DCIT, Chandigarh V. Sh. Avtar Singh, Chandigarh

ITA 1362/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60868 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITA NO. 1362/CHD/2010 ASSESSMENT YEAR: 2006-07 D.C.I.T. C-1 (1) V. AVTAR SINGH CHANDIGARH H NO. 325, SECTOR 15-A CHANDIGARH AGXPS 4227 N CROSS-OBJECTIONS NO. 02/CHD/2012 ARISING OUT OF ITA NO. 1362/CHD/2010 ASSESSMENT YEAR: 2006-07 AVTAR SINGH V. I.T.O. WARD 4(1), H NO. 325, SECTOR 15-A CHANDIGARH CHANDIGARH AGXPS 4227 N (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AKHILESH GUPTA ASSESSEE BY: SHRI AJAY JAIN DATE OF HEARING: 16.05.2012 DATE OF PRONOUNCEMENT: 24.05.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING RE VISED GROUNDS: 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN GIVING A RELIEF OF RS. 9,25,260/- TO THE ASSESSEE BY DETERMI NING THE SUPPRESSED SALES AT RS. 1,08,31,854/- AS AGAINST RS. 1,40,82,4 83/- DETERMINED BY THE ASSESSING OFFICER. 2. THE LD. CIT(A) HAS ALSO ERRED IN DIRECTING THE ASSESSING OFFICER TO APPLY RATE OF 5.20% ON SUPPRESSED SALE WHICH IS IN FACT NET PROFIT DECLARED BY THE ASSESSEE, WHEREAS THE ASSESSING OFF ICER HAD APPLIED GP RATE OF 10.57% ON SUPPRESSED SALE AS DECLARED BY THE ASSESSEE HIMSELF. 2. IN THE CROSS-OBJECTIONS THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: THE LD. CIT(A) CHANDIGARH HAS ERRED BY UPHOLDING THE ADDITION @ 5.2% ON CREDIT ENTRIES OF RS. 1,08,31,854/- PERTAINING T O JOINT AND COLLECTIVE PURCHASES AND TRANSFER OF PRODUCTS AT COST. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE INFORMATION WAS CALLED FROM THE MAN AGER PUNJAB & SIND BANK, SECTOR 15-D, CHANDIGARH IN RESPECT OF CC ACCOUNT OF AMRIT DAIRY AND SB 2 ACCOUNT OF THE ASSESSEE. FROM THE COPIES OF THE AC COUNTS IT WAS SEEN THAT FOLLOWING AMTS HAVE BEEN DEPOSITED IN THE BANK: I ACCOUNT WITH PUNJAB AND SIND BANK, SECTOR 15D, CHANDIGARH-ACCOUNT NO. CC/1(AMRIT DAIRY) (I) CASH RS. 32,60,106/- (II) TRF RS. 76,88,578/- (III) BY CLEARING RS. 1,44,085/- TOTAL RS. 110,92,766/- II S.B. ACCOUNT NO. 3563 (SHRI AVTAR SINGH) (I) CASH RS. 18,94,200/- II) TFT RS. 49,83,684/- TOTAL RS. 68,77,884/- 4. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF THESE DEPOSITS. THE ASSESSEE FILED TWO REPLIES. THROUGH FIRST REPLY IT WAS STATED THAT THE ASSESSEE WAS A TRADER AND DOING THE BUSINESS OF MILK AND MIL K PRODUCTS AND THE SALE OF ASSESSEE IS LESS THAN RS. 40.00 LAKHS. THEREFORE, PROFIT MAY BE COMPUTED @ 5% OF THE SALE. IN THE SECOND REPLY IT WAS STATED THAT THE MILK AND DAIRY ITEMS WERE BEING PURCHASED COLLECTIVELY AND JOINTLY WITH OTHER FAMILY MEMBERS AND PAYMENTS RECEIVED FROM THESE PARTIES WERE ALSO CRED ITED IN THE BANK ACCOUNT. THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCO UNT. INSTEAD OF PRODUCING THE BOOKS OF ACCOUNT, COMPUTERIZED COPIES OF THE LEDGER ACCOUNTS IN RESPECT OF BANK ACCOUNT, DEPRECIATION, PETROL EXPEN SES, PRINTING AND STATIONERY EXPENSES AND CAPITAL ACCOUNT OF THE ASSESSEE WERE F URNISHED. WHEN THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS FROM WHOM THE ASSESSEE WAS DEALING REGARDING PURCHASE OF MILK, HE SHOWED HIS I NABILITY TO PRODUCE SUCH PERSONS. KEEPING THIS FACT IN VIEW THE ASSESSING O FFICER WAS OF THE OPINION THAT ALL THE TRANSACTIONS OF DEBIT AND CREDIT WERE RELAT ING TO ASSESSEES OWN BUSINESS AND ACCORDINGLY TURNOVER WAS FIXED AT RS. 1,79,70, 653/-. SINCE THE ASSESSEE HAS ITSELF SHOWN GP RATE OF 10.5%, THEREFORE, THE R EQUEST FOR ESTIMATION OF PROFIT AT 5% WAS NOT ACCEPTED AND GP RATE OF 10.5% WAS APPLIED. HOWEVER, IN THE INTEREST OF JUSTICE THE ASSESSING OFFICER REDUC ED FROM THE TOTAL RECEIPTS, THE RECEIPT SHOWN BY THE ASSESSEE AT RS. 38,88,170/- AN D THE GP RATE OF 10.57% 3 WAS APPLIED ON THE BALANCE OF SALES AND ADDITION WA S WORKED AT RS. 14,88,518/-. 5. ON APPEAL BEFORE THE LD. CIT(A) IT WAS STATED TH AT THE ASSESSEE WAS A SMALL TRADER AND TURNOVER BEING LESS THAN RS. 40.00 LAKHS NP RATE OF 5% MAY BE APPLIED. IT WAS ALSO SUBMITTED THAT THE ASSESSI NG OFFICER HAS WRONGLY ENHANCED THE TURNOVER. IT WAS FURTHER STATED THAT SOME OF THE DEPOSITS WERE OUT OF WITHDRAWALS FROM THE SAME ACCOUNT. 6. THE LD. CIT(A) ACCEPTED THE SUBMISSIONS PARTIALL Y AND HELD THAT THE ASSESSEE HAD SUPPRESSED THE SALES TO THE EXTENT OF RS. 1,08,31,854/- AND NOT RS. 1,44,82,483/- BECAUSE CREDIT HAS TO BE ALLOWED FOR WITHDRAWALS. ON THIS SALES NP RATE AT 5.20% WAS APPLIED RESULTING IN RE LIEF OF RS. 9,25,260. 7. BEFORE US, THE LD. DR FOR THE REVENUE REFERRED T O THE CONTENTS OF THE ASSESSMENT ORDER AND POINTED OUT THAT THE ASSESSEE HAS CLEARLY DEPOSITED MUCH MORE AMOUNTS THAN THE DECLARED TURNOVER IN THE BANK ACCOUNT AND THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN E NHANCING THE TURNOVER. HE ALSO REFERRED TO THE IMPUGNED ORDER AND CONTENDED T HAT THE LD. CIT(A) HAS NOT GIVEN THE BASIS FOR REDUCING THE TURNOVER. FURTHER THE LD. CIT(A) HAS NOT GIVEN ANY BASIS IN REDUCING THE PROFIT RATE FROM 10.57% T O 5.2% PARTICULARLY WHEN THE ASSESSING OFFICER ESTIMATED THIS PROFIT ON THE BASI S OF RESULTS DECLARED BY THE ASSESSEE HIMSELF. 8. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT IN FACT THE ASSESSING OFFICER HAS NO RIGHT TO ESTIMATE THE TURN OVER PARTICULARLY WITHOUT REJECTING THE BOOKS OF ACCOUNT. THEREFORE, THE ASS ESSING OFFICER AS WELL AS THE LD. CIT(A) WERE WRONG IN ENHANCING THE TURNOVER. HE ALSO SUBMITTED THAT THERE IS NO FORCE IN THE ARGUMENT AGAINST THE REDUCTION I N THE PROFIT BY THE LD. CIT(A) BECAUSE THE ASSESSEE HAD DECLARED 10.57% AS GROSS P ROFIT WHEREAS THE LD. CIT(A) HAS ESTIMATED THE NET PROFIT @ 5.2%. 4 9. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. FIRST OF ALL IT BECOMES CLEAR THAT THE ASSESSEE NEVER PRODUCED THE COMPLETE BOOKS OF ACCOUNT AND ONLY COPIES OF CERTAIN LEDGER ACCOUNTS WERE PRODUCE D. THIS ONLY SHOWS THAT THE ASSESSEE HAD NOT PREPARED PROPER BOOKS OF ACCOUNT A ND WAS NOT IN A POSITION TO PRODUCE THE SAME. SINCE THE DEPOSITS IN THE BAN K CLEARLY ARE MUCH MORE THAN THE DECLARED TRADING RECEIPTS THE ASSESSING OF FICER WAS RIGHT IN ENHANCING THE RECEIPT. HOWEVER, AT THE SAME TIME WE FIND THA T THE LD. CIT(A) HAS CORRECTLY ALLOWED THE CREDIT ON ACCOUNT OF AMOUNTS WHICH WER E WITHDRAWN FROM THIS ACCOUNT BECAUSE IT CAN ALSO BE ASSUMED THAT WITHDR AWN AMOUNT WAS AGAIN DEPOSITED IN THE SAME ACCOUNT. THEREFORE, IN OUR O PINION, THE ESTIMATE OF TURNOVER BY THE LD. CIT(A) IS TOTALLY JUSTIFIED. A S FAR AS THE RATE OF PROFIT IS CONCERNED, WE AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ASSESSEE HAD DECLARED PROFIT AT 10.57% BUT IT WAS GROSS PROFIT AS OBSERVED BY THE ASSESSING OFFICER HIMSELF IN PARA 7 OF THE ASSESSMENT ORDER WHEREAS THE LD. CIT(A) HAS ESTIMATED THE PROFIT AT 5.2% AS NET PROFIT. BEFORE THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) IT WAS CLEARLY STATED THAT THE PROFIT MAY BE ESTIMATED AT 5% SINCE THE TURNOVER WA S LESS THAN RS. 40.00 LAKHS. HOWEVER, ULTIMATELY THE TURNOVER IS MUCH MORE THAN RS. 40.00 LAKHS AND THEREFORE, THE ESTIMATION OF PROFIT AT 5.2% IS JUST IFIED AND REASONABLE. ACCORDINGLY WE CONFIRM THE ORDER OF LD. CIT(A) AND REJECT THE CROSS-OBJECTIONS FIELD BY THE ASSESSEE. 10 IN THE RESULT, APPEAL FILED BY THE REVENUE AND T HE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 24 .5. 2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 .5.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 5