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

ITSSA 163/AHD/2011

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2854 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SAMPATH
• Keywords: Unexplained investment; Unexplained expenditure; Search and seizure; Loose papers; Document seized; Peak credit
• Section: 133A; 69

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. 163/AHD/2011 ( / ASSESSMENT YEAR : 2004-05 ) M/S. SHREE RAM METALIC INDUSTRIES 3/1810, GHAMLAWAD, SHERI NO.1, SALABATPURA, 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 13/01/2017 / 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) 2004-05 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.51,112/- (OUT OF RS.1,30,765)AS MADE BY AO INSTEAD OF DELETING THE ADDITION MADE BY AO ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.9,95,783/- 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.9,95,783/- (RS.10,22,245 - RS,26,242) AS UNEXPLAINED INVESTMENT BECAUSE OF THE FACT THAT ON ONE HAND THE AO HAS CONSIDERED RS.9,95,783/- AS UNEXPLAINED INVESTMENT AND ON THE OTHER HAND HE ITA NO.IT(SS) APPEAL NO.163/AHD/2011 M/S. SHREE RAM METALIC IND. VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2004-05 - 2 - HAS CONSIDERED THE SAME AMOUNT OF RS.10,22,245/- (RS.9,95,783/- + RS. 26,242/-) AS UNRECORDED SALES ON WHICH HE HAS APPLIED GP RATE AND MADE ADDITION THEREOF IN THE HANDS OF THE APPELLANT. (III). WITHOUT PREJUDICE TO GROUND NO.1, THE LD.CIT(A)-II HAS ERRED IN GIVING WRONG REASON FOR DELETING THE ADDITION MADE BY AO ON ACCOUNT OF UNEXPLAINED PURCHASES OF RS.1,06,920/- WITHOUT CONSIDERING THE FACT THAT- - THE SAME IS NOT THE AMOUNT OF UNEXPLAINED PURCHASE BUT IS ACTUALLY UN- RECONCILED SALES ON WHICH THE GP RATE HAS TO BE APPLIED. - THE SAID AMOUNT HAS ALREADY BEEN CONSIDERED AS UN-RECORDED SALES BY THE LD.AO IN THE CASE OF GROUP CONCERN OF THE APPELLANT FIRM M/S. T.N. FABRICS AND GROSS PROFIT THEREON HAS ALREADY BEEN TAXED IN THE HANDS OF M/S. T.N. FABRICS. (IV). WITHOUT PREJUDICE TO GROUND NO.1, THE LD.CIT(A)-II HAS ERRED IN GIVING A WRONG REASON FOR DELETING THE ADDITION MADE BY AO ON ACCOUNT OF GROSS PROFIT OF RS.79,653/- (RS.1,30,765 - RS. 51,112) WITHOUT CONSIDERING THE FACT THAT- - THE SAID GROSS PROFIT HAS ALREADY BEEN TAXED IN THE HANDS OF THE APPELLANT IN A.Y. 2006-07 AND HENCE THE SAME AMOUNTS TO DOUBLE TAXATION OF INCOME ON SAME UN-RECONCILED SALES AMOUNT. 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 THEREAFTER 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 ITA NO.IT(SS) APPEAL NO.163/AHD/2011 M/S. SHREE RAM METALIC IND. VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2004-05 - 3 - A.Y. 2004-05 AS THE INCREMENTAL PEAK, SHOULD NOT BE ADDED AS UNEXPLAINED INVESTMENT 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.01050065245 (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. BUT SAME WAS NOT ACCEPTABLE TO THE LD. A.O. AND HE STATED THAT IN 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 ARE 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, A SUM OF RS.9,95,783/- WAS ADDED TO TAXABLE INCOME UNDER SECTION 69 OF THE INCOME-TAX ACT. ITA NO.IT(SS) APPEAL NO.163/AHD/2011 M/S. SHREE RAM METALIC IND. VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2004-05 - 4 - 5. FURTHER, AS PER THE BANK ACCOUNT STATEMENT ACCOUNT NO. 01050065245, SBS NO. 3439 SALES TURN-OVER OF RS.10,22,245/- HAS BEEN MADE IN F.Y. 2003-04, A.Y. 2004-05 IN AN UNACCOUNTED MANNER AND 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 AND ACCORDINGLY ADDITION OF RS.1,30,765/- WAS MADE. LD.A.O. FURTHER HELD THAT ASSESSEE HAS UNDERTAKEN UNACCOUNTED PURCHASES FOR WHICH IT HAS NOT MAINTAINED ANY ACCOUNTS OR JOURNALS. ALSO NO SATISFACTORY EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE HAVE BEEN PROVIDED. MERE ASSERTION THAT THE UNACCOUNTED EXPENDITURE ARE MADE OUT FROM UNRECORDED SALES IS NOT ACCEPTABLE AS A SATISFACTORY EXPLANATION. THE ASSESSEE HAS FAILED TO FURNISH THE EXACT DETAILS OF UNEXPLAINED PURCHASES AND THE SALES MADE FROM THESE PURCHASES, IN UNACCOUNTED MANNER IN ORDER TO EXPLAIN THE SOURCES OF UNACCOUNTED EXPENDITURES. ON THE BASIS OF DOCUMENT SEIZED FROM THE PREMISES OF THE ASSESSEE AND ADDITION OF UNEXPLAINED PURCHASES OF RS.1,06,920/- WAS ALSO ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. 6. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A), WHO PARTLY ALLOWED THE APPEAL. 7. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND PAPER BOOK FILED BY THE ASSESSEE AND SYNOPSIS FILED BY THE LD. D.R., IT IS A FACT THAT APPELLANT HAS NOT FILED DETAILS AND PROVED THAT THE PURCHASES WERE ON CREDIT, THE ASSESSING OFFICER AND CIT (A) WERE JUSTIFIED IN MAKING THE ADDITION FOR UNEXPLAINED INVESTMENT IN RESPECT OF PEAK BALANCE APPEARING IN THE BANK ACCOUNT. ITA NO.IT(SS) APPEAL NO.163/AHD/2011 M/S. SHREE RAM METALIC IND. VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2004-05 - 5 - 8. FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS MADE OUTSIDE BOOK SALES WHICH IS REFLECTED IN THE BANK ACCOUNT SEIZED AND ALSO ON OTHER LOOSE PAPERS SEIZED. ON THE TURNOVER, THE ASSESSING OFFICER HAS APPLIED G.P. RATE OF 5% AND MADE THE ADDITION OF RS.1,323/- FOR A.Y.2003-04 & RS.1,30,765/- FOR A.Y.2004-05 IN RESPECT OF UNRECORDED SALES. FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENSES OF RS.1,06,920/- IN RESPECT OF UNACCOUNTED PURCHASES AS APPARENT FROM SEIZED PAPERS AND MADE THE ADDITION OF RS.1,06,920/- ON ACCOUNT OF UNEXPLAINED PURCHASES. 9. THEREFORE, IN VIEW OF THE FOREGOING OBSERVATIONS, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/01/2017 ITA NO.IT(SS) APPEAL NO.163/AHD/2011 M/S. SHREE RAM METALIC IND. VS. ASSTT. COMMISSIONER OF INCOME TAX. ASST.YEAR 2004-05 - 6 - / 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