Assistant Commissioner of Income Tax-1, BHILAI(CG) V. Smt Poonam Chand Sahu, DURG(CG)

ITA 153/BIL/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0521 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 04-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHITAL S VERMA
• Keywords: Business income
• Section: 143(3); 145

Judgement Text

1 ITA NO .1 53 /BLPR /2012 IN TH E INCOME TAX APPELLATE TRIBUNAL: RAI PUR BENCH: RAI PUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO .153 /BLPR/2012 ASSESSMENT YEAR : 2009 - 10 THE ASST. COMMISSIONER OF INCOME TAX - 1, 32/32 BUNGLOWS , BH ILAI, DIST. DURG (CG) PIN 490 00 6 VS SMT. POONAM CHAND SAHU, JEVRA SIRSA, PULGAON CHOUKI, DURG PAN:BDPPS2374J (APPELLANT) (RESPONDENT) REVENUE BY SMT. SHITAL S. VERMA, DR ASSESSEE BY NONE DATE OF HEARING: 1 6 - 10 - 2015 DATE OF PRONOUNCEMENT: 4/12 - 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF THE LEARNED CIT (A), RAIPUR DATED 07 - 06 - 2012 FOR ASSESSMENT YEAR 2009 - 10. THE ONLY GROUND RAISED BY THE REVENUE IS REPRODUCED BELO W: - 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 145 OF THE I. TAX ACT 1961 THEREBY DELETING THE ADDITION OF RS.8,99,543/ - MADE BY THE AO AT THE RATE OF 2% OF GROSS TURNOVER. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT DATED 30 TH DECEMBER, 2011 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS ENGAGED IN LIQUOR TRADING BUSINESS. THE AO NOTICED THAT THE PROFIT OF THE ASSESSEE HAS GONE DOWN DURING THE YEAR UNDER CONSIDERATION. THE IMPUGNED ADDITION WAS MADE IN THE LIGHT OF THE FOLLOWING OBSERVATION: - 2 ITA NO .1 53 /BLPR /2012 2. IN THIS CASE, THE ASSESSEE DEALS IN LIQUOR BUSINESS. DURING THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERAT ION TOTAL SALES WERE SHOWN AT RS.12.50 CRORES ON WHICH GROSS PROFIT WAS DISCLOSED AT 74.77 LAKHS AND NET PROFIT AT RS.15.99 LAKHS. THE NET PROFIT RATIO WORKS OUT TO 1.28% WHICH IS FOUND APPARENTLY LOW. THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE REA SONS FOR SUCH LOW PROFIT BUT DESPITE GIVEN SEVERAL OPPORTUNITIES HE DID NOT COME FORWARD WITH ANY PROPER EXPLANATION FOR LOW PROFIT. ALTHOUGH THE ASSESSEE GOT HIS BOOKS AUDITED BUT EXPENSES CLAIMED UNDER VARIOUS HEADS WERE ALMOST FOUND IN CASH AND ROUTED T HROUGH SELF DRAWN VOUCHERS. DAY - TO - DAY STOCK REGISTER WAS NOT MAINTAINED. ADMITTEDLY THERE WERE NO SALE VOUCHERS WHERE ACTUAL SALES COULD BE VERIFIED. NO SPECIFIC REASONS FOR LOW PROFIT WERE OFFERED. UNDER THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINIO N THAT PROVISIONS OF SECTION 145 ARE SQUARELY APPLICABLE IN THIS CASE. IN ONE OF THE CASES FALLING WITHIN THE JURISDICTION OF THIS OFFICE THAT IS IN THE CASE OF SHRI PANCHURAM DESHMUKH, DRUG FOR THE A. Y. 2004 - 05 AND ALSO IN OTHER GROUP OF CASES OF SHRI TR ILOK SINGH DHILLON, THE LD. CIT (A) HAS DIRECTED TO APPLY NET PROFIT RATE OF 2% ON TOTAL SALES SHOWN BY T HE ASSESSEE. SUBSEQUENTLY, THE ABOVE FINDINGS OF T HE LD. CIT (A) WERE UPHELD BY T HE HONBLE MEMBERS OF ITAT IN THE ABOVE MENTIONED CASES. SINCE THE ASS ESSEE IS ALSO DOING THE SAME BUSINESS, IN THE ABSENCE OF ANY PROPER JUSTIFICATION FOR LOW PROFIT DISCLOSED AT 1.28%, THE NET PROFIT IS APPLIED @2% OF THE SALES SHOWN AT RS.12,49,51,676/ - WHICH WORKS OUT TO RS.24,99,03 3/ - . THE ASSESSEE HAS SHOWN THE PROFIT AT 15,99,490/ - . THIS WOULD RESULT INTO AN ADDITION OF RS.8,99,543/ - TO THE TOTAL INCOME ON ACCOUNT OF LOW PROFIT. ADDITION RS.8,99,543 . PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE INCOME - TAX ACT, 1961 ARE INITIATED SEPARATELY. 3 . WHEN THE MATTER WAS CARRIE D BEFORE THE FIRST APPELLATE AUTHORITY, SUBMISSIONS BEFORE THE LEARNED CIT (A) WERE THAT THE AO HAD NOT POINTED OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED U/S 44AB OF THE IT ACT. ACCEPTING TH ESE ARGUMENTS AND AFTER PLACING RELIANCE ON THE DE CISION OF CIT VS SMT. POONAM RAN I, 326 ITR 223 (DEL.), THE LEARNED CIT (A) HELD AS UNDER: 9 . IN THE CASE OF CIT VS. SMT POONAM RANI 326 ITR 223 (DELHI) IT WAS HELD THAT WHERE AN ADDITION WAS MADE BECAUSE OF MERE FALL IN GROSS PROFIT WITHOUT ANY DEFECT IN THE ACCOUNTS EXCEPT FOR THE ABSENCE OF STOCK REGISTER DELETION OF ADDITION WAS UPHELD BY T HE HIGH COURT. IN ASHOK REFRACTORIES PVT. LTD. VS. CIT (2005) 148 TAXMAN 635 (CAL.) IT WAS HELD THAT THE REJECTION OF THE BOOKS OF ACCOUNT ONLY IN THE ABSENCE OF STOCK REGISTER 3 ITA NO .1 53 /BLPR /2012 HAVING REGARD TO THE AVAILABILITY OF THE OTHER MATERIALS FROM WHICH THE INCOME COULD BE DEDUCED, WAS CONTRARY TO THE PROVISO TO SECTION 145 UNLESS THERE WAS A FINDING OR OPINION EITHER THAT THE RECORDS WERE INCORRECT AND INCOMPLETE OR THAT THE METHOD OF ACCOUNTING APPLIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS SO MAINTAINED BY THE APPELLANT. THE GROUND THAT THE ITEM WISE STOCK REGISTER WAS NOT MAINTAINED, AND, THEREFORE, THE ACCOUNTS WERE SOUGHT TO BE REJECTED, WAS ABSOLUTELY PERVERSE AND COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY OPINION EXPRESSED OR ANY FINDING ARRIVES AT TO THE EFFECT THAT THE ACCOUNTS MAINTAINED WERE INCORRECT OR THAT THE METHOD OF ACCOUNTING APPLIE D WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED. IN THE ABSENCE OF ANY SUCH FINDING, THE ACCOUNT BOOKS COULD NOT BE REJECTED MERELY ON THE GROUND THAT ITEM WISE STOCK WAS NOT MAINTAINED IN THE STOCK REGISTER. THUS THE REJECTION OF ACCOUNT BOOKS WAS NOT JUS TIFIED. IN ITO V. BOTHRA INTERNATIONAL (2008) 117 TTJ (JD.) 672 IT WAS HELD THAT WHERE THE AO LAID NO MATERIAL ON RECORD TO SUGGEST THAT THERE HAD BEEN ANY SUPPRESSION OF INCOME NOR THAT THE APPELLANT CARRIED ANY ACTIVITY OUTSIDE THE BOOKS, MERELY BECAUSE OF DECLINE IN GP RATE, BOOKS OF ACCOUNT COULD NOT BE REJECTED. IN DELHI SECURITIES PRINTERS V. D Y . CIT (2007) 15 SOT 353 (DELHI) IT WAS HELD THAT REJECTION OF BOOKS OF ACCOUNT MERELY BECAUSE APPELLANT HAS NOT MAINTAINED STOCK REGISTER, WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN BOOKS OF ACCOUNT OF ANY NATURE WHATSOEVER, COULD NOT BE SAID TO BE JUSTIFIED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS RELIED UPON BY THE APPELLANT AND THOSE CITED ABOVE, I AM OF THE VIEW THAT THERE W AS NO FINDING TO THE EXTENT THAT THE ACCOUNTS WERE NOT CORRECT AND COMPLETE OR THAT THE AO WAS OF THE OPINION THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE APPELLANT. IN THE ABSENCE OF SUCH CONCLUSIONS, SUCH ESTIMATED ADDITION, P ARTICULARLY WITHOUT BRINGING ON RECORD ANY INSTANCE OF UNDERVALUATION OF CLOSING STOCK OR SUPPRESSION IN SALES OR INFLATION IN PURCHASES OR EXPENSES IN THE YEAR UNDER CONSIDERATION, CANNOT BE MADE TO THE INCOME RETURNED BASED ON AUDITED ACCOUNT. HENCE, THE ESTIMATED ADDITION ON ACCOUNT OF LOW N. P. RATE BEING WITHOUT ANY EVIDENCE IS DELETED. 4 . ON THE DATE OF HEARING, NO ONE HAS REPRESENTED THE CASE FROM THE SIDE OF THE RESPONDENT ASSESSEE. FROM THE SIDE OF THE REVENUE, LEARNED DR SMT. SHITAL S. VERMA AP PEARED AND SUPPORTED THE ORDER OF THE AO. 5 . HAVING HEARD THE SUBMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT (A) HAS GRANTED RELIEF BY MAKING CERTAIN OBSERVATIONS WHICH WERE 4 ITA NO .1 53 /BLPR /2012 VERY GENERAL IN NATURE. HOWEVER, ON THE OTHER HAND, THE AO HA D MADE CERTAIN SPECIFIC OBSERVATIONS THAT ALTHOUGH THE ASSESSEE GOT HER BOOKS OF ACCOUNT AUDITED BUT THE EXPENSES WERE INCURRED IN C ASH IN MOST OF THE CASES SUPPORTED BY SELF - DRAWN VOUCHERS. IT HAS ALSO BEEN NOTICED BY THE AO THAT DAY - TO - DAY STOCK REGISTE R WAS NOT MAINTAINED. ON SCRUTINY OF THE ACCOUNTS IT WAS ALSO FOUND BY T HE AO THAT NO SALES VOUCHERS WERE AVAILABLE TO VERIFY THE CORRECTNESS OF THE SALES RECORDED BY THE ASSESSEE. THE AO HAS ALSO MENTIONED THAT NO REASON WAS GIVEN TO EXPLAIN THE FALL IN PROFIT RATE IN THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED OPINION, IF THE LEARNED CIT (A) WANTED TO PLACE RELIANCE ON CERTAIN DECISIONS, THEN, INSTEAD OF TAKING GENERAL VIEW, HE SHOULD HAVE FIRST EXAMINED THE FACTS OF THE CASE WHETHER TO BE APPLIED ON THE FACTS OF THIS CASE OR NOT. IT IS NOT A CASE WHERE MERELY AN ESTIMATED ADDITION WAS MADE BY THE AO BUT IT IS A CASE WHERE THE AO HAS COMPARED THE PROFIT EARNED IN THIS LINE OF BUSINESS BY OTHER TAX PAYERS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AO HAD NO OPTION BUT TO DETERMINE THE RATE OF PROFIT ON THE BASIS OF OTHER COMPARABLE TAX PAYERS WHO ARE IN THE SAME LINE OF BUSINESS. THEREFORE, THE ADDITION WAS MADE BY THE AO WITHIN HIS JURISDICTION WHICH WAS WRONGLY DISTURBED BY THE LEARNED CIT (A ). THE VIEW TAKEN BY THE LEARNED CIT (A) IS, THEREFORE, REVERSED AND THE GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED. 6. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPE N COURT ON THIS 4 TH DAY OF DEC ., 2015. SD/ - SD/ - (SHAMIM YAHYA ) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: NAGPUR, 4 TH DEC ., 2015. LAKSHMI KANT DEKA/SR. PS 5 ITA NO .1 53 /BLPR /2012 COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T., CONCERNED 4. CIT ( APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1 . DRAFT DICTATED ON 30.11.15 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 30.11.15 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 03.12.15 SR.PS 6. DAT E OF PRONOUNCEMENT 04.12.15 SR.PS 7. FILE SENT TO THE BENCH CLERK 04.12.1 5 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER