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Income Tax Appellate Tribunal, JAIPUR BENCHES (SMC
Before: SHRI RAMESH C SHARMAvk;dj vihy la-@ITA No. 329/JP/2016
ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 25/01/2016 for the A.Y. 2010-11 in the matter of order passed U/s 143(3) of the Income Tax Act, 1961 (in short, the Act), wherein the assessee has raised following grounds of appeal: “1.1 Rs. 10,86,165/-: - The Ld. CIT(A) erred in law as well as on the facts of the case in denying the benefit of the availability of the stock, the income of which has already been surrendered in respect to the unaccounted purchases of Rs. 13,00,000/- towards the short stock/suppressed sales found of Rs. 10,86,165/- and this way, wrongly confirmed the double addition made of the same income 2 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO by the AO which is not permissible in law. The addition so made and confirmed, kindly be deleted in full. 1.2 Alternatively and without prejudice to the above. The Id. CIT(A) also erred in law as well as on the facts of the case in denying the benefit of the availability of the sale proceeds resulting from the suppressed sales of Rs. 10,86,165/- toward the unaccounted purchases of Rs. 13,00,000/- and thereby wrongly confirmed the double addition made of the same income by the AO on account of the alleged unexplained investment in purchases of Rs. 13,00,000/-. The addition so made & confirmed being contrary to the provisions of law and facts of the case, kindly be deleted in full. 2 The A.O. erred in law as well as on the facts of the case in charging interest U/s 234B/234C & 234D of the Act. The appellant totally denies liabilities of charging of any such interest. The interest so charged being contrary to the provisions of law and on facts kindly be deleted in full.
3. The appellant prays your Honour indulgences to add, amend and alter of any of the grounds of appeal on or before the date of hearing.”
2. Rival contentions have been heard and record perused. The facts in brief are that the the assessee firm deals in the business of cattle feed on whole sale basis. There was survey u/s 133A was conducted on 15.09.2009 on the business premises of Goyal Group at Ajmer, which also included the assessee. During the course of survey, the assessee offered for taxation the amounts of undisclosed income on account of Cash & Stock of Rs. 14,55,858/- (Rs.1,55,858 Cash + 3 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO Rs.13,00,000/-). But the same were not included by the assessee in its return of income. However, assessment was completed at total income of Rs. 15,00,390/-, by making additions on account of the alleged excess cash of Rs. 1,55,858/-, alleged investments in the unaccounted purchases of Rs. 13,00,000/- and GP on short stock of Rs.754 with others, pursuant to the survey.
3. By the impugned order, the ld. CIT(A) has accepted the availability of cash of Rs.1,55,858/- saying that the same generated out of the undisclosed sales, assuming that it was the cash sale effected on the date of survey itself, hence directed to give set - off but rejected the contention of the utilization of the undisclosed sale proceeds (of Rs. 10,86,165/-) towards the alleged unaccounted purchases of Rs. 13,00,000/-. Against which the assessee is in further appeal before the ITAT.
4. I have gone through the orders of the authorities below and found that the A.O. has purportedly converted the case of an undisclosed/suppressed sale into a case of unexplained investment which is evidently clear from the reading of Q.Ans.16 pages 8 & 9 of the statement of the assessee recorded on 15.09.2009. Firstly, first three lines of the Q- 16, itself shows that the question was with reference to the suppressed 4 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO sales of Rs. 11 Lacs. Thereafter, in the later part some purchase transaction is referred to have been made from one Ishwarlal Teli and ultimately, it is found that such purchases have been duly recorded in the stock register at 11:30 P.M. on 15.09.2009 (i.e. the very day of Survey itself). However thereafter, in the concluding part, the concerned officer treated the suppressed sale of Rs.11.50 Lac of the current year i.e. 01.04.2009 to till date of survey (15.9.2009) to be a case of unaccounted purchases & investments made therein. Further the AO added 10% profit over & above the unexplained purchases, which otherwise should have been a case of a suppressed sale where only 10% could have been added as a part of the suppressed profit. Accordingly, the addition of Rs. 13 lakhs, is purely based on misconception of facts & law both. Q.15 speaks of sale only.
5. From the record I found that the authorities below have solely relied upon the statement of the assessee with reference to Ishwar Lal Teli (consignor) i.e. Q-16 and reproduced by the CIT(A) also at Page-2 in his order and hence drawn an inference that this shows an admission on the part of the assessee that some purchases were made from Ishwar Lal Teli which were not accounted for and simply by referring to telephonic conversation with Ishwar Lal Teli, it was inferred that no bill 5 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO was to be received by the assessee and only bilty was to be given by him, which shows that it was out of books transaction. However, I found that Shri Ishwar Teli, has been sending their goods for sales through the assessee on Aadhat only i.e. on commission basis only. This is evident from Q 21 & 25 of statement of Shri Mahesh Goyal (son of partner), which has been reproduced by the AO also in the Assessment Order at page 4-5. Pertinently the AO himself has made a mention of this fact when Mahesh Goyal stated of the sale of the goods of the parties in Aadat.
6. From the record I also found that the ledger account of the said Ishwar Teli (ledger folio 192 PB-41) which shows the sale of the goods of Ishwar Teli effected by the assessee on his behalf on commission basis and it was credited to his account and the corresponding Aadhat (commission) has been duly credited in the Aadhat Account (Ledger Folio-37). This contention is further fortified & proved when the statement of the assessee were recorded after a gap of 14 days on 29.09.2009 where Ans to Q.No. 2 at pages 1 & 2 (PB-13) is very relevant and worth notable. A bare reading of the Q. itself shows that the department also read these facts to be a case of suppressed sale only and not of the unexplained investment in as much as the Q. itself 6 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO suggests that some of the bills remained to be recorded in the stock register on 15.09.2009 and therefore, after making adjustment of all those sale bills, the closing stock should have been of Rs.60,77,940/- as against of Rs.49,91,775/- found on the day of survey leaving short stock of Rs.10,86,165/- which was a case of suppressed sale and then explanation of the assessee was called upon. In response, the assessee very stated that Rs.10,86,155/- was his suppressed/undeclared sale on which he was agreeable to the addition of the GP @ 2.60% based on the past history, which came to Rs.28,240/- (and which had already been declared in the return filed after the date of survey).
From the record, I found that the entire purchases made by the assessee either on its own account or even the goods received on account of Aadat sale, has duly been entered in the quantitative stock register and this way, the entire purchases made is fully accounted for. At the worst, it was only the suppressed sale made out of the recorded purchases, but in any case, it was not a case of unexplained investment/unaccounted purchases made as wrongly understood by the authorities below. There is a reference of Stock Register in Q. 8 & 11. I also observe that this declaration of Rs. 13.00 lacs and Rs. 1.55 lacs are not supported/corroborated by any other independent evidence found 7 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO during the course of survey nor it is a case made by the survey team nor by the A.O. in the impugned assessment order.
Furthermore, Q. Ans. No. 21 & 25 (AO page 4-5 PB-9) in the statement of Shri Mahesh Goyal son of the assessee recorded on the same very date i.e. 15.09.2009 (but separately) wherein, the same instances of purchases made by the assessee from Shri Ishwar Teli was asked and in the Q. itself an inference was drawn that the assessee was engaged in the unaccounted purchase & sales. But thereafter, two Hind Brand Diaries found & impounded during the survey were referred to which related to the transaction of unrecorded sale and therefore, he was asked that based on those two diaries why the sale of the entire year be not estimated & enhanced. This again shows that it was a case of undisclosed sales only and not of purchases. It is not the case of AO that diary or other evidence was found slowing unexplained purchases.
In respect of undisclosed sales only profit can be added when purchases are recorded but sales is undisclosed. For this purpose, reliance is placed on the following judicial pronouncements:
(i) CIT v/s President Industries (2000) 158 CTR 372 (Guj)
(ii) Bansal Rice Mills v/s ITO (2001)72 TTJ 1 (Chd) (TM).
8 ITA 329/JP/2016 M/s Murlidhar Deendayal Vs ITO 10. In this regard, I also observe that the impugned addition made and confirm is solely based on the statement of the assessee without any corroborative evidence.
The Coordinate Jaipur Bench of ITAT has already been taking this view in the case of ITO vs. Suresh Chandra Koolwal (2004) 32 TW 23 (Jp). Various Benches of the ITAT have taken similar view such as in the cases of R. K. synthetics 30 TW 228 (Jd). Ashok Kumar Soni vs. DCIT (2001) 72 TTJ 323 (Jd), Karam Chand vs. ACIT (2000) 73 ITD 434 (Chd): (2000) 68 TTJ 789 (Chd) & Rishab Kumar Jain vs. ACIT (1999) 63 TTJ 236 (Del). In the case of Rajesh Jain v/s DCIT (2006) 100 TTJ 929 (Del), held that computation of undisclosed income solely on the basis of confessional statement of the assessee was not justified.
In view of the above facts and circumstances, I direct the A.O. to restrict the addition to the extent of Rs. 28,240/- being profit element on unaccounted sales.
In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on 17th February, 2020.