Sh. Hem Raj Verma, Hamirpur V. Addl. CIT, Mandi

ITA 268/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0712 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 28-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A GUPTA
• Assessee Lawyers: S K MUKHI
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 268/CHD/2012 ASSESSMENT YEAR : 2005-06 HEM RAJ VERMA V ADDL C.I.T PROP. VERMA ENGINEERING MANDI RANGE SERVICES, VPO DIDWIN MANDI TIKKER, TEH & DISTRICT HAMIRPUR AAXPV 5004 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.K. MUKHI RESPONDENT BY: SHRI A. GUPTA DATE OF HEARING 8.1.2013 DATE OF PRONOUNCEMENT 14 .1.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), SHIMLA DATED 12.1.2012. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE ORDERS OF THE LD. CIT(A), CHANDIGARH IS ARBITRARY BASED ON EXTRANEOUS CONSIDERATION, DEVOID OF FACTS ON RECORD, AGAINST PRINCIPLES OF JUSTICE THER EFORE, ILLEGAL, ERRONEOUS, PERVERSE AND THUS UNCALLED FOR . 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRI NG WITH THE ASSESSING OFFICER AND THEREBY CONFIRMING THE AD DITION IN TOTO WITHOUT APPRECIATING THE FACTS, REPLIES, CO NTENTIONS AND EVIDENCES FILED BYTHE APPELLANT WHICH NEEDS DU E CONSIDERATION BY THE HON'BLE TRIBUNAL. 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRI NG WITH THE ASSESSING OFFICER AND THEREBY CONFIRMING THE INDEPENDENT / ADDITIONAL INCOME OF RS. 6,48,199/- B Y APPLYING THE PROVISIONS OF SECTION 41(1) OF THE INC OME-TAX ACT, 1961 ONCE IT HAD APPLIED NP RATE OF 8% ON THE GROSS CONTRACT RECEIPTS OF THE APPELLANT BY REJECTING THE BOOKS OF ACCOUNT WHICH IS AGAINST ESTABLISHED PRINCIPLES OF LAW AND THUS PERVERSE. 2 4. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMI NG THE TAXABLE TURNOVER AT RS. 64,68,573/- INSTEAD OF RS. 62,90,1890/- FOR APPLYING THE RATE OF 8% WHICH IS ERRONEOUS. 3 GROUNDS NO. 1& 2 ARE OF GENERAL NATURE AND DO NOT REQUIRE SEPARATE ADJUDICATION. 4. GROUND NO. 3 AFTER CONSIDERING THE RIVAL SUBMI SSIONS WE FIND THAT DURING ASSESSMENT PROCEEDINGS IN ORDER T O VERIFY THE CORRECTNESS AND GENUINENESS OF THE TRADING RESULTS, THE ASSESSING OFFICER MADE AN INQUIRY WITH 30 PARTIES B Y WRITING A LETTER U/S 133(6) FOR CONFIRMATION OF ACCOUNTS. SO ME OF THE PARTIES DID NOT REPLY. IN THE REMAINING REPLIES IT WAS NOTICED THAT THERE WERE SERIOUS DISCREPANCIES IN THE ACCOUN TS AS REFLECTED AND CONFIRMED BY THESE PARTIES. THE ASSES SEE WAS CONFRONTED WITH THESE DISCREPANCIES. THE ASSESSEE C OULD NOT RECONCILE THESE DISCREPANCIES AND ON 28.12.2007, SH RI SANDEEP SHARMA, C.A. LD. A.R. FOR THE ASSESSEE EXPRESSED HI S INABILITY TO RECONCILE THE DISCREPANCIES AND AGREED FOR THE R EJECTION OF BOOKS OF ACCOUNT AND EXPRESSED NO OBJECTION IF THE PROFIT WAS ESTIMATED AT 8%. THE ASSESSING OFFICER REJECTED TH E BOOKS OF ACCOUNT AND APPLIED NP RATE AND WORKED OUT NET PRO FIT DURING THE YEAR AT RS. 5,17,485/-. IN ADDITION TO THIS HE NOTED THAT THERE WERE DISCREPANCIES IN THE ACCOUNTS SUBMITTED BY PARTIES AND THE DIFFERENCE CAME TO RS. 6,48,199/-. THE ASS ESSING OFFICER ADDED THIS AMOUNT SEPARATELY BEING BOGUS LI ABILITY U/S 41(1) OF THE ACT. 5 ON APPEAL, IT WAS MAINLY SUBMITTED THAT IT WAS UN FAIR FOR THE ASSESSING OFFICER TO MAKE ADDITIONS OVER AND A BOVE THE ESTIMATED INCOME AND IN THIS REGARD RELIANCE WAS PL ACED ON CERTAIN DECISIONS. 3 6 THE LD. CIT(A) DID NOT AGREE WITH THE SUBMISSIONS AND OBSERVED THAT THE ASSESSEE FAILED TO RECONCILE THE SAID DISCREPANCIES AND AGREED FOR REJECTION OF BOOKS OF ACCOUNT. THEREFORE, THE ASSESSING OFFICER WAS RIGHT IN APPLY ING NP RATE OF 8%. AS FAR AS ADDITION U/S 41(1) IS CONCERNED, THE LD. CIT(A) OBSERVED THAT SECTION 41(1) SPECIFICALLY PROVIDES T HAT IF LIABILITY HAS CEASED TO EXIST THEN ADDITIONS CAN BE MADE AND SINCE THIS WAS A CASE OF BOGUS LIABILITY, SEPARATE ADDITION WA S JUSTIFIED. 7 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD AGREED ONLY TO APPLICATION OF NET PROFIT @ 8%. ONCE SUCH PROFIT RATE WAS APPLIED THERE WAS NO FURT HER SCOPE FOR SEPARATE ADDITION BECAUSE ENHANCED INCOME IN VI EW OF 8% PROFIT RATE WOULD COVER OTHER ITEMS ALSO. HE SUBMI TTED THAT BOOKS HAVE BEEN REJECTED ONLY ON ACCOUNT OF NON-REC ONCILIATION OF ACCOUNTS WITH VARIOUS PARTIES AND NO OTHER DEFEC T WAS FOUND. THEREFORE, NON-RECONCILIATION ITEMS WOULD BE COVERE D BY THE APPLICATION OF NP RATE OF 8%. 8 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY SUPPORTED THE ORDERS OF ASSESSING OFFICER AND THE L D. CIT(A). 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND FIND SOME MERIT IN THE ARGUMENTS OF THE LD. COUNSEL OF T HE ASSESSEE. APART FROM NON-RECONCILIATION OF ACCOUNTS WITH VARI OUS PARTIES NO OTHER DEFECT HAS BEEN FOUND. SO AT BEST THE ADD ITION COULD HAVE BEEN MADE ONLY OF THE TOTAL AMOUNT WHICH WAS N OT RECONCILED. THE ASSESSING OFFICER HAS NARRATED NON - RECONCILIATION WITH VARIOUS PARTIES. AS AN EXAMPLE , WE QUOTE THE ISSUES ARISING IN CASE OF TWO PARTIES AS UNDER: 4 AS PER THE INFORMATION OBTAINED FROM M/S R.K. PROJ ECTS PVT LTD THERE WAS NO TRANSACTION DURING THE YEAR WI TH THE ASSESSEE NOR ANY OPENING BALANCE. ON THE OTHER HAN D IN HIS BOOKS THE ASSESSEE THERE IS CREDIT ENTRY OF RS. 4,36,800/- ON ACCOUNT OF PURCHASE ON 1.4.2004 AND THIS AMOUNT REMAINED AS SUCH ON 3.3.2005. ON THE OTHER HAND, AS PER THE INFORMATION FROM M/S R.K. PROJECTS PVT LTD. IT HAS ALREADY RECEIVED THE PAYMENT DURING THE EARLIER FINANCIAL YEAR I.E. RELEVANT TO ASSESSMENT YEAR 200 4-05. IT IS NOT POSSIBLE THAT THE PARTY WHICH HAS TO RECE IVE MONEY FROM THE ASSESSEE WOULD FORGO THE SAME WITHOU T ANY BASIS. IN FACT, THE ASSESSEE HAS WILLFULLY CRE ATED BOGUS LIABILITY IN HIS BOOKS. SINCE THE ASSESSEE H AS FAILED TO RECONCILE THE SAME, IT NEEDS TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE F OR THE RELEVANT YEAR. AS PER THE INFORMATION RECEIVED FROM M/S HYDRO POWER ENGINEERS IT HAS SHOWN THE ASSESSEE HAS SUNDR Y CREDITOR IN ITS BOOKS OF ACCOUNT AS ON 1.4.2004 WIT H RS. 20,203/-. ON THE OTHER HAND INSTEAD OF SHOWING THE ABOVE PARTY AS SUNDRY DEBTOR THE ASSESSEE HAS SHOWN IT AS SUNDRY DEBTOR IN HIS BOOKS OF ACCOUNT AT RS. 27,007 /-. SINCE THE ASSESSEE HAS FAILED TO RECONCILE THE SAME , IT NEEDS TO BE ADDED BACK TO THE INCOME OF THE ASSESSE E FOR THE RELEVANT YEAR. SIMILAR DETAILS HAVE BEEN GIVEN BY THE ASSESSING OF FICER IN RESPECT OF OTHER PARTIES ALSO. IT IS CLEAR THAT TH E ASSESSEE HAD SHOWN BOGUS LIABILITIES AND BOGUS PURCHASE IN RESPE CT OF ABOVE ACCOUNTS WHICH TOTALED TO RS. 6,48,199/-. WE ARE O F THE OPINION THAT WHEN THE ASSESSING OFFICER DID NOT FIN D ANY OTHER DEFECT IN THE ACCOUNTS THEN HE SHOULD HAVE ADDED TH IS SUM TO THE INCOME OF THE ASSESSEE INSTEAD OF FIRST ESTIMAT ING THE INCOME AT 8% SIMPLY BECAUSE THE ASSESSEE HAD AGREED FOR REJECTION OF BOOKS BY AN APPLICATION OF 8% OF THE P ROFIT AND THEN AGAIN ADDING THE SUM OF RS. 6,48,199/- ON ACCO UNT OF DISCREPANCIES. IT IS TO BE NOTED THAT NO ATTEMPT W AS MADE BEFORE US TO GIVE ANY EVIDENCE WHICH WOULD RECONCIL E THE ACCOUNTS OF THE VARIOUS PARTIES WHERE DISCREPANCIES WERE NOTED BY THE ASSESSING OFFICER. THEREFORE, WE COULD NOT HAVE GIVEN ONE MORE OPPORTUNITY TO THE ASSESSEE FOR RECONCILIN G THESE ACCOUNTS BY REMANDING THE CASE TO THE ASSESSING OFF ICER, THEREFORE, WE ARE OF THE OPINION THAT AMOUNT OF DIS CREPANCIES 5 CAN BE ADDED TO THE RETURNED INCOME OF THE ASSESSEE . WE PROPOSED ACCORDINGLY AND THIS PROPOSITION WAS AGREE D BY THE LD. COUNSEL OF THE ASSESSEE. ACCORDINGLY WE SET AS IDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OF FICER TO COMPUTE THE INCOME OF THE ASSESSEE AS UNDER: RETURNED INCOME RS. 2,81,682/- ADD DIFFERENCE IN ACCOUNTS OF VARIOUS PARTIES AS NOTED BY THE ASSESSING OFFICER RS. 6,48,199/- RS. 9,29,881/- WE AGAIN CLARIFY THAT NO FURTHER ADDITION SHOULD BE MADE ON ACCOUNT OF ESTIMATING OF PROFIT. 10 GROUND NO. 4 DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD APPLIED 8% PROFIT ON THE GROS S RECEIPT WHEREAS IT IS CONTENDED BEFORE US THAT THE ASSESSEE HAD ALSO PAID SALES TAX AND IN THIS REGARD REFERENCE WAS INV ITED TO PAGE 16 & 17 OF THE PAPER BOOK WHICH IS COPY OF THE SALE S TAX WHICH CLEARLY SHOWS THAT ASSESSEE HAD PAID SALES TAX OF R S. 1,68,770/-. IT WAS CONTENDED THAT NET PROFIT CAN BE APPLIED ONLY ON NET RECEIPT. HOWEVER, THIS ISSUE HAS BECOME INFR UCTUOUS BECAUSE WE HAVE CONFIRMED THE ADDITION ON ACCOUNT O F DIFFERENCE IN VARIOUS ACCOUNTS AND DELETED THE SEPA RATE ADDITION OF APPLICATION OF NET PROFIT. THEREFORE, T HIS GROUND IS DISMISSED BEING INFRUCTUOUS. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 14 .1.2013. SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 14 .1.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 6