Sampat Lal Rampuria, V. I.T.O.,

ITA 104/RAN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85454 (ITAT-RANCHI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2013
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ORAM JCITLD
• Assessee Lawyers: M K CHOUDHARY LD
• Keywords: Gross profit estimation
• Section: 234B

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT M EMBER ITA NO . 104 /RAN/201 3 A.Y 200 8 - 09 SAMPAT LAL RAMPURIA VS. INCOME TAX OFFICE R PROP: M/S. NEW RAMPURIA WARD 3(1), RANCHI PAN: ABQPR7157J ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT :SH RI M.K.CHOUDHARY, ADVOCATE, LD.AR FOR THE RESPONDENT : SHRI CHOUDHARY ORAM, JCIT/LD.DR DATE OF HEARING : 01 - 12 - 2014 DATE OF PRONOUNCEMENT: 01 - 12 - 2014 O R D E R SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THIS APPEAL F ILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30 - 09 - 2013 PASSED BY LD. CIT(A) , RANCHI (JHARKHAND) AND IT RELATES TO THE ASSESSMENT YEAR 200 8 - 0 9 . 2. THE GROUNDS ADJUDICATING IN THIS APPEAL RELATE TO THE FOLLOWING ISSUES : - A. ADDITION OF GROSS PROFIT BY ENHANCING GROSS PROFIT RATE B. DISALLOWANCE O N PART OF SALARY EXPENDITURE C. ADDITION OF UNEXPLAINED BANK DEPOSIT D. DIS ALLOWANCE O N PART OF SHOP EXPENSES, AND E. CHARGING OF INTEREST U/S. 234B OF THE ACT 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. 4. THE FACTS RELATING TO THE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADE IN CLOTH AND SAREES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DECLARED 2 ITA NO.104/RAN/2013 SAMPAT LAL RAMPURIA PROP: M/S. NEW RAMPURIA CLOTH STORES LOWER GROSS PROFIT VIS - - VIS IMMEDIATELY PRECEDING ASSESSMENT YEAR , E VEN THOUGH THE SALES H A D GONE UP . HENCE, TH E ASSESSING OFFICER THE SELECTED THE SAMPLES OF PURCHASE AND SALES BILLS OF CERTAIN ITEM OF STOCK AND WORKED OUT THE GROSS PROFIT [GP] RATE REALI S ED OUT TH ERE I N. AFTER GIVING THE S OME DEDUCTION, THE ASSESSING OFFICER DETERMINED THE GROSS PROFIT AT 30.78 % . ACCORDINGLY THE AO WORKED THE DIFFERENCE AND MADE THE ADDITION. IN TH E APPELLATE PROCEEDINGS, THE LD.CIT(A) REDUCED THE GROSS PROFIT TO 15.25% . STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES PERUSED THE REC ORD. WE NOTICE THAT THE GROS S PROFIT RATE DECLARED BY THE ASSESSEE WAS 9.45% . AT THE TIME OF HEARING THOUGH THE LD.AR CONTENDED THAT THE GROSS PROFIT DETERMINED BY THE LD.CIT(A) IS ON THE HIGHER SIDE, YET HE COULD NOT FURNISH ANY MATERIAL TO CONTRADICT T HE FINDINGS GIVEN BY THE LD.CIT(A) ON THIS ISSUE. FR O M THE ASSESSMENT ORDER, WE NOTICE THAT THE ASSESSING OFFICER HAS TAKEN SAMPLES OF PURCHASE AND SALES OF CERTAIN ITEMS OF STOCK AND WORKED OUT THE GROSS PROFIT RATE AT 30.78% , AFTER GIVING SOME DEDUCTI ON . SINCE THE SAMPLE S TAKEN BY THE AO WERE VERY SMALL , THE LD. CIT(A) DETERMINED THE GROSS PROFIT RATE AT 1 5.28% BY CONSIDERING THE ASSESSEE S PAST HISTORY OF GROSS PROFIT [GP] RATE . HOWEVER, ON PERUSAL OF THE COMPARATIVE CHART OF GROSS PROFIT RATE GIV EN BY THE ASSESSEE , WE NOTICE THAT THE ASSESSEE HAS BEEN DECLARING HIS GP RATE RANGING FROM 8.86% TO 10.1 9 % FROM ASSESSMENT YEARS 2005 - 06 TO 2011 - 12 . IT IS NOTICE D THAT IN MOST OF THE YEARS, THE RETURNS OF INCOME HAVE BEEN ACCEPTED U/S. 143(1) OF THE ACT B Y THE DEPARTMENT. HOWEVER, THERE IS SOME MERIT IN THE CONTENTIONS OF THE ASSESSEE I.E, IN CLOTH TRADE, THE POSSIBILITY OF THE GOOD STOCK TURNING INTO DEAD STOCK IS MORE, DUE TO FREQUENT CHANGES IN THE FASHION AND PRIORITIES H ENCE, CONSIDERING ALL THESE FACTORS, WE ARE OF THE VIEW THAT THE GP R ATE OF 15.25% DETERMINED BY THE LD.CIT(A) IS ALSO ON HIGHER SIDE. ACCORDINGLY, TO PUT THIS ISSUE AT REST, WE DIRECT THE ASSESSING OFFICER TO WORK OUT THE ADDITION BY TAKING THE GP RATE AT 12% . THE ORDER OF THE LD.CIT(A) ON THIS ISSUE STANDS MODIFIED ACCORDINGLY. 3 ITA NO.104/RAN/2013 SAMPAT LAL RAMPURIA PROP: M/S. NEW RAMPURIA CLOTH STORES 6. THE NE XT ISSUE RELATES TO DISALLOWANCE MADE OUT OF SA LARY EXPENDITURE PAID TO AN EMPLOYEE NAMED SHRI RISHAV RAMPURIA. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID SALARY RS. 75,00 0/ - P.A TO THE ABOVE PERSON. THE NEXT HIGHEST SALARY PAID WAS SEEN AT RS.42,000/ - . HENCE S , THE ASSESSING OFFICER HELD THE THAT THE ASSESSEE HAS PAID EXCESS SALARY OF RS.30,000/ - TO SHRI RISHAV RAMPURIA ON THE REASONING T HAT HE HAPPENS TO BE A OF OF THE A SSESSEE. ACCORDINGLY, THE AO DISALLOWED RS.30,000/ - IN TERMS OF SECTION 40A(2) OF THE ACT. THE .CIT(A) ALSO CONFIRMED THIS ADDITION. W E NOTICE T HAT T THE ASSESSING OFFICER MAY INVOKE THE PROVISIONS OF SECTION U/S. 40A(2 )( A) OF THE ACT ONLY IF IT IS FOUN D THAT THE RELEVANT EXPENDITURE IS EXCESS OF THE PREVAILING MARKET RATES . IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT ASCERTAINED ABOUT THE NATURE OF SERVICES RENDERED BY SHRI RISHAV RAMPURIA AND THE PREVAILING MARKET RATE FOR SUCH KIND OF SERV ICES , MEANING THEREBY , THE ASSESSING OFFICER HAS MADE THE IMPUGNED D DISALLOWANCE ON ADHOC BASIS BY COMPARING SALARY TO AN ANOTHER EMPLOYEE , WITHOUT BRINGING ON RECORD THAT THE OTHER EMPLOYEE WAS ALSO PROVIDED THE SAME KIND OF OF SERVICES. UNDER THE SE SET OF FACTS, IN OUR VIEW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THIS DISALLOWAN CE. 7. NEXT ISSUE RELATES TO ADDITION OF UNEXPLAINED BANK DEPOSIT. . THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE CASH DEPOSIT AGGREGATING OF RS. 2.36 LAKH IN HIS S/B ACCOUNT . THE ASSESSEE CLAIMED THAT HE HAS DEPOSITED THE ABOVE AMOUNT FROM M AKING WITHDRAWALS FROM HIS BUSINESS CONCERN . ON VERIFICATION OF THE BOOKS OF ACCOUNT RELATING TO THE WITHDRAWALS , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COULD EXPLAIN THE SOURCE ONLY TO THE EXTENT OF RS.57,847/ - . ACCORDINGLY, HE A SSESSED THE BALANCE OF RS.1,78,153 AS UNEXPLAINED BANK DEPOSIT. 8 . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) NOTICED THAT THE ASSESSEE HAS DEPOSITED A SUM OF RS. 1 LAKH BY WAY OF CHEQUE. ACCORDINGLY, THE LD.CIT(A) GAVE A SET OF RS. 1 LAKH AND CONFIRMED THE ASS ESSMENT OF BALANCE AMOUNT OF RS.78,153/ - . 4 ITA NO.104/RAN/2013 SAMPAT LAL RAMPURIA PROP: M/S. NEW RAMPURIA CLOTH STORES 9. . WE NOTICE THAT THE LD.CIT(A) HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE COULD EXPLAIN THE SOURCE S TO THE EXTENT OF RS.57,847/ - ONLY FROM OUT OF THE WITHDRAWALS MADE FROM HIS BUSINESS CONCERN. THOUGH THE L D.DR CONTENDED THAT HE SOURCE OF DEPOSITS ARE VERIFIABLE FROM THE CAPITAL ACCOUNT OF THE BUSINESS OF THE ASSESSEE, YET HE COULD NOT CONTRADICT THE SPECIFIC FINDINGS GIVEN BY THE ASSESSING OFFICER. FURTHER, WE HAVE ALREADY NOTICED THAT THE LD.CIT(A) HA S GIVEN SET OF RS. 1 LAKH DEPOSITED INTO THE BANK BY WAY OF CHEQUE . THUS, IT IS SEE THAT THE ASSESSEE COULD NOT PROPERLY EXPLAIN THE SOURCES FOR BALANCE AMOUNT OF DEPOSITS. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD.CIT(A) IN CONFIRMING T HE ADDITION TO THE EXTENT OF RS.78,153 / - . ACCORDINGLY W E UPHOLD THE SAME. 1 0 . NEXT ISSUE RELATES TO THE DISALLOWANCE MADE OUT OF SHOP EXPENSES. THE ASSESSING OFFICER NOTICED THAT SHOP EXPENSES OF RS.69,410/ - CLAIMED BY THE ASSESSEE WERE NOT SUPPORTED BY VOUCHERS. HENCE, HE DISALLOWED A SUM OF RS. 39,410/ - OUT OF SHOP EXPENSES. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 30% OF THE SHOP EXPENSES CLAIMED BY THE ASSESSEE. THOUGH THE LD.AR SUBMITTED THAT THE SHOP EXPENSES CLAIME D BY THE ASSESSEE IS REASONABLE AND COMPARED WITH THE ASSESSEE, YET HE COULD NOT CONTRADICT THE FINDINGS OF THE ASSESSING OFFICER THAT THE SAID EXPENSES WERE NOT SUPPORTED BY VOUCHERS. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LD.CIT(A). HENCE, WE UPHOLD THE SAME. 1 1 . LAST ISSUE RELATES TO THE COMPUTATION OF INTEREST U/S. 234B OF THE ACT . THE SAME IS CONSEQUENTIAL IN NATURE AND WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE SAME IN ACCORDANCE WITH THE BI NDING DECISION LAID DOWN BY THE HON'BLE JURISDICTIONAL JHARKHAND HIGH COURT IN THE CASE OF AJAY PRAKASH VERMA VS. ITO IN TAX APPEAL NO.38 OF 2010. 5 ITA NO.104/RAN/2013 SAMPAT LAL RAMPURIA PROP: M/S. NEW RAMPURIA CLOTH STORES 12 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . P RONOUNCED ACCORDINGLY ON 01 - 12 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DT. 01 - 12 - 2014 PLACE : RANCHI PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APP ELLANT : 2 THE RESPONDENT: 3. .THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUIT BENCH, RANCHI 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT. REGISTRAR 6 ITA NO.104/RAN/2013 SAMPAT LAL RAMPURIA PROP: M/S. NEW RAMPURIA CLOTH STORES 1. DATE OF DICTATION ............. 01 - 12 - 2014 ........... ............ 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ........................OTHER MEMBER ..... 02 - 12 - 2014 ........................ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT................................ 01 - 12 - - 2014 ................................................... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. D ATE ON WHICH THE FILE GOES TO THE BENCH CLERK ....................................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ......................................... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................................................................................................. 9. DATE OF DESPATCH OF THE ORDER ..............................................................