M/S VIJAY PRAKASH KHANDAKA HUF, Jaipur V. ITO, Jaipur

ITA 331/JPR/2012

• Counselvise Citation: 33123114 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Section: 131; 145

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 331/JP/2012 ASSTT. YEAR- 2007-08 PAN NO. AAAHV 7900 E M/S VIJAY PRAKASH KHANDAKA (HUF), THE I.T.O. SHOP NO. 182, KISHANPOLE BAZAR, VRS. WARD 1(3), JA IPUR. JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- WRITTEN SUBMISSION. DEPARTMENT BY :- SHRI D.C. SHARMA. DATE OF HEARING : 26/08/2014 DATE OF PRONOUNCEMENT : 28/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 12/01/2012 OF THE LEARNED C.I.T.-III, JAIPUR FOR THE A.Y. 2007-08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN HOLDI NG THAT THE A.O. IS FOUND JUSTIFIED IN INVOKING THE PROVISIONS OF SE CTION 154(3) OF THE IT ACT. THE SAID FINDING IS ILLEGAL AND UNJUSTIF IED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LOWER AUTHORITIES HAVE ERRED IN REJECTING THE BOOKS OF AC COUNTS OF THE ASSESSEE. THE SAID ACTION IS ILLEGAL AND UNJUSTIFIE D. 3. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT IT WOULD BE FAIR AND REASONABLE TO APPLY A GP RATE OF 20% ON THE DECLARED SALES. THE TRADING ADDITION OF RS. 1,26,169/- SUSTAI NED BY THE LEARNED CIT(APPEALS) IS UNJUSTIFIED AND EXCESSIVE. 4. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN SUSTAIN ING DISALLOWANCE OF RS. 11,544/- TOWARDS SHOP EXPENSES AN D SALES 2 PROMOTION EXPENSES. THE ADDITION SUSTAINED IS UNJUST IFIED AND EXCESSIVE. 2. GROUNDS NO. 1, 2 AND 3 OF THE ASSESSEES APPEAL ARE AGAINST REJECTING THE BOOKS OF ACCOUNT U/S 145 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AND ESTIMATING THE G.P. @ 20% B Y THE ASSESSING OFFICER, WHICH WAS CONFIRMED BY THE LEARNED CIT(A). THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF TRADING AND MANUFACTURING OF SILVER AND GOLD ORNAMENTS. THE ASSE SSEE HAS SHOWN GROSS PROFIT RATE OF 19.04% ON TOTAL SALE OF RS. 1,30,75, 857/- AS COMPARED TO THE GROSS PROFIT RATE OF 20.55% ON SALE OF RS. 92,60,93 8/- IN THE PRECEDING YEAR 2006-07. THE ASSESSEE MADE PURCHASE FROM UNREGISTER ED DEALERS, THEREFORE, THE LEARNED ASSESSING OFFICER ASKED TO PRODUCE 15 P ARTIES NAMED IN THE ASSESSMENT ORDER. SIMULTANEOUSLY, HE ALSO ISSUED SU MMONS U/S 131 OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMIT TED THAT HE HAD INFORMED THE PARTIES TO ATTEND THE INCOME TAX PROCEEDING BUT SOME OF THE PARTIES ARE NOT WILLING TO APPEAR BEFORE THE ASSESSING OFFICER. HE WAS UNABLE TO PRODUCE THE PARTIES BEFORE THE ASSESSING OFFICER. IT IS FUR THER OBSERVED THAT SUMMONS ISSUED IN CASE OF SHRI MAHADEV MEENA, SHRI SITARAM JANGIR, SHRI GAJANAND MAHESHWARI, SMT. VINITA KOIRALA AND SHRI OM PRAKASH SHARMA WERE RECEIVED BACK FROM THE POSTAL DEPARTMENT WITH THE REMARKS N OT KNOWN. THREE PERSONS HAVING MADE SALE TO THE APPELLANT. THESE FAC TS WERE INFORMED BY THE ASSESSING OFFICER TO THE APPELLANT VIDE ORDERSHEET ENTRY DATED 23/12/2009 AND 3 ALSO PROPOSED TO APPLY PROVISIONS OF SECTION 145(3) OF THE ACT. THE ASSESSEE REPLIED VIDE LETTER DATED 23/12/2009, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE NO. 4. AFTER CONSIDERING THE ASSESSEES REPLY, IT HAS BEEN CONCLUDED THAT ALL THE PURCHASES WERE NOT FULLY VERIFIABLE. WHILE PURCHASING SUCH OLD ORNAMENTS, IT IS A PRACTICE THA T THE JEWELERS DEDUCT A CERTAIN PERCENTAGE FOR IMPURITIES BUT SUCH DEDUCTIO N WAS NOT AVAILABLE IN THE PURCHASE BILLS OF THE ASSESSEE. MOREOVER, THE SALES OF THE ASSESSEE WERE ALSO NOT FULLY VERIFIABLE AS THE ASSESSEE HAD NOT MENTIO NED COMPLETE NAME AND ADDRESSES IN THE SALES BILLS AND MOST OF THE SALES WERE IN CASH. IN SALES BILLS ALSO, THE ASSESSEE HAD NOT SHOWN THE MAKING CHARGES OF THE GOLD ORNAMENTS. THUS, THE CORRECT VALUE OF GOLD AND MAKING CHARGES C ANNOT BE CALCULATED ON THE BASIS OF SALES BILLS. THUS, HE REJECTED THE BOOK RESULT OF THE ASSESSEE U/S 145(3) OF THE ACT. HE RELIED ON THE FOLLOWING CASE L AWS: 1. AMIYA KUMAR ROY & BROS V CIT (1994) TAX LR 616 (C AL.) 2. S.N. NAMASIVAYAM CHETTIAR V CIT 38 ITR 579 (SC). 3. CIT VS. BRITISH PAINTS INDIA LTD. 188 ITR 44 (SC) 4. CIT VS. MC. MILLION & CO. 33 ITR 182 (SC). THE ASSESSEE HAD SHOWN 20.55% OF G.P. IN PRECEDING YE AR. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KANSARA BEARING S PVT. LTD. 290 ITR 235 HAS HELD THAT THE PAST HISTORY OF THE CASE IS THE B EST GUIDE TO ESTIMATE THE INCOME., THUS HE APPLIED G.P. @ 20.60% ON SALE OF RS . 1,31,00,000/- AND ADDITION OF RS. 2,09,598/- WAS MADE IN THE INCOME OF THE ASSESSEE. 4 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY PERUSED THE OBSERVATIONS OF T HE A.O. AND THE COUNTER ARGUMENTS RAISED BY THE LEARNED AR, TOWARDS THE ISSUE UNDER CONSIDERATION. THE UNDISPUTED RELEVANT FACTS A RE THAT THE APPELLANT HAS SHOWN GP RATE AT 19.04% ON THE TOTAL TURNOVER OF RS.1,30,75,857/-. THE SIMILAR TREND IN THE PREVIOUS YEAR WAS FOUND AT 20.55% ON THE TURNOVER OF RS. 92,60,938/- ONLY. CONSIDERING THE FACT THAT THE APPELLANT WAS HAVING U NVERIFIABLE PURCHASES AND SALES, IMPROPER SALES VOUCHERS ALSO H AVING LOWER GP IN THE CURRENT YEAR, THE A.O. HAS ESTIMATED THE TURNOVER AT RS. 1,31,00,000/- AND ALSO THE GP RATE AT 20.60% U/S 14 5(3) OF THE ACT, IN VIEW OF THE PAST HISTORY OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND ALSO AS IN THE CURRENT YEAR THE GP HAS BEEN SHOWN AT LOWER RATE THAN THE PREVIOUS YEAR, THEREFORE , THE A.O. IS FOUND JUSTIFIED IN INVOKING THE PROVISION OF SEC. 1 45(3) UNDER THE GIVEN CIRCUMSTANCES. 2.3.1. REGARDING THE ESTIMATION OF INCOME U/S 145(3 ), THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KANCHWALA GEMS (288 ITR 10) IS FOUND QUITE RELEVANT AND APPLICABLE, WHEREIN IT IS HELD THAT IF THE REJECTION OF BOOKS IS RESULT OF SEVERAL DEFE CTS FOUND THEREIN THAN THE ESTIMATION OF INCOME EVEN ON GUESS WORK IS JUSTIFIED. IT IS A SETTLED LAW THAT UNDER SUCH CIRCUMSTANCES, TO E STIMATE THE INCOME OF THE APPELLANT, THE PAST HISTORY OF APPELL ANT WOULD BE ONE OF THE MOST RELIABLE GUIDELINE IN THIS REGARD. THE SIMILAR VIEW IS ALSO EXPRESSED IN THE FOLLOWING DECISIONS- 5 I. M/S INANI MARBLES- 316 ITR 125 (RAJ H.C.) II. M/S ACTION ELECTRICALS- 258 ITR 188 (DEL. H.C .) 2.3.2 AS OBSERVED FROM THE PAST YEARS RESULT, IT I S FOUND THAT THE APPELLANT HAS OFFERED 20.55% GP IN THE LAST YEAR AN D ON THE SAME BASIS THE A.O. HAS ESTIMATED THE GP IN THE CURRENT YEAR AT 20.60% U/S 145(3) OF THE ACT. HOWEVER, WHILE DOING SO THE A.O. HAS IGNORED THE VITAL ASPECT I.E. IN THE CURRENT YE AR THE TURNOVER OF THE APPELLANT HAS INCREASED SUBSTANTIALLY BY 40%. I T IS ALSO A MATTER OF FACT THAT TO ACHIEVE SUCH UNUSUAL AUGMENT ATION IN THE TURNOVER, NORMALLY ONE HAS TO COMPROMISE WITH THE GP MARGIN TO SOME EXTENT, AS SUCH. ACCORDINGLY, IT IS FELT THAT WHILE APPLYING THE PAST RECORDS OF THE APPELLANT, I.R.O., TRADING RESU LT, THE A.O. SHOULD HAVE GIVEN DUE MARGIN TO THE ABOVE ASPECT AND ESTIM ATED THE GP IN THE ABOVE BACKGROUND ONLY. MOREOVER, IT IS NOT C LEAR FROM THE ASSESSMENT ORDER THAT ON WHAT BASIS THE A.O. HAS EST IMATED THE HIGHER TURNOVER OF THE APPELLANT AT RS. 1,31,00,000 /-, AGAINST THE TURNOVER SHOWN BY THE APPELLANT IN THIS REGARD. ACCO RDINGLY, THE A.O.S ESTIMATION OF GP RATIO U/S 145(3) IS FOUND R ATHER ON HIGHER SIDE AND THE INCREASE IN THE TURNOVER IS ALSO FOUND UNSUBSTANTIATED. ACCORDINGLY, IN MY CONSIDERED VIEW, ADOPTION OF GP @ 20% IN THE CURRENT YEAR, ON THE ORIGINAL TURNOV ER SHOWN BY THE APPELLANT (I.E. RS. 1,30,75,857/-) WOULD BE FAIR AND SUFFICIENT TO MEET THE BOTH ENDS OF THE JUSTICE. ACCORDINGLY T HE A.O. IS DIRECTED TO RESTRICT THE ESTIMATION OF INCOME U/S 1 45(3), BY ADOPTING THE GP RATE AT 20%, ON THE DECLARED TURNOV ER OF THE APPELLANT ONLY AND WORKED OUT THE ADDITION U/S 145( 3), IN THE LIGHT OF THE ABOVE DIRECTION. CONSEQUENTLY, THIS GROUND O F APPEAL IS PARTLY UPHELD. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6 5. THE ASSESSEE HAD SUBMITTED WRITTEN REPLY VIDE LETT ER DATED 14/8/2014. IT HAS BEEN SUBMITTED THAT THE ASSESSEE IN THIS CAS E WAS MAINTAINING DAY TO DAY STOCK REGISTER, WHICH WAS ALSO PRODUCED BEFORE TH E ASSESSING OFFICER AND THE ASSESSING OFFICER HAD NOT POINTED OUT ANY MISTA KE IN THE MAINTENANCE OF THE STOCK REGISTER. THE BOOKS OF ACCOUNT OF THE ASSE SSEE WERE ALSO DULY AUDITED AND THE ASSESSEE HAD ALSO FURNISHED QUANTIT ATIVE DETAILS ALONGWITH AUDIT REPORT. THERE IS NO JUSTIFICATION ON THE PART OF THE LEARNED CIT(A) TO UPHOLD THE ACTION OF THE ASSESSING OFFICER IN REJEC TING THE BOOKS OF ACCOUNT AND THE PROVISIONS OF SECTION 145(3) OF THE ACT. IT IS FURTHER SUBMITTED THAT IN A.Y. 2005-06, THE G.P. RATE WAS 18.33% AND THE N.P. RATE WAS 3.23%. IN A.Y. 2006-07 G.P. RATE DECLARED WAS 20.56% AND THE N.P. R ATE WAS 3.55%. IN THE YEAR CONSIDERATION, G.P. RATE SLIGHTLY DECLINED BUT THE ASSESSEE HAD SHOWN MUCH HIGHER N.P. RATE @ 3.82% AND PAID HIGHER TAX TO THE GOVERNMENT. THE ASSESSEES SALE HAS ALSO SUBSTANTIALLY INCREASED CO MPARE TO LAST 2 ASSESSMENT YEARS, THEREFORE, THE BOOK RESULT MAY PLEASE BE ACC EPTED. 6. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED ASSESSING OFFICER AS KED TO PRODUCE 15 UNREGISTERED DEALERS, FROM THEM PURCHASE WAS MADE. TH E ASSESSING OFFICER ALSO ISSUED NOTICE U/S 131 OF THE ACT TO THESE PART IES. IN 5 CASES, SUMMONS WERE RETURNED BACK WITH THE REMARKS NOT KNOWN. ONLY 3 PERSONS WERE 7 ATTENDED AND CONFIRMED THAT THEY MADE SALE TO THE A SSESSEE. THE LEARNED ASSESSING OFFICER FURTHER POINTED OUT THAT OTHER BI LLS OF IMPURITIES AND LABOUR CHARGES ON PURCHASE AND SALES BILLS RESPECTIVELY HA D NOT BEEN QUANTIFIED, THEREFORE, HE RIGHTLY APPLIED PROVISIONS OF SECTION 145(3) OF THE ACT. THE GP RATE @ 20% ON DECLARED TURNOVER RIGHTLY CONFIRMED BY THE LEARNED CIT(A). THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT(A). 8. GROUND NO. 4 OF THE ASSESSEES APPEAL IS NOT PRE SSED, THEREFORE, THE SAME STANDS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 28 TH AUGUST, 2014 * RANJAN COPY FORWARDED TO :- 1. M/S VIJAY PRAKASH KHANDAKA (HUF), JAIPUR 2. THE ITO, WARD 1(3), JAIPUR 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 331/JP/2012) BY ORDER, AR ITAT JAIPUR.