Shri Kirit C. Bhimani L/h. of late C. P. Bhimani, Ahmedabad V. THE ACIT, CEN. CIR. -2(3), Ahmedabad

ITA 2891/AHD/2003

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8817 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 19-06-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V C MODI
• Keywords: Unexplained expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.2891& 2832/AHD/2003 ASSESSMENT YEAR: 1995-96 DATE OF HEARING:2.3.10 DRAFTED:2.3.10 SHRI CHAMPAKLAL P BHIMANI, G-13, MADHUPURA MARKET, SHAHIBAUG, AHMEDABAD PAN NO. NOT FOUND INCOME TAX OFFICER, WARD-2(4), AHMEDABAD V/S . V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(3), AHMEDABAD LT. SHRI CHAMPAKLAL P BHIMANI, G-13, MADHUPURA MARKET, AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI DHIREN SHAH, AR REVENUE BY:- SHRI V.C.MODI, ADDL. CIT O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE CROSS APPEALS ONE BY THE ASSESSEE AND OTHE R BY THE REVENUE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-IX, AHMEDABAD IN APPEAL NO. CIT(A)-IX/2(3)/14/98-99 DATED 24-03-2003 . THE ASSESSMENT WAS FRAMED BY THE ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD U/S.143 (3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 24-03-1998 FOR THE ASSESSMENT YEAR 1995-96. FIRST WE WILL DEAL WITH ASSESSEES APPEAL IN ITA NO .2891/AHD/2003. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN REGARD TO TELESCOPING NOT ALLOWED BY THE ASSESSING OFFICER AS WELL, AS AGAINST THE CASH AVAILABLE WITH THE ASSESSEE ON ACCOUNT OF DISC LOSURE IN THE FIRM TO THE EXTENT OF ITA NO.2891 & 2832/AHD/2003 A.Y. 1995-96 SH. CHAMPAKLAL P BHIMANI V. ACIT CC-2(3) ABD PAGE 2 RS.6,64,546/- I.E. M/S. SHAH CHEMICALS. BEFORE US THE FOLLOWING EFFECTIVE TWO GROUNDS RAISED BY THE ASSESSEE:- I. DENIAL OF TELESCOPING EFFECT OF UNEXPLAINED ASS ETS WITH THE CASH FUNDS AVAILABLE WITH SMT. CHANDRIKABEN C B HIMANI 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO GIVE THE TELESCOPING EFFECT OF UNEXPLAINED ASSETS WITH THE C ASH FUNDS AVAILABLE WITH SMT. CHANDRIKABEN C BHIMANI ON THE OBSERVATION THAT THERE IS APPARENT FALLACY IN THE APPELLANTS CONTENTION AND CLAIM. 2. THE LEARNED CIT(A) AS WELL AS THE A.O FAILED TO CONSIDER THE FACT THAT THE UNEXPLAINED ASSETS OF RS.2,00,000/- FOUND DURING TH E COURSE OF SEARCH PROCEEDINGS HAS BEEN TELESCOPED WITH THE CASH AVAIL ABLE WITH APPELLANTS WIFE WHICH WAS RECEIVED FROM FIRM M/S. SHAH CHEMICA LS IN THE CAPACITY OF A PARTNER AND THE NECESSARY EFFECT FOR THE SAME HAS ALREADY BEEN GIVEN IN THE BOOKS OF ACCOUNT. II. ADDITION ON ACCOUNT OF UNEXPLAINED ASSETS RS. 17,000/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN PARTLY CONFIRMING THE ADDITION OF RS.17,000/-/ 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO GIVE THE TELESCOPING EFFECT OF UNEXPLAINED ASSETS WITH THE C ASH FUNDS AVAILABLE WITH SMT. CHANDRAIKABEN C BHIMANI, WIFE OF THE APPELLANT , AS AGAINST THE ADDITION BEING CONFIRMED BY THE CIT(A). 3. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN THE FIRM M/S. SHAH CHEMICALS THERE WAS AVAILABILITY OF FUNDS TO THE EXTENT OF RS.6,64,546/ -, WHICH IS EVIDENT FROM THE TRIBUNALS ORDER IN ITA NO.2892/AHD/2003 DATED 31-03-2008 FOR ASSESSMENT YEAR 1995-96 AND WE FIND THAT THE ASSESSEE HAS ALREADY A VAILED THE BENEFIT OF TELESCOPING TO THE EXTENT OF RS.4,51,500/- VIDE AOS ORDER DAT ED 30-12-2009. THE RELEVANT DIRECTIONS OF TRIBUNAL IN PARA-3 WAS AS UNDER:- 3. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE IT IS NOTICED THAT DURING THE COURSE OF SEARCH PROCEEDINGS THE PHYSICA L VERIFICATION OF STOCK OF VARIOUS CONCERNS OF SHAH BHIMANI GROUP INCLUDING TH AT OF M/S. SHAH CHEMICALS IN WHICH THE ASSESSEES IS A PARTNER HAS BEEN CARRIED OUT M/S SHAH CHEMICALS SUBMITTED RECONCILIATION STATEMENT R EGARDING DISCREPANCY SHORTAGE/EXCESS OF VARIOUS ITEMS ON THE BASIS OF CO MPARISON OF BOOK STOCK AND PHYSICAL STOCK AS TAKEN BY THE SEARCH PARTY ON THE BASIS OF SUCH RECONCILIATION STATEMENT THE FIRM SHAH CHEMICALS HA S TREATED A SHORTAGE ON STOCK AS CASH SALES AND TREATED THE EXCESS STOCK AS UNEXPLAINED. IT WAS PURCHASED FROM THE CASH AVAILABLE ON ACCOUNT OF SHO RTAGE OF STOCK, WHICH WAS TREATED AS CASH SALES. AFTER GIVING EFFECT IN THE B OOKS OF SHAH CHEMICALS, THE CASH TO THE EXTENT OF RS8,64,543/- WAS AVAILABLE WI DTH THE PARTNERS OF THE FIRM OUT OF WHICH THE A SUM OF RS6,64,546/- HAS BEEN WIT HDRAWN BY THE ASSESSEE. ITA NO.2891 & 2832/AHD/2003 A.Y. 1995-96 SH. CHAMPAKLAL P BHIMANI V. ACIT CC-2(3) ABD PAGE 3 THE ASSESSEE HAS NOW CLAIMED THE AVAILABLE CASH IN HAND AS INVESTED IN THE UNEXPLAINED ASSETS FOUND DURING THE COURSE OF SEARC H. FROM THE ORDER OF THE TRIBUNAL IN THE CASE OF SHAH CHEMICALS, SUPRA IT IS NOTICED THAT THE TRIBUNAL HAS GIVEN A DEFINITE FINDING (AS REPRODUCED ABOVE) THAT CASH AVAILABLE ON ACCOUNT OF STOCK UTILIZED FOR ACQUIRING THE EXCESS WAS TO THE TUNE OF RS.6,38,398/- WHICH IS AVAILABLE ON ACCOUNT OF UNAC COUNTED SALES. IT IS NOT THE CASE OF THE REVENUE THAT THIS CASH IN THE HANDS OF SHAH CHEMICALS HAS BEEN UTILIZED BY THE FIRM M/S SHAH CHEMICALS IN ACQUIRIN G ANY ASSETS OR WHICH IS UTILIZED FOR ANY EXPENDITURE. THE TRIBUNALS FINDIN G IS VERY MUCH AVAILABLE THAT CASH TO THE EXTENT OF RS.6,38,398/- IS AVAILABLE WH ICH CAN EXPLAIN THE UNEXPLAINED ASSETS WORTH RS.6,01,500/- AND FOR THE SAME THE CIT(A) SHOULD HAVE ALLOWED THE SET OFF. IN VIEW OF THESE FACTS AN D CIRCUMSTANCES WE FAIRLY FEEL THAT THE ASSESSEE SHOULD BE GIVEN TELESCOPING EFFECT. HOWEVER, AS A MATTER OF CAUTION WE SET ASIDE THIS ISSU9E TO THE F ILE OF ASSESSING OFFICER TO VERIFY WHETHER M/S. SHAH CHEMICALS HAS UTILIZED THI S CASH IN HAND ON ACCOUNT OF SALE OF UNACCOUNTED SALES OR NOT. WHETHER M/S. S HAH CHEMICALS HAS SPENT THIS AMOUNT ON ACCOUNT OF UNACCOUNTED EXPENDITURE O R NOT AND THE ASSESSING OFFICER WILL FIND FROM THE SEARCH MATERIAL IN THESE GROUP CASES. IN VIEW OF THESE DIRECTIONS WE SET ASIDE THIS ISSUE TO THE FILE OF A SSESSING OFFICER FOR VERIFICATION. THE ASSESSING OFFICER IN THE CASE OF SHRI JAHESH P BHIMANI DATED 30-12-2009 HAS ALREADY ALLOWED TELESCOPING TO THE EXTENT OF RS.4,5 1,500/- AND, WE FURTHER DIRECT THE ASSESSING OFFICER THAT IF FURTHER CASH IS AVAILABLE IN THE HANDS OF ASSESSEE FROM THE FIRMS CASH, THEN THE AO AFTER EXAMINING THE PRINCI PLE OF TELESCOPING, WILL ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THESE TWO ISSUE S RAISED BY WAY OF TWO GROUNDS AS REPRODUCED ABOVE, ARE ALLOWED FOR STATISTICAL PU RPOSES. COMING TO REVENUES APPEAL IN ITA NO.2832/AHD/2003. 4. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITION OF RS.3,11,362/- ON AC COUNT OF UNEXPLAINED ASSETS / EXPENDITURE. FOR THIS, REVENUE HAS RAISED THE GROUND NO.1 :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS.3,11,11,362/- ON ACCOUNT OF UNEXPLAINED ASSETS / EXPENDITURE. 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE, WE FIND THAT THE CIT(A) HAS ALLOWED ONLY TELESCOPING T O THE EFFECT OF RS.1.83 LAKH DISCLOSED IN THE RETURN OF INCOME THEREBY DELETED A DDITION OF RS.2,94,362/- AND NOT RS.3,11,362/- AS CLAIMED BY THE REVENUE. THE CIT(A) HAS HELD THAT UNEXPLAINED ASSETS ARE TO THE EXTENT OF RS.2 LAKH FOR WHICH THE ASSESSEE IS IN APPEAL AND THE RELEVANT FINDINGS OF CIT(A) ON PAGE-23 READS AS UNDER:- ITA NO.2891 & 2832/AHD/2003 A.Y. 1995-96 SH. CHAMPAKLAL P BHIMANI V. ACIT CC-2(3) ABD PAGE 4 THE ASSESSEE HAS DISCLOSED RS.1,83,000/- IN THE RE TURN OF INCOME CONSEQUENT TO SEARCH. THERE IS NO EVIDENCE INDICATI NG THAT THERE ARE UNEXPLAINED ASSETS OVER AND ABOVE WHICH WERE FOUND DURING THE COURSE OF SEARCH. THEREFORE, THERE IS FORCE IN THE LEARNED CO UNSELS CONTENTION THAT TELESCOPIC EFFECT OF THIS AMOUNT AGAINST UNEXPLAINE D ASSETS SHOULD BE GIVEN. IN VIEW OF THE ABOVE, ONLY ADDITION OF RS.17,000/- BEING DIFFERENCE OF (RS.2,00,000/- - RS.1,83,000/-) IS SUSTAINED AS AGA INST ADDITION OF RS.3,11,362/-. THE ASSESSEE GETS RELIEF OF RS.2,94, 362/- ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS OF CIT(A) ALLOWING TELESCOPING IS PERFECT AND THERE IS NO INFIRMITY IN THE SAME. ACCORDINGLY, WE UPHELD THE ORDER OF CIT(A) AND THE APPEAL OF THE REVENUE I S DISMISSED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES AND THAT OF REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 02/03/2010 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :02/03/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IX, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD