Vitthal Appaji Jakhadi, Nashik V. ACIT, Cir.-1, Nashik

ITA 276/PUN/2007

• Counselvise Citation: 27624514 RSA 2007
• Duration Of Justice: 4 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 15-02-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C SHIVGUNDE
• Keywords: Unexplained investment; Business income
• Section: 133A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 157/PN/2007 : A.Y. 2002-03 ASSTT. CIT CIR. 1, NASIK APPELLANT VS. SHRI SURESH ANANT JAKHADI PROP. M/S. VITHAL APPAJI JAKHADI JAKHADI CORNER, RAKA COLONY NASIK PAN AABHJ 1507 J RESPONDENT I.T.A. NO. 276/PN/2007 : A.Y. 2002-03 SHRI SURESH ANANT JAKHADI PROP. M/S. VITHAL APPAJI JAKHADI JAKHADI CORNER, RAKA COLONY NASIK PAN AABHJ 1507 J APPELLANT VS. ASSTT. CIT CIR. 1, NASIK RESPONDENT DEPARTMENT BY : SHRI S.C. SHIVGUNDE ASSESSEE BY : SHRI C.H. NANIWADEKAR DATE OF HEARING: 1-8-2011 DATE OF PRONOUNCEMENT: 30-8-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM THESE CROSS APPEALS ARISE OUT OF ORDER OF CIT(A)-I NASIK DATED 30-11-2006 FOR A.Y. 2002-03. SO THESE WERE HE ARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 2. IN REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT UNRECORDED SALES SHALL COVER THE UNRECORDED PURCHASES, THEREFORE THE ADDITION TOWARDS UNRECORDE D PURCHASES IS NOT JUSTIFIED; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE, THE CIT(A) HAS ERRED IN NOT CONSIDERING THE F ACTS THAT SOURCE OF INVESTMENT IN UNRECORDED PURCHASES, IS UNEXPLAINED. 3. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDE R OF A.O. 3. IN ASSESSEES APPEAL, ASSESSEE HAS RAISED THE FO LLOWING GROUNDS. 1. THE LEARNED CIT(A) ERRED IN CANCELLING THE ADDI TION ON ACCOUNT OF UNEXPLAINED PURCHASES ONLY IN PART. 2. HE FAILED TO APPRECIATE THAT THE UNEXPLAINED PURCHASES (EXCLUDING G.P. ON UNACCOUNTED SALES AND AMOUNT OF SEED CAPITAL) AMOUNTS ONLY TO RS. 6,97,614/-. 3. FURTHER, THE ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES (INCLUDING SEED CAPITAL OFFERED AT RS. 3,50,000/-) SHOULD LOGICALLY RESTRICT TO THE VALUE OF EXCESS CLOSING STOCK OVER AND ABOVE THE VALUE OF CLOSING STOCK AS PER REGULAR TRADING ACCOUNT (AS PE R BOOKS) FOR THE PERIOD UPTO THE DATE OF SURVEY, WHIC H AMOUNTS ONLY TO RS. 11,66,703/-. 4. THE LEARNED CIT(A) ERRED IN REJECTING THE APPELLANTS CLAIM FOR CANCELLATION OF ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION O F BUILDING ETC. AS UNDER: BUILDING FURNITURE ELECTRIFICATION 3 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 5. HE FAILED TO APPRECIATE THAT THE ENTIRE INVESTME NT WAS MADE FROM REGULAR BANK ACCOUNT OF THE ASSESSEE HELD BY HIM IN HIS INDIVIDUAL CAPACITY, WHERE IN TH E DEPOSITS MADE REPRESENTED SALE PROCEEDS OF LAND. 6. THE LEARNED CIT(A) ERRED IN RETAINING THE ADDITI ON ON ACCOUNT OF ALLEGEDLY EXCESS CASH BALANCE OF RS. 3,62,921/- WHEN IN FACT THE CASH BALANCE AS PER REGULAR BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY MATCHES THE CASH ALANCE SHOWN IN THE BOOKS ON THAT DAY. 7. THE LEARNED CIT(A) ERRED IN RETAINING THE ADDITI ON OF RS. 1,50,000/- ON ACCOUNT OF UNEXPLAINED ADVERTISEMENT EXPENDITURE WHEN IN FACT THE AMOUNT O F RS. 50,000/- OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME WAS SUFFICIENT TO COVER SUCH. 8. THE LEARNED CIT(A) ERRED IN NOT GIVING PROPER OPPORTUNITY TO PRODUCE BEFORE HIM THE REGULAR BOOKS OF ACCOUNTS AND OTHER EVIDENCE IN SUPPORT OF VARIOUS CLAIMS MADE BY THE APPELLANT. 9. ALL ADDITIONS MAY BE CANCELLED. 4. THE ASSESSEE CARRIES ON BUSINESS OF TRADING IN S ILVER WARES, GOLD ORNAMENTS ETC. SURVEY U/S 133A WAS CARR IED OUT ON 30-10-2001. DURING THE COURSE OF SURVEY OPE RATION, STATEMENT OF KARTA OF THE HUF SURESH JAKHADI WAS RECORDED, INTER ALIA HE HAD DECLARED ADDITIONAL INC OME OF RS. 58,71,816/-, ON ACCOUNT OF INVESTMENT MADE IN UNEXPLAINED PURCHASES. HOWEVER, WHILE FILING THE RE TURN, THE ASSESSEE HAD DECLARED ADDITIONAL INCOME ON ACCO UNT OF DIFFERENCE IN STOCK AT RS. 14,28,986/-IN TRADING AC COUNT AND ALSO DECLARED AN AMOUNT OF RS. 50,000/- TOWARDS EXPENSES, COMMISSION. THE ASSESSEE RETRACTED THE I NCOME DECLARED DURING THE COURSE OF SURVEY OPERATION. TH E 4 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 ASSESSING OFFICER PASSED AN ORDER U/S 144 AND MADE THE ADDITIONS OF RS. 23,64,189/- ON VARIOUS ACCOUNTS. 4.1. ON APPEAL, THE CIT(A) GAVE RELIEF TO THE EXTE NT OF RS. 18,35,760/- BY OBSERVING AS UNDER: IT IS NOTICED THAT WHILE ARRIVING AN UNRECORDED PURCHASES THE A.O HAD CONSIDERED THE PURCHASES AS PER THE AUDITED BOOKS RS. 11,26,730/-, HOWEVER, HE HAS NOT CONSIDERED THE SALES AS PER THE AUDITED BOO KS RS. 9,60,069/- TO ARRIVE AT UNRECORDED SALES. THE UNRECORDED SALES OUT OF THE BOOKS ARE THEREFORE RS. 27,79,960/- I.E. TOTAL SALES RS. 37,40,018/- REDUCE D BY SALES RECORDED IN BOOKS RS. 9,60,058/-. THE PROCEEDS OF UNRECORDED SALES SHALL COVER THE UNRECORDED PURCHASES TAXED BY THE A.O. THEREFORE, THE ADDITION TOWARDS UNRECORDED PURCHASES IS NOT JUSTIF IED AND HENCE DELETED SUBJECT TO THE ADDITION OF GROSS PROFIT ON UNRECORDED SALES OF RS. 27,79,960/- AT 6. 2% I.E. RS. 1,789,473/- AND FURTHER ADDITION TOWARDS S EED CAPITAL RS. 3,50,000/- AS ESTIMATED BY THE APPELLAN T HIMSELF IN HIS WRITTEN SUBMISSION DATED 29-11-2006. THE CONTENTION RAISED BY THE APPELLANT THAT PROFIT ON RECORDED SALES PLUS SEED CAPITAL REQUIRED TO RUN TH E BUSINESS CAN ONLY BE TAXED AS UNDISCLOSED INCOME IS ACCEPTED. THE FORTH GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. THE APPELLANT GETS RELIEF OF RS. 23,64,189/- - 1,78,473/- - 3,50,000/- = 18,35,760/- . 4.2. THE LEARNED DR FOR THE REVENUE HAS SUPPORTED T HE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED CO UNSEL FOR THE ASSESSEE OPPOSED THE PARTIAL SUSTENANCE OF ADDI TION MADE BY THE ASSESSING OFFICER. 4.3. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN GIVING PARTIAL RELIEF TO THE ASSESSEE. 5 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 WHILE ARRIVING AT UNRECORDED PURCHASES, THE ASSESSI NG OFFICER HAS CONSIDERED THE PURCHASES FOR AUDITED BO OKS AT RS. 11,26,730/- BUT HE HAS NOT CONSIDERED SALE AS P ER AUDITED BOOKS OF RS. 9,60,069/- TO ARRIVE AT UNRECO RDED SALES. THE UNRECORDED SALES OUT OF THE BOOKS ARE T HEREFORE, RS. 27,79,960/- I.E. TOTAL SALES RS. 37,40,018/- RE DUCED BY SALE RECORDED IN THE BOOKS AT RS. 9,60,058/-. THE PROCEEDS OF UNRECORDED SALES WAS COVERED UNRECORDED PURCHASE S BOOKS BY THE ASSESSING OFFICER. THEREFORE, THE ADDI TION TOWARDS UNRECORDED PURCHASES WAS NOT VALID AND HENC E THE CIT(A) DELETED SUBJECT TO ADDITION OF UNRECORDED SA LES OF RS. 27,29,960/- AT 6.42% I.E. RS. 1,78,473/- AND FU RTHER ADDITION TOWARDS SEED CAPITAL RS. 3,50,000/- AS EST IMATED BY THE ASSESSEE HIMSELF IN HIS WRITTEN SUBMISSIONS DATED 29-11-2006. ACCORDINGLY, THE CIT(A) ACCEPTED THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE THAT TH E PROFIT OF UNRECORDED SALES PLUS SEED CAPITAL REQUIRED TO R UN THE BUSINESS CAN ONLY BE TAXED AS UNDISCLOSED INCOME WA S FOUND ACCEPTABLE. ACCORDINGLY THE ASSESSEE WAS GRAN TED RELIEF OF RS. 18,35,760/-. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. THE SAME IS UP HELD. ITA NO. 276/PN/2007 (ASSESSEES APPEAL) 5. THE GROUND NO. 1 TO 3 RAISED BY THE ASSESSEE WIT H RESPECT TO UNEXPLAINED PURCHASES AMOUNTING TO RS. 6 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 6,97,614/- WAS NOT PRESSED BY THE LEARNED COUNSEL F OR THE ASSESSEE. THE SAME IS THEREFORE, DISMISSED AS NOT PRESSED. 6. THE NEXT GROUND IS WITH REGARDS TO REJECTION OF ASSESSEES CLAIM FOR CANCELLATION OF ADDITION ON AC COUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDING. DURING THE SURVEY ACTION, THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS. 10,32,742/- TOWARDS UNEXPL AINED INVESTMENT IN CONSTRUCTION. SINCE THERE WAS NO RE SPONSE FROM THE ASSESSEES SIDE TO THE LETTER DATED 6-11-2 006 SENT BY THE ASSESSING OFFICER, THE ASSESSING OFFICER MAD E THE ADDITION OF RS. 10,32,742/- WHICH WAS CONFIRMED BY THE CIT(A). THE SAME HAS BEEN OPPOSED BY THE ASSESSEE BEFORE US. 6.1. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN UPHOLDING THE ADDITION OF RS . 10,32,742/- MADE ON ACCOUNT OF UNEXPLAINED INVESTME NT IN CONSTRUCTION. THE ASSESSEE AVOIDED TO APPEAR BEFORE THE ASSESSING OFFICER AND MADE THE CLAIM FOR THE FIRST TIME BEFORE THE FIRST APPELLATE AUTHORITY WHICH IS AN AFTERTHOUGHT. IT WAS CONTENDED THAT THE INVESTMENT IN CONSTRUCTION WAS IN HIS INDIVIDUAL CAPACITY OUT OF THE SALE PROCEEDS OF THE PLOTS. HOWEVER, THE ASSESSEE HAS N OT 7 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 BROUGHT OUT ANYTHING ON RECORD TO ESTABLISH THAT TH E CONSTRUCTION WAS IN HIS INDIVIDUAL CAPACITY OUT OF THE PROCEEDS OF THE PLOTS. IN THIS VIEW OF THE MATTER, THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE IN RES PECT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION TO THE EXTEN T OF RS. 10,32,742/. THIS GROUND OF THE ASSESSEE IS THUS RE JECTED. 10. THE NEXT GROUND IS WITH REGARDS TO RETENTION OF ADDITION ON ACCOUNT OF ALLEGEDLY EXCESS CASH BALANC E OF RS. 3,62,921/-. IN THIS CONNECTION THE ASSESSEE HAS NOT RAISED ANY SPECIFIC GROUND BEFORE THE LOWER AUTHORITIES. THE CIT(A) OBSERVED THAT NO ADDITIONAL INCOME WAS SHOWN IN THE RETURN OF INCOME ON THIS COUNT. IN VIEW OF THI S, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) I N RETAINING THE ADDITION OF RS. 3,62,921/- ON ACCOUNT OF ALLEGE DLY EXCESS CASH BALANCE. THE SAME IS UPHELD. 7. THE NEXT ISSUE IS WITH REGARDS TO RETENTION OF A DDITION OF RS. 1,50,000/- ON ACCOUNT OF UNEXPLAINED ADVERTI SEMENT EXPENDITURE. DURING THE SURVEY ACTION THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS. 2,00,000/- TOWARD S UNEXPLAINED ADVERTISEMENT EXPENSES AND OTHER EXPENS ES. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD H IMSELF OFFERED TO TAX AND HENCE, ADDED A SUM OF RS. 1,50,0 00/- ON THIS COUNT. ON APPEAL, THE CIT(A) UPHELD THE ADDIT ION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 8 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 I HAVE CAREFULLY CONSIDERED THE CLAIM OF THE APPEL LANT, THE ASSESSMENT ORDER OF THE A.O., THE REMAND REPORT FILED BY THE A.O., THE STATEMENT OF THE APPELLANT A ND DECLARATION OF ADDITIONAL INCOME GIVEN BY THE APPEL LANT DURING THE COURSE OF SURVEY ACTION. ON PERUSAL OF ALL THE ABOVE RECORD I AM OF THE CONSIDERED VIEW THAT T HE CLAIM OF THE APPELLANT AT THE APPELLATE STAGE IS NO T ACCEPTABLE. IT APPEARS FROM THE STATEMENT RECORDED ON OATH OF THE APPELLANT REPRODUCED ABOVE THAT THE SUR VEY PARTY NOTICED THAT THE APPELLANT REGULARLY ADVERTIS ED HIS BUSINESS IN NEWSPAPERS AND HENCE POINTED OUT TH IS FACT TO THE APPELLANT. THE APPELLANT IN HIS STATEM ENT ON OATH STATED THAT SUCH UNRECORDED ADVERTISEMENT AND OTHER EXPENDITURE IS ABOUT RS. 2 LAKHS AND HENC E DECLARED SAME AS HIS ADDITIONAL INCOME. FROM THE AUDITED PROFIT AND LOSS ACCOUNT IT IS NOTICED THAT THE ADVERTISEMENT EXPENSES DEBITED WERE ONLY RS. 5,500/ -. CONSIDERING THE ABOVE FACTS, THE SEVENTH GROUND OF APPEAL OF THE APPELLANT IS REJECTED. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE REASONED ORDER OF THE CIT(A). THE SAME IS UPHELD. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A S WELL AS ASSESSEE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 30 TH AUGUST 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-I NASIK 4. THE CIT I NASIK 5. THE D.R, ITAT A BENCH, PUNE 9 ITA NO.157 AND 276/PN/2007 JAKHADI A.Y. 2002-03 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL