DCIT, Trichur V. M/s Pazheri Jewellers, Palakkad

ITSSA 44/COCH/2006

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8127 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-04-2012
• Assessment Year: misc
• Appeal Filed On: 30-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: C R HARISH
• Keywords: Unexplained cash credit; Gift; Depreciation; Competent authority; Block assessment
• Section: 154

Judgement Text

1 IT(SS)A NO.137/COCH/2005 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. 137/COCH/2005 (BLOCK PERIOD 01-04-1996 TO 28-08-2002) & I.T(SS)A NO. 44/COCH/2006 (BLOCK PERIOD 01-04-1988 TO 28-09-1998) THE DY.C.I.T, CENT.CIRCLE VS M/S PAZHERI JEWELLE RS TRICHUR PAZHERI PLAZA, COURT JUNCTION MANNARKAD, PALAKKAD PAN : AAGFP1096B (APPELLANT) (RESPONDENT) I.T(SS)A NO. 116/COCH/2005 (BLOCK PERIOD 01-04-1996 TO 28-08-2002) M/S PAZHERI JEWELLERS VS THE DY.CIT, CENT.CIRCL E MANNARKAD, PALAKKAD TRICHUR (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.R. SENAPATI ASSESSEE BY : SHRI C.R. HARISH DATE OF HEARING : 26-04-2012 DATE OF PRONOUNCEMENT : 29-06-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE ASSESSEE AND THE REVENUE FILED THE APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(A)-I, KOCHI DATED 18-03- 2005 FOR THE BLOCK PERIOD 01-04- 1996 TO 28-02-2002. THE REVENUE HAS ALSO FILED AN APPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(A) U/S 154 OF THE AC T. SINCE COMMON ISSUES ARISE FOR 2 IT(SS)A NO.137/COCH/2005 CONSIDERATION IN ALL THE APPEALS, WE HEARD THE SAME TOGETHER AND DISPOSE THEM OF BY THIS COMMON ORDER. 2. LET US FIRST TAKE UP THE REVENUES APPEAL IN ITS S 137/COCH/2005. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DEL ETION OF ADDITION OF RS. 1,18,000 BEING THE SHORTFALL IN THE CASH FLOW STATEMENT OF S MT. KADEEJA. 4. SHRI S.R. SENAPATI, THE LD.DR SUBMITTED THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE IN THE CASH FLOW STATEMENT, IT HAS BEEN SH OWN THAT THE FIRM HAS RECEIVED RS.4 LAKHS FROM SMT. P KHADEEJA, WHO IS NONE OTHER THAN THE MOTHER OF SHRI P ABDUL KARIM, PARTNER OF THE FIRM. THE ASSESSEE FILED CASH FLOW STATEMENT TO SUPPORT THE SOURCE FOR INVESTMENT BY SMT. KHADEEJA. THE ASSESSEE HAS CLAI MED RS.2,50,000 AS AGRICULTURAL INCOME FOR THE YEAR ENDED 31-03-1997. HOWEVER, THE ASSESSING OFFICER ESTIMATED THE SAME AT RS.1,32,000 AND THE DEFICIENCY OF RS.1,18,0 00 WAS ADDED AS UNDISCLOSED INCOME IN THE HANDS OF THE FIRM. ACCORDING TO THE LD.REPRE SENTATIVE, IN THE ABSENCE OF MATERIAL TO SUGGEST THAT SMT. KHADEEJA HAS EARNED INCOME AS HAS BEEN SHOWN FROM AGRICULTURE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CL AIM OF THE ASSESSEE AND ESTIMATED THE UNDISCLOSED INCOME. 5. WE HEARD SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE ALSO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED CASH FLOW STATEMENT IN RESPE CT OF SMT. KHADEEJA, MOTHER OF ONE OF THE PARTNERS, SHRI P ABDUL KARIM. IN THE CASH FLOW STATEMENT FOR THE YEAR ENDED 31-03- 1997, THE ASSESSEE CLAIMED AGRICULTURAL INCOME. HO WEVER, THE ASSESSING OFFICER RESTRICTED THE AGRICULTURAL INCOME TO RS.1,32,000 I NSTEAD OF RS.2,50,000. THE ASSESSING OFFICER PLACED HIS RELIANCE ON THE SPECIFICATION PR OVIDED BY THE RUBBER BOARD FOR 3 IT(SS)A NO.137/COCH/2005 CALCULATING AVERAGE YIELD PER ACRE. IT IS A BLOCK ASSESSMENT. THE UNDISCLOSED INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH PROVISIONS OF CHA PTER XIVB. THEREFORE, THE INCOME HAS TO BE COMPUTED ON THE BASIS OF THE MATERIAL FOU ND DURING THE COURSE OF SEARCH OPERATION AND THE INFORMATION WHICH IS RELATABLE TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION. IN THE CASE BEFORE US, THE UNDISCLOSED INCOME WAS COMPUTED ON THE BASIS OF THE CASH FLOW STATEMENT FI LED BY THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IN FACT, THE ASSESSING OFFICER DISBELIEVED THE CASH FLOW STATEMENT IN RESPECT OF THE AGRICULTURAL INCOME AND THE BALANCE WAS ADDED AS UNDISCLOSED INCOME. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION, THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSING OFFICER CANNOT MAKE ANY ADDITION. THEREFORE, THE COMMISSIONER OF INCOME-TA X(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE OR DER OF THE COMMISSIONER OF INCOME- TAX(A) IS CONFIRMED. 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DELE TION OF ADDITION OF RS.2,66,000 AND RS.1,40,873 MADE AS UNEXPLAINED CASH CREDIT. 8. SHRI S.R. SENAPATI, THE LD.DR SUBMITTED THAT IN THE NAME OF SMT.AYISHAKUTTY THE CAPITAL INVESTMENT TO THE EXTENT OF 761.400 GMS OF GOLD VALUED AT RS.2,66,000 WAS SHOWN. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE TO RETAIN 500 GMS OF JEWELLERY IN CASE OF A MARRIED LADY. ACCORDING TO THE LD.DR, SMT.AYISHAKUTTY HAS NO CAPACITY TO ACQUIRE OR POSSESS THE JEWELLERY TO THE EXTENT OF 761.400 GMS. THEREFORE, THE ADDITION MADE TO THE EXTENT OF 2,66,000 HAS TO BE CONFIRMED. 9. ON THE CONTRARY, SHRI C.R. HARISH, THE LD.REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE CREDIT WAS INTRODUCED AT THE INI TIAL STAGE OF THE FIRM. THE ASSESSEE ACQUIRED THE GOLD JEWELLERY BY WAY OF GIFT FROM PAR ENTS AND RELATIVES AT THE TIME OF MARRIAGE. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE DEFICIENCY, IF ANY WHILE SUPPORTING THE SOURCE OF ACQUISITION OF GOLD JEWELL ERY CANNOT BE A REASON FOR MAKING 4 IT(SS)A NO.137/COCH/2005 ADDITION IN THE HANDS OF THE ASSESSEE. AT THE BEST , THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE ADDITION CAN BE MADE ONLY IN THE HAN DS OF SMT.AYISHAKUTTY AND NOT IN THE HANDS OF THE FIRM. ACCORDING TO THE LD.REPRESENTAT IVE, THE CREDIT FOUND IN THE BOOKS OF ACCOUNT WAS CONFIRMED BY THE CREDITOR, SMT.AYISHAKU TTY. NO OTHER MATERIAL WAS FOUND DURING THE COURSE OF SEARCH OPERATION THAT THE CRED IT ENTRY WAS FALSE. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPER ATION, ACCORDING TO THE LD.REPRESENTATIVE, THE SOURCE OF SMT.AYISHAKUTTY CA NNOT BE DOUBTED IN THE BLOCK ASSESSMENT PROCEEDINGS. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE CREDIT ENTRY WAS FOUND IN THE FORM OF GOLD TO THE EXTENT OF RS.2,66,000 IN THE NA ME OF SMT.AYISHAKUTTY. THE CASE OF THE ASSESSEE IS THAT SMT.AYISHAKUTTY RECEIVED GIFTS FROM HER PARENTS AND RELATIVES. SMT.AYISHAKUTTY CONFIRMS THAT SHE HAS GIVEN THE GOL D JEWELLERY AS CAPITAL INVESTMENT IN THE FIRM. WHEN SMT.AYISHAKUTTY CONFIRMS THAT SHE G AVE THE GOLD JEWELLERY, THE ADDITION IF ANY HAS TO BE MADE ONLY IN THE HANDS OF SMT.AYIS HAKUTTY AND NOT IN THE HANDS OF THE FIRM. NO MATERIAL IS FOUND IN THE COURSE OF SEARCH PROCEEDINGS THAT THE ENTRY FOUND IN THE BOOKS OF ACCOUNT WITH REGARD TO THE CREDIT OF G OLD JEWELLERY IS FALSE. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH O PERATION THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSING OFFICER CANNOT MAKE ANY ADDITION WITH REGARD TO THE INVESTMENT MADE IN THE PARTNERSHIP FIRM. THEREFORE , THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. 11. NOW COMING TO THE CREDIT OF RS. 1,40,873 THE LD .DR SUBMITTED THAT SMT. N LUBOO INTRODUCED RS.1,83,000 BEING THE VALUE OF 524.166 G MS OF GOLD AND RS.15,000 AS CASH TOWARDS CAPITAL INVESTMENT IN THE FIRM. THE EXPLAN ATION OF THE ASSESSEE THAT THE GOLD WAS RECEIVED BY SMT. N LUBOO FROM HER PARENTS WAS R EJECTED. HOWEVER, THE ASSESSING OFFICER ACCEPTED THE SOURCE TO THE EXTENT OF 116 GM S OF GOLD. AFTER REDUCING 116 GMS OF 5 IT(SS)A NO.137/COCH/2005 GOLD, THE VALUE OF THE REMAINING GOLD OF 320.166 GM S BEING RS.1,40,873 WAS TREATED A UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE FIR M. 12. WE HEARD, SHRI C.R. HARISH, THE LD.REPRESENTATI VE FOR THE ASSESSEE ALSO. ACCORDING TO THE LD.REPRESENTATIVE, ONCE THERE WAS A CREDIT IN THE BOOKS OF ACCOUNT AND IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COU RSE OF SEARCH OPERATION THERE CANNOT BE ANY ADDITION AS UNDISCLOSED INCOME. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CREDITOR ACCEPTE D THE CREDIT. NO CONTRARY MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO SHOW THAT THE CREDIT FOUND IN THE BOOKS OF ACCOUNT IS FALSE. UNLESS AND UNTIL IT IS SHOWN THAT THE ENTRY FOUND IN THE BOOKS OF ACCOUNT IS FALSE ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION, THIS TRIBUNAL IS OF THE OPINION THAT IT CANNOT BE TREATE D AS UNDISCLOSED INCOME. THE UNDISCLOSED INCOME IS DEFINED IN SECTION 158B(B) OF THE ACT WHICH CLEARLY SAYS THAT THE CREDIT FOUND IN THE BOOKS OF ACCOUNT HAS TO BE SHOW S AS FALSE ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N. IN THE ABSENCE OF ANY SUCH MATERIAL WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 13. NOW COMING TO THE ASSESEES APPEAL IN ITSS 116/ COCH/2005, THE FIRST GROUND OF APPEAL IS WITH REGARD TO TAX DEDUCTED AT SOURCE TO THE EXTENT OF RS.63,507. 14. SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING THIS GROUND OF APPEAL. SI NCE THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS NOT PRESSED, THE SAME IS DISMISSED AS N OT PRESSED. 15. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DEP RECIATION TO THE EXTENT OF RS.10,83,853. 6 IT(SS)A NO.137/COCH/2005 16. SHRI C.R. HARISH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE ASSETS ADDITIO NALLY DISCLOSED. HOWEVER, THE ASSESSING OFFICER WITHOUT CONSIDERING THE CASE OF T HE ASSESSEE DISMISSED THE SAME ON PRESUMPTION. ACCORDING TO THE LD.REPRESENTATIVE, T HE ASSESSEE IS ENTITLED FOR DEPRECIATION IN RESPECT OF ASSET WHICH WAS ADDITION ALLY DISCLOSED TO THE DEPARTMENT. 17. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD.DR SUBMITTED THAT THE PROFIT OF THE ASSESSEE WAS ESTIMATED AT 5% OF THE TURNOVER U/S 44 AF OF THE ACT. ONCE THE PROFIT IS ESTIMATED, ALL EXPENDITURE AND ALLOWANCES INCLUDING DEPRECIATION ARE DEEMED TO HAVE BEEN ALLOWED. THEREFORE, THE COMMISSIONER OF INCOM E-TAX(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE INCOME WAS ESTIMATED U/S 44AF OF THE ACT AT 5% OF THE TOTAL TURNOVER. ONCE THE INCOME IS ESTIMATED, ALL EXPENDITURE, ALLOWANCES INCLUDING DEPRECIATION ARE DEEMED TO HAVE BEEN ALLOWED. WHAT IS FURTHER TO BE ALLOWED IS PARTNERS SALARY. SINCE THE FACT THAT THE INCOME WAS ESTIMATED AT 5% OF THE TURNOVER IS NOT IN DISPUTE, THIS TRIBUNAL IS OF THE OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE FOR DEPRECIATION. ACCORDINGLY, THE ORDER OF THE COMMIS SIONER OF INCOME-TAX(A) ON THIS ISSUE IS CONFIRMED. 19. NOW COMING TO THE APPEAL FILED BY THE REVENUE I N ITSS 44/COCH/2006 AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(A) U /S 154 OF THE ACT, SHRI S.R. SENAPATI, THE LD.DR SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX(A) HAS DELETED THE ADDITION OF RS. 16,04,721 BEING THE VALUE OF JEWELL ERY BROUGHT IN BY THE PARTNERS OF THE ASSESSEE FIRM. ACCORDING TO THE LD.DR, THE INCOME INTRODUCED IN THE NAME OF THE 7 IT(SS)A NO.137/COCH/2005 PARTNERS WAS RIGHTLY ADDED AS INCOME OF THE ASSESSE E FIRM. THEREFORE, ACCORDING TO THE LD.DR, THE COMMISSIONER OF INCOME-TAX(A) IS NOT RIG HT IN DELETING THE ADDITION. 20. ON THE CONTRARY, SHRI C.R. HARISH, THE LD.REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE PARTNERS OF THE FIRM FILED DECLA RATION UNDER THE VDIS 1997 AND THE AMOUNT DISCLOSED AS INCOME IN THE VDIS WAS INTRODUC ED AS CAPITAL IN THE ASSESSEE FIRM. ONCE THE PARTNERS INVESTED THE AMOUNTS WHICH HAVE B EEN DISCLOSED TO THE DEPARTMENT UNDER VDIS, ACCORDING TO THE LD.REPRESENTATIVE, THE RE CANNOT BE ANY ADDITION. THE COMMISSIONER OF INCOME-TAX(A) HAS DELETED THE ADDIT ION ON THE BASIS OF HIS ORDER IN THE CASE OF M/S CHINNANSONS JEWELLERS. ACCORDING TO TH E LD.REPRESENTATIVE, THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY DELETED T HE ADDITION. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE PARTNERS OF THE FIRM HAVE DISCLOSED INCOMES UNDER VDIS 1997. ONCE THE AMOUNT DISCLOSED UNDER VDIS, THE SAME WOULD BE AVAILABLE FOR MAKING FURTHER INVESTMENT. IT IS NOT IN DISPUTE THAT THE AMOUNT DISCLOSED UNDER VDIS WAS ACCEPTED BY THE COMPETENT AUTHORITY. THEREFORE, THE ASSESSING OFFICER CANNOT DOUBT THE SOURCE OF INVEST MENT MADE AT THIS STAGE. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY DELETED THE ADDITION. TH IS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS CONFIRMED. 22. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 29 TH JUNE, 2012 PK/- 8 IT(SS)A NO.137/COCH/2005 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH