The ITO, Ward-5(2), Surat V. Smt. Sangeetaben S.Rathi, Surat

ITA 2412/AHD/2008

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1176 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SEWAK
• Assessee Lawyers: S B VAIDYA
• Keywords: Unexplained cash credit
• Section: 143(3)

Judgement Text

ITA NO .24 1 2 /AHD/ 20 08 ASSESSMENT YEAR: 2 0 0 5 - 06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH , AHMEDABAD [CORAM: PRAMOD KUMAR AM AND KUL BHARAT JM ] ITA NO. 241 2 / AHD / 2 0 08 ASSESSMENT YEAR: 200 5 - 06 INCOME TAX OFFICER, ....... .. . ..... APPELLANT WARD 5(2), SURAT . VS. S ANGEETA BEN S . RATHI , .... ........ .... .. .. .. .... .. RESPONDENT PROPRIETOR OF MEERA FASHIONS , C - 1218 & 19, R ADHA KRISHNA MARKET, RING ROAD, SURAT. [PAN: A A QPR 4458 K ] APPEARANCES BY: SHIVA SEWAK , FOR THE APPELLANT S.B. VAIDYA , FOR THE RESPONDENT DA TE OF CONCLUDING THE HEARING : A UGUST 13 TH , 201 5 DATE OF PRONOUNCING THE ORDER : AUGUST 21 ST , 2015 O R D E R PER PRAMOD KUMAR AM : BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 2 8 TH AP RIL , 20 08 , IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER), FOR THE ASSESSMENT YEAR 200 5 - 06 , ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - I II, SURAT HAS ERRED IN DELETING ADDITION MADE ON ESTIMATED AVERAGE G.P. RATE AT 10% AS AGAINST SHOWN BY THE ASSESSEE @ 6.75%; OF TOTAL TURNOVER OF RS.86,88,911/ - AND THE DIFFERENCE OF RS.2,82,390/ - ; WHICH HAS BEEN ADDED IN THE TOTAL INCOME OF THE ASSESSEE. ITA NO .24 1 2 /AHD/ 20 08 ASSESSMENT YEAR: 2 0 0 5 - 06 PAGE 2 OF 5 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - III, SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF C A SH CR E DIT AMOUNTING TO RS. 4, 04,467/ - & 33,807/ - MADE BY THE A.O. . 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS . THE ASSESSEE BEFORE US IS, AS THE ASSESSING OFFICER HIMSELF PUTS IT, ONE OF THE ENTITIES IN RATHI GROUP OF CASES WHICH WAS SUBJECTED TO SURVEY PROCEEDING ON 31 ST JANUARY, 2006 . AS THE ASSESSEE WAS UNABLE TO PRODUCE THE BOOKS OF ACCOUNT , WHICH WERE ST ATED TO HAVE BEEN DESTROYED IN THE FLOODS, THE GROSS PROFIT WAS ESTIMATED @ 10% - AS AGAINST 6.75 % CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD RECEIVED RS.4,04,467/ - FROM CERTAIN INDIVIDUALS BUT THE ASSESSEE HAS NOT BEEN ABL E TO DISCHARGE OBLIGATION OF PROVING THE GENUINENESS OF THE LOAN TRANSACTION. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER TREATED THE SE CASH CREDITS RAISED IN THE NAMES OF KISHANLAL M . JOSHI, SHYAM SUNDER JOSHI, SUMITRA N. MANTR I AND S U N ITADE VI S. JOSHI, AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO DISALLOWED RS.33,807/ - BEING INTEREST DEBITED IN RESPECT OF THESE LOANS. AGGRIEVED BY THESE ADDITIONS , ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE LD. CIT(A), WHO, IN HIS BRIEF BUT WELL REASONED ORDER, UPHELD ASSESSEE S GRIEVANCE AGAINST ALL THE ADDITIONS BY OBSERVING AS FOLLOWS : - THE NEXT GROUND OF APPEAL IS REGARDING ADDITION O F RS.4,04,467/ - AND RS.33,807/ - AS AN UNEXPLAINED C A SH CREDIT S AND INTEREST THEREON. IT IS SEEN THAT THE AO HIMSELF HAS OBSERVED THAT THESE LOANS WERE FROM BANK ACCOUNT WITH THE SHANGLI CO - OP. BANK AND THESE ACCOUNTS WERE DISCLOSED BY T HE RATHI GROUP OF CASES. IN MY ORDER IN APPEAL NO.CAS - III/65 & 66/07 - 08, DATED 28.03.2008, I HAD HELD THAT ALL THESE A C COUNTS AND INCOME THERE FROM BELONG TO THE INDIVIDUAL SHRI SATYANARAYAN RATHI. THEREFORE, THERE IS NO JUSTIFICATION IN MAKING THE ADDITION FOR THE SAME AMOUNTS IN THE HANDS OF THE APPELLANT. IT IS ALSO SEEN THAT TH E IMPOUNDED BOOKS OF ACCOUNTS AND DOCUMENTS WERE AUDITED BY THE SPECIAL AUDITOR, WHO HAD NOT ADVERSELY COMMENTED ON THE SAME. ADDITION ON THIS ACCOUNT IS THEREFORE DIRECTED TO BE DELETED. ITA NO .24 1 2 /AHD/ 20 08 ASSESSMENT YEAR: 2 0 0 5 - 06 PAGE 3 OF 5 3. THE ASSESSING OFFICER IS NOT SATISFIED BY THE RELIEF SO GRANTE D BY THE CIT(A) AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. SO FAR AS FIRST GROUND OF APPEAL IS CONCERNED, A S LEA RNED R EPRESENTATIVES FAIRLY AGREE, THE ISSUE IS NOW COVERED, ON MERITS, IN FAVOUR OF THE ASSESSEE BY DECISION OF A CO - ORDINATE BENCH, IN THE GROUP CASES OF ITO VS. S . N. RATHI & OTHERS (ORDER D A TED 29.05.2015), WHEREIN THE CO - ORDINATE BENCH HAS INTER ALIA, OBSERVED AS FOLLOWS : - 23. AS OBSERVED EARLIER, WHENEVER AN ADJUDICATOR USED TO ESTIMATE THE INCOME, ELEMENT OF GUESS WORK WOULD ALWAYS BE INVOLVED. THE DISCRETION REQUIRED TO BE EXERCISED BY THE ADJUDICATOR SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDG MENT, CIRCUMSTANCES, AND THE MATERIAL AVAILABLE ON THE RECORD, AS WELL AS CONCEIVED BY THE ASSESSING OFFICER ABOUT THE ASSESSEE FROM THE VICINITY WHICH WILL GOAD HIM TO JUST CONCLUSIONS. THE ASSESSING OFFICER MUST NOT ACT DISHONESTLY OR VINDICTIVELY. FRO M PERUSAL OF THE FINDING OF ASSESSING OFFICER FOR ADOPTING THE PROFIT RATE AT 10% IN THE FINDING (EXTRACTED SUPRA), NO REASONS ARE DISCERNABLE. THE ASSESSING OFFICER WAS OF THE VIEW THAT EXPENSES MUST HAVE BEEN DEBITED BY THE ASSESSEE IN HIS REGULAR BOOKS OF ACCOUNTS. IN OTHER WORDS, THE ASSESSEE HAS BEEN DOING BUSINESS IN HIS NAME FOR WHICH REGULAR BOOKS OF ACCOUNTS ARE BEING MAINTAINED AND INCOME HAS BEEN OFFERED, ACCOUNTS ARE AUDITED. THUS, ASSESSING OFFICER FORMED AN OPINION THAT EXPENSES RELATABLE T O BENAMI TRANSACTION MUST HAVE BEEN DEBITED BY THE ASSESSEE IN THE REGULAR BUSINESS. THEREFORE, A STRAIGHT GROSS PROFIT RATE TO THE TURNOVER IS TO BE APPLIED FOR WORKING OUT OF THE PROFIT. THE LD. ASSESSING OFFICER LOST SIGHT OF THE FACT THAT TURNOVER IN THE BENAMI ACCOUNT IS MULTI - FOLD THAN THE WHOLE BUSINESS IN THE REGULAR BOOKS OF ACCOUNTS. THE EXPENDITURE TO THIS MAGNITUDE CANNOT BE ADJUSTED IN THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE HAS SPECIFICALLY POINTED OUT THAT TURNOVER OF REGULAR BOOKS OF ACCOUNTS WOULD EVEN LESS THAN PACKING EXPENSES IN THE BENAMI TRANSACTION. THEREFORE, ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING GP DIRECTLY ON TURN - OVER FOR WORKING OF THE INCOME OF ASSESSEE. THE LD. ASSESSING OFFICER HAS NOT REFERRED THE CASE OF AN Y SIMILARLY SITUATED ASSESSEE WHO OUGHT TO SHOWN THE PROFIT AT 10% WITHOUT DEBITING THE EXPENDITURE IN THIS LINE OF THE BUSINESS. THE LD. FIRST APPELLATE AUTHORITY ON THE OTHER HAND HAS OBSERVED THAT SPECIAL AUDITOR WAS APPOINTED BY THE ASSESSING OFFICER T O WORK OUT THE PROFIT EMBEDDED IN THESE BENAMI TRANSACTIONS. THE SPECIAL AUDITOR IN HIS AUDIT REPORT SUGGESTED THAT AN AVERAGE NET PROFIT @ 2.45% MAY BE REASONABLE PROFIT IN THIS CASE. THUS, ITA NO .24 1 2 /AHD/ 20 08 ASSESSMENT YEAR: 2 0 0 5 - 06 PAGE 4 OF 5 APART FROM THIS, THE LD. FIRST APPELLATE AUTHORITY HAS ALSO CON SIDERED THE CASE OF OTHER INDIVIDUAL ASSESSEES WHERE PROFIT HAS BEEN OFFERED AT 1.25%, 1.35% AND 2.21%. TAKING INTO CONSIDERATION THE COMPARABLE CASES AND THE OPINION OF THE SPECIAL AUDITOR, LD. FIRST APPELLATE AUTHORITY HAS UPHELD THE APPLICATION OF PROFI T RATE AT 2.45%, IF WE WEIGH THE REASONING ASSIGNED BY THE LD. FIRST APPELLATE AUTHORITY VIS - - VIS THAT OF ASSESSING OFFICER IN THE FINDINGS EXTRACTED ABOVE, THEN SCALE WOULD TILT IN FAVOUR OF LD. FIRST APPELLATE AUTHORITY, BECAUSE LD. FIRST APPELLATE AUT HORITY HAS MADE REFERENCE TO THE COMPARABLE CASES AS WELL AS THE OPINION OF SPECIAL AUDITOR. ON THE OTHER HAND, LD. ASSESSING OFFICER DID NOT POINT OUT ANY COMPARABLE CASES OR ANY SPECIAL MATERIAL WHICH HAS AN INFLUENCE FOR GIVING RISE TO SUCH A PROFIT. THE OTHER DISCUSSION MADE BY ASSESSING OFFICER IN ASSESSMENT ORDER RELATES TO THE ISSUE, AS TO WHY ALLEGED BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED. BUT AFTER REJECTION OF THE BOOKS, THE LD. ASSESSING OFFICER FAILED TO SUBSTANTIATE HIS CONCLUSION FOR COMP UTING THE PROFIT AT @ 10% OF THE TURNOVER. TAKING INTO CONSIDERATION THE FINDING OF THE COMMISSIONER OF INCOME TAX(A), WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDERS IN ALL THE ASSESSMENT YEARS. THUS, GROUNDS OF APPEAL OF THE ASSESSEE AS WELL AS BY THE REVENUE ON THIS ISSUE, IN ALL THESE ASSESSMENT YEARS ARE REJECTED. THE LD. ASSESSING OFFICER SHALL COMPUTE THE PROFIT FROM THE BENAMI BANK ACCOUNTS @ 2.45% OF THE TURNOVER AND ASSESSED IT IN THE HANDS OF SHRI S.N. RATHI INDIVIDUAL. 6 . AS REGARDS T HE GROUND OF APPEAL NUMBER TWO ALSO, WE FIND THAT NO MATERIAL WHATSOEVER HAS BEEN BROUGHT BEFORE US TO CONTROVERT THE WELL REASONED FINDINGS OF LEARNED CIT(A). ALL THE REQUISITE DETAILS, AS NOTED BY THE LD . CIT(A), WERE PLACED ON RECO R D AND NO INCONSISTEN CIES HAVE BEEN POINTED OUT THEREIN. IN A NY EVENT, SIMILAR ADDITIONS IN GROUP CASES, VIDE THE CO - ORDINATE BENCH S DECISION (SUPRA), HAVE BEEN DELETED. 7 . IN VIEW OF THE ABOVE DECISIONS, AND IN THE ABSENCE OF ANY INFIRMITIES HAVING BEEN POINTED OUT IN THE R EASONING A DOPTED BY THE LD . CIT(A), WE SEE NO REASONS TO DISTURB THE CONCLUSIONS ARRIVED AT IN RESPECT OF ADDITION FOR UNEXPLAINED CREDITS OF RS .4, 04,467 / - AND OF INTEREST OF RS.33,807/ - ON THESE LOANS HAVING BEEN DELETED. GROUND NO.2 THUS FAIL S TOO . ITA NO .24 1 2 /AHD/ 20 08 ASSESSMENT YEAR: 2 0 0 5 - 06 PAGE 5 OF 5 8 . FOR THE REASONS SET OUT ABOVE, WE UPHOLD THE IMPUGNED ORDER AND DECLINE TO INTERFERE IN THE MATTER. 9 . IN THE RESULT, THE APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015 ) SD/ - SD/ - KUL BHAR A T PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 21 ST DAY OF AUGUST, 201 5 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) D EPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD