ITO, Gwalior V. Sh. Dinesh Agarwal, Gwalior

ITA 353/AGR/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6964 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJVANSH
• Section: 40A(3); 142(1); 131; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.353/AGR/2009 ASST. YEAR: 2006-07 INCOME TAX OFFICER, VS. SHRI DINESH AGRAWAL, WARD - 3(2), GWALIOR. PROP. M/S PREMA P HARMACEUTICAL CO., 49, KHERAPATI COLONY, GWALIOR. (PAN: AEVPA 6037 J) C.O. NO.09/AGR/2010 (IN ITA NO.353/AGR/2009) ASST. YEAR: 2006-07 SHRI DINESH AGRAWAL, VS. INCOME TAX OFFICER, PROP. M/S PREMA PHARMACEUTICAL CO., WARD - 3(2), G WALIOR. 49, KHERAPATI COLONY, GWALIOR. (PAN: AEVPA 6037 J) (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI HOMI RAJVANSH, C.I.T. (D.R.) ASSESSEE BY : SHRI RAJENDRA SHARMA, ADVOCATE ORDER PER H.S. SIDHU, J.M. : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE HAVE BEEN FILED AGAINST THE IMPUGNED ORDER DATED 26.05.2 009 PASSED BY THE CIT(A), GWALIOR ON THE FOLLOWING GROUNDS :- GROUNDS IN ITA NO.353/AGR/2009 :- 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND FACT DIRECTING TO ADOPT GROSS PROFIT RATE @ 2% ON ESTIMATED SALES INSTEAD OF 25% APPLIED BY THE AS SESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW AND FACT RESTRICTED THE DISALLOWAN CE MADE OUT OF EXPENSES AT THE RATE OF 10% INSTEAD OF 20% DISALLOW ED BY THE ASSESSING OFFICER. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE, THE APPEAL IS FINALLY HEARD FOR DISPOSAL. GROUNDS IN C.O. NO.09/AGR/2010 :- 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE INCOME AFTER APPLY ING THE GROSS PROFIT RATE OF 2% ON TOTAL TURNOVER RS.5,90,00,000/ - AS AGAINST DECLARED GROSS PROFIT RATE OF 1.86% WITH TURNOVER O F RS.5,83,78,323/-. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF EXPENSES AT ADHOC RATE OF 10% OF TO TAL EXPENSES RS.5,91,965/-. 3. THAT, THE RESPONDENT CRAVES LEAVE TO ADD AND/OR AMEND THE GROUND OF CROSS OBJECTION BEFORE AND/OR AT THE TIME OF HEARING. 2. THE ASSESSEE FILED ITS RETURN OF INCOME OF RS.4, 88,240/- ON 31.10.2006 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TA X ACT, 1961 (THE ACT HEREINAFTER) ON 03.04.2005 BY THE ASSESSING OFFICER BUT LATER ON THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND A NOTICE UND ER SECTION 143(2) WAS ISSUED ON 3 30.07.2007, WHICH WAS DULY SERVED ON THE ASSESSEE O N 02.08.2007. SUBSEQUENTLY, NOTICES UNDER SECTION 142(1) WERE ALSO ISSUED TO TH E ASSESSEE. IN RESPONSE TO THE SAME, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSE SSEE APPEARED AND MADE PART COMPLIANCE TO THE QUERIES RAISED BY THE ASSESSING O FFICER. THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS, PURCHASE AND SALE BILLS AND VOUCHERS IN RESPECT OF THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT FOR T HE VERIFICATION OF THE ASSESSING OFFICER EVEN AFTER PROVIDING SEVERAL OPPORTUNITIES TO THE ASSESSEE. THE ASSESSING OFFICER HAS NARRATED 14 DATES OF HEARING PROVIDED T O THE ASSESSEE AT PAGE NO.2, OUT OF WHICH, THE ASSESSEE DID NOT APPEAR 8 TIMES AND 6 TIMES THE COUNSEL FOR THE ASSESSEE ATTENDED AND MADE PART COMPLIANCE. THE AS SESSING OFFICER ALSO ISSUED SUMMON UNDER SECTION 131 TO THE ASSESSEE TO APPEAR PERSONALLY AND PRODUCE BOOKS OF ACCOUNTS WITH RELEVANT BILLS AND VOUCHERS, BUT T HE SAME WAS NOT PRODUCED DURING THE ENTIRE PROCEEDINGS AND LASTLY THE ASSESSING OFF ICER HAS LEFT WITH NO OTHER ALTERNATIVE BUT TO COMPLETE THE ASSESSMENT EX-PART UNDER SECTION 144 OF THE ACT ON THE BASIS OF INFORMATION AVAILABLE ON RECORD. THE ASSESSING OFFICER APPLIED SECTION 145 OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT AN D FINALLY HELD THAT DUE TO NON- PRODUCTION OF BOOKS OF ACCOUNTS AND NON-PRODUCTION OF BILLS/CASH MEMOS IN RESPECT OF PURCHASES MADE AND NON-PRODUCTION OF LEDGER ACCO UNT OF PARTIES FROM WHOM PURCHASES WERE MADE, THE VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT COULD NOT BE EXAMINED AND HE INVOKED THE PROVISIONS SECTION 145 OF THE ACT AND ESTIMATED THE SALE OF RS.6,00,00,000/- AND APPLIED G.P. RATE @ 25% OF THE TOTAL 4 SALES OF RS.6,00,00,000/- KEEPING IN MIND THE CAPIT AL EMPLOYED BY THE PROPRIETOR OF THE FIRM IN PURCHASES MADE IN CASH AND VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND HE MADE THE ADDITION OF RS.1,39,13,4 72/- TO THE TOTAL INCOME OF THE ASSESSEE. RS.1,39,13,472/- AND RS.1,18,393/- BEING 20% EXPENSES OF RS.5,91,965/- DEBITED TO THE P&L ACCOUNT WERE DISALLOWED FOR WANT OF VERIFICATION AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE VIDE ORDER DATED 2 6.12.2008 PASSED UNDER SECTION 144 OF THE ACT. AGGRIEVED BY THE SAME, THE ASSESSE E FILED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO, VIDE THE IMPUGNED OR DER DATED 26.05.2009, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY APPLYING THE G.P. @ 2% AS AGAINST 1.86% DECLARED BY THE ASSESSEE IN THE PREVIOUS YEAR AND A LSO GIVEN RELIEF BY REDUCING THE DISALLOWANCE FROM 20% TO 10% ON ACCOUNT OF TOTAL EX PENSES OF RS.5,91,965/- BY GIVING RELIEF OF RS.59,196/- TO THE ASSESSEE ON ACC OUNT OF EXPENSES. AGGRIEVED BY THE IMPUGNED ORDER DATED 26.05.2009, THE REVENUE AS WELL AS THE ASSESSEE FILED APPEAL AND CROSS OBJECTION RESPECTIVELY. 3. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND, ON THE CONTRARY, THE LD. COU NSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORI TY ON THE ISSUE RAISED BY THE REVENUE IN GROUND NO.1. 5 4. AS REGARDS TO THE ISSUE INVOLVED IN THE APPEAL O F THE REVENUE IN GROUND NO.2, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE LD . FIRST APPELLATE AUTHORITY HAS WRONGLY RESTRICTED THE DISALLOWANCE MADE OUT OF EXP ENSES @ 10% WHICH IS NOT REQUIRED AS PER THE DECISION OF HONBLE ALLAHABAD H IGH COURT IN THE CASE OF CIT VS. BANWARILAL BANSHIDHAR, 229 ITR 229 (ALL.). HE STATED THAT WHERE INCOME OF THE ASSESSEE IS ASSESSED AT G.P. RATE BY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE UNDER SECTION 145(1) OF THE ACT, NO FURTHER DISALLO WANCE CAN BE MADE SEPARATELY. HE REQUESTED THAT APPEAL FILED BY THE REVENUE MAY B E DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE MAY BE ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AVAILABLE WITH US. WE ARE OF THE CONSIDERED OPINION THAT AS REGARDS TO THE ISSUE INVOLVED IN GROUND NO.1 OF APPEAL BY THE REVENUE AS WELL AS CROSS OBJE CTION BY THE ASSESSEE REGARDING DIRECTION TO THE ASSESSING OFFICER TO ADOPT GROSS P ROFIT RATE AT 2% ON ESTIMATED SALES INSTEAD OF 25% APPLIED BY THE ASSESSING OFFIC ER, THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY APPLIED G.P. @ 2% AS AGAINST 1.86% DECLARED BY THE ASSESSEE ON THE BASIS OF PREVIOUS RECORD OF THE ASSESSEE. F OR THE SAKE OF CONVENIENCE, A COMPARATIVE CHART SHOWING SALES, GROSS PROFIT, NET PROFIT AND EXPENSES AS REFERRED BY THE LD. FIRST APPELLATE AUTHORITY AT PAGE NO.8 I S REPRODUCED AS UNDER :- 6 PARTICULARS ASSTT. YEAR 2006-07 ASSTT. YEAR 2005-06 ASSTT. YEAR 2004-05 ASSTT. YEAR 2003-04 SALES 5,83,78,323/- 4,31,32,900/- 6,40,04,694/- 1, 90,55,334/- GROSS PROFIT 10,86,528/- 7,51,503/- 8,34,961/- 3,61 ,041/- PERCENTAGE OF GROSS PROFIT 1.86 1.74 1.30 1.89 NET PROFIT 4,94,563/- 2,43,508/- 2,18,987/- 1,63,91 4/- PERCENTAGE OF NET PROFIT 0.85 0.56 0.34 0.86 6. AFTER THOROUGHLY GOING THROUGH THE AFORESAID CHA RT ALONG WITH THE CITATIONS MENTIONED BY THE LD. FIRST APPELLATE AUTHORITY IN T HE IMPUGNED ORDER, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALL ED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY, DIRECT ING THE ASSESSING OFFICER TO COMPUTE THE INCOME AFTER APPLYING THE G.P. RATE @ 2 % ON THE TOTAL TURNOVER OF RS.5,90,00,000/-. 7. AS REGARDS TO THE ISSUE RAISED IN GROUND NO.2 IN APPEAL FILED BY THE REVENUE AS WELL AS IN THE CROSS OBJECTION FILED BY THE ASSE SSEE, WE ARE OF THE CONSIDERED OPINION THAT WHERE INCOME IS ASSESSED AT GROSS PROF IT RATE BY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE UNDER SECTION 145(1) OF TH E ACT, NO FURTHER DISALLOWANCE CAN BE MADE SEPARATELY. THIS ISSUE HAS BEEN ADJUDI CATED AND DECIDED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARILAL BANSHIDHAR, 229 ITR 229 (ALL.). RESPECTFULLY FOLLOWING THE SAME, D ISALLOWANCE MADE BY THE LD. 7 FIRST APPELLATE AUTHORITY ON ACCOUNT OF EXPENSES @ 10% IS DELETED BECAUSE NO FURTHER DISALLOWANCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.20 11). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 30 TH JUNE, 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY