M/S.SHEKHAWATI POLY YARN LIMITED , MUMBAI V. DY CIT CC 2(2), MUMBAI

ITA 4696/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6035 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 02-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Search and seizure
• Section: 64; 13; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI C.N. PRASAD , JM & SHRI M.BALAGANESH, AM ITA NO. 4696 /MUM/201 8 ( ASSESSMENT YEAR : 2010 - 11 ) ITA NO. 4697 /MUM/201 8 ( ASSESSMENT YEAR : 2011 - 12 ) ITA NO. 4698 /MUM/201 8 ( ASSESSMENT YEAR : 2012 - 13 ) ITA NO. 4699 /MUM/201 8 ( ASSESSMENT YEAR : 2013 - 14 ) & ITA NO. 4700 /MUM/201 8 ( ASSESSMENT YEAR : 2015 - 16 ) M/S. SHEKHAWATI POLY YARN LTD., UNIT NO.1102/1103, A WING EXPRESS ZONE PATEL VATIKA, OFF W.E.HIGHWAY MALAD (E), MUMBAI 400 097 VS. DY. CIT - CC - 2 (2), PRATISHTHA BHAWAN MUMBAI PAN/GIR NO. AABCS5224N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI J.P. BAIRAGRA REVENUE BY SHRI SANDEEP RAJ DATE OF HEARING 06 / 02 /2020 DATE OF PRONOUNCEMENT 14 / 02 /2020 / O R D E R PER M. BA LAGANESH (A.M) : TH ESE APPEAL S IN ITA NO S . 4696/MUM/2018, 4697/MUM/2018, 4698/MUM/2018, 4699/MUM/2018 & 4700/MUM/2018 FOR A.Y. 2010 - 11, ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 2 2011 - 12, 2012 - 13, 2013 - 14 & 2015 - 16 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 48, MUMBAI IN APPEAL NO. CIT(A) - 48/I.T.147 TO 150 AND 152/DCCC - 2(2)/2017 - 18 DATED 30/05/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 153 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 27/12/2017 BY THE LD. DY. C OMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE ONLY COMMON ISSUE INVOLVED IN ALL THESE APPEALS IS AS TO WHETHER THE ADDITION ON ACCOUNT OF DEEMED UNACCOUNTED SCRAP SALE COULD BE MADE IN THE FACTS AND CI RCUMSTANCES OF THE CASE AND WHETHER THE LD. CIT(A) WAS JUSTIFIED IN REDUCING THE SAID ADDITION FOR EACH OF THE ASSESSMENT YEARS UNDER CONSIDERATION. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF T EXTURI Z ING AND T WISTING Y ARN HAVING ITS FACTORY AT SILVASSA AND H EAD O FFICE AT MALAD (EAST), MUMBAI. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT ON 29/09/2015 AT THE RESIDENCE OF THE DIRECTORS OF T HE ASSESSEE COMPANY AND PARALLE LLY SURVEY A CTION U/S.133A OF THE ACT WAS CONDUCTED ON THE FACTORY PREMISES OF THE ASSESSEE COMPANY. DURING THE COURSE OF SURVEY U/S.133A OF THE ACT AT THE FACTORY PREMISES OF THE ASSESSEE COMPANY, STATEMENT OF THE CASHIER OF THE ASSESSEE MR. SURESH KUMAR RUIA WAS RECORDED. THE RELEVANT PORTION S OF THE SAID STATEMENT ARE REPRODUCED IN PAGES 2 AND 3 OF THE ASSESSMENT ORDER. SURVEY TEAM POSED CERTAIN QUERIES TO THE SAID CASHIER WHILE RECORDING THE STATEMENT BY ASKING TO EXPLAIN THE DETAILS OF THE SCRAP SALE MADE IN CASH. IN RESPONSE THERETO , THE CASHIER RESPONDED THAT THE SALE AMOUNT OF SCRAP IS GENERATED BY SALE OF SCRAP BY THE ASSESSEE TO M/S. ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 3 PARESH TEXTILES, IN SUPPORT OF WHICH HE GAVE THE SAMPLE COPIES OF TAX INVOICES WHICH ARE PART OF LOOSE SHEETS IN PAGES 61 - 64 OF ANNEXURE A - 1 OF IMPOUNDED DOCUMENTS . IT IS PERTINENT TO NOTE THAT THE SCRAP SALE IS LIABLE FOR LEVY OF EXCISE DUTY. SURVEY TEAM ALSO ASKED THE DIFFERENCE OF RS.7,51,327/ - IN CASH BALANCE ON THE DATE OF SURVEY BET WEEN THE PHYSICAL CASH BALANCE FOUND AND THE CASH BALANCE AS PER THE BOOKS OF ACCOUNTS. THIS WAS SOUGHT TO BE EXPLAINED BY THE CASHIER BY STATING THAT THE EXCESS CASH FOUND PHYSICALLY WAS DUE TO CERTAIN SCRAP SALES MADE OUT OF THE BOOKS BY THE ASSESSEE WHI CH ARE RETAINED IN THE FORM OF CASH BALANCE. BASED ON THIS, THE LD.AO MADE ADDITION TOWARDS UNACCOUNTED SCRAP SALE BY ESTIMATING THE SALE OF SCRAP AT 0.162% ON TOTAL SALES AND AFTER DEDUCTING THE SCRAP SALES DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME , HE MADE ADDITION FOR THE DIFFERENCE TOWARDS UNACCOUNTED SCRAP SALES FOR VARIOUS ASSESSMENT YEARS IN APPEAL BEFORE US AS UNDER: - AY TOTAL SALES AMOUNT OF SCRAP SALE AS PER RETURN ESTIMATED SALE OF SCRAP (0.162% OF TOTAL SALE) UNACCOUNTED SCRAP SALES 2010 - 11 89,19,11,375 2,15,179 14,44,896 12,29,717 2011 - 12 147,31,61,885 4,11,516 23,86,522 19,75,006 2012 - 13 210,62,87,865 9,54,450 34,12,186 24,57,736 2013 - 14 244,67,86,959 14,80,281 39,63,795 24,83,514 20 15 - 16 357,87,33,988 13,58,614 57,97,549 44,38,935 3.1. THE PERCENTAGE OF SCRAP AT 0.162% WAS WORKED OUT BY THE LD. AO BY DIVIDING THE UNACCOUNTED CASH RECEIPTS ON ACCOUNT OF SALE OF SCRAP OF RS.7,51,327/ - FOR THE MONTHS OF JULY, AUGUST AND SEPTEMBER 2015 BY TOTAL SALES FOR THE SAID THREE MONTHS I.E. RS.46,40,38,395/ - WHICH WORKED ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 4 OUT TO 0.162% AND ACCORDINGLY MADE ADDITION OF UNACCOUNTED SCRAP SALES THEREON. 3.2. WE FIND THAT THE LD. CIT(A) HAD HOWEVER IGNORED THE SAID BASIS OF WORKING OF UNACCOUNTE D SCRAP SALES ADDITION MADE BY THE LD. AO AND PROCEEDED TO MAKE THE ADDITION O N A DIFFERENT FOOTING. WE FIND THAT THE LD. CIT(A) HAD OBSERVED THAT THE UNACCOUNTED SCRAP SALES FOR THREE MONTHS IS RS.7.50 LAKHS APPROXIMATELY AND HENCE THE S AME FOR THE WHOLE YEAR ON EXTRAPOLATION BASIS SHOULD BE RS.30 LAKHS. ACCORDINGLY, HE ESTIMATED THE TOTAL SCRAP SALE TO BE RS.30 LAKHS FOR A.Y.2015 - 16 AND FROM THAT , REDUCED THE SCRAP SALES ALREADY ACCOUNTED BY THE ASSESSEE AND MADE ADDITION FOR THE REMAINING AMOUNT. WE FIN D THAT THE LD. CIT(A) DID REVERSE WORKING AND ESTIMATED THE TOTAL SCRAP SALE FOR EACH OF THE YEARS IN APPEAL BEFORE US ON AN ESTIMATED BASIS AND MADE ADDITION TOWARDS UNACCOUNTED SCRAP SALE IN THE FOLLOWING MANNER : - AY (A) ESTIMATION OF INCOME FROM SALE OF SCRAP (B) AMOUNT OF SCRAP SALE AS PER RETURN OF INCOME (C) ADDITIONS CONFIRMED BY CIT(A) (B) - (C) = (D) 2010 - 11 14 LAKHS 2,15,179 11,84,821 2011 - 12 20 LAKHS 4,11,516 15,88,484 2012 - 13 24 LAKHS 9,54,450 14,45,550 2013 - 14 28 LAKHS 14, 80,281 13,19,719 2015 - 16 30 LAKHS 13,58,614 16,41,386 3.3. WE FIND THE ONLY BASIS OF MAKING THIS ADDITION TOWARD S UNACCOUNTED SCRAP SALE WAS THE STATEMENT RECORDED FROM THE CASHIER OF THE ASSESSEE ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 5 COMPANY WHICH WAS ALSO CONFIRMED BY THE DIRECTOR O F THE ASSESSEE COMPANY WHEN HE WAS CONFRONTED WITH THE STATEMENT GIVEN BY THE CASHIER. B ARRING THIS STATEMENT, NO OTHER MATERIAL WAS FOUND AT THE TIME OF SEARCH OR SURVEY BY THE REVENUE. HENCE, THE SOLE ISSUE THAT REMAINS TO BE ADJUDI CATED IS WHE THER UNACC OUNTED SCRAP SALE ADDITION COULD AT ALL BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ON AN ESTIMATED BASIS. IT IS PERTINENT TO NOTE THAT AGAINST THE ADDITION MADE BY THE LD. CIT(A) ON ESTIMATED BASIS, NO APPEAL HAS BEEN PREFERRED BY THE REVEN UE BEFORE US. HENCE, WHAT REMAINS TO BE ADJUDICATED BY US IS WHETHER THE ESTIMATION OF SCRAP SALE WAS MADE IN A JUST AND FAIR MANNER BY THE LD. CIT(A) IN THE PREVAILING FACTS AND CIRCUMSTANCES OF THE ASSESSEE . 3.4. WE FIND THAT THE STATEMENT GIVEN BY THE CASHIER SUBSEQUENTLY CONFIRMED BY THE DIRECTOR HAD BEEN LATER RETRACTED ON 01/10/2015 BY THE DIRECTOR BY FILING AN AFFIDAVIT WHICH ARE ENCLOSED IN PAGE 396 AND 397 OF THE PAPER BOOK. BUT WE FIND THAT THE DIRECTOR IN HIS ORIGINAL STATEMENT HAD GIVEN A COMPL ETE MODUS OPERANDI OF GENERATION OF UNACCOUNTED INCOME AND ITS UTILIZATION IN HIS VARIOUS BUSINESSES. HENCE, THE SOURCE AS WELL AS THE APPLICATION OF UNACCOUNTED INCOME HAD BEEN DISCUSSED IN DETAIL IN THE STATEMENT RECORDED FROM THE DIRECTOR. ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 6 3.5. WE FIN D THAT THE ONLY EVIDENCE THAT HAS BEEN FOUND IN THE COURSE OF SURVEY BY THE SURVEY TEAM WAS EXCESS CASH FOUND IN THE SUM OF RS.7,51,327/ - BASED ON THE CASH BOOKS IN THE MONTHS OF JULY, AUGUST AND SEPTEMBER 2015 WHICH ADMITTEDLY PERTAINS TO A.Y.2016 - 17. WE FIND THE LD. CIT(A) HAD CONSIDERED RS.7.5 LAKHS AS THE SCRAP SALE OF THREE MONTHS AND HAD EXTRAPOLATED THE SAME FOR THE WHOLE YEAR AND ARRIVED ON THE TOTAL SCRAP SALE OF RS.30 LAKHS FOR A.Y.2015 - 16 , WHEN THE ACTUAL DATA PERTAINS TO A.Y.2016 - 17. HENCE, THE WHOLE BASIS OF PLACING RELIANCE ON A DOCUMENT WHICH DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION ITSELF MAKES THE ADDITION ON A WEAKER FOOTING. 3.6. WE FIND BASED ON THE ESTIMATION OF SCRAP SALE MADE FOR A.Y.2015 - 16 IN THE SUM OF RS.30 LAKHS, THE LD. CIT(A) HAD BACK WORKED AND ARRIVED ON THE ESTIMATED SCRAP SALE FOR RS.28 LAKHS FOR A.Y.2013 - 14; RS.24 LAKHS FOR A.Y.2012 - 13 ; RS.20 LAKHS FOR A.Y.2011 - 12 AND RS.14 LAKHS FOR A.Y.2010 - 11. FOR NONE OF THESE ESTIMATIONS, THERE WAS ANY BASIS FURNISHED BY THE L D. CIT(A). HOWEVER, CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE , WE HOLD THAT THE ASSESSEE WOULD BE ENTITLED FOR RELIEF OF 50% OF THE TOTAL ADDITIONS MADE BY THE LD. CIT(A) ULTIM ATELY AND IN OUR CONSIDERED OPINION, THIS WOULD MEET THE ENDS OF THE JUSTICE . THE LD. AO IS DIRECTED ACCORDINGLY. ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 7 3.7. WE FIND THAT THE ASSESSEE HAD EXPLAINED THE ENTIRE CASH FOUND DURING SEARCH AND SURVEY AT VARIOUS PLACES AS UNDER: - CASH FOUND AT FACTO RY 7,94,900 CASH FOUND AT OFFICE 2,000 CASH FOUND AT HOME 10,43,840 TOTAL CASH PHYSICALLY FOUND 18,40,740 BALANCE AS ON CASH BOOK OF ASSESS E E (SPYL) 15,37,727 BALANCE AS PER CASH BOOK OF KALPANA RUIA 1,23,990 BALANCE AS PER CASH BOOK OF MUKESH RUIA 53,535 BALANCE AS PER CASH BOOK OF MUKESH RUIA HUF 1,25,488 TOTAL CASH AS PER BOOKS OF ACCOUNTS 18,40,740 3. 8 . THE AFORESAID TABULATION FURNISHED BY THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE, THE ENTIRE CASH FOUND AT THE TIME OF SEARCH AND SURVEY HAS BEEN PROPERLY EXPLAINED BY THE ASSESSEE WITH REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNTS. CONSIDERING THIS VALID EXPLANATION GIVEN BY THE ASSESSEE, WE FIND THAT THE LD. AO HAD NOT MAD E ANY ADDITION TOWARDS CASH FOUND AT THE TIME OF SEARCH AND SURVEY. 3.9. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. ITA NO .4696/MUM/2018 AND OTHER APPEALS M/S. SHEKHAWATI POLY YARN LIMITED 8 4. IN THE RESULT APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 02 /2020 SD/ - ( C.N. PRASAD ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 02 / 2020 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE AP PELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//