The ITO, Ward-7(2), Ahmedabad V. Smt Rukmanidevi Pavankumar Agarwal, Ahmedabad

ITA 1441/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9863 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 05-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P PATEL
• Keywords: Gross profit estimation; Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ ITA NO. 1441/AHD/2012 / ASSESSMENT YEAR : 2009-10 ITO, WARD-7 (2), AHMEDABAD VS SMT. RUKMANIDEVI PAVANKUMAR AGARWAL, 1, GOYAL PARK RAW HOUSE, VASTRAPUR, AHMEDABAD PAN : AJUPA 0141 M / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI N.P. PATEL, SR. DR ASSESSEE BY : NONE / DATE OF HEARING : 29/11/2016 / DATE OF PRONOUNCEMENT: 30/11/2016 / O R D E R THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD DATED 20.04.2012 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.40,11,598/- ON ACCOUNT OF LOW GROSS PROFIT, MADE BY THE AO AFTER REJECTING THE BOOKS OF ACCOUNT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 3. IN THIS CASE, THE ASSESSEE IS ENGAGED IN TRADING OF GREY CLOTHS, FABRICS AND HOSIERY ITEMS. IN THE ASSESSMENT ORDER, THE AO OBSERVED...:- (A) THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT WHICH WAS TEST CHECKED. O N VERIFICATION, IT IS SEEN THAT ASSESSEE HAS NOT CLAIMED ANY EXPENSES IN THE P&L ACCOUNT OTHER THAN AUDIT FEES AND BANK CHARGES. THE TURNOVE R OF THE ASSESSEE SMC-ITA NO 1441/AHD/2012 ITO VS. SMT. RUKMANIDEVI PAVANKUMAR AGARWAL AY : 2009-10 2 IS OF RS.16.51 CRORES. SUCH MAGNITUDE OF BUSINESS C ANNOT BE DONE WITHOUT INCURRING ANY EXPENSES. (B) THAT, THE ASSESSEE BEING FEMALE, SHE NEEDS HELP/ASS ISTANCE TO RUN THE ABOVE BUSINESS WHICH IS EVIDENT FROM THE NATURE OF BUSINESS. ALSO THE MINIMUM REQUIREMENT TO RUN THE BUSINESS IS TELEPHON E/MOBILE, VEHICLE FOR CONTACTING PARTIES OR FOR BANK TRANSACT IONS, IN CASE NO VEHICLE IS WITH ASSESSEE THEN CONVEYANCE EXPENSES O R SIMILAR SUCH EXPENSES WHICH IS MUST TO RUN THE BUSINESS. (C) THAT, IN VIEW OF THE ABOVE FACTS, ASSESSEE WAS REQU ESTED TO EXPLAIN AS WHY BOOKS RESULTS SHOULD NOT BE REJECTED AND G.P. S HOULD BE ESTIMATED AT THE RATE OF 2.5% ON THE BASIS OF COMPA RABLE BUSINESS OF SAME/SIMILAR NATURE AND MAGNITUDE. 3.1 THE ASSESSEE, IN RESPONSE TO THE AOS QUERIES, RESP ONDED AS UNDER:- WITH REGARDS TO THE CLARIFICATION ON THE G.P. AS A SKED BY YOUR HONOR, WE HAVE TO STATE THAT THE ASSESSEE IS ENGAGED INTO A B USINESS ARRANGEMENT WHEREIN AFTER RECEIVING THE ORDER OF GOODS FROM ONE PARTY, THE ASSESSEE ARRANGES FOR THE PARTY WHO WOULD FULFILL THE REQUIR EMENT OF THE ORDER. THIS ACTIVITY IS THUS DONE ON A NON-NEGOTIABLE TERMS OF BUSINESS TREATING IT TO BE A KIND OF DALALI BASED BUSINESS AND HENCE CANNOT BE C OMPARED WITH THE NORMAL TRADING WHERE THE DELIVERY OF GOODS IFS TAKEN BY TH E TRADER AND THEN SOLD IN THE NORMAL COURSE OF BUSINESS.. THE BUSINESS ACTIVI TY IS THAT OF A SOLE TRADER WHO ACTS AS AN INTERMEDIARY BETWEEN THE SELLER AND THE PURCHASER FOR A VERY SMALL PERCENTAGE OF MARGIN ON THE TEXTILE GOODS. T HIS ALSO MEANS THAT THE ASSESSEE HAS NOT TO RISK ON GOODS NOR INCUR ANY EXP ENSE ON ACCOUNT OF SUCH SALE OF PURCHASE, I.E. FREIGHT, OCTROI, LOADING, UN LOADING ETC. THE DETAIL OF THE GROSS PROFIT IS AS UNDER:- ASST YEAR TURNOVER (RS) GROSS PROFIT (RS.) GROSS PROFIT (%) 2008-09 45,57,84,314 3,40,670 0.07 2009-10 16,51,35,479 1,16,789 0.071 SMC-ITA NO 1441/AHD/2012 ITO VS. SMT. RUKMANIDEVI PAVANKUMAR AGARWAL AY : 2009-10 3 THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT AND AC COUNTS ARE DULY AUDITED U/S 44AB OF THE I.T. ACT. THE ASSESSEE FIRM HAS MA INTAINED THE QUANTITY DETAILS OF THE GOODS TRADED. THE CONFIRMATIONS FOR ALL THE PURCHASES AND SALES HAVE BEEN FILED. THE ADDITIONS MADE ON GP IN THE P REVIOUS YEAR HAS BEEN DELETED BY CIT(A) AND THEREFORE, BOOK RESULT SHOULD BE ACCEPTED. 3.2 HOWEVER, THE AO WAS NOT CONVINCED. HE PROCEEDE D TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATED GP AT 2.5%, WHICH R ESULTED IN ADDITION OF RS.40,11,598/-. 3.3 UPON ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER:- IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AN D APPLYING THE GP RATE WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BO OKS OF ACCOUNTS. FURTHER, ON SIMILAR GROUNDS, MY PREDECESSOR HAS DELETED THE SIMILAR ADDITIONS MADE FOR AY 2008-09 VIDE ORDER DATED 25.01.2011 IN APPEA L NO.CIT(A)XIV/WARD 7(2)/207/2010-11. WHILE DECIDING THE APPEAL FOR AY 2008-09 MY PREDECESSOR HAS ALSO DISCUSSED THAT SIMILAR ISSUE W AS DECIDED IN AY 2007-08 AND THE ADDITION MADE WERE DIRECTED TO BE DELETED. RESPECTFULLY, FOLLOWING THE DECISION OF MY PREDECESSOR AND THE DISCUSSION M ADE ABOVE, THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED AND THE GR OUND OF APPEAL IS ALLOWED. 3.4 AGAINST THE AFORESAID ORDER OF THE LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE THE ITAT. 4. I HAVE HEARD THE LD. DR. NONE APPEARED ON BEHAL F OF THE ASSESSEE. HOWEVER, IN MY CONSIDERED OPINION, THE APPEAL CAN B E DISPOSED OF BY HEARING LD. DR. I FIND THAT IN THIS CASE THE AO HAS REJECTED THE BOOKS OF ACCOUNTS DUE TO LOW GROSS PROFIT. THE AO HAS NOT B ROUGHT ON RECORD ANY SPECIFIC DEFECTS. SINCE ON IDENTICAL FACTS THE ADDI TION MADE BY THE AO IN AY 2008-09 WAS DELETED BY THE LD. CIT(A), I DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) FOR THE YEAR UNDER CONSIDERATION. IT IS SMC-ITA NO 1441/AHD/2012 ITO VS. SMT. RUKMANIDEVI PAVANKUMAR AGARWAL AY : 2009-10 4 SETTLED LAW THAT A LOW GROSS PROFIT MAY BE REASON F OR ENQUIRY BY THE AO, BUT IT CANNOT BE A SOLE REASON FOR REJECTION OF BOOKS O F ACCOUNTS. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF PANDIT BROS. VS CIT, REPORTED IN (1954) 26 ITR 159 (P&H) FOR THE PROPOSITION THAT IF THE PROFIT APPEARED TOO LOW OR NO STOCK BOOK SUBMITTED, IT CANNOT BE A REASON FOR REJECTING BOOKS OF ACCOUN TS. ACCORDINGLY, ON THE CONSPECTUS OF AFORESAID FACTS, I UPHELD THE ORDER O F THE LD. CIT(A). 5. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 30 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SHAMIM YAHYA (ACCOUNTANT MEMBER) AHMEDABAD; DATED 30/11/2016 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD