M/s. Pramukh Jewellers, Anand v. The Income tax Officer, Ward-1,, Anand

ITA 2764/AHD/2005 | 2002-2003
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 276420514 RSA 2005
Assessee PAN AAEFP5339D
Bench Ahmedabad
Appeal Number ITA 2764/AHD/2005
Duration Of Justice 4 year(s) 7 month(s) 28 day(s)
Appellant M/s. Pramukh Jewellers, Anand
Respondent The Income tax Officer, Ward-1,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 27-08-2010
Date Of Final Hearing 18-08-2010
Next Hearing Date 18-08-2010
Assessment Year 2002-2003
Appeal Filed On 30-12-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER DATE OF HEARING : 18/08/2010 DRAFTED ON: 19/08/ 2010 ITA NO.2764/AHD/2005 ASSESSMENT YEAR : 2002-03 M/S.PRAMUKH JEWELLERS VRAJ COMPLEX STATION ROAD ANAND VS. ITO WARD-1 ANAND PAN/GIR NO. :AAEFP 5339 D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI MILIN MEHTA RESPONDENT BY: SHRI K.M. MAHESH SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV BARODA DATED 07/10/2005 AND THE SUBSTANTIVE GROUND WHICH WAS ARG UED BEFORE US IS GROUND NO.1 WHICH READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING ADDITION OF RS.7 00 0 00/- MADE BY THE ASSESSING OFFICER ON AD-HOC BASIS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) READ WITH SEC.145(3) OF THE I.T. ACT 1961 DATED 24/02/2005 WERE THAT THE ASSESSEE-FIRM IS IN THE B USINESS OF MANUFACTURING AND TRADING OF JEWELLERY. A SURVEY U/S.133A OF THE I.T. ACT 1961 WAS CARRIED ON 19/02/2002. THE ADMITTED FACTUAL POSITION IS ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 2 - THAT DURING THE COURSE OF SURVEY A DEFICIT IN THE S TOCK WEIGHING 353.680GMS WAS DETECTED. IT WAS VALUED AT THAT TI ME AT RS.1 50 000/-. IT HAS ALSO BEEN NOTED THAT THE CASH PHYSICALLY FOU ND DID NOT TALLY WITH THE CASH BALANCE SHOWN IN THE BOOKS OF ACCOUNT. THIRDL Y IT HAS ALSO BEEN NOTED THAT THE ADVANCES RECEIVED FROM THE CUSTOMERS WERE NOT ENTERED IN THE CASH BOOK. BECAUSE OF THESE DISCREPANCIES WHI LE MAKING A STATEMENT RECORDED U/S.131 OF THE I.T. ACT 1961 ONE OF THE P ARTNERS HAS OFFERED THE FOLLOWING AMOUNT:- (1) AGAINST ADVANCES RS.2 00 000/- (2) UNACCOUNTED LABOUR RECEIPTS RS.5 00 000/- (3) DEFICIT IN STOCK (353.68 GMS) VALUED AT RS.1 50 000/- RS.1 50 000/- RS.8 50 000/- 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS I T HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT THERE WAS A DEC LINE IN THE GROSS PROFIT PERCENTAGE WHICH WAS NOTED AS UNDER:- SL.NO. ASSESSMENT YEAR G.P.PERCENTAGE (1) 2002-03 16.55% (2) 2001-02 19.00% (3) 2000-01 15.06% 2.2. THEREAFTER THE ASSESSING OFFICER HAS REJECTED THE BOOK RESULTS AND OBSERVED THAT THOUGH AN ADDITIONAL INCOME WAS ADMIT TED DURING THE COURSE OF SURVEY OF RS.8 50 000/- BUT IT WAS NOT OF FERED FOR TAX. IT WAS REITERATED THAT THE INCOME WAS DISCLOSED AT RS.1 98 4 524/- THOUGH THE SAID OFFER WAS MADE ON ACCOUNT OF DEFICIT IN STOCK UNACCOUNTED LABOUR RECEIPTS AND ADVANCES RECEIVED FROM THE CUSTOMERS HENCE WITHOUT ANY ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 3 - REASON RETRACTED FROM THE SAID STATEMENT. ON THE B ASIS OF THE ABOVE DISCUSSION FINALLY IT WAS CONCLUDED BY THE ASSESS ING OFFICER THAT THE ASSESSEE HAD FAILED TO GIVE SATISFACTORY REASON FOR FALL IN GROSS PROFIT. THE ASSESSING OFFICER HAS REMARKED QUOTE I DO NOT FIND IT NECESSARY TO ESTIMATE THE SALES AND TO WORK OUT ESTIMATED G.P. T HEREON. THE PURPOSE WOULD BE SERVED BETTER BY ESTIMATING ADDITIONAL INC OME NOT DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AFTER TAKING D UE CONSIDERATION OF THE FACTORS WHICH HAVE EMERGED DURING THE SURVEY ACTION . IN THIS VIEW OF THE MATTER I MAKE AN ADHOC ADDITION. THE ADHOC ESTIMA TION HAS BEEN GIVEN PREFERENCE IN PLACE OF ADDITION ON SPECIFIC ITEMS L IKE UNACCOUNTED LABOUR RECEIPTS SUPPRESSION OF SALES UNRECORDED CASH RECE IPTS LOW G.P. AS COMPARED TO THE PRECEDING YEAR. THEREFORE ON THIS COUNT THE ADDITION OF RS.7 50 000/- IS MADE TO THE TOTAL INCOME AFTER TAK ING INTO CONSIDERATION THE DISCLOSURE OF RS.1 94 524/- MADE BY THE ASSESSE E IN THE RETURN OF INCOME AS FURTHER ADDITIONAL UNDISCLOSED INCOME. UNQUOTE. AGAINST THIS SAID ADDITION OF RS.7 50 000/- AN APPEAL WAS P REFERRED. 3. BEFORE THE FIRST APPELLATE AUTHORITY IT WAS VEH EMENTLY CONTESTED THAT THE DEFICIT OF STOCK WAS VERY LESS I.E. ONLY 1.24% OF THE TOTAL SALES. IT HAS ALSO BEEN CONTESTED THAT NO SPECIFIC DEFECT WAS FOUND DURING THE COURSE OF SURVEY THEREFORE IN THE STATEMENT IT W AS DECLARED THAT THE ADVANCES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT HOWEVER IF ANY AMOUNT OF ADVANCE WOULD BE UNRECORDED THEN RS.2 LA CS IS OFFERED AND TO PAY TAX THEREON. RELYING UPON THE DECISION OF HON' BLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS AND SONS VS. CIT REPORTED AS (2003)263 ITR 101 (KER.) IT HAS ALSO BEEN ARGUED T HAT IN THE ABSENCE OF ANY EVIDENCE THE STATEMENT RECORDED AT THE TIME OF SURVEY HAD NO ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 4 - EVIDENTIARY VALUE. HOWEVER THE LEARNED CIT(APPEAL S) WAS NOT CONVINCED AND UPHELD THE ACTION OF THE ASSESSING OF FICER TO THE EXTENT OF RS.7 LACS. IN THAT MANNER PART RELIEF WAS GRANTED WHICH IS THE SUBJECT MATTER OF THIS APPEAL. 4. WITH THIS BRIEF BACKGROUND WE HAVE HEARD BOTH T HE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE COMPILATION FILED BEFORE US. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS EMPHASIZED THAT THERE WAS NO DIRECT OR CLINCHING EVIDENCE WITH THE SURVEY PARTY THROUGH WHICH THE BOOK RESULTS COULD HAVE BEEN REJECTED RA THER HE HAS EMPHASIZED THAT IN THE STATEMENT GIVEN BY THE PARTN ER HE HAS CATEGORICALLY STATED THAT THE ADVANCE AMOUNT WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO POINTED OUT THAT IN RESPECT OF LABOUR CHARGES AS WELL THE SAID PARTNER HAS CATEGORICALLY STATED THAT ALL THE LABOUR CHARGE S WERE ALSO RECORDED IN THE BOOKS OF ACCOUNT. AFTER MAKING THE SAID STATE MENT IT WAS STILL THOUGHT TO OFFER AN AMOUNT OF RS.7 LACS AND IN SUPP ORT AN ENGLISH TRANSLATION OF THE STATEMENT IS PLACED BEFORE US. THE ASSESSING OFFICER AS WELL REPRODUCED A PORTION OF THE SAID STATEMENT RECORDED DURING THE COURSE OF SURVEY AND RELEVANT QUESTIONS AND ANSWERS ARE AS FOLLOWS:- Q.10. TODAY DURING THE COURSE OF SURVEY ACTION PH YSICAL STOCK OF 18836.050 GRAMS WAS FOUND WHEREAS AS PER YOUR BOOKS OF ACCOUNT THE STOCK IS 19189.730 GRAMS. WHAT IS YOUR EXPLANATION ABOUT THE DEFICIT STOCK OF 353.68 GRAMS OF GOLD? ANS.10. I AM READY TO PAY THE TAX ON THIS DIFFERENC E. ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 5 - Q.11. TODAY DURING THE COURSE OF SURVEY ACTION ON VERIFICATION OF YOUR BOOKS OF ACCOUNT AND VOUCHERS IT IS FOUND THAT YOU HAVE TAKEN ADVANCE IN CASH. PLE ASE EXPLAIN FOR WHAT PURPOSE SUCH ADVANCES WERE TAKEN? ANS.11. WE TAKE ADVANCE FROM THE CUSTOMER WHEN ORDE R IS BOOKED FOR MANUFACTURE OF ORNAMENTS AS PER CHOICE AND DESIGN OF CUSTOMER. WHEN ACTUAL DELIVERY OF ORNAMENTS IS GIVEN THEN THE ADVANCE IS ADJUSTED IN THE BILL. Q.16. IN REPLY TO QUESTION NO.11 YOU HAVE STATED TH AT CASH ADVANCE RECEIVED IS ADJUSTED AGAINST THE BILL; BUT TODAY WHEN VOUCHERS ARE VERIFIED WITH CASH BOOK IT IS NOTICED THAT ALL ADVANCES ARE NOT RECORDED. A.16. WE HAVE ACCOUNTED FOR AMOUNT OF EACH ADVANCE IN OUT BOOKS. HOWEVER IF ANY AMOUNT OF ADVANCE IS FOUND UNRECORDED I AM READY TO PAY THE TAX ON SUCH ADVANCES. SUCH ADVANCES AMOUNTS TO RS.2 LACS AND WILL PAY THE TAX ON IT. Q.18 HAVE YOU RECORDED ALL DETAILS OF MAJOORI IN YO UR BOOKS OF ACCOUNT? ANS.18. WE HAVE ACCOUNTED FOR MAJOORI IN OUR BOOKS. HOWEVER FOR ANY REASON IF THE SAME HAVE REMAINED TO BE RECORDED. I ADMIT AN INCOME OF RS.5 LACS FOR THE SAME. Q.19. IN REPLY TO QUESTION NO.16 AND 18 YOU HAVE A DMITTED THE FOLLOWING INCOME 1. TOWARDS ADVANCE - RS.2 LACS. 2. TOWARDS MAJOORI - RS.5 LACS. ------------ TOTAL AMOUNT RS.7 LACS. AGAIN YOU ARE ASKED WHETHER YOU ADMIT THE ABOVE INCOME? ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 6 - ANS.19. YES I ACCEPT AND ADMIT THE ABOVE INC OME AND PAY THE TAXES ON THIS INCOME. 4.1. ON THE BASIS OF THE ABOVE STATEMENT A PERTIN ENT QUESTION WAS RAISED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT WHETHER THERE WAS MENTION OF ANY SPECIFIC DEFICIENC Y FOUND DURING THE COURSE OF SURVEY? HE HAS GIVEN A REPLY THAT THOUG H NO SPECIFIC DEFECT WAS FOUND BY THE SURVEY PARTY BUT STILL THE PARTNE R HAS MADE AN ESTIMATED OFFER OF RS.7 LACS TOWARDS ADVANCE AND MAJOORI . IT HAS ALSO BEEN CONTESTED THAT THE BOOKS OF ACCOUNT HAVE PROPERLY B EEN MAINTAINED AND SUBJECT TO STATUTORY AUDIT REPORT U/S.44AB OF THE I .T. ACT 1961. IF WE EXAMINE THE DECISION OF PAUL MATHEWS AND SONS REPOR TED AS (2003)263 ITR 101(KER.) IN THE LIGHT OF THE FACTS OF THE PRES ENT CASE THEN THE LAW IS CLEAR THAT THE STATEMENT RECORDED U/S.133A OF THE I .T. ACT 1961 ON ITS OWN HAS NO EVIDENTIARY VALUE EXCEPT IN A SITUATION WHEN SUPPORTED BY COGENT EVIDENCES AS HELD BY THE HON'BLE KERLA HIGH COURT IN THE CASE OF PAUL MATHEWS AND SONS-SUPRA AS FOLLOWS (HEAD NOTES ):- A POWER TO EXAMINE A PERSON ON OATH IS SPECIFICALL Y CONFERRED ON THE AUTHORIZED OFFICER ONLY UNDER SECTION 132(4) IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS THE INCOME-TAX ACT W HENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUCH POWER TO E XAMINE A PERSON ON OATH HAS EXPRESSLY PROVIDED FOR IT WHER EAS SECTION 133A DOES NOT EMPOWER ANY INCOME-TAX OFFICER TO EXA MINE ANY PERSON ON OATH. THUS IN CONTRADISTINCTION TO THE P OWER UNDER SECTION 133A SECTION 132(4) OF THE INCOME-TAX ACT ENABLES THE AUTHORIZED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALS O BE USED IN EVIDENCE UNDER THE INCOME-TAX ACT. ON THE OTHER HA ND WHATEVER STATEMENT RECORDED UNDER SECTION 133A OF THE INCOME -TAX ACT IS NOT GIVEN AN EVIDENTIARY VALUE. ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 7 - 4.2. IN THE SAID DECISION THERE WERE FEW OTHER INT ERESTING OBSERVATIONS THAT THOUGH AT THE TIME OF SURVEY SOME OMISSIONS WE RE FOUND AND THEREUPON OFFERED AN ADDITIONAL INCOME BUT LATER O N ON VERIFICATION OF BOOKS OF ACCOUNT THE ITO HAD EXERCISED A JUDICIAL DISCRETION AFTER VERIFYING THE BOOKS OF ACCOUNT HENCE SUCH AN ORDE R PASSED BY THE ASSESSING OFFICER CANNOT BE SAID TO BE AN ERRONEOUS ORDER. AN ANOTHER DECISION IS ALSO PLACED FOR OUR CONSIDERATION IS TH E DECISION OF THE RESPECTED CO-ORDINATE BENCH IN THE CASE OF ASHOK MA NILAL THAKKAR VS. ASSISTANT CIT REPORTED AS (2005) 279 ITR (AT) 143 ( AHMEDABAD) AND THEREIN AN IMPORTANT OBSERVATION WAS MADE THAT SUCH A STATEMENT COULD BE USEFUL TO REV. IF THERE IS MATERIAL ON RECORD TO ES TABLISH THE DISCREPANCY. IT HAS ALSO BEEN OBSERVED THAT SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY THE ASSESSEE AND THE INCOME DISCLOSED THEREIN IT IS NOT LAWFUL TO ASSESS THE SAME IF THERE IS NO MATERIAL ON RECORD TO PROVE THE EXISTENCE OF SUCH EARNING OF INCOME IN THE HANDS OF THE ASSESSEE. I N THE PRESENT CASE AS WELL FEW ADMITTED FACTS ARE THAT THE BOOKS OF ACCO UNT OF THE ASSESSEE WERE DULY AUDITED AND NO SPECIFIC DEFECT WAS NOTICE D WHICH COULD BE CORROBORATED WITH THE OBSERVATION MADE DURING THE C OURSE OF SURVEY. THE DISCLOSURE MADE AS PER THE STATEMENT WAS APPEAR ED TO BE A CONDITIONAL OFFER BECAUSE IT WAS STATED THAT THE AM OUNTS IN QUESTION WERE RECORDED IN THE BOOKS OF ACCOUNT HOWEVER MAKING T HE DISCLOSURE AND OFFERED TO PAY THE TAX. IF IT WAS SO THEN THE ASS ESSING OFFICER COULD HAVE FOUND THE DISCREPANCY EITHER IN RESPECT OF THE MAJOORI OR ADVANCES RECEIVED BUT STRANGE ENOUGH HE HAS PROCEEDED ONLY ON THE GROUND OF LOW GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION. THAT TOO COULD NOT BE SAID TO BE A VERY LOGICAL GROUND BECAUSE IN ASSE SSMENT YEAR 2000-01 THE GROSS PROFIT RATE WAS 15.06% WHICH HAD GONE UP IN 2001-02 AT 19% ITA NO. 2764/AHD/2005 M/S. PRAMUKH JEWELLERS VS. ITO ASST.YEAR - 2002-03 - 8 - HOWEVER GONE DOWN TO 16.55% FOR THE YEAR UNDER CON SIDERATION. IT MEANS THAT THE PROFIT RATE WAS NOT A STATIC PERCENT AGE AND IN THE PAST EVEN THE LOWER RATE OF PROFIT WAS DISCLOSED BY THE ASSES SEE. THUS UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CAS E WE ARE OF THE VIEW THAT THERE WAS NO LOGICAL BASIS FOR SUCH AN ADHOC A DDITION SPECIALLY UNDER THE CIRCUMSTANCES WHEN NO DIRECT EVIDENCE OR MATERI AL WAS POINTED OUT FOR SUCH AN ADDITION BY THE ASSESSING OFFICER. WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO DEL ETE THE ADDITION. 5. REST OF THE GROUNDS I.E. GROUND NOS.2 3 & 4 A RE IN RESPECT OF CHARGING OF INTEREST OR INITIATION OF PENALTY PROCE EDINGS WHICH ARE CONSEQUENTIAL IN NATURE NEED NO INDEPENDENT ADJUDIC ATION. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 27/ 08 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 27/ 08 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. TH E DEPARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(APPEALS)-IV BARODA 5. THE DR AHMEDABAD BENCH. 6. THE GUARD FILE . BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD