Shri Kantilal Shivlal Shah-HUF, Ahmedabad V. The CIT-A'bad-VI., Ahmedabad

ITA 2368/AHD/2009

• Counselvise Citation: 236820514 RSA 2009
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 07-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Business income; Prejudicial to interest
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2368/AHD/2009 ASSESSMENT YEAR :2004-05 KANTILAL SHIVLAL SHAH HUF PROP. M/S. KANTILAL SHIVLAL ZAVERI 321/1, CHOKSI CHAMBER, NR. ROHIT MILLS, KHOKHRA, AHMEDABAD V/S . THE COMMISSIONER OF INCOME TAX, AHMADABAD VI, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD PAN NO. A A DHS3833G (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI MEHUL K. PATEL, A.R. /BY RESPONDENT SHRI ABHAY DAMLE, CIT D.R. /DATE OF HEARING 23.07.2013 /DATE OF PRONOUNCEMENT 13.09.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THE APPEAL IS BELATED OF 104 DAYS AND THE APPELLANT HAD EXPLAINED THE REASONS. THEREFORE, THE APPEAL IS ALLOWED TO BE PR OCEEDED. 2. THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT, AHMEDABAD-VI, DATED 24.02.20 09 FOR ASSESSMENT YEAR 2004-05. THE EFFECTIVE GROUNDS OF APPEAL IS AS UND ER: 1. THE LEARNED CIT HAS ERRED IN PASSING THE ORDER U/S.263 OF THE ACT TREATING THE ASSESSMENT ORDER U/S.143 FOR A.Y.2 004-05 PASSED BY THE A.O, AS ERRONEOUS AND PREJUDICIAL TO THE REVENUE ON THE GROUND THAT THE SAME WAS COMPLETED W ITHOUT ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 2 CARRYING OUT NECESSARY INQUIRIES. THE LEARNED CIT H AVING NOT PROPERLY CONSIDERED AND APPRECIATED THE SUBMISSIONS OF THE APPELLANT FILED BEFORE HIM, THE IMPUGNED ORDER U/S. 263 OF THE ACT REQUIRES TO BE QUASHED AS BAD IN LAW AND WITHOU T JURISDICTION. 2. IT IS CONTENDED THAT THE APPELLANT HAVING PRODUC ED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF T HE NOTICES ISSUED U/S.142(1) AND 143(2) OF THE ACT IN RESPECT OF THE ISSUES IN QUESTION AND AFTER CONSIDERING THE MATERI AL AND EXPLANATIONS AVAILABLE ON RECORD, THE A.O. HAD CAME TO A DEFINITE CONCLUSION AND A PARTICULAR VIEW WAS TAKEN , THE MERE FACT THAT THE LEARNED CTT WAS OF A DIFFERENT VIEW, CANNOT FORM A BASIS FOR ACTION FOR REVISION OF THE ASSESSMENT O RDER. THE IMPUGNED ORDER OF REVISION U/S.263 OF THE ACT IS TH US WHOLLY JUSTIFIED AND BAD IN LAW. RELIANCE IS PLACED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ARVIND JEWELLERS (2003) 259 ITR 502, 506 (GUJ). 3. THE LEARNED CIT FURTHER ERRED IN NOT APPRECIATIN G THE FACT THAT WHEN THE ASSESSING OFFICER MADE REASONABLE ENQUIRY ON THE ISSUES INVOLVED AND PASSED ORDER TAKING INTO CONSID ERATION ALL MATERIAL AND EXPLANATION AVAILABLE ON RECORD, IT CO ULD NOT BE SAID THAT THE ASSESSING OFFICER EITHER PASSED AN OR DER WITHOUT MAKING A REASONABLE ENQUIRY ON THE ISSUE INVOLVED O R PASSED A ORDER SIMPLY ACCEPTING WHAT THE ASSESSEE HAD STAT ED AND FAILED TO MAKE ENQUIRY CALLED FOR IN THE CIRCUMSTAN CES OF THE CASE, AND AS SUCH THE ORDER OF THE ASSESSING OFFICE R COULD NOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO INTERESTS OF REVENUE, SIMPLY BECAUSE HE (LEARNED CIT) WAS OF THE VIEW THAT PROPER ENQUIRIES HAVE NOT BEEN CARRIED OUT. ACCORDI NGLY, THE ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 3 IMPUGNED ORDER U/S.263 OF THE ACT REQUIRES TO BE QU ASHED AS WITHOUT JURISDICTION AND BAD IN LAW. 3. IN THIS CASE, THE ORIGINAL ASSESSMENT WAS PASSED ON 26.12.2006 BY THE DCIT, CIR.-12, AHMEDABAD. THE A.O. MADE ADDITION U /S. 69B BEING INCOME FROM UNDISCLOSED SOURCE AT RS.38,60,084/-. THE LD. CIT FOUND ORDER DATED 26.12.2006 ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE U/S. 263 OF THE IT ACT. THE LD. CIT GAVE SHOW CAUSE NOTICE ON FOLLOWING ISSUES: I) SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AT T HE BUSINESS PREMISES OF THE ASSESSEE ON 16/17.10.2003 DURING TH E COURSE OF WHICH EXCESS STOCK OF GOLD AND SILVER ORNAMENT T O THE EXTENT OF RS.50,43,758/- WAS FOUND. THE ASSESSEE, IN REPLY TO QUESTION NO. 15 OF STATEMENT ON OATH, HAD AGREED TO DISCLOSE THE EXCESS STOCK OF RS.50,43,758/- AS UNDISCLOSED I NCOME FOR THE CURRENT YEAR AND TO PAY THE TAXES THEREON. HOWE VER, ON FILING THE RETURN OF INCOME, THE ASSESSEE HAS INCLU DED THE VALUE OF STOCK TO THE EXTENT OF RS.35,62,040/-. WHI LE COMPLETING THE SAID ASSESSMENT, THE A.O. MADE AN AD DITION OF RS.38,60,084/- ONLY ON ACCOUNT OF EXCESS STOCK FROM DUNRIG THE SURVEY, WHILE THE VALUE OF ENTIRE ADMITTED EXCE SS STOCK OF RS.50,43,758/- WAS TAXABLE AS THE INCOME OF THE AS SESSEE. IF THEREFORE, APPEARS THAT THE INCOME HAS BEEN UNDER ASSESSMENT TO THE EXTENT OF RS.11,83,674/- (RS.50,4 3,758/- - RS.38,60,084/- = RS.11,83,674/-). (II) ON FURTHER EXAMINATION OF THE RETURN OF INCOME , AUDITOR'S REPORT, ETC. IT IS NOTICED THAT THE ASSESSEE HAS CR EDITED RS.35,62,040/- IN THE P&L ACCOUNT BEING THE DIFFERE NCE IN STOCK AND CORRESPONDINGLY DEBITED TO PURCHASE ACCOU NT. (PARA 4 OF THE NOTES FORMING PART OF ACCOUNTS FOR THE YEA R ENDED ON ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 4 31.03.2004); IT APPEARS THAT SINCE EXCESS STOCK OF RS.50,43,758/- WAS FOUND DURING THE COURSE OF SURVE Y, THE CORRESPONDING PURCHASES COULD NOT HAVE BEEN ENTERED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON A LATER DATE. THE AO HOWEVER FAILED TO EXAMINE AS TO HOW THE ASSESSEE HA S DEBITED THE PURCHASES ACCOUNT BY THE CORRESPONDING AMOUNT OF RS.35,62,040/-. IT FURTHER APPEARS THAT THE AO O MITTED TO TAKE INTO CONSIDERATION THAT DEBIT OF THE SAID AMOU NT IN THE PURCHASE ACCOUNT HAD THE EFFECT OF NULLIFYING THE D ISCLOSED INCOME CREDITED BY THE ASSESSEE IN THE P & L A/C. (III) ON FURTHER EXAMINATION OF THE RECORD, IF IS N OTICED THAT INTEREST OF RS.34,264/- HAS BEEN CHARGED U/S.234A OF THE ACT . HOWEVER, THE CORRECT COMPUTATION OF INTEREST U/S.23 4A IS RS.51,396/- AS THE DEFAULT PERIOD IS OF THREE MONTH S AS AGAINST THE PERIOD OF TWO MONTHS FOR WHICH INTEREST HAS BEE N CHARGED. ACCORDINGLY, THERE IS SHORT LEVY OF INTEREST OF RS. 17,132/- U/S.234A OF THE ACT. THE ASSESSEE IS IN THE BUSINESS OF GOLD , SILVER AN D DIAMOND JEWELLERY. THE APPELLANT REPLIED VIDE LETTER DATED 19.02.2009. TH E ASSESSEES REPLY WAS CONSIDERED BUT IT WAS HELD THAT DURING THE COURSE O F SURVEY U/S. 133A OF THE IT ACT, WHICH WAS CARRIED OUT ON 16/17.10.2003 AT THE BUSINESS PREMISES OF THE ASSESSEE AND THE EXCESS STOCK OF RS.50,43,758/- WAS ADMITTED AS UNDISCLOSED INCOME, BUT THE ASSESSEE HAS DISCLOSED IN RETURN EXCESS STOCK OF RS.35,62,040/-. HOWEVER, THE LD. A.O. MADE ADDITIO N OF RS. 38,60,084/- ON ACCOUNT OF EXCESS STOCK. IT IS HELD THAT THE A.O. HAS NOT CONDUCTED ANY INQUIRY AND ACCEPTED THE PURCHASE WITHOUT VERIFICAT ION WHICH WERE ADMITTEDLY NOT RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE AT THE TIME OF SURVEY WOULD ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 5 HAVE AT A LATER STAGE BEING DEBITED TO THE PURCHASE R. THE A.O. HAD NOT EXAMINE WHETHER DEBIT OF RS.35,62,040/- IN THE PURC HASE ACCOUNT HAD THE EFFECT OF NULLIFYING THE DISCLOSED INCOME CREDITED BY THE ASSESSEE IN THE P&L ACCOUNT. THE ASSESSEE ARGUED BEFORE THE CIT THAT H E HAS DEBITED THE PURCHASE ONCE, HOWEVER, THE SAID DISCLOSURE CREDITE D TWICE IN THE P&L ACCOUNT. THE APPELLANT FURTHER ARGUED THAT THIS AS PECT HAD BEEN VERIFIED BY THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT. HOWEV ER, THE CIT HELD THAT THE A.O. HAD NOT EXAMINED THIS ISSUE IN DETAIL AND THER E IS A POSSIBILITY THAT THIS WAS A DEVICE TO MATERIALIZE THE DISCLOSURE OF THE A SSESSEE AT THE TIME OF SURVEY. THERE WAS NO INQUIRY ABOUT THE CHANGING OF THE OPENING STOCK AS ON 01.04.2003, WHICH WAS SUBSEQUENTLY RECTIFIED BY THE APPELLANT AT THE TIME OF AUDIT FOR F.Y. 02-03. THEREFORE, THE ORDER OF THE A.O. DATED 26.12.2006 IS FOUND ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE U/S. 263 OF THE IT ACT. ACCORDINGLY, HE SET ASIDE THE ORDER OF THE A.O. AND RESTORED TO THE FILE OF A.O. FOR FURTHER VERIFICATION. THE ASSESSING OF FICER WAS DIRECTED TO FRAME ASSESSMENT ORDER AFRESH AS PER LAW AFTER CARRYING O UT NECESSARY INQUIRIES. 4. NOW THE ASSESSEE IS BEFORE US. LD. A.R. CONTEND ED THAT THE ASSESSEE HAS DISCLOSED PROFIT EXCESS STOCK OF RS.35,62,040/- . THE A.O. GAVE THE SHOW CAUSE NOTICE ON 25.07.2006 TO FILE THE RETURN FOR A .Y. 04-05. HE GAVE THE SHOW CAUSE NOTICE TO SCRUTINIZE THE CASE U/S. 143(3 ) OF THE IT ACT. LD. A.O. RAISED THE QUERY ABOUT THE EXCESS STOCK FOUND AT TH E TIME OF SURVEY AT RS.50,43,758/- WHEREAS THE ASSESSEE HAS DISCLOSED I N P&L ACCOUNT ON THE GROUND OF EXCESS STOCK OF RS.35,62,040/-. THE ASSE SSEE REPLIED VIDE LETTER ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 6 DATED 28 TH AUGUST, 2006. THE ASSESSEE FURTHER REPLIED VIDE L ETTER DATED 11 TH SEPTEMBER, 2006 TO THE A.O. ON ACCOUNT OF DIFFERENC E OF THE CLOSING STOCK. HE FURTHER HAS DRAWN OUR ATTENTION ON AUDIT REPORT, WH ICH WAS PLACED ON PAGE NOS. 10 TO 54 OF THE PAPER BOOK AND ARGUED THAT THE AUDITOR HAS TRULY CREDITED THE UNDISCLOSED INCOME AS PER AUDIT REPORT IN THE P &L ACCOUNT. HE FURTHER HAS DRAWN OUR ATTENTION ON SALE OF GOLD ORNAMENTS FOR T HE PERIOD OF 14.10.2003 TO 18.10.2003(PLACED ON PAGE NOS. 53 TO 67 OF THE PAPE R BOOK). HE FURTHER RELIED IN CASE OF ITA NO. 976/AHD/2012 FOR A.Y. 07- 08, IN CASE OF MOTI POLYMERS PVT. LTD. VS. CIT, GANDHINAGAR , WHEREIN THE CO-ORDINATE A BENCH, AHMEDABAD, FOUND THAT THE ORDER OF A.O. WAS NOT ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND FACTS ARE IDENTICAL . HE FURTHER RELIED UPON ITA NO. 1211/AHD/2010 FOR A.Y. 05-06, IN CASE OF M/S. S APNA TRADERS VS. CIT . AT THE OUTSET, LD. CIT D.R. RELIED UPON THE ORDER OF T HE CIT AND ARGUED THAT WHATEVER DISCLOSURE MADE BY THE APPELLANT HAD NOT B EEN DISCLOSED IN THE INCOME. HE ADJUSTED THE PURCHASE EVEN CHANGING THE OPENING STOCK AS ON 01.04.2003 WHICH HAS NOT BEEN INQUIRED BY THE A.O. BEFORE ACCEPTING THE RETURN OF ASSESSEE. HE SIMPLY GAVE THE SHOW CAUSE NOTICE TO TREAT THE INCOME DISCLOSED ON ACCOUNT OF EXCESS STOCK U/S. 69 B AS INVESTMENT. NEITHER THE APPELLANT SUPPLIED IN DETAIL OF DEBITING THE PU RCHASE, NOR THE LD. A.O. INQUIRED THIS ISSUE. THUS, THE ORDER OF THE CIT IS JUSTIFIED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE MADE A DISCLOSURE U/S. 133A A T RS. 50,43,758/- WHEREAS THE INCOME DISCLOSED IN THE P&L ACCOUNT AT RS.35,62,040/-. THE A.O. ITA NO. 2368/AHD/09 A.Y. 04-05 PAGE 7 GAVE THE SHOW CAUSE NOTICE ONLY TO DECIDE THE SAME ON THE INCOME WHETHER IT TO ASSESSED AS A BUSINESS INCOME OR AS AN INVESTMEN T U/S. 69B. THE RETURN FOR A.Y. 03-04 WAS FILED AFTER SURVEY ACTION. THE LD. A.O. HAD NOT MADE ANY INQUIRY REGARDING THE CHANGE OF THE OPENING STOCK A S ON 01.04.2003 AS WELL AS PURCHASE DEBITED IN THE ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE LD. CIT HAD SPECIFICALLY POINTED OUT THE DEFECTS IN THE ASS ESSMENT ORDER, PARTICULARLY, WITH REFERENCE TO OPENING STOCK AS ON 01.04.2003 AN D PURCHASE DEBITED. THUS, WE HAVE CONSIDERED VIEW THAT LD. CIT ORDER IS JUSTIFIABLE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT PASSED U/S. 263 OF THE IT ACT. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 13.09.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;