Shri Prahladrai K Agrawal, Ahmedabad V. Asstt. Commissioner of Income Tax, Ahmedabad

ITA 751/AHD/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8313 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-08-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN DATES OF HEARING OF
• Assessee Lawyers: URVASHI SHOLHEM
• Keywords: Unexplained investment; Business income; Income from undisclosed sources
• Section: 133A

Judgement Text

SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [ CORAM : H O N BLE JUSTICE P . P BHATT, PRESIDNET AND PRAMOD KUMAR, VP ] ITA NO . 751 & 3001 / AHD / 2015 ASSESSMENT YEAR : 2011 - 12 SHRI PRAHLADRAI K AGRAWAL ............. APPELLANT 34, NEW CLOTH MARKET, O / S RAIPUR GATE, AHMEDABAD 380001 [ PAN : AELPK7725F ] VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 11 AHMEDABAD ....... RESPONDENT APPEARANCES BY URVASHI SHOLHEM FOR THE APPELLANT L . P JAIN FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : DECEMBER 20 TH , 2019 DATE OF PRONOUNCING THIS ORDER : MARCH 1 2 T H , 2020 O R D E R PER BENCH : ITA NO. 751/AHD/2015 1 . THIS APPEAL , FILED BY THE ASSESSEE, IS DIRECTED AGAINST LEARNED CIT ( A ) S ORDER DATED 21 ST JANUARY 2015, IN THE MATTER OF ASSESSEMENT UNDER SECTION 143 ( 3 ) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSEMENT YEAR 2011 - 12 . 2 . GRIEVANCES RAISED BY THE ASSESSEE - APPELLANT, WHICH WE WILL TAKEN UP TOGETHER, ARE AS FOLLOWS :- SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 2 OF 6 1 . LD . CIT ( A ) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION TO THE EXTENDT OF RS . 31,66,013 /- FROM ADDITION OF RS . 86,94,729 /- MADE BY AO ON ACCONT OF ADDITIONAL INCOME DECLARED BUT NOT OFFERED FOR TAXA TION BY THE APPELLANT . LD . CIT ( A ) OUGHT TO HAVE COMPUTED ANY ADDITION ON ENTIRELY DIFFERENT BASIS DESPITE ACCEPTING THAT SALE REALIZATION OF EXCESS STOCK FUND DURING SURVEY WAS ALREADY SHOWN BY THE APPELLANT . IT BE SO HELD NOW . 2 . LD . CIT ( A ) ERRED IN LAW AND ON FACTS IN OBSERVING THAT THE APPELLANT FIALED TO ESTABLISH THE GENUINENESS OF LOSS OF RS / 4,15,220 /- SUFFERED ON THE SALE OF EXCESS STOCK IGNORING ONE TO ONE TALLY BETWEEN EXESS STOCK AND SALES REALIZATION SUBMITTED BEFORE THE AUTHORITIES . UNDER THE FACTS OF THE CASE LD . CIT ( A ) OUGHT TO HAVE HELD LOSS INCURRED AS GENUINE . IT BE SO HELD NOW . 3 . LD . CIT ( A ) ERRED IN LAW AND ON FACTS IN DETERMINING INCOME ON THE BASIS OF OUTCOME OF SURVEY PROCEEDINGS AND THE NORMAL BUSINESS INCOME ON THE TOTAL TURNOVER . LD . CIT ( A ) ERRED IN ADOPTING N . P OF AY 2010 - 11 THOUGH HOLDING THAT INCOME FOR THE YEAR WAS MANY TIMES TO THE RETURNED INCOME THE PROCEEDING YEARS . LD . CIT ( A ) OUGHT NOT TO HAVE MADE FURTHER ADDITION TO THE RETURNED INCOME INCLUSICE OF UNEXPLAINED INVESTMENT IN STOCK . 4 . LD . CIT ( A ) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT OUGHT TO HAVE OFFERED NORMAL PROFITS ON THE TURNOVER ALONG WITH THE AMOUNT OF DISCLOSURE OF UNEXPLAINED INCOME IN THE RETURN . LD . CIT ( A ) OUGHT TO HAVE APPRECIATED ALREADY OFFERED PROFIT / LSS REALIZED ON SALE OF UNDISCLOSED INVESTMENT IN STOCK AND THAT THERE WAS NO DISCLOSURE OF ANY UNEXPLAINED INCOME . IT BE SO HELD NOW . 5 . LD . CIT ( A ) ERRED IN LAW AND ON FACTS IN CONFIRMING ULTIMATELY ADDITION OF RS . 31,66,033 /- DESPITE ACCEP TING THAT ADDITION OF RS . 86,94,729 /- BY AO AGAINST AMOUNT SHOWN SHORT OF RS . 14,46,393 /- IN THE SHOW CAUSE NOTICE MISUNDERSTANIDING THE FIGURES OF SALES IN HIS WORKING WAS TOTALLY UNCALLED FOR AND AGAINST THE LEGAL PRINCIPLES . 3 . BRIEFLY STATED, THE RELE VANT MATERIAL FACTS ARE LIKE THIS . THE ASSESSEE BEFORE US IS ENGAGED IN, INTER ALIA, MANUFACTURING, PROCESSING AND TRADING OF GREY CLOTHES AND FABRICS . DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE WAS SUBJECTED TO SURVEY PROCEEDINGS . IN THE COURSE OF SC RUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHILE, IN THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE HAD ADMITTED UNACCOUNTED STOCK OF RS . 93,89,180 /- AND UNACCOUNTED CASH OF RS 6,28,401 /- , THE ENTIRE BUSINESS INCOME SHOWN BY HIM WAS ONLY RS . SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 3 OF 6 72,54,540 /-. HE WAS, THEREFORE, OF THE VIEW THAT THE ASSESSEE DID NOT SHOW THAT INCOME, ADMITTED DURING SURVEY PROCEEDINGS, OF RS . 1,00,88,602 /-. WHEN ASSESSEE WAS PUT TO NOTICE ABOUT THIS PRIMA FACIE UNDERSTANDING OF THE ASSESSING OFFICER, IT WAS INTER ALIA EXPLAINED BY THE ASSESSEE THAT ( A ) OUT OF THE EXCESS STOCK OF RS . 93,89,180 /- , HE HAD SOLD STOCK WORTH RS . 80,13,308 /- WHICH IS INCLUDED IN SAL ES, ( B ) THE UNACCOUNTED SALES WAS INADVERTENTLY TAKEN AT SALE PRICE AND NOT THE COST TO THE ASSESSEE, AND ( C ) ONE PURCHASE BILL OF RS . 15,08,361 /- WAS ALSO MISSED OUT AT THE TIME OF SURVEY PROCEEDINGS . THE DETAILED WRITEEN SUBMISSIONS FILED BY THE ASSESSEE WERE ALSO TAKEN TO RECORD . NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE ASSESSING OFFICER . HE WAS OF THE VIEW THAT ADMISSIONS MADE BY THE ASSESSEE, IN THE STATEMENT RECORDED DURING SURVEY PROCEEDINGS, WAS CATEGORICAL AND IT HAD SUBSTANTIAL EVIDENT A RY VALUE . HE WAS ALSO OF THE VIEW THAT PURCHASE OF RS . 15,08,361 /- WHICH WAS NOT EVIDENCED AT THE TIME OF SURVEY, CANNOT BE ACCEPTED . HE NOTED THAT THE ADDITIONAL INCOME ACTUALLY OFFERED TO TAXWAS ONLY RS . 4,15,220 /- , AND AFTER ADJUSTING FOR THE GROSS PROF IT ELEMENT, HE COMPUTED INACCCOUNTED SALES, WHICH REMAINED UNDISCLOSED, AT RS . 86,94,729 /-. AGGRIEVED BY THE RESULTANT ADDITION OF RS . 86,94,729 /- , ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITH ONLY PARTIAL SUCCESS . LEARNED CIT ( A ) UPHELD THE CLAIM OF THE ASSESSEE WITH RESPECT TO PURCHASES OF RS . 15,08,361 /- WHICH WERE NOT TAKEN INTO ACCOUNT AT THE TIME OF SURVEY . HE ALSO ACCEPTED THAT SHOWN SALES REALIZATION OF UNACCOUNTED STOCK FOUND DURING THE SURVEY, BUT HE PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD WRONGLY CLAIMED LOSS ON OTHER SALES WHICH WAS, IN THE LIGHT OF THE PAST CASE HISTORY, SIMPLY NOT POSSIBLE . HE THUS PROCEEDED TO CONFIRM THE ADDITION TO THE EXENT OF RS 31,61,013 /- ON THE BASIS OF FOLLOWING CONCLUSIONS : - 4 . 15 ON GOING THR OUGH THE DETAILS AND SUBMISSIONS IT WAS FOUND THAT ALTHOUGH THE APPELLANT HAD SHOWN THE SALES REALIZATION OF THE EXCESS STOCK FUND DURING THE COURSE OF SURVEY AT RS . 75,98,588 /- BUT IT HAS SHOWN THE LOSSES IN ITS BOOKS OF ACCOUNT AND BECAUSE OF SUCH LOSSES HIS RETURNED INCOME CAME DOWN TO RS . 72,54,540 /- IGNORING EVEN THE NORMAL PROFITS DERIVED BY THE APPELLANT AND THE AFORESAID SURRENDER OF UNDISCLOSED INCOME OF RS . 75,98,588 /-. IN FACE THE APPELLANT HAS FAILED TO ESTABLISH THE GENUINENESS OF SUCH LOSSES C LAIMED IN THE BOOKS OF ACCOUNT HENCE THOSE ARE NOT ACCEPTED AND HENCE REJECTED . 4 . 16 IN VIEW OF THE ABOVE FACTS THE APPELLANT OUGHT TO HAVE AT LEAST SHOWN THE NORMAL PROFITS ON THE TURNOVER AS PER HIS PAST HISTORY AND THE AMOUNT OF DISCLOSURE OF UNEXPLAIN ED INCOME IN THE RETURN OF INCOME . SO THE INCOME TO BE DETERMINED ON THE BAIS OF THE OUTXOME OF THE SURVEY PROCEEDINGS AND THE NORMAL BUSINESS INCOME ON THE TOTAL TURNOVER WOULD BE UNDER : - INCOME SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 4 OF 6 1 REGULAR NET PROFITS ON THE TURNOVER OF RS 9,15,62,262 /- OF BOTH THE GROUP CONCERNS ( N . P RATE 2 . 45 % AS PER THE A . Y 2010 - 11 . NET PROFIT EXCLUDING RENTAL INCOME SALES OF AY 2010 - 11 I . E . RS . 12,24,443 /- RS . 5,00,65,085 /- RS . 22,39,340 /- 2 ADD : DISCLOSURE OF THE UNDISCLOSED INCOME MADE DURING THE COURSE OF SURVEY RS 1,00,88,602 /- 2 . 1 LESS : REDUCTION ON ACCOUNT OF G . P IN BALAJI TAXTILE AS ACCEPTED BY THE AO AS DISCUCED IN PRECEDING PARAS RS 1,76,873 /- 2 . 2 LESS : REDUCTIN ON ACCOUNT OF G . P IN BHARAT EXPORT ACCEPTED BY THE AO AS DISCUSSED IN PRECEDING PARAS RS 2,22 . 155 /- 2 . 3 LESS : PURCHASE BILLS NOT RECORDED IN THE PURCHASE REGISTER ON THE DATE OF SURVEY BUT PHYSICAL STOCK INCLUDED IN THE INVENTORY OF STOCK AS DISCUSSED IN THE PRECEDING PARAS RS 15,08,361 /- 3 UNACCOUNTED INCOME ON ACCOUNT OF SURVEY TO BE INCLUDED IN THE RETURN OF INCOME ( 2 - 2 . 1 - 2 . 2 - 2 . 3 ) RS . 81,81,213 /- TOTAL INCOME DETERMINED ( NORMAL BUSINESS INCOME + UNDISCLOSED INCOME OF SURVEY PROCEEDINGS ) RS 1,04,20,553 /- 4 . 17 IN VIEW OF THE AFORESAID DISCUSSION, THE TOTAL INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION HAVING REGARD TO HIS REGULAR BUSINESS INCOME ON HIS TURNOVER AS PER THE NET PROFIT RAE OF THE IMMEDIATELY PRECEDING YEAR AND THE UNDISCLOSED INCOME DUE TO SURVEY PROCEEDINGS IS WORKD OUT AT RS . 1,04,553 /- A S AGAINST HIS RETUNRED INCOME OF RS . 72,54,540 /-. IN RESULT, THE ADDITION TO THE EXTENT OF RS . 31,66,013 /- ( RS SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 5 OF 6 1,04,20,553 /- (-) RS 92,54,540 /-) IS CONFIRMED AND THE APPELLANT GETS THE RELIEF OF THE BALANCE ADDITION . 4 . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 5 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 6 . WE FIND THAT THE COURSE ADOPTED BY THE CIT ( A ) IS SIMPLY NOT SUS TAINABLE IN LAW . HE HAS PROCEEDED TO ADOPT THE FIGURE OF ADMISSIONS MADE DURING THE SURVEY, WITH RESPECT TO UNEXPLAINED STOCK AND UNEXPLAINED CASH AGGREGATING TO RS . 1,00,88,602 /- , BUT THEN THERE WAS NO ADDITION, EVEN IN THE ASSESSEMTN PROCEEDINGS, WITH RESPECT TO ALLEGED UNEXPLAINED CASH COMPONENT OF RS . 6,28,401 /- INCLUDED THEREIN, AND, EVEN GOING BY CIT ( A ) S UNCONTROVERTED FINDI NGS OF UNACCOUNTED STOCK FOUND DURING SURVEY HAS BEEN FOUND TO HAVE BEEN INCLUDED IN THE SALES SHOWN BY THE ASSESSEE . AS A MATTER OF FACT THE ENTIRE BASIS OF ADDITION, AS SUSTAINED BY THE CIT ( A ) , IS DENIAL OF SO CALLED LOSS SUFFERED IN TRADING BY THE ASSESSEE, BUT THEN THERE WAS NO OPPORTUNITY TO THE ASSESSEE TO HEAR HIM ON THIS ASPECT . IT WAS NOT OPEN TO THE CIT ( A ) TO CHANGE THE BASIS OF ADDITION WITHOUT PUTTING THE ASSESSEE TO NOTICE AND GIVEN HIM AN OPPORTUNITY OF HEARING THEREON . ALL THIS APART, IT IS ONLY ELEMENTARY THAT A STATEMENT RECORDED UNDER SECTION 133A HAS NO EVIDENGTARY VALUE, AS HELD BY HON BLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SONS VS CIT [( 2003 ) 263 ITR 101 ( KERALA )] AND THERE BEING NO CONTRARY DECISION BY HON BLE JURISDICTIONAL HIGH COURT . KEEPING IN VIEW OF THESE DISCUSSIONS, AS ASLO ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DELETE THE I MPUGNED ADDITION OF RS . 31,66,013 /-. THE IMPUGNED ADDITION THUS STANDS DELETED . 7 . IN THE RESULT, THIS APPEAL IS ALLOWED IN THE TERM INDICATED ABOVE . ITA NO. 3001/AHD/2015 8. LEARNED REPRESENTATIVES FAIRLY AGREE THAT IN THE EVENT OF ITA NO. 751/AHD/2015 BEING ALLOWED. THIS APPEAL WILL BE RENDERED ACADEMIC OF INFRUCTUOUS. 9. VIDE OUR ORDER ABOVE, WE HAVE ALREADY ALLOWED THE AFORESAID APPEAL. THIS APPEAL IS, THEREFORE, DISMISSED AS INFRUCTUOUS. ORDERED, ACCORDINGLY. 10. IN THE RESULT, ITA NO. 3001/AHD/2015 IS DISMISSED INFRUCTUOUS. SHRI PRAHLADRAI K AGRAWAL ITA NO. 751 & 3001 /AHD/2015 PAGE 6 OF 6 11. TO SUM UP, ITA NO 751/AHD/2015 IS ALLOWED, ITA NO 3001/AHD/2015 IS DISMISSED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD . S D / - S D / - JUSTICE P . P BHATT PRAMOD KUMAR ( PRESIDENT ) ( VICE PRESIDENT ) AHMEDABAD , DATED THE 1 2 T H DAY OF MARCH , 2020 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD