M/s Cue Apparels Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5603/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81867 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Income from undisclosed sources
• Section: 133A

Judgement Text

ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.5603/DEL/2010 ASSESSMENT YEAR : 2006-07 CUE APPARELS PVT. LTD. VS ASSTT. COM MISSIONER OF INCOME TAX, 14, GOLF LINKS, CI RCLE-3(1), C.R. BUILDING, NEW DELHI. NEW DELHI. (PAN: AACCC4802B) (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY : SMT. PARWINDER KAUR, SR.DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A)-VI, NEW DELHI DATED 07.09.2010 IN APPEAL NO. 288/08-09 FOR AY 2006- 07. 2. ALTHOUGH THE ASSESSEE HAS RAISED AS MANY AS SEVE N GROUNDS IN THIS APPEAL BUT EXCEPT MAIN GROUND NO. 3, THE OTHER GROUNDS ARE ARGUMENTATIVE AND SUPPORTIVE TO THE MAIN GROUNDS WHICH READS AS UNDER :- 3. THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS.14,50,000/- AFTER IGNORING THE FACTS THAT: THE A PPELLANT COMPANY HAS DECLARED INCOME OF RS.14,50,000.00 MUTU ALLY DURING THE SURVEY PROCEEDINGS UNDER SECTION 133A OF THE ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 2 OF 7 INCOME TAX ACT, 1961 WHICH IS PART OF THE NET PROFI T OF RS.46,87,849.74 OF THE COMPANY FOR THE AY 2006-07. 3. WHEN THE CASE WAS CALLED FOR HEARING, NEITHER TH E ASSESSEE NOR HIS REPRESENTATIVE APPEARED BEFORE US AND ON CAREFUL PE RUSAL OF THE APPEAL RECORD, INTER ALIA ASSESSMENT AND IMPUGNED ORDER, WE FIND I T APPROPRIATE TO DECIDE THE APPEAL IN ABSENCE OF ASSESSEE AND HIS REPRESENTATIV E AND, THUS, WE PROCEED TO DECIDE THE APPEAL ON MERITS AFTER HEARING THE LD. D R. 4. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE RETURN OF INCOME WAS FILED ON 30.11.2006 AT AN INCOME OF RS.4 8,58,320/-. A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT BY THE INVESTIGATIO N WING UNIT-III(3), NEW DELHI ON 23.12.2005. DURING THE COURSE OF SEARCH O PERATION, THE ASSESSEE SURRENDERED A SUM OF RS.14,50,000/- FOR TAXATION AS INCOME UNDER THE HEAD OF BUSINESS AND PROFESSION IN RESPECT OF ASSESSEE COMP ANY FOR THE FINANCIAL YEAR ENDING ON 31.3.2006. SUBSEQUENTLY, THE CASE WAS SE LECTED FOR SCRUTINY AND THE AO NOTICED THAT THE ASSESSEE HAS NOT INCLUDED THE I NCOME OF RS.14,50,000 SURRENDERED BY HIM DURING SURVEY OPERATION, THE AMO UNT WAS DECLARED FOR THE FINANCIAL YEAR ENDING ON 31.3.06 AND THE SAME IS IN CLUDED IN THE AMOUNT OF RETURNED INCOME OF THE ASSESSEE AS DECLARED IN THE RETURN WHICH WAS FILED ON 30.11.2006. THE AO REJECTED THE EXPLANATION OF THE ASSESSEE AND ADDED THE SURRENDERED AMOUNT OF RS.14,50,000/- TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDERATION . THE AO HELD THAT IT IS ONLY THE INCOME FROM BUSINESS NOT ACCOUNTED FOR BY THE ASSESSEE WHICH WAS ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 3 OF 7 SURRENDERED DURING THE COURSE OF SEARCH PROCEEDINGS , THEREFORE, IT SHOULD HAVE BEEN REFLECTED EITHER IN THE BALANCE SHEET OR SHOUL D HAVE BEEN ADDED IN THE COMPUTATION OF INCOME. 5. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) WHICH WAS ALSO DISMISSED BY PASSING THE IMPUGNED ORDER. NOW THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE MAIN GROUNDS AS RE PRODUCED HEREINABOVE. 6. WE HAVE HEARD ARGUMENTS OF LD. DR AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. FROM ASSESSMENT ORDER, WE NOTE THAT THE AO MADE IMPUGNED ADDITION WITH FOLLOWING OBSERVATIONS:- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE A LSO DUE TO THE FACT THAT THE ASSESSEE FILED RETURN FOR THE ASSESSMENT YEAR 2006-07 ON 30/11/2006 I.E. THE AFTER ELEVEN MO NTHS OF SURVEY AND ASSESSEE HAS NEITHER SHOWN THE SURRENDER ED AMOUNT OF RS.14,50,000/- IN ITS COMPUTATION OF INC OME NOR GIVEN ANY NOTE THAT THE N.P. DECLARED FOR THE YEAR INCLUDES AMOUNT SURRENDERED DURING SURVEY OPERATION. WHEN TH E DEPARTMENT SHOW CAUSED THE ASSESSEE ON THIS ISSUE T HEN ASSESSEE CLAIMED THAT THE N.P. DECLARED FOR THE A.Y .2006-07 INCLUDES THE AMOUNT SURRENDERED DURING THE SURVEY O PERATION. THE ASSESSEE FAILED TO PROVIDE THE TRADING ACCOUNT AS ON DATE OF SURVEY OPERATION I.E. 23/12/2005. FURTHER THE AM OUNT SURRENDERED DURING SURVEY OPERATION CANNOT BE TREAT ED AS NORMAL INCOME OF THE ASSESSEE FOR THE YEAR TILL THE DATE OF SURVEY. IT IS ONLY THE INCOME FROM BUSINESS NOT ACC OUNTED FOR BY THE ASSESSEE, WHICH WAS SURRENDERED. HENCE IT SH OULD HAVE BEEN REFLECTED EITHER IN THE B/S OR SHOULD HAVE BEE N ADDED IN THE COMPUTATION. HOWEVER, THIS WAS NOT DONE IN THIS CASE. 7. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT( A) UPHELD THE ADDITION WITH FOLLOWING OBSERVATIONS:- ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 4 OF 7 ' 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F LD. AR & HAVE GONE THROUGH THE ASSESSMENT ORDER. A SURVEY OPERATION U/S 133A WAS CARRIED OUT ON THE APPELLANT'S PREMISE S ON 23.12.2005. DURING THE SURVEY PROCEEDINGS. THE APPE LLANT WAS UNABLE TO PRODUCE THE COMPLETE DETAILS FOR PREPARIN G THE TRADING ACCOUNT AS ON 23.12.2005, AND THEREFORE, DECLARED I NCOME OF RS. 14,50,000/- UNDER THE HEAD BUSINESS AND PROFESSION FOR THE FINANCIAL YEAR ENDING ON 31.3.2006, RELEVANT EXTRAC TS OF THE STATEMENT OF SHRI ROHIT GANDHI, DIRECTOR ARE GIVEN IN THE ASSESSMENT ORDER AND FOR THE SAKE OF CONVENIENCE, T HEY ARE REPRODUCED AS UNDER: WE ARE ALSO HAVING STORES OF M/S. CUE APPARELS (P) LIMITED AT BANGALORE, MUMBAI AND M.G. ROAD, GURGOAN MEHRAUL I ROAD, NEW DELHI AND IT IS NOT POSSIBLE FOR ME TO COLLECT THE COMPLETE DETAIL OF SALES AND OTHER STATISTICS FOR PREPARING THE TRADING ACCOUNT AS ON TODAY BESIDES THIS BOOKS OF ACCOUNTS OF M/S. R&R ARTS ARE NOT COMPLETED AND AS SUCH I FIND IT DIFFIC ULT TO PREPARE THE TRADING ACCOUNT OF R&R ARTS AS ON TODAY THE 23R D DECEMBER, 2005 IN ORDER TO AVOID LITIGATION WITH THE DEPARTME NT AND TO HAVE MENTAL PEACE. I HEREBY DECLARE INCOME OF RS. 40,00, 000/- UNDER THE HEAD BUSINESS & PROFESSION IN RESPECT OF BOTH T HE CONCERNS I. E. M/S. R.&R ARTS AND M/S. CUE APPARELS PVT. LTD. A S UNDER THE FINANCIAL YEAR ENDING ON 31.3.2006. THE APPELLANT'S CONTENTION IS THAT THIS INCOME OF R S. 14,50,000/- IS PART OF THE NET PROFIT OF RS. 46,87, 849/-, WHICH IS REFLECTED IN THE RETURNED INCOME. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE APPELLANT COMPANY SHOWS THAT OPERATING INCOME IS SHOWN AT RS. 4,81,66,512/- AND THE NET PROFIT FOR THE YEAR IS REFLECTED AT RS.46,87,849.74. HOWE VER, THE APPELLANT HAS NOT FILED ANY DETAILS AND DOCUMENTS T O SUBSTANTIATE THAT THE INCOME DECLARED ON 23.12.2005 AT RS. 14,50 ,000/- IS PART OF THIS INCOME SHOWN IN THE PROFIT AND LOSS ACCOUNT . NO BIFURCATION OR DETAILS HAVE BEEN FILED TO GIVE A CL EAR PICTURE OF THE INCOME AS ON THE DATE OF SURVEY. DURING THE SUR VEY PROCEEDINGS ALSO, THE APPELLANT SHOWED ITS INABILIT Y TO FURNISH THE TRADING ACCOUNT. IN SUCH CIRCUMSTANCES, I FIND THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION OF RS. 14, 50,000/- ON ACCOUNT OF SURRENDER MADE DURING THE SURVEY PROCEED INGS. 8. ON CAREFUL CONSIDERATION OF ABOVE, AT THE OUTSET , WE NOTE THAT UNDISPUTEDLY SURVEY U/S 133A OF THE ACT WAS CARRIED OUT BY THE INVESTIGATION ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 5 OF 7 WING OF THE DEPARTMENT ON 23.12.2005 AND DURING THE COURSE OF SURVEY PROCEEDINGS, SHRI ROHIT GANDHI, DIRECTOR OF THE ASS ESSEE COMPANY GAVE STATEMENT WHICH HAS BEEN REPRODUCED HEREINABOVE IN THE OPERATIVE PART OF THE IMPUGNED ORDER WHICH CLEARLY SHOWS THAT THE INTENTI ON OF THE ASSESSEE WAS TO DECLARE INCOME OF RS. 14,50,000 FOR THE FINANCIAL Y EAR ENDING ON 31.3.2006. IT WAS CONTENDED BY THE LD. DR THAT THE ASSESSEE COMPA NY SURRENDERED ADDITIONAL INCOME FROM UNDISCLOSED SOURCES, THEREFORE, THE AO WAS JUSTIFIED IN MAKING THE ADDITION WHICH WAS RIGHTLY UPHELD BY THE CIT(A) BY HOLDING THAT DURING THE SURVEY PROCEEDINGS, THE ASSESSEE SHOWED ITS INABILI TY TO FURNISH THE TRADING ACCOUNT, THEREFORE, THE ORDERS OF THE AUTHORITIES BELOW MAY KINDLY BE UPHELD. 9. ON CAREFUL CONSIDERATION OF ASSESSMENT AND IMPUG NED ORDER, WE OBSERVE THAT THE CIT(A,) AT PAGE 2 IN PARA 3 OF THE IMPUGNE D ORDER, HAS OBSERVED THAT THE ASSESSEE HAS SUPPORTED THE CONTENTION THAT MUTUALLY DECLARED/SURRENDERED INCOME OF RS.14,50,000/- WAS PART OF NET PROFIT OF RS.46,87,849/- FOR AY 2006- 07. BEFORE THE CIT(A) IT WAS ALSO CONTENDED BY THE ASSESSEE THAT THE SURVEY TEAM HAD DEMANDED A TRADING ACCOUNT UPTO THE DATE O F SEARCH AND IT WAS NOT POSSIBLE LATE IN THE EVENING TO COLLECT THE SALES D ATA FROM FOUR DIFFERENT SHOWROOMS SITUATED IN VARIOUS PARTS OF THE COUNTRY FOR ACCOUNTING PURPOSES. ON BEHALF OF THE ASSESSEE, IT WAS ALSO SUBMITTED THAT THE COMPANY COULD NOT PREPARE TRADING ACCOUNT AND PROFIT AND LOSS ACCOUNT WITH CO RRECT FIGURES ON THE SPOT ON THE DATE OF SEARCH, THEREFORE, THE DIRECTOR OF THE COMPANY HAS DECLARED THE ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 6 OF 7 INCOME/PROFIT OF THE ASSESSEE COMPANY ON ESTIMATE B ASIS ON THE MUTUAL CONSENT OF THE INCOME TAX SURVEY TEAM WHICH WAS NOT BASED O N ANY DOCUMENT OR ANY OTHER INFORMATION FOUND DURING THE COURSE OF SURVEY . ON CAREFUL CONSIDERATION OF STATEMENT OF SHRI ROHIT GANDHI, DIRECTOR OF THE COMPANY, WE ARE INCLINED TO HOLD THAT THE INTENTION OF THE DIRECTOR WAS TO DECL ARE AND SURRENDER AN INCOME OF RS.14,50,000/- UNDER THE HEAD OF BUSINESS AND PROFE SSION IN RESPECT OF BOTH THE CONCERNS I.E. M/S R&R ARTS AND M/S CUE APPARELS PVT . LTD. FOR THE FINANCIAL YEAR ENDING ON 31.3.2006. SUBSEQUENTLY, THE ASSESS EE COMPANY FILED ITS RETURN FOR AY 2006-07 ON 30.11.2006 AT AN INCOME OF RS.48, 58,320/- FOR THE FINANCIAL YEAR ENDED ON 31.03.2006, THEREFORE, IT CAN SAFELY BE PRESUMED THAT THE SURRENDERED IMPUGNED INCOME WAS INCLUDED IN THE RET URNED INCOME OF THE ASSESSEE, AND HENCE, THE ACTION OF THE AUTHORITIES BELOW IS NOT SUSTAINABLE AND WE SET ASIDE THE SAME. ACCORDINGLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 28 TH OCTOBER, 2014 GS ITA NO.5603/DEL/2010 ASSTT.YEAR: 2006-07 PAGE 7 OF 7 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR