Shri Ikbalhusein Ibrahimbhai Kureshi, Baroda V. The Income tax Officer, Ward-5(1), Baroda

ITA 787/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0447 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-11-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 30-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Unexplained investment; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, J.M. AND D.C. AGRAWAL ITA NO.787/AHD/2006 ASST. YEAR:2002-03 SHRI IKBAL HUSSEIN IBRAHIMBHAI KURESHI, KHANGAH MOHALLA, BARODA 390017. V/S . INCOME-TAX OFFICER, WD-5(1), BARODA. PAN NO.ADRPK4025 B (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SUNIL TALATI RESPONDENT BY:- SHRI C. K. MISHRA, SR. D.R. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 19.01.2006 WHEREIN HE HAS CONFIRMED AN ADDIT ION OF RS.24,77,785/- OUT OF RS.26,33,935/- MADE BY AO ON ACCOUNT OF PURCHASES NOT PROVED. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF DEALING IN RAW SKIN OF SHEEP AND GOAT. DURING THIS YEAR THE ASSESSEE HAD SHOWN TOTAL SALES OF RS.57,62,817/- AND NET PROFIT OF RS.2,51,673/- WAS DECLARED. AS PER BALANCE SHEET AO NOTED SUNDRY CRED ITORS RS.29,74,604/-. AO NOTICED THAT MOST OF THE CREDITORS ARE INDIVIDUA LS AND THE AMOUNT OUTSTANDING ARE FOR RS. 30,000/- TO RS.65,000/-. TH E AO CARRIED OUT SOME TEST CHECK ENQUIRIES. THE RESULT OF THESE ENQUIRIES AS MENTIONED BY THE AO IS AS UNDER :- 2 (I) NISARBHAI GULAMBHAI KHATKI, CAMBAY. ASSESSEE CLAIMED TO HAVE PURCHASED MATERIAL WO RTH RS.1,30,752/- DURING THE YEAR AND RS.36,340/- IS SH OWN AS OUTSTANDING TO HIM UNDER THE HEAD CREDITORS AS ON 31.3.2002. ON INQUIRY, IT IS FOUND THAT THE ABOVE STATED PERSO N IS SERVING MONA MUTTON SHOP, CAMBAY EARNING SALARY OF RS.2,000 /- AND HE HAS STATED THAT HE DOES NOT KNOW THE ASSESSEE NO R HE HAS SOLD ANY SKIN TO THE ASSESSEE IN PAST OR PRESENT. (II) NOORMOHAMED KARIMBHAI KHATKI, VASAD. ASSESSEE HAS CLAIMED TO HAVE PURCHASED SKINS WO RTH RS.1,10,605/- DURING THE Y EAR AND RS.35,548/- IS SHOWN AS OUTSTANDING TO HIM UNDER THE HEAD CREDITORS I N THE BALANCE SHEET AS ON 31.03.2002. ON INQUIRY BY THE INSPE CTOR, IT IS FOUND THAT THE ABOVE STATED TOWN OF VASAD, THERE IS N O SUCH SHOP OF KHATKI NOR ANY PERSON OF THIS NAME IS RESIDING I N THE SAID TOWN. INSPECTOR HAS ALSO CONFIRMED THIS FACT FROM THE LOCAL TALATI & SARPANCH OF THE VASAD GRAM PANCHAYAT WHICH IS PL ACED ON RECORD. (III) SULEMANBHAI JABBARBHAI KHATKI, KALALI ASSESSEE HAS CLAIMED TO HAVE PURCHASED SKINS WOR TH RS.1,37,564/- DURING THE YEAR AND RS.42,279/- IS SHOWN AS OUTSTAN DING TO HIM UNDER THE HEAD SUNDRY CREDITORS IN THE BALANCE SH EET AS ON 31.03.2002. ON LOCAL INQUIRY BY THE INSPECTOR IT IS FOUND THAT NO PERSON OF THIS NAME RESIDES IN THE SAID VILLAGE. TH E SAID FACT IS ALSO CONFIRMED BY THE LOCAL ADMINISTRATION, A COPY OF WH ICH IS PLACED ON RECORD. (IV) KALUBHAI ISHAQBHAI KHATKI, PADRA ASSESSEE HAS CLAIMED TO HAVE PURCHASED SKINS WORTH RS.1,08,060/- DURING THE YEAR FROM THE ABOVE PARTY AND RS.33,778/ - IS SHOWN TO BE OUTSTANDING TO HIM AS ON 31.03.2002. ON LOCAL IN QUIRY BY THE INSPECTOR, IT IS LEARNT THAT NO PERSON OF THIS NAME IS RESIDING IN PADRA OR DOING BUSINESS OF BUTCHERY (KHATKI) AT PAD RA. IN FACT, AS PER THE LOCAL ADMINISTRATION (SHOP & ESTABLISHMENT, PADRA NAGARPALIKA) THERE ARE ONLY FOUR SHOPS IN THE NAMES OF MAHER MUTTOR SHOP, PROP. MOH. HAJIF A SHEIKH, IQBAL ABDUL KADAR KURESHI, AMAR MUTTON SHOP, PROP.ABDUL KARIM KALUBHA I SHEIKH 3 AND LUCKY MUTTON SHOP, PROP. GULAMHUSSEIN ABDULRAHM AN, SHEIKH. HE ACCORDINGLY INFERRED THAT PURCHASES ARE NOT VERI FIABLE. AO ALSO CALLED THE BANK STATEMENT FROM BOB. HE OBTAINED CHEQUES IS SUED BY THE ASSESSEE FOR THE PAYMENT OF PURCHASES. IT WAS NOTIC ED THAT ALL THE CHEQUES WERE COUNTERSIGNED BY THE ASSESSEE OR WERE ENCASHED BY SOME UNKNOWN PERSONS. THEREFORE, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING HIM WHY NOT TO TREAT THE CREDITORS ON THE LA ST DATE OF FY STANDING IN THE BALANCE SHEET AS UNEXPLAINED INVESTMENT. IT WAS EXPLAINED THAT THE RAW SKIN IS PURCHASED FROM THE MANDI OR FROM SELLER S WHO COME AT HIS PLACE. THESE PURCHASES ARE FROM BUTCHERS DOING BUSI NESS OF MUTTON. THEY ARE ILLITERATE PERSONS AND DO NOT MAINTAIN ANY BOOK S OF ACCOUNTS. NO BILLS ARE ISSUED BY SUCH PERSONS. IT IS ONLY ISSUED TO TH EM BY THE ASSESSEE. MANY OF THESE PERSONS DO NOT HAVE LICENCE OR THEY A RE NOT REGISTERED UNDER SALES-TAX ACT. ASSESSEE ACCORDINGLY PAYS SALE S-TAX. ON SUCH PURCHASE FROM UNREGISTERED DEALERS. THUS IT IS NOT POSSIBLE TO IDENTIFY THEM OR PRODUCE BEFORE THE AO. HOWEVER CASH PAYMENT S TO THESE PERSONS ARE PERMISSIBLE UNDER RULE 6DD(F)(II). HAVING BEEN NOT SATISFIED WITH THE EXPLANATION THE AO TREAT A SUM OF RS.26,35,935/- ST ANDING IN THE BALANCE SHEET ON THE LAST DATE OF FY AS UNEXPLAINED INVESTM ENT IN PURCHASES AND MADE ADDITION ACCORDINGLY. 3. THE LD. CIT(A) HOWEVER, DELETED THE ADDITION MAD E ON ACCOUNT OF G.P. AT RS.1,56,150/- OUT OF ADDITION OF RS.26,33,9 35/- ALLOWING THE BENEFIT OF TELESCOPING. THE LD. CIT(A) THUS CONFIRM ED THE ADDITION OF RS.24,77,785/- ON THE GROUND THAT PURCHASES ARE NOT VERIFIABLE AND THE PARTIES FROM WHOM SKINS CLAIMED TO HAVE BEEN PURCHA SED ARE NON- EXISTENT. 4. THE LD. AR SUBMITTED THAT ADDITION SUSTAINED BY THE CIT(A) IS HIGHLY EXCESSIVE. THE ASSESSEE IS POOR ILLITERATE A ND DOES NOT MAINTAIN BOOKS OF ACCOUNTS DUE TO THE NATURE OF BUSINESS. FU RTHER IT IS NOT POSSIBLE TO PRODUCE THE SELLERS FROM WHOM ASSESSEE HAD PURCH ASED THE GOODS. HE SUBMITTED THAT IF WE TREAT THIS SUM AS INCOME THE R ESULTANT GP WILL BE VERY HIGH AND, THEREFORE, WOULD BE AGAINST WHAT THE AO E STIMATED AT 8%. 5. ON THE OTHER HAND LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT IN THE ALTERNATIVE THE DECISION O F THE ITAT, AHMEDABAD IN VIJAY PROTEINS VS. ACIT, (1996) 58 ITD 428 (AHD) WOULD BE APPLICABLE AND ACCORDINGLY 25% OF THE PURCHASE PRIC E SHOULD BE TREATED AS INCOME AT LEAST. 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE PURCHASES MAD E BY THE ASSESSEE ARE NOT VERIFIABLE, THEREFORE, THE RATIO OF THE DECISIO N IN VIJAY PROTEINS (SUPRA) WOULD BE APPLICABLE. HOWEVER, LOOKING TO THE TOTALI TY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT TO APPLY A NET PROFIT RATE OF 20% OVER UNVERIFIABLE PURCHASES OF RS.26,33,935/- WHEREIN TH E TELESCOPING ON FURTHER SUM OF RS.1,56,150/- SHOULD BE GIVEN AS GI VEN BY CIT(A). THE AO WILL WORK OUT THE ADDITION ACCORDINGLY. 7. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. ORDER PRONOUNCED IN OPEN COURT ON 13/11/2009 SD/- SD/- ( MAHAVIR SINGH ) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 13/11/2009 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD