SHRI DHARMENDRA SHARMA, JAIPUR V. INCOME TAX OFFICER, WARD-3, CHURU

ITA 257/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6268 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 26-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DHK
• Keywords: Rejection of books of accounts; Corroborative evidences
• Section: 144

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 FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 257/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2013-14. SHRI DHARMENDRA SHARMA, H-410, PHASE 2, SARNA DOONGAR, JHOTWARA EXTN. INDUSTRIAL AREA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 3 CHURU. (RAJASTHAN) LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. BGIPS 7447 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.P. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.07.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/07/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 15 TH FEBRUARY, 2018 OF LD. CIT (A)-3, JAIPUR FOR THE ASS ESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND AS UNDER : - 1. THAT THE LD. CIT (A) HAS ERRED IN LAW IN SUSTA INING THE ACTION OF THE LD. AO IN APPLYING THE PROVISIONS OF SECTION 14 5(3) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT (A) HAS ERRED SERIOUSLY ON FACT S IN SUSTAINING ADDITION OF RS. 50,000/- IN THE TRADING RESULTS OUT OF THE TOTAL ADDITION OF RS. 1,50,000/- MADE BY THE LD. AO EVEN AFTER NOTICING THAT DURING THIS RELEVANT YEAR THE APPELLA NT HAD DECLARED BETTER RATE OF PROFIT ON THE TURNOVER WHIC H RECORDED A 2 ITA NO. 257/JP/2018 SHRI DHARMENDRA SHARMA, JAIPUR. GROWTH OF 58.75% OVER IMMEDIATELY PRECEDING YEAR. T HEREFORE, THE ADDITION OF RS. 50,000/- SUSTAINED MAY PLEASE B E DELETED. 3. THAT THE LD. CIT (A) HAS ERRED SERIOUSLY ON FACT S IN SUSTAINING THE ADDITION OF RS. 4,95,000/- MADE BY THE LD. AO A S UNEXPLAINED CASH DEPOSIT, WITHOUT PROPERLY APPRECIA TING THE EVIDENCES PRODUCED TO HIM. 4. THAT THE LD. CIT (A) HAS ERRED ON FACTS IN SUSTA INING 50% OF THE DISALLOWANCES MADE BY LD. AO OUT OF FOLLOWING EXPEN SES WITHOUT ANY BASIS. HIS ACTION IS MERE HIS GUESS WORK AND HE NCE THE DISALLOWANCE SO SUSTAINED DESERVES TO BE DELETED :- I) LABOUR FOODING EXPENSES II) MOBILE & TELEPHONE EXPENSES III) OFFICE & MISC. EXPENSES IV) PETROL & CONVEYANCE EXPENSES V) PRINTING & STATIONERY EXPENSES. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL BEFORE HEARING. GROUND NOS. 1 & 2 ARE REGARDING REJECTION OF BOOKS OF ACCOUNT AND TRADING ADDITION. 2. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE DERIVED INCOME FR OM MANUFACTURING OF OXYGEN AND NITROGEN AND SALE THEREOF. DURING THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAS DECLARED PROFIT OF RS. 60,21,563/- ON THE TURNOVER OF RS. 1,38,76,163/-. THUS THE ASSESSEE DECLARED GP @ 43.40%. THE AO NOTED THAT T HE ASSESSEE HAS NOT PRODUCED THE STOCK REGISTER AND, THEREFORE, THE ASSESSEE IS NOT MAINTAINING STOCK REGISTER, ACCORDINGLY THE AO INVOKED THE PROVISIONS OF SECTIO N 145(3) AND REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. CONSEQUENTLY, THE AO ESTIMATED THE INCOME OF THE ASSESSEE BY MAKING AN ADHOC ADDITION OF RS. 1,50,00 0/-. ON APPEAL, THE LD. CIT (A) 3 ITA NO. 257/JP/2018 SHRI DHARMENDRA SHARMA, JAIPUR. HAS RESTRICTED THE TRADING ADDITION TO RS. 50,000/- AS AGAINST RS. 1,50,000/- MADE BY THE AO. 3. WE FIND THAT THE AO HAS NOTED THAT THE GP RATE D ECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 43.40% AS AGAINST T HE GP RATE OF 27.50% DECLARED FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THU S IT IS CLEAR THAT THE ASSESSEE HAS DECLARED BETTER RESULT FOR THE YEAR UNDER CONSI DERATION AND, THEREFORE, EVEN IF THE AO PROCEEDED TO REJECT THE BOOKS OF ACCOUNT, IT WOULD NOT RESULT AN AUTOMATIC ADDITION IN THE INCOME OF THE ASSESSEE. THE PROPER COURSE OF PROCEEDINGS AFTER REJECTION OF BOOKS OF ACCOUNT IS TO ESTIMATE THE IN COME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 144 OF THE IT ACT AND, THEREF ORE, THE AO HAS TO ESTIMATE THE INCOME BY APPLYING A REASONABLE AND PROPER BASIS. IT IS SETTLED PROPOSITION OF LAW THAT THE AVERAGE PAST HISTORY OF GP OF ASSESSEE IS A PROPER AND REASONABLE BASIS FOR ESTIMATION OF INCOME IN CASE THE AO REJECTED THE BO OKS OF ACCOUNT FOR A PARTICULAR ASSESSMENT YEAR. IN THE CASE IN HAND, THE AO AFTER REJECTION OF BOOKS OF ACCOUNT HAS NOT PROCEEDED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BUT HAS MADE AN ADHOC ADDITION OF RS. 1,50,000/- WHICH MEANS THAT T HE AO HAS MADE AN ADDITION TO THE BOOK RESULTS OF THE ASSESSEE ITSELF. IN OTHER WORDS, THE AO EVEN AFTER REJECTING THE BOOKS OF ACCOUNT COMPUTED THE INCOME OF THE ASS ESSEE BY CONSIDERING THE BOOK RESULT AND THEN MAKING ADHOC ADDITION OF RS. 1,50,0 00/- WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND, THEREFORE, THE ACTION OF THE AO IS NOT PERMISSIBLE. THE LD.CIT (A) HAS ALSO PROCEEDED IN THE SAME MANNER THOUGH THE ADDITION MADE BY THE AO WAS RESTRICTED TO RS. 50,00 0/- THAT TOO ON ADHOC BASIS. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE GP DECLARED BY THE 4 ITA NO. 257/JP/2018 SHRI DHARMENDRA SHARMA, JAIPUR. ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS ALMOST DOUBLE OF THE IMMEDIATELY PRECEDING YEAR THEN EVEN AFTER REJECTION OF BOOKS O F ACCOUNT NO TRADING ADDITION IS CALLED FOR. HENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE TRADING ADDITION SUSTAINED BY LD. CIT (A). SINCE WE HAVE D ELETED THE TRADING ADDITION MADE BY THE AO, THEREFORE, THE ISSUE RAISED BY THE ASSES SEE AGAINST THE REJECTION OF BOOKS OF ACCOUNT HAS BECOME ACADEMIC IN NATURE. GROUND NO. 3 IS REGARDING AN ADDITION OF RS. 4,95,0 00/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT. 4. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO NOTED THAT THERE IS A C ASH DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE TO THE TUNE OF RS. 4,95,000/-. SINC E THE ASSESSEE HAS NOT EXPLAINED THE SOURCE OF THE CASH TO THE SATISFACTION OF THE A O, THE AO MADE THE ADDITION OF THE SAID AMOUNT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND PRODUCED THE EVIDENCE SHOWING THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE SOLD HIS COMMERCIAL VEHICLE I.E. TATA 407 PICK UP FOR A SUM OF RS. 5,17,927/- ON 15 TH SEPTEMBER, 2012. THE ASSESSEE PRODUCED THE RECEIP T AS WELL AS THE RTO CERTIFICATE FOR TRANSFER OF THE VEHICLE BY THE ASSESSEE IN THE NAME OF SHRI RAMESH KUMAR CHAUDHARY. THE LD. CIT (A) CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, THE AO OBJECTED TO THE EXPLANATION OF THE ASSESSEE IN THE REMAND REPORT. THE LD. CIT (A) AFTER CONSIDERING THE REMAND REPORT HAS CONFIRMED THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 5. WE HAVE EXAMINED THE RELEVANT EVIDENCE ON THIS P OINT AND FOUND THAT THE ASSESSEE SOLD THE VEHICLE TATA 407 PICK UP VIDE REC EIPT DATED 15.09.2012 FOR A 5 ITA NO. 257/JP/2018 SHRI DHARMENDRA SHARMA, JAIPUR. CONSIDERATION OF RS. 5,17,927/-, A COPY OF THE SAME IS AVAILABLE ON RECORD AT PAGE 37 OF THE PAPER BOOK. FURTHER, THE ASSESSEE ALSO PROD UCED COPY OF REGISTRATION OF THE VEHICLE IN THE NAME OF BUYER WHICH CLEARLY SHOWS TH AT THE REGISTRATION WAS TRANSFERRED IN THE NAME OF THE BUYER AS A SECOND OW NER. THE CERTIFICATE IS PLACED AT PAGE 38 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO P LACED THE REGISTRATION OF THE SAID VEHICLE IN THE NAME OF THE ASSESSEE WHICH IS P LACED AT PAGE 39 OF THE PAPER BOOK AND WE FIND THAT EARLIER THE VEHICLE WAS REGIS TERED IN THE NAME OF THE ASSESSEE AS FIRST OWNER AND THEREAFTER IT WAS TRANSFERRED IN THE NAME OF SHRI RAMESH KUMAR CHAUDHARY. THUS THE ASSESSEE HAS BROUGHT ON RECORD THE SUPPORTING EVIDENCE TO ESTABLISH THAT THE ASSESSEE SOLD THE SAID VEHICLE F OR A CONSIDERATION OF RS. 5,17,927/- ON 15 TH SEPTEMBER, 2012. HENCE THE SOURCE OF DEPOSIT IN TH E BANK ACCOUNT OF RS. 4,95,000/- HAS BEEN CLEARLY ESTABLISHED AND EXPLAIN ED BY THE ASSESSEE. DESPITE ALL THE SUPPORTING EVIDENCES, SURPRISINGLY THE LD. CIT (A) HAS SUSTAINED THE ADDITION AND, THEREFORE, THE ORDER PASSED BY THE LD. CIT (A) IS P ERVERSE AND SUFFERS FROM ILLEGALITY. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDERS OF TH E AUTHORITIES BELOW AND DELETE THE ADDITION MADE ON THIS ACCOUNT. GROUND NO. 4 IS REGARDING ADHOC DISALLOWANCE MADE BY THE AO ON ACCOUNT OF CERTAIN EXPENSES FOR WANT OF PROPER VOUC HERS WHICH WAS RESTRICTED BY THE LD. CIT (A) TO 50% OF THE DISALLO WANCES MADE BY THE AO. 6. AT THE TIME OF HEARING, THE LD. A/R OF THE ASSES SEE STATED AT BAR THAT BECAUSE OF SMALLNESS OF THE AMOUNT, THE ASSESSEE DOES NOT W ANT TO PRESS THIS GROUND AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. D /R HAS NO OBJECTION IF THE 6 ITA NO. 257/JP/2018 SHRI DHARMENDRA SHARMA, JAIPUR. GROUND OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ACCORDINGLY THE GROUND NO. 4 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSE D. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/07/2018. SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/07/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI DHARMENDRA SHARMA, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE ITO WARD-3, CHURU. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 257/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR