The ACIT, Central Circle-2, RAJKOT-GUJARAT V. M/s Standard Buildcon, JAMNAGAR

ITA 436/RJT/2007

• Counselvise Citation: 43624914 RSA 2007
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LD BHARTI
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained expenditure; Income from undisclosed sources; Peak credit; Corroborative evidences
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NOS.435 & 436/RJT/2007 (ASSESSMENT YEARS 2003-04 & 2004-05) ACIT, CENT.CIR.2 VS M/S STANDARD BUILDCON RAJKOT INDRAPRASTHA COMPLEX PANCHESHWAR TOWER DIST : JAMNAGAR PAN :AAHFS3664B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LD BHARTI RESPONDENT BY : SHRI JC RANPURA O R D E R PER AL GEHLOT, AM BOTH THESE APPEALS ARE FILED BY THE REVENUE AND AR E DIRECTED AGAINST THE SEPARATE ORDERS BOTH DATED 02-02-2007 PASSED BY THE CIT(A)-IV, AHMEDABAD FOR THE ASSESSMENT YEARS 2003-04 & 2004-05. 2. THE SOLE EFFECTIVE GROUND TAKEN IN BOTH THE APPE ALS IS IN RESPECT OF DELETION OF ADDITION OF RS.21,55,645 FOR ASSESSMENT YEAR 2003-04 AND RS.28,48,733 FOR ASSESSMENT YEAR 2004-05 MADE ON AC COUNT OF UNEXPLAINED EXPENDITURE. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH OP ERATION U/S 132 OF THE ACT WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE ON 20-02-2004. DURING THE SEARCH CASH BOOK OF THE ASSESSEE WAS SEIZED ALONGWI TH A NUMBER OF VOUCHERS. ON SCRUTINY OF THESE SEIZED VOUCHERS IT WAS FOUND T HAT THE VOUCHERS WERE NOT ENTERED INTO CASH BOOK OF THE ASSESSEE. THE ASSESS EE WAS ASKED TO FURNISH THE DETAILS AND AFTER ENTERING ALL THESE VOUCHERS, THE NEGATIVE PEAK BALANCE WAS WORKED OUT OF RS.28,48,733 BY THE ASSESSEE HIMSELF FOR ASSESSMENT YEAR 2004- 05. THE PEAK BALANCE WORKED OUT BY THE ASSESSEE HA S BEEN VERIFIED BY THE ITA NO.435 & 436/RJT/2007 2 ASSESSING OFFICER AND HE MADE AN ADDITION OF RS.28, 48,733 FOR THE ASSESSMENT YEAR 2004-05. SIMILARLY FOR ASSESSMENT YEAR 2003-0 4 IT WAS FOUND THAT THE VOUCHERS RELEVANT TO THE YEAR WERE NOT ENTERED IN T HE CASH BOOK.. THE ASSESSEE SUBMITTED THAT THE VOUCHERS WERE FOR ADVANCES GIVEN FROM TIME TO TIME TO THE SUPERVISORS AND IT WAS NOT NECESSARY TO ENTER THE S AME IN THE BOOKS AS NO EXPENDITURE HAS BEEN INCURRED. THE ADVANCES VOUCHE R FOR EXPENSES ARE PREPARED BY THE SUPERVISOR OF THE RELEVANT SITE WHI LE MAKING PAYMENTS TO THE WORKERS AND THE CONTRACTOR ON TEMPORARY BASIS OR AS PER THE INSTRUCTION OF THE MANAGEMENT INDICATE ONLY THE HYPOTHETICAL FIGURE OR ESTIMATE FIGURE OF THE EXPENDITURE TO BE INCURRED. THE ASSESSING OFFICER DID NOT SATISFY WITH THE EXPLANATION OF THE ASSESSEE AND CALCULATED SUCH EXP ENDITURE AT RS.21,55,645 AND THE SAME WAS ADDED AS UNDISCLOSED INCOME FOR AS SESSMENT YEAR 2003-04. 4. THE CIT(A) DELETED THE SAID ADDITION FOR ASSESSM ENT YEAR 2003-04 BY OBSERVING THAT ADVANCE WERE GIVEN TO THE SUPERVISOR Y STAFF ENGAGED IN THE CONSTRUCTION WORK FOR SHORT PERIOD ONLY IN ORDER TO MEET THE EXIGENCIES OF THE WORK. THESE ADVANCES DID NOT REPRESENT ACTUAL EXPE NDITURE SINCE THE ACTUAL EXPENDITURE WAS MUCH MORE THAN THE ADVANCES SHOWN I N THE SEIZED MATERIAL. AS REGARDS THE PREPARATION OF VOUCHERS, THE CIT(A) NOT ICED THAT VOUCHERS WERE PREPARED BY THE ASSESSEE FOR THE PURPOSE OF ACCOUNT ING ACTUAL EXPENDITURE AND ADVANCES WERE ONLY FOR TEMPORARY PERIOD. THE ACTUA L PAYMENT WAS MADE BY CHEQUES AS ADMITTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS ITSELF. THE CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE HAS FILED A CHART SHOWING DATE- WISE ADVANCE PAYMENTS AND AS PER THE CASH BOOK, CAS H BALANCE WAS AVAILABLE FOR THOSE ADVANCES. THE ADDITION FOR ASSESSMENT YE AR 2004-05 WAS DELETED ON THE GROUND THAT ADDITION WAS DOUBLE ADDITION AS ASS ESSEE HIMSELF HAS SHOWN THIS AMOUNT OF RS.28,48,733 IN PROFIT & LOSS ACCOUNT. 5. THE LD.DR SUBMITTED THAT THE CIT(A) HAS ACCEPTED THE ASSESSEES CONTENTION WITHOUT SUPPORTING EVIDENCE AND MATERIAL . HE RELIED UPON THE ORDERS OF THE ASSESSING OFFICER. ITA NO.435 & 436/RJT/2007 3 6. THE LD.AR, ON THE OTHER HAND, RELIED UPON THE OR DERS OF CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS FURNISHED EXPLANATI ON REGARDING EACH SEIZED PAPER IN THE FORM OF CHART, ANNEXURE-3, PAPER BOOK PAGES 86-98; ANNEXURE 21, PAPER BOOK PAGES 99 TO 107; AND ANNEXURE 27 PAPER BOOK PAGES 108 TO 115. THE LD.AR SUBMITTED THAT THE VOUCHERS FOUND AND SEI ZED AT THE TIME OF SEARCH RELATED TO ADVANCE PAYMENTS WHICH WERE NOT ENTERED IN THE BOOKS OF ACCOUNT BECAUSE OF THE FACT THAT SUCH ADVANCES WERE TEMPORA RY ADVANCES MADE AT THE SITES BY EMPLOYEES AND ON RECEIPT OF ACTUAL PAYMENT S OF CHEQUES, THE CONTRACTOR USED TO RETURN THE ADVANCES GIVEN. THE ADVANCES WE RE GIVEN OUT OF THE SUFFICIENT FUNDS AVAILABLE AS PER CASH BOOK. A CHART SHOWING DATE-WISE ADVANCE PAYMENT MADE AND CASH AVAILABLE AS PER CASH BOOK WAS FURNIS HED BEFORE THE ASSESSING OFFICER OF WHICH COPY HAS BEEN PLACED AT PAGES 141 TO 145 OF THE PAPER BOK. THE LD.AR POINTED OUT THAT SUCH PAYMENTS USED TO RETURN ON DISBURSEMENT BY ACCOUNT PAYEE CHEQUES DETAILS OF SUCH PAYMENTS ARE DEBITED TO RESPECTIVE ACCOUNTS OF WHICH COPY HAS BEEN PLACED AT PAGES 116 TO 140 OF T HE PAPER BOOK AND A CHART SHOWING THE PERSON-WISE DETAILS PLACED AT PAGES 83 TO 85 OF ASSESSEES PAPER BOOK. THE LD.AR SUBMITTED THAT THE ASSESSING OFFIC ER FAILED TO APPRECIATE THE FACT THAT DURING THE COURSE OF SEARCH CONSTRUCTION WORK AT VARIOUS SITES WAS IN PROGRESS. THE VOUCHERS FOR ADVANCES WERE KEPT BY T HE EMPLOYEES / SUPERVISORS AT DIFFERENT SITES FOR THEIR REFERENCE SO AS TO ENA BLE THEM TO COLLECT THE ADVANCES GIVEN BACK TO RESPECTIVE PERSONS FOR MAKING FINAL P AYMENTS. THE VOUCHERS FOUND OF THE LESSER AMOUNT THAN THE ACTUAL EXPENSES CLAIM ED BY THE ASSESSEE. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION ONLY ON SUSPICION AND WITHOUT ESTABLISHING THAT THE ASSESSEE INCURRED SO-CALLED EXPENDITURE BY BRINGING ON RECORD ANY MATERIAL. THE ASSESSING OFF ICER DID NOT EXAMINE ANY OF THE PERSONS TO WHOM ADVANCES WERE MADE. THEREFORE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. THE LD.AR IN SUPPORT OF HIS CONTENTIONS HAS RELIED UPON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE O F JS PARKAR VS VV PALEKAR 94 ITR 614 (BOM). HE HAS ALSO PLACED RELIANCE ON T HE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS STA R BUILDERS 294 ITR 338 (GUJ). ITA NO.435 & 436/RJT/2007 4 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. A SEARCH WAS CARRIED OUT AT THE PREMISES OF THE ASS ESSEE ON 20-02-2004. SOME VOUCHERS WERE FOUND DURING THE COURSE OF SEARCH WHI CH HAVE BEEN SEIZED. ON THE BASIS OF THOSE VOUCHERS, THE ASSESSING OFFICER FOUND THAT ADVANCES WERE GIVEN BUT THE SAME WERE NOT ACCOUNTED FOR IN THE CA SH BOOK. THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS EX PLAINED THE SEIZED MATERIAL, VOUCHER-WISE. THOSE VOUCHERS PERTAINED TO THE ADVA NCES GIVEN OUT OF THE CASH BALANCE IN THE CASH BOOK. WE FIND THAT THE ASSESSE E HAS FOLLOWED A PECULIAR SYSTEM OF ACCOUNTING WHICH WAS CONVENIENT TO SUIT I TS BUSINESS IN RESPECT OF ADVANCES GIVEN AT DIFFERENT SITES, RECORDED ON SLI PS, WHICH WERE GIVEN OUT OF THE SUFFICIENT CASH BALANCE AVAILABLE IN THE CASH BOOK. THE EXPENDITURES WERE ACCOUNTED FOR, STATED TO BE PAID THROUGH BANKING CH ANNELS AND ADVANCES WERE RECOVERED FROM THE SAME. ON PERUSAL OF RECORD WE N OTICE THAT NEITHER AT THE TIME OF SEARCH NOR AT THE TIME OF ASSESSMENT PROCEEDINGS ANY MATERIAL EVIDENCE WAS FOUND BASED ON WHICH IT CAN BE SAID THAT THERE WAS UNACCOUNTED EXPENDITURE OR UNACCOUNTED INCOME RELATED TO THE YEAR UNDER CONSID ERATION. THE ASSESSING OFFICER PASSED A VERY SHORT ORDER. SOME VOUCHERS R ELATED TO ADVANCES WHICH HAVE BEEN FULLY EXPLAINED BY THE ASSESSEE BEFORE TH E ASSESSING OFFICER AND THE CIT(A) BY FILING VARIOUS CHARTS AND DETAILS AS STAT ED ABOVE. SINCE THERE WAS NO MATERIAL BASED ON WHICH IT CAN BE SAID THAT THERE W AS UNACCOUNTED INCOME FOR THE YEAR UNDER CONSIDERATION. UNDER THE CIRCUMSTAN CES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ORDER OF CIT (A) IS HEREBY CONFIRMED FOR ASSESSMENT YEAR 2003-04. 7.1. IN ASSESSMENT YEAR 2004-05, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE MAXIMUM NE GATIVE PEAK BALANCE WORK OUT TO RS.28,81,757 AS ON 19-02-2004 HAS BEEN CONSI DERED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE AS UNDISCLOSED INCOME. TH E CIT(A) NOTED THAT THIS FACT IS VERIFIABLE FROM AUDITED PROFIT & LOSS ACCOU NT FOR THE YEAR ENDED 31-03-2004 WHEREIN NOTES ON ACCOUNT, SCHEDULE 15 FORMING PART OF AUDITED ACCOUNTS ITA NO.435 & 436/RJT/2007 5 MENTIONED THIS FACT. THE ASSESSING OFFICER HAS VER IFIED THIS FACT AS PER PARAGRAPH NO.3 OF THE ASSESSMENT ORDER. THUS, THE ADDITION M ADE BY THE ASSESSING OFFICER WAS DOUBLE ADDITION. WE HAVE HEARD THE LEARNED REP RESENTATIVES OF THE PARTIES, RECORD PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT IF PEAK WAS CALCULATED, THE AMOUNT COMES TO RS.28,81757. THESE FACTS ARE N OT IN DISPUTE. THE ASSESSEE HAS DISCLOSED RS. 29,31,757 UNDER THE HEA D INCOME DISCLOSED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2004 , A COPY OF WHICH HAS BEEN PLACED AT PAGE 29 OF ASSESSEES PAPER BOOK. THE AU DITOR HAS ALSO PUT A NOTE FORMING PART OF NOTES ON ACCOUNT WHICH READS AS U NDER: (2) AT THE TIME OF THE COURSE OF SEARCH AND SEIZUR E OPERATION U/S 132 OF THE INCOME TAX ACT, 1962, THE BOOKS OF ACCOU NTS WERE NOT COMPLETED. THE SAME HAS BEEN COMPLETED THEREAFTER, ON THE BASIS OF THE PHOTO COPIES OF THE RECORDS OBTAINED FROM TH E DEPARTMENT. THIS HAS RESULTED NEGATIVE CASH BEFORE THE PERIOD O F SEARCH AND THE PICK NEGATIVE CASH AMOUNTING TO RS. 29,31,757 IS CO NSIDERED AS UNDISCLOSED INCOME BY CREDITING THE PROFIT AND LOSS AND DEBITED CASH ACCOUNT ON 19.02.2004. THE AMOUNT DISCLOSED IN THE PROFIT & LOSS ACCOUNT I S RS.29,31,757 WHEREAS THE ADDITION MADE BY THE ASSESSING OFFICER IS RS.28,48, 733. THE LD.AR SUBMITTED THAT THIS AMOUNT OF RS.29,31,757 INCLUDE THE AMOUNT OF RS.28,48,733. THIS FACT HAS NOT BEEN DISPUTED BY THE LD.DR. WE FIND THAT W HEN THE ASSESSEE DISCLOSED THE AMOUNT IN THE PROFIT & LOSS ACCOUNT, NO SEPARAT E ADDITION IS WARRANTED BECAUSE THAT AMOUNTS TO DOUBLE ADDITION OF THE SAME INCOME. IN THE LIGHT OF THE FACT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF T HE CIT(A). THE SAME IS UPHELD. 8. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-05-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 27 TH MAY, 2011 PK/- ITA NO.435 & 436/RJT/2007 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT, CENTRAL-II, AHMEDABAD 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT