Shri Subhash Kumar Bhandari, V. The ACIT,

ITA 88/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2552 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 28-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: H P VERMA
• Keywords: Loose papers

Judgement Text

PAGE 1 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ABDPB0742L I.T.A.NO.88/IND/2008 A.Y. : 2004-05 SHRI SUBHASH BHANDARI, ACIT, C/O SHAH PARIKH & CO., VS RATLAM. SHUKLA CHOWK, MANDSAUR APPELLANT RESPONDENT APPELLANT BY : SHRI H.P.VERMA, ADV. AND SHRI ASHISH GOYAL, C.A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 15/12/2009 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A), UJJAIN, DATED 11.12.2007, FOR THE ASSESSME NT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 IS GENERAL IN NATURE, HENCE, NO SPECIFI C DECISION IS CALLED FOR THEREON. 4. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF LD. CIT(A) IN CONFIRMING THE ACTION OF A.O. REGARDING R EJECTION OF BOOKS OF PAGE 2 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR ACCOUNT U/S 145(3) AND ESTIMATING SALES ON THE BASI S OF LOOSE PAPERS AND PROFIT THEREON AMOUNTING TO RS. 1,50,000/-. 5. THE LEARNED COUNSEL, AT THE VERY-OUT-SET, SUBMITTED THAT HE WAS NOT PRESSING THE ISSUE OF REJECTION OF BOOKS OF ACC OUNT, HENCE, THIS PART OF THIS GROUND IS REJECTED. 6. THE FACTS, IN BRIEF, ARE THAT THERE WAS A SURVEY AC TION AT THE BUSINESS PREMISES OF THE ASSESSEE AND ITS BROTHERS ON 17.7.2003, WHEREIN THE ASSESSEE SURRENDERED A SUM OF RS. 13,14,000/- C OMPRISING OF THE FOLLOWING :- (I) LOOSE PAPERS RS. 1,50,000/- (II) INVESTMENT IN HOUSE CONSTRUCTION RS. 1,50,000/- (III) EXCESS STOCK RS. 3,10,500/- (IV) EXCESS CASH RS. 7,03,500/- 7. THE ASSESSEE, HOWEVER, RETRACTED FROM ITS DISCLOSUR E SUBSEQUENTLY IN RESPECT OF AMOUNT OF RS. 1.50 LAKHS SURRENDERED ON ACCOUNT OF LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY AND REDUCED THE QUANTUM OF SURRENDER OF EXCESS CASH TO RS. 2,03 ,500/-. THE A.O. EXAMINED THE LOOSE PAPERS FOUND IN THE COURSE OF SE ARCH AND FOUND THAT THE TRANSACTIONS REPORTED ON SUCH LOOSE PAPERS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. THE A.O. ON THE BASIS OF LOOSE PA PERS TITLED AS LPF 22 PAGE 3 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR TO 32 FOUND THAT GOODS PURCHASED IN THE COURSE OF K IRANA VYAWSAYA AMOUNTING TO RS. 5,31,487/- WERE NOT RECORDED IN T HE BOOKS OF ACCOUNT. SIMILARLY, HE ANALYZED THE TRANSACTIONS RECORDED IN HEENG DEVI DIARY AND FOUND THAT PURCHASES WORTH RS. 23,78,729/- HAD NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE A.O. ALSO ANALYZED OTHER LOOS E PAPERS. ON THE BASIS OF SUCH WORKING, HE HELD THAT BOOKS OF ACCOUN T WERE NOT CORRECTLY MAINTAINED, HENCE, HE REJECTED THE SAME. THE A.O., THEREAFTER, ESTIMATED THE UNACCOUNTED SALES AT RS. 1,50,00,000/- AND COMP UTED NET PROFIT THEREON AT RS. 7,50,000/- BY APPLYING OF NET PROFIT RATE OF 5%. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEA L BEFORE THE LD. CIT(A), WHEREIN DETAILED SUBMISSIONS WERE MADE IN REGARD TO ALL TRANSACTIONS RECORDED IN LOOSE PAPERS AND IN THE HEENG DEVI DIAR Y, WHICH HAD BEEN REPRODUCED BY THE CIT(A) AT PAGE 6 TO 11 OF THE APP ELLATE ORDER. THE LD. CIT(A) FOUND THAT THE TRANSACTIONS RECORDED IN ONE LOOSE PAPER TITLED AS LPF-35 REGARDING DHANIA, MAITHI AND POSTA AMOUNTING TO RS. 26,62,882/- WERE TALLIED WITH THE PHYSICAL STOCK PREPARED DURIN G THE COURSE OF SURVEY. HENCE, THESE COULD NOT BE A CASE OF SALE OUTSIDE TH E BOOKS OF ACCOUNT IN RESPECT OF SUCH ITEMS. THE LD. CIT(A) FURTHER HELD THAT THE A.O. HAD HIMSELF WORKED OUT TOTAL UNDISCLOSED PURCHASES ON T HE BASIS OF SUCH DOCUMENTS AT RS. 55,73,098/- AND IF THE ENTRY OF RS . 26,62,882/- WAS EXCLUDED, THEN, UNDISCLOSED PURCHASES AMOUNTED TO R S. 29,10,216/- ONLY. PAGE 4 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR HENCE, HE HELD THAT THE UNDISCLOSED SALE FIGURE COU LD BE TAKEN AT RS. 30 LAKHS ON ACCOUNT OF LOOSE PAPERS FOUND DURING THE C OURSE OF SEARCH AND NET PROFIT THEREON WAS TO BE TAKEN AT RS. 1.5 LAKHS , WHICH HAD BEEN ADMITTED BY THE ASSESSEE HIMSELF AT THE TIME OF SUR VEY. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND CONTENDED THAT AS PER LOOSE PAPER LPF 22, THERE WE RE PURCHASE BILLS OF SUGAR AMOUNTING TO RS. 1,56,506/-, AS PER LPF-3, TH ERE WERE PURCHASE BILLS OF SUGARS OF RS. 39,00,930/-, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER, NO SUGAR WAS FOUND IN THE COUR SE OF SURVEY. HENCE, IT WAS LOGICAL TO PRESUME THAT SUCH SUGAR HAD BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNT AND, THEREFORE, CASH REALIZED THERE FROM COULD BE TELESCOPED AGAINST THE AMOUNT OF EXCESS STOCK OF OTHER COMMODI TIES/PRODUCTS AND EXCESS CASH SURRENDERED BY THE ASSESSEE AND, THEREF ORE, NO ADDITION WAS WARRANTED. 9. AS REGARDS ENTRIES MADE ON PAGES LPF-25 AND LPF-32, THE LEARNED COUNSEL CONTENDED THAT MOST OF THE ITEMS ME NTIONED IN THESE DOCUMENTS PERTAINED TO SALE MADE IN EARLIER YEARS A ND, THEREFORE, NO ADDITION COULD BE MADE IN THIS YEAR AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. AS REGARDS ENTRIES IN THE HEENG DEVI DIARY, HE DREW OUR ATTENTION TO PAGE 84 99 OF THE PAPER BOOK AND PAGE 5 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR CONTENDED THAT SALES AND PURCHASES RECORDED IN THES E TRANSACTIONS IN THESE PAGES PERTAINING TO THE YEAR UNDER CONSIDERATION AL ONGWITH TRANSACTIONS OF DADA BHAI RECORDED ON PAGES 100 TO 108 OF THE SAME DIARY, WHICH WERE OWNED BY THE ASSESSEE AMOUNTED TO RS. 22,91,975/- A ND RS. 21,99,936/- RESPECTIVELY AND, THEREFORE, ONLY DIFFERENCE, BEING NET PROFIT AMOUNTING TO RS. 92,039/-, COULD BE ADDED AND THAT WOULD ALSO BE TELESCOPED AGAINST CASH/EXCESS STOCK SURRENDERED BY THE ASSESSEE IN TH E RETURN OF INCOME. HE FURTHER CONTENDED THAT NET PROFIT RATE SHOULD HAVE BEEN APPLIED AND NOT GROSS PROFIT RATE. FOR THIS PROPOSITION, HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF BALACHAND AJIT KUMAR AS REPORTED IN 263 ITR 610. HE ALSO DREW OUR ATTENTION TO NET PROFIT RATE OF THE YEAR UNDER CONSIDERATION AND EA RLIER YEARS FOR THE PURPOSE OF ADOPTION THEREOF IN LIEU OF 5% ADOPTED B Y THE CIT(A). 10. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, SUBMITTED THAT LD. CIT(A) HAD ADOPTED THE NET PROFI T RATE AT 5 %, WHICH WAS IN ACCORDANCE WITH THE DECISIONS CITED BY THE LEARNED COUNSEL, HENCE, THE SAME WAS LIABLE TO BE CONFIRMED. SHE ALS O CONTENDED THAT ASSESSEE COULD NOT RAISE THE ISSUE OF TELESCOPING N OW AS THE ONE HAD NOT BEEN RAISED BEFORE THE TRIBUNAL BY WAY OF SPECIFIC GROUND. SHE FURTHER PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT( A). PAGE 6 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR 11. THE LEARNED COUNSEL, IN THE REJOINDER, CONTENDED TH AT THE ISSUE OF TELESCOPING HAD BEEN RAISED BEFORE THE LD. CIT(A ) ALSO, WHO, DID NOT GIVE ANY FINDING THEREON. HE FURTHER CONTENDED THAT GROUNDS RAISED BY THE ASSESSEE WERE WIDE ENOUGH TO INCLUDE THESE ASPECTS ALSO. 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT DURING THE COURSE OF SURVEY, CERTA IN LOOSE PAPERS AND A DIARY WAS FOUND WHEREIN TRANSACTIONS OF UNREC ORDED PURCHASES/SALES ARE MENTIONED. THE ASSESSEE SURRENDERED A SUM OF RS . 1.5 LAKHS ON ACCOUNT OF TRANSACTIONS RECORDED IN THE LOOSE PAPER S, WHICH WAS SUBSEQUENTLY RETRACTED. THE A.O. ESTIMATED THE SALE S AT RS. 1.5M CRORES AND PROFIT THEREOF AT RS. 7.5 LAKHS. THE LD. CIT(A) HAS AFTER EXAMINING THE EVIDENCES/SUBMISSIONS OF THE ASSESSEE HAS DELET ED THE SALES ESTIMATED BY THE ASSESSING OFFICER ON THE BASIS OF SUCH LOOSE PAPERS. THE LD. CIT(A) HAS ALSO HELD THAT UNRECORDED PURCHASES WAS RS. 29.10,216/-, WHICH HAS TAKEN AT RS. 30 LAKHS IN THE ROUND FIGURE . THE LEARNED COUNSEL HAS TRIED TO RECONCILE THE ENTRIES IN SUCH LOOSE PA PERS/DIARIES. HOWEVER, THE FACT REMAINS THAT THESE TRANSACTIONS ARE NOT RE CORDED IN THE REGULAR BOOKS OF ACCOUNT. IT IS ALSO NOTEWORTHY THAT IF PRO FIT AND UNDISCLOSED CASH IN HAND AS RECORDED IN HEENG DEVI DIARY AND TRANSAC TIONS RECORDED IN LPF-22 & 23 ARE TAKEN INTO CONSIDERATION, THEN THE AGGREGATE FIGURE OF PAGE 7 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR PROFIT WOULD NOT BE LESS THAN RS. 1.5 LAKHS. HENCE, VIEWED FROM ALL ANGLES, IN OUR OPINION, THE ORDER OF LD. CIT(A) IS CORRECT IN LAW. ACCORDINGLY, WE CONFIRM THE SAME. THUS, GROUND NO. 2 OF THE ASSESSEE IS DISMISSED. 14. IN GROUND NO. 3, THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN SUSTAINING THE ADDITION OF RS. 11 ,35,847/- OUT OF ADDITION OF RS. 28,32,157/- MADE BY THE ASSESSING O FFICER ON THE BASIS OF TRANSACTIONS RECORDED IN ONE HEENG DEVI DIARY FOUND FROM PREMISES OF ASSESSEES BROTHER. 15. THE FACTS, IN BRIEF, ARE THAT DURING THE COURSE OF SURVEY AT THE BUSINESS PREMISES OF THE ASSESSEES BROTHER A DIARY WAS FOUND, WHEREIN TRANSACTIONS RELATING TO ASSESSEE WREN RECORDED. TH E ASSESSEE HAS ALSO ACCEPTED SUCH TRANSACTIONS ENTERED INTO BY HIM. THE A.O. BASED UPON THE TRANSACTIONS RECORDED IN SUCH DIARY MADE AN ADDITIO N OF RS. 28,32,157/- AS SUCH ENTRIES WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEA L BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THAT SINCE THE SALES HAD B EEN ESTIMATED, HENCE, NO ADDITION COULD BE MADE AGAIN IN RESPECT OF UNDIS CLOSED INCOME/DEPOSITS. THE LD. CIT(A), HOWEVER, HELD THAT AS PER THE VERSION OF THE ASSESSEE HIMSELF, IT WAS HIS KACHA ROKAD AND THE TRANSACTIONS RECORDED THEREIN WERE NOT FOUND IN THE REGULAR BOOK S OF ACCOUNT, PAGE 8 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR THEREFORE, SUCH TRANSACTIONS REPRESENTED UNDISCLOSE D ITEMS. HOWEVER, THE LD. CIT(A) HELD THAT NO ADDITION COULD BE MADE IN R ESPECT OF DEBIT CARD CREDIT ENTRIES. THE LD. CIT(A), THEREAFTER, HELD TH AT ONLY PEAK INVESTMENT IN THE UNDISCLOSED PURCHASES COULD BE ADDED. THEREA FTER, HE WORKED OUT THE PEAK INVESTMENT QUANTUM. IN RESPECT OF TRANSACT IONS OF SHRI SUBHASH KUMAR AND IN RESPECT OF TRANSACTION OF SHRI DADA BO TH AGGREGATING TO RS. 11,35,847/- AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER TO THIS EXTENT. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 16. THE LEARNED COUNSEL SUBMITTED THAT ENTRIES IN THIS DIARY CONTAINED TRANSACTIONS OF PURCHASE SALES AND CASH P AID/RECEIPTS AND, THEREFORE, PEAK FIGURE WORKED OUT BY THE CIT(A) WAS NOT CORRECT. HE FURTHER CONTENDED THAT CERTAIN TRANSACTIONS WERE NO T UNDERTAKEN DURING THE PREVIOUS YEAR. HENCE, TO THIS EXTENT ALSO, THE PEAK INVESTMENT WAS NOT CORRECTLY WORKED OUT. HE DREW OUR ATTENTION TO PAGE 5 & 6 OF THE WRITTEN SYNOPSIS, WHEREIN A PEAK FIGURE OF RS. 2,70,021/- A S ON 25.4.2003 HAD BEEN WORKED OUT AND FROM SUCH FIGURE, THE LEARNED C OUNSEL SUBMITTED THAT CLOSING BALANCE AS ON 30.3.2003 AMOUNTING TO R S. 1,10,300/- HAD TO BE DEDUCTED AND THE BALANCE FIGURE OF RS. 1,59,721/ - COULD ONLY BE ADDED IN PRINCIPLE. HE FURTHER CONTENDED THAT EVEN THIS A MOUNT WAS COVERED AGAINST CASH/EXCESS STOCK SURRENDERED BY THE ASSESS EE. HE FURTHER CONTENDED THAT IF ADDITION OF PROFIT RATE WAS SUSTA INED, NO ADDITION FOR PAGE 9 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR LOOSE PAPERS COULD BE MADE SEPARATELY AS THE PROFIT RATE COVERED LOOSE PAPERS ALSO. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGRAWAL ENGINEERING COMPANY AS REPORTED IN 156 TAXMAN PAGE 40. 17. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 18. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 19. IT IS NOTED THAT THE ASSESSEE HAS SUBMITTED A SEPAR ATE CHART FOR THE FIRST TIME BEFORE US WHEREIN PEAK INVESTMENT HA S BEEN WORKED OUT AT RS. 1,10,300/-. IT IS NOTED THAT THIS WORKING IS AL SO BASED ON THE BASIS OF TRANSACTIONS RECORDED IN THE DIARY. IT IS FURTHER N OTED THAT THE LD. CIT(A) HAS ADOPTED TWO WEEKS BUSINESS CYCLE IN WORKING OUT THE PEAK INVESTMENT. HOWEVER, NO BASIS FOR SUCH DECISION HAS BEEN GIVEN. IN OUR OPINION, THUS, THE MATTER REQUIRES RECONSIDERATION AND, THEREFORE, WE RESTORE THIS ISSUE RAISED IN THIS GROUND TO THE FIL E OF LD. CIT(A), WHO SHALL ADJUDICATE THIS ISSUE AFRESH AFTER TAKING INTO CONS IDERATION THESE SUBMISSIONS OF THE ASSESSEE AND GIVING AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS GROUND OF THE A SSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. PAGE 10 OF 10 I.T.A.NO. 88/IND/2008 SUBHASH BHANDARI, MANDSAUR 20. WE FURTHER FIND THAT THE ASSESSEE REQUESTED FOR TEL ESCOPING OF DIFFERENT ADDITIONS WITH THE AMOUNT OF EXCESS CASH AND THE EXCESS STOCK SURRENDERED BEFORE THE CIT(A) ALSO. HOWEVER, THE LD . CIT(A) HAS NOT GIVEN ANY FINDING ON THIS PLEA MADE BY THE ASSESSEE . THEREFORE, WE DIRECT THE LD. CIT(A) TO CONSIDER THIS PLEA OF THE ASSESSE E IN REGARD TO BOTH THE ADDITIONS I.E. RS. 1,50,000/- THOUGH SUSTAINED BY U S AND PEAK INVESTMENT AFTER DETERMINING THE QUANTUM THEREOF. 21. GROUND NO. 4 RELATING TO AD HOC DISALLOWANCE MADE B Y THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) WAS N OT PRESSED AND DISMISSED AS NOT PRESSED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED IN TERMS INDICATED ABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH DECEMBER, 2009. CPU* 151718