Income Tax Appellate Tribunal - Chennai
Kumbakonam Silver Shop, Salem vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' Bench Chennai
BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT
AND
SHRI S.S.GODARA, JUDICIAL MEMBER
.....
ITA Nos.890 to 893/Mds./2013
Assessment years:2005-06,2009-10,2009-10 & 2005-06
M/s.Kumbakonam Silver The Deputy
Shop, Commissioner of Income
364,Bazaar Street, Vs. Tax, Central Circle-I,
Salem 636 001 Coimbatore.
PAN AACFK 1324 P
(Appellant) (Respondent)
ITA No.1361Mds./2013
Assessment year:2009-10
&
C.O.No.130/Mds.2013
The Deputy M/s.Kumbakonam Silver
Commissioner of Income Shop,
Tax, Central Circle-I, Vs. 364,Bazaar Street,
Coimbatore. Salem 636 001
PAN AACFK 1324 P
(Appellant) (Respondent/
Cross objector)
2 M/s.Kumbakonam Silver Shop
Assessee by : Shri S.Sridhar,
Advocate
Revenue by : Shri P.B.Sekran,
CIT D.R.
Date of Hearing : 26.08.13
Date of Pronouncement : 29.08.13
ORDER
PER S.S.GODARA JUDICIAL MEMBER:
ITA Nos.890 & 893/Mds/13 (A.Y. 2005-06) These two appeals filed by the assessee arise from different orders of CIT(A)-II, Coimbatore dated 25.02.2013 and 22.03.2013 in I.T.Appeal No.99/10-11 and No.23/11-12 in proceedings under section 153C read with section 143(3) of the Income Tax Act, 1961 (in short 'the Act') and under section 271(1)(c) of the Act, respectively. The relevant assessment year is 2005-06 in both the appeals.
2. At the outset, the assessee in the course of hearing clarifies that ITA No.890/Mds./13 is a quantum appeal whereas ITA No.893/Mds./13 pertains to penalty proceedings. Thereafter, it vehemently argues that in ITA No.890/Mds./13, the CIT(A) has erred in confirming the addition made by the Assessing Officer of `44,76,042/- as undisclosed income. Coming to the penalty 3 M/s.Kumbakonam Silver Shop appeal, it is the contention of the assessee that the same has been wrongly imposed by the Assessing Officer and confirmed by the CIT(A). Accordingly, the assessee prays for acceptance of both the appeals.
3. The case of the Revenue in both the appeals is that the CIT(A) has rightly confirmed the findings of the Assessing Officer in the quantum as well as penalty proceedings.
4. The assessee is a 'firm', engaged in retail business of jewellery. It belongs to one AVR Santhagopalan group in Salem. On 29.01.2009, the group was subjected to a 'search' by the department. On the very same day, a 'survey' was also conducted in assessee's business premises. Since the department had seized certain documents pertaining to assessee in the course of search from the residential premises of Shri A.R.Santhagopalan Chettair, a notice stood issued under section 153C of the Act. The documents recovered forming the basis of the said notice were party balance and general balance of the assessee upto 14.09.2004. It is reiterated that the relevant assessment year is 2005-06 and accounting period is from 01.04.2004 to 31.03.2005.
4 M/s.Kumbakonam Silver Shop
5. On being asked to reconcile the entries in the party balance and general balance aforesaid, the assessee's explanation was that before 25.09.2004, its partners were Sri A.R.Santhagopalan, Sri A.S.Ramesh, Sri A.B.Sundarsanam, Smt.B.Jayalakshmi ammal and Sri S.B.S.Sanjjay. It would further explain that with effect from 25.09.2004, Sri A.B.S.sanjjay, Smt.Jayalakshmi Ammal and Sri A.B.S.Sanjjay entered into a division of the firm and took some of the staff. The assessee pleaded that Sri A.B.Sundarsanam had lent some advances to the staff of the firm out of whom, most of them had either retired or left with the partners above said. It submitted that because of these reasons, the advances made were not accounted in the capital accounts of the partners or in its books. As we find from the assessment order dated 30.11.2010, the Assessing Officer summarily rejected the assessee's explanation by holding that since the transactions were outside the books of accounts, the amount in question of ` 44,76,042/- deserved to be assessed undisclosed income. Accordingly, it was added in the assessee's total income. Penalty notice was also issued under section 271(1)(c) of the Act. The addition has also been confirmed in appeal by the CIT(A).
5 M/s.Kumbakonam Silver Shop In this backdrop of the facts, we are seized of the quantum appeal.
6. Coming to the penalty proceedings, the assessee's explanation above said remained same as in the course of assessment(supra), before the Assessing Officer. However, the Assessing Officer in the penalty order dated 16.03.2011 was of the view that since transactions were not reflected in the books, the act of the assessee amounted to a case of deliberate concealment of income. Accordingly, he imposed penalty of `16,37,895/-. The CIT(A) has upheld the penalty in assessee's appeal. Therefore, ITA No.893/Mds./13 is before us.
7. We have heard both parties qua the quantum as well as penalty proceedings. The common facts relevant to both the cases stand narrated hereinabove. Undisputedly neither the Assessing Officer nor the CIT(A) have adverted to verify the genuineness of the assessee's explanation aforesaid. No attempt has been made to find out as to whether the division of the firm dated 25.09.2004(supra) had in fact taken place or not. Furthermore, in view of the fact that in the assessment order, the names of the employees and other people who had been 6 M/s.Kumbakonam Silver Shop advanced money stand duly mentioned in the general balance as well as party balance statements, we hold that these details have nowhere been verified neither in the course of assessment nor by the CIT(A) in accordance with law. Therefore, in our opinion, the mere fact that the assessee has not accounted the aforesaid entries in the nature of irrecoverable advances to its former staff members who went with the retiring partners or retired in the nature of irrecoverable sums, would not lead to any 'undisclosed' income of the assessee. In these circumstances, both the authorities below have not taken into consideration the explanation of the assessee in appropriate light of facts Therefore, instead of restoring the issue back to the file of the Assessing Officer, we are of the opinion that in the interest of justice would be met in case a lump sum addition of ` 20 lakhs is deleted in favour of the assessee and against the Revenue out of total amount of ` 44,76,042/-. Hence, we partly accept the quantum appeal No.890/Mds./13 filed by the assessee.
8. Now, we come to the assessee's appeal ITA No.893/Mds./13 arising out of penalty proceedings. In view of our observations herein above in quantum appeal, there is hardly any scope for us to hold that the act of the assessee in not accounting 7 M/s.Kumbakonam Silver Shop for irrecoverable advances as income leads to concealment within the meaning of section 271(1)(c) of the Act. Therefore, the impugned penalty stands deleted.
8.1 Consequently, appeal No.890/Mds./13 is partly allowed whereas appeal No.893/Mds./13 is allowed.
ITA Nos.892 & 891/Mds./13 (A.Y. 2009-10)
9. These two are assessee's appeals for assessment year 2009-10 against separate orders passed by CIT(A)-II, Coimbatore dated 25.02.2013 in I.T.Appeal No.101/10-11 in proceedings under section 143(3) of the Act, whereas ITA No.891/Mds./13 arises from the order dated 22.03.2013 in ITA No.22/11-12 in proceedings under section 271AAA of the Act.
10. In the course of hearing, the assessee vehemently argues that the CIT(A) has wrongly confirmed the addition of `13,43,518/- qua value of excess stock of gold jewellery in its total income by the Assessing Officer. In ITA No.891/Mds./13, it is also the contention of the assessee that the CIT(A) has wrongly confirmed the penalty imposed by the Assessing Officer under 8 M/s.Kumbakonam Silver Shop section 271AAA of the Act. Accordingly, it prays for acceptance of the appeals.
11. The Revenue strongly supports the order of the CIT(A) in quantum as well as penalty proceedings and prays for confirmation thereof.
We have heard both parties and gone through the case files.
12. Facts apropos common to both appeals are that in furtherance the impugned search hereinabove, the assessee filed its return of income on 16.08.10 declaring total income of `9,91,07,320/-. In the course of 'scrutiny', the Assessing Officer noticed that in the 'search' and 'survey', the department had inventorised gold jewellery weighing 183644.530 grams. On being asked to reconcile, the assessee is admitted to have accepted difference of 27,630.540 grams excess stock. It also offered gold weighing 1221.380 grams i.e. 27,630.540 - 26,409.380 grams as excess stock due to mistakes in weighing etc. We notice from the assessment order dated 30.11.2010 that the said explanation of the assessee qua the difference in stock failed to convince the Assessing Officer, who rejected possibility 9 M/s.Kumbakonam Silver Shop of a mistake either in weighing or in any other mode of computation including arithmetical error. Therefore, he added the impugned amount of `13,43,518/- under section 69 of the Act. Needless to say, the Assessing Officer made other additions of unexplained money, unaccounted old gold, purchase of gold coin and unaccounted sales etc. of ` 50,911/-, ` 3,25,380/-, `88,163/- & `2,50,594/- respectively. In view thereof, assessee's total income was assessed as `10,11,65,890/-. Along with the same, he also issued a notice for initiating penalty proceedings under section 271AAA of the Act.
13. Aggrieved, the assessee preferred appeal. We notice from the CIT(A)'s order in ITA No.892/Mds./13 that he has confirmed the impugned addition of excess stock in question and deleted the other additions except that of old gold, which has been upheld for want of challenge.
Therefore, the assessee has filed an appeal in ITA No.892/Mds./13 in quantum proceedings qua the addition of excess stock only.
10 M/s.Kumbakonam Silver Shop
14. Coming to the penalty proceedings under section 271AAA of the Act, the assessee pleaded before the Assessing Officer for deletion of the penalty proceedings in view of the fact that it had agreed to the additions only to purchase peace in the course of assessment proceedings. However, by taking notice of the search proceedings and consequent additions, the Assessing Officer imposed penalty of ` 1,34,352/- after computing the same at `28,392/- sales data from IBM server, old gold purchase, gold coin purchase, unexplained cash and excess stock of gold to the tune of ` 32,538/-,` 8,816/-,` 5,091/- & `1,34,352/- respectively.
15. In penalty appeal, the CIT(A) has accepted the assessee's contentions in part and confirmed the penalty of only ` 1,34,352/- qua excess stock. In this backdrop, the penalty involved in the instant appeal is only ` 1,34,352/- in ITA No.22/11-12.
16. Now we come to the quantum proceedings first. There is hardly any dispute on the factual position that the addition has arisen from a difference in the jewellery stock of 1221.380 grams(supra). As per the assessee, the same could have arisen because of some fault in weighing scale or in view of the fact that huge quantity of stock is involved. It is an admitted fact that was 11 M/s.Kumbakonam Silver Shop total stock of 183644.530 grams. Compared to the total stock, ultimate difference hardly comes to 1.5%. There is also a common practice in the jewellery business wherein some precious stones are embedded on the ornaments. Undisputedly, the assessee is jewellery retailer. It is also not a case of the Revenue that the stock is of pure gold without any impurities. In this background and taking into consideration the totality of the facts and circumstances of the case, we exercise our discretion vested under section 254 of the Act and hold that addition of 800 grams out of total difference weighing 1221.380 grams would be just and proper. Accordingly, the assessee gets relief of 421.380 grams and appeal No.892/Mds./13 is partly accepted.
As a sequel to our discussion in the quantum proceedings herein above, we hold that for the purpose of penalty proceedings, since the assessee had declared the stock along with all necessary particulars required under section 271AAA(2) of the Act, the present is not a fit case for confirmation of the penalty. Accordingly, ITA No.891/Mds./13 is accepted.
12 M/s.Kumbakonam Silver Shop ITA No.1361/Mds./13 & C.O. No.130/Mds./13
17. This Revenue's appeal as well assessee assessee's cross objections emanate from a common order of the CIT(A)-II, Coimbatore dated 22.03.13 in ITA No.100/11-12 in proceedings under section 154 of the Act.
18. Before us, the Revenue reiterates the grounds and strongly argues that the CIT(A) has wrongly held in favour of the assessee that the seized cash in the course of search can be adjusted as advance tax in the nature of existing liability and prays for acceptance of the appeal.
19. In reply, the assessee relies upon the CIT(A)'s order as well as pleadings in the cross objections and prays for rejection of the appeal.
20. Concise facts pertaining to this appeal are that in the course of search, an amount of `60 lakhs had been seized by the Department. We reiterate that search was conducted on 29-01- 2009. The assessee filed a petition under section 154 of the Act dated 13.02.09 pressing for adjustment of the aforesaid seized cash as its advance tax liability. Vide order dated 29.06.2011, the 13 M/s.Kumbakonam Silver Shop Assessing Officer relied upon Sec.132B(1) of the Act and held that advance tax sought to be adjusted by the assessee against the seized cash is not an 'existing' liability since a demand under section 210 of the Act did not arise in the case in hand.
21. Aggrieved, the assessee preferred appeal. It is evident from the order under challenge that the CIT(A) has placed reliance on the case law of CIT Vs. Ashok Kumar (2011) 334 ITR 355 (P&H) and that of Vishwanath Khanna Vs. UOI (2011) 225 ITR 548(Del.) in holding that the advance tax is also liable to be adjusted against the cash seized in the course of search. It is also noticed that the CIT(A) has placed reliance on Finance Bill, 2013 presented on 28.02.2013 proposing to amend the provisions under section 234A, 234B & 234C with effect from 01.06.2013 i.e. only prospectively. As per the CIT(A), in this backdrop of facts, the aforesaid case law would still hold good and the assessee's contentions are liable to be accepted.
Therefore, the Revenue is in appeal and assessee has preferred cross objections to support CIT(A)'s order.
22. We have given our thoughtful consideration to the rival contentions and perused the case file. The sole grievance of the 14 M/s.Kumbakonam Silver Shop Revenue is that the CIT(A) has wrongly granted relief to the assessee by holding that the seized cash can be adjusted as contended by the assessee as advance tax. We make it clear that the amount in question comes to be `18,16,470/-, which was paid by the assessee on 03.08.11. As stated herein above, the case law of Hon'ble Punjab & Haryana High Court (supra) has categorically settled the issue in assessee's favour by holding that seized amount would be liable to be adjusted against advance tax. We also find from the assessee's cross objections that the Finance Bill (supra) stand notified as an Act resulting into insertion of Explantion-2 to Sec.132B of the Act. It transpires from the annexure filed by the assessee in cross objections that the explanation takes effect only from 1st June, 2013. In other words, it does not apply retrospectively. In this view of the matter, we agree with the findings of the CIT(A) that the Assessing Officer had wrongly denied the benefit of adjustment of the seized cash against assessee's advance tax liability.
23. Consequently, the Revenue's appeal is dismissed and assessee's Cross Objections have become infructuous.
24. To sum up, appeals filed by the assessee ITA No.890/Mds./13 & ITA No.892/Mds./13 are partly allowed, and 15 M/s.Kumbakonam Silver Shop ITA No.891/Mds./13 & ITA No.893/Mds./13 are allowed. Appeal filed by Revenue ITA No.1361 is dismissed and Cross Objections by assessee become infructuous.
Order pronounced on Thursday, the 29th August, 2013 at Chennai.
Sd/- Sd/-
(DR.O.K.NARAYANAN) (S.S.GODARA )
VICE PRESIDENT JUDICIAL MEMBER
Chennai,
Dated 29th August, 2013 .
K S Sundaram
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file 16 M/s.Kumbakonam Silver Shop