The ITO, Ward-10(1)., Ahmedabad V. M/s. Rajkamal Industrial Co., Ahmedabad

ITA 2744/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9037 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 28-12-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHSH SENIOR
• Assessee Lawyers: S N SOPARKAR WITH SHRI
• Keywords: Unexplained expenditure; Search and seizure
• Section: 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI R V EASWAR VICE-PRESIDENT] [AND SHRI P K BANSAL - ACCOUNTANT MEMBER) ITA NO.2744/AHD/2005 (ASSESSMENT YEAR: 2002-03) THE INCOME-TAX OFFICER, WARD-10(1), AHMEDABAD V/S M/S RAJKAMAL INDUSTRIAL CO., 93, ARIHANT SOCIETY, VASNA, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY :- SMT. NEETA SHSH, SENIOR DR RESPONDENT BY:- SHRI S N SOPARKAR WITH SHRI O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A ) DATED 31 ST OCTOBER, 2005 BY TAKING THE FOLLOWING GROUND OF APP EAL:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.23,87,964/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS PURCHASES DEBITED IN THE P & L ACCOUNT OF THE ASSES SEE. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CHE MICALS AND PETROLEUM PRODUCTS. THE MAIN PRODUCTS ARE FROM M/S POWER OIL PETROLEUM PRODUCTS AND SAVITA CHEMICALS. DURING THE YEAR THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 133(6) OF T HE INCOME-TAX ACT, 1961 [THE ACT FOR SHORT] TO THE CONCERNED SU NDRY 2 CREDITORS AND SUNDRY DEBITORS AS SHE FOUND THE FOLL OWING DISCREPANCIES: 1 POWER OIL CORPORATION FOR THE PERIOD 1-4-2001 TO 31-3-2002 PURCHASES A) AS PER COPY OF ACCOUNT IN M/S RAJKAMAL INDUSTRIAL CO. RS.45,63,724 B) AS PER ACCOUNTS OF POWER OIL PETROLEUM PRODUCTS OBTAINED U/S 133(6) OF THE ACT RS.23,09,696 --------------- DIFFERENCE RS.22,54,028 2 SAVITA CHEMICALS LTD. 1-4-2001 TO 31-3-2002 PURC HASES A) AS PER COPY OF ACCOUNT FILED BY THE ASSESSEE RS.14,70,261 B) SALES AS PER COPY OF A/C OF SAVITA CHEMICALS LTD. REQUISITIONED U/S 133(6) OF THE ACT RS.13,41,324 --------------- DIFFERENCE RS. 1,28,937 ========== WHEN QUESTIONED, THE ASSESSEE POINTED OUT THAT M/S POWER OIL PETROLEUM PRODUCTS IS A DIVISION OF M/S APAR INDUST RIES LTD. THE PURCHASES RECORDED IN THE BOOKS OF THE ASSESSEE ARE TALLIED WITH THAT IN THE BOOKS OF M/S APAR INDUSTRIES LTD. THE ENTRIES IN BOTH THE ACCOUNTS OF M/S POWER OIL PETROLEUM PRODUCTS AS WELL AS M/S APAR INDUSTRIES LTD. SHOULD BE TAKEN INTO ACCOUNT. THE RELEVANT ENTRIES ARE REPRODUCED AS UNDER:- PURCHASE AS PER OUR BOOKS OF A/CS. SALES RECORDED BY APAR IND. LTD. APAR IND. LTD. 14,86,966 A/C NO.1 23,09,696 POWER OIL PETROLEUM 3 PRODUCTS 45,63,373 -------------- A/C NO.2 37,40,643 ------------- 60,50,339 60,50,339 OPENING BALANCE FROM OUR BOOKS OF A/C. WITH APAR IN DUSTRIES LTD. SHOWS CREDIT BALANCE OF RS.4,86,200. AS AGAINST THIS BALANCE FROM BOOKS OF ACCOUNTS OF A PAR INDUSTRIES LTD. SHOWS AS UNDER. A/C NO.1 DEBIT BALANCE RS.7,30,759 A/C NO.2 CREDIT BALANCE RS.2,44,560 -------------- OPENING BALANCE OF RAJKAMAL INDUSTRIES AS PER BOOKS OF APAR INDUSTRIES LTD. RS.4,86,199 -------------- CLOSING BALANCE AS PER OUR BOOKS RS. 97,000 CLOSING BALANCE FROM BOOKS OF A/CS OF APAR INDUSTRI ES LTD. A/C NO.1 RS. 35,300 A/C NO.2 RS.2,05,945 -------------- RS.2,41,245 ONE CHEQUE NOT CREDITED IN THEIR BOOKS RS.1,43,094 -------------- RS. 98,151 KESAR NOT W. FF BY APAR INDUSTRIES RS. 351 -------------- RS. 97,800 ========= THUS, IT WAS SUBMITTED THAT THERE IS NO DIFFERENCE IN BOTH THE ACCOUNTS. THEY ARE DULY RECONCILABLE. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY MADE AN ADDITION OF RS.23,82,915/- AFTER POINTING O UT THE DISCREPANCIES IN THE BANK ACCOUNTS UNDER PARA-3.2 O F HER ORDER. 4 3 THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). T HE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- 2.7 I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE REMAND REPORT DATED 27-10-2005 AND ALSO THE WRITTEN ARGUMENTS OF THE LD. AR AND I FIND MERIT IN THE WRITTEN SUBMISSIONS OF THE LD. AR THAT MERELY BECAUSE THERE WAS INCOMPLETE INFORMATION WITH THE A SSESSING OFFICER I.E. ONLY COPY OF ONE ACCOUNT OF M/S POWER OIL PETR OLEUM CO. AND NOT THE OTHER ONE IN RESPECT OF APAR INDUSTRIES LTD. CO ULD BE NO REASON TO REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT BY INV OKING PROVISIONS OF SEC. 145(3) OF THE I.T. ACT, 1961. THE JUDICIAL DEC ISIONS REFERRED TO ABOVE BY THE LD. AR ALSO COME TO THE RESCUE OF THE APPELLANT. IT IS SEEN FROM BOTH THE COPIES OF ACCOUNT PRODUCED BEFOR E ME THAT THE CORRESPONDING ENTRIES WITH THE APPELLANTS BOOKS RE CONCILE AND THERE IS NO DIFFERENCE AS SUCH IN THE PURCHASES MADE FROM M/ S POWER OIL PETROLEUM CO. AND ALSO APAR INDUSTRIES LTD. THE AS SESSING OFFICER HAS ALSO NOT POINTED OUT ANY SPECIFIC DEFECTS IN TH E ACCOUNTS OF THE APPELLANT FOR THE PURPOSE OF REJECTING THE BOOKS OF ACCOUNTS. IN THE OPINION OF THE ASSESSING OFFICER, THE APPELLANT HAS TRIES TO GIVE A NEW TWIST IN THE ACCOUNTS WHICH I AM AFRAID IS NOT THE CORRECT POSITION OVER HERE. IT IS NOT THE SUBMISSION OF THE ACCOUNTS THAT IS IMPORTANT, BUT THE SUBSTANCE OF TRANSACTIONS IN QUESTION. THERE HAS BE EN NO VARIATION IN THE TWO ACCOUNTS FURNISHED BEFORE ME AND ALSO THE C OPIES OF ACCOUNTS OF M/S POWER OIL PETROLEUM CO. AND M/S APAR INDUSTR IES LTD. SUBMITTED BY THE ASSESSING OFFICER IN HER REMAND RE PORT DATED 27-10- 2005. 2.8 FURTHERMORE, THE ASSESSING OFFICER HAS POINTED OUT IN PARA 3.3 ON PAGE 11 OF THE ASSESSMENT ORDER THAT THE APPELLA NT HAS UNDOUBTEDLY DEBITED EXCESS PRODUCTS IN HIS ACCOUNTS AND ACCORDI NGLY THE BALANCE AMOUNT OF RS.23,82,915 IS NOTHING ELSE BUT THE UNEX PLAINED MONEY OF THE APPELLANT WHICH HAS BEEN TREATED AS UNEXPLAINED INCOME AND ACCORDINGLY ADDITION MADE IN RESPECT OF THE SAID AM OUNT. IN THIS REGARD, I FIND NO MERIT IN THE SUBMISSIONS OF THE L D. AR THAT ALL THE PAYMENTS FOR THE PURCHASES HAVE BEEN MADE BY ACCOUN T PAYEE CHEQUES AND THE AMOUNT WHICH HAS BEEN DEBITED CANNOT BE CAL LED UNEXPLAINED EXPENDITURE. THE PROVISIONS OF SEC. 69(C) OF THE I. T. ACT, 1961 ARE VERY CLEAR AND UNAMBIGUOUS THAT WHAT IS OF CRUCIAL IMPORTANCE FOR INVOKING THE SAID PROVISION IS THE SOURCE OF SUCH U NEXPLAINED EXPENDITURE , I.E. WHETHER THE ASSESSING OFFICER HAS DETECTED A NY UNEXPLAINED PAYMENTS WHICH HAVE NOT BEEN REFLECTED / REFLECTED IN THE 5 BOOKS OF ACCOUNTS OF THE APPELLANT. THE ASSESSING O FFICER HAS NOT BEEN ABLE TO GATHER ANY EVIDENCE ON RECORD REGARDIN G ANY UNEXPLAINED MONEY, I.E., UNEXPENDITURE FOR INVOKING THE PROVISI ONS OF SEC. 69-C OF THE I.T. ACT, 1961. FURTHERMORE, THE ASSESSING OFFI CER HAS NOT BEEN ABLE TO PINPOINT OUT IN HER ASSESSMENT ORDER AS TO HOW THE PAYMENT WAS MADE FOR THE SO CALLED UNRECORDED PURCHASES / I NFLATED PURPOSES. 2.9 FOR THE REASONS GIVEN ABOVE, THE ADDITION OF RS .22,54,028/- ON ACCOUNT OF UNEXPLAINED PURCHASES IS HEREBY DELETED. 2.10 THE DIFFERENCE OF RS.1,33,936 FROM THE ACCOUNT S OF M/S SAVITA CHEMICALS HAS ARISEN DUE TO THE FACT THAT THE SAID CONCERN HAD CREDITED THE SAID BILL IN THE APPELLANTS SISTER CONCERN, NA MELY, RAJKAMAL PRODUCTS THROUGH OVERSIGHT. IN THIS RESPECT, THE NE CESSARY DOCUMENTARY EVIDENCE HAS BEEN PRODUCED AND THE APPELLANT CANNOT BE PENALIZED FOR THE SIMPLE REASON THAT M/S SAVITA CHEMICALS HAS NOT CHANGED THE NAME IN THEIR BOOKS OF ACCOUNTS. ACCORDINGLY, THE A DDITION OF RS.1,33,936 IN RESPECT OF UNEXPLAINED PURCHASES IS HEREBY DELETED. 2.11 ACCORDINGLY, THE TOTAL ADDITION OF RS.23,87,96 4 IS HEREBY DELETED OUT OF THE UNEXPLAINED PURCHASES. 4 THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT M/S POWER OIL PETROLEUM PRODUCTS HAVE TWO DIVISIONS M/S APAR INDUSTRIES LTD. AND M/S POWER OIL PETROLEUM PRODUCT S. THE ASSESSEE HAS MAINTAINED TWO ACCOUNTS IN THE NAMES O F APAR INDUSTRIES LTD. AND M/S POWER OIL PETROLEUM PRODUCT S WHILE M/S APAR INDUSTRIES LTD. IS MAINTAINING TWO ACCOUNTS AS ACCOUNT NO.1 AND ACCOUNT NO.2. IF BOTH THE ACCOUNTS ARE TAK EN TOGETHER, THE TOTAL PURCHASES AND SALES ARE RECONCILABLE AND THERE IS NO DIFFERENCE. FOR THIS OUR ATTENTION WAS DRAWN TO PAG ES-1, 3, 7, 11, 13 AND 14 OF THE PAPER BOOK. SIMILARLY OUR ATTENTIO N WAS ALSO DRAWN IN RESPECT OF ACCOUNT OF M/S SAVITA CHEMICALS AT PAGES-15 AND 19 AND ALSO COPY OF THE BILL AT PAGE-17 AND THU S IT WAS POINTED OUT THAT THERE IS NO DIFFERENCE IN THE ACCO UNTS. THE ASSESSING OFFICER MADE THE ADDITION WITHOUT UNDERST ANDING BOTH 6 THE ACCOUNTS. IN RESPECT OF OBSERVATIONS OF THE ASS ESSING OFFICER UNDER PARA-3.2 FOR THE SUM OF RS.2,42,171/-, RS.2,4 4,030/- AND RS.64,926/-, OUR ATTENTION WAS DRAWN TO THE COPY OF ACCOUNT AT PAGES-7 AND 8 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT THE FIRST TWO PAYMENTS WERE MADE AGAINST THE OPENING BA LANCE OF RS.4,86,200=93 WHILE THE PAYMENT OF RS.64,926/- WAS MADE AGAINST TWO PURCHASE BILLS DATED 23 RD FEBRUARY BEING 105177 AND 105178 OF RS.34,669 AND RS.30,257/-. FOR THE ENTRY OF RS.1,00,602 DATED 9-7-2003 IT WAS POINTED OUT THAT THIS ENTRY DOES NOT RELATE TO THE IMPUGNED ASSESSMENT YEAR AND IS DULY REFLECTED IN THE SUBSEQUENT PERIOD. IN RESPECT OF S AVITA CHEMICALS IT WAS POINTED OUT THAT THE DEBIT ENTRY I S DULY REFLECTED IN THE BOOKS OF THE ASSESSEE. THE ASSESSE E HAS ALSO CREDITED THE PARTY WHILE HE MADE THE PURCHASES ON 2 9-5-01 AND IS DULY DEBITED WHEN THE PAYMENT WAS MADE. IF THE PAR TY HAS NOT INCORPORATED THIS ENTRY IN HIS BOOKS, THE ASSESSEE CAN NOT BE PENALIZED FOR THAT. THUS, IT WAS CONTENDED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. THE LEARNED DR, ON T HE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER ESPECI ALLY THE OBSERVATIONS MADE BY THE ASSESSING OFFICER UNDER PA RAS-3.2 AND 3.3 AND CONTENDED THAT IT IS A FIT CASE FOR SUSTAIN ING THE ADDITION. THE CIT(A) WAS NOT CORRECT IN LAW IN DELETING THE A DDITION. 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH TH E PAPER BOOK PAGES AS HAVE BEEN REFERRED TO BY THE LEARNED AR. F ROM THE PAGES REFERRED WE NOTED THAT THE ENTRIES WHICH HAVE BEEN OBJECTED BY THE ASSESSING OFFICER ARE DULY RECONCIL ABLE AND THERE IS NO DIFFERENCE IN THE ACCOUNTS AS HAVE BEEN MENTI ONED BY THE 7 ASSESSING OFFICER. IN VIEW OF THESE FACTS, WE ARE O F THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE C IT(A) AND THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. THIS IS NO T A FIT CASE WHICH MAY WARRANT OUR INTERFERENCE. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). 6 IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-09-2009 SD/- SD/- (R V EASWAR) VICE-PRESIDENT (P K BANSAL) ACCOUNTANT MEMBER DATE : 18-09-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S RAJKAMAL INDUSTRIAL CO., 93, ARIHANT SOCIETY , VASNA, AHMEDABAD 2. THE ITO, WARD-10(1), AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XVI, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR, ITAT, AHMEDABAD