The ACIT, Central Circle-4, Surat V. M/s. Colour Tax Pvt.Ltd., Surat

ITA 2615/AHD/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94670 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Unexplained expenditure; Document seized; Corroborative evidences; Documents seized
• Section: 69; 132

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2615/AHD/2009 WITH CO NO.238/AHD/2009 / ASSTT. YEAR: 2007-2008 ACIT, CENT.CIR.4 SURAT. VS M/S.COLOUR TEX P. LTD. SURVEY NO.91, OPP: NAVIN FLORINE UDHANA NAVSARI ROAD SURAT. PAN : AAACC 4513 F / (APPELLANT) / (RESPONDENT) REVENUE BY : SMT.VIBHA BHALLA, CIT-DR ASSESSEE BY : SHRI SANJAY KAPADIA WITH SHRI ANKUR D. SHAH ! / DATE OF HEARING : 25/08/2015 '#$ ! / DATE OF PRONOUNCEMENT: 29/10/2015 %& / O R D E R PER BENCH: REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER O F THE LD.CIT(A)- II, AHMEDABAD DATED 17.6.2009 FOR THE ASSTT.YEAR 20 07-08. 2. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, TH E ASSESSEE HAS FILED CROSS-OBJECTION BEARING NO.CO NO.238/AHD/2009 . ITA NO.2615 /AHD/2009 WITH CO 2 3. THE REVENUE IN ITS FIRST GROUND OF APPEAL HAS PL EADED THAT THE LD.FIRST APPELLATE AUTHORITY HAS ERRED IN DELETING THE ADDITION OF RS.1,23,26,300/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH OP ERATION UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT A T THE RESIDENTIAL PREMISES OF THE DIRECTORS AND BUSINESS PREMISES OF ASSESSEE ON 26.7.2006. THE ASSESSEE FILED ITS RETURN OF INCOME ON 24.10.2007 DECLARING TOTAL INCOME AT RS.3,39,36,646/-. THE CAS E OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UND ER SECTION 143(2) OF THE INCOME TAX ACT DATED 7.4.2008 WAS ISSUED AND SE RVED UPON THE ASSESSEE. SHRI NATVARLAL V. THAKKAR WAS THE CHIEF ACCOUNTANT OF THE ASSESSEE-COMPANY AND THE COLOURTEX GROUP AT THE REL EVANT TIME. HIS RESIDENTIAL PREMISES WAS ALSO COVERED UNDER SEARCH ACTION. DURING THE COURSE OF SEARCH, DOCUMENTS INVENTORISED AS ANNEXUR E B1-6 AND B1-7 WAS FOUND AND SEIZED. ON AN ANALYSIS OF THESE DOCU MENTS, THE LD.AO ARRIVED AT A CONCLUSION THAT THESE ARE THE SALES MA DE BY THE ASSESSEE- COMPANY OUT OF BOOKS. HE, ACCORDINGLY, CONFRONTED THE ASSESSEE AS TO WHY THE AMOUNTS MENTIONED IN THESE PAPERS SHOULD NO T BE ADDED AS INCOME OF THE ASSESSEE. IN RESPONSE TO THE QUERY O F THE AO, IT WAS CONTENDED BY THE ASSESSEE THAT SEIZED DOCUMENTS DID NOT REFLECT ANY ACTUAL TRANSACTION OR BUSINESS, BUT, MERELY CONTAIN PLANNING AND ROUGH NOTES AND JOTTING BY THE STAFF. IT WAS ALSO CONTEN DED THAT DOCUMENTS WERE SEIZED FROM THE RESIDENCE OF THE ACCOUNTANT, H ENCE, THEY DID NOT RELATE TO THE ASSESSEE. THE DOCUMENTS DID NOT DISC LOSE, SPECIFICALLY, WHETHER IT IS SALE OR PURCHASE. THUS, THE EMPHASIS OF THE ASSESSEE WAS, THESE ARE DUMP DOCUMENTS NOT BELONGING TO THE ASSES SEE-COMPANY, AND THEREFORE, NO ADDITION BE MADE IN THE HANDS OF THE ASSESSEE. THE LD.AO DID NOT FIND ANY MERIT IT THE CONTENTIONS OF THE ASSESSEE. HE OBSERVED THAT PERUSAL OF VARIOUS PAGES VIZ. 11, 16, 19, 21, 46 ETC. INDICATE THAT THE ASSESSEE HAS MADE CREDIT SALES AM OUNTING TO RS.1,23,26,300/-. IT HAS ALSO INCURRED EXPENDITURE OUT OF THE BOOKS ITA NO.2615 /AHD/2009 WITH CO 3 AMOUNTING TO RS.20,75,500/-. THE LD.AO HAS ULTIMAT ELY HELD THAT THIS SUM OF RS.1,23,26,300/- IS A SALE OUT OF BOOKS, AND IT IS THE PEAK DEBIT/CREDIT BALANCES. THEREFORE, IT IS REQUIRED TO BE ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, IN PRINCIPLE, THE LD.FIRST APPELLATE AUTHORITY CONCURRED WITH THE AO THAT THE DOCUMENTS WERE FOUND FROM THE RESIDENTIAL PREMISES OF THE CHIEF ACCOUNTANT. IT IS TO BE ASSU MED THAT THEY RELATE TO THE ASSESSEE. THE LD.FIRST APPELLATE AUTHORITY OBSERVED THAT THE TRANSACTIONS MENTIONED IN THE DOCUMENTS ARE SALES O UT OF BOOKS, WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE. THE LD.FIR ST APPELLATE AUTHORITY ULTIMATELY HELD THAT PROFIT ELEMENT EMBEDDED IN THI S UNACCOUNTED SALE IS TO BE TREATED AS INCOME OF THE ASSESSEE. THE LD.FI RST APPELLATE AUTHORITY HAS ESTIMATED THE PROFIT MARGIN AT 10% WH ICH GIVES RISE TO A PROFIT OF RS.12,32,630/-. SINCE THE ASSESSEE HAS D EBITED AN EXPENDITURE OF RS.20,75,500/- WHICH IS ALSO OUT OF BOOKS, THUS, CONSIDERING UNEXPLAINED EXPENDITURE, THE LD.FIRST A PPELLATE AUTHORITY CONFIRMED THE ADDITION OF RS.20,75,500/-. BRIEF FI NDING RECORDED BY THE CIT(A) READ AS UNDER: 4. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE APPELLANT. SINCE THE DOCUMENT FOUND AT THE PREMISES OF THE ACCOUNTANT OF THE COMPANY WITH THE SEAL OF THE COMP ANY THE AO WAS JUSTIFIED IN CONCLUDING THAT THE SAME PERTAINS TO THE COMPANY. THE TRANSACTIONS REPRESENTS THE UNACCOUNTE D SALES MADE BY THE ASSESSEE COMPANY AND THE TOTAL COMES TO RS. 1,23,26,300/-. HOWEVER, IN MY OPINION THERE IS NO E VIDENCE THAT THIS REPRESENTS OUTSTANDING DUES OR PEAK DEBTS. HEN CE, IT IS REASONABLE TO APPLY THE GROSS PROFIT MARGIN OF 10% ON THIS UNACCOUNTED SALES, AS IN THE UNACCOUNTED TRANSACTIO N G.P. RATE IS HIGHER THAN THE ACCOUNTED TRANSACTIONS. THEREFORE, THE PROFIT COMES TO RS.12,32,630/-. THERE IS ALSO CREDIT BALA NCE OF RS.20,75,500/- WHICH CAN BE CONCLUDED AS UNACCOUNTE D EXPENDITURE AND THE SAME IS NOT ALLOWED TO AS PER T HE PROVISO TO SECTION 69 OF THE ACT. THE AMOUNT OF RS.20,75,500/ - IS HIGHER THAN THE RS.12,32,630/- THE ADDITION IS RESTRICTED TO THIS AMOUNT OF RS.20,75,500/- AND THE BALANCE AMOUNT OF THE ADD ITION IS DELETED. ITA NO.2615 /AHD/2009 WITH CO 4 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE FACTS THAT THE DOCUMENTS DEMONSTRATING UNACCOUNTED SALES RELATED TO THE ASSESSEE WERE FOUND AND SEIZED. THE MOOT QUESTI ON BEFORE US IS, WHETHER THE GROSS CREDIT AMOUNTS OF THE SALES WORKE D OUT FROM THOSE DOCUMENTS IS TO BE ADDED AS INCOME OF THE ASSESSEE OR THE PROFIT EMBEDDED IN THE SALES, AFTER DEBITING THE EXPENDITU RE FOR ACHIEVING THOSE SALES IS TO BE CONSIDERED AS INCOME OF THE AS SESSEE ? THE LD.AO IN A PASSING REFERENCE HAS MADE AN OBSERVATION THAT IT IS THE PEAK DEBIT (CREDIT) BALANCE. THE LD.FIRST APPELLATE AUTHORITY DID NOT CONCUR WITH THESE CONCLUSION. THE LD.FIRST APPELLATE AUTHORITY HAS OBSERVED THAT THERE IS NO EVIDENCE THAT THIS REPRESENT OUTSTANDIN G DUES OR PEAK DEBITS. THE DEPARTMENT HAS NOT FILED COPIES OF ANY SEIZED MATERIAL WHICH CAN INDICATE THAT THE AMOUNT WORKED OUT BY TH E AO AT RS.1,23,26,300/- IS A GROSS SALES NOT ACCOUNTED BY THE ASSESSEE, RATHER, IT IS THE PEAK DEBIT/CREDIT BALANCE. THE P ROFIT EMBEDDED IN THESE SALES CAN ONLY BE ASSESSED AS INCOME OF THE ASSESSE E. THE LD.CIT(A) AFTER CONSIDERING THE RESULT SHOWN BY THE ASSESSEE ESTIMATED THE GROSS PROFIT OF 10% ON THESE UNACCOUNTED SALES. HOWEVER, ON NOTICING THAT THE ASSESSEE HAS DEBITED UNACCOUNTED EXPENDITURE AL SO, THEN, THOSE EXPENDITURE CANNOT BE ALLOWED TO THE ASSESSEE UNLES S IT EXPLAINS THE SOURCE OF EXPENDITURE. ONCE THE UNEXPLAINED EXPEN DITURE WERE FOUND TO BE HIGHER THAN THE ALLEGED ESTIMATED GROSS PROFI T, THEN THE ADDITION WOULD BE OF THE HIGHER AMOUNT I.E. UNEXPLAINED EXPE NDITURE OF RS.20,75,500/-. 6. ON DUE CONSIDERATION OF FINDING RECORDED BY THE CIT(A) EXTRACTED SUPRA, WE ARE OF THE VIEW THAT THE LD.FIRST APPELLA TE AUTHORITY HAS APPRECIATED THE CONTROVERSY IN RIGHT PERSPECTIVE AN D NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF THE CIT(A) THE GROUN D OF APPEAL OF THE REVENUE IS REJECTED. ITA NO.2615 /AHD/2009 WITH CO 5 7. THE GROUND NO.2 AND 3 ARE INTERCONNECTED. IN TH ESE GROUNDS THE GRIEVANCES OF THE REVENUE IS THAT THE LD.FIRST APPE LLATE AUTHORITY HAS ERRED IN DELEING THE ADDITION OF RS.9,32,604/-. 8. BRIEF FACTS OF THE CASE ARE THAT THE DURING THE COURSE OF SEARCH SURPLUS CASH WAS FOUND AT CPL, BHESTAN BRANCH AND M UMBAI BRANCHES. SIMILARLY, AT M/S.BHAVIN TEXTILE, PROPRIETARY CONCE RN OF COLOURTEX PVT. LTD. DEFICIT IN CASH OF RS.9,32,604/- WAS FOUND. T HE LD.AO HAS ADDED THE SURPLUS CASH FOUND AT MUMBAI BRANCH AND BHESTAN BRANCHES. HE ALSO MADE ADDITION OF DEFICIT IN CASH FOUND AT M/S. BHAVIN TEXTILE. 9. ON APPEAL, THE LD.CIT(A) HAS DELETED THE ADDITIO N WITH REGARD TO THE DEFICIT IN CASH FOUND AT M/S.BHAVIN TEXTILE. T HE REVENUE IS AGGRIEVED WITH THIS ACTION OF THE CIT(A). 10. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSE SSEE WAS THAT AT THE TIME OF SEARCH, CASH BOOK WAS SHOWING MORE CASH THA N THE ONE ACTUALLY AVAILABLE AT THE PREMISES OF M/S.BHAVIN TEXTILES. THE ASSESSEE HAS EXPLAINED THAT PART OF SUCH CASH WAS LYING AT OTHER PREMISES. PART OF THE DEFICIT CASH WERE RELATED TO EXPENSES IN NEAR P AST, WHICH WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AS ON THE DA TE OF SURVEY, ON ACCOUNT OF PAUCITY OF TIME. THE LD.AO DID NOT ACCE PT THIS CONTENTION OF THE ASSESSEE. HOWEVER, THE LD.CIT(A) HAS ACCEPTED. 11. ALONG WITH THIS APPEAL, WE HAVE HEARD 33 APPEAL S OF THIS GROUP. THE AO HAS ULTIMATELY GIVEN A SET OFF OF THE ADDITI ONS QUA THE INCOME DECLARED BY SHRI JAYANTILAL THAKORDAS, WHO IS THE H EAD OF THIS GROUP. IN SOME OF THE CASES, WE HAVE FOUND EXCESS CASH. THE STAND OF THE ASSESSEE IS THAT THE CASH WHICH SHOWN IN THE CASH B OOK, BUT NOT FOUND AT THE PREMISES MUST HAVE BEEN TAKEN ON OTHER PREMI SES. THUS, THE ASSESSEE HAS EXPLAINED ITS POSITION ABOUT THE DEFIC IT IN CASH. THE ITA NO.2615 /AHD/2009 WITH CO 6 LD.CIT(A) HAS APPRECIATED THE FACTS AND CIRCUMSTANC ES IN RIGHT PERSPECTIVE AND NO ADDITION IS CALLED FOR. THE ASS ESSEE HAS EXPLAINED ITS POSITION WITH REGARD TO DEPOSIT IN CASH. 12. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ALLOWED THE RELIEF OF RS.8,50,093 /- ,MADE ON ACCOUNT OF SURPLUS STOCK FOUND DURING THE COURSE OF SURVEY PROCEEDINGS. DURING THE COURSE OF SURVEY, ON PHYSICAL EXAMINATION, STOC K HAVING VALUE OF RS.8,89,71,479/- WAS FOUND. IN THE BOOKS, THE STOC K WAS RECORDED AT RS.8,81,21,386/-. THUS, THERE WAS SURPLUS STOCK. IN RESPONSE TO THE QUERY OF THE AO, IT WAS CONTENDED THAT A STOCK RECO NCILIATION STATEMENT HAS BEEN PREPARED. IN RESPECT OF FEW ITEMS, SALES BILLS WERE PREPARED FOR THE DELIVERY AND REDUCED FROM THE STOCK, BUT TH E PHYSICAL DISPATCH WAS UNDER PROCESS, HENCE, STOCK WAS INCLUDED IN THE ACTUAL STOCK FOUND, BUT THE SAME WAS REDUCED FROM THE BOOKS AS THE SALE BILLS WERE PREPARED. THE ASSESSEE HAS SUBMITTED TWO SALES BIL LS, IDENTIFYING THE STOCK OF 2290 KGS. VALUING RS.5,03,388/-. IT WAS A LSO CONTENDED THAT IN RESPECT OF BILL NO.1305 THERE WAS TWO ITEMS (I) 1 200 KGS. AND (II) FOR ANOTHER 600 KGS. BUT BY MISTAKE AMOUNT OF 1200 KGS. WAS NOT ENTERED IN THE BOOKS. COPIES OF THE BILLS WERE SUBMITTED B Y THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE LD.FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION TO THE EXTENT OF RS.5,03,388/- AND RS.2,13,360/- ON THE GROUND THAT THE ASSESSEE HAS RECONCILED THE STOCK TO THIS EXTENT WITH SUPPORTING EVIDENCE. THE REVENUE IN ITS APPEA L HAS NOT PRODUCED ANY MATERIAL EXCEPT PUTTING RELIANCE UPON THE ORDER OF THE AO. THE LD.AO HAS NOT GIVEN ANY PLAUSIBLE REASON AS TO WHY EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE. TAKING INTO CONSIDERAT ION THE FINDING OF THE CIT(A) AND THE EXPLANATION OF THE ASSESSEE SUBMITTE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS EXPLAINED THE DISCREPANCY IN THE STOCK FOUND AT THE TIME OF SURVEY TO THE EXTENT THE CIT(A) HAS DELETED THE ADDITION. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF THE REVENUE IS REJECTED. ITA NO.2615 /AHD/2009 WITH CO 7 13. THE GROUND NOS.5 AND 6 ARE GENERAL GROUNDS OF A PPEAL, WHICH DO NOT CALL FOR RECORDING OF ANY SPECIFIC FINDING, HEN CE THEY ARE REJECTED. 14. AS FAR AS CO FILED BY THE ASSESSEE IS CONCERNED , WE ARE OF THE VIEW THAT SUB-SECTION 4 OF SECTION 253 AUTHORISES T HE RESPONDENT TO FILE CROSS-OBJECTION ON RECEIPT OF NOTICE IN APPEAL. TH E CO IS REQUIRED TO BE FILED WITHIN 30 DAYS OF RECEIPT OF NOTICE AND IT IS TO BE VERIFIED IN THE MANNER AKIN TO AN APPEAL, BUT, THE CO IS TO BE FILE D AGAINST ANY PART OF THE ORDER IMPUGNED IN THE APPEAL. IN THE CO FILED BY THE ASSESSEE, HE HAS NOWHERE DEMONSTRATED HIS GRIEVANCES AGAINST ANY PART OF THE ORDER OF THE CIT(A), AS SUCH, THE CO IS NOT MAINTAINABLE IN THE PRESENT FORM. 15. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29 TH OCTOBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER