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Cue Apparels Pvt. Ltd. 14, Golf Links, New Delhi. Vs Asstt. Commissioner of Income Tax, Circle-3(1), C.R. Building, New Delhi.
November, 03rd 2014
ITA No.5603/Del/2010
Asstt.Year: 2006-07

               IN THE INCOME TAX APPELLATE TRIBUNAL
                      DELHI BENCH `B' NEW DELHI

            BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
                               AND
           SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                           I.T.A.No.5603/Del/2010
                          Assessment Year : 2006-07

Cue Apparels Pvt. Ltd.       Vs     Asstt. Commissioner of Income Tax,
14, Golf Links,                     Circle-3(1), C.R. Building,
New Delhi.                          New Delhi.
 (PAN: AACCC4802B)
(Appellant)                            (Respondent)

                                    Appellant by: None
                               Respondent by : Smt. Parwinder Kaur, Sr.DR

                               ORDER


PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

       This appeal has been preferred by the assessee against the order of

CIT(A)-VI, New Delhi dated 07.09.2010 in Appeal No.288/08-09 for AY 2006-

07.


2.     Although the assessee has raised as many as seven grounds in this appeal

but except main ground no. 3, the other grounds are argumentative and

supportive to the main grounds which reads as under:-


              "3. The ld. CIT(A) has confirmed the addition of
        Rs.14,50,000/- after ignoring the facts that: The Appellant
        Company has declared income of Rs.14,50,000.00 mutually
        during the survey proceedings under section 133A of the





                                                                      Page 1 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07

        Income Tax Act, 1961 which is part of the Net Profit of
        Rs.46,87,849.74 of the company for the AY 2006-07."
3.     When the case was called for hearing, neither the assessee nor his

representative appeared before us and on careful perusal of the appeal record,

inter alia assessment and impugned order, we find it appropriate to decide the

appeal in absence of assessee and his representative and, thus, we proceed to

decide the appeal on merits after hearing the ld. DR.


4.     Briefly stated the facts giving rise to this appeal are that the return of

income was filed on 30.11.2006 at an income of Rs.48,58,320/-. A survey u/s

133A of the Act was carried out by the Investigation Wing Unit-III(3), New

Delhi on 23.12.2005.     During the course of search operation, the assessee

surrendered a sum of Rs.14,50,000/- for taxation as income under the head of

business and profession in respect of assessee company for the financial year

ending on 31.3.2006. Subsequently, the case was selected for scrutiny and the

AO noticed that the assessee has not included the income of Rs.14,50,000

surrendered by him during survey operation, the amount was declared for the

financial year ending on 31.3.06 and the same is included in the amount of

returned income of the assessee as declared in the return which was filed on

30.11.2006. The AO rejected the explanation of the assessee and added the

surrendered amount of Rs.14,50,000/- to the income of the assessee as

undisclosed income for the year under consideration. The AO held that it is

only the income from business not accounted for by the assessee which was

                                                                        Page 2 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07

surrendered during the course of search proceedings, therefore, it should have

been reflected either in the balance sheet or should have been added in the

computation of income.


5.     The aggrieved assessee preferred an appeal before the CIT(A) which was

also dismissed by passing the impugned order. Now the empty handed assessee

is before this Tribunal with the main grounds as reproduced hereinabove.


6.     We have heard arguments of ld. DR and carefully perused the relevant

material placed on record. From assessment order, we note that the AO made

impugned addition with following observations:-

               "The contention of the assessee is not acceptable also
         due to the fact that the assessee filed return for the assessment
         year 2006-07 on 30/11/2006 i.e. the after eleven months of
         survey and assessee has neither shown the surrendered
         amount of Rs.14,50,000/- in its computation of income nor
         given any note that the N.P. declared for the year includes
         amount surrendered during survey operation. When the
         department show caused the assessee on this issue then
         assessee claimed that the N.P. declared for the A.Y.2006-07
         includes the amount surrendered during the survey operation.
         The assessee failed to provide the trading account as on date
         of survey operation i.e. 23/12/2005. Further the amount
         surrendered during survey operation cannot be treated as
         normal income of the assessee for the year till the date of
         survey. It is only the income from business not accounted for
         by the assessee, which was surrendered. Hence it should have
         been reflected either in the B/S or should have been added in
         the computation. However, this was not done in this case."
7.     During the first appellate proceedings, the CIT(A) upheld the addition

with following observations:-


                                                                         Page 3 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07

              " 4. I have carefully considered the submissions of ld. AR
        & have gone through the assessment order. A survey operation
        u/s 133A was carried out on the appellant's premises on
        23.12.2005. During the survey proceedings. the appellant was
        unable to produce the complete details for preparing the trading
        account as on 23.12.2005, and therefore, declared income of Rs.
        14,50,000/- under the head business and profession for the
        financial year ending on 31.3.2006, Relevant extracts of the
        statement of Shri Rohit Gandhi, director are given in the
        assessment order and for the sake of convenience, they are
        reproduced as under:
               We are also having stores of M/s. Cue Apparels (P) limited
        at Bangalore, Mumbai and M.G. Road, Gurgoan Mehrauli Road,
        New Delhi and it is not possible for me to collect the complete
        detail of sales and other statistics for preparing the trading
        account as on today Besides this books of accounts of M/s. R&R
        arts are not completed and as such I find it difficult to prepare
        the trading account of R&R arts as on today the 23rd December,
        2005 In order to avoid litigation with the department and to have
        mental peace. I hereby declare income of Rs. 40,00,000/- under
        the head business & profession in respect of both the concerns i.
        e. M/s. R.&R Arts and M/s. Cue Apparels Pvt. Ltd. as under the
        financial year ending on 31.3.2006.
               The appellant's contention is that this income of Rs.
        14,50,000/- is part of the net profit of Rs. 46,87,849/-, which is
        reflected in the returned Income. A perusal of the Profit and loss
        account and Balance sheet of the appellant company shows that
        operating income is shown at Rs. 4,81,66,512/- and the net profit
        for the year is reflected at Rs.46,87,849.74. However, the
        appellant has not filed any details and documents to substantiate
        that the income declared on 23.12.2005 at Rs. 14,50,000/- is part
        of this income shown in the profit and loss account. No
        bifurcation or details have been filed to give a clear picture of
        the income as on the date of survey. During the survey
        proceedings also, the appellant showed its inability to furnish the
        trading account. In such circumstances, I find that the Assessing
        Officer was justified in making addition of Rs. 14,50,000/- on
        account of surrender made during the survey proceedings."
8.     On careful consideration of above, at the outset, we note that
[ad}
undisputedly survey u/s 133A of the Act was carried out by the Investigation
                                                                         Page 4 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07

Wing of the Department on 23.12.2005 and during the course of survey

proceedings, Shri Rohit Gandhi, Director of the assessee company gave

statement which has been reproduced hereinabove in the operative part of the

impugned order which clearly shows that the intention of the assessee was to

declare income of Rs. 14,50,000 for the financial year ending on 31.3.2006. It

was contended by the ld. DR that the assessee company surrendered additional

income from undisclosed sources, therefore, the AO was justified in making the

addition which was rightly upheld by the CIT(A) by holding that during the

survey proceedings, the assessee showed its inability to furnish the trading

account, therefore, the orders of the authorities below may kindly be upheld.


9.     On careful consideration of assessment and impugned order, we observe

that the CIT(A,) at page 2 in para 3 of the impugned order, has observed that the

assessee has supported the contention that mutually declared/surrendered

income of Rs.14,50,000/- was part of net profit of Rs.46,87,849/- for AY 2006-

07. Before the CIT(A) it was also contended by the assessee that the survey

team had demanded a trading account upto the date of search and it was not

possible late in the evening to collect the sales data from four different

showrooms situated in various parts of the country for accounting purposes. On

behalf of the assessee, it was also submitted that the company could not prepare

trading account and profit and loss account with correct figures on the spot on

the date of search, therefore, the Director of the company has declared the


                                                                        Page 5 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07

income/profit of the assessee company on estimate basis on the mutual consent

of the income tax survey team which was not based on any document or any

other information found during the course of survey. On careful consideration

of statement of Shri Rohit Gandhi, Director of the company, we are inclined to

hold that the intention of the Director was to declare and surrender an income of

Rs.14,50,000/- under the head of business and profession in respect of both the

concerns i.e. M/s R&R Arts and M/s Cue Apparels Pvt. Ltd. for the financial

year ending on 31.3.2006. Subsequently, the assessee company filed its return

for AY 2006-07 on 30.11.2006 at an income of Rs.48,58,320/- for the financial

year ended on 31.03.2006, therefore, it can safely be presumed that the

surrendered impugned income was included in the returned income of the

assessee, and hence, the action of the authorities below is not sustainable and

we set aside the same. Accordingly, sole ground of the assessee is allowed.


10.    In the result, the appeal of the assessee is allowed.


       Order pronounced in the open court on 28.10.2014.

      Sd/-                                              Sd/-

(G.D. AGRAWAL)                                 (CHANDRAMOHAN GARG)
VICE PRESIDENT                                      JUDICIAL MEMBER

DT. 28th OCTOBER, 2014
`GS'




                                                                        Page 6 of 7
ITA No.5603/Del/2010
Asstt.Year: 2006-07




Copy forwarded to:-

   1.   Appellant
   2.   Respondent
   3.   C.I.T.(A)
   4.   C.I.T.
   5.   DR
                       By Order



                       Asstt.Registrar




                                         Page 7 of 7

 
 
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