M/s. Bhomka Ply & Board Ind., Anand V. The Income tax Officer,Ward-2, Anand

ITA 336/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0040 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITA HARDASANI
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Loose papers; Source of fund
• Section: 133A; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA.NO.336/AHD/2012 / ASSTT. YEAR: 2008-2009 M/S.BHOMKA PLY & BOARD IND. SURVEY NO.739/01, NR.ST. FRANCIS TECHNICAL HIGH SCHOOL, BALAJI ROAD SADANPURA TAL. ANAND 388 001. VS ITO, WARD - 2 ANAND. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI MUKUND BAKSHI, AR REVENUE BY : MS.ANITA HARDASANI, SR.DR / DATE OF HEARING : 18/10/2016 / DATE OF PRONOUNCEMENT: 11/11/2016 $%/ O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST T HE ORDER OF THE LD.CIT(A)-IV, BARODA DATED 22.11.2011 PASSED FOR TH E ASSTT.YEAR 2008-09. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES , 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.9,19,182/- AND ITA NO.336/AHD/2012 2 RS.5,57,031/- WHICH WAS ADDED BY THE AO ON THE GROU ND THAT EXCESS STOCK AND UNEXPLAINED EXPENDITURE WERE FOUND DURING THE C OURSE OF SURVEY PROCEEDINGS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN MANUFACTURING AND SELLING OF PLY-BOARD AND BLOCK-BO ARD. IT HAS FILED ITS RETURN OF INCOME ON 29.2.2008 DECLARING TOTAL LOSS OF RS.3 ,42,514/-. A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 WAS CARRIE D OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 29.2.2008. DURING THE COURSE OF SURVEY, CERTAIN BOOKS OF ACCOUNTS, LOOSE PAPERS WERE FOUND AND IMPO UNDED. STATEMENT OF PARTNER SHRI KANTIBHAI NARSHIBHAI PATEL WAS RECORDE D UNDER SECTION 133A(3)(IA) OF THE INCOME TAX ACT. ACCORDING TO TH E AO, SHRI KANTIBHAI PATEL HAS ADMITTED FOLLOWING UNACCOUNTED INCOME: I) UNACCOUNTED STOCK RS.9,19,182 II) UNEXPLAINED EXPENDITURE ON ACCOUNT OF NEGATIVE CASH BALANCE RS.5,57,031 III) UNEXPLAINED INVESTMENT IN CONSTRUCTION OF SHADE RS.27,000/- RS.15,03,213/- ON THE BASIS OF THIS STATEMENT, LD.AO HAS MADE ADD ITION OF THESE THREE ITEMS. IN THE PRESENT APPEAL, WE ARE CONCERNED WIT H FIRST TWO ITEMS. 4. AS FAR AS ADDITION WITH REGARD TO UNACCOUNTED ST OCK OF RS.9,19,182/- IS CONCERNED, THE CASE OF THE AO IS THAT THE ASSESSEE WAS NOT MAINTAINING DAY-TO- DAY STOCK REGISTER. AT THE TIME OF SURVEY, GOODS H AVING VALUE OF RS.9,19,182/- WAS FOUND. IT WAS NOT REFLECTED IN THE STOCK REGIS TER. THUS, THE LD.AO HAS MADE ADDITION OF THIS UNEXPLAINED STOCK. ON THE OT HER HAND, STAND OF THE ASSESSEE IS THAT OFFICER WHO CARRIED OUT SURVEY WAS NOT EMPOWERED TO ITA NO.336/AHD/2012 3 ADMINISTER OATH WHILE TAKING STATEMENT UNDER SECTIO N 133A(3)(IA). THIS STATEMENT HAS NO EVIDENTIARY VALUE. IT IS JUST AN INFORMATION REQUIRES TO BE USED FOR CORROBORATIVE PURPOSE. FOR BUTTRESSING HI S CONTENTION, THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADAR KHAN SON, (2008) 206 TAXATION 734 (MAD.). THIS DECISION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT ALSO. THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SONS VS. CIT, (2003) 176 TAXATION 97 (KER ). APART FROM THIS, THE ASSESSEE HAS SUBMITTED THAT IT HAS BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS, WHICH CONTAINED DETAILS OF PURCHASES AND SALES. TH E ASSESSEE HAS OPENING STOCK OF RS.25.32 LAKHS. IT MADE PURCHASES OF RS.21 .86 LAKHS, AND IF GP ELEMENT IS BEING ADDED IN THE VALUE OF ABOVE, THEN, TOTAL VALUE OF STOCK WOULD COME OUT TO RS.59.13 LAKHS. AS AGAINST THIS FIGURE , THE ASSESSEE HAS SHOWN SALE OF RS.47.81 LAKHS AND CLOSING STOCK OF RS.11.3 2 LAKHS. IN THIS WAY, BOTH FIGURES DULY TALLIED AND THERE WAS NO EXCESS STOCK. THE LD.AO WAS NOT SATISFIED WITH THIS WORKING OF THE ASSESSEE. HE MA DE ADDITION OF RS.9,19,182/- . APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE HAS GIVEN FOLLOWING WORKING: PARTICULARS RS. IN LACS PARTICULARS RS. IN LACS OPENING STOCK 25.32 SALES 47.81 PURCHASES 21.86 CLOSING STOCK 11.32 GROSS PROFIT @ 25% 11.95 TOTAL 59.13 TOTAL 59.13 THE VALUE OF CLOSING STOCK BY APPLYING GP RATE BASI S RS.11.32 LACS INVENTORY PHYSICALLY FOUND RS.9,19,182/- 5. ON DUE CONSIDERATION OF THE RECORD, WE FIND THAT AS FAR AS STATEMENT OF SHRI KANTIBHAI NARSIHBHAI PATEL IS CONCERNED, IT WA S WITHOUT ADMINISTERING ITA NO.336/AHD/2012 4 OATH AND IT DOES NOT CARRY ANY EVIDENTIARY VALUE. ON THE BASIS OF ANY ADMISSION MADE BY PARTNERS DURING THE DEPOSITION GI VEN UNDER SECTION 133A ADDITION CANNOT BE MADE. IN ORDER TO FORTIFY OURSE LVES, WE DRAW SUPPORT FROM TWO DECISIONS CITED BY THE ASSESSEE BEFORE THE LD.R EVENUE AUTHORITIES. THIS STATEMENT CAN BE USED FOR CORROBORATIVE PURPOSE. 6. NEXT ASPECT OF THE CONTROVERSY IS THAT EVEN THIS STATEMENT IS NOT ADMISSIBLE IN EVIDENCE AS USED BY THE AO, THEN ALSO STOCK OF RS.9,19,182/- WAS FOUND, WHETHER THE ASSESSEE HAS EXPLAINED THAT STOCK OR NOT. THE CASE OF THE ASSESSEE IS THAT THE LD.AO HAS NOT POINTED OUT ANY DEFECT IN THE DETAILS OR PURCHASES OR SALES MADE BY THE ASSESSEE. IF OVERA LL RECORD INCLUDING OPENING STOCK AND CLOSING STOCK ALONG WITH PURCHASES AND SA LES IS BEING VERIFIED, THEN IT WOULD REVEAL THAT THERE WAS NO EXCESS STOCK. TH IS HAS BEEN WORKED OUT MAINLY FOR REASONS THAT STOCK REGISTER WAS NOT MAIN TAINED, BUT NON- MAINTENANCE OF THE STOCK REGISTER WOULD NOT AUTOMAT ICALLY GENERATE EXCESS STOCK. THIS CAN BE EXPLAINED WITH TOTAL PURCHASES AND SALES MADE BY THE ASSESSEE, AND IN THE PRESENT CASE, THE ASSESSEE HAS EXPLAINED THIS POSITION. THE ASSESSEE HAS WORKED OUT TOTAL VALUE OF THE STOCK IN CLUDING OPENING STOCK AND PURCHASES BY MAKING ADDITION OF GP ELEMENT AND THIS RATE OF GP HAS TAKEN ON THE BASIS OF OVERALL GP DISCLOSED BY THE ASSESSEE B ETWEEN PRESENT YEAR AS WELL AS IMMEDIATELY PRECEDING YEAR. THEREFORE, WE ARE O F THE VIEW THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION SOLE LY ON THE BASIS OF STATEMENT GIVEN BY THE PARTNER. WE ALLOW THIS GROU ND OF APPEAL AND DELETE ADDITION OF RS.9,19,182/-. 7. AS FAR AS ADDITION OF RS.5,57,031/- IS CONCERNED , EVIDENCE EXHIBITING INCURRENCE OF EXPENDITURE WAS FOUND. THE CLAIM OF THE ASSESSEE IS THAT THIS EXPENDITURE WAS INCURRED FROM THE CAPITAL CONTRIBUT ION MADE BY THE PARTNERS. ITA NO.336/AHD/2012 5 THIS ASPECT HAS NOT BEEN DISPUTED BY THE AO, BUT HE MADE ADDITION OF RS.5,57,031/-. APPEAL TO THE LD.CIT(A) DID NOT BRI NG ANY RELIEF TO THE ASSESSEE. 8. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF PARA-7.1 OF THE ASS ESSMENT ORDER WOULD INDICATE THAT NINE PARTIERS HAVE MADE FOLLOWING CONTRIBUTION IN THEIR CAPITAL ACCOUNT. 1) SMT. JYOTSNABEN KANTILAL PATEL : RS. 68,000 2) SMT. JYOTIBEN VITHALBHAI PATEL : RS. 70,000 3) SHRI RASIKBHAI MOHANBHAI PATEL : RS. 52,000 4) SMT. PUJABEN RAMESH PATEL : RS. 63,000 5) SHRI RAJESH JAYANTIBHAI PATEL : RS. 1,39 ,300}+RS. 19,000} 6) SHRI BHARAT KARAMSHI PATEL : RS. 1,39,30 0 7) SHRI SHANTILAL BABULAL PATEL : RS. 1,39, 300 8) SHRI KANTI NARSIHBHAI PATEL : RS. 1,39,3 00 9) SMT.TRUPTIBEN RASIKKUMAR PATEL : RS. 35.000 TOTAL : RS.8,64,200 THE LD.AO HAS OBSERVED THAT NEW CAPITAL INTRODUCED BY SHRI RAJESH JAYANTIBHAI PATEL, BHARAT KARAMSHI PATEL, SHANTILAL BABULAL PATEL AND KANTI NARSIHBHAI PATEL TOTALING TO RS.5,57,200/- HAS BEEN ACCEPTED BY THE ASSESSEE AS USED TOWARDS THIS EXPENDITURE. THEREFORE, WHILE MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL CONTRIBUTION, LD.AO DID NOT MAKE ADDITION OF RS.5,57,200/- WITH REGARD TO CAPITAL CONTRIBUTED BY THESE PERSONS. HE MADE ADDITION OF RS.3,07,000/-. THE DISCUSSION MADE BY THE AO READS AS UNDER: 7.2 THE ASSESSEE VIDE ORDER SHEET DATED 06-08-2010 WAS ASKED TO FURNISH THE DETAILS OF SOURCE AND CONFIRMATION OF T HE NEW CAPITAL INTRODUCED BY THE PARTNERS AND TO PROVE THE CREDITW ORTHINESS AND GENUINENESS OF THE CASH CREDITS APPEARED IN THE BOO KS OF ACCOUNTS OF THE ASSESSEE FIRM AND AS TO WHY THE SAME SHOULD NOT BE DISALLOWED U/S.68 OF THE ACT TREATING THE SAME AS UNDISCLOSED SOURCES OF INCOME. ITA NO.336/AHD/2012 6 7.3 AS REGARDS THE NEW CAPITAL INTRODUCED OF RS.1,3 9,300/- EACH BY SHRI RAJESH J. PATEL, SHRI BHARAT K. PATEL, SHRI SHANTIL AL B. PATEL AND SHRI KANTIBHAI N. PATEL TOTALING TO RS.5,57,200/-, THE A SSESSEE HAS EXPLAINED THAT THEY HAVE ALREADY DISCLOSED THE SAME AMOUNT ON ACCOUNT OF UNEXPLAINED EXPENDITURE DURING THE COURSE OF SURVEY U/S.!33A OF THE ACT AND THE SAME AMOUNT CREDITED IN THE AFORESAID FOUR PARTNERS CAPITAL ACCOUNT. FURTHER, THE ASSESSEE HAS FILED THE DETAIL S OF NEW CAPITAL INTRODUCED BY THE FOLLOWING PARTNERS: 1) SMT. JYOTSNABEN KANTILAL PATEL : RS. 68,000 2) SMT. JYOTIBEN VITHALBHAI PATEL : RS. 70,000 3) SHRI RASIKBHAI MOHANBHAI PATEL : RS. 52,000 4) SMT. PUJABEN RAMESH PATEL : RS. 63,000 5) SHRI RAJESH JAYANTIBHAI PATEL : RS. 19,000 6) SMT.TRUPTIBEN RASIKKUMAR PATEL : RS.35,000 TOTAL : RS.3,07,000/- THE ASSESSEE HAS FILED THE DETAILS OF NEW CAPITAL I NTRODUCED BY SMT. JYOTSNABEN K. PATEL, SMT. JYOTIBEN V. PATEL, SHRI R ASIKBHAI M. PATEL AND PUJABEN RAMESH PATEL. ON VERIFICATION OF THE DE TAILS, IT IS NOTICED THAT THESE 4 PARTNERS HAVING OTHER BUSINESS INCOME FROM THEIR PROPRIETARY CONCERNS. HOWEVER, THERE WAS NO WITHDRA WAL/TRANSFER FROM THEIR PROPRIETARY CONCERNS FOR THE NEW CAPITAL INTR ODUCTION INTO M/S. BHOMKA PLY & BOARD INDUSTRIES. THE ASSESSEE HAS ALS O NOT OFFERED ANY EXPLANATION IN RESPECT OF ADDITIONAL CAPITAL OF RS. 19,000/- INTRODUCED BY SHRI RAJESH J. PATEL AND NEW CAPITAL OF RS.35,00 0/- INTRODUCED BY SMT. TRUPTIBEN R. PATEL. FURTHER, THE ASSESSEE COUL D NOT PROVE THE GENUINENESS OF THE CASH CREDITS, THE UNEXPLAINED CA SH CREDITS, THE SUSPICIOUS SUMS HAVE BEEN REQUIRED TO BE TREATED AS INCOME UNDER SEC.68 OF THE ACT FROM UNDISCLOSED SOURCES OF THE A SSESSEE. IN THE CIRCUMSTANCES, THE UNEXPLAINED CASH CREDITS OF RS.3 ,07,000/- IS ADDED TO TOTAL INCOME U/S.68 OF IT ACT. I AM THEREFORE SA TISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME TO THIS EXTENT. HENCE, PENALTY PROCEEDINGS U/S.271(L)(C) ARE SEPARATELY IN ITIATED. 9. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONTE NDED THAT THE LD.CIT(A) HAS DELETED ADDITION OF RS.3,07,000/- BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DY E STUFF INDUSTRIES, ITR NO.241 OF 1993 DATED 6.7.2005. HE CONTENDED THAT C APITAL CONTRIBUTED BY THE ITA NO.336/AHD/2012 7 PARTNERS CANNOT BE ADDED BECAUSE IDENTITY OF THE PA RTNERS IS NOT DISPUTE. THEY HAVE CONFIRMED THE CONTRIBUTION, AND AT THE MOST LD .AO COULD VERIFY THEIR CASES. AS FAR AS SOURCES OF EXPENDITURE IS CONCERN ED THAT HAS BEEN EXPLAINED BY THE ASSESSEE FROM THIS CAPITAL. THE AO HAS TREAT ED THESE TWO ISSUES, AS IF THAT EXPENDITURE IS AUTOMATICALLY BE ADDED AND IT I S BEING GIVEN SET OFF AGAINST THE CAPITAL CONTRIBUTION OF FOUR PERSONS. ONE DUE CONSIDERATION OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT CAPITAL CONTRIBUTED BY ALL NINE PARTNERS IS TO BE TREATED AT PAR AND IT CANNOT BE C ONSIDERED AS UNEXPLAINED CASH CREDIT. IN VIEW OF THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF PANKAJ DYE STUFF INDUSTRIES (SUPRA), THERE CANNOT B E ANY ADJUSTMENT OF UNEXPLAINED EXPENDITURE VIS--VIS ALLEGED CAPITAL C ONTRIBUTION. BOTH THESE ASPECTS ARE REQUIRED TO BE ADJUDICATED INDEPENDENTL Y. SINCE THE AO HAS MADE ADDITION QUA THE CAPITAL CONTRIBUTED BY FOUR PARTNERS UNDER THE IMPRESSION THAT ADDITION OF EQUIVALENT AMOUNT IS BE MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE. IN OUR OPINION, THIS ADDITION UNDER S ECTION 68 CANNOT BE MADE, AND THEREFORE, WHERE ADDITION ON ACCOUNT OF UNEXPLA INED EXPENDITURE CAN BE MADE IS TO BE EXAMINED INDEPENDENTLY. WE FIND THAT THERE IS NO UNEXPLAINED EXPENDITURE, BECAUSE ASSESSEE HAS SOURCE OF SUCH EX PENDITURE IN THE SHAPE OF MONEY RECEIVED FROM THE PARTNERS. THUS, THE LD.REV ENUE AUTHORITIES HAVE FAILED TO APPRECIATE THESE TWO ISSUES IN RIGHT PERS PECTIVE. WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND DELETE RS.5,57,031/-. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 17 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/11/2016