Sri. CHARANJITSINGH A BHELLA, MUMBAI v. ACIT CIR - 21(3), MUMBAI

ITA 1265/MUM/2006 | 2003-2004
Pronouncement Date: 16-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 126519914 RSA 2006
Assessee PAN AACPB7209E
Bench Mumbai
Appeal Number ITA 1265/MUM/2006
Duration Of Justice 5 year(s) 25 day(s)
Appellant Sri. CHARANJITSINGH A BHELLA, MUMBAI
Respondent ACIT CIR - 21(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 16-03-2011
Date Of Final Hearing 19-01-2011
Next Hearing Date 19-01-2011
Assessment Year 2003-2004
Appeal Filed On 21-02-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1265/MUM/2006 (ASSESSMENT YEAR: 2003-04) MR. CHARANJIT SINGH A BHELLA ACIT CIRCLE 21(3) 3 MARUTI DARSHAN IIT MAIN GATE BANDRA MUMBAI POWAI MUMBAI 400076 VS. PAN - AACPB 7209 E APPELLANT RESPONDENT APPELLANT BY: SHRI M. SUBRAMANIAN RESPONDENT BY: SHRI SUMEET KUMAR O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XXI MUMBAI DATED 07.12.2005. THE APPEAL IS ORIGINALLY D ISMISSED AS UNADMITTED AS ASSESSEE HAS NOT APPEARED ON THE DATE OF HEARING AND VIDE MA NO. 491/MUM/2009 DATED 11 TH SEPTEMBER 2009 THE APPEAL WAS RECALLED AND WAS HEARD. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DISMISSED THE APPEAL AND CO NFIRMING THE ASSESSMENT ORDER WHICH ITSELF HAS BEEN PASSED IN VI OLATION OF RULES OF NATURAL JUSTICE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL AND C ONFIRMING THE ASSESSMENT ORDER AND THAT TOO WITHOUT FULLY AND PRO PERTY APPRECIATING THE FACTS OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL AND C ONFIRMING THE ADDITION MADE OF RS.39 000/- AS OUT OF TELEPHONE E XPENSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL AND C ONFIRMING THE ADDITION OF RS.53 240/- AS OUT OF VEHICLE EXPENSES AND DEPRECIATION ON MOTOR CAR ETC. ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 2 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE INTEREST CHARGED U/S. 234A OF THE I.T. ACT IS INVAL ID AND BAD IN LAW. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE INTEREST CHARGED U/S. 234B OF THE I.T. ACT IS INVAL ID AND BAD IN LAW. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE INTEREST CHARGED U/S. 234C OF THE I.T. ACT IS INVAL ID AND BAD IN LAW. 9. BRIEFLY STATED THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF ` 27 53 554/-. THERE WAS A SURVEY ACTION UNDER SECTIO N 133A ON 13.01.2003 AT THE BUSINESS PREMISES OF THE ASSESSEE . ASSESSEE IS PROPRIETOR OF M/S. NIRMAL PROJECTS AND IS ENGAGED IN THE BUSIN ESS OF CIVIL CONTRACTOR MAINLY FOR ROAD CONSTRUCTION. DURING THE COURSE OF SURVEY THREE LOOSE PAPERS WERE FOUND. ON ONE PAPER NOTINGS OF WORK-IN-PROGRES S WERE MADE ON THE SECOND PAPER NOTINGS REGARDING ADVANCE PAYMENTS TO LABOUR CONTRACTORS WERE MADE AND ON THE THIRD PAPER NOTING OF CASH EXP ENSES WERE MADE. THE ASSESSEE WHEN CONFRONTED WITH THE ABOVE THREE DOCUM ENTS ADMITTED AN INCOME OF ` 34.50 LAKHS FOR THE PERIOD ENDING 31.03.2003 OVER A ND ABOVE THE NORMAL PROFIT VIDE STATEMENT QUESTION NOS. 9 TO 12. IN THE ABOVE STATEMENT THE ASSESSEE ADMITTED THAT HE HAS UNACCOUNTED CASH EXPENSES OF ` 9.98 LAKHS UNACCOUNTED ADVANCES OF ` 4.50 LAKHS PAID TO LABOUR CONTRACTORS AND AN ACCOUNTED WORK-IN-PROGRESS OF ` 20 LAKHS BEING THE DIFFERENCE OF WORK-IN- PROGRESS AS PER LOOSE PAPER AND THE WORK-IN-PROGRES S ARRIVED ON THE BASIS OF THE BOOKS OF ACCOUNT MADE ON THE DATE OF SURVEY. TH OSE THREE LOOSE PAPERS WERE IMPOUNDED IN THE COURSE OF SURVEY. AFTER THE S URVEY THE ASSESSEE FILED AN AFFIDAVIT BEFORE THE ASSESSING OFFICER REITERATI NG THE FACT THAT HE HAS VOLUNTARILY DECLARED INCOME OF ` 34 50 000/- DURING THE COURSE OF SURVEY. SINCE THE RETURN FILED FOR THE YEAR DOES NOT SHOW T HE INCOME OF ` 34 50 000/- AS DECLARED DURING THE COURSE OF SURVEY THE A.O. AFTER GIVING DUE OPPORTUNITY PROPOSED A SEPARATE ADDITION OF THE SA ME AMOUNT. IT WAS ASSESSEES CONTENTION THAT THE STATEMENT WAS GIVEN ON THE DAY OF SURVEY BUT LATER ON ALL THE EXPENSES WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND INCOMES WERE DECLARED ON THE BASIS OF THE BOOKS OF ACCOUNT MAINTAINED. ACCORDINGLY IT WAS ASSESSEES CONTENTION THAT THER E IS NO NEED FOR ANY ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 3 ADDITION OF THE UNDISCLOSED INCOME. THE SAME WAS NO T ACCEPTED BY THE AO AND HE MADE A SEPARATE ADDITION OF THE SAID AMOUNT. IN ADDITION TO THE ABOVE AMOUNT THE A.O. ALSO DISALLOWED 10% OF THE T ELEPHONE EXPENDITURE MOTOR CAR EXPENSES BEING PERSONAL IN NATURE WHICH WAS CONTESTED IN GROUND NOS. 4 & 5. GROUND NOS. 6 TO 8 ARE WITH REFE RENCE TO LEVY OF INTEREST APPLICABLE TO THE ASSESSED INCOME. THE LEARNED CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION BY HOLDING AS UNDER: - I HAVE CAREFULLY EXAMINED THE APPELLANTS SUBMISSI ONS. THE APPELLANT HAS PLEADED THAT THE STATEMENT U/S. 133A IS INVALID SINCE THE SURVEY ACTION COMMENCED ON 13.1.2003 AT 2.30 PM AND WAS CONCLUDED ON THE FOLLOWING DAY I.E.14.1.2003 AT 8.3 0 AM AND THE PROPRIETOR STATEMENT WAS RECORDED MAINLY IN THE LAT E HOURS I.E. 11.30 P.M. ON 13.1.2003 AND THE SAME CONTINUED TILL ALMOS T EARLY HOURS OF 14.1.2003 AND THEREFORE THE STATEMENT RECORDED IS IN CONTRAVENTION OF PROVISIONS OF SECTION 133A(2) OF THE ACT. I FIND THAT SECTION 133A(2) OF THE ACT AUTHORISES THE INCOME-TAX AUTHORITY TO E NTER ANY PLACE OF BUSINESS OR PROFESSION ONLY DURING THE HOURS AT WHI CH SUCH PLACE IS OPEN FOR THE CONDUCT OF BUSINESS OR PROFESSION. THE APPELLANT IS NOT DISPUTING THAT THE ENTRY INTO THE PREMISES WAS MADE DURING THE HOURS PROVIDED IN SECTION 133A(2) OF THE ACT. THE FURTHER PROCEEDINGS CONDUCTED UNDER THE POWERS CONFERRED BY SECTION 133 A(3) {INCLUDING RECORDING OF STATEMENT U/S. 133A(3)(III) ARE THEREF ORE LEGAL. THE APPELLANTS CONTENTION THAT HE WAS A HEART PATIENT AND IN SPITE OF REPEATED REQUESTED ABOUT NOT BEING PHYSICALLY AND M ENTALLY FIT HE WAS ASKED TO GIVE THE STATEMENT IS NOT BORNE OUT BY ANY SUCH REQUEST RECORDED IN THE STATEMENT U/S. 133A (PAGE 48 TO 53 OF THE PAPER BOOK) AND IN ANY CASE THERE IS NO PROOF THAT SUCH MENTAL AND PHYSICAL UNFITNESS WAS OF SUCH NATURE AS TO RENDER THE APPELLANT INCAPABLE OF RENDERING THE STATEMENT. THE REPLIES G IVEN DURING THE COURSE OF THE STATEMENT CLEARLY SHOW THAT THE APPEL LANT WAS IN A PROPER MENTAL AND PHYSICAL STATE AND AS NOTED IN TH E END OF THE STATEMENT GAVE THE STATEMENT VOLUNTARILY WITHOUT A NY THREAT COERCION OR UNDUE INFLUENCE. 5. .. 6. .. 7. .. 8. QUESTION NO. 10 AND 11 OF THE STATEMENT OF THE APPELLANT RECORDED DURING THE COURSE OF THE SURVEY U/S. 133A OF THE AC T HAVE BEEN EXTRACTED AT PAGE 3 OF THE ASSESSMENT ORDER. AS REG ARDS THE LOOSE PAPER ON WHICH ADVANCES PAID TO LABOUR CONTRACTORS UPTO 10.1.2003 OF RS.4 50 000/- IS NOTED THE APPELLANT WAS SPECIF ICALLY ASKED TO STATE WHETHER THE ADVANCES ARE RECORDED IN THE BOOK S OF ACCOUNT AND IF NO WHAT IS THE REASON THEREOF. IN THE ANSWER IT WAS SPECIFICALLY STATED THAT THE ADVANCES ARE GIVEN OUT OF THE UNACC OUNTED CASH AND ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 4 THEREFORE THEY ARE NOT RECORDED IN THE BOOKS OF AC COUNT. UNACCOUNTED INCOME OF RS.4 50 000/- AS ADDITIONAL INCOME FOR TH E ACCOUNTING YEAR OVER AND ABOVE THE REGULAR PROFITS WAS DECLARED. TH E APPELLANT HAS NOW PLEADED THAT THE NOTINGS HAVE ALREADY BEEN INCO RPORATED IN THE REGULAR BOOKS OF ACCOUNT. I FIND FROM THE LEDGER AC COUNTS SUBMITTED OF THE LABOUR CONTRACTORS THAT THE PAYMENTS WERE MADE WELL BEFORE THE DATE OF SURVEY AND ARE MAINLY CLAIMED TO BE MADE IN THE PERIOD MAY TO AUGUST 2002. THEREFORE THESE AMOUNTS CANNOT BE THE AMOUNTS NOTED ON THE LOOSE PAPER WHICH WERE ACCEPTED DURING THE COURSE OF SURVEY TO BE OUT OF UNACCOUNTED CASH AND THEREFORE NOT RECORDED IN THE BOOKS OF ACCOUNT. SIMILARLY AS REGARDS THE CAS H EXPENSES INCLUDING TRANSPORT CHARGES LABOUR CHARGES DIESEL CHARGES BITUMEN PURCHASE IN CASH AND CONSUMABLES PURCHASED I CASH T OTALLING TO RS.9.98 LACS THE APPELLANT WAS SPECIFICALLY ASKED IN QUESTION NO. 11 RECORDED DURING THE COURSE OF SURVEY WHETHER HE HAD ANY SUPPORTING EVIDENCE FOR THE EXPENSES AND WHETHER THEY ARE ENTE RED IN THE BOOKS OF ACCOUNT. IN ANSWER THEREOF IT WS STATED THAT TH E APPELLANT DID NOT HAVE ANY SUPPORTING EVIDENCE TO THE EXPENSES THEY ARE MADE OUT OF UNACCOUNTED CASH THEY ARE NOT RECORDED IN THE BOOK S OF ACCOUNT AND THEREFORE AN AMOUNT OF RS.10 LACS IS DECLARED AS A DDITIONAL INCOME FOR THE ACCOUNTING YEAR 2002-03 RELEVANT TO A.Y. 20 03-04 OVER AND ABOVE THE NORMAL PROFIT. HERE ALSO THE ASSESSEES E XPLANATION NOW IS THAT THE CASH EXPENSES OF RS.9.98 LACS ARE PROPERLY ACCOUNTED FOR AND REFLECTED IN THE BOOKS OF ACCOUNT. THE APPELLANT HA S FILED MONTHWISE DETAILS OF TRANSPORT CHARGES ETC AS WELL AS COPIES OF LEDGER ACCOUNTS FROM 1.4.2002 TO 2.1.2003 BUT THESE AMOUNTS ARE THE REGULAR EXPENSES BEING INCURRED FROM APRIL 2002 ONWARDS AND CANNOT BE THE ENTRIES WHICH ARE RECORDED ON THE LOOSE PAPER. FINA LLY IN QUESTION O. 9 THE APPELLANT WAS SHOWN A HAND WRITTEN PAPER WHE REIN WORK IN PROGRESS OF THE VARIOUS PROJECTS AS ON 10.1.2003 WA S SHOWN AT RS.96.20 LACS WHEREAS AS PER COMPUTER SHEET THE ST OCK IN HAND WAS AT RS.76.02 LACS. IT WAS ACCEPTED BY THE APPELLANT THAT THE WIP NOTED ON THE HAND WRITTEN PAPER IS THE CORRECT FIGURE AND THE DISCREPANCY IN THE FIGURE OF WIP AS PER THE BOOKS OF ACCOUNT AND PAPER IS BECAUSE THE FIGURES OF WIP SHOWN IN THE BOOKS OF ACCOUNT AR E NOT THE ACTUAL FIGURE AND THE DIFFERENCE OF RS.20 LACS WAS DECLARE D AS UNDISCLOSED INCOME OVER AND ABOVE THE REGULAR INCOME FOR THE AC COUNTING PERIOD ENDING 31.3.2003 RELEVANT TO A.Y. 2003-04. THE AO H AS EXAMINED THE APPELLANTS SUBMISSIONS DT. 24.1.2005 IN THIS REGAR D AND HAS FOUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE EVID ENCE TO VERIFY THE CORRECT WIP AND THAT THE ASSESSEE WAS NOT HAVING SE PARATE SET OF ACCOUNTS FOR EACH PROJECT BUT THE EXPENSES INCURRED WERE FROM A COMMON POOL AND THE BIFURCATION OF ALL EXPENSES AS WELL AS THE DIMENSIONS OF WORK RELATING TO ASSESSEES INCOME IS NOT GIVEN. IN THESE CIRCUMSTANCES THE APPELLANTS CONTENTION THA T THE WIP AS ON 31.12.02 AS PER BOOKS OF ACCOUNT OF RS.1 06 34 440/ - IS HIGHER THAN THE AMOUNT NOTED IN THE LOOSE PAPER (I.E. RS.96.20 LACS) AS PER THE COMPUTATION SHEET (RS.76.20 LACS) CANNOT BE ACCEPTE D. THE AO IS CORRECT IN OBSERVING THAT DURING THE COURSE OF THE SURVEY THE ADDITIONAL INCOME OF RS.35 50 000/- WAS OFFERED OVE R AND ABOVE THE ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 5 NORMAL PROFITS AND IS TO BE BROUGHT TO TAX. IN THES E CIRCUMSTANCES THE CONTENTION THAT THE NET PROFIT RATE WOULD INCREASE AS COMPARED TO EARLIER YEARS IS NOT RELEVANT AND THE CONTENTION RE GARDING SECTION 44AD IS NOT ACCEPTABLE SINCE THE PRESENT CASE IS BA SED UPON THE INCOME AS PER BOOKS AND THE ADDITIONAL INCOME OVER AND ABOVE THE NORMAL PROFITS DISCLOSED DURING THE COURSE OF SURVE Y. IN THE RESULT THEREFORE GROUNDS NO. 3 TO 5 ARE DISMISSED. 10. IN PARA 5 6 & 7 THE CIT(A) DISCUSSED THE CASE LAWS HOTEL KIRAN VS. ACIT 82 ITD 453 (PUNE) VIDEOMASTER VS. JCIT 83 ITD 102 (MUM) AND DCIT VS. BHOGILAL MULCHAND 3 SOT 211 (AHD) REJECTING ASS ESSEES CONTENTIONS ON THE STATEMENT GIVEN UNDER SECTION 133A. 11. THE LEARNED COUNSEL REFERRING TO THE PAPER BOOK FIL ED IN THIS REGARD OF VARIOUS EXPENDITURE STATEMENTS AND COPY OF THE STAT EMENT RECORDED UNDER SECTION 133A SUBMITTED THAT THE ASSESSEE WAS A CONT RACTOR FOR ROADS AND IN THE COURSE OF SURVEY THE A.O. EXTRACTED A STATEMENT DISCLOSING AN AMOUNT OF ` 34.50 LAKHS WHICH CONSISTS OF ` 20 LAKHS OF WORK-IN-PROGRESS AND BALANCE ` 14.50 LAKHS OF UNACCOUNTED EXPENDITURE BASED ON THE THREE DOCUMENTS. IT WAS HIS SUBMISSION THAT THE PAPER RELATING TO THE W ORK-IN-PROGRESS HAS NOT BEEN PROVIDED TO THE ASSESSEE EVEN AS OF NOW WHEREA S THE OTHER TWO PAPERS REGARDING THE UNACCOUNTED EXPENDITURE WAS PROVIDED. IT WAS HIS SUBMISSION THAT THE SURVEY CONTINUED WHOLE THROUGH THE NIGHT A ND A STATEMENT WAS TAKEN EARLY IN THE MORNING. ACCORDINGLY THERE IS NO VALIDITY FOR THE CONTENTS OF THE STATEMENT UNLESS THEY ARE SUPPORTED BY OTHER EVIDENCE. HE RELIED ON THE DECISION OF THE HON'BLE KERALA HIGH COURT IN TH E CASE OF PAUL MATHEWS AND SONS VS. CIT 266 ITR 101 AND THE HON'BLE MADRAS HIGH COURT IN THE CASE OF 300 ITR 161 FOR THE PROPOSITION THAT THE ST ATEMENT DOES NOT HAVE ANY EVIDENTIARY VALUE. IT WAS FURTHER SUBMITTED THAT TH ERE IS NO CONCLUSIVE PROOF TO HOLD THAT WHAT WAS STATED WAS CORRECT AND REVENU E HAS NOT PROVED ANY UNACCOUNTED INCOME OR EXPENDITURE HENCE THE RELIAN CE ON THE STATEMENT ALONE CANNOT BE MADE. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED. ACCORDINGLY NO ADDITION CAN BE M ADE AND FOR THIS PROPOSITION RELIED ON THE HON'BLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF CIT VS DHINGRA METAL WORKS 328 ITR 384. IT WAS FURT HER SUBMITTED THAT THE INCOME OF 8% IS GENERALLY ACCEPTED IN THE CASE OF C ONTRACTORS WHEREAS THE INCOME ASSESSED BY THE A.O. IS MORE THAN 8% AND THE GP IN EARLIER YEARS IS ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 6 ALSO LESS. THE LEARNED COUNSEL ALSO SUBMITTED THAT ON THE DAY OF SURVEY THE COMPUTER FLOPPIES OF THE ACCOUNT BOOKS WERE TAKEN A WAY BY THE DEPARTMENT AND IT IS ADMITTED THAT THE COPIES OF THE FLOPPIES ARE AVAILABLE WITH THE DEPARTMENT. IT WAS HIS SUBMISSION THAT ALL THE UNAC COUNTED TRANSACTIONS SO RELIED UPON BY THE REVENUE ARE INDEED ACCOUNTED IN THE BOOKS OF ACCOUNT. AT OUR INSTANCE THE LEARNED COUNSEL ALSO FURNISHED THE CASH BOOKS AND LEDGER FOR THE YEAR UNDER CONSIDERATION FOR EXAMINATION. 12. THE LEARNED D.R. IN REPLY SUBMITTED THAT THE STATEM ENT WAS TAKEN ON OATH AND THE ASSESSEE FOLLOWED IT UP WITH AN AFFIDA VIT SUBSEQUENTLY THE CONTENTS OF THE STATEMENT HAVE NOT BEEN WITHDRAWN S O FAR NOR RETRACTED. IT WAS FURTHER SUBMITTED THAT THERE CAN BE AN ELEMENT OF COERCION IN THE CASE OF SEARCH BUT THERE CANNOT BE ANY COERCION IN THE S URVEY. IT WAS FURTHER SUBMITTED THAT THE SURVEY STARTED LATE IN THE DAY A ND ON FINDING UNACCOUNTED TRANSACTIONS IN THE THREE DOCUMENTS TH E BOOKS OF ACCOUNTS WERE VERIFIED AND AFTER VERIFICATION ONLY THE ASSES SEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN THE DOCUMENTS IN WHICH HE AD MITTED UNACCOUNTED EXPENDITURE AND WORK-IN-PROGRESS. IT WAS HIS SUBMIS SION THAT THE EVIDENCE WAS VERIFIED WITH REFERENCE TO THE BOOKS OF ACCOUNT AND HAS EVIDENTIARY VALUE. SINCE THE SURVEY WAS DONE IN THE MONTH OF JA NUARY 2003 NOTHING PREVENTED THE ASSESSEE IN ACCOUNTING THE TRANSACTIO NS SUBSEQUENTLY AS THE BOOKS OF ACCOUNTS ARE AVAILABLE WITH THE ASSESSEE O NLY. HE RELIED ON THE FINDINGS OF THE CIT(A) IN PARA 8 AND FURTHER SUBMIT TED THAT THE P & L ACCOUNT DOES NOT REFLECT THE CURRENT STATE OF AFFAI RS AND CANNOT BE RELIED ON THE LAST YEARS RESULTS FOR ESTIMATION OF G.P. AS CO NTENTED BY THE LEARNED COUNSEL AS SURVEY WAS CONDUCTED MAINLY ON THE DOUBT THAT ASSESSEES P & L ACCOUNT IS SHOWING LESS PROFITS. HENCE THE PROFIT C AN BE REDUCED FOR THIS YEAR ALSO SINCE THE SURVEY RESULTED IN IDENTIFYING UNACC OUNTED TRANSACTIONS. IT IS ALSO HIS FURTHER SUBMISSION THAT THE PROVISIONS OF SECTION 44AD WILL NOT APPLY TO ASSESSEE AS THE ASSESSEE IS NOT A SMALL TI ME CONTRACTOR AND HAS MAINTAINED BOOKS OF ACCOUNT. 13. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE EVIDE NCES PLACED ON RECORD. AS SEEN FROM THE RECORD IN THE COURSE OF SU RVEY THE A.O. FOUND OUT CERTAIN DOCUMENTS WHICH WERE VERIFIED IMMEDIATELY W ITH REFERENCE TO THE ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 7 BOOKS OF ACCOUNT AND THEN ONLY THE STATEMENT WAS RE CORDED WHICH WAS AS UNDER: - Q.9. I AM SHOWING YOU A HAND WRITTEN PAPER WHEREIN NOTING OF THE WORK IN PROGRESS OF YOUR VARIOUS PROJECTS AS ON 10. 1.2003 ARE MADE. AS PER THIS PAPER THE WORK IN PROGRESS AS ON 10.1.2 003 IS AT RS.96.20 LAKH WHEREAS AS PER COMPUTER SHEET SHOWING STOCK IN HAND RS.76.20 LAKH. THUS THERE IS A DIFFERENCE OF RS.20. 00 LAKH IN WORK IN PROGRESS AS ON 10.1.2003. WHAT IS OUR EXPLANATION R EGARDING THE EXCESS WORK IN PROGRESS? ANS. AS PER MY CALCULATIONS THE WORK IN PROGRESS N OTED ON THE HANDWRITTEN PAPER IS THE CORRECT FIGURE. THE DISCRE PANCY IN THE FIGURE OF WORK IN PROGRESS AS PER BOOKS OF A/CS AND PAPER SHOWN TO ME IS BECAUSE THE FIGURES OF W.IP. SHOWN IN BOOKS OF A/C. ARE NOT THE ACTUAL FIGURE. I THEREFORE OFFER THE DIFFERENCE OF RS.20 LAKH AS STATED ABOVE AS MY UNDISCLOSED INCOME OVER AND ABOVE MY REGULAR INCOME FOR THE ACCOUNTING PERIOD ENDING 31.3.2003 RELEVANT TO AY 2 003-04. I STATE THAT THE EXPENSES ON MY TOTAL WORK EXECUTED DURING THIS YEAR HAVE ALREADY BEEN ACCOUNTED AND DEBITED TO P & L A/C. I WILL NOT CLAIM ANY FURTHER EXPENSES ON THE ABOVE DIFFERENCE OF W.I.P. WHICH I HAVE DECLARED AS MY ADDITIONAL INCOME FOR THIS ACCOUNTIN G YEAR. A.10. I AM SHOWING YOU A LOOSE PAPER FOUND IN OUR P REMISES IN WHICH NOTING REGARDING ADVANCES PAID TO LABOUR CONT RACTORS HAVE BEEN MADE. THE AMOUNT OF SUCH ADVANCES IS AT RS.4 5 0 000/- GIVEN TO VARIOUS LABOUR CONTRACTORS UPTO 10.1.2003. ARE T HESE ADVANCES RECORDED IN YOUR BOOKS OF ACCOUNT AND IF NOT WHAT I S THE REASON THEREOF? ANS. THE NOTINGS MADE ON THE PAPER SHOWN TO ME ARE ADVANCES GIVEN OUT OF THE UNACCOUNTED CASH AND THEREFORE THE Y ARE NOT RECORDED IN THE BOOKS OF A/C & THE PAYMENTS ARE MAD E OUT OF BOOKS TO REGULARISE THESE DISCREPANCY. I HEREBY DECLARE T HIS UNACCOUNTED AMOUNT OF RS.4 50 000/- AS MY ADDITIONAL INCOME FOR THIS ACCOUNTING YEAR OVER AND ABOVE MY REGULAR PROFITS. Q.11. I HAVE FOUND A PAPER ON WHICH NOTHINGS OF CAS H EXPENSES INCURRED ARE MADE. THESE EXPENSES INCLUDE TRANSPORT CHARGES LABOUR CHARGES DIESEL CHARGES BITUMEN PURCHASES IN CASH AND CONSUMABLE PURCHASE IN CASH. THE TOTAL OF THESE EXPENSES IS RE CORDED AT RS.9.98 LAKH. DO YOU HAVE ANY SUPPORTING EVIDENCE FOR THESE EXPENSES AND WHETHER THEY ARE ENTERED IN YOUR BOOKS OF ACCOUNT? ANS. I DO NOT HAVE ANY SUPPORTING EVIDENCE FOR THES E EXPENSES. THEY ARE MADE OUT OF THE UNACCOUNTED CASH. THEY ARE NOT RECORDED IN MY BOOKS OF ACCOUNT AND THEREFORE I DECLARE AN AMOU NT OF RS.10 00 000/- AS MY ADDITIONAL INCOME FOR THE ACCO UNTING YEAR 2002-03 RELEVANT TO AY 203-04 OVER AND ABOVE MY NOR MAL PROFIT. THUS I HEREBY VOLUNTARILY OFFER ADDITIONAL INCOME O F RS.34 50 000/- (RS. THIRTY FIVE LAKH FIFTY THOUSAND) FOR THE PERIO D ENDING 31.3.2003 RELEVANT TO AY 2003-04 OVER AND ABOVE THE NORMAL PR OFIT. ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 8 Q12. DO YOU WANT TO SAY ANYTHING ELSE? ANS. NO EXCEPT THAT THE ADDITIONAL INCOME IS OFFER ED ON ACCOUNT OF THE FINDINGS MADE DURING THE COURSE OF SURVEY AND I T IS OFFERED BY ME VOLUNTARILY AND PROMISE TO PAY TAXES DUE THEIR AND REQUEST THAT ALL THE IMMUNITIES AVAILABLE AS PER LAW MAY BE GRANTED TO ME. THE ABOVE STATEMENT IS TRUE AND CORRECT TO THE BES T OF KNOWLEDGE AND BELIEF. THE STATEMENT IS GIVEN BY ME VOLUNTARIL Y WITHOUT ANY THREAT COERCION OR UNDUE INFLUENCES. THE STATEMENT IS READ BY ME AND STATED THAT IT HAS BEEN RECORDED AS DEPOSED BY ME. 14. THE ABOVE STATEMENT INDICATES THAT VARIOUS TRANSACT ION WERE WRITTEN UPTO 10.01.2003 AND THE A.O. ALSO WORKED OUT THE FI GURES OF WORK-IN- PROGRESS AS PER THE BOOKS OF ACCOUNT AND THEN ONLY COMPARED WITH THE DOCUMENTS AVAILABLE IN THE COURSE OF SURVEY. THIS I NDICATES THAT EXAMINATION OF THE DOCUMENT VIS--VIS BOOKS OF ACCOUNT WERE DON E IN THE COURSE OF SURVEY AND ASSESSEE VOLUNTARILY ADMITTED THE ABOVE INCOMES. NOT ONLY THAT THE ASSESSEE ALSO FILED AN AFFIDAVIT CONFIRMING THE SAME SUBSEQUENT TO THE SURVEY AND SO FAR THERE IS NO RETRACTION EXCEPT MAKING THE CONTENTION THAT THE STATEMENT IS NOT VALID. AS SEEN FROM THE RETURN OF INCOME FILED BY THE ASSESSEE THE ASSESSEES PROFIT AS PER THE BOOKS OF ACCOUNT WERE AT ` 26 55 855/- AND THE AMOUNT OF TAX PAYABLE WERE WORK ED OUT AT ` 8 66 000/- WHEREAS THE ASSESSEE PAID ADVANCE TAX IN THE MONTHS FEBRUARY AND MARCH AS UNDER: - 15.02.2003 ` 3 62 250/- 15.03.2003 ` 3 62 250/- 25.03.2003 ` 3 62 250/- THIS INDICATES THAT ASSESSEE HAS HONOURED THE SURVE Y DECLARATION BY PAYING ADVANCE TAX THE EXTENT OF ` 10 86 750/- AND CLAIMED THE ENTIRE AMOUNT AND PART OF TDS AS REFUND AT THE TIME OF FILING THE RET URN (AMOUNTING TO ` 11 31 364/-). THIS INDICATES THAT THE ASSESSEE HAVI NG DECLARED ADDITIONAL AMOUNT AND ALSO HAVING PAID ADVANCE TAX IN THE MONT H OF FEBRUARY AND MARCH CLAIMED THE ENTIRE AMOUNT AS REFUND ON THE BA SIS OF THE INCOME DECLARED IN THE BOOKS OF ACCOUNT. IN VIEW OF THIS WE ARE OF THE OPINION THAT CONDUCT OF THE ASSESSEE INDICATES THAT THE STATEMEN T RECORDED WAS NOT HONOURED EVEN THOUGH ADMITTED AFTER DUE VERIFICATIO N IN THE COURSE OF SURVEY. ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 9 15. NOW WITH REFERENCE TO THE EVIDENTIARY VALUE OF THE DOCUMENTS FOUND DURING THE SURVEY PAGE 56 IS WITH REFERENCE TO THE ADVANCES PAID TO LABOUR CONTRACTORS WHICH IS AS UNDER: - ASHOK PANDEY 90500.00 KALPESH ENGINEERING 88500.00 ANNAMALE 52500.00 RAJU KAHAR 72000.00 MUNNA 48500.00 PRAVIN 36000.00 AJAY 62000.00 450000.00 16. PAGE 57 IS WITH REFERENCE TO CASH EXPENSES WHICH A RE AS UNDER: 1) TRANSPORT CHARGES IN CASH 3.45 2) LABOUR CHARGES IN CASH 3.62 3) HIRE CHARGES IN CASH 0.88 4) DIESEL PURCHASE IN CASH 0.92 5) BITUMEN PURCHASE IN CASH 0.35 6) CONSUMABLE IN CASH 0.76 TOTAL 9.98 ( SEEMS TO BE IN LAKHS) 17. IT WAS ASSESSEES CONTENTION THAT THESE ADVANCES PA ID TO LABOUR CONTRACTORS ARE ACCOUNTED FOR IN THE BOOKS OF ACCOU NT. THIS ASPECT HAS BEEN EXAMINED WITH REFERENCE TO THE ACCOUNT COPIES OF TH E RESPECTIVE PERSONS. AS FAR AS ASHOK PANDEY OF ` 90 500/- IS CONCERNED THE LEDGER PAGE IS AT PAGE 62 SHOWS DEBIT OF ` 90.500/-. HOWEVER AS ON 10.01.2003 THE ACCOUNT IND ICATES THAT THE DEBIT WAS ONLY ` 71 500/-. LIKEWISE IN KALPESH ENGINEERING WORKS THE DEBIT AT THE END OF THE YEAR WAS ` 88 500/- WHEREAS THE AMOUNT OF ` 10 000/- WAS ADVANCE ON 17 TH FEBRUARY THE POST SURVEY. THEREFORE THE BALANCE OF DEBIT WAS ONLY ` 78 500/- AND NOT ` 88 500/- AS ON THE DATE OF SURVEY. WITH REFERENCE TO THE OTHER AMOUNTS PERTAIN ING TO ANNAMALE RAJU KHAR MUNNA AND PARVIN THESE ARE FRESH ACCOUNTS DU RING THE YEAR WHICH INDICATE THE ADVANCE BEFORE THE SURVEY. HOWEVER IT IS NOT KNOWN WHETHER THESE ADVANCES ARE AVAILABLE IN THE ACCOUNT BOOKS W HICH SEEM TO HAVE BEEN IMPOUNDED BY THE REVENUE AT THE TIME OF SURVEY. HAD THEY BEEN ACCOUNTED ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 10 FOR THE ASSESSEE WOULD NOT HAVE BEEN ADMITTED THE AMOUNTS AS OVER AND ABOVE THE BOOK ENTRIES. THE A.O. HOWEVER HAS NOT EXAMINED THIS ASPECT AND ENTIRELY ADDED THE AMOUNT. CONSIDERING THE DISC REPANCIES IN THE OTHER ACCOUNTS STATED ABOVE WE ARE OF THE VIEW THAT THE ENTRIES WITH REFERENCE TO ADVANCES WERE MADE SUBSEQUENT TO THE SURVEY SO AS T O MAKE THEM ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. SIMILAR IS W ITH REFERENCE TO CASH EXPENSES. EVEN WITH REFERENCE TO WORK-IN-PROGRESS T HERE WAS AN EXCESS OF ` 20 LAKHS IN WORK-IN-PROGRESS. THIS ASPECT WAS ALSO VERIFIED WITH REFERENCE TO THE BOOKS AVAILABLE THEN AND ASSESSE WAS ENQUIRE D. THEN THE ASSESSE ADMITTED THE EXCESS ARRIVED AS INCOME. WE ARE OF TH E CONSIDERED OPINION THAT THE ASSESSE HAD UNEXPLAINED TRANSACTIONS AS ON THE DAY OF SURVEY. SINCE THE ISSUE IS APPRECIATION OF FACTS WE DO NOT CONSIDER IT NECESSARY TO EXAMINE THE CASE LAW RELIED UPON. EVEN OTHERWISE M OST OF THE PRINCIPLE WERE ESTABLISHED IN THE CONTEXT OF SEARCH AND SEIZURE PR OCEEDINGS. AS STATED ABOVE THE STATEMENT WAS RECORDED AFTER EXAMINATION OF BOOKS AND ASSESSEE FOLLOWED UP WITH AN AFFIDAVIT AND ALSO PAYMENT OF T AXES BY WAY OF ADVANCE TAX IN THREE INSTALMENTS. THEREFORE THERE IS NO MER IT IN SUBMISSION THAT THE STATEMENT HAS NO VALIDITY. 18. HOWEVER THE ADDITION OF THE ENTIRE ` 35 LAKHS IS NOT CORRECT AS THE UNACCOUNTED EXPENDITURE MAY HAVE GONE INTO INCREASI NG THE WORK-IN- PROGRESS. THEREFORE TELESCOPING THE EXPENSES UNACCO UNTED TO THE DIFFERENCE IN THE WORK-IN-PROGRESS WOULD HAVE JUSTIFIED IN THE GIVEN SET OF FACTS. THE UNACCOUNTED ADVANCES OF ` 4.50 LAKHS AND UNACCOUNTED CASH EXPENSES OF ` 9.98 LAKHS CAN BE TELESCOPED INTO THE DIFFERENCE IN THE WORK-IN-PROGRESS AS THESE UNACCOUNTED EXPENSES COULD HAVE BEEN SPENT FO R THE PURPOSE OF CONTRACT WORK AND THEREFORE INCREASES THE WORK-IN-P ROGRESS. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE UNACCOUNTED EXPENDIT URE CAN BE TELESCOPED TO THE DIFFERENCE IN THE WORK-IN-PROGRESS AND A ROUND SUM ADDITION OF ` 20 LAKHS WOULD SUFFICE AS AN ADDITION. THE AO IS DIREC TED TO RESTRICT THE ADDITION TO THE AMOUNT OF RS. 20 00 000. CONSEQUEN TLY GROUND NOS. 1 TO 3 PERTAINING TO THE ADDITION OF ` 34 50 000/- WAS PARTIALLY CONFIRMED AND AN ADDITION OF ` 20 00 000/- IS SUSTAINED. THE GROUNDS ARE PARTIALLY ALLOWED. ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 11 19. GROUND NO. 4 PERTAINS TO THE ISSUE OF ADDITION OUT OF TELEPHONE EXPENDITURE. ASSESSEE CLAIMED A TOTAL OF ` 3 89 950/- AND THE A.O. DISALLOWED 10% OF THE EXPENDITURE FOR PERSONAL PURPOSES. THE C IT(A) VIDE PARA 11 OF THIS ORDER CONFIRMED THE SAME STATING THAT ASSESSEE HAS NOT MAINTAINED LOG BOOK. 20. CONSIDERING THE NATURE OF THE BUSINESS WE ARE OF TH E OPINION THAT THERE IS NO NEED TO DISALLOW THE TELEPHONE EXPENDIT URE ON ADHOC BASIS. THEREFORE THE A.O. IS DIRECTED TO DELETE THE ADDIT ION. GROUND IS ALLOWED. 21. GROUND NO. 5 PERTAINS TO THE ISSUE OF VEHICLE EXPEN SES AND DEPRECIATION DISALLOWED AT 10% OF THE TOTAL CLAIM. THE ASSESSEE CLAIMED AN AMOUNT OF ` 2 97 717/- TOWARDS VEHICLE EXPENSES AND ` 2 34 749/- TOWARDS DEPRECIATION OF MOTOR VEHICLES. THUS OUT OF THE TO TAL AMOUNT OF ` 5 32 364/- 10% WAS DISALLOWED FOR PERSONAL USE OF THE CAR. IT WAS THE SUBMISSION OF THE ASSESSEE THAT ALL THESE VEHICLES ARE USED FOR THE P URPOSE OF BUSINESS WHEREAS THE CIT(A) CONFIRMED THE SAME. 22. CONSIDERING THE ARGUMENTS OF THE LEARNED COUNSEL AN D THE LEARNED D.R. WE ARE OF THE OPINION THAT THE EXPENDITURE CAN BE RESTRICTED ONLY TO THE EXTENT OF MOTOR CAR BUT NOT THE JEEP AND MOTOR CYCL E WHICH GENERALLY CAN BE USED ONLY FOR BUSINESS PURPOSES. A.O. IS DIRECTED T O RESTRICT THE DISALLOWANCE TO THE EXTENT OF MOTOR CAR AND DEPRECIATION ALONE T O THE EXTENT OF 10% OF THE CLAIM TOWARDS PERSONAL EXPENDITURE. GROUND IS CONSI DERED PARTLY ALLOWED. 23. GROUND NOS. 6 7 & 8 PERTAINING TO INTEREST ARE CON SEQUENTIAL IN NATURE. NO SEPARATE ADJUDICATION IS REQUIRED. 24. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 16 TH MARCH 2011 ITA NO. 1265/MUM/2006 MR. CHARANJIT SINGH A BHELLA 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXI MUMBAI 4. THE CIT XXI MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.