Shri Anil Chimaji Mhaske, Pune V. ITO, Wd, 3(4), Pune

ITA 480/PUN/2010

• Counselvise Citation: 48024514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 01-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Assessee Lawyers: S N DOSHI
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 480/PN/10 (ASSTT. YEAR 2003-04) SHRI ANIL CHIMAJI MHASKE, .. A PPELLANT 650-B DECCAN GYMKHANA, PUNE PANABIPM1477C VS. INCOME-TAX OFFICER, .. RESPONDENT WD. 3(4), PUNE AND ITA NO 890/PN/10 (ASSTT. YEAR 2003-0 4) ASSTT. COMMISSIONER OF I.T. .. APPELLANT CIR. 3, PUNE VS SHRI ANIL CHIMAJI MHASKE, .. RESPONDENT PUNE ASSESSEE BY: SHRI S N DOSHI DEPARTMENT BY: SHRI S.K. AMBASTHA DATE OF HEARING : 14.09.2011 DATE OF PRONOUNCEMENT : 27.09.2011 ORDER PER G.S. PANNU, AM THE CROSS-APPEAL BY THE ASSESSEE AND THE REVENUE A RE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-II, PUNE DATED 15.03.2010, WHICH IN TURN HAS ARISEN FROM 2 THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SEC TION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERT AINING TO THE ASSESSMENT YEAR 2003-04. 2. IN THESE CROSS-APPEALS OF THE ASSESSEE AS WELL AS REVENUE , THE COMMON ISSUE RAISED RELATES TO THE ESTIMATION OF INCOME. OUT OF AN ADDITION OF RS 16,04,022/- MADE BY THE ASSESSING OFFICER ON THIS COUNT, THE COMMISSIONER OF INCOME-TAX (APPEALS) SUSTAINED AN ADDITION OF RS 8,02,0 11/- AND GAVE PARTIAL RELIEF TO THE ASSESSEE. BEING NOT SATISFIED WITH THE AD DITION SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSESSEE IS IN APPEAL BEFORE US, WHEREAS THE REVENUE IS IN APPEAL AGAINST THE RELIEF GR ANTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). 3. THE BRIEF BACKGROUND OF THE DISPUTE IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD POINTED OUT VARIOUS DEFECTS IN BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE ASSESSE E ALSO HAD ADMITTED THAT THERE WERE DIFFERENCES IN THE BALANCES O F VARIOUS CREDITORS AS POINTED OUT BY THE ASSESSING OFFICER. THERE WAS ALSO DIFF ERENCE IN THE STOCK STATEMENT GIVEN TO THE BANK VIS--VIS THAT SHOWN IN THE ACCOUNT BOOKS. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD SHOWN LOSS O F RS 48,284/- ON SALE OF INDICA CAR, WHICH WAS DEBITED TO THE PROFIT & LOSS ACCOUNT WRONGLY, WHICH SHOULD HAVE BEEN ADDED BACK AND SHOULD HAVE BEEN REDUCED FROM THE BLOCK OF ASSETS. FURTHER, THE ASSESSING OFFICER HAS ALSO POIN TED OUT IN PARA 4 OF THE ASSESSMENT ORDER THAT TWO OF THE SUNDRY CREDITORS DI D NOT RESPOND TO THE LETTERS SENT UNDER SECTION 133(6) OF THE ACT FOR CROSS VER IFICATION OF THE BALANCES AND THE ASSESSEE ALSO WAS NOT ABLE TO FILE CONFIRMATIONS O F SUCH CREDITORS, WHICH RELATED TO PURCHASES MADE BY THE ASSESSEE. FOR ALL THESE DEFECTS AND CONSIDERING THE NET PROFIT OF THE ASSESSEE FOR THE ASSESSME NT YEARS 2001-02, 2002-03 AND 2003-04 WHICH WERE SHOWN AT 1.17%, 1.61% AND 1.35% RESPECTIVELY, THE ASSESSING OFFICER REJECTED THE BOOK RESUL TS AND ESTIMATED THE 3 NET PROFIT FOR THE INSTANT ASSESSMENT YEAR AT 1.61% TO COVER UP ALL THE DEFECTS IN THE TRADING ACCOUNT, AS AGAINST 1.35% SHOWN BY THE ASSESSE E, WHICH RESULTED IN A NET ADDITION OF RS 16,04,022/-. IN APPEAL BEFORE T HE COMMISSIONER OF INCOME- TAX (APPEALS), THE ASSESSEE OBJECTED TO THE ESTIMATION B Y SUBMITTING WRITTEN SUBMISSIONS DATED 25.2.2010 STATING THAT THE DEFECTS POI NTED OUT DO NOT JUSTIFY REJECTION OF THE BOOK RESULTS BY INVOKING PROVISIONS OF SE CTION 145(3) OF THE ACT. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE C OMMISSIONER OF INCOME-TAX (APPEALS) SUSTAINED AN ADDITION OF RS 8,02,01 1/- BY HOLDING AS FOLLOWS: 6.2 I HAVE CAREFULLY CONSIDERED THE CONTENTION MAD E BY THE APPELLANT AND VARIOUS ISSUES RAISED BY THE AO IN THE ORDER. I AM OF THE OPINION THAT DUE TO THE DEFECTS POINTED OUT BY THE AO, WHICH HAVE ALSO BEEN ACCEPTED BY THE APPELL ANT IN THE SUBMISSIONS, ESTIMATION OF PROFIT IN APPELLANTS CASE WAS JUSTIFIED. IT IS ALSO AN ADMITTED FACT THAT THERE IS A CLEAR CUT DIFFERENCE OF RS 3,14,898/- IN THE STOCK STATEMENT GIVING TO BANK I.E. THIS MUCH STOCK WAS SHOWN IN EXCESS AND THE APPELLANT HAS ADMITTED THE DIFFERENCE IN THE CREDIT BALANCE OF THE 13 CREDITORS AS WELL AS NOT HAVING ADDED LOSS O F SALE OF INDICA CAR BY AN AMOUNT OF RS 48,284/-. HOWEVER, IT IS NOT ARITHMETICAL EXERCISE THAT FOR ESTIMATING PROPER PROFITS, THE NET PROFIT OF LAST YEAR I.E.; 1.61% SHOULD STRAIGHTAWAY BE APPLIED INSTEAD OF THE NET PROFIT SHOWN IN THIS YEAR WHICH IS 1.35%; WHICH HAS RESULT ED IN ADDITION OF RS 16,04,022/-. HAVING CONSIDERED THE TOTALITY OF THE CIRCUMSTANCES , IT IS DIRECTED THAT THE ADDITION FOR LOS PROFIT DUE TO THE ABOVE MENTIONED DEFECTS/DIFFERENC ES MAY BE RESTRICTED TO 50% OF WHAT HAS BEEN MADE I.E. INSTEAD OF RS 16,04,022/-, THE A DDITION IS RESTRICTED TO RS 8,02,011/-, WHICH IS INCLUSIVE OF HE DISCREPANCIES NOTICED ABOV E. ON ACCOUNT OF THIS ADDITION, THE NET PROFIT RATE BECOMES 1.48% FOR THIS YEAR. THE APPELL ANT, THEREFORE, GETS A PARTIAL RELIEF. GROUND NO. 5 IS, THEREFORE, PARTLY ALLOWED. BEING NOT SATISFIED WITH THE ADDITION SUSTAINED BY THE COMMISSIONER OF INCOME- TAX (APPEALS), ASSESSEE IS IN APPEAL BEFORE US, WHEREAS THE REVENUE IS IN APPEAL AGAINST THE RELIEF GRANTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SU BMITTED THAT THERE WAS NO JUSTIFICATION FOR REJECTING THE BOOK RESULTS DECLARE D BY THE ASSESSEE AND RESORTING TO AN ESTIMATION TO DETERMINE THE INCOME OF THE ASSESSEE. IT WAS POINTED OUT THAT THE DIFFERENCE APPEARING IN THE ACCO UNT BALANCES OF THE CREDITORS WAS QUITE MARGINAL AND SUCH DIFFERENCES ROUTINELY ARISE FOR VARIOUS REASONS VIZ. WRONG ACCOUNTING, INADVERTENT OMISSION OF DEBIT/CREDIT N OTES ETC. CONSIDERING LARGE BUSINESS VOLUMES, A MINOR DIFFERENCE OF RS 47,962/ - IN THE BALANCES OF 13 SUNDRY CREDITORS CANNOT BE CONSIDERED AS A DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED. EVEN WITH REGARD TO CASE OF TWO SUPPLIERS, WHERE CONFIRMATION LETTERS 4 COULD NOT BE FILED BY THE ASSESSEE AND THE LETTER WRITT EN BY THE ASSESSING OFFICER COULD NOT BE SERVED, IT WAS POINTED OUT THAT THE ASSESSE E IS HAVING REGULAR DEALINGS WITH SUCH PARTIES AND PAYMENTS ARE BEING MADE B Y CROSSED CHEQUES AND THEREFORE, IT COULD NOT BE CONSTRUED THAT THERE WA S ANY DEFECT IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSESSEE. WITH REGARD TO THE DI FFERENCE IN THE VALUE OF STOCK DISCLOSED TO THE BANK AS ON 31.3.03 VIS--VIS VALUE OF ST OCK SHOWN IN THE ACCOUNT BOOKS, IT WAS CONTENDED THAT THE FIGURES OF STOCK AR E FURNISHED TO THE BANK ON ESTIMATION AND THE SAME CANNOT BE CONSIDERED AS A DEFECT IN THE ACCOUNT BOOKS MAINTAINED SO AS TO HOLD THE SAME AS UNRELIA BLE. EVEN WITH REGARD TO THE VARIATION IN THE PROFIT RATE IN COMPARISON TO EARLIER YEARS, IT WAS POINTED OUT THAT ASSESSEE HAD EXPLAINED REASONS FOR SUCH VARIATION AND IN ANY CASE THE ASSESSEES BOOKS OF ACCOUNT WERE AUDITED AND THE VARIATION IN PROFIT RATES CANNOT BE A GROUND TO HOLD THE ACCOUNT BOOKS AS UNRELIABLE. FO R ALL THE ABOVE REASONS, THE LEARNED COUNSEL SUBMITTED THAT IN THE ABSENCE OF AN Y CONCRETE DEFECTS FOUND IN THE ACCOUNT BOOKS, THE LOWER AUTHORITIES WERE NOT JU STIFIED IN RESORTING TO ESTIMATE IN ORDER TO DETERMINE THE INCOME OF THE ASSESS EE, AND THAT THE PART ADDITION SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (AP PEALS) BE ALSO DELETED. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS RELIED UPON THE ORDER OF THE ASS ESSING OFFICER IN SUPPORT OF THE CASE OF THE REVENUE AND HAS POINTED OUT THAT IN PARA 10 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS SUMMARIZED VARIOUS DISCREP ANCIES FOUND IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND, THEREFORE, ON THAT BASIS, THE BOOK RESULTS DECLARED HAVE BEEN DISREGARDED AND INSTEAD, INCO ME HAS BEEN DETERMINED ON ESTIMATION. IT WAS ALSO POINTED OUT WITH REFERENCE TO PARA 2 OF THE ASSESSMENT ORDER THAT THE DIFFERENCE IN THE CLOSING BALAN CES OF THE CREDITORS VIS- A-VIS ACCOUNT BOOKS MAINTAINED BY THE ASSESSEE WAS NOT RECO NCILED. MOREOVER, THE STATEMENT OF STOCK AS ON 31.3.2003 FURNISHED TO TH E BANK, WHICH DIFFERED WITH THE VALUE OF STOCK SHOWN IN THE ACCOUNT BOOKS, WAS NOT SUBM ITTED BY THE ASSESSEE AND THEREFORE, THERE WAS NO EXPLANATION FOR SUCH A DIFFERENCE. UNDER 5 THESE CIRCUMSTANCES, THE ESTIMATION MADE BY THE ASSESSING OFFI CER WAS SOUGHT TO BE JUSTIFIED AND EVEN THE PARTIAL RELIEF ALLOWED BY THE COMMISSIONER OF INCOME- TAX (APPEALS) WAS SOUGHT TO BE ASSAILED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N THIS CASE, THE ASSESSEE IS RUNNING A PROPRIETARY BUSINESS OF TRADING IN COM PUTER HARDWARE AND PERIPHERALS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CARRIED OUT VERIFICATION EXERCISE WITH REGARD TO THE CRE DITORS AND FOUND CERTAIN DIFFERENCES IN THE CLOSING BALANCES VIS--VIS THE ACCOUNT BOO KS OF THE ASSESSEE. IN PARA 2, IT IS CATEGORICALLY ASSERTED BY THE ASSESSING OFF ICER THAT IN 13 CASES THE AMOUNTS COULD NOT BE RECONCILED. APART FROM OTHER DISCRE PANCIES, ONE POINT WHICH CLEARLY STANDS OUT IS THE DIFFERENCE IN THE STOCK AS O N 31.3.2003 REPORTED TO THE BANK VIS--VIS STOCK SHOWN IN THE BOOKS OF ACCOUNT. THE A SSESSING OFFICER HAS ASSERTED IN PARA 7 & 8 OF THE ASSESSMENT ORDER THAT ASSESSEE HAS SHOWN EXCESS STOCK OF RS 3,18,438/- TO THE BANK AND ALSO THAT TH E ASSESSEE HAS NOT FURNISHED ANY DETAILS OF THE STOCK FURNISHED TO THE BAN K SO AS TO COMPARE IT WITH THE BOOK RECORDS TO EXAMINE WHETHER THE DIFFERENCE LIE S IN QUANTITIES OR IN VALUATION. APART FROM MAKING A GENERALIZED OBSERVATI ON, NO SPECIFIC EXPLANATION HAS BEEN FURNISHED ON THE AFORESAID POINTS BY THE ASSESSE E AT ANY STAGE. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN OUR VIEW, EVEN IF WE UPHOLD THE PLEA OF THE ASSESSEE THAT THE DEFECTS/DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER DO NOT CALL FOR WHOLESALE REJECTION OF THE TRA DING RESULTS DECLARED, HOWEVER, IN ABSENCE OF ANY CREDIBLE EXPLANATION REGARD ING THE DIFFERENCE IN THE VALUE OF STOCK FURNISHED TO THE BANK AND UNVERIFIABI LITY/NON-RECONCILIATION OF ACCOUNTS OF CERTAIN CREDITORS, IT IS A FIT CASE FOR CERTAIN LEVEL OF ADDITION. THE ADDITION HAS BEEN CRYSTALIZED BY THE ASSESSING OFFICER AS A PERCENTAGE OF TURNOVER AND THE COMMISSIONER OF INCOME-TAX (APPEALS) H AS RESTRICTED THE SAME TO 50% OF THAT MADE BY THE ASSESSING OFFICER. IN OUR CONSI DERED OPINION, THE ESTIMATION OF THE ADDITION MADE BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IS QUITE FAIR AND REASONABLE HAVING REGARD TO THE PAST R ESULTS AS ALSO THE 6 DISCREPANCIES AS NOTICED AFORESAID BY US AND, THEREFORE, W E FIND NO REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOM E-TAX (APPEALS) 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE AS WELL AS T HE CROSS APPEAL OF THE REVENUE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (SHAILENDRAKUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 27 TH SEPTEMBER, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT(A)-II PUNE 4. THE CIT-II, PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE