ITO, UDAIPUR V. Raj Kumar Khandelwal, UDAIPUR

ITA 439/JODH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4806 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Assessee Lawyers: G K GARGIEYA SH DINESH SRIMALI
• Section: 142(1); 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO. 439 /JODH/201 5 ASSESSMENT YEAR:201 1 - 1 2 THE ITO VS. RAJ KUMAR KHANDELWAL WARD - 2(3) WARD NO. 19, FATEH NAGAR UDAIPUR TEHSIL MAVLI UDAIPUR PAN NO. AGHPK6865G (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. G.K. GARGIEYA SH. DINESH SRIMALI DEPARTMENT BY : SH. A.K. DAS DATE OF HEARING : 06/12/2016 DATE OF PRONOUNCEMENT : 08/12/2016 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - 1 DT. 12/06/2015 ON THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN RESTRICTING ADDITION AT RS . 1,62,515/ - BEING THE PROFIT ON UNDISCLOSED SALES OF RS. 59,80,600/ - MADE BY THE AO ON ACCOUNT OF CASH DEPOSITS FROM UNDISCLO SED SOURCES IGNORING THE FACT THAT THE ASSESSEE HAS ADMITTED THAT HE ENGAGED IN THE PURCHASE AND SALE OF SUGAR OUTSIDE THE BOOKS OF ACCOUNTS WHICH HAS NOT DISCLOSED IN THE AUDITED ACCOUNTS AND THE ASSESSEE HAS FAILED TO FURNISH 2 THE NAME AND ADDRESSES OF TH E PARTIES TO WHOM THE SALES AND PURCHASE WERE MADE. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME BY WAY OF TRADING OF SUGAR UNDER THE NAME AND STYLE OF PROPRIETARY CONCERNED M/S. SHREEJI SUGAR CANDY UDH YOG, NEW MARKET, FATEHNAGAR. THE RETURN OF INCOME FILED ON 26/09/2011 SHOWING INCOME AT RS.2,02,180/ - ALONGWITH AUDITED BALANCE SHEET, P&L ACCOUNT AND TAX AUDIT REPORT. THE AO ISSUED NOTICE UNDER SECTION 143(2) DT. 01/08/2012. IN VIEW OF THE CHANGE IN TERR ITORIAL JURISDICTION, THE CASE OF THE ASSESSEE WAS TRANSFERRED TO ITO, WARD - 2(1), UDAIPUR. NOTICE DATED 25/09/2013 WERE ISSUED UNDER SECTION 143(2) OF THE ACT AND 142(1) OF THE ACT ALONGWITH THE QUESTIONNAIRE AND SERVED ON THE ASSESSEE BY ITO, WARD - 2(1) U DAIPUR. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS ASSIGNED TO THE RANGE HEAD VIDE ORDER NO. 8 DT. 09/12/2013 OF CIT, UDAIPUR FOR COMPLETION OF SCRUTINY ASSESSMENT. SUBSEQUENTLY NOTICES DATED 15/01/2014 WERE ALSO ISSUED UNDER SECTION 143(2) OF THE ACT AND 142(1) OF THE ACT ALONGWITH THE QUESTIONNAIRE AND DULY SERVED ON THE ASSESSEE CALLING FOR VARIOUS DETAILS/INFORMATION. THE ASSESSMENT COMPLETED UNDER SECTION 143(2) OF THE ACT THAT THAT ASSESSED INCOME BEING AT RS. 61,83,490/ - AS AGAINST THE RETURNED INCOM E OF RS. 2,02,180/ - . 3. THAT , THE ONLY GROUND OF APPEAL PREFERRED BY THE REVENUE BEFORE US IS THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING ADDITION AT RS. 1,62,515/ - BEING THE 3 PROFIT ON UNDISCLOSED SALES OF OF RS. 59,80,600/ - MADE BY THE AO ON ACCOUNT OF CASH DEPOSITS FROM UNDISCLOSED SOURCES . 4. THAT , AS PER THE ASSESSMENT ORDER THE ASSESSEE HAS CASH DEPOSITS ON VARIOUS DATES STARTING FROM 01/04/2010 TO 31/03/2011 IN HIS SAVINGS BANK ACCOUNT MAINTAINED WITH ADARSH CO - OPERATIVE BANK LTD. 5. THAT , THE A SSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF CASH DEPOSITS THE ASSESSEE FILED COPY OF BANK STATEMENT BEFORE AO AND THE SOURCE OF DEPOSIT WAS EXPLAINED AS SALE CONSIDERATION OF SUGAR AND ALL THE PAYMENTS WERE MADE FOR PURCHASES OF SUGAR. IN SUPPORT OF THIS THE ASSESSEE FILED COPY OF LEDGER OF PURCHASE ALONGWITH PURCHASE BILLS BEFORE THE AO. HOWEVER, THE SU BMISSIONS MADE BY THE ASSESSEE WERE NOT ACCEPTABLE TO THE AO BECAUSE AS PER THE COPES OF THE PURCHASE BILLS FILED ALONGWITH THE LETTER DT. 03/02/2014, THE SAME WERE NOT IN THE NAME OF THE ASSESSEE. FURTHER THE SALES OF RS. 59,80,600/ - WERE EITHER NOT AUDIT ED NOR ACCOUNTED FOR IN THE SALE OF THE PROPRIETARY CONCERN OF THE ASSESSEE DISCLOSED IN THE TRADING AND PROFIT AND LOSS ACCOUNT OF RS. 1,09,24,650/ - . IN VIEW OF THIS, THE AO REQUIRED THE ASSESSEE TO FURNISHE DETAILS AND EXPLANATIONS ON VARIOUS POINTS MENT IONED AT PAGE NOS. 4 & 5 OF THE ASSESSMENT ORDER IN RESPONSE TO WHICH IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS MADE ANY SALE BILL AND MAINTAINED ONLY KACCHI SLIPS FOR CASH RECEIPT DURING THE DAY AND THAT WITH THE HELP OF THOSE KACCHI SLIPS, THE ASSESSEE PREPARED SALE 4 REGISTER AND CASH BOOK. FURTHER IT WAS ALSO SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS MADE RETAIL SALE ONLY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. AS REGARDS THE CLAIM OF THE ASSESSEE THAT HE HAS MADE PURCHASE OF SUGAR, THE ASSESSEE FURNISHED NAME AND ADDRESS OF FIVE PARTIES AS MENTIONED AT PAGE NO. 6 OF THE ASSESSMENT ORDER FROM WHOM THE ALLEGED PURCHASES WERE MADE. IN ORDER TO VERIFY THE AUTHENTICITY OF THE CLAIM OF THE ASSESSEE ABOUT THE PURCHASE OF SUGAR FR OM THE ABOVE PARTIES, THE A.O. CALLED FOR INFORMATION UNDER SECTION 133(6) OF THE ACT FROM THE PARTIES BY ISSUE OF LETTER AT THE NAME AND ADDRESSES FURNISHED BY THE ASSESSEE FIRM REGARDING THE SALE MADE TO THE ASSESSEE. HOWEVER, THE LETTER ISSUED TO SHRI R ADHEYSHYAM RAVI PRAKASH RECEIVED BACK UNSERVED AND NO REPLY FROM OTHER FOUR PARTIES NAMELY SHREE MADHU PRADESH SAHKARI KHAND, SHREE MADHI VIBHAG KHAND UDHYOG AND M/S. RAJ SALES CORPORATION WAS RECEIVED. THEREFORE, THE CONTENTION ABOUT THE SOURCE OF CASH D EPOSITS MADE IN THE SAVING BANK ACCOUNT AS SALE PROCEEDS OF SUGAR REMAINED UNVERIFIABLE AS THE ASSESSEE FAILED TO GIVE THE DETAILS OF PERSONS TO WHOM THE SALES WERE MADE. 6. THAT, FURTHER THE WRITTEN SUBMISSION WAS EVEN SUBMITTED BY THE ASSESSEE BEFORE T HE AO EXPLAINING THE CASH DEPOSITS OF RS. 59,80,600/ - . THE SUBMISSION OF THE ASSESSEE WERE NOT ACCEPTED BY THE AO. AO FINALLY PLACING RELIANCE ON THE RATIO OF DECISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF ROSHAN DI HATTI VS. CIT(SC) 107 ITR 938 A ND KALE KHAN MOHAMMAD HANAIT VS. CIT (SC) 50 ITR 1, 5 THE AO TREATED THE CASH DEPOSIT IN THE BANK AMOUNTING TO RS. 59,80,600/ - AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. THAT, DURING THE APPELLATE P ROCEEDING BEFORE THE LD. CIT(A) DETAILED SUBMISSIONS WERE MADE BY THE ASSESSEE WHICH ALSO FINDS PLACE IN THE ORDER OF THE LD. CIT(A) AND HENCE IN RECORDS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS AL READY PLACED EVIDENCE BEFORE THE AO AS PURCHASE BILL, F REIGHT BILLS, SALES RECORD AND NATURE OF BANK TRANSACTION WHICH MAKES IT CLEAR THAT THE ASSESSEE HAS DONE BUSINESS OF PURCHASE AND SALE OF SUGAR IN A ROUTINE CASE. THE ASSESSEE HAS PLACED ON RECORD PURCHASE ACCOUNT, PURCHASE BILLS, SALES BILLS VOUCHERS, G. P. RATE CHART, CERTIFIED TRUE COPY OF BANK STATEMENT, COPY OF ASSESSEE CCOUNT IN THE BOOKS OF M/S RAJ SALES CORPORATION, SURAT, COPY OF THE CASE LAWS RELIED UPON, ON THE POINT OF G.P. RATE WHERE PURCHASE AND SALES ARE UNRECORDED, HONBLE SUPREME COURT DECI SION ON THE POINT OF INTERPRETATION OF WORD MAY APPEAR IN SEC. 69A AND VARIOUS OTHER JUDICIAL PRONOUNCEMENT IS IN RECORD. 8. THAT , THE LD. CIT(A) HAD CALLED FOR A REPORT FROM THE AO UNDER SECTON 254 OF THE ACT AND VIDE REPORT NO. 448 DT. 05/06/2015, THE AO IN THAT REPORT TRIED TO SUPPORT THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. THAT AS AGAINST THE FINDINGS IN THIS REPORT THE ASSESSEE WAS GIVEN OPPORTUNITY TO SUBMIT HIS POINT OF VIEW AND ACCORDINGLY THE ASSESSEE MADE HIS SUBMISSION WHICH ALSO FINDS PLA CE IN LD. 6 CIT(A) APPEAL ORDER. THE LD. CIT(A) IN HIS ORDER OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE TRADING OF SUGAR AND EFFECTED TOTAL TURNOVER OF RS. 1,09,24,650/ - AND HAS DECLARED THE INCOME FROM SUCH TURNOVER IN THE RETURN. AT THE SAME TIME, THE A SSESSEE WAS ALSO ENGAGED IN THE PURCHASE AND SALE OF SUGAR OUT OF BOOKS OF ACCOUNT FOR WHICH THE ASSESSEE HAS MAINTAINED A SEPARATE SAVING BANK ACCOUNT NO. SS/502 WITH ADARSH COOPERATIVE BANK LTD. FATEHNAGAR WHICH WAS NOT DISCLOSED TO THE DEPARTMENT. THE A SSESSEE USED TO DEPOSIT THE SALE PROCEEDS OF THE SUGAR IN THIS BANK ACCOUNT AND UNRECORDED PURCHASES OF SUGAR WERE ALSO MADE THROUGH RTGS / DEMAND DRAFTS. HOWEVER, THE AO HAS TREATED THE ENTIRE DEPOSITS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES AS THE ASSESSEE FAILED TO PROVE ANY PURCHASES OF SUGAR THROUGH THIS ACCOUNT. THE ASSESSEE HAS MAINLY PURCHASED THE SUGAR FROM RAJ SALES CORPORATION, SURAT VIDE LICENSE NO. W/54/10 FROM THE ASSESSEE MADE PURCHASE OF SUGAR OF RS. 49,51,445/ - AS PER LEDGER ACCO UNT OF THE ABOVE CONCERN. ADMITTEDLY, THIS ACCUNT AS WELL AS SUPPORTING BILLS WERE WITH THE AO AT THE TIME OF ASSESSMENT AND THE AO HAS NOT TAKE ANY COGNIZANCE AS HE HAS NOT GIVEN ANY FINDINGS ON THIS ACCOUNT. THE AO HAS ALSO NOT CONDUCTED ANY ENQUIRY DURI NG THE ASSESSMENT TO FIND OUT WHETHER THE ASSESSEE WAS ENGAGED IN ANY BUSINESS ACTIVITY WHICH WAS NOT DISCLOSED TO THE DEPARTMENT AND THAT THE CASH DEPOSIT MADE IN THE UNDISCLOSED BANK ACCOUNT WAS THE RECEIPTS FROM SUCH UNDISCLOSED BUSINESS ACTIVITIES. THE LD. CIT(A) THEREFORE OBSERVED AND HELD THAT THERE IS NO JUSTIFICATION IN TREATING THE ENTIRE DEPOSITS IN THE SAID BANK ACCOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE 7 BECAUSE THERE IS ALSO SUBSTANTIAL WITHDRAWAL FOR PURCHASE OF SUGAR. EVEN OTHERWISE ALSO, I T IS A FACT THAT FOR EARNING INCOME, SUCH EXPENDITURE IS REQUIRED TO BE INCURRED AND THE AO HAS NOT CONSIDERED THIS PRINCIPLE WHILE TREATING THE ENTIRE RECEIPTS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. 9. THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF RS. 1,62,515/ - BEING THE NP ON UNDISCLOSED SALES OF RS. 59,80,600/ - AS WORKED OUT BY THE ASSESSEES REPRESENTATIVE IN THE SUBMISSION DATED 28/03/2014. THEREFORE THE LD. CIT(A) OUT OF THE TOTAL ADDITION OF RS. 59,80,600/ - DELETED RS. 58,18 ,085/ - AND ADDED TO THE EXTENT OF RS. 1,62,515/ - . 10. WE HAVE PERUSED THE RECORDS IN THIS CASE, FACTS AND CIRCUMSTANCES AND WE ARRIVE AT OUR CONSIDERED VIEW THAT THE FINDINGS OF THE AO IN HIS ORDER IS INCOMPLETE, SINCE THE AO HAS NOT DECIDED ANYTHING OR HAS NOT BROUGHT OUT ANY FINDINGS AS REGARDS TO PURCHASE OF SUGAR MADE THROUGH THE SAID BANK ACCOUNT. THE LEDGER ACCOUNT OF PURCHASE AND SUPPORTING BILLS WERE WITH THE AO AT THE TIME OF ASSESSMENT BUT THE AO HAS NOT CONDUCTED ANY ENQUIRY TO FIND OUT AS TO WHAT AMOUNT IS THE ACTUAL DEPOSIT AND WHAT AMOUNT IS USE D FOR PURCHASE THAT IS RIGHTLY POINTED OUT BY THE LD. CIT(A) THAT TO EARN A INCOME CERTAIN EXPENDITURE IS REQUIRED . THE AO HAS CONSIDERED THE ENTIRE DEPOSIT AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE BUT HAS FAILED TO PROVE THE PURCHASE ELEMENT OR T HE EXPENSES ELEMENT INVOLVED THEREIN . T HAT TO MEET THE ENDS OF JUSTICE W E DEEM IT 8 FIT AND PROPER TO SET ASIDE THIS CASE BACK TO THE FILE OF THE AO DIRECTING HIM TO QUANTIFY THE DEPOSIT AND PURCHASE FROM THE SAID BANK ACCOUNT OF THE ASSESSEE AFTER CONDUCTIN G A THOROUGH ENQUIRY. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/12/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR