SWEETY NX, MUMBAI V. DCIT CEN CIR 33, MUMBAI

ITA 2586/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4538 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 14-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: HARSH BHUTA
• Keywords: Business expenditure
• Section: 143(3); 133A; 234B; 147; 148; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BE NCH, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NOS.2586 & 2587/MUM/2011 ( / ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. SWEETY NX, 2 ND FLOOR, DEV PLAZA, OPP. ANDHERI FIRE STATION, ANDHERI (W), MUMBAI-400 058 / VS. THE DCIT, CENTRAL CIRCLE - 33 AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO.AASFS 8054L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI HARSH BHUTA / RESPONDENT BY: SHRI LOVE KUMAR / DATE OF HEARING :12.01.2016 !' / DATE OF PRONOUNCEMENT :12.01.2016 / O R D E R PER N.K. BILLAIYA, AM: THESE ARE APPEALS BY THE ASSESSEE AGAINST TWO SEP ARATE ORDERS OF THE LD. CIT(A)-41, MUMBAI DATED 17.1.2011 PERTAI NING TO ASSESSMENT YEARS 2006-07 & 2007-08. AS BOTH THE A PPEALS INVOLVED COMMON ISSUES, THEY WERE HEARD TOGETHER AND ARE DIS POSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 2586/M/11 A.Y. 2006-07 2. THE ASSESSEE HAS RAISED 6 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 IS GENERAL IN NATURE AND NEEDS NO SEPA RATE ADJUDICATION. ITA. NO. 2586 & 2587/M/11 2 3. WITH GROUND NO. 2, THE ASSESSEE HAS CHALLENGED T HE ACTION OF THE AO FOR ISSUING NOTICE U/S. 148 OF THE ACT. 3.1. IN THIS CASE, THE RETURN OF INCOME WAS FILED O N 31.10.2007 DECLARING LOSS OF RS. 13,60,128/-. A SURVEY OPERAT ION U/S. 133A OF THE ACT WAS CONDUCTED ON 20.4.2006. DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE ASSESSEE HAD SUPPRESSED SALES OF RS. 85,08,535/- DURI9NG THE PERIOD 1.4.2005 UPTO 19.4.2006. AS THE INCOME HAD ESCAPED ASSESSMENT, NOTICE U/S. 148 WAS ISSUED TO T HE ASSESSEE ON 12.9.208. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THIS NOTICE. IT IS THE SAY OF THE LD. COUNSEL THAT DURING THE COURSE O F SEARCH OPERATIONS AT THE PREMISES OF ONE OF THE SISTER CONCERN OF THE ASSESSEE, A BALANCE SHEET WAS FOUND IN THE HARD DISK RELATING TO THE AS SESSEE AND SINCE THE INCRIMINATING DOCUMENT BELONG TO THE ASSESSEE, THE PROPER SECTION WAS TO MAKE ASSESSMENT U/S. 153C OF THE ACT AND NOT SEC. 147 R.W. SEC. 143(3) OF THE ACT. STRONG RELIA NCE WAS PLACED ON THE DECISION OF THE TRIBUNAL AMRITSAR BENCH IN THE CASE OF ITO VS ARUN KUMAR KAPOOR IN ITA NO. 147/ASR/2010. 4. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE DECISION RELIED UPON BY THE LD. COUNSEL AND WE FIND IT MIS-PLACED I NASMUCH AS IN THAT CASE THE ASSESSMENT WAS BASED UPON THE DOCUMENTS WH ICH WERE SEIZED DURING THE SEARCH U/S. 132 OF THE ACT AND T HE SAME WERE SENT TO THE AO OF THE ASSESSEE AND THE AO OF THE ASSESSE E SHOULD HAVE TAKEN THE ACTION AS PER THE PROVISIONS OF THE LAW F RAMED U/S. 153C OF THE ACT WHEREAS THE AO HAS TAKEN ACTION U/S. 147 OF THE ACT. HOWEVER, IN THE PRESENT CASE, WE FIND THAT THE NOTI CE HAS BEEN ISSUED PURSUANT TO THE SURVEY ACTION CARRIED U/S. 133A OF THE ACT AT ITA. NO. 2586 & 2587/M/11 3 ASSESSEES PREMISES AND THE REASONS FOR REOPENING T HE ASSESSMENT IS ALSO THE INFORMATION RECEIVED DURING THE COURSE OF THE SURVEY. THEREFORE, WE DO NOT FIND ANY FORCE IN THE CONTENTI ON OF THE LD. COUNSEL. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 5. GROUND NO. 3 & 4 RELATES TO THE ADDITIONS MADE O N ACCOUNT OF DIFFERENCE FOUND IN THE STOCK AS PER THE BALANCE SH EET FOUND IN THE HARD DISK OF THE COMPUTER OF THE SISTER CONCERN. 5.1. FACTS RELATING TO THIS ISSUE ARE THAT DURING T HE COURSE OF SEARCH AT THE BUSINESS PREMISES OF M/S. PRIME DEVELOPERS, A LOOSE PAPER FILED MARKED AS A-2 WAS SEIZED. PAGE NO. 69 OF THE SAID FILE CONTAINS BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2006. 5.2. IT WAS FURTHER FOUND THAT THE ASSESSEE HAD A S TOCK OF RS. 1,89,72,375/- AS ON 1.4.2005 AND HAS MADE A PURCHAS E OF RS. 47,17,932/- DURING THE SAID PERIOD OF 1.4.2005 TO 19.4.2006. THUS THE ASSESSEE HAD TOTAL STOCK OF RS. 2,36,90,307/- F ROM THE PROFIT AND LOSS ACCOUNT . IT WAS FOUND THAT THE STOCK AT THE END OF THE YEAR WAS RS. 88,18,414/- WHICH MEANS THAT THE REMAINING STOC K OF RS. 1,48,71,893/- WAS SOLD FOR JUST RS. 84,54,611/- AT A LOSS OF RS. 64,17,282/- WHILE STILL SHOWING A NET PROFIT OF RS. 13,48,890/-. THE ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCE. TH E ASSESSEE FILED A DETAILED REPLY CLAIMING THAT THERE IS NO DIFFERENCE AND THERE IS NO SUPPRESS SALES. THE AO DID NOT ACCEPT THIS SUBMI SSION MADE BY THE ASSESSEE. THE AO WAS OF THE FIRM BELIEF THAT THE A SSESSEE HAS SUPPRESSED SALES OF RS. 85,08,535/- DURING THE PERI OD 1.4.2005 UPTO 19.4.2006 TAKING THE GP RATE OF 28.96%. THE AO COM PUTED THE ITA. NO. 2586 & 2587/M/11 4 INCOME FOR THE YEAR AT RS. 23,42,151/- AND MADE THE ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) AND REITERATED ITS CLAIM THAT THERE IS N O SUPPRESSION OF SALES. THE BALANCE SHEET RELIED UPON BY THE AO CAN NOT BE CONSIDERED TO BE A VALID BALANCE SHEET, IT WAS ONLY A ROUGH WO RKING, UNSIGNED DOCUMENT AND CANNOT BE ACCEPTED AS A PIECE OF EVIDE NCE AND USED AGAINST THE ASSESSEE. 6.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD.CIT(A) ACCEPTED THE ARGUMENT OF THE ASSESSEE THAT SURVEY W AS CONDUCTED ON 20.4.2006 RELEVANT TO ASSESSMENT YEAR 2007-08. HOW EVER, THE LD. CIT(A) OBSERVED THAT THE ADDITIONS MADE IN THE YEAR UNDER CONSIDERATION IS BASED ON THE SEIZED BALANCE SHEET AS ON 31.3.2006 WHEREIN THE STOCK IS SHOWN AT RS. 88,18,414/- IN PL ACE OF RS. 45,16,550/- SHOWN IN THE PROFIT AND LOSS ACCOUNT FI LED WITH THE RETURN OF INCOME. SINCE THE AO HAS ALREADY MADE THE ADDIT ION OF RS. 23,42,151/-, THE LD. CIT(A) ENHANCED THE ADDITION O F RS. 19,59,713/-. 7. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE BALANCE SHEET FOUND IN THE HARD DISK OF TH E COMPUTER IS NOT A COMPLETE DOCUMENT, IS AN UNVERIFIED DOCUMENT WHICH CONTAINED ONLY WORKINGS WHICH ARE NOT RELEVANT FOR THE YEAR UNDER CONSIDERATION. HENCE, ANY ADDITION BASED UPON SUCH DOCUMENT IS NOT JUSTIFIABLE. ITA. NO. 2586 & 2587/M/11 5 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE R ELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND REFERRE D BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ENTIRE ADDITION IS B ASED UPON THE BALANCE SHEET FOUND FROM THE COMPUTER WHICH IS PLAC ED AT PAGE-8 OF THE PAPER BOOK. WE FIND THAT THE CLOSING STOCK IS SHOWN AT RS. 88,18,414/-, AT PAGE-9 IS THE PROFIT & LOSS ACCOUNT WHERE THE CLOSING STOCK IS SHOWN AT RS. 45,16,50/-. IT IS ALSO AN UN DISPUTED FACT THAT THE TRADING PROFIT AND LOSS ACCOUNT AT PAGE-9 OF THE PA PER BOOK IS AS PER AUDIT REPORT AND IS AN AUDITED STATEMENT OF ACCOUNT S WHEREAS BALANCE SHEET AT PAGE-8 IS AN UNSIGNED, UNVERIFIED AND UNAU DITED. MOREOVER, IN THE SAID BALANCE SHEET, WE FIND THE CASH IN HAND SHOWN AS A NEGATIVE BALANCE OF RS. 27.01 LAKHS. IN OUR UNDERS TANDING OF ACCOUNTANCY, NO BALANCE SHEET CAN HAVE A NEGATIVE F IGURE FOR CASH IN HAND. MOREOVER, NO ADVERSE INFERENCE HAS BEEN DRAW N BY THE AO IN SO FAR AS THE AUDITED STATEMENTS OF ACCOUNTS ARE CO NCERNED. NO DISCREPANCY /ERROR/FALLACY HAS BEEN SHOWN IN THE AU DITED STATEMENT OF ACCOUNTS. 10.1. AS MENTIONED ELSEWHERE, THE ENTIRE ADDITION I S BASED UPON THE BALANCE SHEET WHICH IN ITSELF IS AN UNRELIABLE DOCU MENT AND CANNOT JUSTIFY THE ADDITIONS. 11. APART FROM THE ALLEGED BALANCE SHEET, THERE IS NO OTHER MATERIAL ON RECORD BEFORE THE AO TO INDICATE THAT THE ASSESS EE HAD UNEXPLAINED STOCK. THE AO HAD NEITHER CONDUCTED AN Y ENQUIRY NOR MADE ANY EFFORT TO ESTABLISH THE FACT BY BRINGING C OGENT MATERIAL ITA. NO. 2586 & 2587/M/11 6 EVIDENCE ON RECORD TO SHOW THAT THE AMOUNTS SHOWN I N THE BALANCE SHEET ARE TRUE AND CORRECT. WHEN THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AND HAS SUBMITTED THE AUDI TED STATEMENT OF ACCOUNTS, THE SAME CANNOT BE DISBELIEVED WITHOUT BR INGING COGENT MATERIAL ON RECORD TO PROVE THEM WRONG. NO ADDITIO NS CAN BE MADE MERELY ON THE BASIS OF THE IMPUGNED BALANCE SHEET W HICH BY ITS VERY NATURE IS NOT FINAL. THAT BESIDES THE BALANCE SHEE T FOUND DURING THE SEARCH PROCEEDING BEING UNSIGNED ONE NO IMPORTANC E CAN BE ATTACHED TO SUCH A DOCUMENT WHEN THE ASSESSEE HAS SUBMITTED AUDITED P&L ACCOUNT AND BALANCE SHEET, WHICH CANNO T BE DISCARDED UNLESS THERE IS STRONG EVIDENCE TO PROVE THEM WRONG . 11.1. CONSIDERING THE FACTS IN TOTALITY AS MENTIONE D HEREINABOVE, IN OUR CONSIDERED OPINION, NO ADDITIONS NEED TO BE MAD E ON THE GIVEN SET OF FACTS, WE ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITIONS. GROUND NO. 3 & 4 ARE ACCORDINGLY ALLOWED. 12. GROUND NO. 5 RELATES TO NOT ALLOWING DEDUCTION OF PARTNERS REMUNERATION AMOUNTING TO RS. 50,000/-. 12.1. WE FIND THAT THE ASSESSEE HAS NOT FILED ANY D OCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM OF PARTNERS REMUN ERATION, WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY , RESTORE THIS ISSUE TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FU RNISH PARTNERSHIP DEED TO JUSTIFY ITS CLAIM OF REMUNERATION. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AS PER PROVISIONS OF THE LAW. GR OUND NO. 5 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA. NO. 2586 & 2587/M/11 7 13. GROUND NO. 6 RELATES TO THE CHARGING OF INTERES T U/S. 234B OF THE ACT. LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUE NTIAL. THE AO IS DIRECTED TO DECIDE THE SAME AS PER PROVISIONS OF TH E LAW. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED IN PART FOR STATISTICAL PURPOSE. ITA NO. 2587/M/2011 A.Y. 2007-08 15. GROUND NO. 1 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 16. ISSUES RAISED IN GROUND NO. 2 ARE ON SAME SET O F FACTS RELATING TO GROUND NO. 3 & 4 IN ITA NO. 2586/M/11. FOR OUR DET AILED DISCUSSIONS THEREIN, THE IMPUGNED ADDITIONS ARE DIRECTED TO BE DELETED. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 17. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS. 30,711/- BEING INTEREST PAID ON VAT. 17.1. WE FIND THAT THE ASSESSEE HAS DEBITED RS. 30, 711/- AS INTEREST ON VAT IN PROFIT & LOSS ACCOUNT. THE AO WAS OF THE FIRM BELIEF THAT THIS INTEREST HAS NOT BEEN PAID ON ACCOUNT OF BORRO WED FOR BUSINESS PURPOSES AND THEREFORE NOT ALLOWABLE. 17.2. WHEN THE MATTER WAS AGITATED BEFORE THE LD. C IT(A), THE SAME WAS CONFIRMED. 18. AGGRIEVED BY WHICH THE ASSESSEE IS BEFORE US. IN OUR CONSIDERED OPINION, BY NOT PAYING VAT ON TIME, THE ASSESSEE USED THE MONEY IN ITS BUSINESS THEREFORE ANY INTEREST PA ID ON VAT HAS TO ITA. NO. 2586 & 2587/M/11 8 BE ALLOWED AS BUSINESS EXPENDITURE. WE, THEREFORE, REVERSE THE FINDING OF THE LD. CIT(A) AND DIRECT THE AO TO DELE TE THE ADDITION OF RS. 30,711/-. GROUND NO. 3 IS ALLOWED. 19. GROUND NO. 4 RELATES TO THE CHARGING OF INTERES T U/S. 234B OF THE ACT. LEVY OF INTEREST IS MANDATORY THOUGH CONSEQUE NTIAL. THE AO IS DIRECTED TO DECIDE THE SAME AS PER PROVISIONS OF TH E LAW. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 2586/M/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPO SE AND ITA NO. 2587/M/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 12 TH JANUARY, 2016. SD/- SD/- (C.N. PRASAD) (N.K. BILLAIYA) %& /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; ) DATED : 12 TH JANUARY, 2016 . & . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. +,-&&./ , ./' , / DR, ITAT, MUMBAI 6. -012 / GUARD FILE. / BY ORDER, +& //TRUE COPY// / (DY./ASSTT. REGISTRAR) ITA. NO. 2586 & 2587/M/11 9 , / ITAT, MUMBAI