Sri Rajeesh Rawtani, Hyderabad V. ITO, Hyderabad

ITA 719/HYD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2535 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 14-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 23-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: A V RAGHURAM
• Section: 133A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'A' BEFORE SHRI N.R.S.GANESAN AND SHRI AKBER BASHA I.T.A.NO.719/HYD/2008 ASSESSMENT YEAR 2004-05 SRI RAJESH RAWTANI, HYDERABD. .. APPELLANT (PAN ACPPR3468N) VERSUS INCOME-TAX OFFICER, WARD 6(1), HYDERABAD. ..RESPONDENT APPELLANT BY : SHRI A.V.RAGHURAM RESPONDENT BY : SHRI K.V.N.CHARYA O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (APPEALS), VISAKHAPATNAM, DATED 29-2-2008, AND PERT AINS TO ASST. YEAR 2004- 05. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IS ADDITION OF RS.22,83,829. 2. SHRI A.V.RAGHURAM, LEARNED COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ASSESSING OFFICER MADE AN ADDITION OF RS.22,83,829 WHICH WAS SHOWN AS EXCESS LIABILITY IN THE BOOKS OF ACCOUNT. ACCORDING TO THE LEARNED COUNSEL, FOR THE ASST. YEARS 2001-02 TO 2003-04, THE ASSESSEE HAD NOT MAIN TAINED ANY BOOKS OF ACCOUNT. THE PROFIT WAS ESTIMATED UNDER SEC. 44AF O F THE INCOME-TAX ACT, 1961. ACCORDING TO THE LEARNED COUNSEL, THE UN-RECORDED P URCHASES MADE IN THE EARLIER YEARS REMAINED AS STOCK AND THE ASSESSEE HA D TO CONSIDER THEM AS CLOSING STOCK TO THE EXTENT THEY REMAINED WITH THE ASSESSEE. ACCORDING TO THE LEARNED COUNSEL, THE UNSOLD STOCK OF THE EARLIER YE ARS WHICH WAS PURCHASED OUTSIDE THE BOOKS OF ACCOUNT WAS SHOWN AS CLOSING S TOCK. THE LEARNED COUNSEL 2 FURTHER SUBMITTED THAT THE PROFIT ON SUCH UNRECORDE D PURCHASES WAS ESTIMATED FOR EARLIER ASST. YEARS. THEREFORE, ACCORDING TO TH E LEARNED COUNSEL, ON THE BASIS OF THE INFORMATION AVAILABLE WITH THE ASSESSEE IN R ESPECT OF UNRECORDED PURCHASES, THE SAME WAS SHOWN AS LIABILITY IN RESPE CT OF THE PARTIES FROM WHOM THE SAME WAS PURCHASED. ACCORDING TO THE LEARNED CO UNSEL, THE STOCK WHICH REMAINED WITH THE ASSESSEE AND WHICH WAS SHOWN AS L IABILITY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE, ACCORDING TO THE LEARNED COUNSEL, THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE. REFERRI NG TO THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASST. Y EARS 2001-02 TO 2003-04 IN I.T.A.NOS.801 TO 803/HYD/2006 DATED 14-11-2008, THE LEARNED COUNSEL SUBMITTED THAT IN RESPECT OF THE UNRECORDED PURCHAS ES MADE OUTSIDE THE BOOKS OF ACCOUNT, THE PROFIT WAS ESTIMATED AT 5%. ONCE TH E PROFIT WAS ESTIMATED, ADDITION OF THE OUTSTANDING LIABILITY TOWARDS STOCK WOULD AMOUNT TO DOUBLE ADDITION. 3. ON THE CONTRARY, SHRI K.V.N.CHARYA, LEARNED DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT FOR THE ASST. YEARS 2001-02 TO 2003- 04, IT WAS FOUND THAT THE ASSESSEE MADE PURCHASES OUTSIDE THE BOOKS OF ACCOUN T AND SOLD THE GOODS OUTSIDE THE BOOKS OF ACCOUNT. ON THE BASIS OF THE S URVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE UNDER SEC. 133A OF THE INC OME-TAX ACT, THE AO ESTIMATED THE PROFIT ON THE DISPUTED TURNOVER AT 20 %. ON APPEAL BY THE ASSESSEE, THIS TRIBUNAL FOUND THAT WHEN THE PROFIT OF THE ASSESSEE WAS ESTIMATED AT 5% IN RESPECT OF PURCHASES RECORDED IN THE BOOKS OF ACCOUNT, THE SAME PROFIT HAS TO BE ESTIMATED. ACCORDINGLY, THIS TRIBUNAL DIRECTED THE AO TO ESTIMATE THE PROFIT AT 5% IN TERMS OF SEC. 44AF ON THE DISPUTED TURNOVER ALSO. 3 ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E, THE PROFIT WAS ESTIMATED ONLY ON THE TURNOVER AND NOT ON THE PURCHASES. THER EFORE, THE SO-CALLED PURCHASES MADE OUTSIDE THE BOOKS OF ACCOUNT WHICH R EMAINED WITH THE ASSESSEE WERE NOT SUBJECTED TO TAX AT ALL. THEREFOR E, IT IS FOR THE ASSESSEE TO EXPLAIN UNDER WHAT CIRCUMSTANCES SUCH PURCHASES REM AINED WITH THE ASSESSEE EVEN AFTER THE ASST. YEAR 2003-04. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ASSESSEE HAS SHOWN EXCESS LIABI LITY OVER WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT TO THE EXTENT OF RS.22,83,8 29. IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE UNACCOUNTED PURCHASES MAD E IN THE EARLIER YEARS REMAINED WITH THE ASSESSEE EVEN FOR THE ASST. YEAR UNDER CONSIDERATION, IT CANNOT BE SAID THAT THE ASSESSEE HAS SIMPLY ADDED T HE SAME TO THE CLOSING STOCK. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT, FOR THE ASS T. YEARS 2001-02 TO 2003-04 THIS TRIBUNAL DIRECTED THE AO TO ESTIMATE THE PROFI T AT 5% ON THE DISPUTED TURNOVER ALSO. 'TURNOVER' MEANS THE GROSS AMOUNT RE CEIVED BY THE ASSESSEE ON SALE OF FINISHED GOODS. THEREFORE, THE PROFIT HAS T O BE ESTIMATED AT 5% ON THE GROSS RECEIPTS ON SALE OF THE GOODS. IF BY CHANCE T HERE WAS NO SALE IN RESPECT OF THE GOODS PURCHASED OUTSIDE THE BOOKS OF ACCOUNT, T HE SAME CANNOT FORM PART OF THE DISPUTED TURNOVER. THEREFORE, THE GOODS WHIC H REMAINED UNSOLD FOR THE ASST. YEARS 2001-02 TO 2003-04, WHICH WERE MANUFACT URED FROM THE MATERIAL PURCHASED OUTSIDE THE BOOKS OF ACCOUNT, CANNOT BE S AID TO BE SUBJECTED TOT AX FOR THE EARLIER ASST. YEARS. THEREFORE, IF ANY ADDI TION IS MADE IN RESPECT OF STOCK REMAINING WITH THE ASSESSEE WHICH WAS PURCHASED OUT SIDE THE BOOKS OF ACCOUNT 4 FOR THE EARLIER ASST. YEARS, THE SAME HAS TO BE BRO UGHT TO TAX. IN SUCH A SITUATION, IT CANNOT BE SAID THAT THE SAME WAS SUBJ ECTED TO TAX TWICE. 5. THE CASE OF THE ASSESSEE IS THAT THE PURCHASES M ADE FOR THE ASST. YEARS 2001-02 TO 2003-04, WHICH REMAINED WITH THE ASSESSE E, WERE INCORPORATED IN THE STOCK. HOWEVER, THE SPECIFIC DETAILS OF THE GOO DS PURCHASED DURING THE EARLIER YEARS WERE NOT FURNISHED BY THE ASSESSEE BE FORE THE LOWER AUTHORITIES EVEN THOUGH THE AO SPECIFICALLY ASKED FOR THE SAME. ADMITTEDLY, THE ASSESSEE HAS SHOWN EXCESS LIABILITY OF RS.22,83,829. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THIS LIABILITY AROSE OUT OF THE PURCHASES MADE OUTSIDE THE BOOKS OF ACCOUNT IN THE EARLIER YEARS, IN OUR OPINION, THE L OWER AUTHORITIES HAVE RIGHTLY MADE THE ADDITION. FROM THE ORDER OF THE CIT (A) IT APPEARS THAT A REMAND REPORT WAS CALLED FOR FROM THE AO. THE AO GAVE AN O PPORTUNITY TO THE ASSESSEE TO EXPLAIN HOW THE STOCKS PURCHASED IN THE EARLIER YEARS REMAINED WITH THE ASSESSEE. IN SPITE OF OPPORTUNITY, THE ASSESSEE COU LD NOT ESTABLISH THE AVAILABILITY OF STOCK PURCHASED OUTSIDE THE BOOKS O F ACCOUNT IN THE EARLIER YEARS. IN THOSE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 18-12-09. SD SD (AKBER BASHA) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, 18TH DECEMBER, 2009. RRRAO. 5 COPY OF THE ORDER FORWARDED TO:- 1. SHRI K.VASANTKUMAR, 102, FIRST FLOOR, TARAMANDAL CO MPLEX, SAIFBAD, HYDERABAD 500 004. 2. ITO, WARD 6(1), HYDERABAD. 3. CIT III, HYDERABAD. 4. CIT (A), HYDERABAD. 5. DR, ITAT, HYDERABAD.