M/s. Om Sweets Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4966/DEL/2011

• Counselvise Citation: 496620114 RSA 2011
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-09-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AROOP KR SINGH
• Keywords: Unexplained investment; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 4966/DEL/2011 ASSESSMENT YEAR: 2004- 2005 OM SWEETS PVT. LTD. VS. ITO WZ-296, JAIL ROAD, WARD 13(4) , JAIL ROAD, HARI NAGAR C.R. BUILDING NEW DELHI NEW DELHI. (PAN : AAACO5022H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH, ADVOCATE RESPONDENT BY : SHRI AROOP KR SINGH, SR. DR DATE OF HEARING : 18/9/2012 DATE OF PRONOUNCEMENT : 31/10/2012 ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESEE HAS QUESTIONED FIRST APPELLAT E ORDER WHEREBY THE LD. CIT(A) HAS UPHELD THE PENALTY OF RS. 3,03,038/- LEVIED U/S 271(1)(C) OF THE ACT. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN WAY OF ORDERS OF THE AUTHORITIES BELOW AND THE MATE RIAL AVAILABLE ON RECORD. 3. THE RELEVANT FACTS ARE THAT THE AO IMPOSED PENALTY OF RS. 3,03,038/- U/S 271(1) OF THE ACT ON THE ADDITION OF RS. 26,05,462 /- MADE BY THE AO. THE ADDITION OF RS. 26,05,462/- CONSISTED OF (I) ADDITI ON OF RS. 17,25,462/- MADE ON ACCOUNT OF GP RATE, (II) ADDITION OF RS. 5,40,000/- MADE ON ACCOUNT OF ITA NO. 4966/DEL/2011 2 UNDISCLOSED SALE AND (III) ADDITION OF RS. 3,40,000 /- MADE ON ACCOUNT OF INVESTMENT IN EFFECTING THE ABOVE SALES. BEFORE THE LD. CIT(A) THE ASSESSEE QUESTIONED THE PENALTY LEVIED ON THE GROUND THAT OU T OF ADDITION OF RS. 26,05,462/- MADE BY THE AO, ONLY RS. 8,44,706/- WAS SUSTAINED BY THE LD. CIT(A) ON ESTIMATE BASIS. THE LD. CIT(A) DID NOT AG REE WITH THE ASSESSEE AND UPHELD THE PENALTY LEVIED WITH THIS OBSERVATION THA T DURING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE IT WAS REVEALED FRO M CERTAIN DOCUMENTS INCLUDING A BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR 2003-04 RELEVANT TO ASSTT. YEAR 2004-05 THAT SALES AND PROF IT OF THE ASSESSEE COMPANY WERE DIFFERENT FROM THOSE DISCLOSED IN THE RETURN F OR ASSTT. YEAR 2004-05. THE LD. CIT(A) ALSO OBSERVED THAT IN HIS STATEMENT RECORDED ON OATH, THE DIRECTOR OF THE ASSESSEE COMPANY HAD ADMITTED TO HAVE MADE PURCHASE S AND SALES OUTSIDE THE BOOKS BUT THE ASSESSEE DID NOT FILE A REVISED RETUR N IN ACCORDANCE WITH THE DOCUMENTS FOUND DURING SURVEY. 4. IN SUPPORT OF THE GROUND, THE LD. AR WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, POINTED OUT THAT ALL THE ADDITIONS WERE MADE ON ESTIMATE BASIS. THE AO ESTIMATED THE INCOME BY A DOPTING GP RATE AT 36% IN PLACE OF ACTUAL GP RATE OF 33.52% ON ACTUAL SALE WH ICH HAS ULTIMATELY BEEN REDUCED TO 34% ON TOTAL SALES BY THE TRIBUNAL. LIKE WISE THE TRIBUNAL HAS UPHELD THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITI ON OF RS. 2,40,000/- MADE BY THE AO ON ACCOUNT OF UNACCOUNTED INVESTMENT IN CASH PURCHASES. HE SUBMITTED FURTHER THAT AO HAD MADE ESTIMATION OF UNACCOUNTED INVESTMENT OF RS. ITA NO. 4966/DEL/2011 3 3,40,000/- FOR MAKING CASH PURCHASES AND PAYMENTS N OT RECORDED IN THE BOOKS OF ACCOUNTS. HE MADE THE ADDITION ON ADHOC RATE OF 20% OF THE CASH PURCHASE FROM THE UNACCOUNTED FUNDS. 5. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DR POINTED OUT THAT CERTAIN INCRIMIN ATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE. IN THIS REGARD, HE REFERRED CONTENTS OF PAGE NO. 2 OF THE ASSESSMENT O RDER. HE SUBMITTED THAT UNSIGNED COPIES OF BALANCE SHEET AND PROFIT AND LOS S ACCOUNT WERE FOUND IN SURVEY. THE PROFIT AND LOSS ACCOUNT WAS NOT REFLECT ED TRUE INCOME AS IT HAS BEEN OBSERVED BY THE AO AT PAGE NO. 4 OF THE ORDER. 6. CONSIDERING THE ABOVE SUBMISSIONS WE AR E OF THE VIEW THAT UNDISPUTEDLY THE PROFIT HAS BEEN ESTIMATED BY APPLYING A HIGHER GP RATE. HENCE THE ADDITION MADE ON THIS COUNT REMAINED ON ESTIMATE BASIS. THE CONTENTION OF THE ASSESSEE REMAINED THAT DURING THE YEAR THE ASSESSEE HAS SHOW N BETTER RESULT. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF SWE ETS. DURING THE ASSESSMENT PROCEEDINGS FOR ASSTT. YEAR 2005-06 A TRUE AND FAIR ACCOUNT OF THE ASSESSE WAS MADE UPTO THE DATE OF SURVEY WHICH GAVE THE GP RATE OF 37.367%. THIS GP RATE WAS APPLIED WHILE FRAMING THE ASSESSMENT FOR THE AS STT YEAR 2005-06. THE ALLEGATION WAS THAT THE ASSESSEE WAS INDULGING IN S ALES AND PURCHASES OUTSIDE THE BOOKS DURING THIS YEAR AS WELL AND HAD THESE BE EN RECORDED IN THE BOOKS, THE GP WOULD HAVE BEEN HIGHER THAN THE ONE DISCLOSED BY THE ASSESSEE AT 33.53%. THE AO APPLIED GP @36% ON DECLARED SALES OF RS. 6,9 5,37,798/- WHICH RESULTED ITA NO. 4966/DEL/2011 4 IN RS. 2,50,33,607/-.. THUS IN ADDITION OF RS. 17,2 5,462/-( RS. 2,50,33,150/- - RS. 2,33,08,145/-) WAS MADE ON ACCOUNT OF DIFFERENC E IN GP. THE LD. CIT(A) GRANTED 2% REDUCTION IN GP WHICH HAS BEEN UPHELD BY THE TRIBUNAL WITH THIS OBSERVATION THAT THE AO HAS BASED HIS ESTIMATION UP ON THE RESULT OF THE SUBSEQUENT YEAR OF THE ASSESSEE. HE HAS NEITHER CON SIDERED THE PRECEDING ASSTT YEAR 2003-04 SHOWING ON GP RATE OF 30 AND 31% NOR H AS HE BROUGHT ANY COMPARABLE INSTANCES. THE GP RATE IN ASSTT. YEAR 2 003-04 WAS 30.31% AND IN ASSTT. YEAR 2005-06 IT WAS 37.36%. THERE WAS TOTAL INCREASE OF 7%. HALF OF THIS COMES TO 3.5%. THUS THE TRIBUNAL OBSERVED THAT IF T HIS IS ADDED TO GP RATE OF 30.3%, IT COMES TO 33.81%. HENCE ESTIMATION MADE BY THE LD. CIT(A) AT THE RATE OF 34% FOR ASSTT. YEAR 2004-05 IS REASONABLE, HELD THE TRIBUNAL. IN ANY CASE THE ADDITION ON ACCOUNT OF APPLICATION OF HIGHER GP RATE IS ADMITTEDLY ON ESTIMATE BASIS, HENCE WE ARE OF THE VIEW THAT IN ABSENCE OF A DEFINITE FINDING IN THIS REGARD THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF ON THE PART OF THE A SSESSEE, PENALTY U/S 271(1)(C) CAN NOT BE LEVIED ON SUCH ADDITION. WE THUS DIRECT THE AUTHORITIES BELOW TO DELETE THE PENALTY LEVIDED ON THE ADDITION MADE ON ACCOUNT OF GP RATE SUSTAINED BY THE TRIBUNAL. SO FAR AS ADDITION MADE ON ACCOUNT OF UNA CCOUNTED PURCHASES OUTSIDE THE BOOKS FOUND DURING THE COURSE OF SURVEY IS CONC ERNED, ADMITTEDLY THERE WAS CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSE E IN THIS REGARD. WE ARE THUS OF THE VIEW THAT PENALTY U/S 271(1)(C) OF THE ACT I S ATTRACTED ON ACTUAL PURCHASES WHICH MADE OUT OF THE BOOKS WHICH WAS REVEALED DURI NG THE COURSE OF SURVEY. ITA NO. 4966/DEL/2011 5 WE THUS RESTRICT THE PENALTY LEVIED U/S 271(1)(C) O F THE ACT TO SUCH ADDITION. THE GROUND IS THUS PARTLY ALLOWED. 7. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/- SD/- ( G.D. AGRAWAL) ( I. C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATE : 31/10/2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT