Sanjaykumar Jamnadas Lakkad, Manavadar V. The Additional Commissioner of Income Tax, Junagadh Range, JUNAGADH

ITA 194/RJT/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7366 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: J C RANPURA
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA (JM) AND SHRI A. L. GEHL OT AM). ITA NO. 194/RJT/2011. (ASSESSMENT YEAR 2007-08) SANJAYKUMAR JAMNADAS LAKKAD,, VS. THE A.C.I.T., PROP.OF M./S.GIRIRAJ ENTERPRISE, JUNAGADH RANGE, MITADI ROAD, MANAVADAR. JUNAGADH. PAN:ABXPL5499C.. (APPELLANT) (RESPONDENT) ITA NO. 183/RJT/2011. (ASSESSMENT YEAR 2007-08) THE I.T.O., VS. SANJAYKUMAR JAMNADAS LAKKAD,, WARD-1(1), PROP.OF M./S.GIRIRAJ ENTERPRISE, JUNAGADH. MITADI ROAD, MANAVADAR. PAN:ABXPL5499C.. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M. K. SINGH, D. R. ASSESSEE BY : SHRI J. C. RANPURA, C.A.. DATE OF HEARING : .13-12-2011. DATE OF PRONOUNCEMENT : 22-12-2011. O R D E R. PER A. L. GEHLOT (A.M.) : THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE FILED AGAINST THE APPELLATE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS)-IV, RAJKOT DATED 23-02-2011 FOR ASSESSMEN T YEAR 2007-08. 2. THE EFFECTIVE GROUNDS OF ASSESSEES APPEAL ARE R EPRODUCED AS BELOW:- (1)THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WI THOUT PREJUDICE TO ONE ANOTHER. (2)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -IV, RAJKOT ITA 194 & 183-RJT-2011. A.Y. 2007-08. 2 ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING THE AO S ACTION OF REJECTING BOOKS RESULT. THE REJECTION OF BOOKS OF ACCOUNT IS TOTALLY UNJUSTIFIED, THE AO MAY KINDLY BE DIRECTED TO ACCEP T THE SAME. (3)THE LEARNED CIT(A) ERRED ON FACT AS ALSO IN LAW IN ENHANCING THE GP OF THE APPELLANT BY 0.5% ARBITRARILY AND THEREBY RE TAINING ADDITION OF RS.20,14,625/- ON ACCOUNT OF ALLEGED LOW GP. THE A DDITION SUSTAINED MAY KINDLY BE DELETED. (4) THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LA W IN CONFIRMING DISALLOWANCE OF RS.20,430/- OUT OF TOTAL DISALLOWAN CE OF RS.44,790/- BEING 15% OF THE TELEPHONE EXPENSES, VEHICLE EXPENS ES AND TRAVELLING EXPENSE ON THE ALLEGED GROUND OF PERSONA L USE. THE DISALLOWANCE MAY KIND BE DELETED. 3. THE EFFECTIVE GROUNDS OF REVENUES APPEAL ARE RE PRODUCED AS BELOW:- (1) THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.24,42,725/- MADE BY THE AO, BY ADOPT ING THE GP @ 3.25% AS AGAINST 2.14% DECLARED BY THE ASSESSEE, WI THOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O . (2) THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.24,360/- MADE BY THE AO, OUT OF VARI OUS EXPENSES. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF RAW COTTON AND AFTER GINNING AND PRESSI NG, COTTON BALES ARE SOLD. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED T HAT THE TOTAL TURNOVER OF THE ASSESSEE WAS RS.40,29,24,927/- ON WHICH THE ASSESSE E HAS SHOWN NET PROFIT OF RS.2,54,857/- WHICH WORKS OUT TO 0.06%. THE AO FUR THER NOTICED THAT IN THE IMMEDIATELY PRECEDING YEAR, UNDISCLOSED INCOME OF R S.17,00,000/- WAS FOUND DURING THE COURSE OR SURVEYU/S.133A OF THE ACT. IT HAS ALSO BEEN NOTICED BY THE AO THAT THE ASSESSEE PURCHASES THE GOODS FROM REGIS TERED DEALERS AS WELL AS DIRECTLY FROM AGRICULTURISTS I.E. R.D. & U.R.D. PUR CHASES. ON ASKING TO PRODUCE THE STOCK REGISTER, THE ASSESSEE SUBMITTED BEFORE T HE AO THAT STOCK REGISTER IN RESPECT OF RD & URD PURCHASES WERE NOT MAINTAINED. HOWEVER, IN LEDGER ACCOUNT,, QUANTITY PURCHASE IS MENTIONED. THE AO A FTER EXAMINING THE URD & RD PURCHASES FROM VARIOUS ANGLES FOUND THAT THE PUR CHASES FROM AGRICULTURISTS ARE AT THE INFLATED RATES AND THERE IS NO RELIABLE RECORD FOR VERIFICATION. THE NET PROFIT SHOWN BY THE ASSESSEE IS ONLY 0.06% AND GP S HOWN AT 2.14% CANNOT BE ITA 194 & 183-RJT-2011. A.Y. 2007-08. 3 ACCEPTED. THE AO FOUND THAT IN COMPARABLE CASES GP IS MORE THAN 3%. THE COMPARABLE CASES NOTED BY THE AO AT PAGE-19 OF HIS ORDER ARE AS UNDER:- NAME OF THE ASSESSSEE TURNOVER G.P. RATE N.P. RATE. M/S.ASHIRWAD INDUSTRIES, MANAVADAR. 214346479 5169820 2.12% 2193215 0.90% M/S. SHREE PATEL MILL, MANAVADAR 111314416 3597591 3.23% 319997 0.29% M/S.SHREE COTTON GINNING FACTORY, MANAGAR. 182437462 5183432 2.84% 392407 0.22% 5. THE AO AFTER REJECTING BOOKS OF ACCOUNTS APPLIED GP RATE 3.25% AND MADE ADDITION OF RS.44,57,350/- ADDED TO THE GP DEC LARED BY THE ASSESSEE. THE CIT(A) HELD THAT THE AO HAS RIGHTLY REJECTED THE BO OKS OF ACCOUNTS AS FROM VARIOUS INQUIRIES AND CROSS VERIFICATIONS. THE AO D OUBTED THE PURCHASE PRICE OF THE GOODS. HOWEVER, FOR THE PURPOSE OF ESTIMATION M ADE BY THE AO, THE CIT(A) FOUND THAT THE AO WAS NOT FAIR AND JUST. THE COMPAR ABLE CASES CITED BY THE AO THAT THE ASSESSEE HAVING LESS TURNOVER. THE CIT(A) NOTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE AGREED FOR ADD ITION AT THE RATE OF 0.5% AND BEFORE THE CIT(A), NOTHING HAS BEEN PRODUCE TO REBUT THE ADMISSION OF 0.5%. THE CIT(A) ACCORDINGLY, HELD THAT THE GROSS PROFIT DISCLOSED BY ASSESSEE AT 2.14% IS ENHANCED BY 0.5% AND IT WILL BE REASONABLE TO TAKE PROFIT AT 2.64%. THE CIT(A) ACCORDINGLY, RESTRICTED THE ADDITION TO RS.2 0,14,625/- OUT OF TOTAL ADDITION OF RS.44,57,350/- AND BALANCE ADDITION RS.24,42,725 /- WAS DIRECTED TO DELETE. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A) CHALLENGING THE FINDING OF THE CIT(A) IN RESPECT OF REJECTION OF BO OKS OF ACCOUNT AND SUSTAINING GP ADDITION AT 0.5%. WHILE REVENUE IS IN APPEAL AGA INST THE REDUCTION OF GP BY CIT(A) FROM 3.25% TO 2.14%. ONE MORE COMMON GROUND RAISED IN BOTH APPEALS IS RELATED TO DISALLOWANCE OUT OF VARIOUS EXPENSES. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. AS REGARDS THE GROUND OF ASSESSEE IN RESPECT OF REJ ECTION OF BOOKS OF ACCOUNTS, WE FIND THAT ON INQUIRY, THE AO FOUND THAT THERE WA S DIFFERENCE IN RATE OF ITA 194 & 183-RJT-2011. A.Y. 2007-08. 4 PURCHASES BETWEEN RD & URD PURCHASES. THE PAYMENT MADE TO AGRICULTURISTS ON THE STRENGTH OF VOUCHERS CONTENTS VARIOUS DEFECT S. IN THE LIGHT OF VARIOUS DEFECTS POINTED OUT BY THE AO IN HIS ORDER ON DETAI LED EXAMINATION THAT SOME OF THE VOUCHERS FOUND ERASURES/OVER WRITING OF DATES S HOWN IN THE PAYMENT VOUCHERS AND PLACES AND DATES OF PAYMENT PURCHASE W AS SHOWN MORE THAN ONCE. THE AO NOTICED SUCH VOUCHERS MORE THAN 60 VO UCHERS. WE THEREFORE, FIND THAT THE CIT(A) HAS RIGHTLY UPHOLD THE ACTION OF TH E AO FOR REJECTING THE BOOKS OF ACCOUNTS. THE ORDER OF CIT(A) ON THIS ISSUE IS CON FIRMED. 8. IN RESPECT OF ESTIMATION OF INCOME, WE FIND THAT THE AO HAS APPLIED ARBITRARILY GP AT 3.25% WHEREAS, IN COMPARABLE CASE S, THE GP RATE WAS LOWER THAN THE GP ADOPTED BY THE AO. THE AO HAS APPLIED GP RATE 3.25% WITHOUT ANY BASIS. THE CIT(A) FOUND THAT THE ESTIMATION MADE BY THE AO WAS NOT FAIR AND JUST. IN COMPARABLE CASES CITED BY THE AO WAS NOT I N FACT, COMPARABLE AS IN THOSE CASES, THE TURNOVER WAS LOWER THAN THE TURNOV ER OF THE ASSESSEE. THEREFORE, THE ESTIMATION MADE BY AO CANNOT BE ACCE PTED IN TOTO. HOWEVER, CONSIDERING THE FACTS OF THE CASE SAME ADDITION IS WARRANTED. WE FIND FROM THE ORDER OF CIT(A) THAT DURING THE ASSESSMENT PROCEEDI NG, THE ASSESSEE HIMSELF AGREED FOR ADDITION OF GP BY 0.5% IN GP DECLARED BY THE ASSESSEE. ON THE BASIS OF THAT ADMISSION BY THE ASSESSEE AND AFTER CONSIDE RING FACTS OF THE CASE, THE CIT(A) FOUND THAT ADDITION BY 0.5% TO THE GP DECLAR ED BY THE ASSESSEE WILL COVERS DEFICIENCIES POINTED OUT OF THE AO. THE CIT (A) ACCORDINGLY DIRECTED AO TO APPLY 2.64% (2.15% + 0.5%) AND RECALCULATE AMOUNT O F ADDITION. WE ARE AWARE TO THE FACT THAT IN CASE OF ESTIMATION SOME GUESS W ORK IS THERE. IN THE CASE UNDER CONSIDERATION, WE FIND THAT DURING THE ASSESSMENT P ROCEEDINGS, THE ASSESSEE AFTER CONSIDERING THE FACTS AS POINTED OUT BY THE A O THE ASSESSEE AGREED FOR ADDITION TO THE EXTENT AS 0.5% IN THE GP DECLARED B Y HIM. AND CONTRARY TO THAT, NO FURTHER MATERIALS WERE PUT ON RECORD AFTER EXAMI NATION NEITHER BY AO NOR BY ASSESSEE. UNDER THE CIRCUMSTANCES, WE FIND THAT GP 2.64% APPLIED BY CIT(A) IS BASED ON FACTS AND MATERIAL DOES NOT REQUIRE INTERF ERENCE. WE .THEREFORE CONFIRM ITA 194 & 183-RJT-2011. A.Y. 2007-08. 5 THE ORDER OF CIT(A) IN APPLYING 2.,64% GP FOR ESTIM ATION OF THE INCOME OF THE ASSESSEE. THE ORDER OF CIT(A) IS THEREFORE, CONFIR MED. 9. ONE MORE COMMON GROUND RAISED IN BOTH APPEALS IS IN RESPECT OF DISALLOWANCE OF RS.20,430/- BEING15% OF THE TELEPHO NE EXPENSES, VEHICLE EXPENSES AND TRAVELING EXPENSES ON THE GROUND OF PE RSONAL USE. 10. AFTER HEARING THE LEARNED REPRESENTATIVES OF T HE PARTIES, WE FIND THAT THE PERSONAL ELEMENT IN THE EXPENSES OF TELEPHONE, ETC. CANNOT BE RULED OUT. THE AO ESTIMATED SUCH EXPENSES AT 15%. THE CIT(A) NOTI CED THAT THE DISALLOWANCE MADE BY THE AO IS ON HIGHER SIDE. THEREFORE, HE RE STRICTED 1/10 TH OF THE EXPENSES IN RESPECT OF TELEPHONE AND VEHICLE EXPENS ES. HOWEVER, IN RESPECT OF TRAVELING EXPENSES, THE CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES OUT OF TRAVELING EXPENSES. THE CIT(A) ACCORDINGLY, RESTRICTED THE DISALLOWANCE OF 10% OUT OF TELEPHONE AND VEHICLE EX PENSES TO THE EXTENT OF RS.20,430/- AND ALLOWED RELIEF OF RS.24,360/-. THE RE IS NO MATERIALS ON RECORD NEITHER IT HAS BEEN POINTED OUT AT THE TIME OF HEAR ING BEFORE US. WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). THE ORDER OF CIT(A) IS CONFIRMED ON THIS ISSUE. 11. IN THE RESULT, REVENUES APPEAL AND ASSESSEES APPEAL BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-12-2011. SD/- SD/- ( T. K. SHARMA ), ( A. L. GEHLOT ), JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT. DATED: 22 -12-2011. NVA/ ITA 194 & 183-RJT-2011. A.Y. 2007-08. 6 COPY TO:- 1.SANJAYKUMAR JAMNADAS LAKKAD, MANAVADAR. 2 THE ACIT, JUNAGADH RANGE, JUNAGADH.. 3.THE C.I.T.(A)-II, RAJKOT. 4.THE C.I.T., RAJKOT. 5.THE D.R., ITAT, RAJKOT. TRUE COPY. BY ORDER, ASSTT. REGISTRAR, ITAT,RAJKOT.