M/s. Shree Ram Metalic Industries, Surat V. The ACIT.,Cent.Circle-4, Surat

ITSSA 162/AHD/2011

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2865 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-01-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 22-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SAMPATH
• Keywords: Unexplained investment; Search and seizure; Revised return
• Section: 133A; 153A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.(SS)(A)NO. 162/AHD/2011 ( / ASSESSMENT YEAR : 2003-04 ) SHREE RAM METALIC INDUSTRIES, 3/1810, GHAMLAWAD, SHERI NO.1, SALABATPUTA, SURAT. / VS. THE ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4, SURAT. ./ ./ PAN/GIR NO. : AAKFS 0610 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. SAMPATH, A.R. / RESPONDENT BY : SHRI SANJAY AGRAWAL, CIT D.R. / DATE OF HEARING 09/01/2017 / DATE OF PRONOUNCEMENT 12/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- II, AHMEDABAD, DATED 13/12/2010 FOR THE ASSESSMENT YEAR (AY) 2003-04 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: (I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-II HAS ERRED IN DELETING THE ADDITION OF GROSS PROFIT OF RS.1,323/- AS MADE BY AO INSTEAD OF DELETING THE ADDITION MADE BY AO ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.26,462/- ON WHICH THE AO HAS ALREADY TAXED THE GROSS PROFIT IN THE HANDS OF THE APPELLANT. (II) WITHOUT PREJUDICE TO GROUND NO.1, THE LD.CIT(A)-II HAS ERRED IN SUSTAINING THE ACT OF AO IN MAKING ADDITION OF RS.26,462/- AS UNEXPLAINED INVESTMENT BECAUSE OF THE FACT THAT ON ONE HAND THE AO HAS CONSIDERED RS.26,462/- AS UNEXPLAINED INVESTMENT AND ON THE OTHER HAND HE HAS CONSIDERED THE SAME ITA NO.IT(SS) APPEAL NO.162/AHD/2011 SHREE RAM METALLIC INDUSTRIES VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2003-04 - 2 - AMOUNT OF RS.26,462/- AS UNRECORDED SALES ON WHICH HE HAS APPLIED GP RATE AND MADE ADDITION OF RS.1,323/- (III). THAT THE LD.CIT(A)-II HAS ERRED IN NOT DIRECTING THE AO TO DO TELESCOPING IN THE APPELLANTS CASE- - OF THE DISCREPANCY IF ANY REMAINING UNIDENTIFIED IN THE HANDS OF SHRI NAGINBHAI KAPADIA AND/OR SHRI ASHOKBHAI JARIWALA AS CATEGORICALLY MENTIONED BY THEM IN NOTES FILED WITH THEIR REVISED RETURN U/S. 153A STATING THAT THE CONDITIONAL DISCLOSURE MADE THEREIN IS A FIRST HAND APPROXIMATION WHICH MAY VARY WITHIN THE OVERALL AMOUNT DECLARED AT THE TIME OF ASSESSMENT PROCEEDINGS OR APPELLATE OR REVISION PROCEEDINGS AND - THE AMOUNT OF CONDITIONAL DISCLOSURE REMAINING SPECIFICALLY UNIDENTIFIED MAY BE TELESCOPED AGAINST ANY ADDITION OR DISALLOWANCE OF ANY EXPENSES OR DEDUCTION OR OTHERWISE MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE OR REVISION PROCEEDINGS IN THE HANDS OF FAMILY MEMBERS OR ANY GROUP CONCERNS FOR THE PERIOD COVERED UNDER THE NOTICE ISSUED U/S. 153A/153C OF THE ACT. 2. THE FACTS OF THE CASE ARE THE ASSESSEE FIRM IS ONE OF THE CONCERNS OF T.N. KAPADIA (TNK) GROUP COMPRISING OF TWO FAMILIES, VIZ. THE KAPADIA AND JARIWALAS, ENGAGED IN BUSINESS OF MANUFACTURE, TRADING AND ON 14/12/2005 AT THE RESIDENTIAL PREMISES OF THE SH. NAGINDAN T. KAPADIA AND SH. ASHOK H. JARIWALA OF TNK GROUP AND SURVEY ACTION U/S. 133A WERE CONDUCTED AT BUSINESS PREMISES OF THE ASSESSEE GROUP ON THE SAME DATE. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION AT THE RESIDENTIAL PREMISES OF SH. NAGINDAS T. KAPADIA AND SH. ASHOK H. JARIWALA, BOOKS OF ACCOUNTS/DOCUMENTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED AND THEIR AFTER A NOTICE U/S.153C OF THE I.T. ACT, WAS ISSUED AND WHICH WAS SERVED, WHICH IS PRESSED AS UNDER. 1. ACCOUNT NO. 01050065245, SBS NO.3439 REFLECTS THE UNACCOUNTED TURN-OVER CARRIED BY THE CONCERN FOR THE F.Y. 2002-03, AND EFFECTIVELY UPTO FEB. 2004 I.E. A.Y. 2004-05. THE TOTAL TURN-OVER OF THE CONCERN IS RS.17,07,499/-. THE PEAK AMOUNTS WAS RS.26,462/- F.Y. 2002-03 A.Y. 2003-04, RS.10,22,245/- IN F.Y. 2003-04, A.Y.2004-05. THEREFORE, YOU ARE REQUESTED TO SHOW CAUSE WHY A SUM OF RS.26,462/- FOR A.Y. 2003-04 FOR PEAK, AND SUM OF RS.9,95,783/- (RS.10,22,245/- RS.26,462/-) FOR A.Y. 2004-05 AS THE INCREMENTAL PEAK, SHOULD NOT BE ADDED AS UNEXPLAINED INVESTMENT ITA NO.IT(SS) APPEAL NO.162/AHD/2011 SHREE RAM METALLIC INDUSTRIES VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2003-04 - 3 - MADE IN BANK ACCOUNTS U/S.69 OF THE INCOME-TAX, 1961. FURTHER, THERE IS TURN-OVER OF RS.17,07,499/- DURING THE YEAR F.Y. 2003-04. FURTHER, ALSO SHOW CAUSE WHY THE GROSS PROFIT OF 5% ORIGINATING FROM THE ABOVE TRANSACTIONS SHOULD NOT BE ADDED TO YOUR TAXABLE INCOME. IT IS ALSO BROUGHT TO YOUR KIND NOTICE THAT THE PROFIT ON UNACCOUNTED TURN-OVER CAN NEVER BE COMPARED WITH THAT OF ACCOUNTED TURN-OVER. IT IS COMMON KNOWLEDGE THAT PROFIT ON UNACCOUNTED BUSINESS IS FAR HIGHER THAN THAT OF ACCOUNTED BUSINESS BECAUSE OF AVOIDANCE OF ALL TAXES, DUTIES, LEVIES AND GREATER RISK INVOLVED. THEREFORE, THE G.P. RATE ON UNACCOUNTED TURN-OVER IS ADOPTED AT REASONABLE 5% RATE, AND THE INCOME IS ESTIMATED AT RS.85,375/- FOR THE A.Y. 2004-05 AS PROPOSED TO BE ADDED. 3. THEREFORE, ASSESSEE FILED ITS REPLY AS UNDER: ..1.. YOUR HONOUR HAS ASKED US TO SHOW CAUSE AS TO WHY THE INCREMENTAL PEAKS AS REFLECTED IN THE BANK STATEMENT OF ACCOUNT NO.01050065045 (FORMER A/C. NO. 3439) WITH STATE BANK OF SAURASHTRA, SURAT SHOULD NOT BE ADDED AS UNEXPLAINED INVESTMENT AND IN THIS REGARD WE WOULD LIKE TO INFORM YOUR HONOUR THAT THE SAID ACCOUNT WAS MAINTAINED AND OPERATED BY SHRI NAGIBHAI KAPADIA, WHO IS AT THE HELM OF AFFAIRS OF THE GROUP USING THE NAME OF THE FIRM. AT PRESENT, HE IS UNABLE TO RECONCILE THE SAID WITH HIS RECORDS IN THE SHORT TIME CONSTRAINT GIVEN TO HIM AND THEREFORE IN ORDER TO AVOID LITIGATION AND BUY PERSONAL PEACE OF MIND, HE HAS VOLUNTARILY CONSIDERED THE SAME AS PART OF HIS DISCLOSURE OF INCOME STATEMENT. HOWEVER, SINCE THIS TRANSACTION WAS EXECUTED BY HIM WITHOUT CONSULTING THE PARTNERS OF THE FIRM, THE SAID BE TAXED IN HIS HANDS AND NOT IN THE NAME OF THE FIRM IN WHOSE NAME THE TRANSACTION HAD BEEN CARRIED OUT BY HIM. FURTHER, YOUR HONOUR MAY NOTE THAT THE BANK ACCOUNT REFLECTS THE DETAILS OF DEPOSITS OF SALE PROCEEDS AS WELL AS PAYMENT MADE FOR PURCHASE. HENCE, THE GROSS PROFIT EARNED THEREON HAS BEEN OFFERED TO TAX BY SHRI NAGINBHAI KAPADIA IN HIS COMPUTATION OF UNDISCLOSED INCOME STATEMENT. 4. ACCOUNT NO.01050065245, SBS, NO. 3439 REFLECTED UNACCOUNTED TURN-OVER CARRIED OUT BY THE CONCERN FOR THE F.Y. 2002-03, AND EFFECTIVELY UPTO FEBRUARY, 2004 I.E. A.Y. 2004-05. THE TOTAL TURN-OVER OF THE CONCERN IS RS.17,07,499/-. THE PEAK AMOUNT IS RS.26,462/- F.Y.2002-03 A.Y. 2003-04. THEREFORE, A SUM OF RS.26,462/- FOR A.Y. 2003-04 AND SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. THEREAFTER, AS PER THE BANK ACCOUNT STATEMENT ACCOUNT NO.01050065245, SBS, NO.3439 SALES TURN-OVER OF RS.26,462/- HAS BEEN ITA NO.IT(SS) APPEAL NO.162/AHD/2011 SHREE RAM METALLIC INDUSTRIES VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2003-04 - 4 - MADE IN F.Y. 2002-03, A.Y. 2002-03, A.Y. 2003-04 IN AN UNACCOUNTED MANNER. 6. IT CAN BE REASONABLE TAKEN THAT A GROSS PROFIT RATE OF 5% ORIGINATING FROM THE ABOVE TRANSACTIONS SHOULD BE DETERMINED AND ADDED TO THE TAXABLE INCOME. THIS IS BECAUSE THE PROFIT ON UNACCOUNTED TURN-OVER CAN NEVER BE COMPARED WITH THAT OF ACCOUNTED TURN-OVER AND THE FORMER ALWAYS EXCEEDS THE LATER. IT IS COMMON KNOWLEDGE THAT PROFIT ON UNACCOUNTED BUSINESS IS FAR HIGHER THAN THAT OF ACCOUNTED BUSINESS BECAUSE OF AVOIDANCE OF ALL TAXES, DUTIES, LEVIES, BANKING CHANNEL REQUIREMENT AND GREATER RISK INVOLVED. THEREFORE, THE G.P. RATE ON UNACCOUNTED TURN-OVER OF RS.26,462/- IS ADOPTED AT REASONABLE 5% RATE, AND THE INCOME IS ESTIMATED AT RS.1,323/- FOR THE A. A.Y. 2003-04, WHICH IS ADDED TO TAXABLE INCOME. 7. AGAINST THE SAID ASSESSMENT ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD.CIT(A), WHO PARTLY ALLOWED THE APPEAL. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND PAPERS FILED BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT REPRESENTATIVE (DR), IN OUR OPINION ACTION OF THE CIT(A) JUSTIFIED AS ONLY PEAK WAS ADDED AND NOT ALL DEPOSITS. THERE WERE NO SYSTEMATIC DEPOSITS AND WITHDRAWLS TO JUSTIFY ADDING GROSS PROFIT AND FOR GROSS PROFIT, IN ANY CASE, THE GROSS DEPOSITS WERE TO BE TAKEN AS TURNOVER, IF ASSESSEE HAD PROVED DEPOSITS FROM BUSINESS TURNOVER AND PURCHASES ON CREDIT, WHICH WAS NOT DONE IN TELESCOPING AMONG DIFFERENT ASSESSEES AND FOR DIFFERENT YEARS WAS NOT PERMISSIBLE UNDER THE INCOME-TAX ACT. ITA NO.IT(SS) APPEAL NO.162/AHD/2011 SHREE RAM METALLIC INDUSTRIES VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2003-04 - 5 - 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 12/01/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-II, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY