The DCIT, Central Circle-1, Surat V. Smt. Shyama Sanjay Shah, Surat

ITA 3000/AHD/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2406 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained expenditure; Search and seizure; Revenue expenditure
• Section: 69C; 143(3)

Judgement Text

I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD A BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO . 2849/AHD/11 ASSESSMENT YEAR 2009 - 10 SHYAMA SANJAY SHAH .APPELLANT SAHARA GATE, SURAT [PAN: AKPPS2509B ] VS. DY COMMIS SIONER OF INCOME TAX CENTRAL CIRCLE 1, SURAT . RESPONDENT I.T.A. NO . 3000 / AHD/11 ASSESSMENT YEAR 2009 - 10 DY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1, SURAT .APPELLANT VS. SHYAMA SANJAY SHAH . RESPONDENT SAHARA GATE, SURAT [PAN: AKPPS2509B] APPEARANCES BY: J P SHAH FOR THE A SSESSEE DINESH SINGH FOR THE REVENUE DATE OF CONCLUDING THE HEARING : DECEMBER 2 , 201 5 DATE OF PRONOUNCING THE ORDER : MARCH 1 ST , 201 6 O R D E R PER PRAMOD KUMAR AM : 1. THESE CROSS APPEALS ARE FILED AGAINST THE ORDER 19 TH SEPTEMBER 2011 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. AS THES E ARE CROSS I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 2 OF 6 APPEALS AND WERE HEARD TOGETHER, AS A MATTER OF CONVENIENCE, THESE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. GRIEVANCES RAISED BY THE PARTIES ARE AS FOLLOWS: GROUNDS OF APPEAL, AS RAISED BY THE ASSESSEE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) ERRED IN NOT DELETING THE WHOLE ADDITION OF RS.29,80,176 AND HE FURTHER ERRED IN UPHOLDING THE ADDITION TO THE EXTENT OF RS. 10,99,180. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) HAVING INFERRED (AND RIGHTLY SO) THAT SEIZED PAPER WAS NOT A RECORD OF EXPENSES ACTUALLY INCURRED COUPLED WITH THE FACT THAT THE ASSESSEE RECORDED IN HER BOOKS DETAILS OF ITEM - WISE AND DATE - WISE EXPE NSES ACTUALLY INCURRED THE CIT(A) SHOULD HAVE REALIZED AND HELD THAT EVEN THE BASIC COMPLEXION OF THE CASE COMPLETELY CHANGED AND THE MOST RELEVANT POINT WAS AS TO WHETHER OR NOT THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE INCORRECT AND INCOMPLETE. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) SHOULD HAVE REALIZED AND HELD THAT ONCE THE CASE BECAME ONE OF RELIABILITY OF ACCOUNTS WITHOUT FIRST REJECTING THE ACCOUNTS MAINTAINED BY THE ASSESSEE THE DEP ARTMENT CANNOT VENTURE INTO THE EXERCISE OF ESTIMATION OF EXPENSES. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) AFTER HOLDING (AND RIGHTLY SO) THAT THE SEIZED PAPER DID NOT REPRESENT ACTUAL EXPENSES, ER RED IN VENTURING INTO THE EXERCISE OF ESTIMATION AND HE FURTHER ERRED IN REFERRING TO THE FIGURES OF THE SEIZED PAPER FOR ARRIVING AT HIS ESTIMATE OF EXPENSES. 5. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, THE CIT(A) ERRED IN ESTIMATING THE EXPENSES WITHOUT PROVIDING ANY OBJECTIVE BASIS FOR THE SAME AND HE FURTHER ERRED IN ESTIMATING SUCH EXPENSES PURELY ON THE BASIS OF CONJECTURES AND SURMISES. GROUNDS OF APPEAL, AS RAISED BY THE ASSESSING OFFICER 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN GIVING PARTIAL RELIEF TO THE ASSESSEE ON THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED EXPENDITURE EVEN THOUGH IT WAS CATEGORICALLY ANALYZED IN THE BODY OF THE ASSESSMENT ORDER THAT THE SEIZED MATERIAL WAS NOT JUST AN ESTIMATE BUT WAS ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE. I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 3 OF 6 2) THE LD. CLT(A) HAS ERRED IN LAW AND ON FACTS IN GIVING PARTIAL RELIEF TO THE ASSESSEE ON ACCOUNT OF REPEATED FIGURE IN SEIZED MATERIAL OF RS.18,81,000/ - EVEN THOUGH THE SEIZED MATERIAL SHOWS THAT THE FIGURE MENTIONED FOR CIVIL MATERIAL IS RS.10,75,500/ - WHEREAS THE FIGURE MENTIONED FOR CARPENTRY MATERIAL IS RS.10,74,300/ - WHICH WAS SCANNED AND RE - P RODUCED IN THE ASSESSMENT ORDER. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE T HIS. THE ASSE SSEE WAS SUBJECTED TO A SEARCH AND SEIZURE OPERATION ON 12 TH JUNE 2008. DURING THE COURSE OF THESE PROCEEDINGS, A LOSE PAPER WAS FOUND WHICH SET OUT THE DETAILS OF CERTAIN HEAD OF EXPENSES (SUCH AS LABOUR, MATERIAL, POP, HARDWARE ETC) AND CER TAIN AMOUNTS AGAINST SUCH HEADS OF EXPENSES. THE TOTAL OF THESE AMOUNTS WAS RS 54,23,750. IT WAS EXPLAINED BY THE ASSESSEE THAT THIS PAPER WAS A ROUGH NOTING AND IT CONTAINED ESTIMATED EXPENSES ON ACCOUNT OF FURNISHING OF THE FLAT. IT WAS FURTHER SUBMITTE D BY THE ASSESSEE THAT THE ACTUAL EXPENSES INCURRED ON FURNISHING OF THE FLAT, AS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS, ARE RS 35,91,009. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THIS EXPLANATION. HE WAS OF THE VIEW THAT SINCE SOME OF THE AMOU NTS WERE AS SPECIFIC AS 3,83,750, SUCH AMOUNTS COULD NOT BE ESTIMATES. HE ALSO NOTED THAT THE ACTUAL EXPENSE ON THE AC WINDOW AMOUNTED TO RS 2,29,500 WHEREAS THE SEIZED PAPER SHOWED RS 2,30,000 AND, THEREFORE, IT COULD NOT HAVE BEEN AN ESTIMATE. IN THIS B ACKGROUND, THE ASSESSING OFFICER ADDED THE AMOUNT OF DIFFERENCE BETWEEN THE FURNISHING EXPENSES AS PER BOOKS OF ACCOUNTS AND, WHAT HE TERMED AS, FURNISHING EXPENSES AS PER THE SEIZED PAPER. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A ). LEARNED CIT(A) WAS OF THE VIEW THAT THE SEIZED PAPER SHOWED ONLY THE ESTIMATES BUT NEVERTHELESS HE CONFIRMED A PART OF THE ADDITION ON THE GROUND THAT THERE ARE LIKELY TO BE SOME LEAKAGES OR EXPENDITURES NOT STATED IN THE BOOKS IN RESPECT OF CERTAIN IT EMS/ EXPENDITURES . IT WAS IN THIS BACKDROP THAT THE CIT(A) RESORTED TO HIS OWN ESTIMATIONS. THE RELIEF OF RS 18,81,000 WAS THUS GRANTED AND THE BALANCE AMOUNT OF RS 10,99,180 WAS CONFIRMED. NONE OF THE PARTIES IS SATISFIED. WHILE THE ASSESSEE IS AGGRIEVED OF THE DISALLOWANCE SUSTAINED BY THE CIT(A), THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF GRANTED BY THE CIT(A). BOTH THE PARTIES ARE AGGRIEVED AND ARE IN APPEAL BEFORE US. I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 4 OF 6 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND D ULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT IN A WELL REASONED ORDER, LEARNED CIT(A) HAS HELD THAT THE SEIZED PAPER CANNOT BE TREATED AS DETAILS OF EXPENSES ACTUALLY INCURRED, AND THAT IT WAS AT BEST AN ESTIMATION OF THE EXPENSES ON ACCOUNT OF FURNISHING. WHILE DOING SO, LEARNED CIT(A) HAS HELD AS FOLLOWS: 2 I HAVE CONSIDERED THE ORDER OF THE A.O. AND THE CONTENTION AND SUBMISSION OF THE LEARNED A.R. ON PERUSAL OF THE SAME AND IN PARTICULAR THE COPY OF SEIZED LOOSE PAPER, I FIND THAT THE ASSESSING OFFICER S CONTENTION IS THAT THE APPELLANT HAS INCURRED ACTUAL EXPENDITURE AS PER SEIZED PAPER OF AGGREGATE AMOUNT OF RS.54,23,750/ - AND THAT THE EXCESS OVER THE EXPENDITURE AS PER THE BOOKS MUST BE THE PAYMENT , IN CASH. THOUGH THE ASSESSING OFFICER HAS APPLIED PROVISIONS OF SECTION 69C OF THE ACT, SAME IS NOT APPLICABLE IN PRESENT CASE AS AFORESAID EXPENDITURE IS NOT REVENUE EXPENDITURE FOR APPELLANT BUT IT IS ON ACCOUNT OF INVESTMENT. THUS, THE CORRECT SECTION APPLICABLE IS SECTION 69B AS SEIZED PAPER REFERS TO INVESTMENT WHICH IS PARTIALLY REFLECTED IN THE BOOKS OF ACCOUNTS. ON THE OTHER HAND, THE APPELLANT'S CONTENTION IS THAT THE SEIZED MATERIAL REPRESENTS ONLY ESTIMATE OF RENOVATION/INTERIOR EXPENDITURE FOR THE FLAT PURCHASED BY THE APPELLANT AND WHATEVER ACTUAL EXPENDITURE INCURRED IS REFLECTED IN THE BOOKS OF ACCOUNTS. ON PERUSAL OF THE SEIZED PAPER, I FIND THAT THE SEIZED MATERIAL REPRESENTS NOTINGS OF ESTIMATE OF EXPENDITURE TO BE INCURRED BY THE APPELLA NT. THIS CAN BE APPRECIATED FROM THE FACT THAT THE FLAT WAS ACQUIRED ONLY ON 18 - 3 - 2008 BY THE APPELLANT AT BOMBAY AND THAT THE SEARCH TOOK PLACE ON 12 - 6 - 2008 WHEN THE SEIZED MATERIAL WAS FOUND. THUS, THE TIME GAP BETWEEN THESE TWO DATES IS LESS THAN 3 MONT HS. THAT APART THE SEIZED MATERIAL REPRESENTS THE NOTINGS IN ROUND FIGURE. NO NAME OF SUPPLIERS OR CONTRACTORS OR BRAND OF ACS ETC. ARE MENTIONED. NO DATE IS MENTIONED ON LOOSE PAPER. CERTAIN AMOUNTS ARE IN DUPLICATE I.E. REPEATED SUCH AS MATERIAL OF RS .10,74,500/ - IS STATED TWICE IN THE SEIZED MATERIAL. SIMILARLY THE FIGURE OF HARDWARE MATERIAL IS OF RS.1,53,000/ - AND THE SAME FIGURE RS.1,53,000/ - IS FOR MIRROR/GLASS. APART FROM THIS, NO DETAILED BREAK UP OF ANY EXPENDITURE OR BILLS IS FOUND I N THE SEIZED MATERIAL AT THE TIME OF SEARCH. NO DETAILS OF ANY PAYMENT IS FOUND DURING THE SEARCH. EVEN NO CALCULATION OF SPECIFIC REQUIREMENT/SUPPLY OF MATERIALS OR DELIVERY CHALLAN WAS FOUND. NORMALLY AIR - CONDITIONERS ARE COVERED BY THE WARRANTY AND WAR RANTY PAPERS ARE ALWAYS TAKEN BY THE PURCHASER WITH DELIVERY CHALLAN. NO SUCH WARRANTY PAPERS WERE FOUND DURING THE SEARCH. THIS CONFIRMS THAT THE AIR - CONDITIONERS WERE NOT PURCHASED BEFORE THE DATE OF SEARCH. THE A.O. HAS ALSO APPRECIATED THIS AND HA S GIVEN CREDIT FOR THE EXPENDITURE INCURRED SUBSEQUENT TO THE DATE OF SEARCH AGAINST THE HEAD OF EXPENDITURE AS PER SEIZED MATERIAL. ALL THESE FACTS I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 5 OF 6 PROVE THAT THE AMOUNT AS PER SEIZED MATERIAL IS ONLY ESTIMATE OF THE WORK TO BE CARRIED OUT. THEREFORE, TH ERE IS NO JUSTIFICATION FOR HOLDING THAT THE EXPENDITURE WAS ACTUALLY INCURRED BEFORE THE DATE OF SEARCH. THIS IS FURTHER SUPPORTED BY THE FACT THAT IN SOME CASES EXPENDITURE AS PER BOOKS SHOWN BY THE APPELLANT IS MORE THAN THE EXPENDITURE NOTED IN THE SEI ZED MATERIAL SUCH AS PARTICULARS EXPENDITURE INCURRED AS PER BOOKS EXPENDITURE AS PER SEIZED MATERIAL SPLIT AIR CONDITIONERS EXPENDITURE FITTING CHARGES 2,54,950 2,30,000 HARDWARE/GLASS CHANDELIER (ZOOMER) 1,21,740 + 4,73,000 1,53,000 HARDW ARE MATERIAL AND FITTINGS 1,82,364 1,53,000 CONSIDERING THE ABOVE FACTS, I HOLD THAT THE NOTINGS AS PER SEIZED MATERIAL DO NOT REPRESENT ACTUAL EXPENDITURE BUT IT IS ONLY ROUGH WORKING/ESTIMATE FOR THE EXPENDITURE TO BE INCURRED ON RENOVATION OF THE F LAT. HENCE, THE A.O. WAS NOT JUSTIFIED IN FINDING OUT THE DIFFERENCE BETWEEN THE ACTUAL EXPENDITURE AND EXPENDITURE AS PER THE SEIZED MATERIAL AS UNEXPLAINED EXPENDITURE U/S. 69C (CORRECT SECTION SHOULD BE 69B). 6. WE ARE IN CONSIDERED AGREEMENT WITH TH E VIEWS SO EXPRESSED BY THE CIT(A). THE APPROACH OF THE CIT(A) CANNOT INDEED BE FAULTED INASMUCH LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT ANY GOOD REASONS TO REJECT THE SAME. HOWEVER, EVEN AS LEARNED CIT(A) HAS ACCEPTED THIS PAPER TO BE MERE EST IMATION OF EXPENSES, HE HAS NONETHELESS MADE SOME ADJUSTMENT TO PREVENT LEAKAGE OF REVENUE. IT IS DIFFICULT TO UNDERSTAND, MUCH LESS APPROVE, THAT WHEN BOOKS OF ACCOUNTS ARE NOT REJECTED AND WHEN THE SEIZED PAPER IS HELD TO BE NOTHING MORE THAN ESTIMATION OF EXPENSES, HOW CAN THE CIT(A) RESORT TO ESTIMATION OF EXPENSES. WE ARE NOT INCLINED TO ACCEPT THIS APPROACH. IN A SITUATION IN WHICH THE SEIZED PAPER IS HELD TO BE ESTIMATION, AND THE BOOKS OF ACCOUNTS ARE NOT FOUND FAULT WITH, THERE IS NO SCOPE FOR MAKI NG ESTIMATION OF EXPENSES AND THUS MAKING ADHOC ADJUSTMENTS OF THE DIFFERENCES IN ESTIMATION BY THE CIT(A) VIS - - VIS THE AMOUNTS REALLY BOOKED IN THE ACCOUNTS. IN ANY CASE, THE ASSESSEE HAS GIVEN ALL THE DETAILS ABOUT THE ACTUAL EXPENSES AND NO DEFECTS I.T.A. NO. 2849 AND 3000 /AHD/11 ASSESSMENT YEAR 2009 - 10 PAGE 6 OF 6 HA VE BEEN POINTED OUT IN THE SAME. THESE DETAILS WERE ALSO PLACED BEFORE US AT PAGES 24 TO 72 OF THE PAPER BOOK. THE CIT(A) WAS UNNECESSARILY FIGHTING SHY OF GIVING EFFECT TO THE NATURAL COROLLARIES OF HIS FACTUAL FINDING THAT THE SEIZED PAPER IS MERE ESTI MATION AND IT DOES NOT CONSTITUTE DETAILS OF THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER WE UPHOLD THE RELIEF GRANTED BY THE CIT(A) AND DIRECT DELETION OF THE BALANCE ADDITION OF RS 10,99,180 AS WELL. THE ASSESSEE GETS FURTH ER RELIEF ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 1 ST DAY OF MARCH, 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDI CIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 1 ST DAY OF MARCH , 2016 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR IN COME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD