M/s Venkatesh Marbles, Raipur(CG) V. THE ASSTT. COMMISSIONER OF iNCOME TAX, RAIPUR (CG)

ITA 4/BIL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4799 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUBHAA GOYAL
• Assessee Lawyers: R B DOSHI
• Keywords: Unexplained investment; Business income; Loose papers; Deemed to accrue or arise in india
• Section: 143(3); 133A; 69

Judgement Text

1 ITA NO.04/BIL/2016 IN THE INCOME TAX APPELLA TE TRIBUNAL RAIPUR BENCH: RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 04/BIL/201 6 (A.Y 2010-11) VENKATESH MARBLES MARBLES MARKET, RING ROAD NO.1 RAIPUR RAIPUR (CG) AAFFV5852J (APPELLANT) VS ASSTT. COMMISSIONER OF INCOME TAX 2(1), CENTRAL REVENUE BUILDING, CIVIL LINES RAIPUR RAIPUR (CG) RAIPUR. (RESPONDENT) APPELLANT BY SHRI R. B. DOSHI, CA RESPONDENT BY SMT. ANUBHAA GOYAL, DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A) -1, RAIPUR (CG), DATED 30.11.2015 FOR THE A.Y. 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, COMMISS IONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF RS. 76,61 7/- OUT OF ADDITION OF RS. 1,21,377/- MADE BY THE ASSESSING OFFICER FOR ALLEGE D UNDISCLOSED INCOME OUT OF ENTRIES IN LOOSE PAPERS FOUND ON SURVEY BY IGNOR ING EXPLANATION OF THE APPELLANT AND WITHOUT CONSIDERING THE FACTS OF THE CASE PROPERLY AND JUDICIALLY. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, COMM ISSIONER OF INCOME-TAX (APPEALS)S ACTION OF CONFIRMING THE ADDITION TO TH E EXTENT OF RS. 76,617/- IS DATE OF HEARING 16.08.2018 DATE OF PRONOUNCEMENT 22.10.2018 2 ITA NO.04/BIL/2016 TOTALLY UNJUSTIFIED AND UNCALLED FOR. THE CIT (APPE ALS) SHOULD HAVE DELETED THE ENTIRE ADDITIONS OF RS. 1,21,377/-. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, COMM ISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS. 3 ,53,966/- MADE BY THE ASSESSING OFFICER OUT OF REMUNERATION PAID TO THE P ARTNERS BY IGNORING EXPLANATION OF THE APPELLANT AND WITHOUT CONSIDERIN G THE FACTS OF THE CASE PROPERLY AND JUDICIALLY. 3. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGE D IN THE BUSINESS OF TRADING IN MARBLES UNDER THE NAME AND STYLE OF M/S VENKATESH MARBLES. THE RETURN OF INCOME WAS FILED ELECTRONICALLY ON 04.10. 2010 DECLARING TOTAL INCOME OF RS. 37,28,840/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AUDIT REPORT AS REQUIRED U/S 44AB WAS ALSO FURNISHED. AS PER AU DITED ACCOUNTS THE ASSESSEE DISCLOSED A PROFIT OF RS.44,41,356/- BEFOR E DISTRIBUTION OF REMUNERATION AND INTEREST TO THE PARTNERS AND AFTER DISTRIBUTION OF REMUNERATION AND INTEREST TO THE PARTNERS THE NET P ROFIT WAS DISCLOSED AT RS.37,28,836/-. IN THIS CASE SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 23.09.2009. AS A RESULT OF SURVEY EXCESS CASH AMOUNTING TO RS. 13,07,928/- , EXCESS STOCK TO THE TUNE OF RS. 20,93,468/-, UNEXPLAINED INVESTMENT OF RS. 6 ,00,000/- ON RENOVATION OF THE OFFICE AND UNEXPLAINED ENTRIES OF RS. 5,00,000/ - APPEARING IN THE LOOSE PAPERS WERE DETECTED BY THE SURVEY PARTY. SHRI PRAV IN SARDA, BROTHER OF ONE OF THE PARTNERS SHRI ANIL SARDA, WHO WAS AVAILABLE AT THE TIME OF SURVEY AND LOOKS AFTER THE BUSINESS IN ABSENCE OF THE PARTNER COULD NOT EXPLAIN THE ABOVE FINDINGS DETECTED BY THE SURVEY TEAM AND SURRENDERE D THE WHOLE SUM OF RS.45,01,396/- (RS. 13,07,928 + 20,93,468 + 6,00,00 0 + 5,00,000) AS UNDISCLOSED INCOME IN ADDITION TO ITS REGULAR INCOM E. ON VERIFICATION OF ACCOUNTS THE A.O. NOTED THAT AS AGAINST THE TOTAL S UM OF RS. 45,01,396/- THE ASSESSEE HAS INCLUDED AN AMOUNT OF RS. 40,01,396/- ONLY IN THE ACCOUNTS AND RETRACTED FROM SURRENDER OF RS.5,00,000/- MADE ON A CCOUNT OF ENTRIES IN THE LOOSE PAPERS. THE ASSESSEES CONTENTION WAS THAT TH E DISCLOSURE WAS MADE BY BROTHER OF ONE OF THE PARTNERS WHO LOOKS AFTER THE BUSINESS IN ABSENCE OF THE 3 ITA NO.04/BIL/2016 PARTNER AND THAT THE DISCLOSURE IN RESPECT OF EXCES S CASH, EXCESS STOCK AND INVESTMENT ON RENOVATION OF OFFICE WAS CORRECTLY MA DE AND HE WAS NOT WELL AWARE OF THE BUSINESS AFFAIRS. HOWEVER, THE ASSESSI NG OFFICER OBSERVED THAT THE EXPLANATION FILED BY THE ASSESSEE IN RESPECT OF THE ENTRIES APPEARING IN LOOSE PAPERS WERE NOT ACCEPTABLE AND ADDED AN AMOUNT OF R S. 1,21,377/- COVERED IN TRANSACTIONS APPEARING IN LOOSE PAPERS. REGARDING T HE DISALLOWANCE OF REMUNERATION PAID TO THE PARTNERS, THE ASSESSING OF FICER OBSERVED THAT AN AMOUNT OF RS. 4,80,000/- WAS FOUND DEBITED TOWARDS PAYMENT OF REMUNERATION TO PARTNERS WHICH IS MUCH MORE THAN THE PERMISSIBLE MONETARY LIMIT AS PRESCRIBED AS LAID DOWN U/S 40(B)(V) OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER HELD THAT BEFORE CONSIDERING THE AMOUNT OF INCOME OF RS.40,01,396/- SURRENDERED DURING SURVEY AND CREDIT ED TO PROFIT AND LOSS ACCOUNT, THE AMOUNT OF NET PROFIT AS PER P/L ACCOUN T WORKS OUT TO RS.4,39,960/- (44,41,356 40,01,396). THE ASSESSIN G OFFICER HELD THAT SINCE, THE INCOME OF RS. 40,01,396/- SURRENDERED DURING SU RVEY AND CREDITED TO P/L ACCOUNT IS NOT WITHIN THE AMBIT OF BOOK PROFIT IN T ERMS OF SEC. 40(B) OF THE INCOME TAX ACT, 1961 AND NEEDS TO BE ASSESSED U/S 6 9 OF THE ACT, AS SUCH WAS NOT TO BE CONSIDERED WHILE COMPUTING THE REMUNERATI ON TO PARTNERS. THE ASSESSING OFFICER RELIED UPON THE HONBLE CHHATTISG ARH HIGH COURT DECISION IN CASE OF DHANUSH GENERAL STORES VS. CIT (2011) 339 I TR 651. THUS, AS PER SECTION 40(B)(V) OF THE INCOME TAX ACT, 1961 THE AM OUNT OF REMUNERATION TO PARTNER OF RS.1,26,034/- WAS ALLOWED BY THE ASSESSI NG OFFICER AND EXCESS CLAIM OF RS.3,53,966/- WAS DISALLOWED. THUS, THE ASSESSIN G OFFICER COMPLETED ASSESSMENT U/S 143(3) BY MAKING FOLLOWING ADDITION/ DISALLOWANCE:- PARTICULARS AMOUNT (RS.) ADDITION FOR ALLEGED UNDISCLOSED INCOME OUT OF ENTR IES IN LOOSE PAPERS FOUND ON SURVEY 1,21,377.00 DISALLOWANCE OUT OF REMUNERATION PAID TO PARTNERS B Y FOLLOWING DECISION OF HONBLE CG HIGH COURT REPORTE D IN 339 ITR 651 3,53,966.00 4 ITA NO.04/BIL/2016 TOTAL 4,75,343.00 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 5. AS REGARDS TO GROUND NO. 1 AND 2, THE LD. AR SUB MITTED THAT IN THE BUSINESS PREMISES OF THE ASSESSEE, SURVEY PROCEEDIN GS U/S 133A WAS CONDUCTED ON 23.09.2009. DURING THE COURSE OF SURVE Y PROCEEDINGS BOTH THE PARTNERS WERE OUT OF STATION AND SURVEY PROCEEDINGS WERE REPRESENTED BY PRAVIN SARDA (BROTHER OF ONE OF THE PARTNER ANIL SA RDA) IN THEIR ABSENCE AND HIS STATEMENT WAS RECORDED BY THE DEPARTMENT TO KNOW SO URCES OF VARIOUS DISCREPANCIES FOUND ON SURVEY. IN ANSWER TO QUESTIO N NO. 1, PRAVIN SARDA HAD CONFIRMED THAT ONLY IN ABSENCE OF HIS BROTHER ANIL SARDA HE WAS LOOKING AFTER BUSINESS DEALING OF ASSESSEE FIRM AND NOT ON REGULA R BASIS AND ACCORDINGLY, IN ADDITION TO SURRENDERED EXCESS CASH OF RS. 13,07,92 8/- AND EXCESS STOCK OF RS 70.93,468 - FOUND ON SURVEY ON PHYSICAL VERIFICATIO N, HE HAD SURRENDERED INVESTMENT ON RENOVATION OF OFFICE AT RS. 6,00,000/ - AND RS. 5,00,000/- FOR UNDISCLOSED INCOME WITH REFERENCE TO ENTRIES RECORD ED IN LOOSE PAPERS FOUND AND IMPOUNDED ON SURVEY AS PER HIS OWN ESTIMATION. 6. AS REGARDS TO GROUND NO. 3, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED RS.3,53,966/- OUT OF REMUNE RATION PAID TO PARTNERS AS PER TERMS OF DEED AND WITH PRESCRIBED LIMIT U/S 40( B) BY TREATING INCOME SURRENDERED ON SURVEY AND INCORPORATED IN THE BOOKS OF ACCOUNT OF RS.40,01,396/- AS NOT COME WITHIN THE AMBIT OF BOOK PROFIT IN TERMS OF SECTION 40(B), BEING ASSESSABLE AS DEEMED INCOME U/S 69 BY FOLLOWING DECISION OF JURISDICTION HONBLE CG HIGH COURT DECISION IN CASE OF DANUSH GENERAL STORES VS. CIT 339 ITR 651 BY IGNORING DETAILED SUBMISSION OF THE ASSESSEE FIRM IN 5 ITA NO.04/BIL/2016 THIS REGARD AND WITHOUT CONSIDERING FACTS AND CIRCU MSTANCES OF THE CASE PROPERLY AND JUDICIALLY. 7. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A S WELL AS ASSESSING OFFICER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS REGARDS TO GROUND NOS. 1 & 2, IT IS PERT INENT TO NOTE THAT THE CIT(A) HAS MADE CATEGORICAL FINDING THAT THE ASSESSING OFF ICER MADE DISALLOWANCE OF RS. 1,21,377/- AFTER GOING THROUGH THE LOOSE PAPERS AND DISCUSSING ABOUT EACH CLAIM IN THE ASSESSMENT ORDER. BUT THE CIT(A) IGNOR ED THE FACT THAT DURING THE COURSE OF SURVEY PROCEEDINGS BOTH THE PARTNERS WERE OUT OF STATION AND SURVEY PROCEEDINGS WERE REPRESENTED BY PRAVIN SARDA (BROTH ER OF ONE OF THE PARTNER ANIL SARDA) IN THEIR ABSENCE AND HIS STATEMENT WAS RECORDED BY THE DEPARTMENT TO KNOW SOURCES OF VARIOUS DISCREPANCIES FOUND ON SURVEY. IN ANSWER TO QUESTION NO. 1, PRAVIN SARDA HAD CONFIRME D THAT ONLY IN ABSENCE OF HIS BROTHER ANIL SARDA HE WAS LOOKING AFTER BUSINES S DEALING OF ASSESSEE FIRM AND NOT ON REGULAR BASIS AND ACCORDINGLY, IN ADDITI ON TO SURRENDERED EXCESS CASH OF RS. 13,07,928/- AND EXCESS STOCK OF RS 70.9 3,468 - FOUND ON SURVEY ON PHYSICAL VERIFICATION, HE HAD SURRENDERED INVESTMEN T ON RENOVATION OF OFFICE AT RS. 6,00,000/- AND RS. 5,00,000/- FOR UNDISCLOSED I NCOME WITH REFERENCE TO ENTRIES RECORDED IN LOOSE PAPERS FOUND AND IMPOUNDE D ON SURVEY AS PER HIS OWN ESTIMATION. BUT FROM THE RECORDS IT CAN BE SEEN THAT THE ASSESSEE FIRM SURRENDERED THE INCOME UNDER THE HEAD LOOSE PAPERS FOUND AND IMPOUNDED ON SURVEY AND INCLUDED BOTH IN THE TRADING AND PRO FIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31.03.2010 AND COMPUTATION OF TOTAL I NCOME FOR THE A.Y. 2010- 11 UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. THE ASSESSEE ALSO EXPLAINED EACH OF THE LOOSE PAPERS BEFORE THE ASSESSING OFFIC ER, BUT THE ASSESSING OFFICER AS WELL AS THE CIT(A) IGNORED THE EXPLANATION OFFER ED BY THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT BOTH THE CIT(A) AS WELL AS ASSESSING OFFICER ARE NOT 6 ITA NO.04/BIL/2016 CORRECT IN MAKING THIS ADDITION. THE ORDER OF THE C IT(A) IS SET ASIDE. GROUND NO. 1 AND 2 ARE ALLOWED. 9. AS REGARDS TO GROUND NO. 3, THE ASSESSING OFFICE R DISALLOWED RS.3,53,966/- OUT OF REMUNERATION PAID TO PARTNERS AS PER TERMS OF DEED AND WITH PRESCRIBED LIMIT U/S 40(B) BY TREATING INCOME SURRENDERED ON SURVEY AND INCORPORATED IN THE BOOKS OF ACCOUNT OF RS.40,01,39 6/- AS NOT COME WITHIN THE AMBIT OF BOOK PROFIT IN TERMS OF SECTION 40(B) OF T HE ACT AND HELD IT AS ASSESSABLE AS DEEMED INCOME U/S 69 OF THE ACT. THE ASSESSING OFFICER HAS IGNORED THE FACT THAT THE ASSESSEE FIRM HAD GIVEN T HE DETAILED SUBMISSION AS TO WHY INCOME SURRENDERED ON SURVEY AS BUSINESS INCOME . IN FACT IN GROSS TOTAL INCOME OF RS. 37,28,836/-, THE ASSESSEE FIRM IN COM PUTATION OF TOTAL INCOME FOR A.Y. 2010-11 DISCLOSED THE SURRENDERED AMOUNT OF RS . 40,01,396/-. AS FAR AS THE DECISION CITED FROM THE SIDE OF THE REVENUE AND RELIED BY THE CIT(A) IN THE ORDER THAT OF THE DECISION OF THE HONBLE CG HIGH C OURT IN CASE OF DANUSH GENERAL STORES VS. CIT 339 ITR 651 IS CONCERNED, TH E ISSUE BEFORE THE HONBLE HIGH COURT WAS NOT THE CLAIM OF REMUNERATION, BUT I T WAS LIMITED TO THE ISSUE OF TAXABILITY OF EXCESS STOCK FOUND AT THE TIME OF SUR VEY, WHICH WAS HELD AS UNEXPLAINED INVESTMENT. IF THE ISSUE OF ALLOWANCE O F REMUNERATION WAS TAKEN UP BY THE HONBLE HIGH COURT, THEN THE MATTER COULD HAVE BEEN LOOKED INTO IN THE PERSPECTIVE OF COMPUTATION OF BOOK PROFIT FOR T HE PURPOSE OF ADMISSIBILITY OF REMUNERATION U/S 40(B)(V) OF THE ACT. THUS, THE DEC ISION OF THE HONBLE HIGH COURT IS ALTOGETHER ON DIFFERENT ASPECT AND NOT ON THE ISSUE CONTESTED BEFORE US. THE LD. AR RELIED UPON THE TRIBUNAL DECISION IN CASE OF ACIT VS. M/S ASHOK CHAND ANIL KUMAR (ITA NO. 353/NAG/2007 A.Y. 2004-05 ORDER DATED 31.07.2014) WHEREIN THE ISSUE OF REMUNERATION AROSE AND THE DECISION OF THE HONBLE HIGH COURT HAS BEEN CONSIDERED. THE TRIBUNA L HELD THEREIN AS UNDER: 7.3 AS FAR AS THE DECISION CITED FROM THE SIDE OF T HE REVENUE IS CONCERNED, IN THE CASE OFF DHANUSH GENERAL STORES ( SUPRA) THE ISSUE WAS NOT THE CLAIM OF REMUNERATION, BUT IT WAS LIMITED TO TH E ISSUE OF TAXABILITY OF EXCESS STOCK FOUND AT THE TIME OF SURVEY, WHICH WAS HELD AS UNEXPLAINED 7 ITA NO.04/BIL/2016 INVESTMENT. HAD IT BEEN THE ISSUE OF ALLOWANCE OF R EMUNERATION, THEN THE MATTER COULD HAVE BEEN LOOKED INTO IN THE PERSPECTI VE OF COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF ADMISSIBILITY OF REMUNER ATION U/S 40(B)(V). THE SETTLED PRINCIPLE IS THAT A PRECEDENT IS TO BE APPL IED IN THE CONTEXT IT WAS PASSED AND NOT OTHERWISE. 8. IN THE LIGHT OF THE ABOVE DETAILED DISCUSSION, W E ARE OF THE CONSIDERED OPINION THAT THIS ISSUE HAS BEEN DEALT BY SEVERAL C OURTS AND TRIBUNALS AND EXAMINED ALL THE LEGAL ANGLES AND THEREUPON CAME TO THE CONCLUSION THAT IN A SITUATION WHEN THE EXCESS STOCK WAS DETECTED DURING THE COURSE OF SURVEY AND THE VALUE OF THE EXCESS STOCK WAS DECLARED BY THE A SSESSEE IN THE RETURN OF INCOME BY INCORPORATING THE SAME IN THE PROFIT AND LOSS ACCOUNT, THEN SUCH INCOME WAS TO BE TREATED AS BUSINESS INCOME FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT AS PRESCRIBED UNDER SECTION 40(B)( V) TO COMPUTE THE REMUNERATION TO PARTNERS. WE, THEREFORE, CONCLUDE T HAT THE LEARNED CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM TO THE A SSESSEE. FINDINGS OF LEARNED CIT(APPEALS) ARE HEREBY CONFIRMED AND THE G ROUND OF THE REVENUE IS DISMISSED. THE ASSESSEE FIRM HAD NO OTHER SOURCE OF INCOME EXCEPT INCOME FROM TRADING OF MARBLES, GRANITE, TILES ETC. DURING THE YEAR UND ER CONSIDERATION AS IS APPEARING FROM THE AUDITED FINANCIAL STATEMENT AND AUDIT REPORT FOR THE CONCERNED YEAR. BESIDES THAT ON SURVEY PROCEEDINGS NO DOCUMENTS WERE FOUND BY THE REVENUE AUTHORITIES WHICH REVEALED THAT THE ASSESSEE FIRM WAS INVOLVED IN OTHER BUSINESS ACTIVITIES AS WELL. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) AS WELL AS ASSESSING OFFICER BOTH ARE NOT CO RRECT IN RESTRICTING THE REMUNERATION OF THE PARTNERS. GROUND NO. 3 IS ALLOW ED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/10/2018 *R.N COPY FORWARDED TO: 8 ITA NO.04/BIL/2016 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT PRIVATE SECRETARY RAIPUR BENCH, RAIPUR DATE OF DICTATION 17.09 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17 .0 9 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS .0 9 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT . 10 .2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK . 10 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER