ACIT, New Delhi V. Manju Aggarwal, Delhi

ITA 330/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90901 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K CHAUHAN
• Assessee Lawyers: VIKRAM SAHAY
• Keywords: Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A. NO.330 /DEL/2013 ASSESSMENT YEAR : 2007-08 ACIT ,CIRCLE 20(1), VS. SMT. MANJU AGGARWAL, NEW DELHI 3754/12, OLD SUBZI MANDI, DELHI GIR / PAN:AENPA4821J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. K. CHAUHAN, ADV. RESPONDENT BY : SHRI VIKRAM SAHAY, SR. DR DATE OF HEARING : 15.04.2015 DATE OF PRONOUNCEMENT : 15.04.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL OF REVENUE IS DIRECTED AGAINST THE ORDE R PASSED BY THE CIT(A) ON 31.10.2012 RELATING TO THE ASSESSMENT YEA R 2007-08. 2. THE FIRST GROUND IS AGAINST THE DELETION OF TRAD ING ADDITION AMOUNTING TO RS. 5,78,378/-, WHICH WAS MADE BY THE ASSESSING OFFICER (A.O.) AFTER REJECTING THE BOOKS OF ACCOUN T OF THE ASSESSEE. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVED INCOME FROM MANUFACTURING AND SALE OF ICE. DURING THE YEAR UNDER ITA NO.330/DEL/2013 2 CONSIDERATION, SALE OF ICE WAS SHOWN AT RS.1,64,73 ,708 GIVING GROSS PROFIT (G.P.) RATE OF 28.48%, AS AGAINST THE IMMEDIATELY PRECEDING YEARS SALE OF RS.1.87 CRORE WITH G.P. RA TE OF 34.08%. ON BEING CALLED UPON TO EXPLAIN THE REASON FOR DECL INE IN THE G.P. RATE, THE ASSESSEE SUBMITTED THAT IT HAD TO INCUR M ORE REPAIRS & MAINTENANCE EXPENSES IN THIS YEAR AMOUNTING TO RS.1 7.58 LAC AS AGAINST RS.11.60 LAC INCURRED IN THE IMMEDIATELY PR ECEDING YEAR. THE A.O. OBSERVED THAT THE ASSESSEE HAD NOT MAINTAI NED QUANTITATIVE DETAILS OF PRODUCTION AND MOST OF THE SALES WERE SHOWN IN CASH. HE FURTHER OBSERVED THAT THE ASSESSEE DID NOT DISCLOSE ANY CLOSING STOCK OF PACKING MATERIAL AND AMMONIA GAS. CONSIDERING ALL THESE FACTS, THE A.O. INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT MAINTA INED BY THE ASSESSEE. THEREUPON, A G.P. RATE OF 31% WAS APPLIE D ON ESTIMATED SALES OF RS.1.70 CRORE, WHICH RESULTED INTO THE MAK ING OF A TRADING ADDITION TO THE TUNE OF RS.5,78,378/-. THE LD. CI T(A) DELETED THE ADDITION. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE METICULOUSLY GONE THRO UGH THE REASONS GIVEN BY THE A.O. FOR REJECTING THE BOOKS O F ACCOUNT MAINTAINED BY ASSESSEE. WE FIND THAT THE A.O. GOT S WAYED BY THE DECLINE IN G.P. RATE AS A REASON FOR REJECTION THE BOOKS OF ACCOUNT. ITA NO.330/DEL/2013 3 WE WANT TO EMPHASIZE THAT MERE REDUCTION IN G.P. RA TE CANNOT BE A REASON IN ITSELF FOR REJECTION OF BOOKS OF ACCOUNTS . IN ORDER TO INVOKE POWERS U/S 145(3) OF THE ACT, IT IS NECESSAR Y FOR THE A.O. TO DEMONSTRATE AS TO HOW THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE WERE NOT CAPABLE OF DIVULGING THE CORRECT INCOME THEREFROM. A MERE FALL IN THE GROSS PROFIT RATE, A S A CONSEQUENCE OF AN INCREASE IN A PARTICULAR EXPENDITURE DURING THE CURRENT YEAR VIS- -VIS OF EARLIER YEAR, CANNOT BE A GROUND FOR THE R EJECTION OF BOOKS OF ACCOUNT. IF THE EXPENSE OF REPAIR & MAINTENANCE INCURRED BY THE ASSESSEE WAS FOUND BY THE A.O. TO BE HIGHER, TH EN IT WAS UPON HIM TO INDICATE WHETHER SUCH EXPENSE INCURRED BY TH E ASSESSEE WAS GENUINE OR NOT AND WHETHER IT WAS INCURRED FOR THE PURPOSE OF BUSINESS. HAVING NOT DONE SO, THE A.O. CANNOT TAKE ASSISTANCE FROM THIS FACT FOR REJECTING THE BOOKS OF ACCOUNT. AS REGARDS NO CLOSING STOCK OF PACKING MATERIAL AND AMMONIA GAS, THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT EARLIER THE AS SESSEE WAS ADOPTING THE PRACTICE OF HAVING STOCK, BUT FROM THI S YEAR ONWARDS, IT WAS BEING WRITTEN OFF IN THE YEAR OF PURCHASE IT SELF WITHOUT CONSIDERING THE VALUE OF CLOSING STOCK. IN FACT, T HE ASSESSEE CHANGED ITS METHOD OF ACCOUNTING IN SO FAR AS RECOR DING OF THESE EXPENSES WAS CONCERNED. THE AO HAS NOT CONTRADICTE D THIS CONTENTION ABOUT THE CHANGE IN THE PRACTICE OF WRIT ING OFF THE AMOUNT OF SUCH EXPENSE ON YEAR TO YEAR BASIS. FURT HER, WHEN WE ITA NO.330/DEL/2013 4 CONSIDER THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE, BEING A SEASONAL BUSINESS OF MANUFACTURING AND SALES OF ICE , THERE CAN BE HARDLY ANY OBJECTION IN MAKING SALES IN CASH. EVEN OTHERWISE, THE MAKING SALE OF ICE IN CASH, IS NOT PROHIBITED UNDER ANY OTHER LAW. WHEN WE CONSIDER TOTALITY OF THE FACTS AND CIRCUMST ANCES OF THE INSTANT CASE, THE ONLY IRRESISTIBLE CONCLUSION WHIC H FOLLOWS IS THAT THE LD. CIT(A) WAS JUSTIFIED IN REJECTING THE A.O. S POINT OF VIEW ON THIS ASPECT OF THE MATTER AND CONSEQUENTLY DELET ING THE ADDITION. WE, THEREFORE, UPHOLD THE SAME AND DISMISS THIS GRO UND OF THE APPEAL. 4. THE NEXT GROUND IS AGAINST THE DELETION OF DISAL LOWANCE OF RS.5,15,310/-, BEING THE EXPENSES INCURRED FOR THE EARLIER YEAR. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE DEBITED REPAIR AND MAINTENANCE EXPENSES AT RS.17.58 LACS. ON PERU SAL OF DETAILS OF CERTAIN BILLS, IT WAS FOUND THAT A SUM OF RS. 88 ,310/- PERTAINED TO THE PRECEDING YEAR, INASMUCH AS TWO BILL NOS. 137 AND 138, BOTH DATED 13.03.2006 ISSUED BY KIRLOSKAR MOTORS, PERTA INED TO THE EARLIER YEAR. THE LD. CIT(A) GOT CONVINCED WITH TH E SUBMISSIONS ADVANCED BY THE ASSESSEE AND ORDERED FOR THE DELETI ON OF ADDITION. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE LD. C IT(A) HAS ITA NO.330/DEL/2013 5 RECORDED A CATEGORICAL FINDING THAT THE A.O. ERRED IN CORRECTLY NOTING THE DATES INASMUCH AS THESE EXPENSES ACTUALL Y RELATED TO THE YEAR IN QUESTION. NO MATERIAL HAS BEEN PLACED ON R ECORD BY THE LD. D.R. TO CONTROVERT THIS FINDING GIVEN BY THE LD. FI RST APPELLATE AUTHORITY. WE, ERGO, UPHOLD THE IMPUGNED ORDER ON THIS SCORE. THIS GROUND IS NOT ALLOWED. 6. THE LAST GROUND IS AGAINST DISALLOWANCE OF CERTA IN EXPENSES. WHICH WERE TREATED BY A.O. AS CAPITAL IN NATURE. T HE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION FOR EXPENSES AMOUNTING TO RS.4,28,563/- I NCURRED FOR PURCHASE OF CONTAINERS AND STARTERS. THE A.O. TREA TED SUCH AMOUNT AS CAPITAL IN NATURE. AFTER ALLOWING DEPREC IATION @ 15%, HE MADE A DISALLOWANCE FOR THE REMAINING AMOUNT OF RS.3,64,279/-. THE LD. CIT(A) DELETED THIS ADDITION. 7. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS NOTED FROM THE LAST PAGE OF THE IMPUGNED ORDER THAT EACH ICE CONTAINER AND STARTER COSTED LE SS THAN RS.1,000/. SUCH CONTAINERS ARE USED ON DAILY BASIS AND REMAIN IN SALTED WATER BRINGING RUST TO THEM. AFTER GETTING RUST, THEY ST ART LEAKING AND NEED TO BE REPLACED ON REGULAR BASIS. IT CAN BE SE EN FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE A.O. TH AT SHE HAD ITA NO.330/DEL/2013 6 2,800 CONTAINERS IN FACTORY AND ON AN AVERAGE 500-6 00 CONTAINERS WERE BEING REPLACED EVERY YEAR. IN VIEW OF THESE F ACTS, WE DO NOT FIND ANY DIFFICULTY IN HOLDING SUCH EXPENDITURE TO BE OF A REVENUE NATURE. AS SUCH, WE ARE OF THE CONSIDERED OPINION T HAT LD. CIT(A) WAS RIGHT IN DELETING THIS ADDITION. THIS GROUND FA ILS. 8. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH APRIL, 2015. SD./- SD./- ( A. T. VARKEY) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 15.04. 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.330/DEL/2013 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/4 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 15/4 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 15/4 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 15/4 SR. PS/PS 7 FILE SENT TO BENCH CLERK 15/4 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER *