M/s. B.M. Patel & Brothers, Baroda V. The Income tax Officer,Ward-3(1), Baroda

ITA 91/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94404 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources
• Section: 143(3); 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) I.T. A. NOS. 91 & 92 /AHD/2011 (ASSESSMENT YEARS: 2 006-07 & 2007-08) M/S. B.M. PATEL & BROTHERS A-1, KRISHNADHAM DUPLEX, NEAR ISKCON TEMPLE, GOTRI ROAD, VADODARA-390021 V/S ACIT, CIRCLE-3, BARODA (APPELLANT) (RESPONDENT) PAN: AACFB 5678 H APPELLANT BY : SHRI S.N. SOPARKAR, AR RESPONDENT BY : SHRI DILEEP KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 11-09-201 5 DATE OF PRONOUNCEMENT : 18 -09-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE TWO SEPARATE ORDERS OF CIT(A)-II, BARODA DATED 21.10.2010 FOR A.Y. 2006 -07 & 2007-08 RESPECTIVELY. ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 2 2. AT THE OUTSET, BEFORE US, BOTH THE PARTIES SUBMITTE D THAT THOUGH THE APPEALS OF THE ASSESSEE RELATES TO TWO DIFFERENT ASSESSMENT YE ARS BUT THE FACTS AND CIRCUMSTANCES OF BOTH THE YEARS ARE SIMILAR EXCEPT FOR THE ASSESSMENT YEARS AND AMOUNTS INVOLVED AND THEY HAVE COMMON SUBMISSIO NS TO MAKE FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE H EARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TO GETHER FOR THE SAKE OF CONVENIENCE AND PROCEED WITH THE FACTS IN ITA NO. 91/AHD/2011 FOR A.Y. 2006-07. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS. IN THIS CASE SURVEY U/S. 133 A OF THE ACT WAS CARRIED OUT ON 06.10.2006 AT THE OFFICE PREMISES OF THE ASS ESSEE AND OTHER CONCERNS. DURING THE COURSE OF SURVEY PROCEEDINGS, STATEMENT ON OATH OF SHRI B.M. PATEL WAS RECORDED WHEREIN HE ADMITTED THE UNACCOUN TED INCOME OF RS. 20 LACS FOR A.Y. 2006-07. SUBSEQUENTLY ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2006-07 ON 31.12.2006 DECLARING TOTAL INCOME A T RS. 11,35,605/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 26.12.2008 A ND THE TOTAL INCOME WAS DETERMINED AT RS. 15,93,420/-. AGGRIEVED BY THE OR DER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 21.10.2010, APART FROM DISMISSING THE APPEAL OF THE ASSESSEE, MADE EN HANCEMENT OF INCOME. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 3 1. THE ASSESSMENT ORDER U/S 143(3) OF IT ACT PASSED BY THE ASSESSING OFFICER AND PARTLY CONFORMED BY THE FIRST APPELLATE AUTHORITY I S BAD IN LAW AND DESERVED TO BE UNCALLED FOR. 2. THE FIRST APPELLATE AUTHORITY HAS ERRED IN LAW AND ON FACTS IN SEPARATELY TAXING RS.20,00,000/- AS UNACCOUNTED INCOME. THE SAME DESE RVES TO BE DELETED. WITHOUT PREJUDICE IF IT IS CONSIDERED SEPARATELY BE ING GROSS RECEIPTS ONLY 3% OF THE TOTAL AMOUNT MAY BE TAKEN AS INCOME. 3. THE FIRST APPELLATE AUTHORITY HAS ERRED IN LAW AND ON FACTS IN ENHANCING ADDITION BY RS.5,94,107/- . THE SAME DESERVES TO BE DELETED. 5. BEFORE US, AT THE OUTSET LD. A.R. SUBMITTED THAT TH OUGH VARIOUS GROUNDS HAVE BEEN RAISED BY ASSESSEE BUT THE ISSUE IS ONLY WITH RESPECT TO ADDITION MADE ON THE BASIS OF INCOME ADMITTED DURING THE COURSE O F SURVEY AND THE ENHANCEMENT MADE BY LD. CIT(A). 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VER IFICATION OF THE PROFIT AND LOSS ACCOUNT, A.O NOTICED THAT THOUGH AT THE TI ME OF SURVEY ON 06.10.2006, ASSESSEE HAD ADMITTED UNACCOUNTED INCOM E OF RS. 20 LACS BUT ASSESSEE HAD ONLY OFFERED REGULAR INCOME AND THE IN COME ADMITTED AT THE TIME OF SURVEY WAS NOT CONSIDERED BY THE ASSESSEE. THE ASSESSEE WAS THEREFORE ASKED TO SHOW CAUSE THE REASONS FOR THE N ON INCLUSION OF THE AMOUNT ADMITTED AT THE TIME OF SURVEY. THE VARIOUS SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE A.O. A.O NOTED THAT THOUGH ASSESSEE HAD DISCLOSED UNACCOUNTED INCOME OVER AND ABOVE HIS REGULAR INCOME BUT THE NET PROFIT WAS REFLECTED AT RS. 9,34 ,724/-. HE WAS THEREFORE OF THE VIEW THAT THE DISCLOSURE MADE BY THE ASSESSEE A T THE TIME OF SURVEY WAS SET OFF BY CLAIMING EXCESSIVE EXPENSES AND FURTHER ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT WHICH ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 4 WERE EXCESSIVE WHEN COMPARED WITH EARLIER YEARS. HE THEREAFTER RELYING ON THE DECISIONS OF TRIBUNAL IN THE CASE OF MARUTI NAN DAN INFOTECH LTD. AND HARIOM STEEL, REJECTED THE BOOK RESULTS DISCLOSED B Y THE ASSESSEE AND ESTIMATED THE PROFIT AT 3% OF THE RECEIPTS OF RS. 1 ,93,16,587/- AND ACCORDINGLY MADE AN ADDITION OF RS. 5,79,497/-. HE ALSO CONSIDERED THE INCOME OF RS. 20 LACS THAT WAS ADMITTED BY ASSESSEE AT THE TIME OF SURVEY, AS INCOME OF THE ASSESSEE AND ADDED IT TO THE INCOM E. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A) WHO UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE ISSUE INVOLVED IN THIS CASE IS REGARDING THE NATURE OF DECLARATION OF RS.20,00,000/-DURING THE COURSE OF S URVEY. WHILE THE CONTENTION OF THE APPELLANT IS THAT THE DECLARATION WAS IN THE NATURE OF SUPPRESSED GROSS RECEIPTS FROM THE CONSTRUCTION BUSINESS, THE CONTENTION OF THE ASSESS ING OFFICER IS THAT THE -- DECLARATION WAS IN THE NATURE OF NET TAXABLE INCOME FOR THE YEAR. BEFORE EXAMINING THE TRUE NATURE OF THE DECLARATION, IT WOULD BE PROPER TO LOOK INTO TH E ABOVE REPRODUCED SUBMISSION OF THE APPELLANT MAKING VARIOUS ALLEGATIONS IN RESPECT OF THE SURVEY ACTION. THE APPELLANT HAS MADE ALLEGATIONS AGAINST THE SURVEY PARTY STATING T HAT HE WAS TEMPTED TO MADE DISCLOSURE 'FORCEFULLY BY THE SURVEY OFFICER ONLY TO ACHIEVE T HE TARGET OF TAX COLLECTION TO GET CREDIT OF HIGHER AUTHORITIES'. IT IS FURTHER CONTENDED THA T HE HAD MADE DISCLOSURE TO BUY MENTAL PEACE. AFTER LOOKING INTO THE FACTS OF THE CASE, I FIND THE ALLEGATIONS MADE BY THE APPELLANT NOT ONLY COMPLETELY BASELESS BUT ALSO UNFORTUNATELY MALICIOUS. IT HAS NOT BEEN INFORMED AS TO WHAT WAS THE TEMPTATION GIVEN BY THE SURVEY O FFICERS. SIMILARLY, IT IS ALSO NOT INFORMED AS TO WHY, IF HE WAS FORCED TO GIVE THIS D ISCLOSURE AT THE TIME OF SURVEY, AGAIN MADE A SIMILAR DISCLOSURE TWO WEEKS AFTER THE SURVE Y IN HIS STATEMENT RECORDED ON OATH ON 19.10.2006. IT HAS BEEN CONTENDED THAT THE SAID STATEMENT DATED 19.10.2006 WAS RECORDED IN ENGLISH AND THEREFORE HE WAS PREVENTED FROM UNDERSTANDING THE TRUE NATURE OF HIS OWN STATEMENT. THIS CONTENTION IS APPARENTLY A MALAFIDE ALLEGATION IS PROVED BY THE FACT THAT APPELLANT HIMSELF FILED IN AFFIDAVIT ON 1 ST FEBRUARY, 2010 IN ENGLISH AND SIGNED IN ENGLISH. THE ALLEGATION IS APPARENTLY BOGUS AND MALICIOUS. T HIS AFFIDAVIT IS ALSO ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 5 IMPORTANT BECAUSE IN THIS AFFIDAVIT IT HAS AGAIN AD MITTED OF SURRENDER OF INCOME OF RS.20,00,000/- AND THERE IS NOT A WHISPER IN THE AF FIDAVIT THAT IT IS NOT VOLUNTARY. THE ALLEGATIONS LEVELED BY THE APPELLANT ARE MOTIVATED BY DUBIOUS CONSIDERATIONS AND THEREFORE HAVE TO BE REJECTED AS SUCH. COMING TO TH E ISSUE WHETHER THE DECLARATION MADE WAS IN RESPECT OF SUPPRESSED GROSS RECEIPTS OR SUPP RESSED NET INCOME, IT IS REALLY NOT COMPLICATED TO UNDERSTAND TRUE NATURE OF THE DECLAR ATION. IT HAS BEEN ADMITTED BY THE APPELLANT THAT IT IS A GOVERNMENT CONTRACTOR. THERE IS NO QUESTION OF ANY SUPPRESSED GROSS RECEIPTS FROM A GOVERNMENT CONTRACT. AND IF ANY REC EIPT FROM THE GOVERNMENT HAS BEEN SUPPRESSED IT CAN BE EASILY ESTABLISHED BY FURNISHI NG THE DOCUMENTS SHOWING THE ACTUAL RECEIPTS. NO SUCH DOCUMENTS HAVE BEEN FURNISHED TO SHOW THAT ACTUAL RECEIPTS ARE MORE THAN RECORDED IN THE BOOKS. HOWEVER, IT IS VERY EAS Y TO SUPPRESS INCOME FROM SUCH CONTRACT RECEIPTS BECAUSE ACTUAL EXPENDITURE IS MAD E BY THE CONTRACT OR AND ONLY HE IS PRIVY TO THE REAL EXPENDITURE. THUS BY INFLATING AC TUAL EXPENDITURE INCOME CAN BE SUPPRESSED WHICH IS THE CASE HERE. AND THEREFORE IT HAS TO BE HELD THAT WHAT WAS SURRENDERED DURING THE COURSE OF SURVEY WAS NET TAX ABLE INCOME OVER AND ABOVE THE INCOME SHOWN IN THE BOOKS AND TO THAT EXTENT THE CO NTENTION IN THIS REGARD HAS NO MERIT. THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT WHAT WAS SURRENDERED AT THE TIME OF SURVEY WAS TAXABLE INCOME AND THE INDIRECT RETRACTI ON MADE NOW IS NOT ACCEPTABLE IN ABSENCE OF ANY EVIDENCE IS SUPPORT OF SUCH RETRACTI ON. THIS GROUND IS THEREFORE REJECTED. 2.4. DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS NOTICED THAT THERE HAS BEEN UNDER ASSESSMENT OF INCOME TO THE EXTENT OF RS.5,94,107/- . ACCORDINGLY, THE APPELLANT WAS ASKED TO EXPLAIN AS TO WHY THE INCOME SHOULD NOT BE ENHAN CED TO THAT EXTENT. THE APPELLANT, EXCEPT FILING THE LEDGER ACCOUNT OF 'OTHER INCOME' HAS NOT DISPUTED ANYTHING IN THIS REGARD. THE FACTS OF THE CASE IS THAT APPELLANT HAD SHOWN 'OTHER INCOME' TO THE EXTENT OF RS.5,94,107/- IN THE PROFIT AND LOSS ACCOUNT. THIS IS SEPARATE FROM THE BUSINESS RECEIPT AND SURRENDERED AMOUNT. THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT BUT DID NOT MAKE ADDITION OF OTHER INCOME INCLUDED UNDER THE HE AD OTHER INCOME AMOUNTING TO RS.5,94,107/-. 2.5. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS NOT INCLUDED IN THE COMPUTATION OF INCOME AN AMOUNT OF RS.5,79,497/- BEING BUSINESS IN COME DISCUSSED IN PARA-4 OF THE ASSESSMENT ORDER. ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 6 2.6. APPARENTLY, THE ASSESSING OFFICER HAS ERRED IN NOT INCLUDING THESE AMOUNTS IN THE COMPUTATION OF INCOME AS RETURNED BY THE APPELLANT. THERE IS NO DISPUTE ABOUT THESE. ACCORDINGLY AN ENHANCEMENT OF RS. 11,33,604/- IS MA DE IN THIS CASE. THE ASSESSING OFFICER IS DIRECTED TO ADD THIS INCOME. 7. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 8. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A). HE FURTHER SUBMITTED THAT IN THE STATEMENT OF SHRI B.M. PATEL THAT WAS RECORDED U/S. 133A ON 06.10.2006, IN RESPONSE T O QUESTION NO. 25, IT WAS SUBMITTED THAT THE EXPENSES WERE DEBITED WITHOUT PR OPER DOCUMENT AND SINCE THEY WERE UNVERIFIABLE, ADDITIONAL INCOME WITH RESP ECT TO THOSE EXPENSES AMOUNTING TO RS. 20 LACS WAS CONSIDERED AS INCOME O F THE ASSESSEE AND THE SAME WAS OFFERED TO TAX. HE POINTED TO THE ENGLISH TRANSLATION OF THE STATEMENT RECORDED PLACED AT PAGE 22 OF THE PAPER B OOK. HE FURTHER SUBMITTED THAT THE AFORESAID AMOUNT OF RS.20 LACS W AS DECLARED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT FOR THE YEA R ENDED 31 ST MARCH, 2006 AND FOR WHICH HE POINTED AT PAGE 29 OF THE PAPER BO OK AND HE THEREFORE SUBMITTED THAT RS. 20 LACS HAS ALREADY BEEN CONSIDE RED BY ASSESSEE WHILE COMPUTING THE INCOME. HE FURTHER SUBMITTED THAT ONC E A.O HAS REJECTED THE BOOKS RESULTS AND HAS MADE ESTIMATION ON THE BASIS OF NET PROFITS THERE COULD HAVE BEEN NO FURTHER ADDITION OF THE AMOUNT OF UNDI SCLOSED INCOME DECLARED BECAUSE WHEN NET PROFIT IS ESTIMATED, THE INCOME AN D EXPENSES ARE TAKEN CARE OF AND MORE SO WHEN THE AMOUNT OF UNDISCLOSED INCOM E WAS ON ACCOUNT OF INFLATION OF EXPENSES. HE HAS FURTHER SUBMITTED THA T REVENUE HAS BEEN UNABLE TO POINT OUT AS TO WHICH ARE EXPENSES ARE BO GUS AND FURTHER THE ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 7 ASSESSEE COULD NOT HAVE MANIPULATED THE EXPENSES, W HEN THE BOOKS OF ACCOUNTS WERE SEIZED BY REVENUE AND WERE IN THEIR P OSSESSION. FOR THE PROPOSITION THAT WHEN INCOME IS ESTIMATED THERE COU LD BE NO FURTHER DISALLOWANCE, HE PLACED RELIANCE ON THE DECISION O F ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR (1998) 2 29 ITR 229 AND PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWA L ENGG. CO. (2008) 302 ITR 456. THE LD. D.R. ON THE OTHER HAND SUPPORT ED THE ORDER OF A.O AND LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE DURING THE COUR SE OF SURVEY PROCEEDING U/S. 133A HAS MADE DISCLOSURE OF RS. 20 LACS. THE R EPLY OF THE ASSESSEE TO QUESTION NO. 25 ALSO REVEALS THAT THE ADDITIONAL IN COME OF RS. 20 LACS WAS OFFERED ON ACCOUNT OF EXPENSES BEING NON VERIFIABLE IN NATURE. IT IS ALSO FACT THAT IN THE PRESENT CASE A.O HAS REJECTED THE BOOKS OF ACCOUNTS U/S. 145 OF THE ACT AND THEREAFTER THE A.O HAS WORKED OUT THE A DDITION ON THE BASIS OF NET PROFIT OF 3% OF THE GROSS RECEIPTS. THE TERM NE T PROFIT AS COMMONLY UNDERSTOOD MEANS THE PROFIT WHICH HAS BEEN ARRIVED AT BY NETTING OFF INCOME OVER THE EXPENDITURE MEANING THEREBY THAT WHATEVER EXPENSES WHICH WERE DUE AND WERE DEDUCTIBLE HAVE BEEN DEDUCTED FROM THE INCOME OF THE ASSESSEE BEFORE DERIVING THE FINAL FIGURE OF PROFIT . WE ARE OF THE VIEW THAT IN A SITUATION WHEN ONCE ADDITION HAS BEEN MADE ON THE BASIS OF ESTIMATION OF NET PROFIT, FURTHER ADDITION IS NOT CALLED FOR AND FOR THIS CONCLUSION WE DERIVE SUPPORT BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (SUPRA) WHEREIN THE H ONBLE HIGH COURT AFTER CONSIDERING THE DECISION OF ALLAHABAD HIGH C OURT IN THE CASE OF CIT VS. BANSWARILAL BANSHIDHAR (SUPRA) HELD THAT NO FU RTHER ADDITION WAS CALLED ITA NOS. 91 & 92/AHD/2011 . A.Y. 2006-0 7 & 2007-08 8 FOR IN RESPECT OF PURCHASES AND INTRODUCTION OF CAS H. BEFORE US, REVENUE HAS NOT PLACED ON CONTRARY BINDING DECISION IN ITS SUPP ORT NOR HAS CONTROVERTED THE SUBMISSIONS MADE BY LD. A.R. IN VIEW OF THE AFO RESAID FACTS, WE ARE OF THE VIEW THAT APART FROM ADDITION MADE BY A.O BY MA KING ESTIMATION OF NET PROFITS, NO FURTHER ADDITION ON ACCOUNT OF INCOME D ECLARED DURING THE COURSE OF SURVEY WAS CALLED FOR. THUS THIS GROUND OF ASSES SEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. NOW WE TAKE UP ITA NO. 92/AHD/2011 FOR A.Y. 2007-08 . 11. IN THE PRESENT CASES, SINCE BOTH THE PARTIES HAVE A DMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THAT IN A.Y. 2006-07, WE THEREFORE FOR THE REASONS STATED HEREINABOVE WHILE DECIDING T HE APPEAL FOR A.Y. 2006- 07 IN ITA NO. 91/AHD/2011 (SUPRA) AND FOR SIMILAR R EASONS ALLOW THE GROUNDS OF ASSESSEE IN THE PRESENT APPEAL. 12. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 09 - 2015. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)