The ACIT, Circle-7, Surat V. M/s. Saloni Industries, Surat

ITA 767/AHD/2011

• Counselvise Citation: 76720514 RSA 2011
• Duration Of Justice: 4 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Income from undisclosed sources; Deemed to accrue or arise in india
• Section: 69C; 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE ACIT, CIR - 7, ROOM NO. 622, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) VS M/S. SALONI INDUSTRIES, B - 3042 - 3043, MILLENNIUM MARKET, RING ROAD, SURAT PAN: AAUFS0229F (RESPONDENT) REVENUE BY : S H RI A.K. PA NDEY , SR. D . R. ASSESSEE BY: S H RI M.K. PATEL , A.R. DATE OF HEARING : 28 - 08 - 2 015 DATE OF PRONOUNCEMENT : 21 - 10 - 2 015 / ORDER P ER : S. S. GODARA , JU DICIAL MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2007 - 08, AR ISES FROM ORDER OF THE CIT(A) - V, SURAT DATED 16 - 11 - 2010 IN APPEAL NO. CAS - V/237 /09 - 10, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 767 / A HD/20 11 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 767 /AHD/20 11 A.Y. 2007 - 08 PAGE NO ACIT VS. M/S. SALONI INDUSTRIES 2 2. THE REVENUE S TWO SUBSTANTIVE GROUNDS PLEADED IN THE APPEAL CHALLENGE THE CIT(A) S ORDER TREATING ASSESSEE S UNDISCLOSED INCOME DURI NG SURVEY OF RS. 75,16,725/ - AS BUSINESS INCOME AS AGAINST DEEMED INCOME THEREBY HOLDING IT AS PART OF BOOK PROFIT FOR WORKING DEDUCTION U/S. 40B(V) OF THE ACT GRANTING RELIEF OF PARTNERS REMUNERATION OF RS. 33,80,787/ - . 3. THE ASSESSEE FIRM MANUFACTURES AND SELLS ART SILK FABRIC. THE DEPARTMENT CONDUCTED A SURVEY UNE ARTHING DISCREPANCIES IN STOCK AND CASH BOOK. ONE OF THE ASSESSEE S PARTN ERS SHRI SANATH I. KAPADIA DECLARED ADDITIONAL UNACCOUNTED INCOME OF RS. 75, 16,725/ - OVER AND ABOVE REGULAR BUSINESS INCOME AS PERTAINING TO THE RELEVANT PREVIOUS YEAR. THIS COMPRISED OF UNACCOUNTED STOCK OF RS. 70,92,346/ - , UNACCOUNTED SALE OF RS. 4,21, 1 74/ - WITH EXCESS CASH OF RS. 3, 205/ - . THE ASSESSEE FILED ITS RETURN ON 31 - 10 - 2007 STATING INCOME OF RS. 46,55,600/ - . IT WOULD CLAIM VARIOUS EXPENSE S OF PARTNERS SALARIES AND INTEREST ETC AGAINST THE ABOVE STATED UNDISCLOSED INCOME FOR ARRIVING AT A NET P ROFIT OF RS. 25,48,470/ - . THE ASSESSING OFFICE R TOOK UP SCRUTINY. HE WAS OF THE VIEW THAT THE IMPUGNED ADDITIONAL INCOME CAME WITHIN THE PURVIEW OF SECTIONS 69 TO 69C NOT COVERED BY ANY OF THE PRESCRIBED HEAD U/S. 14 OF THE ACT TO BE ELIGIBLE FOR DEDUCTI ON IN QUESTION CLAIMED U/S. 40B(5) OF THE ACT. HE QUOTED CASE LAW OF FAKIR MOHD. HAZI HASSAN VS. CIT (2001) 247 ITR 290 FOR DISALLOWING THE EXCESS REMUNERATION OF RS. 48,18,628/ - IN A REGULAR ASSESSMENT FRAMED ON 30 - 12 - 2009. I.T.A NO. 767 /AHD/20 11 A.Y. 2007 - 08 PAGE NO ACIT VS. M/S. SALONI INDUSTRIES 3 4. THE ASSESSEE PREFERRED A PPEAL. THIS CIT(A) TREATS ITS ADDITIONAL INCOME AS PROFITS AND GAINS OF BUSINESS AND PROFESSION AS UNDER: - BEFORE DECIDING THE ISSUE FOLLOWING FACTS OF THIS CASE WILL HAVE TO BE CONSIDERED: I. THE SURVEY WAS CONDUCTED AT THE BUSINESS PREMISE. II. T HE UNACCOUNTED STOCK FOUND WAS RELATED TO THE BUSINESS OF THE ASSESSEE. II I. THE UNACCOUNTED SALE WAS ALSO RELATED WITH THE BUSINESS OF THE ASSESSEE. IV. THE EXCESS CASH FOUND WAS ALSO IN RELATION TO THE CASH BOOK OF THE BUSINESS OF THE ASSESSEE. V. THE VA RIOUS CONSTITUENTS OF THE ADDITIONAL INCOME DECLARED DURING THE SURVEY WERE FOUND RECORDED IN THE BOOKS OF ACCOUNTS PRODUCED DURING THE ASSESSMENT PROCEEDING. VI. THE ASSESSEE OFFERED ITS EXPLANATION THAT THE SOURCE OF INVESTMENT WHICH WAS NOTHING BUT BUSI NESS INCOME OF THE ASSESSEE. VII. THE DEPARTMENT HAS NOT FOUND ANY EVIDENCE ABOUT ANY OTHER SOURCE OF INCOME OTHER THAN DECLARED BUSINESS INCOME OF THE ASSESSEE, EVEN AFTER SURVEYING THE OFFICE PREMISE OF THE APPELLANT. IN VIEW OF THE ABOVE FACTS AND VARI OUS DECISIONS QUOTED BY THE LD. A.R. I AM OF THE VIEW THAT THE INCOME DECLARED DURING THE SURVEY CANNOT BE TAXED UNDER ANY OTHER HEAD EXCEPT 'PROFIT AND GAINS FROM BUSINESS & PROFESSION'. HENCE, THE QUESTION OF BRINGING THE ADDITIONAL INCOME DECLARED DURIN G SURVEY UNDER THE AMBIT OF SECTION 69 DOES NOT ARISE IN THIS CASE. THEREFORE, THE A.O. IS DIRECTED TO TAX THE DECLARED INCOME AS INCOME FROM BUSINESS AND ALLOW THE CLAIM OF THE PARTNERS' REMUNERATION AS CLAIMED BY THE APPELLANT. ACCORDINGLY, THE FIRST THR EE GROUNDS OF APPEAL ARE ALLOWED. AS FAR AS FOURTH GROUND OF APPEAL IS CONCERNED, I DON'T THINK IT, NECESSARY TO ADJUDICATE UPON BECAUSE IT IS CONSEQUENTIAL TO THE OTHER GROUNDS OF APPEAL WHICH HAVE BEEN ADJUDICATED ABOVE. I.T.A NO. 767 /AHD/20 11 A.Y. 2007 - 08 PAGE NO ACIT VS. M/S. SALONI INDUSTRIES 4 5. WE HAVE HEARD BOTH THE PARTI ES AND GONE THROUGH THE CASE FILE. RELEVANT FACTS STATED IN THE PRECEDING PARAGRAPHS ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE REVENUE SEEKS TO ASSESS ASSESSEE S ADDITIONAL INCOME OF RS. 75,16,725/ - AS DEEMED INCOME U/S. 69 TO 69C OF THE ACT NOT ENTI TLED FOR ANY DEDUCTION ALIKE THE ONES U/S 14 OF THE ACT. ITS CASE IS THAT THE SAME WAS UNEARTHED ONLY DURING SURVEY NOT STATED IN ANY OF THE BOOKS. IT PLEADS THAT THIS ADDITIONAL INCOME IS NOT ENTITLED FOR ANY DEDUCTION PRESCRIBED U/S. 14 OF THE ACT. TH E ASSESSEE STRONGLY SUPPORTS LOWER APPELLATE FINDINGS UNDER CHALLENGE. THE DISPUTE BETWEEN THE PARTIES IS QUA TREATMENT OF ASSESSEE S ADDITIONAL UNACCOUNTED INCOME DISCLOSED DURING SURVEY HEREINABOVE. IN OTHER WORDS, WHETHER THIS INCOME IS TO BE TREATED UNDER THE HEADS PRESCRIBED IN SECTION 14 SO AS TO BE ELIGIBLE PARTNERS REMUNERATION U/S. 40B(V) OF THE ACT. THE HON BLE JURISDICTIONAL HIGH COURT IN (2010) 329 ITR 01 (GUJ) CIT VS. M/S RADHE DEVELOPERS CONSIDER THE EARLIER CASE LAW OF FAKIR MOHD (SUPRA) AND HOLD THAT PROVISIONS OF THE ACT DO NOT ENVISAGE ANY INCOME NOT FALLING UNDER VARIOUS HEADS PRESCRIBED U/S. 14 OF THE ACT. THE VERY VIEW IS REITERATED IN (2013) 219 TAXMANN 279 (GUJ) CIT VS. SHILPA DYING AND PRINTING PVT. LTD. A CO - ORDINATE BENCH OF THE TRIBUNAL IN DCIT VS. M/S NEW UMIYA VIJAY SAW MILL (2012) 40 CCH 413 HOLDS THAT SUCH A BIFURCATION OF AN ADDITIONAL INCOME DISCLOSED IN SURVEY IS NOT PERMISSIBLE. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. WE THEREFORE FOLLOW TH E ABOVE STATED JUDICIAL PRECEDENCE AND UPHOLD THE CIT(A) S FINDINGS UNDER CHALLENGE. THE REVENUE S ARGUMENTS ON IT S BOTH SUBSTANTIVE GROUNDS FAIL . I.T.A NO. 767 /AHD/20 11 A.Y. 2007 - 08 PAGE NO ACIT VS. M/S. SALONI INDUSTRIES 5 6. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 10 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 21 /10 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR , ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,