Sri. Shanthi Prasad R.V., Chamarajanagar V. ITO, Chamarajanagar

ITA 98/BANG/2011

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 101320 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAVANAN B JT
• Assessee Lawyers: RAVISHANKAR S V
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ABRAHAM P. GEOGE, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.98/BANG/2011 ASSESSMENT YEAR : 2007-08 SHRI SHANTHI PRASAD R.V., PROP. M/S. MAHAVIR TRADERS, CAR STREET, CHAMARAJANAGAR. PAN: ASDPS 0692R VS. THE INCOME TAX OFFICER, WARD 1, CHAMARAJANAGAR. APPELLANT RESPONDENT APPELLANT BY : SHRI RAVISHANKAR, S.V., ADVOCATE RESPONDENT BY : SHRI SARAVANAN B., JT. CIT(DR) DATE OF HEARING : 21.03.2016 DATE OF PRONOUNCEMENT : 31.03.2016 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 30.11.2010 OF CIT(APPEALS), MYSORE FOR THE ASSESSME NT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE HON'BLE CIT(A) ERRED IN ESTIMATING THE G/P @ 3.5% ON THE TURNOVER DECLARED AS AGAINST 2.45% DECLARED BY THE ASSESSEE WITHOUT APPRECIATING THAT THE G/P DECLARED WAS FAIR AND ITA NO.98/BANG/2011 PAGE 2 OF 6 REASONABLE AND COMPARED WITH THE RESULTS OF THE PAS T AND ALSO THE RESULTS DECLARED BY PERSONS IN SIMILAR TRADE. 2. THE HON'BLE CIT(A) ERRED IN NOT APPRECIATING TH AT THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNTS INCLUDING STOCK RECORDS AND THAT IN THE SCRUTINY ASSESSMENT THE LEA RNED A.O. DID NOT FIND ANY MISTAKE IN THE BOOKS OF ACCOUNTS NOR N OT IN THE STOCK RECORDS AND FURTHER THAT THE DEFICIT NOTICED AT THE TIME OF SURVEY RELATED ONLY TO THE TURNOVER IN PAINTS WHICH FORMED ONLY A INTEGRAL PART OF THE TOTAL SALES AS CAN BE SEEN FROM THE TAB LE ANNEXED. 3. THE HON'BLE CIT(A) FAILED TO APPRECIATE THAT AS THE STOCK BOOK RELATING TO CEMENT AND STEEL WAS MAINTAINED AN D HAD BEEN EXAMINED AND NO DISCREPANCIES WAS NOTICED AND THAT AS THE BULK OF THE TURNOVER RELATED TO THESE ITEMS THE BOOKS OF ACCOUNTS COULD NOT BE REJECTED ONLY BECAUSE OF CERTAIN DISCREPANCI ES IN THE STOCK STATEMENT OF PAINTS NOTICED AT THE TIME OF SURVEY A ND WITHOUT APPRECIATING THAT IN RESPECT OF PAINTS THE TURNOVER WAS NOT SUBSTANTIAL AND THAT THE ITEMS OF PAINTS ARE TOO MA NY WHICH COULD NOT BE RECONCILED AT THE TIME OF SURVEY. 3. THERE WAS A SURVEY CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 10.8.2006. DURING THE COURSE OF SURVEY, IT WAS FOU ND THAT FOR THE A.Y. 2005-06, 2006-07 ETC., THE ASSESSEE HAD DEBTORS OUT SIDE THE BOOKS. IT WAS INFERRED THAT DEBTORS OUTSIDE THE BOOKS APPARENTLY REPRESENT SALES MADE OUTSIDE THE BOOKS. THE ASSESSEE ADMITTED THE DEBTO RS OUTSIDE THE BOOKS AND OFFERED ADDITIONAL INCOME ON ACCOUNT OF SUCH DE BTORS. 4. APART FROM THE DEBTORS OUTSIDE THE BOOKS, IT WAS ALSO NOTICED THAT THERE WAS DEFICIT STOCK OF CEMENT. THE DEFICIT WAS ESTIMATED TO BE RS. ONE LAKH. THE ASSESSEE ADMITTED THIS DEFICIT IN THE CE MENT STOCK AND AGREED TO OFFER THE SAME AS ADDITIONAL INCOME. THE ASSESSE E UNDERTOOK TO DISCLOSE GP @ 4% OF TURNOVER. HOWEVER, IN THE RETURN FILED AFTER THE END OF PREVIOUS ITA NO.98/BANG/2011 PAGE 3 OF 6 YEAR, THE ASSESSEE DID NOT OFFER THE INCOME BY CONS IDERING THE GP @ 4%. THE AO THEREFORE MADE ADDITION ON ACCOUNT OF DEFICI T STOCK OF CEMENT OF RS.ONE LAKH AND ESTIMATION OF GP @ 4%. THE ASSESSE E DID NOT CONTEST THE ADDITION REGARDING THE DEFICIT CEMENT STOCK OF RS.ONE LAKH, HOWEVER THE ASSESSEE CHALLENGED THE ACTION OF THE AO REGARDING THE ADDITION BY ESTIMATING GP @ 4%. THE ASSESSEE CONTENDED BEFORE THE CIT(APPEALS) THAT WHEN THERE WAS NO DISCREPANCY IN THE BOOKS OF ACCOUNT AND THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT, THEN THERE I S NO JUSTIFICATION ESTIMATING THE GP OF THE ASSESSEE OVER AND ABOVE TH E GP ADMITTED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. 5. THE CIT(APPEALS) DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE AO. 6. BEFORE US, THE LD. AR OF THE ASSESSEE HAS REITER ATED ITS CONTENTION THAT THE AO WITHOUT FINDING ANY DEFECT OR DISCREPAN CY IN THE BOOKS OF ACCOUNT OF ASSESSEE HAS ESTIMATED THE GP @ 4% AS AG AINST THE GP ADMITTED AND DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT @ 2.45%. HE HAS VEHEMENTLY CONTENDED THAT WHEN THE BOOKS OF ACCOUNT ARE NOT REJECTED, THEN THE AO HAS NO JURISDICTION OR AUTHOR ITY TO ESTIMATE THE GP OF THE ASSESSEE. 7. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT DURING THE COURSE OF SURVEY, THE ASSESSEE HIMSELF HAS UNDERTOOK TO OF FER THE INCOME BY CONSIDERING THE GP @ 4%, HOWEVER IN THE RETURN OF I NCOME THE ASSESSEE ITA NO.98/BANG/2011 PAGE 4 OF 6 DID NOT HONOUR HIS UNDERTAKING MADE DURING THE SURV EY. HE HAS RELIED ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT APART FROM THE DEFICIT OF STOCK OF CEMENT WHICH WAS DETECTED DURING THE SURVEY PROCEED INGS, THERE IS NO OTHER DISCREPANCY EITHER IN THE STOCK OR IN ANY OTH ER ITEM DURING THE SURVEY FOR THE YEAR UNDER CONSIDERATION. FURTHER, THE SUR VEY WAS CONDUCTED IN THE MIDST OF THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR AND THEREFORE WHEN THE ASSESSEE HAS PREPARED ITS FINAL ACCOUNTS AS ON 31.3.2007, THEN THE BOOKS RESULTS OF THE ASSESSEE WAS TO BE EXAMINED BY THE AO WITHOUT PLACING SOLE RELIANCE ON THE STATEMENT MADE BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS. WE FIND THAT THE AO HAS NOT BR OUGHT ON RECORD ANY DISCREPANCY OR ANY OTHER MATERIAL DISCLOSING OR IND ICATING ANY INCOME WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. FURTHER, THE AO HAS NOT REJECTED THE BOOK RESULTS AND THEREF ORE MERELY ON THE BASIS OF THE STATEMENT RECORDED DURING THE SURVEY U/S. 13 3A, THE AO IS NOT PERMITTED TO MAKE THE ADDITION BY ESTIMATING THE GP . 9. IN THE CASE OF CIT V. S. KHADER KHAN SON, 210 TAXMAN 248 (SC) , THE HON'BLE SUPREME COURT HAS UPHELD THE JUDGMENT O F THE HON'BLE MADRAS HIGH COURT IN 300 ITR 157 WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT THE STATEMENT RECORDED IN THE SURVEY OPERATION IS N OT A CONCLUSIVE PIECE OF EVIDENCE AND CONSEQUENTLY THE ADDITION MADE SOLELY ON THE BASIS OF ITA NO.98/BANG/2011 PAGE 5 OF 6 STATEMENT RECORDED DURING THE SURVEY WITHOUT ANY SU PPORTING EVIDENCE IS NOT JUSTIFIED. 10. IN VIEW OF THE ABOVE SAID PROPOSITION OF LAW, W HEN THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT ASSESSE E HAS SUPPRESSED THE INCOME AND FURTHER WHEN THE BOOKS OF ACCOUNT OF TH E ASSESSEE ARE NOT REJECTED BY THE AO, THEN THE ADDITION MADE BY THE A O BY ESTIMATING GP OF THE ASSESSEE IS NOT JUSTIFIED. WE FURTHER NOTE THA T GP DECLARED BY THE ASSESSEE AS PER BOOKS OF ACCOUNT IS VERY MUCH IN LI NE OF GP FOR THE EARLIER AS WELL AS SUBSEQUENT ASSESSMENT YEARS. ACCORDINGL Y, WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2016. SD/- SD/- ( ABRAHAM P. GEORGE ) (VIJA Y PAL RAO ) ACCOUNTANT MEMBER J UDICIAL MEMBER BANGALORE, DATED, THE 31 ST MARCH, 2016. /D S/ ITA NO.98/BANG/2011 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.