DILIP J SHAH HUF, MUMBAI v. ITO WD 16(3)(1), MUMBAI

ITA 2295/MUM/2010 | 2006-2007
Pronouncement Date: 07-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 229519914 RSA 2010
Assessee PAN AACHD4567P
Bench Mumbai
Appeal Number ITA 2295/MUM/2010
Duration Of Justice 1 year(s) 5 month(s) 15 day(s)
Appellant DILIP J SHAH HUF, MUMBAI
Respondent ITO WD 16(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 07-09-2011
Date Of Final Hearing 24-08-2011
Next Hearing Date 24-08-2011
Assessment Year 2006-2007
Appeal Filed On 23-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B. RAMAKOTAIAH ( A.M ) ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) DILIP J SHAH HUF 11 SILVER CINEMA 3 RD KHETWADI BACK ROAD MUMBAI-400004. PAN: AACHD4567P INCOME TAX OFFICER WARD 16 (3)(1) MATRUMANDIR 2 ND FLOOR ROOM NO.219 TARDEO ROAD MUMBAI-400007 . APPELLANT V/S RESPONDENT DATE OF HEARING : 24.8.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : S/SHRI SANJAY R.PARIKH SAN JEEV D.LALAN AND RUSHABH MEHTA RESPONDENT BY : SHRI C.G.K.NAIR O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.1.2010 PASSED BY THE LD . CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN HUF ENGAGED IN THE BUSINESS OF TRADING IN STEEL & ALLOYS FILED RETURN DECLARING TOTAL INCOME AT RS.2 02 686 /- ALONG WITH THE STATEMENT OF TOTAL INCOME PROFIT AND LOS S ACCOUNT BALANCE-SHEET AND AUDIT REPORT IN FORM NO.3CB & 3C D AS REQUIRED U/S 44AB OF THE INCOME TAX ACT 1961 (IN SHORT THE ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 2 ACT). THE AO AFTER PROCESSING THE RETURN U/S 143(1 ) OF THE ACT THE CASE WAS SELECTED FOR SCRUTINY AND ACCOR DINGLY ISSUED NOTICE U/S 143(2) FOLLOWED BY NOTICE U/S 14 2(1) OF THE ACT. SINCE THERE WAS NO COMPLIANCE THE AO ASKED T HE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT SHOU LD NOT BE MADE EX-PARTE ALONG WITH THE PROPOSED ADDITION OF RS.7 41 45 205/-. IN THE ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE THE AO COMPLETED THE EX-PARTE ASSESSMEN T AT AN INCOME OF RS.7 43 47 890/- VIDE ORDER 25.11.2008 PA SSED U/S 144 OF THE ACT. 3. ON APPEAL THE LD.CIT(A) WHILE UPHOLDING THE COMPLETION OF THE ASSESSMENT U/S 144 CONFIRMED THE ADDITION OF GROSS PROFIT AT RS.6 52 029/- AN ADDITION OF RS.92 00 000/- ON ACCOUNT OF ADVANCES FROM CUSTOMER S AND DELETED THE ADDITION OF RS.5 74 73 889/- ON ACCOU NT OF SUNDRY CREDITORS AND OTHER LIABILITIES OF RS. 93 1 7 454/- AND PARTLY ALLOWED THE DISALLOWANCES OF EXPENSES BY RS.83 129/-. 4. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 5. GROUND NO.1 IS AGAINST THE UPHOLDING THE ACTION OF THE AO IN PASSING THE EX-PARTE ORDER U/S 144 OF THE AC T WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 3 6. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE ABOVE GROUND WHICH WAS NOT OBJECTED TO BY THE LD.DR. THAT BEING SO IN THE ABS ENCE OF ANY SUPPORTING MATERIAL THE GROUND TAKEN BY THE AS SESSEE IS THEREFORE REJECTED BEING NOT PRESSED. 7. GROUND NO.2(A) AND 2(B) ARE AGAINST THE SUSTEN ANCE OF TRADING ADDITION OF RS.6 52 029/-. 8. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO IN THE PROPOSED RETURN OBSERVED THAT THE ASSESSEE HA S SHOWN THIS INCOME OF RS.3 02 304/- AFTER DEDUCTING THE DE PRECIATION. THE G.P. WAS SHOWN AT 2.89% WHICH IS VERY LESS AS COMPARED TO OTHER ASSESSEES WHO HAS SAME BUSINESS A ND SOLD SAME ITEMS. MOST OF THE ASSESSEES IN THIS FI ELD SHOW GP RATE ABOUT 5% OF TOTAL TURNOVER. THE AO AFTER A PPLYING THE GP RATE AT 5% WORKED OUT THE EXTRA PROFIT OF RS. 6 52 029/- AND ADDED THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE. ON APPEAL IT WAS ARGUED THAT THE ASSES SEES BOOKS ARE SUBJECTED TO AUDIT U/S 44AB OF THE ACT AN D SALES AND PURCHASE FIGURES MENTIONED IN THE PROFIT AND LO SS ACCOUNT ARE AS PER AUDITED BOOKS OF ACCOUNT AND TH E DETAILS OF MOVEMENT OF NUMBER OF ITEMS OF STOCK IN TRADE HA S BEEN FILED AND SALES AND PURCHASES WERE AUDITED AND COM PLETE DETAILS OF STOCK IN TRADE IN NUMBER OF ITEMS WERE AVAILABLE ON RECORD. THERE WAS NO CASE OF ESTIMATION OF GP R ATE. THE ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 4 AO HAS MENTIONED THAT OTHER DETAILS ARE SHOWING 5 % GP BUT HE HAS NOT MENTIONED THE SAME AND THEIR STATE OF A FFAIRES MAY BE DIFFERENT FROM THAT OF ASSESSEE. IT WAS TH EREFORE MENTIONED THAT THE ADDITION MADE BY THE AO BE DELE TED. HOWEVER THE LD.CIT(A) OBSERVED THAT THE ASSESSEE IS HAVING BUSINESS BOTH IN MUMBAI AND DELHI AND IS D OING LARGE VOLUME OF BUSINESS IN THESE CITIES THEREFORE ALSO HAVING INTERRELATED BUSINESS OF THE PARTNERS IN TH E SAME BUSINESS. CONSIDERING ALL THESE FACTS THE GP RA TE SHOWN BY THE APPELLANT APPEARS TO BE LOW. HE FURTHER OBS ERVED THAT THE ASSESSEES TURNOVER HAS BEEN DECLARED FROM PRE VIOUS YEAR RS.4.22 CRORE TO RS.3.09 CRORE IN THE CURRENT YEAR AND THE GP RATE HAS ALSO DECLINED IN THE PREVIOUS YEAR OF 3.2% TO 2.8% IN THIS YEAR. IT DOES NOT APPEAR THAT THEY ARE MAINTAINING DAILY STOCK REGISTER THEY HAVE JUST FI LED DETAILS OF CLOSING STOCK. NO PROPER EXPLANATION OF GP RATE HAS BEEN GIVEN AND HENCE HE CONFIRMED THE ADDITION MADE BY THE AO. 9. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS FILED COMPL ETE DETAILS OF HIS FINANCIAL STATEMENTS ALONG WITH TH E COPY OF TAX AUDIT REPORT APPEARING AT PAGES 21 TO 62 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT BEFORE THE LD. CIT(A) THE ASSESSEE HAS ALSO FILED AN APPLICATION FOR ADM ISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME T AX ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 5 RULES 1962 FOR ADMISSION OF ADDITIONAL EVIDENCE VI Z DETAILS OF OPENING STOCK CLOSING STOCK COPY OF STOCK RE CORDS OF DIFFERENT ITEMS COPIES OF GROUP SUMMARY OF PURCH ASES COPIES OF SUMMARY OF SALES COPY OF DETAILS OF SUND RY DEBTORS AND CREDITORS COPIES OF DETAILS OF SALES AS PER SA LES TAX RETURNS AND AS PER BOOKS COPIES OF DETAILS OF PU RCHASES AS PER SALES TAX RETURNS AND AS PER BOOKS COPY OF ACKNOWLEDGMENT FOR FILING SALES TAX RETURNS COPIES OF CONFIRMATION OF PARTIES ACCOUNTS AND THE COPY OF L ETTER DATED 26.3.2009 FILED WITH CIT(A). HE FURTHER SUBMITS TH AT THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO. T HE AO IN HIS REMAND REPORT DATED 9.12.2009 APPEARING AT PAGE 245 OF THE ASSESSEES PAPER BOOK THROUGH THE PAPER BOOK F ILED BY THE ASSESSEE HAS SUBMITTED THAT HE HAS NO OBJECTION FOR ADMISSION OF THE ADDITIONAL EVIDENCE. IN THE LIGHT OF ABOVE HE SUBMITS THAT SINCE THE ASSESSEE HAS MAINTAINED COMPLETE RECORDS OF OPENING STOCK CLOSING STOCK PURCHASE A ND SALES IN VALUE-WISE AND QUANTITY-WISE APPEARING AT PAGES 15 31 32 33 34 39 TO 51 140 TO 180 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT THE ASSESSEE HAS ALSO FILED COMPLETE DETAILS OF SALES TAX RETURN ALONGWITH R ECONCILIATION STATEMENT APPEARING AT PAGES 181 TO 192 OF THE AS SESSEES PAPER BOOK THEREFORE NO ADDITION IS CALLED FOR. ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 6 10. ON THE OTHER HAND THE LD.DR SUPPORTS THE ORDER OF THE AO AND THE LD. CIT(A). 11. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND MERIT THAT IN THIS CASE THE ASSESSEE HAS FILED THE COMPLETE DETAILS OF FINANCIAL STATEMENTS AS REQUIRED U/S 44A B ALONGWIH THE RETURN OF INCOME. BEFORE THE LD. CIT(A) THE A SSESSEE FILED ADDITIONAL EVIDENCE COMPLETE DETAILS OF TRA DING ACCOUNT SHOWING THE DETAILS OF OPENING AND CLOSING STOCK P URCHASE AND SALES AND DETAILS OF SUNDRY DEBTORS AND SUNDRY CREDITORS AND OTHER DETAILS AS PER THE SALES TAX RETURN. T HE LD. CIT(A) FORWARDED THE SAME TO THE AO. THE AO SUBMITTED HIS REMAND REPORT VIDE LETTER DATED 9.12.2009. THE AO AFTER EX AMINING THE DETAILS FILED BY THE ASSESSEE IN THE REMAND REP ORT HAS ACCEPTED THAT HE HAS NO OBJECTION FOR THE ADMISSI ON OF ADDITIONAL EVIDENCE. SINCE THE ASSESSEE HAS FURNISH ED THE DETAILS OF OPENING AND CLOSING STOCK PURCHASE AND SALES AND STOCK REGISTER WITH QUANTITY AMOUNT WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT IT DOES NOT APPEAR THAT THEY ARE MAINTAINING DAILY STOCK REGIST ER. THEY HAVE JUST FILED DETAILS OF CLOSING STOCK. UNDER S ECTION 145 OF THE ACT THE AO HAS REJECTED THE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE IF HE IS NOT SATISFIED ABOUT THE C ORRECTNESS OR THE COMPLETENESS OF THE ACCOUNT OF THE ASSESSEE OR ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 7 WHETHER THE METHOD OF ACCOUNTING HAS NOT BEEN REGU LARLY FOLLOWED BY THE ASSESSEE THEN THE AO MAY MAKE THE ASSESSMENT IN THE MANNER PROVIDED U/S 144. HOWEVE R IN THE CASE BEFORE US IT IS NOT THE CASE OF THE REVEN UE THAT THE ASSESSEES ACCOUNTS ARE NOT CORRECT OR THE ASSESSEE HAS NOT FOLLOWED THE METHOD OF ACCOUNTING. IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT THE TRADING ADDITIO N OF RS.6 52 029/- MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY TH E SAME IS DELETED. 12. GROUND NO.3(A) AND 3(B) ARE AGAINST THE SUS TENANCE OF ADDITION OF RS.92 17 454/- MADE U/S 68 OF THE A CT BEING ADVANCES FROM THE CUSTOMERS. 13. BRIEF FACTS ON THE ABOVE ISSUE ARE THAT IT HAS BEEN OBSERVED BY THE AO THAT ON VERIFICATION OF THE BAL ANCE SHEET IT IS FOUND THAT THE ASSESSEE HAS SHOWN OTHER LIAB ILITIES AMOUNTING TO RS.92 17 454/-. IN THE ABSENCE OF ANY SUPPORTING EVIDENCE THE AO ADDED THE SAME U/S 68 OF THE ACT. ON APPEAL THE LD. CIT(A) FROM THE DETAILS FI LED BY THE ASSESSEE OBSERVED THAT THESE ADVANCES ARE APPEARIN G FROM LAST 2 TO 3 YEARS IN MANY CASES AND IT IS VERY STRA NGE THAT THESE ADVANCES FROM CUSTOMERS WOULD BE AVAILABLE T O THE APPELLANT COMING FROM THE LAST 2 TO 3 YEARS AND T HE APPELLANT HAS NOT PAID BACK THEIR AMOUNT OR SUPPL IED GOODS ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 8 TO THEM. UNDER THESE CIRCUMSTANCES THESE ENTRIES APPEARING UNDER THE HEAD ADVANCES FROM THE CUSTOMERS DID NOT APPEAR TO BE GENUINE ENTRIES AND APPEARS TO BE APPELLANTS OWN MONEY UNDER THE GUISE OF ADVANCES FROM CUSTOMERS A ND HENCE HE CONFIRMED THE ADDITION OF RS.92 00 000 /-. 14. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE ALONGWITH TAX A UDIT REPORT HAS FILED DETAILS OF SUNDRY CREDITORS APPEAR ING AT PAGES 21 AND 22 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT BEFORE THE LD. CIT(A) DURING THE APPEL LATE PROCEEDINGS THE ASSESSEE HAS FILED CONFIRMATION OF ALL THE ACCOUNTS APPEARING AT PAGES 193 TO 236 OF THE ASSES SEES PAPER BOOK SHOWING PERMANENT ACCOUNT NUMBER OF THE RESPECTIVE CUSTOMERS DULY SIGNED BY THEM. HE FURTH ER SUBMITS THAT IN MOST OF THE CASES THE AMOUNT HAS BE EN RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION ONLY AND THE LD. CIT(A) WAS NOT JUSTIFIED IN OBSER VING THAT THE ADVANCES FROM THE CUSTOMERS ARE COMING FROM THE LA ST 2-3 YEARS. HE THEREFORE SUBMITS THAT THE ADDITION MAD E BY THE AO AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 15. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDE R OF THE AO AND THE LD. CIT(A). ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 9 16. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS F ILED CONFIRMATION OF ACCOUNT OF ALL THE PARTIES DURING T HE APPELLATE PROCEEDINGS APPEARING AT PAGES 193 TO 236 OF THE AS SESSEES PAPER BOOK SHOWING THE CONFIRMATION AND PERMANENT ACCOUNT NUMBERS OF RESPECTIVE PARTIES. HOWEVER TH ERE IS NO IOTA OF EVIDENCE TO SHOW THAT THE ABOVE ACCOUNT HAV E BEEN EXAMINED EITHER BY THE AO OR BY THE LD. CIT(A). ME RELY BECAUSE THE ASSESSEE HAS FILED THE CONFIRMATION OR THE AMOUNT HAS BEEN TAKEN THROUGH BANKING CHANNEL DOES NOT MEAN THAT THE ASSESSEE HAS DISCHARGED HIS ONUS IN TERMS OF THE PROVISIONS OF SECTION 68 OF THE ACT. SINCE IT HAS NOT BEEN EXAMINED PROPERLY EITHER BY THE AO OR BY THE L D. CIT(A) WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND A CCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHO RITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FIL E OF THE AO TO DECIDE THE SAME AFRESH AND IN THE LIGHT OF OUR O BSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GR OUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2295/MUM/2010 (ASSESSMENT YEAR : 2006-07) 10 17. GROUNDS NO.4(A) 4(B) AND 4(C) IS REPETITIVE I N NATURE OF THE ABOVE GROUNDS AND HENCE KEEPING IN VIEW OF OUR FINDINGS RECORDED HEREINABOVE WE HOLD AND ORDER ACCORDINGLY. 18. GROUND NO.5 IS GENERAL AND THE SAME IS THEREFO RE REJECTED. 19. IN THE RESULT THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH SEPTEMBE R 2011. SD SD (B. RAMAKOTAIAH) (D .K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 7TH SEPTEMBER 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI