INCOME TAX OFFICER WARD-1(2), RAIPUR (CG) V. SHRI KISHORE KUMAR KHETPAL, RAIPUR (CG)

ITA 143/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94016 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: R B DOSHI
• Keywords: Gross profit estimation; Rejection of books of accounts; Business income
• Section: 143(3); 133A; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH , RAIPUR BEFORE S/SHRI MUKUL K SHRAWAT, ( JM) AND SHAMIM YAHYA,(AM) I TA . NO . 14 3 / BLPR / 201 1 (ASSESSMENT YEAR : 200 7 - 08 ) THE INCOME TAX OFFICER - 1 ( 2 ), CENTRAL REVENUE BUILDING, CIVIL LINES, RAI PUR, CHHATTISGARH. VS. SHRI KISHOR KUMAR KHETPAL, PROP. M/S DREAM SHOPPE, 45, NEW CLOTH MARKET, PANDRI, RAIPUR. APPELLANT .. RESPONDENT PAN/GIR NO. : AEVPK3062R APPELLANT BY : S HRI D K JAIN RESPONDENT BY : SHRI R B DOSHI DATE OF HEARING : 1 1 .6.2015 DATE OF PRONOUNCEMENT : 19 . 6. 201 5 O R D E R PER MUKUL K SHRAWAT, ( JM) : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LD. CIT(A) - 27.4.2011 FOR THE ASSESS MENT YEAR S 200 7 - 08. 2. T HE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 9,81,058/ - MADE BY THE AO ON ACCOUNT OF LOW GP BY REJECTING B OOKS RESULTS U/S 145 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 10,85,000 / - MADE BY THE AO U/S 68 OF THE INCOME TAX A CT, 1961 ON ACCOUNT OF CAPITAL INTRODUCED BY THE PROPRIE TOR 3. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH IN LAW AND ON FACTS ITA. NO. 14 3 /BLPR/201 1 2 3. AT THE OUTSET, WE FIND THAT IN ONE OF THE GROUP CASES, I.E. IN THE CASE OF BROTHER OF THE ASSESSEE IN THE CASE OF ITO V/S SHRI NIRMAL KUMAR KHETPAL (HUF) IN ITA NO.47/BLPR/2001 (AY - 2007 - 08), THE RAIPUR BENCH OF THE TRIBUNAL VIDE ORDER DATED 22.12.2014 HAS DECIDED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE. 4. FACTS AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 30.12.2009 ARE THAT THE ASSESSEE IN A INDI VIDUAL CAPACITY WAS TRADING IN READYMADE CLOTH. A SURVEY U/S 133A OF THE ACT WAS CONDUC T ED DUE TO WHICH THE CASE WAS SELECTED FOR SCRUTINY. ON THE BASIS OF SU RVEY, THE AO HAS RECALCULATED THE GROSS PROFIT BY REDUCING THE COST PRICE AND WORKED OUT THE TOTAL INCOME OF THE ASSESSEE AS UNDER: 4. I HAVE GONE THROUGH THE BOOKS OF ACCOUNTS AND OTH ER DOCUMENTS PRODUCED BEFORE ME AND ALSO CONSIDERED THE ARGUMENTS OF A SSESSEES COUNSEL . DURING THE SURVEY U/S 133A IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN MRP ON EACH ITEM. HOWEVER, IT WAS STATED BEFORE THE SURVEY PARTY THAT THE MRP IS INCREASED BY 46 - 50% OF THE COST PRICE. THE SURVEY, THEREFORE, DECREASED THE COST B Y 31% FROM MRP TO FIND OUT THE ACTUAL COST . THE ASSESSEE HAS NOT KEPT INVENTORY OF THE STOCK. THE SALES ARE ALSO NOT FULLY SUPPORTED . CASH SALES ARE SHOWN WITHOUT SHOWING THE QUANTITY OR THE NATURE OF THE CLOTH SOLD . THE SALES ARE ALSO NOT OPEN TO VERIFI CATION. THE CORRECT INCOME OF THE ASSESSEE CANNOT BE DEDUCED FROM THE ACCOUNT BOOK AND OTHER DOCUMENTS PRODUCED BEFORE ME. PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT ARE APPLICA BLE TO THE FACTS OF THIS CA S E. THE BOOK RESULT ARE REJECTED AND BY APPLYI NG PROVISIONS OF SECTION 145 THE GROSS PROFIT OF THE ASSESSEE IS DETERMINED AT 30% OF THE TOTAL SALES OF RS.1,28,34,011/ - A S REASONABLE LOOKING TO THE FACTS EMERGING F ROM RECORDS AND ALSO AFTER CONSIDERING THE SUBMISSION S OF T HE ASSESSEES COUNSEL DURING T HE COURSE OF THE ASSESSMENT PROCEEDI NGS . T HIS WORKING OUT TO RS.38,50,203/ - . THIS WOULD MEAN AN ADDITION OF RS.9,81,058/ - IN THE TRAD ING RESULT. PROCEEDINGS U/S 271(1)(C) ARE INITIATED 5. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHO IN TURN HELD THAT THERE WAS NO EVIDENCE IN THE POSSESSION OF REVENUE THAT GP EARNED BY THE ASSESSEE WAS AT THE RATE OF 30%. BY APPLYING THE ITA. NO. 14 3 /BLPR/201 1 3 RATIO LAID DOWN IN THE CASE OF CIT V/S K Y PILIAH AND SONS (1976) 64 ITR 411(SC), THE IMPUGNED ADDITION WAS D ELETED. 6. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AND IN THE LIGHT OF THE FACTS AS DISCUSSED HEREINABOVE, WE FIND THAT RESPECT ED CO - ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DATED 22.12.2014 (SUPRA) HAS HELD AS UNDER : 2.2 WE HAVE CONS IDERED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT THE ASSESSEE IS DEALING IN SAREES AND DRESS MATERIAL,THAT DURING THE SURVEY DISCREPANCY IN THE STOCK WAS FOUND,THAT THE AO HAD REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT.IT IS A FACT THAT THERE WAS SLIGHT FALL IN GP RATE DURING THE YEAR,BUT THAT FACT DOES NOT IPSO FACTO PROVE THAT THE BOOKS OF ACCOUNTS WERE LIABLE TO BE REJECTED.THERE CAN BE MANY A REASONS FOR FALL IN GP IT MAY VARY FROM YEAR TO YEA R AND SEASON TO SEASON ESPECIALLY IN THE BUSINESS OF DRESS MATERIAL. FOR ENHANCING THE GP RATE CONCERTE EVIDENCES HAVE TO BE BROUGHT ON RECORD.IN THE CASE UNDER CONSIDERATION,THE AO HAS NOT DISCUSSED ANY COMPARABLE CASE BEFORE ENHANCING GP.WE ALSO FIND SUB STANCE IN THE ARGUMENT THAT IN THE BUSINESS OF SAREES AND DRESS MATERIAL IT IS NOT PRACTICABLE TO MAINTAIN PERFECT DETAIL OF STOCK FOR A PERSON LIKE THE ASSESSEE.THE AO HAD NOT POINTED OUT ANY DEFECTS IN THE BOOKS THAT COULD JUSTIFY THE EXTREME STEP TAKEN BY HIM I.E.REJECTION OF BOOKS AND ESTIMATION OF HIGHER GP.WE FIND THAT ON SIMILAR KIND OF FACTS,IN THE CASE OF G. V. D. I. AND CO. (363 ITR 27),THE HONBLE MADRAS HIGH COURT HAS HELD AS UNDER THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT EI THER ON THE GROUND OF DIFFERENT INVISIBLE LOSS PROJECTED OR ON THE ACCOUNT OF DAY - TO - DAY STOCK BOOK NOT BEING MAINTAINED. THE GROUNDS GIVEN BY THE ASSESSING OFFICER TO SUSTAIN HIS PROPOSAL TO ADOPT THE PROFIT AS DISCLOSED IN THE IMMEDIATELY PRECEDING YEAR, DID NOT REST ON ANY OF THE CONSIDERATION OR MATERIALS, WHICH WERE NECESSARY FOR TH E PURPOSE OF REJECTING THE CASE OF THE ASSESSEE. THE REVENUE HAD NOT PROVED THE CASE BY ANY SUBSTANTIVE MATERIALS THAT THE GROSS PROFITS DISCLOSED WAS LOW. THUS, THERE WAS N O JUSTIFIABLE GROUND TO ACCEPT THE REVENUE`S CASE. CONSEQUENTLY, WHEN THE ASSESSEE HAD EXPLAINED THE REASON FOR FALL IN THE GROSS PROFIT, THE REVENUE SHOULD HAVE TAKEN ITA. NO. 14 3 /BLPR/201 1 4 THE MATTER FURTHER FOR VERIFICATION TO REST ITS DECISION WHY THE GROSS PROFIT DISCLOSED WAS NOT ACCEPTED BY IT. IN THE CASE UNDER CONSIDERATION THERE IS NO MATERIAL THAT CAN PROVE THAT THE ALLEGATION MADE BY THE AO WERE SUPPORTED BY POSITIVE MATERIAL. IN OUR OPINION,THE ASSESSEE HAD EXPLAINED THE REASONS OF FALL IN GP AND SAME WERE CONVINCI NG AND BELIEVABLE.THE AO HAD NOT REBUTTED THEM.IN THESE CIRCUMSTANCES,IF THE FAA DELETED THE ADDITION THEN NO FAULT CAN BE FOUND WITH HIS DECISION. CONFIRMING HIS ORDER,WE DECIDE GROUND NO.1 AGAINST THE AO. 6.1 SINCE A VIEW HAS ALREADY BEEN TAKEN BY THE RESPECTED CO - ORDINATE BENCH ON IDENTICAL FACTS IN THE CONNECTED GROUP CASE, THEREFORE RESPECTFULLY FOLLOWING THE SAME WE HEREBY CONFIRM THE RELIEF GRANTED BY THE LD. CIT(A). THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7 . APROPOS THE GROUND NO.2, THE OBSERVATIONS OF THE AO WAS THAT DURING THE COURSE OF SURVEY SHORTAGE OF STOCK WAS FOUND. IT WAS ALSO NOTICED THAT THE ASSESSEE HAD CREDITED CASH IN CASH BOOKS ON DIFFERENT DATES BY AN AMOUNT OF RS.10,85,000 / - . ACCORDING TO THE AO , THE ASSESSEE HAS FAILED TO GIVE A SATISFACTORY EXPLANATION, THEREFORE, THE SAID AMOUNT WAS TAXED IN THE HANDS OF T HE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. 8 . WHEN THE SAID ADDITION WAS CHALLENGED BEFORE THE LD CIT(A), IT WAS HELD THAT ON ONE HAND THE AO HAS HELD THAT THERE WAS A SHORTAGE OF STOCK WHICH WAS TAXED AS UNACCOUNTED SALES. ON THE OTHER HAND, THE AO HAS INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT. THE ASSESSEE HAS OFFERED THE SALES IN THE TURNOVER AND THIS IS NOT A CASE OF REVENUE THAT THE IMPUGNED AMOUNT WAS NOT INCLUDED IN THE SAID OFFER . HENCE, THE RELIEF WAS GRANTED. 9 . EVEN THIS ISSUE HAS BEEN DEALT WITH BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ORDER DATED 22.12.2014(SUPRA) AND FINALLY IT WAS HELD AS UNDER : ITA. NO. 14 3 /BLPR/201 1 5 3.2.BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO.AFTER CONSIDERING THE MATERIAL ON RECORD,WE ARE OF THE OPINION THAT SINCE THE PROFIT ELEMENT ON THE VALUE OF SHORTAGE HAD ALREADY BEEN ASSESSED BY THE AO HE SHOULD ALSO HAVE GIVEN THE CREDIT FOR INFLOW OF CASH ON ACCOUN T OF SUCH SALES.IN OUR OPINION,THE CASH RELATING TO THE SALES WAS NOT RECORDED IN THE BOOKS OF ACCOUNT INITIALLY,BUT LATER ON IT FOUND PLACE IN THE BOOKS,THEREFORE THE AMOUNT OF RS.15,24,206/ - CANNOT BE HELD TO BE REPRESENTING UNACCOUNTED CASH.IT HAS TO BE REMEMBERED THAT IT IS NOT A CASE OF EXCESS STOCK - RATHER DURING THE COURSE OF SURVEY PHYSICAL STOCK WAS FOUND LESS THAN THE BOOK STOCK.THE ASSESSEE ACCOUNTED THE DIFFERENCE IN THE STOCK AS CASH SALES AND PREPARED HIS SALES ACCOUNT.CONSIDERING THE ABOVE,THE FAA HAD RIGHTLY HELD THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF THE DISPUTED SUM U/S. 68 OF THE ACT.IN SHORT,NO FURTHER ADDITION WAS CALLED FOR SINCE THE ASSESSEE HAD ALREADY DISCLOSED A HIGHER VALUATION OF THE CLOSING STOCK AND THEREBY HIGHER PRO FIT AND HIGHER TAXABLE INCOME.AS THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY,SO,WE DECIDE GROUND NO.2 AGAINST THE AO. 10 . SINCE ON IDENTI CAL FACTS AND CIRCUMSTANCES OF THE CASE, THE VIEW HAS BEEN TAKEN BY THE RESPECTIVE CO - OR DINATE BENCH OF THIS TRIBUNAL IN A GROUP CA SE , AS CITED (SUPRA), THEREFORE, WE FIND NO REASON TO TAKE ANY OTHER VIEW THAN THE VIEW SO TAKEN BY THE TRIBUNAL. RESULTANTLY , W E FIND NO FORCE IN THIS GROUND OF THE REVENUE, THEREFORE DISMISSED. 1 1 . IN THE R ESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH JUNE , 201 5 SD SD ( SHAMIM YAHYA ) ( MUKUL K SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR : 19TH JUNE,2015. SRL , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - CONCERNED 4. CIT CONCERNED 5. DR, ITAT, RAIPUR CONCERNED 6. GUARD FILE. BY ORDER, SENIOR PRIVATE SECRETARY /ASSTT.REGISTRAR ,