Smt. Sunita Rani, Sirhind V. ITO, Sirhind

ITA 918/CHANDI/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1426 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 03-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Section: 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: SMC BENCH: CHANDIGARH BEFORE HONBLE SHRI D K SRIVASTAVA ITA NO. 918/CHANDI/2009 ASSESSMENT YEAR: 2006-07 SMT. SUNITA RANI V I.T.O. SIRHIND WITH HEADQUAR TER PROP. M/S GOYAL SAREES AT GOBINDGARH ANAJ MANDI, SIRHIND PAN: ABAPR 4496 E (RESPONDENT-ASSESSEE) (RESPONDENT) APPELLANT BY:SHRI NEERAJ JAIN RESPONDENT BY: SHRI N.K. SAINI ORDER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A) ON 20.7.2009. THE ASSESSEE IS PROPRIETOR OF M/S GOYAL SAREES AND IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALES OF SUIT DUPPA TTA, SAREES, SUITINGS, DRESS MATERIAL PRINT, DRESS MATERIAL DYED AND KURTA PAJAMA. THE AS SESSEE FILED HER RETURN OF INCOME ON 29.3.2007 RETURNING TOTAL INCOME AT RS.1,47,540/ -. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY FOLLOWING THE SURVEY CARRIED OUT BY THE DEPARTMENT U/S 133A OF THE INCOME-TAX ACT ON 22.1.2006. ASSESSMENT U/S 143 (3) WAS COMPLETED ON 2.12.2008 ASSESSING HER TOTAL INCOME AT RS. 4,57,06 0. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER DID NOT ACCEPT TH E COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE BEFOR E HIM. HE THEREFORE ESTIMATED THE SALES AT RS.18 LAKHS AS HAVING BEEN MADE OUTSID E THE BOOKS AND THE PROFITS THEREON. 2. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONSID ERED THE MATTER IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD AND THE SUBMISSIONS M ADE BY THE ASSESSEE. HE HOWEVER CONFIRMED THE ACTION OF THE AO IN ESTIMATING THE SA LES AT RS.18.00 LAKHS AS HAVING BEEN MADE OUTSIDE THE BOOK AND CONSEQUENTLY THE PRO FIT (RS.2,02,300/-) THEREON. 3. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE HAS TAKEN THE FO LLOWING GROUNDS OF APPEAL: 1 THE LD. CIT(A) HAS ERRED IN CONFIRMING THE REJEC TION OF BOOKS OF ACCOUNT WHEN PURCHASES, CLOSING STOCK AND EXPENSES HAVE BEEN ACCEPTED. NOTHING SPECIFIC WAS FOUND. 918/CHANDI/2009 2 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 2,02,300/- MADE BY THE AO ON ACCOUNT OF PROFIT ON ALLEGED SUPPRESSED SALES OF RS. 18,00, 000/-. 3 WHILE DOING SO THE LD. CIT(A) HAS WRONGLY AND UNJ USTIFIABLY RELIED UPON THE INCREDIBLE INVENTORY OF STOCKS PREPARED AT THE TIME OF SURVEY U/S 133A WHEREIN THE STOCKS WERE GROSSLY UNDERVALUED ALTHOUG H IT WAS EXPLAINED THAT, THERE WAS HARDLY ANY SIGNIFICANT DIFFERENCE IN THE VALUE OF STOCKS AS PER INVENTORY AND AS PER BOOKS OF ACCOUNT. 4 WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) HA S FURTHER ERRED IN CONFIRMING THE ALLEGED SUPPRESSED SALES AT RS. 18,0 0,000/- WHEN ADMITTEDLY THE DIFFERENCE IN THE VALUE OF STOCKS AS PER BOOKS OF ACCOUNT AND AS PER INVENTORY WAS RS. 14,21,168/- ONLY. 5 THE LD. CIT(A) HAS FURTHER ERRED IN NOT PASSING A SPEAKING AND REASONED ORDER INASMUCH AS HE HAS NOT CONSIDERED NO R RECORD ANY FINDING ON THE DETAILED EXPLANATION OF THE APPELLANT THAT THE INVENTORY PREPARED AT THE TIME OF SURVEY U/S 133A WAS FULL OF MISTAKES AND TH E STOCKS FOUND WERE GROSSLY UNDERVALUED THEREIN. 6 THE ORDER OF THE LD. CIT(A) BEING A NON SPEAKING AND UNREASONED ORDER AND MAINLY BASED ON THE INCURRED AND INCREDIB LE INVENTORY AND MERE SURMISES NOT BEING A VALID ORDER DESERVES TO BE CAN CELLED AND THE ENTIRE ADDITION OF RS. 2,02,300/- DESERVES TO BE DELETED. 4. THE IMPUGNED ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF RESULTS OF SURVEY CARRIED OUT BY THE DEPARTMENT U/S 133A AT TH E BUSINESS PREMISES OF THE ASSESSEE ON 22.1.2006. PARA 3 OF THE ASSESSMENT OR DER DEALS WITH THE ISSUE AS UNDER: 3. AS DISCUSSED EARLIER, SURVEY U/S 133A WAS CONDU CTED ON THE PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT WAS F OUND THAT THE ASSESSEE HAD NOT MAINTAINED THE BOOKS OF ACCOUNT IN THE NORMAL C OURSE, AS THESE WERE NOT WRITTEN UP TO DATE. EVEN SALES RECORDS WERE NOT BEI NG PROPERLY VOUCHED AND WHILE DRAWING A TRADING ACCOUNT UP TO THE DATE OF S URVEY, THE SALES FROM 14.9.2005 TO 22.1.2006 WERE TAKEN ON ESTIMATE BASIS WHILE WORKING OUT THE STOCK POSITION ON THAT DAY. FURTHER, THE STOCK OF G OODS, BEING DEALT IN BY THE ASSESSEE AND AVAILABLE ON THE PREMISES AT THE TIME OF SURVEY, WAS COUNTED IN THE PRESENCE OF THE REPRESENTATIVE OF THE ASSESSEE. THE VALUATION OF THESE STOCKS WAS CARRIED OUT AND THE VALUE OF THEE STOCKS , FOUND PHYSICALLY AT THE BUSINESS PREMISES, WAS WORKED OUT AT RS. 11,44,081/ -. THE ASSESSEE WAS ASKED TO FURNISHED TRADING AND P & L ACCOUNT UP TO THE DATE OF SURVEY ON THE 918/CHANDI/2009 3 BOOKS OF ACCOUNT WHICH HAVE BEEN MAINTAINED BY THE ASSESSEE FOR FILING THE RETURN OF INCOME. AS PER THIS TRADING ACCOUNTS, THE VALUE OF CLOSING STOCK HAS BEEN WORKED OUT AT RS. 25,65,249/-. THERE WAS THUS DIFFERENCE OF STOCKS WHICH WERE CERTAINLY SHORT BY RS. 14,21,168/- ON THE DATE OF SURVEY. THE ONLY INFERENCE THAT CAN THUS, BE TAKEN IS THAT THE ASSES SEE IS CARRYING ON THE BUSINESS OUT OF BOOKS OF ACCOUNT. AS THE BOOKS OF ACCOUNT WERE NOT WRITTEN UP TO DAT E AS HAD BEEN FOUND AT THE TIME OF SURVEY OF THE PREMISES ON 22.1.2006, THESE HAVE NOT BEEN MAINTAINED IN THE NORMAL COURSE AND, THEREFORE, CAN NOT BE RELIED UPON. THE UNACCOUNTED SALES ARE ESTIMATED AT RS.18 LAKHS, KEE PING IN VIEW THE STOCKS FOUND SHORT AT THE TIME OF SURVEY, WHICH WERE OBVIO USLY SOLD OUT WITHOUT ISSUING PROPER SALE INVOICES AND WITHOUT RECORDING THE SAME IN THE BOOKS OF ACCOUNT. THE PROFIT ON SUCH SALES IS BEING CONSIDE RED FOR DETERMINING THE INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) HAS DEALT WITH THE ISS UE IN PARA 3 OF HIS APPELLATE ORDER AS UNDER: 3 GROUND NO. 1 & 2 STATE THAT THE AO HAS ERRED IN REJECTING THE BOOKS OF ACCOUNT BY APPLYING THE PROVISIONS OF SECTION 145 O F THE ACT AND MAKING THEREBY UNWARRANTED ADDITION OF RS. 2,02,300/- ON A CCOUNT OF PROFIT ALLEGEDLY EARNED ON UNACCOUNTED ESTIMATED SALES TO RS. 18,00, 000/- STATED TO HAVE BEEN NOTICED AT THE TIME OF SURVEY U/S 133A. 3.1 THE FACT OF THE CASE IN BRIEF ARE THAT A SURVEY U/S 133A WAS CONDUCTED ON THE PREMISES OF THE APPELLANT DURING WHICH THE A O FOUND THAT THE ASSESSEE HAD NOT MAINTAINED THE BOOKS OF ACCOUNT IN THE NORM AL COURSE AS THESE WERE NOT WRITTEN UP TO DATE. THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUNT U/S 145 OF THE ACT. THE SURVEY PARTY ALSO NOTICED THAT SALES RECORDS IS NOT PROPERLY VOUCHED. THE STOCK OF GOODS WAS ALSO CALCULATED AN D VALUE OF THESE STOCKS PHYSICALLY FOUND AT THE BUSINESS PREMISES WAS WORKE D OUT AT RS. 11,44,081/-. THE P & L ACCOUNT MAINTAINED BY THE ASSESSEE FOR FI LING RETURN OF INCOME ACCORDING TO WHICH CLOSING STOCK HAS BEEN WORKED OU T AT RS. 25,65,249/-. THEREFORE, THE AO HELD THAT THERE IS DIFFERENCE IN STOCK BY RS. 14,21,168/- AND THE ASSESSEE IS CARRYING BUSINESS OUT OF BOOKS OF A CCOUNT AND ESTIMATED UNACCOUNTED SALES AT RS. 18 LAKHS AND MADE THE ADDI TION BY CALCULATING THE PROFIT ON SUCH SALES. 3.2 DURING THE APPELLATE PROCEEDINGS, THE COUNSEL O F THE APPELLANT ATTENDED AND SUBMITTED THAT AS PER BOOKS OF ACCOUNT AS ON 22 .1.2006 THE CLOSING STOCK 918/CHANDI/2009 4 WAS OF RS. 25,65,249/- BUT AS PER INVENTORY PREPARE D BY SURVEY PARTY THE STOCK WAS FOUND ONLY OF RS. 11,44,081/- ACCORDING TO WHIC H DIFFERENCE COMES OUT OF RS. 14,21,168/-. HE CONTENDED THAT THE AO HAS ESTI MATED UNACCOUNTED SALES AT RS. 18,00,000/- BY IGNORING THE CALCULATED DIFFE RENCE OF RS. 14,,21,168/- WHICH IS WITHOUT ANY COGENT REASONS AND WITHOUT ANY MATERIAL ON RECORD BROUGHT BY THE AO. THE COUNSEL HAS FURTHER STATED THAT THE ALLEGED UNACCOUNTED SALES OF RS. 3,78,832/- I.E. (RS. 18,00 ,000 RS. 14,21,168) HAVING BEEN UNJUSTLY ESTIMATED IN EXCESS WHICH IS F ACTUALLY WRONG AND UNJUSTIFIED. 3.3 I HAVE GONE THROUGH THE FACTS OF THE CASE AND R IVAL SUBMISSIONS. AS FAR AS ISSUE OF REJECTION OF BOOKS OF ACCOUNT IS CONCER NED, I FIND THAT AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT ON THE BASIS THAT THE BOOKS WERE NOT PROPERLY MAINTAINED AND ALL THE RELEVANT VOUCHERS W ERE NOT PRODUCED BY THE ASSESSEE AT THE TIME OF SURVEY. THEREFORE, I AM OF THE VIEW THAT REJECTION OF BOOKS OF ACCOUNT IS JUSTIFIED. SO FAR AS THE ISSUE OF ADDITION OF UNACCOUNTED SALES IS CONCERNED, I AM OF THE VIEW THAT SINCE THE STOCKS HAS BEEN FOUND SHORT AT THE TIME OF SURVEY, WHICH WERE SOLD OUT OF BOOKS OF ACCOUNT BY THE APPELLANT. EVEN THE APPELLANT HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN THE SHAPE OF SALE INVOICES ETC. TO SUBSTANTIATE HIS CLAIM. THEREFORE, I HELD THAT THE AO IS JUSTIFIED IN ESTIMATING THE UNACCOUNTED S ALES TO THE EXTENT OF RS. 18 LAKHS 3.4 HENCE, GROUNDS NOS. 1 & 2 ARE DISMISSED. 6. IN SUPPORT OF APPEAL, THE LEARNED AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE AO WAS NOT RIGHT IN REJECTING TH E BOOKS OF ACCOUNT. INVITING MY ATTENTION TO SECTION 145(3), HE SUBMITTED THAT ONLY THOSE BOOKS WHICH WERE INCOMPLETE AT THE STAGE OF ASSESSMENT CAN BE DISCAR DED U/S 145(3) AND NOT THOSE BOOKS WHICH WERE FOUND INCOMPLETE DURING THE COURSE OF PREVIOUS YEAR OR ACCOUNTING PERIOD. HE SUBMITTED THAT THE ASSESSEE IS FREE TO W RITE THE BOOKS OF ACCOUNT EVEN AFTER THE CLOSURE OF THE ACCOUNTING YEAR. ACCORDING TO HIM, THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE BEFORE THE LD. CIT(A) WERE COMPLETE AND CORRECT AT THE TIME WHEN THEY WERE CALLED FOR IN THE COURSE OF ASSESSME NT PROCEEDINGS BY THE AO AND THEREFORE THE AO WAS NOT JUSTIFIED IN DISCARDING TH EM. HIS SECOND SUBMISSION WAS THAT THE QUANTITATIVE DETAILS AS RECORDED BY THE ASSESSE E IN HER BOOKS OF ACCOUNT WERE EXACTLY SIMILAR TO THOSE WHICH WERE FOUND AT THE TI ME OF SURVEY AND THEREFORE THE AO WAS NOT JUSTIFIED IN REJECTING THE STOCK VALUATION DONE BY THE ASSESSEE. HIS THIRD SUBMISSION WAS THAT THE STOCK FOUND AT THE TIME OF SURVEY WAS LOWER THAN THE STOCK RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE, IT WAS NOT OPEN TO THE AO TO MAKE 918/CHANDI/2009 5 ADDITION IN THIS BEHALF. HE SUBMITTED THAT THE VAL UATION OF STOCK RECORDED IN THE BOOKS OF ACCOUNT WAS HIGHER AND THEREFORE, IT HAD HIGHER ELEMENT OF PROFITS EMBEDDED IN IT. ACCORDING TO HIM, THE AO WAS NOT JUSTIFIED IN MAKIN G FURTHER ADDITION ON ACCOUNT OF LOWER VALUE OF STOCK FOUND AT THE TIME OF SURVEY AS IT WOULD LEAD TO DOUBLE ADDITION; ONE, BY WAY OF MAKING IMPUGNED ADDITION AND THE OTH ER BY WAY OF HIGHER VALUE OF STOCK AS REFLECTED IN THE BOOKS OF THE ASSESSEE. HI S FOURTH SUBMISSION WAS THAT THE AMOUNT OF SALES ESTIMATED BY THE AO WAS ON HIGHER S IDE AND EXCESSIVE AND THEREFORE THE IMPUGNED ADDITION SHOULD EITHER BE DELETED OR S UITABLY MODIFIED. 7. IN REPLY THE LD. D.R SUPPORTED THE ORDERS PASSED BY THE AO AND THE LD. CIT(A). HE SUBMITTED THAT THE BOOKS OF ACCOUNT MAINTAINED B Y THE ASSESSEE WERE FOUND INCOMPLETE AT THE TIME OF SURVEY. ACCORDING TO HIM, THE VALUE OF STOCK FOUND AS A RESULT OF PHYSICAL VERIFICATION ON THE DATE OF SURV EY WAS SUBSTANTIALLY LOWER THAN THE VALUE OF STOCK RECORDED BY THE ASSESSEE IN HER BOOK S. HE SUBMITTED THAT THE AO WAS JUSTIFIED IN INVOKING SECTION 145(3) AS THE BOOKS W ERE FOUND INCOMPLETE AND IN ESTIMATING THE SALES OUTSIDE THE BOOKS AND PROFITS THEREON. 8. I HAVE HEARD BOTH PARTIES. DURING THE COURSE OF SURVEY CARRIED OUT BY THE DEPARTMENT, STOCK WAS PHYSICALLY VERIFIED IN THE PR ESENCE OF THE REPRESENTATIVES OF THE ASSESSEE AND VALUED AT RS. 11,44,881/- ON THE DATE OF SURVEY. THE POSITION OF STOCK ON THE DATE OF SURVEY AS PER BOOKS OF THE ASSESSEE WAS RS.25,65,249/-. THUS, THE VALUE OF STOCK AS PHYSICALLY FOUND AT THE TIME OF S URVEY WAS SHORT BY RS.14,21,168/- THAN THE VALUE OF STOCK RECORDED IN THE BOOKS. THE FACT THAT THE INVENTORY OF STOCK WAS TAKEN AND THE VALUATION THEREOF MADE IN THE PRE SENCE OF THE REPRESENTATIVES OF THE ASSESSEE IS NOT DISPUTED. THE ASSESSEE DID NOT RAISE ANY DISPUTE REGARDING CORRECTNESS OF THE VALUE OF STOCK TAKEN AT THE TIME OF SURVEY EITHER AT THE TIME OF SURVEY OR AT ANY TIME THEREAFTER TILL THE MATTER CA ME UP FOR HEARING BEFORE THE AO. 9. AT THE TIME OF HEARING BEFORE ME, THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY CONCEDED THAT THE BOOKS OF ACCO UNT WERE INCOMPLETE AT THE TIME OF SURVEY. HIS SUBMISSION WAS HOWEVER THAT THE BOOKS O F ACCOUNT NEED NOT BE COMPLETE DURING THE ACCOUNTING PERIOD AND THE ASSESSEE WAS F REE TO WRITE THE BOOKS OF ACCOUNT EVEN AFTER THE CLOSURE OF ACCOUNTING PERIOD. I AM U NABLE TO ACCEPT THE AFORESAID SUBMISSION. THE BOOKS OF ACCOUNT ARE RELEVANT AND T HEREFORE ADMISSIBLE IN EVIDENCE ONLY FOR THE REASON THAT THEY ARE MAINTAINED CONTEM PORANEOUSLY, I.E., THE TRANSACTIONS ARE RECORDED AS AND WHEN THEY TAKE PLACE. SECTION 3 4 OF THE EVIDENCE ACT MAKES THE ENTRIES IN THE BOOKS OF ACCOUNT RELEVANT ONLY IF TH E BOOKS OF ACCOUNT ARE REGULARLY MAINTAINED IN THE COURSE OF BUSINESS. THE BOOKS OF ACCOUNT WHICH ARE NOT REGULARLY 918/CHANDI/2009 6 MAINTAINED IN THE DAY TO DAY COURSE OF BUSINESS OR WHICH DO NOT RECORD TRANSACTIONS CONTEMPORANEOUSLY AS AND WHEN THEY TAKE PLACE, CAN NOT THEREFORE BE CONSIDERED RELEVANT FOR THE PURPOSE OF ASSESSMENT. IN THE MATT ER UNDER APPEAL, THE BOOKS OF ACCOUNT, APART FROM BEING INCOMPLETE, ALSO DID NOT REFLECT THE CORRECT STOCK POSITION AS FOUND AT THE TIME OF SURVEY. IN THIS VIEW OF THE MA TTER, THE AO WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE BOOKS OF ACCOUNT PRODUCE D BY THE ASSESSEE WERE NEITHER CORRECT NOR COMPLETE AND THEREFORE WAS JUSTIFIED IN INVOKING SECTION 145(3). THE CONCLUSION REACHED BY THE LD. CIT(A) IN THIS BEHALF IS CONFIRMED. 10. AS REGARDS THE ESTIMATION OF SALES AT RS. 18.0 0 LAKHS OUTSIDE THE BOOKS OF ACCOUNT, IT IS NOTICED THAT THE STOCK FOUND AT THE TIME OF SURVEY WAS SHORT BY RS.14,,21,168/-. THE FACT THAT THE STOCK AT THE TIM E OF SURVEY WAS SUBSTANTIALLY LOWER THAT THE STOCK AS PER BOOKS CONFIRMS THE FINDING OF THE AO THAT SUCH SALES MUST HAVE BEEN MADE OUTSIDE THE BOOKS. THE ACTION OF THE AO I N ESTIMATING THE SALES OUTSIDE THE BOOKS AT RS. 18.00 LAKHS, DOES NOT SEEM TO BE ARBIT RARY OR UNREASONABLE ON THE FACTS OF THE CASE. THE AO HAS APPLIED THE SAME RATE OF PR OFIT ON SALES ESTIMATED BY HIM TO HAVE BEEN MADE OUTSIDE THE BOOKS AS DECLARED BY THE ASSESSEE HERSELF ON SALES RECORDED IN THE BOOKS. THE APPROACH OF THE AO IN TH IS BEHALF IS FAIR AND REASONABLE. 11. IN VIEW OF THE FOREGOING, THE ORDER PASSED BY T HE LD. CIT(A) IS CONFIRMED. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 13 TH JANUARY, 2011 SD/- (D K SRIVASTAVA) ACCOUNTANT MEMBER CHANDIGARH, THE 13 TH JANUARY, 2011 SURESH COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY ASSISTANT REGISTRAR , ITAT, CHANDIGARH