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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
Assessee by : Shri P. M. Jagasheth, CA Revenue by : Ms Usha Shrote, Sr. DR सुनवाईक�तार�ख/ Date of Hearing : 24/03/2021 घोषणाक�तार�ख/Date of Pronouncement : 19/04/2021 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to the Assessment Year (AY) 2008-09, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-II, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS/IV/138/2014-15 & CAS/2/74/Trf/2014-15 dated 12.02.2016 which in turn arises out of an order passed by Assessing Officer (in short “the AO) under section 144 of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
The grievances raised by the assessee are as follows: “1. On the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in opening the assessment u/s.147 of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in making addition of Rs.67,53,500/- on account of fresh capital introduced in firm treated as alleged unexplained cash credit u/s.68 of the Act.
Assessment Years.2008-09 M/s. Shreeji Enterprises 3. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in making addition of Rs.34,50,000/- on account of alleged unsecured loans treated as alleged unexplained cash credit u/s.68 of the I.T. Act, 1961.
4. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in making addition of Rs.49,70,500/- on account of alleged suppressed its 'pass income' treated as undisclosed income.
5. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper.
6. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
3. At the outset, the Learned Counsel submits that assessee does not want to press Ground No.1 raised by him, therefore we dismiss Ground No.1 raised by the assessee as not pressed.
4. Ground No.2 and 3 are interlinked and are connected with similar issue; therefore, they are being adjudicated together.
The facts necessary for disposal of ground Nos. 2 and 3 are stated in brief.The information has been received by the assessing officer from the investigation wing that the partners of the firm had introduced fresh capital during year under consideration. The details of the fresh capital introduced by the partners are as under: Sr. No. Name of the partner Amount 1 Shri Amirdhan Gadhavi Rs.5,00,000/- 2 Shri Ankit Mahendra Suchak Rs.1,00,000/- 3 Shri Dharmesh K. Patel Rs.11,00,000/- 4 M/s. Hari Krupa Rs.5,00,000/- 5 Shri Hemant Suresh Shah Rs.10,00,000/- 6 Shri R. J. Shah Rs.35,53,500/- Total Rs.67,53,500/- In this regard, the assessee was requested to furnish complete details with evidences to prove the genuineness and creditworthiness of fresh capital introduced by the partners of the firm during the year under consideration. But the assessee
Assessment Years.2008-09 M/s. Shreeji Enterprises failed to furnish the detailed source for the introduction of the capital by the partner therefore the amount of Rs.67,53,500/- was added to the total income of the assessee being unexplained cash credit u/s.68 of the I.T. Act.
During the assessment proceedings, it was observed by the assessing officer that assessee has accepted unsecured loans from the following depositors, as under:
Sr. No. Name of the person Amount 1 M/s. Govind Silk Mills Rs.10,00,000/- 2 Shri Hiren Kapadia Rs.5,00,000/- 3 Smt. Usha P. Patel Rs.19,50,000/- Total Rs.34,50,000/- The assessee was requested to prove identity of the depositors, genuineness of the transaction and creditworthiness of the said depositors. But the assessee failed to furnish the evidence to prove the identity of the depositors, genuineness of the transaction and creditworthiness of the depositors. In view of the above, the amount of Rs.34,50,000/- was added to the total income of the assessee, being the unexplained cash credit u/s.68 of the I.T. Act.
On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in appeal before us.
We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Shri P.M. Jagasheth, Learned Counsel submits before the Bench that assessee could not furnish confirmation and proof in respect of additions made in Ground No.2 and 3, reason being one of the Co-partners has killed another Co-partner on the occasion of Garba festival, therefore, there was fight/quarrel and serious dispute among the partners, and one of the partners put into jail by Police/Court, hence required documents could not be submitted before the assessing officer and ld CIT(A). Therefore, ld Counsel prayed the Bench that an opportunity should be given to the assessee to produce required documents and evidences before the assessing officer to prove the identity of the Assessment Years.2008-09 M/s. Shreeji Enterprises depositors, genuineness of the transaction and creditworthiness of the depositors and fresh capital introduced by the partners.
Ms Usha Shrote, the Ld. DR for the Revenue submitted before us that at the time of assessment, all the partners were out of jail and they could file the required documents and evidences before the assessing officer but they have failed to do so, therefore another innings should be given to the assessee.
We have heard both the parties. Learned counsel appearing on behalf of the assessee adverted our attention to pages 3 to13, 14, and 15, of the paper book in support of his contention. Partnership deed, vide page no. 3 of paper book, name of one of the partners, Shri Rajeev Shah is stated who is main accused of murder case. First Information Report (FIR) dated 12.10.2009 is placed on paper book page no.10 to 13. Order of Hon`ble High Court of Gujarat in the case of Mehul Kiritbhai Lakhani and Hiren Shantilal kakadia is placed on paper book page No.15 to 19. After going through the FIR, and other criminal events among the partners, we note that one of the partners has killed another partner on the occasion of Garba festival, therefore, there was fight/quarrel and serious dispute among the partners, one of the partners put into jail by Police/Court and one of the partners has died, hence there was no co-operation among the partners, therefore the required documents could not be submitted before the assessing officer/CIT(A), as the situation was beyond control.
Considering the above facts, we note that because of these criminal events the assessee did not get opportunity to submit documents and evidences during the assessment stage. We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, in the interest of justice, we restore the matter back to the file of Ld. Assessing Officer for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. Assessing officer to adjudicate the issue afresh on merits. For statistical purposes, the ground nos. 2 and 3 of the assessee are treated as allowed. Page | 4 Assessment Years.2008-09 M/s. Shreeji Enterprises 11. Now, we shall take Ground No.4 raised by the assessee which relates to addition of Rs.49,70,500/- on account of alleged suppressed its ‘pass income’ and treated as undisclosed income.
Brief facts qua the issue are that during the assessment proceedings, the assessing officer noticed from the copy of provisional profit and Loss account submitted before the ITO (Inv.), Surat, wherein the assessee has shown indirect income of Rs.1,60,64,700/- including 'Pass income' of Rs.89,50,000/-. Thereafter, the assessee had furnished another copy of Balance Sheet and Profit and Loss account as on 31.03.2008, in which, the assessee has shown "Pass Income' of Rs.39,79,500/- only as against Rs.89,50,000/- shown in the provisional Profit and Loss account as on 31.12.2007. Therefore, assessing officer was of the view that assessee had furnished another copy of Profit and Loss account with a view to suppress the 'Pass Income' to the tune of Rs.49,70,500/- (Rs.89,50,000- Rs.39,79,500) for the event organized during the year under consideration. The assessee has failed to furnish supporting evidence therefore assessing officer made addition of Rs.49,70,500/- to the total income of the assessee, being undisclosed income received during the previous year.
On appeal, ld CIT(A) has confirmed the addition made by Assessing Officer. Aggrieved the assessee is in appeal before us.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that during the assessment stage the Assessing Officer observed that in the Profit and Loss account submitted before the ITO Investigation, Surat, the assessee has shown income of Rs.89,50,000/- and subsequently another Profit &Loss account as on 31.03.2008 has been submitted in which the pass income of Rs.39,79,500/- has been shown as against Rs.89,50,000/- shown in the Profit &Loss account as on 31.12.2007. Therefore, the AO made an addition of Rs.49,70,500/- (Rs.89,50,000-
Assessment Years.2008-09 M/s. Shreeji Enterprises Rs.39,79,500), as undisclosed income. Shri P.M. Jagasheth, Learned Counsel submits before the Bench that the difference in the 'pass income' in the provisional Profit &Loss account as on 31.12.2007 and as on 31.03.2008 is due to the fact that the survey was conducted by the Investigation Wing during the Navratri Festival. The accounts were reconciled only after the event was over and the 'pass income' was collected from the agent and pass selling centers. The difference in the figures of pass income is due to the fact that both the Profit and Loss accounts were prepared on different time periods and the correct figures were included after the reconciliation. However, ld DR for the Revenue reiterated the stand taken by the assessing officer. We note that AO has taken two different figure pertaining to 'pass income' from the Profit &Loss account as on 31.03.2007 and as on 31.03.2008. The figures of December 2007 were provisional figures where the net profit of Rs.1,01,908/- has been shown while in the Profit &Loss account for 31.03.2008 the net loss of Rs.48,68,592/- has been shown. The appellant submitted that the Profit & Loss account for the period 01.04.2007 to 31.03.2008 was actually the provisional Profit & Loss account which was produced before the ITO Investigation, Surat during course of the function as the survey was conducted when the event was in progress. The period mentioned as 01.04.2007 to 31.03.2008 is by default settings of the accounting software. The ‘pass income' has been shown at Rs.39,79,500/- in the Profit &Loss account filed during the course of the event. Subsequently, when the accounts was reconciled, the pass income increased to Rs.89,50,000/-from the income shown of Rs.39,79,500/- on which the net profit Rs.1,01,908/- has been shown. We note that assessee has shown voluntarily the higher pass income at Rs.89,50,000/- as compared to earlier pass income at Rs.39,79,500/- therefore, it should not be doubted that assessee has concealed his income.
Now coming to the next question whether turnover/sales is treated as income or net profit embedded in sales is treated as income of the assessee. In this regard we note that Hon’ble Gujarat High Court in the case of President Industries 258 ITR 654
Assessment Years.2008-09 M/s. Shreeji Enterprises held that only net profit embedded in sales should be treated as income. The findings of the Hon’ble court is reproduced below: “2. The facts giving rise to the present case are that during the course of survey conducted on the premises of the assessee on 1-12-1994, from the excise records found, inference was drawn by the Assessing Officer from the movement of finished goods from the premises of the assessee to godowns that sales amounting to Rs. 29,01,300 have not been disclosed in the books of account. The Assessing Officer made the addition of the entire sum of the said undisclosed sales as income of the assessee for the assessment year 1994-95. The additions on account of undisclosed sales was affirmed by the Commissioner (Appeals) to the reduced sum of Rs. 28,35,883. On further appeal, the Tribunal found that the entire sales could not have been added as income of the assessee for the assessment year in question but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales. The Tribunal also found that there is no material on the record to suggest that the assessee made any investment outside books of account to make alleged unaccounted sales in respect of the aforesaid appellate order. The applicant made an application under section 256(1) for referring the aforesaid question said to be arising out of the Tribunal’s order.
Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner (Appeals) and the Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question, whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred to about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales.
We are, therefore, of the opinion that no question of law which requires to be referred to this Court arise out of the Tribunal’s appellate order. The order of the Tribunal under section 256(1) is not erroneous in reaching such conclusion. Application is rejected.”
Learned Counsel submits and draw our attention to the profit and loss account of the assessee vide paper book page no.93, wherein the net profit is shown to the tune of Rs.1,01,908/-. Therefore, considering the facts and precedent applicable to these facts, as narrated above, we delete the addition of Rs.
Assessment Years.2008-09 M/s. Shreeji Enterprises 49,70,500/- and direct the assessing officer to treat the net income of the assessee at Rs.1,01,908/-. Thus, ground No.4 raised by the assessee is allowed in above terms.
In the result, the appeal of the assessee is partly allowed for statistical purposes
Order is pronounced on 19/04/2021 by placing result on Notice Board.