ITO, Ward-1(2), Midnapore, Midnapore V. Shri Arun Karak, Paschim Medinipur

ITA 754/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87612 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 13-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Court: TRIBUNAL
• Department Lawyers: S ANJAY JCITLDSR
• Section: 133(6)

Judgement Text

, C , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( ) , , [BEFORE HON BLE SHRI MAHAVIR SINGH, JM & HON BLE SHRI SHAMIM YAHYA, AM ] I.T.A NO. 754 /KOL/201 1 A.Y 200 7 - 08 I.T.O, W 1(2), MIDNAPORE VS. SRI ARUN KARAK PAN:AEWPK6181N [ APPELLANT ] [ R ESPONDENT ] APPELLANT BY : SHRI S ANJAY, JCIT/LD/SR.DR RESPONDENT BY : NONE /DATE OF HEARING : 06 - 01 - 2015 /DATE OF PRONOUNCEMENT: 7 - 01 - 2015 / ORDER , SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT (A) DATED 02/03/ 201 1 PERTAINING TO ASSESSMENT YEAR 200 7 - 08. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER : - 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN ALLOWING THE RELIEF TO THE EXTENT OF RS.29,36,342/ - BEING THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED AND UNEXPLAINED PURCHASE, NOT REFLECTED IN THE ACCOUNTS. 2. THE LD. CIT(A) HAD HIMSELF ADMITTED THE UNDISCLOSED PURCHASE TO THE TUNE OF R S.32,62,607/ - MADE OUTSIDE THE ACCOUNTS, YET WITHOUT PREJUDICE TO GROUND NO.1 THE LD.CI T(A) HAS ERRED IN ALLOWING RELIEF TO THE QUANTUM OF RS.29,36,342/ - . 3. FOR THESE AND OTHER GROUND(S) THAT WOULD BE ADDUCED BEFORE THE HON BLE TRIBUNAL, AT THE TIME OF HEARING WITH THE LEAVE OF THE HON BLE ITAT, THE DECISION OF THE LD.CIT(A) MAY BE REVER SED AND THE INTEREST OF THE REVENUE BE RESTORED. 3 . IN TH IS CASE THE AO HAS MADE ADDITIONS OF RS.20,99,898/ - AND RS.11,02,719/ - BEING UNDISCLOSED PURCHASE S OF CEMENTS AND IRON RODS. THE RELEVANT PORTION OF AO S OBSERVATION BEHIND THESE ADDITIONS ARE EXTRA CTED BELOW: - N COURSE OF ASSESSMENT PROCEEDINGS, NOTICE U/S. 133(6) WAS ISSUED TO GRACIM CEMENT INDUSTRIES L TD. FROM THEIR COMPLIANCE, IT IS FOUND THAT DURING THE PERIOD 2006 - 07, THE ASSESSEE HAD PURCHASED GOODS OF R S.32,71,080/ - FROM THEM AND THE PAYMEN TS IN RESPECT OF SUCH PURCHASES WERE MADE BY DD IN E VERY RESPECT. BUT THE ASSESSEE, HAD SHOWN THE FIGURE AS RS.11,71,182/ - ONLY. THUS THERE WAS A CONCEALMENT OF PURCHASES OF RS.20,99,898/ - . THE PAYMENTS AGAINST SUCH PURCHASES ITA NO . 754/KOL/11 - C - SRI ARUN KARAK 2 WERE MADE THROUGH DD WHICH WERE ALSO NOT MADE THROUGH THE DISCLOSED BANK ACCOUNTS. THEREFORE, IN COURSE OF HEARING THE A.R OF THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE UNDISCLOSED PURCHASES OF RS , 20,99,898/ - WOULD NOT BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSE D PURCHASE, PAYMENT AGAINS T WHICH WERE MADE FROM UNDISCLOSED SOURCES. THE A.R OF THE ASSESSEE AS WELL AS THE ASSESSEE HIMSELF FAILED TO OFFER ANY EXPLANATION. HENCE, RS.20,99,898/ - IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. NOTICE U/S. 1 33(60 WAS ISSUED TO BABA LOKNATH TRADERS FROM WHERE HARDWARES ITEMS WERE PURCHASE. IN COMPLIANCE TO NOTICE U/S. 133(6), MR. GOUTAM HUI, PROPRIETOR OF THE SAID CONCERN STATED THAT DURING THE PERIOD THEY HAD SOLD GOODS TO THE TUNE OF R S.24,97,149/ - TO SRI ARUN KARAK, PROP. O F KARAK HARDWARE DURING THE PERIOD 2006 - 07. BUT THE ASSESSEE, HAD SHOWN THE FIGURE AS RS.13,34,440/ - ONLY. THUS THERE WAS A CONCEALMENT OF PURCHASES OF RS.11,62,709/ - . IN COURSE OF HEARING THE A.R OF THE ASSESSEE WAS ASKED TO EXPLAIN WH Y THE UNDISCLOSED PURCHASES OF RS.11,62,709/ - WOULD NOT BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSED PURCHASES, AND WHY PENAL PROCEEDINGS U/S. 271 ( 1) ( C) WOULD NOT BE LIMITED AGAINST SUCH CONCEALMENT OF PURCHASES. THE A.R OF THE ASSE SSEE AS WELL AS THE ASSESSEE HIMSELF FAILED TO OFFER ANY EXPLANATION. HENCE, RS.11,62,709/ - IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD.CIT(A). BEFORE HIM THE ASSESSEE PLEADED THAT AO HAS ALREADY ADDED THE GROSS PROFIT ON UNDISCLOSED TRANSACTION. HENCE, THE ADDITION ON ACCOUNT OF UNDISCLOSED PURCHASE IS NOT JUSTIFIED. CONSIDERING THE ABOVE, THE LD. CIT(A) HELD AS UNDER: - 6. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT. I T TRANSPIRES THAT IN THE COURSE OF REGULAR BUSINESS, THE APPELLANT HAD MADE UNDISCLOSED EXCESS PURCHASES OF CEMENT FOR RS.20,99,898/ - AND IRON RODS FOR RS.11,62,709/ - , TOTALING TO RS.32,62,607/ - . THOSE ITEMS APPEARED TO BE SOLD OUTSIDE BOOKS AS THE AO ESTI MATED INCOME ON SUCH TRANSACTIONS IN THE SAME RATIO OF DISCLOSED GROSS PROFIT. THUS, GOING BY AO S OWN ACTION, ENTIRE EXCESS PURCHASES CANNOT BE ADDED. HOWEVER, THE UNACCOUNTED INITIAL CAPITAL USED FOR SUCH EXCESS PURCHASES SHOULD BE CONSIDERED FOR ADDIT ION. GOING BY THE VOLUME OF UNACCOUNTED PURCHASES (MORE THAN TWICE OF THE DISCLOSED PURCHASES), THERE WAS EVERY POSSIBILITY OF DEPLOYMENT OF CERTAIN UNACCOUNTED AMOUNT AS INITIAL CAPITAL FOR SUCH EXCESS PURCHASES. THE AR OF THE APPELLANT HAS FAILED TO EX PLAIN THE SOURCE OF SUCH INITIAL CAPITAL. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND IT FAIR AND REASONABLE TO ESTIMATE THE UNACCOUNTED INITIAL CAPITAL INVESTMENT AT 10% OF THE TOTAL UNACCOUNTED PURCHASES OF RS.32,62,607/ - , EQUIVALENT TO RS.3,26,261/ - . THUS, THE ADDITION TO THE EXTENT OF RS.3,26,261/ - IS SUSTAINED. THE APPELLANT GETS RELIEF OF RS.29,36,346/ - . 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. ITA NO . 754/KOL/11 - C - SRI ARUN KARAK 3 6 . WE HAVE HEARD THE LD. DR . NONE APPEARED ON BEHALF OF THE ASS ESSEE. HOWEVER, IN OUR CONSIDERED OPINION THE MATTER CAN BE ADJUDICATED U PON HEARING THE LD.DR AND PERUSING THE RECORD. 6.1 UPON CAREFUL CONSIDERATION, WE NOTE THAT THE AO HAS FOUND UNDISCLOSED PURCHASE OF CEMENT & IRON RODS TOTALING TO RS.32,6 6,607/ - . NOW, IF THE AO A DDS THE ESTIMATED PROFIT, WHICH THE ASSESSEE MIGHT HAVE EARNED ON SALE OF UNDISCLOSED PURCHASE , BY NO STRETCH OF IMAGINATION IT IMPLIES THAT THE ASSESSEE S UNDISCLOSED SOURCE OF PURCHASE CANNOT BE CONSIDERED BY THE AO FOR MAKING ADDITION IN THE SHAP E OF UNDISCLOSED CAPITAL EMPLOYED . THE LD. CIT(A) HAS MADE ESTIMATE @ 10% OF THE TOTAL UNACCOUNTED PURCHASE S AS INITIAL CAPITAL EMPLOYED. WE FIND THAT THERE IS NO REASON WHATSOEVER IN THIS REGARD FOR IGNORING THE TOTAL AMOUNT OF PURCHASE WHICH WAS FOUND TO BE OUT OF UNDIS CLOSED PURCHASE OF ASSESSEE. IT IS FOR THE ASSESSEE TO SHOW WITH COGENT EVIDENCES THAT THE ASSESSEE S CAPITAL EMPLOYED IN THIS REGARD WAS MUCH LOWER. HOWEVER, N O SUCH SUBMISSION WAS FURNISHED ON BEHALF OF THE ASSESSEE. HE NCE, W E FIND THAT THE LD.CIT(A) HAS E RRED IN GRANTING RELIEF TO THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THAT OF THE AO. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 - 01 - 2015 SD/ - SD/ - [ , ] [ , ] [ MAHAVIR SINGH , JUDICIAL MEMBER] [ SHAMIM YAHYA, ACCOUNTANT MEMBER ] / DATED: 7 / 01/2015 / COPY OF THE ORDER FORWARDED TO: 1 . /APPELLANT - I T O W 1 (2), MIDNAPORE . 2 / RESPONDENT : SRI ARUN KARAK C.K ROAD, P.O SATBANKURA DIST: PASCHIM MEDINIPUR . 3 . / CIT, 4 . ( )/ CIT(A), 5 . / DR, KOLKATA BENCHES, KOLKATA *PP/SPS [ / TRUE COPY] / BY ORDER, /ASSTT REGISTRAR