DCIT, Ernakulam V. M/s Cosmo Pharama, Thrissur

ITSSA 145/COCH/2004

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7680 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2012
• Assessment Year: misc
• Appeal Filed On: 17-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: K K CHANDRASEKHARAN
• Keywords: Peak credit
• Section: 143(3); 132; 2

Judgement Text

1 ITSS 145/COCH/2004 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T(SS)A NO.145/COCH/2004 (BLOCK PERIOD 01-04-1988 TO 04-08-1998) DY.CIT, CENT.CIR.2 VS M/S COSMO PHARMA ERNAKULAM ERINJERI ANGADI, TRICHUR PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VIJAYAPRABHA RESPONDENT BY : SHRI K.K. CHANDRASEKHARAN DATE OF HEARING : 16-02-2012 DATE OF PRONOUNCEMENT : -03-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI DATED 29-09-2004 FOR THE BLO CK PERIOD 01-04-1988 TO 04-08-1998. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS. 1,79`,929/-, RS.1,56,454/-, RS.1,49,395/- AND RS.1,14,706/- TOWA RDS INFLATED EXPENDITURE FOR THE ASSESSMENT YEARS 1994-95, 1995-96, 1996-97 AND 1997 -98, RESPECTIVELY AND RS.2,79,363 EACH FOR ASSESSMENT YEARS 1994-95 AND 1995-96, RS.1 5,720 FOR ASSESSMENT YEAR 1996- 97, RS.4,40,416 FOR ASSESSMENT YEAR 1997-98 AND RS. 9,38,019 FOR ASSESSMENT YEAR 1998- 99 ON ACCOUNT OF INFLATION IN OFFICE EXPENDITURE IN CLUDING INTEREST. 3. SMT. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT DURI NG THE COURSE OF SEARCH OPERATION, THE MANAGING PARTNER OF THE FIRM, SHRI J OY THOMAS WAS EXAMINED U/S 132 OF 2 ITSS 145/COCH/2004 THE ACT. IN THE STATEMENT HE ADMITTED THAT THERE W AS INFLATION IN THE EXPENDITURE. THEREFORE, THE COMMISSIONER OF INCOME-TAX(A) IS NOT CORRECT IN DELETING THE ADDITION. ON A QUERY FROM THE BENCH AS TO AT WHICH PART OF TH E STATEMENT THE MANAGING PARTNER ADMITTED THAT THE EXPENDITURE WAS INFLATED, THE LD. DR STATED THAT IN RESPONSE TO QUESTION NO.6 (PAGE NO.5 OF THE PAPER BOOK) THE MAN AGING PARTNER ADMITTED THAT HE RECEIVED MONEY FROM THE INFLATED ACCOUNT UNDER THE HEAD TRAVELLING EXPENSES AND NOT FROM THE COMMISSION. THE LD.DR SUBMITTED THAT THIS ANSWER IS EQUALLY APPLICABLE FOR COMMISSION ALSO. 4. ON THE CONTRARY, SHRI K.K. CHANDRASEKHARAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO STATEMENT U/S 132 ADMITTING THE INFLATION OF COMMISSION. THEREFORE, THE COMMISSIONER OF INCOME- TAX(A) HAS RIGHTLY DELETED THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS IS A BLOCK ASSE SSMENT U/S 158BC OF THE ACT. THEREFORE, THE ASSESSING OFFICER HAS TO CONFINE HIM SELF ONLY TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION AND THE INFORMATION AVAILABLE ON RECORD WHICH IS RELATABLE TO THE MATERIAL FOUND DURING THE COURSE O F SEARCH OPERATION. THOUGH THE REVENUE CLAIMS THAT THE MANAGING PARTNER ADMITTED I NFLATION OF COMMISSION IN A STATEMENT U/S 132 OF THE INCOME-TAX ACT, THE LD.DR COULD NOT PINPOINT ANYTHING FROM THE STATEMENT RECORDED FROM THE MANAGING PARTNER. THE QUESTION AND ANSWER REFERRED BY THE LD.DR REFERS TO THE TRAVELLING EXPENSES INFLATE D BY COSMOS PHARMA AND IT DOES NOT RELATE TO COMMISSION. IN THE ABSENCE OF ANY MATERI AL, THIS TRIBUNAL IS OF THE OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY DELET ED THE ADDITION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOM E-TAX(A). ACCORDINGLY THE SAME IS CONFIRMED. 3 ITSS 145/COCH/2004 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION ON ACCOUNT OF UNACCOUNTED SALES. 7. WE HAVE HEARD THE LD.DR AND LD.REPRESENTATIVE FO R THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE PROFIT RATIO ON ACCOUNT OF S ALES WAS 10%. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) FIXED THE SAME AT 8%. THE PROFIT RATIO IS NOT A FIXED FIGURE. THE PROFIT WOULD FLUCTUATE DEPENDING UPON VARIOUS FACTORS. THEREFORE, IT IS FOR THE LOWER AUTHORITIES TO CONSIDER THE RELEVANT FACT ORS WHICH PREVAILED AT THE RELEVANT POINT OF TIME INCLUDING THE PROFIT RATIO DECLARED B Y THE ASSESSEE FOR THE EARLIER PERIOD FOR THE PURPOSE OF FIXING THE PROFIT. THE COMMISSIONER OF INCOME-TAX(A) AFTER CONSIDERING THE RELEVANT FACTORS FIXED THE PROFIT AT 8% OF THE UNACCOUNTED SALES. IN THE ABSENCE OF ANY MATERIAL, THIS TRIBUNAL DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A). ACCORDINGLY HIS ORDER ON THIS ISSUE IS CONFIRMED. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS. 12,99,842. 9. SMT. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE PEAK CREDIT TO THE EXTENT OF RS.12,99,842 WAS ADDED AS UNDISCLOSED INCOME FOR TH E ASSESSMENT YEAR 1995-96. THE ASSESSEE HAS ADVANCED VARIOUS AMOUNTS TO THE WORKER S BY WAY OF COMMISSION. ACCORDING TO THE LD.DR, THE PAYMENTS MADE WERE OUTS IDE THE BOOKS OF ACCOUNT. THEREFORE, THE PEAK OF THE ADVANCES HAS TO BE ADDED AS UNDISCLOSED INCOME. 10. ON THE CONTRARY, SHRI K.K. CHANDRASEKHARAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE OUTGOINGS TOWARDS ADVANCE PAYMENT TO WORKERS AGAINST COMMISSION, ETC. THESE PAYMENTS WE RE SUBSEQUENTLY ADJUSTED AND PERIODICAL ENTRY IN THE BOOKS OF ACCOUNT WAS MADE. THE ASSESSING OFFICER HIMSELF ADMITTED THAT THE PAYMENTS WERE SUBSEQUENTLY RECEIV ED BACK. THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE IN THE REG ULAR ASSESSMENT COMPLETED U/S 143(3) FOR ASSESSMENT YEAR 1995-96. ACCORDING TO T HE LD.REPRESENTATIVE THESE ARE ALL NET 4 ITSS 145/COCH/2004 CREDITS OR DEBITS WHICH WERE REFLECTED IN THE RESPE CTIVE FINAL ACCOUNTS OF THE RESPECTIVE YEAR, THEREFORE, IT CANNOT BE SUBJECTED TO BLOCK AS SESSMENT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSE SSING OFFICER MADE ADDITION OF RS.12,99,842 TOWARDS PEAK CREDIT. IN FACT, IT IS N OT CREDIT BUT IS DEBIT TOWARDS PAYMENT OF COMMISSION ADVANCE PAYMENT, ETC. WHEN THE ASSES SING OFFICER EXAMINED THE PAYMENTS FOR THE ASSESSMENT YEAR 1995-96 IN THE REG ULAR COURSE OF ASSESSMENT U/S 143(3), THIS CANNOT BE SUBJECT MATTER OF BLOCK ASSE SSMENT IN PROCEEDINGS U/S 158BC OF THE ACT. THEREFORE, THE COMMISSIONER OF INCOME-TAX (A) HAS RIGHTLY DELETED THE ADDITION. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE COMMISSIONER OF INCOME- TAX(A). ACCORDINGLY WE CONFIRM THE ORDER OF THE CO MMISSIONER OF INCOME-TAX(A) ON THIS ISSUE. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MARCH, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 09 TH MARCH, 2012 PK/- COPY TO: 1. THE DY.C.I.T., CENT.CIR.2, ERNAKULAM 2. M/S COSMO PHARMA, ERINJERI ANGADI, TRICHUR 3. THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH