ITO, Jaipur V. DEVENDRA KUMAR MALOO, Jaipur

ITA 192/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2157 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S R SHARMA; RAJNIKANT BU TRACA DH R
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 192/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. THE INCOME - TAX OFFICER, WARD-2(1), JAIPUR. CUKE VS. SHRI DEVENDRA KUMAR MALOO, 4484, MALOO BHAWAN, KGB KA RASTA, JOHRI BAZAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AFWPM 3875 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.R. SHARMA AND SHRI RAJNIKANT BU TRA(CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.04.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25 /04/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A)-1 DATED 23/12/2015, PERTAINING TO TH E ASSESSMENT YEAR 2012-13. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN REDUCING THE TRA DING ADDITION TO RS. 2,89,486/- AS AGAINST ADDITION OF RS. 4,30,4 8/- DESPITE UPHOLDING REJECTION OF BOOK OF ACCOUNTS U/S 145(3) OF IT ACT, 1961. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING ADDITIO N OF RS. 49,96,315/- BEING MADE ON ACCOUNT OF CEASED LIABILI TY U/S 41(1) WITHOUT ANY SUBSTANTIAL EVIDENCE AND BASIS. THE APPELLANT CRAVES THE INDULGENCE TO MODIFY, ALTE R, ADD ANY OTHER GROUND OF APPEAL 2 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. 2. BRIEFLY STATED THE FACTS ARE THAT THE RETURN DEC LARING INCOME OF RS. 7,32,860/- WAS FILED ON 25/6/2012. SUBSEQUENTLY, THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT (HEREINAFTER REFERRED TO AS THE ACT) 1961, WAS FRAM ED VIDE ORDER DATED 18 FEBRUARY, 2015. WHILE FRAMING THE ASSESSMENT, THE ASSESSING O FFICER MADE TRADING ADDITION OF RS. 4,30,448/- AND TREATING THE OUTSTANDING IMPORT BILL OF RS. 49,96,351 AS LIABILITIES CEASED. AGAINST THIS THE ASSESSEE PREFERRED AN AP PEAL BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPE AL. THEREBY, THE LD. CIT(A), DELETED THE ADDITIONS. 4. AGAINST THIS THE REVENUE HAS PREFERRED THE PRESE NT APPEAL. 5. GROUND NO. 1 IS AGAINST DELETED THE ADDITION IN RESPECT OF LIABILITIES CEASED AND REDUCED THE TRADING ADDITION FROM RS. 4,30,448/- T O RS. 49,96,351/- AND THE FIRST GROUND IS AGAINST REDUCING OF TRADING ADDITION. 5.1 THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) WAS NOT A JUS TIFIED IN DELETING THE ADDITION. 5.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THERE IS NO ILLEGALITY IN TO THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY DELETED T HE ADDITION. HE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. 3 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . THE LD. CIT(A) DECIDED THE ISSUE BY OBSERVING AS UNDER:- 3.1.2. DETERMINATION: (I) I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FOLLOWING DEFECTS INTO THE BOOKS OF ACCOUNTS OF THE APPELLANT: THE APPELLANT DOES NOT MAINTAIN ANY STOCK REGISTER. PURCHASE RATE OF ANY ITEM SOLD CANT BE ASCERTAINED ON THE BASIS OF RECORD PRODUCED. VALUATION OF OPENING AND CLOSING STOCK IS NOT SUBJE CT TO THE VERIFICATION. THE APPELLANT HAS MADE CASH SALES OF RS. 39,30,361/ - WITHOUT ANY ADDRESSES ON SALE BILLS. THE APPELLANT HAS MADE URD PURCHASES OF RS. 8,90,59 0/- AND MADE PAYMENT OF ALL THESE PURCHASES IN CASH. AFTER ISSUING A SHOW CAUSE NOTICE, THE AO INVOKED T HE PROVISION OF SECTION 145(3) OF THE ACT AND REJECTED BOOKS OF ACC OUNTS OF THE APPELLANT AND APPLIED GP RATE OF 27% AGAINST DECLARED RATE OF 23.95% BY THE APPELLANT ON TURNOVER OF RS. 1,41,21, 268/- THEREBY MAKING TRADING ADDITION OF RS. 4,30,448/-. (II) DURING THE APPELLANT PROCEEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT IT WAS DEALING IN LARGE NUMBER OF GEMSTONES ON VARIOUS QUALITIES AND SIZES. THEREFORE IT WAS IMPOSSIBLE TO MAINTAIN QUALITY WISE DETAILS OF QUANTITY OF GOODS. ALL THE PURCHASES AND SALES WERE COMPLETELY VOUCHED AND NO DEFECT WAS POINTED OUT BY THE AO. E XCEPT SOME PURCHASES FROM URD AND CASH SALES. THE SOURCES OF GEM STONES IS PETTY KARIGARS WHO MANUFACTURES THEM AND AS THEY HA VE LITTLE TURNOVER 4 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. AND PROFIT AND SO ARE NOT REGISTERED UNDER ANY LAW BUT THIS DOES NOT MAKE THAT PURCHASES ARE NOT VERIFIABLE. THE CASH S ALES ARE REQUIRED TO BE MADE TO CONSUMERS WHICH A REGULAR FEATURE OF JEW ELLERY TRADE. IT WAS NOT THE CASE OF AO THAT SALES WERE UNDERSTATED OR PURCHASES/ EXPENSES WERE INFLATED. THE APPELLANT RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS. (III) I HAVE DULY CONSIDERED THE CONTENTIONS OF THE APPEL LANT AND NOTED THAT THE APPELLANT DO NOT MAINTAIN DAY TO DAY STOCK REGI STER THE QUALITATIVE AND QUANTITATIVE DETAILS OF ITS PURCHASE AND SALES AND A PART OF ITS PURCHASES ARE MADE IN CASH AND THUS THE TRADING RES ULTS WERE NOT OPEN TO VERIFICATION. IN VIEW OF THE ABOVE AND CONSIDER ING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THA T THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S 145(3) OF THE ACT. (IV) NOW, THE MOOT QUESTION IS WHAT SHOULD BE THE APPROP RIATE GP RATE IN THE INSTANT CASE UNDER CONSIDERATION. IT IS TO BE NOTED THAT IN THE YEAR UNDER CONSIDERATION, THE TURNOVER OF THE APPELLANT INCREASED BY OVER 50% FROM A.Y. 2011-12 AND INCREASE OF 100% FROM A.Y . 2010-11. THE GP RATE DECLARED IN AY 2010-11 WAS 23.06% AND THIS YEAR THE DECLARED G.P. RATE I MORE EVEN WHEN SALES ARE DOUBLED. IT W AS THE CONTENTION OF THE APPELLANT THAT IN AY 2011-12, THE DECLARED G .P. RATE WAS 26.93% WHICH WAS DUE TO SOME EXCEPTIONAL PROFIT EAR NED IN A FEW GOODS AND EXCHANGE DIFFERENCE. HOWEVER, THE APPELL ANT DID NOT ELABORATE THE SAME. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO LOOKING TO THE PAST HISTORY OF THE CA SE, IT WOULD BE APPROPRIATE TO APPLY GP RATE OF 26% TO THE TURNOVER OF THE APPELLANT AS IT IS OBSERVED THAT WITH INCREASE IN TURNOVER, THER E IS GENERALLY FALL IN GP RATE. THEREFORE, THE APPELLANT OUT OF TRADING A DDITION OF RS. 4,30,448/- A SUM OF RS. 2,89,486/- IS SUSTAINED AND THE APPELLANT WOULD GET A RELIEF OF RS. 1,40,962/-. 5 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. 5.4 FROM THE ABOVE, IT IS EVIDENT THAT LD. CIT(A) H AS TAKEN INTO ACCOUNT THE INCREASE IN THE TURN OVER WHICH IS NOT CONTROVERTED BY THE REVENUE. THEREFORE, THERE IS NO INFIRMITY INTO THE ORDER OF LD. CIT(A), SAME IS HEREBY AFFIRMED. THUS, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 6. GROUND NO. 2, IS AGAINST CESSATION OF LIABILITY. 6.1 THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTI FIED DELETING THE ADDITION. HE SUBMITTED THAT, ASSESSING OFFICER HAS GIVEN A FINDI NG THAT ASSESSEE HAS NOT FILED ANY DOCUMENTARY PROOF, THAT THE LIABILITY IS STILL EXIS TING. 6.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND SUBMITTED THAT THE AC TION OF THE ASSESSING OFFICER IS PATENTLY WRONG IN LAW. THE CREDITORS ARE FOREIGN P ARTIES FROM WHOM IMPORTS WERE MADE IN THE YEAR AND PAST AS WELL. THE LIABILITY HA S NOT BEEN CEASED AND HE SUBSIDIZING AND IS STILL EXISTING. IT HAD NOT WRIT TEN OFF FROM BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE ASSESSEE HAS BEEN ADMITTING THE LIABILITY AND HAS NOW INSTRUCTED THE BANK TO MAKE PAYMENT OF THE SAME IN SUPPORT OF THIS. THE LD. COUNSEL HAS DRAWN OUR ATTENTION TO THE LETTER ADDRESSED TO THE BANKER AND SAME IS ACKNOWLEDGED BY THE CREDITOR. 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS, THAT THE L D. CIT(A) HAS DECIDED THE ISSUE AS UNDER:- 3.2.2 DETERMINATION : 6 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. (I) I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF THE APP ELLANT AND THE MATERIAL PLACED ON RECORD. THE AO MADE THE ADDITIO N OF RS. 49,96,315/- U/S 41(1) OF THE ACT AS THEY WERE OUTST ANDING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. DURING APPELLANT PRO CEEDINGS, IT WAS THE CONTENTION OF THE APPELLANT THAT IT IS SETTLED LAW THAT UNPAID LIABILITIES CANNOT BE ADDED TO APPELLANTS INCOME BY THE ASSESS ING AUTHORITIES. UNDER SECTION 41(1) MERELY BECAUSE THEY REMAINED UN PAID FOR A SUFFICIENTLY LONG TIME. THE LEGAL POSITION IS THAT UNLESS HERE IS EVIDENCE TO SHOW THAT THE CREDITOR HA REMITTED THE DEBT OR O THERWISE BY OPERATION OF LAW THE LIABILITY TO PAY HIM HAS CEASE D, THERE CAN BE NO BENEFIT ARISING TO THE APPELLANT WITHIN THE MEANING OF CLAUSE (A) OF SECTION 41 (1). UNLESS NOTICES WERE ISSUED TO THE CREDITORS AND THEY HAD STATED THAT THEY HAD GIVEN UP THE CLAIMS AGAINS T THE APPELLANT, NO DECISION COULD BE TAKEN BY THE INCOME-TAX AUTHORITI ES, MERELY ON THE GROUND THAT THE DEBTS REMAINED UNPAID IN THE APPELL ANTS BOOKS FOR A NUMBER OF YEARS THAT THE LIABILITY HAD CEASED OR HA D BEEN REMITTED. (II) I FIND MERIT IN THE CONTENTION OF THE APPELLANT AS THE AO NEITHER HAD MADE ANY INQUIRIES NOR BROUGHT ANY MATERIAL ON RECO RD THAT THE CREDITORS EITHER HAD WRITTEN OFF THE SAID LIABILITI ES IN THEIR BOOK OF ACCOUNTS OR DENIED TO OWN THESE AMOUNTS. IN MY CON SIDERED O0PINION, NO ADDITION U/S 41(1) CAN BE MADE MERELY ON THE GRO UND THAT THE DEBTS REMAINED UNPAID IN THE APPELLANTS BOOKS FOR A NUMBER OF YEARS AND NO PRESUMPTION CAN BE MADE THAT THE SAID LIABIL ITY HAD CEASED OR HAD BEEN REMITTED. IT IS NOTED FROM THE ASSESSMENT ORDER THAT OUT OF THE 4 INVOICED, THE PAYMENTS FOR WHICH OUTSTANDING AS ON 31.03.2012, THE 2 WERE PERTAINING TO THE AY 2012-13 I.E. THE YE AR UNDER CONSIDERATION AND 1 EACH WAS PERTAINING TO AY 2010- 11 AND 2011-12, AND THUS AS ON 31.03.2012, THESE DEBTS WERE NOT EVE N BARRED BY LIMITATION. IN VIEW OF THE ABOVE DISCUSSION AND THE JUDICIAL PR ONOUNCEMENTS RELIED UPON BY THE APPELLANT, IT IS HELD THA THE AO WAS NO T JUSTIFIED IN MAKING 7 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR. ADDITION OF RS. 49,96,315/- U/S 41(1) OF THE ACT AN D HENCE THE SAME IS DELETED. 6.4 SINCE THE ASSESSEE HAS DEMONSTRATED THAT LIABIL ITY HAS NOT CEASED. UNDER THESE FACTS WE DO NOT SEE ANY INFIRMITY INTO THE OR DER OF THE LD. CIT(A), SAME IS HERBY AFFIRMED. THIS GROUND OF THE REVENUES APPEA L IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 192/JP/2016 IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 25 /04/2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 25/04/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT-. INCOME-TAX OFFICER, WARD-2(1), J AIPUR. 2. THE RESPONDENT- SHRI DEVENDRA KUMAR MALOO, 4484, MALOO BHAWAN, JAIPUR. 3. THE CIT, 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 192/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 192/JP/2016 SHRI DEVENDRA KUMAR MALOO, JAIPUR.