Shri Amar M.Patel, Ahmedabad V. The Income tax Officer,Ward-11(1), Ahmedabad

ITA 3103/AHD/2010

• Counselvise Citation: 310320514 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 69C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI D.K.TYAGI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2813 / AHD/2009 & I.T.A.NO. 3103/AHD/2010 (ASSESSMENT YEAR 2006-07 & 2005-06 RESPECTIVELY) SHRI AMAR M. PATEL, 46, SARDAR PATEL NAGAR, ELLISBRIDGE, AHMEDABAD VS. ACIT, CIRCLE 11, AHMEDABAD PAN/GIR NO. : ABUPP2794F (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI J P SHAH, AR RESPONDENT BY: SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 13.12.2011 DATE OF PRONOUNCEMENT: ___01.2012 O R D E R PER SHRI A. K. GARODIA, AM:- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) XVI, AHME DABAD DATED 01.09.2009 FOR THE ASSESSMENT YEAR 2006-07 AND DATE D 01.09.2010 FOR THE ASSESSMENT YEAR 2005-06. SINCE COMMON ISSUE IS INV OLVED IN BOTH THESE APPEALS, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. FIRST, WE TAKE UP THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 BECAUSE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005 -06 WAS REOPENED AFTERWARDS. THE GROUNDS RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2006- 07 I.E. IN I.T.A.NO. 2813/AHD/2009 ARE AS UNDER: 1. THE C.I.T. (APPEALS) ERRED IN UPHOLDING TH E FOLLOWING CASH CREDITS OF THE FOLLOWING PERSONS I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 2 (1) ARJUNDEV RS.3,00,000 (2) ASHISHPATEL RS. 35,110 (3) RAJESHPARIKLI RS. 18,500 (4) ALKADAVE RS.19,500 (5) RINAJANI RS. 19,500 (6) IMAYURJANI RS. 18,000 (7) RINKALSHAH RS. 17,500 (8) DHAIRYA GAJJAR RS. 18,000 (9) DINESHPRAJAPATI RS. 12,000 RS.4,40,500 INSPITE OF THE FACT THAT (I) A NOTARISED STATEMENT OF EACH LENDER CONFIRMING THE LOAN WAS GIVEN TO THE ASSESSING OFFICER, WHO CHOSE NOT TO EX AMINE THEM BY ISSUING SUMMONS INSPITE OF REQUEST TO THAT EFFECT, (II) ARJUN DEV IS AN INCOME-TAX PAYER AND HIS UP-TO -DATE POSITION WITH THE INCOME TAX DEPARTMENT WAS PROVED BY FILING ACKNOWLEDGMENT OF HIS RETURN OF INCOME OF RS.3,36,6 007- FOR ASST. YEAR 2008-09 BEFORE THE ASSESSING OFFICER, (III) CERTIFICATES OF THE COMMON EMPLOYER, SAMTECH COMPUTER OF MAYUR JANI AND REENA JANI EARNING RS.4,5007- AND RS .3,0007- PER MONTH FOR FINANCIAL YEAR 2005-06 WERE FILED BEFORE THE ASSESSING OFFICER, (IV) A CERTIFICATE FROM TULIP SECONDARY SCHOOL, THE EMPLOYER STATING THAT MRS. ALKA DAVE, AN ASSISTANT TEACHER W AS PAID RS.36,0007- IN FINANCIAL YEAR 2005-06 WAS FILED BEF ORE THE ASSESSING OFFICER; AND (V) A CERTIFICATE FROM TULIP SECONDARY SCHOOL, STAT ING THAT RAJESH PARIKH WAS ADMINISTRATIVE OFFICER AND RECEIVED SALA RY OF RS.48,0007-IN FINANCIAL YEAR 2005-06 WAS FILED BEFO RE THE ASSESSING OFFICER. 2. THE C.I.T.(APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS.9,27,3787-UNDER SECTION 69C BY WAY OF UNEXPLAINE D EXPENDITURE ALLEGEDLY DONE IN FOREIGN CURRENCY TOWA RDS THE PURCHASE PRICE OF INK WITHOUT PROOF OF SUCH ACTUAL EXPENDITURE ADDUCED BY THE ASSESSING OFFICER AND CONSEQUENTIALL Y NOT ADDING IT TO THE COST OF THE SAME IN CLOSING STOCK VALUATION. I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 3 3. THE C.I.T.(APPEALS) OUGHT TO HAVE ALLOWED THE APPEAL IN TOTO. 3. IT WAS SUBMITTED BY THE LD. A.R. REGARDING GROUN D NO.1 THAT THIS ISSUE MAY BE RESTORED BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION BECAUSE THE MAJOR AMOUNT OF LOAN IS FROM MR. ARJUN DEV WHO IS INCOME TAX PAYER AND THE PROOF OF FILING OF HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 WAS SUBMITTED AND NO INQUI RY WAS MADE BY THE A.O. FROM THE A.O. OF THE LENDER. REGARDING OTHER 8 LOAN CREDITORS OF SMALL AMOUNTS, IT WAS SUBMITTED THAT FOR THESE LOAN CREDITORS, THE CERTIFICATES OF EMPLOYER WAS FILED REGARDING THEIR SOURCE OF INCOME AND HENCE, THE MATTER SHOULD BE DECIDED AFRESH AFTER CO NSIDERING THOSE EVIDENCES. LD. D.R. SUPPORTED THE ORDERS OF AUTHOR ITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY THE LD. CIT(A) ON PAGE 4 OF HIS ORDER THAT INCOME TAX ACKNOWLEDGEMENT OF SHRI ARJUN DEV FOR THE ASSESSMEN T YEAR 2008-09 WAS FILED AS PER WHICH GROSS TOTAL INCOME OF RS.3.3 6 LACS WAS SHOWN. HE HAS FURTHER NOTED THAT THERE IS CONFUSION IN THE AD DRESS OF SHRI ARJUN DEV BECAUSE AT ONE PLACE, THE ADDRESS IS OF SURAT BUT H E IS FILING RETURN AT DELHI AND HE COULD NOT FILE THE EVIDENCE REGARDING HIS CR EDITWORTHINESS FOR THE RELEVANT YEAR. UNDER THESE FACTS, WE FEEL THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION AND THE A SSESSEE SHOULD BRING ON RECORD EVIDENCE REGARDING CREDITWORTHINESS OF SHRI ARJUN DEV, THE LOAN CREDITOR FOR THE RELEVANT YEAR BECAUSE ON THE BASIS OF HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09, CREDITWORTHINESS O F SHRI ARJUN DEV FOR THE ASSESSMENT YEAR 2006-07 CANNOT BE EXAMINED. FO R OTHER LOAN CREDITORS ALSO, WE FEEL THAT IN THE INTEREST OF JUS TICE, ONE MORE OPPORTUNITY SHOULD BE PROVIDED TO THE ASSESSEE TO BRING ON RECO RD EVIDENCES REGARDING I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 4 IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS . THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) IN RESPECT OF THE ADD ITION MADE BY THE A.O. U/S 68 AND RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PRO VIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. REGARDING GROUND NO.2, THE FACTS ARE NOTED BY TH E LD. CIT(A) IN PARA 6 OF HIS ORDER WHICH IS REPRODUCED BELOW: 6. THE NEXT GROUND IS REGARDING ADDITION OF RS. 9, 27,3787- ON ACCOUNT OF UNDER STATESMEN! OF PURCHASE PRICE OF IN K. THIS POINT IS DISCUSSED BY THE ASSESSING OFFICER AT PARA 5 OF PAG E 7 OF THE ASSESSMENT ORDER. BRIEFLY THE FACTS ARE THAT THE AP PELLANT IMPORTED 51 CONTAINERS OF DIGITAL SOLVENT INK DURING THE PER IOD FEB 2003 TO DEC 2005 BUT MISDECLARED THE SAME AS GRAVURE PRINTI NG INK RESULTING INTO EVASION OF CUSTOMS DUTY. THE CUSTOM DEPARTMENT ISSUED SHOW CAUSE NOTICE TO THE APPELLANT RAISING D EMAND OF RS. 55,49,658/- ON THE GROUND OF UNDERVALUATION PF THE CONSIGNMENTS. THE APPELLANT WENT BEFORE THE SETTLEMENT COMMISSION , ADDITIONAL BENCH, CUSTOMS & CENTRAL EXCISE MUMBAI. THE COMMISS ION FIXED THE PURCHASE PRICE OF IMPORTED GOODS AT RS. 14.75 D OLLARS PER LITRE AS AGAINST THE INVOICE PRICE OF $ 4 TO 6 PER LITRE ONLY. AT THE RATE OF RS. 14.45 PER DOLLAR, THE PRICE WAS FIXED BY THE CO MMISSION AT RS. H75.500/- ( I.E. 14,75 X 44.05 X 2270 LITRE IMPORTE D DURING THE YEAR). THE ASSESSING OFFICER ACCORDINGLY ISSUED A S HOW CAUSE NOTICE TO THE APPELLANT REQUIRING HIM TO EXPLAIN AS TO WHY THE UNDERSTATEMENT OF PURCHASE PRICE OF RS. 9,27,378/- ( RS.14,75,500 - 5,48,122) SHOULD NOT BE CONSIDERED AS UNEXPLAINED E XPENDITURE U/S. 69C OF THE I T ACT. THE CONTENTION OF THE APPELLANT THAT THE ORDER OF SETTLEMENT COMMISSION WAS ACCEPTED BY HIM TO AVO ID DETENTION AND OR JAIL DID NOT FIND FAVOUR BEFORE THE A.O. WHO TREATED THE AMOUNT OF RS.9,27,378/- AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 6. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 5 7. IT IS SUBMITTED BY THE LD. A.R. THAT ON PAGE 11 OF THE PAPER BOOK IS THE CONFIRMATION OF THE SUPPLIER. IT WAS ALSO HIS SUBMISSION THAT ADMITTEDLY, THE ASSESSEE HAS NOT MADE PAYMENT TO TH E SUPPLIER EVEN FOR THE BILLED AMOUNT AND HENCE, EVEN IF IT IS ACCEPTED THAT THE PURCHASE PRICE WAS UNDERSTATED, NO ADDITION IS CALLED FOR BECAUSE P & L ACCOUNT WAS DEBITED BY LESSER AMOUNT OF PURCHASE PRICE AND THER E IS NO EVIDENCE ON RECORD TO SHOW ANY CASH PAYMENT MADE BY THE ASSESSE E TO THE OVERSEAS SUPPLIER OUT OF BOOKS OF ACCOUNT. RELIANCE WAS PLA CED BY HIM ON THE JUDGEMENT OF HONBLE DELHI HIGH COURT RENDERED IN T HE CASE OF CIT VS NARESH KHATTAR HUF AS REPORTED IN 261 ITR 664. 8. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW AND RELIANCE WAS PLACED BY HIM ON THE JUDGMENT OF H ONBLE DELHI HIGH COURT RENDERED IN THE CASE OF YADU HARI DALMIA AS R EPORTED IN 4 TAXMAN 525 (DEL.). IT IS ALSO SUBMITTED THAT UNDERVALUATI ON IS NOT AN ALLEGATION BUT ADMISSION BY THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE CASE OF THE A.O. IS THAT THE ASSESSEE HAS IMPORTED DIGITAL SOLVENT INK AND MISDECLARED THE SAME AS GRAVURE PRINTING IN K AND THEREBY ASSESSEE HAS UNDERVALUED THE IMPORTED GOODS. ON TH IS, CUSTOM DEPARTMENT HAS DEMANDED DIFFERENCE OF DUTY OF RS.55 .50 LACS AND THE SAME WAS ULTIMATELY SETTLED BY THE SETTLEMENT COMMI SSION AND THE ASSESSEE HAD ADMITTED THAT THE DUTIES AND LIABILITI ES ARISEN DUE TO UNDER INVOICING OF IMPORTED GOODS. NOW, THE QUESTION IS , AS TO WHETHER UNDER THESE FACTS, ANY ADDITION IS CALLED FOR. SINCE LES SER AMOUNT WAS DEBITED BY THE ASSESSEE IN P & L ACCOUNT ON ACCOUNT OF PURCHAS E OF IMPORTED MATERIAL, ON THIS BASIS, NO ADDITION IS CALLED FOR UNLESS IT IS ESTABLISHED BY THE REVENUE THAT ANY CASH PAYMENT WAS MADE BY THE A SSESSEE TO THE OVERSEAS SUPPLIER OUT OF BOOKS. NO EVIDENCE HAS BE EN BROUGHT ON RECORD I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 6 BY THE A.O. IN THIS REGARD THAT ANY CASH PAYMENT WA S MADE BY THE ASSESSEE TO THE OVERSEAS SUPPLIER OUT OF BOOKS. TH IS FACT ALSO SUPPORTS THE CASE OF THE ASSESSEE THAT EVEN THE BILLED AMOUNT PA YABLE TO VARIOUS OVERSEAS SUPPLIERS ARE OUTSTANDING AND THE DISPUTE IS GOING ON WITH THE SUPPLIERS. HENCE, IT IS DIFFICULT TO ACCEPT AND HO LD THAT ALTHOUGH THE ASSESSEE HAS NOT MADE PAYMENT OF THE BILLED AMOUNT BUT HAS PAID DIFFERENTIAL AMOUNT IN CASH TO THE OVERSEAS SUPPLIE RS. IN THE ABSENCE OF ANY EVIDENCE REGARDING CASH PAYMENT OUT OF BOOKS, A DDITION MADE BY THE A.O. U/S 69C IS NOT SUSTAINABLE. ONLY BECAUSE THE CUSTOM AUTHORITIES HAVE ALLEGED THAT THE GOODS IMPORTED BY THE ASSESSE E ARE UNDER PRICED AND THEY HAVE IMPOSED ADDITIONAL CUSTOM DUTY ON THE ASS ESSEE AND THE ASSESSEE HAS AGREED FOR MAKING PAYMENT FOR SUCH ADD ITIONAL CUSTOM DUTY, IT CANNOT BE INFERRED THAT THE GOODS WERE IN FACT U NDER PRICED AND CASH WAS PAID BY THE ASSESSEE OUT OF BOOKS. HENCE, WE F EEL THAT SUCH ADDITION MADE BY THE A.O. CANNOT BE SUSTAINED IN THE FACTS O F THE PRESENT CASE. - REGARDING THE JUDGMENT CITED BY THE LD. D.R. OF H ONBLE DELHI HIGH COURT, IN OUR CONSIDERED OPINION, THIS JUDGMEN T IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE DISPUTE WAS REGARDING HOUSE HOLD EXPENDITURE AND MARRIAGE E XPENSE DECLARED BY THE ASSESSEE AND THE SAME WAS ALLEGED TO BE LOW ON THIS BASIS THAT THE ASSESSEE WAS HAVING SUBSTANTIAL INCOME AND WEALTH A ND THE ASSESSEE WAS LIVING IN A GRAND STYLE IN A PALATIAL BUILDING WITH A NUMBER OF DOMESTIC ATTENDANTS AND THEREFORE, IT WAS ESTIMATED THAT ACT UAL EXPENDITURE INCURRED BY THE ASSESSEE ON HOUSE HOLD AND MARRIAGE WAS MUCH MORE. UNDER THESE FACTS, IT WAS HELD BY THE HONBLE DELHI HIGH COURT THAT IN THE FACTS OF THIS CASE, IT CAN BE INFERRED THAT THERE MUST HAVE BEEN EXCESS EXPENDITURE AND THE SAME IS ONLY BY ESTIMATE FOR WANT OF DIRECT EVI DENCE. IN THE PRESENT CASE, ONLY ADDITIONAL DEMAND WAS RAISED BY THE CUST OM AUTHORITIES BY ALLEGING THAT IMPORTED INK IS OF HIGHER VALUE AND T HE ASSESSEE HAS MADE I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 7 PAYMENT OF SUCH ADDITIONAL CUSTOM DUTY BUT THERE IS NO OTHER MATERIAL BROUGHT ON RECORD BY THE A.O. SHOWING THAT IN FACT, THE INK IMPORTED BY THE ASSESSES WAS UNDERVALUED AND EXTRA EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR WHICH PAYMENT WAS MADE BY THE ASSESSEE IN CASH OUT OF BOOKS. IT MAY BE THAT AS PER THE CUSTOM AUTHORITIE S, THE INK IS OF HIGHER VALUE BUT THE ASSESSEE HAS IN FACT IMPORTED THE SAM E AT THE DECLARED PRICE AND HENCE, EVEN IF EXTRA CUSTOM DUTY WAS DEMANDED B Y THE CUSTOM AUTHORITIES AND PAID BY THE ASSESSEE, IT CANNOT BE INFERRED THAT ANY CASH PAYMENT OUT OF BOOKS WAS ALSO MADE BY THE ASSESSEE TO THE OVERSEAS SUPPLIERS. THEREFORE, THIS ADDITION IS DELETED. G ROUNDS NO.2 IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THIS YEAR IS ALLOWED AS INDICATED ABOVE. 11. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2005-06 IN I.T.A.NO. 3103/AHD/2010:- THE GROUNDS R AISED BY THE ASSESSEE ARE AS UNDER: 1. THE C.I.T.(APPEALS) ERRED IN UPHOLDING THE ADDI TION OF RS.L2,28,395,-| AND IN THE PROCESS CONFIRMED THE OR DER OF THE ASSESSING OFFICER. 2. THE C.I.T.(APPEALS) OUGHT TO HAVE KEPT IN MIND THE OVERALL FACTS AND ' CIRCUMSTANCES AND THE SUBMISSION TAKEN BEFORE HIM AND OUGHT TO HAVE DELETED THE ADDITION. 3. THE C.I.T.(APPEALS) ERRED IN NOT ACCEPTING THE APPEAL OF THE ASSESSEE IN TOTO. 12. IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS INTERCONNECTED WITH GROUND NO.2 IN ASSESSMENT YEAR 2006-07 AND THE SAME CAN BE DECIDED ON SIMILAR LINES. IN THAT YEAR, THIS GROUN D WAS ALLOWED BY US IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, IN THIS YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. I.T.A.NO.2813 /AHD/2009 I.T.A.NO. 3103/AHD/2010 8 13. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN TERMS INDICATED ABOVE. 14. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (D.K.TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 06/01/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08/01/2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/01/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/1 /2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..