Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Present cross appeals filed by the assessee as well as by the revenue are being disposed off by way of consolidated order to avoid repetition of discussion.
2. The Appellant, M/s. Balaji Perfumes (hereinafter referred to as ‘the assessee’) in by filing the present appeal sought to set aside the impugned order dated 14.12.2009 passed by the Commissioner of Income-tax (Appeals)-II, New Delhi qua the assessment year 2006-07 on the grounds inter alia that :-
“1. On the facts and in the circumstances of the case the Ld. CIT (A) has erred in holding and directing to calculate the unaccounted turnover of the assessee on proportionate basis for four months and thereby allowing a relief of Rs.67,50,000/- to the assessee.
2. The order of the Ld. CIT (A) is erroneous and not tenable in law and on facts.”
3. The Appellant, Deputy Commissioner of Income-tax, Central Circle 15, New Delhi (hereinafter referred to as ‘the sought to set aside the impugned order dated 14.12.2009 passed by the Commissioner of Income-tax (Appeals)-II, New Delhi qua the assessment year 2006-07 on the grounds inter alia that :-
“1. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the assessment order passed by the Ld AO is bad in law and wrong on facts.
That the Ld CIT Appeal II has failed to appreciate that impugned assessment order passed by the learned assessing officer is against the principles of natural justice and has been passed without affording reasonable opportunity of being heard.
That the Ld CIT Appeal IJ has failed to appreciate that on the facts and circumstances of the case, the various observations and findings of the learned assessing officer in the impugned assessment order is irrelevant and vitiated in the law.
4. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the Ld A.O. has erred in relying on a statement of a third party without any basis enquiry and also without allowing any cross examination.
5. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the Ld AO has erred in completing the assessment on the basis of third party documents, enquiry and statements without any basis, material and evidence.
6. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the Ld AO has erred in
7. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the Ld AO has erred in not agreeing with the retracted statement without any basis material and evidence and also without proving the same as not correct.
8. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has failed to appreciate that the Ld AO has erred in considering the alleged surrender while completing the assessment even without considering the retracted statement.
9. That on the facts and circumstances of the case and the provision law the Ld. CIT Appeal II has erred in estimating the income at Rs. 4111764/- without any valid reason, basis and material.
10. That on the facts and circumstances of the case and the provision of law the Ld CIT Appeal II has erred in upholding the alleged unaccounted sales at Rs.130,00,000/- on mere presumption , assumption , conjectures and surmises.
That the Ld CIT Appeal II has erred on facts and in law in sustaining the applicability of G.P. ratio of 25% on the total turnover including the unaccounted sales.
12. That without prejudice the Ld CIT Appeal II while determining the trading addition has erred on facts and in law in not allowing the credit of Rs 855654/- being the G.P. already declared.
13. That on the facts and on the circumstances of the case and the provision of law the Ld err Appeal II has erred in sustaining the addition of Rs 3845985/- even in the case of non invocation of provision of Section 145 of the Act by the Ld. AO.
14. That the Ld CIT Appeal II has failed to appreciate that on the facts and circumstances of the case, the Ld AO has erred in law in not considering the relevant material on record and has made the addition even when no adverse material is there.
15. That on the facts and circumstances of the case the learned assessing officer has erred in initiating the Penalty proceedings u/s 271 (1)(c) of the Income Tax Act 1961.
16. That on the facts and circumstances of the case the interest charged U/s 234A , 234B and 234C is excessive and has been wrongly and illegally charged.”
Briefly stated facts of this case necessary for adjudication of the controversy at hand are : assessee is into the trade of manufacturing of “Gutka” under the brand name of “Maruti”, “Ajeet” and “Kaveri”. A search and seizure operation was conducted at the business premises of the assessee on 22.03.2006.
M/s. Balaji Perfumes belongs to the family of late Shri Bishan Sarup Gupta who has three sons, namely, Shri Abhay Gupta, Shri Anoop Gupta and Shri Ajay Gupta. The entire business of manufacturing of Gutka and sale purchase of Arcanut is looked after by three brothers through M/s. Balaji Perfumes and M/s.
Assam Supari Traders, which is in the name of Smt. Dayawanti, whose operations are being looked after by Shri Anoop Gupta.
Since the entire business of manufacturing of Supari and 6 & 1013/Del./2010 ITA No.3655/Del./2011 sale/purchase of Supari was managed by the family as a whole and the entire details were furnished by Abhay Gupta at the time of search and has surrendered income of Rs.3.5 crores (Rs.1.50 crores for Financial Year 2004-05 and Rs.2 crores for Financial Year 2005-06). Statement got recorded by Abhay Gupta was countersigned by all the seven members of the family, namely : i. Shri Ajay Gupta ii. Shri Anoop Gupta iii. Shri Varun Gupta iv. Smt. Deepa Gupta v. Smt. Dayawanti vi. Smt. Sunita Gupta vii. Smt. Preety Gupta Statement recorded during the search and seizure operation which was based upon facts has been retracted under the guise of mental pressure and duress and that it was not property recorded. It has also come on record that a search was conducted by Director General of Central Excise (Intelligence) in the business premises of the assessee on 07.10.2004 and assessee has suo motu paid additional excise duty of Rs.35,00,000/- pursuant to the show- cause notice issued to it.
The notice u/s 143 (2) was issued on 25.07.2007 and the assessee filed return of income declaring income of Rs.2,65,779/- on 25.03.2007. Then, notice u/s 143(2) along with questionnaire Virender Goel, CA appeared and filed written reply along with photocopy of the dissolution deed of partnership showing that the firm was taken over by Shri Varun Gupta as a proprietor with effect from 27.07.2005. AO found discrepancy in the books of account seized at the time of search and issued a show-cause notice to the assessee to which assessee filed reply by stating that the difference is on account of the fact that the books seized are Kacha Khata which were incomplete at the time of search and stated that the proper books of account have been maintained in the computer system showing correct result.
Simultaneously, a search was also conducted by the Revenue at the business premises of M/s. Supariwala & Co. and during the search proceedings, Mahabir Prasad Gupta, Proprietor of Supariwala & Co. admitted that Supari worth Rs.1,85,10,541/- has been sold outside the books of account to M/s. Assam Supari Traders and this fact has also been admitted by Abhay Gupta, eldest member of the family that this unaccounted Supari purchased from M/s. Supariwala & Co. was ultimately gone to M/s. Balaji Perfumes for manufacturing of Gutka. Assessee found to have shown the sale of Rs.34,47,054/- in the books of account but the total sales after accounting of unaccounted sales came to Rs.1,08,61,764/- and made addition thereof to the income of the assessee.
Assessee carried the matter before the ld. CIT (A) who has partly allowed the appeal by extending the relief of Rs.67,50,000/-.
Feeling aggrieved, both the assessee as well as the Revenue have come up before the Tribunal by way of filing the present cross appeals.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
At the very outset, ld. AR for the assessee contended that he only presses ground no.13 and all other grounds are academic in nature. Ground No.15 is premature, hence needs no adjudication.
Ground No.16 needs no adjudication as the same is consequential in nature
Undisputedly, the AO has made addition of Rs.1,08,61,764/- to the income of the assessee on the basis of statement of Abhay Gupta, one of the partners of the assessee firm and admission made by Mahabir Prasad Gupta, Proprietor of M/s. Supariwala & Co. on whose premises search was also conducted. It is also not in dispute of statement of Abhay Gupta and Mahabir Prasad Gupta, the AO taken the unaccounted sales of Rs.4,34,47,054/- and estimated the profit thereon @ 25% which comes to Rs.1,08,61,764/-.
11. The first contention raised by the ld. AR for the assessee is that since the entire addition has been made on the basis of statement of Abhay Gupta during the search and seizure operation and thereafter which was subsequently retracted being under duress, the same is not sustainable. This contention is not sustainable being misplaced on the ground that the same was voluntarily made by Abhay Gupta in concurrence with his family members/partners of the business who have counter signed the same and his subsequent retraction is not sustainable. Abhay Gupta has not got recorded his statement on his own behalf only rather the said statement was made on behalf of all the partners of M/s. Balaji Perfumes.
When Abhay Gupta being eldest member of the family got recorded his comprehensive statement which was also countersigned by all the seven members of the family including Shri Varun Gupta, the question of recording the same under duress or undue influence does not arise. Moreover, detailed statement of Abhay Gupta recorded on 03.05.2006 was recorded in continuation Act. So, in the given circumstances, retraction made by Abhay Gupta from the statement is an afterthought just to avoid the tax liability.
Moreover, during recording of statement u/s 132(4), Abhay Gupta was confronted with documents and information collected during the course of search and only then he has surrendered an amount of Rs.3,50,00,000/-. So, on the basis of admission made by Abhay Gupta, the undisclosed turnover of the assessee came to Rs.4,00,00,000/- during the period under assessment with profit @ 25%.
Not only this, time gap during the recording of both the statement of Abhay Gupta, first on 18.04.2006 and second on 03.05.2006 itself, goes to prove that during the said period, the assessee had the sufficient opportunities for consultation with the tax expert and cannot be held to make the statement under duress.
Had it been so, Abhay Gupta would have retracted the statement of 18.04.2006 on 03.05.2006. Moreover, the admission made by Abhay Gupta has been endorsed by Shri Varun Gupta regarding turnover of Rs.4,00,00,000/- approximately during 2005-06. So, we find no illegality or perversity in the findings returned by the ld. concurrence with his family members.
Now, the next question arises for determination in this case is :-
“as to whether ld. CIT (A) has erred in holding to calculate the unaccounted turnover of the assessee on proportionate basis for four months and thereby allowing the relief of Rs.67,50,000/- to the assessee?”
Undisputedly, M/s. Balaji Perfumes owned/run the business for about four months as per admission made by Abhay Gupta relied upon by the AO to complete the assessment which has been further endorsed by Varun Gupta regarding turnover of Rs.4,00,00,000/- approximately during the FY 2005-06.
Admission made by Abhay Gupta and Varun Gupta relied upon by AO to complete the assessment makes it apparently clear that for the remaining 8 months, the business was owned by Varun Gupta.
When this fact has not been disputed by the Revenue, the CIT (A) has rightly accounted for the turnover in case of assessee firm for four months i.e. 1/3rd of Rs.4,00,00,000/- and remaining unaccounted turnover of Rs.2,70,00,000/- of M/s. Balaji Perfumes has been accounted for in the hands of Shri Varun Gupta. When Shri Varun Gupta, the said statements cannot be taken on piecemeal basis and moreover, the income has to be assessed in whose hands it actually comes. When the income in the hands of Abhay Gupta has only for four months, he cannot be taxed for the entire financial year qua the unaccounted turnover. So, again, we find no illegality or perversity in the findings returned by ld. CIT (A) in calculating the unaccounted turnover of the assessee on proportionate basis for four months.
Now, the next question arises for determination in this case is :-
“as to whether the AO was having sufficient material to estimate the rate of profit @ 25% on the unaccounted sales in the hands of the assessee?”
Perusal of the impugned order passed by ld. CIT (A) apparently shows that the ld. CIT (A) has not thrashed this issue rather proceeded on the basis of admission of Abhay Gupta and did not interfere in the assessment order passed by the AO.
Apparently, there is no cogent material on the file with AO to adopt the GP rate of 25% on actual sale. When books of account have not been rejected and GP rate of earlier year was 18%, the of guesswork. Keeping in view the nature of business being carried out by the assessee, the GP rate to be adopted by the AO is settled at 18% and this has not been objected to by the ld. AR for the assessee during the course of argument.
Ld. AR for the assessee challenging the impugned order contended that bare perusal of Annexure A-1, A-2 and A-3 taken into account by the AO to complete the assessment, are having no relevance to the year under assessment rather all these documents are qua the earlier period and as such, on these basis, no addition can be made. However, we are unable to agree with the contention raised by the ld. AR on the sole ground that this argument has never been addressed by the ld. AR before the ld. CIT (A) nor these documents have been brought to the notice of the ld. CIT (A) and as such, no notice thereof can be taken at this stage. So, without going into the merits of these documents, the contention raised by the ld. AR is rejected.
The Appellant, Assistant Commissioner of Income-tax, Central Circle 15, New Delhi (hereinafter referred to as ‘the revenue’) in by filing the present appeal sought to set aside the impugned order dated 20.05.2011 passed by assessment year 2006-07 on the grounds inter alia that :-
“1. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law in deleting the addition of Rs.1,00,00,000/- made on account of income surrendered at the time of search.
2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition ofRS.18,79,313/- made on account of unexplained credit.
3. (a) The order of the CIT (A) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
GROUND NO.1
AO made addition by estimating the business income at Rs.1,00,00,000/- on the basis of surrender. Ld. CIT (A) vide impugned order thrashed the issue threadbare and came to the conclusion that assessee has nowhere stated in his statement recorded on 12.03.2006 that entire amount of Rs.1,00,00,000/- belongs to him and the declaration was made by him on behalf of complete family. CIT (A) has also observed that apart from no document/material on record to corroborate the estimation of income of M/s. Balaji Perfumes at Rs.1,00,00,000/- based on above surrender.
Furthermore, when this fact is examined in the light of the order dated 14.12.2009 passed by CIT (A) challenged vide decided by this Bench, the unaccounted turnover of Rs.2,70,00,000/- of M/s. Balaji Perfumes for the FY 2005-06 has already been treated in the hands of Varun Gupta, assessee of the present case. The order dated 14.12.2009 (supra) has already been confirmed by the Tribunal in ITA No.935/Del/2010 to the extent that out of unaccounted turnover of Rs.3,50,00,000/- to Rs.4,00,00,000/- during FY 2005-06 in case of M/s. Balaji Perfumes, the turnover of Rs.1,30,00,000/- has been held to be in the hands of M/s. Balaji Perfumes being owner of the same for four months and remaining unaccounted turnover of Rs.2,70,00,000/- have been held to be in the hands of Varun Gupta, the assessee, who has admittedly taken over M/s. Balaji Perfumes as a Proprietor for remaining eight months of FY 2005-06. Further addition of Rs.1,00,000/- on the basis of solitary statement of Varun Gupta cannot be made.
Balaji Perfumes and Varun Gupta for FY 2005-06 has already been assessed on the basis of statement of Abhay Gupta recorded on his own behalf and on behalf of his other family members with their concurrence including Varun Gupta, as discussed in the preceding paras in on prorata basis i.e. for first four months, the turnover to the tune of Rs.1,30,00,000/- has been attributed to M/s. Balaji Perfumes and for remaining eight months, the said turnover of Rs.2,70,00,000/- has been attributed to Varun Gupta, the assessee, the addition again on the solitary statement of Varun Gupta cannot be made and CIT (A) has rightly deleted the same. So, we find no illegality or perversity in the findings returned by the ld. CIT (A) so far as addition of Rs.1,00,00,000/- on the mere statement of Varun Gupta is concerned.
GROUNDS NO.2 & 3 :
So far as question of deleting the addition of Rs.18,79,313/- by ld. CIT (A) vide impugned order is concerned, the ld. CIT (A) has entertained the additional evidence in the form of copy of account, confirmation and copy of bank statement of the assessee in support of the fact that not only loan has been accepted by cheque but repaid also be cheque.
Bankey Bihari Goyal comprising opening balance of Rs.5,24,246/- plus interest of the year and no fresh loan is proved to have been received during the year and in case of balance of Rs.5,27,848/- in the account of Royal Packaging, it is rightly found to be a trade credit by ld. CIT (A).
Likewise, amount of Rs.4,97,371/- in the name of Devki Krishna Traders, also represents advance from customers in the normal course of business. In the face of confirmations from all these parties filed by the assessee, which have not been filed before the AO, addition has been rightly deleted by the ld. CIT (A).
So far as loan and advances of Rs.2,65,287/- in a case of Gaurav Enterprises is concerned, when the AO has himself accepted the purchase on 20.03.2006 and 21.03.2006 debited to the trading account and AO has not disputed the trading account, profit & loss account and balance sheet, the said trading purchases does not fall within the purview of section 68. So, the addition of Rs.2,65,287/- in case of Gaurav Enterprises has also been rightly deleted by the ld. CIT (A).
We are of the considered view that when the confirmation from all the parties have been filed, which were not filed by the assessee before the AO, there is no justification for making an findings returned by the ld. CIT (A), grounds no.1, 2 & 3 are determined against the Revenue.
In view of what has been discussed above, findings returned by the ld. CIT (A) in qua AY 2006-07 challenged before the Tribunal vide ITA No.935/Del/2010 filed by the assessee are hereby affirmed firstly to the extent that 1/3rd i.e. Rs.1,30,00,000/- of turnover of Rs.4,00,00,000/- is accounted for as turnover in the hands of M/s. Balaji Perfumes and remaining unaccounted turnover of Rs.2,70,00,000/- of M/s. Balaji Perfumes is to be accounted for in the hands of Varun Gupta and secondly, AO is to compute the income in their hands by adopting GP rate at 18%. Consequently, appeal no.935/Del/2010 filed by the assessee is partly allowed and appeals No. 1013/Del/2010 and 3655/Del/2011 filed by the Revenue are hereby dismissed. Order pronounced in open court on this 10th day of February, 2017.