The ACIT, Anand Circle, Anand V. M/s. Siddharth Steel Co., Anand

ITA 2959/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9024 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Business income; Income from undisclosed sources; Bad and doubtful debts
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS. 2959 & 2960/AHD/2013 WITH C.O. NOS. 94 & 95/AHD/2014 (ASSESSMENT YEARS: 2009-10 & 2010-11) ASSTT. COMMISSIONER OF INCOME-TAX, ANAND CIRCLE, ANAND APPELLANT VS. M/S. SIDDHARTH STEEL CO. NR. CEEBEEZ HOTEL, LAMBHVEL ROAD, ANAND - 388001 RESPO NDENT/CROSS OBJECTOR PAN: AAJFS2543K /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /BY ASSESSEE : SHRI S. N. SOPARKAR /DATE OF HEARING : 10.03.2017 /DATE OF PRONOUNCEMENT : 14.03.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO REVENUES APPEALS AND ASSESSEES CROSS OB JECTION THEREIN FOR ASSESSMENT YEARS 2009-10 & 2010-11 ARISE FROM THE C IT(A)-IV, BARODAS ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 2 - SEPARATE ORDERS; BOTH DATED 27.09.2013 PASSED IN CA SES NOS. CAB/IV-A- 130/2012-13 & CAB/IV-A-02/2012-13, IN PROCEEDINGS U /S.143(3) R.W.S. 147 & SECTION 143(3) OF THE INCOME TAX ACT, 1961, IN SH ORT THE ACT; RESPECTIVELY. 2. WE COME TO RIVAL PLEADINGS. THE REVENUES FIRST APPEAL ITA NO.2959/AHD/2013 IN ASSESSMENT YEAR 2009-10 RAISES SOLE SUBSTANTIVE GROUND SEEKING TO REVERSE CIT(A)S ACTION DELETING ADDITION OF RS.39,55,895/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNRECORDED SALES THEREBY ESTIMATING GROSS PROFITS @ 30%; COMING TO RS.61,56,570/-. ITS CASE IS THAT THE CIT(A) HAS WRONGLY FOLLOWED HIS ORDER F OR THE LATTER ASSESSMENT YEAR ESTIMATING SIMILAR GROSS PROFITS @14.5 OF THE UNRECORDED SALES RESULTING IN PART RELIEF BEING GRANTED TO ASSESSEE TO THE TUN E OF RS.39,55,895/- IN QUESTION. THE ASSESSEES CROSS OBJECTION ON THE OT HER HAND CHALLENGES VALIDITY OF RE-ASSESSMENT IN QUESTION MADE U/S.147 OF THE ACT. ITS LATTER SUBSTANTIVE GROUND AVERS THAT THE CIT(A) HAS ERRED IN TAKING GROSS PROFITS @ 14.5% BY PLACING RELIANCE UPON HIS ORDER IN ASSESSM ENT YEAR 2010-11. SHRI SOPARKAR FAIRLY CONCEDES AT THE OUTSET THAT THE ASS ESSEE NO MORE WISHES TO PRESS FOR ITS TWIN SUBSTANTIVE GROUNDS. THIS CROSS OBJECTION NO.94/AHD/2014 IS THUS DISMISSED AS NOT PRESSED. 3. THE REVENUES LATTER APPEAL ITA NO.2960/AHD/2013 FOR ASSESSMENT YEAR 2010-11 ALSO PLEADS AN IDENTICAL SUBSTANTIVE G ROUND CHALLENGING LOWER APPELLATE AUTHORITIES ORDER ESTIMATING GROSS PROFI TS @14.5% THEREBY DELETING ADDITION OF RS.82,10,428/- PERTAINING TO UNRECORDED SALES. THE ASSESSEES CROSS OBJECTION THERETO C.O. NO.95/AHD/2014 ON THE OTHER HAND ASSAILS CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION I N DISALLOWING ITS BAD DEBTS CLAIM OF RS.14,18,236/- IN QUESTION. ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 3 - IT IS THUS EVIDENT THAT REVENUES TWO APPEALS HERE INABOVE RAISE IDENTICAL ISSUE OF ESTIMATION OF GROSS PROFITS. IT HAS COME ON RECORD THAT THE CIT(A) TREATS HIS ORDER FOR LATTER ASSESSMENT YEAR 2010-11 AS THE LEAD ONE. WE ACCORDINGLY TAKE UP REVENUES APPEAL ITA NO.2960 /AHD/2013 ALONG WITH C.O. NO.95/AHD/2014 AS THE LEAD CASES. 4. WE FIRST PROCEED TO DEAL WITH REVENUES SOLE SUB STANTIVE GROUND IN ITS APPEAL. THIS ASSESSEE IS A FIRM TRADING IN BUILDIN G MATERIALS (CEMENT AND STEEL). THE DEPARTMENT CONDUCTED A SURVEY IN ITS C ASE ON 19.02.2010. THE ASSESSEES PARTNER SHRI ASHOK PATEL GOT RECORDED HI S STATEMENT DECLARING UNACCOUNTED INCOME OF RS.5CRORES. THE ASSESSEES R ETURN FILED THEREAFTER ON 15.10.2010 STATED INCOME OF RS.1,31,63,970/- COMPRI SING OF UNDISCLOSED INCOME OF RS.75.67LACS. THE ASSESSING OFFICER THER EFORE NOTICED THIS DIFFERENTIAL SUM IN ASSESSEES SURVEY STATEMENT VIS --VIS THE ONE DISCLOSED IN ITS RETURN. HE FURTHER TOOK INTO ACCOUNT ASSESSEE S BOOKS OF ACCOUNTS TO COME ACROSS ITS ALLEGED UNRECORDED SALES OF RS.5,25,91,4 28/-. THE ASSESSING AUTHORITY THEREAFTER PUT THE ASSESSEE ON NOTICE AND ESTIMATED GROSS PROFITS ON THE ABOVESTATED FIGURES @30% RESULTING IN THE ADDIT ION IN QUESTION OF RS.82,10,428/-. 5. THE CIT(A) REVERSES ASSESSING OFFICERS ACTION A S FOLLOWS: 5.3. I HAVE CONSIDERED THE APPELLANT'S SUBMISSIONS AND THE AO'S OBSERVATIONS. THE AO HAS STATED IN HIS ORDER THAT THERE ARE DEFEC TS IN THE BOOKS OF ACCOUNT OF THE APPELLANT. SUCH DEFECTS HAVE BEEN MENTIONED IN TH E NATURE OF UNACCOUNTED STOCK AND CASH OUT SIDE THE BOOKS OF ACCOUNT FOUND DURING SURVEY PROCEEDINGS. SUCH DISCREPANCIES ARE NOT RELATED TO THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT DURING THE COURSE OF ITS BUSINESS IN WHIC H THE DISCLOSED TRANSACTIONS HAVE BEEN RECORDED. SUCH BOOKS OF ACCOUNT HAVE BEEN DULY AUDITED AND THE AO HAS NOT POINTED OUT ANY DEFECTS IN THEM. SO FAR AS THE TRANSACTIONS OF THE APPELLANT MADE OUTSIDE THE REGULAR BOOKS OF ACCOUNT ARE CONCE RNED, THE APPELLANT HAS ACCEPTED THEM AND HAS DISCLOSED INCOME ON ACCOUNT O F SUCH TRANSACTIONS SEPARATELY IN ITS P & L ACCOUNT. IT IS SEEN THAT TH E AO HAS ESTIMATED INCOME OF THE APPELLANT EARNED FROM THE SALES MADE OUTSIDE THE BO OKS OF ACCOUNT BY ESTIMATING ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 4 - THE PROFIT ON SUCH TRANSACTIONS @ 30%. ACCORDINGLY, THE INCOME DETERMINED BY HIM ON ACCOUNT OF UNRECORDED SALES OF RS.5,25,91,42 8/- HAS BEEN COMPUTED AT RS.1,57,77,428/-. FROM SUCH INCOME, THE AO HAS GIVE N THE SET OFF OF RS.75.67 LACS OFFERED BY THE APPELLANT AS UNDISCLOSED INCOME AND HAS MADE ADDITION OF RS.82,10,428/-. THUS, ULTIMATELY, THE AO HAS NOT DI STURBED THE RESULTS SHOWN IN THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT WHICH HA VE BEEN SUBJECTED TO AUDIT. 5.3.1.ACCORDINGLY, THE ONLY QUESTION REMAINS IS AS TO WHAT SHOULD BE PROPER RATE OF PROFIT FOR DETERMINING THE INCOME OF THE APPELLANT FROM UNRECORDED SALES OF RS.5,25,91,428/-. THE AO HAS NOT GIVEN ANY BASIS FO R ADOPTION OF GROSS PROFIT RATE OF 30%, DESPITE, THE FACT THAT THE GROSS PROFIT OF THE APPELLANT FOR THE YEAR AS PER AUDITED BOOKS OF ACCOUNT WAS 5.14% ONLY. THE APPELL ANT HAS SUBMITTED THAT IT CAN BE SEEN FROM THE DISCLOSURE MADE BY THE IT THAT THE PROFIT DECLARED BY IT ON UNACCOUNTED SALES WAS 14.5% WHICH IS AT SUBSTANTIAL LY HIGHER AMOUNT AND AFTER CONSIDERING THAT THE TRANSACTION NOT RECORDED IN R EGULAR BOOK OF ACCOUNTS, MAY RESULTS INTO HIGHER INCOME, NO FURTHER ESTIMATE AT HIGHER AMOUNT WAS CALLED FOR AS THE SAME IS WITHOUT ANY COMPARATIVE BASIS. 5.3.2. THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN BUILDING MATERIAL I.E. STEEL AND CEMENT. THE APPELLANT'S CONTENTION THAT I N TRADING BUSINESS, THE GP RATES ARE NOT AS HIGH AS ADOPTED BY THE AO IS ACCEPTABLE. IT IS SEEN THAT THE G P RATE OF THE APPELLANT FOR THE CURRENT YEAR AS PER THE REGUL AR BOOKS OF ACCOUNTS WAS 5.14%. IN EARLIER YEARS IT WAS LESS THAN THIS AMOUNT. AS D ECIDED BY THE COURTS, THE G P RATE SHOWN IN THE REGULAR BOOKS OF ACCOUNTS ARE AN APPROPRIATE GUIDING FACTOR FOR ESTIMATING PROFIT FROM UNRECORDED SALES. AS AGAINST THIS RATE, THE APPELLANT HAS DECLARED PROFIT FROM THE UNRECORDED SALES @ 14.5%. THE PROFIT FROM TRANSACTIONS NOT RECORDED IN REGULAR BOOKS OF ACCOUNTS IS GENERA LLY HIGHER THAN THAT FROM TRANSACTIONS RECORDED IN SUCH BOOKS OF ACCOUNTS. T HE GP RATE DECLARED BY THE APPELLANT FROM UNRECORDED SALES IS 2.82 TIMES MORE THAN THE GP RATE SHOWN IN THE REGULAR BOOKS OF ACCOUNTS. UNDER SUCH CIRCUMSTANCE S, THE PROFIT DECLARED ON UNRECORDED SALES IS HELD TO BE ADEQUATE TO COVER UN DISCLOSED INCOME EARNED BY THE APPELLANT FROM SUCH TRANSACTIONS. HENCE THE ADDITIO N MADE BY THE AO OVER AND ABOVE SUCH INCOME DISCLOSED BY THE APPELLANT FROM U NRECORDED SALES IS DIRECTED TO BE DELETED. 6. HEARD BOTH SIDES REITERATING THEIR RESPECTIVE ST ANDS. THE SOLE DISPUTE BETWEEN THEM IS ABOUT CORRECTNESS OF THE LOWER APPE LLATE AUTHORITIES ORDER ESTIMATING GROSS PROFITS @14.5%. IT HAS ALREADY CO ME ON RECORD THAT THE ASSESSING OFFICER HAS ARRIVED AT UNRECORDED SALES F IGURE IN ASSESSEES CASE AMOUNTING TO RS.5,25,91,428/- FOR MAKING THE IMPUGN ED GROSS PROFITS ESTIMATED ADDITION. LEARNED DEPARTMENTAL REPRESENT ATIVE THEREFORE FAILS TO REBUT THE CRUCIAL LOWER APPELLATE FINDING THAT THE ASSESSEES BOOKS HAVE NOWHERE BEEN DISTURBED IN ORDER TO ARRIVE AT THE AB OVE UNRECORDED SALES FIGURE. WE PROCEED FURTHER TO FIND THAT THE ASSESS EES REGULAR BOOK DECLARED ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 5 - GROSS PROFITS @5.14% WHEREAS ITS UNRECORDED SALES P ROFITS HAVE BEEN DISCLOSED TO BE @14.5% INDICATING ALMOST THRICE OF THE FORMER PROFITS FIGURE. WE THEREFORE SEE NO REASON TO INTERFERE IN THE WELL THOUGHT CIT(A)S CONCLUSION EXTRACTED IN THE PRECEDING PARAGRAPHS. THE REVENUE ACCORDINGLY FAILS IN ITS SOLE SUBSTANTIVE GROUND AS WELL AS MAI N APPEAL ITA NO.2960/AHD/2013. WE FURTHER QUOTE THE ABOVE SIMILARITY OF THE ISSUE INVOLVED IN REVENUES APPEAL ITA NO.2959/AHD/2013 FOR PRECEDING ASSESSMENT YEAR 2009-10 TO DECLINE THE SAME. 7. WE NOW ADVERT TO ASSESSEES CROSS OBJECTION RAIS ING SOLE SUBSTANTIVE ISSUE OF BAD DEBTS DISALLOWANCE OF RS.14,18,236/-. IT HAD CLAIMED DEBTORS AMOUNT OF RS.28,37,945/- INCLUDING THE ABOVE BAD DE BTS WRITTEN OFF. THE ASSESSING OFFICER INTER ALIA WAS OF THE VIEW THAT T HE ASSESSEE HAD NOT DECLARED THE ABOVE SUM OF BAD DEBTS WRITTEN OFF AS INCOME IN EARLIER ASSESSMENT YEARS. HE FURTHER OBSERVED THAT BUT FOR SURVEY, THE ASSESS EE WOULD HAVE NEVER DISCLOSED ITS UNRECORDED SALES IN QUESTION. THIS M ADE HIM TO DISALLOW THE IMPUGNED BAD DEBTS CLAIM. 8. THE CIT(A) UPHOLDS ASSESSING OFFICERS ACTION AS FOLLOWS: 6.3. I HAVE CONSIDERED THE APPELLANT'S SUBMISSIONS AND THE AO'S OBSERVATIONS. IT IS SEEN THAT THE SURVEY U/S 133A HAD BEEN MADE AT T HE PREMISES OF THE ASSESSEE ON 19.02.2010. DURING THE COURSE OF SURVEY , SEVERAL INCRIMINATING DOCUMENTS WERE FOUND. ON THE BASIS OF THESE DOCUMEN TS, THE APPELLANT DISCLOSED UNDISCLOSED INCOME OF RS.75,67,000/- IN I TS PROFIT AND LOSS ACCOUNT COMPRISING OF FOLLOWING ITEMS: 1. STOCK DEFICIT : RS. 32,29,059/- 2. DEBTORS : RS. 28,37,941/- 3. CASH : RS. 15,00,000/- 6.3.1 THE UNDISCLOSED INCOME SHOWN BY THE APPELLANT IS IN THE FORM OF APPLICATION OF SUCH INCOME IN THE NATURE OF STOCK AND DEBTORS. ONLY RS.5,00,000/- HAS BEEN SHOWN AS CASH. THE APPELLANT HAS CLAIMED THAT SUCH DEBTORS ARE ON ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 6 - ACCOUNT OF UNRECORDED SALES MADE BY IT. BUT, NO EVI DENCE OF THE SAME IS AVAILABLE ON RECORD. BESIDES, SUCH INVESTMENTS WHIC H ARE NOT RECORDED IN THE BOOKS OF ACCOUNT ARE TAXABLE AS UNEXPLAINED INV ESTMENT AND THE INCOME IS DEEMED TO BE INCOME FROM OTHER SOURCES AS PER PR OVISIONS OF SECTION 69 OF THE ACT. THOUGH, THE APPELLANT HAS SHOWN THESE I NCOMES IN THE P & L ACCOUNT ALSO, THE APPELLANT HAS OFFERED THESE INCOM ES AS INDIRECT INCOME UNDER THE HEADING ADDITIONAL INCOME OFFERED. THE AP PELLANT HAS NOWHERE STATED THAT ANY DETAILS OF SUCH DEBTORS WERE FOUND DURING THE COURSE OF SURVEY WHICH SHOW THAT THEY WERE DEBTORS ON ACCOUNT OF UNRECORDED SALES MADE BY THE APPELLANT. THUS THESE DEBTORS ARE ON AC COUNT OF APPLICATION OF UNDISCLOSED INCOME AND THE APPELLANT HAS NO EVIDENC E TO PROVE THAT THEY ARE DEBTORS ON ACCOUNT OF UNRECORDED SALES AND THAT THE SALES MADE TO THEM HAVE BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOME OF THE APPELLANT. HENCE, THE APPELLANT HAS FAILED TO FULFILL THE BASI C CRITERIA AS PER PROVISIONS OF SECTION 36(2) OF THE IT ACT, 1961. SINCE, AS PER THE PROVISIONS OF SECTION 36(2), THE ONUS IS ON THE APPELLANT TO ESTABLISH TH AT SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING IT S INCOME AND THE APPELLANT HAS NOT BEEN ABLE TO PROVE THIS ON THE BA SIS OF DOCUMENTS AND OTHER EVIDENCES, THIS CLAIM CANNOT BE ALLOWED. THE AO HAS ALSO NOTED THIS FACT THAT THE APPELLANT HAS NOWHERE PROVIDED THE DE TAILS OF SUCH DEBTORS. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS UPH ELD. 9. WE HAVE HEARD RIVAL SUBMISSIONS. THERE IS NO DI SPUTE EVEN AS PER THE CIT(A)S ABOVE EXTRACTED FINDINGS THAT THE IMPUGNED BAD DEBTS FORM PART OF ASSESSEES UNDISCLOSED INCOME TREATED IN THE NATURE OF BUSINESS INCOME FOR ESTIMATING GROSS PROFITS (SUPRA). THE SAME COMPRIS ES OF THREE HEADS INCLUDING THE ONE PERTAINING TO DEBTORS CATEGORY INCLUDING THE BAD DEBTS AMOUNT IN QUESTION. RELEVANT DETAILS OF THIS CLAIM ALREADY FORM PART OF THE PAPER BOOK FROM PAGE 128 ONWARDS ALONGWITH CORRESPO NDING LEDGERS OF THE DEBTORS IN QUESTION AS WELL AS THE ACCOUNTS WRITTEN OFF. THERE IS NO ISSUE SO FAR AS GENUINENESS OF ASSESSEES CLAIM IS CONCERNED SINCE BOTH THE LOWER AUTHORITIES HAVE NOWHERE SOUGHT TO CROSS CHECK THE ABOVE DETAILS FOR THE PURPOSE OF CONDUCTING VERIFICATION. WE TAKE INTO A CCOUNT ALL THESE FACTS TO CONCLUDE THAT ONCE THE ASSESSEE HAS DECLARED ITS UN ACCOUNTED SALES AS BUSINESS INCOME ALREADY SUBJECTED TO GROSS PROFIT ESTIMATION (SUPRA), IT IS VERY WELL ENTITLED TO CLAIM ALL STATUTORY DEDUCTIONS INCLUDIN G THE ONE IN QUESTION PERTAINING TO BAD DEBTS. THIS IS ALSO NOT THE REVE NUES CASE OTHERWISE THAT THE ASSESSEE DOES NOT FULFILL ANY STATUTORY CONDITI ON. WE ACCORDINGLY ACCEPT ITA. NOS. 2959 & 2960/AHD/13 WITH C.O. NOS. 94 & 95 /AHD/2014 (ASSTT. CIT VS. M/S. SIDDHARTH STEEL CO.) - 7 - ASSESSEES INSTANT SUBSTANTIVE GROUND. THE ASSESSI NG OFFICER IS DIRECTED TO DELETE THIS BAD DEBT DISALLOWANCE OF RS.14,18,236/- . THIS CROSS OBJECTION NO.95/AHD/2014 IS ACCEPTED. 10. THESE TWO REVENUES APPEALS ITA NOS. 2959 & 296 0/AHD/2013 ARE DISMISSED. ASSESSEES FORMER C.O. NO.94/AHD/2014 IS DISMISSED AS NOT PRESSED. ITS LATTER C.O. NO.95/AHD/2014 IS ALLOWED . [PRONOUNCED IN THE OPEN COURT ON THIS THE 14 TH DAY OF MARCH, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 14/03/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0