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
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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
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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:-
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" 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
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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
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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'
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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
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