ACIT. CIR.23(2), MUMBAI V. SHRI MAMTA V. THAKKAR, MUMBAI

ITA 3337/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3614 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Assessee Lawyers: PARAS S SAVLA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 3337/MUM/2011 (ASSESSMENT YEAR:2007-08) ACIT, CIRCLE-23(2), MUMBAI-400 051 APPELLANT VS. MRS. MAMTA V. THAKKAR B-504, SWPNA SANGEET, BAL RAJESHWAR ROAD, MULUND (W), MUMBAI 400 080 RESPONDENT PAN: AAIPT1445Q /BY APPELLANT : SHRI CHANDRA VIJAY, D.R. /BY RESPONDENT : SHRI PARAS S. SAVLA, A.R. /DATE OF HEARING : 09.08.2016 /DATE OF PRONOUNCEMENT : 23.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-33, MUMBAI, DA TED 31.01.2011 FOR A.Y. 2007-08 ON FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS. 70,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 2 OF STOCK DIFFERENCE DECLARED DURING THE COURSE OF S URVEY TO RS. 15,58,139/-. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE C IT (A) ERRED IN DELETING THE ADDITION OF RS. 11,00,000/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXPENSES ON RENOVATION OF FLAT AT VIKAS PARADISE, W HICH WAS DECLARED DURING THE COURSE OF SURVEY. 3. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS CASH FOUND DURING THE COURSE OF SURVEY WH ICH WAS NOT DECLARED IN THE RETURN OF INCOME FILED BY T HE ASSESSEE PURSUANT TO THE SURVEY ACTION. 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE ADDITIONAL INC OME OF THE ASSESSEE, SHOULD BE TAKEN AT RS. 63,84,565/- AS DECLARED BY THE ASSESSEE IN HER RETURN OF INCOME INSTEAD OF RS. 85,00,000/- DECLARED DURING THE SURV EY ACTION. 2. IN THIS CASE, ASSESSEE FILED ITS RETURN OF INCOM E DECLARING TOTAL INCOME OF RS.52,17,339/-. IN ASSESSMENT ORDER , ASSESSING OFFICER MADE VARIOUS ADDITIONS, WHICH WERE DELETED BY CIT(A). 3. FIRST ISSUE IS WITH REGARD TO ADDITION OF RS. 70 ,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF STOCK D IFFERENCE DECLARED DURING THE COURSE OF SURVEY TO RS.15,58,13 9/-. IN FACT, ASSESSING OFFICER MADE ADDITION OF RS.70LACS ON ACCOUNT OF DIFFERENCE IN PHYSICAL STOCK WHICH DID NOT FIND PLACE IN RETURN OF INCOME. ASSESSING OFFICER MADE ADDITION IN QUESTION. 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 3 ASSESSEE. 3.2 SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTE R ALIA SUBMITTED THAT CIT(A) ERRED IN RESTRICTING THE ADDI TION OF RS. 70,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF STOCK DIFFERENCE DECLARED DURING THE COURSE OF SURVEY TO RS.15,58,139/-. ACCORDINGLY, ORDER OF CIT(A) BE SE T ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHE R HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A). 3.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD, WE FIND THAT IN ABSENCE OF ANY SPECIFIC REASON FOR FALL IN GROSS PROFIT SPECIFICALLY IN VIE W OF FACT THAT FINDING OF SURVEY WAS THAT STOCK IN BUSINESS OF ASS ESSEE WAS FOUND TO BE UNDERSTATED IN BOOKS. ACCORDINGLY, CIT( A) CONSIDERED THAT GROSS PROFIT SHOULD BE TAKEN AT THE SAME RATE AS IT WAS FOUND ON THE DATE OF SURVEY I.E. @3.92%. WHEN THE SAME WAS PUT AS WAS SEEN IN THE CHART THE DIFFERENC E OF RS.15,58,139/- WAS FOUND EVIDENT. IT MEANS ASSESSE E HAS UNDERSTATED CLOSING STOCK AS ON 31.03.2007 BY THIS AMOUNT I.E. RS.15,58,139/-. HOWEVER, ASSESSEE HAS ALREADY CARRI ED FORWARD THIS VALUE OF STOCK AS REFLECTED ON 31.03.2007 AT R S. 3,72,36,668/- TO 01.04.2007 TO THE NEXT ASSESSMENT YEAR AS OPENING STOCK, SAME WAS NOT DISTURBED AND HENCE ADD ITION TO THE EXTENT OF RS.15,58,139/- WAS MADE IN GROSS PROF IT. ACCORDINGLY, ADDITION TO THE EXTENT OF RS.15,58,139 /- WAS RIGHTLY SUSTAINED OUT OF ADDITION MADE BY ASSESSING OFFICER AT RS.70LACS. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 4 4. NEXT ISSUE IS WITH REGARD TO ADDITION OF THE AMO UNT AS RENOVATION EXPENSES. ASSESSEE HAS FILED RETURN WHE REIN THE COMPUTATION OF INCOME WAS REFLECTED AS UNDER: NET PROFIT FROM M/S. SARASWATI CHEMICALS 51 ,15,435 ADD: DISALLOWABLE/ADDITION: ADDITIONAL INCOME DECLARED IN SURVEY 6384565 AUDIT FEES 82650 DEPRECIATION 203554 ---------- 66,70,769 ------------- 1,17,86,204 LESS: DEDUCTION/EXPENSES: CAR LOAN INT. 4463 44633 ---------------- 1,17,41,571 LESS: BUSINESS DEDUCTIONS: CURRENT DEPRECIATION U/S.32(1) (AS PER WORKING) 203553 2,03,553 --------------- NET BUSINESS INCOME 1,15,38,018 SINCE ASSESSEE HAS ALREADY OFFERED AN ADDITIONAL AM OUNT OF RS.63,84,565/-, WHICH AFTER CONSIDERING THE GAP OF RS. 15,58,139/- ON ACCOUNT OF DIFFERENCE IN GROSS PROFI T AND RS.409/- ON ACCOUNT OF CASH WAS ENOUGH (RS.48,26,01 7/- TO COVER AMOUNT OF RS. 11 LAKHS OF RENOVATION EXPENSES AS STILL BALANCE RS.37,26,017/- WAS LEFT WITH). SAME WAS DELETED. T HIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FR OM OUR SIDE. WE UPHOLD THE SAME. 5. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.4 LA CS IN RESPECT OF CASH. ASSESSING OFFICER STATED THAT ASS ESSEE DID NOT SHOW ENTRY MADE ON 21.02.2007 AND 22.02.2007 TO SHO W THE EXACT CASH BALANCE IN HAND AND SO MADE ADDITION. D URING APPELLATE PROCEEDINGS, ASSESSEE FILED THE CERTIFIED XEROX COPY OF ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 5 CASH BOOK, WHICH ACTUALLY REVEALED THE BANKING TRAN SACTIONS FOR THE PERIOD APRIL 2006 TO FEBRUARY 2007. AS PER THAT THERE WERE WITHDRAWALS FROM THE BANK ON 06.01.2007 OF RS. 2 LACS AND RS.50,000/- AND THE BALANCE AS ON 20.02.2007 WA S RS.4,24,862/-. CIT(A) OBSERVED THAT ASSESSEES BOOK S OF ACCOUNTS WERE INCOMPLETE AND NOT WRITTEN FROM JANUA RY 2007 ONWARDS AS FOUND BY THE SURVEY TEAM IN RESPECT OF P URCHASES AND SALES AS WELL. ASSESSEE HAS SUBMITTED THAT THE SURVEY PARTY FOUND CASH ON HAND RS.4,25,272/-, WHEREAS CAS H ON HAND AS PER BOOKS OF ACCOUNTS WAS RS.4,24,862/- WHI CH HAS WRONGLY BEEN WORKED OUT BY SURVEY PART AT RS.24,863 /-. THIS RESULTED INTO A DIFFERENCE OF RS.4 LACS WHICH WAS A DDED IN THE INCOME OF ASSESSEE. AS BOOKS OF ACCOUNTS WERE AUDI TED AND THIS BALANCE WAS REFLECTED, SAME COULD NOT HAVE BEE N IGNORED. SINCE, ENTRIES IN THE BOOKS OF ACCOUNTS HAD NOT BEE N FOUND WRONG AS PER WHICH THE CASH BALANCE WAS REFLECTED A T RS.4,24,862/- AS MENTIONED ABOVE, ONLY THE DIFFEREN CE BETWEEN THIS AND RS.4,25,271/- THE CASH FOUND ON THE DATE O F SURVEY COULD BE ADDED. THE DIFFERENCE BETWEEN TWO COMES T O RS.409/- WHICH BEING AN NEGLIGIBLE SUM WAS RIGHTLY AVOIDED B Y CIT(A). HOWEVER, SAME WAS TAKEN AS UNACCOUNTED CASH AND ADD ITION TO THIS EXTENT WAS SUSTAINED. ACCORDINGLY, CIT(A) GAVE PARTIAL RELIEF TO ASSESSEE. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. NEXT ISSUE IS WITH REGARD TO ADDITIONAL INCOME O F ASSESSEE. THE TOTAL DISCLOSURE OF RS.85 LAKHS MADE DURING THE COURSE OF SURVEY WAS MADE INCLUDING RS.11 LACS. ASSESSEE HAS EARNED ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 6 NET PROFIT OF RS.52,25,435/- AFTER ADJUSTING THE VA LUE OF CLOSING STOCK AS ON 22.02.2007 TO RS.4,50,78,258/-. HENCE, THE DISCLOSURE OF RS.70 LACS ON ACCOUNT OF UNACCOUNTED STOCK, OUT OF DISCLOSURE OF RS.85 LACS MADE AT THE TIME OF SUR VEY, GETS INCLUDED IN THE NET PROFIT ITSELF. OUT OF THE BALA NCE DISCLOSURE OF RS. 15 LACS (I.E. RS.85LAKHS - RS70LAKHS), THE D ISCLOSURE OF RS.4 LACS ON ACCOUNT OF CASH NEED NOT TO BE MADE AS THE CASH FOUND AT THE TIME OF SURVEY WAS ALMOST EQUAL TO THE CASH ON HAND AS PER BOOKS OF ACCOUNT. ASSESSEE SHOULD HAVE MADE A BALANCE DISCLOSURE OF RS.11 LACS ONLY ON ACCOUNT OF UNEXPLAINED RENOVATION EXPENDITURE IN THE RETURN OF INCOME BY ADDING THE SAME TO THE PROFIT OF RS.51 LACS. HOWEV ER TO KEEP THE PROMISE, ASSESSEE HAS SHOWN BUSINESS INCOME OF RS. L.L5 CRORES AS AGAINST THE REAL INCOME OF RS.62 LACS. T HE VOLUNTARY ADDITION OF RS.63LACS TO THE PROFIT OF RS.51LACS, W HICH WAS MADE TO COVER THE SHORTFALL TO DECLARE INCOME OF RS .1.15 CRORES, WAS MORE THAN ENOUGH TO TAKE CARE OF DISCLOSURE OF UNEXPLAINED RENOVATION EXPENDITURE. NO SEPARATE ADD ITION NEEDED TO THE INCOME DECLARED BY ASSESSEE. ASSESSI NG OFFICER FAILED TO APPRECIATE THESE FACTS AND MADE ADDITION OF RS.11 LACS TO THE NET PROFIT SHOWN. THIS ADDITION OF RS.11LAC S WAS MADE TO SEPARATE ADDITIONS OF CLOSING STOCK AND CASH ON HAND. AS PER SAID SHEET CONTAINING EXPLANATION FOR DISCLOSUR E, ASSESSEES INCOME DURING THE YEAR WAS RS.51,15,435/-, TO PURCH ASE PEACE OF MIND, ASSESSEE CLAIMED TO HAVE OFFERED RS.1.15 C RORES AS HER INCOME AT THE SAME TIME RESERVING HER RIGHT TO BE A SSESSED AT THE ACTUAL INCOME. IT IS THE DUTY OF ASSESISNG OFF ICER TO ASSESS INCOME AT CORRECT FIGURE DISREGARDING THE FACT WHAT ASSESSEE ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 7 HAS RETURNED. IN FACT, IT WAS THE CASE THAT ASSESS EE HAD RETURNED HIGHER INCOME THAN HER ACTUAL INCOME. IN V IEW OF ABOVE, ASSESSEES INCOME WAS ENHANCED DUE TO ADDITI ON SUSTAINED FOR RS.15,58,139/- ON ACCOUNT OF GROSS PR OFIT AND RS.409/- ON ACCOUNT OF DIFFERENCE IN CASH THE INCOM E FROM BUSINESS ONLY STOOD AT RS.78,96,427/- WHICH WAS MOR E THAN ASSESSEES CLAIM OF RS.62LACS. ALONG WITH THIS, ASS ESSEE WAS HAVING CAPITAL GAIN. AS DISCUSSED ABOVE, REGARDING APPLICABILITY OF RULE 8D, ASSESSING OFFICER HAS TO LOOK INTO THE CORRESPONDING EXPENSES BEFORE DISALLOWING THE SAME. IN THIS BACKGROUND, THE ALTERNATIVE PLEA THAT INCOME ACTUAL LY IS ONLY RS.62 LAKHS WAS RIGHTLY DISMISSED BY CIT(A). IN VIE W OF ABOVE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING O F CIT(A) WHO HAS HELD THAT ADDITIONAL INCOME OF ASSESSEE SHOULD BE TAKEN AT RS.63,84,565/- AS DECLARED BY ASSESSEE IN HER RETUR N OF INCOME INSTEAD OF RS.85 LACS DECLARED DURING SURVEY ACTION . WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF AUGUST, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 23/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. %&%'( ) / CONCERNED CIT 4. )- / CIT (A) ITA NO.3337/MUM/11 A.Y. 07-08 [ACIT VS. MAMTA V. THAKKAR) PAGE 8 5.-./00'(, '( , %& / DR, ITAT, MUMBAI 6./4567 / GUARD FILE. BY ORDER / , / % , '( , %&