M.Gopala Rao, Visakhapatnam V. The Assistant Commissioner of Income Tax, Central Circle-1, Visakhapatnam

ITA 84/VIZ/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9047 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 13-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: WASEEM REHMAN
• Keywords: Search and seizure
• Section: 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO S . 84 & 85 / VIZ /201 8 (ASST. YEAR : 20 12 - 0 13 & 20 14 - 1 5 ) MUGADA GOPALA RAO, PROP: GANESH TIMBER MART DEPOT, D.NO. 9 - 21, GOPALAPATNAM, VISAKHAPATNAM. V S . A CIT, CENTRAL CIRCLE , VISAKHAPATNAM. PAN NO. AATPM 1891 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FC A. DEPARTMENT BY : SHRI WASEEM REHMAN - SR. DR DATE OF HEARING : 09 / 1 0 /201 8 . DATE OF PRONOUNCEMENT : 17 / 1 0 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH E S E APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 3 , VISAKHAPATNAM , BOTH DATED 13 /0 2 /201 8 FOR THE ASSESSMENT YEARS 2012 - 13 & 20 14 - 1 5 . SINCE THE FACTS AND ISSUES ARE COMMON, CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. ITA NO. 84/VIZ/2018 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S. GANESH TIMBER MART DEPOT , 2 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) ENGAGED IN THE BUSINESS OF RETAIL TRADE OF TIMBER / FURNITURE WOOD. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') IN THE GROUP CASES OF M/S. SRI LAKSHMI CONSTRUCTIONS ON 17/12/2013 , CERTAIN INCRIMINATING MATERIAL OF THE ASSESSEE WAS FOUND AND SEIZED. CONSEQUENTLY, AFTER FOLLOW ING DUE PROCEDURE, A NOTICE UNDER SECTION 153C WAS ISSUED TO THE ASSESSEE ON 27/07/2015 CALLING RETURN OF INCOME. IN RESPONSE THERETO, THE ASSESSEE HAD FILED RETURN OF INCOME BY DECLA R ING TOTAL INCOME OF RS. 14,19,900/ - IN THE ASSESSMENT ORDER, THE ASSES SING OFFICER HAS NOTED THAT INCRIM IN ATING MATERIAL SEIZED , DURING THE COURSE OF SEARCH IN THE CASE OF M/S. SRI LAKSHMI CONSTRUCTIONS , AT PAGE NO. 60 OF ANNEXURE - A/SLC/01 IN RESPECT OF SALE OF RS. 49,18,393/ - MADE TO M/S. SRI LAKSHMI CONSTRUCTIONS WAS EXAMINED AND FOUND THAT OUT OF RS. 49,18,393/ - , AN AMOUNT OF RS. 25.00 LAKHS WAS RECEIVED THROUGH CHEQUE AND THE SAME WAS DULY REFLECTED ON 04/04/2012 IN THE LEDGER OF M/S. SRI LAKSHMI CONSTRUCTIONS AS APPEARING IN THE BOOKS OF THE ASSESSEE. ON BEING QUES TION ED , THE ASSESSEE HAS STATED IN HIS SWORN STATEMENT THAT , OUT OF RS. 49,18,393/ - , RS.25.00 LAKHS HAS BEEN RECEIVED THROUGH CHEQUE ON 04/04/2012 AND THE SAME IS DULY REFLECTED IN THE BOOKS OF ACCOUNT ON 3 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) 05/04/2012 . HE FURTHER STATED THAT HE NEVER RECEIVED CASH , IN RESPECT OF BALANCE AMOUNT OF RS. 24,18,393/ - , HOWEVER, THE SIGNATURE ON THE PAGE NO.60 IS APPENDED BY HIM ONLY , AND CONFIRMED THAT THE SIGNATURE IS OF HIM . THE ASSESSEE ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT PURCHASES RELATING TO UNRECORDED SALES HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT BECAUSE SOMETIMES , PRIVATE CUSTOMERS APPROACHES HIM FOR PURCHASE OF TIMBER TO BUILDING HOUSES/FLATS , DO NOT WANT TO PAY SALES TAX AND INSIS T HIM FOR SUPPLY , W IT HOUT BILLS. UNDER S UCH CIRCUMS TANCES, THE ASSESSEE PROCURES WOOD FROM THE UNORGANIZED MARKET WITHOUT BILLS AND SUPPLIES THE SAME TO THE CUSTOMERS. THIS WAY BOTH PURCHASE S AND SALES ARE NOT RECORDED IN THE BOOKS , AND AFTER RECEIVING THE AMOUNT FROM THE CUSTOMER S, THE PAYMENTS ARE MADE TO THE SUPPLIER S . THE ASSESSING OFFICER AFTER CONSIDERING THE DETAILED EXPLANATION OF THE ASSESSEE, HE CONCLUDED THAT SINCE THE ASSESSEE HAS NOT RECORDED THE SALE S MADE OF RS. 49,18,393/ - DURING THE FINANCIAL YEAR 2011 - 12 , THE ENTIRE AMOUNT OF RS.49,18,393/ - SHOULD BE TREATED AS CREDIT SALES AND BROUGHT TO TAX FOR THE ASSESSMENT YEAR 2012 - 13. FURTHER, WHATEVER AMOUNT CLAIMED TO HAVE RECEIVED THROUGH CHEQUE FOR RS. 25.00 LAKHS , T HE ASSESSEE HAS SHOWN , THE AMOUNT WAS RECEIVE D ON 05/04/2012. FURTHER , THE ASSESSEE IS ONLY A CREDIT BALANCE OF RS. 8,24,792/ - IN 4 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) HIS ACCOUNT ON 05/04/2012, AFTER WHICH HE MADE SALE S OF RS. 15,505/ - ONLY, HENCE, THE AMOUNT OF RS. 25.00 LAKHS IS NOTHING, BUT THE AMOUNT RECEIVED AS AN ADVANCE AGAINST FUTURE SUPPLIES AND NOT SUPPLIED ALREADY MADE IN THE PRECEDING YEAR I.E. 2011 - 12 THEREFORE, THE ENTIRE AMOUNT OF RS. 49,18,393/ - IS NOT RECORDED AS SALES IN THE ASSESSEES BOOKS AS ON 31/03/2012 , WHICH HAS BEEN TREATED AS UNACCOUNTED SALES MADE TO M/S. SRI LAKSHMI CONSTRUCTIONS. THE ASSESSING OFFICER ALSO CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPECT OF UNACCOUNTED PURCHASES AND OBSERVED TH A T THE ASSESSEE HAS NOT FILED ANY DETAILS IN RESPECT OF UNACCOUNTED PURCHASES, FROM WHOM IT IS PURCHASED . THE ASSESSEE ALSO FAILED TO PROVE THAT PURCHASES WERE MADE ON CREDIT BASIS AND PAID THE SUPPLIERS AFTER SALES ARE MADE AND THEREFORE THERE IS NO EXPLANATION FOR THE SOURCE OF UNACCOUNTED PURCHASES . ACCORDINGLY, THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS. 49,18,393/ - . 3 . ON APPEAL , LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER TO THE EXTENT OF RS. 24,18,393/ - AND GRANTED RELIEF TO THE EXTENT OF RS. 25.00 LAKHS RECEIVED BY THE ASSESSEE THROUGH CHEQUE . FOR THE SAKE OF CONVENIENT, THE RELEVANT PORTION OF THE LD.CIT(A)S ORDER IS EXTRACTED AS UNDER: - 4.4) I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE APPELLANT AND ALSO THE DECISION OF THE ASSESSING OFFICER IN THE 5 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) ASSESSMENT ORDER. THE UNDISPUTED FACT ON THE ISSUE IS THAT THE APPELLANT HAS RESORTED TO RECORDING OF PART OF THE SALES ROUGHLY ABOUT 50%. SUCH INSTANCES HAVE BEEN NOTICED BY THE DEPARTMENT DURING THE SEARCH AND THE TRANSACTIONS WITH M/S. SRI LAKSHMI CONSTRUCTIONS AS WELL AS SRI MOGGA ESWARA RAO FOR DIFFERENT ASSESSMENT YEARS WERE ALSO NOTICED. IN BOTH THE INSTANCES, THE APPELLANT HAD REFLECTED THE CHEQUE PAYMENTS IN HIS BOOKS AND NOT REFLECTED THE CASH PART OF THE S ALE. IT CAN REASONABLY BE PRESUMED THAT THE APPELLANT WOULD HAVE MADE A CLAIM FOR PURCHASES OF GOODS CORRESPONDING TO THE SALES IN ITS BOOKS. WHILE DOING SO, HE WOULD NOT HAVE BIFURCATED PURCHASES TO 50% WHILE DEBITING TO PL ACCOUNT. IN OTHER WORDS, THE CL AIM FOR PURCHASES WOULD HAVE BEEN MADE AT 100% IN P&L ACCOUNT. REGARDING THE SCALING UP OF GROSS PROFIT AT 34%, IF ENTIRE SALES ARE CONSIDERED FOR TAX, IT IS THE CHANCE TAKEN BY THE APPELLANT TO RECORD 50% AND NOT TO RECORD 50% AT HIS OWN VOLITION. IF THE DEPART MENT HAS NOT DISCOVERED IT, THE APPELLANT WOULD HAVE ENJOYED THE BENEFIT WITHOUT PAYING TAX. THERE IS NO MATERIAL PROOF THAT BOTH PURCHASES AND SALES ARE OUTSIDE THE BOOKS. I N OTHER WORDS, WHAT IS RECORDED IN SALES IS CHEQUE AMOUNT BUT NOT CASH RECE IPT. THE LEDGER ACCOUNT COPY OF THE PARTIES IS ALSO A TESTIMONY ON THIS FACT. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASES ARE UNACCOUNTED OR MADE OUTSIDE THE BOOKS. THE FACTS WERE BROUGHT TO THE NOTICE OF THE APPELLANT AND THE APPEL LANT CATEGORICALLY ADMITTED IN HIS STATEMENT THAT THE CASH PART OF THE SALES WAS NOT REFLECTED IN THE BOOKS. IT IS A TAX AUDIT CASE U/S.44AB OF THE ACT. THE DUE DATE FOR FILING OF RETURN OF INCOME IS 30.10.2012. THE SEARCH OPERATION U/S.132 WAS CONDUCTED O N 17.02.2013. IT IS NOT KNOWN WHETHER THE RETURN OF INCOME WAS ORIGINALLY FILED OR NOT. BUT THE RETURN OF INCOME FOR NOTICE ISSUED U/S.153C WAS FILED ON 26.08.2015. IT IS ALSO AN UNDISPUTED FACT THAT THE APPELLANT HAS REFLECTED RS.25,00,000/ - IN HIS BOOKS BUT THE ASSESSING OFFICER HAS DENIED THE CREDIT FOR THIS AMOUNT ON THE PRESUMPTION THAT CHEQUE PAYMENT IS REFERRING TO THE FUTURE SUPPLIES. THE ASSESSING OFFICER HAS NOT ADDUCED ANY EVIDENCE ON HIS PRESUMPTION. THEREFORE, IT IS LOGICAL TO GIVE CREDIT FOR R S.25,00,000/ - OUT OF RS.49,18,393/ - TO THE APPELLANT. REGARDING THE REMAINING AMOUNT I.E. CASH AMOUNT OF RS. 24,18,393/ - (49,18,393 25,00,000), THE ARGUMENTS OF THE APPELLANT THAT THE GROSS PROFIT SHOULD BE CONSIDERED FOR TAX IS NOT PERMISSIBLE SINCE THE APPELLANT HAS CLOSED HIS BOOKS AS ON THE DATE OF FILING OF THE RETURN OF INCOME AND DEBITED PURCHASES AT 100%, BUT CREDITED ONLY THE CHEQUE, AMOUNT. I HAVE PERUSED THE CASE LAWS FILED BY THE APPELLANT AND NOTICED THAT THE FACTS AND CIRCUMSTANCES OF THOSE CASES ARE DIFFERENT AS THAT 6 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) OF THE INSTANT CASE. IT IS PERTINENT TO NOTE THAT THE APPELLANT HAS CATEGORICALLY STATED THAT THE PATTERN OF 50% IS NOT ADOPTED FOR ALL THE CASES EXCEPT THE TWO INSTANCES DISCUSSED SUPRA. THUS, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDITION TO AN EXTENT OF RS.24,18,393/ - INSTEAD OF RS.49,18,393/ - AND TO GIVE CREDIT TO THE CHEQUE AMOUNT OF RS.25,00,000/ - . 4 . ON BEING AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSEE MADE CERTAIN PURCHASES WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ADVANCES RECEIVED IN RESPECT OF PURCHASES , PAID TO THE SUPPLIERS AND THEREFORE SUBMITTED THAT GP ADDITION MADE ON UNRECORDED SALES ONLY. 6 . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIE S BELOW. 8 . THE ASSESSEE IS AN INDIVIDUAL CARRYING IN THE BUSINESS OF RETAIL TRADING OF TIMBER / FURNITURE WOOD . THERE IS A SEARCH AND SEIZURE OPERATIONS CARRIED OUT IN THE GROUP CASES OF M/S. SRI LAKSHMI CONSTRUCTIONS ON 17/12/2013 AND CERTAIN INCRIMINATING MATERIAL BELONGED TO THE ASSESSEE WAS FOUND IN RESPECT OF MATERIAL SUPPLIED BY THE ASSESSEE TO M/S. SRI LAKSHMI CONSTRUCTIONS . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT 7 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) INCRIM IN ATING MATERIAL SEIZED AS PER PAGE NO . 60 OF ANNEXURE - A/SLC/01 IN RESPECT OF SALE S OF 49,18,393/ - M A DE TO M/S. SRI LAKSHMI CONSTRUCTIONS, OUT OF WHICH , AN AMOUNT OF RS. 25.00 LAKHS WAS PAID THROUGH CHEQUE AND THE SAME WAS REFLECTED ON 04/04/2012 IN THE LEDGER EXTRACT OF M/S. SRI LAKSHMI CONSTRU CTIONS AS APPEARING IN THE BOOKS OF THE ASSESSEE. WHEN THE ASSESSING OFFICER QUESTION ED IN RESPECT OF THE ENTIRE PAYMENT OF RS. 49,18,393/ - , IT WAS SUBMITTED THAT HE HAS RECEIVED RS.25.00 LAKHS THROUGH CHEQUE AND THE REMAINING BALANCE OF RS.24,18,393/ - , N OT RECEIVED BY HIM. HOWEVER, HE ACTED THAT IN THE ACKNOWLEDGMENT , SIGNATURE APPENDED BY HIM ONLY, IT IS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT CERTAIN PURCHASES ARE MADE OUTSIDE THE BOOKS OF ACCOUNT AND WHENEVER HE RECEIVES PAYMENTS, SAME IS PAID TO THE SUPPLIERS. THEREFORE, SUBMITTED THAT THERE ARE UNACCOUNTED PURCHASES AND SIMULTANEOUSLY UNACCOUNTED SALES ALSO , ONLY GP ADDITION MAY BE MADE . THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLA N ATION OF THE ASSESSEE, HE HAS NOT BELIEVED WHAT HA S BEEN STATED BY THE ASSESSEE AND ADDED THE ENTIRE AMOUNT IN THE HANDS OF THE ASSESSEE. ON APPEAL, LD. CIT(A) HAS DELETED THE ADDITION MADE IN RESPECT OF PAYMENT RECEIVED THROUGH CHEQUE OF RS. 25.00 LAKHS . THIS POSITION IS ACCEPTED BY THE DEPARTMENT AND THERE IS NO 8 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) APPEAL. THE ONLY DISPUTE BEFORE US IS IN RESPECT OF AMOUNT OF RS. 24,18,393/ - WHICH IS RECEIVED BY THE ASSESSEE IN CASH. BEFORE US, THE ASSESSEES REPRESENTATIVE HAS SUBMITTED THAT THERE ARE CERTAIN PURCHASES AND SALES WHICH ARE NOT RECORD ED IN THE BOOKS OF ACCOUNT . THE ASSESSEE AFTER RECEIVING THE PAYMENTS FROM THE PROSPECTIVE BUYERS, REPAYS THE SAME TO THE SUPPLIERS. THE ASSESSEE IS NOT ABLE TO EXPLAIN THE DETAILS OF UNEXPLAINED PURCHASES , QUANTITY OF THE PURCHASES AND ALSO THE DETAILS OF UNACCO U NTED SALES AND SOURCE FOR THE UNRECORDED PURCHASES. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS FAILED TO PROVE THAT HE MADE UN - A C COUNTED PURCHASES. THEREFORE, HIS REQUEST FOR GP ADD ITION FOR UNACCOUNTED SALES CANNOT BE CONSIDERED. IN VIEW OF THE ABOVE, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA 85/VIZ/2018 9. THE FACTS OF THIS CASE ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO. 84/VIZ/2018, BUT ONLY DIFFERENCE IS IN FIGURES. IN THIS CASE THE ADDITION IS OF RS. 9,31,737/ - IN RESPECT OF UNACCOUNTED SALES, THE ASSESSEE HAS GIVEN SAME EXPLANATION AS HAS BEEN GIVEN FOR EARLIER ASSESSMENT YEAR. KEEPING IN VIEW OF OUR DECISION IN THE ASSESSMENT YEAR 2012 - 13, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. 9 ITA NO S . 84 & 85/VIZ/2018 ( M. GOPALA RAO ) 10 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 7 T H DAY OF OCT . , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 7 T H OCT . , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE MUGADA GOPALA RAO, PROP: GANESH TIMBER MART DEPOT, D.NO. 9 - 21, GOPALAPATNAM, VISAKHAPATNAM. 2. THE REVENUE ACIT, CENTRAL CIRCLE, VISAKHAPATNAM. 3. THE PR. CIT (CENTRAL), VISAKHAPATNAM. 4. THE CIT(A) - 3, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.