L. Giridharlal & Co., Hyderabad V. Income Tax Officer, Ward-8(2), Hyderabad

ITA 516/HYD/2014

• Counselvise Citation: 51622514 RSA 2014
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 516/HYD/2014 ASSESSMENT YEAR: 2009-10 L. GIRIDHARLAL & CO., HYDERABAD. PAN AABFL 0305Q VS. INCOME TAX OFFICER, WARD 8(2), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI RAMAKRISHNA BANDI DATE OF HEARING 10-03-2015 DATE OF PRONOUNCEMENT 13-03-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 09 /01/2014 PASSED BY LD. CIT(A)-III, HYDERABAD FOR THE AY 2009 -10. 2. ASSESSEE HAS RAISED SIX GROUNDS. GROUND NOS. 1 & 6 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SPECIFIC ADJUD ICATION. AS FAR AS GROUND NO. 2 IS CONCERNED, AT THE OUTSET, LD. AR SU BMITTED BEFORE US THAT ON THE INSTRUCTION OF HIS CLIENT, HE DOES NOT WANT TO PRESS THIS GROUND. ACCORDINGLY, GROUND NO. 2 IS DISMISSED AS NOT PRESSED. 3. IN GROUND NO. 3, ASSESSEE HAS CHALLENGED THE DEC ISION OF CIT(A) IN CONFIRMING THE ADDITION OF RS. 77,128. 4. BRIEFLY THE FACTS ARE, ASSESSEE A PARTNERSHIP FI RM IS ENGAGED IN THE BUSINESS OF TRADING IN GOLD JEWELLERY. FOR AY U NDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 29/09/2009 D ECLARING TOTAL 2 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. INCOME OF RS. 61,59,930, BUT, PRIOR TO THAT A SURVE Y OPERATION U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMI SES OF ASSESSEE ON 16/10/2008. ON THE BASIS OF THE MATERIAL FOUND D URING THE SURVEY, AO IN COURSE OF ASSESSMENT PROCEEDING, NOTICED THAT AT THE TIME OF SURVEY WHILE TAKING PHYSICAL INVENTORY CASH OF RS. 8,21,000 WAS AVAILABLE, WHEREAS, AS PER THE BOOKS OF ACCOUNT CAS H BALANCE ON THE DATE OF SURVEY WAS RS. 7,43,872 THEREBY INDICATING EXCESS CASH OF RS. 77,128. AS MENTIONED BY AO, WHEN CONFRONTED ASS ESSEE COULD NOT EXPLAIN THE DIFFERENCE IN CASH EITHER DURING TH E SURVEY PROCEEDING OR IN COURSE OF ASSESSMENT PROCEEDING. ACCORDINGLY, INFERRING THAT THE EXCESS CASH WAS GENERATED FROM UNACCOUNTED SALES, A O ADDED THE SAME TO THE INCOME OF ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). CIT(A) AL SO CONFIRMED THE ADDITION. 5. THE LD. AR SUBMITTED BEFORE US THAT ACTUALLY THE EXCESS CASH BELONG TO HUF OF PARTNERS. FURTHER EXPLAINING, LD. AR SUBMITTED, HUF OF THE PARTNERS IS HAVING INCOME FROM HOUSE PROPERL Y AS WELL AS OTHER SOURCES AND REGULARLY FILING ITS RETURN OF INCOME. IN THIS CONTEXT, LD. AR DREW OUR ATTENTION TO THE RETURNS FILED BY HUF GIRI DHAR LAL & SONS FOR THE AYS 2008-09 AND 2009-10, WHICH ARE PLACED AT PA GES 65 TO 68 OF PAPER BOOK. THUS, IT WAS SUBMITTED BY LD. AR, EXCES S CASH ACTUALLY RELATE TO ASSESSEES HUF. 6. THE LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US, ASSESSEE HAVING FAILED TO EXPLAIN THE EXCESS CASH AT THE TIM E OF SURVEY AND DURING THE ASSESSMENT PROCEEDING ALSO, CONTENTION O F ASSESSEE THAT EXCESS CASH BELONGS TO HUF IS ONLY AN AFTER THOUGHT , HENCE, CANNOT BE ACCEPTED. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT ON PHYSICAL VE RIFICATION EXCESS 3 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. CASH OF RS. 77,120 WAS FOUND AT THE TIME OF SURVEY. AO HAS TREATED EXCESS CASH AS UNEXPLAINED INCOME OF ASSESSEE BY AL LEGING ASSESSEE FAILED TO EXPLAIN THE SOURCE OF EXCESS CASH. HOWEVE R, IT IS THE CONTENTION OF ASSESSEE BEFORE LD. CIT(A) AS WELL AS BEFORE US THAT EXCESS CASH FOUND AT THE TIME OF SURVEY BELONG TO P ARTNERS OF HUF. ON PERUSAL OF THE RETURNS FILED ELECTRONICALLY BY G IRIDHARLAL & SONS, HUF FOR THE AYS. 2008-09 AND 2009-10, IT APPEARS TH AT NOT ONLY THE RETURNS WERE FILED PRIOR O THE DATE OF SURVEY, BUT, THE HUF IS ALSO GENERATING SOME AMOUNT OF INCOME. THE BALANCE SHEET AS ON 31/03/08 ALSO SHOWS CASH IN HAND OF RS. 70,000. THE REFORE, ASSESSEES CLAIM THAT EXCESS CASH ACTUALLY BELONG T O HUF CANNOT BE OUT RIGHTLY REJECTED. IN THE AFORESAID VIEW OF THE MATTER, CONSIDERING THE FACT THAT ASSESSEES EXPLANATION WITH REGARD TO EXCESS CASH IS PLAUSIBLE, THE ADDITION MADE CANNOT BE SUSTAINED. A CCORDINGLY, WE DELETE THE SAME. 8. GROUND NOS. 5 & 6 ARE ON THE COMMON ISSUE OF DI RECTION BY CIT(A) TO ESTIMATE GROSS PROFIT ON THE ALLEGED SUPP RESSION OF SALE OF RS. 33 LAKHS. 9. BRIEFLY THE FACTS ARE, ON THE BASIS OF THE REPOR T SUBMITTED BY AO, WHO CONDUCTED THE SURVEY, AS WELL AS OTHER MATERIAL S FOUND DURING SURVEY, AO NOTICED THAT AS ON THE DATE OF SURVEY I. E. ON 16/10/08, GROSS SALES WERE TO THE TUNE OF RS. 74,22,870, WHE REAS, IN THE RETURN OF INCOME FILED BY ASSESSEE FOR THE IMPUGNED AY GRO SS SALES WERE DISCLOSED AT RS. 1,04,36,120. AO OBSERVED THAT WHIL E EXACTLY IN SIX AND HALF MONTHS PRIOR TO SURVEY ASSESSEE HAS BOOKED SALES OF RS. 74,22,870 WHICH ON AN AVERAGE COMES TO RS. 11,41,98 0 PER MONTH, WHEREAS, FOR REMAINING FIVE AND HALF MONTHS, POST S URVEY, ASSESSEE HAS SHOWN SALES OF RS. 30,13,250, WHICH COMES TO RS . 5,47,863 PER MONTH. THEREFORE, ON AVERAGE THERE WAS A DIFFERENCE OF RS. 6 LAKHS PER MONTH TOWARDS SALES BOOKED BY ASSESSEE PRIOR TO SURVEY AND POST SURVEY. HE, THEREFORE, CALLED UPON ASSESSEE TO EXPL AIN WHY THE SALES FOR THE POST SURVEY PERIOD SHALL NOT BE TAKEN AT PA R WITH THE PRE 4 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. SURVEY PERIOD BY EXTRAPOLATION METHOD. IN RESPONSE TO THE QUERY RAISED BY AO, IT WAS SUBMITTED BY ASSESSEE THAT THE RE IS NO SUPPRESSION OF SALES BY ASSESSEE AS IT IS REGULARLY SUBMITTING VAT RETURNS. IT WAS SUBMITTED, BECAUSE OF ILL HEALTH OF THE MANAGING PARTNER, WHO IS HEAD OF THE FAMILY, OTHER PARTNERS WERE UNABLE TO CONCENTRATE MUCH IN BUSINESS AFTER SURVEY. IT WAS A LSO SUBMITTED, DUE TO SURVEY BUSINESS WAS AFFECTED AND ALSO BECAUSE OF HUGE RISE IN MARKET RATE SALES DECREASED AFTER THE DATE OF SURVE Y. THUS, IT WAS SUBMITTED BY ASSESSEE THAT THERE IS NO NEED TO ESTI MATE ANY SALES AND THE BOOK RESULTS NEED TO BE ACCEPTED. AO, HOWEV ER, DID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE. HE OBSERVED T HAT BECAUSE OF ILL HEALTH OF THE MANAGING PARTNER, THE BUSINESS NEED N OT BE NEGLECTED. FURTHER, EXPLANATION OF ASSESSEE THAT DUE TO SURVEY BUSINESS SUFFERED IS ALSO NOT ACCEPTABLE. AO OBSERVED THAT ASSESSEE H AS ACTUALLY SHOWN MORE SALES DURING OFF-SEASON WHEREAS LESS SAL ES HAVE BEEN SHOWN DURING FESTIVE SEASON. THEREFORE, AO INFERRIN G THAT ASSESSEE HAS MANIPULATED SALES FOR THE POST SURVEY PERIOD, E STIMATED SALES FOR FIVE AND HALF MONTHS @ RS. 6 LAKHS PER MONTH. ACCOR DINGLY, ADDITION OF RS. 33 LAKH WAS MADE BY AO ON THIS COUNT. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPEAL BEFORE CIT (A). 10. LD. CIT(A) CONFIRMED THE ADDITION WITH THE FOLL OWING OBSERVATIONS: 7.2 I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE AND I FIND THAT AFTER THE DATE OF SURVEY, THE APPELLANT HAS DE FINITELY SHOWN FAR LESS SALE AND THERE WAS NO EXPLANATION FOR THE SAME. IN FACT THE OBSERVATION OF THE AO IS CORRECT THAT IT IS DUR ING MONSOON TIME THAT THE SALES ARE THE LEAST. I AGREE WITH THE AO THAT BASED ON THE INFORMATION GATHERED AT THE TIME OF SURVEY, SALE FOR THE REST OF THE FINANCIAL YEAR CAN BE EXTRAPOLATION. I AGREE WITH THE EXTRAPOLATION OF SALE MADE BY THE AO. HOWEVER, THE ENTIRE SALE CANNOT BE ADDED TO THE INCOME OF THE APPELLANT BECA USE THE APPELLANT IS A TRADER OF JEWELLERY AND THAT REQUIRE S PURCHASES AS WELL. THE UNACCOUNTED INVESTMENT IN THE FORM OF EXC ESS STOCK HAS ALREADY BEEN SURRENDERED DURING THE COURSE OF S URVEY AND ADDED BACK BY THE APPELLANT. THEREFORE, WITH REGARD TO THE EXTRAPOLATION OF SALE AND THE EXCESS SALE CALCULATE D BY THE AO, 5 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. THE ONLY ADDITION WHICH IS TO BE MADE IS WITH RESPE CT TO GROSS PROFIT. THE AO IS DIRECTED TO CALCULATE THE GROSS P ROFIT SHOWN BY THE APPELLANT AND MADE AN ADDITION OF THAT PERCENTA GE ON THE EXCESS SALE. THE APPELLANT WILL GET RELIEF ACCORDIN GLY. 11. THE LD. AR MORE OR LESS REITERATING THE SUBMISS IONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT NEITHER AT THE TIME OF SURVEY NOR DURING THE ASSESSMENT PROCEEDING, THE DEPARTMENT HAS BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH SUPPRES SION OF SALES BY ASSESSEE. MERELY BECAUSE THERE IS REDUCTION IN SALE S IN THE POST SURVEY PERIOD, AO CANNOT MAKE ADDITIONS ON ASSUMPTI ONS AND PRESUMPTIONS BY ESTIMATING SALES. LD. AR SUBMITTED BEFORE US, ASSESSEE IS REGULARLY FILING VAT RETURNS DISCLOSING SALES AND NO SUPPRESSION OF SALE HAS BEEN DETECTED BY THOSE AUTH ORITIES, THEREFORE NO ADDITION CAN BE MADE ON ESTIMATE BASIS. LD. AR R EFERRING TO THE COMPARATIVE FIGURE OF SALES FOR FYS 2007-08 TO 200 9-10 SUBMITTED BEFORE US THAT EXCEPT THE MONTHS OF APRIL TO OCTOBE R, THE SALES FOR OTHER MONTHS FOR THE IMPUGNED AY ARE ALMOST AT PAR WITH THE SALES BOOKED FOR THOSE MONTHS IN FY 2007-08 & 2009-10. TH US, IT WAS SUBMITTED, THERE BEING NO MATERIAL BEFORE AO TO CON CLUSIVELY PROVE THE FACT THAT ASSESSEE HAS SUPPRESSED SALES, ADDITI ON MADE BY ESTIMATING SALES FIGURE FOR FIVE AND HALF MONTHS I S NOT CORRECT. 12. THE LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US THAT SUDDEN DECREASE IN SALES FOR THE POST SURVEY PERIOD CLEARL Y SHOWS THAT ASSESSEE HAS MANIPULATED ITS SALES. LD. DR SUBMITTE D, WHEN THERE IS SO MUCH VARIATION, SALES CAN BE ESTIMATED BY APPLYI NG EXTRAPOLATION METHOD. IN SUPPORT OF SUCH ADDITION, HE RELIED ON T HE DECISION OF HONBLE AP HIGH COURT IN CASE OF RAJNIK & CO. VS. A CIT, 251 ITR 561. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. ON PERUSAL OF ASSESSMENT ORDER AS WELL AS OTHER MAT ERIALS ON RECORD, IT IS ABSOLUTELY CLEAR THAT NEITHER AT THE TIME OF SURVEY NOR POST SURVEY PROCEEDING OR EVEN DURING ASSESSMENT PROCEEDING, AN Y EVIDENCE/MATERIAL HAS COME TO THE POSSESSION OF THE DEPARTMENT 6 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. WHICH CAN ESTABLISH SUPPRESSION/MANIPULATION OF SAL E BY ASSESSEE. IT IS VERY MUCH EVIDENT, THE ONLY REASON FOR ESTIMATIN G THE SALES FOR POST SURVEY PERIOD IS BECAUSE THE SALES FOR THE MONTHS O F NOVEMBER TO MARCH ARE MUCH LESS THAN THE SALES BOOKED FOR THE M ONTHS OF APRIL TO OCTOBER. THOUGH, IT MAY BE A FACT THAT SUCH VARIATI ON IN SALES MAY RAISE A SUSPICION IN THE MIND OF AO WITH REGARD TO SALES DISCLOSED DURING THE POST SURVEY PERIOD, BUT, SUCH SUSPICION, HOWEVER STRONG MAY BE CANNOT TAKE THE PLACE OF EVIDENCE. NO MATERI AL HAS BEEN BROUGHT TO OUR NOTICE BY LD. DR TO EVEN REMOTELY IN DICATE ASSESSEE HAS INDULGED IN SUPPRESSION OF SALE. DROP IN SALES FOR THE POST SURVEY PERIOD MAY BE DUE TO VARIOUS REASONS BUT WITHOUT BR INGING ANY MATERIAL ON RECORD TO SUGGEST SUPPRESSION OF SALES, MERELY ON ASSUMPTIONS AND PRESUMPTIONS SALES CANNOT BE ESTIMA TED BY ALLEGING SUPPRESSION OF SALES BY ASSESSEE. MORE SO, WHEN IT IS A FACT ON RECORD THAT ASSESSEE REGULARLY FILES ITS VAT RETURN S DISCLOSING SALES TURNOVER, WHICH IS IN ACCORDANCE WITH THE BOOKS OF ACCOUNT AND AUTHORITIES UNDER THE VAT ACT HAVE NOT POINTED OUT ANY SALES SUPPRESSION. AT LEAST NOTHING OF THE SORT HAS BEEN BROUGHT TO OUR NOTICE. AS REGARDS THE DECISION OF THE HONBLE AP H IGH COURT AS REFERRED TO BY LD. DR, ON CAREFUL EXAMINATION OF TH E SAME, WE ARE OF THE VIEW THAT IT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THE CASE DECIDED BY THE HONBLE HIGH COURT THERE WE RE EVIDENCES ON RECORD TO SHOW THAT ASSESSEE HAS SUPPRESSED SALES. WHEREAS, IN THE PRESENT CASE THERE IS NOT EVEN A SINGLE PIECE OF EV IDENCE TO SHOW THAT ASSESSEE HAS SUPPRESSED ITS SALES. IN VIEW OF THE A FORESAID, WE HOLD THAT ADDITION MADE BY ESTIMATING SALES IS NOT PROPE R, HENCE, CANNOT BE SUSTAINED. ACCORDINGLY, WE DELETE THE SAME. 7 ITA NO. 516 /HYD/2014 L. GIRIDHARLAL & CO. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON ______MARCH, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 13 TH MARCH, 2015 KV COPY TO:- 1) L. GIRIDHARLAL & CO., C/O SHRI S. RAMA RAO, ADVO CATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3-6-643, ST. NO. 9, H IMAYAT NAGAR, HYDERABAD 500 029. 2) ITO, WARD 8(2), HYDERABAD 3 CIT(A)-III, , HYDERABAD 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.