SURESHKUMAR GHEWAECHAND HUNDIA, MUMBAI V. ACIT CC-14, MUMBAI

ITA 4660/MUM/2009

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2484 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 15-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 4660/MUM/2009 (ASSESSMENT YEAR: 2005-06) SURESH KUMAR HUNDIA M/S. HUNDIA EXPORTS 14/A, BHARAT NAGAR, GRANT ROAD, OPP. SHALIMAR CINEMA, MUMBAI, MAHARASHTRA-400007 APPELLANT VS. ACIT-CC-14 CGO (ANNEX), 11 TH FLOOR, MUMBAI RESPONDENT PAN: AAQPH7289E /BY APPELLANT : SHRI M. SUBRAMANIAN, A.R. /BY RESPONDENT : SHRI B. C. S. NAIK, CIT D.R. /DATE OF HEARING : 16.06.2016 /DATE OF PRONOUNCEMENT : 20.07.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THE CAPTIONED APPEAL FILED BY THE ASSESSE PERTAINI NG TO A.Y. 2005-06 IS DIRECTED AGAINST AN ORDER PASSED BY LD. CIT (APPEALS), MUMBAI ON FOLLOWING GROUNDS: ITA NO.4660/MUM/2009 2 THE LEARNED ACIT, C.C.-14, MUMBAI [HEREINAFTER REFERRED TO AS LEARNED A. C. ONLY] ERRED IN ADDING TO THE TOTAL INCOME THE CASH SEIZED RS.1,50,00,000/- (RS. ONE CRORE FIFTY LACS ONLY) AS UNEXPLAINED WITHOUT ANY B ASIS & JUSTIFICATION & LEARNED CIT (APPEAL) CENTRAL III, MUMBAI ERRED IN CONFIRMING THE SAME & HENCE REQUIRE D TO BE DELETED. THE LEARNED A.C. ERRED IN ADDING TO THE TOTAL INCOM E A SUM OF RS.1,75,55,450/- [RS. ONE CRORE SEVENTY FIVE LAKH FIFTY FIVE THOUSAND FOUR HUNDRED FIFTY ONLY] A S UNDISCLOSED INCOME OUT OF CASH SALES @ 0.55% OF CAS H SALES SHOWN AT AHMEDABAD BRANCH AMOUNTING TO RS.319.99 CRORE FOR THE PERIOD 01/06/2004 TO 31/03/2005 WITHOUT ANY JUSTIFICATION & ALSO IN HAST E WITHOUT APPLYING HIS MIND WHICH IS EVIDENT FROM THE FACT THAT LEARNED A.C. HAS ADDED TOTAL AMOUNT AS CALCULA TED BY HIM WITHOUT DEDUCTING RS.1 CRORE ALREADY DECLARE D BY THE ASSESSEE WHILE FILLING THE RETURN IT SELF ON 28/10/2005 AND TO THAT EXTEND IT ALSO AMOUNTS TO DOUBLE TAXATION/ADDITION & LEARNED CIT (APPEAL) CEN TRAL III, MUMBAI ERRED IN CONFIRMING THE SAME & HENCE REQUIRED TO BE DELETED. 2. FIRST GROUND RELATES TO ADDITION OF CASH SEIZED (DURING SEARCH) RS. 1,50,00,000/- HOLDING AS AN UNEXPLAINED AMOUNT. SECOND GROUND RELATES TO AN ADDITION OF RS. 1,75,55,450/- AS UNDISCLOSED INCOME OUT OF CASH SAL ES @ 0.55% OF CASH SALES SHOWN AT AHEMDABAD BRANCH AMOUNTING TO RS. 319.99 CRORE. BRIEFLY PUT, THE RE LEVANT FACTS ARE THAT THE APPELLANT IS ENGAGING IN THE BUS INESS OF IMPORT AND SALE OF BULLION AND OTHER ACTIVITIES CON NECTED THEREWITH AND CARRIED OUT BUSINESS ACTIVITIES AT MU MBAI AND AT AHMEDABAD BRANCH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSE HAS SUBMITTED V ARIOUS DOCUMENTS, EXPLANATIONS AND STATEMENTS TO ESTABLISH THE ITA NO.4660/MUM/2009 3 GENUINENESS OF CASH SEIZED RS. 1,50,00,000/- AND AD DITION BASED ON ESTIMATE AT RS. 1,75,55,450/-. BUT REJECTI NG ALL THE STATEMENTS AND EXPLANATIONS OF THE ASSESSE THE ASSESSING OFFICER DID THE ADDITION. AGGRIEVED FROM THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE FILED AN APPE AL BEFORE THE CIT (APPEALS), WHO CONFIRMED THE ORDER OF ASSES SING OFFICER ON BOTH ACCOUNTS. NOT BEING SATISFIED WITH THE ORDER OF THE CIT (APPEALS) MUMBAI, THE ASSESSE IS IN FURT HER APPEAL BEFORE US. 3. ASSESSING OFFICER MADE FIRST ADDITION RS. 1,50,00,000/- BEING UNEXPLAINED CASH AS DETAILED AT PARA 6 TO 13 OF ASSESSMENT ORDER. THE CIT (A) CONFIRMED T HE ORDER OF THE ASSESSING OFFICER OBSERVING THAT THE APPELLA NTS MANAGER AT AHMEDABAD HAD CATEGORICALLY STATED THAT ALL SALES AT THE AHMEDABAD WERE BEING MADE THROUGH BANK . THE CLAIM OF THE APPELLANT THAT HIS DRIVER HAD BROU GHT THE CASH FROM AHMEDABAD WAS NOT CORROBORATED BY COGENT REASONING. THE APPELLANT HAD FAILED TO FURNISH THE NAMES AND PARTICULARS OF THE PARTIES FROM WHOM THE ALLEGE D CASH OF RS. 1.5 CRORES WAS RECEIVED AT AHMEDABAD AND WER E NOT FOUND IN THE CASH BOOK ON THAT DAY. 3.1 THE ORDER OF CIT(A) HAS BEEN OPPOSED ON VARIOUS ACCOUNTS AND REQUESTED TO GRANT RELIEF. ON OTHER H AND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE HAS TAKEN US THROUGH THE WRITE UP ON EACH ITA NO.4660/MUM/2009 4 ASPECTS OF THE OBSERVATIONS OF THE CIT (A), AS CITE D ABOVE WHICH IS SIMILAR TO THAT NOTED BY THE ASSESSING OFF ICER IN HIS ASSESSMENT ORDER. ACCORDING TO LD. DEPARTMENTAL REPRESENTATIVE WHOLE FACTS HAVE BEEN EXPOSED BY REV ENUE AUTHORITIES WHILE ADDITION IN QUESTION WAS MADE AND CONFIRMED BY CIT(A). SAME SHOULD BE UPHELD. 3.2 WE FIND THAT STATEMENT MADE BY THE MANAGER AT AHMADABAD INTER ALIA STATED THAT ALL SALES AT THE AHMEDABAD WERE BEING MADE THROUGH BANK, WHEREAS IN PARA NO. 19 OF ASSESSMENT ORDER, THE ASSESSING OFFI CER HIMSELF HAS WORKED OUT THE OTHER DISALLOWANCE BASED ON THE CASH SALES OF RS. 319.99 CRORES AT AHMEDABAD. THEREFORE TO SAY THAT ALL SALES AT AHMEDABAD WAS TH ROUGH CHEQUES/BANKS IS CONTRARY TO FACTS ON RECORD. HENCE THE STATEMENT GIVEN BY THE MANAGER AT AHMEDABAD CANNOT BE TAKEN AS SACROSANCT. REGARDING THE OBSERVATION TH AT DRIVER OF ASSESSEE HAD BROUGHT THE CASH FROM AHMEDABAD WAS NOT CORROBORATED BY HIS DRIVER OR BY HIS SON. IN THIS R EGARD, STAND OF ASSESSEE HAS BEEN THAT THEIR STATEMENT REC ORDED SHOULD NOT BE RELIED AND TRUSTED BECAUSE THE DRIVER AND HIS SON WERE NOT LOOKING FOR HIS DAY TO DAY BUSINESS AC TIVITIES. THEY WERE NOT ASSIGNED BUSINESS OF ASSESSEE. THEY WERE NOT AWARE OF THE MINUTE BUSINESS AFFAIRS OF ASSESSE E. MOREOVER, THE ASSESSE HIMSELF WAS NERVOUS BECAUSE H E FACED THE SEARCH ACTION FIRST TIME. REGARDING THE OBSERVATION OF CIT (A) THAT THE APPELLANT HAD FAILE D TO FURNISH THE NAMES AND PARTICULARS OF THE PARTIES FR OM ITA NO.4660/MUM/2009 5 WHOM THE ALLEGED CASH OF RS. 1.5 CRORES WAS RECEIVE D AT AHMEDABAD, THE LD. AUTHORIZED REPRESENTATIVE FOR TH E ASSESSE SUBMITTED THAT IT WAS PRACTICALLY NOT POSSI BLE TO SUPPLY THE NAME AND ADDRESSES OF THOSE CUSTOMERS TO WHOM CASH SALES WERE MADE BECAUSE THE ASSESSEE HAS NOT BEEN MAINTAINING THE RECORDS OF CASH SALE INCLUDING THE NAME OF CUSTOMERS RIGHT FORM THE BEGINNING. IN CAS E OF R.B.JESSARAM FETEHCHAND ( SUGAR DEPT) VS. CIT 75 IT R 33 BOM WHEREIN DELIVERY OF GOODS WAS BEING TAKEN AGAIN ST THE CASH PAYMENT. IT WAS HELD THAT THE NAME AND ADDRES S OF THE PURCHASERS ARE NECESSARY TO BE MAINTAINED. REGA RDING FINDINGS OF THE ASSESSING OFFICER THAT ENTRIES OF R S. 1.5 CRORES WAS NOT FOUND IN THE CASH BOOK ON THAT DAY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSE SUBMITTED THAT IN MODERN BUSINESS ENVIRONMENT IT IS DIFFICULT TO MAIN TAIN DAY TO DAY SALE RECORD. FOR EXAMPLE, A BUSINESS MAN WHO HAS 1000 CUSTOMERS, AND SOME CUSTOMERS DEPOSIT THE CASH IN THE BANK ACCOUNT DIRECTLY AND THEY INFORM THE ASSES SE AFTER TWO DAYS ABOUT THEIR DEPOSIT OF CASH IN THE ASSESSE S BANK ACCOUNT, IN THAT CASE THE ASSESSE CANNOT DO ENTRY O F SUCH TRANSACTION AND IT MAY BE ENTERED IN THE BOOKS AFTE R TWO DAYS AND SOMETIMES HE KEEPS THE CASH BOOK OPEN AND DOES THE ENTRY ON THE SAME DAY, RETROSPECTIVELY AS CASE MAY BE. THIS IS PRACTICAL ASPECT OF MANAGING BUSINESS AFFAI RS BY BUSINESSMAN IS HIS SOLE DISCRETION. REGARDING THE BELIEF OF THE HUGE LOSS OF RS. 4.81 CRORES APPROXIMATELY DURI NG THE PRE-SEARCH PERIOD, WE FIND THAT THERE IS NO CONNECT ION WITH CASH FLOW OF THE ASSESSEES BUSINESS WITH NET LOSS SHOWN BY ITA NO.4660/MUM/2009 6 THE ASSESSEE. THE ASSESSING OFFICER DID NOT TRY ANY RECONCILIATION BETWEEN CASH SALES AND LOSS. AS PER PARA 17 OF ASSESSMENT ORDER THE CASH SALES MADE AT AHMEDABA D WAS AT RS. 351.93 CRORES AND OUT OF THIS RS. 319.99 CRORES ARE FOR THE PERIOD 1/6/2004 TO 31/3/2005. THE ADDI TION OF RS. 1.5 CRORES IS NOT CALLED FOR AS THE ASSESSE IS HAVING TURNOVER OF RS. 1200 CRORES AND AROUND RS. 600 CROR ES WHICH IS BY WAY OF CASH SALES. THE PERCENTAGE OF S EIZED CASH RS.1.5 CRORES WITH RS.600 CRORES ( THAT IS 1.5 CRORE / 600 CRORES X 100 = 0.25%). THUS RS. 1.5 CRORES IS NOT EVEN 1% OF TOTAL CASH SALES THEREFORE IT IS NOT A MATERI AL AND SIGNIFICANT FIGURE FOR IN COMPARISON TO CASH SALES RS. 600 CRORES. ACCORDING TO MATERIALITY CONCEPT, TRIVIAL F IGURES HAVE TO BE STATE DISREGARDED. THE ASSESSE IN HIS STATEME NT ALWAYS SAID TO THE INCOME TAX AUTHORITIES THAT RS. 1.5 CRORES BELONG TO ASSESSES BUSINESS. THE ASSESSING OFFICER DID NOT BRING ANY CONTRARY MATERIAL ON THE RECORD T HAT AMOUNT OF RS. 1.5 CRORES DID NOT BELONG TO ASSESSE S BUSINESS. THE ASSESSING OFFICER DID NOT MAKE RECONC ILIATION OF TOTAL CASH SALES TO JUSTIFY WHETHER RS. 1.5 CROR E IS PART OF BUSINESS OF ASSESSEE OR NOT. THE ASSESSING OFFICER HAS NOT EVEN REJECTED THE BOOKS OF THE ASSESSE AT ANY STAGE . NEITHER CASH SALES NOR TOTAL TURNOVER OF THE ASSESSE WAS OB JECTED BY THE ASSESSING OFFICER IN ANY MANNER. WE FIND THAT A DDITION IS NOT BASED ON COGENT REASONING AS DISCUSSED ABOVE , SO SAME IS NOT JUSTIFIED. ASSESSING OFFICER IS DIRECT ED TO DELETE THE SAME. ITA NO.4660/MUM/2009 7 4. ASSESSING OFFICER MADE OTHER ADDITION OF RS. 1,75,55,450/- AS UNDISCLOSED INCOME OUT OF CASH SAL ES @ 0.55% OF CASH SALES. THIS ADDITION WAS MADE BY ASS ESSING OFFICER DUE TO DIFFERENTIAL RATES OF SALES TAX IN MAHARASHTRA ( 1% ) AND GUJARAT (0.25%) AND AFTER DEDUCTING 0.20 % ON ACCOUNT OF EXPENDITURE. THE ASSESSING OFFICER ADDE D 0.55% OF TOTAL CASH SALES AT AHMEDABAD AMOUNTING TO RS. 3 19.99 CRORES AND THUS WORKED OUT ADDITION AT RS. 1,75,55, 450/- 4.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. DEPARTMENTAL REPRESENTATIVE FOR REVENUE HAS REITERA TED THE STAND TAKEN BY THE ASSESSING OFFICER. ON THE OTHER HAND THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS STATED THAT THE SAID ADDITION IS ON ACCOUNT OF GUESS, SURM ISE AND CONJECTURE WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. 4.2 WE FIND NOTHING ON RECORD TO SUGGEST THAT THE S ALES TAX AUTHORITIES HAVE DISTURBED THE SALE RESULT OF A SSESSEE IN ANY MANNER. AT THE TIME OF SEARCH THE INCOME TA X AUTHORITIES DID NOT CONFRONT THIS INFORMATION WITH THE SALES TAX AUTHORITIES TO JUSTIFY THEIR ACTION. SALES TAX IS LEVIED ON SALES, WHICH IS SUBJECT MATTER OF SALES TAX DEPARTM ENT AND NOT THE INCOME TAX DEPARTMENT. THE ASSESSING OFFICE R DID NOT MAKE ANY RECONCILIATION BETWEEN THE SALES TAX P AID TO THE CONCERNED SALES TAX AUTHORITIES AND SALES TAX R ECORDED IN THE BOOKS OF THE ASSESSEE. THE OBJECT OF THE INC OME TAX ITA NO.4660/MUM/2009 8 DEPARTMENT IS TO LEVY THE INCOME TAX ON NET INCOME. ESTIMATING OF DIFFERENCE OF SALES TAX ON TURNOVER I S NOT BASED ON COGENT EVIDENCE CANNOT BE MADE BASIS OF AD DITION IN QUESTION. THUS, ADDITION IN QUESTION IS NOT WEL L FOUNDED. SAME IS DIRECTED TO BE DELETED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED ON BOTH ACCOUNT AS DISCUSSED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JULY, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: DATED 20/07/2016 / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) , -./ 00'(1 '( 1 %& / DR, ITAT, MUMBAI 3 /45 67 / GUARD FILE. BY ORDER / 1 / % 1 '( 1 %&