SHRI KHUBCHAND PAGRANI, V. THE CIT WARD 4 (2),

ITA 523/IND/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0105 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2009
• Assessment Year: misc
• Appeal Filed On: 19-07-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Unexplained investment
• Section: 133A; 133(6); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI BHAVNESH SAINI, JM & SHRI M.L. GUSIA, A M ITA NO.523/IND/2006 AY 2002-03 KHOOBCHAND PAGARANI, PROP. OF M/S. SAI KRIPA TRADERS, 1/1, WARE HOUSE ROAD, SIYAGANJ, INDORE (PAN ADHPP 4352 N) APPELLANT VS. INCOME TAX OFFICER, WARD-4(1), INDORE RESPONDENT APPELLANT BY SHRI AJAY TULSIYAN, CA RESPONDENT BY SMT. APARNA KARAN, ADDL. CIT, DR O R D E R PER SHRI M.L. GUSIA, AM THE ABOVE APPEAL OF THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY LD. CIT(A)-II, INDORE ON 24.4.2006 FOR TH E ABOVE AY. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE MATERIAL ON RECORD AND CONSID ERED THE ORDERS OF AUTHORITIES BELOW. 3. AT THE OUTSET OF HEARING, GROUND NO.4, 5, 6, 7 & 8 OF APPEAL WERE NOT PRESSED. THEREFORE, SAME ARE DISMISSED BEI NG NOT PRESSED. 4. THE FIRST GROUND OF APPEAL IS THAT THE LD. CIT(A) H AS ERRED IN CONFIRMING ADDITION OF RS.1,05,674/- AS UNEXPLAINED INVESTMENT U/S 69 BY TAKING PEAK CASH PAYMENT MADE TO CREDITORS IN THE MONTH OF JANUARY, 2002. 2 5. FACTS OF THE CASE ARE THAT THE ASSESSEE IS PROP. OF M/S. SAI KRIPA TRADERS, INDORE WHICH IS ENGAGED IN THE TRADI NG OF KIRANA ITEMS. SURVEY U/S 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 24.5.2001. DUR ING THE COURSE OF THE SURVEY, INVENTORY OF STOCK WAS MADE. DURING SURVEY, TRADING ACCOUNT WAS ALSO SUBMITTED BY THE ASSESSEE, ACCORDING TO WHICH, CLOSING STOCK WAS RS.1,83,114/-. HOWEVER, AS PER THE INVENTORY OF STO CK PREPARED AT THE TIME OF THE SURVEY, STOCK VALUED AT RS.4,35,026/-. THUS, EXCESS STOCK OF RS.2,51,912/- WAS FOUND DURING COURSE OF THE SURVEY AND IN THE STATEM ENT RECORDED, HE SURRENDERED ADDL. INCOME OF RS.2,52,00 0/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY. HO WEVER, IN THE RETURN OF INCOME, ADDL. INCOME OF RS.1,25,68 0/- WAS ONLY DECLARED. IT WAS EXPLAINED TO THE AO THAT THE CLOSING STOCK DECLARED IN THE RETURN OF INCOME IS OF RS.3,0 4,338/- AGAINST RS.1,83,114/- DECLARED IN THE TRADING A/C D URING THE COURSE OF THE SURVEY. THE REASON FOR THE DIFFERENCE WAS EXPLAINED THAT AT THE TIME OF THE SURVEY, TRADING A /C WAS NOT CORRECTLY MADE. THERE IS ALSO TOTALING MISTAKE IN THE INVENTORY PREPARED AT THE TIME OF THE SURVEY OF RS. 5,008/-. SOME OF THE PURCHASES REMAINED TO BE INCLUDED IN TH E 3 BOOKS OF ACCOUNT AT THE TIME OF THE SURVEY. HOWEVER , THE AO ISSUED NOTICE U/S 133(6) TO SOME TRADERS TO VERI FY THE PURCHASES SHOWN BY THE ASSESSEE. ON COMPARISON OF T HIS COPY OF ACCOUNTS OF THE ASSESSEE IN THE ACCOUNT BOO KS OF TRADERS WITH THE ACCOUNTS OF TRADERS IN THE BOOKS O F THE ASSESSEE, THE AO NOTICED THAT THERE WERE MAJOR DIFF ERENCES IN THE AMOUNT AS WELL AS IN THE DATE OF PAYMENTS SH OWN BY THE ASSESSEE WITH REFERENCE TO THE DATE OF RECEIPT SHOWN BY THE TRADERS. IN A LARGE NOS. OF TRANSACTIONS, THE D ATE OF PAYMENT OF SALE CONSIDERATION, THE ASSESSEE SHOWED THE DATE OF PAYMENT OF SALE CONSIDERATION MUCH AFTER TH E RECEIPT SHOWN BY THE TRADERS. AFTER VERIFICATION OF THE ACCOUNT OBTAINED FROM TRADERS, A CHART WAS PREPARED IN RESPECT OF DATE-WISE RECEIPTS SHOWN BY THE TRADERS IN THEIR BOOKS OF ACCOUNT. BUT, PAYMENTS RELATING TO SAME WE RE NOT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE O N THOSE PARTICULAR DATES. ON BEING ASKED, IT WAS EXPLAINED THAT GENERAL BUSINESS PRACTICE IN THE MARKET THAT THE CA SH MEMO WERE ISSUED FOR THE PURCHASE MADE BY THE TRADERS AN D GOODS SUPPLIED TO THE PARTY AND AMOUNT OF CASH HAD BEEN COLLECTED BY THE SUPPLIER AFTER SUPPLY OF GOODS AND THE PURCHASER DEBITED THE CASH AT THE TIME OF PAYMENT A ND 4 SELLER CREDITED THE CASH OF CASH MEMO ON THE VERY S AME DAY I.E. THE DATE OF CASH MEMO ISSUED. IT WAS FURTH ER EXPLAINED THAT DUE TO VARIOUS PRACTICAL PROBLEMS IN THE BUSINESS, IT WAS NOT POSSIBLE TO MAKE THE PAYMENT O F CASH MEMO BY HAND TO HAND AS MANY TIMES OR SAY MOST OF T HE TIMES, THE GOODS ORDERED ON TELEPHONE, THE SUPPLIER SUPPLY THE GOODS TO THE PURCHASER AND SEND THE CASH MEMO W ITH THE MESSENGER WITH RIKSHAWALA & HAMMAL AND AFTER TH AT, THE RESPONSIBLE MAN OF THE SUPPLIER WOULD GO AND CO LLECT THE AMOUNT OF CASH MEMO AS PER THEIR CONVENIENCE. H ENCE, LIKE ABOVE SO MANY OTHER PROBLEMS COMING DAY TO DAY BUSINESS AND DUE TO THAT REASONS, DATES OF TRANSACT IONS COULD NOT BE MATCHED WITH THE PURCHASER AND SELLER. HOWEVER, THE AO CONCLUDED THAT THE ASSESSEE MADE TH E PAYMENT IN RESPECT OF PURCHASES ON THE DATE MENTION ED IN THE CHART. BUT, THE SAME WAS ENTERED IN THE CASH BO OK, AS NO CASH BALANCE WAS AVAILABLE WITH THE ASSESSEE AS PER CASH BOOK. HOWEVER, PAYMENTS WERE SHOWN AS PER HIS CONVENIENCE, ONLY AFTER THE AVAILABILITY OF CASH IN CASH BOOK. THEREFORE, ACCORDING TO THE AO, ASSESSEE WAS MAKING PAYMENTS FOR PURCHASES ALTHOUGH NO CASH WAS AVAILAB LE IN THE BOOKS OF ACCOUNT AND SUCH PAYMENTS WERE MADE OU T OF 5 UNDISCLOSED SOURCES. THE AO, THUS, WORKED OUT PEAK MONTHLY CASH PAYMENT FOR THE MONTH OF JANUARY AND M ADE ADDITION OF RS.1,05,672/-. 6. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSEE TO CROSS- EXAMINING THE CREDITORS, THE AO HAD MADE THE ADDITI ON. THE LD. CIT(A) OBSERVED THAT THE AO HAS POINTED OUT GLA RING DISCREPANCIES IN THE BOOKS OF ACCOUNT FOR WHICH THE ASSESSEE HAS NO EXPLANATION. THE TRANSACTIONS HAVE BEEN MADE HAVING NO CORRELATION WITH THE BOOKS ENTRIES. ONLY AFTER AN INDEPENDENT CROSS-VERIFICATION, SUCH DISCR EPANCIES COULD BE BROUGHT ON RECORD. FURTHER, THE ADDITION H AS BEEN MADE ONLY AFTER CONFRONTING THE ASSESSEE WITH THE F INDINGS AND ON ACCOUNT OF THE FAILURE OF THE ASSESSEE TO GI VE SATISFACTORILY REPLY, THE AO PROCEEDED TO MAKE THE ADDITION OF THE PEAK AMOUNT ONLY. THUS, HE CONFIRMED THE ADD ITION. 7. AFTER HEARING RIVAL CONTENTIONS, WE NOTED THAT THE ASSESSMENT WAS COMPLETED ON AN INCOME OF RS.8,36,64 2/- AGAINST THE DECLARED INCOME OF RS.1,79,660/-. THE A SSESSEE HAS SHOWN GROSS PROFIT OF RS.1,15,182/- ON TOTAL SA LES OF RS.24,04,701/- WHICH WORKS OUT G.P. AT 4.78%. THE A O REJECTED THE BOOKS OF ACCOUNT U/S 145(3) AND ESTIMA TED THE 6 G.P. @5% ON ESTIMATED SALES OF RS.30 LAKHS AND AFTE R REDUCING THE G.P. DECLARED BY THE ASSESSEE, ADDITIO N OF RS.34,818/- WAS MADE. THUS, WE NOTED THAT THE ASSES SEE HAS DECLARED EXCESS STOCK VOLUNTARILY IN THE RETURN OF INCOME AT RS.1,25,680/-. THE AO HAS ALSO REJECTED T HE BOOKS OF ACCOUNT AND WORKED OUT THE G.P. ON ESTIMAT ED HIGHER RATE ON ESTIMATED HIGHER TURNOVER. IN SUCH CIRCUMSTANCES, WHEN THE BOOKS OF ACCOUNT WERE REJEC TED HOLDING THAT THE SAME ARE NOT RELIABLE, NO ADDITION ON ACCOUNT OF PEAK BASIS REQUIRED TO BE MADE IN THE ASSESSMENT ORDER. THUS, IN SUCH CIRCUMSTANCES, ADDI TION OF RS.1,05,674/- IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 8. THE SECOND GROUND OF APPEAL IS THAT THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING AN ADDITION OF RS.2,15,9 94/- AS UNEXPLAINED/BOGUS SUNDRY CREDITORS U/S 68 OF THE AC T. 9. FACTS OF THE CASE ARE THAT IN THE BALANCE-SHEET FIL ED WITH THE RETURN OF INCOME, ASSESSEE HAS SHOWN SOME TRADE CREDITORS. ON VERIFICATION FROM THE COPY OF ACCOUNT OBTAINED FROM SUCH CREDITORS, IT WAS NOTICED BY THE AO THAT THERE WERE MAJOR DIFFERENCES IN THE AMOUNTS SHOWN BY THE ASSESSEE AND THE AMOUNTS SHOWN BY THE CREDITORS. ON 7 BEING ASKED, THE ASSESSEE EXPLAINED THAT IT WAS GEN ERAL BUSINESS PRACTICE IN THE MARKET THAT CASH MEMO WAS ISSUED FOR THE PURCHASE MADE BY THE TRADERS AND GOODS SUPP LIED TO THE PARTY AND AMOUNT OF CASH HAD BEEN COLLECTED BY THE SUPPLIER AFTER SUPPLY OF THE GOODS AND THE PURCHASE R DEBITED THE CASH AT THE TIME OF PAYMENT AND SELLER CREDITED THE CASH OF CASH MEMO ON THE VERY SAME DAY I.E. THE DATE OF CASH MEMO ISSUED. IT IS FURTHER EXPLAINED THAT D UE TO VARIOUS PRACTICAL PROBLEMS IN THE BUSINESS, IT IS N OT POSSIBLE TO MAKE THE PAYMENT OF CASH MEMO BY HAND TO HAND AS MANY TIMES OR SAY MOST OF THE TIMES. HOWEVER, THE A O DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE ON THE G ROUND THAT SPECIFIC EXPLANATION WAS NOT GIVEN BY THE ASSE SSEE REGARDING THE SUNDRY CREDITORS APPEARING IN THE BAL ANCE- SHEET I.E. ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASON/EXPLANATION REGARDING THE DIFFERENCE IN THE FIGURES OF THE SUNDRY CREDITS APPEARING IN THE BALANCE-SHEE T AND THAT APPEARING IN THE COPY OF ACCOUNT OBTAINED BY T HE AO U/S 133(6) FROM SUCH CREDITORS. 10. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT NO PROP ER OPPORTUNITY WAS PROVIDED TO THE ASSESSEE AND ADDITI ON HAS BEEN MADE ONLY ON ACCOUNT OF INFORMATION COLLECTED U/S 8 133(6). THE LD. CIT(A) HAS OBSERVED THAT THE AO HAS TREATED THE CREDITS APPEARING IN THE BOOKS OF ACCOU NT OF THE ASSESSEE WHICH COULD NOT BE TALLIED WITH THE BOOKS OF ACCOUNT OF THE PARTIES CONCERNED. HE FURTHER OBSERV ED THAT IT IS A SETTLED PREPOSITION THAT THE ONUS FOR PROVI NG THE CREDIT RECORDED IN THE BOOKS OF ACCOUNT LIES ON THE ASSESSEE AND NOT ON THE REVENUE. THEREFORE, HE CONFIRMED THE ADDITION. 11. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THE AO HAS COLLECTED THE INFORMATION DIRECTLY FROM THE CREDITORS U/S 133(6) AND THE SAME WAS CONFRONTED WITH THE ASS ESSEE. THE ASSESSEE INSTEAD REQUESTING TO CROSS-EXAMINE TH E CREDITORS GAVE GENERAL AND VAGUE EXPLANATION. THERE FORE, NO INTERFERENCE IS CALLED FOR IN THIS REGARD. HENCE , THIS GROUND OF APPEAL IS DISMISSED. 12. THE THIRD GROUND OF APPEAL IS THAT THE LD. CIT(A) H AS ERRED IN LAW IN CONFIRMING AN ADDITION OF RS.2,98,202/- A S UNEXPLAINED INVESTMENT IN PURCHASES U/S 69. 13. FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE PURCH ASES SHOWN BY THE ASSESSEE WITH THE RESPECTIVE SALES SHO WN BY THE SELLERS (TRADERS), IT IS NOTICED THAT ASSESSEE HAS PURCHASED GOODS WORTH RS.2,98,202/- WITHOUT ENTERIN G THE 9 SAME IN THE BOOKS OF ACCOUNT. DETAILS OF SUCH PURCH ASES MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION HAVE BEEN ENCLOSED AS ANNEXURE-B OF THE ASSESSMENT ORDER. AGAIN ON BEING ASKED, THE ASSESSEE GAVE EXPL ANATION ABOUT THE GENERAL BUSINESS PRACTICE PREVAILING IN T HE MARKET AS DISCUSSED IN THE FOREGOING PARAGRAPHS. AS THE AS SESSEE WAS NOT HAVING ANY SPECIFIC EXPLANATION THEREFORE A DDITION OF RS.2,98,202/- WAS MADE U/S 69 OF THE ACT. 14. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE ACT ION OF THE AO TO TREAT THE UNEXPLAINED PURCHASES AS INCOME OF THE ASSESSEE IS ARBITRARY AND AGAINST THE RULE OF NATUR AL JUSTICE. THE AO HAS MADE AN ADDITION OF ALL THE SALES MADE B Y THE SAID CREDITORS WHICH HAVE NOT BEEN SHOWN AS PURCHAS ES BY THE ASSESSEE. IT IS QUITE POSSIBLE THAT THE GOODS M IGHT NOT HAVE BEEN PURCHASES BY THE ASSESSEE AND THE SAID CR EDITORS MIGHT HAVE SOLD THE GOODS TO THIRD PARTY AND DEBITE D THE BILL IN THE ASSESSEES ACCOUNT. SUCH TYPE OF ADDITI ON CANNOT BE MADE ON THE BASIS OF JUST CALLING INFORMATION U/ S 133(6). THE LD. CIT(A) OBSERVED THAT THE REPLY MADE BY THE ASSESSEE IS TOO GENERAL TO BE ACCEPTED. RATHER THAN MAKING EFFORTS TO EXPLAIN THE DISCREPANCIES POINTED OUT BY THE AO WHICH ARE BASED ON INDEPENDENT INQUIRY AND INVESTIG ATION, 10 HE HAS CHOSEN FIND FAULT ON FLIMSY GROUNDS. HE, THE REFORE, UPHELD THE ADDITION. 15. AFTER HEARING RIVAL CONTENTIONS, WE NOTED THAT THE AO HAS CALLED FOR DETAILS DIRECTLY FROM TRADERS U/S 133(6) OF THE IT ACT WHICH WAS CONFRONTED WITH THE ASSESSEE. THE ASS ESSEE TO DISCHARGE HIS ONUS DID NOT REQUEST TO CROSS-EXAM INE SUCH TRADERS. IN CASE, THE ASSESSEE HAS ACCOUNTED FOR SU CH PURCHASES THEN HE SHOULD HAVE REQUESTED FOR CROSS- EXAMINING SUCH TRADERS. BUT, NO SUCH REQUEST WAS MA DE IN SPITE OF THE FACT THAT THE INFORMATION GATHERED U/S 133(6) WAS CONFRONTED WITH HIM BY THE AO. IN SUCH CIRCUMST ANCES, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND THUS, THI S GROUND OF APPEAL IS DISMISSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 17. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28.8.2009. SD/- SD/- JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28.8.2009 {VYAS}