Income Tax Office, Barabanki V. M/s Laxmi Food Products, Barabanki

ITA 434/LKW/2014

• Counselvise Citation: 43423714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAYANK MOHAN MISHRA
• Keywords: Unexplained expenditure; Loose papers; Opportunity of being heard
• Section: 69C; 143(3); 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.434/LKW/2014 ASSESSMENT YEAR 2009-10 M/S LAXMI FOOD PRODUCTS, OPP. PAC GATE, GONDA ROAD BARABANKI-225001 PAN AADFL 0596 M VS INCOME TAX OFFICER, B-5/263, BEGUMGANJ, CIVIL LINES, BARABANKI- 225001 (RESPONDENT) (APPELLANT) SHRI AMIT NIGAM , DR APPELLANT BY SHRI MAYANK MOHAN MISHRA, ADVOCATE RESPONDENT BY 07/10/2015 DATE OF HEARING 19 / 1 1 /2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT (A)-II, LUCKNOW DATED 10.01.2014 FOR THE AY 2009-10. 2. THE GROUND NO.1 RAISED BY THE REVENUE IS AS UNDE R: 1. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCK NOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING R ELIEF OF RS. 48,63,831/- UNDER HEAD UNDISCLOSED INVESTMENT U /S 69B OF THE INCOME-TAX ACT, 1961. 3. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT AS PER THE ASSESSMENT ORDER, THE AO HAS NOTED THAT SALE BILLS OF RS.60,50,669/- WERE NOT FOUND RECORDED IN THE STOCK REGISTER AND THEREFORE, THE AO ADDED THE ENTIRE AMOUNT U/S 69B OF THE ACT BY ALLEGING THAT THIS IS INVESTMENT FROM UNDISCLOSED 2 SOURCES. WHEN THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE LD. CIT (A), HE HAS HELD THAT INSTEAD OF MAKING ADDITION OF ENTIRE AMOUNT OF UNRECORDED SALES, ADDITION SHOULD BE MADE TO THE EX TENT OF GP @ 10.75% OF TOTAL UNRECORDED SALES. HE COMPUTED THE GROSS PROFI T ON THIS BASIS AT RS.6,50,447/-. IN ADDITION TO THAT, HE HAS ALSO HEL D THAT FIRST SALE OF RS.6,00,998/- WAS EFFECTED ON 28.07.2008 AND AFTER DEDUCTING THE GROSS PROFIT THERE FROM, INITIAL CAPITAL REQUIRED FOR MAKING THI S SALE ON 28.07.2008 WAS TO THE EXTENT OF RS.5,36,391/-. HE HELD THAT THE ADDIT ION SHOULD BE MADE OF SUCH INITIAL CAPITAL INVESTED BY THE ASSESSEE FROM UNDIS CLOSED SOURCE FOR AFFECTING THIS OUT OF BOOKS SALE. IN THIS MANNER, HE CONFIRME D THE ADDITION OF RS.11,86,838/- BEING GP OF RS.6,50,447/-+ INITIAL C APITAL REQUIRED OF RS.5,36,391/- AND DELETED THE BALANCE ADDITION. 5. CONSIDERING ALL THESE FACTS, WE FIND NO INFIRMIT Y IN THE ORDER OF LD. CIT(A) ON THIS ISSUE BECAUSE IN RESPECT OF OUT OF B OOKS SALES, ADDITION OF INITIAL CAPITAL AND GROSS PROFIT ON UNRECORDED SALES MEETS ENDS OF JUSTICE AND ADDITION OF ENTIRE UNRECORDED SALES IS NOT PROPER. HENCE, ON THIS ISSUE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A), AC CORDINGLY, GROUND NO.1 OF THE REVENUE IS REJECTED. 6. THE GROUND NO.2 RAISED BY THE REVENUE IS AS UNDE R: 2. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 16,48,575/- ON ACCOUNT OF UNDISCLOSED INVESTMENT U/S 69 OF THE INCOME-TAX ACT , 1961. 7. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT IT IS NOTED BY THE AO IN PARA 6 OF THE ASSESSMENT ORDER IN COURSE OF EXAMINATION OF IMPOUNDED MATERIAL, IT WAS OBSERVED AT PAGE 15 OF L P-38 OF ANNEXURE-A, THERE 3 IS A CLOSING BALANCE OF RS.16,48,575/- IN THE NAME OF SHRI VISHUN KUMAR ACCOUNT. THE AO ASKED THE ASSESSEE TO EXPLAIN THE N ATURE AND SOURCE OF THIS INVESTMENT AND RECONCILE THE SAME WITH THE LEDGER. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THIS IS INTEREST CALCULATION OF SHRI VISHUN KUMAR (PARTNER) OF FIRM WHO WAS INDULGED IN MONEY L ANDING BUSINESS FROM HIS ACCUMULATED AGRICULTURE INCOME. IT WAS ALSO SUBMITT ED THAT THIS WAS TAKEN INTO CONSIDERATION IN HIS CASE U/S 143(3) FOR AY 2004-05 BY THE AO OF BARABANKI AND THE CASE WAS FINALIZED ON 31.12.2009. THE AO WA S NOT SATISFIED AND HE HAS GIVEN A FINDING IN THE ASSESSMENT ORDER THAT TH IS ASSESSMENT ORDER DOES NOT REVEAL THIS CONTENTION AND THE AO MADE ADDITION OF THIS ENTIRE AMOUNT OF RS.16,48,575/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS HELD BY THE LD. CIT(A) THAT TRANSACTION REFL ECTED IN THE SAID PAPER DOES NOT BELONG TO THE ASSESSEE. HE HAS ALSO HELD THAT T HIS TRANSACTION DOES NOT PERTAIN TO THE PRESENT ASSESSMENT YEAR BUT WE DO NO T FIND ANY BASIS FOR THESE FINDINGS OF LD. CIT(A). AT THE SAME TIME, WE FIND T HAT AO HAS ALSO DECIDED THE ISSUE WITHOUT EXAMINING THE CONCERNED PERSON I.E. V ISHUN KUMAR, PARTNER OF THE ASSESSEE FIRM. 9. UNDER THESE FACTS, WE FEEL IT PROPER THAT THIS M ATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER EXAMINI NG THE CONCERNED PERSON I.E. SHRI VISHUN KUMAR, PARTNER OF THE FIRM. HENCE, WE S ET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BA CK TO THE FILE OF THE AO FOR FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFT ER PROVIDING ADJUDICATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDI NGLY, GROUND NO.2 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. THE GROUND NO.3 RAISED BY THE REVENUE IS AS UND ER: 3. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING R ELIEF OF RS. 12,30,002/- UNDER HEAD 'EXCESS STOCK'. 4 11. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE FIN D THAT THIS ADDITION OF RS. 12,73,325/- WAS MADE BY THE A.O. ON THIS BASIS THAT ACTUAL STOCK FOUND IN SURVEY WAS RS. 11,11,685/- AND BOOK STOCK WAS (-) R S. 161,640/- AND THEREFORE, THERE WAS EXCESS STOCK FOUND OF RS. 12,7 3,325/-. BEFORE CIT (A), THE ASSESSEE SUBMITTED THE REVISED TRADING ACCOUNT TO SHOW BOOK STOCK ON THE DATE OF SURVEY. THE DIFFERENCE IN THE WORKING O F THE A.O. AND OF THE ASSESSEE IN THIS REVISED TRADING ACCOUNT IS THIS TH AT THE A.O. HAS NOT CONSIDERED VARIOUS EXPENSES SUCH A LABOUR CHARGES R S. 314,503/-, DIESEL RS. 936,053/-, ELECTRIC RS. 30,54,090/-, AND VARIOUS OT HER EXPENSES SUCH AS FREIGHT INWARD, MANDI SULK, TRADE TAX, PACKING, AND WAGES AND IF THE SAME ARE CONSIDERED, THE BOOK STOCK COMES TO RS. 58,5354 4/. IT WAS ALSO SUBMITTED BEFORE CIT (A) THAT THE SURVEY TEAM AND THE A.O. HA D NOT INCLUDED THE STOCK OF WHEAT 3727 QUINTALS RS. 42,86,650/- AND REFRACTI ON 88 QUINTALS RS. 52,800/- AND AFTER CONSIDERING THE SAME, ACTUAL PHY SICAL STOCK WAS RS. 54,50,535/- AND IN FACT, THERE WAS NO EXCESS STOCK FOUND BUT LES STOCK FOUND OF RS. 403,009/-. LEARNED CIT (A) OBTAINED REMAND R EPORT FROM THE A.O. ON THIS ISSUE BUT IT IS NOTED BY CIT (A) IN HIS ORDER THAT IN THE REMAND REPORT, THE A.O. HAS REPEATED THE FINDINGS IN THE ASSESSMENT OR DER WITHOUT ANY COMMENTS ON THESE CONTENTIONS. LEARNED DR OF THE REVENUE ALS O COULD NOT POINT OUT ANY DEFECT IN THESE CONTENTIONS. WE ALSO AGREE THAT FOR WORKING OUT BOOK STOCK, SALE LESS GROSS PROFIT SHOULD BE REDUCED FROM OPENI NG STOCK, PURCHASES AND ALL EXPENSES INCURRED BEFORE SALE EXCLUDING INTEREST AN D ADMINISTRATIVE EXPENSES. HENCE, WE DO NOT FIND ANY MISTAKE IN THE WORKING OF THE ASSESSEE AS PER WHICH, LESSER STOCK FOUND IS WORKED OUT AT RS. 403, 009/. ABOUT THIS LESS STOCK FOUND IN SURVEY, LEARNED CIT (A) HAS HELD THAT IT S HOULD BE CONSIDERED AS SALE OUTSIDE BOOKS AND HE UPHELD AN ADDITION OF RS. 43,3 23/- BEING GROSS PROFIT @ 10.75 % OF RS. 403,009/-. CONSIDERING THE FACTS AS DISCUSSED, WE FIND NO 5 INFIRMITY IN THE ORDER OF CIT (A) ON THIS ISSUE. AC CORDINGLY, GROUND NO. 3 IS REJECTED. 13. THE GROUND NO.4 RAISED BY THE REVENUE IS AS UND ER: 4. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 1,00,000/- ON ACCOUNT OF UNDATED AND UNNAMED DEBIT VOUCHERS U/S 60C OF THE I NCOME TAX ACT, 1961'. 14. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE FIN D THAT THIS ADDITION OF RS.1.00 LAKH WAS MADE BY THE AO ON THIS BASIS THAT ON EXAMINATION OF LP-18, SIX UNNAMED AND UNDATED DULY RECEIVED DEBIT VOUCHER S WERE FOUND OF WHICH TOTAL AMOUNT IS RS.1.00 LAKH. WHEN THE AO ASKED THE ASSESSEE TO EXPLAIN THESE DEBIT VOUCHERS, IT WAS SUBMITTED BY THE ASSES SEE BEFORE THE AO THAT THESE PAYMENTS WERE MADE TO THE FARMERS IN THE YEAR 2007-08. IT IS NOTED BY THE AO THAT NO DOCUMENTARY EVIDENCE COULD BE SUBMIT TED IN SUPPORT OF THIS CONTENTION. THE AO HELD THAT THESE ARE UNEXPLAINED EXPENDITURE AND HE HAS MADE ADDITION U/S 69C OF THE ACT. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), HE DELETED THIS ADDITION ON THIS BASIS THAT SINCE THESE VOUCHERS DO NOT CONTAIN THE DATE AND NAME OF THE RECIPIENT AND THE NATURE OF TRANSACTION IS NOT REFLECTED ON THESE PAP ERS, THESE PAPERS SHOULD BE CONSIDERED AS DEAF AND DUMB IN NATURE AND NO ACTION CAN BE TAKEN IN THE HANDS OF THE ASSESSEE DURING THE PRESENT YEAR ON TH ESE DOCUMENTS. ON THIS BASIS, HE DELETED THIS ADDITION. 16. WE ARE OF THE CONSIDERED OPINION THAT THIS IS U NDISPUTED FACT THAT THESE PAPERS WERE FOUND IN COURSE OF SURVEY IN THE ASSESS EES PREMISES ON 06.03.2009 AND THEREFORE, THE BURDEN WAS ON THE ASS ESSEE TO EXPLAIN NATURE OF THESE DOCUMENTS ALONG WITH THE NAME OF RECIPIENT AND DATE. WHEN THE 6 ASSESSEE HAS MADE A SUBMISSION BEFORE THE AO, THESE PAYMENTS WERE MADE TO FARMERS IN THE YEAR 2007-08, THE ASSESSEE SHOULD HAVE BROUGHT ON RECORD THE EVIDENCE IN SUPPORT OF THIS CONTENTION. THIS SU BMISSION OF THE ASSESSEE BEFORE THE AO ITSELF ESTABLISHES THAT THE ASSESSEE IS AWARE ABOUT THESE DOCUMENTS AND THESE ARE NOT DEAF AND DUMB DOCUMENTS BECAUSE HAD IT BEEN DEAF AND DUMB DOCUMENTS, THE ASSESSEE COULD NOT HAV E MADE ANY SUBMISSIONS BEFORE THE AO ABOUT THESE DOCUMENTS BUT THE FACT IS THAT THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT THESE ARE PAYMENTS MADE TO FARMERS IN THE YEAR 2007-08. HAVING SAID SO BEFORE THE AO, THE ASSESSEE SHOULD HAVE BROUGHT ON RECORD EVIDENCE TO ESTABLISH THIS CONTEN TION AND SINCE THE ASSESSEE HAS FAILED TO DO SO, IT HAS TO BE ACCEPTED THAT THE SE ARE PAYMENTS OF THE PRESENT YEAR MADE FROM UNDISCLOSED SOURCES AND THER EFORE, SECTION 69C OF THE ACT IS APPLICABLE. THEREFORE, WE REVERSE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. GROUND NO.4 IS AL LOWED. 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. G ARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19/11/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR