Income Tax Appellate Tribunal - Jodhpur
Kailash Chand L/H Of Late Mangilal vs Income Tax Officer on 13 October, 2006
Equivalent citations: (2008)113TTJ(JODH)488
ORDER
Hari Om Maratha, J.M.
1. These are cross-appeals filed against the order of the learned CIT(A) dt. 19th Dec., 2002 pertaining to asst. yr. 2000-01. These appeals are being decided by a common order.
ITA No. 40/Jd/20032. This is the appeal of the assessee, in which an additional ground of appeal has been taken. The additional ground is purely a legal ground and therefore, it was admitted and was taken as ground No. 5 of the appeal, after considering the oral objections of the learned Departmental Representative.
3. At the time of hearing, the learned Authorised Representative appearing on behalf of the assessee, Shri N.R. Mertia did not press ground No. 2. Ground Nos. 3 and 4 are formal in nature. Thus, ground Nos. 2, 3 and 4 stand dismissed.
4. Thus, ground No. 5 (additional ground) and ground No. 1, only now survive for adjudication. Other grounds of this appeal stand dismissed.
5. First, we will deal with ground No. 5, the additional ground, which relates to the action of the IT Inspector in taking statements during the course of search. This ground is connected with ground No. 1, which relates to trading addition. Therefore, these are being disposed of simultaneously.
6. We have heard the rival submissions and perused the evidence on record.
The submission of the learned Authorised Representative is that the Inspector of IT has no authority and power to administer oath to a person for recording his statement. In this case, the assessee admitted that the statement was recorded by the Inspector of the IT. A very strange thing was revealed that the survey was illegal and when we examine the statements in original that these statements are not even signed by the Inspector and not to speak of by the AO. Therefore, legally these statements cannot be read with evidence against the case of the assessee. It was brought to our notice that the trading addition was based solely on the statements of Shri Kailash Chand S/o Shri Mangilal. The statements of Shri Kailash Chand above named persons were recorded in the capacity of manger because Shri Mangilal was suffering from breathing, an old man. The assessee derived income from manufacturing of sweets and its trading together with income from trading of kachha milk and curd for the last several years under the name and style of M/s Mangilal Kailash Chand, Jodhpur. The assessee also carried out job work occasionally for preparing sweets etc. in marriages, festivals etc. On 14th March, 2000, a survey under Section 133A of the Act was conducted at the business premises of the assessee. The AO estimated the physical stock and worked out the same on the basis of the statement of Shri Kailash Chand. Thus, a stock of Rs. 35,769 was found short as compared to stock as per books of accounts on the date of survey. The assessee did not make any surrender of income but deposited Rs. 85,000 as advance tax. The AO, thus, made the trading addition of Rs. 5,68,437 after rejecting the books of accounts under Section 145(1) and by applying higher GP rate of enhanced sales of sweets, milk and curd. The learned CIT(A) relates the trading addition to Rs. 1,26,224. The Revenue has also taken ground No. 1 in this regard. Ground No. (1) of Revenue's appeal has also been decided simultaneously.
7. We have heard the rival submissions and perused the evidence on 'ecord. We have also carefully read the decisions relied before us.
8. After hearing both the parties and after going through the relevant material on record, we are convinced that the statement of Shri Kailash Chand cannot be taken as a piece of evidence against the assessee. The Inspector of the IT was however, authorized by the AO to go on the spot and to prepare an inventory, therefore, we cannot hold the survey itself as illegal. But at the same time, we exclude the statement of Shri Kailash Chand as these are not signed by either the Inspector or the AO. These statements have not been explained and read over to the maker i.e., Shri Kailash Chand, on that reason this statement cannot be taken to be a valid piece of evidence. Various decisions have been quoted by the learned Authorised Representative in this regard and the same are contained in his paper book.
9. Now coming to the question of trading addition, it is an undeniable fact that the assessee has declared better GP rate in this year at 19.94 per cent as compared to 19.89 per cent in asst. yr. 1998-99 and 19.47 per cent in asst. yr. 1999-2000. The assessee has been properly maintaining the books of accounts and it is only on the basis of the statements of Shri Kailash Chand, which now stands excluded by the AO as well as the learned CIT(A), came to the conclusion that the books of accounts were not properly maintained. But the assessee had been issuing the sale vouchers in respect of sweets and milk on estimated basis, which did not indicate the quantity of the goods sold. The assessee was issuing sale vouchers at the end of day by counting cash. The assessee was asked to furnish names and addresses of the parties from whom he made purchases of raw materials, which were used for the manufacture of sweets. On the basis of information given by the firm, confirmation letters were obtained from certain parties. It was found that the assessee did not enter all the purchase bills in his books of accounts and some of such purchase bills, obtained from various parties, were not found recorded in the books of accounts of the assessee as under:
S. No. Name & address of party Bill No. & date Amount 1. M/s Deepchand Meethala, Jodhpur 9761 6th Dec., 1999 Rs. 7,430.00 2. M/s Amrit Traders, Jodhpur 8339 25th June, 1999 Rs. 2137.50 3. M/s Ganapati Agencies, Jodhpur 6704 18th June, 1999 Rs. 3031.74 4. M/s Sreegopal Balkishan, Jodhpur 9039 18th Dec, 1999 Rs. 876.71
The above discrepancy was brought to the notice of the assessee, which was admitted by the assessee. There was no dispute with regard to this fact even at the time of the arguments. Consequently, the total of the above amount is hereby sustained as addition in the trading account. This is the consistent view of the Bench that when GP rate declared in the given year is better than that of the immediately preceding year, no further addition can be made in the trading receipts of the assessee unless some specific and definite evidence to that extent is found. The AC) took sales of the assessee during the relevant year at Rs. 9,390 per day and estimated it at Rs. 32,86,500. The learned CIT(A) took the sales at Rs. 350 per day on the basis of the statement of Shri Kailash Chand and reduced the estimation. Both the AC) and the learned C1T(A) calculated enhanced sales accordingly, and after applying GP rates in their own way, incomes from the sale of sweets, milk and curd separately, made their respective impugned additions. Since, the statement of Shri Kailash Chand stands excluded and no other evidence which can support the trading addition was found during survey, in view of the fact that the combined GP rate in this year is better than the two preceding years as mentioned above. In our considered opinion, no further addition can be made in this account. As a result, additional ground of appeal is not allowed in its entirety and ground No. 1 of assessee's appeal is allowed whereas ground No. 1 of Revenue's appeal is dismissed.
10. In Revenue's appeal, the only other ground is ground No. 2 which relates to relief of Rs. 15,500 given to the assessee on account: of job work receipts.
11. The facts of this issue; are that the AO found that the income shown by the assessee from job work receipts at Rs. 8,500 supported by documentary evidence. lie estimated net income from job works at Rs. 2,000 per month and made addition of Rs. 24.000. The learned CIT(A) reduced this addition to Rs. 8,500 and granted a relief of Rs. 15,500.
12. After hearing rival submissions, we are also in agreement with the learned CIT(A) because there is no basis for making any addition in the account of job work receipts and the income shown by the assessee from job work at Rs. 8,500 has not been found fault with the help of evidence on record. Consequently, this ground of appeal stands dismissed.
13. The assessee also took another legal plea that the appeal has been Tiled by the Revenue against a dead person and consequently the proceeding has to abate and the appeal would become null and void.
14. We have heard the rival submissions and perused the evidence on record.
The learned Authorised Representative has vehemently submitted that Shri Mangilal died on 28th Jan., 2002 and he has also filed a copy of death certificate on record. We have gone though the various decisions relied by the learned Authorised Representative on this point. It is true that any appeal filed against the dead person is not maintainable in ease if respondent is only one. But in this case, the fact of death of Shri Mangilal, the assessee was brought to the notice of the ITO, only after he had filed appeal before the Tribunal. Therefore, this appeal shall not abate and only would amount to a curable irregularity. The Revenue has corrected this mistake by filing the Legal Representatives on record. The title of the appeal is accordingly corrected.
15. In the result, both the appeals are partly allowed