T. Radha vs Assistant Commissioner of Income Tax

P.P.S. Janarthana Raja, J.—The appellant has filed the above tax case appeal against the order of the Income Tax Appellate Tribunal, Chennai "B" Bench dated November 27, 2003, in I. T. A. No. 482/Mds/1997.

The above appeal is filed by raising three questions of law. But when the appeal came up for admission on July 12, 2004, this Court admitted on the following two substantial questions of law:

Whether on the facts and in the circumstances of the case, the Tribunal was right in simply relying upon the statement of the husband of the appellant alone as correct in law when no statement was recorded from the appellant?

Whether on the facts and in the circumstances of the case the Tribunal was right in adopting the gross profit at 8 per cent. without assigning any valid reasons or basis to arrive at such gross profit contrary to the gross profits shown in the books of account?

The assessee is the proprietrix of M/s. Selladurai Nadar Marketing Centre and engaged in the business of stainless steel utensils and other consumer durables. The assessment year is 1993-94 and the corresponding accounting year ended on March 31, 1993. The assessee filed her return of income on November 30, 1994, admitting a loss of Rs. 89,265 and the said return was processed u/s 143(1)(a) of the Act. Later intimation was also sent to the appellant/assessee. Notice u/s 143(2) was issued on various dates. Subsequently, a raid was conducted in the business and residential premises on October 13, 1993, u/s 132 of the Income Tax Act. Various discrepancies were noted at the time of the raid mainly in the form of deficiency in the stock. The assessee''s husband had given a statement and admitted the discrepancy in the stock of the business carried on by himself and his wife and offered a sum of Rs. 8,00,000 in the hands of the wife for the assessment year 1993-94 u/s 132(4) of the Act. The assessment was completed u/s 143(3) and determined the total income at Rs. 7,10,740. While determining the said total income, the Assessing Officer has made an addition of Rs. 8,00,000 as the husband had offered the said amount in the hands of the wife u/s 132(4) of the Act in respect of the deficit stock for the assessment year 1993-94. Further, the Assessing Officer also adopted a gross profit at 15 per cent. on the statement made by the husband before the officer. Aggrieved by that order, the assessee has filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) deleted the addition of Rs. 8,00,000 and sustained the addition of Rs. 50,000 and also was of the view that the profit in the line of business could not be more than 5 per cent. and therefore, fixed the gross profit at 5 per cent. as against 15 per cent. adopted by the Assessing Officer. Aggrieved by that order, the Revenue has filed the appeal before the Income Tax Appellate Tribunal. The Appellate Tribunal confirmed the ad hoc addition of Rs. 6 lakhs as the assessee''s husband in his statement had admitted the value of suppression of stock and also fixed the gross profit at 8 per cent. on the retail sale of stainless steel vessels and aluminium products, etc., as against 5 per cent. fixed by the Commissioner of Income Tax (Appeals). Aggrieved by that, the assessee has filed the present appeal.

The learned Counsel appearing for the assessee vehemently contended that the Tribunal ought not to have estimated the gross profit at 8 per cent. as against 2 per cent. admitted by the assessee. He further submitted that the Tribunal is wrong in making the addition of Rs. 6,00,000 in respect of suppression of sale and further there was no basis for making such addition and the Assessing Officer is wrong in making addition on the ground that the assessee''s husband gave sworn statement at the time of raid. He further submitted that the appellant''s husband was under the custody of the official for a long time and therefore, the statement obtained from her husband was under threat and the statement was given only at the instance of the Department. Hence, the order passed by the Tribunal is not in accordance with law and the same has to be set aside.

The standing counsel appearing for the Revenue submitted that the Tribunal has considered all the facts and circumstances of the case and correctly adopted 8 per cent. gross profit on the appellant''s total sales and also correctly made addition, which is based on valid materials and evidence. Though enough opportunity was given to the assessee to prove the case, she has not produced any valid material before the authorities below to substantiate her claim. Therefore, the order passed by the Tribunal is in accordance with law and the same has to be confirmed.

Heard the learned Counsel appearing on either side and perused the documents available on record. A raid was conducted u/s 132 of the Income Tax Act in the business premises of the appellant/assessee on October 13, 1993. Actually the business of the appellant/assessee was carried on by her husband one Thanaseelan. The said Thanaseelan had given sworn statement before the Income Tax Department and he had also admitted the discrepancy in the business carried on by himself and his wife and in his statement, he stated that he resorted to sales suppression and that the percentage of such suppression constitutes about 15 to 20 per cent. of the total sales turnover and further categorically stated that the deficit stock and sales suppression in the business works out to Rs. 6,00,000 during the assessment year. Later he has retracted the statement given before official of the Revenue. Even though an opportunity was given to the appellant/assessee, she was silent and no explanation was forthcoming from her. It is also seen that the business of the appellant/assessee was managed by her husband. After taking into consideration of the facts, the Tribunal in paragraph 5 of the order, has held as follows:

We have heard the rival submissions and perused the material placed on record. We find that the husband of the assessee has disclosed in his sworn statement, the deficit stock and sales suppression at Rs. 6 lakhs. The assessee was asked to explain the deficit in stock and sales suppression as stated in the sworn statement of her husband but the assessee remained silent when this opportunity was afforded to her. Hence, the Assessing Officer had no other material to rely upon other than the sworn statement which was in his possession. Further, it is noticed that the business of the assessee was managed by her husband and he was in charge of the business. Therefore, he was in the know of all the activities of the business of the assessee.

From the facts, it is clear that the assessee''s husband has voluntarily given the sworn statement. There is no dispute that the assessee''s husband is in charge of the business of the assessee. It has been made categorical in his statement that the sales suppression in the assessee''s proprietory concern M/s. Selladurai Nadar Marketing Centre was in the range of 15 to 20 per cent. and the approximate gross profit ratio was in the range of 15 per cent. and further he has stated that the amount of sales suppression in the said concern would work out to around Rs. 6 lakhs for the assessment year. The said statement was also placed before the assessee and also opportunity was given to the assessee to render evidence to rebut the same. But the assessee was silent without producing any material evidence. Therefore, the Tribunal came to the conclusion that the Assessing Officer was correct in making the addition. The Commissioner of Income Tax (Appeals) has not given any proper reason. Therefore, the finding given by the Tribunal is based on valid materials and evidence. The learned Counsel appearing for the appellant/assessee was also unable to give any material evidence to take a contrary view to that of the Tribunal. It is a question of fact. It is not a perverse order. In such circumstances, we do not find any error or irregularity in the order passed by the Tribunal warranting interference and we answer the first question in favour of the Revenue and against the assessee.

In respect of the second question, the dispute is relating to estimation of gross profit. The assessee admitted in her return that the gross profit is at 2 per cent. The Assessing Officer adopted the gross profit at 15 per cent. The Commissioner of Income Tax (Appeals) has fixed the gross profit at 5 per cent. By averaging the above, the Tribunal has fixed the gross profit at 8 per cent. and in paragraph 6 it has held as follows:

On consideration of the entire matter, we are of the considered opinion that the G. P. rate adopted by the Assessing Officer at 15 per cent. is very high. The Commissioner of Income Tax (Appeals) has taken the G. P. rate at 2 per cent. which is very low compared to the market conditions. Taking into consideration that the assessee is a lady and that this is the first year of business of the assessee, we are of the opinion that the G. P. rate on retail sale of stainless steel vessels and aluminium products, etc., shall be at 8 per cent. Accordingly, we direct the Assessing Officer to take the G. P. rate in this case at 8 per cent. (eight) and conclude the assessment as per law.

So all the authorities below had determined the gross profits only on estimated basis. There is no material available for us to take a contrary view of the Tribunal. In the absence of any valid material on record, we are of the view that the Tribunal is correct in fixing the gross profit at 8 per cent. We do not find any error or illegality in the order passed by the Tribunal warranting interference. In these circumstances, the second question of law is answered against the assessee and in favour the Revenue. In these circumstances, we do not find any merit in the appeal filed by the assessee and the same is dismissed. No costs.