M/s. Ishwarkrupa Ceramics Industries, Mehsana V. The Dy.CIT,Patan Circle, Patan

ITSSA 564/AHD/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0095 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2014
• Assessment Year: misc
• Appeal Filed On: 17-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G C PIPARA
• Keywords: Income from undisclosed sources; Loose papers; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER ISHWARKRUPA CERAMICS INDUSTRIES, AT VILLAGE KHANUSA, TALUKA VIJAPUR, MEHSANA PAN: AAAFI 4437 M (APPELLANT) VS DY CIT, PATAN CIRCLE, PATAN (RESPONDENT) REVENUE BY: SRI SUBHASH BAINS, CIT-D.R. ASSESSEE BY: SRI G.C. PIPARA, A.R. DATE OF HEARING : 29-04-2014 DATE OF PRONOUNCEMENT : 30-05-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR DATED 30-03-2010. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS: IT(SS)A NO. 564/AHD/2010 ASSESSMENT YEAR: BLOCK PERIOD (01-04-1990 TO 19-04-2000) I.T(SS).A NO. 564/AHD/2010 A.Y. BLOCK PERI OD PAGE NO ISWARKRUPA CERAMICS INDUSTRIES VS. DCIT 2 1. THE ID. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS WHILE CONFIRMING THE ADDITION OF RS. 16,07,462/- AS UNDISCLOSED INCO ME ON THE BASIS OF LOOSE PAPERS FOUND AND SEIZED FROM SHRI CHHAGANBHAI I. PATEL. IN VIEW OF THE FACTS AND DETAILS THE SAID ADDITION REQUIRES TO BE DELETED. 2. THE ID. CIT(A) HAS ALSO ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF ALLEGED SALES AS UNACCOUNTED INCOME IGNORING THE CONCEPT OF REAL INCOME WHEREIN THE ONLY ACTUAL INCO ME SHOULD HAVE BEEN CONSIDERED. 3. THE ID. CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE A.O. IN RELYING UPON PART OF THE SEIZED MATERIAL WHICH ARE IN FAVOUR AND IGNORING OTHER PART OF THE SEIZED MATERIAL WHICH IS IN FAVOU R OF THE APPELLANT. THEREFORE, THE ACTION OF THE C1T(A) IN THIS REGARD REQUIRES TO BE CANCELLED. 4. THE ID. CIT(A) HAS ALSO ERRED IN CONFIRMING LEVY OF THE SURCHARGE ON UNDISCLOSED INCOME. IN VIEW OF THE FACTS AND LEGAL POSITION NO SURCHARGE IS REQUIRED TO BE LEVIED IN CASE OF THE APPELLANT AS T HE DATE OF SEARCH IS PRIOR TO THE PROVISO TO SECTION 113 INSERTED WITH EFFECT FROM 1/06/2002. THEREFORE, THE LEVY OF SURCHARGE REQUIRES TO BE CAN CELLED. 3. FIRST THREE GROUNDS RELATE TO ADDITION OF RS. 16 ,07,462/- AS UNDISCLOSED INCOME ON THE BASIS OF LOOSE PAPERS FOU ND AND SEIZED FROM SRI CHHAGANBHAI I. PATEL. 4. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SE IZURE OPERATION U/S. 132 TOOK PLACE IN VISHWAS GROUP ON 19-04-2000, DURI NG WHICH RESIDENCE OF SRI CHHAGAN I PATEL, FATHER OF ONE OF THE PARTNE RS OF THE FIRM SRI JAYESH C. PATEL WAS ALSO COVERED. IN RESPONSE TO NOTICE U /S. 158BD R.W.S. 158BC, THE ASSESSEE FILED A RETURN OF BLOCK ASSESSMENT FOR THE PERIOD OF 01-04- 1990 TO 19-04-2000 DECLARING AN UNDISCLOSED INCOME OF RS. 1,76,024/-. THE BASIS OF DECLARATION OF THIS UNDISCLOSED INCOME WAS THE PAPERS FOUND DURING THE COURSE OF SEARCH WHICH SHOWED SALES AT R S. 42,10,505 WHEREAS SALES DECLARED FOR FINANCIAL YEAR 1996-97 TO WHICH THE PAPER PERTAINED, IN THE RETURN OF INCOME WAS RS. 24,27,019/-. THE ASSE SSEE OFFERED THE GROSS PROFIT EMBEDDED IN THE DIFFERENCES OF RS. 17,83,486 /- I.E. 1,76,024/- AS THE I.T(SS).A NO. 564/AHD/2010 A.Y. BLOCK PERI OD PAGE NO ISWARKRUPA CERAMICS INDUSTRIES VS. DCIT 3 UNDISCLOSED INCOME. THE AO COMPLETED THE BLOCK ASS ESSMENT BY TAKING THE SALES DIFFERENCES AS UNDISCLOSED INCOME. SINCE 1,76,024/- HAD ALREADY BEEN OFFERED, NET ADDITION OF RS. 16,07,462/- WAS M ADE. THIS ADDITION WAS DELETED BY LD. CIT(A). WHEN REVENUE WENT IN APPEAL BEFORE HONBLE ITAT, THE MATTER WAS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION. IN PURSUANCE TO THE ITATS ORDER AO AGAIN REPEATED THE SAME ADDITION OF RS. 16,07,462/- WHICH WAS CONFIRMED BY LD. CIT(A). 5. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMI TTED THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ADDITION HAS BEEN MA DE BY THE AO ON THE BASIS OF A PAPER SEIZED DURING THE SEARCH ACCORDING TO WHICH ASSESSEES SALES WERE TO THE TUNE OF 42,10,505/-. WHILE MAKIN G THE ADDITION ON THE BASIS OF THIS PAPER BOOK, AO HAS IGNORED THE EXPENS ES INCURRED BY THE ASSESSEE FOR MAKING THIS SALE AND IF THOSE EXPENSES ARE TAKEN INTO ACCOUNT, THE ASSESSEES INCOME WHICH HAS ALSO BEEN SHOWN IN THE SEIZED PAPER COMES TO RS. 12,20,519/-. HE THEREFORE FAIRLY CONCEDED THAT UNDISCLOSED INCOME MAY BE TREATED AT RS. 12,20,519/ - REDUCED BY RS. 1,76,024/- SHOWN BY THE ASSESSEE FOR BLOCK PERIOD A ND BY AN AMOUNT OF RS. 33,980/- AS PROFIT SHOWN IN THE REGULAR RETURN. THEREBY AN ADDITION OF RS. 10,10,515/- MAY BE CONFIRMED IN THE FACTS OF TH IS CASE. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF LOWER AUTHORITIE S. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT AO WHILE MAKING THE ADDITION OF RS. 16,07,462/- HAS PLACED RELIANCE ONLY ON THE SEIZED DOCUMENT TAKING THE SALE DIFFERENCE A S UNDISCLOSED INCOME AND REDUCING THE SAME BY RS. 1,76,024/- OFFERED BY THE ASSESSEE. WE FURTHER FIND THAT THIS SEIZED DOCUMENT IS A TRADING AND PROFIT AND LOSS ACCOUNT DRAWN BY THE ASSESSEE IN WHICH ALL THE INCO ME AND EXPENSES HAD DULY BEEN SHOWN AND A NET PROFIT OF RS. 12,20,519/- HAS BEEN REFLECTED. I.T(SS).A NO. 564/AHD/2010 A.Y. BLOCK PERI OD PAGE NO ISWARKRUPA CERAMICS INDUSTRIES VS. DCIT 4 THE ASSESSING OFFICER HAS ADOPTED PICK AND CHOOSE M ETHOD BY TAKING THE SALES FIGURE OF RS. 42,10,505/- AND IGNORING THE IN COME OF RS. 12,20,519/- REFLECTED IN THE SAME PAPER AFTER EXPENSES. IT IS A SETTLED POSITION OF LAW THAT THIS PICK AND CHOOSE METHOD/APPROACH IS NOT SU STAINABLE IN LAW AND IF AT ALL THIS PAPER WAS TO BE RELIED FOR MAKING ADDIT ION IN THE CASE OF ASSESSEE, THE UNDISCLOSED INCOME CAN BE TAKEN ONLY TO THE EXTENT OF RS. 12,20,519/- AS SHOWN BY THE ASSESSEE IN THIS PAPER OUT OF WHICH PROFIT SHOWN IN THE REGULAR RETURN OF INCOME OF RS. 33,980 /- AND UNDISCLOSED INCOME OF RS. 1,76,024/- SHOWN IN THE RETURN OF INC OME FOR BLOCK PERIOD BE REDUCED THEREBY ONLY ADDITION TO THE EXTENT OF RS. 10,10,515/- IS SUSTAINABLE. WE HOLD ACCORDINGLY. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30/05/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,