I.T.O.-1(1), Gwalior V. Sh. Pyare Lal Gabra, Gwalior

ITA 297/AGR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62897 (ITAT-AGRA)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: NAVIN GARGH
• Keywords: Unexplained investment; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 297/AGRA/2012 ASSTT. YEAR : 2005-06 INCOME-TAX OFFICER, VS. SH. PYARE LAL GABRA 1(1), GWALIOR. PROP. M/S. GABRA MARKETING, KAMPOO ROAD, GWALIOR. (PAN: AJDPG 3745 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. MISHRA, JR. D.R. RESPONDENT BY : SHRI NAVIN GARGH, ADVOCATE DATE OF HEARING : 11.12.2012 DATE OF PRONOUNCEMENT OF ORDER : 21.12.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 23.04.2012 FOR THE ASSESSMENT YEAR 20 05-06 ON THE FOLLOWING GROUNDS : (A). WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS JUSTIFIED IN DELETIN G THE ADDITION OF RS.94,925/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SUPPRESSED PROFIT APPLYING NET PROFIT RATE OF 2.5% ON TOTAL ES TIMATED SALES OF RS.67,20,000/-. (B). WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ITA NO. 297/AGRA/2012 2 RS.10,08,000/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNEXPLAINED INVESTMENT U/S. 69 OF THE INCOME-TAX AC T, 1961. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT AT THE A SSESSMENT STAGE, THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND OTHER DETAILS AND THE DETAILS WERE EXPLAINED ON ESTIMATE BASIS. THE AO, THEREFORE, ENH ANCED THE TURNOVER AS WELL AS APPLIED THE NET PROFIT RATE OF 2.5% AGAINST ESTIMAT ED TURNOVER OF RS.67,20,000/- AND MADE ADDITION ON ACCOUNT OF PROFIT AT RS.94,925 /-. SIMILARLY, THE AO WAS OF THE VIEW THAT THE ASSESSEE MADE UNEXPLAINED INVESTM ENT IN BUSINESS WHICH WAS COMPUTED AT THE RATE OF 15% OF THE TOTAL ESTIMATED TURNOVER AND MADE THE ADDITION OF RS.10,08,000/-. BOTH THE ADDITIONS WERE CHALLENG ED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT THE ASSESSEE DECLARED PROFIT ON THE BASIS OF TOTAL TURNOVER OF RS.55,07,681/- WHICH HAS BEEN ACCEPTED BY THE COMME RCIAL TAX OFFICER AND THE ASSESSEE DECLARED RETURNED INCOME AT RS.73,075/- WH ICH GIVES NET PROFIT RATE APPROXIMATELY AT 1.33%. IT WAS, THEREFORE, SUBMITTE D THAT THE ENHANCEMENT TO THE TURNOVER AND APPLICATION OF G.P. RATE OF 2.5% IS UN JUSTIFIED. IT WAS ALSO EXPLAINED THAT EVEN IN OTHER COMPARABLE CASE OF RAJENDRA PRAS AD AGARWAL, LESSER PROFIT RATE HAS BEEN APPLIED. THE LD. CIT(A) ACCEPTED THE CONTE NTION OF THE ASSESSEE AND DELETED THE ADDITION OF RS.94,925/-, ON WHICH THE R EVENUE RAISED GROUND NO. 1 ABOVE. AS REGARDS THE ADDITION OF UNEXPLAINED INVES TMENT, THE LD. CIT(A) NOTED THAT IN ASSESSMENT YEAR 2005-06, SIMILAR ADDITION H AS BEEN DELETED BY HIM ITA NO. 297/AGRA/2012 3 BECAUSE THERE WAS NO BASIS TO SUSTAIN THE ADDITION AS THE ASSESSEE WAS DOING BUSINESS FOR LAST SEVERAL YEARS, ON WHICH THE REVEN UE HAS RAISED GROUND NO. 2 ABOVE. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE ITAT, AGRA BEN CH IN THE ASSESSMENT YEAR 2002-03 IN DEPARTMENTAL APPEAL IN THE CASE OF THE S AME ASSESSEE IN ITA NO. 270/AGRA/2012 AND VIDE ORDER DATED 19.10.2012, THE DEPARTMENTAL APPEAL WAS DISMISSED WITH REGARD TO UNEXPLAINED INVESTMENT AND ON ACCOUNT OF PROFIT, PART ADDITION WAS MAINTAINED AT RS.50,000/- INSTEAD OF R S.3,11,860/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ASSESSMENT YEAR 2002-03, THE SALES OF THE ASSESSEE WERE MORE THAN THE SALES DECLARED IN ASSES SMENT YEAR UNDER APPEAL. THEREFORE, ON THE SAME BASIS, THE ADDITION COULD HA VE BEEN MAINTAINED APPROXIMATELY OF 12,500/-. HE HAS, THEREFORE, SUBMI TTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL DATED 19.10.2012. COPY OF THE ORDER IS FILED IN THE PAPER BOOK. THE LD. DR DID NOT DISPUTE THE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE ABOVE. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND FOUND THAT BOTH THE ISSUES ARE COVERED BY THE ORDER OF ITAT, AGRA BENCH IN THE CASE OF THE SAME ITA NO. 297/AGRA/2012 4 ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 DATED 19.1 0.2012 (SUPRA), IN WHICH THE TRIBUNAL DECIDED BOTH THE ISSUES AS UNDER : ITA NO. 270/AGRA/2012 : 3. THE REVENUE CHALLENGED THE ORDER OF THE LD. CIT( A) IN DELETING THE ADDITION OF RS.3,11,860/- ON ACCOUNT O F ESTIMATE OF NET PROFIT AND IN DELETING THE ADDITION OF RS.15,00,000 /- ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S. 69 OF THE IT ACT. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO R EOPENED THE ASSESSMENT U/S. 148 OF THE IT ACT AND ASSESSEE IN R ESPONSE THERETO FILED THE RETURN OF INCOME AT RS.88,140/-. THE AO N OTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF THE ASSESSEE, IT HAS BEEN ADMITTED B Y THE ASSESSEE THAT HE HAS BEEN CARRYING ON THE BUSINESS OF WHOLESALE T RADING IN BIRI, CIGARETTES ETC. SINCE 1998, BUT NO RETURN OF INCOME HAS BEEN FILED FOR THE YEAR UNDER CONSIDERATION NOR ANY BOOKS OF ACCOU NT HAVE BEEN MAINTAINED. THE STATEMENT OF THE ASSESSEE WAS ALSO RECORDED REGARDING SOURCE OF INCOME. THE ASSESSEE HAS SHOWN TOTAL TURNOVER OF RS.88,13,999/- OF WHICH PROFIT MARGIN WAS SHOWN AT 1% DECLARING PROFIT OF RS.88,140/-. HOWEVER, NO BASIS OF THE TUR NOVER, BILLS, VOUCHERS AND BOOKS OF ACCOUNT WERE PRODUCED. IN THE STATEMENT OF THE ASSESSEE, IT WAS EXPLAINED THAT THE TURNOVER OF THE ASSESSEE HAS BEEN SHOWN ON THE BASIS OF THE TURNOVER DISCLOSED T O THE SALES TAX DEPARTMENT AND THE ACCOUNTS COULD NOT BE PRODUCED B ECAUSE THE ACCOUNTANT WAS OUT OF STATION. THE AO ACCORDINGLY, ESTIMATED THE TURNOVER AT RS.1.00 CRORE AND BY APPLYING NET PROFI T RATE OF 4%, COMPUTED THE BUSINESS INCOME AT RS.4,00,000/- AND A FTER GIVING SET OFF OF THE AMOUNT DISCLOSED IN THE RETURN OF INCOME ADDITION OF RS.3,11,860/- WAS MADE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT SIN CE THE TURNOVER HAS BEEN ACCEPTED BY THE COMMERCIAL TAX DEPARTMENT, THEREFORE, TOTAL TURNOVER SHOULD NOT BE DISTURBED. COPY OF THE ORDER OF COMMERCIAL TAX DEPARTMENT WAS PRODUCED. IT WAS FURT HER SUBMITTED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT IN THE CASE OF RAJENDRA PRASAD AGARWAL, THE TRIBUNAL DIRECTED TO APPLY G.P. RATE OF 0.7% AND TO ALLOW CREDIT OF EXPENDITURE AT THE RATE OF 0 .5% ON THE TOTAL TURNOVER. COPY OF THE ORDERS OF THE TRIBUNAL WAS PR ODUCED BEFORE THE LD. CIT(A). THE LD. CIT(A) ACCEPTED THE CONTENT ION OF THE ITA NO. 297/AGRA/2012 5 ASSESSEE AND DELETED THE ADDITION OF RS.3,11,860/-. FURTHER, THE AO MADE ADDITION OF RS.15,00,000/- ON ACCOUNT OF UNEXP LAINED INVESTMENT IN BUSINESS. THE AO AT THE ASSESSMENT ST AGE ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF INVESTMENT IN BUS INESS. THE ASSESSEE EXPLAINED THAT THE BUSINESS WAS COMMENCED IN 1998 BY HIS FATHER AND SINCE THEN HE IS DOING THE BUSINESS, BUT NO EVIDENCE OF SOURCE OF INVESTMENT WAS FILED. THEREFORE, 15% OF T HE TURNOVER ESTIMATED BY THE AO WAS CONSIDERED AS UNDISCLOSED I NVESTMENT IN THE BUSINESS OF ASSESSEE AND ADDITION OF RS.15,00,0 00/- WAS MADE U/S. 69 OF THE IT ACT. 5. THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEF ORE THE LD. CIT(A) AND SUBMITTED THAT THE COMMERCIAL TAX DEPART MENT GRANTED REGISTRATION TO THE ASSESSEE IN 1997. THEREFORE, TH E ADDITION OF UNDISCLOSED INVESTMENT IN THE ASSESSMENT YEAR UNDER APPEAL IS UNJUSTIFIED. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE BECAUSE IT WAS INCUMBENT UPON THE AO TO FIRST ESTAB LISH THE INVESTMENT MADE DURING THE ASSESSMENT YEAR UNDER AP PEAL AND THEN ONLY ADDITION COULD BE MADE. THE ADDITION WAS ACCOR DINGLY, DELETED. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION OF RS.15,00,000/- HAS BEEN RIGHTL Y DELETED BY THE LD. CIT(A). THE ASSESSEE ESTABLISHED ON RECORD THAT HE WAS DOING BUSINESS SINCE LONG. THEREFORE, THERE WAS NO OCCASI ON TO CONSIDER UNEXPLAINED INVESTMENT IN THE ASSESSMENT YEAR UNDER APPEAL. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO JUSTIF Y HIS CONCLUSION THAT THE ASSESSEE MADE ANY UNDISCLOSED INVESTMENT I N THE ASSESSMENT YEAR UNDER APPEAL. THE AO MERELY ON HYPOTHETICAL CO NSIDERATION AND ON IMAGINARY BASIS, CONSIDERED THE UNEXPLAINED INVESTMENT WHICH HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) IN THE ABSENCE OF ANY EVIDENCE ON RECORD. WE DO NOT INTEND TO INTERFE RE WITH THE FINDINGS OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.15,00,000/-. GROUND NO.2 OF APPEAL OF THE REVENUE IS, ACCORDINGL Y, DISMISSED. 6.1 AS REGARDS THE ADDITION OF GROSS PROFIT, THOUGH IT IS ADMITTED FACT THAT SALES OF THE ASSESSEE AT RS.88,13,999/- H AVE BEEN ACCEPTED BY THE COMMERCIAL TAX DEPARTMENT, BUT THE ASSESSEE FILED TO PRODUCE ANY BOOKS OF ACCOUNT, BILLS, VOUCHERS BEFOR E THE AO TO VERIFY THE PROFIT EARNED BY THE ASSESSEE OUT OF THE WHOLESALE BUSINESS. THE ASSESSEE CLAIMED TO HAVE EARNED PROFI T AT THE RATE OF ITA NO. 297/AGRA/2012 6 1%, BUT NO BASIS OR EVIDENCE WAS PRODUCED. THE LD. CIT(A) MERELY FOLLOWING THE ORDER IN THE CASE OF RAJENDRA PRASAD AGARWAL (SUPRA) DELETED THE ADDITION IN THE CASE OF THE ASSESSEE. S INCE THERE WAS NO BASIS, WHATSOEVER, FOR CLAIMING PROFIT RATE OF 1% I N THE CASE OF THE ASSESSEE, THEREFORE, CONSIDERING THE RETURN OF INCO ME FILED BY THE ASSESSEE, IT WOULD HAVE BEEN NECESSARY FOR THE LD. CIT(A) TO MAKE PART OF THE ADDITION IN ORDER TO DO JUSTICE BETWEEN THE PARTIES. IN THE ABSENCE OF ANY EVIDENCE ON RECORD FOR PROVING PROFI T RATE OF 1% IN THE CASE OF ASSESSEE, WE ARE OF THE VIEW THAT IT WO ULD HAVE BEEN PROPER AND REASONABLE TO MAKE LUMP SUM ADDITION AGA INST THE ASSESSEE IN STEAD OF 4% PROFIT RATE APPLIED BY THE AO. WE ACCORDINGLY, MODIFY THE ORDER OF THE LD. CIT(A) IN DELETING THE ENTIRE ADDITION AND DIRECT THAT ADDITION OF RS.50,000/- WO ULD SERVE THE PURPOSE. WE, THEREFORE, DIRECT THAT INSTEAD OF ADDI TION OF RS.3,11,860/-, THE AO SHALL MAKE ADDITION OF RS.50, 000/- IN ALL. THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED. GROUND NO. 1 OF APPEAL OF THE REVENUE IS ACCORDINGLY PARTL Y ALLOWED. IN THE RESULT THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED. BY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL WE DIS MISS GROUND NO. 2 OF THE DEPARTMENTAL APPEAL. HOWEVER, AS REGARDS THE ADDITI ON DELETED BY THE LD. CIT(A) ON ACCOUNT OF PROFIT RATE, IT IS ADMITTED FACT THAT THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT AND SALES HAVE BEEN ACCEPTED BY TH E COMMERCIAL TAX DEPARTMENT. THE SALES OF THE ASSESSEE ARE LESSER IN ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE ASSESSMENT YEAR 2002-03. THEREFO RE, THE ENDS OF JUSTICE WOULD MEET TO MAINTAIN THE ADDITION OF RS.15,000/- IN ALL INSTEAD OF ADDITION MADE BY THE AO AT RS.94,925/-. ACCORDINGLY, FOLLOWING THE O RDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2002-03 ABOVE, THE ORDER OF THE LD. CIT(A) IS MODIFIED TO THAT EXTENT AND INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.94,925/-, THE ADDITION ITA NO. 297/AGRA/2012 7 WOULD BE MADE AT RS.15,000/- IN ALL. IN THE RESULT, GROUND NO. 1 OF THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED. 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY