The ACIT, Circle-2, Ahmedabad V. Shri Kantilal Shivlal Shah-HUF, Ahmedabad

ITA 3297/AHD/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6038 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-04-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 13-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Deemed to accrue or arise in india
• Section: 143(3); 133A; 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I R. P. TOLANI, VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ACIT, CIRCLE - 12, AHMEDABAD (APPELLANT) VS SHRI KANTILAL SHIVLAL SHAH (HUF), 321/1, CHOKSHI CHAMBER, ROHIT MILL, KHOKHRA, AHMEDABAD PAN: AADHS3833G (RESPONDENT) SHRI KANTILAL SHIVLAL SHAH (HUF), 321/1, CHOKSHI CHAMBER, ROHIT MILL, KHOKHRA, AHMEDABAD PAN: AADHS3833G (APPELLANT) VS THE ACIT, CIRCLE - 12, AHMEDABAD (RESPONDENT) REVENUE BY : S H RI JAMES KURIAN , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING 05 - 04 - 2 017 DATE OF PRONOUNCEMENT : 08 - 05 - 2 017 I T A NO . 32 97 / A HD/20 10 A SSESSMENT YEAR 200 4 - 05 ITA NO. 3356 /AHD/20 10 ASSESSMENT YEAR 200 4 - 05 I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS CROSS APPEALS FILED BY REVENUE AND ASSESSEE FOR A.Y. 2004 - 05 , AR ISE FROM ORDER OF THE CIT(A) - XX , AHMEDABAD DATED 20 - 09 - 2010 IN APPEAL NO. CIT(A) - XX/128/09 - 10 , IN PROCEEDINGS UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . ITA NO. 3297/AHD/2010 (REVENUE S APPEAL) 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ENTIRE ADDITION OF RS.96,07,842/ - ADDED BY THE A.O. ON ACCOUNT OF FALL IN G.P. 1.2 IN DOING SO, THE LD. CIT(A) - XX, AHMEDABAD HAS FURTHER ERRED IN LAW AND ON FACTS IN STATING THAT IF THE NET PROFIT IS CALCULATED AFTER TAKING INTO ACCOUNT THE ADDITION MADE ON ACCOUNT OF UN DISCLOSED STOCK THEN THE NET PROFIT IN THIS ASSESSMENT YEAR WOULD BE AT A HIGHER FIGURE OF 13.69% AS AGAINST 10.72% OF THE EARLIER ASSESSMENT YEAR I.E. THAT OF A.Y.2003 - 04. THE FINDING OF THE CIT(A) IS CONTRARY TO THE FACTS OF THE CASE AND NOT ACCEPTABLE A T ALL BECAUSE THE A.O. WHILE ADDING THE SUM OF RS.96,07,842/ - DID NOT ADD ANY PROFIT SHOWN BY THE ASSSESSEE IN THE RETURN OF INCOME. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE A.O. HAS MADE ONLY TWO ADDITIONS I.E. ESTIMATED NET PROFIT OF RS.96,07,84 2/ - AND ESTIMATED INCOME U/S.69B BEING THE EXCESS STOCK FOUND DURING THE SURVEY. THEREFORE, AS A RESULT OF GIVING CIT(A)'S ORDER EFFECT THE ASSESSED INCOME HAS REDUCED AT RS.50,43,758/ - AS AGAINST THE RETURNED INCOME OF RS.L,22,74,800/ - . THEREFORE, THE FINDING OF THE CIT(A) IS NOT CONTRARY TO THE FACTS, BUT BY VIRTUE OF APPELLATE ORDER, THE ASSESSED INCOME REDUCED TO RS.50,43,758/ - AS AGAINST THE RETURNED INCOME OF RS.1,22,74,800/ - . I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 3 ITA NO . 3356/AHD/2010(ASSESSEE S APPEAL) 3. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.50,43,758/ - U/S.69B OF THE ACT MADE BY THE A.O. ON ACCOUNT OF EXCESS STOCK WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS OF THE CASE AS WELL AS BOOKS OF ACCOUNTS AND STOCK RECORDS OF THE APPELLANT. IN VIEW OF ELABORATE FACTS AND SUBMISSIONS FILED, THE IMPUGNED ADDITION OF RS.50,43,758/ - U/S.69B OF THE ACT REQUIRES TO BE DELETED AND THE RETURNED INCOME BE ACCEPTED. 4 . IN THIS CASE RETURN OF IN COME, DECLARING INCOME OF RS. 1,22,74 , 800/ - WAS FILED ON 31/10/2005. ASSESSMENT U/S. 143(3) WAS MADE IN THIS CASE ON 26 - 12 - 2006 DETERMINING TOTAL INCOME OF THE ASSESSEEE AT RS. 1,25,97,560/ - . 5 . THE GROUNDS OF APPEALS OF THE ASSESSEE AND THE REVENUE ARE INTER - CONNECTED, THEREFORE, THESE ARE DECIDED TOGETHER. 6 . THE BRIEF F ACTS OF THE CASE IS THAT IN THIS CASE SURVEY U/S. 133A OF THE ACT WAS CARRIED OUT ON 16 - 10 - 2003. DURING THE COURSE OF SURVEY , EXCESS STOCK OF GOLD AND SILVER ORNAMENTS TO THE VALUE O F RS. 50,43,758/ - WAS FOUND. HOWEVER, THE ASSESSEE HAD INCLUDED THE VALUE OF THE STOCK AT RS. 35,62,040/ - . THE LD. CIT - VI AHMEDABAD HAD PASSED ORDER U/S. 263 OF THE ACT ON 2 4 - 02 - 2009 STATING THAT T H E ASSESSMENT ORDER DATED 24 - 12 - 2006 PASSED BY THE ASSESS ING OFFICER WAS CONSIDERED TO B E ERRONEOUS A N D PREJUDICIAL TO THE INTEREST OF REVENUE WHICH WAS COMPLETED BY THE ASSESSING OFFICER WIT HOUT CARRYING OUT THE NECESSARY INQUIRES. THE LD. CIT HELD THAT THE I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 4 ASSESSING OFFICER SHOULD HAVE VERIFIED AS TO HOW THE PURCHASES WHICH WERE ADMITTED NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AT THE TIME OF SURVEY COULD HAVE AT A LATER STAGE BEEN DEBITED TO THE PURCHASE ACCOUNT. HE ALSO MENTIONED THAT THE ASSESSEE HAD ATTRIBUTED THE DIFFERENCE OF INCOME DISCLOS ED AT THE TIME OF THE SURVEY OF RS. 50,43,758/ - AND RS. 35 , 62 , 040 TO THE MISTAKE IN ADOPTING THE VALUE OF OPENING STOCK AS ON 01 - 04 - 2003 ON THE BASIS OF UNACCOUNTED COMPUTER RECORDS WHICH REMAINED UNVERIFIED BY THE ASSESSING OFFICER. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. 263 OF THE ACT , THE ASSESSING OFFICER HELD THAT THE EXCESS STOCK OF RS . 50 , 43,758/ - WAS FOUND DURING THE COURSE OF SURVEY AND THE CORRESPONDING PURCHASES COULD NOT HAVE BEEN ENTERED IN THE BOOKS OF AC COUNTS OF THE ASSESSEE ON A LATER DATE. THE EXCESS STOCK OF RS. 50,43,758/ - WAS TAXED AS DEEMED INCOME OF THE ASSESSEE U/S. 69B OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION HAD DECLARED NOT PROFIT OF R S. 1,22,78 , 548/ - ON SALES OF RS. 8 , 97 , 09 , 076/ - WHI CH INCLUDED THE DISCLOSURE OF RS . 35,62 , 040/ - . HE FURTHER OBSERVED THAT AFTER EXCLUDING THIS AMOUNT OF RS . 35,62,040/ - , THE NET PROFIT FOR THE YEAR WORKED OUT TO THE AMOUNT OF RS. 87,16 ,508/ - THAT SHOW NET PROFIT OF 9.71% AS AGAINST TH E NET PROFIT OF 10.71% DECLARED IN THE PRECE DING ASSESSMENT YEAR 2003 - 04. THEREAFTER, HE APPLIED THE PROVISIONS OF SECTION 145 OF THE ACT AND ESTIMATED THE NET PROFIT @ 10.71% ON THE DISCLOSED SALES OF RS. 8,97,09,076/ - AND W ORKED OUT THE NET PROFIT TO THE AMOUNT OF RS. 96,07,842/ - . I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 5 7 . AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESS EE PARTLY BY OBSERVING AS UNDER: - 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT AS FAR AS THE FIRST ADDITION IS CONCERNED, DURING THE COURSE OF SURVEY PROCEEDINGS IT WAS FOUND THAT THE EXCESS STOCK AND THE DEVICES OF THE ASSESSEE WAS RS 50, 43,758/ - AS AGAINST THE ABOVE THE APPELLANT MADE THE DISCLOSURES OF ONLY RS.35,62,040/ - IN THE RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR. THE AR OF THE APPELLANT HAD EXPLAINED DURING THE ASSESSMENT PROCEEDINGS THAT THE CLOSING STO CK AS ON 31/03/2003 HAD BEEN WRONGLY TAKEN AT 32, 663.250 GRAMS AS AGAINST 35, 030.370 GRAMS AS PER THE AUDITED ACCOUNTS. IN THIS REGARD IT IS SEEN THAT THE RETURN OF INCOME FOR ASSESSMENT YEAR 2003 - 04 HAD NOT BEEN FILED AT THE TIME OF SURVEY. IT WAS ON THE BASIS OF THE COMPUTERIZED ACCOUNTS OF THE APPELLANT THAT THE FIGURES OF CLOSING STOCK AS ON 31/03/2003 HAD BEEN TAKEN. THE AR COULD NOT EXPLAIN HOW THE FIGURES CHANGED FROM 32,663.250 GRAMS 35, 030.370 GRAMS. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO IS JUSTIFIED AND THE SAME IS UPHELD. 4.4 AS FAR AS THE SECOND ADDITION IS CONCERNED, IT IS SEEN THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNTS ON THE BASIS OF THE FACT THAT THE STOCK SHOWN BY THE APPELLANT WAS LESS HENCE HE REJECTED THE BOOKS U NDER SECTION 145 OF THE IT ACT 1961. IT IS SEEN THAT THE AO HAS ALREADY RESORTED TO MAKING AN ADDITION OF RS.50,43,758/ - ON ACCOUNT OF THE EXCESS STOCK NOT RECORDED IN THE BOOKS OF ACCOUNTS. IT IS ALSO SEEN THAT IF THE EXCESS STOCK WAS NOT TAKEN INTO ACCOU NT IN THE GROSS PROFIT OF THE ASSESSEE WORKS OUT TO 15.78% FOR ASSESSMENT YEAR 2004 - 05 AS AGAINST A GROSS PROFIT OF 13.58% IN ASSESSMENT YEAR 2003 - 04. IF THE NET PROFIT IS CALCULATED TAKING INTO ACCOUNT THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED STOCK TH EN THE NET PROFIT FOR ASSESSMENT YEAR 2004 - 2005 WORKS OUT TO 13.69% AS AGAINST 10.72% IN THE ASSESSMENT YEAR 2003 - 2004. IS ALSO SEEN THAT BECAUSE OF A PARTICULAR DISCREPANCY THAT THE STOCKS NOT RECORDED IN THE BOOKS OF ACCOUNTS THE AO COULD NOT MAKE SPECI FIC ADDITIONS ON ACCOUNT OF THIS DISCREPANCY AND AT THE SAME TIME REJECT THE BOOKS OF ACCOUNTS ON THIS VERY GROUND AND ESTIMATE THE PROFIT. IN VIEW OF THE ABOVE THE ACTION OF THE AO IN ESTIMATING THE NET PROFIT FOR THE YEAR AT RS.96,07,842/ - IS DELETED. I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 6 8 . WE HAVE HEARD THE RIVAL CONTENTIONS. WE HAVE PERUSED THE MATERIAL ON RECORD CAREFULLY. WE FIND THAT IN THE CASE OF THE ASSESSEE THE RETURN OF INCOME WAS FILED SHOWING INCOME OF RS. 1,22,74,500/ - ON 31/01/2005. THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 263 OF THE ACT AS PER PARA 7 OF THE ASSESSMENT ORDER AS UNDER: - ESTIMATED NET PROFIT FOR THE YEAR RS. 96 , 07 , 842/ - ADD DEEMED INCOME U/S. 69B RS. 50 , 43 , 758/ - --------------------- 1,46,51,600/ - THE LD. CIT( A) VIDE HIS ORDER DATED 20/09/2010 HAD DELETED THE ADDITION ON ACCOUNT OF NET PROFIT OF RS. 9 , 60 , 78 , 842/ - AS A RESULT AFTER APPEAL EFFECT THE INCOME OF THE ASSES S EE WAS REDUCED TO RS. 50,43,758/ - AS AGAINST THE RETURNED INCOME OF RS. 1 , 22 , 74 , 800/ - . AFTER CONSIDERING THE MATERIAL ON RECORD, WE FIND UNCOMMON APPROACH ADOPTED BY THE ASSESSING OFFICER IN THE COMPUTATION OF INCOME AND INCONGRUOUS ACTION OF THE LD. CIT(A) WHILE DECIDING THE APPEAL WITHOUT ANY EMENDATION OF THE MISTAKE COMMITTED BY THE ASSESSING OFFICER. WE HAVE NOT FOUND ANY COGENT AND CONCRETE MATERIAL ON THE BASIS OF W H ICH THE ASSESSING OFFICER HAD IGNORED TO CONSIDER INCOME DECLARE D BY THE A SSESSEE IN THE RETURN OF INCOME AS A BASELINE FOR ASSESSING FURTHER INCOME IN THE CASE OF THE ASSESEE IN CONSEQUENT OF OTHER ADDITION S . REGARDING APPEAL OF THE ASSESSEE IN THIS CASE, W E HAVE ALSO NOTICED THAT THE ASSESSING OFFICER HAS NOT SUBSTANTIATE D WITH SUPPORTING MATERIAL THAT E XCESS STOCK WAS R S . I.T.A NO S . 3297 & 3356 /AHD/20 10 A.Y. 2004 - 05 PAGE NO ACIT VS. SHRI KANTILAL SHIVLAL SHAH (HUF) 7 50 , 43 , 758/ - AS AGAINST THE EXCESS STO CK OF RS. 35 , 6 2 ,040/ - DIS CLOSED BY THE ASSES SEE. WE CONSIDERED THAT AT THIS STAGE THE APPEAL OF THE REVENUE AND T HE APPEAL OF THE ASSESSEE ARE NOT FEASIBLE TO BE DECIDED AS AT THE LEVEL OF THE ASSESSING OFFICER IT IS REQUIRED TO DETERMINE THE INCOME OF THE ASSESSEE IN THE C O RRE C T MANNER AFTER CONSIDERATION OF THE SUPPORTING MATERIALS AND SUBMISSION OF THE ASSESSEE AS MENTIONED SUPRA IN THIS ORDER . THEREFORE, IN THE INTEREST OF THE JUSTICE, WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IT A FRESH AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 08 - 05 - 201 7 SD/ - SD/ - ( R.P. TOLANI ) ( AMARJIT SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 08 /05 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,