HASTIMAL U. SONIGARA, MUMBAI V. ITO 15(1)(2), MUMBAI

ITA 78/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0454 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVDR
• Assessee Lawyers: AJAY R SINGH
• Keywords: Business expenditure; Income from undisclosed sources; Rule of consistency
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 78/MUM/2014 (ASSESSMENT YEAR-2008-09) SHRI HASTIMAL U. SONIGARA, PROP. OF M/S. H.UMEDMAL, 89/91, GROUND FLOOR, DHANJI STREET, MANDAVI, MUMBAI-400003. PAN:AAEPS7391C VS. ITO-15(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 79/MUM/2014 (ASSESSMENT YEAR-2008-09) SHRI RAKESH K. PAREKH, PROP. OF M/S. L.YOGESHWAR & CO., 89/91, GROUND FLOOR, DHANJI STREET, MANDAVI, MUMBAI-400003. PAN:AACPP8435E VS. ITO-15(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 80/MUM/2014 (ASSESSMENT YEAR-2008-09) SHRI LALIT HASTIMAL JAIN, PROP. OF M/S. SANJAY ENTERPRISES, 89/91, GROUND FLOOR, DHANJI STREET, MANDAVI, MUMBAI-400003. PAN:AABPJ4218L VS. ITO-15(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY R. SINGH (AR) REVENUE BY : SHRI RAJESH KUMAR YADAV(DR) ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 2 DATE OF HEARING : 29.11.2017 DATE OF PRONOUNCEMENT : 31.01.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS GROUP OF THREE APPEALS UNDER SECTION 253 OF TH E INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE DIFFERENT ORDE R LD. CIT(A)-26, MUMBAI DATED 28.01.2011 & 30.10.2013 FOR ASSESSMENT YEAR (AY) 2008-09. IN ALL APPEALS, THE ASSESSEES HAVE RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIGURES IN ADDITIONS. AL L ASSESSMENT ORDERS ARE RELATED WITH GROUP CASE AND ARE BASED ON SEARCH ACT ION UNDER SECTION 133A CONDUCTED AT BUSINESS PREMISES OF THE GROUP ON 24.08.2007. THUS, ALL THE APPEALS WERE CLUBBED TOGETHER AND ARE DECID ED BY A CONSOLIDATED ORDER. FOR APPRECIATION OF FACT, WE ARE REFERRING T HE FACT OF ITA NO. 78/MUM/2014. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I : ADDITION OF RS. 25,00,000/- BASED ON STATEMENT RECORDED DURING THE SURVEY ACTION 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE L EARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER MAKING THE ADDITION OF RS. 25,00,000/ - AS INCOME FROM UNDISCLOSED SOURCE MERE LY RELYING THE STATEMENT RECORDED DURING SURVEY ACTION U/S. 133A OF THE ACT, 1961 ON 24/08/2007, WHEREIN ON ESTIMATE BASIS A DECLARATION WAS MADE AN ESTIMATE WORKED OUT BY THE SURVEY OFFICER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) FAILED TO APPRECIATE FACTS THAT A STATEMENT RECORDED DURING T HE SURVEY ACTION DO NOT HAVE ANY EVIDENTREY VALUE, THEREFORE ADDITION MADE MERELY ON BASIS OF STATEMENT RECORDED CANNOT BE SUSTAINED. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE RE WAS NO DISCREPANCY FOUND AT THE TIME OF SURVEY IT WAS EXPLAINED THAT T HE ASSESSEE IS A WHOLESALE DEALER IN HOSIERY GOODS, MAINTAINED HIS CASH SALES THROUGH ISSUING KACCHA BILLS ON COUNTER TILL THE SETTLEMENT OF BILLS, AND THE SALE BILLS FOUND DURING THE ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 3 SURVEY WAS RAISED ONLY AFTER THE DAY OF SURVEY ACTI ON, THEREFORE THERE WAS NO ISSUE OF OUT OF BOOKS' CASH SALES AS ALLEGED BY TH E DEPARTMENT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSING OF FICER HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS AND NOR REJECT ED THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE ACT, OF THE ASSESSEE. 5. WITHOUT PREJUDICE TO THE ABOVE ASSESSING OFFICER ERRED IN ESTIMATING THE NET PROFIT @ 4% TO RS. 25,00,000/- (IN GROUP) AND M AKING ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY ACTION WH ICH ITSELF IS CONTRARY TO THE ASSESSING OFFICER OWN STAND. II. DISALLOWANCE OF EXPENSESS OF RS. : 27,972/- 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE THE EXPENSES WHICH WAS I NCURRED TOWARDS SHOP EXPENSES OF RS. 12,815/-, STAFF WELFARE EXPENSES OF RS. 5,625/-, TELEPHONE EXPENSES OF RS. 1,137/-, CONVEYANCE EXPENSES OF RS. 5,076/- AND VEHICLE EXPENSES OF RS. 3,319/- AS BUSINESS EXPENDITURE. 2. BRIEF FACTS OF THE CASE ARE THAT A SURVEY ACTION WA S CONDUCTED AT THE BUSINESS UNDER SECTION 133A ON 24.08.2007, AT THE P REMISES OF THE ASSESSEE GROUP/FAMILY, ENGAGED IN THE BUSINESS OF H OSIERY ITEMS ON WHOLESALE BASIS. ALL FAMILY MEMBER/GROUP OPERATING FROM SINGLE PREMISES AT 89/91, DHANJI STREET, ZHAVERI BAZAR, MUMBAI. DURING THE S URVEY, IT WAS FOUND THAT NO PROPER STOCK REGISTER OF EACH CONCERN WAS MAINTAINED, SO THAT ALL CONCERN CAN BE PROPERLY IDENTIFIED. STOCK AS PER THE BOOKS WAS ALSO NOT QUANTIFIED NOR VALUED FOR THE YEAR ENDING ON 31.03. 2007. PHYSICAL INVENTORY OF STOCK WAS PREPARED BY SURVEY TEAM WITH THE HELP OF ASSESSEE AND THE STOCK WAS VALUED AT RS. 25,28,318/-. DURING THE SURVEY, SOME KACCHA CHALLANS WERE FOUND, THERE WERE CERTAIN CASH SALES WHICH WERE BRO UGHT TO THE BOOKS. THE SALE SHOWN IN THE BOOKS AND WAS ESTIMATED AT NET PROFIT OF 4% TILL THE DATE OF SURVEY ON 28.08.2007. SINCE SURVEY WAS CONDUCTED AT THE EN D OF EXPIRY OF ALMOST OF THE FINANCIAL YEAR 2007-08, THE TOTAL SALE BOOKED B Y THE GROUP TILL THE TIME OF ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 4 SURVEY WAS RS. 3,18,00,000/-. THUS, TOTAL TURNOVER OF THE ENTIRE GROUP WAS ESTIMATED AT RS. 6,03,00,000/-. THE NET PROFIT IN T HE NORMAL COURSE OF BUSINESS OF EACH OF ASSESSEE WAS ESTIMATED AT 4% I.E. ABOUT RS. 25,00,000/-. DURING THE SURVEY, STATEMENT OF SHRI LALIT HASTIMAL JAIN WAS R ECORDED. IN THE STATEMENT, SHRI LALIT HASTIMAL JAIN OFFERED RS. 80,00,000/- AS ADDITIONAL UNDISCLOSED INCOME OVER AND ABOVE THE REGULAR INCOME OF ALL CON CERN. THE INCOME OFFERED IN THE STAMEN CONSIST OF ADDITIONAL INCOME OF RS. 25,00,000/- OF M/S H. UMEDMAL, RS.25,00,000/- FOR M/S L. YOGESH KU MAR &CO. AND RS. 30,00,000/- FOR M/S SANJAY ENTERPRISES. 3. THE ASSESSEE IS DOING HIS BUSINESS UNDER THE PROPRI ETORSHIP IN THE NAME OF M/S H. UMEDMAL, FILED RETURN OF INCOME FOR RELEVAN T AY ON 29.09.2008 DECLARING TOTAL INCOME OF RS. 3,82,630/-. THE ASSES SMENT WAS COMPLETED ON 24.12.2010 UNDER SECTION 143(3). THE ASSESSING O FFICER ON THE BASIS OF STATEMENT OF LALIT HASTIMAL JAIN MADE THE ADDITION OF RS. 25,00,000/- AS INCOME FROM UNDISCLOSED SOURCES AND DISALLOWED RS. 27,972/- ON ACCOUNT OF EXPENSES. ON APPEAL BEFORE LD COMMISSIONER (APPE ALS) BOTH THE ADDITIONS WERE CONFIRMED. THUS, FURTHER AGGRIEVED B Y THE ORDER OF LD COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PRESE NT APPEAL BEFORE US. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER MADE THE ADDITIONS OF RS. 25. 00/- LACKHS ONLY ON THE ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 5 BASIS OF STATEMENT RECORDED DURING THE SURVEY PROCE EDINGS. THE STATEMENT RECORDED DURING THE SURVEY HAS NO EVIDENTIARY VALUE AND NO ADDITIONS CAN BE MADE ON THE BASIS OF SUCH STATEMENT RECODED DURI NG THE SURVEY. FOR THE ADDITIONS ON DISALLOWANCES OF EXPENSES IT WAS ARGUE D THAT THE SAME WAS MADE ON ADHOC BASIS AND ARE LIABLE TO BE DELETED. O N THE OTHER HAND THE LD. DR FOR REVENUE RELIED ON THE ORDERS OF THE AU THORITIES BELOW. IT WAS ARGUED THAT LALIT HASTIMAL JAIN HAS CATEGORICALLY D ISCLOSED UNDISCLOSED INCOME OF RS. 80,00,000/- IN THE HANDS OF THREE DIF FERENT CONCERNED AND AGREED TO PAY ADVANCE TAX. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. GROUND NO.1 OF THE APPEAL RELATES TO THE ADDITION OF RS. 25,00,000/-. DURING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE DATED 13 .12.2010 PROPOSING ADDITION OF RS. 25,00,000/-. THE ASSESSEE FILED HIS REPLY VIDE REPLY DATED 18.12.2010 AND FURNISHED THE FIGURES OF PURCHASE SA LE AND PROFIT DECLARED FROM THE BUSINESS FOR AY 2005-06, 2006-07 & 2007-08 . IT WAS FURTHER CONTENDED THAT AT THE TIME OF SURVEY, THERE WAS MIN OR DISCREPANCY NOTICED BY THE SURVEY PARTY IN THE STOCK ACCOUNT. A PHYSICA L INVENTORY OF STOCK WAS PREPARED BY THE SURVEY TEAM WITH THE HELP OF AS SESSEE AND SOME KACCHA CHALLAN WERE FOUND AT THE PREMISES AND THAT THERE WERE CERTAIN CASH SALES WHICH WERE NOT BROUGHT TO THE BOOKS. IT WAS FURTHER CONTENDED THAT DECLARATION OF RS. 25,00,000/- WAS MADE UNDER FORCE, THREAT AND ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 6 COMPULSION BY SURVEY PARTY. THE AO NOT ACCEPTED THE CONTENTION OF THE ASSESSEE. THE AO MADE THE ADDITION OF RS. 25,00,00 0/- ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES, ON THE BASIS OF TH E STATEMENT OF SH. LALIT HASTIMAL JAIN RECORDED ON 24.08.2007 DURING T HE SURVEY ACTION CARRIED ON THE GROUP OF THE ASSESSEE. THE LD. CIT(A ) CONFIRMED THE ACTION OF AO HOLDING THAT THE SUBMISSION OF ASSESSEE THAT STATEMENT WAS RECORDED BY APPLYING FORCE AND COERCION IS DEVOID O F MERIT. THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME AND PAID THE TAX ON IT. WE HAVE NOTED THAT THE AO MADE THE ADDITION ON THE BASIS OF STATEMENT RECORDED DURING THE SURVEY. THE AO HAS NOT BROUGHT ON RECORD ANY OTHER CORROBORATIVE MATERIAL. MOREOVER, THE STOCK VALUED BY THE SURVEY TEAM WITH THE HELP OF ASSESSEE WAS VALUED AT RS. 25,28,318/-. THE HONBLE APEX COURT IN CASE OF CIT VS. S. KHADAR KHAN (2012) 25 TAXMAN.COM/352 ITR 480 HELD THAT STATEMENT RECORDED UNDER SECTION 133A HAS NO EVIDEN TIARY VALUE AND THE ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE BASIS OF ADMISSION. THUS, CONSIDERING THE FACTUAL AND LEGAL POSITION DISCUSSED ABOVE, WE HOLD THAT ADDITION OF RS. 25,00,000/- MAD E ON ACCOUNT OF UNDISCLOSED INCOME, BASED ON THE STATEMENT RECORDED DURING SURVEY IS NOT SUSTAINABLE AND THE SAME ARE DELETED. IN THE RESULT , GROUND NO.1 OF THE APPEAL IS ALLOWED. 6. GROUND NO.2 RELATES TO ADDITION OF DISALLOWANCE OF EXPENSES. DURING THE ASSESSMENT, THE AO NOTED THAT ASSESSEE CLAIMED EXPE NSES OF RS. 85433/- ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 7 AND STAFF WELFARE EXPENSES OF RS. 37502/- WAS PAID IN CASH. THE ASSESSEE FURTHER CLAIMED TELEPHONE EXPENSES, CONVEYANCE AND VEHICLE EXPENSES OF RS. 11,372/- RS. 50,761/- AND RS. 33,186/- RESPE CTIVELY. THE AO DISALLOWED 15% OF SHOP EXPENSES AND STAFF WELFARE E XPENSES. THE AO FURTHER DISALLOWED 10% OF TELEPHONE, CONVEYANCE AND VEHICLE EXPENSES ON ACCOUNT OF PERSONAL USE. THE LD. CIT(A) CONFIRME D THE ACTION OF AO HOLDING THAT NO DOCUMENTARY EVIDENCE HAS BEEN FILED TO CONTROVERT THE FINDING OF AO. WE HAVE NOTED THAT THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE BEFORE US. THE LOWER AUTHORITI ES ALSO DISALLOWED THE SHOP EXPENSES AND STAFF WELFARE EXPENSES FOR TH E WANT OF EVIDENCE. THUS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF LOWER AUTHORITIES. WE HAVE NOTED THAT ASSESSEE ARE RUNNIN G THREE CONCERN AT THE SAME ADDRESS AND CLAIMED SHOP EXPENSES AND STAFF WE LFARE EXPENSES IN ALL CONCERN. 7. SO FAR AS DISALLOWANCE RELATED WITH TELEPHONE EXPEN SES, CONVEYANCE AND TRAVELLING EXPENSES ARE CONCERNED, THESE ARE DAY TO DAY EXPENSES RELATED WITH THE BUSINESS. THE LOWER AUTHORITIES DISALLOWED ON ADHOC BASIS. IN OUR VIEW, ALL THREE EXPENSES I.E. TELEPHONE, CONVEYANCE AND VEHICLE EXPENSES ARE ALLOWABLE EXPENSES. CONSIDERING THE FA CT OF THE CASE DISALLOWANCE OF 10% OF TELEPHONE, CONVEYANCE AND VE HICLE EXPENSES ARE DELETED. IN THE RESULT, GROUND NO.2 OF THE APPE AL IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 8 ITA NO. 79/MUM/2014 8. THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. GROU ND NO.1 OF THE APPEAL IS IDENTICAL TO THE GROUND NO.1 OF ITA NO. 78/MUM/2 014. AS WE HAVE ALLOWED THE GROUND NO.1 OF THE APPEAL IN ITA NO. 78 /MUM/2014. THUS, CONSIDERING THE PRINCIPLE OF CONSISTENCY, GROUND NO .1 OF THIS APPEAL IS ALLOWED MUTATIS MUTANDIS. 9. GROUND NO.2 RELATES TO DISALLOWANCE OF EXPENSES. TH IS GROUND OF APPEAL IS IDENTICAL THE GROUND NO. 1 OF ITA NO. 78/MUM/201 4. THE DISALLOWANCE CONSIST OF SHOP EXPENSES OF RS. 9,374/- STAFF WELFA RE EXPENSES OF RS. 4,954 AND TELEPHONE EXPENSES OF RS. 476/-. AS WE HA VE CONFIRMED THE DISALLOWANCE RELATED WITH SHOP EXPENSES AND STAFF W ELFARE EXPENSES AND DELETED THE TELEPHONE EXPENSES IN ITA NO. 78/MUM/20 14. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED WITH SIMILAR DIR ECTION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE PARTLY ALLOWE D. ITA NO. 80/MUM/2014 11. THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. GROU ND NO.1 OF THE APPEAL IS IDENTICAL TO THE GROUND NO.1 OF ITA NO. 78/MUM/2 014. AS WE HAVE ALLOWED THE GROUND NO.1 OF THE APPEAL IN ITA NO. 78 /MUM/2014. THUS, CONSIDERING THE PRINCIPLE OF CONSISTENCY, GROUND NO .1 OF THIS APPEAL IS ALLOWED MUTATIS MUTANDIS. 12. GROUND NO.2 RELATES TO DISALLOWANCE OF EXPENSES. TH IS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.1 OF ITA NO. 78/MUM/2 014. THE ITA NO. 78 TO 89/M/2014- SHRI HASTIMAL U. SONIGARA & ORS. 9 DISALLOWANCE CONSIST OF SHOP EXPENSES OF RS. 12,333 /- STAFF WELFARE EXPENSES OF RS. 6,456 AND TELEPHONE EXPENSES OF RS. 14,853/-. AS WE HAVE CONFIRMED THE DISALLOWANCE RELATED WITH SHOP E XPENSES AND STAFF WELFARE EXPENSES AND DELETED THE TELEPHONE EXPENSES IN ITA NO. 78/MUM/2014. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED WITH SIMILAR DIRECTION. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF JANUARY 2018. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 31/01/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/