ITO 25(3)(2), MUMBAI V. KAUSHIK H PANDHI, MUMBAI

ITA 4226/MUM/2012

• Counselvise Citation: 422619914 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 4226 /MUM/2012 (ASSESSMENT YEAR : 2008-09) THE ITO-25(3)(2), C-11, R.NO.306,PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX,BANDRA(EAST) ... APPELLANT VS. SHRI KAUSHIK H. PANDHI, A/4, JOY CO-OP. SOC., CHARKOP, KANDIVALI (W) MUMBAI 400 013 PAN: AAFPP6497D .... RESPONDENT APPELLANT BY : SHRI RAKESH RANJAN RESPONDENT BY : SHRI JITENDRA JAIN DATE OF HEARING : 23/07/2015 DATE OF PRONOUNCEMENT : 09/09/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL BY THE REVENUE IS DIRE CTED AGAINST THE ORDER OF THE CIT(A)-35, MUMBAI DATED 26/03/2012 PERTAINING TO THE ASSESSMENT YEAR 2008-09, WHICH IN-TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 24/12/2010 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT T HE ACT). 2. THE RESPONDENT ASSESSEE IS AN INDIVIDUAL ENGAGE D IN THE BUSINESS OF DEALING IN MULTICOLOUR OFFSET PRINTERS & IMPORT ERS OF MACHINERY UNDER THE NAME AND STYLE M/S. SHREE KRISHNA AGENCI ES. 2 ITA NO. 4226 /MUM/2012 (ASSESSMENT YEAR : 2008-09) 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER NOTICED THAT ASSESSEE HAD PURCHASED 11 LAPTOPS FOR RS.6,55,000/-, ON WHICH DEPRECIATION ALLOWANCE OF RS.3,93,000/- WAS CLAIMED. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN THE DETAILS OF THE APPLICATION OF THE LAPTOPS SO PURCHASED. THE ASSESSING OFFICER HA S NOTED THAT NO EXPLANATION WAS RENDERED BY THE ASSESSEE AND ACCORD INGLY, HE DISALLOWED 50% OF THE DEPRECIATION CLAIMED OF RS.1 ,96,500/-. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE HOLDIN G THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ONLY ON THE BASIS OF CONJECTURES AND SURMISES. 4. AGAINST THE AFORESAID, LD. DEPARTMENTAL REPRESEN TATIVE CONTENDED ON BEHALF OF THE REVENUE THAT IN THE AB SENCE OF ANY DETAILS SHOWING USAGE OF SUCH LAPTOPS PURCHASED THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE. ACCORDING TO H IM PARTIAL DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS QUIT E JUSTIFIED. 5. IN REPLY, LD. REPRESENTATIVE FOR THE ASSESSEE FA IRLY CONCEDED THE POSITION THAT THERE WERE NO COGENT DETAILS WITH THE ASSESSEE TO SUBSTANTIATE THE USE OF THE AFORESAID LAPTOPS. 6. IN VIEW OF THE AFORESAID, WE FIND THAT THE DIREC TION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS.1 ,96,500/- ON LAPTOPS IS UNSUSTAINABLE. THEREFORE, THE ORDER OF CIT(A) O N THIS ASPECT IS SET ASIDE AND GROUND RAISED BY THE REVENUE IS ALLOWED. 7. THE SECOND GROUND RAISED BY THE REVENUE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS. 58,72,865/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED SAL ES. 3 ITA NO. 4226 /MUM/2012 (ASSESSMENT YEAR : 2008-09) 8. IN THIS CONTEXT, RELEVANT FACTS ARE THAT A VERIF ICATION EXERCISE CARRIED OUT BY THE ASSESSING OFFICER REVEALED THAT IN CASE OF FOUR PARTIES ASSESSEE HAD SHOWN THE AMOUNT RECEIVED AS ADVANCE, WHEREAS SUCH AMOUNTS WERE RECEIVED AGAINST THE SALES MADE. THER EFORE, THE ASSESSING OFFICER INFERRED THAT ASSESSEE HAD SUPPRE SSED THE SALES IN THE GUISE OF ADVANCES AND ACCORDINGLY, HE MADE AN ADDIT ION ON ACCOUNT OF THE GROSS PROFIT RELATABLE TO SUCH UNACCOUNTED SALE S. THE ADDITION ON ACCOUNT OF GROSS PROFIT @ 23.15% CAME TO RS.58,72, 865/-. ON THIS ASPECT, THE CIT(A) HAS DELETED THE ADDITION BY MAKI NG FOLLOWING DISCUSSIONS:- THE A.O MADE ADDITION OF GROSS PROFIT @23.15% ON U NACCOUNTED SALES OF RS.2,72,31,358/- AMOUNTING TO RS.58,72,865/- ON THE GROUND THAT THE APPELLANT HAS ALREADY DEBITED THE DIRECT AND INDIRECT EXPENSES IN THE PROFIT AND LOSS ACCOUNT AND HE TREATED THE GROSS PROFIT AS NET PROFIT OF THE AP PELLANT. AS AGAINST THIS, THE APPELLANT HAS SUBMITTED THAT THE AFORESAID AMOUNT O F RS.58,72,865/- WAS IN THE FORM OF ADVANCE. THE APPELLANT FURTHER SUBMITTED TH AT HE DID NOT SHOW THIS AMOUNT AS SALE AMOUNT BECAUSE SUCH AMOUNT WAS TAKEN AGAINS T DELIVERY OF GOODS TO THREE PARTIES AND THESE WERE ON APPROVAL BASIS. IT IS NO RMAL PRACTICE OF SUCH BUSINESS THAT WHEN THE MACHINERY IS HANDED OVER THE CUSTOMER, THE FINAL INVOICE IS PREPARED AFTER THE CUSTOMER IS SATISFIED FULLY BECAUSE THE COST IN VOLVED IS VERY HIGH. THE APPELLANT FURTHER SUBMITTED THAT FOR THIS SIMPLE REASON THE A PPELLANT HAD SHOWN THIS AMOUNT AS CLOSING STOCK AND THE SAID STOCK WAS DISCHARGED FROM THE BOOKS IN THE SUBSEQUENT ASSTT.YEAR. THE APPELLANT FURTHER SUBST ANTIATED THE SAME BY THE STATEMENT OF ACCOUNT OF SUBSEQUENT YEAR. IN VIEW O F THIS, IT IS FELT THAT ANY GROSS PROFIT ON THE SALE OF COMPUTER AND OTHER ELECTRONIC MATERIALS ARE NOT DENIED BY THE APPELLANT, THE IMPORTANT POINTS IN QUESTION HERE SH OULD BE POINT OF TIME OF TAXATION OF GROSS PROFIT OF THE ABOVE SALE AS REASONABLE OF ARRIVING OF GROSS PROFIT RATIO OF 23.15% AND TREATING THE SAME AS NET PROFIT BY THE A .O. AS REGARDS THE FIXATION OF 23.15% GROSS PROFIT RATIO BY THE A.O., TO MY MIND I T SEEMS ON A VERY HIGHER OR EXTREME SIDE AND MAY NOT GO BEYOND 10%. HOWEVER, G OING BY THE ABOVE CIRCUMSTANCES, EVEN THE GROSS PROFIT OF 10% CANNOT BE SUSTAINED IN A.Y. 2008-2009 BECAUSE AS PER THE APPELLANTS WRITTEN SUBMISSION, THE SAID STOCK IS DISCHARGED FROM THE BOOKS IN SUBSEQUENT YEARAND, THEREFORE, G ROSS PROFIT CANNOT BE BROUGHT TO TAX IN THE F.Y. 2007-08 I.E. A.Y.2008-2009. THE REFORE, THE SAME IS DELETED. 9. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE CONCEDED THAT THERE WAS NO DETAILS/MATERIAL AVAILABLE WITH THE AS SESSEE TO SUBSTANTIATE THE CONCLUSION DRAWN BY THE CIT(A) THA T THE IMPUGNED SUM 4 ITA NO. 4226 /MUM/2012 (ASSESSMENT YEAR : 2008-09) WAS SHOWN AS CLOSING STOCK AND THE SAID STOCK WAS DISCHARGED F ROM THE BOOKS IN THE SUBSEQUENT ASSTT.YEAR. SO HOWEVER, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT AP PLICATION OF THE GP RATE OF 23.15% TO ARRIVE AT THE ASSESSABLE INCOME O N ACCOUNT OF SUCH UNACCOUNTED SALES WAS ON A VERY HIGH SIDE AND CONT ENDED THAT GP RATE OF 7% BE CONSIDERED AS ADEQUATE TO COMPUTE THE INCO ME ON SUCH UNACCOUNTED SALES. 10. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OU T THAT ASSESSEE HAS HIMSELF DECLARED GP OF RS.33,64,633/- ON THE S ALES DECLARED OF RS.1,45,34,585/-, WHICH COMES TO 23.15%, THEREFORE, THE ASSESSING OFFICER HAS MADE NO MISTAKE IN APPLYING THE GP RAT E OF 23.15% TO COMPUTE INCOME FROM THE IMPUGNED UNACCOUNTED SALE S. 11. HAVING CONSIDERED THE RIVAL SUBMISSIONS, IN OUR VIEW, IT WOULD MEET THE ENDS OF JUSTICE IF THE ORDER OF THE CIT(A) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE NET IN COME ON ACCOUNT OF SUCH UNACCOUNTED SALES @10% INSTEAD OF COMPUTING GP BY APPLICATION OF 23.15%. AS A CONSEQUENCE, ON THIS ASPECT, THE R EVENUE PARTLY SUCCEEDS. 12. THE THIRD GROUND, IN THIS APPEAL RELATES TO ACT ION OF THE CIT(A) IN DELETING AN ADDITION OF RS.10,600/- MADE BY THE AS SESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT ON THE ACCOUN T OF OXFORD PRINTER. SIMILARLY, THE FOURTH GROUND OF APPEAL RELATES TO A CTION OF CIT(A) ON ACCOUNT OF DELETION OF AN AMOUNT OF RS.50,000/- BEI NG UNEXPLAINED CREDIT ON ACCOUNT OF M/S. ADHUNIK PRINTER. 5 ITA NO. 4226 /MUM/2012 (ASSESSMENT YEAR : 2008-09) 13. ON BOTH THESE ASPECTS, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED AT THE TIME OF HEARING THAT THE RESPONDEN T ASSESSEE HAS NO COGENT MATERIAL TO DEFEND THE ACTION OF THE CIT(A) IN DELETING THE IMPUGNED ADDITION. ON ACCOUNT OF AFORESAID, WE HER EBY REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING O FFICER ON THESE ASPECTS. THUS, GROUND OF APPEAL NOS.3 & 4 RAISED BY THE REVENUE ARE ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/09/20 15. SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI,DATED 09/09/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS