Shri Paresh Narshidas Dattani, Prop. of Krishna Oil Mills, RAJKOT-GUJARAT v. The Income Tax Officer, Ward-3(2),, JAMNAGAR

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH SMC RAJKOT BEFORE SHRI A.L. GEHLOT (AM) I.T.A. NO. 1254 & 1255/RJT/2010 (ASSESSMENT YEARS 2003-04 & 2004-05) PARESH NARSIDAS DATTANI VS ITO WD.3(2) PROP OF KRISHNA OIL MILLS JAMNAGAR SALAYA GATE JAM-KHMBHALIA JAMNAGAR PAN : AAKPD7291E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DR ADHIA RESPONDENT BY: SHRI JAI RAJ KUMAR O R D E R THESE ARE APPEALS BY THE ASSESSEE AND THEY ARISE O UT OF THE SEPARATE ORDERS OF CIT(A) JAMNAGAR BOTH DATED 08- 09-2010 FOR THE ASSESSMENT YEARS 2003-04 & 2004-05. 2. THE ASSESSEE HAS RAISED AS MANY AS 9-10 GROUNDS OF APPEALS BUT THE EFFECTIVE GROUNDS ARE IN RESPECT OF ADDITION OF RS. 40 786 ON ACCOUNT OF UNACCOUNTED PURCHASES AND ADDITION OF RS. 55 000 OU T OF EXPENSES FOR ASSESSMENT YEARS 2003-04 AND ADDITION OF RS. 1 37 6 63 ON ACCOUNT OF UNACCOUNTED PURCHASES FOR ASSESSMENT YEAR 2004-05. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF GROUNDNUT OIL. STATEMENT U/S 131 OF THE ACT WAS RE CORD ON 04-01-2008 BY THE ADIT(INV) RAJKOT AS THERE WAS DIFFERENCE IN TH E SALES-TAX RETURN AND THE PROFIT & LOSS ACCOUNT SUBMITTED BY THE ASSESSEE WITH THE RETURN OF INCOME. THE ASSESSEE IN REPLIES TO QUESTIONS NO.1 8 TO 21 ADMITTED THE ITA NO.1254 & 1255//RJT/2010 2 DIFFERENCE FOUND IN THE PURCHASES. THE ASSESSING O FFICER REPRODUCED RELEVANT QUESTIONS AND ANSWERS IN HIS ASSESSMENT OR DER AT PAGES 2 & 3 FOR THE ASSESSMENT YEAR 2003-04. QUESTION AND ANSWER N O.21 READS AS FOLLOWS: Q.21 WHY HAVE YOU SHOWN LESS PURCHASE IN INCOME-TAX RETURN AS COMPARED TO THE FIGURES SHOWN IN SALES-TA X RETURN FOR THE FOLLOWING YEARS: A.Y. SHOWN IN IT SHOWN IN ST LESS SHOWN IN IT 2002-03 3060950 3101736 40786 2003-04 32813894 32951557 137663 A. 21 SIR I AGREE WITH YOU THAT I HAVE SHOWN LESS P URCHASE IN INCOME TAX RETURNS AS COMPARED TO FIGURES SHOWN IN SALES TAX DEPARTMENT FOR THE FOLLOWING FYS. I HAVE NO EXPLAN ATION REGARDING THE LESS PURCHASE SHOWN BY ME FOR THESE Y EARS. I ACCEPT AND DECLARE THE FOLLOWING UNACCOUNTED PURCHA SE AND DISCLOSED THE AMOUNT AS MY UNDISCLOSED INCOME FOR T HE FYS SHOWN AGAINST IT. I WILL PAY INCOME TAX ON THIS UN ACCOUNTED PURCHASE. AS STATED ABOVE IN THE RELEVANT PERIOD MY FIRM WAS PARTNERSHIP FIRM. HOWEVER AFTER DEATH OF MY FATHER ON 25.03.2006 I AM THE PROPRIETOR OF THE FIRM. I OWN THE RESPONSIBILITIES OF PAYING ALL INCOME-TAX DUE ARISI NG DUE TO DISCLOSURE MADE BY ME OF THE FOLLOWING UNACCOUNTED PURCHASE FOR ALL THE FOLLOWING FINANCIAL YEAR. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS. 40 786 FOR ASSESSMENT YEAR 2003-04 AND RS. 1 37 663 FOR ASSESS MENT YEAR 2004-05 ON ACCOUNT OF UNACCOUNTED PURCHASES. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THERE IS A DIFFERENCE OF RS. 5 855 RET URN IN THE SALES ACCOUNT BETWEEN THE SALES-TAX RETURN AND THE INCOME-TAX. T HE ASSESSING OFFICER MADE ADDITION OF RS.512 ESTIMATING THE GROSS PROFIT @8.75% ON THIS AMOUNT OF RS. 5 855. THE ASSESSEE ALSO AGREED BEF ORE THE ASSESSING OFFICER FOR ADDITION OF RS. 55 000 BEING THE LUMP S UM AMOUNT FROM ALL ITA NO.1254 & 1255//RJT/2010 3 EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT FOR W ANT OF EVIDENCE. THE CIT(A) CONFIRMED THE ADDITIONS REJECTING ASSESSEES CONTENTION THAT THE PURCHASES WERE DEBITED IN THE DIRECT EXPENSES ACCOU NT AS NO EVIDENCE OF ANY SORT WAS PRODUCED BEFORE THE ASSESSING OFFICER. NOR DID THE ASSESSEE FILED ANY EVIDENCE IN SUPPORT OF HIS ABOVE CONTENTI ON BEFORE THE CIT(A). AS REGARDS THE ADDITION OF RS.55 000 OUT OF EXPENSE S IT WAS CONTENDED BEFORE THE CIT(A) THAT THE ASSESSEE IS READY TO PRO DUCE THE MISSING FILES AND BILLS FOR WHICH THE ASSESSEE AGREED FOR THE ADD ITION. THE CIT(A) HOWEVER OBSERVED THAT THE ASSESSEE DID NOT PRODUCE ANY VOUCHER FILE OR BILLS BEFORE THE ASSESSING OFFICER EVEN THOUGH SUFF ICIENT OPPORTUNITY WAS GRANTED. 4. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER A ND CIT(A) BOTH WERE NOT CORRECT. THE ADDITION CAN BE MADE ONLY IN RESP ECT OF GROSS PROFIT AND NOT THE ENTIRE AMOUNT OF THE PURCHASES. THE LD.AR SUBMITTED THAT AS PER THE ORDER OF THE ITAT IN ITA NO. 88/RJT/2008 DATED 12-02-2009 ONLY PROFIT ON SUCH UNACCOUNTED PURCHASES CAN BE MADE. AS REGA RDS THE LUMP SUM ADDITION OF RS.55 000 OUT OF TOTAL EXPENSES FOR ASS ESSMENT YEAR 2003-04 THE LD.AR SUBMITTED THAT NOW THE ASSESSEE IS IN POS SESSION OF FILES AND VOUCHERS AND IS PREPARED TO PRODUCE THE SAME. HE F URTHER SUBMITTED THAT THE CIT(A) WITHOUT PROVIDING OPPORTUNITY CONFIRMED THE ADDITION. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDER OF CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO POINTED O UT ANY RECORD IN SUPPORT OF THE CONTENTION THAT THERE WAS LACK OF OPPORTUNIT Y. THE ASSESSING OFFICER AND CIT(A) BOTH HAVE PROVIDED REASONABLE OPPORTUNI TY TO THE ASSESSEE. 5. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES RECORD PERUSED. THE ORDER OF THE ITAT RELIED UPON BY THE LD.AR IS DISTINGUISHABLE ON FACTS. IN THE SAID ORDER THE ITAT HELD THAT TH E ASSESSEE WAS UNABLE TO ITA NO.1254 & 1255//RJT/2010 4 EARN 100% PROFIT IN THE TYPE OF BUSINESS THAT ASSES SEE CARRIED. THE RELEVANT FINDING OF THE ITAT AT PARAGRAPH 7 IS REPR ODUCED BELOW: 7. WE HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE GOT ADVERTISEMENTS FROM SEVERAL PARTIES AND MOST OF THE AMOUNTS RECEIVED AS PAYMENTS WERE G IVEN BACK TO THE PERSONS WHO HAD GIVEN THE ADVERTISEMENT . IT IS EVIDENT THAT THERE WERE SEVERAL BOGUS PURCHASES. T HE EXTENT OF PROFIT HAS THEREFORE TO BE ESTIMATED. WE ARE UN ABLE TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE ASSES SEE COULD POSSIBLY EARN 100% PROFIT IN THIS TYPE OF BUSINESS. IN THIS LINE OF BUSINESS THE NORMAL RATE OF PROFIT IS ABOUT 10 P ERCENT AND THEREFORE WE ESTIMATE THE ASSESSEES PROFIT AT 10% OF THE TOTAL RECEIPT I.E. RS.819570/-. THE ITO IS DIRECTED TO T REAT THIS FIGURE AS THE ASSESSEES INCOME FROM BUSINESS FOR THIS YEA R. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ON 1 ST AND 2 ND GROUNDS. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE I FIND THAT THE ADMITTED FACT IS THAT THERE WAS A DIFFERENCE IN THE PURCHASE ACCOUNT BETWEEN THE DETAILS FURNISHED IN THE SALES-TAX RETURN AND THAT FURNISHED IN THE INCOME- TAX RETURN. IT IS A CASE OF INVESTMENT IN PURCHASE S. SINCE THERE IS AN UNACCOUNTED INVESTMENT IN PURCHASES THE ENTIRE AMO UNT IS REQUIRED TO BE ADDED. THE ADDITION BY APPLYING THE GROSS PROFIT R ATE IS APPLICABLE ONLY IN CASE OF UNACCOUNTED SALE AND NOT UNACCOUNTED PURCHA SES. AS STATED ABOVE THE ORDER OF ITAT CITED BY THE LD.AR IS DIST INGUISHABLE ON FACTS AS IN THAT CASE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVERTISEMENT AND RECEIPT OF AMOUNT OUT OF THAT AND PAYMENTS OUT OF T HAT BOTH WERE INVOLVED. THEREFORE UNDER THAT CIRCUMSTANCE THE ADDITION WA S RESTRICTED ONLY TO THE EXTENT OF GROSS PROFIT. I THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE CIT(A) ON THIS ISSUE. 5. AS REGARDS THE ADDITION OF RS.55 000 I FIND THAT THIS IS A LUMP SUM ADDITION AND THOUGH THE ASSESSEE HAS AGREED IN HIS STATEMENT BUT LATER ON ITA NO.1254 & 1255//RJT/2010 5 SUBMITTED THAT THE ASSESSEE POSSESSES ALL THE RELEV ANT FILES AND VOUCHERS AND WAS READY TO PRODUCE BEFORE THE LOWER AUTHORITI ES. HOWEVER THE CIT(A) WITHOUT VERIFYING THOSE RECORDS CONFIRMED TH E ADDITION SUCH ADDITION IS NOT SUSTAINABLE. 6. IN ADDITION TO THE ABOVE I CONFIRM THE ADDITION OF RS. 40 786 IN ASSESSMENT YEAR 2003-04 WHICH ALSO COVERS PETTY DEF ICIENCIES OF NON MAINTENANCE OF VOUCHERS ETC. THEREFORE SEPARATE ADDITION OF RS.55 000 IS NOT WARRANTED THEREFORE SAME IS DELETED. 7. IN THE RESULT APPEAL FOR ASSESSMENT YEAR 2003-0 4 IS PARTLY ALLOWED AND APPEAL FOR ASSESSMENT YEAR 2004-05 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 11-02-2011. SD/- (A.L. GEHLOT) ACCOUNTANT MEMBER RAJKOT DT : 11 TH FEBRUARY 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) JAMNAGAR 4. THE CIT JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT