Delhi High Court
Commissioner Of Income Tax vs Alankar Radio Equipments on 15 December, 2011
Author: Sanjiv Khanna
$~42
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 926/2007
% Date of Decision : 15th December, 2011
COMMISSIONER OF INCOME TAX ..... Appellant
Through Mr. N.P. Sahni, Advocate
versus
ALANKAR RADIO EQUIPMENTS ..... Respondent
Through Mr. Satyen Sethi and Mr. Arta
Trana Panda, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V.EASWAR
1. Whether Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest?
SANJIV KHANNA,J: (ORAL)
The present appeal under Section 260A of the Income Tax Act,
1961 (The Act in short) impugns the order dated 10.08.2006 passed by
the Income Tax Appellate Tribunal (`The Tribunal' for short) in the case
of Alankar Radio Equipments. The order pertains to the Block
Assessment period 01.04.1988 to 24.09.1998.
2. The respondent is a partnership firm of father and son and is
primarily engaged in carrying on business of sale and purchase of audio
cassettes belonging to Super Cassettes Industries Ltd. in old Lajpat Rai
Market. Search under Section 132 of the Act were conducted on the
respondent on 24.09.1998. Immediately after the search, the respondent
had surrendered undisclosed income of Rs.10 Lakhs. However, the
respondent submits that aforesaid surrender was made to get the seized
goods release.
3. After statutory notice under Section 158BC of the Act was served,
block assessment return was filed by the respondent on 14.6.2000
declaring undisclosed income of Rs.13,26,380/-. The details of the said
undisclosed income has been mentioned in the assessment order and
clearly reflects that the respondent had declared undisclosed sales made
by them during the assessment year 1996-1997 onwards and had
computed the gross profit on the said sale at 1.86% as per seized
document A-81, A-85, A-86 etc. In addition, the respondent had also
declared undisclosed sale of Rs.11,73,128/- in respect of decks as per A-
80 @ 9.9% for the assessment year 1996-1997.
4. During the course of the assessment proceedings on 11.10.2000,
Dipak Sethi partner of the respondent had appeared along with his
Chartered Accountant/authorized representative and had furnished the
details of the purchase price and sale price of the audio cassettes of
different types, which were prevalent in the assessment year 1996-1997.
He had further stated that they used to purchase audio recorded cassettes
from Super Cassettes Industries Limited at almost Rs.5.50 more in respect
of recorded/declared prices and Rs. 50 paisa to Re. 1 more in the case of
blank cassettes.
5. The Assessing Officer made four specific additions. First addition
of Rs.15,92,601/- was made on account of undisclosed investment made
for purchase of audio cassettes, which were recorded in the books of
accounts during the period 1988-1989 till 1998-1999. The second addition
of Rs.7,53,953/- was on account of undisclosed investment made for
purchase of audio cassettes which were not recorded in the books of
accounts. The third addition of Rs.11,10,134/- was by increasing the GP
rate to 2.5% on undisclosed sales instead of 1.86% as declared by the
respondent in the block assessment return and by disallowing
Rs.4,65,481/- towards expenditure. The fourth addition of Rs.2,46,047/-
was on account of undisclosed stock found on the date of the search.
6. The CIT (A) deleted the first addition of Rs.15,92,601/- and reduce
the second addition to Rs.3,76,976/-. The GP rate was reduced from 2.5%
to 2% and expenditure claimed of Rs.4,65,481/- was allowed. The last
addition of undisclosed closing stock was deleted.
7. The respondent accepted the aforesaid order passed by the CIT (A)
but the Revenue moved the Tribunal. By the impugned order Tribunal
has dismissed the appeal with regard to the first contention, the GP rate as
well as closing stock. However, the expenditure of R.4,65,481/- which
had been claimed by the respondent for earning of undisclosed income of
Rs.13,69,394/-, was reduced to Rs.2 lakhs. Thus addition to the extent of
Rs.2,65,481/- on expenditure was upheld.
8. Accordingly, ultimately additions made in the case of the
respondent are as under:-
1. Rs.3,76,976/- on account of investment made for purchase of
undisclosed sales.
2. Rs. 2,20,000/- (approx.) as addition made on account of GP rate of
2% on the undisclosed sales.
3. Rs.2,65,481/- on account of expenses on undisclosed sales.
9. After hearing counsel for the parties, we frame the following
substantial question of law:-
(i) Whether the order passed by the Tribunal dated 10.08.2006 is
perverse and contrary to material in evidence on record?
10. Learned counsel for the appellant had rightly contended that the
Tribunal had laid undue emphasis and stress on the retracted statement
made by the respondent vide letter dated 12.2.2001, which was filed
during the course of assessment proceedings in the case of M/s Super
Cassettes Industry Limited. As noted above partner of the respondent
Dipak Sethi had appeared in the course of proceedings on 11.10.2000 and
had made a statement before the Assessing officer in the presence of his
Chartered Accountant/Authorised representative. For the purpose of
present appeal, we are treating and accepting that the statement made on
11.10.2000 as correct and can be relied. Whether or not the said
retraction was justified or merits consideration will be examined, if
required, in the case of Super Cassettes Industries Limited.
11. As notice in the present case the assessee had surrendered
Rs.13,26,380/- as undisclosed income for the block assessment period in
the return filed pursuant to the notice issued under Section 158BC. This
surrender is important and significant. Addition of Rs.3,76,000/-,
Rs.2,65,481/- and Rs. 2,22,000/- (approx.) as noted above have been
sustained by the Tribunal. The last addition which has been made on
enhancement of GP rate of 1.86% to 2% is on the profit earned by the
firm on the undisclosed sales of cassettes.
12. The Assessing Officer while making addition of Rs.15,92,600/- had
computed the disclosed sales made in the assessment years 1998-1999
onwards and calculated undisclosed investment required in each
assessment year. Undisclosed investment as computed was added. The
total comes to the figure of Rs.15,92,601/-.
13. It is noticeable that the Assessing Officer did not take into account
the fact that undisclosed investment made in one year is not distinct or
separate and can be accounted/discounted for in the next years. It is
noticeable that the respondent was doing business in the wholesale market
and the trade turnover was extremely high. The purchases and sales were
in quick succession. Further it is noticed that the respondent had disclosed
income from undisclosed trade and this fact should have been taken into
consideration for computing and calculating undisclosed investment. The
Assessing Officer had made addition of Rs.7,53,953/- on account of
investment made in purchase of undisclosed stock. For the assessment
year 1996-97 the Assessing Officer observed that the assessee had
purchased undisclosed stock of more than Rs.2.75 crores but the addition
as noticed above was of Rs.7,53,953/- only. For the same year the
assessee as per regular books of accounts had made purchase of
Rs.30,83,342/- but the Assessing Officer had taken undisclosed
investment for making regularly recorded purchases at Rs.5,16,460/-. The
difference is apparent. This discrepancy in the order of Assessing Officer
cannot be explained. Further the Assessing Officer has accepted the stand
of the respondent that the cassettes were supplied on credit and sales were
made in cash, to reduce the element of investment.
14. With regard to the GP rate, the Assessing Officer in the assessment
order had recorded that comparable GP in the similar trades was Rs.2.5%.
It is noticeable that no details or particular other dealer were, stated. How
the Assessing Officer got this figure is difficult to fathom. It is quite clear
that respondent was not in a position to make heavy investments as the
GP rate was very low.
15. With regard to the closing stock, the CIT (A) and the Tribunal have
held in view of the addition already made, no further addition of
Rs.2,46,047/- was required.
16. Keeping in view the aforesaid facts we are not inclined to accept
the plea of the appellant and interfere with the order passed by the
Tribunal. Sufficient and adequate additions have been made. The
respondent had also cooperated by disclosing undeclared income of
Rs.13,36,380/-, which is more than Rs.10,00,000/- declared as
undisclosed income immediately after the search. The question of law is
accordingly answered. The appeal is dismissed. No costs.
SANJIV KHANNA,J
R.V.EASWAR, J
DECEMBER 15, 2011
b
