I.T.O., V. Atma Ram Maheshka,

ITA 92/PAT/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1020 (ITAT-PATNA)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C SANNIGRAHI; PAWAN KR SHARMA
• Assessee Lawyers: ARCHANA PRASAD JR S C
• Keywords: Onus to prove
• Section: 68

Judgement Text

, PATNA IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA . . , , BEFORE SHRI A.D. JAIN (JM) AND SHRI SANJAY ARORA (AM) ./ I.T.A. NO. 92 /P AT/201 1 ( / ASSESSMENT YEAR: 2007 - 0 8 ) ITO, WARD - 1(1), BHAGALPUR / VS. ATMA RAM MAHESHKA, MANDROAJA, BHAGALPUR ./ ./ PAN/GIR NO. AEHPM 6616 D ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI S. C. SANNIGRAHI & SHRI PAWAN KR. SHARMA. ADV. / RESPONDENT BY : SMT. ARCHANA PRASAD, J R.S.C. / DATE OF HEARING : 23.04. 2015 / DATE OF PRONOUNCEMENT : 28 .05.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - I , PATNA (CIT(A) FOR SHORT) DATED 26.04.2011 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/ S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2007 - 08 VIDE ORDER DATED 29.12.2009. 2. THE APPEAL RAISES THE FOLLOWING TWO GROUNDS, WHICH WE SHALL TAKE UP IN SERIATIM: 2 ITA NO. 92/PAT/2011 (A.Y. 2007 - 08) ITO VS. ATMA RAM MAHESHKA 1. THE LD. CIT(A) - 1, P ATNA HAS ERRED AND NOT JUSTIFIED IN DELETING ADDITION OF RS.94,358/ - ON ACCOUNT OF GROSS PROFIT ADDITION AS THERE WAS SIGNIFICANT VARIATION IN THE RATE OF GP DURING PRE - SURVEY AND POST SURVEY PERIODS. 2. THE LD. CIT(A) - I, PATNA HAS ERRED IN DELETING THE ADDITION OF RS. 13,3 1,218/ - BY NOT APPRECIATING THE FACTS THAT ALL THE FOUR CREDITORS DID NOT APPEAR BEFORE THE ASSESSING OFFICER IN COMPLIANCE OF SUMMONS ISSUED. 3 . THE ASSESSEE , A TRADER AND PROCESSOR OF SILK PRODUCTS, WAS SUBJECT TO SURVEY U /S.133A OF THE ACT ON 28.11.2 006, WHEREAT , AMONG OTHERS, PHYSICAL INVENTORY OF STOCK WAS TAKEN, AND TRADING ACCOUNT PREPARED. AN EXAMINATION OF ITS ACCOUNTS FOR THE TWO, I.E., THE PRE AND THE POST SURVEY , PERIOD OF THE RELEVANT PREVIOUS YEAR, IN THE C OURSE OF THE ASSESSMENT PROCEEDING S, REVEAL ED THE FOLLOWING: ( AMT. IN RS. ) PERIOD SALES GP GP (%) 01.04.2006 28.11.2006 (P1) 34,84,463 1,30,362 3.74 29.11.2006 31.03.2007 (P2) 25,19,315 1,62,523 6.45 THE ASSESSEE WAS, ACCORDINGLY, QUESTIONE D ON THE WIDE VARIATION (2.71% , OR OVER 72% WITH REFERENCE TO THE GROSS PROFIT OF PERIOD P1) IN THE TRADING RESULTS FOR THE TWO PERIODS COMPRISING THE RELEVANT PREVIOUS YEAR, SHOW CAUSING IT FOR THE ADDITION ON ACCOUNT OF SUPPRESSION OF GROSS PROFIT FOR TH E FIRST PERIOD. THE ASSESSEE EXPLAINED THE VARIATION TO BE ON ACCOUNT OF SUPPLY AND DEMAND FACTORS, I MPACTING THE INPUT COST S AS WELL AS THE OUTPUT RATES , WHICH ARE NOT UNIFORM BUT SUBJECT TO CO NSTANT CHANGE. THE SAME DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER (A.O.), WHO WAS OF THE VIEW THAT AN INCREASE IN COST WOULD RESULT IN A CORRESPONDING INCREASE IN SALE RATE /S AS WELL. HE, ACCOR DINGLY , APPLYING THE GR OSS PROFIT RATE OF 6.45% FOR THE PERIOD P1, EFFECTED AN ADDITION FOR RS.94,538/ - . THE ASSESSEE FO UND FAVOUR WITH THE FIRST APPELLATE AUTHORITY IN APPEAL FOR EXACTLY THE SAME REASONS. NO DEFECT IN THE BOOKS OF ACCOUNT HAD BEEN FOUND AND THERE COULD BE NO PRESUMPTION AS TO UNIFORMITY OF THE GROSS PROFIT ACROSS DIFFERENT 3 ITA NO. 92/PAT/2011 (A.Y. 2007 - 08) ITO VS. ATMA RAM MAHESHKA PERIODS OF THE YEAR, THE RESULTS FOR WHICH ARE TO BE LOOKED AT AS A WHOLE. AGGRIEVED, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. THE CASE S OF BOTH THE PARTIES STAND DELINEATED AS ABOVE (REFER PARA 3) . WE, FIRSTLY, OBSERVE THE CASE OF EIT HER PARTY AS INCHOATE. NO DOUBT, THERE CAN BE NO PRESUMPTION AS TO THE UNIFORMITY OF THE GROSS PROFIT RATE ACROSS DIFFERENT PERIOD S OF TIME, EVEN IF FALLING WITHIN THE SAME PREVIOUS YEAR. AT THE SAME TIME, HOWEVER, THE ASSESSEE RELYING ON ITS BOOKS OF ACCO UNT IN SUPPORT OF ITS RETURN OF INCOME , OUGHT TO BE IN A POSITION TO JUSTIFY THE WIDE VARIATION IN ITS BOOK RESULTS FOR THE TWO PERIODS COMPRISING ITS PREVIOUS YEAR WITH REFERENCE THERETO . IN FACT, BIFURCATED RESULTS ARE NEITHER PREPARED NOR AVAILABLE IN T HE NORMAL COURSE AS FINAL ACCOUNTS ARE PREPARED ONLY AT THE CLOSE OF, AND FOR THE ENTIRE , YEAR. IT IS ONLY ON ACCOUNT OF SURVEY, WHEREAT THE STOCK WAS PHYSICALLY INVENTORIZED , THAT IT HAS BEEN POSSIBLE TO HAVE SEPARATE RESULTS FOR DIFFERENT PERIODS OF TIME DURING THE RELEVANT YEAR. T HE INPUT COST /S AND THE OUTPUT RATES MAY NOT MOVE IN TAND E M, OR MAY DO SO WITH A TIME LAG, RESULTING IN VARIATION IN THE GROSS PROFIT (TRADING) RATE ACROSS DIFFERENT PERIOD S , BUT THE SAME , INCLUDING THE EXTENT THEREOF, CO ULD BE DEMONSTRATED FROM THE ACCOUNTS ITSELF. THE ASSESSEES EXPLANATION IS VAGUE AND GENERAL, AND NOT FOUNDED ON FACTS, AS COLLATED AND GATHERED FROM ITS ACCOUNTS. THE A.O. , ON THE OTHER HAND, IS EQUALLY AT FAULT. AS CORRECTLY OBSERVED BY THE LD. CIT(A) , THE WID E AND APPARENTLY UNEXPLAINED VARIATION DOES GIVE RISE TO A VALID LINE OF INVESTIGATION, BUT BY ITSELF NOT SUFFICIENT TO REJECT THE ASSESSEES BOOKS AS UNRELIABLE; NO DEFECT WHEREIN HAD BEEN OTHERWISE POINTED OUT. THOUGH, WE WOULD THEREFORE, I.E., UNDER THE CIRCUMSTANCES , ORDINARILY RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR PROPER DETERMINATION (REFER: KAPURCHAND SHRIMAL VS. CIT [1981] 131 ITR 451 (SC) ) , WE ARE NOT INCLINED TO DO SO IN THE PRESENT CASE. THE ASSESSEES BOOK STOCK WAS FOUND AT 4529.1 0 SQ. MTRS , A S AGAINST A PHYSICAL STOCK AT 3,890 SQ. MTRS. THE DIFFERENCE, VALUED AT THE SALE RATE , WORKED TO RS.1,65,457/ - , WHICH HAS BEEN CONSIDERED AS SALES OUTSIDE BO OKS , AND CONFIRMED FOR ADDITION, AND WHICH IS ONLY QUA THE FIRST PERIOD (P1). THE SAID DEFECT IS ITSELF A VALID GROUND FOR THE REJECTION OF THE ASSESSEES 4 ITA NO. 92/PAT/2011 (A.Y. 2007 - 08) ITO VS. ATMA RAM MAHESHKA AC COUNTS, W HICH THOUGH CANNOT BE FOR A PART OF THE YEAR. SO MUCH SO FOR THE ASSESSEES STAND OF NO DEFECT IN ITS BOOKS OF ACCOUNT, AND WHICH HAD FOUND ACCEPTANCE BY THE LD. CIT(A) ! HOWEVE R, THE ADDITION FOR THE SHORT SALES, SINCE CONFIRMED, IN DECIDING THE ASSESSEE S GROUND NO. 2 BEFORE HIM, H AS , AS IT APPEARS , BECOME FINAL. THE SAME WOULD, THEREFORE, STAND TO BE TELESCOPED AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED LOWER PROFIT. IF, H OWEVER, THE ASSESSEE IS ALSO IN APPEAL, WHICH WAS NOT DIVULGED TO US BY EITHER PARTY, AND THE ADDITION ON ACCOUNT OF S HORT SALES STANDS DELETED, THE ADDITION FOR SUPPRESSED PROFIT SHALL REVIVE INASMUCH AS THE ADDITION AGAINST WHICH IT IS TELESCOPED ITSELF DOES NOT SURVIVE . T HE MATTER QUA THE IMPUGNED ADDITION WOULD IN THAT CASE GO BACK TO THE FILE OF THE ASSESSING AUTHORITY FOR FRESH DETERMINATION IN ACCORDANCE WITH LAW AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO STATE AND PRESENT ITS CASE BEFORE HIM, ISS UING DEFINITE FINDINGS OF FACT. WE DECIDE ACCORDINGLY. 5. THE SECOND ADDITION, SINCE DELETED, IS IN RESPECT OF THE OUTSTANDING BALANCES (AS AT THE YEAR - END) OF FOUR CREDITORS, WHO DID NOT ATTEND FOR EXAMINATION BY THE A.O. IN RESPONSE TO SUMMONS ISSU ED THERETO U/S.131 OF THE ACT IN VERIFICATION OF THE ASSESSEES BOOKS OF ACCOUNT, AS UNDER: ( AMT. IN RS. ) 1 MD. KHURSHID, PURAINI 5,57,878/ - 2 MD. ANWAR, PURAINI 2,20,135/ - 3 MD. SHAHNAWAZ, PURAINI 2,00,000/ - 4 MD. KAMAL, PURAINI 3,53,205/ - TOTAL 13,31,218/ - TH EIR OUTSTANDING BALANCES, AS APPEARING IN THE ASSESSEES AUDITED ACCOUNTS, REMAINING THUS TO BE VERIF IED, WERE ACCORDINGLY DE EMED AS INCOME U/S. 68 OF THE ACT AFTER S HOW CAUSING THE ASSESSEE IN THE MATTER. IN APPEAL, IT WAS EXPLAINED THAT THE ASSESSEE HAD FURNISHED COMPLETE NAMES AND ADDRESS ES O F THE PARTIES; THE CONFIRMATION OF TRANSACTIONS FROM THE PARTIES, WHOSE IDENTITY WAS ESTABLISHED PER VOTER IDENTITY/DRIVING LI CENSE, ETC. AND THE BANK STATEMENT REFLECTING THE PAYMENT TO THEM THROUGH ACCOUNT PAYEE CHEQUES IN THE FOLLOWING YEAR, AT THE ASSESSMENT STAGE ITSELF. THE ASSESSEE HAD, THUS, DISCHARGED THE BURDEN OF PROOF THAT L AY ON IT. THE A.O. COULD HAVE , IF HE WANTED TO, ENFORCE ATTENDANCE 5 ITA NO. 92/PAT/2011 (A.Y. 2007 - 08) ITO VS. ATMA RAM MAHESHKA BY INVOKING THE POWERS VESTED IN HIM UNDER THE ACT, EVEN AS THREE OF THE FOUR CREDITORS , WHO ARE IN FACT TRADE CREDITORS , HAD IN FACT RESPONDED TO THE SUMMONS PER WRITTEN COMMUNICATIONS. NO CASE FOR ADDITION IS , ACCORDINGLY , MADE OUT . THE ASSESSEE BEING ALLOWED RELIEF BY THE LD. CIT(A) ON THAT BASIS, AGGRIEVED, THE REVENUE IS IN APPEAL. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. THE BASIS OF THE RELIEF BEING IMPUGNED BY THE REVENUE IS THAT THE ASSESSEE , B Y ADDUCING THE STATED MATERIALS, HAS D I S CHARGED THE INITIAL ONUS THAT L IES ON IT U/S. 68 OF THE ACT. IN THIS REGARD, WE OBSERVE THAT THREE OF FOUR CREDITORS, ALL LOCAL , ON WHOM SUMMONS STAND SERVE D , RESPONDED THERETO, CONFIRMING THE TRANSACTIONS WITH THE A SSESSEE. THE ASSESSING AUTHORITY, THUS, APART FROM INSISTING ON THEIR ATTENDANCE, HAS NO BASIS TO DOUBT THE TRANSACTIONS THEREWITH, BOTH FOR SUPPLY OF GOODS AND PAYMENT/S THERE - AGAINST, DURING THE YEAR. IN FACT, THE A.O. HIMSELF OBSERVES, WHILE DISCUSSING THE ISSUE WITH REGARD TO THE SUPPRESSION OF PROFIT FOR A PART OF THE YEAR, OF THE ASSESSEES PURCHASES FOR THE TWO PERIODS OF THE PREVIOUS YEAR AS BEING PROPORTIONATE, SO THAT THERE IS NOTHING TO DOUBT THE SAME. AS REGARDS THE FOURTH CREDITOR, MD. ANWAR , W HO DID NOT RESPOND TO THE SUMMONS, THE POSITION WOULD BE DIFFERENT. EVEN ASSUMING THAT HIS LEDGER ACCOUNT, AS APPEARING IN THE ASSESSEES BOOKS OF ACCOUNT, DULY CONFIRMED BY HIM, WAS SUBMITTED TO THE A.O., THE SAME ONLY SHOWS THAT HE AND THE ASSESSEE WERE IN CONTACT. WHY DID HE NOT, THEN, EITHER ATTEND PERSONALLY OR , IN ANY CASE , FILE THE STATEMENT OF THE ASSESSEES ACCOUNT PER HIS ACCOUNTS DIRECTLY TO THE A.O. THIS BECOMES ALL THE MORE INEXPLICABLE AS NO EXPLANATION FOR HIS NON - ATTENDANCE OR NON - RESPONDING HAS BEEN FURNISHED AT ANY STAGE. AGAIN, THE LEDGER ACCOUNT OF THE CREDITOR (PER I TS BOOKS) AS FURNISHED BY THE ASSESSEE, IS NOT CONFIRMED BY THE CREDITOR (REFER PARA 4.1 OF THE IMPUGNED ORDER) , SO THAT IT CANNOT BE SAID THAT IT HAS DISCHARGED THE ONUS ON IT U/S. 68. THE DOCUMENTS FURNISHED BY THE ASSESSEE, IN ANY CASE , REMAIN UNVERIFIED IN CONSEQUENCE AND, THEREFORE, ARE OF NOT MUCH EVIDENTIA R Y VALUE. AT THE SAME TIME, IT CANNOT ALSO BE SAID THAT THE ASSESSEE HAS NOT ADVANCED ANY EXPLANATION. THE MATTER, A CCORDINGLY , WARRANTS BEING RESTORED BACK TO THE FILE OF THE A.O. FOR COMPLETING THE VERIFICATION PROCESS, AND ADJUDICATION IN ACCORDANCE WITH THE LAW PER A 6 ITA NO. 92/PAT/2011 (A.Y. 2007 - 08) ITO VS. ATMA RAM MAHESHKA SPEAKING ORDER , AND WE DIRECT ACCORDINGLY . THE LD. CIT(A) HAS G LOS SED OVER THE DISTINGUISHING FEATUR ES OF THIS CREDITOR VIS - A - VIS THAT OF THE OTHER THREE CREDITORS WHO RESPONDED TO THE SUMMON S , ALBEIT PER WRITTEN COMMUNICATIONS , SO THAT THE NON - VERIFICATION BY THE A.O. IN THOSE CASE S CANNOT , BY ANY MEAN S , BE ASCRIBED TO THE ASSESSEE. NEEDLESS TO ADD, WE ENDORSE AND CONFIRM THE FINDINGS OF THE LD. CIT(A) FOR THESE THREE CREDITORS , SO THAT IN RESULT THE REVENUE SUCCEEDS IN PART. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE R EVENUE S APPEAL IS DISPOSED OF IN THE ABOVE TERMS . ORDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( A. D. JAIN ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER DATED : 28 . 0 5 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - PATNA 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , ITAT, PATNA