The DCITNavsari Circle, Navsari V. Shri Ghanshyam Bansidhar Agrawal, Navsari

ITA 30/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60554 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Unexplained investment
• Section: 143(3); 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.30/AHD/2009 A. Y. 2005-06 DY. COMMISSIONER OF INCOME TAX, NAVSARI CIRCLE, NAVSARI APPELLANT VS. SHRI GHANSHYAM BANSIDHAR AGRAWAL, PROP. 302, KRISHNA COMPLEX, KABILPORE, BAZAR NAVSARI PAN-ABXPA6155A RESPONDENT DEPARTMENT BY : SHRI B.L. YADAV, SR. D.R. ASSESSEE BY : MRS. URVASHI SHODHAN, A.R. DATE OF HEARING : 03.05.2012 DATE OF PRONOUNCEMENT 22.06.2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER THE PRESENT APPEAL OF THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), VALSAD DATED 18.09.2008 PASSED IN APPEAL NO.CIT(A)/VLS/436/07-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPE AL:- THE LEARNED CIT(APPEALS) ERRED IN DELETING THE AGG REGATE ADDITIONS OF RS.889150/- MADE BY THE AO ON ACCOUNT OF UNDERSTATED OF SURVEY DISCLOSURE, BY THE ASSESSING OFFICER MAY KIN DLY BE RESTORED. I.T.A. NO.30/AHD/2009 A. Y. 2005-06 2 3. THE FACTS, AS NARRATED IN PARA-2 OF THE ORDER O F LD. CIT(A) ARE REPRODUCED AS UNDER:- THE FACTS OF THE CASE IN BRIEF ARE THAT THE APPELL ANT FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND H AD FILED THE RETURN OF INCOME ON 24.10.2005, DECLARING TOTAL INCOME AT RS. 15,28,600/-. THE ASSESSMENT WAS FINALIZED U/S 143(3) OF THE ACT AND THE TOTAL INCOME WAS ASSESSED AT RS.23,78,070/-. IN THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, A SURVEY ACTION U/S. 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE APP ELLANT ON 01.03.2005. DURING THE COURSE OF SURVEY, CERTAIN U NACCOUNTED INVESTMENTS/EXPENSES OF RS.8,89,150/- AND UNACCOUNT ED CASH OF RS.3,50,300/- WERE FOUND AND THE APPELLANT HAD SURR ENDERED THE SAME AS INCOME OF THE FINANCIAL YEAR. WHILE FINALIZING THE ASSESSMENT, BY ESTIMATING THE NORMAL PROFIT AT RS.11,47,033/- AND ADDING THERETO THE SURVEY DISCLOSURE OF RS.12,39,450/- THE AO DETERMIN ED THE TOTAL INCOME OF RS.23,86,483/- AND AFTER ADJUSTING THE TO TAL INCOME OF RS.14,97,332/- AS OFFERED BY THE APPELLANT IN THE R ETURN OF INCOME, MADE THE ADDITION OF RS.8,89,150/- ON ACCOUNT OF UN DERSTATEMENT OF SURVEY DISCLOSURE AND THE ORDER WAS FINALIZED U/S 1 43(3) ON 31.12.2007. THE ASSESSING OFFICER STATED THAT THE APPELLANT FIRM HAD NULLIFIED THE SURVEY DISCLOSURE BY DEBITING AND CRE DITING THE TRADING ACCOUNT BY RS.8,89,150/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN BUILDING MATERIAL DISCLOSED AS ADDITIONAL INCOME AT THE TIME OF SURVEY. 4. AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A). LD. CIT(A), AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION OF RS.8,89,150/- AND THEREBY A LLOWED THE APPEAL OF THE ASSESSEE. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND STRONGLY SUPPORTED THE ORDE R OF THE ASSESSING OFFICER. ON THE CONTRARY, LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER PASSED BY LD. CIT(A) AND HAS ALSO FILED A BRIEF SYN OPSIS. I.T.A. NO.30/AHD/2009 A. Y. 2005-06 3 6. WE HAVE HEARD THE RIVAL SUB MISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE BRIEF SYNOPSIS AS FILED B Y LD. AUTHORISED REPRESENTATIVE FOR RESPONDENTS READS AS UNDER:- 1. THE CAPTIONED DEPARTMENTAL APPEAL IS FILED AGAI NST ORDER PASSED U/S 143(3) THE ACT FOR DELETION OF ADDITION OF RS.8,89,150/- MADE BY AO ON ACCOUNT OF UNDERSTATEMENT OF SURVEY D ISCLOSURE. 2. AO DISCUSSES THE ISSUE FROM PAGES 2 TO 5 OF THE ASSESSMENT ORDER AND GIVES HIS FINDING IN PARA 5.2 THAT IN THE TRADING, PROFIT AND LOSS ACCOUNT DRAWN INCLUDING SURVEY DISCLOSURE THE APPELLANT NULLIFIED THE SURVEY DISCLOSURE BY DEBITING AND CREDITING THE TRADING ACCOUNT BY RS.8,89,150/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN BUILDING MATERIAL DISCLOSED AS ADDITIONAL INCOME AT THE TIME OF SURVEY. AO CONTINUED TO MAKE ADDITION OF THE SAME U/S 69B OF T HE ACT. 3. LD CIT (A) AFTER CONSIDERING SUBMISSIONS, EVIDEN CE PLACED ON RECORD AND CASE LAWS CITED BY THE RESPONDENT HOLDS ON PAGE 6 OF THE APPELLATE ORDER - ' ... EVEN ON THE MERITS OF THE C ASE IT IS VERY CLEAR THAT THE APPELLANT HAD DEBITED THE PURCHASES OF RS.8,89,150/- ATTRIBUTABLE TO SURVEY DISCLOSURE BUT, THE SAME AMO UNT IS REFLECTED TWICE O THE CREDIT SIDE AND IT IS VERY CLEAR THAT T HE SAID COMPONENT OF PURCHASE OF MATERIAL IS INCORPORATED IN THE AMOUNT OF WORK IN PROGRESS OF RS.20,15,OO0/- BECAUSE OTHERWISE -WITHOUT THE DI SCLOSURE AMOUNT, THE TOTAL COST DEBITED WAS JUST RS. 5,28,066/- AS S HOWN IN THE TABLE HEREINABOVE. THUS, IT WAS QUITE CLEAR THAT BY CREDI TING THE SAME AMOUNT TWICE AND DEBITING THE SAME ONCE, THERE WAS AN ADDITIONAL EFFECT OF CREDIT ENTRY -WHICH AUTOMATICALLY RAISE T HE LEVEL OF INCOME AND THEREFORE IT WAS NOT CORRECT THAT THE APPELLANT HAD NULLIFIED THE AMOUNT OF DECLARATION ON ACCOUNT OF PURCHASE OF RS. 8,89,150/-. LD. CIT (A) THAN PROCEEDED TO DELETE THE ADDITION AFTER NOTING DECISION OF THE HON'BLE AMRITSAR BENCH REPORTED AT 67 TTJ 226 ( COPY SUBMITTED) 4. THE RESPONDENT RELIED ON THE ORDER OF THE ID. CI T (A) AND ALSO PLACED ON RECORD DECISION OF HON'BLE 'A' BENCH IN I TA # 31/AHD/2009 ON IDENTICAL FACTS (FILED ON THE SAME DAY BY THE DE PARTMENT) DISMISSING DEPARTMENTAL APPEAL CHALLENGING DELETION OF UNDERSTATED SURVEY DISCLOSURE. THE HON'BLE ITAT OBSERVED THAT I D. CIT (A) HELD THAT IF CLOSING STOCK WAS ACCEPTED WITHOUT INCLUDIN G SURVEY DISCLOSURE THAN IT WOULD RESULT INTO GROSS PROFIT OF 219.54%. THE HON'BLE ITAT FOUND NO INFIRMITY IN THE FINDING OF ID. CIT (A) BE CAUSE VALUE OF CLOSING STOCK CANNOT EXCEED THE COST INCURRED BY THE ASSESS EE AND IF VALUE OF MATERIAL DISCLOSED IS EXCLUDED FROM THE CLOSING STO CK OF WIP THAN THE GROSS PROFIT WOULD COME TO 10% OF THE SALES. CONSID ERING THE FACTS, THE HON'BLE BENCH CONFIRMED THE ORDER OF ID. CIT (A ) AND DISMISSED APPEAL OF REVENUE. I.T.A. NO.30/AHD/2009 A. Y. 2005-06 4 5. IT IS RESPECTFULLY SUBMITTED THAT GP FOR THE YEA R UNDER CONSIDERATION WITHOUT INCLUSION OF SURVEY DISCLOSUR E WORKS OUT AS UNDER -(REFERENCE PAGE 13 OF P/B AUDITED ACCOUNTS) GROSS PROFIT/TURNOVER: 6.28.236.61 13,888,112.66 4.52% GP FOR THE YEAR WITH INCLUSION OF SURVEY DISCLOSURE AS OFFERED BY THE APPELLANT GROSS PROFIT/TURNOVER: 15. 17. 386.61 13,888,112.66 10.78% GP FOR THE YEAR WHEN ADDITION OF SURVEY DISCLOSURE AGAIN MADE BY AO GROSS PROFIT/TURNOVER: 24.06.536.61 13,888,112.66 17.32% AS OBSERVED FROM ABOVE ADDITION OF SURVEY DISCLOSUR E MADE BY AO WILL RESULT INTO 3 TIMES GROSS PROFIT FOR THE YE AR UNDER CONSIDERATION. IN REPLY TO THE QUERY FROM THE HON'BLE BENCH IT IS SUBMITTED THAT GP FOR A.Y. 2004/05 WAS AT 5.74% UNDER THE CIRCUMSTANCES IT IS RESPECTFULLY SUBMITTE D THAT THE DEPARTMENTAL APPEAL BE DISMISSED AS HELD BY THE HON 'BLE 'A' BENCH ON IDENTICAL FACTS IN ITA # 3 L/AHD/2009. 7. THIS ISSUE HAS BEEN DEALT BY LD. CIT(A) IN PARA 4.1 AND 4.2 OF HIS ORDER AND THE SAME IS REPRODUCED AS UNDER:- I HAVE CONSIDERED THE VIEW OF THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION MADE BY THE ARS OF THE APPELLANT. IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE AO HAD CALLED FOR THE DETAILS AND ALSO EXAMINED THE BOOKS OF ACCOUNTS PRODUCED BEFORE HIM BUT, THE AO HAS NOT BEEN ABLE T O POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT AND ALSO HE HAS NOT INVOKED THE PROVISIONS OF SECTION 145 TO REJECT THE BOOKS OF AC COUNTS TO ESTIMATE THE INCOME. SINCE THERE IS NO REJECTION OF BOOK RES ULTS, THE ESTIMATION OF GP OR NET PROFIT CANNOT BE MADE AND THERE IS NO JUSTIFICATION IN DISTURBING THE AUDITED BOOK RESULTS. EVEN ON MERITS OF THE CASE, IT IS VERY CLEAR THAT THE APPELLANT HAD DEBITED THE PURCH ASES OF RS.8,89,150/- ATTRIBUTABLE TO SURVEY DISCLOSURE BUT , THE SAME AMOUNT IS REFLECTED TWICE ON THE CREDIT SIDE AND IT IS VER Y CLEAR THAT THE SAID COMPONENT OF PURCHASE OF MATERIAL IS INCORPORATED I N THE AMOUNT OF WORK IN PROGRESS OF RS. 20,15,000/-BECAUSE OTHER WI SE WITHOUT THE DISCLOSURE AMOUNT, THE TOTAL CO'ST DEBITED WAS JUST . 5,28,066/- AS SHOWN IN THE TABLE HEREINABOVE. THUS, IT WAS QUITE CLEAR THAT BY I.T.A. NO.30/AHD/2009 A. Y. 2005-06 5 CREDITING THE SAME AMOUNT TWICE AND DEBITING THE SA ME ONCE, THERE WAS ONE ADDITIONAL EFFECT OF CREDIT ENTRY WHICH WOU LD AUTOMATICALLY RAISE THE LEVEL OF INCOME AND THEREFORE IT WAS NOT CORRECT THAT THE APPELLANT HAD NULLIFIED THE AMOUNT OF DECLARATION O N ACCOUNT OF PURCHASE OF RS. 8,89,1507-. THE HON'BLE AMRITSAR BENCH OF ITAT IN ITO VS. HINDUSTAN TRADERS [ 67 TTJ 226]. HELD THAT APPEAL NO. CIT(AVVLS/436/ 07-08 'WHEN THERE WAS EXCESS STOCK FOUND DURING THE SURVE Y, AND THE ASSESSEE SURRENDERED A SUM OF RS. XXXXXXX ON THE SA ME DATE, THEN WILE RECASTING THE STOCK, HE IS DEFINITELY JUSTIFIE D ON DEBITING THE PURCHASES BY A SUM OF RS. XXXXXXX AND ALSO CREDITIN G THE SAME SUM TO THE P&L A/C. THE NET EFFECT OF THIS SURRENDERED INC OME, OFFERED BY THE ASSESSEE, DOES NOT STAND NULLIFIED IN CASE THE SAME IS FOUND REFLECTED BY THE ASSESSEE IN SALES ACCOUNTS IN THE BOOKS OF A CCOUNTS AND IS REFLECTED IN HIS CLOSING STOCK. IF THE AMOUNT OF SU RRENDER OF RS. XXXXXXX IS FOUND REFLECTED IN THE SALES AND CLOSING STOCK IN THE ACCOUNT BOOKS OF THE ASSESSEE, THEN NO ADDITION CAN BE MADE ON THIS ACCOUNT BY THE AO..... '. 4.2 THE ABOVE OPINION IS APPLICABLE TO THE FAC TS OF THE CASE OF THE APPELLANT. IN VIEW OF THIS, I AM OF THE VIEW TH AT THE ACTION OF THE AO TO MAKE ESTIMATION OF NET PROFIT WITHOUT POINTIN G OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS AND WITHOUT REJECTION OF BOOK RESULTS BY INVOKING SECTION 145 OF THE ACT IS UNJUSTIFIABLE AND EVEN ON MERITS ON THE BASIS OF THE FACTS OF THE CASE AS WELL AS IN VIEW OF THE OPINION OF THE AMRITSAR BENCH OF ITAT, IT IS CLEAR THAT THE APPELLANT HAS N OT NULLIFIED THE SURVEY DISCLOSURE AND THEREFORE, I DIRECT THE AO TO DELETE THE ADDITION OF RS. 8,89,150/-. IN THE RESULT, THIS GROUND STANDS ALLOW ED. 8. IT IS NOT DISPUTED THAT THE GROSS PROFIT, AS DE CLARED FOR THE YEAR UNDER CONSIDERATION IS HIGHER THAN THE GROSS PROFIT AS DE CLARED IN EARLIER YEARS. WE FIND THAT UNDER THE SIMILAR FACTS, THE HONBLE CO-ORDINA TE BENCH IN ITA NO.31/AHD/2009 IN THE CASE OF CIT VS. M/S SHIV & CO. HAS HELD AS U NDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ADDITION MADE BY THE A.O. O N THIS BASIS THAT HE ADDITIONAL INCOME DECLARED BY THE ASSESSEE IN THE C OURSE OF SURVEY W NOT INCLUDED BY THE ASSESSEE IN THE PROFITS SHOWN B Y HIM WHEREAS THE SAME WAS DELETED BY THE LD. CIT(A) ON THIS BASIS TH AT THIS INCOME WAS INCLUDED IN THE PROFITS SHOWN BY THE ASSESSEE IN IT S TRADING AND P & L ACCOUNT AND THE BASIS OF THIS IS THIS THAT CLOSING STOCK OF W.I.P. SHOWN I.T.A. NO.30/AHD/2009 A. Y. 2005-06 6 BY THE ASSESSEE AT RS.42,46,500/- INCLUDES THIS AMO UNT OF ADDITIONAL MATERIAL DECLARED BY THE ASSESSEE IN THE COURSE OF SURVEY. TO EXAMINE THE VERACITY OF THIS CONTENTION RAISED BY THE ASSES SEE BEFORE LD. CIT(A) AND HIS DECISION, IT IS IMPORTANT TO SEE THE WORKIN G REGARDING VALUATION OF CLOSING STOCK OF W.I.P. BUT THE SAME IS NOT AVAI LABLE IN THE PAPER BOOK AND THE LD. A.R. OF THE ASSESSEE COULD NOT SHO W US ANY SUCH WORKING WAS MADE AVAILABLE BY THE ASSESSEE BEFORE T HE A.O. LD. CIT(A) HAS NOTED THE ARGUMENT OF THE LD. A.R. ON PA GE 5 OF HIS ORDER THAT THE TOTAL AMOUNT OF COST INCURRED AND DEBITED IN THE P & L ACCOUNT IS AMOUNT OF/RS.34.95 LACS OUT OF WHICH THE ASSESSE E DECLARED CONSTRUCTION INCOME (SALES) OF RS.6.66 LACS AND HEN CE NET AMOUNT OF EXPENSES IS AMOUNT OFR?S.28.29 LACS AND THEREFORE, THE CLOTTING STOCK OF W.I.P. SHOWN BY THE ASSESSEE AT RS.42,46,500/- I NCLUDES AMOUNT OF ADDITIONAL MATERIAL DECLARED BY THE ASSESSEE OF RS. 13,93,280/-. HE HAS IMMEDIATELY ACCEPTED THE ARGUMENT OF THE LD. A.R. O N THIS BASIS THAT IF IT IS ACCEPTED THAT THE CLOSING STOCK OF W.I.P. OF RS.42,46,500/- IS WITHOUT INCLUDING THE VALUATION OF MATERIAL DECLARE D BY THE ASSESSEE IN THE COURSE OF SURVEY OF RS.13,93,280/- IT WILL RESU LT INTO GROSS PROFIT OF RS.219.54%. WE DO NOT FIND ANY INFIRMITY IN THE FIN DING OF LD. CIT(A) BECAUSE ADMITTEDLY, THE VALUE OF CLOSING STOCK CANN OT EXCEED THE COST INCURRED BY THE ASSESSEE AND SINCE THE TOTAL COST D EBITED IN THE P & L ACCOUNT IS ONLY; RS.34.95 LACS OUT OF WHICH THE ASS ESSEE HAS SHOWN CONSTRUCTION INCOME (SALES) OF RS.6.66 LACS, THE CO ST FROM SUCH SALES HAS TO BE REDUCED FROM SUCH EXPENSES AND ONLY ;THE BALANCE AMOUNT CAN BE THE CLOSINGS STOCK OF W.I.P. WITHOUT INCLUDI NG THE DECLARATION OF MATERIAL IN THE COURSE OF SURVEY OF RS.13.93 LACS., WHICH WE DO SO. WE FIND THAT IF WE EXCLUDE THE VALUE OF MATERIAL DECLA RED OF RS.13,93,250/- FROM THE CLOSING STOCK OF W.I.P. SHOWN BY THE ASSES SEE AT RS.42,46,500/-, THE GROSS PROFIT COMES TO RS.68,940 /- WHICH IS ABOUT 10% OF THE CONSTRUCTION INCOME (SALES). CONSIDERING A LL THESE FACTS, WE FEEL THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADD ITION MADE BY THE A.O. AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A). 9. IN VIEW OF THE FACT THAT THE ASSESSING OFFICER MADE ADDITION ON THE BASIS THAT THE ASSESSEE HAS MERGED SURVEY DISCLOSUR E IN TRADING RESULT AND DID NOT DISCLOSE THE SAME AS ADDITIONAL INCOME. HOWEVER, W E FIND FORCE INTO THE CONTENTION OF LD. AUTHORISED REPRESENTATIVE THAT TH E ASSESSING OFFICER HAS WRONGLY CAME TO THE CONCLUSION THAT THE SURVEY DISCLOSURE I S NULLIFIED BY THE ASSESSEE BY DEBITING AND CREDITING THE TRADING ACCOUNT BY RS.8, 89,150/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN BUILDING MATERIAL AS ADDI TIONAL INCOME AT THE TIME OF I.T.A. NO.30/AHD/2009 A. Y. 2005-06 7 SURVEY. THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDI NG THAT THE ASSESSEE HAD DEBITED THE PURCHASES OF RS.8,89,150/- ATTRIBUTABLE TO SURV EY DISCLOSURE BUT THE SAME AMOUNT IS REFLECTED TWICE ON THE CREDIT SIDE AND IT IS CLEAR THAT THE SAID COMPONENT OF PURCHASE OF MATERIAL IS INCORPORATED IN THE AMOU NT OF WORK IN PROGRESS OF RS.20,15,000/-. THE REVENUE COULD NOT CONTROVERT T HIS FINDING OF THE FACT OF THE LD. CIT(A). 10. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLO WING THE DECISION OF THE CO- ORDINATE BENCH IN ITA NO.31/AHD/2009, WE ARE HEREBY REJECTING THIS GROUND OF THE APPEAL OF THE REVENUE. 11. IN THE RESULT, THIS APPEAL OF THE REVENUE IS D ISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED IN OPEN COURT ON 22.06.2012 SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *