CHETAN PRAKASH AGARWAL, Jaipur V. DCIT, Jaipur

ITA 293/JPR/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5204 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 01-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROLEE AGARWAL CIT DHK
• Keywords: Unexplained expenditure; Depreciation; Search and seizure; Principle of natural justice
• Section: 153A; 234B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 293 TO 298/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2001-02 TO 2005-06, 2007-08. SHRI CHETAN PRAKASH AGARWAL, SADAR BAZAR, GANGAPUR, DISTT. BHILWARA. CUKE VS. THE DY. CIT (CENTRAL CIRCLE - 3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AARPA 4935 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLEE AGARWAL (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.07.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 04/08/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE TWO SETS OF THREE APPEALS EACH BY THE ASSESSE E ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A), CENTRAL, JAIPUR DATED 17.01.2011 PERTAINING TO ASSESSMENT YEARS 2001-02 TO 2005-06 & 2007-08. SINC E COMMON FACTS AND GROUNDS ARE INVOLVED IN ALL THESE APPEALS, THEREFORE, THESE APPEALS ARE TAKEN UP TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. WE TAKE UP APPEAL IN ITA NO. 293/JP/2011 PERTAIN ING TO ASSESSMENT YEAR 2001-02 AS A LEAD CASE FOR ALL THESE YEARS. THE MO DIFIED GROUNDS AS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACT S OF THE CASE IN CONFIRMING THE NET UNACCOUNTED TURNOVER ADOPTED BY THE AO T RS. 1,413/- AS AGAINST THE NET REVISED TURNOVER DECLARE D BY THE ASSESSEE AT RS. NIL. THE ENHANCEMENT IN THE TURNOVE R, SO MADE AND CONFIRMED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE REDUCED AND THE DECLARED TURNOVER BE DIRE CTED TO BE 2 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. ACCEPTED. THE IMPUGNED ADDITION OF PROFIT, MADE ON THIS BASIS OF THE TURNOVER BE ALSO DIRECTED TO BE REDUCED TO THIS EXTENT. 1.2. RS. 35/-: THE LD. CIT (A) FURTHER ERRED IN LAW AS W ELL AS ON THE FACTS OF THE CASE IN APPLYING THE NP RATE OF 2.5% ( ON THE UNACCOUNTED TURNOVER ADOPTED BY THE AO AS AGAINST N P RATE OF 2% DECLARED BY THE ASSESSEE. THE GP/NP RATE APPLIED AND THE RESULTANT ADDITION MADE BY THE AO AND PARTLY SUSTAI NED BY THE LD. CIT (A) IS TOTALLY CONTRARY TO THE PROVISIONS O F LAW AND FACTS ON THE RECORD AND HENCE THE ADDITION MAY KINDLY BE DELETED IN FULL. 2. RS. 24,980/-: THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF THE FOLL OWING EXPENSES : S.N O HEAD OF EXPENSES EXPENSES CLAIMED 10% DISALLOWED BY THE AO 10% SUSTAINED BY THE LD. CIT (A). 3.1. GENERAL/OFFICE EXP RS. 27,984/ - RS. 2,800/ - RS. 2,800/ - 3.2. TELEPHONE EXP RS. 50,582/ - RS. 5,060/ - RS. 5,060/ - 3.3 VEHICLE RUNNING EXP RS. 18,174/ - RS. 1,820/ - RS. 1,820/ - 3.4. DEPRECIATION ON CAR RS.1,53,044/ - RS. 15,300/ - RS. 15,300/ - TOTAL : RS. 24,980/ - RS. 24,980/ - THE DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. C IT (A) BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE, KINDLY BE DELETED IN FULL. 3. RS. 18,241/- : THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN PARTLY SUSTAINING ADDITION MADE ON ACCO UNT OF THE ALLEGED LOW HOUSEHOLD WITHDRAWALS BY ESTIMATING SUC H WITHDRAWALS AT RS. 1,44,000/- PER ANNUM AS AGAINST RS. 180,000/ - PER ANNUM ESTIMATED BY THE AO BUT AGAINST RS. 1,25,759/- DECL ARED BY THE ASSESSEE. THE ADDITION SO MADE AND PARTLY CONFIRMED BY THE LD. CIT (A) IS TOTALLY CONTRARY TO THE PROVISIONS OF LAW AN D FACTS ON THE RECORD AND HENCE THE SAME KINDLY BE DELETED IN FULL . 4. THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING INTEREST U/S 234B AND 234C. THE APPELLANT TOTALLY DENIES IT LIABILITY OF CHARGING OF ANY SUCH INTEREST. THE INT EREST SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. 3 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION WAS CARRIED ON 22.03.2007 AT THE PREMISES OF THE ASSESS EE SHRI CHETAN PRAKASH AGARWAL AND BHARTIYA SPINNERS LTD. GROUP. SUBSEQUENTLY, TH E AO ASSESSED THE INCOME UNDER SECTION 153A READ WITH SECTION 153B/143(3) OF THE I .T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 17 TH DECEMBER, 2008. WHILE ASSESSING THE INCOME, THE AO MADE ADDITION OF RS. 54,241/- ON ACC OUNT OF LOW HOUSEHOLD WITHDRAWALS, OUT OF TOTAL DISALLOWANCES OF EXPENSES OF RS. 94,616/- AND AS SUCH THE INCOME WAS ASSESSED AT RS. 1,96,867/- AGAINST THE I NCOME DECLARED AT RS. 1,02,251/-. ON APPEAL, THE LD. CIT (A) IN RESPECT OF TRADING ADDITION, NET PROFIT AS CLAIMED BY THE ASSESSEE AT 2% WAS REJECTED AND THE LD. CIT (A) ADOPTED THE NET PROFIT RATE AT 2.5% AND CONFIRMED THE ADDITION OF R S. 35/- IN THE YEAR UNDER APPEAL. IN RESPECT OF OTHER YEARS, THE ADDITION WAS SUSTAIN ED AT RS. 5,96,213/- AND RS.2,96,081/- FOR THE A.YS. 2002-03 AND 03-04 RESPE CTIVELY. IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWA L, THE LD. CIT (A) ESTIMATED THE HOUSEHOLD EXPENSES AT RS. 1,44,000/- AGAINST TH E ASSESSEES WITHDRAWAL OF RS. 1,25,759/- AND MADE THE ADDITION OF RS. 18,241/- FO R THE YEAR UNDER APPEAL. 4. THE ASSESSEE AGGRIEVED BY THIS ORDER, FILED APPE AL BEFORE THE TRIBUNAL. 5. IN RESPECT OF GROUND NO. 1.1 AND 1.2 I.E. SUSTEN ANCE OF ADDITION OF RS. 1,413/- AND RS. 35/- BY ADOPTING THE N.P RATE AT 2.5%, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE LD. CIT (A) HAS FAILED T O APPRECIATE THE FACTS THAT THERE WERE OTHER INTER FIRM TRANSACTIONS THAT WAS CLAIMED AT RS. 2,42,40,801/- @ 20% BUT THE AO AS WELL AS LD. CIT (A) ALLOWED IT TO THE EXT ENT OF RS. 96,31,045/- RESULTING IN ENHANCEMENT OF THE PROFIT. THE LD. COUNSEL SUBMITT ED THAT IN RESPECT OF RS. 4 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. 96,31,045/-, THE ASSESSEE HAD SUBMITTED DOCUMENTARY PROOF AND THE SAME HAS BEEN RIGHTLY CONSIDERED. HOWEVER, FOR ENTIRE INTER FIRM TRANSACTIONS, IT WAS NOT POSSIBLE TO PROVIDE THE DETAILS WITH MATHEMATICAL DECISION. THE REFORE, HE SUBMITTED THAT THE ASSESSEE HAS RIGHTLY ADOPTED THE NP RATE AT 2% AND THE SAME MAY BE ALLOWED. 5.1. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS AND SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE GIVEN THE DETAILS. 5.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS ADMITT ED THE FACT THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO PROVIDE DETAILS WITH MATHEMATIC AL PRECISION IN RESPECT OF INTRA UNIT TRANSACTIONS. THE LD. CIT (A) HAS ADOPTED THE N.P. RATE AT 2.5% WHEREAS THE ASSESSEE HAS URGED TO ALLOW THE SAME AT 2%. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT (A) IN HIS ORDER AT PARA 2.8 HAS AFFIRMED THE ISSUE AS UNDER :- 2.8. I AGREE WITH THE CONTENTION OF THE ASSESSEE T HAT THE MIXED APPROACH OF THE AO WILL LEAD TO INCORRECT CALCULATI ON OF THE ACTUAL PROFIT. THE INTENTION OF THE REVENUE IS TO FIND THE ACTUAL INCOME BY GIVING RATIONAL APPROACH TO THE BUSINESS AND TO TAX THE SA ME. IT IS WORTH TO BE MENTIONED THAT THE ASSESSEE HAS INCURRED LOSSES IN MANY YEARS ON RECORDED TRANSACTIONS, BUT, HE HAS PROVIDED FOR 2% NP IN THOSE YEARS ALSO IN RESPECT OF THESE UNRECORDED TURNOVER. FURTH ER, FROM SEIZED RECORDS IT IS CLEAR THAT THERE WERE SOME EXPENSES W HICH WERE ACTUALLY INCURRED BUT NOT ACCOUNTED IN THE BOOKS, MOREOVER R ECORD OF ALL SUCH EXPENSES IS NOT EXPECTED TO BE AVAILABLE AND FOUND DURING THE COURSE OF SEARCH, MORE PARTICULARLY OF THE OLDER YEARS, AS DETAILS OF SUCH EXPENSES ARE USUALLY NOT PRESERVED FOR LONG TIME. T HAT IS WHY THE PROPORTION OF THESE EXPENSES IS HIGHLY VARYING FROM 12% IN EARLIER YEAR TO 78% OF THE TURNOVER IN LATER YEARS. GOING YEAR W ISE, IN A.Y. 01-02 AGAINST N.P. OF RS. 103/-, THERE ARE EXPENSES OF RS . 48000. IN A.Y. 02- 03, 03-04 AGAINST THE INCOME OF RS. 715456/- AND RS . 355297/-, THE EXPENSES ARE SAME I.E. RS. 48000. FOR A.Y. 06-07, T HE EXPENSES HAVE INCREASED TO AROUND RS. 25.30 LACS AGAINST INCOME O F RS. 32.26 LACS I.E. 78% AND IN CASE OF A.Y. 07-08 IT IS 49%. THUS, AS C AN BE SEEN THAT THE CALCULATION IS GIVING VERY ABSURD RESULTS. LOOKING AT NATURE OF THE 5 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. INDIRECT EXPENSES, THE MAIN SORT OF INDIRECT EXPENS E IS PRESSING, HAMALI, FREIGHT, BROKERAGE, PETROL, CLAIMS WHICH ARE BOUND TO CHANGE IN PROPORTION TO TURNOVER. THUS, IT WOULD BE WRONG TO CONSIDER THE EXPENSES AVAILABLE IN THE SEIZED RECORDS AS THE ONL Y EXPENSES AND TO IGNORE THE OTHER EXPENSES WHICH MUST BE INCURRED FO R THE BUSINESS, AS THIS WOULD LEAD TO INCORRECT DETERMINATION OF THE I NCOME. SO, LOOKING AT THE FACTS OF THE CASE AND ON BASIS OF PRINCIPLE OF NATURAL JUSTICE, I ACCEPT THE CLAIM OF ASSESSEE TO CONSIDER NET PROFIT APPROACH FOR CALCULATION OF THE INCOME ON UNACCOUNTED TURNOVER. NOW COMING TO THE DETERMINATION OF N.P. RATE, I AM NOT CONVINCED WITH THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE HAS SOLD GOODS AT 2- 3% DISCOUNT IN CASE OF UNRECORDED SALES OR THAT HE SELLS GOODS AT 2-3% DISCOUNT AS PAYMENT RECEIVED IMMEDIATELY. NO PROOF OF THE SAME HAS BEEN GIVEN IN SUPPORT OF THE CLAIM OF THE ASSESSEE. HENCE APPELLANTS CLAIMS OF N.P. @ 2% IS ALSO REJECTED CONSIDERING TH E TOTALITY OF FACTS AND TAKING A BALANCE AND RATIONAL APPROACH, N.P. RA TE @ 2.5% IS CONSIDERED REASONABLE. THE NET EFFECT OF THE SAME W ILL BE AS FOLLOWS ON YEAR TO YEAR BASIS :- PARTICULRS A.Y. 01 - 02 A.Y. 02 - 03 A.Y. 03 - 04 TOTAL TURNOVER 1413 23848547 11843248 LESS: INTER TRANSFER 0 0 0 NET TURNOVER 1413 23848547 11843248 N.P. RATE @ 2.5% (A) 35 596213 296081 N.P. DECIDED BY AO (B) 0 667456 307297 INCOME ALREADY DECLARED BY ASSESSEE (C) 0 370000 190000 FINAL NET PROFIT (HIGHER OF A & C (D) 35 596213 296081 RELIEF FROM AO ORDER (B - D) E 0 71242 11216 NET ADDITIONS TO RETURN FILED BY ASSESSEE (C - D) F 35 226213 106081 SO, FROM THE ABOVE TABLE, THE NET PROFIT IS DIRECTE D TO BE TAKEN AT RS. 35/-, RS. 5,96,213/- AND RS. 2,96,081/- FOR A.Y. 20 01-02, 2002-03 AND 2003-04 RESPECTIVELY, LEAD TO ADDITION OF RS. 35/- IN A.Y. 2001-02 AND RELIEF OF RS. 71,242/- AND RS. 11,216/- IN A.Y. 200 2-03 AND 2003-04. FROM THE ABOVE FINDING OF THE LD. CIT (A), IT IS EV IDENT THAT HE HAS EXAMINED ALL THE ASPECTS AND HAS DULY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE HAS 6 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. NOT PLACED ANY CONTRARY MATERIAL ON RECORD SUGGESTI NG THAT THE APPROACH OF THE LD. CIT (A) IS WRONG. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD . CIT (A). THE SAME IS HEREBY UPHELD. GROUND NO. 1.1 AND 1.2 ARE REJECTED. 6. GROUND NO. 2 RELATES TO CONFIRMING THE DISALLOWA NCES OF EXPENSES ON ADHOC BASIS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONCE THE NP RATE HAS BEEN SUSTAINED BY THE LD. CIT (A), THE LD. CIT (A) OUGHT TO HAVE NOT SUSTAINED THE ADDITION MADE ON ACCOUNT OF ADHOC DISALLOWANCES. 6.1. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS. 6.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ADDI TION HAS BEEN SUSTAINED ON THE BASIS OF ESTIMATION. THE AUTHORITIES BELOW HAVE NOT BROUGHT ANY MATERIAL FOR ESTIMATION OF SUCH NET PROFIT BY ADOPTING 10% RATE OF DISALLOWANCE. HENCE, WE ARE UNABLE TO CONFIRM THE FINDINGS OF THE AUTHORITIES B ELOW. THE ADDITION MADE ON THE BASIS OF ADHOC DISALLOWANCES OF RS. 24,980/-, THE A O IS HERE BY DIRECTED TO DELETE THE SAME. THE GROUND IS ALLOWED. 7. GROUND NO. 3 RELATES TO ESTIMATION OF LOW HOUSEH OLD WITHDRAWAL. THE LD. CIT (A) AFTER EXAMINING THE DETAILS HAS HELD THAT EVEN THE ASSESSEE HAS NOT BEEN ABLE TO REASONABLY JUSTIFY WITH SUFFICIENT SUPPORTING EVIDE NCE THAT THE EXPENSES CLAIMED BY ASSESSEE WERE THE ONLY EXPENSES AND WERE SUFFICIENT FOR MAINTAINING THE FAMILY OF 6 PERSONS. THE RATE OF INFLATION AND THE INCREASING P RICES OF FOOD AND GROCERY ITEMS, MAINTENANCE EXPENSES, ELECTRICITY, PETROL AND CONVE YANCE EXPENSES CAN NOT BE RULED OUT. THEREFORE, TAKING A RATIONAL AND BALANCE APPR OACH, HE HELD THAT THE HOUSEHOLD 7 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL. WITHDRAWALS SHOWN BY THE ASSESSEE BEING LESS, THE B ALANCE EXCESS AMOUNT WAS UPHELD AS UNACCOUNTED EXPENDITURE FOR HOUSEHOLD EXP ENSES. THE LD. CIT (A) HAS REASONABLY ESTIMATED THE HOUSEHOLD EXPENDITURE, CON SIDERING THE INFLATION RATE IN VIEW, THEREFORE, WE DO NOT FIND ANY REASON TO INTER FERE IN THE ORDER OF LD. CIT (A), THE SAME IS HEREBY UPHELD. THE GROUND OF THE ASSESS EE IS REJECTED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED 9. GROUND NO. 4 IS CONSEQUENTIAL, THEREFORE, THE SA ME IS DECIDED ACCORDINGLY. ITA NOS. 294, 295, 296, 297 AND 298/JP/2011: 10. SINCE THE GROUNDS AND FACTS INVOLVED IN THESE A PPEALS ARE COMMON AS IN APPEAL IN ITA NO. 293/JP/2011 ABOVE, THE DECISIONS ARRIVED AT IN THIS APPEAL ARE SQUARELY APPLICABLE TO ITA NOS. 294, 295, 296, 297 AND 298/JP/2011. THEREFORE, ALL THE GROUNDS ARE DECIDED ACCORDINGLY. ALL THESE APPE ALS ARE ALLOWED PARTLY. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/08/201 6. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 04/08/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI CHETAN PRAKASH AGARWAL, BHIL WARA. 2. THE RESPONDENT- THE DY. CIT, CENTRAL CIRCLE-3, J AIPUR. 3. THE CIT, 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 293(6)/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NOS. 293(6)/JP/2011. SHRI CHETAN PRAKASH AGARWAL.