DCIT, Sikar V. SHRI RAM KUMAR SONI, Sikar

ITA 1293/JPR/2010

• Counselvise Citation: 129323114 RSA 2010
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MEENA

Judgement Text

1 ITA 1293-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1293/JP/2010 ASSTT. YEAR : 2006-07. THE DCIT, CIRCLE, VS. SHRI RAM KUMAR SONI, SIKAR. PROP.M/S. M.B. & SONS JEWELLERS, NEW DUJOD GATE, SIKAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.MEENA RESPONDENT BY : SHRI SATISH GUPTA ORDER DATE OF ORDER : 22/07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. THE DEPARTMENT IS OBJECTING IN HOLDING THAT PROV ISIONS OF SECTION 145(3) ARE NOT APPLICABLE THEREBY DELETING THE TRADING ADDITION OF RS. 9,83,390/- MADE BY THE AO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN GOLD AND SILVER JEWELLERY. THE RETURN OF INCOME WAS FILED ON 3.1.2007 DECLARING A TOTAL INCOME OF RS. 5,44,210/-. THE CASE WAS SELE CTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE HAD DECLARED A GP RATE OF 12.9% ON THE TURNOVER OF RS. 1,38,57,787/- IN THIS YEAR, WHICH WAS LOW AS COMPARED TO THE GP RATES OF 24.68% AND 24.19% DECLARED BY THE A SSESSEE FOR A.Y. 2004-05 AND A.Y. 2005-06 RESPECTIVELY. FURTHER, THE AO ALSO NOTICED THAT MOST OF THE PURCHASES OF THE 2 ASSESSEE WERE IN CASH AND THE ASSESSEE ISSUED SELF PREPARED VOUCHERS FOR PURCHASES FROM INDIVIDUAL SELLERS IN RESPECT OF GOLD JEWELLERY ITE MS. IN THIS RESPECT, THE AO NOTED THAT PERUSAL OF THE PURCHASE VOUCHERS AND QUANTITATIVE D ETAILS OF GOLD JEWELLERY ACCOUNT SHOWED THAT EVERY TRANSACTION OF PURCHASE REPRESENT ED ALMOST FIXED QUANTITY OF GOLD JEWELLERY WEIGHING ABOUT 20-21 GRAMS, WHICH WAS A V ERY UNLIKELY SITUATION IN VIEW OF THE AOS OPINION. IN ADDITION, THE AO OBSERVED THAT THE ASSESSEE HAD VALUED THE CLOSING STOCK @ 5,897/- PER 10 GRAMS, WHEREAS THE LATEST PURCHASE S MADE BY THE ASSESSEE WERE AROUND RS. 9,500/- PER 10 GRAMS AND, THEREFORE, THE AO WAS OF THE VIEW THAT IF CANNOT BE SAID THAT THE CLOSING STOCK OF THE ASSESSEE HAD BEEN CORRECTL Y VALUED. THE AO ALSO NOTED THAT ITEM- WISE INVENTORY WAS ALSO NOT FILED BY THE ASSESSEE D ESPITE THE SPECIFIC REQUIREMENT THEREOF. HENCE, THE AO PROPOSED TO REJECT THE BOOKS OF ACCO UNT UNDER SECTION 145(3) OF THE I.T. ACT AND TO ESTIMATE THE GROSS PROFIT. IN RESPONSE, THE ASSESSEE FILED A REPLY VIDE LETTER DATED 28.11.2008, THE RELEVANT PARTS OF WHICH HAVE BEEN REPRODUCED BY THE AO ON PAGES 2 TO 5 OF THE ASSESSMENT ORDER. HOWEVER, THE AO DID NOT FIND THE SAID REPLY ACCEPTABLE AND, AS PER DISCUSSION IN PARAS 4 & 6 OF THE ASSESS MENT ORDER, THE AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GP RATE AT 20% ON THE DECLARED TURNOVER OF THE ASSESSEE, WHICH RESULTED INTO THE IMPUGNED TRADING ADDITION O F RS. 9,83,390/-. 4. DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE L D. CIT (A) WHICH ARE REPRODUCED BY LD. CIT (A) IN HIS ORDER AT PAGES 3 & 4. 5. AFTER CONSIDERING THE DETAILED SUBMISSIONS AND P ERUSING THE ORDER OF AO, THE LD. CIT (A) FOUND THAT ASSESSEE HAS MAINTAINED ALL THE RECORDS REQUIRED FOR DEDUCING THE PROPER INCOME. NO SPECIFIC DEFECT WAS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT 3 MAINTAINED BY ASSESSEE. THEREFORE, HE HELD THAT RE JECTION OF BOOKS OF ACCOUNT WAS NOT CORRECT AND ACCORDINGLY TRADING ADDITION MADE BY AO WAS DELETED. 6. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 7. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 8. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE P LACED RELIANCE ON THE ORDER OF LD. CIT (A). 9. AFTER CONSIDERING THE ORDERS OF AO AND LD. CIT ( A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (APPEALS). FINDINGS OF LD. CIT (A) HAVE BEEN GIVEN IN PARA 2.3 ARE AS UNDER :- 2.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE AND SUBMISSIONS OF LD. AR. ON PERUSAL OF RELEVANT RECORDS, I FIND SUBS TANCE IN THE ARGUMENTS OF LD. AR RAISED AGAINST THE ACTION OF THE LD. AO I N REJECTING THE BOOKS OF ACCOUNT (NOTED IN PARA 2.2 ABOVE). IN THIS RESPECT, IT IS OBSERVED THAT THE LD. AO HAS REJECTED THE BOOKS OF ACCOUNT, MAINLY ON ACC OUNT OF TWO OBSERVATIONS, I.E. (I) THE ASSESSEE HAD MADE MOST O F THE PURCHASE3S OF GOLD JEWELLERY ITEMS IN CASH BY ISSUING SELF MADE VOUCHE RS AND ALL THOSE PURCHASES WERE OF ALMOST A FIXED QUANTITY OF GOLD J EWELLERY, WEIGHING ABOUT 20-21 GRAMS, AND (II) THE CLOSING STOCK OF TH E GOLD JEWELLERY HAD BEEN VALUED @ RS. 5,897/- PER 10 GRAMS, WHEREAS THE LAST PURCHASES MADE BY THE ASSESSEE WERE AROUND RS. 9,500/- PER 10 GRA MS, AND HENCE, THE VALUATION OF THE CLOSING STOCK WAS NOT CORRECT. HOW EVER, I FIND THAT THE LD. AR HAS BEEN ABLE TO GIVE LOGICAL EXPLANATION WITH R EGARD TO THE AFORESAID OBSERVATIONS OF THE LD. AO. IN THIS REGARD, FIRSTLY , ON PERUSAL OF THE PURCHASE VOUCHERS, IN QUESTION, IT IS SEEN THAT ALL THE VOUCHERS OF PURCHASE CONTAIN THE NAME AND ADDRESS OF THE PURCHASER, THE QUANTITY AND RATE OF THE GOLD JEWELLERY PURCHASED AND THE SIGNATURE OF THE S ELLER. FURTHER IT IS OBSERVED THAT THE LD. AO HAS NEITHER MADE ANY ENQUI RY IN RESPECT OF ANY OF THE SAID PURCHASES NOR FOUND ANY SPECIFIC DEFECT IN ANY OF THE AFORESAID 4 PURCHASE VOUCHERS. IT IS ALSO NOTED THAT ALL THE PU RCHASES ARE NOT OF 20-21 GRAMS OF GOLD JEWELLERY, AND INVOLVED PURCHASE OF G OLD JEWELLERY OF HIGHER WEIGHT ALSO. THEREFORE, ON THESE FACTS, THE PURCHAS ES OF THE ASSESSEE CANNOT BE SAID TO BE UNRELIABLE MERELY ON THE BASIS OF DOU BT. SECONDLY, AS FAR AS THE VALUATION OF THE CLOSING STOCK IS CONCERNED, I T IS OBSERVED THAT THE APPELLANT IS MAINTAINING QUANTITATIVE TALLY OF THE STOCK OF THE GOLD JEWELLERY, AS A WHOLE, ON A DAY TO DAY BASIS AND HA S VALUED THE CLOSING STOCK OF THE GOLD JEWELLERY AT THE AVERAGE COST OF THE PURCHASES MADE DURING THE YEAR, WHEREIN NO SPECIFIC DEFECT HAS BEE N FOUND BY THE LD. AO. FURTHER, IT IS SEEN THAT THE SAME PRACTICE HAS BEEN FOLLOWED BY THE ASSESSEE IN THE EARLIER YEARS. THEREFORE, NO FAULT CAN BE FO UND WITH THE SAID PRACTICE ADOPTED BY THE ASSESSEE FROM YEAR TO YEAR. FURTHER, I FIND SUBSTANCE IN THE ARGUMENT OF LD. AR THAT THE NATURE OF BUSINESS OF T HE ASSESSEE IS SUCH THAT MAINTAINING OF THE QUANTITATIVE TALLY OF THE STOCK, EACH ITEM-WISE, WAS NOT PRACTICALLY FEASIBLE/REQUIRED, PARTICULARLY, WHEN T HE ASSESSEE IS MAINTAINING WEIGHT WISE, DAY TO DAY, STOCK TALLY OF THE GOLD J EWELLERY AND WHEN THE DAY TO DAY MARKET RATES OF THE GOLD WERE VERIFIABLE FROM NEWSPAPERS ETC. THEREFORE, CONSIDERING THE AFOREMENTIONED FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT LD. AO WAS NOT JUSTIFIED IN REJEC TING THE BOOKS OF ACCOUNT, WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOO KS OF ACCOUNT OR THE OTHER DETAILS/VOUCHERS PRODUCED BEFORE THE LD. AO B Y THE APPELLANT. HENCE, THE ACTION OF THE AO IN REJECTING BOOKS OF ACCOUNT IN THE APPELLANTS CASE WAS NOT FOUND TO BE SUSTAINABLE AND HENCE, THE SAME IS NOT SUSTAINED. FURTHER, AS THE REJECTION OF THE BOOKS OF ACCOUNT I N THE APPELLANTS CASE IS NOT SUSTAINED, CONSEQUENTLY, THE ESTIMATION OF THE GROSS PROFIT BY THE LD. AO, (AGAINST THE DECLARED GROSS PROFIT BY THE ASSES SEE), IS ALSO NOT SUSTAINED. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE IMPUGNED TRADING ADDITION OF RS.9,83,3290/-3. CONSEQUENTLY, THIS GRO UND OF APPEAL IS ALLOWED. 5 10. THE ABOVE FINDINGS REMAINED UNCONTROVERTED, THE REFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDI NGLY FINDINGS OF LD. CIT (A) ARE CONFIRMED. 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 2.7.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE DCIT CIRCLE SIKAR. SHRI RAM KUMAR SONI, SIKAR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1293/JP/10) BY ORDER, AR ITAT JAIPUR.