Tax Recovery officer Cen Nashik, Nashik V. Vinsura Winery P.Ltd, Nashik

ITA 700/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8492 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Keywords: Unexplained expenditure; Search and seizure; Document seized; Documents seized
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.700 & 701/PN/2012 (A.YS: 2006-07 & 2007-08) TAX RECOVERY OFFICER (CENTRAL), NASHIK APPELLANT VS. VINSURA WINERY PVT. LTD., 1, GOVIND APARTMENT, OPP. TELEPHONE EXCHANGE, N.D. PATEL ROAD, NASHIK. PAN: AAFCS7421K RESPONDENT APPELLANT BY : SMT. M.S. VE RMA, CIT RESPONDENT BY : SHRI ABHA Y AVCHAT DATE OF HEARING: 06.08.2014 DATE OF ORDER : 20.08.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE FILE D BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF COMMISSION ER OF INCOME TAX (APPEAL)-I, NASHIK, DATED 19.01.2012 FOR A.YS. 2006-07 AND 2007-08. 2. IN ITA NO.700/PN/2012, THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.20,16,163/- MADE ON ACCOUNT OF UNEXPLAINED CASH COUNTER SALES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING THE BENE FIT OF SET OFF COST OF PURCHASES, WHICH WERE NOT RECORDED IN T HE SEIZED BOOKS OF ACCOUNTS. 2 ITA NOS.700 & 701 OF 12 M/S. VINSURA WINERY PVT. LTD 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE DECISION OF THE LEARNED CIT(A) IS CONTRARY TO THE EVIDENCE ON RECORD SINCE THERE IS NO EVIDENCE OF UN DISCLOSED PURCHASES IN THE SEIZED MATERIAL THE NATURAL COROLL ARY OF WHICH IS THAT THE COST OF PURCHASES ARE ALREADY DEB ITED IN THE REGULAR BOOKS OF ACCOUNT AND HENCE THE ENTIRE UNRECORDED SALE PROCEEDS HAVE TO BE BROUGHT TO TAX AND NOT THE GROSS PROFIT ELEMENT ONLY AS HELD BY THE LEARNE D CIT(A). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE DECISION OF THE LEARNED CIT(A) IS PERVERSE SINCE HIS DECISION IS CONFINED TO THE UNDISCLOSED GROSS PROFI T ONLY WITHOUT GIVING A FINDING AS TO THE ELEMENT OF INVES TMENT IN THE GOODS SOLD, SINCE BOTH THE PURCHASES AND SALES ARE HELD TO BE OUTSIDE BOOKS OF ACCOUNT. 5. THE ORDER OF THE LEARNED CIT(A)-I, NASHIK MAY BE VA CATED AND THAT OF THE AO BE RESTORED. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2.1 THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGA GED IN MANUFACTURING OF GRAPE WINE. A SEARCH AND SEIZURE ACTION U/S.132(1) OF THE I.T. ACT, 1961 WAS CONDUCTED BY T HE INCOME TAX DEPARTMENT ON 12.03.2008 IN THE PAWAR-HOLKAR GROUP OF CASES AT NASHIK. THE BUSINESS AND RESIDENTIAL PREMISES O F COMPANY WERE ALSO COVERED UNDER SEARCH AND SEIZURE ACTION. IN RESPONSE TO THE NOTICE U/S 153A, THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.NIL ON 30.01.2009. TH E ASSESSING OFFICER SCRUTINIZED THE RETURN AND SEIZED DOCUMENTS . HE NOTICED THAT STOCK TRANSFERRED FOR COUNTER SALES DID NOT RE FLECT IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER ADDED RS.2 6,00,300/- ON ACCOUNT OF CASH COUNTER SALES OF 4339 BOTTLES VA LUING RS.12,24,800/- AND 5341 BOTTLES VALUING AT RS.13,75 ,500/- AND MADE NET ADDITION OF RS.24,77,468/- AND ASSESSED TH E TOTAL LOSS AT RS.NIL AFTER SET-OFF OF UNABSORBED LOSS OF A.Y. 2004-05. 3. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AS DISCUSSED IN PARA 4.2 OF CIT(A) ORDER. ONE OF THE 3 ITA NOS.700 & 701 OF 12 M/S. VINSURA WINERY PVT. LTD CONTENTIONS WAS THAT A SIMILAR ADDITION FOR A.Y. 20 05-06 IN THE ASSESSEES OWN CASE OF RS.4,47,050/- WAS RESTRICTED TO RS.91,838/-. FOLLOWING THE SUBMISSIONS OF THE ASSE SSEE AND THE DECISION OF HIS OWN CASE FOR A.Y. 2005-06, THE ADDI TION OF RS.24,77,468/- MADE BY THE ASSESSING OFFICER ON THI S ISSUE HAS BEEN RESTRICTED TO RS.4,61,305/-. THUS, THE ASSESS EE GOT RELIEF OF RS.20,16,163/-. THE SAME HAS BEEN OPPOSED BEFORE U S ON BEHALF OF THE REVENUE, INTER ALIA, SUBMITTED THAT THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.20,16,163/- MADE ON ACC OUNT OF UNEXPLAINED CASH COUNTER SALES. THE CIT(A) HAS ERR ED IN ALLOWING THE BENEFIT OF SET OFF COST OF PURCHASES, WHICH WER E NOT RECORDED IN THE SEIZED BOOKS OF ACCOUNTS. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE H AS SUPPORTED THE ORDER OF CIT(A). 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MADE IMPUGNED ADDITION IN ITS ASSESSMENT ORDER BY OBSERVING AS UN DER: 9. THE CLAIM OF THE ASSESSEE IS VERIFIED AND ANALY SED WITH THE SEIZED DOCUMENT NO.A-18 TO 23 AND 38 VIS-A-VIS BR-II REGISTER WHICH WERE SEIZED. ON VERIFICATION IT IS F OUND THAT PAGE NOS.24 ONWARDS OF REGISTER WHICH WERE SEIZED A T SR. NO.A-20 AND REGISTER AT SR. NO.21 PERTAINS TO THE Y EAR UNDER ASSESSMENT. FROM PAGES OF REGISTER AT SR. NO. A-20 IT IS SEEN THAT THE ASSESSEE HAS MADE CASH COUNTER SAL ES OF 4339 BOTTLES, THE VALUATION THEREOF WORKS OUT TO RS . 12,24,800/- FOR THE YEAR UNDER ASSESSMENT. SO ALSO FROM PAGES OF REGISTER AT SR. NO.A-21 IT IS SEEN THAT TH E ASSESSEE HAS MADE CASH COUNTER SALES OF 5341 BOTTLES, THE VA LUATION THEREOF WORKS OUT TO RS.13,75,500/-. THE WORKING OF 4339 AND 5341 BOTTLES OF CASH COUNTER SALES IS ANNEXED T O THE ASSESSMENT ORDER MARKED AS ANNEXURE-A. 10. THE CASH COUNTER SALES OF 4339 BOTTLES VALUING RS.12,24,800/- AND 5341 BOTTLES VALUING AT RS.13,7 5,500/- ARE FOUND IN THE REGISTER AT SR. NO.A-20 AND A-21 RESPECTIVELY WHICH ARE SEIZED. THE FACT THAT THE SA LES IN CASH IS NOT REFLECTED AND RECORDED IN THEIR REGULAR SALE S REGISTERS. 4 ITA NOS.700 & 701 OF 12 M/S. VINSURA WINERY PVT. LTD 11. IN THE LIGHT OF ABOVE, IT IS HELD THAT SHE ASSE SSEE COMPANY HAS MADE THE CASH COUNTER SALES AMOUNTING T O RS.12,24,800/- AND RS.13,75,500/- TOTALING TO RS.26,00,300/- DURING THE YEAR UNDER ASSESSMENT, WH ICH REMAINED OUT OF THE BOOKS OF ACCOUNTS. THEREFORE, A DDITION OF RS.26,00,300/- IS MADE BEING CASH COUNTER SALES NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS. IT IS N OTICED THAT AT THE TIME OF FILING RETURN U/S 153A THE ASSESSEE HAS MADE DECLARATION U/S 132 OF RS.1,22,832/-. THE SAME IS R EDUCED FROM THE ADDITION OF RS.26,00,300/ AND NET ADDITION ON ACCOUNT OF CASH SALES OUT OF BOOKS AMOUNTING TO RS.24,77,468/- IS MADE WHILE COMPUTING THE INCOME F OR THE YEAR UNDER ASSESSMENT. DURING THE COURSE OF ACTION U/S 132 NO UNEXPLAINED PURCHASES WERE FOUND. FURTHER MO RE NO CLAIM THAT UNEXPLAINED EXPENDITURE IS INCURRED AND REMAINED TO BE BOOKED IN BOOKS OF ACCOUNTS WAS PUT FORTH ANY TIME DURING THE COURSE OF ASSESSMENT PROCEEDING S. HENCE, ENTIRE SALES ARE REQUIRED TO BE ADDED IN THI S CASE. 4.1 IN APPEAL AS WELL AS BEFORE US, THE STAND OF TH E ASSESSEE HAS BEEN THAT (I) THE ASSESSEE IS A SMALL SCALE INDUSTRY ENGAGED IN T HE FIELD OF WINE MANUFACTURING. THE WINE INDUSTRY AS IT IS IN STILL IN A NASCENT STAGE AND THE WINE CULTURE HA S NOT YET GAINED ACCEPTANCE AMONG THE INDIAN MASSES. (II) THE IT DEPARTMENT HAS MADE THE ADDITION ON TOTAL UNDISCLOSED SALE AS THE ASSESSEES INCOME FOR THE RESPECTIVE ASSESSMENT YEAR. THE FIGURE OF UNDISCLO SED SALES AS DETERMINED AND FINALIZED BY THE LEARNED A. O. FOR THE A.Y.2006-07 IS RS.26,00,300/-. (III) THE ASSESSEE HAS MADE AN ATTEMPT TO EXPLAIN THE FAC T TO THE ASSESSING OFFICER THAT IT WOULD BE PRUDENT T O ADD ONLY THE PROFIT DERIVED ON THE SALES AND NOT TH E ADDITIONAL SALES ITSELF TOWARDS THE UNDISCLOSED INC OME OF YOUR ASSESSEE. HOWEVER, THE ASSESSING OFFICER D ID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND PROCEEDED TO ADD THE ENTIRE FIGURE OF UNDISCLOSED SALES AS THE INCOME OF YOUR ASSESSEE FOR THE YEAR. 5. IT WAS THE STAND OF THE ASSESSEE THAT AS PER REG ULAR BOOKS OF ACCOUNT OF THE ASSESSEE, IT IS EVIDENT THAT THE G.P . RATE FOR THE YEAR UNDER CONSIDERATION WAS 18.62%. THIS FACT WAS CLAIMED TO 5 ITA NOS.700 & 701 OF 12 M/S. VINSURA WINERY PVT. LTD BE SUBSTANTIATED BY AUDIT REPORT FOR THE SAID ASSES SMENT YEAR. IN THIS SITUATION, THE ADDITION MADE BY THE ASSESSI NG OFFICER IS ARBITRARY AND MAY BE DELETED. THE LEARNED AUTHORIZ ED REPRESENTATIVE HAS ALSO RELIED ON CERTAIN CASE LAWS ON THE ISSUE BEFORE CIT(A). HAVING CONSIDERED THE SAME, THE CIT (A) HAS OBSERVED THAT FACTS THIS YEAR ARE IDENTICAL WITH TH E FACTS OF THE A.Y. 2005-06, WHEREIN FOR THE DETAILED REASONS MENT IONED IN THE CIT(A) ORDER DATED 19.01.2012 IN ITA NO.NSK/CIT(A)/ 537/2009- 10, THE ADDITION OF RS.4,47,050/- WAS RESTRICTED TO RS.91,838/-. FOLLOWING THE SAME REASONING AND SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HAS RESTRICTED THE ADDITION OF RS.24,77, 468/- MADE BY THE ASSESSING OFFICER ON THIS ISSUE TO RS.4,61,305/ -. TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATION, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF CIT(A) WHEREBY, TH E CIT(A) HAS RESTRICTED THE IMPUGNED ADDITION TO RS.4,61,305/-. WE UPHOLD THE SAME. 6. A SIMILAR ISSUE AROSE IN ITA NO.701/PN/2012 FOR A.Y. 2007- 08. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REA SONING, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF CIT(A ), WHEREBY THE CIT(A) HAS RESTRICTED THE ADDITION OF RS.24,32,827/ - MADE BY THE ASSESSING OFFICER ON THIS ISSUE TO RS.4,52,992/-. WE UPHOLD THE SAME. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF AUGUST, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 20 TH AUGUST, 2014 GCVSR 6 ITA NOS.700 & 701 OF 12 M/S. VINSURA WINERY PVT. LTD COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE