M/s Rajesh Auto Parts, Indore V. The ACIT 4(1), Indore

ITA 441/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53979 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: S S SOLANKI
• Keywords: Unexplained investment; Retraction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABFR3371G I.T.A.NO. 441/IND/2010 A.Y. : 2007-08 M/S.RAJESH AUTO PARTS, ACIT, 14, CHHOTI GWALTOLI, VS 4(1), INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.SOLANKI, C. A. RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 10.10.2011 DATE OF PRONOUNCEMENT : 20.10.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 15.3.2010 FOR THE ASSESSMENT YEAR 2 007-08, IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME -TAX ACT, 1961. -: 2: - 2 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN THE TRADING OF AUTO PARTS ON SEMI-WHOLESALE AND RET AIL BASIS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 13.11.20 07, DECLARING A TOTAL INCOME OF RS. 51,22,450/-. A SURV EY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 8.9.20 06 WHEREIN PARTNER OF ASSESSEE FIRM ADMITTED UNDISCLOS ED INCOME OF RS.60 LAKHS ON ACCOUNT OF UNDISCLOSED CASH RS. 9 ,50,000/- UNDISCLOSED STOCK RS. 4,01,000/- UNDISCLOSED INCOME AS PER INCRIMINATING DOCUMENTS RS. 46,49,000/-. 3. IN THE SCRUTINY ASSESSMENT FRAMED U/S 143(3), THE A O OBSERVED THAT THE ASSESSEE HAD DECLARED THE UNDISCL OSED INCOME OF RS. 60,00,000/- DURING THE SURVEY, HOWEVE R, AT THE TIME OF FILING OF RETURN, THE ASSESSEE OFFERED ONLY RS. 55,99,000/- AS UNDISCLOSED INCOME. THEREFORE, VIDE LETTER DATED 20.08.2009, ASSESSEE WAS ASKED TO EXPLAIN THE REASON BEHIND RETRACTION OF RS. 4,01,000/-. ASSESSEE SUBMI TTED ITS REPLY ON 14.10.2009, WHICH IS REPRODUCED AS FOLLOWS :- THAT THE ASSESSEE DURING THE COURSE OF SURVEY SURRENDERED A SUM OF RS. 60,00,000/- WHICH INCLUDED RS. 4,01,000/- UNDER THE HEAD STOCK. THE -: 3: - 3 AMOUNT OF OTHER INCOME REPRESENT AMOUNT SURRENDERED EXCLUDING THE AMOUNT OF STOCK OF RS. 4,01,000/-. ACTUALLY THE AMOUNT OF OTHER INCOME SURRENDERED SHOULD HAVE BEEN RS. 55,99,000/-. 4. THE AO NOTED THAT AS PER THE SURVEY REPORT, THE UNDISCLOSED STOCK DURING THE TIME OF SURVEY WAS OF RS. 4,01,000/-. THIS STOCK WAS THAT PART OF THE WHOLE S TOCK WHICH WAS UNACCOUNTED IN THE BOOKS OF THE ASSESSEE. 5. AFTER DISCUSSING UNEXPLAINED EXPENSES, THE INCOME WAS ASSESSED AT RS. 56,60,570/- AS AGAINST RETURNED INCOME OF RS. 51,22,450/-. 6. BEFORE THE CIT(A), THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS :- 1. THAT THE LD. AO ERRED IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE REGARDING FORCEFUL SURRENDER AND NOT TO TREAT THIS RS. 60 LAKHS SURRENDERED AS HIS INCOME AS NO INCRIMINATING DOCUMENT WAS FOUND FROM THE PREMISES OF THE ASSESSEE. THE SURRENDER AMOUNT OF RS. 60 LAKHS, -: 4: - 4 THEREFORE, REQUIRE TO BE DELETED FROM THE INCOME OF THE ASSESSEE. 2. THAT THE LD. AO ERRED IN ADDING RS. 4,01,000/- AN ALLEGED UNDISCLOSED STOCK OF THE ASSESSEE. THE ADDITION SO MADE BEING ILLEGAL AND WRONG, THE SAME REQUIRE TO BE DELETED. 3. THAT THE LD. AO ERRED IN DISALLOWING RS. 1,15,786/- OUT OF VARIOUS EXPENSES BY APPLYING HIS OWN THEORY. THE DISALLOWANCE SO MADE BEING ILLEGAL AND WRONG, THE SAME REQUIRE TO BE DELETED. 4. THAT THE LD. AO ERRED IN DISALLOWING TELEPHONE EXPENSES OF RS. 11,334/- OUT OF TELEPHONE EXPENSES OF RS. 68,003/-. THE DISALLOWANCE SO MADE BEING ILLEGAL, THE SAME REQUIRE TO BE DELETED. 7. WITH REGARD TO THE GRIEVANCE OF THE ASSESSEE REGARD ING FORCEFUL SURRENDER OF RS. 60 LAKHS, THE LD. CIT(A) OBSERVED AS UNDER :- FACTS ON RECORD, FINDINGS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THE CONTENTIONS -: 5: - 5 PUT FORWARD BY THE ASSESSEE ARE TAKEN INTO CONSIDERATION FOR DECIDING THIS APPEAL. 4.1 THE ASSESSEE HAS FILED A COPY OF STATEMENT OF PARTNER SHRI MAHENDRA JAIN RECORDED DURING SURVEY BY THE AUTHORIZED OFFICER. THE PARTNER OF FIRM HAS STATED THAT THE STATEMENT HAS BEEN GIVEN BY HIM AFTER CONSULTING HIS C. A. SHAILENDRA SOLANKI. THE OTHER PARTNER OF FIRM SHRI JINENDRA JAIN HAS EXPRESSED HIS CONSENT TO THE STATEMENT GIVEN BY SHRI MAHENDRA JAIN. FROM A CAREFUL READING OF THE STATEMENT, NOTHING TRANSPIRES FROM THE STATEMENT THAT THE SURRENDER OF RS. 60 LAKHS HAS BEEN ELICITE D FORCEFULLY, AS CONTENDED BY THE ASSESSEE. THE DEPONENT PARTNER MADE SURRENDER DURING SURVEY AS UNDER :- (I) RS. 9,50,000/- ON ACCOUNT OF EXCESS CASH FOUND AT BUSINESS PREMISES ON PAGE 2 OF STATEMENT; -: 6: - 6 (II) RS. 4,01,000/- ON ACCOUNT OF EXCESS STOCK FOUND AT BUSINESS PREMISES ON PAGE 3 OF STATEMENT; AND (III) RS. 46,49,000/- ON ACCOUNT OF INDISCRIMINATING DOCUMENTS FOUND AT BUSINESS PREMISES ON PAGE 3 OF STATEMENT. THUS, THE PARTNER MADE TOTAL SURRENDER OF RS. 60,00,000/- VOLUNTARILY IN ADDITION TO REGULAR INCOME OF THE FINANCIAL YEAR 2006-07. THE SURVEY WAS CONDUCTED ON 08-09-2006 AND THEREAFTER THE ASSESSEE FIRM HAD A LONG TIME OF MOR E THAN A YEAR TILL DATE OF FILING THE RETURN ON 13.11.2007 FOR BRINING ITS GRIEVANCE OF COERCIVE SURRENDER IN THE NOTICE OF ADMINISTRATIVE OFFICERS. THE ASSESSEE HAS NOT BEEN ABLE TO ADDUCE SINGLE EVIDENCE IN THE FORM OF AFFIDAVIT FILED OR COMPLAIN T MADE TO HIGHER AUTHORITIES AFTER THE CONCLUSION OF SURVEY IN SUPPORT OF THE CONTENTION OF FORCEFUL SURRENDER. THE PLEA OF COERCIVE SURRENDER IS NOTHIN G -: 7: - 7 BUT AN AFTER THOUGHT WITH A CALCULATED IDEA TO ESCAPE FROM TAX LIABILITY. 8. OBSERVATION OF LD. CIT(A) WITH REGARD TO THE EXCESS STOCK OF RS. 4,01,000/- OVER AND ABOVE THAT RECORDE D IN THE BOOKS OF ACCOUNT WAS AS UNDER :- 4.2 IT IS AN ADMITTED FACT THAT AN EXCESS STOCK OF RS. 4,01,000/-, OVER AND ABOVE THAT RECORDED IN BOOKS O F ACCOUNT, WAS FOUND DURING SURVEY OPERATIONS AND THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF INVESTMENT MADE THEREIN AND IT IS ONLY FOR THIS REASON THAT HE HAD SURRENDERED THE SAME AS UNDISCLOSED INCOME OF THE FINANCIAL YEAR 2006-07, AS DISCUSSED ABOVE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS GIVEN ELUSIVE REPLIES ABOUT ACCOUNTING TREATMENT GIVEN TO THE EXCESS STOCK FOUND IN SURVEY AND HAS NOT GIVEN ANY SATISFACTORY EXPLANATION FOR THE SAME HAS RIGHTLY MADE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS. 4,01,000/- IN PURCHASE OF STOCK, NOT RECORDED IN BOOKS OF ACCOUNT . NO EFFORT HAS BEEN MADE TO EXPLAIN THE SOURCE OF -: 8: - 8 INVESTMENT AND ACCOUNTING TREATMENT GIVEN TO EXCESS STOCK AT APPEAL STAGE ALSO. THE AOS ACTION, BEING PERFECTLY IN CONFORMITY WITH FACTS ON RECORD AND IN LAW, IS HEREBY CONFIRMED. 4.3 DURING ASSESSMENT PROCEEDINGS, THE AO NOTED DISPROPORTIONATE INCREASE IN OPERATIONAL AND OTHER EXPENSES, OFFICE AND ADMINISTRATIVE EXPENSES AND SELLING AND DISTRIBUTION EXPENSE SIN POST SURVEY PERIOD AS COMPARED TO PRE-SURVEY PERIOD AND ASKED APPELLANTS EXPLANATION. THE APPELLANT SUBMITTED A COMPARATIVE CHART OF PRECEDING TWO YEARS AND CLAIMED THAT THE EXPENSES HAVE DECREASED THIS YEAR IN COMPARISON TO THE PRECEDING YEARS BUT WITHOUT GIVEN COMPARATIVE TURNOVER FIGURE OF EARLIER YEARS. THE APPELLANT FURTHER SUBMITTED EXPLANATION FOR PAR T OF EXPENSES ONLY. THUS INCOMPLETE COMPARISON IS OF NO MUCH VALUE AND CAN NOT HELP THE ASSESSEE. SINCE THE ASSESSEE HAS FAILED TO SATISFACTORILY EXPLAIN T HE DISPROPORTIONATE INCREASE IN POST SURVEY PERIOD AS COMPARED TO PRE SURVEY PERIOD, PARTICULARLY IN VIEW OF -: 9: - 9 THE FACT THAT THE SURVEY WAS CONDUCTED ON 8-09.06, I.E. THE MIDST OF THE FY AND NO PROOF OF EXCEPTIONA L CIRCUMSTANCES JUSTIFYING SUCH DISPROPORTIONATELY HIGHER INCREASE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE. FURTHER THERE IS NO DENIAL THAT THE BOOKS STAND PROVED TO BE INCOMPLETE AND INCORRECT. IN THE FINAL ANALYSIS AO HAS DISALLOWED ONLY THOSE PART OF EXPENSES, WHICH WERE NOT SUPPORTED BY ANY DOCUMENTS EXPLANATION. HOWEVER, CONSIDERING BREAK UP OF SELLING & ADMN., EXPENSES FURNISHED, WHERE MAJOR PAYMENT OF RS. 1,28.733/- OUT OF RS. 1,44,785/- RELATED TO VAT, AND OTHER EXPLANATION OFFERED AND DISALLOWANCE MADE RE DIRECTED TO BE RESTRICTED TO RS. 20,00/-, RS. 28,000/- AND RS. 2,000/- RESPECTIVELY THAT IS RS. 50,000/- IN ALL. THE GROUND IS THUS PARTLY ALLOWED. 9. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US AND TAKEN FOLLOWING GROUNDS :- 1. THAT THE LD. CIT(A) ERRED IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE SURRENDER OF RS . -: 10: - 10 60 LACS WAS A FORCEFUL SURRENDER AND NO INDISCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SURVEY. THE FORCEFUL SURRENDER OF RS. 60 LACS REQUIRES TO BE DELETED FROM TOTAL INCOME OF TH E ASSESSEE. 2. THAT THE LD. CIT(A) ERRED IN MAINTAINING ADDITION O F RS. 4,01,000/- ON ALLEGED UNDISCLOSED STOCK OF THE ASSESSEE. THE ADDITION SO SUSTAINED BEING ILLEGAL AND WRONG, THE SAME REQUIRE TO BE DELETED. 10. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. IT IS CLEAR FROM THE ORDER OF THE AO AND L D. CIT(A) THAT THE ASSESSEE HAS SURRENDERED RS. 60 LAKHS DURING SU RVEY. STATEMENT OF THE PARTNER OF THE FIRM RECORDED DURIN G THE COURSE OF SURVEY, WHEREIN AFTER CONSULTING HIS C. A. SHRI SHAILENDRA SOLANKI, THE ASSESSEE HAS COME FORWARD T O SURRENDER ON ACCOUNT OF EXCESS CASH, EXCESS STOCK F OUND AT BUSINESS PREMISES AND ALSO RS. 46,49,000/- ON ACCOU NT OF INCRIMINATING DOCUMENTS FOUND AT BUSINESS PREMISES ON PAGE 3 OF HIS STATEMENT. NOTHING WAS BROUGHT ON RECORD B Y LD. AUTHORIZED REPRESENTATIVE EITHER BEFORE THE AO OR B EFORE THE -: 11: - 11 CIT(A) OR EVEN BEFORE TRIBUNAL TO SUBSTANTIATE ITS STAND THAT SURRENDER WAS TAKEN FORCEFULLY. IT IS VERY INTEREST ING TO NOTE THAT SURVEY WAS CONDUCTED ON 08.09.2006, THEREAFTER ASSESSEE FIRM HAD LONG TIME OF MORE THAN A YEAR TILL DATE OF FILING RETURN ON 13.11.2007 FOR RETRACTING FROM THE SURRENDER IF ANY MADE UNDER COERCION OR UNDUE INFLUENCE. NOTHING WAS BROU GHT TO THE NOTICE OF THE HIGHER AUTHORITIES, NEITHER ANY L ETTER NOR ANY AFFIDAVIT WAS FILED IN SUPPORT OF CONTENTION OF FOR CEFUL SURRENDER. EVEN IN THE RETURN OF INCOME, THE ASSESS EE HAS INCORPORATED THE INCOME DECLARED ON ACCOUNT INCRIMI NATING DOCUMENTS FOUND AMOUNTING TO RS. 46,49,000/-. EVEN BEFORE THE AO, THE ASSESSEE DID NOT RETRACT INCOME RETURNE D WITH RESPECT TO INCRIMINATING DOCUMENTS. FOR THE FIRST T IME BEFORE CIT(A), THE ASSESSEE CAME WITH A NEW PLEA THAT SURR ENDER WAS FORCEFUL. AFTER RECORDING DETAILED FINDING, THE CIT (A) CAME TO CONCLUSION THAT THERE WAS NO FORCEFUL SURRENDER AND THE ADDITION WAS MADE AFTER DUE APPLICATION OF MIND AND CONSULTATION OF THE OTHER PARTNER AND CHARTERED ACC OUNTANT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A) FOR SUSTAINING ADDITION WITH RE GARD TO THE -: 12: - 12 AMOUNT SURRENDERED WITH RESPECT TO THE INCRIMINATIN G DOCUMENTS FOUND DURING SURVEY. 11. WITH REGARD TO THE ADDITION ON ACCOUNT OF EXCESS ST OCK AMOUNTING TO RS. 4,01,000/-, NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT PHYSICAL STOCK TAKEN BY THE DE PARTMENT WAS NOT CORRECT OR THAT STOCK AS PER BOOKS AND PHYS ICAL TAKING WAS EQUAL. EVEN BEFORE THE TRIBUNAL, NOTHING WAS BR OUGHT ON RECORD TO PERSUADE THE BENCH TO DEVIATE FROM THE CO NCLUSION DRAWN BY THE LOWER AUTHORITIES, WHICH IS ALSO EVIDE NT FROM THE STATEMENT OF THE PARTNERS RECORDED DURING COURSE OF SURVEY. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF CIT(A). 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH OCTOBER, 2011. CPU* 1020