Income Tax Appellate Tribunal - Mumbai
Shankarlal P. Mali, Mumbai vs Asst Cit (Osd I) Cen Rg 7, Mumbai on 22 June, 2018
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IN THE INCOME TAX APPELL ATE TRIBUNAL "D" BENCH, M UMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI G MANJUNATHA, AM
Aayakr ApIla saM
sa M . / ITA Nos.1725 to 1729/Mum /2013 & ITA
Nos.5785&5786/Mum/2015
(inaQa- a rNa baYa- / Assessment Year 2002-03, 2001-02, 2003-04,
2004-05, 2005-06, 2006-07 & 2007-08 respectively)
Shankar Lal P. Mali, ACIT (OSD-1),
Prop M.S. Sundha Maa Central Range-7, 413,
Enterprises, 21, Ashish Indl. Vs. Aayakar Bhavan, M.K.
Estate, Gokhale Road (S), Road, Mumbai-400 020.
Dadar (W ), Mumbai-400 025.
(ApIlaaqaI
ApIlaaqaI- / Appellant) .. (p`p`%yaqaaI
%yaqaaI- / Respondent)
%yaqaa
PAN No.AABPM7296D
a
Revenue by : Girish Dave, A.R.
Assessee by : Jay Kumar, CIT(DR)
Date of hearing: 23.05.2018 Date of pronouncement : 22-06-2018
AadoSa / O R D E R
PER MAHAVIR SINGH, JM:
These 7 appeals by the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-40, Mumbai [in short CIT(A)], in appeal Nos. CIT(A)-40/ACIT(OSD-I)C.R.7/223 to 227/08-09 dated 4.1.2013 and Appeal Nos.CIT(A)-52/AC-CC-4(4)/99&100/2015-16 dated 23.9.2015. The Assessments were framed by the Assistant Commissioner of Income Tax (OSD-1), Central Range-7, Mumbai (in short 'ACIT') for the 2 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 A.Y. 2001-02 to 2007-08 vide different orders dated 29.12.2008 under section 143(3) read with section 153A of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The first comm on issue in these seven appeals of assessee is as regards to the order of CIT(A) confirming the action of the A.O., first estimating unaccounted sales over and above found as per documents recovered during the course of search and further estim ating the gross profit as against net profit. This common issue is raised by assessee in all the seven appeals and the grounds raised are exactly identical except the quantum. Accordingly, the grounds we will reproduce from assessment year 2006-07 and f acts also we will take from this assessment year and will decide the issue accordingly. The relevant ground raised in assessment year 2006-07 is in ITA No.5785/Mum bai/2015 reads as under:
1. The Learned CIT(A) has erred in law and on facts and in the circumstances, in considering unaccounted sales of ₹1,32,53,537/- as against an amount of ₹1,31,07,282/- found as per documents recovered during the search under sec.132 of the I.T. Act, 1961.
2. The learned CIT(A) has erred in law and on facts and in the circumstances, in confirming an addition of ₹17,90,553/-
on account of gross profit on accounted sales instead of applying Net profit. As tax is computed on net profit and not on gross profit.
3. Briefly stated facts are that assessee Shri Shankarlal P. Mali belongs to Mali group of cases, which is engaged in manufacturing and trading of Readym ade garm ents i.e. Shirts, Kidswear, Sherwani, etc. A search & seizure operation under section 132 of the Act was 3 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 carried out on this group of cases on 28.6.2006. The assessee is a proprietor of M/s. Sundhamaa Enterprises, which is engaged in the manufacturing of readymade garments and carrying on business from 21, Ashish Indl. Estate, Gokhale Road(S), Dadar (W ), Mumbai. During the course of search, the revenue from the business and residential premises of the assessee found incriminating material including unaccounted purchases and sales, cash of ₹22,836/- and other assets. The revenue during the course of search found documents in the shape of loose sheets, which contains unaccounted sales for financial year 2000-01 of ₹1,800/-, for 2001- 02 of ₹6,000/-, for 2002-03 of ₹3,040/- for 2003-04 of ₹1,47,849/-, for 2004-05 of ₹7,22,894/-, for 2005-06 of ₹1,32,53,537/- and for part of the year i.e. for financial year 2006-07 up to 28.6.2006 a sum of ₹57,13,421/-. Similarly, unaccounted purchases for financial year 2000-01 of ₹Nil, for 2001-02 of ₹4,785/- for 2002-03 of ₹1,416/- for 2003-04 a sum of ₹1,13,699/-, for 2004-05 a sum of ₹18,07,277/-, for 2005-06 a sum of ₹65,32,086/- and for part of the financial year 2006-07 i.e. upto 28.6.2006 a sum of ₹20,58,967/-. The assessing officer estimated the unaccounted sales by applying the ratio adopted in assessment year 2006-07 at 31% and extrapolated the sam e for all the financial years starting from 2000-01 to 2006-07 i.e. up to 28.6.2006 and thereby estimated the unaccounted sales f or financial year 2000-01 of ₹25,78,690/-, for financial year 2001-02 at ₹28,76,414/-, for financial year 2002-03 at ₹45,96,638/-, for 4 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 financial year 2003-04 at ₹1,21,96,427/-, for financial year 2004-05 at ₹97,12,076/-, for financial year 2005-06 at ₹1,31,90,034/- and for part of the financial year 2006-07 i.e. up to 28.6.2006 at ₹3,12,07,667/-. The assessing officer applied gross profit rate at 13.51% on unaccounted sales, as is adopted by the assessee in the accounts books of the assessee for disclosed sales and estimated the undisclosed profit for financial year 2001-02 at ₹3,97,376/-, for financial year 2001-02 at ₹4,71,731/-, for financial year 2002-03 at ₹ 6,63,294/-, for financial year 2003-04 at ₹16,30,662/-, for financial year 2004-05 at ₹13,26,669/-, for financial year 2005-06 at ₹17,81,973/- and for part of the financial year 2006-07 up to 28.6.2006 at ₹35,92,022/-. The A.O. accordingly assessed the undisclosed profit by taking this gross profit from unaccounted sales found during the course of search and seizure operation. Aggrieved, against the action of the A.O. in all these years, assessee preferred appeals before CIT(A). The CIT(A) confirmed the action of the A.O. applying G.P. rate of 13.51% to the figures of unaccounted sales adopted by the A.O. but CIT(A) recomputed the unaccounted sales by observing in para-6 as under:
"6. In ground No 1, the assessee has disputed estimation of unaccounted sales at Rs 1,31,90,034 as against Rs.1,31,07,282/- as per the seized materials. It is relevant to mention over here that while completing the assessment, the Ld. AO in Para 6, 6.1, 6.2 & 6.3, of the assessment order, more particularly in Table A & Table B, on page 5 of the order had clearly mentioned that details of huge unaccounted sales and purchases were found and seized during the course of search from the premises of the assessee. It has been further stated that during the FY 2005-06 relevant to AY 2006-07, there was 5 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 unaccounted sale for Rs 1,32,53,537/- and unaccounted purchases of Rs 65,32,086/-. As against the AO had estimated such unaccounted sales only at Rs 1,31,90,034/- through backward integration method, which was neither required nor necessary. I am of the opinion that there were no necessity at the end of the Ld AO to go for such a step especially when unaccounted sales estimated by him were going to be a bit lesser than actual unaccounted sales found during the course of search. It appears to me that slight difference in sales figure may have arisen because of rounding off the ratio of unaccounted sales to total sales made by the AO and to this extent his decision was faulty. Therefore, in the circumstances, I am of the view that, unaccounted sales may be adopted at Rs 1,32,53,537/-, as mentioned in the assessment order and as found during the course of search. However, the assessee in the ground of appeal mentioned that such unaccounted sales were only Rs 1,31,07,282/-. However, no computation or details in this regard were filed by the assessee before me. In fact, in the written submissions dates 19/08/2015, the assessee has himself argued that such unaccounted sales were Rs. 1,32,53,537/-. So there appears to be no confusion on this issue. In the absence of any evidence or clarification from the assessee that such sales were only 1,31,07,282/- and not Rs.1,32,53,537/-, I am not in a position to accept the contention of the assessee in this regard. Therefore, unaccounted sales figure is directed to be taken at Rs. 1,32,53,537/-. Otherwise also there is hardly any difference in unaccounted sales figure as per assessee and as per the Ld AO and still much lesser amount has been brought to tax on account of such difference after applying GP rate @ 13.51%. Accordingly, this ground of appeal is rejected."
4. Before CIT(A), the assessee also filed copy of Tribunal's order in the case of one of the assessee's group cases in the case of Chunnilal P. Mali in ITA No.1483/M/2010 dated 18.3.2011.
5. The CIT(A) has not allowed the relief of expenses claimed by assessee by stating that the A.O. has reasonably applied the profit rate at 13.51%, as adopted by assessee himself on regular sales. For this, the CIT(A) observed in para-9 and 10 as under:
6
IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 "9. I have considered the above order of the Hori'ble ITAT and am of the view that no benefit what so ever could be given to the assessee against G.P. rate as computed by the A.O, as firstly no details of any direct/indirect expenses as appearing in the seized records have been produced by the assessee and further even if such expenses are actually there, the same are liable to be added in the hands of the assess u/s 69C. I have also considered the facts of the case , submissions of the assessee , as also the assessment order completed by the AO in the case of Chunilal Mali subsequent to such order of the Hon'ble ITAT and feel that AO without much application of mind has decided this issue, in summary manner and applied a profit rate of 6% on accounted sales. The AO did not even consider, as to what were the other expenses, if any, appearing in the seized records which were liable to be considered against the gross profit so computed by his predecessor and whether source of such expenses were in any way explained. The AO also did not look into the issue of simultaneous addition u / s 69C of such expenses. Therefore, in my considered view the decision taken by the AO in the case of Chunilal Mali, may not be genaralised and applied on the facts of the present case. During the course of appellate proceedings, the assessee was asked to produce details of any expenses in relation to commission, hel-majury, packing, loading and unloading expenses, conveyance, staff welfare, business promotion expenses etc. as appearing in the seized records which should be allowed against gross profit as computed above.
The assessee was also asked to explain sources of such expenses else the same may be disallowed in his hands u/s 69C of the I.T. Act. But the assessee could not produce any satisfactory evidence in this regard. Therefore, the contention of the assessee in this regard is liable to be rejected.
10. As regards the application of GP rate @ 13.51%, the assessee has himself shown a G.P. rate of 13.51%, on regular sales disclosed during the year. Beyond that, no evidence has been produced as to why GP rate on unaccounted sales was lesser. Further no details of any expenses appearing in seized records have been filed by the assessee and even assuming that there were such expenses, they are liable to be added and taxed in the hands of the assessee u/s 69C."
Aggrieved, assessee is in second appeal before the Tribunal.
6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that in the assessment year 2006-07, relevant to financial year 2005-06, the unaccounted 7 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 sales found from the incriminating material by the revenue is amounting to ₹ 1,32,53,537/- and A.O. applied the ratio for estimating the unaccounted sales at 31% which comes to ₹ 1,31,90,034/- but he estimated the unaccounted sales at ₹1,32,53,537/-. Similarly, the A.O. in other years applied this ratio of 31%, whereas the documents found during the course of search reflecting unaccounted sales and unaccounted purchases clearly reveals that percentage from assessment year 2001-02 to 2005-06 is meagre at 0.02% to 3.24% and even in assessment year 2007-08, it is 5.68%. There is no evidence except the quantum of unaccounted sales found during the course of search, which was extrapolated by the A.O. for working out unaccounted sales and thereby estimating the profit rate at 13.51%. Now the question arises whether this extrapolation @ 31% in other years except in assessment year 2006-07 can be made by the A.O. or not. This issue has already been considered by coordinate bench in assessee's group cases in the case of Chunnilal P. Mali (supra), wherein the Tribunal has considered this issue and finally held that extrapolation of unaccounted sales is not possible without any basis and more over the profit rate is also settled at 6% in the case of Bhagaram P. Mali Vs. CIT in ITA Nos.5779 to 5782/Mum/2015 dated 3.1.2017 of paper book and the A.O. while giving appeal effect to the Tribunal's order for assessment year 2006-07 accepted the net profit rate of 6% on unrecorded sales found during the course of search. Ld. Counsel before us referred to the order passed by the A.O. giving appeal effect to the ITAT order under section 143(3) read with section. 254 of the Act dated 15.9.2017 vide para 7 the A.O. has considered that "The submission of assessee is considered & it is held that 6% on unrecorded sales of ₹23,04,730/- 8
IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 is reasonable estimate of net profit of undisclosed sales & according ₹1,38,284/- on accounted sales." The Tribunal in the case of Chunnilal P. Mali (supra) for considering only the unaccounted sales and unaccounted purchases found in the documents seized during the course of search and the net profit on the same is to be estimated and it has not to be extrapolated. The relevant held portion of the Tribunal in Chunnilal P. Mali (supra) by observing in para 5.5 to 5.7 as under:
5.5 We have perused the records and considered the rival contentions carefully. The dispute is regarding estimation of unaccounted sales based on the material found in other years. A search was conducted in case of the assessee during the course of which some documents were found showing unaccounted sales of Rs.73,88,66s/- and Rs,42,64,419/~ for A.YRS.2006-07 AND 2007-08 respectively. No material showing unaccounted sales for A.Y.2005-06 was found.
The AO however on the basis of material found for A.Y.2006-07 which showed that unaccounted sales were 83% of total sales and accounted sales were only 17% treated the sales declared by the assessee for assessment year 2005-06 only @ 17% of total sales. He thus estimated total sales for A.Y.2005-06 at Rs,57,83,847/~ which included unaccounted sales of Rs.48,00,641/-. In A.Y.2007-08 the assessee had declared sales of Rs.19,20,372/- and unaccounted sales found from the seized documents were to the tune of Rs.42,61,419/- taking the total sales figure at Rs.61,84,791/-. The AO however estimated the unaccounted sales for A,Y. 2007-08 on the basis of percentage of unaccounted sales i.e. 83% found for A.Y.2006-
07. He thus determined the unaccounted sales for A.Y.2007-08 at 83% of total sales which gave the figure of Rs.51,33,376/-. CIT(A) upheld the view of the AO that unaccounted sales could be estimated on the basis of material found in other years. The decision of the CIT(A) has been challenged before us.
5.6 We have carefully considered the various aspects of the matter including the judicial pronouncements cited by both the parties. In our view each assessment year is an independent assessment year and unless some material is found for that year showing some unaccounted sale estimation of unaccounted sales for that year based on the material found in other years will not be justified, In case the assessee had really indulged into unaccounted sales in A.Y.2005-06 there would have definitely been some material found showing unaccounted sales for that year also as both the residential and office premises of the assessee had been searched. Moreover, we also note that unaccounted sales for A.Y.20Q6-Q7 had been found only from 1.10,2005 to 31.3,2006 and AO had accepted the unaccounted sales found on the basis of 9 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 material found and had not estimated any accounted sale for the remaining period of A.Y.2006-07 i.e. from 1.4.2005 to 30.9.2005. Therefore, estimation of unaccounted sales for the period of even before 1.4.2005 cannot be justified. The Learned DR has relied upon the judgment of Hon'ble Supreme Court in case of H,M. Esufali and others (90 ITR 271). On perusal of the said judgment we find that for the accounting period 1.11.59 to 20,10,60 the assessee had disclosed turnover of Rs.3,97,356/- and taxable turnover of Rs, 1,10,2467- for the purpose of sales tax. There was inspection by sales tax authorities on 19.9.63 and a bill book was found for 19 days from 1.9.60 to 19.9,60 showing that sales of Rs.31,171.28 were not recorded. On that basis, the AO estimated unaccounted sales for the entire year at Rs.2.50 lacs under the state sales tax act and Rs.1 lac under the central sales tax act. The Hon'ble Supreme Court upheld the estimation of sales made by the sales tax authorities. It may be noted that estimation of turnover had been made for the year for which the material had been found and not on the basis of material found for other years. Therefore, the said judgment does not help the case of the revenue that unaccounted sales can be estimated on the basis of material found for some other years. There are however judgments which support the case of the assessee that undisclosed sales or income cannot be estimated for the period for which there were no material found. In case of CIT Vs CJ Shah & Co. (117 Taxman 577) relied upon by the assessee, the seized material had indicated unaccounted sale for the period 3.9.96 to 4.12.96 i.e. for the three month period. The AO on that basis had estimated undisclosed profit for the entire block period at Rs.3.40 crores. The tribunal however deleted the addition on the ground that there was no material found indicating undisclosed sale for the period prior to the three months period. The order of tribunal was upheld, by the High Court. Similarly in case of CIT Vs Smt, Usha Tripathi (116 Taxman 838) the Hon'ble High Court held that the AO was not justified in estimating undisclosed income for the period for which there were no details in any of the seized materials. The Learned AR for the assessee has also relied on the decision of the tribunal in case of DCIT Vs Royal Marwar Tobacco Products Pvt. Ltd. (29 SOT 53). In that case the search has resulted into material showing suppressed sales for A.Y.2004-05 but there was no material for 2001-02 to 2003-04. The AO had however estimated suppressed sales for A.Y.2001-02 to 2003-04 based on the material for A.Y.2004-05 in assessments made under section 153A. The tribunal held that there was no material found for the earlier years and there was also no defect in the books and therefore addition in the earlier years was not justified. Therefore, in our view estimation of unaccounted sales for A.Y,2005-06 is not justified and order of CIT(A) on this point is set aside and addition made on this account is deleted.
5.7 Insofar as A.Y. 2007-08 is concerned the unaccounted sales found from the seized material was Rs.42,64,419/- but the AO estimated unaccounted sales at Rs.51,33,376/- on the basis of percentage of 10 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 unaccounted sales found for A.Y. 2006-07. In our view estimation made by the AO cannot be justified. The unaccounted sales actually found from the seized documents has to be considered as unaccounted sales. The same approach have been adopted by the AO in |flf.2006-07 in which unaccounted sales actually found from seized documents had been accepted. It cannot be said that the assessee was making unaccounted sales exactly in the same proportion in all the years. The unaccounted sales actually found from the seized material have to be assessed as such. Therefore, the unaccounted sales have to be accepted at ₹42,64,419/- the order of CIT(A) is set aside on this point and the unaccounted sales at ₹42,61,419/- found from the seized document are accepted."
7. In view of the facts of the present case is identical to the facts of the case before Tribunal in group cases i.e. Chunnilal P. Mali (supra) and accordingly the unaccounted sales in assessment year 2001-02 is to be considered only to the extent of ₹1800/-, in assessment year 2002-03 at 6,000/- , in assessment year 2003-04 at ₹3,040/-, in assessment year 2004-05 at 1,47,849/-, in assessment year 2005-06 at ₹7,22,894/-, in assessment year 2006-07 at ₹1,32,53,537/- and in assessment year 2007-08 i.e. part of the assessment year up to 28.6.2006 at ₹ 57,13,421/-. The same may be taken for estimating the net profit. The extrapolation is not possible in view of the lack of evidence and this issue has been settled by Tribunal's decision in assessee's group cases in the case of Chunnilal P. Mali (supra). Accordingly, we direct the A.O. to restrict to the unaccounted sales found recorded in the documents during the course of search and estimate the profit rate accordingly. This issue of assessee's appeal is accordingly allowed.
8. The next dispute is regarding percentage of profit rate. We have already noticed that the revenue has accepted the Tribunal's view in the case of Chunnilal P. Mali (supra) and estimated the profit @ 6%. Even in other group cases i.e. Bhagaram P. Mali (supra), the revenue has accepted the Tribunal's 11 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 decision, while giving appeal effect to the order the Tribunal has estimated the profit rate @ 6%. In this case also we direct the A.O. to accept the profit rate at 6% and accordingly recompute the income. These two issues i.e. estimation of unaccounted sales and estimation of profit rate are partly decided in favour of assessee as directed above.
9. The next issue in this appeal in ITA No.1726/Mum/2013 for assessment year 2001-02 is as regards to the order of the CIT(A) confirming the action of the A.O. in making addition of gift received as income treating the same as unexplained income. For this, assessee has raised following ground No.1:
"1. The learned CIT(A) has erred in law and on facts and in the circumstances in upholding the order of the Assessing Officer making addition ₹1,00,002/- by treating the gift received as income of the appellant ignoring all the details submitted to him relating to the 'gift' including the order passed in regular assessment by the predecessor A.O."
10. At the outset, Ld. Counsel for the assessee stated that this gift was received by assessee i.e. ₹50,001/- from Smt. Kiran M. Patiawala and further gift of ₹50,0001/- from Shri Mahendra K. Haria. According to the Ld. Counsel, these gifts were received by account payee cheques and disclosed in the balance sheets originally filed with returns of income and considered by the A.O. in the original assessment proceedings. The same cannot be subject matter of search assessment while framing assessment under section 153A read with section. 143(3) of the Act. Ld. Counsel for the assessee drew our attention to the return of income filed on 31.10.2001 for assessment year 2001- 02 along with balance sheet and profit & loss account, wherein these gifts were 12 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 disclosed. According to the Ld. Counsel, this issue is covered by the decision of Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) wherein it is held that whatever is considered in the original assessment proceedings and that has not abated, the addition cannot be repeated while framing search assessment under section 153A of the Act in case there is no seized material. In the present case before us also, there is no seized material as conceded by revenue before us. Accordingly, we delete this addition and allow this issue of assessee's appeal.
11. The next issue in this appeal in ITA No.1726/Mum/2013 for assessment year 2001-02 is as regards to the order of CIT(A) upholding the addition of unexplained investment in stock of ₹5,84,976/-. For this, assessee has raised following ground No.5:
"Learned CIT(A) has erred in law and on the facts and in the circumstances of the case in upholding the addition of ₹5,84,976/- as unexplained investment under section 69A of the Act."
12. As regard to this issue, the A.O. computed the undisclosed sales at ₹25,82,850/- and after giving set off of disclosed income on account of stock i.e. additional income of ₹17,61,700/-, the A.O. added the balance as unexplained investment in stock of ₹5,84,976/- within the meaning of section 69A of the Act. Since we have already adjudicated the issue for application of gross profit rate and directed the A.O. to apply net profit rate @ 6% of the unaccounted sales in the above issue of unaccounted sales and computation of net profit, here we direct the A.O. to recompute the undisclosed sales and if he 13 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 finds anything, only then the addition can be made. We find that in this year i.e. 2001-02, the assessee's unaccounted sales are to the tune of ₹1,800/- and assessee has already offered ₹17,61,700/- as additional income on account of stock. Accordingly, in our view, there remains nothing, which is to be added. Hence, we direct the A.O. to verify any unaccounted sales remain or unaccounted stock remains and accordingly decide the issue after allowing reasonable opportunity to the assessee.
13. The next issue in these appeals in ITA Nos.1725/Mum/2013, 1727/Mum/2013 & 5785/Mum/2015 for assessment years 2002-03, 2003-04 & 2006-07 is as regards to estimation of personal expenses or low household withdrawals of ₹50,000/- in each year. Identically worded grounds are raised in these 3 years by the assessee and additions made and confirmed by CIT(A) is also identically worded. Hence, we will take the issue from assessment year 2002-03. The relevant ground raised vide ground No.4 reads as under:
"The learned CIT(A) has erred in law and on facts and in the circumstances of the case in dismissing appeal for personal expenses addition of ₹50,000/- on this ground notwithstanding directions given to the A.O. for verification and contrary to his decision in subsequent assessment year 2004-05."
14. We find that in all the years, the A.O. has simply estimated the addition and given no reason for making this addition in each of the year. The CIT(A) also confirmed the same. We find that the A.O. has not brought out what type of expenses and how much is the amount involved which has been incurred by the assessee on account of personal expenses. Accordingly, we are of the view that no 14 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 disallowance is permissible. We delete the addition in all the 3 years. The A.O. is ordered accordingly.
15. The next issue in this appeal in ITA No.5786/Mum/2015 for assessment year 2007-08 is as regard to order of CIT(A) confirming the action of the A.O. in making the addition of unexplained investment in jewellery amounting to ₹50,000/-. For this assessee has raised following ground No.3:
"The learned CIT(A) has erred in law and on facts and in the circumstances, in confirming ₹50,000/- as income on account of unexplained investment in jewellery."
16. Briefly stated facts are that during the course of search, jewellery worth ₹1,79,560/- was found at the residence of the assessee. The assessee in his statement recorded under section 132(4) of the Act admitted that the jewellery in question belonged to his wife as her Stridhan. The A.O. noted that the assessee failed to file any evidence and accordingly he has given benefit of ₹79,560/- and balance₹1 lakh was treated as unexplained investment within the meaning of section 69A of the Act and added to the total income of the assessee. The CIT(A) further reduced the addition on account of jewellery to ₹50,000/- . We find that the jewellery found is much lesser than the limit of 500 gms as prescribed by Central Board of Direct Taxes for the purpose of sizure. We find that the jewellery found during the course of search to the extent of ₹1,79,560/- is quite reasonable as Stridhan of the assessee, which is much less than 500 gms as prescribed by CBDT for the seizure purpose for the reason that up to that quantity the jewellery 15 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 is treated as explained by the department in case it is found during the course of search. As we find nothing unexplained and hence, the same is deleted.
17. The next additional issue raised by assessee in ITA No.5786/Mum/2015 for assessment year 2007-08 is as regards to the CIT(A) not granting telescoping effect in regard to addition made on account of investment in property in the name of mother of the assessee amounting to ₹4.51 lakhs. For this assessee has raised following additional ground:
"The Learned AO has made addition of ₹4,51,000/- on account of investment in property made in the name of mother. AO had granted telescoping benefit to assessee. The Learned CIT(A) had not granted telescoping effect to assessee. Your honour is requested to delete additions made. Alternatively your honour may grant telescoping benefit for additional income declared & additions made & confirmed by appellate authorities."
18. Briefly stated facts are that the revenue during the course of search found papers indicating that an investment of a sum of ₹14,32,250/- made by assessee in the purchase of property in the name of mother of the assessee. The investment to the extent of ₹9,81,250/- pertains to assessment year 2006-07 and a sum of ₹4.51 lakhs pertains to assessment year 2007-08, the year under consideration. As the assessee has not explained the source of investment, the A.O. treated the sum as unexplained, but he refrained to making double addition by stating that "however, it is presumed that the assessee have invested ₹4,51,000/- out of the undisclosed profit of 16 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15 ₹35,92,035/- earned on the unaccounted sales as discussed in para 8 above. Therefore, no separate addition on this account is made."
19. From the above, we find that the A.O. has already made addition of undisclosed profit of ₹33,02,022/-. However, the CIT(A) retained this addition on the premise that the addition to be covered by cumulative surrender of ₹25,86,400/-, in other words, does not mean that such amount was lying with the assessee on the date of investment in the property. Hence, CIT(A) made this addition separately. Ld. Counsel for the assessee before us only contended that let this fact be verified whether this amount of ₹25,86,000/- is invested somewhere or not. If it is available, the A.O. can be directed to give telescoping effect to the same. When this was put to Ld. Sr. D.R., he agreed for setting aside of this issue to the A.O.
20. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that only plea of the assessee is that let this amount be telescoped against the cumulative surrender of ₹25,86,400/- made in different years in case this is available for telescoping. We find the plea of the assessee is quite reasonable and remand the matter back to the file of the A.O., who will find out that how much funds are available with the assessee after setting off other items out of this amount. Accordingly, this matter is restored back to the file of the A.O. 17 IT A No s . 1 72 5 t o 1 72 9/ Mu m/ 20 1 3& I T A No s .5 785 &5 7 8 6/ M /2 0 15
21. In the result, all the seven appeals of the assessee are partly allowed for statistical purposes as directed above.
Order pronounced in the open court on 22-06-2018.
Aado S a kI Gaao YaNaa
Y aNaa Ku l ao mao idnaM k 22.06.2018 kao kI ga[-
ga[ - .
Sd/- Sd/-Sd/-
Sd/-
(G MANJUNATHA) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 22-06-2018
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai BY ORDER,
6. Guard file.
//True Copy//
Assistant Registrar
ITAT, MUMBAI