Shri Shamjibhai T. Ahir, JAMNAGAR V. The Assistant Commissioner of Income Tax, Gandhidham Circle, GANDHIDHAM

ITA 33/RJT/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7749 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND N SONTAKKE
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 33/RJT/2014 (ASSESSMENT YEAR: 2009-10) SHRI SHAMJIBHAI TEJABHAI AHIR TEJABHAI TOWER, 201, PLOT NO. 208 SECTOR NO. 9, GANDHIDHAM-KUTCHH V/S ASST. COMMISSIONER OF INCOME TAX GANDHIDHAM CIRCLE, GANDHIDHAM- KUTCHH (APPELLANT) (RESPONDENT) PAN: ACXPA7959H APPELLANT BY : SHRI CHETAN AGARWAL, A.R. RESPONDENT BY : SHRI ARVIND N. SONTAKKE, SR. D.R. ( )/ ORDER DATE OF HEARING : 27 -04-201 8 DATE OF PRONOUNCEMENT : 10 -05-2018 MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-II, RAJKOT DATED 22.03.2013 PERTAINING TO A.Y. 2009-10 AND FOLLOWING GROUND HAS BEEN TAKEN BY THE APPELLANT: ITA NO. 33/R JT/2014 . A.Y.2009-10 2 1. HON. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT IN CONFIRMING ADDITION OF RS. 24,25,000/- MADE BY LEARNED A.O. ON ACCOUNT OF 20% ADHOC DISALLOWANCE FROM PURCHASES. 2. THE FACTS OF THE CASE ARE THAT THE APPELLANT CARRIE D HIS BUSINESS OF MANUFACTURING AND TRADING OF SALT IN THE NAME OF M/ S. SHYAM SALT FARM. THE APPELLANT ALSO CARRIED OUT THE BUSINESS OF SALT TRA DING ONLY IN THE NAME OF HARI TRADING CO. APPELLANT HAD MAINTAINED TWO SEPARATE S ET OF BOOKS IN RESPECT OF BOTH THESE PROPRIETARY CONCERNS AND SEPARATE GROSS PROFIT AND NET PROFIT WERE DERIVED ON THE BASIS OF THESE BOOKS OF ACCOUNTS. TH ESE BOOKS OF ACCOUNTS WERE ALSO AUDITED U/S. 44AB OF THE ACT. THE ASSESSING OF FICER HAD CARRIED OUT INQUIRIES WITH THE HELP OF INSPECTOR OF HIS OFFICE WHO PAID SPOT VISITS AND REPORTED THE NON-EXISTENCE OF THE PARTIES FROM WHOM THE SALT WAS CLAIMED TO HAVE BEEN PURCHASED FOR TRADING PURPOSE. HE ALSO NO TICED THE FACT THAT THE BARDAN AND PLASTIC BAGS WERE NOT USED FOR FILLING I N THE SALT AS THE OPENING AND CLOSING STOCK REMAINED AT THE SAME FIGURE. THE A.O. AFTER GRANTING OPPORTUNITIES TO THE ASSESSEE CALLING FOR EXPLANATI ON AND EVIDENCES, REJECTED HE BOOKS OF ACCOUNTS U/S. 145 OF THE ACT. HE ACCEPTED THE BOOK RESULTS BUT DISALLOWED THE PURCHASES @ 20% MADE BY THE TWO PROP RIETARY CONCERNS AND MADE ADDITION OF RS. 48,30,000/- IN RESPECT OF HARI TRADING CO. AND RS. 12,60,000/- FROM SHYAM SALT FARM. THUS, THE A.O. MA DE THE TOTAL ADDITION OF RS. 60,90,000/- OUT OF PURCHASES FOR THE REASON THA T THE PURCHASES WERE BOGUS AND NON-VERIFIABLE. 3. AGAINST THE SAID ORDER, APPELLANT PREFERRED FIRST S TATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE APPELLA NT. ITA NO. 33/R JT/2014 . A.Y.2009-10 3 4. WE HAVE GONE THROUGH THE IMPUGNED ORDER AND FACTS O F THE CASE SO FAR AS REJECTION OF BOOKS IS CONCERNED. WHILE REJECTING TH E BOOKS OF ACCOUNTS, DEFECTS HAVE TO BE POINTED OUT BY THE ASSESSING OFFICER AND A SPECIFIC FINDING SHOULD HAVE BEEN GIVEN AS TO WHETHER THESE DEFECTS LEAD TO DERIVE SATISFACTION TO THE EFFECT THAT THE BOOKS OF ACCOUNTS SO MAINTAINED WE RE NOT CORRECT OR COMPLETE ON THE BASIS OF WHICH THE INCOME HAS BEEN DEDUCTED. IN THE INSTANT CASE, THE A.O. DID NOT POINT OUT THE SPECIFIC DEFECTS EXCEPT FOR COMMENTING ON THE IDENTICAL PRINTED MATERIAL IN THE FORM OF DELIVERY CHALLANS WHICH BEAR DIFFERENT RUBBER STAMPS. BASED ON THESE DELIVERY CHALLANS, TH E INSPECTOR CARRIED INQUIRES BY PAYING SPOT VISITS AT THE PLACES WHERE THE SALT SUPPLIERS WERE MANUFACTURING THE SALT AT THE RELEVANT TIME AND REPORTED THE NON- AVAILABILITY OF SALT SUPPLIERS ON THE DATE OF HIS VISIT. THE VISIT WAS IN NOVEMBER , 20.11 WHEN THERE WAS OFF SEASON IN THIS LINE OF BUSINESS AS CONTENDED BY THE A.R. OF THE APPELLANT THROUGH VIDE PARA 4 OF THE WRITTEN SUBMISSIONS DAT ED 21.06.2012. HOWEVER, THE APPELLANT HAD OBTAINED THE AFFIDAVITS OF SOME O F THE SALT MANUFACTURERS/TRADERS IN THE MONTH OF DECEMBER, 201 1, JUST WITHIN ONE MONTH OF THE INSPECTOR'S VISIT ON 18.11.2011. IN THE VILL AGES AND PARTICULARLY IN LINE OF THIS BUSINESS, THE PERSONS ARE KNOWN BY THEIR NAMES RATHER THAN THE BUSINESS NAMES AND ANY INQUIRY BY GIVING BUSINESS NAME IN SU CH REMOTE PLACES MAY NOT YIELD THE DESIRED RESULTS FOR LOCATING SUCH, PERSON S. THEREFORE BECAUSE OF THE PEAK SEASON THOSE BUSINESSMEN COULD NOT BE LOCATED. 5. SO FAR DISALLOWANCE OF 20% IS CONCERNED BECAUSE THE RE WAS NO SPECIFIC ADVERSE FINDINGS RECORDED ON THE BASIS OF INQUIRES MADE IN THAT CASE. SO FAR AS THE PURCHASES OF RS. 2,41,50,000/- AS DEBITED IN THE BO OKS OF HARI TRADING CO. ARE CONCERNED, THERE MAY BE DEFECTS IN MAINTAIN THE REC ORDS AND NON-EXISTENT OF SOME OF THE PARTIES AT THE TIME OF INQUIRY MADE BY THE INSPECTOR. BUT THE ITA NO. 33/R JT/2014 . A.Y.2009-10 4 AFFIDAVITS FILED DURING THE COURSE OF ASSESSMENT PR OCEEDINGS WHICH WERE ACCEPTED WITHOUT EXAMINING THE PERSONS ON OATH OR O THERWISE LEAD TO THE FACT THAT THESE PARTIES WERE IN EXISTENCE WHO SUPPLIED T HE SALT TO THE APPELLANT AT THE RELEVANT TIMES. THE PAYMENTS HAVE ALSO BEEN EVIDENC ED IN THE SUBSEQUENT YEARS. 6. LD. CIT(A) MENTIONED IN HIS ORDER THAT THE ADDITION OF RS. 60,90,000/- IS HELD TO BE NON-SUSTAINABLE. BECAUSE IF THIS ADDITION IS CONFIRMED, THEN THE GROSS PROFIT OF BOTH THE PROPRIETARY CONCERNS WILL BE ENH ANCED TO 26.22% AS AGAINST THE DECLARED G.P. OF 6.22% IN THE CASE OF HARI TRAD ING CO. WHEREIN THE HIGHEST GROSS PROFIT OF 13.67% WAS DECLARED FOR ASSESSMENT YEAR 2008-09. SIMILARLY, IN THE CASE OF SHYAM SALT FARM, THE GROSS PROFIT WOULD BE ENHANCED TO 27.78% AS AGAINST THE DECLARED GP OF 7.78% FOR THE YEAR AND T HE MAXIMUM GROSS PROFIT IN THIS CONCERN WAS DECLARED WAS 10.75% FOR ASSESSMENT YEAR 2006-07. THEREFORE, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES HA VE MADE ARBITRARY AND HIGH PITCHED ADDITION AND APPELLANT HAS GIVEN ALL THE DE TAILS IN SUPPORT OF HIS CONTENTION. THEREFORE, IN OUR CONSIDERED OPINION, ADDITION OF RS. 24,25,000/- CANNOT BE MADE. THUS, THE A.O. IS DIRECTED TO DELET E THE ADDITION OF RS. 24,25,000/-. 7. IN THE RESULT, THE APPEAL FILED BY THE APPELLANT IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10- 05 - 2018 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD DATED: 10/05/2018