ITO, Mohindergarh V. Sh. Ajay Kumar, Mahendergarh

ITA 1887/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6712 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 09-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT GOEL
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 1887 /DEL/201 3 A.Y. : 20 09 - 1 0 INCOME TAX OFFICER, WARD-2, NARNAUL DISTT. MOHINDERGARH VS. SH. AJAY KUMAR PROP. M/S KANNU & COMPANY, ANAJ MANDI, MAHENDERGARH (HARYANA)-123029 (PAN: AFQPK7071N) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. RAKESH KUMAR, SR. DR ASSESSEE BY : SH. AMIT GOEL, FCA ORDER THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 16/1/2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-ROHTAK ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND FACTS IN DELETING THE ADDITION OF RS. 15,79,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN KOTAK MAHENDRA BANK LTD. INDORE RELYING UPON THE SUBMISSION OF THE ASSESSEE THAT THE CASH DEPOSITS IN BANK WERE 2 MADE OUT OF THE SALES OF BRANCH OFFICE OF INDORE WHE REAS AS PER AUDIT REPORT NO BRANCH OFFICE HAS BEEN MENTIONE D AND NO SALES AND PURCHASES HAVE BEEN SHOWN IN THE RETURN OF INCOME FROM THE ALLEGED BRANCH. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND FACTS IN DELETING THE ADDITION OF RS. 11,801/- MA DE ON ACCOUNT OF LOW G.P. ON THE GROUNDS THAT THE BOOKS OF ACCOUNTS WERE SUBJECT TO AUDIT AND NO DISCREPANCIES WERE POINTED OUT WHEREAS ADDITION WAS MADE AFTER REJECTING THE BOOK VERSION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN LA W AND FACTS IN DELETING THE ADDITION OF RS. 65,000/- MA DE ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS ON THE GROUND THAT THE WIFE OF THE ASSESSEE HAS MADE WITHDRAWALS OF RS. 1,02,000/- FOR HOUSE HOLD EXPENSES WHEREAS NO S UCH PLEA WAS TAKEN DURING THE ASSESSMENT PROCEEDINGS AN D NO SUCH PROOF WAS FILED. 4. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT TH E TIME OF HEARING OF APPEAL. 3 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETUR N OF INCOME DECLARING TOTAL INCOME OF RS. 2,63,818/- FROM COMMIS SION AND PURCHASE AND SALE OF COTTON SEED AND COTTON SEED CAKE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE AS SESSEE TO FURNISH COMPLETE DETAILS AND COPIES OF ALL BANK A CCOUNTS IN RESPONSE TO WHICH THE ASSESSEE ENCLOSED COPIES OF B ANK ACCOUNTS OF STATE BANK OF PATIALA (SBOP), MAHENDERGARH, SBOP, BA WANA AND COOPERATIVE BANK, BAWANA, HAS REFLECTED IN THE AUDITED BALANCE SHEET. THE AO NOTED FROM THE IT RETURN OF THE ASSESSE E FOR THE AY 2010-11 THAT HE WAS HAVING ONE MORE BANK A/C WITH SBI , DHAMNOD FOR WHICH THE ASSESSEE STATED THAT IT WAS OPENED BY H IM ONLY ON 31.3.2010. THEREUPON, AS PER THE INFORMATION AVAILABL E, THE AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCES FOR THE CAS H DEPOSITS OF RS. 35,79,000/- IN THE SB A/C WITH KOTAK MAHENDRA BA NK, INDORE. THE ASSESSEE IN RESPONSE TO HIS REPLY HAS STATED THAT THE TRANSACTIONS IN KOTAK MAHINDRA BANK RELATED TO THE BUSIN ESS IN BO AT INDORE AND COTTON SEED CAKE WAS PURCHASE FROM M/S A SHU & CO., DHAMNOD FOR RS. 35,70,000/- AND THE PAYMENTS WERE SH OWING THE SAID BANK ACCOUNT. ASSESSEE FURTHER STATED BEFORE THE AO THAT PURCHASE AND SALES AT BO WERE NOT SHOWING THE RETURN O F INCOME AS THE PROFIT WAS IN EXCESS OF THE RATE SPECIFIED IN SEC TION 44AF, AS HE IS NOT AN EDUCATED PERSON AND HAS NO KNOWLEDGE ABOUT A CCOUNTING 4 PRINCIPLES AND AS SUCH NO PARTICULARS OF INCOME WER E CONCEALED. AO DID NOT FIND THE REPLY SATISFACTORILY AND THEREFORE, MADE ADDITION OF ENTIRE CASH DEPOSITS IN KOTAK MAHINDRA BANK A/C, INDOR E OF RS. 35,70,000/- U/S. 69 OF THE I.T. ACT VIDE HIS ORDER D ATED 28.12.2011 PASSED U/S. 143(3) OF THE I.T. ACT, 1961 AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 39,24,780/-. 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, ASS ESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 16.1.2013 HAS DELETED ADDITIONS AND ALLO WED THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALLOW ED. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH NEEDS TO BE UPHELD AND AC CORDINGLY, THE APPEAL OF THE REVENUE MAY BE DISMISSED. 5 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). I FIND THAT LD. CIT(A) HAS ELABORATELY ADJUDICATED THE ISSUE RAISE D IN GROUND NO. 1, 2 & 3 IN DISPUTE VIDE PARA NO. 6 TO 9.2 AT PAGE NO. 7 TO 9 OF THE IMPUGNED ORDER AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THE TURNOVER OF THE ASSESSEE (HO & BO) EXCEEDED RS 40.00 LACS AND THEREFORE THE PROVISIONS OF SECTION 44AF ARE NOT AVAILABLE. THE ACTION OF THE ASSESSEE IN SUBJECTING ONLY THE BOOKS OF ACCOUNTS OF HO TO AUDIT FOR DECLARING PROFIT BELOW THE PRESCRIBED RATE U/S. 44AF AND NOT GETTING THE BOOKS OF BO AUDITED ON THE GROUND THAT THE PROFIT OF THE BO EXCEEDED THE PRESCRIBED RATE U/S. 44AF IS ERRONEOUS. FURTHER, CREDITING THE PROFITS OF THE BO IN THE CAPITAL A/C UNDER THE HEAD 'MISC. RECEIPTS' WITHOUT TAKING IT TO THE P&L A/C IS AGAIN ERRONEOUS. THE ABOVE MENTIONED INSTANCES SHOW THAT THE AFFAIRS OF THE ASSESSEE ARE NOT PROPERLY MANAGED. BE THAT AS IT MAY, THE ADDITION OF RS. 35,79,000/- IS ADJUDICATED AS UNDER:- 6 6.1 THE ASSESSEE STARTED THE BUSINESS AT INDORE BO FROM 01.12.2008 FOR TRADING IN COTTON SEED CAKE AND OPENED SB A/C WITH KOTAK MAHINDRA BANK, INDORE. AS PER THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS ETC. IT IS SEEN THAT THE ASSESSEE PURCHASED COTTON SEED CAKE FROM M/S ASHU & CO., A PROPRIETARY CONCERN OF HIS WIFE. IT IS SEEN FROM THE AUDITED BOOKS OF ACCOUNTS, IT RETURN OF M/ S ASHU & CO. THAT IT HAS A TURNOVER OF MORE THAN RS 4.62 CRORES OF WHICH THE TURNOVER ON ACCOUNT OF COTTON SEED CAKE IS RS 47,87,500/- AND THE SALES TO THE ASSESSEE IS TO THE TUNE OF RS 35,70,000/-. M/S ASHU & CO. IS SEPARATELY ASSESSED TO TAX AND THE BOOKS OF ACCOUNTS ARE AUDITED BY A DIFFERENT CA. AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE SALE OF COTTON SEED CAKE WAS MADE IN CASH, DEPOSITED IN THE BANK A/C WITH KOTAK MAHINDRA BANK FROM WHICH CHEQUES WERE ISSUED TOWARDS PAYMENT TO M/ S ASHU & CO. THESE TRANSACTIONS ARE SUPPORTED BY THE PURCHASE/ SALE BILLS AND THE 7 ENTRIES IN THE BOOKS OF ACCOUNTS. THE AO HAS NOT NOTICED ANY DISCREPANCY/INCONSISTENCY OF THE ABOVE MENTIONED CLAIM WHILE EXAMINING THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS, BANK STATEMENTS ETC. DURING REMAND PROCEEDINGS. THE DOUBT EXPRESSED BY THE AO OF SALE BILLS OF M/ S ASHU & CO. TO THE ASSESSEE NOT BEARING TIN NUMBERS AND OTHER DOUBTS HAVE BEEN DULY EXPLAINED BY THE ASSESSEE, AS MENTIONED IN PARA 5 ABOVE. ALL THE ABOVE MENTIONED EVIDENCES/FACTS INDICATE THAT THE ENTRIES IN KOTAK MAHINDRA BANK A/C REFLECT THE BUSINESS TRANSACTIONS OF THE INDORE BO DEALING IN COTTON SEED CAKE AND NO CONTRARY VIEW IS PLAUSIBLE. IN VIEW OF THE ABOVE, IT IS HELD THAT THE CASH DEPOSITS IN KOTAK MAHINDRA BANK A/ C REFLECT THE SALE PROCEEDS OF THE INDORE BO AND AS SUCH THE ADDITION MADE BY THE AO OF RS 35,70,000/- U/S 69 IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 7. THE AO NOTED THAT ON THE HO TURNOVER OF RS. 15,18,970/-, GP@ 2.31% OF RS 35,135/- WAS 8 DECLARED WHEREAS IN THE PRECEDING YEAR, ON A TURNOVER OF RS. 11,80,510/-, GP RATE OF 3.09% WAS DECLARED. THE AO HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE FOR THE FALL IN GP RATE IS NOT ACCEPTABLE AND REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE GP @ 3.09% AND MADE AN ADDITION OF RS 11.801/-. 8. THIS ACTION OF THE AO WAS CONTESTED IN GROUND NO. 2 OF APPEAL. BEFORE ME THE AR STATED THAT THE SALES HAVE INCREASED, THE QUANTITATIVE DETAILS IN THE FORM OF STOCK REGISTER HAVE BEEN MAINTAINED, BOOKS OF ACCOUNTS. WERE SUBJECT TO AUDIT AND THE COMPLETE BILLS/VOUCHERS WERE PRODUCED BEFORE THE AO. THE ACTION OF THE AO IN SUMMARILY REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE PROFIT AS PER THE PREVIOUS YEAR RESULT IS UNJUSTIFIED. 8.1 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THE BOOKS OF ACCOUNTS HAVE BEEN SUBJECT TO AUDIT AND ALL THE RELEVANT BILLS/VOUCHERS AND STOCK REGISTER HAVE BEEN PRODUCED BEFORE THE AO. UNDER THESE 9 CIRCUMSTANCES, REJECTING THE AUDITED BOOKS OF ACCOUNTS WITHOUT POINTING ANY DEFICIENCY/DISCREPANCY AND ESTIMATING THE PROFIT AS PER PREVIOUS YEAR RESULT IS NOR JUSTIFIED. THE ADDITION MADE BY THE AO IS THEREFORE DELETED AND THE GROUND OF APPEAL IS ALLOWED. 9. THE ASSESSEE HAS SHOWN WITHDRAWAL FOR HOUSE HOLD EXPENSES OF RS. 55,000/-. HAVING REGARD TO THE FAMILY CONSISTING OF SELF, WIFE AND TWO CHILDREN AND THE STATUS OF LIVING OF THE ASSESSEE, THE AO ESTIMATED THE HOUSE HOLD EXPENSES AT RS 10,000/- P.M. AND MADE AN ADDITION OF RS 65,000/- ON ACCOUNT OF LOW HOUSE HOLD EXPENSES. 9.1 THIS ACTION OF THE AO WAS CONTESTED IN GROUND NO. 3 OF APPEAL AND THE AR SUBMITTED BEFORE ME THAT THE WIFE OF THE APPELLANT SMT. SUNITA MITTAL, AN IT ASSESSEE HAS SHOWN WITHDRAWALS OF RS 1,02,000/ - AND THEREFORE THE WITHDRAWALS OF THE FAMILY AMOUNTS TO RS 1,57,000/-, MUCH ABOVE THE EXPENDITURE ESTIMATED BY THE AO OF RS 1,20,000/-. 10 THE AR FURNISHED COPIES OF THE CAPITAL A/ C OF SMT. SUNITA MITTAL. 9.2 SINCE THE WITHDRAWALS FOR HOUSE HOLD EXPENSES BY THE ASSESSEE AND HIS WIFE AMOUNT TO RS 1,57,000/-, NO ADDITION IS CALLED FOR SINCE THE AO HIMSELF ESTIMATED THE EXPENDITURE AT RS 1,20,000/-. AS SUCH THE ADDITION IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT(A ), AS AFORESAID, WITH REGARD TO GROUND NO. 1 RELATING TO DELETION OF ADDITION OF RS. 35,79,000 MADE ON ACCOUNT OF UNEXP LAINED CASH DEPOSITS IN KOTAK MAHINDRA BANK LTD., INDORE IS CONCER NED, I FIND THAT THE ASSESSEE STARTED THE BUSINESS AT INDORE BO FRO M 01.12.2008 FOR TRADING IN COTTON SEED CAKE AND OPENED SB A/C WITH KOTAK MAHINDRA BANK, INDORE. AS PER THE BOOKS OF AC COUNTS, BILLS/VOUCHERS ETC. IT IS SEEN THAT THE ASSESSEE PURCH ASED COTTON SEED CAKE FROM M/S ASHU & CO., A PROPRIETARY CONCER N OF HIS WIFE. IT IS SEEN FROM THE AUDITED BOOKS OF ACCOUNTS, IT RETURN OF M/ S ASHU & CO. THAT IT HAS A TURNOVER OF MORE THAN RS 4.62 CRORES OF WHICH THE TURNOVER ON ACCOUNT OF COTTON SEED CAKE IS RS 47,87,50 0/- AND THE SALES TO THE ASSESSEE IS TO THE TUNE OF RS 35,70,000/-. M/S ASHU & 11 CO. IS SEPARATELY ASSESSED TO TAX AND THE BOOKS OF AC COUNTS ARE AUDITED BY A DIFFERENT CA. AS PER THE BOOKS OF ACCOUN TS OF THE ASSESSEE, THE SALE OF COTTON SEED CAKE WAS MADE IN C ASH, DEPOSITED IN THE BANK A/C WITH KOTAK MAHINDRA BANK FROM WHICH CHEQUES WERE ISSUED TOWARDS PAYMENT TO M/ S ASHU & CO. THESE TRANS ACTIONS ARE SUPPORTED BY THE PURCHASE/ SALE BILLS AND THE ENTRIES IN THE BOOKS OF ACCOUNTS. I FURTHER FIND THAT THE AO HAS NOT NOTICED ANY DISCREPANCY/INCONSISTENCY OF THE ABOVE MENTIONED CL AIM WHILE EXAMINING THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS, BAN K STATEMENTS ETC. DURING REMAND PROCEEDINGS. THE DOUBT EXPRESSED B Y THE AO OF SALE BILLS OF M/ S ASHU & CO. TO THE ASSESSEE NOT BE ARING TIN NUMBERS AND OTHER DOUBTS HAVE BEEN DULY EXPLAINED B Y THE ASSESSEE, AS MENTIONED IN PARA 5 ABOVE. ALL THE ABOVE MENTIONED EVIDENCES/FACTS INDICATE THAT THE ENTRIES IN KOTAK MAH INDRA BANK A/C REFLECT THE BUSINESS TRANSACTIONS OF THE INDORE BO DEA LING IN COTTON SEED CAKE AND NO CONTRARY VIEW IS PLAUSIBLE. IN VIEW OF THE ABOVE, LD. CIT(A) HAS RIGHTLY HELD THAT CASH DEPOSITS IN KOTA K MAHINDRA BANK A/C REFLECT THE SALE PROCEEDS OF THE INDORE BO AND AS SUCH THE ADDITION MADE BY THE AO OF RS. 35,70,000/- U/S 69 W AS RIGHTLY DELETED, WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I AFFIRM THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DI SPUTE AND DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 12 7.2 WITH REGARD TO GROUND NO. 2 RELATING TO DELETION OF ADDITION OF RS. 11,801/- MADE ON ACCOUNT OF LOW GP IS CONCERNED , I FIND THAT THE BOOKS OF ACCOUNTS HAVE BEEN SUBJECT TO AUDIT AND ALL THE RELEVANT BILLS/ VOUCHERS AND STOCK REGISTER HAVE BEEN PRODUCED BEFORE THE AO. UNDER THESE CIRCUMSTANCES, REJECTING THE AUDITED BOOKS OF ACCOUNTS WITHOUT POINTING ANY DEFICIENCY/ D ISCREPANCY AND ESTIMATING THE PROFIT AS PER PREVIOUS YEAR RESULTS IS NOT JUSTIFIED, HENCE, THE LD. CIT(A) HAS DELETED THE ADDITION IN DIS PUTE, WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, THEREFORE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DI SMISS THE GROUND NO. 2 RAISED BY THE REVENUE. 7.3 WITH REGARD TO GROUND NO. 3 RELATING TO DELETION OF ADDITION OF RS. 65,000/- MADE ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS IS CONCERNED, I FIND THAT WITHDRAWALS FOR HOUSE HOLD EXP ENSES BY THE ASSESSEE AND HIS WIFE AMOUNT TO RS 1,57,000/-, NO AD DITION IS CALLED FOR SINCE THE AO HIMSELF ESTIMATED THE EXPENDITURE AT RS 1,20,000/- AS SUCH THE ADDITION WAS RIGHTLY DELETED BY THE LD. CI T(A) WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. ACC ORDINGLY, THE GROUND NO.3 IS DISMISSED. 13 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/02/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 10/02/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES