Income Tax Appellate Tribunal - Delhi
Ajay Kumar Aggarwal, New Delhi vs Department Of Income Tax
ITA NO. 2210/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A", NEW DELHI
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 2210/Del/2011
A.Y. : 2007-08
I.T.O., Ward-32(2), vs. Sh. Ajay Kumar Aggarwal,
Room No. 332-B, CR Building, C-7, Gurudwara Road, Housing
New Delhi Society,
N.D.S.E.-I, New Delhi
(PAN/GIR NO. : AAGPA8915Q)
(Appellant ) (Respondent )
Assessee by : Sh. B.C. Gupta, CA & Manju Goel
CA
Department by : Sh. Bhim Singh, D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXVI, New Delhi dated 24.2.2011 pertaining to assessment year 2007-08.
2. The grounds raised read as under:-
i) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (A) was not justified in deleting the addition of ` 8,02,700/- on account of excess cash found and accepted by the assessee in his statement during the course of survey u/s. 133A.1
ITA NO. 2210/Del/2011
ii) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (A) was not justified in deleting the addition of ` 18,20,000/- on account of renovation of shop from unaccounted sources being accepted by the assessee during the course of survey u/s. 133A.
iii) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (A) was not justified in deleting the addition of ` 8,17,962/- on account of excess stock found at the premises of the assessee during the course of survey u/s. 133A.
iv) The appellant craves leave to add, alter or amend any / all the grounds of appeal before or during the course of hearing of the appeal.
3. The assessee in this case is an individual and proprietor of M/s Ceramique Point. A survey u/s. 133A was conducted at the business premises of the assessee. During the course of survey a surrender of ` 4000526/- was made by the assessee vide his statement recorded on 8.3.2007.
3.1 As regards issue of excess cash found of ` 8,02,700/-, Assessing Officer observed that during the course of survey cash of ` 842161/- was stated to have been found whereas the cash book recorded the availability only ` 39461/-. Assessee surrendered the excess cash. However, in the return of income, assessee has not disclosed this amount of surrender on the ground that the statement was obtained under compulsion.
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4. Upon assessee's appeal Ld. Commissioner of Income Tax (A) observed that the Assessing Officer has not brought on record the detailed inventory of the cash found. He noted that infact ld. Counsel of the assessee stated that no such inventory was prepared. Ld. Commissioner of Income Tax (A) held that the Assessing Officer has not referred to the existence of any such cash inventory. In the absence of inventory of cash stated to have been drawn, but not evidenced by any record, he held that the finding of excess cash found during the survey is false. In this background Ld. Commissioner of Income Tax (A) deleted the addition.
5. Against the above order the Revenue is in appeal before us.
6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that following was a detail of cash found during the survey, copy of statement was duly submitted by the ld. Counsel of the assessee. The same inventory read as under:-
(Rs.)
i) 1000x100 = 1,00,000
ii) 500x1362 = 6,81,000
iii) 100 x 519 = 51,900
iv) 500 x 50 = 7,500
v) 20 x 15 = 300
vi) 10 x 132 = 1,320
vii) Coins = 141 = ` 8,42,161/-3
ITA NO. 2210/Del/2011 From the above, we note that Ld. Commissioner of Income Tax (A) has clearly erred in holding that there no inventory of cash found. The inventory of cash was duly found at the time of survey and excess cash was noted. The cash inventory prepared was duly signed by the assessee. Under the circumstances, the addition regarding the excess cash found is sustainable. The case law relied upon by the ld. Counsel of the assessee in the case of C.I.T. vs. S. Khader Khan son 254 CTR 228 (SC) is not applicable on the facts of the present case. In the said decision, it was that section 133A does not empower any IT authority to examine any person on oath and, therefore, any admission made in a statement recorded during survey cannot, by itself, be made the basis for addition. We find in this case that the addition is not solely based on statement recorded u/s. 133A. The additions were duly backed by cash inventory prepared at the time survey. The balance in the cash book was also noted at the time of survey. Under the circumstances, in our considered opinion, the addition in this regard is sustainable. Hence, we set aside the order of the Ld. Commissioner of Income Tax (A) on this issue and restore of the Assessing Officer in this regard.
7. Apropos addition of ` 18,20,000/- made on account of office renovation expenses.
On this issue on the basis of statement given at the time of survey, Assessing Officer observed that huge expenditure of ` 18,20,000/- was incurred on the renovation of shop. The Assessing Officer made the addition in this regard based upon the survey statement.
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8. Assessee appealed before the Ld. Commissioner of Income Tax (A) and the Ld. Commissioner of Income Tax (A) observed that there is no evidence on record which would even remotely suggest that huge expenditure of 18,20,000/- has been incurred in renovation of the shop. Ld. Commissioner of Income Tax (A) observed that earlier in the surrender statement on this account the assessee has stated "no major renovation has been done in this premises, it is in the nature of normal repairs.... however, to buy peace I am surrendering ` 18,20,000/- on account of renovation of this shop."
8.1 From the above, Ld. Commissioner of Income Tax (A) observed that it is evident that addition of ` 18,20,000/- was not based on any material or evidence. The premises are stated to be on rent. At the time of survey no unaccounted bills or vouchers relating to this expenditure have been found or identified. Accordingly, Ld. Commissioner of Income Tax (A) held that the addition was unjustified and accordingly, he deleted the same.
9. Against the above order the Revenue is in appeal before us.
10. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that at the time of survey no evidence was found regarding the assessee's alleged huge expenditure of ` 18,20,000/- on the renovation of shop. We find that during the survey no unaccounted bills or vouchers relating to this expenditure have been found. The addition was totally based on the statement recorded during the survey. We find that the case law from the Hon'ble Apex Court in the case of C.I.T. vs. S. Khader Khan son 254 CTR 228 (SC) (Supra) is applicable on the case that without any corroborative material merely on the basis of statement recorded 5 ITA NO. 2210/Del/2011 on survey, the addition is not justified. Accordingly, we uphold the order of the Ld. Commissioner of Income Tax (A) on this issue.
11. Apropos addition on account excess stock found.
On this issue the stock was inventorised at the time of survey and was determined at ` 8072465/- after reducing the gross profit of 4.98%. A difference of ` 8,36,677/- of the stock as per books and stock actually found was determined. Assessee has surrendered the same amount.
12. Before the Ld. Commissioner of Income Tax (A) it was submitted that the addition in this regard is totally unjustified. It was further submitted that the assessee valued closing stock at cost price and market price whichever is lower. It was further submitted that the average discount provided in this regard on the purchase was 18 to 24% approx. on the rate mentioned in the bill. Accordingly, it was submitted that the valuation as taken by the survey team on the MRP of items was misleading and unjustified. Considering the above, Ld. Commissioner of Income Tax (A) observed that on being confronted with the excess stock found in reply to query no. 19 the assessee has clarified that "Physical inventory has been valued at MRP. If it is taken at cost price there should not be any difference." However, as per the assessee's own admission stock register was not maintained. Hence, it was not possible to show the cost price of each and every item because of numerous items. Ld. Commissioner of Income Tax (A) observed that stock inventory prepared during the survey has been perused and it is seen that the value has been taken on MRP. The copy of various purchases bills filed by the assessee's counsel clearly shows that as per the purchase bills discount ranging to 18 to 30% has 6 ITA NO. 2210/Del/2011 been provided to the assessee. Ld. Commissioner of Income Tax (A) concluded as under:-
"Therefore, taking all factors into consideration, including the wide variety of items as also the discount on purchases, it would be reasonable to allow a further deduction of 20% on the MRP value. On the MRP value a further deduction @ 20% of ` 1614493/- is allowed to the appellant. The position of stock as per trading account on the date of survey therefore works out to be ` 6457972/-. The stock as per books is supposed to be ` 6833779/-. Thus there is a shortage of stock of ` 375807/-. In view of shortage the only possibility is that the appellant has indulged in sales outside books. As the appellant has declared a GP rate of 4.98% in the preceding year, applying the same rate of 4.98% the sum of ` 18715/- is treated as undisclosed profit outside books of account. Therefore, as discussed there is no case for making an addition on account of excess stock and the addition of ` 836677/- is in principle deleted; however the addition is partly substituted by the addition of ` 18715/- being 'undisclosed profits' on the sale outside the books. The appellant accordingly gets a relief of ` 817962/-."
13. Against the above order the Revenue is in appeal before us.
14. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that it is the contention 7 ITA NO. 2210/Del/2011 of the assessee on this issue that the stock at the time of survey was valued at MRP. If the necessary valuation is done by applying the average purchase cost the same would not result any discrepancy in stock. In our considered opinion, Ld. Commissioner of Income Tax (A) has correctly observed that it would be reasonable to allow 20% discount on the MRP value. In our considered opinion, Ld. Commissioner of Income Tax (A) has taken a correct view of the matter which does not need any interference on our part. Accordingly, we uphold the order of the Ld. Commissioner of Income Tax (A) on this issue.
15. In the result, the appeal filed by the Revenue is partly allowed.
Order pronounced in the open court on 19/12/2012.
Sd/- Sd/-
[RAJPAL YADAV]
YADAV] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 19/12/2012
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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