Zakira Kamil, New Delhi V. ITO, New Delhi

ITA 3022/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6882 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES F : DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.NO. 3022/DEL/2016 ASSESSMENT YEAR 2012-13 ZAKIRA KAMIL PRO. ZK AGRO, 6477, GROUND FLOOR, SHER KA PINZARA, QURESH NAGAR, SADAR BAZAR, NEW DELHI 110 006 PAN AALPK5504A VS. ITO WARD 63 (3) NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI VED JAIN, ADVOCATE FOR REVENUE : SHRI SURENDRA PAL, SR. DR DATE OF HEARING : 08 .10 .201 8 D ATE OF PRONOUNCEMENT : 03 . 01 .201 9 ORDER PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 23.3.2016, PASSED BY LD. CIT(APPEALS) 20, NEW DELHI FOR THE QUANTUM OF ASSESSMENT FOR ASSESSMENT YEAR 2012-13. IN VARIOUS GROUNDS OF APPEAL ASSESSEE HAS CHALLENGED THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND ESTIMATION OF INCOME AT RS. 77,04,617/- BY TAKING 2% TO THE TOTAL RECEIPT. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE OF LIVESTOCK AND MEAT FROM FARMERS AND SHEPHERDS AND SELL THEM TO SLAUGHTER HOUSES OR SUPPLY THE MEAT AND OTHER SMALL MEAT FACTORIES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN SALES OF RS. 38,52,30,886/- AS COMPARED TO THE EARLIER PRECEDING YEARS WHICH WAS RS. 9,01,77,387/-. THE NET PROFIT DECLARED BY THE ASSESSEE WAS @ 0.12% WHICH WAS RS. 5,00,522/- WHICH WAS LOWER THAN THE EARLIER YEAR DECLARED @.44%. DURING THE YEAR ASSESSEE HAS SHOWN PURCHASES OF RS. 38,20,44,886/-. LD. AO NOTED THAT ASSESSEE HAS MADE ALL THE PAYMENTS IN CASH TO THE PERSONS FROM WHOM PURCHASES WERE MADE. LD. AO ASKED THE ASSESSEE TO PROVIDE FOLLOWING DETAILS:- A) NAME AND ADDRESSES OF THE PERSONS FROM WHOM PURCHASES WERE MADE, B) NOTE ON BUSINESS ACTIVITIES, C) PRODUCE BOOKS OF ACCOUNTS WITH ALL BILLS/VOUCHERS ETC. D) ALL THE DETAILS AS CALLED FOR EARLIER, E) COPIES OF ALL BANK ACCOUNTS MAINTAINED. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, AS NOTED BY THE AO NO DETAILS WERE FURNISHED AND ACCORDINGLY, HE HELD THAT NEITHER THE PURCHASES NOR THE DETAILS REGARDING ADVANCES MADE TO THE SUPPLIERS WERE FILED. THEREFORE, HE REJECTED THE BOOKS OF ACCOUNTS U/S 145 (3) AND ESTIMATED THE INCOME OF THE ASSESSEE @ 2% OF THE TOTAL SALES WHICH WORKED OUT TO RS. 77,04,617/-. REASONS FOR REJECTION OF BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER WERE AS UNDER:- A. NO BOOKS OF ACCOUNTS, BILLS & VOUCHERS WERE PRODUCED INSPITE OF NUMBER OF OPPORTUNITIES GIVEN TO THE ASSESSEE B. ALL THE PAYMENTS WERE MADE IN CASH AND ASSESSEE HAS NOT BEEN ABLE TO PROVIDE EVEN A SINGLE NAME AND ADDRESS OF THE PERSONS TO WHOM PAYMENTS WERE MADE. C. HE HAS NOT BEEN ABLE TO PROVIDE EVEN A SINGLE NAME & ADDRESS OF THE PERSON TO WHOM ADVANCES WERE GIVEN. D. HE HAS NOT BEEN ABLE TO PROVIDE EVEN A SINGLE CONFIRMED COPY OF ACCOUNT OF THE PERSONS FROM WHOM PURCHASES WERE MADE AND PAYMENT HAS BEEN MADE IN CASH E. NO BILLS/VOUCHERS HAVE BEEN PRODUCES W.R.T. THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT F. AFTER GIVING SHOW CAUSE ON THE ORDER SHEET ON 18.2.2015, NO REPLY HAS BEEN FILED BY THE ASSESSEE. G. HE EVEN DID NOT PROVIDE THE DETAILED NOTE ON BUSINESS ACTIVITIES OF THE ASSESSEE. 4. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT ASSESSEE HAS MAINTAINED PARTY WISE DETAILS AND SALES ALONG WITH THE LEDGER ACCOUNT WHERE WERE DULY FURNISHED BEFORE THE AO INCLUDING THE BANK STATEMENT FOR WHOLE OF THE FINANCIAL YEAR TO SHOW THAT ALL THE SALES HAVE BEEN MADE THROUGH BANKING CHANNELS. THE ASSESSEE HAS ALSO PLACED DETAILS OF PARTY WISE PURCHASES FOR THE WHOLE YEAR ALONGWITH THE STOCK REGISTER WHICH WERE ALSO PLACED BEFORE THE LD. CIT (A) ALONGWITH THE LETTER WHICH FILED BEFORE THE ASSESSING OFFICER ENCLOSING THESE DETAILS. IT WAS VEHEMENTLY CONTENDED THAT THE OBSERVATION OF THE AO THAT NONE OF THE DETAILS WERE FURNISHED WAS FACTUALLY INCORRECT AND ALL THE DETAILS AS ASKED BY THE AO WERE FURNISHED ALONG WITH THE AUDITED ACCOUNTS. ASSESSEE HAS FURNISHED THE NAMES OF THE PARTIES FROM WHOM PURCHASES WERE MADE AND SINCE ALL THE PURCHASES WERE MADE IN CASH, THEREFORE, HE HAS NOT MAINTAINED THEIR ADDRESS. THE REASON GIVEN WAS THAT, IN THIS TRADE THE FARMERS AND THE SHEPHERDS WHO SUPPLIED THE ANIMALS WERE ILLITERATE AND DID NOT MAINTAIN ANY BANK ACCOUNT. THEY OPERATE IN A GROUP UNDER THE NAME OF AN INDIVIDUAL WHO HEADS THE TEAM AND INTERACTS WITH THE ASSESSEE. THE ASSESSEE MAINTAINS THE ACCOUNT IN THE NAMES OF THE PERSONS WHO ARE AGENTS OF THE BUTCHERS AS WELL AS THE ASSESSEE AND IT IS THE AGENT IN TURN WHO MAKES THE PAYMENT TO THE OTHER PERSONS IN THE GROUP. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS DERIVED INCOME FROM PURCHASES AND SALES OF FRESH MEAT WHICH IS PROCURED MAINLY FORM PETTY SUPPLIERS, MAJORITY OF THEM ARE ILLITERATE AND THEY SELL THEIR PRODUCTS ONLY IN CASH. ALL THE PURCHASERS DULY SUPPORTED BY PURCHASE VOUCHERS WHICH ARE PREVALENT AND COMMON PRACTICE IN THIS LINE OF THE BUSINESS AS PURCHASES ARE MADE MOSTLY FROM BUTCHERS WHO DO NOT HAVE THEIR OWN VOUCHERS. THE ASSESSEE HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS AND THE LEDGER ACCOUNTS INDICATING THE NAMES AND FIRM FROM WHOM PURCHASES WERE DULY SUBMITTED BEFORE THE AO. THE BOOKS OF ACCOUNTS CANNOT BE REJECTED SOLELY ON THE BASIS OF NON FURNISHING OF PARTICULARS OF THE PARTIES FROM WHOM PURCHASES HAVE BEEN MADE. IN THIS LINE OF BUSINESS EVEN PROVISION OF SECTION 40A (3) READ WITH RULE 6DD WOULD NOT BE APPLICABLE BECAUSE CASH PAYMENT IS ALLOWED FOR THE PURCHASE OF PRODUCE OF ANIMAL HUSBANDRY INCLUDING LIVESTOCK, MEAT, HIDES AND SKINS ETC. ASSESSEE HAS ALSO FILED THE DETAILS OF TURNOVER AND NET PROFIT RATIO OF EARLIER YEAR AND IN THIS YEAR WHICH IS AS UNDER:- PARTICULARS F.Y. 2011 - 12 F.Y. 2010 - 11 TURNOVER 38,52,30,886 9,01,77,387 EXPENDITURE 38,47,30,364 8,97,76,017 GROSS PROFIT 14,72,000 9,14,262 GROSS PROFIT RATIO 0.38% 1.01% NET PROFIT 5,00,522 4,01,370 NET PROFIT RATIO 0.13% 0.45% 5. ASSESSEE ALSO CHALLENGED THE ESTIMATION OF SUCH A HIGH RATE OF PROFIT WITHOUT ANY BASIS OR CONSIDERING THE ASSESSEES PAST RECORD. THE ENTIRE DISCUSSION OF THE ASSESSEES EXPLANATION HAS BEEN DEALT IN THE IMPUGNED APPELLATE ORDER FROM PAGES 6 TO 17. 6. LD. CIT (A) HAS CONFIRMED THAT THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER :- I HAVE CONSIDERED THE BASIS OF ESTIMATING NET PROFIT EMPLOYED BY THE AO. THE AO HAS ALSO ATTENDED THE PROCEEDINGS AND SUBMITTED DETAILS OF COMPARABLE WITHIN THE INDUSTRY WHERE THE GROSS PROFIT VARIES FROM 0.29% TO 8%. I HAVE ALSO TAKEN INTO ACCOUNT THE PREVALENT PRACTICES IN THE TRADE, WHERE A RATE IS USUALLY DECLARED IN THE MARKET FOR PURCHASE OF MEATS FROM THE SUPPLIERS. THE RATE DECLARED IS THE FINAL RATE OF PURCHASE FOR THE DAY. THIS PRACTICE LEAVES A VERY LITTLE SCOPE FOR VARIATION IN THE SALE/PURCHASE PRICE IRRESPECTIVE OF THE QUANTUM OF THE TURNOVER AMONG THE VARIOUS SUPPLIERS. IN VIEW OF THESE CIRCUMSTANCES, IT IS MY CONSIDERED VIEW THAT THE AO IS JUSTIFIED IN TAKING A RATIONAL VIEW ON THE GROSS PROFIT RATE IN DETERMINING THE INCOME AT THE RATE OF 2% OF THE GROSS SALES. IT IS ALSO TO BE TAKEN INTO ACCOUNT THAT IN THE APPELLANT OWN CASE THERE IS WIDE VARIATION IN THE GP AND NP RATE IF COMPARED TO THE IMMEDIATE PRECEDING YEARS. IN VIEW OF SUCH FACTS AND CIRCUMSTANCES, AOS ESTIMATION OF NET PROFIT @ 2% OF THE GROSS RECEIPTS THAT COMES TO RS. 77,04,617/- IS JUSTIFIED. ACCORDINGLY, APPELLANTS GROUNDS OF APPEAL ARE REJECTED. 7. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT MATERIAL REFERRED TO BEFORE US DURING THE TIME OF HEARING AND ALSO THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT THE AO IN HIS ASSESSMENT ORDER HAS STATED THAT NO DETAILS WERE FURNISHED AND ACCORDINGLY HAS MADE BEST JUDGEMENT ASSESSMENT ORDER AFTER REJECTING THE BOOKS OF ACCOUNTS. FROM THE PERUSAL OF THE REPLIES FILED BEFORE THE AO WHICH IS PLACED ON THE PAPER BOOK WHICH HAS ALSO BEEN SUBMITTED BEFORE THE LD. CIT (A), WE FIND THAT ALL THE DETAILS OF PURCHASES, STOCK REGISTER, LEDGER ACCOUNT OF SALES, DETAILS OF PARTY WISE PURCHASES DETAILS OF SALES, BANK STATEMENT, DETAILS OF PARTY WISE PURCHASES, ETC. WERE DULY FILED BEFORE THE AO. THE LIST OF REPLIES AND DETAILS FILED BEFORE THE AO AS APPEARED IN THE PAPER BOOK ARE AS UNDER:- COPY OF REPLY FILED BEFORE AO ENCLOSED : I. COPY OF LEDGER A/C OF SALES II. COPY OF LEDGER A/C OF FRIGORIFICO ALLANA LTD. COPY OF REPLY FILED BEFORE THE AO ENCLOSED: I. DETAILS OF PARTY WISE SALES II. COPY OF BANK STATEMENT ALONG WITH BANK RECONCILIATION STATEMENT OF RBS BANK III. COPY OF LEDGER A/C OF ANJANIYA COLD STORAGE & ARIHANT EXP. P. LTD. IV. COPY OF SAVING ACCOUNT. COPY OF REPLY FILED BEFORE AO ENCLOSED : COPY OF LEDGER ACCOUNTS OF : I. RENT II. TELEPHONE EXPENSES III. PRINTING & STATIONERY IV. POSTAGE EXP. V. MISC. EXPENSES VI. CONVEYANCE VII. BUSINESS PROMOTION VIII. SALARY IX. ACCOUNTING CHARGES X. WAGES & LABOUR XI. CARTAGE & FORWARDING XII. PURCHASE A/C COPY OF REPLY FILED BEFORE AO ENCLOSED: I. DETAILS OF PARTY-WISE PURCHASES II. DETAILS OF STOCK REGISTER COPY OF NOTICE U/S 143(2) DATED 19.12.2014 COPY OF REPLY FILED BEFORE AO COPY OF REPLY FILED BEFORE AO ENCLOSED: I. COPY OF LEDGER A/CS OF PARTIES FROM WHOM PURCHASE HAVE BEEN MADE. COPY OF WRITTEN SUBMISSION FILED BEFORE THE CIT(A) 8. WHEN THESE DETAILS HAVE BEEN FURNISHED BEFORE THE AO, THEN THE ENTIRE OBSERVATION OF THE LD. AO IN THE ASSESSMENT ORDER THAT THESE DETAILS HAVE NOT BEEN FURNISHED RENDERS FACTUALLY INCORRECT. THIS FACT WAS REITERATED BEFORE THE LD. CIT (A) AND THERE IS NO REBUTTAL EITHER BY THE AO WHO WAS PRESENT IN THE APPELLATE PROCEEDINGS OR BY THE LD. CIT (A). ONCE THE ASSESSEE HAD JUSTIFIED THE ENTIRE SALES WHICH IS PURELY THROUGH CHEQUES AND BANKING CHANNELS AND HAS GIVEN THE PARTY WISE DETAILS OF THE PURCHASERS AND ALSO EXPLAINED THE NATURE OF TRADE WHEREBY THE ASSESSEE HAS NO OPTION BUT TO MAKE THE PURCHASES IN CASH WHICH OTHERWISE HAS STATUTORY SANCTITY IN VIEW OF INCOME TAX RULES UNDER 6DD, THEN SIMPLY BECAUSE ASSESSEE COULD NOT FURNISH THE PARTICULARS OF THE PURCHASERS, THAT DOES NOT MEAN THAT THE ENTIRE PURCHASES ARE BOGUS OR ARE NOT VERIFIABLE. WHILE EXAMINING THE TRADING RESULT, IT IS IMPORTANT TO KEEP IN MIND THE NATURE OF TRADE AND THE TRADE PRACTICES WHICH NEEDS TO BE UNDERSTOOD AND WHILE DETERMINING THE INCOME, TRADE PRACTICES PREVALENT AND THE ACCOUNTING SYSTEM HAS TO BE APPRECIATED. ALL THE TRADE CANNOT BE VIEWED FROM SAME GLASS AS THE DIFFERENT TRADE HAS DIFFERENT REALITIES ESPECIALLY IN COUNTRY LIKE OURS WHERE MOST OF US AGRARIANS AND NOT MUCH OF THE POPULATION WERE EXPOSED TO BANKING SYSTEMS AT THE RELEVANT TIME; NOR THERE ARE ANY ORGANISED SECTOR ESPECIALLY DEALING WITH RURAL PEOPLE. ASSESSEE IS DEALING IN SALE AND PURCHASE OF MEAT AND ALSO LIVESTOCK WHO PROCURES THE MEAT FROM LOCAL BUTCHERS OR SHEPHERDS OR FARMERS WHO ARE MOSTLY ILLITERATE AND WORK IN A MUCH UNORGANISED SECTOR. IN SUCH CIRCUMSTANCES IT WOULD VERY DIFFICULT TO EITHER MAKE THE PURCHASES THROUGH ACCOUNT PAYEE CHEQUES OR GET PROPER BILLS. THUS, THE REASONS GIVEN BY THE AO FOR REJECTING THE BOOKS OF ACCOUNTS ON THE FACTS OF THE PRESENT CASE CANNOT BE SUSTAINED. LD. CIT(A) WITHOUT PROPERLY ANALYSING THE FACTS BROUGHT ON RECORD BY THE ASSESSEE HAS SIMPLY REITERATED THE REASONING GIVEN BY THE AO AND NOTED THAT THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNTS BEFORE THE AO IN ORDER TO CLAIM DEDUCTION AND EXPENSES AND THEREFORE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. HE HAS NOT GIVEN ANY FINDING ABOUT THE DETAILS AND REPLIES FILED BY THE ASSESSEE BEFORE THE AO AND ALSO THE DETAILED EXPLANATION GIVEN BEFORE HIM IN THE WRITTEN SUBMISSIONS. HENCE REASONING GIVEN BY THE LD. CIT (A) TO UPHOLD THE ORDER OF THE AO IS COMPLETELY DE-HORS THE MATERIAL AND FACTS PLACED ON RECORD CANNOT BE APPRECIATED. ACCORDINGLY, THE REASONING GIVEN BY THE LD. CIT (A) IS SET ASIDE; AND ON THE BASIS OF REASONING GIVEN BY US AS ABOVE, WE HOLD THAT NO PROPER GROUNDS FOR REJECTION OF BOOKS OF ACCOUNT HAS BEEN GIVEN AND CONSEQUENTLY THE TRADING RESULT CANNOT BE DISTURBED. THE ADDITIONS THUS MADE BY THE AO AND AS SUSTAINED BY THE LD. CIT(A) FOR REJECTING THE ESTIMATE IS DELETED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2019. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 3 RD JANUARY, 2019 VEENA COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT G BENCH, DELHI 6. GUARD FILE.