Shree Nirmal Kumar Saraf, SUJANGARH V. AO, CHURU

ITA 160/JODH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54439 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Assessee Lawyers: SHAFI MOHD
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO.160/JU/2010 ASSESSMENT YEAR : 2006-07 PAN: APDPS 7979L SHREE NIRMAL KUMAR SARRAF VS THE ITO PROP M/S. MANISH TRADING CO. WARD- 2 SUJANGARH CHURU (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHAFI MOHD. DEPARTMENT BY: SHRI R.H. GOHEL DATE OF HEARING: 08-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A)-III, JAIPUR DATED 10-12-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS AS UNDER:- THAT THE LD.CIT(A) GROSSLY ERRED IN SUSTAINING TH E INVOKING OF THE PROVISIONS OF SECTION 145 OF THE ACT AS WELL AS CONFIRMING THE TRADING ADDITION OF RS. 2,44,403/- BY WRONG REJ ECTING THE OPTION AVAILED BY THE APPELLANT U/S 44AF. HE HAD ARBITRAR ILY CONFIRMED THE RATE OF GROSS PROFIT @ 12% BY IGNORING ALL THE SUBMISSIONS PUT FORTH BY THE APPELLANT. WORTHY LD.CIT(A) FAILED TO CONSIDER EVEN 2 HIS OWN APPEAL ORDER VIDE WHICH HE HAD ALLOWED THE APPEAL OF THE APPELLANT FOR ASSESSMENT YEAR 2001-02, 2002-03, 200 3-04 & 2005- 06 IN WHICH HE HAD EVEN QUASHED THE INVOKING OF PRO VISIONS OF SECTION 145 APART FROM DELETION OF TRADING ADDITION . 2.2 THE ASSESSEE DEALS IN FIRE WORKS. DURING THE C OURSE OF SURVEY, THE INVENTORY OF STOCK WAS PREPARED AS PER PHYSICAL VERIFICATION. THE STOCK FOUND ON PHYSICAL VERIFICATION WAS TO THE EXTENT OF RS.14,57,932/- AS AGAINST THE STOCK AS PER BOOKS OF ACCOUNT OF RS. 21,59,657/-. THE STOCK WAS FOUND SHORT BY RS. 7,01, 725/-. THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE AND AGREED TO PAY THE TAX @ NET PRO FIT RATE OF 12% ON THE SHORT STOCK OF RS. 7,01,725/-. THE AO NOTICED THAT THE ASSESSEE HA S SHOWN THE REGULAR SALES OF RS. 34,91,473/- AND HAS DECLARED THE RATE OF 5% AS PER PROVISIONS OF SECTION 44AF OF THE ACT. SINCE THE STOCK WAS FOUND SHORT, THE AO WAS OF THE OPINION THAT TURNOVER DURING THE YEAR EXCEEDS RS. 40.00 LACS. IN CASE THE STOCK FOUN D SHORT IS ADDED TO THE RECORDED SALES THEN THE AO WAS OF THE OPINION THAT PROVISIONS OF S ECTION 44AF ARE NOT APPLICABLE. SINCE THE ASSESSEE SURRENDERED NET PROFIT RATE OF 12% ON THE STOCK FOUND SHORT , THEREFORE, THE AO APPLIED THE NET PROFIT RATE OF 12% ON REGULAR SA LES. THE ASSESSEE ALSO SURRENDERED A SUM OF RS. 1.00 LAC ON ACCOUNT OF LOW WITHDRAWALS F OR HOUSE HOLD EXPENSES AND REQUESTED THAT AMOUNT MAY BE TELESCOPED WITH THE ADDITION BEI NG MADE IN THE TRADING ACCOUNT. THE AO HAS NOTICED THAT THE DAUGHTER OF THE ASSESSEE JO INED COACHING OF BANSAL CLASSES IN JAIPUR. THE ASSESSEE HAS PAID FEE OF RS. 46,000/-. THUS THE AO PASSED THE SPEAKING ORDER THAT THE WITHDRAWALS SHOWN WERE INADEQUATE. HOWEVER , THE AO MADE SEPARATE ADDITION OF RS. 1.00 LAC IN ADDITION TO THE TRADING ADDITION. 3 2.3 THE LD.CIT(A) HELD THAT SECTION 44AF IS NOT APP LICABLE BECAUSE THE TURNOVER OF THE ASSESSEE EXCEEDS RS. 40.00 LACS. THE LD.CIT(A) THEREFORE, UPHELD THE ACTION OF THE AO. HOWEVER, THE LD.CIT(A) DIRECTED THE AO TO REDUC E THE TRADING ADDITION BY SUM OF RS. 84,231/- WHICH HAS BEEN SURRENDERED BY THE ASSE SSEE IN RESPECT OF PROFIT ON THE STOCK FOUND LESS DURING THE COURSE OF SURVEY. 2.4 WE HAVE HEARD BOTH THE PARTIES. IT IS TRUE THAT THE ASSESSEE HAS SURRENDERED THE PROFIT @ 12% ON THE STOCK FOUND LESS. BEFORE US, TH E LD. AR HAS SUBMITTED THAT PAST HISTORY IS THE BEST GUIDE OR THE RATE OF 5% AS MEN TIONED IN SECTION 44AF SHOULD HAVE BEEN APPLIED. IT IS THE ASSESSEE WHO IS WELL AWARE OF THE MARGIN OF PROFIT. DURING THE COURSE OF SURVEY, THE ASSESSEE ADMITTED THE NET PRO FIT RATE OF 12%. IT IS NOT THE CASE OF THE ASSESSEE THAT STATEMENT WAS RECORDED UNDER COERCION AND DURESS. THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE NET PROFIT RATE. THE ASSE SSEE SHOULD HAVE PRODUCED THE PURCHASE AND SALE VOUCHERS SO AS TO ENABLE THE AO TO ASCERTA IN THE GROSS PROFIT RATE. IT IS TRUE THAT IN EARLIER YEARS, THE GROSS PROFIT RATE HAS VARIED FRO M 13.2% TO 12.45%. SINCE THE EXPENSES WERE ALREADY CONSIDERED, THEREFORE, THE ASSESSEE AG REED TO PAY FOR THE NET PROFIT RATE OF 12% BE APPLIED ON THE STOCK FOUND LESS AT THE TIME OF SURVEY. TAKING THE OVERALL VIEW, WE FEEL THAT IT WILL BE FAIR AND REASONABLE TO APPLY N ET PROFIT RATE OF 10%. THE AO WILL RECOMPUTE THE NET PROFIT RATE OF 10% ON THE DECLARE D SALES. IN RESPECT OF THE STOCK FOUND LESS, THE ASSESSEE HIMSELF HAS SURRENDERED INCOME B Y APPLYING NET PROFIT RATE OF 12%. THE AO WILL RECOMPUTE THE INCOME AS PER DIRECTION GIVEN ABOVE. 4 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16- 12-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 16/12/2011 MISHRA COPY TO: 1. SHRI NIRMAL KUMAR SARRAF, SUJANGARH 2. THE ITO, WARD- 2, CHURU 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 160/JU/10) A.R.. ITAT: JODHPUR 5 6 7 8