Denesh Chandra Grover, Allahabad V. ACIT, Allahabad

ITA 224/ALLD/2011

• Counselvise Citation: 22420714 RSA 2011
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 05-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTAVE
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 224/ALLD./2011 ASSTT. YEAR : 2006-07 DINESH CHANDRA GROVER, VS. A.C.I.T., CIRCLE-1, LOK BHARTI, 15-A, M.G. MARG, ALLAHABAD. ALLAHABAD. (PAN : ACJPG 9162 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY KUMAR ADVOCATE RESPONDENT BY : SHRI Y.P. SRIVASTAVE, D.R. DATE OF HEARING : 08.11.2012 DATE OF PRONOUNCEMENT OF ORDER : 09.11.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A), ALLAHABAD DATED 09.08.2011 FOR THE ASSESSMENT YEAR 2006-07. 2. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUND NO. 2 OF APPEAL OF THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED. 3. ON GROUND NO. 1, THE ASSESSEE CHALLENGED ADDITIO N OF RS.1,37,436/- ON ACCOUNT OF EXTRA PROFIT. THE ASSESSEE USED TO RUN B USINESS IN THE NAME AND STYLE OF ITA NO. 224/ALLD./2011 2 M/S. LOK BHARTI PUBLISHERS AND BOOKSELLERS, WHICH I NCLUDED PUBLISHING OF BOOKS ON BEHALF OF THE AUTHORS AND TRADING OF BOOKS PUBLISHE D BY OTHER PUBLISHERS. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER NOTED THE SUBMISSIONS OF THE ASSESSEE AS UNDER : (I) OWN PUBLISHED BOOKS (FROM 1.4.2005 TO 31.8.2005)- O UT OF SUCH SALES GROSS PROFIT OF 27% ON TURNOVER OF RS.32,85,060/- WHICH C OMES TO RS.8,86,966/- HAS BEEN DISCLOSED. (II) SALE OF BOOKS PUBLISHED BY OTHER PUBLICATIONS OUT OF SUCH SALES GROSS PROFIT @ 7% ON TURNOVER OF RS.77,81,080/- WHICH COM ES TO RS.5,44,672/- HAS BEEN DISCLOSED. (III) SALES OF BOOKS OF M/S. RAJ KAMAL, M/S. RADHA KISHAN AND M/S. LOK BHARTI (AFTER 1.9.2005 TO 31.3.2006) OUT O SUCH S ALES GROSS PROFIT OF 10% ON TURNOVER OF RS.16,08,756/- WHICH COMES TO RS .1,60,876/- HAS BEEN CLOSED. 3.1 THE ASSESSING OFFICER REFERRED TO THE ASSESSEE S AUDITORS IN AUDIT REPORT IN FORM NO. 3CD AND 3CB DATED 02.08.2006, WHO HAS POIN TED OUT THAT DURING THE YEAR UNDER CONSIDERATION LIKE PAST YEARS, ONLY PROF IT AND LOSS ACCOUNT HAS BEEN PREPARED AND THE ASSESSEE MAINTAINED BOOKS OF ACCOU NTS SUCH AS CASH BOOK, LEDGER ETC. THE ASSESSING OFFICER CONFRONTED THE OBSERVATI ONS OF THE AUDITORS TO THE ASSESSEE THAT IF BOOKS OF ACCOUNT HAVE BEEN MAINTAI NED THEN HOW THE GROSS PROFIT IN PERCENTAGE TERMS HAVE BEEN DISCLOSED. THE ASSESSEE SUPPORTED STAND BY EARLIER YEARS ASSESSMENT ORDERS AND THE APPELLATE ORDERS. THE ASSESSING OFFICER REFERRED TO THE PROVISIONS OF SECTION 44AA OF THE IT ACT AND POINTED OUT THAT THE ASSESSEE HAS TO MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOC UMENTS AS MAY ENABLE THE ITA NO. 224/ALLD./2011 3 ASSESSING OFFICER TO COMPUTE HIS TOTAL INCOME. IT W OULD NOT MAKE ANY DIFFERENCE THAT IN ANY PRECEDING YEAR, THE PROFIT DISCLOSED IN PERCENTAGE TERMS HAS BEEN ACCEPTED BY THE DEPARTMENT. THE ASSESSING OFFICER A CCORDINGLY, REJECTED THE BOOK RESULTS U/S. 145(3) OF THE IT ACT. THE ASSESSING OF FICER STATED THAT THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT, I.E., BALANCE SHEET, OPENING AND CLOSING STOCK ETC. THE G.P. RATE DISCLOSED BY THE ASSESSEE IN PERCENTAGE TERMS IS NOT SUBJECTED TO VERIFICATION. THE ASSESSING OFFICER ES TIMATE THE SALES FROM ALL THESE ACTIVITIES AND MADE ADDITIONS ON ACCOUNT OF EXTRA P ROFIT BY RS.67,784/-, RS.26,528/- AND RS.43,124/-. THE ASSESSING OFFICER ALSO ENHANCE D THE G.P. RATE THE ASSESSEE CHALLENGED THE ESTIMATE OF SALES AND ENHANCEMENT OF G.P. BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT ENHANCEMENT IN THE SALES IS WITHOUT ANY BASIS AND WITHOUT ANY ADVERSE MATERIAL. THE BOOKS OF ACCOUNT HAVE BEE N TEST CHECKED AND NO UNRECORDED SALES AND ADVERSE MATERIAL HAS BEEN FOUN D. THE G.P. RATE IS SHOWN AS PER PAST PRACTICE AND THE ASSESSEE HAS BEEN MAINTAI NING CASH BOOK, LEDGER ON DAY- TO-DAY BASIS, BUT NO STOCK VALUATION HAS BEEN DONE. THEREFORE, THE ADDITION IS UNJUSTIFIED. THE LD. CIT(A) FOUND THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT AND HAS APPLIED THE SAME PROFIT RA TE. THEREFORE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED AND THE BOOKS OF AC COUNT HAVE BEEN RIGHTLY REJECTED. THE LD. CIT(A) ACCORDINGLY DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO. 224/ALLD./2011 4 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO REFERRED THE EARLIER ORDER OF THE LD. CIT(A) ACCEPTING THE G.P. RATE OF ASSESSEE (PB -8). ON THE OTHER HAN D, THE LD. DR RELIED UPON THE ORDERS O THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, THE AS SESSING OFFICER HAS POINTED OUT IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS N OT MAINTAINED PROPER BOOKS OF ACCOUNT. EVEN DURING THE COURSE OF ARGUMENTS, THE L D. COUNSEL FOR THE ASSESSEE ADMITTED THAT THE ASSESSEE DID NOT MAINTAIN COMPLET E BOOKS OF ACCOUNTS, BUT HAS MAINTAINED SALES RECORDS COMPLETELY AND DETAILS OF EXPENSES. THEREFORE, IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNTS, REJECTION OF BOOK RESULTS U/S. 145(3) IS JUSTIFIED. MERELY BECAUSE SUCH INCOMPLETE BOOKS HAV E BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS, WOULD NOT BE A GROUND TO ACCEPT THE INCOMPLETE BOOKS IN THE YEAR UNDER APPEAL. HOWEVER, IT IS A FACT THA T THE ASSESSING OFFICER HAS NOT POINTED OUT ANY MATERIAL IN THE ASSESSMENT ORDER TO POINT OUT ANY DEFECT IN THE SALES OR THAT THE SALES ARE NOT VERIFIABLE. SINCE THE ASS ESSEE MAINTAINED COMPLETE DETAILS OF SALES AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER, THEREFORE, ENHANCEMENT IN THE SALES IS WHOLLY UNJUS TIFIED. THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT CANNOT BE SUSTAINE D. HOWEVER, CONSIDERING THE FACT ITA NO. 224/ALLD./2011 5 THAT THE ASSESSEE DID NOT MAINTAIN PROPER ACCOUNTS AND THAT SAME G.P. IS ACCEPTED IN EARLIER ASSESSMENT YEAR, IT WOULD MEET THE ENDS OF JUSTICE IF EXTRA PROFIT ADDITION IS RESTRICTED TO RS.50,000/- AS AGAINST THE ADDITIO N MADE BY THE AUTHORITIES AT RS.1,37,436/-. THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED AND ADDITION IS RESTRICTED TO RS.50,000/- ON THIS ISSUE . GROUND NO. 1 OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6. ON GROUND NO. 3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.5,88,795/-. THE ASSESSING OFFICER MADE ADDITION OF RS.5,88,795/- CO NSIDERING IT TO BE UNEXPLAINED EXPENDITURE U/S. 69C OF THE IT ACT. THE ASSESSEE SU BMITTED BEFORE THE ASSESSING OFFICER THAT HE HAS MADE PAYMENT OF ROYALTY TO AUTH ORS ON SALE OF BOOKS FROM 01.09.2005 TO BE PAID BY SHRI. ASHOK MAHESHWARI. TH E ASSESSEE FURTHER STATED THAT ROYALTY UPTO 31.08.2005 AMOUNTING TO RS.5,68,795/- HAS BEEN PAID BY HIM. THE ASSESSING OFFICER NOTED THAT NO SUCH PAYMENT IS ENT ERED IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, IT WAS CONSIDERED AS UNEXPLAINE D U/S. 69C OF THE IT ACT AND ADDITION WAS ACCORDINGLY MADE. THE ASSESSEE SUBMITT ED BEFORE THE LD. CIT(A) THAT ABOVE ROYALTY PAYMENT WAS MADE TO THE AUTHORS BY AC COUNT PAYEE CHEQUES. AS THE ASSESSEE DID NOT PREPARE THE STOCK INVENTORY OR TRA DING ACCOUNT, IT DID NOT REFLECT IN THE PROFIT AND LOSS ACCOUNT. IT WAS SHOWN AS PER PA ST PRACTICE. THE LD. CIT(A) CONFIRMED THE ADDITION BECAUSE IT WAS UNACCOUNTED E XPENDITURE. ITA NO. 224/ALLD./2011 6 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE DID NOT MAKE ANY CLAIM OF DEDUCTION IN THE RETURN OF INCOME AND PAYMENT HAS BEEN MADE OUT OF BOOKS OF ACCOUNT. THEREFORE, IT IS NOT UNEXPLAINED EXPENDITURE. ON TH E OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE ASSESS ING OFFICER. IT IS ADMITTED FACT THAT THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT AND DID NOT MAKE ANY CLAIM OF DEDUCTION IN PROFIT AND LOSS ACCOUNT OF RO YALTY PAYMENT. THEREFORE, IT IS CLEAR THAT THE ASSESSEE DID NOT MAKE ANY CLAIM OF E XPENDITURE IN THE RETURN OF INCOME FILED WITH THE REVENUE DEPARTMENT OF THE AMO UNT IN QUESTION. THEREFORE, IT CANNOT BE TREATED AS EXPENDITURE. FURTHER, HOW IT I S UNEXPLAINED IS ALSO NOT VERIFIED BY THE AUTHORITIES BELOW. THE ASSESSEE CLAIMED THAT ROYALTY PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. THEREFORE, THE AUTHO RITIES BELOW SHOULD HAVE VERIFIED THIS FACT FROM THE BANK ACCOUNT FROM WHERE SUCH ROYALTY HAS BEEN PAID. IF THE ASSESSEE HAS PAID ROYALTY FROM BANKING CHANNEL, IT COULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE. IT IS, THEREFORE, NECESSAR Y THAT THE AUTHORITIES BELOW SHOULD VERIFY THE CLAIM FROM THE BANK ACCOUNT FROM WHERE THE PAYMENT HAS BEEN ITA NO. 224/ALLD./2011 7 MADE FOR ROYALTY. WE ACCORDINGLY, SET ASIDE THE ORD ERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE DIRECTION TO RE-DECIDE THIS ISSUE AS PER ABOVE DISCUSSION AND IN CASE PAYM ENT IS MADE THROUGH THE BANKING CHANNEL, THE ASSESSING OFFICER SHALL DELETE THE ADD ITION. THE ASSESSING OFFICER SHALL GIVE REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUND NO. 3 OF APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY