Sh. Umesh Trehan, Chandigarh V. Addl. CIT, Chandigarh

MA 34/CHANDI/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5314 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER M.A.NO.34/CHD/2016 IN ITA NO.278/CHD/2012 (ASSESSMENT YEAR: 2007-08) UMESH TREHAN, VS. THE ADDL.C.I.T., SCO 9-A, SECTOR 7-C, RANGE-1, CHANDIGARH. CHANDIGARH. PAN: AMBPT3744 R (APPELLANT) (RESPONDENT) APPLICANT BY : SHRI DEEPAK AGGARWAL RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 09.12.2016 DATE OF PRONOUNCEMENT : 02.03.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY THE ASSESSEE SEEKING RECTIFICATION IN THE ORDER PAS SED BY THE I.T.A.T. IN ITA NO.278/CHD/2012 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED IN ITS MISCELLANEOUS APPLICATION THAT WHILE ADJUDICATI NG THE ISSUE PERTAINING TO INVESTMENT MADE FOR THE PURPOSE OF ACHIEVING UNDISCLOSED SALES, THE TRIBUNAL HAD STATE D THAT NO ADDITION WAS REQUIRED FOR THE PURPOSE OF FIXED A SSETS OR INVESTMENT MADE IN M/S GIAN RESIDENCY (P) LTD. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IF THESE AS SETS ARE 2 EXCLUDED FROM THE CALCULATION, THE INVESTMENT WORKS OUT AT RS.93,32,365/- WHILE THE TRIBUNAL ESTIMATED THE SAME AT RS.1.50 CRORES. THIS ACCORDING TO THE LD. COUNS EL FOR THE ASSESSEE, IS A MISTAKE IN THE ORDER WHICH IS BE ING SOUGHT TO BE RECTIFIED BY WAY OF THIS MISCELLANEOUS APPLICATION. 3. WE HAVE HEARD BOTH THE PARTIES. TO BETTER UNDERSTAND THE ISSUE BEFORE US, IT WOULD BE NECESSA RY TO GO THROUGH THE BACKGROUND OF THE CASE. THE BRIEF BACKGROUND OF THE CASE IS THAT DURING THE IMPUGNED ASSESSMENT YEAR A SURVEY WAS CONDUCTED U/S 133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON THE AS SESSEE, DURING THE COURSE OF WHICH AN ADDITIONAL INCOME OF RS.2.05 CRORES WAS OFFERED FOR TAXATION BY THE ASSE SSEE. THE SURVEY REPORT INDICATED THAT THE SURRENDER HAD BEEN MADE TO COVER UP DISCREPANCIES ON ACCOUNT OF UNACCOUNTED PURCHASES AND SALES AND ALSO AGAINST UNACCOUNTED CASH. DURING ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE UNACCOUNTED SALES WORTH RS.10,00,70,135/- AND UNACCOUNTED PURCHASES AMOUNTING TO RS.50,05,56,490/ - WHICH WERE DISCOVERED DURING THE COURSE OF SURVEY. THE ASSESSING OFFICER TOOK THE FIGURE OF UNACCOUNTED SA LES AMOUNTING TO RS.10 CRORES AS A BASE TO CALCULATE TH E UNACCOUNTED PROFITS AND UNEXPLAINED INVESTMENT FOR THE PURPOSE OF ACHIEVING THE SALES AND TOOK THE TRADING RESULTS OF THE ASSESSEE AS DISCLOSED IN THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET, TO CALCULATE THE SAME. THE 3 ASSESSEE HAD SHOWN GP RATE OF 5.51% IN THE IMPUGNED YEAR AND APPLYING THE SAME TO THE UNRECORDED CASH SALE O F RS.10,00,70,135/-, THE UNACCOUNTED INCOME WAS COMPU TED AT RS.55,13,865/-. SIMILARLY, THE ASSESSING OFFICER CALCULATED THE INVESTMENT REQUIRED FOR ACHIEVING TH E TURNOVER OF RS.10,00,70,135/- BY REFERRING TO THE A SSESSEES BALANCE SHEET AS ON 31.3.2007 AND AFTER ADDING CAPI TAL ACCOUNT EXCLUDING THE PROFITS EARNED DURING THE YEA R, THE SECURED LOANS AND UNSECURED LOANS WHICH AGGREGATED IN ALL TO RS.2,45,02,300/- AS AGAINST WHICH TOTAL TURNOVER ACHIEVED DURING THE YEAR AS REFLECTED IN THE TRADIN G ACCOUNT WAS RS.13,27,91,312/-, THE PROPORTION OF INVESTMENT REQUIRED WAS WORKED OUT FROM THESE FIGURES AND APPL IED TO THE UNACCOUNTED TURNOVER OF RS.10,00,70,135/-. THU S THE INVESTMENT REQUIRED FOR ACHIEVING THE UNACCOUNTED T URNOVER WAS WORKED OUT AT RS.1.85 CRORES. ACCORDINGLY, THE ASSESSING OFFICER COMPUTED THE UNDISCLOSED INCOME O N UNACCOUNTED SALES AT RS.2.45 CRORES. THE ADDITION ON ACCOUNT OF EXCESS CASH AND EXCESS STOCK FOUND DURIN G THE SURVEY WAS ALSO MADE AND THE TOTAL UNDISCLOSED INCO ME DETECTED DURING SURVEY WAS COMPUTED AT RS.2,60,01,5 68/-. REDUCING THEREFROM THE SURRENDERED AMOUNT OF RS.2.0 5 CRORES THE ASSESSING OFFICER MADE AN ADDITION OF RS.55,01,568/- TO THE INCOME OF THE ASSESSEE. THE MATTER WAS CARRIED IN APPEAL TO THE LD. CIT (APPEALS) WHO UPHELD THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE F ILED AN APPEAL BEFORE THE TRIBUNAL, WHO PARTLY ALLOWED THE ASSESSEES APPEAL RESTRICTING THE ADDITION MADE TO RS.20 4 LACS AS AGAINST RS.55,01,568/- MADE BY THE ASSESSIN G OFFICER. 4. IN THE PRESENT MISCELLANEOUS APPLICATION THE LD . COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT WHILE RESTRICTING THE ADDITION TO RS.20 LACS, THE TRIBUNA L HAD OBSERVED THAT WHILE CALCULATING/WORKING OUT THE INVESTMENT REQUIRED FOR ACHIEVING THE UNDISCLOSED S ALES NO ADDITION WAS REQUIRED TO BE MADE FOR THE PURPOSE OF FIXED ASSETS OR INVESTMENT MADE IN M/S GIAN RESIDENCY (P) LTD. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT TAKING INTO CONSIDERATION THE AFORESAID OBSERVATION IF THE FIGU RE OF FIXED ASSETS AND INVESTMENT IN M/S GIAN RESIDENCY ( P) LTD. ARE TAKEN OUT FROM THE FORMULA ADOPTED BY THE ASSESSING OFFICER THE ADDITION ON ACCOUNT OF INVEST MENT MADE FOR THE PURPOSE OF EARNING UNACCOUNTED SALES, WOULD WORK TO RS.93,32,365/-. THE CALCULATION OF THE SAM E IS REPRODUCED IN THE MISCELLANEOUS APPLICATION FILED B Y THE LD. COUNSEL FOR THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE THEREAFTER STATED THAT THE ADDITION THOUGH SUSTAINED BY THE TRIBUNAL IS RS.1.50 CRORES. THUS THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT AN ERROR OR MISTAKE HAS CREPT IN THE ORDER OF THE I.T.A.T. WHIL E RESTRICTING THE ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT TO RS.1.50 CRORES, WHICH IS NOT IN ACCOR DANCE WITH ITS OBSERVATION THAT THE FIXED ASSETS AND INVE STMENT MADE IN M/S GIAN RESIDENCY (P) LTD. OUGHT NOT TO BE TAKEN IN CONSIDERATION FOR CALCULATING THE SAME. THE LD. 5 COUNSEL FOR THE ASSESSEE, THEREFORE, STATED THAT RECTIFICATION TO THIS EXTENT IS, THEREFORE, WARRANT ED IN THE ORDER OF THE I.T.A.T. AT THIS JUNCTURE, THE LD. C OUNSEL FOR THE ASSESSEE WAS ASKED AT BAR ABOUT THE PENDENCY OF APPEAL OF THE ASSESSEE IN THE IMPUGNED CASE, IF ANY , BEFORE THE HON'BLE HIGH COURT AND THE STATUS REGARD ING THE SAME. TO THIS, THE LD. COUNSEL FOR THE ASSESSE E CONCEDED THAT THE ORDER OF THE I.T.A.T. HAD BEEN UP HELD BY THE HON'BLE HIGH COURT ON THIS ISSUE. COPY OF THE SAME WAS PLACED BEFORE US. 5. THE LD. DR ARGUED THAT THE ISSUE HAVING BEEN DECIDED BY THE HON'BLE HIGH COURT WITH THE ORDER OF THE I.T.A.T. HAVING BEEN UPHELD ON THIS ISSUE, THE SAME HAD ATTAINED FINALITY AND THERE WAS NO SCOPE OF ANY RECTIFICATION IN THIS REGARD. 6. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. WE FIND NO MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THOUGH WE DO AGREE WITH THE FACT THE TRIBUNAL DID MAKE AN OBSERVATION WHILE ADJUDICATING THE ISSUE OF INVESTMENT REQUIRED TO BE MADE FOR MAKING THE UNACCOUNTED SALES, THAT FIXED ASSET S AND INVESTMENT MADE IN M/S GIAN RESIDENCY (P) LTD. NEED NOT TO BE TAKEN INTO CONSIDERATION WHILE WORKING OUT TH E SAME, WE ALSO FIND THAT THE I.T.A.T. IN THE SAME BR EATH, HAD STATED THAT THE ASSESSEE HAS, HOWEVER, HIMSELF OFFERED A SUM OF RS.2.05 CRORES AGAINST THE UNDISCLOSED SAL ES OF RS.10 CRORES WHICH SHOWS THAT UNDISCLOSED INVESTMEN T 6 WAS ALSO REQUIRED FOR THE SAME AND SINCE IT IS VERY DIFFICULT TO ESTIMATE THE CORRECT AMOUNT AND BY MAK ING SURRENDER AND NOT DISCLOSING FURTHER DETAILS THE AS SESSEE HAD PREVENTED THE REVENUE FROM CONDUCTING FURTHER ENQUIRY, THE ONLY ALTERNATIVE LEFT IS TO ESTIMATE F AIR AMOUNT OF INVESTMENT REQUIRED FOR ACHIEVING SUCH SA LES WHICH THE I.T.A.T. WENT TO ESTIMATE TO RS.1.5 CRORE S AGAINST RS.1.84 CRORES ESTIMATED BY THE ASSESSING O FFICER REDUCING THE ADDITION MADE BY RS.34,64,675/-. THE RELEVANT PORTION OF THE ORDER OF THE I.T.A.T. REPRO DUCED IN THE MISCELLANEOUS APPLICATION ALSO WHICH IS AS FOLL OWS: SIMILARLY EXCESS STOCK WAS CALCULATED ON THE BASIS OF VALUATION OF STOCK FURNISHED BY THE ASSESSEE ON THE BASIS OF TRADING ACCOUNT BEFORE AND AFTER THE SURVE Y AND THEREFORE, NO FAULT CAN BE FOUND IN THE SAME. AS FA R AS REQUIREMENT OF INVESTMENT FOR ACHIEVING UNDISCLOSED SALES IS CONCERNED, IT CANNOT BE DENIED THAT INVESTMENTS ARE DEFINITELY REQUIRED FOR ACHIEVING S UCH SALES IN THE FORM OF STOCK, TRADE DEBTORS ETC. AT T HE SAME TIME IT CANNOT BE DENIED THAT NO ADDITION MAY BE REQUIRED FOR THE PURPOSE OF FIXED ASSETS OR INVESTM ENT MADE IN M/S GIAN RESIDENCY (P) LTD ETC. HOWEVER, AT THE SAME TIME, THE ASSESSEE HAS HIMSELF OFFERED A S UM OF RS.2.05 CRORES AGAINST THE UNDISCLOSED SALES OF APPROXIMATELY AT RS.10 CRORES WHICH SHOWS THAT UNDISCLOSED INVESTMENT WAS ALSO REQUIRED FOR SAME. IT IS VERY DIFFICULT TO ESTIMATE CORRECT AMOUNT AND BY MAKING SURRENDER AND NOT DISCLOSING FURTHER DETAILS , THE ASSESSEE HAS PREVENTED THE REVENUE FROM CONDUCTING FURTHER ENQUIRIES. IN THESE CIRCUMSTANCES ONLY ALTERNATIVE IS TO ESTIMATE A FAIR AMOUNT OF INVESTM ENT REQUIRED FOR ACHIEVING SUCH SALES. THE ESTIMATE MAD E BY THE AO AT RS.1,84,64,675/- SEEMS TO BE ON HIGHER SI DE. 7 CONSIDERING THE OVERALL CIRCUMSTANCES OF THE CASE W E ESTIMATE THIS UNDISCLOSED INVESTMENT AT RS.1,50,00,000/-. ACCORDINGLY THE ADDITION OF RS.55,01,5687- MADE BY THE AO NEEDS TO BE REDUCED B Y RS.34,64,675/-. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) IN RESPECT OF GROUND NO.1 & 2 AND GIVE R ELIEF OF RS.34,,64,675/- TO THE ASSESSEE. 7. THUS, IT IS EVIDENT FROM THE ABOVE THAT THE I.T.A.T. HAD DELIBERATED ON THE ISSUE BUT HAD NOWHE RE GIVEN A CATEGORICAL FINDING THAT THE INVESTMENT IN FIXED ASSETS AND M/S GIAN RESIDENCY (P) LTD. HAS TO BE RE DUCED WHILE CALCULATING THE INVESTMENT TO BE MADE FOR THE PURPOSE OF EARNING UNACCOUNTED SALES. THEREFORE, T HE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE I.T.A.T. HAD STATED SO, IS INCORRECT. THE I.T.A.T. IN THE SAID ORDER HAD ONLY MADE AN OBSERVATION THAT IT CAN NOT BE DENIED THAT SUCH ADDITION ON ACCOUNT OF FIXED ASSET S AND INVESTMENT IN M/S GIAN RESIDENCY (P) LTD. MAY NOT B E REQUIRED BUT CONSIDERING THAT THE ASSESSEE HAD HIMS ELF SURRENDERED ON ACCOUNT OF UNDISCLOSED INVESTMENT PREVENTING THE REVENUE TO ESTIMATE THE AMOUNT CORRE CTLY, THEREFORE, NO CLEAR-CUT DIRECTION WAS GIVEN IN THIS REGARD. CLEARLY THEREFORE, THERE WAS NO MISTAKE OR ERROR IN THIS REGARD IN THE ORDER OF THE I.T.A.T. 8. FURTHER WE FIND THAT THIS ISSUE WAS FURTHER CARRIED IN APPEAL BEFORE THE HON'BLE HIGH COURT WHE RE THE ASSESSEE HAD SPECIFICALLY ARGUED THAT THE INVESTMEN T IN M/S GIAN RESIDENCY (P) LTD. AND FIXED ASSETS OUGHT TO BE REDUCED FROM THE CALCULATIONS. THE ARGUMENTS OF TH E LD. 8 COUNSEL FOR THE ASSESSEE BEFORE THE HIGH COURT REPR ODUCED AT PARA 6 OF THE ORDER ARE REPRODUCED HEREUNDER: 6. THE ASSESSEE, HOWEVER, CONTENDED THAT VARIOUS A MOUNTS OUGHT TO BE DEDUCTED FROM THE FIGURE OF RS.2.45 CRO RES. FOR INSTANCE, HE CONTENDS THAT AN AMOUNT OF RS.65.80 LA CS WORTH OF FIXED ASSETS OUGHT TO BE DEDUCTED AS NO INVESTMENT IS REQUIRED IN FIXED ASSETS FOR THE UNACCOUNTED CASH SALE. HE FURT HER CONTENDS THAT RS.55.38 LACS OUGHT TO BE DEDUCTED AS NO INVES TMENT IS REQUIRED FOR THE INVESTMENT IN M/S GIAN RESIDENCY P VT. LTD. AND THAT RS.34.40 LACS OUGHT TO BE DEDUCTED AS NO INVES TMENT IS REQUIRED ON ACCOUNT OF DEBTORS SINCE THE SALES ARE CASH SALES. ULTIMATELY THE BALANCE AMOUNT ACCORDING TO THE ASSES SEE WORKS OUT TO ONLY RS.42.63 LACS. 9. THE HON'BLE HIGH COURT, WE FIND, HAD DISMISSED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT THE ACTION OF THE ASSESSING OFFICER IN NOT DEDUCTING THE AFORE SAID AMOUNT AS CLAIMED BY THE ASSESSEE, CANNOT BE SAID T O BE PERVERSE OR IRRATIONAL. THE HON'BLE HIGH COURT FUR THER WENT TO STATE THAT THE TRIBUNAL HAD SPECULATED ON T HE ISSUE BY REDUCING UNDISCLOSED INVESTMENT AT RS.1.5 CRORES AND THE ASSESSEE CAN HARDLY BE AGGRIEVED BY SPECULA TION IN HIS FAVOUR. THE RELEVANT FINDINGS OF THE HIGH C OURT AT PARA 7 OF THE ORDER ARE REPRODUCED AS UNDER: WHETHER THESE AMOUNTS FORMED PART OF RS.2.45 CRORES OR NOT IS A QUESTION OF FACT. THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE TO ESTABLISH THE SAME. THE MANNER IN WHICH T HE ASSESSING OFFICER HAS CAME TO THE FIGURE OF RS.2.45 CRORES CANNOT BE HELD TO BE PERVERSE OR IRRATIONAL. HIS RE FUSAL TO DEDUCT THE AMOUNTS AS CLAIMED BY THE ASSESSEE FROM THIS AMOUNT CANNOT BE SAID TO BE PERVERSE OR IRRATIONAL EITHER. THE TRIBUNAL INDEED SPECULATED BY REDUCING THE UNDISCLOSE D 9 INVESTMENT AT RS.1.50 CRORES AND THE ADDITION OF RS.55.0 1 LACS TO ABOUT RS.34.65 LACS. HOWEVER, THE TRIBUNAL SPECU LATED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE CAN HARDLY BE A GGRIEVED BY THE SPECULATION IN HIS FAVOUR. 10. IT IS EVIDENT FROM THE ABOVE THAT SPECIFIC IS SUE OF REDUCING THE AMOUNT OF INVESTMENT IN FIXED ASSET S AND M/S GIAN RESIDENCY (P) LTD. WAS TAKEN UP BEFORE THE HIGH COURT ALSO WHICH HAS BEEN DISMISSED BY THE HIGH COU RT. IN VIEW OF THE SAME SINCE THE ISSUE HAS ALREADY BEE N DECIDED BY THE HIGH COURT AND HAS THUS ATTAINED FIN ALITY WITH THE FINDINGS OF THE TRIBUNAL HAVING BEEN UPHEL D BY THE HIGH COURT, THERE IS NO QUESTION OF ANY ERROR O R MISTAKE REMAINING IN THE ORDER OF THE I.T.A.T. IN T HIS REGARD AND FOR THIS REASON, WE DISMISS MISCELLANEOU S APPLICATION FILED BY THE ASSESSEE. 11. IN THE RESULT, THE MISCELLANEOUS APPLICATION F ILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 ND MARCH, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, 10 ITAT, CHANDIGARH