The DCIT, Navsari Circle,, Navsari v. Shri Amthabhai B.Parekh, Navsari

ITA 3138/AHD/2008 | 2005-2006
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 313820514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 3138/AHD/2008
Duration Of Justice 2 year(s) 4 month(s) 16 day(s)
Appellant The DCIT, Navsari Circle,, Navsari
Respondent Shri Amthabhai B.Parekh, Navsari
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-01-2011
Date Of Final Hearing 19-01-2011
Next Hearing Date 19-01-2011
Assessment Year 2005-2006
Appeal Filed On 04-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.3138/AHD/2008 ASSESSMENT YEAR :2005-06 DATE OF HEARING:19.1.11 DRAFTED:24..1.11 DY. COMMISSIONER OF INCOME-TAX NAVSARI CIRCLE NAVSARI V/S . M/S. AAMTHABAHAI B PAREKH WARD-4 MOTA BAZAR NAVSARI PAN NO.AAEFA2941E (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R.K. DHANESTA SR-DR RESPONDENT BY:- WRITTEN SUBMISSIONS O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VALSAD IN APPEAL NO. CIT(A) /VLS/252A/07-08 DATED 10-05-2008. THE ASSESSMENT WAS FRAMED BY DCIT NAVS ARI CIRCLE NAVSARI U/S143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28-12-2007 FOR ASSESSMENT YEAR 200 5-06. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF DISCLOSURE MADE DURING THE SURVEY. FOR THIS REVENUE HAS RAISE D THE FOLLOWING GROUND NO.1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED C.I.T(APPEALS) ERRED IN DELETING THE ADDITI ON MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SURVEY DISCLOSURE OF RS.31 70 534/-. ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 2 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER TREATED TH E BUSINESS INCOME REPRESENTING DISCLOSURE OF UNDISCLOSED STOCK-IN-TRA DE CASH-IN-HAND AND INVESTMENT IN RENOVATION OF SHOP FOUND DURING THE C OURSE OF SURVEY AS INCOME FROM OTHER SOURCE U/S 69B OF THE ACT. THE ASSESSEE CLAIMED THIS DECLARATION AND DISCLOSURE AS INCOME FROM TRADING RECEIPTS IN T HE AUDITED ACCOUNTS BUT THE ASSESSING OFFICER RE-WORK THE ALLOWABLE INTEREST AN D REMUNERATION TO THE PARTNERS U/S.40(B)(V) OF THE ACT BY EXCLUDING TO AD DITIONAL INCOME OFFERED DURING THE SURVEY. THE AO RECORDED THE FINDINGS AS UNDER:- THE NORMAL NET PROFIT OF RS.11 15 258/- IS ARRIVED AFTER EXCLUDING SURVEY DISCLOSED AND CONSIDERING THE EXPENSES SHOWN IN HOL D LETTERS WITH REFERENCE TO INCREASED IN SALE @ 8.23% AND REMUNERA TION TO PARTNERS ALLOWABLE U/S.40(B)(V) OF THE I.T. ACT. THE UNACCOU NTED INCOME OF RS.67.51 994/- CREDITED TO PROFIT AND LOSS ACCOUNT IS ASSESSABLE AS INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 69B OF THE ACT 1961 WHICH IS SIMILAR IN NATURE OF UNEXPLAINED EXPE NDITURE DEEMED AS INCOME U/S.69C OF THE ACT AND NO CORRESPONDING DEDU CTION OUT OF SUCH DEEMED INCOME IS ALLOWABLE UNDER THE HEAD OF INCOME . AS SUCH THE ASSESSEE OUGHT TO HAVE OFFER FOR TAXATION ITS TOTAL INCOME AT RS.78 67 252/- (NORMAL N.P. RS.11 15 258/- + SURVEY DISCLOSURE OF RS.67 51 994/-) AGAINST WHICH THE ASSESSEE HAS OFFE RED ONLY RS.46 96 718/- S PER RETURN OF INCOME. ACCORDINGLY THE ASSESSEE FIRM HAS UNDERSTATED THE SURVEY DISCLOSURE BY RS.31 70 5 34/-. IN VIEW OF THE ABOVE THE ASSESSEE WAS ASKED TO EXP LAIN AS TO WHY EXCESS CLAIM OF EXPENSE FROM UNDISCLOSED DECLARED U /S/.133A OF THE ACT OF WHICH SOURCES WERE UNEXPLAINED SHOULD NOT BE DIS ALLOWED U/S.69B AND 69C OF THE I.T. ACT 1961 VIDE QUESTIONNAIRE DA TED 23.10.2007 AND ALSO ORDER SHEET ENTRY DATED 26.09.2007. THE REPRESENTATIVE OF THE ASSESSEE VIDE REPLY DATED 25.10.2007 EXPLAINED AS UNDER:- IN THE CASE OF THE ASSESSEE THE PROVISIONS OF THE SECTION 69B AND 69C ARE NOT APPLICABLE AS THE ASSESSEE IS TRADI NG IN SILVER ORNAMENTS AND THE AMOUNT OF EXCESS CASH AND EXCESS STOCK DECLARED DURING THE CURSE OF SURVEY AND CREDITED TO THE PROFIT AND LOSS ACCOUNT IS PART OF ITS BUSINESS RECEIPTS. HERE THE ITAT JUDGEMENT ( ITA NO.307[RJT] OF 1998 A.Y. 1994-95 IN THE CASE OF INCOME-TAX OFFICER WARD-1 AMRELI V. JAMNADAS MULJIBHAI AMRELI IS QUITE RELEVANT . ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 3 IT IS WORTH TO MENTION HERE THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAINED THE NATURE AND SOURCE OF INVESTMENT IN UN ACCOUNTED INCOME BY WAY OF EXCESS STOCK CASH AND INVESTMENT IN FURN ITURE FUND AT THE TIME OF SURVEY. SHRI SHAILESHBHAI MAHENDRABHAI PARE KH ONE OF THE PARTNERS OF THE FIRM VIDE COMMON ANSWER TO QUESTION NO.12 STATED THAT THE DISCREPANCY IN STOCK AND CASH FOUND REPRESENTS THE UNACCOUNTED INCOME OF THE FIRM. FOR THE CURRENT FINANCIAL YEAR 2004-05 RELEVANT TO A.Y 2005-06 AND VOLUNTARILY ADMITTED THE SAME AS IT S ADDITION INCOME AND AGREED TO PAY ADVANCE-TAX THEREON. HE FURTHER U RGED NOT TO PENALIZE FOR THE SAME. IT IS CLEAR THAT SHRI SHAILE SHBHAI MAHENDRABHAI PAREKH ONE OF THE PARTNERS OFF THE FIRM COULD NOT EXPLAIN THE SOURCE OF EXCESS STOCK AND CASH FOUND AT THE TIME OF SURVEY. FURTHER HE COULD NOT JUSTIFIED THAT THE SAME WAS REPRESENTING THE UNACCO UNTED INCOME GENERATED OUT OF THE FIRMS ACTIVITIES AS SPECIFIED IN THE DEED OF PARTNERSHIP ONLY. IT IS NOTHING BUT CONTRAVENTION O F TERMS AND CONDITIONS LAID DOWN AS PER DEED OF PARTNERSHIP. THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE UNACCOUNTED PURCHASED AND SAL E PROCEEDS OF THE FIRM WHICH WERE FORMING PART OF UNACCOUNTED STOCK AND CASH FOUND IN SURVEY. THUS THE SOURCES OF UNACCOUNTED STOCK AND CASH REMAINED UNEXPLAINED. HENCE THE PROVISIONS OF SECTION 69B A ND 69C OF THE ACT 1961 ARE CLEARLY APPLICABLE IN THIS CASE THE FA CTS OF THE CASE OF DECISION ON WHICH THE ASSESSEE RELIED UPON ARE DIFF ERENT. IN THAT CASE THE ASSESSEE EXPLAINED THE SOURCE OF EXCESS STOCK D ISCLOSED AT THE TIME OF SURVEY WAS ONLY FROM THE BUSINESS ACTIVITIES OF THAT FIRM. HE FURTHER REITERATED TO HIS SUBMISSION DATED 24.07.2007 VIDE HIS ANOTHER SUBMISSION DATED 30.07.2007. IN VIEW OF THE ABOVE IT IS CLEAR THAT WHEN THE INV ESTMENT IN ACCOUNTED STOCK AND CASH ETC. WHICH WERE FOUND IN THE POSSESS ION OF THE ASSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT A ND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INVESTMENT/ACQUISITION AND THE VALUE OF SUCH ITEM W AS NOT RECORDED IN THE BOOKS OF ACCOUNT THERE CAN ARISE NO QUESTION O F ALLOWING ANY EXPENSES AGAINST THE VALUE OF SUCH ITEMS WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE AND SUCH DEEMED INCOME DOES NOT FALL UNDER THE HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFESSION . CONSIDERING THE ABOVE FACTS AS ALSO PROVISO TO SECT ION 69C OF THE ACT THE ASSESSEE IS NOT ENTITLED FOR FURTHER DEDUCTION IN RESPECT OF ANY EXPENDITURE AGAINST THE DEEMED INCOME OF RS.67 51 9 94/-. ACCORDINGLY THE EXCESS CLAIM OF THE ASSESSEE IN THIS REGARD OF RS.31 70 534/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE FIRM. I AM SATISFIED THAT REMUNERATION HAS BEEN CLAIMED DELIBE RATELY TO REDUCE ITS TOTAL TAXABLE INCOME AND THEREBY FURNISHING INACCUR ATE PARTICULARS OF INCOME IN RESPECT OF THE REMUNERATION OF RS.31 70 5 34/- ARE SEPARATELY INITIATED. ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 4 AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY GIVING FOLLOWING FINDINGS IN PARA-5.3 OF HIS APPELLATE ORDER:- 5.3 I HAVE CONSIDERED THE CONTENTION OF THE APPELL ANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THE AO HAS NOT DISPUTED THE FACT THAT THE APPELLANT FIRM HAD MADE PROPER ENTRY IN THE BOOKS OF ACCOUNTS OF RS.67 51 994/- BEING ADDITIONA L INCOME DECLARED SHOWING THE EXCESS STOCK OF RS.62 86 624/- AND EXCE SS CASH FOUND RS.3 09 370/- AND RENOVATION EXPENSES OF RS.1 56 00 0/- DURING THE COURSE OF SURVEY AS INCOME FROM BUSINESS AND PART O F THE BOOK PROFIT AS INCLUDED UNDER THE BUSINESS HEAD ACCORDINGLY AND RE FLECTED IN THE AUDITED PROFIT & LOSS ACCOUNT ALSO. IF THE AO WAS O F THE VIEW THAT THE EXPLANATION FURNISHED BY THE ASSESSEE FIRM REGARDIN G EXCESS STOCK FOUND EXCESS CASH FOUND AND RENOVATION EXPENSES WH ICH REPRESENTED BUSINESS INCOME OF THE CURRENT YEAR WAS FOUND TO B E NOT ACCEPTABLE OR UNTRUE THE AO SHOULD HAVE GIVEN REASON TO DISPUTE THE ASSESSEES VERSION AS TO THE SOURCE BEING OTHER THAN BUSINESS INCOME. NO MATERIAL HAS BEEN BROUGHT OUT ON RECORD EITHER BY THE SURVEY PARTY OR BY THE AO TO DISPROVE THE APPELLANTS CONTENTION REGARDING TH E ONLY SOURCE OF THE FIRM BEING BUSINESS INCOME. IT HAS NOT BEEN BROUGHT OUT ON RECORD THAT THE APPELLANT FIRM IS DOING SOME OTHER ACTIVITIES F ROM WHICH SUCH INCOME WAS EARNED AND THE EXCESS STOCK EXCESS CASH FOUND AND THE EXPENDITURE ON RENOVATION OF SHOP REPRESENTED THE I NCOME FROM SUCH OTHER SOURCE. AS PER THE PROVISIONS OF SECTINO40(B) EXPANATION3 FOR THE PURPOSE OF THIS CLAUSE BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIO US YEAR COMPUTED IN THE MANNER LAID DOWN IN CHAPTER IV - AS INCREASED BY THE AGGREGATE AMOUNT OF REMUNERATION PAID OR PAYABLE TO ALL THE W ORKING PARTNERS OF THE FIRM IF SUCH AMOUNT HAS BEEN DEDUCTED WHILE CO MPUTING THE NET PROFIT IN THE INSTANT CASE THERE IS NO DISPUTE TO THE FACT THAT NET PROFIT OF THE APPELLANT FIRM WAS INCLUSIVE OF THE PROFIT EARN ED IN COURSE OF BUSINESS FOUND TO BE IN THE FORM OF EXCESS CASH E XCESS STOCK AND RENOVATION EXPENSES INCURRED ON SHOP UNEARTHED AT T HE TIME OF SURVEY. IT IS ALSO TRUE THAT THE REMUNERATION PAID TO PARTN ERS IS TAXED IN THEIR INDIVIDUAL HANDS. I AM THEREFORE INCLINED TO AGREE WITH THE CONTENTION OF THE AR THAT SOURCE OF EXCESS STOCK EXCESS CASH FOU ND AND THE EXPENDITURE ON RENOVATION OF SHOP IS FROM BUSINESS INCOME AS THE SAME HAS BEEN RECORDED IN THE BOOKS ON THE DATE OF SURVE Y AND THE ADDITIONAL INCOME CANNOT BE TAXED U/S.69B. THE APPELLANT FIRM HAS RIGHTLY MADE THE CLAIM FOR DEDUCTION OF RS.32 18 645/- AS REMUNE RATION U/S.40(B)(V) OF THE ACT. THE ADDITION OF RS.31 70 534/- MADE BY THE AO IS THEREFORE E DELETED. THE APPELLANTS GROUND NO.1 IS ALLOWED. ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 5 4. THE LD. SR-DR RELIED ON THE ASSESSMENT ORDER HO WEVER ASSESSEE FILED WRITTEN SUBMISSIONS WHEREBY IT WAS CLAIMED T HAT ASSESSING OFFICER HAS WRONGLY TREATED THE AMOUNT OF STOCK-IN-TRADE DISCLO SED DURING THE SURVEY AS INCOME U/S.69B OF THE ACT AND DISALLOWED SALARY TO PARTNERS ON THE AMOUNT OF SURVEY DISCLOSURE AMOUNT OF RS.31 70 534/- AND ASSE SSING OFFICER HIMSELF WORKED OUT TRADING AND PROFIT & LOSS ACCOUNT INCLUD ING/EXCLUDING SURVEY DISCLOSURE AND ARRIVED AT NORMAL BUSINESS PROFIT AT RS.11 52 258/-. THE AO ADDED THE SURVEY DISCLOSURE AMOUNT OF RS.67 51 994/ - IN NORMAL PROFIT AND ARRIVED AT TOTAL INCOME AT RS.78 67 252/- AND ADDED RS.31 70 534/- AS UNDERSTATED SURVEY DISCLOSED. THE ASSESSEE CONTENDE D THAT DURING THE COURSE OF SURVEY PROCEEDINGS A STATEMENT U/S.131 OF THE A CT WAS RECORDED ON OATH OF THE PARTNER OF THE ASSESSEE-FIRM SHRI SHAILESHBHAI MAHENDRABHAI PAREKH. ON BEING ASKED TO EXPLAIN THE REASONS OF EXCESS STOCK OF GOLD ORNAMENTS RENOVATION AND CASH FOUND OF RS.62 86 624/- RS.1.5 6 LAKH AND RS.3 09 370/- RESPECTIVELY VIDE QUESTION NO.12 IN HIS REPLY SHRI SHAILESHBHAI MAHENDRABHAI PAREKH ONE OF THE PARTNERS OF THE FIRM EXPLAINED THAT EXCESS STOCK RENOVATION EXPENSES AND CASH FOUND WAS UNACCOUNTED INCOME OF THE FIRM AND SAME WAS VOLUNTARILY ADMITTED AS ADDITIONAL INCOME OF THE ASSESSEE-FIRM OF THE CURRENT FINANCIAL YEAR 2004-05 RELEVANT TO ASSE SSMENT YEAR 2005-06 AND AGREED TO PAY ADVANCE TAX THEREON. THE ASSESSEE SUB MITTED THAT THE PARTNER SHRI SHAILESHBHAI MAHENDRABHAI PAREKH HAS NEVER SAI D THAT EXCESS STOCK OF GOLD ORNAMENTS RENOVATION AND CASH FOUND OF RS.62 86 624/- RS.1.56 LAKH AND RS.3 09 370/- RESPECTIVELY WAS UNACCOUNTED INC OME OF THE ASSESSEE- FIRM. THE QUESTION NO.12 OF THE STATEMENT RECORDED DURING THE SURVEY WAS WHAT DO YOU WANT TO SAY ABOUT CASH BALANCE RS.3 09 370/- IN QUESTION NO.10 AND GOLD ORNAMENTS STOCK DIFFERENCE RS.62 86 624/- OF QUESTION NO.11 SHRI SHAILESHBHAI MAHENDABHAI PAREKH REPLIED TO QUESTION NO.12 YES WITH CONSENT OF PARTNERS OF M/S. AMTHABHAI B PAREKH I S TATE THAT CASH RS.3 09 372/- GOLD ORNAMENT STOCK DIFFERENCE RS.62 86 627/- AND REPAIRING AND RENOVATION OF SHOP OF M/S./ AMTHABHAI PAREKHI RS.1.56 LAKH I.E. TOTAL RS.67 51 994/- RUPEES SIXTY LACS FIFTY ONE THOUSAND NINE HUNDRED NINETY FOUR) ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 6 DECLARE AS CURRENT YEAR ADDITION INCOME I.E. OVER A ND ABOVE CURRENT YEARS NET INCOME AND I & MY PARTNERS WILL BOUND TO PAY TAX P AYABLE ON SAID INCOME WITHIN TIME. I AND OTHER PARTNERS ARE AGREED. THERE IS DIRECT NEXUS WITH BUSINESS DEALT IN BY THE ASSESSEE-FIRM THAT STOCK-I N-TRADE GENERATES FROM BUSINESS INCOME. THE ASSESSEE CONTENDED THAT EVEN T HE BUSINESS INCOME WAS ASSESSED BY ASSESSING OFFICER AS BUSINESS INCOM E IN PARA-7 OF WRITTEN STATEMENT AS UNDER:- INCOME FROM BUSINESS OR PROFESSION: NET TOTAL INCOME AS PER STATEMENT RS.46 96 720 ADD: DISALLOWANCE/ADDITION 1. ADDITION ON ACCOUNT OF UNDER STATED OF SURVEY DISCLOSURE AS DISCUSSED IN PARA NO.5 RS.31 70 534 2. DISALLOWANCE OUT OF VEHICLE EXPENSES TELEPHONE EXPENSES AS DISCUSSED IN PARA NO.6 RS. 46 525 RS.32 17 059 RS.79 13 779 ROUNDED OFF U/S.288A RS.79 13 779 THE ASSESSEE RELIED ON THE DECISION OF THIS TRIBUNA L IN THE CASE OF DCIT NAVSARI CIRCLE V. M/S DAYARAM BRIJBHUKHANDAS CHOKSI IN ITA NO.1379/AHD/2010 DATED 30-11-2010 FOR ASSESSMENT YEAR 2006-07 WHER EIN THE TRIBUNAL HAS HELD IN PARA-6 AS UNDER:- 6. THUS ONCE IT IS HELD THAT UNACCOUNTED ASSET S DECLARED AS INCOME DURING SURVEY IS TO BE ASSESSED UNDER THE HE AD BUSINESS THEN ASSESSEE IS ENTITLED TO CLAIM HIGHER AMOUNT OF REMU NERATION TO PARTNERS AS PER LIMIT PRESCRIBED UNDER SECTION 40(B). SINCE THERE IS NO DISPUTE OVER THE CALCULATION WE DECLINE TO INTERFERE IN TH E ORDER OF LD. CIT(A) IN GRANTING HIGHER REMUNERATION TO THE PARTNERS. THE A PPEAL FILED BY THE REVENUE IS DISMISSED. AS THE INCOME DECLARED DURING THE SURVEY IS CONSIDE RED BY ASSESSING OFFICER AS BUSINESS INCOME AND THIS IS NOT DISPUTED BY REVE NUE EVEN NOW BEFORE US CONSEQUENTIAL DEDUCTION U/S 40(B) WILL BE AVAILABLE . THE ASSESSEE HAS RIGHTLY ITA NO.3138/AHD/2008 A.Y.2005-06 DCIT NAVSARI CIRCLE V. M/S. AMTHABHAI B PAREKH PAGE 7 CLAIMED HE DEDUCTION U/S.40(B) OF THE ACT. ACCORDIN GLY THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21/01/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 21/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VALSAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD