M/S ADVIT FURNITURE HOUSE, BILASPUR(CG) V. DY.. C.I.T.-1(1), BILASPUR(CG)

ITA 343/BIL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0209 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHITAL VERMA
• Assessee Lawyers: RICHA KHATRI
• Keywords: Rejection of books of accounts; Unexplained expenditure; Business income; Depreciation; Deemed to accrue or arise in india; Valuation report

Judgement Text

ITA NO . 343 / RPR /201 4 ASSESSMEN T Y EAR: 20 1 0 - 11 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, SMC , RAIPUR [CORAM : PRAMOD KUMAR AM ] ITA NO . 343 / RPR /201 4 AS SESSMENT Y EAR : 20 1 0 - 11 ADVIT FURNITURE HOUSE .APPELLANT C / O. SUNIL KUMAR BHUTANI, MAGARPA R A, BILASPUR (CG) . [P AN: A AQ FA 9745 G ] VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 1 (1), BILASPUR (C.G.) ...... . RESPONDENT APPEARANCES BY: RICHA KHATRI , FOR THE A PPELLANT SHITAL VERMA , F OR THE RE SPONDENT DATE OF CONCLUDING THE HEARING : 2 3 .0 6.2016 DATE OF PRONOUNCING THE ORDER : 22 .09.2016 O R D E R 1. BY WAY OF TH IS APPEAL, THE A SSESS EE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 18 .0 6 .201 4 , PASSED BY THE LEARNED CIT (A), BILASPUR (C.G.), IN THE MATTER OF ASSESSM ENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 20 10 - 11 . THE ASSESSEE HAS, AFTER RAISING THE GROUNDS OF APPEAL AS SET OUT IN THE MEMORANDUM OF APPEAL, FILED FURTHER MODIFIED/REVISED ADDITIONAL GROUNDS AS WELL. THESE GROUNDS OF APPE AL ARE REPRODUCED BELOW: 1. THAT THE ORDER OF THE CIT (APPEALS) IS BAD IN LAW AS WELL AS ON FACTS. 2. THE ORDER OF THE COMMISSIONER ( APPEALS ) CONFIRMING REJECTION OF BOOKS OF ACCOUNTS IS CONTR A RY TO LAW AND ON FACTS. ITA NO . 343 / RPR /201 4 ASSESSMEN T Y EAR: 20 1 0 - 11 PAGE 2 OF 5 3. THE ORDER OF THE COMMISSIONE R (APPEALS) TREATING THE EXCESS STOCK AND CASH AMOUNTING TO RS.30 , 01 , 850 AS DEEMED INCOME U/S 69B CONTRARY TO LAW AND THE F A CT S OF THE CASE. 4. THE ORDER OF THE COMMISSIONER (APPEALS) NOT TREATING THE EXCESS STOCK AND CASH AMOUNTING AS BUSINESS INCOME CO NTRARY TO LAW AND THE FACTS OF THE CASE. 5. THE ORDER OF THE COMMISSIONER (APPEALS) CONFIRMING THE INCOME OF THE APPELLANT @ 8% OF THE TURNOVER IS CONTRARY TO LAW AND THE FACTS OF THE CASE. 6 . THE ORDER OF THE COMMISSIONER (APPEALS) SUSTAINING THE ADDITI ON OF R S .933889/ - ON ACCOUNT OF EXCESS INVESTMENT IN SHOP IS CONTRARY TO LAW AND THE FACTS OF THE CASE. REVISED/ MODIFIED GROUNDS OF APPEAL 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS BAD IN LAW AS WELL AS ON FACTS. 2. THE LEARNED CIT (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE VALUE OF EXCESS CASH AND EXCESS STOCK SURRENDERED DURING SURVEY WAS NOT BUSINESS INCOME AND IT WAS NOT ELIGIBLE FOR INCLUSION IN BOOK PROFIT FOR THE PURPOSE OF WORKING OUT REMUNERATION AND INTEREST TO PARTNERS. 3. THE LEARNED CIT(APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING REJECTION OF BOOKS OF A/C AND CONSEQUENT ESTIMATION OF NET BUSINESS INCOME AT RS.19000/ - PARTICULARLY WHEN THE SUM SURRENDERED AS BUSINESS INCOME SUFFICIENTLY TAKES CARE OF THE DEFICIENCIES, IN THE BOOKS OF A/C., EVEN IF THERE BE ANY. 4. THE ORDER OF THE LEARNED CIT (APPEALS) IN SUSTAINING THE ADDITION OF RS.933889/ - , PRESUMING THE SAME TO BE THE EXCESS INVESTMENT IN SHOP, IS CONTRARY TO LAW AND FACTS OF THE CASE. 5. THE APPELLANT CRAVES LEA VE TO URGE, ADD/ALTER OR AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. ADDITIONAL GROUND OF APPEAL: THE LEARNED LOWER AUTHORITIES ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE CLAIMS OF DEPRECIATION ADMISS IBLE AS PER RULES ITA NO . 343 / RPR /201 4 ASSESSMEN T Y EAR: 20 1 0 - 11 PAGE 3 OF 5 2. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FURNITURE . THE ASSESSEE HAD DISCLOSED A GROSS PROFIT OF RS 4,80,840 ON THE TOTAL TURNOVER OF RS 26,65,127, WHICH, AS NO TED BY THE ASSESSING OFFICER, WORKS OUT TO 18.04% ON SALES AS AGAINST THE GP OF 14.85% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE WAS SUBJECTED TO A SURVEY PROCEEDINGS UNDER SECTION 133A, AND, IN THE COURS E OF THE SURVEY, THE ASSESSEE OFFERED INCOME OF RS 11,98,650 AS EXCESS CASH AND RS 18,03,200 AS EXCESS STOCK. HOWEVER, WHEN THE INCOME TAX RETURN WAS FILED BY THE ASSESSEE IT SHOWED INCOME OF RS 23,62,840, WHICH, IN THE OPINION OF THE ASSESSING OFFICER, IN ADEQUATE. THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE WERE REJECTED ON THE GROUND THAT THE QUANTITATIVE DETAILS OF STOCKS WERE NOT MAINTAINED, AND, THAT, IF THE AMOUNT SURRENDERED BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS WAS TO BE EXCLUDED, THE BOO KS OF ACCOUNTS WOULD SHOW A LOSS OF RS 12,54,365. REJECTING THE BOOKS OF ACCOUNTS, THE PROFIT WAS ESTIMATED @ 8% OF SALE OF FURNITURE AND 50% ON REPAIRS OF FURNITURE, IN ADDITION TO AMOUNTS SURRENDERED DURING SURVEY WHICH AGGREGATED TO RS 30,01,850. THE A SSESSING OFFICER THUS RECOMPUTED PROFIT FROM BUSINESS, AFTER DEDUCTING INTEREST AND REMUNERATION TO THE PARTNERS, AT RS 19,000. ON A SEPARATE NOTE, THE ASSESSING OFFICER OBTAINED VALUATION REPORT OF THE SHOP OF THE ASSESSEE, WHICH SHOWED THE VALUE AT RS 39 ,20,000 WHEREAS THE VALUE DISCLOSED BY THE ASSESSEE WAS RS 29,86,111. THE DIFFERENCE BETWEEN THESE TWO FIGURES, I.E. RS 9,33,889 WAS BROUGHT TO TAX, AS UNEXPLAINED EXPENDITURE. AGGRIEVED BY THE ADDITIONS SO MADE BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. ITA NO . 343 / RPR /201 4 ASSESSMEN T Y EAR: 20 1 0 - 11 PAGE 4 OF 5 3. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 4. I FIND THAT THERE IS NO LEGALLY SUSTAINABLE REASON TO REJECT THE BOOKS OF ACCOUNTS IN THIS CASE. THE MERE FACT THAT THE INCOME SURRENDERED IN NOT SEPARATELY SHOWN AS INCOME, EVEN IF THAT BE SO, CANNOT JUSTIFY THE REJEC TION OF ACCOUNTS. IT IS ONLY ELEMENTARY THAT A STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS DOES NOT BIND THE ASSESSEE. HON BLE KERALA HIGH COURT S JUDGMENT, IN THE CASE OF PAUL MATHEW & SONS VS CIT (263 ITR 101), HOLDS SO AND NOTHING CONTRARY THERETO HAS BEEN HELD BY HON BLE JURISDICTIONAL HIGH COURT EITHER. THAT LEGAL PROPOSITION APART , THE INCOME, EVEN IF TO BE ADDED, IS IN THE NATURE OF BUSINESS INCOME ONLY, AND THE DEDUCTION FOR INTEREST PAID TO PARTNERS AND INTEREST TO BE ALLOWED TO THE PARTNERS HAS TO TAKE THAT INCOME INTO ACCOUNT AS WELL. IN THE PRESENT CASE, THE INCOME ON SURRENDER HAS BEEN DULY CREDITED AND T HEREAFTER THE ASSESSEE HAD CLAIMED INTEREST ON CAPITAL AND REMUNERATION FOR THE PARTNERS. THE REJECTION OF THE BOOKS OF ACCOUNTS, ON THE GIVEN FACTS, IS NOT AT ALL JUSTIFIED. IN ANY EVENT, THERE IS NO BASIS FOR ESTIMATING PROFITS@ 8%. THE MERE FACT THAT THIS PERCENTAGE OF PROFIT IS ADOPTED, FOR PRESUMPTIVE BASIS TAXATION, IN SOME OTHER CONTEXT AND CERTAIN OTHER SITUATIONS DOES NOT JUSTIF Y ITS APPLICATION IN THE PRESENT CASE. KEEPING IN MIND THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, IN MY VIEW, REJECTION OF THE BOOKS OF ACCOUNTS AND ADOPTION OF PROFIT @ 8% IS HELD TO BE UNJUSTIFIED, AND THE SAID ACTION IS VACATED. AS REGARDS THE ADDITION OF RS 9,33,889 ON ACCOUNT OF DIFFERENCE IN INVESTMENT IN SHOPS AS PER BOOKS OF ACCOUNTS AND THE VALUATION REPORT, IN MY CONSIDERED VIEW, THE VALUATION REPORT IS NOTHING BUT AN ESTIMATE, HOWSOEVER SCIENTIFIC AS IT MAY BE, AND A VALUATI ON REPORT PER SE CANNOT BE REASON ENOUGH TO MAKE INVESTMENT, FOR ALLEGED ITA NO . 343 / RPR /201 4 ASSESSMEN T Y EAR: 20 1 0 - 11 PAGE 5 OF 5 SUPPRESSED INVESTMENT, UNLESS THE BOOKS OF ACCOUNTS ARE FOUND TO BE DEFICIENT. THAT S CERTAINLY NOT THE CASE HERE. I, THEREFORE, DELETE THIS ADDITION AS WELL. I FURTHER DIRECT THE ASS ESSING OFFICER TO GRANT DEPRECIATION AS PER THE RULES, AS ADMISSIBLE TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES 1963 TODAY ON 22 ND DAY OF SEPTEMBER, 2016 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 22 ND DAY OF SEPTEMBER , 2016 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASS ISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR