ACIT, Jaipur V. PRECIOUS TRADING CORPORATION, Jaipur

ITA 145/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99378 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: S L PODDAR DHK
• Keywords: Depreciation
• Section: 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 145/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ACIT CIRCLE- 6 JAIPUR CUKE VS. M/S. PRECIOUS TRADING CORPORATION FLAT NO.803, C-25, UPASANA RESIDENCY SAWAI JAI SINGH HIGHWAY, BANI PARK, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABFP 3019 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR, ADVOCATE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16/10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 18-12-2013 FOR THE ASSESS MENT YEAR 2008-09 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUND S IN ITS APPEAL. (I) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RES TRICTING THE TRADING ADDITION TO RS. 37,642/- AS AGAINST THE ADD ITION OF RS. 7,53,058/- MADE BY THE AO (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 2 THE DISALLOWANCE TO RS. 1,916/- AS AGAINST THE ADDI TIONS MADE BY WAY OF DISALLOWANCE OF RS. 25,15,840/- UNDER VAR IOUS HEADS WITHOUT APPRECIATING THE FACT THAT ASSESSEE D ID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THESE EXPENSES 2.1 AS REGARDS GROUND NO. 1 OF THE REVENUE, BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS E-RETURN OF INCOME ON 2 9-09-2008 DECLARING TOTAL LOSS OF RS. 1,00,64,881/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY NOTICE U/S 143( 2) OF THE ACT WAS ISSUED. THE AO ASKED THE LD. AR OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND ALSO TO FURNISH CERTAIN INFORMATION BUT THE ASSESSEE FAILED TO FURNISH THE DESIRED INFORMATION. IT WAS STATED BY THE LD. AR OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE NOT IN POSS ESSION OF THE ASSESSEE BUT IT IS WITH SHRI SURESH JHALANI, UNCLE OF SHRI M ANISH JHALANI, PARTNER OF THE ASSESSEE FIRM AND DUE TO SOME FAMILY DISPUTES, HE WAS NOT COOPERATING FOR COMPLETING THE ASSESSMENT PROCEEDINGS. THE AO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND O THER REQUISITE DETAILS AS DESIRED BY HIM UNDER THE LAW FOR COMPLETING THE ASSESSMENT PROCEEDINGS FOR WHICH THE AO SHOW CAUSED THE ASSESS EE AS TO WHY GROSS PROFIT OF 10% BE NOT APPLIED INVOKING THE PROVISION OF SECTION 145(3) OF THE ACT. HOWEVER, THE LD. AR OF THE ASSESSEE VIDE H IS REPLY DATED 27-12- 2010 SHOWED THE INABILITY TO PRODUCE THE BOOKS OF A CCOUNT AND DESIRED ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 3 INFORMATION INDICATING THAT THE ASSESSEE HAS NOT CO NDUCTED ANY BUSINESS NOR ANY BOOKS OF ACCOUNTS AND OTHER RECORDS IN HIS POSSESSION. THE AO OBSERVED FROM THE SEQUENCE OF THE EVENTS THAT IT WA S THE RESPONSIBILITY OF THE PARTNERS OF THE FIRM I.E. SHRI MANISH JHALANI AND SMT. EKTA JHALANI TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER REQUISITE DE TAILS BUT THEY FAILED TO PRODUCE THE SAME. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OTHER ALTERNATIVE EXCEPT TO COMPLETE THE ASSESSMENT EX-PA RTE U/S 144 OF THE ACT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. T HE AO FURTHER OBSERVED THAT IN ITS FINAL ACCOUNTS, THE ASSESSEE HAD DECLAR ED GROSS PROFIT OF RS. 28,24,017/- ON THE GROSS TURNOVER OF RS. 3,57,70,7 45/- YIELDING RATE OF 7.89%. THE AO FURTHER OBSERVED THAT THE CASE OF ASS ESSEE FOR THE ASSESSMENT YEAR 2007-08 WAS ALSO UNDER SCRUTINY AND IN THAT YEAR, A GROSS PROFIT RATE OF 10% WAS APPLIED ON DECLARED SALES FO R VARIOUS REASONS MENTIONED IN THAT ASSESSMENT PROCEEDINGS. THE AO OB SERVED THAT SINCE THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACC OUNT AND OTHER RELATED DOCUMENTS TO PROVE ITS TRADING RESULTS, HE PROCEEDE D TO APPLY GROSS PROFIT RATE OF 10% ON THE TOTAL DECLARED SALES OF THIS YEA R WHICH RESULTED IN AN ADDITION OF RS. 7,53,058/- (RS. 35,77,075 MINUS RS. 28,24,017). ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 4 2.2 AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFOR E THE LD. CIT(A) WHERE THE LD. CIT(A) CONFIRMED THE REJECTION OF BOO KS OF ACCOUNT AND APPLIED THE GROSS PROFIT RATE OF 8% BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION . ASSESSING OFFICER REJECTED THE BOOK RESULTS SINCE B OOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE AO AND HE APP LIED 10% GROSS PROFIT RATE AS WAS DONE IN ASSESSMENT YEA R 2007- 08. APPELLANT SUBMITTED THAT IN THE IDENTICAL FACTS IN ASSESSMENT YEAR 2007-08, ITAT CONFIRMED THE REJECTI ON OF BOOK RESULTS BUT DIRECTED THE AO TO CALCULATE TRAD ING ADDITION BY APPLYING GROSS PROFIT RATE OF 8%. SINCE FACTS OF THIS YEAR ARE IDENTICAL AS ALSO MENTIONED BY THE AO AND APPELLANT, RESPECTFULLY FOLLOWING THE ORDER OF ITAT DATED 31- 05-2011 IN THE APPELLANTS OWN CASE IN ASSESSMENT Y EAR 2007-08, REJECTION OF BOOK RESULT MADE BY THE AO IS CONFIRMED AND AO IS DIRECTED TO RESTRICT THE TRADIN G ADDITION BY APPLYING 8% GROSS PROFIT RATE IN PLACE OF 10%. 2.3 THE LD. DR RELIED ON THE ORDER OF THE AO. 2.4 THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AS WELL AS THE ORDER OF ITAT, JAIPUR BENCH DATED 31-0 5-2011 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08. ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 5 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESS EE HAS NOT PROVIDED THE BOOKS OF ACCOUNT AND OTHER RELATED DOCUMENTS AS DES IRED BY THE AO UNDER THE LAW FOR WHICH HE HAD NO OTHER ALTERNATIVE EXCEP T TO COMPLETE THE ASSESSMENT EX-PARTE U/S 144 OF THE ACT BASED ON THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF NON-SUBMITTING OF THE BOOKS OF A CCOUNT BY THE ASSESSEE, THE AO INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT BY REJECTING THE BOOKS OF ACCOUNT AND APPLIED 10% GROS S PROFIT RATE, BY CONSIDERING THE CASE OF THE ASSESSEE FOR THE ASSESS MENT YEAR 2007-08, ON TOTAL DECLARED SALES OF THIS YEAR WHICH RESULTED IN AN ADDITION OF RS. 7,53,058/- (RS. 35,77,075 MINUS RS. 28,24,017). SUB SEQUENTLY, THE LD. CIT(A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE AND APPLIED THE GROSS PROFIT RATE OF 8% IN VIEW OF THE DECISION OF COORDINATE BENCH IN THE CASE OF THE ASSESSEE (ITA NO. 1204/JP/ 2010 DATED 31-05- 2011) FOR THE ASSESSMENT YEAR 2007-08. ADMITTEDLY, THERE IS NO DISPUTE THAT THE FACTS OF THE CASE ARE IDENTICAL WITH FACTS OF ASSESSMENT YEAR 2007-08. THEREFORE, RESPECTFULLY FOLLOWING THE JUDG MENT OF COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEA R 2007-08 WHERE TRADING ADDITIONS HAVE BEEN CONFIRMED BY APPLYING 8 % GROSS PROFIT RATE ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 6 ON DECLARED TURNOVER. ACCORDINGLY WE CONFIRM THE OR DER OF THE LD. CIT(A) AND GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS D ISMISSED. 3.1 AS REGARDS GROUND NO. 2 OF THE REVENUE, THE AO OBSERVED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE DEB ITED THE EXPENSES OF RS. 1,25,79,204 ON ACCOUNT OF VARIOUS EXPENSES. THE AO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE THE RELEVANT DETAILS AND DOCUMENTS TO PROVE THE BUSINESS EXPEDIENCY OF THE EXPENSES DEBITED BY IT. THEREFORE, THE AO HAD NO OPTION EXCEPT TO DISALLOW AT LEAST 20% OF THESE EXPENSES WHICH RESULTED INTO AN ADDITION OF RS. 25,15,840/- IN THE TOTAL INCOME OF THE ASSESSEE. 3.2 AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFOR E THE LD. CIT(A) WHERE THE LD. CIT(A) RESTRICTED THE DISALLOWANCE T O RS. 11,916/- BY FOLLOWING OBSERVATIONS. 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER DISALLOWED 20% OF ALL EXPENSES DEBITED IN PROFIT AN D LOSS ACCOUNT WHICH INCLUDED FOREIGN EXCHANGE DIFFERENCE DEPRECIA TION AND OTHER VERIFIABLE EXPENSES. APPELLANT SUBMITTED THAT IDENT ICAL ISSUE CAME IN ASSESSMENT YEAR 2007-08 IN WHICH LD. CIT(A) CONF IRMED THE 20% DISALLOWANCE IN RESPECT OF ONLY CERTAIN EXPENS ES AS MENTIONED BY APPELLANT IN PARA 3.2. THE ORDER OF LD . CIT(A) WAS CONFIRMED BY ITAT AND THEREFORE, THE DECISION OF CI T IS FINAL ON ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 7 THIS ISSUE. RESPECTFULLY, FOLLOWING THE DECISION OF LEARNED PREDECESSOR WHICH IS ALSO CONFIRMED BY ITAT BY ORD ER DATED 31- 05-2011, AO IS DIRECTED TO RESTRICT 20% DISALLOWANC E OF CLEANING CHARGES, EXPORTS, POSTAGE AND COURIER, OFFICE RENT AND, IT CONSULTANCY, TELEPHONE EXPENSES, OFFICE EXPENSES. T HE DISALLOWANCE OUT OF OTHER EXPENSES I.E. FOREIGN EXC HANGE DIFFERENCE, INTEREST, SALARY, BANK CHARGES AND COMM ISSION AND AUDIT FEES ETC. IS DELETED. 3.3 THE LD. DR RELIED ON THE ORDER OF THE AO. 3.4 THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AS WELL AS THE ORDER OF ITAT, JAIPUR BENCH DATED 31-0 5-2011 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08. 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE AO IN THIS CASE DISALLOWED 20% OF ALL EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT WHICH INCLUDED FOREIGN EXCHANGE DIFFERENCE, DEPRECIATION AND OTHER VERIFIABLE EXPEN SES. LD. CIT(A), TAKING INTO ACCOUNT THE ORDER OF COORDINATE BENCH DATED 31-05-2011 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 (SUPRA) DIRECTED THE AO TO RESTRICT 20% DISALLOWANCE OF CLEARING CHARGES EXPORTS, POSTAGE AND COURIER, OFFICE RENT AND IT CONSULTANCY, TELEPHONE EXPENSES, OFFICE EXPENSES AND THE DISALLOWANCE OUT OF OTHER EXPENSES I.E. FOREIGN EXCHANGE ITA NO. 145/JP/2014 THE ACIT, CIRCLE- 6, JAIPUR VS. M/S. PRECIOUS TRADI NG CORPORATION 8 DIFFERENCE, INTEREST, SALARY, BANK CHARGES & COMMIS SION AND AUDIT FEES ETC. WERE DELETED. WE HAVE PERUSED THE ORDER OF THE COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 AND RESPECTFULLY FOLLOWING THE SAME, WE SEE NO INFIRMITY IN THE ORDE R OF THE LD. CIT(A). HENCE, THE GROUND NO. 2 OF THE REVENUE IS ALSO DISM ISSED. 4.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/10/20 15. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16/10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT,CIRCLE- 6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. PRECIOUS TRADING CORPORATION, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.145/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR