Dy. Commissioner of Income Tax, Lucknow V. Raees Alam Siddqui, Lucknow

ITA 100/LKW/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83427 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O N PATHAK
• Assessee Lawyers: ARVIND SHUKLA
• Keywords: Bogus purchase
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.100/LKW/2013 ASSESSMENT YEAR:2009 - 10 DY.C.I.T., RANGE - 1, LUCKNOW. VS. SHRI RAEES ALAM SIDDIQUI, 304, II FLOOR, SAHARA SHOPPING CENTRE, FAIZABAD ROAD, INDIRA NAGAR, LUCKNOW. PAN:AICPS0379L (APPELLANT) (RESPONDENT) C.O. NO.05/LKW/2014 (IN ITA NO.100/LKW/2013) ASSESSMENT YEAR:2009 - 10 SHRI RAEES ALAM SIDDIQUI, 304, II FLOOR, SAHARA SHOPPING CENTRE, FAIZABAD ROAD, INDIRA NAGAR, LUCKNOW. PAN:AICPS0379L VS. DY.C.I.T., RANGE - 1, LUCKNOW. (OBJECTOR) (RESPONDENT) REVENUE BY SHRI O. N. PATHAK, D. R. ASSESSEE BY SHRI ARVIND SHUKLA, ADVOCATE DATE OF HEARING 16/10/2014 DATE OF PRONOUNCEMENT 1 1 /1 2 /2014 O R D E R PER A. K. GARODIA, A.M. THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION I S FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) - I, LUCKNOW DATED 19/12/2012 FOR ASSESSMENT YEAR 2009 - 10. 2 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER: 1. THE CTT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN RESTRICTING ESTIMATION OF N.P. TO 11.5% OF TURNOVER IN RESPECT OF BOTH CONCERNS AS AGAINST 20% & 15% ESTIMATED BY THE A.O. HE FAILED TO APPRECIATE THAT HUGE UNVERIFIED CREDITORS OUTSTANDING IN THE BALANCE SHEET ARE AN EXTENSION OF BOGUS PURCHASES CLAIMED IN THE TRADING A/C WHICH HA S DIRECT BEARING ON THE NET PROFIT OF THE ASSESSEE. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN FAILING TO APPRECIATE THE FACT THAT ONCE HE HAD CONFIRMED THE ACTION OF THE A.O. IN ESTIMATING THE N.P. RATE IN PASSING THE ASSESSMENT ORDER U/S 144 OF THE I.T. ACT, HE COULD NOT SUBSTITUTE HIS ESTIMATE FOR THAT OF THE A.O. WITHOUT GIVING ANY SOUND BASIS FOR THE SAME. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN GIVING PART RELIEF AND PARTLY CONFIRMING A HIGH PITCHED ASSESSMENT ORDER U/S.143(3) BASED SIMPLY ON CONJECTURES AND SURMISES WITHOUT APPRECIATING THE CORRECT FACTS AND CIRCUMSTANCES OF THE CASE IN THE CORRECT LEGAL PERSPECTIVE. 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS ESTIMATING THE NET PROFITS IN BOTH BUSINESS UNITS OF THE ASSESSEE @ 11.5% AGAINST THE DECLARED RATE OF 9.5% AND 8% RESPECTIVELY WHICH ARE FAIRLY REASONABLE IN THE LINE OF TRADE. 3. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE ACCOUNTS WERE PROPERLY MAINTAINED AND AUDITED BUT DUE TO CIRCUMSTANCES BEYOND CONTROL SOME CREDITORS DID NOT COOPERATE GI VING DOUBT TO THE CREDENTIALS OF THE APPELLANT ASSESSEE AND HENCE THE BOOK RESULTS DESERVED TO BE ACCEPTED. 3 4. BRIEF FACTS ARE THAT THE ASSESSEE IS HAVING TWO PARTNERSHIP CONCERNS NAMELY M/S SUN SURGICALS AND M/S PRABHAT ENTERPRISES. THE ASSESSING OFFIC ER REJECTED THE BOOK RESULT AND ESTIMATED THE NET PROFIT @20% OF THE TURNOVER IN THE CASE OF M/S SUN SURGICALS AND @ 1 5% IN THE CASE OF M/S PRABHAT ENTERPRISES. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL, LEARNED CIT (A) HAS DIRECTED THE ASSESSING OFFI CER TO ESTIMATE THE PROFIT OF THE ASSESSEE @11.50% OF THE TURNOVER IN RESPECT OF BOTH THE BUSINESS CONCERNS. NOW THE REVENUE IS IN APPEAL FOR THE PART RELIEF ALLOWED BY CIT(A) AND THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE PART ADDITION CONFIRMED BY CIT(A). 5. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A) IN RESPECT OF REVENUES APPEAL. IN RESPECT OF ASSESSEES CROSS OBJECTION , HE SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE PART ADDITION. HE DRAWN OUR ATTENTION TO PAGE 5 & 6 OF THE PAPER BOOK AND POINTED OUT THAT ON PAGE NO. 5 OF THE PAPER BOOK IS A COMPARATIVE CHART OF NET PROFIT RATE OF THE ASSESSEE FOR THREE YEARS IN RESPECT OF BOTH THE BUS INESS CONCERNS AND ON PAGE NO. 6 OF THE PAPER BOOK IS GROSS PROFIT RATE AND NET PROFIT RATE OF VARIOUS COMPARABLE CASES FOR THE SAME ASSESSMENT YEAR I.E. 2009 - 10. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS CONFIRMED THE REJECTIO N OF BOOKS AND THIS IS THE GRIEVANCE OF THE ASSESSEE AS PER GROUND NO. 3 OF THE CROSS OBJECTION THAT BOOK RESULTS SHOULD BE ACCEPTED. BUT WE DO NOT FIND ANY MERIT IN THIS CONTENTION BECAUSE IT IS DECIDED BY CIT(A) THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE CORRECTNESS OF DISCLOSED NET PROFIT BY REQUISITE EVIDENCE. HENCE, THIS GROUND IS DECIDED AGAINST THE ASSESSEE. ONCE THE BOOK RESULT IS REJECTED, THE INCOME OF THE 4 ASSESSEE HAS TO BE ESTIMATED IN A FAIR MANNER. IN THIS CONTEXT, WE FIND THAT AS PER P AGE NO. 5 OF THE PAPER BOOK, IN THE CASE OF THE ASSESSEE, DISCLOSED NET PROFIT RATE WAS AROUND 5% IN CASE OF M/S SUN SURGICALS AND AROUND 3% TO 4% IN THE CASE OF M/S PRABHAT ENTERPRISES AFTER EXCLUDING FDR INTEREST IN THE PRESENT YEAR AND IN PRECEDING TWO YEARS. IT IS NOTED BY CIT(A) IN PARA 5.1 THAT NET PROFIT IS OF 10.1% FOR ASSESSMENT YEAR 2007 - 08 IN THE CASE OF M/S SUN SURGICALS AND 20.44% IN THE CASE OF M/S PRABHAT ENTERPRISES FOR ASSESSMENT YEAR 2008 - 09 AND IT IS FOR THE REASON THAT THERE WAS SUBSTAN TIAL AMOUNT OF INTEREST ON FDR. HE HAS ALSO GIVEN A FINDING THAT WHILE APPLYING THE ESTIMATED RATE OF NET PROFIT OF 20% AND 15% , A.O. DID NOT CITE ANY COMPARABLE CASES NOR MADE ANY LOGICAL AND SCIENTIFIC ANALYSIS OF MATERIAL AVAILABLE. ON THIS BASIS, HE HAS HELD THAT ADOPTING SUCH HIGH NET PROFIT OF 20% AND 15% FOR M/S SUN SURGICALS AND M/S PRABHAT ENTERPRISES RESPECTIVELY IS NOT JUSTIFIED. HIS DIRECTION TO ADOPT 11.5% NET PROFIT AS AGAINST 8.72% AND 9.85% REPORTED BY THE ASSESSEE IN THE CASE OF M/S SUN SURGICALS & M/S PRABHAT ENTERPRISES RESPECTIVELY IS FOR ADOPTING NET PROFIT RATIO INCLUDING FDR INTEREST. HENCE, FDR INTEREST IS NOT REQUIRED TO BE ADDED FURTHER. THEREFORE, THE ADDITION UPHELD BY CIT(A) IS ROUGHLY 2.5% IN RESPECT OF TURNOVER OF M/S SUN SURGICALS AND 1.65% IN CASE OF M/S PRABHAT ENTERPRISES, WHICH IS REASONABLE IN VIEW OF THIS FACT THAT THE CREDITORS ARE NOT CON FIRMING THE OUTSTANDING CREDIT BALANCE AND IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT ABOUT 22 CREDITORS WERE THOSE CREDITORS FROM WHOM LETTER HAVE RETURNED UNSERVED AND 12 CREDITORS ARE SUCH CREDITORS WHO HAVE DENIED HAVING ANY TRAN SACTION WITH THE ASSESSEE. IN ONE OF THE CASE S I.E. M/S ALLIED SALES CORPORATION, THE PARTY HAS CONFIRMED TO HAVE SOLD MATERIAL AMOUNTING TO RS.62,326/ - WITH NO OUTSTANDING BALANCE AS ON 31/03/2009 BUT THE ASSESSEE HAS SHOWN OUTSTANDING CREDIT BALANCE OF RS.6,90,607/ - . HENCE, IT 5 HAS TO BE ACCEPTED THAT THE POSSIBILITY OF INFLATION OF PURCHASE CANNOT BE RULED OUT AND THEREFORE, ADOPTING A REASONABLE NET PROFIT RATE AFTER REJECTING THE BOOKS OF ACCOUNT IS JUSTIFIED. CONSIDERING THE TOTALITY OF THE FACTS, I N OUR CONSIDERED OPINION, ADOPTING THE NET PROFIT RATE OF 11.5% IS REASONABLE AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER WAS PRONO UNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 1 /12/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR