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

ITA 144/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94017 (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: 2008-2009
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: R B DOSHI
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI MUKUL K. SHRAWAT , JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER IT A NO. 144 / BLPR./2011 ( ASSESSMENT YEAR : 20 08 09 ) INCOME TAX OFFICER, WARD 1(2) CENTRAL REVENUE BUILDING C IVIL LINES, RAIPUR (C.G) APPELLANT V/S SHRI SRAWAN KUMAR ARORA PROP: M/S. M.P. STEEL TRADERS TELGHANI NAKA, RAIPUR PAN ACJPA4935H .... RESPONDENT REVENUE BY : SHRI S.K. MEENA ASSESSEE BY : SHRI R.B. DOSHI DATE OF HEARING 11 .06.2015 DATE OF ORDER 19 .0 6.2015 O R D E R PER SHAMIM YAH YA, A. M. T HIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27 TH APRIL 2011 , PASSED BY THE LEARNED CIT(A), RAIPUR, FOR THE ASSESSMENT YEAR 20 08 09 . THE GROUND S RAISED BY THE REVENUE ARE AS UNDER: SHRI SRAWAN KUMAR ARORA 2 1. WHETHER IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 4,77,000 , MADE BY THE A.O. ON ACCOUNT OF LOW GROSS PROFIT; 2 . WHETHER IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 2,83,897, MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT ON ACCOUNT OF INTEREST PAID; 3 . WHETHER IN LAW AND ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 5.07.090, MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) ON ACCOUNT OF COMMISSION PAID BY INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT; AND 4. WHETHER IN LAW AND ON FACTS AND IN T HE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 66,000, MADE BY THE A.O. ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS. 2. APROPOS GROUND NO.1; IN THIS CASE, THE ASSESSEE IS IN WHOLESALE BUSINESS OF PURCHASE AND SALE OF IRON, STEEL, PLATES, ETC. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN FOLLOWING TURNOVER AND GROSS PROFIT: CURRENT YEAR ` 6.08 CRORES 5 .61 % LAST YEAR ` 2.77 CRORES 6.37% YEAR BEFORE LAST ` 1.53 CRORES 6.52% 3. THE ASSESSING OFFICER OPIN ED THAT THE DECLINE IN GROSS PROFIT NEEDED AN EXPLANATION. THE ASSESSEE SUBMITTED THAT THERE HAS BEEN MANY FOLD AND HUGE INCREASE IN THE TURNOVER WHICH HAS AFFECTED THE MARGIN OF PROFIT. THIS SUBMISSION WAS REJECTED BY THE ASSESSING SHRI SRAWAN KUMAR ARORA 3 OFFICER. THE ASSESSING OFFICER ALSO NOTED THAT THERE WAS SOME ABSENCE OF AUTHENTICITY AND GENUINENESS OF BILLS AND VOUCHERS. HOWEVER, THE ASSESSING OFFICER DID NOT MAKE ANY SPECIFIC INSTANCES. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE WAS NOT MAINTAINING DAY TO DAY STOC K BOOK, HENCE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GROSS PROFIT @ 6.37% AND MADE AN ADDITION OF ` 4,77,000. 4. UPON THE ASSESSEES APPEAL, THE LEARNED CIT(A) DELETED THE ADDITION. HE HELD THAT THE ASSESSING OFFICER HAS NOT B ROUGHT ANY MATERIAL ON RECORD WHICH CAN SUGGEST THAT BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT CORRECT AND COMPLETE. 5. AFTER HEARING BOTH THE PARTIES, WE ARE IN AGREEMENT WITH THE OBSERVATION OF THE LEARNED CIT(A) THAT THE ASSESSING OFFICER HAS NOT BROUGHT O N RECORD ANY COGENT MATERIAL IN SUPPORT OF THE CLAIM THAT ASSESSEES BOOKS OF ACCOUNT ARE LIABLE TO BE REJECTED. A VERY SLIGHT DECLINE IN GROSS PROFIT RATIO CANNOT GIVE RISE TO REJECTION OF BOOKS OF ACCOUNT IN THIS CASE. THERE IS NO RULE THAT THE GROSS PRO FIT RATIO SHOULD FOLLOW A CONSTANT RATIO WITH MATHEMATICAL PRECISION. WE FURTHER NOTE THAT THERE HAS BEEN A HUGE AND OVER 100% INCREASE IN THE TURNOVER AS COMPARED TO PRECEDING YEAR. HENCE, THE EXPLANATION THAT INCREASE IN SHRI SRAWAN KUMAR ARORA 4 TURNOVER HAS AFFECTED MARGIN CANN OT BE BRUSHED ASIDE. IN THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DELETE THE ADDITION OF ` 4.77 LAKHS ON ACCOUNT OF LOW GROSS PROFIT. GROUND NO.1, IS DISMISSED. 6. APROPOS GROUND NO.2; ON THIS ISSUE, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS OBTAINED UNSECURED LOAN FROM PERSONS SPECIFIED UNDER SECTION 40A(2) OF THE ACT AND PAID INTEREST @ 18%, WHILE ON THE LOAN OBTAINED FROM THE BANK, THE INTEREST PAID WAS 14% AND THE LOAN OF ` 10 LAKHS OBTAINED FROM SHRI TRILOCHAN SINGH CHAW LA, RAIPUR , T HE ASSESSEE PAID INTEREST @ 9%. THE ASSESSING OFFICER HELD THAT, IN HIS OPINION, INTEREST BEYOND 14.25% TO THE PERSONS SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT WAS EXCESSIVE. HENCE, THE ASSESSING OFFICER MADE DISALLOWANCE OF ` 2.83 LAKHS. 7. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) DELETED THE ADDITION. AGAINST THIS ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT BANK INTEREST RATE CANNOT BE COMPARED WITH THE RATE OF INTERE ST ON UNSECURED LOAN. HE SUBMITTED THAT EVEN BANK CHARGES INTEREST @ 24% ON CREDIT CARD. AS REGARDS LOAN FROM SHRI TRILOCHAN SINGH CHAWLA, HE SUBMITTED THAT IT WAS FOR A SHORT PERIOD OF SIX MONTHS. HE CLAIMED THAT SHRI SRAWAN KUMAR ARORA 5 IN THE ASSESSMENT YEAR 2007 08, THE RATE O F INTEREST @ 18% WAS ACCEPTED IN SCRUTINY ASSESSMENT. 9. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 10. UPON CAREFUL CONSIDERATION, WE AGREE THAT THE INTEREST PAID ON UNSECURED LOAN CANNOT BE COMPARED WIT H BANK INTEREST RATES. FURTHERMORE, SIMILAR RATE OF INTEREST HAS BEEN PAID BY THE ASSESSEE IN O THE R ASSESSMENT YEARS WHICH HAS BEEN ACCEPTED BY THE REVENUE. THE INSTANCE OF SHRI TRILOCHAN SINGH CHAWLA, HAS BEEN SUITABLY DISTINGUISHED BY THE LEARNED COUNSEL . IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE RATE OF INTEREST PAID BY THE ASSESSEE TO THE PERSONS SPECIFIED UNDER SECTION 40A(2)(B) CANNOT BE CONSIDERED TO BE EXCESSIVE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). GROUND NO.2, IS DI SMISSED. 11. APROPOS GROUND NO.3; ON THIS ISSUE, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD PAID COMMISSION TO TWO PERSONS NAMELY SHRI ASHOK KUMAR ARORA AND SHRI INERPAL ARORA, WHO ARE THE PERSONS SPECIFIED UNDER SECTION 40A(2) OF THE ACT. WHEN CONFRON TED, THE ASSESSEE SUBMITTED THAT BECAUSE OF THEIR EFFORTS, THE ASSESSEES SALES WERE INCREASED BY ` 2.50 CRORES AND THAT THESE PERSONS EARNED SIMILAR SHRI SRAWAN KUMAR ARORA 6 COMMISSION FROM ACL ENTERPRISE LTD. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED. HE HELD THAT NO DOCU MENTARY EVIDENCE HAS BEEN SUBMITTED BY THE ASSESSEE TO SUBSTANTIATE THE CLAIM. THE ASSESSING OFFICER HELD THAT THIS IS A SIMPLE PLOY BY THE ASSESSEE TO REDUCE THE PROFITS AND, HENCE, THE HE MADE THE DISALLOWANCE. 12. UPON THE ASSESSEES APPEAL, THE LEARNED CI T(A) NOTED THAT IN SUPPORT OF THE COMMISSION CLAIMED, THE ASSESSEE HAS FILED COPIES OF BILLS RAISED BY TWO PARTIES, PROFIT & LOSS ACCOUNT AND INCOME TAX RETURNS OF THE RECIPIENTS OF THE COMMISSION. THE LEARNED CIT(A) FURTHER NOTED THAT THE ASSESSEES SALES HAS BEEN INCREASED BY 126% BY ` 2.50 CRORES, HENCE, THE LEARNED CIT(A) DELETED THE ADDITION. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL. 13. AFTER HEARING BOTH THE PARTIES, WE NOTE THAT THERE HAS BEEN SUBSTANTIAL INCREASE IN THE TURNOVER OF THE ASSESS EE, HENCE, THE CLAIM THAT IT WAS THE EFFORTS OF THE COMMISSION RECIPIENTS THAT BROUGHT A HUGE INCREASE IN THE TURNOVER CANNOT BE REJECTED. IT IS A SETTLED LAW THAT THE ASSESSING OFFICER CANNOT SIT INTO THE SHOES OF THE ASSESSEE AND DECIDE AS TO WHAT IS REA SONABLE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). GROUND NO.3, IS DISMISSED. SHRI SRAWAN KUMAR ARORA 7 14. APROPOS GROUND NO.4; ON THIS ISSUE, REFERRING TO THE CAPITAL GAINS OF THE ASSESSEE, THE ASSESSING OFFICER OPINED THAT ALL THE MEMBERS OF THE ASSESSEE FAMILY ARE BE STOWED WITH SUBSTANTIAL ACCUMULATION OF CAPITAL. MAKING AN ESTIMATE OF INCOME AND DRAWINGS SHOWN BY THE MEMBERS OF THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE OPINION THAT WITHDRAWAL OF ` 3,480 PER MONTH PER MEMBER WAS NOT SUFFICIENT. HE PROCEEDED TO MA KE ESTIMATED ADDITION OF ` 66,000. IN THIS REGARD, THE LEARNED CIT(A) DELETED THE ADDITION HOLDING THAT THE SAME WAS ON PRESUMPTION. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 15. HAVING HEARD BOTH THE PARTIES, WE AGREE THAT THE ASSESSING OFFICE R HAS MADE ADDITION ON PRESUMPTION. THE ASSESSING OFFICER HAS COMPUTED THAT PER MEMBER PER MONTH WITHDRAWAL BY THE ASSESSEES FAMILY WAS ` 3,500. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, GROUND NO.4 I S DISMISSED. 16. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 19 TH JUNE 2015 SD/ - MUKUL K. SHRAWAT JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER RAI PUR , DATED : 19 TH JUNE 2015 SHRI SRAWAN KUMAR ARORA 8 COPY OF THE ORDER FORWAR DED TO : (1) THE ASSESSEE ; (2) THE REVENUE; (3) THE CIT(A ) ; (4) THE CIT, BILASPUR CITY CONCERNED ; (5) THE DR, ITAT, RAIPUR (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY SR. PRIVATE SECRETARY / A SS ISTANT REGISTRAR ITAT, RAIPUR