Satish Laxminarayan Agrawal, Aurangabad V. ITO, Wd.-2(2), Aurangabad

ITA 457/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56420 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K OZHA
• Keywords: Retraction
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 457/PN/2009 : A.Y. 2004-05 SATISH L. AGRAWAL PROP. M/S. KAILASH MACHINERY & MOTOR STORES SHAHGUNJ, AURANGABAD 431 001 PAN AAPPA 5542 C APPELLANT VS. I.T.O. WARD 2(2) AURANGABAD RESPONDENT APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI K.K. OZHA DATE OF HEARING: 29-8-2011 DATE OF PRONOUNCEMENT: 30-8-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) WHEREIN SUSTAINING THE ADDITION OF RS. 1,88,452/- ON ACCOUNT OF EXCESS STOCK HAS BEEN OPPO SED. 2. THE ASSESSEE, AN INDIVIDUAL, IS RUNNING A PROPRI ETARY CONCERN IN THE NAME AND STYLE OF M/S. KAILASH MACHI NERY & MOTOR STORES. DURING THE YEAR UNDER CONSIDERATION, SURVEY PROCEEDINGS U/S 133A OF THE ACT WERE CARRIED ON 19- 9- 2003. DURING THE SURVEY PROCEEDINGS EXCESS STOCK O F GOODS TO THE TUNE OF RS. 2,33,385/- AND EXCESS CASH OF RS . 2 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 2,65,933/- WERE FOUND. ON THE BASIS OF DISCREPANCI ES DETECTED DURING THE COURSE OF SURVEY PROCEEDINGS U/ S 133A, THE ASSESSEE HAD DECLARED AN ADDITIONAL INCOME OF R S. 5,00,000/- BEING UNACCOUNTED MONEY INVESTED IN THE EXCESS STOCK AND PHYSICAL CASH FOUND. WHILE FILING THE RETURN OF INCOME, THE OFFER OF ADDITIONAL INCOME TO THE EXTENT OF RS. 2,12,217/- IN RESPECT OF UNACCOUNTED STOCK AND RS. 2,19,533/- IN RESPECT OF UNEXPLAINED CASH F OUND DURING THE COURSE OF SURVEY WAS RETRACTED BY THE AS SESSEE AND RETURN WAS FILED SHOWING INCOME OF RS. 21,168/- ON ACCOUNT OF UNACCOUNTED STOCK AND RS. 46,400/- IN RE SPECT OF UNEXPLAINED CASH. THE ASSESSING OFFICER HOWEVER , REJECTED THE ASSESSEES CLAIM AND ADDED RS. 4,31,75 0/- ON ACCOUNT OF UNACCOUNTED STOCK AND UNEXPLAINED CASH F OUND DURING THE COURSE OF SURVEY. A FURTHER ADDITION OF RS. 6,420/- WAS ALSO MADE BY THE ASSESSING OFFICER ON E STIMATE BASIS OUT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD ADVERTISEMENT, SHOP EXPENSES, TELEPHONE, CAR A ND TRAVELLING EXPENSES. 3. IN APPEAL, VARIOUS CONTENTIONS WERE RAISED ON BE HALF OF THE ASSESSEE AND THE CIT(A) AFTER TAKING INTO CONSI DERATION VARIOUS SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE HAS RESTRICTED THE ADDITION TO 2,12,217/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY TO AN AMOUN T OF 3 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 RS. 1,53,217/-. THE SAME HAS BEEN OPPOSED BEFORE U S ON BEHALF OF THE ASSESSEE. 4. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT T HE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION ON ACCOUNT OF EXCESS STOCK AS DISCUSSED ABOVE. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF THE ASS ESSING OFFICER. 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT DURIN G THE COURSE OF SURVEY, ADDITIONAL INCOME OF RS. 5,00,000 /- WAS OFFERED ON ACCOUNT OF UNACCOUNTED STOCK AND UNEXPLA INED EXCESS CASH FOUND DURING THE COURSE OF SURVEY. THE STATEMENT OF ASSESSEE WAS RECORDED ON OATH ON 19-9- 2003 AND WHILE ANSWERING TO QUESTION NO. 10 AND 11, THE ASSESSEE ADMITTED THE POSSESSION OF UNACCOUNTED STO CK TO THE TUNE OF RS. 2,32,285/- AND OFFERED THE SAME AS ADDITIONAL INCOME EARNED FROM UNACCOUNTED SALE TRANSACTIONS. SIMILARLY, HE ADMITTED THE POSSESSIO N OF UNEXPLAINED CASH OF RS. 2,65,933/- AND OFFERED THE SAME FOR TAXATION. THE AFORESAID OFFER OF ADDITIONAL IN COME WAS RE-CONFIRMED BY THE ASSESSEE WHILE ANSWERING QUESTI ON NO. 13. THERE IS NOTHING ON RECORD TO SHOW THAT THERE WAS ANY PRESSURE ON THE ASSESSEE AND THE INVENTORY OF STOCK AND 4 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 CASH PREPARED DURING THE COURSE OF SURVEY WERE UNRE LIABLE. THE STATEMENT OF THE ASSESSEE INDICATED THAT THE AS SESSEE NOT ONLY OFFERED THE ADDITIONAL INCOME BUT ALSO REC ONFIRMED HIS CONFESSION. THE AFORESAID STATEMENT WAS RECORD ED ON 19-9-2003 AND THERE WAS NO EVIDENCE ON RECORD TO SH OW THAT THE ASSESSEE HAS RAISED ANY OBJECTION REGARDIN G PRESSURE OR COERCION BEFORE ANY INCOME-TAX AUTHORIT Y AFTER THE DAY OF SURVEY. SIMILARLY, NO EXPLANATION REGARD ING AVAILABILITY OF STOCK AND CASH WAS FILED BY THE ASS ESSEE BEFORE ANY INCOME-TAX AUTHORITY SUBSEQUENT TO THE S URVEY PROCEEDINGS. THERE WAS NO EVIDENCE TO SUGGEST THAT AFTER RECORDING OF STATEMENT, ASSESSEE TOOK ANY STEP TO C LARIFY HIS POSITION WITH REGARDS TO CONFESSION IN STATEMEN T. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDING S AND APPELLATE PROCEEDINGS, THE ASSESSEE HEAVILY RELIED ON BOOKS OF ACCOUNT PREPARED SUBSEQUENT TO THE SURVEY IN SUP PORT OF HIS ACT OF RETRACTION. ON PERUSAL OF TRADING ACCOU NT FURNISHED BY THE ASSESSEE CLEARLY INDICATED THAT TH E SAME WAS AN AFTERTHOUGHT. VARIOUS DISCREPANCIES IN THE T RADING ACCOUNT WERE FOUND IN THE ACCOUNT FURNISHED BY THE ASSESSEE. AS PER TENTATIVE TRADING ACCOUNT AND STAT EMENT OF THE ASSESSEE, OPENING STOCK WAS OF RS. 3,96,390/-, HOWEVER, IN FINAL TRADING ACCOUNT THE FIGURE WAS IN CREASED TO RS. 5,88,920/- WHICH HAS NOT BEEN SUBSTANTIATED BY ANY COGENT REASONS AND EVIDENCE ESTABLISHING THE INCREA SE IN 5 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 THE OPENING STOCK EITHER DURING THE COURSE OF ASSES SMENT PROCEEDINGS OR THE APPELLATE PROCEEDINGS, OTHER THA N RELYING UPON THE BOOKS PREPARED SUBSEQUENT TO THE S URVEY. SIMILARLY, WHILE EXPLAINING THE UNEXPLAINED CASH, T HE ASSESSEE RELIED UPON THE REVISED PROFIT AND LOSS AC COUNT AND TRADING ACCOUNT AND SUBMITTED THAT ON THE DAY O F SURVEY OPENING CASH BALANCE AVAILABLE WITH THE ASSE SSEE AS PER BOOKS OF ACCOUNT WAS RS. 2,22,503/-. THE ASSES SING OFFICER OBSERVED FROM THE RECORD THAT THE ASSESSEE HAS RE- CASTED HIS BOOKS OF ACCOUNTS WITH AN INTENTION TO C OVER UP THE EXCESS STOCK AND UNEXPLAINED CASH FOUND DURING THE COURSE OF SURVEY. IT IS AN ADMITTED POSITION THAT REGULAR BOOKS OF ACCOUNTS WERE NOT FOUND DURING THE COURSE OF SURVEY AND TENTATIVE TRADING ACCOUNT PREPARED AT TH E TIME OF SURVEY WAS BASED ON PRIMARY DOCUMENTS. HENCE, TH E TENTATIVE TRADING ACCOUNT WAS RELIABLE AND ACCURATE . THE SUBSEQUENT BOOKS PREPARED AND PRODUCED BY THE ASSES SEE ARE RESULT OF CREATIVE ACCOUNTING WITH SOLE INTENTI ON TO HIDE THE UNACCOUNTED ASSETS AND THERE IS NO JUSTIFIABLE REASON AND MATERIAL BEHIND THE RETRACTION BY THE ASSESSEE. 6. WE ARE AWARE THAT THE ASSESSEE HAS RIGHT TO RETR ACT BUT RETRACTION HAS TO BE BASED ON EVIDENCE BROUGHT ON R ECORD TO THE CONTRARY AND THERE MUST BE JUSTIFIED REASON AND MATERIAL FOR SUCH RETRACTION. THE CIT(A) AFTER DIS CUSSING 6 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 VARIOUS CASE LAW HELD THAT A STATEMENT RECORDED U/S 133A OF THE ACT COULD NOT BE RELIED IN FRAMING AN ASSESS MENT ORDER. THE CIT(A) FOUND FORCE IN THE ASSESSEES ARG UMENT THAT WHILE PREPARING THE TENTATIVE TRADING ACCOUNT, THE COST PRICE OF THE STOCK FOUND DURING THE COURSE OF SURRE Y WAS ARRIVED AT AFTER DEDUCTING GP RATE AT 7.24% AND VAL UE OF CLOSING STOCK WAS ARRIVED AFTER ADOPTING GP RATE OF `13%. THE TRADING AND P & L ACCOUNT OF IMMEDIATELY PRECED ING YEAR FILED BY THE ASSESSEE SHOWED GP RATE OF 19.83% . IF WHILE COMPUTING THE CLOSING STOCK, ONE ADOPTS GP RA TE AT EVEN 19%, THE GROSS PROFIT AS PER TENTATIVE TRADING ACCOUNT WILL BE RS. 1,38,938/- AS AGAINST RS. 95,105/- RAIS ING THE VALUE OF CLOSING STOCK BY AN AMOUNT OF RS. 43,833/- . SIMILARLY, IF GP RATE OF 19% IS ADOPTED WHILE VALUI NG THE INVENTORY OF STOCK FOUND DURING THE COURSE OF SURVE Y, THE VALUE OF THE STOCK WILL BE REDUCED BY APPROXIMATELY RS. 16,000/- IN VIEW OF THE ABOVE, THE CIT(A) WAS JUSTI FIED IN DIRECTING TO RESTRICT THE ADDITION TO RS. 2,12,217/ - ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY TO AN AMOUNT OF RS. 1,53,217/- WHICH HAS NOT BEEN OPPOSED BY THE REVENUE BEFORE US. AFTER TAKING ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INC LINED TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS RE STRICTED THE ADDITION AS INDICATED ABOVE. THE SAME IS UPHELD . 7 ITA NO.457/PN/2009 SATISH AGRAWAL A.Y. 2004-05 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 30 TH AUGUST 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)- AURANGABAD 4. THE CIT AURANGABAD 5. THE D.R, ITAT B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL