NUMBER ONE AUTOMOBILE P.LTD, MUMBAI V. ITO WD 8(2)(4), MUMBAI

ITA 4563/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0709 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: HITESH P SHAH
• Keywords: Business income
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.4478/M/2014 ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER- 8(2)(3), ROOM NO.213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. NUMBER ONE AUTO MOBILES PVT. LTD., DADDYS GARDEN BUNGALOW, PLOT NO.368/105, SHER-E-PUNJAB CHS LTD., ANDHERI (E), MUMBAI 400 093 PAN: AACCN2576K (APPELLANT) (RESPONDENT) ITA NO.4563/M/2014 ASSESSMENT YEAR: 2008-09 M/S. NUMBER ONE AUTO MOBILES PVT. LTD., DADDYS GARDEN BUNGALOW, PLOT NO.368/105, SHER-E-PUNJAB CHS LTD., ANDHERI (E), MUMBAI 400 093 PAN: AACCN2576K VS. INCOME TAX OFFICER, WARD-8(2)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400021 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HITESH P. SHAH, A.R. REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 04.12.2017 DATE OF PRONOUNCEMENT : 12.01.2018 ITA NO.4478/M/2014 & ITA NO.4563/M/2014 M/S. NUMBER ONE AUTO MOBILES PVT. LTD. 2 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 28.03.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008- 09. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: ASSESSEE IS ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF USED CARS ON COMMISSION BASIS AND ALSO ON AGREED PR ICE FROM THE CAR OWNER AND IS SOLD AFTER DOING SOME REPAIRS/ALTERATI ONS. A SURVEY ACTION UNDER SECTION 133A WAS CARRIED OUT ON 09.10. 2007 AND CERTAIN STATEMENTS WERE RECORDED AND DOCUMENTS WERE IMPOUND ED. THE ASSESSEE HAD FILED THE RETURN DECLARING LOSS OF RS. 15,598/- AND HE WAS ASKED TO FILE THE COPIES OF AUDITED PROFIT & LOSS A CCOUNT, BALANCE SHEET AND BOOKS OF ACCOUNT, BASED ON WHICH SUCH STA TEMENT AND RETURN OF INCOME WAS FILED. THE ASSESSEE HAS FILED TWO PROFIT & LOSS ACCOUNTS, ONE WITH TOTAL SALES OF RS.6,37,34,479/- AND ON RECEIVING THE STATEMENTS OF SALES SUBMITTED BY THE ASSESSEE D URING SURVEY THE TOTAL SALES WERE CHANGED TO THE TUNE OF RS.9,67,28, 525/- IN THE SECOND PROFIT & LOSS ACCOUNT. THEREFORE, ASSESSING OFFICE R (HEREINAFTER REFERRED TO AS THE AO) WAS OF A VIEW THAT THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE. THEREFORE, AO HAS ESTIMATED THE GROSS PROFIT @ RS.10,00,000/- PER MONTH AND THUS ESTIMATED THE GRO SS PROFIT @ RS.1,20,00,000/- IN THE ENTIRE YEAR. ITA NO.4478/M/2014 & ITA NO.4563/M/2014 M/S. NUMBER ONE AUTO MOBILES PVT. LTD. 3 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) CALLED THE REMAND REPORT AND CONSIDERED THE DOCUMENT. HE HAS RESTRICTED THE GP AND RESTRICTED THE ADDITION TO RS.36,00,000/- BY OBSERVING AS UNDER: 2.6 THE AO'S ORDER AND REPORTS, THE CONTENTIONS OF THE APPELLANT AND MATERIALS ON RECORD HAVE BEEN CONSIDERED. THE AO HAS ESTIMATED T HE APPELLANT'S INCOME HOLDING THAT AN ESTIMATE IS NECESSARY AS THE APPELLANT HAS NOT MAINTAINED ANY PROPER BOOKS OF ACCOUNT. THE AO HAS APPLIED AN AVERAGE GP RATE @ 15 % SINCE THE AO FOUND THAT THE GP VARIED FROM 2% TO 31%. THE AO HAS ALSO NOT FOUND AC CEPTABLE THE APPELLANT'S CONTENTION THAT STATEMENT OF PROFIT/LOSS ON CARS IS EASILY VERIFIABLE FROM THE DETAILS AVAILABLE IN THE REGISTER OF CARS AND DELIVERY NOTE S WHICH WERE IMPOUNDED DURING SURVEY. ON THE OTHER HAND THE APPELLANT CLAIMS THAT WHILE NO BOOKS OF ACCOUNT WERE MAINTAINED, DETAILS OF PURCHASE, SALE AND PROFIT OF CARS WAS MAINTAINED VEHICLE-WISE AND THIS WAS STATED BY SHRI AVATAR SINGH SETHI IN H IS STATEMENT RECORDED DURING SURVEY PROCEEDINGS. THE DETAILS OF THE CODE USED VI Z., LOCKWASHER WAS ALSO ELABORATED, THAT EACH ALPHABET CORRESPONDS TO WHICH NUMERAL AND THAT EACH OF THE DELIVERY NOTES RECORDS ON THE REVERSE SIDE THE AMOU NTS AS PER THE ABOVESAID CODE. THE APPELLANT HAS ALSO STATED THAT THE TOTAL SALES COMPRISE OF SALES OF THE PROPRIETARY M/S POPULAR AUTOMOBILES AND THE APPELLANT COMPANY M /S NUMBER ONE AUTOMOBILES PVT. LTD. THE APPELLANT FURNISHED STATEMENT OF PROFIT ON SALE OF CARS GIVING DATE, ITEM (I.E., CAR MAKE, VEHICLE REGISTRATION NUMBER, SALES VALUE BIFURCATED FRO POPULAR AUTOMOBILES AND NUMBER ONE AUTOMOBILES PVT. LTD., P URCHASE AMOUNT BIFURCATED FRO POPULAR AUTOMOBILES AND NUMBER ONE AUTOMOBILES PVT. LTD., AND PROFIT EARNED ON EACH SALE AGAIN BIFURCATED FRO POPULAR AUTOMOBIL ES AND NUMBER ONE AUTOMOBILES PVT. LTD. ENTRIES IN THE SAME WERE SOUG HT TO BE VERIFIED WITH REFERENCE TO THE DELIVERY NOTES, THE CODE ENTRIES MADE ON THE REVERSE OF EACH DELIVERY NOTE AND WITH REFERENCE TO THE CASH ENTRIES REFLECTED IN THE STATEMENT PREPARED AT THE TIME OF SURVEY. WHILE SOME ENTRIES WERE FOUND REFLECTED AND MATCHED WITH THE FIGURES IN THE DELIVERY NOTES, A FEW DELIVERY NOTES RELEVANT TO EN TRIES IN THE STATEMENT FILED WERE NOT FOUND. FURTHER IT WAS NOTED THAT WHILE THE APPELLAN T CLAIMED SALES OF RS.3,29,94,092/- RELATED TO POPULAR AUTOMOBILES, THE TURNOVER DECLAR ED IN THE IT RETURN FILED WAS AT RS.3,36,76,488/-. THUS THE STATEMENT FILED CANNOT B E TAKEN AS FULLY ACCURATE AS REFLECTING EITHER THE ACCURATE SALES OF THE ACCURAT E PROFIT, CONSEQUENTLY SOME ESTIMATE OF PROFIT WOULD NECESSARILY HAVE TO BE MAD E. HOWEVER NEVERTHELESS SINCE MANY OF THE ENTRIES IN THE STATEMENT MATCHED WITH T HE DELIVERY NOTES AS PER FIGURES RECORDED IN CODE, AND DECODED AS PER ALPHA-NUMERIC EQUATION FURNISHED BY THE APPELLANT, THE TOTAL SALES FIGURE OF RS.9,67,28,527 /- IS TAKEN AS THE STARTING POINT. SINCE THE DELIVERY NOTES IN THE INITIAL MONTHS OF THE REL EVANT FINANCIAL YEAR ALSO WERE ON THE LETTER HEAD OF POPULAR AUTOMOBILES AND OF THE LATER MONTHS WERE MAINLY IN THE NAME OF THE APPELLANT COMPANY, THE CLAIM THAT THE TOTAL SALES COMPRISE OF SALES OF THE PROPRIETARY CONCERN M/S POPULAR AUTOMOBILES AND THE APPELLANT COMPANY M/S NUMBER ONE AUTOMOBILES PVT. LTD. ALSO HAS MERIT. AS TO THE GP RATE TO BE APPLIED, ITA NO.4478/M/2014 & ITA NO.4563/M/2014 M/S. NUMBER ONE AUTO MOBILES PVT. LTD. 4 THE AO HAS TAKEN THE GP AT 15% BEING THE AVERAGE OF GP RATES ON VARIOUS SALES VARYING BETWEEN 2% AND 31%. THE AO HA S APPARENTLY TAKEN THE AVERAGE OF ONLY POSITIVE PROFITS RESULTING FROM SAL ES BY THE APPELLANT. HOWEVER PERUSAL OF THE STATEMENT SHOWS THERE WERE SOME SALE S SHOWING A LOSS AND SOME SHOWING ZERO PROFIT. HENCE THE AO'S AVERAGE WOULD NECESSARILY HAVE TO BE REVISED DOWNWARDS. IN WRITTEN SUBMISSION DATED 28/03/2014, THE APPELLANT HAS ADMITTED THAT IN THE STATEMENT RECORDED THE DIRECTOR HAS ACC EPTED PROFIT OF RS.17,000/- ON SALE OF RS.2,65,000/- (REFERRING TO QUESTION NO. 9 OF TH E STATEMENT). EVEN TAKING THIS ADMITTED GP RATE, THIS WOULD WORK OUT AT 6.41%. AP PLYING THIS ADMITTED GP RATE OF 6.41% TO TOTAL SALES OF RS.9,67,28,527/- WORKED OUT BY THE APPELLANT ITSELF, THE GP WOULD WORK OUT TO RS.62,00,298/-. PERUSAL OF THE IT RETURN FILED BY POPULAR AUTOMOBILES SHOWS THAT THE PROPRIETARY CONCERN HAS DECLARED GROSS PROFIT AT RS.9,37,533/-. REDUCING THE SALE FROM THE TOTAL GP OF RS.62,00,298/-, THE GP OF THE APPELLANT COMPANY COMES TO RS.52,62,765/-. ALLOWING THE EXPENSES CLAIMED AT RS.17,56,482/- THE NET WOULD BE OF RS.35,06,283/-. GIVEN THE INACCURACIES IN THE STATEMENT OF PURCHASES, SALES AND PROFIT NOTED, THE AO IS DIRECTED TO RESTRICT ADDITION TO RS.36,00,000/-, WHICH WOULD OVER AND ABOVE THE R ENT RECEIPT DECLARED BY THE APPELLANT IN ITS P & L ACCOUNT. AS REGARDS GROUND NO.2 OF APPEAL, THE AO IS DIRECTE D TO CONFIRM IF THE DEPARTMENT HAS NOT FILED SECOND APPEAL AGAINST ORDE R OF CIT(A) FOR A.Y. 2007-08, AND IF SO, THE PROTECTIVE ADDITION IS NOT CALLED FO R. 4. THE DEPARTMENT IS IN APPEAL AGAINST RESTRICTING THE GP @ RS.36,00,000/- AND ASSESSEE IS IN APPEAL FOR ESTIMA TING THE GP @ 6.41% ON THE BASIS OF SINGLE SALE TRANSACTION. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS CALLED FOR T HE REMAND REPORT AND THE LD. CIT(A) HAS ALSO SENT THE ADDITIONAL EVI DENCE AND THE AO HAS VERIFIED ALL THESE DOCUMENTS AND ALSO VERIFIED THE DETAILS OF REGISTRATION OF CAR AND DELIVERY NOTES WHICH WERE I MPOUNDED DURING THE SURVEY AND THE LD. CIT(A) HAS ALSO VERIFIED ALL THESE DOCUMENTS AND AFTER VERIFYING THE REPORT THE LD. CIT(A), CONS IDERING THE SALES OF PRE-SURVEY AND POST SURVEY AND CONSIDERING THE SALE S, HAS ESTIMATED THE GP AND WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. ITA NO.4478/M/2014 & ITA NO.4563/M/2014 M/S. NUMBER ONE AUTO MOBILES PVT. LTD. 5 CIT(A). HENCE, WE HAVE NO ALTERNATIVE BUT TO ENDOR SE THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ITA NO.4563/M/2014 7. THE ASSESSEE HAS FILED THE APPEAL ON THE GROUND THAT THE LD. CIT(A) HAS NOT ACCEPTED THE DECISION FOR A.Y. 2007- 08 WHEREIN THE ADDITION OF RS.16,00,000/- WAS ACCEPTED ON THE BAS IS OF INCOME DECLARED INADVERTENTLY WORKED OUT AT THE TIME OF SU RVEY FOR 2008-09. 8. WE HAVE GONE THROUGH THE ORDER OF THE LD. CIT(A). THE LD. CIT(A) HAS GIVEN THE DIRECTION THAT IF THE DEPARTME NT HAS NOT FILED THE APPEAL FOR 2007-08 THE PROTECTIVE ADDITION IS N OT CALLED FOR. THEREFORE, WE RESTORE THIS ISSUE BACK TO THE FILE O F THE AO TO VERIFY THE SAME AND DECIDE IT AFRESH. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.01.2018. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.01.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.4478/M/2014 & ITA NO.4563/M/2014 M/S. NUMBER ONE AUTO MOBILES PVT. LTD. 6 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.