SHRI PADAM SINGHAL, DHOLPUR V. INCOME TAX OFFICER, WARD-4, BHARATPUR

ITA 1099/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0390 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA JCIT DHK
• Keywords: Reassessment proceedings
• Section: 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1099/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12. SHRI PADAM SINGHAL AGRASEN MARKET, BARI, DISTRICT DHOLPUR. CUKE VS. THE INCOME TAX OFFICER, WARD-4, BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. CNBPS 8943 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PC PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : MS. CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16.12.2019. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/12/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT (A), ALWAR DATED 11.07.2019 FOR THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN APPLYING THE N.P. RATE OF 2% ON TURNOVER OF RS. 4,52,29,640/- AS AGAINST N.P. RATE OF 0.66% DECLARED BY THE ASSESSEE, THEREBY CON FIRMING ADDITION OF RS. 6,05,893/-. 2. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 3. NECESSARY COST BE AWARDED TO THE ASSESSEE. 2 ITA NO. 1099/JP/2019 SHRI PADAM SINGHAL, DHOLPUR. 2. THE ASSESSEE IS ENGAGED IN THE WHOLESALE AND RET AIL TRADING OF SUGAR. THE ASSESSEE FILED HIS RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE IT ACT DECLARING TOTAL INCOME OF RS. 1,49,700/-. DURI NG THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE MADE PU RCHASES OF RS. 4,23,80,318/- WHICH ARE NOT VERIFIABLE. THE AO HAS INVOKED THE PR OVISIONS OF SECTION 145(3) OF THE ACT AND THEN MADE A DISALLOWANCE OF 25% OF THE PURC HASES AMOUNTING TO RS. 1,05,95,080/-. ON APPEAL, THE LD. CIT (A) HAS REST RICTED THE ADDITION MADE BY THE AO BY TAKING THE NET PROFIT RATE OF 2% OF THE TURNO VER AND THEREBY RESTRICTED THE ADDITION TO RS. 7,54,892/-. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE LD. CIT(A) HAS TAKEN THE NET PROFIT RATE OF 2% BY CONSIDERING TWO COMPARABLE CASES IN CASES OF M/S. BAJAJ HINDUSTAN AND SHREE RENUKA SUGARS LTD. HE HAS CONTENDED THAT THESE TWO COMPANIES ARE NOT COMPARABLE WITH THE ASSESSEE AS THESE TWO COMPANIES ARE MANUFACTURERS OF SUGAR WHEREAS THE ASSESSEE IS A WH OLESALER AND RETAIL TRADER OF SUGAR. THEREFORE, THE REASONABLE RATE ADOPTED BY TH E LD. CIT (A) IS BASED ON INCORRECT FACTS AS THESE TWO COMPANIES ARE NOT COMP ARABLE DUE TO DIFFERENT BUSINESS AND FUNCTIONS. HE HAS FURTHER CONTENDED THAT THE A SSESSEE HAS DECLARED THE NET PROFIT AT 0.33% WHICH IS REASONABLE IN THIS LINE OF BUSINESS. FURTHER, THIS IS THE FIRST YEAR OF ASSESSEES BUSINESS, THEREFORE, THE ADDITIO N MADE BY THE LD. CIT (A) WITHOUT CONSIDERING ALL THE RELEVANT FACTS IS NOT JUSTIFIED . THE AO HAS FURTHER SUBMITTED THAT EVEN THE AVERAGE NET PROFIT RATE ADOPTED BY THE LD. CIT (A) OF 2% IS ALSO NOT CORRECT AS IN CASE OF M/S. BAJAJ HINDUSTAN, THE NET PROFIT DECLARED BY THE SAID COMPANY FOR THE FY 2009-10 & 2010-11 (YEAR ENDING 30.09.2011) A RE 1.91% AND 0.39% 3 ITA NO. 1099/JP/2019 SHRI PADAM SINGHAL, DHOLPUR. RESPECTIVELY AND IN CASE OF SHREE RENUKA SUGARS LTD . THE NET PROFIT DECLARED FOR THE ENDING ON 31.03.2012 IS 2.14%. THUS THE AVERAGE NE T PROFIT RATE OF THESE THREE RATES IS 1.48% AND NOT 2%. HE HAS RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF GOTAN LIME KHA NIZ UDYOG, 256 ITR 243 (RAJ.). 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ONCE THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED UNDER SECTION 145(3), THEN THE AO IS DUTY BOUND TO ESTIMATE THE INCOME OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS REJECTED THE BOOKS OF ACCOUNT O F THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THOUGH TH E AO HAS MADE A DISALLOWANCE OF 25% OF THE PURCHASES ON THE GROUND OF NON-VERIFIABL E, HOWEVER, THE LD. CIT (A) HAS RESTRICTED THE SAID ADDITION BY TAKING THE NET PROF IT RATE OF 2% ON THE ENTIRE TURNOVER. WE FIND THAT THE LD. CIT (A) HAS ADOPTED A RIGHT APPROACH OF ESTIMATING THE INCOME OF THE ASSESSEE PURSUANT TO THE REJECTIO N OF BOOKS OF ACCOUNT UNDER SECTION 145(3). HOWEVER, THE ESTIMATION OF INCOME S HOULD BE BASED ON SOME PROPER AND REASONABLE CRITERIA. IN THE CASE IN HAND, THERE IS NO PAST HISTORY AS THIS IS THE FIRST YEAR OF ASSESSEES TRADING, THEREFORE, THE RE ASONABLE RATE OF PROFIT OR GP OUGHT TO HAVE BEEN TAKEN AS DECLARED BY THE SIMILARLY SIT UATED WHOLESALER/RETAILER OF SUGAR. THE LD. CIT (A) INSTEAD OF SELECTING COMPARABLE CAS ES HAS SELECTED THE SUGAR MANUFACTURING COMPANIES BEING M/S. BAJAJ HINDUSTAN AND SHREE RENUKA SUGARS LTD. THEREFORE, THE ADOPTION OF PROPER AND REASONABLE RA TE ON THE BASIS OF THE SUGAR MANUFACTURING COMPANIES DECLARED NET PROFIT IS NOT APPROPRIATE WHEN THE ASSESSEE IS ONLY A WHOLESALER/RETAILER IN SUGAR. HENCE IN TH E FACTS AND CIRCUMSTANCES OF THE 4 ITA NO. 1099/JP/2019 SHRI PADAM SINGHAL, DHOLPUR. CASE AND IN THE INTEREST OF JUSTICE TO BRING THIS D ISPUTE TO AN END, WE FIND IT PROPER TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT OF 1%. WE FURTHER NOTE THAT EVEN THE CORRECT AVERAGE NET PROFIT OF M/S. BA JAJ HINDUSTAN AND SHREE RENUKA SUGARS LTD. COMES TO 1.48% AND NOT 2% AS ADOPTED BY THE LD. CIT (A). ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES, WE FIND THAT THIS I S THE FIRST YEAR OF BUSINESS OF ASSESSEE AND ACCORDINGLY A NET PROFIT @ 1% WOULD BE PROPER AND REASONABLE CRITERIA FOR ESTIMATING THE INCOME OF THE ASSESSEE. HENCE T HE AO IS DIRECTED TO COMPUTE THE INCOME BY ADOPTING NET PROFIT RATE OF 1% OF THE TOT AL TURNOVER. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/12/20 19. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/12/2019. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI PADAM SINGHAL, DHOLPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE ITO, WARD-4, BHARATPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1099/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 5 ITA NO. 1099/JP/2019 SHRI PADAM SINGHAL, DHOLPUR.