THE DCIT, 4 (1), v. M/S SWASTIK ELECTRICALS,

ITSSA 57/IND/2006 | misc
Pronouncement Date: 21-07-2011 | Result: Dismissed

Appeal Details

RSA Number 5722716 RSA 2006
Assessee PAN AAHFM1326J
Bench Indore
Appeal Number ITSSA 57/IND/2006
Duration Of Justice 5 year(s) 2 month(s) 20 day(s)
Appellant THE DCIT, 4 (1),
Respondent M/S SWASTIK ELECTRICALS,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 21-07-2011
Date Of Final Hearing 15-06-2011
Next Hearing Date 15-06-2011
Assessment Year misc
Appeal Filed On 01-05-2006
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER IT(SS)A NO.57/IND/2006 BLOCK PERIOD: 1.4.1996 TO 17.11.2002 DCIT-4(1) INDORE ..APPELLANT V/S. M/S. SWASTIK ELECTRICALS INDORE PAN AAHFM 1326J/S-301 ..RESPONDENT DEPARTMENT BY : SHRI KESHAVE SAXENA CIT/DR ASSESSEE BY : SHRI TRIBHUVAN SACHDEVA ADV. O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II IN DORE DATED 10.3.2006 ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. FIRST APPELLATE AUTHORITY ERRED IN: 2 1. DELETING THE ADDITION OF RS.4 31 065/- MADE ON ACCOUNT OF CASH FOUND UNEXPLAINED. 2. DELETING THE ADDITION OF RS.8 98 893/- MADE ON ACCOUNT OF ALLEGED DIFFERENCE OF STOCK FOUND DURING THE TUNE OF SEARCH. 3. DELETING THE ADDITION OF RS.42 00 000/- MADE BY THE A.O. ON ACCOUNT ESTIMATED PROJECT ON UNDISCLOSED SALES. 2. WE HAVE HEARD SHRI KESHAV SAXENA LEARNED CI T DR AND SHRI TRIBHUVAN SACHDEVA LD. COUNSEL FOR ASSESSEE. SO FAR AS GROUND NO. 1 IS CONCERNED THE LEARNED CIT DR CONTENDED BEFORE US THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN DELETING THE ADDITION OF RS. 4 31 065/- AS THE S AME WAS UNEXPLAINED CASH WHICH WAS FOUND DURING THE COURSE OF SEARCH AND SUPPORTED THE ASSESSMENT ORDER . ON THE OTHER HAND THE LD. COUNSEL FOR ASSESSEE STR ONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE CASH WAS DULY EXPLAINED AND THE COPY OF THE BALANCE - 3 SHEET FOR THE ASSESSMENT YEAR 2003-04 WAS DULY FILE D DURING THE COURSE OF REGULAR ASSESSMENT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND SHR I AMARLAL CHUGH AND ASHOK KHURANA ARE TWO PARTNERS. THE FIRM DEALS IN TRADING OF ELECTRICAL AND ELECTRO NIC GOODS. SEARCH U/S 132(1) WAS CONDUCTED AT THE FIRM S BUSINESS PREMISES ITS GODOWNS AND AT THE RESIDENTI AL PREMISES OF THE PARTNERS. DURING THE COURSE OF SEAR CH CASH OF RS. 4 31 065/- WAS FOUND UNEXPLAINED. THE ASSESSING OFFICER OBSERVED THAT CASH OF RS. 1 01 06 5/- WAS FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. A BAG CONTAINING RS. 3 05 000/- WAS ALSO FOUND IN THE POSSESSION OF ONE PARTY FROM DELHI WHO ADMITTED THA T THE SAME WAS HANDED OVER BY ONE OF THE PARTNERS SHRI KHURANA AND IT BELONGED TO THE FIRM. SHRI KHURANA ADMITTED THIS FACT. ANOTHER CASH OF RS. 25 000/- W AS ALSO FOUND DURING THE COURSE OF SEARCH WHICH WAS ST ATED 4 TO BE PAYMENT BY A PARTY OF SHAJAPUR AGAINST THE AM OUNT TO BE REALISED BY THE ASSESSEE. THE AGGREGATE OF TH ESE AMOUNTS CAME TO RS. 4 31 065/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE THAT THE ABOVE AMOUNT REPRESENTED CASH BALANCE AS ON 13.11.2002. THIS PLEA WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER AND HE ACCORDIN GLY REJECTED THE SAME. AGGRIEVED THE ASSESSEE PREFERRE D FIRST APPEAL BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THE BIFURCATION OF THE ABOV E AMOUNT OF RS. 4 31 065/- AS UNDER :- A. RS. 1 01 065/- AT SHOP SWASTIK ELECTRICALS B. RS. 3 05 000/- CASH FOUND IN THE BAG WITH ONE S HRI GANESH MADAN C. RS. 25 000/- AMOUNT DEPOSITED BY ONE SHRI A BHAY JAIN OF SHAJAPUR ON 16.11.2002 SENT BY SHRI MOHAMMAD OF M/S BOMBAY MACHINERY SHAJAPUR. ----------------- TOTAL- RS.4 31 065/- IT WAS SUBMITTED BY THE LD. COUNSEL FOR ASSESSEE TH AT THE ABOVE ENTIRE CASH WAS ASSESSED BY THE ASSESSING OFF ICER MAINLY BECAUSE THE BOOKS WERE NOT PRODUCED DURING T HE 5 SEARCH PROCEEDINGS. HE ALSO SUBMITTED THAT THE CIRCUMSTANCES UNDER WHICH THE BOOKS COULD NOT BE PRODUCED HAVE ALREADY BEEN STATED BY THE ASSESSEE I N LETTERS DATED 21.5.2004 16.11.2004 AND 26.11.2004. IN PARA (I) OF LETTER DATED 21.5.2004 IT WAS STATED AS UNDER :- TOTAL CASH AT SHOP AS PER ANNEXURE CF 1 DATED 13.11.02 WAS FOUND AT RS.4 06 065/- OUT OF WHICH RS. 3 90 000/- WAS SEIZED. ANOTHER SUM OF RS. 25 000/- WAS DEPOSITED BY A PARTY AGAINST DUES ON 16.11.02 WHICH WAS ALSO SEIZED. THUS TOTAL AMOUNT SEIZED WAS RS. 4 15 000/- WHICH AS PER BOOKS WAS DEBITED TO THE INCOME TAX DEPARTMENT. A COPY OF BALANCE-SHEET FOR THE ASSESSMENT YEAR 2003-04 FILED IN THE REGULAR AST IS ENCLOSED. THE REGULAR BOOKS ARE ALSO BEING PRODUCED AND AS SUCH THERE IS NO UNEXPLAINED CASH AS ALLEGED BY THE DEPARTMENT. IT WAS SUBMITTED THAT ALONG WITH THE LETTER DATED 26.11.2004 RELEVANT PAGES OF THE CASH BOOK FROM 11.11.2002 TO 16.11.2002 WERE ALSO ENCLOSED. IT WAS 6 SUBMITTED THAT IN VIEW OF THESE FACTS EXPLANATIONS OF THE ASSESSEE AND THE COPIES OF BILLS AND CASH MEMOS TH ERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE ADDITION ON ACCOUNT OF CASH FOUND. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDER ING THE ENTIRE ISSUE IN THE LIGHT OF THE SUBMISSIONS MA DE BEFORE HIM OBSERVED AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND FIND SUFFICIENT MERITS IN THE CONTENTION OF THE APPELLANT. THE CONCLUSION DRAWN BY THE A.O. DOES NOT STAND ON FIRM FOOTING. THE FACT REMAINS THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM DURING ASSESSMENT PROCEEDINGS EVIDENCING AVAILABILITY OF CASH WITH THE APPELLANT. NO DEFECT IN THE BOOKS OF ACCOUNT HAS BEEN POINTED OUT IN THIS REGARD BY THE ASSESSING OFFICER. IT MAY BE MENTIONED HERE DURING THE APPEAL PROCEEDINGS THE A.O. IN THE REMAND REPORT WITH REGARD TO THE GROUND NO. 4 7 HAS ADMITTED THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE PREDECESSOR A.O. WHO MADE THE ASSESSMENT AND HAD ALSO VERIFIED. THE SUPPORTING BILLS/VOUCHERS ETC. WERE ALSO ADMITTED TO HAVE BEEN LYING IN THE CUSTODY OF THE DEPARTMENT. THE APPELLANT HAS ALSO SUBMITTED A COPY OF THE LETTER RECEIVED BY THE A.O. ON 29.11.2002 IN WHICH THE COPIES OF THE RELEVANT PAGES OF THE CASH BOOK FROM 11.11.2002 TO 16.11.2002 HAVE BEEN ENCLOSED TO SHOW THAT THE CASH FOUND AND SEIZED DURING SEARCH WAS REFLECTED IN THE BOOKS OF ACCOUNT AND WAS EXPLAINABLE. HOWEVER IT APPEARS THAT THE A.O. HAS NOT TAKEN DUE COGNIZANCE OF THE SAID LETTER AND THE CASH BOOK FOLIOS SHOWING ADEQUATE CASH BALANCE AVAILABLE WITH THE APPELLANT AS ON THE DATE OF SEARCH. IN THE LIGHT OF SUCH FACTS THERE IS NO SUBSTANCE IN THE ADVERSE CONCLUSION DRAWN BY 8 THE A.O. AS THE ADDITION HAS BEEN MADE ONLY ON THE GROUND THAT BOOKS OF ACCOUNT WERE NOT FOUND BY THE DEPARTMENT DURING SEARCH. THYE APPELLANT HAS PRODUCED THE RELEVANT BOOKS OF ACCOUNT DURING ASSESSMENT PROCEEDINGS BUT THE A.O. HAS NOT BEEN ABLE TO NPOINT OUT ANY DEFECT OR DISCREPANCY. THE BALANCE HAS BEEN DRAWN BY THE APPELLANT EXPLAINING THE CASH ON THE BASIS OF SEIZED BILLS/VOUCHERS WHICH COULD NOT BE IGNORED WITHOUT BRINGING ON RECORD ANY MATERIAL FINDING REGARDING THEIR AUTHENTICITY. IN THE LIGHT OF THE ABOVE DISCUSSION IT IS HELD THAT THE APPELLANT HAS BEEN ABLE TO SATISFACTORILY EXPLAIN THE CASH FOUND DURING SEARCH OPERATION AND THERE IS NO SUBSTANCE IN THE ACTION OF THE A.O. IN TREATING THE SAME AS UNEXPLAINED INCOME OF THE APPELLANT. THE ADDITION MADE IS THEREFORE DELETED. 9 IN VIEW OF THE ABOVE THERE IS AN UNCONTROVERTED FI NDING IN THE IMPUGNED ORDER THAT THE BOOKS OF ACCOUNT WER E PRODUCED DURING ASSESSMENT PROCEEDINGS EVIDENCING AVAILABILITY OF CASH WITH THE ASSESSEE AND NO DEFEC T WAS POINTED OUT IN THE BOOKS. EVEN IN THE REMAND REPORT BEFORE THE LD. FIRST APPELLATE AUTHORITY THE LEARN ED ASSESSING OFFICER HIMSELF ADMITTED THAT BOOKS OF AC COUNT WERE DULY PRODUCED BEFORE HIS PREDECESSOR WHO MADE THE ASSESSMENT AND VERIFIED THE SAME. THE SUPPORTING BILLS/VOUCHERS ETC. WERE ALSO ADMITTEDLY LYING IN THE CUSTODY OF THE DEPARTMENT. EVEN THE LETTER OF THE ASSESSEE DATED 29.11.2004 ADDRESSED TO THE ASSESSI NG OFFICER FORTIFIES THE CLAIM OF THE ASSESSEE AS PER WHICH THE RELEVANT PAGES OF THE CASH BOOK FROM 11.11.2002 TO 16.11.2002 WERE DULY ENCLOSED THEREFORE WE FIND N O INFIRMITY IN THE CONCLUSION DRAWN BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRM TH E SAME. IN THIS VIEW OF THE MATTER GROUND NO. 1 OF THE REVENUE IS DISMISSED. 10 4. COMING TO GROUND NO. 2 AGAINST DELETION OF ADDIT ION OF RS. 8 98 893/- MADE ON ACCOUNT OF ALLEGED DIFFE RENCE OF STOCK FOUND DURING SEARCH WE FIND THAT THE ALLE GED DIFFERENCE IN STOCK DURING SEARCH TO THE TUNE OF RS. 8 98 873/- WAS FOUND AND THE VALUATION OF THE SAME WAS GOT DONE BY THE DEPARTMENT FROM THE EMPLOYEE OF THE PWD. THE STAND OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. FIRST APPELLATE A UTHORITY WAS THAT THERE WERE LOT OF INFIRMITIES IN THE CALCU LATION AND CERTAIN OTHER MISTAKES WERE ALSO POINTED OUT. T HE RECONCILIATION OF CORRECT STOCK AT RS. 16 26 856/- WAS CLAIMED TO BE FURNISHED IN WHICH IT WAS CLAIMED THA T NO MISTAKE WAS POINTED OUT BY THE ASSESSING OFFICER IN SUCH STOCK FIGURES. THE VALUATION WAS CLAIMED TO BE DON E ON THE BASIS OF PWD RATES INSTEAD OF PURCHASE INVOICES AND A RECONCILIATION STATEMENT OF TRADING ACCOUNT FOR T HE PERIOD FROM 1.4.2002 TO 13.11.2002 AND 14.11.2002 T O 31.3.2003 WAS FILED ALONG WITH REGULAR RETURN FILED FOR THE ASSESSMENT YEAR 2003-04. THE CLARIFICATION WAS ALS O 11 CLAIMED TO BE FILED TO THE QUERY OF THE ASSESSING O FFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ALREADY MADE A DETAILED DISCUSSION AS OOZING OUT FR OM PAGES 8 ONWARDS INCLUDING THE REMAND REPORT SUBMITT ED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) BY THE ASSESSING OFFICER. WE HAVE GONE THROUGH THE IMPUGNED ORDER RELEVANT RECORD REMAND REPORT AND FIND THAT WHILE FRAMING THE ASSESSMENT ORDER THERE WERE GLARING MISTAKES IN THE INVENTORISATION OF VALUATIO N OF STOCK AND DO NOT FIND ANY INFIRMITY IN THE CONCLUSI ON OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE CONFIRM THE SAME. AS SUCH THIS GROUND OF THE REVE NUE IS ALSO DISMISSED. 5. THE LAST GROUND PERTAINS TO DELETING THE ADDITION OF RS. 42 LACS MADE ON ACCOUNT OF ESTIMAT ED PROJECT ON UNDISCLOSED SALES. THE BRIEF FACTS ARE T HAT THE ASSESSING OFFICER ESTIMATED THE UNRECORDED SALES AT THE RATE OF RS. 35 LACS PER MONTH FOR 80 MONTHS AT RS. 2 80 00 000/- WHICH RESULTED INTO UNDISCLOSED PROFI T TO 12 THE TUNE OF RS. 42 LACS WITH THE APPLICATION OF GRO SS PROFIT RATE AT 15%. THE STAND OF THE ASSESSEE IS THAT THE ESTIMATION MADE BY THE ASSESSING OFFICER IS CONTRAR Y TO FACTS AND IS ALSO EXCESSIVE AND ARBITRARY. A PLEA WAS ALSO RAISED THAT SUCH ESTIMATION WAS NEITHER CONFRONTED TO THE ASSESSEE NOR THE DETAILS WORKED OUT BY THE ASS ESSING OFFICER WERE SUPPLIED TO THE ASSESSEE. THE STAND O F THE REVENUE IS THAT NO EXPLANATION WAS FILED BY THE ASS ESSEE WITH REGARD TO LOOSE PAPERS SUCH AS LPS-1 2 4 AND 9 AND ONE OF THE PARTNERS ALSO ADMITTED ABOUT UNRECOR DED SALES. THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE INDULGED IN LARGE SCALE UNACCOUNTED SA LES AND PURCHASES. A STRONG PLEA WAS RAISED THAT THE ASSESSEE VIDE LETTER 12.8.2004 FURNISHED COMPLETE INFORMATION AS ASKED FOR AND EVEN EXPLAINED THE ENT RIES POINTED OUT IN THE LOOSE PAPERS WHICH WERE DULY RECORDED/DECLARED. WE FIND THAT THERE IS NO JUSTIFI CATION IN THE STAND OF THE ASSESSING OFFICER IN ESTIMATING THE PURCHASES/SALES AND LEARNED COMMISSIONER OF INCOME 13 TAX (APPEALS) WHILE COMING TO A PARTICULAR CONCLUSI ON DULY CONSIDERED THE REMAND REPORT FROM THE ASSESSIN G OFFICER. EVEN OTHERWISE THE UNDISCLOSED INCOME OF BLOCK PERIOD IS TO BE COMPUTED ON THE BASIS OF EVIDENCE F OUND DURING SEARCH OR ANY INFORMATION WHICH IS RELATED T O SUCH EVIDENCE. EVEN OTHERWISE THE FIGURES OF UNRECO RDED SALES WERE DULY FURNISHED BY THE ASSESSEE AND THE S AME WERE VERIFIED THEREFORE STILL ESTIMATION OF THE S AME IS NOT JUSTIFIED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALREADY DELIBERATED UPON VARIOUS JUDI CIAL PRONOUNCEMENTS INCLUDING FROM THE HONBLE JURISDICTIONAL HIGH COURT THEREFORE WE ARE REFRAI NING OURSELVES FROM THE REPEATING THE SAME BEING A MATTE R OF RECORD. THE DECISION RELIED UPON BY THE LEARNED CI T DR LIKE RAJNIK & COMPANY (251 ITR 561) (AP) HAS ALSO B EEN DISCUSSED IN THE IMPUGNED ORDER. WE FURTHER FIND TH AT THE APPLICATION OF GROSS PROFIT AT THE RATE OF 15% BY THE ASSESSING OFFICER IS ALSO WITHOUT ANY JUSTIFICATION BECAUSE WHILE DRAWING THE ADVERSE CONCLUSION THE 14 ASSESSING OFFICER EVEN DID NOT APPRECIATE HIS OWN F INDING AS RECORDED IN THE ORDER SHEET CLEARLY INDICATING T HAT THE BOOKS OF ACCOUNT WERE DULY PRODUCED DURING THE ASSESSMENT PROCEEDINGS ALONG WITH VARIOUS TRANSACTI ONS RECORDED IN THE SEIZED PAPERS WERE DULY VERIFIED B Y THE ASSESSING OFFICER AND NO DISCREPANCY WAS NOTICED. IN VIEW OF THE UNCONTROVERTED FINDING IN THE IMPUGNED ORDER WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDE R AND CONFIRM THE SAME. HENCE THIS GROUND IS ALSO REJEC TED. FINALLY THE APPEAL OF THE REVENUE IS HAVING NO MERITS AND THEREFORE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JULY 2011. (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST JULY 2011 COPY TO:APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GUARD FI LE DN/- 15