The ACIT, Circle-5, Surat V. Smt. Vasantaben Shantilal Modi, Surat

ITA 576/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72968 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: BIRJU SHAH
• Keywords: Unexplained expenditure; Income from undisclosed sources
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 576 & 614 /AHD/2013 (ASSESSMENT YEAR: 2009-10) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE. 5 ROOM NO. 309 3 RD FLOOR AAYAKAR BHAVAN, MAJURA GATE SURAT. V/S SMT. VASANTABEN SHANTILAL MODI, PROP OF M/S. LAXMI TOBACCO STORES, SHOP NO. 9/931-B, NR. ZATPATIA HANUMAN MANDIR, AMBAJI ROAD, SURAT (APPELLANT) (RESPONDENT) SMT. VASANTABEN SHANTILAL MODI, PROP OF M/S. LAXMI TOBACCO STORES, SHOP NO. 9/931-B, NR. ZATPATIA HANUMAN MANDIR, AMBAJI ROAD, SURAT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE. 5 ROOM NO. 309 3 RD FLOOR AAYAKAR BHAVAN, MAJURA GATE SURAT. (APPELLANT) (RESPONDENT) PAN: ABPPM 8988F APPELLANT BY : SHRI K.C. MATHEWS, SR. D.R . RESPONDENT BY : SHRI BIRJU SHAH A.R. ( )/ ORDER DATE OF HEARING : 29-01-2014 DATE OF PRONOUNCEMENT : 14 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE ASSESSEE AND TH E OTHER FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A)-I, SURAT DA TED 27.12.2012 FOR A.Y. 2009-10. ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF LAXMI T OBACCO STORES AND ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF PAN MASALA AND TOBACCO. 4. IN THIS CASE, SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 27.02.2009 WHEREIN CERTAIN DOCUMENTS WERE FOUND AND INVENTORISED AND STATEMENT OF SHRI KAMLESH MODI, SON OF THE ASSESSEE WAS RECORDED ON 27.02.2009 WHEREIN HE ADMITTED TO UNDISCLOSED INCOM E OF RS. 50 LACS ON ACCOUNT OF UNACCOUNTED RECEIVABLE AND SHORTAGE OF S TOCK IN THE HANDS OF THE ASSESSEE WHICH WAS OVER AND ABOVE HER REGULAR I NCOME. ASSESSEE THEREAFTER FILED HER RETURN OF INCOME ON 29.09.2009 FOR A.Y. 2009-2010 DECLARING TOTAL INCOME OF RS. 16,87,876/-. THE CA SE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 29.12.2011 AND THE TOTAL INCOME WA S ASSESSED AT RS. 52,03,987/-. AGGRIEVED BY THE ORDER OF A.O, ASSESS EE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 27.12.2012 G RANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER O F CIT(A), THE ASSESSEE AS WELL AS REVENUE ARE NOW IN APPEAL BEFOR E US. 5. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE IN PRE SENT READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED INCOME DISCLOSED OF RS. 35,00,000/- DURING THE COURSE OF SURVEY PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION AGAINST THE INCOME DISCLOSED DURING THE C OURSE OF SURVEY TO THE TUNE OF RS. 35,00,000/-. 6. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN EST IMATING UNDISCLOSED TURNOVER AT RS. 1.8 CRORES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN EST IMATING THE NET PROFIT @ 3% COMING TO RS. 13 LAKHS WHICH IS AFTER ROUNDED OFF. ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 3 3. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN EST IMATING THE SEED CAPITAL/INITIAL CAPITAL OF RS. 15 LAKHS. 4. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN EST IMATING UNDISCLOSED TURNOVER, SEED CAPITAL AND GROSS PROFIT AND THEREBY UPHOLDING THE ADDITION OF RS. 11,00,000/-. 7. SINCE THE GROUNDS RAISED BY REVENUE AND ASSESSEE AR E INTERCONNECTED BOTH THE APPEALS ARE CONSIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT DURING THE COURSE OF SURVEY, ASSESSEE HAD ADMITTED ADDITIONAL INCOME OF RS. 50 LACS ON ACCOUNT OF RECEIVABLE AND SHORTAGE OF STOCK AS U NACCOUNTED INCOME WHICH WAS ALSO ACCEPTED IN THE STATEMENT OF SHRI KA MLESH MODI, THE SON OF THE ASSESSEE WHICH WAS RECORDED U/S. 133A OF THE ACT. THE ASSESSEE HAD VOLUNTARILY OFFERED THE SAME FOR TAX AND ASSESS EE HAD ALSO AGREED TO PAY THE TAXES THEREON. HOWEVER, IN THE RETURN OF IN COME FILED BY THE ASSESSEE, A.O. NOTICED THAT ASSESSEE HAS DISCLOSED INCOME AT RS. 15 LACS AS AGAINST RS. 50 LACS ADMITTED DURING THE COURSE O F SURVEY. THE ASSESSEE WAS THEREFORE ASKED TO JUSTIFY THE UNDER S TATED INCOME OF RS. 35 LACS. THE ASSESSEE INTERALIA SUBMITTED THAT THE VAR IOUS AMOUNTS WRITTEN AGAINST DIFFERENT DATES REPRESENTED UNACCOUNTED CAS H SALE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THE AMOUNTS WHICH HA VE BEEN NOTED IN THE DIARIES WERE GROSS SALE RECEIPTS AND WERE NOT NET P ROFITS. IT WAS FURTHER SUBMITTED THAT ONLY NET PROFIT WAS LIABLE TO TAX AN D NOT THE GROSS SALES RECEIPTS. IT WAS FURTHER SUBMITTED THAT THE GRAND TOTAL OF ALL THE AMOUNTS OF SALES MENTIONED IN THE DIARIES AGGREGATED TO RS. 21,03,466/- WHICH WAS FAIRLY BELOW THE AMOUNT OF RS. 50 LACS WHICH WAS DE CLARED ERRONEOUSLY DURING THE SURVEY. IT WAS FURTHER SUBMITTED THAT THE GROSS PROFIT MARGIN OF THE BUSINESS FOR THE YEAR UNDER CONSIDERATION WA S 2% AND THEREFORE THE PROFIT WHICH CAN BE SUBJECTED TO TAX COULD BE RS. 4 2,069/-(RS. 21,03,466 ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 4 X 2%). THE SUBMISSION OF THE ASSESSEE WAS NOT FOUN D ACCEPTABLE TO THE A.O. FOR THE REASON THAT DURING THE COURSE OF SURVE Y PROCEEDINGS, THE SURVEY PARTY HAD FOUND UNACCOUNTED INCOME ON ACCOUN T OF RECEIVABLE AND SHORTAGE OF STOCK TO WHICH THE ASSESSEE COULD NOT O FFER ANY SATISFACTORY EXPLANATION AND ULTIMATELY THE SAME WAS OFFERED FOR TAX. THE A.O. THEREFORE CONSIDERED THE BALANCE OF RS. 35 LAC (RS. 50 LAC LESS RS. 15 LAC) BEING THE DIFFERENCE OF ADDITIONAL INCOME NOT REFLE CTED IN THE RETURN OF INCOME AND THAT OFFERED FOR TAX DURING THE COURSE O F SURVEY, AS UNACCOUNTED INCOME DURING THE YEAR. AGGRIEVED BY TH E ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) G RANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 8.1 THE APPELLANTS CONTENTION HAS BEEN EXAMINED. T HE APPELLANT HAS DISCLOSED A TURNOVER OF RS 2. 36 CRORES ON WHICH, A GROSS PROFIT OF ONLY 2% HAS BEEN SHOWN. THE EXPENSES IN PROFIT & LOSS A/C AFTER GROSS PROFIT ARE NEGLIGIBLE AND HAVE BEEN SHOWN AT RS 1,42,226/- INCLUDING MISC EXPENSES OF RS 52,263/-. THEREFORE, PRIMA FACIE NOT ONLY THE GROSS PROFIT SHOWN IS VERY LOW, BUT ALSO THE EXPENSES CLAIMED AFTER GROSS PROFIT ARE UNREASONABLY LOW TO SUSTAIN A TURNOVER OF RS. 2. 36 CRORES. 8.2 IN THIS BACKGROUND, IT IS NOTICED THAT IMPOUNDED DI ARIES CONTAINED A RECORD OF 'UNACCOUNTED SALES' FROM 16.01.2009 TO 27.02.2009. (I.E. THE IMPOUNDED DIARIES COVERED A PERIOD OF ABOUT 43 DAYS AND THE TOTAL UNACCOUNTED SALES COMES TO RS 21,03,466/-. HO WEVER, IN THE STATEMENT ON OATH, INCOME OF THE ENTIRE YEAR WAS DECLARED AND NOT JUST UNDISCLOSED I NCOME OF THESE 43 DAYS. THERE HAS BEEN SPECIFIC ADMISSION IN THE STATEMENT ON OATH (SUPRA) THAT SOM E OF THE RECEIPTS ARE MISSING. THEREFORE, IT CANNOT BE ACCEPTED THAT THERE HAS BEEN NO ' UNACCOUNTED SA LES ' EXCEPT FOR THE PERIOD OF 43 DAYS REFERRED SUPRA, MORE SO, WHEN IT WAS ADMITTED THAT SOME OF T HE RECEIPTS ARE MISSING. IF WE CALCULATE THE 'UNACCOUNTED ' TURNOVER OF ENTIRE YEAR ON PROPORTIO NATE BASIS, WE GET AN UNACCOUNTED TURNOVER OF RS 1, 78,55,002/- ( RS 21.03,466 / 365) . 43 IF WE ROUND IT OFF TO RS. 1,80,00,000/- AND THEN ES TIMATE THE SEED CAPITAL / INITIAL CAPITAL REQUIRED TO SUSTAIN THIS TURNOVER, CONSIDERING THE MONTHLY CYCL E OF ROTATION OF FUNDS, THE SEED CAPITAL COMES TO RS. 15,00,000 /- IE. (18,00,000/-). 12 8.3 MOREOVER, AS DISCUSSED SUPRA, THE GROSS PROFIT OF 2 % IS VERY LOW CONSIDERING THE TURNOVER. THE WITHDRAWALS OF HOUSEHOLD EXPENSE SHOWN BY THE APPEL LANT ARE ONLY RS 48,000/- WHICH ARE ALSO VERY MEAGRE AND ESTABLISH THE EXISTENCE OF UNACCOUNTED W ITHDRAWALS FROM ' UNACCOUNTED INCOME'. 8.4 IN THIS BACKGROUND, IF THE GROSS PROFIT OF 10% IS ESTIMATED ON UNACCOUNTED SALES OF RS 1, 80,00,000/-, WE GET A GROSS PROFIT OF RS 18,00,000/ -. IF THE SAME GROSS PROFIT IE. 10 % IS APPLIED TO THE DISCLOSED TURNOVER OF RS 2. 36 CRORES, WE GET ADDIT IONAL GROSS PROFIT OF 8% ON RS 2,36,42,628/- WHICH COMES TO APPROXIMATELY RS 19,00,000/-. IF WE ADD TH E ESTIMATION OF SEED CAPITAL OF RS 15,00,000/- , GROSS PROFIT OF UNACCOUNTED SALES OF RS 18,00,000/- AND SUPPRESSION OF GROSS PROFIT ON DISCLOSED SALES OF RS. 19,00,000/-, THE TOTAL UNACCOUNTED INCOME CO MES TO RS. 52,00,000/- WHICH IS COMPARABLE TO THE DECLARATION OF RS 50,00,000/- MADE BY THE APPELLANT . THEREFORE, IT CANNOT BE SAID THAT DECLARATION MADE AT THE TIME OF SURVEY, WAS EXCESSIVE, UNREASON ABLE, AND HAD NO CONNECTION WITH EVIDENCE FOUND DURING THE COURSE OF SURVEY. IN FACT, IT WAS A VOLU NTARY DISCLOSURE, AND AN ESTIMATION OF UNACCOUNTED INCOME EARNED FOR THE ENTIRE YEAR, ON THE BASIS OF EVIDENCE FOUND FOR 43 DAYS. THEREFORE, THE APPELLAN T ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 5 'S CONTENTION IS REJECTED IN PRINCIPLE. HOWEVER, AS DISCUSSED SUPRA, THE APPELLANT HAS SHOWN NEGLIGIBL E EXPENSES AFTER GROSS PROFIT AND SAID EXPENSES CANNO T SUSTAIN THIS KIND OF TURNOVER. THEREFORE, THERE H AS BEEN UNACCOUNTED EXPENDITURE MET OUT OF UNACCOUNTED INCOME. 8.5 CONSIDERING THE SAME, IF THE APPELLANT'S TURNOV ER IS ESTIMATED AT RS 4.2 CRORES INCLUDING THE DISCLOSED TURNOVER (RS 2. 4 CRORES + RS 1.8 CRORES ) AND NET PROFIT ON THE SAME IS ESTIMATED @ 3 %, WE GET A NET PROFIT OF RS. 12. 6 LAKHS, WHICH MAY BE R OUNDED OFF TO RS 13 LAKHS. ONCE, THE ESTIMATION OF SEED CAPITAL / INITIAL CAPITAL OF RS 15 CRORES IS A DDED TO IT, THE TOTAL INCOME COMES TO RS 28 LAKHS. IF WE REDUCE THE TOTAL INCOME AS PER COMPUTATION OF INCOM E OF RS 16,87,876/- FROM THIS AMOUNT, THE REMAINING AMOUNT COMES TO RS. 11,12,124/- WHICH MAY BE ROUNDED OF TO RS 11,00,000/- . THEREFORE, THE ADDITION OF RS. 35,00,000/- MADE BY THE A.O. IS REDUCED TO RS. 11, 00,000/-. 8.6 THE ADDITION HAS BEEN SUSTAINED ON THE BASIS OF ESTIMATION OF TOTAL TURNOVER OF RS. 4.2 CRORES A ND NET PROFIT OF 3% ALONG WITH SEED CAPITAL OF RS. 15, 00,000/-. 9. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE AND A SSESSEE ARE NOW IN APPEAL BEFORE US. 10. BEFORE US, THE LD. D.R. SUBMITTED THAT DURING THE C OURSE OF SURVEY, ASSESSEE HAD ADMITTED TO UNDISCLOSED INCOME OF RS. 50 LACS FOR A.Y. 09- 10 WHICH IS OVER AND ABOVE HER REGULAR INCOME AND N OT RECORDED IN THE BOOKS OF ACCOUNTS. FURTHER IN THE STATEMENT NOWHERE IT WAS SUBMITTED THAT THE INCOME DISCLOSED WAS THE AMOUNT RECEIVED ON ACC OUNT OF UNACCOUNTED SALES AS REFLECTING IN THE IMPOUNDED DIARY. LD. D.R . FURTHER SUBMITTED THAT CIT(A) HAS WRONGLY CONSIDERED THE NUMBER OF DA YS TO BE 43 WHEREAS THE ACTUAL NUMBER OF DAYS WERE 18. CIT(A) SHOULD TH EREFORE WORKED OUT THE UNACCOUNTED SALE ON BASIS OF 18 DAYS AND NOT 43 DAYS AND IN THAT EVENTUALITY THE TURNOVER WOULD WORK OUT TO HIGHER A MOUNT AND FOR WHICH HE POINTED TO PAGE 11 TO 16 OF THE PAPER BOOK OF AS SESSEE. IT WAS FURTHER SUBMITTED THAT AFTER THE DECLARATION WAS MADE, NO E FFORTS WERE TAKEN BY THE ASSESSEE AND THE ASSESSEE KEPT SILENT IN RESPEC T OF RECEIVABLE AND SHORTAGE OF STOCK AS ESTIMATED WHICH WAS NOW TREATE D BY THE ASSESSEE ONLY AS CASH SALES. HE FURTHER SUBMITTED THAT THERE IS NOTHING ON RECORD TO SHOW THAT ANY THREAT OR COERCION WAS EXERTED ON ASS ESSEE TO GET A CONFESSION AND THEREFORE SUBMITTED THAT IF THE STAT EMENT OF THE ASSESSEE IS ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 6 VOLUNTARY AND THERE HAS BEEN NO PRESSURE ON HIM, TH E STATEMENT IS BINDING ON THE ASSESSEE. HE THUS SUPPORTED THE ORDER OF A.O . 11. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE E NTRIES IN THE DIARIES WERE CASH SALES AGGREGATING TO RS. 21,03,466/- WHIC H WERE NOT RECORDED IN THE BOOKS OF ASSESSEE AND THERE WAS SHORTAGE OF STOCK IN TRADE TO THE TUNE OF RS. 22,671/- BUT HOWEVER ASSESSEE ADMITTED A SUM OF RS. 50 LACS AS UNACCOUNTED INCOME. HE FURTHER SUBMITTED THAT S INCE THE DISCLOSURE OF RS. 50 LAC WAS MUCH HIGHER THAN WHAT SHOULD BE CHAR GEABLE TO TAX, ASSESSEE HAD ONLY OFFERED RS. 15 LACS TO COVER ALL DISCREPANCIES AND SHORTAGE OF STOCK FOUND DURING THE COURSE OF SURVEY . HE FURTHER SUBMITTED THAT THE ASSUMPTIONS MADE BY CIT(A) FOR S USTAINING THE ADDITION IS ON THE BASIS OF ASSUMPTION AND NOT SUPP ORTED BY ANY MATERIAL ON RECORD. HE THEREFORE SUBMITTED THAT NO ADDITION WAS CALLED FOR. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT A SURVEY WAS CONDUCTE D AT THE PREMISES OF ASSESSEE AND DURING THE COURSE OF SURVEY CERTAIN DI ARIES WERE FOUND WHICH CONTAINED ENTRIES OF CERTAIN AMOUNTS AGAINST DIFFERENT DATES AGGREGATING TO RS. 21,03,466/-. IN THE STATEMENT R ECORDED, ASSESSEE SUBMITTED THAT THE SAME REFLECTED CASH SALES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND OFFERED RS. 50 LAC AS UND ISCLOSED INCOME BUT HOWEVER IN THE RETURN OF INCOME, ASSESSEE OFFERED O NLY RS. 15 LACS. BASED ON THE DETAILS OF ACCOUNTED CASH SALES FOUND DURING THE SURVEY, CIT(A) WORKED OUT SALES FOR THE ENTIRE YEAR, CAPITA L REQUIREMENT AND THEREAFTER APPLYING THE NET PROFIT RATE @ 3% RESTRI CTED THE ADDITION TO RS. 11 LACS AS AGAINST RS. 35 LACS MADE BY A.O. BEFORE US, LD. D.R. HAS ITA NOS. 576 & 614/A HD/2013 . A.Y. 2009- 10 7 POINTED OUT THAT CIT(A) HAS WORKED OUT THE SALES ON THE BASIS OF ENTRIES FOUND IN DIARY AND CONSIDERING THE NUMBER OF DAYS T O BE 43 INSTEAD OF 18 DAYS AND THEREFORE THE ADDITION HAS BEEN WORKED OUT TO A LOWER FIGURE. BEFORE US, LD. A.R. ON THE OTHER HAND HAS SUBMITTED THAT CIT(A) HAS PROCEEDED ON THE BASIS OF PRESUMPTION BUT AT THE SA ME TIME, THE LD. A.R. HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO CONT ROVERT THE FINDINGS OF CIT(A). CONSIDERING THE TOTALITY OF FACTS, WE ARE O F THE VIEW THAT THE ENDS OF JUSTICE SHALL BE MET IF ADDITION IS RESTRICTED T O RS. 5 LAC AS AGAINST THE ADDITION OF RS. 35 LAC MADE BY A.O. AND WHICH WAS S USTAINED AT RS. 11 LAC BY CIT(A). WE THUS DIRECT ACCORDINGLY. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND REVEN UE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 02 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD