Shri Kiran Vadilal Shah, Himatnagar V. The Income tax Officer,S.K. Ward-3, Himatnagar

ITA 2361/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1368 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Unexplained investment; Retrospective amendment; Additional evidence; Corroborative evidences; Tax effect
• Section: 68; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE ITO, SABARKANTHA WARD - 3, HIMATNAGAR (APPELLANT /RESPONDENT ) VS SHRI KIRAN VADILAL SHAH, PROP: VALLABH TRADERS, 39, KOTIYARK SOCIETY, CHHAPRIYA ROAD, HIMATNAGAR, DIST: SABARKANTHA PAN: ACDPS9860K (RESPONDENT /APPELLAN T ) REVENUE BY : S H RI K. MADHUSUDAN , SR. D . R. ASSESSEE BY: S H RI TUSHAR HEMANI , A.R. DATE OF HEARING : 11 - 04 - 2 016 DATE OF PRONOUNCEMENT : 16 - 06 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THE REVENUE AND AS SESSSE HAVE FILED THE INSTANT CROSS APPEALS FOR A.Y. 2008 - 09 AGAINST THE O RDER DATED 20 - 07 - 2012 PASSED BY THE CIT(A) - V III, AHMEDABAD, IN APPEAL NO. CIT(A) - VIII/ITO/SK. WD. 3/HMT//522/10 - 11 , IN PROCEEDINGS UNDER SECTION 144 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2226 & 2361 / A HD/20 12 A SSESSMENT YEAR 200 8 - 09 I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 2 2. WE COME TO REVENUE S APPEAL FIRST. IT RAISES TWO SUBSTANTIAL GROUNDS INTER ALIA SEEKING TO RESTORE ENTIRE GROSS PROFITS ADDITION @ 9.25% MADE BY THE ASSE SSING OFFICE R AS RESTRICTED TO 6.25% IN COURSE O F LOWER APPELLATE PROCEEDINGS. ITS SUBSTANTIVE GROUND CHALLENGES CORRECTNESS OF THE LOWER APPELLATE ORDER DELETING UNEXPLAINED INVESTMENTS ADDITION OF RS. 4.06,450/ - . THE PECUNIARY STAKE INVOLVED IN THE FORMER GROUND I S OF RS. 11 LACS IF WE GO BY THE QUANTUM ADDITION AMOUNT IN ASSESSMENT ORDER DATED 08 - 12 - 2010. NET TAX EFFECT FORMING SUBJECT MATTER OF THE REVENUE S T WO SUBSTANTIVE GROUNDS COMES TO LESS THAN RS. 10 LACS. WE FIND THAT THE CENTRAL BOARD OF DIRECT TAXES; HEREAFTER THE BOARD HAS ISSUED THE CIRCULAR NO. 21/2015 DATED 10 - 12 - 2015 CLEARLY ENVISAGING THEREIN THAT DEPARTMENT S PENDING APPEALS BEFORE THE TRIBUNAL/HIGH COURTS ARE TO BE WITHDRAWN/NOT PRESSED AS PER THE ABOVE STATED CIRCULAR. THE SAME HAS BEEN DEC LARED TO BE HAVING RETROSPECTIVE EFFECT IN OTHER WORDS. WE TAKE INTO CONSIDERATION THE ABOVE STATED BOARD S CIRCULAR AND DISMISS THE INSTANT APPEAL ACCORDINGLY. 3. REVENUE S APPEAL 2226/AHD/2012 IS DISMISSED FOR LOW TAX EFFECT. 4 . THIS LEAVES US WI TH THE ASSESSEE S APPEAL I TA 2361/AHD/ 2012 RAISING THE FOLLOWING SUBST A N TIVE GROUNDS: - 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN REJECTING THE APPELLANT'S BOOKS OF ACCOUNTS U/S 145 OF THE AC T. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT AO WAS NOT RIGHT IN REJECTING APPELLANT'S BOOKS OF ACCOUNTS. THE SAME BE HELD SO NOW. I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 3 2. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CA SE IN DIRECTING THE AO TO ESTIMATE APPELLANT'S GROSS PROFIT @ 6.25%. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE ACCEPTED THE GROSS PROFIT DECLARED BY THE APPELLANT. THE SAME BE HELD SO NOW. 3. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 18,00,000/ - MADE IN RESPECT OF ALLEGED UNACCOUNTED CASH DEPOSITS. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE SAME BE HELD SO NOW. 5 . THIS ASSESSEE IS A WHOLE SELLER IN CIGARETTE AND CONFECTION ARY ITEMS. THE ASSESSING OFFICER ISSUED VARIOUS SHOW CAUSE NOTICES TO HER AS STATED AT PAGE NO. 2 OF THE ASSESSMENT ORDER SHOW CAUSING GROSS PROFIT ES TIMATION @ 9.25% BY ADOPTING AVERAGE OF THE PRECEDING FINANCIAL YEAR AFTER REJECTION OF BOOKS. THE ASSESSEE DOES NOT SEEM TO HAVE COOPERATED AS PER THE ASSESSMENT ORDER HERE INABOVE. THE ASSESSING OFFICER TOOK RECOURSE TO BEST JUDGMENT ASSESSMENT. HE REJ ECTED BOOKS U/S. 145 OF THE ACT. HE FURTHER NOTICED ASSESSEE S GROSS PROFIT IN QUESTION TO HAVE FALLEN FROM THAT @ 10.78% IN THE PRECEDING ASSESSMENT YEAR TO 2.63% IN THE IMPUGNED ASSESSMENT YEAR. HE PROPOSED TO ADOPT AVERAGE OF THE THREE FINANCIAL YEAR COMING TO 9.5% . 6 . THE ASSESSEE SEEMS TO HAVE FILED AN EXPLANATION INTER ALIA EXPLAINING THAT SHE OBTAINED ITC DEALERSHIP IN JANUARY MONTH AND SHE HAD TO CLEAR HER OLD STOCK ON NO PROFIT NO LOSS BASIS, HER GROSS PRO F ITS IN TRADING BUSINESS RANGED BETWEEN 2 TO 3%, SHE HAD AVAILED UNSECURED LOANS OF RS. 2,77,418/ - AND ALSO USED TRANSPORTATION VANS I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 4 IN DISTRIBUTION BU SI NE S S. THE ASSESSEE ATTRIBUTED ALL THIS FACTORS FOR NON ESTIMATION OF GROSS PROFITS. THE ASSESSING OFFICER IN ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS OR SUPPORTIVE EVIDENCE EXCEPT FINANCIAL STATEMENTS. HE ACCORDINGLY WENT BY HIS INITIAL PROPOSAL OF ESTIMATING GROSS PROFITS @ 9.25%RESULTLING IN THE IMPUGNED ADDITION AMOUNTING TO RS. 11 LACS. 7 . THE ASSESSEE PREFERRED APPEAL. SHE SUBMITTED ADDITIONAL EVIDENCE IN COURSE OF THE LOWER APPELLATE PROCEEDINGS . THE CIT(A) SOUGHT A REMAND REPORT AND RESTRICTED THE ABOVE STATED GROSS PROFITS FROM 9.25% TO 6.25% AS FOLLOWS: - 3.4 I HAVE CA REFULLY CONSIDERED THE ENTIRE FACTS ON RECORD. SINCE THE ASSESSEE HAS NOT CO - OPERATED WITH THE A.O DURING ASSESSMENT PROCEEDINGS AND THEREFORE, THE A.O WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE ACT AND THEREFORE, THE ACTION OF THE A.O REGARDING REJECTION OF BOOKS OF ACCOUNTS IS CONFIRMED. HOWEVER, THE; ESTIMATED G.P @ 9.25 % ADOPTED BY THE A.O IS TOWARDS HIGHER SIDE COMPARED UP TO THE A.Y. 2006 - 07, THE A.O WAS IN DIFFERENT BUSINESS FROM AY. 2007 - 08; THE A.O IS DOING THE BUSINESS OF WHO LE SALE TRADING OF CIGARETTE AND CONFECTIONERY ITEMS. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLE SALE TRADING OF CIGARETTE AND CONFECTIONARY ITEMS. THE GROSS PROFIT OF THE APPELLANT HAS DECREASED COMPARED TO EARLIER YEARS . THIS FACT IS FURTHER CONFIRMED BY THE G.P RATE OF 2.63 % DECLARED BY THE APPELLANT IN A.Y. 2007 - 08 AND 3.89 % IN A.Y. 2009 - 10. IT IS AN ADMITTED FACT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND THE TAX OF HAS BEEN FILED ALONG WITH THE RETUR N OF INCOME. THERE IS NO CASE OF ANY MAJOR DISCREPANCY NOTICED BY THE A.O DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY OTHER EARLIER YEAR OF ASSESSMENT. IN VIEW OF THESE FACTS, THE ESTIMATED G.P @ 9.25 % IS VERY HIGH. THE L.R REITERATING THE FACT THAT THE ASSESSEE IS DEALING IN THE I.T.C LTD WHERE THE PROFIT MARGIN ARE EXTREMELY LOW AT THE MOST THE MAXIMUM G.P EARNED BY THE I.T.C COMPANY FALLS IN THE RANGE OF 2 TO 3 %. THE G.P DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS IS 5.56 %. THE G.P IN 2007 - 08 IS ONLY 2.63 % AND IN A.Y. 2009 - 10 IS 3.89 %. THE G.P. DECL ARED BY THE APPELLANT DURING THE ASSESSMENT YEAR 2008 - 09 IS ALREADY HIGHER THAN FINANCIAL YEARS. I THEREFORE, HELD THAT THE G.P I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 5 ESTIMATION @ 6.25 % WILL BE FAIR AND REASONABLE. I. DIRECT TH E A.O TO ADOPT THE G.P@ 6.25% INSTEAD OF 9.25 %. AS SUCH, THIS GROUND IS PARTLY ALLOWED. 8 . HEARD BOTH SIDES. RELEVANT FINDINGS PERUSED. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER RE - ESTIMATED ASSESSEE S GROSS PROFIT @ 9.25% . THE SAME STANDS RESTR ICTED TO 6.25% IN THE L OWER APPELLATE FINDINGS. LD. CI T(A) OBSERVES THAT ASSESSEE S BOOKS ADOPT GROSS PROFIT S @ 5.56%. THE SAME LEAVES BEHIND A VERY MINISCULE MARGIN OF A LITTLE MORE THAN 0.5%. LD. AUTHORIZED R EPRESENTATIVE FAILS TO POINT OUT ANY SPEC IFIC ILLEGALITY OR INFIRMITY IN THE CIT(A) S ORDER. HIS ONLY ARGUMENT SEEKS TO REDUCE GROSS PROFITS @ 6.25% TO FURTHER LOWER ESTIMATION. WE ARE OF THE OPINION THAT THE LOWER APPELLATE AUTHORITY HAS ALREADY G RAN TED SUFFICIENT RELIEF AS WARRANTED IN PECULIA R FAC T S OF THE CASE . WE SEE NO REASON TO REVERSE THE SAME WITHOUT ANY MATERIAL ON REC ORDS SUPPORTING ASSESSEE S ORAL SUBMISSIONS . WE AFFIRM THE CIT(A) S FINDINGS AS EXTRACTED HEREINABOVE. THIS FIRST SUBSTANTIVE GROUND FAILS . 9 . WE COME TO ASSESSEE S SECOND SUBS TANTIVE GROUND CHALLENGING SECTION 68 UNEXPLAINED CASH DEPOSITS ADDITION OF RS. 18 LACS MADE BY BOTH THE LOWER AUTHORITIES. SHE DID NOT EXPLAIN SOURCE THEREOF IN COURSE OF SCRUTINY. THE ASSESSEE SUBMITTED ADDITIONAL EVIDENCE . THE CIT(A) REFE RRED THE MATTE R BACK TO THE ASSESSING OFFICER. THE ASSESSEE ATTRIBUTED SOURCE OF THESE DEPOSITS TO HER TRADING SALES ON VARIOUS DATES OF THE RELEVANT PREVIOUS YEAR. THE I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 6 ASSESSING OFFICER FILED REMAND REPORT DATED 29 - 07 - 2011 DEALING WITH THE ISSUE AS UNDE R: - WITH REGARD TO THE CASH DEPOSITS MADE IN THE BANK IT IS SUBMITTED THAT ON VERIFICATION OF THE CASH BOOK SUPPLIED BY THE ASSESSEE ON 20/7/2011 (ANNEXURE - C) IT IS OBSERVED THAT DURING THE YEAR HUGE CASH HAS BEEN INTRODUCED BY WAY OF SALES ON VARIOUS DAT ES (ANNEXURE - S). FOR INSTANCE ON THE LAST DAY OF THE ACCOUNTING YEAR ASSESSEE HAS RECORD ED CASH SALES OF RS. 6,71,554 . THE AUTHENTICITY OF THESE CASH S ALES NEEDS TO BE VERIFIED FROM THE BOOKS AND FROM VERIFICATION OF THE SALES BILLS / VOUCHERS AND THE STO CK REGISTER MAINTAINED, IF A NY, BY THE ASSESSEE. ASSESSEE HA S I NTRODUCED CASH IN THE CASH BOOKS BY WAY OF SALES, TO SHOW THE ACCUMULATED CASH IN T HE CASH BOOK TO JUSTIFY ITS CASH DEPOSIT S M ADE IN THE BANKS. ASSESSEE HAS A M AL AFIDE INTEN TION OF NOT PROD UCING ITS BOOKS AND SUPPORTING EVIDENCES FOR VERIFI CATION. MERELY ON THE BASIS OF CAS H B OOK THE ENTIRE SALES AND THE CASH INT RODUCTION BY THE ASSESSEE CANNOT BE ACCEPTED ON FACE VALUE. ASSESSEE NEEDS TO FURNI SH DOCUMENTARY EV IDENCES IN SUPPORT O F SALES, FOR WHICH IT WAS GIVE AN OPPORTUNITY WHICH THE ASSESSEE HAS NOT AVAILED AT THE TIME OF ASSESSMENT PRO CEEDINGS AND AT PRESENT ALSO. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE HAS PRODUCED BEFORE YOU HONO UR THE DAIL Y SUMMARY OF CASH FOR THE WHOLE YEAR AND CASH BOOK FOR THE PERIOD 01 - 11 - 2007 TO 31/12/2007 ONLY. CASH BOOK IS IMPORTANT AND NOT THE DAILY SUMM ARY. IN THIS OFFICE ASSESSEE HAS SUBMITTED CASH BOOK FOR ENTIRE ACCOUNTING YEAR. THE CLOSING BALANCE SHOWN IN THE CASH BOOK IS RS. 8,49,244/ - . FURTHER ON VERIFI CATION OF THE AUDIT REPORT FOR THE F.Y. RELEVANT TO A.Y. UNDER CONSIDERATION, FILED BY THE ASSESSEE, IT IS SEEN FROM THE BALANCE SHEET (ANNEXURE - B) THAT THERE IS CASH O N HAND' OF RS.6,96,974, 67/ - . THU S, THE CLOSIN G BALANCES OF THE CASH BOOK PROD UCED BY THE ASSESSEE DOES NOT MATCH WITH THE AUDITED BOOKS OF ACCOUNTS (BALAN CE SHEET). EVEN IN THE DAILY CASH SUMMARY SU BMITTED BEFORE YOUR HONOUR THE AVERA GE DEBIT BALANCE WORKED OUT BY THE ASSESSEE DOES NOT MATCHES WITH THE BALANCE SHEET FIGURES OF CASH ON HAND. THE BALANCE O F AVERAGE OF DAILY SUMMARY IS 88 8240/ - AND FIGURE OF CASH ON HAND IN B ALANCE SHEET IS OF RS. 6,96,974.67. ASSE SSEE HAS NOT COME BEFORE YOUR HONOUR WITH CLEAN HANDS. ASSESSEE HAS PRODU CED FABRICATED CASH BOOK. I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 7 THE CIT(A) THEREAFTER REJECTED ASSESSEE S ARGUMENTS BY HOLDING THAT HER PLEA ATTRIBUTING SOURCE OF THE DEPOSIT TO TRADING SALES IS NOT SUPPORTED BY ANY BOOKS OF ACCOUNTS, ORIGINAL PURCHASE BILLS AND SALE BILLS E TC. 10 . WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE REPEATS HER STAND AS ADOPTED BEFORE THE LOWER AUTHORITIES EXPLAINING SOURCE OF CASH DEPOSITS TO HER TRADING SALES. RELEVANT EXTRACTS OF CASH BOOK AT PAGES 16 TO 25 AS WELL AS CONTENTS OF THE REMAND REPORT ARE REFERRE D IN COURSE OF THE HARING. IT IS CONTENDED THAT IT IS ACTUAL CASH BALANCE AND NOT AVERAGE DAILY CASH THAT MATTERS IN THESE CIRCUMSTANCES . HER FURTHER CASE IS THAT PRIMA FACIE STOOD DISCHARGED AND THERE IS NO MATERIAL TO REBUT THE SAME. THE REVENUE STRON GLY SUPPORTS BOTH THE LOWER AUTHORITIES MAKING THE IMPUGNED ADDITION. WE FIND THAT PAGE 40 OF THE PAPER BOOK DEMONSTRATES ASSESSEE S TRADING SALES TO BE THAT OF RS. 1,66,79,344/ - IN THE RELEVANT PREVIOUS YEAR AS PER PROFIT AND LOSS ACCOUNT . EVEN THE CI T( A) DOES NOT REJECT HER SALES WHILE ESTIMATING GROSS PROFIT @ 6.25%. THE ASSESSING OFFICER AT HIS END TERMS ASS ESSEE S CASH BOOK TO BE A FABRICATED ONE WITHOUT STATING DUE REASONS IN SUPPORT. THERE IS ALSO NO CASE OF DIVERSION OF SALE PROCEE DS BEING MADE OUT. WE OBSERVE IN THESE FACTS THAT THE ASSESSEE SUCCEEDS IN ATTRIBUTING SOURCE OF HER DEPOSITS TO THE ABOVE STATED SALE PROCEEDS FORMING PART OF PROFIT AND LOSS ACCOUNT. WE ACCEPT HER ARGUMENT IN THESE PECULIAR FACTS AND CIRCUMSTANCES. THIS I.T.A NO S . 2226 & 2361 /AHD/20 12 A.Y. 2008 - 09 PAGE NO ITO VS. SHRI KI RAN VADILAL SHAH, PROP. VALLABH TRADERS 8 SECTION 68 ADDITION OF RS. 18 LACS STANDS DELETED. ITA 2361/AHD/2012 IS PARTLY ACCEPTED. 11 . REVENUE S APPEAL ITA 22 2 6 /AHD/2012 IS DISMISSED. ASSESS EE S CROSS APPEAL 2361/AHD/2012 IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 16 - 06 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 16 /06 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,