Shyam Sundar Agarwal, Cuttack V. ITO, Ward-2(3), Cuttack, Cuttack

ITA 494/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6328 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SHETH; M SETH
• Keywords: Unexplained investment
• Section: 133(6); 68; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 4 94 / C TK /20 1 3 ( / ASSESSMENT YEAR : 20 0 8 - 09 ) SHYAM SUNDAR AGARWAL, PROP. SHREE RAM TEXTILES, JHOLA SAHI, CUTTACK - 753 002 VS. ITO, WARD 2(3), CUTTACK ./ ./ PAN/GIR NO. : A ASPA 3895 R ( / APPELLANT ) .. ( / RESPO NDENT ) /ASSESSEE BY : SHRI D.K.SHETH & SHRI M.SETH /REVENUE BY : SHRI S.C.MOHANTY / DATE OF HEARING : 2 8 TH APRIL , 201 4 / DATE OF PRONOUNCEMENT : 01/05 /2014 / O R D E R PER BENCH : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 1 0 .09.2012 . 2 . GROUND NO.1 IS NOT PRESSED AND G ROUND NO. 5 IS GENERAL IN NATURE, THEREFORE, FOLLOWING GROUNDS ARE SURVIVING FOR OUR ADJUDICATION : - 2. F OR THAT THE ADDITION OF RS.2,42, 470/ - BY WAY OF ESTIMATING THE GROSS PROFIT @9% IS UNCALLED FOR AND UNJUSTIFIED AND THE BOOK RESULT AS SHOWN SHOULD HAVE BEEN ACCEPTED. 3. FOR THAT THE ADDITION OF RS. 4,87,030/ - AS MADE UNDER HEAD INCOME FROM OTHER SOURCE S IS UNWARRANTED AND UNJUSTIFIED AND APPLICATION OF THE PROVISIONS OF SEC. 68 OF THE I.T. ACT IS IMPROPER. 4. FOR THAT THE ADDITION OF RS. 3,00,000/ - AS MADE UNDER HEAD UNEXPLAINED INVESTMENT IS ALSO ARBITRARY AND UNJUSTIFIED AS THE ASSESSE PROPERLY EXPL AINED THE SOURCES OF SUCH INVESTMENT. 2 ITA NO. 494 /201 3 3 . BRIEF FACTS OF THE CASE RELATING TO GROUND NO. 2 ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN CLOTH ITEMS. THE AO NOTICED THAT THE ASSESSE DID NOT MAINTAIN INVENTORY OF THE STOCK AND DID NOT MAINTAIN ANY STOCK REGISTER AS PER COLUMN 28A OF THE TAX AUDIT REPORT IN FORM NO. 3CD . IN VIEW OF NON - MAINTENANCE OF THE INVENTORY RECORD AND NOT PRODUCING OF THE CLOSING STOCK FOR VERIFICATION, THE AO VERIFIED THE PURCHASE AND SALES BILLS AND FOUND DI FFERENT DISCREPANCIES IN THE CLOSING STOCK FIGURE AND NOTED THAT THE GROSS PROFIT RATE WORKS OUT AT THE RATE OF 26.15% , 32.72%, 27.29% & 30.36% IN RESPECT OF THE FOUR DIFFERENT VERITIES OF SAREES FROM THE PURCHASE AND SALES INVOICES FOR THE MONTH OF MARCH, 2008 . THEREFORE, THE AO TOOK THE VIEW THAT IN THE ABSENCE OF MAINTENANCE OF PROPER STOCK, THE BOOKS CANNOT BE RELIED AND REJECTED THE BOOKS OF ACCOUNT IN VIEW OF THE DECISION IN THE CASE OF S.N. N AMASHIVAYAM CHETTIAR VS. CIT, 38 ITR 579 (SC) AND ESTIMATED THE PROFIT AT THE RATE OF 9% OF THE TURNOVER . THUS, A SUM OF RS. 2,42,470/ - WAS ADDED IN THE INCOME OF THE ASSESSE. WHEN THE ASSESSE WENT IN APPEAL BEFORE THE CIT(A) , THE CIT(A) CONFIRMED THE REJECTION OF THE BOOKS OF ACCOUNTS AS WELL AS ESTIMATION OF THE P ROFIT @9% . 3 . 1 BEFORE US, L EARNED AR VEHEMENTLY CONTENDED THAT THE ESTIMATION OF THE PROFIT @9% IS VERY HIGH AND IS NOT JUSTIFIED, PARTICULARLY, ON THE FACTS OF THE CASE WHEN IN THE EARLIER YEAR, THE GP RATE WAS 7.2% IN A.Y. 2007 - 08 , 5.95% IN A.Y 2006 - 07 . IN THE IMPUGNED ASSESSMENT YEAR 3 ITA NO. 494 /201 3 IT WAS STATED THAT THE GP RATE WAS @7.41% . THE REJECTION OF THE BOOKS OF ACCOUNTS WERE NOT CHALLENGED BEFORE US. 3.2 LEARNED DR , ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A). 3 . 3 WE HEARD RIVAL SUBMISSIONS AND CA REFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. SINCE THE REJECTION OF THE BOOKS WAS NOT CHALLENGED BY THE ASSESSE BEFORE US, THEREFORE, THE ONLY ISSUE REMAINS FOR OUR ADJUDICATION IS AT WHAT RATE THE GROSS PROFIT SHOULD BE ESTIMATED. THE ASSESSE HAS SHOWN THE GROSS PROFIT @7.41% AND IN THE PRECEDING ASSESSMENT YEAR I.E. A.Y.2007 - 08 , THE BOOK RESULTS WERE ACCEPTED IN THE ASSESSMENT FRAMED U/S. 143(3 ) AND THE GP RATE OF 7.2% WAS ALSO ACCEPTED. THIS IS A FACT THAT DURING THE BOO K RESULTS HAVE NOT BEEN ACCEPTED AND THE BOOKS HAVE BEEN REJECTED BY THE AO, THE ONLY COURSE REMAINS BEFORE THE AO TO ESTIMATE THE PROFIT AS PER THE PROVISION OF SECTION 144 ON THE BASIS OF RELEVANT MATERIAL ON RECORD. WE NOTED THAT THE AO & CIT(A) HAS EST IMATED THE PROFIT @9% BUT NOT GIVEN ANY COMPARATIVE IN STANCE. THE ASSESSEES RESULT IN THE PRECEDING ASSESSMENT YEAR, IN OUR OPINION, ARE BEST EVIDENCE AND CANNOT BE IGNORED. THEREFORE, WE, IN THE INTEREST OF JUSTICE AND FAIR - PLAY TO BOTH THE PARTIES, SET AS IDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ESTIMATE THE GP RATE @ 8% . THIS GROUND IS PARTLY ALLOWED. 4 . GROUND NO. 3 RELATES TO THE ADDITION OF RS. 4 , 87,030/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO NOTED THAT A SUM OF 4 ITA NO. 494 /201 3 RS. 2,90,2 30/ - HAS BEEN SHOWN AS DEBIT BALANCE AS ON 31 - 3 - 2008 FOR M/S CHANDAN CLOTH STORE. THE AO COLLECTED THE INFORMATION U/S. 133(6) AND NOTED THAT PARTY HAS BEEN CONFIRMED. IT MADE CASH PAYMENT OF RS. 5,49,800/ - TO THE ASSESSE. THE ASSESSEE HAS SHOWN CASH PAYMEN T RECEIVED AT RS. 10,01,160/ - . THUS, EXCESS CREDIT OF RS. 4,51, 360/ - WAS SOUGHT FROM THIS PARTY. THE AO CONFRONTED THE ASSESSE, ULTIMATELY THE AO ADDED THE SUM OF RS. 4,87, 030/ - AS UNEXPLAINED CASH DEPOSIT IN THE BOOKS OF THE ASSESSE AND ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSE. 4.1 WE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE SAME CAREFULLY. WE NOTED THAT FROM THE COPY OF THE PAPER BOOK AT PAGE 8 AND 5 THAT THERE WAS AN OPENING DIFFERENCE AMOUNTING TO RS. 5,29, 000/ - IN THE BOOKS OF SHRI CHANDAN CLO TH STORE , O PENING BALANCE AT RS. 52,670/ - WHILE IN THE BOOKS OF ASSESSEE THE OPENING BALANCE WAS AT RS. 5,81,670/ - . IT WAS ALSO STATED THAT THE ASSESSE HAS SOLD THE GOODS TO THE EXTENT OF RS. 1,64,490/ - WHILE BILL NO. 25237, WHICH WAS NOT SHOWN BY THE CHANDA N CLOTH STORE IN HIS BOOKS OF ACCOUNT. THE ASSESSE HAS RECEIVED THE PAYMENT TO THE EXTENT OF RS. 1,01,160/ - AND THE CLOSING BALANCE AS PER THE BOOKS OF THE ASSESSEE WAS RS . 2,90,230/ - WHILE CHANDAN CLOTH STORE WAS S HOWN AT RS. 46,100/ - . WE FIND FORCE IN THE S UBMISSION OF THE LEARNED AR THAT THE SALES SHOWN BY THE ASSESSE HAS DULY BEEN ACCEPTED BY THE AO EVEN THE OPENING BALANCE IN THE PREVIOUS YEAR HAS ALSO BEEN ACCEPTED. THE PARTY M/S CHANDAN CLOTH STORE HAS NOT ENTERED THE SALES BILL AS WELL AS CERTAIN 5 ITA NO. 494 /201 3 PAYME NT MADE TO THE ASSESSE. THE AO SHOULD HAVE EXAMINED M/S CHANDAN CLOTH STORE AS TO HOW THESE PAYMENTS HAVE NOT BEEN ENTERED BY THEM AND HOW THERE IS AN OPENING BALANCE. THE PAYMENT HAS BEEN RECEIVED BY THE ASSESSEE ON ACCOUNT OF THE OPENING BALANCE AND EVEN THERE IS A DIFFERENCE IN THE CLOSING BALANCE. IN OUR OPINION, ONCE THE AO HAS ACCEPTED THE SALES MADE BY THE ASSESSEE TO M/S CHANDAN CLOTH STORE, THE AO SHOULD HAVE ALSO ACCEPTED THE STATEMENT ACCOUNT OF THE CHANDAN CLOTH STORE IN THE BOOKS OF THE ASSESSE E ON THE BASIS OF SALE BILL NO. 103. IT IS APPARENT THAT THE CHANDAN CLOTH STORE MIGHT NOT HAVE ENTERED CERTAIN TRANSACTION OTHERWISE THERE MAY HAVE NOT BEEN DIFFERENCE AT OPENING AND CLOSING BALANCE. IT IS NOT A CASE WHERE THE AO TOOK THE VIEW THAT THE ASSESSEE HAS NOT MADE THE SALES. IN VIEW OF THIS AND ESPECIALLY THE FACT THAT THERE WAS A DIFFERENCE IN THE OPENING BALANCE TO THE EXTENT OF RS. 5,29,000/ - AND DIFFERENCE IN THE SALES MADE TO THE SAID PARTY TO THE EXTENT OF RS. 1,64, 490/ - , WE DELETE THE ADD ITION OF RS. 4,87, 030/ - . THUS, THIS GROUND IS ALLOWED. 5 . GROUND NO. 4 RELATES TO ADDITION OF RS. 3,00,000/ - UNDER THE HEAD UNEXPLAINED INVESTMENT. 5.1 BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED THAT THERE WAS CASH DEPOSIT OF RS. 3,00,000/ - IN THE BANK OF THE ASSESSEE ON 29 - 10 - 2007 . THE ASSESSEE IN REPLY, THEREFORE, SUBMITTED THAT THE CASH - FLOW STATEMENT SHOWING OPENING BALANCE AS ON 1 - 4 - 2007 AS PER THE 6 ITA NO. 494 /201 3 EARLIER YEAR BALANCE SHEET AT RS. 3,31, 641.95 . THE AO TOOK THE VIEW THAT THE ASSESSEE WOULD HAVE NOT KEPT CASH IN HAND FOR SIX MONTHS. 5.2 WE HEARD RIVAL SUBMISSION AND CAREFULLY CONSIDERED THE SAME. THIS IS A FACT THAT THE ASSESSEE WAS HAVING OPENING CASH IN HAND AS ON 1 - 4 - 2007 OF RS. 3,31,641.95. THIS FACT HAS NOT BEEN DENIED BY THE AO. TH E AO MERELY ON THE BASIS OF ASSUMPTION AND PRESUMPTION TOOK THE VIEW THAT THIS MONEY COULD HAVE NOT BEEN USED FOR DEPOSITING INTO THE BANK AFTER THE EXPIRY OF SIX MONTHS AND THE ASSESSEE WOULD HAVE NOT KEPT THE CASH IDLE. WE DO NOT FIND ANY PROVISION UNDER THE INCOME TAX ACT WHICH PROHIBITS THE ASSESSEE TO KEEP THE CASH IN HAND WITH HIM. IN OUR OPINION, THE ADDITION CAN NOT BE MADE MERELY ON THE BASIS OF ASSUMPTION AND PRESUMPTION, HOWSOEVER STRONG IT MAY BE. THE ONUS IS ON THE REVENUE TO PROVE THAT THE SOME OPENING CASH HAS BEEN UTILIZED BY THE ASSESSEE SOMEWHERE ELSE. NO SUCH COGENT EVIDENCE OR MATERIAL HAS BEEN BROUGHT ON RECORD. WE, THEREFORE, DELETE THE ADDITION. THIS GROUND IS ALLOWED. 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/05 / 201 4 . 01/05 /2014 SD/ - SD/ - ( . . ) ( D.T.GARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 01/05 /2014 . . /PKM , . / PS 7 ITA NO. 494 /201 3 / COPY OF THE ORDER FORWARDE D TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , CUTTACK 4. / CIT , CUTTACK 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//