Shri Amit Tiwari, Indore V. THE DCIT-1(1), Indore

ITA 146/IND/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0576 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Rejection of books of accounts; Tax effect
• Section: 44AD; 143(3)

Judgement Text

ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.145 & 146/IND/2017 ASSESSMENT YEARS: 2010-11 & 2012-13 / VS. SHRI AMIT TIWARI, 304, SHARMA CHAMBERS, 5, JAWAHAR MARG, INDORE (M.P.) (APPELLANT) THE DCIT - 1(1) INDORE (M.P.) (REVENUE ) P.A. NO. ACVPT3933C ITA NOS.249 & 250/IND/2017 ASSESSMENT YEARS: 2010-11 & 2012-13 / VS. ACIT, CENTRAL-2, INDORE (REVENUE ) SHRI AMIT TIWARI, 304, SHARMA CHAMBERS, 5, JAWAHAR MARG, INDORE (M.P.) (APPELLANT) P.A. NO. ACVPT3933C APPELLANT BY SHRI S.N. AGRAWAL, AR RESPONDENT BY SHRI P.K. MISHRA, DR DATE OF HEARING: 10.09.2018 DATE OF PRONOUNCEMENT: 19.09.2018 ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 2 / O R D E R PER KUL BHARAT, J.M: THIS BUNCH OF FOUR APPEALS BY THE ASSESSEE AND REVENUE PERTAINING TO THE ASSESSMENT YEARS 2010-11 & 2012-13 ARE DIRECTED AGAINST TWO DIFFERENT ORDERS OF THE CIT(A)-1, INDORE BOTH DATED 5.12.2016. 2. AT THE OUTSET, IT IS POINTED OUT BY THE LD. AUTH ORISED REPRESENTATIVE (A.R.) ON BEHALF OF THE ASSESSEE THAT TH E APPEALS FILED BY THE REVENUE ARE BELOW THE MONETARY LIM IT AS PRESCRIBED BY THE LATEST CBDT CIRCULAR NO.3 OF 2018 DATED 11.7.2018. 3. LD. D.R. CONCEDED THIS FACT. THEREFORE, THE APPEALS IN ITA NOS.249 & 250/IND/2017 OF THE REVENUE WHERE TAX EFFECT IS LOWER THAN THE LIMIT PRESCRIBED BY THE CBD T CIRCULAR NO.3 OF 2018 DATED 11.7.2018 ARE DISMISSED AS NOT MAINTAINABLE. ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 3 4. NOW COMING TO THE ASSESSEES APPEAL IN ITA NO.145/IND/2017 PERTAINING TO THE ASSESSMENT YEAR 2010 - 11, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN APPROVING THE REJECTION OF THE BOOKS OF AC COUNT OF THE APPELLANT BY INVOKING THE PROVISION OF SECTION 145( 3) OF THE INCOME TAX ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN MAINTAINING ADDITION OF RS.17,13,476/- WIT HOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION M ADE BEFORE HIM. 3. THE APPELLANT RESERVE ITS RIGHT TO ADD, ALTER OR DE LETE ANY GROUND OF APPEAL ON OR BEFORE THE DATE OF FINAL HEARING. 5. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WAS FRAMED VIDE ORDER DATED 14.12.2012. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE EXPENSES RELATED TO CARTAGE AND FREIGHT ARE NOT INCL UDED IN THE CLOSING STOCK BY THE ASSESSEE. THEREFORE, T HE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS ON T HIS BASIS AND ESTIMATED THE NET PROFIT @ 5% AND 8% RESPECTIVELY, THEREBY HE MADE ADDITION OF RS.42,78,10 8/-. ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 4 AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD . CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS SUSTAINE D THE FINDING OF REJECTION OF BOOKS OF ACCOUNTS, HOWEVER, ADOPTED THE AVERAGE GROSS PROFIT OF THE PRECEDING YEARS AT 8.87 % AS AGAINST GROSS PROFIT OF 7.48% AS ADOPTED BY THE ASSESSE E. AGAINST THIS, BOTH ASSESSEE AND REVENUE FILED RESPECT IVE APPEALS. GROUND NO.1 OF THE ASSESSEES APPEAL IS AGAINST REJECTION OF BOOKS OF ACCOUNTS. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE A.O. OUGHT TO HAVE ACCEPTED THE BOO K RESULT DECLARED BY THE ASSESSEE. LD. COUNSEL SUBMITT ED THAT MERELY BECAUSE THE ASSESSEE COULD NOT INADVERTENTL Y INCLUDED THE EXPENSES RELATED TO FREIGHT AND CARTAGE IN THE CLOSING STOCK, THIS SHOULD NOT HAVE BEEN SUFFICIENT FOR REJECTION OF BOOKS OF ACCOUNTS. THE A.O. HAS NOT GI VEN ANY ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 5 FINDING IN RESPECT OF THE OTHER INFORMATION DECLARED BY THE ASSESSEE. 6. ON THE CONTRARY, LD. D.R. OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THE LAW IS VERY CLEAR. THE A.O. IS EMPOWERED TO INVOKE PROVISIONS OF SECTION 145(3) OF THE ACT IN THE EVENT THAT ON THE BASIS OF THE ACCOUNTS, THE CO RRECT FIGURE OF THE PROFIT CANNOT BE DEDUCED. IN SUPPORT OF THIS, LD. D.R. RELIED UPON THE JUDGEMENT OF THE HON'BLE S UPREME COURT IN THE CASE OF BRITISH PAINT INDIA PVT. LTD. VS. CIT REPORTED IN 188 ITR 44. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE A.O. WOULD BE WITHIN HIS POWER TO R EJECT BOOKS OF ACCOUNTS, IF HE IS SATISFIED THAT THE BOOKS O F ACCOUNTS PLACED BEFORE HIM DO NOT GIVE THE CORRECT FI GURE OF THE PROFIT. IN THE PRESENT CASE, ADMITTEDLY, THE ASSE SSEE ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 6 HAS NOT INCLUDED EXPENSES RELATED TO THE CARTAGE AND FREIGHT IN HIS BOOKS OF ACCOUNTS, BY THIS IT HAS DIST ORTED THE CORRECT FIGURE OF PROFIT. THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER WAS JUSTIFIED IN THE PRESENT CASE TO REJECT THE BOOKS OF ACCOUNTS. GROUND NO.1 OF THE ASSESSEES APPEAL IS DISMISSED. 8. GROUND NO.2 IS AGAINST SUSTAINING THE ADDITION OF RS.17,13,476/-. LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT ACCEPTING THE RATE OF PROFIT AS DECLARED BY THE ASSESSEE. 9. ON THE CONTRARY, LD. D.R. SUPPORTED THE ORDER OF THE A.O. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(A ) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER: ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 7 5.3 AS REGARDS, THE ESTIMATION OF THE PROFITS BY AP PLYING SECTION 44AF & SECTION 44AD OF THE ACT IS CONCERNED THE CONTENTION OF THE APPELLANT IS FOUND TO BE JUSTIFIED IN VIEW OF THE TURNOVER AND THE GROSS RECEIPTS SHOWN. IT IS SEEN THAT THE APPELLANT HAS SHOWN GROSS PROFIT PERCENTAGE OF 7.48% FOR THE YEAR UNDER CONSIDERATION AS AGAINST 9.59% FOR A.Y. 2009-10 AND 7.79% FOR A.Y. 2012-13. AS HAS ALREADY BEEN NOTED IN PARA ABOVE THE APPELLA NT HAS SUBMITTED A WORKING OF VALUATION OF CLOSING STOCK INCORPORATING THE IMP ACT OF FREIGHT, CARTAGE ETC. NOT CONSIDERED IN THE VALUATION. AS PER THE WORKING TH E STOCK IS UNDERVALUED TO THE EXTENT OF RS.1323134/- WHICH WORKS OUT TO 0.87% OF THE TOTAL TURNOVER AND GROSS RECEIPTS SHOWN BY THE APPELLANT. FROM THE DETAILS ON RECORD, IT IS SEEN THAT THE GROSS PROFIT PERCENTAGE OF THE APPELLANT HAS SHOWN A VARIATION FROM 9.07% IN A.Y. 2007-08, 9.35% IN A.Y. 2008-09, 9.59% IN A.Y. 2009-10 AND 7.48% IN THE YEAR UNDER CONSIDERATION I.E. A.Y. 2010-11. AS AGA INST THIS THE NET PROFIT OF THE APPELLANT IS 2.88%, 2.0%, 2.11% AND 2.98%. THERE I S THUS A FALL IN GROSS PROFIT IN THE YEAR UNDER CONSIDERATION AND THERE IS A MARGINA L RISE IN THE NET PROFIT. THE FALL IN GROSS PROFIT IS PARTLY ATTRIBUTABLE TO THE FACT THAT THE TURNOVER HAS GONE UP FROM RS.2.69 CRORES TO RS.11.10 CRORES AND GROSS RE CEIPTS OF JOB WORK HAVE GONE UP FROM RS.76.45 LACS TO RS.4.06 CRORES. THE AVERA GE GROSS PROFIT FOR THE ABOVE 4 YEARS COMES TO 8.87% AS AGAINST GROSS PROFIT OF 7.4 8% FOR THE YEAR UNDER CONSIDERATIONI I.E. A DIFFERENCE OF 1.39%. CONSIDE RING ALL THE FACTS OF THE CASE IT WOULD BE REASONABLE TO ESTIMATE THE ADDITIONAL NET PROFIT AT 1.13% (0.87% + 1.39%/2) OF THE TOTAL TURNOVER AND GROSS RECEIPTS O F RS.151635080/- WHICH WORKS OUT TO RS.1713476/-. THE ADDITION IS THEREFO RE CONFIRMED TO THE EXTENT OF RS.1713476/- AS AGAINST RS.4756260/- (RS.478152/- ( +) RS.4278108/-) MADE BY THE A.O. THE APPELLANT GETS RELIEF OF RS.304278 3/-. THE ABOVE GROUNDS OF THE APPELLANT ARE THEREFORE PARTLY ALLOWED. 11. FROM THE ABOVE FINDING OF THE LD. CIT(A), IT IS CLEAR THAT THE LD. CIT(A) HAS ADOPTED THE PROFIT ON THE BASIS OF PAST HISTORY OF THE ASSESSEE. THE ONLY CONTENTION OF THE ASSESSEE IN THE PRESENT YEAR IS THAT GROSS TURNOVER OF THE ASSESSEE HAS INCREASED, THEREFORE, THE PROFIT CANNOT BE ESTIMATED MERELY ON THE BASIS OF THE PAST HISTORY. WE ARE ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 8 UNABLE TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE AS TH E LD. CIT(A) HAS RIGHTLY ADOPTED THE GROSS PROFIT ON THE BAS IS OF PAST HISTORY AND THE IMPACT OF NOT TAKING INTO ACCOUNT THE EXPENSES RELATED TO FREIGHT AND CARTAGE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 12. NOW COMING TO THE ASSESSEES APPEAL IN ITA NO.146/IND/2017 FOR THE A.Y. 2012-13, THE ASSESSEE H AS RAISED IDENTICAL GROUNDS IN THIS YEAR ALSO, WHICH READS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN MAINTAINING THE REJECTION OF THE BOOKS OF ACCOUNT OF THE APPELLANT BY INVOKING THE PROVISION OF SECTION 145( 3) OF THE INCOME TAX ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN MAINTAINING ADDITION OF RS.18,03,514/- WIT HOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION M ADE BEFORE HIM. 3. THE APPELLANT RESERVE ITS RIGHT TO ADD, ALTER OR DE LETE ANY GROUND OF APPEAL ON OR BEFORE THE DATE OF FINAL HEARING. 13. THE COUNSELS FOR THE PARTIES HAVE ADOPTED THE SAME ARGUMENT AS WERE MADE IN ITA NO.145/IND/2017. FOR THI S, GROUNDS OF APPEAL WERE DISPOSED OF IN ITA ITA 145 146 249 250/IND/2017 SHRI AMIT TIWARI, INDORE 9 NO.145/IND/2017 ABOVE IN PARA NOS.5 TO 11. IN THE SAME REASONING, THESE GROUNDS OF THE ASSESSEE ARE ALSO DISMISSED. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE FO R THE A.Y.S 2010-11 & 2012-13 ARE DISMISSED AND THE REVENU ES APPEALS FOR THE A.YS. 2010-11 & 2012-13 ARE ALSO DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 .09.2018. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 19/09/2018 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER SR. PRIVATE SECRETARY, INDORE