SHRI VINOD KUMAR KOTHARI, TONK V. ITO, WARD, TONK

ITA 1381/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8722 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 23-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA CIT DHK
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Depreciation; Corroborative evidences; Set aside
• Section: 143(3); 145(3); 22

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 1381/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15. SHRI VINOD KUMAR KOTHARI 02, INDUSTRIAL AREA, MALPURA, TONK. CUKE VS. THE INCOME TAX OFFICER, WARD TONK. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACRPK 8599 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K.L. MOOLCHANDANI (CA) JKTLO DH VKSJ LS@ REVENUE BY : MS CHANCHAL MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.07.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22 /07/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25.10.2019 OF LD. CIT (A)-3, JAIPUR FOR THE ASSESSMENT YEAR 2014-15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) HAS INCORRECTLY OBSERVED THAT NONE ATTENDED ON 7.3. 2019, 25.3.2019 & 10.4.2019. AS EVIDENT FROM THE COPY OF SUBMISSIONS MADE BEFORE HIM, THE APPELLANT HAD ATTENDED HIS OFF ICE ON ALL THESE DAYS AND SOUGHT TO SUBMIT THE WRITTEN REPLY ON THE GIVEN DATES. FINALLY THE REPLY COULD BE SUBMITTED ON 10.4.2019, AS THE SAME WAS NOT RECEIVED BY THE LD. CIT ON EARLIER DATES DUE T O PAUCITY OF TIME. IN THE CIRCUMSTANCES THE LD. CIT (A) HAS DISM ISSED THE APPEAL SUMMARILY WITHOUT GOING INTO THE MERITS OF T HE CASE AS 2 ITA NO. 1381/JP/2019. SHRI VINOD KUMAR KOTHARI, TONK. CONTENDED IN THE WRITTEN REPLY. THUS DISMISSING TH E APPEAL IN SUMMARY MANNER BY HIM WITHOUT GOING INTO THE MERITS OF THE FACTS IS BAD IN LAW AND THE SAME DESERVES TO BE QUASHED S UMMARILY. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND NO. 1, ON MERITS ALSO, THE LD. AUTHORITIES BELOW HAVE FACTUALLY AND LEGALLY ERRED IN MAKING AND CONFIRMING THE FOLLOWING ADDITIONS WITHOUT APPRECIA TING THE FACTS OF THE CASE IN RIGHT PERSPECTIVE AS CONTENDED IN THE W RITTEN REPLY SUBMITTED ON 10.4.2019 : (I) LUMP SUM TRADING ADDITION OF RS. 1,00,000/- (II) ADDITION OF RS. 2,33,106/- OUT OF DEPRECIATION ON P LANT & MACHINERY (III) ADDITION OF RS. 8,61,466/- BY DISALLOWING POWER & F UEL EXPENSES AND (IV) ADDITION OF RS. 1,20,000/- ON ACCOUNT OF RENTAL INC OME. 3. THE APPELLANT CRAVES TO ADD, AMEND OR WITHDRAW A NY OF THE GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING O F APPEAL. 2. THE HEARING OF THE APPEAL WAS CONCLUDED THROUGH VIDEO CONFERENCE DUE TO THE PREVAILING SITUATION OF COVID 19 PANDEMIC. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS A WHOLESALE DEALER IN GRAINS A ND FILED HIS RETURN OF INCOME ON 21 ST SEPTEMBER, 2014 DECLARING TOTAL INCOME OF RS. 2,18, 230/-. THE AO PROPOSED TO REJECT THE BOOKS OF ACCOUNT ON THE GROUND THAT THE GP DECL ARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 0.93% AS AGAINST THE GP DECL ARED FOR THE IMMEDIATELY PRECEDING YEAR AT 1.75%. THE LD. A/R HAS FURTHER SUBMITTED T HAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT ONLY FOR MAKING THE TRADING ADDITION AND WITHOUT FINDING ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT. HE HAS THUS CONTENDED THAT THE AO HAS MADE A LUMP SUM ADDITION OF RS. 1,00,000/- AFTER REJECTING THE BOOK S OF ACCOUNT UNDER SECTION 145(3) OF THE IT ACT. THUS THE LD. A/R HAS CONTENDED THAT WH EN THE ASSESSEE IS MAINTAINING 3 ITA NO. 1381/JP/2019. SHRI VINOD KUMAR KOTHARI, TONK. REGULAR BOOKS OF ACCOUNT, THEN THE REJECTION OF BOO KS OF ACCOUNT IS ARBITRARY AND ILLEGAL. HE HAS FURTHER SUBMITTED THAT THE AO HAS ALSO DISAL LOWED DEPRECIATION ON PLANT & MACHINERY, POWER AND FUEL EXPENSES ON THE GROUND TH AT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY AND THE FACTORY WAS GIVEN ON RENT TO SOME OUTSIDE PARTY. HOWEVER, THE ASSESSEE HAS EXPLAINED THE FACT THAT T HE TENANT HAS ALREADY VACATED THE PREMISES WITHOUT PAYING ANY RENT AND THE ASSESSEE I S USING THE SAME FOR THE PURPOSE OF ITS GODOWN AND, THEREFORE, ALL THE CLAIMS OF DEPREC IATION AND POWER EXPENSES ARE ALLOWABLE EXPENDITURE. SINCE THE TENANT HAS VACATE D THE PREMISES WITHOUT PAYING THE RENT, THEREFORE, NO RENTAL INCOME WAS OFFERED TO TA X AND THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS ALSO UNJUSTIFIED. THE LD. A/R HA S FURTHER SUBMITTED THAT THE ASSESSEE HAS DULY FILED HIS WRITTEN SUBMISSION BEFORE THE LD . CIT (A), HOWEVER, THE LD. CIT (A) WITHOUT CONSIDERING THE WRITTEN SUBMISSIONS FILED B Y THE ASSESSEE HAS DISMISSED THE APPEAL OF THE ASSESSEE BY PASSING THE IMPUGNED EX P ARTE ORDER. THEREFORE, THE REASONING GIVEN BY THE LD. CIT (A) IS CONTRARY TO T HE RECORD. HENCE THE LD. A/R HAS SUBMITTED THAT THE IMPUGNED ORDER OF LD. CIT (A) MA Y BE SET ASIDE. 3. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO HAS GIVEN THE FINDING OF FACT THAT THE ASSESSEE IS NOT MAINTAINING PROPER STOCK REGISTER AND, THEREFORE, THE CORRECT RESULT AND INCOME CANNOT BE DEDUCED FROM TH E BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE AO HAS POINTED OUT SPECIFIC DEFE CT IN THE BOOKS OF ACCOUNT AS NO DAY TO DAY STOCK REGISTER HAS BEEN MAINTAINED AND FURTH ER THE ASSESSEE HAS ALSO NOT MAINTAINED THE STOCK ON THE QUALITY OF GOODS WHEN T HE ASSESSEE IS DEALING IN THE GRAINS. THE AO HAS INVOKED THE PROVISIONS OF SECTI ON 145(3) BY FOLLOWING THE JUDGMENT 4 ITA NO. 1381/JP/2019. SHRI VINOD KUMAR KOTHARI, TONK. OF HON'BLE SUPREME COURT IN CASE OF CHHABIL DAS TRU BHUWANDAS SHAH VS. CIT 59 ITR 733 (SC) AS WELL AS VARIOUS HIGH COURTS. SHE HAS R ELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE GP DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS VERY LESS IN COMPARISON TO THE GP DECLARED IN THE PRECEDING YEARS. THE ASSESSEE HAS NOT DISPUTED THE FACT THAT IN THE IMME DIATELY PRECEDING YEAR THE ASSESSEE DECLARED THE GP @ 1.75% AND FOR THE ASSESSMENT YEAR 2012-13 AT 1.87% WHEREAS FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLA RED GP AT 0.93%. THEREFORE, THIS SHARP DECLINE IN THE GP IS A GOOD REASON FOR EXAMIN ATION AND VERIFICATION OF THE BOOK RESULT AND CORRECTNESS OF THE BOOKS OF ACCOUNT. THE AO ACCORDINGLY HELD THAT THE ASSESSEE IS NOT MAINTAINING PROPER STOCK REGISTER T O GIVE THE DETAILS OF QUANTITY-WISE AS WELL AS QUALITY-WISE STOCKS. THERE IS NO DISPUTE T HAT NON MAINTENANCE OF STOCK REGISTER WOULD RESULT DEFECT IN THE BOOKS OF ACCOUNT SO FAR AS IT DOES NOT REFLECT THE TRUE STATE OF AFFAIRS OF THE BUSINESS OF THE ASSESSEE AND PARTICU LARLY THE INVENTORIES AND IN-FLOW AND OUT-FLOW OF THE GOODS. HOWEVER, THE FINDING OF THE AO SHALL NOT BE BASED MERELY ON THE MINOR DEFECTS IN THE STOCK REGISTER, IF THE ASSESSE E IS PROPERLY FOLLOWING THE ACCOUNTING PRINCIPLES AND PARTICULARLY THE BOOKS ARE MAINTAINE D AS PER THE ACCOUNTING STANDARD. THE LD. CIT (A) HAS DISMISSED THE APPEAL OF THE ASS ESSEE BY RECORDING THE REASON THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATION NO R ANY SUPPORTING EVIDENCE WERE PRODUCED. THE LD. A/R HAS SUBMITTED THAT THE ASSES SEE HAS FILED THE WRITTEN SUBMISSIONS BEFORE THE LD. CIT (A) ON 07.03.2019 BU T THE SAME WERE NOT CONSIDERED BY 5 ITA NO. 1381/JP/2019. SHRI VINOD KUMAR KOTHARI, TONK. THE LD. CIT (A) WHILE PASSING THE IMPUGNED ORDER. THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) IS NOT A SPEAKING ORDER BUT THE APPEAL OF THE ASSESSEE WAS DISMISSED SUMMARILY. THE RELEVANT PART OF THE ORDER OF THE L D. CIT (A) IN PARA 5 IS AS UNDER :- 5. I HAVE CAREFULLY PERUSED THE GROUNDS OF APPEAL AND ASSESSMENT ORDER U/S 143(3) OF I.T. ACT, 1961. AS ALREADY DISC USSED ABOVE, THE APPELLANT HAS FAILED TO OFFER ANY EXPLANATION FOR S UBMISSION IN SUPPORT OF THE GROUNDS RAISED IN THIS APPEAL NOR ANY SUPPORTIN G EVIDENCES WERE PRODUCED BY HIM DESPITE ADEQUATE OPPORTUNITY HAVING BEEN PROVIDED. IN THIS CONNECTION, RELIANCE MAY BE PLACED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF H.M. ESUFALI H .M. ABDULALI (1973) 90 ITR 271 WHEREIN THE HON'BLE COURT HAS HELD THAT THE APPELLATE AUTHORITY CANNOT SUBSTITUTE ITS OWN JUDGMENT IN PLACE OF THE JUDGMENT OF THE AO UNLESS IT IS SHOWN THAT THE JUDGMENT OF THE AO WAS BIASED, IRRATIONAL, VINDICTIVE OR CAPRICIOUS. IN THE INSTANT CASE THE APPELLANT HAS NOT ABLE TO S HOW THAT THE DECISION OF THE ASSESSING OFFICER WAS ARBITRARY, BI ASED, IRRATIONAL, VINDICTIVE OR CAPRICIOUS WITHOUT ANY BASIS, I FIND NO REASON TO INTERFERE WITH THE DECISION OF THE ASSESSING OFFICER. ACCORDINGLY, WHEN THE ISSUE OF REJECTION OF BOOKS O F ACCOUNT AS WELL AS OTHER DISALLOWANCES MADE BY THE AO HAS NOT BEEN PROPERLY EXAMINED BY THE LD. CIT (A) IN THE LIGHT OF VARIOUS OBJECTIONS RAISED BY THE ASSES SEE, THEN IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JU STICE, WE ARE OF CONSIDERED OPINION THAT THE MATTER REQUIRES RE-ADJUDICATION ON THE PAR T OF THE LD. CIT (A) AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE, WE SET ASIDE THE IMPUGNED ORDER OF LD. 6 ITA NO. 1381/JP/2019. SHRI VINOD KUMAR KOTHARI, TONK. CIT (A) AND REMIT THE MATTER TO THE RECORD OF THE L D. CIT (A) FOR DECIDING THE SAME AFRESH AFTER GIVING AN OPPORTUNITY OF HEARING TO TH E ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22/07/2 020. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 22/07/2020. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI VINOD KUMAR KOTHARI, TONK. 2. THE RESPONDENT THE ITO WARD TONK. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1381/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR