ITO, JODHPUR V. Shri Manish Jhanwar, JODHPUR

ITA 140/JODH/2014

• Counselvise Citation: 14023314 RSA 2014
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Keywords: Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 140 /JODH/2014 (A.Y. 200 6 - 07 ) ITO , WARD - 1(3), JODHPUR. VS. SHRI MANISH JHANWAR, PROP. M/S. CROSS COUNTRY, KHASRA NO. 1087/740, BASNI, JODHPUR. (APPELLANT) PAN NO. ABEPJ 9313 N (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI JAI SINGH - D.R. DATE OF HEARING : 27 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 28 /0 8 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 31 /12 /2013 OF L D . CIT(A), J ODHPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN DE L ETING THE TRADING ADDITION OF RS. 3,00,000/ - IGNORING THE FACT 2 THAT THE ASSESSEE DOES NOT MAINTAIN THE STOCK REGISTER AND HAS DECLARED LOW G.P. IN COMPARISON TO PRECEDING YEAR. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOWANCE OF EXEMPTION CLAIMED U/S. 10BA OF RS. 11,82,334/ - DESPITE OF THE FACT THAT THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR A.Y. 2007 - 08 TO 2009 - 10 IN I.T.A.NO. 176, 1 77 & 178/JODH/2013 WAS NOT ACCEPTED BY THE DEPARTMENT AND MA AGAINST THIS ORDER FOR ALL THE THREE ASSESSMENT YEARS HAVE BEEN FILED BY THE DEPARTMENT. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, OR ALTER ANY OR ALL THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF APPEAL IS FINALLY HEARD FOR DISPOSAL. 2 GROUND NO. 3 IS GENERAL IN NATURE, SO DO NOT REQUIRE ANY COM M ENTS ON OUR PART. VIDE GROUND NO. 2 , THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF DISALLOWANCE OF EXEMPTION CLAIMED U/S. 10BA OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) AMOUNTING TO RS. 11,82,334/ - . 3. FROM THE BARE READING OF THIS GROUND, IT IS CLEAR THAT THE ISSUE IS COVERED BY THE EARLIER ORDER OF THE ITAT AND IT HAS BEEN RAISED SINCE THE DEPARTMENT HAS FILED A MISC. APPLICATION AGAINST THE EARLIER ORDER. WE HAVE DISPOSED OFF THE M.A.NOS. 44 TO 46/JODH/2014 ARISING OUT OF THE ORDER DATED 10/09/2013 IN I.T.A.NOS. 176 TO 178/JODH/2013 AND THE MISC. APPLICATIONS FILED BY THE DEPARTMENT HAVE BEEN DISMISSED VIDE ORDER OF THE EVEN DATE. 3 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES ON THIS ISSUE . IT IS NOTICED THAT THE LD. CIT(A) WHILE DELETING THE IMPUGNED ADDITION HAS FOLLOWED THE EARLIER ORDER OF THE ITAT FOR THE A.Y S . 2007 - 08 T O 2009 - 10 IN I.T.A.NOS. 176 TO 178/JODH/2013 (SUPRA) . THE RELEVANT FINDINGS AND OBSERVATIONS OF THE LD. CIT(A) ON THIS ISSU E HAS MEN TIONED IN PARA 7 TO 7.3.1 WHICH ARE REPRODUCED VERBATIM AS UNDER: - 7.1 IN THE ASSESSMENT ORDER THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS WHICH ARE REQUIRED IN SECTION 10BA. THE ASSESSING OFFICER HAS FURTHER STATED THAT THE ASSESSEE HAS FAILED TO PROVE WHAT MANUFACTURING PROCESS HAS BEEN CARRIED OUT ON THE HANDICRAFT ITEMS PURCHASED B Y IT FROM THE HANDICRAFT DEALERS. SINCE IT IS MATTER OF CLAIMING EXEMPTION, THE ONUS IS ENTIRELY UPON THE ASSESSEE TO SHOW WITH COGENT EVIDENCE THAT ASSESSEE HAS ACTUALLY MANUFACTURED HANDICRAFT ITEMS AND EXPORTED THEM. ACCORDING TO THE ASSESSING OFFICER T HE ASSESSEE HAS NOT DISCHARGED THIS ONUS. HE MENTIONED THAT THE ASSESSEE HAS PURCHASED HANDICRAFT ITEMS AND WHAT THE ASSESSEE HAS EXPORTED ARE HANDICRAFT ITEMS. HENCE THERE IS NO CHANGE IN NAME, CHARACTER OR USE AND NO NEW PRODUCT HAS COME OUT OF WHATEVER PROCESS CLAIMED TO HAVE BEEN MADE BY ASSESSEE. THUS, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS EXPORTED THE ARTICLES AND THINGS NOT MANUFACTURED BY IT BUT HAS EXPORTED TRADING GOODS. IN VIEW OF THE ABOVE, IT WAS HELD BY THE ASSESSING OFFICER THA T THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 10BA OF THE INCOME TAX ACT, 1961, ACCORDINGLY, HE DISALLOWED THE CLAIM OF DEDUCTION OF RS 11,82,334/ - U/S 10BA OF THE ACT. 7.2 DURING THE COURSE OF APPELLATE PROCEEDING , THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT SUBMITTED THAT ON THE IDENTICAL FACTS EXCEPTING QUANTUM INVOLVED AND ON THE SAME BASIS THE ASSESSING OFFICER ALSO DENIED THE EXEMPTION CLAIMED U/S 10BA FOR THE A.Y. 2007 - 08, 2008 - 09 AND 2009 - 10 AND THE ACTION OF THE ASSESSIN G OFFICER WAS CONFIRMED BY THE ID CIT (A). THE MATTER TRAVELLED TO THE HONBLE ITAT, JODHPUR BENCH, 4 JODHPUR, WHO AFTER CONSIDERING THE SUBMISSION AND DETAILS FURNISHED BY THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. 7.3 I HAVE GONE THROUGH THE ORDER OF THE HON'BLE ITAT, JODHPUR BENCH IN ITA NO. 176,177 & 178/JODH/2013 FOR AY 2007 - 08 TO 2009 - 10 AND I FIND THAT THE ISSUE OF ALLOWABILITY OF CLAIM U/S 10BA HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT, BY CONCLUDING AS UNDER: - SINCE, THE FACTS O F THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO ORDER DATED 17/07/2013 IN THE CASE OF M/S SURAJ EXPORTS INDIA, SARDAR SHAHAR, CHUR U V/S ITO, WARD - 2(SUPRA), SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT (A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 10BA OF THE ACT. 7.3.1 IT IS NOTICED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR AND IDENTICAL TO THAT OF ASSESSEES OWN CASE IN AY 2007 - 08 TO 2009 - 10, EXCEPT THAT THE QUANTUM OF CLAIM OF DEDUCTIONS ARE DIFFERENT, THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF HON'BLE ITAT, IT IS HELD THAT THE APPELLANT FULFILLS ALL CONDITION TO BE ELIGIBLE FOR DE DUCTION U/S 10BA. THEREFORE THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM U/S. 10BA ON RS. 11,82,334/ - (WHICH INCLUDES RS. 3,00,000/ - OF DEPB & RS. 4,63,951/ - OF DDB). THE GROUND OF APPEAL IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 5. AFTER C ONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE TOTALITY OF THE FACTS AS MENTIONED ABOVE, WE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 10/09/ 2013 IN I.T.A.NO S . 176 TO 178/JODH/2013 FOR THE A.YS. 2007 - 08 TO 2009 - 10 OF THE ITAT. WE, 5 THEREFORE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 6 . THE GRIEVANCE OF THE DEPARTMENT VIDE GROUND NO. 1 RELATES TO THE DELETION OF TRADING ADDITION OF RS. 3 LAC MADE BY THE ASSESSING OFFICER. 7 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE CONTINUED TO BE A MANUFACTURER AND EXPORTERS OF HANDICRAFT ITEMS AND DIS C L OSED TOTAL TURNOVER OF RS. 7,01,35,911/ - ON WHICH GROSS PROFIT OF RS. 1,47,79,322/ - WAS DECLARED GIVING GROSS PROFIT RATE OF 21.06% AS COMPARED TO LAST YEAR TURNOVER OF RS. 5,00,01,942/ - GROSS PROFIT OF RS. 1,23,71,095/ - DECLARED GIVING GROSS PROFIT RATE OF 24.74%. THE ASSESSING OFFICER BY POINTING OUT THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER AND THE GROSS PROFIT RATE IN THE YEAR UNDER CONSIDERATION WAS AT LOWER SIDE, MADE A LUMP SUM ADDITION OF RS. 3 LAC . 8 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO DELETED THE ADDITION BY OBSERVING THAT A SIMILAR TRADING ADDITION OF RS. 5 LAC WAS MADE FOR THE A.Y. 2008 - 09 WHICH WAS DEL E TED BY THE THEN LD. CIT(A) BY OBSERVING AS UNDER: - 6 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE. I REACHED TO THE CONCLUSION THAT SIMPLY FALL IN G.P. RATE IN COMPARISON TO PRECEDING YEAR CANNOT BE A REASON FOR MAKING A LUMP SUM TRADING ADDITION PARTICULARLY WHEN BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED. SIMPLY, SAYING THAT G.P. DECLARED BY OTHER HANDICRAFT EXPORTERS ARE VERY HIGH WILL NOT JUSTIFY TRADING ADDITION. A.O. HAS ALSO FAILED TO QUOTE EVEN A SINGLE EXAMPLE WERE HANDICRAFT EXPORTER HAS SHOWN HIGHER GROS S PROFIT. HENCE, IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ADDITION MADE BY THE A.O. IS DELETED. THE IMPUGNED ADDITION HAS BEEN DELETED BY THE LD. CIT(A) BY OBSERVING IN PARA 5.3 OF THE IMPUGNED ORDER WHICH READS AS UNDER: - 5.3 IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS U/S. 145(3) EVEN IMPLIEDLY. NO TRADING ADDITION CAN BE MADE WITHOUT REJECTING THE BOOKS OF ACCOUNT. FURTHER MERE FALL IN THE G.P. RATE OR NON - MAINTENAN CE OF STOCK REGISTER CANNOT ALONE BE A GROUND FOR MAKING THE LUMP SUM TRADING ADDITION WITHOUT RECORDING ANY PROPER AND CONCRETE FINDING. THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL ON RECORD WHICH CAN BE SAID TO BE INDICATIVE OF ANY SUPPRESSIO N OF INCOME OR INDULGENCE OF APPELLANT IN TRANSACTIONS OUTSIDE THE BOOKS OF ACCOUNTS . OTHERWISE, ALSO A TRADING ADDITION REQUIRES TO BE BASED ON CERTAIN REASONS AND VALID BASIS AND IT CANNOT BE MADE ON CONJECTURES AND SURMISES. THE TRADING ADDITION MADE BY THE ASSESSING OFFICER AT RS. 3,00,000/ - IS NOT SUPPORTED BY ANY FACTS, FIGURES OR EVIDENCES. I ALSO FAIL TO UNDERSTAND HOW THE FIGURE OF RS. 3,00,000/ - WAS ARRIVED AT. THE LUMP SUM ADDITION OF RS. 3,00,000/ - IS TOTALLY BASED ON SURMISES AND CONJECTURE . IN VIEW OF THE ABOVE, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE TRADING ADDITION OF RS. 3,00,000/ - , SAME IS HEREBY DELETED. THE GROUND OF APPEAL IS ALLOWED. 9 . THE LD. CIT(A) HELD THAT THE OBSERVATIONS OF THE THEN LD. CIT(A), BIKANER FOR THE A.Y. 2008 - 09 HOLDS GOODS FOR THE YEAR UNDER CONSIDERATION ALSO. ACCORDINGLY, THE IMPUGNED TRADING ADDITION WAS DELETED. NOW THE DEPARTMENT IS IN APPEAL. 7 10 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 28/11/2011. 11 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND FURTHER SUBMITTED THAT NON - MAINTENANCE OF STOCK REGISTER CANNOT BE A CRITERIA TO MAKE ADHOC TRADING ADDITION , T HEREFORE, LD. CIT(A) RIGHTLY DEL E TED THE IMPUGNED ADDITION. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE , IT IS AN ADMITTED FACT THAT THERE WAS A TREMENDOUS INCREASE IN THE TURNOVER OF THE ASSESSEE WHICH INCREASED FROM RS. 5 CRORE IN THE EARLIER YEAR TO RS. 7 CRORE IN THE YEAR UNDER CONSIDERATION AND THERE WAS A SLIGHT DECLINE IN THE GROSS PROFIT WHICH CAME DOWN TO 21.06% IN THE YEAR UNDER CONSIDERATION IN COMPARISON TO 24.74% IN THE EARLIER YEAR, T HE INCREASE IN THE TURNOVER MAY BE A REASON FOR SLIGHT DECREASE IN THE GROSS PROFIT RATE . IN THE PRESENT CASE, THE ASSESSING OFFICER WHILE MAKING THE ADHOC ADDITION DID NOT POINT OUT ANY INFLATED PURCHASES OR SUPPRESSED SALES. HE ALSO DID NOT DOUBT ABOUT THE EXPENSES INCURRED BY TH E ASSESSEE EVEN THE BOOKS OF ACCOUNTS MAINTAINED IN REGULAR COURSE OF BUSINESS WERE NOT 8 REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. WE THEREFORE, DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 1 3 IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 28 TH AUGUST , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH AUGUST , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .