Praveen Kumar Goyal v. Assistant Commissioner Of Income Tax, Circle 5, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 22 / 2010 Praveen Kumar Goyal, Proprietor M/s Tirupati, Plywood Industries , F-50, RIICO, Industrial Area Sikar ----Appellant Versus Assistant Commissioner of Income Tax, Circle 5, Jaipur ----Respondent Connected With D.B. Income Tax Appeal No. 51 / 2011 Commissioner of Income Tax-Central, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Sh. Sadhu Ram Goyal, P/o M/s. Swastic Udyog, F-30, RIICO, Industrial Area, Sikar. ----Respondent D.B. Income Tax Appeal No. 120 / 2011 Commissioner of Income Tax-central, New Central Revenue Building , Statue Circle, Jaipur(Raj) ----Appellant Versus Praveen Kumar Goyal, P/o M/s. Swastic Udyog, F-30, RIICO, Industrial Area, Sikar. ----Respondent D.B. Income Tax Appeal No. 196 / 2011 Sadhu Ram Goyal, Proprietor M/s Swastik Udyog, F-30, RIICO, Industrial Area Sikar ----Appellant Versus Assistant Commissioner of Income Tax, Circle 5, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar with Mr. Prakul Khurana (respondent in appeal no.51/11 & 120/11) For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay in appeal no.22/10 (appellant in appeal no.51/11 & 120/11) Mr. Sameer Sharma for Mr. Anil Mehta in appeal 196/2011 _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 03/08/2017 1. In all these appeals common question of law and facts areinvolved hence they are decided by this common judgment. Out ofthese four appeals, appeal no.22/2010 and 196/2011 are filed bythe assessee. 2.By way of these appeals, the appellant has assailed thejudgment and order of the Tribunal whereby tribunal has partlyallowed the appeal of the assessee and dismissed the appeal ofthe department. 3.This court while admitting the appeals framed followingsubstantial question of law:- 3.1Appeal No.22/2010 admitted on 20.1.2010 "(1) Whether the specific scope definedunder the law for the determination ofundisclosed income in block assessmentunder chapter XIV-B of the Act can beextended beyond the evidences discoveredduring the search in the case of anassessee u/s 132 of the Act and whether intheabsenceofanydirectmaterial/evidence, undisclosed income canbe determined on the basis of meresuspicion, conjectures and inferencesdrawn by the Assessing Officer?under the law for the determination ofundisclosed income in block assessmentunder chapter XIV-B of the Act can beextended beyond the evidences discoveredduring the search in the case of anassessee u/s 132 of the Act and whether intheabsenceofanydirectmaterial/evidence, undisclosed income canbe determined on the basis of meresuspicion, conjectures and inferencesdrawn by the Assessing Officer? (2) Whether the Tribunal was justified indeciding two cases having identicalallegations differently inasmuch as in caseof ACIT vs. Vikas Timbers Products Pvt Ltd,ITSSA No 39/JP/2006 and ITSSA No53/JP/2006 it has sustained the addition tothe extent of profit computed @ 3% on theundisclosed turnover whereas in case ofthe appellant it has sustained the additionto the extent of profit computed @24% onthe undisclosed turnover?" 3.2Appeal No.51/2011 admitted on 1.10.2013 (2) Whether the Tribunal was justified indeciding two cases having identicalallegations differently inasmuch as in caseof ACIT vs. Vikas Timbers Products Pvt Ltd,ITSSA No 39/JP/2006 and ITSSA No53/JP/2006 it has sustained the addition tothe extent of profit computed @ 3% on theundisclosed turnover whereas in case ofthe appellant it has sustained the additionto the extent of profit computed @24% onthe undisclosed turnover?" 3.2Appeal No.51/2011 admitted on 1.10.2013 "Whether the Tribunal was justified indeleting the penalty of Rs.36,37,998/-levied by the Assessing officer andconfirmed by the CIT(A) under Section158BFA(2) of the Act, on the basis ofspecific findings recorded by the Assessingofficer and confirmed by CIT(A) as well asthe Tribunal in the quantum proceedings,that the assessee was involved inunrecorded transactions and underinvoicing of sales?" 3.3Appeal No.120/2011 admitted on 8.11.2013 "Whether the Tribunal was justified indeleting the penalty of Rs.10,91,529/- leviedby the Assessing officer and confirmed bythe CIT(A) under Section 158BFA(2) of theAct, on the basis of specific findingsrecorded by the Assessing officer andconfirmed by CIT(A) as well as the Tribunalin the quantum proceedings, that theassessee was involved in unrecordedtransactions and under invoicing of sales?" 3.4Appeal No.196/2011 admitted on 2.5.2012 "(1) Whether the specific scope definedunder the law for the determination ofundisclosed income in block assessmentunder chapter XIV-B of the Act can be extended beyond the evidences discoveredduring the search in the case of anassessee u/s 132 of the Act and whether intheabsenceofanydirectmaterial/evidence, undisclosed income canbe determined on the basis of meresuspicion, conjectures and inferences drawnby the Assessing Officer? (2) Whether the Tribunal was justified indeciding two cases having identicalallegations differently in as much as in caseof ACIT vs. Vikas Timbers Products Pvt Ltd,ITSSA No 39/JP/2006 and ITSSA No53/JP/2006 it has sustained the addition tothe extent of profit computed @ 3% on theundisclosed turnover whereas in case of theappellant it has sustained the addition tothe extent of profit computed @24% on theundisclosed turnover?" 4.Counsel for the respondent specifically contended withregard to finding of the tribunal on page 24 which reads asunder:- “Therefore, the AO is not justified inincluding the unaccounted sales for theperiod/transactions not covered by TFL andTFL 2K3 files. The ld. AR has relied upon thedecision of ITAT, Jaipur Bench in the case ofACIT vs. Vikas Timber Products (P) Ltd. InITSSANo.39/JP/2006andITSSANo.53/JP/2006 dated 29.8.07 especiallypara 23 and 28 of the order. We haveperused the said orrder and we are of theview that profit rate applied in the case ofM/s. Vikas Timber Products (P) Ltd., supracannot be applied since the circumstancesand facts of the present case suggest thatonly the past history in assessee's own caseis the best guide and nothing else. Asregards the application of gross profit, theAO has rightly taken the average of grossprofit during the block period which isworked out at 23.96% and by rounding ofthe same a gross profit rate of 24% hasrightly been applied on the unaccountedsales. The decision of the ld. CIT(A) forcalculating the unaccounted sales and the gross profit is without any cogent reasoningand the material which cannot be accepted.Therefore, the AO is directed to sustain theaddition on the basis of gross profit rateapplied by him on the unaccounted salesworked out on the basis of TFL and TFL 2K3files.” 4.1In that view of the matter, since we have remitted back thematter of M/s Vikas Timber Products (P) Ltd. where departmentwas in appeal being DBITA No. 367/2008 decided on 8.2.2017which reads as under:- gross profit is without any cogent reasoningand the material which cannot be accepted.Therefore, the AO is directed to sustain theaddition on the basis of gross profit rateapplied by him on the unaccounted salesworked out on the basis of TFL and TFL 2K3files.” 4.1In that view of the matter, since we have remitted back thematter of M/s Vikas Timber Products (P) Ltd. where departmentwas in appeal being DBITA No. 367/2008 decided on 8.2.2017which reads as under:- “By way of these appeals, the departmenthas challenged the judgment and order ofthe Tribunal whereby the Tribunal hasdismissed the appeal preferred by therevenue and partly allowed the appealpreferred by the assessee modifying theorder of the CIT(A). 2. This Court while admitting the appealNo.300/2008 on 03.11.2008 has framedthe following substantial questions of law:“(i) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified inupholding the deletion of estimatedunaccounted sales of Rs.88,75,289/- forthe period not covered by the seizedmaterial inspite of admitting the fact thatthe unaccounted sales were made by theassessee? (ii) Whether it is open for the Tribunal tomake addition on account of unaccountedsales for a particular period and notestimating the sales for the balance periodfalling within the block period by holdingthat no estimation can be made on thebasis of seized material, which is incorrectand against the settled preposition of law? (iii) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified in reducingthe addition of Rs.46,10,095/- made onaccount of gross profit earned @24% on unaccounted sales of Rs.1,92,08,727/- tomerely Rs.3,10,003/- without assigningany reason for the same? (iv) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified inupholding the deletion of addition ofRs.24,05,679/- made on account of excessstock found during physical verification ofstock entered in the books of accounts onthe same day?” 2.1. This Court while admitting the appealNo.367/2008 on 12.12.2008 has framedthe following substantial questions of law: “(i) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified in reducingthe addition of Rs.46,10,095/- made onaccount of gross profit earned @24% onunaccounted sales of Rs.1,92,08,727/- tomerely Rs.3,10,003/- without assigningany reason for the same? (ii) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified in applyingnet profit rate of 3% on accounted sales ofRs.1,03,33,438/- only as against g.p. rateof 24% applied by the Assessing Officer byciting comparable cases and also ignoringthe gross profit rate of 13% shown by theassessee itself? (iii) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified in reducingthe addition of Rs.4,86,807/- made onaccount of initially investment requiredform making unaccounted sales, merely toRs.1,00,000/- without justified the saidreduction and ignoring the findingsrecorded by the Assessing Officer?” 3. Both the matters were heard togetherand for the convenience of the Court, thefirst matter taken up is AppealNo.367/2008. 4. We have heard Mr. Singhi for theappellant and Mr. Gupta for the assesseerespondent. 5. Mr. Singhi has taken us to the order ofthe Assessing Officer completely and theorder of CIT (A) and more particularly,para 20 of the Tribunal. (iii) Whether on the facts andcircumstances of the case, the learnedTribunal was right and justified in reducingthe addition of Rs.4,86,807/- made onaccount of initially investment requiredform making unaccounted sales, merely toRs.1,00,000/- without justified the saidreduction and ignoring the findingsrecorded by the Assessing Officer?” 3. Both the matters were heard togetherand for the convenience of the Court, thefirst matter taken up is AppealNo.367/2008. 4. We have heard Mr. Singhi for theappellant and Mr. Gupta for the assesseerespondent. 5. Mr. Singhi has taken us to the order ofthe Assessing Officer completely and theorder of CIT (A) and more particularly,para 20 of the Tribunal. “20. After considering the argumentsadvanced by the parties, material availableon record and the orders of the lowerauthorities, we find that there is no disputeon the fact that during the course of searchof the assessee not a single evidence wasfound which proves that the assessee wasinvolved in the unaccounted under invoicedsales. At the same time the evidencesfound from the possession of thewholesaler referred as Ashish InternationalGroup cannot be brushed aside. It is also amatter of fact that the computer generatedprint out also contains the name of theassessee or its director. Also from theperusal of the entries contained therein itreveals that they are day to day accountsof sales and the receipts of paymentsthough the entries contained therein are incoded figures and a decimal point has beenplaced before the last two digits of theactual amount. These facts are alsoverifiable from the bank entries appearingin the bank accounts of the assessee asthese payments are made through bankare tallied with actual payments made bythe wholesalers to the assessee. Assesseehas not been able to controvert thesefacts. The fact regarding making ofunaccounted and under invoiced sales andpurchases by this wholesales group M/sAshish International Group as found notedin the two computerized digital files in acoded manner also gets confirmed by theiremployees and from the documents foundand seized from the possession of theother manufacturers who also supplied tothe same wholesalers group. We do notfind force in the arguments of the assesseethat the department has failed to link theentires contained in the seized diaries TFLand TFL 2K3. The entire sets of the eventsand the evidences brought on recordsclearly suggest that these diaries relate tothe assessee and therefore the turnovermentioned therein in coded figure havingdecimal before the last two digits relates to the assessee which was actually sold to theAshish International Group for which theinvoices were issued at much a lowerfigure.” 6. He has contended that Assessing Officerand the CIT (A) has taken Gross Profit,however, the Tribunal all of a sudden hasconverted into Net Profit. 7. Counsel for the respondent has tried tojustify the fact that the material which wasfound was not found from his premises andwas found from the premises of the thirdparty and the work which has been shownare on assumption and without anymaterial on record. 8. On the issue nos.2 and 3 in the firstmatter and issue nos.2, 3 and 4 in thesecond, we are in complete agreementwith the view taken by the Tribunalregarding reducing it to Rs.1,00,000/- and24% GP rate which was reduced to 13%.However, on the first issue regardingconverting Gross Profit into Net Profit, weare of the opinion that the Tribunal hasseriously committed an error in convertingGP into NP and reducing it to 3% NP from10% GP which has been done by CIT(A).In our view, the Tribunal while deciding thematter, should not have converted GP intoNP since it is always a matter of calculationwhich has to be done with the accountsubmitted by the parties. Therefore, thefirst issue is answered in favour of thedepartment. 8. On the issue nos.2 and 3 in the firstmatter and issue nos.2, 3 and 4 in thesecond, we are in complete agreementwith the view taken by the Tribunalregarding reducing it to Rs.1,00,000/- and24% GP rate which was reduced to 13%.However, on the first issue regardingconverting Gross Profit into Net Profit, weare of the opinion that the Tribunal hasseriously committed an error in convertingGP into NP and reducing it to 3% NP from10% GP which has been done by CIT(A).In our view, the Tribunal while deciding thematter, should not have converted GP intoNP since it is always a matter of calculationwhich has to be done with the accountsubmitted by the parties. Therefore, thefirst issue is answered in favour of thedepartment. 9. In that view of the matter, theobservations which are made by theTribunal in para 23 which reads as under: “regarding the application of profit rate it istrue that in the case of unrecorded salesonly profits should be taxed. The onlyquestion remained that what rate shouldbe applied for which the past history of theassessee is the best guide to assess anyincome at the reasonable magnitude. Inthis case the ld. AO has applied the profitrate of 24% which has been reduced bythe ld. CIT (A) to 10%. While doing so ldAO as well as ld. CIT(A) have committedthe serious error of ignoring the assessee’s own history. Before us ld. A/R hassubmitted the profit chart of the assesseewherein it has earned maximum profit atthe rate of 0.78% during the periodcovered under the seized diaries and if theratio of the under invoiced sales to thedeclared sales as calculated by the AO at3.18 is applied, the maximum profit thatcould have been earned by the assesseecomes to 2.5% approx. However, lookingto the circumstances and also consideringthe fact that in the case of under invoicedsales assessee might have saved the taxesetc. the profit rate of 3% is quitereasonable on the under invoiced salesfound recorded in the seized diaries TFL &TFL 2K3 at Rs.1,03,33,438/- which comesto Rs.3,10,003/-. We order accordingly,thus the grounds raised by the assesseeare partly allowed and of the revenue isdismissed.” 10. The observations made above by theTribunal are quashed and set aside. Thematter is remitted back to the tribunal onlyto decide GP and not NP. The rest of theorder of the Tribunal is maintained.” 4.2Therefore, the questions raised in these appeals No.22/2010& 196/2011 are not required to be decided by us. The matter isremitted back to the tribunal. 5.However, it will be open for both the sides to place on recordall the documents before the authority and the authority willconsider the same after hearing both the sides and will pass freshorder without influencing by the fact that the earlier order wasconfirmed by higher authority. 5.1In view of the order passed in the case of two assesseeappeal’s No.22/2010 & 196/2011, the appeals of the departmentwill not survive and the same stands disposed of. 6.It will be open for the AO to pass a fresh order of issuingnotice if there is assessment against the assessee regardingpenalty. All the appeals stand disposed of. (INDERJEET SINGH)J. (K.S.JHAVERI)J. Brijesh 55-58.