Rajvi Paper Traders Pvt.Ltd., Vapi V. The Income Tax Officer, Ward-7, Vapi

ITA 2745/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7270 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R MEENA
• Assessee Lawyers: P M JAGASHETH
• Keywords: Rejection of books of accounts; Search and seizure

Judgement Text

RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A.NO.2745/AHD/2016 [ [ / ASSESSMENT YEAR: 2012-13 RAJVI PAPER TRADERS P. LTD., PLOT NO.215/1, NR. MORARJI CIRCLE, GIDC, VAPI. [PAN: AABCR 8594 A] VS. THE INCOME TAX OFFICER, WARD-7, VAPI. APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI P.M.JAGASHETH CA /REVENUE BY SHRI S.R.MEENA SR. DR / DATE OF HEARING: 25 . 0 7 .201 9 /PRONOUNCEMENT ON: 26 .0 7 .2019 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD DATED 02.07.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. THE LEARNED AO HAS ERRED IN DISALLOWING URD PURCHASES OFRS.57,73,496/-. 2. THE APPELLANT SEEKS PERMISSION TO ADD, ALTER OR DELETE ANY OF THE OTHER GROUNDS ON OR BEFORE THE COMPLETION OF THE APPELLATE PROCEEDINGS. RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 2 OF 6 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN WASTE PAPER. THE ASSESSEE HAS SHOWN TOTAL PURCHASE OF RS.15,26,48,678/- OUT OF WHICH RS.2,58,44,191/- IS FROM REGISTERED DEALERS AND RS.12,68,04,487/- WERE FROM UNREGISTERED DEALERS. ON VERIFICATION OF DETAILS THE ASSESSING OFFICER NOTED THAT PURCHASES FROM THE URD ARE NOT VERIFIABLE AS NO ADDRESSES AND PAN OF SELLERS PARTIES GIVEN. THEREFORE, THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED AND WHY THE 3% ON TOTAL URD PURCHASE AMOUNT SHOULD NOT BE TREATED AS UNVERIFIABLE AND SHOULD NOT BE DISALLOWED BY REJECTING THE BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT. IT WAS CONTENDED THAT THERE IS NO GROUNDS FOR TERMING THE BOOKS OF ACCOUNTS AS UNRELIABLE. IT WAS SUBMITTED THAT THE ASSESSE HAS SUBMITTED A CHART GIVING DETAILS OF GROSS PROFIT MARGIN AND NET PROFIT MARGIN ACCORDING TO WHICH NET PROFIT MARGIN FOR THE YEAR UNDER CONSIDERATION WAS 0.88% IN COMPARISON TO LAST YEARS NET PROFIT MARGIN 0.76%. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION AND OBSERVED THAT THE ASSESSEE HAS NOT DISPUTED THE FACT ALL THE PURCHASES WERE MADE IN CASH AND NO FULL NAME AND ADDRESS OF THE PURCHASES OF PARTIES APPEARING MEMOS/VOUCHERS. THE ASSESSING OFFICER FURTHER REFERRED A DECISION OF AHMEDABAD ITAT IN IT(SS)A.NO.66 AHD 2013 DATED 28.09.2013 IN THE CASE OF DCIT, CENTRAL CIRCLE-3, SURAT VS.V.P.DESAI(HUF) IN WHICH NET PROFIT BETWEEN 2 TO 3% OF URD RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 3 OF 6 PURCHASES WAS CONSIDERED. IN VIEW OF THIS, THE ASSESSING OFFICER CONSIDERED 3% OF TOTAL PURCHASES OF RS.14,37,04,487/- AND COMPUTED NET PROFIT AT RS.43,11,134/- AS AGAINST WHICH THE LOSS ARRIVED BY COMPUTING THE TRADING BUSINESS OF RS.14,62,362/- WAS ADDED TO THE SAME AND ARRIVED A FIGURE OF RS.57,73,496/- AND DISALLOWED THE SAME ACCORDINGLY. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A). 5. HOWEVER, THE LD.CIT(A) FOLLOWING THE NET PROFIT RATE @3% HAS ADOPTED BY THE ITAT IN RESPECT OF URD PURCHASES IN RESPECT OF V.D.DESAI(HUF) (SUPRA) UPHELD THE ACTION OF THE ASSESSING OFFICER. 6. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF GROSS PROFIT BY APPLYING 3% RATE OF URD PURCHASES. HOWEVER, THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS U/S.143(3) OF THE ACT, THEREFORE NO ADDITION CAN BE MADE WITHOUT REJECTION OF THE BOOKS OF ACCOUNTS AS HELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR & CO. [2016] 67 TAXMANN.COM 278 (KARNATAKA) WHEREIN IT WAS HELD THAT WHERE THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD NOT BEEN REJECTED AND ASSESSMENT HAVING NOT BEEN FRAMED U/S.144 OF ENTIRE ADDITION RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 4 OF 6 MADE BY ASSESSING OFFICER BASED ON ESTIMATION OF INCOME WAS TO BE DELETED. SIMILARLY, THE LD.COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF VIJAY INDUSTRIES VS. CIT, ALWAR, TAX APPEAL NO.21/2005 DATED 21.03.2017 WHEREIN ALSO IT WAS HELD THAT ADDITION CANNOT BE JUSTIFIED WITHOUT REJECTION OF BOOKS OF ACCOUNTS. SIMILARLY, IN THE CASE OF ACIT VS. ERCON COMPOSITES [2014] 49 TAXMANN.COM 489 (JODHPUR TRIBUNAL) WHEREIN IT WAS HELD THAT WITHOUT REJECTING BOOKS OF ACCOUNT ADDITION ON ESTIMATE BASIS WAS NOT JUSTIFIED. SIMILARLY, THE LD.COUNSEL ALSO PLACED RELIANCE IN THE CASE OF SKY JET 71 ITD 91 AHMEDABAD TRIBUNAL. 7. PER CONTRA, THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION BY ESTIMATING THE GROSS PROFIT RATE OF URD PURCHASES WITHOUT REJECTION OF BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY PARTICULAR DEFECTS OR DISCREPANCIES IN THE ACCOUNTS BOOKS MAINTAINED THE ASSESSEE. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS SHOW GROSS PROFIT RATE @5.05% AS AGAINST 3.50% OF LAST YEAR NET PROFIT OF 0.88% AS AGAINST NET PROFIT RATE OF 0.76% OF LAST YEAR, THEREFORE THE GROSS PROFIT AND NET PROFIT RATE DISCLOSED BY THE ASSESSEE IS ALSO HIGHER THAN THE LAST YEAR. THEREFORE, WE DO NOT FIND ANY REASON TO ESTIMATE RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 5 OF 6 THE NET PROFIT RATE WITHOUT BRINGING MATERIAL ON RECORD, FURTHER THE ASSESSEE IS DEALING IN WASTE PAPER IN WHICH THE ASSESSEE IS MAKING PURCHASES FROM VARIOUS CUSTOMERS. FURTHER THE CASE LAW OF VIJAY DESAI (HUF) (SUPRA) RELIED BY THE LD.ASSESSING OFFICER AND LD.CIT(A) IS RELATED TO SEARCH AND SEIZURE ACTION WAS CARRIED OUT AND INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH INDICATING UNRECORDED PURCHASES, THEREFORE THE SAME IS DISTINGUISHABLE ON THE PRESENT FACTS OF THE CASE. FURTHER, WE FIND THAT THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR & CO. [2016] 67 TAXMANN.COM 278 (KARNATAKA) WHEREIN IT WAS HELD THAT WHERE THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD NOT BEEN REJECTED AND ASSESSMENT HAVING NOT BEEN FRAMED U/S.144 OF ENTIRE ADDITION MADE BY ASSESSING OFFICER BASED ON ESTIMATION OF INCOME WAS TO BE DELETED. SIMILARLY, THE LD.COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF VIJAY INDUSTRIES VS. CIT, ALWAR, TAX APPEAL NO.21/2005 DATED 21.03.2017 WHEREIN ALSO IT WAS HELD THAT ADDITION CANNOT BE JUSTIFIED WITHOUT REJECTION OF BOOKS OF ACCOUNTS. SIMILARLY, IN THE CASE OF ACIT VS. ERCON COMPOSITES [2014] 49 TAXMANN.COM 489 (JODHPUR TRIBUNAL) WHEREIN IT WAS HELD THAT WITHOUT REJECTING BOOKS OF ACCOUNT ADDITION ON ESTIMATE BASIS WAS NOT JUSTIFIED. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.57,73,496/- ON ACCOUNT OF URD PURCHASES, HENCE THE SAME IS RAJVI PAPER TRADERS PVT. LTD., VS. ITO, WARD-7, SURAT/ITA NO.2745/AHD/2016 A.Y. 2012-13 PAGE 6 OF 6 THEREFORE DIRECTED TO BE DELETED, ACCORDINGLY, THE SALE GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.07.2019 SD/- SD/- (BHAVNESH SAINI) (O.P.MEENA) ( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER) / SURAT, DATED : 26 TH JULY , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT