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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-18, Chennai, in & 11/15- 16 dated 30.09.2016 for assessment years 2010-11 & 2013-14, respectively.
:-2-: ITA No. 3362&3363/Mds/2016
2. Shri S. Gopi, the assessee, an individual and proprietor of M/s. S.S.
Jewellery at Dharmapuri, is a Goldsmith by profession and has a shop in front of his residence. He purchases gold bars/bullion from recognised bullion merchants on a small scale, manufactures gold jewellery and sells them to customers in and around his residence in Dharmapuri and surrounding areas.
In the assessment made for assessment year 2010-11, the Assessing Officer held that from the bills and vouchers, the sales tax returns and other details produced, bills amounting to Rs. 12 lakhs is unaccounted. The assessee explained that the difference between purchases and sales as per sales tax returns and the IT return was due to the fact that certain sales, which were not suffering VAT were not included in ST returns. However, he admitted such sales in the IT returns which resulted in offering of the extra income for income tax purpose. When the AO insisted for bills for Rs. 12 lakhs, the assessee submitted that even if it has made a purchase for Rs. 12lakhs, only GP of it should be brought to tax. Since the assessee has booked all the expenses, the AO held that the unaccounted purchases to the extent of Rs. 12 lakhs to be added to the income and made an addition accordingly.
Aggrieved, the assessee filed an appeal before the CIT(A) and the CIT(A) has dismissed the appeal.
For Assessing Officer 2013-14, The Railway Police, Coimbatore, intercepted shri Anandan, who was carrying bag containing cash of Rs.
:-3-: ITA No. 3362&3363/Mds/2016 89,12,500/- and Shri Anandan stated that the cash belonged to Shri S. Gopi, the assessee. The assessee did not offer proper explanation with documentary evidence for the origin of the cash and hence, the Railway Police took the cash into custody and intimated the investigation Wing, Coimbatore on 13.12.2012. The cash was requisitioned u/s. 132A from the Railway Police by warrant of authorization dated 13.12.2012 and Rs. 89,12,500/- was seized.
The AO completed the assessment on 16.03.2015. While doing so, the Assessing Officer levied interest under sections 234B & C of the Income Tax Act. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal in the consolidated order for the assessment years 2010-11 and 2013-14. Aggrieved on such order, the assessee filed an appeal against charging of interest under sections 234B & C, relying on the decision of ITAT Rajkot Bench in of 2010 and ITAT Kolkata in ITA No. 1956/Kol/2009.
4. Since, both the appeals are filed by the same assessee, they are heard together and disposed off together for the sake of convenience.
The AR invited our attention to the letters addressed to the AO dated 23.01.2015 and 20.02.2015. With regard to the difference between the IT returns and the returns submitted to the sales tax authorities, the AR invited our attention to the following portion of the letter dated 23.01.2015.
:-4-: ITA No. 3362&3363/Mds/2016
“b) Year ended 31.03.2010 – no difference n purchases figures. Sales as per IT return Rs. 2,04,79,743/- and a per sales tax returns Rs. 2,30,69,011/-. Excess sales reported in IT returns is Rs. 10,10,732/- and hence no effect on income returned.”
5.1 Thereafter, the AR took our attention to the letter dated 20.02.2015, wherein, the assessee replied that to his knowledge there is no discrepancy of Rs. 12 lakhs towards purchase and bills unaccounted. The AR, further invited our attention to the written submissions to the CIT(A) which is extracted as under:
“1. The only issue involved in the above appeal is addition of Rs.
Lacs to the income returned as unaccounted purchases by the appellant.
Query raised by AO in the letter dt: 12.02.2015 regarding the above issue " Further, on examination of the details 1 purchase bills filed by you, it was seen that bills amounting to Rs. 12,00,000/- is not accounted. You are caused to show why the same should not be assessed to tax as your unaccounted expenditure".
3. Copy of reply dt: 23.012015 filed by the appellant with AO is enclosed. In page No -3 of the above letter the appellant has clearly stated that there is no difference in purchase figures. Sales as per Income - Tax return is Rs. 2,40,79,743/- and sales reported in sales tax returns is Rs. 2,30,69,011/-. Excess sales reported in Income - Tax returns is Rs. 10,10,732/- and hence no effect on Income returned.
Copy of letter dt: 20.02.2015, which letter has been referred to in the assessment order is enclosed. In the above letter, in para 4 , the appellant specifically stated that there is no unaccounted purchase bills.
5. On a turnover of Rs. 2,40,79,743/-, gross profit is Rs. 12,06,428/- giving a rate of 5.01%. If the above addition of Rs. 12,00,000 is telescoped into the gross profit, the gross profit comes to :-5-: ITA No. 3362&3363/Mds/2016 Rs. 24,06,428/- giving a rate of 9.99%. The AO has not brought in any materials on record to substantiate that the above rate of gross profit is achievable in the line of business of the appellant.
6. A copy of written submissions filed with CIT(A) on 22.09.2016 is enclosed. From the above details it could be seen that the purchase details for the period 01.04.2009 to 31.03.2010 exactly tallies with the trading account figure of Rs. 2,58,60,005/- The above facts have not been met by the lower authorities in their orders.
This is to certify that the enclosures to this written submission finds a place in the records of the lower authorities.”
5.2 Then the AR submitted that during the year the assessee purchased for Rs. 2,58,60,005/- only and all the entries are accounted in the P & L account and the Assessing Officer has not found any purchase omission specifically.
There was a difference only in the sales between the IT return and the Sales Tax returns at Rs. 2,40,79,743/- and Rs. 2,30,69,011/-, respectively. The assessee has reported excess sales in the IT return at Rs. 10,10,732/- for the reason that in the IT return, the sales made which were not suffering VAT were including while in the sales tax returns, such sales were not included.
Per contra, the DR relied on the assessment order and the order of the CIT(A).
We heard the rival submissions and found merits in the AR submissions.
In the assessment made for assessment year 2010-11, the Assessing Officer has not pointed out specifically which purchase has not been accounted and :-6-: ITA No. 3362&3363/Mds/2016 hence, the addition made is unwarranted. The assessee’s above explanation has not been disputed by the AO & the CIT(A). On the above facts and circumstances, the above explanation appears reasonable and hence the addition is deleted.
7. For the assessment year 2013-14, the AR submitted that cash was seized on 12.12.2012, the assessee filed his original return on 08.01.2014 showing the amount seized as advance tax at Rs. 89,32,500/-. Further, he submitted that the assessee filed a revised return on 12.11.2014 admitting a gross total income of Rs. 1,12,50,206/- (including the seized sum) and after adjusting the seized sum of Rs. 89,32,500/- under the head advance tax, he sought the refund of Rs. 56,35,750/-. The AR made a plea that once a revised return is filed and the assessee sought adjustment of seized sum towards the tax and sought the balance sum as a refund, the Assessing Officer should have adjusted the seized cash towards tax. On such facts and circumstances, the AO should not have levied interest under sections 234B&C w.e.f. 12.11.2014. Per contra, the DR supported the order of the AO and CIT(A).
We heard the rival submissions and found merits in the AR’s submissions. When the assessee has filed revised return admitting Rs. 1,42,50,206/- which included the seized cash and sought refund of Rs.
:-7-: ITA No. 3362&3363/Mds/2016 56,35,750/-, the AO should have adjusted to the seized sum towards the admitted tax. Hence, levy of interest under sections 234B&C beyond 12.11.2014 on the admitted income is untenable and hence, levy of interest under sections 234B & C on the admitted income beyond 12.11.2014 are deleted. To this extent, the appeal is allowed.
In the result, the assessee’s appeal for the assessment year 2010-11 is allowed and for the assessment year 2013-14 is partly allowed.
Order pronounced on Monday, the 20th day of June, 2017 at Chennai.