ASHWIN DOSHI, BILASPUR(CG) V. ITO WARD-1(1), BILASPUR(CG)

ITA 10/BIL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2418 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 19-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H N MOHARANA
• Assessee Lawyers: R B DOSHI
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

, RA IPUR IN THE INCOME TA X A PPELLA TE TRIBUNA L, RA IPUR BEFORE S/SHRI MUKUL SHRAW AT ( JM) SHAMIM YAH Y A (AM) , , ./ I.T.A. NO. 10/BLPR/2013 ( / ASSESSMENT YEAR : 2008 - 09 ) ASWINI DOSHI, PROP. M/S. FIROZABAD BANGLS STORES, OPPOSITE HOTEL AJEET, TELIPARA, BILASPUR / VS. ITO, WA RD 1(1), AAYAKAR BHAVAN, VY APAR VIHAR,BILASPUR ./ ./ PAN/GIR NO. : AAZPD 4331 L ( / AP PELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI R.B.DOSHI / RESPONDENT BY : SHRI H.N.MOHARANA / DATE OF HEARING : 15 - 02 - 2016 / DATE OF PRONOUNCEMENT : 17 - 02 - 2016 / O R D E R PER MUKUL SHRAWAT, JM THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM A N ORDER OF THE LD CIT(A), BILASPUR DATED. 2.11.2012 FOR THE ASSESSMENT YEAR 2008 - 09. THE GROUNDS RAISED BY THE ASSESSEE ARE ARGUMENTATIVE IN NATURE; HOWEVER, FOLLOWING TW O GROUNDS HAVE BEEN PRESSED BEFORE US, WHICH ARE REPRODUCED BELOW: 1. BECAUSE THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW BY JUSTIFYING REJECTION OF THE BOOKS U/S.145 BY AO AND THER EBY, MAKING ADDITIONS TO INCOME BY PROPOSING NET PROFIT ON ARBITRARY AND ESTIMATED RATE AT 5% OF SALES WITHOUT ANY COGENT BASIS AND AS PER PROVISIONS OF SECTION 44AF OF THE INCOME TAX ACT, 1961 APPLICABLE TO RETAIL 2 I.T.A. NO.10/BLPR/2013 ASSESSMENT YEAR :2008 - 09 TRADERS, WHEREAS THE ASSESSEE IS ENGAGED IN WHOLESALE BUSINESS AND HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT AND VOUCHERS AND THE SAME HAVE BEEN AUDITED U/S.44AB OF THE INCOME TAX ACT, 1961. 2. BECAUSE THE LD CIT(A) HAS ERRED IN OVERLOOKING THE FACTS AND DETAILS SUBMITTED ON 2.11.2012 ALONGWITH THE EVIDENCE AND SOURCE OF DEPOSIT DETAILED BANK STATEMENTS AND CASH BOOK AND IN ACCEPTING THE ADDITION OF RS.40,000/ - AS UNEXPLAINED CASH CREDITS U/S.68 BY THE AO). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED BY THE ASSESS ING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 10.8.2010 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN WHOLESALE BUSINESS OF GLASS BANGLES. THE BOOKS OF ACCOUNT WERE MAINTAINED ON MERCANTILE BASIS AND AUDITED U/S.44AB OF THE I.T.ACT, 1961. T HE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT RS.2,93,794/ - . FOR THE YEAR UNDER CONSIDERATION, THE TURNOVER DECLARED WAS AT RS.60,40,810/ - . THE NET PROFIT DECLARED WAS 3.54%. AS AGAINST THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. .Y. 2007 - 08, THE TURNOVER WAS RS.39,97,767/ - AND THE NET PROFIT DECLARED WAS AT 3.37%. T HE AO HAS OBJECTED THAT NO QUANTITATIVE DETAILS WERE MAINTAINED BY THE ASSESSEE. O NE MORE OBJECTION WAS RAISED BY THE AO THAT AS PER THE SALE BILLS, QUANTITY OF THE ITEMS I.E. SALE O F BANGLES WAS NOT REFLECTED AND HENCE, THE GROSS PROFIT COULD NOT BE ASCERTAINED. IN HIS OPINION, THERE WAS NO WAY TO VERIFY THE CLOSING STOCK. I N THE LIGHT OF ABOVE BACKDROP THE AO REJECTED THE BOOKS OF ACCOUNT. THE ASSESSEES SUBMISSION WAS THAT IN TH IS LINE OF BUSINESS I.E. SALE OF LADIES BANGLES, IT WAS NOT POSSIBLE TO MAINTAIN THE QUANTITATIVE DET AILS. H OWEVER, THE AO WAS NOT CONVINCED AND 3 I.T.A. NO.10/BLPR/2013 ASSESSMENT YEAR :2008 - 09 ESTIMATED THE NET PROFIT AT 5% AS AGAINST THE NET PROFIT DISCLOSED BY THE ASSESSEE AT 3.54%, THEREFORE THE DIF FER ENCE OF RS.86,384/ - WAS TAXED IN THE HANDS OF THE ASSESSEE. 3. WH EN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE LD CIT(A) HAS AFFIRMED THE ACTION OF THE AO AS UNDER: I CONSIDERED THE SUBMISSIONS MADE BY THE LD AR CAREFULLY. ADMIT TEDLY, QUANTITATIVE DETAILS OF PURCHASES AND SALES ARE NOT MAINTAINED. T HE FINDINGS OF THE AO THAT THE SALES BILLS DO NOT HAVE QUANTIFICATION OF SALES ITEMS, THAT VALUATION OF CLOSING STOCK WAS MADE ON THE BASIS OF PERCENTAGE OF GROSS PROFIT, ETC, WERE NO T REFUTED BY ADDUCING COGENT EVIDENCE IN ANY PROCEEDINGS UNDER THE ACT. T HE SERIOUS IRREGULARITIES IN ACCOUNTS WERE UNEARTHED IN COURSE OF SURVEY CONDUCTED IN THE PRECEDING PREVIOUS YEAR WHICH LED TO SURRENDER OF ADDITIONAL INCOME ON ACCOUNT OF EXCESS STO CK AS WELL AS CASH FOUND. F ROM THE ABOVE, A LEGITIMATE INFERENCE CAN BE DRAWN THAT ALL IS NOT WELL WITH THE BOOKS AND SAME CANNOT BE RELIED UPON TO ASSESS THE INCOME OF THE APPELLANT. ( AWADHESH PRATAP SINGH, ABDUL RAHMAN & BROTHERS VS CIT, 210 ITR 406, 4 08 (ALL). IN SUCH A SITUATION, I FI ND THAT AO IS JUSTIFIED IN REJECTING THE ACCOUNT BOOKS U/S.145 OF THE ACT. H E IS ALSO JUSTIFIED IN REASONABLY ASSESSING THE I NCOME AT 5% OF THE TURNOVER , APPLICABLE TO THE RETAIL TRADERS AS PER PROVISIONS OF 44AF OF TH E ACT. A CCORDINGLY, THE GROUND OF APPEAL IS REJECTED. 4. ON THIS SHORT ISSUE, WE HAVE HEARD BOTH THE SIDES. A COMPILATION HAS BEEN FILED BEFORE US ALONGWITH CERTAIN CASE LAWS TO DEMONSTRATE THAT THE BOOKS OF ACCOUNT HAVE BEEN DULY AUDITED AND TH E ASSESSEE HAS MAINTAINED PROPER BILLS AND VOUCHERS TO CORROBORATE THE CORRECTNESS OF THE BOOK RESULTS. L D A.R. HAS PLEADED BEFORE US THAT NO SPECIFIC DEFECT WAS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT. T HE ASSESSEE HAS ADOPTED THE CORRECT METHOD O F VALUATION OF STOCK, WHICH WAS NOT DISTURBED IN THE PAST. H OWEVER, HE HAS SUGGESTED THAT TO CURTAIL 4 I.T.A. NO.10/BLPR/2013 ASSESSMENT YEAR :2008 - 09 THE LITIGATION AND TO BUY THE MENTAL PEACE, A REASONABLE NET PROFIT CAN BE APPLIED , BUT IN ANY CASE, THE NET PROFIT OF 5% AS ADOPTED BY THE AO WAS ON HIGH ER SIDE. HE HAS ALSO MENTIONED THAT THE TURNOVER AS WELL AS THE NET PROFIT SHOWN WAS BETTER DURING THE YEAR UNDER CONSIDERATION THAN THE PRECEDING YEAR. INTER - ALIA, HE HAS SUGGESTED THAT INSTEAD OF 3.54% AS DECLARED BY THE ASSESSEE, AN ESTIMATE OF ROUND PERCENTAGE OF 4% CAN BE APPLIED. 4.1 I N SUCH A SITUATION WHEN THE BOOKS OF ACCOUNT HAVE BEEN AUDITED AND NO SPECIFIC DEFECT WAS POINTED OUT BY THE AO, MOREOVER THE BOOK RESULTS WERE FOUND TO BE BETTER THAN THE PAST YEAR, STILL CONSIDERING THE SUBMIS SION, WE HEREBY DIRECT THE AO TO COMPUTE THE NET PROFIT BY APPLYING THE NET PROFIT RATE OF 4% ONLY. T HIS PERCENTAGE OF PROFIT SHALL BE APPLIED FOR THE YEAR UNDER CONSIDERATION BECAUSE THIS OFFER HAS BEEN MADE ONLY TO CURTAIL THE LITIGATION. R ESULTANTLY, THE VIEW TAKEN BY THE LD CIT(A) IS HEREBY REVERSED AND GROUNDS RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 5. THE NEXT GROUND IS IN RESPECT OF ADDITION OF RS.40,000/ - TAXED AS UNEXPLAINED CASH CREDIT BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T.ACT, 1961. 5.1 THE AO HAS NOTICED THAT A SUM OF R.40,000/ - WAS CREDITED IN CASH IN A BANK ACCOUNT. TH E EXPLANATION OF THE ASSESSEE WAS THAT THE AMOUNT IN QUESTION WAS RECEIVED ON MATURITY OF AN INVESTMENT, WHICH WAS DEPOSITED. I T WAS FURTHER 5 I.T.A. NO.10/BLPR/2013 ASSESSMENT YEAR :2008 - 09 EXPLAINED THAT T HE MATURITY AMOUNT WAS RECEIVED IN S.B. ACCOUNT AND FROM THAT ACCOUNT, THE SAID DEPOSIT WAS MADE. H OWEVER, THE AO WAS NOT CONVINCED AND NOTICED THAT THE WITHDRAWALS WERE MADE BY ONE PANKAJ KUMAR DOSHI. HENCE, THE SOURCE OF DEPOSIT WAS NOT CORRECTLY EXPLA INED BY THE ASSESSEE. A S A RESULT, THE IMPUGNED AMOUNT OF RS.40,000/ - WAS TAXED IN THE HANDS OF THE ASSESSEE. 6. WH EN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LD CIT(A) HAS AFFIRMED THE ACTION OF THE AO. 7. WE HAVE HEARD BOTH THE SID ES. WE HAVE B EEN INFORMED THAT THE ASSESSEE H AS MAINTAINED BOOKS OF ACCOUNT AS PROPRIETORSHIP CONCERN M/S. FIROZABAD BANGLES STORES. T HE ASSESSEE H AS BOOKS OF ACCOUNT IN RESPECT OF PROPRIETORSHIP CONCERN. T HE ASSESSEE WAS ALSO HAVING BANK ACCOUNT IN HIS INDIVIDUAL NAME OPERATING WITH CORPORATION BANK, RAIPUR. T HE AMOUNT OF RS.40,000/ - WAS DEPOSITED IN CORPORATION BANK ON 5.2.2008. T HE EXPLANATION OF THE ASSESSEE WAS THAT FIRSTLY, THERE WERE REGULAR CASH WITHDRAWALS IN THE SAID PROPRIETORSHIP CONCERN , OUT OF WHICH , THE AMOUNT COULD BE EXPLAINED AS DEPOSITED IN THE BANK. H OWEVER, THE ASSESSEE HAS ALSO EXPLAINED THAT HIS BROTHER WAS HAVING ACCOUNT WITH STATE BANK OF INDIA, OUT OF WHICH, THE SAID SUM WAS WITHDRAWN AND DEPOSITED WITH CORPORATION BANK. T HE ASSESSEE HAS PLACED CERTAIN INFORMATION AS WELL AS BANK PASSBOOK OF SBI AND CORPORATION BANK. CONSIDERING THE SMALLNESS OF THE AMOUNT AS WELL AS THE EX PLANATION OFFERED, WE 6 I.T.A. NO.10/BLPR/2013 ASSESSMENT YEAR :2008 - 09 HEREBY REVERSE THE FI NDINGS OF THE AUTHORITIES BELOW AND DIRECT TO DELETE THE A DDITION. THIS GROUND IS ACCORDINGLY ALLOWED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 /02/2016 . SD/ - SD/ - ( , ) ( , ) SHAMIM Y AHY A , ACCOUNT ANT MEMBER MUKUL SHRA WA T , JUDICIAL M EM BER RAIPUR , DATED 17 / 02 /20 1 6 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASWINI DOSHI, PROP. M/S. FIROZABAD BANGLS STORES, OPPOSITE HOTEL AJEET, TELIPARA, BILASPUR 2. / THE RESPONDENT : ITO, WA RD 1(1), AAYAKAR BHAVAN, VYAPAR VIHAR, BILASPUR 3. ( ) / THE CIT(A) - RAIPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR