Shri Bhupendra Kumar Pahuja, v. The A C I T 2 (1),

CO 83/IND/2008 | 2005-2006
Pronouncement Date: 09-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 8322723 RSA 2008
Assessee PAN AJOPP4609A
Bench Indore
Appeal Number CO 83/IND/2008
Duration Of Justice 1 year(s) 6 month(s) 1 day(s)
Appellant Shri Bhupendra Kumar Pahuja,
Respondent The A C I T 2 (1),
Appeal Type Cross Objection
Pronouncement Date 09-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 09-04-2010
Date Of Final Hearing 06-04-2010
Next Hearing Date 06-04-2010
Assessment Year 2005-2006
Appeal Filed On 08-10-2008
Judgment Text
PAGE 1 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : AJOPP4609A I.T.A.NO.394/IND/2008. A.Y. : 2005-06 ACIT SHRI BHUPENDRA KUMAR PAHUJA 2(1) VS 49/2 ALIGANJ BHOPAL JUMERATI BHOPAL. APPELLANT RESPONDENT C.O.NO.83/IND/2008. (ARISING OUT OF I.T.A.NO. 394/IND/2008) A.Y. : 2005-06 SHRI BHUPENDRA KUMAR PAHUJA ACIT 49/2 ALIGANJ VS 2(1) JUMERATI BHOPAL. BHOPAL CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SMT.APARNA KARAN SR.DR RESPONDENT BY : SHRI S.S.DESHPANDE C. A. DATE OF HEARING : 06.04.2010 O R D E R PER BENCH THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARISE OUT OF THE ORDER OF CIT(A) BHOPAL DATED 11.06.2008. PAGE 2 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST WE SHALL TAKE UP THE REVENUES APPEAL IN I.T.A.NO.394/IND/2008. 4. IN GROUND NO.1 THE REVENUE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 3 42 396 /- OUT OF TOTAL ADDITION OF RS. 13 42 396/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK AND UNEXPLAINED CASH FOUND DURING THE COURSE OF SURVEY. 5. THE FACTS IN BRIEF ARE THAT ON THE DATE OF SURVEY THE STOCK WAS PHYSICALLY COUNTED AND VALUED AT RS. 10 51 256/- AN D CASH OF RS. 2 91 140/- WAS ALSO FOUND. THE A.O. OBSERVED THAT I N THE COURSE OF SURVEY TWO TYPES OF BILL BOOKS WERE FOUND I.E. ONE REGULAR SALES BOOK AND ANOTHER KACHCHA SALE BILL BOOK AND IT WAS ALSO NOTICED THAT KACHCHA SALES BILL BOOK WAS NOT ENTERED INTO THE BOOKS OF ACCOUNT. THE ASSE SSEE ALSO ADMITTED THAT THE BOOKS OF ACCOUNT WERE PREPARED FOR THE PURPOSE OF SALES TAX. THE A.O. THEREAFTER TREATED BOTH CASH AS WELL AS STOCK FOUND IN THE COURSE OF SURVEY AS INCOME OF THE ASSESSEE REJECTING THE PLEA OF THE ASSESSEE TO GIVE CREDIT FOR OPENING STOCK AND OPENING CASH IN HAND FOR THE REASON THAT THE ASSESSEE WAS HIMSELF NOT RELYING ON THE BOOKS FOR T HE PURPOSE OF INCOME. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE SUBMITTED THAT A S UM OF RS. 10 LAKHS WAS PAGE 3 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA OFFERED AS INCOME OF THE ASSESSEE ON ACCOUNT OF OPE NING ASH AND STOCK AND IN THE BALANCE SHEET FILED ALONGWITH RETURN OF INCOME BEFORE THE DATE OF SURVEY THE OPENING CASH AND STOCK DO NOT SHOW AN D THEREFORE THE SAME SHOULD HAVE BEEN GIVEN CREDITS BY THE ASSESSIN G OFFICER. THE LD. CIT(A) ACCEPTED THIS PLEA OF THE ASSESSEE AND ALSO NOTED THAT THERE WAS A TOTALLING MISTAKE OF RS. 23 710/-. THE LD. CIT(A) R ESTRICTED THE ADDITION TO RS. 10 LAKHS WHICH HAD ALREADY BEEN SURRENDERED BY THE ASSESSEE AND DELETED THE BALANCE ADDITION OF RS. 3 42 396/-. AGG RIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE BOOKS OF ACCOUNT WERE NOT TO BE RELIED ON THEN ALSO AS PE R THE RECORD OF THE ASSESSEE WITH THE DEPARTMENT THE OPENING STOCK IN HAND AND CASH BALANCE SHOULD HAVE BEEN GIVEN CREDIT. HE FURTHER PLACED RE LIANCE ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT PHYSICAL STOCK AND PHYSICAL CASH F OUND DURING THE COURSE OF SURVEY HAVE BEEN ADDED AS INCOME OF T HE ASSESSEE WITHOUT GIVING CREDIT TO THE OPENING BALANCE OF THESE ITEMS AS PER THE BALANCE PAGE 4 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA SHEET WHICH HAD BEEN FILED ALONGWITH RETURN BEFORE THE DATE OF SURVEY AND ALSO OF TOTALING MISTAKE OF RS. 23 710/-. THE L D. CIT(A) HAS GIVEN CREDIT FOR THESE ITEMS WHICH IN OUR OPINION IS A CORRECT VIEW IN THE FACTS OF THE CASE. HENCE WE DISMISS THIS GROUND OF THE R EVENUE. 10. IN GROUND NO.2 THE REVENUE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 1 17 525 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN THE PURCHASE OF CAR. 11. THE FACTS IN BRIEF ARE THAT THE A.O. FOUND THAT T HERE WAS AN ADDITION IN THE VALUE OF CAR IN THE BLOCK OF FIXED ASSETS TO THE TUNE OF RS. 1 17 525/- WHICH WAS EXPLAINED BY THE ASSESSEE AS AN ADDITION BY WAY OF PURCHASE OF A SECOND HAND CAR FROM THE SALE PROCEED S/OTHER CASH TRANSACTIONS OF THE ASSESSEE. THE A.O. HOWEVER HE LD THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE SOURCE OF THIS ADDITION IN THE FIXED ASSETS HENCE HE TREATED THE SAME AS UNDISCLOSED INVESTMENT BY TH E ASSESSEE AND MADE THE ADDITION. AGGRIEVED BY THIS THE ASSESSEE CARRI ED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTEN DED THAT ENTRY OF PURCHASE OF SUCH CAR WAS RECORDED IN THE BOOKS OF A CCOUNT. HENCE THE A.O. WAS NOT JUSTIFIED IN TREATING THE SAME AS UNDI SCLOSED ASSET. IT WAS ALSO CONTENDED THAT THE FUNDS IN THE BOOKS CAME FRO M CASH SALE COLLECTION FROM SUNDRY DEBTORS WITHDRAWALS FROM THE BANKERS UNSECURED LOANS PAGE 5 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA RECEIVED BY THE ASSESSEE ETC. HENCE INDIVIDUAL S OURCE OF SUCH INVESTMENT COULD NOT BE IDENTIFIED. THE LD. CIT(A) FOUND THAT IN THE BALANCE SHEET FILED BEFORE THE A.O. THE A.O. DID NOT FIND ANY CR EDIT ENTRY REPRESENTING THE SOURCE OF FUNDS UTILIZED BY THE ASSESSEE TO PUR CHASE THE CAR AS UNEXPLAINED. HENCE HE HELD THAT A.O. WAS NOT JUSTI FIED IN TREATING THE APPLICATION IN SUCH EXPENDITURE FUNDS AS SOURCE OF INVESTMENT IN THE CAR. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 12. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. 13. THE LD.AUTHORIZED REPRESENTATIVE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF LD. CIT(A) AND SUBMISSIONS MADE THEREIN. 14. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 15. IT IS NOTED THAT THE ASSESSEE HAS PURCHASED A SECON D HAND CAR DURING THE YEAR UNDER CONSIDERATION OUT OF COLLEC TIVE FUNDS GENERATED FROM BUSINESS TRANSACTIONS AS WELL AS CURRENT ACCOU NT TRANSACTIONS. IT IS ALSO NOTED THAT IN THE BALANCE SHEET BOTH ASSETS AN D LIABILITIES HAVE BEEN SHOWN AND THE GENUINENESS OF THE LIABILITY SHOWN BY THE ASSESSEE HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. WE ALSO FIND THAT THOUGH THE BOOKS OF ACCOUNT MAY NOT BE AS ACCURATE AS THE SAME SHOULD BE. HOWEVER PAGE 6 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA WITHOUT ANY SPECIFIC FINDING AS REGARD TO SHORTAGE OF CASH IN THE BOOKS OF ACCOUNT ON ANY DATE OR ASSESSEES INABILITY TO OTHE RWISE PROVE THE SOURCE OF FUND IN THE MANNER AS DESIRED BY THE ASSESSING O FFICER THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. ACC ORDINGLY WE CONFIRM THE FINDINGS OF THE LD. CIT(A) IN THIS REGARD. THUS THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 16. IN GROUND NO.3 THE REVENUE IS AGGRIEVED BY THE DEC ISION OF LD. CIT(A) IN DELETING THE ADDITION OF RS. 22 58 919/- OUT OF TOTAL ADDITION OF RS. 26 46 803/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF LOW NET PROFIT. 17. THE FACTS IN BRIEF ARE THAT ON THE BASIS OF DOCUM ENTS EVEN IN THE COURSE OF SURVEY AND THE SALE OF RS.13 LAKHS IN THE FIRST WEEK OF NOVEMBER 2005 THE A.O. REACHED TO THE CONCLUSION THAT THE ASSESSEE WAS NOT DISCLOSING THE ACTUAL SALES HENCE ESTIMAT ION OF SALES WAS TO BE DONE. THEREAFTER THE A.O. COMPARED THE RATIO OF KA CHHI SALES TAX TOTAL SALES (REGULAR SALES BOOK AND KACHCHI SALES TAX)AND HELD THAT 95% OF THE SALES OF THE PERIOD FROM 3.11.2004 TO 6.11.2004 WAS MADE OUT OF THE BOOKS AND ON THAT BASIS ESTIMATED THE SALES FOR F ULL YEAR AT RS. 5 29 36 089/- ESTIMATED THE NET PROFIT RATE @ 5% T HEREON AND MADE AN ADDITION OF RS. 26 46 803/-. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN T HE ASSESSEE MADE PAGE 7 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA DETAILED SUBMISSIONS AND ASSAILED THE ORDER OF THE A.O. ON EACH OF THE REASONS MENTIONED BY THE ASSESSING OFFICER FOR EST IMATING THE SALES. THE LD. CIT(A) EXAMINED THE ISSUE IN DETAIL AND HELD TH AT AS THE A.O. WAS NOT JUSTIFIED IN MAKING ESTIMATE OF SALES. THE LD. CIT( A) HOWEVER INCREASED THE NET PROFIT RATE TO 10% AND WORKED OUT THE PROFI T ACCORDINGLY ON THE SALES DISCLOSED BY THE ASSESSEE. IN THIS PROCESS T HE LD. CIT(A) HELD THAT THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT ON N UMEROUS OCCASIONS. HENCE IT WAS NOT PROPER FOR THE A.O. TO FORM AN AD VERSE OPINION ON ACCOUNT OF ASSESSEES FAILURE TO PRODUCE THE BOOKS ON 27.12.2007. THE LD. CIT(A) ALSO HELD THAT THE A.O. FAILED TO BRING ANY MATERIAL ON RECORD TO JUSTIFY THE SALES ESTIMATED BY HIM IN PRE-SURVEY PE RIOD AND POST SURVEY PERIOD. IT WAS ALSO HELD THAT UNDECLARED INCOME OF THE ASSESSEE UP TO THE DATE OF SURVEY HAD BEEN SURRENDERED HENCE FURTHER ESTIMATION OF SALES AND PROFITS IN PRE-SURVEY PERIOD AMOUNTED TO DOUBLE ADDITION. THE LD. CIT(A) ALSO FOUND THAT THE SALES TAX AUTHORITIES HA D ACCEPTED THE SALES OF RS. 38 78 842/- DECLARED BY THE ASSESSEE. THE LD. C IT(A) ALSO TOOK NOTE OF THE FACT THAT THE ASSESSEE HAD OFFERED HIS INCOM E U/S 44AF IN THE EARLIER YEARS ALSO WHICH HAD BEEN ACCEPTED BY THE DEPARTM ENT. THEREAFTER THE LD. CIT(A) HELD THAT THERE COULD NOT BE ANY PRESUMP TION TO THE EFFECT THAT WHATEVER DISCREPANCIES WERE FOUND IN PRE-SURVEY PER IOD WOULD HAVE BEEN PAGE 8 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA CONTINUED IN POST SURVEY PERIOD IN THE BUSINESS IN THE ABSENCE OF ANY MATERIAL FOUND TO SUPPORT SUCH PRESUMPTION. 18. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 19. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED STRONG RELIANCE ON THE ORDER OF A.O. THE LEA RNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND REITERATED THE SUBMISS IONS MADE BEFORE THE LD. CIT(A) BESIDES PLACING RELIANCE ON THE ORDER OF LD. CIT(A). 20. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 21. IT IS NOTED THAT IN THE COURSE OF SURVEY SOME DISCREPANCIES/INCRIMINATING DOCUMENTS HAVE BEEN FOU ND WHICH SUGGESTED THAT THE ASSESSEE WAS NOT RECORDING ALL THE PURCHAS ES AND SALES TRANSACTIONS IN THE REGULAR BOOKS OF ACCOUNT. HOWEV ER THE FACT REMAINS THAT THE A.O. HAS ESTIMATED THE SALES FOR THE FULL YEAR ON THE BASIS OF SALE OF FOUR DAYS SALES OF DIWALI SEASON IGNORING THE CO MPLETE SALES/PURCHASES I.E. BASED UPON THE KACHCHA SALES TAX AS WELL AS P UCCA SALES TAX FOUND DURING THE COURSE OF SURVEY. HENCE THE BASIS FOR E STIMATION OF SUCH SALES IS BY ITSELF IS NOT APPROPRIATE. WE ALSO FIND THAT THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE ASSESSEE WAS INDULG ING IN THE SAME PRACTICES IN THE POST SURVEY PERIOD ALSO. WE ALSO F IND THAT SALES AS SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED BY THE SALES TAX DEPARTMENT ALSO. IT IS PAGE 9 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.83 /IND/2008 BHUPENDRA KUMAR PAHUJA ALSO NOTED THAT THE A.O. HAS NOT EVEN BOTHERED TO T AKE NOTE OF THE FACT THAT IN THE COURSE OF SURVEY THE ASSESSEE OFFERED THE E XCESSIVE STOCK AND EXCESS CASH AND THEREFORE FURTHER ESTIMATION OF S ALES AND PROFIT IN PRE- SURVEY PERIOD SHOULD HAVE BEEN AVOIDED. IN THIS VIE W OF THE MATTER WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY QUA SHED THE ACTION OF A.O. IN ESTIMATION OF SALES. ACCORDINGLY WE CONFIRM THE FINDINGS OF THE LD. CIT(A). THUS THIS GROUND OF THE REVENUE IS ALSO DI SMISSED. 22. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 23. NOW WE SHALL TAKE UP ASSESSEES CROSS OBJECTION IN C.O.NO. 83/IND/2008. 24. GROUND NOS. 1 & 2 OF CROSS OBJECTION WERE NOT PRESS ED HENCE DISMISSED AS NOT PRESSED. 25. IN GROUND NO. 3 THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF LD. CIT(A) IN ENHANCING NET PROFIT RATE OF 5% SHOWN BY THE ASSESSEE. 26. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES SALES WERE LESS THAN RS. 40 LAKHS. HENCE THE PROFIT RATE AS PER SECTION 44AF COULD ONLY BE APPLIED ESPECIALLY WHEN THE PROFIT WAS LESS THAN 5%. HENCE THE LD. CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE RATE TO 10 %. 27. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). PAGE 10 OF 10 - I.T.A.NO. 394/IND/2008 & C.O.NO.8 3/IND/2008 BHUPENDRA KUMAR PAHUJA 28. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 29. ONCE THE SALES HAVE BEEN ACCEPTED BY THE CIT(A) AT RS. 38 LAKHS APPROXIMATELY WHICH IS LESS THAN SPECIFIED L IMIT OF RS. 40 LAKHS U/S 44AF THEN THE NET PROFIT HAS TO BE ESTIMATED AT TH E RATE PRESCRIBED THEREIN WHEN BOOK PROFIT IS LESS THAN SUCH RATE. A CCORDINGLY WE HOLD THAT THE NET PROFIT SHOULD BE ESTIMATED AT 5 % OF THE SA LES AND NOT @ 10 %. THUS THIS GROUND OF THE ASSESSEE IS ACCEPTED. 30. IN THE RESULT THE CROSS OBJECTION FILED BY THE ASS ESSEE IS PARTLY ALLOWED. 31. TO SUM UP REVENUES APPEAL IS DISMISSED AND ASSESS EES CROSS OBJECTION IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 9 TH APRIL 2010. CPU* 6484