Shri Jagatkumar Satishbhai Patel, Mehsana v. The Income tax Officer,Ward-1,, Mehsana

ITA 1675/AHD/2008 | 2001-2002
Pronouncement Date: 16-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 167520514 RSA 2008
Assessee PAN RYEAR2011A
Bench Ahmedabad
Appeal Number ITA 1675/AHD/2008
Duration Of Justice 3 year(s) 6 month(s) 2 day(s)
Appellant Shri Jagatkumar Satishbhai Patel, Mehsana
Respondent The Income tax Officer,Ward-1,, Mehsana
Appeal Type Income Tax Appeal
Pronouncement Date 16-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 16-11-2011
Date Of Final Hearing 27-12-2010
Next Hearing Date 27-12-2010
Assessment Year 2001-2002
Appeal Filed On 14-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH .. ! ! ! ! . .. . . .. .'#$% '#$% '#$% '#$% & & & & ' ' ' ' BEFORE S/SHRI T.K. SHARMA JUDICIAL MEMBER AND A.K. GARODIA ACCOUNTANT MEMBER ITA NO. APPELLANT RESPONDENT 2253/AHD/2007 A.Y.2001-2002 ITO WARD-1 MEHSANA. VS. SHRI JAGATKUMAR SATISHBHAI PATEL BY LEGAL HEIR : JYOTIBEN J. PATEL PROP. LUNA ENGG. WORKS THIRD LINE PARA MEHSANA. 646/AHD/2008 A.Y.2000-2001 JAGATKUMAR SATISHBHAI PATEL BY LEGAL HEIR : JYOTIBEN J. PATEL (PROP. LUNA ENGG. WORKS) THIRD LANE PARA MEHSANA. VS. ITO WARD-1 MEHSANA. 2798/AHD/2007 A.Y.2001-02 JAGATKUMAR SATISHBHAI PATEL BY LEGAL HEIR : JYOTIBEN J. PATEL (PROP. LUNA ENGG. WORKS) THIRD LANE PARA MEHSANA. VS. ITO WARD-1 MEHSANA. 1675/AHD/2008 A.Y.2001-02 JAGATKUMAR SATISHBHAI PATEL BY LEGAL HEIR : JYOTIBEN J. PATEL (PROP. LUNA ENGG. WORKS) THIRD LANE PARA MEHSANA. VS. ITO WARD-1 MEHSANA. 360/AHD/2009 A.Y.2000-01 JAGATKUMAR SATISHBHAI PATEL BY LEGAL HEIR : JYOTIBEN J. PATEL (PROP. LUNA ENGG. WORKS) THIRD LANE PARA MEHSANA. VS. ITO WARD-1 MEHSANA. ( ) * / REVENUE BY : SHRI P.R. GHOSH -. ) * / ASSESSEE BY : SHRI S.V. AGRAWAL 2253/AHD/2007 AND 4 OTHERS -2- / 0 ) .&/ DATE OF HEARING : 20 TH OCTOBER 2011 1#2 ) .&/ DATE OF PRONOUNCEMENT : 16 TH NOVEMBER 2011 / / / / O R D E R PER A.K. GARODIA ACCOUNTANT MEMBER : OUT OF BUNCH OF THESE FIVE APPEALS THERE ARE TWO APPEALS OF THE ASSESSEE FOR A.Y.2000-2001 OUT OF WHICH ONE APPEAL IS IN QUANTUM PROCEEDINGS AND OTHER APPEAL IS IN PENALTY PROCEEDI NGS. IN A.Y.2001-02 THERE ARE CROSS- APPEALS OF THE ASSESSEE AND THE REVENUE IN QUANTUM AND THE REMAINING ONE APPEAL IS OF THE ASSESSEE IN RESPECT OF PENALTY PROCEEDINGS. ALL TH ESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. FIRST WE NOTE DOWN ALL THE RELEVANT FACTS OF THE PRESENT CASE. IN A.Y.2000-2001 THE RETURN OF INCOME WAS FILED BY THE ASSESSEE AND NET LOSS OF RS.1 22 100/- WAS DISCLOSED BY THE ASSESSEE IN RESPECT OF THE SALE SHOWN BY THE ASSESS EE OF RS.39 45 105/-. AS PER THE ASSESSMENT ORDER OF THAT YEAR THE AO DID NOT ACCEP T THE CLAIM OF THE ASSESSEE REGARDING THE SALES AND HE HELD THAT THE SALE OF ONLY RS.5 04 400 /- IS ACCEPTABLE. AGAINST THE LOSS DISCLOSED BY THE ASSESSEE OF RS.1 22 100/- THE AO ESTIMATED THE INCOME OF THE ASSESSEE AT RS.36 506/- ON THE BASIS THAT PROFIT AT 8% WAS ESTIMATED ON THE LABOUR CONTRACT RECEIPTS AND RENT RECEIPTS OF RS4 56 331.00. APART FROM THIS THE AO MADE ADD ITION OF RS.10 09 000/- UNDER SECTION 68 IN RESPECT OF UNSECURED LOANS AND ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.10 45 500/- AS AGAINST THE LOSS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME AT RS.1 22 100/-. BEING AGGRIEVED THE ASSESSEE CARRI ED THE MATER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE I S IN FURTHER APPEAL BEFORE US IN THE QUANTUM PROCEEDINGS. IN THE MEANTIME THE AO INITI ATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) IN RESPECT OF THE ADDITION MADE BY HIM OF RS.10 09 000/- UNDER SECTION 68 AND HE IMPOSED PENALTY OF RS.3 16 415/-. AGAINST THIS PE NALTY ORDER ALSO THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WIT HOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US IN RESPECT OF PENALTY PROC EEDINGS ALSO. 2253/AHD/2007 AND 4 OTHERS -3- 3. IN A.Y.2001-2002 THE RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLARING LOSS OF RS.2 62 705/- IN RESPECT OF SALES CLAIMED BY THE AS SESSEE OF RS.39 55 810/-. THE GP SHOWN BY THE ASSESSEE WAS AT RS.5 07 751/-. ON PAGE NO.1 0 OF THE ASSESSMENT ORDER OF THIS YEAR THE AO ESTIMATED THE GP OF THE ASSESSEE AT RS.8 00 000/ - AT THE RATE OF 20% ON ESTIMATED SALES OF RS.40 00 000/- AND IN THIS MANNER HE MADE ADDITION OF RS.2 92 249/-. IN ADDITION TO THIS THE AO HELD THAT THE CLAIM OF THE ASSESSEE REGARDING BA NK INTEREST EXPENSES OF RS.5 74 411/- IS NOT ALLOWABLE BECAUSE IT IS NOTED BY HIM THAT IN TH E BALANCE SHEET OF THE ASSESSEE NO BANK LOAN IS APPEARING. ALTHOUGH THE AO HAS STATED AT P AGE NO.11 OF THE ASSESSMENT ORDER THAT SUCH DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT O F BANK INTEREST EXPENSES OF RS.5 74 411/- IS NOT ALLOWABLE BUT IN THE FINAL COMPUTATION OF T HE INCOME OF THE ASSESSEE AT PAGE NO.18 OF THE ASSESSMENT ORDER HE DID NOT MAKE ANY SUCH ADDI TION BUT IT WAS RECTIFIED BY PASSING AN ORDER U/S 154. THE AO ALSO MADE DISALLOWANCE OF RS .1 00 000/- OUT OF LABOUR EXPENSES OF RS.8 48 506/- CLAIMED BY THE ASSESSEE AGAINST THE R ECEIPT OF LABOUR CONTRACT INCOME OF RS.8 18 780/-. THE AO ALSO MADE DISALLOWANCE OF RS .27 687/- OUT OF VEHICLE EXPENSES AND RS.14 907/- OUT OF TELEPHONE EXPENSES. IN ADDITION TO THIS THE AO ALSO MADE ADDITION OF RS.31 59 000/- IN RESPECT OF UNSECURED LOANS AND HE MADE ADDITION OF RS.81 LAKHS IN RESPECT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 IN RESP ECT OF CASH DEPOSIT BY THE ASSESSEE IN VARIOUS BANK ACCOUNTS FOR MAKING PAYMENT TO STATE B ANK OF INDIA AS PER ONE TIME SETTLEMENT (OTS) SCHEME REGARDING THE OLD LOAN LIAB ILITY. IN THIS MANNER THE AO COMPLETED THE ASSESSMENT IN THIS YEAR AT A TOTAL INCOME OF RS .1 14 31 140/- AS AGAINST THE LOSS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME AT RS.2 62 705/-. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A). THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE AO IN RESPECT OF GP OF RS.2 92 249/. THE REVENUE HAS RAISED GROUND FOR DELETION OF ADDITION MADE BY THE AO OF RS.5 74 411/- ON ACCOUNT OF BANK INTEREST AND ALSO FOR DELETION OF ADDITION MADE BY THE AO OF RS. 1 00 000/- ON ACCOUNT OF LABOUR EXPENSES. OUT OF THE ADDITION MADE BY THE AO OF RS.31.59 LAKH S IN RESPECT OF UNSECURED LOAN AND OF RS.81 LAKHS IN RESPECT OF CASH DEPOSIT IN VARIOUS B ANK ACCOUNTS MADE BY THE AO UNDER SECTION 68 RELIEF WAS ALLOWED BY THE LEARNED CIT(A ) TO THE EXTENT OF RS.30.09 LAKHS OUT OF 2253/AHD/2007 AND 4 OTHERS -4- ADDITION OF UNSECURED LOAN AND RELIEF WAS ALSO ALLO WED OF RS.41 17 600/- OUT OF ADDITION MADE BY THE AO OF RS.81 LAKHS IN RESPECT OF CASH DE POSIT IN VARIOUS BANK UNDER SECTION 68. 4. THE REVENUE HAS RAISED THESE TWO ISSUES ALSO BEF ORE US IN THE APPEAL FILED BY IT. IN THE APPEAL FILED BY THE ASSESSEE IN THE QUANTUM PROCEED INGS FOR A.Y.2001-02 THE ASSESSEE HAS RAISED TWO ISSUES I.E. REGARDING CONFIRMATION OF TH E ADDITION MADE BY THE AO OF RS.1 50 000/- RECEIVED FROM V.K. CHAUDHRY AND CONFI RMATION OF RS.39 82 4000/- BEING FUNDS DEPOSITED IN VARIOUS BANKS FOR PAYMENT OF BAN K LOAN UNDER OTS SCHEME. IN ADDITION TO THIS THE AO INITIATED PENALTY PROCEEDINGS FOR A .Y.2001-02 IN RESPECT OF TWO ADDITIONS CONFIRMED BY THE LEARNED CIT(A) OF RS.1 50 000/- OU T OF UNSECURED LOAN AND OF RS.39 82 400/- OUT OF THE ADDITION MADE BY THE AO I N RESPECT OF CASH DEPOSIT IN BANK. THE AO IMPOSED THE PENALTY OF RS.14 50 472/- IN RESPECT OF THESE TWO ADDITIONS. AGAINST THE PENALTY ORDER ALSO IN THIS YEAR THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US IN RESPECT OF PENALTY PROCEEDINGS ALSO. 5. IT IS SUBMITTED BY THE LEARNED AR BEFORE US THAT IN RESPECT OF A.Y.2001-02 THE SALES OF THE ASSESSEE IS SUPPORTED BY THE SALES-TAX ASSESSME NT ORDER ALSO COPY OF WHICH IS AVAILABLE AT PAGE NO.100 OF THE PAPER BOOK. HE ALSO SUBMITTED T HAT THE AO HAS ALSO ESTIMATED THE SALES OF THE ASSESSEE IN THIS YEAR AT RS.40 LAKHS WHICH IS N EAR TO THE SALE DISCLOSED BY THE ASSESSEE AND THEREFORE THE SALES OF THIS YEAR SHOULD BE ACCEPTE D AS CLAIMED BY THE ASSESSEE. HE ALSO SUBMITTED THAT THE DEPOSIT IN BANK IS IN A.Y.2001-0 2 AND FUND FLOW STATEMENT FOR THIS ASSESSMENT YEAR IS AVAILABLE AT PAGE NOS.96 TO 99 O F THE PAPER BOOK AND FUND FLOW STATEMENT FOR A.Y.2000-2001 IS AVAILABLE IN THE ANNEXURE FILE D WITH THE WRITTEN SUBMISSIONS FILED AS PER THE DIRECTIONS OF THE BENCH. HE SUBMITTED THAT THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR ENDING AS ON 31-3-2000 IS AVAILABLE AT PAGE NO.13 O F THE PAPER BOOK AND THE BALANCE SHEET ENDING AS ON 31-3-2001 IS AVAILABLE AT PAGE NO.9 OF THE PAPER BOOK. HE SUBMITTED THAT AS PER THE BALANCE SHEET AS ON 31-3-2000 SUNDRY CREDITORS WERE ONLY RS.36 169/- AND THE SAME AS PER THE BALANCE SHEET AS ON 31-3-2001 IS RS.2 28 52 1/- AND HENCE IN RESPECT OF A.Y.2001-02 2253/AHD/2007 AND 4 OTHERS -5- ALSO EVEN IF THE SALE OF THE ASSESSEE IS NOT ACCEP TED IN FULL IT WILL HAVE NO IMPACT ON THE AVAILABILITY OF CASH WITH THE ASSESSEE IN A.Y.2001- 02 BECAUSE IF THE SALE HAS TO BE IGNORED THE PURCHASES ARE ALSO TO BE IGNORED IN A.Y.2000-20 01 AS HAS BEEN DONE BY THE AO AND HENCE THE CASH IN HAND WILL GO DOWN ON ACCOUNT OF REDUCTION IN SALE BUT CASH IN HAND WILL BE GO UP ON ACCOUNT OF REDUCTION IN PURCHASES AND N ET IMPACT ON CASH POSITION WILL BE NIL OR NEGLIGIBLE. HE SUBMITTED THAT IN THIS FACTUAL POSITION THE DELETION MADE BY THE AO OF RS.81 LAKHS IN RESPECT OF CASH DEPOSIT WITH THE BAN K IS NOT SUSTAINABLE. HE FURTHER SUBMITTED THAT OUT OF THIS DEPOSIT IN BANK OF RS.81 LAKHS IN RESPECT OF PAYMENT TO STATE BANK OF INDIA UNDER OTS THE AO ALSO ACCEPTED IN REMAND PROCEEDIN GS THAT THE DEPOSIT IN BANK OF RS.20 LAKHS IN ON ACCOUNT OF CHEQUE DEPOSIT FOR UNSECURED LOAN RECEIVED FROM SHRI V.K. CHAUDHARI. HE SUBMITTED THAT COPY OF THE REMAND REPORT OF THE AO IS AVAILABLE AT PAGE NO.101 TO 112 OF THE PAPER BOOK AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO PAGE NO.11 OF THE REMAND REPORT WHICH IS AVAILABLE AT PAGE NO.111 OF THE PAPER BOOK WHERE THE AO HAS STATED THAT OUT OF TOTAL LOAN OF RS.81 LAKHS AN AMOUNT OF RS.20 LAKHS HAS B EEN PROVED AND THE BALANCE AMOUNT OF RS.61 LAKHS HAS NOT BEEN PROVED. HE HAS SUBMITTED THAT IN VIEW OF THIS FACTUAL POSITION THAT THE SALE OF THE ASSESSMENT YEAR 2001-02 ARE ACCEPTE D BY THE AO AND EVEN IF THE SALE OF A.Y.2001-02 ARE NOT ACCEPTED IT WILL NOT HAVE ANY IMPACT ON THE CASH POSITION IN VIEW OF IGNORING OF THE PURCHASES AND THEREFORE THE ADDITI ON MADE BY THE AO ON THIS ACCOUNT IS NOT JUSTIFIED. 6. REGARDING THE ADDITION MADE BY THE AO IN RESPECT OF UNSECURED LOAN OF RS.10.09 LAKHS IN A.Y.2000-01 IT WAS SUBMITTED THAT NO SUCH ADDIT ION IS JUSTIFIED BECAUSE THE LOAN IN QUESTION WERE NOT RECEIVED DURING THIS YEAR AND THE SE ARE OPENING BALANCE. IN SUPPORT OF THIS CONTENTION OUR ATTENTION WAS DRAWN TO PAGE NO.17 O F THE PAPER BOOK FOR A.Y.2001-02 IN WHICH A CHART OF UNSECURED LOAN IS GIVEN AND AS PER THIS CHART A LOAN OF RS.50000/- ONLY WAS RECEIVED IN THIS YEAR AND REMAINING RS.9.50 LAKHS W ERE OPENING BALANCE AS ON 1-4-1999. HE ALSO SUBMITTED THAT COPY OF THE LEDGER ACCOUNT OF T HE FOUR LOAN CREDITORS IS ALSO AVAILABLE AT PAGE NOS.18 TO 20 OF THE PAPER BOOK AND AS PER THE SAME ALSO ONLY RS.50 000/- WAS RECEIVED DURING THIS YEAR FROM ONE LOAN CREDITOR I.E. JAGATK UMAR S. PATEL (HUF) IT IS SUBMITTED THAT 2253/AHD/2007 AND 4 OTHERS -6- THIS IS ALSO BY WAY OF ACCOUNT PAYEE CHEQUE AND IDE NTITY OF THE LOAN CREDITORS IS NOT IN DOUBT BECAUSE THE KARTA OF HUF IS ASSESSEE HIMSELF. 7. REGARDING VARIOUS OTHER ADDITIONS DELETED BY THE LEARNED CIT(A) IN A.Y.2001-02 IN RESPECT OF BANK INTEREST OF RS.5 74 411/- LABOUR C HARGE OF RS.1 LAKH ETC. HE PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A). AS AGAINST THI S THE LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT AND PENALTY ORDERS FOR BOT H THESE YEARS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD AND HAVE GONE THOUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT IN A. Y. 2000 01 THE A. O. HAS ACCEPTED THE SALES OF THE ASSESSEE TO THE EX TENT OF RS. 504 400/- ONLY AS AGAINST RS. 39 45 105/- CLAIMED BY THE ASSESSEE AND ASSESSED TH E INCOME OF THE ASSESSEE AT RS. 36 506/- BEING 8% OF RECEIPT SHOWN BY THE ASSESSEE ON ACCOUN T OF RENT AND LABOUR CONTRACT AS AGAINST LOSS OF RS. 147 107.27 AS PER THE PROFIT & LOSS ACC OUNT FILED BY THE ASSESSEE. OUT OF THE BALANCE SALES ONE SALE OF RS. 16 18 085/- IS CLAIM ED TO HAVE BEEN MADE TO A GOVERNMENT DEPARTMENT I.E. DEPT. OF MINES & GEOLOGY DEPARTMENT GOVARDHAN VILLAS ROAD UDAIPUR RAJASTHAN. COPY OF THE RELEVANT BILL IS AVAILABLE I N PAPER BOOK. IT IS NOT THE CASE OF THE A. O. THAT ON ENQUIRY IT WAS STATED BY THIS GOVERNMENT D EPARTMENT THAT NO SUCH SALE HAS TAKEN PLACE. UNDER THESE FACTS WE FEEL THAT THIS SALE SH OULD ALSO BE ACCEPTED AS GENUINE. FOR THE REMAINING SALES OF THIS YEAR WE ARE OF THE CONSIDE RED OPINION THAT FOR WANT OF SUPPORTING EVIDENCES 50% SALES SHOULD BE ACCEPTED. HENCE TOT AL SALES TO BE ACCEPTED COMES TO RS. 504 400/- + RS. 16 18 085/- + 50% OF (RS. 39 45 105 /- - 504 400/- - 16 18 085/-). THIS COMES TO RS. 30 33 795/-. THE SECOND ALLEGATION OF THE A. O. IS THAT THERE IS NO OPENING STOCK AS AGAINST AN OPENING STOCK OF RS. 34 91 710/- CLAIMED BY THE ASSESSEE. IN THIS REGARD WE FEEL THAT THIS ACTION OF THE A. O. IS ALSO WITHOUT ANY B ASIS BECAUSE WHEN THE A.O. INITIATED THE PROCEEDINGS U/S 148 FOR THIS YEAR ON 06.09.2005 HE COULD HAVE INITIATED SUCH PROCEEDINGS FOR A. Y. 1999 2000 ALSO BUT HE HAS NOT DONE SO. IT I S SETTLED POSITION OF LAW THAT THE OPENING STOCK OF A YEAR HAS TO BE SAME AS THE CLOSING STOCK OF THE PRECEDING YEAR. WITHOUT DISTURBING THE CLOSING STOCK OF A. Y. 1999 2000 THE A. O. C ANNOT SAY THAT THE OPENING STOCK OF THE 2253/AHD/2007 AND 4 OTHERS -7- PRESENT YEAR IS NIL WHEN AS PER THE P/L ACCOUNT AND BALANCE SHEET FOR THE YEAR ENDED ON 31.03.1999 CLOSING STOCK WAS SHOWN AT RS. 34 91 71 0/- AS PER COPY OF BALANCE SHEET AND P/L ACCOUNT OF THAT YEAR AVAILABLE IN THE PAPER BOO K. MOREOVER EVEN ON THE ACCEPTED SALES OF THE ASSESSEE OF RS. 504 400/- THE A. O. WORKED OUT NET LOSS OF RS. 73 202.27 AS PER REVISED P/L ACCOUNT PREPARED BY THE A. O. ON PAGE 1 3 OF THE ASSESSMENT ORDER BUT IGNORED THE LOSS WHILE COMPUTING THE TOTAL INCOME ON PAGE 1 7 OF THE ASSESSMENT ORDER. THIS SHOWS THAT THE A. O. HIMSELF HAS NOT ACCEPTED AND ACTED U PON THIS REVISED P/L ACCOUNT PREPARED BY HIM ON PAGE 13 OF THE ASSESSMENT ORDER. IN THIS P/L ACCOUNT THE A. O. HAS ACCEPTED SALES AT RS. 504 400/- AND CLOSING STOCK OF RS. 782 950/- AN D NET LOSS IS COMPUTED BY HIM AT RS.73 202.27 BUT TOTAL INCOME WAS COMPUTED BY HIM A T RS. 36 506/- BY IGNORING THIS LOSS AND WITHOUT MAKING ANY COMMENT AS TO WHY HE IS IGNORING THIS LOSS COMPUTED BY HIMSELF AND WITHOUT CARRYING THIS EXERCISE TO ITS LOGICAL CONCL USION TO FIND OUT CASH IN HAND AS ON 31.03.2000 BY DRAWING THE CONSEQUENTIAL BALANCE SHE ET THE A. O. JUMPED TO THE CONCLUSION THAT THERE IS NO CASH IN HAND AS ON 31.03.2000. HEN CE WE FEEL THAT THIS EXERCISE STARTED BY THE A. O. SHOULD BE TAKEN TO ITS LOGICAL CONCLUSION BY DRAWING CONSEQUENTIAL BALANCE SHEET AS ON 31.03.2000 AND THEN IT SHOULD BE SEEN AS TO H OW MUCH IS THE CASH IN HAND AS ON 31.03.2000. IN NORMAL CIRCUMSTANCES WE WOULD HAVE RESTORED THE MATTER BACK TO THE FILE OF THE A. O. TO CARRY OUT THIS EXERCISE BUT IN THE PRE SENT CASE THE ASSESSEE IS NO MARE AND HIS LEGAL HEIR IS HIS WIDOW AND LONG TIME HAS ALREADY P ASSED BECAUSE THE ASSESSMENT YEARS INVOLVED ARE 2000 01 AND 2001 02 AND WE ARE TOW ARDS THE END OF THE CALENDAR YEAR 2011 AND HENCE WE FEEL IT PROPER TO CARRY OUT THIS EXER CISE OURSELVES. WE DRAW REVISED P/L ACCOUNT ON THE BASIS OF ACCEPTING THE OPENING STOCK AS PER ABOVE DISCUSSION AND BY ACCEPTING SALES OF RS. 30 33 795/- AS PER ABOVE DIS CUSSION AND KEEPING THE PROFIT AS PER THE ASSESSMENT ORDER AND THE CONSEQUENTIAL BALANCE SHEE T AS ON 31.03.2000 IS ALSO DRAWN ALONG WITH THE BALANCE SHEET SUBMITTED BY THE ASSESSEE ON PAGE 13 OF THE PAPER BOOK WHICH IS AS UNDER:- 2253/AHD/2007 AND 4 OTHERS -8- REVISED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED A S ON 31.03.2000 EXPENSES AS PER ASSESSEE REVISED BY US INCOMES AS PER ASSESSEE REVISED BY US OPENING STOCK 34 91 710.00 34 91 710.00 SALES 39 45 105.00 30 33 795.00 PURCHASE & EXPENSES 57 23 303.00 46 28 317.00 LABOUR CONT. INCOME 1 77 731.00 1 77 731.00 NET PROFIT -1 47 170.27 36 506.00 RENT IN COME 2 78 600.00 2 78 600.00 CLOSING STOCK 46 66 407.00 46 66 407.00 90 67 842.73 81 56 533.00 90 67 843.00 81 56 533.00 NOTES:- (1) CLOSING STOCK IS TAKEN AS SAME SINCE OPENING ST OCK IS NOT DISTURBED. (2) PURCHASE & EXPS. IS THE BALANCING FIGURE BY KEE PING THE INCOME AS PER THE ASSESSMENT ORDER. REVISED BALANCE SHEET FOR THE YEAR ENDED AS ON 31 .03.2000 LIABILITIES AS PER ASSESSEE REVISED BY US ASSETS AS PER ASSESSEE REVISED BY US LOAN LIABILITY: CAPITAL A/C 3 42 247.63 1 58 571.36 BANK OD 75 15 983.65 75 15 983.65 FIXED ASSETS: SECURED LOAN 37 151.00 37 151.00 P & M 48 442.00 48 442.00 UNSECURED LOAN 10 09 000.00 9 59 000.00 VEHICLES 2 60 576.00 2 60 576.00 CURRENT LIABILITY FURNITURE 25 915.00 25 915.00 PROVISIONS 22 295.00 22 295.00 SHED 1 10 510.00 1 10 510.00 SUNDRY CRS. 36 169.00 36 169.00 CURRENT ASSETS: PROFIT & LOSS ACCOUNT: CLOSING STOCK 46 66 407.00 46 66 407.00 OF THIS YEAR -1 47 170.27 36 506.00 DEPOSIT (ASSET) 1 00 520.00 1 00 520.00 LESS: TRANSFERRED TO CAPITAL 1 47 170.27 -36 506.00 LOAN & ADV. 30 607.20 30 607.20 S. DEBTORS -876000.00 0.00 CASH IN HAND 38 32 596.97 30 90 273.24 BANK A/CS 28 898.85 28 898.85 TDS FOR 1999- 2000 49 878.00 49 878.00 86 20 598.65 85 70 598.65 86 20 598.65 85 70 598.65 NOTE: 1) ADVANCE FROM CUSTOMERS OF RS. 8.76 LACS IS TAKEN AS NIL FOR WANT OF EVIDENCE. 2) CASH IN HAND IS THE BALANCING FIGURE . 3) UNSECURED LOAN IS REDUCED BY RS.50 000/- BECAUSE OF TELESCOPING BENEFIT ALLOWED. 4) DEBIT BALANCE OF CAPITAL ACCOUNT IS REDUCED BY T HE INCREASE IN PROFIT AS PER REVISED P/L ACCOUNT OF THIS YEAR. 2253/AHD/2007 AND 4 OTHERS -9- 9. FROM THE ABOVE WE FIND THAT AS ON 31.03.2000 T HE CASH IN HAND HAS GONE DOWN TO RS. 30 90 273.24 AS AGAINST RS. 38 32 596.97 AS PER THE BALANCE SHEET OF THE ASSESSEE. ACCORDINGLY GROUND NO. 2 STANDS REJECTED BUT SUBJE CT TO THIS THAT SALES AND STOCK AND CONSEQUENTLY CASH IN HAND STANDS INCREASED AS COMPA RED TO THE SAME ACCEPTED BY THE A.O. ALTHOUGH CASH HAS GONE DOWN AS COMPARED TO THE AMOU NT IN THE BALANCE SHEET SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK ALTHOUGH INCOME ASSE SSED BY THE A. O. STANDS CONFIRMED. 10. THE OTHER ISSUE IN A. Y. 2000 01 IS ADDITION MADE BY THE A. O. OF RS. 10 09 000/- ON ACCOUNT OF UNSECURED LOAN. IN THIS REGARD WE FI ND THAT OUT OF THESE LOANS OF THIS AMOUNT ONLY RS. 50 000/- WAS RECEIVED IN THE PRESENT YEAR AND THE BALANCE IS ON ACCOUNT OF OPENING BALANCE. HENCE ONLY THIS AMOUNT OF RS. 50 000/- CA N BE CONSIDERED FOR ADDITION UNDER SECTION 68 IN THIS YEAR. WE THEREFORE DELETE THE BALANCE ADDITION. NOW ON ACCOUNT OF THE LOAN OF RS. 50 000/- RECEIVED BY THE ASSESSEE IN TH E PRESENT YEAR WE FEEL THAT ALTHOUGH THE ASSESSEE COULD NOT PROPERLY EXPLAIN THE SAME BUT TH E ASSESSEE DESERVES THE BENEFIT OF TELESCOPING AGAINST THE ADDITION IN THE INCOME MADE BY THE A.O. WHICH IS CONFIRMED BY US. AS AGAINST A LOSS OF RS. 122 100/- DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME INCOME ASSESSED BY THE A. O. IS RS. 36 506/- WHICH MEANS T HAT TOTAL ADDITION MADE BY THE A.O. WHICH IS CONFIRMED BY US ALSO IS RS. 158 606/- WHER EAS THE FRESH LOAN IS ONLY OF RS. 50 000/- ONLY. HENCE THIS ADDITION OF RS. 50 000/- IS ALSO DELETED. GROUND NO. 3 IS ALLOWED. GROUND NO. 1 WAS NOT PRESSED AND HENCE REJECTED AS NOT PR ESSED. GROUND NO. 4 IS CONSEQUENTIAL AND GR. NO. 5 IS GENERAL. 11. IN THE RESULT QUANTUM APPEAL FOR A. Y. 2000 01 IS PARTLY ALLOWED AND THE FINAL ASSESSED INCOME SHOULD BE AT RS.36 506/-. 2253/AHD/2007 AND 4 OTHERS -10- 12. NOW WE TAKE UP THE PENALTY APPEAL FOR A. Y. 20 00 01. PENALTY WAS IMPOSED U/S 271 (1) (C) FOR ADDITION MADE U/S 68 OF RS. 10.09 LACS. SINCE THIS ENTIRE ADDITION IS DELETED NO PENALTY SURVIVES. WE HOLD ACCORDINGLY. 13. IN THE RESULT THE PENALTY APPEAL OF THE ASSESS EE FOR A. Y. 2000 01 IS ALLOWED. 14. FOR A. Y. 2001 02 WE FIND THAT AS AGAINST TH E SALES OF RS. 39 55 810/- CLAIMED BY THE ASSESSEE THE A. O. IN THE ASSESSMENT ORDER HAS ESTIMATED THE SALES OF THE ASSESSEE AT RS. 40 LACS AND G.P. WAS ESTIMATED BY HIM AT RS. 8 LACS BEING 20 % OF RS. 40 LACS. HENCE AS PER THE ASSESSMENT ORDER FOR THIS YEAR THE SALES O F THE ASSESSEE ARE IN FACT INCREASED BY THE A. O. AND EXPENSES ARE REDUCED BECAUSE THE A. O. HAS E STIMATED THE G.P. AT A HIGHER AMOUNT. AS AGAINST THIS LEARNED CIT (A) HAS HELD THAT THERE I S NO SALE IN THIS YEAR BECAUSE THE ASSESSEE HAS NOT MAINTAINED QUANTITATIVE RECORDS AND HE HAS BRUSHED ASIDE THE OTHER EVIDENCES SUCH AS SALES TAX ASSESSMENT ORDER AND COPY OF BANK STATEME NTS SHOWING DEPOSIT OF CHEQUES/DRAFTS AGAINST SALES. IN OUR CONSIDERED OPINION THE CLAIM OF THE ASSESSEE ABOUT SALES IN THIS YEAR CANNOT BE REJECTED IN THE LIGHT OF THESE INDEPENDEN T EVIDENCES BEING SALES TAX ASSESSMENT ORDER AND BANK STATEMENTS ETC. IN FACT THE A. O. H AS ESTIMATED THE SALES OF THIS YEAR AT RS. 40 LACS. ON THIS ASPECT I.E. SALES ASPECT WE REVERSE THE ORDER OF LEARNED CIT (A) AND RESTORE THAT OF THE A.O. THE A.O. HAS MADE ADDITION OF RS. 292 2 49/- BY ESTIMATING THE G.P. AT RS. 8 LACS BEING 20% OF ESTIMATED SALES OF RS. 40 LACS. THIS G .P. ADDITION WAS DELETED BY THE LEARNED CIT (A) ON THIS BASIS THAT WHEN THERE IS NO SALE T HERE CANNOT BE ANY G.P. ADDITION BUT ONCE WE ACCEPT THE SALES AS ESTIMATED BY THE A.O. G.P. ASPECT HAS TO BE DECIDED. IN OUR CONSIDERED OPINION ESTIMATION OF G.P. @ 20% IS REA SONABLE AND HENCE WE CONFIRM THE SAME. GROUND NO. 1 OF THE REVENUE IS ALLOWED. 15. NOW THE MAIN ISSUE IS ABOUT THE SOURCE OF PAY MENT TO BANK OF RS. 81 LACS UNDER OTS. OUT OF THIS SOURCE IS ACCEPTED BY THE A. O. A LSO IN THE REMAND REPORT TO THE EXTENT OF RS. 20 LACS BEING OUT OF LOAN FROM V. K. CHAUDHURY HENCE THE BALANCE TO BE EXPLAINED IS ONLY RS. 61 LACS. TO EXAMINE THE AVAILABILITY OF CA SH FOR THIS PURPOSE FOR THIS YEAR ALSO WE PREPARE THE REVISED P/L ACCOUNT AND REVISED BALANCE SHEET AS UNDER:- 2253/AHD/2007 AND 4 OTHERS -11- REVISED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED AS ON 31.03.2001 EXPENSES AS PER ASSESSEE REVISED BY US INCOMES AS PER ASSESSEE REVISED BY US OPENING STOCK 46 66 407.00 46 66 407.00 SALES 39 55 810.00 40 00 000.00 PUR. & EXPS. 24 39 483.35 21 48 830.35 LAB. CONT. INC. 8 48 506.00 8 48 506.00 NET PROFIT - 2 75 774.35 59 068.65 RENT I NCOME 3 34 320.00 3 34 320.00 CLOSING STOCK 16 91 480.00 16 91 480.00 68 30 116.00 68 74 306.00 68 30 116.00 68 74 306.00 NOTES:- (1) CLOSING STOCK IS TAKEN AS SAME SINCE OPENING ST OCK IS NOT DISTURBED. (2) PROFIT IS CONSIDERED AFTER RETAINING THE ADDITI ON MADE BY THE A.O. OF RS.2 92 249/- ON ACCOUNT OF G.P. AND RS.27 687/- DISALLOWED OUT OF VEHICLE EXPENSES AND RS.14 907/- DISALLOWED OUT OF TELEPHONE EXPENSES. (3) PURCHASE & EXPS. IS THE BALANCING FIGURE BY KE EPING THE G.P. ADDITION AND OTHER ADDITIONS AS ABOV E INTACT AS PER THE ASSESSMENT ORDER. REVISED BALANCE SHEET FOR THE YEAR ENDED AS ON 31. 03.2001 LIABILITIES AS PER ASSESSEE REVISED BY US ASSETS AS PER ASSESSEE REVISED BY US LOAN LIABILITY: CAPITAL A/C 6 74 308.98 1 55 789.71 BANK OD 81 00 000.00 81 00 000.00 FIXED ASSETS: U/S LOAN 31 59 000.00 31 09 000.00 P & M 34 332.00 34 332.00 CURRENT LIAB. VEHICLES 2 30 111.00 2 30 111.00 PROVISIONS 64 365.00 64 365.00 FURNITURE 25 623.00 25 623.00 SUNDRY CRS. 2 28 621.00 2 28 621.00 SHED 82 582.00 82 582.00 PROFIT & LOSS ACCOUNT: CURRENT ASSETS: OF THIS YEAR -2 75 774.35 59 068.65 CLOSING STOCK 16 91 480.00 16 91 480.00 LESS: TRAN. TO CAPITAL 2 75 774.35 -59 068.65 DEPOSIT (ASSET) 10 20 520.00 10 20 520.00 LOAN & ADV. 9 34 059.00 9 34 059.00 S. DEBTORS -1420000.00 0.00 CASH IN HAND 81 36 133.57 71 84 652.84 BANK A/CS 22 619.45 22 619.45 TDS FOR 1999-2000 & 2000-01 1 20 217.00 1 20 217.00 1 15 51 986.00 1 15 01 986.00 1 15 51 986.00 1 15 01 986.00 NOTE: 1) ADVANCE FROM CUSTOMERS OF RS. 14.20 LACS I S TAKEN AS NIL FOR WANT OF 2253/AHD/2007 AND 4 OTHERS -12- EVIDENCE. 2) CASH IN HAND IS THE BALANCING FIGUR E BEFORE PAYMENT TO BANK OF RS. 81 LACS 3) UNSECURED LOAN IS REDUCED BY RS.50 000/- AS I N LAST YEAR. 4) DEBIT BALANCE IN CAPITAL ACCOUNT IS REDUCED TO THE EXTENT OF INCREASE IN NET PROFIT AS PER REVISED P/L ACCOUNT OF THIS YEAR AND ALSO OF THE PRECEDING YEAR. 5) CASH IN HAND ABOVE INCLUDES CHEQUES DEPOSITED IN BANK ON ACCOUNT OF UNSECURED LOANS OF RS.21.50 LACS USED FOR REPAYMENT TO SBI UNDER OTS. 16. FROM THE ABOVE WORKING WE FIND THAT AS AGAINST PAYMENT OF RS. 81 LACS TO BANK CASH IN HAND IS ONLY OF RS. 71.84 LACS AND ODD. HENCE T O THE EXTENT OF RS. 9.16 LACS THE REPAYMENT TO BANK REMAINS UNEXPLAINED. ADDITION ON THIS ACCOUNT IS CONFIRMED TO THE EXTENT OF RS. 9.16 LACS. GROUND NO. 2 OF ASSESSEES QUANTU M APPEAL IS PARTLY ALLOWED AND GR. NO. 4 OF THE REVENUES APPEAL IS REJECTED. 17. ABOUT THE ADDITION MADE BY THE A. O. ON ACCOUN T OF UNSECURED LOANS OF RS. 31 59 000/- IN A. Y. 2001 02 IT IS SEEN THAT IT INCLUDES THE AMOUNT OF RS. 10 09 000/- BEING CLOSING BALANCE ON 31.03.2000 AND RS. 20 LACS WHIC H IS ACCEPTED BY THE A. O. AS EXPLAINED IN THE REMAND REPORT. TO THIS EXTENT NO ADDITION I S JUSTIFIED U/S 68 IN RESPECT OF UNSECURED LOANS. NOW FOR THE BALANCE AMOUNT OF UNSECURED LOAN OF RS. 150 000/- IT IS THE CLAIM OF THE LEARNED AR OF THE ASSESSEE THAT THIS AMOUNT IS ALSO RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUE FROM THE SAME PERSON FROM WHOM RS. 20 LACS W AS RECEIVED AND ACCEPTED BY THE A. O. ALSO IN THE REMAND REPORT. WE HAVE SEEN THE REMA ND REPORT OF THE A. O. WHICH IS AVAILABLE IN THE PAPER BOOK. AS PER THIS REMAND REPORT THE A .O. HAS ACCEPTED THIS LOAN OF RS. 20 LACS AS EXPLAINED. HENCE THE IDENTITY OF THIS LOAN CRED ITOR IS NOT IN DOUBT. THIS AMOUNT OF RS. 1.50 LACS IS ALSO RECEIVED BY ACCOUNT PAYEE CHEQUE AND H ENCE WE FEEL THAT GENUINENESS OF THE TRANSACTION IS ALSO THERE. CAPACITY OF THIS LOAN CR EDITOR FOR ADVANCING THIS SMALL AMOUNT OF RS. 1.50 LACS SHOULD ALSO BE ACCEPTED AS EXPLAINED WHEN THE A. O. HIMSELF IS ACCEPTING ABOUT RS. 20 LACS RECEIVED FROM THIS VERY PERSON AS EXPLAINED . WE THEREFORE FEEL THAT NO ADDITION IS CALLED FOR U/S 68 IN RESPECT OF THIS UNSECURED LOAN OF RS. 1.50 LACS ALSO. GROUND NO. 1 OF THE ASSESSEES QUANTUM APPEAL IS ALLOWED. 18. NOW THERE ARE TWO MORE ISSUES IN THE APPEAL OF THE REVENUE I.E. ABOUT DELETION OF ADDITION MADE BY THE A. O. OF RS. 574 411/- IN RES PECT OF BANK INTEREST AND OF RS. 1 LAC IN RESPECT OF LABOUR CHARGES. WE FEEL THAT ON BOTH THE SE ISSUES NO INTERFERENCE IS CALLED FOR IN 2253/AHD/2007 AND 4 OTHERS -13- THE ORDER OF LEARNED CIT (A) BECAUSE THE LEARNED DR OF THE REVENUE COULD NOT SHOW ANY MISTAKE IN THE ORDER OF LEARNED CIT (A) ON THESE TW O ISSUES. THE INTEREST TO BANK IS DULY PAID BY THE ASSESSEE AND THE OPENING BALANCE AS PER BOOK S OF THE ASSESSEE WAS LESSER BY THIS AMOUNT AS COMPARED TO PAYMENT ON OTS OF RS. 81 LACS AND HENCE THIS IS NOTHING BUT BANK INTEREST AND IT IS ALLOWABLE U/S 43B IN THE YEAR OF PAYMENT EVEN IF IT RELATES TO AN EARLIER YEAR. FOR THE LABOUR CHARGES WE FIND THAT IT WAS DISALLO WED BY THE A. O. WITHOUT ANY COGENT REASON AND HENCE IT IS RIGHTLY DELETED BY THE LEARNED CIT (A). 19. NOW THE ONLY REMAINING ISSUE IS PENALTY. GROUN D NO. 2 OF THIS PENALTY APPEAL WAS NOT ARGUED AND HENCE IT IS TREATED AS NOT PRESSED AND D ISMISSED ACCORDINGLY. THE PENALTY WAS CONFIRMED BY THE LEARNED CIT (A) IN RESPECT OF ADDI TION CONFIRMED BY HIM OF RS. 39 82 400/- . OUT OF THIS WE HAVE CONFIRMED THE ADDITION OF R S. 9.16 LACS ONLY AND HENCE PENALTY SHOULD BE REWORKED FOR THIS ADDITION ONLY AND WHILE WORKIN G OUT THE AMOUNT OF PENALTY THE DIRECTION OF LEARNED CIT (A) SHOULD BE FOLLOWED REG ARDING QUANTUM OF THE TAX LIABILITY TO BE WORKED OUT AS PER APPLICABLE TAX SLAB. GROUND NO. 1 OF THE PENALTY APPEAL IS PARTLY ALLOWED. 20. IN THE RESULT BOTH THE APPEALS OF THE ASSESSE E FOR A.Y. 2001-02 ARE PARTLY ALLOWED WHEREAS THE APPEAL OF THE REVENUE FOR THIS YEAR STA NDS DISMISSED. IN QUANTUM PROCEEDINGS OF THIS YEAR THE INCOME ASSESSED SHOULD BE RS.16 474. 65 PLUS RS.27 687/- OUT OF VEHICLE EXPENSES RS.14 907/- OUT OF TELEPHONE EXPENSES AND RS.916 000/- BEING UNEXPLAINED CASH TOTAL RS.975 068.65 BUT PENALTY SHOULD BE WORKED OU T ON RS.9 16 000/- ONLY BECAUSE NO PENALTY WAS LEVIED ON ACCOUNT OF ADDITION IN RESPEC T OF G.P. ADDITION AND DISALLOWANCE OF EXPENSES. 21. IN THE COMBINED RESULT BOTH THE QUANTUM APPEAL S OF THE ASSESSEE AND PENALTY APPEAL FOR A. Y. 2001 02 ARE PARTLY ALLOWED PENALTY APP EAL FOR A. Y. 2000 01 IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD./- SD./- ( .. /T.K. SHARMA ) /JUDICIAL MEMBER ( . .. . . .. .'#$% '#$% '#$% '#$% /A.K. GARODA) & & & & /ACCOUNTANT MEMBER 2253/AHD/2007 AND 4 OTHERS -14- ORDER PRONOUNCED ON 16/11/2011 SD./- SD./- (A.K.GARODIA) (D.K.TYAGI) AM JM C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD 1. DATE OF DICTATION : 25-10-2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER. : 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 11/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT. : 16/11 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 16/11 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 16/11/2011 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :