ITO, New Delhi V. Sh. Brijesh Kumar, Delhi

ITA 3961/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65250 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRTS ANUSHA KHURANA
• Keywords: Unexplained investment; Cost of acquisition; Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3961/DEL/2011 ASSESSMENT YEAR : 2007-08 ITO, SHRI BRIJESH KUMAR, WARD-38 (1), 94-RAMVIHAR, NEW DELHI. V. DELHI-110092. AND C.O NO.349/DEL/2011 IN I.T.A. NO.3961/DEL/2011 ASSESSMENT YEAR : 2007-08 SHRI BRIJESH KUMAR, ITO, 94-RAM VIHAR, WARD-38(1), MEW DELHI-110092. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AMUPK AMUPK AMUPK AMUPK- -- -2710 2710 2710 2710- -- -R RR R DEPARTMENT BY : MRTS. ANUSHA KHURANA, SR. DR. RESPONDENT BY : SHRI R.S. SINGHVI. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A), XXVIII, NEW DELHI DATED 30.6.2011. THE ASSESSEE HAS FILE D CROSS OBJECTION TO THE APPEAL VIDE MEMORANDUM OF CROSS OBJE CTION. THESE WERE HEARD TOGETHER AND THEREFORE ARE BEING DISPOSED OFF BY A ITA NO3961 & 349/DEL/2011 2 COMMON ORDER. THE GROUNDS OF APPEALS TAKEN BY THE R EVENUE AND IN THE CROSS OBJECTION ARE AS UNDER:- I.T.A. I.T.A. I.T.A. I.T.A. 396 396 396 3961 11 1/DEL/201 /DEL/201 /DEL/201 /DEL/2011 11 1 (DEPARTMENTS APPEAL): (DEPARTMENTS APPEAL): (DEPARTMENTS APPEAL): (DEPARTMENTS APPEAL): 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD CIT(A) XVIII, NEW DELHI HAS ERRED IN RESTRICTING THE ADDITION OF ` .19,55,791/- AT ` ,2,33,590/- BY APPLYING THE PROFIT RATE OF 12% TO THE TOTAL UNRECORDED SALES WHICH IS NOTHING BUT UNEXPL AINED INVESTMENT IN STOCK. 2. THE LD CIT(A) ERRED IN DELETING THE ADDITION OF ` .15 LAKHS AS IT PERTAIN TO PREVIOUS ASSESSMENT YEAR 2006-07 WITHOUT ANY QUALIFYING REMARKS THAT THE ABOVE AMOUNT IS DELETED IN THE ASSESSMENT YEAR 2007-08 ONLY IF THE SAID AMOUNT IS OFFERE D BY THE ASSESSEE WITHOUT CONTESTING THE SAME FOR THE PENDING REOPENED ASSESSMENT FOR ASSESSMENT YEAR 2006-07. THE REASON IS THAT THE ASSESSING OFFICER HAD NOT MADE THE ABOVE ADD ITION SPECIFICALLY AS THE ASSESSEE HIMSELF HAD FILED THE REVISED RETURN OFFERING THE ABOVE AMOUNT. 3. THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GRO UND OF APPEAL AT ANY TIME. C.O. NO. 349/DEL/2011(ASSESSEES APPEAL): C.O. NO. 349/DEL/2011(ASSESSEES APPEAL): C.O. NO. 349/DEL/2011(ASSESSEES APPEAL): C.O. NO. 349/DEL/2011(ASSESSEES APPEAL): 1(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF ` .2,33,590/- ON ALLEGED UNRECORDED SALES. (II) THAT WHOLE BASIS OF ADDITION IS ILLEGAL, ARBITRAR Y AND WITHOUT PROPER APPRECIATION OF FACTS AND EVIDENCE ON RECORD. ITA NO3961 & 349/DEL/2011 3 2. THAT ORDERS OF THE LOWER AUTHORITIES IN RESPECT OF ADDITION SUSTAINED ARE NOT JUSTIFIED ON FACTS AND UNDER THE LAW. 2. BRIEFLY STATED THE ASSESSEE DERIVES INCOME FROM EXECU TION OF CIVIL CONTRACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY UNDER COMPULSORY SCRUTINY AND AFTER HEARING THE COUNSEL OF ASSESSEE, THE ASSESSMENT PROCEEDINGS WERE COMPLETED AND FOLLOWING ADD ITIONS WERE MADE:- ADDITION OF ADDITION OF ADDITION OF ADDITION OF ` ` ` ` .19,55,791/ .19,55,791/ .19,55,791/ .19,55,791/- -- -: : : : 3. A SURVEY U/S 133A OF INCOME TAX ACT, 1961 WAS COND UCTED ON 13.12.2006 ON THE PREMISES OF THE ASSESSEE AND DURING SEAR CH OPERATIONS CERTAIN DOCUMENTS WERE IMPOUNDED AND WERE NUMBERED AS 1 TO 86 AND FOR THE EXPLANATION OF THE SAME, THE ASSESSE E VIDE LETTER DATED 9.2.2007 HAD CLAIMED THAT THESE PAPERS PERTAIN TO VARIOUS PAYMENTS MADE TO MATERIAL SUPPLIER M/S HINDUSTAN PRE C AST. THE ASSESSING OFFICER OBSERVED THAT AT PAGE NO.85 VARIOUS KI NDS OF MATERIAL OF VARIOUS SIZES AND SHAPES USED IN CONSTRUCTION BUSINESS WAS MENTIONED AND THE AMOUNT WAS ` .19,55,791/-. ON THE SAME PAGE, AFTER THE TOTAL OF ` .19,55,791/-, A SUM OF ` .10,12,000/- WAS WRITTEN TO HAVE BEEN RECEIVED. THE ASSESSING OFFICER FURTHER NOTE D THAT BACK SIDE OF PAGE 85, CONTAINED BREAK UP OF AMOUNT OF ` .10,12,000/-. 4. WHEN CONFRONTED WITH THESE FACTS, THE ASSESSEE VIDE RE PLY DATED 26.11.2009 AS WELL AS THROUGH AFFIDAVIT DATED 9.12.20 09 SUBMITTED THAT PAGE 85-86 DO NOT BELONG TO HIM AS THE SAME WERE NOT IN HIS HAND WRITING AND ALSO WERE NOT PART OF HIS BOOKS OF ACCOUNT S. ITA NO3961 & 349/DEL/2011 4 5. THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY FRO M ASSESSEE DID NOT AGREE WITH THE CONTENTION AND ARRIVED AT TH E CONCLUSION THAT ASSESSEE HAD NOT CORRECTLY REFLECTED THE PURCHASES IN THE BOOKS OF ACCOUNTS AND HAD INFLATED THE PURCHASE COST TO UNDERST ATE HIS INCOME. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER REJECTED TH E BOOKS OF ACCOUNTS OF ASSESSEE U/S 145(3) AND ASSESSED THE ENTIRE AMOU NT OF ` .19,55,791/- AS PURCHASES NOT BEING CONSUMED IN THE BUSI NESS AND HELD THAT THIS WAS SOLD OUT SIDE THE BOOKS OF ACCOUNTS. THE CONTENTION OF THE ASSESSEE THAT HE HAD ALREADY SURRENDERED AN AMOU NT OF ` .15 LAKHS WHICH ALONG WITH DECLARED PROFIT WILL GIVE A N ET PROFIT RATIO OF 10.90% WAS NOT ACCEPTED BY THE ASSESSING OFFICER. SURRENDER OF INCOME SURRENDER OF INCOME SURRENDER OF INCOME SURRENDER OF INCOME ` ` ` ` .16,75,000/ .16,75,000/ .16,75,000/ .16,75,000/- -- -: :: : 6. DURING COURSE OF SURVEY, THE ASSESSEE SURRENDERED AN AM OUNT OF ` .16,75,000/- BEING CASH DEPOSITED IN BANK ACCOUNT WIT H VIJAY BANK., ` .15 LAKHS AND RENOVATION OF FURNITURE & FIXTURE ETC. FOR ` .1,75,000/-. THE CASH WAS DEPOSITED BY ASSESSEE ON VARIOUS DATES AS MENTI ONED AT PAGE 9 OF THE ASSESSMENT ORDER. THE ASSESSEE OFFERED THIS AM OUNT OF ` .16,75,000/- AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER OBSERVED THAT THE ABOVE ` .15 LAKHS WAS DEPOSITED ON VARIOUS DATES WHICH FELL IN THE FINANCIAL YEAR 2005-06 AND SINCE T HESE AMOUNTS COULD NOT BE CONSIDERED IN THE CURRENT YEAR, HE PROCEEDED TO REOPEN THE CASE OF THE ASSESSEE RELATING TO FINANCIAL YEAR 2005-06 BY R ESORTING TO PROVISIONS OF SECTION 147/148 OF THE ACT. HOWEVER, WHI LE COMPLETING THE ASSESSMENT ORDER HE INCLUDED THIS AMOUNT OF ` .15 LAKHS IN THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS SUBJECT TO ASSES SMENT OF ABOVE AMOUNT IN THE YEAR 2005-06. THE REMAINING AMO UNT ` .1,75,000/- SPENT ON RENOVATION OF FURNITURE & FIXTURE WAS ASSESSED A S INCOME FROM OTHER SOURCES. ITA NO3961 & 349/DEL/2011 5 7. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD CIT( A) AND SUBMITTED AS UNDER:- I) THAT ASSESSING OFFICER MERELY CONSIDERED PAGES 85-86 FOR THE PURPOSE OF ADDITION IN AN ARBITRARY AND ALTERNATIVE MANNER AND WITHOUT EXAMINING THE NATURE OF THE ENTRY. II) THAT PAGE 85 TO 86 IS MERELY A SUMMARY OF VARIOUS NOTI NG ON PAGES 1 TO 84 AND PAGES 85-86 ARE ROUGH WORKING PAPER OF M/S HINDUSTAN PRE CAST AND SO ASSESSING OFFICER SHOULD HAVE ENQUIRED ABOUT IT FROM THE ABOVE SAID PARTY. III) THAT THERE IS REFERENCE TO ASSIGNMENT OF JOB WORK TO M /S HINDUSTAN PRE CAST AND THERE IS NO QUESTION OF SALE OUT SIDE THE BOOKS OF ACCOUNTS AND IN FACT MATERIAL OBTAINED F ROM M/S HINDUSTAN PRE CAST WAS USED FOR OUR BUSINESS. IV) THAT JOB WORK WAS CARRIED OUT BY M/S HINDUSTAN PRE CA ST ON OUR BEHALF WHICH CAN BE VERIFIED FROM VARIOUS CHALLA NS FROM M/S HINDUSTAN PRE CAST FORMING PART OF PAGES 1 TO 84. V) THAT EVEN IF IT IS PRESUMED THAT THERE WAS ANY SUCH SAL E OUTSIDE THE BOOKS OF ACCOUNTS, THE ADDITION COULD ONLY BE IN RESPECT OF PROFIT ELEMENT AND NOT IN RESPECT OF ENTIR E SALE. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS WHEREIN IT WAS HELD THAT AMOUNT OF SALES COULD NOT REPRESENT THE INCO ME OF THE ASSESSEE AND IT IS ONLY THE PROFIT ELEMENT WHICH CAN BE TAXED. FEW JUDGMENTS RELIED UPON BY THE LD AR AS UNDE R:- I) CIT V. PRESIDENT INDUSTRIES 258 ITR 654 (GUJ.). II) CIT V. BALCHAND AJIT KUMAR 135 TAXMAN 180 (MP). III) MAN MOHAN SADANI V. CIT 304 ITR 52.(M.P.). ITA NO3961 & 349/DEL/2011 6 8. THEREFORE, IN VIEW OF THE ABOVE JUDGMENTS AND IN VIEW OF VARIOUS DECISIONS OF HON'BLE SUPREME COURT THE LD AR SUBMITTED THAT ANY ADDITION ON THE BASIS OF SURMISES AND CONJECTURE AND ON HYPOTHETICAL BASIS CANNOT BE MAINTAINED AND THEREFORE ONLY INCOME ELEMENT FROM SAID AMOUNT OF ` .19,55,791/- SHOULD BE TAXED. THE LD CIT(A) AFTER HEARING THE SUBMISSIONS OF LD AR HELD THAT ENTIRE AMOU NT CANNOT BE TAXED. THE RELEVANT PORTION OF LD CIT(A) S ORDER IS REPRODUCED BELOW:- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AN D THE JUDGMENTS CITED BY THE APPELLANT IN SUPPORT OF HIS CLA IM, I AM OF THE CONSIDERED OPINION THAT THE AMOUNT OF SALES THOUGH UNRECORDED IN THE BOOKS OF ACCOUNT DO NOT REPRESENT T HE INCOME OF THE ASSESSEE. ONLY THE REALIZATION OF THE EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFIT. IF THE TOTA L AMOUNT OF ` .19,55,791/- IS TREATED AS SALES NOT RECORDED IN THE B OOKS OF ACCOUNT AND THE BOOKS OF ACCOUNT RELATED TO ANNEXURE A-1 CONTAINING PAGES 1-86 ARE REJECTED BY THE ASSESSING OFFI CER U/S 145(3) THEN AS PER THE PROVISIONS OF LAW THE GROSS PROFI T IS TO BE ESTIMATED BY APPLYING A RATE PREVALENT IN THE SAME TY PE OF BUSINESS. I, THEREFORE, APPLY A RATE OF 12% TO THE TOT AL UNRECORDED SALES OF ` .19,55,791/- I.E. ` .2,33,590/-. THE ADDITION OF ` .2,33,590/- IS SUSTAINED OUT OF TOTAL ADDITION MADE B Y THE ASSESSING OFFICER TO THE TUNE OF ` .19,55,791/-. 9. REGARDING SECOND ADDITION OF ` .15 LAKHS, THE LD CIT(A) OBSERVED THAT ASSESSING OFFICER HAD ALREADY INITIATED PROCEEDING S U/S 147/148 OF THE ACT FOR REOPENING THE CASE OF THE ASSESSEE FOR FINA NCIAL YEAR 2005- 06 AND THE AMOUNT OF ` .15 LAKHS WAS TAXED IN THE YEAR 2006-07 ONLY ON PROTECTIVE BASIS. THEREFORE, HE DELETED THE AMOUNT OF ` .15 LAKHS. ITA NO3961 & 349/DEL/2011 7 10. AGGRIEVED BOTH THE ASSESSEE AND THE DEPARTMENT ARE IN APPEAL BEFORE US. 11. THE LD DR ARGUED THAT AMOUNT OF ` .19,55,791/- WAS NOTHING BUT UNEXPLAINED INVESTMENT IN STOCK AND THEREFORE LD CIT (A) HAS WRONGLY TAKEN 12% AS PROFIT ON THE ABOVE AMOUNT. THE UNEXPLA INED INVESTMENT HAD BEEN DETECTED DURING THE COURSE OF SEARCH PROCEED INGS AND SHOULD HAVE BEEN ADDED IN TOTAL AS WAS DONE BY THE ASSESSING OFF ICER. 12. IN RESPECT OF SECOND DELETION OF ` .15 LAKHS SHE ARGUED THAT LD CIT(A) HAD DELETED THE ADDITION OF ` .15 LAKHS WITHOUT QUALIFYING REMARK THAT AMOUNT IS DELETED ONLY IF THE SAME IS OFFERED BY THE ASSESSEE WITHOUT CONTESTING IN THE FINANCIAL YEAR 2005-06. 13. THE LD AR, ON THE OTHER HAND ARGUED THAT THE SAI D AMOUNT OF ` .19,55,791/- WAS ON ACCOUNT OF VARIOUS SUPPLIES RECEIVE D BY THE ASSESSEE ON VARIOUS DATES FROM ONE SUPPLIER I.E. M/S HINDUS TAN PRE CAST. THE MATERIAL THUS RECEIVED WAS USED IN THE BUSINE SS OF ASSESSEE AND THE INCOME WAS RECEIVED ONLY FROM DDA IN THE FOR M OF CHEQUES AFTER DEDUCTION OF TDS. HE ALSO ARGUED THAT PART PAY MENT OF SAID PURCHASES WAS MADE THROUGH CHEQUES ALSO. IN THIS RESPECT, HE INVITED OUR ATTENTION TO BACK SIDE OF PAGE 85 (PAPER BOOK PA GE 66). HE ALSO INVITED OUR ATTENTION TO PAPER BOOK PAGES 65-147 WHE REIN THE BREAK UP OF MATERIAL RECEIVED ON VARIOUS DATES WAS PLACED. IN VIEW OF THESE FACTS, HE ARGUED THAT AMOUNT REPRESENTED PART OF PURC HASES AGAINST WHICH SALES WERE ALREADY BOOKED IN THE FORM OF CHEQUE S FROM DDA AND THEREFORE HE ARGUED THAT NO ADDITION OF EVEN 12% WA S WARRANTED. 14. REGARDING SECOND ADDITION OF ` .15 LAKHS, THE LD AR PLACED ON RECORD AN ASSESSMENT ORDER RELATING TO ASSESSEE FOR FINANCI AL YEAR 2005-06 CONCLUDED U/S 143(3)/147 OF THE ACT WHEREIN HE POINTED OUT AT ITA NO3961 & 349/DEL/2011 8 PAGE 6 OF THE ASSESSMENT ORDER THAT AMOUNT OF ` .15 LAKHS HAS ALREADY BE TAXED. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED FROM THE PAPER BOOK PAGES 65-147 THAT PAGE 85 REPRESE NTS THE SUMMARY OF VARIOUS PURCHASES MADE BY THE ASSESSEE ON VARIO US DATES AS PER PAPER BOOK PAGES 69, 70,86,87,111,115,123 & 13 0 AND ` .10,12,000/- IS SUPPOSED TO BE PAYMENTS MADE BY ASSESSEE AG AINST THESE PURCHASES. THE BREAK UP OF WHICH IS AT PAGE 66 OF PAPER BOOK WHICH INCLUDES PAYMENT BY CHEQUE ALSO. THEREFORE, IT CAN BE CONCLUDED THAT THIS AMOUNT OF ` .19,55,791/- WAS PART OF PURCHASES AGAINST WHICH ASSESSEE HAD BOOKED SALES BUT ASSESSEE COULD NOT PROVE BEFOR E ASSESSING OFFICER AND BEFORE LD CIT(A) AND BEFORE US TH AT THESE PURCHASES WERE REFLECTED IN THE BOOKS OF ACCOUNTS OF A SSESSEE. HAD HE BEEN ABLE TO PROVE THAT THESE WERE PART OF PURCHASES A S PER BOOKS, THEN NO ADDITION COULD HAVE BEEN MADE BUT IN THE PR ESENT CASE, THE ASSESSEE COULD NOT CORRELATE THE FIGURES OF IMPOUNDED DO CUMENTS WITH BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE, WE ARE OF TH E CONSIDERED OPINION THAT LD CIT(A) HAD RIGHTLY APPLIED NET PROF IT RATE OF 12% TO CALCULATE THE ELEMENT OF PROFIT IN THE ABOVE. 16. AS REGARDS ` .15 LAKHS, THE ASSESSEES CASE FOR FINANCIAL YEAR 2005-06 HAS ALREADY BEEN ASSESSED VIDE ORDER DATED 26.12 .2011 AND AN AMOUNT OF ` .15 LAKHS HAS ALREADY BEEN TAXED THEREIN SO THIS AMOUNT CANNOT BE TAXED AGAIN. THE ASSESSING OFFICER HAD INCLUD ED THIS AMOUNT OF ` .15 LAKHS ON PROTECTIVE BASIS ONLY. THEREFORE, WE DO N OT FIND ANY INFIRMITY WITH THE ORDER OF LD CIT(A). ITA NO3961 & 349/DEL/2011 9 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A S WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH DAY O F AUGUST, 2012. SD/- SD/- (R.P. TOLANI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 9.8.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 27.6.2012 DATE OF DICTATION 3.8.2012 DATE OF TYPING 3.8.2012 DATE OF ORDER SIGNED BY 9.8.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 9.8.2012 & SENT TO THE BENCH CONCERNED.