Shri Kayyum Ahamed, Meerut V. ITO, Meerut

ITA 2410/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0061 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAIRAV DUDEJA
• Assessee Lawyers: VINOD GOEL
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 2410/DEL/2013 ASSESSMENT YEAR : 2009-10 SHRI KAYYUM AHAMED, ` VS. ITO, WAD 1(3), PORP. VIP PUBLICITY, MEERUT 422/13, SHASTRI NAGAR, MEERUT GIR / PAN:AERPA2406F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD GOEL, ADV RESPONDENT BY : SHRI GAIRAV DUDEJA, SR. DR DATE OF HEARING : 14.05.2015 DATE OF PRONOUNCEMENT : 22.05.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FIELD BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A) DATED 07.02.2013. THE ASSESSEE HAS TAKEN ONLY ONE EFFECTIVE GROUND OF APPEAL IN WHICH HE HAS RAISED HIS GRIEVANCE REGARDI NG CONFIRMATION OF ADDITION OF RS.47,93,474/- BY LD. CIT(A), WHICH A.O . HAD MADE ON ACCOUNT OF ADDITION OF UNRECORDED SALES DETECTED DURING ASS ESSMENT PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ADVERTISEMEN T AND PUBLICITY AND IS WORKING AS CONTRACTOR. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE FILED RETURN OF INCOME DECLARING GROSS RECEIPT OF R S.47,87,763/-. HOWEVER, DURING ASSESSMENT PROCEEDINGS, THE A.O. FROM FORM 2 6AS OBSERVED THAT GROSS RECEIPTS OF THE ASSESSEE WERE RS.89,81,785/- AND, THEREFORE, ASSESSEE ITA NO.2410/DEL/2013 2 WAS SHOW CAUSED AS TO WHY THE DIFFERENCE OF TURNOVE R AS REFLECTED IN FORM 26AS AND AS DECLARED BY ASSESSEE, BE NOT INCLUDED I N THE INCOME OF THE ASSESSEE. IN REPLY, THE ASSESSEE SUBMITTED THAT TH E AUDITED BALANCE SHEET WAS PREPARED FROM CORRUPTED DATA AND, THEREFORE, THE FI GURES CONTAINED IN P & L ACCOUNT AND BALANCE SHEET WERE WRONG AND, THEREFORE , HE PREPARED REVISED P & L ACCOUNT WHEREIN HE DECLARED GROSS RECEIPT OF RS .89,81,785/- AS REFLECTED IN THE FORM 26AS AND ALSO DECLARED INCREASED PROFIT S AS COMPARED TO THAT DECLARED IN THE RETURN OF INCOME. THE ASSESSEE FUR THER SUBMITTED THAT THERE WAS DIFFERENCE ONLY IN AMOUNTS OF PURCHASES OF MATE RIAL AND LABOUR CHARGES AND REST OF THE EXPENSES WERE ALMOST SAME AS REFLEC TED IN THE ORIGINAL P & L ACCOUNT. THE A.O. DID NOT AGREE WITH THE CONTENTIO N OF THE ASSESSEE AND HELD THAT SINCE AS PER THE CLAIM OF THE ASSESSEE, THE DA TA WAS CORRUPTED AND THEREFORE, THE REVISED P & L ACCOUNT CANNOT BE ACCE PTED AND IN VIEW OF ABOVE, HE MADE ADDITION OF RS.47,93,422/- BEING THE DIFFERENCE BETWEEN DECLARED TURNOVER SHOWN IN THE RETURN OF INCOME AND THE TURNOVER REFLECTED IN FORM 26AS. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND REITERATED HIS SUBMISSIONS MADE BEFORE A.O. HOWEVE R, LD. CIT(A) DID NOT AGREE WITH THE CONTENTION OF ASSESSEE AND UPHELD TH E ADDITION AS MADE BY A.O. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. 3. AT THE OUTSET, LD. A.R. SUBMITTED THAT DURING PR OCEEDINGS BEFORE LD. CIT(A), LD. CIT(A) HAS CALLED FOR A REMAND REPORT F ROM A.O. WHICH WAS PLACED AT PAPER BOOK PAGES B-1 AND B-2. INVITING O UR ATTENTION TO PARA 4 OF THE REPORT OF A.O., LD. A.R. SUBMITTED THAT THE A.O . HIMSELF IN THE REMAND REPORT HAD RECOMMENDED THAT GROSS RECEIPT OF ASSESS EE SHOULD BE TAXED @ 8% WHEREAS LD. CIT(A) DID NOT LOOK INTO THIS ASPECT OF A.O.S REPOT AND CONFIRMED THE ADDITION. LD. A.R. SUBMITTED THAT TH E ASSESSEE DURING EARLIER ITA NO.2410/DEL/2013 3 THREE YEARS HAD BEEN DECLARING NET PROFIT RANGING 6 % TO 8% AND THE SAME WERE BEING ACCEPTED, THEREFORE IN THE CURRENT YEAR ALSO, THE SAME RATIO SHOULD BE ACCEPTED SPECIFICALLY IN VIEW OF THE RECOMMENDAT IONS OF THE A.O. DURING REMAND PROCEEDINGS. LD. A.R. SUBMITTED HAT THE ADD ITION CONFIRMED BY LD. CIT(A) HAS GIVEN VERY ABSURD PICTURE OF P & L ACCOU NT WHEREIN THE NET PROFIT COMES OUT AT 55% OF GROSS RECEIPTS WHICH IS NOT AT ALL BELIEVABLE AND ACHIEVABLE. LD. A.R. FURTHER SUBMITTED THAT INCLUS ION OF ENTIRE TURNOVER WITHOUT GIVING ALLOWANCE FOR EXPENSES IS AGAINST LA W AND THERE ARE VARIOUS DECISIONS OF HON'BLE HIGH COURTS WHEREIN SIMILAR IS SUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN THIS RESPECT OUR ATTENT ION WAS INVITED TO DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES 250 ITR 654. 4. LD. D.R. ON THE OTHER HAND SUBMITTED THAT ASSESS EE HAD FILED RETURN OF INCOME AFTER GETTING HIS ACCOUNTS AUDITED AND A REP ORT U/S 44AB WAS ALSO FILED AND IN THE ORIGINAL P & L ACCOUNT AS AUDITED BY CA, ASSESSEE HAD DECLARED LESSER TURNOVER AND IT IS ONLY WHEN THE AS SESSEE WAS CORNERED BY THE A.O. ON THE BASIS OF FORM 26AS, THE ASSESSEE SUBMIT TED REVISED P & L ACCOUNT WHEREIN HE INCLUDED THE UNDISCLOSED TURNOVE R AND ALSO INFLATED EXPENDITURE AND IN SUPPORT OF INFLATED EXPENDITURE, THE ASSESSEE DID NOT SUBMIT ANY BILLS / VOUCHERS TO SUBSTANTIATE HIS CLA IM. HE FURTHER INVITED OUR ATTENTION TO REMAND REPORT AS PLACED AT PAPER BOOK PAGES B1 AND B-2 AND SUBMITTED THAT IN EARLIER PART OF REMAND REPORT, TH E A.O. HAD RECOMMENDED THE ADDITION OF RS.37,07,217/- ON THE BASIS OF HIDD EN INVESTMENT IN THE BUSINESS. HE ARGUED THAT LD. A.R. DID NOT INVITE TH E ATTENTION TO THIS ASPECT. 5. LD. D.R. PLACED HIS RELIANCE ON THE FOLLOWING CA SE LAWS FOR THE PROPOSITION THAT ENTIRE SALE NEEDS TO BE ADDED:- ITA NO.2410/DEL/2013 4 CIT VS CALCUTTA AGENCY LTD. 19 ITR 191 (S.C.) . CIT VS CHANDRAVILAS HOTEL 164 ITR 102 (GUJ.) CIT VS MODI STORE LTD. 203 TAXMAN 123 (DEL.) 5.1 LD. D.R. FURTHER PLACED HIS RELIANCE ON THE DEC ISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SHAKTIBHOG FOODS PVT .L TD. VS ACIT IN I.T.A. NO. 2777 TO 2778/DEL/2010 AND ALSO RELIED UPON THE CASE LAW OF GANESH RICE MILLS VS CIT DECIDED BY HONBLE ALLAHABAD HIGH COURT AND ON THE BASIS OF ABOVE CASE LAWS AND ON FACTS OF THE PRESEN T CASE, LD. D.R. STRONGLY ARGUED THAT THE ADDITION MADE BY A.O. NEEDS TO BE C ONFIRMED. 6. WE HAVE HEARD RIVAL PARTIES AND HAVE PERUSED THE MATERIAL PLACED ON RECORD. WE FIND FROM THE WRITTEN STATEMENT PLACED IN PAPER BOOK THAT ASSESSEE HAD DECLARED NET PROFIT FOR EARLIER THREE YEARS AS UNDER AND THE RESULTS DECLARED BY ASSESSEE WERE ACCEPTED DURING ASSESSMENT PROCEEDINGS:- ASSESSMENT YEAR GROSS RECEIPTS N.P. N.P. RATE _____________ 2006-07 38,05,126 3,04,411 8% (UNDER 44AD) 2007-08 50,78,403 3,05,742 6% (AS PER BOOKS OF A/ C) 2008-09 29,57,136 2,36,589 8% (UNDER 44AD) 6.1 DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE CLAIMED THAT DUE TO FAULT IN THE DATA IN COMPUTER, THE BALANCE SHEET AN D P & L ACCOUNT PREPARED AND SUBMITTED TO INCOME TAX DEPARTMENT CONTAINED WR ONG FIGURES. WE FIND THAT THE A.O. ON THE BASIS OF THE FIGURES CONTAINED IN FORM 26AS HAD CORNERED THE ASSESSEE AND, THEREFORE THE ASSESSEE H AD PREPARED REVISED P & L ACCOUNT DECLARING RECONCILED TURNOVER AND ALSO CLAI MED REVISED EXPENSES. THE A.O. WITHOUT CONSIDERING THE INCREASE IN EXPENS ES, MADE THE ADDITION OF ENTIRE TURNOVER WHEREAS THE FACT REMAINS THAT IF TH ERE WAS CONCEALED TURNOVER, THERE MUST HAVE BEEN SOME CONCEALED EXPEN SES ALSO WHICH MUST HAVE BEEN INCURRED AND THE A.O. SHOULD HAVE CONSIDE RED THE CLAIM OF ITA NO.2410/DEL/2013 5 EXPENSES ALSO. THOUGH THE ASSESSEE DID NOT FURNIS H VOUCHERS AND BILLS FOR THE EXPENSE YET THE A.O. SHOULD HAVE TAKEN GUIDANCE FROM THE PROVISIONS OF SECTION 44AD WHICH PROVIDES DETERMINATION OF NET PR OFITS ON THE BASIS OF 8% OF GROSS RECEIPT IN THE CASE OF SMALL TRADERS. FROM THE FIGURES OF TURNOVER OF ASSESSEE, WE FIND THAT ASSESSEE ALSO FA LLS IN THE CATEGORY OF SMALL TRADERS AND HIS UNDISCLOSED INCOME SHOULD HAVE BEEN CALCULATED ON THE BASIS OF CERTAIN PERCENTAGE ON UNDISCLOSED TURNOVER. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES AS RELIED UPON BY LD. A.R. PLACED AT PAPER BOOK PAGE 45 HAS HELD THAT THE AMOU NT OF UNDISCLOSED SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESS EE AND THE SALES ONLY REPRESENT PRICE RECEIVED BY SELLER OF GOODS BUT FOR ACHIEVING OF SUCH SALES, IT HAD ALREADY INCURRED THE COST. THE FINDINGS OF HON 'BLE HIGH COURT AS CONTAINED IN PARA 3 ARE REPRODUCED BELOW: HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE A. O., THE ORDER MADE BY THE COMMISSIONER (APPEALS) AND TRIBUNAL, WE ARE SATISFIED THAT THE TRIBUNAL WAS JUSTIFIED IN REJECTING THE AP PLICATION U/S 256(1). IT CANNOT BE A MATTER OF AN ARGUMENT THAT THE AMOUN T OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY I NCURRED THE COST. IT IS THE REALIZATION OF EXCESS OVER THE COSTS INCURRE D THAT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALE S. THEREFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING COST OF ACQUIRING GOODS WHICH HAVE BEEN SOLD HAS BEEN MA DE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED, THE QUESTION, WHETHER ENTIRE SUM OF UNDISCLOSED SALES PROCEED CAN BE TREA TED AS INCOME OF THE RELEVANT ASSESSMENT YEAR ANSWERS BY ITSELF IN T HE NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR AN Y MATERIAL HAS BEEN REFERRED TO ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN FOUND SUBJECT OF UNDISCLOSED SALES. ITA NO.2410/DEL/2013 6 6.2 THE ABOVE CASE LAW RELIED UPON BY LD. A.R. SQUA RELY COVERS THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE, FOLLOWING THE HON'BLE GUJARAT HIGH COURT WE HOLD THAT ENTIRE TURNOVER CANNOT BE ADDED TO THE INCOME OF ASSESSEE AND PROFITS EMBEDDED IN THE TURNOVER CAN ONLY BE TA XED. THE ASSESSEE DID NOT PRODUCE VOUCHERS / BILLS TO SUPPORT THE INCREAS E IN EXPENDITURE IN HIS REVISED P & L ACCOUNT. THEREFORE, INSTEAD OF 8% OF TURNOVER TO BE INCLUDED AS PROFITS ON UNDISCLOSED TURNOVER, WE HOLD THAT AN AMOUNT EQUIVALENT TO 12% OF TURNOVER BE INCLUDED IN THE INCOME OF ASSESS EE. IN VIEW OF THE ABOVE, THE A.O. IS DIRECTED TO DELETE THE ADDITION ON ACCOUNT OF UNRECORDED TURNOVER AND INSTEAD, MAKE AN ADDITION EQUIVALENT T O 12% OF UNDISCLOSED TURNOVER. 6.3 THE CASE LAWS RELIED UPON BY LD. D.R. ARE DISTI NGUISHABLE ON FACTS. THE CASE LAW OF HON'BLE SUPREME COURT, HON'BLE GUJA RAT HIGH COURT AND THAT OF HON'BLE DELHI HIGH COURT RELATE TO THE CLAI M OF EXPENSES WHEREIN THE COURTS HAD HELD IN FAVOUR OF REVENUE HOLDING THAT P RIMARY ONUS WAS ON ASSESSEE TO PROVE THAT EXPENSES WERE INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. OTHER CASE LAWS RELIED UPON B Y LD. D.R. ARE ALSO DISTINGUISHABLE. 7. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED AS ABOVE. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAY, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPOO R) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 22 ND MAY, 2015 SP ITA NO.2410/DEL/2013 7 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/5 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 18, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 22/5/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 22/5 SR. PS/PS 7 FILE SENT TO BENCH CLERK 22/5 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER