TaxTMI 
TaxTMI 
2021 (5) TMI 913
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....0/- leading gross profit rate of 5.05%. 03. Assessee filed his return of income declaring an income of Rs. 4,656,960/- on 21/9/2013. Assessee's case was picked up for scrutiny and learned assessing officer issued a requisite notices u/s 143 (2) on 2/9/2014 and notices u/s 142 (1). LD assessing officer noted that assessee has shown proprietors capital of Rs. 24,732,346/- and opening stock of Rs. 51,051,565/- in return for assessment year 2013 - 14. Assessee has also shown sales of Rs. 52,851,660. It resulted into a gross profit of Rs. 180,095/-. Against this assessee has shown net profit of Rs. 875,491/-. Learned assessing officer asked assessee to file income tax return, computation of income for assessment year 2012 - 13, capital account for assessment year 2012 - 13, bank statements and also to explain why not disclosed in closing stock and proprietors capital account was filed for income tax return for assessment year 2000 - 11, 2011 - 12 and 2012 - 13. Assessee was also asked to explain from where capital and opening stock in assessment year 2013 - 14 has come. assessee submitted a detailed reply and submitted that both opening capital as well as opening stock are brought....
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....ther showing any expenses towards this nor can it be gathered that he has dedicated substantial time and efforts to do so, as he was pursuing fulltime professional courses during this period. He has in fact shifted all his stock from one place to another thereby exposing it to further degradation. He has not given any evidentiary proof of source of investment and purchase of stock neither has he give any satisfactory reply as to why correct figures of capital and stock were not filed in income tax returns for 6 consecutive years. Reasons for issuing summons to assessee were to confront him with all above facts and record his statement on oath, so that based on his replies further queries could have been asked to demystify the charade and ply presented by the assessee, however his absence from station for 10-12 days prevented this office from doing so. 18 The reason for selection of this case was introduction of capital in a year and difference in opening stock in current year with closing stock of previous year. Having regard to the discussion made in the foregoing paragraphs an amount of Rs. 5,10,51,565/- which is the opening stock of the assessee in AY 2013-14 is being treated as....
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....g stock is correct. Once the profit is accepted. The opening stock ought to have been accepted. The appellant has relied on the decision of the Hon'ble Supreme Court in the case of Union of India v. British India Corporation reported in 268 ITR 481. The portion of the judgment quoted is as under: ...... 10.15 Besides the above, the appellant has relied on three more decisions quoted on page 11 of the submission. These decisions are not being repeated here for the sake of brevity. 10.16 In the written submission, the appellant has submitted that he furnished the copy of the bank statements 4 both for saving account and current account. In the reply dated 16.10.2015 before the Assessing officer the details regarding party-wise sales were given. The assessee furnished the confirmation for the outstanding balances as on 31.3.2013 from Ms. Sushma Jain, Shri Krishan Jian, M/s BSR Industries Pvt. Ltd., Sh. Mayank Jain and Sh. Santosh Jain. During the year under consideration, the assessee was occupying C-2/4, Pragati Market, Ashok Vihar, Phase-2 as office and Plot No. 325 Phase-IV, HSIDC, Kundli, Haryana as godwon. The assessee has quoted the s....
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.... submission. It is pleaded that the Assessing Officer was not justified to reject the claim of the Appellant in the absence of any defect being poined out in the books of accounts maintained by the Appellant. Some of the decisions claimed to be supporting in his favour are referred to on page 30 and 31 of the submission. Another argument is that on addition can be made on the basis of surmises, suspicion and conjectures. It is submitted by the Appellant that he furnished sale bills to support the transactions of sales and in supports of ownership and holding of the stocks in the instant year. All the realization of the sales was substantially by account payee cheques, duly recorded in the books of account. The Appellant has submitted that the whole foundation for this case has been laid down by the Assessing Officer on the basis of the alleged inspection report which was brief and vague without mentioning even the basic details as to the date of inquiry, individuals who were inquired etc. Even otherwise the premises inspected were not the business place used by the Assessee. No notice was given before carrying out any investigation and verification for the aforesaid premises. When ....
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....oath. Such business does not require any regular presence. The business can take place over the phone of the Assessee may be presence as and when required. The elder brother Sh. Mayank Jain had stated that Sh. Madhur Jain used to come home whenever required during his study. On the adverse comments of the Assessing Officer relating to change of godown it is submitted that the businessmen is entitled to take the decision in his interest and the department cannot set pinot the shoes of a taxpayer. The Appellant further argued that it is ironical that on one hand the Assessing Officer seeks to place reliance on the statement of sh. Alok Jain that there was no pressure on the Assessee to vacated the premises, on the other hand she sought to dispute the fact that there was no stock at the basement of the property owned by SH. Alok Jain. The stock was shfted way back in 2011 whereas the inquires were conducted by the Assessing Officer in 2016. The owner of the godown could not keep the space vacant all these years. 10.19 I have given due consideration to the inquire conduced by the Assessing Officer, submission of the Appellant and relevant case laws. The Assessing Officer has d....
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....e of the opening stock. That way the gross profit o the Assessee could be more than declared in the return. Bu this hypothesis will go against the logic of the Assessing Officer, which has been mentioned in para 17 of the Assessment Order that cloth being a VAT free product, is 8 many times misused to convert black money into white by showing sales and purchases of large amounts. As a matter of fact, if the hypothesis of inflation of the purchase or stock is admitted for the sake of the argument, that would go against the logic of the Assessing Officer whereby an Assessee could try to maximize the profit in the books of account instead of generating unaccounted profit. In the case of Pushpal Kumar Das vs. ITO, Ward-48(1), Kolkata in ITA No. 1442/Kol/2012 dated 10.12.2015, ITAT, Kolkata Bench 'C' , has held as under: ...... 10.20 From the above decision a logical proposition can be deduced here that after believing the sales or not rejecting the same through the inquiry, rejection of the corresponding debit side could result in absurdity. I find support from the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Bholanath Poly Fab Pvt. Ltd. reported in 3....
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....sion on the similar facts in the case of ITO vs. Manish Kanji Patel in ITA No. 7299/Mum/2014, 7154/Mum/2012& 7300/Mum/2014 dated 18.05.2017, ITAT 'H' Bench, Mumbai, wherein it has been held as under : ...... 10.25 From the above decisions, it can be held that where there are sales, there must be corresponding purchase or stock on the debit side of the Profit & Loss account. If the Assessing Officer has not brought out any facts to disbelieve the genuineness of the sales, it can be inferred that the same is possible only with available stock in any possible form. One can doubt the modus operandi or modus Vivendi of the business but if the sales have been accepted, the availability of stock cannot be doubted. 10.26 If for the sake of logic, observation of the Assessing Officer to the effect that claimed business of the cloth by the Assessee is not genuine and he only tried to introduce his black money into white by showing fictitious business activities, is accepted, the question would arise what benefit ultimately is gained by doing all this exercise. The Assessee has shown gross profit of Rs. 18,00,095/- and net profit of Rs. 8,75,491.50 meaning thereby maximum in....
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....on of the honourable Delhi High Court which confirmed the order of the coordinate bench wherein the addition on similar facts was deleted. He also referred to the decision of the learned CIT - A wherein in paragraph number 9.2 certain annexure filed by the assessee were considered by the learned CIT - A for deleting the above addition. He also referred paragraph number 10 of the order of the learned CIT - A wherein each issue raised by the learned assessing officer have been dealt with. Therefore, he submitted that there is no infirmity in the order of the learned CIT - A in deleting the above addition and now the issue is squarely covered in favour of the assessee. 09. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the written submission made by the learned authorised representative along with the paper book and various decisions cited therein. Coming straight made to the decision of the honourable Delhi High Court wherein the issue has been dealt with as Under:- "7. Briefly stated, the Respondent-Assessee, Shri Akshit Kumar filed his ITR on 31.03.2015 for AY 2014-15 declaring his income of Rs. 4....
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....heet of M/s Loraiya Trading there is no weighing machine in the fixed asset schedule. It was pertinent to note that as per the stock register, the unit of opening stock of cloth fabric is in Kilogram and not pre- packaged units like boxes or crates which may or may not require being weighed. e. The assessee had neither shown any building in its fixed asset schedule nor any rent expense in his P/L Account. The assessee had shown huge opening stock of 19,85,109.530 kg.valued at over Rs. 30 crores which would require considerable storage space. It is pertinent to answer if the assessee was indeed selling goods from the opening stock available with it, then where was this stock stored." 8. The AO conducted on the spot physical verification, under Section 133B of the Act, of the business premises of the Respondent- Assessee, to ascertain if the claimed business was actually in existence or not. As a result of the said survey, the AO concluded that the premises from where the Respondent-Assessee purportedly conducted his business had been abandoned for several years and there was no built-up area in its vicinity. The AO also gave a categorical finding that there was no ....
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....he very absence of the business place and even a weighing machine in the balance-sheet, coupled with the fact that there was no expenditure on account of rent, depreciation etc. in the profit and loss account of the Respondent-Assessee, the inferences drawn by the AO were correct. He submitted that maintaining a huge inventory of stock in the range of Rs. 20 to 30 Crores year after year and making comparatively small amount of sales, itself raised serious doubts about the genuineness of the business. He further submitted that the finding of the AO to the effect that the Respondent-Assessee had created a false business with the objective of laundering its unaccounted income is based on the enquiries conducted by the AO under Section 133B and also because the Respondent-Assessee had failed to appear in person even after being summoned under Section 131(1) of the Act to clarify the position. He submitted that learned ITAT had erred by not taking into consideration the findings of the AO raising serious concerns about the genuineness of Respondent-Assessee's claim of doing business which had been fully endorsed by the CIT(A). 10. We have carefully considered the contention....
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....ssessee's business or business premise could be found. The counter of the assessee on this issue had been that it was carried out form the space provided by M/s S.K. Wheels Pvt. Ltd., however, for that also AO observed that no credible evidence has been brought on record. For other evidences also like electricity bill to prove the location of M/s S.K. Wheels Pvt.Ltd. alongwith rental receipts from where M/s S.K. Wheels was functioning has not been accepted by the AO due to lack of any corroborative and independent evidence. On the issue where such a huge stock of fabrics have been alleged to be kept by the assessee, his main contention has been that same was kept in the premise provided by M/s S.K. Wheels which has given huge godown to the assessee without charging any rent as the said Company belonged to his family members. M/s S.K. Wheels was authorised dealer in Maruti Suzuki cars and in support confirmation from the said company has been given that rent free place has been given to the assessee during the financial year 2013-14. Electricity bill has also been produced to show that premises did existed at 75A/2, Kon Village Mumbai, Panvel, Raigad, the copy of electr....
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....was also the opening balance in this year and out of the said opening stock, sales of Rs. 4,20,62,550/- have been made and closing stock of Rs. 15,48,57,470/- has been shown on which gross profit of Rs. 15,40,360/- has been disclosed. The controversy to resolve here is, whether the stock in the books have been sold or not; or the entire deposits claimed out of sales in unaccounted money of the assessee. Going by the history of trading account in the earlier years, viz., opening stock, purchases, sales, closing stock, gross profit and the assessments made by the department, we find that way back in the assessment year 2007-08, assessment was passed u/s 143(3)/147, whereby the entire books of accounts have been scrutinised and assessee's income from business have been accepted. This inter-alia means that entire opening stock, sales and closing stock made during that year stands accepted. Again for assessment years 2008-09 to 2011-12, though returns have been accepted u/s 143(1), however the positions of stock were never disturbed and were duly reflected in the audited accounts. In the assessment year 2012-13 again the assessee's trading activity and books of accounts were sub....
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....nly that, if the gross profit is also not disturbed then the GP which is the balancing figure of opening stock and purchases on debit side and sales and closing stock on the credit side has not been disturbed then how the entire stock could have been disposed of by the assessee has not been dealt by the AO. If the AO's view is accepted that at no point of time there was any business carried out by the assessee, then how can the entire trading activity, stock purchased and sold and income derived there from which stood accepted in earlier years and assessments which have attained finality can be disregarded. If way back in the A.Y. 2006-07 assessee had made huge purchases of stock, the source of which has been disclosed in the books of account and audited financial statement and in the return of income for the assessment year 2006-07; and thereafter year by year assessee has been making purchases and sales or has been selling his stock carried forward from the preceding year which stands accepted, then in the impugned assessment year can it be held that there was no stock in existence at all and only activity done by the assessee was to deposit certain unaccounted cash in the ga....
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....s, therefore, non existence of stock or business cannot be upheld; secondly, the sale of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the assessee will be difficult proposition; thirdly, inquiry and inspection by the AO done much after the closure of business may not be persuasive for the past events especially in wake of facts as discussed above; and lastly, once neither any item in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it is unexplained money. 18. Our finding given above is peculiar to this case, because here in this case in the earlier years, scrutiny assessment have been done whereby the assessee's opening stock, closing stock and trading activities have been duly accepted and it is not a simple case where mere return income has been accepted u/s 143(1). Thus, we hold that AO is not justified under law to treat the sales as income from unexplained sources and accordingly ....
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....ITAT has taken into consideration the entire material placed on record including the report of the AO. The learned ITAT has applied the rule of consistency and rejected the enquiry made by the AO in the relevant assessment year. No doubt principles of res judicata are not applicable to the Income-Tax proceedings however, it is equally well settled law that rule of consistency is a well- established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Respondent28 Assessee had closed his business in July, 2015 after selling all the stocks and the survey carried out at a later stage would not have strong evidentiary value. Besides, all these aspects are completely factual in nature and we are unable to find any perversity in the impugned order. The factual findings recorded by the Income-Tax authorities, have been examined by the last fact-finding authority i.e. the learned ITAT. In absence of any perversity in the impugned order, we are not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore, in our view no question of law, much less substantial question of law, arises....