Shri Gadgil P. Yashwant, Sangli V. ITO (Central), Kolhapur

ITA 359/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49726 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 24-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Keywords: Business income; Search and seizure; Loose papers; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI SHAILENDRA KUMAR YA DAV J UDICIAL MEMBER AND SHRI D. KARUNAKARA RAO A CCOUNTANT M EMBER ITA NO. 359 /PN/200 9 ( ASSTT. YEAR : 2006 - 07 ) SHRI GADGIL PURUSOTTAM YASHWANT , A PPELLANT C/O. M/S. P.N. GADGIL, SARAF BAZAR, SANGLI PAN : NOT AVAILABLE V/S. INCOME - TAX OFFICER (CENTRAL), RESPONDENT K OLHAPUR ITA NO. 683 /PN/200 9 ( ASSTT. YEAR : 2006 - 07 ) INCOME - TAX OFFICER (CENTRAL), APPELLANT KOLHAPUR V/S. SHR I PURSHOTTAM Y. GADGIL, RESPONDENT 132 B, SOUTH SHIVAJINAGAR, SANGLI A SSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI HARESHWAR SHARMA ORDER PER D KARUNAKARA RAO AM THES E CROSS APPEAL FIL ED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 19.01.2009. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. THE LD CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF UNDISCLOSED IN VESTMENT IN GOLD TRADING BUSINESS TO THE EXTENT OF RS.7,63,146/ - . 2. THE LEARNED ASSESSING OFFICER AND CIT(APPEALS) ERRED IN HOLDING THAT THE ENTIRE COST OF GOLD TRADED DURING 5 MONTHS AND 29 TRANSACTIONS WERE INVESTED AT ONE ONCE. 3. THE LEARNED CIT(AP PEALS) FAILED TO APPRECIATE THAT THE NATURE OF TRANSACTIONS, THE FREQUENCY OF TRANSACTIONS AND TIME LAG BETWEEN TWO TRANSACTIONS ITSELF SHOWS THAT THE ENTIRE INVESTMENT WAS NOT REQUIRED TO BE DONE AT ONCE AS ASSUMED AND HELD BY THE ASSESSING OFFICER & THE CIT (APPEALS). 4. THE LEARNED CIT (APPEALS) FAILED TO APPRECIATE THAT EVEN THE INVESTMENT OF RS. 18.00 LAKHS DECLARED BY THE ASSESSEE IS MUCH IN EXCESS OF REQUIRED INVESTMENT EVEN ON MONTHLY AVERAGE BASIS. 5. THE ADDITION TO THE EXTENT OF RS.7,63,146/ - CONFIRMED BY THE CIT(APPEALS), BE DELETED. 2. IN ADDITION, ASSESSEE RAISED FOLLOWING ADDITIONAL GROUND : ITA 359 & 683 /PN/ 2009 SHRI GADGIL PURSOTTAM YASHWANT 2 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITI ON OF RS.1,50,964/ - ON ACCOUNT OF NET PROFIT IN RESPECT OF THE UNACCOUNTED SALE OF JEWELLERY W ITHOUT APPRECIATING THAT THE ASSESSEE HAD DECLARED RS. 18 LACS ON ACCOUNT OF THE UNACCOUNTED SALE TRANSACTIONS WHICH WAS MUCH MORE THAN THE INITIAL INVESTMENT MADE THEREIN AND THE NET PROFIT EARNED THERE FROM AND THUS, NO SEPARATE ADDITION ON ACCOUNT OF NE T PROFIT EARNED ON THE SAID UNACCOUNTED TRANSACTIONS WAS WARRANTED. 3. REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL : 1. THE LD.C.I.T.(A), HAS ERRED IN DELETING THE ADDITION OF RS.6,15,959/ - MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN GOLD TRADIN G BUSINESS AS REFLECTED IN LOOSE PAPER NUMBER 46 & 47 OF BUNDLE NUMBER 3 SEIZED DURING THE COURSE OF SEARCH. 2. THE LEARNED C.I.T.(APPEALS) ERRED IN HOLDING THAT THE WEIGHT OF GOLD MENTIONED IN PAPER NUMBER 46 & 47 IS IDENTICAL AND IT IS A REPETITION OF A SINGLE TRANSACTION. 3. THE LEARNED C.I.T.(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE TRANSACTIONS RECORDED IN LOOSE PAPER NUMBER 46 & 47 ARE DIFFERENT TRANSACTIONS AND THE TOTAL WEIGHT OF THE GOLD AS RECORDED IN THE SEIZED LOOSE PAPER NUMBER 23 TO 55 IS 5263.270 GRAMS AS ADMITTED BY THE ASSESSEE IN THE STATEMENT RECORDED DURING THE SEARCH ON 26/10/2005. 4. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN DELETING THE GROSS PROFIT OF RS.36,279 ON THE ABOVE SALE TRANSACTION OF RS.615,959/ - . 4. WE HAVE HEARD T HE PARTIES. IN RESPECT OF ADDITION OF RS.13,79,105/ - ON ACCOUNT OF UNDISCLOSED INVESTMENT IN GOLD TRADING BUSINESS, THE LD CIT(A) HAS OBSERVED AS UNDER : RELEVANT FACTS OF THE CASE ARE THAT THE THERE WA S SEARCH ACTION ON THE ASSESSEE DURING WHICH CERTA IN PAPERS WERE FOUND RELATING TO SALE OF GOLD ITEMS. THE ASSESSEE ADMITTED THAT THE SALES RECORDED IN THOSE LOOSE PAPERS WERE MADE IN HIS PERSONAL CAPACITY AND WERE NOT RECORDED IN THE BOOKS. ACCORDINGLY, H E DECLARED UNACCOUNTE D INVESTMENT IN BUSINESS A MOUNTING TO RS 18 LACS. THE AO HOWEVER, DID NOT AGREE WITH THE AMOUNT DECLARED. ACCORDING TO THE AO, AVERAGE RATE OF GOLD FOR THE PERIOD WAS RS.604/ - PER GM. THUS, THE TOTAL INVESTMENT IN 5263.270 GMS OF GOLD SOLD AS PER THE PAPERS FOUND AGGREGATED TO R S.31,79,015/ - . THUS, AN ADDITION WAS MADE OF THE BALANCE AMOUNT OF RS.13,79,015/ - ( RS.31,79,015 RS 18 LAKHS) . THE ASSESSEE SUBMITTED THAT THE ENTIRE INVESTMENT IN GOLD WAS NOT DONE IN ONE GO AND IT WAS DONE OVER A PERIOD OF TIME AND RELIED ON THE SEIZED PAPERS IN THIS REGARD. AS PER THE ASSESSEE THIS PERIOD SPREAD OVER PERIOD FROM APRIL TO AUGUST. CIT(A) DISCUSSED THIS ISSUE IN HIS ORDER AND THE RELEVANT PORTIONS ARE AS UNDER. ITA 359 & 683 /PN/ 2009 SHRI GADGIL PURSOTTAM YASHWANT 3 THE APPELLANT SUBMITTED DATEWISE CHART OF SALES AS RECORDED IN THE PAPERS FOUND DURING THE SEARCH. THE COST OF THE ITEMS SOLD HAS ALSO BEEN COMPUTED BY REDUCING THE PROFIT MARGIN. IT IS ARGUED THAT THE GOLD WAS NOT PURCHASED AT ONE TIME BUT PURCHASED AS AND WHEN ORDERS WERE PLACED BY CUSTOMERS. THE ELEMENT OF TURNOVER SHOULD HAVE BEEN CONSIDERED. THE APPELLANT FURNISHED A STATEMENT SHOWING THE DETAILS OF SALES MONTH - WISE. ACCORDING TO THE CHART, THE MAXIMUM CASH REQUIRED FOR THE INVESTMENT ASSUMING THAT THE PERIOD OF TURNOVER WAS ONE MONTH WORKED OUT TO RS.11.08 LACS. THIS A MOUNT WAS MUCH LESS THAN THE AMOUNT DECLARED BY THE APPELLANT THUS, IT WAS ARGUED THAT THE DECLARATION OF RS.18 LACS WAS MORE THAN THE ACTUAL AMOUNT OF INVESTMENT REQUIRED BY THE BUSINESS. THEREFORE, NO ADDITION SHOULD HAVE BEEN MADE. 6. I HAVE CONSIDE RED THE SUBMISSIONS. IN HIS STATEMENT AT THE TIME OF SEA R CH, THE APPELLANT HAD STATED THAT HE HAD BEEN CONTINUING THE SAID BUSINESS OF TRADING FOR THE LAST FIVE TO SIX MONTHS AND THAT HE HAD INVESTED CAPITAL OF RS. 18 LACS IN THE SAID BUSINESS. IT IS ALS O UNDISPUTED THAT TOTAL QUANTITY OF GOLD TRADED DURING THE PERIOD WAS 5263.27 GMS. THE APPELLANT IS THE BEST JUDGE OF HIS OWN AFFAIRS. IT IS PERTINENT TO NOTE THAT IF THE APPELLANT HAS DECLARED AN AMOUNT OF RS. 18 LACS AS INVESTMENT IN THE BUSINESS, THE D ECLARED AMOUNT WOULD HAVE PRECEDENCE OVER AN AMOUNT CALCULATED MATHEMATICALLY FOR PEAK INVESTMENT. AN AMOUNT COMPUTED MATHEMATICALLY CANNOT SUBSTITUTE A DECLARATION OF AN AMOUNT MADE UNDER THE OATH WHICH IS PRESUMED TO BE TRUE TO THE KNOWLEDGE OF THE PERSO N MAKING THE DECLARATION. 7. THE APPELLANT IN HIS CHART HAS WORKED OUT THE PEAK INVESTMENT BY TAKING THE TURNOVER PERIOD OF ONE MONTH. THERE IS NO PROOF WITH TH E APPELLANT THAT IN EFFECT, THE ITEMS SOLD WERE PURCHASED AS AND WHEN ORDERS WERE RECEIVED FR OM THE CUSTOMERS. IN SHORT, THE PERIOD OF ONE MONTH IS TAKEN ARBITRARILY WITHOUT ANY EVIDENCE TO SUPPORT THE SAME. THE APPELLANT IS A PARTNER IN ONE OF THE LARGEST JEWELLERY IN THE AREA. IN THIS BACKGROUND, IT IS PROBABLE THAT GOLD JEWELLERY HAD NOT BEE N PURCHASED IN ONE LOT AND SOLD OVER THE PERIOD OF TIME. THE BURDEN WAS ON THE APPELLANT TO PROVE WITH THE HELP OF PURCHASE DETAILS OF THE ITEMS SOLD TO SUPPORT THE PERIOD OF ROLL OVER OF STOCK. IN THE ABSENCE OF ANY EVIDENCE, THE CONTENTION CANNOT BE AC CEPTED. 8. THE APPELLANT HAS RAISED ANOTHER ISSUE REGARDING THE DISCREPANCY IN LOOSE PAPER BUNDLE NUMBERED 47 TO 46, IT IS STATED AS UNDER : PAPER NO. 47 PAPER NO. 46 82.110 GMS. 1019.800 GMS. 937.690 GMS 1019.800 GMS. THE WEIGHT MENTIONED IN THE PAPER NO. 46 AND 47 IS IDENTICAL. IT IS THE CONTENTION OF THE APPELLANT THAT BOTH THE PAPERS RELATE TO SAME ITEMS OF JEWELLERY. THERE ARE OTHER NOTINGS IN PAPER NUMBER 46 WHICH ARE NOT THERE IN PAGE NUMBER 47. HOWEVER, ONE THING IS UNMISTAKABLE WHICH IS THAT IN PAPER NUMBER 47, THE ENTRIES ARE CANCELLED BY MAKING CROSS MARK OVER THE ENTIRE NOTING. EVEN IT IS NOT ACCEPTED THAT BOTH THE PAPERS ARE IDENTICAL AND RELATE THE SAME ITEMS, IT IS QUITE CLEAR THAT PAPER NUMBER 47 ITA 359 & 683 /PN/ 2009 SHRI GADGIL PURSOTTAM YASHWANT 4 HAS BEEN CANCELLED. SINCE THE PAPER NUMBER 46 ALSO CONTAINS THE SAME WEIGHT OF GOLD, IT CAN BE ACCEPTED THAT ONE PAPER REPRESENTS A ROUGH CALCULATION WHICH WAS CANCELLED. FAIR AND A SECOND CALCULATION WAS MADE WHICH IS AT A PAPER NO.46. THE AMOUNT OF GOLD IN PAPER NO. 47 WORKS OUT TO RS.615959/ - @ 604 PER GM. THE TOTAL SALES MADE SHOULD THEREFORE BE REDUCED BY THIS AMOUNT. THE APPELLANT WILL THUS GET A RELIEF OF RS.615959/ - FROM THE TOTAL ADDITIONS MADE OF RS.13,79,105/ - . 5. FROM THE ABOVE, WE FIND THAT THE CIT(A) HAS PASSED A SPEAKING ORDER AND GRANTED RELIEF TO THE ASSESSEE TO THE EXTENT OF RS. 6 , 15 , 959/ - AFTER PROVIDING LOGICAL CONCLUSIONS . THE UNESCAPABLE REASONING OF THE CIT(A) FOR REJECTING THE ASSESSEE SUBMISSION REVOLVES AROUND (I) ASSESSEES FAI LURE TO DISCHARGE THE ONUS; (II) THE LACK OF EVIDENCES SEIZED DURING THE SEARCH IN SUPPORT OF THE CALCULATIONS OF THE PEAK INVESTMENT. AS SEEN FROM THE EXTRACT FROM THE IMPUGNED ORDER, WE FIND THAT THE CIT(A) HAS FAIR LY PROVIDED RELIEF TO THE TUNE OF RS. 6,15,959/ - AND IT DOES NOT CALL FOR ANY INTERFERENCE. THEREFORE, THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD ARE TO BE DISMISSED . 6. REGARDING THE ASSESSEES APPEAL WITH ITS GROUNDS AND THE ADDITIONAL GROUNDS , WE FIND THAT CIT(A) HAS FAIRLY CONSIDER ED THE SUBMISSIONS AND G A VE A FINDING THAT ASSESSEE HAS NOTHING IN HIS POSSESSION TO SUPPORT THE CONTENTIONS RELATING TO PEAK INVESTMENT AND THE INVESTMENT IN QUESTION IS OVER A PERIOD OF TIME OF FEW MONTHS. CONSIDERING THE FACT THAT THIS IS SEARCH AND S EIZURE CASE , THE BURDEN TO PROVING IS HEAVILY ON THE ASSESSEE. NOW THE REAL ISSUE RELATES TO THE DISCHARGING OF THE BURDEN OF PROOF AND THE DIRECT OR CIRCUMSTANTIAL EVIDENCES IN SUPPORT OF THE PEAK INVESTMENTS. APPARENTLY, THE ASSESSEE HAS NOTHING TO SUP PORT THE SUBMISSIONS. REGARDING THE ISSUE RAISED IN THE ADDITIONAL GROUND WE FIND THAT THE ISSUE RAISED HERE RELATES TO THE ASSESSEES ARGUMENT THAT THE INITIAL INVESTMENTS RS 18 LAKHS ONLY AND THE SAME IS NOT APPRECIATED BY THE CIT(A) IN VIEW OF THE ABSEN CE OF THE EVIDENCES AND FAILURE TO DISCHARGE THE ONUS. IN OUR CONSIDERED OPINION, THE ASSESSEES CONTENTION THAT SEPARATE ADDITION ON ACCOUNT OF PROFIT ON THE SAID UNACCOUNTED TRADING IN GOLD JEWELLARY IS UNWARRANTED HAS TO BE DISMISSED. ACCORDINGLY, THE A DDITIONAL GROUND RAISED IS DISMISSED. AT THE END, W E ARE THEREFORE OF THE OPINION THAT THE CIT(A) S ORDER DOES NOT CALL FOR ANY INTERFERENCE. AS SUCH, IT IS A SETTLED ISSUE THAT IN SUCH SEARCH AND SEIZURE CASES, DEDUCTION IF ANY IN FAVOUR OF THE ASSESS EE IS ALLOWED ONLY BASED ON THE EVIDENCES GATHERED DURING THE SEARCH AND SEIZURE ACTION AND PROVIDED BY THE THIRD PARTY . NOTHING IS BROUGHT ON RECORD TO DEMONSTRATE EVEN BEFORE US THAT THE IMPUGNED PEAK INVESTMENT IS ONLY RS 18 LAKHS. THEREFORE, GROUND S RAISED BY THE ASSESSEE ARE DISMISSED . ITA 359 & 683 /PN/ 2009 SHRI GADGIL PURSOTTAM YASHWANT 5 7. IN THE RESULT, BOTH THE APPEAL OF REVENUE AND ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 06 TH APRIL , 201 1 SD/ - SD/ - ( SHAILENDRA KUMAR YADAV ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE 06 TH APRIL , 201 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PP ELLANT 2. THE RESPONDENT 3. THE CIT(A) - KOLHAPUR 4. THE CIT - I /II, KOLHAPUR / CIT (CENTRAL), PUNE 5. THE D.R. ITAT A BENCH 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE