Shri Babulal K.Daga, Ahmedabad v. The CIT,A'bad-IV,, Ahmedabad

ITA 1368/AHD/2011 | 2006-2007
Pronouncement Date: 31-07-2012 | Result: Allowed

Appeal Details

RSA Number 136820514 RSA 2011
Assessee PAN ADQPD8962R
Bench Ahmedabad
Appeal Number ITA 1368/AHD/2011
Duration Of Justice 1 year(s) 2 month(s) 19 day(s)
Appellant Shri Babulal K.Daga, Ahmedabad
Respondent The CIT,A'bad-IV,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-07-2012
Date Of Final Hearing 03-07-2012
Next Hearing Date 03-07-2012
Assessment Year 2006-2007
Appeal Filed On 11-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER ITA NO. 1368/AHD/2011 ASSESSMENT YEAR :2006-07 BABULAL K. DAGA. PROP. OF PORBANDAR ROAD LINES. 810 P.B. PAREKH TOWER OPP. VANIJYA BHAVAN KANKARIYA AHMADABAD-380006. V/S . COMISSIONER OF INCOME-TAX AHMADABAD-IV AHMADABAD. PAN NO. ADQPD8962R (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI P.F. FAIJ A.R. /BY RESPONDENT SHRI S.K. GUPTA CIT D.R. /DATE OF HEARING 03.07.2012 /DATE OF PRONOUNCEMENT 31.07.2012 O R D E R PER : T.R.MEENA ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT AHMEDABAD-IV AHMEDABAD ORDE R DATED 10.03.2011 FOR ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. CIT AHMEDABAD-IV AHMEDABAD HAS GRIEVOU SLY ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S.263 A ND RESORTING TO PROVISIONS OF SECTION 263 AGAINST THE ORDER PASSED AFTER SCRUTINY U/S. 143(3) ON 31/12/2008 IN THE CASE OF APPELLANT INASM UCH AS THAT THE ORDER PASSED U/S.143(3) IS NEITHER ERRONEOUS NOR PR EJUDICIAL TO THE INTEREST OF REVENUE. ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 2 2. THE LD. CIT AHMEDABAD-IV AHMEDABAD HAS GRIEVOUS LY ERRED IN LAW AND ON FACTS IN DIRECTING TO COMPUTE THE DISCLO SED UNACCOUNTED EXPENDITURE BY INVOKING DEEMING PROVISIONS OF SECTI ON 69 C OF THE I.T. ACT AND TO DISALLOW BUSINESS EXPENSES CLAIMED AGAIN ST UNDISCLOSED INCOME WHICH ARE NOT PROVED TO HAVE BEEN INCURRED F OR EARNING SUCH UNDISCLOSED INCOME WITHOUT APPRECIATING THE FACTS T HAT SUCH ASPECTS HAVE ALREADY BEEN CONSIDERED BY THE ASSESSING OFFIC ER WHILE PASSING THE SCRUTINY ORDER U/S. 143(3) OF THE I.T. ACT. 3. THE ORDER PASSED U/S.263 IS BAD IN LAW AND ON FA CTS IN AS MUCH AS THAT THE ISSUE OF DISALLOWANCE OF EXPENDITURE AN D DETERMINATION OF INCOME HAS ALREADY MERGED IN THE ORDER OF CIT (APPE ALS) AND THEREFORE THE IMPUGNED ORDER U/S. 263 IS WITHOUT JURISDICTION . 2. THE ASSESSEE IS A PROPRIETOR OF M/S PORBANDAR RO AD LINES AND DOING TRANSPORT BUSINESS. THERE WAS A SURVEY U/S 133A OF THE IT ACT ON 07.11.2006 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING T HE COURSE OF SURVEY THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS WERE FOUND DUL Y INVENTORIED AND THE SAME WERE IMPOUNDED VIDE ORDER U/S 133A(3)(IA) OF T HE IT ACT. DURING THE COURSE OF SURVEY THE ASSESSEE HAD DISCLOSED THE AD DITIONAL INCOME OF RS.77 01 958/- OUT OF LIABILITY OF RS.1 03 24 530/- UNDER HEAD UNPAID FREIGHT AS ON 31.03.2006. OUT OF THIS TOTAL LIABILITY THE AP PELLANT HAD PAID RS.77 01 958/- DURING THE FINANCIAL YEAR 2005-06 HAD ADMITTED IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY THAT THE AMOUNT OF RS.7 7 01 958/- UNACCOUNTED INCOME IN THE YEAR I.E. F.Y. 05-06. 3. THE CIT AHMADABAD-IV AHMADABAD ISSUED NOTICE TO THE ASSESSEE U/S 263 OF THE IT ACT ON 21.02.2011 ON THE ADMISSIO N OF DISCLOSURE OF RS.77 01 958/- FOR MEETING OUT OUTSTANDING LIABILI TY FROM UNACCOUNTED INCOME ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 3 AND THE A.O. HAD ACCEPTED UNACCOUNTED INCOME AS BUS INESS INCOME INSTEAD OF COMPUTING INCOME U/S 69C OF THE IT ACT. THE ORD ER OF THE A.O. PASSED U/S 143(3) DATED 31.12.2008 WAS FOUND ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF FAKIR MOHMED HAJI HASSAN VS. CIT (247 ITR 290). AFTER CONSIDERING THE ASSESSEES REPLY AND HONBLE GUJARAT HIGH COURT DEC ISION IN CASE OF FAKIR MOHMED HAJI HASSAN VS. CIT (SUPRA) HAD HELD AS UNDE R:- I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE BUT THE SAME HAS NOT BEEN FOUND SATISFACT ORY. SURVEY U/S. 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 7/11/2006. DURING THE COURSE OF SURVEY PROCEEDINGS THE SURVEY TEAM OBSERVED THAT THE ASSESSEE HAD SHOWN LIABILITY OF R S.1 03 24 530/- AS UNPAID FREIGHT AS ON 31/3/2006 BUT ON VERIFICATION OF VOUCHERS AND PAYMENT DETAILS FOUND DURING THE COURSE OF SURVEY P ROCEEDINGS IT WAS NOTICED THAT AN AMOUNT OF RS.77 01 958/- WAS PAID D URING THE FINANCIAL YEAR 2005-06 BUT THE SAME WAS NOT RECORDED IN ITS B OOKS OF ACCOUNT. THE ASSESSES HAD ADMITTED IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY THAT THE PAIDLIABILITY AMOUNT OF RS. 77 01 9587- WA S FROM UNACCOUNTED INCOME. IN THE P & L ACCOUNT ATTACHED W ITH THE RETURN OF INCOME THE ASSESSEE HAS SHOWN DISCLOSED INCOME UND ER INDIRECT INCOME OF RS.77 01 958/- AS DECLARED DURING SURVEY AS BUSINESS INCOME UNDER THE HEAD 'PROFIT & GAIN' AND TRIED TO NULLIFY THE INCOME DISCLOSED UNDER SURVEY BY CLAIMING VARIOUS BUSINESS EXPENSES. THE A.O. HAS ACCEPTED THE ACCOUNTING SYSTEM OF INCOME A S SHOWN BY THE ASSESSEE WITHOUT ASCERTAINING THE CORRECT NATURE O F INCOME DISCLOSED BY THE ASSESSEE AND THE DECISION OF TERRITORIAL JUR ISDICTIONAL HIGH COURT. IT IS AN ADMITTED FACT THAT EXPENSES PAID OF RS.77 01 958/- WAS NOT FOUND RECORDED IN ITS BOOKS OF ACCOUNT. SECTION 69C OF THE IT ACT SAYS 'WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 4 EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION IF A NY OFFERED BY HIM IS NOT IN THE OPINION OF THE AO SATISFACTORY THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF AS THE EASE MAY BE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FI NANCIAL YEAR.' HON'BLE GUJARAT HIGH COURT HAS DEALT IN DETAIL THE DEEMING PROVISIONS IN THEIR DECISION IN THE CASE OF FAKIR MOHMED HAJI HASAN VS.CIT ( 247 ITR 290). IN THE PRESENT CASE THE ASSESSES HAS ADMITTED TO H AVE PAID OUTSTANDING LIABILITY OF RS.77 01 958/- FROM OUT OF UNDISLOSED INCOME AND IN VIEW OF THAT ADMISSION DEEMING PROVISIONS O F SECTION 69C WAS REQUIRED TO BE INVOKED. HOWEVER THE AO FAILED TO A PPLY HIS MIND AND ACCEPTED THE DISCLOSED INCOME FROM UNACCOUNTED SOUR CES AS BUSINESS INCOME AND IGNORED THE DECISION OF' TERRITORIAL JUR ISDICTIONAL HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN VS.CIT (247 ITR 290). IN FACT UNACCOUNTED EXPENDITURE DISCLOSED DURING THE COURSE OF SURVEY WAS REQUIRED TO BE TAXED UNDER THE DEEMING PROVISIONS U /S.69C OF THE IT ACT UNDER THE HEAD 'INCOME FROM OTHER SOURCES .' THE AO FAILED TO DO SO. AS THE AO FAILED TO TAX THE DISCLOSED UNACCOUNTED E XPENDITURE BY INVOKING DEEMING PROVISIONS OF SECTION 69C AND ALLO WED SET OFF OF BUSINESS EXPENDITURE THE ORDER PASSED BY THE AO IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E TO THIS EXTENT. THEREFORE THE ASSESSMENT ORDER IS SET ASIDE TO THI S EXTENT WITH THE DIRECTION TO COMPUTE THE DISCLOSED UNACCOUNTED EXPE NDITURE BY INVOKING DEEMING PROVISIONS OF SECTION 69C OF THE I.T.ACT AN D BUSINESS EXPENSES CLAIMED AGAINST UNDISCLOSED INCOME WHICH A RE NOT PROVED TO HAVE INCURRED FOR EARNING SUCH UNDISCLOSED INCOME M AY BE DISALLOWED. ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 5 4. BEING AGGRIEVED BY THE ORDER OF CIT THE ASSESSE E IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE FILED THE PAPER BOOK WHICH INCLUDES THE COPY OF NOTICE U/S 263 COPY OF ORDER OF CO-ORDINATE BENCH ITAT C BENCH FOR A.Y. 06-07 IN ASSESSEES CASE COPY OF THE CIT(A) ORDER FOR A.Y. 06-07 COPY OF VARIOUS NOTICES ISSUED BY THE A.O. AND REPLY GIVEN BY THE ASSESSEE AND COPY OF AUDIT REPORT. LD. COUNSEL HAS DRAWN OUR ATTENTI ON ON THE QUERY LETTER DATED 02.12.2008 ISSUED BY THE A.O. IN WHICH THE DISCLOSU RE OF RS.77 LACS DURING THE COURSE OF SURVEY HAS BEEN CONSIDERED BY THE A.O. THE A.O. QUERY IS REPRODUCED AS UNDER: PLEASE REFER.ON GOING THROUGH THE COMPUTATIO N OF BUSINESS AND PROFESSION IT IS REVEALED THAT YOU HAV E SHOWN A LOSS OF 58 76 290/- AND SURPRISINGLY THIS IS ARRIVED AFTER INCLUDING DISCLOSURE UNDER SURVEY TOWARDS EXCESS LIABILITIES CREATED AND FOUND DURING THE COURSE OF SURVEY PROCEEDINGS CONDUCTED IN YOUR BUSI NESS PREMISES ON 07-11-2006..THE TURNOVER IS RS.11.68 CRORES. AFTER RAISING QUERY BY THE A.O. HE HAD GIVEN FINDI NGS IN THE ASSESSMENT ORDER AND NO ADVERSE INFERENCE HAD BEEN DRAWN BY THE A.O. IN ORIGINAL ASSESSMENT ORDER ON ACCOUNT OF DISCLOSURE MADE DURING THE COUR SE OF SURVEY. THE A.O. MADE FOLLOWING ADDITIONS: (I) OUT OF MAJOR OPERATIONAL EXPENSES - RS. 14 60 450/- (II) DISALLOWANCE U/S. 40(A) (IA) - RS. 53 824/- (III) DISALLOWANCE OUT OF PERSONAL EXPENSES - RS. 1 32 456/- (IV) BAD DEBT - RS.1 16 13 286/- THE LD. A.O. HAD OBSERVED THAT: ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 6 2.1 DURING THE COURSE OF SURVEY PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN A LIABILITY A SUM OF RS. 1 03 24 530/- AS UNPAID FREIGHT AS ON 31-03-200. ON VERIFICATION OF VOUCHER S AND PAYMENTS DETAILS FOUND DURING THE COURSE OF SURVEY PROCEEDIN GS IT IS NOTICED OUT OF THAT AN AMOUNT OF RS. 77 01 958/- PAID DURING THE FINANCIAL YEAR 2005- 06 HAS ADMITTED IN HIS STATEMENT RECORDED DURING T HE COURSE OF SURVEY THAT THE AMOUNT OF RS. 77 01 958 UNACCOUNTED INCOME IN THE YEAR I.E. F.Y 2005-06. THE ASSESSEE HAS NOT FILED HIS RETURN OF INCOME FOR A.Y 2006-07 AND HAS PROMISED THAT HE WILL FILE THE RETU RN OF INCOME ON OR BEFORE 31.12.2006 SHOWING UNDISCLOSED INCOME OF RS . 77 01 958/- AS DECLARED IN ADDITION TO HIS REGULAR INCOME 8 PAY TAX ACCORDINGLY. THE FACT BEING A SURVEY WAS CARRIED OUT AND ASSESSE E HAS TO FILE HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-0 7 SHOWING MORE INCOME THAN THE INCOME ALREADY ADMITTED/ DISCLOSED /IDENTIFIED IN THE COURSE OF SURVEY I.E. 77.01 958/-. BUT SURPRISINGLY THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR THE A.Y. 2006-07 SHOWING I NCOME OF RS. 69 27 336/- ( LESS THAN THE DISCLOSURE MADE DURING THE SURVEY/ADDITIONAL INCOME OFFERED) 2.2 AS PER THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS SHOWN GROSS RECEIPT OF RS.11 68 24 064/- AGAINST WHICH SHOWN GR OSS PROFIT OF RS.2 94 53 387/- AND ADDED RS.86 80 423/- AS INDIRE CT INCOME WHICH INCLUDED 77 01 958/- AND FINALLY HE HAS SHOWN INDIR ECT EXPENSES OF 4 40 10 100/-. THUS A NET LOSS OF 58 76 289/- EVEN AFTER CONSIDERING 77 01 958/-. HE FURTHER CLAIMED THAT THESE ADDITIONS WERE CHALLE NGED BEFORE THE LD. CIT(A) AND CIT(A) HAD ALLOWED THE APPEAL PARTLY IN FAVOUR OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE CONFIRMATION MADE BY THE CI T RS.14 60 450/- I.E. 1/5 TH DISALLOWANCE OUT OF FREIGHT ACCOUNT TRIP EXPENSES DIESEL EXPENSES TYRE EXPENSES AND TRUCK EXPENSES IN TOTAL RS.9 73 63 349 /-. THE HONBLE ITAT C ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 7 BENCH HAD DECIDED THIS ISSUE AND CONFIRMED THE ADDI TION PARTLY. THE ITAT C BENCH VIDE ITS ORDER IN ITA NO. 2638/AHD/2009 DATE D 16.12.2011 HAS HELD AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS EVIDENT THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE NOT VERIFIABLE AND CANNOT BE RELIED UPON COMPLETELY FROM THE BILLS AND VOUCHERS PRODUCED BEFORE THE REVENUE AUTHORITIES. THERE IS EVERY POS SIBILITY OF CERTAIN ADJUSTMENTS MADE REMAINS TO BE UNDETECTED. HOWEVER ON SIMILAR CIRCUMSTANCES FOR THE EARLIER ASSESSMENT YEAR 2003- 04 THE LD. CIT(A) AFTER CONSIDERING THE ISSUE HAD DELETED SUCH ADDIT ION. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED THAT AN AD HOC ADDITION OF 0.5% MAY BE MADE INSTEAD OF 1.5% MADE BY THE AO TO MEET THE ENDS OF JUSTICE. IT IS ORDERED ACCORDINGLY. LD. COUNSEL FURTHER ARGUED THAT THIS ISSUE HAS BEEN CONSIDERED BY THE A.O. AND ASSESSMENT HAS BEEN MERGED WITH THE ORDER OF TH E CIT AND WAS PENDING BEFORE THE ITAT. THE CIT HAS NO JURISDICTION TO P ASS ORDER U/S.263 OF THE IT ACT AS PROCEEDING HAS BEEN MERGED WITH THE APPELLAT E AUTHORITY. HE FURTHER ARGUED THAT THE ORDER OF THE CIT IS CHANGE OF OPINI ON. THUS THE ORDER PASSED BY THE CIT U/S 263 IS LIABLE TO BE SET ASIDE. 5. FROM THE SIDE OF THE REVENUE LD. CIT D.R. RELIE D ON THE ORDER OF THE CIT. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND HEARD THE ARGUMENTS FROM BOTH THE SIDES. THE SURVEY DISCLOSU RE HAS BEEN CONSIDERED BY THE A.O. HE HAS CONSIDERED UNPAID FREIGHT AND LIABILITY AND NO ADDITION WAS MADE ON ACCOUNT OF OUTSTANDING LIABILITY FROM UNACCOUNTED INCOME U/S ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 8 69C OF THE IT ACT. THE CIT HAS PASSED THE ORDER U/ S 263 ON THE BASIS OF LIABILITY OF RS.1 03 24 530/- HAS BEEN SHOWN AS UNP AID FREIGHT AS ON 31.03.2006 AND LIABILITY PAID RS.77 01 958/- DURING THE F.Y. 05-06 WHICH HAS BEEN CONSIDERED BY THE A.O. THE LD. CIT HAS FRAMED DIFFERENT OPINION ON SIMILAR FACTS CONSIDERED BY THE A.O. IN ASSESSMENT ORDER. THEREFORE THE CIT ORDER U/S 263 IS A CHANGE OF OPINION. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT DATED 10.03.2011. 7. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMB ER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ) ) 12( / DR ITAT AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ 8/ 1 ': ) 12( ; ITA NO. 1368/AHD/2011 A.Y. 06-07 PAGE 9 STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 25.07.2012 & 30.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 25.07.2012 4) DATE OF CORRECTION 30.07.2012 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 31.07.2012 7) ORDER UPLOADED ON 31.07.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 31.07.2012