Prakash Mulchand Jewarni, Kolhapur V. ITO, Wd 1(3), Kolhapur, Kolhapur

ITA 735/PUN/2007

• Counselvise Citation: 73524514 RSA 2007
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 18-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTUAMA
• Keywords: Unexplained investment; Retraction
• Section: 143(3); 133A; 234B; 68

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G S PANNU, ACCOUNTANT MEMBER ITA NO 735/PN/07 (ASSTT. YEAR: 2002-04) SHRI PRAKASH MULCHAND JERWANI, .. APPELLANT PROP. BALAJI CUSTOM & GENERAL STORES, FLAT NO 4, SAITEURAM APTS. GANDHINAGAR, KOLHAPUR PAN ACPPJ5676E VS. INCOME-TAX OFFICER, .. RESPONDENT WD 1(3), KOLHAPUR APPELLANT BY : SHRI M K KULKARNI RESPONDENT BY: SMT ANN KAPTUAMA ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLHAPUR DATE D 9.2.2007 WHICH, IN TURN, HAS ARISEN OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2002- 03. 2. THE MAIN GROUNDS OF APPEAL RAISED BY THE ASSESSE E ARE AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS 8,50,728/- AS AGAINST MADE BY AO OF RS 11,05,356/- OF EXCESS STOCK SINCE TH E EXCESS STOCK WAS SIMPLY WORKED OUT ON THE BASIS OF TENTATIVE TRADING ACCOUNT FOR THE PURPOSES OF ADDITION. THE ADDI TION SUSTAINED BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS 4,52,500/- ARISING OUT OF CASH ALLEGED TO HAVE BEEN FOUND AT THE T IME OF SURVEY. THE EXISTENCE OF SUCH A HUGE AMOUNT OF CASH ON HAND H AS 2 NOT BEEN PROVED EVEN ON THE DENIAL OF EXISTENCE OF CASH B Y THE APPELLANT. THE ADDITION OF NON-EXISTENT CASH BE DELETE D. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) OUGHT TO HAVE DELETED THE ADDITION OF NON-EXI STENT CASH OF RS 4,52,500/- ON THE SAME BASIS HE HAD RIGHTLY DELETED THE UNEXPLAINED NON-EXISTENT INVESTMENT IN INTERIOR DECORAT ION OFD RS 2,10,000/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION U/ S 68 OF THE ACT OF RS 3,30,551/- ON ACCOUNT OF ALLEGED BOGUS CREDITORS. T HE ADDITION BEING UNWARRANTED BE DELETED. 3. IN BRIEF THE FACTS ARE THAT THE ASSESSEE IS TRAD ING IN CUSTOM NOTIFIED GOODS AND GENERAL ITEMS THROUGH THE PROPRI ETARY CONCERN M/S BALAJI CUSTOM & GENERAL STORES. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, A SURVEY A CTION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT IN THE COUR SE OF WHICH STATEMENT OF THE ASSESSEE WAS RECORDED ON OATH, STO CK AND CASH WAS PHYSICALLY VERIFIED AND ITS INVENTORY PREPARED. IN THE COURSE OF SURVEY, THE ASSESSEE DISCLOSED INCOMES ON ACCOUNT OF EXCESS STOCK AND OTHER ITEMS AS UNDER: EXCESS STOCK RS 12,15,356/- EXCESS CASH RS 4,52,500/- UNEXPLAINED INVESTMENT IN FURNITURE ETC. RS 2,10,000/- PROFIT ON UNACCOUNTED SALES RS 3,00,000/- TOTAL: RS 21,77,856/- ============ HOWEVER, IN THE RETURN, PART OF THE DECLARATION WAS RETRACTED AND INSTEAD THE FOLLOWING AMOUNTS WERE OFFERED TO TAX GP ON EXCESS STOCK OF 550000 RS 1,10,000/- UNDISCLOSED CASH RS 51,000/- FURNITURE RS 10,000/- TOTAL: RS 1,71,000/- 3 4. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E RETRACTION MADE BY THE ASSESSEE AND ASSESSED THE EXCESS STOCK AS PR THE DECLARATION DURING THE SURVEY AT RS 12,15,356/- AFT ER ALLOWING CREDIT FOR PROFIT DECLARED OF RS 1,10,000/-. SIMILARLY EXC ESS CASH, UNEXPLAINED INVESTMENT IN FURNITURE AND PROFIT ON U NACCOUNTED SALES WAS ASSESSED AT THE FIGURES DECLARED DURING THE COU RSE OF SURVEY. AGAINST SUCH ITEMS, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALLOWED PARTIAL RELIEF TO THE ASSESSEE, THEREBY ADD ITION ON ACCOUNT OF EXCESS STOCK HAS BEEN SCALED DOWN TO RS 11,05,356/- . SIMILARLY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FU RNITURE HAS ALSO BEEN DELETED BY THE COMMISSIONER OF INCOME-TAX (APP EALS) AND THE ADDITION ON ACCOUNT OF PROFIT ON ACCOUNT OF UNACCOU NTED SALES HAS BEEN RETAINED. AGAINST THE ADDITIONS RETAINED, ASSE SSEE IS IN FURTHER APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT VEHEMENTLY SUBMITTED THAT DURING THE COURSE OF SURVEY, THE ASS ESSEE WAS MADE TO DECLARE THE AMOUNTS WHICH WERE MUCH HIGHER THAN WHAT WAS FOUND IN THE COURSE OF SURVEY. IT IS POINTED OUT THAT NO DECLARATION COULD HAVE BEEN LEGALLY OBTAINED DURING THE COURSE OF SUR VEY. IT WAS SUBMITTED THAT EVEN A DECLARATION MADE DOES NOT HAV E AN EVIDENTIARY VALUE SO AS TO JUSTIFY THE IMPUGNED ADDITION. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDER OF THE COMMISSIONER OF IN COME-TAX (APPEALS) TO POINT OUT THAT THE ADDITION ON ACCOUNT OF THE EXCESS STOCK HAS BEEN RETAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) 4 BASED ON THE VALUATION CARRIED OUT BY THE ASSESSEE HIMSELF DURING THE APPELLATE PROCEEDINGS. THEREFORE, ACCORDING TO HER, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS NOT JUSTIFIED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THIS CASE, OSTENSIBLY THE ASSESSING OFFICER ASSESSED EXC ESS STOCK AS DECLARED BY THE ASSESSEE DURING THE COURSE OF SURVE Y AT RS 12,15,356/-. SUBSEQUENTLY, DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE POINTED OUT THE REVISED V ALUATION OF THE STOCK WAS RS 13,21,039/- AS THE VALUATION CARRIED O UT BY THE SURVEY TEAM WAS NOT CORRECT. THE COMMISSIONER OF INCOME-TA X (APPEALS) FOUND THAT THE REVISED VALUATION IS BASED ON THE PU RCHASE DOCUMENTS AND, THEREFORE, ACCORDING TO HIM, THE REVISED STATE MENT AT RS 13,21,039/- WAS ACCEPTABLE. ON THIS BASIS, THE ADDI TION HAS BEEN REWORKED AND RESTRICTED TO RS 8,50,728/-. BEFORE US , APART FROM MAKING BALD ASSERTION THAT THE EXCESS STOCK WORKING WAS NOT JUSTIFIED, THERE IS NO MATERIAL TO NEGATE THE FIGURE OF REVISE D STOCK ADOPTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). PERTINENT LY, THE SAID FIGURE HAS BEEN REWORKED BY THE ASSESSEE AND, THERE FORE, IN OUR VIEW, THERE IS NO FURTHER SCOPE FOR THE ASSESSEE TO MILITATE AGAINST THE ADDITION BASED ON SUCH VALUATION OF STOCK. AS A RES ULT THEREOF, WE HEREBY AFFIRM THE ORDER OF THE COMMISSIONER OF INCO ME-TAX (APPEALS) RESTRICTING THE ADDITION ON ACCOUNT OF EXCESS STOCK TO RS 8,50,728/- IN PLACE OF RS 11,05,356/- MADE BY THE ASSESSING OFFIC ER. THUS, IN RESPECT OF GROUND NO 1 ASSESSEE FAILS. 5 8. THE NEXT GROUND IS IN RELATION TO AN ADDITION OF RS 4,54,500/- MADE ON ACCOUNT OF EXCESS CASH FOUND DURING THE SUR VEY. THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND T HAT A TOTAL CASH OF RS 4,67,500/- WAS FOUND ON PHYSICAL VERIFICATION , WHEREAS CASH BALANCE AS PER THE BOOKS OF ACCOUNT WAS RS 25,000/- ONLY. THE BALANCE OF RS 4,52,500/- WAS ADDED AS UNACCOUNTED C ASH. THE PLEA SET UP BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US IS TO THE EFFECT THAT AVAILABILITY OF CASH TO TH E EXTENT OF RS 4,67,500/- IS UNTENABLE, INASMUCH AS MONTHLY TURNOV ER OF THE ASSESSEE WAS MERELY RS 1.5 LAKH AND, THEREFORE, IT WAS NOT POSSIBLE FOR HIM TO KEEP CASH OF THE AFORESAID AMOUNT. THE C OMMISSIONER OF INCOME-TAX (APPEALS) FOUND THAT SURVEY RECORDS SHOW ED INVENTORY OF CASH FOUND AT THE BUSINESS PREMISES INCLUDING THE D ENOMINATION OF NOTES WHICH WAS DULY SIGNED BY A PARTNER OF THE FIR M. IN VIEW OF THE AFORESAID EVIDENCE, THE ADDITION MADE BY THE ASSESS ING OFFICER HAS SINCE BEEN UPHELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS). 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EXISTENCE OF SUCH A HUGE AMOUNT OF CASH IN HAND WAS NOT PROVED AND, THEREFORE, THE ADDITION HAS BEEN WRONGLY SUSTA INED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). ON THE CONTRA RY, THE LEARNED DEPARTMENTAL REPRESENTATIVE, APPEARING FOR THE REVE NUE, HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD, IN OUR CONSIDERED OPINION, THE ONUS IS ENTI RELY ON THE 6 ASSESSEE TO PROVE THE NON-EXISTENCE OF THE CASH EME RGING FROM THE SURVEY RECORDS. THERE IS NO MATERIAL TO HOLD THAT C ASH WAS NON- EXISTENT AS BEING SOUGHT TO BE MADE OUT BY THE ASSE SSEE ESPECIALLY AFTER THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE FACTUM OF CASH PREPARED BY THE SURVEY PARTY HAS BEE N COUNTERSIGNED BY THE PARTNER OF THE FIRM. APART THEREFROM, WE ALS O FIND THAT THERE IS NO EXPLANATION PUT-FORTH BY THE ASSESSEE AS REGARDS AVAILABILITY OF SUCH CASH AND, THEREFORE, SAME HAS BEEN RIGHTLY ADD ED AS UNACCOUNTED CASH IN THE HANDS OF THE ASSESSEE. THUS , ON THIS GROUND ALSO ASSESSEE FAILS. AS A RESULT THEREOF, GR OUND NOS 2 & 3 FAIL. 11. GROUND NO. 4 RELATES TO THE ADDITION OF RS 3,30 ,551/- MADE UNDER SECTION 68 OF THE ACT WITH REGARD TO SUNDRY C REDITORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER REQUIRED THE ASSESSEE TO GIVE A FULL LIST OF CREDITORS AND C ONFIRMATION OF CREDITORS. SINCE THE ASSESSEE COULD NOT FURNISH SUC H DETAILS, THE ASSESSING OFFICER TREATED CREDITS OUTSTANDING TO TH E EXTENT OF 50% AS BOGUS AND MADE ADDITION OF RS 3,30,551/- UNDER SEC TION 68 OF THE ACT. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APP EALS) AFFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER HOLDING AS UNDER: 22. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. AS REGARDS THE SUNDRY CREDITORS, THE AO ISSUED A LETTER TO THE APPELLAN T TO SUBMIT CONFIRMATION LETTERS REGARDING THE CREDITS FROM THE RESP ECTIVE PARTIES. THE APPELLANT EXPRESSED HIS INABILITY TO PROVIDE THE ACCOUNTS AN D CONFIRMATION LETTERS REQUESTED BY THE AO. HE HAS AGREED BY AFFIXING HI S SIGNATURE TO THE ORDER SHEET THAT AN ADDITION ON ACCOUNT OF BOGUS CREDITS TO THE EXTENT OF 50% OF THE TOTAL AMOUNT OF SUNDRY CREDITORS WAS ACCEPTABL E. THE ISSUE HAS TO BE SEEN FROM THE PERSPECTIVE OF BOOKS OF ACCOUNT NOT BEING MAINTAINED AND VARIOUS OTHER DISCREPANCIES FOUND WITH REG ARD TO RECORD KEEPING OF THE BUSINESS. IF THE ASSESSEE CLAIMS THAT CERTAI N AMOUNT WERE PAYABLE TO CERTAIN PARTIES, THE ONUS IS ON HIM TO SUBSTANT IATE HIS CLAIM BY 7 PROVING THE IDENTITY OF THE PARTIES, THEIR CREDIT WORTH INESS AND THE GENUINENESS OF THE TRANSACTIONS. THE APPELLANT HAS CLEARLY NOT BEEN ABLE TO DISCHARGE THE ONUS ON HIM AND HAS THEREBY AGREED FOR THE DISALLOWANCE. THERE IS NO SPECIAL REASON OR ARGUMENT ADVAN CED AT THE STAGE OF APPELLATE PROCEEDINGS TO WARRANT A REVIEW OF T HE STAND TAKEN BY THE AO. THE ADDITION U/S 68 IS, THEREFORE, CONFIRMED. 12. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. W E DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER O F INCOME-TAX (APPEALS). BEFORE US, NO FRESH FACTS HAVE BEEN BRO UGHT TO OUR NOTICE BY THE LEARNED COUNSEL. THEREFORE, FOR THE WELL-FOU NDED REASONS GIVEN BY THE COMMISSIONER OF INCOME-TAX (APPEALS) W E AFFIRM HIS ORDER. ASSESSEE FAILS ON THIS GROUND. 13. THE LAST GROUND RELATING TO LEVY OF INTEREST UN DER SECTION 234A, 234B & 234C IS CONSEQUENTIAL IN NATURE AND NEEDS NO ADJUDICATION. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. DECISION WAS PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JULY, 2011. SD/- SD/- (I.C. SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE: DATED: 15 TH JULY, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B BENCH, PUNE 5. GUARD FILE TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, PUNE 8