NARESH KUMAR MATLANI, BHARATPUR v. ITO, BHARATPUR

ITA 182/JPR/2011 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 18223114 RSA 2011
Assessee PAN ACOPM6851D
Bench Jaipur
Appeal Number ITA 182/JPR/2011
Duration Of Justice 4 month(s) 21 day(s)
Appellant NARESH KUMAR MATLANI, BHARATPUR
Respondent ITO, BHARATPUR
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-07-2011
Assessment Year 2005-2006
Appeal Filed On 03-03-2011
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.182/ JP/2011 ASSESSMENT YEAR: 2005-06 PAN: ACOPM 6851 D SHRI NARESH KUMAR MATLANI VS. THE ITO S/O SHRI NIHAL CHAND MATLANI WARD- 2 (RAHUL SUPARI WALE) BEHIND PRADEEP HOSPITAL BHARA TPUR OPP. JAWAHAR NAGAR HOUSING BOARD OUTSIDE BE-NARAIN GATE BHARATPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI R.K. MEENA ASSESSEE BY : SHRI RAJENDRA AGARWAL ORDER PER N.L. KALRA AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A) ALWAR DATED 06-12-2010 FOR THE ASSESSMENT YEAR 2 005-06. 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS A GAINST REJECTION OF BOOKS OF ACCOUNTS AND APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 2.2 THIS GROUND WAS NOT PRESSED BY THE ASSESSEE DUR ING THE COURSE OF HEARING. HENCE THE SAME IS DISMISSED BEING NOT PRE SSED. 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 5 6 0 371/-. 2 3.2 THE ASSESSEE IS TRADING IN SUPARI AND CHURAN GO LI. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 14-12- 2004. AT THE TIME OF SURVEY THE STOCK WAS FOUND AT RS. 61 605/- AS AGAINST STOCK OF RS. 1 95 098/- AS PER BOOKS OF ACCOUNTS. T HERE WAS SHORTAGE OF STOCK AND THE SHORTAGE OF THE STOCK SHOWS THAT THE ASSESSEE IS INDULGING IN PURCHASING AND SALES OUTSIDE THE BOOKS OF ACCOUNTS. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE SALES OF RS. 34 48 380/- AND ON SUCH SALES HE HAS SHOWN GROSS PROFIT RATE OF 23.62%. IN THE PRECEDING YEARS THE GROSS PROFIT RATE WAS 18.74% 23.88% AND 27.38%. AT THE TIME OF SURVEY SMALL DIARIES AND LOOSE PAPERS WERE FOUND AND THESE DOCUMENTS SHO W THAT THE ASSESSEE WAS EFFECTING THE SALES OUTSIDE THE BOOKS OF ACCOUN TS. BEFORE THE AO THE ASSESSEE HAS INITIALLY CONTENDED THAT THE SALES AS MENTIONED IN THE DIARIES OR LOOSE PAPERS ARE INCLUDED IN THE SALE BILLS ISSUED ON A PARTICULAR DATE. THE AO IN THE ORDER HAS MENTIONED THAT IT IS NOT POSSIBLE TO VERIFY THAT THE SALES AS MENTIONED IN THE DIARIES OR IN THE LOOSE PAPERS ARE INCLUDED IN THE SALE BILLS. THE REPLY OF THE ASSESSEE IS NEITHER CONVINCING NOR SATISFACTORY. THE ASSESSEE IS INCLUDING PART OF ACTUAL SALES IN HIS BOOKS OF ACCOUNTS AT HIS SWEET WILL. THE AO IN HIS ORDER HAS GIVEN THE DETAILS OF SALES LEDGERISED FROM THE DIARIES. SUCH DETAILS ARE AS UNDER:- 3 MONTH 2004 AMOUNT OF SALE APRIL 1 00 806 MAY 6 95 478 JUNE 4 76 982 JULY 7 33 042 AUGUST 4 74 264 SEPT 5 78 234 OCT 5 41 070 NOV 5 51 394 DEC 3 31 262 GRAND TOTAL 4 82 534 THE LOOSE PAPERS ALSO CONTAIN THE SALES TO THE EXTE NT OF RS. 3 47 217/-. THUS THE TOTAL SALES ENTERED IN THE SMALL DIARY AND LOOS E PAPERS WERE TO THE EXTENT OF RS. 48 29 751/-. BEFORE THE AO THE ASSESSEE TOO K A PLEA THAT SMALL DIARIES ARE NOT RELATED TO HIS BUSINESS BUT RELATES TO SALE SMAN. THE AO REQUIRED THE ASSESSEE TO PRODUCE THE SALESMAN FOR EXAMINATION BU T NO SALESMAN WAS PRODUCED. FROM PERUSAL OF DIARY IT REVEALS THAT TH E SALES ARE NOT ENTERED PARTYWISE. HENCE SUCH SALES CANNOT BE CONSIDERED T HE SALES MADE BY THE SALESMAN. THE CONTENTION OF THE ASSESSEE WAS REJECT ED AS THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE DIARIES RELATED TO THE SALESMAN. THE SALES IN THE DIARIES WERE FROM 01-04-2004 TO 14-12-2004. THE AO ON THE BASIS OF THE EVIDENCE FOUND DURING THE COURSE OF SURVEY ESTIMATE D THE SALES AT RS. 55.00 LACS AND APPLIED THE GROSS PROFIT RATE OF 25%. THE AO ACCORDINGLY MADE THE TRADING ADDITION OF RS. 5 60 371/-. 4 3.3 THE LD. CIT(A) HAS CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE ASSESSEE THE LD. AO HAS MADE AN ADDITION ON BASIS OF IMPOUNDED DOCUMENTS WHICH WERE FOUND DURING THE COURSE OF SURVEY. THE LD. AR HAS NOT POINTED OUT ANY SPECIFIC DEFECTS W.R.T. IMPOUNDED DOCUMENTS. HE SIMPLY ARGUED HIS CASE ON THE BASIS OF LOGIC AND CASE LAWS. THIS IS A CASE OF FACTUAL ISSUES. EVEN BEFORE ME ALSO HE HAS NOT MADE HIS CASE ON THE BASIS OF ANY DOCUMENTS. I HAVE ALSO GONE THROUGH THE ABOVE CASE LAWS WHICH ARE NOT SQUARELY APPLICABLE IN CASE OF THE ASSESSEE. THE LD AO HAD POINTED OUT VARIOUS DEFECTS IN CLOSING STOCK IN CASH IN OPENING AND CLOSING STOCK AND PURCHASE AND SALE. HE RIGHTLY REJECTED THE BOOKS U/S 145(3) OF THE INCOME TAX ACT. THE LD. AO HAS CALCULATED SALE ON THE BASIS OF IMPOUNDED DOCUMENTS MORE THAN 48 LACS. HE ESTIMATED FURTHER TO ABRIDGE ANY LEAKAGE AT RS. 5 LACS. HE ALSO APPLIED REASONABLE GROSS PROFIT @ 25% ON ABOVE SALES AS ASSESSEE HAS SHOWN MORE THAN 27% GROSS PROFIT IN PRECEDING YEAR. THEREFORE ADDITION OF RS. 5 60 371/- IS CONFIRMED. 5 3.4 WE HAVE HEARD BOTH THE PARTIES. BEFORE THE LOWE R AUTHORITIES THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE SA LES ENTERED IN THE DIARIES RELATED TO THE SALESMAN. THE SALES IN THE DIARIES A RE FOR NINE MONTH. THE ASSESSEE HAS SHOWN THE SALES ONLY TO THE EXTENT ARO UND RS. 34.00 LACS WHILE THE SALES IN THE DIARIES FOR 09 MONTHS ARE TO THE E XTENT OF RS. 44.00 LACS. LOOKING TO THE SALES MENTIONED IN THE DIARIES WE F EEL THAT THE AO WAS JUSTIFIED IN ESTIMATING THE SALES AT RS. 55.00 LACS . THE HON'BLE APEX COURT IN THE CASE OF C.S.T. H.M. ESAFALI H.M. ABDUL ALI 90 ITR 271 HAS CONSIDERED A CASE IN WHICH THE SALES OUTSIDE THE BOOKS OF ACCO UNTS WERE NOTICED FOR 19 DAYS AND THE AO ESTIMATED THE ESCAPED TURNOVER AT RS. 2.50 LACS ON THE BASIS OF THE DEALINGS OUTSIDE THE ACCOUNTS OF THE V ALUE AT RS. 31 171.28 FOR 19 DAYS. IT WAS HELD THE AO WAS RIGHT IN INFERRING THAT THE ASSESSEE HAS LARGE SCALE DEALINGS OUTSIDE THE ACCOUNTS. THE IMPOUNDED DOCUMENTS SHOW THE SALES AROUND RS. 44.00 LACS FOR NINE MONTHS AND THE REFORE THE AO HAS RIGHTLY ESTIMATED THE SALES AT RS. 55.00 LACS FOR E NTIRE YEAR AS COMPARED TO THE SALES DISCLOSED BY THE ASSESSEE AT RS. 34 48 38 0/-. IT IS TRUE THAT THE ASSESSEE HAS SHOWN THE G.P.RATE OF 27.38% IN THE IM MEDIATELY PRECEDING YEAR. THE SALES IN THE PRECEDING YEAR WERE TO THE E XTENT OF RS. 27.91 LACS. IN THE ASSESSMENT YEAR 2002-03 AND 2003-04 THE ASSESS EE SHOWED THE G.P.RATE OF 18.74% AND 23.88% ON SALES OF RS. 26.27 LACS AND RS. 25.45 LACS. 6 LOOKING TO THE INCREASE IN THE QUANTUM OF SALES AND CONSIDERING THE FACT THAT THE G.P.RATE DISCLOSED IS COMPARABLE TO THE G.P.RAT E DISCLOSED IN THE ASSESSMENT YEAR 2002-03 AND 2003-04 WE FEEL THAT I T WILL BE FAIR AND REASONABLE TO APPLY THE G.P.RATE OF 23.7%. THIS WIL L MEAN A GROSS PROFIT OF RS. 13 03 500/- AS AGAINST RS. 8 14 629/-. THUS THE TRADING ADDITION WILL BE RS. 4 88 871/- AS AGAINST RS. 5 60371/- CONFIRMED B Y THE LD. CIT(A). 4.1 THE THIRD GROUND OF THE ASSESSEE IS THAT THE LD . CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1.00 LAC STATING AS UNRECORDED PURCHASES AND EXPENSES. 4.2 ON VERIFICATION OF THE LOOSE PAPERS FOUND DURIN G THE COURSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE HAS NOT ENTERED CE RTAIN PURCHASES AND EXPENSES IN THE REGULAR BOOKS OF ACCOUNT. THE PURCH ASE AND EXPENSES WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AMOUNTED T O RS. 5 80 329/-. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY SUCH UNR ECORDED PURCHASES AND EXPENSES SHOULD NOT BE TREATED HIS DEEMED INCOME U/ S 69 OF THE ACT. THE LD. AR OF THE ASSESSEE VIDE LETTER DATED 30 TH NOV 2007 STATED THAT PEAK THEORY MAY BE APPLIED FOR THE UNRECORDED PURCHASES FOUND O N THE BASIS OF THE LOOSE PAPERS BECAUSE THE SAME AMOUNT IS BEING ROUTED AT T IME TO TIME TO MAKE THE PURCHASES. THE AO HELD THAT IT WILL BE REASONABLE T O INFER THAT SOME AMOUNT 7 HAS BEEN INITIALLY INVESTED BY THE ASSESSEE FOR EFF ECTING PURCHASES AND SUCH INITIAL INVESTMENT WAS ESTIMATED AT RS. 1.00 LAC. 4.3 THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. 4.4 WE HAVE HEARD BOTH THE PARTIES. IT HAS BEEN NOT ICED DURING THE COURSE OF SURVEY THAT THE ASSESSEE WAS HAVING STOCK OF RS. 61 605/- AS AGAINST STOCK OF RS. 195 098/- THIS FACTS SHOWS THAT THE ASSESSEE IS UTILIZING THE INVESTMENT FROM DISCLOSED INVESTMENT FOR MAKING PURCHASES OUTS IDE THE BOOKS THE SHORTAGE IN SALES MEANS THAT THE FUNDS FROM SUCH SA LES HAVE BEEN UTILIZED FOR MAKING PURCHASES AND SALES OUTSIDE THE BOOKS OF ACC OUNT AND NO FURTHER INVESTMENT IS NEEDED. HENCE THE ADDITION OF RS. 1. 00 LAC IS DELETED. 5.1 THE FOURTH GROUND OF THE ASSESSEE IS THAT THE L D. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 5.19 LACS AS UNEXPLA INED INVESTMENT. 5.2 CERTAIN LOOSE PAPERS WERE FOUND AT THE TIME SUR VEY AND THESE LOOSE PAPERS CONTAIN CERTAIN ENTRIES IN THE NAMES OF VARI OUS PERSONS AND THE AMOUNT IS ALSO BEING WRITTEN AGAINST EACH NAME. THE NAMES OF THE PERSONS ARE EITHER HALF WORDED OR NICK NAMES. NO ADDRESSES OF THESE PERSONS ARE AVAILABLE. THE ASSESSEE VIDE LETTER DATED 3 RD SEPT. 2007 WAS REQUIRED TO GET SUCH ENTRIES VERIFIED FROM THE BOOKS OF ACCOUNT. TH E LD. AR OF THE ASSESSEE VIDE LETTER DATED 8 TH OCT. 2007 STATED THAT THE LOOSE PAPERS DID NOT REL ATE TO THE ASSESSEE. THE LOOSE PAPERS RELATED TO SOME PRIV ATE LOTTERY WHICH WAS 8 BEING RUN BY SANTOSH CHAPPALWALA. THE ASSESSEE IN H IS STATEMENT RECORDED AT THE TIME OF SURVEY ACCEPTED THAT HE IS KNOWN AS RA JA IN THE MARKET. IN THE LOOSE PAPER A SUM OF RS. 5.19 LACS IS MENTIONED AG AINST THE NAME OF RAJA. THE ASSESSEE STATED THAT HE HAS NOT DEPOSITED ANY A MOUNT IN THE LOTTERY. THE AO TREATED THE ABOVE AMOUNT AS UNEXPLAINED INVESTME NT U/S 69 OF THE ACT. HOWEVER NO SEPARATE ADDITION WAS MADE AFTER RELYIN G ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF T AYARAMAL BAL CHAND VS CIT 165 ITR 453. 5.3 THE LD. CIT(A) HAS CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER:- 8.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE ASSESSEE THE LOOSE VOUCH ERS WERE FOUND AND IMPOUNDED FROM THE BUSINESS PREMISES OF THE ASSESSEE. THE ONUS OF THE ASSESSEE TO PROVE OTHERWISE WITH EVIDENCE. HE HAS ADMITTED BEFORE THE AO THAT THESE PAPERS WERE RELATED TO HIS BUSINESS. HE IS KNOWN TO NICK NAME OF RAJA. THE AO HAS GIVEN SUFFICIENT TIME TO EXPLAIN THESE ENTRIES. THE LD. A R HAS NOT PRODUCED ANY EVIDENCE TO CONTROVERT TO THE FIND INGS OF THE AO BEFORE ME. HE SIMPLY MADE A SUBMISSION WITHOUT ANY EVIDENCE. THEREFORE THIS ADDITION IS CONFIRMED. 9 5.4 WE HAVE HEARD BOTH THE PARTIES. THE PHOTOSTAT C OPY OF LOOSE PAPERS IS AVAILABLE AT PAGES 1AND 2 OF THE PAPER BOOK FILED B Y THE LD.. AR. AGAINST CERTAIN NAMES THE WORD CASH IS ALSO BEING MENTIONE D. THERE ARE ENTRIES IN THE NAME OF 57 PERSONS. NO DATE IS AVAILABLE ON THI S LOOSE PAPERS LOOSE PAPER IS NOT IN THE HANDWRITING OF THE ASSESSEE. SH RI SANTOSH CHAPPALWALA HAS DENIED TO HAVE MANAGED SOME LOTTERY. THE AO BEF ORE MAKING THE ASSESSMENT HAS NOT MADE ENQUIRY FROM ANY OTHER PERS ONS MENTIONED IN THAT LOOSE PAPER. THE LD. CIT(A) IN THE CASES OF SHRI P REM CHAND NARANG AND MAHENDRA KUMAR AGARWAL DELETED THE ADDITION AS THE AMOUNT IS ALSO BEING REFLECTED AGAINST THESE TWO PERSONS. THE ORDER OF T HE LD. CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL VIDE ORDER DATED 11 TH FEB. 2011. FOLLOWING OUR ORDER IN THE CASE OF PREM CHAND NARANG (ITA NO.1183 /JP/2010 DATED 11- 02-2011) WE FEEL THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. MOREOVER THE AO HAS NOT MADE ANY SEPARATE ADDITION AND THIS ADDITION HAS BEEN COVERED IN THE TRADING ADDITION OF RS. 5 60 37 1/-. WE HAD ALREADY CONFIRMED THE TRADING ADDITION OF RS.4 88 871/-. HE NCE EVEN IF THE MATTER HAS TO GO AGAINST THE ASSESSEE THEN THE ADDITION WI LL BE AROUND RS. 32 000/-. HOWEVER SINCE WE ARE HOLDING THAT THE ADDITION IS NOT TO BE MADE THEREFORE THE ADDITION OF RS. 5.19 LACS IS DELETED 10 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22-07 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 22/07/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI NARESH KUMAR MATLANI BHARATPUR 2. THE ITO WARD- 2 BHARATPUR 3. THE LD. CIT (A) JAIPUR 4. THE LD. CIT BY ORDER 5. THE LD.DR 6. THE GUARD FILE (ITA NO.182/JP /11) A.R ITAT JAIPUR 11 12