The ITO, Ward-5(1), Surat V. Shri Bajranglal Mundra, Surat

ITA 3909/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6309 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: MITESH S MODI
• Keywords: Unexplained cash credit; Additional evidence

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI M. K. SHRAWAT, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WARD 5(1), SURAT. VS. SHRI BAJRANGLAL MUNDRA, PROP. OF POONAM CREATING, 138, HARIKRUPA MARKET, BEGAMWADI SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI B. L. YADAV, DR RESPONDENT BY:- SHRI MITESH S. MODI, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN RESTRICTING THE ADDITION OF RS.37,27,926/- TO RS.4,44,729/- MADE BY THE AO ON T HE GROUND OF UNVERIFIABLE PURCHASES, DISALLOWED EXPENSES AND UNEXPLAINED CASH CREDITS. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG OF CUT-PIECE CLOTH. THE RETURN OF INCOME FOR ASST. YEAR UNDER CO NSIDERATION WAS FILED ON 20.10.2005 DECLARING AN INCOME OF RS.1,08,990/-. THE AO SELECTED THE CASE FOR SCRUTINY UNDER CASS. HE CALLED FOR THE DET AILS BUT IN SPITE OF SEVERAL REMINDERS AND NOTICES AS MENTIONED BY HIM I N THE ASSESSMENT ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 2 ORDER ASSESSMENT ORDER, ASSESSEE DID NOT PRODUCE AN Y DETAIL. THE AO ACCORDINGLY RESORTED TO AN EX PARTE ASSESSMENT ORDE R U/S 144. HE DISALLOWED 25% OF THE PURCHASES BY FOLLOWING THE DE CISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S VIJAY PROTEINS (1996) 55 TTJ (AHD) 76 ON THE GROUND THAT PURCHASES WERE NOT VERIFIABLE . THIS RESULTED IN AN ADDITION OF RS.31,85,958/-. THE ASSESSEE ALSO FAILE D TO SUBMIT ANY EVIDENCE IN RESPECT OF VARIOUS EXPENDITURE DEBITED IN TRADING ACCOUNT OR PROFIT AND LOSS ACCOUNT AND ACCORDINGLY THE AO DISA LLOWED 25% THEREON RESULTING IN AN ADDITION OF RS.4,41,968/-. THERE WA S A CREDIT OF RS.1 LACS FROM ONE SHREEGOPAL MUNDRA AS UNSECURED LOAN. THE A SSESSEE FAILED TO FURNISH THE COMPLETE NAME AND ADDRESS OF THE PARTIE S, THEIR PAN, COPY OF CONTRA ACCOUNT ETC AND ACCORDINGLY THE AO TREATED T HE SUM OF RS.1 LAC AS UNEXPLAINED AND MADE ADDITION UNDER SECTION 68. 3. THE LD. CIT(A) REDUCED THE ADDITIONS UNDER ALL T HE THREE HEADS TO RS.4,44,729/-. IN THE APPELLATE ORDER THE LD. CIT(A ) GAVE FOLLOWING FINDINGS:- (1) THE BOOKS OF THE ASSESSEE WERE LOST IN THE FLOODS I N THE CITY IN THE MONTH OF AUGUST, 2006; (2) MAJOR PORTION OF THE EXPENDITURE LIKE BANK INTEREST , ELECTRICITY, INTEREST ON LOAN, POSTAL AND TELEGRAM ETC. DEBITED IN THE PROFIT ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 3 AND LOSS ACCOUNT CANNOT BE DOUBTED SINCE THEY WERE PAID TO GOVERNMENT AGENCIES OR TO A BANK; (3) THERE IS LITTLE DOUBT ABOUT THE GENUINENESS OF THE CASH CREDIT OF RS.1 LAC IN VIEW OF THE DETAILS FILED BY THE ASSESS EE IN THE BELATED WRITTEN SUBMISSIONS; (4) THE AO HAD FAILED TO MAKE NOTICE OF TOTALITY OF THE CIRCUMSTANCES AND MADE HIGH-PITCHED ADDITIONS; (5) SINCE BOOKS OF ACCOUNT ARE NOT AVAILABLE ONE SHOULD GO BY FINANCIAL RESULTS OF PRECEDING AND SUCCEEDING YEARS ; AND (6) IN THE IMMEDIATELY PRECEDING YEAR THE ASSESSEE HAS SHOWN PROFIT OF 9.06% AND THEREFORE, IT WILL BE REASONABLE TO AP PLY GP RATE OF 9% THIS YEAR ALSO WHICH COULD RESULT IN THE ADDITIO N SO SUSTAINED BY HIM. 4. AGAINST THIS, THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING VARIOUS NOTICES AND REMINDERS ISSUED BY THE AO TO THE ASSESSEE TO WHICH ASSESSEE HAS FAILED TO RESPON D. 4.1 THE ASSESSEE FAILED TO PROVE THAT BOOKS OF ACCO UNT WERE DESTROYED IN THE FLOODS. NO EVIDENCE LIKE FIR WAS FILED. THER E IS NO EVIDENCE OF ANY DESTRUCTION OF STOCK IF FLOODS HAVE RAVAGED THE PRE MISES OF ASSESSEE. ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 4 4.2 THE LD. CIT(A) ADMITTED ADDITIONAL EVIDENCES SU BMITTED BY THE ASSESSEE BEFORE HIM WITHOUT AFFORDING OPPORTUNITY T O THE AO TO VERIFY THE SAME. THESE EVIDENCES INCLUDE THE EVIDENCE ABOUT LO SS OF BOOKS IN THE FLOODS AND ABOUT CASH CREDIT. FURTHER THE LD. CIT(A ) WAS NOT CORRECT IN HOLDING THAT MAJOR EXPENDITURE WERE TO GOVERNMENT A ND BANK AND HENCE THEY CANNOT BE DOUBTED. 5. THE LD. AR ON THE OTHER HAND, SUBMITTED THAT ONC E BOOKS ARE NOT AVAILABLE ONLY RECOURSE AVAILABLE TO THE DEPARTMENT IS TO ESTIMATE THE PROFITS. THE LD. CIT(A) HAS RIGHTLY RELIED ON THE R ESULTS OF PRECEDING ASST. YEAR. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE LD. CIT(A) HAS A LLOWED THE RELIEF WITHOUT APPRECIATING THAT ASSESSEE FAILED TO CO-OPE RATE WITH THE AO. IN SPITE OF REPEATED REMINDERS AND NOTICES THE ASSESSE E DID NOT PRODUCE ANY DETAIL BEFORE THE AO. IT IS ONLY BEFORE HIM THAT RE LIANCE WAS PLACED ON COMPUTERIZED DATA AND AUDIT REPORT. IT IS NOT A CAS E TO OUR UNDERSTANDING THAT ASSESSEE STOPPED DOING BUSINESS WITH ALL THOSE PARTIES FROM WHOM IT HAD SHOWN PURCHASES IN THE YEAR UNDER CONSIDERATION . HE SHOULD HAVE VERY WILL PRODUCED CONTRA COPY ACCOUNT AND CONFIRMA TION AND DETAILS OF ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 5 THE PAYMENTS MADE BY THE ASSESSEE TO THOSE PARTIES FROM WHOM PURCHASES HAVE BEEN SHOWN TO HAVE BEEN MADE. SIMILARLY, EVIDE NCE REGARDING CASH CREDIT WOULD HAVE BEEN PRODUCED BEFORE THE AO FOR H IS VERIFICATION. THE DETAILS ABOUT LOSS IF ANY IN THE FLOODS SHOULD HAVE BEEN PROPERLY FILED BEFORE THE AO. MERE CLAIM THAT LOSS OF BOOKS IN FLO ODS IS SUPPORTED BY AFFIDAVIT IS NOT SUFFICIENT. IT HAS TO BE FURTHER S HOWN THAT BECAUSE OF SUCH LOSS ASSESSEE HAS SUFFERED FROM HIS CREDITORS OR DE BTORS. WITHOUT THE BOOKS HOW ASSESSEE WAS ABLE TO RECOVER FROM THE DEB TORS AND ON WHAT BASIS ASSESSEE WAS ABLE TO SQUARE UP ITS ACCOUNT WI TH THE CREDITORS SHOULD ALSO HAVE BEEN DEMONSTRATED. PAYMENTS MADE TO GOVER NMENT AGENCIES SHOULD HAVE BEEN SUPPORTED BY CERTIFICATES FROM THO SE AGENCIES AS TO WHAT PAYMENT ASSESSEE HAS MADE TO THEM. FURTHER MERELY R ELYING ON RESULT OF ONE PRECEDING YEAR IS NOT SUFFICIENT AS DONE BY LD. CIT(A). THE DATA OF SEVERAL EARLIER ASST. YEARS AND SUCCEEDING YEARS SH OULD HAVE BEEN GIVEN TO ARRIVE AT PROPER GP RATE IF REQUIRED TO BE APPLI ED IN THE CURRENT ASST. YEAR. FURTHER THE RESULTS OF OTHER PARTIES DOING SI MILAR BUSINESS SHOULD ALSO BE SHOWN SO THAT A PROPER ESTIMATE OF PROFITS CAN BE MADE IN THE CASE OF THE ASSESSEE. IN OUR VIEW, THE LD. CIT(A) HAS HU RRIEDLY DISPOSED OF THE APPEAL WITHOUT APPRECIATING ALL THE FACTS AND, THER EFORE, THE CASE IS REQUIRED TO BE RE-EXAMINED BY THE AO DE NOVO PARTIC ULARLY ON THE LINES SUGGESTED BY US ABOVE. AS A RESULT, THE APPEAL FILE D BY THE REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 6 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 24/6/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 24/6/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.3909/AHD/2008 ASST. YEAR 2005-06 7 1.DATE OF DICTATION 20/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 21/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..