Shri Chaudhary Abdul Samad, Pune v. ACIT, Pune

ITA 1057/PUN/2010 | 2005-2006
Pronouncement Date: 28-02-2011 | Result: Partly Allowed

Appeal Details

RSA Number 105724514 RSA 2010
Assessee PAN AARPC2458F
Bench Pune
Appeal Number ITA 1057/PUN/2010
Duration Of Justice 7 month(s) 12 day(s)
Appellant Shri Chaudhary Abdul Samad, Pune
Respondent ACIT, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 28-02-2011
Date Of Final Hearing 24-02-2011
Next Hearing Date 24-02-2011
Assessment Year 2005-2006
Appeal Filed On 16-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ITA NO. 1057/PN/2010 (ASSESSMENT YEAR: 2005-06) SHRI CHOUDHARY ABDUL SAMAD .. APPELLANT GAT NO. 15 CHIKHLI MOSHI ROAD CHIKHALI PUNE PAN AARPC2458F VS. ASSTT. COMMISSIONER OF INCOME-TAX . RESPONDENT CIR.9 PUNE APPELLANT BY: SHRI S.N DOSHI RESPONDENT BY: SHR I HEMANT C LEUVA ORDER PER D. KARUNAKARA RAO A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V PUNE DATED 21.6.2010 WHI CH IN TURN HAS ARISEN FROM AN ORDER DATED 31.12.2007 PASSED BY THE ASSESSING OFFI CER UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) PERTAININ G TO THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEA L READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS 15 00 000/- AS MADE B Y THE AO OVERLOOKING THE FACT THAT THIS AMOUNT AS DECLARED AT THE TIME OF SURVEY HAVE BEEN DULY OFFERED BY ADDING THE STOCK AS ON THE SALE OF SURVEY BY RS 15 00 0000/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD CIT (A) HAS ERRED IN NOT ACCEPTING THE CASH CREDIT OF RS 1 50 000/- APPEARIN G N THE NAME OF MR SIRAJUDDIN ABDUL SAMAD CHAUDHARI PROP. OF REGENT STEEL INSPI TE OF FURNISHING THE CONFIRMATION LETTER ONLY ON THE GROUND THAT THE SAME WAS NOT FUR NISHED BEFORE THE A.O. 2 3. THE RELEVANT FACTS OF THE CASE ARE THAT THERE WA S SURVEY OPERATION IN THE FIRST WEEK OF THE MARCH UNDER SECTION 133A OF THE ACT ON THE ASSESSEE. IT RESULTED IN DISCOVERY OF EXCESS STOCK AMOUNTING TO RS 14.5 LAKH S. THE ASSESSEE IN A SWORN STATEMENT UNDER SECTION 133A/131 OF THE ACT MADE A STATEMENT OFFERING AN ADDITIONAL INCOME OF RS 15 LAKHS IN ADDITION TO THE REGULAR INCOME O F THE ASSESSEE FOR THE RELEVANT PERIOD. CONSEQUENT TO THE ABOVE DI SCOVERY BY THE REVENUE THE ASSESSEE ADJUSTED ITS STOCK ACCOUNT BY INCREASING T HE CLOSING STOCK TO THE EXTENT OF ONE LAKH UNITS AND FINALIZED THE TRADING ACCOUNT AC CORDINGLY. BASED ON THE SAID STOCK REGISTER AND THE OTHER BOOKS THE ASSESSEE FILED TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. CONTRARY TO THE EXPECTATIONS O F THE REVENUE THE ASSESSEE DID NOT REFLECT THE SUM OF RS 15 LAKHS CREDITED TO THE P AND L ACCOUNT WHILE FILING THE RETURN OF INCOME AS PER THE SUM AS AGREED DURING TH E SURVEY OPERATION. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER RAISE D THIS ISSUE AND PROCEEDED TO MAKE ADDITION OF RS 15 LAKHS OVER AND ABOVE THE RET URNED INCOME. IN THE PROCESS HE REJECTED THE ASSESSEES EXPLANATION THAT THE SAID S UM IS ALREADY OFFERED BY WAY OF ADJUSTMENT OF INCRIMINATING STOCK IN THE BOOKS. THE ASSESSEE ALSO FILED REQUISITE RECONCILIATION DEPICTING THE MANNER OF ADJUSTMENT I N THE BOOKS OF ACCOUNT ON ACCOUNT OF UNDISCLOSED STOCK. OF SCRAP. 4. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSE SSEE RELIED UPON THE RECONCILIATION AND THE BOOKS OF ACCOUNT AND DEMONST RATED THE FACT OF ADDING ONE LAKH KG. OF SCRAP TO THE STOCK ACCOUNT. ASSESSEE FILED D OCUMENTS BEFORE THE CIT(A) REQUIRED FOR RECONCILIATION OF THE IMPUGNED RS 15 L AKHS. THE COMMISSIONER OF INCOME-TAX (APPEALS) REMANDED THE MATTER TO THE ASS ESSING OFFICER. DURING THE REMAND PROCEEDINGS THE ASSESSING OFFICER INSISTED FOR OFFER OF RS 15 LAKHS IN COMPLIANCE OF THE OFFER OF ADDITIONAL INCOME AS PER THE STATEMENT RECORDED ON OATH AND RELIED ON THE STATEMENT GIVEN BY THE ASSESSEE D URING THE SURVEY OPERATION. DURING THE FIRST APPELLATE PROCEEDINGS AFTER CONSI DERING THE REMAND REPORT OF THE ASSESSING OFFICER THE COMMISSIONER OF INCOME-TAX ( APPEALS) FOUND CERTAIN 3 DISCREPANCIES BETWEEN THE STOCK REGISTER MAINTAINED BY THE ASSESSEE WHICH WERE FOUND DURING THE SURVEY OPERATION AND THE STOCK STA TEMENTS TAKEN OUT FROM THE COMPUTERS AS SUPPLIED BY THE ASSESSEE AND FINALLY H E RELIED ON THE DISCOVERIES MADE DURING THE SURVEY OPERATION. AS EVIDENT FROM HIS OR DER CIT(A) HAS GIVEN HIS FINDING ON THE STATEMENT OF RECONCILIATIONS FILED BY THE AS SESSEE; BUT HE MERELY TRAVELLED ON THE LEGALITIES OF THE STATEMENT MADE U/S 131 VIS A VIS THE 133A OF THE ACT. FINALLY HE RELIED ON THE STATEMENTS GIVEN BY THE ASSESSEE DURI NG THE SURVEY FULLY AND REJECTED THE ASSESSEES SUBMISSIONS. THE RELEVANT DETAILS AR E GIVEN IN PARAS 12 TO 15. AS PER THE SAME THE COMMISSIONER OF INCOME-TAX (APPEALS) HIGHLIGHTED THE IMPORTANCE OF STATEMENT RECORDED UNDER SECTION 131/133A OF THE AC T AND HELD THAT THE ASSESSEE IS UNDER OBLIGATION TO COMPLY WITH THE SAID STATEMENT AND TO DISCLOSE THE ADDITIONAL INCOME OF THE SUM OF RS 15 LAKHS IN ADDITION TO HIS REGULAR INCOME. ACCORDINGLY HE CONFIRMED THE ADDITION OF RS 14.5 LAKHS. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL BEFOR E US. 5. DURING THE PROCEEDINGS BEFORE US THE LEARNED CO UNSEL FOR THE ASSESSEE- APPELLANT FILED A PAPER BOOK ALONG WITH WRITTEN SUB MISSIONS. BRIEFLY THE SUBMISSIONS ARE AS FOLLOWS: 1. DECLARATION OF RS 15 LAKHS ON ACCOUNT OF EXCESS STOCK FOUND IS INCLUDED IN THE STOCK REGISTER WHEREIN ENTRY HAS BEEN MADE SHOWING THE ADDITION OF 1 LAKH KG OF STOCK VALUED AT RS 15/- PER KG. SEE PAGE NO. 6. 2 THIS ADDITIONAL QUANTITY ALONG WITH THE EXISTING QUANTITY TOGETHER HAS BEEN CARRIED FORWARD WITH FURTHER ADDITIONS FOR THE PURCHASES MADE AND DELETI ONS FOR THE SALES EFFECTED UPTO 31.3.2005. AS A RESULT OF THESE ENTRIES IN THE STOCK REGISTER THE APPELLANT DISCLOSED THE CLOSING STOCK OF 140450 KG AND VALUED THE SAME AT RS 12.91 PER KG. I .E. RS 18 13 678/-. THESE FURTHER ADDITIONS ON ACCOUNT OF PURCHASES AND DELETION OF S ALE ARE SUPPORTED BY PURCHASE BILLS AND SALES BILLS. SEE PAGE NOS. 6-7 WHICH IS A CHART SHO WING THESE DETAILS. THE FACT THAT CLOSING STOCK QUANTITY 140450 KGS INC LUDES THE STOCK DECLARED OF 1 LAKH KG AND HAD THAT NOT BEEN INCLUDED THE CLOSING STOCK WOULD HAVE BEEN ONLY 40450 KGS AND IT WOULD HAVE BEEN VALUED ONLY AT RS 5 22 209/- AS AGAINST R S 18 13 678/- DECLARED IN THE TRADING ACCOUNT. CERTAINLY IT HAS GONE INTO AN INCREASE IN THE GROSS PROFIT BY THE SAID AMOUNT. IT IS TRUE THAT THIS VALUATION OF 1 LAKH KG AS ON 31.3.2005 IS RS 12 91 468/-. IT IS BECAUSE THE SAID EXCESS QUANTITY SO DECLARED IS MERGED IN THE CLOSIN G STOCK WITH THE SUBSEQUENT PURCHASES AND SALES EFFECTED. THE CLOSING STOCK IS VALUED AT COST OR MARKET PRICE WHICHEVER IS LESS. THE LATEST PURCHASE BILLS SUPPORT THIS VALUATION. HENCE IT IS INCORRECT TO STATE THAT THE DECLARATION IS NOT OFFERED. 3. THE CONTENTION OF THE LOWER AUTHORITIES THAT HAD THE DECLARED AMOUNT OF RS 15 LAKHS IS EXCLUDED FROM THE TOTAL INCOME OF RS 16 55 600/- T HE NET PROFIT WOULD HAVE BEEN ONLY RS 1 55 600/- I.E. 0.5% ON THE TOTAL TURNOVER IS OF NO SIGNIFICANCE. 4 IT IS BECAUSE ON DECLARATION OF THE STOCK AND REFLE CTED IN THE CLOSING STOCK AS OF 31.3.2005 THE GROSS PROFIT DECLARED IS RS 22 59 939/- WHICH INCLU DES THE VALUE OF STOCK OF 100000 KG VALUED AT RS 12 91 000/- AND HAD THAT BEEN EXCLUDED FROM T HE GROSS PROFIT SHOWN OF RS 22 59 939/- THE BALANCE OF GROSS PROFIT WOULD HAVE BEEN AT RS 9 74 047/-. 4. THE PERCENTAGE OF GROSS PROFIT OF THIS ASSESSMEN T YEAR HAS GONE UP TO 7.34% AS AGAINST 5.56% DISCLOSED IN THE PRECEDING ASSESSMENT YEAR. T HUS THERE IS INCREASE IN GROSS PROFIT BY 1.78%. 5. THE ENTIRE PURCHASES SALES ARE SUPPORTED BY THE BILLS. THE ACCOUNTS ARE SUBJECTED TO TAX AUDIT. 6. NO DEFECT HAS BEEN DETECTED BY THE AO IN THE BOO KS OF ACCOUNTS IN SUCH A CASE THE AO CANNOT DISBELIEVE THE BOOK RESULT. 7. THOUGH COMPARISON OF NET PROFIT IS NOT CORRECT NONETHELESS THE NET PROFIT DISCLOSED IN THIS ASSESSMENT YEAR IS 5.37% OF THE TURNOVER AS AGAINST 1.15% SHOWN IN THE PREVIOUS ASSESSMENT YEAR. COPIES OF FINAL ACCOUNTS AS OF 31. 3.2004 AND 31.3.2005 ARE AT PAGE NO. 51- 65. 8. FINALLY IF THERE IS FALL IN GROSS PROFIT AND AS SUMING SUCH FALL IS NOT SATISFACTORILY EXPLAINED AT THE MOST THERE COULD BE ADDITION ON ACCOUNT OF LOW GROS S PROFIT PROVIDED THE AO DETECTS ANY DEFECTS IN THE BOOKS OF ACCOUNTS. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE FOR THE REVENUE RELIED ON THE DETAILED ORDERS OF BOTH THE INCOME TA X AUTHORITIES. FURTHER THE DEPARTMENTAL REPRESENTATIVE TOOK US THROUGH PAGE 6 OF THE PAPER BOOK AND MENTIONED THAT ASSESSEE CLEVERLY INCREASED THE STOC K BY ONE LAKH KGS OF SCRAP AND SUBSEQUENT TO SUCH ENTRY ON 21.3.2005 MADE ALL MIS CHIEF BY REGISTERING/RECORDING UNUSUAL SALES AND PURCHASES DURING POST SURVEY PERI OD. FURTHER TAKING US THROUGH THE RELATABLE BILLS THE LEARNED DEPARTMENTAL REPRE SENTATIVE MENTIONED THAT IT IS UNUSUAL THAT A LORRY A SCRAP TRANSPORT VEHICLE WI TH CAPACITY OF 5 TO 6 TONS IS FOUND TRANSPORTING SCRAP TO THE TUNE OF MORE THAN 22 TONS AT A GIVEN POINT OF TIME. IN THIS REGARD HE RELIED ON PAGE 48 49 AND 50 OF THE PAPE R BOOK FOR THIS ANOMALOUS TRANSPORTATION CAPACITY OF THE TRANSPORT VEHICLES. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS POINT. WE HAVE ALSO GONE THOUGH PAGE 6 OF THE PAPER BOOK WHEREIN ONE LAKH KG. WORTH OF S TOCK WAS SHOWN ENTERED IN THE STOCK REGISTER ON 21.3.2005. THERE IS NO DISPUTE ON THIS ISSUE. WE HAVE FOUND THAT THE CIT(A) IS SILENT ON THE ISSUE OF RECONCILIATION OF THE DISCREPANCIES OF IMPUGNED EXCESS STOCK OF SCRAP FILED BY THE ASSESSEE. THE AD DITION MADE BY THE AO IS SUSTAINED BY HIM MERELY BASED ON THE LEGALITIES OF THE STATEMENT. IN OUR OPINION PASSING OF AN ORDER BY THE CIT(A) IN THIS WAY IS NO T TUNE WITH THE PROVISIONS OF SECTION 5 250(6) OF THE ACT. WITHOUT BRINGING ANY EVIDENCE AG AINST THE ASSESSEE WITH REGARD TO THE SALES AND PURCHASES EFFECTED DURING THE PERIOD RELEVANT TO THE POST SURVEY PERIOD THE REVENUE CANNOT PROCEED TO SUSTAIN HE AD DITION OF RS 14.5 LAKHS IGNORING THE FACT THE ASSESSEE HAD ALREADY BROUGHT TO BOOKS THE UNRECORDED EXCESS STOCK OF SCRAP AMOUNT TO 1 LAKHS KGS. THEREFORE WE ARE OF T HE CONSIDERED OPINION THE CIT(A) HAS TO PASS A SPEAKING ORDER ALSO ON THE MERITS OF THE ADDITION GIVING CLEAR FINDING ON THE EXCESS STOCK BROUGHT INTO THE BOOKS BY THE ASSE SSEE. IF NECESSARY HE MAY OBTAIN REQUISITE ENQUIRY REPORT ON THE SALE AND PUR CHASE TRANSACTIONS RELATABLE TO THE POST SURVEY PERIOD. FURTHER HE IS DIRECTED TO ENSU RE THERE IS NO DOUBLE TAXATION ON THE IMPUGNED STOCK OF RS 15 LAKHS OR RS 14.5 LAKHS AS THE CASE MAY BE. NO DOUBT THE ORDER OF THE CIT(A) IS QUITE VOLUMINOUS BUT IT IS ON THE LEGALITY RATHER THAN ON THE FACTS. CIT(A) HAS NOT SUCCESSFULLY COME OUT OF THE ASSESSEES ALLEGATION AS MADE IN GROUND 1 THAT THE CIT(A) OVERLOOKED THE FACT THAT THIS AMOUNT AS DECLARED AT THE TIME OF SURVEY HAVE BEEN DULY OFFERED BY ADDING THE STOCK AS ON THE SALE OF SURVEY BY RS 15 00 0000/-. THEREFORE WE ARE OF THE OPINION THIS ISSUE HAS TO BE SET ASIDE TO THE FILES OF THE CIT(A) FOR FRESH EXAMINATION OF TH E ISSUE AND ALSO FOR WANT OF FINDING ON THE ONE LAKHS KGS OF SCRAP CREDITED TO THE STOCK REGISTER AND SUBSEQUENT MANIPULATION IF ANY. CIT(A) SHALL GRANT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY THE ISSUE RAISED IN THIS GROUND IS SET ASIDE. 8. GROUND NO. 2 RELATES TO CONFIRMING OF CASH CREDI T OF RS 1 50 000/-. ON FACT THIS IS A CREDIT TRANSACTION BETWEEN THE FATHER (ASSESSE E) AND THE SON WHO IS A PROPRIETOR OF M/S REGENT STORES. THE LEARNED COUNSEL MENTIONED THAT IT IS UNFAIRLY CONFIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IGNORING T HE FACT THAT THE ASSESSEE FILED A CONFIRMATORY LETTER FROM THE CREDITOR WHICH IS PLACED AT PAGE 66 OF T HE PAPER BOOK. FROM THE SAID PAGE WE FIND THAT THE CREDITOR IS AS SESSED TO TAX AND THE PAYMENT IS MADE THROUGH BANKING CHANNELS THEREBY IT INDICATES THAT NOT ONLY THE IDENTITY CAPACITY CUM CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTION. IT IS A FACT THAT THE 6 SAID LETTER WAS NOT FILED BEFORE THE AO AND FOR THE FIRST TIME IT WAS FILED BEFORE THE CIT(A). CIT(A) IGNORED THE SAID LETTER AND ITS BONA FIDE CONTENTS BEFORE CONFIRMING THE ADDITION OF RS 1.5 LAKHS BY THE AO. IT IS NOT CLEA R FROM THE IMPUGNED ORDER WHY THE SAID DOCUMENT WAS NOT ADMITTED OR WHY IT WAS NOT RE MANDED TO THE FILES OF THE AO. ON FINDING THAT THE SAID CONFIRMATION LETTER WAS NO T FILED BEFORE THE ASSESSING OFFICER FOR THIS SOLE REASON THE COMMISSIONER OF INCOME-TA X (APPEALS) REJECTED THE CLAIM OF THE ASSESSEE AND CONFIRMED THE ADDITION OF RS 1 50 000/-. RELEVANT DISCUSSION IS IN PARA 35 OF THE IMPUGNED ORDER. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE DOCUMENTS FILED BEFORE US. IT IS AN ESTABLISHED PRI NCIPLE THAT IN MATTERS OF SUCH ADDITIONS THE ONUS IS LARGELY ON THE AO WHEN THE ASSESSEE HAS FILED THE RELEVANT BASIC FACTS TO THE AO ON THE ASPECTS OF IDENTITY C REDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. CONSIDERING THE FAC T THE IMPUGNED CREDIT IS BORNE OUT OF THE BOOKS OF HIS ACCOUNTS AND THE TRANSACTIO N IS ROUTED THROUGH THE BANKING CHANNELS THE CONFIRMATION LETTER ALONG WITH THE CO NTENTS THEREIN CONSTITUTES DISCHARGE OF INITIAL ONUS OF THE ASSESSEE. NOW IT IS FOR THE AO/CIT(A) TO DISPROVE THE GENUINENESS OF THE SAID BASIC FACTS SUPPLIED BY THE ASSESSEE. CIT(A) SIMPLY REJECTED THE SAID BASIC FACTS WITHOUT PUTTING THEM TO TEST O R WITHOUT DISPROVING THESE FACTS MERELY REASONING THAT IT WAS FILED BEFORE THE AO. I N THE PROCESS IN OUR OPINION THE CIT(A) IGNORED THE RECORDED ENTRIES IN RELEVANT UNS ECURED LOANS ACCOUNTS OF THE ASSESSEES BOOKS OF ACCOUNTS. FURTHER WE OBSERVED THAT IT IS NOT THE CASE OF THER CIT(A) THAT THE ASSESSEE IS NOT PREVENTED FROM FURN ISHING THE SAID CONFIRMATION LETTER BEFORE THE AO. THEREFORE IN OUR OPINION THE IMPUG NED CREDIT OF RS 1.5 LAKHS IS REQUIRED TO BE ALLOWED IN FAVOUR OF THE ASSESSEE AS THE SAID CONFIRMATION LETTER DOES NOT SUFFER FROM ANY DEFICIENCY. MERELY BECAUSE THE SAME WAS NOT FILED BEFORE THE ASSESSING OFFICER EVIDENTIARY VALUE OF THE SAID CO NFIRMATORY LETTER CANNOT BE LOST TILL SOMETHING CONTRARY IS BOUGHT OUT BY THE REVENUE. TH EREFORE WE ARE OF THE OPINION 7 THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A PPEALS) HAS TO BE REVERSED IN THIS REGARD. THUS THE GROUND NO. 2 IS ALLOWED . 10. IN THE RESULT APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28TH DAY OF FE BRUARY 2011. SD/- SD/- (I.C. SUDHIR) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCO UNTANT MEMBER PUNE DATED: 28TH FEBRUARY 2011 COPY TO:- 1) SRI CHOUDHARY A SAMAD PUNE 2) THE ACIT CIR.9 PUNE 3) THE CIT (A)-V PUNE 4) THE CIT-I V PUNE 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I .T.A.T. PUNE. BY ORDER TRUE COPY ASST. REGISTRAR I.T.A.T. PUNE B