Gaja Nand Garg, Haryana V. ACIT, Rewari

ITA 6866/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6448 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 25-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 31-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJANA
• Assessee Lawyers: NAVEEN GUPTA
• Keywords: Unexplained investment
• Section: 40A(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I: NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 6866/DEL/2015 ASSESSMENT YEAR: 2011-12 GAJA NAND GARG PROP. M/S. AJAY TRADING CO. NEW MANDI, NARNAUL DISTT. MAHENDERGARH HARYANA PAN: ALLPG8180B VS. ACIT REWARI CIRCLE REWARI (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI NAVEEN GUPTA, ADV. REVENUE BY SHRI P.DAM KANUNJANA, SR. DR DATE OF HEARING 25.02.2016 DATE OF PRONOUNCEMENT 18.03.2016 ORDER PER O.P. KANT, A.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 13.11.2015 OF THE CIT(A) ROHTAK RAISING FOLLOWING GROUNDS OF AP PEAL :- 1. THAT THE ORDER OF LD. CIT(APPEALS) IS AGAINST LAW AND FACTS. 2. THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE A DDITION OF RS. 40,000/- U/S 40A(3) OF THE ACT ALTHOUGH NO PAYMENT EXCEEDING 20,000/- WAS MADE BY THE APPELLANT IN A SINGLE DAY. 3. THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE A DDITION OF RS. 17,806/- MADE BY THE LD. AO ON ACCOUNT OF CASH FOUN D SHORT AT THE TIME OF SURVEY. 2 IT A NO. 6866/DEL/2015 G AJA NAND GARG 4. THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION OF 6000/- MADE BY THE LD. A.O. ON ACCOUNT OF STOCK FOUND SHOR T AT THE TIME OF SURVEY. 5. THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE A DDITION OF RS. 102079/- MADE BY THE LD. AO ON ACCOUNT OF ALLEGED P ROFIT IN TRADING OF SUGAR AGAINST THE LOSS OF RS. 24952/- SHOWN IN T HE BOOKS OF ACCOUNTS OF THE APPELLANT. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER ANY OF THE GROUNDS OF APPEAL 2.1 THE FACTS IN BRIEF ARE THAT THE ASSESSEE WA S ENGAGED IN TRADING OF GROCERY ITEMS (KIRYANA) LIKE SUGAR, GUR ETC. IN THE CA SE OF ASSESSEE, A SURVEY U/S 133A OF THE INCOME TAX ACT (FOR SHORT THE ACT) WA S CONDUCTED ON 23.02.2011 IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YE AR. THE ASSESSEE FILED RETURN OF INCOME ON 20.08.2011 DECLARING INCOME OF RS. 6,16, 793/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 1 43(2) WAS ISSUED AND SERVED WITHIN STATUTORY PERIOD. BASED ON THE IMPOUNDED BOO KS OF ACCOUNTS AND OTHER DOCUMENTS, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: (A) CASH PAYMENTS AGAINST PURCHASE RS. 40,000/- (B) CASH FOUND FOUND SHORT NO. BY SURVEY RS. 17,806 /- (C) SHORTAGE OF STOCK OF GUD SHAKKAR SURVEY RS. 6,000/- (D) LOSS IN SUGAR SALE AFTER SURVEY RS. 1,02,079/- (E) DISALLOWANCE OF TELEPHONE EXPENSES RS. 2,078/- 2.2 ON APPEAL, THE FIRST APPELLATE AUTHORITY DELETE D THE ADDITION OF RS. 2,078/- FOR DISALLOWANCE IN RESPECT OF TELEPHONE EXPENSES A ND CONFIRMED THE OTHER ADDITIONS MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE GROUNDS NO. 1 AND 6 OF THE APPEAL ARE GENERA L IN NATURE AND NOT REQUIRED TO ADJUDICATE UPON, THEREFORE, SAME ARE DI SMISSED AS INFRUCTUOUS. 3 IT A NO. 6866/DEL/2015 G AJA NAND GARG 4. IN GROUND NO. 2, THE ASSESSEE HAS AGITATED THE ADDITION OF RS. 40,000/- U/S 40A(3) OF THE ACT FOR PAYMENT EXCEEDING RS. 20,000/ - IN CASH. THE LD. AR SUBMITTED THAT THE ASSESSEE MADE PAYMENT ON TWO DIF FERENT DATES OF RS. 20,000/- EACH I.E. RS. 20,000/- ON 28.01.2011 AND RS. 20,000 /- ON 29.01.2011 IN THE CORRESPONDING ENTRIES MADE IN THE BOOKS OF ACCOUNTS , WHICH WERE NOT REJECTED THE ASSESSING OFFICER. ACCORDING TO LD. AR, SINCE T HE PAYMENT ON A SINGLE DAY WAS NOT EXCEEDING RS. 20,000/-, THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. HE ALSO SUPPORTED HIS CASE WITH THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COU RT IN THE CASE OF SHRI LUXMI SATYA NARAYANA OIL MILLS VS. CIT REPORTED IT 49 TAXMANN. COM 363 WHERE IT IS HELD THAT WHERE PAYMENT MADE IN CASH ON THE INSISTENCE OF SELLER AND THERE WAS NO DOUBT ABOUT THE GENUINENESS, NO DISAL LOWANCE U/S 40A(3) OF THE ACT COULD BE MADE. ON THE OTHER HAND, LD. SR. DR RE LIED ON THE ORDER OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. IN THE CASE OF THE ASSESSEE A SURVEY UNDER SECTION 133 A OF THE ACT WAS CONDUCTED AND IN THE COURSE OF SURVEY A DIARY WAS IMPOUNDED A S ANNEXURE A- 5 AND THE PAGE NO. 34 OF THAT DIARY REVEALED CASH PAYMENT OF RS. 40,000/- ON 29.01.2011 TO M/S. MANIK CHAND ASHOK KUMAR AGAINST PURCHASES. WHEN THIS ISSUE WAS RAISED BY THE ASSESSING OFFICER, THE ASSESSEE TOOK THE PLEA THAT ONE PAYMENT OF RS. 20,000/- WAS MADE ON 28.01.2011 AND ANOTHER PAY MENT OF RS. 20,000/- WAS MADE ON 21.09.2011, WHEREAS BY MISTAKE, IN DIARY BO TH THE PAYMENTS WERE WRITTEN ON 29.01.2011. AS NO FURTHER EVIDENCE IN RE SPECT OF THE ABOVE CLAIM WAS FILED BY THE ASSESSEE, THE ASSESSING OFFICER MADE D ISALLOWANCE IN TERMS OF SECTION 40A(3) OF THE INCOME TAX ACT. BEFORE THE CI T(A), ALSO THE ASSESSEE REITERATED THE SAME SUBMISSION. IT IS EVIDENT THAT IT WAS NOTED IN THE DIARY IMPOUNDED FROM THE POSSESSION OF THE ASSESSEE HAVIN G TWO ENTRIES OF CASH PAYMENT EACH RS. 20,000/- ON 29.01.2011 AND THE DIA RY WAS MAINTAINED IN REGULAR COURSE OF BUSINESS, THE CASE OF THE ASSESSE E IS SQUARELY COVERED BY 4 IT A NO. 6866/DEL/2015 G AJA NAND GARG SECTION 40A(3) OF THE ACT. FURTHER, THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE THAT CASH PAYMENT WAS AT THE INSISTENCE OF THE SELL ER AND THEREFORE THE RATIO IN THE CASE OF THE LUXMI SATYA NARAYAN OIL MILLS VS. C IT (SUPRA) CITED BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE ASSE SSEE AND WE, THEREFORE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE. THE GRO UND OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 6. IN THE GROUND NO. 3, THE ASSESSEE HAS RAISED A DDITION OF RS. 17,806/- MADE BY THE LD. AO FOR CASH FOUND SHORT AT THE TIME OF SURV EY. THE LD. AR SUBMITTED THAT DURING THE SURVEY CASH OF RS. 17,806/- WAS STA TED TO BE SHORT AS COMPARED TO THE CASH BOOK. HE FURTHER SUBMITTED THAT THE ASSESS EE EXPLAINED THAT CERTAIN PAYMENTS RECEIVED BY THE ASSESSEE WERE LYING IN HIS POCKETS BUT THE ASSESSING OFFICER DID NOT BELIEVE THE CONTENTION OF THE ASSES SEE. THE LD AR FURTHER SUBMITTED THAT AT THE MOST SUCH A SMALL AMOUNT COUL D BE TREATED AS TEMPORARY WITHDRAWAL AND DEPOSITED BACK. ON THE OTHER HAND, T HE LD. SR. DR RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE MATERIAL ON RECORD. THE SMALL DISCREPANCIES IN CASH OF RS. 17,806/- WAS EXP LAINED BY THE ASSESSEE AS MONEY WAS LYING IN HIS POCKETS AND WHICH THE SURVEY TEAM DID NOT TAKE NOTICE. THE EXPLANATION OF THE ASSESSEE IS NOT JUSTIFIED AS HAD THE CASH BEEN IN HIS POCKETS, HE COULD HAVE EXPLAINED THE SAME AT THE TI ME OF SURVEY AND THE CASH AS PER BOOKS OF ACCOUNT COULD HAVE BEEN RECONCILED, HO WEVER, NO SUCH EXPLANATION WAS SUBMITTED AT THE TIME OF SURVEY. NOTWITHSTANDIN G ABOVE EXPLANATION, WE FIND THAT THE SHORTAGE OF SUCH SMALL AMOUNT OF CASH CAN BE CONSIDERED AS TEMPORARY WITHDRAWAL BY THE PROPRIETOR AND DEPOSITE D BACK AND FOR WHICH NO ADDITION IS WARRANTED IN THE CASE OF THE ASSESSEE. IN OUR CONSIDERED VIEW NO ADDITION ON ACCOUNT OF SHORTAGE OF CASH CAN BE MADE . THE LD. DR COULD NOT BRING OUT ANY AUTHORITY IN SUPPORT OF THE PROPOSITION THA T SHORTAGE OF CASH CAN BE TREATED AS INCOME OF THE ASSESSEE. IN VIEW OF THE A BOVE FACTS AND CIRCUMSTANCES, 5 IT A NO. 6866/DEL/2015 G AJA NAND GARG WE DELETE THE ADDITION SUSTAINED BY THE CIT(A) AND GROUND NO. 3 OF THE APPEAL IS THUS ALLOWED. 8. THE GROUND NO. 4 IS IN RESPECT OF ADDITION OF R S. 6,000/- ON ACCOUNT OF SHORTAGE OF STOCK FOUND AT THE TIME OF SURVEY. THE LD. AR SUBMITTED THAT AT THE TIME OF SURVEY ON 23.02.2011 STOCK OF GUD SHUKKAR WAS FOUND AT 589 BAGS AS AGAINST STOCK OF 595 BAGS AS PER BOOKS OF ACCOUNTS, AND FOR THAT SHORTAGE OF 6 BAGS, THE ASSESSING OFFICER MADE ADDITION OF RS. 6, 000/- TAKING COST OF THE EACH BAG AT RS. 1,000/- . THE LD. AR EXPLAINED THAT SHOR TAGE ON STOCK MIGHT BE DUE TO COUNTING MISTAKE ALSO. HE FURTHER SUBMITTED THAT EV EN FOR ARGUMENTS IT WAS TAKEN THAT THE GOODS WORTH RS. 6,000/- WERE SOLD OUT BOOK S OF ACCOUNTS, THEN ALSO IN WORSE TO WORSE CASE THE GP RATE CAN BE ADDED AND NO T THE ENTIRE SALES. LD. SR. DR ON THE OTHER HAND SUBMITTED THAT AS FAR AS COUNT ING OF BAGS WAS CONCERNED, IT WAS MADE IN PRESENCE OF THE ASSESSEE OR ITS REPRESE NTATIVE DURING SURVEY AND NO DOUBT COULD BE RAISED NOW AT THE STAGE OF APPEAL BE FORE THE TRIBUNAL. HE FURTHER, RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE NOT AGREED WITH THE SUBMISSION OF TH E LD. AR THAT THERE MIGHT BE DIFFERENCE IN COUNTING OF BAGS, BECAUSE NO SUCH ISS UE WAS RAISED BEFORE THE LOWER AUTHORITIES OR DURING THE COURSE OF SURVEY. THE LD AR HAS FURTHER SUBMITTED THAT ONLY ADDITION FOR THE GROSS PROFIT O N THE SALES SHOULD HAVE BEEN MADE. BUT IN OUR VIEW WHEN THE ENTIRE ACTIVITY OF P URCHASE AND SALE IS OUT OF BOOKS OF ACCOUNT AND IN THAT CASE, THE UNEXPLAINED INVESTMENT FOR PURCHASE AND SUBSEQUENT GROSS PROFIT ON SALES COULD BE MADE, BUT WHERE THE PURCHASES CORRESPONDING TO UNACCOUNTED SALES ARE ALREADY DEBI TED IN BOOKS OF ACCOUNT, THEN ADDITION FOR ENTIRE UNACCOUNTED SALES NEED TO BE MADE. SINCE IN THE CASE OF THE ASSESSEE THE PHYSICAL QUANTITY OF GOODS IS FOUN D LESS THAN THE QUANTITY OF GOODS AS PER BOOKS, WHICH MEANS THE PURCHASES ARE A LREADY DEBITED AND THUS IN 6 IT A NO. 6866/DEL/2015 G AJA NAND GARG OUR VIEW, THE AO HAS RIGHTLY MADE ADDITION FOR ENTI RE AMOUNT OF UNACCOUNTED SALES. ACCORDINGLY, THE GROUND NO. 4 IS THUS DIS MISSED. 10. THE GROUND NO. 5 IS IN RESPECT OF ADDITION O F RS. 1,02,079/- ON ACCOUNT OF PROFIT IN SUGAR TRADE FROM 24.02.2011 TO 31.03.2011 ( I.E. POST SURVEY PERIOD). THE LD. AR SUBMITTED THAT ON THE DATE OF SURVEY NO STOCK OF SUGAR WAS FOUND, HOWEVER, BETWEEN 01.04.2011 TO 23.02.2011( I.E. PRE SURVEY PERIOD) , THE ASSESSEE EARNED GROSS PROFIT OF RS. 6,12,377/- ON S ALE OF SUGAR OF RS. 52,25,875/-. HE FURTHER SUBMITTED THAT FROM 24.02.2011 TO 31.03. 2011, THE ASSESSEE INCURRED A LOSS OF RS. 24,952/- IN SUGAR ACCOUNT, HOWEVER, SAM E WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE, APPLYING, THE GROSS PROFI T RATE FOR THE PERIOD PRIOR TO SURVEY, ON THE SALES OF SUGAR MADE POST SURVEY , C OMPUTED A PROFIT OF RS. 1,02,079/- AND ADDED TO THE INCOME OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT ENTIRE SALES AND PURCHASES OF THE AS SESSEE WERE SUPPORTED BY THE VOUCHER AND DAY TO DAY STOCK REGISTER WAS DULY MAIN TAINED AND THE LOSS IN THE TRADE WAS DUE TO FALL IN THE PRICES OF THE SUGAR. H E FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT REJECT BOOKS OF ACCOUNTS. THE LD. AR RELYING ON THE JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF MALANI RAM JIWAN JAGANNATH VS. ACIT REPORTED AT PAGE 207 CTR 19 THA T WHERE NONE OF THE DATE AND ENTRIES OF THE TRADING ACCOUNT HAVE BEEN FOUND TO BE INCORRECT IN ANY MANNER, REJECTION OF G.P. RATE AND BOOKS BY THE AP PLICATION OF RULE OF THUMB WAS NOT JUSTIFIED. ON THE OTHER HAND THE LD. DR STR ONGLY RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE AGREE WITH THE SUBMISSION OF THE LD. AR THAT WITHOU T REJECTING BOOKS OF ACCOUNTS, THE AO WAS NOT ALLOWED TO MAKE ADDITION A PPLYING THE GROSS PROFIT RATE FOR THE PERIOD BEFORE THE SURVEY, ON THE SALES FOR THE POST SURVEY PERIOD. THE AO HAS NOT POINTED OUT ANY MISTAKE IN INVENTORY REG ISTER OF THE GOODS RELEVANT TO THE ISSUE IN DISPUTE. IN OUR CONSIDERED VIEW, NO ADDITION COULD BE MADE IN THE 7 IT A NO. 6866/DEL/2015 G AJA NAND GARG FACTS OF THE ASSESSEE ON THE ISSUE IN DISPUTE. ACCO RDINGLY, WE DELETE THE ADDITION SUSTAINED BY THE LD. CIT(A) IN IMPUGNED ORDER THUS, GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2016. SD/- SD/- (DIVA SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH MARCH, 2016. BINITA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 8 IT A NO. 6866/DEL/2015 G AJA NAND GARG SL. NO. PARTICULARS DATE 1. DATE OF DICTATION (HAND WRITTEN ) 01.03.2016 2. DATE ON WHICH THE DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02.03.2016 3. DRAFT PLACED BEFORE THE OTHER MEMBER 4. APPROVED DRAFT COMES TO THE SR. PS/PS 5. KEPT FOR PRONOUNCEMENT ON 18.03.2016 6. FINAL ORDER RECEIVED AFTER PRONOUNCEMENT 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILES GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR 10. DATE OF DISPATCH OF ORDER