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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
PER Waseem Ahmed, Accountant Member:-
The cross-appeals for the Assessment Year 2009-10 have been filed by the Revenue as well as by the assessee against the common order of Commissioner of Income Tax (Appeals)-I dated 28.02.2013 and the Cross Objection (CO) has been filed by the assessee in Revenue’s appeal No.1203/Kol/2013. Shri S.Jhajharia and Sujoy Sen, Ld. Authorized Representative appeared on behalf of assessee and Shri Niraja Kumar, Ld. Departmental Representative represented on behalf of Revenue.
All these are heard together and are being disposed of by way of common order for the sake of convenience. First we take up assessee’s appeal in ITA No.1223/Kol/2013.
The assessee in ground No. 1 to 3 is inter-related and therefore being taken up together has challenged the validity of the proceedings initiated & completed u/s 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). For this, the assessee has raised the following grounds of appeal:- “1. For that in view of the facts and in the circumstances the Ld. CIT(A) was wholly unjustified in confirming the legality of order passed by the AO u/s 153A/143(3) and in view of the facts and in the circumstances the action of the Ld CIT(A) in such respect is wholly bad & illegal and such order is liable to be quashed / cancelled / set aside and it may kindly be held accordingly.
2. Without prejudice to ground No.1 above and in view of the facts and in circumstances, the Ld. CIT(A) failed to appreciate the fact that no valid search having taken place in respect of the appellant, the proceedings so initiated by the AO u/s. 153A is void abinitio and the Ld. CIT(A) without appreciating the fact dismissed the appellant’s ground in such respect and in view of the facts and in the circumstances the ordered so passed u/s.153A may kindly be quashed / cancelled / set aside.
3. For that in view of the facts and in the circumstances and without prejudice to Grounds No.1 & 2 above, the entire asst and all the additions in the hands of your appellant having been made by the AO on the basis of papers and documents impounded during survey carried out on at the office of Magna Dealers (P) Ltd. on 25.02.2009 such survey not being on Shree Prakash ,1223/Kol/2013 & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 3 Bagla and your appellant and such papers having been found and impounded from the possession / custody of Magna Dealers (P) Ltd. And not your appellant any such asst. And addition made u/s 153A/ 143(3) in the hands of your appellant without examining the persons surveyed and bringing any evidence on record is wholly bad, illegal and valid abinitio and is liable to be quashed / cancelled and in view of the facts and in the circumstances it may kindly be held accordingly.”
4. At the outset, it was observed that the ld AR in its appeal has challenged the reassessment proceedings initiated and completed u/s 153A of the Act. Accordingly, the ld AR made his arguments at length at the time of hearing but at the conclusion of the hearing on this issue the ld AR agreed to the order of ld CIT(A) and did not challenge the validity of assessment framed u/s 153A of the Act.
On the other hand, the ld DR relied on the order of authorities below.
In view of above factual position, we find no merit in the argument of the ld AR. Hence, the issue in the aforesaid grounds of appeal is hereby dismissed.
Last issue in this appeal of assessee is general in nature and does not require any adjudication.
In the result, assessee’s appeal is dismissed. Coming to Revenue’s appeal in .
The issue raised by the Revenue in ground No. 1 is that ld CIT(A) erred in reducing the gross profit determined by the AO at the rate of 4% to 1.5% of the gross turnover.
A search & seizure operation u/s 132 of the Act was conducted on SALTEE Group including the assessee dated 25.02.2009 and on subsequent dates by the Investigation Unit of Income Tax Department. The assessee is one of the directors in the group. As a result of search, it was discovered that the assessee is engaged in the trading business of the soaps, damarbata furniture, wax oil which was not disclosed to the income tax Department. The undisclosed turnover from the said business was ascertained at Rs.8,14,26,433/- pertaining to the year under consideration on the basis of seized documents marked SPB/19 & 21. The assessee & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 4 offered income on the undisclosed turnover @ 1% but the AO rejected the same and estimated @ 4% of the turnover. The AO accordingly determined the profit at Rs.32,57,057.00 and added to the total income of the assessee.
Aggrieved, assessee preferred an appeal to the Ld. CIT(A). The assessee submitted before the Ld. CIT(A) that the AO has adopted the rate of gross profit arbitrary and without any base. The assessee in support of his claim has submitted that Magna Dealers Private Limited (MDPL for short) is also engaged in similar business of trading items. The MDPL has shown its gross profit in the last 4 years as detailed under : S.No. AYs GP Rate 1. 2006-07 1.09% 2. 2007-08 1.43% 3. 2008-09 0.26% 4. 2009-10 0.36% The above gross profit rate declared by the MDPL was duly accepted by the Revenue in the assessment of MDPL. The ld CIT(A) after considering the submission of the assessee has reduced the gross profit from 4% to 1.5% of the undisclosed turnover by observing as under:- “8. I have perused the assessment order and considered the submissions of the appellant as well as the material on record. The undisclosed sales for the assessment years 2007-08 to 2009-10 as determined by the AO in his assessment orders on the basis of the impounded material has not been contested by the appellant. The only dispute relates to the application of gross profit rate on such undisclosed sales. I find that the appellant had in his disclosure petition submitted before the DDIT(Inv) surrendered undisclosed profit by applying the gross profit rate of 1%. I find merit in the argument that the AO has brought no material on record to suggest that the gross profit rate of 1% was low as observed by him in his assessment orders. I find from the assessment orders that there is no material on record which even remotely suggests that the appellant had utilized the business establishment of Abhishek Enterprises or Songal Engineers for its unaccounted business. The AO has not explained in his assessment orders as to how he arrived at the conclusion that the business establishment of Abhishek Enterprises or Songal Engineers was utilized by the appellant for its unaccounted business. The AO has also not explained the basis for applying the gross profit rate of 4% in the case of the appellant. In view of the above, I am of the opinion that the action of the AO in applying the gross profit rate of 4% is arbitrary and without any basis as it is not supported by any material or evidence on record. It was submitted before me that Magna Dealers (P) Ltd was also engaged in similar business whose trading results were accepted by its AO in the assessment ,1223/Kol/2013 & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 5 order assed u/s 143(3) for the assessment year 2009-10. The company has declared gross profit rate of 1.09%, 1.43%, 0.26% and 0.36% in the assessment years 2006-07 to 2009-10. In this factual background, I am of the opinion that it would be appropriate to apply the gross profit rate of 1.5% in the case of the appellant. In consequence, the unaccounted profit on the undisclosed sales should work out as under:- Assessment year Undisclosed profit (Rs) 2007-08 2,79,857 2008-09 11,51,038 2009-10 12,21,396
In view of the above, the addition on account of profit on undisclosed sales as made by the AO in the assessment years 2007-08, 2008-09 and 209-10 is restricted to Rs.2,79,857/-, 11,51,038/- and 12,21,396/- respectively.”
Being aggrieved by the order of ld CIT(A) the Revenue is in appeal before us on the following ground of appeal :-
1. The ld. CIT(A), Central-I, Kolkata has erred in deleting the gross profit of Rs.20,35,661/- from Rs.32,57,057/- at the rate from 4% to 1.5% stating the AO was unjustified and excessive addition was made.”
The ld. DR before us relied on the order of AO and he left the issue to the discretion of the Bench. On the other hand, the ld AR before us filed a paper book which is running from pages 1 to 184 and reiterated the arguments that were made before the ld. CIT(A).
We have heard the rival contentions and perused the materials available on record. The issue in the present ground of appeal is arising as alleged by the Revenue that the ld. CIT(A) has reduced the GP rate. In this regard it was found that the addition was made by estimating the gross profit @ 4% on the undisclosed turnover. Admittedly, the assessee was engaged in the trading business which was not disclosed to the Revenue. Now, the issue arises for adjudication to work out the income earned by the assessee from his undisclosed business. The assessee has offered gross profit on such undisclosed business @ 1% whereas the AO has taken gross profit @ of 4%. However, on perusal of assessment order, we find that the estimated rate @ of 4% towards the gross profit was adopted by the AO without adducing any reason. On the contrary, the ld. CIT(A) has reduced the rate of gross profit from of 4% to 1.5% by having reliance in the assessment order in the case of MDPL, engaged in the similar business, where the gross profit was shown @ less & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 6 than 1.5% and the same was accepted by the Revenue. At the outset, we find that the AO has adopted the rate of gross profit without any basis. On the contrary, the ld CIT(A) has adopted the scientific approach for determining the gross profit on the undisclosed income. As such, we find no infirmity in the order of ld CIT(A) and we uphold the same. Hence, this ground of appeal of the Revenue is dismissed.
13. Next issue raised by the Revenue is that ld CIT(A) erred in deleting the addition made by the AO for Rs. 34 Lacs on account of investment made in the land.
The AO on the basis of seized documents marked as page 38,40,43 & 44 of SPB/19 found that the assessee has made payments to Shri Sandeep Harlalka in cash as detailed under:- 23.04.08 Rs. 5,00,000 [page 44 SPB/19] 25.04.08 Rs. 5,00,000 [page 44 SPB/19] 26.04.08 Rs. 2,00,000 [page 43 SPB/19] 28.04.08 Rs. 3,00,000 [page 43 SPB/19] 10.05.08 Rs.15,00,000 [page 40 SPB/19] 20.05.08 Rs 5,00,000 [page 38 SPB/19] Total Rs.35,00,000 The above payment was not recorded in the books of accounts of the assessee. Therefore, the same was treated as undisclosed investment in land and added to the total income of the assessee.
Aggrieved, assessee preferred an appeal to the Ld. CIT(A). The assessee before the Ld. CIT(A) submitted that the additions has already been made by the AO on the basis of seized documents. These additions were made in the form of gross profit on the undisclosed business as well as undisclosed investment in such business. On the similar set of documents of no separate addition can be made on account of investment in the land. It was also submitted that the AO in the remand report has admitted that payment recorded in the impounded documents represent personal expenses as well as unaccounted investment. The ld CIT(A) after ,1223/Kol/2013 & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 7 considering the submission of the assessee has deleted the addition made by the AO by observing as under:- “The AO has admitted in his remand report that the rotation statement filed by the appellant in course of the appellate proceedings incorporates all the debit and credit entries recorded in the seized documents SPB/19, SPB/20, SPB/21 and SPB/23. The AO has also admitted that the cash payments record in the impounded documents represent personal expenses as well as unaccounted investment. I find from the assessment order that the AO has considered all the receipts as appearing in the impounded documents SPB/19, SPB/20, SPB/21 and SPB/23 while computing the undisclosed sales for the assessment years 2007-08, 2008-09 and 2009-10. The AO has also stated in the assessment order that the cash payments totaling to Rs.34,00,000/- are recorded in the impounded document SPB/19. I find merit in the argument that when the AO has considered all the receipts recorded in the impounded document SPB/19 while computing the undisclosed sales, then no separate addition can be made on account of payments recorded in such impounded documents as they have come out of the receipts already considered by the AO. I have already confirmed the undisclosed sales of Rs.1,86,57,135/-, Rs.7,67,35,863/- and Rs.8,14,26,433/- in the assessment years 2007-08, 2008-09, and 2009-10 as computed by the AO in his assessment orders. I have also upheld the order of the AO in assessing the gross profit on such undisclosed sales as well as addition on account of undisclosed investment. Under the circumstances, the cash payments as recorded in the impounded document SPB/19 has to be treated as made out of the receipts recorded in SPB/19 which have already been considered by the AO. in other words, the cash payments as recorded in the impounded document SPB/19 has to be treated as explained in view of the receipts recorded in SPB/19 which have already been considered by the AO. I agree with the appellant that no separate addition can be made on account of payments recorded in the impounded documents as they have come out of the receipts recorded in such documents which have already been considered by the AO for the purposes of taxation. In view of the above, the addition of Rs.35,00,000/- I the assessment year 2009-10 as made by the AO in the assessment order is directed to be deleted.”
Being aggrieved by the order of ld CIT(A) the Revenue is in appeal before us on the following ground of appeal :-
2. The ld. CIT(A) erred in deleting the addition made a the time of assessment as undisclosed investment in land (S. Haralalka Rs.35 lakhs) stating that the investment is covered in the undisclosed turnover.”
16. Before us both parties relied on the order of Authorities Below as favorable to them. ,1223/Kol/2013 & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 8 17. We have heard the rival contentions and perused the materials available on record. The issue in the present appeal relates to the undisclosed investments made by the assessee to the tune of Rs. 34 lacs. We note that the ld. CIT-A has confirmed the undisclosed sales of Rs.1,86,57,135/-, Rs.7,67,35,863/- and Rs.8,14,26,433/- in the assessment years 2007-08, 2008-09, and 2009-10 which was worked out by the AO in his assessment orders passed under section 153A of the Act respectively. We also observed that the ld. CIT-A have also upheld the order of the AO in assessing the gross profit on such undisclosed sales as well as addition on account of undisclosed investment. Thus the ld. CIT-A was of the opinion that the cash payments as recorded in the impounded document SPB/19 has to be treated as made out of the receipts recorded in SPB/19 which have already been considered by the AO. In other words, according to the ld. CIT-A the cash payments as recorded in the impounded document SPB/19 has to be treated as explained in view of the receipts recorded in SPB/19 which have already been considered by the AO. The aforesaid factual finding was not controverted by the ld. DR. Therefore we fully agree with the reasons given by the ld. CIT-A and for the same we rely in the judgment of Hon’ble Supreme Court of India in the case of CIT vs. K.Y. Pilliah & Sons reported in 63 ITR 411 wherein it was held as under:- “The Tribunal is the final fact-finding authority and normally it should record its conclusion on every disputed question raised before it, setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Tribunal fully agrees with the view expressed by AAC and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the AAC on which the decision was given against the assessee or the Department.”
Therefore we concur with the view of ld. CIT(A) and hence this ground of appeal of the revenue is dismissed.
In the result, Revenue’s appeal is dismissed. Coming to assessee’s CO No.94/Kol/2013.
First issue raised in ground No. 1 is that the validity of the proceedings initiated & completed u/s 153A/143(3) of the Act. For this, the assessee has raised the following ground:- “1. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the initiation of the proceeding u/s. & CO.94/Kol/2013 DCIT CC-VII, Kol. Vs. Sh Prakash Bagla Page 9 153A of the Act and the consequential order passed by the AO u/s 153A/143(3) inspite of the fact that there was no specific search warrant against the appellant assessee and as such thee was no valid search and further that the survey operation u/s. 133A of the Act was conducted at the premises of a third party. The proceeding u/s 153A as well as the order u/s 153A/143(3) of the Act are liable to be quashed / cancelled.”
20. We have already adjudicated the same issue in assessee’s appeal in embodied in Para 3 to 4 of this order. We hold accordingly. Hence, this ground of assessee’s CO is dismissed.
21. Next ground No. 2 & 3 has challenged the addition of the gross profit determined on the undisclosed turnover.
22. At the outset, it was observed that the ld AR has not advanced any argument on the above stated issue at the time of hearing. Therefore, both the grounds of the assessee become infructuous and accordingly dismissed as infructuous.
23. Last ground No. 4 has challenged the action of the ld. CIT(A) for not excluding the addition made by the AO for the AY 2008-09 for Rs.2,56,727/- while determining the peak credit for the year under consideration.
At the outset, it was observed that the instant issue raised by the assessee is not arising out of the order of AO. Therefore, the same is dismissed as infructuous.