The ITO, Ward-2(3), Bhavnagar V. National Ginning & Presing Factory, Bhavnagar

ITA 3484/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89730 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: P B PARMAR
• Section: 40A(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER . ITA. NO. 3 484 /AHD/20 1 0 (ASSES SMENT YEAR: 2 00 7 - 0 8 ) INCOME - TAX OFFICER, WARD 2 ( 3 ), BHAVNAGAR APPELLANT VS. NATIONAL GINNING & PRESSING FACTORY, AT: GARIYADHAR, DIST. : BHAVNAGAR RESPONDENT PAN: AA D F N0254E / BY APPELLANT : SHRI NARENDRA SINGH, SR. D.R. / BY RESPONDENT : SHRI P. B. PARMAR, A.R. / DATE OF HEARING : 0 2 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 22 . 0 7 .201 5 I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J . M: THIS A PPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - X X , AHM E DABAD, DATED 11.10. 20 1 0 FOR A.Y. 200 7 - 0 8 ON FOLLOWING GROUNDS: 1. THE LD. CIT(A) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1 1,46, 000 / - REPRESENTING UNACCOUNTED CASH PURCHASES WHICH HAD BEEN DISCLOSED BY A PARTNER OF THE ASSESSEE FIRM IN COURSE OF THE SURVEY U/S . 133A OF THE I .T. ACT. IN DOING SO, THE CIT(A) IGNORED THE FACT THA T SUCH DISCLOSURE WAS MADE OVER AND ABOVE THE EXCESS STOCK FOUND DURING THE SURVEY, AND THE ONUS WAS ON THE PART OF THE ASSESSEE TO SHOW THAT SUCH PURCHASES HAD NOT BEEN SOLD OUTSIDE THE BOOKS O F ACCOUNT AND THAT, THE UNACCOUNTED ST OCK F OUND DURING THE SURVEY INCLUDED SUCH UNACCOUNTED CASH PURCHASES. 2. TH E LD. CIT(A) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION O F RS.1,77,010 / - REPRESENTING THE G.P. EARNED FROM THE SALE OF THE UNACCOUNTED PURCHASES, ON THE SOLE GROUND THAT THE ASSESSING OFFICER HAD BEEN UNABLE TO PROVE THAT SUCH SAL E HAD BEEN EFFECTED PRIOR TO THE DATE OF THE SURVEY. IN DOING SO, THE LD. CIT(A) HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT ONCE UNACCOUNTED CASH PURCHASES HAS BEEN DEFECTED AND ESTABLISHED, THE S A LE OF THE SAME WOULD HAVE ALSO BEEN UNACCOUNTED, A S ALSO THE INCOME EARNED THEREFROM. HE HAS ALSO FAILED TO ESTABLISH THAT SUCH UNACCOUNTED PURCHASES WERE INCLUDED IN THE EXCESS STOCK DETECTED IN COURSE OF THE SURVEY. 3. THE LD. CIT(A) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE GUJAR AT ELECTRICITY BOARD (GEB), TO WHOM A CASH PAYMENT WAS MADE, WAS THE GOVERNMENT ITSELF AS E NVISAGED UNDER RULE 6DD OF THE I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 3 I .T, RULES AND HENCE, SUCH PAYMENT WAS OUTSIDE THE PU RVIEW OF SECTION 40A(3) OF THE I .T, ACT. 4. ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 2. ASSESSING OFFICER MAD E ADDITION BY OBSERVING AS UNDER: 'ON VERIFICATION OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH,2007 ATTACHED WITH THE AUDIT REPORT FOR F Y 2006 - 07, IT IS REVEALED THAT THE ASSESSEE FIRM, OVER AND ABO VE THE GROSS PROFIT, ADDED RS32, 56 , 207/ - UN DER THE HEAD 'BY STOCK DECLARATION A/C. THE ASSESSE E FIRM HAS ALSO ADDED RS. 5,79,000 / - UNDER THE HEAD 'BY ASSETS DECLARATION A/C. HOWEVER, THE ASSESSEE FIRM DID NOT ADDED RS.L,77, 010 / - FROM STOCK DECLARATION AND RS.L 1, 46,000/ - OUT OF UNDISCLOSED PURCHASE IN CASH. ON BEING ASKED TO THE AR OF THE ASSESSEE FIRM, IT WAS SUBMITTED VIDE HIS LETTER DATED 03 - 11 - 2009 THAT 'AS PER PROFIT & LOSS ACCOUNT, WE HAVE SHOWN CREDIT OF RS.5,79, 000 / - RESPECT TO ASSETS AND RS.32,56,207/ - FOR STOCK OF MATERIAL (FINISHED & RAW) AGAINST TOTAL DECLARATION OF RS.51,58,217/ - ON 28 - 2 - 2007. (1) RS. 11,46,000 / - PURCHASES MADE IN CASH & NOT RECORDED (RAW COTTON PURCHASES) ARE INCLUDED IN EXCESS STOCK ON THE DAY OF STOCK VERIFICATION ON 28 - 2 - 2007. (2) AS EXCESS STOCK FOUND O N DATE 28 - 2 - 2007 REMAIN AS CLOSING STOCK AS ON 31 - 3 - 2007, WHY GP RS.11,46, 000/0 - TO BE ADDED TO UN DISCLOSED AMOUNT. THUS, WE REQUEST SIR TO DEDUCT RS.11,46, 000/ - & RS.1,77,010/ - FROM DECLARED AMOUNT AS PER OUR STATEMENT GIVEN BY PARTNER OF THE FIRM'. I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 4 A REPLY WAS GIVEN TO THE ABOVE LETTER ON THE SAME DAY I.E. ON 03 - 11 - 2009 AND SERVED BY RPAD ON 0 7 - 11 - 2009. THE SAID REPLY IS REPRODUCED IN PARA:2 OF THIS ORDER. FIRST OF ALL, ONE THING SHOULD BE CLEAR THAT WHATEVER AMOUNT IS ACCEPTED AS UNACCOUNTED INCO ME OR CONCEALED INCOME, WHETHER IN CASH OR IN KIND AND ACCEPTED BY THE ASSESSEE (HERE BY THE PARTNER OF THE ASSESSEE FIRM) CANNOT BE RETRACTED BY ANY OTHER INTERPRETATION. THE ACCEPTATION IS THE FINAL OUTCOME OF THE SURVEY ACTION. SECONDLY, IT WAS AGREED UPON BY THE PARTNER OF THE ASSESSEE FIRM THAT THE FIRM HAD PURCHASE IN CASH OF RS. 11, 46 ,000 / - . IF THE STOCK AT THE TIME OF SURVEY MAY FOUND LESS, THEN FOR SAKE OF ARGUMENTS, IT MAY BE PLEADED THAT THE GP SHOULD BE TAKEN AS UNDISCLOSED INCOME ON AMO UNT OF SUCH SHORT OF STOCK. BUT, HERE THE POSITION IS DIFFERENT. THERE WAS EXCESS STOCK OF RS. 11 ,46, 000 / - WHICH WAS PURCHASED FROM UNDISCLOSED INCOME IN CASH. UNDER THE CIRCUMSTANCES, THE ARGUMENTS OF THE AR OF THE ASSESSEE FIRM IS NOT ACCEPTABLE, HENCE THE AMOUNT OF RS. 11, 46 , 000/ - AND RS.L,77,010/ - (TOTAL RS.13,23 , 010/ - ) IS , HEREBY ADDED T O THE TOTAL INCOME OF THE ASSESSEE. 2 . 1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE R AISED ON BEHALF OF ASSESSEE WITH REGARDS TO ADDITION IN QUESTION AND HAVING CONSIDERED THE SAME CIT(A) GRANTED RELIEF TO THE ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE. LEARNED DEPARTMENTAL REPRESENTATIVE REQUESTED TO SET ASIDE THE ORDER OF CIT( A) AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 2 . 2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSEE IS A PARTNERSHIP FIRM. FOR THE YEAR UND ER CONSIDERATION, ASSESSEE HAD FILED RETURN OF INCOME ON 06/11/2007 DECLARING TOTAL INCOME AT RS.NIL. THE CASE OF I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 5 ASSESSEE WAS TAKEN UP OF FOR SCRUTINY AND NOTICES U/S. 143(2) WAS ISSUED ON 15.09.2008. ASSESSING OFFICER MADE TOTAL ADDITION AS DISCUS SED ABOVE. IN APPEAL, CIT(A) OBSERVED THAT ASSESSING OFFICER HAD MADE DISCUSSION ONLY ABOUT PURCHASE RECORDED IN THESE SHEETS OF PAPER FOUND DURING COURSE OF SURVEY OPERATIONS BEING UNACCOUNTED. ASSESSING OFFICER HAS NOT REFERRED TO ANY SHEET OF PAPER I N PARTICULAR TO SHOW THAT THE GOODS PURCHASES UNACCOUNTED HAVE BEEN SOLD DURING COURSE OF BUSINESS OF ASSESSEE PRIOR TO THE DATE OF SURVEY. ADDITION BY ASSESSING OFFICER HAS BEEN MADE ON THE BASIS OF STATEMENT OF PARTNER OF ASSESSEE RECORDED U/S.133A(1)(I II) OF THE IT ACT, 1961. IN STATEMENT RECORDED, NO MENTION HAS BEEN MADE ABOUT ANY SALES OUT OF UNACCOUNTED PURCHASES. ASSESSING OFFICER DID NOT MAKE SUFFICIENT INQUIRY TO COME TO THE REASONABLE CONCLUSION THAT U NACCOUNTED PURCHASES OF COTTON WA S ALSO SO LD BEFORE THE DATE OF SURVEY. IN VIEW OF ABOVE, IT WAS FOUND BY CIT(A) THAT UNACCOUNTED PURCHASES OF COTTON MADE BY ASSESSEE AS EVIDENCED BY THE RECORDINGS IN THE LOOSE SHEETS OF PAPER WAS AVAILABLE ON THE DATE OF SURVEY BY ASSESSEE. SAME WAS INCLUDED IN THE STOCK, WHICH WAS FOUND EXCESS DURING COURSE OF SURVEY. IN VIEW OF ABOVE, SEPARATE ADDITION OF RS.11,46,000/ - MADE BY ASSESSING OFFICER WAS NOT JUSTIFIED. SAME WAS RIGHTLY DELETED BY CIT(A). THIS FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3 . NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.1,77,010/ - REPRESENTING THE G.P., MADE TO THE TOTAL INCOME OF ASSESSEE AS I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 6 UNDISCLOSED INCOME. ASSESSING OFFICER HAS MADE ADDITION ON THE GROUND THAT THE PARTNER OF ASSESSEE FI RM ADMITTED IN STATEMENT RECORDED DURING COURSE OF SURVEY THAT ASSESSEE HAD MADE UNACCOUNTED PURCHASES OF RS.11,46,000/ - . ASSESSING OFFICER HELD THAT SINCE PURCHASES WERE UNACCOUNTED AND SAME WAS SOLD BEFORE THE SURVEY ADDITION ON ACCOUNT OF GROSS PROFIT IN SUCH UNACCOUNTED SALES WAS ALSO REQUIRED TO BE MADE. 3 . 1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY AND HAVING CONSIDERED THE STATEMENT OF ASSESSEE, CIT(A) DELETED THE ADDITION IN QUESTION. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTER ALIA SUBMITTING THAT ORDER OF CIT(A) ON THE ISSUE BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 3 . 2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, W E FIND THAT ADDITION HAS BEEN MADE RELATING TO UNACCOUNTED PURCHASES MADE IN CASH PRIOR TO THE DATE OF SURVEY. THERE IS NOTHING ON RECORD TO SUGGEST THAT UNACCOUNTED SALE OF THESE GOODS PURCHASED IN THIS HAD BEEN AFFECTED PRIOR TO THE DATE OF SURVEY. ASS ESSING OFFICER WAS NOT ABLE TO ESTABLISH THAT SALES OF UNACCOUNTED PURCHASES HAD BEEN MADE PRIOR TO THE DATE OF SURVEY. SO, THERE WAS NO QUESTION OF MAKING ADDITION ON ACCOUNT OF GROSS PROFIT ON ABOVE UNACCOUNTED PURCHASES. IN VIEW OF ABOVE, ADDITION OF RS.1,77,010/ WAS RIGHTLY DELETED BY CIT(A). WE UPHOLD THE SAME. I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 7 4 . NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.56,759/ - U/S.40A(3) OF THE ACT. ASSESSING OFFICER MADE THIS ADDITION BY OBSERVING AS UNDER: ON VERIFICATION OF COPY OF LEDGER FOR ELECTRIC BI LLS (L.T. & H.T.) FOR FINANCIAL YEAR 2006 - 07, IT IS REVEALED THAT THE ASSESSEE FIRM HAS PAID THE FOLLOWING ELECTRICITY BILLS IN CASH. AMOUNT PAID TO RECEIPT NO. DATE OF PAYMENT RS.39,160 GUJARAT ELECTRICITY BOARD 756047 06 - 05 - 2006 RS.51,461 - DO - 021683 25 - 05 - 2006 RS.22,910 - DO - 023046 17 - 06 - 2006 RS.44,100 - DO - 662287 30 - 06 - 2006 RS.26,110 - DO - 662284 30 - 06 - 2006 RS.76,110 - DO - 662287 30 - 06 - 2006 RS.23,943 - DO - 662285 30 - 06 - 2006 I T APPEARS FROM ABOVE THAT THE ASSESSEE FIRM HAS MADE THE PAYMENT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON BANK OR ACCOUNT PAYEE BANK DRAFT. THUS, THE ASSESSEE FIRM HAS MADE A DEFAULT U/S.40A(3)(A) OF THE IT ACT, 1961. ACCORIDNGLY, TWENTY PERCEN T OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION. HENCE, A SUM OF RS.56,759/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . 1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF A SSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 4 . 2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ASSESSEE HAS MADE PAYMENTS IN CASH TO GUJARAT STATE ELECTRICITY BOARD ON SEVERAL OCCASIONS IN CASH. SUCH PAYMENTS ARE COVERED UNDER THE EXEMPTIONS PROVIDED UNDER RULE 6DD OF IT RULES. IN VIEW OF ABOVE, CIT(A) WAS I T A NO . 3 484 /AHD/ 1 0 A.Y. 07 - 0 8 [ IT O VS. NATIONAL GINNING & PRESSING FACTORY ] PAGE 8 JUSTIFIED IN DELE TING THE DISALLOWANCE MADE U/S. 40A(3) OF THE ACT AMOUNTING TO RS.56,759/ - . SAME IS UPHELD. 5 . AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF JULY , 201 5 . SD/ - SD/ - (ANIL CH ATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 22 /0 7 /2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER / , / ,