SASIKUMAR V. PILLAI, MUMBAI V. ITO 23(3)(4), MUMBAI

ITA 259/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: S C TIWARI
• Keywords: Initiation of penalty proceedings
• Section: 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 SASIKUMAR V PILLAI, F-35, SHARDA INDL. ESTATE, LAKE ROAD, BHANDUP (W), MUMBAI-400 078 PA NO.AABPP 6472 G ITO 23(3)(4), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI S.C.TIWARI RESPONDENT BY: SHRI V. KRISHNAMOORTHY DATE OF HEARING: 18.10.2012 DATE OF PRONOUNCEMENT: 7 . 11 .2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2007-08 AGAINST ORDER DATED 29.11.2010 OF LD CIT(A)-33, MUMBAI. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT(A) HAS ERRED IN REJECTING THE SUBMISSIONS OF THE APPEL LANT REGARDING CASH DEPOSITS OF RS.35,17,320 OUT OF THE SALE PROCEEDS O F SCRAP AND COLLECTION OF DEBTORS, WITHOUT BRINGING ANY MATERIAL ON RECORD . 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD CIT(A) HAS ERRED IN CONCLUDING THE GENERATION OF SCRAP IN THE RANGE OF 15% IN THIS TYPE OF BUSINESS AND APPLYING THE SAID PERCENT AGE OF SCRAP GENERATION TO CURRENT YEARS PURCHASE VALUES. 2. THE RELEVANT FACTS GIVING RISE TO THESE GROUNDS OF APPEAL THAT ASSESSEE IS A PROPRIETOR OF M/S. SHILPI MOULDING PRODUCTS AND IS ENGAGED IN MANUFACTURING OF METAL COMPONENTS, CANS, METAL CARTRIDGES AND PLASTICS CO MPONENTS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED FROM THE BANK STATEMENT OF VIJAY BANK, MULUND (EAST ) VIDE ACCOUNT ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 2 NO.50480621000003 THAT THE ASSESSEE MADE CASH DEPOS ITS OF RS.35,17,320 AT VARIOUS DATES. THE ASSESSEE WAS ASKED TO EXPLAIN THE DEPOS IT AMOUNTS. IN REPLY THERETO, ASSESSEE VIDE LETTER DATED 24.12.2009 STATED AS UND ER: THE CASH CREDITS IN TO BANK ARE ON ACCOUNT OF SCRA P SALE AND PROCESS REJECTIONS AMOUNTING TO RS. 9,71,186/- WHICH HAS BE EN DULY OFFERED FOR TAXATION SINCE IT FORMS PART OF LOCAL SALES SHOWN I N MY PROFIT AND LOSS ACCOUNT. FURTHER, I HAVE RECOVERY FROM OPENING DEBT ORS WHICH HAS BEEN DEPOSITED PERIODICALLY. 4. ASSESSING OFFICER STATED THAT THE EXPLANATION OF FERED BY ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS NOT SATISFACTORY, AND, THEREFORE, THE SUM SO CREDITED TO THE BANK ACCOUNT IS TO BE CHARGED AS THE ASSESSES INCO ME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. LD CIT(A) AFTER CONSIDERING THE SUB MISSION OF ASSESSEE AND DOCUMENTS FILED BEFORE HIM HAS STATED THAT THE TOTAL PURCHASE S MADE BY THE ASSESSEE WHICH ARE REFLECTED AT RS.39,45,761 AND CONSIDERED 15% THEREO F AS SCRAP SALE WHICH THE ASSESSEE COULD SOLD. THE SAID AMOUNTS COMES TO RS.5,91,864 AND, ACCORDINGLY ALLOWED THE DEPOSIT TO THE EXTENT OF RS.5,92,000 AND SUSTAINED ADDITION OF THE BALANCE AMOUNT OF RS.29,25,320. THE RELEVANT PARA OF THE ORDER OF LD CIT(A) READS AS UNDER: DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HA S FURNISHED A COPY OF THE BILLS ISSUED BY SHILPI MOULDING PRODUCTS IN THE NAME OF F OUR PARTIES. THE APPELLANT THUS FURNISHED ZEROX COPIES OF SALE BILLS ISSUED BY THE APPELLANT ITSELF I.E. SHILPI MOULDING PRODUCTS IN THE NAME OF VARIOUS PERSONS AP PARENTLY SCRAP PURCHASER FROM SHILPI MOULDING PRODUCTS. ALONG WITH THIS HE H AS ALSO FURNISHED WEIGH BRIDGE PAPERS SHOWING WEIGHT OF SCRAP AND MATERIAL GATE PASS ISSUED BY APPELLANT HIMSELF. IT IS SEEN FROM THE SALE BILLS I SSUED BY SHILPI MOULDING PRODUCTS THAT NAME OF INDIVIDUALS ARE APPEARING IN CASE OF T WO PURCHASING PARTIES AND FOR THE REST TWO PARTIES THE NAMES ARE NOT EVEN COMPLET E. FOR EXAMPLE, SCRAP SALE BILL NO 1043 DATED 7.3.2007 OF THE APPELLANT IS ISS UED IN THE SAME OF MR. YADAV AND BILL NO.1042 DATED 5.1.07 IN THE NAME OF MR. PA NDAYE. FURTHER, NONE OF THE BILLS SO ISSUED DURING THE YEAR IS INDICATING ADDRE SSES OF ANY OF THESE PARTIES. THEN THE APPELLANT HAS STATED THAT THE GATE PASS AL WAYS ON THE SAME DATE BECAUSE THESE PEOPLE ARE NOT RELIABLE AND THE SCRAP SOLD IS ON CASH BASIS ONLY. HOWEVER, THE MATERIAL GATE PASS DID NOT ALWAYS CORR OBORATE WITH DATE IN THE GATE PASS. FOR EXAMPLE; IN THE CASE OF BILL NO. 1044 WHI CH IS DATED 28.3.07 THE MATERIAL GATE PASS IS FOR 28.3.07 WHEREAS WEIGH BRI DGE PAPER IS DATED 25.02.2007. IT IS ALSO NOTEWORTHY THAT IN SOME OTHE RS THE WEIGH BRIDGE PAPER AND EARLIER GATE PASSES ARE FOR THE SAME DATE BUT T HE SALE BILL DATES ARE DIFFERENT IN GOOD NUMBER OF CASES. HENCE, HIS STATEMENT IS CO NTRADICTORY. IT IS FURTHER CONTRADICTORY BECAUSE OF THE FACT THAT MATERIAL GAT E PASS IN ALL THE CASES IS FOR SHEET WHICH IS RAW MATERIAL OF APPELLANT FOR MANUFA CTURING AS IS EVIDENT FROM THE STAMP IN A FEW FOR MATERIAL RECEIVED ALSO. AGAINS T THAT THESE GATE PASSES COPIES PRODUCED BY APPELLANT ARE FOR SALE OF MATERIAL SCRA P. IT IS THE SCRAP LEFT OUT IN ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 3 FORM OF CUT PIECES FROM THESE SHEETS WHICH THE APPE LLANT STATES THAT HI IS USING FOR MANUFACTURING AND IT IS THE SALE OF THESE SCRAP S WHICH IS SOURCE OF THIS CASH DEPOSITS MADE IN THE BANK. OVER AND ABOVE, THE FACT REMAINS THAT ALL THE SALE BILLS ARE MADE BY SHILPI MOULDING PRODUCTS AND THER E IS NO PURCHASE BILL ISSUED BY ANY OF THESE SCRAP DEALERS WHO ARE APPARENTLY PAYIN G ON ANY GIVEN DATE REASONABLY ADEQUATE CASH AMOUNT RANGING FROM RS. 15 ,000/- TO RS. 56,440/- AS CAN BE SEEN FROM THE PAPERS. FOR SCRAP PICKERS THES E AMOUNTS OF CASH PAYMENT CANNOT BE SAID TO BE MEAGER. FOR EXAMPLE THE BILL N O. 1044 IS FOR THE AMOUNT OF RS. 51,418/-, BILL NO.1043 IT IS RS.54,979/-, BILL NO. 1041 IT IS RS. 49,920/- AND SO ON. IN VIEW OF THIS DISCREPANCY I AM NOT CONVINCED WITH THE ARGUMENT TAKEN BY THE APPELLANT THAT CASH WAS SALE PROCEEDS OF THE SCRAP SOLD TO THESE VARIOUS SCRAP PICKING PEOPLE FOR THE REASON FIRSTLY: THAT THEIR C OMPLETE NAMES AND ADDRESSES ARE NOT KNOWN TO THE APPELLANT, SECONDLY MATERIAL S CRAP GATE PASS SHOWS MATERIAL AS SHEET AND NOT SCRAP AND FINALLY THE DAT ES ALSO ARE NOT MATCHING IN GOOD NUMBER OF BILLS WHICH GOES AGAINST THE STATEME NT MADE BY THE APPELLANT THAT EVERYTHING IS DONE SIMULTANEOUSLY. HOWEVER, A T THE SAME TIME, THIS FACT CANNOT BE DOUBTED THAT IN THE NATURE OF BUSINESS OF THE APPELLANT THERE WILL BE SOME SCRAP GENERATION WHICH AS PER THE INTERNATIONA L STANDARDS ONLY; IS IN THE RANGE OF 15%. FOR THE SAME, THE TOTAL VALUE PURCHAS ES MADE DURING THE YEAR WHICH ARE REFLECTED AT 39,45,761/-, 15% OF THE AMOU NT CAN BE TAKEN AS SCRAP WHICH AT THE MAX CAN BE SOLD. THIS AMOUNT COMES TO_ RS.5,91,864/- AND HENCE DEPOSIT TO THE EXTENT BY TAKING AROUND THE SAME AT RS. 5,92,000 IS ALLOWED AND THE BALANCE AMOUNT OF RS. 29,25,320/- IS SUSTAINED. THE GO S A RELIEF FOR THE BALANCE AMOUNT OF RS.592000/-. 5. HENCE, THIS APPEAL BY THE ASSESSEE. 6. DURING THE COURSE OF HEARING, LD A.R. SUBMITTED THAT ASSESSEE DEPOSITED THE CASH AMOUNT IN HIS BANK OUT OF BOOKS OF ACCOUNT. T HE BANK ACCOUNT IS REFLECTED IN THE BOOKS OF ACCOUNT OF ASSESSEE AND, THEREFORE, AO SHO ULD HAVE CONSIDERED THAT THE SOURCE OF BANK DEPOSIT AS EXPLAINED BECAUSE DEPOSIT IN THE BANK HAS COME FROM BOOKS OF ACCOUNT. HE SUBMITTED THAT AO COULD HAVE EXAMINED THE SOURCE OF ENTRIES FROM THE BOOKS OF ACCOUNT AND WHEN THE SOURCE OF BANK DEPOSI T IS EXPLAINED I.E. BOOKS OF ACCOUNT,, AO COULD NOT HAVE APPLIED PROVISIONS OF S ECTION 68 OF THE ACT. LD A.R. FURTHER SUBMITTED THAT THE SOURCE OF AMOUNT RECEIVED BY ASS ESSEE IS PARTIALLY FROM SALE OF SCRAP AND PARTIALLY RECOVERY FROM DEBTORS AND, THEREFORE, AO WAS NOT JUSTIFIED TO STATE THAT THE EXPLANATION FURNISHED BY ASSESSEE WAS NOT SATISFACT ORY. LD A.R, FURTHER SUBMITTED THAT ASSESSEE HAS SHOWN SALE OF SCRAP AND RECOVERY OF RS .35,17,320 AND LD CIT(A) WHEN ACCEPTED THE SALE OF SCRAP OF RS.5,92,000, AS SUCH HE HAS ACCEPTED LESS SALE, ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 4 THEREFORE, ASSESSEES SALE IS REDUCED. HE SUBMITTE D THAT THE BALANCE AMOUNT SHOULD BE REDUCED INSTEAD OF MAKING ANY ADDITION. LD A.R. FU RTHER THAT THE ADDITION AS SUSTAINED BY LD CIT(A) IS NOT JUSTIFIED. 7. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER O F LD CIT(A). HE SUBMITTED THAT ASSESSEE HAS NOT EXPLAINED THE SOURCE OF CASH DEPOS IT IN THE BANK ACCOUNT. HE SUBMITTED THAT MERELY BECAUSE ENTRIES ARE MENTIONED IN THE BOOKS OF ACCOUNT OF ASSESSEE, IT DOES NOT MEAN THE SOURCE OF RECEIPT IN THE BOOKS OF ACCOUNT IS EXPLAINED, AND CONSEQUENTLY THE TRANSACTION IN THE BANK DEPOSI T IS EXPLAINED. HE SUBMITTED THAT LD CIT(A) HAS SUSTAINED THE BALANCE ADDITION OF RS.29, 25,320 AFTER CONSIDERING ALL THE FACTS AS SUBMITTED ON BEHALF OF ASSESSEE BEFORE HER. 8. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. 9. IT IS THE SUBMISSIONS OF LD A.R. THAT WHEN THE D EPOSIT IN THE BANK ACCOUNT COMES FROM BOOKS OF ACCOUNT OF ASSESSEE, THE SOURCE OF RE CEIPT SHOULD BE TREATED AS EXPLAINED. WE DO NOT FIND MERIT ON ABOVE SUBMISSION OF ASSESSE E. THE ASSESSEE HAS TO EXPLAIN THE SOURCE OF RECEIPT AS ENTERED IN THE BOOKS OF ACCOUN T OF ASSESSEE. DURING THE COURSE OF HEARING BEFORE US, LD A.R. MERELY STATED THAT THE S OURCE IN THE BOOKS ENTRIES IN CASH IS PARTIALLY FROM SALE OF SCRAP AND PARTIALLY RECOVERY FROM DEBTORS BUT COULD NOT GIVE DETAILS AND/OR FURNISH ANY DOCUMENTARY EVIDENCE. CONSIDERI NG ABOVE FACTS AND THE FACTS AS STATED BY LD CIT(A) THAT THE PURCHASE OF THE ASSESS EE IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS ONLY RS.39,45,761, WE ARE OF THE C ONSIDERED VIEW THAT HE HAS RIGHTLY STATED THAT 15% OF THE AMOUNTS OF PURCHASE COULD BE TAKEN AS SCRAP SALE WHICH ASSESSEE COULD SELL. THUS, HE HAS ACCEPTED THE SAL E OF SCRAP OF RS.5,92,000. LD A.R. COULD NOT PLACE ANY EVIDENCE ON RECORD TO SUPPORT HIS SUBMISSION THAT PARTIAL RECOVERY AS ENTERED IN THE BOOKS OF ACCOUNT OF ASSESSEE IS B Y WAY OF RECOVERY FROM DEBTORS. LD A.R. DID NOT STATE THE DETAILS OF THE AMOUNT STATED TO HAVE BEEN RECEIVED FROM ASSESSEES DEBTORS. FURTHER DURING THE COURSE OF A SSESSMENT PROCEEDINGS, ASSESSEE VIDE HIS LETTER DATED 24.12.2009 STATED THAT CASH CREDIT S IN THE BANK ARE ON ACCOUNT OF SCRAP SALE AND PROCESS REJECTIONS AMOUNTING TO RS.9,71,18 6, WHICH WERE OFFERED FOR TAXATION ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 5 BUT DURING THE COURSE OF HEARING BEFORE US, ASSESSE E STATED THAT THE SAID SOURCE OF BANK DEPOSITS AND ENTRIES IN THE BOOKS OF ACCOUNT IS PAR TIALLY SCRAP SALE AND PARTIALLY RECOVERY FROM DEBTORS. CONSIDERING ABOVE FACTS AND SUBMISSI ONS OF LD A.R, WE AGREE WITH LD D.R. THAT ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOUR CE OF CASH RECEIPTS WHICH IS STATED TO BE ENTRIES IN THE BOOKS OF ACCOUNT. MERELY THE BAN K ACCOUNT IS DISCLOSED AND ENTRIES ARE REFLECTED IN THE BOOKS OF ACCOUNT, DOES NOT MEAN TH AT SOURCE OF RECEIPT IS TO BE TREATED AS EXPLAINED. HENCE, WE REJECT GROUND NOS. 1 &2 TA KEN BY ASSESSEE. 10. GROUND NO.3 READS AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.13,766 O N ACCOUNT OF VARIOUS EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT, OU T OF THE DISALLOWANCE MADE OF RS.16637 BY THE LD AO WITHOUT BRINGING ANY MATERIAL RECORDS. 11. WE HAVE HEARD LD REPRESENTATIVES OF PARTIES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT AO HAS DISALLOW ED 15% OF THE TOTAL EXPENSES WHICH WERE CLAIMED BY ASSESSEE AGGREGATING TO RS.1,10,908 AS UNDER: CONVEYANCE - RS. 15205/. GENERAL EXPENSES- RS. 17,214/- POSTAGE AND COURIERS RS.19, 132/- PRINTING & STATIONARY RS. 15,863/- STAFF WELFARE RS. 25,744/ TRAVELLING EXPENSES -RS.17,750/- TOTAL: RS.1,10,908 12. AO STATED THAT ASSESSEE ONLY PRODUCED LEDGER AC COUNT AND DID NOT SUBMIT ANY VOUCHERS TO SUBSTANTIATE THE CLAIM. THEREFORE, AO WORKED OUT 15% OF THE CLAIM OF ASSESSEE WHICH COMES TO RS.16,637 AND DISALLOWED TH E SAME. IN THE FIRST APPEAL, LD CIT(A) HAS STATED THAT NO DISALLOWANCE IS TO BE MAD E IN RESPECT OF CLAIM OF ASSESSEE OF POSTAGE AND COURIERS OF RS.19,132 AND, THEREFORE, D ISALLOWED 15% OF THE BALANCE AMOUNT WHICH COMES TO RS.13,766. HENCE, THIS APPEA L BY THE ASSESSEE. 13. LD A.R. COULD NOT DISPUTE THE SAID FACT THAT AS SESSEE COULD NOT PRODUCE VOUCHERS AND, THEREFORE, THE EXPENSES AS CLAIMED COULD NOT B E SUBSTANTIATED WITH DOCUMENTARY ITA NO.259/MUM/2011 ASSESSMENT YEAR: 2007-08 6 EVIDENCE. CONSIDERING THE FACTS IN TOTALITY, WE A RE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE @ 10% OF RS.91,776 I.E. RS.9,180 WILL BE REASONABLE AND JUSTIFIABLE AS AGAINST RS.13,776 SUSTAINED BY LD CIT(A). THIS GRO UND IS ALLOWED IN PART. 14. GROUND NO.4 IS AS UNDER: UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT(A) HAS ERRED IN REJECTING THE GROUNDS PERTAINING TO INITIA TION OF PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) AND CHARGING INTERE ST UNDER SECTION 2345A AND 234B OF THE ACT. 15. IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, SAME DOES NOT REQUIRE ANY ADJUDICATION AS THIS GROU ND IS TAKEN ONLY ON PRESUMPTION AND IF ANY PENALTY PROCEEDINGS IS INITIATED, ASSESS EE WILL BE AT LIBERTY TO TAKE NECESSARY LEGAL COURSE AS PER LAW. HOWEVER, CHARGING OF INTE REST UNDER SECTION 234A AND 234B IS CONSEQUENTIAL AND DO NOT REQUIRE ANY SPECIFIC ADJUD ICATION. THIS GROUND IS DISMISSED. 16. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED IN PART. PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 7 TH NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),33, MUMBAI 4. COMMISSIONER OF INCOME TAX, 23 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI