SYNTHETEIC COLOUR CHEM INDUSTRIES, MUMBAI V. DCIT CIR 13(2), MUMBAI

ITA 5563/MUM/2009

• Counselvise Citation: 556319914 RSA 2009
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 28-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Unexplained investment; Loose papers
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI R.S.PADVEKAR (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.5563/M/2009 ASSESSMENT YEAR 2005-06 M/S. SYNTHETIC COLOUR CHEM INDUSTRIES THE DY CIT 1 3(2), AAYAKAR 347/349, 1 ST FLOOR, SAMUEL STREET BHAVAN, M.K. MARG, VADGADI, MUMBAI 400 003. MUMBAI 400 020. PAN : AAFFS 3781 B APPELLANT RESPONDENT ASSESSEE BY : SHRI SHAILESH N. DOSHI REVENUE BY : SHRI R.K. GUPTA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 22.7.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06 . THE DISPUTES RAISED IN THIS APPEAL RELATE TO ADDITIONS ON ACCOUNT OF INCOM E FROM UNACCOUNTED SALES AND UNACCOUNTED COMMISSION. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH ERE WAS A SURVEY CONDUCTED ON 18.2.2005 UNDER SECTION 133A AT THE PREMISES OF THE ASSESSEE FIRM WHO WAS ENGAGED IN THE BUSINESS OF IMPORTING AND TRADING IN CHEMICALS. DURING THE COURSE OF THE SEARCH, SOME LOOSE PAPERS WERE FOUND WHICH WERE IMPOUNDED. THE PAGES 26 TO 28 OF THE LOOSE PAPERS SHOWED UNACC OUNTED CASH SALES AS PER DETAILS GIVEN BELOW : 2 I) CASH SALES ON 15.5.2004 RS.9.75 LACS II) CASH SALES ON 27.5.2004 RS.2.10 LACS III) CASH SALES ON 18.11.2004 RS.8.10 LACS TOTAL RS.19.95 LACS ====== 2.1 SIMILARLY THE PAGES 29 & 30 SHOWED COMMISSION I NCOME OF RS.26,96,797/- AND RS.40,18,324/- RESPECTIVELY. 2.2 A STATEMENT OF SHRI SURINDER KUMAR CHOUDHARY, P ARTNER WAS RECORDED AT THE TIME OF SURVEY ON 18.2.2005 IN WHICH HE ADMITTE D THAT THE COMMISSION INCOME AND THE CASH SALES WERE NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS AND IN RESPONSE TO QUESTION NO.15 HE OFFERED INCOME OF RS.1,05,00,000/- AS ADDITIONAL INCOME FOR A.Y. 2005-06 IN THE NAME OF T HE ASSESSEE FIRM. HOWEVER IN THE RETURN OF INCOME FILED ON 28.3.2006 THE ASSE SSEE FIRM DID NOT DISCLOSE THE ADDITIONAL INCOME AS DECLARED AT THE TIME OF SU RVEY. AN AFFIDAVIT FROM THE PARTNER SHRI SURINDER KUMAR CHOUDHARY WAS ENCLOSED WITH THE RETURN WITHDRAWING THE DECLARATION MADE AT THE TIME OF SUR VEY. IT WAS ALLEGED IN THE AFFIDAVIT THAT THE DISCLOSURES AND DOCUMENTS WERE C OOKED UP AND FORCIBLY PREPARED BY THE SURVEY TEAM. IT WAS ALSO ALLEGED TH AT ASSESSEES SON SHRI APURVA CHOUDHARY WAS MADE TO PREPARE THE PAGES 26, 27 & 28 OF THE LOOSE PAPERS. REGARDING COMMISSION INCOME, IT WAS ALLEGED IN THE AFFIDAVIT THAT ONE OF THE STAFF MEMBERS SHRI PAWAR WAS FORCED TO PREPA RE THE STATEMENT OF COMMISSION INCOME. THE AO HOWEVER DID NOT ACCEPT TH E ALLEGATIONS MADE IN THE AFFIDAVIT. IT WAS OBSERVED BY HIM THAT IN CASE THE ASSESSEE HAD REALLY BEEN FORCED TO PREPARE THE STATEMENT, IT WOULD HAVE IMME DIATELY RAISED THE ISSUE AND MADE COMPLAINT TO HIGHER AUTHORITIES. IT WAS FU RTHER OBSERVED THAT THE 3 ASSESSEE HAD FILED A LETTER DATED 4.3.2005 I.E. A F ORTNIGHT AFTER THE SURVEY REGARDING THAT THE ASSESSEE MAY BE GRANTED INSTALLM ENT FACILITY TO PAY TAXES INVOLVED IN THE ADDITIONAL DECLARATION MADE DURING THE COURSE OF SURVEY. AO THEREFORE HELD THAT THE AFFIDAVITS WHICH WAS FILED AFTER 6 MONTHS OF SURVEY WAS NOTHING BUT A SELF SERVING STATEMENT AND ACCORDINGL Y HE REJECTED THE ALLEGATIONS MADE. THE AO AFTER NECESSARY EXAMINATION MADE ADDIT ION OF RS.9.75 LACS ON ACCOUNT OF UNACCOUNTED SALES, RS.24,539/- ON ACCOUN T OF GROSS PROFIT IN RELATION TO CASH SALES AND ADDITIONS OF RS.8,62,245/- AND RS .11,23,980/- AS UNACCOUNTED COMMISSION INCOME. IN APPEAL CIT(A) CON FIRMED THE ADDITIONS MADE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL B EFORE THE TRIBUNAL. 2.3 IN THE GROUND NOS.1 & 2, THE ASSESSEE HAS RAISE D THE ISSUE OF FORCIBLE EXTRACTION OF THE STATEMENT BY THE SURVEY PARTY AT THE TIME OF SURVEY. IT HAS BEEN SUBMITTED THAT AT THE TIME OF SURVEY, NO INCRI MINATING DOCUMENTS WERE FOUND AND THE SURVEY TEAM HAD FORCED ONE OF THE PAR TNERS TO DECLARE ADDITIONAL INCOME. THE SON OF THE PARTNER AS WELL AS AN EMPLOY EE WERE ALSO FORCED TO WRITE THE ALLEGED PAPERS RELATING TO UNACCOUNTED SA LES AND COMMISSION INCOME. 2.4 WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORDS AND CONSIDERED THE MATTER CAREFULLY. THE SURVEY WAS CONDUCTED ON 18.2. 2005 WHEN THE LOOSE PAPERS BEING THE PAGES 26, 27, 28, 29, 30 WERE FOUN D WHICH HAD BEEN DULY SIGNED BY THE PARTNER OF THE ASSESSEE FIRM BASED ON ENTRIES AND BASED ON THE SAID PAPERS THE PARTNER OF THE ASSESSEE HAD DECLARE D UNDISCLOSED INCOME OF RS.1.05 CRORES. SUBSEQUENTLY ON 4.3.2005, A FORTNIG HT AFTER THE DATE OF SURVEY, THE ASSESSEE HAD WRITTEN A LETTER TO THE AO IN WHIC H A REQUEST HAD BEEN MADE THAT INSTALLMENTS MAY BE GRANTED FOR PAYMENT OF ADD ITIONAL TAX. HOWEVER, 6 MONTHS LATER WHEN THE RETURN WAS FILED, A RETRACTIO N STATEMENT WAS ENCLOSED 4 ALLEGING THAT THE PARTNER HAD BEEN FORCED TO ADMIT ADDITIONAL INCOME AND IN FACT NO INCRIMINATING PAPERS WERE FOUND. THESE CLAIMS HA VE BEEN REJECTED BY THE AUTHORITIES BELOW AS AN AFTER THOUGHT. WE SEE NO IN FIRMITY IN THE CONCLUSION ARRIVED AT BY THE REVENUE AUTHORITIES ON THIS POINT . IN CASE, THE PARTNER HAD REALLY BEEN FORCED TO ADMIT ADDITIONAL INCOME AND P APERS WERE COOKED UP, BY THE SURVEY PARTY, THE ASSESSEE WOULD HAVE IMMEDIATE LY AFTER SURVEY COMPLAINED TO THE HIGHER AUTHORITIES. THE LEARNED A R FOR THE ASSESSEE ADMITTED THAT NO COMPLAINT HAD BEEN FILED BY THE ASSESSEE. I N FACT TWO WEEKS AFTER THE DATE OF SURVEY THE ASSESSEE HAD WRITTEN A LETTER DA TED 4.3.2005 TO THE AO REQUESTING FOR INSTALLMENT AND EVEN IN THIS LETTER NO ALLEGATION WAS MADE. THE LOOSE PAPERS FOUND HAVE BEEN DULY SIGNED BY THE PAR TNERS AND THESE CLEARLY GAVE THE DETAILS OF UNACCOUNTED SALES AND UNACCOUNT ED COMMISSION. UNDER THESE CIRCUMSTANCES THE AFFIDAVITS FILED RETRACTING THE STATEMENT AND MAKING ALLEGATIONS SIX MONTHS LATER HAS TO BE TREATED AS A SELF SERVING STATEMENT BY THE PARTNER AND HIS EMPLOYEES AND THIS HAS TO BE RE JECTED AS AN AFTERTHOUGHT. THE ALLEGATIONS MADE IN GROUND NOS.1 AND 2 ARE THER EFORE REJECTED. 2.5 IN GROUND NO.3 & 4 THE DISPUTE RAISED IS REGARD ING ADDITION OF RS.9,75,000/- ON ACCOUNT OF UNRECORDED INVESTMENT I N RELATION TO THE CASH SALES AND ADDITION ON ACCOUNT OF GROSS PROFIT. AS M ENTIONED EARLIER THE ENTRIES MADE ON PAGES 26, 27 & 28 SHOWED SALES OF RS.9.75 L ACS ON 15.5.2004; SALES OF RS.2.10 LACS ON 27.5.2004; SALES OF RS.8.10 LACS ON 18.11.2004. AO OBSERVED THAT THE ORIGINAL INVESTMENT ON 15.5.2004 WAS SUFFICIENT TO EXPLAIN THE SOURCE OF SUBSEQUENT TRANSACTIONS. HE THEREFORE MADE ONLY OF RS.9.75 LACS AS UNEXPLAINED INVESTMENT AND NO ADDITION WAS MADE ON ACCOUNT OF OTHER TWO TRANSACTIONS. HE HOWEVER MADE ADDITION OF GROSS PRO FIT OF RS.24,539/- IN RELATION TO THE UNACCOUNTED SALES. IN APPEAL THE AS SESSEE SUBMITTED THAT ALL THE 5 THREE LOOSE PAPERS WERE WRITTEN AT THE SAME POINT O F TIME BY THE SAME PERSONS AND THE EVIDENCE WAS FABRICATED. IT WAS ALSO SUBMIT TED THAT THESE WERE DUMP DOCUMENTS. CIT(A) HOWEVER DID NOT ACCEPT THE CLAIM THAT THE DOCUMENTS WERE COOKED UP. IT WAS OBSERVED BY HIM THAT THE LOOSE PA PERS WERE FOUND FROM THE PREMISES OF THE ASSESSEE WHICH CONTAINED CASH SALES WHICH WERE NOT REFLECTED IN THE BOOKS. THE PARTNER OF THE ASSESSEE ADMITTED THESE FACTS AT THE TIME OF SURVEY. HE THEREFORE UPHELD THE ORDER OF AO MAKING ADDITION OF RS.9.75 LACS AS UNEXPLAINED INVESTMENT AND RS.24,539/- ON ACCOUNT O F GROSS PROFIT ON THE UNACCOUNTED SALES. AGGRIEVED BY THE SAID DECISION T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.6 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. T HE LEARNED AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOW ER AUTHORITIES WHEREAS THE LEARNED DR PLACED RELIANCE ON THE ORDERS OF AUTHORI TIES BELOW. WE HAVE ALREADY HELD EARLIER IN PARA 2.4 THAT THE ALLEGATIONS OF CO OKING UP OF DOCUMENTS AND FORCIBLE EXTRACTION OF THE STATEMENT IS NOT SUPPORT ED BY ANY EVIDENCE AND THE AFFIDAVITS FILED HAVE TO BE REJECTED AS SELF SERVIN G STATEMENT. THE PAGES 26, 27, & 28 COPIES OF WHICH HAVE BEEN PLACED IN THE PAPER BOOK CLEARLY SHOW CASH SALES GIVING THE QUANTITY OF SALES, RATES AND SALE VALUE. THESE ARE NOT DUMP DOCUMENTS. THESE SALES ARE ADMITTEDLY NOT ACCOUNTED IN THE REGULAR BOOKS. THEREFORE IN OUR VIEW THESE HAVE BEEN RIGHTLY CONSI DERED AS UNACCOUNTED SALES AND ADDITIONS HAVE BEEN RIGHTLY MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT AND GROSS PROFIT. AO HAS COMPUTED UNEXPLAINED INVES TMENT IN A FAIR MANNER BY TREATING THE SUBSEQUENT TWO SALES AS EXPLAINED FROM THE INCOME RECEIVED FROM THE FIRST SALE. THERE IS NOTHING PRODUCED BEFORE US TO CONTRAVERT THE FINDINGS OF THE AUTHORITIES BELOW. WE THEREFORE SEE NO INFIRMIT Y IN THE ORDER OF CIT(A) 6 CONFIRMING THE ADDITION ON ACCOUNT OF UNACCOUNTED S ALES AND GROSS PROFIT. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD. 3. THE DISPUTE RAISED IN GROUND NO.5 IS REGARDING A DDITIONS MADE OF RS.8,62,345/- AND RS.11,23,980/- AS UNACCOUNTED COM MISSION INCOME BASED ON THE LOOSE PAPERS BEING THE PAGE NOS.29 & 30 FOUN D AT THE TIME OF SURVEY SHOWING COMMISSION INCOME OF RS.26,96,797/- AND RS. 40,18,324/- RESPECTIVELY. THE ASSESSEE EXPLAINED THAT OUT OF CO MMISSION INCOME OF RS.26,96,797/-, A SUM OF RS.17,92,802/- HAD ALREADY BEEN OFFERED IN THE NAME OF SISTER CONCERN I.E. VISHAL COMMERCIAL CORPORATIO N AND RS.41,750/- WAS RECORDED IN THE ASSESSEES OWN BOOK. THE ASSESSEE D ID NOT OWN THE BALANCE COMMISSION OF RS.8,62,345/-. IN RELATION TO THE COM MISSION INCOME OF RS.40,18,324/- IT WAS EXPLAINED THAT THE ASSESSEE H AD ALREADY OFFERED A SUM OF RS.13,31,353/- AND THE BALANCE AMOUNT OF RS.26,86,9 71/- WAS EXPLAINED AS DISCOUNT. THE AO NOTED THAT OUT OF THE COMMISSION I NCOME OF RS.26,96,797/- ENTERED ON THE PAGE NO.29, THE COMMISSION TO THE TU NE OF RS.8,62,245/- FULL DETAILS OF WHICH GIVING THE NAME OF THE PARTIES FRO M WHOM RECEIVED AND THE AMOUNT HAD BEEN GIVEN (AS PER TABLE BELOW) WERE NEI THER RECORDED IN THE ASSESSEES BOOKS NOR IN THE BOOKS OF M/S. VISHAL CO MMERCIAL CORPORATION. AO THEREFORE ADDED A SUM OF RS.8,62,245/- AS UNACCOUNT ED COMMISSION INCOME BASED ON THE PAGE NO.29. NAME OF THE PARTY AMOUNT DATE ADANI EXPORTS LTD. 30,000 28.7.2004 SARVODAYA TRADING CO. 37,500 5.8.2004 JUPITER DYECHEM LTD. 27,600 2.8.2004 ADANI EXPORTS LTD. 30,000 7.8.2004 7 ADANI EXPORTS LTD. 82,203 10.7.2004 M. KUMAR UDYOG PVT. LTD. 2,77,942 NOT RECORDED HAZEL MERCANTILE LTD. 45,000 NOT RECORDED HAZEL MERCANTILE LTD. 92,000 NOT RECORDED ADANI EXPORTS LTD. 22,500 14.8.2004 HAZEL MERCANTILE LTD. 1,27,500 NOT RECORDED ADANI EXPORTS LTD. 17,500 28.9.2004 CRESCENT INTERNATIONAL 37,500 NOT RECORDED ADANI EXPORTS LTD. 35,000 28.9.2004 TOTAL 8,62,245 3.1 AS REGARDS THE ENTRIES MADE ON PAGE NO.30 TOTAL LING RS.40,18,324/- AO AFTER NECESSARY EXAMINATION AND AFTER CONSIDERING T HE EXPLANATION OF THE ASSESSEE FOUND THAT THE COMMISSION TO THE TUNE OF R S.16,30,000/- FULL DETAILS OF WHICH GIVING THE NAME OF THE PARTIES FROM WHOM RECE IVED AND THE AMOUNT (AS PER DETAILS GIVEN IN THE TABLE BELOW) REMAINED TOTA LLY UNACCOUNTED. THE DETAILS WERE AS UNDER : NAME OF THE PARTY AMOUNT ADANI EXPORTS 7,00,000 SUDARSHAN CHEMICALS 1,25,000 METRIC LABS 50,000 JUPITER DYECHEM 3,00,000 HAZEL MERCANTILE LTD. 4,15,000 CADILA HEALTHCARE LTD. 40,000 TOTAL 16,30,000 8 3.2 THE AO NOTED THAT IN RESPECT OF FIRST ITEM OF R S.7,00,000/- THE ASSESSEE HAD DECLARED RS.5,06,020/- IN THE COMMISSION ACCOUN T BUT NO EXPLANATION WAS GIVEN REGARDING THE BALANCE AMOUNT OF RS.1,93,980/- . THE OTHER ENTRIES WERE TOTALLY UNEXPLAINED. AO THEREFORE MADE ADDITION OF RS.11,23,980/-. 3.3 IN APPEAL, THE ASSESSEE SUBMITTED THAT THE SURV EY TEAM HAD FORCED ONE OF THE STAFF MEMBERS TO DRAW STATEMENT OF COMMISSIO N INCOME AND WRITE IMAGINARY FIGURES AGAINST THE NAMES OF THE SOME OTH ER PARTIES. IT WAS ALSO SUBMITTED THAT THE SURVEY TEAM HAD NOT EXAMINED WHE THER THE DEBIT NOTES WERE ACCOUNTED IN THE BOOKS. IT WAS POINTED OUT THA T MOST OF THE TRANSACTIONS FOUND ON THE LOOSE PAPERS WERE RECORDED IN THE REGU LAR BOOKS OF ACCOUNT. CIT(A) FOR THE REASONS GIVEN EARLIER REJECTED THE A LLEGATION OF COOKING UP OF ENTRIES. IT WAS OBSERVED BY HIM THAT THE ENTRIES FO UND ON THE LOOSE PAPERS WERE PARTLY RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE IN CASE OF THE PART OF THE ENTRIES WERE FOUND TO BE CORRECT, THE REMAINING PAR T COULD NOT BE REJECTED AS INCORRECTLY. DOCUMENTS COULD NOT BE PARTLY RECORDED CORRECTLY AND PARTLY INCORRECT. HE THEREFORE HELD THAT UNACCOUNTED ENTRI ES MENTIONED IN THE LOOSE PAPERS HAVE BEEN RIGHTLY ASSESSED AS UNACCOUNTED CO MMISSION. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.4 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. T HE LEARNED AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOW ER AUTHORITIES WHEREAS THE LEARNED DR PLACED RELIANCE ON THE FINDING GIVEN IN THE ORDERS OF AUTHORITIES BELOW. WE HAVE PERUSED THE RECORDS AND CONSIDERED T HE MATTER CAREFULLY. THE LOOSE PAPERS BEING THE PAGES 29 & 30 WERE DULY SIGN ED BY THE PARTNERS AND FOUND AT THE TIME OF SURVEY. WE HAVE ALREADY VIDE P ARA 2.4 OF THIS ORDER REJECTED THE ALLEGATION OF THE ASSESSEE THAT THE EN TRIES WERE COOKED UP AND 9 THAT ONE OF THE STAFF MEMBERS HAD BEEN FORCED TO WR ITE THE ENTRIES. PART OF THE ENTRIES FOUND ON THESE PAPERS HAVE BEEN FOUND TO BE RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE IF THE PART OF THE ENTRIES HAS F OUND TO BE CORRECT THE REMAINING PART CANNOT BE REJECTED AS INCORRECT. THE DOCUMENT FOUND CANNOT BE TAKEN AS PARTLY CORRECT AND PARTLY INCORRECT. THE A DDITION HAS BEEN ONLY IN RELATION TO THE ENTRIES NOT RECORDED IN THE BOOKS O F ACCOUNT. WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) CONFIRMING THE ADDITION IN R ELATION TO ENTRIES NOT RECORDED ON THE BOOKS AND THE SAME IS THEREFORE UPHELD. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. 5. ORDER WAS PRONOUNCED IN THE OPEN COURT 11.05.201 1. SD/- SD/- ( R.S. PADVEKAR ) (RAJEND RA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 11.05.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR I BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK