M/s. Shantichand Sunil Bhansali, JODHPUR V. ACIT, JODHPUR

ITA 152/JODH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4931 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: N R MERTIA
• Keywords: Rejection of books of accounts; Business income

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 152/JODH/2011 (A.Y. 2002-03) M/S. SHANTICHAND SUNIL BHANSALI, VS. ACIT, CIRCLE -3, C/O M/S. MERTIA & COMPANY, JODHPUR. CHARTERED ACCOUNTANTS, 244, KAMLA NEHRU NAGAR, OPP. PRAKATIK CHIKITSA KENDRA, CHOPASNI ROAD, JODHPUR. PAN NO. AAPFS 6841 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.R. MERTIA DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 21/11/2013. DATE OF PRONOUNCEMENT : 26/11/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 15/03/2011 OF LD. CIT (A), JODHPUR. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN SU STAINING ADDITION OF RS. 1,76,412/- OUT OF THE TRADING ADDITIONS MADE RS. 2, 16,676/- BY LD. A.O. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION MADE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN LAW AND FACTS IN SUSTAINING ADDITION OF RS. 22,662/ - MADE BY THE LD. A.O. ON ACCOUNT OF CASH PAYMENTS OUT OF BOOKS. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION/DISALLOWANCE OF RS . 17,850/- OUT OF RS. 25,804/- MADE BY THE LD. A.O. ON ACCOUNT OF EXPENSE S FOR PERSONAL USE. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE B OOKS OF ACCOUNTS HAVE BEEN WHEN REJECTED THE SURRENDER OF INCOME MADE DUR ING SURVEY WAS OFFERED FOR TAX AND WAS ACCORDINGLY TAXED THEREFORE , NO SEPARATE ADDITIONS, AS WERE MADE, WERE JUSTIFIED. THE LD. C IT(A) ERRED IN NOT ACCEPTING THE FACTS OF THE CASE AND POSITIONS OF LA W AND THEREBY ERRED IN SUSTAINING THE DISPUTED ADDITIONS/DISALLOWANCE. THUS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE HE OUGHT NOT TO HAVE SUSTAINED THE SAME. 5. THAT, THE APPELLANT CRAVES LEAVE TO ADDITIONAL, AMEND, ALTER, MODIFY, DELETE OR SUBSTITUTE ANY OF THE GROUNDS MENTIONED H EREINABOVE ON OR BEFORE THE APPELLATE HEARING. 6. THE APPELLANT PRAYS THAT ITS APPEAL MAY PLEASE B E ALLOWED. 2. FIRST ISSUE IN THIS APPEAL RELATES TO THE SUSTENAN CE OF ADDITION OF RS. 1,76,412/- OUT OF TRADING ADDITION MADE BY THE ASSE SSING OFFICER AT RS. 2,16,676/-. 3. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE DERIVED INCOME FROM TRADING OF DRY FRUITS & KIRANA ITEMS AN D FILED ITS RETURN OF INCOME ON 31/10/2002 DECLARING AN INCOME OF RS. 8,7 8,480/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE I.T. ACT, 196 1 (HEREINAFTER REFERRED 3 TO AS THE ACT IN SHORT). IN THIS CASE, A SURVEY WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 13/02/2002 AND A DIFFERENCE OF RS. 12,04,814/- IN THE STOCK, SHORTAGE OF CASH OF RS. 1 ,89,112/- WAS FOUND BY THE SURVEY PARTY AND THE ASSESSEE SURRENDERED RS. 1 7,00,000/- ON THIS COUNT. THE CASE WAS SELECTED FOR SCRUTINY. THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE DISCLOSED GROSS PROFIT (GP) OF RS . 8,73,996/- ON TOTAL SALES OF RS. 78,01,012/- INCLUDING DIFFERENCE FOUND IN STOCK OF RS. 12,04,814/- GIVING GP RATE OF 11.04% AND THE LAST Y EAR IT WAS OF 13.93% ON TOTAL SALES OF RS. 1,66,098/-. THE ASSESSING OFFIC ER POINTED OUT THAT THE ASSESSEE HAD NOT MAINTAINED THE QUANTITATIVE DETAIL S OF OPENING AND CLOSING STOCK AND THE VALUATION THEREOF HAD BEEN MA DE ON ESTIMATED BASIS. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND APPLIED GP RATE OF 14% ON TOT AL SALES OF RS. 78,01,012/- AND MADE THE ADDITION OF RS. 2,16,676/- BEING DIFFERENCE OF GP. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT EARLIER YEAR WAS ONLY OF 40 DAYS WHEREIN GP RATE OF 13.93% ON THE SALES OF RS. 1,66,098/- WAS DECLARED. IT WAS SUBMITTED THAT DURING THE COURSE OF SURVEY, A SHORT STOCK AMO UNTING TO RS. 12,04,814/- WAS WORKED OUT AND THE ASSESSEE SURREND ERED TOTAL INCOME OF 4 RS. 17,00,000/- IN THE PROFIT & LOSS ACCOUNT. IT W AS FURTHER STATED THAT AFTER THE DATE OF SURVEY, THERE WAS VERY SMALL SALE OF RS. 5,80,876/-ON WHICH GP OF RS. 76,966/- WAS DISCLOSED GIVING GP RA TE OF 13.25%. IT WAS CONTENDED THAT WHEN THE STOCK WAS FOUND SHORT, THEN IT WAS NOT THE VALUE OF STOCK WHICH HAS TO BE ADDED, BUT IT WAS THE PROF IT ELEMENT INVOLVED IN SHORT STOCK FOUND, WHICH HAD ONLY TO BE ADDED. THE REFORE, THE ASSESSING OFFICER SHOULD HAVE ACCEPTED INCOME DISCLOSED IN TH E PROFIT & LOSS ACCOUNT WITHOUT FURTHER DISTURBANCE. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE IN THE EARLIER YEAR DISCLOSED GP RATE AT 13.25%, HE CONSIDERED IT REASONABLE TO APPLY GP RATE 13.50% ON THE TOTAL SALES OF RS. 78,01,012/- AND ACCORDINGLY SUST AINED THE ADDITION OF RS. 1,76,412/-. NOW THE ASSESSEE IS IN APPEAL. 5. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE INCOME SURRENDERED BY THE ASSESSEE WAS MORE THAN THE DISCR EPANCIES NOTICED BY THE SURVEY PARTY, THEREFORE, THE ADDITION MADE BY T HE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER AS WELL AS LD. CIT(A) WA S NOT JUSTIFIED WHILE 5 ESTIMATING THE GP RATE FOR THE YEAR UNDER CONSIDERA TION ON THE BASIS OF GP RATE OF EARLIER YEAR, WHICH WAS ONLY FOR 40DAYS. 6 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. A FTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIE S AND THE MATERIAL ON RECORD, IT APPEARS THAT THE ASSESSING O FFICER AS WELL AS LD. CIT(A) APPLIED GP RATE ONLY ON THE BASIS OF THE GP RATE DECLARED BY THE ASSESSEE IN THE EARLIER YEAR. HOWEVER, THEY HAVE N OT CONSIDERED THIS VITAL FACT THAT THE TOTAL SALES AMOUNTING TO RS. 1,66,098 /- FOR THE EARLIER YEAR WAS ONLY FOR 40 DAYS AND IN THE YEAR UNDER CONSIDER ATION, THERE WAS A TREMENDOUS INCREASE IN COMPARISON TO THE EARLIER YE AR IN THE SALES, WHICH WAS AT RS. 78,01,012/-. THEREFORE, THE GP RATE APPL IED BY THE ASSESSING OFFICER AT 14% AND SUSTAINED BY THE LD. CIT(A) AT 1 3.50% WAS NOT JUSTIFIED. MOREOVER, THE ASSESSEE SURRENDERED AN I NCOME OF RS. 17,00,000/-, WHICH WAS HIGHER THAN THE STOCK FOUND SHORT AT RS. 12,04,814/- AND CASH FOUND SHORT BY RS. 1,89,112/-. IN OUR OPINION, WHEN THE ASSESSEE HAD ALREADY SURRENDERED THE INCOME MUC H HIGHER THAN THE STOCK FOUND SHORT BY THE DEPARTMENT DURING THE COUR SE OF SURVEY, THE TRADING ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. 6 CIT(A) WAS NOT JUSTIFIED. ACCORDINGLY, THE ORDER O F THE LD. CIT(A) ON THIS ISSUE IS SET ASIDE AND THE ADDITION SUSTAINED IS DE LETED. 8. THE NEXT ISSUE VIDE GROUND NO.2 RELATES TO THE SUST ENANCE OF ADDITION OF RS. 22,662/- MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF CASH PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS. 9. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICE D THAT THE CASH PAYMENT OF RS. 22,662/- WAS MADE ON 04/03/2002 TO S HRI JAYESH KUMAR WHEREAS THERE WAS NO ENTRY IN THE CASH BOOK. HE, T HEREFORE, MADE THE ADDITION. 10. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THERE MIGHT HAVE BEEN IMPROPER P OSTING IN THE LEDGER ON ACCOUNT OF INCORRECT MENTIONING OF THE DATE OF T HE PAYMENT OR FOLIO NUMBER. ALTERNATIVELY, IT WAS STATED THAT THE ASSE SSEE HAD SURRENDERED A SUM OF RS. 17,00,000/-, THEREFORE, THE ASSESSING OF FICER OUGHT TO HAVE GIVEN SET OFF OF THE SAID CASH PAYMENT OF RS. 22,62 2/-. HOWEVER, THE LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE ADDITION. NOW THE ASSES SEE IS IN APPEAL. 7 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN T HE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD SURRENDERED A S UM OF RS. 17,00,000/- WHICH WAS MORE THAN THE DISCREPANCIES NOTICED BY TH E SURVEY PARTY, THEREFORE, IF THERE WAS ANY PAYMENT AMOUNTING TO RS . 22,622/- OUTSIDE THE BOOKS OF ACCOUNTS, THE SAME WAS ALREADY INCLUDE D BY THE ASSESSEE IN THE SURRENDERED INCOME OF RS. 17,00,000/- AS SUCH, NO ADDITION WAS CALLED FOR TO THE IMPUGNED AMOUNT. IN THAT VIEW OF THE MATTER, THE ADDITION SUSTAINED BY THE LD. CIT(A) IS DELETED. 12. LAST ISSUE VIDE GROUND NO.3 RELATES TO THE SUSTENAN CE OF DISALLOWANCE OF RS. 17,850/- OUT OF RS. 25,804/- MA DE ON ACCOUNT OF EXPENSES FOR PERSONAL USE. 13. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DISALL OWED 1/5 TH OF THE EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF STA FF WELFARE, TELEPHONE AND ELECTRICITY CONSIDERING THE SAME FOR PERSONAL U SE. 14. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A), WHO DELETED THE DISALLOWANCE OUT OF ELECTRICITY EXP ENSES AND SUSTAINED 8 THE DISALLOWANCE OF 1/5 TH OUT OF STAFF WELFARE AND TELEPHONE EXPENSES. NOW THE ASSESSEE IS IN APPEAL. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT C ASE, IT IS NOTICED THAT THE ASSESSING OFFICER WHILE MAKING THE AD-HOC DISALLOWANCE, HAD NOT POINTED OUT ANY SPECIFIC INSTANCE WHERE THE EXPENSE S ON ACCOUNT OF STAFF WELFARE, TELEPHONE OR ELECTRICITY WERE USED FOR PER SONAL PURPOSES. MOREOVER, THE ASSESSEE HAD SURRENDERED A SUM OF RS. 17,00,000/- AND PAID DUE TAX ON THE SAID SURRENDERED AMOUNT, THEREF ORE, IF ANY EXPENSES ON ACCOUNT OF PERSONAL USE WERE DEBITED IN THE BOOK S OF ACCOUNTS, THEN ALSO SURRENDER MADE BY THE ASSESSEE WAS MUCH HIGHER , THEREFORE, NO SUCH DISALLOWANCE WAS CALLED FOR. ACCORDINGLY, THE IMPU GNED DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS DELETED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 26 TH NOVEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH NOVEMBER , 2013. VR/- 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.