ACIT CEN CIR 25, MUMBAI V. THAKKAR POPATLAL VELJI SALES LTD, PANVEL

ITA 4813/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1689 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-02-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: MANISH SANGHAVI
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 4812/M/2010 (AY: 2003-2004) I.T.A. NO. 4813/M/2010 (AY: 2005-2006) I.T.A. NO. 4845/M/2010 (AY: 2004-2005) ACIT, CENTRAL CIRCLE-25, ROOM NO.404, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S. THAKKAR POPATLAL VELJI SALES LTD., 41, JEWSWANI HOUSE, M.G. ROAD, PANVEL 410 206. PAN: AABCT 7939 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.P. SINGH, CIT-DR RESPONDENT BY : SHRI MANISH SANGHAVI DATE OF HEARING: 20.2.2013 DA TE OF ORDER: 08.3.2013 O R D E R PER BENCH: THERE ARE THREE APPEALS UNDER CONSIDERATION AND THE ALL THE APPEAL S ARE FILED BY THE REVENUE AGAINST THE ORDERS OF CIT (A)-39, MU MBAI, WHICH ARE COMMONLY DATED 12.03.2010, FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06. FOR THE SAKE OF CONVENIENCE, WE ARE ADJUDICATING ALL TH E THREE APPEALS IN THIS CONSOLIDATED ORDER. REQUISITE ADJUDICATION IS GIVE N IN THE FOLLOWING PARAGRAPHS. 2. IN VIEW OF THE COMMONNESS OF THE GROUNDS RAISED I N ALL THE APPEALS, FIRSTLY, WE SHALL TAKE UP ITA NO.4812/M/2010 (AY 2003-2004) AND THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) ERRED IN DIRECTING THE AO TO DELETE THE ADD ITION MADE ON ACCOUNT OF ESTIMATED UNACCOUNTED TURNOVER AND UNACCOUNTED INCOME WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. AT THE OUTSET, SHRI MANISH SANGHAVI, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN ALL THE THREE APPEALS, THE ASSESSING OFFICE R MADE ESTIMATIONS FOR ARRIVING AT AN UNACCOUNTED TURNOVER AND UNACCOUNTED INCOME BASE D ON THE LOOSE PAPERS DISCOVERED DURING THE SEARCH AND SEIZURE OPERATION FOR THE PERIOD FROM 15.1.2007 TO 2 31.5.3007 (AY 2007-2008). IN THIS REGARD, LD COUNS EL RELIED ON THE SPECIAL BENCH DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT [2012] 23 TAXMANN.COM 103 (MUM) (SB) AS WELL AS THE SETTLED P RINCIPLE RELATING TO EXTRAPOLATION IE NO EXTRAPOLATION IS ALLOWED BEYON D THE PREVIOUS YEAR IN QUESTION. HE ALSO MENTIONED THAT CIT (A) RELIED ON VARIOUS DE CISIONS MENTIONED IN PARA 6.2 AND 6.3 OF THE IMPUGNED ORDER BEFORE ALLOWING THE A PPEALS OF THE ASSESSEE. OTHERWISE, ASSESSEE RELIED ON THE HONBLE SUPREME C OURT JUDGMENT IN THE CASE OF CST VS. H.M. ESUF ALI AND H.M. ABDUL ALI AND ALSO RELIED ON THE DECISION OF ITAT PUNE BENCH IN THE CASE OF ACIT VS. SHRI GURUMUKH M. JAGWANI VIDE ITA NO.1771 TO 1773/PN/07 FOR AYS: 2002-03 TO 2004-05, DATED 7.1. 2011 (PARA 4 IS RELEVANT IN THIS REGARD) IN SUPPORT OF HIS ARGUMENTS AND PRAYED FOR CONFIRMING THE ORDER OF CIT (A). 4. ON THE OTHER HAND, LD DR FAIRLY RELIED ON THE OR DER OF THE DR HAS NOT SUBMITTED AND BROUGHT ANYTHING NEW BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES ON THIS LIMITED I SSUE OF WHETHER THE EXTRAPOLATION BEYOND THE ASSESSMENT YEAR FOR WHICH THE SEIZED PAPERS ARE FOUND IS ALLOWABLE IN THE EYES OF LAW OR NOT? IT IS AN ADMIT TED CASE THAT THE SEIZED MATERIAL INDICATES UNACCOUNTED SALES ONLY FOR THE PERIOD REL ATING TO THE AYS 2006-07, 2007-08 AND 2008-09 AND NOT TO ANY OF THE ASSESSMENT YEARS WHICH ARE UNDER CONSIDERATION. WE HAVE ALSO PERUSED THE DECISION OF ITAT, PUNE BEN CH IN THE CASE OF ACIT VS. SHRI GURUMUKH M. JAGWANI (SUPRA), IN WHICH ONE OF US IS A PARTY, AND FIND THAT THE SAME ISSUE HAS BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE VIDE PARA 4 OF THE SAID ORDER AND THE SAME READS AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE P ARA 4 OF THE ORDER OF THE TRIBUNAL VIDE ITA NO.1375 TO 1378/PN/07 DATED 2 2.6.2009, FOR THE PROPOSITION THAT THE EXTRAPOLATION OF SUPPRESSED SALES TO AN AY BASED ON THE SEIZED DATA FOR PART OF THE PY OF A DIFFERENT AY, IS NOT TO BE ENTERTAINED LEGALLY. FOR THE SAKE OF COMPLETENESS RELEVANT PAR A 4 AND 5 OF THE ORDER DATED 22.6.2006 ARE REPRODUCED AS UNDER: 4. HEARD THE SUBMISSIONS OF BOTH THE SIDES. FROM THE SIDE OF REVENUE SHRI A.S. SINGH APPEARED AND PLACED RELIANC E ON THE ORDER OF THE AO. HOWEVER, FROM THE SIDE OF RESPONDENT, ASSE SSEE SHRI SUNIL PATHAK APPEARED AND SUPPORTED THE ORDER OF THE LD C IT (A). ON APPRECIATION OF FACTS OF THE CASE AS DISCUSSED HERE INABOVE, IT IS EVIDENT THAT THE AO HAS ATTEMPTED TO EXTRAPOLATE TU RNOVER OF THE 3 ASSESSEE ON THE BASIS OF DIARY WHICH HAS RECORDED D EPOSITS OF GOODS ONLY FOR THE PERIOD FROM 1.5.2004 TO 22.9.2004. ON DUE APPRECIATION OF FACTS AND CIRCUMSTANCES OF THE CASE, THE FIRST A PPELLATE AUTHORITY HAS ARRIVED AT THE CONCLUSION THAT THERE WAS NO BAS IS FOR THE IMPUGNED BACKWARD EXTRAPOLATION OF THE TURNOVER ESP ECIALLY WHEN NO INCRIMINATING EVIDENCE OR MATERIAL WAS FOUND CONSEQ UENT UPON THE SEARCH TO DEMONSTRATE THAT IN THE PAST YEARS AS WEL L, THE ASSESSEE WAS INDULGED IN SUPPRESSION OF SALES. MOREOVER, TH E ADMITTED POSITION IS THAT THE ASSESSEE HAS MAINTAINED REGULA R BOOKS OF ACCOUNTS STATED TO BE COVERED UNDER TAX AUDIT REPOR T BRING DULY AUDITED. AN ANOTHER FACTUAL FINDING IS PLACED ON R ECORD THAT THE STOCK FOR THE SAID PERIOD WAS FOUND SHORT AT THE TI ME WHEN THE SEARCH WAS CONDUCTED. THEREFORE, VEHEMENT CONTENTI ON WAS THAT A CONCLUSION COULD EASILY BE DRAWN THAT THE SHORTAGE OF STOCK HAS ESTABLISHED THE FACT THAT THOSE DISPATCHES AS RECOR DED IN THE DIARY WERE MADE OUT OF THE SAID STOCK. A LEGAL PLEA HAS ALSO BEEN RAISED THAT ONCE THE SEIZED MATERIAL IE DIARY PERTAINED TO A SPECIFIC FINANCIAL YEAR IE 2004-05 RELEVANT TO AY 2005-06, THEN IF AT ALL ANY ACTION WAS REQUIRED, THE SAME OUGHT TO BE FOR THE AY 2005-06 A S IT WAS HELD BY SEVERAL COURTS THAT NO INCOME COULD BE ESTIMATED FO R THE OTHER YEARS ON THE BASIS OF EVIDENCE FOUND FOR ONE PARTICULAR Y EAR ESPECIALLY WHEN THERE WAS NO INCRIMINATING EVIDENCE PERTAINED TO ANY OTHER ASSESSMENT YEAR. THE CASE LAW CITED WAS AS FOLLOWS :- 1. ROYAL MARWAL TOBACCO PRODUCTS (P) LTD (120 TTJ 387) (AHD) 2. H.C. CHANDNA (P) LTD. VS. DCIT (91 TTJ 243 (DEL)) 3. ACIT VS. SMT. RADHA RANI (101 TTJ 1017 (JP)) 4. ACIT VS. AMBICA FOOD INDUSTRIES LTD. (110 TTJ (HYD) ) 5. ACIT VS. M.M. SALES AGENCIES (97 TTJ 575 JP) 6. STATE OF ORISSAJ VS. J.P. SIKIRIA 7 CO (67 STC 101 (ORISSA)) 5. ON THE EXAMINATION OF THE LAW LAID DOWN IN THE A BOVE PRECEDENTS AND ALSO CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS DISCUSSED HEREINABOVE, WE FIND NO FALL ACY IN THE ORDER OF THE CIT (A) ESPECIALLY WHEN THE IMPUGNED UNSUPPORTED BACKWARD EXTRAPOLATION OF THE TURNOVER WAS NOT BASED UPON OR SUPPORTED BY ANY INCRIMINATING MATERIAL FOR THE Y EARS UNDER CONSIDERATION THOUGHT THE REVENUE DEPARTMENT AND TAKEN AN EXTREME STEP OF SEARCH AT THE PREMISES OF THE AS SESSEE. WE HEREBY CONFIRM THE FINDINGS OF THE LD CIT (A) AND D ISMISS THE GROUNDS OF THE REVENUE. 5. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO I NCRIMINATING MATERIAL FOR SUPPORTING THE REVENUES ALLEGATIONS THAT THERE IS SUPPRESSION OF SALES FOR ALL THESE THREE YEARS. IN SUCH CIRCUMSTANCES, THE ISSU E STANDS COVERED IN FAVOUR OF THE ASSESSEE BY OUR ORDERS REFERRED ABOVE. IN T HE RESULT, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T IT IS A REASONABLY SETTLED ISSUE THAT NO ESTIMATION CAN BE MADE BY THE AO FOR WHICH NO INCRIMINATING MATERIAL 4 WERE DISCOVERED AND NO ESTIMATIONS WERE MADE BASED ON THE THEORIES OF EXTRAPOLATION AND MULTIPLICATION. IN THE ABSENCE O F ANY MATERIAL OF EVIDENCE FOUND DURING THE COURSE OF SEARCH TO SUGGEST THAT ASSESSE E WAS ALL ALONG INDULGING IN SUCH UNACCOUNTED TRANSACTIONS, WE ARE OF THE OPINION THA T THE DECISION OF THE CIT (A) TO ALL THE ISSUES RAISED IN ALL THE THREE APPEALS DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE IN ALL T HE THREE APPEALS ARE DISMISSED . 7. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH, 2013. SD/- SD/- (VIVEK VARMA) (D. KARUNAKARA RA O) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 8.3.2013 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR F, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI 5 SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 21.2.2013 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 25.2.2013 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 D ATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH OF ORDER