M/s. Sadbhav Builders, Anand V. The Income tax Officer, Ward-1, Anand

ITA 2659/AHD/2005

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9591 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-10-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 20-12-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Keywords: Loose papers
• Section: 133A; 145; 263

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M M/S SADBHAV BUILDERS, C/O KIRAN PATEL & CO., CHARTERED ACCOUNTANTS, SHREE RAM NIVAS OPP. BOB STATION ROAD, ANAND. VS. INCOME-TAX OFFICER, WARD-1, ANAND. (APPELLANT) .. (RESPONDENT) AND M/S SADBHAV BUILDERS, C/O KIRAN PATEL & CO., CHARTERED ACCOUNTANTS, SHREE RAM NIVAS OPP. BOB STATION ROAD, ANAND. VS. COMMISSIONER OF INCOME-TAX-II, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI ASEEM L. THAKKAR, AR RESPONDENT BY:- SHRI S. K. GUPTA, CIT, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE ASSESSEE FOR AS ST. YEAR 2002-03. 2. ITA NO.842/AHD/2006 ASST. YEAR 2002-03 IS THE AP PEAL AGAINST THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 W HEREIN HE HAS DIRECTED ITA NO.2659/AHD/2005 ASST. YEAR :2002-03 ITA NO.842/AHD/2006 ASST. YEAR :2002-03 ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 2 THE AO TO MAKE THE ADDITION OF RS.8 LACS BEING THE DISCLOSURE MADE BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS. THE ASS ESSEE HAS RAISED FOLLOWING GROUND: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT-II, BARODA ERRED IN - 1. PASSING THE ORDER U/S 263 OF THE IT ACT AND THER EBY DIRECTING THE ITO TO TREAT THE DISCLOSURE OF RS.8,00,000/- DU RING THE COURSE OF SURVEY AS INCOME FROM OTHER SOURCES BY AP PLYING THE RATIO OF HON. GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMED HAJI HASSAN 247 ITR 290. 3. ITA NO.2659/AHD/2005 ASST. YEAR 2002-03 IS THE A PPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 23.9.2005 IN RESPECT OF VARIOUS QUANTUM ADDITIONS CONFIRMED BY HIM MADE BY THE AO IN THE ASSESSMENT ORDER DATED 30.3.2005. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE TEAMED C.I.T. (APPEALS) - IV, BARODA ERRED I N LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF BRICKS EXPS. OF RS.1, 00,000/- BY ITO WARD -1, ANAND. 2. THE TEAMED CLT (APPEALS) - IV, BARODA ERRED IN L AW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.1,00,000/- OUT OF TOTAL CLAIM OF OCTROI/TRANSPORT EXPS. MADE BY ITO WARD-I, ANAND. 3. THE LEARNED CLT. (APPEALS) - IV, BARODA ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.7,00,000/- OUT OF EXPS. FOR CONSTRUCTION WORK BY ITO WARD-1, ANAND. 4. THE TEAMED C,LT(APPEALS)- IV, BARODA ERRED IN LA W AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.1,61,119/- OUT OF CEMENT PURCHASES EXPS. MADE BY ITO WARD-1, ANAND. 5. THE LEARNED CIT (APPEALS)- IV, BARODA ERRED IN L AW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.32,801/- OUT OF GLASS EXPS. AND RS.80,839/- OUT OF WOOD EXP. MADE BY ITO WARD-1, AN AND. ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 3 ITA NO.842/AHD/2006 ASST. YEAR 2002-03 4. THE FACTS OF THE CASE ARE THAT THE AO PASSED THE ORDER ON 30.3.2005 DETERMINING TOTAL INCOME OF RS.14,88,640/-. A SURVE Y UNDER SECTION 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE ON 25 TH JULY, 2002 WHEREIN UNRECORDED CASH RECEIPTS OR EXPENDITURE AMO UNTING TO RS.8 LACS AND ODD WERE FOUND. IN THE STATEMENT RECORDED DURIN G THE COURSE OF SURVEY SHRI SUNIL R. PATEL BEING THE POWER OF ATTOR NEY HOLDER OF SMT. SMITABEN MAHENDRABHAI PATEL ADMITTED THAT SUCH RECE IPTS AND EXPENDITURE ARE OUTSIDE THE BOOKS. HE ACCORDINGLY DISCLOSED A S UM OF RS.8 LACS AND AGREED TO PAY TAX THEREON. BUT WHEN RETURN OF INCOM E WAS FILED, THE AO NOTED THAT NET INCOME HAS BEEN DECLARED AT RS.69,88 0/- EVEN THOUGH SUM OF RS.8 LACS WAS SHOWN AS CREDIT IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD SHOWN TOTAL CONTRACT RECEIPTS OF RS.41 ,58,726/- WITH GROSS PROFIT OF RS.3,97,055/- AS AGAINST TOTAL CONTRACT RECEIPTS OF RS.83,62,502/- WITH GROSS PROFIT OF RS.4,16,326/- GIVING GP RATE O F 4.97%. WHEN THE AO EXAMINED THE IMPOUNDED PAPERS AND BOOKS OF ACCOUNT HE FOUND THAT THERE ARE DISCREPANCIES IN THE NOTINGS AS PER LOOSE PAPER S AND ENTRIES MADE IN THE CASH BOOK AS UNDER :- NOTICES AS PER LOOSE PAPERS ENTRY MADE IN THE CASE BOOK DATE AMOUNT DATE AMOUNT TO WHOM PAID 8..5.2001 5,000/- 8.5.2001 5,000/- GOVINDBHAI PRAJAPATI 12.5.2001 5,000/- 11-5-2001 5,000/- -DO- 21.5.2001 5,000/- 21.5.2001 5,000/- -DO- - 17,000/- 22.5.2001 17,000/- -DO- - 15,000/- 30.5.2001 15,000/- HARIBHAI - 10,000/- 4.6.2001 10,000/- GOVINDBHAI 5.6.2001 40,000/- 5.6.2001 15,000/- -DO- 5.6.2001 18,000/- HARIBHAI 31.3.2001 43,000/- 21.6.2001 15,000/- GOVINDBHAI ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 4 5.7.2001 37,000/- 6.7.2001 19,000/- -DO- 6.7.2001 17,000/- HARIBHAI 20.7.2001 45,000/- 20.7.2001 15,000/- GOVINDBHAI 20.7.2001 17,000/- HARIBHAI 30,000/- 31.7.2001 15,000/- HARIBHAI 31.7.2001 15,000/- GOVINDBHAI 2,47,000/- 2,03,000/- SINCE SEVERAL OF ENTRIES IN THE LOOSE PAPER DID NO T TALLY WITH THE ENTRIES IN CASH BOOK, THE AO REJECTED THE BOOKS UNDER SECTION 145. HE THEREAFTER PROCEEDED TO MAKE SPECIFIC ADDITIONS AS AGAINST APP LYING GP RATE. HE EXAMINED EXPENDITURE UNDER VARIOUS HEADS SUCH AS ST EEL EXPENSES, BRICKS EXPENSES, OCTROI/TRANSPORTATION EXPENSES, VARIOUS P AYMENTS IN THE CONTRACT WORK, CASH PAYMENTS, ETC. AND PROCEEDED TO MAKE FOL LOWING ADDITIONS UNDER SPECIFIC HEADS AS UNDER :- ADD: 1. DISALLOWANCE OUT OF STEEL EXPENSES AS DISCUSSED IN PARA 6.2(A) ABOVE 1,00,000/- 2. DISALLOWANCE OUT OF BRICKS EXPENSES AS DISCUSSED IN PARA 6.2(B) ABOVE 2,00,000/- 3. DISALLOWANCE OUT OF OCTROI/TRANSPORTATION EXPENSES AS DISCUSSED IN PARA 6.2 (C) ABOVE 1,00,000/- 4. DISALLOWANCE OUT OF CONSTRUCTION WORK EXPENSES AS DISCUSSED IN PARA 6.2 (D) ABOVE 7,00,000/- 5. UNRECORDED CASH PAYMENT AS DISCUSSED IN PARA 6.3 ABOVE 44,000/- 6. DISALLOWANCE OF CEMENT EXPENSES AS DISCUSSED IN PARA 7 ABOVE 1,61,119/- 7. DISALLOWANCE OF WOOD EXPENSES AS DISCUSSED IN PARA 8 ABOVE 80,839/- 8. DISALLOWANCE OF GLASS EXPENSES AS DISCUSSED I N PARA 9 ABOVE 32,801/- RS.14,18,759/- THE LD. CIT IN PROCEEDINGS UNDER SECTION 263 CONSID ERED THAT AO HAS NOT SPECIFICALLY MADE THE ADDITION OF RS.8 LACS. IT WAS EXPLAINED TO THE LD. CIT ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 5 THAT THIS ISSUE HAS BEEN CONSIDERED BY THE AO WHILE EXAMINING THE BOOKS OF ACCOUNT BUT THE LD. CIT DID NOT AGREE AND DIRECT ED TO MAKE SPECIFIC ADDITION OF RS. 8 LACS DISCLOSED BY THE ASSESSEE DU RING SURVEY. THE LD. CIT RELIED ON THE DECISION OF HON.GUJARAT HIGH COUR T IN THE CASE OF FAKIR MOHAMMED HAJI HASSAN VS. CIT 247 ITR 290 (GUJ) IN S UPPORT OF HIS CONCLUSION THAT SPECIFIC ADDITION SHOULD BE MADE IN RESPECT OF UNDISCLOSED INCOME/EXPENDITURE ADMITTED DURING SURVEY. 5. AGAINST THE ABOVE ORDER OF LD. CIT, THE LD. AR F OR THE ASSESSEE SUBMITTED THAT AO HAD SPECIFICALLY CONSIDERED THE Q UESTION OF ADDITION OF RS.8 LACS, WHO CHOSE TO MAKE SPECIFIC ADDITION AFTE R REJECTING THE BOOKS. IN FACT ASSESSEE HAD DECLARED THE SUM OF RS.8 LACS IN THE PROFIT AND LOSS ACCOUNT. HE DREW OUR ATTENTION TO PAGE 14 OF THE PA PER BOOK WHICH SHOWS UNDISCLOSED INCOME OF RS. 8 LACS. THUS ACCORDING TO THE LD. AR LD. CIT COULD NOT HAVE SUBSTITUTED HIS OPINION AND DIRECT T HE AO TO MAKE ADDITION OF RS.8 LACS SEPARATELY WHEN THE AO HAS DECIDED NOT TO DO SO. 6. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER OF LD. CIT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE LD. CIT WAS JUSTIFIED IN DIRECTING THE AO TO MAKE THE ADDITION OF RS.8 LACS DISCLOSED BY THE ASSESSEE DURING SURVEY PROCEEDINGS. THE REASONS ARE THAT ONCE A SUM OF RS.8 LACS IS DECLARED BY THE ASSESSEE IN THE PROFIT AND LOSS ACC OUNT AS IT IS UNDISCLOSED INCOME THEN THAT HAS TO BE TAXED SEPARATELY AND IND EPENDENTLY OF OTHER BOOK RESULTS. FURTHER THIS DISCLOSURE WAS MADE ON T HE BASIS OF DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY. SUCH DOCUMEN TS INDICATE THAT ASSESSEE HAD UNDISCLOSED RECEIPTS AS WELL AS PAYMEN TS AND NET THEREON HAD BEEN WORKED OUT AT RS.8 LACS. MERELY BECAUSE TH IS UNDISCLOSED INCOME OF RS. 8 LACS HAS BEEN SHOWN AS A PART OF PR OFIT AND LOSS ACCOUNT IT ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 6 DOES NOT LOSE ITS SEPARATE IDENTITY AND HAS TO BE T AKEN OUT FROM THE PROFIT AND LOSS ACCOUNT FOR SEPARATE CONSIDERATION. THIS W OULD BE NOTWITHSTANDING THE TRADING RESULTS WHICH ARE FINAL LY SETTLED IN THE APPEAL PENDING BEFORE US IN ITA NO.2659/AHD/2005. SINCE TH E AO FAILED TO TAKE NOTE OF SEPARATE AND INDEPENDENT IDENTITY OF THIS I NCOME IN THE PROFIT AND LOSS ACCOUNT AND CONSIDER IT INDEPENDENT OF OTHER T RADING RESULTS, HIS ORDER BECOMES ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE. WE ACCORDINGLY CONFIRM THE ORDER OF LD. CIT AND DISMIS S THE APPEAL FILED BY THE ASSESSEE. ITA NO.2659/AHD/2005 ASST. YEAR 2002-03 8. THE FACTS OF THIS CASE HAVE BEEN PARTLY DISCUSSE D WHILE DISPOSING OF ITA NO.842/AHD/2006 ASST. YEAR 2002-03. IN SURVEY O PERATION ASSESSEE DECLARED A SUM OF RS. 8 LACS AS HIS UNDISCLOSED INC OME BUT IN THE RETURN ONLY NET INCOME OF RS.69,880/- WAS DECLARED. THE AO REJECTED THE BOOKS UNDER SECTION 145 AFTER POINTING OUT THE DISCREPANC IES IN ENTRIES RECORDED IN THE LOOSE PAPERS AND REGULAR CASH BOOK. THE AO M ADE SPECIFIC DISALLOWANCES WHICH HAVE BEEN DESCRIBED BY US IN OU R ORDER IN ITA NO.842/AHD/2006. THE LD. CIT(A) CONFIRMED THE VARIO US ADDITIONS AGITATED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. THE MAIN REASONS FOR CONFIRMING THE ADDITIONS ARE - (1) THE ASSESSEE DID NOT FURNISH DETAILS AS ASKED FOR B Y THE AO. (2) THERE IS NO DOCUMENTARY EVIDENCE TO SHOW THAT ASSES SEE HAD ANY MONOPOLY IN CARRYING OUT THE CONSTRUCTION WORK ON THE RELEVANT SITE. THERE IS NO GUARANTEE THAT EXPENDITU RE WERE INCURRED FOR THE PURPOSE OF BUSINESS. (3) THERE IS SUBSTANTIAL INCREASE IN VARIOUS EXPENSES C LAIMED BY THE ASSESSEE AND EXPLANATION FURNISHED IS QUITE GENERAL AND VAGUE. ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 7 9. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT ONCE BOOKS ARE REJECTED THERE IS NO CASE FOR MAKING SPECIFIC A DDITION OUT OF THE BOOKS. THE CASE AGAINST THE ASSESSEE FOR REJECTING THE BOO KS IS MADE OUT ONLY ON THE GROUND THAT ASSESSEE IS NOT ABLE TO SUPPORT THE CLAIM OF EXPENDITURE. ONLY ADDITION WHICH CAN BE MADE WOULD BE A GP ADDIT ION. SINCE ASSESSEE HAS SHOWN GP OF 4.97% IN PRECEDING YEAR THEN NOT MO RE THAN THAT RATE SHOULD BE APPLIED ON THE CONTRACT RECEIPTS. 10. THE LD. DR ON THE OTHER HAND, SUBMITTED THAT AD DITION OF RS.8 LACS SHOULD BE OVER AND ABOVE THE ADDITIONS OF VARIOUS E XPENSES OR ADDITION ON ACCOUNT OF GP. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. WHILE DISPOSING OF APPEAL IN ITA NO.842 /AHD/2006 WE HAVE HELD THAT SEPARATE ADDITION OF RS.8 LACS SHOULD BE MADE BEING DISCLOSED BY THE ASSESSEE ON THE BASIS OF LOOSE PAPERS AND DO CUMENTS FOUND DURING SURVEY. THERE-AFTER ONCE BOOKS ARE REJECTED THERE I S NO RELEVANCE OF MAKING SPECIFIC ADDITIONS DISALLOWING THE CLAIM OF VARIOUS EXPENSES. THEREFORE, WE DIRECT TO APPLY NET PROFIT RATE OF 5% ON CONTRACT WORK OF RS.41,58,726/-. THUS THE INCOME OF THE ASSESSEE THR OUGH CONTRACT WORK WOULD BE RS.2,07,936/- OR ROUNDED TO RS.2,07,940/-. THIS WOULD BE IN ADDITION TO RS.8 LACS DISCLOSURE MADE BY THE ASSESS EE DURING SURVEY. THUS TOTAL INCOME OF THE ASSESSEE FOR THE ASST. YEAR BEF ORE US WOULD BE RS.10,07,940/-. THIS APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ITA NO.2659/A/2005 & ITA NO.842/A/2006 ASST. YEAR 2002-03 8 12. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.842/ AHD/2006 IS DISMISSED AND APPEAL IN ITA NO.2659/AHD/2005 IS PAR TLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 15/10/10. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 15/10/10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 7/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 14/10/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..