Omprakash Chhapolia, Cuttack v. ACIT, Cuttack

ITSSA 16/CTK/2010 | 2006-2007
Pronouncement Date: 23-07-2010 | Result: Dismissed

Appeal Details

RSA Number 1622116 RSA 2010
Assessee PAN ABKPC8382Q
Bench Cuttack
Appeal Number ITSSA 16/CTK/2010
Duration Of Justice 1 month(s) 8 day(s)
Appellant Omprakash Chhapolia, Cuttack
Respondent ACIT, Cuttack
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 23-07-2010
Date Of Final Hearing 20-07-2010
Next Hearing Date 20-07-2010
Assessment Year 2006-2007
Appeal Filed On 15-06-2010
Judgment Text
( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET IN THE INCOME-TAX APPELLATE TRIBUNAL CUTTACK BENCH; CUTTACK (BEFORE S/SHRI D.K.TYAGI JM & K.K. GUPTA AM.) I.T.(SS)A.NO.16/CTK/2010 ASSESSMENT YEAR: 2006-07 OMPRAKASH CHHAPOLIA V. THE A.C.I.T CIRCLE 1(1) NAYASARAK CUTTACK-753 002. ARUNODAYA MARKET BUILDG. PA NO..ABKPC 8382 Q LINK ROAD CUTTACK (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.K.SETH/M.SETH RESPONDENT BY: SHRI A.K.GAUTAM ORDER PER D.K.TYAGI JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.5.2010 OF THE CIT (A)-CUTTACK AND RELATES TO THE ASSESSMENT YEAR 2006-07. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION OF RS.19 23 714/- AS MADE BY THE AO UNDER HEAD EXTRA GROSS PROFIT IS UNWARRANTED AND UNCALLED FOR AND THE CONTENTION AND EXPLANATION OF THE APPELLANT SHOULD HAVE BEEN ACCEPTED. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL. IN THE RELEVANT ASSESSMENT YEAR HE WAS IN THE BUSINESS OF PAPER TRADING. A SEARCH AND SEIZURE OPERATION U/S.132 OF THE I.T.ACT 1961 WAS CONDUCTED ON 28.3.2006 AT THE BUSINESS PREMISES OF THE ASSESSEE ALONGWITH HIS OTHER BROTHERS VIZ SHRI RAMESH KUMAR CHAPOLIA PROP. OF M/S. MARUTI TRADING CO SRI BISWANATH CHAPOLIA PROP. M/S. RAJASHREE MARKETING SERVICE SHRI GOURI SHANKAR CHAPPOLIA AND SMT SUNITA CHAPOLIA PROP. KONARK SALES CORPORATION. ACCORDINGLY NOTICE U/S.153 A ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET WAS ISSUED ASKING THE ASSESSEE TO FILE THE RETURNS FOR SIX IMMEDIATE PRECEDING ASSESSMENT YEARS I.E. 2000-2001 TO 2006-07 RESPECTIVELY. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED RETURN DECLARING A TOTAL INCOME OF R.1 43 960/- ON 28.11.2007. THE ASSESSING OFFICER FOUND THAT DURING THE COURSE OF SEARCH OPERATION IN THE RESIDENTIAL PREMISES AND BUSINESS PREMISES DURING THE F.Y. 2005-06 AND 2006-07 CERTAIN SEIZED MATERIALS WERE FOUND WITH REGARDS TO RATES AT WHICH SIMILAR ITEMS OF PAPERS WERE PURCHASED BY KONARK TRADING COMPANY AND ITS SISTER CONCERNS MARUTI TRADING CO. THE DETAILS OF THE COMPARISON ARE AS UNDER:- SEIZED MATERIAL CONCERN TO WHICH IT RELATES DATE OF PURCHASE SUPPLIER NAME/BRAND DESCRIPTION OF MATERIAL BROUGHT QTUM OF PURCHASE PURCHASE RATE T O T A L PURCHASE RKC-12/ PG 21 MTC 25.5.05 B A L A J I P A P E R S INTERNATIONAL COL.WOVE RETREADY 45X56CM 6.1050 MT 18 750 PER MT 1 23 955 AKTC-4/ 229 KTC 1.8.05 -DO- 44X55 CM 2.12 MT 18 750 PER MT 43 044 RKC-13/ 24 MTC 25.1.06 M A G N U M PAPER CO. MP-A 15 W R I T I N G PAPER 15 456 MT 21 900 PER MT 3 33 148 SIMILARLY IT WAS FOUND THAT KONARK TRADING CO. SOLD SIMILAR ITEMS OF PAPERS ALMOST AT THE SAME RATE E.G MATERIAL HKW/C WOVE WAS FOUND TO BE SOLD @ RS.90 TO RS.95 FOR MTC BUT @ RS.96 FOR KTC. THESE WERE FOUND ON 20.2.2006 FOR MTC AND ON 3.3.2006 FOR KTC. FROM THE ABOVE THE AO INFERRED THAT THE ASSESSEE WAS ENGAGED IN SIMILAR ACTIVITIES AS HIS SISTER CONCERN HAD ADOPTED. SRI RAMESH CHHAPOLIA THE OWNER OF THE SISTER CONCERN MTC HAS ADMITTED TO HAVE EARNED UNDISCLOSED INCOME FROM PAPER TRADING IN TERMS OF PREMIUMS RECEIVED FROM UNDER INVOICING OF SALE AND PURCHASE. SINCE THE TRADE AND CREDITORS ARE SAME FOR BOTH THE CONCERNS THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY NOT HIS BOOKS OF ACCOUNT FOR A.Y. 2006-07 BE REJECTED AS THE ACTUAL SALES AND PURCHASES HAD NOT SEEMS TO BE RECORDED AND THE GROSS PROFIT BE ESTIMATED VIS--VIS THE FINDINGS OF SISTER CONCERNS. ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET 3. IN HIS WRITTEN SUBMISSIONS THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE FULLY VERIFIABLE AND REGULARLY MAINTAINED. ALL THE PURCHASES AND SALES ARE ALSO RECORDED IN THE BOOKS OF ACCOUNT. THE ABOVE SUBMISSIONS OF THE ASSESSEE DID NOT FIND FAVOUR AS THE ASSESSEE WAS ENGAGED IN SIMILAR BUSINESS ACTIVITY AND AS A COROLLARY WAS UNDERSTATING ITS PURCHASE AND SALES WITH MARUTI TRADING COMPANY OWNED BY SRI RAMESH KUMAR CHHAPOLIA. AFTER CONSIDERING VARIOUS CASE LAWS THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S.145 OF THE ACT. THE AO ALSO NOTED THE GROSS PROFIT SHOWN BY RAMESH KUMAR CHHAPOLIA IN MARUTI TRADING COMPANY WAS CLOSE TO 7.5% OF THE TURNOVER. HE NOTED THAT THE GROSS RECEIPT EARNED BY KONARK TRADING CORPORATION WAS RS.4 24 94 310 INCLUDING TURNOVER FROM NON-CONSIGNMENT SALE AMOUNTING TO RS.1 86 36 540.00. HENCE KEEPING IN VIEW THE GROSS PROFIT EARNED BY MARUTI TRADING COMPANY @ 7.5% OF THE TURNOVER THE GROSS PROFIT EARNED BY M/S. KONARK TRADING CORPORATION WOULD BE RS.31 87 052. SINCE THE ASSESSEE HAD DECLARED A GROSS PROFIT OF RS.5 63 674.00 FROM NON CONSIGNMENT SALES AND RS.6 99 664.00 FROM COMMISSION ON CONSIGNMENT SALES THE EXCESS GROSS PROFIT EARNED OF RS.19 23 714/- WAS DETERMINED BY THE AO. THE AO ALSO NOTED THAT THE ASSESSEE IN A JOINT DECLARATION MADE AN UNDISCLOSED INCOME OF RS.24 00 000/- WHICH WAS LATER ON RETRACTED. 4. BEFORE LD CIT (A) IT WAS SUBMITTED THAT THE AO MADE THE ADDITION MERELY FOLLOWING THE ASSESSMENT IN THE CASE OF RAMESH CHHAPOLIA SINCE BOTH ARE ENGAGED IN SIMILAR BUSINESS ACTIVITY. HOWEVER NO PAPER OR DOCUMENT WAS FOUND DURING SEARCH TO INDICATE THAT THE ASSESSEE DID ANY EXTRA ACTIVITIES TO EARN EXTRA PROFIT. IT WAS SUBMITTED THAT ADDITION SHOULD NOT BE MADE FOLLOWING THE CASE OF SOME OTHER PERSON WITHOUT ANY SUPPORTING EVIDENCE. IT WAS SUBMITTED THAT THE DISCLOSURE OF RS.24 00 000/- MADE TO BUY PEACE AND TO END LITIGATION WAS LATER ON RETRACTED AS THE DEPARTMENT DID NOT ACCEPT THE SAME. THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO.286/2003 DT.10.3.2003 AND MUMBAI BENCH OF THE ITAT IN THE CASE OF JAIN TRADING CO. V ITO 17 SOT 574 WAS ALSO REFERRED TO STATE THAT ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET NO ADDITION SHOULD BE MADE ON THE BASIS OF SUCH STATEMENT WHICH ARE MADE MERELY TO END LITIGATION AND TO BUY PEACE BUT WITHOUT SUPPORT OF ANY EVIDENCE.. 5. LD CIT (A) CONFIRMED THE ADDITION OF RS.19 23 714/- INTER ALIA OBSERVING THAT THE ASSESSEE HAD HIMSELF MADE A DECLARATION OF UNDISCLOSED INCOME OF RS.24 00 000/- BEFORE THE DIT (INV) BHUBANESWAR AFTER THE SEARCH. HENCE THERE WAS NO OCCASION OF GIVING THE STATEMENT UNDER DURESS OR THREAT. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING LD COUNSEL FOR THE ASSESSEE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW FURTHER SUBMITTED THAT THE CIT (A) HAS NOT GIVEN ANY FINDING ON THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE HIM AND HAS ONLY CONFIRMED THE ACTION OF THE AO ON THE GROUND THAT THE ASSESSEE HAD DECLARED INCOME OF RS.24 LAKHS DURING THE SEARCH AND SEIZURE OPERATION WHICH CANNOT BE A BASIS FOR SUSTAINING THE ADDITION. HE FURTHER SUBMITTED THAT IN THE PREVIOUS AND SUBSEQUENT YEARS BOOKS OF ACCOUNT OF THE ASSESSEE WAS NEVER REJECTED AND THE BOOK RESULTS SHOWN BY THE ASSESSEE WERE BEING ACCEPTED BY THE REVENUE. HE SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT (A) MAY KINDLY BE DELETED. 7. LD D.R. ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RECORD OF THE CASE. IN VIEW OF ASSESSEE HAVING EARNED INCOME FROM IDENTIFIED SALES BOTH CONSIGNMENT AND DIRECT SALES SEPARATELY THE AO IS DIRECTED TO COMPUTE THE GROSS PROFITS OF DIRECT SALES @ 7.3% IN VIEW OF OUR DECISION IN THE CASE OF RAMESH KUMAR CHHAPOLIA IN IT(SS) A NO.10/CTK/2010 FOR THE ASSESSMENT YEAR 2006-07 AND ACCEPT THE G.P. RATE AS RETURNED ON CONSIGNMENT SALES. ACCORDINGLY THE AO IS DIRECTED TO RECALCULATE THE ADDITION. ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. PRONOUNCED ON THE OPEN COURT ON 23 RD JULY 2010. SD/- SD/ (K.K.GUPTA) (D.K.TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD JULY 2010 PARIDA COPY TO : 1. ASSESSEE- 2. ASSESSING OFFICER 3. CIT 4. D.R. ITAT CUTTACK. TRUE COPY BY ORDER SR. PVT. SECRETARY