M/s. Surajdev Udyog , Akola V. Assistant Commissioner of Income-Tax,Akola Circle-Akola, Akola

ITA 5/NAG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75941 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: K B LOHIA
• Keywords: Unexplained investment; Income from undisclosed sources; Difference of opinion; Retraction

Judgement Text

- -- - IN THE INCOME TAX APPELLATE TRIBUNAL-E-BENCH, NAGPU R ( ! '#$ $ % '$ / THROUGH VIDEO CONFERENCE AT MUMBAI) '& ' '& ' '& ' '& ' ( (( (. .. . . .. . , ,, ,% % % %+ ++ + ' '' ' ,$-. ,$-. ,$-. ,$-., ,, ,$ $$ $. .. .' '' ' . .. . BEFORE S/SH.H.L.KARWA,PRESIDENT AN D RAJENDRA,ACCOUNTANT MEMBER './ ITA NO.5/NAG/2012 & & & & 0& 0& 0& 0& / // / ASSESSMENT YEAR 2007-08 M/S SURAJDEV UDYOG, 3, GAURAKSHAN ROAD, AKOLA, PIN: 444005 PAN: AADFS8088H V/S. ASSISTANT COMMISSIONER OF INCOME TAX, AKOLA, AAYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA-444005 ( 12 / // / APPELLANT ) ( 3412 / RESPONDENT ) ASSESSEE BY : SHRI K.B. LOHIA REVENUE BY : SHRI NARENDRA KANE ' 56 / DATE OF HEARING : 21- 01 -2013 7!0 56 /DATE OF PRONOUNCEMENT : 06 - 0 2-201 4 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) )$ $$ $ -5&5 -5&5 -5&5 -5&5 ?$@ ?$@ ?$@ ?$@ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM - -- -$ '?A $ '?A $ '?A $ '?A, ,, ,,$-. $ ' ,$-. $ ' ,$-. $ ' ,$-. $ ' : CHALLENGING THE ORDER DT.08.11.2011OF THE CIT(A)-I, NAGPUR,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDI NG THAT THE CASE HAS BEEN PROPERLY PICKED UP FOR SCRUTINY AS PER CASS GUIDELINES. 2.THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT F OLLOWING THE CBDT INSTRUCTIONS FOR SELECTION OF CAS ES FOR SCRUTINY. 3.THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDI NG THAT EXCESS STOCK DETECTED IS NOT REFLECTING ANYWHERE IN THE BOOKS OF ACCOUNT OF ASSESSEE. 4.THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDI NG THAT ASSESSEE HAS DILUTED DISCLOSER MADE AT THE TIME OF SURVEY BY TAKING THE AMOUNT OF EXCESS STOCK FOUND TO THE TRADING A/C AS CLOSING STOCK. 5.THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDI NG THAT A.O. HAS RIGHTLY ADDED BACK AN AMOUNT OF RS . 210000/- OFFERED BY APPELLANT AS ADDITIONAL INCOME. 6.THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDI NG THAT ESTIMATION OF G.P.AT RS. 5208/- ON EXCESS STOCK IS PROPERLY ASSESSED THOUGH THE EXCESS STOCK IS NOT SOLD AND REFLECTING IN THE CLOSING STOCK. 7.APPELLANT CRAVES FOR LEAVE TO TAKE ANY OTHER GROU NDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARI NG OF APPEAL. 2. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF MANUFACTUR ING & TRADING OF ALL TYPES OF PULSES, GRAINS ETC.(DAL MILL) AND FINANCERS,FILED ITS RETURN OF IN COME ON 11-07-2007 DECLARING TOTAL INCOME OF RS.15,59,071/-.AO FINALISED THE ASSESSMENT ON 30.12 .2009 DETERMINING THE INCOME HIS INCOME AT RS.17,74,279/-. FIRST TWO GROUNDS OF APPEAL ARE AGAINST THE SELECTI ON OF THE CASE FOR SCRUTINY.AS PER THE ASSESSEE THERE WAS NO BASIS FOR SELECTING THE ITS CASE FOR SCRUTINY AS PER NORMS FIXED BY CBDT.IN SUPPORT OF ITS CONTENTION ASSESSEE FILED A PRESS NOTE DATED 06-07-2008,WHEREIN IT HAD NOTIFIED THAT IF ANY ASSESSEE HAD BEEN SURVEYED IN 2006-07 AND IT HAD DE CLARED ADDITIONAL INCOME IT WOULD BE EXEMPTED FROM SCRUTINY,PROVIDED NO ACCOUNT BOOKS W ERE IMPOUNDED AT THE TIME OF SURVEY.AS PER THE PRESS-NOTICE THERE SHOULD NOT BE RETRACTION OF INCOME AND INCOME DECLARED EXCLUDING ADDITIONAL TAX DEMANDED BY DEPARTMENT WAS NOT LESS THAN TAX RAISED DURING THE LAST FISCAL YEAR. REFERRING THE ABOVE NOTE,ASSESSEE CLAIMED THAT THE AO ERRED SELECTION OF CASE FOR SCRUTINY.FIRST APPELLATE AUTHORITY (FAA) CALLED FOR A REMAND REPOR T IN THIS REGARD FROM THE AO,WHO INFORMED 2 ITA NO. 5/NAG/2012 M/S SURAJDEV UDYOG THAT AS PER ORDER SHEET ENTRY DATED 29-07-2008 THE THEN AO HAD CONCLUDED THAT THE CASE WAS NOT FOUND FIT TO BE SELECTED FOR SCRUTINY AS PER GUIDEL INES OF THE BOARD,THAT AS PER ORDER SHEET ENTRY DATED 24-09-2008 THE THEN AO MADE A NOTING THAT THE CASE HAD BEEN SELECTED FOR SCRUTINY UNDER CASS,THAT A COPY OF LIST OF CASES SELECTED FOR SCRU TINY UNDER CASS WAS ALSO PLACED ON RECORD IN SUPPORT OF THE NOTING ON ORDER SHEET DATED 24-09-20 08,THAT IN VIEW OF THE ABOVE STATED FACTS CASES WAS PROPERLY SELECTED FOR SCRUTINY UNDER CASS.CONSI DERING THE ABOVE FACTS,FAA HELD THAT THE CASE WAS NOT SELECTED FOR SCRUTINY UNDER THE LIST O F CASES THAT WERE COMPULSORILY SCRUTINISED ON ACCOUNT OF SURVEY,THAT THE CASE HAD BEEN SELECTED F OR SCRUTINY UNDER CASS WHICH WAS A RANDOM METHOD OF SELECTION ON BASIS OF CERTAIN CRITERIA WH ICH CHANGED FROM YEAR TO YEAR,THAT SUCH METHOD WAS PRESCRIBED FOR SCRUTINISING CASES BY THE CBDT,T HAT DUE PROCEDURE WAS FOLLOWED BY THE AO IN PICKING UP THE MATTER FOR SCRUTINY.HE DISMISSED THE GROUND FILED BY THE ASSESSEE. 3. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT SELECTION OF CASE FOR SCRUTINY BY THE AO WAS AGAINST THE PRESS NOTE RELEASED BY THE BOARD.DE PARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL RECORD.FROM THE REMAND REPORT SUBMITTED BY THE AO IT IS CLEAR THAT INITIALLY,FOLLOWING THE GUIDELINES ISSUED BY THE BOARD,AO DID NOT SELECT THE CASE FOR SCRUTINY,THAT LATER ON MATTER WAS PICKED UP BY BOARD UNDER THE RANDOM METHOD I.E.UNDER CASS.CLEARLY,AO WAS COM PLYING THE DIRECTIONS OF THE BOARD AND THEREFORE,NO FAULT CAN BE FOUND WITH HIM IN SCRUTIN ISING THE CASE.THEREFORE, CONFIRMING THE ORDER OF THE FAA WE DECIDED GROUND NO.1-2 AGAINST THE ASS ESSEE. 4. NEXT FOUR GROUNDS ARE ABOUT THE ADDITION MADE BY TH E AO AS A RESULT OF SURVEY CARRIED OUT ON 18-10-2007 AT THE BUSINESS PREMISES OF THE ASSESSEE DURING THE COURSE OF WHICH IT HAD OFFERED EXCESS STOCK OF RS. 2,10,000/-.DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO OBSERVED THAT THE EXCESS STOCK HAD BEEN CREDITED TO THE P&L A/C. HOWE VER,AO WAS OF THE VIEW THAT EXCESS STOCK AS ON 19-01-2007 SHOULD HAVE BEEN DISCLOSED, THAT THE TURNOVER OF THE ASSESSEE SHOULD HAVE BEEN INCREASED TO THAT EXTENT AND G.P. SHOULD HAVE BEEN MORE THAN RETURNED.AO ESTIMATED G.P.ON THE AMOUNT UNDER APPEAL @2.48% AND ADDED A SUM OF RS. 5 ,208/- TO THE INCOME OF ASSESSEE. FURTHER AO ALSO HELD THAT THE EXCESS STOCK FOUND AT THE TIM E OF SURVEY HAD BEEN ACCEPTED AS INVESTMENT OUT OF UNACCOUNTED INCOME OF ASSESSEE-FIRM AND HAD BEEN OFFERED AS ADDITIONAL INCOME FOR YEAR BY THE PARTNERS IN THE COURSE OF STATEMENTS RECORDED A T THE TIME OF SURVEY,THAT WHEN THE RETURN OF INCOME WAS FILED NO AMOUNT PERTAINING TO INVESTMENT IN STOCK HAD BEEN DISCLOSED SEPARATELY. HE REJECTED THE CONTENTION OF AO THAT THE G.P. SHOWN B Y THE ASSESSEE HAD AUTOMATICALLY INCREASED BY CONSIDERING THIS AMOUNT OF STOCK IN ITS P&L A/C.AO ADDED BACK AN AMOUNT OF RS. 2,10,000/- TO THE INCOME OF ASSESSEE. 5.ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA,BEFOR E HIM IT WAS SUBMITTED THAT AT THE TIME OF SURVEY EXCESS STOCK WAS FOUND TO THE EXTENT OF RS 2 ,10,000/- AND THE SAME WAS DECLARED AS ADDITIONAL INCOME FOR A. Y. 2007-08,THAT THE EXCESS STOCK HAD BEEN CREDITED TO MANUFACTURING, TRADING & PROFIT & LOSS A/C WITH SPECIFIC NOTE THAT EXCESS STOCK WAS AGREED BY THE PARTNERS AT THE TIME OF SURVEY,THAT IN THE AUDIT REPORT,ACCOUNTING POLICIES AND NOTES FORMING PART OF ACCOUNT IT WAS STATED THAT ON 18-01-2007 A SURVEY U/S. 131WAS CONDUCTED BY THE INCOME TAX DEPARTMENT AND THE PARTNERS OF THE ASSESSEE-FIRM HAD AGREED TH AT AT THE TIME OF SURVEY EXCESS STOCK OF RS 2,10,000/- WAS FOUND,THAT THE EXCESS STOCK WAS REFL ECTING IN THE NET PROFIT OF THE FIRM, THAT HAD IT WAS NOT SO CREDITED THE NET PROFIT WOULD HAVE BEEN LESS BY RS. 21,0000/-.THE WORKING UNDER THE MANUFACTURING,TRADING AND PROFIT AND LOSS A/C FOR T HE YEAR ENDED ON 31 ST MARCH 2007 WAS ALSO PROVIDED BY THE ASSESSEE. 6. AFTER CONSIDERING THE FINDING IN THE ASSESSMENT ORD ER AND THE WRITTEN SUBMISSIONS MADE BY THE ASSESSEE,FAA HELD THAT DURING THE COURSE OF SURVEY EXCESS STOCK OF RS. 2,10,000/- WAS FOUND AND THE SAME WAS DECLARED AS ADDITIONAL INCOME FOR A.Y- 2007-08,THAT THE ASSESSEE HAD NOT DISCLOSED THE ADDITIONAL INCOME IN THE RETURN OF INCOME,THAT THE CONTENTION OF THE ASSESSEE WAS NOT TENABLE,THAT THE EXCESS STOCK WHICH WAS NOT PART OF THE BOOKS OF ACCOUNT AND DETECTED DURING THE 3 ITA NO. 5/NAG/2012 M/S SURAJDEV UDYOG SURVEY ACTION WAS INVESTMENT THAT WAS NOT DISCLOSED IN BOOKS OF ACCOUNT OF THE ASSESSEE,THAT THE VALUE OF ADMITTED STOCK WAS REQUIRED TO BE DECLARED AS INCOME SEPARATELY,THAT THE EXCESS STOCK DETECTED WAS NOT REFLECTING ANYWHERE IN THE BOOKS O F ACCOUNT OF ASSESSEE,THAT IT HAD DILUTED THE DISCLOSURE MADE AT THE TIME OF SURVEY BY TAKING THE AMOUNT OF EXCESS STOCK FOUND TO THE TRADING ACCOUNT AS CLOSING STOCK,THAT AO HAD RIGHTLY ADDED BACK AN AMOUNT OF RS. 2,10,000/-OFFERED BY APPELLANT AS ADDITIONAL INCOME AND GP ON EXCESS STO CK @ 5,208/-. 7.BEFORE US,AR SUBMITTED THAT THE EXCESS STOCK FOUN D DURING THE SURVEY PROCEEDINGS WAS OFFERED FOR TAXATION,THAT ASSESSEE HAD MADE ENTRIES OF THE EXCESS STOCK IN THE BOOKS OF ACCOUNTS,THAT AO WANTED TO TAX THE SAME AMOUNT TWICE,THAT ONCE THE A SSESSEE MADE THE ADMISSIONS SAME WAS ACCOUNTED FOR IN THE P & L ACCOUNT,THAT HAD IT NOT DISCLOSED THE AMOUNT IN THE BOOKS OF ACCOUNTS LESS PROFIT,TO THE EXTENT OF RS.2.10 LAKHS,WOULD HA VE BEEN REFLECTED IN THE ACCOUNTS PRESENTED BY IT.DR SUPPORTED THE ORDER OF THE AO AND THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT DURING THE SURVEY UNACC OUNTED STOCK OF RS.2.10 LAKHS WAS FOUND AND IT WAS OFFERED FOR TAXATION BY THE ASSESSEE,THAT THERE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT THE TREATMENT TO BE GIVEN TO IT. IT IS FOUND THAT ASSESSEE HAD MADE NECESSARY ENTRIES IN THE BOOKS OF ACCOUNTS ABOUT THE UNDECLAR ED STOCK WHICH RESULTED IN OFFERING HIGHER PROFIT BY RS.2.10 LAKHS.IT IS A SETTLED PRINCIPLE OF TAXATION THAT AN ASSESSEE CANNOT BE ASKED TO PAY TAX TWICE FOR THE SAME AMOUNT AND SIMILARLY AN ASSE SSEE CANNOT CLAIM DOUBLE DEDUCTION FOR THE ANY AMOUNT.UNACCOUNTED INVESTMENT RESULTS IN INCREA SING THE VALUE OF THE STOCK AND WHICH IN TURN AFFECTS PROFIT AND TAXABLE INCOME.IN THE MATTER UND ER APPEAL UNACCOUNTED STOCK WAS REFLECTED IN THE BOOKS OF ACCOUNTS AND AS A RESULT CORRESPONDING PROFIT ALSO INCREASED TO THAT EXTENT.AFTER CONSIDERING THE CHART SUBMITTED BY THE ASSESSEE,BEF ORE THE FAA ABOUT THE TREATMENT GIVEN TO THE UNDISCLOSED STOCK IN THE BOOKS OF ACCOUNTS,WE ARE O F THE OPINION THAT STAND TAKEN BY THE ASSESSEE WAS AS PER LAW.THEREFORE,REVERSING THE DECISION OF THE FAA WE DECIDE GROUNDS NO.3-6 IN ITS FAVOUR. AS A RESULT,APPEAL FILED BY THE AS SESSEE STANDS PARTLY ALLOWED. B 5C &B5 D ?E @5C ,F ,5 G . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH FEBRUARY,2014. ?$@ 7!0 $ - 6 H 6 , 2014 ! . SD/- SD/- (H.L.KARWA/ ( (( (. .. . . .. . ) ( ,$-. ,$-. ,$-. ,$-. / RAJENDRA) PRESIDENT/ %+ $ $ $ $ '?A '?A '?A '?A /ACCOUNTANT MEMBER / MUMBAI, ? / DATE: 06.02.2014 SK ?$@ ?$@ ?$@ ?$@ 35 35 35 35 I$05 I$05 I$05 I$05 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 12 2. RESPONDENT / 3412 3. THE CONCERNED CIT(A)/ 'J K , 4. THE CONCERNED CIT / 'J K 5. DR ITAT,NAGPUR BENCH/ L 35 , . . - . - . 6. GUARD FILE/ & H . '45 35 //TRUE COPY// ?$@ ' / BY ORDER, M / ' , DY./ASST. REGISTRAR , /ITAT, MUMBAI.