Dhanjibhai Khodabhai Makwana, AMRELI V. The Deputy Commissioner of Income Tax, Circle-2, JUNAGADH

ITSSA 6/RJT/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2846 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-11-2016
• Assessment Year: misc
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDEY
• Assessee Lawyers: MJ RANPURA
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Block assessment
• Section: 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI R. P. TOLANI, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] DHANJIBHAI KHODABHAI MAKWANA, BEHIND RANA S PETROL PUMP, VILLAGE DHARI, DIST. AMRELI (APPELLANT) THE DCIT CIRC LE - 2, JUNAGADH (APPELLANT) VS VS THE DCIT CIRCLE - 2, JUNAGADH (RESPONDENT) DHANJIBHAI KHODABHAI MAKWANA, BEHIND RANA S PETROL PUMP, VILLAGE DHARI, DIST. AMRELI (RESPONDENT) REVENUE BY : S H RI YOGESH PANDEY, C.I.T. D . R. ASSESSEE BY: S H RI M.J. RANPURA , A.R. DATE OF HEARING : 08 - 1 1 - 2 016 DATE OF PRONOUNCEMENT : 23 - 12 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - I T (SS) A NO S . 6 & 8 / RJT /20 11 A SSESSMENT YEAR BLOCK PERIOD (01 - 04 - 1987 TO 24 - 09 - 1997) I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 2 THE S E CROSS APPEAL S FOR BLOCK ASSESSMENT YEAR 01 - 04 - 1987 TO 24 - 09 - 1997 , AR ISE FROM ORDER OF THE CIT(A) - IV, RAJKOT DATED 2 1 - 02 - 2011 IN APPEAL NO. CIT(A) - I V / 0939/01 - 02 , IN PROCEEDINGS UNDER SECTION 158B C OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE GROUNDS OF APPEALS RAISED BY ASSESSEE & REVENUE; RESPECTIVELY ARE AS UNDER: - ASSESSEE: - 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) - IV, RAJKOT [HEREINAFTER REFERRED TO AS THE 'CIT(A)'] ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING THE ADDITION OF RS. 3,48,572/ - OUT OF THE TOTAL ADDITIONS OF RS. 10,09,730/ - MADE ON ACCOUNT OF ALLEGED UNDISCLOSED I NCOME. 3.0 THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLEGING VIDE PARA 3 OF HIS ORDER THAT THE UNEXPLAINED INVESTMENTS MADE BY THE APPELLANT AND HIS FAMILY DURING BLOCK PERIOD WERE RS. 6,79,150/ - AND THEREBY CONFIRMING AN ADDITION OF RS. 3,48,572/ - AFT ER CONSIDERING DIAMOND BUSINESS INCOME WORKED OUT BY HIM AT RS. 3,16,808/ - . THE ADDITION SO MADE MAY KINDLY BE DELETED. 4.0 THE LD. CIT(A) ERRED ON FACTS AND ALSO IN LAW IN ESTIMATING DIAMOND BUSINESS INCOME AT RS. 3,16,808/ - (I.E. RS. 50,000/ - EACH IN A. YS. 1993 - 94 TO 1997 - 98 AND RS. 66,808 IN A.Y. 1998 - 99). THE ESTIMATE OF INCOME MADE MERELY ON CONJECTURES MAY KINDLY BE DELETED . REVENUE: - 1. THE LD. CIT(A), HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 6,61,158/ - OUT OF THE TOTAL AD DITION OF RS. 10,09,730/ - MADE BY THE AO, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 3 THE AO AS WELL AS WITHOUT CONSIDERING THE FACT THAT THE ASSESSMENT UNDER CONSIDERATION WAS A SEARCH RELEVANT ASSESSMENT. 3. IN THIS CASE, SEARCH ACTION U/S. 132 OF THE I.T. ACT WAS CARRIED OUT AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 24 TH SEPTEMBER, 199 7. THE ASSESSING O FFICER ISSUED NOTICE U/S. 158BC OF THE ACT ON 3 RD JUNE, 1999. THE RETURN OF BLOCK PERIOD ASSESSMENT WAS NOT FILED BY THE ASS ESSEE. THE ASSESSEE WAS CARRYING OUT CUTTING AND POLISHING OF ROUGH DIAMONDS MAINLY FROM M/S. BHAVANI G EMS FROM WHICH ASSESSEE WAS RECEIVING LABOR CHARGES. THE ASSESSING O FFICER HAS ASSESSED THE INCOME VIDE ORDER U/S. 158BC OF THE I.T. ACT DATED 29 - 09 - 1998 AT RS. 10 , 09 , 730/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER STATED THAT ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNTS AND BANK STATEMENT FOR THE BLOCK PERIOD PERTAINING TO BLOCK ASSESSMENT. HE FURTHER STATED THAT ASSESSEE HA D NOT MAINTAINED BOOKS OF ACCOUNTS LIKE STOCK REGISTER ETC. FOR RECORDING OF RECEIPT OF ROUGH DIAMONDS AND GENERATION OF POL ISHED/PROCESSED DIAMONDS. THE ASSESSING OFFICER ON THE BASIS OF JANGAD SLIP S AND ANNEXURE A - 1, A - 20, A - 23 AND A - 24 SEIZED FROM THE ASSESSEE S PREMISES HAD MADE VARIOUS YEAR - WISE ADDITION AS MENTIONED ON PAGE 4 AND 5 OF THE ASSESSMENT ORDER. 4. AGGR IEVED AGAINST THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS STATED THAT VARIOUS HEARING NOTICES WERE SERVED ON THE ASSESSEE . N EITHER THE ASSESSEE NOR AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 4 BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THEREFORE, HE STATED THAT HE HAD NO OPTION BUT TO DECIDE THE APPEAL ON THE BASIS OF FACTS AVAILABLE IN THE ASSESSMENT ORDER, STATEMENT RECORDED U/S. 132(4), SEARCH ANNEXURE AND FORM NO. 35. LD. COMMISSIONER OF INCOME TAX(A) STATED THAT TOTAL UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLO CK PER IOD 01 - 04 - 1987 TO 24 - 09 - 1997 CONFIRMED TO THE AMOUNT OF RS. 3 , 48 , 572/ - AND DELETED THE REST OF ADDITION OF RS. 6 , 61 , 158/ - . THE DECISION OF LD. COMMISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - 3.3. I HAVE CAREFULLY CONSIDERED THE FINDING OF TH E ASSESSING OFFICER AND THE FACTS OF THE CASE AND THE STATEMENT RECORDED DURING THE COURSE OF SEARCH. IT IS AN ADMITTED FACT THAT THE APPELLANT IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS. THE STATEMENT OF THE APPELLANT AVAILABLE ON RECORDS, RECORDED DURING T HE COURSE OF SEARCH ON OATH U/S. 132(4) OF THE ACT ON PAGE - 2 IN REPLY TO Q. NO.2, THE APPELLANT HAS STATED THAT SOURCE OF HIS INCOME IS FROM DIAMOND POLISHING 'LABOUR WORK, EARNING AROUND RS. 40000 TO RS. 5000 PER ANNUM AFTER DEDUCTING ALL THE EXPENSES REL ATED TO THE FACTORY. FROM THE ABOVE FACTS, IT IS CLEAR THAT NET RECEIPT IN A YEAR IN HAND OF THE APPELLANT IS AROUND RS.40000/ - TO RS.50000/ - . IN CASE NO BOOKS OF ACCOUNTS ARE MAINTAINED, THE POSSIBLE WAY TO ESTIMATE THE INCOME IS TO FIND OUT THE SOURCE OF INCOME AND DOCUMENTS WHICH SHOW THE INCOME AND ALSO TO VERIFY THE UTILIZATION OF INCOME AS INVESTMENT IN VARIOUS ASSETS/EXPENDITURE. KEEPING IN VIEW THE QUANTUM OF NET RECEIPT I.E. RS.40000/ - TO RS.50000/ - IN THE HANDS OF TH E APPELLANT AND ITS INVESTMENT IN A PARTICULAR YEAR, IT WILL BE REASONABLE IF THE SET OFF OF INVESTMENT AGAINST INCOME IS ALLOWED IN A PARTICULAR ACCOUNTING YEAR, AND ONLY WHEN THE INVESTMENT IS MORE THAN THE INCOME, THE QUESTION OF ADDITION OF INCOME FROM UNDISCLOSED SOURCES IS REQUIRE D TO BE MADE. THOUGH THE APPELLANT HAS NOT FILED ANY RETURN OF INCOME, BECAUSE OF THE APPELLANT IS NOT ASSESSED TO TAX, THEREFORE, THE INCOME SHOWN IN EACH YEAR IS TO BE ' TAKEN AT UNDISCLOSED INCOME OF THE APPELLANT FOR THE YEAR. KEEPING IN VIEW ALL THE F ACTS NARRATED IN THE ASSESSMENT ORDER, FORM NO. 35, STATEMENT U/S. 132(4) OF THE ACT AND THE SEARCH ANNEXURES, ETC., THE UNDISCLOSED INCOME OF EACH YEAR STARTING FROM A.Y. 1990 - 91 TO 1998 - 99 IS WORKED OUT AS UNDER: - I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 5 A.Y. INVESTMENTS INCOME DIFFERENCE/UN DISCLOSED INCOME 1990 - 91 35000/ - NIL 35000/ - 1993 - 94 125000/ - 50000/ - 75000/ - 1994 - 95 50000/ - 50000/ - NIL 1995 - 96 82500/ - 50000/ - 32500/ - 1996 - 97 NIL 50000/ - NIL 1997 - 98 NIL 50000/ - NIL 1998 - 99 386650/ - 80 578/ - + 206072/ - 100000/ - (RS.50000/ - EACH FOR A.YS. 1997 - 98 & 98 - 99 AVAILABLE FOR INVESTMENT) TOTAL UNDISCLOSED INCOME 348572/ - THEREFORE, THE TOTAL UNDISCLOSED INCOME OF THE APPELLANT FOR THE BLOCK PERIOD 1 - 4 - 87 TO 24 - 09 - 97 COMES TO RS.348572/ - , THE SAME IS CONFIRMED, AN D REST OF ADDITION OF RS. 661158/ - ( 1009730 - 348572) IS HEREBY ORDERED TO BE DELETED. APPELLANT GETS RELIEF OF RS. 661158/ - . THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 6 5. DURING THE COURSE OF APPE LLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAD COMMITTED ERROR IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 3 , 48 , 572/ - WITHOUT CONSIDERING THE EXPLANATION AND EVIDENCES M ADE BY THE ASSESSEE BEFO RE THE ASSESSING O FFICER AT THE TIME OF ASSESSMENT IN THIS CASE. THE LD. COUNSEL HAS ALSO SUBMITTED WRITTEN SUBMISSION CONTAINING THE SUBMISSION ON THE DIFFERENT ISSUES ON WHICH THE LD. COMMISSIONER OF INCOME TAX(A) HAS SUST AINED THE ADDITION MADE BY THE ASSESSING O FFICER. ON THE OTHER HAND, LD. D.R. RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) FOR THE ADDITIONS WHICH WERE CONFIRMED BY THE LD.CIT(A).HE SUPPORTED THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE CROSS APPEAL FILED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) ON DELETING THE ADDITION OF RS. 6 , 61 , 158/ - OUT OF THE TOTAL ADDITION OF RS. 10 , 09 , 730/ - MADE BY THE ASSESSING O FFICER . ON THE OTHER HAND, THE LEARNED COUNSEL HAS SUPPORTED THE ORDER OF THE LD. COMMISSIONE R OF INCOME TAX(A) ON DELETING THE ADDITION OF RS. 6 , 61 , 158/ - . 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE FIND THAT IN THIS CASE, THE LD. COMMISSIONER OF INCOME TAX(A) HAS DECIDED THE APPEAL OF THE ASSESSEE ON THE B ASIS OF FACTS AVAILABLE IN THE ASSESSMENT ORDER AS ASSESSEE HAS NOT ATTENDED THE APPELLATE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) .WE HAVE PERUSED THE WRITTEN SUBMISSION FILED BY THE ASSESSEE ON THE VARIOUS ADDITIONS MADE IN THIS CASE A LONG WITH THE SUPPORTING DETAILS EX P L AINING IN DETAIL. IN THIS CONNECTION WE HAVE I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 7 CONSIDERED THAT THE ASSESSEE FAILED TO ATTEND THE APPELLATE PROCEEDINGS BEFORE THE LD.CIT(A) AS RESULT HE HAD DECIDED THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE AS PER REC ORD. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES WE CONSIDERED IT APPROPRIATE TO SET ASIDE THIS CASE TO THE FILE OF THE LD.CIT(A) TO DECIDE IT AS A FRESH AFTER PROVIDING ONE MORE OPPORTUNITY TO THE ASSESSEE TO DECIDE THE CASE ON MERIT. 6. 1 IN VIEW O F THE ABOVE, APPEAL OF THE ASSESSEE HAS BEEN SET ASIDE TO THE FILE OF THE LD . COMMISSIONER OF INCOME TAX(A) TO DECIDE AFRESH, THEREFORE, APPEAL OF THE REVENUE HAS BECOME INFRUCTUOUS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE BECOMES INFRUCTUOUS WHICH MAY BE FILED AGAIN ON THE OUTCOME OF FRESH DECISION OF THE LD. CIT(A). ORDER PR ONOUNCED IN THE OPEN C OUR T ON 23 - 12 - 201 6 SD/ - SD/ - (R.P. TOLANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 23 /12 /2016 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, I. T(SS) A NO. 06 & 08 /RJT /20 11 A.Y. BLOCK PERIOD PAGE NO DHANJIBHAI KHODABHAI MAKWANA VS DCIT 8 ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT