SURESHKUMAR GHEWARCHAND HUNDIA, MUMBAI V. ACIT CC 14, MUMBAI

ITA 4323/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3140 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SUBRAMANIAN
• Assessee Lawyers: VIKRAM BATRA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.C. SHARMA(ACCOUNTANT MEMBER) AND SHRI AMIT SHUKLA (JUDICIAL MEMBER) ITA NO. 4323/MUM/2012 ASSESSMENT YEAR: 2005-06 SHRI. SURESH KUMAR GHEWARCHAND VS. ACIT, CC-14 HUNDIA 14/A, BHARTA N NAGAR MUMBAI- 400020 OPP. SHALIMAR CINE AGRANT ROAD.MUMBAI PAN NO. AAQPH7289E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI. M. SUBRAMANIAN ASSESSEE BY : SHRI. VIKRAM BATRA DATE OF HEARING : 08/09/2016 DATE OF PRONOUNCEMENT : 08/09/2016 ORDER PER R.C. SHARMA, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT(A) FOR THE AY 2005-06 IN THE MATTER OF IMPOSITION OF PENALTY UNDE R SECTION 271(1) (C) OF THE INCOME TAX ACT. 2. AT THE OUTSET THE LD. AR PLACED ON RECORD QUANTUM O RDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN ADDITION MADE BY AO ON ACCOUNT OF CASH SEIZED OF RS. 1.50 CRORES AND ESTIMA TED ADDITION MADE OF RS. 1,75,55,450/- WAS DELETED BY THE TRIBUNAL VIDE ITS OR DER DATED 20/07/2016. IT WAS CONTENDED THAT WHEN THE QUANTUM ITSELF HAS BEEN D ELETED BY THE TRIBUNAL, THE PENALTY SO IMPOSED WITH RESPECT TO THESE ADDITIONS HAS NO LEGS TO STAND. 2 3. WE HAD CAREFULLY GONE THROUGH THE ORDER OF TRIBUN AL IN ITA NO. 4660/MUM/2009 FOR THE AY 2005-06, DT. 20/07/2016, WHERE IN BOTH THE ADDITIONS HAVE BEEN DELETED BY THE TRIBUNAL AFTER HAVI NG FOLLOWING OBSERVATIONS: 3.2 WE FIND THAT STATEMENT MADE BY THE MANAGER AT AHMADABAD INTER ALIA STATED THAT ALL SALES AT THE AHMEDABAD WERE BE ING MADE THROUGH BANK, WHEREAS IN PARA NO. 19 OF ASSESSMENT ORDER, T HE ASSESSING OFFICER HIMSELF HAS WORKED OUT THE OTHER DISALLOWANCE BASED ON THE CASH SALES OF RS. 319.99 CRORES AT AHMEDABAD. THEREFORE TO SAY TH AT ALL SALES AT AHMEDABAD WAS THROUGH CHEQUES/BANKS IS CONTRARY TO FACTS ON RECORD. HENCETHE STATEMENT GIVEN BY THE MANAGER AT AHMEDABA D CANNOT BE TAKEN AS SACROSANCT. REGARDING THE OBSERVATION THAT DRIVER OF ASSESSEE HAD BROUGHT THE CASH FROM AHMEDABAD WASNOT CORROBORATED BY HIS DRIVER OR BY HIS SON. IN THIS REGARD, STAND OF ASSESSEE HAS BEEN THAT THEIR STATEMENT RECORDED SHOULD NOT BE RELIED AND TRUSTED BECAUSE T HE DRIVERAND HIS SON WERE NOT LOOKING FOR HIS DAY TO DAY BUSINESS ACTIVI TIES. THEY WERE NOT ASSIGNED BUSINESS OF ASSESSEE. THEY WERE NOT AWARE OF THE MINUTE BUSINESS AFFAIRS OF ASSESSEE. MOREOVER, THE ASSESSE HIMSELF WAS NERVOUS BECAUSE HE FACED THE SEARCH ACTION FIRST TIME. REGARDING THE O BSERVATION OF CIT (A) THAT THE APPELLANT HAD FAILED TO FURNISH THE NAMES AND P ARTICULARS OF THE PARTIES FROM WHOM THE ALLEGED CASH OF RS. 1.5 CRORES WAS RE CEIVED AT AHMEDABAD, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSE S UBMITTED THAT IT WAS PRACTICALLY NOT POSSIBLE TO SUPPLY THE NAME AND ADD RESSES OF THOSE CUSTOMERS TOWHOM CASH SALES WERE MADE BECAUSE THE A SSESSEE HAS NOT BEEN MAINTAINING THE RECORDS OF CASH SALE INCLUDING THE NAME OF CUSTOMERS RIGHT FORM THE BEGINNING. IN CASE OF R.B.JESSARAM F ETEHCHAND ( SUGAR DEPT) VS. CIT 75 ITR 33 BOM WHEREIN DELIVERY OF GOODS WAS BEING TAKEN AGAINST THE CASH PAYMENT. IT WAS HELD THAT THE NAME AND ADDRESS OF THE PURCHASERS ARE NECESSARY TO BE MAINTAINED. REGARDING FINDINGS OF THE ASSESSING OFFICER THAT ENTRIES OF RS. 1.5 CRORES WAS NOT FOUND IN THE CASH BOOK ON THAT DAY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSE SUBMI TTEDTHAT IN MODERN BUSINESS ENVIRONMENT IT IS DIFFICULT TO MAINTAIN DA Y TO DAY SALE RECORD. FOR EXAMPLE, A BUSINESS MAN WHO HAS 1000 CUSTOMERS, AND SOME CUSTOMERS DEPOSIT THE CASHIN THE BANK ACCOUNT DIRECTLY AND TH EY INFORM THE ASSESSE AFTER TWO DAYS ABOUT THEIR DEPOSIT OF CASH IN THE A SSESSES BANK ACCOUNT, IN THAT CASE THE ASSESSE CANNOT DO ENTRY OF SUCH TRANS ACTION AND IT MAY BE ENTERED IN THE BOOKS AFTER TWO DAYS AND SOMETIMES H E KEEPS THE CASH BOOK OPEN AND DOES THE ENTRY ON THE SAME DAY, RETROSPECT IVELY AS CASE MAY BE. THIS IS PRACTICAL ASPECT OF MANAGING BUSINESS AFFAI RS BY BUSINESSMAN IS HIS SOLE DISCRETION. REGARDING THE BELIEF OF THE HUGE L OSS OF RS. 4.81 CRORES APPROXIMATELY DURING THE PRE-SEARCH PERIOD, WE FIND THAT THERE IS NO CONNECTION WITH CASH FLOW OF THE ASSESSEES BUSINES S WITH NET LOSS SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT TRY ANY RECONCILIATION BETWEEN CASH SALES AND LOSS. AS PERPARA 17 OF ASSESSMENT OR DER THE CASH SALES MADE AT AHMEDABAD WAS AT RS. 351.93 CRORES AND OUT OF TH IS RS. 319.99CRORES ARE FOR THE PERIOD 1/6/2004 TO 31/3/2005. THE ADDITION OF RS. 1.5 CRORES IS NOT 3 CALLED FOR AS THE ASSESSE IS HAVING TURNOVER OF RS. 1200 CRORES AND AROUND RS. 600 CRORES WHICH IS BY WAY OF CASH SALES. THE PERCE NTAGE OF SEIZED CASH RS.1.5 CRORES WITH RS.600 CRORES ( THAT IS 1.5CRORE / 600 CRORES X 100 = 0.25%). THUS RS. 1.5 CRORES IS NOT EVEN 1% OF TOTAL CASH SA LES THEREFORE IT IS NOT A MATERIAL AND SIGNIFICANT FIGURE FOR IN COMPARISON T O CASH SALES RS. 600 CRORES. ACCORDING TO MATERIALITY CONCEPT, TRIVIAL FIGURES H AVE TO BE STATE DISREGARDED. THE ASSESSE IN HIS STATEMENT ALWAYS SA ID TO THE INCOME TAX AUTHORITIES THAT RS. 1.5 CRORES BELONG TO ASSESSES BUSINESS. THE ASSESSING OFFICER DID NOT BRING ANY CONTRARY MATERIAL ON THE RECORD THAT AMOUNT OF RS. 1.5 CRORES DID NOT BELONG TO ASSESSES BUSINESS. TH E ASSESSING OFFICER DID NOT MAKE RECONCILIATION OF TOTAL CASH SALES TO JUSTIFY WHETHER RS. 1.5 CRORE IS PART OF BUSINESS OF ASSESSEE OR NOT. THE ASSESSING OFFIC ERHAS NOT EVEN REJECTED THE BOOKS OF THE ASSESSE AT ANY STAGE. NEITHER CASH SAL ES NOR TOTAL TURNOVER OF THE ASSESSE WAS OBJECTED BY THE ASSESSING OFFICER I N ANY MANNER. WE FIND THAT ADDITION IS NOT BASED ON COGENT REASONING AS D ISCUSSED ABOVE, SO SAME IS NOT JUSTIFIED. ASSESSING OFFICER IS DIRECTE D TO DELETE THE SAME. 4. ASSESSING OFFICER MADE OTHER ADDITION OF RS. 1,7 5,55,450/- AS UNDISCLOSED INCOME OUT OF CASH SALES @ 0.55% OF CASH SALES. THI S ADDITION WAS MADE BY ASSESSING OFFICER DUE TO DIFFERENTIAL RATES OF SALE S TAX IN MAHARASHTRA ( 1% ) AND GUJARAT (0.25%) AND AFTER DEDUCTING 0.20% ON AC COUNT OF EXPENDITURE. THE ASSESSING OFFICER ADDED 0.55% OF TOTAL CASH SAL ES AT AHMEDABAD AMOUNTING TO RS. 319.99 CRORES AND THUS WORKED OUT ADDITION AT RS. 1,75,55,450/- 4.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THECASE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DEPARTMENTAL REPRESENTATIVE FOR REVENUE HAS REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER. ON THE OT HER HAND THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS STAT ED THAT THE SAID ADDITION IS ON ACCOUNT OF GUESS, SURMISE AND CONJECTURE WITH OUT BRINGING ANY COGENT MATERIAL ON RECORD. 4.2 WE FIND NOTHING ON RECORD TO SUGGEST THAT THE S ALES TAX AUTHORITIES HAVE DISTURBED THE SALE RESULT OF ASSESSEE IN ANY MANNER . AT THE TIME OF SEARCH THE INCOME TAX AUTHORITIES DID NOT CONFRONT THIS IN FORMATION WITH THE SALES TAX AUTHORITIES TO JUSTIFY THEIR ACTION. SALES TAXI S LEVIED ON SALES, WHICH IS SUBJECT MATTER OF SALES TAX DEPARTMENT AND NOT THE INCOME TAX DEPARTMENT. THE ASSESSING OFFICER DID NOT MAKE ANY RECONCILIATION BETWEEN THE SALES TAX PAID TO THE CONCERNED SALES TAX AUTHO RITIES AND SALES TAX RECORDED IN THE BOOKS OF THE ASSESSEE. THE OBJECT O F THE INCOME TAX DEPARTMENT IS TO LEVY THE INCOME TAX ON NET INCOME. ESTIMATING OF DIFFERENCE OF SALES TAX ON TURNOVER IS NOT BASED ON COGENT EVIDENCE CANNOT BE MADE BASIS OF ADDITION IN QUESTION. THUS, ADDITION IN QUESTION IS NOT WELL FOUNDED. SAME IS DIRECTED TO BE DELETED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED ON BOTH ACCOUNT AS DISCUSSED ABOVE. AS THE ADDITION ITSELF HAD BEEN DELETED, PENALTY ORDE R HAS NO LEGS TO STAND WITH RESPECT TO THE ADDITION SO DELETED BY THE TRIBUNA L. THE LD. DR HAS FAIRLY 4 CONCEDED THAT ADDITION HAVE BEEN DELETED BY THE TRIBU NAL VIDE ITS ORDER DT. 20/07/2016. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/09/2016. SD/- SD/- (AMIT SHUKLA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 08 /09/2016 AG (ON TOUR) 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, MUMBAI 5 DICTATION PAD ATTACHED DATE INITIAL 1. DRAFT DICTATED ON 08/09/2016 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08/09/2016 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT 08/09/2016 SR.PS 7. FILE SENT TO THE BENCH CLERK 12/09/2016 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER