The ITO, Ward2(3),, Surat v. Shri Bherumal Gothi,Prop. of M/s. Regal & Regal,, Surat

ITA 1896/AHD/2006 | 2002-2003
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 189620514 RSA 2006
Bench Ahmedabad
Appeal Number ITA 1896/AHD/2006
Duration Of Justice 4 year(s) 2 month(s) 4 day(s)
Appellant The ITO, Ward2(3),, Surat
Respondent Shri Bherumal Gothi,Prop. of M/s. Regal & Regal,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 29-10-2010
Date Of Final Hearing 19-10-2010
Next Hearing Date 19-10-2010
Assessment Year 2002-2003
Appeal Filed On 25-08-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D.AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA NO.1896 1897 AND 1898/AHD/2006 [ASSTT. YEAR : 2002-2003 2003-2004 AND 2004-2005] ITO WARD-2(3) SURAT. VS. SHRI BHERUMAL GOTHI PROP: OF M/S.REGAL & REGAL 1044 TEXTILE MARKET RING ROAD SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI SHAILENDRA SHARMA O R D E R PER T.K. SHARMA JUDICIAL MEMBER : THESE APPEALS ARE BY THE REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-II SURAT DATED 26.05.2006 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 144 OF THE INCOME TAX ACT. SINCE I SSUES AND GROUNDS RAISED IN ALL THESE APPEALS ARE SIMILAR EXCEPT QUANTUM WE F OR THE SAKE OF CONVENIENCE DISPOSE OF THESE APPEALS BY THIS CONSOLIDATED ORDER . 2. ON THE LAST DATE OF HEARING I.E. 8-7-2010 NONE APPEARED THEREFORE THE BENCH DIRECTED THAT THE NOTICES BE SERVED THROUGH D EPARTMENT FIXING THE DATE OF HEARING FOR 19-10-2010. BUT ON 19-10-2010 DESPITE SERVICE OF NOTICE BY THE DEPARTMENT NONE APPEARED FROM THE SIDE OF THE ASSE SSEE NOR FILED AN APPLICATION FOR ADJOURNMENT. PROCEEDINGS RECORD OF ALL THREE APPEALS INDICATE THAT THE ASSESSEE IS NOT INTERESTED IN DEFENDING IT S CASE. IN THESE CIRCUMSTANCES WE PROCEED TO DECIDE ALL THE THREE APPEALS AFTER HE ARING LEARNED DR AND CONSIDERING MATERIAL AVAILABLE ON RECORD. 3. GROUNDS RAISED IN ALL THESE APPEALS ARE IDENTICA LLY WORDED AND THE SAME ARE REPEATED HEREIN. ITA NO.1896 1897 AND 1898/AHD/2006 -2- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) HAS ERRED IN DELEING THE GP ADDITION TO THE EXTENT OF RS.4 86 233/- RS.21 05 640/- AND RS.13 43 865/- FO R A.Y.2002-03 2003- 04 AND 2004-05 RESPECTIVELY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 69 742/- ON ACCOUNT OF PEAK AMOUNT IN THE UNACCOUNTED BANK STATEMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD.CIT(A) SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE AO TO T HAT EXTENT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ART SILK CLOTH IN THE NAME & STYLE OF M/S.REGAL PRINTS. HOWEVER IT WAS DISCOVERED BY THE DEPARTME NT THAT THE ASSESSEE WAS ALSO DOING UNACCOUNTED TRADING BUSINESS IN THE NAME AND STYLE OF M/S.REGAL & REGAL FROM 501 502 SHRI HARI MARKET RING ROAD S URAT. THE BANK ACCOUNT OF M/S.REGAL & REGAL PROP. SHRI BHERULAL GOTHI WA S IN THE TEXTILE COOPERATIVE BANK SURAT. THE DETAILS OF THIS UNACC OUNTED BANK ACCOUNT MAINTAINED BY THE ASSESSEE ARE AS UNDER: PERIOD (A.Y.) PEAK AMOUNT (RS.) TURNOVER (RS.) 2002-03 5 16 009 63 30 705 2003-04 69 742 1 92 59 678 2004-05 - 1 41 14 024 5. THE AO AFTER RECORDING DETAILED REASONS HAD ISSU ED NOTICES UNDER SECTION 148 OF THE ACT ON 31-3-2005 FOR A.Y.2002-03 2003-04 AND 2004-05. IN RESPONSE TO THE NOTICE UNDER SECTION 148 THE AS SESSEE FILED RETURN OF INCOME FOR UNACCOUNTED CONCERN M/S.REGAL & REGAL IN THE ST ATUS OF AOP. THE DETAILS OF WHICH ARE AS UNDER: PERIOD (A.Y.) DATE OF FILING INCOME SHOWN (RS.) 2002-03 26-12-2005 5 48 970 2003-04 26-12-2005 2 06 055 2004-05 26-12-2005 1 41 140 ITA NO.1896 1897 AND 1898/AHD/2006 -3- 6. BIFURCATION OF INCOME DECLARED BY THE ASSESSEE I N RESPONSE TO THE NOTICE UNDER SECTION 148 IN EACH OF THE ASSESSMENT IS AS U NDER: ASSTT.YEAR INCOME IN FORM OF DIFFERENTIAL PEAK CREDITS 1% NP AFTER PEAK TURNOVER TOTAL INCOME OFFERED 2002-03 RS.5 16 009 RS.32 961 RS.5 48 970 2003-04 RS.69 742 RS.1 36 313 RS.2 06 055 2004-05 NIL RS.1 41 140 RS.1 41 1240 7. BEFORE THE AO THE ASSESSEE SUBMITTED THAT THE A FORESAID RETURNS OF INCOME FILED SHOULD BE TREATED IN RESPONSE TO THE N OTICES ISSUED U/S.148 OF THE ACT. THE BANK ACCOUNT OF M/S.REGAL & REGAL WAS IN THE NAME OF SHRI BHERULAL M. GOTHI AS ITS PROPRIETOR. THE TURNOVER SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT DOES NOT INCLUDE THE BUSINESS TURNOVER DONE BY HIM THROUGH M/S.REGAL & REGAL. THE AO DID NOT FOUND THE BOOKS OF ACCOUNT OF THE ASSESSEE AS RELIABLE AND HENCE THE BOOK RESULTS SHOWN BY THE AS SESSEE WAS REJECTED. THE INCOME OF THE ASSESSEE EARNED THROUGH UNACCOUNTED B USINESS CONCERN WAS ESTIMATED ON THE BASIS OF UNACCOUNTED INVESTMENT MA DE BY THE ASSESSEE WHICH WAS REFLECTED IN THE FORM OF PEAK AMOUNT IN THE UNA CCOUNTED BANK STATEMENT. THE AO HAS ADDED THE SAME AS UNACCOUNTED INVESTMENT OF THE ASSESSEE. FURTHER THE INCOME EARNED THROUGH UNACCOUNTED TURN OVER WAS ESTIMATED ON THE BASIS OF GROSS PROFIT DECLARED BY THE ASSESSEE IN H IS ACCOUNTED CONCERN I.E. M/S.REGAL PRINTS. OUT OF TOTAL GROSS PROFIT ESTIM ATED IN RESPECT OF UNACCOUNTED TURNOVER OF THE ASSESSEE THE AO HAS ALLOWED LUMP S UM RS.1 LAKH BASIC EXPENSES FOR EACH ASSESSMENT YEAR IN RESPECT OF SEP ARATE BUSINESS PREMISES MAINTAINED BY THE ASSESSEE. THE DETAILS OF GP DECL ARED BY THE ASSESSEE IN HIS ACCOUNTED CONCERN I.E. M/S.REGAL PRINTS FOR A.Y.200 2-03 2003-04 AND 2004- 05 @ 11.26% 13.09% AND 12.23% RESPECTIVELY. FOR ALL THE THREE ASSESSMENT YEARS THE AO MADE THE FOLLOWING ADDITIONS: ITA NO.1896 1897 AND 1898/AHD/2006 -4- PERIOD (A.Y.) PEAK AMOUNT GP TOTAL ADDITION (RS.) 2002-03 5 16 009 6 12 837 11 28 846 2003-04 69 742 24 21 092 24 90 834 2004-05 - 16 26 145 16 26 145 8. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED CI T(A) CONFIRMED THE ADDITION OF RS.5 16 009/- IN RESPECT OF PEAK CREDIT FOR THE ASSESSMENT YEAR 2003-04. HOWEVER FOR THE ASSESSMENT YEAR 2003-04 THE ADDITION OF RS.69 742/- WHICH WAS MADE BY THE AO ON ACCOUNT OF PEAK CREDIT WAS DELETED BY THE LEARNED CIT(A) OBSERVING THAT IN THE ASSESSM ENT YEAR 2003-04 RS.69 742/- WAS INVESTED IN THE UNACCOUNTED BANK AC COUNT. WITH REGARD TO GP ADDITION THE LEARNED CIT(A) TOOK THE VIEW THAT IT WOULD BE JUST AND FAIR IF THE NET PROFIT IS ADOPTED AT THE RATE OF 2% OF THE TOTA L TURNOVER IN RESPECT OF THE RESPECTIVE ASSESSMENT YEARS. THE LEARNED CIT(A) A CCORDINGLY DELETED THE ADDITION TO THE EXTENT OF RS.4 86 233/- RS.21 05 6 40/- AND RS.13 43 865/- FOR THE ASSESSMENT YEARS 2002-03 2003-04 AND 2004-05. CONSEQUENTLY THE PEAK ADDITION OF RS.69 714/- DECLARED IN THE A.Y.2003-04 WAS ALSO DELETED ON THE BASIS OF THE INCOME EARNED BY THE ASSESSEE THROUGH HIS UNACCOUNTED TO RS.1 26 614/- AS THE SAME STANDS EXPLAINED THE DIFF ERENTIAL PEAK. IN THE MANNER THE CIT(A) DIRECTED THE AO TO COMPUTE THE I NCOME OF THE ASSESSEE FOR EACH OF THE THREE ASSESSMENT YEARS AS UNDER: PERIOD (A.Y.) PEAK AMOUNT NP TOTAL (RS.) 2002-03 RS.5 16 009 1 26 614 RS.6 42 623 2003-04 NIL 3 85 194 RS.3 85 194 2004-05 NIL 2 82 280 RS.2 82 280 9. AGGRIEVED WITH THE ORDER OF THE LEARNED CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 10. AT THE TIME OF HEARING BEFORE US THE LEARNED D R POINTED OUT THAT FOR THE ASSESSMENT YEAR 2002-03 THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.56 396/- WHEREIN HE HAS DECLARED INCOM E FROM HIS PROPRIETORSHIP ITA NO.1896 1897 AND 1898/AHD/2006 -5- CONCERN VIZ. M/S.REGAL. THE RETURN INCOME IN THE N AME AND STYLE OF M/S.REGAL & REGAL WAS FILED ON 26-12-2005 IN THE AOP STATUS. THE AO FOUND THAT THE BUSINESS DONE BY THE ASSESSEE IN M/S.REGAL & REGAL IS ALSO IN HIS INDIVIDUAL CAPACITY. HE FURTHER SUBMITTED THAT THE EVIDENCES FILED CLEARLY SHOWED THAT M/S.REGAL & REGAL IS A PROPRIETARY CONCERN AND NOT AN AOP AS DECLARED BY THE ASSESSEE. THIS VIEW OF THE AO HAS BEEN UPHELD BY TH E LEARNED CIT(A) ALSO. IN THIS BACKDROP THE LEARNED DR ARGUED THAT THE ASSES SEE HAS HIMSELF DECLARED GP OF 11.26% IN HIS PROPRIETARY CONCERN REGAL PRINTS. THEREFORE ON THIS BASIS FOR THE ASSESSMENT YEAR 2002-03 THE AO IS LEGALLY AND FACTUALLY CORRECT IN WORKING OUT THE GP BY APPLYING GP RATE OF 11.26%. ON THIS BASIS GP WORKED OUT TO RS.7 12 837/-. OUT OF THIS ESTIMATED GP THE AO AL LOWED LUMP SUM AMOUNT OF RS.1 LAKH AS ESTIMATED BACK EXPENSES AND ONLY REMAI NING AMOUNT OF RS.6 12 837/- IS TAXED. THE LEARNED DR FURTHER SUB MITTED THAT IN OTHER TWO ASSESSMENT YEAR ALSO THE AO ON THIS BASIS HAS COMP UTED THE GP ADDITION OF UNACCOUNTED BUSINESS CARRIED OUT BY THE ASSESSEE IN THE NAME AND STYLE OF M/S.REGAL & REGAL AT RS.24 21 092/- AND RS.16 26 1 45/- FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 AND THE LEARNED CIT(A) IS NOT JUSTIFIED IN REDUCING THE GP ADDITION BY APPLYING NET PROFIT AT 2%. THE LEARNED DR POINTED OUT THAT THERE IS NO BASIS ON WHICH THE CIT(A) HAS ESTIMATED ON WHICH THE CIT(A) HAS ESTIMATED NET PROFIT AT 2% ON UNACCOUNTED TURNOVER OF THE ASSESSEE. THE AO HAS ADOPTED GP RATE THE ASSESSEE HIMSELF DECLARED IN THE BOOKS OF ACCOUNTS OF REGAL PRINTS DURING THE RESPECTIVE ASSESSMENT YEAR S. THE LEARNED DR ALSO POINTED OUT BEFORE THE AO THE ASSESSEE TOOK THE PLE A OF RATE OF NET PROFIT ACCEPTED BY THE DEPARTMENT UNDER SECTION 44AF OF TH E I.T.ACT I.E. AT THE RATE OF 5% OF THE TOTAL TURNOVER DURING THE ASSESSMENT PROC EEDINGS AS PER THEIR LETTERS DATED 27-2-2006 FILED FOR EACH ASSESSMENT PERIOD. HE SUBMITTED THAT THIS HAS BEEN SUBMITTED BY THE AO IN EACH OF THE ASSESSMENT ORDER. FOR THIS HE DREW OUR ATTENTION TO PARA 3.10.1 OF THE ASSESSMENT ORDE R. HE POINTED OUT THAT THE AO REJECTED THE PLEA OF THE ASSESSEE TO REJECT THE NET PROFIT AT THE RATE OF AS AGAINST THE THIS IN THE IMPUGNED ORDER THE LEARNE D CIT(A) DIRECTED THE AO TO ITA NO.1896 1897 AND 1898/AHD/2006 -6- APPLY NET PROFIT RATE OF 2%. ON THIS BASIS HE SUB MITTED THAT THE LEARNED CIT(A) SHOULD HAVE TAKEN THIS FACT AND AT LEAST NET PROFIT SHOULD HAVE BEEN ADOPTED AT THE RATE OF 5% OF THE UNACCOUNTED TURNOVER OF M/S.R EGAL & REGAL. 11. WITH REGARDING TO THE DELETION OF RS.69 742/- THE LEARNED DR FAIRLY ADMITTED THAT THIS ADDITION WAS MADE ONLY IN THE AS SESSMENT YEAR 2003-04. THIS HAS BEEN DELETED BY THE LEARNED CIT(A) ON THE PRESUMPTION THAT THE ASSESSEE HAS REINVESTED HIS UNACCOUNTED BANK ACCOUN T FOR THE ASSESSMENT YEAR 2002-03 DURING THE ASSESSMENT YEAR 2003-04. HE SUB MITTED THAT THIS RELIEF HAS BEEN ALLOWED WITHOUT ANY MATERIAL EVIDENCE ON RECOR D THEREFORE THE ADDITION OF RS.69 742/- MADE BY THE AO FOR THE A.Y.2003-04 B E RESTORED. 12. AFTER HEARING THE LEARNED DR WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN RESPONSE TO THE NOTICE UNDER SECTION 148 THE ASSESSEE FILED RETURN OF INC OME IN THE NAME AND STYLE OF M/S.REGAL & REGAL IN THE STATUS OF AOP. BOTH THE D EPARTMENTAL AUTHORITIES HAVE DISCUSSED AT LENGTH THAT THIS INCOME BELONGED TO THE ASSESSEE AS THE SAME WAS EARNED IN HIS INDIVIDUAL CAPACITY. IN THE ASSE SSMENT ORDER THE AO WORKED OUT THE GP ADDITION BY ADOPTING GP RATE AT THE RATE OF 11.26% FOR THE A.Y.2002-03 13.09% FOR A.Y.2003-04 AND 12.23% FOR THE ASSESSMENT YEAR 2004-05. FROM THIS FIGURE HE HAS ALSO ALLOWED LUM P SUM EXPENDITURE OF RS.1 LAKH FOR EACH OF THE ASSESSMENT YEAR. ADMITTEDLY THE TURNOVER OF THE M/S.REGAL & REGAL IS NOT RECORDED BY THE ASSESSEE I N THE BOOKS OF ACCOUNTS. THE ASSESSEE WAS MAINTAINING THE UNACCOUNTED BANK A CCOUNT NO.6255 IN THE TEXTILE COOPERATIVE BANK FROM WHICH DISCOVERED THE NAME OF M/S.REGAL & REGAL PROP. SHRI BHERULAL GOTHI I.E. THE ASSESSEE AND IN COMPLIANCE TO THE NOTICE UNDER SECTION 148 THE RETURNS WERE FILED DE CLARING THE INCOME AS UNDER: ASSTT.YEAR INCOME IN FORM OF DIFFERENTIAL PEAK CREDITS 1% NP AFTER PEAK TURNOVER TOTAL INCOME OFFERED 2002-03 RS.5 16 009 RS.32 961 RS.5 48 970 ITA NO.1896 1897 AND 1898/AHD/2006 -7- 2003-04 RS.69 742 RS.1 36 313 RS.2 06 055 2004-05 NIL RS.1 41 140 RS.1 41 140 IT IS ALSO NOT A DISPUTED FACT THAT BUSINESS OF UNA CCOUNTED OF THE CONCERN VIZ. M/S.REGAL AND REGAL IS CARRIED OUT IN THE RENTAL PR EMISES VIZ. FROM 501 502 SHRI HARI MARKET RING ROAD SURAT WHEREAS REGULAR BUSINESS IS CONDUCTED AT 1044 TEXTILE MARKET SURAT. IN THE IMPUGNED ORDE R THE LEARNED CIT(A) DIRECTED THE AO TO ADOPT NP AT 2% OF TOTAL TURNOVER IN THE RESPECTIVE ASSESSMENT YEARS. ON THIS BASIS BY APPLYING NP RA TE OF 2% THE LEARNED CIT(A) WORKED OUT THE NET INCOME OF UNACCOUNTED BUS INESS CARRIED OUT BY THE ASSESSEE IN THE REGAL & REGAL CONCERN AS UNDER: PERIOD (A.Y.) NP 2002-03 1 26 614 2003-04 3 85 194 2004-05 2 82 280 13. IT APPEARS THAT BEFORE THE AO FOR ALL THE ASSES SMENT YEARS THE ASSESSEE PLEADED THAT THE NP RATE OF 5% MAY BE APPLIED IN RE SPECT OF TURNOVER OF REGAL AND REGAL CONCERN AS PROVIDED IN SECTION 44AF OF TH E IT ACT. THIS PLEA HAS BEEN REJECTED BY THE AO ON THE GROUND THAT THE ASSE SSEE HAS NOT FILED RETURN OF INCOME FOR ALL THE THREE YEARS VOLUNTARILY UNDER SE CTION 44AF OF THE ACT. APART THIS THE TURNOVER OF THE ASSESSEE IS MORE THAN RS. 40 LAKHS. THE LEARNED DR CONTENDED THAT THE LEARNED CIT(A) OUGHT TO HAVE DIR ECTED THE AO TO COMPUTE THE INCOME BY APPLYING NET PROFIT RATE OF 5% INSTEA D OF 2% ON UNACCOUNTED TURNOVER OF THE SAID CONCERN. WE FIND FORCE IN THI S SUBMISSION MADE BY THE LEARNED DR BECAUSE THE ASSESSEE IS CARRYING ON THE BUSINESS IN THE NAME AND STYLE OF REGAL & REGAL FROM SEPARATE PREMISES. WE ACCORDINGLY DIRECT THE AO TO APPLY NET PROFIT AT 5% IN RESPECT OF UNACCOUNTED TURNOVER OF REGAL & REGAL CONCERN. ON THIS BASIS THE ADDITION WORKS OUT AS U NDER: ASSTT.YEAR TOTAL TURNOVER NP @ 5% 2002-03 6330705 3 16 535 ITA NO.1896 1897 AND 1898/AHD/2006 -8- 2003-04 19259678 9 62 983 2004-05 14114024 7 05 701 THIS IS GROUND IS ACCORDINGLY PARTLY ALLOWED. 14. COMING TO THE NEXT ADDITION OF RS.69 742/- DELE TED BY THE LEARNED CIT(A) WE ARE OF THE VIEW THAT THE GP ADDITION MAD E BY THE AO IN THE ASSESSMENT YEARS UNDER APPEALS HAS BEEN UPHELD BY U S AS ABOVE THE SURPLUS FUND GENERATED THEREFROM WAS AVAILABLE TO THE ASSES SEE FOR MAKING THE INVESTMENT IN THE ASSESSMENT YEAR 2003-04. ON THIS BASIS THE VIEW TAKEN BY THE LEARNED CIT(A) FOR THIS ADDITION IS JUSTIFIED A ND ACCORDINGLY WE UPHOLD. THUS GROUND NO.2 OF THE REVENUE ONLY FOR THE ASSES SMENT YEAR 2003-04 IS REJECTED. 15. IN RESULT THE REVENUES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH OCTOBER 2010. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (T.K. SHARMA) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 29-10-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD