The ACIT,(OSD), Circle-5, Ahmedabad V. Par Polypack India Ltd., Ahmedabad

ITA 967/AHD/2011

• Counselvise Citation: 96720514 RSA 2011
• Duration Of Justice: 4 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: PF JAIN
• Keywords: Rejection of books of accounts; Unexplained expenditure; Income from undisclosed sources
• Section: 143(3); 133A

Judgement Text

ITA NO967/AHD/2011 ASSESSMENT YEAR: 2007-08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO.967/AHD/2011 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX (OSD), .. ...........APPELLANT CIRCLE-5, AHMEDABAD. VS. PAR POLYPACK INDIA LIMITED, ................ ........RESPONDENT 30/31/32, CHANGODAR INDL. ESTATE, SARKHEJ, BAVLA HIGHWAY, CHANGODAR, AHMEDABAD. [PAN: AABCP 6079 N] APPEARANCES BY: DINESH SINGH, FOR THE APPELLANT P.F. JAIN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 29, 2015 DATE OF PRONOUNCING THE ORDER : JULY 21, 2015 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 24 TH JANUARY, 2011, PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR THE ASSESSMENT YEAR 2007-08, ON THE FOLLOWING GROUNDS:- 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.32,63,215/- MA DE ON ACCOUNT OF UNACCOUNTED EXPENDITURE INCURRED FROM UNACCOUNTED S OURCE OF INCOME DETECTED DURING THE COURSE OF SURVEY U/S 133 A OF THE ACT. 2. THE LD./ COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DIRECTING THE AO TO VERIFY THE CONTENTION OF ASSESSEE AND TO DELETE THE ADDITION OF RS.19,59,337/- WHICH WAS MAD E ON ACCOUNT OF REJECTION OF BUSINESS LOSS, IN CONTRAVENTION OF SEC . 251 OF THE ACT. ITA NO967/AHD/2011 ASSESSMENT YEAR: 2007-08 PAGE 2 OF 4 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 2. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSE IS ENGAGED IN THE BUSINESS OF MANUFACTURING BARRELS AN D WAS SUBJECTED TO A SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSE UNDER SECT ION 133A ON 21 ST NOVEMBER 2006. DURING THE COURSE OF THIS SURVEY, THE ASSESS E HAD UNDISCLOSED CASH AT RS 1,99,999, UNACCOUNTED STOCK VALUED AT RS 12,65,134, UNACCOUNTED EXPENDITURE ON RENOVATION OF BUILDING AMOUNTING TO RS 12,65,134 , UNACCOUNTED SALES OF WASTAGES AMOUNTING TO RS 7,85,320 AND UNACCOUNTED S HARE TRADING PROFIT AMOUNTING TO RS 17,40,000. WHEN ASSESSE FILED HIS RETURN OF INCOME, HE TOOK THE STAND THAT UNACCOUNTED SALE OF WASTAGES AMOUNTI NG TO RS 7,85,000 AND UNACCOUNTED SHARE TRADING INCOME AMOUNTING TO RS 17 ,40,000 FUNDED THE RENOVATION EXPENSES OF RS 12,65,000 AND INVESTMENT IN STOCK OF RS 10,12,000, LEAVING THE UNACCOUNTED CASH BALANCE IN HAND AMOUNT ING TO RS 2,48,000 WHICH EXPLAINED RS 1,99,999 AS WELL. ACCORDING TO THE ASS ESSE, THUS, UNACCOUNTED EXPENDITURE AND ASSETRS WAS FULLY FUNDED BY UNACCOU NTED INCOME AND ALL THAT WAS TO BE OFFERED TO TAX WAS THE TAXATION OF UNACCO UNTED INCOME OF RS 25,25,000. THIS PLEA, HOWEVER, WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SET OFF CAN BE GIVEN ONLY IF IT IS APPARENT FROM THE LOSE PAPER WHICH SHOWS INCOME AS WELL AS THE APPLICATION AND THAT, IN ANY CASE, THE ASSESSE HAS ALSO TO ESTABLISH DIRECT NEXUS BETWEEN UNACCOUNTED INCOME AND ITS APPLICATION WHICH HAS NOT BEEN DONE IN THE PRESENT CASE. IT WAS IN THIS BACKDROP THAT, DURING THE SCRUTINY ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER MADE AN ADDITION OF RS 32,63,215 TO THE INC OME OF THE ASSESSE. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSE HAS S HOWN PROFIT OF ONLY RS 12,58,148 EVEN AFTER CONSIDERING THE INCOME DISCLOS ED DURING THE SURVEY ON ACCOUNT OF SALE OF EMPTY BAGS AND PROFIT ON INVESTM ENTS AMOUNTING TO RS ITA NO967/AHD/2011 ASSESSMENT YEAR: 2007-08 PAGE 3 OF 4 7,85,320 AND RS 17,40,000 RESPECTIVELY. HE NOTED T HAT IF THESE TWO ITEMS WERE TO BE EXCLUDED, THERE IS A LOSS OF RS 12,67,172 WHE REAS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HE HAS SHOWN A PROFIT OF 2.71%. REJECTING THE BOOKS OF ACCOUNTS, AND ADOPTING THIS PROFIT RATE TO WORK OUT THE PROFITS, THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS 19,59,377. AGGR IEVED, INTER ALIA , BY THE ADDITIONS SO MADE BY THE ASSESSING OFFICER, ASSESS E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) HELD THAT THE WH EN THE ASSESSE ADMITS THE UNACCOUNTED INCOMES AND UNACCOUNTED EXPENDITURES, A SET OFF IN RESPECT OF THE UNACCOUNTED INCOME, WHILE COMPUTING UNEXPLAINED EXP ENDITURE, IS TO BE GIVEN. HE ALSO NOTED THAT SO FAR AS THE ASSESSING OFFICER S ADDITION OF LOW PROFITS ARE CONCERNED, THIS IS UNSUSTAINABLE IN LAW INASMUCH AS NEITHER HE COULD HAVE REJECTED THE BOOKS OF ACCOUNTS NOR HAD HE CORRECTLY COMPUTED THE PROFITS OF THE ASSESSE, WITHOUT INCOME OFFERED TO TAX DURING SURVE Y BEING TAKEN INTO ACCOUNT, AS IT SHOWED 3.95% PROFIT ON SALES AS AGAINST 2.71% PROFIT ON SALES SHOWN IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. BOTH THE ADD ITIONS WERE THUS DELETED. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 4. WE ARE OF THE CONSIDERED VIEW THAT THE UNACCOUNT ED EXPENDITURE ACCEPTED BY THE ASSESSE CANNOT BE CONSIDERED IN ISOLATION WI TH UNACCOUNTED INCOME ACCEPTED WITH THE ASSESSE. WHAT CAN BE BROUGHT TO T AX IS UNEXPLAINED EXPENDITURE AND AS LONG AS THE SAME IS EXPLAINED OU T OF THE INCOME OFFERED TO TAX BY THE ASSESSE, THE SAME CANNOT BE BROUGHT TO T AX AGAIN. AS FOR THE STATEMENT RELIED UPON BY THE ASSESSING OFFICER, NOTHING REALL Y TURNS ON THE SAME BECAUSE THE TAXABILITY IS NOT, AND CANNOT BE, ON THE BASIS OF A SURVEY RECORDED DURING THE SURVEY PROCEEDINGS UNDER SECTION 133A BUT BECAUSE O F THE ACCEPTED FACTUAL ELEMENTS EMBEDDED IN THE SURVEY STATEMENT. THERE IS NO DENIAL ABOUT THE EXPENDITURE BUT ALL THAT IS TO BE CONSIDERED IS WHE THER IN THE LIGHT OF THE UNACCOUNTED INCOME OFFERED TO TAX, CAN SUCH EXPENDI TURE BE CONSIDERED UNEXPLAINED. THE ANSWER, IN OUR CONSIDERED VIEW, IS IN NEGATIVE. AS REGARDS THE ITA NO967/AHD/2011 ASSESSMENT YEAR: 2007-08 PAGE 4 OF 4 REJECTION OF BOOKS OF ACCOUNTS AND COMPUTING THE PR OFITS ON THE BASIS OF LAST YEARS RESULTS, IT IS UNTENABLE IN LAW FOR THE SHOR T REASON THAT NO DEFECTS, BARRING THE LOW PROFITS SHOWN- EVEN IF THAT BE ACTUALLY SO, HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS SO AS TO WARRANT THE REJECTION TH EREOF. AS FOR THE DISCREPANCIES NOTICED DURING THE SURVEY PROCEEDINGS , THE APPROPRIATE ADJUSTMENTS HAVE BEEN MADE IN RESPECT OF THE SAME B Y BRINGING THE RELATED INCOME TO TAX. IN THESE CIRCUMSTANCES, AND WITHOUT THERE BEING ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFF ICERS RESORTING TO ESTIMATION OF PROFITS WAS WHOLLY UNWARRANTED. WE APPROVE THE A CTION OF THE CIT(A) ON THIS COUNT AS WELL. IN VIEW OF THESE DISCUSSIONS, AS ALS O BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 21 ST DAY OF JULY, 2015. SD/- SD/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 21 ST DAY OF JULY, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD