Shri VIJAY GOYAL, Indore V. THE ITO-5(1), Indore

ITA 289/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5891 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: N D PATWA ADVOATES
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 289 & 290/IND/2016 A.YS. : 2006-07 & 2008-09 SHRI VIJAY GOYAL, ITO, INDORE. VS 5(1), INDORE. APPELLANT RESPONDENT PAN NO. AFTPG7374P A PPELLANT BY : SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADVOATES RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF CIT(A)-22, NEW DELHI, CAMP OFFICE AT INDOR E, DATED 16.02.2016 AND 15.02.2016 AND RELATE TO ASSESSMENT YEARS 2006-07 AND 2008-09. DATE OF HEARING : 25 .0 5. 20 16 DATE OF PRONOUNCEMENT : 27 . 0 6 . 201 6 SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN WHOLESALE TRADING BUSINESS OF OIL AND VAN ASPATI. THE ASSESSEE IS CARRYING ON THE BUSINESS IN THE NAM E AND STYLE OF M/S. GOYAL ENTERPRISES. AS PER THE INFORMATION A VAILABLE ON RECORD, IT WAS SEEN THAT TWO BANK ACCOUNTS WERE OPERA TED BY THE ASSESSEE, WHICH WERE NOT MADE PART OF RETURN OF I NCOME FILED BY THE ASSESSEE. THE ASSESSEE HAS TWO BANK AC COUNTS WITH KARUR VYSYA BANK, INDORE S. B. A/C NO. 23011550000120000 AND CURRENT ACCOUNT NO. 2301115000001842. THE TOTAL DEPOSIT TRANSACTIONS DU RING THE YEAR IN SAVING ACCOUNT WERE RS. 51,17,000/- AND HIS BANK ACCOUNT WAS NOT DISCLOSED BY THE ASSESSEE. THE ASSES SEE WAS ASKED TO EXPLAIN THE SOURCE. THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNTS AND THE ASSESSEE CONFIRMED THE CASH DEPOSIT, BUT DURING THE YEAR THE RE WERE DEPOSITS AND FREQUENT WITHDRAWALS AND THERE WAS PEAK C REDIT OF RS. 3,65,931/- AND DUE TO ROTATION OF THE MONEY THIS WAS THE AMOUNT WHICH WAS AT THE MAXIMUM ON A PARTICULAR D ATE. MOREOVER, THE ASSESSEE HAS ALSO EXPLAINED THAT FROM PERUSAL OF THE BANK ACCOUNT, IT IS REVEALED THAT BESIDES CASH DEPOSITS OF SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 3 3 RS. 51,17,000/-, THERE WERE OTHER DEPOSITS OF RS. 1,99,41,400/- . IN ADDITION TO THIS THERE WERE TRAN SACTIONS OF RS. 4,10,89,225/- IN CURRENT ACCOUNT. THE ASSESSEE HAS SHOWN TURNOVER OF RS. 29,78,459/-. THEREFORE, THE PEAK CR EDIT OF RS. 3,65,931/- WAS ADDED TO THE INCOME OF THE ASSESSEE A ND THE ASSESSEE HAS NOT SHOWN THE TURNOVER OF RS. 4,62,88,5 84/-. THEREFORE, THE AO HAS ADDED PROFIT @ 1.5 % AND MADE THE ADDITION OF RS. 6,94,328/-. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS ENHANCED THE PROFIT FROM 1.5 % TO 5% AND HE HAS ENHANCED THE PROFIT AT RS. 23,14,429/-. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED THE WRITTEN SUBMISSION, WHICH READS AS UNDER :- IN A.Y. 2007-08, IT HAS BEEN HELD THAT THE BUSINESS IS WHOLESALE BUSINESS. IN A.Y. 2007-08, THE DEPARTMENT, ITSELF HAS ACCEPTED THAT THE BUSINESS O F THE ASSESSEE IS 'WHOLESALE' TRADING BUSINESS. EVEN THE ID CIT(A) HAD ACCEPTED THIS FACT AND APPLIED PR OFIT RATE OF 1%. THE SAME BANK ACCOUNT WAS OPERATED IN THE CURRENT ASSESSMENT YEAR. IT CANNOT THEREFORE BE SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 4 4 SAID THAT THE NATURE OF BUSINESS WAS DIFFERENT. THE BUSINESS OF THE ASSESSEE WAS 'WHOLESALE' TRADING BUSINESS; THEREFORE TAKING A PROFIT RATE OF 5% IS N OT JUSTIFIED. PROFIT RATE OF 1% IS VERY REASONABLE, WH ICH THE DEPARTMENT ITSELF ACCEPTED IN THE A.Y. 2007-08. SINCE THE BUSINESS IS OF WHOLESALE TRADING, HENCE SECTION 44AF NOT APPLICABLE. SECTION 44AF APPLIES WHERE THE ASSESSEE IS ENGAGED IN A RETAIL TRADING BUSINESS. IN THE PRESENT CASE, THIS FACT IS ABSOLUT ELY CLEAR, THAT THE BUSINESS OF THE ASSESSEE WAS WHOLESALE TRADING BUSINESS. IN THE EARLIER YEAR ALS O, THE ID ASSESSING OFFICER IN THE SET-ASIDE ORDER, AS QUOTED ABOVE, STATED THAT THE BUSINESS IS 'WHOLESAL E' TRADING BUSINESS, WHICH IS RECORDED IN THE BANK ACCOUNTS, WHICH WERE UNDISCLOSED. FURTHER, IN CURRENT ASSESSMENT YEAR ALSO, THE ASSESSING OFFICER NOTED IN PARA 2.1 - 'THE ASSESSEE IS ENGAGED INTO THE WHOLESALE TRADING BUSINESS OF OIL & VANASPATI'. THIS FACT WAS NEVER DENIED BY THE ID. CIT(A) IN HIS ORDER, THAT THE APPELLANT IS ENGAGED IN THE WHOLESA LE SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 5 5 BUSINESS. FURTHER, SINCE THE TURNOVER OF THE ASSESSEE IS MORE THAN RS. 40 LACS, SECTION 44AF NOT APPLICABLE. SECTION 4 4AF IS APPLICABLE ONLY WHEN THE TURNOVER OF ASSESSEE DO ES NOT EXCEED RS. 40 LACS. IN THE PRESENT CASE, THE TU RNOVER OF THE ASSESSEE INCLUDING THE UNRECORDED SALES EXCEEDED RS. 40 LACS. THUS, SECTION 44AF, IS NOT APPLICABLE TO WHOLESALE BUSINESS AND NOT APPLY TO PRESENT CASE. THE PARTICULARS OF ESTIMATION OF PROFIT RATE FOR AY 2006- 07, 2008-09 AND 2007-08, WHICH WAS ACCEPTED BY THE DEPARTMENT ARE AS UNDER :- PARTICULARS A.Y. 2006-07 A.Y.2008-09 A.Y. 2007-08 ACCEPTED BY THE DEPARTMENT. UNRECORDED RECEIPTS FROM WHOLESALE BUSINESS 4,62,88,584 75,40,037 2,47,58,202 PROFIT RATE APPLIED BY THE AO 1.50% 1.50% 1.50% PROFIT RATE APPLIED BY CIT(A) 5% 5% 1% THE PROFIT RATE TAKEN BY ID CIT(A) IN A.Y. 2007-08 WAS AFTER CONSIDERING COMPARABLE CASES, WHERE PROFI T RATE WAS IN THE RANGE OF 0.64% TO 0.97%. THE PROFIT SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 6 6 RATE ESTIMATED BY ID CIT(A) FOR A.Y. 2007-08 HAS BEEN ACCEPTED BY THE DEPARTMENT. THERE IS NO BASIS FOR TAKING PROFIT RATE OF 5%. THEREFORE, THE PROFIT RATE MAY BE RETAINED AT 1% BEING THAT OF EARLIER YEAR. L D. CIT(A) QUOTED THE JUDGMENT IN THE CASE OF GOETZ IND IA LTD. 284 ITR 383 (SC). THE SAID JUDGMENT IS NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE. ASSESSEE IS NO T MAKING A FRESH CLAIM IN THE ASSESSMENT. THE ISSUE I S ABOUT THE APPLICABILITY OF PROFIT RATE ON THE UNACCOUNTED RECEIPTS IN THE BANK ACCOUNT. IN KRISHI UPAJ MANDI SAMITI 6 ITJ 145 (JAB. TRIB.)(SMC), THE ISSUE INVOLVED WAS REGISTRATION U/S. 12A. ONE OF TH E CIT'S HAD ACCORDED REGISTRATION U/S. 12A. IT WAS HE LD BY THE HON'BLE TRIBUNAL THAT ONCE THE REGISTRATION IS ACCORDED BY ONE CIT, THE DEPARTMENT ACTING THROUGH OTHER CIT CANNOT REFUSE REGISTRATION ON IDENTICAL F ACTS. IN OTHER WORDS, THE ORDER OF CIT WAS HELD TO BE BINDING ON THE CIT, IN IDENTICAL FACTS. IN THE PRES ENT CASE, THE LD. CIT(A) HAS ALREADY DECIDED THE ISSUE FOR ASSESSMENT YEAR 2007-08. IN IDENTICAL SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 7 7 CIRCUMSTANCES, THE LD. CIT(A) CANNOT CHANGE HIS STA ND BY TAKING A DIFFERENT VIEW IN OTHER YEAR. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT IN ASSESSMENT YEAR 2007-08, THE TWO BANK ACCOUNTS WE RE FOUND, WHEREIN WHOLESALE TRADING BUSINESS WAS CARRIED OUT BY THE ASSESSEE AND THAT IS ADMITTED BY THE AO. THE AO HAS MADE THE ADDITION @ 5% ON UNRECORDED RECEIPTS U/S 4 4AF. HOWEVER, THE ASSESSEE WENT IN APPEAL BEFORE CIT U/ S 264, WHO DIRECTED THE AO TO MAKE INQUIRY. THEREAFTER, TH E AO HAS APPLIED THE NET PROFIT RATE @ 5% ON TURNOVER. 7. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS ACCEPTED NET PROFIT RATE OF 1% ON THE TOTAL TUR NOVER OF THE BUSINESS AND ON THAT BASIS, REASSESSMENT PROCEEDING S U/S 2006-07 AND 2008-09 WERE INITIATED. THE AO HAS ADOP TED THE NET PROFIT RATE OF 1.5%, BUT I AM OF THE VIEW THAT T HE ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACCOUNTS. THEREFORE, I AM OF THE SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 8 8 VIEW THAT THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS O F ACCOUNTS AS PER SECTION 44AF. SECTION 44AF IS APPLI CABLE IF THE TURNOVER IS BELOW RS. 40 LAKHS. SECTION 44AF IS APPLICABLE WHEN THE ASSESSEE IS CARRYING OUT WHOLESALE TRADING B USINESS AND NOT MAINTAINING THE BOOKS OF ACCOUNTS AND 5% NE T PROFIT RATE HAS TO BE ADOPTED. IN THIS CASE, THE TURNOVER OF THE ASSESSEE EXCEEDS RS. 40 LAKHS, THEREFORE, PROFIT RA TE HAS TO BE APPLIED IF THE ASSESSEE MAINTAINED THE BOOKS OF ACC OUNTS, BUT IN THE INSTANT CASE, THE ASSESSEE DID NOT DISCLOSE THE SAVING BANKS ACCOUNT, WHICH IS IN KARUR VYSYA BANK TO THE DEPARTMENT AND HE HAS CARRIED OUT THE BUSINESS OUTS IDE THE BOOKS. THEREFORE, WHEN THE ASSESSEE IS CARRYING OUT THE BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS AND WHEN THE AO HIMSELF HAS ADOPTED 5% RATE APPLIED IN HIS ASSESSME NT ORDER FOR UNRECORDED RECEIPTS FROM WHOLESALE BUSINESS, THA T HAS TO BE ADOPTED, IN VIEW OF THE FACT THAT THE LD. CIT(A) HAS GIVEN THE DIRECTION TO CONDUCT THE INQUIRY IN THAT YEAR & THE AO HAS TAKEN NET PROFIT RATE AT 1.5 % AND THE LD. CIT(A) H AS REDUCED THE NET PROFIT RATE AT 1 %. THE DEPARTMENT HAS NOT GONE IN APPEAL. EVERY ASSESSMENT YEAR IS AN INDEPENDENT ASS ESSMENT SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 9 9 YEAR AND IT IS NOT BINDING ON THE DEPARTMENT TO GO IN APPEAL FOR EACH AND EVERY YEAR. THE DEPARTMENT SOMETIMES D O NOT GO IN APPEALS AS THERE MAY BE LOW TAX EFFECT IN THOSE A PPEALS. DURING THE COURSE OF HEARING, I HAVE VERIFIED THE N ET PROFIT RATES APPLIED IN VARIOUS YEARS. THE AO HIMSELF HAS APPLIED THE NET PROFIT RATE OF 5% ON HIS RETURN OF INCOME FOR U NRECORDED TRANSACTIONS, BUT THE ASSESSEE SUBMITTED THAT HE HA S CARRIED OUT WHOLESALE BUSINESS. I HAVE GONE THROUGH THE ASSE SSMENT ORDER. THE AO HAS NOT MADE A PROPER INQUIRY AND THE Y HAVE APPLIED NET PROFIT RATE @ 1.5 %, WHICH IS NOT REASO NABLE, WHEN THE AO HIMSELF HAS ADOPTED THE NET PROFIT RATE OF 5 % ON NET TURNOVER OF UNDISCLOSED BUSINESS, THOUGH THE ASSESS EE IS CARRYING OUT UNDISCLOSED BUSINESS. THE UNDISCLOSED BUSINESS MAY BE WHOLESALE OR TRADING, BUT IT DOES NOT MAKE AN Y DIFFERENCE. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN ENHANCING THE NET PROFIT AND ENHANCING THE INCOME, BUT LOOKIN G TO THE PAST HISTORY, WHEN THE ASSESSEE HAS NOT DISCLOSED TH E BUSINESS TO THE DEPARTMENT, IT WILL BE REASONABLE AND FAIR T O ESTIMATE THE NET PROFIT RATE @ 2.5 % INSTEAD OF 5% TAKEN BY THE LD. CIT(A). SHRI VIJAY GOYAL, INDORE VS. ITO, 5(1), INDORE I.T.A.NOS. 289 AND 290/IND/2016 A.YS. 2006-07 AND 2 008-09 10 10 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 27 TH JUNE, 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 27 TH JUNE, 2016. CPU*