Manoj Dhanjibhai Satani, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Circle-5, RAJKOT-GUJARAT

ITA 453/RJT/2011

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1588 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Deemed to accrue or arise in india; Capital expenditure
• Section: 143(3); 37; 10

Judgement Text

MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 1 OF 7 , , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . . [ , . . , BEFORE SHRI C. M.GARG , JUDICIAL MEMBER AND SHRI O.P.MEENA , ACCOUNTANT MEMBER . . ./ I.T . A . NO. 453 / RJT / 201 1 [[ / ASSESSMENT YEAR : 20 0 8 - 09 MANOJ DHANJIBHAI SATANI, C/O.M/S.MANOJ INDUSTRIES, 9 - ATIKA INDUSTRIAL AREA, DHEBBAR ROAD (SOUTH), RAJKOT. [PAN: AEXPS 2417 J] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 5, RAJKOT APPELLANT / RESPONDENT [ /ASSESSEE BY SHRI D.M.RINDANI AR. /REVENUE BY SHRI PRAVEEN VERMA SR. D.R. / DATE OF HEARING: 22 .11. 2018 /P RONOUNCEMENT ON 26 . 1 1 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME T AX (APPEALS) - I V , RAJKOT ( IN SHORT THE CIT (A)) DATED 29.09.201 PERTAINING TO ASSESSMENT YEAR 2008 - 09 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 5 , MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 2 OF 7 RAJKOT (IN SHORT THE AO) DATED 20 . 1 2.20 10 UNDER SECTION 143(3) OF INCOME TA X ACT,1961 (IN SHORT THE ACT). 2. GROUNDS RAISED BY ASSESSEE READ AS UNDER: 1. THE COMMISSIONER OF INCOME TAX (APPEAL) IV, RAJKOT ERRED IN SUSTAINING THE ADDITION OF RS. 26,91,540/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOSS ON DECLARED STOCK SOLD DURING THE YEAR. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) - IV, RAJKOT ERRED IN SUSTAINING THE ADDITION OF RS. 1,64,198/ - BY WAY OF TREATING SHED REPAIRING EXPENSES AS CAPITAL EXPENDITURE. 3. GROUND NO.1 RELATES TO SUSTAINING THE ADDITION OF RS.26 ,91,540/ - MADE BY THE AO ON ACCOUNT OF LOSS OF DECLARED STOCK SOLD DURING THE YEAR. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE SURVEY U/S.133A WAS CARRIED OUT ON 19.03.2008 WHEREIN IN HIS STATEMENT RECORD ED ON OATH , THE ASSESSEE HAS DISCLOSED EXCESS ST OCK OF RS.40,10,000/ - ON ACCOUNT OF FORGING RING OR OF 25000 QUANTITY AND FORGING RING I R FOR 16000 Q UANTITY. THIS STOCK OF OR WAS VALUED @ 9 0/ - PER PIECE AND STOCK OF IR WAS VALUED AT 110 PER PIECE AT THE TIME OF SURVEY. THIS STOCK WAS SHOWN IN THE RETU RN OF INCOME, HOWEVER THE ASSESSEE HAS CLAIMED LOSS OF RS.26,91,540/ - AS THE SAID STOCK DECLARED IN THE COURSE OF SURVEY WAS SOLD BY THE ASSESSEE AS SCRAP @ 26 PER KG TO M/S.PRADIP MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 3 OF 7 STEEL. THE AO EXAMINED THE PROPRIETOR OF SHRI PRADIPBHAI RAJPUT OF PRADIP STE E L WHEREIN HE HAS CONFIRMED THE PURCHASES FROM THE ASSESSEE IN REPLY TO QUESTION NO.12 HE HAS PRODUCED THE PURCHASE REGISTER AND COPY OF SALE BILL FOR SALE OF ABOVE SCRAP TO ASR MULTI METAL PVT. LTD., AND MODE OF TRANSPORTATION. HOWEVER, THE AO DISBELI EVED THE INDEPENDENT THIRD PARTY EVIDENCES AND DISALLOWED THE LOSS OF RS.26,91,540/ - . 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A). THERE LD.CIT(A) OBSERVED THAT THE APPELLANT IS DOING THE JOB WORK OF TURNING OF CNC MACHINES AND THE REFORE GENERATION OF SCRAP IS NATURAL BY - PRODUCT IN THE BUSINESS OF THE APPELLANT . I N FACT, THE TRADING ACCOUNT OF THE APPELLANT CONSIST OF JOB WORK INCOME AND SALE OF SCRAP. THE APPELLANT HAS TO COLLECT TCS ON SALE OF SCRAP, AND THEREFORE HE FILES A QUA RTERLY STATEMENT IN FORM NO.27EQ . T HE DETAILS FORM NO.27EQ FROM APRIL 2007 TO FEBRUARY 2008 SHOWS THAT THE APPELLANT WAS SELLING THE SCRAP GENERATED IN HIS BUSINESS TO M/S. BAPA SITARAM TRADERS ONLY. THE APPELLANT HAD SOLD SCRAP TO M/S.BAPA SITARAM TRADE RS FROM APRIL 2007 TO FEBRUARY 2008 AND SOLD OR AND IR RINGS FOUND OUTSIDE THE BOOKS AT THE TIME SURVEY AS SCRAP FOR RS.13,18,460/ - ON 27.03.2008 TO PRADIP STEEL. THIS WAS DONE BY THREE SEPARATE MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 4 OF 7 BILLS OF RS.5,48,187/ - , RS.4,00,999/ - AND RS.4,40,743/ - ON W HICH TCS HAS ALSO BEEN DEDUCTED AND DULY PAID AND SUBMITTED WITH NSDL ON 09.07.2008 IN FORM 27EQ. SHRI PRADIPBHAI RAJPUT APPEARED BEFORE THE AO ON 24.11.2010 AND 30.11.2010 AND ACCEPTED THAT HE HAS PURCHASED THE RINGS FROM THE ASSESSEE. HOWEVER, THE CIT( A) OBSERVED THAT AT THE TIME OF SURVEY THE APPELLANT STATED THAT HE MADE UNACCOUNTED PURCHASES OF RS.40.1 LAKHS OF OR AND IR RINGS DURING THE FINANCIAL YEAR 2007 - 08 ITSELF. T H E APPELLANT CHANGED THE STAND AND STATED DURING THE ASSESSMENT PROCEEDINGS THAT HE HAS ACQUIRED THESE OR AND IR RINGS SINCE MANY YEARS AND MAINLY 8 TO 10 YEARS BEFORE. THE CIT(A), THEREFORE, OBSERVED THAT THE APPELLANT WAS NOT ABLE TO PROVE THE MODE OF PA YMENT FOR ACQUISITION OF SUCH PURCHASE. THEREFORE, THE APPELLANT COULD NOT EXPLAIN THE SOURCE AND YEAR OF ACQUISITION OF THIS OR AND IR RINGS . A CCORDINGLY THE CIT(A) CONSIDERED THE SAME AS UNACCOUNTED EXPENDITURE U/S.69C OF THE ACT AND OBSERVED THAT SUCH UNACCOUNTED EXPENDITURE CLAIMED FOR DEDUCTION ANY HEAD OF INCOME INCLUDING WILL BE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AS PER EXPLANATION 2 SECTION 69C. ACCORDINGLY, THE CIT(A) UPHELD THE ADDITION BY TREATING THE SAME MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 5 OF 7 OF RS.26,91,540/ - ON SALE O F UNACCOUNTED STOCK OF RS.40,10,000/ - AS DEEMED INCOME U/S.69C OF THE ACT. 6. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS CONFIRMED THE ADDITION ON COMPLETELY DIFFERENT G ROUND BY HOLDING THAT THE DECLARATION OF EXCESS STOCK OF RS.40,10,000/ - BECOMES UNACCOUNTED EXPENDITURE U/S.69C OF THE ACT AND SUCH DEEMED INCOME BECOME THE SOURCE OF UNACCOUNTED STOCK BUT THE SAME CANNOT BE CLAIMED AS DEDUCTION U/S.69C OF THE ACT AND THER EFORE EVEN IF THE ASSESSEE SALE THE SAID STOCK AT A LOWER PRICE THE COST OF STOCK CANNOT BE CLAIMED AS A DEDUCTION FROM SALE THEREOF U/S.28 OR 37 OF THE ACT. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLARED UNDISCLOSED STOCK OF RS.40,10,000 / - AS UNEXPLAINED INVESTMENT MADE OUT OF UNACCOUNTED INCOME AND SAME HAS BEEN SOLD DURING THE YEAR FOR RS.13,18,460/ - GIVING RIGHT TO A BUSINESS LOSS OF RS.26,91,540/ - . T HE AO HAS EXAMINED THE PURCHASER OF THE SAID STOCK SHRI PRADIPBHAI RAJPUT WHO HAS ADMI TTED TO HAVE PURCHASED THE SAME AT THE SCRAP VALUE, THEREFORE THE CIT(A) WAS NOT JUSTIFIED IN TREATING THE SAME AS UNEXPLAINED EXPENDITURE WHEREAS IN FACT MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 6 OF 7 THE STOCK HAS BEEN PURCHASED AS UNACCOUNTED INVESTMENT BY THE ASSESSEE. 7. PER CONTRA, THE LD.SENIOR DEP ARTMENTAL REPRESENTATIVE (SR.DR) SUPPORTED THE ORDERS OF THE AO AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIND THAT THE ASSESSEE HAS MADE DECLARATION OF EXCESS STOCK OF RS.40,10,000/ - AS UNEXPLAINED INVESTMENT DURING THE COURSE OF SURVEY . TH E ASSESSEE HAS DULY ACCOUNTED FOR THE SAME IN HIS PROFIT AND LOSS ACCOUNT(PLA). HOWEVER, THE ASSESSEE HAS SOLD THIS STOCK FOR RS.13,18,460/ - BEING THE SCRAP VALUE OF THE STOCK WHICH HAS NOT BEEN DISPUTED BY THE AO AND CIT(A), THEREFORE LOSS ARISING FROM THE UNACCOUNTED STOCK DISCLOS ED IN THE COURSE OF SURVEY IS NOT UNEXPLAINED EXPENDITURE TO THE BUSINESS LOSS WHICH HAS TO BE ALLOWED AS DEDUCTION IN THE COURSE OF BUSINESS. THE CIT(A) OBSERVED THAT THE SOURCE OF UNACCOUNTED STOCK WAS NOT EXPLAINED, THEREFO RE IT WAS UNEXPLAINED EXPENDITURE U/S .69C OF THE ACT. HOWEVER, SINCE THE ASSESSEE HAS ADMITTED THIS AS UNEXPLAINED INVESTMENT MADE IN THE STOCK. THEREFORE, THE CONCLUSION DRAWN BY THE CIT(A) IS WITHOUT ANY BASIS, HENCE, THE GENUINENESS BUSINESS LOSS INCU RRED BY THE ASSESSEE WHICH HAS BEEN VERIFIED BY THE CIT(A) AND ALSO ACCEPTED BY THE AO CANNOT MANOJ DHANJIBHAI SATANI VS. ACIT,CIRCLE 5, RAJKOT / ITA NO. 453/RJT/2011/ A . Y. 2008 - 09 PAGE 7 OF 7 BE DENIED. THEREFORE, THE AO IS DIRECTED TO ALLOW THIS GENUINE BUSINESS LOSS , ACCORDINGLY THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 9. GROUND NO.2 RELATES TO SUST AINING OF ADDITION OF RS.1,64,198/ - BY WAY OF TREATING THE SHED REPAIRING EXPENSES AS CAPITAL EXPENDITURE, THIS GROUND WAS NOT PRESSED BEFORE US, THEREFORE THIS GROUND IS DISMISSED AS NOT PRESSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. T HE ORDER PRONOUNCED IN THE OPEN COURT ON 26 .11.2018 . SD/ - SD/ - ( . . /C.M. GARG) ( . . / O.P.MEENA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / RAJKOT, DATED : 26 TH NOVEMBER , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT