NISAR A. KHAN, V. ITO 21(3)(4),

MA 4/MUM/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2157 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 08-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP SINGH
• Assessee Lawyers: ASHWIN S CHHAG
• Keywords: Unexplained cash credit; Unexplained investment; Peak credit

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , . . . . BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM 04/ MUM/2014 ARISING OUT OF ITA NO. 4698/MUM/2009 ( / ASSESSMENT YEAR : 2005-06) NISAR A. KHAN, PROP. NISAR STEEL, 1-2/7 MASTER CHAWL, KHURIYA ESTATE PAR BLDG.,CST ROAD, KALONA SANTACRUZ, MUMBAI 400055. / VS. ITO 21(3)(4), C-11, 6 TH FLOOR, BKC BANDRA (E), MUMBAI 400051. . / PAN : AAEPK4307L ( ( / APPELLANT ) .. ( )*( / RESPONDENT ) ( + / APPLICANT BY : SHRI ASHWIN S. CHHAG )*( + / RESPONDENT BY : CAPT. PRADEEP SINGH + / DATE OF HEARING : 6-6-2014 + / DATE OF PRONOUNCEMENT : 6-6-2014 / O R D E R PER P.M. JAGTAP, A.M . : BY THIS MISC. APPLICATION, THE ASSESSEE IS SEEKING RECTIFICATION OF THE MISTAKES ALLEGED TO HAVE CREPT IN THE ORDER OF THE TRIBUNAL DATED 12-7-2013 PASSED IN ITA NO. 4698/MUM/2009. 2. AS SUBMITTED BY THE ASSESSEE IN THE PRESENT MISC . APPLICATION AND FURTHER REITERATED BY THE LD. COUNSEL FOR THE ASSESSEE AT T HE TIME OF HEARING BEFORE US, THE ORDER OF THE TRIBUNAL DATED 12-7-2013 ALLEGEDLY SUFFERS F ROM THE FOLLOWING MISTAKES:- MA 04/MUM/2014 2 THE ORDER OF APPEAL WAS RECEIVED ON L0.12.2013, IT IS NOTICED THAT THERE IS ERROR IN ADJUDICATING THE GROUNDS NO.5 AS HBLE BEN CH HAS DRAWN AN INFERENCE THAT THE CIT(A) WAS RIGHT TO DISMISS THE GROUNDS OF APPEAL WITHOUT RECORDING THE FINDING OF THE FACTS, GIVEN BY THE AO FOLLOWED BY T HE CIT(A) MERELY ON THE BASIS OF THEORY PROPOUNDED BY THEM. FOR THE TRIBUNAL, BEING A FINAL FACT FINDING AUTHOR ITY, IT IS IMPERATIVE TO EXAMINE SUCH FACTS RECORDED AND ITS VERACITY BEFORE GROUNDS OF APPEAL IS BEING ADJUDICATED AND NOT DOING SO WOULD MAKE THE ORDER E RRONEOUS TO RECTIFY U!S.254(2) OF THE ACT. (2) ON MERIT: BY NOT RECORDING THE FACT, HBLE BENC H HAS FAILED TO EXAMINE THE VALIDITY OF THE FINDINGS OF THE LOWER AUTHORITI ES AND TO MISS OUT THE FOLLOWING WHICH IS VERY APPARENT FROM THE ORDER OF AO/ CIT(A) : (I) THAT THE AO HAS HIS UNIQUE WAY TO ARRIVE AT TH E PEAK OF INVESTMENT, TO DO THIS HE HAS TAKEN DEPOSITS MADE I N THE BANK WHICH IS REDUCED BY THE OPENING CAPITAL OF THE APPELLANT IN CONTRAST TO USUAL PEAK THEORY OF STRIKING EXCESS BETWEEN CREDIT AND DEBIT, ATTENTION IS DRAWN TO PARA 7 OF THE ORDER OF LD.CIT(A). THUS, THERE IS ERROR TO CONFIRM THE ORDER OF ID.CIT (A) WITHOUT EXAMINING THE FACTS AND ENSURE ITSELF IN THE INTEREST OF JUST ICE THAT THE FACTS REALLY DESERVES THE APPLICATION OF PEAK THEORY OR THAT THE AO HAS CORRECTLY FOLLOWED THE PEAK THEORY UNDER THE GIVEN FACTS AND NOT NAMED PEAK THEORY TO SOME FANCY CALCULATION OF THE INCOME DON E BY THE AO. (II) WITHOUT PREJUDICE TO THE AFORESAID, IT IS PERT INENT TO NOTE THAT BY THIS DECISION TOTAL INCOME OF THE APPELLANT WOULD BE 22% OF THE DEPOSITS RS. 1,31,37,688/-IN CONTRAST TO THE CONFIRMING N.P.@ 8% BY THE BENCH IN THE GROUND OF APPEAL NO.4 ADJUDICATED. 3. THE LD. D.R., ON THE OTHER HAND, STRONGLY OPPOSE D THIS MISC. APPLICATION FILED BY THE ASSESSEE. HE SUBMITTED THAT A WELL DISCUSSED A ND WELL REASONED ORDER HAS BEEN PASSED BY THE TRIBUNAL WHILE DISPOSING OF THE APPEA L OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OF THE CASE AS WELL AS SUBMISSIONS MADE BY BOTH THE SIDES AND THERE IS NO MISTAKE APPARENT FROM RECORD IN THE SAID ORDER OF THE TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS OBSERVED THAT THE MAIN ISSU ES INVOLVED IN THE APPEAL OF THE ASSESSEE WERE RELATING TO ESTIMATION OF THE INCOME FROM THE UNDISCLOSED SALES AND UNEXPLAINED INVESTMENT MADE HIM FOR EFFECTING SUCH UNACCOUNTED SALE. WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE VIDE ITS OR DER DATED 12-7-2013 (SUPRA), THE MA 04/MUM/2014 3 TRIBUNAL DISCUSSED ALL THE FACTS RELEVANT TO THESE ISSUES AS BORNE OUT FROM THE ORDERS OF THE AUTHORITIES BELOW IN PARA 2 TO 9 OF ITS ORDER I NCLUDING THE REMAND REPORT SUBMITTED BY THE A.O. TO THE LD. CIT(A), THE CONTENTS OF WHIC H WERE ALSO DISCUSSED AND CONSIDERED. THEREAFTER, THE SUBMISSIONS MADE BY BO TH THE SIDES WERE DULY DISCUSSED BY THE TRIBUNAL IN PARA 12 TO 13 OF ITS ORDER BEFORE F INALLY RECORDING ITS FINDINGS/CONCLUSION IN PARA 14 & 15 OF ITS ORDER AS UNDER:- 14. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IN OUR OPINION, WHEN THE UNACCO UNTED SALES WERE FOUND TO BE MADE BY THE ASSESSEE, THE ESTIMATION OF HIS INCOME FROM SUCH UNEXPLAINED SALES IS GENERALLY MADE BY APPLYING GROSS PROFIT RATE AS THERE IS A PRESUMPTION THAT SUCH UNACCOUNTED SALES ARE NOT POSSIBLE WITHOUT THE CORRESPONDING PURCHASES WHICH ARE ALSO UNACCOUNTED. THERE IS HOWEVER NO SUC H PRESUMPTION WHICH CAN BE DRAWN IN THE CASE OF OTHER EXPENSES AND UNLESS T HERE IS SOMETHING TO SHOW THAT SUCH EXPENSES WERE ALSO INCURRED BY THE ASSESS EE OUTSIDE THE BOOKS OF ACCOUNT IN CONNECTION WITH UNACCOUNTED PURCHASES AN D SALES, THERE IS NO JUSTIFICATION TO ESTIMATE THE INCOME OF THE ASSESSE E BY APPLYING NET PROFIT RATE. AS REGARDS THE EXPENSES OF RS.54,000/- DEBITED IN T HE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, WE FIND THAT THE NET PROFIT OF THE ASSESSEE AS REFLECTED IN THE P&L A/C AFTER REDUCING THE SAID EXPENSES WAS TAKEN BY T HE AO AS STARTING POINT WHILE COMPUTING THE INCOME OF THE ASSESSEE IN THE ASSESSM ENT ORDER AND AS RIGHTLY SUBMITTED BY THE ID DR, ONLY THE DIFFERENCE BETWEEN THE ESTIMATED GROSS PROFIT AND THE GROSS PROFIT DECLARED BY THE ASSESS HAVING BEEN ADDED TO THE SAID NET PROFIT, THE EXPENSES DEBITED IN THE P& L A/C STOOD ALREADY ALLOWED AND THERE IS NO CASE FOR ANY FURTHER RELIEF TO THE ASSESSEE ON T HIS ISSUE. IN OUR OPINION, THE LD.CIT(A) HAS ADOPTED A VERY FAIR AND REASONABLE AP PROACH WHILE ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING THE GP RATE OF 8 % ON THE UNEXPLAINED CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SA ME AS THE SALES OF THE ASSESSEE AND WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE, GROUND NO. 3 & 4 ARE ACCORDINGLY DISMIS SED. 15. AS REGARDS THE ISSUE RAISED IN GROUND NO. 5 REL ATING TO THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT OF THE AS SESSEE, THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED BEFORE US T HE SUBMISSION MADE ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE PEAK CREDIT REPRESENTING PROCEEDS OF THE SALES HAVING ALREADY B EEN CONSIDERED FOR THE PURPOSE GROSS PROFIT ADDITION, NO SEPARATE ADDITION ON ACCOUNT OF PEAK CREDIT WAS REQUIRED TO BE MADE. WE FIND NO MERIT IN THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. AS RIGHTLY HELD BY TH E LD. CIT(A), WHEN THE ASSESSEE IS FOUND TO HAVE MADE UNACCOUNTED SALES, N OT ONLY THE PROFIT OF SUCH SALES REPRESENTS HIS INCOME BUT THERE IS ALSO INVESTMENT PART MADE BY THE ASSESSEE FOR EFFECTING SUCH UNACCOUNTED SALES. THE APPROPRIATE METHOD TO DETERMINE SUCH INVESTMENT IS TO ASCERTAIN THE PE AK CREDIT AND SINCE THERE IS NO MISTAKE POINTED OUT BY THE ID. COUNSEL FOR THE ASSESSEE IN THE PEAK CREDIT WORKING MADE BY THE AO, WE ARE OF THE V IEW THE ADDITION MADE BY THE AO ON THIS ISSUE IS RIGHTLY CONFIRMED B Y THE ID. CIT(A). WE, MA 04/MUM/2014 4 THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE ID. CIT (A) ON THIS ISSUE AND DISMISS THE GROUND NO. 5 OF THE ASSESSEES APPE AL. 5. A PERUSAL OF THE ORDER OF THE TRIBUNAL INCLUDING ESPECIALLY THE FINDINGS/CONCLUSION RECORDED IN PARA 14 & 15 CLEARL Y SHOWS THAT ALL THE RELEVANT FACTS OF THE CASE INCLUDING THE SUBMISSIONS MADE BY BOTH THE SIDES WERE DULY CONSIDERED BY THE TRIBUNAL AND ON SUCH CONSIDERATION, BOTH THE MAIN I SSUES INVOLVED IN THE APPEAL OF THE ASSESSEE RELATING TO THE ESTIMATION OF THE INCOME O F THE ASSESSEE FROM THE UN-ACCOUNTED SALE AND UNEXPLAINED INVESTMENT MADE FOR EFFECTING SUCH UNACCOUNTED SALE WERE DECIDED BY THE TRIBUNAL TAKING A SPECIFIC AND DEFIN ITE VIEW. IT IS THUS NOT A CASE WHERE THE TRIBUNAL HAS FAILED TO CONSIDER ANY MATERIAL FA CT AS ALLEGED BY THE ASSESSEE IN THE PRESENT MISC. APPLICATION AND IN OUR OPINION, THERE IS NO MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL REQUIRING ANY RECTIFIC ATION U/S 254(2) OF THE ACT. WHAT THE ASSESSEE IS SEEKING BY WAY OF THIS MISC. APPLICATIO N IS REVIEW OF THE WELL CONSIDERED DECISION RENDERED BY THE TRIBUNAL WHICH IS BEYOND T HE SCOPE OF SECTION 254(2) OF THE ACT. WE THEREFORE FIND NO MERIT IN THE MISC. APPLI CATION FILE BY THE ASSESSEE AND DISMISS THE SAME 6. IN THE RESULT, THE MISC. APPLICATION FIL ED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06-6-2014. . + 5 6 0690692014 + SD/- SD/- (DR. S.T.M. PAVALAN) ( P.M. JAGTAP ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 6 DATED 06-06-2014 .../ RK , SR. PS MA 04/MUM/2014 5 ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. )*( / THE RESPONDENT. 3. C () / THE CIT(A)-CONCERNED 4. C / CIT CONCERNED 5. )G , G , / DR, ITAT, MUMBAI H BENCH 6. H / GUARD FILE. / BY ORDER, * ) //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI