ASST CIT 17(3), MUMBAI V. PATEL HOSIERY MILLS, MUMBAI

ITA 2534/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3839 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2011
• Court: TRIBUNAL
• Department Lawyers: S R KIRTANE
• Assessee Lawyers: D V LAKHANI
• Keywords: Retraction

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI D.KARUNAKARA RAO , AM & SHRI PAWAN SINGH , JM ./ ITA NO. 2534 / MUM/20 1 1 ( / ASSESSMENT YEAR : 200 6 - 0 7 ) ACIT - 17(3), MUMBAI VS. M/S PATEL HOSIERY MILLS, KRDN ESTATE, OFF AAREY ROAD, GOREGAON (EAST), MUMBAI - 400063 ./ ./ PAN/GIR NO. : A BMPM 5490 K ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI S.R.KIRTAN E /ASSESSEE BY : SHRI D.V.LAKHANI / DATE OF HEARING : 15 / 0 2 /201 6 / DATE OF PRONOUNCEMENT 17/02 /201 6 / O R D E R PER PAWAN SINGH (JM ) : TH E PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 29, DATED 31 - 1 - 2011 , RELATING TO THE ASSESSMENT YEAR 200 6 - 0 7, ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.39,01,801/ - MADE ON ACCOUNT OF ESTIMATION OF GROSS PROFIT WITHOUT APPRECIATING THE FACTS IN THE PROPER PROSPECTIVE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.95,99,800/ - MADE ON ACCOUNT OF UNACCOUNTED STOCK WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE IN HIS STATEMENT RECORDED ON OATH U/S.133A DURING THE COURSE OF SURVEY ACTION HAD DECLARED ADDITIONAL INCOME OF RS.1 CRORE. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO. 2534 /1 1 2 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF COTTON KNITTED HOSIERY GARMENTS SUCH AS T SHIRTS ETC, FILED ITS RETURN OF INCOME FOR A.Y.2006 - 07 ON 31 - 10 - 2006, DECLARING TOTAL INCOME OF RS. 57,49,691/ - . THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE WAS ISSUED AND SERVED UPON THE ASSESSEE. WHILE MAKING THE ASSESSMENT THE AO OBSERVED THAT A SURVEY U/S.133A OF THE A CT WAS CARRIED OUT ON 10 - 3 - 2006 AND DURING THE COURSE OF SURVEY THE ASSESSEE DISCLOSED RS.1 CRORE AS UNACCOUNTED STOCK AS THE SAME WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT. THIS DISCLOSURE WAS MADE OVER AND ABOVE THE REGULAR INCOME BEING EARNED BY THE AS SESSED DURING THE FINANCIAL YEAR. THEREFORE, THE ASSESSEE AGREED TO PAY THE DUE TAXES ON REGULAR INCOME PLUS THE UNACCOUNTED STOCK FOUND AND DISCLOSED DURING THE COURSE OF SURVEY. THE ORDER OF AO FURTHER REVEALS THAT BOOKS OF ACCOUNT OF THE ASSESSEE WAS RE JECTED AND THE NET PROFIT WAS ESTIMATED AT 10% OF THE GROSS RECEIPT AND AS PER THE PROFIT AND LOSS ACCOUNT, THE GROSS RECEIPT DURING THE YEAR WAS RS. 3,90,18,112/ - AND ACCORDINGLY NET PROFIT OF RS.39,01,811/ - WAS WORKED OUT AS TOTAL NET PROFIT AND FURTHER R S.1 CRORE WAS ABOVE AND ABOVE OF THE REGULAR INCOME WAS ALSO ADDED. 3. AGAINST THE ORDER OF ASSESSMENT, THE APPEAL WAS FILED BEFORE THE CIT(A) - 29, MUMBAI AND THE LD. CIT(A) WHILE DEALING WITH THE APPEAL OF THE ASSESSEE DELETED THE ADDITION OF RS. 39,01,811 / - AND OUT OF RS.1 CRORE ONLY A SUM OF RS. 4,00,200/ - WAS SUSTAINED AND, THUS, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE IN ITS ORDER DATED 31 - 1 - 2011. AGAINST WHICH THE PRESENT APPEAL IS FILED BEFORE US BY THE REVENUE. 4. LD. DR OF THE REVENUE HAS ARGUED THAT THE AO WHILE MAKING THE ASSESSMENT HAS FAIRLY CALCULATED THE NET PROFIT @10% OF THE GROSS RECEIPTS AND, THUS, ADDITION MADE ON ACCOUNT OF 10% OF THE GROSS RECEIPTS ARE REASONABLE AND ITA NO. 2534 /1 1 3 FURTHER ARGUED THAT THE STATEMENT GIVEN DURING THE SURVEY PROCEEDING S WAS THAT THE PERSON WHO MAKES THE STATEMENT DURING THE SURVEY PROCEEDINGS FOR ADDITION OF RS.1 CRORE ON ACCOUNT OF SURPLUS STOCK NEVER RETRACTED FROM HIS STATEMENT AND, THUS, THE ADDITION OF RS.1 CRORE WAS ALSO MADE ON THE BASIS OF STATEMENT OF PARTY AND THE LD. CIT(A) WRONGLY DELETED/PARTLY ALLOWED THE ADDITION MADE BY THE AO. 5. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS ARGUED THAT DURING THE SURVEY PROCEEDINGS, THE STATEMENT OF ISHWARI BHAI PATEL WAS RECORDED, WHO IS NOT A PARTNER OF THE ASSESS FOR M AND THE PARTNER IN THE ASSESSEE FIRM ARE SHRI BHA RAT PATEL AND SAVITRI DEVI PATEL AND THE STATEMENT MADE BY SHRI ISHWARI BHAI PATEL HAS NOT RELEVANCE. LD. AR OF THE ASSESSEE FURTHER RELIED UPON IN THE CASE OF CIT VS. BALASUBRAMANIUM, 354 ITR 116 , WHER EIN IT WAS HELD THAT STATEMENT MADE DURING SURVEY HAS NO EVIDENTIARY VALUE ON AS THE SAME ISNOT RECOVERED ON OATH. 6. WE HAVE HEARD LD. DR OF THE REVENUE AND LD. AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTICED THAT THE CIT(A) WH ILE DEALING WITH THE GROUNDS OF ADDITION OF RS. 39 ,01,801/ - , HAS CONSIDERED THAT THE ADDITION CANNOT BE SUSTAINED AS THERE WAS DISCREPANCY ON THE CONSUMPTION OF THE ELECTRICITY AS AGAINST PRODUCTION OF GARMENTS HAS BEEN EXPLAINED TO BE JOB WORK UNDERTAKEN IN THOSE PARTICULAR MONTHS AND DURING THOSE MONTHS THE ASSESSEE UNDERTAKEN THE JOB WORK AND THE TOTAL SALE FOR THE YEAR WAS RS. 3,61,23,007/ - AND PURCHASE WAS OF RS. 244,54,354/ - AND THERE MAY BE SOME OTHER EXPENSES DEBITED WHICH HAVE NOT BEEN QUESTIONED. TH US, IT CANNOT BE SAID THAT THE TRADING RESULTS CAN RESULT IN A PROFIT OF RS.39.01 LACS. EVEN THE ADDITION INCOME IF ANY, THE ASSESSEE HAS ALREADY INCLUDED THE SAME AS EXTRA STOCK. THERE WAS NO FINDING OF AO THAT THE PURCHASES ARE NOT GENUINE. NO ITA NO. 2534 /1 1 4 DISCREPA NCY WAS FOUND IN THE BOOKS OF ACCOUNT. THERE WAS NO FINDING OF AO THAT THE EXPENSES WERE NON - GENUINE. MOREOVER , THE SALE OF RS.3,61,23,007/ - AND CLOSING STOCK OF RS.105,12,250/ - , THERE IS PURCHASE OF RS. 244,54,354/ - AND OPENING STOCK OF RS.67,40,450/ - . BES IDES THAT WAGES DEBITED FOR AN AMOUNT OF RS. 53, 14,069/ - AND THE ELECTRICITY CONSUMPTION OF RS.5,34,348/ - AND ON THE BASIS OF THESE DETAILS IT CANNOT BE SAID THAT PROFIT HAS BEEN UNDERSTATED AND DELETED THE ADDITION. WE HAVE CAREFULLY EXAMINED THE DETAILS ENUMERATED BY LD. CIT(A) INCLUDING CLOSING STOCK, PURCHASES, OPENING STOCK, WAGE DEBITED AND THE ELECTRICITY CONSUMPTION PAID AND THE LD. CIT(A) WHILE CONSIDERING THE OTHER FACTS OF THE CASE, HAS RIGHTLY CONCLUDED THAT THE ADDITION MADE BY THE AO IS NOT SU STAINABLE. 7. THE SECOND GROUND FOR OUR CONSIDERATION IS DELETION OF RS. 1 CRORE. LD. CIT(A) WHILE DEALING WITH THE ISSUE HAS DISCUSSED THAT THOUGH THE ASSESSEE HAS NOT RETRACTED FROM THE FIGURE OF RS.1 CRORE. ON THE OTHER HAND, THE ONLY UNDISCLOSED INCOME OF RS.95,99,800/ - HAS BEEN DISCLOSED BY THE ASSESSEE AND OFFERED TO TAX IN THE RETURN OF INCOME. THEREFORE, THERE IS A SHORT FALL OF RS.4,00,200/ - WHICH WAS PROMISED BY THE ASSESSEE DURING THE COURSE OF SURVEY. THEREFORE, THE CIT(A) OBSERVED THAT THE ASSE SSEE HAS FAILED TO OFFER AN AMOUNT OF RS.4,00,200/ - BEING UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SURVEY AND BROUGHT THE SAME TO TAX. THE RELEVANT OBSERVATIONS OF THE CIT(A) IN THIS REGARD ARE AS UNDER : - 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS FO THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. I FIND THAT APPELLANT HAS ALREADY DISCLOSED THE PROMISED AMOUNT OF UNDISCLOSED STOCK. THE APPELLANT HAS DRAWN TWO TRADING ACCOUN TS I.E. ONE FOR THE PERIOD UP TO THE DATE OF SURVEY AND ONE FOR THE PERIOD AFTER THE DATE OF SURVEY. IN THE TRADING ACCOUNT AS ON 10TH OF MARCH 2006 THE APPELLANT HAS ADDED THE DISCLOSED SOCK PROMISED DURING THE SURVEY AMOUNTING TO RS.95,99,800/ - TO THE BO OK STOCK OF THE FIRM WHICH AMOUNTED TO RS.26,68,210/ - . AFTER ADDING THE UNDISCLOSED STOCK OF RS.95,99,800/ - THE TOTAL STOCK CAME TO RS.1,22,68,010/ - . THEREFORE IT CANNOT BE SAID THAT APPELLANT DID NOT DISCLOSE THE PROMISED AMOUNT OF ITA NO. 2534 /1 1 5 UNDISCLOSED STOCK. IN B OTH THE TRADING ACCOUNTS AS ON 10TH OF MARCH 2006 AND AS ON 31ST OF MARCH 2006, THERE IS SUBSTANTIAL AMOUNT OF PROFIT DISCLOSED. HENCE AS CAN BE SEEN THE APPELLANT HAS OFFERED TO TAX THE ENTIRE AMOUNT OF UNDISCLOSED STOCK PROMISED FOR DISCLOSURE. THEREFORE THERE CANNOT BE AN ADDITION UPTO THE EXTENT OF RS.95,99,800/ - . THIS AMOUNT ADDED ON ACCOUNT OF UNDISCLOSED STOCK IS DELETED. HOWEVER, THE APPELLANT HAD MADE A TOTAL DISCLOSURE OF RS.1 CRORE AND HAS NOT RETRACTED FROM THIS FIGURE. ON THE OTHER HAND ONLY UNDISCLOSED INCOME OF RS.95,99,800/ - HAS BEEN DISCLOSED BY THE APPELLANT AND OFFERED TO TAX IN THE RETURN OF INCOME. HENCE, THERE IS A SHORT FALL OF RS.4,00,200/ - WHICH WAS PROMISED BY THE APPELLANT DURING THE COURSE OF SURVEY. NO EXPLANATION HAS BEEN OFFE RED BY THE APPELLANT EITHER AT ASSESSMENT STAGE OR AT APPEAL STAGE EXPLAINING WHY THIS AMOUNT HAS NOT BEEN OFFERED TO TAX. THE ARGUMENT OF THE APPELLANT THAT SHRI ISWARBHAI PATEL WHO MADE THE DISCLOSURE ON BEHALF OF THE APPELLANT WAS NEITHER A PARTNER NOR AN EMPLOYEE OF THE FIRM, IS NOT TENABLE. MR.PATEL WAS IN - CHARGE OF THE BUSINESS OF THE FIRM AND ALSO HAPPENED TO BE SPOUSE OF A PARTNER. THE FIRM HAS STOOD BY HIS DISCLOSURE. HE IS THE FATHER OF ONE OF THE PARTNER AND HUSBAND OF THE OTHER PARTNER, SMT. SAV ITABEN. THERE IS ALSO NO RETRACTION OF THE DECLARATION MADE. THEREFORE I FIND THAT APPELLANT HAS FAILED TO OFFER AN AMOUNT OF RS.4 ,00,200/ - BEING UNDISCLOSED INCOME - ADMITTED DURING THE COURSE OF SURVEY. THIS HAS TO BROUGHT TO TAX. HENCE OUT OF A TOTAL ADD ITION OF RS.1 ,00,00,000/ - MADE BY THE ASSESSING OFFICER RS.4 ,00,200/- IS SUSTAINED AND BALANCE ADDITION ON ACCOUNT OF UNDISCLOSED STOCK IS DELETED AS PER DISCUSSION ABOVE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. FROM THE ABOVE FINDINGS OF THE CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) IN THIS REGARD. MOREOVER, THE PERSON WHO HAS MADE THE STATEMENT WAS NOT A PARTNER AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE TO SHOW THAT THE PERSON WHO ADMITTED THE STATEMENT DU RING THE SURVEY WAS HAVING DOMINANCE OVER THE BUSINESS OF THE ASSESSEE. HENCE, THE ADDITION WAS ACCORDINGLY RIGHTLY DELETED BY CIT(A). 9 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED O RDER PRONOUNCED IN THE OPEN COURT ON THIS 17/02 /2016 . S D/ - ( D.KARUNAKARA RAO ) SD/ - ( PAWAN SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED 17 /0 2 /2016 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO. 2534 /1 1 6 / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//