Shri Vasantlal Amrutlal Doriwala, Surat V. The ACIT.,Circle-5, Surat

ITA 474/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67877 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Keywords: Income from undisclosed sources; Opportunity of being heard; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 474/AHD/2013 ASSESSMENT YEAR : 2007-08 SHRI VASANTLAL AMRUTLAL DORIWALA PROP. OF DORIWALA INDUSTIRES & DORIWALA IND. MFG. UNIT 8, HAZOORI CHAMBERS, ZAMPA BAZAR, SURAT - 395003 V/S . ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-5, SURAT. PAN NO. A CCPD6390C (APPELLANT) .. (RESPONDENT) BY APPELLANT WRITTEN SUBMISSION (NONE) /BY RESPONDENT SHRI O.P. BHATEJA, SR. D.R. /DATE OF HEARING 25.10.2013 /DATE OF PRONOUNCEMENT 31.10.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF ASSESSEE WHICH H AS EMANATED FROM THE ORDER OF CIT(A)-I, SURAT, DATED 27.12.2012 FOR ASSESSMENT YEAR 2007-08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER IN MAKING ADDITION OF RS.15,78,074/- ON ACCOUNT OF SUPPRESSIO N OF SALE RECEIPTS. ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER IN MAKING ADDITION OF RS.57,453/- BEING 20% OF OFFICE, TELEPH ONE AND VEHICLE EXPENSES. 2. THE FIRST GROUND OF APPEAL IS AGAINST CONFIRMING THE ADDITION OF RS.15,78,04/- ON ACCOUNT OF SUPPRESSION OF SALE REC EIPTS. THE A.O. OBSERVED THAT THE ASSESSEE FURNISHED A CHART OF SALE OF IMPO RTED GOODS PARTY-WISE AS WELL AS QUALITY-WISE. THE CHART REVEALS A PATTERN INDICATING THE FACT THAT THE ASSESSEE SOLD THE SAME TYPE OF YARN TO DIFFERENT PA RTIES AT DIFFERENT RATE ON THE SAME DATE OR WITHIN COUPLE OF DAYS. THE DIFFERENCE IN RATE WAS SUBSTANTIAL. IT WAS CONCLUDED BY THE A.O. THAT GOODS WERE IMPORTED BY UNDER BILLING AND DIFFERENTIAL PAYMENTS MADE WAS THROUGH HAWALA. SIN CE THE GOODS WERE OSTENSIBLY PURCHASED AT LOWER PRICE AT THE SAID IN TURN HAD TO BE EFFECTED AT LOWER PRICES. THE DIFFERENCE BETWEEN THE BILL PRIC E AND THE ACTUAL PRICE WAS COLLECTED IN CASH WHICH WAS AGAIN REQUIRED FOR REMI TTANCE THROUGH HAWALA. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. THE ASSESSEE RESPONDED IN RESPONSE TO THIS QUERY. THE SUBMISSION MADE BY THE ASSESSEE DID NOT FIND CONVINCING TO HIM ON FOLLOWIN G GROUNDS: I) THE ASSESSEE HAS NOT PRODUCED THE SALES TAX REC ORDS DURING THE ASSESSMENT PROCEEDINGS. II) THE ASSESSEE HAS NOT PRODUCED ANY BROKER WHO FI XES THE DEAL, DURING THE COURSE OF ASSESSMENT PROCEEDINGS N OR WAS ANY EVIDENCE PRODUCED IN SUPPORT OF THE DEAL. III) THE MAIN CONTENTION PUT BY THE ASSESSEE THAT T HE RATE IS DECIDED BY THE MARKET DEMAND AND SUPPLY BASIS AND I T VARY ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 3 DAY TO DAY. IN THIS REGARD IT IS WORTHWHILE TO MEN TION HERE THAT ON THE SAME OR WITHIN COUPLE OF DAYS THE ASSESSEE H AD SOLD THE SAME QUALITY OF YARN TO DIFFERENT PARTIES ON TH E DIFFERENT RATE. SO THIS CONTENTION IS NOT STAND ANY MORE. IT WAS HELD BY THE A.O. THAT ASSESSEE HAD SOLD THE IMPORTED GOODS AT RS.2,93,03,433.85/-. THE SALE WAS ESTIMATED ON THE BASIS OF PEAK RATE AT RS.3,08,81,507.93/- AT DIFFERENCE OF RS.15,78,074/- WAS TREATED AS SUPPRESSED SALE AND ADDED BACK IN THE INCOME OF THE ASSESSEE. IT WAS FURTHER OBSERVED THAT IN PRECEDING YEAR, SIMILAR AD DITION HAS BEEN CONFIRMED BY THE CIT(A)-III, SURAT VIDE ORDER NO. CAS-III/13 3/2008-09 DATED 24.11.2009. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD CONFIRMED THE ADDI TION BY OBSERVING AS UNDER: 8.1 THE CONTENTION OF THE APPELLANT HAS BEEN EXAMI NED. THE APPELLANT CLAIMED THAT THERE IS CONSIDERABLE VARIAT ION IN THE RATE OF YARN DUE TO MARKET FORCES AND THEN DEALS ARE FIXED THROUGH BROKERS IN ADVANCE, WHICH HAS RESULTED IN VARIATION IN THE RATE. HOWEVER, THE ASSESSING OFFICER HELD THAT THE APPELLANT COULD NEI THER PRODUCE ANY BROKER/S AT THE TIME OF ASSESSMENT PROCEEDINGS, NOR COULD ESTABLISH HIS EXPLANATION. CONSEQUENTLY THE ASSESSING OFFICE R ESTIMATE THE SUPPRESSION OF SALES ON THE BASIS OF PEAK PRICE RAT E. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT AN IDENTICAL ADDITI ON IN ASSESSMENT YEAR 2006-07 WAS CONFIRMED BY THE CIT(APPEALS) III, IN HIS ORDER NO. CAS/III/173/2008-09 DATED 24.11.2009. 4. NOW THE ASSESSEE IS BEFORE US. A WRITTEN REPLY H AS BEEN FILED WHICH IS REPRODUCED AS UNDER: ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 4 2. THE ASSESSING OFFICER MADE THE ADDITION OF R S. 15,78,074/- ON ACCOUNT OF THE SUPPRESSION OF THE SALE RECEIPTS ON THE GROUND THAT THE ASSESSES SOLD SAME YARN WITH DIFFERENT RATES IN A VERY SHORTEST SPAN OF TIME. 3. THE SIMILAR ADDITION OF RS. 38.33,830/- WAS M ADE IN PRECEDING ASSESSMENT YEAR I.E. A.Y. 2006-07. THE ASSESSEE FIL ED THE SIMILAR EXPLANATION IN BOTH THE YEARS WHICH WAS REJECTED BY THE ASSESSING OFFICER. ASSESSING OFFICER ALSO AT PARA NO. 4.6 OBS ERVED THAT ON THE SAME ISSUE ADDITION MADE IN THE PRECEDING YEAR I.E. A.Y. 2006-07 WAS CONFIRMED BY THE ID. CIT(A)-III, SURAT VIDE ORD ER NO. CAS- III/133/2008-09 DATED 24.11.2009. 4. THE ID. CTT(A) CONFIRMED THE ADDITION BY FOLL OWING THE EARLIER ORDER DATED 24.11.2009 AS CAN BE MADE OUT FROM HIS OBSERVATION IN PARA NO. 8.1 OF THE APPELLATE ORDER. 5. IN PRECEDING YEAR ASSESSEE FILED THE APPEAL B EFORE HONOURABLE TRIBUNAL AND THE ADDITION WAS DELETED AS PER THE FI NDING OF THE HONOURABLE TRIBUNAL CONTAINED AT PARA NO. 4 (PAGE N O. 3&4). THE FACTS OF BOTH THE YEARS ARE EXACTLY SIMILAR AS CAN BE SEEN FROM THE PERUSAL OF THE ASSESSMENT ORDERS OF THE BOTH THE YE ARS AND ORDER OF THE HONOURABLE TRIBUNAL. ACCORDINGLY THE MATTER IS SQUARELY COVERED BY THE ORDER OF HONOURABLE TRIBUNAL IN A.Y. 2006-07 IN IT A NO. 776/A/2010. ACCORDINGLY THE ADDITION OF RS. 15,78,0 74/- MAY PLEASE BE DELETED. AT THE OUTSET, LD. SR. D.R. RELIED UPON THE ORDER O F THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ADDITION MADE BY THE A.O. IS IDENTICAL WITH A.Y. 06-07, WHERE SIMILAR ADDITION HAD BEEN DELETED BY THE CO-ORDINAT E A BENCH IN ITA NO. 776/AHD/2010, THE OPERATIVE PORTION OF THE ORDER IS AS UNDER: ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 5 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSING OFFICER HAD MADE THE ADDITION ON THE GROUND THAT THERE WAS A DIFFERENCE IN SALE-PRIC E FOR THE SAME MATERIAL. THE AO IN HIS ORDER HAS OBSERVED THAT IN ORDER TO VERIFY THE MODUS OPERANDI ADOPTED BY OTHER TRADERS, THE BILLS WERE THOROUGHLY CHECKED AND VERIFIED AND AFTER IN-DEPTH VERIFICATIO N OF THE LIST SO PREPARED, HE CAME TO THE CONCLUSION THAT THE ASSESS EE ALSO ADOPTED THE MODUS OPERANDI OF GENERATION OF BLACK MONEY OR UNACCOUNTED INCOME. THE CONTENTION OF THE LD. COUNSEL FOR THE A SSESSEE IS THAT THE ENTIRE FINDING IS BASED ON CONJECTURES & SURMIS ES. THE AO HAS NOT BROUGHT ANYTHING ON RECORD THAT THE AMOUNT RELA TING TO SO-CALLED SUPPRESSED SALES WAS RECEIVED BY THE ASSESSEE FROM THE CONCERNED PARTIES. SO FAR AS THE DECISION OF SELLING ANY MATE RIAL AT A DIFFERENT RATE OR AT A UNIFORM RATE IS CONCERNED, THE SAME RE MAINS WITH THE BUSINESS MAN EXCEPT IN THE CIRCUMSTANCES WHERE THE PRICES ARE REGULATED BY THE COMPETENT AUTHORITY. IN THE PRESEN T CASE, NOTHING IS BROUGHT ON RECORD THAT SALE-PRICE WAS REGULATED BY ANY LAW. THEREFORE, THE ASSESSEE WAS WITHIN THE RIGHTS TO SE LL HIS MATERIAL IN ACCORDANCE WITH HIS OWN WISH. IF THE REVENUE FEELS THAT THE SALE PRICE IS DECLARED BY THE ASSESSEE IS NOT CORRECT, T HEN THE REVENUE SHOULD PLACE ON RECORD AS TO HOW THE SALE-PRICE AS DECLARED BY THE ASSESSEE IS NOT CORRECT AND IF THERE IS ANY DIFFERE NCE IN THE SALE-PRICE AS DECLARED BY THE ASSESSEE AND THE SALE PRICE ACTU ALLY RECEIVED BY THE ASSESSEE, THE REVENUE IS REQUIRED TO DEMONSTRAT E THAT THE DIFFERENCE IN SALE-PRICE DECLARED BY THE ASSESSEE A ND THE PRICE CLAIMED BY THE REVENUE BEING THE ACTUAL WAS RECEIVE D BY THE ASSESSEE BY WAY OF UNDECLARED ROUTE. IN THE ABSENCE OF THE MATERIAL SUGGESTING THAT THE MONEY WAS ACTUALLY RECEIVED BY THE ASSESSEE AS A SALE-PRICE HIGHER THAN THE PRICE DECLARED BY THE ASSESSEE, WE ARE ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 6 OF THE CONSIDERED VIEW THAT THE REVENUE IS NOT JUST IFIED TO MAKE ANY ADDITION MERELY ON THE BASIS THAT THE ASSESSEE HAS SOLD THE SAME MATERIAL AT DIFFERENT RATES TO DIFFERENT PARTIES OR THE SAME PARTY IN A SINGLE DAY OR WITHIN A SHORTEST SPAN OF TIME. HENCE , WE FIND THERE IS MERIT IN THE CONTENTION OF THE ID. COUNSEL FOR THE ASSESSEE THAT A BUSINESS MAN CAN HAVE THE RIGHT TO DECIDE THE SALE- PRICE ON HIS MATERIAL. THE REVENUE HAS NO ROLE OR AUTHORITY TO D ECIDE THE SALE- PRICE. IN THE LIGHT OF ABOVE DISCUSSION, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. ACCORDINGLY, THE AO IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS.38,33,830/- MADE AN ACCOU NT OF SUPPRESSION OF SALE RECEIPTS. BY RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIAN TE A BENCH ON IDENTICAL ISSUE BEOFR US. THEREFORE, WE REVERSE THE ORDER OF THE CIT(A). 6. THE SECOND GROUND OF APPEAL IS AGAINST CONFIRMIN G THE ADDITION OF RS.57,453/- BEING 20% OF OFFICE, TELEPHONE AND VEHI CLE EXPENSES. THE A.O. DISALLOWED RS.57,453/- OUT OF OFFICE EXPENSES OF RS .50,973/-, TELEPHONE EXPENSES OF RS.1,33,346/- AND VEHICLE EXPENSES AT R S.1,02,943/- I.E. 20% EXPENSES BY TREATING NON BUSINESS / PERSONAL EXPEND ITURE. THE CIT(A) CONFIRMED THIS ADDITION BY HOLDING THAT THE ASSESSE E HAD NOT GIVEN DETAILS OF EXPENDITURE IN RESPECT OF TELEPHONE AND VEHICLE EXP ENSES MADE OUT OF THE WITHDRAWAL, THE DISALLOWANCES WERE NOMINAL. NOW THE ASSESSEE CLAIMED THAT THIS DISALLOWANCE IS EXCESSIVE AND EXPENDITURE INCU RRED FOR BUSINESS PURPOSE. AT THE OUTSET, LD. SR. D.R. SUPPORTED THE ORDER OF THE CIT(A). AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND 10 % DISALLOWANCE REASONABLE. THEREFORE, ASSESSEE GETS RELIEF PARTIA LLY. THE A.O. IS DIRECTED TO ITA NO. 474/AHD/2013, A.Y. 07-08 PAGE 7 RE-CALCULATE THE DISALLOWANCE @ 10% OF ABOVE EXPEND ITURE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED THIS ORDER PRONOUNCED IN OPEN COURT ON 31.10.2013 SD/- SD/- ( MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;