Advit Furniture House v. Dy. Commissioner of Income Tax, Circle 1(1), Bilaspur
[Citation -2016-LL-0922-37]

Citation 2016-LL-0922-37
Appellant Name Advit Furniture House
Respondent Name Dy. Commissioner of Income Tax, Circle 1(1), Bilaspur
Court ITAT-Bilaspur/Raipur
Relevant Act Income-tax
Date of Order 22/09/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags memorandum of appeal • business of trading • valuation report • interest paid • deemed income • excess stock
Bot Summary: The learned CIT erred on facts and in law in holding that the value of excess cash and excess stock surrendered during survey was not business income and it was not eligible for inclusion in book profit for the purpose of working out remuneration and interest to partners. The learned CIT(Appeals) erred on facts and in law in confirming rejection of books of a/c and consequent estimation of net business income at Rs.19000/- particularly when the sum surrendered as business income sufficiently takes care of the deficiencies, in the books of a/c. During the relevant previous year, the assessee was subjected to a survey proceedings under section 133A, and, in the course of the survey, the assessee offered income of Rs 11,98,650 as excess cash and Rs 18,03,200 as excess stock. The books of accounts produced by the assessee were rejected on the ground that the quantitative details of stocks were not maintained, and, that, if the amount surrendered by the assessee during the survey proceedings was to be excluded, the books of accounts would show a loss of Rs 12,54,365. On a separate note, the Assessing Officer obtained valuation report of the shop of the assessee, which showed the value at Rs 39,20,000 whereas the value disclosed by the assessee was Rs 29,86,111. The mere fact that the income surrendered in not separately shown as income, even if that be so, cannot justify the rejection of accounts. In the present case, the income on surrender has been duly credited and thereafter the assessee had claimed interest on capital and remuneration for the partners.


I TA N o. 34 3/ RP R/ 2 01 4 As s ess m e nt Ye r: 20 10 - 1 1 Page 1 of 5 IN INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, SMC , RAIPUR [Coram: Pramod Kumar AM] ITA No.343/RPR/2014 Assessment Year: 2010-11 Advit Furniture House .Appellant C/o. Sunil Kumar Bhutani, Magarpara, Bilaspur (CG). [PAN: AAQFA 9745 G] Vs. Dy. Commissioner of Income Tax, Circle 1(1), Bilaspur (C.G.) ...... .Respondent Appearances by: Richa Khatri, for appellant Shital Verma, for respondent Date of concluding hearing: 23.06.2016 Date of pronouncing order : 22.09.2016 O R D E R 1. By way of this appeal, assessee appellant has challenged correctness of order dated 18.06.2014, passed by learned CIT(A), Bilaspur (C.G.), in matter of assessment under section 143(3) of Income Tax Act, 1961 for assessment year 2010-11. assessee has, after raising grounds of appeal as set out in memorandum of appeal, filed further modified/revised additional grounds as well. These grounds of appeal are reproduced below: 1. That order of CIT (Appeals) is bad in law as well as on facts. 2. order of Commissioner (Appeals) confirming rejection of books of accounts is contrary to law and on facts. I TA N o. 34 3/ RP R/ 2 01 4 As s ess m e nt Ye r: 20 10 - 1 1 Page 2 of 5 3. order of Commissioner (Appeals) treating excess stock and cash amounting to Rs.30,01,850 as deemed income u/s 69B contrary to law and facts of case. 4. order of Commissioner (Appeals) not treating excess stock and cash amounting as business income contrary to law and facts of case. 5. order of Commissioner (Appeals) confirming income of appellant @ 8% of turnover is contrary to law and facts of case. 6. order of Commissioner (Appeals) sustaining addition of Rs.933889/- on account of excess investment in Shop is contrary to law and facts of case. Revised/ modified grounds of appeal 1. order of learned CIT (Appeals) is bad in law as well as on facts. 2. learned CIT (Appeals) erred on facts and in law in holding that value of excess cash and excess stock surrendered during survey was not business income and it was not eligible for inclusion in book profit for purpose of working out remuneration and interest to partners. 3. learned CIT(Appeals) erred on facts and in law in confirming rejection of books of a/c and consequent estimation of net business income at Rs.19000/- particularly when sum surrendered as business income sufficiently takes care of deficiencies, in books of a/c., even if there be any. 4. order of learned CIT (Appeals) in sustaining addition of Rs.933889/-, presuming same to be excess investment in shop, is contrary to law and facts of case. 5. appellant craves leave to urge, add/alter or amend or withdraw any ground of appeal either before or at time of hearing of appeal. Additional Ground of Appeal: learned lower authorities erred on facts and in law in not allowing claims of depreciation admissible as per rules I TA N o. 34 3/ RP R/ 2 01 4 As s ess m e nt Ye r: 20 10 - 1 1 Page 3 of 5 2. Briefly stated, relevant material facts are as follows. assessee is engaged in business of trading in furniture. assessee had disclosed gross profit of Rs 4,80,840 on total turnover of Rs 26,65,127, which, as noted by Assessing Officer, works out to 18.04% on sales as against GP of 14.85% in immediately preceding assessment year. During relevant previous year, assessee was subjected to survey proceedings under section 133A, and, in course of survey, assessee offered income of Rs 11,98,650 as excess cash and Rs 18,03,200 as excess stock. However, when income tax return was filed by assessee it showed income of Rs 23,62,840, which, in opinion of Assessing Officer, inadequate. books of accounts produced by assessee were rejected on ground that quantitative details of stocks were not maintained, and, that, if amount surrendered by assessee during survey proceedings was to be excluded, books of accounts would show loss of Rs 12,54,365. Rejecting books of accounts, profit was estimated @ 8% of sale of furniture and 50% on repairs of furniture, in addition to amounts surrendered during survey which aggregated to Rs 30,01,850. Assessing Officer thus recomputed profit from business, after deducting interest and remuneration to partners, at Rs 19,000. On separate note, Assessing Officer obtained valuation report of shop of assessee, which showed value at Rs 39,20,000 whereas value disclosed by assessee was Rs 29,86,111. difference between these two figures, i.e. Rs 9,33,889 was brought to tax, as unexplained expenditure. Aggrieved by additions so made by Assessing Officer, assessee carried matter in appeal before CIT(A) but without any success. assessee is not satisfied and is in further appeal before me. I TA N o. 34 3/ RP R/ 2 01 4 As s ess m e nt Ye r: 20 10 - 1 1 Page 4 of 5 3. I have heard rival contentions, perused material on record and duly considered facts of case in light of applicable legal position. 4. I find that there is no legally sustainable reason to reject books of accounts in this case. mere fact that income surrendered in not separately shown as income, even if that be so, cannot justify rejection of accounts. It is only elementary that statement recorded during survey proceedings does not bind assessee. Hon ble Kerala High Court s judgment, in case of Paul Mathew & Sons Vs CIT (263 ITR 101), holds so and nothing contrary thereto has been held by Hon ble jurisdictional High Court either. That legal proposition apart, income, even if to be added, is in nature of business income only, and deduction for interest paid to partners and interest to be allowed to partners has to take that income into account as well. In present case, income on surrender has been duly credited and thereafter assessee had claimed interest on capital and remuneration for partners. rejection of books of accounts, on given facts, is not at all justified. In any event, there is no basis for estimating profits@ 8%. mere fact that this percentage of profit is adopted, for presumptive basis taxation, in some other context and certain other situations does not justify its application in present case. Keeping in mind these discussions as also bearing in mind entirety of case, in my view, rejection of books of accounts and adoption of profit @ 8% is held to be unjustified, and said action is vacated. As regards addition of Rs 9,33,889 on account of difference in investment in shops as per books of accounts and valuation report, in my considered view, valuation report is nothing but estimate, howsoever scientific as it may be, and valuation report per se cannot be reason enough to make investment, for alleged I TA N o. 34 3/ RP R/ 2 01 4 As s ess m e nt Ye r: 20 10 - 1 1 Page 5 of 5 suppressed investment, unless books of accounts are found to be deficient. That s certainly not case here. I, therefore, delete this addition as well. I further direct Assessing Officer to grant depreciation as per rules, as admissible to assessee. 5. In result, appeal is allowed. Pronounced under rule 34(4) of Appellate Tribunal Rules 1963 today on 22nd day of September, 2016. Sd/- Pramod Kumar (Accountant Member) Dated: 22 nd day of September, 2016. PBN/* Copies to: (1) appellant (2) respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Raipur Bench, Raipur Advit Furniture House v. Dy. Commissioner of Income Tax, Circle 1(1), Bilaspur
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