J.M CORPORATION, MUMBAI v. DCIT CEN CIR-22, MUMBAI

ITA 1698/MUM/2009 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 169819914 RSA 2009
Assessee PAN AAEFJ1509M
Bench Mumbai
Appeal Number ITA 1698/MUM/2009
Duration Of Justice 2 year(s) 4 month(s) 17 day(s)
Appellant J.M CORPORATION, MUMBAI
Respondent DCIT CEN CIR-22, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 29-07-2011
Date Of Final Hearing 25-07-2011
Next Hearing Date 25-07-2011
Assessment Year 2004-2005
Appeal Filed On 13-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1697/MUM/2009 (ASSESSMENT YEAR: 2003-04) ITA NO. 1698/MUM/2009 (ASSESSMENT Y EAR: 2004-05) M/S. J.M. CORPORATION DCIT CENTRAL CIRCLE -22 B-14 THAKUR COMPLEX MUMBAI KANDIVALI (E) MUMBAI 400101 VS. PAN - AAEFJ 1509 M APPELLANT RESPONDENT APPELLANT BY: SHRI RAKESH JOSHI RESPONDENT BY: SHRI D.S. SUNDER SINGH DATE OF HEARING: 25/07/2011 DATE OF PRONOUNCEMENT: 29/07/2011 O R D E R PER B. RAMAKOTAIAH A.M. THESE TWO APPEALS ARE BY THE ASSESSEE AGAINST THE O RDERS OF THE CIT(A) CENTRAL IV MUMBAI DATED 06.01.2009 CONFIRMING THE ADDITIONS MADE BY THE A.O. AS UNDISCLOSED INCOME. ASSESSEE RAISED COMMON GROUNDS FOR BOTH THE ASSESSMENT YEARS. 2. BRIEFLY STATED THERE WAS SEARCH AND SEIZURE OPERA TIONS IN THE CASE OF M/S. PIONEER EMBROIDERIES LTD. AND ITS GROUP ON 24. 11.2004. CERTAIN DOCUMENTS WERE SEIZED AS PER ANNEXURE 2 3 & 4 OF P ANCHAMA DATED 24.11.2004 AND ANNEXURE 4 OF PANCHAMA DATED 04.01.2 005. THESE DOCUMENTS SEIZED INDICATE NUMBER OF TRANSACTIONS OF THE ASSESSEE WITH VARIOUS PARTIES WHICH WERE NOT ACCOUNTED. SHRI MANO J DUGAR PARTNER OF THE ASSESSEE FIRM WAS QUESTIONED AND STATEMENT UNDER SE CTION 132(4) WAS RECORDED ON 24.11.2004. SHRI DUGAR WAS NOT ONLY SAL ES MANAGER OF M/S. ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 2 PIONEER EMBROIDERIES LTD. BUT ALSO MANAGING PARTNER OF THE ASSESSEE FIRM. THE A.O. MADE OUT A CASE ON THE BASIS OF STATEMENT THAT ASSESSEE HAS NOT RECORDED 30% OF SALES WHICH WERE IN CASH AND ON THE BASIS OF THE ADMISSION OF UNACCOUNTED INCOME BY SHRI MANOJ DUGAR TO BE IN THE REGION OF ` 50 00 000/- THE A.O. MADE AN ADDITION OF ` 28 98 867/- FOR A.Y. 2003-04 AND AN AMOUNT OF ` 35 60 994/- FOR A.Y. 2004-05. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE STATEMENT WAS GIVEN UNDER DUR ESS AND THE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACC OUNT. WITHOUT PREJUDICE IT WAS SUBMITTED THAT IF THE SALES ARE TO BE ACCEPT ED AS UNACCOUNTED CORRESPONDING PURCHASES ALSO WERE TO BE GIVEN CREDI T AND THE ENTIRE SALES CANNOT BE TREATED AS INCOME. THE CIT(A) AFTER CONS IDERING THE LEGAL PRINCIPLES OF ADMISSION OF THE ASSESSEE BY WAY OF S TATEMENT HELD THAT SOMERSAULT BY THE ASSESSEE WAS AN AFTER THOUGHT AND A DEVICE TO FRUSTRATE THE EFFORTS OF THE DEPARTMENT TO BRING TO TAX THE U NACCOUNTED INCOME FOR FAILURE OF THE ASSESSEE TO DISCHARGE THE PRIMARY ON US OF PROVING THAT SALES WERE GENUINE. APPEALS OF THE ASSESSEE WERE REJECTED AND THE ADDITIONS WERE CONFIRMED. HENCE ASSESSEE HAS RAISED SIMILAR GROUND S IN BOTH THE YEARS WITH VARIATION OF THE QUANTUM INVOLVED. THE GROUND RAISE D FOR A.Y. 2003-04 ARE AS UNDER: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.28 98 867/- AS ALLEGED UNACCOUNTED SALES MADE DURING THE YEAR ON T HE BASIS OF THE CERTAIN PAPERS FOUND DURING THE COURSES OF SEAR CH ACTION AT THE OFFICE PREMISES OF M/S. PIONEER EMBROIDERIES L TD. WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E. 3. IN THE COURSE OF ARGUMENT THE LEARNED COUNSEL REFER RING TO THE PAPER BOOK FILED IN THIS REGARD SUBMITTED THAT VIDE QUEST ION NO. 15 ASSESSEES STATEMENT IT WAS ADMITTED THAT THE TURNOVER UPTO MA RCH 2002 WAS AROUND ` 12 00 000/- AND FROM 01-04-2003 TO 31-03-04 IT WAS AROUND ` 60 00 000/- AND AFTERWARDS IT HAS COME DOWN TO ` 10 00 000/-. IT WAS FURTHER SUBMITTED VIDE QUESTION NO. 17 THAT SHRI MANOJ DUGAR HAS STAT ED THAT NORMALLY ACCOUNTS WERE BEING MAINTAINED BY SHRI GAURI SHANKA R GUPTA CHIEF ACCOUNTANT OF PEL AND HE WAS ONLY SIGNING THE STATE MENTS TO INDICATE THAT ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 3 THE MANAGING PARTNER SHRI MANOJ DUGAR HAS NO ROLE IN MAINTENANCE OF ACCOUNTS AND SO HIS STATEMENT REGARDING CONFIRMATIO N OF SALES AT 30% OUTSIDE BOOKS ACCOUNT CANNOT BE TAKEN AS TRUE. THEN HE REFERRED TO QUESTION NO. 19 TO SUBMIT THAT THE ASSESSEE DID IND EED GAVE A STATEMENT THAT 70% OF THE SALES WERE BY WAY OF CHEQUES AND 30 % BY WAY OF CASH. HE ALSO REFERRED TO QUESTION NO. 25 IN PAGE NO. 13 WHE REIN IT WAS STATED THAT 75% OF THE SALES WERE BY CHEQUE AND 25% BY CASH ON THE BASIS OF THE MATERIAL SENT TO THE PARTIES WITH SLIPS. IT WAS FUR THER SUBMITTED THAT THERE IS VARIATION IN THE PERCENTAGE STATED BY SHRI DUGAR SO 30% CANNOT BE TAKEN AS THE BASIS. IT WAS FURTHER SUBMITTED THAT THE A.O. H AS QUANTIFIED THE TRANSACTIONS BY WAY OF UNACCOUNTED SALES IN PARA 3. 1 IN PAGE 3 OF THE ORDER FOR TWO ASSESSMENT YEARS AT ` 62 56 060/- BUT MADE ADDITIONS IN DIFFERENT ASSESSMENT YEARS AT 30% OF THE NET SALES RECORDED IGNORING THE TRANSACTIONS AS INDICATED BY THE SEIZED MATERIAL. HE THEN FILED THE FOLLOWING STATEMENT TO RECONCILE THE CASH TRANSACTIONS AS PER THE SEIZED D OCUMENTS: - PARTICULARS PAGE NOS. F.Y. 2002-03 F.Y. 2003-04 CASH TRANSACTIONS: 13 21 21A 22 23 24 28 76 11 18 781.95 - - - - - 22 066.00 - 393 377.85 366 535.40 852 960.00 590 642.75 1048 257.18 534 557.95 - 1051 964.31 A 11 40 847.95 48 38 295.44 LESS: REPEATED ENTRIES : 23-21A 24-22 - - 810 187.50 456 578.75 B - 12 66 766.25 CASH SALES RECORDED C 3 72 215.00 19 65 193.00 TOTAL (A-B-C) 7 68 632.95 16 06 336.19 4. IT WAS LEARNED COUNSELS SUBMISSION THAT CASH TRANS ACTIONS WERE TOTALLING TO ` 11 40 847/- IN F.Y. 2002-03 OUT OF WHICH SALES TO T HE EXTENT OF ` 3 72 215/- WERE RECORDED IN THE BOOKS OF ACCOUNT AN D THE NET UNACCOUNTED TRANSACTIONS WERE ONLY ` 7 68 632/-. FURTHER IT WAS SUBMITTED THAT OUT OF ` 48 38 296/- FOR F.Y. 2003-04 THERE WERE TRANSACTION S REPEATED TO THE ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 4 EXTENT OF ` 12 66 766/- AND CASH SALES RECORDED WERE ` 19 65 193/-. THEREFORE THE NET UNACCOUNTED TRANSACTIONS ARE ` 16 06 336/- FOR THAT YEAR. 5. THE LEARNED COUNSEL FURTHER SUBMITTED THAT ASSESSEE HAD A PRACTICE OF ISSUING MATERIAL BY WAY OF CHALLANS AND MONIES RECE IVED BY CHEQUES CONTAIN THE BILLS WHEREAS SOME OF THE CHALLANS DOES NOT CON TAIN THE BILLS. THE RIGHT SIDE OF THE SEIZED PAPERS WHERE THE CHALLANS WERE M ENTIONED WERE TRANSACTIONS IN CASH WHICH WERE NOT ACCOUNTED BUT I T WAS HIS SUBMISSION THAT PAGE NO. 23 IN ANNEXURE 2 HAVING TRANSACTIONS OF ` 10 48 357/- INCLUDED THE TRANSACTIONS OF PAGE NO. 21A IN ANNEXU RE 2 TO THE EXTENT OF ` 8 10 187/- AND THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE A.O. EITHER WITH REFERENCE TO THE CHALLANS ISSUED OR WITH REFER ENCE TO THE BILLS. THE LEARNED COUNSEL FURTHER SUBMITTED THAT MAKING ADDIT IONS ONLY ON THE BASIS OF THE STATEMENT WITHOUT EXAMINING THE SEIZED MATER IAL OR WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE TRANSACT IONS IS NOT CORRECT AND REQUESTED FOR RESTORING THE ISSUE TO THE A.O. FOR N ECESSARY EXAMINATION BEFORE MAKING THE ADDITIONS. 6. THE LEARNED D.R. IN REPLY SUBMITTED THAT ASSESSEE WAS GIVEN OPPORTUNITY IN THE COURSE OF SCRUTINY AND ASSESSEE SIMPLY WITHDREW THE STATEMENT GIVEN IN THE COURSE OF SEARCH WITHOUT ADM ITTING ANY UNDISCLOSED INCOME AND THEREFORE ON THE BASIS OF THE SEIZED MAT ERIAL WHICH INDICATED CASH TRANSACTIONS AND ON THE BASIS OF THE STATEMENT THE A.O. HAS CORRECTLY EXAMINED THE ISSUE AND BROUGHT TO TAX UNACCOUNTED S ALES IN THE RESPECTIVE ASSESSMENT YEARS. HE ALSO EXPLAINED THAT THE ASSESS EE HAS ADMITTED THAT THERE ARE UNACCOUNTED TRANSACTIONS AND IT IS FOR TH E ASSESSEE TO RECONCILE THE TRANSACTIONS AND EXPLAIN TO THE A.O. SO THAT CO RRECT INCOME CAN BE BROUGHT TO TAX. SINCE ASSESSEE FAILED TO RECONCILE AS POINTED OUT BY THE CIT(A) THE ADDITION WAS MADE BY THE A.O. ON THE BA SIS OF THE STATEMENT IS CORRECT AS THERE IS CORRESPONDING EVIDENCE THAT ASS ESSEE IS NOT ACCOUNTING SALES OF CASH TRANSACTIONS. 7. BOTH THE PARTIES RELIED ON VARIOUS CASE LAWS WITH R EFERENCE TO ADMISSION OF THE STATEMENT AND ITS VERACITY. ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 5 8. WE HAVE CONSIDERED THE ISSUES. WITHOUT GOING INTO T HE LEGAL PRINCIPLES AND VERACITY OF THE STATEMENT WE ARE OF THE OPINIO N THAT ASSESSEES REQUEST FOR EXAMINATION OF THE SEIZED MATERIAL HAS TO BE AC CEPTED. AS SEEN FROM THE ASSESSMENT ORDER THE PROCEEDING UNDER SECTION 153C WAS INITIATED VIDE ORDER SHEET DATED 04.10.2006 AND NOTICE WAS ISSUED ON THAT DAY. THE RETURN WAS FILED ON 29.11.2006 AND NOTICE UNDER SECTION 14 3(2) WAS ISSUED ON THAT DATE ALONG WITH A QUESTIONNAIRE. ASSESSMENT HAS BEE N COMPLETED ON 26.12.2006 I.E. WITHIN A MONTH OF FILING THE RETUR N AND ISSUING NOTICES. THERE IS NOTHING ON RECORD TO INDICATE THAT ASSESSE ES EXPLANATION WAS CALLED FOR IN THE COURSE OF ASSESSMENT PROCEEDINGS NOR ANY RECONCILIATION WAS ASKED TO BE FURNISHED. AS SEEN FROM THE TABLE PREPA RED BY THE A.O. IN PARA 3.1 THE TOTAL OF UNACCOUNTED SALES VIDE ANNEXURE 12 A AND 13 WAS ARRIVED AT ` 15 29 018/-. AS SEEN FROM PAGE 12A PLACED IN THE PA PER BOOK THERE IS A CARRIED FORWARD TOTAL OF ` 15 12 160/- MAKING THE TOTAL AT ` 15 29 018/- IN PAGE 12A. THE CARRIED FORWARD TOTAL CAME FROM PAGE 13 IN WHICH THERE ARE BILL AMOUNTS OF ` 11 18 782/- AND ` 3 93 378/-. IT WAS LEARNED COUNSELS EXPLANATION THAT THE BILL AMOUNTS WERE ACCOUNTED FO R AND ONLY THE CHALLAN AMOUNTS WERE NOT ACCOUNTED WHEREAS IN THE STATEMENT EXTRACTED ABOVE THESE TRANSACTIONS WERE ACCEPTED AS CASH TRANSACTIO NS. SO SOME OF THE SUBMISSIONS WITH REFERENCE TO BILL NUMBER AND CHALL AN NUMBER ARE NOT VERIFIABLE AS THE BOOKS OF ACCOUNTS ARE NOT PLACED BEFORE US. EVEN THOUGH IT WAS THE EXPLANATION OF THE ASSESSEE THAT THE TRANSA CTIONS IN PAGE 21A WERE REPEATED IN THE TRANSACTIONS IN PAGE 23 AS SEEN FR OM THE TOTAL TAKEN BY THE AO ONLY THE DIFFERENCE OF ` 10 48 257/- WAS TAKEN AND THERE SEEMS TO BE NO DOUBLE OR DUPLICATE ENTRIES IN THE TOTAL TAKEN BY T HE A.O. HOWEVER AS SEEN FROM THE ASSESSMENT ORDER THE A.O. HAS NOT GIVEN AN Y CREDIT FOR THE CASH TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT. ACCO RDING TO THE ASSESSEE CASH SALES RECORDED IN A.Y. 2003-04 ARE TO THE TUNE OF ` 3 72 215/- AND FOR A.Y. 2004-05 WAS TO THE EXTENT OF ` 19 65 193/-. THESE CASH SALES RECORDED HAVE NOT BEEN EXAMINED OR CONSIDERED WHETHER THEY W ERE OF THE SAME DAY OR PERIOD. 9. THERE ARE ALSO VARIATIONS BETWEEN THE AMOUNTS TAKEN IN THE ASSESSMENT ORDER AND THE AMOUNTS SUMMARISED BY THE ASSESSEE IN THE TABLE ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 6 ABOVE. SINCE THE SEIZED MATERIAL REQUIRE EXAMINATIO N WITH REFERENCE TO THE BOOKS OF ACCOUNT AND ALSO TO EXAMINE WHETHER ASSESS EES CONTENTIONS THAT SOME OF THE CASH SALES WERE ACCOUNTED IN THE BOOKS OF ACCOUNT WE ARE OF THE OPINION THAT THE MATER REQUIRED TO BE SET ASIDE TO THE A.O. FOR EXAMINING WITH REFERENCE TO THE SEIZED MATERIAL VIS--VIS THE BOOKS OF ACCOUNT. 10. IT IS ALSO NOTICED THAT THE UNACCOUNTED CASH TRANSA CTIONS ARRIVED AT BY THE A.O. ON THE BASIS OF THE SEIZED MATERIAL WAS AT ` 62 56 060/- WHEREAS THE TOTAL ADDITION MADE IN BOTH THE YEARS WAS AT ` 64 54 861/-. AS SEEN FROM THE SEIZED MATERIAL THE MATERIAL PERTAINS TO ONLY FEW MONTHS AND NOT FOR THE WHOLE YEAR. THEREFORE THE RATIO OF CASH TRANSACTIO NS TO THAT OF SALES ON THE SAME DAY OR SAME MONTH HAS TO BE VERIFIED IN ORDER TO EXAMINE WHETHER ASSESSEES STATEMENT THAT UNACCOUNTED CASH TRANSACT IONS WERE 25% OR 30% OR EVEN A DIFFERENT ONE. THE CORRECT RATIO CAN ONL Y BE ASCERTAINED ONLY WHEN THESE ARE ANALYSED. THE EXAMINATION VIS--VIS THE S EIZED MATERIAL AND THE TRANSACTIONS ACCOUNTED IN THE BOOKS OF ACCOUNT HAS NOT BEEN DONE BY THE A.O. SIMPLY ON THE BASIS OF STATEMENT ALONE THE ADD ITIONS CAN NOT BE MADE OR SUSTAINED UNLESS THERE IS CORRELATION WITH ENTRI ES IN SEIZED MATERIAL. IT IS THE SUBMISSION THAT THE CHALLANS WERE ISSUED IN THE FACTORY PREMISES AND ONLY BILLS ISSUED WERE ACCOUNTED FOR. ONE WAY OF V ERIFICATION IS WITH REFERENCE TO THE CHALLANS ISSUED FOR THE AMOUNT OF SALES MADE OR QUANTITY ISSUED AND TO EXAMINE WHETHER THE SALES WERE COMPLE TELY RECORDED OR NOT AND ARRIVE AT THE UNACCOUNTED SALES. UNLESS A VERIF IABLE METHOD OF EXAMINATION WAS UNDERTAKEN BY THE A.O. EITHER ON TH E BASIS OF THE CHALLANS ISSUED OR ON THE BASIS OF THE SEIZED DOCUMENTS VIS- -VIS THE TRANSACTIONS ACCOUNTED THEREIN IT IS DIFFICULT TO MAKE ADDITION S ON THE BASIS OF STATEMENT UNDER SECTION 132 ALONE AS MADE OUT BY THE A.O. THE REFORE WE ARE OF THE OPINION THAT THE MATTER REQUIRE RE-EXAMINATION BY T HE A.O. AND HE IS DIRECTED TO KEEP THE ABOVE DIRECTIONS AND OBSERVATI ONS WHILE EXAMINING THE BOOKS OF ACCOUNT AND SEIZED PAPERS BEFORE COMPLETIN G THE ASSESSMENT. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY TO EXPLAIN THE TRANSACTIONS ACCOUNTED OR UNACCOUNTED VIS--VIS THE SEIZED MATER IAL OR ANY OTHER RELEVANT DOCUMENTS. WITH THESE DIRECTIONS BOTH THE ASSESSME NTS IN THE IMPUGNED YEARS ARE SET ASIDE TO BE CONSIDERED AFRESH. ITA NOS. 1697&1968/MUM/2009 M/S. J.M. CORPORATION 7 11. IN THE RESULT APPEALS OF THE ASSESSEE ARE CONSIDER ED ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 29 TH JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL IV MUMBAI 4. THE CIT CENTAL II MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.