The ITO, Ward-1(3), RAJKOT-GUJARAT V. Shri Bharatkumar Gordhandas Rajani (HUF), JUNAGADH

ITA 486/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0126 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 29-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Unexplained investment; Opportunity of being heard; Assessment record
• Section: 69C; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI B.R.JAIN, AM ITA NO. 486/RJT/2012 / ASSESSMENT YEAR 2005-06 THE INCOME TAX OFFICER, WARD1(2), BHUTHNATH CHAMBERS, COLLEGE ROAD, JUNAGAD, ( / APPELLANT) VS. SHRI BHARAT G RAJANI (HUF) BLOCK NO.18, RAJKIRAN APARTMENT, JAYSHRI NAGAR, JUNAGADH. PAN: AAHHR1954F / RESPONDENT / REVENUE BY SHRI AVINASH KUMAR ' / ASSESSEE BY SHRI SAMIR JANI & / DATE OF HEARING 4.12.2012 & / DATE OF PRONOUNCEMENT 7.12.2012 / / / / ORDER B.R.JAIN, A. M. THIS APPEAL BY REVENUE AGAINST THE ORDER DATED 18.6.2012 OF LD. CIT(A)-IV, RAJKOT RAISES THE FOLLOW ING GROUNDS : 1. THE LD. CIT(A), RAJKOT HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.9,41,616/- MADE BY THE AO U/S 69 OF THE ACT, BEING UNEXPLAINED PURCHASES, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 2. THE LD. CIT(A), RAJKOT HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS.8,63,496/- MADE BY THE AO ON ACCOUNT OF SUPPRESSED SALES, WITHOUT APPRECIATING THE FACTS BROUG HT ON RECORDS BY THE AO 2. WITH REGARD TO GROUND NO.1, BRIEFLY THE FACTS AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TEA ON WHOLESALE BASIS AN D HAS DECLARED GROSS PROFIT OF RS.18,66,275/- YIELDING PROFIT AT TH E RATE OF 2.38% ON TOTAL TURNOVER OF RS.7,82,27,341/- AS AGAINST GROSS PROFIT O F RS.50,91,062/- ITA NO. 486/RJT/2012 2 YIELDING GROSS PROFIT AT THE RATE OF 7.30% ON TOTAL T URNOVER OF RS.6,96,74,965/- DECLARED BY THE ASSESSEE IN THE IMMEDIA TELY PRECEDING YEAR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSI NG OFFICER FOUND THAT THE ASSESSEE HAS DECLARED CLOSING STOCK AMOUNTING TO RS.9,41,616/- IN THE BALANCE SHEET UNDER THE HEAD VEPARI SCHEME GO ODS. SINCE THE PURCHASE OF THESE GOODS WERE NOT ROUTED THROUGH ITS TRADING ACCOUNT, THE ASSESSING OFFICER TOOK A VIEW THAT THE ASSESSEE HAS MADE IN VESTMENT IN THE FORM OF PURCHASE OF VEPARI SCHEME GOODS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. HE, THEREFORE, REJECTED THE BOOK R ESULTS SHOWN BY THE ASSESSEE BY APPLICATION OF THE PROVISIONS OF SECTION 1 45(3) OF THE INCOME TAX ACT, 1961 (THE ACT) AND MADE THE ADDITION OF RS.9,41,616/- AS UNEXPLAINED INVESTMENT U/S 69C OF THE ACT. 3. THE LD. CIT(A) FOUND THAT THERE WAS NO CONSUMPTION OF VEPARI SCHEME GOODS DURING THE YEAR UNDER CONSIDERATION AND AS SUCH NO TRANSACTIONS WERE ROUTED THROUGH THE TRADING ACCOUNT AN D DID NOT HAVE ANY INCOME EFFECT ON THE TRADING ACCOUNT OR REVENUE F OR THE YEAR UNDER CONSIDERATION. SINCE CLOSING STOCK OF SUCH GOODS WAS TAKEN AT COSTS AND THE VALUATION OF CLOSING STOCK WAS DONE AT COST UNDER VEP ARI SCHEME GOODS TO THE BALANCE SHEET, HE FOUND NO WRONG OR INFIRMITY IN TREATING THE SUCH GOODS AS CURRENT ASSETS OF THE YEAR UNDER CONSIDER ATION. THE SAME, THEREFORE, COULD NOT BE TAKEN AS UNEXPLAINED IN VESTMENT U/S 69C OF THE ACT AND THUS DELETED THE ADDITION SO MADE FOR R S.9,41,616/-. 4. WE HAVE HEARD PARTIES WITH REFERENCE TO THE MATER IAL ON RECORD AND HAVE ALSO EXAMINED THE COPIES OF BILLS WHICH WER E REQUIRED TO BE PRODUCED FOR EXAMINING THE FACT AS TO WHEN THE ASSESSEE HAD MADE ITA NO. 486/RJT/2012 3 PURCHASES OF SUCH GOOD. THE GOODS ARE FOUND TO HAVE BE EN PURCHASED DURING THE YEAR UNDER CONSIDERATION AND STOOD DULY R ECORDED IN THE ACCOUNTS. THE GOODS AS ARE CONTAINED IN THE INVOICES ARE NOT SUCH GOODS THAT ARE DEALT WITH BY THE ASSESSEE IN THE ORDINARY COU RSE OF BUSINESS, THE SAME ARE CLAIMED TO HAVE BEEN KEPT AS STOCK IN HAND AT TH E END OF THE YEAR AS UNDER THE HEAD CURRENT ASSETS IN THE BALANCE SHEET PLACED ON ASSESSMENT RECORD. MERELY BECAUSE, THE PURCHASES HAVE NOT BEEN ROUTED THROUGH TRADING ACCOUNT, IT DOES NOT LEAD TO AN Y PRESUMPTION THAT THE PURCHASES ARE UNEXPLAINED. THE LD. CIT(A) IS TH US FOUND JUSTIFIED IN DELETING THE ADDITION AND WE FIND NO REASON TO INT ERFERE IN THE DECISION SO REACHED IN APPEAL BY HIM. ACCORDINGLY GROUND NO.1 RA ISED BY THE REVENUE STANDS REJECTED. 5. IN GROUND NO.2, THE ASSESSING OFFICER UPON VERIFICATI ON OF DETAILS AVAILABLE ON RECORD NOTICED THAT AS AGAINST SALES FOR RS.7,90,90,838/- THE ASSESSEE DECLARED SALES OF RS.7,82,27,341/- ONLY IN THE P ROFIT AND LOSS ACCOUNT. HE, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAI N AS TO WHY THE DIFFERENCE SHOULD NOT BE TAKEN AS SUPPRESSED SALES AMOUNTI NG TO RS.8,63,496/- AND ADDED TO THE TOTAL INCOME OF THE ASSE SSEE. THE ASSESSEES EXPLANATION THAT THERE IS NO DIFFERENCE IN SAL ES AS DECLARED IN THE BOOKS OF ACCOUNT AND THE SALES DISCLOSED IN TRADING AND PROFITS AND LOSS ACCOUNT IN VIEW OF THE FACT THAT THERE ARE CONTRA EN TRY IN THE ACCOUNT OF M/S RAJANI DISTRIBUTORS PVT LTD. AND B.G.RAJANI (HUF) BY AN AMOUNT OF RS.23,74,000/-, DID NOT FIND ANY FAVOUR WITH THE ASSE SSING AUTHORITY. HE, THEREFORE TREATED THAT THE SALES BY RS.8,63,496/- AR E THE SUPPRESSED SALES OF THE ASSESSEE AND ADDED THE SAME TO THE DECLARED I NCOME. ITA NO. 486/RJT/2012 4 6. THE LD. CIT(A) GOING BY THE SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD HELD THAT THE ASSESSING OFFICER HAD COMMITTED AN ERROR IN COMPARING THE SALES IN PROFIT AND LOSS ACCOUNT WITH THE SALES DECLARED IN THE BOOKS OF ACCOUNT IN VIEW OF THE FOLLOWING DATA : SALES CONSIDERED BY THE ASSESSING OFFICER LESS : ERROR IN CONSIDERING EXCESS SALE TO RAJANI DISTRIBUTORS PVT. 7,90,90,838 -23,74,000 ADD : ERROR IN NOT CONSIDERING SALES TO BHAGYODAY TRADING PVT. LTD, OM ENTERPRISE, RAJANI BROTHERS, MAJESTIC TRADERS, CASH SALES LESS : ERROR IN NOT REDUCING SALES TAX/CST IN EXCLUSIVE METHOD OF ACCOUNTING 76,01,743 -60,91,240 SALES 7,82,27,341 HE, THEREFORE, TOOK THAT THE SALES AFTER CORRECTION AR E RS.7,82,27,341/- WHICH ARE EQUAL TO SALES DISCLOSED IN THE PROFIT AND LOSS A CCOUNT AND HELD THAT HE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.8,6 3,496/- ON MISUNDERSTANDING OF ACCOUNTS OF APPELLANT PARTICULARLY WH EN THERE WAS NO DIFFERENCE IS SALES REFLECTED IN THE INDIVIDUAL LEDGER ACCOUNT OF THE CUSTOMERS AND CUMULATIVE SALES IN THE PROFIT AND LOSS ACCOUN T UNDER EXCLUSIVE METHOD OF ACCOUNTING. ACCORDINGLY, HE DELETED THE ADDITION OF RS.8,63,496/- SO MADE BY THE AO. 7. HEARD PARTIES WITH REFERENCE TO THE MATERIAL ON RE CORD. THE LD. CIT(A) APPEARS TO HAVE TAKEN A DECISION ON THE BASIS OF COPIES OF ACCOUNT OF CERTAIN PARTIES AVAILABLE ON RECORD BUT DID NOT CA LL FOR THE BOOKS OF ACCOUNT AND VERIFIED THE CORRECTNESS OF THE ENTRIES THEREI N VIS--VIS VARIOUS ENTRIES LEADING TO ASSUMPTION OF THE CORRECT SALES MADE BY HIM. WE, THEREFORE, FIND NO JUSTIFICATION IN HIS ACTION TO DELET E THE ADDITION. IN ORDER TO RENDER SUBSTANTIAL JUSTICE, WE CONSIDER IT APPROPR IATE TO SET ASIDE THE ITA NO. 486/RJT/2012 5 ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO HIS FILE SO AS TO EXAMINE THE CORRECTNESS OF THE STATEMENT OF ACCOUNT WITH R EFERENCE TO THE BOOKS OF ACCOUNT AND RENDER THE DECISION IN ACCORDANCE WIT H LAW AFTER AFFORDING A REASONABLE AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. 8. IN THE RESULT, REVENUES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSE. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 7.12.20 12. SD SD (T. K. SHARMA) ( B.R.JAIN) /JUDICIAL MEMBER / ACCOUNTANT MEMBER +/ ORDER DATE 7.12.2012. /RAJKOT SRL - - - - .- .- .- .- / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-, 2. / RESPONDENT- 3. 4 / CONCERNED CIT. 4. 4- / CIT (A). 5. - , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT. ITA NO. 486/RJT/2012 6 1.DATE OF DICTATION : 5.12.2012. 2.DATE OF PLACING THE DRAFT. : 5.12.2012 3.DATE OF APPROVAL OF DRAFT. : 4.DATE OF RETURN FROM JM : 5.DATE OF PRONOUNCEMENT : 6.DATE OF SENDING TO BENCH CLERK : 7.DATE OF RECEIPT BY BENCH CLERK : 8.DATE OF PLACING IT FOR ENDORSEMENT : 9.DATE OF ENDORSEMENT : 10.DATE OF DISPATCH