The ACIT-1(1), Bhopal V. M/s. Paris Gift House, Bhopal

ITA 389/IND/2013

• Counselvise Citation: 38922714 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MEENA
• Keywords: Rejection of books of accounts; Gift; Business income; Loose papers
• Section: 133A

Judgement Text

PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 1 IN THE INCOME TAX APPELLATE TRIBUNA L INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 389/IND/2013 A.Y.2007-08 ACIT 1(1) BHOPAL ::: APPELLANT VS M/S PARIS GIFT HOUSE BHOPAL PAN AAEFP 6180E ::: RESPONDENT ITA NO. 469/IND/2013 A.Y.2007-08 M/S PARIS GIFT HOUSE BHOPAL ::: APPELLANT VS DCIT 1(1) BHOPAL ::: RESPONDENT REVENUE BY SHRI R.R. MEENA ASSESSEE BY NONE DATE OF HEARING 12.8.2015 DATE OF PRONOUNCEMENT 1 . 9 .2015 PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 2 O R D E R PER SHRI B.C. MEENA, AM BOTH THESE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE EMANATE FROM THE ORDER OF THE LEARNED CIT(A)- I, BHOPAL, DATED 7.3.2013. 2. ITA NO. 467/IND/2013 WAS FILED BY THE ASSESSEE. T HIS APPEAL WAS FIXED FOR HEARING ON 6.7.2015 ON WHICH DATE T HE ASSESSEE DID NOT APPEAR. THEREAFTER THE CASE WAS FIXED FO R HEARING ON 12.8.2015 FOR WHICH REGISTERED NOTICE WAS SENT TO THE ASSESSEE BUT ON THIS DATE ALSO THERE WAS NO REPRESENTATION ON BEHALF OF THE ASSESSEE. SHRI R.R. ME ENA, LEARNED SENIOR DR WAS PRESENT FOR THE REVENUE. 3. FROM THE ABOVE CONDUCT OF THE ASSESSE, IT SEEMS TH AT THE ASSESSEE IS NOT INTERESTED IN PURSUING HER APPEAL. IT WAS THE DUTY OF THE ASSESSEE TO MAKE NECESSARY ARRANGEMENTS FOR EFFECTIVE REPRESENTATION ON THE APPOIN TED DATE. MERE FILING OF APPEAL IS NOT ENOUGH RATHER IT REQU IRES PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 3 EFFECTIVE PROSECUTION ALSO. IN VIEW OF THESE FACTS, W E ARE OF THE VIEW THAT THE APPEAL OF THE ASSESSEE IS LIABLE FOR DISMISSAL. OUR VIEW IS SUPPORTED BY THE FOLLOWING JU DICIAL PRONOUNCEMENTS: I) IN THE CASE OF CIT V. B.N. BHATTACHARGEE AND ANOTHER, REPORTED IN 118 ITR 461 (RELEVANT PAGES 477 AND 478) WHEREIN THEIR LORDSHIPS HAVE HELD THAT: THE APPEAL DOES NOT MEAN MERELY FILING OF THE APPEAL BUT EFFECTIVELY PURSUING IT. II) IN THE CASE OF ESTATE OF LATE TUKOJIRAOHOLKAR V. CWT, 223 ITR 480 (M.P.) WHILE DISMISSING THE REFERENCE MADE AT THE INSTANCE OF THE ASSESSEE IN DEFAULT MADE FOLLOWING OBSERVATION IN THEIR ORDER: IF THE PARTY, AT WHOSE INSTANCE THE REFERENCE IS MADE, FAILS TO APPEAR AT THE HEARING, OR FAILS IN TAKING STEPS FOR PREPARATION OF THE PAPER BOOKS SO AS TO ENABLE HEARING OF THE REFERENCE, THE COURT IS NOT BOUND TO ANSWER THE REFERENCE. III) IN THE CASE OF CIT V. MULTIPLAN INDIA LTD., 38 ITD 320 (DEL), THE APPEAL FILED BY THE PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 4 REVENUE BEFORE THE TRIBUNAL, WHICH WAS FIXED FOR HEARING. BUT ON THE DATE OF HEARING, NOBODY REPRESENTED THE REVENUE/APPELLANT NOR ANY COMMUNICATION FOR ADJOURNMENT WAS RECEIVED. THERE WAS NO COMMUNICATION OR INFORMATION AS TO WHY THE REVENUE CHOSE TO REMAIN ABSENT ON DATE. THE TRIBUNAL ON THE BASIS OF INHERENT POWERS, TREATED THE APPEAL FILED BY THE REVENUE AS UNADMITTED IN VIEW OF THE PROVISIONS OF RULE 19 OF THE APPELLATE TRIBUNAL RULES, 1963. 4. IN VIEW OF THE ABOVE, WE DISMISS THE APPEAL OF THE ASSESSEE NON-PROSECUTION. 5. IN GROUND NO. 1 OF THE REVENUES APPEAL THE ISSUE OF REGARDING DELETION OF ADDITION OF RS.53,86,130/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF SALES OUT OF BOOK S. 6. WE HAVE HEARD THE REVENUE. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF GIFT ITEMS. THERE WAS SURV EY OPERATION U/S 133A AT THE PREMISES OF THE ASSESSEE ON 10.11.2006. NO BOOKS OF ACCOUNTS WERE FOUND. ON PHY SICAL VERIFICATION OF STOCK, THE INVENTORY WAS VALUED AT PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 5 RS.1,29,47,097/-. AFTER REDUCING THE MARGIN OF 7% GR OSS PROFIT AS DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR, THE BALANCE OF STOCK WAS WORKED OUT AT RS.1,20,40,800/-. THE CLOSING STOCK OF IMMEDIATELY PRECEDING YEAR I.E. 31.3.2006 WAS RS.31,10,000/-. TH E DIFFERENCE WORKED OUT WAS RS.89,30,800/-. THE ASSESS ING OFFICER MADE THE ADDITION OF UNACCOUNTED STOCK OF RS.45,16,902/-. THE LEARNED CIT(A) ENHANCED THE ADDI TION TO RS.65,05,425/-. THE ASSESSEE RAISED THIS ISSUE IN GROUND NO. 1 WHICH WE HAVE DISMISSED FOR NON- PROSECUTION. THE OTHER ADDITION MADE WAS OF RS.58,67,822/-. THE LEARNED CIT(A) HAS DELETED THE ADDITION BY HOLDING AS UNDER :- 4.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE SUBMISSION OF THE APPELLANT AND REMAND REPORT OF THE A.O. AND FACTS OF THE CASE. IT IS NOTICED TH AT IN THE LOOSE PAPERS IMPOUNDED CONTAINED IN LPS-28, PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 6 33, 36, 38, 42 & 43, THERE ARE ENTRIES OF SALES MAD E BY THE APPELLANT AND THE NET AMOUNT INVOLVED WAS RS.69,87,116/- UPTO THE DATE OF SURVEY I.E. 10.11.2006. AS VERIFIED BY THE A.O. IN THE REMAND REPORT, THESE UNACCOUNTED SALES PERTAINS TO THE PERIOD FROM 01.04.2006 TO 10.11.2006 AND THE NOT FOR ONE MONTH AS CONSIDERED BY THE A.O. IN THE ASSESSMENT ORDER. THE CONTENTION OF THE APPELLANT THAT TRANSACTIONS RECORDED IN THESE LOOSE PAPERS WERE DULY ENTERED INTO THE REGULAR BOOKS WAS NOT FOUND ACCEPTABLE BECAUSE THE APPELLANT FAILED TO DEMONSTRATE AS TO HOW THE TRANSACTIONS RECORDED IN THESE LOOSE PAPERS WERE ENTERED IN THE REGULAR BOOKS OF ACCOUNTS BY POINTING OUT THE SPECIFIC ITEM S OF SALE ENTERED IN THE REGULAR BOOKS RELATED TO THE TRANSACTIONS RECORDED IN THESE DOCUMENTS. IT MAY ALSO BE NOTED HERE THAT WHEN THESE LOOSE PAPERS PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 7 FOUND DURING THE COURSE OF SURVEY WERE CONFRONTED TO THE PARTNER OF THE APPELLANT FIRM, HE ADMITTED THAT THE APPELLANT FIRM WAS INDULGING IN MAKING SALES OUTSIDE THE BOOKS OF ACCOUNTS. IT MAY BE RELEVANT TO REPRODUCE RELEVANT PORTION OF THE STATEMENT OF SHRI SUJAN SINGH PARTNER OF THE FIRM RECORDED U/S 133A ON 10.11.2006 AS UNDER :- 20 :- SURVEY ! ' #$%& ' () #* DETAILS 12 34 5 6 LPS-43 ! ' 15, 16 ?) 19.10.2006 B3 C ! D? E? % #F 12 G H B3 I ' J 3? E? I& K I ' J (LPS-17) ! ' $!O PQ D G P D 3 R F S3 J BOOKS ! ' (SALES & PURCHASE) ) 12 G 6 ZJ I[ (LPS-42) 3 1-125 H (LPS-43) 3 1-200 P 2 3 3 [E G D B3 \[ R ] ! ' ' () SALE ) 12?) 5 6 ZJ F B3 PROFIT/ INCOME J S3 J ' ) P G 6 D3PE PP $!K P F 3 3GH ' 6 PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 8 DI :- GJ D ! 5 3[ %J G D R D IK F !J IL$!?) ' 5 J F ! J INCOME ) 3? H ! TAX %J O ! 1 3) ' Z J \J K P J!P Q ! \ 5 D P %J SALE ! C ) 12 E G DJP ! Q SALE ! ' P4 J Z)! B) ? H DJ 3 P %J Q G % P G G6 FROM THE ABOVE IT IS CLEAR THAT THE APPELLANT HAD MADE SALES OUTSIDE THE BOOKS OF ACCOUNTS AND THE TRANSACTIONS RECORDED IN THESE DOCUMENTS WERE NOT ACCOUNTED FOR. HOWEVER, THERE WAS NO EVIDENCE ON RECORDS TO SHOW THAT THE APPELLANT HAD CONTINUED TO MAKE UNACCOUNTED SALES IN POST SURVEY PERIOD ALSO. IN THE ABSENCE OF ANY MATERIAL ON RECORDS, UNACCOUNTED SALES FOR THE POST SURVEY PERIOD CANNOT BE ESTIMATED. IN THIS REGARD REFERENCE CAN BE MADE TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANAND PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 9 KUMAR DEEPAK KUMAR (2007) 294 ITR 0497(DELHI). IN THIS CASE AS A RESULT OF THE SEARCH CARRIED OUT IN THE PREMISES OF THE ASSESSEE UNACCOUNTED SALES WERE FOUND. THOUGH THE ASSESSING OFFICER DID NOT NOTE ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS IN THE POST SEARCH PERIOD, YET HE PRESUMED SUCH UNACCOUNTED SALES FOR THE ENTIRE ACCOUNTING PERIOD. THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL FOUND THAT ON THE FACTS THERE WAS NO DISCREPANCY NOTED IN THE BOOKS OF ACCOUNTS IN THE POST SEARCH PERIOD AND DELETED THE ADDITION FOR THE POST SEARCH PERIOD. ON APPEAL BY THE DEPARTMENT, THE HON'BLE HIGH COURT HELD AS UNDER :- HELD, DISMISSING THE APPEAL, THAT THE ASSUMPTION OF THE ASSESSING OFFICER MAY HAVE PERHAPS BEEN VALID IF THE ASSESSING OFFICER HAD FOUND SOME DISCREPANCY IN THE BOOKS OF PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 10 ACCOUNTS OR IF THE SEARCH HAD BEEN CONDUCTED AFTER THE ACCOUNTING YEAR AND THE BOOKS OF ACCOUNTS HAD BROUGHT OUT SOME DISCREPANCIES. BUT IN THE ASSESSEES CASE THE ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNTS IN THE MIDDLE OF THE ACCOUNTING YEAR. MERELY BECAUSE THERE WERE SOME DISCREPANCIES IN THE PRE-SEARCH PERIOD, IT COULD NOT LEAD TO ANY PRESUMPTION THAT THE DISCREPANCIES WOULD HAVE CONTINUED IN THE POST SEARCH PERIOD PARTICULARLY WHEN THERE WAS FACTUALLY NO EVIDENCE AT ALL AS FOUND BY BOTH THE AUTHORITIES BELOW TO SUPPORT SUCH A VIEW. THEREFORE, THE ASSESSING OFFICER COULD NOT DRAW SUCH A PRESUMPTION. IN THE INSTANT CASE ALSO, THE A.O. HAD NOT NOTED AN Y MATERIAL TO SUGGEST THAT THE APPELLANT CONTINUED MAKING UNACCOUNTED SALES IN THE POST SURVEY PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 11 PERIOD ALSO. THEREFORE, THE A.O. WAS NOT JUSTIFIED IN ESTIMATING THE UNACCOUNTED SALE FOR THE POST SURVEY PERIOD. ACCORDINGLY, THE TOTAL UNACCOUNTED SALES MADE BY THE APPELLANT AS FOUND RECORDED IN THE IMPOUNDED DOCUMENT TS WERE TO THE TUNE OF RS.69,87,116/-. THE APPELLANT HAD SHOWN GROSS PROFIT RATE OF 6.894% IN THE TRADING ACCOUNT OF PRE - SURVEY PERIOD. THUS, THE UNACCOUNTED POFIT ON ACCOUNT OF SALES OUTSIDE THE BOOKS OF ACCOUNTS OF RS.69,87,116/- WORKS OUT AT RS.4,81,692/- (6.894% OFRS.69,87,116). ACCORDINGLY, THE ADDITION TO THE TUNE OFRS.4,81,692/- IS CONFIRMED ON ACCOUNT OF PROFITS EARNED ON UNACCOUNTED SALES. THUS, THE APPELLANT GETS A RELIEF OF RS.53,86,130/- (RS.58,67,822 RS.4,81,692/-) IN THIS GROUND OF APPEAL. PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 12 7. AFTER HEARING THE REVENUE, WE FIND THAT THE LEARNED CIT(A) HAS ESTIMATED THE GROSS PROFIT @ 6.89% ON THE UNRECORDED SALES WORKED OUT ON THE BASIS OF IMPOUNDED DOCUMENTS AND SUSTAINED THE ADDITION OF RS.4,81,692/-. THE LD. DR FAILED TO BRING ANYTHING CONTRARY TO DISLOD GE THE FINDINGS OF THE LEARNED CIT(A). WE, THEREFORE, FIND NO MERIT IN THIS GROUND OF APPEAL. THE SAME IS DISMISSED. 8. THE OTHER ISSUE IN THE REVENUES APPEAL IS AGAINST REDUCING THE ADDITION TO RS.8,55,173/- OUT OF RS.10,38,1731- MADE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNTS. THE LEARNED CIT(A) GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- 5.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF APPELLANT AND THE OBSERVATION OF THE A.O. REGARDING THIS ISSUE. IT MAY BE NOTED THAT THE A.O. HAD POINTED OUT VERY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS AND THE APPELLANT WAS NOT PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 13 ABLE TO REBUT SUCH REASONS/DEFECTS. THESE DEFECTS ARE DEFINITELY OF THE NATURE WHICH WARRANTS APPLICATION OF PROVISIONS OF SECTION 145(3) OF IT ACT. THEREFORE, THE ACTION OF THE A.O. FOR REJECTIO N OF BOOKS OF ACCOUNTS U/S 145(3) OF IT ACT IS CONFIRMED. AS REGARDS ESTIMATION OF INCOME AND APPLICATION OF NP RATE, IT IS A SETTLED LAW THAT EV EN AFTER REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF PROVISION OF SEC. 145(3), THE ASSESSING OFFICER DOES NOT GET UNFETTERED POWERS TO MAKE ASSESSMENT AT ANY INCOME. THE INCOME IS TO BE ASSESSED EITHER BY PREVIOUS RESULTS OR ON THE BASIS OF SOME COMPARABLE CASES AND REFERENCE CAN BE MADE ON THE FOLLOWING CASE LAWS FOR SUCH PROPOSITION OF LAW :- (I ) GANGA PRASAD SHARMA VS. CIT (1981) 132 ITR 87(MP ) (II) RAMDASJUNGANI VSCIT (2006) 288 ITR 356(MP) PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 14 (III)SHRI RAM JHAWAR LAL VS.ITO(2005)98 TTJ 639(ITAT JODHPUR) THE INCOME OF THE APPELLANT IS ACCORDINGLY TO BE DETERMINED KEEPING IN VIEW OF RATIO LAID DOWN IN THE ABOVE MENTIONED DECISIONS OF HON'BLE COURTS. IN THIS CONNECTION IT MAY BE NOTED THAT IN A.Y. 2005-06 THE A.O. HAD APPLIED 5% NP RATE ON GROSS SALES WHEREAS THE LD. CIT(A) WHILE DECIDING THE APPEAL IN ITA NO. 627/2007-08 DATED 02.04.2008 RESTRICTED THE N PRATE AT 2.5%. IN FURTHER APPEAL, THE HON'BLE ITAT IN ITA NO. 392/IND/2008 VIDE ORDER DATED 20.4.2010 CONFIRMED THE FINDING OF THE LD. CIT(A) IN RESPECT OF NP RATE. THEREFORE, KEEPING IN VIEW THE PAST HISTORY OF THE CASE, IT WOULD BE FAIR AND REASONABLE TO APPLY NP RATE OF 2.5% AFTER ALLOWING INTEREST AND SALARY TO THE PARTNERS. ACCORDINGLY, THE A.O. IS DIRECTED TO APPLY NP RATE OF 2.5% ON PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 15 TOTAL TURNOVER. THE APPELLANT HAD SHOWN TOTAL TURNOVER OF RS.3,63,55,702/- IN BOOKS OF ACCOUNTS AND THERE WERE UNACCOUNTED SALES OFRS.69,87,116/- TILL THE DATE OF SURVEY. THUS, THE TOTAL SALES WORKED OUT AT RS,.4,33,42,818/- AND NET INCOME @ 2.5% AT RS.10,.83,570/-. IT MAY BE NOTED THAT ADDITION TO THE EXTENT OF RS.4,81,692/- HAS BEEN CONFIRMED IN GROUND NO. 2 ON ACCOUNT OF PROFITS EARNED ON UNACCOUNTED SALES AND THE APPELLANT HAD SHOWN NET INCOME AT RS.4,46.705/- . THEREFORE, THE NET ADDITION REQUIRED WOULD WORK OUT AT RS.1,55,173/- (RS.10,83,570 RS.4,81,692 RS.4,46,705) IN THE INCOME RETURNED BY THE APPELLANT. ACCORDINGLY, THE A.O. IS DIRECTED TO MAKE NET ADDITION OF RS.1,55,173/- INTO THE RETURNED INCOME. PARIS GIFT HOUSE ITA NO. 469 & 389/INMD/2013 16 THE LD. DR FAILED TO BRING ANYTHING CONTRARY TO DISLOD GE THE FINDINGS OF THE LEARNED CIT(A). WE, THEREFORE, FIND NO MERIT IN THIS GROUND OF APPEAL. THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND THE REVENUE STAND DISMISSED. PRONOUNCED IN OPEN COURT ON IST SEPTEMBER, 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER IST SEPTEMBER, 2015 DN/-