M/s. Laxmi Glass & Aluminium, Morbi V. The Income Tax Officer, Ward-5(3), Morbi

ITA 474/RJT/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72585 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Unexplained cash credit; Income from undisclosed sources; Charitable institution
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 474 /RJ T/201 1 ASSESSMENT YEAR : 200 6 - 20 07 M/S. LAXMI GLASS & ALUMINIUM, SHANALA ROAD, MORBI PAN: AABFL 6970 F V. ITO RAJKOT , WARD - 5 (3), MORBI DATE OF HEARING : 12 .0 7 .2013 DATE OF PRONOUNCEMENT : 13 .0 9 .2013 ASSESSEE BY : SHRI TEJ SHAH, ADVOCATE REVENUE BY : SHRI AVINASH KUMAR, DR ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDE R PASSED BY THE CIT(A) - IV, RAJKOT ON 30 . 0 9 .2 0 11 , ON THE FOLLOWING GROUNDS: - 1) THE IMPUGNED ORDER DATED 30 - 09 - 2011 IS ILLEGAL AND BAD IN LAW AND REQUIRES TO BE SET ASIDE. 2) THE COMMISSIONER OF INCOME TAX (APPEALS) IV, RAJKOT ERRED IN LAW AND ON FACTS O F CASE IN HOLDING BOGUS SALES TO THE TUNE OF RS.4,77,513/ - . 3) THE COMMISSIONER OF INCOME TAX (APPEALS) IV, RAJKOT FAILED TO APPRECIATE VARIOUS SUBMISSIONS AND DOCUMENTARY EVIDENCE AVAILABLE ON RECORD. 4) THE APPELLANT THEREFORE HUMBLY PRAYS THAT THE HON BLE MEMBERS WILL BE PLEASED TO DELETE ADDITION OF RS.4,77,153/ - ON ACCOUNT OF BOGUS SALES BILLS. 5) THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND OR ALTER ANY GROUND OF APPEAL ON OR BEFORE THE HEARING OF THIS APPEAL. 2. THE ASSESSEE IS A FIRM. IT IS ENG AGED IN TRADING OF GLASS, ALUMINUM AND HARDWARE ITEMS. IT FILED ITS RETURN OF INCOME ON 29.12.2006 RETURNING TOTAL INCOME AT RS.4,85,760/ - . DURING S URVEY OPERATIONS U/S 133A OF THE I - T ACT CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.03.2006 , STOCK WORTH RS.5,00,982/ - WAS FOUND TO BE IN EXCESS OVER THE STOCK RECORDED IN THE BOOKS OF ACCOUNT. S TATEMENT OF SHRI VIPUL AMBALAL MANDPARA , PARTNER WAS RECORDED AT THE TIME OF SURVEY IN WHICH HE ADMITTED THAT THE SAID DIFFERENCE IN STOCK REPRESENTED UN ACCOUNTED INCOME . THE 2 47 4 - RJT - 2011 LAXMI GLASS & ALUMINIUM SAID DIFFERENCE IN STOCK HAS BEEN SEPARATELY ADDED BY THE ASSESSING OFFICER , WHICH HOWEVER IS NOT THE SUBJECT MATTER OF APPEAL BEFORE US . ANOTHER ADDITION MADE BY THE AO, WHICH IS NOW T HE SUBJECT MATTER OF APPEAL BEFORE US , IS THE ADD ITION OF RS.5,09,997/ - (REDUCED TO RS.4,77,153/ - BY THE CIT(A)} MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS SALES RECORDED IN THE BOOKS , WHICH HAS BEEN REDUCED TO RS.4,77,153/ - BY THE CIT(A) . FACTS ON THE BASIS OF WHICH THE IMPUGNED ADDITION HAS BEEN MADE BY THE AO AND THE REASONS GIVEN BY THE CIT(A) FOR CONFIRMING T HE IMPUGNED ADDITION CAN BETTER BE APPRECIATED IN THE FOLLOWING OBSERVATIONS MADE BY THE LD. CIT(A) IN HIS APPELLATE ORDER : - 4. I HAVE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF APP ELLANT. THE FACTS OF THE CASE SHOW THAT THERE WAS A SURVEY U/S.133A IN THE PREMISES OF APPELLANT ON 20.3.2006. TOTAL STOCK OF RS.42, 20,221/ - WAS FOUND ON THE DATE OF SURVEY. THE CLOSING STOCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY WAS DETERMINED AT RS.37,19,239/ - . APPELLANT WAS FOUND IN POSSESSION OF EXCESS STOCK OF RS.5,00,982/ - ON THE DATE OF SURVEY. SHRI VIPUL A MEDPARA, ONE OF THE PARTNERS OF APPELLANT FIRM HAD ADMITTED THIS EXCESS STOCK AS UNACCOUNTED INCOME OF APPELLANT. IN THE POST SURVEY P ERIOD FROM 21 - 3 - 2006 TO 31 - 3 - 2006, APPELLANT HAS SHOWN SALE OF SOME ITEM AS ACTUAL SALE AT RS.3,99,604/ - TO SHANTIDHAM CHARITABLE TRUST AND AS BOGUS SALE AT RS.5,09,997/ - OF THE SAME ITEM IN THE TRADING ACCOUNT. A BOGUS SALE OF RS.5,09,997/ - IS EQUIVALENT TO UNEXPLAINED CREDIT IN BOOKS OF APPELLANT U/S.68 OF THE I.T. ACT AND IS THEREFORE DEEMED AS INCOME U/S.68 OF THE I.T. ACT. HOWEVER, ON ACCOUNT OF CONSIDERATION OF SALE OF RS.5,09,997/ - AS BOGUS SALE, THE ACTUAL SALE IS REQUIRED TO BE REDUCED BY RS.5,09,9 97/ - FROM TRADING ACCOUNT. THE SALE OF 509997/ - WAS BOOKED AFTER THE DATE OF SURVEY. THEREFORE CORRECTION OF BOGUS SALE WILL REDUCE THE TRADING GROSS PROFIT OF APPELLANT FOR THE PERIOD 21 - 3 - 2006 TO 31 - 3 - 2006 IN THE MANNER AS UNDER: TRADING ACCOUNT FOR 21 - 3 - 2006 TO 31 - 3 - 2006 OPENING STOCK 4220221 SALES 1242601 PURCHASES 718960 BY CLOSING STOCK 3305400 SALES TAX 5909 GROSS PROFIT - 397089 4548001 4548001 3 47 4 - RJT - 2011 LAXMI GLASS & ALUMINIUM IT IS QUITE ABSURD THAT APPELLANT WAS LEFT WITH STOCK OF ONLY 33,05,400/ - ON 31 - 3 - 2006 AFTER MAKING A SALE OF WORTH RS.12,42,601/ - OUT OF OPENING STOCK OF RS.42,20,221/ - AND PURCHASE OF RS.7,18,960 IN THE PERIOD 21 - 3 - 2006 TO 31 - 3 - 2006. THIS WOULD MEAN THAT APPELLANT SOLD STOCK OF (RS.42,20,221 + RS.7,18,960 RS.33,05,400)= RS.16,33, 781/ - FOR A PRICE OF RS.12,42,601 IN THE PERIOD 21 - 3 - 2006 TO 31 - 3 - 2006, INCURRING A GROSS LOSS OF RS.3,97,089/ - . ASSESSING OFFICER CONSIDERED THAT APPELLANT HAS SHOWN THE CLOSING STOCK AS ON 31 - 3 - 2006, LESS BY RS.509997/ - AND ADDED THIS VALUE TO THE TOTAL INCOME OF APPELLANT. APPELLANT HAS NOT OPPOSED THE ACTION OF ASSESSING OFFICER IN THE WRITTEN SUBMISSION GIVEN AT THE TIME OF APPELLATE PROCEEDINGS. APPELLANT HAS ONLY STATED THAT THE VALUE OF SUPPRESSED STOCK AS ON 31 - 3 - 2006 SHOULD BE TAKEN AT COST AND NO T AT SALE VALUE AND SUBMITTED THAT THE VALUE OF STOCK SHOULD BE TAKEN AT A VALUE WHICH IS RS.32,844/ - LESS THAN THE BOGUS SALE VALUE OF RS.509997/ - . CONSIDERING THE FACT THAT THE SAME ITEM WAS SOLD TO SHANTIDHAM CHARITABLE TRUST FOR RS.3,99,604 FOR WHICH B OGUS SALE BILLS WERE RAISED AT RS.509997/ - , THE CONTENTION OF APPELLANT IS ACCEPTABLE THAT THE COST VALUE OF SUCH CLOSING STOCK WHICH WAS ARTIFICIALLY REDUCED ON ACCOUNT OF BOGUS SALE OF RS.509997/ - WOULD BE EQUIVALENT TO SUCH SALE VALUE OF RS.509997/ - LES S THE GROSS PROFIT OF RS.32,884/ - . THE CLOSING STOCK AS ON 31 - 3 - 2006 SHOULD BE INCREASED BY RS.477153/ - INSTEAD OF RS.509997/ - . I THEREFORE DIRECT THE ASSESSING OFFICER TO REDUCE THE VALUE OF UNDERVALUATION OF STOCK FROM RS.509997/ - TO RS.477153/ - AND REDU CE THE TOT AL INCOME OF APPELLANT BY RS.32, 844/ - . 3. AGGRIEVED BY THE ORDER PASSED BY THE LD . CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD . C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED SALES WERE GENUINE AND NOT BOGUS AS HELD BY THE AO/CIT(A) . ACCORDING TO HIM, TWO SALES WERE RECORDED IN THE BOOKS OF ACCOUNT ON ACCOUNT OF MISTAKE OF ACCOUNTANT. THESE SALES WERE OF A SUM OF RS.4,83,397/ - RECORDED ON 2 2 .03. 2006 AND OF RS.2 6 ,600/ - RECORDED AS ON 31.03.2006. HE SUBMITTED THAT BOTH THE AFORESAID SALES WERE INCORRECTLY RECORDED OUT OF MISTAKE COMMITTED BY THE ACCOUNTANT. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS 4 47 4 - RJT - 2011 LAXMI GLASS & ALUMINIUM NEVERTHELESS INCLUDED THE AFORESAID SALES , WHICH WERE RECORDED BY MISTAKE IN THE BOOKS , IN THE OVER ALL SALES AND ACCORDINGLY CONSIDERED THEM FOR WORKING OUT ITS GROSS PROFIT. HIS ALTERNATIVE SUBMISSION WAS THAT BOTH THE AFORESAID SALES SHOULD HAVE BEEN COMPLETELY EXCLUDED FROM THE SALES AS THEY WERE WRONGLY RECORDED IN THE BOOKS ON ACCOUNT OF MISTAKE OF THE ASSESSEE. 4. IN REPLY, THE LD D R SUPPORTED THE ORDER PASSED BY THE LD CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. IT IS CLAIMED BY THE ASSESSEE THAT THE SALES AMOUNTING TO RS.4,83,397/ - RECORDED ON 22.03.2 006 AND FURTHER SALES AMOUNTING TO RS.26,600/ - RECORDED ON 31.03.2006 WERE WRONGLY SHOWN IN THE BOOKS OF ACCOUNT ON ACCOUNT OF MISTAKE COMMITTED BY THE ACCOUNTANT. SINCE BOTH THE AFORESAID SALES WERE REPORTED TO HAVE BEEN RECORDED ON ACCOUNT OF MISTAKE COM MITTED BY THE ACCOUNTANT OF THE ASSESSEE, THE LD . C OUNSEL FOR THE ASSESSEE WAS ASKED WHETHER THE ENTRY OF BOTH THE SALES WERE REVERSED IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT THEY WERE NOT REVERSED . IT IS STATED IN THE APPELLATE ORDER PASSED BY THE LD C IT(A) THAT A SUM OF RS.5,09,997/ - (BEING THE AGGREGATE OF THE AFORESAID SALES) WAS CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. IN TERMS OF SECTION 68 OF THE INCOME - TAX ACT, THE BURDEN WAS ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF THE AFORESA ID AMOUNT FOUND CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER APPEAL. EXPLANATION OF THE ASSESSEE WAS THAT IT REPRESENT ED THE SALES PROCEEDS. BOTH THE ASSESSING OFFICER AND THE LD CIT(A) FOUND THAT THERE WAS NO GENUINE SALE. IN OTHER WORDS, THE EXPLANATION OF THE ASSESSEE AS REGAR DS THE NATURE AND SOURCE OF THE IMPUGNED CASH CREDIT WAS FOUND TO BE FALSE AND UNSATISFACTORY. THERE IS NO MATERIAL BEFORE US TO TAKE A VIEW DIFFERENT FROM THE ONE TAKEN BY THE CIT(A). IN THIS VIEW OF THE MATT ER, THE ACTION OF THE LD . CIT(A) IN CONFIRMING THE IMPUGNED ADDITION AS UNEXPLAINED CASH CREDIT DESERVES TO BE CONFIRMED AND IS ACCORDINGLY CONFIRMED. A PPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 13 . 0 9 . 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 13 .0 9 .2013 B T