The Deputy Commissioner Of Income Tax, Central Circle- 1, Mangaluru V. Smt. Shabana Sharief, Mangalore

ITA 2458/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7142 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-08-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 02-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Document seized; Cost of acquisition; Documents seized
• Section: 44AD; 133A; 153A; 143(1); 69B; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER IT A NO . 2458/BANG/2019 ASSESSMENT YEAR : 2013 - 14 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, MANGALURU. VS. SMT. SHABANA SHARIEF, PROP. M/S. GOLDEN SUPARI TRADERS, D.NO.20-1-713, SABEENA COMPLEX, AZIZUDDIN ROAD, BUNDER, MANGALORE 575 001. P AN: AKTPS 3681 C APPELLANT RESPONDENT APPELLANT BY : SHRI ELAMURUGU, G., JT. C IT(DR)(IT AT ), BENGALURU. RESPO NDENT BY : SHRI SRINIVAS KAMATH, CA DATE OF HEARING : 31 . 0 8 .2021 DATE OF PRONOUNCEMENT : 03 .0 9 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(APPEALS)-2, PANAJI DATED 26.9.2019 FOR THE ASSE SSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD.CIT(A) IS OPPOSED TO LAW AN D FACTS OF THE CASE. 2. THE LD.CIT(A) ERRED IN NOT APPRECIATING THE APPL ICATION OF PROVISIONS OF SECTION 292C OF IT ACT TO THE EVIDENC E. ITA NO. 2458/BANG/2019 PAGE 2 OF 6 3. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THE UNACCOUNTED PURCHASES ALSO ATTRACT PROVISION OF SEC .69B AS IT IS AN INVESTMENT IN STOCK IN TRADE. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UP ON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESS MENT ORDER TO BE RESTORED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF GOLDEN SUPARI TRADERS, AZIZUDDIN ROAD, BUNDER, MANG ALORE. ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE U/S. 139 (1) ON 30/09/2013 DISCLOSING A TAXABLE INCOME OF RS.15,43,790/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT ON 15.01.2014. T HERE WAS A SEARCH ACTION IN THE CASE OF ASSESSEE U/S. 132 OF THE INCO ME-TAX ACT, 1961 [THE ACT] ON 24.11.2015 AT HER RESIDENTIAL PREMISES AND A SURVEY WAS CONDUCTED ON THE SAME DAY AT HER BUSINESS PREMISES. NOTICE U /S. 153A OF THE ACT WAS ISSUED ON 23.9.2016. THE ASSESSEE FILED RETURN OF INCOME ON 27.10.2016 DECLARING INCOME OF RS.1,54,37,790. THE INCOME FROM BUSINESS WAS ADMITTED U/S. 44AD OF THE ACT. 3. IN THE COURSE OF ASSESSMENT, THE AO INTER ALIA M ADE THE ADDITION OF RS.2,14,90,104 AS INCOME FROM OTHER SOURCES IN VIEW OF UNDISCLOSED INVESTMENTS. THE AO RECORDED THERE WERE TRADE RECEI VABLES AS ON 31.3.2012 AS COMPILED FROM POCKET DIARIES WHICH WER E NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE INCOME ATTRIBUTABLE TO THIS UNDISCLOSED ASSETS WERE BROUGHT TO TAX AS UNEXPLAINED INCOME AT TRIBUTABLE TO THE TRADE RECEIVABLES FOR AY 2013-14. AGAINST THIS, THE ASS ESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. THE CIT(APPEALS) OBSERVED THAT AO IS NOT JUSTIFI ED IN BRING THE ENTIRE UNDISCLOSED TURNOVER OF RS.2,14,90,104 AND HE OUGHT TO HAVE TAXED ONLY THE PROFIT ELEMENT. SINCE THE AMOUNT OF RECEIVABLE S ARE FROM SALES OF ARECANUT WHICH COULD BE TERMED AS TURNOVER OF THE A SSESSEE, THEREFORE HE ITA NO. 2458/BANG/2019 PAGE 3 OF 6 DIRECTED THE AO TO ESTIMATE THE INCOME @ 5% OF RS.2 ,14,90,104 BEING SALES TURNOVER OF THE ASSESSEE. AGAINST THIS, REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THERE WAS A SEARCH IN THE CA SE OF ASSESSEE ON 24.11.2015 AT THE RESIDENTIAL PREMISES STITAUTED AT D.NO.35-2-256, IMTIYAZ MANZIL, KARMBAR BAJPE AND ALSO BUSINESS PREMISES OF M/S. GOLDEN SUPARI TRADERS AT 20-1-713, SABEENA COMPLEX, AZIZUDDIN ROA D, BUNDER, MANGALORE. ALSO SURVEY WAS CONDUCTED AT BUSINESS P REMISES ON THE SAME DAY. CONSEQUENT TO THE SEARCH, SEARCH PARTY FOUND POCKET DIARIES WHICH CONTAINED RECEIVABLES AS BELOW:- TOTAL RECEIVABLES (OP BAL) COLLECTION SALE TOTAL RECEIVABLES FY 2012-13 21490104 FY 2013-14 21490104 86799537 89395185 2595648 FY 2014-15 19472649 108025741 101066069 -6959672 FY 2015-16 7381135 11172342 9801703 539573 TOTAL 205997620 200262957 17665653 6. ON THESE RECEIPTS, THE AO MADE ADDITION OF RS.2, 14,90,104 IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS UNDISCLOSED INCOME. HOWEVER, THE CIT(A) AFTER HEARING THE LD. AR OF THE ASSESSEE OBSERVED THAT IT IS UNDISCLOSED TURNOVER OF THE ASSESSEE, THE ENTIRE TU RNOVER CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF ASSESSEE. THE ESTIMATE MUST BE REASONABLE, FAIR AND HONEST. TURNOVER INCLUDES PUR CHASE COST, LABOUR COST AND OTHER COSTS AND GROSS PROFIT. ONLY THE PROFIT CAN BE TERMED AS INCOME OF THE ASSESSEE. ACCORDING TO HIM, THE AO CONSIDER ING THE ENTIRE ITA NO. 2458/BANG/2019 PAGE 4 OF 6 RECEIVABLES OF RS.2,14,90,104 IS NOT CORRECT. HE H AS GIVEN DIRECTION TO THE AO TO ESTIMATE INCOME @ 5% OF THIS TURNOVER. 7. NOW THE CONTENTION OF THE LD. DR IS THAT AS PER THE PROVISIONS OF SECTION 292C OF THE ACT, THERE IS A PRESUMPTION THA T DOCUMENTS ETC. FOUND DURING THE SEARCH ACTION U/S. 132 AS WELL AS SURVEY U/S. 133A OF THE ACT ARE THAT DOCUMENTS BELONGS TO THE ASSESSEE FROM WHOSE P OSSESSION AND CONTROL IT WAS FOUND. THE SECOND PRESUMPTION IS TH AT THE CONTENTS OF SUCH DOCUMENTS ARE TRUE. THE THIRD PRESUMPTION IS THAT SIGNATURE AND HANDWRITING SHALL BE TAKEN TO BE OF THAT PERSON FRO M WHOM DOCUMENTS ARE FOUND. AS SUCH, ACCORDING TO THE LD. DR, THE ENTIRE TURNOVER HAS TO BE CONSIDERED AS UNEXPLAINED INVESTMENT U/S. 69B OF TH E ACT AND THE CIT(A) WAS NOT JUSTIFIED IN ESTIMATING INCOME @ 5% OF THE TURNOVER I.E., RS.2,14,90,104. 8. THE QUESTION BEFORE US IS HOW TO DEAL WITH THE P RESUMPTION U/S. 292C OF THE ACT IN THIS CASE. THERE IS NO DISPUTE THAT THE CIT(A) HAS NOT AT ALL HELD THAT THE SEIZED MATERIAL FOUND IN THE FORM OF POCKET DIARIES DOES NOT BELONG TO THE ASSESSEE. HE CONSIDERED THE POCKET D IARIES FOUND DURING THE COURSE OF SEARCH ACTION AS BELONGING TO THE ASSESSE E. HE ALSO CONSIDERED THE CONTENTS MENTIONED IN THE POCKET DIARIES AS TRU E. HE OBSERVED THAT IT REFLECTS THE UNDISCLOSED TURNOVER OF THE ASSESSEE. HOWEVER, HE HAS GIVEN A FINDING THAT THE ENTIRE TURNOVER MENTIONED IN THE POCKET DIARIES IN ITS ENTIRETY CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE AND TURNOVER INCLUDES PURCHASE COST, LABOUR COST, OTHER COSTS AND GROSS PROFIT AND HE ESTIMATED ONLY THE NET PROFIT OF THAT TURNOV ER @ 5% AND DIRECTED THE AO ACCORDINGLY. IN OUR OPINION, EVEN AFTER APPLYI NG THE PRESUMPTIONS U/S. 292C OF THE ACT TO THE FACTS OF THE PRESENT CASE, T HERE WAS NO ADEQUATE MATERIAL TO CONCLUDE THAT THE TRANSACTION RECORDED IN THE SEIZED DOCUMENTS ARE TOTAL UNDISCLOSED INCOME OF ASSESSEE WHICH REMA INED UNEXPLAINED. THE OTHER ASPECT OF THE MATTER IS THAT PRESUMPTIONS U/S. 292C ARE ITA NO. 2458/BANG/2019 PAGE 5 OF 6 REBUTTABLE PRESUMPTIONS AND THEY DO NOT LEAD TO CON CLUSIVE EVIDENCE. THE ASSESSEE HAS RIGHT TO REBUT THE PRESUMPTION. IN TH E PRESENT CASE, SINCE THE ASSESSEE HAS NOT REBUTTED THE PRESUMPTION, THE CIT( A) HAS GIVEN A DIRECTION TO ESTIMATE THE INCOME ON THE TURNOVER @ 5% AS INCOME OF THE ASSESSEE. IN OUR OPINION, IN VIEW OF THE INADEQUAT E MATERIAL TO SUGGEST THAT THE ENTIRE TURNOVER IS INCOME OF THE ASSESSEE, TO B E REASONABLE AND FAIR, THE CIT(A) ESTIMATED INCOME @ 5% OF THE TURNOVER. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISS UE. MORE SO, SIMILAR ISSUE CAME UP FOR CONSIDERATION IN ASSESSEES OWN CASE IN ITA NO.2629/BANG/2019 FOR AY 2014-15 AND THE TRIBUNAL V IDE CONSOLIDATED ORDER DATED 22.3.2021 IN PARA 7.2 HELD AS FOLLOWS:- 7.2 WE HAVE ALREADY DISCUSSED THIS ISSUE IN EARLIE R PART OF THIS ORDER WHILE ADJUDICATING IN ITA NOS.2628 TO 2631/BA NG/2019 FOR THE ASSESSMENT YEARS 2013- 14, 2014-15, 2015-16 AND 2016-17 IN THE CASE OF SMT. SHABANA SHAREEF OBSERVING THAT ANY UNEXPLAINED DEPOSITS IN THE BANK ACCOUNTS, IT SHOUL D BE CONSIDERED AS BUSINESS RECEIPTS AND INCOME AT 2% HA S TO BE ASSESSED AS UNDISCLOSED INCOME OF THE ASSESSEE BY P LACING RELIANCE ON THE JUDGEMENT OF M.A. SIDDIQUE VS. DCIT CITED SUPRA. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY 2% OF THIS CASH DEPOSIT OF RS.2,61,00,100 AS U NDISCLOSED INCOME OF THE ASSESSEE. THIS GROUND OF APPEAL OF AS SESSEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 9. THE ABOVE ORDER OF THE TRIBUNAL WAS PASSED BY FOLLO WING THE EARLIER ORDER OF THE TRIBUNAL IN M.A. SIDDIQUE VS. DCIT IN ITA NOS.62 TO 66/BANG/2020 DT.14.08.2020 WHEREIN THE TRIBUNAL CONSIDERED THE BUSINESS OF SUPARI AND OBSERVED THAT IN THE CASE OF UNACCOUN TED SALES NO BILL IS ISSUED AND THEREFORE NO CUSTOMER WILL PAY TAXES AND LEVIES WHICH WILL RESULT INTO HIGHER PROFIT TO THE SELLER. THE TRIBUNAL ADOP TED THE PROFIT RATE OF 2% IN THE CASE OF SUPARI BUSINESS. ITA NO. 2458/BANG/2019 PAGE 6 OF 6 10. THE ABOVE ORDER IS SQUARELY APPLICABLE TO THE F ACTS OF THE CASE. BEING SO, THE ENTIRE TRANSACTION RECORDED IN THE SE IZED MATERIAL AT RS.2,14,90,104 CANNOT BE CONSIDERED AS INCOME OF AS SESSEE US/. 69B. THEREFORE, WE ARE INCLINED TO CONFIRM THE ORDER OF CIT(APPEALS) ON ESTIMATION OF INCOME @ 5% OF THE TURNOVER. IN VIE W OF THE ABOVE DISCUSSION, WE DISMISS THE GROUNDS OF THE REVENUE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF SEPTEMBER, 2021. SD/- SD/- ( N V VASUDEV AN ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTA NT MEMBER BANGALORE, DATED, THE 3 RD SEPTEMBER, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.