Shri Shiv Choukse, Indore V. The I.T.O., Indore

ITA 191/IND/2010

• Counselvise Citation: 19122714 RSA 2010
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: SANJAY SODANI
• Keywords: Unexplained investment; Peak credit
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AGPPC0004R I.T.A.NO. 191/IND/2010 A.Y. : 2007-08 SHRI SHIV CHOUKSE, ITO, 1133, NEW GOURI NAGAR, VS 1(1), BEHIND MILAN RESTAURANT, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI SANJAY SODANI, C. A. RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 5.2.2010 FOR THE ASSESSMENT YEAR 20 07-08, IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME -TAX ACT, 1961. 2. FIRST GROUND OF APPEAL OF THE ASSESSEE RELATES TO G ROSS PROFIT ADDITION MADE BY THE ASSESSING OFFICER BY ES TIMATING -: 2: - 2 PROFIT RATE OF 5% AFTER REJECTING BOOKS OF ACCOUNT AND THE SECOND GROUND RELATES TO ADDITION OF RS. 7,78,000/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT ON CAPITAL ACCOUN T AND RS. 3,80,000/- AS UNSECURED LOAN TAKEN FROM AJAY CHOUKS EY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN RETAIL TRADING OF COUNTRY LIQUOR. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO ASKED FOR PRODUCTION OF BOOKS OF ACCOUNT, HOWEVER, THE ASSESSEE PRODUCED CASH BOOK LEDGER AND SUPPORTING VOUCHERS IN RESPECT OF CERTAIN EXPENSES. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS PRODUCED MONTHL Y SALES AND PURCHASES AND SALE WHEREIN ENTIRE PURCHASE MADE DURING THE MONTH WAS SHOWN AS SOLD, MEANING THEREBY THERE WAS NO CLOSING STOCK AT THE END OF THE MONTH. THE AO REJEC TED THE BOOKS OF ACCOUNT ON THE PLEA THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND COPIES OF SALE BILLS HAVE NOT BEEN PRODUCED. THE AO ESTIMATED SALES AT RS. 3.32 C RORES IN PLACE OF DECLARED SALES OF RS. 2 CRORES AND AFTER A PPLYING NET PROFIT RATE OF 5% ON ADDITION OF RS. 16.63 LAKHS W AS MADE IN -: 3: - 3 PLACE OF RETURNED INCOME OF RS. 2.16 LAKHS. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS GIVEN PART RELIEF BY ESTI MATING SALES AT RS. 2.5 CRORES IN PLACE OF RS. 3.32 CRORES MADE BY THE ASSESSING OFFICER. HOWEVER, THE NET PROFIT RATE WAS KEPT AT 5 %. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUN D THAT THE ASSESSEE HAS PRODUCED CASH BOOK, LEDGER, S UPPORTING VOUCHERS OF EXPENSE. MERELY BECAUSE THE ASSESSEE HA S NOT MAINTAINED STOCK REGISTER AND ALSO DID NOT PRODUCE SALES VOUCHERS, THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED NOT ONLY SALES AT HIGHER FIGURE WITHOUT P OINTING OUT ANY COGENT REASONS FOR THE SAME AND ALSO APPLIED NE T PROFIT RATE OF 5 % IN PLACE OF NET PROFIT RATE OF 0.93 % SHOWN BY THE ASSESSEE. THE AO HAS FOLLOWED THE DECISION IN THE C ASE OF BADRIPRASAD BHAGWANDAS AND CO. RELATING TO YEAR 198 2 WITH REGARD TO ESTIMATION OF NET PROFIT RATE IN CASE OF LIQUOR TRADE. HOWEVER, THE LD. CIT(A) FOUND THAT STATE EXCISE ACT HAS BEEN ENTIRELY AMENDED IN THE YEAR 1996 AND, THEREFORE, T HE PROPOSITION OF LAW LAID DOWN IN THE CASE OF BADRIPR ASAD BHAGWANDAS & CO. IS NOT APPLICABLE TO THE ASSESSEE. THE REASONING GIVEN BY THE ASSESSING OFFICER FOR REJECT ING THE BOOK -: 4: - 4 RESULT IS NOT FULLY JUSTIFIED SINCE THE ASSESSEE HA S PRODUCED CASH BOOK, LEDGER AND SUPPORTING VOUCHERS OF EXPENS ES SINCE ENTIRE PURCHASE OF MONTH WAS SOLD DURING THE YEAR, THERE WAS NO CLOSING STOCK, NO PURPOSE WOULD BE SERVED BY THE STOCK REGISTER. THEREFORE, KEEPING IN VIEW THE NATURE OF TRADE, ASSESSEE HAS BEEN CARRYING ON WHERE CASH SALES ARE EFFECTED, AND THE DECISION OF THE COORDINATE BENCH IN THE CAS E OF RAM CHANDRA RAVINDRA KUMAR RAI VS. ITO, 14 ITJ 34, APPL ICATION OF THE NET PROFIT RATE OF 2 % ON THE SALES WILL SE RVE THE PURPOSE. RESPECTFULLY FOLLOWING THE DECISION OF COO RDINATE BENCH AND APPLYING THE SAME TO THE FACTS AND CIRCUM STANCES, WE DIRECT THE AO TO RECOMPUTED THE PROFIT OF LIQUOR TRADE BY APPLYING NET PROFIT RATE OF 2 % ON SALES OF RS. 2.5 CRORES. WE DIRECT ACCORDINGLY. 6. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF RS. 9,85,600/- ON ACCOUNT OF CAPITAL CONTRIBUTION BY TH E PARTNERS. 7. THE CASE OF THE ASSESSEE IS THAT NO FRESH CAPITAL W AS INTRODUCED DURING THE YEAR AND THE AO HAS WRONGLY T AKEN THE OPENING CAPITAL AS A CAPITAL INTRODUCED DURING THE YEAR. AS PER THE LD. AUTHORIZED REPRESENTATIVE, NO ADDITION CAN BE MADE IN -: 5: - 5 RESPECT OF CAPITAL WHICH HAS NOT BEEN INTRODUCED DU RING THE YEAR BUT WAS BROUGHT FORWARD FROM EARLIER YEARS. HE ALSO PLACED ON RECORD A CERTIFICATE FROM CHARTERED ACCOU NTANT CERTIFYING THAT THE ASSESSEE WAS HAVING OPENING CAP ITAL BALANCE OF RS. 9,85,600/-. HOWEVER, AS PER THE OBSE RVATION OF THE LOWER AUTHORITIES, THIS CAPITAL WAS INTRODUCED DURING THE YEAR, WHICH THE ASSESSEE CANNOT EXPLAIN, THEREFORE, THE ADDITION WAS WARRANTED. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS GROUND TO THE FILE OF THE AO FOR DE CIDING AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO EXP LAIN THE INTRODUCTION OF CAPITAL IN THE EARLIER YEARS. WE DI RECT ACCORDINGLY. 8. LAST GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF RS. 3,80,000/- RECEIVED AS UNSECURED LOAN FROM SHRI AJA Y CHOUKSEY WHICH WAS ALSO REPAID DURING THE YEAR. AO MADE ADDITION ON THE PLEA OF CREDITWORTHINESS OF LOAN CR EDITOR WAS NOT ESTABLISHED. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAS TAKEN LOAN FROM AJAY CHOUKSEY HAVING PERMANENT ACCOUNT NO. AHIPC 6793 P. DURING THE YEAR, THE ASSE SSEE HAS TAKEN ONE CHEQUES OF RS. 2 LAKHS FROM MR. AJAY CHOU KSEY AND -: 6: - 6 THE SAME HAS BEEN RETURNED ON 15.6.2006. AFTER THAT ON 26.6.2006, THE ASSESSEE HAS AGAIN TAKEN LOAN OF RS. 1.80 LAKHS FROM AJAY CHOUKSEY AND THE SAME HAS BEEN RETU RNED ON 28.6.2006. THUS, THE MAXIMUM AMOUNT INVOLVED IN THI S TRANSACTION WAS ONLY RS. 2 LAKHS. THEREFORE, APPLYI NG THE THEORY OF PEAK CREDIT, WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF RS. 2 LAKHS. WE DIRECT ACCORDINGLY . 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE ALLOWED I N PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST APRIL, 2011. CPU* 2021