The ACIT, Circle - 6(1), Hyderabad V. Smt. K. Vasundhara Propx: M/s. Vasundhara's Gems & Jewels, Hyderabad

ITA 51/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66154 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Unexplained investment; Business income
• Section: 143(3); 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRID. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.51/HYD/2011 ASSESSMENT YEAR : 2007-08 ACIT, CIRCLE-6(1), HYDERABAD. .... APPELLANT VS. M/S.K. VASUNDHARA GEMS & JEWELS, HYDERABAD. RESPONDENT PAN:AEDPK 3759 F APPELLANT BY : SHRI K.VISWANATHAM RESPONDENT BY : SHRI C.P.RAMASWAMY DATE OF HEARING : 14-06-2012 DATE OF PRONOUNCEMENT: 10 -08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 29-10-2010 PASSED IN APPEAL NO.212/ACIT 6(1)/CIT (A)-IV/09-10 FOR ASSESSMENT YEAR 2007-08 CHALLENGIN G THE DIRECTION OF THE CIT (A) IN DELETING THE ADDITION O F RS. 1,00,00,000/- MADE U/S 69 OF THE ACT. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE A N INDIVIDUAL IS CARRYING ON BUSINESS IN MANUFACTURING AND SALE OF G OLD JEWELLERY, ORNAMENTS AND GEMS UNDER THE NAME AND STYLE OF M/S VASUNDHARA GEMS & JEWELS. A SURVEY U/S 133A WAS CONDUCTED IN A SSESSEES 2 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. BUSINESS PREMISES ON 13/10/2006. IN COURSE OF SURVE Y SUPPRESSION OF SALE OF JEWELLERY IN RESPECT OF FINA NCIAL YEAR 2005- 06 AND 2006-07 WAS DETECTED. THE ASSESSEE ADMITTED OMISSION OF SALES OF RS. 769.66 LACS AND RS. 380.48 LACS FOR TH E ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY AND ALSO ADMI TTED ADDITIONAL INCOME OF RS. 1 CRORE AND RS. 50 LACS FO R THESE TWO ASSESSMENT YEARS. IN TERMS WITH THE ADMISSION MADE, THE ASSESSEE FILED HER RETURNS FOR THE AFORESAID TWO AS SESSMENT YEARS DISCLOSING THE ADDITIONAL INCOME OF RS. 1 CRORE AND RS. 50 LAKHS. IN COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS WH ILE EXAMINING THE ASSESSEES TRADING AND P&L A/C, THE ASSESSING O FFICER NOTED THAT WHILE THE ASSESSEE HAD SHOWN THE OPENING STOCK AS ON 01/04/2006 AT RS. 1,99,47,193/- SHE HAD SHOWN THE C LOSING STOCK AS ON 31/03/2006 AT RS. 99,47,193/-. WHEN THE ASSES SING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE, THE A SSESSEE EXPLAINED THAT THE ADDITIONAL INCOME OF RS. 1 CRORE AND RS. 50 LAKHS WERE VOLUNTARILY ADMITTED BY HER AT THE TIME OF SURVEY. IN THE STATEMENT RECORDED FROM HER AT THE TIME OF SURV EY THE ASSESSEE HAD STATED THAT RS. 1 CRORE DECLARED AS AD DITIONAL INCOME WAS UTILIZED FOR STOCK-IN-TRADE OF THE BUSIN ESS AND THE BALANCE RS. 50 LAKHS WERE USED FOR OTHER PURPOSES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FILED HER RETURN OF INCOME FOR THE AY 2006-07 ON 31/10/2006 AFTER THE SURVEY WAS C ONDUCTED. THOUGH THE ASSESSEE ADMITTED ADDITIONAL INCOME OF R S. 1 CRORE, SHE DID NOT DISTURB THE CLOSING STOCK AS ON 31/03/2 006. THEREFORE, PHYSICAL STOCK OF JEWELLERY OF THE VALUE OF RS. 1,99,47,193/- WAS NOT AVAILABLE WITH THE ASSESSEE A S ON 31/03/2006. THE ASSESSING OFFICER CAME TO A CONCLU SION THAT THE ASSESSEE HAD SIMPLY INCREASED THE OPENING STOCK AS ON 01/04/2006 BY RS. 1,00,00,000/- WITHOUT AVAILABILIT Y OF PHYSICAL STOCK TO THAT EXTENT. THE ASSESSING OFFICER FURTHER HELD THAT THERE 3 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. BEING NOT MUCH VARIATION BETWEEN THE STOCK VALUED B Y THE APPROVED VALUER AT THE TIME OF SURVEY AT RS. 1.55 C RORES AND THE AVAILABILITY OF STOCK DECLARED BY THE ASSESSEE AT R S. 1.00 CRORE TO RS. 1.5 CRORE, THE ASSESSEE HAS SIMPLY INCREASED TH E VALUE OF STOCK BY INCREASING THE OPENING VALUE OF STOCK EVEN THOUGH THE STOCK WAS NOT PHYSICALLY AVAILABLE. ON THE AFORESAI D CONCLUSION THE ASSESSING OFFICER ADDED THE INCREASE IN OPENING STOCK OF AN AMOUNT OF RS. 1,00,00,000 AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 3. THE ASSESSEE CHALLENGED THE ADDITION BY FILING A N APPEAL BEFORE THE CIT (A). IN COURSE OF HEARING OF APPEAL THE ASSESSEE SUBMITTED BEFORE THE CIT (A) THAT SHE HAS FILED HER RETURN FOR THE ASSESSMENT YEAR 2006-07 ON THE BASIS OF TALLY PACKA GE AND THE ADDITIONAL INCOME OF RS. 1 CRORE WAS SHOWN UNDER TH E HEAD OTHER SOURCES. THE CLOSING STOCK OF RS. 99,47,193/- WAS S HOWN ON THE BASIS OF TALLY PACKAGE. WHILE FILING THE RETURN FOR THE ASSESSMENT YEAR 2007-08 THE ASSESSEE ALSO OFFERED THE ADDITION AL INCOME OF RS. 50 LAKHS AS INCOME FROM OTHER SOURCES. THE TRAD ING AND PROFIT & LOSS A/C FOR THE AY 2007-08 WAS RECONSTRUCTED BY INCREASING THE OPENING STOCK BY RS. 1 CRORE. THE ASSESSEE SUBMITTE D THAT THE ASSESSING OFFICER WHILE MAKING THE ADDITION DID NOT CONSIDER THE FACT THAT RS. 1 CRORE HAD BEEN ADMITTED AS INCOME F OR THE PRECEDING ASSESSMENT YEAR OVER AND ABOVE THE INCOME COMPUTED AS PER THE TALLY PACKAGE. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT ADJUST THE TRADING & P&L A/C AS PER THE TALLY P ACKAGE WITH THE EXTRA INCOME OFFERED IN THE EARLIER YEAR. LATER THI S OMISSION WAS MADE GOOD BY TAKING INTO ACCOUNT THE CREDIT OF RS. 1 CRORE BY ADDING THE SAID AMOUNT TO THE OPENING STOCK. THE AS SESSEE SUBMITTED THAT WHILE FOR THE ASSESSMENT YEAR THE AS SESSEE HAD SHOWN A TURNOVER OF RS. 5,55,41,991, WHEREAS ON THE DATE OF 4 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. SURVEY THE SALES WERE FOUND TO BE RS. 603.58 LACS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IN HER STATEMENT RECORD ED DURING SURVEY OPERATION HAD CATEGORICALLY STATED THAT ADDI TIONAL INCOME OF RS. 1 CRORE WAS INVESTED IN STOCK-IN-TRADE WHICH HAS TOTALLY BEEN IGNORED BY THE ASSESSING OFFICER. ASSESSEE REL YING UPON DECISIONS OF THE HONBLE SUPREME COURT AND HIGH COU RTS SUBMITTED THAT INTANGIBLE ADDITIONS MADE IN THE PAS T COULD BE BROUGHT TO THE BOOKS AND UTILISED FOR INVESTMENT IN STOCK-IN- TRADE. 4. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXAMINING THE MATERIAL ON RECORD BEFOR E HIM HELD AS FOLLOWS:- 7. I HAVE GONE THROUGH THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT. FROM THE COMPUTATION OF THE TOTAL INCOME FOR THE ASST. YEAR 2006-07, IT IS SEEN THAT THE APPELLANT HAD SHOWN THE AMOUNT OF RS. 1 CR., BEING THE INCOME OFFERED TO TAX DURING 133 A PROCEEDINGS, AS 'INCOME FROM OTHER SOURCES'. IT IS ALSO SEEN THAT THE ASSES SING OFFICER PASSED AN ORDER U/S 143(3) FOR THE A.Y. 2006-07, WHEREIN A FURTHER ADDITION OF RS. 5,000/- WAS MADE, AS THE ADDITIONAL INCOME ADMITTED DURING THE SURVEY ON SALES NOT REFLECTED IN THE BOOKS OF ACCOU NTS WAS RS. 1,00,05,000/-. THEREFORE, THERE REMAINS NO DOUBT TH AT EVEN THOUGH THE ADDITIONAL INCOME OF RS. 1 ER WAS OFFERE D UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THE SAME WAS ACCEPTED AS 'INCOME FROM SALES NOT REFLECTED IN THE BOOKS OF ACCOUNTS'. THE SAID INCOME WAS ACCEPTED AS INCOME FROM 'BUSINESS' OF THE APPELLANT ONLY, THOUGH THE RESPECTIVE SALES WER E NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. ON THE O THER HAND IT IS ALSO TRUE THAT THE REGULAR PROFITS FOR THE AS SESSMENT YEAR 2006-07 HAD BEEN ARRIVED AT ON THE BASIS OF ENTRIES MADE IN THE ACCOUNTS MAINTAINED UNDER TALLY PACKAGE. THE AP PELLANT HAD ACCORDINGLY SHOWN THE REGULAR CLOSING STOCK OF RS. 99,47,193/ - AS PER THE ENTRIES RECORDED IN THE SAI D PACKAGE ON A REGULAR BASIS. HOWEVER, IF THE ADDITIONAL INCO ME DECLARED DURING THE SURVEY WAS THE 'REAL INCOME' OF THE APPE LLANT, THE SAME WAS INDEED TO FIND SOME CONCRETE APPLICATION I N THE ACCOUNTS OF THE APPELLANT. THE APPELLANT THEREFORE, INCREASED THE OPENING STOCK AS ON 1.4.2006 BY THE AMOUNT OF R S. 1 CORE AND DISCLOSED OPENING STOCK AT RS. 1,99,47,193/-. I T CAN ALSO NOT BEEN DENIED THAT DURING THE COURSE OF SURVEY IT SELF, THE APPELLANT HAD ADMITTED THAT THE ADDITIONAL INCOME G ENERATED FROM UNDISCLOSED SALES HAD BEEN INVESTED IN CLOSING STOCK, 5 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. BESIDES BEING INVESTED IN INTERIORS OF THE NEW PREM ISES AND ACQUISITION OF PROPERTY AT MANGALAGIRI. IT IS ALSO CLEAR THAT THE STOCK WAS FOUND TO BE OF THE ORDER OF RS. 1.55 CROR ES ON THE DATE OF SURVEY. THIS FURTHER STRENGTHENS THE CONTEN TION OF THE APPELLANT THAT THE PROFITS FROM UNRECORDED SALES IN THE EARLIER YEAR HAD BEEN INVESTED IN STOCKS. UNDER THE CIRCUMS TANCES, IN THE LIGHT OF THE DECISIONS RELIED UPON BY THE REPRE SENTATIVE OF THE APPELLANT, IT CANNOT BE DENIED THAT THE ADDITIO NAL INCOME SO DISCLOSED BY THE APPELLANT WAS AS MUCH PART OF H ER 'REAL INCOME' AS THAT DISCLOSED BY HER BOOKS OF ACCOUNTS. THE ASSESSMENT OF SUCH INCOME IN THE HANDS OF THE APPEL LANT SHOWED THAT SUCH INCOME HAD THE SAME CONCRETE EXIST ENCE AND WAS AVAILABLE TO THE APPELLANT JUST LIKE THE REGULA R BOOK PROFITS FOR APPLICATION. THIS INDEED CONSTITUTED A FUND WHICH WAS CONTENDEDLY UTILIZED FOR ACQUISITION OF CLOSING STO CKS. 7.1 ON THE OTHER HAND, THE ASSESSING OFFICER HAS NOT BEEN ABLE ESTABLISH THAT THE ADDITIONAL INCOME OF RS. 1 CRORE DISCLOSED IN THE PRECEDING YEAR HAD BEEN INVESTED OR SENT FUR ANY OTHER PURPOSE. UNDER THE CIRCUMSTANCES, I AM OF THE VIEW THAT THE INCREMENT IN THE OPENING STOCK AS ON 1.4.2006 COULD HAVE BEEN VERY WELL ATTRIBUTABLE TO THE SAID ADDITION INCOME, WHICH WAS OFFERED AND ASSESSED IN THE APPELLANT'S HAND IN THE IMMEDIATELY PRECEDING YEAR. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF LAGADAPATI SUBBARAMIAH VS. CIT (SUPR A), ONCE THE ADDITIONAL INCOME SO ASSESSED TO TAX IN TJ1E E ARLIER YEAR, IT WAS OPEN TO THE APPELLANT TO BRING SUCH PROFITS INT O THE BOOKS AND THEREFORE THE INCREASE IN OPENING STOCK MADE ON THE BASIS OF SUCH INCOME COULD NOT HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT U/S. 69 MERELY BECAUSE THE APPELLANT HAD FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 WITHOUT SHOWING SUCH INCOME AS APPLIED TOWARDS STOCK IN TRA DE. DELETING THE ADDITION OF RS. 1 CRORE THE GROUNDS RA ISED IN THIS APPEAL ARE DECIDED IN FAVOUR OF THE APPELLANT. 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LEARNED DR SUPPORTING THE ORDER P ASSED BY THE ASSESSING OFFICER SUBMITTED THAT THE ASSESSEE F ILED HER RETURN FOR THE ASSESSMENT YEAR 2006-07 AFTER THE SURVEY OP ERATION TOOK PLACE. HENCE, IF THE ASSESSEE HAD REALLY INVESTED T HE ADDITIONAL INCOME DECLARE OF RS. 1 CRORE IN STOCK-IN-TRADE, IT SHOULD HAVE BEEN TAKEN TO THE CLOSING STOCK AS ON 31/03/2006, W ITHOUT TAKING IT TO CLOSING STOCK THE OPENING STOCK HAS ONLY BEEN INCREASED BY RS. 1 CRORE, THEREFORE, THE ASSESSING OFFICER WAS J USTIFIED IN MAKING ADDITION OF RS. 1 CRORE U/S 69 OF THE ACT. 6 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. 7. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T THE ASSESSEE ON THE DATE OF SURVEY IN THE STATEMENT REC ORDED HAD STATED THAT THE ADDITIONAL INCOME OF RS. 100.05 LAK HS WAS INVESTED IN STOCK-IN-TRADE. THE VALUATION OF STOCK DONE AT THE TIME OF PHYSICAL VERIFICATION DURING SURVEY ALSO MA TCHED WITH THE STATEMENT GIVEN BY THE ASSESSEE. THEREFORE, THE ASS ESSING OFFICER WAS NOT CORRECT IN MAKING THE ADDITION OF RS. 1,00, 00,000/- U/S 69 WHEN HE HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ADDITIONAL INCOME OF RS. 1 CRORE WAS INVESTED IN ANY OTHER ASSET. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WHEN SUPPRESSION OF SALE WAS DETECTED AT THE TIME OF SURVEY, THE ASSESSEE CAME FORWARD TO OWN IT UP AND ADMITTED ADDITIONAL INCOME OF RS. 1 CRORE IN ASSESSMENT YEAR 2006-07 AND RS. 50 LAKHS IN ASSESSMENT YEAR 2007-08. IN THE ST ATEMENT RECORDED FROM HER THE ASSESSEE ALSO EXPLAINED HOW A ND WHERE THESE ADDITIONAL INCOME HAVE BEEN INVESTED. FOR CON VENIENCE THE SAME IS EXTRACTED HEREUNDER:- DO YOU HAVE ANYTHING TO SAY? FOR THE DISCREPANCIES POINTED OUT ABOVE? CONSIDERING THE DEFICIENCIES, I OFFER AN ADDITIONAL INCOME OF RS.100.05 LAKHS OVER AND ABOVE MY REGULAR INCOME FOR THE F.Y 2005-06. FOR THE CURRENT FY I AM ADMITTING AN ADDITIONAL INCOME OF RS.49.46 LAKHS OVER AND ABOVE MY REGULAR INCOME. I HAVE UTILISED THE ABOVE INCOME I N DOING INTERIOR OF THE NEW PREMISES AND STOCK IN TRADE OF THE BUSINESS. I ALSO UTILISED A PART OF THIS INCOME IN PURCHASE OF 84 CENTS OF LAND AT MANGALAGIRI. AS THE ADDITIO NAL 7 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. INCOME IS WORKED OUT BY ME VOLUNTARILY, IT IS REQUE STED NOT TO INITIATE ANY PENALTY PROCEEDINGS. I AM ALSO CON FIRMING THAT THE ADDITIONAL INCOME IS NOT OF ALL EXPENSES A ND THE TAXES WILL BE PAID IN TIME. 9. FROM THE AFOREMENTIONED STATEMENT, IT IS CLEAR T HAT THE ASSESSEE HAD INVESTED THE ADDITIONAL INCOME OF RS. 1 CRORE IN STOCK-IN-TRADE OF THE BUSINESS. IT IS ALSO A FACT T HAT IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE HAD COMPUTED THE BUSINESS INCOME SEPARATELY AND THE ADD ITIONAL INCOME OF RS. 1 CRORE THOUGH WAS FROM THE BUSINESS WAS SHOWN AS INCOME FROM OTHER SOURCES. THE ASSESSEES EXPLANATI ON THAT THIS WAS DUE TO THE FACT THAT REGULAR PROFITS FOR BUSINE SS FOR THE AY 2006-07 WAS ARRIVED AT ON THE BASIS OF ENTRIES MADE IN THE ACCOUNTS MAINTAINED UNDER TALLY PACKAGE IS ACCEPTAB LE. THAT APART THE ASSESSING OFFICER WHILE REJECTING THE ASSESSEE S EXPLANATION HAS NOT GIVEN ANY FINDING ON WHERE THIS ADDITIONAL INCOME OF RS. 1 CRORE WAS INVESTED BY THE ASSESSEE. IN THESE CIRCUM STANCES, IT HAS TO BE ACCEPTED THAT THE ADDITIONAL INCOME OF RS . 1 CRORE WAS AVAILABLE TO THE ASSESSEE TO BE TELESCOPED INTO THE OPENING STOCK AS ON 01/04/2006. THE DECISIONS RELIED UPON BY THE ASSESSEE AND CONSIDERED BY THE CIT(A) ALSO SUPPORT THIS VIEW. IN AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT (A), HENCE, IT IS UPHELD. THE GROUNDS RAISE D BY THE DEPARTMENT ARE REJECTED. 8 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10 - 8-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH AUGUST, 2012. COPY TO:- 1) ACIT,CIRCLE-6(1), HYDERABAD. 2) SMT. K. VASUNDHARA, PROPX. M/S VASUNDHARAS GEMS & JEWEL;S, FLAT NO.2A, D.NO.6-6-34, DIVYA SHAKTI APAR TMENTS, DWARAKAPURI COLONY, PUNJAGUTTA, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 9 ITA NO. 51 OF 2011 SMT. K. VASUNDHARA, HYDERABAD.