Income Tax Appellate Tribunal - Ahmedabad
Ramesh Parimal Valrani, Bhavnagar vs Assessee on 11 July, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, AHMEDABAD
(BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No.1111/AHD/2011
(Assessment Year:
Ramesh Pariamal Valrani V/S The D.C.I.T., Central Cirlce-
Prop. of M/s. Ramesh 1(1), Ahmedabad
Dresses, Khijadiwala Sheri,
Gol Bazar, Bhavnagar
(Appellant) (Respondent)
PAN: AAHPV 5302P
Appellant by : Shri B.R. Popat
Respondent by : Shri B.L. Yadav, Sr. D.R.
आदे श)/ORDER
(आदे Date of hearing : 07-07-2014 Date of Pronouncement : 11-07-2014 PER SHRI ANIL CHATURVEDI,A.M.
1. This appeal is filed by the Assessee against the order of CIT(A)-I, Ahmedabad dated 01.03.2011 for A.Y. 2005-06.
2. The facts as culled out from the material on record are as under.
3. Assessee is a wholesale dealer of Readymade Garments. A survey action u/s. 133 of the Act was conducted on 30.11.2004 which was subsequently converted into search action. During the course of search, total cash balance of Rs. 5,67,700/- was found out of which a sum of Rs. 5,00,000/- was seized, physical stock was found short as compared to the book value. Thereafter Assessee prepared supplementary books of accounts wherein unaccounted 2 ITA No 1111/AHD/2011 . A.Y. 2005-06 transaction were incorporated. Assessee filed his return of income for A.Y. 05-06 on 11.08.2005 disclosing total income of Rs. 2,60,030/-. Assessment was framed under section 143(3) vide order dated 29.11.2006 and the total income was determined at Rs. 16,22,110/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) vide order dated 01.03.2011 granted partial relief to the Assessee. Aggrieved by the order of CIT(A), Assessee is now in appeal before us and has raised the following grounds:-
1. Confirming the action of the AO in making addition of Rs.38,742/-on account of additional sales;
2. Confirming the action of the AO in disallowing the deduction of Rs.1,72,957/-legitimately claimed;
3. Confirming the action of the AO in making addition of Rs. 13,234/-on account of low GP;
4. Confirming the action of the AO in making addition of Rs.5,03,597/-on account of cash physically excess found;
5. Partly confirming the addition of Rs.5,000/- by making adhoc disallowance out of telephone expenses;
Ground no. 1 was not pressed and therefore dismissed as not pressed.
Ground no. 2 is with respect to disallowing the deduction of Rs. 1,72,957/-.
4. A.O noticed on the basis of paper book submitted that from 01.04.2004 to 22.11.2004, Assessee had made payments on various account, the details of which are listed at page 11 of his order aggregating to Rs. 6,26,304/-. A.O noticed that Assessee had claimed payment to suppliers from 01.04.2004 to 22.11.2004 to the extent of Rs. 75,431/- towards current year purchases. A.O was of the view that the aforesaid amount was part of the total amount of Rs. 1,15,567/- claimed as purchases in the supplementary books of accounts. He also noticed that Assessee had also made payments aggregating to Rs. 1,72,957/- on account of salary expenses and job work expenses. He was of the view that this expenditure was already included in the amount of unexplained expenditure of RS. 6,26,304/-. He also noticed that Assessee has claimed deduction of Rs. 1,72,957/- under the head purchases, salary and job work charges in the Profit and Loss account. A.O noted that since the 3 ITA No 1111/AHD/2011 . A.Y. 2005-06 expenditure has been treated as unexplained expenditure as per provisions of Section 69C, therefore as per proviso to Section 69C, the Assessee is not allowed to claim deduction in respect of expenditure of Rs. 1,72,957/- under any head of income. He accordingly disallowed the same. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) upheld the action of A.O by holding as under:-
12. I have considered the submissions of the appellant. While adjudicating ground No.2, the addition of Rs.6,26,304/- has been directed to be deleted. In the present case, the appellant has claimed the deduction of expenses of Rs.1,72,957/- twice by debiting these expenses in the profit and loss account.
As the expenses of Rs.1,72,957/-could not be allowed to be deducted twice, therefore, the addition of Rs.1,72,957/- is confirmed.
5. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
Before us, ld. A.R. reiterated the submissions made before A.O. He further submitted that the amount was already included in the unexplained expenses and the claim of the Assessee was not a double claim of expenses. He therefore submitted that the Assessee be allowed for deduction of Rs. 1,72,957/-. The ld. D.R. on the other hand relied on the order of A.O. In the alternate he submitted that the matter may be remitted to A.O to verify the submission of Assessee that the claim of Assessee is not a double claim of expenses.
6. We have heard the rival submissions and perused the material on record. We find that it is Assessee's contention that the claim of expenses is not a double claim but on the other hand, A.O has held the claim of expenses to be the double claim. We feel that in such circumstances, the factual position needs verification and to which the ld. D.R. has also no objection. We therefore remit the issue to the file of A.O for verification of the Assessee's claim and de novo consideration after considering the submissions of the Assessee. The Assessee is also directed to furnish all the necessary details called for by A.O promptly. In the result, this ground of Assessee is allowed for statistical purposes.
4 ITA No 1111/AHD/2011
. A.Y. 2005-06
Ground no. 3 is with respect to upholding the addition of Rs. 13,234/- on account of low G.P.
7. Before A.O, Assessee submitted trading results for pre-search period i.e. 01.04.2004 to 30.11.2004 and the results for post search period i.e. from 01.12.2004 to 31.03.2005. A.O noticed that the gross profit for the pre search period worked out to 16.01% whereas the gross profit for the post search period worked out to 14.86% and thus there was decline in the gross profit for the post search period. He also noticed that the average gross profit for the earlier 3 years was 16.10% which was also admitted by the Assessee while working out the difference of stock as per the books as compared to the physical stock found at the time of search. He therefore worked out the gross profit for the entire period at 16.10% and after granting the credit of the gross profit shown by the Assesee worked out the difference of Rs. 13,234/- on account of low gross profit and added the same to the income. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) upheld the order of A.O by holding as under:-
15. I have considered the submissions of the appellant It is observed that the appellant has contended that the gross profit rate in the post search period has declined to 14.86%. I agree with the findings recorded by the Assessing Officer that average gross profit rate has to be taken at 16.10%, which is based on the business result of A.Y.2002-03 to A.Y.2004-05. Therefore, the addition of Rs.13,234/- is considered justified and same is confirmed.
8. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
9. Before us, the ld. A.R. reiterated the submissions made before A.O and CIT(A). The ld. D.R. on the other hand supported the order of CIT(A).
10. We have heard the rival submissions and perused the material on record.
Before us, ld. A.R. has not brought any material on record to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus this ground of Assessee is dismissed.
5 ITA No 1111/AHD/2011
. A.Y. 2005-06
4th ground is with respect to confirming the addition of Rs. 5,03,597/- on account of excess cash found.
11. A.O noticed that cash of Rs. 5,67,700/- was found at the time of search, the source of which was admitted by the Assessee to be part of unaccounted sale. A.O noted that during the search no evidences in the form sales bills, cash receipts from debtors and debtors account were found which could prove that the unrecorded sales were realized till the date of search. In the absence of documentary evidence, A.O considered the unaccounted cash amounting to Rs. 5,03,597/- to be unexplained and therefore added the same as undisclosed income u/s. 69A of the Act. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) confirming the addition made by A.O by holding as under:-
18. I have considered the submissions of the appellant. As mentioned in the instant appellate order, the cash generated due to unrecorded sales is normally invested or expended by the businessman in variety of manners, which includes making unrecorded purchases, making unaccounted investments, giving unaccounted loans, making unaccounted expenditure etc. Normally, the unrecorded sale proceeds are not kept at the business premises and such unaccounted sale proceed are taken away at the time of closure of the shop. It is highly unbelievable that appellant is keeping the unaccounted cash in the business premises. Besides, at the time of search action, no documentary evidence has been recovered from the premises of the appellant which could establish that the amount of cash found at the time of search action represents the unrecorded cash sale proceeds. In view of above, I am in agreement with the findings recorded by the Assessing Officer that cash amounting to Rs.5,03,597/-
has to be taxed u/s.69A of the I.T. Act. The addition of Rs.5,03,597/- is confirmed.
12. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
13. Before us, the ld. A.R. reiterated the submissions made before A.O and CIT(A). The ld. D.R. on the other hand supported the order of A.O and CIT(A).
14. We have heard the rival submissions and perused the material on record. We find that CIT(A) while confirming the action of A.O has given a finding that no documentary evidence were recovered at the time of search which could establish that the amount of cash found at the time of search represented the unrecorded sales. The findings of A.O and CIT(A) has not been controverted 6 ITA No 1111/AHD/2011 . A.Y. 2005-06 by Assessee by placing any tangible material on record. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Assessee is dismissed.
5th ground is with respect to confirming the addition of Rs. 5,000/- on account of telephone expenses.
15. A.O noticed that Assessee had claimed telephone expenses of Rs. 23,624/-
which included the telephone installed at the job and at the residence. The Assessee was asked to explain the incurring of expenditure exclusively for the purpose of business. A.O noted that Assessee has not explained the nature and use of telephone at his residence and had also failed to explain the exclusive use of telephone line at job for business purpose. Considering the personal element and non business use of telephones, he considered 25% of the expenditure to be having personal element and accordingly worked the disallowance at Rs. 7,250/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) granted partial relief to the Assessee by holding as under:-
21. I have considered the submissions of the appellant. In the assessment order, the Assessing Officer has pointed out that during the year under consideration, the appellant has claimed deduction of an amount of Rs.7,219/- for telephone connection installed at the residence and Rs.16,405/- in respect of telephones installed at shop.
Besides a provisions of Rs.1,793/- has also been claimed as an expenditure. However, I am of the opinion that disallowance of 25% of the telephone expenses is too high. Considering the facts in totality, the disallowance out of telephone expenses is directed to restricted at Rs.5,000/- which also includes the disallowance on account of provisions of Rs.1,793/-. The appellant get a relief of Rs.2,250/- on this score.
16. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
Before us, ld. A.R. submitted that the expenses were for the purpose of business and no disallowance was called for. The ld. D.R. on the other hand supported the order of CIT(A).
17. We have heard the rival submissions and perused the material on record. We find that CIT(A) after considering the submission of the Assessee granted 7 ITA No 1111/AHD/2011 . A.Y. 2005-06 relief of Rs. 2,250/-. Before us, the ld. A.R. has not brought any material on record in support of his contention. We therefore find not reason to interfere with the order of CIT(A) and thus this ground of Assessee is dismissed.
18. In the result, the appeal of Assessee is partly allowed for statistical purposes.
Order pronounced in Open Court on 11 - 07 - 2014.
Sd/- Sd/-
(G.C.GUPTA) (ANIL CHATURVEDI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad. TRUE COPY
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad