Shri Gufran Ahmed Chaudhari, Valsad V. The Income Tax Officer, Vapi Ward-1, Vapi

ITA 2613/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2149 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-09-2015
• Court: TRIBUNAL

Judgement Text

SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO. 2613/AHD/2015/SRT / ASSESSMENT YEAR :2011-12 SH. GU R F AN AHMED CHAUDHARY, PROP. SABA TRADING CO. NEAR BOMBAY RESTAURANT, N.H. NO.8, AT BALITHA, VAPI. [PAN: AEYPC 0922 M] V S . THE I NCOME TAX OFFICER , VAPI WARD.1, VAPI. APPELLANT /RESPONDENT /ASSESSEE BY SHRI A. GOPALAKRISHNAN, C.A. /REVENUE BY SHRI B.P.K. PANDA, SR. DR / DATE OF HEARING: 27 .06.2018 /PRONOUNCEMENT ON 12 .07.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL), VALSAD [IN SHORT THE CIT(A)] DATED 15.07.2015 FOR THE A.Y. 2011-12. 2. REVISED GROUND NO.1 STATES THAT THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE LEARNED A.O. TO DETERMINED THE TAXABLE INCOME BY MAKING ADDITION AT THE RATE OF 2% OF THE TURNOVER OF THE NET PROFIT OF THE ASSESSMENT. SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 2 OF 8 3. SUCCINCT FACTS AS CULLED ARE THAT THE ASSESSEE IS IN THE BUSINESS OF RESALE OF WASTE PAPER IN THE NAME OF SABA TRADING CO. THE ASSESSEE HAS PURCHASED WASTE PAPER OF RS.40,32,248/- AGAINST SALE OF RS.42,38,351/- AND SHOWN THE SUNDRY CREDITORS AT RS.26,34,565/- WHICH IS 65.33% OF THE TOTAL PURCHASES. THE ASSESSEE HAS FAILED TO PRODUCE PURCHASED REGISTER ALONG WITH SUPPORTING EVIDENCE SUCH AS BILLS, HENCE, THE A.O. MADE DISALLOWANCE OF 15% OF THE URD PURCHASES WHICH WORKED OUT TO RS.6,04,838/-. 4. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE CIT(A) WHERE IT WAS SUBMITTED THAT THE SAME TYPE OF ADDITION WAS MADE IN A.Y. 2006-07 AND 2008-09 IN THE CASE OF THE ASSESSEE. BASED ON THESE DECISIONS, THE CIT(A) HAS RESTRICTED THE ADDITION @ OF 2% OF THE TOTAL TURNOVER. FURTHER, ITAT HAS ALSO UPHELD THE NET PROFIT RATE 3% IN THE CASE OF VIJAY PRANUBHAI DESAI, VAPI IN ITA (SS) NO.46, 48, 50, 52, 54 AND 56/AHD/2013. THEREFORE, IT WAS CONTENDED THAT ADDITION TO BE DELETED IN TOTO. HOWEVER, CIT(A) HAS OBSERVED THAT SIMILAR TYPE OF ADDITIONS WERE MADE BY THE A.O. IN ESTIMATING GROSS PROFIT RATE OF 0.75% OF THE TURNOVER. THIS TYPE OF ADDITION WAS ALSO MADE IN ASSESSEES OWN CASE FOR ASSESSMENT SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 3 OF 8 YEARS 2006-07 TO 2008-09, WHEREIN NET PROFIT RATE AT 2% OF THE TURNOVER BY PREDECESSOR WAS UPHELD. THEREFORE, THE CIT(A) OBSERVED THAT NET PROFIT RATE DISCLOSED @ OF 0.85% BY THE ASSESSEE IS ESTIMATED TO 2% OF THE TURNOVER KEEPING IN VIEW OF PRINCIPLE OF CONSISTENCY. 5. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SHOWN TURNOVER AT RS.42,38,351/- ON WHICH NET PROFIT IS SHOWN AT RS.1,38,042/- WHICH GIVE NET PROFIT RAT E AT 3.26%. THEREFORE, CIT(A) HAS WRONGLY ESTIMATED THE 2% AND NET PROFIT RATE ON TOTAL TURNOVER. IF THE SAID NET PROFIT RATE IS CONSIDERED, THEN IT WOULD BE 5.26% (3.26% + 2% = 5.26%), HENCE, THE CIT(A) HAS WRONGLY CONSIDERED THE NET PROFIT AT 0.85% OF THE TURNOVER. THEREFORE, IT WAS URGED UPON US TO DELETE THE ADDITION RESTRICTED @ 2% OF THE TOTAL TURNOVER. 6. PER CONTRA, THE LEARNED SR. D.R. HAS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THESE FACTS AND HEARD THE PARTIES. WE FIND THAT THE BOOKS OF ACCOUNTS ARE AUDITED AS PER PROVISION OF LAW. HOWEVER, PURCHASES ARE MADE FROM SMALL RADDIWALAS, THEREFORE, IT SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 4 OF 8 IS NOT PRACTICAL TO HAVE PURCHASE BILL. WE ALSO NOTE THAT THE SIMILAR CASES IN CENTRAL CHARGES NET PROFIT RATE IS RANGING BETWEEN 0.05% TO 0.75%. HOWEVER, CIT(A) APPLY THE RATIO OF PERCENTAGE, AND ACCORDINGLY, CIT(A) UPHELD ADDITION @ OF 2% OF THE TURNOVER. HOWEVER, THE ASSESSEE HAS SHOWN NET PROFIT AT 3.26% DURING THE YEAR. WE FURTHER FIND IN A.Y. 2006-07 TO 2008-09 IN ITA NO.1552, 1554 AND 1360 AND 1361/AHD/2012 DTD.11.03.2016 UPHELD THE NET PROFIT RATE AT 2% IN A.Y. 2006-07 AND 3% IN A.Y.2007-08 AND 2% IN A.Y.2008-09. THUS, MAXIMUM NET PROFIT RATE OF 3% HAS BEEN UPHELD. HOWEVER, IN THE CASE OF ASSESSEE, THE ASSESSEE HAS SHOWN NET PROFIT RATE AT 3.26% BY DISCLOSING NET PROFIT OF RS.1,38,042/- ON TURNOVER OF RS.42,38,351/-. IT IS SEEN THAT THE CIT(A) HAS CONSIDERED THE NET PROFIT RATE AT 0.85% AND ESTIMATED NET PROFIT RAT E OF 2% WHEREAS, THE ASSESSEE HIMSELF HAS SHOWN NET PROFIT RATE AT 3.26% AND NOT NET PROFIT RATE AT 0.85% OF THE TURNOVER, HENCE, NO ADDITION ON ACCOUNT OF NET PROFIT IS REQUIRED TO BE MADE. THEREFORE, WE DIRECT THE A.O. THAT NO ADDITION ON ACCOUNT OF NET PROFIT RATE IS TO BE MADE AS THE NET PROFIT RATE DISCLOSED BY THE ASSESSEE AT 3.26% IS MORE THAN NET PROFIT RATE AT 3% ESTIMATED AND UPHELD BY THE TRIBUNAL IN THE CASE OF ASSESSEE FOR A.Y.2007-08 AS SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 5 OF 8 MENTIONED ABOVE. THEREFORE, THIS GROUND NO.1 OF APPEAL IS ALLOWED. 8. GROUND NO.2 STATES THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN TREATING ENTIRE AMOUNT OF SUNDRY CREDITORS TOTALING OF RS.26,34,565/- BASED ON THE PRESUMPTION AND DESERVES TO BE DELETED. 9. SHORT FACTS OF THESE GROUNDS ARE THAT THE A.O. HAS FOUND THAT THE ASSESSEE HAS SHOWN URD PURCHASES OF RS.40,32,248/- AS AGAINST WHICH SUNDRY CREDITOR OF RS.26,34,565/- ARE SHOWN WHICH COMES TO 65.33% ON TOTAL PURCHASES. ON THE OTHER SIDE, THE ASSESSEE HAS GIVEN ADVANCES ON 11.70% TO HIS FAMILY MEMBERS. THE A.O. WAS, THEREFORE, ASKED TO FURNISH THE BILLS AND REGISTER, BUT THE ASSESSEE FAILED TO PRODUCE THE SAME. THEREFORE, THE A.O. CONSIDERED THE EXPLANATION OF THE ASSESSEE AND NOTED THAT THE ASSESSEE HIMSELF HAS STATED THAT THE PURCHASES ARE MADE FROM SMALL CONTRACTOR WHO BELONGS POOR STRATA OF THE SOCIETY POPULARLY KNOWN AS RADDIWALAS. HENCE, THEY ARE NOT PAID AND SHOWN OUTSTANDING 65.35%. BESIDES THIS, THE ASSESSEE HAS SHOWN FAMILY LOAN OF RS.11.70 LACS. IN VIEW OF THIS MATTER, THE A.O. TREATED THE ENTIRE SUNDRY CREDITORS OF SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 6 OF 8 RS.26,34,565/- AS UNEXPLAINED AND ADDED THE SAME TO THE TOTAL INCOME. 10. BEING AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE CIT(A). THE CIT(A) OBSERVED THAT THE ASSESSEE HAS SHOWN CASH PURCHASES RANGING BETWEEN RS.18,000/- TO RS.19,500/- ON CONTINUOUS MANNER. IT BELIES THE CONTENTION OF THE ASSESSEE THAT SUCH PAYMENT IS MADE IN NEXT YEAR AS AND WHEN THEY ARE RECEIVED THE PAYMENT FROM MILL. IT IS STRANGE TO NOTE THAT WHEN PAYMENTS FROM MILLS HAVE BEEN RECEIVED, THEN WHAT WAS THE NECESSITY OF THE PAYMENTS TO BE MADE IN NEXT YEAR AND THAT TOO IN CASH. SECONDLY, IF THE PAYMENT IS MADE IN NEXT YEAR, THEN WHAT PREVENTED THE ASSESSEE TO FILE CONFIRMATION OF THE BALANCE OUTSTANDING FROM THE SUNDRY CREDITORS, WHICH THE ASSESSEE FAILED TO CLARIFY DURING THE YEAR UNDER CONSIDERATION. KEEPING IN VIEW OF THESE FACTS, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE A.O. 11. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LEARNED COUNSEL SUBMITTED THAT SUNDRY CREDITORS BALANCE PERTAINS TO PARTIES TO WHOM PAYMENT WAS MADE IN NEXT FINANCIAL YEAR. THE ASSESSEE COULD NOT FURNISH CONFIRMATION FROM CREDITORS BEING SMALL VENDOR. THIS IS THE NATURE OF BUSINESS WHEN SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 7 OF 8 THE PAYMENT RECEIVED FROM MILL, THEN, THE AMOUNTS ARE PAID TO THE CREDITORS. THE LEARNED COUNSEL, RELIED IN THE CASE OF ITO VS. TAYAB YUNUS BARUDGAR ITA NO.1351/AHD/2012 A.Y.2009-10 IN WHICH SIMILAR FACTS, THE ADDITION MADE BY THE CIT(A) WAS ALSO CONFIRMED BY THE TRIBUNAL. THEREFORE, IT WAS CONTENDED THE ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS MAY BE DELETED. 12. PER CONTRA, THE LEARNED SR. D.R. RELIED ON THE LOWER AUTHORITIES. 13. WE HAVE HEARD RIVAL SUBMISSIONS AND FIND THAT THE A.O. HAS CONSIDERED THE SUNDRY CREDITORS OF RS.26.34 LACS. BESIDES, THIS THE ASSESSEE HAS GIVEN ADVANCE OF RS.11.70 LACS TO FAMILY MEMBERS. THE AGGREGATE OUTSTANDING AMOUNT COMES TO RS.38.04 LACS AS AGAINST PURCHASES OF RS.40.32 LACS. THEREFORE, IT IS NOT UNDERSTOOD AS TO HOW THE ASSESSEE HAS MADE THE ALMOST ENTIRE PURCHASES ON CREDIT. FURTHER, THE ASSESSEE MAKES PURCHASES FROM SMALL VENDOR WHO CANNOT WAIT FOR PAYMENT FOR A LONGER PERIOD. THEREFORE, IT IS APPARENT THAT THE PAYMENT WAS MADE AT THE TIME OF PURCHASES AND THUS, THERE SHOULD HAVE BEEN NO SUNDRY CREDITORS AS OUTSTANDING AND WHEREAS, SUNDRY CREDITORS ARE SHOWN OUTSTANDING. IN VIEW OF THIS MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) SO SHRI GURFAN AHMED CHAUDHARY (PROP..SABA TRADING CO) .V. ITO WARD.1, VAPI/I.T.A. NO.2613/AHD/2015/SRT/2011-12 PAGE 8 OF 8 FAR, RELIANCE IN THE CASE OF ITO VS. TAYAB YUNUS BARUDGAR (SUPRA) IS CONSIDERED, WE FIND THAT THE FACTS ARE ENTIRELY DIFFERENT. IN THAT CASE, PURCHASES WERE MADE FROM ONLY THREE COMPANIES AND SUCH PURCHASES WERE NOT DOUBTED. FURTHER, THE EVIDENCE OF PAYMENT WAS SUBMITTED. HENCE, THE TRIBUNAL HAS CONFIRMED THE FINDING OF CIT(A) WHEREAS IN THE CASE OF PRESENT ASSESSEE, PAYMENTS ARE MADE IN CASH AND THEREFORE, HOW ONE CAN BELIEVE THAT AS AGAINST PURCHASES OF 40.30 LACS ONLY, RS.2 LACS HAVE BEEN PAID AND BALANCE WAS OUTSTANDING DURING THE WHOLE YEAR. THEREFORE, WE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE ASSESSEE. THEREFORE, FINDINGS OF LOWER AUTHORITIES ARE UPHELD. ACCORDINGLY, THIS GROUND NO.2 OF APPEAL IS DISMISSED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. ORDER PRONOUNCED IN OPEN COURT ON 12-07-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED: 12 TH JULY , 2018 / BVC COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT