DY. C.I.T. AMRAVATI CIR-, AMRAVATI V. SHRI PARMANAND RAMAVATAR AGRAWAL, AMRAVATI

ITA 312/NAG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1323 (ITAT-NAGPUR)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Rejection of books of accounts

Judgement Text

1 ITA NO. 312/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 312 /NAG/2016 ASSESSMENT YEAR : 200 7 - 08 . DY. COMMISSIONER OF INCOME - TAX, SHRI PARMANAND RAMAVATAR AGRAWAL, AMRAVATI CIRCLE, AMRAVATI. VS. AMRAVATI. PAN AAQPA 7025M. APPELLANT. RESPONDENT. APPELL ANT BY : SHRI A.R. NINAWE. RESPONDENT BY : SHRI MANOJ MORYANI. DATE OF HEARING : 13 - 10 - 2016 DATE OF PRONOUNCEMENT : 14 TH OCT., 2016 O R D E R. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 29 - 02 - 2016 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. THE GROUND OF APPEAL READ S AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.38,94,025/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESSIVE SHORTAGE OF CHANA CLAIMED BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. IN THIS CASE THE AO NOTED THAT THE ASSESSEE IS A MA JOR TRADER OF GRAMS. THE SHORTAGE SHOWN BY THE ASSESSEE ON CHANA IS 2.78% OF THE PURCHASES. ON AOS QUERY THE ASSESSEE RESPONDED AS UNDER : YOUR GOODNESS HAS DIRECTED TO GIVE REASONS FOR THE EXCESSIVE SHORTAGES. IN FACT SHORTAGE IS NOT EXCESSIVE. THE RE ASON FOR SHORTAGE IS BECAUSE OF DRYAGE OF MOISTURE CONTENT IN THE GOODS AS ALL THESE GOODS ARE PRODUCED FROM AGRICULTURAL CULTIVATION. EVEN IN THE PAST AS WELL AS IN ALL OTHER 2 ITA NO. 312/NAG/2016. SIMILAR CASES IT WILL BE SEEN THAT THIS IS A REGULAR PHENOMENON OF SHORTAGES. TH E SHORTAGES ALSO DEPENDS ON THE QUALITY OF GOODS PURCHASED & PERIOD WHEN IT IS PURCHASED. AS REGARDS AGRICULTURAL PURCHASES, IF THE GOODS ARE PURCHASED IMMEDIATELY AFTER HARVESTING THEN THE SHORTAGE WILL BE MORE AS COMPARED TO THE GOODS IF THEY ARE PURCHAS ED IN SUMMER. IN THE PURCHASES OF FRESH AGRICULTURAL GOODS IN APMC MANY TIMES SHORTAGES GOES UPTO 3 TO 4%. IN THE ASSESSEES CASE SHORTAGE IS NOT AT ALL MORE. SOME SHORTAGE IS ALSO DUE TO STORING OF GOODS IN GODOWN DUE TO RATS AND OTHER INSECTS AND DAMAGES . IN ANY CASE AS THE BOOKS RESULTS ARE QUITE FAIR AND REASONABLE THE SAME BE ACCEPTED AS THERE IS NO EVIDENCE THAT EXCESS SHORTAGE IS SHOWN BY THE ASSESSEE. HOWEVER, THE AO WAS NOT SATISFIED. HE OBSERVED THAT ANOTHER CONCERN M/S JAI AMBE TRADERS HAD SHOWN SHORTAGE OF ONLY .03% OF THE PURCHASES. HE FURTHER OBSERVED THAT THE ASSESSEE HIMSELF IN ASSESSMENT YEAR 2008 - 0 9 HAD SHOWN SHORTAGE IN GRAM AT 1.02% OF THE PURCHASES. HENCE THE AO PROCEEDED TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATED THE LOSS OF WEIGHT IN CHANA AT 1% AND THUS ADDED RS.38,94,025/ - TO THE INCOME OF THE ASSESSEE. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) ELABORATELY CONSIDERED THE ISSUE. HE CONCLUDED AS UNDER : 5.2 I HAVE ALSO EXAMINED THE PURCHASE AND SALE REGISTER OF THE APPELLANT AND THE ASSESSEE HAS SHOWN BETTER NET PROFIT AS COMPARED TO IMMEDIATELY PRECEDING YEAR AS UNDER : SINGHANIYA TRADING COMOPANY BACHARAJ PLOT, LADDHA COMPLES , AMRAVATI. ASSTT. TURNOVER G.P. N.P. G.P.% N.P.% YEAR. 2003 - 04 11,15,09,883.16 17,46,615.93 1,63,746.01 1.57% 0.15% 2004 - 05 8,06,92,387.48 20,10,200.34 1,69,710.19 2.49% 0.21% 2005 - 06 8,7 2,91,498.37 22,57,766.39 1,24,711.57 2.59 % 0.14% 2006 - 07 24,57,81,258.00 41,37,066.43 5,05,503.90 1.68% 0.20% 2007 - 08 35,91,65,798.56 45,14,982.13 9,67,879.12 1.26% 0.27% 2008 - 09 43,91,70,845.88 59,70,016.15 34,71,882.63 1.36% 0.79% 2009 - 10 32,22,90,324.92 57,94,128.67 23,26,956.49 1.80% 0.72% 3 ITA NO. 312/NAG/2016. 5.3 IT CAN BE SEEN FROM THE ABOVE TABLES THAT THERE IS SIGNIFICANT VARIATION IN THE PATTERN IN WHICH THE TRADING HAS BEEN CONDUCTED BY THE APPELLANT IN THE TWO YEARS. IN RESPECT OF OIL CAKE, ALMOST 90% OF THE PURCHASE IN AY 2007 - 08 HAS BEEN MADE IN THE MONTH OF DECEMBER, 2006 WHILE THE PURCHASES ARE FAIRLY SPREAD OUT THROUGH NOVEMBER, DECEMBER & JANUARY 2007 IN AY 2008 - 09. THE SALES ALSO HAVE BEEN MADE ONLY IN THE MONTH OF JUNE, 2006 IN AY 2007 - 08 WHILE SALES ARE SPREAD OUT OVER SEVERAL MONTHS IN AY 2008 - 09. ALSO, IN SOYABEN, IN AY 2007 - 08, ALMOST THE ENTIRE PURCHASE HAS BEEN MADE IN THE MONTH OF NOVEMBER WHILE IN AY 2008 - 09 THERE IS UNIFORM SPREAD OF PURCHASE OVER SEVERAL MONTHS. THERE ARE SIMILAR VARIATION IN RESPECT OF TOOR ALSO WHICH CLEARLY ESTABLISHES THAT THE PATTERN OF BUSINESS IS DIFFERENT FOR AY 2008 - 09 AS COMPARED TO AY 2007 - 08 AND CONSEQUENTLY THE SHORTAGE THAT WOULD ARISE WOULD ALSO BE DIFFERENT IN EACH YEAR FOR EACH I TEM. 5.4 THE LD. AOS USE OF SHORTAGE FIGURES OF M/S JAI AMBE TRADERS WITHOUT GIVING AN OPPORTUNITY TO APPELLANT TO EXAMINE THE FACTS AND FIGURES OF THE SAID FIRM ALSO WEAKENS THE CASE OF THE LD. AO. COMPLETE DETAILS REGARDING THE BUSINESS PATTERN OF M/S JAI AMBE TRADERS INCLUDING THEIR TRADING, P & L A/C, DETAILS OF PURCHASE AND SALE, PERIODS OF STORAGE ETC. WOULD HAVE TO BE PROVIDED TO THE APPELLANT BEFORE ANY SUCH EVIDENC E CAN BE PUT TO USE AGAINST THE APPELLANT. 5.5 IT IS ALSO A FACT THAT NP PERCENTAG E IS SIGNIFICANTLY HIGHER THAN THE IMMEDIATELY PRECEDING YEAR. IT IS NOT DISPUTED THAT THE TURNOVER AND NP RATE DECLARED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION ARE HIGHER AS COMPARED TO THE PRECEDING YEAR AND IT IS ALSO A FACT THAT IN THE EAR LIER ASSESSMENT YEARS BOOK RESULTS OF THE APPELLANT HAS BEEN ACCEPTED AS TRUE AND CORRECT. IT IS ALSO NOT DISPUTED THAT THE BOOKS OF ACCOUNT ARE DULY SUPPORTED BY PURCHASE VOUCHERS, VOUCHERS FOR EXPENSES AND STOCK RECORDS. IN THE ABSENCE OF ANY SPECIFIC IN STANCES SOF MISTAKES IN THE BOOKS OF ACCOUNT AND OTHER RECORDS, THE BOOK RESULS CANNOT BE REJECTED. THUS REJECTION OF BOOKS OF ACCOUNT IS WITHOUT ANY JUSTIFICATION AND IN VIEW OF THE SAME THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF SHORTAGE AMOUNTING TO RS.38,94,025/ - OF GRAM (CHANA) IS UNJUST AND WITHOUT BASIS AND IS HEREBY DIRECTED TO BE DELETED. 4 ITA NO. 312/NAG/2016. 4. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED D.R. RELIED UPON THE ORDER OF THE AO. HE ALSO SUBMITTED THAT THE ASSESSEES GROSS PROFIT RATIO HAS COME DOWN. HENCE HE SUBMITTED THAT THE ORDER OF THE AO BE UPHELD. 6. PER CONTRA LEARNED COUNSEL OF THE ASSESSEE SUBMITTED T HAT THE AO IN THIS CASE HAS NOT FOUND ANY DEFECT WHATSOEVER IN THE BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNTS WERE DULY AUDITED. THE SAME WERE TEST CHECKED BY THE AO ALSO. THE AO DID NOT FIND ANY SHORTCOMING OR DEFECT. HOWEVER, BY SIMPLY COMPARING THE SHORTAGE IN CHANA WITH THAT OF JAI AMBE TRADERS, THE AO REJECTED THE BOOKS OF ACCOUNTS AND SUBSTITUTED HIS OWN ESTIMATE FOR SHORTAGE IN CHANA. LEARNED COUNSEL FURTHER SUBMITTED THAT THOUGH THE GROSS PROFIT HAS COME DOWN MARGINALLY , THE NET PROFIT HAS SHOWN AN INCREASE. LEARNED COUNSEL PLEADED THAT THERE WAS NO COGENT REASON FOR REJECTING THE BOOKS OF ACCOUNTS. LEARNED COUNSEL FURTHER SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 53/NAG/2014 AND VIDE ORDER DATED 21 - 08 - 2015 THE ITAT HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE BY DISMISSING THE REVENUES APPEAL. 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I FIND THAT THE SOLE REASON ATTRIBUTED BY THE AO FOR REJECTION OF BOOKS OF ACCOUNTS AND SUBSTITUTION OF HIS ESTIMATE OF SHORTAGE IN CHANA IS THE COMPARISON OF SHORTAGE SHOWN BY THE ASSESSEE WITH JAI AMBE TRADERS. ASSESSEES BOOKS OF ACCOUNTS ARE AUDITED. THE SAME WERE PRODUCED BEFORE THE AO. THE AO DID NOT FIND ANY DEFECT WHATSOEVER IN THE BOOKS OF ACCOUNTS. IN SUCH CIRCUMSTANCES B Y MERE COMPARISON OF THE SHORTAGE IN CHANA WITH JAI AMBE TRADERS DEHORSE ANY FINDING ON THE OVER ALL PROFITABILITY THE AO HAS ERRED IN REJECTING THE BOOKS OF ACCOUNTS. IF THERE WAS SOME INCREASE IN SHORTAGE THE SAME COULD HAVE BEEN 5 ITA NO. 312/NAG/2016. REASON FOR THE AO TO MA KE SOME MORE INVESTIGATION AND EXAMINATION. THAT ALONE CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT. 8. FURTHER MORE I NOTE THAT THIS ITAT IN ASSESSEES OWN CASE VIDE ORDER DATED 21 - 08 - 2015 IN ITA NO. 53/NAG/2014 HAS CONSIDERED THE ISSUE AND DECID ED IN ASSESSEES FAVOUR HOLDING AS UNDER : UPON CAREFUL CONSIDERATION, WE NOTE THAT IT IS UNDISPUTED THAT THE GROSS PROFIT PERCENTAGE AND NET PROFIT PERCENTAGE OF THE ASSESSEE IS SIGNIFICANTLY HIGHER THAN THE IMMEDIATELY PRECEDING YEAR. THE BOOKS OF ACC OUNT ARE DULY SUPPORTED BY VOUCHERS AND STOCK RECORDS. NO DEFECT HAS BEEN FOUND BY THE ASSESSING OFFICER IN THE SAME. OUT OF THE FIVE ITEMS TRADED, IN THREE ITEMS, THE SHORTAGES HAVE INCREASED AS COMPARED TO PREVIOUS YEAR BUT AT THE SAME TIME, THERE IS VAS T IMPROVEMENT IN OTHER TWO ITEMS. THIS GOES TO SUBSTANTIATE THE ASSESSEE'S CONTENTION AND LEARNED CIT(A)'S FINDING THAT VARIOUS FACTORS LEAD TO THE VARIATION SUCH AS QUALITY OF GOODS PURCHASED, MONTH IN WHICH PURCHASES ARE MADE, THE PERIOD FOR WHICH THE GO ODS ARE LYING WITH THE PURCHASER, THE METHOD OF TRANSPORT USED, THE AMOUNT OF EARTH / OTHER PURITIES IN THE GOODS PURCHASED. IT CANNOT BE SAID THAT THERE IS MANIPULATION BY THE ASSESSEE. THE SHORTAGES OBSERVED ARE ALSO NOT SUBSTANTIAL . IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER CANNOT INSIST UPON THE MATHEMATICAL PRECESSION IN THE LEVEL OF VARIATION IN SHORTAGES. MOREOVER, AS RIGHTLY COMMENTED BY THE LEARNED CIT(A), IN THE ABSENCE OF DETAIL REGARDING THE BUS INESS PATTERN OF M/S. JAI AMBE TRADERS, THEIR RESULTS CANNOT BE THE SOLE CRITERIA FOR JUDGING THAT T ASSESSEE'S BOOKS OF ACCOUNT ARE NOT RELIABLE. UNDER THES E CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD COGE NT BASIS FOR REJECTION OF BOOKS OF ACCOUNT. THE LEARNED CIT(A) IS CORRECT IN HOLDING THAT THERE IS NO REASON TO REJECT THE BOOKS OF ACCOUNT AND, ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). THE GROUNDS RAISED BY THE REVENUE ARE DISMISSE D. 9 . FURTHER MORE I ALSO NOTE THAT HONBLE PUNJAB HIGH COURT IN THE CASE OF PANDIT BROTHERS VS. CIT 26 ITR 159 HAS HELD THAT THE FALL IN PROFITS MAY GIVE THE AO REASON FOR MAKING MORE INVESTIGATION BUT IT CANNOT BE A SOLE REASON FOR REJECTION OF BOOKS OF AC COUNTS. ACCORDINGLY RESPECTFULLY FOLLOWING THE 6 ITA NO. 312/NAG/2016. PRECEDENT S AS ABOVE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). HENCE I UPHOLD THE SAME. 10 . IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON THIS 14 TH DAY OF OCT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED : 14 TH OCT. , 2016. COPY FORWARDED TO : 1. SHRI PARMANAND RAMAVATAR AGRAWAL, PROP. M/S SINGHANIYA TRADING COMPANY, LADDHA COMPLEX, BACCHARAJ PLOT, AMRAVATI - 444601. 2. D .C.I.T., AMRAVATI CIRCLE, AMRAVATI. 3. C.I.T. - I , NAGPUR. 4. CIT(APPEALS), - I , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.