SHRI PAPPU QURESHI, JAIPUR V. INCOME TAX OFFICER, WARD-4-5, JAIPUR

ITA 314/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2092 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C JAIN
• Keywords: Rejection of books of accounts; Business income; Reassessment proceedings
• Section: 40A(3); 142(1); 143(2); 139(1); 44AB; 145(3); 147; 148; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 314/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 PAPPU QURESHI 250-251, SANJAY NAGAR, BHATA BASTI, SHASTRI NAGAR, JAIPUR. CUKE VS. THE ITO, WARD-4(5), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABPQ 8488 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.C. JAIN (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MISS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 18/02/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 28/04/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), AJMER DATED 29.01.2019 FOR THE ASSESSMENT Y EAR 2010-11 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LEARNED ASSESSING OFFICER HAD ERRED A T LAW AS WELL AS ON FACTS IN REOPENING THE ASSESSMENT U/S 148 AND THER EBY FURTHER ERRED IN MAKING THE ORDER U/S 144 ON TOTALLY DIFFERENT ASPE CTS BEYOND THE ISSUES COVERED UNDER REASONS RECORDED U/S 147. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING BUT CONFIRMING THE ACTION OF TH E A.O. 2. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL AS ON FACTS IN COMPARING THE BUSINESS RESULTS WITH THE PR ECEDING ASSESSMENT ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 2 YEAR WHEREAS THE ACTIVITIES WERE DIFFERENT DURING T HIS ASSESSMENT YEAR AND THEREBY THE TRADING RESULTS WERE NOT COMPARABLE . 3. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL AS ON FACTS IN APPLYING THE NET PROFIT RATE OF 5% AS SPEC IFIED U/S 44AF ON THE DECLARED TURNOVER OF RS.7,94,47,417/- DESPITE ADMIT TING THAT THE ASSESSEES CASE IS COVERED U/S 44AB. THE LEARNED CI T(A) HAS FURTHER ERRED IN NOT ADJUDICATING AND CONFIRMING THE ACTION OF THE A.O. 4. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL ON FACTS IN COMPLETING THE ASSESSMENT U/S 144 FOR NON-PRODUC TION OF BOOKS DESPITE THAT THE ASSESSMENT WAS REOPENED BEYOND 4 Y EARS AS SUCH THE BOOKS WERE NOT AVAILABLE EXCEPT THE COMPUTER ACCOU NTS. THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT ADJUDICATING BUT CO NFIRMING THE ACTION OF THE ASSESSING OFFICER. 5. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL AS ON FACTS IN MAKING ADDITION TO THE INCOME OF RS.34,28, 749/- AND TO COMPLETE THE ASSESSMENT ON TOTAL INCOME OF 38,72,37 0/- AS AGAINST THE RETURNED INCOME OF RS.4,43,620/- . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE HAS FILED ORIGINAL RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4,43 ,620/-. SUBSEQUENTLY NOTICE U/S 148 OF THE IT ACT DATED 31.03.2017 WAS ISSUED A FTER SEEKING NECESSARY PERMISSION FROM THE LD. PR. CIT, JAIPUR. IN RESPONS E, THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME AS PER ORIG INAL RETURN OF INCOME OF RS 4,43,620/-. SUBSEQUENTLY, NOTICE U/S 143(2) OF T HE ACT WAS ISSUED AND THE ASSESSMENT WAS COMPLETED AT ASSESSED INCOME OF RS. 38,72,370/- WHEREIN THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS. 3 4,28,749/-. THE FINDING OF THE ASSESSING OFFICER HAVE SINCE BEEN CONFIRMED BY THE LD. CIT(A) AND AGAINST THE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFOR E US. ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 3 3. DURING THE COURSE OF HEARING, THE LD. AR TAKEN US THROUGH THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUANCE O F NOTICE U/S 148 OF THE ACT AND SUBMITTED THAT ON PERUSAL OF THE REASONS SO REC ORDED BY THE ASSESSING OFFICER, IT IS CLEAR THAT THE REOPENING HAS BEEN DO NE ON THE BASIS OF SUSPICION RELATING TO DEPOSIT OF CASH IN THE ASSESSEES BANK ACCOUNT AND THEREFORE, FOR THE PURPOSE OF VERIFICATION OF CASH TRANSACTION IN THE ASSESSEES BANK ACCOUNT, THE MATTER HAS BEEN REOPENED. IT WAS SUBMITTED THAT REOPENING OF THE ASSESSMENT FOR THE PURPOSE OF VERIFICATION OR MAKIN G THE ENQUIRY IS NOT PERMISSIBLE AS PER THE SETTLED LEGAL PROPOSITION AS LAID DOWN BY THE VARIOUS COURTS FROM TIME TO TIME. IT WAS FURTHER SUBMITTED THAT IN THE REASONS SO RECORDED, THE ASSESSING OFFICER HAS STATED ABOUT HE AVY CASH TRANSACTIONS AMOUNTING TO RS. 3,24,81,500/- HOWEVER, HE HAS NOT INDICATED AS TO WHETHER THE SAID TRANSACTIONS RELATING TO DEPOSITS OR WITHD RAWALS. IT WAS SUBMITTED THAT ON PERUSAL OF THE BANK STATEMENT OF THE ASSESS EE MAINTAINED WITH ICICI BANK, THERE IS TOTAL CASH DEPOSITS OF RS. 6,27,44,2 61/- AND CORRESPONDING WITHDRAWAL IN CASH OF RS. 6,01,09,971/-. IT WAS ACC ORDINGLY SUBMITTED THAT WHILE RECORDING THE REASONS, NO PROPER MATERIAL OR RECORDS WERE LOOKED INTO AND THE VAGUE REASONS WERE RECORDED. IT WAS FURTHER SUBMITTED THAT IN THE REASONS SO RECORDED, THE ASSESSING OFFICER HAS ALLE GED THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC T HOWEVER, HE HAS NOT SPECIFIED WHAT MATERIAL FACTS HAVE NOT BEEN DISCLOSED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE APPROVAL BY THE LD PR. CIT, JAIP UR WAS ALSO IN A MECHANICAL MANNER AND DOES NOT REFLECT APPLICATION OF MIND ON THE PART OF THE LD. PR. CIT, JAIPUR. 4. ON MERITS, IT WAS SUBMITTED BY THE LD AR THAT TH E BOOKS OF ACCOUNT, BILLS AND VOUCHERS WERE DULY MAINTAINED BY THE ASSESSEE W HICH WERE SUBJECT TO AUDIT U/S 44AB OF THE ACT. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, VARIOUS DETAILS WERE FILED INCLUDING EXTRACTS OF BO OKS OF ACCOUNTS, BANK ACCOUNT, PURCHASES AND SALES HOWEVER, THE ORIGINAL BOOKS OF ACCOUNT COULD ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 4 NOT BE PRODUCED SINCE THE SAME WERE NOT AVAILABLE A S THE CASE WAS REOPENED AFTER A PERIOD OF 6 YEARS. IT WAS SUBMITTED THAT T HE REASSESSMENT PROCEEDINGS WERE INITIATED WITH ISSUANCE OF NOTICE U/S 142(1) ON 18.10.2017 AND BY THAT TIME, THE PERIOD REQUIRED FOR MAINTAINI NG THE BOOKS OF ACCOUNTS AS SPECIFIED IN RULE 6F(5) GOT EXPIRED. IT WAS ACCORDI NGLY SUBMITTED THAT THE FINDING OF THE ASSESSING OFFICER REGARDING NON-PROD UCTION OF BILLS AND VOUCHERS IS TOTALLY INCORRECT SINCE THE ASSESSEE WAS NOT REQ UIRED TO HAVE SUCH RECORDS AVAILABLE WITH HIM WHEN THE PROCEEDINGS HAVE BEEN T AKEN UP AFTER A PERIOD OF 6 YEARS. IT WAS FURTHER SUBMITTED THAT THE ENTIRE DETAILS RELATING TO THE PURCHASES, SALES, BANK STATEMENTS AND AUDIT REPORT ISSUED U/S 44AB BY THE INDEPENDENT AUDITORS WERE FILED AND RELIED UPON BY THE ASSESSING OFFICER WHICH INDICATED THE ASSESSEE HAS COMPLIED WITH ALL THE PROVISIONS OF SECTION 44AA OF THE ACT. IT WAS FURTHER SUBMITTED THAT WHEN THE BOOKS OF ACCOUNT WERE AUDITED AND TURNOVER HAS BEEN ACCEPTED AS DECL ARED BY THE ASSESSEE THERE IS NO BASIS FOR INVOCATION OF PROVISIONS OF S ECTION 44AF OF THE ACT AND UPHOLDING THE NET PROFIT RATE OF 5%. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD NOT INVOKED PROVISIONS OF SEC TION 145(3) OF THE ACT AND HAD COMPLETED THE ASSESSMENT AS PER PROVISIONS OF S ECTION 144 OF THE ACT FOR SIMPLE REASON OF NON PRODUCTION OF BOOKS AND HAD AP PLIED THE RATE OF 5% ON THE TURNOVER AS DECLARED. 5. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS F ILED THE RETURN OF INCOME U/S 139(1) WHICH WAS ACCOMPANIED WITH THE AU DITED STATEMENT OF ACCOUNTS AND THE AUDIT REPORT ISSUED U/S 44AB OF TH E IT ACT DECLARING THE TURNOVER, PURCHASES, VARIOUS EXPENSES AS WELL AS OF OTHER DETAILS AS SPECIFIED UNDER THE ACT. THE REASONS RECORDED FOR REOPENING O F THE ASSESSMENT WERE SIMPLY BASED UPON THE DEPOSIT OF CASH IN THE BANK A CCOUNT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CLEARLY SP ECIFIED THAT THE ANIMALS ARE BEING PURCHASED BY THE ASSESSEE FROM THE PRODUC ERS OF LIVE STOCKS BEING AGRICULTURISTS AND THEREAFTER THE SAME ARE SOLD TO THE VARIOUS MEAT FACTORIES ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 5 AND THE PAYMENTS AGAINST THE PURCHASES ARE BEING MA DE IN CASH TO THE AGRICULTURISTS AND THE CASH WAS DEPOSITED DIRECTLY BY THE BUYERS IN THE ACCOUNT OF THE ASSESSEE WHO HAVE PURCHASED THESE ANIMALS. T HE ASSESSING OFFICER REOPENED THE CASE FOR THE REASON OF DEPOSIT OF CASH WHEREAS WHILE COMPLETING THE ASSESSMENT THE A.O. HAD RESORTED TO MAKE THE AD DITION TO THE INCOME BY APPLICATION OF NP RATE 5% ON THE DECLARED SALES. IT CLEARLY INDICATES THAT THE SALES DECLARED BY THE ASSESSEE ARE NOT IN DISPUTE A ND COLLECTION OF THE SALES PROCEEDS IS DEFINITELY BEING DEPOSITED IN THE BANK ACCOUNTS. 6. IT WAS FURTHER SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE BOOKS WERE SUBJECT TO AUDIT U/S 44AB AND THE TURNOVER AS BEING ADMITTED AND SPECIFIED IN THE ASSESSMENT ORDER WAS MUCH BEYOND THE LIMIT AS P RESCRIBED U/S 44AF, THEN HOW FOR MAKING ADDITION, SECTION 44AF BE INVOK ED. 7. IT WAS FURTHER SUBMITTED THAT THE A.O. HAD SPECI FIED THAT THE G.P. RATE DURING THE YEAR UNDER CONSIDERATION HAS GONE DOWN W HEN COMPARED WITH THE PREVIOUS YEAR WHEREAS IT WAS EXPLAINED TO THE A.O. THAT THE ASSESSEE TILL THE PRECEDING ASSESSMENT YEAR WAS GETTING THE GROSS MAR GIN ON PURCHASE AND SALE FOR SELLING THE BONELESS AND WITH BONE MEAT WH EREAS DURING THE CURRENT YEAR THERE WAS NO SALE OF MEAT BUT WAS DIRECT SALE OF ANIMALS AND ACCORDING HE WAS GETTING A FIXED AMOUNT OF RS.80/- TO RS.100/ - PER ANIMAL AS A DIFFERENCE BETWEEN THE PURCHASES AND SALES PRICES. THEREFORE, THE G.P HAS REDUCED. THE FACT RELATING TO THE CHANGE OF BUSINES S WAS ALSO SPECIFIED BY THE AUDITORS IN THE AUDIT REPORT ISSUED U/S 44AB IN THE COLUMN 8 OF BUSINESS BY STATING THAT THE ASSESSEE WAS WORKING DURING THIS Y EAR AS A PAKKA AARTHIA OF UNPRODUCTIVE ANIMALS WITH EFFECT FROM 15 TH AUGUST, 2009. THEREFORE, THE TRADING RESULTS AS BEING COMPARED BY THE A.O. WITH THE PRECEDING YEAR ARE NOT APPLICABLE SINCE THE ACTIVITY OF BUSINESS OF THE AS SESSEE WAS TOTALLY CHANGED IN THIS YEAR. ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 6 8. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFI CER HAS MADE A REMARK SALES AND PURCHASES HAVE BEEN CLAIMED TO BE MADE I N CASH. HUGE CASH DEPOSITS AND WITHDRAWALS IN BANK ACCOUNTS HAS BEEN MADE. IT WAS SUBMITTED THAT THE STATEMENT OF THE A.O. RELATING TO HEAVY WI THDRAWALS FROM THE BANK ACCOUNTS IN CASH IS NOT DENIED SINCE THE PAYMENT FO R THE ANIMALS IS BEING MADE TO THE AGRICULTURISTS ALWAYS IN CASH AND THE S AME ARE BEING EXEMPT AS PER RULE 6DD AND THE A.O. PURPOSELY HAD IGNORED THA T THE WITHDRAWALS OF CASH WAS USED FOR MAKING PAYMENTS FOR PURCHASES NOT CHARGEABLE PER SECTION 40A(3) OF THE ACT BEING EXEMPT UNDER RULE 6DD. 9. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFI CER HAD FAILED TO COMPARE OR TO SPECIFY ANY OF THE COMPARABLE CASE IN THE ASSESSMENT ORDER WHERE THE RATE OF 5% IS BEING DECLARED BY THE TRADE R AS NET PROFIT ENGAGED IN THE BUSINESS OF SALES OF ANIMALS TO THE MEAT FACTOR IES AND ACCORDINGLY THE JUDGMENT OF THE A.O. TO APPLY THE RATE IS ARBITRARY AND BASED UPON HIS OWN ASSUMPTION. 10. IT WAS FURTHER SUBMITTED THAT THE PROCEEDINGS F OR WHICH THE CASE SO REOPENED WERE CONCLUDED BY THE ASSESSING OFFICER BY HAVING NO ADVERSE IMPACT AND THEREFORE WHEN THE A.O. WAS SATISFIED AB OUT THE DEPOSITS AND WITHDRAWALS IN CASH IN THE BANK ACCOUNT THERE WAS N O REASON TO MAKE ANY FURTHER ADDITION BY APPLICATION OF N.P. RATE. IN SU PPORT, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- CIT V/S SHRI RAM SINGH (2008) 306 ITR 343. RANBAXY LABORATORIES LTD V/S COMMISSIONER OF INCOME TAX (2011) 336 ITR 136 (DEL) CIT V/S JET AIRWAYS INDIA LTD. (2011) 331 ITR 236 ( BOM) CIT V/S ADHUNIK NIRYAT ISPAT LIMITED (2011) 63 DTR 212 (DEL) 11. IT WAS ACCORDINGLY SUBMITTED THAT UNDER THE CIR CUMSTANCES, THE ENTIRE PROCEEDINGS TAKEN BY THE ASSESSING OFFICER RESORTIN G TO MAKE ADDITION BY ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 7 APPLYING THE N.P. RATE OF 5% IS TOTALLY UNJUSTIFIED , UNWARRANTED AND AGAINST THE PROVISION OF LAW AS WELL AS BEYOND THE SCOPE OF SECTION 148 FOR WHICH THE ASSESSMENT WAS REOPENED BY RECORDING REASONS SINCE NO MATTER WAS FOUND TO BE TAXABLE AS PER REASONS RECORDED ABOUT THE CASH D EPOSITS AND WITHDRAWALS IN THE BANK ACCOUNTS AND THEREFORE, THE ADDITION SO MADE DESERVES TO BE DELETED. 12. PER CONTRA, THE LD DR SUBMITTED THAT THE MATTER WAS REOPENED BY THE ASSESSING OFFICER IN VIEW OF HUGE CASH TRANSACTIONS MADE BY THE ASSESSEE IN HIS BANK ACCOUNT AND THEREAFTER, DURING THE COURSE OF PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS AND VOUCHERS WHICH HE FAILED TO PRODUCE AND IN VIEW OF THE SAME, THE ASSE SSING OFFICER HAS ESTIMATED GROSS PROFIT @ 5% AS AGAINST 1.76% DECLARED BY THE ASSESSEE. THE LD DR SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES AND SUBMITTED THAT NO INTERFERENCE IS CALLED FOR IN THE SAID FINDINGS AND THE ORDER OF THE LD CIT(A) MAY ACCORDINGLY BE CONFIRMED AND THE APPEAL OF THE ASSESSEE BE DISMISSED. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSEE HAD ORIGINALLY FILED HIS RETURN OF INCOME ON 29.09.2010 DECLARING TOTAL INCOME OF RS 4 43,620/-, THEREAFTER, NOTICE U/S 148 WAS ISSUED ON 31.03.2017. THE REASON S FOR REOPENING SO RECORDED BY THE ASSESSING OFFICER READ AS UNDER: AS PER THE INFORMATION AVAILABLE WITH THIS OFFICE , IT IS FOUND THAT THE ASSESSEE HAS MADE HEAVY CASH TRANSACTIONS IN HIS BA NK ACCOUNT AMOUNTING TO RS 3,24,81,500/- DURING THE FINANCIAL YEAR 2009-10. AS PER MATERIAL AVAILABLE ON RECORD, IT IS FOUND THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE HEAVY CASH TRANSACTIONS IN HIS BANK ACCOUNTS. ON VERIFICATION OF RECORD, IT IS FOUND THAT THE RET URN OF INCOME HAS BEEN FILED FOR A.Y 2010-11 DECLARING TOTAL INCOME AT RS 4,43,620/-. ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 8 LOOKING TO THE FACTS MENTIONED ABOVE, I HAVE THE RE ASONS TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS 3,24,81,500/- H AS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT, 1961 ON ACCOUNT OF FAILURE ON PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR WHI CH NOTICE U/S 148 OF THE ACT IS REQUIRED TO BE ISSUED. 14. IN RESPONSE TO NOTICE U/S 148, THE ASSESSEE FIL ED HIS RETURN OF INCOME REITERATING THE INCOME AS DECLARED IN THE ORIGINAL RETURN OF INCOME. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE WA S ASKED TO JUSTIFY THE TRANSACTIONS OF BANK ACCOUNT WITH THE RESPECTIVE SA LES/PURCHASES AND THE PROFIT DECLARED AND IN THIS REGARD, THE RETURN OF I NCOME, AUDIT REPORT U/S 44AB, COPIES OF BANK ACCOUNT AND REPLIES FILED BY THE ASS ESSEE WERE EXAMINED BY THE ASSESSING OFFICER. THEREAFTER, THE ASSESSING O FFICER HAS CONCLUDED THE REASSESSMENT PROCEEDINGS AND THE RELEVANT FINDINGS READ AS UNDER: THE TRADING AND P & L ACCOUNT WAS ANALYZED AND IT W AS SEEN THAT ASSESSEE HAS DECLARED TOTAL SALES OF RS. 7,94,47,41 7/- AND PURCHASES OF RS. 7,80,47,438/-. OPENING AND CLOSING STOCK HAS BE EN CLAIMED AT RS. NIL. NO DIRECT EXPENSES HAS BEEN CLAIMED AND GROSS PROFIT HAS BEEN DECLARED AT RS.13,99,979/- GIVING GP RATE 1.76% NO OTHER INCOME OR RECEIPT HAS BEEN DECLARED. IN P & L ACCOUNT AFTER VARIOUS EXPENSES NET PROFIT OF RS.5,43,621/- HAS BE EN DECLARED GIVING NP RATE 68%. DURING PROCEEDING THE BANK ACCOUNT OF THE ASSESSEE WAS ANALYZED AND IT WAS HUGE CASH DEPOSITS IN THE BANK ACCOUNT HELD WITH ICICI BANK AND HUGE WITHDRAWALS. THE FREQUENCY AND AMOUNT INVOLVED IN THE ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 9 TRANSACTIONS ARE UNUSUALLY HIGH IN RELATION TO WHAT WOULD BE EXPECTED FROM A NORMAL BUSINESS ACTIVITY. ALL THE RELATED FACTS HAVE BEEN EXAMINED. SALES AND PURCHASES HAVE BEEN CLAIMED TO BE MADE IN CASH ONLY. HUGE CASH DEP OSITS AND WITHDRAWALS IN BANK ACCOUNTS HAVE BEEN MADE. THE G. P. RATE DECLARED BY THE ASSESSEE IN EARLIER YEAR WAS 4.46% AS COMPA RED TO THIS YEAR DECLARED 1.76% JUSTIFICATION OF LOW G.P. GIVEN HAS ALREADY BEEN NOT CONSIDERED AS PER DISCUSSED ABOVE. DURING ENTIRE AS SESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNT HAVE NOT BEEN PRO DUCED FOR VERIFICATION. VARIOUS FIGURES REFLECTED IN AUDIT RE PORT U/S 44AB, RETURN OF INCOME FILED AND SUBMISSION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS COULD NOT BEEN VERIFIED. THE AR HAS SHO WN HIS INABILITY TO PRODUCE THESE BOOKS OF ACCOUNT AND SUPPORTING BILLS AND VOUCHERS. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THIS CASE, I ESTIMATE THE NET PROFIT RATE OF THE ASSESSEE AT 5% WHICH IS QUITE JU STIFIABLE TO THE CASE OF NON-MAINTENANCE OF BOOKS OF ACCOUNTS AND SUPPORTED BY PROVISION OF SECTION 44AF APPLICABLE THE YEAR. APPLYING THE ABOVE ANALOGY, THE NET INCOME OF THE A SSESSEE FROM HIS PROPRIETOR SHIP CONCERN M/S AL RAHIM & CO. WORKS OU T TO RS. 39,72,370/ (5% OF RS. 7,94,47,417/-) AS AGAINST RS. 5,43,621/- DECLARED BY THE ASSESSEE RESULTING IN ADDITION OF R S. 34,28,749/- TO TOTAL INCOME OF THE ASSESSEE. 15. WE THEREFORE FIND THAT THE ASSESSING OFFICER HA S NOTICED THAT THERE ARE HUGE CASH TRANSACTIONS IN THE BANK ACCOUNT OF THE A SSESSEE IN TERMS OF DEPOSITS AND WITHDRAWALS AND HAS ALSO NOTICED THAT THE SALES AND PURCHASES AS REFLECTED IN THE AUDITED FINANCIAL STATEMENTS HA VE BEEN MADE IN CASH, HOWEVER, HE HAS NOT HIGHLIGHTED ANY DISCREPANCY OR MIS-MATCH IN SUCH ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 10 TRANSACTIONS. THEREFORE, THE TRANSACTIONS SO REFLEC TED IN THE BANK ACCOUNT RECONCILES WITH THE TRANSACTIONS SO REFLECTED IN TH E AUDITED FINANCIAL STATEMENTS AND NO ADDITION HAS BEEN MADE TOWARDS AN Y UNRECORDED SALES TRANSACTIONS OR ANY PURCHASE TRANSACTIONS MADE OUT OF BOOKS AND NO ADDITION HAS BEEN MADE IN RESPECT OF THE REASONS FOR WHICH T HE MATTER WAS REOPENED IN TERMS OF UNVERIFIED BANK DEPOSITS, THUS, THE SUB SEQUENT ESTIMATION OF PROFITS ON THE DECLARED TURNOVER SO ACCEPTED ON ACC OUNT OF LOWER DECLARED PROFITS CANNOT BE SUSTAINED AND THE ADDITION DESERV ED TO BE SET-ASIDE ON THIS ACCOUNT ITSELF. 16. FURTHER, WE FIND THAT THE ASSESSING OFFICER HAS ESTIMATED THE GROSS PROFIT RATE OF 5% AS AGAINST 1.76% WITHOUT EVEN REJ ECTING THE BOOKS OF ACCOUNTS SO MAINTAINED BY THE ASSESSEE. EVEN WHERE THE COMPLETE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED FOR VERIFICATION AND THE ASSESSEE HAS ONLY PRODUCED COPY OF AUDITED FINANCIAL STATEMENTS ALONG WITH AUDIT REPORT, WHERE THE FIGURES OF SALES AND PURCHASES HAVE BEEN ACCEPT ED AND IN ABSENCE OF OPENING AND CLOSING STOCK, WE FIND THAT THERE CANNO T BE A CASE OF DEEMED REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF GR OSS PROFIT RATE. FURTHER, FOR ESTIMATING GROSS PROFIT RATE, THE AO HAS APPLIED TH E PROVISIONS OF SECTION 44AF OF THE ACT IGNORING THE FACT THAT THE ASSESSEE WAS ENGAGED IN THE PURCHASE AND SALE OF ANIMALS WHICH DOESNT TECHNICALLY FALLS UNDER THE CATEGORY OF RETAIL TRADE OF GOODS AND MERCHANDISE, AND IN ANY CASE, TH E TURNOVER SO DECLARED BY THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER FOR THE YEAR WAS RS 7,94,47,417/- WELL BEYOND THE PRESCRIBED LIMITS U/S 44AF OF THE ACT. FURTHER, WE FIND THAT THERE IS A CHANGE IN THE BUSI NESS MODEL OF THE ASSESSEE AS COMPARED TO THE PREVIOUS YEAR WHICH HAS APPARENT LY ESCAPED THE ATTENTION OF THE ASSESSING OFFICER WHERE HE HAS COMPARED THE CURRENT YEAR RESULTS WITH THAT OF THE PREVIOUS YEAR AND IN ABSENCE OF ANY REA SONABLE BASIS FOR ESTIMATION OF GROSS PROFIT RATE IN FORM OF ANY COMP ARABLE THIRD PARTY DATA, THE ITA NO. 314/JP/2019 PAPPU QURESHI VS. ITO 11 ESTIMATION OF GROSS PROFIT RATE OF 5% CANNOT BE SUS TAINED. THEREFORE, IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, TH E ADDITION OF RS 34,28,749/- SO MADE BY THE ASSESSING OFFICER IS HEREBY DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28/04/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/04/2020. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- PAPPU QURESHI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(5), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 314/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR