The Asstt. Commissioner of Income-tax, Jalandhar V. M/s. Chaudhary Wines Private Limited, Jalandhar

ITA 478/ASR/2012

• Counselvise Citation: 47820914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 28-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Corroborative evidences; Documents seized
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.478(ASR)/2012 ASSESSMENT YEAR:2001-02 PAN :AAACC9079N ASSTT. COMMR. OF INCOME TAX, VS.M/S. CHAUDHARY WINE S PRIVATE LIMITED CENTRAL CIRCLE-1, 5-A, SATLUJ MARKET, JALANDHAR. JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY:SH.MAHAVIR SINGH, DR RESPONDENT BY:NONE DATE OF HEARING: 25 /02/2014 DATE OF PRONOUNCEMENT:18/03/2014 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A)-1, LUDHIANA, DATED 10.10.2012 FOR THE ASSESSMENT YEAR 2001-02. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND O N FACTS IN DELETING THE ADDITION MADE BY THE AO AMOUNTING TO RS.15,00,000/- HOLDING THAT NO BUSINESS WAS TRANSAC TED AFTER 01.04.2001 UNDER CONSIDERATION AND AFTER THIS YEAR AND THE AO DOES NOT HAVE ANY LOGICAL BASIS AND AMOUNTS TO PUR E GUESS ITA NO.478(ASR)/2012 2 WORK, WHEREAS THE YEAR UNDER CONSIDERATION IS THE F INANCIAL YEAR 2000-2001 RELEVANT TO THE ASSESSMENT YEAR 2001-02 W HICH IS PRIOR TO 01.04.2011. 2. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE ASSESSEE HAD NOT FU RNISHED ANY INFORMATION FOR VERIFICATION AND HAD NOT CO-OPERATE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS RESULTING IN EX-PA RTE ASSESSMENTS. 3. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT ASSESSING OFFICER RIGHT LY MADE THE ADDITION ON THE BASIS OF SEIZED MATERIAL/ACCOUNTS S TATEMENTS FOUND AT THE TIME OF SEARCH AFTER GIVING DUE COMPAR ISON OF PREVIOUS PERIOD. 4. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT NUMBER OF OPPORTUNITIES WERE AFFORDED TO THE ASSESSEE BUT INSTEAD OF FILING THE INFORMATION REQUIRED FOR EXAMINATION, HE SIMPLY FILED RETURN OF INCOME DECLARING INCOME OF RS.23,680/- AT VERY LATER STAGE BEYOND THE TIME ALLOWED U/S 139(4) AND NO COGNIZANCE OF THIS R ETURN WAS TAKEN BY THE A.O. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND GROUND(S) OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSE D OFF. 6. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM TH E ORDER OF THE A.O. ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON THE B USINESS PREMISES OF THE COMPANY AND RESIDENTIAL PREMISES OF ITS DIRECTORS ON 8.2.2000 WHEN A NUMBER OF INCRIMINATIN G DOCUMENTS INCLUDING ACTUAL BALANCE SHEETS AS ON 31. 3.1999 AND 31.8.1999 AND PROFIT AND LOSS ACCOUNT OF THE ASSESS EE FOR THE FINANCIAL YEAR 1990-91 TO 1998-99 WERE SEIZED.THE P ROFIT AS PER ITA NO.478(ASR)/2012 3 THE RETURNS FILED BY THE ASSESSEE WAS FOUND TO BE O NLY A FRACTION AS COMPARED TO THE ACTUAL (NO.1) DOCUMENTS FOUND AN D SEIZED DURING SEARCH. THE OTHER INFORMATION IN THE POSSESS ION OF THE DEPARTMENT BY VIRTUE OF SEARCH ACTION WAS CONFRONT ED TO THE ASSESSEE IN LETTER DATED 5.3.2004. IT WAS POINTED O UT TO THE ASSESSEE THAT ACTUAL PROFIT OF EARLIER YEARS, LAST BEING RS.13.77 LACS IN THE FINANCIAL YEAR 1998-99 IS BORNE OUT FRO M THE SEIZED DOCUMENTS AS AGAINST THE DECLARED PROFIT OF RS.26,0 00/- ONLY. THE ASSESSEE WAS ALSO INFORMED THAT I INTEND TO USE THIS INFORMATION AND ALSO THAT THE ASSETS OF THE COMPANY AS PER THE ACTUAL BALANCE SHEET, WHICH ALONGWITH PROFIT & LOSS ACCOUNT WERE ACCEPTED TO BE CORRECT, WERE RS.294 LAC WHILE THESE WERE DECLARED TO THE DEPARTMENT AT RS.89 LAC ONLY. THE A SSESSEE WAS ALSO CONFRONTED WITH THE FACT THAT THE COMPANYS IN VOLVEMENT IN L-2 VENTURES WAS PROVED DURING SEARCH. THE ASSESSEE WAS SHOWING SUPPRESSED SALES TO THE SALES-TAX DEPARTMEN T AND THE EVADED SALES TAX WAS DIVERTED TO SHARE CAPITAL. THE SALES TAX SO EVADED WAS IN THE NATURE OF PROFIT. 3. ON THE DATE OF HEARING I.E. 12.03.2004, NEITHER THE BOOKS OF ACCOUNT/OTHER DOCUMENTS IN SUPPORT OF THE RETURN ED INCOME HAVE BEEN PRODUCED NOR HAS THE INFORMATION CALLED F OR IN THE LETTERS ADDRESSED TO THE ASSESSEE BEEN FURNISHED. 4. THE PROFIT FOR THE FINANCIAL YEAR 1998-99 AS PER THE SEIZED PROFIT AND LOSS ACCOUNT WAS RS.13.7 LAC. THE TOTAL PROFIT AS DEBITED IN NO.2 DOCUMENTS SEIZED FOR FINANCIAL YEARS 1990- 91 TO 1998-99 IS RS.58.12 LACS WHEREAS THAT SHOWN T O THE DEPARTMENT IS ONLY RS.1.64 LAC. THIS SHOWS THE EXTE NT OF UNDERSTATEMENT AND SUPPRESSION OF PROFIT ON THE PAR T OF THE ASSESSEE. 5. THE SEIZED BALANCE SHEET AS ON 31.3.99 ALSO REFL ECTED ASSESSEES INVESTMENT IN BENAMI L-2 BUSINESS. THE B EHLS, WHO WERE ALSO SUBJECTED TO SEARCH SIMULTANEOUSLY WITH T HE ASSESSEE, WERE CO-BENEFICIARIES WITH THE ASSESSEE IN THIS BUS INESS. THE ASSESSEE WAS FOUND TO HAVE PRODUCED L-2 LICENSE IN BENAMI NAME AND TWO SUCH BENAMI L-2 CONCERNS I.E. M/S. PUN JAB TRADERS AND M/S. S.ENTERPRISES CAME TO THE NOTICE O F THE DEPARTMENT. ITA NO.478(ASR)/2012 4 6. THE BALANCE SHEET FOR THE FINANCIAL YEAR 1990-91 SHOWED THAT THE CAPITAL BALANCE DURING THE YEAR ZOOMED FRO M RS.4.01 LAC TO RS.51.06 LAC NOT ONLY ON ACCOUNT OF PROFIT O F RS.15.48 LAC IN THAT YEAR BUT ALSO ON ACCOUNT OF DEPOSITS OF RS. 20.62 LAC. THUS, SUBSTANTIAL ACCRETION TO CAPITAL WAS ON ACCO UNT OF DEPOSITS. IT WAS ALSO FOUND DURING SEARCH THAT THE ASSESSEE WAS SHOWING SUPPRESSED SALES TO SALES-TAX DEPARTMENT TH AN THOSE DISCLOSED . THE ASSESSEE ADDED THE AMOUNT OF SALES TAX OF RS.7,89,821/- DIRECTLY TO THE CAPITAL. THE SALES-TA X SO EVADED WAS IN THE NATURE OF PROFIT. 7. IN VIEW OF THE FACT THAT THE ACTUAL PROFIT OF TH E ASSESSEE DURING FINANCIAL YEAR 1998-99 WAS RS.13.77 LAC AS P ROVED, THE INVOLVEMENT IN L-2 BUSINESSES, MAKES PROFIT BY EVAD ING SALES- TAX AND IS SHOWING A FACTION OF ITS PROFIT IN THE R ETURNS OF INCOME AND THE FACT THAT THE ASSESSEE HAS NOT DISCL OSED THE SATE OF ITS UNDISCLOSED INVESTMENTS/FUNDS PROVED DURING BLOCK PERIOD, THE TOTAL INCOME FOR THE A.Y. IS ESTIMATED AT RS 15 LACS, TO THE BEST OF MY JUDGMENT. 3. THE LD. CIT(A) DELETED THE ADDITION AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE AND THE REPORT OF THE A.O. THE RELE VANT FINDINGS OF LD. CIT(A) ARE REPRODUCED FOR THE SAKE OF CONVENIENCE A S UNDER: I HAVE CONSIDERED THE BASIS OF ADDITION MADE BY TH E A.O. AND THE ARGUMENTS OF THE AR ON THE ISSUE. I AM OF THE OPINION THAT THE A.O. WAS JUSTIFIED IN FRAMING THE ASSESSMENT U/ S 144. HOWEVER, IT IS SEEN THAT THE ASSESSEE NO BUSINESS A FTER 1.4.2001 AS EVIDENCED BY THE CERTIFICATE ISSUED BY THE EXCIS E & TAXATION OFFICER-10, JALANDHAR, AS IT HAD NO LICENSE TO DO S O. THE A.O. HAS MERELY RELIED UPON THE UNACCOUNTED INCOME AS PE R THE SEIZED RECORD FOR PERIOD PRIOR 1.4.1999 TO ESTIMATE THE INCOME FOR THE YEAR UNDER CONSIDERATION. THE ESTIMATE OF T HE A.O. DOES NOT TAKE INTO ACCOUNT THE FACTS THAT NO BUSINESS WA S TRANSACTED DURING THE YEAR UNDER CONSIDERATION AND AFTER THIS YEAR. IN THE CIRCUMSTANCES, THE ADDITION MADE BY THE A.O. DOES N OT HAVE ANY LOGICAL BASIS AND AMOUNTS TO PURE GUESS WORK. AS AG AINST THIS ITA NO.478(ASR)/2012 5 THE RETURN OF INCOME THOUGH FILED BEYOND THE PRESC RIBED TIME LIMIT IS BASED UPON AUDITED BOOKS OF ACCOUNTS FOR WHICH AUDIT REPORT HAD ALSO BEEN FILED. AS SUCH THE ADDITION MADE BY THE A.O, BEING WITHOUT ANY SUPPORTING EVIDENCED IS DIRE CTED TO BE DELETED. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF VALID SERVICE OF NOTICE. THEREFORE, WE ARE PROCEEDING TO DECIDE THIS APPEAL AFTER HEARING THE LD. DR AND ON THE BASIS OF MATERIAL AVAILABLE ON RE CORD. 5. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVAN T MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE AS TO THE FRAMING OF ASSESSMENT UNDER SECTION 144 OF THE ACT, SINCE THE ASSESSEE HAS NOT CO-OPERA TED IN THE ASSESSMENT PROCEEDINGS AND THE LD. CIT(A) HAS CONFIRMED THE AC TION OF THE A.O. VIDE PARA 4 & 5 OF HIS ORDER. THERE IS NO APPEAL OF THE ASSESSEE IN THIS REGARD. 6.1. AS REGARDS THE DELETION OF ADDITION OF RS.15 L ACS, THERE IS NO DISPUTE TO THE FACT THAT CERTAIN INCRIMINATING DOCUMENTS WERE FOUND IN THE CASE OF THE ASSESSEE AND THE RESIDENTIAL PREMISES OF ITS DIREC TORS. AS REGARDS THE BUSINESS DURING THE IMPUGNED YEAR, WE HAVE GONE THR OUGH THE SUBMISSIONS OF THE LD. AR APPEARING ON BEHALF OF THE ASSESSEE B EFORE THE LD. CIT(A), WHICH ARE REPRODUCED IN PARA -3 AS UNDER 3. DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT SUBMITTED HIS ARGUMENTS ON THE ISSUE AS U NDER: ITA NO.478(ASR)/2012 6 A VERY HEAVY ASSESSMENT IN THIS CASE WAS FRAMED A T RS.15 LACS AGAINST THE DECLARED INCOME OF RS.23,680/-. THE ADD ITION IS AGAINST LAW, FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. I N THIS RESPECT, THE ASSESSEE VERY HUMBLY SUBMITS AS UNDER: A) THAT THE ASSESSMENT IN THIS CASE HAS BEEN MADE AT R S.15 LAC AGAINST THE DECLARED INCOME OF RS.23,680/-. THE AO HAS NOT GIVEN ANY BASIS FOR MAKING SUCH A HUGE ADDI TION. B) THAT THE ACCOUNTS OF THE COMPANY ARE REGULARLY AUDI TED BY CA AND THE COPY OF THE COMPLETE AUDIT ACCOUNTS W AS FILED BEFORE THE A.O. FROM WHERE HE FAILED TO MAKE ANY DEFECT WHICH ENTITLED A.O. TO MAKE SUCH A HUGE ADDI TION. C) THAT FURTHERS THIS BEING THE LAST YEAR OF THE BUSIN ESS OF THE ASSESSEE AND ULTIMATELY THE FIRM STANDS CLOSED W.E.F. 1.4.2001. THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN BETTER RESULTS AS COMPARED WITH THE PREVIOUS YEAR. A COPY OF DULY AUDITED ACCOUNTS IS ENCLOSED FOR YOUR KIND CONSIDERATION IN THIS RESPEC T. D) THAT THE POSITION OF THE COMPANY DURING THE PREVIOU S AS WELL AS IN THE SUBSEQUENT YEAR IS AS FOLLOWS: ASSTT. YEAR INCOME RETURNED INCOME ASSESSED REMARKS 1995-96 22,340 22,340 - 1996-97 29,159 29,159 - 1997-98 32,810 32,810 - 1998-99 44,480 44,480 - 1999- 2000 27,090 27,090 - 2000-01 NIL NIL - 2001-02 23,680 15 LACS PRESENT APPEAL 2002-03 NIL 15 LAC FULL ADDITION DELETED CIT(A) 2003-04 NIL 17 LACS -DO- 2004-05 NIL 8 LACS -DO- ITA NO.478(ASR)/2012 7 E) THAT KEEPING IN VIEW THE FACT THAT THE A.O. FAIL ED TO POINT OUT ANY MISTAKE IN ANY ACCOUNTS, WHICH ARE FULLY AU DITED BY A CA. FURTHER, THE POSITION FIND FAVOURS AS COMPARED WITH THE PREVIOUS YEARS. FOR READY REFERENCE THE COPY OF P & L ACCOUNT IS ENCLOSED FOR YOUR KIND CONSIDERATION. THE ENTIRE FINDINGS IN THE ASSESSMENT ORDER RELATES TO THE BLOCK PERIOD HA S NOTHING TO DO WITH THIS YEAR. 6.2. IN THE SAID SUBMISSIONS, THE BUSINESS OF THE A SSESSEE STANDS CLOSED W.E.F.01.04.2001WHICH IS RELEVANT TO THE FINANCIAL YEAR FROM 01.04.2001 TO 31.03.2002 AND THE RELEVANT FOR THE ASSESSMENT YEAR 2002-03. THIS IS EVIDENT FROM THE SAID SUBMISSIONS OF THE ASSESSEE-COMPANY BEFORE THE LD. CIT(A), AS REPRODUCED HEREINABOVE THAT THE BUSINESS OF THE ASSESSEE WAS CARRIED ON UPTO 31 ST MARCH, 2001. THIS FACT HAS BEEN CONFIRMED BY THE L D. CIT(A) IN HIS ORDER IN PARA -5 REPRODUCED HEREINABOVE, AS EVIDENC ED BY THE CERTIFICATE ISSUED BY THE EXCISE DEPARTMENT AND THE ASSESSEE HA S NO BUSINESS AFTER 1.4.2001. THIS FINDING OF THE LD. CIT(A) SHOWS THAT THE BUSINESS OF THE ASSESSEE WAS BEING CARRIED UPTO 31.03.2001 RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2001-02. THEREFORE, THE LD. CIT(A) CANNOT BLOW HOT & COLD IN THE SAME BREATH I.E. ON ONE HAND, HE IS EVIDENCI NG THAT THE BUSINESS WAS BEING CARRIED ON UPTO 31 ST MARCH, 2001 BUT WAS CLOSED AFTER 1.4.2001 AND ON THE OTHER HAND, HE IS GIVING FINDING THAT NO BUSINE SS WAS TRANSACTED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN VIEW OF THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE REPRODUCED IN PARA 3 OF C IT(A)S ORDER, AS ITA NO.478(ASR)/2012 8 MENTIONED HEREINABOVE AND THE FACTS AND FINDINGS O F LD. CIT(A) IN PARA 5, WE ARE OF THE VIEW THAT THE ASSESSEE WAS CARRYING O N BUSINESS UPTO 31.03.2001 RELEVANT TO ASSESSMENT YEAR 2001-02. THE REFORE, NO ERROR HAS BEEN POINTED OUT BY THE LD. CIT(A) IN THIS REGARD A ND ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NO T JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) REVERSED AND THAT OF THE A.O. IS RESTORED. THUS, ALL THE GRO UNDS OF THE REVENUE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.478(ASR)/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH MARCH, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18TH MARCH, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR