Income Tax Officer, Ward-1, Gokak., Gokak V. Shri Tajpal Annasaheb Khemalapure, Gokak

ITA 245/PAN/2014

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9689 (ITAT-PANAJI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-11-2014
• Assessment Year: 2011-2012
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RATNAKAR LD
• Assessee Lawyers: ASHOK G MU DNUR
• Keywords: Business income; Income from undisclosed sources
• Section: 44AD; 133A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO.245/PNJ/2014 (ASSESSMENT YEAR 2011 - 12) THE INCOME TAX OFFICER, WARD 1, GOKAK (APPELLANT) VS. SHRI TEJPAL ANNA SAHEB KHEMALAPURE. 980, BAZAR ROAD PO : GHATAPRABHA, TAL: GOKAK, DIST: BELGAUM P AN:ADVPK5552F (RESPONDENT) APPELLANT BY : RATNAKAR, LD. DR . RESPO NDENT BY : ASHOK G. MUDNUR, CA. DATE OF HEARING : 10/11 /2014 DATE OF PRONOUNCEMENT : 19 /12 /2014 O R D E R PER: D.T. GARASIA THIS APPEA L HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), BELGAUM DATED 5 TH MAY , 2 014 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE. (I) THE LEARNED CIT(APPEALS), ERRED IN NOT APPRECIATING THE FACTS COMPLETELY THAT THE ASSESSEE HAS SHOWN MAJURI OF RS. 1,31,717 ONLY ON THE MANUFACTURE OF GOLD ORNAMENTS OF 7282.894 GRAMS BUT FAILED TO SUPPLY INFORMATION REGARDING NAME AND ADDRESS OF THE KAREGARS, ACCOUNTS OF THE KAREGARS AND NAME AND ADDRESS OF THE CUSTOMERS DESPITE PROVIDING SUFFICIENT OPP ORTUNITY EVEN DURING THE ASST PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. (II) THE LEARNED CIT(APPEALS), ERRED IN HOLDING THAT THE AO HAS MADE ADDITIONS ON SURMISES WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS ADMITTEDLY MANUFACTURED GOLD ORNAMENT S OF 7282.894 GRAMS ON MAJURI BASIS AND SHOWN MEAGRE INCOME OF RS.1,31,717 WHICH WORKS OUT TO 1.35% WHICH IS COMPARATIVELY VERY LOW COMPARED TO THE PREVAILING MARKET TREND IN THIS LINE OF BUSINESS. (III) THE LEARNED CIT(APPEALS) ERRED IN NOT APPRECIATING T HE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM OF MANUFACTURING OF GOLD ORNAMENTS WEIGHING 7282.894 GRAMS ON MAJURI BASIS BY FURNISHING NAME AND ADDRESS OF THE KAREGARS AND 2 . ITA NO.245/PNJ/2014 (ASST. YEAR 2011 - 12) CUSTOMERS AND THEREBY DISCHARGE ITS ONUS IN ESTABLISHING THAT THE I NCOME FROM MAJURI DECLARED WAS CORRECT. (IV) THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT IN THE LINE OF ASSESSEES BUSINESS MAJURI OF 12% TO 1 7% IS BEING COLLECTED ON THE VALUE OF ORNAMENTS MANUFACTURED FOR CUSTOMERS AND ASSESSEE ALSO E ARNS INCOME IN THE FORM OF WASTAGE WHICH HAS NOT BEEN CONSIDERED BY THE CIT(APPEALS). (V) THE LEARNED CIT(APPEALS) WRONGLY CONCLUDED THAT THE ASSESSING OFFICER HAS TREATED 10% OF GOLD RECEIVED FOR JOB WORK TO ASSESSEES OWN STOCK WHEREAS THE AO HAS TREATED THE VALUE OF 10% OF GOLD MANUFACTURED BY THE ASSESSEE AS HIS INCOME UNDER THE HEAD MAJURI AND NOT AS UNACCOUNTED STOCK AS HELD BY THE CIT(APPEALS). (VI) THE LEARNED CIT(APPEALS) IGNORED THE FACT THAT THE ASSESSEE INSTEAD OF FURNISHING INFORMATION TO SUB STANTIATE HIS MAJURI INCOME OF RS. 1,31,717 CLAIMED TO HAVE EARNED BY WAY OF MANUFACTURING OF GOLD ORNAMENTS OF 7282.894 GRAMS OF THE CUSTOMERS, THE ASSESSEE TOOK A SHELTER UNDER THE DEEMING PROVISIONS OF SECTION 44AF STATING THAT HE HAS DECLARED MORE THAN 5% PROFIT AND QUESTION OF FURNISHING INFORMATION ABOUT KAREGARS DOES NOT ARISE. (VII) THE LEARNED CIT (APPEALS) ERRED IN NOT APPRECIATING THE NATURE OF ASSESSEES BUSINESS IS THAT OF TRADING AS WELL AS MANUFACTURING OF GOLD ORNAMENTS AND AS SUCH HIS ACTIV ITY OF MANUFACTURING ORNAMENTS ON JOB WORK BASIS FALLS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 44 AF OF THE IT. ACT, 1961. (VIII) THE LEARNED CIT(APPEALS) ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS MADE ADDITION ON SURMISES AND S USPICION WITHOUT APPRECIATING THE FACT THAT THE ADDITION OF RS, 9,62,640 WAS MADE ON ACCOUNT OF MAJURI EARNED ON MANUFACTURE OF 7282.894 GRAMS OF GOLD ORNAMENTS WHICH WORKS OUT TO 10% OF THE TOTAL VALUE OF 720 GRAMS OF GOLD ORNAMENTS MANUFACTURED BY THE AS SESSEE WHICH WAS SCIENTIFICALLY BASED ON MARKET TREND OF JEWELLERY BUSINESS. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A RETAIL TRADER IN GOLD & SILVER JEWELLERY AND ARTICLES AND ALSO AN AGRICULTURIST. THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,53,689/ - DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAS PRODUCED THE SALE BILLS, CASH BOOK, BANK STATEMENT, PURCHASE BILLS ETC. WHICH WERE VERIFIED BY THE A.O . DURING THE YEAR, THE TOTAL TURNOVER SHOWN IN RESPECT OF GOLD AND SILVER IS RS.18,87,843/ - . FROM PERUSAL OF PROFIT AND LOSS ACCOUNT FOR THE ASSESSMENT YEAR 2009 - 10, IT WAS REVEALED TO THE A.O THAT ASSESSEE HAS SHOWN SALE OF GOLD OF ONLY 52 GRAMS PER MONTH WHEREAS HE HAD MANUFACTURED GOLD ORNAMENTS OF ABOUT 880 GRAMS PER 3 . ITA NO.245/PNJ/2014 (ASST. YEAR 2011 - 12) MONTH. IN VIEW OF THIS, THE ASSESSEE WAS ASKED BY THE AO TO FURNISH DETAILS LIKE THE NAME OF THE KARIGARS WHO MADE ORNAMENTS FOR THE ASSES SEE, THEIR PAN NOS, CONTACT NO. , NAMES AND ADDRESS OF ALL THE CUSTOMERS WHO HAD GIVEN GOLD FOR MA KING ORNAMENTS, PERCENTAGE OF CARAT OF EACH ORNAMENTS RECEIVED FROM CUSTOMERS, ORNAMENTS MADE BY THE ASSESSEE, WEIGHT DETAILS OF MAKING CHARGES PAID, DETAILS OF TDS ETC. THE ASSESSEE CO U LD NOT FURNISH SUCH DETAILS AS ASKED FOR BY THE APPELLANT. THE A.O THE REFORE, VERIFY THE ASPECTS . TO VERY THIS ASPECT, A SURVEY U/S. 133A WAS CONDUCTED BY THE A.O AT THE BUSINESS PREMISES OF THE ASSESSEE ON 27.09.2011. DURING THE COURSE OF SURVEY QUESTION NO. 13 WAS ASKED WHICH READ AS UNDER: 4.1.1 QUESTION NO. 13 OF THE A SSESSEES STATEMENT RECORDED DURING THE COURSE OF SURVEY IS REPRODUCED BELOW: Q. 13: YOU HAVE SHOWN MAKING CHARGES IN YOUR RETURNS OF INCOME FOR THE FOLLOWING ASSESSMENT YEARS AS FOLLOWS: A. Y. NET WEIGHT OF GOLD (GINS) 2007 - 08 5840.000 2008 - 09 5650.000 2 009 - 10 7000.00 0 2010 - 11 6880.000 2011 - 1 2 7610.000 2012 - 13 1770.000 OUT OF WHICH YOU HAVE STATED THAT 10% OF GOLD BELONGS TO YOU, WHICH IS SOLD OUT OF BOOKS, APPLYING THE PREVAILING MARKET R ATES OF THE RELEVANT A.YS THE VA LUE OF GOLD IN V ESTED BY YOU OUT OF BOOKS COME AS PER THE CHART SHOWN AT NEXT PAGE. A. Y. NET WEIGHT RATE AMOUNT 2007 - 08 58.40(10% OF 584 GMS) 9,400 5,48,960 2008 - 09 585 12,300 6,94,950 2 009 - 10 700 15,370 9,35,900 2010 - 11 688 16,600 11,42,800 201 1 - 22 671 21,100 14,15,810 2012 - 13 177 26,500 4,69,050 TOTAL 52,07,470 AS THE SAME BEING SOLD OUT OF BOOKS OF ACCOUNTS, THE SAME WILL BE TREATED AS YOUR INCOME FOR RELEVANT ASST. YEAR. PLEASE OFFER YOU R EXPLANATION. 4 . ITA NO.245/PNJ/2014 (ASST. YEAR 2011 - 12) ANS: I AM UNABLE TO ANSWER THIS QUESTION AT PRESENT. 4.2 THE ASSESSEE IN HIS REPLY DATED 06.11.2013 SUBMITTED BEFORE THE A.O ASUNDER: I WOULD LIKE TO SUBMIT THAT AS PER SECTION 44AD OF THE INCOME TAX ACT 1961, I NEED NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS. THE SECTION 44AD WHICH READS AS UNDER - NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C, IN THE CASE OF AN ELIGIBLE ASSESSEE ENGAGED IN ELIGIBLE BUSINESS, A SUM EQUAL TO EIGHT PER CENT OF THE TOTAL TURNO VER OR GROSS RECEIPTS OF THE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM CLAIMED TO HAVE BEEN EARNED BY THE ELIGIBLE ASSESSEE, SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSI NESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION THE SECTION BEGINS WITH NOTWITHSTANDING ANYTHING ... SECTION 28 TO 43C AND HENCE BEING SMALL RETAILER AND I HAVING DECLARED MORE THAN 8% AS NET INCOME THE BUSINESS INCOME IS REQUIRED TO BE ACCEPTED IN RESPECT OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE A.O DID NOT ACCEPT THE ASSESSEES EXPLANATION, THEREFORE, THE AO ESTIMATED THE NET INCOME OUT OF GOLD INVOLV ED IN MAKING ORNAMENTS. AS PER THE DETAILS FURNISHED BY THE ASSESSEE DURING THE YEAR 6710 GR AMS ORNAMENTS WERE MADE, 10% OF IT WORKED OUT TO 671 GRAMS WAS UNACCOUNTED INCOME AND TOTAL ADDITION OF RS. 14,15,810/ - WAS MADE. 4. THE MATTER CARRIED TO CIT(A) AND C IT(A) HAS DELETED THE ADDITION MADE BY THE AO. 5 . THE LEARNED DR SUBMITTED THAT THE STATEMENT DURING THE SURVEY HAS TO BE BELIEVED AND AO IS JUSTIFIED IN ESTIMATING THE INCOME. 6 . THE LEARNED AR RELIED UPON THE ORDER OF COMMISSIONER OF INCOME TAX. 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. THE ASSESSEE IS A RETAIL TRADER IN GOLD & SILVER JEWELLERY AND A RTICLES AND ALSO AGRICULTURIST. THE ASSESSEE UNDERTAKES MAKING OF JEWELLERY ITEMS ON JOB WORK BASIS FOR CUSTOMERS ON WHICH HE EARNS MAK ING CHARGES. THE ASSESSEE FILED REGULAR RETURN OF INCOME U/S. 44AD AS HIS TOTAL TURNOVER IS LESS THAN RS.40 LAKHS AND REGULARLY SHOWS NET 5 . ITA NO.245/PNJ/2014 (ASST. YEAR 2011 - 12) PROFIT OF MORE THAN 20% AS AGAINST 8%, THE REQUIREMENT OF SECTION 44AD. THE ASSESSEE WA S ASKED TO SUBMIT THE DETAILS F OR A.Y.2009 - 10 REGARDING KARIGARS AND CUSTOMERS IN RESPECT OF JOB WORK BUSINESS AND THE ASSESSEE SHOWING GREATER TURNOVER INVOLVED IN JOB WORK COMPARED TO REGULAR SALES LED THE AO TO SUSP ECT THAT THE ASSESSEE EFFECTED SALES OUTSIDE THE BOOKS OF ACCOUNTS AN D IN ORDER TO VERIFY THESE FACTS, HE CONDUCTED A SURVEY U/S 133A AT THE BUSINESS PREMISES OF THE ASSESSEE ON 27.09.2011 AND FOUND ONLY A SMALL AMOUNT OF EXCESS STOCK WHICH WAS DECLARED BY THE ASSESSEE AS HIS INCOME FROM A.Y.2012 - 13 AND NO OTHER EVIDENCE RE GARDING UNACCOUNTED SALES, UNACCOUNTED PURCHASES AND MAINTENANCE OF UNACCOUNTED STOCK WERE FOUND. THE ASSESSEE WAS PUT THE QUESTION REGARDING 10% OF GOLD RECEIVED FOR JOB WORK TO BE ASSESSEES OWN STOCK. THE ASSESSEE REPLIED THAT HE HAS NOT ABLE TO REPLY O N THAT BASIS THE AO HAS MADE THE ADDITION OF RS.14,15,810/ - . THE AO HAS NOT ADDED THIS UNACCOUNTED PURCHASES, UNACCOUNTED SALES OR UNACCOUNTED STOCK ON THE BASIS OF VISITING THE ASSESSEES PREMISES U/S. 133A. THE CIT(A) HAS HELD THAT ASSESSEE FILED THE RET URN U/S. 44AF WAS NOT REQUIRED TO MAINTAIN SUCH DETAILS AND EVEN IF FOR SOME REASONS THIS PLEA OF THE ASSESSEE IS NOT ACCEPTED, THE WORSE THAT CAN BE PRESUMED IN SUCH CIRCUMS TANCES IS THAT THE INCOME SHOWN IN RESPECT OF JOB WORK WAS EITHER FICTITIOUS OR IN CORRECT. THEREFORE, CIT(A) HAS DELETED THE ADDITION AND OUR INTERFERENCE IS NOT REQUIRED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 .12 .2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTAN T MEMBER JUDICIAL MEMBER PLACE : PANAJI / GO A DATED : 1 9 .12 .2014 . P.S. - *PK* 6 . ITA NO.245/PNJ/2014 (ASST. YEAR 2011 - 12) COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER