M/s. Chandak Construction Girls High School Chowk, Amaravati V. Commissioner of Income Tax -III, Nagpur

ITA 25/NAG/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3091 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: C J THAKAR
• Section: 69C; 133A; 69; 263

Judgement Text

1 ITA NO. 25/NAG/2010 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO.25/NAG/2010 ASSESSMENT YEAR : 2007 - 08. M/S CHANDAK CONSTRUCTION, ASSTT. COMMISSIONER OF INCOME - TAX, AMRA VATI. VS. AMRAVATI CIRCLE, AMRAVATI. PAN AAEFC0892Q APPELLANT. RESPONDENT . APPELLANT BY : SHRI C.J. THAKAR. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 14 - 01 - 2016 DATE OF PRONOUNCEMENT : 31 - 03 - 2016. O R D E R P ER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX - III, NAGPUR PASSED U/S 263 OF THE I.T. ACT DATED 10 - 09 - 2009. THE GROUNDS OF APPEAL READ AS UNDER : 1. IMPUGNED ORDER U/S 263 OF I.T. ACT, 1961 PASSED BY HON. C.I.T. IS WITHOUT JURISDICTION AND BAD IN LAW. 2. ASSESSMENT ORDER PASSED BY THE AO WAS PROPER, LEGAL AND AFTER FULL INQUIRY AND IT DID INCLUDE THE ENTIRE AMOUNT OF RS.30 LACS DECLARED AT THE TIME OF SURVEY. THERE WAS NO ERROR OR OMI SSION IN THE SAID ORDER. 3. ORDER PASSED BY LEARNED C.I.T. DIRECTING FURTHER ADDITION OF RS.20 LACS WAS ERRONEOUS. 2 . BRIEF FACTS OF THE CASE LEADING TO THE ISSUE OF SHOW CAUSE NOTICE U/S 263 OF THE I.T. ACT AS RECORDED IN THE LEARNED CITS ORDER ARE AS UNDER : IT IS OBSERVED THAT A SURVEY U/S 133A OF THE I.T.ACT, 1961 WAS CONDUCTED IN THE CASE ON 12.10.2006. A STATEMENT ON OATH OF SHRI RAJGOPAL JAIKUMAR CHANDAK, 2 ITA NO. 25/NAG/2010 PARTNER OF THE FIRM RECORDED.ON 16.10.2006 IS ON RECORD WHEREIN IN RESPONSE TO QUESTI ON NO.9, HE HAS STATED THAT ON ACCOUNT OF, IRREGULARITIES NOTICED IN THE BOOKS OF ACCOUNTS AND TO COVER UP DISCREPANCIES . THE SUM OF RS.30 LAKHS WAS BEING VOLUNTARI L Y OFFERED TO TAX FOR AY 2007 - 08 WHICH WOULD BE IN ADDITION TO THE FIRM'S REGULAR INCOME. / - , LETTER FROM THE FIRM IS ALSO ON RECORD WHEREIN IT HAS BEEN STATED THAT ON A :COUNT OF DEFICIENCIES AND OMISSIONS FOUND IN THE ACCOUNTS, IT IS OFFERING 'ADDITIONAL' INCOME OF RS.30 LAKHS TO COVER ALL OMISSIONS A ND COMMISSIONS, 'IN ADDITION TO THE REGULAR INCOME FOR THE AY 2007 - 08'. IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AVAILABLE IN THE ASSESSMENT FOLDER, IT IS NOTED THAT THE ASSESSEE HAS DISCLOSED RS.30 LAKHS AS 'DECLARED INCOME A/C' UND ER THE HEAD INDIRECT INCOME. SIMULTANEOUSLY, IT IS NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.20 LAKHS ON ACCOUNT OF 'DECLARED CLOSING STOCK A/C' UNDER THE HEAD DIRECT EXPENSES. FROM THE DETAILS AVAILABLE ON THE SURVEY FOLDER, IT IS .APPARENT THAT FIRM HAS DECLARED THE SUM OF RS.30 LAKHS AS ADDITIONAL INCOME OVER AND ABOVE THE REGULAR INCOME FOR THE YEAR UNDER CONSIDERATION. THUS THE SAID AMOUNT OFFERED AS ADDITIONAL INCOME WAS NET OF EXPENSES. FURTHER, THERE DOES NOT APPEAR TO BE ANY STATEM ENT AVAILABLE ON THE SURVEY FOLDER SPECIFYING ITEMS ON WHICH THE DECLARATION HAS BEEN MADE. PERUSAL OF THE ASSESSMENT FOLDER REVEALS THAT THE CASE HAS BEEN SELECTED FOR SCRUTINY ON THE GROUND A SURVEY HAD BEEN CONDUCTED IN THIS CASE. THE AO HAS RECORD E D THE REASON FOR ITS SELECTION FOR SCRUTINY AS 'DECLARED CLOSING STOCK RS.20',/LAKHS AND ALSO DECLARED INCOME A/C 30 LACS'. CLEARL Y , THE AO HAS SELECTED THE CASE FOR SCRUTINY ON THE GROUND NOT ONLY THAT A DECLARATION OF ADDITIONAL INCOME OF RS.30 LAKHS HAD BEEN MADE BUT ALSO THAT THE ASSESSEE HAS DECLARED THE CLOSING STOCK, OVER AND ABOVE ITS REGULAR STOCK OF RS.20 LAKHS. HOWEVER, DURING THE ASSESSMEM PROCEEDINGS NO ENQUIRIES APPEAR TO HAVE BEEN MADE WITH REGARD TO THE REASON WHY A DEDUCTION OF RS.20 LAKHS HAS BEEN CLAIMED ON ACCOUNT OF STOCK DECLARED DURING SURVEY. INSTEAD THE AO HAS PROCEEDED TO ACCEPT THE RETURNED INCOME IN THE ASSESSMENT ORDER PASSED BY HIM. 3. CONSIDERING THE ASSESSEES RESPONSE, LEARNED CIT HELD AS UNDER : IN VIEW OF THE TOTALITY OF CIRCUMSTANCES DISCUSSED ABOVE, IT IS HELD THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF REVENUE IN AS 3 ITA NO. 25/NAG/2010 MUCH AS NO EXPLANATION HAS BEEN SOUGHT WHY ONLY THE NET ADDITIONAL INCOME OF RS.1 0 LAKHS HAS BEEN OFFERED TO TAX WHEREAS DURING THE SURVEY AND IMMEDIATELY THEREAFTER, THE ASSESSEE HAD UNDERTAKEN TO OFFER ADDITIONAL INCOME OF RS.30 LAKHS FOR THE YEAR UNDER CONSIDERATION AS ALSO THAT THE ASSESSING OFFICER OUGHT TO HAVE MADE THE DISALLOWA NCE U/S 69 OF THE ACT OF THE DEBIT TO THE PROFIT & LOSS ACCOUNT O RS.20 LAKHS MADE UNDER THE HEAD DECLARED CLOSING STOCK ACCOUNT. THE ASSESSING OFFICER AS MECHANICALLY AND WITHOUT ANY APPLICATION OF MIND HAS ACCEPTED THE INCOME OFFERED BY THE ASSESSEE. REL IANCE IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES COMPANY (243 ITR 83) AND TARADEVI AGGARWAL (88 ITR 323) AS ALSO THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES (99 ITR 375). CONSIDERING THE ABOVE, THE TOTAL INCOME OF THE ASESSEE FOR THE YEAR UNDER CONSIDERATION IS COMPUTED AS UNDER : TOTAL INCOME AS PER THE RETURN OF INCOME : RS. 30,75,256/ - ADD: DISALLOWANCE U/S 69C OF THE ACT : RS. 20,00,000/ - RS. 50,75 , 256 / - TOTAL INCOME (ROUND OFF) : RS. 50,75,260/ - THE ASSESSING OFFICER IS DIRECTED TO COMPUTE TAX ON THE ABOVE TOTAL INCOME, GIVE CREDIT TO PREPAID TAXES (IF ANY), CHARGE INTEREST(S) AS PER LAW. 3. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS ACCEPTED THE TOTAL INCOME AS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. THERE IS NO DISCUSSION IN THIS REGARD. IN THIS REGARD WE REFER TO THE LEARNED CITS NOTING THAT FOR SCRUTINY CASE THE RECORDED REASONS ARE THAT THE ASSESSEE HAS DECLARED CLOSING STOCK OF 20 LAKHS AND HAS ALSO DECLARED INCOME OF RS.30 LAKHS. THUS IT IS CLEAR THAT THE AO HAS SELECTED THE 4 ITA NO. 25/NAG/2010 CASE FOR SCRUTINY ON THE GROUND NOT ON LY THAT A DECLARATION OF ADDITIONAL INCOME OF RS.30 LAKHS HAS BEEN MADE BUT ALSO THAT THE ASSESSEE HAS DECLARED CLOSING STOCK OVER AND ABOVE ITS REGULAR STOCK OF RS.20 LAKHS. LEARNED CIT HAS GIVEN A FINDING THAT DURING THE ASSESSMENT PROCEEDINGS NO ENQUIR IES WERE MADE WITH REGARD TO THE REASON WHY A DEDUCTION OF RS.20 LAKHS HAS BEEN CLAIMED ON ACCOUNT OF STOCK DECLARED DURING SURVEY. INSTEAD THE AO HAS PROCEEDED TO ACCEPT THE RETURNED INCOME. IN THESE CIRCUMSTANCES, WHEN THE ASSESSEE HAS OFFERED AN ADDITIO NAL INCOME OF RS.30 LAKHS OVER AND ABOVE THE REGULAR INCOME AND THEN HE HAS ALSO CLAIMED A DEDUCTION OF RS.20 LAKHS ON ACCOUNT OF STOCK AND THE CASE WAS SELECTED FOR SCRUTINY BY RECORDING THIS ASPECT, THEN WE AGREE WITH THE LEARNED CIT THAT IT WAS INCUMBEN T UPON THE AO TO EXAMINE THE ISSUE PROPERLY. HENCE BY NO T EXAMINING THE ISSUE WE AG R EE WITH THE LEARNED CIT THAT THE RESULTANT AOS ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HOWEVER, WE NOTE THAT IN PARA 6 OF HIS ORDER U/S 263, LEARNED CIT HAS HELD THAT THE SUM OF RS.20 LAKHS WAS TO BE DISALLOWED U/S 69C OF THE I.T. ACT AND HAS ACCO RDINGLY MADE AN ADDITION OF THE SAME. WE ARE NOT IN AGREEMENT WITH THE LEARNED CIT IN THIS REGARD. IN OUR CONSIDERED OPINION SINCE THE AO HAS NOT EXAMINED THE ISSUE UNDOUBTEDLY THE ISSUE NEEDS EXAMINATION BY THE AO BUT THE ISSUE NEEDS TO BE EXAMINED IN THE PROPER PERSPECTIVE. NOWHERE IT IS ON RECORD THAT THERE IS CORROBORATIVE EVIDENCE OF THE FINDINGS AND DECLARATION IN SURVEY. IN OUR CONSIDERED OPINION INSTEAD OF DIRECTING A STRAIGHTAWAY DISALLOWANCE, THE ISSUE NEEDS TO BE REMITTED TO THE FILE OF THE AO. T HE AO IS DIRECTED TO EXAMINE THE ISSUE AFRESH AND PASS A PROPER AND SPEAKING ORDER. 5 ITA NO. 25/NAG/2010 5. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH , 2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 31 ST MARCH, 2016. COPY FORWARDED TO : 1. M/S CHANDAK CONSTRUCTION, GIRLS HIGH SCHOOL CHOWK, CAMP, AMRAVATI. 2. A.C.I.T., AMRAVATI CIRCLE, AMRAVATI. 3. C.I.T. - III, NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.