Sh. Mewa Singh, Sirhind v. ACIT,, Patiala

ITSSA 21/CHANDI/2007 | misc
Pronouncement Date: 22-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 2121516 RSA 2007
Assessee PAN ACJPS6331E
Bench Chandigarh
Appeal Number ITSSA 21/CHANDI/2007
Duration Of Justice 4 year(s) 8 month(s) 17 day(s)
Appellant Sh. Mewa Singh, Sirhind
Respondent ACIT,, Patiala
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 22-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-02-2012
Assessment Year misc
Appeal Filed On 04-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI MEHAR SINGH ACCOUNTANT MEMBER IT(SS)A NO. 21/CHD/2007 BLOCK PERIOD 1.4.1989 TO 24.3.2000 SHR MEWA SINGH VS THE ACIT CENTRAL CIRCLE C/O MEWA SINGH & BROS PATIALA SIRHIND PAN NO. ACJPS 6331 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV DUTTA RESPONDENT BY : SHRI MANJEET SINGH DATE OF HEARING : 21.02.2012 DATE OF PRONOUNCEMENT : 22.02.2012 ORDER PER H.L.KARWA VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-I LUDHIANA DATED 30.3.2007 RELATING TO BLO CK PERIOD 1.4.1989 TO 24.3.2000. 2. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE A ND HENCE NO FINDINGS ARE BEING GIVEN. 3. GROUND NOS. 2 TO 5 READS AS UNDER:- 2. THAT ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A ) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER TREATING THE DEPOSITS IN THE BANK RELATING TO INTEREST ENCA SHMENT OF FDRS AND CONTRA ENTRIES AS RECEIPTS FORM FABRICATI ON AND 2 HAS FURTHER ERRED IN CONFIRMING THE APPLICATION OF GROSS PROFIT RATE OF 10% ON SUCH CREDITS. 3. THAT THERE WAS NO EVIDENCE WITH THE DEPARTMENT TO HOLD THAT THE ENTIRE RECEIPTS IN THE BANK ACCOUNTS WERE PERTA INING TO THE FABRICATION JOB ONLY. 4. THAT THE LEARNED CIT(A) HAS ERRED IN ESTIMATING THE TRADING IN LOGS ONLY AT RS.15.50 LACS WHEREAS THE RE WAS NO SUCH EVIDENCE WITH THE A.O. FOR HOLDING THAT THE OTHER RECEIPTS WERE FROM FABRICATION OF TRUCK BODIES ONLY . 5. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PROFIT ON FABRIC ATION RECEIPTS @ 10%. 4. THESE GROUNDS OF APPEAL ARE INTERCONNECTED AND THEREFORE WE WILL DISPOSE OF THE SAME IN SUCCEEDING PARAGRAPHS. 5. THE RELEVANT FACTS AS NOTED IN THE RECORDS ARE T HAT THE ASSESSEE IS PROMINENT MEMBER OF THE MEWA SINGH GROUP OF CASES SIRHIND. THE BUSINESS AS WELL AS RESIDENTIAL PREMISES WERE SEARCHED U/S 1 32 OF THE INCOME TAX ACT 1961 (IN SHORT 'THE ACT') ON 24.3.2000 BY DDIT(INV) PATIALA. THE MAIN SOURCE OF THE INCOME OF THE ASSESSEE IS FABRICATION OF TRUCK BODIES. DURING THE COURSE OF SEARCH CERTAIN INCRIMINATING DOCUMEN TS FOUND WERE SEIZED. BESIDES THIS CASH AND OTHER ASSETS AS WELL AS STOC K WERE ALSO SEIZED. NOTICE U/S 158 BC OF THE ACT FOR THE BLOCK PERIOD WAS ISSU ED TO THE ASSESSEE. IN RESPONSE THERETO THE ASSESSEE FILED RETURN FOR THE BLOCK PERIOD ON 9.7.2001 DECLARING UNDISCLOSED INCOME AT RS. 21 20 000/- AND THE DETAILS OF WHICH ARE AVAILABLE AT PAGE 1 OF THE ASSESSMENT ORDER DATED 2 1.3.2002. THE ASSESSEE DECLARED UNDISCLOSED INCOME FOR THE BLOCK PERIOD AT RS. 21 20 000/-. HOWEVER THE ASSESSING OFFICER HAS WORKED OUT UNDIS CLOSED INCOME FOR THE ENTIRE BLOCK PERIOD AT RS. 27 59 460/-. AS REGARDS ASSESSMENT YEARS 1990-91 3 TO 1994-95 THERE IS NO VARIATION BETWEEN THE ASSES SEE AND THE ASSESSING OFFICER WITH REGARD TO THE UNDISCLOSED INCOME. IN OTHER WORDS THE FIGURES SHOWN BY THE ASSESSEE IN THE BLOCK RETURNS FOR ALL THE YEARS ARE SAME AS ADOPTED BY THE ASSESSING OFFICER WHILE COMPLETING T HE BLOCK ASSESSMENT. HOWEVER WITH REGARD TO THE ASSESSMENT YEARS 1995-9 6 TO 2000-01 THE INCOME DECLARED BY THE ASSESSEE IN THE BLOCK RETUR N AND AS ASSESSED BY THE ASSESSING OFFICER IS AS UNDER:- ASSTT. YR. INCOME DISCLOSED IN THE ASSESSED BY DIFFERENCE BLOCK RETURN THE A. O . 1995-96 80 000 1 05 000 25 000 1996 - 97 1 65 000 1 65 000 - 1997 - 98 1 30 000 1 34 800 4 8 00 0 1998 - 99 90 000 1 73 100 83 100 1999 - 00 2 00 000 3 98 860 1 98 800 2000 - 01 4 60 000 7 87 100 3 27.100 THE ASSESSING OFFICER MADE THE ABOVE ADDITIONS AFTE R DISCUSSING SEIZED DOCUMENTS AND VARIOUS ENTRIES MADE IN THE VARIOUS B ANK ACCOUNTS WHICH WERE NOT DISCLOSED TO THE DEPARTMENT. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR WORKING OUT THE UNDISCLOSED INCOME ARE GIVEN IN PARA 11 OF THE ASSESSMENT ORDER WHICH READS AS UNDER:- 11. BASIS OF UNDISCLOSED INCOME BY ASSESSEE : VIDE THIS OFFICE NOTICE DT. 9-1-2002 THE ASSESSEE WAS ASKED TO GIVE THE BASIS OF COMPUTATION OF UNDISCLOS ED INCOME YEAR WISE. AS PER ASSESSEE THE INCOME DURING THE B LOCK PERIOD HAS BEEN EARNED MAINLY FROM TRUCK BODY FABRICATION AND TRADING IN WOODEN LOGS. HE HAS ADMITTED HAVING CONDUCTED TH E BUSINESS OUTSIDE THE ACCOUNT BOOKS AS PER RETURN OF INCOME O F THE BLOCK PERIOD. REGARDING THE BASIS OF COMPUTATION OF INCOM E HE HAS 4 EXPLAINED THAT 'THE UNDISCLOSED INCOME HAS BEEN WOR KED OUT BY APPLYING PROFIT RATE ON THE FABRICATION OF TRUCK BO DIES AND PROFIT RATE ON TRADING IN WOODEN LOGS THE NET PROFIT ON T RADING VARIES BETWEEN 4% TO 5%. THE CREDITS IN BANK ACCOUNT NO. 190 HAVE BEEN ON ACCOUNT OF SALE OF WOODEN LOGS OR FABRICATI ON OF TRUCK BODIES. IN ADDITION TO THE ABOVE THE INVESTMENT IN PURCHASE OF FDRS AND INVESTMENT IN LAND HAS BEEN TAKEN INTO ACC OUNT WHILE ARRIVING AT THE UNDISCLOSED INCOME. THE ASSESSEE HA S FILED A CASH FLOW STATEMENT FOR THE BLOCK PERIOD WHICH HAS BEEN CHECKED. THE DEPOSITS IN THE UNDISCLOSED BANK ACCOUNTS CANNOT BE PRESUMED TO BE REFLECTING THE ENTIRE UNACCOUNTED BUSINESS DURIN G THE BLOCK PERIOD AS THE MODUS-OPERANDI OF THIS GROUP HAS ADMI TTEDLY BEEN TO RECEIVE THE SALE CONSIDERATION BOTH IN CASH AND BY CHEQUES /DRAFTS INCLUDING ADVANCES ALSO. IT IS OBVIOUS THAT SOME CASH RECEIPTS FROM THE UNACCOUNTED BUSINESS MIGHT NOT HA VE BEEN DEPOSITED IN THE BANK ACCOUNTS AS THESE MIGHT HAVE BEEN UTILIZED FOR EXPENSES NOT ACCOUNTED FOR IN THE BOOKS. THE EL EMENT OF INCOME BECAUSE OF SALES-TAX EVASION IS ALSO THERE O N ACCOUNT OF SUPPRESSED/UNACCOUNTED SALES. THE ASSESSEE HAS BEEN HIMSELF DECLARING OVER 10% GR OSS PROFIT RATE ON THE FABRICATION OF TRUCKS AS DISCUS SED ABOVE THERE IS ELEMENT OF SALES-TAX EVASION ON UNRECORDED SALES WHICH MAKES THE PROFIT OF SUCH TRANSACTIONS HIGHER. FURTH ER THE ASSESSEE IS MAKING UNACCOUNTED PURCHASES ON THESE A LSO HE IS AVOIDING TO PAY TAXES. THE ASSESSEE IS PLEADING THA T SOME PART OF THE RECEIPTS IS BECAUSE OF SALE OF LOGS DIRECTLY WH ERE THE NET PROFIT IS LESS. HOWEVER SUCH QUANTITIES ARE QUITE LOW WHEN SEEN IN THE LIGHT OF TOTAL TRANSACTIONS. FURTHER AS DIS CUSSED EARLIER THE BANK ACCOUNTS CANNOT IN ANY CASE REPRESENT THE ENTIRE RECEIPTS FROM TRANSACTIONS CONDUCTED OUT OF BOOKS O F ACCOUNTS. IT IS BUT NATURAL THAT THE ASSESSEE IF RECEIVES SOME C ASH ON ACCOUNT OF SALES OUTSIDE THE BOOKS OF ACCOUNTS WILL NOT DEP OSIT IT IN THE BANK ACCOUNT IF THERE IS NEED TO MAKE SOME PAYMENTS FOR OUTSIDE 5 BOOKS PURCHASES WHICH HE IS CLAIMING TO BE DONE. IN THE LIGHT OF ABOVE FACTS AN APPLICATION OF 10% RATE. ONLY ON TH E RECEIPTS IN THE BANK ACCOUNTS WILL BE THE MOST CONSERVATIVE ES TIMATE OF THE PROFIT FROM SUCH TRANSACTIONS. HERE THE FACT DISCU SSED IN PARA-4 REGARDING UNRECORDED PURCHASE OF HARDWARE ITEMS TOT ALLING RS.4 29 476/- IN TWO MONTHS ONLY IS TO BE HIGHLIGHT ED SHOWING THAT THE FABRICATION WORK DONE OUTSIDE THE BOOKS OF ACCOUNTS IS ENORMOUS AND MUST BE ABOVE THE RECEIPTS DEPOSITED I N THE BANK ACCOUNTS. 6. ON APPEAL THE CIT(A) HELD THAT THE ASSESSING OF FICER HAS RIGHTLY ADOPTED THE GP RATE OF 10% ON UNACCOUNTED SALES. H OWEVER THE CIT(A) DIRECTED THE ASSESSING OFFICER TO EXCLUDE A SUM O F RS. 15.50 LACS I.E. RECEIPTS ON ACCOUNT OF SALES OF LOGS FROM THE TOTAL SALES AND APPLY GP RATE OF 4% ON THE SUM OF RS. 15.50 LACS. THE RELEVANT FINDI NGS OF THE CIT(A) ARE AS UNDER:- 3.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AND ALSO THE WRITTEN SUBMISSIONS MADE BY THE LEARNED A.R. AND I FIND THAT THE MAIN THRUST OF THE ARGUMENT OF THE LEARNED A.R. IS THAT THE G.P. RATE APPLIED BY THE A.O IS ON THE HIGHER SIDE . ANOTHER CONTENTION OF THE LEARNED A.R. IS THAT ENTIRE RECEI PTS HAVE BEEN CONSIDERED AS OUT OF UNDISCLOSED RECEIPTS FROM TRUC K BODY FABRICATION. ALSO AS PER THE LEARNED A.R. THE A.O . HAS NOT TAKEN INTO CONSIDERATION THE SALE OF LOGS MADE OUTS IDE THE BOOKS OF ACCOUNT ON WHICH THE G.P. RATE WAS LOWER. IT I S SEEN BY ME THAT FROM THE SEIZED DOCUMENTS SALE OF LOGS IS TO THE EXTENT OF RS. 15.50 LAC IN THE MONTHS OF JAN AND FEB. 2000. THE LEARNED A.R. HAS FAILED TO ESTABLISH THAT APART FROM THIS S ALE OF LOGS OF RS. 15.50 LAC THE DEPOSITS IN THE BANK REPRESENTED SOME OF THE RECEIPT OUT OF THE UNACCOUNTED SALE OF LOGS. THEREF ORE THE CONTENTION OF THE LEARNED AR THAT 25% OF THE TOTAL RECEIPTS 6 SHOULD BE CONSIDERED AS OUT OF SALE OF LOGS IS TOTA LLY UNSUBSTANTIATED AND CANNOT BE ACCEPTED. AS REGARDS THE G.P. RATE IN THE YEAR 2000-01 THE DECLARED G.P. RATE OF THE APPELLANT WAS 7.85%. HOWEVER THE A.O. HAS RIGHTLY POINTED OU T THAT ON UNACCOUNTED SALES THE APPELLANT HAD NOT PAID SALES TAX ETC. WHICH WILL GO TO SHOOT UP THE G.P. RATE. THIS ARGUM ENT OF THE AO. HAS NOT BEEN REFUTED BY THE LEARNED A.R. THERE FORE I AM OF THE OPINION THAT THE ASSESSING OFFICER HAS RIGHT LY ADOPTED THE GP RATE OF 10% ON UNACCOUNTED SALES AND THE SAME IS CONFIRMED. HOWEVER THE ASSESSING OFFICER IS DIRE CTED TO EXCLUDE THE SUM OF RS. 15.50 LAC I.E. RECEIPT ON AC COUNT OF SALE OF LOGS FROM THE TOTAL SALES AND ON THIS SUM BY AP PLYING GP RATE OF 4% SHOULD WORK OUT THE UNDISCLOSED INCOME. THE ASSESSEE GETS PART RELIEF. 7. BEFORE US SHRI RAJEEV DUTTA LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. SHRI RAJEEV DUTTA LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AUTHORITIES BELOW HAVE CONSIDERED ALL THE CREDITS IN THE BANK ACCOUNT AND RECEIPTS FROM FABRICATION WHEREAS THE CREDITS IN THE BANK ACCOUNT ALSO REPRES ENTED INTEREST INTEREST ON FDRS WHICH HAS BEEN SEPARATELY ASSESSED IN THE BLOC K CASH DEPOSITS AGAINST CASH WITHDRAWALS IN ROUND FIGURES AND SOME CONTRACT ENTRIES AGAINST SALES OF WOODEN LOGS. AS REGARDS GP RATE SHRI RAJEEV DUTTA LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT YEAR 2000 -01 THE DECLARED GP RATE OF THE ASSESSEE WAS 7.58%. HE THEREFORE SUBMITTED THAT GP RATE ADOPTED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) I S ON HIGHER SIDE AND HENCE NOT TENABLE IN LAW. SHRI MANJEET SINGH LD . DR HEAVILY RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 7 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI RAJEEV DUTTA LD. COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE CIT(A) WAS NOT JUSTIFI ED IN CONSIDERING ALL THE CREDITS IN THE BANK ACCOUNT AS RECEIPTS FROM FABRIC ATION. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE THE CREDITS IN THE BANK A CCOUNT ALSO REPRESENTS TOWARDS INTEREST INTEREST ON FDRS WHICH HAS BEEN S EPARATELY ASSESSED IN THE BLOCK CASH DEPOSITS AND CASH WITHDRAWALS IN ROUND FIGURES AND SOME CONTRA ENTRIES. HOWEVER SHRI RAJEEV DUTTA LD. COUNSEL FO R THE ASSESSEE COULD NOT SUBSTANTIATE THE SAME. IN OUR OPINION THE ABOVE C ONTENTION HAS BEEN MADE FOR ARGUMENTS SAKE ONLY BUT THERE IS NO MATERIAL ON RECORD TO SUBSTANTIATE THE SAME AND THEREFORE WE REJECT THE ABOVE CONTENTIO N OF SHRI RAJEEV DUTTA LD. COUNSEL FOR THE ASSESSEE. IT IS ALSO OBSERVED THAT CIT(A) HAS ACCEPTED SALE OF LOGS TO THE EXTENT OF RS. 15.50 LACS FOR TH E MONTHS OF JANUARY AND FEBRUARY 2000. THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE DEPOSITS IN THE BANK REPRESENT SOME OF THE RECEIPTS OUT OF THE UNACCOUNTED SALE OF LOGS EXCEPT THE SALE OF LOGS OF RS. 15.50 LACS. AS REGA RDS THE GP RATE OF 10% APPLIED ON UNACCOUNTED SALES APPEARS TO BE ON HIGHE R SIDE. IT IS TRUE THAT IN THE YEAR 2000-01 THE DECLARED GP RATE OF THE ASSES SEE IS 7.58%. IN NONE OF THE EARLIER YEARS THE GP RATE DECLARED BY THE ASSE SSEE WAS HIGHER THAN 7.58%. WE ALSO FIND THAT BOTH THE AUTHORITIES BELOW HAVE P OINTED OUT THAT ON UNACCOUNTED SALES THE ASSESSEE HAD NOT PAID SALES TAX ETC. WHICH WILL GO TO SHOOT UP THE GP RATE. WE ALSO OBSERVE HERE THAT TH E GP RATE CANNOT BE UNIFORM IN ALL THE YEARS. CONSIDERING THE ENTIRE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE ARE OF THE VIEW THAT ASSESSIN G OFFICER SHOULD ADOPT THE GP RATE OF 9% ON ACCOUNT OF UNACCOUNTED SALES AND T HE SAME IS CONFIRMED. 8 THUS WE MODIFY THE ORDER OF CIT(A) UP TO THE ABOVE EXTENT. THESE GROUNDS OF APPEAL ARE ALLOWED PARTLY AS INDICATED ABOVE. 9. GROUND NO.6 READS AS UNDER:- 6. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT IS L IABLE TO PAY SURCHARGE @ 10% ON THE TAX CHARGEABLE FOR THE B LOCK PERIOD 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISS UE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SURESH N. GUPTA (2008) 297 ITR 322 (SC) WHEREIN IT HAS BEEN HELD THAT THE SURCHARGE IN ADDITION TO THE INCOME TAX IS LEVIABLE ON UNDISCLOSED INCOME AND PROVISO TO SE CTION 113 IS CLARIFICATORY IN NATURE. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SURESH N. GUTPA WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL AND ACCORDINGLY WE DISMISS THE SAME. 11. IN THE RESULT APPEAL IS ALLOWED PARTLY AS INDI CATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 22 ND FEBRUARY 2012 RKK 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR