Income Tax Appellate Tribunal - Mumbai
Kanch Ghar, Mumbai vs Assessee on 2 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "A", MUMBAI
Before Shri P.M. Jagtap, Accountant Member
& Shri Amit Shukla, Judicial Member.
I.T.A. No.3578 & 3579/Mum/2011
Assessment Year : 2004-05 & 2006-07.
M/s Kanch Ghar, Asstt. Commissioner of
Shop No.1, Abhishek Building, Vs. Income-tax,
Vallabhbhai Road, Central Circle-17 & 28,
Vile Parle (West), Mumbai.
Mumbai - 400056.
PAN AAAFK1417F
Appellant. Respondent.
Appellant by : Shri Vijay Mehta.
Respondent by : Ms. Anu Krishna.
Date of hearing : 02-08-2012
Date of pronouncement : 10-08-2012
ORDER
Per P.M. Jagtap, A.M. :
These two appeals filed by the assessee against two separate orders passed by the learned CIT(Appeals)-39, Mumbai both dated 23-02-2011 involve a common issue relating to addition made to the total income of the assessee on account of unaccounted profit on cash sales and the same, therefore, have been heard together and are being disposed of by the single consolidated order.
2. The assessee in the present case is a partnership firm which is engaged in the business of dealing in glass, glass products, plywood, laminates, metals and 2 ITA Nos.3578&3579/Mum/2011.
hardware items. A search action in the cases belonging to Euro Group was conducted by the Department and the assessee being the associated concern, a survey u/s 133A was carried out at its premises at Vile Parle on 2nd and 3rd of August, 2006. During the course of survey, a document was found showing unaccounted sales made by the assessee amounting to Rs.38,30,065/- during the period 27-10-2003 to 30-03-2004 and Rs.34,23,460/- during the period 01-04-2005 to 31-07-2005. In the revised returns filed after the survey, the assessee declared additional income of Rs.2,55,000/- and Rs.2,90,000/- on unaccounted sales calculated at the rate of 8% for assessment years 2004-05 and 2006-07 taking the quantum of unaccounted sales at Rs.31,85,065/- and Rs.31,18,559/- respectively. In the revised return filed for assessment year 2004-05, the assessee also declared additional income of Rs.5 lakhs on account of initial capital contributed to carry out unaccounted transactions. The AO reopened the assessments for assessment years 2004-05 and 2006-07 by issuing notices u/s 148 after recording the reasons. During the course of assessment proceedings, the assessee accepted unaccounted sales for the period 27-10-2003 to 30-03-2004 as per the impounded material were to the extent of Rs.38,30,065/- as against the unaccounted sales of Rs.31,85,065/- taken by him while declaring the additional income in the revised return. The assessee, however, vehemently opposed the proposal of the AO to estimate the unaccounted sales for the period 01-04-2003 to26-10-2003 and 01-08-2005 to 31- 03-2006 proportionately on the basis of the figures of unaccounted sales as reflected in the relevant documents impounded during the course of survey. His contention was that no such estimate was justifiable in the absence of any evidence available to show that there was any unaccounted sales made during that period. In support of its stand that such estimation of unaccounted sales for the remaining period was not permissible, reliance was placed on behalf of the assessee on the various judicial pronouncements. The AO, however, found those decisions to be 3 ITA Nos.3578&3579/Mum/2011.
distinguishable on facts and relying on the decision of Hon'ble Supreme Court in the case of H.M. Esufali H.M. Abdulali reported in 90 ITR 271, he estimated the unaccounted sales of the assessee for the balance period on prorata basis and added Rs.4,80,372/- and Rs.5,31,613/- to the total income of the assessee for assessment years 2004-05 and 2006-07 being profit at 8% on such unaccounted sales.
3. The additions made by the AO on account of profit on estimated unaccounted sales were challenged by the assessee in the appeals filed before the learned CIT(Appeals) for both the assessment years under consideration i.e. assessment years 2004-05 and 2006-07 and after considering the submissions made on behalf of the assessee as well as material available on record, the learned CIT(Appeals) confirmed the said additions made by the AO for both the years under consideration relying mainly on the decision of Hon'ble Supreme Court in the case of H.M. Esufali H.M. Abdulali (supra) wherein it was held that best judgement assessment estimating unaccounted sales/turnover was justified in the facts and circumstances of the case. Aggrieved by the orders of the learned CIT(Appeals), the assessee has preferred these appeals before the Tribunal.
4. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that although incriminating documents were impounded during the course of survey showing sales made by the assessee outside the books of account for the period 27-10-2003 to 30-03-2004 and 01-04-2005 to 31-07-2005, there was nothing found during the course of survey or even brought on record during the course of assessment proceedings to show that any sales were made by the assessee during the period 01-04-2003 to 26-10-2003 and 01-08-2005 to 31-03-2006. The AO, however, estimated the unaccounted sales of the assessee for these two periods on prorata basis assuming that the assessee was indulging in unaccounted sales throughout both the years under consideration. For this purpose 4 ITA Nos.3578&3579/Mum/2011.
the AO relied on the decision of Hon'ble Supreme Court in the case of H.M. Esufali H.M. Abdulali (supra) to support the estimation of unaccounted sales made by him and even the learned CIT(Appeals) has upheld the said estimation mainly relying on the said decision of Hon'ble Supreme Court. As pointed out by the learned counsel for the assessee, the said decision was rendered by the Hon'ble Supreme Court in the sales-tax matter holding that the estimation of unaccounted sales was possible as a part of best judgement assessment. As rightly contended by the learned counsel for the assessee, in so far as income-tax proceedings are concerned, estimation of sales is permissible subject, however, to the condition that the books of accounts maintained by the assessee regularly are rejected. In the present case, there is nothing in the assessment orders passed by the AO to show that the books of accounts regularly maintained by the assessee were rejected by him. There is nothing in the assessment orders to show that any mistake in the books of accounts maintained by the assessee for the period for which estimate of sales was made had been found or pointed out by the AO. In the case of CIT vs. Anand Kumar Deepak Kumar 294 ITR 497 (Delhi) cited by the learned counsel for the assessee, a similar issue arose for consideration and it was held by the Hon'ble Delhi High Court that there is no presumption that such unaccounted sales as found during the course of search would continue for post search period and the estimation made by the AO assuming unaccounted sales for the entire year cannot be sustained especially when there was no discrepancy noted in the books of account for the post search period and there was no evidence found to support the presumption of the AO. In our opinion, the ratio of the decision of Hon'ble Delhi High Court in the case of Anand Kumar Deepak Kumar (supra) is squarely applicable in the present case and respectfully following the same, we hold that no addition can be made to the total income of the assessee on account of profit earned from estimated unaccounted sales. At the time of hearing before us, the 5 ITA Nos.3578&3579/Mum/2011.
learned DR has pointed out that the quantum of unaccounted profit disputed by the assessee in the grounds raised is not correct. Since the learned counsel for the assessee also accepted this position, we direct the AO to verify this aspect and make the addition to the total income of the assessee only on account of profit on unaccounted sales actually found on the basis of relevant material impounded during the course of survey.
5. In the result, the appeals of the assessee are allowed subject to verification of the relevant figures as directed above.
Order pronounced on this 10th day of August, 2012.
Sd/- Sd/-
(Amit Shukla) (P.M. Jagtap)
Judicial Member Accountant Member
Mumbai,
Dated: 10th August, 2012.
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, A-Bench.
(True copy)
By Order
Asstt. Registrar,
ITAT, Mumbai Benches, Mumbai.
Wakode