M/s. P.Rambhai Mohandas & Co., Ahmedabad V. The ACIT.,Cent,Circle-2(2), Ahmedabad

ITA 2908/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5959 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNA KUMAR
• Keywords: Rejection of books of accounts
• Section: 133A; 132

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.2908/AHD/2011 ( & ' (' & ' (' & ' (' & ' (' / / / / ASSESSMENT YEAR : 2009-10) M/S.P. RAMBHAI MOHANDAS & CO. 51, DEEP COMPLEX LIMBUPOLE, RATANPOLE AHMEDABAD-380 001 & & & & / VS. THE ACIT CENTRAL CIRCLE-2(2) AHMEDABAD ) '# ./*+ ./ PAN/GIR NO. : AAJFP 5640 A ( ), / // / APPELLANT ) .. ( -.), / RESPONDENT ) ), / ' / APPELLANT BY : SHRI VARTIK CHOKSHI -.), 0 / ' / RESPONDENT BY : SHRI T.P. KRISHNA KUMAR, CIT-DR &1 0 # / / / / DATE OF HEARING : 11/04/2014 23( 0 # / DATE OF PRONOUNCEMENT : 29/04/2014 '4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-III, AHMEDAB AD (CIT(A) FOR SHORT) DATED 01/07/2011 PERTAINING TO ASSESSME NT YEAR (AY) 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER U/S.143(3) OF IT ACT PASSED BY ASSESSING OFFICER AND CONFIRMED BY FIRST APPELLATE AUTHORITY IS BAD IN LA W AND DESERVED TO BE UNCALLED FOR. ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 2 - 2. THE ASSESSING OFFICER AD FIRST APPELLATE AUTHORITY HAS ERRED IN LAW AND ON FACTS IN MAKING AD CONFIRMING RESPECTIVELY A DDITION OF RS.17,50,000/-. THE SAME DESERVES TO BE DELETED. 3. THE ASSESSING OFFICER AND FIRST APPELLATE AUTHORITY HAS ERRED IN LAW AND ON FACTS IN ESTIMATING RS.5,89,324/- AS INCOME OF INDORE BRACH. THE SAME DESERVES TO BE DELETED. 4. THE APPELLANT CRAVES TO RESERVE ITS RIGHT TO ADD, A LTER, AMEND, OR DELETE ANY GROUND OF APPEAL DURING THE COURSE OF HE ARING. 2. BRIEFLY STATED FACTS OF THE CASE AS RECORDED IN THE ORDER OF LD.CIT(A) ARE THAT INFORMATION WAS RECEIVED FROM TH E RPF AUTHORITIES THAT ONE SHRI DASHRATHBHAI PATEL WAS CARRYING RS.17 .50 LACS CASH WHO WAS CLAIMED TO BE WORKING FOR PATEL RAMABHAI MOHAND AS AND COMPANY, WHICH IS ENGAGED IN THE COURIER BUSINESS AT INDORE. AS PER THE CLAIM OF SHRI DASHRATHBHAI PATEL, HE WAS CARRYING THE CASH A MOUNT ON 24/10/2008 TO BE DELIVERED AT THE HEAD OFFICE OF THE FIRM AT A HMEDABAD FROM ITS BRANCH OFFICE SITUATED AT UG-33, SILVER MALL, RNT M ARG, INDORE. IN ORDER TO VERIFY THIS CLAIM, A SURVEY ACTION UNDER SECTION 133A OF THE INCOME TAX WAS CARRIED OUT ON 25/10/2008 AT THE BRA NCH OFFICE OF THE APPELLANT FIRM AT INDORE. DURING THE COURSE OF SUR VEY, CASH OF RS.17.50 LACS WAS NOT PROPERLY EXPLAINED, THEREFORE A WARRAN T OF AUTHORIZATION UNDER SECTION 132 OF THE INCOME-TAX ACT WAS EXECUTE D ON 25/10/2008 TO SEIZE THE CASH. IN THE STATEMENT, SHRI DASHRATHBHA I PATEL STATED THAT THE SUM OF RS.17.50 LACS WAS GIVEN TO HIM BY SH.SANJAY KUMAR M PATEL, MANAGER OF THE OFFICE OF THE APPELLANT FIRM AT INDO RE FOR DELIVERING TO THE FIRMS HEAD OFFICE AT AHMEDABAD. SINCE, THE SAID C ASH WAS STATED TO BE BELONGING TO THE APPELLANT FIRM, PROCEEDINGS UNDER SECTION 153C OF THE INCOME-TAX ACT WAS INITIATED AGAINST THE APPELLANT. IN RESPONSE TO NOTICE UNDER SECTION 153C, THE APPELLANT FILED RETURN OF I NCOME ON 25/10/2010 ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 3 - DECLARING TOTAL INCOME AT RS.147,230. IN THE ASSES SMENT ORDER, THE AO HELD THAT THE CASH OF RS.17.50 LACS IS UNEXPLAINED AND THEREFORE, IN VIEW OF THE DISCUSSION MADE FROM PARA NUMBER 4 TO 6.4, A DDITION OF RS.17.50 LACS WAS MADE BY THE AO IN THE TOTAL INCOME OF THE APPELLANT. FURTHER AT PARA-6.3 OF THE ASSESSMENT ORDER THE AO HELD THAT D AILY TURNOVER OF THE APPELLANT FIRM VARIES FROM RS.15 TO 20 LACS AND THE RATE OF COMMISSION VARIES FROM RS.150 TO RS.200 PER LAKH. HE THEREFOR E WORKED OUT THE COMMISSION INCOME OF THE APPELLANT FOR THE YEAR AFT ER CONSIDERING THE AVERAGE DAILY TRANSACTIONS OF RS.17.50 LACS AND AVE RAGE RATE OF COMMISSION AT RS.175 PER LAKH AT RS.897,459 (FOR 29 3 WORKING DAYS) AS AGAINST THE COMMISSION INCOME OF RS.308,135 DISCLOS ED BY THE APPELLANT IN THE RETURN OF INCOME. ON THIS GROUND HE HELD TH AT THE APPELLANT HAS SUPPRESSED THE COMMISSION INCOME BY RS.589,324 BUT DID NOT MAKE SEPARATE ADDITION ON THE GROUND THAT THIS COMMISSIO N INCOME IS INCLUDED IN THE SEIZURE OF CASH OF RS.17.50 LACS. AGAINST T HIS ACTION OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, DISMISSED THE APPEAL. NOW, THE AS SESSEE IS IN FURTHER APPEAL BEFORE US. 3. GROUND NOS.1 TO 3 ARE INTER-CONNECTED. THE LD.CO UNSEL FOR THE ASSESSEE HAS FILED SYNOPSIS. IN THE SUBMISSION, TH E AOS OBSERVATION FOR REJECTING THE ASSESSEES REPLY WAS THAT DURING THE COURSE OF SURVEY, BOOKS OF ACCOUNT WERE NOT FOUND AND NONE OF THE EMPLOYEES WAS AWARE ABOUT THE MAINTENANCE OF BOOKS OF ACCOUNT. HE SUBMITTED THAT THE AO OBSERVED THAT SHRI VIJAYBHAI AND SHRI VIRALBHAI, EM PLOYEES OF THE ASSESSEE-FIRM HAD NO KNOWLEDGE ABOUT ANY BOOKS OF A CCOUNT. HE ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 4 - SUBMITTED THAT THE ANOTHER OBJECTION OF THE AO WAS THAT SHRI SANJAY MANAGER OF THE APPELLANT-FIRM CAME TO THE BRANCH OF FICE AFTER ABOUT A GAP OF 5 HOURS AND HE BROUGHT WITH HIM THE BOOKS OF AC COUNT WHICH WERE IMPOUNDED. HE SUBMITTED THAT BOOKS OF ACCOUNTS WERE MAINTAINED AT THE HEAD OFFICE. HE SUBMITTED THAT THE BOOKS WHICH WER E MAINTAINED AT BRANCH OFFICE AT INDORE WERE WITH THE MANAGER AND M ANAGER HAS DULY PRODUCED THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS BUT HAS ADDED THE AM OUNTS PURELY ON THE BASIS OF CONJECTURES AND SURMISES. HE SUBMITTED TH AT THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT THE ASSESS EE-FIRM WAS HAVING SUFFICIENT CASH IN HAND AND WERE DULY REFLECTED IN THE BOOKS OF ACCOUNTS. HE FURTHER SUBMITTED THAT BOTH THE AUTHORITIES BELO W FAILED TO APPRECIATE THE FACT WHEN THE CASH WAS SEIZED FROM THE PERSON W HO IS THE EMPLOYEE OF THE ASSESSEE-FIRM, IT WAS CATEGORICALLY STATED T HAT MONEY IS BEING TRANSFERRED FROM BRANCH OFFICE TO HEAD OFFICE AND A LETTER AUTHORIZING THE PERSON TO CARRY THE CASH WAS ALSO RECOVERED FROM TH E EMPLOYEE OF THE ASSESSEE-FIRM. HE SUBMITTED THAT THE AO HAS WRONGL Y ASSUMED THAT NOTINGS ON THE KACHCHA-PAPERS WERE IN THE NATURE OF VITAL AND PRIMARY DOCUMENTS. THE NOTINGS ARE ACTUALLY IN THE FORM OF MEMORANDA ON KACHCHA-PAPERS REGARDING RECEIPTS AND PAYMENTS AND ON THE BASIS OF THESE NOTINGS CASH BOOK WAS DAILY PREPARED BY SHRI SANJAY AND, THEREFORE, THE KACHCHA-PAPERS WERE DESTROYED AFTER THE NOTINGS ARE RECORDED IN THE REGULAR CASH BOOK. THESE KACHCHA-PAPERS ARE NTO BI LLS OR VOUCHERS WHICH CAN BE SAID TO BE OF PRIMARY DOCUMENTS. IT IS QUIT E LOGICAL THAT KACHCHA- PAPERS ARE DESTROYED AFTER INCORPORATING THE NOTING S IN THE CASH BOOK. THUS, THE AO WAS WHOLLY UNJUSTIFIED IN DRAWING ADVE RSE INFERENCE FROM ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 5 - THIS ACT. HE SUBMITTED THAT INTERESTINGLY IN THE S AME CASH BOOK, THE AO FOUND ENTRY OF RS.4.15 LACS IN THE MORNING OF 25 TH OCTOBER, 2008 BEING DISPATCHED TO AHMEDABAD THROUGH ANOTHER EMPLOYEE AN D THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER TO BE GENUIN E WITH THE RESULT THAT NO ADDITION HAS BEEN MADE, IN SPITE OF THE FACT THA T THE NATURE OF BOTH THE TRANSACTIONS ARE IDENTICAL. HE SUBMITTED THAT ALL OTHER SEVERAL ENTRIES IN THE SAME CASH BOOK REFLECTING TRANSFERS OF CASH FRO M THE BRANCH OFFICE TO THE HEAD OFFICE AND VICE-VERSA HAVE BEEN FULLY ACCE PTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE BOOKS OF ACCOUNTS A RE STATUTORILY AUDITED AND ARE SUPPORTED BY AUDITORS CERTIFICATE U/S.44AB OF THE I.T.ACT. HE FURTHER SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIF IED IN CONFIRMING THE ARBITRARY ADDITION MADE BY THE AO MERELY ON ASSUMPT IONS. HE SUBMITTED THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD EITHER BY THE LD.AO OR BY THE LD.CIT(A) IN SUPPORT THE ESTIMATED COMMISSION INCOM E WHICH WAS THE RESULT OF SOME GUESS-WORK SOLELY ON THE BASIS OF TH E STATEMENT OF AN EMPLOYEE WHO HAD NO KNOWLEDGE ABOUT THE DAILY TRANS ACTIONS OF THE FIRM. HE SUBMITTED THAT THE STATEMENT OF SHRI SANJAYBHAI, BRANCH MANAGER AT INDORE WAS RECORDED U/S.132(1) OF THE IT ACT WHO HA D STATED THAT THE DAILY TURNOVER OF TRANSACTIONS WAS AROUND RS.50,000 /- TO RS.60,000/-. THIS STATEMENT HAS BEEN TOTALLY IGNORED BY THE LOWE R AUTHORITIES EVEN THOUGH THE SAME WAS RECORDED UNDER OATH AS PER THE PROVISIONS OF SECTION 132. HE SUBMITTED THAT THE AO HAS CONVENIENTLY CHO SEN TO ASSUME THAT THE STATEMENT OF SHRI VIJAYBHAI REFLECTED THE TRUE AFFAIRS. HE SUBMITTED THAT THE APPELLANT-FIRM WAS NEVER ALLOWED AN OPPORT UNITY TO CROSS- EXAMINE SHRI VIJAYBHAI AND, THEREFORE, FOR THAT REA SON ALSO HIS STATEMENT ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 6 - HAS NO EVIDENTIARY VALUE. IN SUPPORT OF THIS CONTE NTION, HE RELIED ON THE FOLLOWING DECISIONS:- (I) PRAKASH CHAND NAHTA VS. CIT REPORTED AT 301 I TR 134(MP). (II) HEIRS AND L.RS. OF LATE LAXMANBHAI S.PATEL VS . CIT REPORTED AT 222 CTR 138 (GUJ.). (III)CIT VS. RAJESHKUMAR REPORTED AT 306 ITR 27 (D EL.). 3.1. HE SUBMITTED THAT THE ADDITIONS MADE BY THE LD .AO AND CONFIRMED BY THE LD.CIT(A) ARE BASED ON SUSPICION, ASSUMPTION S AND SURMISES WHICH IS NOT PERMISSIBLE IN LAW. IN SUPPORT OF THI S CONTENTION, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- (I) OMARSALLAY MOHAMED SAIT VS. CIT REPORTED AT 37 ITR 151(SC). (II) CIT VS. DAULATRAM RAWATMULL REPORTED AT 87 IT R 349 (SC). (III) DCIT VS. ADINATH INDUSTRIAL REPORTED AT 252 ITR 476 (GUJ.). (IV) UNION OF INDIA VS. PLAYWORLD ELECTRONICS P.LT D. REPORTED AT 184 ITR 308 (SC). (V) VINAYKUMAR MODI VS. CIT REPORTED AT 272 ITR 91 (DEL.). 4. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDERS OF THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT ON THE DATE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE WAS NOT MAINTAINING THE BOO KS OF ACCOUNTS AT THE BUSINESS PREMISES. HE FURTHER SUBMITTED THAT ONE O F THE EMPLOYEES OF THE ASSESSEE-FIRM HAS STATED THAT THE DAILY ABOUT RS.15 TO 20 LACS RECEIVED IN THE BRANCH AND FOR CARRYING THE SAME COMMISSION AT A RATE OF RS.150/- TO 200/- PER LAC IS RECEIVED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE OBJECTION OF THE AO WAS THAT THE BOOKS OF ACCOU NTS ARE NOT MAINTAINED IN THE BUSINESS PREMISES OF THE ASSESSEE -FIRM AND THEY ARE ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 7 - MAINTAINED OUTSIDE. IT IS THE CONTENTION OF THE AS SESSEE THAT THE ACCOUNTS ARE MAINTAINED AT HEAD OFFICE. THE FACT THAT THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNTS AT HEAD OFFICE IS NOT DISPUTED BY THE AUTHORITIES BELOW. FROM THE RECORDS, IT IS TRANSPIRED THAT NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO IN RESPECT OF THE BOOKS OF ACCOUNTS. THE LD.CIT(A) HAS CONFIRMED THE ADDITION ON THE BASIS THAT CASH FOUND IN THE POSSESSION OF THE EMPLOYEES OF THE ASSESSEE-FIRM AS ON 24/10/2008 , CLEARLY SHOWS THAT THE DAILY TURNOVER WAS AT RS.17,51,000/- AND HAS T AKEN AS COMMISSION INCOME @ RS.175/- PER LAC. THIS FINDING OF THE LD. CIT(A) IS PURELY BASED ON CONJECTURES AND SURMISES. THEREFORE, THE VIEW T AKEN BY THE LD.CIT(A) IS NOT JUSTIFIED. THE REVENUE HAS NOT PLACED ANY M ATERIAL ON RECORD THAT THE ASSESSEE WAS HAVING ATLEAST DAILY TURNOVER OF R S.17,51,000/-. MERELY FINDING ON A SINGLE DAY CANNOT BE MADE APPLICABLE FOR THE ENTIRE MONTH OR THROUGHOUT THE YEAR. THERE IS ALWAYS POSSIBILIT Y OF LESSER AND HIGHER AMOUNT. SINCE NO SPECIFIC DEFECT IS POINTED OUT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WE THEREFORE DIRECT THE AO TO DELE TE THE ADDITION MADE ON THE BASIS OF ESTIMATION. HENCE, GROUND NOS.1 TO 3 OF ASSESSEES APPEAL ARE ALLOWED. 6. GROUND NO.4 IS GENERAL IN NATURE NEEDS NO IND EPENDENT ADJUDICATION. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 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 29/04/2014 ..&, .&../ T.C. NAIR, SR. PS ITA NO.2908/AHD /2011 M/S.P. RAMBHAI MOHANDAS & CO. VS. ACIT ASST.YEAR 2009-10 - 8 - '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)-III, AHMEDABAD 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 .. 22.4.14/28.4.14 (DICTATION-P AD 15-PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.4.14 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.29.4.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.4.14 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