Shri Ashish Sureshbhai Shah, Ahmedabad V. The Addl.CIT.,Range-6, Ahmedabad

ITA 2661/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89443 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Gift
• Section: 143(3); 133A

Judgement Text

, D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH , !' # $% & , ' ' ! ( BEFORE S/SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AN D KUL BHARAT, JUDICIAL MEMBER) ITA NO.2661/AHD/2011 [ASSTT.YEAR : 2008-2009] SHRI ASHISH SURESHBHAI SHAH PROP: LA-PHARMACEUTICALS 465 PHASE-II, GIDC ESTATE VATVA, AHMEDABAD 382 445. PAN : ACDPS 9782 L /VS. ADDL. CIT, RANGE-6 AHMEDABAD. ( *+ / APPELLANT) ( ,-*+ / RESPONDENT) ASSESSEE BY : SHRI P.M. MEHTA WITH SHRI HIREN TRIVEDI REVENUE BY : SMT.SONIA KUMAR, SR.DR DATE OF HEARING : 8 TH MAY, 2015 DATE OF PRONOUNCEMENT : 15-05-2015 O R D E R PER KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (A)-XI, AHMEDABAD DATED 23.8.2011. 2. THE ASSESSEE HAS RAISED CONCISE GROUNDS OF APPEA L AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEPARTMENTAL AUTHORITIES ERRED IN NOT ACCEPTING THE ASSESSEE'S V ERSION THAT HE HAD INCURRED LABOUR EXPENSES OF RS.2 LACS FOR REALIZING SALE PROCEEDS OF MISCELLANEOUS ITEMS OF RS.5,50,000 AND THEY FURTHER ERRED IN TAKING THE CORRESPONDING INCOME AT RS.5,50,000 IN PLACE OF ASS ESSEE'S FIGURE OF RS.3,50,000. ITA NO.2661/AHD/2011 -2- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN NOT ACCEPTING THE ASSESSEE'S PLEA THAT NO DISALLOWA NCE WAS WARRANTED OUT OF TELEPHONE AND VEHICLE EXPENSES AND HE FURTHER ER RED IN QUANTIFYING SUCH DISALLOWANCE IN A SUM OF RS.14,836. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NO.2 OF THE APPEAL. SR. D R HAS NO OBJECTION TO THE SAME. ACCORDINGLY, THE GROUND NO.2 OF THE APPEAL O F THE ASSESSEE IS DISMISSED AS NOT PRESSED. 4. THE GROUND NO.3 IS GENERAL IN NATURE, NEEDS NO A DJUDICATION. 5. THE ONLY EFFECTIVE GROUND, NOW LEFT IN THIS APPE AL, IS AGAINST THE CONFIRMATION OF ADDITION OF RS.2 LAKHS MADE AS UNDI SCLOSED INCOME. 6. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SURV EY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE. SUBSEQUENTL Y, DURING THE SURVEY SEVEN ITEMS WERE TREATED AS UNDISCLOSED INCOME. THEREAFT ER, THE ASSESSEE IN THE RETURN OF INCOME DECLARED TOTAL INCOME OF RS.1,92,88,640/- . THE RETURN WAS PICKED UP FOR SCRUTINY ASSESSMENT, AND THE ASSESSMENT UNDER S ECTION 143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 29.3.2010, THEREBY, THE AO MADE DISALLOWANCE OF RS.2.00 LAKHS TOWARDS UNDISCLOSED INCOME, R.9,457/ - TOWARDS TELEPHONE EXPENSES, RS.20,216 TOWARDS VEHICLE EXPENSES AND RS .25,000/- TOWARDS SALES PROMOTION AND GENERAL EXPENSES. AGAINST THESE ADDI TIONS, THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A), WHO, AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. THE LEARNED CI T(A) WHILE PARTLY ALLOWING THE APPEAL, CONFIRMED THE ADDITION OF RS.2.00 LAKHS AND DELETED THE DISALLOWANCE OF RS.25,000/-. ITA NO.2661/AHD/2011 -3- 7. THE ASSESSEE FEELING AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) IS, NOW IN APPEAL BEFORE US. 8. THE ONLY EFFECTIVE GROUND OF THE APPEAL IS AGAIN ST THE CONFIRMATION OF RS.2.00 LAKHS. THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED THE SUBMISSIONS MADE IN THE STATEMENT OF FACTS-CUM-SYNOPSIS ASSESSE E. ON THE CONTRARY, LEARNED DR SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDE R OF THE CIT(A) AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA LS AVAILABLE ON RECORD. IN THE SYNOPSIS, THE ASSESSEE HAS MADE THE FOLLOWIN G SUBMISSION: FACTS TO THE EXTENT RELEVANT ARE THAT ASSESSEE IS AN INDIVIDUAL AND RUNS A PHARMACEUTICAL ENTERPRISE IN THE INDUSTRIAL ESTATE OF VATVA (AHMEDABAD). SURVEY OPERATIONS U/S.133A WERE INITIA TED AT HIS BUSINESS PREMISES ON 28.9.2007. DEPARTMENT DETECTED SOME UNA CCOUNTED CASH AND SOME PAPERS WITH RATINGS AND JOTTINGS. ASSESSEE'S S TATEMENT WAS RECORDED WITH REFERENCE TO THE SAME IN GREAT DETAIL ON 28.9. 2007 AND 29.9.2007. THAT STATEMENT IN VERNACULAR RUNS INTO 16 PAGES BUT FOR OUR PURPOSE FIRST SEVEN PAGES THEREOF ARE NOT RELEVANT. HENCE, COPIES OF 8 TO 16 THEREOF ARE ENCLOSED FOR READY REFERENCE - ANNEXURE-A. 15 OF TH AT STATEMENT QUESTION NO.24 AS PUT BY THE DEPARTMENT A LIST OF SEVEN ITEM S WHICH ARE TREATED AS UNDISCLOSED INCOME. THAT LIST IS AS FOLLOWS:- RS. (1) CONSTRUCTION AND RENOVATION OF 15,00,000 FACTORY/OFFICE (2) UNACCOUNTED CASH 2,05,000 (3) DEBTORS RECEIVABLE 20,00,000 (4) EXPENDITURE ON GIFT ITEMS AND SALES 9 ,70,000 PROMOTION (5) SALE OF WASTAGE AND PACKING MATERIAL 5,50,000 (6) LABOUR CHARGES PAID 2,00,000 (7) DIFFERENCE IN INVENTORY 10,37,500 TOTAL : 64,62,500 IT IS IMPORTANT TO NOTE THAT THAT LIST IS A PART OF THAT QUESTION WHICH IS PUT TO THE ASSESSEE BY THE DEPARTMENT. IN OTHER WORDS, THAT LIST IS NOT DRAWN ITA NO.2661/AHD/2011 -4- UP BY THE ASSESSEE THOUGH HE HAS IN REPLY TO THAT Q UESTION NO.24 NOT QUESTIONED THE CORRECTNESS OF ITS CONTENTS. 2. IN VIEW OF THIS LIST THE ASSESSEE DISCLOSED A S UM OF RS.65 LACS OBVIOUSLY BY ROUNDING OFF RS.64,62,500 TO RS.65,00, 000 AND THERE IS NO DISPUTE ABOUT THIS ASPECT OF ROUNDING OFF. IN THE R ETURN OF INCOME THE ASSESSEE DISCLOSED A SUM OF RS.63,00,000 WHICH COMP RISED OF ALL THE SEVEN ITEMS LISTED HEREINABOVE EXCEPT FOR THE FACT THAT AGAINST ITEM NO.5 FOR INCOME FROM SALE PROCEEDS OF PACKING MATERIAL E TC. HE ADOPTED A NET FIGURE OF RS.3,50,000 BY CLAIMING THAT A SUM OF RS. 2 LACS WAS PAID TO LABOUR FOR REALIZING THE AFORESAID SALE PROCEEDS OF RS.5,50,000 AND HENCE THE NET INCOME FROM THOSE SALE PROCEEDS WAS RS.3,50 ,000 ONLY. THE DEPARTMENTAL AUTHORITIES HAVE REJECTED ASSESSEE'S T HIS CLAIM. THE ASSESSING OFFICER HAS TREATED IT AS AN AFTERTHOUGHT AND THE CIT(A) HAS GIVEN HAS OWN REASONS, WHICH ARE NOT VALID. 3. IN THIS REGARD IT IS SUBMITTED THAT ON PAGE-13 OF ASSESSEE'S THAT STATEMENT (ANNEXURE-A) QUESTION NO.22 IS DIRECTLY R EFERRING TO THE PAPER ON WHOSE BASIS THE AFORESAID ADDITION IS BASED. FRE E ENGLISH RENDERING OF THAT QUESTION NO.22 WOULD BE SOMEWHAT AS FOLLOWS: Q.22. A LOOSE PAPER IS FOUND IN WHICH RS.5,50,0 00 ARE SHOWN AS SALE PROCEEDS OF WASTAGE MATERIAL AND FROM THIS FIG URE RS.2 LACS ARE SHOWN AS PAID FOR LABOUR. SO, PLEASE EXPLA IN WHERE THIS RS.5,50,000 FOR SALE IS RECORDED IN YOUR BOOKS . 4. THUS, THE DEPARTMENTAL OFFICE WHO WAS CONDUCT ING THE SURVEY HIMSELF INTERPRETED THAT LOOSE PAPER AS SHOWING RECEIPT OF SALE PROCEEDS AS RS.5,50,000 AND PAYMENT OF LABOUR CHARGES OF RS.2 L ACS AGAINST THE SAME. 5. ASSESSEE'S REPLY TO THAT QUESTION NO.22 STARTS F ROM THE BOTTOM OF PAGE 13 AND FREE ENGLISH RENDERING THEREOF WOULD BE SOME WHAT AS FOLLOWS: ANS.22 FOR PRODUCTION OF THINGS IN OUR FACTORY S OME PACKING MATERIAL LIKE DRUMS, BOXES, PLASTIC BAGS AND BOTTLE S ETC. ARE BOUGHT AND OUT OF THAT MATERIAL SOME IS LEFT AND RE JECTED. THAT REJECTED PACKING MATERIAL AND WASTAGE IS SOLD FOR RS.5,50,000 AND OUT OF THAT RECEIPT RS.2 LACS IS IN CURRED AS EXPENDITURE FOR PAYMENT TO DIFFERENT PERSONS WITH T HE RESULT THAT OUT OF TOTAL RECEIPT OF RS.5,50,000 RS.2 LACS IS INCURRED AS EXPENDITURE BUT THIS RECEIPT AND EXPENDITURE IS NOT RECORDED IN MY REGULAR BOOKS OF ACCOUNT THE ABOVE MENTIONED FIGURES VIZ. RS.5,50,000 AND RS.2 LACS I SURRENDER FOR INCOME OF THE CURRENT YEAR. ITA NO.2661/AHD/2011 -5- 6. THUS, EVEN IN THE REPLY IS CLEARLY MENTIONED BY THE ASSESSEE THAT SALE PROCEEDS OF PACKING MATERIAL ETC. WERE RS.5,50 ,000 AND FOR REALIZING THOSE RECEIPTS A SUM OF RS.2 LACS WAS PAI D AS LABOUR TO DIFFERENT WORKERS AND THE NET RESULT IS SURRENDERED FOR INCOME OF THE CURRENT YEAR. IT IS IMPORTANT TO NOTE THAT ON T HIS ASPECT OF THE FIGURES OF RS.5,50,000 AND RS.2 LACS FOR LABOUR PAY MENT THERE IS NO OTHER CLARIFICATION SOUGHT OR MODIFICATION ATTEMP TED IN THE AFORESAID STATEMENT OF THE ASSESSEE RECORDED EVEN B Y THE DEPARTMENTAL OFFICER WHO WAS CONDUCTING THE SURVEY. 7. IT IS SUBMITTED THAT QUESTION NO.22 AS PUT BY TH E DEPARTMENTAL OFFICER AS WELL AS ANSWER THERETO AS GIVEN BY THE ASSESSEE CLEARLY SHOWS THAT THE RELEVANT PAPER ITSELF HAS SHOWN CLEARLY THAT AGAINS T SALE PROCEEDS OF RS.5,50.000 A SUM OF RS.2 LACS WAS PAID AS LABOUR C HARGES. IT IS SUBMITTED THAT THE RELEVANT PAPER FOUND WAS CLEARLY UNDERSTOOD BY THE DEPARTMENTAL OFFICER WHO CONDUCTED THE SURVEY AND F RAMED THE QUESTIONS INCLUDING QUESTION NO.22 AS SHOWING THAT AGAINST SA LE PROCEEDS OF RS.5,50,000 AN EXPENDITURE OF RS.2 LACS WAS INCURRE D. SIMILAR WAS THE POSITION EMERGING FROM THE ANSWER TO QUESTION NO.22 AS GIVEN BY THE ASSESSEE. IT IS SUBMITTED THAT THE PAPER FOUND ITSE LF CONTAINED THE INFORMATION OF RS.2 LACS FOR LABOUR HAVING BEEN INC URRED FOR REALIZING THE SALE PROCEEDS OF RS.5,50,000 ON SALE OF WASTE MATER IAL ETC. THEREFORE, THERE IS NO QUESTION OF THIS BEING TAKEN BY THE ASS ESSEE AS AN AFTERTHOUGHT. 8. IT IS FURTHER SUBMITTED THAT THE ASSESSEE'S STAN D IS FULLY SUPPORTED BY THE SEIZED PAPER. A COPY THEREOF IS ANNEXED AS ANNEXURE - B. IT READS SOMEWHAT AS FOLLOWS: ACCUMULATED PACKING MATERIAL WASTAGE-NO VECHAN (SALE OF ) RS.5,50,000/- LESS: PAID FOR WAGES RS.2,00,000/- BALANCE RS.3,50,000/- THIS LEAVES ABSOLUTELY NO DOUBT ABOUT THE CORRECTNE SS OF THE ASSESSEE'S STAND. 9. IN THE INTEREST OF COMPLETENESS IT MAY ALSO BE M ENTIONED THAT IN THE LIST OF SEVEN ITEMS AS APPEARING IN QUESTION NO.24 FOR T OTAL OF RS.64,62,500 THERE IS ANOTHER ITEM OF RS.2 LACS AT SR. NO.6 FOR CASH PAYMENT TO LABOUR. THIS ITEM OF RS.2 LACS IS THUS SEPARATELY ADDED FOR QUANTIFYING THE SURRENDERED INCOME. THE CONFUSION PERHAPS HAS ARISE N ON ACCOUNT OF THE FIGURE BEING SAME VIZ. 2 LACS AND THE DESCRIPTION A LSO BEING SAME BEING LABOUR PAYMENT. CORRECT POSITION IS THAT AGAINST SA LE PROCEEDS OF RS.5,50,000 ONE IS DEDUCTIBLE FROM THE TOTAL SALE P ROCEEDS AND THE OTHER ITA NO.2661/AHD/2011 -6- ITEM OF RS-2 LACS APPEARING AT SR. NO.6 OF THE ABOV E MENTIONED LIST IS UTILIZATION OF CASH FOR PAYMENT OF OTHER LABOUR CHA RGES. 10. IN THE INTEREST OF COMPLETENESS AGAIN IT MAY FU RTHER BE MENTIONED THAT THE LIST OF SEVEN ITEMS TOTALLING RS.64,62,500 IN Q UESTION NO.24 DOES NOT TAKE INTO ACCOUNT THE DEDUCTION OF LABOUR PAYMENT O F RS.2 LACS OUT OF THE SALE PROCEEDS OF RS.5,50,000 (APPEARING AT SR. NO.5 ) FOR SALE OF WASTE MATERIAL. IT IS SUBMITTED THAT WHEN IN QUESTION NO. 22 AND IN REPLY THERETO IT HAD BEEN DEARLY UNDERSTOOD THAT RS.2 LACS WAS SE PARATELY PAID OUT OF SALE PROCEEDS OF RS.5,50,000 THE OMISSION OF THAT D EDUCTION OF RS.2 LACS FROM THE SALE PROCEEDS OF RS.5.50 LACS IN QUESTION NO.24 AS FRAMED BY THE DEPARTMENTAL OFFICER WAS MERELY AN OMISSION OF THE NATURE OF MISTAKE APPARENT FROM RECORD. ASSESSEE'S ONLY FAULT WAS THA T AT THE SPUR OF THE MOMENT HE DID NOT POINT OUT THAT MISTAKE THEN AND T HERE. 10. WE FIND FORCE IN THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE, AS THE ASSESSEE, IN ITS SYNOPSIS SUBMITTED THAT RS. 5,50,000/- REPRESENTED THE RECEIPTS AND RS.2.00 LAKHS REPRESENTS WAGES. IF TH E REVENUE HAS TREATED RS.5,50,000/- AS RECEIPTS, THEN THE CORRESPONDING E XPENDITURE MENTIONED IN THE SAME PAPER SHOULD HAVE BEEN ALLOWED. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE IMPUGNED ADDITION. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( / ANIL CHATURVEDI) !' # /ACCOUNTANT MEMBER ( & /KUL BHARAT) ' ' /JUDICIAL MEMBER C OPY OF THE ORDER FORWARDED TO: