M/s. Patel Chimanlal Vrajlal, Baroda V. The ACIT.,Cent.Circle-1, Baroda

ITA 2374/AHD/2009

• Counselvise Citation: 237420514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K VOHRA SRDR
• Keywords: Unexplained investment; Revised return; Set aside

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., !'# $ $ $ $ %% % &, ' ( # BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER $./ I.T.A. NO.2374/AHD/2009 ( * * * * / / / / ASSESSMENT YEAR : 2007-08) M/S.PATEL CHIMANLAL VRAJLAL M.G.ROAD, BARODA / VS. THE ACIT, CENTRAL CIRCLE-1, BARDOA '+ (, $./- $./ PAN/GIR NO. :AADFP 1221D ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : MS.URVASHI SHODHAN, A.R. /0+. 2 1 ( / RESPONDENT BY : SHRI R.K. VOHRA, SR. D.R. % 3 2 &, / / / / DATE OF HEARING : 15/09/2011 45* 2 &, / DATE OF PRONOUNCEMENT : 30/09/2011 (6 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF THE CIT(A)-IV, AHMEDABAD DATED 04/02/2009 PASSED FO R AY 2007-08. GROUNDS RAISED ARE REPRODUCED BELOW: 1] THE LD.CIT(A) HAS SERIOUSLY ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE A.O. WHEREIN, AN IMPUG NED ADDITION OF RS.8,10,917/- WAS MADE FOR THE ALLEGED UNACCOUNTED INVESTMENT IN STOCK . ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 2 - 2] THE LD. CIT(A) HAS FURTHER ERRED ON FACTS AND IN LAW IN REJECTING TO ADMIT ADDITIONAL GROUND OF APPEAL FILED ON 29.01.09. 3] IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE IMPUGNED ADDITION MADE OF RS.8,10,917/- BUT OUGHT T O HAVE RETAINED AN AMOUNT OF RS. 1,52,857/- BEING AN AVERAGE G.P. COMPONENT ON THE VALUE OF DEFICIT IN STOCK AND THUS , OUGHT TO HAVE GRANTED THE RELIEF AS CLAIMED IN THE WRITTEN S UBMISSION MADE BEFORE HIM. 4] FURTHER, IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE REJECT ED TO ADMIT THE ADDITIONAL GROUND OF APPEAL FILED BEFORE HIM BUT OUGHT TO HAVE ADMITTED AND GRANTED RELIEF BY DIRECT ING TO THE A.O. TO RETAIN RS.4,62,500/- BEING AN AVERAGE G.P. COMPONENT ON THE VALUE OF DEFICIT OF STOCK OF RS.25 ,00,000/- WHICH WAS ADDED IN THE REVISED RETURN FILED DUE TO BONA FIDE MISTAKE AND THUS, HE OUGHT TO HAVE GRANTED RELIEF A S CLAIMED IN THE SUBMISSION MADE BEFORE HIM. 5] HOWEVER, THE LD. CIT(A) COMMITTED A BLATANT ERR OR ON FACTS AND IN LAW IN DELIVERING HIS DECISION/FINDINGS BASE D ONLY ON FINDINGS RECORDED BY THE A.O. WITHOUT MEETING OUT T HE RELEVANT POINTS RAISED FOR HIS ADJUDICATION IN THE WRITTEN SUBMISSION FILED BEFORE HIM AND THUS, FAILED COMPLE TELY TO GRANT RELIEFS AS CLAIMED. THUS, THE ORDER OF THE LD. CIT(A) MAY KINDLY BE SET ASIDE AND THE APPEAL OF THE APPELLANT MAY KINDLY BE ALLOWED. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 25/11/2008 WERE THAT THE ASSESSEE- FIRM IS IN THE RETAIL BUSINESS OF LADIES GARMENTS . A SURVEY WAS CONDUCTED U/S.133A OF I.T. ACT ON 31.05.2006. IT IS WORTH TO MENTION ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 3 - THAT A RETURN WAS FILED U/S.139(1) ON 31.10.2007 DE CLARING AN INCOME OF RS.31,14,126/- AND SUBSEQUENTLY A REVISED RETURN WA S FILED ON 11.03.2008 DECLARING AN INCOME OF RS.56,14,126/-. DURING THE COURSE OF SURVEY, AN INVENTORY OF THE STOCK WAS PREPARED. ON PHYSICAL VERIFICATION, STOCK OF RS.4,58,02,769/- WAS FOUND AS AGAINST THE STOCK RE CORDED IN THE BOOKS OF ACCOUNTS OF RS.3,46,12,530/-. THE COST PRICE OF THE STOCK WAS CALCULATED BY REDUCING THE GROSS PROFIT RATE. TH EREAFTER, AN EXERCISE WAS DONE BY THE REVENUE DEPARTMENT AND THE DIFFERENCE O F THE VALUATION OF THE STOCK AS FOUND AT THE TIME OF SURVEY AND AS IT WAS FOUND RECORDED IN THE BOOKS OF ACCOUNT WAS COMPUTED AT RS.33,10,917/- . IT HAS ALSO BEEN NOTED BY THE AO THAT ONE OF THE PARTNER OF THE FIRM HAD ADMITTED AN UNACCOUNTED INVESTMENT OF RS.25 LACS IN THE STOCK. THE DIFFERENCE BETWEEN THE TWO WAS RS.8,10,917/- (RS.33,10,917 RS.25,00,000), WHICH WAS ASKED TO EXPLAIN DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT ONCE A N AMOUNT OF RS.25,00,000/- HAS ALREADY BEEN DISCLOSED AND OFFER ED FOR TAX TO COVER UP THE ALLEGED DISCREPANCY IN THIS STOCK, THEN THERE S HOULD NOT BE ANY REASON TO FURTHER MAKE AN ADDITION OVER AND ABOVE THE SAID DISCLOSURE. HOWEVER, THE AO HAS REJECTED THE SAID EXPLANATION A ND HELD AS UNDER:- THE ASSESSEE HAS CONTENDED THAT THERE HAS NOT BEEN SUCH DISCREPANCY EXISTED AS ALLEGED OF RS.33,10,917/- BE TWEEN THE BOOK STOCK AND PHYSICAL STOCK TAKEN BY THE DEPARTMENT. THE ASSESSEES CONTENTION GOES CONTRARY BECAUSE THE DISCREPANCY WA S NOTICED WITH THE HELP OF STAFF OF ASSESSEE. HOWEVER, IF TH ERE WOULD NOT BE ANY SUCH DISCREPANCY, THE ASSESSEE WOULD NEVER HAVE DISCLOSED RS.25 LACS, WHAT A PRUDENT MEN DOES. THEREFORE, IN VIEW OF THE FACTS CITED SUPRA, I AM OF THE OPINION THAT THE ASS ESSEE HAS NOT DISCLOSED DISCREPANCY IN THE STOCK TO THE TUNE OF R S.8,10,917/-, WHICH IS NOW ADDED TO THE TOTAL INCOME OF THE ASSES SEE. FURTHER, ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 4 - THE ASSESSEE HAS REVISED ITS INCOME TO RS.56,14,126 /-, DISCLOSING RS.25 LACS ON ACCOUNT OF DIFFERENCE IN STOCK, HENCE , THE ASSESSEE HAS CONCEALED ITS INCOME TO THE TUNE OF RS.33,10,91 7/-. PENAL PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE INITIATED FOR CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS OF I NCOME. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. BEFORE LD.CIT(A) AN ADDITIONAL GROUND HAS BEEN R AISED IN RESPECT OF THE DISCLOSURE OF RS.25 LACS. THE SAID ADDITIONA L GROUND WAS NOT ADMITTED BY LD.CIT(A). IN RESPECT OF THE ADDITION, LD.CIT(A) HAS HELD THAT ONE OF THE PARTNER HAS ADMITTED U/S.132(4) ABO UT THE UNACCOUNTED INVESTMENT IN STOCK AND THERE WAS A DIFFERENCE WHIC H WAS CALCULATED BY THE AO, THEREFORE, NO INTERFERENCE WAS CALLED FOR I N RESPECT OF THE SAID ADDITION WHICH WAS MADE ON ACCOUNT OF DEFICIT IN TH IS STOCK. SINCE THE APPEAL WAS DISMISSED, HENCE, THE ASSESSEE IS NOW FU RTHER IN APPEAL. 4. FROM THE SIDE OF THE APPELLANT, LD.AR MS.URVASHI SHODHAN APPEARED AND PLACED BEFORE US AN INTERESTING FACT THAT THE STOCK AS PER BOOKS WAS MORE THAN THE VALUE OF THIS STOCK AS CALC ULATED BY THE SURVEY PARTY. ON PAGE NO.40 OF THE PAPER-BOOK THERE WAS A CALCULATION OF THE STOCK FOUND DURING THE SURVEY WH ICH CAN BE REPRODUCED FOR READY REFERENCE DETAILS OF STOCK FOUND DURING PHYSICAL VERIFICATIO N AT AS ON 31/05/2006. AMOUNT AT CHIMANLAL VRAJLAL NATIONAL PLAZA - 32465590 AT -DO- MANDVI 13337179 ------------ (AS MRP) TOTAL 45802769 STOCK AS PER STOCK REGI. - 34612530 ------------ ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 5 - GROSS PROFIT WORKS OUT TO 31.66% ON 45802769 LESS:GROSS PROFIT:- 14501156 ------------ STOCK 31301613 DIFF :- 3310917 ===== SD/- SD/- SD/- SHRIKANT PATEL RAJENDRA M.ZAVERI PIYUS COMPUTER OPERATOR CASHIER,DT.31.5.06 SALES MA NAGER 5. THE LD.AR HAS ALSO DRAWN OUR ATTENTION ON A COMPARABLE CASE , VIZ. M/S.TARIKA EXCLUSIVE, VADODARA, A FIRM ALSO IN THE BUSINESS OF SALE OF LADIES GARMENTS. IN THAT CASE ALSO, THERE WAS A DEFICIT OF STOCK A ND THE SAME A.O. I.E. ACIT CENTRAL CIRCLE-I, VADODARA HAD APPLIED GP RATE OF 15.90% AND ACCORDINGLY THAT AMOUNT WAS ONLY TAXED. AS AGA INST THAT, THE SAME AO HAS TAXED THE ENTIRE DEFICIT MERELY ON THE GROUND THAT THE TOTAL DISCREPANCY WAS TO BE TAXED IN THE HANDS OF T HE ASSESSEE. LD.AR HAS ALSO DRAWN OUR ATTENTION ON PAGE NO.23 OF PAPER -BOOK, A SHOW CAUSE NOTICE DATED 1/9/2008 ISSUED BY THE AO THROUGH WHIC H VIDE QUERY NO.13 IT WAS ASKED TO EXPLAIN THE DEFICIT IN THIS STOCK WORTH OF RS.33,10,917/-. LD.AR HAS THEREFORE VEHEMENTLY CONTESTED THAT THE A O WAS NOT REASONABLE IN ADOPTING A DIFFERENT VIEW IN THE CASE OF ASSESSEE THAN THE VIEW TAKEN IN RESPECT OF OTHER CASES OF LIKE NATURE . SHE HAS PLACED RELIANCE ON THE DECISION OF CIT VS. PRESIDENT INDUS TRIES 258 ITR 654 (GUJ.) AND OF CIT VS. GURUBACHHAN SINGH J. JUNEJA 302 ITR 63 (GUJ.). 6. FROM THE SIDE OF REVENUE, SR.DR MR.R.K.VOHRA AP PEARED. HE HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW A ND ARGUED THAT THE ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 6 - DISCREPANCY IN THIS STOCK WAS FOUND ONLY AFTER THE SURVEY ACTION AND THE ASSESSEE HAS ADMITTED THAT THERE WAS EXCESS STOCK I N HIS POSSESSION THAN THE STOCK WHICH WAS RECORDED IN THE BOOKS OF ACCOUN T. THE ASSESSEE HAS NOT ONLY ADMITTED BUT SURRENDERED AN AMOUNT OF RS.2 5 LACS. SINCE A DISCREPANCY WAS DETECTED IN THE STOCK, THEREFORE, I T WAS RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND HAVE CAREFULLY PERUSED THE ORDERS OF AUTHORITIES BELOW IN THE LIG HT OF THE COMPILATION FILED AND THE CASE LAWS CITED. WE FIND FORCE IN TH E CASE OF THE ASSESSEE AND THE REASONS CAN BE SUMMARIZED HEREAFTER. AS P ER THE DETAILS OF STOCK WHICH WAS TABULATED AT THE TIME OF SURVEY THE VALUE WAS AT RS.3,13,01,613/- ,( TOTAL VALUE OF THE STOCK AT RS.4,58,02,769/-CALC ULATED BY THE SURVEY PARTY AND AFTER THE REDUCTION OF G.P. OF 1,45,01,156/- THE FIGURE ARRIVED AT AS PER THE CHART REPRODUCED ABOVE ) AS AGAINST THAT AS PER BOOKS THE VALUE OF THE STOCK WAS RECORDED AT RS .3,46,12,530/-. THEREFORE, THE ADMITTED FACTUAL POSITION WAS THAT T HE STOCK AS PER BOOKS WAS MORE THAN THE STOCK VALUED BY THE REVENUE DEPAR TMENT. THE NEXT REASON IS THAT THE AO WAS AWARE ABOUT THE SAID DEFI CIT DETECTED CONSEQUENCE UPON THE SURVEY, AS RECORDED IN THE SH OW CAUSE NOTICE, BUT STILL HE HAS NOT TAKEN THE COGNIZANCE. HE HAS TA XED THE ENTIRE DIFFERENCE THOUGH IN A PARALLEL CASE HE HAS APPLIED THE GP RAT E AND THE NET AMOUNT WAS TAXED. THE LAST REASON WHICH IS MOST RELEVANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS THAT A SUM OF RS.25 LACS WAS OFFERED BY THE ASSESSEE TO COVER UP THE ENTIRE DIS CREPANCY IN THIS STOCK . THIS IS ALSO AN ADMITTED FACTUAL POSITION THAT ORI GINALLY AN INCOME OF RS.31,14,126/- WAS DECLARED AND THAT RETURN WAS REV ISED AT RS.56,14,125/- ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 7 - IN VIEW OF THIS, WE HEREBY ACCEPT THE VEHEMENT CONT ENTION OF THE ASSESSEE THAT THE SAID SURRENDER HAD EVEN COVERED THE DISCRE PANCY AS ALLEGED BY THE AO. THE LD.AR HAS ALSO CITED TWO PRECEDENTS(SU PRA) OF HONBLE GUJARAT HIGH COURT FOR THE LEGAL PROPOSITION THAT T HE ENTIRE DISCREPANCY OR THE ENTIRE SALE PROCEEDS COULD NOT BE TAXED AND ONL Y GROSS PROFIT EARNED ON SALE CAN BE SUBJECTED TO TAX. THEREFORE THE A.O . HAD FAULTED IN TAXING THE ENTIRE DEFICIT DIFFERENCE IN CONTRAVENTION OF T HE LAW PRONOUNCED BY THE HONBLE COURTS. TOTALITY OF THE CIRCUMSTANCES T HUS WARRANTS TO REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND WE HEREBY DIRECT TO DELETE THE ADDITION. RESULTANTLY, GROUND NO.1 IS ALLOWED . 8. AS FAR AS GROUND NO.2 IS CONCERNED, THE SA ME WAS RIGHTLY REJECTED BY LD.CIT(A), HOWEVER, IT HAS ALSO NOT BEEN CONTEST ED BEFORE US HENCE DISMISSED. REST OF THE GROUNDS WERE STATED TO BE ALTERNATE GROUNDS RAISED BY THE ASSESSEE. SINCE GROUND NO.1 HAS ALR EADY BEEN ALLOWED, THEREFORE, THE ALTERNATE PLEA AS RAISED IN REST OF THE GROUNDS NEED NO ADJUDICATION. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED IN T HE TERMS STATED ABOVE. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/ 09 /2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 30 / 09 /2011 7.. , . ../ T.C. NAIR, SR. PS ITA NO. 2374/AHD/2009 M/S.PATEL CHIMANLAL VRAJLAL VS. ACIT ASST.YEAR - 2007-08 - 8 - (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. $$ & %9 / CONCERNED CIT 4. %9() / THE CIT(A)-IV, AHMEDABAD 5. 8<= /& , , / LEARNED DEPARTMENTAL REPRESENTATIVE, ITAT, AHMEDABAD 6. = >3 / GUARD FILE. (6 % (6 % (6 % (6 % / BY ORDER, 08& /& //TRUE COPY// ! !! !/ // / $ $ $ $ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 15/09/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15/09/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.30.9.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.9.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER