Shri. Kushal D. Oswal, Bijapur V. CIT, Belgaum

ITA 593/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60776 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QUERSHI
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Unexplained investment
• Section: 43B; 143(3); 147; 69; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE RESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NOS.593 &, 594/BA NG/2011 (ASST. YEARS - 2004-05 & 2005-06) SHRI KUSHAL D OSWAL, PORP : HEMENDRA KIRANA BHANDAR, KIRANA BAZAR, BIJAPUR. . APPELLANT PAN - AABPO9185D. VS. THE COMMISSIONER OF INCOME-TAX, BELGAUM. . RESPONDENT APPELLANT BY : SHRI ASHOK A KULKARNI, ADVOCATE RESPONDENT BY : SHRI FARHAT HUSSAIN QUERSHI, CIT DATE OF HEARING : 21-06-2012 DATE OF PRONOUNCEMENT : 29-06-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEARS ARE 2004-05 AND 2005-06. THE APPEALS ARE DIR ECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX AT BELGAU M DATED ITANOS.593&594/B/2011 2 29.03.2011. THE APPEALS ARISE OUT OF THE ORDER PAS SED U/S 263 OF THE INCOME-TAX ACT, 1961 2. IN BOTH THE APPEALS, THE ASSESSEE IS AGGRIEVED B Y THE ORDER OF THE CIT U/S 263 OF THE INCOME-TAX ACT REVISING THE ASSE SSMENT ORDER PASSED U/S 143(3) READ WITH SEC. 144 OF THE INCOME- TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, AN INDIVIDUAL, IS A DEALER IN KIRANA GOODS UNDER THE NAME AND STYLE O F HEMENDRA KIRANA BHANDAR, BIJAPUR. FOR THE ASSESSMENT YEAR 2004-05 , THE ASSESSEE FILED ITS RETURN OF INCOME ON 24.10.2004 DECLARING A TOTAL INCOME OF RS.1,63,930/-. THE SAME WAS PROCESSED U/S 143(1) O F THE INCOME-TAX ACT. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SUPPRESSED T HE SALES AS DETECTED BY SALES-TAX AUTHORITIES. THEREFORE, DURING THE AS SESSMENT PROCEEDINGS U/S 143(3) READ WITH SEC. 144 OF THE IN COME-TAX ACT, THE ASSESSING OFFICER MADE THE ADDITION OF INCOME ON SU PPRESSED TURNOVER @ 8.01% AND AFTER ALLOWING THE DEDUCTION OF SALES-TAX PAID BY THE ASSESSEE ON SUPPRESSED SALE, COMPUTED THE TA XABLE INCOME AT RS.3,80,654/-. ITANOS.593&594/B/2011 3 4. AGGRIEVED BY THE SAME, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO REDUCED PERCENTAGE OF PROFIT ON SUPP RESSED SALE TO 5%. ON FURTHER APPEAL, THE ITAT HAS RESTRICTED THE PERCENTAGE OF PROFIT TO 3% OF THE NET SALES AND OBSERVED THAT NO OTHER EXPENSES ARE TO BE ALLOWED. 5. MEANWHILE, THE CIT U/S 263 OF THE INCOME-TAX ACT PERUSED THE ASSESSMENT ORDER AND ON VERIFICATION OF THE RECORDS OBSERVED THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE, AS THE ASSESSING OFFICER HAS NOT DONE PROP ER EXAMINATION OR INQUIRY OR VERIFICATION AND HAS CLEARLY OMITTED CER TAIN ISSUES WHILE PASSING THE ASSESSMENT ORDER. IN VIEW OF THE SAME, HE ISSUED NOTICE U/S 263 DATED 14.10.2010 ASKING THE ASSESSEE TO SHO W CAUSE ON THE FOLLOWING ISSUES: 1) IN RESPECT OF SUPPRESSED SALES, THE INCOME WAS E STIMATED @ 8.01% AND THE SALES-TAX AMOUNTING TO RS.87,635/- ON THIS ACCOUNT HAS BEEN ALLOWED AS A DEDUCTION, BUT THE S ALES TAX AMOUNT IS NOT PAID DURING THE YEAR AND, THEREFORE, SHOULD HAVE BEEN ADDED BACK TO THE ASSESSED INCOME. ITANOS.593&594/B/2011 4 2) IN RESPECT OF SUPPRESSED SALE, THE ASSESSEE HAS MADE CORRESPONDING PAYMENT TOWARDS PURCHASES, THE SOURCE S OF WHICH ARE NEITHER RECORDED IN THE ASSESSEES BOOKS OF ACCOUNT NOR IS THERE ASSESSEES EXPLANATION ON RECORD ABOUT THE NATURE AND INVESTMENT. THEREFORE, UNEXPLAINED INVESTMENT ON PURCHASES AS PER THE PROVISIONS OF SEC. 69 OF THE A CT IS TO BE DEEMED AS INCOME TO BE TAXED ACCORDINGLY. 6. THE ASSESSEES REPRESENTATIVE APPEARED AND EXPLA INED THE CASE OF THE ASSESSEE. IT WAS SUBMITTED THAT THERE WAS I NSPECTION BY THE INTELLIGENCE WING DIVISION OF THE COMMERCIAL-TAX D EPARTMENT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 25.8.2003 AND 22.10.2003, DURING WHICH IT WAS FOUND BY THE COMMERCIAL-TAX AUT HORITIES THAT THERE WAS VARIATION IN THE STOCK AS PER THE BOOKS O F ACCOUNT AND PHYSICAL STOCK. AFTER SCRUTINY OF THE SAID REPORTS OF THE INSPECTION AUTHORITIES, THE ASST. COMMISSIONER OF COMMERCIAL-T AX HAS DETERMINED THE TOTAL TURNOVER AT RS.87,36,933/- AND LEVIED TAX THEREON AND THE ASSESSEE HAS ACCEPTED IT AND HAS NOT FILED ANY APPEAL AGAINST THE SAID ORDER. ITANOS.593&594/B/2011 5 7. ON RECEIPT OF THE INFORMATION FROM THE ASST. COM MISSIONER OF COMMERCIAL-TAX, BIJAPUR, THE ASST. COMMISSIONER OF INCOME-TAX RE- OPENED THE ASSESSMENT U/S 147 BY ISSUANCE OF NOTICE U/S 148 ON 12.10.2007 AND HAS COMPLETED THE ASSESSMENT U/S 143 (3) READ WITH SEC. 144 ON 19.12.2008, MAKING THE ADDITION ON ACCO UNT OF SUPPRESSED TURNOVER AND THE ASSESSING OFFICER HAS MADE THE ADD ITION ON ACCOUNT OF INCOME FROM SUPPRESSED SALE AND HAS LEVIED THE T AX ACCORDINGLY. 8. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT ON AP PEAL TO THE ITAT, THE INCOME ON THE SUPPRESSED SALES WAS RESTRI CTED TO 3% AND THAT NOWHERE THE COMMERCIAL-TAX OFFICERS HAVE MENTI ONED THAT ASSESSEE HAS SUPPRESSED PURCHASES. THUS, ACCORDING TO THE ASSESSEE, THE REVISION OF THE ORDER WAS NOT NECESSARY. THE C IT WAS HOWEVER NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE ASSESSMENT ORDER OF THE ASST. COMMISSIONER OF COMME RCIAL-TAX DATED 31.11.2005 CLEARLY BROUGHT OUT THAT THERE ARE UNACC OUNTED PURCHASES TO THE TUNE OF RS.21,24,207/- AND, THEREFORE, THE A SSESSEE HAS NOT EXPLAINED THE SOURCE OF INVESTMENT FOR THE SAID PUR CHASES. HE, THEREFORE, DIRECTED THE AO TO ADD THE UNACCOUNTED P URCHASES OF RS.21,24,207/- U/S 69 OF THE INCOME-TAX. AS REGARD S THE ASSESSEES SUBMISSION THAT THE ASSESSMENT ORDER HAS ALREADY ME RGED WITH THE ITANOS.593&594/B/2011 6 ORDER OF THE CIT(A) AND THE ITAT, THE CIT U/S 263 H ELD THAT THE ISSUE OF UNEXPLAINED INVESTMENT U/S 69 WAS NOT BROUGHT B EFORE THE CIT(A) AND THE ITAT AND, THEREFORE, THERE IS NO CASE OF AN Y MERGER AND THE ASSESSMENT ORDER ON THIS ISSUE WAS AMENABLE TO THE JURISDICTION U/S 263 OF THE INCOME-TAX ACT. 9. AS REGARDS THE ISSUE OF DISALLOWANCE OF SALES-TA X ON THE SUPPRESSED TURNOVER IS CONCERNED, HE OBSERVED THAT BOTH THE CIT(A) AND THE ITAT HAVE NOT CONSIDERED THE APPLICABILITY OF SEC. 43B AS THIS WAS NOT BEFORE THEM AND ALSO THAT SALES-TAX PAYABLE BY THE ASSESSEE WAS DETERMINED ON 31.1.2005 I.E AFTER THE END OF TH E FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05 AND , THEREFORE, THE SALES-TAX ON THE SUPPRESSED TURNOVER WHICH WAS NOT PAYABLE DURING THE YEAR NOR PAID DURING THE YEAR HAS TO BE ADDED BACK. THE CIT ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO MODIF Y THE ASSESSMENT ORDER PASSED ON 19.12.2008 AS PER THE DIRECTION GIV EN IN THE REVISION ORDER. 10. AGGRIEVED BY THE ORDER OF REVISION U/S 263, THE ASSESSEE IS IN APPEAL BEFORE US. ITANOS.593&594/B/2011 7 11. THOUGH THE ASSESSEE HAS RAISED GROUNDS OF APPEA L RELATING TO JURISDICTION OF THE CIT TO PASS THE ORDER U/S 263 B Y RAISING GROUNDS 2 AND 3, HOWEVER, AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS NOT INT ERESTED TO PURSUE THE SAME. THEREFORE, THE GROUNDS 2 AND 3 RELATING TO T HE JURISDICTION OF THE CIT U/S 263 OF THE INCOME-TAX ACT ARE DISMISSED AS NOT PRESSED. 12. COMING TO THE GROUNDS 4 AND 5 RELATING TO THE M ERITS OF THE DIRECTION OF THE CIT TO THE AO TO MAKE AN ADDITION OF UNACCOUNTED PURCHASES OF RS.21,24,207/- AS UNEXPLAINED INVESTME NT U/S 69 OF THE INCOME-TAX ACT AND THE ALTERNATE PLEA THAT ONLY THE BOOK INVESTMENT SHOULD BE BROUGHT TO TAX AND NOT THE TOTAL INVESTME NT APPEARED IN THE PREVIOUS YEAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DETERMINATION OF THE UNACCOUNTED PURCHASES BY THE S ALES-TAX AUTHORITIES CANNOT BE CONSIDERED FOR THE PURPOSE OF MAKING ADDITION U/S 69 OF THE INCOME-TAX ACT. HE SUBMITTED THAT T HE SALES-TAX PAYABLE ON SUPPRESSED SALES ALONE IS TO BE TAKEN INTO CONSI DERATION AND NOT THE UNACCOUNTED PURCHASES. HOWEVER IN THE ALTERNATIVE PLEA, HE PRAYED THAT ONLY THE PEAK INVESTMENT SHOULD BE BROUGHT TO TAX AS THE ASSESSEE PURCHASES MOST OF THE MATERIAL ON CREDIT BASIS AS I S EVIDENT FROM HIS SUBMISSIONS TO THE ASSESSING AUTHORITY FOR THE ASSE SSMENT YEAR 2005- ITANOS.593&594/B/2011 8 06. HE HAS DRAWN OUR ATTENTION TO THE ASSESSEES S UBMISSIONS BEFORE THE ASSESSING AUTHORITY FOR THE ASSESSMENT YEAR 200 5-06 FIELD IN THE PAPER BOOK BEFORE US IN SUPPORT OF HIS CONTENTION. 13. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 14. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTION, WE FIND THAT COMMERCIAL-TAX DEPARTMENT OFFICIALS HAD INSPECTED THE PREMISES OF THE ASSESSEE AND HAD FOUN D BOTH THE SUPPRESSED SALES AS WELL AS UNACCOUNTED PURCHASES. THE ASSESSEE HAS ACCEPTED THE FIGURES OF SUPPRESSED SALES AS DETERMI NED BY THE COMMERCIAL-TAX AUTHORITIES AND HAS PAID THE SALES-T AX AS DETERMINED BY THEM AND HAS ALSO NOT FILED ANY APPEAL AGAINST S UCH ASSESSMENT ORDER. 15. HAVING ACCEPTED PART OF THE ASSESSMENT ORDER BY THE SALES-TAX AUTHORITIES, ASSESSEE CANNOT NOW TAKE A CONTRARY ST AND WITH REGARD TO THE UNACCOUNTED PURCHASES. WE FIND THAT IN THE ASSE SSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05, THE ACIT SALES-TAX DEP T HAS CLEARLY MENTIONED THAT UNACCOUNTED PURCHASES HAVE ALSO BEEN DETECTED TO THE ITANOS.593&594/B/2011 9 TUNE OF RS.21,24,207/-. THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY EVIDENCE BEFORE THE SALES-TAX AUTHORITIES NOR BEFOR E THE AUTHORITIES BELOW IN SUPPORT OF HIS CONTENTION THAT THERE WERE NO PURCHASES OUTSIDE THE BOOKS. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT U/S 263 OF THE INCOME-TAX ACT DIRECTING THE AO TO MAKE AN ADDITION ON ACCOUNT OF THE UNACCOUNTED PURCHASES CORRESPONDING TO THE SUPPRESSED SALES ACC EPTED BY THE ASSESSEE. THE ALTERNATE PLEA OF THE ASSESSEE TO CO NSIDER ONLY THE PEAK INVESTMENT AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT IS ALSO NOT ACCEPTABLE, AS THE QUANTUM OF THE UNACCOUNTED PURCH ASES HAS BEEN DETERMINED BY THE SALES-TAX AUTHORITIES AND THE ASS ESSEE HAS NOT CHALLENGED THE SAID ORDER OF THE SALES-TAX DEPARTME NT. IN VIEW OF THE SAME, THE ASSESSEES APPEAL IS DISMISSED. 16. FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEES CONTENTION IS THAT THE SALES-TAX AUTHORITIES HAVE CLEARLY RECORDE D IN THEIR ASSESSMENT ORDER THAT THE PURCHASE DETAILS HAVE BEEN DULY REC ORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THAT NO UNACCOUNTED PURCHASES HAVE BEEN DETECTED. SUCH BEING THE CASE, ACCORDING TO T HE LEARNED COUNSEL FOR THE ASSESSEE, THE CIT CANNOT TAKE DIFFERENT STA ND FOR THE OTHER YEAR, WHERE NO SUCH FINDING HAS BEEN GIVEN. ITANOS.593&594/B/2011 10 17. THE LEARNED DR, HOWEVER SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 18. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THERE HAS TO BE CONSISTEN CY IN PLACING RELIANCE UPON THE ASSESSMENT ORDER OF THE SALES-TAX ASST. COMMISSIONER FOR MAKING THE ADDITION ON ACCOUNT OF UNACCOUNTED PURCHASES. THE CIT HAS PLACED RELIANCE UPON THE AS SESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 OF THE ASST. COMMISSION ER OF SALES-TAX TO MAKE THE ADDITION OF UNACCOUNTED PURCHASES, THER EFORE, HE HAS TO GIVE THE SAME CREDENCE TO THE ASSESSMENT ORDER OF T HE SALES-TAX DEPARTMENT FOR THE ASSESSMENT YEAR 2005-06, WHEREIN IT IS CLEARLY MENTIONED THAT THE PURCHASES HAVE BEEN ACCOUNTED FO R IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN THE ABSENCE OF ANY REC ORD BY THE SALES TAX AUTHORITIES THAT THERE ARE ALSO UNACCOUNTED PURCHAS ES, THE CIT CANNOT COME TO A DIFFERENT CONCLUSION. IN VIEW OF THE SAM E, THE ASSESSEES APPEAL IS ALLOWED AND THE ORDER OF THE CIT U/S 263 DIRECTING THE AO TO MAKE ADDITION ON ACCOUNT OF UNACCOUNTED PURCHASES C ORRESPONDING TO THE SUPPRESSED SALE IS NOT CALLED FOR. ITANOS.593&594/B/2011 11 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH JUNE, 2012. SD/- SD/- (N BARATHVAJA SANKAR) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER VMS. BANGALORE DATED : 29/06/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.