Pallod Creations, Satara V. Additional Commissioner of Income-tax,

ITA 349/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1001 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Assessee Lawyers: NIKHIL PATHAK SHRI SUHAS BORA
• Keywords: Business income
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . . , , , BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 349 /PN/201 4 / ASSESSMENT YEAR : 200 5 - 06 PALLOD CREATIONS, 63, DR. SABANE ROAD, MAHABALESHWAR, DISTT. - SATARA PAN : AAEFP9532C / ....... / APPELLANT / V/S. ADDL. COMMISSIONER OF INCOME TAX, SATARA RANGE, SATARA / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK/ SHRI SUHAS BORA REVENUE BY : SHRI HITENDRA NINAVE / DATE OF HEARING : 04 - 08 - 2015 / DATE OF PRONOUNCEMENT : 16 - 10 - 2015 / ORDER / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - II I, PUNE DATED 10 - 12 - 2013 FOR THE ASSESSMENT YEAR 2005 - 06. THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION OF R S.12,20,218/ - BY ESTIMATING GROSS PROFIT AT @ 14.90% , AS WELL AS ESTIMATING TURNOVER OF THE ASSESSEE FOR THE POST SURVEY PERIOD. 2 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 2. THE BRIEF FACTS OF THE CASE ARE: THE ASSESSEE IS ENGAGED IN RETAIL BUSINESS OF CLOTHS AND SAREES. A SURVEY U/S. 13 3A OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 1 6 /17 FEBRUARY, 2005. DURING SURVEY EXCESS STOCK TO THE TUNE OF RS.31,36,093/ - WAS FOUND. AT THE TIME OF SURVEY, STATEMENT OF SHRI SURESH M. PALLOD , MANAGING PARTNER OF THE ASSESSEE FIRM WAS RECORDED. HE ADMITTED THAT THE SALES TURNOVER WAS SUPPRESSED. THE ASSESSEE DECLARED RS.35,00,000/ - (RS.33,00,000/ - ON ACCOUNT OF UN - DISCLOSED STOCK AND RS.2,00,000/ - ON ACCOUNT OF EXCESS CASH) DURING SURVEY. 2. 1 IN THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER OBSERVED FROM THE IMPOUNDED REGISTER THAT THE TOTAL SALES RECORDED IN THE REGISTER FROM 01 - 04 - 2004 TO 15 - 02 - 2005 WAS RS.3,00,51,331/ - . APART FROM THE ABOVE THERE WERE CREDIT SALES OF RS.13,1 1,986/ - AND PARCEL SALES (SALES ON APPROVAL) OF RS.10,31,722/ - . WHEREAS , IN THE INCOME RETURNED THE ASSESSEE DISCLOSED THE TOTAL SALES FROM APRIL, 2004 TO MARCH, 2005 AS RS.3,16,00,837/ - . THE ASSESSING OFFICER DID NOT ACCEPT THE TOTAL SALES TURNOVER DISCL OSED BY THE ASSESSEE . THE ASSESSING OFFICER MADE ADDITION OF RS.46,27,863/ - IN RESPECT OF POST SEARCH SALE I.E. FROM 16 - 02 - 2005 TO 31 - 03 - 2005. THE ASSESSING OFFICER COMPUTED THE TOTAL SALES TURNOVER AT RS.3,70,22,902/ - WITH THE FOLLOWING BREAK - UP: SALES FR OM 1/4/2004 TO 15/2/2005 (I.E. UPTO THE DATE OF SURVEY) 3,00,51,331/ - CREDIT SALES 13,11,986/ - PARCEL SALES 10,31,722/ - POST SURVEY SALES (I.E. FROM 16/2/2005 TO 31/3/2005) 46,27,863/ - TOTAL SALES 3,70,22 , 902/ - 3 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 THE ASSESSEE HAD DECLARED GROSS PROFIT @ 13.03% DURING THE ASSESSMENT YEAR 2005 - 06. THE ASSESSING OFFICER OBSERVED THAT IN THE PRECEDING ASSESSMENT YEARS 2001 - 02, 2002 - 03 AND 2003 - 04 THE AVERAGE GROSS PROFIT WAS AROUND @ 14.90%. NO REASON WHATSOEVER WAS GIVEN FOR DROP IN THE GRO SS PROFIT WHEREAS THERE HAS BEEN ST EA DY INCREASE IN THE TURNOVER. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT @ 14.90% BY TAKING THE AVERAGE OF GROSS PROFIT OF THE THREE PRECEDING FINANCIAL YEARS AND THUS, MADE TOTAL ADDITION OF RS.12,20,218/ - IN THE INCOME RETURNED BY THE ASSESSEE ON ACCOUNT OF SUPPRESSION OF SALES AND PROFIT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28 - 12 - 2007, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE ASSESSMENT ORDER. NOW , THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRM ING AD - HOC ADDITION OF GROSS PROFIT , AS WELL AS POST SEARCH SALES TURNOVER. 3. SHRI NIKHIL PATHAK AND SHRI SUHAS BORA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED, THAT THE ASSESSING OFFICER WHILE CALCULATING SALES TURNOVER FOR THE POST SURVEY PERIOD HA S MADE DOUBLE ADDITION. THE LD. AR REFERRED TO PAGE 9 OF THE PAPER BOOK WHERE THE STATEMENT SHOWING MONTHLY SALES AS PER THE BOOKS ARE EXTRACTED. THE LD. AR CONTENDED THAT THE TOTAL SALES TURNOVER OF THE ASSESSEE INCLUDING POST SURVEY PERIOD IS RS.3,16,0 0,837.24/ - . THE ASSESSING OFFICER HAS ERRED IN MAKING FURTHER ADDITION OF RS.46,27,863/ - IN RESPECT OF SALES TURNOVER FOR THE POST SURVEY PERIOD. ONCE, THE ASSESSEE HAS INCLUDED THE POST SURVEY PERIOD IN COMPUTING TOTAL SALES , N O FURTHER ADDITION 4 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 WAS CA LLED FOR IN RESPECT OF THE POST SURVEY SALES. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION UNDER THE IMPRESSION THAT THE SALES TURNOVER OF RS.3,16,00,837/ - AS DISCLOSED BY THE ASSESSEE IS UP TO THE DATE OF SURVEY I.E. UP TO 15 - 02 - 2005 , WHEREAS THE AFORESAID TURNOVER UP TO 31 - 03 - 2005. 3.1 THE LD. AR FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN ESTIMATING GROSS PROFIT @ 14.90% . T HE ACTUAL GROSS PROFIT OF THE ASSESSEE WAS ONLY 13.03% DURING THE FINANCIAL YEAR 2004 - 05. THE LD. AR MADE PRAYER THAT SINCE EXCESS STOCK HAS ALREADY BEEN OFFERED FOR ADDITION TELESCOPING BENEFIT SHOULD BE GIVEN FOR G.P. ADDITION. THE LD. AR CONTENDED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER AND UPHELD BY THE COMMISSIONER OF INCOME TAX (AP PEALS) ARE ARBITRARY AND UNJUSTIFIED , AND PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER. 4. ON THE OTHER HAND SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDI TIONS. THE LD. DR SUBMITTED THAT DURING THE ASSESSMENT YEARS 2003 - 04 TO 2005 - 06 THE TURNOVER HA S INCREASED ALMOST 100% , WHEREAS , PROFIT S FROM THE BUSINESS HA S REDUCED BY 50%. THE AVERAGE GROSS PROFIT OF THE ASSESSEE IN THE PRECEDING ASSESSMENT YEARS IS NEARLY 14.90%, WHEREAS, IN THE IMPUGNED ASSESSMENT YEAR IT HAS HAD DROPPED TO 13% DESPITE THE FACT THAT THERE WAS SUBSTANTIAL INCREASE IN THE TURNOVER OF THE ASSESSEE. DURING SURVEY UNACCOUNTED SALES WERE FOUND APART FROM UNDISCLOSED STOCK. THE ADDITIONS WERE MADE ON BEHALF OF THE UNACCOUNTED SALES. THE LD. DR VEHEMENTLY SUPPORTED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALES TURNOVER , AS WELL AS ESTIMATION OF GROSS PROFIT IN THE 5 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 IMPUGNED ASSESSMENT YEAR. THE LD. DR VEHEMENTLY OPPOSED THE PRAYER OF THE ASSESSEE IN GRANTING THE BENEFIT OF TELESCOPING. 5. THE LD. AR CONTROVERTING THE SUBMISSIONS MADE ON BEHALF OF THE DEPARTMENT SUBMITTED THAT G.P. ADDITION CANNOT BE SUBSTITUTED FOR UNDISCLOSED STOC K. THE G.P. IS UTILIZED FOR MAKING INVESTMENT IN STOCK. THE STOCK AS WELL AS G.P. CANNOT BE ADDED. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS EXTRAPOLATED THE SALES TURNOVER FOR THE POST SURVEY PERIOD IN AN UNJUSTIFIED MANNER. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE FIRM IS ENGAGED IN THE RETAIL BUSINESS OF CLOTHS AND SAREES. A T THE TIME OF SURVEY ACTION U/S. 133A SOME DOCUMENTS, B OOKS AND REGISTER S WERE SEIZED FROM THE BUSINESS PREMISES OF THE ASSESSEE . U NDISCLOSED SALES AND CASH OF RS.35,00,000/ - WAS ADMITTED BY THE MANAGING PARTNER OF THE ASSESSEE DURING SURVEY. IN THE PRESENT APPEAL, THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ESTIMATING SALES TURNOVER (FOR POST SURVEY PERIOD) AND AD - HOC G.P. ADDITION ON TOTAL SALES. 7. ACCORDING TO THE ASSESSEE THE TOTAL S ALES TURNOVER DURING THE FINANCIAL YEAR 2004 - 05 , RELEVANT TO THE ASSESSMENT YEAR 2005 - 06 IS RS.3,16,00,837.24 . WHEREAS, THE ASSESSING OFFICER HAS ESTIMATED TOTAL SALES OF THE ASSESSEE AT RS.3,70,22,902/ - . AS PER THE CONTENTIONS OF THE ASSESSEE THE ASSESSI NG OFFICER HAS MADE DOUBLE ADDITION OF THE SALES TURNOVER IN RESPECT OF POST SURVEY PERIOD I.E. FROM 16 - 02 - 2005 TO 31 - 03 - 2005. THE ASSESSING OFFICER HAS MADE ADDITION OF 6 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 RS.46,27,863/ - ON SALES TURNOVER DURING THE AFORESAID PERIOD OF 1 MONTHS. WE FIND M ERIT IN THE SUBMISSIONS OF THE LD. AR THAT DOUBLE ADDITION CANNOT BE MADE. IN OUR CONSIDERED VIEW THIS ISSUE NEEDS A REVISIT TO THE ASSESSIN G OFFICER. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS CALCULATED THIS AMOUNT OF RS.46,27 ,863/ - BY AVERAGING THE SALES OF 10 MONTHS (I.E. FOR THE PERIOD PRIOR TO SURVEY) AND THEN EXTRAPOLATED IT FOR THE POST SURVEY PERIOD OF 1 MONTHS. A S PER THE ASSESSEE THE TOTAL SALES TURNOVER OF RS.3,16,00,837/ - INCLUDES THE SALES TURNOVER FOR THE POST S U RVEY PERIOD. THE ASSESSING OFFICER SHALL ASCERTAIN THE SALES TURNOVER AFTER RE - EXAMINING THE RECORDS AND AFTER VERIFYING THE CONTENTIONS OF THE ASSESSEE. IN CASE THE TOTAL SALES TURNOVER AS DISCLOSED BY ASSESSEE (RS.3,16,00,837.24) IS FOUND TO BE CORRECT, NO FURTHER ADDITION IS CALLED FOR. 8. IN SO FAR AS THE SECOND GRIEVANCE OF THE ASSESSEE WITH REGARD TO ESTIMATION OF GROSS PROFIT IS CONCERNED , THE ASSESSING OFFICER HAS COMPUTED GROSS PROFIT AFTER EXAMINING THE RECORDS OF PRECEDING THREE FINANCIAL YEAR S. THE GROSS PROFIT PERCENTAGE TO SALES OF IMMEDIATELY THREE PRECEDING ASSESSMENT YEARS IS 14.85%, 14.90% AND 14.94% , RESPECTIVELY . T HE ASSESSING OFFICER HAS TAKEN THE AVERAGE GROSS PROFIT S OF THE THREE PRECEDING ASSESSMENT YEARS I.E. 14.90%. THE GROSS PROFIT MARGIN DECLARED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR IS 13.03%. NO PLAUSIBLE REASON WHATSOEVER HAS BEEN GIVEN BY THE ASSESSEE FOR FALL IN GROSS PROFIT RATE . THUS, WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE AUTHORITIES BELOW IN E STIMATI NG, SO FAR AS GROSS PROFIT IS CONCERNED. 7 ITA NO. 349/PN/2014, A.Y. 200 5 - 06 9. THE CASE FILE IS REMITTED BACK TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE FACT FROM THE RECORDS , WHETHER POST SURVEY SALES IS INCLUDED IN THE TOTAL SALES TURNOVER DECLARED BY THE ASSESSEE . BEFORE CALCULATING AND ASCERTAINING THE SALES TURNOVER, THE ASSESSING OFFICER SHALL GRANT AN OPPORTUNITY OF HEARING TO THE ASSESSEE , IN ACCORDANCE WITH LAW . 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ACCEPTED FOR STATISTICAL PURP OSE IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY , THE 16 TH DAY OF OCTOBER, 2015. SD/ - SD/ - ( . . / R.K. PANDA) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 16 TH OCTOBER, 2015 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT . 2. / THE RESPONDENT . 3. ( ) / THE CIT(A) - II I, PUNE 4. / THE CIT - II I, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE . / DR, ITAT, B BENCH, PUNE . 6. / GUARD FILE. / / / // TRUE COPY// / BY ORDER, // TRUE COPY // / PRIVATE SECRETARY, , / ITAT, PUNE , / ITAT, PUNE