M/s Abhinav Vastralaya, Mandsaur V. The ITO, Mandsaur

ITA 252/IND/2011

• Counselvise Citation: 25222714 RSA 2011
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2000-2001
• Appeal Filed On: 21-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: S S MUNDRA
• Keywords: Rejection of books of accounts; Unexplained investment; Loose papers
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH, INDORE BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.252/IND/2011 A.Y. 2000-01 M/S. ABHINAV VASTRALAYA, GAROTH PAN AABFA 8893 N ... APPELLANT VS ITO, MANDSAUR ... RESPONDENT APPELLANT BY : SHRI S.S. MUNDRA, CA DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 27.10.2011 DATE OF PRONOUNCEMENT : 27.10.2011 O R D E R THIS APPEAL IS DIRECTED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-UJJAIN, DATED 11.7.2011 FOR THE AY 2000-01 ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. FIRST APPELLATE AUTHORITY IS NOT AT ALL JUSTIFIED IN : - 2 1. SUSTAINING GROSS PROFIT @ 15.6% ON SALES AS PER ACCOUNT BOOKS WORTH RS.31,42,323/- AND THEREBY CONFIRMING ADDITION OF RS.45,440/- (RS.4,90,202/- BEING GROSS PROFIT @ 15.6% WORKED OUT BY ASSESSING OFFICER MINUS RS.4,44,762/- DECLARED BY APPELLANT AS PER ACCOUNT BOOKS); 2. CONFIRMING ENHANCEMENT IN SALES AT RS.2,57,677/- (SALES ESTIMATED AT RS.34,00,000/- AGAINST SALES AS PER ACCOUNT BOOKS RS.31,42,323/-) AS AGAINST ESCAPED SALES FOUND WORTH RS.1,27,492/-. THE ENHANCEMENT IN ESCAPED SALES AT RS.1,30,185/- IS ARBITRARY, UNREASONABLE, UNWARRANTED AND IN THE ALTERNATIVE HIGHLY EXCESSIVE. 3. SUSTAINING THE ADDITION OF RS.64,420/- AS ALLEGED INVESTMENT IN STOCK ATTRIBUTABLE TO ESCAPED SALES ESTIMATED AT RS.2,57,677/- IGNORING INTER ALIAS THE FACT THAT : - (A) REALIZATIONS OF ADMITTED ESCAPED SALES WORTH RS.1,27,492/- ARE THEMSELVES MORE THAN SUFFICIENT FOR ANY SUCH ALLEGED INVESTMENT IN STOCK. (B) IN ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT THERE IS UNEXPLAINED INVESTMENT BY THE APPELLANT, NO SUCH ADDITION IS WARRANTED (2008) 215 CTR 509 AND (2011) 135 TTJ (CHENNAI) 112. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. 3 3. THE FACTS, IN BRIEF, ARE THAT SURVEY OPERATION U /S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF TH E ASSESSEE ON 27.5.2003. DURING THE COURSE OF SURVEY, EXCESS CASH, STOCK AND SOME DOCUMENTS IN THE FORM O F PROMISSORY NOTES AND OTHER LOOSE PAPERS WERE FOUND. THE ASSESSING OFFICER IN THE ASSESSMENT HAS NOTED THAT ON SALES OF RS.31,42,323/-, THE ASSESSEE HAS SHOWN GRO SS PROFIT @14.15% AT RS.4,44,762/-. IN RESPONSE TO NOT ICE ISSUED U/S 148, THE ASSESSEE FILED RETURN OF INCOME ON 19.11.2007 DECLARING TOTAL INCOME AT RS.14,350/-, I N WHICH THE ASSESSEE HAS INCLUDED NET PROFIT OF RS.6, 375/- I.E. @5% OF SALES OF RS.1,27,492/- CALCULATED AS PE R LOOSE PAPERS FOUND DURING SURVEY FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS NOTED THAT THE PROMISSORY AND OTHER LOOSE PAPERS FOUND PERTAINING TO SALE AND PURCHASE OF DIFFERENT ITEMS OF CLOTHES HAV E NOT BEEN ENTERED INTO THE BOOKS OF ACCOUNTS. THE ASSESS ING OFFICER HAS COME TO THE CONCLUSION THAT THE ASSESSE E HAS MADE PURCHASES AND SALES OUTSIDE THE BOOKS OF ACCOU NT 4 AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. THE ASSESSING OFFICER HAS ESTIMA TED THE SALES AT RS.34 LACS AGAINST SALES SHOWN BY THE ASSE SSEE AT RS.31,42,323/- AND APPLIED GROSS PROFIT RATE OF 15.6% (AS SHOWN IN THE ASSESSMENT YEAR 2002-03) AND THUS GROSS PROFIT COMES TO RS.5,30,400/- AS AGAINST GROS S PROFIT SHOWN BY THE ASSESSEE AT RS.4,51,137/-. THE ASSESSING OFFICER ACCORDINGLY MADE GROSS PROFIT ADD ITION OF RS.79,263/- TO THE TOTAL INCOME. THE ASSESSING O FFICER ALSO MADE AN ADDITION OF RS.64,420/- FOR ALLEGED INVESTMENT IN STOCK BY CALCULATING 25% OF RS.2,57,6 77/- I.E. DIFFERENCE OF SALES ESTIMATED BY THE ASSESSING OFFICER AT RS.34 LACS AND DECLARED BY THE ASSESSEE AT RS.31,42,323/- IN THE ORIGINAL RETURN OF INCOME. 4. WITH REGARD TO THE GROUND NO.1, THE LD. CIT(A), AFTER CONSIDERATION OF FACTS AS NARRATED ABOVE, SUBMISSIO NS AND CASE LAWS HAS GIVEN PART RELIEF TO THE ASSESSEE ON THE GROUND THAT THE I.T.A.T., INDORE BENCH VIDE ORDER I N ITA 5 NO.49/IND/2008 DATED 8.4.2010 IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2004-05 HAS DIRECTED THE ASSESS ING OFFICER TO ADOPT THE NET PROFIT RATE FOR MAKING THE IMPUGNED ADDITION AND ACCORDINGLY, RECOMPUTED THE QUANTUM OF ADDITION. STILL AGGRIEVED, THE ASSESSEE IS BEFORE ME ON THIS ISSUE. 4.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE REV ENUE AUTHORITIES WHEREAS LD. SR. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. ON CONSIDERATION OF ABOVE, I D O NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE OF THE LD. CIT(A) BECAUSE THE ASSESSING OFFICER HAD FOUND THAT THE ASSESSEE HAS MADE PURCHASES AND SALES OUTSIDE T HE BOOKS OF ACCOUNT AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. THE ASSESSING OFFICE R, THEREFORE, APPLIED GROSS PROFIT RATE OF 15.6% AS AG AINST GROSS PROFIT RATE SHOWN BY THE ASSESSEE AT 14.15%. I ALSO 6 FIND THAT ON CONSIDERATION OF FACTS & CIRCUMSTANCES AS NOTED HEREINABOVE, LD. CIT(A) HAS RIGHTLY GIVEN PAR T RELIEF FOLLOWING THE ORDER OF I.T.A.T., INDORE BENCH DATED 8.4.2010 (SUPRA). IN VIEW OF ABOVE, THE ORDER OF TH E LD. CIT(A) IS UPHELD. THUS, GROUND NO.1 OF THE APPEAL O F THE ASSESSEE IS DISMISSED. 5. WITH REGARD TO GROUND NO.2, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER H AS ESTIMATED ESCAPED SALES AT RS.2,57,677/-, HOWEVER, THE SALE AS PER LOOSE PAPER FOUND IS RS.1,27,492/-. THE ASSESSING OFFICER ON PRESUMPTION BASIS ESTIMATED TH E ENHANCED ESCAPED SALES AT RS.1,30,185/-. THE ENHANCEMENT IN SALES IS NOT BASED ON ANY POSITIVE MATERIAL BUT ON SURMISES AND CONJECTURES ONLY. ON T HE OTHER HAND, THE LD. SR. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES BUT COULD NOT CONTROVERT THE ASSERTION MADE BY THE LEARNED COUNSEL FOR THE ASSES SEE BY BRINGING ANY POSITIVE MATERIAL ON RECORD. 7 5.1 ON CONSIDERATION OF FACTS & CIRCUMSTANCES AS NARRATED ABOVE AND RIVAL SUBMISSIONS, I AM OF THE V IEW THAT THE ENHANCEMENT IN SALES BY RS.1,30,185/- IS N OT BASED ON ANY POSITIVE MATERIAL BUT ON SURMISES AND CONJECTURES ONLY. THEREFORE, THE ENHANCEMENT IN ESC APED SALES AT RS.1,30,185/- IS DIRECTED TO BE DELETED FR OM THE ESTIMATED ESCAPED SALES AT RS.2,57,677/-. THUS, GRO UND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. WITH REGARD TO THE GROUND NO.3, THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CAS E LAW, CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE REASON THAT SOME INVESTMENT ATTRIBUTABLE TO ESCAPED SALES HAS GOT TO BE MADE. AGGRIEVED WITH THE SAME, THE ASSESSEE IS BEFORE ME ON THIS GROUND. 6.1 BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN ADDITION OF RS.64,420/- MADE ON ACCOUNT OF INVESTMENT IN STOCK IS NOT JUSTIFIED AS THERE IS NO MATERIAL ON RECORD TO ESTABLISH THAT ANY SUCH 8 INVESTMENT HAS BEEN MADE. HE PLACED RELIANCE ON THE DECISIONS IN CASE OF CIT VS. GURUBACHAN SINGH JUNEJ A (2008) 215 CTR 509 (GUJ) AND RADHESHYAM TANWAR VS. ACIT (2002) 77 TTJ (JODH) 505. ON THE OTHER HAND, T HE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. 7. ON CONSIDERATION OF ABOVE, I AM OF THE VIEW THAT THE ADDITION ON THIS COUNT IS JUSTIFIED BECAUSE IT IS A DMITTED FACT THAT THE ASSESSEE ESCAPED SALES AT RS.1,27,492 /-, THEREFORE, LD. CIT(A) IS RIGHT IN HOLDING THAT SOME INVESTMENT ATTRIBUTABLE TO ESCAPED SALES HAS GOT TO BE MADE. THE ASSESSING OFFICER HAS ESTIMATED THE FIGUR E OF SUCH STOCK @25% OF ESCAPED SALES WHICH IS REASONABL E IN VIEW OF THE FACTS AS DISCUSSED HEREINABOVE. HOWEVER , SINCE I HAVE PARTLY ALLOWED GROUND NO.2 ABOVE OF TH E APPEAL OF THE ASSESSEE HOLDING THAT THE ESCAPED SAL ES AT RS.1,27,492/- AGAINST RS.2,57,677/-, THE ASSESSING OFFICER IS DIRECTED TO TAKE INVESTMENT ATTRIBUTABLE TO SUCH ESCAPED SALES OF RS.1,27,492/-, WHICH WORKS OUT TO BE 9 RS.31,873/-. THE LEARNED COUNSEL FOR THE ASSESSEE A LSO PLEADED THAT EXTRA PROFIT WORKED OUT BY ASSESSING O FFICER BY ESTIMATING GROSS PROFIT RATE AT 15.6% IN PLACE O F GROSS PROFIT RATE OF 14.15% DISCLOSED BY ASSESSEE, SHOULD BE TELESCOPED AGAINST THIS ADDITION FOR ALLEGED INVEST MENT IN STOCK. IF I ALLOW TELESCOPING OF ADDITION OF RS.45, 440/- MADE BY ASSESSING OFFICER BY ESTIMATING HIGHER GROS S PROFIT RATE, OUT OF ADDITION OF RS.31,873/-, PROPOS ED FOR INVESTMENT IN UNACCOUNTED SALES, THERE REMAINS NIL ADDITION ON THIS ACCOUNT. ACCORDINGLY, GROUND NO.3 IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED, IN TERMS INDICATED HEREINABOVE. SD (R.C.SHARMA) ACCOUNTANT MEMBER DATED: 27.10.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!