Income Tax Appellate Tribunal - Ahmedabad
Dadasaheb K.Jadav, Palanpur vs Department Of Income Tax on 7 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH - AHMEDABAD
(BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN ALANKAMONY, AM)
ITA No.3485/Ahd/2007
A. Y.: 2005-06
The Income Tax Officer, Vs Shri Dadasaheb K. Jadav,
Ward 1, Prop. Jagdamba Traders,
Palanpur Moti Bazar,
Siddhi Vinayak Complex,
Palanpur,
PAN No. ABNPJ 2440 B
(Appellant) (Respondent)
ITA No.2527/Ahd/2009
A.Y.: 2005-06
Shri Dadasaheb K. Jadav, Vs The Income Tax Officer,
Prop. Jagdamba Traders, Ward 1,
Moti Bazar, Palanpur
Siddhi Vinayak Complex, Palanpur,
PAN No. ABNPJ 2440 B
(Appellant) (Respondent)
Department by Shri B. L. Yadav, Sr. DR
Assessee by Dhiren Shah, AR
Date of hearing: 07 -02-2012
Date of pronouncement: 09-02-2012
ORDER
PER BHAVNESH SAINI: This order shall dispose of both the above appeals in the case of the same assessee.
ITA No.3485/Ahd/2007 and 2527/Ahd/2009 2Shri Dadaseb K. Jadav, Palanpur
2. We have heard the learned representatives of both the parties and perused the findings of the authorities below.
ITA No.3485/Ahd/2007: (AY- 2005-06)(Departmental appeal)
3. This appeal by the revenue is directed against the order of the learned CIT(A)-XV, Ahmedabad dated 30-05-2007, for assessment year 2005-06.
4. On ground No.1, revenue challenged the deletion of addition of Rs.2,57,405/- on account of estimation of gross profit. In this case, a survey u/s 133A of the IT Act was conducted on 11-03-2005 in which additional income of Rs.10,00,000/- was disclosed. The survey party inventorized the stock of gold on the date of survey which was found to be in 2143.622 grams in quantity physically available whereas the stock availability of the gold as per books of accounts was 543.620 grams. Thus, the excess gold to the tune of 1600.002 grams was found which was valued at Rs.10,00,000/- @ Rs.6250/- per 10 grams. The same was shown by the assessee as his income at the time of filing the return. The assessee has claimed loss of Rs.1,80,874/- which was allegedly incurred due to fluctuating rate of gold over the year. The contention of the assessee was not accepted on the reasons that accounts of various parties as appearing in the books are not tallying with the contra accounts obtained from those parties, there was difference in the purchases, unaccounted cash is introduced, there was unexplained deposit in the bank account of Rs.9,35,000/- for which no plausible explanation is given and the ITA No.3485/Ahd/2007 and 2527/Ahd/2009 3 Shri Dadaseb K. Jadav, Palanpur assessee has resorted to under-pricing in the sale price of gold subsequent to the date of survey. On the basis of irregularities noted above by the AO in the books of accounts, book results were rejected u/s 145(3) of the IT Act. The AO estimated the profit for current year at 2.28% taking average of gross profit declared by the assessee in preceding 3 years and addition was made by applying the same against total turnover by rejecting the theory of gross loss. Addition of Rs.2,57,405/- was accordingly made. It was submitted before the learned CIT(A) that loss was resulted in normal course of business which were due to continuous fluctuation in purchase and sale rates. Complete details had been filed and there were certain wrong postings of certain entries made by the Accountant which were tried to be reconciled at the assessment stage. It was further explained that the contra accounts which were not tallied as per the AO, the Accountant has given wrong credit to Abhushan Jewellers. It w as further submitted that there was a typing mistake in the case of Dhara Jewellers and wrong postings have been made to the accounts of Chokshi Paritosh Ramanlal. In the case of Bhumi Jewellers, difference was due to wrong postings which have been reconciled by making correct postings. It was further submitted that other discrepancies were also reconciled which were mainly on account of wrong postings in the case of other parties which stand reconciled before the AO. It was, therefore, submitted that since all the points raised by the AO were reconciled, therefore, the said amount should be excluded which have been reconciled. The learned CIT(A) considering the explanation of the assessee and material on record partly accepted the contention of the assessee. The learned CIT(A) ITA No.3485/Ahd/2007 and 2527/Ahd/2009 4 Shri Dadaseb K. Jadav, Palanpur however, found that the assessee tried to explain sale price of gold but the explanation is not correct. It was found that the assessee understated price of gold which was not based on market price. Addition was, therefore, made in a sum of Rs.1,63,086/- as against made by the AO at Rs.2,57,405/-. The findings of the learned CIT(A) in the appellate order in Para 3.1 to Para 3.3 are reproduced as under:
"3.1 All these submissions have been verified by me and are found to be correct. The reconciled accounts have been placed at page 55, 26, 56, 57, 58, 51 and 59 of the paper book. On the basis of correct posting as is rectified by the appellant, all these accounts can be said to be fully reconciled and no adverse inference could be drawn.
3.2 The difference of Rs.2 lacs as pointed out by the ld. Assessing Officer between the purchases declared by the appellant to the Income-tax Department with that of the Sales tax department was also reconciled by the Authorised Representative by filing a copy of the Sales-tax order which is available at page 69 and 70 of the paper book. Since the purchases of Rs.35,37,500 shown to the IT department tallied with the same amount taken in the assessment order of the sales tax department, no adverse inference could therefore be drawn.
3.3 The reasons mentioned at Sr. No. (iii and iv) of para 1.2 above will be separately discussed while disposing off the ground of appeal No.4 and 2. The ld. Assessing Officer at page 6 of the assessment has observed that the average sale rate of gold during the period 21/3/2005 to 30/3/2005 was ranging between Rs.6,200/- to Rs.6,300/- per 10 grams whereas the appellant has shown the sales at Rs.5,950/- per 10 grams during this period. According to the ld. Assessing Officer, the appellant has resorted to the understatement of sale price of ITA No.3485/Ahd/2007 and 2527/Ahd/2009 5 Shri Dadaseb K. Jadav, Palanpur gold just to reduce its taxable profits as he had disclosed additional income of Rs. 10 lacs during the course of survey.
The ld. Authorised Representatives have tried to explain that their sale price is genuine because the gold has been sold at the market rate as was prevailing on different dates to various of its customers. The explanation so given by the Authorised Representatives does not appear to be logical because the other parties have sold the gold at an average rate of Rs.6200 to Rs.6300 per 10 gram and therefore, the sale rate disclosed by the appellant at Rs.5,950/- per 10 grams is definitely not on the basis of the market price of the gold during this period. There is an apparent difference of Rs.300 per 10 grams. The appellant has sold 543.620 grams during 22nd March to 30th March,2005 which is to be multiplied by Rs.300/- per 10 grams so as to work out the understatement of sales. In this manner, the addition can be estimated at Rs.1,63,086/- as against Rs.2,57,405/- estimated by the Assessing Officer taking the average G.P. rate for the last three preceding years. It would thus be fair and reasonable to restrict the addition to Rs.1,63,086/- which will have effect of reducing the gross loss to Rs.17,788/-. The addition of Rs.2,57,405/- is therefore, deleted."
5. The learned DR relied upon the order of the AO and submitted that excess stock was found and assessee has not explained the discrepancies, therefore, addition was rightly made by the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below.
6. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The learned Counsel for the assessee admitted that the assessee has not preferred any appeal against the addition maintained by the learned CIT(A). The order of the learned CIT(A) reveal that for excess stock found during ITA No.3485/Ahd/2007 and 2527/Ahd/2009 6 Shri Dadaseb K. Jadav, Palanpur the course of survey, the assessee has declared the same unaccounted income and the further discrepancies found on verification of accounts, the assessee explained the same before the learned CIT(A). The learned CIT(A) accepted all the accounts which have been fully reconciled. Since it is a departmental appeal and nothing is produced before us to contradict the findings of the learned CIT(A), therefore, we do not find any justification to interfere in the order of the learned CIT(A) in deleting part of the addition. Further, for understatement of sale price of the gold, the learned CIT(A) on proper appreciation of the facts comparable with market rage confirmed the addition against the assessee in a sum of Rs.1,63,086/-. Since, the assessee accepted this addition and no appeal is preferred, therefore, no further interference is called for in the matter. It appears that revenue has taken wrong ground of appeal because the learned CIT(A) has maintained part of the addition on this issue. This ground of appeal of the revenue has no merit and is accordingly dismissed.
7. On ground No.2, revenue challenged the order of the learned CIT(A) in deleting the addition of Rs.9,35,000/- on account of unexplained investment. The assessee has deposited Rs.2,95,000/- and Rs.6,40,000/- as cash in the bank account on 24-03-2005. The AO treated the entire cash deposit to be unexplained money of the assessee as according to him, the assessee was not having sufficient cash balance in his books of accounts on this date. It was submitted before the learned CIT(A) as regards deposit of Rs.2,95,000/- that the assessee has withdrawn the same amount from cash in hand on ITA No.3485/Ahd/2007 and 2527/Ahd/2009 7 Shri Dadaseb K. Jadav, Palanpur 24-03-2005. The assessee was having cash balance of Rs.4,82,744/- as on 24-03-2005 and copy of the cash book was filed in support of the same. The Accountant instead of making entry of cash withdrawal on 24-03-2005 has wrongly made entry on 27-03-2005. It was, therefore, explained that the assessee was having sufficient cash balance for making deposit in the bank. In order to explain cash deposit of Rs.6,40,000/- in the bank on the same day, it was submitted that this money belonged to wife of the assessee which was handed over to her Accountant to be deposited in her own bank account because she was to issue cheques of the equal amount in favour of her husband. However, the Accountant committed a mistake and instead of depositing the said cash amount in her bank account, he directly made the deposit in the bank account of the assessee. Later on, when this mistake was realized the amount was withdrawn from the bank and it was returned to the wife of the assessee on 31-03-2005. Her personal cash book was produced in support of the same contention. She was assessed to tax, also having Permanent Account Number and she filed written confirmation to that effect. It was, therefore, submitted that addition is clearly unjustified. The learned CIT(A) considering the explanation of the assessee and material on record deleted the entire addition. His findings in Para 4.3 of the appellate order are reproduced as under:
"4.3 The contention of the Authorised Representatives regarding the cash deposit of Rs.2,95,000/- in the bank account as on 24/3/2005 needs to be accepted because the appellant was having sufficient c ash in hand of Rs.4,82,744/- in his books of accounts as on that date. The amount of Rs.2,95,000/- could thus easily be despoiled out the cash in hand. While ITA No.3485/Ahd/2007 and 2527/Ahd/2009 8 Shri Dadaseb K. Jadav, Palanpur making the entries in the books, the accountant has wrongly shown the withdrawal of cash from the cash book on 27/3/2005 whereas it should have been posted on 24th March,2005. I also find that even on 27th March, 2005, the appellant was having cash in hand of Rs.5,38,644/-. It will be little harsh to penalize the appellant just because the Accountant has made a wrong posting of the withdrawal of cash on 27/3/2005. In the background of these facts, the cash deposit of Rs.2,95,000/- in the bank on 24-3-2005 cannot be held to be unexplained as the appellant was having sufficient cash in hand.
In so far as the other cash deposit is concern, the explanation given by the appellant in this regard appears to be correct on the fact of it. Smt. Sumanben D. Jadav was having cash of Rs.6,40,000/- which she wanted to give it her husband through normal banking channel. She handed over the money to her accountant who incidentally happens to be the accountant of her husband also. The money was meant to be deposited in her bank account but the accountant deposited the same money in the bank account of her husband. The plea of Smt. Sumanben D. Jadav appears to be believable because the accountant seems to be a careless person who has messed up th4e accounts of the appellant in so many ways. In so far as the course of Rs.6,40,000/- is concerned, she has owned up the cash in her hand and has accepted it to be belonging to her. Her identity is not in doubt because she is regularly assessed to tax with t4he same Assessing Officer having PA No. ABNPJ 2441 A. She has confirmed in writing having given the money and she has also confirmed to have received the money back from her husband on 31/3/2005. In this background of the matter, the source of the cash having been given by the wife of the appellant, can be said to be explained in the hands of the appellant. The addition of Rs.9,35,000/- is therefore, deleted."
8. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The assessee produced sufficient material and evidences and confirmation before the learned CIT(A) to explain the availability of sufficient cash for the purpose of ITA No.3485/Ahd/2007 and 2527/Ahd/2009 9 Shri Dadaseb K. Jadav, Palanpur deposit in the bank account. The amount given by wife of the assessee which was wrongly deposited in the bank account of the assessee was also explained through evidences and confirmation on record. Considering the findings of the learned CIT(A) on the basis of evidences and material on record, we do not find it to be a fit case for interference. The assessee explained the source of deposits of the cash in his bank account; therefore, this ground of appeal of the revenue has no merit and is dismissed.
9. On ground No.3, revenue challenged the deletion of addition of Rs.2,24,746/- on account of labour for gold and silver refining. The AO made the above addition because during the assessment year the assessee has not shown any labour income. The AO noted that such income was shown in the earlier assessment year; therefore, the AO on average basis of last 3 years estimated labour income and made the addition. It was submitted before the learned CIT(A) that since no income is earned in this assessment year, therefore, it was not a real income but the AO made the addition on account of imaginary income. Nothing was detected during the course of survey if the assessee earned any labour income, therefore, no addition could be made. The learned CIT(A) accepted the contention of the assessee because no evidence was brought on record by the AO to prove that the assessee had in fact earned any labour income on this issue. No evidence was also found during the course of survey to prove contention of the AO. Addition was accordingly deleted.
ITA No.3485/Ahd/2007 and 2527/Ahd/2009 10Shri Dadaseb K. Jadav, Palanpur
10. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The AO merely on the basis of the income declared on account of labour in earlier years presumed that the assessee has earned labour income in this assessment year also. No evidence however, was brought on record to support such contention of the AO. No material was also found during the course of survey against the assessee on this issue. Therefore, the learned CIT(A) on proper appreciation of facts and material on record rightly deleted the addition. This ground of appeal of the revenue has no merit and is dismissed.
11. In the result, the departmental appeal is dismissed.
ITA No.2527/Ahd/2009: (AY -2005-06)(Assessee's appeal)
12. This appeal of the assessee is directed against the order of the learned CIT(A)-XV, Ahmedabad dated 18-06-2009 for assessment year 2005-06, challenging levy of penalty u/s 271 (1) ( c ) of the IT Act in a sum of Rs.49,910/-.
13. The facts of the case are already noted above in which the learned CIT(A) on quantum restricted the addition to Rs.1,63,086/- on which we have considered ground No.1 of departmental appeal. The AO on the basis of the addition confirmed by the learned CIT(A) found that the assessee has sold the gold at lesser value and it is nothing but understatement of sales. The AO collected information from other parties in support of the same contention and therefore, held that the assessee has deliberately understated the sales as ITA No.3485/Ahd/2007 and 2527/Ahd/2009 11 Shri Dadaseb K. Jadav, Palanpur worked to reduce the tax liability. The assessee has not put forth any further explanation regarding manipulation in the profits. Penalty was accordingly levied for furnishing inaccurate particulars of income to the extent of Rs.1,63,086/-. We have noted that the learned CIT(A) confirmed the addition to that extent in the appellate order and the assessee has not preferred any appeal on quantum before the Tribunal as is submitted by the learned Counsel for the assessee. It, therefore, stands proved that addition of Rs.1,63,086/- has become final against the assessee on which the AO imposed penalty and the learned CIT(A) confirmed the penalty because the suppression of sales was found against the assessee.
14. The learned Counsel for the assessee submits that it is an estimated addition, therefore, no penalty is leviable and replied upon the decision in the case of Reliance Petroproducts Pvt. Ltd., 322 ITR 158 in which it was held that "where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting penalty.
15. On the other hand, the learned DR relied upon the orders of the authorities below and submitted that if there would not have been any survey conducted in the premises of the assessee, the understatement of sale price of the gold would not have been detected and the assessee would not have come out to surrender the additional amount for taxation, therefore, penalty was rightly imposed in the matter.
ITA No.3485/Ahd/2007 and 2527/Ahd/2009 12Shri Dadaseb K. Jadav, Palanpur
16. We have considered the rival submissions and material on record. The Hon'ble Delhi High Court in the case of CIT Vs Harparshad And Company Ltd., 328 ITR 53, held as under:
"Held, that the reasons given by the Tribunal for quashing the penalty proceedings were irrelevant, not germane to the issue and the Tribunal had lost sight of aspects which had been conclusively established in the quantum proceedings. The Tribunal had failed to take note of the fact that part of the claim as commission was allowed to the assessee not because R had rendered any services but because J had rendered services for which it was paid 1 per cent of the commission by R out of the 3 per cent received by her. As far as commission to R was concerned, it was accepted by the Tribunal in the quantum proceedings that she did not render any services at all. The assessee had failed to offer any explanation in respect of the addition of Rs.1,83,078 and it could be deemed to have concealed the particulars of income or furnished inaccurate particulars thereof, by virtue of this explanation. The Tribunal was not justified in deleting the penalty imposed by the Income-tax Officer under section 271 (1) (c) of the Act.
The findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any additional or fresh circumstances in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified.
Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision.
ITA No.3485/Ahd/2007 and 2527/Ahd/2009 13Shri Dadaseb K. Jadav, Palanpur The Explanation appended to section 271 (1)
(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271 (1) (c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the mater of prosecution under section 276C of the Act."
16.1 The Hon'ble Bombay High Court in the case of Jyoti Laxman Konkar Vs CIT, 292 ITR 163 held as under:
"The assessee had filed a return for the assessment year 1999-2000 declaring an income of Rs.7,40,510. Not satisfied therewith, the Assessing Officer carried out a survey under section 133A of the Income-tax Act, 1961, and during the survey found that there was a discrepancy in stock to the tune of Rs.18,28,706 which was brought to the notice of the assessee, and the assessee filed a revised return disclosing additional income of Rs.18,28,706. The Assessing Officer imposed penalty under section 271 (1) ( c ) and this was upheld by the Tribunal. On appeal to the High Court:
Held, dismissing the appeal, that the question whether there is concealment of income or not has to be decided with reference to the facts of a given case and the fact finding authorities under the Act having come to the conclusion that in the facts of the case, the assessee had concealed the income initially with a view to avoid payment of tax, the imposition of penalty was valid."ITA No.3485/Ahd/2007 and 2527/Ahd/2009 14
Shri Dadaseb K. Jadav, Palanpur 16.2 The Hon'ble Gujarat High Court in the case of LMP Precision Engg. Co. Ltd. Vs DCIT (Assessment), 330 ITR 93, held as under:
"Held, that it was only after the statement of the chairman and managing director was recorded by the Deputy Director of Income-tax (Investigation), Mumbai, that the first disclosure dated October 20, 1988, Rs.54,71,463 was made accompanied by another disclosure of Rs.54 lakhs in a round figure being divided into three segments of Rs.18 lakhs each for assessment years 1986-87, 1987-88 and 1988-89. The revised return declaring a sum of Rs.78,56,613 came about as a consequence of follow- up proceedings undertaken by the Deputy Director of Income-tax in relation to the other three suppliers, viz., SC, NB and NPST. Therefore, the assessee could not be stated to have voluntarily come forward to disclose income which had unintentionally been omitted from the original return of income. The imposition of penalty was valid."
17. Considering the facts of the case in the light of the above decisions, we are of the view penalty is rightly imposed by the AO which has been rightly confirmed by the learned CIT(A). In this case, it is undisputed fact that excess gold was found during the course of survey; therefore, the assessee surrendered additional income. Several discrepancies were found in the accounts of the assessee which were based upon the material found during the course of survey. Some of the discrepancies were reconciled by the assessee but it was specifically found that the assessee has resorted to under- pricing the sale price of gold subsequent to survey. The assessee could not file any satisfactory explanation before the authorities below, therefore, on the basis of the material on record and market ITA No.3485/Ahd/2007 and 2527/Ahd/2009 15 Shri Dadaseb K. Jadav, Palanpur price of the gold and the market price ascertained by the AO for gold, it was found that the assessee understated sale price of the gold. The finding of facts recorded by the authorities below have not been disputed by the assessee in which the learned CIT(A) confirmed the addition of Rs.1,63,086/-. The assessee did not challenge the said addition before the Tribunal. Thus, it has been finally concluded that the assessee understated the gold price which was not as per the market rate. Had there been no survey conducted in the business premises, the understatement of gold price could not have been unearthed. The assessee would not have disclosed the additional amount for the purpose of taxation. The assessee ultimately accepted the addition because the assessee has no explanation whatsoever to explain understatement of the gold price. Despite in survey, material found against the assessee, the assessee again deliberately furnished inaccurate particulars of income to the extent of Rs.1,63,086/- because after survey, assessee manipulated trading loss to reduce tax liability of tax payments. It was done so by reducing the sale price of gold. It is not an estimated addition as made by the learned CIT(A). The findings recorded by the learned CIT(A) are reproduced above in this order on ground No.1 of the departmental appeal clearly prove that it is specific addition made against the assessee in respect of understated of the gold price as compared with the market price. Therefore, the decisions cited above squarely apply to the case of the assessee. The findings given in the quantum proceedings have a probative value against the assessee and the assessee has not produced any fresh evidence, material before the authorities below to explain the above issue. Therefore, ITA No.3485/Ahd/2007 and 2527/Ahd/2009 16 Shri Dadaseb K. Jadav, Palanpur penalty is rightly attracted in the case of the assessee. The decision in the case of Reliance Petroproducts Pvt. Ltd. (supra) would not support the case of the assessee. We accordingly, confirm the order of the learned CIT(A) in confirming levy of penalty against the assessee. The appeal of the assessee has no merit.
18. In the result, the appeal of the assessee is dismissed.
19. In the result, the departmental appeal and the appeal of the assessee, both are dismissed.
Order pronounced in the open Court on the date mentioned above.
Sd/- Sd/-
(A. MOHAN ALANKAMONY) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Deka/--
Lakshmikant Deka/
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Dy. Registrar, ITAT, Ahmedabad