M/S ABHINAV VASTRALAYA, V. THE ITO,

ITA 49/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3066 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2010
• Assessment Year: misc
• Appeal Filed On: 05-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S MUNDRA
• Keywords: Business income

Judgement Text

PAGE 1 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AABFA8893-N I.T.A.NO.49/IND/2008 A.Y. : 2004-05 ABHINAV VASTRALAYA, ITO, OLD BUS STAND GAROTH VS MANDSAUR DISTRICT MANDSAUR. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.MUNDRA, C. A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 05.04.2010 O R D E R PER BENCH THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A), UJJAIN , DATED 03.12.2007, FOR THE ASSESSME NT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN CONFIRMING THE ESTIMATION OF SALES AS WELL AS ADOPTION OF GROSS PROFIT RATE OF 15 % THEREON INSTEAD OF NET PR OFIT RATE ON SUCH PAGE 2 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH ENHANCED SALE IN VIEW OF THE DECISION OF THE HON'BL E M.P.HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR, REPORTED I N 263 ITR 610. 4. THE FACTS, IN BRIEF, ARE THAT THERE WAS A SURVEY AC TION U/S 133A, WHEREIN SOME EXCESS CASH STOCK AND OTHER INCRIMINAT ING DOCUMENTS WERE FOUND. THE A.O. HELD THAT FOR ONE MONTH AND TWENTY SEVEN DAYS, THE SALE SHOWN BY THE ASSESSEE WAS RS. 10,05,659/-, WHEREAS IN NEXT TEN MONTHS SALE ONLY OF RS. 29,54,688/- HAD BEEN SHOWN. HENCE, THE A.O. HELD THAT THE ASSESSEE HAS INDULGENCE IN MAKING SALES OUTSID E THE BOOKS COULD NOT BE RULED OUT. THE A.O. FURTHER HELD THAT THERE WERE SEVERAL DISCREPANCIES NOTED IN THE COURSE OF SURVEY ACTION, WHICH ALSO RE SULTED INTO A CONCLUSION THAT THE TRANSACTIONS WERE NOT RECORDED ON DAY TO D AY BASIS. ACCORDINGLY, THE A.O. ESTIMATED THE SALES AT RS. 50 LAKHS AND AP PLIED A GROSS PROFIT RATE OF 15 % THEREOF. SINCE THE ASSESSEE HAD SHOWN GROSS PROFIT AT RS. 5,74,878/-, HENCE, THE A.O. MADE AN ADDITION OF RS. 1,75,122/-. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE DETAILED SUBMISSIONS WERE M ADE TO CONTROVERT THE FINDINGS/OBSERVATIONS OF THE A.O. IT WAS ALSO SUBMI TTED THAT IN ASSESSMENT YEAR 2003-04, THE TOTAL SALES WERE ADOPTED BY THE C IT(A) AT RS. 40 LAKHS AS AGAINST THE SALES OF RS. 38,46,819/- SHOWN BY TH E ASSESSEE. IT WAS CONTENDED THAT GROSS PROFIT NET PROFIT RATE WAS REQ UIRED TO BE APPLIED, IN VIEW OF THE AFORESAID DECISION OF HON'BLE M.P. HIGH COURT. THE LD. PAGE 3 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH CIT(A), HOWEVER, CONFIRMED THE GROSS PROFIT RATE AD OPTED BY THE ASSESSING OFFICER BUT REDUCED THE QUANTUM OF SALES TO RS. 42 LAKHS AND, ACCORDINGLY, THE ADDITION OF RS. 55,122/- WAS ONLY SUSTAINED. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL NARRATED THE FACTS AND CONTENDE D THAT IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COU RT IN THE CASE BALCHAND AJIT KUMAR (SUPRA) AND LATEST DECISION OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF MANMOHAN SADAN VS. CIT, AS REPORTED IN 304 ITR 52, ONLY NET PROFIT RATE HAD TO BE ADOPTED. HE FURTHER CONTENDED THAT INDORE BENCH OF THE TRIBUNAL IN THE CASE OF A.S.N.AGRI GENETIC PRIV ATE LIMITED VS. DY. CIT, IN I.T.A.NO. 303/IND/2006 HAD ALSO DIRECTED TO ADOPT THE NET PROFIT RATE INSTEAD OF GROSS PROFIT RATE. THE LD. DEPARTME NTAL REPRESENTATIVE, ON THE OTHER HAND, PREFERRED TO RELY ON THE ORDER OF T HE LD. CIT(A). 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 7. IT IS NOTED THAT IN ASSESSMENT YEAR 2003-04, THERE HAVE BEEN AN ADDITION ON ACCOUNT OF SALES OUTSIDE THE BOOKS, WHI CH HAS BEEN ACCEPTED BY THE ASSESSEE AND, THEREFORE, ESTIMATION OF SALES CANNOT BE SAID TO BE INCORRECT. WE FURTHER FIND THAT DURING THE COURSE O F SURVEY IN THE YEAR UNDER CONSIDERATION SOME DEFICIENCIES/MISTAKES HAV E ALSO BEEN NOTICED AND FOR THIS REASON ALSO, THE ESTIMATION OF SALES I S JUSTIFIED. HOWEVER, IN PAGE 4 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH VIEW OF THE JUDICIAL DECISION CITED BY THE LEARNED COUNSEL, WE DIRECT THE A.O. TO ADOPT THE NET PROFIT RATE FOR MAKING THE IM PUGNED ADDITION AND, ACCORDINGLY, RECOMPUTE THE QUANTUM OF ADDITION. THU S, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED. 8. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 2,64,0 86/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. 9. THE FACTS, IN BRIEF, ARE THAT DURING THE COURSE OF SURVEY, INVENTORY OF ITEMS TRADED BY THE ASSESSEE WAS PREPA RED. A TENTATIVE TRADING ACCOUNT HAD ALSO BEEN PREPARED. THE TENTATI VE TRADING ACCOUNT, THE STOCK ON THE DATE OF SURVEY, WAS ESTIMATED AT RS. 8 ,96,789/-, WHEREAS AS PER LIST OF STOCK PREPARED IN THE COURSE OF SURVEY, THE STOCK WAS RS. 11,60,875/-. THE A.O. ADDED THE DIFFERENCE BETWEEN THE TWO AS UNDISCLOSED INVESTMENT BY THE ASSESSEE AND MADE AN ADDITION OF RS. 2,64,086/-. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THA T AT THE TIME OF SURVEY, STOCK WAS NOT PHYSICALLY TAKEN, WHICH WAS E VIDENT FROM THE FACT THAT THE INVENTORY CONSISTED OF ONLY 22 ITEMS, WHER EAS THE ASSESSEE WAS RETAIL DEALER IN CLOTH HAVING SEVERAL TYPES OF CLOT HS OF DIFFERENT VARIETIES AND DIFFERENT RATES. IT WAS ALSO CONTENDED THAT THE EXCESS STOCK SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SU RVEY WAS NOT SHOWN IN PAGE 5 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH THE RETURN OF INCOME AS SUBSEQUENTLY IT WAS FOUND T HAT NO EXACT EXCESS STOCK ACTUALLY EXISTED FOR THE REASONS STATED ABOVE AS WELL AS IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY, THE RE WAS NO MENTION OF THE INVENTORY OF STOCK BEING PREPARED AND SUCH INVE NTORY LIST DID NOT BEAR SIGNATURES OF ANY OF THE OFFICER OF THE SURVEY TEAM . THE LD. CIT(A), HOWEVER, HELD THAT IT WAS NOT MATERIAL THAT SUCH IN VENTORY LIST DID NOT BEAR SIGNATURE OF ANY OFFICERS OF THE SURVEY TEAM, SINCE IT HAD BEEN SIGNED BY ONE OF THE PARTNERS. THE LD. CIT(A) ALSO HELD THAT INVENTORY OF STOCK WAS GENERALLY PREPARED WITH THE ASSISTANCE OF THE ASSES SEE OR HIS EMPLOYEES. HENCE, OBJECTIONS RAISED BY THE ASSESSEE SUBSEQUENT LY DID NOT CARRY MUCH WEIGHT. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE A CTION OF THE A.O. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LEARNED COUNSEL NARRATED THE FACTS, DREW OUR AT TENTION TO THE INVENTORY PREPARED DURING THE COURSE OF SURVEY AND SUBMITTED THAT IT HAD NOT BEEN SIGNED BY ANY OF THE OFFICERS OF THE S URVEY TEAM, HENCE, FOR THIS REASON ALONE, NO SIGNIFICANCE/VALUE COULD BE A TTACHED TO SUCH LIST. HE FURTHER DREW OUR ATTENTION TO THE SPECIFIC ITEMS, W HEREIN ONLY 22 ITEMS HAVE BEEN TAKEN AS AGAINST VARIOUS ITEMS EXISTING I N THE STOCK OF THE SHOP AT THAT TIME. THE LEARNED COUNSEL ALSO SUBMITTED TH AT THE LIST WAS PREPARED JUST BY WAY OF CLOTHS, AD HOC RATE/ AD HOC QUANTITY HAD BEEN ADOPTED AND, THEREFORE, SUCH INVENTORY WAS FACTUALL Y INCORRECT ALSO. THE PAGE 6 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH LEARNED COUNSEL PLACED STRONG RELIANCE ON THE ORDER OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BANSAL HIGH CARBO NS (P) LIMITED, AS REPORTED IN 223 CTR (DEL) 179, WHEREIN THE HON'BLE COURT HAD OBSERVED THAT STOCK COULD NOT BE PREPARED THROUGH GUESS WORK AND THE FACT THAT EMPLOYEES OF THE ASSESSEE SIGNED THE PANCHNAMA DID NOT MEAN THAT THIS CERTIFIED THE CORRECTNESS OF THE NUMBER OF BUNDLES OR THE AVERAGE RATE OF EACH BUNDLE AS THEIR CERTIFICATE CONVEYED THE MESSA GE THAT THEY WERE MERELY WITNESS TO THE PROCEEDINGS. THE LEARNED COUN SEL SUBMITTED THAT THIS DECISION WAS SQUARELY APPLICABLE ON THE FACTS OF THIS CASE. HE FURTHER SUBMITTED THAT SURRENDER MADE IN THE COURSE OF THE SURVEY HAD BEEN RETRACTED IN VIEW OF THE CORRECT FACTS COMING TO TH E KNOWLEDGE OF THE ASSESSEE THEREAFTER. 11. THE LD. SR. DR, ON THE OTHER HAND, SUBMITTED THAT T HE DECISION OF THE HON'BLE DELHI HIGH COURT RELIED ON BY THE ASSES SEE WAS NOT APPLICABLE IN THE PRESENT CASE, THE ASSESSEE HAD SURRENDERED T HE STOCK FOUND IN THE COURSE OF SURVEY AS WELL AS IT WAS A CASE OF SURVEY AND NOT OF THE SEARCH. SHE FURTHER PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT THE INVENTORY PREPARED DURING THE COURSE OF SURVEY IS NOT VARIETY-WISE, ITEM-WISE, BUT APPARENT LY IT IS A CASE OF AD HOC PAGE 7 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH APPROACH. HENCE, THE QUANTITY OF SUCH INVENTORY AND VALUATION THEREOF, IN OUR OPINION, CANNOT BE A PROPER BASIS TO WORK OUT T HE QUANTUM OF EXCESS STOCK. IT IS FURTHER TO BE NOTED THAT NONE OF THE O FFICERS OF THE SURVEY TEAM HAS SIGNED THE SAME NOR IT FINDS ANY MENTION IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY. THEREFORE, LEGALITY OF SUCH INVENTORY IS ALSO IN DOUBT. THE DECISION OF THE HON'BLE DELHI HIGH CO URT, IN OUR OPINION, APPLIES TO THE FACTS OF THE CASE, BECAUSE WHETHER I T IS A CASE OF SEARCH OR SURVEY OPERATION, THE MODUS OPERANDI TO PREPARE THE STOCK PHYSICALLY WOULD REMAIN THE SAME I.E. THE INVENTORY OF ITEMS T RADED/DEALT WITH BY A PARTICULAR ASSESSEE SHOULD BE SCIENTIFICALLY PREPAR ED. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE ADDITION SUSTAINED BY THE CIT(A) IS NOT CORRECT IN LAW. ACCORDINGLY, WE DELETE THE SAME. THUS, THIS GR OUND OF THE ASSESSEE IS ALSO ALLOWED. 14. GROUND NO. 3 BECOMES INFRUCTUOUS IN VIEW OF OUR DEC ISION IN RESPECT OF GROUND NOS. 1 & 2 HEREINABOVE. HENCE, TH E SAME IS DISMISSED AS INFRUCTUOUS. PAGE 8 OF 8 - ,I.T.A.NO. 49/IND/2008 ABHINAV VASTRALAYS, GAROTH 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 8 TH APRIL, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8 TH APRIL, 2010. CPU* 574