Sanjay Javeilal Jain, Pune V. Deputy Commissioner of Income-tax,

ITA 270/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0820 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVYA BAJPAI
• Keywords: Income from undisclosed sources
• Section: 40A(3); 143(3); 133A; 153A; 132

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NOS.268 TO 271/PN/2014 ASSESSMENT YEARS : 2003-04 TO 2006-07 SHRI SANJAY JAVERILAL JAIN, 59, M.G. ROAD, KHADKI, PUNE 411 003. PAN : ACOPJ2209G . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), PUNE. . RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK & SHRI P.D. KUDVA / RESPONDENT BY : SMT. DIVYA BAJPAI / DATE OF HEARING : 09.11.2015 / DATE OF PRONOUNCEMENT: 27.11.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THIS BUNCH OF FOUR APPEALS FILED BY THE SAME ASSESS EE ARE AGAINST THE FOUR SEPARATE ORDERS OF CIT(A)-CENTRAL, PUNE EVEN D ATED 11.11.2013 RELATING TO FOUR DIFFERENT ASSESSMENT YEARS I.E. A.Y. 2003-04 T O 2006-07 PASSED UNDER SECTION 153A(B) R.W.S. 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT). 2. SINCE THE FACTS AND CIRCUMSTANCES IN ALL THE FOU R APPEALS ARE IDENTICAL AND INVOLVE COMMON ISSUE, THESE ARE DISPOSED-OFF BY A COMMON ORDER. THE APPEAL OF THE ASSESSEE RELATING TO ASSESSMENT YEAR 2003-04 IN ITA NO.268/PN/2014 IS TAKEN AS THE LEAD CASE. 3. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWIN G GROUNDS OF APPEAL :- 2 ITA NOS.268 TO 271/PN/2014 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.1,09,785 U/S 40A(3) ON ESTIMATED PURCHASES OF RS.5,48,295/- WITH OUT APPRECIATING THAT THE DISALLOWANCE MADE WAS NOT JUSTIFIED AT ALL. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE U/S 40A(3) WITHOUT APPRECIATING THAT NO EVIDENCE WAS FOUND IN THE COUR SE OF SURVEY THAT THE ASSESSEE HAD ACTUALLY MADE PURCHASES IN CASH IN EXCESS OF RS .20,000/- AND ACCORDINGLY, THE DISALLOWANCE MADE ON PRESUMPTIONS AND SURMISES IS N OT JUSTIFIED IN LAW. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT NO DISALLOWANCE U/S 40A(3) COULD BE MADE IN RESPECT OF UNACCOUNTED PURCHASES A ND THEREFORE, THE ADDITION MADE MAY KINDLY BE DELETED. 4. THE LEARNED CIT(A) AND THE AO FAILED TO APPRECIA TE THAT IN THE SURVEY ACTION CONDUCTED AT THE ASSESSEE'S BUSINESS PREMISES, NO D OCUMENTS EVIDENCING UNRECORDED CASH PURCHASES WERE FOUND AND THAT THE ADDITIONAL I NCOME OF RS.3,00,000 DECLARED FOR THE YEAR IS BASED ON THE ESTIMATED PROFIT DECLA RED BY THE ASSESSEE TO THE SURVEY PARTY AT THE TIME OF THE SURVEY ON 27.04.2005. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AME ND, MODIFY OR WITHDRAW ANY OR ALL GROUNDS OF APPEAL. 4. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS PROPRIETOR OF M/S ANUPAM ELECTRICALS. THE ASSESSEE FILED HIS RETURN OF INCOME ON 24.09.2003 DECLARING TOTAL INCOME OF RS.2,16,477/-. THE RESID ENTIAL PREMISE OF THE ASSESSEE WAS SEARCHED UNDER SECTION 132 OF THE ACT ON 27.04.2005. A SURVEY UNDER SECTION 133A OF THE ACT WAS ALSO CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE WHEREIN THE TRADING STOCKS OF THE ASSE SSEE WERE STATED TO BE VERIFIED. IN THE COURSE OF THE SEARCH, CERTAIN VAL UABLES AND DOCUMENTS WERE FOUND AND SEIZED. THE ASSESSEE ADMITTED UNDISCLOSE D INCOME OF RS.31 LAKHS IN AGGREGATE ARISING OUT OF HIS PROPRIETARY CONCERN, M /S ANUPAM ELECTRICALS RELEVANT TO ASSESSMENT YEARS 2003-04 TO 2006-07 AND DECLARED THE SAME IN THE RETURNS FILED UNDER SECTION 153A OF THE ACT. THE D ETAILS OF ESTIMATED INCOME ON UNRECORDED SALES ON CASH OR CREDIT DECLARED AGAI NST THE RESPECTIVE FINANCIAL YEARS ARE TABULATED AS UNDER :- F.Y. 2002-03 A.Y. 2003-04 RS.3 LAKH F.Y. 2003-04 A.Y. 2004-05 RS.5 LAKH F.Y. 2004-05 A.Y. 2005-06 RS.21 LAKH F.Y. 2005-06 A.Y. 2006-07 RS.2 LAKH (APRIL 05) TOTAL RS.31 LAKH 3 ITA NOS.268 TO 271/PN/2014 5. THUS, FOR THE RELEVANT ASSESSMENT YEAR 2003-04, THE ASSESSEE OFFERED A SUM OF RS.3,00,000/- TOWARDS UNRECORDED SALES AND D ECLARED THE SAME AS ADDITIONAL INCOME IN HIS RETURN OF INCOME FILED UND ER SECTION 153A OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT ALTHOUGH ESTIMA TED INCOME ARISING FROM UNACCOUNTED SALES HAS BEEN OFFERED ON ESTIMATED BAS IS AS DECLARED IN THE SURVEY PROCEEDINGS, THE ASSESSEE OBVIOUSLY HAS MADE UNRECORDED CASH PURCHASES TO ENABLE HIM TO MAKE CORRESPONDING UNREC ORDED SALES. THE UNRECORDED CASH PURCHASES AS PER PROFIT & LOSS ACCO UNT SUBMITTED BY THE ASSESSEE HIMSELF, DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, IS STATED TO BE RS.5,48,295/-. THE ASSESSING OFFICER, ACCORDINGLY, DISALLOWED A SUM OF RS.1,09,785/- OUT OF CASH PURCHASES BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 6. THE CIT(A) ENDORSED THE ACTION OF THE ASSESSING OFFICER AND SUSTAINED THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 8. THE LD. AUTHORIZED REPRESENTATIVE ON BEHALF OF T HE ASSESSEE VEHEMENTLY EMPHASIZED AT THE OUTSET THAT THE ASSESSEE HAS DECL ARED THE INCOME AGAINST THE RESPECTIVE ASSESSMENT YEARS BY WAY OF RETURNED INCO ME AS AGREED BEFORE THE SURVEY TEAM AND HAS SACROSANCTLY HONORED HIS COMMIT MENT. HE NEXT SUBMITTED THAT THE DECLARATIONS MADE AGAINST THE VARIOUS YEAR S IN APPEAL ARE ONLY ESTIMATED INCOME BASED ON UNACCOUNTED SALES WHICH D ECLARATION REMAINS UNDISPUTED BY THE ASSESSING OFFICER. THE YEAR-WISE STATEMENT OF UNDISCLOSED INCOME OUTSIDE THE REGULAR BOOKS OF ACCOUNT WERE SU MMARIZED YEAR-WISE TO ARRIVE AT THE ESTIMATED INCOME DECLARED IN THE RESP ECTIVE ASSESSMENT YEARS. THE LD. AR THEREAFTER INVITED OUR ATTENTION TO THE PROFIT & LOSS ACCOUNT FOR DECLARATION OF SUCH UNDISCLOSED INCOME AS APPEARING AT PAGE NO.16 OF THE PAPER BOOK AND SUBMITTED THAT THE ONLY FIGURE IN TH E SAID PROFIT & LOSS ACCOUNT WHICH CAN BE EVIDENCED QUA THE SURVEY PROCEEDINGS, IS THE RESULTANT 4 ITA NOS.268 TO 271/PN/2014 NET PROFIT OF RS.3,00,055/-. THE FIGURE OF SALES, PURCHASES, CLOSING STOCKS, ETC. ARE ONLY ESTIMATES. THE ASSESSEE HAS SHOWN ESTIMAT ED PURCHASE OF RS.5,48,295/- MERELY TO RECONCILE AND MATCH THE SAL E AND NET PROFIT DECLARED IN THE SURVEY PROCEEDINGS. THE ALLEGED UNACCOUNTED PU RCHASES OF RS.5,48,295/- WHICH IS THE BASIS OF DISALLOWANCE OF RS.1,09,785/- UNDER SECTION 40A(3) OF THE ACT IS NOT BACKED BY ANY DOCUMENTARY EVIDENCES. NO EVIDENCE WAS FOUND FOR SUCH ESTIMATED PURCHASES AND PURPORTED CASH PAYMENT THEREON IN THE COURSE OF SEARCH/SURVEY. HE, THEREFORE, SUBMITTED THAT THE I MPUGNED PURCHASE IS MERELY A BALANCING ENTRY TO MATCH THE DECLARATIONS MADE AT THE TIME OF SURVEY UNCONNECTED TO ANY TANGIBLE EVIDENCES. THUS, THE A CTION OF THE ASSESSING OFFICER IN INVOKING SECTION 40A(3) OF THE ACT ON SU CH ESTIMATED PURCHASES IS NOT JUSTIFIED AND UNCALLED FOR. THE LD. AR SUBMITT ED THAT ONCE THE ESTIMATED PROFIT ON UNACCOUNTED SALES HAS BEEN DECLARED IN TH E SURVEY AND ACCEPTED BY THE REVENUE WITHOUT ANY DEMUR, THERE IS NO JUSTIFIC ATION TO MAKE FURTHER DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, WHICH WILL RESULT IN FURTHER INCREASE IN THE ESTIMATED PROFITS DECLARED. TO SUP PORT THE PROPOSITION THAT ONCE THE INCOME HAS BEEN ESTIMATED BY APPLYING GP RATE, FURTHER DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT IS NOT CALLED FOR, HE REL IED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. MOHAMMAD DHURABUDEEN, (2008) 4 DTR 218 (MAD.) AND THE DECISI ONS OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF (I) DCIT VS. SHRI NA RENDRA MITHAILAL AGRAWAL IN ITA NO.811 & 808/PN/2010, ORDER DATED 26.09.2012; (II) KIRTIKUMAR VISHNUDAS BHUTADA VS. ACIT IN ITA NO.207/PN/2007, O RDER DATED 14.05.2012; AND (III) SATISHKUMAR VISHNUDAS BHUTADA VS. ITO IN ITA NOS.1522, 1619 & 1620/PN/2011, ORDER DATED 19.04.20 13. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ON BEHALF OF THE REVENUE, ON THE OTHER HAND, SUBMITTED THAT THE ORDER OF THE CIT(A) IS WELL REASONED AND DOES NOT CALL FOR INTERFERENCE. HE FURTHER RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAI METAL WORKS, 241 CTR 377 (P&H) AND THE DECISION OF THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF HYNOUP FOOD AND OIL INDUSTRIES, 290 ITR 702 (GUJ.) FOR THE 5 ITA NOS.268 TO 271/PN/2014 PROPOSITION THAT THE PROVISIONS OF SECTION 40A(3) C AN BE APPLIED EVEN IN RESPECT OF PURCHASES OUTSIDE THE BOOKS. 10. IN REJOINDER, THE LD. AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE DECISION IN THE CASE OF SATISHKU MAR VISHNUDAS BHUTADA (SUPRA) RELIED UPON HAS DULY CONSIDERED THE DECISIO N IN THE CASE OF SAI METAL WORKS (SUPRA) RELIED UPON BY THE LD. DEPARTMENTAL R EPRESENTATIVE WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 40A(3) OF T HE ACT CANNOT BE APPLIED WHERE ADMITTEDLY PROFIT HAS BEEN ESTIMATED IN THE A BSENCE OF MAINTENANCE OF BOOKS OF ACCOUNT. SIMILARLY, THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF HYNOUP FOOD AND OIL INDUSTRIES (SUPRA) HAS ALSO BEEN TAKEN INTO ACCOUNT IN THE CASE OF SHRI NARENDRA MITHAILAL AGRA WAL (SUPRA). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, ORDER S OF THE AUTHORITIES BELOW AND PERUSED THE CASE LAWS RELIED UPON. THE O NLY QUESTION FOR DETERMINATION IS WHETHER ESTIMATED PURCHASES ENTRY IN THE PROFIT & LOSS ACCOUNT PREPARED FOR RECONCILIATION AND MATCHING TH E ESTIMATED DECLARED INCOME FROM UNRECORDED SALES AT THE TIME OF SURVEY ARE SUBJECTED TO DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT ON THE ASSUMPTION THAT THESE PURPORTED UNACCOUNTED PURCHASES ARE IMPLIEDLY MADE IN CASH. WE NOTICE THAT THERE HAS BEEN CONSISTENT PLEA OF THE ASSESSEE THAT THE ESTIMATED PURCHASES ARE ONLY IN THE NATURE OF BALANCING ENTRY TO ARRIVE AT THE PRE-DETERMINED PROFIT FROM UNDISCLOSED SALE TRANSACTIONS AS DECLARED IN SURVEY WHICH HAS REMAINED UNCONTROVERTED BY THE REVENUE. ANOTHER NOTICEABLE FACT IS THAT THE INCOME DECLARED FROM THESE UNACCOUNTED TRANSACTIONS ARE CO NSISTENT WITH THE ESTIMATED INCOME DECLARED IN THE COURSE OF SURVEY. IT IS ALS O UNDISPUTED FACT THAT THE ESTIMATED PURCHASES STATED TO BE A BALANCING ACCOUN TING ENTRY TO ARRIVE AT THE INCOME DECLARE TOWARDS UNACCOUNTED BUSINESS ACTIVIT IES IS NOT CORROBORATED BY ANY TANGIBLE EVIDENCE FOUND DURING THE COURSE OF SE ARCH/SURVEY. IN OTHER WORDS, THE ALLEGED CASH PURCHASES AS SHOWN IN THE P ROFIT & LOSS ACCOUNT PREPARED TO DECLARE THE UNACCOUNTED INCOME IS NOT B ACKED ANY UNDERLYING DOCUMENT. WE FIND THAT THE PUNE BENCH OF THE TRIBU NAL IN THE CASE OF 6 ITA NOS.268 TO 271/PN/2014 KIRTIKUMAR VISHNUDAS BHUTADA (SUPRA) AFTER TAKING C OGNIZANCE SEVERAL DECISIONS OF VARIOUS HIGH COURTS ON THE ISSUE HAS H ELD IN ESSENCE THAT ONCE THE INCOME EMANATING FROM UNRECORDED AND UNDISCLOSED TR ANSACTIONS OUTSIDE OF ACCOUNT ARE DECLARED AND ACCEPTED, NO ADDITIONAL DI SALLOWANCE UNDER SECTION 40A(3) OF THE ACT IS CALLED FOR. RESPECTFULLY FOLL OWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL, WE HOLD THAT FURTHER DI SALLOWANCE UNDER SECTION 40A(3) ON PURPORTED UNACCOUNTED PURCHASES IS NOT JU STIFIED IN THE FACTS OF THE CASE AND THEREFORE IS DIRECTED TO BE DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.268/PN/2014 RELATING TO ASSESSMENT YEAR 2003-04 IS ALLOWED. 13. WE FIND THAT MATERIAL FACTS AND CIRCUMSTANCES I N ITA NO.269, 270 & 271/PN/2014 RELATING TO ASSESSMENT YEARS 2004-05, 2 005-06 & 2006-07 ARE IDENTICAL TO THAT PREVAILING IN THE CASE OF THE ASS ESSEE IN ITA NO.268/PN/2014 RELATING TO ASSESSMENT YEAR 2003-04 AND HENCE THE R ATIO SHALL APPLY MUTATIS- MUTANDIS TO ASSESSMENT YEARS 2004-05, 2005-06 & 2006-07. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN I TA NO.269, 270 & 271/PN/2014 RELATING TO ASSESSMENT YEARS 2004-05, 2 005-06 & 2006-07 ARE ALSO ALLOWED. 15. RESULTANTLY, ALL THE CAPTIONED APPEALS OF THE A SSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 27 TH NOVEMBER, 2015. 7 ITA NOS.268 TO 271/PN/2014 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-CENTRAL, PUNE; 4) THE CIT-CENTRAL, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE