Shri Ashwani Kumar Legal Heir of Late Shri Satish Arora, New Delhi V. ACIT, New Delhi

ITA 3183/DEL/2011

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7398 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY GOEL
• Keywords: Search and seizure; Document seized; Revised return; Documents seized
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER THROUGH VIDEO CONFERENCING I.T.A. NO.3183/DEL/2011 ASSESSMENT YEAR: 2006-2007 SHRI ASHWANI KUMAR, LEGAL HEIR OF LATE SHRI SATISH ARORA, L-9, VIJAY CHOWK, LAXMI NAGAR, DELHI. VS. ASST. CIT, CENTRAL CIRCLE-12, NEW DELHI. TAN/PAN: AAJPA9425C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJEEV SAXENA, ADV. & MS. SUMANGLA SAXENA, ADV. RESPONDENT BY: SHRI SANJAY GOEL, CIT-DR DATE OF HEARING: 20 07 2020 DATE OF PRONOUNCEMENT: 31 08 2020 O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 30.03.2011, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI F OR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3)/153A FOR TH E ASSESSMENT YEAR 2006-07. IN VARIOUS GROUNDS OF APPE AL, THE ASSESSEE HAS CHALLENGED ESTIMATION OF SALES AT RS.3,50,93,668/- ON THE BASIS OF SEIZED DOCUMENTS A ND I.T.A. NO.3183/DEL/2011 2 THEREBY MAKING ADDITION OF RS.12,75,683/- BY TAKING 5% NET PROFIT ON SUCH ALLEGED SALES. 2. THE FACTS IN BRIEF ARE THAT A SEARCH AND SEIZURE ACTION WAS CARRIED OUT U/S.132 ON 09.12.2005 AT THE RESIDE NCE OF THE ASSESSEE, DURING THE COURSE OF WHICH CERTAIN DOCUME NTS WERE FOUND AND SEIZED. THE ASSESSEE IS CARRYING OUT BUSI NESS OF JEWELLERY ON WHOLESALE BASIS. INITIALLY THE RETURN O F INCOME WAS FILED ON 02.08.2006 DECLARING INCOME OF RS.91,6 90/-, SHOWING SALARY AND INTEREST INCOME WHICH WAS LATER ON REVISED TO RS.5,70,690/- ON 19.12.2007 WHICH INCLUD ED UNDISCLOSED INCOME OF RS.4,79,000/- FROM JEWELLERY BUSINESS. THE MAIN ISSUE RAISED IN THE PRESENT APPEAL IS THAT THE ASSESSING OFFICER HAD MADE A MISTAKE IN CONSTRUING THE WEIGHT OF THE PURCHASES AS NOTED IN THE SEIZED DOCU MENT TO BE ALLEGED SALES IN VALUE BY TAKING FIGURE OF RS.3,50, 93,668/-. IT WAS STATED BEFORE THE ASSESSING OFFICER AND LD. CIT (A) THAT THE ASSESSEE IS A SENIOR DIRECTOR IN M/S. ARORA JEW ELLERS PVT. LTD. WHICH WAS ENGAGED IN MANUFACTURE AND SALE OF G OLD AND SILVER JEWELLERY. THE SAID COMPANY HAD SHOWN GP RAT E OF 20.45% FROM THE MANUFACTURE AND RETAIL SALES OF GOL D JEWELLERY. BUT IN THE FINAL RESULT, IT HAD SHOWN BUS INESS LOSS OF RS.4,33,236/- ON ITS SALES FOR THIS YEAR AS AGAI NST THE NET PROFIT OF RS.4,79,000/-. THE ASSESSEE WAS ALSO CARR YING OUT WHOLESALE BUSINESS IN HIS INDIVIDUAL CAPACITY WHICH WAS SAID TO BE INCOMPARABLE TO THE BUSINESS OF THE SAID COMP ANY, AND THEREFORE, ASSESSING OFFICER SHOULD NOT HAVE APPLIE D THE NET PROFIT RATE OF 20.48% AS AGAINST THE GP RATE OF 20. 48% ON THE I.T.A. NO.3183/DEL/2011 3 BASIS OF ALLEGED UNRECORDED SALES OF RS.3,50,93,668 /- WHICH WAS BASED ON TOTAL INTERPRETATION MADE BY THE ASSES SING OFFICER FROM THE SEIZED DOCUMENT. THIS WAS BASED ON CERTAIN CALCULATION AT PAGE 4 OF ANNEXURE-I OF THE SEIZED D OCUMENT. THE ASSESSEES SUBMISSION IN THIS REGARD BEFORE THE ASSESSING OFFICER AND LD. CIT (A) WERE AS UNDER:- 7.2 IT HAS BEEN SUBMITTED THAT AS PER PAGE 4 OF A NNEXURE- I, THE LAST BALANCE OF GOLD JEWELLERY WEIGHED 2040. 530 GMS. THE APPELLANT SOLD GOLD JEWELLERY WEIGHING 298.990 GMS. WHEREUPON THE APPELLANT HAD BEEN LEFT WITH GOLD JEW ELLERY OF WEIGHING 1741.540 GMS. THE APPELLANT HAD PURCHAS ED GOLD JEWELLERY WEIGHING 994.470 GMS. IN THIS YEAR WHEREUPON THE CLOSING BALANCE OF THE GOLD JEWELLERY WEIGHTED 2736.010 GMS. THE ASSESSING OFFICER DID NO T APPRECIATE THE TRUE POSITION BUT ERRED IN ASSUMING THAT THE CLOSING BALANCE OF GOLD JEWELLERY WEIGHING 2736.010 REPRESENTED ALLEGED SALES OF THE APPELLANT OF RS. 2 7.36.010 WITHOUT THERE BEING ANY MATERIAL WHATSOEVER IN. SUP PORT OF THE ALLEGED SALES. 7.3 IT HAS ALSO BEEN SUBMITTED THAT AS PER PAGE 13 OF ANNEXURE A-I, THE APPELLANT HAD PURCHASED GOLD JEWE LLERY WEIGHING 13 GMS. BESIDES THE OPENING JEWELLERY WEIG HING 1.382.230 GMS. THUS THE APPELLANT HAD CLOSING BALAN CE OF GOLD JEWELLERY WEIGHING 1395.320 GMS. THE ASSESSING OFFICER HAD, HOWEVER, ERRED IN ASSUMING THAT JEWELL ERY WEIGHING 1395.320 REPRESENTED THE ALLEGED SALES OF GOLD JEWELLERY OF THE VALUE OF RS. 13,95,320 WITHOUT THE RE BEING AN IOTA OF EVIDENCE IN SUPPORT OF THE ALLEGED SALES . ACTING ON I.T.A. NO.3183/DEL/2011 4 THE BASIS OF THE SAID MISTAKES, THE ASSESSING OFFIC ER ESTIMATED THE SALES OF THE APPELLANT FOR THIS YEAR AT RS. 3,50,93,668 AS AGAINST THE SALES OF RS. 95,75,449 W HICH HAD BEEN SHOWN BY THE APPELLANT IN RESPECT OF HIS B USINESS CARRIED ON WHOLESALE BASIS FROM A PART OF HIS RESID ENCE. 3. THE LD. CIT(A) HAS ACCEPTED THAT ASSESSEE HAS BE EN CARRYING ON BUSINESS OF PURCHASE AND SALE OF GOLD JE WELLERY AND SILVER ORNAMENTS FROM A PART OF HIS RESIDENCE I N HIS INDIVIDUAL CAPACITY FOR WHICH ASSESSEE HAS SHOWN NE T PROFIT OF 5% ON SALE OF RS.95,75,449/-. SUCH BUSINESS HAS BEE N ACCEPTED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEA R 2001- 02, WHEREIN NET PROFIT RATE OF 2.8% ON SALE HAS BEE N ACCEPTED. HE HAS ALSO ACCEPTED THAT BUSINESS OF M/S. ARORA JE WELLERS PVT. LTD. FOR THE MANUFACTURE AND SALE ON GOLD JEWE LLERY AND SILVER ORNAMENTS ON RETAIL BASIS FROM TWO SHOWROOMS WAS DISTINGUISHABLE FROM THE BUSINESS OF THE ASSESSEE W HICH HE WAS CARRYING ON WHOLESALE BASIS IN HIS INDIVIDUAL C APACITY. HE HELD THAT IN THESE FACTS AND CIRCUMSTANCES, ASSESSI NG OFFICER WAS NOT JUSTIFIED IN APPLYING THE NET PROFIT RATE OF 20.48% ON SALES OF RS.3,50,93,668/- AND HE HAS NOT GIVEN ANY REASON AS TO HOW HE HAS TO ARRIVE AT FIGURE OF SUCH SALES. DE SPITE MAKING SUCH AN OBSERVATION, LD. CIT(A) HELD THAT TH E ASSESSEE ALSO COULD NOT SUBSTANTIATE THE CORRECTNES S OF THE FIGURE OF SALES OF RS.95,75,449/- AS DECLARED BY HI M IN THE REVISED RETURN, AND ACCORDINGLY, HE TREATED THE UNR ECORDED SALES AS PER SEIZED PAPER AT RS.3,50,93,668/- AND A PPLIED 5% INSTEAD OF 20.48% TAKEN BY THE ASSESSING OFFICER ON I.T.A. NO.3183/DEL/2011 5 UNRECORDED SALES, WHICH WORKED OUT TO RS.17,54,683/ -. SINCE ASSESSEE HAD ALREADY DISCLOSED RS.4,79,000/- THE NE T UNDISCLOSED PROFIT WAS WORKED OUT AT RS.12,75,683/- . 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE, MR. RAJI V SAXENA SUBMITTED THAT THE ENTIRE BASIS OF TAKING THE ALLEG ED UNRECORDED SALES IS ERRONEOUS FOR THE REASON THAT; FIRSTLY, THE ASSESSING OFFICER HAS TAKEN QUANTITY/WEIGHT OF THE JEWELLERY AS VALUE; SECONDLY, THE ASSESSEE HIMSELF HAS GIVEN THE WORKING AND THE CALCULATION OF NET PROFIT INCLUDING SALE AND PURCHASE WERE WORKED OUT FROM THE SEIZED MATERIAL I TSELF. THERE IS NO DISPUTE REGARDING QUANTITY OF PURCHASE AND SALE. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE A SSESSEE HAS NOT FURNISHED ANY EXPLANATION IS ABSOLUTELY WRONG, BECAUSE ENTIRE DETAILS OF PURCHASES AND SALES AS RECORDED I N THE SEIZED DOCUMENT WERE DULY FURNISHED BEFORE THE ASSESSING O FFICER AND WERE ALSO FURNISHED BEFORE THE LD. CIT (A). HE POINTED OUT FROM THE LETTER WRITTEN TO THE ASSESSING OFFICER, C OPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK, WHEREIN THE ASSE SSEE HAS GIVEN SPECIFIC REPLY AND ANNEXURE-WISE DETAILS, IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER. SIMILARL Y, HE POINTED OUT THAT SIMILAR DETAILED SUBMISSIONS WERE MADE BEFORE THE LD. CIT (A) ALSO. AS AN EXAMPLE HE EXPLA INED THAT, FROM THE PERUSAL OF THE SEIZED DOCUMENT WHICH HAS B EEN PLACED AT PAGE 82 OF THE PAPER BOOK AMOUNT INFERRED BY THE ASSESSING OFFICER WAS RS.27,36,010/- WHICH IN FACT IS 2736.010 GMS. OF GOLD AND IT HAS ALREADY BEEN OFFER ED AS A SALE OF GOLD ORNAMENTS IN THE INCOME DECLARED. FURT HER AT I.T.A. NO.3183/DEL/2011 6 PAGE 81, THE ASSESSING OFFICER HAS TAKEN THE FIGURE OF 3,42,444/- WHICH IN FACT IS 37.500 GMS OF GOLD JEWE LLERY. HE HAS REFERRED TO VARIOUS OTHER SEIZED DOCUMENTS PLAC ED IN THE PAPER BOOK TO POINT OUT THAT WHAT WAS RECORDED WERE THE QUANTITY AND WEIGHT-WISE DETAILS OF GOLD JEWELLERY WHICH HAS BEEN INFERRED BY THE ASSESSING OFFICER AS VALUE IN TERMS OF RUPEES. THUS, THE ENTIRE BASIS OF THE SALES TAKEN B Y THE ASSESSING OFFICER IS INCORRECT. HE FURTHER SUBMITTE D THAT IN THE EARLIER YEARS SIMILAR MISTAKE WAS DONE BY THE A SSESSING OFFICER WHICH HAS BEEN DULY ACCEPTED BY THE LD. CIT (A). THUS, THE BASIS OF ALLEGED SALES ON ESTIMATING THE NET PROFIT IS BASED ON MIS-APPRECIATION OF FACTS AND MISINTERPRET ATION OF THE SEIZED DOCUMENTS. 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE FINDINGS OF THE LD. CIT (A). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF THE RELEVANT FINDINGS AND MATERIAL REFERRED TO B EFORE US, AT THE TIME OF HEARING, WE FIND THAT THE ONLY CONTROVE RSY IS WITH REGARD TO THE ESTIMATION OF SALES OF RS.3,50,93,668 /- ON THE BASIS OF CERTAIN SEIZED DOCUMENTS WHICH ACCORDING T O ASSESSEE IS RS.95,75,449/- WHICH HAS BEEN DECLARED BY THE ASSESSEE HIMSELF. THE CALCULATION MADE BY THE ASSES SEE IS BASED ON THE SEIZED MATERIAL ITSELF WHICH HAS BEEN DECLARED IN THE RETURN OF INCOME. FIRST OF ALL, WE FIND THAT TH E ASSESSEE RIGHT FROM THE STAGE OF THE ASSESSMENT PROCEEDINGS HAS BEEN CLARIFYING THAT THE QUANTITY OF PURCHASE AND SALE M ENTIONED IN I.T.A. NO.3183/DEL/2011 7 THE SEIZED DOCUMENTS HAS DULY BEEN DISCLOSED IN THE WORKING OF PURCHASE AND SALE OF JEWELLERY AND THE FIGURES A RE NOT IN TERMS OF VALUE. PRIMA FACIE THE FIGURES OF WEIGHT/Q UANTITY HAS BEEN WRONGLY INFERRED BY THE ASSESSING OFFICER. THI S EXPLANATION WAS ALSO GIVEN BEFORE THE LD. CIT (A) A LSO AS INCORPORATED ABOVE. 7. FOR INSTANCE, FROM THE PERUSAL OF THE SEIZED DOC UMENTS ANNEXED AT PAGE 82, REFLECTS THAT THERE WAS A CLOSI NG BALANCE OF GOLD JEWELLERY 2763.010 GMS WHICH ARE IN TERMS O F QUANTITIES AND THE ASSESSING OFFICER HAS INTERPRETE D THE SAME AS ALLEGED SALES OF RS.27,63,010. IT WAS SPECIFIC C LARIFIED BEFORE THE AUTHORITIES BELOW THAT THE DIFFERENCE BE TWEEN THE WEIGHT AND THE VALUE WAS DETERMINED DEPENDING UPON THE PURITY OF THE GOLD AS REFLECTED IN THE WORKING GIVI NG IN THE SEIZED DOCUMENTS. A BARE PERUSAL OF THESE DOCUMENTS READ WITH EXPLANATION IT IS QUITE CLEAR THAT THE VALUE O F THE QUANTITY OF THE GOLD JEWELLERY HAS BEEN INFERRED AS IN TERMS OF VALUE AND THE SALES HAS BEEN ESTIMATED ON THE BASIS OF VA LUES INSTEAD OF WORKING GIVEN BY THE ASSESSEE IN TERMS O F QUANTITY OF PURCHASE AND SALE. THE SALES DECLARED BY THE ASS ESSEE AT RS. 95,75,449/- IN FACT TALLIES WITH THE ENTIRE QUA NTITY RECORDED IN THE SEIZED DOCUMENTS AND THE DIFFERENCE IS ONLY ON ACCOUNT OF INFERENCE DRAWN BY THE ASSESSING OFFI CER THAT THESE QUANTITIES ARE IN FACT IN RUPEES. OTHERWISE T HERE IS NO DIFFERENCE IN QUANTITIES MENTIONED IN THE SEIZED RE CORDS. THUS, WE HOLD THAT THIS ESTIMATION OF SALE AT RS.3, 50,93,668/- I.T.A. NO.3183/DEL/2011 8 IS ERRONEOUS AND ADDITION OF RS.12,75,683/- IS DIRE CTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2020 SD/- SD/- [G.S. PANNU] [AMIT SHUKLA] [VICE PRESIDENT] JUDICIAL MEMBER DATED: 31/08/2020 PKK: