M/s. Arihant Publications (India) Ltd., New Delhi V. ACIT, Meerut

ITA 2983/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7363 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 25-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 2983/DEL/2016 ASSESSMENT YEAR: 2012-13 M/S. ARIHANT PUBLICATIONS (INDIA) LTD., ADC LEGAL SERVICES PVT. LTD., 59, NEHRU APARTMENTS, OUTER RING ROAD, KALKAJI, NEW DELHI VS. ACIT, CIRCLE-1, MEERUT. PAN :AAECA7236R (APPLICANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 28.03.2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS), MEERUT [IN SHORT LEARNED CIT(A)] FOR A SSESSMENT YEAR 2012-13. 2. IN THE GROUNDS RAISED ASSESSEE IS MAINLY AGGRIEVED BY THE ADDITIONS OF RS.1,41,85,545/- WHICH HAS BEEN UPHELD BY THE LEARNED CIT(A). 3. FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF PUBLICATION OF BOOKS. THE ASSESS EE FILED RETURN APPLICANT BY SHRI DEEPAK KAPOOR, ADV. RESPONDENT BY MS. RAKHI VIMAL, SR.DR DATE OF HEARING 23.01.2020 DATE OF PRONOUNCEMENT 30.01.2020 2 ITA NO. 2983/DEL/2016 OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.09 .2012, DECLARING TOTAL INCOME OF RS.98,14,240/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 14 3(2) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) WAS ISSU ED AND COMPLIED WITH. DURING THE ASSESSMENT PROCEEDING, THE ASSESSI NG OFFICER OBSERVED THAT NO STOCK REGISTER WAS MAINTAINED BY T HE ASSESSEE AND DETAILS OF OPENING AND CLOSING STOCK WAS ALSO N OT FOUND TO BE VERIFIABLE. IT WAS EXPLAINED BY THE ASSESSEE THAT T HE STOCK REGISTER COULD NOT BE PRODUCED AS THERE WERE SO MANY VARIETI ES OF BOOKS AND THE RAW MATERIAL USED BY THE ASSESSEE COMPANY A ND STOCK WAS PHYSICALLY VERIFIED BY THE MANAGEMENT. THE ASSE SSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND OBSERVE D THAT IN ABSENCE OF STOCK REGISTER THE QUANTITATIVE AND QUAL ITATIVE DETAILS OF STOCK CANNOT BE VERIFIED AND THE GROSS PROFIT RATE OF 21.14% DECLARED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AS SESSING OFFICER. THE ASSESSEE JUSTIFIED ITS GROSS PROFIT RA TE OF 21.14% DECLARED BY IT BY CITING INSTANCES OF OTHER TWO PUB LISHERS, I.E., M/S. CHITRA PRAKASHAN AND MASTER MIND PUBLICATION, WHICH HAD SHOWN LOWER GROSS PROFIT THEN THE ASSESSEE. THE SAM E WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE REFERRED T O THE GROSS PROFIT OF M/S. ARVIND PRAKASHAN P. LTD. FOR ASSESSM ENT YEAR 2012- 13 WHICH IS 27.22%. IN VIEW OF FACTS AND CIRCUMSTA NCES OF THE CASE, THE LEARNED AO APPLIED A GROSS PROFIT RATE OF 25% ON THE TURNOVER OF RS. 76,26,63,673/- AND WORKED OUT GROSS PROFIT OF RS.19,06,65,918/-. AS THE ASSESSEE HAD ALREADY DECL ARED GROSS PROFIT OF RS.16,12,27,100/-, THE DIFFERENCE AMOUNT OF RS. 2,94,21,167/- WAS ADDED TO THE INCOME OF THE ASSESS EE BY THE ASSESSING OFFICER. 3 ITA NO. 2983/DEL/2016 3.1 ON FURTHER APPEAL, THE LEARNED CIT(A) AFTER VERIFY ING THE TRADING ACCOUNTS AND QUANTITATIVE DETAILS SUBMITTED BY THE ASSESSEE TO THE BANK WHEREIN THE ASSESSEE DECLARED THE GROSS PROFIT RATE OF 23%. ACCORDINGLY, HE APPLIED THE RAT E OF 23% ON THE TURNOVER OF THE ASSESSEE AND SUSTAINED THE ADDITION S OF RS.1,41,85,545/-. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE RE FERRED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESS EE FOR ASSESSMENT YEAR 2010-11 AND 2011-12. THE LEARNED CO UNSEL ALSO REFERRED TO ASSESSMENT ORDER FOR ASSESSMENT YEAR 20 17-18 WHEREIN THE GROSS PROFIT RATE OF 21.89% WAS ACCEPTE D. IT WAS SUBMITTED THAT THE VALUATION OF THE CLOSING STOCK W AS CONSISTENTLY FOLLOWED BY THE ASSESSEE SINCE ASSESSMENT YEAR 2009 -10. ACCORDING TO THE ASSESSEE, WHEN THE ASSESSING OFFIC ER HIMSELF IN SUBSEQUENT YEARS HAS ACCEPTED THE VALUATION OF THE CLOSING STOCK OF THE COMPANY AS WELL AS GROSS PROFIT RATE DECLARE D BY THE ASSESSEE, NO ADDITION SHOULD BE SUSTAINED IN THE YE AR UNDER CONSIDERATION. 5. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT HE WAS JUSTIFI ED IN MAKING ADDITIONS FOR NON-MAINTENANCE OF THE STOCK REGISTER . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND TH AT IN THIS CASE THE APPEAL FILED BY THE REVENUE AGAINST THE IMPUGNE D ORDER HAS ALREADY BEEN DECIDED IN ITA NO.3756/DEL/2016 (AY: 2 012-13, DATED 04.02.2019). THE RELEVANT FINDING OF THE TRIB UNAL IS REPRODUCED AS UNDER: 4 ITA NO. 2983/DEL/2016 5. UNDISPUTEDLY, AUDITED BOOKS OF ACCOUNT HAVE NO T BEEN DISPUTED BY THE ASSESSING OFFICER WHO HAS PROCEEDED TO ESTIM ATE THE GROSS PROFIT @ 25% ON THE SOLE GROUND THAT STOCK REGISTER HAS NOT BEEN PRODUCED BY THE ASSESSEE. IT IS THE CASE OF THE ASS ESSEE THAT THE FALL IN THE GDP RATE WAS DUE TO INCREASE IN THE TURNOVER AND COMPETITIVE MARKET. IT IS FURTHER CASE OF THE ASSESSEE THAT ASS ESSEE DOES NOT MAINTAIN THE STOCK RECORDS TO SHOW THE QUANTITATIVE DETAILS AND THE MANAGEMENT CARRIES OUT PHYSICAL VERIFICATION IN A P ERIODIC INTERVALS AS WELL AS AT YEAR END TO WORK OUT THE CLOSING STOC K POSITION. 6. LD. CIT(A) AFTER TAKING INTO ACCOUNT THE FACT T HAT WHEN ASSESSEE IS ADMITTEDLY IN THE BUSINESS OF PUBLICATION AND SA LE OF BOOKS WHICH ARE PRINTED AND SOLD IN NUMBERS AND ROYALTY IS ALSO PAID TO AUTHORS ON A NUMBER OF COPIES PRINTED, IT IS NOT DIGESTIBLE THAT THE ASSESSEE HAS NOT MAINTAINED STOCK RECORDS. IN THESE CIRCUMST ANCES, ID. CIT (A), BY RELYING UPON THE DECISIONS RENDERED BY THE HONBLE DELHI HIGH COURT, HONBLE PUNJAB AND HARYANA HIGH COURT, HONBLE KERALA HIGH COURT AND HONBLE JURISDICTIONAL ALLAHA BAD HIGH COURT, REACHED THE CONCLUSION TO ESTIMATE THE GP RATE BY M AKING COMPARISON WITH OTHER PUBLICATIONS AT 23% AS AGAINS T GP RATE OF 21.14% SHOWN BY THE ASSESSEE AND 25% ESTIMATED BY T HE AO. SO, IN THESE CIRCUMSTANCES, FINDING NO ILLEGALITY OR PERVE RSITY IN THE IMPUGNED ORDER, PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. 6.1 WE ALSO NOTE THAT IN ASSESSMENT YEAR 2010-11 AND 2 011-12, THE TRIBUNAL IN ITA NO.5405/DEL/2013 AND 6640/DEL/2 014 HAS UPHELD THE GROSS PROFIT RATE OF 23% IN THE YEAR UND ER CONSIDERATION. THE LEARNED CIT(A) HAS APPLIED THE G ROSS PROFIT RATE OF 23% WHICH WAS APPLIED BY THE ASSESSEE WHILE FILING VALUATION OF THE STOCK BEFORE THE BANK. THE RELEVAN T FINDING OF THE LEARNED CIT(A) IS REPRODUCED AS UNDER: I HAVE CAREFULLY CONSIDERED THE GROUNDS OF ADDITIO N AND ALSO THE SUBMISSIONS MADE BY THE AR IN APPEAL. THE APPELLANT HAS RAISED SEVEN GROUNDS IN APPEAL BUT EFFECTIVE GROUND IN APP EAL IS ADDITION OF RS 2,94,38,818/- ON ACCOUNT OF SUBSTITUTION OF GP R ATE @25% IN ABSENCE OF PRODUCTION OF STOCK RECORDS. THE APPELLANT IS IN THE BUSINESS OF PUBLICATION OF BOOKS, THE APPELLANT HAS NOT PRODUCED ANY STOCK DETAILS AS TO QUANTITY OF EACH BOOK EITHER BEFORE THE A.O OR DURING THE APPELLATE PROCEEDINGS. THE A.R HAS MAINTAINED THAT THE APPELLANT DOESNT MAINT AIN STOCK RECORDS TO SHOW QUANTITATIVE DETAILS AND MANAGEMENT CARRIES OUT PHYSICAL VERIFICATION AT PERIODIC INTERVALS AS WELL AS AT YEAR END TO WORK OUT THE CLOSING STOCK POSITION. 5 ITA NO. 2983/DEL/2016 THE APPELLANT IS IN THE BUSINESS OF PUBLICATION AND SALE OF BOOKS WHICH ARE PRINTED AND SOLD IN NUMBERS. IT IS BEYOND IMAGINATION THAT WHERE ROYALTY IS PAID TO AUTHOR ON NUMBER OF C OPIES PRINTED, WHERE SALE OF BOOKS IN MADE IN NUMBERS THAN ALSO PU BLISHER DOESNT MAINTAIN STOCK RECORDS. SINCE STOCK RECORDS WERE NO T PRODUCED BEFORE A.O HE WAS LEFT WITH NO OPTION BUT TO ESTIMA TE G.P RATE TO ARRIVE AT THE CORRECT INCOME. THE A.R HAS QUOTED NUMBER OF CASES IN WHICH G.P RAT E WAS ESTIMATED BY REJECTION OF BOOKS OF ACCOUNTS, THE PR ESENT CASE IS NOT OF REJECTION OF BOOKS OF ACCOUNTS BUT A CASE WHERE STOCK RECORDS WERE NOT PRODUCED AND TO ARRIVE AT CORRECT STOCK FI GURES GP RATE WAS WORKED OUT @ 25% BY MAKING COMPARISON WITH OTHER PU BLISHERS. THE AR HAS MAINTAINED DURING APPEAL PROCEEDINGS ALS O THAT STOCK RECORDS ARE NOT BEING MAINTAINED BY THE APPELLANT. HOWEVER, THERE IS A GRAVE CONTRADICTION IN THE STATEMENT MADE AND MAT ERIAL PLACED ON RECORD DURING THE APPEAL. IN THE PAPER BOOK SUBMITT ED DURING APPEAL, PROCEEDINGS ON PG NO 49 TO 69 AND MARKED AN NEXURE -2 ARE THE AUDITED FINANCIAL STATEMENTS ALONG WITH AUDITOR S REPORT UNDER THE COMPANIES ACT WHICH HAS BEEN FILED. IN THE AUDI TORS REPORT IT IS MENTIONED THAT: (II)THE INVENTORY HAS BEEN PHYSICALLY VERIFIED AT THE YEAR END. THE COMPUTERIZED STOCK BEEN KEPT BY THE COMPANY AND THE SAME IS BEING DEALT WITH THE ACCOUNTS. IT IS CLEAR FROM THE RECORDS THAT THE APPELLANT HAS COMPUTERIZED STOCK RECORDS BUT HAS NOT PRODUCED THE STOCK RECORDS EITH ER BEFORE A.O OR IN APPELLATE PROCEEDINGS. IT WAS SEEN FROM THE AUDI TED ACCOUNTS THAT APPELLANT IS HAVING CASH CREDIT LIMIT FROM PUNJAB N ATIONAL BANK, ABU LANE, MEERUT BRANCH. INFORMATION WAS SOUGHT FROM TH EM U/S 133(6) AS TO THE STOCK STATEMENTS SUBMITTED BY THEM OR ANY STOCK AUDIT CONDUCTED ON BEHALF OF THE BANK. IN RESPONSE TO THE SAME BANK HAS SUBMITTED VIDE THERE LETTER DATED 21.03.2016 THE ST OCK POSITION SUBMITTED BY THE APPELLANT TO THE BANK AT THE END O F EACH MONTH AS WELL AS STOCK AUDIT REPORT OF M/S M. PRUTHI & CO, C HARTERED ACCOUNTANTS. IN THE STOCK AUDIT REPORT ALSO IT HAS BEEN CERTIFIED BY THE STOCK AUDITOR THAT STOCK TALLIES WITH THE BOOKS AND STOCK RECORDS ARE MAINTAINED PROPERLY. WHEN IT IS AN ADMITTED FAC T THAT STOCK RECORDS ARE MAINTAINED THAN NON PRODUCTION OF SAME CAN BE EXPLAINED BY APPELLANT ONLY. IN THE STOCK STATEMENT SUBMITTED TO BANK APPELLANT HAS ITSELF SHOWN GP RATE OF 23% IN WORKING OUT CLOSING STOCK FIGURES. IT WILL BE IN THE INTEREST OF JUSTICE TO ACCEPT THE GP RATE AS DISCLOSED BY APPELLANT ITSELF IN ALL ITS SUBMISSIONS TO THE B ANK OF 23%. THE A.O. IS DIRECTED TO APPLY GP RATE OF 23% AND THE GROSS P ROFIT WILL WORK OUT TO RS.17,54,12,645/- AND WILL GET RELIEF OF RS.1,52 ,53,273/-. 6 ITA NO. 2983/DEL/2016 6.2 BEFORE US, THE LEARNED COUNSEL HAS SUBMITTED THAT N O OPPORTUNITY WAS PROVIDED BY THE LEARNED CIT(A) FOR RELYING ON THE GROSS PROFIT RATE FOR VALUATION OF THE STOCK SUBMIT TED TO THE BANK. THIS ARGUMENT OF THE LEARNED COUNSEL IS NOT MAINTAI NABLE BECAUSE THIS WAS THE ASSESSEES OWN VALUATION SUBMITTED TO THE BANK AND WHICH WAS VERY MUCH AVAILABLE TO THE ASSESSEE. IT W AS NOT A VALUATION OF A THIRD PARTY FOR WHICH THE ASSESSEE R EQUIRED CONFRONTATION BEFORE CONSIDERATION OF THE SAME. IN VIEW OF GROSS PROFIT RATE APPLIED BY THE ASSESSEE FOR VALUATION O F THE STOCK IN THE YEAR UNDER CONSIDERATION AND IN VIEW OF THE GROSS P ROFIT RATE OF 23% UPHELD BY THE TRIBUNAL IN ASSESSMENT YEARS 2010 -11 AND 2011-12, WE DO NOT FIND ANY ERROR IN THE ORDER OF T HE LEARNED CIT(A) IN SUSTAINING THE GROSS PROFIT RATE AT 23% I N THE YEAR UNDER CONSIDERATION ALSO. ACCORDINGLY, WE UPHOLD THE FIND INGS OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2020. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH JANUARY, 2020. RK/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI