Shreenath Traders, Vapi V. The ACIT.,Vapi Circle, Vapi

ITA 3159/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9810 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 08-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 20/09/2010 DRAFTED ON: 21/09/2010 ITA NO.3159/AHD/2008 ASSESSMENT YEAR : 2005-06 SHREENATH TRADERS 4, RAJHANS, 1 ST FLOOR NEAR CHAR RASTA GIDC, VAPI VS. THE ACIT CIRCLE VAPI VAPI PAN/GIR NO. : AAOFS 8066 N ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.N. SOPARKAR, A.R. RESPONDENT BY: SHRI R. K. DHANESTA, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-V, VALSAD DATED 18/06/2008 PASSED FOR ASSESSMENT YEAR 2005-07 AND T HE SUBSTANTIVE GROUND NOS.1 & 4 WHICH ARE REPRODUCED BELOW:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF LD. AO IN ADDING A SUM OF RS.43,69,0 00/- TO THE INCOME OF THE APPELLANT AS UNACCOUNTED COMMISSION. 4. ALTERNATIVELY AND WITHOUT PREJUDICE, THE SAID INCOM E OF RS.43,69,000/- CANNOT BE ADDED TWICE OVER, INASMUCH AS ONCE ON THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT AND SECONDLY, ADDITION TO THE TOTAL RETURNED INCOME, WHICH IS ALR EADY INCLUSIVE OF THIS COMMISSION RECEIPTS. ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 2 - 2. IN ADDITION TO THE ABOVE GROUNDS, AN ADDITIONAL GROUND HAS ALSO BEEN RAISED, THE CONTENTS OF THE SAME ARE AS FOLLOW S:- ADDITIONAL GROUND OF APPEAL APPELLANT CRAVES LEAVE TO RAISE THIS ADDITIONAL GRO UND OF APPEAL BEFORE THE HON'BLE ITAT. THIS IS A LEGAL GROUND AND THER EFORE AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NA TIONAL THERMAL POWER (229 ITR 383), IT CAN BE RAISED BEFORE THE HO N'BLE ITAT. 1. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT T HE FINDING OF LD. CIT(A) IS INCOHERENT AND INCAPABLE OF PROPER APPREC IATION. IN ANY CASE THE DIRECTIONS GIVEN IN PARAGRAPH 5 OF HIS ORDER ARE CONTRARY TO LAW AND ARE REQUIRED TO BE QUASHED. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 14/ 11/2007 WERE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY OF CR AFT-PAPER TO PACKAGING INDUSTRY ON COMMISSION BASIS. A SURVEY U/S.133A O F THE I.T. ACT, 1961 WAS CARRIED OUT ON 09/03/2005. A STATEMENT U/S.1 33A(3)(III) OF THE I.T. ACT, 1961 WAS RECORDED. RELEVANT QUESTION AND THE ANSWER OF THE ASSESSEE WAS REPRODUCED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER AS FOLLOWS:- Q-8) HAVE YOU CREDITED ALL YOUR RECEIPTS FOR COMMI SSION DISCOUNT ETC.? A-8) THERE IS SOME COMMISSION/DISCOUNT RECEIVED DU RING THE YEAR WHICH IS NOT ACCOUNTED YET AND WHICH IS WORTH AROUND RS.43,69,000/- WHICH I WOULD LIKE TO DISCLOS E AS MY ADDITIONAL INCOME FOR THE YEAR AND PAY TAXES ON IT. 3.1. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICE R THAT THEREAFTER, A RETURN OF INCOME WAS FILED ON 21/10/2005 DECLARING AN INCOME OF ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 3 - RS.25,67,680/-. THE ALLEGATION OF THE ASSESSING OF FICER WAS THAT THOUGH AT THE TIME OF SURVEY A DECLARATION WAS MADE, HOWEV ER, AS PER THE RETURN OF INCOME, NO SUCH AMOUNT WAS OFFERED FOR TAXATION. AS PER ASSESSING OFFICER, THE SAID DECLARATION WAS IN RESPECT OF THE RECEIPTS WHICH WERE NOT DISCLOSED AND THE SAID DECLARATION WAS NOT IN RESPE CT OF THE INCOME. AFTER REFERRING A DECISION OF HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ACIT VS. YEAR NAGABHUSHANAM REPORTED AS 226 ITR 843 -849[A.P.] FOR THE PROPOSITION THAT A STATEMENT CAN BE TREATED AS AN ADMISSIBLE EVIDENCE. THE ASSESSING OFFICER HAS TAXED THE ENTIRE AMOUNT O F RS.43,69,000/- AS AN UNACCOUNTED INCOME OF COMMISSION. 4. BEING AGGRIEVED, THE MATTER WAS GONE IN APPEAL B EFORE THE LEARNED CIT(APPEALS). 5. THE LEARNED CIT(APPEALS) HAS EXTRACTED THE FACTS OF THE CASE AND, THEREAFTER VIDE PARAGRAPH NO.5.4 HELD AS UNDER:- 5.4. I HAVE CONSIDERED THE RIVAL CONTENTIONS. THE ARGUMENTS ADVANCED BY THE AR OF THE APPELLANT DEALS WITH THE COUPLE OF SITUATIONS VIZ. TAXING OF GROSS RECEIPTS AND RECORD ING OF INCOME SUBSEQUENT TO THE SURVEY ACTION. THE AR OF THE APPELLANT FORGET THE FUNDAMENTAL FACTS THAT THE SURVEY WAS CONDUCTED ON 09/03/2005 I.E. FAG END OF THE YEAR. IN THE STATEM ENT RECORDED DURING THE COURSE OF SURVEY, THE APPELLANT HIMSELF AGREED AND OFFERED THE INCOME VOLUNTARILY. WHILE MAKING THE DISCLOSURE, HE HAD MADE IT VERY CLEAR THAT TILL 09.03.2005, HE HAD EARNED THE DISCOUNT/COMMISSION INCOME TO THE EXTENT OF RS.43,6 9,000/- WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THIS MAKES IT CLEAR THAT THE EXPENDITURE FOR THE YEAR TILL TO 09.03.2005 WERE RE CORDED IN THE BOOKS OF ACCOUNT. THUS, HE DOES NOT MAKE ANY CLARI FICATION WITH ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 4 - REGARD TO THE EXPENDITURE AND SIMPLY DISCLOSED AN A DDITIONAL INCOME OF RS.43,69,000/-. THEREFORE, THE ARGUMENTS ADVANCED BY THE AR OF THE APPELLANT DOES NOT SURVIVE WITH REGA RD TO THE TAXING OF GROSS INCOME AS THE APPELLANT HIMSELF DISCLOSED THE INCOME AS AN ADDITIONAL INCOME I.E. NET INCOME . SO FAR AS RECORDING OF TRANSACTIONS IS CONCERNED, IT IS SIMPLE RECORDING O F INCOME AND NOT THE TRANSACTIONS. THE AO IS DIRECTED TO VERIFY THE BOOKS OF ACCOUNT OF THE ASSESSEE AS ON THE DATE OF SURVEY I. E. 09.03.2005 AND DISALLOW ALL ITEMS OF EXPENDITURE RELATED TO TH E ABOVE SURRENDER OF INCOME ON ACCOUNT OF COMMISSION/DISCOU NT, WHICH IS EITHER ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AFT ER 09.03.2005 AND THEREFORE ACTUALLY SPENT AFTER 09.03.2005 OR AC TUALLY SPENT AFTER 09.03.2005 EVEN THOUGH CLAIMED TO HAVE BEEN A CCOUNTED FOR IN THE BOOKS BEFORE 09.03.2005 AS IT IS HELD THAT A LL THE RELATED EXPENDITURE, INCURRED FOR EARNING THE ABOVE COMMISSION/DISCOUNT HAS ALREADY BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND HAS ALREADY BEEN SPENT TILL AT THE DATE OF SURVEY, WHICH TOOK PLACE AT THE FAG END OF THE FINA NCIAL YEAR I.E. 09.03.2005. HENCE THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. WITH THIS BRIEF FACTUAL BACKGROUND, WE HAVE HEAR D BOTH THE SIDES. 7. A VEHEMENT CONTENTION BEFORE US WAS THAT THE REV ENUE AUTHORITIES HAVE NOT CORRECTLY APPRECIATED THE STATEMENT MADE B Y ONE OF THE PARTNERS THAT THE COMMISSION/DISCOUNT RECEIVED DURING THE YEAR W HICH IS NOT ACCOUNTED YET AND WHICH IS WORTH AROUND RS.43,69,000/- WHICH I WOULD LIKE TO DISCLOSE AS MY ADDITIONAL INCOME FOR THE YEAR AND PAID TAXES ON IT. HAS NOT BEEN PROPERLY APPRECIATED. IN THE STATEMENT IT WAS STAT ED THAT THE COMMISSION THOUGH RECEIVED DURING THE YEAR COULD NOT BE ACCOUN TED FOR IN THE BOOKS OF ACCOUNT TILL THAT DATE OF SURVEY. THEREFORE, IT IS VEHEMENTLY ARGUED THAT IN THE SAID STATEMENT THE PARTNER HAS SAID THAT THE IMPUGNED COMMISSION WAS YET TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT . ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 5 - MEANING THEREBY AS EXPLAINED BEFORE US, THE EXPENDI TURE IN CONNECTION WITH THE EARNING OF THE COMMISSION/DISCOUNT WAS ALR EADY DEBITED IN THE BOOKS OF ACCOUNT IN THE REGULAR COURSE OF BUSINESS, HOWEVER, CORRESPONDING COMMISSION RECEIPTS COULD NOT BE RECO RDED IN THE BOOKS OF ACCOUNT. TO SUBSTANTIATE THIS ARGUMENT, NOW THE ASSESSEE HAS PLACED BEFORE US THE DETAILS OF THE COMMISSION RECEIVED ST ATED TO BE RECORDED FROM 09/03/2005 TO 31/03/2005 TOTALLING TO RS.44,61 ,172/-. IT IS VEHEMENTLY CONTESTED THAT THE COMMISSION HAS BEEN RECEIVED FROM ESTABLISHED LIMITED COMPANIES, THEREFORE, THE RECEI PT OF COMMISSION CAN ALWAYS BE VERIFIED; BUT THE REVENUE AUTHORITIES HAV E NOT EXERCISED THAT OPTION. LIKEWISE, THE AMOUNT OF RATE DIFFERENCE H AS ALSO BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND, ACCORDIN GLY, THE FINAL ACCOUNT WAS MADE. AS PER THE FIGURES OF FINAL ACCOUNT FOR THE PERIOD ENDED ON 31/03/2005, THE TOTAL OF COMMISSION AND DISCOUNT EA RNED WAS SHOWN AT RS.64,48,199/-. THIS TOTAL FIGURE HAD TWO COMPONEN TS; VIZ.(I) COMMISSION OF RS.44,61,173/- AND (II) RATE DIFFERENT DISCOUNT OF RS.19,87,027/-, THUS, TOTALLING TO RS.64,48,1999/-. AS AGAINST THAT, THE EXPENDITURE UNDER THE HEAD SALARY, WAGES, PURC HASES, INTEREST, ETC. WERE DULY RECORDED IN THE BOOKS OF ACCOUNT TOT ALLING TO RS.49,62,233/-. THEREFORE, THE NET FIGURE OF RS.25 ,76,657/- WAS DISCLOSED AS THE PROFIT OF THE FIRM FOR THE YEAR UNDER CONSID ERATION. 8. SINCE THE FIGURE IN QUESTION HAS STATED TO BE AL READY RECORDED IN THE BOOKS OF ACCOUNT AND THE NET PROFIT DISCLOSED AS PE R THE RETURN WAS PART AND PARCEL OF THE SAID FIGURE OF COMMISSION, THEREF ORE, IT WAS NOT FAIR ON THE PART OF THE ASSESSING OFFICER TO AGAIN TAX THE SAME AMOUNT IN THE ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 6 - HANDS OF THE ASSESSEE. SO, THE VEHEMENT CONTENTION BEFORE US IS THAT THE SAME AMOUNT OF ALLEGED UNDISCLOSED COMMISSION INCOM E SHOULD NOT HAVE BEEN TAXED TWICE IN THE HANDS OF THE ASSESSEE. WE FIND FORCE IN THIS CONTENTION OF THE ASSESSEE, HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER AND ALSO THE ORDER OF THE LEARNED CIT(APPEALS), WE HEREBY CAN MAKE AN OBSERVATION THAT THE ENTIRE ISSUE HAS NOT BEEN DECI DED IN THE RIGHT PERSPECTIVE. UPTO THIS EXTENT, WE CAN UPHOLD THE D IRECTION OF THE LEARNED CIT(APPEALS)TO THE ASSESSING OFFICER TO VERIFY THE BOOKS OF ACCOUNT BUT WHY HE HAS ALSO DIRECTED TO DISALLOW THE ITEMS OF E XPENDITURE RELATED TO THE IMPUGNED AMOUNT IS NOT APPEALING TO US. ON WHA T BASIS THE LEARNED CIT(APPEALS) HAS HELD THAT ALL THE RELATED EXPENDIT URE HAD ALREADY BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT IN RESPECT OF THE COMMISSION/DISCOUNT WAS RECORDED, AFTER 09/03/2005. CONTRARY TO THIS, IN OUR CONSIDERED OPINION, THE LEARNED CIT(APPEALS) SHOULD HAVE ASKED THE ASSESSING OFFICER TO VERIFY THE DETAILS OF THE COMMISSION/DISCOUNT RECORDED IN THE BOOKS OF ACCOUNT, AFTER THE DATE OF SURVEY, I.E. 09/03/2005 AND ALSO TO VERIFY THE RELATED EXPENDITURE INCURRED TO EARN THE SAID PROFIT, IF THE SAID EXPENDITURE IS ALLOWABLE BEING WHOLLY A ND EXCLUSIVELY INCURRED FOR THE PURPOSE OF EARNING THE SAID AMOUN T, THEN NATURALLY THE AMOUNT SO CLAIMED BEING DIRECTLY COVERED U/S.37(1) OF THE I.T. ACT, 1961 OUGHT TO HAVE BEEN ALLOWED. WITH THESE DIRECTIONS , WE HEREBY RESTORE THIS ISSUE BACK TO THE STAGE OF ASSESSING OFFICER T O BE DECIDED DE NOVO, AFTER CONSIDERING THE PROFIT & LOSS ACCOUNT AND TH E CONNECTED EXPENSES OF THE YEAR UNDER CONSIDERATION. WE HEREBY ALSO H OLD THAT THE EXPENDITURE INCURRED DURING THE FINANCIAL YEAR FOR EARNING OF A PARTICULAR INCOME, THOUGH RECORDED EARLIER SHOULD NOT BE DISAL LOWED MERELY BECAUSE ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 7 - THOSE CONNECTED RECEIPTS WERE DISCLOSED AFTER THE DATE OF SURVEY; NEVERTHELESS THE ASSESSEE IS ALWAYS UNDER OBLIGATIO N TO ESTABLISH THE NEXUS BETWEEN THE TWO. WITH THESE DIRECTIONS, WE HEREBY REVERSE IN PART SOME OF THE FINDINGS OF THE LEARNED CIT(APPEALS) AN D RESTORE THE ISSUE BACK TO THE STAGE OF ASSESSING OFFICER TO BE DECIDE D DE NOVO IN TERMS OF OUR OBSERVATION MADE HEREINABOVE. WITH THIS OBSERV ATION, WE HEREBY ALLOW ALL THE GROUNDS OF THE ASSESSEE FOR STATISTIC AL PURPOSES. TO BE DECIDED DE NOVO , NEEDLESS TO SAY AFTER PROVIDING A REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE. 9. REST OF THE GROUNDS IN RESPECT OF THE EVIDENTIAR Y VALUE OF THE STATEMENT RECORDED AT THE TIME OF SURVEY NEED NOT T O BE DECIDED AT PRESENT BECAUSE THE MAJOR PART OF THE INCOME WAS CLAIMED TO HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT. THUS, THE GROUN D MAY BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24/09/2010. SD/- SD/- ( D.C.AGRAWAL ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 24 / 09 /2010 T.C. NAIR, SR. PS ITA NO.3159/AHD /2008 SHREENATH TRADERS VS. ACIT ASST.YEAR - 2005-06 - 8 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, VALSAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..20/09/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/09/2010 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 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 22/09/2010 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24/09/2010 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