUPPRE SSED SALES, WHATSOEVER. THIS WAS REJECTED BY THE AO AND HE MAD E AN ADDITION ON ACCOUNT OF GROSS PROFIT ON UNRECORDED SALES AT 1 7% OF UNRECORDED SALES. THE CRUCIAL WORDS IN THE ORDER O F ASSESSMENT READS AS FOLLOWS: CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E THE G.P. RATE ON UNDISCLOSED SALE IS CALCULATED @ 17%. AND THE S AME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. NO FURTH ER EXPENSES ARE ALLOWED AS ASSESSEE HAS ALREADY DEBITED HUGE EXPENS ES (ADDITION RS.38,470/-) 14. IT IS CLEAR FROM THE ABOVE OBSERVATIONS OF THE AO AND THE OBSERVATIONS IN PARA-3 OF THE ORDER OF ASSESSMENT T HAT HE HAD TAKEN DUE COGNIZANCE OF ALL DEBIT ITEMS IN THE PROFIT AND LOSS ACCOUNT, THE TAX AUDIT REPORT, THE IMPOUNDED DOCUMENTS, STATEMEN T RECORDED DURING SURVEY AND DURING ASSESSMENT PROCEEDINGS, BO OKS AND ACCOUNTS AND OTHER DOCUMENTS, BILLS, VOUCHERS ETC. 15. THE CIT HAS EXERCISED JURISDICTION U/S.263 OF THE ACT ON THE GROUND THAT THE AO FAILED TO MAKE PROPER ENQUIRY WH ICH HE OUGHT TO HAVE MADE BEFORE COMPLETING THE ASSESSMENT. THE RE IS A DISTINCTION BETWEEN 'LACK OF ENQUIRY' AND 'INADEQUA TE ENQUIRY'. IF THERE IS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NO T BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER UNDER S. 263, MER ELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. SUCH A COUR SE OF ACTION IS OPEN ONLY IN CASES OF 'LACK OF ENQUIRY'. ALTHOUGH A PPARENTLY THE ASSESSMENT DOES NOT GIVE ANY REASONS WHY PURCHASED WERE NOT BEING ADDED AS INCOME, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAS NOT APPLIED HIS MIND TO THE IS SUE. AO IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION IN THE ASSESSMENT ORDER. AO HAD CALLE D FOR EXPLANATION REGARDING SUPPRESSED SALES AND THE ASSE SSEE HAD FURNISHED HIS EXPLANATION. THUS, IT CANNOT BE SAID THAT IT IS A CASE OF 'LACK OF ENQUIRY'. FURTHER, EVEN THE CIT IS NOT CLEAR AS TO WHETHER ENTIRE PURCHASES HAS TO BE ADDED OR PEAK PU RCHASES HAS TO BE ADDED OR THE ENTIRE SALES HAS TO BE ADDED AS INC OME. THEREFORE, THE VIEW TAKEN BY THE AO WAS ONE OF THE POSSIBLE VI EWS AND THE ASSESSMENT ORDER PASSED BY THE AO COULD NOT BE HELD TO BE PREJUDICIAL TO THE REVENUE. EVEN THE CIT CONCEDED THE POSITION THAT THE AO MADE THE INQUIRIES, ELICITED REPLIES ON GROSS PROFIT AND ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 7 THEREAFTER PASSED THE ASSESSMENT ORDER. THE GRIEVAN CE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIRIES AS TO WHETHER ANY ADDITION HAS TO BE MADE ON ACCOUNT OF UNRECORDE D PURCHASES OR WHETHER THE ENTIRE SUPPRESSED SALES HAD TO BE RE GARDED AS INCOME OF THE ASSESSEE RATHER THAN ACCEPTING THE EX PLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF ' LACK OF INQUIRY'. THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF GANBRIEL INDIA LTD. (SUPRA) CLEARLY SUPPORTS THE ST AND TAKEN BY THE ASSESSEE IN THIS REGARD. WE ALSO DERIVE SUPPORT FO R OUR CONCLUSIONS AS ABOVE FROM THE DECISION OF THE HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.). 16. FOR REASONS STATED ABOVE, WE ARE OF THE VIEW T HAT THE JURISDICTION U/S.263 OF THE ACT WAS NOT PROPERLY EX ERCISED BY THE CIT AS THE CONDITION PRECEDENT FOR INVOKING THE SAM E VIZ., THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IS NOT SHOWN TO BE PRESENT IN THE PRESENT C ASE. WE THEREFORE QUASH THE ORDER U/S.263 OF THE ACT AND AL LOW THE APPEAL BY THE ASSESSEE. 12. IN THE LIGHT OF OBSERVATIONS MADE BY THE COORDI NATE BENCH OF THIS TRIBUNAL, WE ARE OF THE VIEW THAT THE CIT DID NOT M AKE ANY SPECIFIC OBSERVATION AS TO HOW THE ORDER OF THE AO IS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF REVENUE AS IT IS A CONDITION PRECEDENT TO INVOKE TH E JURISDICTION UNDER SECTION 263 OF THE ACT. THEREFORE, IN THE ABSENCE OF SUCH O BSERVATION, THE IMPUGNED ORDER BEFORE US IS NOT IN ACCORDANCE WITH LAW. THUS , WE QUASH THE ORDER OF CIT AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M. BALAGANESH] [S.S.VISWANETHRA RAVI] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 08.07.2016. TALUKDAR ITA NO.2300/KOL/2013 RITESH KUMAR BOYED. A.YR.2008-09 8 COPY OF THE ORDER FORWARDED TO: 1. RITESH KUMAR BOYED, 108/110, B.T.ROAD, KOLKATA-3 5. 2 THE C.I.T., KOLKATA-XIV, KOLKATA. 3. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES