Om Prakash Vipin Kumar, V. ACIT, Circle-16,

ITSSA 153/DEL/2006

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3119 (ITAT-DELHI)
• Duration Of Justice: 11 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 31-05-2017
• Assessment Year: misc
• Appeal Filed On: 25-05-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained investment; Unexplained expenditure; Document seized; Block assessment; Documents seized
• Section: 142(1); 132

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH G , NEW DELHI BEFORE : S MT. DIVA SINGH , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER IT (SS) A NO. 153/DEL./2006 BLOCK PERIOD : 01.04.1997 TO 29.04.2003 OM PRAKASH VIPIN KUMAR, 3501, CHOWRI BAZAR, DELHI. PAN AAAFO5543N (APPELLANT) VS. ACIT, CENTRAL CIRCLE - 16, NEW DELHI. (RESPONDENT) A PPELLANT BY SH. M.P. RASTOGI, ADVOCATE RE SPONDENT BY SH. S.S. RANA, CIT/DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - II, NEW DELHI DATED 30.03.2006 FOR THE BLOCK PERIOD 01.04.1997 TO 29.04.2003. THE ASSESSEE HAS RAISED FOLLOWING REVISED GROUNDS OF APPEAL : 1) THAT THE AUTHORITIES BELOW, WHILE FRAMING ASSESSMENT /S 158BC OF THE INCOME - TAX ACT, 1961 (THE ACT), OUGHT TO HAVE DETERMINED THE UNDISCLOSED INCOME ON THE BASIS OF THE SEARCHED MATERIAL AND CONSEQUENTLY THE ADDITION OF RS.5,99,770/ - BEING THE GROSS PROFIT ESTIMATE D, THEREBY APPLYING THE GP RATE OF 10% ON SALE OF RS.59,97,706/ - , IS ARBITRARY, UNJUST AND OUGHT TO HAVE DETERMINED THE INCOME AFTER DEDUCTING THE EXPENSES FROM SALES AS RECORDED IN SEIZED MATERIAL. DATE OF HEARING 31.05.2017 DATE OF PRONOUNCEMENT 10 .07.2017 IT(SS)A NO. 153/DEL./2006 2 2) THAT THE ADDITION OF RS.5,00,000/ - BEING THE INVESTME NT ALLEGED TO HAVE BEEN MADE BY THE PARTNER MR. VIPIN M, GUPTA TO START THE UNACCOUNTED BUSINESS IN THE HANDS OF THE APPELLANT, WHILE FRAMING ASSESSMENT U/S 158BC OF THE ACT, IS ARBITRARY, UNJUST AND AT ANY RATE VERY EXCESSIVE. 2. THE BRIEF FACTS OF THE C ASE ARE THAT A SEARCH ACTION WAS CONDUCTED U/S. 132 OF THE INCOME TAX ACT ON ASSESSEE FIRM ON 29.04.2003. SIMULTANEOUSLY, SEARCH WAS ALSO CONDUCTED AT THE RESIDENCE OF PARTNER SHRI VIPIN M. GUPTA AT B - 1/52, SECOND FLOOR MALVIYA NAGAR, NEW DELHI. SEPARATE B LOCK ASSESSMENTS WERE FRAMED IN BOTH THE CASES. DURING THE SEARCH PROCEEDINGS, INCRIMINATING MATERIALS WERE FOUND AND SEIZED MARKED AS ANNEXURE A - 1 TO A - 10. THEREAFTER, A NOTICE U/S. 158BC WAS ISSUED ON 13.08.2004 AND SUBSEQUENTLY, NOTICES U/S. 143(2) AND 142(1) WERE ALSO SENT TO THE ASSESSEE. THE PARTNERSHIP FIRM CAME INTO EXISTENCE IN JANUARY, 2000 AND THERE WERE TWO PARTNERS, NAMELY, SH. VIPIN M. GUPTA, AND SMT. SUNITA AGARWAL W/O SH. RAVINDRA AGARWAL, EACH HAVING 50% SHARE IN PROFIT AND LOSS. THE PARTNE RSHIP FIRM WAS ENGAGED IN TRADING OF HARDWARE GOODS, MACHINE TOOLS AND MILL STORES ETC. DURING THE COURSE OF SEARCH, IT WAS FURTHER FOUND THAT THE ASSESSEE WAS ENGAGED IN PURCHASE AND IT(SS)A NO. 153/DEL./2006 3 SALES ACTIVITIES OUTSIDE THE BOOKS OF ACCOUNT. SOME MATERIALS WERE ALSO FOUND ON THE BASIS OF WHICH, THE AO AFTER CALCULATING SUCH TRANSACTIONS, INFORMED THE ASSESSEE THAT THERE WAS TOTAL UNACCOUNTED SALES AT RS.59,97,706/ - , UNACCOUNTED PURCHASES OF RS.55,14,529/ - AND UNACCOUNTED EXPENSES OF RS.6,02,624/ - . THE AO ASKED THE ASS ESSEE TO EXPLAIN THE SAME. IN THIS REGARD, THE ASSESSEE AGREED THAT THERE WERE UNDISCLOSED SALES OF RS.58.53 LACS, UNACCOUNTED PURCHASES OF RS.53.72 LACS AND UNEXPLAINED EXPENDITURE OF RS.5.70 LACS. FURTHER THE AO ASKED THE ASSESSEE TO EXPLAIN THE GENUINEN ESS OF THE EXPENSES AND TO PROVE THAT THESE WERE INCURRED FOR BUSINESS PURPOSES AND WHY THE UNDISCLOSED SALES SHOULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE FIRM. HE ALSO DESIRED TO EXPLAIN AS TO WHY A SUITABLE ESTIMATE OF INVESTMENT MADE IN SUCH BUSIN ESS SHOULD NOT BE MADE. THE ASSESSEE FILED REPLY, BUT THE AO WAS NOT SATISFIED AND ESTIMATED THE GROSS PROFIT OF RS.11,99,540/ - REPRESENTING TO 20% ON THE UNDISCLOSED SALES. IN ADDITION TO THIS, THE AO ALSO ESTIMATED THE INVESTMENT OF RS.5,00,000/ - FOR MAK ING SUCH UNACCOUNTED SALES. IN THIS WAY, THE AO ASSESSED TOTAL UNDISCLOSED INCOME OF RS.16,99,540/ - (RS.11,99,540 + RS.5,00,000). AGGRIEVED BY THIS IT(SS)A NO. 153/DEL./2006 4 ADDITION, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY AND SUBMITTED DETAILED WRITTEN SUBMISSI ONS. HE OBJECTED TO APPLICATION OF GP RATE OF 20% STATING THAT THE FIRM HAD BEEN ASSESSED IN LAST 10 YEARS AT GP RATE OF ABOUT 10%. HE ALSO ARGUED THAT AFTER APPLICATION OF GP RATE, THE EXPENSES RECORDED SHOULD ALSO BE ALLOWED AS DEDUCTION. THE WRITTEN SUB MISSIONS WERE SENT TO THE AO FOR REMAND REPORT WHICH WAS SUBMITTED BY THE AO. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REMAND REPORT OF AO, SEIZED DOCUMENTS AND ALL OTHER MATERIAL FACTS, REDUCED THE GP RATE TO 10%, BUT CONFIRMED TH E ADDITION OF RS.5,00000/ - MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 3. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT IN BLOCK ASSESSMENT, THE AO HAS NO POWER UNDER THE LAW TO DEVIATE FROM THE SEIZED MATERIAL. IF THE SALES AS PER SEIZED MATERIAL ARE TO BE ACCEPTED, THERE IS NO REASON AS TO WHY THE EXPENSES SHOULD NOT BE ACCEPT ED. THE SEIZED MATERIAL FOUND FROM THE RESIDENCE OF THE PARTNER SHOWS INVESTMENT MADE BY THE PARTNER IN SUCH ACTIVITIES IT(SS)A NO. 153/DEL./2006 5 AT RS.4.98 LAKH. THE ASSESSING OFFICER TAKES THIS AMOUNT AS UNEXPLAINED IN THE ABSENCE OF SOURCE AND TREATS THE AMOUNT OF RS.5 LAKH AS U NDISCLOSED INCOME. THE LD. CIT(A) HAS WRONGLY AFFIRMED THE SAME. SINCE THE AMOUNT OF INVESTMENT OF 5 LAKH HAS BEEN MADE BY THE PARTNER AND ALSO FOUND FROM THE RESIDENCE, THEREFORE THE SAME SHOULD HAVE BEEN CONSIDERED IF NECESSARY IN THE HANDS OF THE PARTNE R . IT WAS SUBMITTED THAT THE BLOCK ASSESSMENT DOES NOT CONFER ANY POWER OF ESTIMATION AND THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE MADE ANY ESTIMATION OF GP RATE WHEN THE SEIZED MATERIAL DECLARES UNRECORDED SALES, PURCHASE AND EXPENSES. WHEN THE SE IZED MATERIAL ITSELF GIVES THE EXTENT OF PROFIT, THERE IS NO NEED OF ESTIMATION, AS DONE IN THE INSTANT CASE. TO SUM UP, THE LD. COUNSEL SUBMITTED THAT MATERIAL FOUND FROM THE RESIDENCE CANNOT BE CONSIDERED IN THE HANDS OF THE FIRM; THAT THE AUTHORITIES BE LOW SHOULD HAVE RELIED ALL THE THREE FIGURES AND NOT ONLY ONE; THAT THE AUTHORITIES BELOW ADMITTED THE INVESTMENT OF RS.5 LAKHS BY VIPIN M GUPTA BUT TREATS THE INCOME OF THE FIRM IN THE ABSENCE OF SOURCE, WHICH IS NOT CORRECT AND IT SHOULD HAVE BEEN CONSID ERED IN THE HANDS OF THE PARTNER; THAT THE GROSS PROFIT IS NOT TAXABLE IT(SS)A NO. 153/DEL./2006 6 INCOME AND AFTER GROSS PROFIT EXPENSES AS FOUND DURING THE SEARCH SHOULD HAVE BEEN ALLOWED; THAT THERE CANNOT BE ANY ESTIMATE OF GROSS PROFIT RATE IN THE BLOCK ASSESSMENT WHICH SHOULD B E BASED ON THE SEIZED MATERIAL. IT WAS ALSO SUBMITTED THAT THE LD. CIT(A) HAS REDUCED THE GROSS PROFIT TO 10%, BUT HAS NOT CONSIDERED THE EXPENSES AS DECLARED IN THE SEIZED MATERIAL. HE, ACCORDINGLY, URGED FOR DELETION OF ADDITIONS SUSTAINED BY THE LD. CIT (A). 4. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD. CIT(A) AND RELIED ON THE FOLLOWING CASE LAWS WITH RESPECT TO THE ADDITION MADE ON ACCOUNT OF G ROSS PROFIT : (I). SMT. DAYAWANTI VS. CIT, 75 TAXMANN.COM 308 (DEL.) (II). CIT VS. CHADH A AUTOMOBILES(INDIA) 13 TAXMANN.COM 152. (III). KACHWALA GEMS VS. CIT, 158 TAXMAN 71(SC) 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD AND WE FIND NO JUSTIFICATION TO DISTURB THE CONCLUSIONS REACHED BY THE LD. CIT(A) IN THE IMPUGNED ORDER ON THE ISSUES UNDER CONSIDERATION. THE LD. IT(SS)A NO. 153/DEL./2006 7 CIT(A) HAS GIVEN COGENT REASONS WHILE DECIDING THESE ISSUES OBSERVING AS UNDER : 4.3 REGARDING GP RATE IT WAS STATED THAT NO GP RATE FOR THE YEAR 1997 - 98 WAS GIVEN SINCE THE FIRM DID NOT EXIST IN THIS ASSESSMENT YEAR. IT WAS FURTHER ARGUED THAT EXPENSES SHOULD BE ALLOWED AND GP RATE OF ONLY 10% SHOULD BE APPLIED IF NECESSARY AND UNRECORDED SALES FOUND FROM THE RESIDENCE FROM VIPIN M. GUPTA NEED NOT TO BE CONSIDERED IN THIS ASSESSMENT. THE A.O. HAS RIGHTLY ESTIMATED THE UNACCOUNTED SALES AFTER TAKING INTO ACCOUNT THE MATERIAL FOUND FROM THE RESIDENCE OF THE PARTNER AS THESE SALES RELATE TO THE FIRM. I DO NOT FIND ANY FORCE IN THE ARGUMENT THAT THESE SALES SHOULD BE CONSIDERED IN THE PARTNER'S HAND. THE NEXT POINT IS TO THE APPLICATION OF GP RATE. THE ASSESSING HAS NO BASIS FOR APPLYING GP RATE OF 20% AS AGAINST EVIDENCE OF APPLICATION OF GP RATE OF 10% IN THE ASSESSEE'S OWN CASE IN THE EARLIER YEARS. I, THEREFORE AGREE WITH ASSESSEE THAT THE GP RATE OF 10% ONLY SHOULD BE APPLIED. ON THIS BASIS THE UNDISCLOSED IN COME COMES TO RS. 5,99,770/ - ON SALE OF RS.59,97,706/ - . HOWEVER, NO FURTHER ALLOWANCE IS TO BE ALLOWED TO THE APPELLANT FOR EXPENSES AS CLAIMED BY IT. THE ASSESSEE GETS PART RELIEF IN THIS REGARD. THE ASSESSING OFFICER ESTIMATES THAT THE ASSESSEE MUST HAVE INVESTED SOME AMOUNT IN SUCH PURCHASE AND SALES BUSINESS AND HE TOOK SUCH AMOUNT AT RS, 5 LAKHS. IN THIS REGARD THE ASSESSEE FILED WRITTEN SUBMISSIONS AND IN SUCH SUBMISSIONS IT IS STATED THAT THE SEIZED RECORD ITSELF CONTAINED THAT VIPIN M. GUPTA HAD INT RODUCED THE SUM OF RS. 4.98 LAKHS TO SOURCE SUCH BUSINESS. THE AMOUNT OF RS. 5 LAKHS HAS BEEN TAKEN BY THE ASSESSING OFFICER FROM THE SEIZED MATERIAL. THE ASSESSEE'S AR MAINLY HAD STRESSED ON TWO POINTS. FIRSTLY THE SEIZED MATERIAL ITSELF PROVES THAT THE A MOUNT OF RS. 5 LAKHS HAS BEEN INTRODUCED BY VIPIN M. GUPTA. HE FURTHER ARGUES THAT THE ASSESSING OFFICER IS TAKING THE AMOUNT OF RS. 5 LAKHS FROM THE SEIZED MATERIAL THERE IS NO REASONS AS TO WHY HE SHOULD NOT BELIEVE THE INTRODUCTION OF RS. 5 LAKHS BY VIP IN M. GUPTA AS IT(SS)A NO. 153/DEL./2006 8 EXPLAINED IN THE SEIZED MATERIAL. SECONDLY NOTHING HAS BEEN FOUND DURING SEARCH THAT THERE IS ANY INVESTMENT IN SUCH BUSINESS ACTIVITIES AND IN THE ABSENCE OF ANYTHING FOUND DURING SEARCH THERE CAN NOT BE ANY ADDITION IN BLOCK ASSESSMENT BAS ED ON IDEAS, ESTIMATES AND REASONABILITY. 4.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IT IS CLAIMED BY THE APPELLANT THAT ONE OF THE PARTNER SH. VIPIN M. GUPTA HAD INTRODUCED THE SUM OF RS. 4.98 LAKHS TO START THE UNACCOUNTED BUSINESS. BU T, WHAT IS THE SOURCE OF THE CASH IN HIS HANDS HAS NOT BEEN EXPLAINED. THE UNACCOUNTED BUSINESS IS ALSO IN THE SAME ITEMS AS DEALT IN BY THE FIRM. SO, IT CAN BE SAFELY CONCLUDED THAT IT WAS THE FIRM WHICH WAS DOING THE UNACCOUNTED BUSINESS, OF COURSE THROU GH ITS PARTNERS. THEREFORE, I HOLD THAT IT IS FIRM'S UNACCOUNTED MONEY WHICH HAS BEEN UTILIZED FOR MAKING INVESTMENT IN UNRECORDED PURCHASES. THEREFORE, THE ADDITION OF RS. 5 LACS IS CONFIRMED. 6. FROM THE AFORESAID FINDINGS OF THE LD. CIT(A), WE FIND TH AT THE FIRST APPELLATE AUTHORITY HAS MADE A GOOD REASONED ORDER WHICH NEEDS NO INTERFERENCE . THE ASSESSEE COULD NOT BE ABLE TO REBUT THE REASONING GIVEN BY THE LD. CIT(A) FOR APPLYING THE G.P. RATE OF 10% AND ALSO SUSTAINING THE ADDITION OF RS.5 LAKHS ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE IN UNACCOUNTED BUSINESS. THE ASSESSEE ITSELF ADMITTED UNACCOUNTED PURCHASES AND SALES, BUT HAD NOT SUBMIT TED ANY REVISED TRADING ACCOUNT BEFORE THE AUTHORITIES BELOW INCORPORATING SUCH UNACCOUNTED PURCHASES AND SALES. THE SOURCE OF INVESTMENT IN UNACCOUNTED SALES COULD ALSO NOT BE PROVED. THEREFORE, FOR WANT OF ANY IT(SS)A NO. 153/DEL./2006 9 MATERIAL CONTRARY TO THE FINDINGS REACHED BY LD. CIT(A), WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE IMPUGNED ORDER ON THESE ISSUES. ACCORDINGLY, THE APPEAL OF THE ASSESSEE HAS NO MERITS AND IS LIABLE TO FAIL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.07.2017 . SD/ - SD/ - ( DIVA SINGH) ( L.P. SAHU ) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 10.07.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI