M/s. Pashupati Auto Industries, Gurgaon V. ITO, Gurgaon

ITA 1189/DEL/2010

• Counselvise Citation: 118920114 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 17-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEETA SINHA
• Assessee Lawyers: SOMIL AGARWAL ACA
• Keywords: Depreciation
• Section: 44AD; 143(3); 234B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1189/DEL/2010 ASSESSMENT YEAR : 2002-03 M/S PASHUPATI AUTO INDUSTRIES, ITO, HOUSE NO.1010, SECTOR-15, WARD-4, PART-II, GURGAON. V. GURGAON. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AABFT AABFT AABFT AABFT- -- -1687 1687 1687 1687- -- -A AA A APPELLANT BY : SHRI ASHWANI TANEJA, FCA. SHRI TARUN KUMAR, ADVOCATE & SHRI SOMIL AGARWAL, ACA. RESPONDENT BY : MS. MEETA SINHA, SR. DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 16.12.2009. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHING THE ASSESSMENT ORDER PASSED BY LD ASSESSING OFFICER WITHOUT ASSUMING JURISDICTION AS PER LAW AND WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS AS PRESCRIBED U/S 147 TO 151 AND W ITHOUT COMPLYING THE PRINCIPLES LAID DOWN BY THE HON'BLE SU PREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. ITO 259 ITR 19. ITA NO1189/DEL/2010 2 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING DISALLOWANCE OF ` .4,81,057/- ON ACCOUNT CLOSING STOCK. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .3,67,479/- ON ACCOUNT OF DIFFERENCE IN PURCHASE ACCOUNT FROM THE SUPPLIERS. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .10,86,875/- OUT OF ALLEGED DIFFERENCE FOUND ON ACCOUNT OF SUNDRY CREDIT ORS. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .103500/- ON ACCOUNT OF PURCHASE MADE FROM SHREE YUNE POLYMERS. ON ACCOUNT O 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING TH E ACTION OF LD ASSESSING OFFICER IN MAKING ADDITION OF ` .17,482/- UNDER THE HEAD VEHICLE REPAIRS MAINTENANCE. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN QUASHING THE IMPUGNED ASSESSMENT ORDER BY LD ASSESSING OFFICER AND IN NOT DELETIN G THE VARIOUS ADDITIONS/DISALLOWANCES MADE BY THE LD ASSESSING OF FICER AS THE ASSESSMENT ORDER IS NOT SUSTAINABLE ON VARIOUS LEGA L AND FACTUAL GROUNDS AND MORE SO BY RECORDING INCORRECT FA CTS AND FINDING. ITA NO1189/DEL/2010 3 8. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT GRANTI NG TELESCOPING OF THE ADDITIONS MADE BY LD ASSESSING OFFICER AND HAS FURTHER ERRED IN MAKING DOUBLE ADDITION IN THIS R EGARD. 9. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT RE VERSING THE ACTION OF LD ASSESSING OFFICER IN CHARGING INTEREST U/S 2 34A, 234B & 234C. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF TWO LADIES. THE FIRM CAME INTO EXIST ENCE VIDE PARTNERSHIP DEED DATED 28.1.1998. THE FIRM IS ENGAGE D IN THE PURCHASE, SALE AND MANUFACTURE OF RUBBER PLASTIC COMPO NENTS AND AUTO PARTS. THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 20 02-03 WAS REOPENED U/S 147/148 OF THE ACT AS IT WAS FOUND DURING ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003-04 THAT THERE WAS DIFFERENCE IN OPENING BALANCES OF CREDITORS AMOUNTING TO ` .17,56,417/-. DURING RE- ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT O N THE BASIS OF PURCHASES AND SALES THERE WAS A DIFFERENCE OF CLO SING STOCK AMOUNTING TO ` .4,81,057/-. HE FURTHER OBSERVED THAT THERE WAS A DIFFERENCE IN THE ACCOUNT STATEMENTS OF M/S AGGARWAL C HEMICALS, REWARI, M/S NARESH MOHAN LAVLESH MOHAN, GURGAON AND M/ S IMPEX RUBBER, FARIDABAD. AS THE ASSESSEE COULD NOT EXPLAIN TH E DIFFERENCE AS PER ASSESSEES BOOKS OF ACCOUNTS AND AS PER STATEMENT OBTAI NED FROM THE ABOVE PARTIES, THE ASSESSING OFFICER PROCEEDED TO MA KE ADDITION ON ACCOUNT OF DIFFERENCE. FURTHER THE ASSESSING OFFICER NOTED FROM THE COPIES OF ACCOUNTS OF VARIOUS CREDITORS/SUPPLIERS THAT TH ERE WAS SIGNIFICANCE DIFFERENCES IN BALANCES AS ON 3.3.2003 AMO UNTING TO ` .18,23,217/-. THE ASSESSING OFFICER OBSERVED THAT THE DI FFERENCE WAS ON ACCOUNT OF ALLEGED PAYMENT BY THE ASSESSEE TO THESE P ARTIES ITA NO1189/DEL/2010 4 WHICH ACCORDING TO HIM WERE NOT RECORDED IN THE BOO KS OF ACCOUNTS. SIMILARLY CERTAIN OTHER DISCREPANCIES WERE OBSERVED BY THE ASSESSING OFFICER TO WHICH HE DID NOT FIND THE REPLY FILED BY THE ASSESSEE TO BE SATISFACTORY. THEREFORE, FOLLOWING ADDITIONS WERE MADE TO THE INCOME OF THE ASSESSEE: 1) ` .4,81,057/- ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 2) ` .3,67,479/- ON ACCOUNT OF DIFFERENCE IN PURCHASES. 3) ` .10,86,875/- ON ACCOUNT OF PAYMENTS MADE TO SUPPLIERS BUT NOT RECORDED IN THE BOOKS OF ACCOUNTS. 4) ` .1,03,500/- ON ACCOUNT OF PURCHASE OF PLASTIC JARS. 5) ` .48,000/- ON ACCOUNT OF DISALLOWANCE OF PARTNERS SALA RY. 6) ` .1,49,850/- ON ACCOUNT OF INFLATED PURCHASES. 7) ` .17,482/- ON ACCOUNT OF DISALLOWANCE OF 1/6 TH OF VEHICLE EXPENSES. 3. DISSATISFIED WITH THIS ORDER THE ASSESSEE TOOK THE MATTE R TO LD CIT(A) WHO AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE DELETED A FEW ADDITIONS AND UPHELD REMAINING. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THIS TRIB UNAL. 5. AT THE OUTSET, THE LD AR STATED THAT HE WILL NOT P RESS THE POINT OF REOPENING U/S 147/148 OF THE ACT AND THEREFORE GROUN D NO.1 OF THE APPEAL IS DISMISSED AS NOT PRESSED. 6. AS REGARDS THE MERITS OF THE CASE, THE LD AR SUBMITT ED THAT FIRM WAS OWNED BY LADY PARTNER WHO WERE NOT AWARE OF VARI OUS TECHNICALITIES OF LAW. HE FURTHER STATED THAT IF ALL THE ADDITIONS AS UPHELD BY LD CIT(A) ARE ADDED TOGETHER THEN GP RATI O OF ASSESSEE ITA NO1189/DEL/2010 5 COMES OUT TO BE MORE THAN 17% WHICH WAS EXORBITANT AN D CANNOT HAPPEN IN REALITY. THEREFORE, HE ARGUED THAT A REASO NABLE BASIS MAY BE ADOPTED BY THE BENCH ON THE BASIS OF PART TURNOVER A ND ON PAST PERCENTAGE OF PROFIT SO THAT INCOME OF THE ASSESSEE COUL D BE ASSESSED IN A REASONABLE WAY. HE TOOK US TO PAGES 68 TO 84 OF T HE PAPER BOOK WHEREIN CHART SHOWING SALE, GP RATE AND BALANCE SHEET OF THE ASSESSEE WERE PLACED. HE FURTHER SUBMITTED THAT AVERAGE TURN OVER RANGED BETWEEN ` .50 LAKHS TO ` .55 LAKHS AND ARGUED THAT THE TURNOVER OF THE FIRM WAS NEVER QUESTIONED AND AS PER SALES TAX ASSESSMENT A LSO, THE SAME ACCEPTED. IN VIEW OF THE ABOVE, HE REQUESTED TH AT A REASONABLE RATE OF NET PROFIT BE TAKEN TO ESTIMATE THE INCOME O F THE ASSESSEE. 7. ON THE OTHER HAND, LD DR, RELIED UPON THE ORDER OF LD ASSESSING OFFICER AND LD CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT ASSESSING OFFICER BY COMPARING THE STATEMENTS OF AC COUNTS OF VARIOUS SUPPLIERS AND DEBTORS WITH THE ACCOUNT BOOKS SUBM ITTED BY THE ASSESSEE FOUND DISCREPANCIES AND ALL DISCREPANCIES WERE ADD ED TO THE INCOME OF THE ASSESSEE. WE HAVE FURTHER NOTED THAT ON T HE BASIS OF BALANCE SHEET AND TURNOVER OF THE FIRM, THE ASSESSEE IS A SMALL TIME FIRM AND IT HAS BEEN SHOWING GP RATE FROM 13.61% TO 1 3.90% IN THE FINANCIAL YEAR 1999-2000 TO FINANCIAL YEAR 2002-03. SIMILARLY NET PROFIT RATE HAS BEEN SHOWN TO BE 0.99% TO 1.66% IN THESE FOUR YEARS. THE MAIN ADDITION MADE BY THE ASSESSING OFFICER IS ON ACCOUN T OF DIFFERENCE IN THE STATEMENTS OF ACCOUNTS OF SUPPLIERS AN D ASSESSEE ON ACCOUNT OF PAYMENTS WHICH ACCORDING TO ASSESSING OFFICER WERE MADE BY ASSESSEE OUT OF BOOKS OF ACCOUNTS. THE ASSESSING OFFICER ALSO OBSERVED DIFFERENCE IN CALCULATION OF CLOSING STOCK TO THE EXTENT OF ITA NO1189/DEL/2010 6 ` .4,71,057/-. FURTHER THE DIFFERENCE POINTED OUT BY THE ASSESSING OFFICER AMOUNTED TO ` .3,67,479/- BETWEEN THE PURCHASES AS PER ASSESSEE AND SALES AS PER SUPPLIES. THE DIFFERENCE CAN BE DU E TO WRONG MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE OR BY TH E SUPPLIERS. SIMILARLY, THE ADDITION OF ` .10,86,874/- ON ACCOUNT OF DIFFERENCE IN PAYMENTS MADE BY THE ASSESSEE AND THOSE REFLECTED BY SUPPL IER CAN ALSO BE DUE TO WRONG MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE OR BY THE SUPPLIERS. HOWEVER, NO WHERE THE ASSESSING OFFICER HAD DISPUTED THE TURNOVER OF THE ASSESSEE WHICH FOR THE YEAR UNDER CONSIDERATION WAS ` .56,01,318/-. SINCE SALES HAS NOT BEEN DISPUTED, WE HOLD THAT ASSESSEE MUST HAVE PAID FOR THE PURCHASES ALSO BU T COULD NOT MAINTAIN PROPER BOOKS OF ACCOUNTS. THE LD AR DURING A PPELLATE PROCEEDINGS HAD PLEADED TO ESTIMATE NET PROFIT ON TH E BASIS OF PAST TURNOVER AND NET PROFIT RATIO WHICH IN OUR OPINION CANNOT BE ACCEPTED IN VIEW OF VARIOUS GLARING DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER. MOREOVER, THE LD AR COULD NOT SUBMIT PAST ASSE SSMENTS MADE U/S 143(3) NOR HE WAS ABLE TO PRODUCE ASSESSMENT OF ANY A SSESSEE ENGAGED IN SIMILAR TRADE SO AS TO SUBSTANTIATE HIS CLAIM. 10. ON THE OTHER HAND, IF ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER AND UPHELD BY LD CIT(A) ARE CONSIDERED THE N P RATIO OF THE FIRM WILL COME OUT TO 39% WHICH DO NOT SEEM TO BE ANYWHER E NEAR THE REALITY KEEPING IN VIEW THE NORMAL NP RATIO WHICH P REVAILS IN THE INDUSTRY IN GENERAL. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE CONSIDERED OPINION THAT NET PROFIT OF THE FIRM CAN B E ESTIMATED ON THE BASIS OF GUIDELINES OF SECTION 44AD OF THE INCOME TAX A CT, 1961 WHICH THOUGH ARE APPLICABLE TO TRADERS BUT STILL CAN BE OF HELP IN ESTIMATING NET PROFITS OF THE ASSESSEE. SECTION 44AD PROVIDES 8% OF TOTAL TURNOVER TO BE THE PROFITS AND GAINS OF A BUSINESS IN CASE OF NON MAINTENANCE OF ACCOUNTS. APPLYING THE SAME ON A TOTAL OF ` .56,01,315/-, THE NET PROFIT ITA NO1189/DEL/2010 7 OF THE FIRM IS ESTIMATED AT ` .4,48,105/-. THE ABOVE NET PROFIT IS NET OF ALL EXPENSES INCLUDING DEPRECIATION. HOWEVER, PARTNER S SALARY AS ALLOWABLE AS PER TERMS OF PARTNERSHIP DEED CAN BE REDU CED FROM THE ABOVE INCOME TO ARRIVE AT THE TAXABLE PROFITS OF THE FIRM. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO CALCULATE THE TAXABLE PROFITS OF THE FIRM ACCORDINGLY. 11. CHARGING OF INTEREST U/S 234A, 234B & 234C ARE MA NDATORY PROVISIONS, THE INCIDENCE OF WHICH DEPENDS UPON THE TA X LIABILITY. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD DAY OF NOVEMBER, 2012. SD/- SD/- (RAJPAL YADAV ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 23 .11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 24.9.2012 ITA NO1189/DEL/2010 8 DATE OF DICTATION 16.11.2012 DATE OF TYPING 16.11.2012 DATE OF ORDER SIGNED BY 23.1.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 23.11.2012 & SENT TO THE BENCH CONCERNED.