The DCIT, Circle-6, Surat V. M/s. Rupali Dyg.& Ptg.Mills, Surat

ITA 2851/AHD/2011

• Counselvise Citation: 285120514 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: JP SHAHAR
• Keywords: Income from undisclosed sources; Corroborative evidences; Retraction

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BENCH, AHMEDABAD , . .. . . .. . , , , , '# ' $ '# ' $ '# ' $ '# ' $ BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI T.R.MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.2851/AHD/2011 ( & ' (' & ' (' & ' (' & ' (' / / / / ASSESSMENT YEAR : 2008-09) DY.CIT CIRCLE-6 SURAT & & & & / VS. M/S.RUPALI DYG. & PTG. MILLS OPP. UNN JAKAT NAKA BHESTAN, SURAT ) '# ./*+ ./ PAN/GIR NO. : AACFG 9622 Q ( ), / // / APPELLANT ) .. ( -.), / RESPONDENT ) ), / ' / APPELLANT BY : SHRI J.P. JHANGID, SR.D.R. -.), 0 / ' / RESPONDENT BY : SHRI J.P. SHAH, A.R. &1 0 # / / / / DATE OF HEARING : 09/04/2014 23( 0 # / DATE OF PRONOUNCEMENT : 25/04/2014 '4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-IV, SURAT (CIT(A) FOR SHORT) DATED 28/07/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.15,55,285/- ON ACCOUNT OF VOLUNTARY DISCLOSURE O F UNACCOUNTED INCOME MADE BY THE ASSESSING OFFICER. ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 2 - 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.1,00,000/- LUMP-SUM ADDITION ON ACCOUNT OF FALL IN GP RATE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A)- IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING OFFICER. 4) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT-I V, SURAT MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. BRIEFLY STATED FACTS ARE THAT A SURVEY U/S.133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WA S CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 13/02/2008. D URING THE COURSE OF SURVEY PROCEEDINGS, A STATEMENT U/S.133A OF THE ACT WAS RECORDED OF SHRI BANSILAL MADANLAL JAIN, ONE OF THE PARTNERS OF THE ASSESSEE-FIRM, WHO ACCEPTED THAT THE FINISHED STOCK OF 4,80,915 METERS AND UNFINISHED STOCK OF 2,19,738 METERS WAS UNACCOUNTED. THE VALUE OF U NFINISHED STOCK @ ` 13/- PER METER WAS WORKED OUT AT RS.28,56,594/- AN D FINISHED STOCK @ ` 25/- PER METER WAS WORKED OUT AT RS.96,18,300. THE TOTAL UNACCOUNTED STOCK OF ` 1,24,74,894/- WAS ACCEPTED BY THE ASSESSEE AS ITS U NACCOUNTED INCOME FOR THE F.Y. 2007-08. THEREAFTER, THE ASSE SSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.94,28,205/- AND THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. THE ASSESSMENT U /S.143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 30/11/2010, THEREBY THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF VOLUNTARY DISCLOSURE OF UNACCOUNTED INCOME OF RS.15,55,285/-, LUMP-SUM ADDITION ON ACCOUNT OF REJECTION OF FALL IN GP RATE OF RS.1 LAC, DISALLOWANCE OUT OF EXPENSES C LAIM DUE TO NON- BUSINESS USE OF RS.92,163/- AND ADDITION OF UNPAID EMPLOYEES CONTRIBUTION OF RS.2,53,221/-. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 3 - THE ASSESSEE PARTLY ALLOWED THE APPEAL. NOW, THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 3. THE FIRST GROUND OF REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.15,55,285/- MADE ON ACCOUNT OF DISCL OSURE MADE IN RESPECT OF UNACCOUNTED STOCK. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITT ED THAT THE ASSESSEE HIMSELF HAS GIVEN THE VALUE AS PER HIS STATEMENT DU RING THE COURSE OF SURVEY. THE ASSESSEE CANNOT BE ALLOWED TO TAKE A D IFFERENT STAND THAT WAS TAKEN DURING THE COURSE OF SURVEY. HE SUBMITTED THAT THE AO WAS JUSTIFIED IN MAKING THE ADDITION. 4. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SHR I J.P. SHAH SUBMITTED THAT THERE IS NO DISPUTE IN RESPECT OF TH E QUANTITY OF STOCK BUT DISPUTE IS WITH REGARD TO VALUATION ADOPTED BY THE REVENUE AND THE VALUE DECLARED BY THE ASSESSEE BY FURNISHING THE REQUISIT E DOCUMENTARY EVIDENCE. HE SUBMITTED THAT DURING THE COURSE OF SURVEY, THE VALUE OF THE STOCK WAS WORKED OUT ON THE BASIS OF ESTIMATION ONLY. HE FURTHER SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN NOT APPR ECIATING THE SUBMISSIONS OF THE ASSESSEE. HE SUBMITTED THAT D URING THE COURSE OF SURVEY, THE ASSESSEE CLEARLY DISCHARGED THE ONUS OF PROVING THE FACT THAT THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY FETCHED A VALUE OF RS.1,09,19,609/- AND THE VALUE OF THE SAID STOCK WA S TAKEN ON AN ESTIMATED BASIS AT RS.1,24,74,894/- DURING THE COUR SE OF SURVEY. HE SUBMITTED THAT THE AO FAILED TO APPRECIATE THE FACT THAT THE ENTIRE STOCK OF 2,19,711 MTS. OF GREY CLOTH AND 4,80,773 MTS. OF FI NISHED FABRICS WAS ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 4 - FULLY OFFERED AS ADDITIONAL INCOME. HE SUBMITTED THAT THE AO WAS APPRISED OF THE FACT THAT THE ENTIRE EXCESS STOCK W AS NOT OF THE SAME QUALITY AND DIFFERENT DESIGNS AND PATTERNS WOULD FE TCH DIFFERENT RATES HOWEVER, DURING THE COURSE OF SURVEY A SINGLE RATE OF RS.13/- PER METRE FOR GREY CLOTH AND RS.20/- PER METRE FOR FINISHED F ABRICS WAS TAKEN ON AN ESTIMATED BASIS, UNIFORMLY FOR THE ENTIRE STOCK. H E SUBMITTED THAT THE ESTIMATION CANNOT OVERRIDE THE ACTUAL VALUE AND SUP PORTED WITH THE EVIDENCES. HE SUBMITTED THAT ACTUAL VALUE REALIZED ON EXCESS STOCK WAS OFFERED FOR TAX AND THE ASSESSEE HAD FURNISHED IN S UPPORT OF THE SALES OF THE EXCESS STOCK, NAMES AND ADDRESSES OF THE PERSON S TO WHOM THE SAID CLOTH WAS SOLD, COPY OF SALES BILLS, CONFIRMATION O F THE SALES PARTIES AND PROOF OF PAYMENT RECEIVED BY ACCOUNT PAYEE CHEQUE. THEREFORE, HE SUBMITTED THAT THE LD.CIT(A) WAS JUSTIFIED IN DELET ING THE ADDITION. FURTHER, TO BUTTRESS HIS CONTENTION, HE RELIED ON T HE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. A.RAMAN & CO. REPORTED AT 67 ITR 11 (SC). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE HAS F URNISHED THE SUPPORTING EVIDENCES IN RESPECT OF THE SALE VALUE O F THE UNACCOUNTED STOCK. THE AO HAS NOT MADE ANY ENQUIRY ON THE EVID ENCES GIVEN BY THE ASSESSEE. THE HONBLE APEX COURT IN THE CASE OF CI T VS. RAMAN & CO. REPORTED AT 67 ITR 11 HAS HELD THAT THE LAW DOES NO T OBLIGE A TRADER TO MAKE THE MAXIMUM PROFIT THAT HE CAN OUT OF HIS TRAD ING TRANSACTIONS. INCOME WHICH ACCRUES TO A TRADER IS TAXABLE IN HIS HANDS : INCOME WHICH ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 5 - HE COULD HAVE, BUT HAS NOT EARNED IS NOT MADE TAXAB LE AS INCOME ACCRUED TO HIM. WE FIND THAT THE LD.CIT(A) HAS OBSERVED T HAT THE ASSESSEE IN ITS RETURN OF INCOME OFFERED FOR TAXATION THE SALE VALU E OF UNDISCLOSED STOCKS DISCOVERED DURING SURVEY AND NOT THE FULL VALUE OF INVESTMENT IN UNDISCLOSED STOCK. THIS HAS BEEN TREATED BY THE AO AS RETRACTION FROM STATEMENT MADE DURING SURVEY. THE APPELLANTS CONT ENTION THAT THE UNACCOUNTED STOCK FOUND DURING SURVEY (VALUED AT ` 1,24,74,894/-) WAS SOLD WITHIN THE YEAR FOR ` 1,09,19,609/-, AND FOR WHICH FULL DETAILS OF SALES WERE PROVIDED, HAS NOT BEEN DISPROVED BY THE A.O. THERE IS NO DIFFERENCE BETWEEN QUANTITY OF UNEXPLAINED STOCK DI SCOVERED DURING SURVEY AND QUANTITY OF STOCK SOLD AS OFFERED IN RET URN OF INCOME. SINCE THE UNACCOUNTED STOCK HAD BEEN SOLD DURING THE YEAR , THE APPELLANT WAS REQUIRED TO PASS THREE ENTRIES IN ITS ACCOUNTS CR EDIT OF ` 1,24,74,894/- ON ACCOUNT OF VALUE OF UNEXPLAINED STOCK FOUND DURING SURVEY, DEBIT ENTRY OF ` 1,24,74,894/- TOWARDS COST OF GOODS SOLD AND AGAIN CREDIT ENTRY OF ` 1,09,19,609/- IN RESPECT OF SALE OF THE SAME STOCK INSTEAD OF WHICH IT HAS PASSED JUST ONE CREDIT ENTRY OF ` 1,09,19,609/- TOWARDS SALE PROCEEDS WHICH HAS LED TO THE CONFUSION THAT INCOME DISCLOSE D HAS BEEN RETRACTED WHEN IN EFFECT ONLY THE CONTRA ENTRIES OF ` 1,24,74,894/- HAVE BEEN IGNORED BY THE APPELLANT. THIS MAKES NO DIFFERENCE TO THE INCOME WHICH WOULD ULTIMATELY ARISE TO THE APPELLANT DURING THE YEAR FROM UNEXPLAINED STOCKS DISCOVERED DURING SURVEY. THIS FINDING ON FACT OF LD.CIT(A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY MATE RIAL ON RECORD TO REBUTTING THE CLAIM OF THE ASSESSEE THAT THE UNACCO UNTED STOCK WAS SOLD AT HIGHER THAN RS.1,09,19,609/-. THE ARGUMENT OF TH E REVENUE IS THAT THE UNACCOUNTED STOCK HAS BEEN SOLD WITHIN A SHORT SPAN OF TIME WHICH GIVES ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 6 - RISE TO SUSPICION. THIS ARGUMENT OF THE REVENUE IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT NO ENQUIRY HAS BEEN MADE BY THE AO TO ASCERTAIN WHETHER THE UNACCOUNTED STOCK WAS SOLD TO THE PARTIES AND A T A VALUE AS DECLARED BY THE ASSESSEE. THE REVENUE HAS NOT BROUGHT ANY M ATERIAL ON RECORD SUGGESTING THAT THE CLAIM OF THE ASSESSEE IS FALSE OR WITHOUT ANY BASIS. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, THIS GROUND OF REVENU ES APPEAL IS DISMISSED. 6. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.1 LAC MADE ON ACCOUNT OF FALL IN GP RATE. 6.1. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO, W HEREAS THE LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT A CATEGO RICAL FINDING HAS BEEN GIVEN BY THE LD.CIT(A) THAT NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO IN HIS ORDER. UNDER THESE CIRCUMSTANCES, THE A O WAS NOT JUSTIFIED IN MAKING THE ADDITION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE I N PARA-5 OF HIS ORDER, BY OBSERVING AS UNDER:- 5. GROUND NO.2 IS AGAINST THE A.O. MAKING A LUMP S UM ADDITION OF ` 1,00,000/- ON ACCOUNT OF FALL IN G.P. THE A.O. OBSERVED THAT THE G.P. RATE HAD FALLEN FROM 13.58% IN THE PRECEDING YEAR A.Y. 2007-08 TO 10.09% IN CURRENT YE AR, ALTHOUGH ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 7 - TURNOVER HAD REMAINED CONSTANT. IN RESPONSE TO THE SHOW CAUSE, IT WAS EXPLAINED BY THE APPELLANT THAT IN THE PRECEDIN G YEAR ONLY PROCESSING OF CLOTH ON JOB WORK BASIS WAS DONE WHER EAS DURING THE YEAR BOTH MANUFACTURING FOR SELF AND PROCESSING ON JOB WORK BASIS WAS DONE. IT WAS ALSO SUBMITTED THAT THIS IS EVIDE NT FROM UNACCOUNTED FINISHED FABRICS FOUND AND OFFERED AS I NCOME DURING SURVEY. IT WAS SUBMITTED THAT COMPARISON OF G.P. F ROM CLOTH PROCESSING ON JOB WORK BASIS FOR THE TWO YEARS SHOU LD BE MADE AFTER THE MANUFACTURING AND OPERATIONS EXPENSES ATT RIBUTABLE TOWARDS OWN FINISHED FABRICS ARE REDUCED. THE ASSE SSEE SUBMITTED CALCULATION OF G.P. ON THIS BASIS WHICH SHOWED THA T G.P. FOR THE YEAR ON PROCESSING JOB WORK ACTIVITY WAS 13.52%. I T WAS ALSO SUBMITTED THAT ANY PROPOSED ADDITION ON ACCOUNT OF FALL IN GP BE TELESCOPED I THE DISCLOSURE OF INCOME OF ` 1,09,19,609/-. THE A.O. MENTIONS THAT THE ARGUMENT OF THE ASSESSEE IS FOUND TO BE BROADLY ACCEPTABLE BUT FALL IN G.P. INDICATES SUPPRESSION O F INCOME AND THEREFORE MADE A LUMP SUM ADDITION OF ` 1,00,000/-. DURING THE COURSE OF APPEAL PROCEEDINGS SIMILAR ARGUMENTS AS I N ASSESSMENT WERE FORWARDED. HAVING GONE THROUGH THE FACTS OF T HE CASE, THE REASONS GIVEN BY THE A.O. AND SUBMISSIONS OF THE AP PELLANT, IT IS HELD THAT NO SUCH ADDITION ON ACCOUNT OF FALL IN GP WAS WARRANTED BECAUSE THE EXPLANATION GIVEN BY THE ASSESSEE WAS BROADLY ACCEPTABLE TO THE A.O. AND HE HAS NOT GIVEN ANY RE ASON FOR PARTIAL NON-ACCEPTANCE NOR HAS HE SHOWN ANY SPECIFI C DEFECTS IN THE BOOKS. THE ADDITION MADE IS DELETED. THIS GRO UND IS ALLOWED. 7.1. HOWEVER, THE AO BROADLY ACCEPTED THE ARGUMENT OF THE ASSESSEE, BUT HE PROCEEDED TO MAKE A LUMP SUM ADDITION OF RS. 1 LAC. 7.2. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING LUMP S UM ADDITION WITHOUT POINTING OUT ANY SPECIFIC DEFECT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME IS HEREBY UPHE LD. THUS, GROUND OF REVENUES APPEAL IS REJECTED. ITA NO.2851/AHD /2011 DY.CIT VS. M/S.RUPALI DYG. & PTG. MILLS ASST.YEAR 2008-09 - 8 - 8. GROUND NOS.3 & 4 ARE GENERAL IN NATURE NEED NO I NDEPENDENT ADJUDICATION. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 25/04/2014 ..&, .&../ T.C. NAIR, SR. PS '4 0 -7 8'7( '4 0 -7 8'7( '4 0 -7 8'7( '4 0 -7 8'7(/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-IV, SURAT 5. 7: -& , , / DR, ITAT, AHMEDABAD 6. :;' <1 / GUARD FILE. '4& '4& '4& '4& / BY ORDER, .7 - //TRUE COPY// = == =/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 10.4.14 (DICTATION-PAD 19- P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.4.14/17.4.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.25.4.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.4.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER