ITO Ward-II (3), Faridabad V. Paras Nath Kushwaha Prop., Faridabad

ITA 3261/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9710 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 10-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 31-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NOS.3260/DEL/2008 & 3261/DEL/2008 ASSESSMENT YEARS : 2003-04 & 2004-05 INCOME TAX OFFICER, WARD-II(3), FARIDABAD. VS. SHRI PARAS NATH KUSHWAHA, PROP. M/S SARVODAYA CASTING INDUSTRIES, 29A, SGM NAGAR, FARIDABAD. PAN NO.AIGPK5594D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K.LAL, DR. RESPONDENT BY : SHRI ALOK KUMAR GUPTA, ADVOCATE. ORDER PER R.C.SHARMA, AM : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE AY 2003-04 AND 2004-05 IN THE MATTER OF ORDER P ASSED U/S 144 OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE IS A SMALL BUSINESSMAN ENGAGED IN THE ACTIVITY OF CASTING. FOR BOTH THE YEARS UNDER CONSIDERATION, RETURN OF INCOME WAS FILED ON ESTIMATED BASIS. NO BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE. IN THE AY 2003-04 ON THE CASTING WORK OF RS.4,65,600/- ON ESTIMATE BASIS INC OME WAS SHOWN AT RS.63,500/- WHEREAS IN THE AY 2004-05 ON A CASTING WORK OF RS.8 ,67,672/- THE RETURN WAS FILED ON ESTIMATED INCOME OF RS.1,23,570/-. THE AO GOT T HE INFORMATION THAT ASSESSEE HAS FILED DIFFERENT PROFIT & LOSS ACCOUNT AND BALAN CE SHEET WITH THE BANK, HE OBTAINED THE SAME FROM THE BANK AND FOUND THAT HIGH ER PURCHASE AND SALE WERE SHOWN IN THE P & L ACCOUNT AND BALANCE SHEET SO FIL ED WITH THE BANK. IN THE PROFIT AND LOSS ACCOUNT SO FILED WITH THE BANK NET PROFIT OF RS.1,08,493/- AND RS.1,23,565/- WAS SHOWN IN THE AY 2003-04 AND 2004- 05 RESPECTIVELY. THE AO ITA-3260 & 3261/D/2008 2 CALLED THE ASSESSEE TO SUBSTANTIATE THE BALANCE SHE ET FILED WITH THE BANK BUT THE ASSESSEE DID NOT TURN UP, THEREFORE ASSESSMENT WAS FRAMED U/S 144 WHEREIN AO ADDED THE ENTIRE AMOUNT OF PURCHASES SHOWN IN THE T RADING ACCOUNT FILED WITH BANK, AS ASSESSEES INCOME FROM UNEXPLAINED SOURCES . IN THE AY 2003-04 IN PLACE OF RETURNED INCOME OF RS.63,500/- THE AO HAS TAKEN THE RETURNED INCOME AT RS.1,23,570/- AS PER PROFIT & LOSS ACCOUNT FILED WI TH THE BANK WHEREIN INCOME OF RS.1,23,565/- WAS SHOWN. IN THE AY 2004-05, THE AO HAS TAKEN THE RETURNED INCOME AS FILED BY THE ASSESSEE AT RS.1,23,570/- BU T ADDED THEREIN THE ENTIRE AMOUNT OF PURCHASE SHOWN IN THE TRADING ACCOUNT FIL ED WITH THE BANK. 3. BY THE IMPUGNED ORDER THE CIT(A) HELD THAT FRAMI NG OF ASSESSMENT U/S 144 WAS JUSTIFIED AS THE ASSESSEE DID NOT TURN UP INSPI TE OF GIVING VARIOUS OPPORTUNITIES BY THE AO. ON MERITS, THE CIT(A) CONSIDERED THE SA LES FIGURES AS DETERMINED BY THE SALES TAX AUTHORITIES WHICH WERE ALSO FILED BEF ORE THE AO. THE CIT(A) OBSERVED THAT AUTHENTIC FIGURES FILED WITH THE SALE S TAX AUTHORITIES HAVE NOT BEEN CONSIDERED BY THE AO AND THAT AO HAS CONSIDERED THE TRADING ACCOUNT FILED WITH THE BANK WHICH WAS ONLY FOR OBTAINING THE CREDIT LI MITS AND THE SAME WAS NOT A CORRECT TRADING ACCOUNT OF THE ASSESSEE. DURING AP PELLATE PROCEEDINGS, THE CIT(A) ALSO CALLED THE AO AND THE FIGURE OF SALES AS DETER MINED BY SALES TAX AUTHORITIES WAS GOT EXAMINED BY THE AO FOR WHICH HE DID NOT MAD E ANY OBJECTION AND AFTER CITING THE COMPARABLE CASE ENGAGED IN THE SAME LINE OF ACTIVITY WHEREIN NET PROFIT OF 9.31% WAS ASSESSED U/S 143(3), THE CIT(A) APPLIE D THE PROFIT RATE OF 10% ON THE TURNOVER AND ACCORDINGLY INCOME WAS DETERMINED. TH E ADDITION MADE ON ACCOUNT OF PURCHASE WAS DELETED. THE CIT(A) FOUND THAT IF THE FIGURES OF DEBTORS, CREDITORS ETC. AS SHOWN TO BANK IS BEING TAKEN INTO ACCOUNT, AS PER THE CASH FLOW STATEMENT THE ENTIRE PURCHASE IS DULY SUPPORTED BY THE AVAILA BILITY OF SUFFICIENT FUNDS, THEREFORE MAKING ADDITION ON ACCOUNT OF ENTIRE PURC HASE AS HAVING BEEN NOT EXPLAINED WAS NOT CORRECT. BY REFERRING TO THE DEC ISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWAL ENGINEERING CO. 302 ITR 246 AND CIT VS. RAM PIYARA SATISH KUMAR 257 ITR 7 68, THE CIT(A) HELD THAT IN ITA-3260 & 3261/D/2008 3 CASE THE NET PROFIT RATIO IS APPLIED TO THE BUSINES S RESULTS OF AN ASSESSEE, NO SEPARATE ADDITION ON ACCOUNT OF ANY OTHER EXPENSES OR OTHERW ISE IS IMPERATIVE OR NECESSARY. AGGRIEVED BY THIS ORDER OF CIT(A), THE REVENUE IS I N FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ASSESSEE IS A SMALL TECHNICAL PERSON ENGAGED FOR THE FIRST TIME IN CAST ING WORK. NO BOOKS OF ACCOUNT WERE MAINTAINED AND THE RETURNS FOR THE YEARS UNDER CONSIDERATION WERE FILED ON ESTIMATE BASIS. BEING IN FINANCIAL CRISES, A LOAN WAS APPLIED FROM THE BANK AND HE WAS ADVISED THAT IF THE BALANCE SHEET WITH HIGHER P URCHASE AND SALE WAS FILED WITH THE BANK, THE BANK CAN SANCTION HIGHER TERM LOAN AN D WORKING CAPITAL. ACCORDINGLY, TO AVAIL HIGHER TERM LOAN AND WORKING CAPITA HE FILED BALANCE SHEET WITH THE BANK WITHOUT ANY BASIS WHEREIN HIGHER PURC HASES AND SALES WERE SHOWN IN ADDITION TO FIGURE OF DEBTORS, CREDITORS ETC. AS T HE AO GOT INFORMATION REGARDING THIS BALANCE SHEET, HE REOPENED THE ASSESSMENT AND MADE THE ADDITION ON THE BASIS OF FIGURES OF PURCHASE SHOWN IN THE TRADING ACCOUNT FILED WITH THE BANK WITHOUT TAKING INTO CONSIDERATION THE OTHER FIGURES OF DEBT ORS, CREDITORS ETC SHOWN THEREIN. THE AO ALSO DID NOT CONSIDER THE FIGURES OF SALES T AX RETURN FILED WITH THE SALES TAX AUTHORITY AND THE SALES TAX ASSESSMENT FRAMED THERE ON. AS THE ASSESSMENT WAS FRAMED U/S 144, THE CIT(A) FOUND THAT EVEN WHILE FR AMING EX-PARTE ASSESSMENT THE AO IS REQUIRED TO TAKE INTO ACCOUNT THE ENTIRE MATE RIAL IN HIS POSSESSION WITHOUT ANY REGARD TO THE FACTS AND FIGURES WHICH GOES AGAI NST THE ASSESSEE OR IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, HE FOUND THAT EVEN IF P URCHASES SHOWN TO THE BANK ARE BEING TAKEN INTO ACCOUNT, THE DEBTORS AND CREDITORS WHICH EXPLAINS THE SOURCE OF PURCHASE SHOULD NOT HAVE BEEN DISREGARDED BY THE AO . AS PER THE CASH FLOW STATEMENT, THE CIT(A) FOUND THAT AFTER TAKING INTO CONSIDERATION ALL THE DEBTORS AND CREDITORS VIS--VIS PURCHASES, NO PORTION OF THE PU RCHASES REMAINS UNEXPLAINED. THE CIT(A) FOUND THAT SALES TAX ASSESSMENT FRAMED B Y THE STATE GOVERNMENT DEPARTMENT IS MORE AUTHENTIC, ACCORDINGLY, BY TAKIN G THE FIGURES OF SALES AS SHOWN BY THE ASSESSEE IN HIS SALES TAX RETURN AND BY APPL YING THE RATE OF NET PROFIT BEING ITA-3260 & 3261/D/2008 4 TAKEN BY THE IT DEPARTMENT IN COMPARABLE CASE ENGAG ED IN THE SAME LINE OF ACTIVITY, THE CIT(A) ESTIMATED PROFIT AT 10% OF THE SALES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE DETAILED REASONING GIVEN BY CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS ORDER F OR MAKING ADDITION BY APPLYING THE NET PROFIT RATE TO THE SALES AND DELETING THE A DDITION MADE ON ACCOUNT OF PURCHASES. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 10 TH SEPTEMBER, 2009. SD/- SD/- (D.R.SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10.09.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR