M/s. Ambica Golden Jewellers, Bharuch V. The Income tax Officer, Ward-1, Bharuch

ITA 270/AHD/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2068 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-04-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 15-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SANKAR SRDR
• Assessee Lawyers: R N VEPARI
• Section: 40A(3); 133A

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.270/AHD/2007 AND 3664/AHD/2008 [ASSTT.YEAR : 2002-2003] M/S.AMBICA GOLDEN JEWELLERS 2/3, RANG UPAVAN SHOPPING CENTRE PANCH BATTI, STATION ROAD BHARUCH. /VS. ITO, WARD-1 BHARUCH. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI R.N. VEPARI + 2 3 )/ REVENUE BY : SHRI T. SANKAR, SR.DR 5 2 &(*/ DATE OF HEARING : 10 TH APRIL, 2013 678 2 &(*/ DATE OF PRONOUNCEMENT : 10-5-2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE TWO APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-2003 ARE DIRECTED AGAI NST THE ORDERS OF THE CIT(A)- VI, BARODA. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.270/AHD/2007 (QUANTUM APPEAL) 2. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE LD.IT(A) ERRED IN CONFIRMING ADDITION OF RS .23,69,885/- IN RESPECT OF ALLEGED DIFFERENCE IN STOCK WHEN SUCH ST OCK WAS EXPLAINED. ITA NO.270/AHD/2007 AND 3664/AHD/2008 -2- 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT A SURVEY ACTION WAS TAKEN PLACE AT THE BUSINESS PREMISES OF THE ASS ESSEE UNDER SECTION 133A ON 7.1.2002. HE SUBMITTED THAT AS PER THE DEPARTME NT, TWO DISCREPANCIES WERE FOUND AT THE TIME OF SEARCH VIZ. A DIARY WAS F OUND CONTAINING RECORDING OF UNACCOUNTED SALE OF GOLD ORNAMENTS WOR TH RS.11,96,041/- AND CONSEQUENTLY AN EXCESS STOCK OF RS.11,73,784/- WAS FOUND. HE SUBMITTED THAT IN FACT THERE WAS NO DISCREPANCY, AS THE ACCOU NT BOOKS OF THE ASSESSEE WERE NOT COMPLETE AT THE TIME OF SURVEY AS THE MANA GING PARTNER, SHRI BHAGWANDAS H. SONI WAS AWAY, AND ON HIS RETURN THE NECESSARY ENTRIES WERE PASSED AND THE ACCOUNTS BOOKS WERE MADE COMPLE TE. HE SUBMITTED THAT ENTRIES OF SALE OF ORNAMENTS, AS PER THE DIARY AMOUNTING TO RS.11,96,041/- WAS RECORDED IN THE SALE, AND ALSO P URCHASE BILLS OF GOLD ORNAMENTS AMOUNTING TO RS.12,20,187/- AND RS.4,01,5 30/- OF PURCHASE OF SILVER, WERE ENTERED INTO IN THE REGULAR BOOKS OF A CCOUNTS OF THE ASSESSEE, AND THEREFORE, THERE REMAINS NO DISCREPANCY WHATSOE VER. HE SUBMITTED THAT THE ASSESSEE IS ENTITLED TO INCORPORATE THE NECESSA RY ENTRIES IN ITS ACCOUNT BOOKS, BEFORE FINALIZATION OF ITS ACCOUNT, AND BEFO RE FILING OF ITS RETURN OF INCOME. HE REFERRED TO VARIOUS PAPERS FILED IN T HE COMPILATION BEFORE THE TRIBUNAL, AND IN PARTICULAR, PAGE NOS.97 AND 98 OF ITS COMPILATION TO ESTABLISH THAT THE NECESSARY ENTRIES OF PURCHASE AN D SALE OF GOLD ORNAMENTS AND SILVER WAS PASSED IN THE ACCOUNT BOOKS OF THE A SSESSEE, AND THE EXCESS STOCK FOUND BY THE DEPARTMENT STANDS RECONCILED. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT SURVEY ACTION W AS TAKEN ON 7.1.2002 UNDER SECTION 133A OF THE ACT, AND THE ASSESSEE HAS FILED A BELATED RETURN ON 28.3.2003. HE REFERRED TO THE STATEMENT OF THE PARTNER, SHRI HEMRAJ H. SONI, WHO WAS PRESENT AT THE TIME OF SURVEY, WHO HA S ADMITTED THE DISCREPANCY OF RS.23,69,885/- IN THE STOCK OF THE A SSESSEE, WHICH WAS ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. HE SUBMIT TED THAT THE CIT(A) IN ITS APPELLATE ORDER HAS POINTED OUT VARIOUS DISCREPANCI ES WHILE UPHOLDING THE ITA NO.270/AHD/2007 AND 3664/AHD/2008 -3- ADDITION MADE, SUCH AS CASH PURCHASES WERE MADE ON DIFFERENT DATES, AND NO DETAILED DATE-WISE CASH FLOW STATEMENT WAS FILED BY THE ASSESSEE. THE CIT(A) HAS ALSO RECORDED THAT DATE-WISE QUANTITATIV E TALLIES OF THE PURCHASE AND SALES ENTERED IN THE CASH BOOK ON 7.1.2002, HAS NOT BEEN FURNISHED BY THE ASSESSEE. HE REFERRED TO THE REPLY OF THE ASS ESSEE DATED 26.2.2005 IN SUPPORT OF THE CASE OF THE REVENUE. ALTERNATIVELY, HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED CASH PURCHASE OF GOLD ORNAMENT S AMOUNTING TO RS.9,55,380/- AND CASH PURCHASE OF SILVER RS.2,80,4 95/-, MAKING A TOTAL OF RS.12,35,875/-, ON WHICH 20% DISALLOWANCE UNDER SEC TION 40A(3) ON ACCOUNT OF CASH PURCHASE HAS TO BE MADE. HE HAS RE LIED ON THE ORDERS OF THE AO AND THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO COPIES OF VARIOU S DOCUMENTS FILED IN THE COMPILATION BY THE ASSESSEE. WE FIND THAT THE SURVEY ACTION WAS UNDERTAKEN BY THE DEPARTMENT UNDER SECTION 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 7.1.2002. WIT H REGARD TO FIRST DISCREPANCY POINTED OUT BY THE DEPARTMENT REGARDING NON-RECORDING OF SALES AMOUNTING TO RS.11,96,041/-, WE FIND THAT NECESSARY ENTRIES OF SALES HAVE BEEN MADE IN THE ACCOUNT BOOKS OF THE ASSESSEE ON T HE RETURN OF SHRI BHAGWANDAS H. SONI, MANAGING PARTNER, WHO WAS SAID TO BE WELL-VERSED WITH VARIOUS DETAILS OF BUSINESS OF THE ASSESSEE, A ND HAD GONE TO RAJASTHAN FOR SOCIAL FUNCTION ON THE DATE OF SURVEY. WE FI ND THAT THE REVENUE COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE THAT THE SALES OF ORNAMENTS AS PER THE SEIZED DIARY AMOUNTING TO RS.11,96,041/- WE RE ENTERED IN THE ACCOUNT BOOKS OF THE ASSESSEE, AND RECORDED AS SALE S, AND THEREFORE, THERE REMAINS NO DISCREPANCY ON THIS COUNT. WE FIND THAT THE OBSERVATIONS OF THE CIT(A) WHILE UPHOLDING THE ADDITION THAT THE ASSESS EE HAS MADE CASH PURCHASES ON VARIOUS DATES AND DETAILED DATE-WISE C ASH FLOW STATEMENT SHOULD HAVE BEEN FURNISHED, AND THAT THE ASSESSEE C OULD NOT FURNISH DATE- WISE QUANTITATIVE TALLY OF PURCHASE AND SALES ENTER ED IN THE CASH BOOK, ARE ITA NO.270/AHD/2007 AND 3664/AHD/2008 -4- NOT SUSTAINABLE IN LAW, AND COULD NOT FORM THE BASI S FOR ASSESSING FIGURE OF SALES ACCOUNTED FOR IN ITS ACCOUNT BOOKS OF THE ASS ESSEE, AS INCOME IN THE HANDS OF THE ASSESSEE. WE HAVE PERUSED THE PAGE NO .97 AND 98 OF THE COMPILATION FILED BY THE ASSESSEE, SHOWING THAT THE ASSESSEE HAS ENTERED THE REQUIRED SALE BILLS OF THE ORNAMENTS AMOUNTING TO R S.11,96,041/-, AND ALSO THE PURCHASE BILLS OF GOLD ORNAMENTS AMOUNTING TO R S.12,20,187/-, AND OF PURCHASE OF SILVER OF RS.4,01,530/- IN ACCOUNT BOOK S OF THE ASSESSEE. IN THESE FACTS OF THE CASE, WE HOLD THAT NO CASE OF AD DITION ON ACCOUNT OF UNACCOUNTED SALE OF ORNAMENTS OF RS.11,96,041/- COU LD BE MADE OUT BY THE REVENUE, AND ACCORDINGLY THE ADDITION MADE ON THIS COUNT IS DELETED, AND THE ASSESSEE GETS A RELIEF OF RS.11,96,041/-. 6. WITH REGARD TO OTHER ADDITION MADE BY THE DEPART MENT ON ACCOUNT OF EXCESS STOCK FOUND AT THE TIME OF SURVEY OF RS.11,7 3,784/-, THE ASSESSEE HAS EXPLAINED THAT THERE REMAINS NO DISCREPANCY AFTER N ECESSARY ENTRIES OF SALE OF ORNAMENTS AMOUNTING TO RS.11,96,041/-, AND PURCH ASE OF GOLD ORNAMENTS OF RS.12,20,187/- AND PURCHASE OF SILVER AMOUNTING TO RS.4,01,530/- WAS PASSED IN ITS ACCOUNT BOOKS BY THE ASSESSEE. WE FI ND THAT ALTHOUGH THE ASSESSEE HAS FILED EXPLANATION IN THIS REGARD, BUT THE ASSESSEE COULD NOT FULLY SUBSTANTIATE THE SAME. WE FIND THAT OUT OF PURCHAS E OF ORNAMENTS, THE ASSESSEE HAS ACCOUNTED FOR SALE OF ORNAMENTS OF RS. 11,96,041/-, BUT IT COULD NOT SAID THAT THE ENTIRE EXCESS STOCK FOUND AT THE TIME OF SURVEY STAND EXPLAINED WITH THE ENTRIES OF PURCHASE OF GOLD ORNA MENTS AMOUNTING TO RS.12,20,187/- AND PURCHASE OF SILVER OF RS.4,01,53 0/-, MAKING A TOTAL OF RS.16,21,717/-. IN THE FACTS OF THE CASE, WE FIND THAT OUT OF PURCHASE OF GOLD ORNAMENTS AND SILVER AMOUNTING TO RS.16.21 LAKHS, E NTERED INTO BY THE ASSESSEE IN ITS ACCOUNT BOOKS, THE ASSESSEE HAS ALR EADY TAKEN CREDIT OF SALE RECORDED IN THE SEIZED DIARY AT RS.11.96 LAKHS, AND THEREFORE THERE REMAINS ONLY RS.4.25 LAKHS (IN ROUND FIGURE), WHICH COULD B E CLAIMED AS REFLECTED IN THE EXCESS STOCK FOUND AT THE TIME OF SURVEY. CONS IDERING THE ENTIRE FACTUAL MATRIX OF THE MATTER, WE ARE OF THE VIEW THAT AFTER ALLOWING THE CREDIT OF ITA NO.270/AHD/2007 AND 3664/AHD/2008 -5- RS.4.25 LAKHS, AS DETAILED ABOVE, THERE STILL REMAI NS A SUM OF RS.7.5 LAKHS (IN ROUND FIGURE), OUT OF EXCESS STOCK FOUND, FOR W HICH, THE ASSESSEES EXPLANATION IS NOT CORROBORATED WITH ANY EVIDENCE. ACCORDINGLY, WE HOLD THAT ENDS OF JUSTICE SHALL BE MET, IF THE ADDITION OF RS.7.5 LAKHS IS SUSTAINED OUT OF THE EXCESS STOCK FOUND, AND ADDED IN THE HAN DS OF THE ASSESSEE, AND THE BALANCE ADDITION ON THIS COUNT IS DELETED. 7. THIS LEAVES US TO THE ONLY ISSUE OF THE ALTERNAT IVELY PLEA OF THE REVENUE THAT THE PURCHASE AMOUNTING TO RS.12,35,875 /- OF GOLD ORNAMENTS AND SILVER MADE IN CASH SHOULD BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT. 8. WE HAVE HEARD BOTH SIDES ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT ADDUCE ANY REASONABLE AND SUFFIC IENT CAUSE FOR MAKING CASH PAYMENTS FOR THE PURCHASES. THERE IS A CLEAR V IOLATION OF PROVISION OF SECTION 40A(3) OF THE ACT IN THIS CASE AND ACCORDIN GLY, THE DISALLOWANCE AT THE RATE OF 20% OF THE TOTAL VALUE OF CASH PURCHASE IS SUSTAINED AT RS.2.47 LAKHS. THE TOTAL ADDITION SUSTAINED BY US SHALL BE RS.7.5 LAKHS, AS DETAILED ABOVE, AND RS.2.47 LAKHS ON ACCOUNT OF CASH PURCHAS E UNDER SECTION 40A(3), MAKING TOTAL OF RS.9,97,000/-, OUT OF ADDIT ION OF RS.23,69,885/-/- MADE BY THE AO AND THE GROUND OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 3664/AHD/2008 (PENALTY UNDER SECTION 271(1) (C) OF THE ACT.) 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS REGARDING PENALTY LE VIED UNDER SECTION 271(1) (C) OF THE ACT. HE SUBMITTED THAT THE ASSESSEE HAS FILED EXPLANATION, WHICH WAS BONA FIDE , AND THEREFORE IT IS NOT A CASE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE PURCHASE AND SALE BILLS WERE DULY INCORPORATED IN THE ACCOUNT BOOKS OF THE ASSESSEE, ON THE RETURN OF THE MANAGING PARTNER, THE COPY OF THE RECONCILIATION STATEMENT FILED HAS BEEN FILED IN THE ITA NO.270/AHD/2007 AND 3664/AHD/2008 -6- COMPILATION. THE LEARNED DR HAS OPPOSED THE SUBMIS SIONS OF THE LEARNED COUNSEL OF THE ASSESSEE, AND HAS RELIED ON THE ORDE RS OF THE AO AND THE CIT(A). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT PENALTY LEVIED ON ACCOUNT OF NON- RECORDING OF SALES OF GOLD ORNAMENTS AMOUNTING TO R S.11.94 LAKHS IS LIABLE TO BE DELETED, SINCE THE ADDITION ON THIS AMOUNT HA S BEEN DELETED BY US IN THE FORGOING PARAS OF THIS ORDER WHILE DECIDING THE QUANTUM APPEAL OF THE ASSESSEE. 11. WITH REGARD TO THE OTHER ISSUE, THE ADDITION ON ACCOUNT OF EXCESS STOCK, WE FIND THAT WE HAVE SUSTAINED THE ADDITION OF RS.7.5 LAKHS, AND HAS ALLOWED PART RELIEF TO THE ASSESSEE IN THE QUANTUM APPEAL OF THE ASSESSEE, AS DISCUSSED IN THE FORGOING PARAS OF THIS ORDER. THE ASSESSEE HAS FILED AN EXPLANATION, WHICH COULD NOT BE SAID TO BE NOT BONA FIDE . THE ASSESSEE HAS MADE NECESSARY ENTRIES IN ITS BOOKS OF ACCOUNTS OF THE PURCHASE AND SALE BILLS, AND HAS CLAIMED THAT THE EXCESS STOCK FOUND, IS COVERED WITH THE ENTRIES PASSED BY THE ASSESSEE, IN ITS ACCOUNT BOOK S. THE ASSESSEE HAS RELIED ON THE RECONCILIATION OF THE EXCESS STOCK OF GOLD A ND EXCESS SILVER FOUND, AS FILED AT PAGE NO.97 AND 98 OF THE COMPILATION FILED BEFORE US. WE FIND THAT THE ASSESSEE HAS PASSED NECESSARY ENTRIES OF PURCHA SE AND SALE OF GOLD ORNAMENTS AND SILVER IN ITS ACCOUNT BOOKS. THE ADD ITION OF RS.7.5 LAKHS HAS BEEN SUSTAINED BY US IN THE QUANTUM APPEAL OF THE A SSESSEE OUT OF EXCESS STOCK FOUND ON ACCOUNT OF PREPONDERANCE OF PROBABIL ITIES. FACTS OF THE CASE, MAY JUSTIFY PART CONFIRMATION OF THE ADDITION MADE BY THE AO IN THE ASSESSMENT CASE OF THE ASSESSEE, BUT DID NOT JUSTIF Y THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT IS WELL SETTLED THAT PARAMETERS OF SUSTAINING AN ADDITION AND SUSTAINING PENALTY FOR CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOM E ARE DIFFERENT. THE ASSESSEE HAS GOT PART RELIEF OUT OF EXCESS STOCK FO UND AT THE TIME OF SURVEY, ITA NO.270/AHD/2007 AND 3664/AHD/2008 -7- VIDE OUR ORDER IN THE FOREGOING PARAS OF THIS ORDER IN THE QUANTUM APPEAL OF THE ASSESSEE. THE REVENUE COULD NOT FOUND ANY INCR IMINATING EVIDENCE/MATERIAL AT THE TIME OF SURVEY TO SUGGEST THAT THE ASSESSEE WAS HAVING UNDISCLOSED STOCK WITH IT. THE ASSESSEE HAS EXPLAINED THAT ITS MANAGING PARTNER WAS AWAY, WHO WAS WELL-VERSED WITH THE FACTS OF THE CASE, AND THE PARTNER PRESENT AT THE TIME OF SURVEY COULD NOT EXPLAIN THE THINGS PROPERLY, AND ENTRIES OF THE PURCHASE AND SA LE BILLS OF THE STOCK IN TRADE WERE PASSED AFTER THE MANAGING PARTNER CAME B ACK FROM RAJASTHAN. IN THESE FACTS OF THE CASE, WE HOLD THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE A SSESSEE, WHICH IS ACCORDINGLY CANCELLED. 12. IT MAY BE ADDED HERE THAT WITH REGARD TO THE DI SALLOWANCE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF CASH PURCHA SES MADE BY THE ASSESSEE, NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS IMPOSABLE, AS IT IS MERELY DISALLOWANCE ON ACCOUNT OF STATUTORY PROVISI ON OF LAW. 13. ACCORDINGLY, THE PENALTY UNDER SECTION 271(1)(C ) OF THE ACT IS CANCELLED AND THE GROUND OF THE ASSESSEE IS ALLOWED . 14. IN THE RESULT, THE ASSESSEES APPEAL IN ITA NO. 270/AHD/2007 IS PARTLY ALLOWED AND OTHER APPEAL ITA NO.3664/AHD/200 8 IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/- SD/- ( %&' %&' %&' %&'( (( ( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD