Income Tax Officer, Ward-5(2), Hyderabad V. M/s Plylam Centre, Hyderabad

ITA 456/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0302 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: P MURALI MOHAN RAO
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 456/HYD/2014 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD 5(2), HYDERABAD. VS. M/S PLYLAM CENTRE, HYDERABAD (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJAT MITRA ASSESSEE BY : SHRI P. MURALI MOHAN RAO DATE OF HEARING 20-07-2015 DATE OF PRONO UNCEMENT 29-07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 29/11/2013 OF LD. CIT(A), HYDERABAD FOR AY 20 09-10. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE DEPARTME NT IS CHALLENGING THE DECISION OF LD. CIT(A) IN DELETING ADDITION OF RS. 99 LAKHS MADE BY AO. 3. BRIEFLY THE FACTS ARE, ASSESSEE A PARTNERSHIP FI RM IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF PLYWOOD, DECOL AM, ETC. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUS INESS PREMISES OF ASSESSEE ON 18/03/09. DURING THE SURVEY OPERATION, BOOKS OF ACCOUNT AND DOCUMENTS WERE IMPOUNDED WHICH INDICATED THAT P URCHASES/SALES ACTUALLY EFFECTED BY ASSESSEE WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY. THEREFORE, A STAT EMENT WAS 2 ITA NO. 456 /HYD/2014 M/S PLYLAM CENTRE RECORDED FROM ONE OF THE PARTNERS OF THE FIRM WHERE IN HE ADMITTED THAT CERTAIN PURCHASES/SALES WERE NOT RECORDED IN THE BO OKS OF ACCOUNT. FURTHER, TAKING INTO ACCOUNT THE DISCREPANCY FOUND IN THE BOOKS OF ACCOUNT, ASSESSEE OFFERED TO DISCLOSE ADDITIONAL IN COME OF RS. 1.10 CRORES FOR THE AY 2009-10 IN ADDITION TO REGULAR PR OFITS OF BUSINESS AND ALSO PROMISED TO PAY TAX OF RS. 10 LAKHS BY 19/ 03/09 AND BALANCE AMOUNT OF RS. 25 LAKHS BY 31/03/09. HOWEVER, IT WAS NOTICED BY AO THAT IN THE RETURN OF INCOME FILED FOR AY UNDER CON SIDERATION, ON 30/09/09 ASSESSEE HAS DECLARED INCOME OF RS. 20,43, 067 WITHOUT DISCLOSING THE ADDITIONAL INCOME OF RS. 1.10 CRORES OFFERED AT THE TIME OF SURVEY OPERATION. HE, THEREFORE, ISSUED A S HOW CAUSE NOTICE TO ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF RS. 1.1 0 CRORE SHOULD NOT BE ADDED TO THE INCOME OF THE YEAR. IN REPLY, A SSESSEE SUBMITTED THAT INCOME DECLARED IN THE RETURN OF INCOME IS ON THE BASIS OF GROSS PROFIT OF ITS ACTUAL TURNOVER. AO, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF ASSESSEE. HE OBSERVED THAT AT THE TI ME OF SURVEY, PARTNERS OF ASSESSEE FIRM HAVING CATEGORICALLY ADMI TTED OF SUPPRESSION OF SALES AND OFFERED ADDITIONAL INCOME OF RS. 1.10 CRORE, THE SAME IS TO BE TREATED AS INCOME OF ASSESSEE. AC CORDINGLY, HE COMPLETED THE ASSESSMENT BY ADDING THE AMOUNT OF RS . 1.10 CRORE TO THE INCOME OF ASSESSEE. BEING AGGRIEVED OF SUCH ADD ITION, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF PROCEEDING BEFORE LD. CIT(A), ASSES SEE ACCEPTED THAT IN THE PARTICULAR LINE OF TRADE SOME OF THE PR ODUCTS PURCHASED ARE NOT SUPPORTED BY ADEQUATE VOUCHERS BUT AT THE SAME TIME, IT WAS SUBMITTED THAT ASSESSEE HAS RECORDED ALL SALES AND PURCHASES AND HAS NO INTENTION TO CONCEAL THE INCOME. HOWEVER, CO NSIDERING THE FACT THAT SOME PURCHASES/SALES WERE NOT SUPPORTED BY BIL LS AND VOUCHERS, ASSESSEE SUBMITTED THAT PERCENTAGE OF SUCH SALES/PU RCHASES WOULD NOT BE MORE THAN 5 TO 10% OF THE TOTAL TURNOVER, HE NCE, IT CANNOT BE SAID THAT SUPPRESSION OF SALES/PURCHASE TURNOVER W OULD BE GENERATING INCOME OF RS. 1.10 CRORE. ASSESSEE SUBMI TTED THAT IN THE STATEMENT RECORDED AT THE TIME OF SURVEY WHAT THE P ARTNER ACTUALLY 3 ITA NO. 456 /HYD/2014 M/S PLYLAM CENTRE OFFERED TO DISCLOSE WAS THE UNACCOUNTED SALES OF RS . 1.10 CRORES AND NOT THE INCOME. THAT IS THE REASON WHY ASSESSEE RET RACTED FROM THE STATEMENT WHILE FILING THE RETURN OF INCOME. IT WAS FURTHER SUBMITTED BY ASSESSEE, EVEN ACCEPTING UNDISCLOSED SALES OF ASSES SEE ARE TO THE TUNE OF RS. 1.10 CRORE BUT THE ENTIRE SALE PROCEEDS CANNOT BE REGARDED AS PROFITS OR TREATED AS UNDISCLOSED INCOM E OF ASSESSEE. ONLY THE PROFIT ELEMENT OF SUCH UNACCOUNTED SALES H AS TO BE ADOPTED AS INCOME OF ASSESSEE. IN SUPPORT OF SUCH CONTENTIO N, ASSESSEE RELIED UPON A NUMBER OF JUDICIAL PRECEDENTS. ASSESS EE SUBMITTED FOR EARNING INCOME OF RS. 1.10 CRORES BY ADOPTING THE G ROSS PROFIT RATE OF 4.5%, ASSESSEE SHOULD HAVE ADDITIONAL TURNOVER OF R S. 25 CRORES, WHICH IS IMPOSSIBLE TO ACHIEVE UNDER THE PREVAILING CIRCUMSTANCES. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, FOUND MERIT IN ASSESSEES CONTENTION. HE OBSERVED THAT AO EXCEPT RELYING UPON THE STATEMENT OF THE PARTNER HAS NOT BROUGHT ANY COGENT REASONS ON RECORD TO ESTABLISH THAT ASSESSEES ADDITIONAL INCO ME AMOUNTING TO RS. 1.10 CRORES WAS OUT OF UNACCOUNTED SALES. LD. C IT(A) FOLLOWING THE PRINCIPLES LAID DOWN IN THE DECISIONS CITED BEF ORE HIM, ULTIMATELY, HELD THAT EVEN ACCEPTING THE FACT THAT UNACCOUNTED SALES OF ASSESSEE DURING THE YEAR IS RS. 1.10 CRORE, PROFIT SHOULD BE ESTIMATED AT REASONABLE RATE. ACCORDINGLY, HE PROCEEDED TO ESTIM ATE THE NET PROFIT ON THE UNACCOUNTED SALES OF RS. 1.10 CRORE BY APPLY ING THE RATE OF 10%. THUS, THE PROFIT ON ACCOUNT OF UNACCOUNTED SAL ES WAS DETERMINED AT RS. 11,00,000 THEREBY LD. CIT(A) DELE TED THE BALANCE ADDITION OF RS. 99 LAKHS. 6. LD. DR REFERRING TO THE STATEMENTS RECORDED FROM ONE OF THE PARTNERS OF ASSESSEE FIRM DURING THE SURVEY, SUBMI TTED, WHEN ASSESSEE HAS ACCEPTED OF HAVING SUPPRESSED ITS PURC HASES AND SALES AND CAME FORWARD TO DECLARE ADDITIONAL INCOME OF RS . 1.10 CRORE, THERE IS NO REASON WHY IT SHOULD GO BACK ON OFFER M ADE AT THE TIME OF SURVEY AND FILED RETURN OF INCOME WITHOUT SHOWING A DDITIONAL INCOME 4 ITA NO. 456 /HYD/2014 M/S PLYLAM CENTRE OF RS. 1.10 CRORE. LD. DR EXTENSIVELY REFERRING TO THE STATEMENT RECORDED FROM THE PARTNER OF THE ASSESSEE FIRM SUBM ITTED, NOT ONLY ASSESSEE FIRM OFFERED ADDITIONAL INCOME OF RS. 1.10 CORE BUT IT ALSO PROMISED TO PAY TAX OF RS. 35 LAKHS. THUS, IT WAS S UBMITTED BY LD. DR WHILE MAKING OFFER AT THE TIME OF SURVEY WHAT ASSES SEE ACTUALLY MEANT IS INCOME OF RS. 1.10 CRORE AND NOT TURNOVER AS SUB SEQUENTLY STATED BY ASSESSEE. THUS, LD. DR SUBMITTED THAT ADDITION M ADE BY AO SHOULD BE RESTORED. 7. LD. AR, ON THE OTHER HAND, STRONGLY SUPPORTING T HE ORDER OF LD. CIT(A) SUBMITTED BEFORE US, STATEMENT RECORDED AT T HE TIME OF SURVEY HAS NO EVIDENTIARY VALUE, HENCE, TAX LIABILITY OF A SSESSEE CANNOT BE DETERMINED BY SOLELY RELYING UPON SUCH STATEMENT. F OR SUCH PROPOSITION, LD. AR RELIED UPON THE FOLLOWING DECIS IONS, WHICH ARE AS UNDER: 1. CIT VS. S. KHADER KHAN SON, [2008] 300 ITR 157 (MAD.) 2. ACIT VS. MAYA TRADING CO., [2013] 34 TAXMANN.CO M 144 (AGRA BENCH) REITERATING THE SUBMISSIONS MADE BEFORE LD. CIT(A), LD. AR CONTENDED, WHAT ASSESSEE HAS ACTUALLY MEANT TO OFF ER AT THE TIME OF SURVEY WAS UNACCOUNTED SALES OF RS. 1.10 CRORE AND NOT INCOME OF RS. 1.10 CRORE. REFERRING TO THE P&L A/C FOR THE YE AR UNDER CONSIDERATION, LD. AR SUBMITTED, TOTAL TURNOVER OF ASSESSEE DURING THE RELEVANT YEAR IS RS. 6.30 CRORES AND, THEREFORE, TH E PROFIT COMPUTED IF COMPARED TO THE PREVIOUS YEARS PROFIT, THERE CANN OT BE ANY ROOM FOR FURTHER ADDITION. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. NO DOUBT, AT THE TIME OF SURVEY ON 18/03/09 A STAT EMENT WAS RECORDED FROM SHRI MANCHALA RAMESH, PARTNER OF ASSE SSEE FIRM WHEREIN ADMITTING THE FACT THAT THERE ARE UNACCOUNT ED PURCHASES AND 5 ITA NO. 456 /HYD/2014 M/S PLYLAM CENTRE SALES, HE OFFERED ADDITIONAL INCOME OF RS. 1.10 CRO RE FOR AY 2009-10. IT IS ALSO A FACT THAT AN AMOUNT OF RS. 35 LAKHS WA S PROMISED TO BE PAID TOWARDS TAX LIABILITY. HOWEVER, ON PERUSAL OF THE FACTS AND RECORDS, IT IS SEEN THAT AMONGST IMPOUNDED MATERIA LS IS A DIARY MARKED AS PC17, WHEREIN, AS PER ASSESSEES VERS ION, DAY TO DAY SALES ARE RECORDED. THEREFORE, THE MINIMUM THE AO S HOULD HAVE DONE IS TO VERIFY THE SALES RECORDED IN THE DIARY WITH T HE BOOKS OF ACCOUNTS TO FIND OUT THE ACTUAL SUPPRESSION OF SALES. WITHOU T DOING SO, AS WOULD BE EVIDENT FROM THE ASSESSMENT ORDER, AO HAS SIMPLY RELIED ON THE STATEMENT OF THE PARTNER RECORDED ON THE DATE O F SURVEY ON 18/03/09 FOR MAKING ADDITION OF RS. 1.10 CRORE. TIM E AND AGAIN, IT HAS BEEN HELD BY JUDICIAL AUTHORITIES THAT SOLELY ON TH E BASIS OF THE STATEMENT RECORDED AT THE TIME OF SURVEY, NO ADDITI ON CAN BE MADE UNLESS THERE ARE CORROBORATIVE EVIDENCE TO BACK SUC H ADDITION. THE DECISIONS RELIED UPON BY LD. AR SUPPORT SUCH VIEW. IN THE PRESENT CASE, AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT ASSESSEE HAS SUPPRESSED SALES TO THE EXTENT FOR GEN ERATING INCOME OF RS. 1.10 CRORE. AT LEAST, THERE IS NO DISCUSSION BY AO IN THIS REGARD IN THE ASSESSMENT ORDER. MOREOVER, IT IS SEEN FROM TH E MATERIAL ON RECORD THAT IN THE IMMEDIATELY PRECEDING AY, ON TO TAL SALES OF RS. 5,56,61,182 ASSESSEE DECLARED GROSS PROFIT OF RS. 20,69,814.43. WHEREAS, IN THE AY UNDER CONSIDERATION, ASSESSEE H AS DECLARED GROSS SALES OF RS. 630,68,104 WITH GROSS PROFIT OF RS. 28,51,977.34 WHICH WORKS OUT TO 4.5% OF THE GROSS SALES. THUS, COMPARED TO THE FIGURES OF IMMEDIATELY PRECEDING AY, BOTH TURNOVER AND GP SHOWN BY ASSESSEE APPEARS TO BE REASONABLE. IN THE AFORESAID FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT SALES OF ASSE SSEE HAS INCREASED TO SUCH AN EXTENT THAT ASSESSEE WOULD HAVE EARNED P ROFIT OF RS. 1.10 CRORES. FROM THE AFORESAID FACTS, ASSESSEES CONTEN TION THAT WHAT THE PARTNER OFFERED AT THE TIME OF SURVEY IS UNACCOUNTE D SALES OF RS. 1.10 CRORE APPEARS TO BE CORRECT. IN THE AFORESAID FACTS AND CIRCUMSTANCES, LD. CIT(A) HAVING ESTIMATED THE PROFIT @ 10% ON THE UNACCOUNTED SALES OF RS. 1.10 CRORE, WE DO NOT FIND ANY INFIRMI TY IN THE SAME. 6 ITA NO. 456 /HYD/2014 M/S PLYLAM CENTRE ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) BY D ISMISSING THE GROUND RAISED BY REVENUE. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. . PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 29 TH JULY, 2015 KV COPY TO:- 1) ITO, WARD 5(2), HYDERABAD 2) PLYLAM CENTRE, 5-5-865, GOSHAMAHAL, HYDERABAD 3)CIT(A), HYDERABAD 3 CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.