M/s Labo Tek, New Delhi V. JCIT, New Delhi

ITA 2109/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4928 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 10-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Assessee Lawyers: PRANSHU SINGHAL SMT RANO JAIN
• Keywords: TDS
• Section: 40(a)(ia); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIALMEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2109/DEL/2015 ASSESSMENT YEAR: 2010-11 LABO TEK, 1/6, KIRTI NAGAR INDUSTRIAL AREA, NEW DELHI. PAN: AABFL6009R VS JCIT, CIRCLE-38, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRANSHU SINGHAL, SMT. RANO JAIN, ADVOCATE & SHRI VENKATESH CHAURASIA, ADVOCATE REVENUE BY : SMT. NAINA SOIN KAPIL, SR. DR DATE OF HEARING : 31.07.2019 DATE OF PRONOUNCEMENT : 13.08.2019 ORDER PER R.K. PANDA, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 10 TH FEBRUARY, 2015 OF THE CIT(A)-20, NEW DELHI RELATING TO ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A FIRM ENGAGED IN THE BUSINESS OF INSTALLATION AND SALES OF UPS AND INVER TER SYSTEMS. IT CONSISTS OF TWO PARTNERS HAVING PROFIT SHARING RATIO OF 50% EACH. IT FILED ITS RETURN OF INCOME ON ITA NO.2109/DEL/2015 2 30 TH SEPTEMBER, 2010 DECLARING THE TOTAL INCOME AT RS.3 4,16,570/-. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, OBSERVED THAT THE TOTAL TURNOVER, GP AND NP OF THE ASSESSEE FOR THE IMPUGNE D ASSESSMENT YEAR AS WELL AS THE PRECEDING TWO ASSESSMENT YEARS ARE AS UNDER:- A.Y. TOTAL TURNOVER GROSS PROFIT NET PROFIT GP RATI O NP RATIO 2008-09 RS.7,97,95,635/- RS.97,04,256/- RS.9,36,512 /- 12.16% 1.17% 2009-10 RS.9,23,59,949/- RS.1,18,02,909/- RS.24,63,904/- 12.78% 2.67% 2010-11 RS.19,01,48,128/- RS.1,56,30,176/- RS.34,01,565/- 8.22% 1.79% 3. SINCE THE ASSESSEE WAS NOT MAINTAINING ANY DAY T O DAY STOCK REGISTER AND CERTAIN INFIRMITIES WERE FOUND IN THE BOOKS OF ACCO UNT MAINTAINED BY THE ASSESSEE, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS BY INVOKING THE PROVISIONS OF SECTION 145(3) AND ADOPTED THE GP RATE OF 12.78% ON THE BASIS OF THE PAST HISTORY OF THE ASSESSEE AND MADE ADDITION OF RS.86,70,755/- TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER, SIMILARLY MADE AD DITION OF RS.7,51,196/- BEING THE COMMISSION DEBITED TO THE PROFIT & LOSS ACCOUNT ON THE GROUND THAT THE PERSONS WHO HAVE RECEIVED THE COMMISSION HAVE NOT D ONE ANY SERVICE TO THE ASSESSEE SINCE THE ASSESSEE COULD NOT SUBSTANTIATE THE REQUIREMENT OF THE COMMISSION SO PAID. SIMILARLY, OUT OF THE BUSINESS PROMOTION EXPENSES CLAIMED AT RS.12,90,329/-, THE ASSESSING OFFICER DISALLOWED 25 % OF SUCH EXPENSES ON ESTIMATE BASIS ON ACCOUNT OF ELEMENT OF PROBABLE PE RSONAL USE. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.76,000/- BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS. SIMI LARLY, HE MADE AN ADDITION OF ITA NO.2109/DEL/2015 3 RS.58,142/- OUT OF THE MOTOR CAR EXPENSES AND DEPRE CIATION ON ACCOUNT OF PROBABLE PERSONAL USE. HE ALSO MADE DISALLOWANCE OF RS.17,9 29/- OUT OF THE TELEPHONE EXPENSES BEING 10% OF THE TOTAL EXPENDITURE OF RS.1 ,79,294/- ON ACCOUNT OF ELEMENT OF PERSONAL USE. THUS, THE ASSESSING OFFIC ER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.1,37,73,930/-. 3.1 IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER IN REJECTING THE BOOK RESULTS AND ADDITION OF RS.86,7 0,755/-. SHE ALSO UPHELD THE VARIOUS OTHER ADDITIONS MADE BY THE ASSESSING OFFIC ER ON THE GROUND THAT THE PROBABLE PERSONAL USE OF TELEPHONE AND MOTOR CAR CO ULD NOT BE RULED OUT AND THAT THE ASSESSEE COULD NOT BRING ANY EVIDENCE TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY THE ASSESSING OFFICER IN RESPECT OF OTHER ADDITIONS. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)[(CIT(A )] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS DESPITE THE SAME HAVING BEEN PROPERLY MAINTAINED BY THE ASSESSEE AS PER LAW. (II) THAT THE LEARNED CIT(A) HAS CONFIRMED THE REJE CTION OF BOOKS OF ACCOUNTS IGNORING THE EXPLANATION AND EVIDENCES SUB MITTED BY THE ASSESSEE TO REBUT EACH OF THE ALLEGATION LEVIED BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AD DITION OF RS.86,70,755/- MADE BY AO BY APPLYING THE GROSS PROFIT AT AN ARBIT RARY RATE OF 12%. ITA NO.2109/DEL/2015 4 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORI NG THE DETAILED EXPLANATION AND EVIDENCES SUBMITTED BY THE ASSESSEE IN SUPPORT OF GROSS PROFIT ACTUALLY EARNED DURING THE YEAR. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DI SALLOWANCE OF AN AMOUNT OF RS.7,51,196/- INCURRED BY THE ASSESSEE ON ACCOUNT O F COMMISSION EXPENSES. (II) THAT THE DISALLOWANCE HAS BEEN MADE DESPITE TH E FACT THAT THERE IS NO PROHIBITION BY LAW AND THE EXPENSES HAVE BEEN INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS ONLY. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFI RMING THE DISALLOWANCE OF AN AMOUNT OF RS.76,000/- BY AO BY INVOKING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DISALLOW ANCE OF AN AMOUNT OF RS.3,22,582/- ON ACCOUNT OF BUSINESS PROMOTION EXPE NSES. (II) THE SAID DISALLOWANCE HAS BEEN CONFIRMED DESPI TE THE SAME HAVING BEEN MADE AT AN ADHOC RATE OF 25% WITHOUT THERE BEI NG ANY BASIS FOR THE SAME. 8(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DI SALLOWANCE OF AN AMOUNT OF RS.58,142/- BEING 10% OF THE CAR EXPENSES. (II) THAT THE SAID DISALLOWANCE HAS BEEN CONFIRMED DESPITE THE SAME HAVING BEEN MADE AT AN ARBITRARY RATE OF 10%, WITHO UT THERE BEING ANY BASIS FOR THE SAME. 9(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DI SALLOWANCE OF AN AMOUNT OF RS.17,929/- ON ACCOUNT OF TELEPHONE EXPENSE. (II) THAT THE SAID DISALLOWANCE HAS BEEN CONFIRMED DESPITE THE SAME HAVING BEEN MADE AT AN ARBITRARY RATE OF 10%, WITHO UT THERE BEING ANY BASIS FOR THE SAME. 10. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND O R ALTER ANY OF THE GROUNDS OF APPEAL. ITA NO.2109/DEL/2015 5 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A). WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IT IS AN ADMITT ED FACT THAT THE ASSESSEE, IN THE INSTANT CASE, HAS NOT MAINTAINED ANY STOCK REGISTER SO AS TO GIVE THE DETAILS OF DATE- WISE PURCHASE AND SALES OF ITEMS TRADED AND THE CLO SING STOCK BALANCE POSITION ON A PARTICULAR DAY. SIMILARLY, NOTICES U/S 133(6) WER E ISSUED TO VARIOUS SUNDRY CREDITORS WHICH WERE RETURNED UNSERVED ON THE GROUN D THAT EITHER THEY HAVE LEFT OR THE PREMISES ARE LOCKED OR THE ADDRESSES WERE INSUF FICIENT. IT IS ALSO AN ADMITTED FACT THAT THE COMMISSION PAID TO VARIOUS PARTIES RE MAINED UNSUBSTANTIATED IN ABSENCE OF NATURE OF SERVICES RENDERED BY THEM. SI MILARLY, THE ASSESSEE ALSO COULD NOT SUBSTANTIATE THE ADVERTISEMENT EXPENSES INCURRE D BY IT AND COULD NOT SUBSTANTIATE THAT NO ELEMENT OF PERSONAL USE IS THE RE IN RESPECT OF THE TELEPHONE EXPENSES AND THE MOTOR CAR RUNNING EXPENSES. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE VARIOUS INFIRMITIES POINTED OUT BY THE ASSESSING OFFICER, WE HOLD THAT THE LD.CIT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOK RESULTS AND GOING FOR ESTIMAT ION OF THE PROFITS. 6. NOW, COMING TO THE RATE OF PROFIT TO BE ADOPTED, WE FIND THE TURNOVER OF THE ASSESSEE DURING THE IMPUGNED YEAR HAS GONE UP SUBST ANTIALLY. IT HAS GONE UP TO RS.19.01 CRORE AS AGAINST RS.9.24 CRORE IN THE IMME DIATELY PRECEDING ASSESSMENT YEAR. WHEN THE TURNOVER GROWS SUBSTANTIALLY, IT IS QUITE POSSIBLE THAT THE RATE OF GP AND RATE OF NP WILL COME DOWN. A PERUSAL OF THE RE SULTS SHOWN BY THE ASSESSEE FOR ITA NO.2109/DEL/2015 6 THE IMPUGNED ASSESSMENT YEAR AS WELL AS THE IMMEDIA TELY PRECEDING ASSESSMENT YEARS SHOWS THAT THE NET PROFIT IN THE IMPUGNED ASS ESSMENT YEAR HAS BEEN SHOWN AT 1.79% WHEREAS IT WAS 2.67% DURING 2009-10 AND 1.17% DURING ASSESSMENT YEAR 2008-09. SINCE THE NET PROFIT RATIO IS FLUCTUATING WHICH WAS SHOWN AT 1.17% AT 2008-09, 2.67% FOR ASSESSMENT YEAR 2009-10 AND 1.79 % FOR ASSESSMENT YEAR 2010- 11, THEREFORE, THE PROFIT DECLARED AT 1.79% DURING THE IMPUGNED ASSESSMENT YEAR CANNOT BE ACCEPTED. CONSIDERING THE TOTALITY OF TH E FACTS OF THE CASE AND CONSIDERING THE FACT THAT THE BOOKS OF ACCOUNT OF T HE ASSESSEE ARE AUDITED AND THE AUDITORS HAVE NOT POINTED OUT ANY DEFECTS AND THE T URNOVER OF THE ASSESSEE HAS GONE UP SUBSTANTIALLY DURING THE YEAR AS AGAINST THE IMM EDIATELY PRECEDING ASSESSMENT YEARS, THEREFORE, WE DEEM IT PROPER TO ADOPT THE NE T PROFIT RATIO OF 1.88% WHICH IS THE AVERAGE OF THE CURRENT YEAR AS WELL AS THE TWO IMMEDIATELY PRECEDING ASSESSMENT YEARS. THE ASSESSING OFFICER IS DIRECTE D TO RECOMPUTE THE ADDITION TO BE MADE ON THE BASIS OF THE NET PROFIT RATIO AS AGA INST THE GP RATIO ADOPTED BY HIM AND UPHELD BY THE CIT(A). SINCE WE ARE GOING FOR N ET PROFIT ADDITION, THE VARIOUS OTHER ADDITIONS MADE BY THE ASSESSING OFFICER AND S USTAINED BY THE CIT(A), IN OUR OPINION, DO NOT REQUIRE ANY SEPARATE ADDITION AND T HE SAME ARE LIABLE TO BE DELETED. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. ITA NO.2109/DEL/2015 7 7. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 3.08.2019. SD/- SD/- (BHAVNESH SAINI) (R.K. PANDA) JUDICIAL MEMBER ACCOUN TANT MEMFBER DATED: 13 TH AUGUST, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI