SMT. PUSHPA MITTAL, ALWAR V. INCOME TAX OFFICER, WARD, BHIWADI

ITA 1313/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4211 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 26-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Keywords: Rejection of books of accounts
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA , ACCOUNTANT MEMBER VK;DJ VIHY LA -@ ITA NO. 1313/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 PUSHPA MITTAL C/O M/S K.L. DATTA & CO. VASHISTHA PLAZA, 2, MANU MARG, ALWAR. VS. I.T.O. WARD, BHIWADI LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AGFPM2855C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/04/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/05/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), ALWAR DATED 07/09/2018 FOR THE A.Y. 2014-15 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: - THAT THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING A TRADING ADDITION OF RS.11,58,162.00 BY INVOKING THE PROVISION OF SECTION 145(3) OF THE I. TAX, 1961 AND THE LD. CIT(A) HAS ERRED IN SUSTAINING A SUM OF RS.5,64,296.00 OUT OF THE SAME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF SOCKS. ITA NO.1313/JP/2018 PUSHPA MITTAL VS ITO 2 DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. OBSERVED THAT THE G.P. RATE IS CONTINUOUSLY DECREASING OVER THE YEARS AND N.P. RATE HAS ALSO DECREASED DRASTICALLY. THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGISTER IN THE ABSENCE OF WHICH IT IS NOT POSSIBLE TO VERIFY THE PURCHASE, SALE WHICH MEANS THAT GROSS PROFIT DECLARED BY THE ASSESSEE IS NOT AMENABLE TO VERIFICATION. FURTHER, ASSESSEE HAS NOT MAINTAINED PROPER BILLS/ VOUCHERS IN SUPPORT OF EXPENSES CLAIMED AND ONLY SELF- MADE VOUCHERS WERE PRODUCED FOR VERIFICATION. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SECTION 145(3) OF IT ACT AND APPLIED G.P RATE OF 35% ON TURNOVER OF RS. 2,18,33,283/- RESULTING INTO TRADING ADDITION OF RS.11,58,162/-. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) AFTER APPLYING THE AVERAGE G.P. RATE OF LAST 2 YEARS WHICH COMES TO 32.28%, CONFIRMED THE TRADING ADDITION TO THE EXTENT OF RS.5,64,296/-. 5. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT AGAINST THE TRADING ADDITION UPHELD BY THE LD. CIT(A). 6. I HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE DEFECTS POINTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNT WAS CORRECT, THEREFORE, INVOCATION OF PROVISIONS OF SECTION 145(3) OF THE ACT WAS JUSTIFIED. AFTER REJECTING BOOKS OF ACCOUNT, THE A.O. APPLIED G.P. RATE OF 35% AS AGAINST THE G.P. RATE OF 29.70% DECLARED BY THE ASSESSEE AND ITA NO.1313/JP/2018 PUSHPA MITTAL VS ITO 3 MADE TRADING ADDITION. I FOUND THAT EVEN THOUGH THE G.P. OF THE ASSESSEE HAS DECLINED VERY MARGINALLY I.E. FROM 30.43% TO 29.70%. HOWEVER, THE N.P. RATE OF THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION HAS DECLINED DRASTICALLY FROM 3.39% TO 0.14%. THE A.O. HAS MISDIRECTED HIMSELF AND IN SPITE OF LOOKING TO THE EXPENDITURE CLAIMED WHICH RESULTED IN REDUCTION OF NET PROFIT, HE HAS JUST APPLIED MODERATE G.P. RATE AND MADE THE TRADING ADDITION. BY THE IMPUGNED ORDER, THE LD CIT(A) UPHELD THE ADDITION BY RESTRICTING THE G.P. RATE AT 32.28% WHICH IS AVERAGE OF LAST TWO YEARS G.P. RATE. PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: 5.4 I HAVE CONSIDERED THE ABOVE-MENTIONED FACTS OF THE CASE. THE A.O HAS GIVEN REASON FOR THE REJECTION OF BOOKS OF ACCOUNTS ON THE STRENGTH OF NO MAINTENANCE OF BOOKS OF ACCOUNTS AND ALSO NON VERIFICATION EXPENSE AS THE BILLS/VOUCHERS ARE SELF-GENERATED AND WITHOUT ANY SIGNATURE OF THE RECIPIENTS ETC. THEREFORE, I CONCUR WITH THE VIEW OF THE A.O THAT IN ABSENCE OF PROPER VERIFICATION VARIOUS EXPENSES, TRUE INCOME CANNOT BE DETERMINED AND ALSO IN MANUFACTURING SECTOR, PROPER STOCK REGISTER IS ALSO VERY VITAL. HOWEVER, THE A.O HAS TAKEN THE GP AT 35% WITHOUT ASSIGNING ANY REASON OR COMPARABLE TRADING RESULTS. THEREFORE, IT WOULD BE PROPER TO TAKE AVERAGE OF LAST 2 YEARS GP TO DETERMINE THE LIKELY GP FOR THE YEAR UNDER CONSIDERATION. THE AVERAGE GP OF LAST 2 YEARS COMES TO 32.28%. ACCORDINGLY, THE TRADING ADDITION IS REDUCED TO RS.5,64,296/- AND THE APPELLANT'S GROUND OF APPEAL ON THE ISSUE IS PARTLY ALLOWED. 7. IT WAS CONTENTION OF THE LD AR THAT DECLINE IN G.P. RATE WAS DUE TO INCREASE IN TURNOVER, THEREFORE, DECLINE IN G.P. RATE IS INEVITABLE ITA NO.1313/JP/2018 PUSHPA MITTAL VS ITO 4 BECAUSE THE ASSESSEE WANT TO HAVE MORE TURNOVER AT A SACRIFICE OF MARGINAL G.P. RATE. HOWEVER, I FOUND THAT THE NET PROFIT OF THE ASSESSEE HAS REDUCED FROM RS. 5,01,573/- IN THE A.Y. 2013-14 TO RS. 31,360/- DURING THE YEAR UNDER CONSIDERATION, EVEN WHEN THERE IS INCREASE IN THE TURNOVER BY 47.70% DURING THE YEAR AS COMPARED TO THE TURNOVER OF THE IMMEDIATE PRECEDING YEAR. THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES, I DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE BY APPLYING G.P. RATE OF 30% IN PLACE OF G.P. RATE OF 29.70% OFFERED BY THE ASSESSEE. I DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MAY, 2019. SD/- JES'K LH 'KEKZ (RAMESH C SHARMA) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10 TH MAY, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. PUSHPA MITTAL, ALWAR 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O, WARD- BHIWADI. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1313/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR