M/s. Jay Jewellery, Mehsana V. The Income Tax Officer, Ward-3, Mehsana

ITA 3517/AHD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 7747 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Principle of natural justice; Deemed to accrue or arise in india
• Section: 133A; 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 3517/AHD/2016 (ASSESSMENT YEAR: 2012-13) M/S. JAY JEWELLERY CHOKSEY BAZAR, STATION ROAD, MEHSANA V/S INCOME TAX OFFICER, WARD- 3, MEHSANA (APPELLANT) (RESPONDENT) PAN: AAHFJ7971Q APPELLANT BY : SHRI S. N. DIVATIA, AR RESPONDENT BY : SHRI ALOK KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 04 -07-201 8 DATE OF PRONOUNCEMENT : 27 -09-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 12.10.2006 PERTAINING TO A.Y. 2012-13 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 2 1. THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS IN PASSING AN EX-PARTE ORDER WITHOUT GRANTING PROPER AND ADEQUATE OPPORTUN ITY OF HEARING CONSIDERING THE FACT THAT THE APPELLANT AND HIS REGULAR A.R. AR E RESIDING OUTSIDE AHMEDABAD. THAT APART, THE ID. CIT(A) FAILED TO APPRECIATE THE FACT THAT ON THE GIVEN DATE OF HEARING THE A.R. OF THE APPELLANT WAS OUT OF TOWN A ND HENCE COULD NOT EITHER APPEAR OR FILE AN ADJOURNMENT. THE APPELLANT HUMBLY STATES THAT THE APPEAL BE SET-ASIDE TO THE FILE OF THE ID. CIT(A) FOR DECISIO N AFRESH IN THE INTEREST OF NATURAL JUSTICE AND EQUITY. 2. THE ID. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS I N CONFIRMING THE VARIOUS ADDITIONS MADE BY THE AO WITHOUT APPRECIATING AND/O R IGNORING THE FACT THAT THE SAID ADDITIONS WERE MADE BY THE AO SOLELY ON THE BA SIS OF STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS U/S.133A OF THE ACT. THAT SINCE THERE BEING NO EVIDENTIARY VALUE OF STATEMENT RECORDED U/ S.133A OF THE ACT AS HELD BY VARIOUS COURTS OF LAW INCLUDING THE JURISDICTIONAL COURT OF LAW, THE IMPUGNED ADDITIONS OUGHT, TO HAVE BEEN DELETED ON THIS GROUN D ITSELF. 3. THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF THE AO IN NOT TREATING RS.30,00,000/- DECLARED BY THE APPELLANT D URING THE COURSE OF SURVEY AS BUSINESS INCOME OF THE APPELLANT, THE ONLY SOURCE O F WHICH IS BUSINESS INCOME. 4. THE ID. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E AO IN WORKING OUT BOOK PROFIT AS CONTEMPLATED IN SEC. 40(B) EXCLUDING THE BUSINES S INCOME OF RS.30,00,000/- DECLARED BY THE APPELLANT IN FORM OF UNACCOUNTED ST OCK AND THEREBY ERRED IN LAW AND ON FACTS IN DISALLOWING THE CLAIM OF REMUNERATI ON TO PARTNERS AMOUNTING TO RS. 18,00,116/- OUT OF RS.38,15,396/- CLAIMED IN TH E RETURN OF INCOME. THE APPELLANT STATES THAT IN VIEW OF FACTS OF THE CASE AND SUBMISSIONS FILED, COUPLED WITH LEGAL POSITION, THE SAID ADDITION DESERVES TO BE DELETED. 5. THE ID. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.4,00,000/- MADE BY THE AO TREATING THE SAID AMOUNT AS NOT INCLUDED IN THE RET URNED INCOME WITHOUT CONSIDE.ING AND APPRECIATING THE FACT THAT THE TOTA L DISCLOSURE OF UNACCOUNTED INCOME WAS ONLY RS.30,00,000/- AND THE BIFURCATION GIVEN IN THE STATEMENT WAS ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 3 MERELY TENTATIVE AND PROMPTED BY THE SURVEY PARTY, THE APPELLANT STATES THAT EVEN OTHERWISE SINCE IT IS SETTLED LAW THAT THE STA TEMENT RECORDED U/S.!33A HAS NO EVIDENTIARY VALUE AS HELD BY NUMEROUS COURTS OF LAW , RELIANCE ON SUCH STATEMENT BY THE AO AND CONFIRMATION OF THE ADDITION BY THE I D. CIT(A) IS NOT JUSTIFIED AND THUS REQUIRES TO BE DELETED 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IT IS SEEN FROM THE RECORDS THAT SURVEY ACTION U/S. 133A OF I. T. ACT, 1961 WAS CARR IED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 02.09.2011. THE ST ATEMENT OF PARTNER SHRI ASHOKBHAI C. MODI AND SHRI MAHESHKUMAR MODI WERE RE CORDED U/S. 131 OF I. T. ACT, 1961 ON 02.09.2011. IT WAS REPORTED BY THE PARTNER THAT ACTUAL BUSINESS OF THE ASSESSEE FIRM WAS STARTED W.E.F. 01.04.2011. IT WAS ADMITTED BY SHRI MAHESHKUMAR MODI, PARTNER IN CONSULTATION WITH OTHE R PARTNER SHRI ASHOKBHAI MODI THAT THE EXCESS STOCK FOUND AND WORKED OUT ON PHYSICAL STOCK TAKING WAS EXCESS THEN RECORDED IN THE BOOKS OF ACCOUNT, IT WA S CATEGORICALLY ADMITTED THAT 'IT MEANS THE INVESTMENT IN STOCK IS FROM UNDISCLOS ED SOURCES. ON THE UNACCOUNTED STOCK OF RS.26,00,000/--(APPROXIMATELY) I AM READY TO PAY THE TAX IN INSTALLMENTS'. 3. IT WAS FURTHER REPORTED IN REPLY OF STATEMENT THAT INVESTMENT OF RS.4,00,000/- APPROXIMATELY HAS BEEN MADE ON ACCOUNT OF PREPARATI ON OF SHOWROOM. IN THIS WAY TOTAL UNACCOUNTED INVESTMENT IS RS.30,00,000/-. THIS AMOUNT WAS OFFERED AS ADDITIONAL INCOME FOR TAXATION FOR A.Y. 2012-201 3. THE ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED AND IN THE P&L ACCOUNT RS .30,00,000/- HAS BEEN SHOWN UNDER THE HEAD 'INCOME DISCLOSED ACCOUNT'. 4. THE PLAIN READING OF STATEMENT RECORDED U/S. 131 OF I. T. ACT, 1961 DURING THE COURSE OF SURVEY IN THE CASE OF SHRI MAHESHKUMAR MO DI MAKES IT CLEAR THAT ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 4 INVESTMENT IN STOCK AND SHOW ROOM IS FROM UNDISCLOS ED SOURCES. IN OTHER WORDS IT CAN BE INTERPRETED THAT THE INVESTMENT IS NOT MADE OUT OF BUSINESS INCOME OF THE ASSESSEE FIRM. THIS IS CORRECT ALSO I N VIEW OF THE FACTS THAT THE BUSINESS OF THE ASSESSEE FIRM WAS STARTED W.E.F. 01 .04.2011 OUT OF SALE OF RS.25,70,469/ UPTO 02.09.2011 THERE CANNOT BE PROFI T OF RS.30,00,000/-. 5. THE SCRUTINY OF TRADING ACCOUNT (IN TERMS OF ITEMWI SE GOLD ORNAMENTS, SILVER ORNAMENTS., TT GOLD BAR, DIAMOND JEWELLER, PACKING MATERIAL ETC.) SHOWING OPENING STOCK, PURCHASES, INCOME DISCLOSED AT SURVE Y, SALES, CLOSING STOCK ETC. MAKES IT CLEAR THAT INCOME DISCLOSED UNDER THE HEAD GOLD ORNAMENTS / SILVER ORNAMENTS AMOUNTING TO RS. 30,00,000/-. 6. HOWEVER, AS PER STATEMENT RECORDED U/S. 131 OF I. T . ACT, 1961 IT IS CLEAR THAT 26,00,000/- IS ON ACCOUNT OF GOLD AND SILVER ORNAME NTS UNACCOUNTED STOCK AND RS. 4,00,000/- IS FOR INVESTMENT MADE IN PREPARATIO N OF SHOW ROOM. BUT IN THE TRADING ACCOUNT ENTIRE RS.30,00,000/- ARE COVERED U NDER TWO HEADS I.E. GOLD ORNAMENTS AND SILVER ORNAMENTS AND RS.4,00,000/- SE PARATELY OFFERED FOR TAXATION ON ACCOUNT OF UNACCOUNTED INVESTMENT IN SH OW ROOM IS NOT SHOWN OR THERE IS NO CLARIFICATION ON THIS POINT. 7. ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE TO EXPLAIN THE DIFFERENCE AND TO SHOW CAUSE WHY RS. 4,00,000/- SHOULD NOT BE TAXED FOR A. Y. 2012-13. AND THEREAFTER ASSESSEE FURNISHED WRITTEN REPLY, IT HAS BEEN CLARI FIED THAT THE SUBMISSION MADE BY THE ASSESSEE VIDE LETTER DATED 20.02.2015 HAVE B EEN CONSIDERED CAREFULLY AND AS PER ADMISSION MADE BY THE PARTNERS DURING THE CO URSE OF SURVEY ACTION U/S. 133A OF I. T. ACT, 1961 RS. 26,00,000/- WAS OFFERED FOR TAXATION ON ACCOUNT OF INVESTMENT MADE IN STOCK OUT OF UNDISCLOSED SOURCES . HOWEVER, NOW IT IS ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 5 WORKED OUT AT RS. 30,00,000/- AS STATED ABOVE SO TH E CORRECT AMOUNT OF INVESTMENT MADE IN STOCK OF GOLD AND SILVER ORNAMEN TS IS ADOPTED AT RS.30,00,000/- AS PER ASSESSEE'S OWN WORKING MADE I N P&L ACCOUNT AS DISCUSSED ABOVE. STILL THERE IS INVESTMENT MADE IN SHOW ROOM OUT OF UNDISCLOSED SOURCES AMOUNTING TO RS.4,00,000/-. THI S INVESTMENT OF RS.4,00,000/- WAS SHOWN OFFERED SEPARATELY OVER AND ABOVE THE INVESTMENT MADE IN GOLD AND SILVER ORNAMENTS. THIS HAS NOT BEE N SHOWN IN THE ACCOUNT OR HAS NOT BEEN OFFERED FOR TAXATION. 8. AND ACCORDING TO THE ASSESSEE FIRM IS COVERED UNDER THE PROVISIONS OF SECTION 69 OF INCOME TAX ACT AND RS. 34,00,000/- ARE TAXED AS INCOME OF THE ASSESSEE FIRM AS DEEMED INCOME U/S. 69 OF INCOME TAX ACT. 9. THE SCRUTINY OF ACCOUNTS AND DOCUMENTS FURNISHED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS REVEALS THAT IN P&L ACCOUNT RS.38,15,396/- HAS BEEN DEBITED UNDER THE HEAD 'PARTNER'S REMUNERATION'. AS PER COMPUTATION OF TOTAL INCOME SAID RS.38,15,396/- HAS BEEN ADOPTED AND DED UCTED UNDER THE HEAD PARTNER'S REMUNERATION PAID TO PARTNERS. 10. THEREAFTER LD. A.O. ISSUED A SHOW CAUSE NOTICE AND IN REPLY APPELLANT STATED THAT THE FIRM IS A PARTNERSHIP FIRM AND BUSINESS INCOME IS THE SOLE SOURCE OF INCOME OF THE FIRM. AND, THEREFORE, THE INCOME DISCLOSED D URING THE SURVEY SHOULD BE CONSIDERED AS INCOME UNDER THE HEAD INCOME FROM PR OFITS AND GAINS OF BUSINESS AND FROM NO OTHER SOURCES. BUT LD. A.O. W AS NOT AGREED WITH THE CONTENTION OF THE APPELLANT AND LD. A.O. MENTIONED THAT ON A TOTAL INVESTMENT OF RS. 34 LACS, THERE CANNOT BE REMUNERATION OF RS. 38,15,396/- AND LD. A.O. CALCULATED NET PROFIT FROM THE BUSINESS OF THE APPE LLANT RS. 1193549/- AND ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 6 ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS, TO TAL INCOME WAS ASSESSED RS.4593700/-. 11. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) BUT TO NO AVAIL AND LD. CIT(A) DISMISSED THE APPEAL OF THE APPELLANT WITH FOLLOWING OBSERVATION: 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE ASSESSMENT ORDER. AS REGARDS THE ADDITION MADE BY THE AO OF RS.30 LACS AND RS.4 LACS, IT IS PERUSED THAT A SURVEY ACTION U/S 133ACOF THE ACT WAS CARRIED OUT A T THE BUSINESS PREMISES OF THE APPELLANT. THE STATEMENT OF PARTNERS WERE RECORDED U/S 131 OF THE ACT AND IT WAS REPORTED BY THE PARTNER THAT ACTUAL BUSINESS OF THE APPELLANT WAS STARTED W.E.F. 01/04/2011. IT WAS ADMITTED BY SHGRI MAHESHKUMAR MO DI, PARTNER IN CONSULTATION WITH OTHER PARTNER SHRI ASHOKBHAI MODI THAT THE EXCESS STOCK FOUND AND WORKED OUT ON PHYSICAL STOCK TAKING WAS EXCESS THEN RECORDED IN THE BOOKS OF ACCOUNTS. IT IS CATEGORICALLY ADMITTED THAT 'IT MEAN S THE INVESTMENT IN STOCK IS FROM UNDISCLOSED SOURCES. ON THE UNACCOUNTED STOCK OF RS.26,00,000/- (APPROXIMATELY) I AM READY TO PAY THE TAX IN INSTAL LMENTS' IN ANSWER TO QUESTION NO.7 OF STATEMENT RECORD. AO IN THE ASSESSMENT ORDE R HAS CONTENDED THAT THE CASE OF THE APPELLANT IS COVERED UNDER THE PROVISIO NS OF SECTION 69 OF THE ACT AS THE TWO CONDITIONS I.E. INVESTMENT/EXPENDITURE ARE NOT RECORDED IN THE ACCOUNTS OF THE ASSESSEE AND (2) THE NATURE AND SOURCE OF AC QUISITION OF ASSETS I.E. STOCK AND EXPENDITURE INCURRED FOR PREPARATION OF SHOW RO OM ARE NOT EXPLAINED SATISFACTORILY. ON CONSIDERATION OF THE ENTIRE FACTS IT IS SEEN THA T THE FACTS MAKE IT CLEAR FROM APPELLANT'S OWN DOCUMENTS THAT THE UNACCOUNTED STOC K OF GOLD AND SILVER ORNAMENTS WAS RS.30 LACS AND THE VALUE OF UNACCOUNT ED INVESTMENT MADE IN THE 'SHOW ROOM PREPARATION' WAS RS.4 LAC. EVEN IN THE A UDITED ACCOUNTS, GOLD AND SILVER ORNAMENTS WORTH RS.30 LACS HAVE BEEN REPORTE D WHICH HAD BEEN ADMITTED ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 7 BY THE PARTNER OF THE APPELLANT FIRM. IN SUCH FACTS AND ALSO IN ABSENCE OF ANY DOCUMENTARY EVIDENCES/SUBMISSIONS MADE BY THE APPEL LANT, THE ADDITION MADE BY THE AO OF RS.30 LAC IS HEREBY HELD JUSTIFIED AND IS HEREBY CONFIRMED. FURTHER, WITH REGARD TO THE ACTION OF THE AO I N DISALLOWING PARTNER'S REMUNERATION OF RS. 18,00,116/-, APPELLANT HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCES NOR HAS PRODUCED ITS BOOKS OF ACCOUNTS FO R VERIFICATION. IN SUCH FACTS, THE CLAIM OF THE APPELLANT CANNOT BE ALLOWED. THERE FORE, THE ADDITION MADE BY THE AO ON THIS COUNT OF RS.,18,00,116/- IS HEREBY C ONFIRMED. 12. NOW APPELLANT IS BEFORE US BY WAY OF SECOND APPEAL. 13. WE HAVE GONE THROUGH THE RELEVANT RECORD AND THE IM PUGNED ORDER AND WE HAVE NOTICED THAT LD. CIT(A) HAS PASSED AN EX-PARTE ORDER. FROM THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE CIT(A), IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED THE EXCESS STOCK OF GOLD AND SILVER FOUND I N THE COURSE OF SURVEY IS TO BE REGARDED AS BUSINESS INCOME AND NOT TO BE TAXED UNDER DEEMING FICTIONS OF SECTION 68, 69, 69A, 69B ETC. THE ISSUE REQUIRES TO BE EXAMINED IN THE LIGHT OF THE DECISION OF THE CO-ORDINATE BENCH OF TRIBUNAL I N THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. D.C.I.T. 141 TTJ 1. THE LD. C IT(A) HAS NOT EXAMINED THE ISSUE IN THIS PERSPECTIVE. WE ARE ALSO UNABLE TO DE TERMINE THE ISSUE IN THE ABSENCE OF COMPLETE FACTS. THEREFORE, WE CONSIDER I T JUST AND PROPER TO REMIT THE ISSUES RAISED IN THIS APPEAL TO THE FILE OF THE CIT(A). HOWEVER IN THE SAME VAIN, WE FIND THAT ASSESSEE HAS REMAINED NEGLIGENT IN ATTENDING THE PROCEEDING BEFORE THE LD. CIT(A). NO COGENT REASON IS DISCERNI BLE FROM THE RECORD. THEREFORE, WHILE RESTORING THE ISSUE BACK TO THE FI LE OF CIT(A), WE CONSIDER IT APPROPRIATE TO IMPOSE A TOKEN COST TOWARDS NON COM PLIANCE WHICH IS QUANTIFIED OF RS. 5000/-. THE ASSESSEE IS ACCORDING LY DIRECTED TO DEPOSIT THE AFORESAID AMOUNT TO THE PRIME MINISTER RELIEF FUND AND FURNISH A PROOF OF ITA NO 3517/ AHD/2016 . A.Y. 2012-1 3 8 PAYMENT BEFORE THE LD. CIT(A) FOR CONTINUATION OF P ROCEEDING BEFORE HIM. IN TERMS OF DIRECTION NOTED ABOVE, THE ORDER OF THE LD . CIT(A) IS SET ASIDE AND THE ISSUES RAISED ARE RESTORE FOR ADJUDICATION BY THE F IRST APPELLATE AUTHORITY. 14. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN OPEN COURT ON 27 - 09- 2018 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 27/09/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD