Shri Hotchand Tillani, Burhanpur V. The Income-tax Officer, Burhanpur

ITA 376/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0049 (ITAT-INDORE)
• Duration Of Justice: 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 21-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R TARWALA
• Keywords: Depreciation; Income from undisclosed sources; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.II) BENCH : INDORE BEFORE SHRI M.L.GUSIA,A.M. PAN NO. : ABCPT0627 I.T.A.NO.376/IND/2009. A.Y. : 2004-05 SHRI HOTCHAND TILLANI INCOME-TAX OFFICER, PROP. M/S. MAHESH AGENCY, VS WARD, MANDI BAZAR, BURHANPUR. BURHANPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI R.TARWALA, C.A. RESPONDENT BY : SMT. APARNA KARAN, ADDL. CIT DR O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE LD. CIT(A)-II, INDORE, ON 3.12.2008 FOR THE ASSESSM ENT YEAR 2004-05. 2. THE FIRST GROUND OF THE APPEAL IS THAT THE LD. CIT( A) ERRED IN CONFIRMING AND MAINTAINING THE GROSS PROFIT ADDITIO N OF RS. 50,000/- WITHOUT APPRECIATING THE EXPLANATION AND FACTS AND CIRCUMSTANCES OF THE CASE. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DECLARE D GROSS PROFIT @ 4.1 % IN THE YEAR UNDER CONSIDERATION AS AGAINST 4.28 % IN THE PRECEDING ASSESSMENT YEAR. THE AO NOTED DECLINE IN GROSS PROFIT AT -: 2 :- 2 0.27%. THE AO ASKED THE ASSESSEE TO EXPLAIN THE REA SONS OF DECLINE IN THE GROSS PROFIT, WHICH COULD NOT BE EXPLAINED PROP ERLY BY THE ASSESSEE. THE AO FURTHER NOTED THAT THE ASSESSEE IS NOT MAINT AINING DAY TO DAY STOCK NOR ANY STOCK REGISTER IS MAINTAINED. IN VIEW OF THE ABOVE, HE WORKED THE GROSS PROFIT @ 4.28 % ON THE TOTAL TURNO VER OF RS. 3,05,40,037/- AND, THUS, MADE ADDITION OF RS. 82,51 2/-. THE LD.CIT(A) NOTED THAT THE ASSESSEE ADMITTED THAT INVENTORIES O F OPENING AND CLOSING STOCK WERE NOT KEPT BESIDES NON-MAINTAINING THE STO CK REGISTER. HE FURTHER OBSERVED THAT LOOKING TO THE NATURE OF BUSI NESS, THE PLEA OF THE ASSESSEE THAT MAINTENANCE OF STOCK REGISTER IS NOT FEASIBLE APPEARS TO BE TENABLE, BUT NOT WITH REFERENCE TO THE DETAILS OF O PENING AND CLOSING STOCK, SINCE THE SAME ARE IMPORTANT TO WORK OUT THE CORRECT PROFIT. HE FURTHER OBSERVED THAT IF THE AMOUNT OF CLOSING STOC K IS NOT CORRECT AND RELIABLE, THE TRADING PROFIT WORKED OUT/DECLARED CA N ALSO NOT BE RELIABLE. HE FURTHER NOTED THAT THE FIGURE OF CLOSING STOCK W AS WORKED OUT AFTER INSERTING THE GROSS PROFIT FIGURE AS PER THE CONVEN IENCE OF THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF CIT VS. BRITISH PANTS INDIA LIMITED, 188 ITR 44, AND CONSIDERING THE -: 3 :- 3 GROSS PROFIT CANNOT BE STATIC YEAR AFTER YEAR. HE S USTAINED THE ADDITION TO THE EXTENT OF RS. 50,000/-. 4. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED THAT THE ASSESSEE IS DOING WH OLESALE BUSINESS AND HAVING AGENCY OF HINDUSTAN LEVER (INDIA) LIMITED & PERPEDI INDIA LIMITED, DEALING IN COSMETICS, SHOPS AND CHOCOLATES RESPECTIVELY. THE ASSESSEE HAS NO RETAIL SALE. DURING THE YEAR, THE T OTAL TURNOVER HAS BEEN REDUCED FROM RS. 3,78,89,854/- TO RS.3,05,40,037/-. THE FALL IN TURNOVER WAS FOR THE REASON THAT THE ASSESSEES BUSINESS PLA CE IS SITUATED AT THE BORDER OF MAHARASHTRA STATE WHERE THE COMPANY LAUNC HES SCHEME IN M.P., THE SALE IN M.P. INCREASED AND IF COMPANY LAU NCHES SCHEME IN MAHARASHTRA, MOST OF THE TRADERS OF M.P.PURCHASES G OODS FROM MAHARASHTRA. IT IS FURTHER CONTENDED THAT THE AO FA ILED TO POINT OUT A SINGLE INSTANCE OF OMISSION, DEFECT IN THE BOOKS OF ACCOUNT, AS THE SAME ARE PROPERLY MAINTAINED AND SUPPORTED FULLY BY VOUC HERS AND BILLS. THEREFORE, THE ADDITION IS NOT CALLED FOR. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRE SENTATIVE ARGUED THAT THE ASSESSEE DID NOT MAINTAIN STOCK REG ISTER AND THE CLOSING STOCK HAS BEEN DECLARED AT THE SWEET WILL TO REDUCE THE ACTUAL PROFIT. -: 4 :- 4 THEREFORE, SHE CONTENDED THAT THE AO HAS RIGHTLY MA DE THE ADDITION AND SUSTAINED BY THE LD. CIT(A). 6. AFTER HEARING RIVAL CONTENTIONS AND THE REASONS GIV EN FOR LESSER TURNOVER IN THE YEAR UNDER CONSIDERATION AND ALSO C ONSIDERING THE FACT THAT THE GROSS PROFIT CANNOT BE STATIC YEAR AFTER Y EAR, I AM OF THE VIEW THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) IS ST ILL ON HIGHER SIDE. THEREFORE, THE SAME IS REDUCED TO RS. 25,000/-. THU S, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7. THE NEXT GROUND OF APPEAL IS THAT THE LD.CIT(A) ER RED IN CONFIRMING AND MAINTAINING THE FOLLOWING DISALLOWAN CE :- (I) ROAD TAX AND INSURANCE @ 20 % RS. 4,608/- (II) SHOP EXPENDITURE DISALLOWANCE @ 20%. RS. 3,771/- (III) PRINTING AND STATIONERY @ 20 % RS. 2,825/- (IV) VEHICLE EXPENSES @ 20 % RS. 4,020/- (V) TELEPHONE EXPENSES 20% RS. 1,305/- (VI) DEPRECIATION @ 20% RS. 2,383/- 8. IN REGARD TO DISALLOWANCE OF ROAD TAX AND INSURANCE AT RS. 4,608/-, IT IS NOTED BY THE AO THAT THE ASSESSEE HA S CLAIMED VEHICLE INSURANCE OF RS. 3,029/- AND ROAD TAX AT RS. 1,559/ - AGGREGATING TO RS. -: 5 :- 5 4,608/-, WHICH HAS NOT BEEN DISCLOSED IN THE BOOKS OF ACCOUNT AND THE SAME WERE PAID OUT OF THE UNACCOUNTED INCOME OF THE ASSESSEE. THEREFORE, THE AO HAS MADE THE ADDITION WAS RS. 4,6 08/-, WHICH IS SUSTAINED BY THE LD. CIT(A). 9. DURING THE COURSE OF HEARING BEFORE ME, THE LEARNED AUTHORIZED REPRESENTATIVE INVITED MY ATTENTION TO P AGE 18 OF THE PAPER BOOK WHICH IS PHOTOCOPY OF PAGE NO. 386 OF THE CASH BOOK DATED 31.1.2004, WHEREIN RS. 3,049/- HAS BEEN DECLARED TO BE PAID TO ORIENTAL INSURANCE FOR THE VEHICLE. SIMILARLY, AT PAGE 385 O F CASH BOOK DATED 30.1.2004, THE ASSESSEE CLAIMED RS. 2500/- IN SHOP EXPENSES, WHICH INCLUDES ROAD TAX OF RS.1,559/-. HENCE, IT IS EVIDE NT THAT THE PAYMENT HAS BEEN MADE AND DECLARED IN THE BOOKS OF ACCOUNT. THEREFORE, NO ADDITION IS CALLED FOR. HENCE, THE SAME IS DISMISSE D. 10. IN REGARD TO DISALLOWANCE OF SHOP EXPENSES AT RS. 3,771/- ,VEHICLE EXPENSES AT RS. 4,020/-, TELEPHONE EXPENSE S AT RS. 1,305/- AND DEPRECIATION AT RS. 2,383/-, IT IS NOTED BY ME THAT ALL THESE EXPENSES HAVE BEEN MADE ON AD HOC BASIS @ 20 %, THE SAME APP EARED TO BE ON HIGHER SIDE. THE PERSONAL USER OF THE ABOVE EXPENSE S BY THE PARTNERS CANNOT BE RULED OUT. THEREFORE, ALL THESE EXPENSES ARE REDUCED FOR -: 6 :- 6 DISALLOWANCE @ 10 % AND THE BALANCE AMOUNT IS SUSTA INED UNDER THE ABOVE HEADS. 11. IN REGARD TO PRINTING AND STATIONERY EXPENSES OF RS . 2,825/- @ 20 %, IT IS NOTED BY ME THAT THE ASSESSEE HAS CLAIM ED EXPENDITURE OF RS. 14,124/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF PRINTING AND STATIONERY. THE AO ASKED THE ASSESSEE TO PRODUCE TH E VOUCHERS OF THE ABOVE EXPENDITURE, BUT THE ASSESSEE FAILED TO PRODU CE THE SAME FOR VERIFICATION OF THE AO. IN SUCH CIRCUMSTANCES, I AM OF THE VIEW THAT THE DISALLOWANCE HAS REASONABLY BEEN MADE BY THE ASSESS ING OFFICER. THEREFORE, THE SAME IS CONFIRMED. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 12. THE NEXT GROUND OF APPEAL IS IN REGARD TO CASH ADD ITION ON ACCOUNT OF CASH CREDIT OF RS. 44,119/-, RS. 35,561/ - AND RS. 43,835/- IN THE NAMES OF SHRI SANJAY KUMAR MOHANLAL TILLANI, SH RI PAWAN KUMAR TEKCHAND AND SHRI DEEPIKA MAHESH TILLANI. 13. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT ALL THE ABOVE CASH CREDITS APPEARING IN THE NA MES OF ABOVE THREE PERSONS ARE NOT ASSESSED TO INCOME TAX AND THE ASSE SSEE HAS PRODUCED THEIR CONFIRMATION LETTERS, BUT ON BEING ASKED TO P RODUCE THEM -: 7 :- 7 PERSONALLY FOR EXAMINATION, THE ASSESSEE FAILED TO PRODUCE THEM. THEREAFTER, THE AO DEPUTED INSPECTOR TO MAKE ENQUIR Y, WHO REPEATEDLY REQUESTED TO THE ASSESSEE TO PRODUCE ALL THE THREE CREDITORS FOR EXAMINATION, BUT THE ASSESSEE FAILED TO PRODUCE THE M BEFORE THE INSPECTOR NOR ANY ADDRESS WAS SUPPLIED TO THE INSPE CTOR. THEREFORE, NO INQUIRY COULD BE MADE BY THE INSPECTOR AND IN SUCH CIRCUMSTANCES, THE AO HAS MADE THE ADDITION OF RS. 44,119/-, RS. 35,56 1/- AND RS. 43,835/- APPEARING AS DEPOSIT IN THE NAME OF SANJAY KUMAR MOHAN TILLANI, SHRI PAWAN KUMAR TEKCHAND AND DEEPIKA MAHE SH TILLANI RESPECTIVELY. 14. DURING COURSE OF APPELLATE PROCEEDINGS BEFORE THE C IT(A), THE LEARNED AUTHORIZED REPRESENTATIVE FURNISHED AFFIDAV IT OF ALL THE THREE CREDITORS AND REQUESTED TO ADMIT AS ADDITIONAL EVID ENCE UNDER RULE 46A, BUT THE LD.CIT(A) DECLINED TO ADMIT THE SAME F OR THE REASON THAT THE SAME COULD NOT BE ADMITTED IN VIEW OF THE CONDI TION LAID DOWN FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES. IT IS ARGUED BEFORE THE CIT(A) BY THE LEARNE D AUTHORIZED REPRESENTATIVE THAT ALL THE THREE CREDITORS CAN BE PRODUCED FOR THE EXAMINATION BEFORE THE CIT(A). HOWEVER, THE CIT(A) DECLINED TO ADMIT -: 8 :- 8 THE ADDITIONAL EVIDENCE OR EXAMINATION OF THE CREDI TOR AND CONFIRMED THE ADDITION. 15. DURING THE COURSE OF HEARING BEFORE ME, THE LEARNED AUTHORIZED REPRESENTATIVE FILED COPIES OF AFFIDAVIT S OF ALL THE THREE CREDITORS CONFIRMING THE ADVANCES MADE BY THEM TO T HE ASSESSEE AND ALSO MENTIONING THE AMOUNT OF INTEREST RECEIVED BY THEM. THE COPY OF CASH ORDERS WERE ALSO FILED TO PROVE THAT THE AMOUN T WAS DEPOSITED THROUGH BANKING CHANNEL AND COPY OF THEIR LEDGER AC COUNTS WERE ALSO PRODUCED. THE LEARNED AUTHORIZED REPRESENTATIVE GAV E ASSURANCE DURING COURSE OF HEARING THAT IN CASE MATTER IS REM ANDED TO THE FILE OF THE AO, THE ASSESSEE WILL PRODUCE ALL THE THREE CAS H CREDITORS FOR THE EXAMINATION BY THE ASSESSING OFFICER TO VERIFY THE TRUTHFULNESS OF THE AMOUNT OF THE LOAN OBTAINED BY THE ASSESSEE. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE ASSESSEE FAILED TO PRODUCE THE CREDITORS FOR EXAMINATION BY THE ASS ESSING OFFICER AS WELL AS BY THE INSPECTOR. SHE FURTHER ARGUED THAT EVEN THEIR ADDRESSES COULD NOT BE GIVEN SO THAT THE INSPECTOR COULD HAVE MADE INQUIRY BY CONTACTING PERSONALLY. IN SUCH CIRCUMSTANCES, THE C IT(A) HAS RIGHTLY -: 9 :- 9 DECLINED TO ADMIT THE ADDITIONAL EVIDENCE AND TO EX AMINE THE CREDITORS AT HIS STAGE. 16. AFTER HEARING RIVAL CONTENTIONS AND GOING THROUGH T HE ORDER SHEET OF THE AO FURNISHED BEFORE ME BY THE LEARNED AUTHORIZED REPRESENTATIVE, I NOTED THAT ON 30.11.2006, THE AO HAS MENTIONED THAT ALL THE THREE CASH CREDITORS ARE NOT INCOME TAX PAY ER AND TWO OF THEM ARE THE LADIES BELONGING TO THE FAMILY OF THE ASSES SEE AND IN SUCH CIRCUMSTANCES, IT IS NOT POSSIBLE TO PRODUCE THEM I N THE OFFICE OF THE ITO. THEREFORE, THE ITO INSTRUCTED HIS INSPECTOR TO MAKE INQUIRY IN THIS REGARD AND THE CASE WAS ADJOURNED TO 12.12.2006. ON 12.12.2006, ON ORAL REQUEST, THE CASE WAS ADJOURNED ON 14.12.2006. ON 14.12.2006, IT IS CONTENDED BEFORE THE AO THAT MUNIM OF THE ASSESS EE HAS GONE OUT OF THE STATION AND ON THE SAME DAY, THE ASSESSMENT ORD ER WAS PASSED. FROM THE ABOVE, I NOTED THAT THE AO ASKED THE ASSESSEE T O PRODUCE THE CASH CREDITORS ON 30.11.2006 AND ON 14.12.2006, THE ASSE SSMENT ORDER WAS PASSED. IN BETWEEN THE INSPECTOR WAS ALSO DEPUTED F OR INQUIRY WITH THE CASH CREDITOR. 17. THUS, FROM THE ABOVE, I NOTED THAT ONLY 14 DAYS TI ME HAS BEEN GIVEN TO THE ASSESSEE FOR PRODUCING THE CREDITORS F OR THE EXAMINATION, -: 10 :- 10 WHICH SHOW THAT THE PROPER AND REASONABLE OPPORTUNI TY WAS NOT GIVEN TO THE ASSESSEE. FURTHER, THE LEARNED AUTHORIZED RE PRESENTATIVE HAS GIVEN ASSURANCES THAT IN CASE THE MATTER IS REMANDE D TO AO, THEN HE WILL PRODUCE ALL THE THREE CREDITORS FOR THEIR EXAM INATION. IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THI S ISSUE IS RESTORED BACK TO THE FILE OF THE AO, WHO AFTER PROVIDING OPP ORTUNITY TO THE ASSESSEE, WILL DECIDE THE ISSUE DE NOVO. THUS, THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED ON 10TH AUGUST, 2009 . SD/- (M.L.GUSIA) ACCOUNTANT MEMBER DATED : 10 TH AUGUST, 2009. CPU* 297