Shri Sanwarmal Agarwal, Guwahati V. Assistant Commissioner of Income Tax, Circle - 1, Guwahati

ITA 267/GTY/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5452 (ITAT-GUWAHATI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDIP SENGUPTA
• Keywords: Document seized; Documents seized
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ECOURT, KOLKATA /GAUHATI [BEFORE HONBLE SHRI A.T. VARKEY, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 267/GAU/201 7 ASSESSMENT YEAR : 2008-0 9 SANWARMAL AGARWAL -VS- ACIT, C IRCLE-1, GUWAHATI [PAN: ABVPA 6563 A] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SOMNATH GHOSH , ADVOCATE FOR THE RESPONDENT : SHRI SANDIP SENGUPTA, JCI T DATE OF HEARING : 23.10.2018 DATE OF PRONOUNCEMENT : 31.10.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 1, GUWAHATI [ IN SHORT THE LD CITA] IN APPEAL NO. GUWA- 151/2010-11 DATED 09.06.2017 AGAINST THE ORDER PAS SED BY THE ACIT, CIRCLE-1, GUWAHATI [IN SHORT THE LD AO] UNDER SECTION 153C / 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31.12.2010 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING AN AD HOC ADDITION OF RS. 5, 00,000/- MADE TOWARDS ALLEGED INVESTMENT IN GOODS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.267/GAU/2017 SANWARMAL AGARWAL A.YR.2008-09 2 3. BRIEF FACTS OF THIS ISSUE IS THAT THERE WAS A SE ARCH & SEIZURE OPERATION U/S 132 OF THE ACT IN MANOJ AGARWAL AND OTHER GROUP OF CASES DURIN G THE PERIOD 28.03.2008 TO 23.05.2008. DURING THE COURSE OF SEARCH OPERATION, PAPERS AND DOCUMENTS MARKED AS MA-1 TO MA-18 WERE FOUND AND SEIZED. PARALLELLY SEA RCH & SEIZURE OPERATION WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF SHRI LAL C HAND AGARWAL ON 28.03.2008. DURING THE COURSE OF SEARCH OPERATION, PAPERS AND DOCUMENT S MARKED AS BA-1 TO BA-8 WERE FOUND AND SEIZED. IN EFFECT DURING THE COURSE OF SE ARCH CONDUCTED IN THE PREMISES OF VARIOUS PARTIES BELONGING TO THE GROUP THE FOLLOWIN G PAPERS AND DOCUMENTS WERE FOUND AND SEIZED. I) MA-1 TO MA-18 II) BA-1 TO BA-8 III) BB-1 TO BB-33 IV) THC-1 TO THC-31 V) MSL-1 TO MSL-55 VI) HR-1 THE ASSESSEE IS A PROPRIETOR OF M/S S.M ENTERPRISES ENGAGED IN THE BUSINESS OF TRADING OF COAL. THE LD. AO OF THE SEARCHED PARTY FOUND THA T THE SEIZED DOCUMENTS MARKED AS MSL-04; THC-41; MSL-03 ETC. WERE FOUND TO BE BELONG ING TO M/S S.M. ENTERPRISES, THE PROPRIETORSHIP CONCERN OF THE ASSESSEE. ACCORD INGLY, NOTICE U/S 153C OF THE ACT WAS ISSUED TO THE ASSESSEE ON 11.01.2010. IN RESPONSE T O THE SAID NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON 19.10.2010 DECLARING TOTAL INCO ME OF RS. 9,39,070/-. THE LD. AO OBSERVED THAT NO BOOKS OF ACCOUNTS OF M/S S.M. ENTE RPRISES WERE PRODUCED BY THE ASSESSEE EVEN THOUGH THE TURNOVER DISCLOSED IN THE ACCOUNTS WERE MORE THAN PRESCRIBED LIMITS U/S 44AA OF THE ACT. THE LD. AO ALSO OBSERVE D THAT THE ASSESSEE HAD FAILED TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT. THE SAID SEIZED DOCUMENTS PERTAINING TO ASSESSEE CONTAINED DETAILS OF SALES MADE BY THE ASS ESSEE TO VARIOUS PARTIES. WHEN 3 ITA NO.267/GAU/2017 SANWARMAL AGARWAL A.YR.2008-09 3 CONFRONTED IN THIS REGARD, THE ASSESSEE SUBMITTED T HAT THE ENTIRE SALES DISCLOSED IN THE SAID SEIZED DOCUMENTS WERE DULY CONSIDERED BY HIM A ND THAT IT IS ALREADY FORMING PART OF THE TURNOVER DISCLOSED IN THE SUM OF RS. 13,22,1 3,676/-. THE LD. AO OBSERVED THAT THE TOTAL OF SALES AS REFLECTED IN THE SEIZED DOCUMENTS THC-16, MSL-2, MSL-10, THC-12, THC-13, THC-17 AND THC-12 WORKS OUT TO RS. 8,79,52, 239/- AS PER THE WRITTEN SUBMISSION FURNISHED ON 15.12.2010. THE LD. AO OBSE RVED THAT THE SEIZED MATERIALS REFERENCE THC-2 WHICH ALSO CONTAINS DETAILS OF SALE S MADE BY THE ASSESSEE WERE NOT TAKEN INTO CONSIDERATION BY THE ASSESSEE TO THE TUN E OF RS. 5,17,44,706/-. THE BREAKUP OF THE SAME IS RS. 1,69,50,000/- WORTH OF GOODS SOLD T O BHARALI KEROSENE DEPOT/ M/S G.N.P TRADE AND AGENCY BY THE ASSESSEE AND RS. 3,47 ,94,706/- WORTH OF GOODS SOLD TO BHARALI KEROSENE DEPOT/ M/S G.N.P TRADE AND AGENCY BY THE ASSESSEE. HENCE THE LD. AO CONFRONTED THE ASSESSEE THAT THE TOTAL OF SALES REFLECTED IN THE SEIZED DOCUMENTS THC-2 HAS NOT BEEN CONSIDERED BY THE ASSESSEE. ACCO RDINGLY, THE LD. AO SOUGHT TO IDENTIFY THE TOTAL UNDISCLOSED SALES OF THE ASSESSE E FOR THE WHOLE YEAR AS UNDER: TURNOVER DETERMINED AS PER SEIZED DOCUMENTS RS. 87952239/- ADD: TRANSACTION QUOTED IN THC-2 RS. 51744706/- TOTAL TRANSACTION (SALE) AS PER SEIZE DOCUMENTS RS . 139696945/- SALE DISCLOSED BY THE ASSESSEE RS. 132213676/- UNDISCLOSED SALE RS. 7483269/- THE LD. AO OBSERVED THAT FOR THIS UNDISCLOSED TURNO VER OF RS. 74,83,269/-, CERTAINLY SOME AMOUNT OF INVESTMENT IN GOODS SHOULD HAVE BEEN MADE BY THE ASSESSEE. ACORDINGLY, HE ESTIMATED THE AMOUNT OF INVESTMENT O N AN AD HOC BASIS AT RS. 5,00,000/- AND MADE AN ADDITION TOWARDS UNDISCLOSED INVESTMENT THEREON IN THE ASSESSEE. THIS ADDITION WAS UPHELD BY THE LD. CIT(A). AGGRIEVED, T HE ASSESSEE IS IN APPEAL BEFORE US. 4 ITA NO.267/GAU/2017 SANWARMAL AGARWAL A.YR.2008-09 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. AR ARGUED THAT THE MANNER OF DETERMINING THE ALLEGED UNDISCLOSED INVESTMENT OF R S. 5,00,000/- WAS NOT BROUGHT OUT BY THE LD. AO IN HIS ORDER. HE ARGUED THAT IT IS NO T THE CASE OF THE LD. AO THAT THE SAID DIFFERENTIAL AMOUNT OF SALES OF RS. 74,83,269/- DOE S NOT REPRESENT THE BUSINESS PROCEEDS OF THE ASSESSEE. THE LD AR ARGUED THAT THE PURCHASE OF GOODS TO EFFECT THOSE SALES WERE ALREADY ACCOUNTED BY THE ASSESSEE AND ALREADY DEBIT ED IN THE ACCOUNTS OF THE ASSESSEE. THE LD. AR ALSO ARGUED THAT THE ASSESSEE IS IN THE HABIT OF RECEIVING ADVANCE FROM CUSTOMERS AS IS EVIDENT FROM THE BALANCE SHEET OF M /S S.M. ENTERPRISES AND THE SAID MONIES WERE PAID FOR PROCURING THE GOODS HENCE THER E IS NO NEED TO MAKE SEPARATE ADDITION TOWARDS UNDISCLOSED INVESTMENT. WE FIND LO T OF FORCE IN THIS ARGUMENT OF THE LD. AR. WE FIND FROM THE MATERIALS AVAILABLE ON RECORD THAT THE ASSESSEE IS IN THE HABIT OF RECEIVING ADVANCE FROM CUSTOMERS AGAINST THE SUPPLY OF GOODS TO BE MADE IN THE PAST AS WELL AS IN THE YEAR UNDER APPEAL. THIS PRACTICE HA S BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND OTHER GROUP MEMBERS. WE FIND THAT MOST OF THE MEMBERS OF THE GROUP ARE ALSO ENGAGED IN THE SIMILAR LINE OF BUSINESS AS THA T OF ASSESSEE AND THEY ARE IN THE HABIT OF RECEIVING ADVANCE FROM CUSTOMERS AGAINST THE SUP PLY OF GOODS TO BE MADE. HENCE WE HOLD THAT THE RECEIPT OF ADVANCE MONEY FROM CUSTOME RS IS VERY MUCH AVAILABLE WITH THE ASSESSEE TO PROCURE THE GOODS WHICH EXPLAINS THE SO URCE OF INVESTMENT MADE BY THE ASSESSEE IN THE GOODS. HENCE THERE IS NO NEED TO MA KE ANY SEPARATE ADDITION TOWARDS UNDISCLOSED INVESTMENT IN GOODS IN THE INSTANT CASE . IN ANY CASE, THE LD. AO HAD MADE THIS ADDITION OF RS. 5,00,000/- ONLY ON AN AD HOC BASIS. ACCORDINGLY, THE ADDITION MADE IN THE SUM OF RS. 5,00,000/- IS HEREBY DIRECTED TO BE DELETED AND GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS W ITH REGARD TO DETERMINATION OF NET PROFIT ON THE TOTAL TURNOVER OF THE ASSESSEE IN THE ABSENCE OF BOOKS OF ACCOUNTS. 5 ITA NO.267/GAU/2017 SANWARMAL AGARWAL A.YR.2008-09 5 6. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE A DMITTEDLY DID NOT PRODUCE BOOKS OF ACCOUNTS BEFORE THE LD. AO TO JUSTIFY HIS BOOK RESU LTS. THE TOTAL TURNOVER DISCLOSED BY THE ASSESSEE IS RS. 13,22,13,676/-. THE ADMITTED UN DISCLOSED TURNOVER AS PER THE SEIZED DOCUMENTS IS RS. 74,83,269/-. HENCE THE TOTAL TURNO VER WORKS TO RS. 13,96,96,945/-. THE ASSESSEE HAS DISCLOSED NET PROFIT OF RS. 9,91,605/- IN RESPECT OF HIS PROPRIETARY CONCERN M/S S.M. ENTERPRISES AT 0.75% OF TURNOVER. THE LD. AO RESORTED TO ESTIMATE THE NET PROFIT AT 1% OF TOTAL TURNOVER AND ARRIVED AT A REV ISED NET PROFIT OF RS. 13,96,969/-. FROM THE SAID FIGURE, HE REDUCED THE NET PROFIT ALREADY DISCLOSED BY THE ASSESSEE IN THE SUM OF RS. 9,91,605/- AND MADE AN ADDITION OF RS. 4,05,364 /- BEING THE REMAINING SUM, AS UNDISCLOSED INCOME OF THE ASSESSEE. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T SIMILAR ISSUE OF ESTIMATION OF NET PROFIT IN THE GROUP CASE OF ASSESSEE IN THE CASE OF M/S FUEL SALES CORPORATION IN I.T.A. NOS. 46 TO 50/GAU/2012 DATED 24.05.2017 WAS THE SUB JECT MATTER OF ADJUDICATION BY THIS TRIBUNAL, WHEREIN, FOR PERSONS ENGAGED IN THE SIM ILAR LINE OF BUSINESS UNDER SIMILAR CIRCUMSTANCES, THIS TRIBUNAL HAD ESTIMATED THE NET PROFIT AT 0.80%. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE LD. AO T O DETERMINE THE NET PROFIT OF THE ASSESSEE FROM M/S S.M .ENTERPRISES AT 0.80% AND REW ORK THE TAXABLE NET PROFIT ACCORDINGLY. HENCE THE GROUND NOS. 3 AND 4 RAISED B Y THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 31.10.2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER 6 ITA NO.267/GAU/2017 SANWARMAL AGARWAL A.YR.2008-09 6 DATED : 31.10.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SANWARMAL AGARWAL, SOHEL NIWAS, 3 RD FLOOR, CHATTRIBARI ROAD, GUWAHATI-781001. 2. ACIT, CIRCLE-1, GUWAHATI, AAYAKAR BHAWAN, 6 TH FLOOR, ROOM 613, G.S.ROAD, GUWAHATI-781005. 3..C.I.T.(A)- 4. C.I .T.- 5. CIT(DR), TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY/ HOO/DDO ITAT , GAUHATI BENCH