Shri Mahendrasingh Saluja, Ahmedabad V. The Dy.CIT.,Circle-12, Ahmedabad

ITA 2407/AHD/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9867 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P PATEL
• Assessee Lawyers: MANISH M RAJVAIDYA
• Keywords: Unexplained cash credit; Unexplained investment; Business expenditure; Opportunity of being heard
• Section: 143(3); 145; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ ITA NO. 2407/AHD/2010 / ASSESSMENT YEAR : 1998-1999 MAHENDRASINGH SALUJA, M/S. SUPER TYRES, 11, SULEMANI ROZA BUILDING, SARASPUR, AHMEDABAD PAN : ADKPS 5722 L VS DCIT, CIRCLE-12, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI MANISH M. RAJVAIDYA, AR REVENUE BY : SHRI N.P. PATEL, SR. DR / DATE OF HEARING : 30/11/2016 / DATE OF PRONOUNCEMENT: 30/11/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XX, AHMEDABAD DATED 16.04.2010 AND PERTAINS TO ASSESSMENT YEAR 1998-99. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE C.I.T (APPEAL) ERRED IN LAW AND ON FACT WHIL E CONFIRMING ADDITION ON ACCOUNT OF PEAK DEFICIT OF STOCK U/S 69B OF THE I.T . ACT OF RS. 7,91,019/- ARRIVED ON THE BASIS OF MONTH WISE TABLE FOR SALES, PURCHASES AND STOCK MADE IN ASSESSMENT ORDER DATED 28/2/2001. THE L.D. A.O. AS WELL AS LD. CIT(A) HAS FAILED TO APPRECIATED THE FACTS THAT THE APPELL ANT WERE RECEIVING GOODS ON DELIVERY CHALLAN AND THEREFORE THE SALE ARISE PRIOR TO PURCHASE BILL AS PURCHASE BILL ARE LATER RECEIVED BY APPELLANT. THE LD. A.O. AND LD. CIT (A) FAILED TO CONSIDERED THE FACTS THAT THE APPELLANT BOOKS OF AC COUNTS AND DELIVERY CHALLAN WERE DESTROYED IN THE FOLD OCCURRED AT THE TIME OF SURVEY WHICH CAN BE EVIDENT FROM THE SURVEY STATEMENT. THEREFORE ON THE BASIS OF FACTS AND CIRCUMSTANCES OF CASE AND LAW THE SAME IS OUGHT TO BE DELETED. 2. THE C.I.T (APPEAL) ERRED IN LAW AND ON FACT WHIL E CONFIRMING ADDITION ON ACCOUNT OF INCOME FROM UNDISCLOSED SALES OF RS. 23, 043/- ARRIVED ON THE BASIS OF FACTS AND LAW THE SAME IS OUGHT TO BE DELETED. 3. THE C.I.T (APPEAL) ERRED IN LAW AND ON FACT WHIL E CONFIRMING ADDITION ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK AMOUNTING R S. 17,23,761/- AND ON THE BASIS OF FACTS AND LAW THE SAME IS OUGHT TO BE DELETED. SMC-ITA NO 2407/AHD/2010 MAHENDRASINGH SALUJA VS DCIT AY : 1998-1999 2 4. THE C.I.T (APPEAL) ERRED IN LAW AND ON FACT WHIL E CONFIRMING ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF RS. 5,37,007/ - U/S 68 OF THE I. T ACT AND ON THE BASIS OF FACTS AND LAW THE SAME IS OUGHT TO BE DELETED. 5. THE C.I.T. (APPEAL) ERRED IN LAW AND ON FACT WH ILE PARTLY CONFIRMING ADDITION ON ACCOUNT OF EXPENSES DISALLOWED OF RS.25 ,000/- AND ON THE BASIS OF FACTS AND LAW THE SAME IS OUGHT TO BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN THE BUSINESS OF DEALING IN TYRES AND IS AN EXCLUSIVE DE ALER OF APOLLO TYRES. A SURVEY WAS CONDUCTED ON 16.02.1998 AT THE BUSINESS PREMISES OF THE ASSESSEE AND A DEFICIT IN STOCK WAS FOUND AT RS.15,130/-. 3.1 AFTER SCRUTINY OF DETAILS FILED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ADDITIONS WERE MADE AND TOTAL INCOM E WAS ASSESSED AT RS.44,59,130/-. THE APPELLANT WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISPOSED OFF THE APPEAL VIDE ORDER NO. CIT(A )XVII/2001-02 DATED 28/11/2001. THE MATTER WENT BEFORE THE HON'BLE ITAT WHO IN ITA NO. 266/AHD/2002 DATED 29/02/2008 HAS RESTORED THE MATT ER BACK TO THE FILE OF THE AO TO DECIDE THE MATTER AFRESH IN ACCORDANCE WI TH LAW AFTER GIVING PROPER OPPORTUNITY OF BEING HEAD TO THE ASSESSEE. F OLLOWING THE DIRECTION OF THE HON'BLE ITAT, THE AO HAS PASSED THE ASSESSMENT ORDER AFRESH U/S. 143(3) RWS 254 OF THE ACT DATED 02/12/2009. 3.2 IN THE ASSESSMENT ORDER, THE AO NOTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT FOUND AT THE BUSINESS PREMISE S; THAT THE ASSESSEE CLAIMED THAT DUE TO HEAVY RAINS ON 13 TH AND 14 TH JULY, 2000, HIS BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WERE DESTROYED; THAT H OWEVER, THE DAMAGED BOOKS WERE NEVER PRODUCED. HOWEVER, SOME DETAILS W ERE FURNISHED BY THE ASSESSEE AND ON THE BASIS OF THOSE DOCUMENTS, THE A O PASSED THE ASSESSMENT ORDER AS UNDER:- AS PER THE AUDITED ACCOUNTS FILED BY THE ASSESSEE, THE ASSESSEE HAD OPENING STOCK OF RS. 2,72,414/-; MADE PURCHASES OF RS. 1,67 ,52,019/-;MADE SALES OF RS. 1,65,41,734/-. THE CLOSING STOCK AT THE END OF YEAR IS DECLARED AT SMC-ITA NO 2407/AHD/2010 MAHENDRASINGH SALUJA VS DCIT AY : 1998-1999 3 RS.10,85,3557-. THE GROSS PROFIT DECLARED FOR THE Y EAR IS RS.6,02,656/- GIVING A GROSS PROFIT RATE OF 3.64%. THE NET PROFIT DECLAR ED FOR THE YEAR IS RS.1,70,909/-. AFTER TAKING IN TO CONSIDERATION THE MONTH WISE DETAILS OF PURCHASE AND SALES MADE BY THE ASSESSEE THE MONTH W ISE STOCK POSITION IS WORKED OUT AND IT IS SEEN FROM THE CHART (COPY ATTA CHED) THAT IN MANY MONTHS THERE WAS NO STOCK AVAILABLE WITH THE ASSESSEE WHIC H COULD BE SOLD. THE PEAK STOCK DEFICIT IS OBSERVED AT THE END OF THE MONTH O F JUNE. THE DEFICIT WORKED OUT IS OF RS.7,91,0197-, WHICH CLEARLY REPRESENTS T HE UNEXPLAINED INVESTMENT OF THE ASSESSEE. IT IS AN ADMITTED TACT THAT SALES HAVE BEEN MADE BY THE ASSESSEE AND CORRESPONDING PURCHASES HAVE TO BE MAD E FOR MAKING OR EFFECTING THE SALES. IT IS ALSO AN ADMITTED POSITIO N THAT NO QUANTITATIVE RECORDS ARE MAINTAINED. ADDITION OF RS. 7,91,019/- IS THERE FORE MADE AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S. 69B OF THE IT ACT S INCE THERE IS NO CONVINCING OR REASONABLE EXPLANATION TO EXPLAIN THIS STATE OF AFFAIRS FROM THE SIDE OF THE ASSESSEE. FURTHER ON THE DATE OF SURVEY I. E 16.02.1998 THE B OOK STOCK WORKS OUT TO RS. 15,03,582/- WHERE AS THE STOCK FOUND ON THE DATE OF SURVEY WAS RS.8,70,516/-. THUS THERE IS SHORTAGE OF STOCK OF R S.6,33,066/- ON THE DATE OF SURVEY. THIS COULD LEAD TO ONLY ONE CONCLUSION THAT THE GOODS HAVE BEEN SOLD OUT OF BOOKS AND THE PROFITS EARNED THEREON APPROPR IATED BY THE ASSESSEE. THE G.P. DECLARED BY THE ASSESSEE IS 3.64%. THEREFORE A PPLYING THE G P RATE OF 3.64% THE PROFITS EARNED BY THE ASSESSEE ON THE UND ISCLOSED SALES WORKS OUT TO RS. 23,043/-. THE UNDISCLOSED INCOME OF RS. 23,0 43/-IS THEREFORE BROUGHT TO TAX. FURTHER ANALYSIS REVEALS THAT THE CLOSING STOCK OF GOODS AS ON 31.03.1998 OUGHT TO BE RS. 28,09,116/- WHERE AS THE ASSESSEE HAS DECLARED THE CLOSING STOCK OF 10,85,355/-. ADDITION OF RS.17,23, 761/- IS REQUIRED TO BE MADE AND ACCORDINGLY ADDITION OF RS. 17,23,761/- IS MADE IN THE TOTAL INCOME COMPUTATION OF THE ASSESSEE AS THE ASSESSEE HAS ACC OUNTED FOR ALL THE PURCHASES MADE BY HIM. THE DECLARATION OF ONLY RS. 10,85,355/- AS CLOSING STOCK AS ON 31.03.1998 HAS RESULTED IN SUPPRESSION OF THE CLOSING STOCK AS ON 31.03.1998. THE ACTUAL CLOSING STOCK OF RS.28,09,11 67- IS REQUIRED TO BE SHOWN AS ON 31.03.1998 TO WORK OUT THE TRUE AND COR RECT INCOME OF THE ASSESSEE. THE PROVISION OF SECTION 145 IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE AND HENCE IS INVOKED. IN VIEW OF WHAT IS STATE D ABOVE ADDITION OF RS.7,91,019/-, RS. 23,043/- AND RS.17,23,761/- IS M ADE IN THE TOTAL INCOME COMPUTATION. ON VERIFICATION OF THE BALANCE SHEET IT IS SEEN THA T THE ASSESSEE HAS SHOWN APOLLO TYRES LTD. HAS HIS CREDITOR HAVING CRE DIT BALANCE OF RS.66,53,949/- WHERE AS THE BALANCE OF THE ASSESSEE IN THE BOOKS OF APOLLO TYRES LTD AS PER THE COPY OF THE CONTRA ACCOUNT FIL E IS RS. 61,16,942/-. THE DIFFERENCE OF RS.5,37,007/- HAS NOT BEEN RECONCILED BY THE ASSESSEE. THE EXCESS CREDIT OF RS.5,37,007/- SHOWN IN THE NAME OF APOLLO TYRES LTD. IS SQUARELY CAUGHT BY THE PROVISIONS OF SECTION 68 OF THE IT AC T AS THE LIABILITY TO THIS SMC-ITA NO 2407/AHD/2010 MAHENDRASINGH SALUJA VS DCIT AY : 1998-1999 4 EXTENT IS NOT OWNED UP BY APOLLO TYRES LTD. THE PRO VISIONS OF SECTION 68 ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE AND HE NCE ARE INVOKED. ADDITION OF RS. 5,37,007/- IS MADE AS UNEXPLAINED CASH CREDITS U/S. 68 IN THE TOTAL INCOME COMPUTATION OF THE ASSESSEE. 6. THE ASSESSEE HAS CLAIMED EXPENSES TOTALING TO R S, 4,02,575/- WHICH ARE NOT PROPERLY VOUCHED AND ALSO NOT CARRYING FULL PAR TICULARS/DETAILS. SOME OF THE EXPENSES LIKE VEHICLE, TELEPHONE, VATAV, KASAR, MISCELLANEOUS ARE SUCH WHERE PERSONAL AND NON BUSINESS PURPOSES CANNOT BE RULED OUT. CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE 10% OF RS.4,02,575/- IS DISALLOWED AS NON BUSINESS EXPENDITURE. ADDITION OF RS. 40,257 /- IS ACCORDINGLY MADE. 3.3 AGAINST THE AFORESAID ORDER OF AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHEREIN THE LD. CIT(A) GRANT ED SOME RELIEF TO THE ASSESSEE, BUT AFFIRMED THE AOS ACTION. 4. AGAINST THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD BOTH THE COUNSELS AND PERUSED THE R ECORDS. I FIND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS C LEAR THAT A SURVEY WAS CONDUCTED AT THE ASSESSEES PREMISES AND THE DEFICI T IN STOCK FOUND DURING THE SURVEY WAS ONLY RS.15,130/-. IT IS ALSO TRUE TH AT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS. WHEN THE BOOKS OF ACCOUNTS HAVE NOT BEEN PRODUCED, THEN THE NORMAL COURSE OF ACTION IS THAT THERE SHOULD BE MADE AN ESTIMATE OF PROFIT BASED UPON THE PAST RESULT OF TH E ASSESSEE AND/OR THE GENERAL PRACTICE IN THE BUSINESS AREAS IN WHICH THE ASSESSEE IS OPERATING. IN THIS CASE, I FIND THAT THE BOOKS OF ACCOUNTS HAVE N OT BEEN PRODUCED. THE AO HAS PROCEEDED TO MAKE VARIOUS ASSUMPTIONS AND PRESU MPTIONS ON THE BASIS OF CERTAIN STATEMENTS OBTAINED FROM THE ASSESSEE AN D THEREAFTER, MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENTS, SUP PRESSED PROFIT, SUPPRESSED STOCK, EXPENSES DISALLOWED ETC. IN MY CONSIDERED OPINION, WHEN THE BOOKS OF ACCOUNTS ARE NOT RELIABLE, THE AB OVE ACTION OF THE AO IS NOT SUSTAINABLE. THE ONLY ACTION PERMISSIBLE IN SUC H CASES IS THAT THE SMC-ITA NO 2407/AHD/2010 MAHENDRASINGH SALUJA VS DCIT AY : 1998-1999 5 ESTIMATION OF PROFIT ON THE BASIS OF PAST RESULTS A ND/OR BUSINESS PRACTICE IN THE AREA. 5.1 AS REGARDS THE ADDITION OF RS.5,37,007/- U/S 68 OF THE ACT ADDED ON ACCOUNT OF DIFFERENCE BETWEEN THE ASSESSEES ACCOUN T WITH THAT OF APOLLO TYRES LTD, LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS SUBMITTED A RECONCILIATION STATEMENT BEFORE THE AUT HORITIES BELOW AND THEY HAVE NOT COMMENTED ON THE SAME. 5.2 IN THE BACKGROUND OF AFORESAID FACTS AND CIRCUM STANCES, IN MY CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SER VED IF THE ISSUE IS REMITTED BACK TO THE FILE OF AO WITH THE FOLLOWING DIRECTION S:- (I) IN ABSENCE OF BOOKS OF ACCOUNTS, THE AO SHALL MAKE AN ESTIMATE OF PROFIT ON THE BASIS OF PAST RESULTS OF THE ASSESSEE AND/OR THE OPERATING PROFITS IN THE SECTOR IN WHICH THE ASSESS EE IS OPERATING. (II) THE AO SHALL CONSIDER THE RECONCILIATION STATEMENT OF APOLLO TYRES LTD SUBMITTED BY THE ASSESSEE. HENCE, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF AO WITH THE ABOVE DIRE CTIONS. THE AO SHALL CONSIDER THE SAME AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 30 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SHAMIM YAHYA (ACCOUNTANT MEMBER) AHMEDABAD; DATED 30/11/2016 *BIJU T., SR. PS SMC-ITA NO 2407/AHD/2010 MAHENDRASINGH SALUJA VS DCIT AY : 1998-1999 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD